Document:

EXHIBIT 10.38

 

EXHIBIT 10.38

 The Goldman Sachs Group, Inc. 
Non-Qualified Deferred Compensation Plan

for 
U.K. Extended Managing Directors

and other Select U.K. Employees

ARTICLE 1

INTRODUCTION

1.1       Purpose of Plan

The Goldman Sachs Group, Inc. Non-Qualified Deferred Compensation Plan for U.K. Extended Managing
Directors and Other Select U.K. Employees is intended to promote the interests of GS Inc. and its
shareholders by encouraging certain Eligible U.K. Employees to remain in the employ of the Firm by
providing them with a means by which they may request to defer receipt of a portion of their
Eligible Compensation.

ARTICLE 2

DEFINITIONS

Wherever used herein, the following terms have the meanings set forth below, unless a different
meaning clearly is required by the context:

 

 

2.1       Account means, for each Participant, a notional account maintained on the books and
records of GS Inc. (by GS Inc. or such third party record keeper or record keepers as GS Inc. may
from time to time appoint) that is established for his or her benefit and as to which amounts are
credited under Section 5.1.

2.2       Administrative Committee means the person or persons designated by the Compensation Policy
Committee or the Board of Directors with the authority to perform day-to-day administrative
functions for the Plan. If no such person is so serving at any time, the Compensation Policy
Committee shall be the Administrative Committee.

2.3       Board of Directors means the Board of Directors of GS Inc.

2.4       Compensation Policy Committee means the GS Inc. Compensation Policy Committee, as it may be
constituted from time to time.

2.5       Code means the Internal Revenue Code of 1986. Reference to any section or subsection of
the Code includes reference to any comparable or succeeding provisions of any legislation that
amends, supplements or replaces such section or subsection.

2.6
      Deferral means the portion of a Participant’s Eligible Compensation that is deferred
in accordance with Section 4.1 hereof.

2.7       Deferral Date means, with respect to each Plan Year, the earliest date GS Inc. determines
that Eligible Compensation subject to a Deferral Request would have been paid to the Eligible
Employee in the absence of the Plan, or such other date or dates as may be selected by the
Administrative Committee in its sole discretion prior to the date Deferral Requests are required to
be returned to the Administrative Committee for a Plan Year.

2.8       Deferral Request means any request by a Participant to make a Deferral hereunder by
submitting a Deferral Request Form in accordance with Section 4.1 hereof.

2.9       Deferral Request Form means the form (which may be in electronic form) specified by the
Administrative Committee from time to time pursuant to which an Eligible Employee can make a
Deferral Request.

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2.10       Distribution Date means, with respect to each Deferral made by a Participant, the date on
which an amount shall become payable to a Participant in accordance with Article 7 hereof.

2.11       Effective Date means November 27, 2004, the date as of which the Plan first became
effective.

2.12       Eligible Compensation means, for each Eligible Employee, with respect to each Plan Year the
amount the Firm determines in its sole discretion otherwise would have been payable to the Eligible
Employee as a gross end-of-year bonus or, with respect to any Eligible Employee paid on a net
commission basis, Net Commissions (excluding any amounts payable to the Eligible Employee that are
directly attributable to the performance of services prior to the beginning of such Plan Year), and
before giving effect to any Deferral, but after giving effect to: (i) any pension or retirement
contribution or the cost of contribution by the Firm for any public or private employee benefit
plan (including, without limitation, in the United States, any contribution to the Money Purchase
Plan or any “voluntary contribution election” under The Goldman Sachs Employees’ Profit Sharing
Retirement Income Plan,” (as defined in that plan) if applicable to you); (ii) any amount the Firm
decides to contribute as part of compensation to the Goldman Sachs UK Retirement Plan or GSI
International Pension Plan or any other plan maintained outside the United States primarily for
non-U.S. citizens or residents that the Administrative Committee determines is similar thereto; and
(iii) the value of any award recommendation in respect of any plan or arrangement the Firm
determines is similar to The Goldman Sachs UK Conditional Share Reward Plan, including, without
limitation, any such plan or arrangement involving the establishment and funding of an “employee
benefit trust” in the United Kingdom. Unless otherwise permitted
by the Administrative Committee,
no year-end award (including, if the Eligible Employee is paid on a commission basis, the portion
of such individual’s “Target Total Compensation” allocated to any such award) granted under The
Goldman Sachs Amended and Restated Stock Incentive Plan, as in effect from time to time, shall
constitute Eligible Compensation. Notwithstanding the foregoing, the Administrative Committee, in
its discretion, with respect to any Eligible Employee or Eligible Employees (on a uniform or
non-uniform basis) shall have the authority to (a) designate any jurisdiction or jurisdictions from
which amounts earned by any Eligible Employee will be excluded from Eligible Compensation and (b)
include or exclude, as the case may be, any amounts that otherwise would be excluded or included,
as the case may be, in any Eligible Employee’s Eligible Compensation.

2.13       Eligible Employee means, unless otherwise provided by the Administrative Committee, in a
Plan Year, any U.K. Employee (i) who is not eligible to make a deferral under The Goldman Sachs
Group, Inc. Non-Qualified Deferred Compensation Plan for U.S Extended Managing Directors and Other
Select U.S. Employees, (ii) does not participate in The Goldman Sachs Partner Compensation Plan or
The Goldman Sachs

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Restricted Partner Compensation Plan (iii) who earned Minimum Eligible Compensation for either or
both of the immediately preceding Plan Year or the second preceding Plan Year, and (iv) who is
designated by the Administrative Committee as eligible to participate in the Plan or is a member of
a class of employees who is designated by the Administrative Committee as eligible to participate
in the Plan for the Plan Year. The Administrative Committee may, in its sole discretion, add or
exclude any individual or any member of a class of individuals from being considered an Eligible
Employee. An individual shall first be considered an Eligible Employee on the date he or she first
receives written notification from the Administrative Committee that he or she is eligible to
participate in the Plan. Unless otherwise provided by the Administrative Committee (including, by
reason of legal, tax or other regulatory restrictions or impediments to the individual or to the
Firm arising out of a country other than the United States or United Kingdom), an individual that
is an Eligible Employee for any Plan Year shall, for so long as he remains an active employee of
the Firm, be an Eligible Employee for any future Plan Year (or, an “Eligible Employee” under The
Goldman Sachs Group Inc. Non-Qualified Deferred Compensation Plan for U.S. Extended Managers and
Other Select U.S. Employees, if such person becomes in such year a resident for tax purposes in the
United States).

2.14       ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to
time. Reference to any section or subsection of ERISA includes reference to any comparable or
succeeding provisions of any legislation that amends, supplements or replaces such section or
subsection.

