{"id":38788,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/directors-deferred-compensation-plan-schwab.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"directors-deferred-compensation-plan-schwab","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/compensation\/directors-deferred-compensation-plan-schwab.html","title":{"rendered":"Directors’ Deferred Compensation Plan – Schwab"},"content":{"rendered":"

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

DIRECTORS153 DEFERRED COMPENSATION PLAN <\/strong><\/p>\n<\/p>\n

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

\n

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

DIRECTORS153 DEFERRED COMPENSATION PLAN <\/strong><\/p>\n<\/p>\n

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

1.1 Establishment of the Plan<\/u>. Effective as of January 1, 1996, The
\nCharles Schwab Corporation (hereinafter, the “Company”) hereby establishes The
\nCharles Schwab Corporation Directors153 Deferred Compensation Plan (the “Plan”),
\nas set forth in this document. Effective December 8, 2004, no further
\ndeferrals shall be permitted under the Plan except deferrals relating to
\npayments earned prior to January 1, 2005. <\/strong><\/p>\n<\/p>\n

1.2 Purpose of the Plan<\/u>. The Plan permits Directors to defer the
\npayment of directors153 fees that they may earn. The opportunity to elect such
\ndeferrals is provided in order to help the Company attract and retain outside
\ndirectors. This Plan is unfunded and is maintained primarily for the purpose of
\nproviding deferred compensation for its outside directors. It is intended to be
\nexempt from the participation, vesting, funding, and fiduciary requirements set
\nforth in Title I of the Employee Retirement Income Security Act of 1974, as
\namended.<\/p>\n<\/p>\n

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

2.1 Definitions<\/u>. The following definitions are in addition to any
\nother definitions set forth elsewhere in the Plan. Whenever used in the Plan,
\nthe capitalized terms in this section shall have the meanings set forth below
\nunless otherwise required by the context in which they are used:<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

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

\n

“Administrator<\/u>” the administrator described in section 3.1 that is
\nselected by the Committee to assist in the administration of the Plan.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Beneficiary<\/u>” 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<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Board<\/u>” means the Board of Directors of the Company.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Company<\/u>” means The Charles Schwab Corporation, a Delaware
\ncorporation.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Committee<\/u>” means the Compensation Committee of the Board.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

1<\/p>\n<\/p>\n

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

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

\n

“Deferral Account<\/u>” means the account representing deferrals of cash
\ncompensation, plus investment adjustments, as described in sections 5.4 and 5.5.\n<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Director<\/u>” means each member of the Board of the Directors who is not
\nan employee of the Company or any of its subsidiaries. The term “Director” shall
\nalso include each member of the Board of Directors of any subsidiary of the
\nCompany who is not an employee of the Company or any of its subsidiaries, but
\nonly if the Committee has approved participation in the Plan for such
\nsubsidiary153s non-employee directors.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Plan<\/u>” means The Charles Schwab Corporation Directors153 Deferred
\nCompensation Plan, as in effect from time to time.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Plan Year<\/u>” means the calendar year.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Termination<\/u>” means the date a Participant ceases to be a Director.\n<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

“Valuation Date<\/u>” 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 5.4.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

2.2 Gender and Number<\/u>. Except when otherwise indicated by the context,
\nany masculine or feminine terminology shall also include the neuter and other
\ngender, and the use of any term in the singular or plural shall also include the
\nopposite number.<\/p>\n<\/p>\n

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

3.1 Committee and Administrator<\/u>. The Committee shall administer the
\nPlan and may select one or more persons to serve as the Administrator. The
\nAdministrator shall perform such administrative functions as the Committee may
\ndelegate to it from time to time. Any person selected to serve as the
\nAdministrator may, but need not, be a Committee member or an officer or employee
\nof the Company. However, if a person serving as Administrator or a member of the
\nCommittee is a Participant, such person may not vote on a matter affecting his
\ninterest as a Participant.<\/p>\n<\/p>\n

