Severance Pay Plan - Charles Schwab & Co. Inc.
THE CHARLES SCHWAB
SEVERANCE PAY PLAN
Restated As of May 1, 2003
ARTICLE 1 - PURPOSE OF PLAN
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The purpose of this Plan is to set forth the terms and conditions under
which severance pay and other severance benefits will be provided to certain
employees of the Company and/or its Affiliates. This Plan is intended to
constitute an employee welfare benefit plan within the meaning of Section 3(1)
of ERISA, and is intended to memorialize the provisions of the Company's
severance pay program.
ARTICLE 2 - DEFINITIONS
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A. "Administrator" means Schwab or such person or committee as may be
appointed from time to time by Schwab to supervise the administration of the
Plan.
B. "Affiliate" means any company which is a member of a controlled group of
corporations (within the meaning of Code Section 414(b)) or a group of trades or
businesses under common control (within the meaning of Code Section 414(c)) that
includes the Company. As of the Restated Effective Date, "affiliates" include
the following:
Affiliates:
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Schwab Holdings, Inc.
Charles Schwab & Co., Inc.
Charles Schwab Investment Management, Inc.
Schwab Capital Markets, LP
Mayer & Schweitzer, Inc.
The Charles Schwab Trust Company
Performance Technologies, Inc.
TrustMark, Inc.
Schwab Retirement Plan Services, Inc.
Charles Schwab International Holdings, Inc.
Schwab (SIS) Holdings, Inc. I
Charles Schwab, Cayman, Ltd.
CyberTrader, Inc.
CyBerCorp Holdings, Inc.
U.S. Trust Company National Association
U.S. Trust Company of Delaware
U.S. Trust Company of Florida Savings Bank
U.S. Trust Company of New Jersey
U.S. Trust Company of North Carolina
U.S. Trust Company of Texas National Association
U.S. Trust Mortgage Services Company
UST Financial Services Corporation
UST Fiduciary Services LTD
UST LPO Corp.
UST Securities Corporation
United States Trust Company of New York
C. "Base Salary" means the Participant's rate of regular annual base pay,
determined as of the date of Participant's Notice of Eligibility. Base Salary
excludes amounts such as bonuses, overtime, commissions, shift differential,
incentive pay, and the value of any employee benefits.
D. "Code" means the Internal Revenue Code of 1986, as amended.
E. "Company" means The Charles Schwab Corporation, a Delaware corporation,
and (unless the context requires otherwise) any Participating Company.
F. "Eligible Employee" means any Employee who is classified by the Company
as a "regular" full time or "regular" part-time employee, or "seasonal"
employee, other than any individuals employed pursuant to the terms of a
collective bargaining agreement between the Company or an Affiliate and a
bargaining unit representing such Employee; provided that an Employee shall not
be considered an Eligible Employee if the Employee is on an unpaid leave of
absence and is not guaranteed a job upon completion of the leave. In addition,
an Employee will not be eligible to participate in the Plan if the Employee has
entered into a written employment or service agreement with the Company that
sets forth terms and conditions of employment and specifies the payments to
which that Employee may be entitled in the event of termination of employment,
or who is otherwise not entitled to Severance Benefits pursuant to the terms of
this Plan.
G. "Employee" means any individual directly employed by the Company or a
Participating Company and on whose behalf the Company withholds income tax from
his or her compensation. "Employee" does not include independent contractors or
consultants, persons who have signed independent contractor agreement(s) or
vendor or consultant agreement(s) or have been performing services for the
Company as an independent contractor, consultant or vendor or pursuant to an
independent contractor, consultant or vendor agreement or any type of third
party agreement; irrespective of whether any such individuals are determined by
any third party (including without limitation any court, arbitrator or
governmental or regulatory agency) to constitute employees of the Company any
kind, including but not limited to, a common law employee, an agency temporary,
a joint employee or a leased employee.
H. "Job Elimination" means an involuntary termination of employment on
account of changes in the Company's operations or organization, as determined by
the Company in its sole discretion, including, without limitation,
reorganizations, staffing changes, job elimination, or job force reductions.
