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HomeMy WebLinkAboutRES NO 99-97 99-97 RESOLUTION NO. A RESOLUTION APPROVING AN AMENDED EMPLOYEES' DEFERRED COMPENSATION PLAN AND AUTHORIZING ITS IMPLEMENTATION. WHEREAS, federal law regarding deferred compensation plans has recently been amended; and WHEREAS, the City of Bakersfield's Deferred Compensation Plan should be modified to reflect the recent changes in federal law. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF BAKERSFIELD AS FOLLOWS: The above-recitals are true and correct and are incorporated herein by reference. 2. The City of Bakersfield's "Deferred Compensation Plan and Trust," attached hereto as Exhibit A and incorporated herein by reference, is hereby adopted. 3. The City Manager is authorized to implement said plan, and the City of Bakersfield consents to the plan and assumes the obligations to be performed on its part as set forth in said plan. 4. This resolution shall not diminish any rights acquired by participants or beneficiaries under any previously adopted Deferred Compensation Plans. ORIGINAL I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the Council of the City of Bakersfield at a regular meeting thereof held on JUN ~ Ii 1997, by the following vote: AYES: NOES: ABSTAIN: ABSENT: COUNCILMEMBER CARSON, DEMOND, SMITH, MCDERMOTT, ROWLES, SULLIVAN, SALVAGGIO COUNCILMEMBER ~A ~ COUNCiLMEMBER COUNCILMEMBER ~..~ J"VL-~ - APPROVED JUt~ 2 5 1~7 CITY CLERK and Ex Officio Clf~oe of the Council of the City of Bakersfield APPROVED AS TO FORM: JUDY K. SKOUSEN CITY ATTORNEY Chief Assistant City Attorney COUNTERSIGNED: By:.,~~O RMS/meg Exhibit A S:~COUNCIL~RES~DEFE RRED.COM --June 16, 1997 -2- DEFERRED COMPENSATION PLAN AND TRUST ARTICLE 1 GENERAL Section 1.01 Name. The name of this Plan is the City of Bakersfield Deferred Compensation Plan and Trust (hereinafter referred to as the "Plan"). This Plan amends in its entirety any and all City of Bakersfield Deferred Compensation Plans previously adopted including, but not limited to, the Plan adopted on March 18, 1974 pursuant to Resolution No. 21-74, and subsequently amended by Resolutions 91-81, 29-85, 51-88, and 155-92. All participants in the originally adopted Plan and the subsequent amendments will be participants in this Plan. This Plan shall not diminish any rights acquired by Participants or their Beneficiaries in any previously adopted City of Bakersfield Deferred Compensation Plan or amendments thereto. Section 1.02 Puroose. The purpose of this Plan is to extend to Employees of the Employer certain benefits which ordinarily accrue from participation in a Deferred Compensation Plan, and to conform with Internal Revenue Code (hereinafter "Code") § 457. The Plan will permit Employees to provide for deferring current income until death, disability, retirement or other termination of employment with the City of Bakersfield. The Employer does not and cannot represent or guarantee that any particular federal or state income, payroll or other tax consequence will occur by reason of an Employee's participation in this Plan. An Employee wishing to participate in the Plan should consult his or her own attorney or other representative regarding all tax or other consequences of participation in this Plan. This Plan shall be an agreement solely between the Employer and participating Employees. The Plan and Trust forming a part hereof are established and shall be maintained for the exclusive benefit of eligible Employees and their Beneficiaries. No part of the corpus or income of the Trust shall revert to the Employer or be used for or diverted to purposes other than the exclusive benefit of Participating Employees and their Beneficiaries. Section 1.03 Definitions. For the purpose of this Plan, certain words or phrases used herein shall have the following meanings: (a) "Account" shall mean the bookkeeping account maintained for each Participant reflecting the cumulative amount of the Participant's Deferred Compensation, including any income, gains, losses, or increases or decreases in market value attributable to the Employer's investment of the Participant's Deferred Compensation, and further reflecting any distributions to the Participant or the Participant's Beneficiary and any fee~< or expenses charged against such Participant's Deferred Compensation. ORIGINAL (b) "Accounting Date" shall mean each business day that the New York Stock Exchange is open for trading, as provided in Section 5.06 for valuing the Trust's assets. (c) "Administrator" or "Plan Administrator" shall mean any financial institution or other organization authorized by law to carry out certain nondiscretionary administrative functions under the Plan. (d) "Advisory Committee" shall mean a committee consisting of three (3) members appointed by the City Manager, Such committee shall operate according to the guidelines specified in Section 2.01 of this Plan. (e) "Beneficiary" shall mean the person or persons designated by the Participant in his Joinder Agreement who shall receive any benefits payable hereunder in the event of the Participant's death. In the event that the Participant names two or more Beneficiaries, each Beneficiary shall be entitled to equal shares of the benefits payable at the Participant's death, unless otherwise provided in the Participant's Joinder Agreement. If no beneficiary is designated in the Joinder Agreement, if the Designated Beneficiary predeceases the Participant, or if the designated Beneficiary does not survive the Participant for a period of fifteen (15) days, then the estate of the Participant shall be the Beneficiary. (f) "City" shale mean the City of Bakersfield, California. (g) "Compensation" or "Normal Compensation" shall mean all wages or salaries or other forms of income to be paid by Employer to an Employee for services rendered. (h) "Deferred Compensation" shall mean that portion of an Employee's Compensation which said Employee has elected to defer in accordance with the provisions of this Plan or which the Employee and the City mutually agree shall be deferred in accordance with the provisions of this Plan. (i) "Disability" shall mean the inability of a Participant to engage in his or her usual occupation by reason of a medically determinable physical or mental impairment as determined by the Employer on the basis of advice from a competent physician or physicians. (j) "Employee" shall mean any full-time, probationary or permanent employee or elected official of the Employer. (k) "Employer" shall mean the City of Bakersfield, California. DEFERRED COMPENSATION pLAN AND TRUST S:~PERS~AGRSLOEFCOMP.K -- May 20. 