Document:

Exhibit 10.45

 

 

WILLIS LEASE FINANCE CORPORATION

 

DEFERRED COMPENSATION PLAN

 

 

Effective as of July 1, 2001

 

 

 

 

TABLE OF CONTENTS

 

	
  Purpose

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2
  Selection, Enrollment, Eligibility

  	
   

  
	
  2.1

  	
  Selection by Committee

  	
   

  
	
  2.2

  	
  Enrollment Requirements

  	
   

  
	
  2.3

  	
  Eligibility; Commencement of Participation

  	
   

  
	
  2.4

  	
  Termination of Participation and/or
  Deferrals

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 Deferral Commitments/Company
  Matching/Crediting/Taxes

  	
   

  
	
  3.1

  	
  Amount of Deferrals

  	
   

  
	
  3.2

  	
  Election to Defer; Effect of Election Form

  	
   

  
	
  3.3

  	
  Withholding of Annual Deferral Amounts

  	
   

  
	
  3.4

  	
  Annual Company Matching Amount

  	
   

  
	
  3.5

  	
  Investment of Trust Assets

  	
   

  
	
  3.6

  	
  Vesting

  	
   

  
	
  3.7

  	
  Crediting/Debiting of Account Balances

  	
   

  
	
  3.8

  	
  FICA and Other Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 Short-Term Payout;
  Unforeseeable Financial Emergencies; Withdrawal Election

  	
   

  
	
  4.1

  	
  Short-Term Payout

  	
   

  
	
  4.2

  	
  Other Benefits Take Precedence Over
  Short-Term

  	
   

  
	
  4.3

  	
  Withdrawal Payout for Unforeseeable
  Financial Emergencies

  	
   

  
	
  4.4

  	
  Withdrawal Election

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 Retirement Benefit

  	
   

  
	
  5.1

  	
  Retirement Benefit

  	
   

  
	
  5.2

  	
  Payment of Retirement Benefit

  	
   

  
	
  5.3

  	
  Death Prior to Completion of Retirement
  Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 Pre-Retirement Survivor
  Benefit

  	
   

  
	
  6.1

  	
  Pre-Retirement Survivor Benefit

  	
   

  
	
  6.2

  	
  Payment of Pre-Retirement Survivor Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 Termination Benefit

  	
   

  
	
  7.1

  	
  Termination Benefit

  	
   

  
	
  7.2

  	
  Payment of Termination Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 Disability Waiver and
  Benefit

  	
   

  
	
  8.1

  	
  Disability Waiver

  	
   

  
	
  8.2

  	
  Continued Eligibility; Disability Benefit

  	
   

  

 

i

 

	
  ARTICLE 9 Beneficiary Designation

  	
   

  
	
  9.1

  	
  Beneficiary

  	
   

  
	
  9.2

  	
  Beneficiary Designation; Change; Spousal
  Consent

  	
   

  
	
  9.3

  	
  Acknowledgment

  	
   

  
	
  9.4

  	
  No Beneficiary Designation

  	
   

  
	
  9.5

  	
  Doubt as to Beneficiary

  	
   

  
	
  9.6

  	
  Discharge of Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 Leave of Absence

  	
   

  
	
  10.1

  	
  Paid Leave of Absence

  	
   

  
	
  10.2

  	
  Unpaid Leave of Absence

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 Termination, Amendment or
  Modification

  	
   

  
	
  11.1

  	
  Termination

  	
   

  
	
  11.2

  	
  Amendment

  	
   

  
	
  11.3

  	
  Plan Agreement

  	
   

  
	
  11.4

  	
  Effect of Payment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12 Administration

  	
   

  
	
  12.1

  	
  Committee Duties

  	
   

  
	
  12.2

  	
  Administration Upon Change in Control

  	
   

  
	
  12.3

  	
  Agents

  	
   

  
	
  12.4

  	
  Binding Effect of Decisions

  	
   

  
	
  12.5

  	
  Indemnity of Committee

  	
   

  
	
  12.6

  	
  Employer Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13 Other Benefits and
  Agreements

  	
   

  
	
  13.1

  	
  Coordination with Other Benefits

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14 Claims Procedures

  	
   

  
	
  14.1

  	
  Presentation of Claim

  	
   

  
	
  14.2

  	
  Notification of Decision

  	
   

  
	
  14.3

  	
  Review of a Denied Claim

  	
   

  
	
  14.4

  	
  Decision on Review

  	
   

  
	
  14.5

  	
  Legal Action

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15 Trust

  	
   

  
	
  15.1

  	
  Establishment of the Trust

  	
   

  
	
  15.2

  	
  Interrelationship of the Plan and the Trust

  	
   

  
	
  15.3

  	
  Distributions From the Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16 Miscellaneous

  	
   

  
	
  16.1

  	
  Status of Plan

  	
   

  
	
  16.2

  	
  Unsecured General Creditor

  	
   

  
	
  16.3

  	
  Employer’s Liability

  	
   

  
	
  16.4

  	
  Nonassignability

  	
   

  
	
  16.5

  	
  Not a Contract of Employment

  	
   

  

 

ii

 

	
  16.6

  	
  Furnishing Information

  	
   

  
	
  16.7

  	
  Terms

  	
   

  
	
  16.8

  	
  Captions

  	
   

  
	
  16.9

  	
  Governing Law

  	
   

  
	
  16.10

  	
  Notice

  	
   

  
	
  16.11

  	
  Successors

  	
   

  
	
  16.12

  	
  Spouse’s Interest

  	
   

  
	
  16.13

  	
  Validity

  	
   

  
	
  16.14

  	
  Incompetent

  	
   

  
	
  16.15

  	
  Court Order

  	
   

  
	
  16.16.

  	
  Distribution in the Event of Taxation

  	
   

  
	
  16.17

  	
  Insurance

  	
   

  
	
  16.18

  	
  Legal Fees to
  Enforce Rights After Change in Control

  	
   

  

 

iii

 

WILLIS LEASE FINANCE CORPORATION

DEFERRED COMPENSATION PLAN

Effective as of July 1, 2001

 

Purpose

 

The purpose of this Plan is to provide specified benefits to a select
group of management and highly compensated Employees who contribute materially
to the continued growth, development and future business success of Willis
Lease Finance Corporation and its subsidiaries, if any, that sponsor this
Plan.  This Plan shall be unfunded for
tax purposes and for purposes of Title I of ERISA.  This document sets forth the terms and
conditions of the Plan, effective as of July 1, 2001.

 

ARTICLE 1

Definitions

 

For purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:

 

1.1                                             “Account
Balance” shall mean, with respect to a Participant, a credit on the records of
the Employer equal to the sum of (i) the Deferral Account balance, and (ii) the
vested Company Matching Account balance. 
The Account Balance, and each other specified account balance, shall be
a bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to a Participant, or
his or her designated Beneficiary, pursuant to this Plan.

 

1.2                                             “Annual
Bonus” shall mean any compensation, in addition to Base Annual Salary relating
to services performed during any calendar year, whether or not paid in such
calendar year or included on the Federal Income Tax Form W-2 for such
calendar year, payable to a Participant as an Employee under any Employer’s
annual bonus and cash incentive plans, excluding stock options, or as
commissions.  For the first Plan Year
only, the Annual Bonus shall include any bonus amounts paid in respect of
services performed during the 2001 calendar year.

 

1.3                                             “Annual
Company Matching Amount” for any one Plan Year shall be the amount determined
in accordance with Section 3.4.

 

1.4                                             “Annual
Deferral Amount” shall mean that portion of a Participant’s Base Annual Salary
and Annual Bonus that a Participant elects to have, and is deferred, in
accordance with Article 3, for any one Plan Year.  In the event of a Participant’s Retirement,
Disability (if deferrals cease in accordance with Section 8.1), death or a
Termination of Employment prior to the end of a Plan Year, such year’s Annual Deferral
Amount shall be the actual amount withheld prior to such event.

 

1.5                                             “Annual
Installment Method” shall be an annual installment payment over the number of
years selected by the Participant in accordance with this Plan, calculated as
follows: The Account Balance of the Participant shall be calculated as of the
close of business on the last business day of the year.  The annual installment for the next-following
year shall be calculated by multiplying this balance by a fraction, the
numerator of which is one, and the denominator of which is the remaining number
of annual payments due the Participant. 
By way of example, if

 

	
  Willis
  Lease Finance Corporation

  	
   

  	
   

  
	
  Deferred
  Compensation Plan

  	
   

  	
   

  

 

1

 

the Participant elects a 10 year Annual Installment Method, the first
payment shall be 1/10 of the Account Balance, calculated as described in this
definition.  The following year, the
payment shall be 1/9 of the Account Balance, calculated as described in this definition.  Each annual installment shall be paid on or
as soon as practicable after the last business day of the applicable year.

 

1.6                                             “Base
Annual Salary” shall mean the annual base salary payable to the Participant
relating to services performed during any calendar year, whether or not paid in
such calendar year or included on the Federal Income Tax Form W-2 for such
calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock
options, relocation expenses, incentive payments, non-monetary awards,
directors fees and other fees, automobile and other allowances paid to a
Participant for employment services rendered (whether or not such allowances
are included in the Employee’s gross income). Base Annual Salary shall be
calculated before reduction for compensation voluntarily deferred or
contributed by the Participant pursuant to all qualified or non-qualified plans
of any Employer and shall be calculated to include amounts not otherwise
included in the Participant’s gross income under Code Sections 125, 402(e)(3),
402(h), or 403(b) pursuant to plans established by any Employer; provided,
however, that all such amounts will be included in compensation only to the
extent that, had there been no such plan, the amount would have been payable in
cash to the Employee.

 

1.7                                             “Beneficiary”
shall mean one or more persons, trusts, estates or other entities, designated
in accordance with Article 9, that are entitled to receive benefits under
this Plan upon the death of a Participant.

 

1.8                                             “Beneficiary
Designation Form” shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the Committee to
designate one or more Beneficiaries.

 

1.9                                             “Board”
shall mean the board of directors of the Company.

 

1.10                                       “Change
in Control” shall mean with respect to the Company the first to occur of any of
the following events:

 

(a)                                  any
“person” (as such term is used in Section 13(d) and 14 (d) of
the Securities Exchange Act of 1934, as amended), other than Charles F. Willis
IV or an Affiliate of Charles F. Willis IV, is or becomes the “beneficial owner”
(as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing at least fifty percent (50%) of the
total voting power represented by the Company’s then outstanding voting
securities;

 

(b)                                 the
stockholder of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger of consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty (50%)
of the total voting power represented by the voting securities of the Company
or such surviving entity outstanding immediately after such a merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition by the Company or all or substantially all of the

 

2

 

Company’s assets, provided, however, that if such merger,
consolidation, liquidation, dissolution, sale or disposition does not
subsequently close, a Change in Control shall not be deemed to have occurred;
or

 

(c)                                  individuals
who are directors of the Company as of the date hereof cease for any reason to
constitute a majority of the Board unless such change(s) is approved by a
majority of the directors of the Company who serve on the Board as of the date
hereof or who have been previously approved by a majority of the directors of
the Company.

 

For purposes of this Section 1.10, “Affiliate” shall mean, with
respect to a person, a person that directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with such
person.

 

1.11                                       “Claimant”
shall have the meaning set forth in Section 14.1.

 

1.12                                       “Code”
shall mean the Internal Revenue Code of 1986, as it may be amended from time to
time.

 

1.13                                       “Committee”
shall mean the committee described in Article 12.

 

1.14                                       “Company”
shall mean Willis Lease Finance Corporation and any successor to all or
substantially all of the Company’s assets or business.

 

1.15                                       “Company
Matching Account” shall mean (i) the sum of all of a Participant’s Annual
Company Matching Amounts, plus (ii) amounts credited in accordance with
all the applicable crediting provisions of this Plan that relate to the
Participant’s Company Matching Account, less (iii) all distributions made
to the Participant or his or her Beneficiary pursuant to this Plan that relate
to the Participant’s Company Matching Account.

 

1.16                                       “Deferral
Account” shall mean (i) the sum of all of a Participant’s Annual Deferral
Amounts, plus (ii) amounts credited in accordance with all the applicable
crediting provisions of this Plan that relate to the Participant’s Deferral
Account, less (iii) all distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that relate to his or her Deferral
Account.

 

1.17                                       “Deduction
Limitation” shall mean the following described limitation on a benefit that may
otherwise be distributable pursuant to the provisions of this Plan.  Except as otherwise provided, this limitation
shall be applied to all distributions that are “subject to the Deduction
Limitation” under this Plan.  If an
Employer determines in good faith prior to a Change in Control that there is a
reasonable likelihood that any compensation paid to a Participant for a taxable
year of the Employer would not be deductible by the Employer solely by reason
of the limitation under Code Section 162(m), then to the extent deemed
necessary by the Employer to ensure that the entire amount of any distribution
to the Participant pursuant to this Plan prior to the Change in Control is
deductible, the Employer, at the direction of the Committee, may defer all or
any portion of a distribution under this Plan. 
Any amounts deferred pursuant to this limitation shall continue to be
credited/debited with additional amounts in accordance with Section 3.10
below, even if such amount is being paid out in installments.  The amounts so deferred and amounts credited
thereon shall be distributed to the Participant or his or her Beneficiary (in
the event of the Participant’s death) at the earliest possible date, as
determined

 

3

 

by the Employer in good faith, on which the deductibility of
compensation paid or payable to the Participant for the taxable year of the
Employer during which the distribution is made will not be limited by Section 162(m),
or if earlier, the effective date of a Change in Control.  Notwithstanding anything to the contrary in
this Plan, the Deduction Limitation shall not apply to any distributions made
after a Change in Control.

 

1.18                                       “Disability”
shall mean a period of disability during which a Participant qualifies for
disability benefits under the Company’s long-term disability plan.

 

1.19                                       “Disability
Benefit” shall mean the benefit set forth in Article 8.

 

1.20                                       “Election
Form” shall mean the form established from time to time by the Committee that a
Participant completes, signs and returns to the Committee to make an election
under the Plan.

 

1.21                                       “Employee”
shall mean a person who is an employee of any Employer.

 

1.22                                       “Employer(s)”
shall mean the Company and/or any of its subsidiaries or joint ventures (now in
existence or hereafter formed or acquired) that have been selected by the Board
to participate in the Plan and have adopted the Plan as a sponsor.

 

1.23                                       “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as it may be
amended from time to time.

