THE SEMPRA ENERGY
DEFERRED COMPENSATION AND EXCESS SAVINGS PLAN
TABLE OF CONTENTS
ARTICLE I. TITLE AND DEFINITIONS......................................1
1.1 Title................................................1
1.2 Definitions..........................................1
ARTICLE II. PARTICIPATION.............................................7
ARTICLE III. CONTRIBUTIONS............................................7
3.1 Elections to Defer Compensation and 401(k) Excess.......7
3.2 Transfers from Prior Plans..............................9
3.3 Company Matching Contributions..........................9
3.4 FICA and Other Taxes....................................9
ARTICLE IV. INVESTMENTS..............................................10
4.1 Measurement Funds......................................10
4.2 Investment Elections...................................10
4.3 Investment of Transferred Accounts.....................12
4.4 Compliance with Section 16 of the Exchange Act.........12
ARTICLE V. ACCOUNTS..................................................12
5.1 Accounts...............................................12
ARTICLE VI. VESTING..................................................13
ARTICLE VII. DISTRIBUTIONS...........................................13
7.1 Distribution of Accounts...............................13
7.2 Early Distributions....................................15
7.3 Hardship Distribution..................................16
7.4 Effect of a Change in..................................16
7.5 Inability to Locate Participant........................17
ARTICLE VIII. ADMINISTRATION.........................................17
8.1 Committee..............................................17
8.2 Administrator..........................................17
8.3 Committee Action.......................................17
8.4 Powers and Duties of the Committee.....................18
8.5 Construction and Interpretation........................18
8.6 Information............................................18
8.7 Compensation, Expenses and Indemnity...................19
8.8 Quarterly Statements...................................19
8.9 Disputes...............................................19
ARTICLE IX. MISCELLANEOUS............................................20
9.1 Unsecured General Creditor.............................20
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9.2 Restriction Against Assignment.........................21
9.3 Withholding............................................21
9.4 Amendment, Modification, Suspension or Termination.....21
9.5 Designation of Beneficiary.............................21
9.6 Insurance..............................................22
9.7 Governing Law..........................................22
9.8 Receipt of Release.....................................22
9.9 Compliance with Code Section 162(m)....................22
9.10 Payments on Behalf of Persons Under Incapacity.........23
9.11 Limitation of Rights...................................23
9.12 Exempt ERISA Plan......................................23
9.13 Notice.................................................23
9.14 Errors and Misstatements...............................24
9.15 Pronouns and Plurality.................................24
9.16 Severability...........................................24
9.17 Status.................................................24
9.18 Headings...............................................24
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THE SEMPRA ENERGY
DEFERRED COMPENSATION AND EXCESS SAVINGS PLAN
Sempra Energy, a California corporation (the "Company"), and its direct
and indirect subsidiaries maintain the Sempra Energy Deferred
Compensation Plan for Directors, the Sempra Energy Executive Deferred
Compensation Plan, the Sempra Energy Deferred Compensation Plan, the
Sempra Energy Excess Savings Plan, the Pacific Enterprises Executive
Deferred Compensation Plan, the Pacific Enterprises Deferred
Compensation Plan for Directors, the Pacific Enterprises Deferred
Compensation Plan, the San Diego Gas & Electric Co. deferred
compensation agreements and the Enova deferred compensation agreements
to provide supplemental retirement income benefits for certain
directors and for a select group of management and highly compensated
employees.
The Company wishes to merge these plans and agreements in the form of
this Sempra Energy Deferred Compensation and Excess Savings Plan (the
"Plan") which is designed to provide supplemental retirement income
benefits for certain directors and for a select group of management and
highly compensated employees through deferrals of salary and incentive
compensation and Company matching contributions. This Plan is also
designed to provide for benefits that cannot be provided under the
Sempra Energy Savings Plan due to the limitations of Code Sections
401(a)(17), 402(g) and 415. This Plan shall be effective as of January
1, 2000.
ARTICLE I.
TITLE AND DEFINITIONS
1.1 Title.
This Plan shall be known as The Sempra Energy Deferred Compensation and
Excess Savings Plan.
1.2 Definitions.
Whenever the following words and phrases are used in this Plan, with
the first letter capitalized, they shall have the meanings specified
below.
(a) "Account" or "Accounts" shall mean a Participant's Deferral
Account, 401(k) Excess Account, Company Matching Account and/or
Transferred Account.
(b) "Affiliate" has the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act.
(c) "Base Salary" shall mean a Participant's annual base salary,
excluding bonus, incentive and all other remuneration for services
rendered to the Company, prior to reduction for any salary
contributions to a plan established pursuant to Section 125 of the Code
or qualified pursuant to Section 401(k) of the Code.
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(d) "Beneficial Owner" has the meaning set forth in Rule 1 3d-3
under the Exchange Act.
(e) "Beneficiary" or "Beneficiaries" shall mean the person or
persons, including a trustee, personal representative or other
fiduciary, last designated in writing by a Participant to receive the
benefits specified hereunder in the event of the Participant's death in
accordance with Section 9.5.
(f) "Board of Directors" or "Board" shall mean the Board of
Directors of the Company.
(g) "Bonus" shall mean the annual incentive award earned by a
Participant under the Company's short-term incentive plan. At the
Committee's sole discretion, other incentive payments may be included
in any Participant's Bonus.
(h) "Change in Control" shall be deemed to have occurred when:
(1) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Sempra Energy representing twenty percent
(20%) or more of the combined voting power of Sempra Energy's then
outstanding securities; or
(2) The following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on
the Effective Date, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including, but not
limited to, a consent solicitation, relating to the election of
directors of Sempra Energy) whose appointment or election by the Board
or nomination for election by Sempra Energy's shareholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously
so approved or recommended; or
(3) There is consummated a merger or consolidation of Sempra
Energy or any direct or indirect subsidiary of Sempra Energy with any
other corporation, other than (A) a merger or consolidation which would
result in the voting securities of Sempra Energy outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of Sempra Energy or
any subsidiary of Sempra Energy, at least sixty percent (60%) of the
combined voting power of the securities of Sempra Energy or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation, or (B) a merger or consolidation effected
to implement a recapitalization of Sempra Energy (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of Sempra Energy (not including
in the securities beneficially owned by such Person any securities
acquired directly from Sempra Energy or its affiliates other than in
connection with the acquisition by Sempra Energy or its affiliates of a
business) representing twenty percent (20%) or more of the combined
voting power of Sempra Energy's then outstanding securities; or
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(4) The shareholders of Sempra Energy approve a plan of complete
liquidation or dissolution of Sempra Energy or there is consummated an
agreement for the sale or disposition by Sempra Energy of all or
substantially all of Sempra Energy's assets, other than a sale or
disposition by Sempra Energy of all or substantially all of Sempra
Energy's assets to an entity, at least sixty percent (60%) of the
combined voting power of the voting securities of which are owned by
shareholders of Sempra Energy in substantially the same proportions as
their ownership of Sempra Energy immediately prior to such sale.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Committee" shall mean the compensation committee of the Board
of Directors.
