21
SPS TECHNOLOGIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN II
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SPS TECHNOLOGIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN II
Original effective date December 7, 1989
As most recently amended effective December 1, 1993
PAGE
ARTICLE I - PURPOSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . .. 1
2.1 "Account" . . . . . . . . . . . . . . . . . .. 1
2.2 "Annualized Deferral Amount" . . . . . . . . . 1
2.3 "Beneficiary" . . . . . . . . . . . . . . . .. 1
2.4 "Board" . . . . . . . . . . . . . . . . . . .. 1
2.4(a) "Cause" . . . . . . . . . . . . . . . . . . .. 1
2.5 "Change of Control" . . . . . . . . . . . . .. 2
2.6 "Committee" . . . . . . . . . . . . . . . . .. 4
2.7 "Compensation" . . . . . . . . . . . . . . . . 4
2.8 "Deferral Commitment" . . . . . . . . . . . .. 4
2.9 "Deferral Period" . . . . . . . . . . . . . .. 4
2.10 "Determination Date" . . . . . . . . . . . . . 4
2.11 "Director" . . . . . . . . . . . . . . . . . . 4
2.12 "Director-Participant" . . . . . . . . . . . . 4
2.12(a) "Disability" . . . . . . . . . . . . . . . . . 4
2.13 "Early Retirement Date" . . . . . . . . . . . . 5
2.14 Intentionally left blank . . . . . . . . . . .. 5
2.15 "Employee" . . . . . . . . . . . . . . . . . .. 5
2.16 "Employee-Participant" . . . . . . . . . . . .. 5
2.17 "Employer" . . . . . . . . . . . . . . . . . .. 5
2.18 "Exchange Act" . . . . . . . . . . . . . . . .. 5
2.18(a) "Executive Severance Agreement" . . . . . . . . 5
2.19 "Fees" . . . . . . . . . . . . . . . . . . . .. 5
2.20 "Initial Deferral Period". . . . . . . . . . .. 5
2.21 "Interest" . . . . . . . . . . . . . . . . . .. 6
2.22 "Normal Retirement Date" . . . . . . . . . . .. 6
2.23 "Participant" . . . . . . . . . . . . . . . . . 6
2.24 "Participation Agreement" . . . . . . . . . . . 6
2,25 "Participating Subsidiary" . . . . . . . . . .. 6
2.26 "Plan" . . . . . . . . . . . . . . . . . . . .. 7
2.27 "Plan Benefit" . . . . . . . . . . . . . . . .. 7
2.28 "Plan Year" . . . . . . . . . . . . . . . . . . 7
2.29 "Retirement" . . . . . . . . . . . . . . . . .. 7
2.30 "Retirement Account" . . . . . . . . . . . . .. 7
2.31 "RIP" . . . . . . . . . . . . . . . . . . . . . 7
2.31(a) "SERP" . . . . . . . . . . . . . . . . . . . .. 7
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2.31(b) "Senior Executive Severance Plan" . . . . . . . 7
2.32 "Severance of Employment" . . . . . . . . . . . 7
2.33 "Severance of Service" . . . . . . . . . . . .. 7
2.34 "Smoker" . . . . . . . . . . . . . . . . . . .. 7
2.35 "SPS" . . . . . . . . . . . . . . . . . . . . . 7
2.36 "Subsequent Deferral Period" . . . . . . . . .. 7
2.37 "Suicide" . . . . . . . . . . . . . . . . . . . 7
2.38 "Termination Account" . . . . . . . . . . . . . 8
2.39 "Triggering Termination" . . . . . . . . . . .. 8
ARTICLE III - PARTICIPATION AND DEFERRAL COMMITMENTS . . . . 8
3.1 Eligibility and Participation . . . . . . . . . 8
3.2 Form of Deferral; Maximum and Minimum Deferral . 8
3.3 Commitment Limited by Retirement . . . . . . . . 9
3.4 Modification of Deferral Commitment . . . . . .. 9
ARTICLE IV - DEFERRED COMPENSATION ACCOUNTS . . . . . . . .. 10
4.1 Deferral of Compensation or Fees . . . . . . .. 10
4.2 Determination of Accounts . . . . . . . . . . . 10
4.3 Statement of Accounts . . . . . . . . . . . . . 10
ARTICLE V - PLAN BENEFITS . . . . . . . . . . . . . . . . .. 10
5.1 Retirement Benefit . . . . . . . . . . . . . .. 10
5.2 Disability Benefit . . . . . . . . . . . . . .. 10
5.3 Death Benefit . . . . . . . . . . . . . . . . . 11
5.4 Severance Benefit . . . . . . . . . . . . . . . 12
5.5 Pre-Termination Withdrawals . . . . . . . . . . 12
5.6 Incomplete Deferral Commitment . . . . . . . .. 12
5.7 Form of Benefit Payment . . . . . . . . . . . . 13
5.8 Withholding; Payroll Taxes . . . . . . . . . .. 14
5.9 Commencement of Payments . . . . . . . . . . .. 14
5.10 Full Payment of Benefits . . . . . . . . . . .. 14
5.11 Payment to Guardian . . . . . . . . . . . . . . 14
5.12 Responsibilities for Payment . . . . . . . . .. 14
5.13 Acceleration of Plan Benefits . . . . . . . . . 15
ARTICLE VI - BENEFICIARY DESIGNATION . . . . . . . . . . . . 15
6.1 Beneficiary Designation . . . . . . . . . . . . 15
6.2 Amendments . . . . . . . . . . . . . . . . . .. 15
6.3 No Beneficiary Designation . . . . . . . . . .. 15
6.4 Death of Beneficiary . . . . . . . . . . . . .. 16
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ARTICLE VII - ADMINISTRATION . . . . . . . . . . . . . . . . 16
7.1 Designation of Committee . . . . . . . . . . .. 16
7.2 Duties of Committee . . . . . . . . . . . . . . 16
7.3 Agents . . . . . . . . . . . . . . . . . . . . 16
7.4 Binding Effect of Decisions . . . . . . . . .. 16
7.5 Indemnity of Committee . . . . . . . . . . . . 17
ARTICLE VIII - CLAIMS PROCEDURE . . . . . . . . . . . . . . 17
8.1 Claim . . . . . . . . . . . . . . . . . . . .. 17
8.2 Denial of Claim . . . . . . . . . . . . . . .. 17
8.3 Review of Claim . . . . . . . . . . . . . . .. 17
8.4 Final Decision . . . . . . . . . . . . . . . . 17
8.5 Enforcement; No Set-off . . . . . . . . . . .. 18
ARTICLE IX - AMENDMENT, MODIFICATION AND TERMINATION OF PLAN 18
9.1 Amendment . . . . . . . . . . . . . . . . . .. 18
9.2 Modification . . . . . . . . . . . . . . . . . 19
9.3 Board's Right to Terminate . . . . . . . . . . 19
9.4 Change of Control . . . . . . . . . . . . . .. 19
ARTICLE X - MISCELLANEOUS . . . . . . . . . . . . . . . . . 20
10.1 No Funding . . . . . . . . . . . . . . . . . . 20
10.2 Insurance . . . . . . . . . . . . . . . . . .. 20
10.3 Conflicting Provisions . . . . . . . . . . . . 20
10.4 Nonassignability . . . . . . . . . . . . . . . 20
10.5 Not a Contract of Employment . . . . . . . . . 20
10.6 Protective Provisions . . . . . . . . . . . .. 21
10.7 Terms . . . . . . . . . . . . . . . . . . . .. 21
10.8 Captions . . . . . . . . . . . . . . . . . . . 21
