{"id":38761,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/deferred-compensation-plan-schwab.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"deferred-compensation-plan-schwab","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/deferred-compensation-plan-schwab.html","title":{"rendered":"Deferred Compensation Plan – Schwab"},"content":{"rendered":"

THE CHARLES SCHWAB CORPORATION <\/strong><\/p>\n<\/p>\n

DEFERRED COMPENSATION PLAN <\/strong><\/p>\n<\/p>\n

(As Amended Through December 8, 2004) <\/strong><\/p>\n<\/p>\n

\n

Table of Contents <\/u><\/p>\n<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n
\n

Article I. Purpose<\/p>\n<\/td>\n

<\/td>\n\n

1<\/p>\n<\/td>\n<\/tr>\n

\n

1.1<\/p>\n<\/td>\n

<\/td>\n\n

Establishment of the Plan<\/p>\n<\/td>\n

<\/td>\n\n

1<\/p>\n<\/td>\n<\/tr>\n

\n

1.2<\/p>\n<\/td>\n

<\/td>\n\n

Purpose of the Plan<\/p>\n<\/td>\n

<\/td>\n\n

1<\/p>\n<\/td>\n<\/tr>\n

\n

Article II. Definitions<\/p>\n<\/td>\n

<\/td>\n\n

1<\/p>\n<\/td>\n<\/tr>\n

\n

2.1<\/p>\n<\/td>\n

<\/td>\n\n

Definitions<\/p>\n<\/td>\n

<\/td>\n\n

1<\/p>\n<\/td>\n<\/tr>\n

\n

2.2<\/p>\n<\/td>\n

<\/td>\n\n

Gender and Number<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

Article III. Administration<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

3.1<\/p>\n<\/td>\n

<\/td>\n\n

Committee and Administrator<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

Article IV Participants<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

4.1<\/p>\n<\/td>\n

<\/td>\n\n

Participants<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

Article V Deferrals<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

5.1<\/p>\n<\/td>\n

<\/td>\n\n

Salary Deferrals<\/p>\n<\/td>\n

<\/td>\n\n

3<\/p>\n<\/td>\n<\/tr>\n

\n

5.2<\/p>\n<\/td>\n

<\/td>\n\n

Deferrals of Bonuses, Commissions and Other Cash Incentive Compensation<\/p>\n<\/td>\n