(k) "Company" shall mean Sempra Energy and any successor
corporations. Company shall also include each corporation which is a
member of a controlled group of corporations (within the meaning of
Section 414(b) of the Code) of which Sempra Energy is a component
member, if the Board provides that such corporation shall participate
in the Plan and such corporation's governing board of directors adopts
this Plan.
(l) "Company Matching Account" shall mean the bookkeeping account
maintained by the Company for each Participant that is credited with an
amount equal to the Company Matching Contribution, if any, debited by
amounts equal to all distributions to and withdrawals made by the
Participant and/or his Beneficiary and adjusted for investment earnings
and losses pursuant to Article V. The Company Matching Account may be
further subdivided into sub-accounts, one representing the matching
contribution, if any, related to any deferral of Compensation, and a
second representing the matching contribution, if any, related to any
401(k) Excess contributed to the Plan.
(m) "Company Matching Contributions" shall mean the employer
matching contribution made to the Plan on behalf of Participants who
make deferrals under Article III.
(n) "Compensation" shall mean Base Salary, Bonus and Dividend
Equivalents that the Participant who is an employee is entitled to
receive for services rendered to the Company. Compensation shall mean
retainer payments and/or meeting and other fees, received from the
Company for services performed by any Participant as a Director.
(o) "Deferral Account" shall mean the bookkeeping account maintained
by the Company for each Participant that is credited with amounts equal
to the portion of the Participant's Compensation that he elects to
defer pursuant to Section 3.1, debited by amounts equal to all
distributions to and withdrawals made by the Participant and/or his
Beneficiary and adjusted for investment earnings and losses pursuant to
Article V.
(p) "Deferral Election Form" shall mean the form designated by the
Committee for purposes of making deferrals under Section 3.1.
(q) "Director" shall mean an individual who is a non-employee member
of the Board.
(r) "Disability" shall mean a "disability" as defined in the
Company's long-term disability plan, as then in effect.
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(s) "Distributable Amount" shall mean the sum of the vested balance
of a Participant's Deferral Account, 401(k) Excess Account, Company
Matching Account and Transferred Account.
(t) "Dividend Equivalent" shall mean the phantom dividends relating
to post-July 1, 1998 stock option grants under the 1998 Sempra Energy
Long-Term Incentive Plan which are eligible for deferral.
(u) "Early Distribution" shall mean an election by a Participant in
accordance with Section 7.2 to receive a withdrawal of amounts from his
or her Deferral Account, Transferred Account, Company Matching Account
and 401(k) Excess Account prior to the time in which such Participant
would otherwise be entitled to such amounts.
(v) "Effective Date" shall mean January 1, 2000.
(w) "Election Period" shall mean the period designated by the
Committee.
(x) "Eligible Individual" shall mean those individuals selected by
the Committee from (i) those employees of the Company who either (A)
are Executive Officers or (B) have Base Salary for a Calendar Year that
is at least $ 100,000, as adjusted by the Committee from time to time
and (ii) those Directors who are not employees of the Company. The
Committee may, in its sole discretion, select such other individuals to
participate in the Plan who do not otherwise meet the foregoing
criteria.
(y) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
(z) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the applicable rules and regulations thereunder.
(aa) "Executive Officer" shall mean an employee of the Company who
holds a position as an executive officer in the Company and is eligible
to participate in the Sempra Energy Supplemental Executive Retirement
Plan or is so designated by the Committee.
(bb) "401(k) Excess Account" shall mean the bookkeeping account
maintained by the Company for each Participant that is credited with
amounts equal to the Participant's 401(k) Excess that he elects to
defer pursuant to Section 3.1, debited by amounts equal to all
distributions to and withdrawals made by the Participant and/or his
Beneficiary and adjusted for investment earnings and losses pursuant to
Article V.
(cc) "401 (k) Excess" shall mean the amount, if any, which a
Participant may not contribute to the applicable 401(k) Plan by reason
of Code Section 401(a)(17) or 415 and the regulations issued
thereunder, or which may not be contributed to the applicable 401(k)
Plan by reason of the limitations set forth in Code Section 402(g).
(dd) "401(k) Plan" shall mean the Sempra Energy Savings Plan
maintained by the Company under Code Section 401(k), as in effect from
time to time or as applicable for any Participant, a plan maintained by
a direct or indirect subsidiary of the Company under Code
Section 401(k).
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(ee) "Manager" shall mean an employee of the Company who is an
Eligible Individual, other than an Executive Officer or a Director.
(ff) "Measurement Fund" shall mean one or more of the investment
funds selected by the Committee pursuant to Section 4.2.
(gg) "Moody's Plus Rate" shall mean the Moody's Rate (as defined
below) plus the greater of (i) 10% of the Moody's Corporate Bond Yield
Average - Monthly Average Corporates as published by Moody's Investors
Service, Inc. (or any successor) or (ii) one percentage point per
annum. The Moody's Rate for the month of June means the average of the
daily Moody's Corporate Bond Yield Average - Monthly Average Corporates
for the month of June.
(hh) "Participant" shall mean any Eligible Individual who becomes a
Participant in accordance with Article II.
(ii) "Payroll Date" shall mean, with respect to any Participant, the
date on which he would otherwise be paid Compensation.
(jj) "Payment Date" shall mean the time as soon as practicable after
(1) the first day of the month which is at least 30 days after the date
of the Participant's Termination or Retirement, (2) January 1 of the
year following the year in which the Participant has a Termination or
Retirement, or (3) the Scheduled Withdrawal Date, as the Participant
has elected.
(kk) "Person" means any person, entity or "group" within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except
that such term shall not include (i) the Company or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its Affiliates, (iii)
an underwriter temporarily holding securities pursuant to an offering
of such securities, (iv) a corporation owned, directly or indirectly,
by the shareholders of Sempra Energy in substantially the same
proportions as their ownership of stock of Sempra Energy, or (v) a
person or group as used in Rule 13d-l(b) under the Exchange Act.
(ll) "Plan" shall mean The Sempra Energy Deferred Compensation and
Excess Savings Plan set forth herein, as amended from time to time.
(mm) "Plan Year" shall mean the 12 consecutive month period
beginning on each January 1 and ending on each December 31.
(nn) "Prior Plans" shall mean the Sempra Energy Deferred
Compensation Plan for Directors, the Sempra Energy Executive Deferred
Compensation Plan, the Sempra Energy Deferred Compensation Plan, the
Sempra Energy Excess Savings Plan, the Pacific Enterprises Executive
Deferred Compensation Plan, the Pacific Enterprises Deferred
Compensation Plan for Directors, the Pacific Enterprises Deferred
Compensation Plan, the San Diego Gas & Electric Co. deferred
compensation agreements and the Enova deferred compensation agreements
5
designed to provide supplemental retirement income benefits for any
director or select group of management and highly compensated
employees of the Company or its direct and indirect subsidiaries.
