As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
COVANCE INC.
(Exact name of Registrant as specified in its Charter)
Delaware 210 Carnegie Center 22-3265977
(State of Princeton, New Jersey 08540-6233 (I.R.S. Employer
Incorporation) (Address of principal executive offices) Identification Number)
COVANCE INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(Full Title of the Plan)
Jeffrey S. Hurwitz, Esq.
Corporate Senior Vice President,
General Counsel and Secretary
Covance Inc.
210 Carnegie Center
Princeton, New Jersey 08540-6233
(609) 452-4430
(Name, address and telephone number of agent for service)
Copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Stephen T. Giove, Esq.
(212) 848-7325
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered Offering Price per Aggregate Offering Registration Fee
Share (1) Price (1)
<S> <C> <C> <C> <C>
Common Stock, par 511,572 $20.66 $10,569,078. $3,203.00
value $.01 per share
</TABLE>
(1) Estimated solely for purposes of determining the registration fee. Such
estimate is calculated pursuant to Rule 457(h) under the Securities Act
of 1933, as amended, based on the average bid and asked price of the
shares on Wednesday, September 24, 1997, which high and low prices were
$21.00 and $20.3125, respectively.
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PART I
INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with the
Introductory Note to Part I of Form S-8.
Item 2. Company Information and Employee Plan Annual Information.
Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with the
Introductory Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed or to be filed by Covance Inc. ("the
Company") with the Securities and Exchange Commission (the "Commission") are
incorporated by reference in this Registration Statement as of their respective
dates:
1. The Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), containing
audited financial statements for the Registrant's latest fiscal year,
including any amendment or report filed for the purpose of updating
such description.
2. The description of the Company's Common Stock
contained in the Company's Registration Statement on Form 10, declared
effective by the Commission on November 26, 1996 pursuant to Section
12(b) of the Exchange Act, including any amendment or report filed for
the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing with the
Commission of a post-effective amendment to this Registration Statement that
indicates that all securities offered have been sold or effects the
deregistration of the balance of such securities then remaining unsold shall be
deemed to be incorporated herein by reference and to be part hereof from the
date of filing of such documents.
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Item 4. Description of Securities.
Incorporated by reference to Registrant's Form 10 declared effective by
the Commission on November 26, 1996 pursuant to Section 12(b) of the Exchange
Act, including any amendment or report filed for the purpose of updating such
description.
Item 5. Interests of Named Experts and Counsel.
Jeffrey S. Hurwitz, Corporate Senior Vice President, General Counsel
and Secretary of the Company, issued the opinion as to the legality of
securities being registered herein, attached as Exhibit 5.1 hereto. Mr. Hurwitz
participates in the Employee Stock Ownership Plan, other Company stock and
option benefit plans and holds directly shares of the Company's Common Stock.
Item 6. Indemnification of Directors and Officers.
As permitted by the Delaware Law, the Company's Restated Certificate of
Incorporation provides that directors of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, relating to prohibited dividends or distributions or the repurchase or
redemption of stock or (iv) for any transaction from which the director derives
an improper personal benefit. In addition, the Company's Restated Certificate of
Incorporation provides for indemnification of the Company's officers and
directors to the fullest extent permitted under Delaware law. Section 145 of the
Delaware Law provides that a corporation may indemnify any persons, including
officers and directors, who were or are, or are threatened to be made, parties
to any threatened, pending or completed legal action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
was an officer, director, employee or agent of such corporation or is or was
serving at the request of such corporation as an officer, director, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, for criminal proceedings,
had no reasonable cause to believe that his conduct was unlawful. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses that such officer or
director actually and reasonably incurred. Insofar as indemnification for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Commission such
2
<PAGE>
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The directors and officers of the Company are insured against certain
liabilities under the Company's directors' and officers' liability insurance.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
The following exhibits are filed herewith:
Exhibit
No. Document
------ --------
4.1 The Covance Inc. Employee Stock Ownership Plan.
5.1 Opinion of the General Counsel as to the legality of
securities being registered.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of the General Counsel (contained in the
opinion filed as Exhibit 5.1 to this Registration
Statement).
24.1 Power of Attorney (included on Signature Page).
Item 9. Undertakings.
The undersigned Company hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
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<PAGE>
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this Registration Statement.
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement;
Provided, however, that paragraphs (i) and (ii) of this section do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) that, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Princeton and State of New Jersey on September
26, 1997.
COVANCE INC.
By: /s/ Christopher A. Kuebler
---------------------------------------
Christopher A. Kuebler
Chairman, President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Jeffrey S. Hurwitz and Diana Ingallinera Faillace each of them, his
true and lawful attorneys-in-fact and agents each with full power of
substitution and resubstitution for him in any and all capacities to sign any
and all amendments (including pre- or post-effective amendments) to this
Registration Statement on Form S-8 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, hereby
ratifying and confirming all that each such attorney-in-fact, or his substitute
or substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Christopher A. Kuebler
- ---------------------------
Christopher A. Kuebler Chairman of the Board, September 26, 1997
President and Chief Executive
Officer (Principal Executive
Officer)
/s/ Charles C. Harwood, Jr.
- ---------------------------
Charles C. Harwood, Jr. Corporate Senior Vice President September 26, 1997
and Chief Financial Officer
(Principal Financial Officer)
/s/ Michael Giannetto
- ---------------------------
Michael Giannetto Vice President and Controller September 26, 1997
(Principal Accounting Officer)
/s/ Robert M. Baylis
- ---------------------------
Robert M. Baylis Director September 26, 1997
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<PAGE>
/s/ Van C. Campbell
- ---------------------------
Van C. Campbell Director September 26, 1997
/s/ Irwin Lerner
- ---------------------------
Irwin Lerner Director September 26, 1997
/s/ J. Randall MacDonald
- ---------------------------
J. Randall MacDonald Director September 26, 1997
/s/ Nigel W. Morris
- ---------------------------
Nigel W. Morris Director September 26, 1997
/s/ William A. Ughetta
- ---------------------------
William A. Ughetta Director September 26, 1997
6
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Page No.
- ----------- -------- --------
4.1 The Covance Inc. Employee Stock Ownership Plan.
Filed herewith.
5.1 Opinion of the General Counsel as to the legality of
securities being registered. Filed herewith.
23.1 Consent of Price Waterhouse LLP. Filed herewith.
23.2 Consent of the General Counsel (contained in opinion
filed as Exhibit 5.1 to this Registration Statement).
Filed herewith.
24.1 Power of Attorney (included on Signature Page).
Filed herewith.
7
FINAL DRAFT MARCH 20, 1997
THE COVANCE INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(EFFECTIVE AS OF DECEMBER 31, 1996)
<PAGE>
TABLE OF CONTENTS
INTRODUCTION.................................................................1
ARTICLE I DEFINITIONS......................................................2
ARTICLE II ELIGIBILITY AND PARTICIPATION....................................8
2.1 Eligibility............................................................8
2.2 Participation..........................................................8
2.3 Beneficiary Designation................................................8
2.4 Notification of Individual Account Balance.............................9
2.5 Diversification of Investments or Distribution for Certain
Participants...........................................................9
ARTICLE III CONTRIBUTIONS...................................................11
3.1 Discretionary Contributions...........................................11
3.2 Maximum Deductible Contribution.......................................11
3.3 Payment of Contributions to Trustee...................................11
ARTICLE IV ALLOCATIONS TO INDIVIDUAL ACCOUNTS...............................12
4.1 Individual Accounts...................................................12
4.2 Allocation of Discretionary Contributions.............................12
4.3 Allocation of Forfeitures.............................................12
4.4 Maximum Additions.....................................................13
4.5 Multiple Plan Participation...........................................14
ARTICLE V DISTRIBUTIONS.....................................................16
5.1 Normal Retirement.....................................................16
5.2 Disability Retirement.................................................16
5.3 Death Before Retirement or Termination of Employment..................16
5.4 Death After Retirement or Termination of Employment...................17
5.5 Termination of Employment.............................................17
5.6 Method of Payment.....................................................19
5.7 Benefits to Minors and Incompetents...................................19
5.8 Payment of Benefits...................................................20
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5.9 Valuation of Accounts................................................21
5.11 Payment to Alternate Payee Under QDRO................................22
ii
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ARTICLE VI TRUST FUND.......................................................24
6.1 Contributions.......................................................24
6.2 Trustee.............................................................24
6.3 Employer Stock Fund.................................................24
6.4 Dividends on ESOP Stock Attributable to Exempt Loan.................24
6.5 Voting and Tender Offer Rights on Employer Stock....................25
ARTICLE VII FIDUCIARIES.....................................................26
7.1 General.............................................................26
7.2 Corporation.........................................................26
7.3 Employer............................................................27
7.4 Trustee.............................................................27
7.5 Committee...........................................................27
7.6 Claims for Benefits.................................................29
7.7 Denial of Benefits - Review Procedure...............................29
7.8 Records.............................................................30
7.9 Missing Persons.....................................................30
ARTICLE VIII AMENDMENT AND TERMINATION OF THE PLAN..........................31
8.1 Amendment of the Plan...............................................31
8.2 Termination of the Plan.............................................31
ARTICLE IX PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN................32
9.1 Method of Participation............................................32
9.2 Withdrawal.........................................................32
9.3 Adoption of ESOP by Participating Employer.........................33
ARTICLE X TOP-HEAVY PROVISIONS..............................................34
10.1 Determination of Top-Heavy.........................................34
10.2 Top-Heavy Definitions..............................................36
ARTICLE XI MISCELLANEOUS....................................................38
11.1 Governing Law.......................................................38
11.2 Construction........................................................38
11.3 Administration Expenses.............................................38
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11.4 Participant's Rights; Acquittance...................................38
11.5 Spendthrift Clause..................................................38
11.6 Merger, Consolidation or Transfer...................................38
11.7 Mistake of Fact.....................................................39
11.8 Counterparts........................................................39
ARTICLE XII ADOPTION OF THE PLAN............................................40
SUPPLEMENT A - to the Covance Inc. Employee Stock Ownership Plan -
Employee Stock Ownership Plan (ESOP).........................A1
SUPPLEMENT B - Supplemental List of Participating Employees.................B1
SUPPLEMENT C - 1996 Domestic and International Allocation Formula...........C1
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INTRODUCTION
This Plan establishes the Plan which shall be generally effective as of
the Distribution Date except as specifically noted otherwise.
This plan document is intended to be a retirement plan qualified under
Code Section 401(a) and the separately adopted Trust Agreement is intended to
establish the Trust Fund as tax-exempt under Code Section 501(a) as part of the
Plan. This Plan is intended to operate as an "employee stock ownership plan" as
defined in Code Section 4975(e)(7) and related regulations.
Except as otherwise noted in this Plan document, this Plan shall apply
only to Employees who work for, or continue to work for, the Employer on or
after the Distribution Date.