<\/td>\n\n

4<\/p>\n<\/td>\n<\/tr>\n

\n

5.3<\/p>\n<\/td>\n

<\/td>\n\n

Deferral Procedures<\/p>\n<\/td>\n

<\/td>\n\n

4<\/p>\n<\/td>\n<\/tr>\n

\n

5.4<\/p>\n<\/td>\n

<\/td>\n\n

Election of Time and Manner of Payment<\/p>\n<\/td>\n

<\/td>\n\n

4<\/p>\n<\/td>\n<\/tr>\n

\n

5.5<\/p>\n<\/td>\n

<\/td>\n\n

Accounts and Earnings<\/p>\n<\/td>\n

<\/td>\n\n

6<\/p>\n<\/td>\n<\/tr>\n

\n

5.6<\/p>\n<\/td>\n

<\/td>\n\n

Maintenance of Accounts<\/p>\n<\/td>\n

<\/td>\n\n

6<\/p>\n<\/td>\n<\/tr>\n

\n

5.7<\/p>\n<\/td>\n

<\/td>\n\n

Change in Control<\/p>\n<\/td>\n

<\/td>\n\n

7<\/p>\n<\/td>\n<\/tr>\n

\n

5.8<\/p>\n<\/td>\n

<\/td>\n\n

Payment of Deferred Amounts<\/p>\n<\/td>\n

<\/td>\n\n

8<\/p>\n<\/td>\n<\/tr>\n

\n

5.9<\/p>\n<\/td>\n

<\/td>\n\n

Acceleration of Payment<\/p>\n<\/td>\n

<\/td>\n\n

8<\/p>\n<\/td>\n<\/tr>\n

\n

Article VI General Provisions<\/p>\n<\/td>\n

<\/td>\n\n

9<\/p>\n<\/td>\n<\/tr>\n

\n

6.1<\/p>\n<\/td>\n

<\/td>\n\n

Unfunded Obligation<\/p>\n<\/td>\n

<\/td>\n\n

9<\/p>\n<\/td>\n<\/tr>\n

\n

6.2<\/p>\n<\/td>\n

<\/td>\n\n

Informal Funding Vehicles<\/p>\n<\/td>\n

<\/td>\n\n

9<\/p>\n<\/td>\n<\/tr>\n

\n

6.3<\/p>\n<\/td>\n

<\/td>\n\n

Beneficiary<\/p>\n<\/td>\n

<\/td>\n\n

9<\/p>\n<\/td>\n<\/tr>\n

\n

6.4<\/p>\n<\/td>\n

<\/td>\n\n

Incapacity of Participant or Beneficiary<\/p>\n<\/td>\n

<\/td>\n\n

10<\/p>\n<\/td>\n<\/tr>\n

\n

6.5<\/p>\n<\/td>\n

<\/td>\n\n

Nonassignment<\/p>\n<\/td>\n

<\/td>\n\n

10<\/p>\n<\/td>\n<\/tr>\n

\n

6.6<\/p>\n<\/td>\n

<\/td>\n\n

No Right to Continued Employment<\/p>\n<\/td>\n

<\/td>\n\n

10<\/p>\n<\/td>\n<\/tr>\n

\n

6.7<\/p>\n<\/td>\n

<\/td>\n\n

Tax Withholding<\/p>\n<\/td>\n

<\/td>\n\n

10<\/p>\n<\/td>\n<\/tr>\n

\n

6.8<\/p>\n<\/td>\n

<\/td>\n\n

Claims Procedure and Arbitration<\/p>\n<\/td>\n

<\/td>\n\n

11<\/p>\n<\/td>\n<\/tr>\n

\n

6.9<\/p>\n<\/td>\n

<\/td>\n\n

Termination and Amendment<\/p>\n<\/td>\n

<\/td>\n\n

11<\/p>\n<\/td>\n<\/tr>\n

\n

6.10<\/p>\n<\/td>\n

<\/td>\n\n

Applicable Law<\/p>\n<\/td>\n

<\/td>\n\n

12<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\n

THE CHARLES SCHWAB CORPORATION <\/strong><\/p>\n

DEFERRED COMPENSATION PLAN <\/strong><\/p>\n<\/p>\n

Article I. Purpose <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

1.1<\/p>\n<\/td>\n

Establishment of the Plan<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Effective as of July 1, 1994, The Charles Schwab Corporation (hereinafter,
\nthe “Company”) hereby establishes The Charles Schwab Corporation Deferred
\nCompensation Plan (the “Plan”), as set forth in this document.<\/p>\n<\/p>\n

Effective December 8, 2004, no further deferrals shall be permitted
\nunder the Plan except deferrals relating to payments earned prior to January 1,
\n2005. <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

1.2<\/p>\n<\/td>\n

Purpose of the Plan<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Plan permits participating employees to defer the payment of certain cash
\ncompensation that they may earn. The opportunity to elect such deferrals is
\nprovided in order to help the Company attract and retain key employees. This
\nPlan is unfunded and is maintained primarily for the purpose of providing
\ndeferred compensation for a select group of management or highly compensated
\nemployees. It is accordingly intended to be exempt from the participation,
\nvesting, funding, and fiduciary requirements set forth in Title I of the
\nEmployee Retirement Income Security Act of 1974.<\/p>\n<\/p>\n

Article II. Definitions <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

2.1<\/p>\n<\/td>\n

Definitions<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The following definitions are in addition to any other definitions set forth
\nelsewhere in the Plan. Whenever used in the Plan, the capitalized terms in this
\nsection shall have the meanings set forth below unless otherwise required by the
\ncontext in which they are used:<\/p>\n<\/p>\n

(a) “Administrator” the administrator described in section 3.1 that is
\nselected by the Committee to assist in the administration of the Plan.<\/p>\n<\/p>\n

(b) “Beneficiary” means a person entitled to receive any benefit payments
\nthat remain to be paid after a Participant153s death, as determined under section
\n6.3.<\/p>\n<\/p>\n

(c) “Board” means the Board of Directors of the Company.<\/p>\n<\/p>\n

(d) “Company” means The Charles Schwab Corporation, a Delaware corporation.\n<\/p>\n<\/p>\n

(e) “Category 1 Participant” and “Category 2 Participant” each refer to a
\nspecific Participant group and have the meaning set forth in section 4.1.<\/p>\n<\/p>\n

(f) “Committee” means the Compensation Committee of the Board.<\/p>\n<\/p>\n

-1-<\/p>\n

\n

(g) “Deferral Account” means the account representing deferrals of cash
\ncompensation, plus investment adjustments, as described in sections 5.5 and 5.6.\n<\/p>\n<\/p>\n

(h) “Participant” means any employee who meets the eligibility requirements
\nof the Plan, as set forth in Article 4, and includes, where appropriate to the
\ncontext, any former employee who is entitled to benefits under this Plan.<\/p>\n<\/p>\n

(i) “Plan” means The Charles Schwab Corporation Deferred Compensation Plan,
\nas in effect from time to time.<\/p>\n<\/p>\n

(j) “Plan Year” means the calendar year.<\/p>\n<\/p>\n

(k) “Retirement” shall mean:<\/p>\n<\/p>\n

(l) any termination of employment with the Company and its Subsidiaries with
\nthe exception of U.S. Trust Corporation for any reason other than death at any
\ntime after the Participant has attained age fifty (50), but only if, at the time
\nof such termination, the Participant has been credited with at least seven (7)
\nYears of Service; provided, however, that with respect to any payments made on
\naccount of a deferral election made prior to November 1, 1994, Retirement shall
\nalso mean any termination of employment with the Company and its Subsidiaries
\nfor any reason other than death after the Participant has attained age 55; and\n<\/p>\n<\/p>\n