(oo) "Prior Rate" shall mean the rate of investment return
established under the applicable Prior Plan, subject to the terms of
such Prior Plan.
(pp) "Retirement" shall mean, for a Participant who is an employee
of the Company, a Participant's voluntary retirement from employment
with the Company on or after age 55 and 5 years of employment with the
Company in accordance with the Company's retirement policies as then in
effect. Retirement shall mean, for a Participant who is a Director,
ceasing to be a Director for any reason other than for death or
Disability. If a Participant is both an employee of the Company and a
Director, Retirement shall occur only after he resigns from both
positions.
(qq) "Rule 1 6b-3" shall mean that certain Rule 1 6b-3 under the
Exchange Act, as such Rule may be amended from time to time.
(rr) "Scheduled Withdrawal Date" shall be in January in the year
elected by the Participant for an in-service withdrawal of all amounts
of Compensation or 401(k) Excess deferred in a given Plan Year, but
excluding earnings and losses attributable thereto, as set forth on the
election forms for such Plan Year.
(ss) "Sempra Energy Stock Fund" shall mean the Measurement Fund in
which investment earnings and losses parallel the investment return on
the common stock of the Company.
(tt) "Termination" shall mean for any Participant who is an
employee, ceasing to be an employee of the Company for reasons other
than death, Disability or Retirement. For any Participant who is a
Director, "Termination" shall mean ceasing to be a Director for any
reason, including death, Disability or Retirement. If a Participant is
both an employee of the Company and a Director, he shall not have a
Termination until he resigns from both positions.
(uu) "Transferred Account" shall mean the bookkeeping account
maintained by the Company for each Participant that is credited with
amounts which were transferred from a Prior Plan, debited by amounts
equal to all distributions and withdrawals made to the Participant or
his Beneficiary and adjusted for investment earnings and losses
pursuant to Article V.
(vv) "Valuation Date", with respect to the Measurement Funds that
are available under the 401 (k) Plan, shall have the same meaning as
under the 401 (k) Plan. For purposes of the Moody's Plus Rate,
"Valuation Date" shall mean the last day of the calendar month. For
purposes of the Prior Rate, "Valuation Date" shall have the same
meaning it has under the applicable Prior Plan.
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ARTICLE II.
PARTICIPATION
An Eligible Individual shall become a Participant in the Plan by (1)
electing to make deferrals in accordance with Section 3.1 and (2)
filing such other forms as the Committee may reasonably require for
participation hereunder. Additionally, in order to defer 401(k) Excess,
the Eligible Individual must be making 401(k) contributions to the
401(k) Plan at the rate of no less than 6% of compensation (as defined
in the 401 (k) Plan) for the year. An Eligible Individual who completes
the requirements of the preceding sentences shall commence
participation in this Plan as of the first Payroll Date with respect to
which Compensation is deferred.
ARTICLE III.
CONTRIBUTIONS
3.1 Elections to Defer Compensation and 401(k) Excess
(a) General Rule. Each Participant may defer Base Salary, Dividend
Equivalents, Bonus and/or 401(k) Excess by filing with the Committee a
Deferral Election Form that conforms to the requirements of this
Section 3.1, no later than the last day of the applicable Election
Period. The Committee may permit an Eligible Individual to have his
first Election Period during a Plan Year. An election to defer
Compensation must be filed during the Election Period prior to the
effective date of such election and will be effective for Compensation
earned during periods beginning after the effective date of such
election.
(b) Deferral Amounts. The amount of Compensation and/or 401 (k)
Excess which a Participant may elect to defer is such Compensation
and/or 401(k) Excess earned on or after the time at which the
Participant elects to defer each Plan Year in accordance with Section
3.1(a). The applicable limitations for any Participant shall be
determined based on his classification by the Committee.
(1) Each Participant who is a Manager shall be permitted to defer
(A) from 5% to 50% of Base Salary and (B) from 5% to 100% of his Bonus
and Dividend Equivalents.
(2) Each Participant who is an Executive Officer shall be
permitted to defer (A) from 10% to 100% of Base Salary and (B) from 10%
to 100% of his Bonus and Dividend Equivalents.
(3) Each Participant who is a Director shall be permitted to defer
from 10% to 100% of his Compensation.
(4) Each Participant who participates in the 401(k) Plan and makes
401(k) contributions at a rate of 6% of compensation (as defined in the
401(k) Plan) per year shall be deemed to make the same election under
this Plan that he has made under the applicable 401(k) Plan, not to
exceed 15% of Base Salary for purposes of deferring 401(k) Excess under
the Plan, unless a contrary election is made under the Plan.
7
Notwithstanding the limitations established above, the total amount
deferred by a Participant may be limited in any calendar year, if
necessary, to satisfy the Participant's income and employment tax
withholding obligations (including Social Security, unemployment and
Medicare), and the Participant's employee benefit plan contribution
requirements, as determined in the sole and absolute discretion of the
Committee. If permitted by the Committee, the Participant may make
deferrals with respect to any designated portion of his Compensation
(such as meeting fees, for example).
(c) Ordering Rule. If a Participant elects to defer both
Compensation and 401(k) Excess, the Compensation deferrals will be
deducted from the Participant's compensation and contributed to the
Plan before any 401(k) Excess deferrals.
(d) Duration of Deferral Election.
(1) A Participant's election to defer made during the Election
Period immediately preceding the next Plan Year (or, if the
Participant's first Election Period, made during a Plan Year) is
effective for the next Plan Year (or, if the Participant's first
Election Period, for the remainder of the Plan Year), except as
modified or suspended.
(2) If permitted by the Administrator, a Participant may modify or
suspend his election to defer Compensation and/or 401(k) Excess during
a Plan Year only in the event that (A) the Participant has a change in
marital status, (B) the Participant has a change in the number of his
dependents (as defined under Code Section 152(a)) or (C) the
Participant or his spouse has a change in employment status (as
determined by the Administrator). Such modification or suspension shall
be made by filing such an election during the Election Period
immediately prior to the date of such modification or suspension is to
be effective.
(3) A Participant's election to defer 401(k) Excess shall
automatically be suspended for the remainder of the Plan Year if the
Participant's election under the 401 (k) Plan falls below 6% of his
compensation (as defined under the 401(k) Plan) per year.
(4) Except as provided in Section 3.1 (b)(4), a Participant must
file a new election for each subsequent Plan Year during the Election
Period immediately prior to the next Plan Year, which election shall be
effective on the first day of the next following Plan Year. In the
event a Participant fails to timely file an election for the next Plan
Year, he should be deemed to have elected not to have deferred any
Compensation and or 401(k) Excess for any relevant period except as
provided in Section 3.1(b)(4).
(e) Elections. Subject to the limitations of subsection (b), any
Eligible Individual who does not elect to defer Compensation and/or
401(k) Excess during his Election Period may subsequently become a
Participant. Subject to the limitations of subsection (b), any Eligible
Individual who has terminated a prior deferral election may elect to
again defer Compensation and/or 401(k) Excess by filing a Deferral
Election Form during a subsequent Election Period.