10.9 Governing Law . . . . . . . . . . . . . . . .. 21
10.10 Validity . . . . . . . . . . . . . . . . . . . 21
10.11 Notice . . . . . . . . . . . . . . . . . . . . 21
10.12 Successors . . . . . . . . . . . . . . . . . . 21
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SPS TECHNOLOGIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of this Executive Deferred Compensation
Plan is to provide current tax planning opportunities as well as
supplemental funds upon retirement or death for directors and key
management employees (and their beneficiaries) of SPS
Technologies, Inc. and certain of its subsidiaries which elect to
participate in the Plan. It is intended that the Plan will aid
in retaining and attracting directors and employees of
exceptional ability by providing such individuals with these
benefits.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the context
clearly indicates otherwise.
2.1 "Account" means the Retirement Account or the
Termination Account maintained as recordkeeping accounts by the
Employer.
2.2 "Annualized Deferral Amount" means, with respect
to any Participant, an amount equal to the total dollar amount of
a Deferral Commitment divided by four (4).
2.3 "Beneficiary" means the person, persons or entity
designated by the Participant, or as provided in Article VI, to
receive any Plan Benefit payable after a Participant's death.
2.4 "Board" means the Board of Directors of SPS.
2.4(a)"Cause" means misappropriation of funds, habitual
insobriety, substance abuse, conviction of a crime involving
moral turpitude, or gross negligence in the performance of
employee's duties, which gross negligence has had an adverse
effect on the Company's business, operations, assets or
properties so as to materially adversely affect the financial
condition of the Company and its subsidiaries taken as a whole.
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2.5 A "Change of Control" shall be deemed to have
taken place if (i) any Person (except the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, any Person or entity organized,
appointed or established by the Company for or pursuant to the
terms of any such employee benefit plan, or an Exempted Person),
together with all Affiliates and Associates of such Person, shall
become the Beneficial Owner in the aggregate of twenty percent
(20%) or more of the Common Stock of the Company then outstand-
ing, (ii) an Exempted Person, together with all Affiliates and
Associates of such Person, shall become the Beneficial Owner in
the aggregate of thirty percent (30%) or more of the Common Stock
of the Company, or (iii) during any thirty-six (36) month period,
(A) individuals who were directors at the beginning of such
period (the "Initial Directors") cease for any reason to con-
stitute a majority of the Board, unless (B) the Initial
Directors, plus other directors who became directors subsequent
to the beginning of the thirty-six (36) month period and whose
election and nominations for election by the Company's share-
holders were on each such occasion during the thirty-six (36)
month period approved by a vote of at least two-thirds (2/3) of
the Initial Directors then in office, constitute a majority of
the Board. If a Person as described in subsection (i) or an
Exempted Person as described in subsection (ii) inadvertently
becomes a Beneficial Owner of the Company's Common Shares
aggregating the amounts described in either of subsections (i) or
(ii) above, and as soon as practicable divests (without
exercising or retaining any power, including voting, with respect
to such shares) a sufficient amount of such shares so as to hold
less than the amounts described therein, after notice by the
Company that such Person or Exempted Person, as appropriate, will
be deemed by the Company to have caused a Change of Control
unless such divestiture is made, then, despite the provisions of
subsections (i) or (ii) as applicable, a Change of Control shall
not be deemed to have taken place.
For the purposes of this Section 2.5:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(b) A Person shall be deemed the "Beneficial
Owner" of any securities:
(i) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly,
has the right to acquire (whether such right is
exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon
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the exercise of warrants, options, conversion
rights, exchange rights, or other rights or
otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of securities
tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's
Affiliates or Associates until such tendered
securities are accepted for payment, purchase or
exchange;
(ii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly,
has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including without
limitation pursuant to any agreement, arrangement
or understanding, whether or not in writing;
provided, however, that a Person shall not be
deemed the "Beneficial Owner" of any security
under this subsection (ii) as a result of an oral
or written agreement, arrangement or understanding
to vote such security if such agreement,
arrangement or understanding (A) arises solely
from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable
provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor
report); or
(iii) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate
or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has
any agreement, arrangement or understanding
(whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to
subsection (ii) above) or disposing of any voting
securities of the Company;
provided, however, that nothing in this Subsection (b) shall
cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of any securities
acquired through such Person's participation in good faith in a
firm commitment underwriting until the expiration of forty (40)
days after the date of such acquisition.