2.15       Firm means GS Inc. and its subsidiaries and affiliates.

2.16       GS Inc. means The Goldman Sachs Group, Inc., and any successor thereto.

2.17       Investment Committee means a committee of two or more individuals selected by the
Administrative Committee, which shall have the authority to select the Notional Investments that
are made available from time to time under the Plan.

2.18       Maximum Aggregate Deferral Amount means, with respect to each Plan Year, $100 million or
such other amount as may be determined by GS Inc. from time to time, which shall be the maximum
total of all Deferrals for all Participants permitted under the Plan for such Plan Year. GS Inc.
may, in its discretion, (i) aggregate the Plan with such other deferred compensation plan or plans
as it may determine for purposes of applying the Maximum Aggregate Deferral Amount and (ii)
allocate the Maximum Aggregate Deferral Amount among the Plan and any deferred compensation plans
that are so aggregated with the Plan in any manner deemed appropriate by it.

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2.19       Maximum Deferral Amount means unless otherwise determined by GS Inc., with respect to each
Participant for each Plan Year, the lesser of: (i) 35% of the Participant’s Eligible Compensation
and (ii) £250,000 for UK Extended Managing Directors or
£145,000 for any other Participant.

2.20
      Minimum Deferral Amount means,
with respect to each Participant for each Plan Year, £5,250
or such other amount as may be determined by the Administrative Committee prior to the date
Deferral Request Forms are required to be returned to the Administrative Committee for a Plan Year,
which shall be the minimum amount that a Participant may request as a Deferral for a Plan Year.

2.21       Minimum Eligible Compensation means total compensation of at least USD $200,000 or such
other amount as may be determined by the Administrative Committee. For purposes of the foregoing,
the Administrative Committee shall prescribe such rules and limitations it deems appropriate for
purposes of taking into account the total compensation of any commission based Eligible Employee.

2.22       Money Purchase Plan means The Goldman Sachs Money Purchase Pension Plan, as amended from
time to time, or any successor thereto.

2.23       Net Commission means, for each Eligible Employee that is paid on a commission basis, with
respect to each Plan Year, the amount the Firm determines in its sole discretion would be paid in
cash to the Eligible Employee as a net cash commission after certain adjustments, including for
draws and payments to client analysts and certain other adjustments consistent with Firm practice
as in effect from time to time. For purposes of the foregoing, the Administrative Committee shall
prescribe such rules and limitations it deems appropriate for purposes of taking into account the
total compensation and adjustments to net commissions of any commission-based Eligible Employee.

2.24       Notional Investment means a hypothetical investment made available under the Plan by the
Investment Committee from time to time in which a Participant’s Account may be deemed to be
invested in whole or in part in accordance with Sections 5.2 and 5.3 hereof in order to measure the
value of the Account.

2.25       Participant means any Eligible Employee who participates in the Plan in accordance
with Article 3.

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2.26       Plan means The Goldman Sachs Group, Inc. Non-Qualified Deferred
Compensation Plan for U.K. Extended Managing Directors and Other Select U.K. Employees.

2.27       Plan Year means the 12-month period that coincides with GS Inc.’s fiscal year.

2.28       Total and Permanent Disability means, with respect to any Participant, if such Participant
is unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, or is, by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement benefits for not
less than 3 months under any accident or health plan covering employees of the Firm.

2.29       U.K. Employee means a person:

     (a)       who has or is expected to perform duties in the United Kingdom for
a substantially continuous period of at least three months and all or substantially
all of his remuneration and other costs of his employment are paid by or charged
to a business, directly or indirectly, which is subject to U.K. corporation tax; or

     (b)       all or substantially all of whose duties under his employment
contract during a Plan Year are to be performed in the United Kingdom; or

     (c)       is designated by the Administrative Committee as a U.K. Employee.

A person will not be a U.K. Employee for the relevant Plan Year if he is, at any time during that
Plan Year, resident for tax purposes in the United States.

ARTICLE 3

PARTICIPATION

3.1       Commencement of Participation

Any Eligible Employee who requests to defer part of his or her Eligible Compensation in accordance
with Article 4 shall, if and to the extent the Firm, in its discretion, agrees to follow the
request, become a Participant in the Plan as of the first Deferral Date as of which a Deferral is
credited to the Eligible Employee’s Account in accordance with Section 4.2.

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3.2       Continued Participation

A Participant in the Plan shall continue to be a Participant so long as any amount remains
credited to his or her Account.

ARTICLE 4

DEFERRALS

4.1       Deferral Request Form

Subject to the provisions of Article 4 hereof, for each Plan Year for which the Plan is in effect,
an Eligible Employee may, by properly completing a Deferral Request Form and filing it with the
Administrative Committee not later than the date specified by the Administrative Committee and,
before the amount of the Eligible Compensation to which the Deferral relates has been determined,
request that a Deferral be made on his or her behalf, on such terms as the Administrative Committee
may permit in its sole discretion. The Firm may, in its sole discretion, determine whether or not
to follow any Deferral Request with respect to any Eligible Employee.

4.2       Mechanics of Deferral

Subject to the provisions of this Article 4, if and to the extent the Firm determines to follow a
Deferral Request, an Eligible Employee’s Eligible Compensation shall be reduced in accordance with
the Participant’s Deferral Request, and the amount of the resulting Deferral shall be credited to
the Participant’s Account as of the Deferral Date.

4.3       Minimum Deferral Amount

Notwithstanding anything herein or in any Deferral Request Form to the contrary, no Deferral shall
be for an amount and no Deferral Request shall be valid to the extent that it specifies an amount
less than the Minimum Deferral Amount for the applicable Plan Year.

4.4       Maximum Deferral Amount

Notwithstanding anything herein or in any Deferral Request Form to the contrary, no Deferral shall
be for an amount in excess of the Maximum Deferral Amount. If any amount specified on a Deferral
Request Form as a Deferral would exceed the Maximum Deferral Amount, such Deferral Request Form
shall be deemed to have specified the Maximum Deferral Amount.

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4.5       Maximum Aggregate Deferral Amount

Notwithstanding anything herein or in any Deferral Request Form to the contrary, if and to the
extent that the aggregate amounts specified on all Deferral Request Forms in a Plan Year that the
Firm determines to follow exceed the Maximum Aggregate Deferral Amount, the amounts specified on
each Participant’s Deferral Request Form shall be reduced, and each Participants’ Deferrals shall
be reduced, under a formula or method determined by the Administrative Committee in its sole
discretion, including, without limitation, a pro rata reduction to the ratio of the Maximum
Aggregate Deferral Amount to the aggregate of the amounts specified by all Participants on their
Deferral Request Forms so that the aggregate Deferrals of all Participants do not exceed the
Maximum Aggregate Deferral Amount; provided that no Participant’s Deferral shall be reduced to an
amount below the Minimum Deferral Amount.