As an employee stock ownership plan, the Plan is intended to provide
Employees who qualify as Participants with retirement income by investment of
Plan assets primarily in Employer securities. Plan benefits are related to the
value of Company Stock, other Employer stock, and other assets in which the Plan
is invested. Such benefits and potential stock ownership will encourage
Employees to enhance their total available retirement capital by promoting the
growth of the Employer and the appreciation of its stock value.
The Employer intends this Plan to meet all of the applicable
requirements of ERISA and the Code, and this Plan shall be interpreted to comply
with ERISA, the Code and all final regulations and formal rulings thereunder.
The assets of the employee stock ownership plan shall be invested
primarily in common shares of the Employer ("Employer Stock") which qualify as
"employer securities" within the meaning of section 409(1) of the Internal
Revenue Code.
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ARTICLE I
DEFINITIONS
1.1 As used herein, unless otherwise required by the context, the following
words and phrases shall have the meanings indicated:
Active Participant - A Participant shall be deemed an Active
Participant with respect to a Fiscal Quarter if he is employed on the last day
of such Fiscal Quarter.
Affiliate - An organization which is not an Employer, but which must be
considered together with an Employer under Code Sections 414(b), (c), (m) or
(o).
Base Compensation - An Employee's annualized salary for the Plan Year;
except that if the Employee is a part-time employee Base Compensation shall be
earnings reported on Form W-2, but excluding amounts for overtime, bonus or
other special compensation.
Beneficiary - Any person designated by a Participant under Section 2.3
to receive such benefits as may become payable hereunder after the death of such
Participant.
Board - The Board of Directors of the Corporation.
Calendar Quarter - January 1 - March 3; April 2 - June 30; July 1 -
September 30; October 1 - December 31.
Change in Control - In the event
(i) any person (including as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the beneficial owner,
directly or indirectly, of the Corporation's securities representing 20% or more
of the combined voting power of the Corporation's then outstanding securities;
or
(ii) as a result of a proxy contest or contests or other forms of
contested shareholder votes (in each case either individually or in the
aggregate), a majority of the individuals elected to serve on Corporation's
Board of Directors are different then the individuals who served on
Corporation's Board of Directors at any time within the two years prior to such
proxy contest or contests or other forms of contested shareholder votes (in each
case either individually or in the aggregate); or
(iii) the Corporation's shareholders approve a merger, or consolidation
(where in each case the Corporation is not the survivor thereof), or sale or
disposition of all substantially all of the Corporation's assets or a plan or
partial or complete liquidation; or
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(iv) an offerer (other than the Corporation) purchases shares of the
Corporation's common stock pursuant to a tender or exchange offer to such
shares.
Code - The Internal Revenue Code of 1986, as amended.
Committee - The Benefits Administration Committee, as provided for in
Section 8.5.
Contributions - Payments as provided herein by the Employer to the
Trustee for the purpose of providing the benefits under this Plan.
Corning - Corning Incorporated, a New York corporation.
Corporation - Covance Inc. a Delaware corporation, or any successor
thereto. The Corporation is the sponsor, named Fiduciary, and plan administrator
of the Plan for purposes of ERISA as it relates to the employees of each
Employer.
Discretionary Contributions - Contributions made by an Employer under
Section 3.3.
Distribution Date - December 31, 1996, the effective date of the
spinoff of the Employer from Corning through the distribution of stock dividends
in shares of Corning, CCL and the Employer.
Effective Date - Except as specified otherwise, the Plan is effective
as of the Distribution Date.
Eligible Employee - An Employee eligible for participation under
Section 2.1.
Employee - Any person employed by an Employer. Notwithstanding the
preceding sentence, Employee shall not include (1) independent contractors, (2)
any person who is covered by a collective bargaining agreement where such
agreement provides for a different retirement plan, or where no provision is
made for any retirement plan after good faith bargaining between the Employer
and employee representatives and (3) any person who is excluded from
participation hereunder by the terms of his Employer's adoption of this Plan. No
person who is a leased employee of an Employer within the meaning of Code
Section 414(n), or who receives compensation solely for service as a member of
the Board, shall be eligible to participate in this Plan.
Employer - Collectively or individually as the context may indicate,
Covance Inc. (formerly Corning Pharmaceutical Services Inc.); and any other
entity listed in Supplement B which (1) must be considered together with the
Corporation under Code Section 414(b), (c) or (m), (2) has been authorized by
the Board to adopt the Plan and (3) by action of its own board of directors
shall have adopted the Plan, or any successor to one or more of such entities.
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Employer Stock - Any class of the Employer's common stock or the
Employer's preferred stock that is convertible into common stock. Employer Stock
includes ESOP Stock.
Employment Commencement Date - The date on which an Employee first
performs an hour of service for an Employer (even if such date is before the
Effective Date with respect to such Employer).
ERISA - The Employee Retirement Income Security Act of 1974, as
amended.
ESOP Stock - Employer securities within the meaning of Code section
409(1) that have been acquired with the proceeds of an Exempt Loan. Unallocated
ESOP Stock shall remain in a suspense account described in Section A-5 until
allocated to Participants' ESOP Accounts pursuant to Section A-9.
Fiduciary - The Corporation, the Employer, the Trustee, the Committee
and any individual, corporation, firm or other entity which assumes, in
accordance with Article VIII, responsibilities of the Corporation, the Employer,
the Trustee or the Committee respecting management of the Plan or the
disposition of its assets.
Fund - The Trust Fund.
Highly Compensated Employee - (a) For any Plan Year, any employee
described in subsection (b) or (c).
(b) Any employee who during the immediately preceding Plan Year:
(1) was at any time a 5-percent owner (as defined in Code
Section 416(i)(l));
(2) received compensation (as defined in Code Section
414(q)(7)) from an Employer or an Affiliate in excess of $50,000 (as adjusted
under Code Section 414(q)(1)); or
(3) was at any time an officer and received compensation (as
defined in Code Section 414(q)(7)) from an Employer or an Affiliate greater than
50 percent of the amount in effect under Code Section 415(b)(1)(A) for such
year.
(c) Any employee who during the current Plan Year:
(1) was at any time a 5-percent owner (as defined in Code
Section 416(i)(l));
(2) received compensation (as defined in Code Section
414(q)(7)) from an Employer or an Affiliate in excess of $50,000 (as adjusted
under Code Section 414(q)(1)) and was one of the 100 employees receiving the
most compensation (as defined in Code Section 414(q)(7)); or
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(3) was at any time an officer who received compensation (as
defined in Code Section 414(q)(7)) from an Employer or an Affiliate greater than
50 percent of the amount in effect under Code Section 415(b)(1)(A) for such year
and was one of the 100 employees receiving the most compensation (as defined in
Code Section 414(q)(7).
This definition shall be applied in accordance with Code Section 414(q)
and the regulations issued thereunder.
(d) For purposes of applying the HC Family Member aggregation rules
under this Plan, Highly Compensated Employee shall also include former employees
who separated prior to the Plan Year being tested and who met the definition of
Highly Compensated Employee in either (1) the Plan Year in which they separated
or (2) any Plan Year ending on or after their 55th birthday.
HC Family Member - With respect to a Highly Compensated Employee who is
either a 5% owner or one of the ten most highly compensated Employees, the
spouse and the lineal ascendants and descendants (and spouses of such ascendants
and descendants) of any such Highly Compensated Employee.
Individual Account - That portion of Participant's Discretionary
Contributions allocated to such Participant under Section 4.4 and any earnings
or losses on such contribution.
Limitation Year - The Limitation Year is January 1 - December 31.
Normal Retirement Age - Age 65.
Participant - Any Employee or former Employee who has an Individual
Account balance and any Employee who has met the eligibility requirements of
Section 2.1. Participation ends in accordance with Section 2.2.
Period of Severance - The period of time commencing on an Employee's
Severance from Service Date and ending on his Reemployment Commencement Date.
Plan - The Covance Inc. Employee Stock Ownership Plan as contained
herein or as duly amended
Plan Year -The Plan Year is January 1 - December 31.
Reemployment Commencement Date - The first date on which an Employee
again performs an hour of service following a Period of Severance.
Section 415 Compensation - An Employee's wages as defined in Code
Section 3401(a) and all other payments of compensation to an Employee by an
Employer (in the course of the
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Employer's trade or business) for which the Employer is required to furnish the
Employee a written statement under Code Sections 6041(d) and 6051(a)(3). Section
415 Compensation shall be determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed (such as the exception for agricultural labor in Code
Section 3401(a)(2)). Section 415 Compensation does not include employee pre-tax
contributions to a qualified Plan and salary reduction contributions to a Code
Section 125 cafeteria plan.
Severance from Service Date - The date on which an Employee quits,
retires, is discharged or dies, provided he does not earn an hour of service for
an Employer within 12 months after such date.
Testing Compensation - For each Participant, the Section 415
Compensation paid to an Employee by the Employer for his services, excluding
reimbursements or other expense allowances, cash and non-cash fringe benefits
(e.g., employee discounts), moving expenses, deferred compensation and welfare
benefits, plus any employee pre-tax contributions to a qualified defined
contribution plan and salary reduction contributions to a Code Section 125
cafeteria plan. Testing Compensation in excess of $160,000 (or such different
amount as may be applicable under Code Section 401(a)(17)(B)) shall not be taken
into account.
Total and Permanent Disability - A Participant shall be considered
totally and permanently disabled once the Committee, in its sole discretion,
determines that he has incurred a disability which renders him totally and
permanently unable to satisfactorily perform his usual duties for his Employer
or the duties of such other position which the Employer makes available to him
and for which he is qualified by reason of his training, education or
experience. Such determination shall be made by the Committee based on medical
reports and such other evidence which the Committee determines to be
satisfactory; provided, however, that conclusive evidence that the Participant
is eligible for and is receiving disability benefits under the provisions of the
Federal Social Security Act shall be sufficient to deem the Participant totally
and permanently disabled.
Trust Agreement - The agreement entered into between the Employer and
the Trustee under Article VII.
Trust Fund - All funds received by the Trustee together with all
income, profits and increments thereon, and less any expenses or payments made
out of the Trust Fund.
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Trustee - Such individual, individuals, financial institution, or a
combination of them as shall be designated in the Trust Agreement to hold in
trust any assets of the Plan for the purpose of providing benefits under the
Plan, and shall include any successor trustee to the Trustee initially
designated thereunder.
Valuation Date - The date on which a Participant's Individual Account
is valued pursuant to Section 5.9. Subject to Section 5.9(b), the Valuation Date
shall be a date that falls as soon as administratively feasible after a
properly-completed written request for a distribution is received by an
authorized representative of the Committee.