(c) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
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(d) "Exempted Person" shall mean the group known
as GAMCO Investors/Gabelli Funds, Inc. as identified in the most
recent Schedule 13D filed by such group prior to the date hereof,
unless and until such group or any Person in such group, together
with all Affiliates and Associates of such group or any Person in
such group, becomes the Beneficial Owner of thirty percent (30%)
or more of the Common Shares of the Company then outstanding.
The purchaser, assignee or transferee of Common Shares of the
Company of an Exempted Person shall not be an Exempted Person.
(e) "Person" shall mean any individual, firm,
corporation, partnership, or other entity.
(f) "Subsidiary" shall have the meaning ascribed
to such term in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
2.6 "Committee" means the Executive Compensation and
Stock Option Committee of the Board.
2.7 "Compensation" means the base earnings of an
Employee-Participant for employment with an Employer, calculated
according to the regular monthly rates paid to the Employee-
Participant. Compensation does not include bonuses, expense
reimbursements, or any form of non-cash remuneration and
benefits.
2.8 "Deferral Commitment" means the total amount to be
deferred by a Participant during the Deferral Period pursuant to
the Participant's Participation Agreement.
2.9 "Deferral Period" means the Initial Deferral
Period and any Subsequent Deferral Period.
2.10 "Determination Date" means the last day of each
calendar month.
2.11 "Director" means a member of the Board.
2.12 "Director-Participant" means any Participant who
participates or has participated in the Plan by reason of being a
Director.
2.12(a) "Disability" means a disability which qualifies
the Participant for benefits under the SPS Technologies, Inc.
Long Term Disability Plan or any other disability of a nature
which in the judgment of the Committee, relying upon such
professional advice as the Committee deems appropriate under the
circumstances, prevents a Participant from performing his
29
employment obligations to Employer. In the absence of fraud, the
Committee's determination shall be conclusive.
2.13 "Early Retirement Date" means the first day of the
calendar month coincident with or next following the date on
which an Employee-Participant is eligible to commence receipt of
benefits in accordance with RIP and/or SERP.
2.14 Intentionally left blank
2.15 "Employee" means a person who is employed by an
Employer and designated by the Committee in accordance with
3.1(a)(i).
2.16 "Employee-Participant" means any Participant who
participates or has participated in the Plan by reason of being
an Employee.
2.17 "Employer" means SPS or any Participating
Subsidiary or any successors to the businesses thereof. For the
purposes of this Plan, SPS and each Participating Subsidiary
shall be considered separate Employers and each separate
corporation shall be treated as the Employer only with respect to
its own employees.
2.18 "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
2.18 (a) "Executive Severance Agreement" means an
agreement between SPS and certain select management employees
(including Participants) dated as of December 1, 1988, as such
agreement may be amended or restated from time to time, or any
similar severance agreement entered into after December 1, 1988,
which provides for compensation and benefits (as set forth in the
agreement) in the event that there is a Triggering Termination of
such employee as that term is defined in the Executive Severance
Agreement. In the event that such an agreement is not in effect
for a Participant at a particular point in time relevant under
the terms of this Plan, Executive Severance Agreement shall mean
the most recent agreement, as defined in the preceding sentence,
in effect between the Company and the Participant.
2.19 "Fees" means all amounts, including annual fees
and committee fees, payable to Director-Participants as
remuneration for service on the Board and committees thereof.
Fees do not include expense reimbursements.
2.20 "Initial Deferral Period" means the period from
January 1, 1990 through December 31, 1993.
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2.21 "Interest" means interest computed at the interest
rate provided below.
(a) Termination Account Interest. The interest
rate applicable to a Termination Account shall be the effective
annual rate of six percent (6%).
(b) Retirement Account Interest. The interest
rate applicable to a Retirement Account for a Plan Year shall be
the greater of the effective annual rate of eight percent (8%) or
the effective annual yield on Moody's Average Corporate Bond
Yield Index for the three (3) calendar months September through
November immediately preceding the Plan Year in which the
interest is credited to a Participant's Account, as published by
Moody's Investors Service, Inc. (or any successor thereto), or,
if such monthly index is no longer published, a substantially
similar index selected by the Committee (the Base Interest Rate).
Retirement Account Interest shall also include the additional
effective annual rate of four percent (4%) for a Participant who
is not a Smoker commencing with the date upon which such
Participant is determined not to be a Smoker, and three percent
(3%) otherwise (the Supplemental Interest Rate).
2.22 "Normal Retirement Date" means, with respect to an
Employee - Participant, the first day of the calendar month
coincident with or next following the date on which such
Employee-Participant attains age sixty-five (65) and, with
respect to a Director-Participant, the first day of the calendar
month coincident with or next following the date on which such
Director-Participant undergoes a Severance of Service. An
Employee-Participant whose Severance of Employment is within
thirty-six (36) months following a Change of Control of SPS or is
with the prior written approval of the Employer shall be deemed
to have retired at Normal Retirement Date, without regard to his
age or calendar years of service.
2.23 "Participant" means any individual whose name is
set forth in Schedule A attached hereto (as it may be amended
from time to time) and any Director who is participating or has
participated in this Plan as provided in Article III. An
individual who is both a Director and an Employee may participate
in this Plan as a Director-Participant and/or an Employee-
Participant.
2.24 "Participation Agreement" means the agreement
filed by a Participant with respect to his participation in the
Plan for the Deferral Period.