4.6       Deferral Request Irrevocable

Except to the extent determined by the Administrative Committee (but in no event later than the
date on which all Deferral Request Forms must be returned to the Administrative Committee for a
Plan Year), all Deferral Requests shall be irrevocable when made, and no Participant may change or
revoke his or her Deferral Request with respect to Eligible Compensation payable for a Plan Year.

ARTICLE 5

ACCOUNTS

5.1       Accounts

The Administrative Committee shall maintain an Account for each Participant that reflects each
Participant’s Deferrals (and with respect to any employee that is paid on a commission basis, any
rate of interest credited from and including the date deferred through but excluding the date such
Deferral is credited to his or her account calculated in a manner determined by the Administrative
Committee), and any adjustments determined in accordance with Section 5.2, forfeitures and any
payments made under Article 7 with respect to the Account. The Administrative Committee shall
provide each Participant with a periodic statement of his or her Account adjusted in accordance
with Section 5.2.

5.2       Adjustment of Accounts

The amount of each Participant’s Deferral (and with respect to any employee that is paid on a
commission basis, any rate of interest credited from and including the date deferred through but
excluding the date such Deferral is credited to his or her account calculated in a manner
determined by the Administrative Committee), for a Plan Year shall be credited to the Participant’s
Account as of the applicable Deferral Date. The

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Participant’s Account shall be adjusted from time to time to reflect: (i) Deferrals for subsequent
Plan Years, if any; (ii) gains (or losses) determined as if the Account were invested directly in
the Notional Investment or Notional Investments selected by the Participant (without taking into
account any tax consequences that may have arisen were the Account so directly invested); (iii) the
amount described in Section 7.5; (iv) any payments under Article 7 in respect of a Deferral; and
(v) any administrative charge determined by the Compensation Policy Committee or Administrative
Committee in its sole discretion to be appropriate to cover part or all of the cost to the Firm of
making the Plan available to Participants or otherwise maintaining the Plan.

5.3       Notional Investments

     (a)       The Notional Investment or Notional Investments that shall be available
under the Plan shall be determined from time to time by the Investment Committee in its
sole discretion. The Investment Committee may, in its sole discretion, provide
limitations or procedures on the availability of any Notional Investment or Notional
Investments with respect to any Participant or class of Participants. The Investment
Committee may modify, amend, eliminate or replace any or all of the Notional
Investments that may be available under the Plan to Plan Participants or any of them, in
any manner in its sole discretion at any time from time to time with or without notice to
the Participants and effective retroactively or prospectively, subject to Section 9.3
hereof.

     (b)       In selecting any Notional Investment or Notional Investments to be made
available under the Plan or prescribing any rules related thereto, the Investment
Committee and the Administrative Committee shall be acting solely on behalf of the
Firm and not as a fiduciary or adviser with respect to any Deferral, any Participant or
any other person employed by the Firm or in respect of any Account. Each Participant,
by requesting to participate in the Plan, agrees that none of the Investment Committee,
the Administrative Committee, the Compensation Policy Committee, GS Inc., the Firm
or any other person shall have any liability whatsoever to any Participant or any other
person as a result of, arising out of or related to the selection or elimination or
modification of Notional Investments, any monitoring of any such Notional Investment or
any Participant’s selection or failure to select any Notional Investment.

     (c)       The Administrative Committee or the Investment Committee may adopt
such rules and administrative practices as they, in their sole discretion, shall deem
necessary or appropriate in connection with any Participant’s ability to select Notional
Investments hereunder, including restrictions on the timing or frequency of such
selections; all such Notional Investment selections shall be made in such form as may
be required by the Administrative Committee from time to time.

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ARTICLE 6

VESTING

6.1       Accounts Generally Vested

Without limiting Section 7.6 or Section 10.1, each Participant shall be immediately vested
in, and shall have a nonforfeitable right to the balance credited to, the Participant’s
Account subject to the terms of the Plan, including without limitation Section 7.5 hereof.

ARTICLE 7

PAYMENTS

	7.1  	      Commencement and Form of Payment

The Participant shall receive a payment of the entire portion of the Participant’s Account
attributable to a Deferral in a single lump sum within 30 business days after the earlier of (i)
the applicable Distribution Date and (ii) the date on which the Participant’s active employment
with the Firm ends (provided if the Firm determines such Participant to be a “key employee” within
the meaning of Section 416(i) of the Code, the Participant will receive the balance of his or her
Account within 30 business days after the earlier of the Distribution Date for that Deferral and
six months after the Participant’s active employment with the Firm ends).

7.2       Distribution Date

In accordance with procedures established by the Administrative Committee in its sole discretion,
at the time each Participant makes a Deferral Request, the Participant shall select a Distribution
Date with respect to a Deferral. Unless otherwise determined by the Administrative Committee in its
sole discretion, a Participant shall be permitted to request only one of the following as a
Distribution Date with respect to a Deferral: (i) the third anniversary of the Deferral Date, (ii)
the fourth anniversary of the Deferral Date (iii) the fifth anniversary of the Deferral Date (iv)
the sixth anniversary of the Deferral Date or (v) the seventh anniversary of the Deferral Date.

7.3       Death and Total and Permanent Disability

     (a)       If a Participant dies prior to the payment of the entire balance credited to his or
her Account, unless otherwise determined by the Administrative Committee, and notwithstanding any
Participant’s request pursuant to Section 7.2, the amount credited to his or her Account shall be
paid as soon as practicable to the representative of the Participant’s estate. No payment shall be
made to the representative of a Participant’s

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estate until the
Administrative Committee shall have been furnished with such evidence and other
documentation as it shall deem necessary or appropriate to establish the validity of the payment.

     (b)       If a Participant has a Total and Permanent Disability prior to the payment. of the
entire balance credited to his or her Account, unless otherwise determined by the Administrative
Committee and notwithstanding any Participant’s request pursuant to Section 7.2, such balance shall
be paid as sóon as practicable to the Participant or if the Participant is determined by the
Administrative Committee, in its sole discretion, to be incompetent by reason of physical or mental
disability, to another person for the benefit of the Participant, without responsibility on the
part of the Administrative Committee, the Firm or any other person to monitor the application or
use of such funds. No payment shall be made to the Participant or such other person until the
Administrative Committee shall have been furnished with such evidence and other documentation as it
shall deem necessary or appropriate to establish the validity of the payment.

7.4       Taxes and Social Security

All Federal, State, foreign, local, hypothetical or other taxes, or social security or social
insurance charges, if any, that are required to be withheld in respect of any Deferrals hereunder
or from any payments made pursuant to this Article 7 shall be withheld from amounts payable
hereunder or from any other amounts payable to a Participant by any person.

