Document:

Ameritrade Holding Corporation

 

Exhibit 4.2

AMERITRADE HOLDING CORPORATION

1996 DIRECTORS INCENTIVE PLAN

(As Amended and Restated, Effective as of September 9, 2002)

 

 

AMERITRADE HOLDING CORPORATION

1996 DIRECTORS INCENTIVE PLAN

(As Amended and Restated, Effective as of September 9, 2002)

     1.     History and Purpose. Ameritrade Holding Corporation (“Old Ameritrade”)
previously established the Ameritrade Holding Corporation 1996 Directors
Incentive Plan (the “Plan”) to attract and retain as non-employee directors
persons whose abilities, experience and judgment can contribute to the
continued progress of the company and its subsidiaries and to facilitate the
directors’ ability to acquire a proprietary interest in the company. Pursuant
to an agreement and plan of merger (the “Merger Agreement”), Old Ameritrade
became a subsidiary of a newly formed corporation, Ameritrade Holding
Corporation (“Ameritrade” or the “Company”) effective as of September 9, 2002
(the “Restatement Date”) and as of the Restatement Date Ameritrade assumed the
Plan, and all outstanding obligations hereunder. The following provisions
constitute an amendment, restatement and continuation of the Plan as of the
Restatement Date.

     2.     Administration.

             2.1 Administration By Committee. The Plan shall be administered by the
Compensation Committee (the “Committee”) of the Board of Directors of the
Company (the “Board”). Notwithstanding the foregoing, no member of the
Committee shall act with respect to the administration of the Plan except to
the extent consistent with the exempt status of the Plan under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (“Rule
16b-3”).

             2.2 Authority. Subject to the provisions of the Plan, the Committee shall
have the authority to (a) interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan,
(b) correct any defect or omission and to reconcile any inconsistency in the
Plan or in any payment made hereunder, and (c) make all other determinations
and to take all other actions necessary or advisable for the implementation and
administration of the Plan. The determination of the Committee on matters
within its authority shall be conclusive and binding on the Company and all
other persons.

     3.     Participation. Only Non-Employee Directors shall be eligible to
participate in the Plan. As of any applicable date, a “Non-Employee Director”
is a person who is serving as a director of the Company and who is not an
employee of the Company or any subsidiary of the Company as of that date.

     4.     Definition of Fair Market Value. For purposes of the Plan, the “Fair
Market Value” of a share of common stock of the Company (“Stock”) as of any
date shall be the closing market composite price for such Stock as reported on
NASDAQ on that date or, if Stock is not traded on that date, on the next
preceding date on which Stock was traded.

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     5.     Shares Subject to the Plan.

                   5.1 Number of Shares Reserved. The shares of Stock with respect to which
awards may be made under the Plan or which may be distributed pursuant to
elections under Sections 9 or 10 of the Plan shall be shares currently
authorized but unissued or currently held or subsequently acquired by the
Company as treasury shares, including shares purchased in the open market or in
private transactions. Subject to the provisions of subsection 5.3, the number
of shares of Stock which may be issued with respect to awards under the Plan or
distributed pursuant to elections made in accordance with Section 9 or 10 of
the Plan shall not exceed 960,000 shares in the aggregate.

                   5.2 Reusage of Shares.

	 	 	 
	 	(a)	
In the event of the exercise or termination (by reason of
forfeiture, expiration, cancellation, surrender or otherwise) of any
award under the Plan, that number of shares of Stock that was
subject to the award but not delivered shall again be available for
awards under the Plan.
	 
	 	(b)	
In the event that shares of Stock are delivered under the
Plan as a Stock Award (as defined in Section 7) and are thereafter
forfeited or reacquired by the Company pursuant to rights reserved
upon the award thereof, such forfeited or reacquired shares shall
again be available for awards under the Plan.
	 
	 	(c)	
Notwithstanding the provisions of paragraphs (a) or (b), the
following shares shall not be available for reissuance under the
Plan: (i) shares with respect to which the Non-Employee Director has
received the benefits of ownership (other than voting rights),
either in the form of dividends or otherwise, and (ii) shares which
are surrendered in payment of the Option Price (as defined in
subsection 6.3) upon the exercise of an Option.

                   5.3 Adjustments to Shares Reserved. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff, stock dividend, stock
split, reverse stock split, exchange or other distribution with respect to
shares of Stock or other change in the corporate structure or capitalization
affecting the Stock, the type and number of shares of stock which are or may be
subject to awards under the Plan and the terms of any outstanding awards
(including the price at which shares of stock may be issued pursuant to an
outstanding award) shall be equitably adjusted by the Committee, in its sole
discretion, to preserve the value of benefits awarded or to be awarded to
Non-Employee Directors under the Plan. In determining what adjustment, if any,
is appropriate pursuant to the preceding sentence, the Committee may rely on
the advice of such experts as they deem appropriate, including counsel,
investment bankers and the accountants of the Company.

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     6.     Options.

                   6.1 Definitions. The grant of an “Option” under this Section 6 entitles
the Non-Employee Director to purchase shares of Stock at the Option Price,
subject to the terms of this Section 6. Options granted under this Section 6
shall be non-qualified stock options which are not intended to be “incentive
stock options” as that term is described in section 422(b) of the Internal
Revenue Code of 1986, as amended (the “Code”).

                   6.2 Awards of Options. Each Non-Employee Director shall be awarded
Options under this Section 6 in accordance with the following:

	 	 	 
	 	(a)	
Upon his election to the Board for his first term, each
Non-Employee Director shall be awarded an Option to purchase such
number of shares of Stock as determined by the Chairman of the
Board; provided, however, that such award shall be approved by the
Board.
	 
	 	(b)	
At such times as the Board shall determine, each Non-Employee
Director shall be awarded an Option to purchase that number of
shares of Stock determined by the Board and approved by the members
of the Board other than those receiving the grant of an Option
pursuant to this paragraph (b). In determining the number of shares
of Stock subject to an Option under this paragraph (b), the Board
may take into account such objective or subjective factors as it
determines appropriate.

                   6.3 Option Price. The price at which shares of Stock may be purchased
upon the exercise of an Option (the “Option Price”) shall be not less than the
greater of (i) the Fair Market Value of a share of Stock as of the date on
which the Option is granted, or (ii) the par value of a share of Stock on such
date.

                   6.4 Exercise. Except as otherwise provided in the Plan, each Option
granted to a Non-Employee Director under this Section 6 shall become
exercisable in substantially equal annual installments over a period of three
years, beginning with the first anniversary of the date of grant and no Option
shall be exercisable after the Expiration Date (as defined in Section 8).
Notwithstanding a Non-Employee Director’s termination of service as a director,
Options shall continue to vest over a period of three years unless the
Non-Employee Director terminates for cause. If a Non-Employee Director’s
service as a director terminates for Cause, Options shall continue to vest over
a period of one year following such termination of service. The full Option
Price of each share of Stock purchased upon the exercise of any Option shall be
paid at the time of such exercise and, as soon as practicable thereafter, a
certificate representing the shares so purchased shall be delivered to the
person entitled thereto. The Option Price shall be payable in cash or in
shares of Stock (valued at Fair Market Value as of the day of exercise), or in
any combination thereof.