1997 -- Page 2 of 18 Pages -- OR~GIAIAL b (I) "lncludible Compensation" shall mean the amount of an Employee's compensation from the Employer for a taxable year that is attributable to services performed for the Employer and that is inctudible in the Employee's gross income for the taxable year for federal income tax purposes. Such term does not include any amount excludable from gross income under this Plan or any other plan described in Section 457(b) of the Code or any other amount excludable from gross income for federal income tax purposes. Includible Compensation shall be determined without regard to any community property laws. (m) "Joinder Agreement" shall mean an agreement entered into between an Employee and the Employer, including any amendments or modifications thereof. Such agreement shall fix the amount of Deferred Compensation, specify a preference among the investment alternatives designated by the Employer, designate the Employee's Beneficiary or Beneficiaries, and incorporate the terms, conditions, and provisions of the Plan by reference. Such Joinder Agreement shall also include an acknowledgment by the Participant that his salary, wage or other compensation is as set forth in any salary schedule adopted by resolution or otherwise, without deductions for amounts deferred under the provisions of this Plan. Such Joinder Agreement shall also include a provision whereby the Participant, together with his heirs, successors and assigns, holds harmless the Employer from any liability hereunder for all acts performed in good faith, including acts relating to the investment of deferred amounts and/or the Employee's investment preference hereunder. (n) "Normal Retirement Age" shall mean any range of ages ending no later than age 701/~ and beginning no earlier than the earliest age at which the Participant has the right to retire under the Employer's basic pension plan without consent of the Employer, and to receive immediate retirement benefits without actuarial or similar reduction because of retirement before some later specified age in the Employeds basic pension plan. (For public safety employees, this age is currently set at 50, while the age for miscellaneous employees is 55.) For a Participant who continues in the service of the Employer after age 70~, normal retirement age shall be the age at which the Participant separates from service with the Employer. A Participant's normal retirement age determines the period during which a Participant may utilize the catch-up limitation of Section 4.02 hereunder. Once a Participant has to any extent utilized the catch-up limitation of Section 4.02 his normal retirement age may not be changed. (o) "Participant" shall mean any Employee who voluntarily elects to participate in this Plan by filing a duly executed Joinder Agreement with the Employer or who previously participated in the City of Bakersfield Deferred Compensation Plan adopted on March 18, 1974 and subsequently amended. DEFERRED COMPENSATION PLAN AND TRUST S:'~PERS~AGRS~EFCOMP.K -- May 20, 1997 -- Page 3 of 18 Pages -- O~IGINA c~ (p) "Participation Account" shall mean the book account to which are credited the Participant's Deferred Compensation, together with any interest, dividends, gains, losses or the like thereon. (q) "Plan Year~ shall mean the calendar year in which the Plan becomes effective, and each succeeding calendar year during the existence of this Plan. (r) "Separation From Service" or "Termination of Employment" shall mean severance of the Participant's employment with the Employer which constitutes a "separation from service" within the meaning of Section 402(d)(4)(A)(iii) of the Code. In general, a Participant shall be deemed to have severed his employment with the Employer for purposes of this Plan when, in accordance with the established practices of the Employer, the employment relationship is considered to have actually terminated. (s) "Trust" shall mean the Trust created under Article 5 of the Plan which shall consist of all compensation deferred under the Plan, plus any income and gains thereon, less any losses, expenses and distributions to Participants and Beneficiaries. ARTICLE 2 ADMINISTRATION OF THE PLAN Section 2.01 Role of Advisory Committee. The Plan shall be governed by an Advisory Committee which shall select the Plan Administrator or Administrators (hereinafter referred to in the singular) and shall rule on all questions arising out of the administration, interpretation and the application of the Plan, which determination shall be conclusive and binding on all Participants. Members of the Advisory Committee may participate in the Plan, but no member of the Advisory Committee shall be entitled to make decisions solely with respect to his or her own participation. Under no circumstances shall any member of the Advisory Committee be personally liable for anything done or omitted to be done by the Advisory Committee, any Plan Administrator, the Employer or anyone else arising out of or connected with the terms and provisions of this Plan or its administration. Section 2.02 Role of the Administrator. The Administrator, as agent for the Employer, shall perform nondiscretionary administrative functions in connection with the Plan, including the maintenance of Participant's Accounts, the provision of periodic reports of the status of each Account, and the disbursement of benefits on behalf of the Employer in accordance with the provisions of this Plan. DEFERRED COMPENSATION PLAN .AND TRUST S :~PE RS~AG RS"/~E FCOM P.K -- May 20, t 997 -- Page 4 of 18 Pages -- ARTICLE 3 PARTICIPATION IN THE PLAN Section 3.01 Initial Participation. An Employee may become a Participant by entering into a Joinder Agreement prior to the beginning of the calendar month in which the Joinder Agreement is to become effective to defer compensation not yet earned. Section 3.02 Amendment of Joinder Agreement. A Participant may amend an executed Joinder Agreement to change the amount of compensation not yet earned which is to be deferred (including the reduction of such future deferrals to zero) or to change his or her investment