2<\/p>\n<\/p>\n

\n

The Committee shall have discretionary authority to construe and interpret
\nthe Plan provisions and resolve any ambiguities thereunder; to prescribe, amend,
\nand rescind administrative rules relating to the Plan; to determine eligibility
\nfor benefits under the Plan; and to take all other actions that are necessary or
\nappropriate for the administration of the Plan. Such interpretations, rules, and
\nactions of the Committee shall be final and binding upon all concerned and, in
\nthe event of judicial review, shall be entitled to the maximum deference
\nallowable by law. Where the Committee has delegated its responsibility for
\nmatters of interpretation and Plan administration to the Administrator, the
\nactions of the Administrator shall constitute actions of the Committee.<\/p>\n<\/p>\n

Article IV. Participants <\/u><\/strong><\/p>\n<\/p>\n

4.1 Participants<\/u>. Each Director shall be eligible to participate in
\nthis Plan.<\/p>\n<\/p>\n

Article V. Deferrals <\/u><\/strong><\/p>\n<\/p>\n

5.1 Deferrals<\/u>. Each Director may elect to defer up to 100 percent of
\nthe fees otherwise receivable from the Company for service as a Director. Any
\nsuch election must be made by entering a deferred compensation agreement with
\nthe Company, as evidenced by a form approved by and filed with the Administrator
\non or before the deadline specified by the Committee (which shall be no earlier
\nthan one month prior to the beginning of the election period for which the
\ndeferred fees are to be earned; provided that for the first year in which the
\nPlan is in effect, the deferral election shall be made within the first thirty
\ndays of the election period). For this purpose, the election period shall be the
\ncalendar year; provided, however, that during periods in which the Plan is not
\nin effect for a full calendar year or a Director is not a Participant for a full
\ncalendar year, the election period shall be the portion of the calendar year
\nduring which the Plan is in effect and the Director is an eligible Participant.
\nDeferrals that have been elected shall occur throughout the election period in
\npro rata increments.<\/p>\n<\/p>\n

5.2 Deferral Procedures<\/u>. Participants shall have an opportunity to
\nelect deferrals each year. Unless the Committee specifies other rules for the
\ndeferrals that may be elected, deferrals may be made in increments of 10 percent
\nor in a fixed dollar amount. If a deferral is elected, the<\/p>\n<\/p>\n

3<\/p>\n<\/p>\n

\n

election shall be irrevocable. Deferral elections shall be made on a form
\nprescribed by the Committee or the Administrator. As provided in section 6.7,
\nany deferral is subject to any applicable tax withholding measures and may be
\nreduced to satisfy any applicable tax withholding requirements.<\/p>\n<\/p>\n

5.3 Election of Time and Manner of Payment<\/u>. At the time a Participant
\nmakes a deferral election under section 5.1, the Participant shall also
\ndesignate the manner of payment and the date on which payments from his or her
\nDeferral Account shall begin, from among the following options:<\/p>\n<\/p>\n

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

(ii) a series of annual installments, commencing in the year following the
\nParticipant153s Termination and payable each year on or before the end of
\nFebruary, over a period of five, ten, or fifteen years, as designated by the
\nParticipant.<\/p>\n<\/p>\n

A Participant may modify an election of the time for payment under
\ncircumstances determined by the Committee, provided that (i) 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
\n(ii) all payment elections shall become irrevocable one year prior to the date
\non which 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

4<\/p>\n<\/p>\n

\n

Notwithstanding the foregoing, however, if earnings or any other amounts
\ncredited to a Participant153s Deferral Account do not otherwise meet any
\napplicable requirements of the Internal Revenue Code allowing the Company and
\nits Subsidiaries to receive a federal income tax deduction for such amounts upon
\npaying them at the time provided under the Participant153s election, the payment
\nof such amounts, to the extent in excess of the amount that would be currently
\ntax deductible, shall automatically be deferred until the earliest year that the
\npayment can be deducted.<\/p>\n<\/p>\n

