Exhibit 10.5
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SUN COMPANY, INC.
DEFERRED COMPENSATION PLAN
(Amended and Restated as of March 4, 1998)
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ARTICLE I
Definitions
1.1 Cash Unit - shall mean the entry in a Deferred Compensation Account of a
credit equal to One Dollar ($1.00).
1.2 Change in Control - shall mean the occurrence of any of the following
events or transactions:
(a) Continuing Directors cease, within one year of a Control Transaction,
to constitute a majority of the Board of Directors of Sun Company, Inc. (or
of the Board of Directors of any successor to Sun Company, Inc. or to all or
substantially all of its assets), or
(b) any entity, person or Group acquires shares of Sun Company, Inc. in a
transaction or series of transactions that result in such entity, person or
Group directly or indirectly owning beneficially more than 20% of the
outstanding voting shares.
1.3 Committee - shall mean the Compensation Committee of the Board of
Directors of Sun Company, Inc.
1.4 Company - shall mean Sun Company, Inc., a Pennsylvania corporation. The
term "Company" shall include any successor to Sun Company, Inc., any subsidiary
or affiliate which has adopted the Plan, or a corporation succeeding to the
business of Sun Company, Inc., or any subsidiary or affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
1.5 Continuing Director - shall mean a Director who was a member of the Board
of Directors immediately prior to a Control Transaction which results in a
Change in Control.
1.6 Control Transaction - shall mean any of the following transactions or any
combination thereof:
(a) any tender offer for or acquisition of capital stock of Sun Company,
Inc.;
(b) any merger, consolidation, or sale of all or substantially all of the
assets of Sun Company, Inc.; or
(c) the submission of a nominee or nominees for the position of director
of Sun Company, Inc. by a shareholder or a group of shareholders in a proxy
solicitation or otherwise.
1.7 Deferred Bonus Account - shall mean, with respect to any Participant, the
total amount of the Company's liability for payment of deferred compensation to
the Participant under this Plan, including any accumulated Interest Equivalents
and/or Dividend Equivalents.
1.8 Dividend Equivalent - shall mean the entry in a Participant's Deferred
Bonus Account of a dividend credit with respect to a Share Unit, each Dividend
Equivalent being equal to the dividend paid from time to time on a Share.
1.9 Executive Resource Employee - shall mean any individual employed by the
Company who has been designated by the Company as a member of the Company's
executive resources group. Generally such group shall include employees in
Grades 14-20 and all employees subject to Section 16 of the Securities Exchange
Act of 1934, as amended.
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1.10 Group - shall mean persons who act in concert as described in Sections
13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended.
1.11 Incentive Plan - shall mean the Sun Company, Inc. Executive Incentive
Plan. The Incentive Plan provides that the Board of Directors may pay bonuses
annually, as additional compensation to such employees as the Board determines
have principally contributed to the profitability of the Company.
1.12 Interest Equivalent - shall mean the entry in a Participant's Deferred
Bonus Account of an interest credit with respect to a Cash Unit, the interest
factor being equal to the interest rate for ten-year U.S. Treasury Notes as of
December 31 of the preceding year, to be compounded on the basis of the balance
in the Participant's Deferred Bonus Account.
1.13 Non-Cash Bonus - shall have the meaning set forth herein at Section 4.1.
1.14 Participant - shall mean any Executive Resource Employee who meets the
eligibility requirements of the Incentive Plan and who is participating in this
Plan.
1.15 Permanent and Total Disability - shall mean, with respect to any
Participant, that such Participant is eligible to receive benefits under the
applicable long-term disability plan of such Participant's employer.
1.16 Plan - shall mean the Deferred Compensation Plan set forth herein and as
it may be amended from time to time.
1.17 Retirement - shall mean the date on which a Participant is retired in
accordance with the applicable retirement plan, program, or policy of such
Participant's employer.
1.18 Share - shall mean a share of the Company's authorized voting Common
Stock ($1.00 par value per share) and any share or shares of stock of the
Company hereafter issued or issuable in substitution or exchange for each such
share, except for the Company's Series A Preference Stock.
1.19 Share Unit - shall mean the entry in a Participant's Deferred Bonus
Account of a credit equal to one Share.
1.20 Subsidiaries - shall mean corporations in which the Company, directly or
indirectly owns fifty percent (50%) or more of the outstanding voting stock.
ARTICLE II
Background and Purpose of Plan
2.1 Purpose. The Company has established this Deferred Compensation Plan to
provide Executive Resource Employees who are participants in the Incentive Plan
with the option to irrevocably defer the receipt of all or a portion of the
bonus to which such participants would otherwise be entitled, subject to the
terms and conditions hereinafter set forth.