Circumstances that result in Job Elimination may include, without limitation,
(i) a relocation or dissolution of a portion of the business of the Company,
(ii) a withdrawal by the Company from a segment of a market served by the
Company; (iii) the elimination of one or more Company product lines; (iv) an
elimination, reduction, or change in the Company's need for one or more
specialized skills provided by the Employee; (v) an organizational change in the
Company, including without limitation a business redesign, reorganization or
consolidation; (vi) a significant change in the Company's systems or technology;
(vii) a reduction in the Company's staffing levels; (viii) a sale of any portion
of a business, following which an Employee is not offered a position by the
acquiring organization at substantially the same salary level; (ix) a
significant involuntary decrease by the Company in the number of hours in the
Employee's regularly scheduled workweek; and (x) an involuntary decrease by the
Company in the Employee's regularly scheduled workweek or in the Employee's
employment classification which causes the Employee's loss of eligibility for
medical benefits. Notwithstanding anything to the contrary contained herein, a
Job Elimination shall not result (i) from an Employee's termination of
employment on account of voluntary resignation, retirement or death prior to
notice to the Employee of eligibility for Severance Benefits due to Job
Elimination; (ii) if the Company has offered the Employee a comparable
replacement position (which determination will be made by the Company, within
its sole discretion, taking into account, for example, the similarity of duties,
similarity of exempt or nonexempt status and salary range; provided that a new
position will not be considered "comparable" if it is not within reasonable
commuting distance from the employee's home, offers a salary less than the
employee's former position, or is of a grade more than one grade below the
employee's former position); (iii) from a termination on account of the
Employee's substandard performance or failure of condition of employment prior
to or after Notice of Eligibility; (iv) from a termination resulting from an
Employee's violation of law or of Company policy(ies), including without
limitation, the failure to obtain a required license, absenteeism, fraud, theft,
conflict of interest, or misconduct (including, but not limited to, dishonesty
or harassment); (v) where, following the sale or outsourcing of any portion of a
business, an Employee is offered by the successor organization a position at a
base salary rate not significantly lower than that for the Employee's former
position, or of a grade not more than one grade lower than the Employee's former
position; (vi) the Employee's failure to return to work within the time required
following an approved leave of absence (vii) a change in employment that results
from a natural disaster, unforeseeable governmental action, act of war, or other
similar unanticipated business disaster; or (viii) a transfer of employment
among the Company and any of its Affiliates.
I. "Non-Officer" means an Eligible Employee who is not an Officer.
J. "Notice of Eligibility" means a written notice, in a form approved by
the Company, provided to an Eligible Employee that (1) there will be a Job
Elimination and that the employee is eligible to obtain Severance Benefits under
the Plan or (2) the employee's participation in the Voluntary Separation Program
has been approved by the Company and that the employee is eligible to obtain
Severance Benefits under the Plan. An Eligible Employee who has been provided a
Notice of Eligibility is considered a Participant.
K. "Notice Period" means a sixty (60) calendar day period typically
commencing on the next day following the date of the Notice of Eligibility, or
on such later date as the Company shall determine in its sole discretion.
Participants are relieved from job responsibilities during the Notice Period and
generally are not required to report work unless notified otherwise by the
Company. Also during the Notice Period, all Compliance, Human Resources and
Information Security policies and procedures that applied to Participants before
receiving Notice of Eligibility continue in full force and effect and
Participants remain subject to those policies and procedure. Participants will
continue to receive Base Salary, participate in certain employee benefits, be
eligible for consideration for bonus and other incentive compensation etc.
during the Notice Period as though working pursuant to their regular schedule
(except with regard to any period that would otherwise be a "furlough" period
for a Participant who is a seasonal Employee, for which period seasonal Employee
Participants will not receive pay or the other benefits but will continue to be
considered Employees until the end of the furlough period), in accordance with
normal Company policy and the terms of the applicable plans.
L. "Notice Period Date" means the first day of the Notice Period.
M. "Officer" means an Eligible Employee who has been elected an Officer of
the Company or Schwab or who has a job grade/designation level "E1" or above
with a Participating Company.
N. "Participant" means any Eligible Employee who has been provided a Notice
of Eligibility.
O. "Participating Company" means the Company and any Affiliate that
participates in the Plan, as determined by the Company in its sole discretion.
P. "Plan" means The Charles Schwab Severance Pay Plan.
Q. "Plan Year" means the calendar year.
R. "Regular Employee" means any Employee with regular full-time or
part-time employment or seasonal employment with the Company, who is considered
and classified by the Company as a "regular" or "seasonal" employee." "Regular
Employee" does not include, without limitation, any of the following:
(i) Schwab Temps or floaters;
(ii) Agency Temporaries or other temporary workers
(iii)Employees on an unpaid leave of absence who do not have a job
guarantee upon completion of the leave;
(iv) Consultants/Independent contractors, persons who have signed
Independent Contractor, consultant or vendor Agreement(s) or
provide services to the Company pursuant to an Independent
Contractor, consultant or vendor Agreement, or pursuant to an
agreement with any third party, irrespective of whether any such
individuals are determined by any third party (including without
limitation any court, arbitrator or governmental or regulatory
agency) to constitute an employee of the Company or any Affiliate
(including but not limited to, a common law employee, a joint
employee or a lease employee); and
(v) Persons (including but not limited to those identified in
subparagraphs (i) through (iv)) not otherwise considered by the
Company to be a "regular employee," irrespective of whether any
such individuals are deemed by a court. arbitrator or government
agency to be an employee of the Company or any Affiliate
(including but not limited to, a common law employee, a joint
employee or a lease employee).