preference (subject to such restrictions as may result from the nature of terms of any investment made by the Employer). Such amendment shall become effective not later than the fifteenth (15th) day of the calendar month commencing after the date the amendment is executed. A Participant may at any time amend his Joinder Agreement to change the designated Beneficiary, and such amendment shall become effective immediately. ARTICLE 4 LIMITATIONS ON DEFERRALS Section 4.01 Non~al Limitation. Except as provided in Section 4.02, the maximum amount of Deferred Compensation for any Participant for any taxable year shall not exceed the lesser of $7,500.00, as adjusted for the cost-of-living in accordance with Code section 457(e)(15) for taxable years beginning after December 31, 1996 (the "dollar limitation"), or 33-1/3 percent of the Participant's Includible Compensation for the taxable year. This limitation will ordinarily be equivalent to the lesser of the dollar limitation in effect for the taxable year or 25 percent of the Participant's Normal Compensation. The minimum amount deferred shall be at least twelve dollars ($12.00) per pay period. Section 4.02 Catch-Up Limitation. For each of the last three (3) taxable years of a Participant ending before his attainment of Normal Retirement Age, the maximum amount of Deferred Compensation shall be the lesser of: (1) $15,000 per year or (2) the sum of (i) the Normal Limitation for the taxable year, and (ii) the Normal Limitation for each prior taxable year of the Participant commencing after 1978 less the amount of the Participant's Deferred Compensation for such prior taxable years. A prior taxable year shall be taken into account under the preceding sentence only if (i) the Participant was eligible to participate in the Plan for such year (or in any other eligible deferred compensation plan established under Section 457 of the Code which is properly taken into account pursuant to regulations under section 457), and (ii) compensation (if any) deferred under the Plan (or such other plan) was subject to the deferral limitations set forth in Section 4.01. DEFERRED COMPENSAT~N PLAN AND TRUST S:"PERS~AGRS~EFCOMP.K -- Page 5 of 18 Pages -- OR;G~NA£ Section 4.03 Other Plans. The amount excludable from a Participant's gross income under this Plan or any other eligible deferred compensation plan under section 457 of the Code shall not exceed $7,500.00 (or such greater amount allowed under Section 4.01 or 4.02 of the Plan), less any amount excluded from gross income under section 403(b), 402(a)(8), or 402(h)(1)(B) of the Code, or any amount with respect to which a deduction is allowable by reason of a contribution to an organization described in section 501 (c)(18) of the Code. ARTICLE 5 TRUST ANDINVESTMENT OF ACCOUNTS Section 5.01 Investment of Deferred Compensation. A Trust is hereby created to hold all the assets of the Plan for the exclusive benefit of Participants and Beneficiaries, except that expenses and taxes may be paid from the Trust as provided in Section 5.03. The trustee shall be the Employer. Section 5.02 Investment Powers. The trustee or the Plan Administrator, acting as agent for the trustee, shall have the powers listed in this Section with respect to investment of Trust assets, except to the extent that the investment of Trust assets is directed by Participants pursuant to Section 5.05. (a) To invest and reinvest the Trust without distinction between principal and income in any form of tangible or intangible property, real, personal, or mixed, and wherever situated, including, but not by way of limitation, common or preferred stocks, shares of regulated investment companies and other mutual funds, bonds, loans, notes, debentures, mortgages, certificates of deposit, interest, or participation, equipment trust certificates, commercial paper including but not limited to participation in pooled commercial paper accounts, contracts with insurance companies including but not limited to insurance, individual or group annuity, deposit administration, and guaranteed interest contracts, deposits at reasonable rates of interest at banking institutions including but not limited to savings accounts and certificates of deposit, and other forms of securities or investments of any kind, class, or character whatsoever and representing interests in any form of enterprise, wherever it may be located, organized or operated within or without the United States of America, whether such investments are income producing or not, without being limited in any respect by statute or court rule or decision of any jurisdiction now or hereafter in force purporting to limit or otherwise affect such investments. Assets of the Trust may be invested in securities or new ventures that involve a higher degree of risk than investments that have demonstrated their investment performance over an extended period of time. DEFERRED COMPENSAT~3N PLAN AND TRUST S:~PERS~GRS~DEFCOMP.K -- May 20, 1997 -- Page 6 of 18 Pages -- ORiGiNAl_ ~ (b) To invest and reinvest all or any part of the assets of the Trust in any common, collective or cornmingled trust fund that is maintained by a bank or other institution and that is available to Employee plans described under sections 457 or 401 of the Code, or any successor provisions thereto, and during the period of time that an investment through any such medium shall exist, to the extent of participation of the Plan, the declaration of trust of such common, collective, or cornmingled trust fund shall constitute a part of this Plan. (c) To invest and reinvest all or any part of the assets of the Trust in any group annuity, deposit administration or guaranteed interest contract issued by an insurance company or other financial institution on a cornmingled or collective basis with the assets of any other 457 plan or trust qualified under section 401 (a) of the Code or any other plan described in section 401(a)(24) of the Code, and such contract may be held or issued in the name of the Plan Administrator, or such custodian as the Plan Administrator may appoint, as agent and nominee for the Employer. During the period that an investment through any such contract shall exist, to the extent of participation of the Plan, the terms and conditions of such contract shall constitute a part of the Plan. (d) To purchase part interests in real property or in mortgages