5.4 Accounts and Earnings.<\/u> The Company shall establish a Deferral
\nAccount for each Participant who has elected a deferral under section 5.1 above,
\nand its accounting records for the Plan with respect to each such Participant
\nshall include a separate Deferral Account or subaccount for each deferral
\nelection of the Participant that could cause a payment made at a different time
\nor in a different form from other payments of deferrals elected by the same
\nParticipant. Each Deferral Account balance shall reflect the Company153s
\nobligation to pay a deferred amount to a Participant or Beneficiary as provided
\nin this Article V.<\/p>\n<\/p>\n

Under procedures approved by the Committee and communicated to Participants,
\na Participant shall elect between the following two alternatives with respect to
\nthe deferred amounts at the same time that the Participant elects to defer the
\nfees payable for a calendar year (provided that elections made for the 1999
\ncalendar year shall be made within 30 days of the date the Participant receives
\nnotice of the election, or such shorter time as may be specified by the
\nCommittee). Once made, a Participant153s election for the method of payment may
\nnot be changed; however, a Participant may make a different election with
\nrespect to amounts that the Participant elects to defer in subsequent periods.\n<\/p>\n<\/p>\n

(1) Payment in Shares<\/u>. Under this alternative, a Participant shall be
\ncredited with an award of Performance Shares pursuant to Section 4.7 of the 1992
\nStock Incentive Plan, in a number of Performance Shares equal to (i) the amounts
\ndeferred hereunder, divided by (ii) the closing price of the Common Stock of the
\nCompany on the date the Deferral occurred. Performance Shares credited hereunder
\nshall be issued to one or more grantor trusts formed by<\/p>\n<\/p>\n

5<\/p>\n<\/p>\n

\n

the Company (“rabbi trusts”) pursuant to Section 6.2 hereof. Any dividends
\npaid on shares of the Common Stock of the Company issued to a rabbi trust shall
\nbe reinvested in Common Stock of the Company, which shall be treated as having
\nbeen issued to the Participant as additional Performance Shares under the 1992
\nStock Incentive Plan. Notwithstanding the foregoing, the crediting of assumed
\nearnings shall not mean that any deferred compensation promise to a Participant
\nis secured by particular investment assets or that the Participant is actually
\nearning any form of investment income under the Plan.<\/p>\n<\/p>\n

(2) Issuance of Stock Options Under the 1992 Stock Incentive Plan<\/u>.
\nUnder this alternative, a Participant may elect, in lieu of receiving any
\npayments from the Plan, to be issued nonqualified stock options pursuant to
\nSection 4.6 of The Charles Schwab Corporation 1992 Stock Incentive Plan. A
\nParticipant who elects this alternative shall, on the date the fees deferred
\npursuant to Section 5.1 hereof would otherwise have been payable, be issued a
\nnumber of nonqualified stock options with a fair market value equal to the
\namounts deferred, as determined under the valuation methods set forth in Exhibit
\nA hereto.<\/p>\n<\/p>\n

5.5 Maintenance of Accounts<\/u>. The Accounts of each Participant shall be
\nentered on the books of the Company and shall represent a liability, payable
\nwhen due under this Plan, from the general assets of the Company. Prior to
\nbenefits becoming due hereunder, the Company shall expense the liability for
\nsuch accounts in accordance with policies determined appropriate by the
\nCompany153s auditors. Except to the extent provided pursuant to the second
\nparagraph of this section 5.5, the Accounts created for a Participant by the
\nCompany shall not be funded by a trust or an insurance contract; nor shall any
\nassets of the Company be segregated or identified to such account; nor shall any
\nproperty or assets of the Company be pledged, encumbered, or otherwise subjected
\nto a lien or security interest for payment of benefits hereunder.<\/p>\n<\/p>\n

5.6 Change in Control<\/u>. In the event of a Change in Control (as defined
\nbelow), the following rules shall apply:<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

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

\n

All Participants shall continue to have a fully vested, nonforfeitable
\ninterest in their Deferral Accounts.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