(m) any termination of employment from U.S. Trust Corporation for any reason
\nother than death at any time after (i) the Participant has attained age
\nsixty-five (65); (ii) the sum of the Participant153s age and credited Years of
\nService, at the time of such termination, is equal to or greater than eighty
\n(80); or (iii) the Participant has attained age sixty (60), but only if, at the
\ntime of such termination, the Participant has been credited with at least ten
\n(10) Years of Service.<\/p>\n<\/p>\n

For purposes of this subparagraph (k), the term “Years of Service” shall have
\nthe same meaning given to it under the SchwabPlan Retirement Savings and
\nInvestment Plan (or any successor plan).<\/p>\n<\/p>\n

(n) “Subsidiary” means a corporation or other business entity in which the
\nCompany owns, directly or indirectly, securities with more than 80 percent of
\nthe total voting power.<\/p>\n<\/p>\n

(o) “Valuation Date” means each December 31 and any other date designated
\nfrom time to time by the Committee for the purpose of determining the value of a
\nParticipant153s Deferral Account balance pursuant to section 5.5.<\/p>\n<\/p>\n

-2-<\/p>\n

\n\n\n\n
<\/td>\n\n

2.2<\/p>\n<\/td>\n

Gender and Number<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Except when otherwise indicated by the context, any masculine or feminine
\nterminology shall also include the neuter and other gender, and the use of any
\nterm in the singular or plural shall also include the opposite number.<\/p>\n<\/p>\n

Article III. Administration <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

3.1<\/p>\n<\/td>\n

Committee and Administrator<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Committee shall administer the Plan and may select one or more persons to
\nserve as the Administrator. The Administrator shall perform such administrative
\nfunctions as the Committee may delegate to it from time to time. Any person
\nselected to serve as the Administrator may, but need not, be a Committee member
\nor an officer or employee of the Company. However, if a person serving as
\nAdministrator or a member of the Committee is a Participant, such person may not
\nvote on a matter affecting his interest as a Participant. The Committee shall
\nhave discretionary authority to construe and interpret the Plan provisions and
\nresolve any ambiguities thereunder; to prescribe, amend, and rescind
\nadministrative rules relating to the Plan; to select the employees who may
\nparticipate and to terminate the future participation of any such employees; to
\ndetermine eligibility for benefits under the Plan; and to take all other actions
\nthat are necessary or appropriate for the administration of the Plan. Such
\ninterpretations, rules, and actions of the Committee shall be final and binding
\nupon all concerned and, in the event of judicial review, shall be entitled to
\nthe maximum deference allowable by law. Where the Committee has delegated its
\nresponsibility for matters of interpretation and Plan administration to the
\nAdministrator, the actions of the Administrator shall constitute actions of the
\nCommittee.<\/p>\n<\/p>\n

Article IV Participants <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

4.1<\/p>\n<\/td>\n

Participants<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Officers and other key employees of the Company and each of its Subsidiaries
\nshall be eligible to participate in this Plan upon selection by the Committee.
\nTo be nominated for participation, an employee must be highly compensated or
\nhave significant responsibility for the management, direction and\/or success of
\nthe Company as a whole or a particular business unit thereof. Directors of the
\nCompany who are full-time employees of the Company shall be eligible to
\nparticipate in the Plan. Participating employees of the Company in the position
\nof executive vice president or above shall be “Category 1 Participants.” All
\nother participating employees shall be “Category 2 Participants.”<\/p>\n<\/p>\n

Article V Deferrals <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.1<\/p>\n<\/td>\n

Salary Deferrals<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Each Category 2 Participant selected under Section 4.1 may elect to defer up
\nto 50 percent of his regular base salary (subject to the provisions of this
\nArticle V). Any such election must be made by entering a deferred compensation
\nagreement with the employer, as evidenced by a form approved by and filed with
\nthe Administrator on or before the deadline specified by the Administrator
\n(which shall be no earlier than one month prior to the beginning of the election\n<\/p>\n<\/p>\n

-3-<\/p>\n

\n

period for which the deferred salary is to be earned). For this purpose, the
\nelection period shall be the calendar year; provided, however, that during
\nperiods in which the Plan is not in effect for a full calendar year or an
\nemployee is not a Participant for a full calendar year, the election period
\nshall be the portion of the calendar year during which the Plan is in effect and
\nthe employee is an eligible Participant. Notwithstanding the foregoing, a person
\nwho is not a Participant at the beginning of a calendar year shall not be
\nallowed to elect a deferral of compensation that takes effect during that year
\nwithout the consent of the Committee. Salary deferrals that have been elected
\nshall occur throughout the election period in equal increments for each payroll
\nperiod.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.2<\/p>\n<\/td>\n