Year of Vesting Service - (a) As of any date, the aggregate of an
Employee's periods of vesting service, including any vesting service credited
under subsection (b) and excluding any vesting service disregarded under
subsection (c). For purposes of this subsection (a), a period of vesting service
is each period of time required to be recognized under this Plan commencing on
the later of the Effective Date of this Plan, the Employee's Employment
Commencement Date, or any subsequent Reemployment Commencement Date, and ending
on a Severance from Service Date.
(b) Vesting service shall also include the following:
(1) Periods of employment with an Affiliate (while such
organization is an Affiliate) which would have constituted vesting service had
the Participant been employed by an Employer shall be included as if such
periods had been performed for an Employer; and
(2) Periods of employment with an Employer other than as an
Employee, including employment as a leased employee within the meaning of Code
Section 414(n), which would have constituted vesting service had the Participant
been employed as an Employee shall be included as if such periods had been
performed as an Employee.
(c) Years of Vesting Service on or after the Effective Date
recognized under the preceding subsections shall not include any vesting service
earned prior to a five-year Period of Severance if, when the Period of Severance
commenced, the Employee Individual Account was not vested under Sections 5.5 or
10.1.
(d) Periods of Employment during an authorized leave of
absence shall be included as vesting service, up to a maximum of three months
during any single consecutive leave or such longer periods approved by the
Corporation in accordance with its policies and procedures.
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ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility
An Employee who has completed an hour of service on the Effective Date
shall be a Participant. Each other Employee shall become a Participant on the
date following the Effective Date on which he completes an hour of service with
an Employer.
2.2 Participation
Each person who becomes a Participant shall remain a Participant so
long as he remains an Employee or maintains an Individual Account balance. If a
Participant terminates employment with no balance in his Individual Account, he
shall cease being a Participant upon his termination of employment. In the event
an Employee ceases to be a Participant and is later reemployed as an Employee,
he shall once again become a Participant upon his reemployment date.
2.3 Beneficiary Designation
(a) Upon commencing participation, each Participant shall designate a
Beneficiary by filing a properly-completed form with an authorized
representative of the Committee. In the absence of any valid designation of
Beneficiary, the Participant shall be deemed to have designated his spouse as
his Beneficiary, and if the Participant is unmarried upon his death, he shall be
deemed to have designated his estate as his Beneficiary.
(b) The Beneficiary of a married Participant shall be his spouse unless
the Participant designates someone other than his spouse as his Beneficiary, and
the Participant files with an authorized representative of the Committee his
spouse's written consent to such designation. Such spousal consent shall be on a
form approved by the Committee, shall be irrevocable by the spouse, shall
acknowledge the effect of such designation and shall be witnessed by a Committee
member (or an authorized representative) or a notary public. The spouse may
alternatively execute an irrevocable general consent that does not identify the
designated Beneficiary and which allows the Participant to make future changes
in the Beneficiary designation without spousal consent. Any such general consent
shall satisfy the requirements of Treasury Regulation ss.1.401(a)-20 Q&A-31(c).
(c) If an unmarried Participant later marries, or if a married
Participant later remarries, any prior designation by such Participant of a
Beneficiary other than the spouse to
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whom he is married on his date of death shall be null and void unless consented
to by such spouse in the manner provided in subsection (b).
(d) The interpretation of the Committee with respect to any Beneficiary
designation, subject to applicable law, shall be binding and conclusive upon all
parties, and no person who claims to be a Beneficiary, or any other person,
shall have the right to question any action of the Committee.
(e) The rights of any spouse or Beneficiary hereunder shall be subject
to the provisions of any qualified domestic relations order within the meaning
of ERISA Section 206(d)(3).
2.4 Notification of Individual Account Balance
As of the last day of each Plan Year (or such other earlier period
during the year), the Committee shall notify each Participant of the amount of
his share in the Contributions for the period just completed and the balance of
his Individual Account, including distributions, if any, since the effective
date of the last statement. Such notification shall be provided within a
reasonable period of time following the end of the Plan Year.
2.5 Diversification of Investments or Distribution for Certain Participants
For purposes of this Section 2.5, "Qualified Participant" shall mean a
Participant who has completed at least five years of participation in the Plan.
"Qualified Election Period" shall mean the period of six Plan Years
beginning with the later of (i) the Plan Year in which the Participant first
becomes a Qualified Participant, or (ii) the Plan Year which includes the tenth
anniversary of the Distribution Date; provided that the Qualified Election
Period shall not begin unless and until the fair market value of Employer Stock
allocated to the Participant's ESOP Account is at least $500 as of any Valuation
Date.
No later than 90 days after the last day of each Plan Year during his
Qualified Election Period, each Qualified Participant shall be permitted to
direct the Plan as to the investment of 100 percent (100%) of an amount equal to
the value of his Individual Account attributable to Employer Stock. The
Participant's direction shall be provided to the Committee in writing and shall
be effective no later than 180 days after the close of the Plan Year to which
the direction applies.
The Plan shall satisfy the Participant's direction by transferring the
portion of his Account that is covered by the election to another qualified plan
(including the portion of this
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Plan that does not constitute an ESOP) of the Employer that accepts the transfer
and permits employee-directed investments and offers the Participant at least
three investment options (not inconsistent with regulations prescribed by the
Secretary of the Treasury) other than Employer Stock. The transfer shall be
made, and the amount transferred shall be invested in accordance with the
Participant's election, no later than 90 days after the last day of the period
during which the election can be made. If at the time of an election no Employer
then maintains a qualified plan that is eligible to receive the portion of the
Participant's Account that is covered by the election, the Plan shall distribute
that portion to the Qualified Participant within 90 days after the last day of
the period during which the election can be made, subject to the requirements of
Section A-11 concerning put options. This Section shall apply notwithstanding
any other provision of the Plan, other than such provisions as require the
consent of the Participant to a distribution with a present value in excess of
$3,500. If the Participant does not consent to such a distribution, the amount
as to which the election is made shall be retained in the Plan and the
diversification requirement of this Section shall be deemed to have been
satisfied.
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ARTICLE III
CONTRIBUTIONS
3.1 Discretionary Contributions
To the extent permitted under the terms of the Plan, the Code and
ERISA, the Corporation shall make a Discretionary Contribution as of the last
day of the first Plan Year for each Participant who was an active Participant
during the Plan Year, which amount shall be allocated in accordance with Section
4.2 As of the last day of each Plan Year thereafter, the Corporation, at the
discretion of the Board, may make a Discretionary Contribution. Such
Discretionary Contribution, if made, shall be expressed as a percentage of Base
Compensation and shall be allocated in accordance with Section 4.2. No
Discretionary Contribution shall be made with respect to any Participant who is
not an Active Participant for the applicable Plan Year. The Employer shall also
contribute sufficient Discretionary Contributions as may be required by Section
10.1(b). Notwithstanding the foregoing, no contribution shall be made and
allocated under Section 4.2 to the extent it would cause the Participant to
exceed the maximum additions under Section 4.4 for the Plan Year.
3.2 Maximum Deductible Contribution
In no event shall the Employer be obligated to make a Contribution for
a Plan Year in excess of the maximum amount deductible by it under Code Section
404(a)(3).
3.3 Payment of Contributions to Trustee
Unless an earlier time for contribution is specified elsewhere in this
Plan, in all events the Employer shall pay to the Trustee its Contributions for
each Plan Year within the time prescribed by law, including extensions of time
for the filing of its federal income tax return for the Employer's taxable year
during which such Plan Year ended.
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ARTICLE IV
ALLOCATIONS TO INDIVIDUAL ACCOUNTS
4.1 Individual Accounts
(a) The Committee shall establish and maintain an Individual Account in
the name of each Participant, compromised of Discretionary Contributions and
investment earnings thereon, to which the Committee shall credit all amounts
allocated to each such Participant under this Article IV.
(b) Separate accounts shall be maintained for all former Employee
Participants who have an interest in the Plan.
(c) The maintenance of separate accounts shall not require a
segregation of the Trust assets and no Participant shall acquire any right to or
interest in any specific asset of the Trust as a result of the allocations
provided for in the Plan.
4.2 Allocation of Discretionary Contributions
(a) A Participant's allocable share as determined under subsection (b)
of the Discretionary Contribution shall be credited to the Participant's
Individual Account as of the last day of each Plan Year for which the
Corporation shall make a Discretionary Contribution under Section 3.1 and shall
be invested in Employer Stock.
(b) Each Participant who is an Active Participant for the Plan Year
with respect to which the Corporation makes a Discretionary Contribution shall
receive an allocation of the Discretionary Contribution. No other Participant
shall receive an allocation. Each Active Participant shall receive an amount
equal to the Discretionary Contribution, multiplied by a fraction where the
numeration is the Participant's Base Compensation and the denominator is the sum
of the Base Compensation of all Active Participants. Notwithstanding the
foregoing, the Corporation may designate that all or any portion of a
Discretionary Contribution shall be allocated only to new Participants during
the Plan Year based on Base Compensation and in accordance with the above
allocation formula.
4.3 Allocation of Forfeitures
As of the last day of each Plan Year, any forfeitures arising under
Section 5.5(c) shall be used to the extent necessary to restore a Participant's
Individual Account as provided in Section 5.5(c)(1), and/or shall be allocated
per capita to new Participants during the Plan Year
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ending December 31, 1997 and December 31, 1998. Notwithstanding the foregoing,
for Plan Years ending December 31, 1999 and 2000, any forfeitures shall be
allocated per capita to all Active Participants.
4.4 Maximum Additions
(a) Notwithstanding anything herein to the contrary but subject to
subsection (b), the sum of the Discretionary Contributions allocated to a
Participant's Individual Account for any Limitation Year (the "Annual
Additions"), when combined with any annual additions credited to the Participant
for the same period under another qualified defined contribution plan maintained
by the Employer or an Affiliate, shall not exceed the lesser of the following:
(1) $30,000 or such larger amount as may be determined under
Code Section 415(c)(1)(A); or
(2) 25% of the Participant's total Section 415 Compensation
received from the Employer for such Limitation Year.
(b) In the event a Participant is covered by more than one defined
contribution plan maintained by the Employer (or an Affiliate), the maximum
Annual Additions to this Plan shall be decreased as determined necessary by the
Employer to insure that the limitations of Code Section 415(c) are not exceeded.
In the event that corrective adjustments in the Annual Additions to any
Individual Accounts are required due to a reasonable error in estimating a
Participant's compensation that may be made with respect to any Participant
under the annual additions limit of Sections 4.4(a) and (b), the adjustment
shall first be made by reducing the Discretionary Contributions provided under
this Plan, employer contribution under any qualified defined contribution plan
maintained by the Employer, and next any employee pre-tax contributions.
Any amounts withheld or taken from a Participant's Individual Account
pursuant to the above shall be segregated in the Trust Fund in a separate
account and applied toward the Contribution of the Employer for the next
Limitation Year for the affected Participant, including a special Discretionary
Contribution under section 4.2(b) earmarked exclusively for that Participant,
subject to satisfying any restriction under section 401(a)(y) of the code with
regard to all such special contributions.