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2.2 Creation of Deferred Bonus Account. Each of the following shall be
credited to a Deferred Bonus Account established by the Company for each
Participant:
(a) any bonus amounts voluntarily deferred by the Participant pursuant to
Article III (Deferral of Bonuses by Participant) hereof; and/or
(b) any Non-Cash Bonus amounts deferred in the discretion of the Committee
pursuant to Article IV (Deferral of Bonuses by Committee) hereof.
Any bonus amounts voluntarily deferred by the Participant will be credited to
a Participant's Deferred Bonus Account in the form of Cash Units or Share Units,
in the discretion of the Participant, as set forth in the Plan. The deferral of
any Non-Cash Bonus amounts caused by action of the Committee will be credited to
a Participant's Deferred Bonus Account in the form of Cash Units or Share Units
as the Committee, in its sole discretion, may decide in accordance with the
Plan.
ARTICLE III
Deferral of Bonuses by Participant
3.1 Participant's Election to Defer. A Participant voluntarily may elect to
defer, in the form of Cash Units or Share Units, all or a portion of his or her
bonus to be awarded under the Incentive Plan by filing a written election with
the Committee on forms prescribed by the Committee. Such election must include
the following:
(a) percentage of bonus to be deferred;
(b) the form of deferral, being either Cash Units, Share Units or a
combination of the two and the percentage allocations of such;
(c) a designation of beneficiary as set forth in Article VI (Designation
of Beneficiaries); and
(d) an irrevocable election of a method of payment as set forth in Section
3.10 hereof.
Any such voluntary election by the Participant shall apply only to bonuses
for the year specified in the election.
3.2 Amount of Deferral. The amount of bonus to be deferred in any year shall
be designated by the Participant as a percentage of such Participant's bonus in
multiples of five percent (5%) but shall not be less than ten percent (10%).
3.3 Time of Election. A separate election to defer must be filed for each
year and must be received by the Company no later than forty-five (45) days
before the end of the year in which the bonus is earned. Any election by a
Participant with respect to a bonus in a given year will not preclude a
different action with respect to bonuses in subsequent years, consistent with
the provisions of this Article III with respect to the giving of notice of
deferral election.
3.4 Crediting Share Units. Share Units shall be credited to a Participant's
Deferred Bonus Account at the time the bonus otherwise would have been paid had
no election to defer been made. The number of Share Units to be credited to the
Deferred Bonus Account shall be determined by dividing the portion of the bonus
to be deferred by the average closing price for Shares as reported on the New
York Stock Exchange-Composite Transactions for the ten (10) day period prior to
the day on which the bonus otherwise would have been paid. Any fractional Share
Units shall also be credited to a Participant's Deferred Bonus Account. Share
Units shall not entitle any person to the rights of a shareholder.
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3.5 Crediting Dividend Equivalents. For Share Units, the Company shall
credit the Participant's Deferred Bonus Account with Dividend Equivalents being
equal to the dividends declared on the Company's Shares. The crediting shall
occur as of the date on which said dividends are paid. The number of Share
Units to be credited to the Deferred Bonus Account shall be calculated by
dividing the Dividend Equivalents by the average closing price for Shares as
reported on the New York Stock Exchange-Composite Transactions for the period of
ten (10) trading days prior to the day on which the dividends are paid on the
Company's Shares. Any fractional Share Units shall also be credited to a
Participant's Deferred Bonus Account.
3.6 Crediting Cash Units. Cash Units shall be credited to a Participant's
Deferred Bonus Account at the time the bonus would otherwise have been paid had
no election to defer been made.
3.7 Crediting Interest Equivalents. For Cash Units credited to a
Participant's Deferred Bonus Account, the Company shall credit such
Participant's Deferred Bonus Account on a quarterly basis with an Interest
Equivalent.
3.8 Share Unit Conversion. Immediately upon termination of the Participant's
employment with the Company, and so prior to the commencement of any payout or
distribution of any amounts hereunder, the Participant may make a one-time
election to convert to Cash Units all or a portion of the balance of Share Units
in such Participant's Deferred Bonus Account. Any Share Units so converted to
Cash Units as a result of this one-time conversion election shall be valued at
the average closing price for Shares as reported on the New York Stock Exchange
- -Composite Transactions for the ten (10) day period immediately prior to such
one-time conversion election.