on real property, wherever such real property may be situated, and to delegate to a property manager or the holder or holders of a majority interest in such real property or mortgage on real property the management and operation of any part interest in such real property or mortgages. (e) To hold cash awaiting investment and to keep such portion of the Trust in cash or cash balances, without liability for interest, in such amounts as may from time to time be deemed to be reasonable and necessary to meet obligations under the Plan or otherwise to be in the best interests of the Plan. (f) To retain, manage, operate, administer, divide, subdivide, partition, mortgage, pledge, improve, alter, demolish, remodel, repair, and develop in any manner any property, or any part of or partial interest in any property, real or personal, held in the Trust, to lease such property for any period of time, and to grant options to sell, exchange, lease, or otherwise dispose of any such property, without regard to restrictions applicable to fiduciaries or others and without the approval of any court. (g) To sell for cash or credit, redeem, exchange for other property, convey, transfer, or otherwise dispose of any property held in the Trust in any manner and at any time, by private contract or at public auction or otherwise, and no other person shall be bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any such sale or other disposition. DEFERRED COMPENSATION PLAN AND TRUST $:~PERS~AGR$',DE FCOMP.K -- May 20. 1997 -- Page 7 of 18 Pages -- m OR'GlObAL ~J (h) To enter into contracts for or to make commitments either alone or in company with others to purchase or sell at any future date any property acquired for the Trust. (i) To vote or to refrain from voting any stocks, bonds, or otl~er securities held in the Trust, to exercise any other right appurtenant to any securities or other property held in the Trust, to give general or special proxies or powers of attorney with or without power of substitution with respect to such securities and other property, to exercise any conversion privileges, subscription rights, or other options or privileges with respect to such securities and other property and make any payments incidental thereto, and generally to exercise, personally or by general or limited power of attorney, any of the powers of an owner with respect to stocks, bonds, securities, or other property held in the Trust at any time. (j) To oppose or to consent to and participate in any organization, reorganization, consolidation, merger, combination, readjustment of finances, or similar arrangement with respect to any corporation, company, or association, any of the securities of which are held in the Trust, to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments, or subscriptions that may be deemed necessary or advisable in connection therewith, and to accept, hold, and retain any securities or other property that may be so acquired. (k) To deposit any property held in the Trust with any protective, reorganization, or similar committee, and to delegate discretionary power thereto and to pay and agree to pay part of its expenses and compensation and any assessments levied with respect to any such property so deposited. (I) To hold, to authorize the holding of, and to register any investment to the Trust in the name of the Plan, the Employer, or any nominee or agent of any of the foregoing, including the Plan Administrator, or in bearer form, to deposit or arrange for the deposit of securities in a qualified central depository even though, when so deposited, such securities may be merged and held in bulk in the name of the nominee of such depository with other securities deposited therein by any other person, and to organize corporations or trusts under the laws of any jurisdiction for the purpose of acquiring or holding title to any property for the Trust, all with or without the addition of words or other action to indicate that property is held in a fiduciary or representative capacity but the books and records of the Plan shall at all times show that all such investments are part of the Trust. (m) Upon such terms as may be deemed advisable by the Employer or the Plan Administrator, as the case may be, for the protection of the interests of the Plan or for the preservation of the value of an investment, to exercise and enforce by suit for legal or equitable remedies or by other action, or to waive any right or claim on behalf of the Plan or any default in any obligation owing to the Plan, to renew, extend the time for DEFERRED COMPENSATION PLAN AND TRUST S :%C'E RS%AG RS~DE FCOMP.K -- May 20, 1997 -- Page 8 of 18 Pages -- OR;G~NAL payment of, agree to a reduction in the rate of interest on, or agree to any other modification or change in the terms of any obligation owing to the Plan, to settle, compromise, adjust, or submit to arbitration any claim or right in favor of or against the Plan, to exercise and enforce any and all rights of foreclosure, bid for property in foreclosure, and take a deed in lieu of foreclosure with or without paying consideration therefor, to commence or defend suits or other legal proceedings whenever any interest of the Plan requires it, and to represent the Plan in all suits or legal proceedings in any court of law or equity or before any body or tribunal. (n) To employ suitable consultants, depositories, agents, and legal counsel on behalf of the Plan. (o) To make, execute, acknowledge, and deliver any and all deeds, leases, mortgages, conveyances, contracts, waivers, releases, or other instruments in writing necessary or proper for the accomplishment of any of the foregoing powers. (p) To open and maintain any bank account or accounts in the name of the Plan, the Employer, or any nominee or agent of the foregoing, including the Plan Administrator, in any bank or banks. (q) To do any and all other acts that may be deemed necessary to carry out any of the powers set forth herein. Section 5.03 Taxes and Expenses. All taxes of any and all kinds whatsoever that may be levied or assessed under existing or future laws upon, or in respect to the Trust, or the income thereof, and all commissions or acquisitions or dispositions of securities and similar expenses of investment and reinvestment of the Trust, shall be paid from the Trust. Such reasonable compensation of the Plan