(c) A Participant's annual additions with respect to Employer Stock
allocable to an Exempt Loan shall be determined on the basis of the lesser of
contributions thereto or the value of Employer Stock released from the Suspense
Account and, if no more than one third
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of any employer matching contributions which are deductible under Section
404(a)(9) of the Code by reason of their application to make payments on an
Exempt Loan are allocated to Highly Compensated Employees, a Participant's
annual additions shall not include employer contributions which are deductible
under Section 404(a)(9)(B) of the Code by reason of their applications to the
payment of interest on an Exempt Loan or forfeitures of Employer Stock
attributable to an Exempt Loan.
4.5 Multiple Plan Participation
(a) If a Participant is a participant in a defined benefit plan
maintained by the Employer, the sum of his defined benefit plan fraction
(determined in subsection (c)) and his defined contribution plan fraction
(determined in subsection (b)) for any Limitation Year may not exceed 1.0.
(b) The term "defined contribution plan fraction" shall mean a
fraction, the numerator of which is the sum of all of the Annual Additions to
the Participant's Individual Account under this Plan as of the close of the
Limitation Year and the denominator of which is the sum of the lesser of the
following amounts determined for such Limitation Year and for each prior
Limitation Year of employment with the Employer:
(1) the product of 1.25 multiplied by the dollar limitation in
effect under Section 4.6(a)(1) for such Year; or
(2) the product of 1.4 multiplied by an amount determined
under Section 4.6(a)(2) for such Year.
(c) The term "defined benefit plan fraction" shall mean a fraction the
numerator of which is the Participant's projected annual benefit determined as
of the close of the Limitation Year and the denominator of which is the lesser
of:
(1) the product of 1.25 multiplied by the dollar limitation in
effect under Code Section 415(b)(1)(A) for such Limitation Year; or
(2) the product of 1.4 multiplied by the amount which may be
taken into account under Code Section 415(b)(1)(B) with respect to each
individual under the Plan for such Limitation Year.
For purposes of this limitation, all defined benefit plans maintained
by an Employer (or any Affiliates), whether or not terminated, are to be treated
as one defined benefit plan and all defined contribution plans maintained by an
Employer (or any Affiliates), whether or not terminated, are to be treated as
one defined contribution plan. The extent to which the annual
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<PAGE>
benefit under any defined benefit plans shall be reduced in order to achieve
compliance with the limitations of Code Section 415 shall be determined in such
a manner so as to maximize the aggregate benefits payable to such Participant.
If such reduction is under this Plan, the Committee shall advise affected
Participants of any additional limitation on their annual benefits required by
this Section.
(d) The above limitations in Section 4.4 and this Section 4.5 are
intended to comply with the provisions of Code Section 415 so that the maximum
benefits able to be provided by plans of the Employer shall be exactly equal to
the maximum amounts allowed under Code Section 415. If there is any discrepancy
between the provisions of Section 4.4 or this Section 4.5 and the provisions of
Code Section 415, such discrepancy shall be resolved in such a way as to give
full effect to the provisions of Code Section 415, which provisions are hereby
incorporated by reference.
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ARTICLE V
DISTRIBUTIONS
5.1 Normal Retirement
Upon the retirement of a Participant on or after attaining his Normal
Retirement Age, the value of his Individual Account (as determined under Section
5.9) shall become 100% vested and shall become payable as soon as
administratively feasible following his retirement. The Committee shall
thereupon direct the Trustee to distribute to the retiring Participant such
amount in accordance with Section 5.6.
5.2 Disability Retirement
(a) A Participant may retire from the employment of the Employer on the
first day of any month coincident with or next following a determination by the
Committee that the Participant has incurred a Total and Permanent Disability.
Upon the retirement of a Participant under this Section 5.2, the value of his
Individual Account (as determined under Section 5.9) shall become 100% vested
and shall become payable as soon as administratively feasible following his
retirement. The Committee shall thereupon direct the Trustee to distribute to
the retiring Participant such amount in accordance with Section 5.6.
(b) Notwithstanding anything herein to the contrary, a Participant who
retires in accordance with this Section 5.2 shall (1) have the right to delay
receipt of his disability retirement benefit until the time required by Section
5.8(b), and (2) if deferred benefit commencement is elected, have the right at
any time subsequent to his disability retirement date but prior to the time
required by Section 5.8(b) to request benefit commencement at some earlier date.
5.3 Death Before Retirement or Termination of Employment
Upon the death of a Participant before retirement or termination of
employment, the value of such Participant's Individual Account (as determined
under Section 5.9) shall become 100% vested and shall become payable as soon as
administratively feasible following his death. Subject to subsection (b), the
Committee shall direct the Trustee to distribute to the deceased Participant's
Beneficiary such amount in accordance with Section 5.6.
5.4 Death After Retirement or Termination of Employment
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Upon the death of a Participant who has terminated employment and who
is not receiving benefit payments in accordance with a form of distribution
under Section 5.6, the value of the vested portion of such Participant's
Individual Account (as determined under Section 5.9) shall become payable as
soon as administratively feasible following his death. (For any Participant who
is receiving benefit payments in accordance with a form of distribution under
Section 5.6, the provisions of such form of distribution shall control any
payments upon the death of such Participant.) The Committee shall direct the
Trustee to distribute to the deceased Participant's Beneficiary such amount in
accordance with Section 5.6.
5.5 Termination of Employment
(a) Upon termination of employment for any reason other than retirement
under Section 5.1 or 5.2, or death, a Participant shall be entitled to the value
of the vested portion of his Individual Account (as determined under Section
5.9) and payable at the time set forth in subsection (b). A Participant's
Individual Account shall vest on the earlier of two years and one day from the
date of the initial allocation to the Participant or after earning five Years of
Vesting Service, provided that all amounts shall become fully vested as of
January 1, 2001. Notwithstanding the foregoing, a Participant's Individual
Account shall become fully vested in the event of a Change of Control.
(b) (1) As soon as administratively feasible following a Participant's
termination of employment, the Committee shall direct the Trustee to distribute
to such Participant the value of the vested portion of his Individual Account
(as determined under Section 5.9). Notwithstanding the preceding sentence, if
the amount to be distributed under this subsection (b) exceeds (or at the time
of any prior distribution exceeded) $3,500, then no distribution shall be made
prior to the Participant attaining his Normal Retirement Age unless he consents
in writing to the making of such distribution. The consent of the Participant
shall be obtained in writing within the 90-day period ending on the date
distribution commences. The Participant shall be given a written notice of the
right to defer any distribution until the Participant's Individual Account
balance is no longer immediately distributable. Such notification shall be
provided no less than seven days and no more than 90 days prior to the date
distribution commences and shall inform the Participant that he has a right to a
period of at least 30 days after receiving the notice to consider the decision
of whether or not to elect a distribution.
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(2) As soon as administratively feasible following the
attainment of Normal Retirement Age on the part of a Participant who has
previously terminated his employment but the distribution of whose benefit has
not commenced, the Committee shall direct the Trustee to distribute to such
Participant the value of his Individual Account (as determined under Section
5.9) in a lump sum payment.
(c) If a Participant's employment terminates for any reason other than
retirement or death at a time when he is not fully vested in his Individual
Account, then the Committee shall follow the procedure set forth in paragraph
(1) or that set forth in paragraph (2) below, as appropriate:
(1) If the vested portion of the Individual Account is
distributed to him at any time before the end of the second Plan Year following
the Plan Year in which his employment terminated, the remaining portion of such
Accounts shall be forfeited as of the date of such termination of employment.
However, if the Participant had no vested interest in his Individual Account at
the time of his termination of employment, the Committee nonetheless shall treat
the Participant as if he had received a distribution on the date his employment
terminated and shall forfeit the Participant's Individual Account on the date
his employment terminated. If the former Participant returns as an Employee
prior to incurring a one-year Period of Severance beginning immediately after
the date of his distribution (or on the date his employment terminated in the
case of a former Participant who had no vested interest in Individual Account on
the date his employment terminated), then his Account, determined as of the date
of the distribution of his vested interest, shall be fully restored to him as of
the end of the Plan Year in which such repayment occurred. In such case, the
Participant's Individual Account shall be restored first out of forfeitures for
such Plan Year and, if such forfeitures are insufficient to restore such
Account, the Employer shall make a special contribution to the extent necessary
so that the Participant's Account is fully restored.
(2) If a Participant's vested interest in his Individual
Account is distributed to him under section 5.6 (or is deemed to be distributed
to the Participant), any portion of such Accounts which is not vested shall be
forfeited immediately.
(d) In the event a Participant who terminated his employment with an
Employer is reemployed as an Employee prior to receiving a distribution of his
Individual Account, he shall not be entitled to a distribution as provided in
this Section 5.5 due to such termination,
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but shall be entitled to a distribution as determined herein upon any subsequent
termination of employment for any reason.
5.6 Method of Payment
Benefit payments hereunder shall be made in a lump sum.
Furthermore, distributions to a Participant (or to his Beneficiary if the
Participant dies before distribution of his benefit has commenced), the value of
the vested portion of whose Individual Account does not exceed (or at the time
of any prior distribution did not exceed) $3,500, automatically shall be made in
a lump sum. A Participant who is not vested in any portion of his Individual
Account shall be deemed to distributed to the Participant. Payment from
investments held in Employer Stock may be distributed in cash or in stock, at
the direction of the Participant. Payments from other investment accounts shall
be made only in cash.
5.7 Benefits to Minors and Incompetents
(a) In case any person entitled to receive payment under the Plan shall
be a minor, the Committee, in its discretion, may distribute such payment in any
one or more of the following ways:
(1) By payment thereof directly to such minor;
(2) By application thereof for the benefit of such minor;
(3) By payment thereof to either parent of such minor or to
any person who shall be legally qualified and shall be acting as guardian of the
person or the property of such minor, provided the parent or adult person to
whom any amount shall be paid shall have advised the Committee in writing that
he will hold or use such amount for the benefit of such minor.
(b) In the event a person entitled to receive payment under the Plan is
physically or mentally incapable of personally receiving and giving a valid
receipt for any payment due (unless prior claim therefor shall have been made by
a duly qualified legal representative of such person), such payment in the
discretion of the Committee may be made to the spouse, son, daughter, parent,
brother or sister of the recipient or to any other person who is responsible for
the welfare of such recipient.
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(c) Any payments made under subsections (a) or (b) shall, to the extent
of the payments, fully discharge the obligations of the Committee and the Plan
to any other person making a claim hereunder with respect to such payments.