6<\/p>\n<\/p>\n

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

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

\n

Deferrals of amounts for the year that includes the Change in Control shall
\ncease beginning with the first payment otherwise due that follows the Change in
\nControl.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

A special allocation of earnings on all Deferral Accounts shall be made under
\nsection 5.4 as of the date of the Change in Control on a basis no less favorable
\nto Participants than the method being followed prior to the Change in Control.\n<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

All payments of deferred amounts following a Change in Control, whether or
\nnot they have previously begun, shall be made in a lump sum no later than 30
\ndays following the Change in Control and, except as provided in section 5.3 with
\nrespect to installment payments in progress, shall be in an amount equal to the
\nfull Deferral Account balance, as adjusted pursuant to paragraph (c) above, as
\nof the date of the Change in Control.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

Nothing in this Plan shall prevent a Participant from enforcing any rules in
\na contract or another plan of the Company or any Subsidiary concerning the
\nmethod of determining the amount of fees or other form of compensation to which
\na Participant may become entitled following a change in control, or the time at
\nwhich that compensation is to be paid in the event of a change in control.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\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

The acquisition by any individual, entity or group (within the
\nmeaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
\n1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership
\n(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
\nmore of either (i) the then outstanding shares of common stock of the
\nCorporation (the “Outstanding Corporation Common Stock”) or (ii) the combined
\nvoting power of the then outstanding voting securities of the Corporation
\nentitled to vote generally in the election of directors (the “Outstanding
\nCorporation Voting Securities”); provided, however,<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

7<\/p>\n<\/p>\n

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

that for purposes of this paragraph (1), the following acquisitions shall not
\nconstitute a Change of Control: (i) any acquisition directly from the Company,
\n(ii) any acquisition by the Company, (iii) any acquisition by any employee
\nbenefit plan (or related trust) sponsored or maintained by the Company or any
\ncorporation controlled by the Company, or (iv) any acquisition by any
\ncorporation pursuant to a transaction which complies with clauses (i), (ii) and
\n(iii) of paragraph (3) hereof; 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, as of January 1, 1996, constitute the Board (the “Incumbent
\nBoard”) cease for any reason to constitute at least a majority of the Board;
\nprovided, however, that any individual becoming a director subsequent to
\nJanuary 1, 1996 whose election, or nomination for election by the Company153s
\nshareholders, was approved by a vote of at least a majority of the directors
\nthen comprising the Incumbent Board shall be considered as though such
\nindividual were a member of the Incumbent Board, but excluding, for this
\npurpose, any such individual whose initial assumption of office occurs as a
\nresult of an actual or threatened election contest with respect to the election
\nor removal of directors or other actual or threatened solicitation of proxies or
\nconsents by or on behalf of a Person other than the Board; or<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

Consummation of a reorganization, merger or consolidation, or
\nsale or other disposition of all or substantially all of the assets of the
\nCompany (a “Business Combination”), in each case, unless, following such
\nBusiness Combination, (i) all or substantially all of the individuals and
\nentities who were the beneficial owners, respectively, of the Outstanding
\nCorporation Common Stock and Outstanding Corporation Voting Securities
\nimmediately prior to such Business Combination beneficially own, directly or
\nindirectly, more than 50% of, respectively, the then<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