7.5       Certain Account Adjustments

Unless otherwise determined by GS Inc., the amount payable on a Distribution Date to any
Participant under the Plan shall be net of, and a Participant’s Account shall be adjusted to
reflect on such Distribution Date, any outstanding amounts (including, without limitation, travel
and entertainment or advance account balances, loans, or amounts repayable to the Firm pursuant to
tax equalization, housing, automobile or other employee programs) the Participant owes to the Firm
(including by reason of any obligations of such Participant under any Firm sponsored investment
program, including under the Firm’s “Special Investments Program”), any amounts owed to the Firm by
reason of such Participant’s misconduct with respect to such Participant’s employment with the
Firm, including, without limitation, the Participant’s misappropriation of funds or other property
from the Firm, and any amount the Administrative Committee otherwise deems appropriate pursuant to
any tax equalization policy or agreement or otherwise applicable as of such Distribution Date. Each
Participant shall be required, as a condition to participation in the Plan, to sign such documents,
and make such representations and consents, to the extent deemed necessary or appropriate by the
Administrative Committee, to comply with this Section 7.5.

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7.6       Certain Delayed Payments to Covered Employees

Notwithstanding anything herein or in any Deferral Request Form to the contrary, if and to the
extent that GS Inc. determines, in its sole discretion, that GS Inc.’s or the Firm’s U.S. Federal
tax deduction in respect of a payment under the Plan may be limited as a result of Section 162(m)
of the Code or any successor section of the Code, the Administrative Committee may delay such
Payment until such time or times as GS Inc. or the Administrative Committee determines, in its sole
discretion, that neither GS Inc.’s nor the Firm’s deduction for any such payment will be limited as
a result of Section 162(m) of the Code or any successor section of the Code and as are consistent
with Section 409A of the Code.

7.7       Payment Currency

Unless otherwise determined by the Administrative Committee in its discretion, any payments under
the Plan shall be made in the same currency in which the Participant’s bonus or commissions
otherwise would have been paid, in the absence of the Plan.

ARTICLE 8

ADMINISTRATIVE COMMITTEE;

INDEMNIFICATION

8.1       Plan Administration and Interpretation

The Plan shall be administered by the Administrative Committee. The Administrative Committee shall
have complete control and authority to administer the Plan, and authority to determine the rights
and benefits and all claims, demands and actions arising out of the provisions of the Plan of any
Participant, representative of a deceased Participant’s estate, or any other person having or
claiming to have any interest under the Plan. The Administrative Committee shall have complete
discretion and power to interpret the Plan and to decide all matters under the Plan. Any
interpretation or decision by the Administrative Committee shall be final, conclusive and binding
on all Participants and any person claiming under or through any Participant. Any individual
serving on the Administrative Committee who also is a Participant shall not vote or act on any
matter relating solely to himself or herself. When making a determination or calculation, the
Administrative Committee shall be entitled to rely on information furnished by a Participant or
other person entitled to payment hereunder, or the Firm. The Administrative Committee shall adopt
such claims procedures as it determines in its sole discretion may be necessary or appropriate for
the proper determination of the rights of any Participant under this Plan.

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8.2       Powers, Duties, Procedures, Etc.

In exercising its powers and duties, the Administrative Committee may adopt such rules and
procedures, appoint such officers or agents, delegate such powers and duties and receive such
reimbursements and compensation, in each case, as it may establish or
determine from time to time
consistent with the provisions of the Plan.

8.3       Indemnification of Administrative Committee and Investment Committee

No member of the Administrative Committee or Investment Committee or any employee, officer or
director of the Firm (each such person, a “Covered Person”) shall have any liability to any person
(including any Participant) for any action taken or omitted to be
taken or any determination made
in good faith with respect to the Plan. Each Covered Person shall be
indemnified and held harmless
by GS Inc. against and from: (a) any loss, cost, liability or expense (including attorneys’ fees)
that may be imposed upon or incurred by such Covered Person in connection with or resulting from
any action, suit or proceeding to which such Covered Person may be a party or in which such Covered
Person may be involved by reason of any action taken or omitted to be taken under the Plan and (b)
any and all amounts paid by such Covered Person, with GS Inc.’s approval, in settlement thereof, or
paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding
against such Covered Person, provided that GS Inc. shall have the right, at its own expense, to
assume and defend any such action, suit or proceeding and, once GS Inc. gives notice of its intent
to assume the defense, GS Inc. shall have sole control over such defense with counsel of GS Inc.’s
choice. The foregoing right of indemnification shall not be available to a Covered Person to the
extent that a court of competent jurisdiction in a final judgment or other final adjudication, in
either case not subject to further appeal, determines that the acts or omissions of such Covered
Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith,
fraud or willful criminal act or omission. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which Covered Persons may be entitled under GS
Inc.’s Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, as a
matter of law, or otherwise, or any other power that GS Inc. may have to indemnify such persons or
hold them harmless.

ARTICLE 9

AMENDMENT AND TERMINATION

9.1       Amendments

Subject only to Section 9.3 hereof, GS Inc. shall have the right, in its sole discretion, to amend
or modify the Plan in any respect from time to time, including in any manner that adversely affects
the right of any Participant. Any such amendment may be effected by an action of the Board of
Directors or the Compensation Policy Committee. In addition, and without limiting the foregoing,
the Administrative Committee shall have the right, in

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its sole discretion, to accelerate any payment to any or all Participants to any date or dates
prior to the Distribution Date.

9.2       Termination of Plan

This Plan is a strictly voluntary undertaking on the part of GS Inc. and shall not be deemed to
constitute a contract between GS. Inc. and any Eligible Employee (or any other person). Subject
only to Section 9.3 hereof, GS Inc. reserves the right to terminate the Plan at any time with
respect to any or all Participants, in whole or in part, by an instrument in writing that has been
executed on the Firm’s behalf by its duly authorized officer. Upon termination, with respect to
each Participant affected by any termination (an “Affected Participant”) on a
Participant-by-Participant basis the Firm shall either: (a) elect to continue to maintain part or
all of the Affected Participant’s Account and pay amounts hereunder as they become due as if the
Plan had not terminated; or (b) pay promptly to each Affected Participant (or such Affected
Participant’s estate) part or all of the balance of the Affected Participant’s Account (or combine,
in any manner, the alternatives described in Sections 9.2(a) and 9.2(b) hereof).

9.3       Existing Rights

No amendment or modification to, or termination of, the Plan shall be effective to the extent that
it reduces the amount credited to a Participant’s Account immediately prior to the amendment,
modification or termination, without the Participant’s prior written consent.

