AMENDMENT AND RESTATEMENT OF THE SEMPRA ENERGY 2005 DEFERRED COMPENSATION PLAN

Exhibit 10.18

 

 

 

AMENDMENT AND RESTATEMENT OF
THE SEMPRA ENERGY 2005
DEFERRED COMPENSATION PLAN

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

ARTICLE I. TITLE AND DEFINITIONS

1.1

Title .

1.2

Definitions.

ARTICLE II. PARTICIPATION

ARTICLE III. CONTRIBUTIONS

3.1

Elections to Defer Compensation

3.2

Distribution Elections.

3.3

Company Matching Contributions

3.4

FICA and Other Taxes.

ARTICLE IV. INVESTMENTS

4.1

Measurement Funds.

4.2

Investment Elections.

4.3

Compliance with Section 16 of the Exchange Act.

ARTICLE V. ACCOUNTS

5.1

Accounts.

5.2

Subaccounts.

ARTICLE VI. VESTING

ARTICLE VII. DISTRIBUTIONS

7.1

Distribution of Accounts.

7.2

Hardship Distribution.

7.3

Effect of a Change in Control.

7.4

Inability to Locate Participant.

7.5

Prohibition on Acceleration of Distributions.

ARTICLE VIII. ADMINISTRATION

8.1

Committee.

8.2

Administrator.

8.3

Committee Action.

8.4

Powers and Duties of the Committee.

8.5

Construction and Interpretation.

8.6

Information.

8.7

Compensation, Expenses and Indemnity.

8.8

Quarterly Statements.

8.9

Disputes.

8.10

Compliance with Section 409A of the Code

ARTICLE IX. MISCELLANEOUS

9.1

Unsecured General Creditor.

9.2

Restriction Against Assignment.

9.3

Withholding.

9.4

Amendment, Modification, Suspension or Termination.

9.5

Designation of Beneficiary.

9.6

Insurance.

9.7

Governing Law.

9.8

Receipt of Release.

9.9

Compliance with Code Section 162(m)

9.10

Payments on Behalf of Persons Under Incapacity.

9.11

Limitation of Rights

9.12

Exempt ERISA Plan

9.13

Notice

9.14

Errors and Misstatements

9.15

Pronouns and Plurality

9.16

Severability

9.17

Status

9.18

Headings.

ARTICLE X.   Employees of Sempra Energy Trading Corporation
 and Sempra Energy Solutions LLC

ARTICLE XI.  SECTION 409A OF THE CODE

 

 

 

 

 

 

 

Sempra Energy, a California corporation (the “Company”), and its direct and indirect subsidiaries hereby establish and maintain this Sempra Energy 2005 Deferred Compensation Plan (the “Plan”) which is designed to provide supplemental retirement income benefits for certain directors and for a select group of management and highly compensated employees through deferrals of salary and incentive compensation and Company matching contributions.  This Plan shall be effective as of January 1, 2005.

The Company hereby amends and restates the Plan, effective as of the date of adoption, except as otherwise provided herein.  The elections and amendments made in accordance with the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79 and Internal Revenue Service Notice 2007-86 shall be effective for the relevant periods on or before December 31, 2008.

The Plan is intended to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations and other guidance issued by the Secretary of the Treasury thereunder.  To the extent permitted by such Treasury Regulations or other guidance, the Plan may be amended to conform to the requirements of Section 409A of the Code.

ARTICLE I.
TITLE AND DEFINITIONS

1.1

Title .

This Plan shall be known as the Sempra Energy 2005 Deferred Compensation Plan.

1.2

Definitions .

Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below.

(a)

“ Account” or “Accounts ” shall mean a Participant’s Deferral Account and/or Company Matching Account.

(b)

“ Administrator ” shall mean the individuals designated by the Committee  (who need not be a member of the Committee) to handle the day-to-day Plan administration.  If the Committee does not make such a designation, the Administrator shall be the Senior Vice-President of Human Resources of the Company.

(c)

 “ Affiliate ” has the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act.

(d)

 “ Base Salary ” shall mean a Participant’s annual base salary, excluding bonus, incentive and all other remuneration for services rendered to the Company, prior to reduction for any salary contributions to a plan established pursuant to Section 125 of the Code or qualified pursuant to Section 401(k) of the Code and prior to reduction for deferrals under this Plan.