     7.     Stock Awards.

                   7.1 Definition. Subject to the terms of this Section 7, a “Stock Award”
under the Plan is a grant of shares of Stock to a Non-Employee Director, the
vesting of which is subject

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to the conditions described in subsection 7.3. The
period beginning on the date of the grant of a Stock Award and ending on the
vesting or forfeiture of such Stock (as applicable) is referred to as the
“Restricted Period”.

                   7.2 Non-Discretionary Awards. Upon his election to the Board for his
first term, each Non-Employee Director shall be awarded such number of shares
of Stock pursuant to this Section 7 as determined by the Chairman of the Board;
provided, however, that such award shall be approved by the Board; and provided
further that, the Fair Market Value of the Stock awarded to a Non-Employee
Director pursuant to this subsection 7.2 shall be approximately $20,000 or such
other amount determined by the Board from time to time.

                   7.3 Vesting. Except as otherwise provided in the Plan, the shares of Stock
subject to an award under this Section 7 shall become vested in substantially
equal annual installments over a period of three years, beginning with the
first anniversary of the date of grant and all shares of Stock awarded pursuant
to this Section 7 which are not vested on the Expiration Date shall be
forfeited.

                   7.4 Rights with Respect to Stock. Beginning on the date of the grant of
shares of Stock comprising a Stock Award, and including any applicable
Restricted Period, the Non-Employee Director, as owner of such shares, shall
have the right to vote such shares; provided, however, that payment of
dividends with respect to Stock Awards shall be subject to the following:

	 	 	 
	 	(a)	
On and after date that a Non-Employee Director has a fully
earned and vested right to the shares comprising a Stock Award, and
the shares have been distributed to the Non-Employee Director, the
Non-Employee Director shall have all dividend rights (and other
rights) of a stockholder with respect to such shares.
	 
	 	(b)	
Prior to the date that a Non-Employee Director has a fully
earned and vested right to the shares comprising a Stock Award, the
Committee, in its sole discretion, may award Dividend Rights (as
defined below) with respect to such shares.
	 
	 	(c)	
On and after the date that a Non-Employee Director has a
fully earned and vested right to the shares comprising a Stock
Award, but before the shares have been distributed to the
Non-Employee Director, the Non-Employee Director shall be entitled
to Dividend Rights with respect to such shares, at the time and in
the form determined by the Committee.

A “Dividend Right” with respect to shares comprising a Stock Award shall
entitle the Non-Employee Director, as of each dividend payment date, to an
amount equal to the dividends payable with respect to a share of Stock
multiplied by the number of such shares. Dividend Rights shall be settled in
the same form (either cash or in shares of Stock) as dividends paid to
shareholders of the Company.

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     8.     Expiration of Awards. The “Expiration Date” with respect to an award
under the Plan means the earlier of the following dates:

	 	 	 
	 	(a)	
the ten-year anniversary of the date on which the award is
granted; or
	 
	 	(b)	
the one-year anniversary of the date on which the
Non-Employee Director’s service as a director of the Company
terminates for cause.

     9.     Payment of Retainers; Elections.

                   9.1 Payment of Retainer. Subject to the terms and conditions of the Plan,
for each fiscal year of the Company (the “Award Year”), each individual who is
a Non-Employee Director shall be paid a retainer in an amount determined from
time to time by the Board (the “Retainer”) in accordance with and subject to
the following:

	 	 	 
	 	(a)	
For each Award Year, a “Cash Retainer” shall be payable to
each individual who is a Non-Employee Director as of the first day
of the Award Year in an amount equal to one-half of the Retainer for
the Award Year; and
	 
	 	(b)	
For each Award Year, a “Stock Retainer” shall be payable to
each individual who is a Non-Employee Director as of the first day
of the Award Year in an amount equal to one-half of the Retainer for
the Award Year, which Stock Retainer shall be payable in shares of
Stock having a Fair Market Value equal to the Stock Retainer, with
the Fair Market Value of any fractional share payable in cash.
	 
	 	(c)	Notwithstanding the foregoing, if a Non-Employee Director has
met the specified requirements of the Ameritrade Holding Corporation
Equity Ownership and Disposition Guidelines, the Non-Employee
Director may elect to receive all or any portion of the Stock
Retainer in cash. The portion of a Non-Employee Director’s retainer
which is paid in cash pursuant to this paragraph (c) shall be
treated as part of the Cash Retainer.

Notwithstanding the foregoing, the Board, in its sole discretion, may determine
that an Award Year of less than 12 months is appropriate, in which case, the
amount of the Retainer for such Award Year shall be equitably adjusted as
determined by the Board.

                   9.2 Elections to Receive Stock. Subject to the terms and conditions of
the Plan, each Non-Employee Director may elect to forego receipt of all or any
portion of the Eligible Cash Payments (as defined below) payable to him in any
Award Year beginning after the date of his election and instead to receive
whole shares of Stock of equivalent value to the Eligible Cash Payments so
foregone (determined in accordance with subsection 9.4). An election under
this subsection 9.2 to have Eligible Cash Payments paid in shares of Stock
shall be valid only if it is in writing, signed by the Non-Employee Director,
and filed with the Committee in accordance with uniform and nondiscriminatory
rules adopted by the Committee, including, but not limited to, rules required
to cause the receipt of Stock pursuant to any such election to be

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exempt under Rule 16b-3. For purposes of the Plan, the term “Eligible Cash Payments” means
the Cash Retainer and meeting fees and committee fees that would otherwise be
payable to the Non-Employee Director by the Company in cash as established,
from time to time, by the Board or any committee thereof.

                   9.3 Revocation of Election to Receive Stock. Once effective, an election
pursuant to subsection 9.2 to receive Stock shall remain in effect for
successive Award Years until it is revised or revoked. Any such revision or
revocation shall be in writing, signed by the Non-Employee Director, shall be
effective for the Award Year next following the date on which it is received by
the Committee, or such later date specified in such notice, and shall be filed
with the Committee in accordance with uniform and nondiscriminatory rules
established by the Committee, including, but not limited to, rules required to
cause the receipt of Stock (or the receipt of cash in lieu of Stock as
previously elected) to be exempt under Rule 16b-3.

