1
Exhibit 10.34
XXXXX XXXXXX GROUP INC.
SUPPLEMENTAL EMPLOYEE'S RETIREMENT PLAN
FOR
CERTAIN SENIOR OFFICERS
(As amended and restated effective January 1, 1999)
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TABLE OF CONTENTS
Page
1. Purpose 1
2. Definitions and Construction 1
(a) Definitions 1
(b) Construction 6
3. Continuity and Eligibility 7
(a) Continuity 7
(b) Participants 7
(c) Reemployment 7
(d) Deferred Compensation Agreement 7
4. Administration 7
(a) General Authority 7
(b) Plan Administrator 7
(c) Actions; Indemnification 8
5. Vesting of Benefits 8
(a) Initial Continuing Participants 8
(b) Other Participants 8
(c) Forfeiture 8
(d) Competing Employment 8
6. Normal Retirement Benefit 9
(a) Eligible Participants 9
(b) Amount of Normal Retirement Benefit 9
7. Early Retirement Benefit 9
(a) Eligible Participants 9
(b) Amount of Early Retirement Benefit 10
(c) Early Retirement Reduction Factor 10
8. Disability Retirement Benefit 10
(a) Eligible Participants 10
(b) Amount of Disability Retirement Benefit 10
(c) Recovery from Disability 11
9. Other Retirement Income 11
(a) From Pension Plan and Any Other Pension Plan 11
(b) From Social Security 12
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Page
10. Death Benefit to Surviving Spouse 13
(a) Eligibility for Surviving Spouse Benefit 13
(b) Amount of Surviving Spouse Benefit 13
11. Forms of Payment 13
(a) Benefit Forms 13
(b) Election Procedures 14
12. Variable Annuity Procedures 14
(a) Right to Elect 14
(b) Operational Procedures for the Variable Annuity 15
(c) Variable Annuity Adjustments 16
(d) Mortality Risk; Residual Assets 17
(e) Death of a Participant 17
(f) Special Definitions 17
13. Change in Control 18
(a) Changes to the Vesting Schedule 18
(b) Adjustment to the Service Fraction 19
(c) Elimination of Early Retirement Factors 19
(d) Effect on Section 5(d) 19
(e) Lump-Sum Payment 19
(f) Required Trust Contribution 19
(g) Investment of Trust Fund Assets 20
14. Trust Fund 20
(a) Contributions 20
(b) Assets of the Trust Fund 20
15. Actuarial Equivalent 20
16. Amendment and Termination 21
17. Claims Procedure 21
(a) Initial Claim 21
(b) Appeal to the Compensation Committee 21
(c) Finality 21
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Page
18. Miscellaneous 22
(a) No Right to Continued Employment 22
(b) Spendthrift Provision 22
(c) Payment of Expenses 22
(d) Payment of Taxes 22
(e) Unfunded 23
(f) Unsecured Promise to Pay 23
(g) Successors 23
(h) Tax Withholding 23
(i) Headings and Captions 23
(j) Governing Law 24
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Xxxxx Xxxxxx Group Inc.
Supplemental Employee's Retirement Plan
for Certain Senior Officers
1. Purpose. The Plan is maintained by PWG for the purpose of
providing Participants with a means of supplementing the retirement benefits
provided to them under the other retirement plans and programs sponsored by
PaineWebber. The Plan is intended to be a plan which is unfunded within the
meaning of ERISA and the Code and maintained by PWG primarily for the purpose of
providing deferred compensation to a select group of management or highly
compensated employees within the meaning of Section 201(2) of ERISA.
2. Definitions and Construction.
(a) Definitions. As used in the Plan, the following capitalized
words shall have the meanings set forth below:
"Actuarial Equivalent" has the meaning set forth in Section 15.
"Actuary" means the actuary for the Pension Plan, as selected by the
Plan Administrator from time to time.
"Base Salary" means the highest annual rate of base salary paid to a
Participant, on or before December 31, 1998, by PaineWebber while employed
thereby, exclusive of commissions, draw, bonuses, severance and other
irregular or special compensation, except as may be provided otherwise by
the Compensation Committee, but including employee deferrals of base
salary under (i) the PaineWebber Savings Plus Plan, (ii) any Deferred
Compensation Agreement between PaineWebber and a Participant, (iii) the
PaineWebber PartnerPlus Plan or the PaineWebber PartnerPlus Plan for
Branch Managers or (iv) any other similar PaineWebber pension, welfare,
deferred compensation or other plan designated by the Plan Administrator.
Increases to a Participant's Base Salary on or after December 31, 1998
shall not be taken into account for any purpose under the Plan.
"Beneficiary" means the person or persons designated in writing in a
form prescribed by the Plan Administrator as a beneficiary or contingent
annuitant for purposes of the optional forms of benefit set forth in
Section 11(a). No Beneficiary designation shall be effective unless it is
in writing and received by the Plan Administrator prior to the date that
the payment of the Plan Benefit commences under the Plan. A trust or other
entity may be designated as a Participant's Beneficiary under the ten-year
certain and life option, but not under a contingent annuitant option.
6
"Board" means the Board of Directors of PWG.
"Cause" means (i) a Participant's conviction or plea of no contest
to a felony involving the business of PaineWebber, (ii) a Participant's
fraud against the business of PaineWebber as determined by the
Compensation Committee, (iii) any intentional act or omission by a
Participant not undertaken in the good faith belief that it was in pursuit
of the business of PaineWebber and which is intended to cause and does
cause material injury to the financial condition of PaineWebber, or (iv) a
Participant's continued and repeated failure to perform the material
duties of the Participant's position with PaineWebber (other than by
reason of approved leave of absence, illness or disability) after the
Participant has received written notice from PaineWebber of such failure.
"Change in Control" shall mean the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act, other than PWG, a Subsidiary,
any trustee or other fiduciary holding securities under an
employee benefit plan of PWG or a Subsidiary, or any
corporation owned, directly or indirectly, by the stockholders
of PWG in substantially the same proportions as their
contemporaneous ownership of voting securities of PWG, is or
becomes a "20% Beneficial Owner."