(e)

“ Beneficial Owner ” has the meaning set forth in Rule 13d-3 under the Exchange Act.

(f)

“ Beneficiary ” or “ Beneficiaries ” shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant to receive the benefits specified hereunder in the event of the Participant’s death in accordance with Section 9.5.  

(g)

“ Board of Directors ” or “ Board ” shall mean the Board of Directors of the Company.

(h)

“ Bonus ” shall mean the annual incentive award earned by a Participant under the Company’s short-term incentive plan and other special payments or awards that may be granted by the Company from time to time.

(i)

“ Change in Control ” shall be deemed to have occurred when any event or transaction described in paragraph (1), (2), (3) or (4) occurs, subject to paragraph (5):

(1)

Any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of Sempra Energy representing twenty percent (20%) or more of the combined voting power of Sempra Energy’s then outstanding securities; or

(2)

The following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of Sempra Energy) whose appointment or election by the Board or nomination for election by Sempra Energy’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

(3)

There is consummated a merger or consolidation of Sempra Energy or any direct or indirect subsidiary of Sempra Energy with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of Sempra Energy outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of Sempra Energy or any subsidiary of Sempra Energy, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of Sempra Energy (not including in the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its affiliates other than in connection with the acquisition by Sempra Energy or its affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energy’s then outstanding securities; or

(4)

The shareholders of Sempra Energy approve a plan of complete liquidation or dissolution of Sempra Energy or there is consummated an agreement for the sale or disposition by Sempra Energy of all or substantially all of Sempra Energy’s assets, other than a sale or disposition by Sempra Energy of all or substantially all of Sempra Energy’s assets to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.

(5)

An event or transaction described in paragraph (1), (2), (3), or (4) shall be a “Change in Control” only if such event or transaction is a “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation,” within the meaning of Section 409A(a)(2)(A)(v) of the Code, to the extent provided by the Secretary of the Treasury.

(j)

 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(k)

“ Committee ” shall mean the compensation committee of the Board of Directors.

(l)

“ Company ” shall mean Sempra Energy and any successor corporations.  Company shall also include each corporation which is a member of a controlled group of corporations (within the meaning of Section 414(b) of the Code) of which Sempra Energy is a component member, if the Board provides that such corporation shall participate in the Plan and such corporation’s governing board of directors adopts this Plan.

(m)

 “ Company Matching Account ” shall mean the bookkeeping account maintained by the Company for each Participant that is credited with an amount equal to the Company Matching Contribution, if any, debited by amounts equal to all distributions to and withdrawals made by the Participant and/or his Beneficiary and adjusted for investment earnings and losses pursuant to Article V.

(n)

“ Company Matching Contributions ” shall mean the employer matching contribution made to the Plan on behalf of Participants who make deferrals under Article III.

(o)

“ Compensation ” shall mean Base Salary and Bonus that the Participant who is an employee is entitled to receive for services rendered to the Company.  In addition, for any Participant who is an Executive Officer, Compensation includes (i) SERP Lump Sum, (ii) Restricted Stock Units, and (iii) Severance Payments.   Compensation shall mean retainer payments and/or meeting and other fees, received from the Company for services performed by any Participant as a Director.

(p)

“ Deferral Account ” shall mean the bookkeeping account maintained by the Company for each Participant that is credited with amounts equal to the portion of the Participant’s Compensation that he elects to defer pursuant to Section 3.1, debited by amounts equal to all distributions to and withdrawals made by the Participant and/or his Beneficiary and adjusted for investment earnings and losses pursuant to Article V.  The Deferral Account may be further subdivided into subaccounts as determined by the Committee.

(q)

“ Deferral Election Form ” shall mean the form designated by the Committee for purposes of making deferrals under Section 3.1.

(r)

“ Director ” shall mean an individual who is a non-employee member of the Board.

(s)

“ Disability ” or “ Disabled ” means, with respect to a Participant, that the Participant:

(1)

is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or

(2)

is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident or health plan covering employees of such Participant’s employer,

as determined in accordance with Section 409A(a)(2)(C) of the Code and the Treasury Regulations thereunder.