(f) Termination of Participation and/or Deferrals. If the Committee
determines in good faith that a Participant no longer qualifies as a
Director or a member of a select group of management or highly
compensated employees, as membership in such group is determined in
accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the
Committee shall have
8
the right, in its sole discretion and only for purposes of preserving
the Plan's exemption from Title I of ERISA, to (i) terminate any
deferral election the Participant has made for the remainder of the
Plan Year in which the Participant's membership status changes, (ii)
prevent the Participant from making future deferral elections and/or
(iii) immediately distribute the balance of the participant's Accounts
and terminate the Participant's participation in the Plan.
3.2 Transfers from Prior Plans.
All amounts credited to this Plan as a result of the merger of the
Prior Plans shall be credited to Participants' Transferred Accounts
under this Plan. Each Participant is always 100% vested in his
Transferred Account at all times. No additional amounts may be
contributed to a Participant's Transferred Account other than
investment earnings. Any amounts so transferred to a Participant's
Transferred Account will be subject to the terms of this Plan for all
purposes, except as provided in Section 4.3 and Section 7.1(a)(6).
3.3 Company Matching Contributions
(a) The Company shall make a Company Matching Contribution on behalf
of select Participants who make deferrals under Article III in an
amount equal to
(1) the product of (A) the rate of the matching contribution under
the 401 (k) Plan in which the Participant participates and (B) the sum
of the Participant's Base Salary and Bonus,
less
(2) the amount credited to the Participant's matching contribution
account under the 401(k) Plan for that Plan Year.
Notwithstanding the above, the Company reserves the right to change the
Company Matching Contribution in its sole discretion.
(b) Pursuant to the Committee's procedures, for each Plan Year each
Participant's Company Matching Account shall be credited with an amount
described in subsection (a) above, if any.
3.4 FICA and Other Taxes.
(a) Annual Deferral Amounts. For each Plan Year in which a
Participant who is an employee makes a deferral under Section 3.1, the
Company shall withhold from that portion of the Participant's
Compensation that is not being deferred, in a manner determined by the
Company, the Participant's share of FICA and other employment taxes on
such amount. If necessary, the Committee may reduce the Participant's
deferrals under Section 3.1 in order to comply with this Section.
(b) Company Matching Amounts. For each Plan Year in which a
Participant is credited with a contribution to his or her Company
Matching Account under Section 3.3, the Company shall withhold from the
Participant's Compensation that is not deferred, in a manner
9
determined by the Company, the Participant's share of FICA and other
employment taxes. If necessary, the Committee may reduce the
Participant's Company Matching Account in order to comply with this
Section.
ARTICLE IV.
INVESTMENTS
4.1 Measurement Funds.
(a) In the manner designated by the Committee, Participants may
elect one or more Measurement Funds to be used to determine the
additional amounts to be credited to their Accounts. Although the
Participant may designate the Measurement Funds, the Committee shall
not be bound by such designation. The Committee shall select from time
to time, in its sole discretion, the Measurement Funds to be available
under the Plan.
(b) No Actual Investment. Notwithstanding any other provision of
this Plan that may be interpreted to the contrary, the Measurement
Funds are to be used for measurement purposes only, and a Participant's
election of any such Measurement Fund, the allocation to his Accounts
thereto, the calculation of additional amounts and the crediting or
debiting of such amounts to a Participant's Accounts shall not be
considered or construed in any manner as an actual investment of his
Accounts in any such Measurement Fund. In the event that the Company or
the trustee, in its own discretion, decides to invest funds in any or
all of the Measurement Funds, no Participant shall have any rights in
or to such investments themselves. Without limiting the foregoing, a
Participant's Accounts shall at all times be a bookkeeping entry only
and shall not represent any investment made on his or her behalf by the
Company. The Participant shall at all times remain an unsecured
creditor of the Company.
4.2 Investment Elections.
(a) Executive Officers and Director Participants.
(1) Deferral. 401(k) Excess and Transferred Accounts. Except as
provided in Section 4.3, Participants who are either Executive Officers
or Directors may designate how their Deferral, 401(k) Excess and
Transferred Accounts will be deemed to be invested under the Plan.
(A) Such Participants may make separate investment elections for
(I) their future deferrals of Compensation and 401(k) Excess as well as
transfers under Section 3.2 and (II) the existing balances of their
Deferral, 401(k) Excess and Transferred Accounts.
(B) Such Participants may make and change their investment
elections by choosing from the Measurement Funds designated by the
Committee in accordance with the procedures established by the
Committee.
(C) Except as otherwise designated by the Committee, the available
Measurement Funds under this Section 4.2(a)(1) shall be the investment
funds under the 401(k) Plan (excluding the Stable Value Fund and any
brokerage account option).
10
Additionally, for the Deferral Account only, there shall also be a
Measurement Fund based on the Moody's Plus Rate.
(D) If a Participant fails to elect a Measurement Fund under this
Section, he shall be deemed to have elected the default Measurement
Fund (as designated by the Committee) for all of his Accounts.
(2) Company Matching Account. Participants may not direct the
investment of their Company Matching Account which will be deemed to be
invested in the Sempra Energy Stock Fund.
(b) Manager Participants.
(1) 401(k) Excess Accounts. Except as provided in Section 4.3,
Participants who are Managers may designate how their 401(k) Excess
Accounts will be deemed to be invested under the Plan.
(A) Manager Participants may make separate investment elections
for (I) their future deferrals of 401 (k) Excess and (II) the existing
balances of their 401 (k) Excess Accounts.
(B) Participants may make and change their investment elections by
choosing from the Measurement Funds designated by the Committee in
accordance with the procedures established by the Committee.
(C) Except as otherwise designated by the Committee, the available
Measurement Funds under this Section 4.2(b)(1) for the 401(k) Excess
Accounts shall be the investment funds under the 401(k) Plan (excluding
the Stable Value Fund and any brokerage account option).
(D) If a Participant fails to elect a Measurement Fund under this
Section, he shall be deemed to have elected the default Measurement
Fund (as designated by the Committee) for his 401(k) Excess Account.
(2) Deferral Account. Any Participant who is a Manager will have
his Deferral Account invested in the Measurement Fund based on the
Moody's Plus Rate, except as otherwise permitted by the Committee.
(3) Company Matching Account. Participants may not direct the
investment of their Company Matching Account which will be invested in
the Sempra Energy Stock Fund.
(c) Participants who have had a Termination but not yet commenced
distributions under Article VII or Participants or Beneficiaries who
are receiving installment payments may continue to make investment
elections pursuant to subsection (a) and (b) above, as applicable,
except as otherwise determined by the Committee.
11
4.3 Investment of Transferred Accounts.
(a) Each Participant's Transferred Account balance shall be treated
as invested in a Measurement Fund with a rate of investment return
based solely on the Prior Rate, except as provided in subsection (b).