 

1.24                                       “401(k)
Plan” shall mean the Company’s 401(k) plan.

 

1.25                                       “Participant”
shall mean any Employee (i) who is selected to participate in the Plan, (ii) who
elects to participate in the Plan, (iii) who signs a Plan Agreement, an
Election Form and a Beneficiary Designation Form, (iv) whose signed
Plan Agreement, Election Form and Beneficiary Designation Form are
accepted by the Committee, (v) who commences participation in the Plan,
and (vi) whose Plan Agreement has not terminated.  A spouse or former spouse of a Participant
shall not be treated as a Participant in the Plan or have an account balance
under the Plan, even if he or she has an interest in the Participant’s benefits
under the Plan as a result of applicable law or property settlements resulting
from legal separation or divorce.

 

1.26                                       “Plan”
shall mean the Willis Lease Finance Corporation Deferred Compensation Plan
which shall be evidenced by this instrument and by each Plan Agreement, as they
may be amended from time to time.

 

1.27                                       “Plan
Agreement” shall mean a written agreement, as may be amended from time to time,
which is entered into by and between an Employer and a Participant.  Each Plan Agreement executed by a Participant
and the Participant’s Employer shall provide for the entire benefit to which
such Participant is entitled under the Plan; should there be more than one Plan
Agreement, the Plan Agreement bearing the latest date of acceptance by the
Employer shall supersede all previous Plan Agreements in their entirety and
shall govern such entitlement.  The terms
of any Plan Agreement may be different for any Participant, and any Plan
Agreement may, among other things, provide additional benefits not set forth in
the Plan or limit the benefits otherwise provided under the Plan; provided,
however, that any such additional benefits or benefit limitations must be
agreed to by both the Employer and the Participant.

 

4

 

1.28                                       “Plan
Year” shall mean a period beginning on January 1 of each calendar year and
continuing through December 31 of such calendar year, except for the first
Plan Year which shall be the six month period beginning July 1, 2001.

 

1.29                                       “Pre-Retirement
Survivor Benefit” shall mean the benefit set forth in Article 6.

 

1.30                                       “Retirement”,
“Retire(s)” or “Retired” shall mean, with respect to an Employee, severance
from employment from all Employers for any reason other than a leave of
absence, death or Disability on or after the earlier of the attainment of (a) age
sixty-five (65) with five (5) Years of Service, or (b) age fifty-five
(55) with ten (10) Years of Service.

 

1.31                                       “Retirement
Benefit” shall mean the benefit set forth in Article 5.

 

1.32                                       “Short-Term
Payout” shall mean the payout set forth in Section 4.1.

 

1.33                                       “Termination
Benefit” shall mean the benefit set forth in Article 7.

 

1.34                                       “Termination
of Employment” shall mean the severance of employment with all Employers,
voluntarily or involuntarily, for any reason other than Retirement, Disability,
death or an authorized leave of absence.

 

1.35                                       “Trust”
shall mean one or more grantor trusts established by the Company.

 

1.36                                       “Unforeseeable
Financial Emergency” shall mean an unanticipated emergency that is caused by an
event beyond the control of the Participant that would result in severe
financial hardship to the Participant resulting from (i) a sudden and
unexpected illness or accident of the Participant or a dependent (as defined in
Code Section 152(a)) of the Participant, (ii) a loss of the
Participant’s property due to casualty, or (iii) such other extraordinary
and unforeseeable circumstances arising as a result of events beyond the
control of the Participant, all as determined in the sole discretion of the
Committee.

 

1.37                                       “Years
of Service” shall mean the total number of full years in which a Participant
has been employed by one or more Employers. 
For purposes of this definition, a year of employment shall be a 365 day
period (or 366 day period in the case of a leap year) that, for the first year
of employment, commences on the Employee’s date of hiring and that, for any
subsequent year, commences on an anniversary of that hiring date.  Any partial year of employment shall not be
counted.

 

5

 

ARTICLE 2

Selection, Enrollment, Eligibility

 

2.1                                             Selection by Committee.  Participation in the Plan shall be limited to
a select group of management and highly compensated Employees of the Employers,
as determined by the Committee in its sole discretion.  From that group, the Committee shall select,
in its sole discretion, Employees to participate in the Plan.

 

2.2                                             Enrollment Requirements.  As a condition to participation in the Plan,
each selected Employee shall complete, execute and return to the Committee a
Plan Agreement, an Election Form and a Beneficiary Designation Form, all
within 30 days after he or she is selected to participate in the Plan, and in
no event later than the day before the effective date of the Participant’s
commencement of participation in the Plan. 
In addition, the Committee shall establish from time to time such other
enrollment requirements as it determines in its sole discretion are necessary.

 

2.3                                             Eligibility; Commencement of Participation.  Provided an Employee selected to participate
in the Plan has met all enrollment requirements set forth in this Plan and
required by the Committee, including returning all required documents to the
Committee within the specified time period, that Employee shall commence
participation in the Plan on the first day of the month following the month in
which the Employee completes all enrollment requirements.  If an Employee fails to meet all such
requirements within the period required, in accordance with Section 2.2,
that Employee shall not be eligible to participate in the Plan until the first
day of the Plan Year following the delivery to and acceptance by the Committee
of the required documents.

 

2.4                                             Termination of Participation and/or Deferrals.  If the Committee determines in good faith
that a Participant no longer qualifies as a member of a select group of
management or highly compensated employees, as membership in such group is
determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate
any deferral election the Participant has made for the remainder of the Plan
Year in which the Participant’s membership status changes, (ii) prevent
the Participant from making future deferral elections and/or (iii) immediately
distribute the Participant’s then Account Balance as a Termination Benefit and
terminate the Participant’s participation in the Plan.

 

6

 

ARTICLE 3

Deferral Commitments/Company Matching/Crediting/Taxes

 

3.1                                             Amount of Deferrals.

 

For each Plan Year, a
Participant may elect to defer, as his or her Annual Deferral Amount, Base
Annual Salary and Annual Bonus up to the following maximum percentages for each
deferral elected:

 

	
  Deferral

  	
   

  	
  Maximum Amount

  
	
  Base Annual Salary

  	
   

  	
  80%

  
	
  Annual Bonus

  	
   

  	
  100%

  

 

Notwithstanding the foregoing,
with respect to the first Plan Year of the Plan or for any Plan Year where a
Participant first becomes a Participant after the first day of a Plan Year, the
maximum Annual Deferral Amount, with respect to both Base Annual Salary and
Annual Bonus, shall be limited to the amount of compensation not yet earned by
the Participant as of the date the Participant submits a Plan Agreement and
Election Form to the Committee for acceptance.

 

3.2                                 Election to Defer; Effect of Election Form.

 

(a)                                  First Plan Year.  In connection with a Participant’s
commencement of participation in the Plan, as amended and restated herein, the
Participant shall make an irrevocable deferral election for the Plan Year in
which the Participant commences participation in the Plan, along with such
other elections as the Committee deems necessary or desirable under the
Plan.  For these elections to be valid,
the Election Form must be completed and signed by the Participant, timely
delivered to the Committee (in accordance with Section 2.2 above) and
accepted by the Committee.

 

(b)                                 Subsequent Plan Years.  For each succeeding Plan Year, an irrevocable
deferral election for that Plan Year, and such other elections as the Committee
deems necessary or desirable under the Plan, shall be made by timely delivering
to the Committee, in accordance with its rules and procedures, before the
end of the Plan Year preceding the Plan Year for which the election is made, a
new Election Form. If no such Election Form is timely delivered for a Plan
Year, the Annual Deferral Amount shall be zero for that Plan Year.

 

3.3                                             Withholding of Annual Deferral Amounts.  For each Plan Year, the Base Annual Salary
portion of the Annual Deferral Amount shall be withheld from each regularly
scheduled Base Annual Salary payroll in equal amounts, as adjusted from time to
time for increases and decreases in Base Annual Salary.  The Annual Bonus portion of the Annual
Deferral Amount shall be withheld at the time the Annual Bonus is or otherwise
would be paid to the Participant, whether or not this occurs during the Plan
Year itself.

 

3.4                                             Annual Company Matching Amount.  A Participant’s Annual Company Matching
Amount for any Plan Year shall be as determined by the Committee each year in
its discretion.

 

7

 

3.5                                             Investment of Trust Assets.  The Trustee of the Trust shall be authorized,
upon written instructions received from the Committee or investment manager
appointed by the Committee, to invest and reinvest the assets of the Trust in
accordance with the applicable Trust Agreement.

 

3.6                                             Vesting.

 

(a)                                  A
Participant shall at all times be 100% vested in his or her Deferral Account.

 

(b)                                 A
Participant shall be vested in his or her Company Matching Account in
accordance with the following schedule, or as otherwise provided in a
Participant’s individual Plan Agreement:

 

 

	
  Years of Service on Date

  of Termination of Employment

  	
   

  	
  Vested Percentage of

  Company Matching Account

  
	
  Less than 6 years

  	
   

  	
  0%

  
	
  6 years

  	
   

  	
  33.33%

  
	
  7 years

  	
   

  	
  66.67%

  
	
  8 years or more

  	
   

  	
  100%

  

 

(c)                                  Notwithstanding
paragraph (b), a Participant shall be 100% vested in his or her Company
Matching Account if (1) the Participant attains Retirement age while an
Employee, (2) the Participant dies while an Employee, or (3) there is
a Change in Control while the Participant is an Employee, except as otherwise
provided in a Participant’s individual Plan Agreement.

 

3.7                                             Crediting/Debiting of Account Balances.  In accordance with, and subject to, the rules and
procedures that are established from time to time by the Committee, in its sole
discretion, amounts shall be credited or debited to a Participant’s Account
Balance in accordance with the following rules:

 

(a)                                  Election of Measurement Funds.  A Participant, in connection with his or her
initial deferral election in accordance with Section 3.2(a) above,
shall elect, on the Election Form, one or more Measurement Fund(s) (as
described in Section 3.7(c) below) to be used to determine the
additional amounts to be credited to his or her Account Balance for the first
pay period in which the Participant commences participation in the Plan and
continuing thereafter for each subsequent pay period in which the Participant
participates in the Plan, unless changed in accordance with the next
sentence.  The Participant may (but is
not required to) elect, by submitting an Election Form to the Committee
that is accepted by the Committee, to add or delete one or more Measurement
Fund(s) to be used to determine the additional amounts to be credited to his or
her Account Balance, or to change the portion of his or her Account Balance
allocated to each previously or newly elected Measurement Fund. If an election
is made in accordance with the previous sentence, it shall apply upon its
acceptance by the Committee in its discretion and continue thereafter until
again changed in accordance with the previous sentence.

 

8

 

(b)                                 Proportionate Allocation.  In making any election described in Section 3.7(a) above,
the Participant shall specify on the Election Form, in increments of one
percentage point (1%), the percentage of his or her Account Balance to be
allocated to a Measurement Fund (as if the Participant was making an investment
in that Measurement Fund with that portion of his or her Account Balance).

 

(c)                                  Measurement Funds.  The Participant may elect one or more of the
measurement funds (the “Measurement Funds”) for the purpose of crediting
additional amounts to his or her Account Balance, which funds shall be those
available from time to time under the Willis 401(k) Plan.

 

As necessary,
the Committee may, in its sole discretion, discontinue, substitute or add a
Measurement Fund.  Each such action will
take effect as of the date selected by the Committee.

 

(d)                                 Crediting or Debiting Method.  The performance of each elected Measurement
Fund (either positive or negative) will be determined by the Committee, in its
reasonable discretion, based on the performance of the Measurement Funds
themselves.  A Participant’s Account
Balance shall be credited or debited on a daily basis based on the performance
of each Measurement Fund selected by the Participant, as determined by the
Committee in its sole discretion, as though (i) a Participant’s
Account Balance were invested in the Measurement Fund(s) selected by the
Participant, in the percentages applicable to such amounts, as of the close of
business on the previous day, at the closing price on such date; (ii) the
portion of the Annual Deferral Amount that was actually credited on that day,
if any, were invested in the Measurement Fund(s) selected by the Participant, in
the percentages applicable to such Annual Deferral Amount, as of the close of
business on such day, at the closing price on such date; and (iii) any
distribution made to a Participant that decreases such Participant’s Account
Balance ceased being invested in the Measurement Fund(s), in the percentages
applicable to such amounts, as of the close of business on such date.  A Participant’s Annual Company Matching
Amount shall be credited to his or her Account Balance for purposes of this Section 3.7(d) at
the same time and in the same manner as the Annual Deferral Amount to which it
relates.

 

(e)                                  No Actual Investment.  Notwithstanding any other provision of this
Plan that may be interpreted to the contrary, the Measurement Funds are to be
used for measurement purposes only, and a Participant’s election of any such
Measurement Fund, the allocation to his or her Account Balance thereto, the
calculation of additional amounts and the crediting or debiting of such amounts
to a Participant’s Account Balance shall  not be considered or
construed in any manner as an actual investment of his or her Account Balance
in any such Measurement Fund.  In the
event that the Company or the Trustee (as that term is defined in the Trust),
in its own discretion, decides to invest funds in any or all of the Measurement
Funds, no Participant shall have any rights in or to such investments
themselves.  Without limiting the
foregoing, a Participant’s Account Balance shall at all times be a bookkeeping
entry only and shall not represent any investment made on his or her behalf by
the Company or the Trust; the Participant shall at all times remain an
unsecured creditor of the Company.

 

9

 

3.8                                             FICA and Other Taxes.

 

(a)                                  Annual Deferral Amounts.  For each Plan Year in which an Annual
Deferral Amount is being withheld from a Participant, the Participant’s
Employer(s) shall withhold from that portion of the Participant’s Base Annual
Salary and Bonus that is not being deferred, in a manner determined by the
Employer(s), the Participant’s share of FICA and other employment taxes on such
Annual Deferral Amount.  If necessary,
the Committee may reduce the Annual Deferral Amount in order to comply with
this Section 3.8.

 

(b)                                 Company Matching Amounts.  When a participant becomes vested in a
portion of his or her Company Matching Account, the Participant’s Employer(s)
shall withhold from the Participant’s Base Annual Salary and/or Bonus that is
not deferred, in a manner determined by the Employer(s), the Participant’s
share of FICA and other employment taxes. 
If necessary, the Committee may reduce the vested portion of the
Participant’s Company Matching Account in order to comply with this Section 3.8.