Administrator, as may be agreed upon from time to time by the Employer and the Plan Administrator, and reimbursement for reasonable expenses incurred by the Plan Administrator in performance of its duties hereunder (including but not limited to fees for legal, accounting, investment and custodial services) shall also be paid from the Trust. Section 5.04 Payment of Benefits. The payment of benefits from the Trust in accordance with the terms of the Plan may be made by the Plan Administrator, or by any custodian or other person so authorized by the Employer to make such disbursement. The Plan Administrator, custodian or other person shall not be liable with respect to any distribution of Trust assets made at the direction of the Employer. Section 5.05 Investment Funds. In accordance with uniform and nondiscriminatory rules established by the Employer and the Plan Administrator, the Participant may direct his/her Accounts to be invested in one (1) or more investment funds available under the Plan; provided, however, that the Participant's investment directions shall not violate any investment restrictions established by the Employer. Neither the DEFERRED COMPENSATION PLAN AND TRUST S:~PERS~AGRS~DEFCOMP.K -- May 20, 1997 -- Page 9 of 18 Pages -- Employer, the Administrator, nor any other person shall be liable for any losses incurred by virtue of following such directions or with any reasonable administrative delay in implementing such directions. Section 5.06 Valuation of Accounts. As of each Accounting Date, the Plan assets held in each investment fund offered shall be valued at fair market value and the investment income and gains or losses for each fund shall be determined. Such investment income and gains or losses shall be allocated proportionately among all Account balances on a fund-by-fund basis. The allocation shall be in the proportion that each such Account balance as of the immediately preceding Accounting Date bears to the total of all such Account balances as of that Accounting Date. For purposes of this Article, all Account balances include the Account balances of all Participants and Beneficiaries. Section 5.07 Crediting of Accounts. The Participant's Account shall reflect the amount and value of the investments or other property obtained by the Employer through the investment of the Participant's Deferred Compensation pursuant to Sections 5.05 and 5.06. It is anticipated that the Employer's investments with respect to a Participant will conform to the investment preference specified in the Participant's Joinder Agreement, but nothing herein shall be construed to require the Employer to make any particular investment of a Participant's Deferred Compensation. Each Participant shall receive periodic reports, not less frequently than annually, showing the then current value of his/her Account. Section 5.08 Transfers. (a) Incoming Transfers. A transfer may be accepted from an eligible deferred compensation plan maintained by another employer and credited to a Participant's Account under the Plan if (i) the Participant has separated from service with that employer and become an Employee of the Employer, and (ii) the other employer's plan provides that such transfer will be made. The Employer may require such documentation from the predecessor plan as it deems necessary to effectuate the transfer, to confirm that such plan is an eligible deferred compensation plan within the meaning of Section 457 of the Code, and to assure that transfers are provided for under such plan. The Employer may refuse to accept a transfer in the form of assets other than cash, unless the Employer and the Administrator agree to hold such other assets under the Plan. Any such transferred amount shall be treated as a deferral subject to the limitations of Article 4, except that, for purposes of applying the limitations of Sections 4.01 and 4.02, an amount deferred during any taxable year under the plan from which the transfer is accepted shall be treated as if it has been deferred under this Plan during such taxable year and compensation paid by the transferor employer shall be treated as if it had been paid by the Employer. {~EFERRED COMPENSATION PLAN AND TRUST S:tPERS~AGRS~DEFCOMP,K -- May 20, 1997 -- Page 10 of 18 Pages -- (b) Outgoing Transfers. An amount may be transferred to an eligible deferred compensation plan maintained by another employer, and charged to a Participant's Account under this Plan, if (i) the Participant has separated from service with the Employer and become an employee of the other employer, (ii) the other employer's plan provides that such transfer will be accepted, and (iii) the Participant and the employer have signed such agreements as are necessary to assure that the Employer's liability to pay benefits to the Participant has been discharged and assumed by the other employer. The Employer may require such documentation from the other plan as it deems necessary to effectuate the transfer, to confirm that such plan is an eligible deferred compensation plan within the meaning of section 457 of the Code, and to assure that transfers are provided for under such plan. Such transfers shall be made only under such circumstances as are permitted under section 457 of the Code and the regulations thereunder. 5.09 Employer Liability. In no event shall the Employer's liability to pay benefits to a Participant under this Plan exceed the value of the amounts credited to the Participant's Account; neither the Employer nor the Advisory Committee nor the Administrator shall be liable for losses arising from depreciation or shrinkage in the value of any investments acquired under this Plan. ARTICLE 6 BENEFITS Section 6.01 Retirement Benefits and Election on Separation from Service. Except as otherwise provided in this Article 6, the distribution of a Participant's Account shall commence as of April 1 of the calendar year after the Plan Year of the Participant's Retirement, and the distribution of such Retirement benefits shall be made in accordance with one of the payment options described in Section 6.02. Notwithstanding the foregoing, but subject to the following paragraph of this Section 6.01, the Participant may irrevocably elect within 60 days following Separation from Service to have the distribution of benefits commence on a fixed determinable date other than that described in the preceding