For purposes of this provision, a "20% Beneficial Owner" means
a person who is or becomes the "beneficial owner" (as defined
in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of PWG representing 20% or more of the combined
voting power of PWG's then-outstanding voting securities;
provided that (A) the term "20% Beneficial Owner" shall not
include any beneficial owner who has exceeded such 20%
threshold solely as a result of an acquisition of securities
directly from PWG, or solely as a result of an acquisition by
PWG of PWG securities, until such time thereafter as such
person acquires additional voting securities other than
directly from PWG and, after giving effect to such
acquisition, such person would constitute a 20% Beneficial
Owner; and (B) with respect to any person who is and remains
eligible to file a Schedule 13G pursuant to Rule 13d-1(b)(1)
of the Exchange Act with respect to PWG securities, there
shall be excluded from the number of securities deemed to be
beneficially owned by such person for purposes of determining
whether such person is a 20% Beneficial Owner a number of
securities representing 10% of the combined voting power of
PWG's then-outstanding voting securities;
(ii) during any period of two consecutive years,
individuals who, at the beginning of such period, constitute
the Board, together with any new director (other than a
director designated by a person who has entered into an
agreement with PWG to effect a transaction described in
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paragraph (i), (iii), or (iv) hereof) whose election by the
Board or nomination for election by PWG's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute at least a
majority thereof;
(iii) the stockholders of PWG approve a merger,
consolidation, recapitalization, or reorganization of PWG, or
a reverse stock split of any class of voting securities of
PWG, or the consummation of any such transaction if
stockholder approval is not obtained, other than any such
transaction which would result in at least 80% of the total
voting power represented by the voting securities of PWG or
the surviving entity outstanding immediately after such
transaction being beneficially owned by persons who together
beneficially owned at least 80% of the combined voting power
of the voting securities of PWG outstanding immediately prior
to such transaction, with the relative voting power of each
such continuing holder compared to the voting power of each
other continuing holder not substantially altered as a result
of the transaction; provided that, for purposes of this
paragraph (iii), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be
satisfied if the failure to meet such 80% threshold (or to
substantially preserve such relative voting power) is due
solely to the acquisition of voting securities by an employee
benefit plan of PWG or such surviving entity or of any
subsidiary of PWG or such surviving entity;
(iv) the stockholders of PWG approve a plan of complete
liquidation of PWG or an agreement for the sale or disposition
by PWG of all or substantially all of PWG's assets (or any
transaction having a similar effect); or
(v) any other event which the Board determines shall
constitute a Change in Control for purposes of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"Compensation Committee" means the Compensation Committee of the
Board, as constituted from time to time.
"Continuous Employment" means the period beginning on a
Participant's employment commencement date with PaineWebber and ending on
his severance date from PaineWebber, as determined by the Plan
Administrator in accordance with the rules and procedures for calculating
"continuous employment" under the Pension Plan, but without regard to
whether the Participant is eligible to participate in the Pension Plan.
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"Deferred Compensation Agreement" means a written agreement between
a Participant and PWG setting forth a Participant's right to receive
certain deferred compensation benefits from PaineWebber.
"Disability" means any physical or mental injury or disorder of a
Participant which precludes the continued employment of a Participant and
which is evidenced by the Participant's eligibility to receive disability
benefits under the PaineWebber Long-Term Disability Plan (or a
determination by the Plan Administrator that such Participant would be
eligible to receive disability benefits if then participating in such
plan).
"Effective Date" means January 1, 1999.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the applicable rulings and regulations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the applicable rulings and regulations thereunder.
"FICA and HI Taxes" means the employee portion of Social Security
tax under the Federal Insurance Contribution Act and Medicare tax.
"Initial Continuing Participants" means the individuals designated
as such by the Compensation Committee.
"Investment Manager" means a person appointed to direct the
investment of some or all of the assets of the Trust Fund.
"Normal Retirement Date" means the first day of the month coincident
with or next following the later of (i) the date of the Participant's
sixty-fifth birthday and (ii) the fifth anniversary of the date on which
the Participant's Continuous Employment commenced.
"Other Participants" means the individuals (other than the Initial
Continuing Participants) who were participating in or eligible for
benefits under the Plan immediately prior to the Effective Date.
"Other Pension Plan" means any U.S. or non-U.S. long-term
disability, pension or retirement plan, other than the Pension Plan,
sponsored by PaineWebber or to which PaineWebber contributes or accrues
benefits on behalf of a Participant, including any long-term disability or
retirement program mandated or permitted by a foreign jurisdiction;
provided, however, that Other Pension Plan shall not include the
PaineWebber Savings Investment Plan, the Deferred Compensation Agreement,
the PaineWebber PartnerPlus Plan or the PaineWebber PartnerPlus Plan for
Branch Managers.
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"Other Retirement Income" has the meaning set forth in Section 9,
and includes the benefits payable in respect of a Participant pursuant to
the Pension Plan, any Other Pension Plan and the Social Security Act.
"PaineWebber" means PWG and each of its Subsidiaries.
"Participants" means the Initial Continuing Participants and the
Other Participants.
"Pension Plan" means the PaineWebber Pension Plan, as amended from
time to time.
"Plan" means this Xxxxx Xxxxxx Group Inc. Supplemental Employee's
Retirement Plan for Certain Senior Officers, as amended and restated as of
the Effective Date.
"Plan Administrator" means the person serving from time to time as
the Director of Human Resources for PWI or such other person designated as
the Plan Administrator by the Compensation Committee.
"Plan Agreement" means a written agreement between a Participant and
PWG setting forth the Participant's rights to benefits under the Plan.
"Plan Benefit" means a monthly benefit of a Participant determined
in accordance with Section 6, Section 7 or Section 8 or a monthly benefit
to a surviving Spouse under Section 10.
"Prior Plan Restatement" means the terms of the Plan in effect prior
to the Effective Date.
"PWG" means Xxxxx Xxxxxx Group Inc., a Delaware corporation, and any
successor thereto.
"PWI" means PaineWebber Incorporated, a Delaware corporation, and
any successor thereto.
"Retirement" means the first day of the month on which a Plan
Benefit is paid to a Participant.
"Social Security Act" or "Social Security" means the Social Security
Act of 1935, as amended, and the applicable rulings and regulations
thereunder.
"Spouse" means the spouse of a Participant who has been legally
married to the Participant under the laws of the jurisdiction in which the
marriage was contracted for a period of at least one year immediately
prior to the Participant's death or one year immediately prior to
Retirement.
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"Subsidiary" means any corporation of which PWG directly or
indirectly controls 50% or more of the total combined voting power
entitled to vote in the election of directors.
"Trust" means the grantor trust established by written agreement
between PWG and the Trustee for the purpose of accumulating funds to
assist PaineWebber in meeting its obligations under the Plan, of which PWG
is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Code. The establishment of the Trust is not
intended in any way to affect the status of the Plan as "unfunded" for
purposes of ERISA and the Code.
"Trust Agreement" means the written agreement between PWG and the
Trustee, as amended from time to time.
"Trust Fund" means the assets of the Trust.
"Trustee" means any bank or trust company (i) that is not affiliated
with PaineWebber and that has, at the time of appointment, trust assets
under management of at least $10 billion and (ii) with which PWG has
entered into the Trust Agreement pursuant to which such institution has
agreed to administer the Trust and to hold and distribute the assets of
the Trust Fund.