(t)

 “ Distributable Amount ” of a Participant’s subaccounts with respect to a Plan Year shall mean the sum of the vested balance of the subaccount in a Participant’s Deferral Account and Company Matching Account with respect to such Plan Year.

(u)

“ Effective Date ” shall mean January 1, 2005.

(v)

“ Election Period ” with respect to a Plan Year shall mean the period designated by the Committee; provided, however, that such period shall be no less than ten business days.  The Election Period with respect to a Plan Year shall end not later than the last day of the prior Plan Year; provided, however , that, in the case of an Eligible Individual who first becomes eligible to participate in the Plan during a Plan Year, the Election Period may be the thirty (30) day period commencing on the date such Eligible Individual first becomes eligible to participate in accordance with Section 409A(a)(4)(B)(ii) of the Code and the Treasury Regulations thereunder; and provided, further, in the case of an Eligible Individual’s election to defer a Bonus (or portion thereof) for a Plan Year that is performance-based compensation based on services over a period of at least twelve (12) months, within the meaning of Section 409A(a)(4)(B)(iii) of the Code and the Treasury Regulations thereunder, the Election Period may be a period designated by the Committee during such Plan Year that satisfies the requirements of Section 409A(a)(4)(B)(iii) of the Code and the Treasury Regulations thereunder.

(w)

“ Eligible Individual ” shall mean those individuals selected by the Committee from (1) those employees of the Company who either (A) are Executive Officers or (B) have Base Salary for a Calendar Year that is at least $140,000, as adjusted by the Committee from time to time and (2) those Directors who are not employees of the Company.  The Committee may, in its sole discretion, select such other individuals to participate in the Plan who do not otherwise meet the foregoing criteria.

(x)

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(y)

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder.

(z)

“ Executive Officer ” shall mean an employee of the Company who holds a position as an executive officer in the Company and is eligible to participate in the Sempra Energy Supplemental Executive Retirement Plan or is so designated by the Committee.

(aa)

“ 401(k) Plan ” shall mean the Sempra Energy Savings Plan maintained by the Company under Code Section 401(k), as in effect from time to time or as applicable for any Participant, a plan maintained by a direct or indirect subsidiary of the Company under Code Section 401(k).

(bb)

“ Manager ” shall mean an employee of the Company who is an Eligible Individual, other than an Executive Officer or a Director.

(cc)

“ Measurement Fund ” shall mean one or more of the investment funds selected by the Committee pursuant to Section 4.1.

(dd)

“ Moody’s Plus Rate ” shall mean the Moody’s Rate (as defined below) plus the greater of  (1) 10% of the Moody’s Corporate Bond Yield Average – Monthly Average Corporates as published by Moody’s Investors Service, Inc. (or any successor) or (2) one percentage point per annum. The Moody’s Rate for the month of June means the average of the daily Moody’s Corporate Bond Yield Average – Monthly Average Corporates for the month of June.

(ee)

“ Participant ” shall mean any Eligible Individual who becomes a Participant in accordance with Article II and who has not received a complete distribution of the amounts credited to his Accounts.

(ff)

“ Payroll Date ” shall mean, with respect to any Participant, the date on which he would otherwise be paid Compensation.

(gg)

“ Payment Date ” shall mean the date determined by the Administrator that is on or within thirty (30) days after one of the following dates as designated by the Participant in his distribution form election with respect to a Plan Year:

(1)

the first day of the first calendar month on or next following thirty (30) days after the date of the Participant's Separation from Service or Disability, or

(2)

the first day of the first, second, third, fourth or fifth calendar year next following the date of the Participant’s Separation from Service or Disability.  

“Payment Date” shall also mean the Scheduled Withdrawal Date elected in accordance with the provisions of Section 7.1(b).  

(hh)

 “ Person ” means any person, entity or “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term shall not include (1) the Company or any of its Affiliates, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (3) an underwriter temporarily holding securities pursuant to an offering of such securities, (4) a corporation owned, directly or indirectly, by the shareholders of Sempra Energy in substantially the same proportions as their ownership of stock of Sempra Energy, or (5) a person or group as used in Rule 13d-1(b) under the Exchange Act.