5.8 Payment of Benefits
(a) Except as provided in subsection (b), in the event a Participant's
Individual Account shall be due and payable under this Article V and the
Participant has not elected otherwise in accordance with the Plan, any payment
of benefits to the Participant shall begin not later than 60 days after the
close of the Plan Year in which occurs the latest of:
(1) the date on which the Participant attains age 65;
(2) the 10th anniversary of the date in which the Participant
commenced participation in the Plan; and
(3) termination of employment of the Participant with the
Employer.
(b) Notwithstanding subsection (a) above, distribution of a
Participant's benefit shall be made no later than April 1 of the calendar year
following the calendar year during which such Participant attains age 70 1/2,
regardless of whether or not he has terminated employment with the Employer.
Such distribution shall be made over a period not extending beyond the life or
life expectancy of the Participant or the joint lives or life expectancies of
the Participant and a designated Beneficiary. Life expectancies shall be
determined at the time payments commence and shall not thereafter be
recalculated.
(c) If a Participant dies before distribution of his benefit has
commenced, the Participant's entire benefit shall be distributed within five
years after his death. The preceding sentence shall not apply to any portion of
the Participant's benefit if the following requirements in paragraphs (1) and,
if applicable, (2) are met with respect to such portion:
(1) (A) if the portion of the Participant's benefit is payable
to or for the benefit of a designated Beneficiary;
(B) such portion will be distributed over a period not
extending beyond the life expectancy of such Beneficiary at the time payments
commence; and
(C) such distributions begin not later than December 31 of
the calendar year following the calendar year of the Participant's death.
(2) If the designated Beneficiary referred to in paragraph
(1)(A) above is the surviving spouse of the Participant, then the date on which
the distributions are required to
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begin under paragraph (1)(C) shall not be earlier than December 31 of the
calendar year in which the Participant would have attained age 70 1/2.
If the surviving spouse dies before the distributions to such
spouse begin, this Section 5.8(c) (with the exception of paragraph (2)) shall be
applied as if the surviving spouse were the Participant.
This Section 5.8(c) shall not apply if the distribution of the
Participant's benefit has commenced prior to his death and the remaining portion
of the Participant's benefit will be distributed at least as rapidly as under
the method of distribution being used at the date of the Participant's death.
For purposes of this Section 5.8(c), under regulations to be
prescribed by the Secretary of the Treasury, any amount paid to a child shall be
treated as if it had been paid to the surviving spouse upon such child reaching
the age of majority (or other designated event prescribed under such
regulations).
(d) Distributions under this Article V shall be made in accordance with
regulations issued by the Secretary of the Treasury under Code Section
401(a)(9), including Treasury Regulation ss.1.401(a)(9)-2, which regulations
shall override any distribution options in this Plan inconsistent with Section
401(a)(9).
5.9 Valuation of Accounts
All distributions hereunder shall be based upon the value of the
Participant's Individual Account as determined under this Section 5.9.
(a) The value of a Participant's Individual Account upon a distribution
hereunder is the product of (A) the per unit value of the Employer Stock Fund
and (B) the number of units of such fund allocated to the Participant's
Individual Account as of such Valuation Date.
(b) If a Discretionary Contribution is made on behalf of a Participant
after the date on which his Individual Account is valued under subsection (a),
the Participant shall receive an additional distribution equal to the amount of
the Discretionary Contribution and any earnings or losses thereon. Such
additional distribution shall be valued in the same manner as the Participant's
Individual Account was valued under subsection (a), except that the Valuation
Date shall be a date that falls as soon as administratively feasible after the
Discretionary Contribution is made.
5.10 Direct Rollovers
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(a) 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 Committee, to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) (1) 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 distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and 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) 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
section 403(a) of the Code, or a qualified defined contribution plan described
in section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(3) A "distributee" includes an employee or former employee.
In addition, the employee's or former employee's surviving spouse and the
employee's or 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.
(4) A "direct rollover" is a payment by the Plan to the eligible
retirement plan specified by the distributee.
5.11 Payment to Alternate Payee Under QDRO
Notwithstanding any other provision of this Plan, once the Committee
determines that a domestic relations order is a qualified domestic relations
order ("QDRO") within the meaning of Section 206(d)(3) of ERISA, unless the QDRO
specifically provides otherwise, the
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Committee shall direct the Trustee to distribute, as soon as administratively
feasible following the date on which the Committee determines that the domestic
relations order is a QDRO, to the alternate payee named in the QDRO the benefit
provided therein in a lump sum.
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ARTICLE VI
TRUST FUND
6.1 Contributions
Contributions by the Employer as provided for in Article III shall be
paid over to the Trustee. All Contributions by the Employer shall be
irrevocable, except as otherwise provided in this Plan and may be used only for
the exclusive benefit of the Participants and their Beneficiaries. The
Employer's Contribution will be made either in cash or in Employer Stock, or
partially in each.
6.2 Trustee
The Corporation will maintain an agreement with the Trustee whereunder
the Trustee will receive, invest and administer as a trust fund Contributions
made under this Plan in accordance with the Trust Agreement.
Such Trust Agreement is incorporated by reference as a part of the
Plan, and the rights of all persons entitled to benefits hereunder are subject
to the terms of the Trust Agreement. The Trust Agreement specifically provides,
among other things, for the investment and reinvestment of the Fund and the
income thereof, the management of the Fund, the responsibilities and obligations
of the Trustee, removal of the Trustee and appointment of a successor,
accounting by the Trustee and the disbursement of the Fund.
The Trustee shall, in accordance with the terms of such Trust
Agreement, accept and receive all sums of money paid to it from time to time by
the Employer, and shall hold, invest, reinvest, manage and administer such
moneys and the increment, increase, earnings and income thereof as a trust fund
for the exclusive benefit of the Participants and their Beneficiaries and for
the payment of reasonable expenses of administering the Plan.
6.3 Employer Stock Fund
The Employer Stock Fund shall be invested in the common stock of the
Employer, provided such stock qualifies as qualifying employer securities within
the meaning of ERISA Section 407(d)(5). The level of Plan assets invested in
such fund may consist of up to 100% of all Plan assets.
6.4 Dividends on ESOP Stock Attributable to Exempt Loan
It is anticipated that all dividends payable with respect to shares of
ESOP Stock held in the Suspense Account shall be used for the purpose of
repaying one or more Exempt Loans
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and will not be allocated to Participants' Individual Accounts invested in
Employer Stock and that all dividends payable with respect to all other Employer
Stock held in the Trust Fund shall be added to the Participants' Employer Stock
Fund, subject to Section A-6. Nevertheless, the Committee may, in its sole
discretion, determine for any Plan Year that dividends payable with respect to
shares of ESOP Stock shall, if payable in cash (i) paid currently to
Participants or (ii) used for the purpose of repaying one or more Exempt Loans
if such use of said dividends so applied meets the requirements of Code Section
404(k). Such discretion herein granted may be exercised by the Committee
independently, and in whole or in part, with respect to the stock held from time
to time in one or more of Employer Stock Funds established under the Trust.
Discretion so exercised for any Plan Year, or for any portion thereof, may be
changed by the Committee at any subsequent time. Cash dividends which are to be
paid to the Participants may be paid directly by the Company or may be paid by
the Trustee within ninety (90) days after the end of the Plan year or receipt by
the Trustee.
6.5 Voting and Tender Offer Rights on Employer Stock
Each Participant shall have the right to vote all shares of Employer
Stock held in the Participant's accounts. Each Participant shall also have the
right to direct the Trustee whether to tender such shares of Stock in the event
an offer is made by any person other than the Employer to purchase such shares.
The Committee shall make any such arrangements with the Trustee as may be
appropriate to pass such voting or tender offer rights through to a Participant.
In the event a Participant fails to vote his shares or fails to indicate his
preference with respect to a tender offer, the Trustee shall vote the
Participant's shares or tender his shares in the same proportions as those Plan
Participants who did respond cast their votes or tendered their shares. The
Trustee shall also vote and exercise any tender offer rights with respect to
unallocated ESOP Stock held in a suspense account in the same proportions as
those Plan Participants who responded cast their votes or tendered their shares.
In the event of a Change of Control the Trustee shall exercise its discretion
regarding the voting of unallocated ESOP Stock and any allocated ESOP Stock that
a Participant fails to vote.
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ARTICLE VII
FIDUCIARIES
7.1 General
Each Fiduciary who is allocated specific duties or responsibilities
under the Plan or any Fiduciary who assumes such a position with the Plan shall
discharge his duties solely in the interest of the Participants and
Beneficiaries and for the exclusive purpose of providing such benefits as
stipulated herein to such Participants and Beneficiaries, or of defraying
reasonable expenses of administering the Plan. Each Fiduciary in carrying out
such duties and responsibilities shall act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with such matters would use in exercising such
authority or duties.
A Fiduciary may serve in more than one Fiduciary capacity and may
employ one or more persons to render advice with regard to his Fiduciary
responsibilities. If the Fiduciary is serving as such without compensation, all
expenses reasonably incurred by such Fiduciary shall be reimbursed by the
Employer or, at the Corporation's direction, from the assets of the Trust.
A Fiduciary may allocate any of his responsibilities for the operation
and administration of the Plan. In limitation of this right, a Fiduciary may not
allocate any responsibilities as contained herein relating to the management or
control of the Fund except (1) through the employment of an investment manager
as provided in Section 8.3 and in the Trust Agreement relating to the Fund, or
(2) to the extent Participants specify their own Investment Options.
7.2 Corporation
The Corporation established and maintains the Plan for the benefit of
its Employees and those of participating Employers and of necessity retains
control of the operation and administration of the Plan. The Corporation is the
Plan administrator within the meaning of ERISA Section 3(16)(A). The Corporation
in accordance with specific provisions of the Plan has, as herein indicated,
delegated certain of these rights and obligations to the Employer, the Trustee
and the Committee and these parties shall be solely responsible for these, and
only these, delegated rights and obligations.
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7.3 Employer
The Employer shall indemnify each member of the Board of Directors, the
Committee, and any of its employees to whom any fiduciary responsibility with
respect to the Plan is allocated or delegated, from and against any and all
liabilities, costs and expenses incurred by such persons as a result of any act
or omission to act in connection with the performance of their fiduciary duties,
responsibilities and obligations under the Plan and under ERISA, except for
liabilities and claims arising from such fiduciary's willful misconduct or gross
negligence. For such purpose, the Employer may obtain, pay for and keep current
a policy or policies of insurance. Where such policy or policies of insurance
are purchased, there shall be no right to indemnification under this Section
8.3, except to the extent of any deductible amount under the policy or policies
or with regard to covered claims in excess of the insured amount. No Plan assets
may be used for any indemnification.
The Employer shall supply such full and timely information for all
matters relating to the Plan as (a) the Committee, (b) the Trustee, and (c) the
accountant engaged on behalf of the Plan by the Corporation may require for the
effective discharge of their respective duties.