"Year of Continuous Employment" means each completed twelve-month
period of Continuous Employment. For purposes of the Plan, partial Years
of Continuous Employment shall be determined based on completed months of
Continuous Employment.
(b) Construction. When used herein, unless the context clearly
requires otherwise, the masculine pronoun shall be deemed to include the
feminine, and a singular noun or pronoun shall be deemed to include the plural
form.
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3. Continuity and Eligibility.
(a) Continuity. As of the Effective Date, the terms and provisions
of the Plan as set forth herein supersede and replace the provisions of the
Prior Plan Restatement for all Participants.
(b) Participants. On and after the Effective Date, subject to
Section 3(d), only individuals who were participating in the Plan prior to the
Effective Date shall be eligible for Plan Benefits.
(c) Reemployment. If a Participant terminates Continuous Employment
without a vested right to receive a benefit under this Plan and subsequently
resumes Continuous Employment, he shall not again become a Participant under the
Plan.
(d) Deferred Compensation Agreement. Anything in the Plan or in the
Prior Plan Restatement to the contrary notwithstanding, no individual who
participated in the Plan prior to the Effective Date and who is a party to a
Deferred Compensation Agreement that provides that such agreement supersedes or
replaces the Plan shall, on or after the Effective Date, be eligible for any
Plan Benefits.
4. Administration.
(a) General Authority. The general supervision of the Plan shall be
the responsibility of the Compensation Committee, which, in addition to such
other powers as it may have as provided herein, shall have the power: (i) to
make and enforce such rules and regulations as it shall deem necessary or proper
for the efficient administration of the Plan; (ii) to interpret and construe the
Plan and the rules and regulations of the Compensation Committee, to resolve
ambiguities, inconsistencies or omissions in the text of the Plan and to take
such other action as may be necessary or advisable for the orderly
administration of the Plan; (iii) to make any and all factual determinations in
connection with the administration and implementation of the Plan; (iv) to
delegate to any person the authority to carry out such administrative duties,
powers and authority relative to the administration of the Plan as the
Compensation Committee may determine; and (v) to review actions taken by the
Plan Administrator or any other person to whom authority is delegated under the
Plan.
(b) Plan Administrator. The Plan Administrator shall be responsible
for the day-to-day operation of the Plan, having the power (except to the extent
such power is reserved to the Compensation Committee) to take all action and to
make all decisions necessary or proper in order to carry out his duties and
responsibilities under the provisions of the Plan. If the Plan Administrator is
a Participant, the Plan Administrator shall not resolve, or participate in the
12
resolution of, any question which relates directly or indirectly to him and
which, if applied to him, would significantly vary his eligibility for, or the
amount of, any benefit to him under the Plan. The Plan Administrator shall
report to the Compensation Committee at such times as the Compensation Committee
shall request concerning the operation of the Plan.
(c) Actions; Indemnification. The members of the Compensation
Committee, the Plan Administrator and any officer or employee of PaineWebber to
whom responsibilities are delegated by the Compensation Committee or the Plan
Administrator shall not be liable for any actions or failure to act hereunder.
PaineWebber shall indemnify and hold harmless, to the fullest extent permitted
by law, the Compensation Committee (and each member thereof), the Plan
Administrator and any officer or employee of PaineWebber to whom
responsibilities are delegated by the Compensation Committee or the Plan
Administrator from and against any liabilities, damages, costs and expenses
(including attorneys' fees and amounts paid in settlement of any claims approved
by PaineWebber) incurred by or asserted against it or him by reason of its or
his duties performed in connection with the operation or administration of the
Plan.
5. Vesting of Benefits.
(a) Initial Continuing Participants. Subject to Section 5(d), the
Plan Benefit of each Initial Continuing Participant shall be fully vested and
nonforfeitable.
(b) Other Participants. Subject to Section 5(d), the Plan Benefit of
each Other Participant shall be fully vested and nonforfeitable upon the earlier
to occur of (i) the Participant's attaining at least ten Years of Continuous
Employment and at least age fifty while in Continuous Employment and (ii) the
Participant's attaining at least five Years of Continuous Employment and at
least age fifty-five while in Continuous Employment. Both the age and service
requirement must be satisfied while in Continuous Employment in order for an
Other Participant to vest in his Plan Benefit.
(c) Forfeiture. Any Participant who terminates Continuous Employment
prior to vesting in his Plan Benefit shall forfeit all rights to payments and
benefits under the Plan, the Trust or any applicable Plan Agreement.
(d) Competing Employment. Each Participant (i) whose employment with
PaineWebber is terminated prior to attaining age sixty and (ii) who, at any time
during the one-year period following such termination of employment, becomes an
owner, principal, officer, employee, consultant or investor in a financial
services organization which is in substantial and direct competition with the
then core or basic lines of business of PaineWebber (whether or not a
Participant personally participates in any such competitive activities) shall
not be entitled to receive any benefits to which such Participant (or the
Participant's Beneficiary) is otherwise entitled to receive under the Plan and
which have not yet been paid. For purposes of this Section 5(d), (i) any passive
investment which constitutes less than one percent by vote or market value of
the outstanding equity interests of a corporation, partnership or other business
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entity, any of whose equity interests are regularly traded on a recognized
securities exchange, shall be disregarded; and (ii) whether or not any financial
services organization is in substantial and direct competition with the then
core or basic lines of business of PaineWebber shall be determined by the
Compensation Committee in its sole judgment. If requested in writing by a
Participant, the Compensation Committee shall inform the Participant within a
reasonable period of time following its receipt of the Participant's written
request as to whether or not any particular organization would be considered a
"financial services organization in substantial and direct competition with
PaineWebber."
6. Normal Retirement Benefit.
(a) Eligible Participants. A Participant who has a vested Plan
Benefit shall be entitled to retire under the Plan on his Normal Retirement Date
and receive a monthly benefit in the form of a single-life annuity commencing on
his Normal Retirement Date.
(b) Amount of Normal Retirement Benefit. The monthly amount payable
under this Section 6 shall be equal to one-twelfth of the annual amount
determined in accordance with the formula ((P x C x F) - R) x E, where
P equals (i) 1.0 for each Initial Participant and (ii)
.75 for each Other Participant;
C equals the Participant's Base Salary;
F equals a fraction (not greater than one), the
numerator of which is the number of Years of Continuous
Employment (not greater than fifteen) credited to the
Participant as of the date of the Participant's termination of
Continuous Employment and the denominator of which is fifteen;
R equals the Participant's Other Retirement Income, as
determined in accordance with Section 9; and
E equals 1.0.