(ii)

“ Plan ” shall mean the Sempra Energy 2005 Deferred Compensation Plan set forth herein, as amended from time to time.

(jj)

“ Plan Year ” shall mean the twelve (12) consecutive month period beginning on each January 1 and ending on each December 31.

(kk)

“ Restricted Stock Units ” shall mean restricted stock units granted to Executive Officers under the Sempra Energy 1998 Long Term Incentive Plan or the Sempra Energy 2008 Long Term Incentive Plan .

(ll)

“ Rule 16b-3 ” shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time.

(mm)

“ Scheduled Withdrawal Date ” shall be in January in the year elected by the Participant for an in-service withdrawal of all amounts of Compensation deferred in a given Plan Year, but excluding earnings and losses attributable thereto, as set forth on the election forms for such Plan Year.  

(nn)

“ Sempra Energy Stock Fund ” shall mean the Measurement Fund in which investment earnings and losses parallel the investment return on the common stock of the Company.

(oo)

“ Separation from Service ”, with respect to a Participant (or another Service Provider), means the Participant’s (or such Service Provider’s) “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h), with respect to the Service Recipient.   

Effective as of January 1, 2008, and in accordance with Treasury Regulation Section 1.409A-1(h)(3) (and the transitional relief under Internal Revenue Service Notice 2005-1, the proposed regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79 and Internal Revenue Notice 2007-86), and in connection with the formation of RBS Sempra Commodities (as defined in Section 10), with respect to the benefits payable under this Plan to a Participant who is an employee of SET LLC or SES (each, as defined in Section 10), and who is a Transferred Employee (as defined in Section 10), the foregoing definition of “Separation from Service” shall be applied by determining the “service recipient,” as defined in Treasury Regulation Section 1.409A-1(g), by substituting the language “at least 20%” for the language “at least 80%” and applying Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Section 414(b) of the Code and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code.  This subsection shall not apply with respect to the benefits payable under this Plan to any other Participant.

(pp)

“ SERP Lump Sum ” shall mean the lump sum retirement benefit that would be payable to an Executive Officer who is a Plan Participant under either the Sempra Energy Supplemental Executive Retirement Plan or the Sempra Energy Excess Cash Balance Plan.

(qq)

“ Service Provider ” means a Participant or any other “service provider,” as defined in Treasury Regulation Section 1.409A-1(f), with respect to the Service Recipient.

(rr)

“ Service Recipient ”, with respect to the Participant, means Sempra Energy (if the Participant is employed by Sempra Energy or is a Director), or the subsidiary of Sempra Energy employing the Participant, whichever is applicable, and all persons considered part of the “service recipient,” as defined in Treasury Regulation Section 1.409A-1(g), as determined from time to time.  As provided in Treasury Regulation Section 1.409A-1(g), the “ Service Recipient ” shall mean the person for whom the services are performed and with respect to whom the legally binding right to compensation arises, and all persons with whom such person would be considered a single employer under Section 414(b) or 414(c) of the Code.

(ss)

“ Severance Payment ” shall mean any severance payments payable to a Participant under an executive employment agreement or severance agreement with the Company.

(tt)

“ Specified Employee ” means a Service Provider who, as of the date of the Service Provider’s Separation from Service is a “ Key Employee ” of the Service Recipient any stock of which is publicly traded on an established securities market or otherwise.  For purposes of this definition, a Service Provider is a “ Key Employee ” if the Service Provider meets the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the Treasury Regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the Testing Year.  If a Service Provider is a “ Key Employee ” (as defined above) as of a Specified Employee Identification Date, the Service Provider shall be treated as “ Key Employee ” for the entire twelve (12) month period beginning on the Specified Employee Effective Date.  For purposes of this definition, a Service Provider’s compensation for a Testing Year shall mean such Service Provider’s compensation, as determined under Treasury Regulation Section 1.415(c)-2(a) (and applied as if the Service Recipient were not using any safe harbor provided in Treasury Regulation Section 1.415(c)-2(d), were not using any of the elective special timing rules provided in Treasury Regulation Section 1.415(c)-2(e), and were not using any of the elective special rules provided in Treasury Regulation Section 1.415(c)-2(g)), from the Service Recipient for such Testing Year.  The “Specified Employees” shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i).