3.9 Time of Payment. Except as provided in Article V (Change in Control)
hereof, all payments of a Participant's Deferred Bonus Account shall be made at,
or shall commence on, the date selected by the Participant in accordance with
the terms of this Article III. The date of payment or distribution must be
irrevocably specified by the Participant in his or her written notice of
election. The Participant may elect to defer the receipt of all or a specified
portion of such Participant's bonus to:
(a) the first day of any calendar year, provided such date is at least six
(6) months after the end of the quarter in which the bonus is earned; or
(b) the first day of the year following the date of:
(1) the Participant's retirement;
(2) final determination that the Participant has a Permanent and Total
Disability;
(3) termination of the Participant's employment with the Company; or
(4) death of the Participant. Upon the death of a Participant prior to
the final payment of all amounts credited to his or her Deferred Bonus
Account, the balance of the Deferred Bonus Account shall be paid in
accordance with Article VI (Designation of Beneficiaries) hereof,
commencing on the first day of the calendar year following the year of
death.
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Notwithstanding the foregoing provisions of this Section 3.9, and except as
provided in Article V (Change in Control) hereof, in no event shall any payment
or distribution be made within six (6) months of the bonus being earned or
awarded. The benefit commencement date may not be later than the third calendar
year following the date of: (i) Participant's retirement, or (ii) termination of
Participant's employment.
3.10 Method of Payment. A Participant in this portion of the Deferred
Compensation Plan shall have the option of:
(a) selecting a lump-sum payment;
(b) selecting a series of approximately equivalent annual installments
(adjusted as necessary to reflect Dividend Equivalents and/or Interest
Equivalents accrued during the installment payout period) in such number of
installments as the Participant shall specify (not exceeding ten (10)
installments); or
(c) not selecting a method of payment at the time the Form for Deferred
Payment Election/Designation of Beneficiary is prepared. If the Participant
does not select a method of payment, he or she must, at least twelve (12)
months prior to the time the deferral amount is scheduled to be paid, notify
the Company as to the specific method of payment which will be either in a
lump sum or in approximately equivalent annual installments. Failure to
provide appropriate notification to the Company will result in a lump sum
payment on the deferral payment date.
Participant shall receive in cash all deferred compensation credited to such
Participant's Deferred Compensation Account. Share Units credited to the
Participant's Deferred Compensation Account shall be valued at the average
closing price for Shares as reported on the New York Stock Exchange-Composite
Transactions for the ten (10) day period prior to each new calendar year.
3.11 Hardship Distribution. Participant may request a modification in the
payment terms hereunder only in the event of severe financial hardship and only
to the extent reasonably necessary to eliminate the hardship. Such request
shall specify in detail the grounds for the requested modification and shall be
referred to the Committee. A qualifying severe financial hardship must be
caused by accident, illness, or event beyond the control of the Participant.
The decision of the Committee with respect to the requested modification shall
be solely at the discretion of the Committee and in accordance with its
evaluation of the exigencies of the situation. Such decision shall be binding
on the Company and Participant.
ARTICLE IV
Deferral of Bonuses by Committee
4.1 Committee's Election to Defer. Each year in conjunction with the award
of any bonus to the Participant, the Committee, in its sole discretion, may
cause to be credited to a Participant's Deferred Bonus Account in the form of
either Cash Units or Share Units, a specified dollar amount representing all or
a portion of such Participant's bonus for that year (the "Non-Cash Bonus").
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4.2 Crediting Share Units. Share Units shall be credited to a Participant's
Deferred Bonus Account at the time the bonus would otherwise have been paid had
no Committee action to defer been taken. The number of Share Units credited to
the Participant's Deferred Bonus Account shall be determined by dividing the
Non-Cash Bonus by the average closing price for Shares as reported on the New
York Stock Exchange-Composite Transactions for the ten (10) day period prior to
the date such bonus otherwise would have been paid had no Committee action been
taken. Any fractional Share Units shall also be credited to such Participant's
Deferred Bonus Account. Share Units shall not entitle any person to the rights
of a stockholder.
4.3 Crediting Dividend Equivalents. The Company shall credit the
Participant's Deferred Bonus Account with Dividend Equivalents being equal to
the dividends declared on the Company's Shares. The crediting shall occur as of
the date on which said dividends are paid. The number of Share Units to be
credited to the Deferred Bonus Account shall be calculated by dividing the
Dividend Equivalents by the average closing price for Shares as reported on the
New York Stock Exchange-Composite Transactions for the period of ten (10)
trading days prior to the day on which the dividends are paid on the Company's
Shares. Any fractional Share Units shall also be credited to a Participant's
Deferred Bonus Account.