 

(c)                                  Distributions.  The Participant’s Employer(s), or the trustee
of the Trust, shall withhold from any payments made to a Participant under this
Plan all federal, state and local income, employment and other taxes required
to be withheld by the Employer(s), or the trustee of the Trust, in connection
with such payments, in amounts and in a manner to be determined in the sole
discretion of the Employer(s) and the trustee of the Trust.

 

10

 

ARTICLE 4

Short-Term Payout; Unforeseeable Financial Emergencies;

Withdrawal Election

 

4.1                                             Short-Term Payout.  Subject to the Deduction Limitation, in
connection with each election to defer an Annual Deferral Amount, a Participant
may irrevocably elect to receive a future “Short-Term Payout” from the Plan
with respect to such Annual Deferral Amount. 
Subject to the Deduction Limitation, the Short-Term Payout shall be a
lump sum payment in an amount that is equal to the Annual Deferral Amount plus
amounts credited or debited in the manner provided in Section 3.7 above on
that amount, determined at the time that the Short-Term Payout becomes payable
(rather than the date of a Termination of Employment).  Subject to the terms and conditions of this
Plan, each Short-Term Payout elected shall be paid out during a 60 day period
commencing immediately after the last day of any Plan Year designated by the
Participant that is at least three (3) Plan Years after the Plan Year in
which the Annual Deferral Amount is actually deferred.

 

4.2                                             Other Benefits Take Precedence Over Short-Term.  Should an event occur that triggers a benefit
under Article 5, 6, 7 or 8, any Annual Deferral Amount, plus amounts
credited or debited thereon, that is subject to a Short-Term Payout election
under Section 4.1 shall not be paid in accordance with Section 4.1
but shall be paid in accordance with the other applicable Article.

 

4.3                                             Withdrawal Payout for Unforeseeable Financial
Emergencies.  If the
Participant experiences an Unforeseeable Financial Emergency, the Participant
may petition the Committee to receive a partial or full payout from the
Plan.  The payout shall not exceed the
lesser of the Participant’s Account Balance, calculated as if such Participant
were receiving a Termination Benefit, or the amount reasonably needed to
satisfy the Unforeseeable Financial Emergency and shall be paid without penalty
or forfeiture.  If, subject to the sole
discretion of the Committee, the petition for a payout is approved, such payout
shall be made within 60 days of the date of approval.

 

4.4                                             Withdrawal Election.  A Participant may elect, at any time, to
withdraw all of his or her Account Balance, calculated as if there had occurred
a Termination of Employment as of the day of the election, less a withdrawal
penalty equal to 10% of such amount (the net amount shall be referred to as the
“Withdrawal Amount”).  This election can
be made at any time, before or after Retirement, Disability, death or
Termination of Employment, and whether or not the Participant is in the process
of being paid pursuant to an installment payment schedule.  If made before Retirement, Disability or
death, a Participant’s Withdrawal Amount shall be all or a portion of his or
her Account Balance calculated as if there had occurred a Termination of
Employment as of the day of the election. 
The Participant shall make this election by giving the Committee advance
written notice of the election in a form determined from time to time by the
Committee. The Participant shall be paid the Withdrawal Amount within
60 days of his or her election. 
Once the Withdrawal Amount is paid, the Participant’s participation in
the Plan shall be suspended during the Plan Year in which the withdrawal occurs
and the next-following Plan Year.  The
payment of this Withdrawal Amount shall not be subject to the Deduction Limitation.

 

11

 

ARTICLE 5

Retirement Benefit

 

5.1                                             Retirement Benefit.  Subject to the Deduction Limitation, a
Participant who Retires shall receive as a Retirement Benefit his or her
Account Balance.

 

5.2                                             Payment of Retirement Benefit.  A Participant, in connection with his or her
commencement of participation in the Plan, shall elect on an Election Form to
receive the Retirement Benefit in a lump sum or pursuant to an Annual
Installment Method of 5, 10 or 15 years. 
The Participant may annually change his or her election to an allowable
alternative payout period by submitting a new Election Form to the
Committee, provided that any such Election Form is submitted at least one (1) year
prior to the Participant’s Retirement and is accepted by the Committee in its
sole discretion.  The Election Form most
recently accepted by the Committee shall govern the payout of the Retirement
Benefit.  If a Participant does not make
any election with respect to the payment of the Retirement Benefit, then such
benefit shall be payable in a lump sum. 
The lump sum payment shall be made, or installment payments shall
commence, no later than 60 days after the last day of the Plan Year in
which the Participant Retires.  Any
payment made shall be subject to the Deduction Limitation.

 

Notwithstanding
any other provision of the Plan to the contrary, the Participant’s Account
shall be paid in the form of a lump sum if such Account is less than $25,000 as
of the date the Participant Retires.

 

5.3                                             Death Prior to Completion of Retirement Benefit.  If a Participant dies after Retirement but
before the Retirement Benefit is paid in full, the Participant’s unpaid
Retirement Benefit payments shall continue and shall be paid to the Participant’s
Beneficiary over the remaining number of years and in the same amounts as that
benefit would have been paid to the Participant had the Participant survived.

 

12

 

ARTICLE 6

Pre-Retirement Survivor Benefit

 

6.1                                             Pre-Retirement Survivor Benefit.  The Participant’s Beneficiary shall receive a
Pre-Retirement Survivor Benefit equal to the Participant’s Account Balance if
the Participant dies before he or she Retires, experiences a Termination of
Employment or suffers a Disability.

 

6.2                                             Payment of Pre-Retirement Survivor Benefit.  A Participant, in connection with his or her
commencement of participation in the Plan, shall elect on an Election Form whether
the Pre-Retirement Survivor Benefit shall be received by his or her Beneficiary
in a lump sum or pursuant to an Annual Installment Method of 5, 10 or 15
years.  The Participant may annually
change this election to an allowable alternative payout period by submitting a
new Election Form to the Committee, which form must be accepted by the
Committee in its sole discretion.  The
Election Form most recently accepted by the Committee prior to the
Participant’s death shall govern the payout of the Participant’s Pre-Retirement
Survivor Benefit.  If a Participant does
not make any election with respect to the payment of the Pre-Retirement
Survivor Benefit, then such benefit shall be paid in a lump sum.  Despite the foregoing, if the Participant’s
Account Balance at the time of his or her death is less than $25,000, payment
of the Pre-Retirement Survivor Benefit shall be made in the form of a lump
sum.  The lump sum payment shall be made,
or installment payments shall commence, no later than 60 days after the last
day of the Plan Year in which the Committee is provided with proof that is satisfactory
to the Committee of the Participant’s death. 
Any payment made shall be subject to the Deduction Limitation.

 

13

 

ARTICLE 7

Termination Benefit

 

7.1                                             Termination Benefit.  Subject to the Deduction Limitation, the
Participant shall receive a Termination Benefit which shall be equal to the
Participant’s Account Balance if a Participant experiences a Termination of
Employment prior to his or her Retirement, death or Disability.

 

7.2                                             Payment of Termination Benefit.  Payment of a Participant’s Termination
Benefit shall be in a lump sum paid no later than 60 days after the end of the
Plan Year during which the Participant experiences the Termination of
Employment.  Any payment made shall be
subject to the Deduction Limitation.

 

14

 

ARTICLE 8

Disability Waiver and Benefit

 

8.1                                             Disability Waiver.

 

(a)                                  Waiver of Deferral.  A Participant who is determined by the
Committee to be suffering from a Disability shall be excused from fulfilling
that portion of the Annual Deferral Amount commitment that would otherwise have
been withheld from a Participant’s Base Annual Salary and/or Annual Bonus for
the Plan Year during which the Participant first suffers a Disability.  During the period of Disability, the
Participant shall not be allowed to make any additional deferral elections, but
will continue to be considered a Participant for all other purposes of this
Plan.

 

(b)                                 Return to Work.  If a Participant returns to employment with
an Employer after a Disability ceases, the Participant may elect to defer an
Annual Deferral Amount for the Plan Year following his or her return to
employment or service and for every Plan Year thereafter while a Participant in
the Plan; provided such deferral elections are otherwise allowed and an
Election Form is delivered to and accepted by the Committee for each such
election in accordance with Section 3.2 above.

 

8.2                                             Continued Eligibility; Disability Benefit.  A Participant suffering a Disability shall,
for benefit purposes under this Plan, continue to be considered to be employed
and shall be eligible for the benefits provided for in Articles 4, 5, 6
or 7 in accordance with the provisions of those Articles.  Notwithstanding the above, the Committee
shall have the right to, in its sole and absolute discretion and for purposes
of this Plan only, deem the Participant to have experienced a Termination of
Employment, or in the case of a Participant who is eligible to Retire, to have
Retired, at any time (or in the case of a Participant who is eligible to
Retire, as soon as practicable) after such Participant is determined to be
suffering a Disability, in which case the Participant shall receive a
Disability Benefit equal to his or her Account Balance at the time of the
Committee’s determination; provided, however, that should the Participant
otherwise have been eligible to Retire, he or she shall be paid in accordance
with Article 5.  The Disability
Benefit shall be paid in a lump sum within 60 days of the Committee’s exercise
of such right.  Any payment made shall be
subject to the Deduction Limitation.

 

15

 

ARTICLE 9

Beneficiary Designation

 

9.1                                             Beneficiary.  Each Participant shall have the right, at any
time, to designate his or her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable under the Plan to a beneficiary
upon the death of a Participant.  The
Beneficiary designated under this Plan may be the same as or different from the
Beneficiary designation under any other plan of an Employer in which the
Participant participates.

 

9.2                                             Beneficiary Designation; Change.  A Participant shall designate his or her
Beneficiary by completing and signing the Beneficiary Designation Form, and
returning it to the Committee or its designated agent.  A Participant shall have the right to change
a Beneficiary by completing, signing and otherwise complying with the terms of
the Beneficiary Designation Form and the Committee’s rules and procedures,
as in effect from time to time.  Upon the
acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled.  The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant and
accepted by the Committee prior to his or her death.

 

9.3                                             Acknowledgment.  No designation or change in designation of a
Beneficiary shall be effective until received and acknowledged in writing by
the Committee or its designated agent.

 

9.4                                             No Beneficiary Designation.  If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant’s benefits, then the Participant’s designated
Beneficiary shall be deemed to be his or her surviving spouse.  If the Participant has no surviving spouse,
the benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the Participant’s estate.

 

9.5                                             Doubt as to Beneficiary.  If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the Committee
shall have the right, exercisable in its discretion, to cause the Participant’s
Employer or the Trust to withhold such payments until this matter is resolved
to the Committee’s satisfaction.

 

9.6                                             Discharge of Obligations.  The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant’s Plan Agreement shall terminate upon such
full payment of benefits.

 

16

 

ARTICLE 10 

Leave of Absence

 

10.1                                       Paid Leave of Absence.  If a Participant is authorized by the
Participant’s Employer for any reason to take a paid leave of absence from the
employment of the Employer, the Participant shall continue to be considered
employed by the Employer and the Annual Deferral Amount shall continue to be
withheld during such paid leave of absence in accordance with Section 3.3.

 

10.2                                       Unpaid Leave of Absence.  If a Participant is authorized by the
Participant’s Employer for any reason to take an unpaid leave of absence from
the employment of the Employer, the Participant shall continue to be considered
employed by the Employer and the Participant shall be excused from making
deferrals until the earlier of the date the leave of absence expires or the
Participant returns to a paid employment status.  Upon such expiration or return, deferrals
shall resume for the remaining portion of the Plan Year in which the expiration
or return occurs, based on the deferral election, if any, made for that Plan
Year.  If no election was made for that
Plan Year, no deferral shall be withheld.

 

17

 

ARTICLE 11

Termination, Amendment or Modification

 

11.1                                       Termination.  Although each Employer anticipates that it
will continue the Plan for an indefinite period of time, there is no guarantee
that any Employer will continue the Plan or will not terminate the Plan at any
time in the future.  Accordingly, each
Employer reserves the right to discontinue its sponsorship of the Plan and/or
to terminate the Plan at any time with respect to any or all of its
participating Employees, by action of its board of directors.  Upon the termination of the Plan with respect
to any Employer, the Plan Agreements of the affected Participants who are
employed by that the Employer shall terminate and their Account Balances,
determined as if they had experienced a Termination of Employment on the date
of Plan termination or, if Plan termination occurs after the date upon which a
Participant was eligible to Retire, then with respect to that Participant as if
he or she had Retired on the date of Plan termination, shall be paid to the
Participants as follows:  If the Plan is
terminated with respect to any or all of its Participants the applicable
Employer shall prior to a Change in Control have the right, in its sole
discretion and notwithstanding any elections made by the Participant, to pay
such benefits in a lump sum or pursuant to an Annual Installment Method of up
to 15 years, with amounts credited and debited during the installment period as
provided herein.  After a Change in
Control, benefits shall be payable solely in accordance with Participant
elections or otherwise applicable terms of the Plan.  Notwithstanding the foregoing the termination
of the Plan shall not adversely affect any Participant or Beneficiary who has
become entitled to the payment of any benefits under the Plan as of the date of
termination.

 

11.2                                       Amendment.  Any Employer may, at any time, prior to a
Change in Control amend or modify the Plan in whole or in part with respect to
that Employer by the action of its board of directors; provided, however, that:
(i) no amendment or modification shall be effective to decrease or
restrict the value of a Participant’s Account Balance in existence at the time
the amendment or modification is made, calculated as if the Participant had
experienced a Termination of Employment as of the effective date of the
amendment or modification or, if the amendment or modification occurs after the
date upon which the Participant was eligible to Retire, the Participant had
Retired as of the effective date of the amendment or modification, or the level
of vesting in such Account (ii) no amendment or modification of this Section 11.2
of the Plan made after a Change in Control shall be effective; and (iii) after
a Change in Control the Committee must consent to any amendment.  The amendment or modification of the Plan
shall not affect any Participant or Beneficiary who has become entitled to the
payment of benefits under the Plan as of the date of the amendment or
modification.

 

11.3                                       Plan Agreement.  Despite the provisions of Sections 11.1
and 11.2 above, if a Participant’s Plan Agreement contains benefits or
limitations that are not in this Plan document, the Employer may only amend or
terminate such provisions with the consent of the Participant.

 

11.4                                       Effect of Payment.  The full payment of the applicable benefit
under Articles 4, 5, 6, 7 and 8 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under this
Plan and the Participant’s Plan Agreement shall terminate.