8<\/p>\n<\/p>\n

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

outstanding shares of common stock and the combined voting power of the then
\noutstanding voting securities entitled to vote generally in the election of
\ndirectors, as the case may be, of the corporation resulting from such Business
\nCombination (including, without limitation, a corporation which as a result of
\nsuch transaction owns the Company or all or substantially all of the Company153s
\nassets either directly or through one or more subsidiaries) in substantially the
\nsame proportions as their ownership, immediately prior to such Business
\nCombination, of the Outstanding Corporation Common Stock and Outstanding
\nCorporation Voting Securities, as the case may be, (ii) no Person (excluding any
\ncorporation resulting from such Business Combination or any employee benefit
\nplan (or related trust) of the Company or such corporation resulting from such
\nBusiness Combination) beneficially owns, directly or indirectly, 20% or more of,
\nrespectively, the then outstanding shares of common stock of the corporation
\nresulting from such Business Combination or the combined voting power of the
\nthen outstanding voting securities of such corporation except to the extent that
\nsuch ownership existed prior to the Business Combination and (iii) at least a
\nmajority of the members of the board of directors of the corporation resulting
\nfrom such Business Combination were members of the Incumbent Board at the time
\nof the execution of the initial agreement, or of the action of the Board,
\nproviding for such Business Combination; or<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

Approval by the shareholders of the Company of a complete liquidation or
\ndissolution of the Company.<\/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 5.6 shall not apply to any Participant who alone or together with
\none or<\/p>\n<\/p>\n

9<\/p>\n<\/p>\n

\n

more other persons acting as a partnership, limited partnership, syndicate,
\nor other group for the purpose of acquiring, holding or disposing of securities
\nof the Company, triggers a “Change in Control” within the meaning of paragraphs
\n(1) and (2) above. Moreover, no acquisition by (i) Charles Schwab and\/or his
\nspouse or any of his lineal descendants or (ii) any trust created by or for the
\nbenefit of Charles Schwab and\/or his spouse or any of his lineal descendants or
\n(iii) the Schwab Family Foundation shall constitute a Change of Control.<\/p>\n<\/p>\n

5.7 Payment of Deferred Amounts<\/u>. A Participant shall have a fully
\nvested, nonforfeitable interest in his or her Deferral Account balance at all
\ntimes. However, vesting does not confer a right to payment other than in the
\nmanner elected by the Participant pursuant to section 5.3 (subject to any
\nmodification that may occur pursuant to section 5.4, 5.6 or 5.8). Upon the
\nexpiration of a deferral period selected by the Participant in one or more
\ndeferral elections, the Company shall pay to such Participant (or to the
\nParticipant153s Beneficiary, in the case of the Participant153s death), an amount
\nequal to the balance of the Participant153s Account attributable to such expiring
\ndeferral elections, plus any assumed earnings (determined by the Company
\npursuant to section 5.4) thereon.<\/p>\n<\/p>\n

5.8 Acceleration of Payment<\/u>. The Committee, in its discretion, upon
\nreceipt of a written request from a Participant, may accelerate the payment of
\nall or any portion of the unpaid balance of a Participant153s Deferral Account in
\nthe event of the Participant153s death, permanent disability, or upon its
\ndetermination that the Participant (or his Beneficiary in the case of his death)
\nhas incurred a severe, unforeseeable financial hardship creating an immediate
\nand heavy need for cash that cannot reasonably be satisfied from sources other
\nthan an accelerated payment from this Plan. The Committee in making its
\ndetermination may consider such factors and require such information as it deems
\nappropriate.<\/p>\n<\/p>\n

Article VI. General Provisions <\/u><\/strong><\/p>\n<\/p>\n

6.1 Unfunded Obligation<\/u>. The deferred amounts to be paid to
\nParticipants pursuant to this Plan constitute unfunded obligations of the
\nCompany. Except to the extent specifically<\/p>\n<\/p>\n

10<\/p>\n<\/p>\n

\n

provided hereunder, the Company is not required to segregate any monies from
\nits general funds, to create any trusts, or to make any special deposits with
\nrespect to this obligation. Title to and beneficial ownership of any
\ninvestments, 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

6.2 Informal Funding Vehicles<\/u>. To the extent required pursuant to
\nSection 5.4(1), the Company shall arrange for the establishment and use of a
\ngrantor trust or other informal funding vehicle to facilitate the payment of
\nbenefits and to discharge the liability of the Company and participating
\nAffiliates under this Plan to the extent of payments actually made from such
\ntrust or other informal funding vehicle. In addition, the Company may, but need
\nnot, arrange for the establishment and use of such a grantor trust or other
\ninformal funding vehicle to the extent otherwise permitted pursuant to the Plan.\n<\/p>\n<\/p>\n