7.4 Trustee
The Trustee, in accordance with the Trust Agreement, shall have
authority to manage the Fund, except that (1) the Committee may in its
discretion employ at any time and from time to time an investment manager (as
defined in section 3(38) of ERISA) to direct the Trustee with respect to all or
a designated portion of the assets comprising the Fund, and (2) Participants may
specify their own Investment Options.
Each Participant in the Plan shall be a "named fiduciary" within the
meaning of section 402 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), to the extent that Employer Stock or shares of Corning or
CCL, whether or not allocated to his accounts, are voted or tendered according
to the Participant's directions.
7.5 Committee
The Board shall appoint a Benefits Administration Committee of not less
than three persons to hold office during the pleasure of the Corporation. No
compensation shall be paid members of the Committee from the Fund for service on
such Committee.
The Committee shall choose from among its members a chairman and a
secretary. Any action of the Committee shall be determined by the vote of a
majority of its members.
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Either the chairman or the secretary may execute any certificate or other
written direction on behalf of the Committee.
The Committee shall hold meetings upon such notice, at such place or
places and at such time or times as the Committee may from time to time
determine. Meetings may be called by the chairman or any two members. A majority
of the members of the Committee at the time in office shall constitute a quorum
for the transaction of business. The Committee may also act by written consent
in lieu of a meeting.
A Committee member may resign at any time by giving written notice of
his resignation to the Corporation at least thirty days in advance, unless the
Corporation shall accept shorter notice. The Corporation shall appoint
replacement Committee members. Any Committee member who was employed by the
Employer when appointed to the Committee shall automatically be deemed to have
resigned from the Committee effective as of the date he ceases to be employed by
the Employer, unless the Corporation shall affirmatively act to keep said member
on the Committee.
Nothing herein shall prevent a Committee member from being a
Participant, or from acting on Plan matters which affect himself by virtue of
affecting all Participants generally. However, a Committee member shall not act
on any matter which affects himself specially. If application of the preceding
sentence results in there not being a quorum to act on any matter, the
Corporation shall appoint the necessary number of temporary Committee members to
take the action.
In accordance with the provisions hereof, the Committee has been
delegated certain administrative functions relating to the Plan with all powers
necessary to enable it properly to carry out such duties.
The Committee shall have discretionary authority to construe the Plan,
and to determine, consistent with the terms of the Plan, all questions that may
arise thereunder relating to (a) the eligibility of individuals to participate
in the Plan, (b) the amount of benefits to which any Participant or Beneficiary
may become entitled hereunder, and (c) any situation not specifically covered by
the provisions of the Plan. The determination of the Committee shall be final
and binding on all interested parties. All disbursements by the Trustee, except
for the ordinary expenses of administration of the Fund or the reimbursement of
reasonable expenses at the direction of the Corporation as provided herein,
shall be made upon, and in accordance with, the written directions of the
Committee. When the Committee is required
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in the performance of its duties hereunder to administer or construe, or to
reach a determination under any of the provisions of the Plan, it shall do so on
a uniform, equitable and nondiscriminatory basis.
7.6 Claims for Benefits
All claims for benefits under the Plan shall be submitted to the
Committee which shall have the responsibility for determining the eligibility of
any Participant or Beneficiary for benefits. All claims for benefits shall be
made in writing and shall set forth the facts which such Participant or
Beneficiary believes to be sufficient to entitle him to the benefit claimed. The
Committee may adopt forms for the submission of claims for benefits in which
case all claims for benefits shall be filed on such forms. The Committee shall
provide Participants and Beneficiaries with all such forms.
Upon receipt by the Committee of a claim for benefits, it shall
determine all facts which are necessary to establish the right of an applicant
to benefits under the provisions of the Plan and the amount thereof as herein
provided. The applicant shall be notified in writing by the Committee of its
decision with respect to such applicant's claim within 90 days after the receipt
of written request for benefits.
If any claim for benefits is denied, the notice shall be written in a
manner calculated to be understood by the applicant and shall include:
(a) The specific reason or reasons for the denial;
(b) Specific references to the pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information necessary
for the applicant to perfect the claim and an explanation why such material or
information is necessary; and
(d) An explanation of the Plan's claim review procedures.
If special circumstances require an extension of time for processing the initial
claim, a written notice of the extension and the reason therefor shall be
furnished to the claimant by the Committee before the end of the initial 90-day
period. In no event shall such extension exceed 180 days after the receipt of
the initial claim for benefits.
7.7 Denial of Benefits - Review Procedure
In the event a claim for benefits is denied or if the applicant has had
no response to such claim within 90 days of its submission (in which case the
claim for benefits shall be deemed to have been denied), the applicant or his
duly authorized representative, at the
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applicant's sole expense, may appeal the denial by filing a written request for
review with the Committee within 60 days of the receipt of written notice of
denial or 60 days from the date such claim is deemed to be denied. In pursuing
such appeal the applicant or his duly authorized representative may review
pertinent Plan documents, and may submit issues and comments in writing.
The decision on review shall be made by the Committee within 60 days of
receipt of the request for review, unless special circumstances require an
extension of time for processing, in which case a decision shall be rendered as
soon as possible, but not later than 120 days after receipt of a request for
review. If such an extension of time is required, written notice of the
extension shall be furnished to the claimant before the end of the original 60
day period. The decision on review shall be in writing, shall be written in a
manner calculated to be understood by the claimant, and shall include specific
references to the provisions of the Plan on which such denial is based. If the
decision on review is not furnished within the time specified above, the claim
shall be deemed denied on review. The decision of the Committee upon review will
be final and binding on all parties.
7.8 Records
All acts and determinations of the Committee shall be duly recorded by
the secretary thereof and all such records, together with such other documents
as may be necessary in exercising its duties under the Plan shall be preserved
in the custody of such secretary. Such records and documents shall at all times
be open for inspection and for the purpose of making copies by any person
designated by the Corporation. The Committee shall provide such timely
information, resulting from the application of its responsibilities under the
Plan, as needed by the Trustee and the accountant engaged on behalf of the Plan
by the Corporation, for the effective discharge of their respective duties.
7.9 Missing Persons
The Committee shall make a reasonable effort to locate all persons
entitled to benefits under the Plan. If such a person cannot be located, the
amount to which such a person otherwise would be entitled shall be retained by
the Trustee and treated in all respects as assets of the Trust, pending
disposition of such amount in accordance with regulations promulgated by the
Secretary of Labor or the Secretary of the Treasury. The Trustee may deposit any
such amounts into an "escheat fund" maintained by such Trustee but not within
the Trust.
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ARTICLE VIII
AMENDMENT AND TERMINATION OF THE PLAN
8.1 Amendment of the Plan
The Corporation shall have the right at any time by action of the Board
to amend the Plan in whole or in part, including retroactively to the extent
necessary. The duties, powers and liability of the Trustee hereunder shall not
be increased without its written consent. The amount of benefits which at the
later of the adoption or effective date of such amendment shall have accrued for
any Participant or Beneficiary hereunder shall not be adversely affected
thereby. No such amendment shall have the effect of revesting in the Employer
any part of the principal or income of the Fund. No amendment may eliminate or
reduce any early retirement benefit or subsidy that continues after retirement
or optional form of benefit. Unless expressly provided for in an amendment, it
shall not affect the rights and obligations of any Participant who terminated
employment prior to the effective date of the amendment.
8.2 Termination of the Plan
The Corporation expects to continue the Plan indefinitely, but
continuance is not assumed as a contractual obligation and each Employer
reserves the right at any time by action of its board of directors to terminate
the Plan as applicable to itself. If an Employer terminates or partially
terminates the Plan or permanently discontinues its Contributions at any time,
each Participant affected thereby shall be then fully vested in his Individual
Account.
In the event of termination of the Plan by an Employer, the Committee
shall value the Fund as of the date of termination. That portion of the Fund
applicable to any Employer for which the Plan has not been terminated shall be
unaffected. The Individual Accounts of the Participants and Beneficiaries
affected by the termination, as determined by the Committee, shall continue to
be administered as a part of the Fund or distributed to such Participants or
Beneficiaries pursuant to Section 5.6 as the Committee, in its sole discretion,
shall determine. Any distributions upon plan termination of amounts attributable
to Employee Pre-Tax Contributions shall only be made to the extent permissible
by Code Section 401(k)(10).
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ARTICLE IX
PROVISIONS RELATIVE TO EMPLOYERS INCLUDED IN PLAN
9.1 Method of Participation
Any organization which is affiliated with the Corporation may with the
consent of the Board adopt the Plan. In order to adopt the Plan, appropriate
action is required by the board of directors (or other governing body) of the
adopting organization and by the Board. Any organization which becomes a party
to the Plan shall thereafter promptly deliver to the Trustee provided for in
Article VII hereof a certified copy of the resolutions or other documents
evidencing its adoption of the Plan or a similar plan and also a written
instrument showing the Board's approval of such organization's becoming a party
to the Plan.
9.2 Withdrawal
Any one or more of the Employers included in the Plan may withdraw from
the Plan at any time by giving six months advance notice in writing to the Board
and the Committee (unless a shorter notice shall be agreed to by the Board) of
its or their intention to withdraw. Upon receipt of notice of any such
withdrawal, the Committee shall certify to the Trustee the equitable share of
such withdrawing Employer in the Fund (to be determined by the Committee).
The Trustee shall thereupon set aside from the Fund then held by it
such securities and other property as it shall, in its sole discretion, deem to
be equal in value to such equitable share. If the Plan is to be terminated with
respect to such Employer, the amount set aside shall be dealt with in accordance
with the provisions of Section 9.2. If the Plan is not to be terminated with
respect to such Employer, the Trustee shall pay such amount to such trustee as
may be designated by such withdrawing Employer, and such securities and other
property shall thereafter be held and invested as a separate trust of the
Employer which has so withdrawn, and shall be used and applied according to the
terms of a new agreement and declaration of trust between the Employer so
withdrawing and the trustee so designated.
Neither the segregation of the Fund assets upon the withdrawal of an
Employer, nor the execution of any new agreement and declaration of trust
pursuant to any of the provisions of this Section 9.2, shall operate to permit
any part of the corpus or income of the Fund to be
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used for or diverted to purposes other than for the exclusive benefit of
Participants and Beneficiaries or to defray reasonable costs of administering
the Plan and Trust.