 

18

 

ARTICLE 12

Administration

 

12.1                                       Committee Duties.  Except as otherwise provided in this Article 12,
this Plan shall be administered by a Committee which shall consist of the
Board, or such committee as the Board shall appoint.  Members of the Committee may be Participants
under this Plan.  The Committee shall
also have the discretion and authority to (i) make, amend, interpret, and
enforce all appropriate rules and regulations for the administration of
this Plan and (ii) decide or resolve any and all questions including
interpretations of this Plan, as may arise in connection with the Plan.  Any individual serving on the Committee who
is a Participant shall not vote or act on any matter relating solely to himself
or herself.  Benefits under this Plan
will be paid only if the Committee decides in its discretion that the claimant
is entitled to them.  When making a
determination or calculation, the Committee shall be entitled to rely on
information furnished by a Participant or the Company.

 

12.2                                       Administration Upon Change in Control.  Upon and after the occurrence of a Change in
Control, the “Committee” shall either be an independent third party or a group
of individuals approved by the individual who, immediately prior to such event,
was the Company’s Chief Executive Officer or, if not so identified, the Company’s
highest ranking officer (the “Ex-CEO”). 
Upon and after the occurrence of a Change in Control, the Company
must:  (1) pay all reasonable
administrative expenses and fees of the Committee; (2) indemnify the
Committee against any costs, expenses and liabilities including, without
limitation, attorney’s fees and expenses arising in connection with the
performance of the Committee hereunder, except with respect to matters
resulting from the gross negligence or willful misconduct of the Committee or
its employees or agents; and (3) supply full and timely information to the
Committee or all matters relating to the Plan, the Trust, the Participants and
their Beneficiaries, the Account Balances of the Participants, the date of
circumstances of the Retirement, Disability, death or Termination of Employment
of the Participants, and such other pertinent information as the Committee may
reasonably require.  Upon and after a
Change in Control, Committee members may be only terminated (and a replacement
appointed) by the Trustee with the approval of the Ex-CEO and no Committee
member may be terminated by the Company.

 

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

 

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

 

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

 

19

 

12.6                                       Employer Information.  To enable the Committee to perform its
functions, the Company and each Employer shall supply full and timely
information to the Committee, as the case may be, on all matters relating to
the compensation of its Participants, the date and circumstances of the
Retirement, Disability, death or circumstances of the Retirement, Disability,
death or Termination of Employment of its Participants, and such other
pertinent information as the Committee may reasonably require.

 

20

 

ARTICLE 13

Other Benefits and Agreements

 

13.1                                       Coordination with Other Benefits.  The benefits provided for a Participant and
Participant’s Beneficiary under the Plan are in addition to any other benefits
available to such Participant under any other plan or program for employees of
the Participant’s Employer.  The Plan
shall supplement and shall not supersede, modify or amend any other such plan
or program except as may otherwise be expressly provided.

 

21

 

ARTICLE 14

Claims Procedures

 

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

 

14.2                                       Notification of Decision.  The Committee shall consider a Claimant’s
claim within a reasonable time, and shall notify the Claimant in writing:

 

(a)                                  that
the Claimant’s requested determination has been made, and that the claim has
been allowed in full; or

 

(b)                                 that
the Committee has reached a conclusion contrary, in whole or in part, to the
Claimant’s requested determination, and such notice must set forth in a manner
calculated to be understood by the Claimant:

 

(i)                                     the
specific reason(s) for the denial of the claim, or any part of it;

 

(ii)                                  specific
reference(s) to pertinent provisions of the Plan upon which such denial was
based;

 

(iii)                               a
description of any additional material or information necessary for the
Claimant to perfect the claim, and an explanation of why such material or
information is necessary; and

 

(iv)                              an
explanation of the claim review procedure set forth in Section 14.3 below.

 

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

 

(a)                                  may
review pertinent documents;

 

(b)                                 may
submit written comments or other documents; and/or

 

(c)                                  may
request a hearing, which the Committee, in its sole discretion, may grant.

 

14.4                                       Decision on Review.  The Committee shall render its decision on
review promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee’s

 

22

 

decision must be rendered within 120 days after such date.  Such decision must be written in a manner
calculated to be understood by the Claimant, and it must contain:

 

(a)                                  specific
reasons for the decision;

 

(b)                                 specific
reference(s) to the pertinent Plan provisions upon which the decision was
based; and

 

(c)                                  such
other matters as the Committee deems relevant.

 

14.5                                       Legal Action.  A Claimant’s compliance with the foregoing
provisions of this Article 14 is a mandatory prerequisite to a Claimant’s
right to commence any legal action with respect to any claim for benefits under
this Plan.

 

23

 

ARTICLE 15

Trust

 

15.1                                       Establishment of the Trust.  The Company shall establish the Trust, and
each Employer shall at least annually transfer over to the Trust such assets as
the Employer determines, in its sole discretion, are necessary to provide, on a
present value basis, for its respective future liabilities created with respect
to the Annual Deferral Amounts, Annual Company Contribution Amounts, and
Company Matching Amounts for such Employer’s Participants for all periods prior
to the transfer, as well as any debits and credits to the Participants’ Account
Balances for all periods prior to the transfer, taking into consideration the
value of the assets in the trust at the time of the transfer.

 

15.2                                       Interrelationship of the Plan and the Trust.  The provisions of the Plan and the Plan
Agreement shall govern the rights of a Participant to receive distributions
pursuant to the Plan.  The provisions of
the Trust shall govern the rights of the Employers, Participants and the
creditors of the Employers to the assets transferred to the Trust.  Each Employer shall at all times remain
liable to carry out its obligations under the Plan.

 

15.3                                       Distributions From the Trust.  Each Employer’s obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Employer’s obligations under
this Plan.

 

24

 

ARTICLE 16

Miscellaneous

 

16.1                                       Status of Plan.  The Plan is intended to be a plan that is not
qualified within the meaning of Code Section 401(a) and that “is
unfunded and is maintained by an employer primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employee” within the meaning of ERISA Sections 201(2), 301(a)(3) and
401(a)(1).  The Plan shall be
administered and interpreted to the extent possible in a manner consistent with
that intent.

 

16.2                                       Unsecured General Creditor.  Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests or
claims in any property or assets of an Employer.  For purposes of the payment of benefits under
this Plan, any and all of an Employer’s assets shall be, and remain, the
general, unpledged unrestricted assets of the Employer.  An Employer’s obligation under the Plan shall
be merely that of an unfunded and unsecured promise to pay money in the future.

 

16.3                                       Employer’s Liability.  An Employer’s liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as entered
into between the Employer and a Participant. 
An Employer shall have no obligation to a Participant under the Plan
except as expressly provided in the Plan and his or her Plan Agreement.

 

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

 

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

 

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

 

25

 

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

 

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

 

16.9                                       Governing Law.  Subject to ERISA, the provisions of this Plan
shall be construed and interpreted according to the internal laws of the State
of California, without regard to its conflicts of laws principles.

 

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

 

Deferred Compensation Plan Committee

Willis Lease Finance Corporation

2320 Marinship Way

Sausalito, CA 94965

 

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

 

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

 

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

 

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

 

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

 

16.14                                 Incompetent.  If the Committee determines in its discretion
that a benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that person’s
property, the Committee may direct payment of such benefit to the guardian,
legal representative or person having the care and custody of such minor,
incompetent or incapable person.  The
Committee may require proof of minority, incompetence, incapacity or
guardianship, as it may deem appropriate prior to distribution of

 

26

 

the benefit.  Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant’s Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.

 

16.15                                 Court Order.  The Committee is authorized to make any
payments directed by court order in any action in which the Plan or the
Committee has been named as a party.  In
addition, if a court determines that a spouse or former spouse of a Participant
has an interest in the Participant’s benefits under the Plan in connection with
a property settlement or otherwise, the Committee, in its sole discretion,
shall have the right, notwithstanding any election made by a Participant, to
immediately distribute the spouse’s or former spouse’s interest in the
Participant’s benefits under the Plan to that spouse or former spouse.

 

16.16.                              Distribution in the Event of Taxation.

 

(a)                                  In General.  If, for any reason, all or any portion of a
Participant’s benefits under this Plan becomes taxable to the Participant prior
to receipt, a Participant may petition the Committee for a distribution of that
portion of his or her benefit that has become taxable. Upon the grant of such a
petition, which grant shall not be unreasonably withheld, a Participant’s
Employer shall distribute to the Participant immediately available funds in an
amount equal to the taxable portion of his or her benefit (which amount shall
not exceed a Participant’s unpaid Account Balance under the Plan).  If the petition is granted, the tax liability
distribution shall be made within 90 days of the date when the Participant’s
petition is granted.  Such a distribution
shall affect and reduce the benefits to be paid under this Plan.

 

(b)                                 Trust. 
If the Trust terminates in accordance with its terms and benefits are
distributed from the Trust to a Participant in accordance therewith, the
Participant’s benefits under this Plan shall be reduced to the extent of such
distributions.

 

16.17                                 Insurance.  The Employers, on their own behalf or on behalf
of the trustee of the Trust, and, in their sole discretion, may apply for and
procure insurance on the life of the
Participant, in such amounts and in such forms as the Trust may
choose.  The Employers or the trustee of
the Trust, as the case may be, shall be the sole owner and beneficiary of any
such insurance.  The Participant shall
have no interest whatsoever in any such policy or policies, and at the request
of the Employers shall submit to medical examinations and supply such
information and execute such documents as may be required by the insurance
company or companies to whom the Employers have applied for insurance.

 

16.18                                 Legal Fees to Enforce Rights After Change in Control.  The Company and each Employer is aware that
upon the occurrence of a Change in Control, the Board or the board of directors
of a Participant’s Employer(s) (which might then be composed of new members) or
a shareholder of the Company or the Participant’s Employers, or of any
successor corporation might then cause or attempt to cause the Company, the
Participant’s Employer(s) or such successor to refuse to comply with its
obligations under the Plan and might cause or attempt to cause the Company or
the Participant’s Employer(s) to institute, or may institute, litigation seeking
to deny Participants the benefits intended under the Plan.  In these circumstances, the purpose of the
Plan could be frustrated.  Accordingly,
if, following a Change in Control, it should appear to any Participant that the
Company, the Participant’s Employer(s) or any successor corporation

 

27

 

has failed to comply with any of its obligations under the Plan or any
agreement thereunder or, if the Company, such Employer(s) or any other person
takes any action to declare the Plan void or unenforceable or institutes any
litigation or other legal action designed to deny, diminish or to recover from
any Participant the benefits intended to be provided, then the Company and the
Participant’s Employer(s) irrevocably authorize such Participant to retain
counsel of his or her choice whose reasonable fees and charges shall be borne
by the Company and the Participant’s Employer(s) (who shall be jointly and
severally liable for such amounts) to represent such Participant in connection
with the initiation or defense of any litigation or other legal action, whether
by or against the Company, the Participant’s Employer(s) or any director,
officer, shareholder or other person affiliated with the Company, the
Participant’s Employer or any successor thereto in any jurisdiction.

 

IN WITNESS WHEREOF, the Company has executed this Plan document as of July 1,
2001.

 

 

	
   

  	
  WILLIS LEASE FINANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

28Exhibit 10.1.1

 

PRINCIPAL
FINANCIAL GROUP, INC. 

2005 STOCK INCENTIVE PLAN

 

SECTION 1.

PURPOSE

 

The purpose of the “PRINCIPAL
FINANCIAL GROUP, INC. 2005 STOCK INCENTIVE PLAN” (the “Plan”) is to foster
and promote the long-term financial success of the Company and its subsidiaries
and materially increase shareholder value by (a) motivating superior
performance by means of performance-related incentives, (b) encouraging
and providing for the acquisition of an ownership interest in the Company by
the Company’s and its Subsidiaries’ employees and agents, and (c) enabling
the Company to attract and retain the services of outstanding employees upon
whose judgment, interest, and special effort the successful conduct of its
operations is largely dependent.

 

SECTION 2.

DEFINITIONS

 

(a)                                  Definitions.    Whenever used herein,
the following terms shall have the respective meanings set forth below:

 

(1)                                  “Agent”
means each insurance agent (whether or not a statutory employee) and each other
individual providing personal service to the Company or any Subsidiary who, in
either case, is not an Employee.

 

(2)                                  “Approved Retirement” means termination of a
Participant’s employment or service (i) on
or after the normal retirement date or any early retirement date established
under any defined benefit pension plan maintained by the Company or a
Subsidiary and in which the Participant participates or (ii) with the approval of the
Committee (which may be given at or after grant), on or after attaining
age 50 and completing such period of service as the Committee shall
determine from time to time.

 

(3)                                  “Award” means an Option, SAR, award of
Restricted Stock or Performance Shares, an award of Restricted Stock Units or
Performance Units or an Other Stock-Based Award.

 

(4)                                  “Beneficial Owner” means such term as defined
in Rule 13d-3 under the Exchange Act.

 

(5)                                  “Board” means the Board of Directors of the
Company.

 

(6)                                  “Cause” means (i) dishonesty, fraud or misrepresentation, (ii) the Participant’s engaging in
conduct that is injurious to the Company or any Subsidiary in any way,
including, but not limited to, by way of damage to its reputation or standing
in the industry, (iii) the
Participant’s having been convicted of, or entered a plea of nolo contendere to, a crime that
constitutes a felony; (iv) the
breach by the Participant of any written covenant or agreement with the Company
or any Subsidiary not to disclose or misuse any information pertaining to, or
misuse any property of, the Company or any Subsidiary or not to compete or
interfere with the Company or any Subsidiary or (v) a violation by the Participant of any policy of the
Company or any Subsidiary.

 

(7)                                  “Change of Control” means the occurrence of
any one or more of the following:

 

(i)                                     any SEC Person becomes the Beneficial Owner
of 25% or more of the Common Stock or of Voting Securities representing 25% or
more of the combined voting power of all Voting Securities of the Company (such
an SEC Person, a “25% Owner”); or

 

(ii)                                  the Incumbent Directors cease for any reason
to constitute at least a majority of the Board (other than in connection with a
Merger of Equals); or

 

(iii)                               consummation of a merger, reorganization, consolidation, or similar
transaction (any of the foregoing, a “Reorganization Transaction”) other than a
Reorganization Transaction (x) following
which the Continuity of Ownership is more than 60% or (y) which is (and continues to
qualify as) a Merger of Equals; or

 

87

 

(iv)                              consummation of a plan or agreement that has been approved by the
shareholders of the Company for the sale or other disposition of all or
substantially all of the consolidated assets of the Company or a plan of
liquidation of the Company; or

 

(v)                                 any other event or circumstance (or services
of events or circumstances) that the Board shall determine to constitute a
Change of Control.