ARTICLE 10

MISCELLANEOUS

10.1       No Funding

The Plan constitutes a mere promise by GS Inc. to make payments in accordance with the terms of the
Plan, and Participants and beneficiaries shall have the status with respect to the amounts credited
to their Accounts from time to time only of general unsecured creditors of GS Inc. Nothing in the
Plan will be construed to give any Participant or any other person rights to any specific assets of
GS Inc., the Firm or any other person. In all events, it is the intent of GS Inc. that the Plan be
treated in a manner consistent with the applicable provisions of Section 409A of the Code and be
treated as unfunded for U.S. Federal tax purposes and for purposes of ERISA, and the Plan shall be
interpreted accordingly.

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10.2       Non-Assignability

None of the benefits, payments, proceeds or claims of any Participant or any other person shall be
subject to any claim of any creditor of any Participant or any other person and, in particular,
such benefits, payments, proceeds or claims shall not be subject to attachment or garnishment or
other legal process by any creditor of such Participant or other person, nor shall any Participant
or any other person have any right to alienate, participate, hedge, commute, pledge, encumber or
assign any of the benefits, payments, proceeds or claims that he or she may expect to receive,
contingently or otherwise, under the Plan and any attempt to so alienate, participate, hedge,
commute, pledge, encumber or assign any such benefit, payment, proceed or claim shall be null and
void and of no force or effect.

10.3       Limitation of Participants’ Rights

Nothing contained in the Plan shall confer upon any person a right to continue to be employed by
the Firm or shall affect any right the Firm may have to terminate or alter the terms and conditions
of a Participant’s employment.

10.4       Participants Bound

Any action with respect to the Plan taken by the Administrative Committee, the Investment
Committee, the Compensation Policy Committee, the Board of Directors, the Firm or any action
authorized by or taken at the direction of any of them, shall be final, binding and conclusive upon
all Participants (and any other persons).

10.5       Benefits Conditioned on Release

Any payment to any Participant made in accordance with the provisions of the Plan shall, to the
extent thereof, be in full satisfaction of all claims against the Firm, the Plan, the
Administrative Committee and the Investment Committee. The Administrative Committee may require a
Participant, as an express condition precedent to any payment hereunder, to execute a release to
such effect. If any Participant or other person entitled to payment hereunder is determined by the
Administrative Committee to be incompetent by reason of physical or mental disability to give a
valid release, the Administrative Committee may cause the payment or payments becoming due to such
person to be made to another person for his or her benefit without responsibility on the part of
the Administrative Committee, the Firm or any other person to follow the application or use of such
funds.

15

 

10.6       Arbitration; Choice of Forum

     (a)       Any dispute, controversy or claim between the Firm and a Participant
arising out of or relating to or concerning the Plan shall be finally settled by arbitration
in New York City before, and in accordance with the rules then obtaining of, the New York
Stock Exchange, Inc. (the “NYSE”) or, if the NYSE declines to arbitrate the matter (or if
the matter otherwise is not arbitrable by it), the American Arbitration Association (the
“AAA”) in accordance with the commercial arbitration rules of the AAA. Prior to
arbitration, all claims maintained by a Participant or any other person must first be
submitted to the Administrative Committee in accordance with claims procedures
determined by the Administrative Committee. This Paragraph is subject to the
provisions of Paragraphs (b) and (c) below.

     (b)       THE FIRM AND EACH PARTICIPANT SHALL IRREVOCABLY SUBMIT
TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO OR CONCERNING THE PLAN
THAT IS NOT OTHERWISE ARBITRATED OR RESOLVED ACCORDING TO
PARAGRAPH 10.6(a) HEREOF. This includes any suit, action or proceeding to compel
arbitration or to enforce an arbitration award. The Firm and each Participant, by
requesting to participate in the Plan, acknowledge that the forum designated by this
Paragraph (b) has a reasonable relation to the Plan and to the Participant’s relationship
with the Firm. Notwithstanding the foregoing, nothing herein shall preclude the Firm
from bringing any action or proceeding in any other court for the purpose of enforcing
the provisions of this Section 10.6 or otherwise.

     (c)       This provision as to forum is independent of the law that may be applied in
the suit, action or proceeding, and each Participant, by requesting to participate in the
Plan, and the Firm agrees to such forum even if the forum may under applicable law
choose to apply non-forum law. Each Participant, by requesting to participate in the
Plan, and the Firm hereby waive, to the fullest extent permitted by applicable law, any
objection which the Participant or the Firm now or hereafter may have to personal
jurisdiction or to the laying of venue of any such suit, action or proceeding in any court
referred to in Paragraph (b) of this Section 10.6. Each Participant, by requesting to
participate in the Plan, and the Firm undertake not to commence any suit, action or
proceeding arising out of or relating to or concerning the Plan in any forum other than a
forum described in this Section 10.6. Each Participant, by requesting to participate in
the Plan, and the Firm agree that, to the fullest extent permitted by applicable law, a
final and non-appealable judgment in any such suit, action or proceeding in any such
court shall be conclusive and binding upon the Participant and the Firm.

     (d)       Each Participant, by requesting to participate in the Plan, irrevocably
appoints the General Counsel of GS Inc. as the Participant’s agent for service of
process in connection with any action or proceeding arising out of or relating to or
concerning the Plan that is not arbitrated pursuant to the provisions of this Section 10.6,
who shall promptly advise the Participant of any such service of process.

16

 

     (e)       Each Participant, by requesting to participate in the Plan, agrees to keep
confidential the existence of, and any information concerning, a dispute, controversy or claim
described in this Section 10.6, except that a Participant may disclose information concerning such
dispute, controversy or claim to the arbitrator or court that is considering such dispute,
controversy or claim or to his or her legal counsel (provided that such counsel agrees not to
disclose any such information other than as necessary to the prosecution or defense of the dispute,
controversy or claim).

10.7       Governing Law

The Plan shall be construed, administered and governed in all respects under and by the laws of the
State of New York, without reference to the principles of conflicts of law (except if and to the
extent preempted by applicable Federal law). It is the intent of GS Inc. that this Plan be
considered and interpreted as a plan maintained outside the United States primarily for the benefit
of nonresident aliens of the United States. If and to the extent any portion of the Plan is not so
treated it shall be treated in all respects as part of a bonus plan within the meaning of U. S.
Department of Labor Regulation Section 2510.3-2(c) and not in any respect as an employee pension
plan for purposes of ERISA. If and to the extent that any portion of this Plan shall be determined
to be an employee pension benefit plan subject to ERISA, then such portion shall be considered a
separate plan covering only those Participants as to whom this Plan is determined to be a pension
plan. Such pension plan shall in all respects be considered and interpreted as a plan which is
unfunded and maintained primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees and exempt from coverage of Parts 1,2,3 and 4
of Subtitle B of Title I of ERISA to the maximum extent permissible under the provisions thereof.
Further, it is the intent of GS Inc. that this Plan be considered and interpreted in all respects
as a nonqualified deferred compensation plan satisfying the requirements of Section 409A of the
Code and deferring the recognition of income by Participants in respect of Deferrals until amounts
are actually paid to them pursuant to Article 7.