2.25 "Participating Subsidiary" means any affiliated or
subsidiary corporation of SPS which elects to participate in the
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Plan and which has been approved for participation in the Plan by
the Board.
2.26 "Plan" means the SPS Technologies, Inc. Executive
Deferred Compensation Plan II, effective December 7, 1989, as set
forth herein and as amended from time to time.
2.27 "Plan Benefit" means the benefit payable to a
Participant as calculated in sections 5.1, 5.2, 5.3 and 5.4.
2.28 "Plan Year" means the calendar year, and the first
Plan Year shall begin January 1, 1990.
2.29 "Retirement" means Severance of Employment or
Severance of Service at or after the Participant's Normal
Retirement Date or Early Retirement Date.
2.30 "Retirement Account" means an account to which
amounts deferred by a Participant shall be credited for
recordkeeping purposes by the Employer.
2.31 "RIP" means the SPS Technologies, Inc. Retirement
Income Plan maintained by an Employer.
2.31(a) "SERP" means the SPS Technologies, Inc.
Supplemental Executive Retirement Plan.
2.31(b) "Senior Executive Severance Plan" means the SPS
Technologies Senior Executive Severance Plan, originally adopted
December 14, 1992, as amended from time to time.
2.32 "Severance of Employment" means the termination of
the employment relationship (voluntarily or involuntarily)
between an Employee-Participant and all Employers.
2.33 "Severance of Service" means the termination of
the independent contractor relationship (voluntarily or
involuntarily) between a Director-Participant and SPS.
2.34 "Smoker" means a Participant who is determined by
the Committee to not qualify for non-smoker life insurance
premium rating.
2.35 "SPS" means SPS Technologies, Inc.
2.36 "Subsequent Deferral Period" means any four (4)
year period designated by the Committee as a Deferral Period for
one or more individuals subsequent to the Initial Deferral
Period.
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2.37 "Suicide" means the death of a Participant under
circumstances that would permit any insurance company that has
issued a policy of life insurance to SPS for that Participant not
to make payment under the life insurance policy.
2.38 "Termination Account" means an account to which
amounts deferred by a Participant shall be credited for
recordkeeping purposes by the Employer.
2.39 "Triggering Termination" means a severance of
employment which is a Triggering Termination under either the
Executive Severance Agreement or the Senior Executive Severance
Plan.
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation.
(a) Eligibility. Eligibility to participate in
the Plan is limited to:
(i) those Employees designated by the
Committee, as set forth in Schedule A; and
(ii) any Director who is a member of the
Board when such Director files a timely Participation Agreement.
(b) Participation. An eligible individual may
elect to participate in the Plan by filing with the Committee a
Participation Agreement no later than December 31, 1989, or upon
becoming an eligible employee. Such Participation Agreement
shall be effective only with regard to Compensation or Fees
earned after the Participation Agreement is filed with the
Committee.
3.2 Form of Deferral; Maximum and Minimum Deferral. A
Participant may elect in the Participation Agreement one of the
following Deferral Commitments.
(a) Employee Deferral Commitment. An Employee
who wishes to participate must elect to defer from his
Compensation an Annualized Deferral Amount which is at least
$5,000 per Plan Year for a total of at least $20,000 for the
Deferral Period and not more than the amount set forth on
Schedule A. The Annualized Deferral Amount shall be withheld
from the Employee-Participant's Compensation in equal monthly
installments during each Plan Year of the Deferral Period.
33
(b) Director Deferral Commitment. A Director who
is not an employee who wishes to participate may elect up to a
maximum of $8,000 per Plan Year during the Deferral Period. A
Director who is also an Employee and who wishes to participate as
a Director may elect to defer up to a maximum of $2,000 per Plan
Year during the Deferral Period. The Annualized Deferral Amount
shall be withheld from the Director-Participant's Fees in
approximately proportionate installments during each Plan Year of
the Deferral Period.
3.3 Commitment Limited by Retirement. If a
Participant intends to retire prior to the end of a Deferral
Period, the Participant may elect, with the Committee's consent,
an alternative Deferral Commitment as follows:
(a) If Retirement will occur prior to the end of
the Deferral Period, the Participant may elect in the
Participation Agreement to discharge his Deferral Commitment over
a period which ends at the intended date of Retirement in equal
monthly installments if he is an Employee-Participant or
approximately proportionate installments if he is a Director-
Participant;
(b) If, subsequent to the filing of a
Participation Agreement, the Participant decides to retire prior
to the end of the Deferral Period, the Participant may elect to:
(i) accelerate the discharge of the remaining
balance of his Deferral Commitment. The accelerated deferrals
shall be made over the period from the first day of the calendar
year following the receipt by the Committee of such election to
the date of the Participant's Retirement in equal monthly
installments if he is an Employee-Participant and in
approximately proportionate installments if he is a Director-
Participant; or
(ii) if the Participant continues after
Retirement to render services to Employer as a consultant,
complete the deferral commitment out of amounts payable for such
services, commencing the first day of the calendar year following
the receipt by the Committee of such election.
3.4 Modification of Deferral Commitment. A Deferral
Commitment shall be irrevocable except that the Committee may
permit a Participant to reduce the amount to be deferred, or
waive the remainder of the Deferral Commitment, if the Committee
determines that the Participant has suffered a severe financial
hardship.
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ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1 Deferral of Compensation or Fees. The amount of
Compensation or Fees that a Participant elects to defer shall be
withheld and credited to the Participant's Account as the non-
deferred portion of Compensation or Fees becomes payable. Any
withholding of taxes or other amounts with respect to deferred
Compensation or Fees which is required by state, federal or local
law shall be withheld from the Participant's non-deferred
Compensation or Fees.