 

(8)                                  “Change of Control Price” means the highest
price per share of Common Stock offered in conjunction with any transaction
resulting in a Change of Control (as determined in good faith by the Committee
if any part of the offered price is payable other than in cash) or, in the case
of a Change of Control occurring solely by reason of a change in the
composition of the Board, the highest Fair Market Value of the Common Stock on
any of the 30 trading days immediately preceding the date on which a Change of
Control occurs.

 

(9)                                  “Code” means the Internal Revenue Code of
1986, as amended.

 

(10)                            “Committee” means the Human Resources
Committee of the Board or such other committee of the Board as the Board shall
designate from time to time.

 

(11)                            “Common Stock” means the common stock of the
Company, par value $0.01 per share.

 

(12)                            “Company” means Principal Financial Group, Inc.,
a Delaware corporation, and any successor thereto.

 

(13)                            “Continuity of Ownership” of a stated
percentage means that the SEC Persons who were the direct or indirect owners of
the outstanding Common Stock and Voting Securities of the Company immediately
before such Reorganization Transaction became, immediately after the
consummation of such Reorganization Transaction, the direct or indirect owners
of both the stated percentage of the then-outstanding common stock of the
Surviving Corporation and Voting Securities representing the stated percentage
of the combined voting power of the then-outstanding Voting Securities of the
Surviving Corporation, in substantially the same respective proportions as such
Persons’ ownership of the Common Stock and Voting Securities of the Company
immediately before such Reorganization Transaction.

 

(14)                            “Disability” means, with respect to any
Participant, long-term disability as defined under any long-term disability
plan maintained by the Company or a Subsidiary in which the Participant
participates. In the event of any question as to whether a Participant has a
Disability, the plan administrator of the relevant long-term disability plan
shall determine whether a disability exists, in accordance with such plan.

 

(15)                            “Domestic Partner” means any person
qualifying to be treated as a domestic partner of a Participant under the
applicable policies, if any, of the Company or Subsidiary which employs the
Participant.

 

(16)                            “Employee” means any employee (including each
officer) of the Company or any Subsidiary.

 

(17)                            “Exchange Act” means the Securities Exchange
Act of 1934, as amended.

 

(18)                            “Executive Officer” means any officer of the
Company or any Subsidiary who is subject to the reporting requirements under Section 16(b) of
the Exchange Act.

 

(19)                            “Fair Market Value” means, on any date, the
price of the last trade, regular way, in the Common Stock on such date on the
New York Stock Exchange or, if at the relevant time, the Common Stock is not
listed to trade on the New York Stock Exchange, on such other recognized
quotation system on which the trading prices of the Common Stock are then
quoted (the “applicable exchange”). In the event that (i) there are no Common Stock
transactions on the applicable exchange on any relevant date, Fair Market Value
for such date shall mean the closing price on the immediately preceding date on
which Common Stock transactions were so reported and (ii) the applicable exchange adopts a trading policy
permitting trades after 5 P.M. Eastern Standard Time (“EST”), Fair Market
Value shall mean the last trade, regular way, reported on or before 5 P.M.
EST (or such earlier or later time as the Committee may establish from time to
time).

 

(20)                            “Family Member” means, as to a Participant,
any (i) child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, mother-in-law,
father-in-law, son-in-law or daughter-in-law (including adoptive
relationships), or Domestic Partner of such Participant, (ii) trusts for the exclusive benefit
of one or more such persons and/or the Participant and (iii) other entity owned solely by
one or more such persons and/or the Participant.

 

88

 

(21)                            “Imminent Control Change Period” means the
period commencing on the date any one or more of the following events occurs
(or the first of such events in a series of such events) and ending on the date
on which a Change of Control or a Merger of Equals occurs:

 

(i)                                     The Company enters into an agreement the
consummation of which would constitute a Change of Control;

 

(ii)                                  Any SEC Person attempts to become a 25%
Owner, as evidenced by filing or other certification of notice of such intent
with any state’s governmental agency established to regulate the insurance
industry, which, if consummated, would constitute a Change of Control;

 

(iii)                               Any SEC Person commences a “tender offer” (as such term is used in Section 14(d) of
the Exchange Act) or exchange offer, which, if consummated, would result in a
Change of Control; or

 

(iv)                              Any SEC Person files with the SEC a preliminary or definitive proxy
solicitation or election contest to elect or remove one or more members of the
Board, which, if consummated or effected, would result in a Change of Control;

 

provided,
however, that an Imminent Control Change Period will lapse upon the occurrence
of any of the following:

 

(A)                              With respect to an event described in
clause (i) of this definition, the date such agreement is terminated,
cancelled or expires without a Change of Control or Merger of Equals occurring;

 

(B)                                With respect to an event described in
clause (ii) of this definition, the date such filing or other
certification is withdrawn, expires or is denied or otherwise rejected by the
relevant state regulators without a Change of Control or Merger of Equals
occurring;

 

(C)                                With respect to an event described in clause (iii) of
this definition, the date such tender offer or exchange offer is withdrawn or
terminates without a Change of Control or Merger of Equals occurring;

 

(D)                               With respect to an event described in
clause (iv) of this definition, (1) the
date the validity of such proxy solicitation or election contest expires under
relevant state corporate law, or (2) the
date such proxy solicitation or election contest culminates in a stockholder
vote, in either case without a Change of Control or Merger of Equals occurring;
or

 

(E)                                 The date a majority of the Incumbent
Directors makes a good faith determination that any event or condition
described in clause (i), (ii), (iii) or (iv) of this definition
is no longer likely to result in a Change of Control, provided that such determination may not
be made prior to the six (6) month anniversary of the occurrence of such
event.

 

(22)                            “Incentive Stock Option” (ISO) means an
option within the meaning of Section 422 of the Code.

 

(23)                            “Incumbent Directors” means, as of any date,
the individuals then serving as members of the Board who were also members of
the Board as of the date two years prior to the date of determination; provided that any member appointed or
elected as a member of the Board after such prior date, but whose election, or
nomination for election, was approved by a vote or written consent of at least
a majority of the directors then comprising the Incumbent Directors shall also
be considered an Incumbent Director unless such person’s election, or nominated
for election, to the Board was as a result of, or in connection with, a proxy
contest or a Reorganization Transaction.

 

(24)                            “Merger of Equals” means the occurrence of a
Reorganization Transaction that satisfies all of the following:

 

(i)                                     the consummation of such Reorganization
Transaction results in Continuity of Ownership of at least 40%, but not more
than 60%; and

 

(ii)                                  an SEC Person does not become a 25% Owner as
a result of such Reorganization Transaction; and

 

89

 

(iii)                               throughout the period beginning on the effective date of the event and
ending on the second anniversary of such effective date, the Incumbent
Directors continue to constitute not less than

 

(A)                              a majority of the Board, if subclause (i) of
this definition is satisfied because the Reorganization Transaction resulted in
Continuity of Ownership of at least 50%, but not more than 60%; or

 

(B)                                one (1) member less than a majority of
the Board, if subclause (i) of this definition is satisfied because
the Reorganization Transaction resulted in Continuity of Ownership of at least
40%, but less than 50%; and

 

(iv)                              the person who was the Chief Executive Officer of the Company
immediately prior to the first to occur of (x) the day prior to the
beginning of the Imminent Control Change Period or (y) the day prior to
the effective date of the Reorganization Transaction shall serve as the Chief
Executive Officer of the Surviving Corporation at all times during the period
commencing on the effective date of the Reorganization Transaction and ending
on the first anniversary thereof, provided that this condition shall not fail
to be satisfied due to the death or Disability of the Chief Executive Officer;

 

provided,
however, that a Reorganization Transaction shall cease to be considered a
Merger of Equals (and shall instead be treated as a Change of Control) from and
after the first date:

 

(A)                              during the two year period following the date
as of which such Reorganization Transaction occurs that any of the conditions of
any of clause (ii), (iii) or (iv) of this definition shall not
be satisfied; or

 

(B)                                prior to the first anniversary of the
effective date of the Reorganization Transaction, the Company shall make a
filing with the Securities and Exchange Commission, issue a press release, or
make a public announcement to the effect that the Surviving Corporation is
seeking or intends to seek a replacement for its Chief Executive Officer (other
than due to the death or Disability of such person), whether such replacement is
to become effective before or after such first anniversary.

 

(25)                            “Net Exercised” shall mean the exercise of an
Option or any portion thereof by the delivery of the greatest number of whole
shares of Common Stock having a Fair Market Value on the date of exercise not
in excess of the difference between the aggregate Fair Market Value of the
shares of Common Stock subject to the Option (or the portion of such Option
then being exercised) and the aggregate exercise price for all such shares of
Common Stock under the Option (or the portion thereof then being exercised),
with any fractional share that would result from such equation to be payable in
cash.

 

(26)                            “Nonstatutory Stock Option” (NSO) means an
option which is not an Incentive Stock Option within the meaning of Section 422
of the Code.

 

(27)                            “Option” means the right to purchase Common
Stock at a stated price for a specified period of time. For purposes of the
Plan, an Option may be either (i) an
“Incentive Stock Option” (ISO) within the meaning of Section 422 of the
Code or (ii) an option which
is not an Incentive Stock Option (a “Nonstatutory Stock Option” (NSO)).

 

(28)                            “Other Stock-Based Award” means an award of,
or related to, shares of Common Stock other than an Award of Options, SAR,
Restricted Stock, Performance Shares, Restricted Stock Units or Performance
Units, as granted by the Committee in accordance with the provisions of Section 9
hereof.

 

(29)                            “Participant” means any Employee or Agent
designated by the affirmative action of the Committee (or its delegate) to
participate in the Plan.

 

(30)                            “Performance Criteria” means the objectives
established by the Committee for a Performance Period pursuant to Section 7(c) for
the purpose of determining the extent to which an award of Performance Shares or
Performance Units has been earned.

 

(31)                            “Performance Period” means the period
selected by the Committee during which performance is measured for the purpose
of determining the extent to which an award of Performance Shares or
Performance Units has been earned.

 

(32)                            “Performance Share” means an award granted
pursuant to Section 7 of the Plan of a contractual right to receive one
share of Common Stock (or the Fair Market Value thereof in cash or any
combination of

 

90

 

cash
and Common Stock, as determined by the Committee), or a fraction or multiple
thereof, upon the achievement, in whole or in part, of the applicable
Performance Criteria.

 

(33)                            “Performance Unit” means an award granted
pursuant to Section 7 of the Plan of a contractual right to receive a
fixed or variable dollar denominated unit (or a unit denominated in the
Participant’s local currency), or a fraction or multiple thereof, upon the
achievement, in whole or in part, of the applicable Performance Criteria. The
Committee shall determine whether the earned portion of any such Performance
Units shall be payable in cash, Common Stock or any combination thereof.

 

(34)                            “Period of Restriction” means the period
specified by the Committee or established pursuant to the Plan during which a
Restricted Stock or Restricted Stock Unit award is subject to forfeiture.

 

(35)                            “Prior Plan” means the Principal Financial
Group Inc. Stock Incentive Plan.

 

(36)                            “Reorganization Transaction” shall have the
meaning ascribed thereto in the definition of Change of Control.

 

(37)                            “Restricted Stock” means an award of Stock
made pursuant to Section 6 that is forfeitable by the Participant until
the completion of a specified period of future service, the achievement of
pre-established performance objectives or until otherwise determined by the
Committee or in accordance with the terms of the Plan.

 

(38)                            “Restricted Stock Unit” means a contractual
right awarded pursuant to Section 6 that entitles the holder to receive
shares of Common Stock (or the value thereof in cash) upon the completion of a
specified period of future service or the achievement of pre-established
performance objectives or at such other time or times determined by the
Committee or in accordance with the terms of the Plan.

 

(39)                            “SAR” means a stock appreciation right
granted under Section 8 of the Plan in respect of one or more shares of
Common Stock that entitles the holder thereof to receive, in Common Stock
(unless otherwise determined by the Committee at the time of grant), an amount
per share of Common Stock equal to the excess, if any, of the Fair Market Value
on the date the SAR is exercised over the Fair Market Value on the date the SAR
is granted.

 

(40)                            “SEC Person” means any person (as such term
is defined in Section 3(a)(9) of the Exchange Act) or group (as such
term is used in Rule 13d-5 under the Exchange Act), other than an
affiliate or any employee benefit plan (or any related trust) of the Company or
any of its affiliates.

 

(41)                            “Subsidiary” means (i) any corporation in which the Company owns, directly
or indirectly, at least 50% of the total combined voting power of all classes
of stock of such corporation, (ii) any
partnership or limited liability company in which the Company owns, directly or
indirectly, at least 50% of the capital interests or profits interest of such
partnership or limited liability company and (iii) any
other business entity in which the Company owns at least 50% of the equity
interests thereof, provided that,
in any such case, the Company is in effective control of such corporation,
partnership, limited liability company or other entity.

 

(42)                            “Surviving Corporation” means the corporation
resulting from a Reorganization Transaction or, if securities representing at
least 50% of the aggregate voting power of such resulting corporation are
directly or indirectly owned by another corporation, such other corporation.

 

(43)                            “25% Owner” shall have the meaning ascribed
thereto in the definition of Change of Control.

 

(44)                            “Voting Securities” means, with respect to
any corporation, securities of such corporation that are entitled to vote
generally in the election of directors of such corporation.

 

SECTION 3.

POWERS OF THE COMMITTEE; GENERAL TERMS OF AWARDS

 

(a)                                  Power to Grant.    The Committee shall
determine those Employees and/or Agents to whom an Award shall be granted and
the terms and conditions of any and all such Awards. The Committee may
establish different terms and conditions for different Awards and different
Participants and for the same Participant for each Award such Participant may
receive, whether or not granted at different times.

 

(b)                                 Rules, Interpretations and
Determinations.    The
Plan shall be administered by the Committee. The Committee shall have full
authority to interpret and administer the Plan, to establish, amend, and
rescind rules and regulations relating to the Plan, to provide for
conditions deemed necessary or advisable to protect the interests of

 

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the Company, to construe the terms of any Award or
any document evidencing the grant of such Award and to make all other
determinations necessary or advisable for the administration and interpretation
of the Plan in order to carry out its provisions and purposes. Unless otherwise
expressly provided hereunder, any power, discretion or authority conveyed to or
reserved to the Committee may be exercised by it in its sole and absolute
discretion. Determinations, interpretations, or other actions made or taken by
the Committee shall be final, binding, and conclusive for all purposes and upon
all persons.