(b) In accordance with the procedures established by the Committee,
once each calendar quarter an Executive Officer Participant or a
Director Participant may elect to transfer a designated percentage of
the balance of his Transferred Account to new Measurement Funds, as
provided in Section 4.2. As of the effective date of such an election,
such designated percentage of the balance of his Transferred Account
may be allocated to the Participant's other Accounts in accordance with
the type of contributions with which it is credited (i.e., pre-tax
deferrals will be credited to the Participant's Deferral Account). Such
portion of the Transferred Account shall cease to be credited with
investment returns at the Prior Rate and may not be subsequently
invested at the Prior Rate.
4.4 Compliance with Section 16 of the Exchange Act.
(a) Any Participant or Beneficiary who is subject to Section 16 of
the Exchange Act shall have his Measurement Fund elections under the
Plan subject to the requirements of the Exchange Act, as interpreted by
the Committee. Any such Participant or Beneficiary who elects to have
any portion of his Deferral, 401 (k) Excess or Transferred Accounts,
his future deferrals (pursuant to Section 3.1) or future transfers
(pursuant to Section 3.2) either (i) invested in the Sempra Energy
Stock Fund or (ii) transferred from the Sempra Energy Stock Fund to
another available Measurement Fund under the Plan may not make an
election with the opposite effect under this Plan or any other Company-
sponsored plan until six months and one day following the original
election.
(b) Notwithstanding any other provision of the Plan or any rule,
instruction, election form or other form, the Plan and any such rule,
instruction or form shall be subject to any additional conditions or
limitations set forth in any applicable exemptive rule under Section 16
of the Exchange Act (including any amendment to Rule 1 6b-3) that are
requirements for the application of such exemptive rule. To the extent
permitted by applicable law, such Plan provision, rule, instruction or
form shall be deemed amended to the extent necessary to conform to such
applicable exemptive rule.
ARTICLE V.
ACCOUNTS
5.1 Accounts.
(a) The Committee shall establish and maintain a Deferral Account,
401 (k) Excess Account, Transferred Account and Company Matching
Account for each Participant under the Plan. Each Participant's
Accounts shall be further divided into separate subaccounts
("investment fund subaccounts"), each of which corresponds to a
Measurement Fund elected by the Participant pursuant to Section 4.2.
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(b) The performance of each elected Measurement Fund (either
positive or negative) will be determined by the Committee, in its
reasonable discretion, based on the performance of the Measurement
Funds themselves. A Participant's Accounts shall be credited or debited
on each Valuation Date based on the performance of each Measurement
Fund selected by the Participant, as determined by the Committee in its
sole discretion, as though (i) a Participant's Accounts were invested
in the Measurement Fund(s) selected by the Participant, in the
percentages applicable to such period, as of the close of business on
the first business day of such period, at the closing price on such
date; (ii) the portion of the Participant's Compensation that was
actually deferred pursuant to Section 3.1 during any period were
invested in the Measurement Fund(s) selected by the Participant, in the
percentages applicable to such period, no later than the close of
business on the first business day after the day on which such amounts
are actually deferred from the Participant's Compensation, at the
closing price on such date; and (iii) any withdrawal or distribution
made to a Participant that decreases such Participant's Accounts ceased
being invested in the Measurement Fund(s), in the percentages
applicable to such period, no earlier than one business day prior to
the distribution, at the closing price on such date. The Participant's
Company Matching Contribution, if any, shall be credited to his Company
Matching Account for purposes of this Section in the manner determined
by the Committee.
ARTICLE VI.
VESTING
Each Participant shall be 100% vested in his Deferral Account, 401(k)
Excess Account, Matching Account and Transferred Account at all times.
ARTICLE VII.
DISTRIBUTIONS
7.1 Distribution of Accounts.
(a) Distribution at Termination. Disability or Retirement.
(1) Normal Form. Except as provided in subsection 7.1(a)(2),
subsection 7.1 (a)(6) or Section 7.4, upon the Termination, Disability
or Retirement of the Participant, the Distributable Amount shall be
paid to the Participant in substantially equal annual installments over
10 years beginning on the Participant's Payment Date.
(2) Optional Forms. Instead of receiving his Distributable Amount
as described at Section 7.1(a)(1), the Participant may elect one of the
following optional forms of payment (on the form provided by Company)
at the time of his deferral election:
(i) annual installments (calculated as set forth at subsection 7.1
(a)(5)) over 5 years beginning on the Participant's Payment Date,
(ii) annual installments (calculated as set forth at subsection 7.
l(a)(5)) over 15 years beginning on the Participant's Payment Date, or
13
(iii) a lump sum.
A Participant may change his election with respect to the frequency of
payment, provided such change in the frequency of payment occurs at
least one year prior to the Participant's Termination or Retirement.
(3) Small Accounts. Notwithstanding any provision to the contrary,
in the event the Distributable Amount is equal to or less than $25,000,
such Distributable Amount shall be distributed to the Participant (or
his Beneficiary, as applicable) in a lump sum.
(4) Investment Adjustments. The Participant's Accounts shall
continue to be adjusted for investment earnings and losses pursuant to
Section 4.2 and Section 4.3 of the Plan until all amounts credited to
his Accounts under the Plan have been distributed.
(5) Calculating Installments. All installment payments made under
the Plan shall be determined in accordance with the annual fractional
payment method, calculated as follows: the balance of the Participant's
Accounts shall be calculated as of the close of business on the last
business day of the year. The annual installment shall be calculated by
multiplying this balance by a fraction, the numerator of which is one,
and the denominator of which is the remaining number of annual payments
due the Participant. By way of example, if the Participant elects 10
year installments the first payment shall be 1/10 of the balance of his
Accounts calculated as described in this definition. The following
year, the payment shall be 1/9 of the balance of the Participant's
Accounts, calculated as described in this definition. Each annual
installment shall be paid on or as soon as practicable after the last
business day of the applicable year.
(6) Distribution of Transferred Accounts. Until a Participant so
elects, his Transferred Account shall be subject to his most recent
form of distribution election in effect under the applicable Prior
Plan. However, if the Participant elects to apply his distribution
election in effect under this Plan to the balance of his Transferred
Account, then any prior distribution election under the Prior Plan
shall automatically be permanently revoked.
(b) Distribution on a Scheduled Withdrawal Date.
(i) In the case of a Participant who has elected a Scheduled
Withdrawal Date for a distribution while still in the employ of the
Company or while still a Director, such Participant shall receive his
or her deferrals of Compensation and 401 (k) Excess (but excluding any
investment earnings on such amounts) (the "Withdrawal Amount") as shall
have been elected by the Participant to be subject to the Scheduled
Withdrawal Date. A Participant's Scheduled Withdrawal Date with respect
to amounts of Compensation and/or 401(k) Excess deferred in a given
Plan Year be at least three years from the last day of the Plan Year
for which such deferrals are made.
(ii) The Withdrawal Amount shall be paid in a lump sum.