10.8       Certain Consents

As a condition of participating in the Plan, each Eligible Employee wishing to make a Deferral
Request, and each Participant, shall be required to sign such documents, make such representations
and sign such consents, including, without limitation signing any consent or taking any other
action necessary for the Firm to insure the life of the Participant and name itself as beneficiary
to the extent deemed necessary or appropriate of such insurance.

Without limiting the foregoing, by submitting a Deferral Request Form, a Participant will have
irrevocably agreed to consent to (i) the Firm’s supplying to any third party recordkeeper such
personal information as the Administrative Committee deems advisable to administer the Plan, (ii)
the Firm’s deducting amounts from the Participant’s wages to reimburse the Firm for any advances
made on the Participant’s behalf to

17

 

satisfy any withholding and other tax obligations, (iii) the Firm’s deducting or withholding
from any payment or distribution to the Participant, whether or not pursuant to the Plan, the
amount of any taxes (including, without limitation, FICA, National Insurance Contributions or
social insurance taxes) the Administrative Committee determines apply in connection with any
Deferral or distribution under the Plan and (iv) withholding from any distribution under the Plan
any amount the Administrative Committee determines is payable by the Participant to the Firm.

10.9       Currency Conversions

The Administrative Committee, in its discretion, shall have the authority to prescribe such rules
and procedures as it may deem appropriate for purposes of converting any currency into another
currency for purposes of the Plan including, without limitation, for purposes of determining (i)
the Minimum Deferral Amount, (ii) the Maximum Deferral Amount, (iii) the Maximum Aggregate Deferral
Amount, (iv) the amount of any Eligible Employee’s Deferral, (v) the amount of any investment gains
or losses to be allocated to a Participant’s Account, (vi) the amount of any distribution, (vii)
the amount of any Participant’s Eligible Compensation and (viii) the amount of any Participant’s
Minimum Eligible Compensation. The determination of the exchange rate by the Administrative
Committee shall be conclusive.

10.10       Non-Uniform Determinations

None of the Administrative Committee’s determinations under the Plan need to be uniform and any
such determinations may be made by it selectively among persons who make Deferral Requests under
the Plan (whether or not such persons are similarly situated). Without limiting the generality of
the foregoing, the Administrative Committee shall be entitled, among other things, to make
non-uniform and selective determinations with regard to Deferrals, currency conversions and
availability of Notional Investments, and to enter into non-uniform and selective Deferral
Requests, as to (a) the persons permitted to make Deferrals, (b) the terms and provisions of any
Deferral, (c) whether a Participant’s employment with the Firm has been terminated for purposes of
the Plan and (d) any adjustments to be made with respect to any Deferral as described herein or
otherwise.

10.11       Severability; Entire Agreement

If any of the provisions of this Plan is finally held to be invalid, illegal or unenforceable
(whether in whole or in part), such provision shall be deemed modified to the extent, but only to
the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall
not be affected thereby. Each Participant, by requesting to participate in the Plan, acknowledges
that the Plan contains the entire agreement of the parties with respect to the subject matter
thereof and supersedes all prior agreements,

18

 

promises, covenants, arrangements, communications, representations and warranties between them,
whether written or oral with respect to the subject matter thereof.

10.12       No Third Party Beneficiaries

The Plan shall not confer on any person other than the Firm and the Participants any rights or
remedies thereunder; provided that the exculpation and indemnification provisions of Section 8.3
shall inure to the benefit of a Covered Person’s estate, beneficiaries and legatees.

10.13       Headings and Subheadings

Headings and subheadings in this Plan are inserted for convenience only and are not to be
considered in the construction of the provisions hereof.

19EX-10.1:

 

Exhibit 10.1

10 December 2004

«Name»

«Addr1»

«Addr2»

«Addr3»

«Addr4»

Long-Term Incentive Plan - Fiscal Year 2005 Awards

Dear «Nickname»:

One of the priorities of our Management Compensation Program is to provide you with the opportunity
to share in the long-term success of Air Products. You play an important role in the present and
future performance of our Company. As a result of your performance during the past year, I am
pleased to present your 2005 stock awards under the Company’s Long-Term Incentive Program.

As in the past, our long-term incentive awards recognize your contributions to the business, align
individual goals and performance with shareholder interests and the longer-term Company focus, and
provide you with a competitive pay opportunity. Your 2005 awards include:

	•  	A Nonstatutory Stock Option to purchase «Nqo_Grnt» shares of
Common Stock at a purchase price of $54.17 per share, which is
100% of the 1 October 2004 Fair Market Value of a share of Common
Stock.

	•  	An award of «Nqo_Grnt» Restricted Shares of Company Common Stock
issued to you as of 4 October 2004; and

	•  	«Nqo_Grnt» Deferred Stock Units for the Cycle 1A performance
period, «Nqo_Grnt» Deferred Stock Units for the Cycle 1B
performance period, and «Nqo_Grnt» Deferred Stock Units for the
Cycle 1C performance period, each Unit (a “Performance Share”)
being equivalent in value to one share of common Stock (see
Exhibit D).

We are committed to offering long-term incentive awards for our employees who contribute to our
success — both now and in the future. Thank you again for your dedication and on-going
contributions to Air Products.

 

 

Your 2005 Awards are subject to and contingent upon your agreement to the conditions described in
Paragraph 17 of Exhibit 1 (the “Conditions”). In order for your 2005 Awards to become effective,
please countersign this letter, make a copy for your records, and return the original of the letter
in the enclosed envelope to Jim Bell, Manager of Compensation, by 17 January 2005 in acknowledgment
of your agreement to the Conditions.

This letter, together with its Exhibit, constitutes the agreement governing your 2005 Awards (this
“Awards Agreement”). Your 2005 Awards are also at all times subject to the applicable provisions
of the Long-Term Incentive Plan (the “Plan”) and to any determinations made by the Management
Development and Compensation Committee of the Board of Directors (or its delegate) with respect to
your 2005 Awards as contemplated or permitted by the Plan or the Conditions. In addition, the
Committee has established a one-year holding period for a portion of your Nonstatutory Stock
Option. You are expected to hold, for one year, 50% of the net shares (after taxes and
commissions) that you receive upon an exercise of the Stock Option.

Neither your 2005 Awards, this Awards Agreement or the Plan constitute a contract of employment,
nor do they guarantee your continued employment for any period required for all or any of your 2005
Awards to vest or become exercisable, or to be earned or paid out. Except as otherwise indicated
all capitalized words used in this Awards Agreement have the meanings described in the Plan.