 

(c)                                  Delegation of Authority.    The Committee may
delegate to the Company’s Chief Executive Officer and/or to such other
officer(s) of the Company the power and authority to make and/or administer
Awards under the Plan with respect to individuals who are below the position of
Senior Vice President (or any analogous title), pursuant to such conditions and
limitations as the Committee may establish; provided
that only the Committee or the Board may select, and grant Awards to, Executive
Officers or exercise any other discretionary authority under the Plan in
respect of Awards granted to such Executive Officers. Unless the Committee
shall otherwise specify, any delegate shall have the authority and right to
exercise (within the scope of such person’s delegated authority) all of the
same powers and discretion that would otherwise be available to the Committee
pursuant to the terms hereof. The Committee may also appoint agents (who may be
officers or employees of the Company) to assist in the administration of the
Plan and may grant authority to such persons to execute agreements or other
documents on its behalf. All expenses incurred in the administration of the
Plan, including, without limitation, for the engagement of any counsel,
consultant or agent, shall be paid by the Company.

 

(d)                                 Restrictive Covenants and
Other Conditions.    Without
limiting the generality of the foregoing, the Committee may condition the grant
of any Award under the Plan upon the Participant to whom such Award would be
granted agreeing in writing to certain conditions (such as restrictions on the
ability to transfer the underlying shares of Common Stock) or covenants in
favor of the Company and/or one or more Subsidiaries (including, without
limitation, covenants not to compete, not to solicit employees and customers
and not to disclose confidential information, that may have effect following
the termination of the Participant’s employment or service with the Company and
its Subsidiaries and after the Common Stock subject to the Award has been
transferred to the Participant), including, without limitation, the requirement
that the Participant disgorge any profit, gain or other benefit received in
respect of the Award prior to any breach of any such covenant.

 

(e)                                  Participants Based Outside
the United States.    To
conform with the provisions of local laws and regulations, or with local
compensation practices and policies, in foreign countries in which the Company
or any of its Subsidiaries operate, but subject to the limitations set forth
herein regarding the maximum number of shares issuable hereunder and the
maximum award to any single Participant, the Committee may (i) modify the terms and conditions
of Awards granted to Participants employed outside the United States (“Non-US Awards”), (ii) establish subplans with modified
exercise procedures and such other modifications as may be necessary or
advisable under the circumstances (“Subplans”),
and (iii) take any action
which it deems advisable to obtain, comply with or otherwise reflect any
necessary governmental regulatory procedures, exemptions or approvals with
respect to the Plan. The Committee’s decision to grant Non-US Awards or to
establish Subplans is entirely voluntary, and at the complete discretion of the
Committee. The Committee may amend, modify or terminate any Subplans at any
time, and such amendment, modification or termination may be made without prior
notice to the Participants. The Company, Subsidiaries, and members of the
Committee shall not incur any liability of any kind to any Participant as a
result of any change, amendment or termination of any Subplan at any time. The
benefits and rights provided under any Subplan or by any Non-US Award (i) are wholly discretionary and,
although provided by either the Company or a Subsidiary, do not constitute
regular or periodic payments and (ii) are
not to be considered part of the Participant’s salary or compensation under the
Participant’s employment with the Participant’s local employer for purposes of
calculating any severance, resignation, redundancy or other end of service
payments, vacation, bonuses, long-term service awards, indemnification, pension
or retirement benefits, or any other payments, benefits or rights of any kind.
If a Subplan is terminated, the Committee may direct the payment of Non-US
Awards (or direct the deferral of payments whose amount shall be determined)
prior to the dates on which payments would otherwise have been made, and, in
the Committee’s discretion, such payments may be made in a lump sum or in
installments.

 

(f)                                    Maximum Individual Grants.    Subject to adjustment
as provided in Section 4(d), no Participant shall be granted (i) Options or SARs (with tandem
Options and SARs being counted only once with respect to this limit) during any
36-month period with respect to more than 3,000,000 shares of Common Stock or (ii) Restricted Stock, Restricted
Stock Units, Performance Shares and/or Other Stock-Based Awards during any 12-month
period that are denominated in shares of Common Stock with respect to more than
250,000 shares of Common Stock. In addition to the foregoing, the maximum
dollar value payable to any participant in any 12-month period with respect

 

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to Performance Units and/or Other Stock-Based Awards
that are valued with reference to cash or property other than shares of Common
Stock is $10,000,000.

 

(g)                                 Dividends and Dividends
Equivalents.    Unless
otherwise determined by the Committee at the time of grant, to the extent that
shares of Common Stock are issued at the time of grant of any Award under the
Plan, the Participant shall be entitled to receive all dividends and other
distributions paid with respect to those shares, provided that if any such
dividends or distributions are paid in shares of Common Stock, such shares
shall be subject to the same forfeiture restrictions and restrictions on
transferability as apply to the shares subject to such Award on which such
dividends or distributions were paid. To the extent that shares of Common Stock
are not issued at the time of the grant of any Award, the Committee shall
determine whether, and to what extent, the Participant shall be entitled to
receive the payment of dividend equivalents in respect of that number of
outstanding shares of Common Stock corresponding to the shares subject to such
Award. Unless otherwise determined by the Committee at or after grant, any
additional shares credited in respect of any dividends or dividend equivalents
payable in respect of any shares of Common Stock subject to any Award shall
become vested and nonforfeitable upon the same terms and conditions as are
applicable to the shares underlying the Award in respect of which they are payable
(including, with respect to any Award that will become earned and vested upon
the attainment of Performance Criteria, the achievement of such Performance
Criteria).

 

SECTION 4.

COMMON STOCK SUBJECT TO PLAN

 

(a)                                  Number.    Subject to Section 4(d) below,
unless the shareholders of the Company approve an increase in such number by a
shareholder vote, the maximum number of shares of Common Stock that may be made
issuable or distributable under the Plan is 24,000,000. The number of shares of
Common Stock subject to an Option or SAR shall be counted against such limit as
one share for each share issued or issuable, provided that when a SAR is
granted in tandem with an Option, so that only one may be exercised with the
other terminating upon such exercise, the number of shares of Common Stock
subject to the tandem Option and SAR award shall only be taken into account
once (and not as to both awards) for purposes of this limit (and for purposes
of the provisions of Section 4(b) below). Without limiting the generality
of the foregoing, the maximum number of shares as to which Incentive Stock
Options may be granted shall not exceed 10 million shares. The shares to
be delivered under the Plan may consist, in whole or in part, of treasury
Common Stock or authorized but unissued Common Stock, not reserved for any
other purpose.

 

(b)                                 Canceled or Terminated Awards.    Any shares of Common
Stock subject to an Award (as determined under Section 4(a)) or any award
made or granted under the Prior Plan which for any reason expires without
having been exercised, is canceled or terminated or otherwise is settled
without the issuance of any Common Stock shall again be available for grant
under the Plan. In applying the immediately preceding sentence, if (i) shares otherwise issuable or
issued in respect of, or as part of, any Award that are withheld to cover taxes
shall not be treated as having been issued under the Plan and (ii) any SARs are settled in shares
of Common Stock or any Options are Net Exercised, only the net number of shares
of Common Stock issued in respect of such SARs or Options shall be deemed
issued under the Plan. In addition, shares of Common Stock tendered to exercise
outstanding Options or other Awards or to cover taxes shall also be available
for issuance under the Plan (and shall be counted as one share for purposes of Section 4(a)),
except and unless such shares are tendered more than ten years after the
effective date of the Plan.

 

(c)                                  Repurchased Shares.    In addition to the
shares otherwise authorized for issuance hereunder, any shares of Common Stock
that are acquired by the Company through the application of the cash proceeds
received in connection with the exercise of Options shall also be available for
issuance under the Plan in the same manner as though such shares had been
tendered to exercise the corresponding Options.

 

(d)                                 Adjustment Due to Change in
Capitalization.    In
the event of any Common Stock dividend or Common Stock split, recapitalization
(including, but not limited to, the payment of an extraordinary dividend to the
shareholders of the Company), merger, consolidation, combination, spin-off,
distribution of assets to shareholders (other than ordinary cash dividends),
exchange of shares, or other similar corporate change, the aggregate number of
shares of Common Stock available for grant under Section 4(a) or
subject to outstanding Awards and the respective exercise prices or base
prices, if any, applicable to outstanding Awards may be appropriately adjusted
by the Committee, in its discretion, and the Committee’s determination shall be
conclusive.

 

93

 

(e)                                  Assumption of Options and
Other Equity-Based Awards.    In
the event that there is a merger, stock purchase or other transaction whereby the
Company or any of its Subsidiaries acquires another business or any portion
thereof, and that pursuant to the arrangements governing such acquisition, the
Company agrees to provided options and/or other awards in respect of the Common
Stock upon the assumption or in substitution of existing equity-based awards
for other securities held by employees and other service providers of the
acquired business, the shares of Common Stock subject to such assumed or
substituted awards shall not be counted against the limits set forth under Section 4(a) (and
no shares related to any such assumed or substituted awards shall be added to
the number of awards issuable under this Plan pursuant to Section 4(b)),
and none of the provisions of the Plan that would otherwise limit or constrain
the ability of the Company to make such assumption or substitution (such as the
provisions hereof that require the issuance of Options with an exercise price
at least equal to the Fair Market Value on the date of grant) shall apply to the
awards issued in substitution of the awards granted in respect of the employees
and service providers of such acquired business.

 

SECTION 5.

STOCK OPTIONS

 

(a)                                  Grant of Options.    Subject to the
provisions of Section 3(f) and Section 4 above, Options may be
granted to Participants at such time or times as shall be determined by the
Committee. Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonstatutory Stock Options.
Except as otherwise provided herein, the Committee shall have complete
discretion in determining the number of Options, if any, to be granted to a
Participant, except that Incentive Stock Options may only be granted to
Employees. The terms and conditions of each Option grant, including, but not
limited to, the type of Option granted, the exercise price, the duration of the
Option, the number of shares of Common Stock to which the Option pertains,
shall be evidenced in writing. Each such Option grant may also contain such
other terms and conditions not inconsistent with the provisions of the Plan as
the Committee shall determine.

 

(b)                                 Exercise Price.    Nonstatutory Stock
Options and Incentive Stock Options granted pursuant to the Plan shall have an
exercise price no less than the Fair Market Value of a share of Common Stock on
the date on which the Option is granted. No Option granted hereunder may have
its exercise price reduced (other than pursuant to the provisions of Section 4(d))
unless such action is expressly authorized by shareholder action in accordance
with Section 11.

 

(c)                                  Exercise of Options.    The Committee shall
determine the exercise schedule applicable with respect to any Option
granted hereunder. Such schedule may require a minimum period of service
that must be completed before all or a portion of such Option shall be
exercisable, and may establish performance-based conditions to the exercise of
such Option which are in addition to, in lieu of, or as an alternative to any
service requirement. Except as otherwise expressly provided in the Plan (i) upon a termination of employment
due to death, Disability or Approved Retirement or (ii) in connection with a Change of Control, and unless
the Committee shall determine that special circumstances (including, but not
limited to, the achievement of performance objectives) justify an exception,
the minimum period of service required to exercise an Option, in whole or in
part, shall be one year. Subject to the provisions of this Section 5, once
any portion of any Option has become exercisable it shall remain exercisable
for its full term. The Committee shall determine the term of each Nonstatutory
Stock Option or Incentive Stock Option granted hereunder, but, except as
expressly provided below, in no event shall any such Option be exercisable for
more than ten (10) years after the date on which it is granted.

 

(d)                                 Payment.    The Committee shall
establish procedures governing the exercise of Options. No shares shall be
delivered pursuant to any exercise of an Option unless arrangements
satisfactory to the Committee have been made to assure full payment of the
exercise price therefor. Without limiting the generality of the foregoing,
payment of the exercise price may be made (i) in
cash or its equivalent; (ii) by
exchanging shares of Common Stock (which are not the subject of any pledge or
other security interest) which have been owned by the person exercising the
Option for at least six (6) months at the time of exercise; (iii) by any combination of the
foregoing; provided that the
combined value of all cash and cash equivalents paid and the Fair Market Value
of any such Common Stock tendered to the Company, valued as of the date of such
tender, is at least equal to such exercise price; or (iv) in accordance with any other procedure or
arrangement approved by the Committee. Additionally, to the extent authorized
by the Committee (whether at or after grant), Options may be Net Exercised
subject to such terms and conditions as the Committee may from time to time
impose.

 

(e)                                  Incentive Stock Options.    Notwithstanding
anything in the Plan to the contrary, no Option that is intended to be an
Incentive Stock Option may be granted after the tenth (10th) anniversary of the
effective date of

 

94

 

the Plan and no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without the consent
of any Participant affected thereby, to disqualify any Incentive Stock Option
under such Section 422.

 

(f)                                    Termination of Employment
or Service.

 

(i)                                     Due to Death.    In the event a
Participant’s employment or service terminates by reason of death, any Options
granted to such Participant shall become immediately exercisable in full and
may be exercised by the Participant’s designated beneficiary or, if none is
named, by the person determined in accordance with Section 12(b) below,
at any time prior to the earlier to occur of (i) the expiration of the
term of the Options or (ii) the third (3rd) anniversary (or such earlier
date as the Committee shall determine at the time of grant) of the Participant’s
death.

 

(ii)                                  Due to Disability.    In the event a
Participant’s employment or service is terminated by reason of Disability, any
Options granted to such Participant shall become immediately exercisable in
full and may be exercised by the Participant (or, in the event of the
Participant’s death after termination of employment or service when the Option
is exercisable pursuant to its terms, by the Participant’s designated
beneficiary or, if none is named, by the person determined in accordance with Section 12(b) below),
at any time prior to the earlier to occur of (i) the
expiration of the term of the Options or (ii) the
third (3rd) anniversary (or such earlier date as the Committee shall determine
at the time of grant) of the Participant’s termination of employment or
service.

 

(iii)                               Approved Retirement.    In the event a
Participant’s employment or service terminates by reason of Approved
Retirement, any Options granted to such Participant shall become immediately
exercisable in full and may be exercised by the Participant (or, in the event
of the Participant’s death after termination of employment or service when the
Option is exercisable pursuant to its terms, by the Participant’s designated
beneficiary or, if none is named, by the person determined in accordance with Section 12(b) below),
at any time prior to the expiration date of the term of the Options (or such
shorter period following the Participant’s Approved Retirement as the Committee
shall determine at the time of grant).