7. Early Retirement Benefit.
(a) Eligible Participants. A Participant who terminates Continuous
Employment with a vested Plan Benefit and prior to attaining age fifty-five
shall be eligible to elect to begin receiving an early retirement benefit
hereunder in the form of a single-life annuity commencing on the first day of
any month following the month in which the Participant attains age fifty-five
and prior to his Normal Retirement Date. A Participant who terminates Continuous
Employment with a vested Plan Benefit after attaining age fifty-five shall be
eligible to elect to begin receiving an early retirement benefit hereunder in
the form of a single-life annuity commencing on the first day of any month
following the month in which the Participant terminates Continuous Employment
and prior to his Normal Retirement Date.
(b) Amount of Early Retirement Benefit. The monthly amount of a
Participant's early retirement benefit payable under this Section 7 shall be
equal to one-twelfth of the amount determined in accordance with the formula ((P
x C x F) - R) x E, where P, C and F are as defined in Section 6, where R is as
determined in Section 9 and where
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E equals the early retirement factor as determined in
accordance with Section 7(c).
(c) Early Retirement Reduction Factor. The early retirement factors
applicable to an early retirement benefit payable under this Section 7 shall be
100% less the sum of (i) twenty-five hundredths percent (0.25%) for each month
by which the later of (A) the initial payment date of the early retirement
benefit and (B) the first day of the month coincident with or next following the
Participant's sixtieth birthday precedes the Normal Retirement Date; plus (ii)
one-half percent (0.5%) for each month by which the initial payment date of the
early retirement benefit precedes the first day of the month coincident with or
next following the date that the Participant attains his sixtieth birthday.
8. Disability Retirement Benefit.
(a) Eligible Participants. If a Participant terminates Continuous
Employment by reason of a Disability and if he shall have completed five Years
of Continuous Employment as of the date his employment terminates, the
Participant shall be entitled to elect to receive a monthly Disability
retirement benefit under the Plan. A Participant who retires as a result of a
Disability may elect to begin receiving a Disability retirement benefit in the
form of a single-life annuity on the first day of any month coincident with the
month in which the Participant has satisfied all of the conditions to the
receipt of benefits under the PaineWebber Long-Term Disability Plan (or would
have satisfied all of such conditions if the Participant were covered by such
plan). A Disability retirement benefit shall be in lieu of any other benefit
payable under the Plan.
(b) Amount of Disability Retirement Benefit. The monthly amount of a
Participant's Disability retirement benefit payable under this Section 8 shall
be equal to one-twelfth of the amount determined in accordance with the formula
((P x C x F) - R) x E, where P, C and E are as defined in Section 6, where R is
as determined in Section 9, and where
F equals a fraction (not greater than one), the
numerator of which is the number of Years of Continuous
Employment (not greater than fifteen) that the Participant
would have had upon his attainment of Normal Retirement Date
had he continued in the employ of PaineWebber to such date,
and the denominator of which is fifteen.
(c) Recovery from Disability. Any Participant who (i) terminated his
Continuous Employment with PaineWebber by reason of Disability and (ii) recovers
from such Disability and returns to employment with PaineWebber or any other
employer before his Normal Retirement Date shall receive no further benefits
pursuant to this Section 8. A Participant who resumes employment with
PaineWebber after a Disability will become a Participant in the Plan with
respect to Continuous Employment following the date of such reemployment only if
designated a Participant in the manner contemplated by Section 3(c). A
Participant whose Disability retirement benefit ends by operation of this
Section 8(c) may be eligible to elect to receive a normal retirement benefit
under Section 6 or an early retirement benefit under Section 7; provided that
the Participant has satisfied all of the Plan's eligibility requirements
applicable to the receipt of such a benefit as of the last day of the month for
which a Disability benefit is paid under this Section 8. For purposes of the
previous sentence, a Participant's Continuous Employment shall include each
month for which the Participant received a Disability benefit under this Section
8 plus each month of Continuous Employment otherwise credited under the Plan
(other than by operation of this Section 8), but
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shall in no event include any period following the last day of the month for
which a Disability benefit was paid under this Section 8.
9. Other Retirement Income.
(a) From Pension Plan and Any Other Pension Plan. For purposes of
determining the retirement benefits paid under Section 6, Section 7, Section 8
and Section 10, "R" in the retirement income formula in each such section shall
include the aggregate annual amount of the Other Retirement Income a Participant
would be entitled to receive as a single-life annuity under the Pension Plan and
any Other Pension Plan, as follows:
1. Calculations for Early and Normal Retirement. For
purposes of determining the retirement benefits paid under
Section 6, Section 7 or Section 10, the Other Retirement
Income shall be calculated as if retirement income commences
on the date of Retirement and as if no distributions of Other
Retirement Income had been made from the Pension Plan or Other
Pension Plan prior to Retirement.
2. Calculations for Disability Retirement Prior to Attainment of
Normal Retirement Date. For purposes of determining the
retirement benefit paid under Section 8 prior to attainment of
Normal Retirement Date, the Other Retirement Income shall
equal the amount of the Disability retirement income a
Participant is entitled to receive as a single-life annuity
under the Pension Plan or any Other Pension Plan.
3. Calculations for Disability Retirement on and After Attainment
of Normal Retirement Date. For purposes of determining the
retirement benefit paid under Section 8 on and after the
attainment of Normal Retirement Date, the Other Retirement
Income shall be calculated as if the Participant had remained
in employment until the Normal Retirement Date, as if the
Other Retirement Income had commenced at the Normal Retirement
Date, and as if no distributions had been made prior to
Retirement from the Pension Plan or Other Pension Plan.
If any Other Pension Plan does not provide benefits in the form of a single-life
annuity, then the Actuary shall compute the single-life annuity which is the
Actuarial Equivalent of such Other Pension Plan's normal form of benefit. If
amounts determined under this Section 9(a) arise out of more than one plan, the
provisions of this Section 9(a) shall be applied separately with respect to each
such plan.
(b) From Social Security. For purposes of determining the retirement
benefit paid under Section 6, Section 7, Section 8 and Section 10, "R" in the
retirement income formula in each such section shall also include the annual
amount of the Other Retirement Income applicable to a Participant (excluding any
benefit payable on behalf of a spouse or other dependent) under the Social
Security Act as in effect on the date of the Participant's commencement of
payments under the Social Security Act. The Other Retirement Income determined
under this Section 9(b) shall be included in "R" in the applicable retirement
formula only after the commencement date indicated below and shall not be
redetermined subsequent to such commencement date.
1. Use of Participant's Actual Benefit from Social
Security. If a Participant has not delayed his retirement
under Social Security beyond the earlier
16
of his Social Security normal retirement age or the
commencement of any Social Security disability benefit to such
Participant, the Other Retirement Income shall be the initial
amount actually paid to such Participant at the Participant's
actual Social Security commencement date, if such Participant
provides PaineWebber with a written statement documenting the
amount so paid and the commencement date.