(iii) A Participant may extend the Scheduled Withdrawal Date for the
Withdrawal Amount for any Plan Year, provided such extension occurs at
least one year before the scheduled Withdrawal Date and is for a period
of not less than five years from the Scheduled
14
Withdrawal Date. The Participant shall have the right to modify any
Scheduled Withdrawal Date only once, without the consent of the
Committee, by submitting a written notice of such modification to the
Committee at least one year in advance of the originally elected
Scheduled Withdrawal Date. A Participant who has modified a Scheduled
Withdrawal Date, may again once further modify the Scheduled Withdrawal
Date, but only with the consent of the Committee.
(iv) In the event of Participant's Termination, Disability or
Retirement prior to a Scheduled Withdrawal Date, the Participant's
entire Withdrawal Amount will be paid in accordance with the
Participant's election under Section 7.1(b). In the event of a
Participant's death prior to a Scheduled Withdrawal Date, the
Participant's entire Withdrawal Amount will be paid as soon as
practicable after the Termination in a lump sum.
(c) Distribution upon Death. In the event a Participant dies before
he has begun receiving distributions under Section 7.1(a), his Accounts
will be paid to his Beneficiary in the same manner elected by the
Participant. In the event a Participant dies after he has begun
receiving distributions under Section 7.1 (a) with a remaining balance
in his Accounts, the balance shall continue to be paid to his
Beneficiary in the same manner. Notwithstanding the above, the
Committee may, in its sole discretion, permit the Beneficiary to
receive an immediate lump sum payment of the Participant's Accounts
reduced by a penalty of 10% of the balance of the Accounts. The penalty
amount shall be permanently forfeited and the Company shall have no
obligation to the Beneficiary with respect to such forfeited amount.
(d) Other Distribution. Independent of any termination of this Plan,
if the Internal Revenue Service makes a final determination that
amounts under this Plan are immediately taxable to any Participant or
Beneficiary, the Committee has the discretion to accelerate
distributions under the Plan to such Participants or Beneficiaries.
7.2 Early Distributions.
A Participant shall be permitted to elect an Early Distribution from
his or her Deferral Account, 401(k) Excess Account and Transferred
Account prior to the Payment Date, subject to the following
restrictions:
(a) The election to take an Early Distribution shall be made by
filing a form provided by and filed with the Committee prior to the end
of any calendar month.
(b) The amount of the Early Distribution shall in all cases be an
amount not less than $10,000.
(c) The amount described in subsection (b) above shall be paid in a
single cash lump sum as soon as practicable after the end of the
calendar month in which the Early Distribution election is made.
(d) If a Participant requests an Early Distribution, 10% of the
gross amount to be distributed shall be permanently forfeited and the
Company shall have no obligation to the Participant or his Beneficiary
with respect to such forfeited amount.
15
(e) If a Participant receives an Early Distribution the Participant
will be ineligible to contribute deferrals to the Plan for the
remainder of the Plan Year and for the next following Plan Year.
7.3 Hardship Distribution.
(a) A Participant shall be permitted to elect a Hardship
Distribution of all or a portion of his Accounts under the Plan prior
to the Payment Date, subject to the following restrictions:
(1) The election to take a Hardship Distribution shall be made by
filing the form provided by the Committee before the date established
by the Committee.
(2) The Committee shall have made a determination in its sole
discretion that the requested distribution constitutes a Hardship
Distribution in accordance with subsection (b).
(3) The amount determined by the Committee as a Hardship
Distribution shall be paid in a single cash lump sum as soon as
practicable after the end of the calendar month in which the Hardship
Distribution election is made and approved by the Committee.
(4) If a Participant receives a Hardship Distribution, the
Participant will be ineligible to contribute deferrals to the Plan for
the balance of the Plan Year and the following Plan Year.
(b) "Hardship Distribution" shall mean a severe financial hardship
to the Participant resulting from (i) a sudden and unexpected illness
or accident of the Participant or of his or her dependent (as defined
in Section 1 52(a) of the Code), (ii) loss of a Participant's property
due to casualty, or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The circumstances that would constitute an unforeseeable
emergency will depend upon the facts of each case, but, in any case, a
Hardship Distribution may not be made to the extent that such hardship
is or may be relieved (A) through reimbursement or compensation by
insurance or otherwise, (B) by liquidation of the Participant's assets,
to the extent the liquidation of such assets would not itself cause
severe financial hardship or (C) by cessation of deferrals under this
Plan
7.4 Effect of a Chance in Control.
(a) In the event there is a Change in Control, the person who is the
chief executive officer (or, if not so identified, the Company's
highest ranking officer) shall name a third-party fiduciary as the sole
member of the Committee immediately prior to such Change in Control.
The appointed fiduciary, in its sole discretion, may permit immediate
distributions. If permitted by the appointed fiduciary, a Participant
who has a Termination within 24 months of the effective date of the
Change in Control may elect one of the optional forms of distribution
as provided in Section 7.1(a)(2).l
(b) Upon and after the occurrence of a Change in Control, the
Company must (i) pay all reasonable administrative fees and expenses of
the appointed fiduciary and (ii) indemnify the appointed fiduciary
against any costs, expenses and liabilities including, without
limitation, attorney's fees and expenses arising in connection with the
appointed fiduciary's duties
16
hereunder, other than with respect to matters resulting from the gross
negligence of the appointed fiduciary or its agents or employees and
(iii) timely provide the appointed fiduciary with all necessary
information related to the Plan, the Participants and Beneficiaries.
(c) Notwithstanding Section 9.4, in the event there is a Change in
Control no amendment may be made to this Plan except as approved by the
third-party fiduciary. Upon a Change in Control, assets shall be placed
in a rabbi trust in an amount which shall equal the full accrued
liability under this Plan as determined by Towers Perrin, or a
successor actuarial firm.
7.5 Inability to Locate Participant.
In the event that the Committee is unable to locate a Participant or
Beneficiary within two years following the required Payment Date, the
amount allocated to the Participant's Accounts shall be forfeited. If,
after such forfeiture, the Participant or Beneficiary later claims such
benefit, such benefit shall be reinstated without interest or earnings
from the date of forfeiture, subject to applicable escheat laws.
ARTICLE VIII.
ADMINISTRATION
8. I Committee.
The Committee shall administer the Plan in accordance with this
Article.
8.2 Administrator.
The Committee may designate an individual (who need not be a member of
the Committee) to handle the day-to-day Plan administration (the
"Administrator"). If the Committee does not make such a designation,
the Administrator shall be the Senior Vice-President of Human
Resources. The Administrator, unless restricted by the Committee, shall
exercise the powers under Sections 8.4 and 8.5 except when the exercise
of such authority would materially affect the cost of the Plan to the
Company or materially increase benefits to Participants.
8.3 Committee Action.
The Committee shall act at meetings by affirmative vote of a majority
of the members of the Committee. Any action permitted to be taken at a
meeting may be taken without a meeting if, prior to such action, a
written consent to the action is signed by all members of the Committee
and such written consent is filed with the minutes of the proceedings
of the Committee. A member of the Committee shall not vote or act upon
any matter which relates solely to himself or herself as a Participant.
The chairman or any other member or members of the Committee designated
by the chairman may execute any certificate or other written direction
of behalf of the Committee.