 

(iv)                              Termination of Employment For Cause or Resignation.    In the event a
Participant’s employment or service is terminated by the Company or any
Subsidiary for Cause or by the Participant other than due to the Participant’s
death, Disability or Approved Retirement, any Options granted to such
Participant that have not yet been exercised shall expire at the time of such
termination and shall not be exercisable thereafter.

 

(v)                                 Termination of Employment for Any Other Reason.    Unless otherwise
determined by the Committee at or following the time of grant, in the event the
employment or service of the Participant shall terminate for any reason other
than one described in Section 5(f)(i), (ii), (iii), or (iv) above,
any Options granted to such Participant which are exercisable at the date of
the Participant’s termination of employment or service may be exercised by the
Participant (or, in the event of the Participant’s death after termination of
employment or service when the Option is exercisable pursuant to its terms, by
the Participant’s designated beneficiary, or, if none is named, by the person
determined in accordance with Section 12(b)), at any time prior to the
expiration of the term of the Options or the ninetieth (90th) day following the
Participant’s termination of employment or service, whichever period is
shorter, and any Options that are not exercisable at the time of termination of
employment or service shall expire at the time of such termination and shall
not be exercisable thereafter.

 

SECTION 6.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

(a)                                  Grant of Restricted Stock.    The Committee may
grant Restricted Stock or Restricted Stock Units to Participants at such times
and in such amounts, and subject to such other terms and conditions not
inconsistent with the Plan as it shall determine. If Restricted Stock is
evidenced by the issuance of stock certificates, the Committee shall require
that such stock certificates be held in the custody of the Secretary of the
Company until the Period of Restriction lapses, and that, as a condition of
such Restricted Stock award, the Participant shall have delivered a stock
power, endorsed in blank, relating to the Common Stock covered by such award.
The terms and conditions of each grant of Restricted Stock or Restricted Stock
Units shall be evidenced in writing.

 

(b)                                 Restrictions on
Transferability.    Except
as provided in Section 12(a), no Restricted Stock may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until
the lapse of the Period of Restriction. The Committee shall determine the
Period of Restriction applicable with respect to any award of Restricted Stock;

 

95

 

provided, however, that, except as otherwise
expressly provided in the Plan the Period of Restriction with respect to any
such Award shall not be less than three years but may lapse ratably over such
three year Period of Restriction. Notwithstanding the foregoing, such minimum
three-year Period of Restriction shall not be applicable with respect to any
grant made to a newly-hired employee made to compensate for equity-based or
other forms of compensation forfeited from a prior employer or grants made in
satisfaction of incentive or other compensation payable to the Participant in
respect of service to the Company or any of its Subsidiaries. The Committee may
provide that the Period of Restriction on Restricted Stock shall lapse, in
whole or in part, upon the achievement of performance criteria (and without
regard to the minimum service requirement), which criteria shall be selected
from those available to the Committee under Section 7(c), provided, however, that any Award of
Restricted Stock made to any Executive Officer that is intended to qualify as
other performance based compensation under Section 162(m) of the Code
shall be subject to the same restrictions and limitations applicable to
Performance Share Awards under Section 7(d) and subject to the
certification required under Section 7(e).

 

(c)                                  Rights as a Shareholder.    Unless otherwise
determined by the Committee at the time of grant and subject to Section 3(g),
Participants holding shares of Restricted Stock may exercise full voting rights
and other rights as a shareholder with respect to those shares during the
Period of Restriction.

 

(d)                                 Termination of Employment
Due to Approved Retirement, Disability or Death.    Unless otherwise
determined by the Committee at the time of grant, in the event a Participant’s
employment or service terminates by reason of Approved Retirement, any shares
related to Restricted Stock held by such Participant shall become
non-forfeitable at the time the restrictions would have lapsed had the
Participant continued in employment; provided,
however, that the Committee may waive any forfeiture and transfer
restrictions with respect to up to the portion of the Award as is necessary for
the Participant to satisfy any applicable tax withholding obligations in
connection with such Award arising at the time of such termination of
employment. Unless otherwise determined by the Committee at the time of grant,
in the event a Participant’s employment or service terminates by reason of
Disability or death, any shares related to Restricted Stock held by such
Participant shall become non-forfeitable on the date of termination.

 

(e)                                  Termination of Employment for Any
Other Reason.    Unless
otherwise determined by the Committee at or after the time of grant, in the
event the employment or service of the Participant shall terminate for any
reason other than one described in Section 6(d), any Restricted Stock
awarded to such Participant as to which the Period of Restriction has not
lapsed shall be forfeited.

 

(f)                                    Restricted Stock Units.    The Committee may
elect to grant any Participant Restricted Stock Units, which are intended to be
the economic equivalent of an award of Restricted Stock. Any such Restricted
Stock Units Award shall be made on substantially the same terms as apply to an
Award of Restricted Stock under this Section 6, except that a Participant
receiving such Award shall not have any rights as a shareholder prior to the
actual issuance of such Common Stock (although, pursuant to Section 3(g),
the Committee may authorize the payment of dividend equivalents on such rights
equal to the dividends that would have been payable had the corresponding
equity rights been outstanding shares of Common Stock).

 

SECTION 7

PERFORMANCE SHARES AND PERFORMANCE UNITS

 

(a)                                  Generally.    The Committee shall
have the authority to determine the Participants who shall receive Performance
Shares and Performance Units, the number of Performance Shares and the number
and value of Performance Units each Participant receives for each or any
Performance Period, and the Performance Criteria applicable in respect of such
Performance Shares and Performance Units for each Performance Period. The
Committee shall determine the duration of each Performance Period (the duration
of Performance Periods may differ from each other), and there may be more than
one Performance Period in existence at any one time as to any Participant or
all or any class of Participants. Performance Periods may be no shorter than
twelve months. Each grant of Performance Shares and Performance Units shall be
evidenced in writing and shall specify the number of Performance Shares and the
number and value of Performance Units awarded to the Participant, the
Performance Criteria applicable thereto, and such other terms and conditions
not inconsistent with the Plan as the Committee shall determine. No shares of
Common Stock will be issued at the time an Award of Performance Shares is made,
and the Company shall not be required to set aside a fund for the payment of
Performance Shares or Performance Units.

 

(b)                                 Earned Performance Shares and
Performance Units.    Performance
Shares and Performance Units shall become earned, in whole or in part, based
upon the attainment of specified Performance Criteria or the occurrence

 

96

 

of any event or events, including a Change of
Control, as the Committee shall determine, either at or after the time of
grant. In addition to the achievement of the specified Performance Criteria,
the Committee may, at the grant date, condition payment of Performance Shares
and Performance Units on the Participant completing a minimum period of service
following the date of grant or on such other conditions as the Committee shall
specify.

 

(c)                                  Performance Criteria.    At the discretion of
the Committee, Performance Criteria may be based on the total return to the
Company’s shareholders, inclusive of dividends paid, during the applicable Performance
Period (determined either in absolute terms or relative to the performance of
one or more similarly situated companies or a published index covering the
performance of a number of companies), or upon the attainment of one or more of
the following criteria, whether in absolute terms or relative to the
performance of one or more similarly situated companies or a published index
covering the performance of a number of companies: stock price, operating
earnings, net earnings, return on equity, income, market share, combined ratio,
level of expenses, growth in revenue, earnings before interest, taxes,
depreciation and amortization, cash flow, earnings per share, return on
invested capital, return on assets, economic value added, improvements in or
attainment of working capital levels, and, in the case of persons who are not
Executive Officers, such other criteria as may be determined by the Committee.
Performance Criteria may be established on a Company-wide basis or with respect
to one or more business units or divisions or Subsidiaries. When establishing
Performance Criteria for a Performance Period, the Committee may exclude any or
all “extraordinary items” as determined under U.S. generally accepted
accounting principles including, without limitation, the charges or costs
associated with restructurings of the Company or any Subsidiary, discontinued
operations, other unusual or non-recurring items, and the cumulative effects of
accounting changes. Except to the extent that the exercise of (or the ability
to exercise) such discretion in the case of Awards to Executive Officers
intended to be other performance-based compensation under Section 162(m)(4) of
the Code would cause them to fail to satisfy that requirement, the Committee
may also adjust the Performance Criteria for any Performance Period as it deems
equitable in recognition of unusual or non-recurring events affecting the
Company, changes in applicable tax laws or accounting principles, or such other
factors as the Committee may determine.

 

(d)                                 Special Rule for
Performance Criteria.    If,
at the time of grant, the Committee intends a Performance Share Award or
Performance Unit to qualify as other performance based compensation within the
meaning of Section 162(m)(4) of the Code, the Committee must
establish Performance Criteria for the applicable Performance Period no later
than the 90th day after the Performance Period begins (or by such other date as
may be required under Section 162(m) of the Code), and the Committee shall
not have the authority in respect of such Awards to exercise any discretion
applicable to a grant of Performance Shares or Performance Units otherwise
conveyed by this Section 7, if the ability to exercise such discretion
would cause such Award not to qualify as other performance based compensation.

 

(e)                                  Certification of Attainment
of Performance Criteria.    As
soon as practicable after the end of a Performance Period and prior to any
payment in respect of such Performance Period, the Committee shall certify in
writing the number of Performance Shares and the number and value of
Performance Units which have been earned on the basis of performance in
relation to the established Performance Criteria.

 

(f)                                    Payment of Awards.    Earned Performance
Shares and the value of earned Performance Units shall be distributed to the
Participant or, if the Participant has died, to the Participant’s beneficiary,
as soon as practicable after the expiration of the Performance Period and the
Committee’s certification under paragraph 7(e) above, provided that (i) earned Performance Shares and the
value of earned Performance Units shall not be distributed to a Participant
until any other conditions on payment of such Awards established by the
Committee have been satisfied, and (ii) any
amounts payable in respect of Performance Shares or Performance Units pursuant
to Section 10 shall be distributed in accordance with Section 10. The
Committee shall determine whether Performance Shares and the value of earned
Performance Units are to be distributed in the form of cash, shares of Common
Stock or in a combination thereof, with the value or number of shares payable
to be determined based on the Fair Market Value of Common Stock on the date of
the Committee’s certification under paragraph 7(e) above.

 

(g)                                 Newly Eligible
Participants.    Notwithstanding
anything in this Section 7 to the contrary, the Committee shall be
entitled to make such rules, determinations and adjustments as it deems
appropriate with respect to any Participant who becomes eligible to receive
Performance Shares or Performance Units after the commencement of a Performance
Period.

 

97

 

(h)                                 Termination of Employment.

 

(i)                                     Termination of Employment
due to Approved Retirement, Disability or Death.    Unless otherwise
determined by the Committee at or after the time of grant, a Participant whose
employment or service terminates by reason of Approved Retirement, Disability
or death shall be entitled to receive the same payment or distribution in respect
of Performance Shares and Performance Units (without pro-ration) that would
have been payable for the Performance Period had his or her employment
continued until the end of the applicable Performance Period. Any Performance
Shares or value of Performance Units becoming payable in accordance with the
preceding sentence shall be paid at the same time as Performance Shares and the
value of Performance Units are paid to other Participants (or at such earlier
time as the Committee may permit). Any rights that a Participant or beneficiary
may have in respect of any Performance Shares or Performance Units outstanding
at the date of such termination of employment that may not be earned (or that
are eligible to be earned, but are not earned) in accordance with this section 7(h)(i) shall
be forfeited and canceled, effective as of the date of the Participant’s
termination of employment or service (or, if eligible to be earned, but are not
earned, the date of the Committee’s certification pursuant to Section 7(e)).

 

(ii)                                  Termination for any Other
Reason.    Unless
otherwise determined by the Committee at or after the time of grant, in the
event the employment or service of the Participant shall terminate during a
Performance Period for any reason other than the one described in Section 7(h)(i),
all of the Participant’s rights to Performance Shares and Performance Units
related to such Performance Period shall be immediately forfeited and canceled
as of the date of such termination of employment.

 

(iii)                               Cause.    Notwithstanding
anything in this Section 7 to the contrary, a Participant’s rights in
respect of unearned Performance Shares and Performance Units shall in all
events be immediately forfeited and canceled as of the date of the Participant’s
termination of employment for Cause.

 

SECTION 8

STOCK APPRECIATION RIGHTS

 

(a)                                  Grant of SARs.    SARs may be granted
to any Participants, all Participants, any class of Participants at such time
or times as shall be determined by
the Committee. SARs may be granted in tandem with an Option, or may be granted
on a freestanding basis, not related to any Option. The term and conditions of
any SAR grant shall be evidenced in writing, and shall include such provisions
not inconsistent with the Plan as the Committee shall determine.

 

(b)                                 Terms and Conditions of
SARs.    Unless
the Committee shall otherwise determine, the terms and conditions (including,
without limitation, the exercise period of the SAR, the vesting schedule applicable
thereto and the impact of any termination of service on the Participant’s
rights with respect to the SAR) applicable with respect to (i) SARs granted in tandem with an
Option shall be substantially identical (to the extent possible taking into
account the differences related to the character of the SAR) to the terms and
conditions applicable to the tandem Options and (ii) freestanding SARs shall be substantially identical
(to the extent possible taking into account the differences related to the
character of the SAR) to the terms and conditions that would have been
applicable under Section 5 above were the grant of the SARs a grant of an
Option.

 

(c)                                  Exercise of Tandem SARs.    SARs which are
granted in tandem with an Option may only be exercised upon the surrender of
the right to exercise such Option for an equivalent number of shares and may be
exercised only with respect to the shares of Common Stock for which the related
Option is then exercisable.

 

(d)                                 Payment of SAR Amount.    Upon exercise of a
SAR, the holder shall be entitled to receive payment, in cash, in shares of
Common Stock or in a combination thereof, as determined by the Committee, of an
amount determined by multiplying:

 

(i)                                     the excess, if any, of the Fair Market Value
of a share of Common Stock at the date of exercise over the Fair Market Value
of a share of Common Stock on the date of grant, by

 

(ii)                                  the number of shares of Common Stock with
respect to which the SARs are then being exercised.

 

SECTION 9.