4.2 Determination of Accounts. Each Participant's
Retirement Account and Termination Account as of each
Determination Date shall consist of the balance of the
Participant's Account as of the immediately preceding
Determination Date, reduced by any intervening distributions
therefrom and increased by any additional portion of the Deferral
Commitment credited thereto and Interest earned thereon since the
immediately preceding Determination Date. Interest earned shall
be calculated as of each Determination Date based upon the
balance of the Account at the preceding Determination Date, using
the monthly equivalent of the appropriate effective annual
interest rate.
4.3 Statement of Accounts. The Committee shall submit
to each Participant, within sixty (60) days after the close of
each Plan Year, a statement setting forth the balance as of the
end of the Plan Year to the credit of each Account maintained for
the Participant. The Committee may at such time(s) as it
determines provide to such Participant(s) as it selects a
statement setting forth the balance as of any date to the credit
of such Account(s) maintained for the Participant(s).
ARTICLE V
PLAN BENEFITS
5.1 Retirement Benefit. Subject to section 5.6, each
Participant whose Severance of Employment or Severance of Service
is by reason of Retirement shall be entitled to a benefit equal
to the amount of the Participant's Retirement Account.
5.2 Disability Benefit.
(a) Employee-Participant. Subject to Section
5.6, each Employee-Participant who suffers a Disability that
35
continues without interruption until he begins to receive a
benefit from RIP and/or SERP, whichever first occurs, shall be
entitled to a benefit equal to the amount of the Employee-
Participant's Retirement Account.
(b) Director-Participant. Subject to section
5.6, each Director-Participant whose Severance of Service is by
reason of a Disability shall be entitled to a benefit equal to
the amount of the Director-Participant's Retirement Account.
5.3 Death Benefit.
(a) Death Not by Suicide. Upon the death of a
participant (except by Suicide), the Participant's Beneficiary
shall be entitled to one of the following:
(i) After Severance of Employment or
Service. If the Participant dies after Severance of Employment
or Severance of Service, the remaining unpaid balance of the
Participant's applicable Account shall be paid in the same form
as the Participant was entitled to receive under Section 5.7,
except that, where the Participant has elected the form of
benefit payment provided under Section 5.7(a), the Committee, in
its absolute discretion, may pay the amount due in a single sum,
but only if requested by the deceased Participant's personal
representative or, if there is no personal representative
appointed, by the deceased Participant's Beneficiary.
(ii) Before Severance of Employment or
Service. If a Participant dies prior to Severance of Employment
or Severance of Service, the Participant's Retirement Account
balance plus an amount equal to twice the Participant's total
Deferral Commitment for all Deferral Periods shall be paid in the
form elected by the Participant under Section 5.7, except that,
where the Participant has elected the form of benefit payment
provided under Section 5.7(a), the Committee, in its absolute
discretion, may pay the amount due in a single sum, but only if
requested by the deceased Participant's personal representative
or, if there is no personal representative appointed, by the
deceased Participant's Beneficiary. For the purposes of this
Section 5.3(a)(ii), a Participant who dies while under Disability
and is not at that time entitled to a benefit under Section 5.2,
shall be deemed to have died prior to Severance.
(b) Death by Suicide. Upon the death of a
Participant by Suicide, the amount payable shall be the
Participant's Termination Account Balance. Whether the death by
Suicide occurs before or after Severance of Employment or
Severance of Service, this benefit shall be payable in the same
form as the Participant was entitled to receive under Section
36
5.7, except that, where the Participant has elected the form of
benefit payment provided under Section 5.7(a), the Committee, in
its absolute discretion, may pay the amount due in a single sum,
but only if requested by the deceased Participant's personal
representative or, if there is no personal representative
appointed, by the deceased Participant's Beneficiary.
5.4 Severance Benefit.
Employee-Participant. Each Employee-Participant
whose Severance of Employment is for reasons other than
Retirement or death or who suffers a Disability that does not
continue until he begins to receive a benefit from RIP and/or
SERP and who does not return to active employment with the
Employer within the period during which right to reinstatement is
provided under the Employer's policies from time to time in
effect shall be entitled to a benefit equal to the amount of the
Employee-Participant's:
(a) Retirement Account, if the severance is
involuntary (which term shall include any Triggering Termination
under an Executive Severance Agreement or the Senior Executive
Severance Plan) and not for Cause; or
(b) Termination Account, if the severance is
voluntary, or for Cause.
5.5 Pre-Termination Withdrawals.
Hardship Distributions. Upon a finding that a
Participant has suffered a severe and immediate financial
hardship, the Committee may, in its sole discretion, allow
distributions from the Participant's Account prior to the time
otherwise specified for payment of Plan Benefits. The amount of
such distribution shall be limited to the amount reasonably
necessary to meet the Participant's requirements during the
financial hardship and shall not exceed the Termination Account
balance at the time of the distribution or, for an Employee-
Participant with a Disability at the time of distribution, the
Retirement Account balance.
5.6 Incomplete Deferral Commitment.
(a) Death (Except by Suicide), Disability or
Change of Control. If the Participant fails to complete the
Deferral Commitment because of death (except by Suicide),
Disability, or Severance of Employment or Severance of Service
within thirty-six (36) months following a Change of Control of
SPS, Plan Benefits shall be equal to the amount of the
Participant's Retirement Account.
37
(i) If the Participant fails to complete the
Deferral Commitment because of death (except by Suicide), or
Severance of Employment or Severance of Service within thirty-six
(36) months following a Change of Control of SPS, the Retirement
Account shall include the portion of the Deferral Commitment then
withheld and credited to the Participant's Account.
(ii) If the Participant fails to complete the
Deferral Commitment because of Disability, the Retirement Account
shall be credited with the entire Deferral Commitment over the
remainder of the Deferral Period.
(b) Otherwise. If the Participant fails to
complete the Deferral Commitment for reasons other than those
specified in (a) above, then, unless the Deferral Commitment is
modified pursuant to Section 3.4, Plan Benefits shall be equal to
the amount of the Participant's Termination Account.