2. Social Security Benefit Calculated by the Actuary. If a
Participant's Social Security benefit is not determined in
accordance with the paragraph 1, the Actuary shall estimate
the amount and specify the commencement date of the Other
Retirement Income on the basis of (A) such Participant's
actual earnings history or (B) if such Participant does not
provide such earnings history to PaineWebber, reasonable
actuarial assumptions as applied to such Participant's
earnings history with PaineWebber. The Actuary shall assume
that the Participant commences his Social Security benefit at
the later of (A) the earliest Social Security retirement date
or (B) the date of Retirement, but (C) in no case later than
the earlier of such Participant's Social Security normal
retirement age or the commencement of any Social Security
disability benefit to such Participant. The determination of
the Actuary with respect thereto shall be final and binding on
all interested persons absent manifest error.
10. Death Benefit to Surviving Spouse.
(a) Eligibility for Surviving Spouse Benefit. If (i) a Participant
dies after having earned a vested Plan Benefit under the Plan and prior to
Retirement and (ii) at the time of such Participant's death, the Participant is
survived by a Spouse, then such Participant's surviving Spouse shall be entitled
to a surviving Spouse's benefit in the amount determined in accordance with
Section 10(b).
(b) Amount of Surviving Spouse Benefit. The monthly amount of a
Spouse's Plan Benefit payable under this Section 10 shall be equal to fifty
percent of one-twelfth of the amount of the retirement benefit which would have
been payable to the Participant as if he had retired on the first day of the
month following the month in which his death occurred in accordance to the
formula ((P x C x F) - R) x E, where P, C and F are as defined in Section 6,
where E is as determined in Section 7(c), and where
R equals the amount determined in accordance with the provisions
of Section 9, with the amount and commencement thereof based
upon the deceased Participant's eligibility for such Other
Retirement Income.
The payment of the Spouse's benefit shall commence on the first day of the month
immediately following the later of (i) the death of the Participant and (ii) the
date on which such Participant would have attained age fifty-five, and
subsequent payments shall be made on the first day of each month thereafter,
with the last payment being made on the first day of the month coinciding with
or preceding the death of the Spouse. A surviving Spouse may not elect an
optional form of benefit under Section 11 or a variable annuity.
17
11. Forms of Payment.
(a) Benefit Forms. Absent an election by a Participant in accordance
with Section 11(b), the Plan Benefit under Section 6, 7 or 8, as the case may
be, shall be paid monthly in the form of a single-life annuity, which shall be
an annuity for the life of such Participant commencing with the retirement date
selected by such Participant and ending on the first day of the month coincident
with or immediately preceding the date of such Participant's death. In lieu of a
single-life annuity, a Participant may elect at any time prior to the actual
commencement of his Plan Benefit to receive the Actuarial Equivalent of his Plan
Benefit paid in the form of any of the options set forth below:
1. Ten-Year Certain and Life Option. Under this option, a
reduced monthly benefit shall be payable during the
Participant's lifetime, but if the Participant dies before
having received 120 monthly payments, the remaining number of
payments shall be made to the Participant's Beneficiary. If
the Participant and the Beneficiary (including any alternate
Beneficiaries) all die before 120 payments have been made, the
Actuarial Equivalent of the remaining payments shall be paid
in a lump sum to the estate of the last to survive of the
Participant and the Beneficiaries.
2. Contingent Annuitant Option. Under this option, a reduced
monthly retirement benefit shall be payable during the
Participant's lifetime, and upon his death 100%, 75% or 50%,
as elected by the Participant, in writing, of the monthly
benefit that had been payable to the Participant during his
lifetime shall be paid to his designated Beneficiary, if such
person survives the Participant, for the lifetime of such
Beneficiary, with the last such payment being made on the
first day of the month coincident with or immediately
preceding the date of the Beneficiary's death.
When the Plan Benefit is reduced pursuant to Section 9 subsequent to its
original commencement date, then the elected option shall also be reduced at
such date by the same Actuarial Equivalent factor as was applied initially to
the calculation of the optional form of benefit. If a Participant with a
Disability elects an optional form of benefit, the payments following such
Participant's death shall not be adjusted to reflect a redetermination of the
amounts initially determined in Section 9 but shall only reflect the
application, if any, of the percentage elected under Section 2.
(b) Election Procedures. To be effective, all elections and
designations made by Participants shall be (i) in writing, (ii) in a form
satisfactory to the Plan Administrator and (iii) delivered to the Plan
Administrator at least thirty days before the payment of the Participant's Plan
Benefit is to commence. All elections and Beneficiary designations that are so
effective shall revoke all prior elections and designations. A Participant's
election of any optional form under this Section 11 may be made or cancelled and
a new election made on any date which is at least thirty days prior to the date
that the payment of the Plan Benefit is to commence. The election of a
contingent annuitant option shall automatically become void if the designated
Beneficiary dies prior to the Participant's Retirement.
12. Variable Annuity Procedures.
(a) Right to Elect. A Participant may elect to convert the
retirement benefit otherwise payable to such Participant under the single-life
annuity option or the contingent annuitant option to a variable annuity. A
Participant's election of a variable annuity must be made in accordance with the
election procedures specified in Section 11(b) and in accordance with such other
procedures as the Plan Administrator may reasonably require.
18
(b) Operational Procedures for the Variable Annuity. If a
Participant elects a variable annuity, the Plan Administrator shall cause such
Participant's variable annuity to be administered in any calendar year either
(i) through the actual investment of the Designated Portion of the Trust Fund
("Option A") or (ii) through the establishment of a Notional Account and the
investment of the Notional Account in the manner directed by such Participant
("Option B"). The operational procedures applicable to Options A and B are as
follows:
Option A: If the Plan Administrator directs that the variable
annuity shall be administered in accordance with Option A for a
given calendar year, the Trustee, upon the instruction of the Plan
Administrator, shall establish the Designated Portion of the Trust
Fund and shall invest the assets constituting the Designated Portion
of the Trust Fund in accordance with the investment directions
received from the Participant who has elected the variable annuity
or from an Investment Manager retained by the Participant for this
purpose. The fair market value of the Designated Portion of the
Trust Fund on the Initial Payment Date (or first Adjustment Date to
which Option A applies) shall equal the Fixed Amount and shall
initially consist of cash or cash equivalent assets of the Trust
Fund. For as long as Option A is in effect, the monthly Plan Benefit
payable to the Participant or such Participant's Beneficiary shall
be paid only from the assets of the Designated Portion of the Trust
Fund. If the Plan Administrator elects to continue Option A for a
subsequent calendar year, then, on the Adjustment Date preceding the
start of that calendar year, the Plan Administrator shall direct the
Trustee to allocate sufficient cash or cash equivalent assets to the
Designated Portion of the Trust Fund so that the value of the
Designated Portion of the Trust Fund equals the Participant's Fixed
Amount as of such Adjustment Date.