OTHER STOCK-BASED AWARDS

 

(a)                                  Other Stock-Based Awards.    The Committee may
grant other types of equity-based and equity-related awards in addition to
Options, SARs, Restricted Stock, Performance Shares, Restricted Stock Units and

 

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Performance Units, including, but not limited to,
the outright grant of Common Stock in satisfaction of obligations of the
Company or any Subsidiary under another compensatory plan, program or
arrangement, modified awards intended to comply with or structured in
accordance with the provisions of applicable non-U.S. law or practice, or the
sale of Common Stock, in such amounts and subject to such terms and conditions
as the Committee shall determine, including, but not limited to, the
satisfaction of Performance Criteria. Notwithstanding the immediately preceding
sentence, except in the case of Other Stock-Based Awards issued in satisfaction
of an obligation of the Company or any Subsidiary to make a payment in cash in
respect of a Participant (including, but not limited to, when an annual or
long-term incentive compensation award is satisfied with the issuance of shares
of Common Stock instead of cash or in respect of a Participant’s accrued
benefit under a deferred compensation plan), except as provided under Section 10,
no Participant shall be entitled to vest in any such Other Stock-Based Award on
a schedule which is more favorable to the Participant than ratably over a
period of three years from the date of grant. Each such Other Stock-Based Award
shall be evidenced in writing and specify the terms and conditions applicable
thereto. Any such Other Stock-Based Award may entail the transfer of actual
shares of Common Stock or the payment of the value of such Award in cash based
upon the value of a specified number of shares of Common Stock, or any
combination of the foregoing, as determined by the Committee. The terms of any
Other Stock-Based Award need not be uniform in application to all (or any class
of) Participants, and each Other Stock-Based Award granted to any Participant
(whether or not at the same time) may have different terms.

 

(b)                                 Termination of Employment
or Service.    In
addition to any other terms and conditions that may be specified by the
Committee but subject to the limitations set forth in Section 9(a), each
Other Stock Based Award shall specify the impact of termination of employment
upon the rights of a Participant in respect of such Award. At the discretion of
the Committee, such conditions may be the same as apply with respect to
Restricted Stock or Restricted Stock Units, or may be contain terms that are
more or less favorable to the Participant.

 

SECTION 10.

CHANGE OF CONTROL

 

(a)                                  Accelerated Vesting and
Payment.    Subject
to the provisions of Section 10(b) below, in the event of a Change of
Control (i) each Option and
SAR then outstanding shall be fully exercisable regardless of the exercise schedule otherwise
applicable to such Option and/or SAR, (ii) the
Period of Restriction shall lapse as to each share of Restricted Stock then
outstanding, (iii) each
outstanding Restricted Stock Unit shall become fully vested and payable, (iv) each outstanding Performance
Share Award and Performance Unit Award shall be deemed earned at the target
level of performance for such Award, and (v) each
outstanding Other Stock-Based Award shall become fully vested and payable. In
addition, in connection with such a Change of Control, the Committee may, in
its discretion, provide that each Option and/or SAR shall, upon the occurrence
of such Change of Control, be canceled in exchange for a payment per share in
cash (the “Settlement Payment”) in an amount equal to the excess, if any, of
the Change of Control Price over the exercise price for such Option or the base
price of such SAR. Should the Committee authorize any Settlement Payments in
respect of Options, the Committee may determine that any Options which have an
exercise price per share below the Change of Control Price shall be deemed
cancelled and satisfied in full for a deemed Settlement Payment of zero. The
Committee may also direct that each Restricted Stock Unit, Other Stock-Based
Award, Performance Share and/or Performance Unit shall be settled in cash with
its value determined based on the Change of Control Price.

 

(b)                                 Alternative Awards.    Notwithstanding Section 10(a),
no cancellation, acceleration of exercisability, vesting, cash settlement or
other payment shall occur with respect to any Award if the Committee reasonably
determines in good faith, prior to the occurrence of a Change of Control, that
such Award shall be honored or assumed, or new rights substituted therefor
(such honored, assumed or substituted award hereinafter called an “Alternative
Award”), by a Participant’s employer (or the parent or an affiliate of such
employer) immediately following the Change of Control; provided that any such Alternative Award
must:

 

(i)                                     be based on stock which is traded on an
established U.S. securities market;

 

(ii)                                  provide such Participant with rights and
entitlements substantially equivalent to or better than the rights, terms and
conditions applicable under such Award, including, but not limited to, an
identical or better exercise or vesting schedule and identical or better
timing and methods of payment;

 

(iii)                               have substantially equivalent economic value to such Award (determined
at the time of the Change of Control); and

 

99

 

(iv)                              have terms and conditions which provide that in the event that, during
the 24-month period following the Change of Control, the Participant’s
employment or service is involuntarily terminated for any reason (including,
but not limited to a termination due to death, Disability or without Cause) or
Constructively Terminated (as defined below), all of such Participant’s Options
and/or SARs shall be deemed immediately and fully exercisable, the Period of
Restriction shall lapse as to each of the Participant’s outstanding Restricted
Stock awards, each of the Participant’s outstanding Restricted Stock Unit
awards and other Stock-Based Awards shall be payable in full and each such
Alternative Award shall be settled for a payment per each share of stock
subject to the Alternative Award in cash, in immediately transferable, publicly
traded securities or in a combination thereof, in an amount equal to, in the
case of an Option or SAR, the excess of the Fair Market Value of such stock on
the date of the Participant’s termination over the corresponding exercise or
base price per share and, in the case of any Restricted Stock, Restricted Stock
Unit, or Other Stock-Based Award, the Fair Market Value of the number of shares
of Common Stock subject or related thereto.

 

For this purpose, a Participant’s employment or
service shall be deemed to have been Constructively Terminated if, without the
Participant’s written consent, the Participant terminates employment or service
within 120 days following either (x) a material reduction in the
Participant’s base salary or a Participant’s incentive compensation
opportunity, or (y) the relocation of the Participant’s principal place of
employment or service to a location more than 35 miles away from the
Participant’s prior principal place of employment or service.

 

(c)                                  Section 409A.    Should any event
constitute a Change of Control for purposes of the Plan, but not constitute a
change of control within the meaning of Section 409A of the Code, if
necessary to avoid the imposition of an additional tax on the recipient, no
payment or distribution shall be made to any affected Participant by reason of
such Change of Control (although any other modification or enhancement to the
Award, such as accelerated vesting, shall still apply) and the value of such
Award as determined by the Committee prior to such Change of Control shall be
paid to the affected Participant on the earlier to occur of (i) the day after the six month anniversary
of such Participant’s termination of employment and (ii) whichever of the following is applicable to such
Award (A) with respect to
any unvested Award that would have become vested solely upon the passage of
time and the continued performance of service, the date the Award would have
otherwise become vested without regard to the Change of Control, (B) with respect to any unvested
Award that would have become vested upon the achievement of specified
Performance Criteria, on the last day of the applicable Performance Period or (C) if the Award was already vested
at the time the Change of Control occurs, on the date on which the Award would
have expired in accordance with its terms.

 

SECTION 11

AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

 

The Board may, at any time
and from time to time amend, modify, suspend, or terminate this Plan, in whole
or in part, without notice to or the consent of any Participant, Employee or
Agent; provided, however, that
any amendment which would (i) increase
the number of shares available for issuance under the Plan, (ii) lower the minimum exercise price
at which an Option (or the base price at which a SAR) may be granted or
otherwise permit the repricing of any outstanding Options or SARs (other than
in the context of a transaction referenced in Section 4(d)), (iii) extend the maximum term for
Options or SARs granted hereunder or (iv) otherwise
amend the Plan in a material fashion that would require the approval of
shareholders under the applicable rules and regulations of any exchange or
automated quotation system on which the Common Stock is listed to trade shall
be subject to the approval of the Company’s shareholders. No amendment,
modification, or termination of the Plan shall in any manner adversely affect
any Award theretofore granted under the Plan, without the consent of the
Participant.

 

SECTION 12.

MISCELLANEOUS PROVISIONS

 

(a)                                  Transferability.    No Award granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than in accordance with Section 12(b) below,
provided that the Committee may
permit transfers of Awards (other than Incentive Stock Options) to Family
Members (including, without limitation, transfers effected by a domestic
relations order) subject to such terms and conditions as the Committee shall
determine.

 

(b)                                 Beneficiary Designation.    Each Participant
under the Plan may from time to time name any beneficiary or beneficiaries (who
may be named contingently or successively) to whom any benefit under the Plan
is to be paid or

 

100

 

by whom any right under the Plan is to be exercised
in case of the Participant’s death; provided
that, if the Participant shall not have designated any beneficiary
under this Plan, the Participant’s beneficiary shall be deemed to be the person
designated by the Participant under the group life insurance plan of the
Company or a Subsidiary in which such Participant participates (unless such
designated beneficiary is not a Family Member). Each designation made hereunder
will revoke all prior designations by the same Participant with respect to all
Awards previously granted (including, solely for purposes of this Plan, any
deemed designation), shall be in a form prescribed by the Committee, and will
be effective only when received by the Committee in writing during the
Participant’s lifetime. In the absence of any such effective designation
(including a deemed designation), benefits remaining unpaid at the Participant’s
death shall be paid to or exercised by the Participant’s surviving spouse, if
any, or otherwise to or by the Participant’s estate. Except as otherwise
expressly provided herein, nothing in this Plan is intended or may be construed
to give any person other than Participants any rights or remedies under this
Plan.

 

(c)                                  Deferral of Payment.    At the time any Award
is granted (or such earlier time as the Committee may require), the Committee
may permit a Participant to elect, upon such terms and conditions as the Committee
may establish, to defer receipt of shares of Common Stock that would otherwise
be issued in connection with an Award.

 

(d)                                 No Guarantee of Employment or
Participation.    The
existence of this Plan, as in effect at any time or from time to time, or any
grant of Award under the Plan shall not interfere with or limit in any way the
rights of the Company or any Subsidiary to terminate any Participant’s
employment or other service provider relationship at any time, nor confer upon
any Participant any rights to continue in the employ or service of the Company
or any Subsidiary or any other affiliate of the Company. Except to the extent
expressly selected by the Committee to be a Participant, no person (whether or
not an Employee, an Agent or a Participant) shall at anytime have a right to be
selected for participation in the Plan or, having been selected as a
Participant, to receive any additional awards hereunder, despite having
previously participated in an incentive or bonus plan of the Company or an affiliate.
The existence of the Plan shall not be deemed to constitute a contract of
employment between the Company or any affiliate and any Employee, Agent or
Participant, nor shall it constitute a right to remain in the employ or service
of the Company or any affiliate. Except as may be provided in a separate
written agreement, employment with or service for the Company or any affiliate
is at-will and either party may terminate the participant’s employment or other
service provider relationship at any time, for any reason, with or without
cause or notice.

 

(e)                                  Tax Withholding.    The Company or an
affiliate shall have the right to deduct from all payments or distributions
hereunder any federal, state, foreign or local taxes or other obligations
required by law to be withheld with respect thereto. The Company may defer
issuance of Common Stock in respect of any Award until such requirements are
satisfied. The Committee may, in its discretion, permit a Participant to elect,
subject to such conditions as the Committee shall impose, (i) to have
shares of Common Stock otherwise to be issued under the Plan withheld by the
Company or (ii) to deliver to the Company previously acquired shares of
Common Stock, in either case for the greatest number of whole shares having a
Fair Market Value on the date immediately preceding the date on which the
applicable tax liability is determined not in excess of the minimum amount
required to satisfy the statutory withholding tax obligations with respect to
any Award.

 

(f)                                    No Limitation on Compensation; Scope of
Liabilities.    Nothing
in the Plan shall be construed to limit the right of the Company to establish
other plans if and to the extent permitted by applicable law. The liability of
the Company or any affiliate under this Plan is limited to the obligations
expressly set forth in the Plan, and no term or provision of this Plan may be
construed to impose any further or additional duties, obligations, or costs on
the Company or any affiliate thereof or the Committee not expressly set forth
in the Plan.

 

(g)                                 Requirements of Law.    The granting of
Awards and the issuance of shares of Common Stock shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

 

(h)                                 Term of Plan.    The Plan shall be
effective upon the date, if any, on which it is approved by the Company’s
shareholders. The Plan shall continue in effect, unless sooner terminated
pursuant to Section 11 above, until the tenth anniversary of the date of
such shareholder approval.

 

(i)                                     Governing Law.    The Plan, and all
Awards granted hereunder (and the terms and conditions of any document
evidencing any such grant), shall be construed in accordance with and governed
by the laws of the State of Delaware, without regard to principles of conflict
of laws.

 

101

 

(j)                                     No Impact On Benefits.    Except as may
otherwise be specifically stated under any employee benefit plan, policy or
program, Awards shall not be treated as compensation for purposes of
calculating an Employee’s or Agent’s right or benefits under any such plan,
policy or program.

 

(k)                                  No Constraint on Corporate Action.    Except as provided in
Section 11 above, nothing contained in this Plan shall be construed to
prevent the Company, or any affiliate, from taking any corporate action
(including, but not limited to, the Company’s right or power to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, or to merge or consolidate, or dissolve, liquidate, sell,
or transfer all or any part of its business or assets) which is deemed by it to
be appropriate, or in its best interest, whether or not such action would have
an adverse effect on this Plan, or any awards made under this Plan. No
director, beneficiary, or other person shall have any claim against the
Company, or any of its affiliates, as a result of any such action.

 

(l)                                     Indemnification.    Each member of the
Board and each member of the Committee shall be indemnified and held harmless
by the Company and each Employer against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member of the
Board or Committee in connection with or resulting from any claim, action,
suit, or proceeding to which such member may be made a party or in which such
member may be involved by reason of any action taken or failure to act under
the Plan (in the absence of bad faith) and against and from any and all amounts
paid by such member in settlement thereof, with the Company’s approval, or paid
by such member in satisfaction of any judgment in any such action, suit, or
proceeding against such member, provided
that such member shall give the Company an opportunity, at its own
expense, to handle and defend the same before such member undertakes to handle
and defend it individually. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of indemnification to
which any such person may be entitled under the Company’s Certificate of
Incorporation or By-Laws, by contract, as a matter of law, or otherwise.

 

(m)                               Rights as a Stockholder.    A Participant shall
have no rights as a stockholder with respect to any shares of Common Stock
covered by any Award until the Participant shall have become the holder of
record of such shares.

 

(n)                                 Captions.    The headings and
captions appearing herein are inserted only as a matter of convenience. They do
not define, limit, construe, or describe the scope or intent of the provisions
of the Plan.

 

102

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