17
8.4 Powers and Duties of the Committee.
(a) The Committee, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan in accordance with its terms,
shall be charged with the general administration of the Plan, and shall
have all powers necessary to accomplish its purposes as set forth
herein, including, but not by way of limitation, the following:
(1) To select the Measurement Funds in accordance with Section 4.2
hereof;
(2) To construe and interpret the terms and provisions of the Plan
and to remedy any inconsistencies or ambiguities hereunder;
(3) To select employees eligible to participate in the Plan;
(4) To compute and certify to the amount and kind of benefits
payable to Participants and their Beneficiaries;
(5) To maintain all records that may be necessary for the
administration of the Plan;
(6) To provide for the disclosure of all information and the
filing or provision of all reports and statements to Participants,
Beneficiaries or governmental agencies as shall be required by law;
(7) To make and publish such rules for the regulation of the Plan
and procedures for the administration of the Plan as are not
inconsistent with the terms hereof;
(8) To appoint a plan administrator or any other agent, and to
delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to time
prescribe; and
(9) To take all actions necessary for the administration of the Plan.
8.5 Construction and Interpretation.
The Committee shall have full discretion to construe and interpret the
terms and provisions of this Plan, which interpretations or
construction shall be final and binding on all parties, including but
not limited to the Company and any Participant or Beneficiary. The
Committee shall administer such terms and provisions in a uniform and
nondiscriminatory manner and in full accordance with any and all laws
applicable to the Plan.
8.6 Information.
To enable the Committee to perform its functions, the Company shall
supply full and timely information to the Committee on all matters
relating to the Compensation of all Participants, their death or other
events which cause termination of their participation in this Plan, and
such other pertinent facts as the Committee may require.
18
8.7 Compensation, Expenses, and Indemnity.
(a) The members of the Committee shall serve without compensation
for their services hereunder.
(b) The Committee is authorized at the expense of the Company to
employ such legal counsel and other advisors as it may deem advisable
to assist in the performance of its duties hereunder. Expenses and fees
in connection with the administration of the Plan shall be paid by
the Company.
(c) To the extent permitted by applicable state law, the Company
shall indemnify and save harmless the Committee and each member
thereof, the Board of Directors and any delegate of the Committee who
is an employee of the Company against any and all expenses, liabilities
and claims, including legal fees to defend against such liabilities and
claims arising out of their discharge in good faith of responsibilities
under or incident to the Plan, other than expenses and liabilities
arising out of willful misconduct. This indemnity shall not preclude
such further indemnities as may be available under insurance purchased
by the Company or provided by the Company under any bylaw, agreement or
otherwise, as such indemnities are permitted under state law.
8.8 Quarterly Statements.
Under procedures established by the Committee, a Participant shall
receive a statement with respect to such Participant's Accounts on a
quarterly basis as of each March 31, June 30, September 30 and December
31.
8.9 Disputes.
(a) Claim.
A person who believes that he or she is being denied a benefit to which
he or she is entitled under this Agreement (hereinafter referred to as
"Claimant") may file a written request for such benefit with the
Administrator, setting forth his or her claim. The request must be
addressed to the Administrator at the Company at its then principal
place of business.
(b) Claim Decision.
Upon receipt of a claim, the Administrator shall advise the Claimant
that a reply will be forthcoming within 90 days and shall, in fact,
deliver such reply within such period. The Administrator may, however,
extend the reply period for an additional 90 days for special
circumstances.
If the claim is denied in whole or in part, the Administrator shall
inform the Claimant in writing, using language calculated to be
understood by the Claimant, setting forth: (i) the specified reason or
reasons for such denial; (ii) the specific reference to pertinent
provisions of this Agreement on which such denial is based; (iii) a
description of any additional material or information necessary for the
Claimant to perfect his or her claim and an explanation of why such
material or such information is necessary; (iv) appropriate information
as to the steps to be
19
taken if the Claimant wishes to submit the claim for review; and (v)
the time limits for requesting a review under subsection (c).
(c) Request For Review.
With 60 days after the receipt by the Claimant of the written opinion
described above, the Claimant may request in writing a review the
determination of the Administrator. Such review shall be completed by
the Senior Vice-President of Human Resources of the Company for
Participants who are Managers and by the Committee for Participants who
are Executive Officers or Directors. Such request must be addressed to
the Secretary of the Company, at its then principal place of business.
The Claimant or his or her duly authorized representative may, but need
not, review the pertinent documents and submit issues and comments in
writing for consideration by the Senior Vice-President of Human
Resources or the Committee, as applicable. If the Claimant does not
request a review within such 60 day period, he or she shall be barred
and estopped from challenging the Administrator's determination.
(d) Review of Decision.
Within 60 days after the receipt of a request for review by the Senior
Vice-President of Human Resources or the Compensation Committee, as
applicable, after considering all materials presented by the Claimant,
the Senior Vice-President of Human Resources or the Compensation
Committee, as applicable, will inform the Participant in writing, in a
manner calculated to be understood by the Claimant, the decision
setting forth the specific reasons for the decision contained specific
references to the pertinent provisions of this Plan on which the
decision is based. If special circumstances require that the 60 day
time period be extended, the Senior Vice- President of Human Resources
or the Compensation Committee, as applicable, will so notify the
Claimant and will render the decision as soon as possible, but no later
than 120 days after receipt of the request for review.
ARTICLE IX.
MISCELLANEOUS
9.1 Unsecured General Creditor.
Participants and their Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interest in any
specific property or assets of the Company. No assets of the Company
shall be held in any way as collateral security for the fulfilling of
the obligations of the Company under this Plan. Any and all of the
Company's assets shall be, and remain, the general unpledged,
unrestricted assets of the Company. The Company's obligation under the
Plan shall be merely that of an unfunded and unsecured promise of the
Company to pay money in the future, and the rights of the Participants
and Beneficiaries shall be no greater than those of unsecured general
creditors. It is the intention of the Company that this Plan be
unfunded for purposes of the Code and Title I of ERISA.
20
9.2 Restriction Against Assignment.
(a) The Company shall pay all amounts payable hereunder only to the
person or persons designated by the Plan and not to any other person or
entity. No right, title or interest in the Plan or in any account may
be sold, pledged, assigned or transferred in any manner other than by
will or the laws of descent and distribution. No right, title or
interest in the Plan or in any Account shall be liable for the debts,
contracts or engagements of the Participant or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding
sentence.
(b) Notwithstanding the provisions of subsection (a), a
Participant's interest in his Account may be transferred by the
Participant pursuant to a domestic relations order that constitutes a
"qualified domestic relations order" as defined by the Code or Title I
of ERISA.
9.3 Withholding.
There shall be deducted from each payment made under the Plan or any
other Compensation payable to the Participant (or Beneficiary) all
taxes which are required to be withheld by the Company in respect to
such payment or this Plan. The Company shall have the right to reduce
any payment (or compensation) by the amount of such of cash sufficient
to provide the amount of said taxes.
