NU SKIN ENTERPRISES, INC.
DEFERRED COMPENSATION PLAN
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First
Effective as of December 14, 2005 Amended and Restated as of
December 19, 2008 but Effective January 1, 2009
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NU SKIN ENTERPRISES, INC.
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
NU SKIN ENTERPRISES, INC.
DEFERRED COMPENSATION PLAN
PREAMBLE
Nu Skin Enterprises, Inc.,
(the “Company”) has previously established the
Nu Skin Enterprises, Inc. Deferred Compensation Plan (the
“Plan”). The purpose of the Plan is to provide a select
group of management, highly compensated employees, or Directors of
the Company (and certain affiliates) with the opportunity to defer
a portion of their compensation. The Plan is intended to constitute
an unfunded “top hat” plan described in
Section 201(2), 301(a)(3), and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended
(“ERISA”). As a “top hat” plan, the Plan is
not subject to ERISA’s eligibility, vesting, funding, or
fiduciary responsibility requirements. The Plan has made a notice
filing with the United States Department of Labor (the
“DOL”) and is required to provide information to the
DOL on request.
The Plan has been, and shall
continue to be, administered in good faith compliance with
Section 409A and interim guidance issued thereunder from
December 15, 2005 until January 1, 2008. This Plan was
first amended and restated effective as of January 1, 2008 to
comply with final regulations issued under Section 409A of the
Code.
The Plan is hereby amended and
restated effective January 1, 2009, to change the vesting schedule
and payment terms applicable to Participants who are employed with
the Company on or after January 1, 2009.
ARTICLE 1
DEFINITIONS
The following words and phrases
used in the Plan with the initial letter capitalized shall have the
meanings set forth in this Article, unless a clearly different
meaning is required by the context in which the word or phrase is
used:
1.1.
“ Account ” means all of such accounts as are
established under this Plan from time to time.
1.2. “ Affiliate
” means (a) a corporation that is a member of the same
control group of corporations (within the meaning of
Section 414(b) of the Code) as is the Company, (b) any
other trade or business (whether or not incorporated) controlling,
controlled by, or under common control (within the meaning of
Section 414(c) of the Code) with the Company, and (c) any
other corporation, partnership, or other organization that is a
member of an affiliated service group (within the meaning of
Section 414(m) of the Code) with the Company or which is
otherwise required to be aggregated with the Company under
Section 414(o) of the Code.
1.3.
“ Base Salary ” means a Participant’s
annual base salary, excluding bonuses, commissions, incentive and
all other remuneration for services rendered to the Company and
prior to reduction for any salary deferrals, including but not
limited to, deferrals under plans established pursuant to
Section 125 of the Code or qualified pursuant to
Section 401(k) of the Code.
1.4.
“ Beneficiary ” means the person or entity that
a Participant, in his most recent written designation filed with
the Plan Administrator has designated to receive his benefit under
the Plan in the event of his death. Changes in designations of
Beneficiaries may be made upon written notice to the Plan
Administrator in any form as the Plan Administrator may
prescribe.
1.5.
“ Board of Directors ” or “ Board
” means the Board of Directors of the Company.
1.6.
“ Bonus ” means the additional cash compensation
paid to a Participant by the Company or an Affiliate pursuant to
any incentive or bonus plan, program, or practice of the Company or
an Affiliate.
1.7.
“ Cause. ” Termination of employment or service
for “Cause” shall mean the termination of a
Participant’s employment with or service to the Company (for
purposes of this Section 1.7, “Company” shall refer to
the Company and any affiliates or subsidiaries of the Company)
because of:
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(a)
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a
material breach by the Participant of any of the
Participant’s obligations under the Company’s Key
Employee Covenants or any Employment Agreement, which breach is (i)
not cured within any applicable cure period set forth in the Key
Employee Covenants or employment agreement, and (ii) materially
injurious to the Company;
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(b)
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any
willful violation by the Participant of any material law or
regulation applicable to the business of the Company, which is
materially injurious to the Company, or the Participant’s
conviction of, or a plea of nolo contendre to, a felony or any
willful perpetration of common law fraud; or
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(c)
any other willful misconduct by the Participant that is materially
injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any of its
subsidiaries or affiliates.
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1.8.