Any investments and any creation or maintenance of memorandum accounts or a
\ntrust or other informal funding vehicle shall not create or constitute a trust
\nor a fiduciary relationship between the Committee or the Company or an affiliate
\nand a Participant, or otherwise confer on any Participant or Beneficiary or his
\nor her creditors a vested or beneficial interest in any assets of the Company or
\nany Affiliate whatsoever. Participants and Beneficiaries shall have no claim
\nagainst the Company or any Affiliate for any changes in the value of any assets
\nwhich may be invested or reinvested by the Company or any Affiliate with respect
\nto this Plan.<\/p>\n<\/p>\n

6.3 Beneficiary<\/u>. The term “Beneficiary” shall mean the person or
\npersons to whom payments are to be paid pursuant to the terms of the Plan in the
\nevent of the Participant153s death.<\/p>\n<\/p>\n

11<\/p>\n<\/p>\n

\n

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 designation is ineffective, or if the Beneficiary dies
\nbefore the balance of the Account is paid, the balance shall be paid to the
\nParticipant153s surviving spouse, or if there is no surviving spouse, to the
\nParticipant153s estate.<\/p>\n<\/p>\n

6.4 Incapacity of Participant or Beneficiary<\/u>. Every person receiving
\nor claiming benefits under the Plan shall be conclusively presumed to be
\nmentally competent and of age until the date on which the Administrator receives
\na written notice, in a form and manner acceptable to the Administrator, that
\nsuch person is incompetent or a minor, for whom a guardian or other person
\nlegally vested with the care of his person or estate has been appointed;
\nprovided, however, that if the Administrator finds that any person to whom a
\nbenefit is payable under the Plan is unable to care for his or her affairs
\nbecause of incompetency, or because he or she is a minor, any payment due
\n(unless a prior claim therefor shall have been made by a duly appointed legal
\nrepresentative) may be paid to the spouse, a child, a parent, a brother or
\nsister, or to any person or institution considered by the Administrator to have
\nincurred expense for such person otherwise entitled to payment. To the extent
\npermitted by law, any such payment so made shall be a complete discharge of
\nliability 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

12<\/p>\n<\/p>\n

\n

6.5 Nonassignment<\/u>. The right of a Participant or Beneficiary to the
\npayment of any amounts under the Plan may not be assigned, transferred, pledged
\nor encumbered nor shall such right or other interests be subject to attachment,
\ngarnishment, execution, or other legal process.<\/p>\n<\/p>\n

6.6 No Right to Continued Service<\/u>. Nothing in the Plan shall be
\nconstrued to confer upon any Participant any right to continue as a Director of
\nthe Company.<\/p>\n<\/p>\n

6.7 Tax Withholding<\/u>. Any appropriate taxes shall be withheld from
\npayments made to Participants pursuant to the Plan. To the extent tax
\nwithholding is payable in connection with the Participant153s deferral of income
\nrather than in connection with the payment of deferred amounts, such withholding
\nmay be made from amounts currently payable to the Participant, or, as determined
\nby the Administrator, the amount of the deferral elected by the Participant may
\nbe reduced in order to satisfy required tax withholding for any applicable
\ntaxes.<\/p>\n<\/p>\n

6.8 Claims Procedure and Arbitration<\/u>. The Company shall establish a
\nreasonable claims procedure consistent with the requirements of the Employee
\nRetirement Income Security Act of 1974, as amended. Following a Change in
\nControl of the Company (as determined under section 5.6) the claims procedure
\nshall include the following arbitration procedure.<\/p>\n<\/p>\n