4.4 Crediting Cash Units. Cash Units shall be credited to a Participant's
Deferred Bonus Account at the time the bonus otherwise would have been paid had
no Committee action to defer been taken.
4.5 Crediting Interest Equivalents. For Cash Units credited to a
Participant's Deferred Bonus Account, the Company shall credit such
Participant's Deferred Bonus Account on a quarterly basis with an Interest
Equivalent.
4.6 Share Unit Conversion. Immediately upon termination of the Participant's
employment with the Company, and so prior to the commencement of any payout or
distribution of any amounts hereunder, the Participant may make a one-time
election to convert to Cash Units all or a portion of the balance of Share Units
in such Participant's Deferred Bonus Account. Any Share Units so converted to
Cash Units as a result of this one-time conversion election shall be valued at
the average closing price for Shares as reported on the New York Stock Exchange
- -Composite Transactions for the ten (10) day period immediately prior to such
one-time conversion election.
4.7 Time of Payment. The Committee will specify in writing its election of
the earliest date of payment or distribution, and such election shall remain
effective until revoked in writing by the Committee. If the Committee elects a
new date with regard to payment or distribution, such election will apply only
prospectively to any additional Share Units and/or Cash Units to be credited to
such Participant's Deferred Bonus Account by Committee action in accordance with
this Article IV. If the Committee fails to designate a time of payment, payment
shall commence on the first day of the calendar year following the termination
of such Participant's employment. Notwithstanding the foregoing provisions of
this Section 4.7, in no event, however, shall the payment date be later than the
third calendar year following the date of: (i) Participant's retirement, or (ii)
termination of Participant's employment.
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4.8 Method of Payment. The Participant must select a method of payment at
least twelve (12) months prior to the time the deferral amount is scheduled to
be paid, by notifying the Company as to whether the method of payment will be
either:
(a) a lump sum payment; or
(b) a series of approximately equivalent annual installments (adjusted as
necessary to reflect Dividend Equivalents accrued during the installment
payout period), in such number of installments as the Participant shall
specify (not exceeding ten (10) installments).
If no election is made, payment or distribution of any amounts deferred by
Committee action pursuant to this Article IV (together with the Dividend
Equivalents and/or Interest Equivalents, as the case may be, accrued thereon)
shall be made in a single lump sum on the earliest payment date permitted by the
Committee as provided under Section 4.7 hereof. Share Units credited to the
Participant's Deferred Bonus Account shall be valued at the average closing
price for Shares as reported on the New York Stock Exchange-Composite
Transactions for the ten (10) day period prior to each new calendar year.
ARTICLE V
Change in Control
5.1 Acceleration of Payment Upon Change in Control. The terms of this Section
5.1 shall immediately become operative, without further action or consent by any
person or entity, upon a Change in Control, and once operative shall supersede
and control over any other provisions of this Plan. Upon the occurrence of a
Change in Control, and for twelve (12) months thereafter, each Participant,
whether or not he or she is still an employee of the Company, shall have the
right to withdraw, in a single lump-sum cash payment, an amount equal to ninety-
five percent (95%) of the balance of such Participant's Deferred Bonus Account,
as of the valuation date immediately preceding the date of withdrawal; provided,
however, that if this option is exercised, such Participant will forfeit to the
Company the remaining five percent (5%) of the balance of each such account (as
of the valuation date immediately preceding the date of withdrawal) from which
the funds are withdrawn as a penalty. Payments under this Section 5.1 shall be
made as soon as practicable, but no later than thirty (30) days after the
Participant notifies the Company in writing that he/she is exercising his/her
right to withdraw pursuant to this Section 5.1.
5.2 Amendment on or after Change in Control. On or after a Change in
Control, no action, including by way of example and not of limitation, the
amendment, suspension or termination of the Plan, shall be taken which would
affect the rights of any Participant or the operation of this Plan with respect
to the balance in the Participant's Accounts.
5.3 Attorney's Fees. The Company shall pay all legal fees and related
expenses incurred by a Participant in seeking to obtain or enforce any payment,
benefit or right such Participant may be entitled to under the plan after a
Change in Control. The Participant shall reimburse the Company for such fees
and expenses at such time as a court of competent jurisdiction, or another
independent third party having similar authority, determines that the
Participant's claim was frivolously brought without reasonable expectation of
success on the merits thereof.