WITNESSETH the due execution of this Awards Agreement at Allentown, Pennsylvania effective as of
the 1st day of October 2004 intending to be legally bound hereby.

	 	 	 	 	 
	 	 	AIR PRODUCTS AND CHEMICALS, INC.
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	          John P. Jones III

ACKNOWLEDGED AND AGREED this

_____ day of ____________________, 200__.

_____________________________________

      «Name»

Exhibit

 

 

EXHIBIT I

AIR PRODUCTS AND CHEMICALS, INC.

LONG TERM INCENTIVE PLAN

FY2005 AWARDS AGREEMENT

	1.  	As described in the foregoing grant letter, you are hereby granted FY2005 Awards consisting
of Stock Options (“Options”), shares of Company Common Stock (“Restricted Shares”), and
Deferred Stock Units to be called “Performance Shares” under the Air Products and Chemicals,
Inc. Long Term Incentive Plan as amended and restated on January 23, 2003 (the “Plan”). The
Options are “Nonstatutory Stock Options” as described in Section 6 of the Plan. The
Restricted Shares are described in Section 8 of the Plan. The Deferred Stock Units are
described in Section 9 of the Plan. The Management Development and Compensation Committee of
the Company’s Board of Directors has approved these Awards subject to the applicable
provisions of the Plan and the terms of this Agreement, and contingent upon your execution of
this Agreement. All capitalized terms used in this Agreement have the meaning ascribed to
them in the Plan.

	2.  	Each Option entitles you to purchase one share of Common Stock (“Share”) at a purchase
price of $54.17 as described below. You can first purchase Shares as follows: (i) up to
one-third of the Shares may be purchased on or after 1 October 2005 and (ii) up to an
additional one-third of such Shares may be purchased on or after 1 October 2006 and 2007,
respectively. The Options cannot be exercised with respect to fractional Shares, and,
accordingly, the number of Shares will be rounded down to the nearest Share on the first two
of the foregoing dates and up to the nearest Share on the third such date to eliminate
fractional Shares. The Options were granted on 1 October 2004 and will continue for a period
of ten (10) years and one day from such grant date and will expire and no longer be
exercisable on 2 October 2014.

	3.  	You may purchase Shares by delivering to the Company, at its principal offices in
Allentown, Pennsylvania, written notice of exercise of the Option on forms to be provided by
the Company and the full purchase price of the Shares. Payment of the purchase price may be
made in cash, by the delivery of an irrevocable exercise notice coupled with irrevocable
instructions to a designated broker to simultaneously sell the Shares and deliver to the
Company on the settlement date the portion of the proceeds representing the purchase price
and any taxes to be withheld, or by delivery or attestation of ownership of other shares of
Common Stock owned by you. Payment of any taxes required to be withheld at the time of
exercise may be made in cash (including from a broker on the settlement date) or by having
the number of Shares acquired in the exercise reduced by an amount equal in value to the
amount of such taxes required to be withheld.

 

 

	4.  	Your Options terminate as of the close of business on the last day of your employment with
the Company or a Subsidiary, unless your employment ends due to your death, Disability or
Retirement. However, Options which have been held for less than one year from the date of
grant terminate when employment ends for any reason. Upon your, death, Disability or
Retirement on or after 30 September 2005, any unexercisable portion of the Options will be
extended for the remaining term of the award (that is, will become vested and be exercisable)
as if you have continued to be an active employee of the Company or a Subsidiary.

	5.  	In the event of a Change in Control, the Options become exercisable on the later of the
Change in Control or the first date more than six months from grant. Further, during the
30-day period following a Change in Control, Options may be surrendered for payment of 100%
of the “spread” between the value of the Shares (as defined in Section 11(a)(A) of the Plan),
and the purchase price.

	6.  	Options are nonassignable and nontransferable except to your Designated Beneficiary, by
will or by the laws of descent and distribution, or by gift to family members or to trusts of
which only family members are beneficiaries. Transfers by gift can be made only after the
Option has become exercisable and subject to such administrative procedures and to such
restrictions and conditions as the officers of the Company shall determine to be consistent
with the purposes of the Plan and the interests of the Company and/or to be necessary or
appropriate for compliance with all applicable tax and other legal requirements. Subject to
the foregoing, you may transfer Options by gift only by delivering to the Company at its
principal offices in Allentown, Pennsylvania, written notice of the intent to transfer the
Options on forms to be provided by the Company.

	7.  	The Restricted Shares shall be issued to you, contingent upon your execution of this
Agreement, as of 4 October 2004. Upon issuance of the Restricted Shares, you shall have all
the rights of a shareholder with respect to the Restricted Shares, including the right to
vote such Restricted Shares and receive all dividends or other distributions paid with
respect to the Restricted Shares, subject only to the restrictions contained in Paragraph 8
below. In the event of any change in the outstanding shares of Common Stock of the Company
or the occurrence of certain other events described in Section 12 of the Plan, an equitable
adjustment of the number of Restricted Shares covered by this Agreement shall be made
consistent with the impact of such change or event upon the rights of the Company’s other
shareholders, and any additional shares of Common Stock issued to you as a result of such
adjustment shall be Restricted Shares subject to this Agreement, including, without
limitation, the restrictions contained in Paragraph 8.

	8.  	The “Restriction Period” with respect to the Restricted Shares shall be the period
beginning 4 October 2004 and ending upon the earliest of your death,

 

 

	   	Disability, Retirement or a Change in Control of the Company. During the Restriction Period,
the Restricted Shares may not be sold, assigned, transferred, encumbered, or otherwise
disposed of by you; provided however, that upon your exercise of Stock Options, such
Restricted Shares may be used to pay the purchase price by attestation, with the stipulation
that the Restricted Shares attested will remain subject to the restrictions of this Paragraph
8 and the terms of this Agreement. If your employment by the Company and all its Subsidiaries
is terminated for any reason prior to October 1, 2005, or for any reason other than death,
Disability or Retirement after September 30, 2005, the Restricted Shares shall be returned to
the Company and forfeited in their entirety; provided that, in the event of a Change in
Control of the Company, your rights to the Restricted Shares shall become immediately
transferable and nonforfeitable.
	 
	9.  	At the end of the Restriction Period, and, if earlier, upon your election to include the
value of the Restricted Shares in your federal taxable income pursuant to Internal Revenue
Code Section 83(b), payment of taxes required to be withheld by the Company must be made.
When taxation occurs at the end of the Restriction Period, applicable taxes will be withheld
by reducing the number of the Restricted Shares issued to you by an amount equal in market
value to the taxes required to be withheld. In the event you make a section 83(b) election,
applicable taxes must be paid in cash to the Company at the time the election is filed with
the Internal Revenue Service.
	 