Deferrals of Bonuses, Commissions and Other Cash Incentive
\nCompensation<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Each Category 1 Participant and each Category 2 Participant may elect to
\ndefer all or any portion (subject to the provisions of this Article V) of (a)
\nhis or her commissions; and (b) any amount that he or she subsequently earns
\nunder an annual cash bonus program and\/or a long-term cash incentive
\ncompensation program of the Company or a participating Subsidiary. Any such
\nelection must be made by entering a deferred compensation agreement with the
\nemployer, as evidenced by a form approved by the Committee that is filed with
\nthe Administrator on or before the deadline specified by the Administrator. For
\nannual cash bonuses, this deadline shall be no earlier than one month prior to
\nthe beginning of year (or portion thereof) for which the bonus will be earned.
\nFor commissions and other cash incentive compensation, this deadline shall be a
\ndate no later than six months before the end of the year or other period for
\nwhich the commissions or incentive compensation will be earned. Rules similar to
\nthose in Section 5.1 shall apply in cases where the Plan is not in existence or
\nan employee is not a Participant for the full period in which an annual cash
\nbonus, commission or long-term incentive compensation award is earned.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.3<\/p>\n<\/td>\n

Deferral Procedures<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Participants eligible to elect salary deferrals under section 5.1 shall have
\nan opportunity to do so each year. Participants eligible to elect deferrals
\nunder section 5.2 shall have a separate opportunity to do so for each (a) cash
\nbonus under an annual bonus program; (b) cash bonus or incentive payment under a
\nlong-term incentive plan; and (c) commission that they may earn. Unless the
\nCommittee specifies other rules for the deferrals that may be elected, the
\nminimum deferral shall be 20 percent of the compensation to which a deferral
\nelection applies; and, subject to the maximum percentage allowed under section
\n5.1 or 5.2, as applicable, deferrals in excess of the minimum allowable
\npercentage may be made only in increments of 10 percent. If a deferral is
\nelected, the election shall be irrevocable with respect to the particular
\ncompensation that is subject to the election. Deferral elections shall be made
\non a form prescribed by the Committee or the Administrator. As provided in
\nsection 6.7, any deferral is subject to appropriate tax withholding measures and
\nmay be reduced to satisfy tax withholding requirements.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.4<\/p>\n<\/td>\n

Election of Time and Manner of Payment<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

At the time a Participant makes a deferral election under section 5.1 or 5.2,
\nthe Participant shall also designate the manner of payment and the date on which
\npayments from his or her Deferral Account shall begin, from among the following
\noptions:<\/p>\n<\/p>\n

(a) A lump sum payable by the end of February of any year that the
\nParticipant specifies;<\/p>\n<\/p>\n

-4-<\/p>\n

\n

(b) a lump sum payable by the end of February in the year immediately
\nfollowing the Participant153s Retirement;<\/p>\n<\/p>\n

(c) a series of annual installments, commencing in any year selected by the
\nParticipant and payable each year on or before the end of February, over a
\nperiod of four years; or<\/p>\n<\/p>\n

(d) a series of annual installments, commencing in the year following the
\nParticipant153s Retirement and payable each year on or before the end of February,
\nover a period of five, ten, or fifteen years, as designated by the Participant.\n<\/p>\n<\/p>\n

However, if a Participant terminates employment for any reason other than
\nRetirement, the payment of the Participant153s entire Deferral Account, including
\nany unpaid installments pursuant to clause (c) above, shall be made in a single
\nlump sum by the end of February in the year next following the year in which the
\nParticipant terminates employment, notwithstanding the terms of the
\nParticipant153s election.<\/p>\n<\/p>\n

Any election of a specified payment date pursuant to clauses (a) or (b),
\nabove, shall be subject to any restrictions that the Committee may, in its sole
\ndiscretion, choose to establish in order to limit the number of different
\npayment dates that a Participant may have in effect at one time.<\/p>\n<\/p>\n

A Participant may modify an election of the time for payment under
\ncircumstances determined by the Committee, provided that (a) a payment election
\nmay not be modified in a manner that would cause payments to commence earlier
\nthan the date payments would have commenced absent such modification, and (b)
\nall payment elections shall become irrevocable one year prior to the date on
\nwhich payment will commence under the election.<\/p>\n<\/p>\n

If payment is due in the form of a lump sum, the payment shall equal the
\nbalance of the Deferral Account being paid, determined as of the Valuation Date
\ncoincident with or immediately preceding the payment date. If payment is due in
\nthe form of installments, the amount of each installment payment shall be equal
\nto the quotient determined by dividing (A) the value of the portion of the
\nDeferral Account to which the installment payment election applies (determined
\nas of the Valuation Date coincident with or immediately preceding the date the
\npayment is to be made), by (B) the number of years over which the installment
\npayments are to be made, less the number of years in which prior payments
\nattributable to such installment payment election have been made.<\/p>\n<\/p>\n

Notwithstanding the foregoing, however, if earnings or any other amounts
\ncredited to a Participant153s Deferral Account are not considered
\nperformance-based compensation, within the meaning of Section 162(m) of the
\nInternal Revenue Code, and do not otherwise meet Internal Revenue Code
\nconditions allowing the Company and its Subsidiaries to receive a federal income
\ntax deduction for such amounts upon paying them at the time provided under the
\nParticipant153s election, the payment of such amounts, to the extent in excess of
\nthe amount that would be currently tax deductible, shall automatically be
\ndeferred until the earliest year that the payment can be deducted.<\/p>\n<\/p>\n