Option B: If the Plan Administrator directs that the variable
annuity shall be administered in accordance with Option B for a
given calendar year, PaineWebber shall establish on its books a
Notional Account as of the Initial Payment Date or Adjustment Date
preceding the start of such calendar year. The value of the Notional
Account on the Initial Payment Date (or first Adjustment Date to
which Option B applies) shall equal the Fixed Amount. Prior to the
establishment of the Notional Account, the Participant or an
Investment Manager retained by the Participant for this purpose
shall inform the Plan Administrator in writing as to the manner in
which the amounts credited in the Notional Account are to be deemed
invested, and the Notional Account shall be notionally invested in
accordance with such written instructions. If no such written
instructions are received for some or all of the Notional Account,
the portion of the Notional Account for which no such instructions
are received will be deemed invested in the money market funds
available for investment of the assets of the Trust Fund. The
Participant or the Investment Manager may thereafter change the
manner in which the Notional Account is invested as of the last day
of each month (or more frequently if permitted by the Plan
Administrator). Any such change shall be communicated to the Plan
Administrator in writing prior to the date such change is to become
effective. For as long as Option B is in effect, the monthly Plan
Benefit payable to the Participant or the Participant's Beneficiary
shall be charged against the Notional Account as of the first day of
the month for which such amounts are paid. If the Plan Administrator
elects to continue Option B for a subsequent calendar year, then, on
the Adjustment Date preceding the start of that calendar year,
PaineWebber shall credit the Notional Account with a notional cash
amount that is sufficient to cause the amount
19
credited to the Notional Account as of the applicable Adjustment
Date to equal the Participant's Fixed Amount as of that date.
The Trustee (in the case of Option A) or the Plan Administrator (in the case of
Option B) may refuse to follow the investment directions received by a
Participant or the Investment Manager retained by such Participant if the
Trustee or Plan Administrator reasonably determines that such investment
instructions would require the actual or deemed investment of assets (i) in
securities of PWG or any of its Subsidiaries or affiliates (other than a Mutual
Fund managed by an affiliate of PaineWebber), (ii) in securities or other
property for which there is no readily ascertainable fair market value or that
would require a private valuation or appraisal, or (iii) in securities or other
property that could cause a loss to or impair the assets of the Trust Fund not
allocated to the Designated Portion of the Trust Fund. If Option B applies,
PaineWebber may (but need not) direct the Trustee to invest some or all of the
assets of the Trust Fund in the manner in which the Notional Account is
invested.
(c) Variable Annuity Adjustments. For the period beginning on the
Initial Payment Date and ending on the Initial Adjustment Date, the monthly
retirement income amount paid to a Participant shall be determined without
regard to the election of the variable annuity. On the Initial Adjustment Date
and each Subsequent Adjustment Date thereafter, the monthly retirement income
amount payable to such Participant for the calendar year following the
Adjustment Date shall be determined in accordance with the formula (B/A x C),
where
A equals the Account Balance as of the immediately
preceding Adjustment Date (or, in the case of the Initial
Adjustment Date, as of the Initial Payment Date) compounded
monthly from such date to the Adjustment Date at the Reference
Rate and reduced for the benefit payments, each compounded
monthly from the date of its payment to the Adjustment Date at
the Reference Rate;
B equals the Account Balance on the Adjustment Date,
prior to adjustment in accordance with the last sentence of
the Option A or Option B paragraph above, as the case may be;
C equals the monthly retirement income amount paid to a
Participant or Beneficiary during the calendar year preceding
the applicable Adjustment Date.
The monthly retirement income amount for the calendar year following the
Adjustment Date shall be determined in the manner specified above, and no
further adjustments shall be made to such amount paid to the Participant until
the next Adjustment Date.
(d) Mortality Risk; Residual Assets. Any portion of the Designated
Portion of the Trust Fund remaining after the payment of all benefits to the
Participant and such Participant's Beneficiary shall continue to be held as part
of the Trust Fund and shall be used to pay Plan Benefits to other Participants
or shall revert to PaineWebber in accordance with the provisions of the Trust
Agreement. PaineWebber shall continue to be obligated to pay benefits to the
Participant and the Participant's Beneficiary if the Designated Portion of the
Trust Fund shall not be sufficient to fund the benefits to such Participant or
such Participant's Beneficiary solely as a result of the mortality assumptions
used to calculate the Fixed Amount.
20
(e) Death of a Participant. Upon the death of a Participant, the
surviving Beneficiary, if any, shall receive monthly payments in accordance with
the distribution option elected by such Participant but shall not be entitled to
direct the investment of the Designated Portion of the Trust Fund or the
Notional Account. The monthly retirement amounts charged against the Designated
Portion of the Trust Fund or debited against the Notional Account shall
thereafter refer to the monthly amount payable to the Beneficiary. On the
Adjustment Date for the calendar year in which the date of such Participant's
death occurs, the monthly amount payable to the Beneficiary shall be adjusted in
the manner contemplated above; provided, however, that the Plan Administrator
may provide that such Adjustment Date may be the last day of any month following
the date of death of such Participant, if the Plan Administrator determines that
such interim Adjustment Date is in the best interests of the Plan, the
Beneficiary or PaineWebber or is necessary or advisable for the orderly
administration of the Plan. The Plan Administrator may exercise such discretion
without the approval of the Beneficiary. Following such adjustment, the monthly
benefit paid to the Beneficiary shall remain fixed and shall not thereafter be
adjusted.
(f) Special Definitions. The following definitions are solely for
the purposes of this Section 12.
"Account Balance" means the fair market value of the Designated
Portion of the Trust Fund or of the value of the Notional Account at any
specified date.
"Adjustment Date" means the Initial Adjustment Date and each
Subsequent Adjustment Date.
"Designated Portion of the Trust Fund" means a portion of the assets
of the Trust Fund allocated to a sub-account in the Trust for purposes of
funding a Participant's variable annuity in accordance with Option A.
"Fixed Amount" means the Actuarial Equivalent of the then remaining
Plan Benefit expressed as a lump sum as of the Initial Payment Date and as
of each Adjustment Date, using the Plan Benefit for the subsequent year as
determined as of the Adjustment Date in accordance with the formula in
Section 12(c).
"Initial Adjustment Date" means the last day of a calendar year in
which the Initial Payment Date occurs or, if the last day of such calendar
year occurs within less than three months following the Initial Payment
Date, the last day of the next succeeding calendar year.
"Initial Payment Date" means the first day of the month in which an
annuity subject to this Section 12 is paid.