sentence which is at least 61 days after Separation from Service, but not later than April 1 of the year following the year of the Participant's Retirement or attainment of age 70~, whichever is later. Effective on or after January 1, 1997, the Participant may elect to defer the commencement of distribution of benefits to a fixed determinable date later than the date described above, but not later than Apdl 1 of the year following the year of the Participant's retirement or attainment of age 70%, whichever is later, provided (a) such election is made after the 61st day following Separation from Service and before commencement of DEFERRED COMPENSATION PLAN AND TRUST S:~PERS~AGRS~DEFCOMP.K -- May 20, 1997 -- Page 11 of 18 Pages distributions and (b) the Participant may make only one (1) such election. Notwithstanding the foregoing, the Administrator, in order to ensure the orderly administration of this provision, may establish a deadline after which such election to defer the commencement of distribution of benefits shall not be allowed. Section 6.02 Payment Options. As provided in Sections 6.01, 6.04 and 6.05, a Participant or Beneficiary may elect to have value of the Participant's Account distributed in accordance with one of the following payment options, provided that such option is consistent with the limitations set forth in Section 6.03. (a) Equal monthly, quarterly, semi-annual or annual payments in an amount chosen by the Participant, continuing until his/her Account is exhausted; (b) One lump-sum payment; (c) Approximately equal monthly, quarterly, semi-annual or annual payments, calculated to continue for a period certain chosen by the Participant. (d) Annual Payments equal to the minimum distribution required under Section 401(a)(9) of the Code over the life expectancy of the Participant or over the life expectancies of the Participant and his Beneficiary. (e) Payments equal to payments made by the issuer of a retirement annuity policy acquired by the Employer. (f) A split distribution under which payments under options (a), (b), (c) or (e) commence or are made at the same time, as elected by the Participant under Section 6.01, provided that all payments commence (or are made) by the latest benefit commencement date under Section 6.01 and that once a payment is made subsequent payments will be made in substantially nonincreasing amounts. (g) Any payment option elected by the Participant and agreed to by the Employer and Administrator, provided that such option must provide for substantially nonincreasing payments for any period after the benefit commencement date under Section 6.01. A Participant's or Beneficiary's selection of a payment option made after December 31, 1995, under Subsections (a), (c), or (g) above may include the selection of an automatic annual cost-of-living increase. Such increase will be based on the rise in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of the last year in which a cost-of-living increase was provided to the third quarter of the current year. Any increase will be made in periodic payment checks beginning the following January. The first cost-of-living increase will be based on the rise in the CPI-U from the third quarter of 1995 to the third quarter of 1996, and will be applied to amounts paid beginning January 1997. DEFERRED COMPENSATION PLAN AND TRUST S:~PERS~,GRS~DEFCOMP.K -- May 20,1 ~97 -- Page 12 of 18 Pages -- OR~G~tVAL ~ A Participant's or Beneficiary's election of a payment option must be made at least 30 days before the payment of benefits is to commence. If a Participant or Beneficiary fails to make a timely election of a payment option, benefits shall be paid monthly under option (c) above for a period of five years or such shorter period of time necessary to ensure that the amount of any installment is not less than $1,200 per year, without the inclusion of a cest-of-living increase. Section 6.03 Limitation on Options. No payment option may be selected by a Participant under subsection 6.02(a) or (c) unless the amount of any installment is not less than $1,200 per year. No payment option may be selected by a Participant or Beneficiary under Sections 6.02, 6.04, or 6.05 unless it satisfies the requirements of Sections 401(a)(9) and 457(d)(2) of the Code, including that payments commencing before the death of the Participant shall satisfy the incidental death benefits requirement under sections 457(d)(2)(B)(i)(1 ). A cost-of-living increase included as part of a payment option selected under Section 6.02 shall not be considered to fail to satisfy the requirement under section 457(d)(2)(b) that any distribution made over a period of more than one (1) year can only be made in substantially nonincreasing amounts. Unless otherwise elected by the Participant (or spouse, in the case of distributions described in Section 6.05 below) by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the Participant (or spouse) and shall apply to all subsequent years. The life expectancy of a nonspouse Beneficiary may not be recalculated. Section 6.04 Post-retirement Death Benefits. (a) Should the Participant die after he/she has begun to receive benefits under a payment option, the remaining payments, if any, under the payment option shall be payable to the Participant's Beneficiary within the thirty (30) day period commencing with the 61 st day after the Participant's death, unless the Beneficiary elects payment under a different payment option that is available under Section 6.02 within sixty (60) days of the Participant's death. Any different payment option elected by a Beneficiary under this section must provide for payments at a rate that is at least as rapid under the payment option that was applicable to the Participant. In no event shall the Employer, Advisory Committee or Administrator be liable to the Beneficiary for the amount of any payment made in the name of the Participant before the Administrator receives proof of death of the Participant. (b) If the designated Beneficiary does not continue to live for the remaining period of payments under the payment option, then the commuted value of any remaining payments under the payment option shall be paid in a lump sum to the estate of the Beneficiary. In the event that the Participant's estate is the Beneficiary, the cemmuted value of any remaining payments under the payment option shall