“ Change of Control ” means a “change in
the ownership of the Employer,” a “change in effective
control of the Employer,” and/or a “change in the
ownership of a substantial portion of the Employer’s
assets” as defined under Treasury Regulation
§ 1.409A-3(i)(5).
1.9.
“ Code ” means the Internal Revenue Code of
1986, as amended.
1.10.
“ Company ” means NU SKIN ENTERPRISES, INC. and
any successor corporations.
1.11.
“ Company Contribution ” means contributions by
the Company pursuant to Section 3.2 of this Plan.
1.12.
“ Company Contribution Account ” means the
bookkeeping account maintained by or for the Company for each
Participant that is credited with an amount equal to the Company
Contributions Amount, if any, and earnings and losses credited on
such amounts pursuant to Section 4.2.
1.13.
“ Compensation ” means Base Salary or Director
Fees payable in such Plan Year, and Bonuses earned in such Plan
Year (whether payable during such Year or the following Year), that
the Participant is entitled to receive for services rendered to the
Company.
1.14.
“ Compensation Committee ” means the
compensation committee appointed by the Board of Directors, which
includes select members of the Board of Directors.
1.15.
“ Deferral Account ” means the bookkeeping
account maintained by or for the Plan Administrator for each
Participant, which account is credited with amounts equal to the
portion of the Participant’s Compensation that he or she
elects to defer, and the earnings and losses pursuant to
Section 4.1.
1.16.
“ Deferral Contributions ” means contributions
by a Participant pursuant to Section 3.1 of this
Plan.
1.17.
“ Director ” means a non-employee director of
the Company.
1.18.
“ Director Fees ” means all Board and committee
meeting fees payable to a Director, and any annual retainer payable
for a Plan Year beginning after the Effective Date, determined in
each case before reduction for amounts deferred under the Plan.
Director Fees do not include expense reimbursements, incentive
stock awards or any form of noncash compensation or
benefits.
1.19.
“ Disability ” means any illness or other
physical or mental condition of a Participant that renders the
Participant unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, or any
medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months and in which
Participant is receiving income replacement benefits for a period
of not less than 3 months under and accident and health plan
covering employees. The Plan Administrator may require such medical
or other evidence as it deems necessary to judge the nature and
permanency of the Participant’s condition.
1.20.
“ Distributable Amount ” means the vested
balance in Participant’s Deferral Account and Company
Contribution Account.
1.21.
“ Effective Date ” means the effective date of
this restatement, which shall be January 1, 2009. The original
effective date of the Plan was December 14, 2005.
1.22.
“ Employee ” means (1) each person
receiving remuneration, or who is entitled to remuneration, for
services rendered to the Company or an Affiliate as a common-law
employee, or (2) a Director of the Company or an
Affiliate.
1.23.
“ ERISA ” means the Employee Retirement Income
Security Act of 1974, as amended.
1.24.
“ Fund ” means one or more of the investment
funds selected by the Plan Administrator pursuant to
Section 3.3.
1.25.
“ Interest Rate ” means, for each Fund, an
amount equal to the net gain or loss on the assets of such Fund
during each month, as determined by the Plan
Administrator.
1.26.
“ Participant ” means an Employee who has been
selected to participate under Section 2.1, who has elected to
participate under Section 2.2, and whose participation has not
been terminated. If indicated by the context, the term Participant
also includes former Participants whose active participation in the
Plan has terminated but who have not received all amounts to which
they are entitled under the Plan.
1.27.
“ Participation Agreement ” means the agreement
entered into by the Company and a Participant as set forth in
Section 2.2.
1.28.
“ Plan ” means the Nu Skin Enterprises,
Inc. Deferred Compensation Plan, as amended from time to
time.
1.29.
“ Plan Administrator ” means the Compensation
Committee or its designated agents (to the extent such authority
has been designated by the Compensation Committee).
1.30.
“ Plan Year ” shall mean the calendar
year.
1.31.
“ Reasonable Time ” shall mean any date within
the same calendar year as the applicable distribution event (
e.g ., Separation from Service) or, if later, by the 15th
day of the third calendar month following the occurrence of such
distribution event.
1.32.
“ Scheduled Withdrawal ” means the distribution
date elected by the Participant for an in-service withdrawal from
such Accounts deferred in a given Plan Year, and earnings and
losses attributable thereto, as set forth on the election form for
such Plan Year.