"Mutual Fund" means an investment company registered under the
Investment Company Act of 1940, as amended.
"Notional Account" means the bookkeeping account established on the
books and records of PaineWebber to record and administer Option B.
"Reference Rate" means the annualized rate of return for the assets
of the Pension Plan from the immediately preceding Adjustment Date (or, in
the case of the Initial Adjustment Date, as of the Initial Payment Date)
to the applicable Adjustment Date.
21
"Subsequent Adjustment Date" means the last date of each calendar
year beginning after the Initial Adjustment Date and ending with the
calendar year in which occurs the date of death of the Participant.
13. Change in Control. Anything in the Plan to the contrary
notwithstanding, the provisions of this Section 13 shall apply in the event of a
Change in Control to each Participant who is employed by PaineWebber immediately
prior to the Change in Control.
(a) Changes to the Vesting Schedule. As of the date of a Change in
Control, each Participant shall be fully vested in his Plan Benefit.
(b) Adjustment to the Service Fraction. As of the date of the Change
in Control, each Participant shall be credited for purposes of "F" in the
formula in Section 6(b) with Years of Continuous Employment equal to the sum of
X and Y (but in no event greater than fifteen), where X equals the Years of
Continuous Employment credited to the Participant under the Plan as of the date
of the Change in Control and Y equals the number of Years of Continuous
Employment such Participant would earn if his employment with PaineWebber
continued uninterrupted from the date of the Change in Control to such
Participant's Normal Retirement Date.
(c) Elimination of Early Retirement Factors. If a Participant has at
least five Years of Continuous Employment as of the date of the Change in
Control, the following shall apply: (i) the early retirement factors in Section
7(c) shall not be applied in calculating the monthly retirement benefits payable
to the Participant; and (ii) the Participant shall be eligible to commence
receiving his Plan Benefit under Section 7 regardless of his age as of the first
day of any month following the date his Continuous Employment terminates on or
after the date of the Change in Control.
(d) Effect on Section 5(d). On and after a Change in Control, the
provisions of Section 5(d) shall cease to apply.
(e) Lump-Sum Payment. If a Participant's employment with PaineWebber
is terminated other than for Cause during the two-year period following a Change
in Control, the Actuarial Equivalent of a Participant's Plan Benefit shall be
paid to the Participant in a cash lump-sum within five days following the date
of such termination of employment.
(f) Required Trust Contribution. On the date of a Change in Control,
PaineWebber shall contribute to the Trust a lump sum cash amount that shall be
sufficient to cause the fair market value of the assets of the Trust Fund on the
date of the Change in Control to equal 110% of the amount that would be the
Plan's projected benefit obligation ("PBO") calculated as of such date. For
purposes of the previous sentence, the PBO of the Plan shall be determined by
the Actuary in accordance with the directives of Statement of Financial
Accounting Standards No. 87, and after giving full effect to the provisions of
this Section 13, except that the interest rate assumption used by the Actuary
for purposes of calculating the PBO of the Plan shall be the lesser of (i) the
interest rate utilized for purposes of calculating the PBO in the financial
statements of PWG for the most recently completed fiscal year and (ii) 5%. The
determination of the Actuary shall, absent manifest error, be final and binding
on all interested persons. Thereafter, on each anniversary of the date of the
Change in Control, PaineWebber shall make an additional cash contribution to the
Trust Fund in an amount that shall be sufficient to cause
22
the fair market value of the assets of the Trust Fund as of such anniversary
date to equal 110% of the PBO calculated as of such date, determined in
accordance with the provisions of this Section 13(f).
(g) Investment of Trust Fund Assets. On and after a Change in
Control, the assets of the Trust Fund shall be invested at the direction of the
Trustee, except that any portion of the Trust Fund allocated to a sub-account in
accordance with Section 12 in connection with a Participant's election of a
variable annuity shall continue to be invested in accordance with the investment
directions received from the Participant or from an Investment Manager retained
by the Participant for this purpose. Following a Change in Control, the Plan
Administrator may not elect to have Option B apply with respect to any
Participant who has elected or who subsequently elects a variable annuity, and
Option A shall commence to apply as of the date of the Change in Control in
respect of any Participant who has elected a variable annuity and for which
Option B applies as of the date of the Change in Control.
14. Trust Fund.
(a) Contributions. Subject to Section 13(f), PaineWebber may from
time to time contribute such cash or other property to the Trust for the purpose
of providing assets to satisfy its obligations under the Plan. To the extent
that the assets of the Trust Fund are not sufficient to satisfy all of
PaineWebber's obligations under the Plan, such obligations shall be satisfied in
full from the general assets of PaineWebber.
(b) Assets of the Trust Fund. The assets of the Trust Fund shall be
held by the Trustee and shall be invested in accordance with the investment
policy communicated to the Trustee by the Compensation Committee or in
accordance with the directions of an Investment Manager appointed by the
Compensation Committee to direct the Trustee with respect to the investment of
some or all of the assets of the Trust Fund. If a portion of the Trust Fund is
allocated to a sub-account in accordance with Section 12 in connection with a
Participant's election of a variable annuity, the assets credited to that
sub-account shall be invested in accordance with the investment directions
received from the Participant or from an Investment Manager retained by the
Participant for this purpose.
15. Actuarial Equivalent. For purposes of the Plan, "Actuarial
Equivalent" forms of benefit shall be determined as follows:
(i) For purposes of calculating optional forms of
benefits (including option payment forms of Other Retirement
Income and the lump-sum payment contemplated by Section 13(e)
above): in accordance with the factors, assumptions and
methodologies applicable to such calculations under the
Pension Plan; and
(ii) For the purpose of calculating the Fixed Amount
under Section 12: in accordance with the interest rate and
other assumptions relevant to a retired participant that are
used for the funding standard account of the Pension Plan in
the plan year of the Pension Plan ending nearest to the
Adjustment Date.
16. Amendment and Termination. The Board or the Compensation
Committee may, at any time and from time to time, amend, modify or terminate the
Plan, in whole or in part, in any manner, whether prospectively or
retroactively; provided, however, that no amendment may reduce the accrued
benefits of any Participant without the Participant's written consent.
23
17. Claims Procedure.
(a) Initial Claim. All claims for benefits under the Plan shall be
submitted in writing to the Plan Administrator on the form prescribed for that
purpose by the Plan Administrator. Written notice of the Plan Administrator's
decision regarding the application for benefits shall be furnished to the
claimant within ninety days after receipt of the claim; provided, however, that,
if special circumstances require an extension of time for processing the claim,
an additional ninety days from the end of the initial period shall be allowed
for processing the claim, in which event the claimant shall be furnished with a
written notice of the extension prior to the termination of the initial
ninety-day period indicating the special circumstances requiring an extension.