9.3 Adoption of ESOP by Participating Employer
Any Employer joining the Plan which is not 100 percent owned by the
Employer must expressly provide in said joiner agreement whether the leveraging
provisions of the ESOP are being adopted by such participating Employer. If the
leveraged ESOP is not so adopted, said participating Employer shall participate
in the ESOP provisions of this Plan as may be modified in said joiner agreement,
but all specific provisions applicable to Exempt Loans and the suspense account
established pursuant to the loan shall not apply. If the ESOP provisions of the
Plan are adopted by such a non-100 percent owned participating Employer, any
Exempt Loan applicable to said participating Employer and its Participants shall
be solely the obligation of said participating Employer, and not the Employer or
any other participating Employer under the Plan, and separate accounting shall
be maintained on behalf of said participating Employer and its Participants with
only Participants employed by said participating Employer entitled to
allocations from the fund maintained for said participating Employer's Exempt
Loan. The foregoing provisions governing separate Exempt Loans and separate
groups of Employees of non-100 percent owned participating Employers shall
similarly apply to an Exempt Loan of the Employer and its 100 percent owned
Participating Employers which join the Plan, and their respective Participants,
but for this purpose a 100 percent owned participating employer may, if so
provided in its joinder agreement, join in the Employer's Exempt Loan and in
such case all participating Employer contributions by the Employer and said
Participating Employers and all accounting for shares released from the suspense
account shall be combined for Participants employed by the Employer and each
such participating Employer.
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ARTICLE X
TOP-HEAVY PROVISIONS
10.1 Determination of Top-Heavy
(a) (1) The Plan will be considered a Top-Heavy Plan for any Plan Year
if as of the Determination Date (A) the value of the Individual Accounts of
Participants who are Key Employees as of such Determination Date exceeds 60% of
the value of the Individual Accounts of all Participants determined as of such
Determination Date, excluding former Key Employees (the "60% Test") or (B) the
Plan is part of a Required Aggregation Group which is Top-Heavy. Notwithstanding
the results of the 60% Test, the Plan shall not be considered a Top-Heavy Plan
for any Plan Year in which the Plan is a part of a Required or Permissive
Aggregation Group which is not Top-Heavy.
(2) For purposes of the 60% Test,
(A) all distributions made from Individual Accounts within
the five- year period ending on the Determination Date shall be taken into
account;
(B) if any Participant is a non-Key Employee with respect
to the Plan for any Plan Year, but such Participant was a Key Employee with
respect to the Plan for any prior Plan Year, the Individual Account of such
Participant shall not be considered; and
(C) If a Participant has not performed any service for the
Employer or any Affiliate which maintains the Plan at any time during the
five-year period ending on the Determination Date, the Individual Account of
such Participant shall not be considered.
(b) Minimum Allocations: Notwithstanding Sections 4.3 and 4.4, for any
Plan Year during which the Plan is a Top-Heavy Plan, the rate of Employer
Matching Contributions and Discretionary Contributions for such Plan Year
allocated to the Individual Accounts of Participants who are non-Key Employees
and who remain employed by the Employer (or any Affiliate) at the end of the
Plan Year (regardless of any such Participant's hours of service or level of
compensation during the Plan Year) shall be not less than the lesser of:
(1) three percent (3%) of such non-Key Employee Participant's
Section 415 Compensation; or
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(2) the highest aggregate percentage of Section 415
Compensation at which Employer Matching Contributions, Discretionary
Contributions, and Employee Pre-Tax Contributions are made (or required to be
made) and allocated under Article IV for any Key Employee for the Plan Year.
If a Participant is covered by more than one defined contribution plan
on account of his employment with the Employer and/or any Affiliate, the minimum
allocation required by this Section shall be determined by aggregating the
allocations under all such plans.
(c) (1) Notwithstanding Section 5.5, for any Plan Year in which the
Plan is a Top-Heavy Plan, a Participant who has earned at least one hour of
service during such Plan Year shall have a vested interest in those portions of
his Individual Account which are not automatically one hundred percent (100%)
vested, including allocations made to those portions of the Account in Plan
Years prior to the Plan becoming Top-Heavy, determined as follows:
Years of Vesting Service Vested Interest
- -------------------------------------- -----------------------------------------
less than 2 0%
- -------------------------------------- -----------------------------------------
2 or more 100%
- -------------------------------------- -----------------------------------------
(2) If the Plan ceases to be a Top-Heavy Plan, the vesting
rules set forth in Section 5.5 shall again apply except that:
(A) any portion of a Participant's Individual Account that
was vested before the Plan ceased to be a Top-Heavy Plan shall remain vested,
and
(B) any Participant with three or more years of service
shall have the option to continue to have his vested interest in those portions
of his Individual Account which are not automatically one hundred percent (100%)
vested determined under this Section 10.1(c).
(d) Impact on Minimum and Maximum Benefits where Employer
Maintains Both Defined Benefit and Defined Contributions Plans
(1) Impact on Minimum. If the Employer (or any Affiliate)
maintains a defined benefit plan in addition to this defined contribution plan,
both of which are Top-Heavy, then:
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(A) in the case of non-Key Employee participants covered
only by the defined benefit plan, the minimum benefit under the defined benefit
plan shall be provided; and
(B) in the case of non-Key Employee Participants not
covered by the defined benefit plan or covered by both plans, a minimum
allocation of five percent (5%) of such non-Key Employee Participant's Section
415 Compensation shall be provided. If a Participant is covered by more than one
defined contribution plan on account of his employment with the Employer and/or
any Affiliate, the minimum allocation required by this Section shall be
determined by aggregating the allocations under all such defined contributions
plans.
(2) Impact on Maximum. If the Employer (or any Affiliate)
maintains a defined benefit plan in addition to this defined contribution plan,
both of which are Top-Heavy, Section 4.7 shall be read by substituting the
number "1.00" for the number "1.25" wherever it appears therein, unless (A) the
total aggregate accrued benefits under both such plans for Key Employees does
not exceed 90% of the total aggregate accrued benefits under both such plans for
all Employees (computed in the same manner as the determination in subsection
(a)), and (B)(i) paragraph (1) is read by substituting "seven and one-half
percent (7 1/2%)" for "five percent (5%)," and (ii) in the case of non-Key
Employee participants covered only by the defined benefit plan, a minimum
benefit of three percent (3%) for each year of service (not to exceed 10) shall
be provided.
10.2 Top-Heavy Definitions
Determination Date - With respect to any Plan Year, the last day of the
preceding Plan Year.
Key Employee - Any Employee or former Employee who at any time during
the Plan Year containing the Determination Date, or the four preceding Plan
Years, is or was (1) an officer of the Employer having annual Section 415
Compensation for such Plan Year which is in excess of 50 percent of the dollar
limit in effect under Code Section 415(b)(1)(A) for the calendar year in which
such Plan Year ends (but in no event shall the number of officers taken into
account as Key Employees exceed the lesser of (i) 50 or (ii) the greater of 3 or
10% of all employees); (2) an owner of (or considered as owning within the
meaning of Code Section 318) both more than a 1/2 percent interest as well as
one of the ten largest interests in the Employer and having annual Section 415
Compensation greater than the dollar limit in effect
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under Code Section 415(c)(1)(A) for such Plan Year; (3) a five percent owner of
the Employer; or (4) a one percent owner of the Employer who has annual Section
415 Compensation of more than $150,000. For purposes of determining five percent
and one percent owners, neither the aggregation rules nor the rules of
subsections (b), (c) and (m) of Code Section 414 apply. Beneficiaries of an
Employee acquire the character of the Employee who performed services for the
Employer. Also, inherited benefits will retain the character of the benefits of
the Employee who performed services for the Employer. A non-Key Employee is any
Employee who is not a Key Employee, or who is a former Key Employee.
Permissive Aggregation Group - Each employee pension benefit plan
maintained by the Employer (or any Affiliate) which is considered part of the
Required Aggregation Group, plus one or more other employee pension benefit
plans maintained by the Employer (or any Affiliate) that are not part of the
Required Aggregation Group but that satisfy the requirements of Section
401(a)(4) and Section 410 of the Code when considered together with the Required
Aggregation Group.
Required Aggregation Group - Each employee pension benefit plan
maintained by the Employer (or any Affiliate), whether or not terminated, in
which a Key Employee participates in the Plan Year containing the Determination
Date or any of the four preceding Plan Years, and each other employee pension
benefit plan maintained by the Employer (or any Affiliate), whether or not
terminated, in which no Key Employee participates but which during the same
period enables any employee pension benefit plan in which a Key Employee
participates to meet the requirements of Section 401(a)(4) or Section 410 of the
Code.
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ARTICLE XI
MISCELLANEOUS
11.1 Governing Law
The Plan shall be construed, regulated and administered according to
the laws of New Jersey except in those areas preempted by the laws of the United
States of America.
11.2 Construction
The headings and subheadings in the Plan have been inserted for
convenience of reference only and shall not affect the construction of the
provisions hereof. In any necessary construction the masculine shall include the
feminine and the singular the plural, and vice versa.
11.3 Administration Expenses
The expenses of administering the Fund and the Plan may be paid either
by the Employer or from the Fund, as directed by the Corporation.
11.4 Participant's Rights; Acquittance
No Participant in the Plan shall acquire any right to be retained in
the Employer's employ by virtue of the Plan, nor, upon his dismissal, or upon
his voluntary termination of employment, shall he have any right or interest in
and to the Fund other than as specifically provided herein. The Employer shall
not be liable for the payment of any benefit provided for herein. All benefits
hereunder shall be payable only from the Fund. 11.5 Spendthrift Clause
Except as provided by a qualified domestic relations order within the
meaning of ERISA Section 206(d)(3), none of the benefits, payments, proceeds, or
distributions under this Plan shall be subject to the claim of any creditor of a
Participant or a Beneficiary hereunder or to any legal process by any creditor
of a Participant or Beneficiary. Neither a Participant or Beneficiary shall have
any right to alienate, commute, anticipate, or assign any of the benefits,
payments, proceeds or distributions under this Plan. 11.6 Merger, Consolidation
or Transfer
In the event of the merger or consolidation of the Plan with another
plan or transfer of assets or liabilities from the Plan to another plan, each
then Participant or Beneficiary shall not, as a result of such event, be
entitled on the day following such merger, consolidation or
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transfer under the termination of the Plan provisions to a lesser benefit than
the benefit he was entitled to on the day prior to the merger, consolidation or
transfer if the Plan had then terminated.
11.7 Mistake of Fact
Notwithstanding anything herein to the contrary, upon the Employer's
request, a Contribution which was made by a mistake of fact, or conditioned upon
initial qualification of the Plan or upon the deductibility of the Contribution
under Code Section 404, may be returned to the Employer by the Trustee within
one (1) year after the payment of the Contribution, the denial of the
qualification or the disallowance of the deduction (to the extent disallowed),
whichever is later. For purposes of the preceding sentence, all contributions to
the Plan made before receipt of a favorable determination letter on
qualification from the Internal Revenue Service shall be conditioned on the
Plan's initial qualification, and all contributions, whenever made, shall be
conditioned on their deductibility under Code Section 404.
11.8 Counterparts
The Plan and the Trust Agreement may be executed in any number of
counterparts, each of which shall constitute but one and the same instrument and
may be sufficiently evidenced by any one counterpart.
39
<PAGE>
ARTICLE XII
ADOPTION OF THE PLAN
Anything herein to the contrary notwithstanding, this Plan is adopted
and maintained under the condition that it is qualified by the Internal Revenue
Service under Code Section 401(a) and that the Trust hereunder is exempt under
Code Section 501(a).