9.4 Amendment, Modification, Suspension or Termination.
Subject to Section 7.4, the Committee may amend, modify, suspend or
terminate the Plan in whole or in part, except that no amendment,
modification, suspension or termination shall have any retroactive
effect to reduce any vested amounts allocated to a Participant's
Accounts. In the event of Plan termination, distributions may be
accelerated.
9.5 Designation of Beneficiary.
(a) Each Participant shall have the right to designate, revoke and
redesignate Beneficiaries hereunder and to direct payment of his
Distributable Amount to such Beneficiaries upon his death.
(b) Designation, revocation and redesignation of Beneficiaries must
be made in writing in accordance with the procedures established by the
Committee and shall be effective upon delivery to the Committee.
(c) No designation of a Beneficiary other than the Participant's
spouse shall be valid unless consented in writing by such spouse. If
there is no Beneficiary designation in effect, or the designated
beneficiary does not survive the Participant, then the Participant's
spouse shall be the Beneficiary. If there is no surviving spouse, the
duly appointed and currently acting personal
21
representative of the Participant's estate (which shall include either
the Participant's probate estate or living trust) shall be the
Beneficiary.
(d) After the Participant's death, any Beneficiary (other than the
Participant's estate) who is to receive installment payments may
designate a secondary beneficiary to receive amounts due under this
Plan to the Beneficiary in the event of the Beneficiary's death prior
to receiving full payment from the Plan. If no secondary beneficiary is
designated, it shall be the Beneficiary's estate.
9.6 Insurance.
(a) As a condition of participation in this Plan, each Participant
shall, if requested by the Committee or the Company, undergo such
examination and provide such information as may be required by the
Company with respect to any insurance contracts on the Participant's
life and shall authorize the Company to purchase life insurance on his
life, payable to the Company.
(b) If an insurance policy is invalidated because a Participant
commits suicide during the two-year period beginning on the first day
of the first Plan Year of such Participant's participation in the Plan,
or if the Participant makes any material misstatement of information or
nondisclosure of medical history, then no benefits will be payable
hereunder to such Participant, his Beneficiary or his surviving spouse,
other than payment of the amount of deferrals of Compensation and/or
401(k) Excess then credited to the Participant's Accounts, without any
interest including interest theretofore credited under this Plan.
9.7 Governing Law.
Subject to ERISA, this Plan shall be construed, governed and
administered in accordance with the laws of the State of California.
9.8 Receipt of Release.
Any payment to a Participant or the Participant's Beneficiary in
accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims against the Committee
and the Company. The Committee may require such Participant or
Beneficiary, as a condition precedent to such payment, to execute a
receipt and release to such effect.
9.9 Compliance with Code Section 162(m)
It is the intent of the Company that any Compensation which is deferred
under the Plan by a person who is, with respect to the year of
distribution, deemed by the Committee to be a "covered employee" within
the meaning of Code Section 162(m) and regulations thereunder, which
Compensation constitutes either "qualified performance-based
compensation" within the meaning of Code Section 1 62(m) and
regulations thereunder or compensation not otherwise subject to the
limitation on deductibility under Section 162(m) and regulations
thereunder, shall not, as a result of deferral hereunder, become
compensation with respect to which the Company in fact would not be
entitled to a tax deduction under Code Section 162(m). If the Company
determines in good faith prior to a Change in Control that there is a
reasonable likelihood that any compensation paid to a Participant for a
taxable year of the Company would not be
22
deductible by the Company solely by reason of the limitation under Code
Section 1 62(m), then to the extent deemed necessary by the Company to
ensure that the entire amount of any distribution to the Participant
pursuant to this Plan prior to the Change in Control is deductible, the
Company may defer all or any portion of a distribution under this Plan.
Any amounts deferred pursuant to this limitation shall continue to be
credited/debited with additional amounts in accordance with Article IV,
even if such amount is being paid out in installments. The amounts so
deferred and amounts credited thereon shall be distributed to the
Participant or his Beneficiary (in the event of the Participant's
death) at the earliest possible date, as determined by the Company in
good faith, on which the deductibility of compensation paid or payable
to the Participant for the taxable year of the Company during which the
distribution is made will not be limited by Section 1 62(m), or if
earlier, the effective date of a Change in Control. Notwithstanding
anything to the contrary in this Plan, this Section shall not apply to
any distributions made after a Change in Control.
9.10 Payments on Behalf of Persons Under Incapacity.
In the event that any amount becomes payable under the Plan to a person
who, in the sole judgment of the Committee, is considered by reason of
physical or mental condition to be unable to give a valid receipt
therefore, the Committee may direct that such payment be made to any
person found by the Committee, in its sole judgment, to have assumed
the care of such person. Any payment made pursuant to such termination
shall constitute a full release and discharge of the Committee and the
Company.
9.11 Limitation of Rights
Neither the establishment of the Plan nor any modification thereof, nor
the creating of any fund or account, nor the payment of any benefits
shall be construed as giving to any Participant or other person any
legal or equitable right against the Company except as provided in the
Plan. In no event shall the terms of employment of, or membership on
the Board by, any Participant be modified or in any be effected by the
provisions of the Plan.
9.12 Exempt ERISA Plan
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for directors and a select group
of management or highly compensated employees within the meaning of
Sections 201, 301 and 401 of ERISA and therefore to be exempt from
Parts 2, 3 and 4 of Title I of ERISA.
9.13 Notice
Any notice or filing required or permitted to be given to the Committee
under the Plan shall be sufficient if in writing and hand delivered, or
sent by registered or certified mail, to the principal office of the
Company, directed to the attention of the General Counsel and Secretary
of the Company. Such notice shall be deemed given as of the date of
delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
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9.14 Errors and Misstatements
In the event of any misstatement or omission of fact by a Participant
to the Committee or any clerical error resulting in payment of
benefits in an incorrect amount, the Committee shall promptly cause the
amount of future payments to be corrected upon discovery of the facts
and shall pay or, if applicable, cause the Plan to pay, the Participant
or any other person entitled to payment under the Plan any underpayment
in a lump sum or to recoup any overpayment from future payments to the
Participant or any other person entitled to payment under the Plan in
such amounts as the Committee shall direct or to proceed against the
Participant or any other person entitled to payment under the Plan for
recovery of any such overpayment
9.15 Pronouns and Plurality.
The masculine pronoun shall include the feminine pronoun, and the
singular the plural where the context so indicates.
9.16 Severability.
In the event that any provision of the Plan shall be declared
unenforceable or invalid for any reason, such unenforceability or
invalidity shall not affect the remaining provisions of the Plan but
shall be fully severable, and the Plan shall be construed and enforced
as if such unenforceable or invalid provision had never been included
herein.
9.17 Status
The establishment and maintenance of, or allocations and credits to,
the Accounts of any Participant shall not vest in any Participant any
right, title or interest in and to any Plan assets or benefits except
at the time or times and upon the terms and conditions and to the
extent expressly set forth in the Plan.
9.18 Headings.
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
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