(uu)

“ Specified Employee Effective Date ” means the first day of the fourth month following the Specified Employee Identification Date.  The Specified Employee Effective Date may be changed by Sempra Energy, in its discretion, in accordance with Treasury Regulation Section 1.409A-1(i)(4).

(vv)

“ Specified Employee Identification Date ” ”, for purposes of Treasury Regulation Section 1.409A-1(i)(3), shall mean December 31.  The “ Specified Employee Identification Date ” shall apply to all “nonqualified deferred compensation plans” (as defined in Treasury Regulation Section 1.409A-1(a)) of the Service Recipient and all affected Service Providers.  The “ Specified Employee Identification Date ” may be changed by Sempra Energy, in its discretion, in accordance with Treasury Regulation Section 1.409A-1(i)(3).

(ww)

“ Subaccount ” or “ Subaccounts ” shall mean the subaccount or subaccounts maintained with respect to a Participant’s Deferral Account or Company Matching Account.

(xx)

“ Testing Year ” shall mean the twelve (12) month period ending on the Specified Employee Identification Date, as determined from time to time.

(yy)

 “ Valuation Date ”, with respect to the Measurement Funds that are available under the 401(k) Plan, shall have the same meaning as under the 401(k) Plan.  For purposes of the Moody’s Plus Rate, “Valuation Date” shall mean the last day of the calendar month.  

ARTICLE II.
PARTICIPATION

(a)

An Eligible Individual shall become a Participant in the Plan by (1) electing to make deferrals in accordance with Section 3.1 and (2) filing such other forms as the Committee may reasonably require for participation hereunder.  

(b)

An Eligible Individual who completes the requirements of the preceding subsection shall commence participation in this Plan as of the first day of the Plan Year with respect to which Compensation is deferred.   

ARTICLE III.
CONTRIBUTIONS

3.1

Elections to Defer Compensation

(a)

General Rule .  Each Eligible Individual may defer Compensation for a Plan Year by filing with the Administrator a Deferral Election Form for such Plan Year that conforms to the requirements of this Section 3.1, no later than the last day of the applicable Election Period for such Plan Year, and such deferral election shall become irrevocable on the last day of the applicable Election Period for such Plan Year.  The Committee may permit an Eligible Individual who first becomes eligible to participate in the Plan during a Plan Year to have his first Election Period during such Plan Year.  An election to defer Compensation for a Plan Year must be filed during the Election Period prior to the effective date of such election and shall be irrevocable when made and shall be effective only for Compensation that constitutes compensation for services performed during periods during the Plan Year beginning after the effective date of such election.   Notwithstanding the previous sentence, if an Eligible Individual’s Bonus (or portion thereof) is a performance-based compensation based on services performed over a period of at least twelve (12) months, within the meaning of Section 409A(a)(4)(B)(iii) and the Treasury Regulations thereunder, the Committee may permit such Eligible Individual to file an election to defer such Bonus (or such portion thereof), or change such Eligible Individual’s prior election to defer such Bonus (or such portion thereof), no later than the date that is six months before the end of the performance period over which such services are to be performed, under the terms and conditions specified by the Committee, in accordance with Section 409A(a)(4)(B)(iii) of the Code and the Treasury Regulations thereunder, and such deferral election shall become irrevocable on the date that is six months before the end of the performance period.  A Participant shall make a separate election to defer Compensation for each Plan Year.  

(b)

Special Rules .  Notwithstanding the above, the following restrictions apply to deferrals of certain elements of Compensation.

(1)

Severance Payments .  A Participant may elect to defer Severance Payments  (or a portion thereof), to the extent permitted by the Committee.  In order to defer Severance Payments (or a portion thereof), an eligible Participant must file the appropriate Deferral Election Form no later than the election date required under Section 409A of the Code and the Treasury Regulations thereunder.  The Participant’s election to defer Severance Payments (or a portion thereof) shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b).  Such deferral election shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made.  Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made (or, in the case of a life annuity or installment payments treated as a single payment, five years from the date the first amount was scheduled to be paid), in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).  