5.7 Form of Benefit Payment. Except as otherwise
provided under the Plan, the Plan Benefit shall be paid in one of
the forms provided below, as irrevocably elected by the
Participant in his initial Participation Agreement, except that
where the Participant has elected the form of benefit payment
provided under (a) below, the Committee, in its absolute
discretion, may pay the amount due in a single sum, but only if
requested by the Participant.
(a) Installments. Equal monthly installments of
the applicable Account amortized over a period of not more than
one hundred and eighty (180) months. The installments paid
during the first Plan Year of the period the Plan Benefit is
payable shall be amortized as of the date the first installment
is paid over the installment period on the basis of the minimum
Interest that could have been earned on a Retirement Account for
such Plan Year. The installments paid during each subsequent
Plan Year of the period the Plan Benefit is payable shall be
amortized as of the first day of such Plan Year over the then
remaining installment period on the basis of the minimum Interest
that could have been earned on a Retirement Account for each such
subsequent Plan Year. The applicable Account of the Participant
shall continue to be credited with Interest under sections 2.21
and 4.2 during the period Plan Benefits are payable.
(b) Single sum. A single sum payment.
(c) Notwithstanding any contrary election,
payment from a Termination Account, or from the Retirement
Account of a Director-Participant who has served as a director
for less than 5 years, shall be made in a lump sum.
38
5.8 Withholding; Payroll Taxes. The Employer shall
withhold from payments made hereunder any taxes required to be
withheld from a Participant's wages for the federal or any state
or local government.
5.9 Commencement of Payments. Payment of a Plan
Benefit shall commence to an Employee-Participant or his
Beneficiary at the absolute discretion of the Committee, but,
except as provided in the penultimate sentence, not later than as
of the January 1 following the month in which the event giving
rise to payment occurs, provided that, if the event giving rise
to payment is Retirement, and the Participant is at least sixty-
two (62) years of age, but less than sixty-five (65) years of
age, then not later than January 1, following the month in which
he becomes sixty-five (65). Payment of a Plan Benefit to a
Director-Participant or his Beneficiary shall commence as of the
January 1, following the date of the Director's Severance of
Service as determined by the Committee. If the event giving rise
to payment occurs after November 1 of any year, the payment shall
commence no later than March 1 of the following year. All
payments shall be made as of the first day of the month.
5.10 Full Payment of Benefits. Notwithstanding any
other provision of this Plan, all benefits not paid by the time
the Participant attains or would have attained age eighty (80)
shall be paid in a single sum at that time.
5.11 Payment to Guardian. If a Plan Benefit is payable
to a minor or a person declared incompetent or to a person
incapable of handling the disposition of property, the Committee
may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such
minor or incompetent person. The Committee may require proof of
incompetency, minority, incapacity or guardianship as it may deem
appropriate prior to distribution of the Plan Benefit. Such
distribution shall completely discharge the Committee and the
Employer from all liability with respect to such Plan Benefit.
5.12 Responsibilities for Payment. The Plan Benefit
shall be paid by the Employer(s) employing the Employee-
Participant during the respective Deferral Period(s) on account
of which such Plan Benefit is payable. Plan Benefits payable by
any Participating Subsidiary or former Participating Subsidiary
shall be guaranteed by SPS. Plan Benefits shall be paid to
Director-Participants by SPS. No other Employer or employee,
officer, director or agent of any Employer shall have any
liability for payments hereunder.
39
5.13 Acceleration of Plan Benefits.
(a) In the event that benefits payable under this
Plan are secured pursuant to the terms of a trust, then, if after
a Change of Control (as such term may be defined in the trust
instrument) the trust is terminated, the benefits so secured
shall become immediately payable under this Plan in a lump sum,
calculated in accordance with 5.13(b) where applicable, anything
to the contrary contained herein notwithstanding.
(b) In the case where a Participant has elected
the form of benefit payment described in Section 5.7(a), then if,
after a Change of Control, such Participant's benefit is secured
pursuant to the terms of a trust, or paid, within thirty-six (36)
months following a Change of Control, in a lump sum benefit equal
to the amount of such Participant's Retirement Account, the
amount so secured or paid shall be calculated so as to include
the then present value of Retirement Account Interest which would
have accrued if payment were to commence immediately and be paid
in accordance with such Participant's election. Such present
value shall be determined by discounting the sum of total future
payments assumed to be made at the Retirement Account Interest
rate, at a rate equal to the Base Interest Rate.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. Each Participant shall
have the right, at any time, to designate any person or persons
as his or her Beneficiary or Beneficiaries (both primary and
secondary) to whom the Plan Benefit shall be paid in the event of
his or her death prior to complete distribution to the
Participant of the Plan Benefit due him or her. Each beneficiary
designation shall be in a written form prescribed by the
Committee and will be effective only when filed with the
Committee during the Participant's lifetime.
6.2 Amendments. Any Beneficiary designation form may
be changed by a Participant without the consent of any designated
Beneficiary or other person by the filing of a new beneficiary
designation form with the Committee. The filing of a new benefi-
ciary designation form will cancel all beneficiary designation
forms previously filed.
6.3 No Beneficiary Designation. If any Participant
fails to designate a Beneficiary in the manner provided above or
if the Beneficiary designated by a deceased Participant
40
predeceases the Participant, the Committee shall direct such
Participant's Plan Benefit (or the balance thereof) to be
distributed as follows:
(a) to the Participant's surviving spouse, if
any; or
(b) if the Participant shall have no surviving
spouse, then to the Participant's estate.
6.4 Death of Beneficiary. If the Beneficiary
designated by a deceased Participant dies before receiving
complete distribution of the Plan Benefit and no other effective
beneficiary designation is in effect, the Committee shall direct
that the balance of such Plan Benefit be distributed to such
beneficiary as the Beneficiary shall designate, or if no such
designation is in effect, then to the Beneficiary's estate.