be paid to the estate in a lump sum. DEFERRED COMPENSATION PLAN AND TRUST $ :tPERS~AGRS',DE FCOM p.K -- May 20, 1997 -- Page 13 of 18 Pages -- Section 6.05 Pre-retirement Death Benefits. (a) Should the Participant die before he has begun to receive the benefits provided by Section 6.01, the value of the Participant's Account shall be payable to the Beneficiary commencing within the thirty (30) day period commencing on the 91 st day after the Participant's death, unless the Beneficiary elects a different fixed or determinable benefit commencement date within ninety (90) days of the Participant's death. Such benefit commencement date shall be not later than the later of (i) December 31 of the year following the year of the Participant's death, or (ii) if the Beneficiary is the Participant's spouse, December 31 of the year in which the Participant would have attained age 70%. (b) Unless a Beneficiary elects a different payment option prior to the benefit commencement date, death benefits under this Section shall be paid in approximately equal annual installments over five years, or over such shorter period as may be necessary to assure that the amount of any annual installment is not less than $3,500. A Beneficiary shall be treated as if he/she were a Participant for purposes of determining the payment options available under Section 6.02, provided, however, that the payment option chosen by the Beneficiary must provide for payments to the Beneficiary over a period no longer than the life expectancy of the Beneficiary, and provided that such period may not exceed fifteen (15) years if the Beneficiary is not the Participant's spouse. (c) In the event that the Beneficiary dies before the payment of death benefits has commenced or been completed, the remaining value of the Participant's Account shall be paid to the estate of the Beneficiary in a lump sum. In the event that the Participant's estate is the Beneficiary, payment shall be made to the estate in a lump sum. Section 6.06 Unforeseeable Emergencies, (a) In the event an unforeseeable emergency occurs, a Participant may apply to the Employer to receive that part of the value of his/her Account that is reasonably needed to satisfy the emergency need. If such an application is approved by the Employer, the Participant shall be paid only such amount as the Employer deems necessary to meet the emergency need, but payment shall not be made to the extent that the financial hardship may be relieved through cessation of deferral under the Plan, insurance or other reimbursement, or liquidation of other assets to the extent such liquidation would not itself cause severe financial hardship. (b) An unforeseeable emergency shall be deemed to involve only circumstances of severe financial hardship to the Participant resulting from a sudden unexpected illness, accident, or disability of the Participant or of a dependent (as defined in section 152(a) of the Code) of the Participant, loss of the Participant's property due to DEFERRED COMPENSATION PLAN .AND TRUST S :~PE R$~AG RS ~)EFCOMP.K -- May 20, 1997 -- Page 14 of 18 Pages -- casualty, or other similar and extraordinary unforeseeable circumstances arising as a result of events beyond the control of the Participant. Foreseeable personal expenses normally budgetable such as the need to send a Participant's child to college or the purchase of an automobile or down payment on a home shall not be considered unforeseeable emergencies. The determination as to whether an unforeseeable emergency exists shall be based on the merits of each individual case. (c) Notwithstanding any other provision herein, for "unforeseeable emergencies" a Participant shall apply to the Advisory Committee to withdraw, in whole or in part, from the Plan prior to retirement or any other termination of his employment with the Employer. If the application for withdrawal is approved by the Advisory Committee, the withdrawal shall be effected at the time designated by the Advisory Committee. The Advisory Committee will require a written request for the withdrawal, stating the nature of the emergency and any applicable circumstances that will be of benefit to the Committee's decision-making process. At its discretion, the Advisory Committee may require additional financial information. The decision of the Advisory Committee concerning "unforeseeable emergencies" shall be final as to all Participants. Section 6.07 Transitional Rule for Pre-1989 Benefit Elections. In the event that, prior to January 1, 1989, a Participant or Beneficiary has commenced receiving benefits under a payment option or has irrevocably elected a payment option or benefit commencement date, then that payment option or election shall remain in effect notwithstanding any other provision of the Plan. Section 6.08 De Minimis Accounts. Notwithstanding the foregoing provisions of this Article, if the value of a Participant's Account does not exceed $3,500 and (a) no amount has been deferred under the Plan with respect to the Participant during the 2-year period ending on the date of the distribution and (b) there has been no prior distribution under the Plan to the Participant pursuant to this Section 6.08, the Participant may elect to receive or the Employer may distribute the Participant's entire Account without the consent of the Participant. Such distribution shall be made in a lump sum. ARTICLE 7 MISCELLANEOUS Section 7.01 Amendment or Termination of Plan. This Plan may be modified, amended or terminated in whole or in part (including retroactive amendments) by the Employer at any time. No amendment or termination of the Plan shall reduce or impair the rights of any Participant or his Beneficiary which have already accrued. Upon termination of the Plan, the Employer shall distribute all amounts credited to each Participation Account in accordance with the Participant's payment option selected pursuant to Section 6.02. All Participants shall be treated in the same manner. DEFERRED COMPENSATION PLAN AND TRUST S:~ERSVkGRS~DEFCOMP.K -- May 20, 1997 -- Page 15 of 18 Pages -- Section 7.02 Creditors. A Participant may not assign, transfer, sell, hypothecate, or otherwise dispose of any or all of his investment account or any right which he may have under the Plan, and any attempt to do so shall be void. Section 7.03 Employment. Participation in the Plan shall not be construed as