S. "Restated Effective Date" means May 1, 2003.
T. "Return Date" means the date by which a Participant must sign and return
a Severance Agreement where required to do so in order to obtain Severance
Benefits in addition to participation in and payment for the Notice Period under
this Plan. Except as otherwise determined by the Company in its sole discretion,
the Return Date is the date twenty one (21) calendar days following the date the
Participant is provided with Notice of Eligibility; provided however that:
1) the Return Date will be on the next business day if the twenty-first
calendar day is not a business day; and
2) if the Participant is at least forty years old, and the Job Elimination
and/or the Voluntary Separation Program affects two or more Participants at
least forty years old, the Return Date will be on the forty-fifth (45) calendar
day following the date the Participant is provided with Notice of Eligibility
(or the next business day if the forty-fifth calendar day is not a business
day); and
3) if the Participant is under forty years old and is otherwise entitled,
under applicable state or local fair employment practice law, to more than
twenty-one (21) calendar days in which to consider whether to execute the
Severance Agreement, the Return Date will be a date determined by reference to
applicable state or local fair employment practices law.
A Severance Agreement returned to the Company that is signed and physically
received by the Return Date, or, if mailed, is addressed properly for delivery,
postmarked by the United State Postal Service no later than the Return Date, and
actually received by the Company no later than 10 calendar days from the Return
Date, will be considered timely. Severance Agreements which are not signed
and/or returned as provided here will not be accepted by the Company, unless the
Company decides to accept it on a case-by-case basis, in its sole discretion.
U. "Revocation Period" means the seven calendar day (or other longer
legally required calendar day) period immediately following the date the
Participant signs the Severance Agreement, as defined in Article 2W below,
during which a Participant who is either: (i) at least forty (40) years old; or
(ii) is under forty (40) years old and is employed in a state that requires a
specific Revocation Period, may revoke his or her signed Severance Agreement. To
be effective, a written request to revoke must be received by the Company (as
defined by applicable law) no later than 5:00 p.m. PST on the seventh calendar
day (or other longer period required by law) from the date the Participant
signed the Severance Agreement or, if mailed, be postmarked no later than the
seventh calendar day (or other longer period required by law) from the date the
Participant signed the Severance Agreement.
V. "Schwab" means Charles Schwab & Co., Inc., a California corporation.
W. "Severance Agreement" means a written agreement in a form satisfactory
to the Company, in its sole discretion, by which a Participant agrees to waive
and release the Company from legal claims in exchange for payment of Severance
Benefits as provided in Article 6. To be effective, a Severance Agreement must
be signed and returned by the Return Date (and not revoked during any applicable
Revocation Period). Severance Agreements are not required to be identical among
Participants.
X. "Severance Benefits" means all payments and benefits provided for in
this Plan, including but not limited to all salary and benefits for periods
during which a Participant remains an Employee after being provided a Notice of
Eligibility (such as the Notice Period and/or Severance Period), all forms of
compensation and/or benefits of any kind for or in connection with such periods,
and all other amounts paid or payable to Participants in accordance with the
Plan. The Severance Benefits a Participant may receive are net amounts from
which applicable taxes, withholding and appropriate deductions have been taken,
including but not limited to deduction of any outstanding amount owed to the
Company by the Participant regardless of the reason for or source of the amount
due. In order to receive Severance Benefits under Article 6, a Participant must
timely sign and return (and not revoke, where a Revocation Period applies) a
Severance Agreement as defined in Article 2W. All Severance Benefits shall be
applied toward satisfaction of the Company's WARN obligations, if any, and shall
constitute WARN notice and/or WARN benefits where WARN applies.
Y. "Severance Period" means the period of time following the Notice Period
during which an Officer Participant is eligible to receive salary in installment
payments pursuant to Section 6.3 in exchange for entering into a Severance
Agreement. Officer Participants must be available to perform services as may be
required. Compliance, Human Resources and Information Security policies continue
to apply during the Severance Period.
Z. "Termination Date" means the last day that the Employee is employed by
the Company. For Non-Officer Participants, the Termination Date is the day the
Notice Period ends (as it may be accelerated under Articles 5 and/or 6)). For
Officer Participants, the Termination Date is the last day of the Notice Period
(as it may be accelerated under Articles 5 and/or 6), or, if an Officer
Participant signs, returns and does not revoke a Severance Agreement in the
required time, the Termination Date is the last day of the Severance Period (as
it may be accelerated under Articles 5 and/or 6).
AA. "Voluntary Separation Program" means a program of limited time duration
under which an eligible employee is permitted to voluntarily separate from
employment with the Company, thereby receiving certain associated benefits,
including participation in this Plan. In the absolute discretion of the Company,
employees in certain job groups, job descriptions or job categories may not be
considered eligible to request participation in the Voluntary Separation
Program. Even for employees eligible to participate in the Voluntary Separation
Program, their actual participation is not guaranteed and the Company may deny
an eligible employee's request for participation, in its absolute discretion.
BB. "WARN" means the Federal Worker Adjustment Retraining and Notification
Act, as amended, and any applicable state plant or facility closing or mass
layoff law. In the event WARN applies to a Participant, any Notice Period and/or
Severance Period, and all compensation and all benefits of any kind due or paid
with respect to either are also deemed to constitute WARN notice and/or WARN
benefits, and will be applied toward satisfying the Company's obligations under
WARN.
CC. "Year of Service" means a continuous complete twelve-month period
commencing on a Participant's date of hire with the Company or an Affiliate
(and, in the case of an Employee who is rehired after terminating employment
with the Company or an Affiliate, including service prior to a break in service
for other than a Severance), and anniversaries thereof, during which a
Participant is employed by the Company or an Affiliate, and ending on the
Participant's Notice Period Date. For purposes of the foregoing, a Participant
will receive credit for any time on a paid leave of absence, but not for time on
an unpaid leave of absence. Also for purposes of the foregoing, a Participant
who was a seasonal employee at the time of receiving Notice of Eligibility will
receive credit for any time on furlough, assuming the Participant returned to
Schwab or an Affiliate at the end of the furlough period. A Participant will
also receive credit for Service with BankAmerica Corporation and its affiliates
during the time it was an affiliated company of the Company, if the Participant
was employed by the Company before November 24, 1993, and service with
BankAmerica Corporation and its affiliates prior to the date it became an
affiliated company of the Company, if the Participant was employed by the
Company prior to April 1, 1987. A Participant will also receive credit for
service with any Affiliate prior to the time it became an Affiliate if the
Participant was employed by such Affiliate on the date it became an Affiliate.
ARTICLE 3 - ELIGIBILITY
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3.1. Eligible Employees will become eligible to participate in the Plan as
of the date the Eligible Employee is provided with a Notice of Eligibility.
ARTICLE 4 - EFFECT ON OTHER BENEFITS
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4.1. Eligibility for other employee benefits (such as medical, dental,
vision insurance) will cease in accordance with the terms of any respective plan
no later than the last day of the month that includes the Termination Date.
4.2 A Participant will continue accruing paid time off benefits until the
Termination Date, but in any event no later than the end of the Notice Period.
The rate of accrual during the Notice Period will be the same as the rate of
accrual prior to Notice of Eligibility.
ARTICLE 5 - NOTICE AND SEVERANCE PeriodS
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5.1 Notice Period. Following an Eligible Employee's Notice of Eligibility,
the Participant will enter a Notice Period for a period of sixty (60) calendar
days. During the Notice Period, Participants are not required to report to work
unless notified otherwise and Participants remain subject to Company policies
and procedures. If WARN is applicable to a Participant, the Notice Period and
all compensation (including but not limited to salary/wages, benefits and
benefit plan participation) attributable to the Notice Period shall constitute
WARN notice and the payment of WARN benefits, respectively, and will be applied
against any notice period or other payments that would otherwise be due to
satisfy the Company's obligations under WARN. The Termination Date, which is
originally established as the end of the 60 day Notice Period, will be
accelerated or otherwise changed if any of the following events occur:
a. If, prior to the end of the Notice Period, a Participant resigns or
otherwise obtains an external position or acts as an employee, consultant or
independent contractor or as a sole proprietor of a business or acts as an
officer, director, or partner in another public or privately held company. In
that case, the Participant is required to notify the Company immediately, the
end of the Notice Period and the Termination Date will be accelerated to
coincide with the next day after the Participant resigned or otherwise obtained
that position. The Participant will receive a payment reflecting the balance of
the Base Salary attributable to the unused portion of the original Notice
Period, provided however that no payment will be made for the value of bonuses,
or other incentive compensation or the value of other employee benefits that
might otherwise have been received if the Termination Date had not been
accelerated. The Participant remains eligible to sign and return the applicable
Severance Agreement by the Return Date in order to obtain additional Severance
Benefits under Article 6, provided however that:
(i) Officer Participants who resign or otherwise obtain an external
position or act as an employee, consultant or independent contractor or as
a sole proprietor of a business or act as an officer, director, or partner
in another public or privately held company prior to the end of the Notice
Period, who so notify the Company, and who sign, return (and do not revoke)
a Severance Agreement within the required time, shall not enter the
Severance Period. Such Officer Participants shall receive a lump sum
payment for Base Salary that otherwise would have been payable during a
Severance Period in accordance with section 6.3. Also, Officer Participants
will receive a lump sum payment for COBRA premiums in accordance with
section 6.3. Other than as provided here, no lump sum payment shall be made
for the value of any bonuses, incentives or other employee benefits the
Officer Participant would have received during the Notice Period or
Severance Period.
b. If a Participant is permitted by the Company to obtain, and does obtain,
another regular full time or part time position or seasonal position within the
Company before the end of the Notice Period (without regard to whether the end
of the Notice Period has been accelerated pursuant to section 5.1(a)), his/her
Termination Date under the Plan will be cancelled and the Participant is no
longer eligible to receive any Severance Benefits or any payment of any kind for
compensation (including benefits) otherwise attributable to the unused portion
of the Notice Period. If a Participant already received payment of lump sum
Severance Pay under sections 6.1 and/or 6.2, the Participant is required to
repay the lump sum Severance Pay, including the COBRA premium, in full, as a
condition of the employment. In addition, if a Participant already received a
lump sum payment for the unused portion of the Notice period under section
5.1(a), the Participant is required to repay the amount by which this lump sum
payment exceeds the amount the Participant would have received if the payment
has been calculated based on the number of business days that actually elapsed
between the beginning of the Notice Period and the date of the re-hire with the
Company, as a condition of the employment.
5.2 Severance Period. For Officer Participants who sign and return (and do
not revoke, if a Revocation Period applies) the Severance Agreement as required,
the Notice Period is followed by a Severance Period. Officer Participants
receive installment payments in the form of Base Salary during the Severance
Period and continue to be eligible for certain employee benefits (as determined
by the Company in accordance with the terms of the respective plans) in exchange
for agreeing to remain available to perform services for the Company during the
Severance Period. The length of the Severance Period is determined by the
officer level and Years of Service, in accordance with section 6.3. During the
Severance Period, Compliance, Human Resources and Information Security policies
and procedures continue in full force and effect and Officer Participants remain
subject to those policies and procedures. If WARN is applicable to an Officer
Participant, the Severance Period and all compensation (including but not
limited to salary/wages, benefits and benefit plan participation) attributable
to the Severance Period shall constitute WARN notice and the payment of WARN
benefits, respectively, and will be applied against any notice period or other
payments that would otherwise be due to satisfy the Company's obligations under
WARN. In addition:
a. During the Severance Period, Officer Participants are not eligible for
bonuses or any other incentive compensation.
b. The Termination Date for Officer Participants who sign and return (and
do not revoke, where applicable) the Severance Agreement in the required time is
reset to the end of the Severance Period under section 6.3. The Termination Date
will be accelerated or otherwise changed:
(i) if, prior to the end of the Severance Period, an Officer
Participant resigns or otherwise obtains an external position or acts as an
employee, consultant or independent contractor or as a sole proprietor of a
business or acts as an officer, director, or partner in another public or
privately held company. In that case, an Officer Participant must notify
the Company immediately and the end of the Severance Period and the
Termination Date will be accelerated to coincide with the next day after
the Officer Participant resigned or otherwise obtained that position. The
Officer Participant will receive a lump sum payment for the balance of Base
Salary for the unused portion of the original Severance Period, provided
however that no payment will be made for the value of bonuses, incentive
compensation or other employee benefits. In addition, Officer Participants
will receive a lump sum payment for COBRA premiums as provided in section
6.3.
(ii) if an Officer Participant is permitted by the Company to obtain,
and does obtain, another regular full time or part time or seasonal
position within the Company after the Severance Period begins and before
the date it is scheduled to end. In that case, the Termination Date under
the Plan will be cancelled and the Officer Participant is no longer
eligible to receive any Severance Benefits or any payment of any kind for
compensation (including but not limited to benefits or the value of any
benefits) otherwise attributable to the unused portion of the Severance
Period.
ARTICLE 6 - BENEFITS
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Upon being provided with a Notice of Eligibility, a Participant becomes
entitled to receive the Severance Benefits described in sections 6.1, 6.2, and
6.3 (as applicable) only if the Participant returns to the Company a signed
Severance Agreement no later than the Return Date. If a Revocation Period
applies, a Participant's entitlement to these Severance Benefits also is
conditioned upon the Participant not revoking (or attempting to revoke) the
Severance Agreement during the Revocation Period. Subject to those conditions,
the Participant will be entitled to receive the amounts set forth in Sections
6.1 and 6.2, or 6.3 (as applicable).
6.1 Non-Officer Severance Pay. Non-Officer Participants who experience an
involuntary termination will receive a lump sum severance pay benefit hereunder
equal to the greater of the amount determined under (a) or (b) below:
a. The amount of Base Salary that would have been payable for
one-half month of active employment (i.e., 11 business days)
multiplied by the Non-Officer Participant's full Years of Service
(but in no event to exceed the maximum amount equivalent to 176
business days).
The Non-Officer Participant also will receive credit for a
partial Year of Service (after aggregation of partial years),
based on the following table:
Length of Partial Year No. of Days
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Not more than 3 months 3 Business Days
More than 3 but not more than 6 months 6 Business Days
More than 6 but not more than 9 months 9 Business Days
More than 9 but less than 12 months 11 Business Days
OR
b. The amount of Base Salary that would have been payable for the
number of business days determined under the following table:
Base Salary No. of Days
----------- -----------
$29,999 or less 22 Business Days
$30,000 to $39,999 44 Business Days
$40,000 to $54,999 66 Business Days
$55,000 to $74,999 88 Business Days
$75,000 and over 110 Business Days
The length of service under Formula A will be used in the event application
of A and B result in the same amount.
c. Non-Officer Participants who experience a voluntary separation will
receive a lump sum severance pay benefit equal to the greater of the amount
determined under (a) or (b) plus an amount equal to three months of Base
Salary. The three months of Base Salary will be calculated by multiplying
the amount of the Non-Officer Participant's semimonthly paycheck by six
(6).
6.2 COBRA Payment - Non-Officers
A Non-Officer Participant who becomes entitled to receive Severance
Benefits under section 6.1 will also receive payment for a portion of the
Non-Officer Participant's COBRA health care coverage premium. The
Non-Officer Participant shall receive a single lump sum payment in an
amount equal to the amount the Non-Officer Participant will be charged for
the COBRA premiums for the employee and his/her enrolled dependents for a
number of days equal to the number of days for which the Non-Officer
Participant is eligible to receive Severance Pay under Section 6.1.
The payment for a portion of COBRA premiums is based on group medical,
dental, vision, and employee assistance program ("EAP") coverage at the
same benefits levels in effect for the Non-Officer Participant and any
enrolled dependents at the time the Non-Officer Participant is given Notice
of Eligibility. The single lump sum payment representing COBRA premiums is
based on COBRA premium levels in effect at the Termination Date and in no
event is a Participant entitled to receive payment for a subsequent
increase, if any, in COBRA premium levels. If the Non-Officer Participant
or his/her dependents were not enrolled for group health coverage at the
time the Company gave Notice of Eligibility, the Non-Officer Participant
will not receive any payments under this Section 6.2.
6.3 Officer Severance Pay Benefit. Officer Participants shall receive Base
Salary (paid in installment payments in accordance with normal payroll
practices) for a Severance Period based on the applicable provision below,
taking into account officer level, Years of Service and the reason for
termination of employment (involuntary termination or voluntary separation):
a. Officer (Vice President) - Involuntary Termination:
Base Salary: An Officer (Vice President) Participant who experiences an
involuntary termination shall receive Base Salary for a Severance Period as
follows:
Years of Service Severance Period
---------------- ----------------
Less than 2 years 9 months
At least 2 years but no more than 5 years 11 months
More than 5 years 12 months
Officer (Vice President) - Voluntary Termination: An Officer
(Vice President) Participant who experiences a voluntary separation
shall receive the benefit determined under (a) above and, in addition,
will receive a lump sum payment equal to three months of Base Salary.
The three months of Base Salary will be calculated by multiplying the
amount of the Officer Participant's semimonthly paycheck by six (6).
b. Officer (Senior Vice President and Executive Vice President) -
Involuntary Termination:
Base Salary: An Officer (Senior Vice President and Executive Vice
President) Participant who experiences an involuntary termination
shall receive Base Salary for a Severance Period as follows:
Years of Service Severance Period
---------------- ----------------
Less than 2 years 12 months
At least 2 years but no more than 5 years 14 months
More than 5 years 16 months
Officer (Senior Vice President and Executive Vice President) -
Voluntary Separation: An Officer (Senior Vice President and Executive
Vice President) Participant who experiences a voluntary separation
shall receive the benefit determined under (b) above and, in addition,
will receive a lump sum payment equal to three months of Base Salary.
The three months of Base Salary will be calculated by multiplying the
amount of the Officer Participant's semimonthly paycheck by six (6).
For purposes of determining the Severance Period above under section 6.3a
and 6.3b, a "month" is considered 30 calendar days.
An Officer Participant whose Termination Date is accelerated and is
entitled to receive a lump sum payment for the installment payments contained in
section 6.3a or 6.3b, also will receive a lump sum payment calculated in an
amount equal to the amount the Officer Participant will be charged for COBRA
premiums for him/herself and his/her enrolled dependents for the number of
months for which the Officer Participant would otherwise have been eligible to
receive installment payments during a Severance Period.
The payment for a portion of COBRA premiums is based on group medical,
dental, vision and EAP coverage at the same benefits level that is in effect for
the Officer Participant and any enrolled dependents at the time the Officer
Participant enters the Severance Period or the Termination Date, whichever is
earlier. The single lump sum payment representing COBRA premiums is based on
COBRA premium levels in effect at the Termination Date and in no event is a
Participant entitled to receive payment for a subsequent increase, if any, in
COBRA premium levels. If the Officer Participant or his/her dependents were not
enrolled for group health coverage at the time the Company gave Notice of
Eligibility, the Officer Participant will not receive any payments representing
COBRA premiums.
6.4 Additional Provisions Related to Severance Benefits
a) If a Participant who either has incurred a Job Elimination or has
voluntarily separated under the Voluntary Separation Program, and then has
terminated employment is subsequently rehired by the Company (or an
Affiliate), any subsequent Severance Benefit that may become payable to the
Participant under this Plan following the date of rehire on account of a
Job Elimination or voluntary separation under the Voluntary Separation
Program shall be calculated based solely on the Participant's Years of
Service following his date of rehire after Severance.
b) Notwithstanding anything to the contrary contained herein, (i) an
Employee or Participant whose employment with the Company (or an Affiliate)
is terminated before or after receipt of Notice of Eligibility for any
reason other than Job Elimination within the meaning of Article 2H or
voluntary separation under the Voluntary Separation Program shall not be
entitled to receive any Severance Benefits hereunder, (ii) a Participant
may lose eligibility to receive Severance Benefits if the Company becomes
aware of circumstances which could or would have caused a Participant's
termination from employment, such as engaging in violations of the law or
of Company polic(ies), including without limitation, fraud, theft,
inappropriate use of confidential information, or misconduct (including,
but not limited to, dishonesty or harassment), and (iii) in the case of an
Employee who has entered into an employment agreement with the Company or
an Affiliate which contains a provision for the payment (or nonpayment) of
severance benefits (or payments upon termination of employment), the
calculation of any payment of such Eligible Employee upon a Severance shall
be governed by the terms of such employment agreement, and not by this
Article 6.
c) Any lump sum benefit payable pursuant to Sections 6.1 or 6.2 shall
be paid during the next Payroll processing cycle that follows the later of
(i) the date the Severance Agreement is received, assuming it is signed and
returned to the Company in the required time and is not revoked in
accordance with any applicable Revocation Period; or (ii) the Termination
Date, as it may be accelerated under Article 5 or 6. Generally, the close
date for a payroll cycle is the 2nd business day of that cycle.
d) Except for any lump sum payment equal to three months of Base
Salary, any lump sum benefit payable pursuant to section 6.3 shall be paid
during the Payroll processing cycle that follows the later of (i) the date
the signed Severance Agreement is received, assuming it is signed and
returned to the Company in the required time and is not revoked in
accordance with any applicable Revocation Period; or (ii) the Termination
Date, as it may be accelerated under Article 5 or 6. The lump sum payment
equal to three months of Base Salary shall be payable as soon as
practicable following the end of the Notice Period provided that, by that
date, the Severance Agreement is signed and returned to the Company in the
required time and was not revoked in accordance with any applicable
Revocation Period.
e) (i) If a Non-Officer Participant receives payment of any or all of
his/her Severance Benefit under sections 6.1 and 6.2 and after his
Termination Date subsequently accepts re-employment by the Company or with
an Affiliate, the Participant will be required, except as the Company
otherwise determines in its sole discretion, as a condition of
reemployment, to repay the amount (if any) by which the lump sum payment
(including COBRA payments) exceeds the amount the Participant would have
received if such payment had been calculated based on the number of
business days that have actually elapsed between Termination Date and the
date of the subsequent employment. The repayment obligation is applicable
regardless of whether the Participant's severance pay was paid under 6.1
and/or 6.2 above. Repayment of a pro rata share of Severance Benefits does
not affect the validity of the Severance Agreement.
(ii) If an Officer Participant receives a lump sum payment for any or
all of his/her Severance Benefits under section 6.3 due to acceleration of
the Termination Date, and the Participant subsequently accepts
re-employment by the Company or with an Affiliate, the Participant will be
required, except as the Company otherwise determines in its sole
discretion, as a condition of reemployment, to repay the amount (if any) by
which the lump sum payment (including COBRA payments) exceeds the amount
the Participant would have received if such payment had been calculated
based on the number of business days that have actually elapsed between
Termination Date and the date of the subsequent employment. Repayment of a
pro rata share of Severance Benefits does not affect the validity of the
Severance Agreement.
f) Notwithstanding anything to the contrary contained in this Plan, in
the event WARN is applicable to a Participant: (1) any Notice Period and/or
Severance Benefits paid or payable to the Participant will be deemed to
constitute and shall be attributed to WARN notice and/or WARN benefits; (2)
all Severance Benefits under this Plan will be reduced and/or offset by any
notice, payments or benefits to which the Participant may be entitled under
WARN; and (3) all Severance Benefits under this Plan will be reduced and/or
offset by any amount of paid days and/or paid benefits in lieu of notice
the Participant is given or is required to be given by the Company to
satisfy its obligations under WARN. A Severance Agreement is not required
for receipt of WARN benefits.
g) Notwithstanding anything to the contrary contained herein, the
Company may revoke a Participant's Severance Agreement during any
applicable Revocation Period.
ARTICLE 7 - FUNDING
-------------------
The amount required to be paid as Severance Benefit under this Plan shall
be paid from the general assets of the Company at the time such Severance
Benefits are to be paid.
ARTICLE 8 - ADMINISTRATION
--------------------------
The administration of the Plan shall be under the supervision of the
Administrator. It shall be the responsibility of the Administrator to assure
that the Plan is carried out in accordance with its terms, for the exclusive
benefit of Participants without discrimination among them. The Administrator
shall have full power and discretionary authority to administer, interpret and
construe the Plan, and to determine all claims for benefits, subject to the
requirements of ERISA. For this purpose, the Administrator's powers shall
include, but shall not be limited to, the following authority, in addition to
all other powers provided by this Plan.
(a) To make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan;
(b) To interpret and construe the plan, its interpretation and
construction thereof in good faith to be final and conclusive on
all persons claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the eligibility
of any person to participate in the Plan;
(d) To compute the amount of benefits which will be payable to any
Participant accordance with the provisions of the Plan, and to
determine the person or persons to whom such benefits will be
paid;
(e) To authorize the payment of benefits;
(f) To appoint such agents, counsel, accountants, consultants and
actuaries as may be required to assist in administering the Plan;
and
(g) To allocate and delegate its responsibilities under the Plan and
to designate other persons to carry out any of its
responsibilities under the Plan, and such allocation, delegation
or designation to be by written instrument and in accordance with
Section 405 of ERISA.
The interpretations and determinations of the Administrator shall be final
and binding unless lawfully determined to be arbitrary and capricious. The
Administrator also reserves the right to provide additional benefits, in the
Administrator's sole discretion. Determinations to be made in the discretion of
the Company are made by the Company in its non-fiduciary capacity, with regard
to the best interests of the Company, and are not required to be uniform among
similarly situated individuals.
In administering the Plan, the Administrator shall be entitled, to the
extent permitted by law, to rely conclusively on all tables, valuations,
certificates, opinions and reports which are furnished by any accountant,
counsel or other expert who is employed or engaged by the Administrator.
Schwab shall be the "named fiduciary" for purposes of Section 402(a)(1) of
ERISA with authority to control and manage the operation and administration of
the Plan, and shall be responsible for complying with all of the reporting and
disclosure requirements of Part 1 of Subtitle B of Title I of ERISA.
8.1 Claims Procedure
If any person believes he or she is being denied any rights or benefits
under the Plan or disagrees with the calculation of Severance Benefits as set
forth in the Notice of Eligibility, such person must file a claim in writing
with the Administrator. If any such claim is wholly or partially denied, the
Administrator shall notify such person of its decision in writing. Such
notification shall be written in a manner calculated to be understood by such
person and shall contain (i) specific reasons for the denial, (ii) specific
reference to pertinent Plan provisions, (iii) a description of any additional
material or information necessary for such person to perfect such claim and an
explanation of why such material or information is necessary, and (iv)
information as to the steps to be taken if the person wishes to submit a request
for review. Such notification shall be given within ninety (90) calendar days
after the claim is received by the Administrator (or within one hundred eighty
(180) calendar days, if special circumstances require an extension of time for
processing the claim, and if written notice of such extension and circumstances
is given to such person within the initial ninety (90) day period). If such
notification is not given within such period, the claim shall be considered
denied as of the last day of such period and such person may request a review of
his or her claim.
8.2 Review Procedure
Within sixty (60) calendar days after the date on which a person receives a
written notice of a denied claim (or, if applicable, within sixty (60) calendar
days after the date on which such denial is considered to have occurred) such
person (or his duly authorized representative) may (i) file a written request
with the Administrator for a review of his denied claim and of pertinent
documents and (ii) submit written issues and comments to the Administrator. The
Administrator shall notify such person of its decision in writing. Such
notification shall be written in a manner calculated to be understood by such
person and shall contain specific reasons for the decision as well as specific
references to pertinent Plan provisions. The decision on review shall be made
within sixty (60) calendar days after the request for review is received by the
Administrator (or within one hundred twenty (120) calendar days, if special
circumstances require an extension of time for processing the request, such as
an election by the Administrator to hold a hearing, and if written notice of
such extension and circumstances is given to such person within the initial
sixty (60) day period). If the decision on review is not made within such
period, the claim shall be considered denied.
The Company agrees to indemnify, defend and hold harmless to the fullest
extent permitted by law any Employee serving as or on behalf of the
Administrator or as a member of a committee designated as Administrator
(including any Employee or former Employee who formerly served as Administrator
or as a member of such committee) against all liabilities, damages, costs and
expenses (including attorneys' fees and amounts paid in settlement of any claims
approved by the Company) occasioned by any act or omission to act in connection
with the Plan, if such act or omission is in good faith.
ARTICLE 9 - AMENDMENT AND TERMINATION
-------------------------------------
The Plan and/or any of its terms may be amended at any time with or without
prior notice by action of the Board of Directors of Schwab or its delegee.
The Plan and/or any of its terms may be terminated at any time with or
without prior notice by the Board of Directors of the Company or its delegee.
ARTICLE 10 - MISCELLANEOUS
--------------------------
Except where otherwise indicated by the context, any masculine terminology
used herein shall also include the feminine and vice versa, and the definition
of any term herein in the singular shall also include the plural, and vice
versa.
This Plan shall not be deemed to constitute a contract between the Company
and any Eligible Employee or to be a consideration or an inducement for the
employment of any Eligible Employee. Nothing contained in this Plan shall be
deemed to give any Eligible Employee the right to be retained in the service of
the Company or to interfere with the right of the Company to discharge any
Eligible Employee at any time, irrespective of the effect which such discharge
shall have upon such individual as a Eligible Employee of this Plan.
This Plan shall be construed and enforced according to federal law, except
where not preempted, by the laws of the State of California other than its laws
respecting choice of law.