ARTICLE VII
ADMINISTRATION
7.1 Designation of Committee. This Plan shall be
administered by the Committee. Members of the Committee may be
Participants under this Plan, but shall not participate in any
decision of the Committee made with respect to such Participant's
receipt of benefits hereunder.
7.2 Duties of Committee. The Committee shall be
responsible for interpretation of Plan provisions and approval of
benefit payments to the extent such responsibility has not been
allocated under the Plan to another entity, and subject to and in
accordance with the provisions hereof shall determine all
questions arising under the Plan. The Committee may also make
such rules and regulations and prescribe such forms and
procedures for the conduct of its meetings and administrative
duties as it deems appropriate. The Committee shall endeavor to
act by general rules so as not to discriminate in favor of any
person.
7.3 Agents. The Committee shall appoint an individual
to be the Committee's agent with respect to the day-to-day
administration of the Plan. In addition, the Committee may, from
time to time, employ other agents and delegate to them such
administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.4 Binding Effect of Decisions. The decision or
action of the Committee in respect of any question arising out of
41
or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated
hereunder shall be final and conclusive and binding upon all
persons having any interest in the Plan, except to the extent
that a court of competent jurisdiction shall decide to the
contrary.
7.5 Indemnity of Committee. SPS shall indemnify and
hold harmless the members of the Committee against any and all
claims, loss, damage, expense or liability arising from any
action or failure to act with respect to this Plan, except in the
case of willful misconduct.
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim. Any person claiming a Plan Benefit,
requesting an interpretation or ruling under the Plan, or
requesting information under the Plan shall present the request
in writing to the Committee which shall respond in writing as
soon as practicable.
8.2 Denial of Claim. If the claim or request is
denied, the written notice of denial shall state:
(a) the reason(s) for denial, with specific
reference to the Plan provision(s) on which the denial is based;
(b) a description of any additional material or
information required and an explanation of why it is necessary;
and
(c) an explanation of the Plan's claim review
procedure.
8.3 Review of Claim. Any person whose claim or
request is denied or who has not received a response within
thirty (30) days of the filing of such claim or request may
request review by notice given in writing to the Committee within
60 days. The claim or request shall be reviewed by the Committee
which may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation,
examine pertinent documents, and submit issues and comments in
writing.
8.4 Final Decision. The decision on review shall
normally be made within thirty (30) days of the filing of such
request, except that if special circumstances exist, the claimant
42
shall be notified and the decision shall be made within sixty
(60) days. The decision shall be in writing and shall state the
reason(s) therefor and shall reference the relevant plan
provision(s).
8.5 Enforcement; No Set-off
(a) In the event that SPS shall fail or refuse to
make payments of any amounts due the Participant under the Plan,
SPS shall pay to the Participant, in addition to the payment of
any other sum provided in the Plan, interest, compounded daily,
on any amount remaining unpaid from the date payment is required
until paid to the Participant, at the rate from time to time
announced by CoreStates Bank, N.A. as its "prime rate" plus four
percent (4%), each change in such rate to take effect on the
effective date of the change in such prime rate.
(b) It is the intent of the parties that the
Participant not be required to incur any expenses associated with
the enforcement of his rights under the Plan by arbitration,
litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to
be extended to the Participant under the Plan. Accordingly, SPS
shall pay the Participant on demand the amount necessary to
reimburse the Participant in full for all expenses (including all
attorneys' fees and legal expenses) incurred by the Participant
in enforcing any of the obligations of SPS under this Plan.
(c) SPS's obligation to make the payments
provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which SPS may have against the
Participant or others.
ARTICLE IX
AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
9.1 Amendment. Except as provided in Section 9.4, the
Board may at any time amend the Plan in whole or in part,
provided, however, that no amendment shall be effective to
decrease or restrict any Account maintained pursuant to any
existing Participation Agreement(s) under the Plan nor to
establish an interest rate (a) in the case of the Retirement
Account lower than the greater of the effective rate of eight
percent (8%) or the effective annual yield on Moody's Average
Corporate Bond Yield Index for the three (3) calendar months
43
September through November immediately preceding the Plan Year in
which the interest is credited to a Participant's Account, as
published by Moody's Investors Service, Inc. (or any successor
thereto), or, if such monthly index is no longer published, a
substantially similar index selected by the Committee, or (b) in
the case of the Termination Account lower than the effective
annual yield on the monthly average for one year U.S. Treasury
Constant Maturities for the three (3) calendar months, September
through November, immediately preceding the Plan Year in which
the interest is credited to a Participant's Account, as published
by the Board of Governors of the Federal Reserve System (or any
successor thereto), or if such monthly average is no longer
published, a substantially similar index selected by the
Committee. Any change in the definition of Interest so as to
decrease the interest rate shall not become effective until the
first day of the Plan Year which follows the adoption of the
amendment.
9.2 Modification. Notwithstanding any provision of
the Plan to the contrary, the Committee shall have the right to
deny participation in the Plan, or to modify the terms of the
Plan, as applied to any person not insurable at standard rates.
9.3 Board's Right to Terminate. The Board may at any
time terminate the Plan as to any or all Employers if, in its
judgment, the tax, accounting, or other effects of the
continuance of the Plan, or potential payments thereunder would
not be in the best interests of any or all Employers. In such
event, the Employers (or any Employer as to whom the Plan has
been terminated) shall have no further liability or obligation
under the Plan or the Participant's Participation Agreement,
provided that the Participant is paid the full amount of the
Participant's Retirement Account in a single sum as of the date
of termination of this Plan, or in equal installments over a
period of not more than five (5) years, as the Board may
determine. If the Participant has elected the form of benefit
payment described in Section 5.7(a), the amount paid shall be
calculated so as to include the then present value of Retirement
Account Interest which would have accrued if payment were to
commence immediately and be paid in accordance with such
Participant's election. Such present value shall be determined
by discounting the sum of total future payments assumed to be
made at the Retirement Account Interest rate, at a rate equal to
the Base Interest Rate.