	10.  	In the event your employment is terminated due to your death on or after September 30, 2005,
the Restricted Shares shall be transferred free of restriction, net of any applicable taxes,
to your Designated Beneficiary or, if none, to your legal representative.
	 
	11.  	The Performance Shares granted to you will be divided into three portions to be earned over
three separate performance cycles as follows: (A) the Cycle 1A award and shall be earned at
the percentage indicated on the attached Schedule for the level of Operating Return on Net
Assets (“ORONA”) achieved for one year performance cycle ending September 30, 2005; (B) the
Cycle 1B award and shall be earned at the percentage indicated on the attached Schedule for
the level of average annual ORONA achieved for a two year performance cycle ending September
30, 2006 ; and (C) the Cycle 1C award and shall be earned at the percentage indicated on the
attached Schedule for the level of average annual ORONA achieved for a three year performance
cycle ending September 30, 2007. Subject to the forfeiture conditions contained in
Paragraph 12, each earned Performance Share will entitle you to receive, at the end of the
Deferral Period (as defined below), a payment equal to the value of one share of Company
Common Stock.
	 
	12.  	The Deferral Period will begin on the date of this Agreement and will end on the respective
date your Performance Shares are paid as described in Paragraph 13. If your employment by the
Company and all its affiliates is

 

 

	   	terminated for any reason prior to 1 October 2005, all your Performance Shares will be
automatically forfeited in their entirety. If your employment by the Company and all its
affiliates terminates after 30 September 2005 other than due to death, Disability or
Retirement, you will forfeit all of your Performance Shares for which the performance cycle is
not completed. If your employment by the Company and all its affiliates is terminated after 30
September 2005 due to death, Disability, or Retirement, you will forfeit a pro-rata portion of
your earned Cycle 1B Performance Shares if your employment is terminated before 1 October
2006 and/or a pro rata portion of your earned Cycle 1C Performance Shares if your employment
is terminated before 1 October 2007, which portion in each case shall be based on the number
of full months you worked following the grant date.
	 
	13.  	Performance Shares earned and not forfeited for each performance cycle shall be paid as
follows, in each case as soon as administratively practical after the due date: one-half shall
be paid in a cash payment at the end of the applicable performance cycle which shall be equal
to the Fair Market Value, as of the last day of the performance cycle, of the number of shares
of Company Common Stock representing half of the Performance Shares earned; and the remaining
half of the earned Performance Shares shall be paid in shares of Company Common Stock
(“Deferred Shares”) at the end of the two-year period following the end of the performance
cycle. No portion of the Deferred Shares will be distributed to you if you terminate
employment by the Company and all its affiliates prior to the end of the Deferral Period other
than due to death, Disability, or Retirement. No cash dividends or other amounts shall be
payable with respect to the Performance Shares during the Deferral Period. If your employment
by the Company and all affiliates is terminated during the Deferral Period due to death,
Disability, or Retirement, your earned Deferred Shares will be paid as follows: Deferred
Shares for which the performance cycle is complete will be paid on the earlier of the date
they would have been paid if you remained employed or six months after your employment
terminates, and Deferred Shares for which the performance cycle is not complete will be paid
on the later of six months after the termination of your employment or the completion of the
performance cycle. At the end of the Deferral Period for each earned and nonforfeited
Performance Share, the Company will also pay to you, an additional cash payment equal to the
dividends which would have been paid on a share of Common Stock during the Deferral Period,
net of applicable taxes. Additional information regarding a voluntary election to defer the
payout of your earned Performance Shares will be sent to you in a future communication.
	 
	14.  	If your employment by the Company or a Subsidiary terminates during the Deferral Period due
to death, payment in respect of earned Performance Shares that are not forfeited and of
related Dividend Equivalents shall be made to your Designated Beneficiary or, if none, your
legal representative.

 

 

	15.  	Following or in connection with a Change in Control, all outstanding Performance Shares,
together with any Dividend Equivalents for the period for which such Performance Shares have
been outstanding, shall be paid in accordance with Section 11(e) of the Plan.
	 
	16.  	In the event of any change in the outstanding shares of Common Stock of the Company or the
occurrence of certain other events as described in Section 12 of the Plan, an equitable
adjustment of the number of Performance Shares covered by this Agreement shall be made as
provided in the Plan.
	 
	17.  	Notwithstanding the above, your FY2005 Awards are granted subject to forfeiture for breach of
the following conditions (“Conditions”):

	 	(i)  	You continue to comply with the terms of your employee patent and trade secret
agreement and with all other agreements with, and obligations and duties to, the
Company and any of its subsidiaries and affiliates (hereafter, together, the
“Company”), and refrain from conducting yourself in a manner adversely affecting the
Company;

	 	(ii)  	Without limiting the generality of the foregoing, while employed by the Company and
for two years following your separation from service with the Company for any reason, you

	 	•  	Refrain from engaging in any activity in competition with the
Company, whether as an officer, director, employee, consultant, advisor, agent,
broker, independent contractor, partner, shareholder, or principal of any
corporation, partnership, proprietorship, firm, association, person or other
entity;

	 	•  	Refrain from undertaking any employment or activity wherein the
fulfillment of your duties would call upon you to reveal, to make judgments on, or
otherwise to use any “confidential information” of the Company;

	 	•  	Refrain from directly or indirectly, either for yourself or for any
other person, diverting or taking away or attempting to divert or take away (or
calling on or soliciting or attempting to call on or solicit) any of the Company’s
customers or patrons, including but not limited to those upon whom you called or
whom you solicited or with whom you became acquainted while employed by the
Company; and

	 	•  	Refrain from directly or indirectly or by action in concert with
others, inducing or influencing (or seeking to induce or influence) any person who
is engaged (as an employee, agent, independent contractor, or otherwise) by the
Company to terminate his or her employment or engagement.

 

 

	   	If, in the Committee’s sole discretion, it is determined that you have breached any of the
foregoing Conditions, after notice by registered mail directed to your last known address, all
of your outstanding awards under the Plan, including any unexercised Options and any
Restricted Shares which are still subject to restriction will be completely terminated.
Notwithstanding any other provisions hereof, following or in connection with a Change in
Control, the foregoing Conditions shall lapse and be of no further force or effect.
	 
	18.  	Neither your FY2005 Awards, this Award Agreement, nor the Plan constitute a contract of
employment; nor do they guarantee your continued employment for any period required for all or
any of your Options to vest or become exercisable.

 

 

ATTACHMENT I

ORONA Performance Schedule

The following schedule will be used to determine the earnout for each of the three cycles of the
fiscal year 2005 Performance Share award.

	 	 	 
	ORONA	 	Earnout Factor
	12%
	 	200%
	11%
	 	100%
	10.5%
	 	50%
	10%
	 	35% subject to further reduction at
	 
	 	the discretion of the MD&CC

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