Since time will be of the essence in determining whether any payments are due
\nto the Participant under this Plan following a Change in Control, a Participant
\nmay submit any claim for payment to arbitration as follows: On or after the
\nsecond day following the Termination or other event triggering a right to
\npayment, the claim may be filed with an arbitrator of the Participant153s choice
\nby submitting the claim in writing and providing a copy to the Company. The
\narbitrator must be:<\/p>\n<\/p>\n\n\n\n
<\/td>\n\n

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

\n

a member of the National Academy of Arbitrators or one who currently appears
\non arbitration panels issued by the Federal Mediation and Conciliation Service
\nor the American Arbitration Association; or<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
<\/td>\n\n

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

\n

a retired judge of the State in which the claimant is a resident
\nwho served at the appellate level or higher. The arbitration hearing shall be
\nheld within 72 hours (or as soon thereafter as possible) after filing of the
\nclaim unless the Participant<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

13<\/p>\n<\/p>\n

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

and the Company agree to a later date. No continuance of said hearing shall
\nbe allowed without the mutual consent of the Participant and the Company.
\nAbsence from or nonparticipation at the hearing by either party shall not
\nprevent the issuance of an award. Hearing procedures which will expedite the
\nhearing may be ordered at the arbitrator153s discretion, and the arbitrator may
\nclose the hearing in his or her sole discretion upon deciding he or she has
\nheard sufficient evidence to satisfy issuance of an award. In reaching a
\ndecision, the arbitrator shall have no authority to ignore, change, modify, add
\nto or delete from any provision of this Plan, but instead is limited to
\ninterpreting 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<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

6.9 Termination and Amendment<\/u>. The Committee may from time to time
\namend, suspend or terminate the Plan, in whole or in part, and if the Plan is
\nsuspended or terminated, the Committee may reinstate any or all of its
\nprovisions. Except as otherwise required by law, the Committee may delegate to
\nthe Administrator all or any of its foregoing powers to amend, suspend, or
\nterminate the Plan. Any such amendment, suspension, or termination may affect\n<\/p>\n<\/p>\n

14<\/p>\n<\/p>\n

\n

future deferrals without the consent of any Participant or Beneficiary.
\nHowever, with respect to deferrals that have already occurred, no amendment,
\nsuspension or termination may impair the right of a Participant or a designated
\nBeneficiary to receive payment of the related deferred compensation in
\naccordance with the terms of the Plan prior to the effective date of such
\namendment, suspension or termination, unless the affected Participant or
\nBeneficiary gives his express written consent to the change.<\/p>\n<\/p>\n

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

15<\/p>\n<\/p>\n

\n

Exhibit A <\/strong><\/p>\n<\/p>\n

For purposes of determining the number of Options to
\nbe granted <\/strong><\/p>\n

Under the Stock Option Investment Election, Options
\nwill be valued <\/strong><\/p>\n

under the Black-Scholes method, based on the following
\n<\/strong><\/p>\n

assumptions: <\/strong><\/p>\n<\/p>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Assumed Option Term = 5 years<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Volatility = Actual volatility over the 3 year period
\nimmediately preceding the grant<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Risk Free Interest Rate = 5 year Treasury Note Rate<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Dividend Yield = Current Annual Dividend Yield On Option Grant
\nDate (Quarterly Dividend x 4) \/ Market Price on Option Grant Date = Dividend
\nYield<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Sample Calculation<\/u>: ($.028 x 4)\/ $55 = .2% <\/em><\/p>\n<\/p>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Fair Market Value = Closing Price Of Schwab Common Stock on Date
\nof Grant (Same as Date of Retainer and Meeting Fee Payment)<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Exercise Price = Same as above<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Sample Stock Option Calculation <\/u><\/strong><\/p>\n<\/p>\n\n\n\n
\n<\/td>\n<\/td>\n\n

Fees Deferred \/ Black Scholes Valuation = Number of Stock Option
\ngrants from Deferral Election<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Sample Calculation:<\/u><\/em> $14,250 \/ $23.82 = 598.2368 Stock
\nOptions, rounded up to nearest full option, = grant of 599 Stock Options.<\/p>\n<\/p>\n

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