                   9.4 Equivalent Amount of Stock. The number of whole shares of Stock to be
distributed to any Non-Employee Director by reason of his election pursuant to
subsection 9.2 to receive Stock in lieu of Eligible Cash Payments shall be
equal to (rounded to the nearest whole number of shares):

	 	 	 
	 	(a)	
the amount of the Eligible Cash Payments which the
Non-Employee Director has elected to have paid to him in shares of
Stock;
	 
	 	 	
DIVIDED BY
	 
	 	(b)	
the Fair Market Value of a share of Stock as of the date on
which such Eligible Cash Payments would otherwise have been payable
to the Non-Employee Director.

     10.     Deferred Compensation.

                   10.1 Deferral of Compensation. Subject to the terms and conditions of the
Plan, each Non-Employee Director, by filing a written ‘Deferral Election’ with
the Committee in accordance with uniform and nondiscriminatory rules adopted by
the Committee, may elect to defer the receipt of all or any portion of the
Eligible Deferral Amounts (as defined below) otherwise payable to him on or
after the Effective Date until a future date (the ‘Distribution Date’)
specified by the Non-Employee Director in his Deferral Election as of which
payment of his Deferred Compensation Account (as defined in subsection 10.2)
shall commence in accordance with subsection 10.3. If no Distribution Date is
specified in a Non-Employee Director’s Deferral Election, the Distribution Date
shall be deemed to be the first business day in January of the year following
the date on which the Non-Employee Director ceases to be a director of the
Company for any reason. A Non-Employee Director’s Deferral Election shall be
effective with respect to Eligible Deferral Amounts otherwise payable to him
for services rendered after the last day of the fiscal year in which such
election is filed with the Committee; provided, however, that:

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	 	(a)	
a Deferral Election which is filed within 30 days of the date
on which a director first becomes a Non-Employee Director shall be
effective with respect to all Eligible Deferral Amounts otherwise
payable to him for periods after the date on which the Deferral
Election is filed; and
	 
	 	(b)	
by notice filed with the Committee in accordance with uniform
and nondiscriminatory rules established by it, a director may
terminate or modify any Deferral Election as to Eligible Deferral
Amounts payable for services rendered after the last day of the
fiscal year in which such notice is filed with the Committee;
provided, however, that no modification may be made to the
Distribution Date unless the Non-Employee Director shall file such
notice with the Committee at least six months prior thereto.

Notwithstanding the provisions of paragraph (b) next above, the Committee may,
in its sole discretion, after considering all of the pertinent facts and
circumstances, approve a change to the Distribution Date which is requested by
a Non-Employee Director less than six months prior thereto. For purposes of
the Plan, the term ‘Eligible Deferral Amounts’ shall mean the Retainer
(including both the Cash Retainer and the Stock Retainer) and meeting fees and
committee fees that would otherwise be payable to the Non-Employee Director by
the Company, all as established from time to time by the Board or any committee
thereof.

                   10.2 Crediting and Adjustment of Deferred Amounts. The amount of any
Eligible Deferral Amounts deferred pursuant to a Non-Employee Director’s
Deferral Election in accordance with subsection 10.1 (“Deferred Compensation”)
shall be credited to a bookkeeping account maintained by the Company in the
name of the Non-Employee Director (the “Deferred Compensation Account”), which
account shall consist of two subaccounts, one known as the “Cash Subaccount”
and the other as the “Company Stock Subaccount.” Any portion of the Stock
Retainer and any Eligible Cash Payments that the Non-Employee Director has
elected to receive in Stock pursuant to subsection 9.2 and, in each case, with
respect to which the Non-Employee Director has made a Deferral Election
pursuant to subsection 10.1 shall be credited to his Company Stock Subaccount.
Any other Deferred Compensation shall be credited to his Cash Subaccount. A
Non-Employee Director’s Deferred Compensation Account shall be adjusted as
follows:

	 	 	 
	 	(a)	
As of the first day of each fiscal quarter occurring after
the Effective Date (which dates are referred to herein as
“Accounting Dates”), the Non-Employee Director’s Cash Subaccount
shall be adjusted as follows:

	 	 	 	 
	 	 	(i)	first, the amount of any distributions from the
Cash Subaccount made since the last preceding Accounting Date
shall be charged to the Cash Subaccount;
	 
	 	 	(ii)
	next, the balance of the Cash Subaccount after
adjustment in accordance with subparagraph (i) above shall be
credited with interest since the last

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	 	 	preceding Accounting
Date computed at the prime rate as reported by The Wall Street
Journal for such date, or if such date is not a business day,
for the next preceding business day; and
	 
	 	(iii)	finally, after adjustment in accordance with the
foregoing provisions of this subsection 10.2, the Cash
Subaccount shall be credited with the Deferred Compensation
otherwise payable to the Non-Employee Director since the last
preceding Accounting Date which is to be credited to the Cash
Subaccount.

	 	 	 
	 	(b)	
The Non-Employee Director’s Company Stock Subaccount shall be
adjusted as follows:

	 	 	 
	 	(i)	as of any date on or after the Effective Date on
which Eligible Deferral Amounts would have been payable to the
Non-Employee Director in Stock but for his or her Deferral
Election, the Non-Employee Director’s Company Stock Subaccount
shall be credited with that number of stock units (“Stock
Units”) equal to the number of shares of Stock to which he
would have been entitled as of the applicable date;
	 
	 	(ii)	as of the date on which shares of Stock are
distributed to the Non-Employee Director in accordance with
subsection 10.3 below, the Company Stock Subaccount shall be
charged with an equal number of Stock Units; and
	 
	 	(iii)	as of the record date for any dividend paid on
Stock, the Company Stock Subaccount shall be credited with
that number of additional Stock Units which is equal to the
number obtained by multiplying the number of Stock Units then
credited to the Company Stock Subaccount by the amount of the
cash dividend or the fair market value (as determined by the
Board of Directors) of any dividend in kind payable on a share
of Stock, and dividing that product by the then Fair Market
Value of a share of Stock.	 
	 
	 	 	In the event of any merger, consolidation, reorganization,
recapitalization, spinoff, stock split, reverse stock split, rights
offering, exchange or other change in the corporate structure or
capitalization of the Company affecting the Stock, each
Non-Employee Director’s Company Stock Subaccount shall be equitably
adjusted in such manner consistent with subsection 5.3.

                   10.3 Payment of Deferred Compensation Account. Except as otherwise
provided in this subsection 10.3 or subsection 10.4, the balances credited to a
Non-Employee Director’s Deferred Compensation Account shall each be payable to
the Non-Employee Director in 10 annual installments commencing as of the
Distribution Date and continuing on each annual anniversary thereof.
Notwithstanding the foregoing, a Non-Employee Director may elect, by

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filing a
notice with the Committee at least six months prior to the Distribution Date,
to change the number of payments to a single payment or to any number of annual
payments not in excess of ten. Each such payment shall include a cash portion,
if applicable, and a Stock portion, if applicable, as follows:

	 	 	 
	 	(a)	The cash portion to be paid as of the Distribution Date or
any anniversary thereof and charged to the Cash Subaccount shall be
equal to the balance of the Cash Subaccount multiplied by a
fraction, the numerator of which is one and the denominator of which
is the number of remaining payments to be made, including such
payment.
	 