giving any Participant any right to continue his employment with the Employer. Section 7.04 Non-Assignability Clause. It is agreed that neither a Participant nor a beneficiary, nor any other designee, shall have any right to commute, sell, assign, transfer, or otherwise convey the right to receive any payments hereunder, which payments and right thereto are expressly declared to be nonassignable and nontransferable, and in the event of any attempted assignment or transfer, the Employer and the Advisory Committee shall have no further liability hereunder nor shall any payments be transferable by operation of law in event of bankruptcy or insolvency, except to the extent otherwise provided by law, notwithstanding the above clause. Section 7.05 Written Notice. Any notice or other communication required or permitted under the Plan shall be in writing, and if directed to the Employer, shall be sent to the designated officer of the Employer, and, if directed to a Participant or to a Beneficiary, shall be sent to such Participant or Beneficiary at either his last known address as it appears on the Employer~s record or to his work site, at the Employer's option. Section 7.06 Total Agreement. This Plan and the Joinder Agreement, and any subsequently adopted amendment thereof, shall constitute the total agreement or contract between the Employer and the Participant regarding the Plan. No oral statement regarding the Plan may be relied upon by the Participant. Section 7.07 (~ender. As used herein, the masculine shall include the neuter and the feminine where appropriate. Section 7.08 Controlling Law. This Plan is created and shall be interpreted under the laws of the State of California as the same shall be at the time any dispute or issue is raised. Section 7.09 Domestic Relations Orders. (a) Allowance of Transfers. Totheextentrequiredunderfinaljudgment, decree, or order (including approval of a property settlement agreement) made pursuant to a state domestic relations law, any portion of a Participant's Account may be paid or set aside for payment to a spouse, former spouse, or child of the Participant. Where necessary to carry out the terms of such an order, a separate Account shall be established with respect to the spouse, former spouse, or child who shall be entitled to make investment selections with respect thereto in the same manner as the Participant; any DEFERRED COMPENSATION PlAN AND TRUST S:~OERS~AGRS~DEFCOMP.K -- May 20. 1997 -- Page 16 of 18 Pages -- ORIGINAL amount so set aside for a spouse, former spouse, or child shall be paid out in a lump sum at the earliest date that benefits may be paid to the Participant, unless the order directs a different time or form of payment. Nothing in this Section shall be construed to authorize any amount to be distributed under the Plan at a time or in a form that is not permitted under Section 457 of the Code. Any Payment made to a person other than the Participant pursuant to this Section shall be reduced by required income tax withholding; the fact that payment is made to a person other than the Participant may not prevent such payment from being includible in the gross income of the Participant for withholding and income tax reporting purposes. (b) Release from Liability to Participant. The Employer~s liability to pay benefits to a Participant shall be reduced to the extent that amounts have been paid or set aside for payment to a spouse, former spouse, or child pursuant to paragraph (a) of this Section. No such transfer shall be effectuated unless the Employer or Administrator has been provided with satisfactory evidence that the Employer and the Administrator are released from any further claim by the Participant with respect to such amounts. The Participant shall be deemed to have released the Employer and the Administrator from any claim with respect to such amounts, in any case in which (i) the Employer or Administrator has been served with legal process or otherwise joined in a proceeding relating to such transfer, (ii) the Participant has been notified of the pendency of such proceeding in the manner prescribed by the law of the jurisdiction in which the proceeding is pending for service of process in such action or by mail from the Employer or Administrator to the Participant's last known mailing address, and (iii) the Participant fails to obtain an order of the court in the proceeding relieving the Employer or Administrator from the obligation to comply with the judgment, decree or order. (c) Participation in Legal Proceedings. The Employer and Administrator shall not be obligated to defend against or set aside any judgment, decree or order described in paragraph (a) or any legal order relating to the garnishment of a Participant's benefits, unless the full expense of such legal action is borne by the Participant. In the event that the Participant's action (or inaction) nonetheless causes the Employer or Administrator to incur such expense, the amount of the expense may be charged against the Participant's Account and thereby reduce the Employer~s obligation to pay benefits to the Participant. In the course of any proceeding relating to divorce, separation, or child support, the Employer and Administrator shall be authorized to disclose information relating to the Participant's Account to the Participant's spouse, former spouse, or child (including the legal representatives of the spouse, former spouse, or child), or to a court. DEFERRED COMPENSATION PLAN AND TRUST S :',PE RS~AG RS~DE FCOM P.K -- May 20, 1997 -- Page 17 of 18 Pages -- ORIGINAL ARTICLE 8 RELATIONSHIP TO OTHER PLANS AND EMPLOYMENT AGREEMENTS This Plan serves in addition to any other retirement, pension, or benefit plan or system presently in existence or hereinafter established for the benefit of the Employer's employees, and participation hereunder shall not affect benefits receivable under any such plan or system. Nothing contained in this Plan shall be deemed to constitute an employment contract or agreement between any Participant and the Employer or to give any Participant the right to be retained in the employ of the Employer. Nor shall anything herein be construed to modify the terms of any employment contract or agreement between a Participant and the Employer. DEFERRED COMPENSATK:)N pLAN AND TRUST $ :~PERS~,G RS~DEFCOM P.K -- May 20, 1997 -- Page 18 of 18 Pages --