Any written notice denying a claim shall set forth the reasons for the denial,
including specific reference to pertinent provisions of the Plan on which the
denial is based, a description of any additional information necessary to
perfect the claim and information regarding review of the claim and its denial.
(b) Appeal to the Compensation Committee. A claimant may review all
pertinent documents and may request a review by the Compensation Committee of a
decision denying the claim. Such a request shall be made in writing and filed
with the Compensation Committee within sixty days after delivery to the claimant
of written notice of the decision of the Plan Administrator. Such written
request for review shall contain all additional information that the claimant
wishes the Compensation Committee to consider. The Plan Compensation Committee
may hold a hearing or conduct an independent investigation, and the decision on
review shall be made as soon as possible after the Compensation Committee's
receipt of the request for review. Written notice of the decision on review
shall be furnished to the claimant within sixty days after receipt by the
Compensation Committee of a request for review, unless special circumstances
require an extension of time for processing, in which event an additional sixty
days shall be allowed for review, and the claimant shall be so notified in
writing. Written notice of the decision on review shall include specific reasons
for the decision.
(c) Finality. For all purposes under the Plan, such decision by the
Plan Administrator on claims (where no review is requested) and decision by the
Compensation Committee on review (where review is requested) shall be final,
conclusive and binding on all interested persons as to participation and
benefits eligibility, the amount of benefits and any other matter of fact or
interpretation relating to the Plan.
18. Miscellaneous.
(a) No Right to Continued Employment. To the extent of any
retirement benefits or other rights accrued hereunder, the Plan shall be deemed
to constitute a contract between PWG and the Participant, and the Plan (to the
extent of such accrued or other benefits) shall be part of the consideration or
inducement for the employment of such Participant by PaineWebber.
Notwithstanding the foregoing, nothing contained in the Plan shall be deemed (i)
to give any person the right to be retained in the employ of PaineWebber or (ii)
to interfere with the right of PaineWebber to discharge any person at any time
without regard to the effect which such discharge shall have upon his rights or
potential rights, if any, under the Plan. The provisions of the Plan are in
addition to, and not a limitation on, any rights which any Participant may have
against PaineWebber by reason of any employment or other agreement with
PaineWebber.
(b) Spendthrift Provision. To fully protect the benefits hereunder
against claims of all kinds, direct or otherwise, none of the retirement
benefits provided hereunder to any person shall be
24
assignable or transferable voluntarily, nor shall they be subject to the claims
of any creditor whatsoever, nor subject to attachment, garnishment or other
legal process by any creditor or to the jurisdiction of any bankruptcy court or
insolvency proceedings by operation of law or otherwise, and no person shall
have any right to alienate, anticipate, pledge, commute, or encumber any of such
benefits voluntarily or involuntarily; provided, however, that, as long as no
Change in Control has occurred, such payments may be subject to set off or
counterclaim by, or on behalf of, PaineWebber.
(c) Payment of Expenses. All expenses incurred in connection with
the operation and administration of the Plan or the investment of any assets of
the Trust Fund, including, but not limited to, the compensation of any Trustee,
Investment Advisor, any Actuary, accountant, counsel, other experts or persons
who shall be employed by the Compensation Committee or the Plan Administrator in
connection with the operation or administration of the Plan, shall be paid by
PaineWebber, unless paid from the Trust Fund in accordance with the provisions
of the Trust Agreement.
(d) Payment of Taxes. If any amounts held in the Trust Fund are
found in a "determination," within the meaning of Section 1313(a) of the Code,
to have been includible in the gross income of a Participant or the
Participant's Beneficiary prior to the date such amounts are otherwise payable
to the Participant or the Participant's Beneficiary under the Plan, then PWG
will, as soon as practicable, (i) pay such amounts to the applicable Participant
or Beneficiary or (ii) notify the Trustee to pay such amounts to the Participant
or the Participant's Beneficiary for the assets of the Trust. The provisions of
this Section 18(d) shall not apply to any FICA and HI Taxes owed by the
Participant or the Participant's Beneficiary. Promptly after receipt by the
Participant or the Participant's Beneficiary of written notice of the assertion
of any claim, or the commencement of any suit, action, proceeding, investigation
or audit in respect of which the Participant or the Participant's Beneficiary
could receive a distribution under this Section 18(d), the Participant or the
Participant's Beneficiary shall give written notice to PWG of the assertion or
commencement thereof. PWG shall have the right (at its own expense) to
participate in, assume the defense of and control any such suit, action,
proceeding, investigation or audit. If PWG assumes the defense of such an
action, (a) no compromise or settlement thereof may be effected by PWG without
the Participant's or the Beneficiary's consent (which shall not be unreasonably
withheld) and (b) no compromise or settlement thereof may be effected by the
Participant or the Participant's Beneficiary without the consent of PWG (which
shall not be unreasonably withheld). If PWG elects to assume the defense of such
action, the Participant or the Participant's Beneficiary may employ his own
counsel, at his own expense, to participate in a secondary role in such defense.
If written notice is given to the Participant or Participant's Beneficiary of
the assertion of any claim, or the commencement of any suit, action, proceeding,
investigation or audit, and PWG does not, within ten days after the
Participant's or Beneficiary's written notice to PWG together with reasonably
complete details of the claim, suit, action, proceeding, investigation or audit,
give written notice to the Participant or Participant's Beneficiary of its
election to assume the defense thereof, PWG shall be bound by any determination
made in such claim, suit, action, proceeding, investigation or audit or any
compromise or settlement thereof effected by the Participant or Participant's
Beneficiary.
(e) Unfunded. It is intended that the Plan shall be unfunded for
purposes of the Code and ERISA.
(f) Unsecured Promise to Pay. The Plan shall constitute an unsecured
promise by PaineWebber to make benefit payments in the future pursuant to the
terms hereof, and each Participant's interest in the Plan shall be solely that
of an unsecured general creditor of PWG.
25
(g) Successors. PWG shall require any successor to all or
substantially all of the business or assets of PaineWebber expressly to assume
the Plan and all of PaineWebber's obligations under the Plan.
(h) Tax Withholding. There shall be deducted and withheld from all
benefit payments (and remitted to the appropriate taxing authority) any taxes
required, in the reasonable judgment of the Plan Administrator, to be deducted
and withheld for payment to any federal, state, local or other taxing authority.
(i) Headings and Captions. The titles to the sections in the Plan
are for convenience of reference only, and, in case of any conflict, the text of
this instrument, rather than such titles or headings, shall control.
(j) Governing Law. This Plan, the Trust Agreement and all provisions
thereof shall be construed and administered according to the laws of the State
of New York without regard to the choice of law principles thereof.
XXXXX XXXXXX GROUP INC.
By:
-------------------
Name:
Title:
