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HomeMy WebLinkAboutRES NO 190-01 190-01, RESOLUTION NO.. A RESOLUTION APPROVING AN AMENDED EMPLOYEES' DEFERRED COMPENSATION PLAN, AUTHORIZING IMPLEMENTATION OF THE PLAN AND INDEMNIFYING THE CITY'S ADVISORY COMMITTEE. WHEREAS, the City of Bakersfield currently provides a Deferred Compensation Plan pursuant to Internal Revenue Code section 457 for its employees choosing to participate in the Plan; and WHEREAS, the City wishes to implement recently passed changes to the laws governing section 457 Deferred Compensation Plan as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); and WHEREAS, this Council is approving the increased contribution amounts allowed in the attached amended Deferred Compensation Plan contingent on the State of California approving the necessary legislation to implement those provisions of EGTRRA; and WHEREAS, the City Council recognizes that the City of Bakersfieid's Deferred Compensation Plan is administered by an advisory committee acting within the scope and course of their employment with the City and consisting of three employees: one member each from Finance, Public Works and the Attorney's Office; and WHEREAS, the Council wishes to indemnify the advisory committee for their actions and decisions in the administration of the Plan. 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. The City of Bakersfieid's "Deferred Compensation Plan, Trust and Custodial Account," attached hereto as Exhibit "A" and incorporated herein by reference, is hereby adopted. 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. Page 1 of 3 o This resolution shall not diminish any rights acquired by participants or beneficiaries under any previously adopted Deferred Compensation Plans. The City of Bakersfield shall indemnify, defend, and hold harmless the City's advisory committee (described in the attached Plan document), whether collectively or individually, against any and all liability, claims, actions, causes of action, or demands whatsoever against them, or any of them, before administrative or judicial tribunals of any kind whatsoever, arising out of, connected with, or caused by any actions or decisions whether past, present, or future of any kind of the advisory committee in any way related to the administration of the City of Bakersfield's Deferred Compensation Plan, Trust and Custodial Account. Page 2 of 3 I HEREBY CERTIFY that the foregoing Resolution was passed an~l~opted by the Council of the City of Bakersfield at a regular meeting thereof held on 12 2001 , by the following vote: AYES: NOES: ABSTAIN: ABSENT: COUNCIL MEMBER CARSON, HANSEN, MAGGARD, COUCH, BENHAM, SULLIVAN, SALVAGGIO COUNCIL MEMBER ~ COUNCIL MEMBER ~.Y~C'~2.~ COUNCIL MEMBER ~.~F'~ ~ APPROVED DEC 12 Z001 MAYOR of Bakersfield CITY CLERK and Ex Officio ~erk of the Council of the City of Bakersfield APPROVED as to form: CITY ATTORNEY'S OFFICE ROBERT M. SHERFY Assistant City Attorney RMS:dlr Attachment A:\DeferredCom pAm dRes2001 .Fnl.wpd Page 3 of 3 DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT ARTICLE 1 GENERAL Section 1.01 Name. The name of this Plan is the City of Bakersfield Deferred Compensation Plan, Trust and Custodial Account (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 Mamh 18, 1974 pursuant to Resolution No. 21-74, and subsequently amended by Resolutions 91-81,29-85, 51-88, 155-92, and 99-97. All current participants in the Plan 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 Purpose. 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") section 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 or will not 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 nor any Custodial Account 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 investment of the Participant's Deferred Compensation, and further reflecting any distributions to the Participant or the Participant's Beneficiary and any fees or expenses charged against such Participant's Deferred Compensation. DEFERRED COMPENSATION pLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001 .Fnl.wpd December 3, 2(X)l -- Page 1 of 22 Pages -- (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 or Custodial Account's assets. (¢) "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) "Automatic Distribution Date": Prior to January 1, 2002, "Automatic Distribution Date" means the 60th day of the calendar year after the Plan Year of the Participant's retirement or any other date permitted under the regulations promulgated under Code Section 457. On and after January 1, 2002, "Automatic Distribution Date" means April l~t of the calendar year after the Plan Year the Participant attains age 70½ or, if later, has a Severance Event. (f) "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. Spousal consent shall be required in order for a Participant to name as first Beneficiary anyone other than the spouse. (g) "City" shall mean the City of Bakersfield, California. (h) "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 without regard to the effect of any pre-tax contributions. (i) "Custodial Account" shall mean an account created and maintained by a Custodian under Article 5 of the Plan which shall consist of all compensation deferred under the Plan and not held in a Trust, plus any income and gains thereon, less any losses, expenses and distributions to Participants and Beneficiaries whose accounts are invested through investment fund assets held in the Custodial Account. (j) "Custodian" shall mean any financial institution or other organization with which the Employer has established a custodial account for the benefit for Participants. DEFERRED COMPENSATION PLAN. TRUST AND CUSTODIAL ACCOUNT A:\Defen'edCompAgr2001 .Fnl.wpd December3,2001 -- Page 2 of 22 Pages -- (k) "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. "Deferred Compensation" also means any amount credited to a Participant's Account by reason of a transfer under Section 5.08, a rollover under Section 5.10, or any other amount which the Employer agrees to credit to a Participant's Account. (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. (m) "Dollar Limitation" shall mean the applicable dollar amount within the meaning of Section 457(b)(2)(A) of the Code, as adjusted for the cost-of-living in accordance with Section 457(e)(15) of the Code. (n) "Employee" shall mean any full-time, probationary or permanent employee or elected official of the Employer. (o) "Employer" shall mean the City of Bakersfield, California. (p) "457 Catch-Up Dollar Limitation": Prior to January 1,2002, "457 Catch- Up Dollar Limitation means Fifteen Thousand Dollars ($15,000). On and after January 1, 2002, "457 Catch-Up Dollar Limitation" means twice the Dollar Limitation. (q) "Includible 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 includible 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. (r) "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 choice among the investment alternatives provided by a Plan Administrator or Administrators, 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 DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001 .Fnl.wpd Decernber 3, 2001 -- Page 3 of 22 Pages -- whereby the Participant, together with his heirs, successors and assigns, holds harmless the Employer, any Custodian, Trustee, Advisory Committee, and Administrator 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 choices hereunder. (s) "Normal Compensation" shall mean the amount of Compensation that would be payable to a Participant by the Employer for a taxable year if no Joinder Agreement were in effect to defer compensation under this Plan. (t) "Normal Limitation" shall mean the maximum amount of Deferred Compensation for any Participant for any taxable year (other than the amounts referred to in Sections 5.08 and 5.10). (u) "Normal Retirement Age" shall mean age 70%, unless the Participant has elected an alternate Normal Retirement Age by written instrument delivered to the Administrator prior to a Severance Event. A Participant's Normal Retirement Age determines the period during which a Participant may utilize the 457 Catch-Up Dollar Limitation of Section 4.02 hereunder. Once a Participant has to any extent utilized the catch-up limitation of Section 4.02(b), his Normal Retirement Age may not be changed. A Participant's alternate Normal Retirement Age may not be earlier than the earliest date that the Participant will become eligible to retire and receive unreduced retirement benefits under the Employer's Basic Retirement Plan covering the Participant and may not be later than the date the Participant will attain age 70%. If a Participant continues employment after attaining age 70%, not having previously elected alternate Normal Retirement Age, the Participant's alternate Normal Retirement Age shall not be later than the mandatory retirement age, if any, established by the Employer, or the age at which the Participant actually has a Severance Event if the Employer has no mandatory retirement age. If the Participant will not become eligible to receive benefits under a Basic Retirement Plan maintained by the Employer, the Participant's alternate Normal Retirement Age may not be earlier than age 55 and may not be later than age 70%. (v) "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 Mamh 18, 1974 and subsequently amended. (w) "Pementage Limitation": Prior to January 1, 2002, the Percentage Limitation means 33 1/3% of the Participant's Includible Compensation for the taxable year, which will ordinarily be equivalent to the lesser of the Dollar Limitation in effect for the taxable year or 25% of the Participant's Normal Compensation. After December 31,2001, the Pementage Limitation means 100% of the Participant's Includible Compensation for the taxable year which will ordinarily be equivalent to the lesser of the Dollar Limitation in effect for the taxable year or 50% of the Participant's Normal Compensation. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001.Fnl.wpd --Page 4 of 22 Pages -- December 3, 2001 (x) "Plan Year" shall mean the calendar year in which the Plan becomes effective, and each succeeding calendar year during the existence of this Plan. (y) "Retirement" shall mean the first date upon which both of the following shall have occurred with respect to a Participant: Severance Event and attainment of age 65. (z) "Severance Event": Prior to January 1, 2002, severance of the Participant's employment with the Employer that constitutes a "Separation from Service" within the meaning of Section 402(e)(4)(D)(iii) of the Code. After December 31,2001, a Severance Event means a severance of the Participant's employment with the Employer within the meaning of Section 457(d)(1)(A)(ii) of the Code. In general, a Participant shall be deemed to have experienced a Severance Event for purposes of this Plan when, in accordance with the established practices of the Employer, the employment relationship is considered to have actually terminated. In the case of a Participant who is an independent contractor of the Employer, a Severance Event shall be deemed to have occurred when the Participant's contract under which services are performed has completely expired and terminated, there is no foreseeable possibility that the Employer will renew the contract or enter into a new contract for the Participant's services, and it is not anticipated that the Participant will become an Employee of the Employer, or such other events as may be permitted under the Code. (aa) "Trust" shall mean any Trust created under Article 5 of the Plan which shall consist of all compensation deferred under the Plan and not held in a Custodial Account, plus any income and gains thereon, less any losses, expenses and distributions to Participants and Beneficiaries whose accounts are invested through investment fund assets held in the Trust. (bb) "Trustee" shall mean any financial institution or organization which administers any Trust. 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 cimumstances 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, any Trustee, or any Custodian, DEFERRED COMPENSATION pLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001 .Fnl.wpd Decernber3. 2001 -- Page 5 of 22 Pages -- 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. ARTICLE 3 PARTICIPATION IN THE PLAN Section 3.01 Initial Particioation. 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 choices (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 not later than the fifteenth (15th) day of the calendar month after the date the designated Beneficiary is so designated in writing. ARTICLE 4 LIMITATIONS ON DEFERRALS Section 4.01 Normal 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 the Dollar Limitation or the Percentage Limitation. The minimum amount deferred shall be at least Twelve Dollars ($12.00) per pay period. Section 4.02 Catch-Up Limitation. (a) Catch-Up Contributions for Participants ARe 50 and Over. A Participant who has attained the age of 50 before the close of the Plan Year, and with respect to whom no other elective deferrals may be made to the Plan for the Plan Year by reason of the Normal Limitation of Section 4.01, may enter into a Joinder Agreement to make elective deferrals in addition to those permitted by the Normal Limitation in an amount not exceed the lesser of (1) the applicable dollar amount as defined in Section 414(v)(2)(B) of the Code, as adjusted for the cost-of-living in accordance with Secti~[~ DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DefermdCompAgr2001.FnLwpd --Page 6 of 22 Pages -- December 3, 2001 414(v)(2)(C) of the Code, or (2) the excess (if any) of (i) the Participant's compensation (as defined in Section 415(c)(3) of the Code) for the year, over (ii) any other elective deferrals of the Participant for such year which are made without regard to this Section 4.02(a). An additional contribution made pursuant to this Section 4.02(a) shall not, with respect to the year in which the contribution is made, be subject to any otherwise applicable limitation contained in Section 4.01 above, or be taken into account in applying such limitation to other contributions or benefits under the Plan or any other plan. This Section 4.02(a) shall not apply to any year in which Section 4.02(b) applies. The provisions of this Section 4.02(a) of the Plan shall only apply on and after January 1, 2002. (b) Last Three Years Catch-Up Contribution. For each of the last three (3) taxable years for a Participant ending before his or her attainment of Normal Retirement Age, the maximum amount of Deferred Compensation shall be the lesser of: (1) the 457 Catch-Up Dollar Limitation, 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 (x) the Participant was eligible to participate in the Plan for such year (or in any other eligible Deferred Compensation Plan established under Section 457(b) of the Code which is properly taken into account pursuant to regulations under Section 457), and (y) compensation (if any) deferred under the Plan (or such other plan) was subject to the Normal Limitation. Section 4.03 Other Plans. Notwithstanding any provision of the Plan to the contrary, the amount excludable from a Participant's gross income under this Plan or any other eligible deferred compensation plan under Section 457(b) of the Code shall not exceed the limits set forth in Sections 457(b) and 414(v) of the Code. Prior to January 1, 2002, the limits under Section 457(b) of the Code described in the first sentence of this Section 4.03 shall be further reduced by any amount excluded from gross income under Sections 401(k), 402(e)(3), 402(h)(1)(B) and 403(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, CUSTODIAL ACCOUNT ANDINVESTMENT OF ACCOUNTS Section 5.01 (a) Investment of Deferred Compensation in Trusts and Custodial Accounts. Notwithstanding any contrary provision of this Plan, in accordance with Section 457(g) of the Internal Revenue Code, all amounts of compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights shall be held in a Trust or in a Custodial Account for the exclusive benefit of Participants and Beneficiaries under the Plan. DEFERRED COMPENSATION pLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001.Fnl.wpd Page 7 of 22 Pages -- December3, 2001 -- A trust is hereby created to hold all the assets of the Plan that are not held in a custodial account 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 or such other person or entity which hereafter agrees to act in that capacity hereunder. The Custodian of any Custodial Account created pursuant to the Plan must be a bank, as described in Section 408(n) of the Internal Revenue Code, or a person who meets the non-bank Trustee requirements of Paragraphs (2) - (6) of Section 1.408- 2(e) of the Income Tax Regulations relating to the use of non-bank Trustees. All amounts of compensation deferred under the Plan shall be transferred to a Trust or to a Custodial Account described in Section 401(f) of the Internal Revenue Code within a period that is no longer than is reasonable for the proper administration of the accounts of Participants. To comply with this requirement, all amounts of compensation deferred under the Plan shall be transferred to a Trust established under this Plan or to a Custodial Account described in Section 401(f) of the Internal Revenue Code not later than fifteen (15) business days after the end of the month in which the compensation would otherwise have been paid to the Employee. (b) Current and Future Trust and Custodial Account Provisions. Pursuant to subparagraph (a) above, the Employer is currently the Trustee for all amounts of compensation deferred pursuant to the Plan, except for amounts contained in a Custodial Account. Currently, the City has contracted with National Deferred Compensation, Inc. and (with regard to certain federally insured deposit products) Washington Mutual Bank, FA, as Plan Administrators. All monies under the Plan which Participants have elected to invest with National Deferred Compensation, Inc. or Washington Mutual Bank, FA are maintained in Custodial Accounts for the exclusive benefit of Participants and Beneficiaries. Currently, the City also has contracted with the International City Management Association Retirement Corporation (ICMA Retirement Corporation) as a Plan Administrator to offer Employees another provider of investments options for deferred compensation investments. In the future, the City may contract with additional Plan Administrators, orthe contracts with current Administrators may be amended or terminated. Such changes shall not affect the validity of the Plan, nor shall such changes require an amendment to the Plan. (c) Investment Options. Any Custodian or Trustee shall maintain such investment options for the investment of deferred payments by Participants and, where applicable, their Beneficiaries as it may deem appropriate for offering under the Plan. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001.Fnl.wpd Page 8 of 22 Pages -- December3, 2001 -- (1) Participants may select from among the available options for the investment of their Accounts. (2) In the event an investment option is deleted, the Trustee, Custodian or Plan Administrator may require affected Participants and, where applicable, Beneficiaries to select an alternate investment option offered under the Plan. If any Participant fails to act in response to any written transfer notice, the Trustee, Custodian or Plan Administrator may transfer funds from the deleted option to an alternative option. (3) In the event a Custodian, Trustee or Plan Administrator is terminated, the successor Custodian, Trustee or Plan Administrator designated by the City may require affected Participants or Beneficiaries to select one or more alternative investment options offered. (4) By exercising his/her right to select investment options, or by failing to respond to a transfer notice (relating to the transfer of funds between investment options), each Participant or Beneficiary agrees that neither the Plan Administrator, Advisory Committee, City, or any Custodian or Trustee shall be liable for any investment losses (or lost investment opportunity in a situation where funds are transferred by the Custodian, Trustee or Plan Administrator) that may be experienced by the Participants or Beneficiaries in any investment option that they select (or that is selected for them if they fail to take appropriate action with respect to a deleted option). (d) Designation of Fiduciaries. The Plan Administrator, Custodian or Trustee and any person they designate to carry out or assist in carrying out their fiduciary duties or responsibilities (except the Advisory Committee) are fiduciaries under the Plan. Each fiduciary has only those duties or responsibilities specifically assigned to him/her under the Plan or agreement with any Custodian or Trustee or delegated to him/her by another fiduciary. Each fiduciary may assume that any direction, information or action of any other fiduciary is proper and need not inquire into the propriety of any such action, direction or information. Except as and to the extent provided by law, no fiduciary shall be responsible for the malfeasance, misfeasance, or nonfeasance of any other fiduciary. (e) Fiduciary Standards. (1) All fiduciaries identified in the preceding paragraph shall discharge their duties with respect to the Plan solely in the interest of the Participants and Beneficiaries. Such duties shall be discharged for the exclusive purpose of providing benefits to the Participants and Beneficiaries and defreying expenses to the Plan. (2) All Plan fiduciaries shall discharge their duties with care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, and in accordance with applicable California law. DEFERRED COMPENSATION PLAN, TRUST AND CUSTOD~,L ACCOUNT A:\DefermdCompAg r2001 .Fnl.wpd De~ernber 3, 2001 -- Page 9 of 22 Pages -- (f) Powers and Duties. The Custodian's, Trustee's and Plan Administrator's duties shall be those applicable under California law to persons holding custody of public employees' deferred compensation funds in a fiduciary capacity. Section 5.02 Investment Powers. The Trustee, Custodian, or a Plan Administrator acting as agent for a Trustee or Custodian, shall have the powers listed in this Section with respect to investment of Trust or Custodial assets, except to the extent that the investment of Trust or Custodial assets is directed by Participants pursuant to Section 5.05. (a) To invest and reinvest the Trust or Custodial Account 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 or Custodial Account 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. (b) To invest and reinvest ail or any part of the assets of the Trust or Custodial Account in any common, collective or commingled 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 commingled trust fund shall constitute a part of this Plan. (¢) To invest and reinvest all or any part of the assets of the Trust or Custodial Account in any group annuity, deposit administration or guaranteed interest contract issued by an insurance company or other financial institution on a commingled 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. ~'~'~:~' DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DefermdCompAgr2001.Fnl.wpd .~ ~i~lf~ ' Decernber3.2001 -- Page 10 of 22 Pages -- (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 or Custodial Account 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 or Custodial Account, 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 or Custodial Account 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. (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 or Custodial Account. (i) To vote or to refrain from voting any stocks, bonds, or other securities held in the Trust or Custodial Account, to exercise any other right appurtenant to any securities or other property held in the Trust or Custodial Account, 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 or Custodial Account 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, anyofthe securities of which are held in the Trust or Custodial Account, 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. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001 .Fnl.wpd ~'~, Decernber 3,2001 -- Page 1 1 of 22 Pages -- (k) To deposit any properbj held in the Trust or Custodial Account 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 or Custodial Account 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 or Custodial Account. (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 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. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:~Defe rredCo rnpAgr2001.Fnl.w~l -- Page 12 of 22 Pages" December 3, 2001 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 Custodial Account, or the income thereof, and all commissions or acquisitions or dispositions of securities and similar expenses of investment and reinvestment of the Trust or Custodial Account, shall be paid from the Trust or Custodial Account. 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 or Custodial Account. Section 5.04 Payment of Benefits. The payment of benefits from the Trust or Custodial Account in accordance with the terms of the Plan may be made by the Plan Administrator, Trustee, Custodian, or other person so authorized by the Employer to make such disbursement. The Plan Administrator, Trustee, Custodian, Advisory Committee, Employer or other person shall not be liable with respect to any distribution of Trust or Custodial assets made at the direction of the Employer or Participant. Section 5.05 Investment of Funds. In accordance with uniform and nondiscriminatory rules established by the Employer and the Plan Administrator, the Participant may direct his/her Account 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 Employer, the Administrator, Advisory Committee, 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. It is the intent of this Section 5.05 to require that all Trustees and Custodians under this Plan fully comply with all disclosure requirements under Section 404(c) of the Federal ERISA law and California Government Code Section 53213.5. 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 beam 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 Creditinu of Accounts. A Participant's Account shall reflect his/her pre-rata allocable share of the amount and value of the investments or other property held by the Trustee, Custodian or Plan Administrator as adjusted to reflect any investment earnings and gains (or losses) resulting from the investment of the Participant's Deferred Compensation pursuant to Sections 5.05 and 5.06. It is anticipated that the investments with respect to a Participant will conform to the investment choices specified in the Participant's Joinder Agreement, but nothing herein shall be construed to require t~, DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001.Fnl.wpd --Page 13 of 22 Pages -- ~,,*, December 3, 2001 '~ Trustee, Custodian or Plan Administrator 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, and such other information as is necessary or appropriate in order to ensure compliance with Federal ERISA law Section 404(c) and Government Code Section 53213.5. 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 had a Severance Event 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. (b) Out~ 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 had a Severance Event 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. Section 5.09 Left Intentionally Blank Section 5.10 Eligible Rollover Distributions. (a) Effective Date: This Section 5.10 is effective January 1,2002. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DefermdCompAgr2001 .Fnl.wpd December3,2001 -- Page 14 of 22 Pages -- (b) Incoming Rollovers: An eligible rollover distribution may be accepted from an eligible retirement plan maintained by another employer and credited to a Participant's Account under the Plan. The Employer may require such documentation from the distributing plan as it deems necessary to effectuate the mllover in accordance with Section 402 of the Code and to confirm that such plan is an eligible retirement plan within the meaning of Section 402(c)(8)(B) of the Code. The Plan shall separately account for eligible rollover distributions from any eligible retirement plan that is not an eligible deferred compensation plan described in Section 457(b) of the Code maintained by an eligible governmental employer described in Section 457(e)(1)(A) of the Code. (c) Out~ Rollovers: Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rellover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (d) Definitions: (1) Eli{3ible Rollover Distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the d istributee's designated beneficiary, or for a specified period of ten(10) years or more; any distribution to the extent such distribution is required under Sections 401(a)(9) and 457(d)(2) of the Code; and any distribution made as a result of an unforeseeable emergency of the Employee. For purposes of distributions from other eligible retirement plans rolled over into this Plan, the term eligible rollover distribution shall not include the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Sections 403(a) or 403(b) of the Code, a qualified trust described in Section 401(a) of the Code, or an eligible deferred compensation plan described in Section 457(b) of the Code which is maintained by an eligible governmental employer described in Section 457(e)(1)(A) of the Code, that accepts the distributee's eligible rollover distribution. (3) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's for former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001.Fnl.wpd December 3, 2001 -- Page 15 of 22 Pages -- (4) Direct Rollover: A direct mllover is a payment by the plan to the eligible retirement plan specified by the distributee. Section 5.11 Trustee-to-Trustee Transfers to purchase Permissive Service Credit: Ail or a portion of a Participant's Account may be transferred directlyto the trustee or custodian of a defined benefit governmental plan (as defined and modified in Section 414(d) of the Code) if such transfer is (A) for the purchase of permissive service credit (as defined in Section 415(n)(3)(A) of the Code) under such plan, or (B) a repayment to which Section 415 of the Code does not apply by reason of subsection (k)(3) thereof, within the meaning of Section 457(e)(17) of the Code. Section 5.12 Treatment of Distributions of Amounts Previously Rolled Over from 401(a) and 403(b) Plans and IRAs: For purposes of Section 72(t) of the Code, a distribution from this Plan shall be treated as a distribution from a qualified retirement plan described in Section 4974(c)(1) of the Code to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in Section 4974(c) of the Code). Section 5.13 No Liability. In no event shall the Trustee's or Custodian'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, the Advisory Committee, the Administrator nor any Trustee or Custodian shall be liable for losses arising from depreciation or shrinkage in the value of any investments or choice(s) between funds made available under this Plan. ARTICLE 6 BENEFITS Section 6.01 Retirement Benefits and Election on Severance Event: (a) General Rule: Except as otherwise proved in this Article 6, the distribution of a Participant's Account shall commence as of a Participant's Automatic Distribution Date, and the distribution of such benefits shall be made in accordance with one ofthe payment options described in Section 6.02. Notwithstanding the foregoing, but subject to the following paragraphs of this Section 6.01, the Participant may elect following a Severance Event to have the distribution of benefits commence on a fixed determinable date other than that described in the preceding sentence, but not later than April 1st of the year following the year of the Participant's Retirement or attainment of age 70%, whichever is later. Prior to January 1, 2002, an election made pursuant to the preceding sentence shall not be valid unless such election is made not less than thirty (30) days prior the date that the distribution of a Participant's Account would otherwise commence. DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001 .Fnl.wpd December 3, 2001 -- Page 16 of 22 Pages -- (b) Additional Delay in Distribution: Prior to January 1, 2002, the Participant may elect to defer the commencement of distribution of benefits to a fixed determinable date later than the date provided in Section 6.01(a), but not later than April 1st of the year following the year of the Participant's retirement or attainment of age 70%, whichever is later, provided, however, that (a) such election is made after the 61st day following the Participant's Severance Event and before commencement of distributions, (b) the Participant may make only one (1) such election, and (c) such election is made not less than thirty (30) days prior to the date the distribution of a Participant's Account would otherwise commence. On or after January 1, 2002, the Participant's right to change his or her election with respect to commencement of the distribution of benefits shall not be restrained by this Section 6.01. 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 the 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, including the incidental death benefit requirements of Section 401(a)(9)(G), 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 through which the Participant's account is invested. (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. (g) Any payment option elected by the Participant and agreed to by the Employer and Administrator. 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 thi[d?~:~,~ DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT '~ A:\Defe n'edCompAg r2001.Fnl.wpd ' December 3, 2001 -- Page 17 of 22 Pages -- 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. If, prior to January 1, 2002, a Participant made a timely election of a payment date but failed to specify a payment option or failed to make a timely election of both payment date and option, and as a result, either was defaulted to benefit commencement at age 65, or such other date as the Participant may have specified, benefits shall be paid annually in the amount of $100 per year commencing at age 65 or the dates specified by the Participant until the Participant reaches age 70¼. When the Participant reaches age 70~, payments shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder. Section 6.03 Limitation on Options. No payment option may be selected by a Participant under subsections 6.02(a) or (c) unless the amount of any installment is not less than $100. No payment option may be selected by a Participant under Section 6.02, 6.04, or 6.05 unless it satisfies the requirements of Section 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 benefit requirements under Section 401(a)(9)(G). 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 continue until the Administrator receives notice of the Participant's death. Upon notification of the Participant's death, benefits shall be payable to the Participant's Beneficiary commencing not later than December 31 of the year following the year of the Participant's death, provided that the Beneficiary may elect to begin benefits earlier than that date. (b) If the Beneficiary has not attained age 80 at the time payments commence, he or she may elect to receive payments in a single lump-sum payment or in equal or approximately equal monthly, quarterly, semi-annual or annual payments continuing over a period not to exceed ten (10) years from the first payment. The Beneficiary also may elect to receive a partial lump-sum payment followed by monthly, quarterly, semi-annual or annual installments, provided that all payments are made within a period of ten (10) years from the initial payment. In the event that the Beneficiary is age 80 or over, the remaining balance in the Participant's account will be paid to the Beneficiary in a single lump sum. (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 6.05 Pre-Retirement Death Benefits. (a) Should the Participant die before he or she 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 not later than December 31 of the year following the ye~r~ DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001.Fnl.wpd --Page 18 of 22 Pages -- December 3, 2001 of the Participant's death, provided that the Beneficiary may elect to begin benefits earlier than that date. (b) If the Beneficiary has not attained age 80 at the time payments commence, he or she may elect to receive payments in a single lump-sum payment or in equal or approximately equal monthly, quarterly, semi-annual or annual payments continuing over a period not to exceed ten (10) years from the first payment. The Beneficiary also may elect to receive a partial lump-sum payment followed by monthly, quarterly, semi-annual or annual installments, provided that all payments are made within a period of ten (10) years from the initial payment. In the event that the Beneficiary is age 80 or over, the remaining balance in the Participant's Account will be paid to the Beneficiary in a single lump sum. (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 Emeraencies. (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 1 52(a) of the Code) of the Participant, loss of the Participant's property due to 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 DEFERRED COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT ~ ~' A:\DeferredCompAgr2001.Fnl.wpdPage 19 of 22 Pages-- '~- ,, 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, prior to January 1, 2002, if the value of a Participant's Account does not exceed the dollar limit under Section 411(a)(11 )(A) of the Code as described in Section 457(e)(9)(A) of the Code and (a) no amount has been deferred under the Plan with respect to the Participant during the two-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 involuntarily distribute the Participant's entire Account without the consent of the Participant. Such distribution shall be made in a lump sum. On or after January 1, 2002, if the value of a Participant's Account is less than $1,000, the Participant's Account shall be paid to the Participant in a single lump sum distribution, provided that (a) no amount has been deferred under the Plan with respect to the Participant during the two-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. Ifthe value ofthe Participant's Account is at least $1,000, but not morethan the dollar limit under Code Section 411(a)(11)(A) and (a) no amount has been deferred under the Plan with respect to the Participant during the two-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 his or her entire Account. Such distribution shall be made in a lump sum. ARTICLE 7 MISCELLANEOUS Section 7.0t 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 Account in accordance with the Participant's payment option selected pursuant to Section 6.02. All Participants shall be treated in the same manner. Nothing in this Plan shall be construed as granting or creating in any Participant or Beneficiary any vested or contractual rights under Federal or California law nor any right to the continued existence of the Plan in its current or amended form. DEFERRED COMPENSATION pLAN, TRUST AND CUSTODIAL ACCOUNT ~.~ ~ * A:~DeferredCompAgr2001.Fnl.wpd Page 20 of 22 Pages -- ' * "~ December 3, 2001 " '~ :~" ~ ' SectionT.02 Creditors. AParticipantmaynotassign, 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-AssignabilityClause. Itisagreed that neither a Participant nor a Beneficiary, nor any other designee, shall have any right to commute, sell, assign, transfer, or otherwise conveythe 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 Finance Department 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 Aareement. 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 Gender. 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. To the extent required under final judgment, 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 choices with respect thereto in the same manner as the Participant; any 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 December 3, 2001 -- Page 21 of 22 Pages ...... ,~ ~,.:1~. 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 Liabilityto Participant. The Trustee's or Custodian'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 under subparagraph (a) unless the Employer or Administrator has been provided with satisfactory evidence that the Employer, Advisory Committee, Custodian, Trustee and Administrator are released from any further claim by the Participant with respect to such amounts. The Participant shall be deemed to have released all of the entities in this paragraph 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) where applicable, 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 all of the entities in this paragraph 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. 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 COMPENSATION PLAN, TRUST AND CUSTODIAL ACCOUNT A:\DeferredCompAgr2001 .FnLwpd December3.2001 -- Page 22 of 22 Pages --