The directors deferred stock plan agreement is a written form of a sort of arrangement of deferring the compensation to certain extent for their future use. This program is valid for the directors of the organization, who are not among the employees of the organization. As per this agreement certain percentage of a director’s earning is transferred in a stock account. The stock account includes the cash equivalent invested in certain shares of stock.
The deferred amount is calculated in cash and is then converted in hypothetical shares on a quarterly basis at the average closing price of that particular stock. This average is calculated from the trading price on all the trading days during that particular quarter. Any eligible director can choose to participate in this program. Such agreements are drafted by company lawyers and are recorded among the minutes of meetings of the board within specified parameters.
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