-5-<\/p>\n

\n\n\n\n
<\/td>\n\n

5.5<\/p>\n<\/td>\n

Accounts and Earnings<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Company shall establish a Deferral Account for each Participant who has
\nelected a deferral under section 5.1 or 5.2 above, and its accounting records
\nfor the Plan with respect to each such Participant shall include a separate
\nDeferral Account or subaccount for each deferral election of the Participant
\nthat could cause a payment made at a different time or in a different form from
\nother payments of deferrals elected by the same Participant. Each Deferral
\nAccount balance shall reflect the Company153s obligation to pay a deferred amount
\nto a Participant or Beneficiary as provided in this Article V. Under procedures
\napproved by the Committee and communicated to Participants, a Participant153s
\nDeferral Account balance shall be increased periodically (not less frequently
\nthan annually) to reflect an assumed earnings increment, based on an interest
\nrate or other benchmark selected by the Committee and in effect at the time.
\nUntil the time for determining the amount to be paid to the Participant or
\nBeneficiary, such assumed earnings shall accrue from each Valuation Date on the
\nDeferral Account balance as of that date and shall be credited to the account as
\nof the next Valuation Date. The rate of earnings may, but need not, be
\ndetermined with reference to the actual rate of earnings on assets held under
\nany existing grantor trust or other informal funding vehicle that is in effect
\npursuant to section 6.2. Any method of crediting earnings that is followed from
\ntime to time may, with reasonable advance notice to affected Participants, be
\nrevoked or revised prospectively as of the beginning of any new Plan Year.
\nEarnings that have been credited for any Plan Year, like deferred amounts that
\nhave been previously credited to a Participant, shall not be reduced or
\neliminated retroactively unless they were credited in error. The crediting of
\nassumed earnings shall not mean that any deferred compensation promise to a
\nParticipant is secured by particular investment assets or that the Participant
\nis actually earning interest or any other form of investment income under the
\nPlan. Consistent with the foregoing authority to exercise flexibility in
\nestablishing a method for crediting assumed earnings on account balances, the
\nCommittee may, but need not, consult with Participants about their investment
\npreferences and may, but need not, institute a program of assumed earnings that
\ntracks the investment performance in a Participant153s qualified defined
\ncontribution plan account or in an assumed participant-directed investment
\narrangement.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.6<\/p>\n<\/td>\n

Maintenance of Accounts<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Accounts of each Participant shall be entered on the books of the Company
\nand shall represent a liability, payable when due under this Plan, out of the
\ngeneral assets of the Company. Prior to benefits becoming due hereunder, the
\nCompany shall expense the liability for such accounts in accordance with
\npolicies determined appropriate by the Company153s auditors. Except to the extent
\nprovided pursuant to the second paragraph of this section 5.6, the Accounts
\ncreated for a Participant by the Company shall not be funded by a trust or an
\ninsurance contract; nor shall any assets of the Company be segregated or
\nidentified to such account; nor shall any property or assets of the Company be
\npledged, encumbered, or otherwise subjected to a lien or security interest for
\npayment of benefits hereunder. Notwithstanding that the amounts to be paid
\nhereunder to Participants constitute an unfunded obligation of the Company, the
\nCompany may direct that an amount equal to any portion of the Accounts shall be
\ninvested by the Company as the Company, in its sole discretion, shall determine.
\nThe Committee may in its sole discretion determine that all or any portion of an
\namount equal to the Accounts shall be paid into one or more grantor trusts that
\nmay be established by the Company for the purpose of providing a potential
\nsource of funds to pay Plan benefits. The Company may designate an investment\n<\/p>\n<\/p>\n

-6-<\/p>\n

\n

advisor to direct the investment of funds that may be used to pay benefits,
\nincluding the investment of the assets of any grantor trusts hereunder.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.7<\/p>\n<\/td>\n

Change in Control<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

In the event of a Change in Control (as defined below), the following rules
\nshall apply:<\/p>\n<\/p>\n

(a) All Participants shall continue to have a fully vested, nonforfeitable
\ninterest in their Deferral Accounts.<\/p>\n<\/p>\n

(b) Deferrals of amounts for the year that includes the Change in Control
\nshall cease beginning with the first payroll period that follows the Change in
\nControl.<\/p>\n<\/p>\n

(c) A special allocation of earnings on all Deferral Accounts shall be made
\nunder section 5.5 as of the date of the Change in Control on a basis no less
\nfavorable to Participants than the method being followed prior to the Change in
\nControl.<\/p>\n<\/p>\n