	 	(b)	The Stock portion to be paid as of the Distribution Date or
any anniversary thereof and charged to the Company Stock Subaccount
shall be distributed in whole shares of Stock, the number of shares
of which shall be determined by rounding to the next highest integer
the product obtained by multiplying the number of Stock Units then
credited to the Non-Employee Director’s Company Stock Subaccount by
a fraction, the numerator of which is one and the denominator of
which is the number of remaining payments to be made, including such
payment.

Notwithstanding the foregoing, the Committee, in its sole discretion, may
distribute all balances in any Deferred Compensation Account to a
Non-Employee Director (or former Non-Employee Director) in a lump sum as of any date.

                   10.4 Payments in the Event of Death. If a Non-Employee Director dies
before payment of his Deferred Compensation Account commences, all amounts then
credited to his Deferred Compensation Account shall be distributed to his
Beneficiary (as described below), as soon as practicable after his death, in a
lump sum. If a Non-Employee Director dies after payment of his Deferred
Compensation Account has commenced but before the entire balance of such
account has been distributed, the remaining balance thereof shall be
distributed to his Beneficiary, as soon as practicable after his death, in a
lump sum. Any amounts in the Cash Subaccount shall be distributed in cash and
any amounts in the Stock Subaccount shall be distributed in whole shares of
Stock determined in accordance with paragraph 10.3(b). For purposes of the
Plan, the Non-Employee Director’s “Beneficiary” is the person or persons the
Non-Employee Director designates, which designation shall be in writing, signed
by the Non-Employee Director and filed with the Committee prior to the
Non-Employee Director’s death. A Beneficiary designation shall be effective
when filed with the Committee in accordance with the preceding sentence. If
more than one Beneficiary has been designated, the balance in the Non-Employee
Director’s Deferred Compensation Account shall be distributed to each such
Beneficiary per capita. In the absence of a Beneficiary designation or if no
Beneficiary survives the Non-Employee Director, the Beneficiary shall be the
Non-Employee Director’s estate.

     11.     Replacement Awards. Each holder of an award related to the common
stock of Old Ameritrade which was granted pursuant to the Plan prior to the
Restatement Date and which was outstanding as of the Restatement Date after
giving effect to the transactions contemplated by the

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Merger Agreement (the “Existing Awards”), will, as of the Restatement Date, be
automatically granted a “Replacement Award” under the Plan and the Existing Awards shall be cancelled
in exchange for the Replacement Awards. The number of shares of Stock and, if
applicable, the Option Price per share of Stock, subject to a Replacement Award
shall be equal to the same number of shares of common stock of Old Ameritrade
and, if applicable, the same Option Price per share, subject to corresponding
Existing Award. Except as provided in the preceding sentence, the Replacement
Awards granted pursuant to this Section 11 shall be subject to the same terms
and conditions as the corresponding Existing Awards.

     12.     Miscellaneous.

                   12.1 Duration. The Plan shall be unlimited in duration and, in the
event of Plan termination, shall remain in effect as long as any awards under
it are outstanding.

                   12.2 Withholding Payments. To the extent that any Non-Employee Director
would incur an obligation for Nebraska state income taxes on account of an
award or payment to him under the Plan or the exercise of any award under the
Plan (referred to as the “Withholding Obligation”), the Company, in its sole
discretion, may make a cash payment to such Non-Employee Director in an amount
such that, after payment of all federal, state or local taxes on such cash
payment, the Non-Employee Director retains a cash payment equal to the
Withholding Obligation.

                   12.3 Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:

	 	 	 
	 	(a)
	Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under the
Plan or make any other distribution of benefits under the Plan
unless such delivery or distribution would comply with all
applicable laws and the applicable requirements of any securities
exchange or similar entity.
	 
	 	(b)
	To the extent that the Plan provides for issuance of
certificates to reflect the transfer of shares of Stock, the
transfer of such shares may be effected on a non-certificated basis,
to the extent not prohibited by applicable law or the rules of any
stock exchange.

                   12.4 Transferability. Awards under the Plan are not transferable except
as designated by a Non-Employee Director by will or by the laws of descent and
distribution. To the extent that the Non-Employee Director who receives an
award under the Plan has the right to exercise such award, the award may be
exercised during the lifetime of the Non-Employee Director only by the
Non-Employee Director.

                   12.5 Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to

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the Committee, in care of the Company, at
its principal executive offices. The Committee may, by advance written notice
to affected persons, revise such notice procedure from time to time. Any
notice required under the Plan (other than a notice of election) may be waived
by the person entitled to notice.

                   12.6 Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Non-Employee Director or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require. Any
notice required under the Plan may be waived by the person entitled thereto.

                   12.7 Agreement With the Company. At the time of an award to a
Non-Employee Director under the Plan, the Committee may require a Non-Employee
Director to enter into an agreement with the Company in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.

                   12.8 Limitation of Implied Rights.

	 	 	 
	 	(a)	Neither a Non-Employee Director nor any other person shall,
by reason of the Plan, acquire any right in or title to any assets,
funds or property of the Company whatsoever, including, without
limitation, any specific funds, assets, or other property which the
Company, in its sole discretion, may set aside in anticipation of a
liability under the Plan. A Non-Employee Director shall have only a
contractual right to the amounts, if any, payable under the Plan,
unsecured by any assets of the Company. Nothing contained in the
Plan shall constitute a guarantee by the Company that the assets of
such companies shall be sufficient to pay any benefits to any
person.
	 
	 	(b)	The Plan does not constitute a contract of continued service,
and participation in the Plan shall not give any Non-Employee
Director the right to be retained as a director of the Company, nor
any right or claim to any benefit under the Plan, unless such right
or claim has specifically accrued under the terms of the Plan.
Except as otherwise provided in the Plan, no award under the Plan
shall confer upon the holder thereof any right as a shareholder of
the Company prior to the date on which he fulfills all service
requirements and other conditions for receipt of such rights.

                   12.9 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.

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                   12.10 Gender and Number. Where the context admits, words in one gender
shall include the other gender, words in the singular shall include the plural
and the plural shall include the singular.

                   12.11 Source of Payments. The provisions of Sections 9 and 10 constitute
only unfunded, unsecured promises of the Company to make payments to directors
(or other persons) in the future in accordance with the terms of the Plan.

                   12.12 Nonassignment. Neither a director’s nor any other person’s rights
to payments under the Plan are subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the director.

     13.     Amendment and Termination.

     The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 5.3 (relating to certain adjustments to shares) and
subsection 10.3 (relating to lump sum payments of amounts held in a
Non-Employee Director’s Deferred Compensation Account), no amendment or
termination may, without the consent of the Non-Employee Director or
beneficiary, if applicable, materially adversely affect the rights of any
Non-Employee Director or beneficiary under any award made under the Plan or
rights already accrued hereunder prior to the date such amendment is adopted by
the Board.

     14.     Change in Control. Notwithstanding any provision in the Plan to the
contrary, upon a Change in Control, all outstanding Options will become fully
exercisable and all outstanding Stock Awards shall become fully vested. For
purposes of the Plan, the term “Change in Control” means a change the
beneficial ownership of the Company’s voting stock or a change in the
composition of the Board which occurs as follows:

	 	 	 
	 	(a)	
Any “person” (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) is or becomes a beneficial owner, directly or
indirectly, of stock of the Company representing 30 percent or more
of the total voting power of the Company’s then outstanding stock.
	 
	 	(b)	
A tender offer (for which a filing has been made with the
Securities Exchange Commission (“SEC”) which purports to comply with
the requirements of Section 14(d) of the Exchange Act and the
corresponding SEC rules) is made for the stock of the Company, which
has not been negotiated and approved by the Board. In case of a
tender offer described in this paragraph (b), the Change in Control
will be deemed to have occurred upon the first to occur of (i) any
time during the offer when the person (using the definition in (a)
above) making the offer owns or has accepted for payment stock of
the Company with 25 percent or more of the total voting power of the
Company’s stock, or (ii) three business days before the offer is to
terminate unless the offer is withdrawn first, if the person making
the offer could own, by the terms of the offer plus any shares owned
by this person, stock with 50 percent or more of the total
voting power of the Company's stock when the offer terminates.
	 
	 	(c)	
Individuals who were the Board's nominees for election as directors
of the Company immediately prior to a meeting of the shareholders of
the Company involving a contest for the election of directors shall
not constitute a majority of the Board following the election.”

12Ameritrade Holding Corporation

 

Exhibit 4.2

AMERITRADE HOLDING CORPORATION

1996 LONG-TERM INCENTIVE PLAN

(As Amended and Restated Effective as of September 9, 2002)

 

 

AMERITRADE HOLDING CORPORATION

1996 LONG-TERM INCENTIVE PLAN

(As Amended and Restated Effective as of September 9, 2002)

     1.     History and Purpose. The Ameritrade Holding Corporation 1996
Long-Term Incentive Plan (the “Plan”) was originally adopted by Ameritrade
Holding Corporation for the purpose of increasing shareholder value and to
advance the interests of Ameritrade Holding Corporation (“Old Ameritrade”) and
its subsidiaries by awarding equity and performance based incentives designed
to attract, retain and motivate employees. As used in the Plan, the term
“subsidiary” means any business, whether or not incorporated, in which
Ameritrade has an ownership interest. Pursuant to an agreement and plan of
merger (the “Merger Agreement”), Old Ameritrade became a subsidiary of a newly
formed corporation, Ameritrade Holding Corporation (“Ameritrade” or the
“Company”) effective as of September 9, 2002 (the “Restatement Date”) and as of
the Restatement Date Ameritrade assumed the Plan, and all outstanding
obligations under the Plan. The following provisions constitute an amendment,
restatement and continuation of the Plan as of the Restatement Date.

     2.     Administration.

               2.1. Administration by Board or Committee. The Plan shall be administered
by the entire Board of Directors of Ameritrade (the “Board”) or a Committee of
the Board (the “Committee”) consisting of two or more non-employee directors
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) and “outside directors” within the
meaning of Treas. Reg. § 1.162-27(e)(3). Notwithstanding the foregoing, the
Board or the Committee, as applicable and subject to the terms and conditions
of the Plan, may delegate to any individual (or individuals) who are then
serving as a member(s) of the Board (the “Committee Designate”) the authority
to act as a subcommittee of the Board or Committee, as applicable, for purposes
of making grants or awards under the Plan to such employees of the Company and
its subsidiaries who are not subject to section 16(a) of the Exchange Act as
the Committee Designate shall determine in his or her sole discretion and the
Committee Designate shall have the authority and duties of the Committee with
respect to such grants or awards.

               2.2. Authority. Subject to the provisions of the Plan, the Board or the
Committee shall have the authority to (a) manage and control the operation of
the Plan, (b) interpret and construe the provisions of the Plan, and prescribe,
amend and rescind rules and regulations relating to the Plan, (c) make Awards
under the Plan, in such forms and amounts and subject to such restrictions,
limitations and conditions as it deems appropriate, including, without
limitation, Awards which are made in combination with or in tandem with other
Awards (whether or not contemporaneously granted) or compensation or in lieu of
current or deferred compensation, (d) modify the terms of, cancel and reissue,
or repurchase outstanding Awards, (e) prescribe the form of agreement,
certificate or other instrument evidencing any Award under the Plan, (f)
correct any defect or omission and reconcile any inconsistency in the Plan or
in any Award hereunder, and (g) make all other determinations and take all
other actions as it deems necessary or desirable for the implementation and
administration of the Plan; provided, however, that in no event shall the Board
or the Committee cancel or modify any outstanding Option for

1

 

the purpose of
reissuing an additional option to the option holder at a lower exercise price.
The determination of the Board or the Committee on matters within its authority
shall be conclusive and binding on the Company and all other persons.

     3.     Participation. Subject to the terms and conditions of the Plan, the
Board or the Committee shall determine and designate, from time to time, from
among the employees of the Company and its subsidiaries those persons who will
be granted one or more Awards under the Plan, and thereby become “Participants”
in the Plan. In the discretion of the Board or the Committee, and subject to
the terms of the Plan, a Participant may be granted any Award permitted under
the provisions of the Plan, and more than one Award may be granted to a
Participant. Except as otherwise agreed by the Board or the Committee and the
Participant, or except as otherwise provided in the Plan, an Award under the
Plan shall not affect any previous Award under the Plan or an award under any
other plan maintained by the Company. For purposes of the Plan, the term
“Award” shall mean any award or benefit granted to any Participant under the
Plan.

     4.     Definition of Fair Market Value. For purposes of the Plan, the “Fair
Market Value” of a share of common stock of Ameritrade (“Stock”) as of any date
shall be the closing market composite price for such Stock as reported on
NASDAQ on that date or, if Stock is not traded on that date, on the next
preceding date on which Stock was traded.

     5.     Shares Subject to the Plan.

     5.1. Number of Shares Reserved. The shares of Stock with respect to which
Awards may be made under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by Ameritrade as treasury
shares, including shares purchased in the open market or in private
transactions. Subject to the provisions of subsection 5.4, the number of
shares of Stock which may be issued with respect to Awards under the Plan shall
not exceed 20,000,000 shares in the aggregate.

     5.2. Individual Limits on Awards. Notwithstanding any other provision of
the Plan to the contrary, the maximum aggregate number of shares of Stock that
may be granted or awarded to any Participant under the Plan for any calendar
year shall be 6,000,000 and the maximum aggregate cash payout with respect to
grants or awards under the Plan in any calendar year to any Covered Employee
shall be $2,500,000. The determination made under the foregoing provisions of
this subsection 5.2 shall be based on the shares subject to the Awards at the
time of grant, regardless of when the Awards become exercisable.

     5.3. Reusage of Shares.

	 	(a)	 	In the event of the exercise or termination (by reason of
forfeiture, expiration, cancellation, surrender or otherwise) of any
Award under the Plan, that number of shares of Stock that was
subject to the Award but not delivered shall again be available for
Awards under the Plan.
	 
	 	(b)	 	In the event that shares of Stock are delivered under the
Plan as a Stock Award (as defined in Section 8) and are thereafter
forfeited or reacquired by the Company

2

 

	 	 	 	pursuant to rights reserved
upon the award thereof, such forfeited or reacquired shares shall
again be available for awards under the Plan.
	 
	 	(c)	 	Notwithstanding the provisions of paragraphs (a) or (b), the
following shares shall not be available for reissuance under the
Plan: (i) shares with respect to which the Participant has received
the benefits of ownership (other than voting rights), either in the
form of dividends or otherwise; (ii) shares which are withheld from
any award or payment under the Plan to satisfy tax withholding
obligations (as described in subsection 12.4) (iii) shares which are
surrendered to fulfill tax obligations (as described in subsection
12.4); and (iv) shares which are surrendered in payment of the
Option Price (as defined in subsection 6.3) upon the exercise of an
Option.

     5.4. Adjustments to Shares Reserved. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff, stock dividend, stock
split, reverse stock split, exchange or other distribution with respect to
shares of Stock or other change in the corporate structure or capitalization
affecting the Stock, the type and number of shares of stock which are or may be
subject to awards under the Plan and the terms of any outstanding awards
(including the price at which shares of stock may be issued pursuant to an
outstanding award) shall be equitably adjusted by the Board or the Committee,
in its sole discretion, to preserve the value of benefits awarded or to be
awarded to Participants under the Plan.

     6.   Options.

     6.1. Definitions. The grant of an “Option” under this Section 6 entitles
the Participant to purchase shares of Stock at the Option Price (determined
under subsection 6.3), subject to the terms of this Section 6. Options granted
under this Section 6 may be either Incentive Stock Options or Non-Qualified
Stock Options, as determined in the discretion of the Board or the Committee.
An “Incentive Stock Option” is an Option that is intended to satisfy the
requirements applicable to an “incentive stock option” described in section
422(b) of the Code. A “Non-Qualified Option” is an Option that is not intended
to be an “incentive stock option” as that term is described in section 422(b)
of the Code.

     6.2. Restrictions Relating to Incentive Stock Options. To the extent
that the aggregate fair market value of Stock with respect to which Incentive
Stock Options are exercisable for the first time by any individual during any
calendar year (under all plans of the Company) exceeds $100,000, such options
shall be treated as Non-Qualified Stock Options, to the extent required by
section 422 of the Code.

     6.3. Option Price. The price at which shares of Stock may be purchased
upon the exercise of an Option (the “Option Price”) shall be established by the
Board or the Committee or shall be determined by a method established by the
Board or the Committee at the time the Option is granted; provided, however,
that in no event shall such price be less than the greater of: (i) 100% of the
Fair Market Value (as defined in Section 4) of a share of Stock as of the date
on which the Option is granted; or (ii) the par value of a share of Stock on
such date. Notwithstanding the foregoing, any Option granted on or after the
Effective Date may have an

3

 

Option Price which is less than Fair Market Value
(but in no event less than 75% of Fair Market Value) provided such Option is
granted by the Committee (and not any person acting in the capacity of the
Committee hereunder).

     6.4. Exercise. Except as otherwise expressly provided in the Plan, an
Option may be exercised, in whole or in part, in accordance with terms and
conditions established by the Board or the Committee at the time of grant;
provided, however, that no Option shall be exercisable after the Expiration
Date (as defined in Section 11) applicable to that Option and no Option or any
portion thereof will first become exercisable after the Participant’s
termination of employment with the Company. The full Option Price of each
share of Stock purchased upon the exercise of any Option shall be paid at the
time of such exercise (except that, in the case of a cashless exercise
arrangement approved by the Committee, payment may be made as soon as
practicable after the exercise) and, as soon as practicable thereafter, a
certificate representing the shares so purchased shall be delivered to the
person entitled thereto. The Option Price shall be payable in cash or in
shares of Stock (valued at Fair Market Value as of the day of exercise), or in
any combination thereof, as determined by the Board or the Committee and, to
the extent provided by the Committee, a Participant may elect to pay the Option
Price upon the exercise of an Option through a cashless exercise arrangement.
The exercise of an Option will result in the surrender of the corresponding
rights under a tandem Stock Appreciation Right, if any.

     6.5. Post-Exercise Limitations. The Board or the Committee, in its
discretion, may impose such restrictions on shares of Stock acquired pursuant
to the exercise of an Option (including stock acquired pursuant to the exercise
of a tandem Stock Appreciation Right) as it determines to be desirable,
including, without limitation, restrictions relating to disposition of the
shares and forfeiture restrictions based on service, performance, Stock
ownership by the Participant, and such other factors as the Board or the
Committee determines to be appropriate.

     6.6. Reload Provision. In the event the Participant exercises an Option
and pays all or a portion of the Option Price in Stock, in the manner permitted
by subsection 6.4, such Participant (either pursuant to the terms of the Option
Award, or pursuant to the exercise of Committee discretion at the time the
Option is exercised) may be issued a new Option to purchase additional shares
of Stock equal to the number of shares of Stock surrendered to the Company in
such payment. Such new Option shall have an exercise price equal to the Fair
Market Value per share on the date such new Option is granted, shall first be
exercisable six months from the date of grant of the new Option and shall have
an Expiration Date on the same date as the Expiration Date of the original
Option so exercised by payment of the Option Price in shares of Stock.

     7.    Stock Appreciation Rights.

     7.1. Definition. Subject to the terms of this Section 7, a “Stock
Appreciation Right” granted under the Plan entitles the Participant to receive,
in cash or Stock, value equal to all or a portion of the excess of: (a) the
Fair Market Value of a specified number of shares of Stock at the time of
exercise; over (b) a specified price which shall not be less than 100% of the
Fair Market Value of the Stock at the time the Stock Appreciation Right is
granted, or, if granted in tandem with an Option, the exercise price with
respect to shares under the tandem Option.

4

 

     7.2. Exercise. If a Stock Appreciation Right is not in tandem with an
Option, then the Stock Appreciation Right shall be exercisable in accordance
with the terms established by the Board or the Committee at the time of grant;
provided, however, that no Stock Appreciation Right shall be exercisable after
the Expiration Date applicable to that Stock Appreciation Right and no Stock
Appreciation Right or any portion thereof will first become exercisable after
the Participant’s termination of employment with the Company. If a Stock
Appreciation Right is in tandem with an Option, then the Stock Appreciation
Right shall be exercisable at the time the tandem Option is exercisable. The
exercise of a Stock Appreciation Right will result in the surrender of the
corresponding rights under the tandem Option.

     7.3. Settlement of Award. Upon the exercise of a Stock Appreciation
Right, the value to be distributed to the Participant, in accordance with
subsection 7.1, shall be distributed in shares of Stock (valued at their Fair
Market Value at the time of exercise), in cash, or in a combination thereof, in
the discretion of the Board or the Committee.

     7.4. Post-Exercise Limitations. The Board or the Committee, in its
discretion, may impose such restrictions on shares of Stock acquired pursuant
to the exercise of a Stock Appreciation Right as it determines to be desirable,
including, without limitation, restrictions relating to disposition of the
shares and forfeiture restrictions based on service, performance, ownership of
Stock by the Participant, and such other factors as the Board or the Committee
determines to be appropriate.

     8.    Stock Awards.

     8.1. Definition. Subject to the terms of this Section 4, a “Stock Award”
under the Plan is a grant of shares of Stock to a Participant, the earning,
vesting or distribution of which is subject to one or more conditions
established by the Board or the Committee. Such conditions may relate to
events (such as performance or continued employment) occurring before or after
the date the Stock Award is granted, or the date the Stock is earned by, vested
in or delivered to the Participant. If the vesting of Stock Awards is subject
to conditions occurring after the date of grant, the period beginning on the
date of grant of a Stock Award and ending on the vesting or forfeiture of such
Stock (as applicable) is referred to as the “Restricted Period”. Stock Awards
may provide for delivery of the shares of Stock at the time of grant, or may
provide for a deferred delivery date.

     8.2. Terms and Conditions of Awards. Beginning on the date of grant (or,
if later, the date of distribution) of shares of Stock comprising a Stock
Award, and including any applicable Restricted Period, the Participant, as
owner of such shares, shall have the right to vote such shares; provided,
however, that payment of dividends with respect to Stock Awards shall be
subject to the following:

	 	(a)	 	On and after date that a Participant has a fully earned and
vested right to the shares comprising a Stock Award, and the shares
have been distributed to the Participant, the Participant shall have
all dividend rights (and other rights) of a stockholder with respect
to such shares.

5

 

	 	(b)	 	Prior to the date that a Participant has a fully earned and
vested right to the shares comprising a Stock Award, the Board or
the Committee, in its sole discretion, may award Dividend Rights (as
defined below) with respect to such shares.
	 
	 	(c)	 	On and after the date that a Participant has a fully earned
and vested right to the shares comprising a Stock Award, but before
the shares have been distributed to the Participant, the Participant
shall be entitled to Dividend Rights with respect to such shares, at
the time and in the form determined by the Board or the Committee.

A “Dividend Right” with respect to shares comprising a Stock Award shall
entitle the Participant, as of each dividend payment date, to an amount equal
to the dividends payable with respect to a share of Stock multiplied by the
number of such shares. Dividend Rights shall be settled in cash or in shares
of Stock, as determined by the Board or the Committee, shall be payable at the
time and in the form determined by the Board or the Committee, and shall be
subject to such other terms and conditions as the Board or the Committee may
determine.

     9.    Performance Units.

     9.1. Definition. Subject to the terms of this Section 9, the Award of
“Performance Units” under the Plan entitles the Participant to receive value
for the units at the end of a Performance Period to the extent provided under
the Award. The number of units earned, and the value received for them, will
be contingent on the degree to which the performance measures established at
the time of grant of the Award are met. For purposes of the Plan, the
“Performance Period” with respect to the award of any Performance Units shall
be the period over which the applicable performance is to be measured.

     9.2. Terms and Conditions of Awards. For each Participant, the Board or
the Committee will determine the value of units, which may be stated either in
cash or in units representing shares of Stock; the performance measures used
for determining whether the Performance Units are earned; the Performance
Period during which the performance measures will apply; the relationship
between the level of achievement of the performance measures and the degree to
which Performance Units are earned; whether, during or after the Performance
Period, any revision to the performance measures or Performance Period should
be made to reflect significant events or changes that occur during the
Performance Period; and the number of earned Performance Units that will be
paid in cash and the number of earned Performance Units to be paid in shares of
Stock.

     9.3. Settlement. Settlement of Performance Units shall be subject to the
following:

	 	(a)	 	The Board or the Committee will compare the actual
performance to the performance measures established for the
Performance Period and determine the number of units as to which
settlement is to be made, and the value of such units.
	 
	 	(b)	 	Settlement of units earned shall be wholly in cash, wholly in
Stock or in a combination of the two, to be distributed in a lump
sum or installments, as determined by the Board or the Committee.

6

 

	 	(i)	 	For Performance Units stated in units
representing shares of Stock when granted, one share of Stock
will be distributed for each unit earned, or cash will be
distributed for each unit earned equal to either (A) the Fair
Market Value of a share of Stock at the end of the Performance
Period or (B) the average Stock value over a period determined
by the Board or the Committee.
	 
	 	(ii)	 	For Performance Units stated in cash when
granted, the value of each unit earned will be distributed in
its initial cash value, or shares of Stock will be distributed
based on the cash value of the units earned divided by (A) the
Fair Market Value of a share of Stock at the end of the
Performance Period or (B) the average Stock value over a
period determined by the Board or the Committee.

	 	(c)	 	Shares of Stock distributed in settlement of the units shall
be subject to such vesting requirements and other conditions, if
any, as the Board or the Committee shall determine.

     9.4. Termination During Performance Period. If a Participant’s
termination of employment with the Company occurs during a Performance Period
with respect to any Performance Units granted to him, the Board or the
Committee may determine that the Participant will be entitled to settlement of
all or any portion of the Performance Units as to which he would otherwise be
eligible, and may accelerate the determination of the value and settlement of
such Performance Units or make such other adjustments as the Board or the
Committee, in its sole discretion, deems desirable.

     10.   Replacement Awards. Each holder of an Award related to the common
stock of Old Ameritrade which was granted pursuant to the Plan prior to the
Restatement Date and which was outstanding as of the Restatement Date after
giving effect to the transactions contemplated by the Merger Agreement (the
“Existing Awards”), will, as of the Restatement Date, be automatically granted
a “Replacement Award” under the Plan and the Existing Awards shall be cancelled
in exchange for the Replacement Awards. The number of shares of Stock and, if
applicable, the Option Price per share of Stock, subject to a Replacement Award
shall be equal to the same number of shares of common stock of Old Ameritrade
and, if applicable, the same Option Price per share, subject to corresponding
Existing Award. Except as provided in the preceding sentence, the Replacement
Awards granted pursuant to this Section 10 shall be subject to the same terms
and conditions as the corresponding Existing Awards.

     11.   Expiration of Awards. The “Expiration Date” with respect to an Award
under the Plan means the date established as the Expiration Date by the Board
or the Committee; provided, however, that, except as otherwise specifically
provided by the Committee, the Expiration Date with respect to any Award under
the Plan shall not be later than the earliest to occur of:

	 	(a)	 	the ten-year anniversary of the date on which the Award is
granted;

7

 

	 	(b)	 	if the Participant’s termination of employment with the
Company occurs on account of disability (as defined below), the
one-year anniversary of such termination of employment;
	 
	 	(c)	 	if the Participant’s termination of employment with the
Company occurs by reason of retirement (as defined below), the
one-year anniversary of such termination of employment;
	 
	 	(d)	 	the one-year anniversary of the Participant’s death;
	 
	 	(e)	 	if the Participant’s termination of employment with the
Company occurs for reasons other than retirement, death or
disability, the three-month anniversary of such termination of
employment; or
	 
	 	(f)	 	in the case of any Option which is intended to constitute an
Incentive Stock Option, the last day on which such Option may be
exercised in accordance with the provisions of section 422 of the
Code.

If a Stock Appreciation Right is in tandem with an Option, then the “Expiration
Date” for the Stock Appreciation Right shall be the Expiration Date for the
related Option. In no event shall the Expiration Date for any Award be later
than the ten-year anniversary of the date on which the Award is granted. For
purposes of the Plan, a Participant’s employment with the Company shall be
considered to have terminated on account of disability if, at the time of
termination, the Participant is eligible for benefits under the applicable
Company’s long-term disability plan and a Participant’s employment with the
Company shall be considered to have terminated on account of retirement if his
employment terminates after the Participant has attained age 55 and completed
at least 10 years of continuous service with the Company.

     12.   Miscellaneous.

     12.1. Duration. The Plan shall be unlimited in duration and, in the
event of Plan termination, shall remain in effect as long as any Awards under
it are outstanding; provided, however, that no Incentive Stock Options may be
granted under the Plan on a date that is more than ten years from the date the
Plan is adopted or, if earlier, the date the Plan is initially approved by
shareholders.

     12.2. Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:

	 	(a)	 	Notwithstanding any other provision of the Plan, Ameritrade
shall have no liability to deliver any shares of Stock under the
Plan or make any other distribution of benefits under the Plan
unless such delivery or distribution would comply with all
applicable laws and the applicable requirements of any securities
exchange or similar entity.
	 
	 	(b)	 	In the case of a Participant who is subject to Section 16(a)
and 16(b) of the Exchange Act, the Board or the Committee may, at
any time, add such conditions and limitations to any Award to such
Participant, or any feature of any such

8

 

	 	 	 	Award, as the Board or the
Committee, in its sole discretion, deems necessary or desirable to
comply with Section 16(a) or 16(b) and the rules and regulations
thereunder or to obtain any exemption therefrom.
	 
	 	(c)	 	To the extent that the Plan provides for issuance of
certificates to reflect the transfer of shares of Stock, the
transfer of such shares may be effected on a non-certificated basis,
to the extent not prohibited by applicable law or the rules of any
stock exchange.

     12.3. Performance-Based Compensation. To the extent that the Board or
the Committee determines that it is necessary or desirable to conform any
Awards under the Plan with the requirements applicable to “Performance-Based
Compensation”, as that term is used in section 162(m)(4)(C) of the Code, it
may, at or prior to the time an Award is granted, take such steps and impose
such restrictions with respect to such Award as it determines to be necessary
or desirable.

     12.4. Withholding. All Awards and other payments under the Plan are
subject to withholding of all applicable taxes, which withholding obligations
may be satisfied, with the consent of the Board or the Committee, through the
surrender of shares of Stock which the Participant already owns, or to which a
Participant is otherwise entitled under the Plan; provided, however, that in no
event shall the Fair Market Value of the number of shares withheld from any
Award to satisfy tax withholding obligations exceed the amount necessary to
meet the required Federal, state and local withholding tax rates then in effect
that are applicable to the participant and to the particular transaction.

     12.5. Transferability. Awards under the Plan are not transferable except
as designated by a Participant by will or by the laws of descent and
distribution. To the extent that the Participant who receives an Award under
the Plan has the right to exercise such Award, the Award may be exercised
during the lifetime of the Participant only by the Participant.

     12.6. Notices. Any notice or document required to be filed with the
Board or the Committee under the Plan will be properly filed if delivered or
mailed by registered mail, postage prepaid, to the Board or the Committee, in
care of Ameritrade, at its principal executive offices. The Board or the
Committee may, by advance written notice to affected persons, revise such
notice procedure from time to time. Any notice required under the Plan (other
than a notice of election) may be waived by the person entitled to notice.

     12.7. Form and Time of Elections. Unless otherwise specified herein,
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Board or the Committee
at such times, in such form, and subject to such restrictions and limitations,
not inconsistent with the terms of the Plan, as the Board or the Committee
shall require.

     12.8. Agreement With Ameritrade. At the time of an Award to a
Participant under the Plan, the Board or the Committee may require a
Participant to enter into an agreement with Ameritrade (the “Agreement”) in a
form specified by the Board or the Committee, agreeing to

9

 

the terms and
conditions of the Plan and to such additional terms and conditions, not
inconsistent with the Plan, as the Board or the Committee may, in its sole
discretion, prescribe.

     12.9. Limitation of Implied Rights.

	 	(a)	 	Neither a Participant nor any other person shall, by reason
of the Plan, acquire any right in or title to any assets, funds or
property of the Company whatsoever, including, without limitation,
any specific funds, assets, or other property which the Company, in
its sole discretion, may set aside in anticipation of a liability
under the Plan. A Participant shall have only a contractual right
to the amounts, if any, payable under the Plan, unsecured by any
assets of the Company. Nothing contained in the Plan shall
constitute a guarantee by the Company that the assets of such
companies shall be sufficient to pay any benefits to any person.
	 
	 	(b)	 	The Plan does not constitute a contract of employment, and
selection as a Participant will not give any employee the right to
be retained in the employ of the Company, nor any right or claim to
any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as
otherwise provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a shareholder of Ameritrade
prior to the date on which he fulfills all service requirements and
other conditions for receipt of such rights.

     12.10. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.

     12.11. Gender and Number. Where the context admits, words in one gender
shall include the other gender, words in the singular shall include the plural
and the plural shall include the singular.

     13.   Amendment and Termination.

     The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 5.4 (relating to certain adjustments to shares), no
amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Award made under the Plan prior to the
date such amendment is adopted by the Board.

10

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