(2)

Restricted Stock Units .  A Participant may elect to defer Restricted Stock Units (or a portion thereof), to the extent permitted by the Committee.  In order to defer Restricted Stock Units (or a portion thereof), an eligible Participant must file the appropriate Deferral Election Form no later than the election date required under Section 409A of the Code and the Treasury Regulations thereunder.  The Participant’s election to defer Restricted Stock Units (or a portion thereof) shall apply only if the Restricted Stock Units (or portion thereof) constitute a legally binding right to a payment of compensation in a subsequent taxable year and, absent a deferral election, would be treated as a short-term deferral, within the meaning of Treasury Regulation Section 1.409A-1(b)(4), and such deferral election shall satisfy the requirements of Treasury Regulation Section 1.409A-2(a)(4).  Such deferral election shall be irrevocable when made and shall be in accordance with Treasury Regulation Section 1.409A-2(b), applied as if the amount were a deferral of compensation and the scheduled payment date for the amount were the date the substantial risk of forfeiture lapses.  Such deferral election shall become effective only if made at least twelve (12) months before the date on which the substantial risk of forfeiture, within the meaning of Treasury Regulation Section 1.409A-1(d), with respect to the Restricted Stock Units (or portion thereof) lapses.  Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date on which the substantial risk of forfeiture, within the meaning of Treasury Regulation Section 1.409A-1(b)(4), lapses, in accordance with Treasury Regulation Sections 1.409A-2(a)(4) and 1.409A-2(b)(1)(ii); provided, however, that such deferral election may provide that the deferred amounts will be payable upon a change in control event (as defined in Treasury Regulation Section 1.409A-3(i)(5)) without regard to the five year additional deferral requirement in Treasury Regulation Section 1.409A-2(b)(1)(ii).

(3)

SERP Lump Sum .  A Participant may elect to defer a SERP Lump Sum (or a portion thereof), to the extent permitted by the Committee.  In order to defer a SERP Lump Sum (or a portion thereof), an eligible Participant must file the appropriate Deferral Election Form no later than the election date required under Section 409A of the Code and the Treasury Regulations thereunder.  The Participant’s election to defer SERP Lump Sum Payments (or a portion thereof) shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b).  Such deferral election shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made.  Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made (or, in the case of a life annuity or installment payments treated as a single payment, five years from the date the first amount was scheduled to be paid) in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).

(4)

Limitation on Deferrals .  A Participant may elect to defer Severance Payments, Restricted Stock Units or a SERP Lump Sum, or any portion thereof, only to the extent such deferral satisfies the requirements of Section 409A of the Code and the Treasury Regulations thereunder.  For purposes of this subsection (b), payment shall have the meaning set forth in Treasury Regulation Section 1.409A-2(b) to the extent applicable.

(5)

Special SERP Lump Sum Deferral Elections .  Notwithstanding paragraphs (3) and (4), a Participant may elect to defer a SERP Lump Sum (or a portion thereof), to the extent permitted by the Committee, in accordance with this paragraph (5).  Such deferral election shall be irrevocable when made and shall be made on or after January 1, 2006 and on or before December 31, 2008 in accordance with the transitional relief under Section 409A of the Code and Internal Revenue Service Notices 2006-79 and 2007-86; provided, however, that a Participant’s deferral election made in 2006 shall apply only with respect to a SERP Lump Sum that would not otherwise be payable in 2006, and shall not cause a SERP Lump Sum to be made in 2006 that would not otherwise be payable in 2006; and, provided, further, that a Participant’s deferral election made in 2007 shall apply only with respect to a SERP Lump Sum that would not otherwise be payable in 2007, and shall not cause a SERP Lump Sum to be made in 2007 that would not otherwise be payable in 2007; and, provided, further, that a Participant’s deferral election made in 2008 shall apply only with respect to a SERP Lump Sum that would not otherwise be payable in 2008, and shall not cause a SERP Lump Sum to be made in 2008 that would not otherwise be payable in 2008.  No election under this paragraph (5) may be made by a Participant after December 31, 2008.