(d) All payments of deferred amounts following a Change in Control, whether
\nor not they have previously begun, shall be made in a cash lump sum no later
\nthan 30 days following the Change in Control and, except as provided in section
\n5.4 with respect to installment payments in progress, shall be in an amount
\nequal to the full Deferral Account balance, as adjusted pursuant to paragraph
\n(c) above, as of the date of the Change in Control.<\/p>\n<\/p>\n

(e) Nothing in this Plan shall prevent a Participant from enforcing any rules
\nin a contract or another plan of the Company or any Subsidiary concerning the
\nmethod of determining the amount of a bonus, incentive compensation, or other
\nform of compensation to which a Participant may become entitled following a
\nchange in control, or the time at which that compensation is to be paid in the
\nevent of a change in control.<\/p>\n<\/p>\n

For purposes of this Plan, a “Change in Control” means any of the following:\n<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

(1)<\/p>\n<\/td>\n

\n

Any “person” who, alone or together with all “affiliates” and “associates” of
\nsuch person, is or becomes (A) an “acquiring person” or (B) the “beneficial
\nowner” of 35% of the outstanding voting securities of the Company (the terms
\n“person”, “affiliates”, “associates” and “beneficial owner” are used as such
\nterms are used in the Securities Exchange Act of 1934 and the General Rules and
\nRegulations thereunder); provided, however, that a “Change in Control” shall not
\nbe deemed to have occurred if such “person” is Charles R. Schwab, the Company,
\nany subsidiary or any employee benefit plan or employee stock plan of the
\nCompany or of any Subsidiary, or any trust or other entity organized,
\nestablished or holding shares of such voting securities by, for or pursuant to,
\nthe terms of any such plan; or<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

(2)<\/p>\n<\/td>\n

\n

Individuals who at the beginning of any period of two
\nconsecutive calendar years constitute the Board cease for any reason, during
\nsuch period, to constitute at least a majority thereof, unless the election, or
\nthe<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

-7-<\/p>\n

\n\n\n\n
<\/td>\n\n

nomination for election by the Company153s Shareholders, of each new Board
\nMember was approved by a vote of at least three-quarters (3\/4) of the Board
\nmembers then still in office who were Board members at the beginning of such
\nperiod; or<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

(3)<\/p>\n<\/td>\n

\n

Approval by the shareholders of the Company of:<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

(A)<\/p>\n<\/td>\n

\n

the dissolution or liquidation of the Company;<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

(B)<\/p>\n<\/td>\n

\n

the sale or transfer of substantially all of the Company153s business and\/or
\nassets to a person or entity which is not a “subsidiary” (any corporation or
\nother entity a majority or more of whose outstanding voting stock or voting
\npower is beneficially owned directly or indirectly by the Company); or<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

(C)<\/p>\n<\/td>\n

\n

an agreement to merge or consolidate, or otherwise reorganize, with one or
\nmore entities which are not subsidiaries (as defined in (B) above), as a result
\nof which less than 50% of the outstanding voting securities of the surviving or
\nresulting entity are, or are to be, owned by former shareholders of the Company;
\nor<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

(4)<\/p>\n<\/td>\n

\n

The Board agrees by a majority vote that an event has or is about to occur
\nthat, in fairness to the Participants, is tantamount to a Change in Control.\n<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

A Change of Control shall occur on the first day on which any of the
\npreceding conditions has been satisfied. However, notwithstanding the foregoing,
\nthis section 5.7 shall not apply to any Participant who alone or together with
\none or more other persons acting as a partnership, limited partnership,
\nsyndicate, or other group for the purpose of acquiring, holding or disposing of
\nsecurities of the Company, triggers a “Change in Control” within the meaning of
\nparagraphs (1) and (2) above.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.8<\/p>\n<\/td>\n

Payment of Deferred Amounts<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

A Participant shall have a fully vested, nonforfeitable interest in his or
\nher Deferral Account balance at all times. However, vesting does not confer a
\nright to payment other than in the manner elected by the Participant pursuant to
\nsection 5.4 (subject to any modification that may occur pursuant to section 5.5,
\n5.7 or 5.9). Upon the expiration of a deferral period selected by the
\nParticipant in one or more deferral elections, the Company shall pay to such
\nParticipant (or to the Participant153s Beneficiary, in the case of the
\nParticipant153s death) an amount equal to the balance of the Participant153s Account
\nattributable to such expiring deferral elections, plus assumed earnings
\n(determined by the Company pursuant to section 5.5) thereon.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

5.9<\/p>\n<\/td>\n

Acceleration of Payment<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Committee, in its discretion, upon receipt of a written request from a
\nParticipant, may accelerate the payment of all or any portion of the unpaid
\nbalance of a Participant153s Deferral<\/p>\n<\/p>\n

-8-<\/p>\n

\n

Account in the event of the Participant153s Retirement, death, permanent
\ndisability, resignation or termination of employment, or upon its determination
\nthat the Participant (or his Beneficiary in the case of his death) has incurred
\na severe, unforeseeable financial hardship creating an immediate and heavy need
\nfor cash that cannot reasonably be satisfied from sources other than an
\naccelerated payment from this Plan. The Committee in making its determination
\nmay consider such factors and require such information as it deems appropriate.\n<\/p>\n<\/p>\n