1.33.
“ Separation from Service ” means a severance of
a participant’s employment relationship with the Company and
all Affiliates for any reason other than the participant’s
death. Whether a Separation from Service has occurred is determined
under Section 409A of the Code and Treasury Regulation
1.409A-1(h) ( i.e ., whether the facts and circumstances
indicate that the Employer and the employee reasonably anticipated
that no further services would be performed after a certain date or
that the level of bona fide services the employee would perform
after such date (whether as an employee or independent contractor)
would permanently decrease to no more than 20% of the average level
of bona fide services performed (whether as an employee or an
independent contractor) over the immediately preceding 36 month
period (or the full period of services to the employer if the
employee has been providing services to the employer less than 36
months)). Separation from Service shall not be deemed to occur
while the employee is on military leave, sick leave or other bona
fide leave of absence if the period does not exceed six (6) months
or, if longer, so long as the employee retains a right to
reemployment with the Company or an affiliate under an applicable
statute or by contract. For this purpose, a leave is bona fide only
if, and so long as, there is a reasonable expectation that the
employee will return to perform services for the Company or an
affiliate. Notwithstanding the foregoing, a 29 month period of
absence will be substituted for such 6 month period if the leave is
due to any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last
for a continuous period of no less than 6 months and that causes
the employee to be unable to perform the duties of his or her
position of employment.
1.34.
“ Trust Agreement ” means any trust agreement
established pursuant to Section 8.1 between the Company and
the Trustee or any trust agreement hereafter
established.
1.35.
“ Trustee ” means the Trustee under the Trust
Agreement.
1.36.
“ Trust Fund ” means all assets of whatsoever
kind or nature held from time to time by the Trustee pursuant to
the Trust Agreement and forming a part of this Plan, without
distinction as to income and principal and without regard to
source, i.e., Participant contributions, earnings, or
forfeitures.
ARTICLE 2
ELIGIBILITY
2.1.
General . For purposes of Title I of ERISA, the Plan is
intended to be an unfunded plan of deferred compensation covering a
select group of management, highly compensated employees, and
Directors. As a result, participation in the Plan shall be limited
to Employees who are properly included in one or all of these
categories. The Plan Administrator shall designate the individuals
who are eligible to participate in the Plan. The Plan
Administrator, in the exercise of its discretion, may exclude an
Employee who otherwise meets the requirements of this
Section 2.1 from participation in the Plan if it concludes
that excluding the Employee is necessary to satisfy these
requirements. The Plan Administrator also may exclude an Employee
who otherwise meets the requirements of this Section 2.1 for
any other reason, or for no reason, as the Plan Administrator deems
appropriate.
2.2.
Participation . Each Employee who is designated as eligible
to participate in the Plan by the Plan Administrator may become a
Participant by completing and signing an enrollment form provided
by the Plan Administrator and delivering the form to the Plan
Administrator. The Employee must designate on the form the amount
of his Deferral Contributions and must authorize the Company or an
Affiliate to reduce his Compensation in an amount equal to his
Deferral Contributions.
2.3.
Timing of Participation . After an Employee has been
selected by the Plan Administrator to participate in the Plan for
the first time (and does not participate in or has not previously
participated in another voluntary deferral plan of the Company or
an Affiliate), the Employee has 30 days to notify the Plan
Administrator whether he will participate in the Plan. If the
Employee timely notifies the Plan Administrator of his intent to
participate in the Plan, the Employee’s participation will
commence on the first payroll period following or coinciding with
the first day of the calendar month after the Plan Administrator is
so notified. If the Employee does not timely notify the Plan
Administrator of his intent to participate in the Plan, the
Employee’s participation may commence on the first payroll
period following or coinciding with the first day of any later Plan
Year by notifying the Plan Administrator prior to the first day of
such Plan Year and provided further that the Plan Administrator
determines that the Employee remains eligible to participate in the
Plan under Section 2.1.
2.4.
Discontinuance of Participation . Once an Employee is
designated as a Participant, he will continue as such for all
future Plan Years unless the Plan Administrator specifically
discontinues his participation. The Plan Administrator may
discontinue an individual’s participation in the Plan at any
time for any or no reason. If an individual’s participation
is discontinued, the individual will no longer be eligible to make
future deferral elections or receive Company Contributions. The
Employee will not be entitled to receive a distribution, however,
until the occurrence of one of the events listed in
Article VI, or as permitted in Article VII.