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ARTICLE VI
Designation of Beneficiaries
The Participant shall name a beneficiary to receive any payments due such
Participant at the time of death, with the right to change such beneficiary at
any time. In case of a failure of designation or the death of the designated
beneficiary without a designated successor, distribution shall be made to the
person or persons designated as beneficiary in the designation most recently
filed under the Sun Company, Inc. Capital Accumulation Plan, or if no such
designation has been made or the Participant is not participating in such plan,
the surviving spouse of a deceased Participant, or, if there is no surviving
spouse, the children of the Participant in equal shares (the share of any child
who predeceases the Participant to go in equal shares to the issue of such
deceased child), or if there is no surviving spouse, child, or issue of such
children, the estate of the Participant. No designation of beneficiaries shall
be valid unless in writing signed by the Participant, dated and filed with the
Company. Upon the Participant's death, any balance in the Participant's
Deferred Bonus Account is payable under the method elected by the Participant or
in such other manner as the Committee may determine in its sole discretion.
ARTICLE VII
Miscellaneous
7.1 Source of Payments. All payments of deferred bonuses shall be paid in
cash from the general funds of the Company and the Company shall be under no
obligation to segregate any assets in connection with the maintenance of the
Deferred Bonus Account, nor shall anything contained in this Plan nor any action
taken pursuant to the Plan create or be construed to create a trust of any kind,
or a fiduciary relationship between the Company and Participant. Title to the
beneficial ownership of any assets, whether cash or investments, which the
Company may designate to pay the amount credited to the Deferred Bonus Account
shall at all times remain in the Company and Participant shall not have any
property interest whatsoever in any specific assets of the Company.
Participant's interest in the Deferred Bonus Account shall be limited to the
right to receive payments pursuant to the terms of this Plan and such rights to
receive shall be no greater than the right of any other unsecured general
creditor of the Company.
7.2 Nonalienation of Benefits. Participant shall not have the right to sell,
assign, transfer or otherwise convey or encumber in whole or in part the right
to receive any payment under this Plan except in accordance with Article VI
(Designation of Beneficiaries) hereof.
7.3 Acceptance of Terms. The terms and conditions of this Plan shall be
binding upon the heirs, beneficiaries, and other successors in interest of
Participant to the same extent that said terms and conditions are binding upon
the Participant. This Plan shall not be construed in any way as an employment
contract requiring the Company or Participant to continue the employment
relation.
7.4 Administration of the Plan. The Plan shall be administered by the
Committee which may make such rules and regulations and establish such
procedures for the administration of this Plan as it deems appropriate. In the
event of any dispute or disagreements as to the interpretation of this Plan or
of any rules, regulation, or procedure or as to any questioned right or
obligation arising from or related to this Plan, the decision of the Committee
shall be final and binding upon all persons.
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7.5 Adjustments for Changes in Capitalization. The number of Share Units in
the Participant's Deferred Bonus Account shall be appropriately adjusted by the
Committee in the event of changes in the Company's outstanding common stock by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, and such
adjustments shall be conclusive.
7.6 Termination and Amendment. The Plan may be terminated at any time by the
Board of Directors of Sun Company, Inc., and may be amended at any time by the
Committee provided, however, that no such amendment or termination shall
adversely affect the rights of Participants or their beneficiaries with respect
to amounts credited to Deferred Bonus Accounts prior to such amendment or
termination, without the written consent of the Participant.
7.7 Notices. To be effective, all notices, requests and demands to or upon
the Company or the Participant, as the case may be, shall be in writing, by
facsimile, by overnight courier or by registered or certified mail, postage
prepaid and return receipt requested, and shall be deemed to have been duly
given or made upon:
(a) delivery by hand;
(b) one business day after being sent by overnight courier;
(c) four business days after being deposited in the United States mail,
postage prepaid; or
(d) in the case of transmission by facsimile, when confirmation of receipt
is obtained.
Such communications shall be addressed and directed as listed below (or to
such other address or recipient for a party as may be hereafter notified by such
party hereunder), to the Company or the Participant, respectively:
If to the Company, to:
SUN COMPANY, INC.
Human Resources Department
Ten Penn Center - 20th Floor
1801 Market Street
Philadelphia, PA 19103-1699
Attn: Director, Compensation & Benefits
FAX : (215) 246-8498
Confirm: (215) 246-8392
If to Participant, to:
The most recent address for Participant appearing in the books and records
of the Company.
7.8 Construction. The captions and headings used for the various Articles
and Sections of this Plan are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
7.9 Severability. In the case of any one or more of the provisions contained
in this Plan shall be invalid, illegal, or unenforceable in any respect the
remaining provisions shall be construed in order to effectuate the purposes
hereof and the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
7.10 Governing Law. This Plan shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.