Article VI General Provisions <\/strong><\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.1<\/p>\n<\/td>\n

Unfunded Obligation<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The deferred amounts to be paid to Participants pursuant to this Plan
\nconstitute unfunded obligations of the Company. Except to the extent
\nspecifically provided hereunder, the Company is not required to segregate any
\nmonies from its general funds, to create any trusts, or to make any special
\ndeposits with respect to this obligation. Title to and beneficial ownership of
\nany investments, including any grantor trust investments which the Company has
\ndetermined and directed the Administrator to make to fulfill obligations under
\nthis Plan shall at all times remain in the Company. Any investments and the
\ncreation or maintenance of any trust or Accounts shall not create or constitute
\na trust or a fiduciary relationship between the Administrator or the Company and
\na Participant, or otherwise create any vested or beneficial interest in any
\nParticipant or his or her Beneficiary or his or her creditors in any assets of
\nthe Company whatsoever. The Participants shall have no claim for any changes in
\nthe value of any assets which may be invested or reinvested by the Company in an
\neffort to match its liabilities under this Plan.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.2<\/p>\n<\/td>\n

Informal Funding Vehicles<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Notwithstanding section 6.1, the Company may, but need not, arrange for the
\nestablishment and use of a grantor trust or other informal funding vehicle to
\nfacilitate the payment of benefits and to discharge the liability of the Company
\nand participating Affiliates under this Plan to the extent of payments actually
\nmade from such trust or other informal funding vehicle. Any investments and any
\ncreation or maintenance of memorandum accounts or a trust or other informal
\nfunding vehicle shall not create or constitute a trust or a fiduciary
\nrelationship between the Committee or the Company or an affiliate and a
\nParticipant, or otherwise confer on any Participant or Beneficiary or his or her
\ncreditors a vested or beneficial interest in any assets of the Company or any
\nAffiliate whatsoever. Participants and Beneficiaries shall have no claim against
\nthe Company or any Affiliate for any changes in the value of any assets which
\nmay be invested or reinvested by the Company or any Affiliate with respect to
\nthis Plan.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.3<\/p>\n<\/td>\n

Beneficiary<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The term “Beneficiary” shall mean the person or persons to whom payments are
\nto be paid pursuant to the terms of the Plan in the event of the Participant153s
\ndeath. A Participant may designate a Beneficiary on a form provided by the
\nAdministrator, executed by the Participant, and delivered to the Administrator.
\nThe Administrator may require the consent of the Participant153s spouse to a
\ndesignation if the designation specifies a Beneficiary other than the spouse.
\nSubject to the foregoing, a Participant may change a Beneficiary designation at
\nany time. Subject to the property rights of any prior spouse, if no Beneficiary
\nis designated, if the<\/p>\n<\/p>\n

-9-<\/p>\n

\n

designation is ineffective, or if the Beneficiary dies before the balance of
\nthe Account is paid, the balance shall be paid to the Participant153s surviving
\nspouse, or if there is no surviving spouse, to the Participant153s estate.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.4<\/p>\n<\/td>\n

Incapacity of Participant or Beneficiary<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Every person receiving or claiming benefits under the Plan shall be
\nconclusively presumed to be mentally competent and of age until the date on
\nwhich the Administrator receives a written notice, in a form and manner
\nacceptable to the Administrator, that such person is incompetent or a minor, for
\nwhom a guardian or other person legally vested with the care of his person or
\nestate has been appointed; provided, however, that if the Administrator finds
\nthat any person to whom a benefit is payable under the Plan is unable to care
\nfor his or her affairs because of incompetency, or because he or she is a minor,
\nany payment due (unless a prior claim therefor shall have been made by a duly
\nappointed legal representative) may be paid to the spouse, a child, a parent, a
\nbrother or sister, or to any person or institution considered by the
\nAdministrator to have incurred expense for such person otherwise entitled to
\npayment. To the extent permitted by law, any such payment so made shall be a
\ncomplete discharge of liability therefor under the Plan.<\/p>\n<\/p>\n

If a guardian of the estate of any person receiving or claiming benefits
\nunder the Plan is appointed by a court of competent jurisdiction, benefit
\npayments may be made to such guardian provided that proper proof of appointment
\nand continuing qualification is furnished in a form and manner acceptable to the
\nAdministrator. In the event a person claiming or receiving benefits under the
\nPlan is a minor, payment may be made to the custodian of an account for such
\nperson under the Uniform Gifts to Minors Act. To the extent permitted by law,
\nany such payment so made shall be a complete discharge of any liability therefor
\nunder the Plan.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.5<\/p>\n<\/td>\n

Nonassignment<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The right of a Participant or Beneficiary to the payment of any amounts under
\nthe Plan may not be assigned, transferred, pledged or encumbered nor shall such
\nright or other interests be subject to attachment, garnishment, execution, or
\nother legal process.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.6<\/p>\n<\/td>\n