9.4 Change of Control. Upon a Change of Control the
Board shall be precluded from amending the Plan and for a period
of three (3) years, commencing on the effective date of the
Change of Control, from terminating the Plan.
44
ARTICLE X
MISCELLANEOUS
10.1 No Funding. The Employer's obligation under the
Plan shall be merely that of an unfunded and unsecured promise of
the Employer to pay money in the future, and Participants and
their Beneficiaries, heirs, successors and assigns shall have no
further legal or equitable rights, interest or claims in any
property or assets of the Employer.
10.2 Insurance. The Employer shall have the right, but
not the obligation, to purchase one or more policies of life
insurance upon the life of a Participant. In the event such
policies are purchased, they shall be owned by the Employer, and
no Participant, their Beneficiaries, heirs, successors and
assigns shall have any right or interest therein. Each
Participant shall, however, cooperate in the application for, and
in the maintenance of, such insurance in any way in which
requested to do so by the Employer.
10.3 Conflicting Provisions. To the extent that any
provision of this Plan conflicts with any provision of the
Executive Severance Agreement or the Senior Executive Severance
Plan, the provision of the Executive Severance Agreement or the
Senior Executive Severance Plan, as the case may be, shall
prevail, and this Plan shall be deemed to have been amended to
the extent thus required.
10.4 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, which
are, and all rights to which are, expressly declared to be
unassignable and nontransferable. No part of the amounts payable
shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person,
nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
10.5 Not a Contract of Employment. The terms and
conditions of this Plan shall not be deemed to constitute a
contract of employment between the Employer and the Participant,
and the Participant (or his Beneficiary) shall have no rights
against the Employer except as may otherwise be specifically
provided herein. Moreover, nothing in this Plan shall be deemed
to give a Participant the right to be retained in the service of
45
the Employer or to interfere with the right of the Employer to
discipline or discharge him or her at any time.
10.6 Protective Provisions. A Participant will
cooperate with the Employer by furnishing any and all information
requested by the Employer in order to facilitate the payment of
benefits hereunder, by taking such physical examinations as the
Employer may deem necessary and taking such other action as may
be requested by the Employer.
10.7 Terms. Wherever any words are used herein in the
singular or in the plural, they shall be construed as though they
were used in the plural or the singular, as the case may be, in
all cases where they would so apply.
10.8 Captions. The captions of the articles, sections
and paragraphs of this Plan are for convenience only and shall
not control or affect the meaning or construction of any of its
provisions.
10.9 Governing Law. The provisions of this Plan shall
be construed and interpreted according to the laws of the
Commonwealth of Pennsylvania.
10.10 Validity. In case any provision of this Plan
shall be held illegal or invalid for any reason, said illegality
or invalidity shall not affect the remaining parts hereof, but
this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 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, at the principal address of SPS.
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.
10.12 Successors. The provisions of this Plan shall
bind and inure to the benefit of the Employer and its successors
and assigns. The term successors as used herein shall include
any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Employer, and
successors of any such corporation or other business entity.
Pursuant to resolution of the Board, this instrument is
to be effective as of December 7, 1989.
46
Schedule A
Effective 1/1/90
EXECUTIVE DEFERRED COMPENSATION PLAN II
JANUARY 1, 1990 TO DECEMBER 31, 1993
ANNUALIZED
1990 THEREAFTER
MAXIMUM DEFERRAL DEFERRAL TO
MANAGEMENT DEFERRAL COMMITMENT AMOUNT 12/31/90
---------- -------- ---------- -------- --------
J.R. Selby $400,000 $400,000 $100,000 $100,000
H.J. Wilkinson 225,252 225,252 56,313 56,313
T.R. O'Neill 150,000 150,000 37,500 37,500
E.H. Kottcamp 141,000 54,000 0 18,000
A.B. Belden 105,000 105,000 26,250 26,250
J.P. McGrath 65,000 65,000 16,250 16,250
H.W. Antes 48,800 48,800 12,200 12,200
R.M. Groves 47,600 47,600 11,900 11,900
A. Nerenberg 46,000 46,000 6,571 13,143
S.E. Engelman 40,000 40,000 10,000 10,000
J.M. Morrash 34,800 20,000 5,000 5,000
R.H. Garreth 72,500 72,000 10,286 20,571
D.L. Hinmon 70,000 70,000 17,500 17,500
R.A. Walker 70,000 70,000 17,500 17,500
W.T. Benecki 65,000 65,000 16,250 16,250
R.E. Schwer 61,500 61,500 4,731 18,923
B.S. Freeston 52,500 52,500 13,125 13,125
P.W. Wallace 50,000 50,000 12,500 12,500
DIRECTORS
---------
J.F. Lubin $32,000 32,000 8,000 8,000
A.C. Menke 32,000 32,000 8,000 8,000
P.F. Miller, Jr. 32,000 32,000 8,000 8,000
F.J. Skinner 32,000 32,000 8,000 8,000
S.W. McConnell 32,000 32,000 8,000 8,000
J.R. Selby 8,000 8,000 2,000 2,000
H.J. Wilkinson 8,000 8,000 2,000 2,000
47
Schedule A-1
Effective January 1, 1994
Executive Deferred Compensation Plan II
January 1, 1994 to December 31, 1997
Annualized
1994 Thereafter
Maximum Deferred Deferred to
Management Deferral Commitment Amount 12/31/97
---------- -------- ---------- -------- ----------
Charles W. Grigg $400,000 $400,000 $100,000 $100,000