(c)

Deferral Amounts .  The amount of Compensation which a Participant may elect to defer for a Plan Year is such Compensation earned on or after the time at which the Participant elects to defer each Plan Year in accordance with Section 3.1(a), and which is earned during such Plan Year.  The applicable limitations for any Participant shall be determined based on his classification by the Committee, determined on the first day of the Election Period for such Plan Year.  

(1)

Each Participant who is a Manager shall be permitted to defer, in any whole percentage:  (A) from 6% to 100% of Base Salary and (B) from 6% to 100% of his Bonus.

(2)

Each Participant who is an Executive Officer shall be permitted to defer, in any whole percentage:  (A) from 6% to 100% of Base Salary, (B) from 6% to 100% of his Bonus and (c) from 10% to 100% of his Restricted Stock Units, Severance Payments and SERP Lump Sum, subject to Section 3.1(b).

(3)

Each Participant who is a Director shall be permitted to defer, in any whole percentage, from 10% to 100% of his Compensation.

Notwithstanding the limitations established above, the total amount deferred by a Participant shall be limited in any calendar year, if necessary, to satisfy the Participant’s income and employment tax withholding obligations  (including Social Security, unemployment and Medicare), and the Participant’s employee benefit plan contribution requirements, determined on the first day of the Election Period for such Plan Year, as determined by the Committee.  If permitted by the Committee, the Participant may make deferrals for a Plan Year with respect to any designated portion of his Compensation (such as meeting fees, for example), to the extent elected by such Participant during the Election Period for such Plan Year.

(d)

Duration of Deferral Election .

(1)

A Participant shall not modify or suspend his election to defer Compensation during a Plan Year.

(2)

A Participant must file a new deferral election for each subsequent Plan Year.  In the event a Participant fails to file a timely deferral election for the next Plan Year, he shall be deemed to have elected not to defer any Compensation for such Plan Year.

( 3)

A Participant’s election to defer all or any portion of his SERP Lump Sum shall automatically become void in the event the Participant dies or becomes disabled while employed by the Company.

(e)

Elections .  Subject to the limitations of subsection (b), any Eligible Individual who does not elect to defer Compensation during his Election Period for a Plan Year may subsequently become a Participant.  

(f)

Termination of Participation and/or Deferrals .  If the Committee determines in good faith that a Participant no longer qualifies as a Director or a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion and only for purposes of preserving the Plan’s exemption from Title I of ERISA, to (1) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant’s membership status changes, (2) prevent the Participant from making future deferral elections and/or (3) immediately distribute the balance of the Participant’s Accounts and terminate the Participant’s participation in the Plan.

3.2

Distribution Elections .

(a)

General Rule .  Each Participant shall make a separate distribution election with respect to each Plan Year for which such Participant elects to defer Compensation in accordance with Section 3.1.  A Participant’s distribution election with respect to a Plan Year shall apply to:  (1) the subaccount in his Deferral Account to which shall be credited the amount equal to the portion of his Compensation earned during such Plan Year that he elects to defer pursuant to Section 3.1; and (2) the subaccount in his Company Matching Account to which shall be credited the amount equal to the Company Matching Contribution for such Plan Year.  A Participant’s distribution election with respect to a Plan Year shall elect the Payment Date and the form of distribution of his Distributable Amount with respect to such Plan Year for purposes of distributions under subsection 7.1(a) in the event of such Participant’s Separation from Service or Disability.  Such Payment Date and distribution form elections shall be made on such Participant’s Deferral Election Form during the Election Period for which such Participant elects to defer Compensation under Section 3.1 for such Plan Year, and such Payment Date and distribution form elections with respect to such Plan Year shall be irrevocable, except as provided in subsection (b).  A Participant may elect any Payment Date described in Section 1.2(gg), and may elect distribution in the normal form, as described in paragraph 7.1(a)(1), or an optional form described in subparagraphs 7.1(a)(2)(A), (B) or (C).  In the event a Participant fails to elect a Payment Date for his Distributable Amount with respect to a Plan Year, his Payment Date for his Distributable Amount with respect to such Plan Year shall be the date described in Section 1.2(gg)(1).  In the event a Participant fails to make a distribution form election for his Distributable Amount with respect to a Plan Year, his Distributable Amount with respect to such Plan Year shall be distributed in the normal form, as described in paragra