No Right to Continued Employment<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Nothing in the Plan shall be construed to confer upon any Participant any
\nright to continued employment with the Company, nor shall the Plan interfere in
\nany way with the right of the Company to terminate the employment of such
\nParticipant at any time without assigning any reason therefor.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.7<\/p>\n<\/td>\n

Tax Withholding<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Appropriate taxes shall be withheld from cash payments made to Participants
\npursuant to the Plan. To the extent tax withholding is payable in connection
\nwith the Participant153s deferral of income rather than in connection with the
\npayment of deferred amounts, such withholding may be made from other wages and
\nsalary currently payable to the Participant, or, as determined by the
\nAdministrator, the amount of the deferral elected by the Participant may be
\nreduced in order to satisfy required tax withholding for employment taxes and
\nany other taxes.<\/p>\n<\/p>\n

-10-<\/p>\n

\n\n\n\n
<\/td>\n\n

6.8<\/p>\n<\/td>\n

Claims Procedure and Arbitration<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Senior Vice President, Specialty Services of Charles Schwab & Co.,
\nInc. shall establish a reasonable claims procedure consistent with the
\nrequirements of the Employee Retirement Income Security Act of 1974, as amended.
\nFollowing a Change in Control of the Company (as determined under section 5.8)
\nthe claims procedure shall include the following arbitration procedure.
\nFollowing a Change in Control of the Company (as determined under section 5.8)
\nthe claims procedure shall include the following arbitration procedure. Since
\ntime will be of the essence in determining whether any payments are due to the
\nParticipant under this Plan following a Change in Control, a Participant may
\nsubmit any claim for payment to arbitration as follows: On or after the second
\nday following the termination of the Participant153s employment or other event
\ntriggering a right to payment, the claim may be filed with an arbitrator of the
\nParticipant153s choice by submitting the claim in writing and providing a copy to
\nthe Company. The arbitrator must be (a) a member of the National Academy of
\nArbitrators or one who currently appears on arbitration panels issued by the
\nFederal Mediation and Conciliation Service or the American Arbitration
\nAssociation; or (b) a retired judge of the State in which the claimant is a
\nresident who served at the appellate level or higher. The arbitration hearing
\nshall be held within 72 hours (or as soon thereafter as possible) after filing
\nof the claim unless the Participant and the Company agree to a later date. No
\ncontinuance of said hearing shall be allowed without the mutual consent of the
\nParticipant and the Company. Absence from or nonparticipation at the hearing by
\neither party shall not prevent the issuance of an award. Hearing procedures
\nwhich will expedite the hearing may be ordered at the arbitrator153s discretion,
\nand the arbitrator may close the hearing in his or her sole discretion upon
\ndeciding he or she has heard sufficient evidence to satisfy issuance of an
\naward. In reaching a decision, the arbitrator shall have no authority to ignore,
\nchange, modify, add to or delete from any provision of this Plan, but instead is
\nlimited to interpreting this Plan. The arbitrator153s award shall be rendered as
\nexpeditiously as possible, and unless the arbitrator rules within seven days
\nafter the close of the hearing, he will be deemed to have ruled in favor of the
\nParticipant. If the arbitrator finds that any payment is due to the Participant
\nfrom the Company, the arbitrator shall order the Company to pay that amount to
\nthe Participant within 48 hours after the decision is rendered. The award of the
\narbitrator shall be final and binding upon the Participant and the Company.
\nJudgment upon the award rendered by the arbitrator may be entered in any court
\nin any State of the United States. In the case of any arbitration regarding this
\nAgreement, the Participant shall be awarded the Participant153s costs, including
\nattorney153s fees. Such fee award may not be offset against the deferred
\ncompensation due hereunder. The Company shall pay the arbitrator153s fee and all
\nnecessary expenses of the hearing, including stenographic reporter if employed.\n<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.9<\/p>\n<\/td>\n

Termination and Amendment<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Committee may from time to time amend, suspend or terminate the Plan, in
\nwhole or in part, and if the Plan is suspended or terminated, the Committee may
\nreinstate any or all of its provisions. Except as otherwise required by law, the
\nCommittee may delegate to the Administrator all or any of its foregoing powers
\nto amend, suspend, or terminate the Plan. Any such amendment, suspension, or
\ntermination may affect future deferrals without the consent of any Participant
\nor Beneficiary. However, with respect to deferrals that have already occurred,
\nno amendment, suspension or termination may impair the right of a Participant or
\na designated Beneficiary to receive payment of the related deferred compensation
\nin accordance with the<\/p>\n<\/p>\n

-11-<\/p>\n

\n

terms of the Plan prior to the effective date of such amendment, suspension
\nor termination, unless the affected Participant or Beneficiary gives his express
\nwritten consent to the change.<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

6.10<\/p>\n<\/td>\n

Applicable Law<\/u><\/p>\n

.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The Plan shall be construed and governed in accordance with applicable
\nfederal law and, to the extent not preempted by such federal law, the laws of
\nthe State of California.<\/p>\n<\/p>\n

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