ARTICLE 3
DEFERRAL ELECTIONS
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3.1.
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Elections to Defer
Compensation .
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3.1.1.
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Deferral of Base
Salary . For any Plan
Year, a Participant may elect to defer a portion of the Base Salary
otherwise payable to him. Any such deferrals shall be in whole
percentages or a specific dollar amount of the Participant’s
Base Salary, as specified in the Participant’s Participation
Agreement.
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3.1.2.
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Deferral of Bonuses
. A Participant may also elect to
defer a portion of any Bonus which might be payable to him by the
Company. Any such deferrals shall be in whole percentages or a
specific dollar amount of the Participant’s Bonus, as
specified in the Participant’s Participation
Agreement.
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3.1.3.
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Limitations on
Deferrals . A Participant
may elect to defer up to 80% of Participant’s Base Salary and
100% of Participant’s Bonus for each Plan Year, provided that
the total amount deferred by a Participant shall be limited in any
calendar year, if necessary, to satisfy any employment tax, income
tax and employee benefit plan withholding requirements as
determined in the sole and absolute discretion of the Plan
Administrator. There is no minimum deferral amount. The Plan
Administrator reserves the right to change such limits from time to
time.
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3.1.4.
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Duration of Compensation
Deferral Election . An
Employee’s initial election to defer Compensation must be
made within the time frame established by the Plan Administrator,
which shall be prior to the taxable year in which the election
relates and is to be effective with respect to Compensation earned
for services performed after such deferral election is processed.
Such election shall specify the time and method of distribution of
the annual deferral amount in accordance with Articles VI and
VII. A Participant may increase, decrease or terminate a deferral
election with respect to Compensation for any subsequent Plan Year
by filing a new election within the time frame established by the
Plan Administrator but in no event later than December 31 in
the year prior to the beginning of the next Plan Year, which
election shall be effective on the first day of the next following
Plan Year. In the absence of a Participant making a new election,
the last election on file will apply to deferrals for the new Plan
year. In the case of an employee who first becomes eligible to
participate in the Plan after January 1, 2006 (and does not
participate in or has not previously participated in another
voluntary deferral plan of the Company or an Affiliate), such
Employee shall have 30 days from the date he becomes eligible to
make an election with respect to Compensation earned for services
performed subsequent to the election. Such election shall be for
the remainder of the Plan Year (and future Plan Years, unless
subsequently changed prior to the commencement of a given Plan
year) in the event the Plan Year has commenced. Such election shall
specify the time and method of distribution of the annual deferral
amount in accordance with Articles VI and VII.
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3.1.5.
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Elections Other Than Initial
Election . Any Employee
or Director who has terminated a prior Compensation deferral
election may elect to again defer Compensation by completing and
signing an enrollment form provided by the Plan Administrator and
delivering the form to the Plan Administrator within the time frame
established by the Plan Administrator but in no event later than
December 31 of the year prior to the beginning of the Plan
Year to which such deferral election relates. An election to defer
Compensation must be filed in a timely manner in accordance with
Section 3.1(d). Such election shall apply to Compensation for
services performed in the Plan Year to which such deferral election
relates. Such election shall specify the time and method of
distribution of the annual deferral amount in accordance with
Articles VI and VII.
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3.2.
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Company
Contribution . On or
before the end of each fiscal year of the Company, the Compensation
Committee shall determine, in its sole discretion, an amount, if
any, to be credited to each Participant’s Account.
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3.3.
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Investment
Elections .
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(a)
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At the time of making the
deferral elections described in Section 3.1, Participant shall
designate, on a form provided by the Plan Administrator, the types
of investment funds in which Participant’s Account will be
deemed to be invested for purposes of determining the amount of
earnings and losses to be credited to that Account. In making the
designation pursuant to this Section 3.3, Participant may
specify that all or any percentage of his Account is to be deemed
invested, in whole percentage increments, in one or more of the
types of investment funds deemed to be provided under the Plan, as
communicated from time to time by the Plan Administrator. A
Participant may change the designation made under this
Section 3.3 by filing an election, on a form provided by the
Plan Administrator, on a daily basis (limited to 4 per month)
. If a Participant fails to elect a type of fund under this
Section 3.3, he or she shall be deemed to have elected the
money market type of investment fund.
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(b)
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Although a Participant may
designate the type of investments, the Plan Administrator shall not
be bound by such designation. The Plan Administrator may select
from time to time, in its sole and absolute discretion,
commercially available investments of each of the types
communicated by the Plan Administrator to the Participant pursuant
to Section 3.3(a) above to be the Funds. The Interest Rate of
each such commercially available investment fund shall be used to
determine the amount of earnings or losses to be credited to
Participant’s Account under Article IV.
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ARTICLE 4
DEFERRAL ACCOUNTS
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4.1.
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Deferral Accounts
. The Plan Administrator shall
establish and maintain a Deferral Account for each Participant
under the Plan. Each Participant’s Deferral Account shall be
further divided into separate subaccounts (“investment fund
subaccounts”), each of which corresponds to an investment
fund elected by the Participant pursuant to Section 3.3(a). A
Participant’s Deferral Account shall be credited as
follows:
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(a)
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Within a reasonable time after
amounts are withheld and deferred from a Participant’s
Compensation, the Plan Administrator shall credit the investment
fund subaccounts of the Participant’s Deferral Account with
an amount equal to Compensation deferred by the Participant in
accordance with the Participant’s election under
Section 3.3(a); that is, the portion of the
Participant’s deferred Compensation that the Participant has
elected to be deemed to be invested in a certain type of investment
fund shall be credited to the investment fund subaccount
corresponding to that investment fund;
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(b)
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Each business day, each
investment fund subaccount of a Participant’s Deferral
Account shall be credited with earnings or losses in an amount
equal to that determined by multiplying the balance credited to
such investment fund subaccount as of the prior day plus
contributions credited that day to the investment fund subaccount
by the Interest Rate for the corresponding fund selected by the
Company pursuant to Section 3.3(b).
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(c)
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In the event that a Participant
elects for a given Plan Year’s deferral of Compensation to
have a Scheduled Withdrawal, all amounts attributed to the deferral
of Compensation for such Plan Year shall be accounted for in a
manner which allows separate accounting for the deferral of
Compensation and investment gains and losses associated with such
Plan Year’s deferral of Compensation.
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4.2.
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Company Contribution
Account . The Plan
Administrator shall establish and maintain a Company Contribution
Account for each Participant under the Plan. Each
Participant’s Company Contribution Account shall be further
divided into separate investment fund subaccounts corresponding to
the investment fund elected by the Participant pursuant to
Section 3.3(a). A Participant’s Company Contribution
Account shall be credited as follows:
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(a)
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On the third business day after a
Company Contribution, the Plan Administrator shall credit the
investment fund subaccounts of the Participant’s Company
Contribution Account with an amount equal to the Company
Contribution, if any, applicable to that Participant, that is, the
proportion of the Company Contribution, if any, which the
Participant elected to be deemed to be invested in a certain type
of investment fund shall be credited to the corresponding
investment fund subaccount; and
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(b)
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Each business day, each
investment fund subaccount of a Participant’s Company
Contribution Account shall be credited with earnings or losses in
an amount equal to that determined by multiplying the balance
credited to such investment fund subaccount as of the prior day
plus contributions credited that day to the investment fund
subaccount by the Interest Rate for the corresponding Fund selected
by the Company pursuant to Section 3.3(b).
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4.3.
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Schedule a Accounts for
Pre-Existing Deferred Compensation Obligations
. Prior to the Effective Date of the
Plan, the Company and/or certain of its Affiliates had entered into
non-qualified deferred compensation arrangements with certain
Participants employed by the Company and/or its Affiliates. The
terms of such arrangements are set forth in individual
“plans” or agreements signed by the Company and/or an
Affiliate and the employee. The deferred compensation arrangements
identified on Schedule A attached hereto
(“Schedule A Arrangements”) are incorporated
herein by reference. It is intended that the Schedule A
Arrangements will comply with Code Section 409A . Effective
January 1, 2005, the rights and obligations of the parties to
those arrangements will be governed by the terms of this Plan, and
will not be governed by the terms of the Schedule A
Arrangements, except as otherwise provided hereafter. The Plan
Administrator will establish and maintain under this Plan a
“Schedule A Account” for each Participant who is
party to a Sched
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