As evidence of its adoption of the Plan, Covance Inc. has caused this
instrument to be signed by its authorized officer this ___ day of __________,
199__, effective as the _______ day of _____________, 199____.except as
otherwise provided herein.
Covance Inc. hereby signifies its adoption of this Plan.
ATTEST: COVANCE INC.
(f/k/a Corning Pharmaceutical Services Inc.
____________________________ By:___________________________________(SEAL)
(Title)
Date:__________________________________
Covance Preclinical Corporation Inc. hereby signifies its adoption of this Plan.
ATTEST: COVANCE PRECLINICAL CORPORATION
(f/k/a Hazleton Corporation)
___________________________ By:__________________________________(SEAL)
(Title)
40
<PAGE>
Covance Clinical and Periapproval Services Inc. hereby signifies its
adoption of this Plan.
ATTEST: COVANCE CLINICAL AND PERIAPPROVAL SERVICES
INC.
(f/k/a Corning Besselaar, Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
Covance Clinical Research Unit Inc., a wholly-owned subsidiary of
Covance Clinical and Periapproval Services Inc., hereby signifies its adoption
of this Plan.
ATTEST: COVANCE CLINICAL RESEARCH UNIT INC.
(f/k/a Corning Besselaar Clinical Research Unit,
Inc.)
___________________________ By:_______________________________________(SEAL)
Secretary (Title)
____________________________________________
(Date)
Covance Periapproval Services Inc., a wholly-owned subsidiary of
Covance Clinical and Periapproval Services Inc., hereby signifies its adoption
of this Plan.
ATTEST: COVANCE PERIAPPROVAL SERVICES INC.
(f/k/a Corning Pact, Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
41
<PAGE>
Covance Laboratories Inc., a wholly-owned subsidiary of Covance
Preclinical Corporation, hereby signifies its adoption of this Plan.
42
<PAGE>
ATTEST: COVANCE LABORATORIES INC.
(f/k/a Corning Hazleton Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
Covance Research Products Inc., a wholly-owned subsidiary of Covance
Preclinical Corporation, hereby signifies its adoption of this Plan.
ATTEST: COVANCE RESEARCH PRODUCTS INC.
(f/k/a HRP, Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
Covance Pharmaceutical Packaging Services Inc. hereby signifies its
adoption of this Plan.
ATTEST: COVANCE PHARMACEUTICAL PACKAGING SERVICES INC.
(f/k/a Corning National Packaging, Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
43
<PAGE>
Covance Central Laboratory Services Inc. hereby signifies its adoption
of this Plan.
ATTEST: COVANCE CENTRAL LABORATORY SERVICES INC.
(f/k/a Corning Scicor, Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
Covance Health Economics and Outcome Services Inc. hereby signifies its
adoption of this Plan.
ATTEST: COVANCE HEALTH ECONOMICS AND OUTCOME SERVICES INC.
(f/k/a Corning HTA Inc.)
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
Covance Biotechnology Services Inc., hereby signifies its adoption of
this Plan.
ATTEST: COVANCE BIOTECHNOLOGY SERVICES INC.
___________________________ By:_______________________________________(SEAL)
(Title)
____________________________________________
(Date)
44
<PAGE>
Covance Central Laboratory Limited Partnership (d/b/a Covance Central
Laboratory Services Inc. f/k/a Corning SciCor Limited Partnership), hereby
signifies its adoption of this Plan.
ATTEST: COVANCE CENTRAL LABORATORY LIMITED PARTNERSHIP
(d/b/a Covance Central Laboratory Services Inc.
f/k/a Corning SciCor Limited Partnership)
___________________________ By:_______________________________________(SEAL)
Secretary (Title)
____________________________________________
(Date)
45
<PAGE>
Supplement A
TO
COVANCE INC. INC.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
A-1 Purpose. The purpose of this Supplement A to the Plan is to set forth the
terms of the Plan as applied to the portion of the ESOP attributable to Exempt
Loans as described in subsection A-4.
A-2 Effective Date. The effective date of this Supplement A is the Effective
Date.].
A-3 Participation. Each Participant in the Plan on the Effective Date of this
Supplement A shall immediately become a Participant in this Supplement A. Every
other person who thereafter becomes a Participant in the Plan shall at the same
time become a Participant in this Supplement A.
A-4 Exempt Loan. Any loan to the Plan or Trust not prohibited by section 4975(c)
of the Code, including a loan which meets the requirements set forth in section
4975(d)(3) of the Code and the regulations promulgated thereunder, the proceeds
of which are used to finance the acquisition of ESOP Stock or to refinance such
a loan. An Exempt Loan shall be for a specific term, shall bear a reasonable
rate of interest and shall not be payable on demand except in the event of
default. An Exempt Loan may be secured by a pledge of the financed shares so
acquired (or acquired with the proceeds of a prior Exempt Loan which is being
refinanced). No other Trust Fund assets may be pledged as collateral for an
Exempt Loan, and no lender shall have recourse against Trust Fund assets other
than any financed shares remaining subject to pledge. If the lender is a party
in interest (under ERISA), the Exempt Loan must provide for a transfer of Trust
Fund assets on default only upon and to the extent of the failure of the Trust
to meet the payment schedule of the Exempt Loan. Any pledge of financed shares
must provide for the release of the shares so pledged as payments on the Exempt
Loan are made by the Trustee and such financed shares are allocated to
Participants'
A1
<PAGE>
accounts. Payments of principal on any Exempt Loan shall be made by the Trustee
(as directed by the Committee) only from Employer contributions paid in cash
under the Plan to enable the Trust to repay such Exempt Loan, from earnings
attributable to such Employer contributions and from any cash dividends received
by the Trust on such financed shares or dividends on such other shares of
Employer Stock as is permitted under Code section 404(k).
A-5 Investment of Exempt Loan Proceeds. The Employer may direct the Trustee to
enter into one or more Exempt Loans to finance the acquisition of ESOP Stock.
Proceeds from an Exempt Loan may be used to acquire ESOP Stock from the
Employer's shareholders or directly from the Employer. If such shares are
purchased from the Employer, no commission may be charged with respect thereto
and the sale price shall not be more than the fair market value thereof, defined
for this purpose with respect to the Employer's common stock to be said common
stock's New York Stock Exchange closing price on the first business day
immediately preceding the date of sale. There shall be no limit on the amount of
stock of the Employer which may be held at any one time by the Trustee in the
Trust Fund regardless of the percentage which such stock so held bears to the
assets of the Trust Fund or to the outstanding shares of stock of the Employer
or for any other reason.
Notwithstanding any other provision of the Plan, all proceeds of an Exempt Loan
shall be used, within a reasonable time after receipt by the Trust Fund, for the
following purposes:
(a) To acquire ESOP Stock;
(b) To repay the same Exempt Loan; or
(c) To repay any previous Exempt Loan.
ESOP Stock acquired by the Trust Fund through an Exempt Loan shall be initially
maintained in a Suspense Account and shall thereafter be released from suspense
and allocated to Participants' ESOP Accounts as hereinafter provided.
A2
<PAGE>
A-6 Supplement A Cash Equivalents Fund. All cash dividends on Employer Stock
held in a Suspense Account which are not allocated to Participants' accounts or,
in the case of allocated shares, which the Employer directs are to be used to
make payments on Exempt Loans shall be credited to the Supplement A Cash
Equivalents Fund pending their application to Exempt Loan payments. Except as
provided under Section 7.5, all such dividends and all earnings of the
Supplement A Cash Equivalents Fund shall be used to make principal payments on
outstanding Exempt Loans to the extent then due. In the event that the amount of
such dividends and earnings exceeds the amount of principal payable on that
date, the excess shall be applied until exhausted to interest payable on that
date, and principal and interest payments due thereafter. Notwithstanding the
preceding sentences of Section A-6, in lieu of making payments on outstanding
Exempt Loans, the Committee may direct that all or any amount of cash dividends
received with respect to Employer Stock allocated to participants' accounts
shall be credited proportionately to such Participants' Accounts pending
investment in the Employer Stock Fund. Any amount that is applied to make a
payment on an outstanding Exempt Loan after the last day of a plan year (the
"prior plan year"), but on or before the due date (including extensions thereof)
for the filing of the federal income tax return of the Employer for the tax year
in which the last day of such prior plan year occurs, may be designated by the
employers as a payment with respect to such prior plan year.
A-7 Coordination with Employer Contributions. For each Plan Year the Employer
shall make contributions under this Section A-7 which, after taking into account
the use of dividends and earnings in accordance with Section A-6, are sufficient
to meet all scheduled payments of principal and interest on outstanding Exempt
Loans. Employer contributions under Section 3.3 (discretionary) shall be applied
against payments on any Exempt Loan to the extent the Committee in its sole
discretion shall determine and ESOP Stock shall then be released. An Employer's
obligations to contribute under Section 3.3 shall be reduced for such month by
the fair market value as of the date of release of the ESOP Stock so released or
otherwise allocated as below provided. To the extent said fair market value is
less than said Employer's obligations under Section 3.3 for any such month, the
Employer shall make
A3
<PAGE>
further contributions to the Trust Fund to fully meet said obligations. For each
Plan Year, if for a calendar month the fair market value as of the date of
release of the shares so released is in excess of the Employer's obligations to
contribute under Section 3.3 for such month, the shares released for said month
representing the excess ("excess shares") shall continue to be held by the
Trustee and shall thereafter be allocated to the Participants' Individual
Accounts in the following manner: first, if in a succeeding calendar month
within said Plan Year, the fair market value of the shares so released for said
month are less than the Employer's obligations to contribute under Section 3.3
for said month, then "excess shares" remaining unallocated for any prior
calendar month in said Plan Year shall be allocated to the Participants'
Individual Accounts to the extent that said Employer obligations exceed the
value of the released shares, and for this purpose said "excess shares" to be so
allocated shall be valued at the same value as the value of the shares released
for said month; and second, if as of the last day of the Plan Year there remain
"excess shares" which have not been allocated to Participants' Individual
Accounts as aforesaid, said "excess shares" shall be allocated as of the last
day of the Plan Year to the Participants' Individual Accounts, as the Committee
may determine in its sole discretion on a year-to-year basis, in direct
proportion to the value (determined as of the date allocated to the
Participants' Individual Accounts) of those shares released and allocated to the
Fund so determined by the Committee, together with all other Employer
contributions to Participants' Individual Accounts for said Plan Year. In
addition to the foregoing contributions, in any Plan Year, the Employers may
make supplemental contributions to be used by the Trustee to prepay any Exempt
loan, to pay expenses of the Plan and any related trust and to satisfy the
dividend requirements for that year with respect to Employer Stock allocated to
Participants' Individual Accounts. All Employer Discretionary Contributions
shall be used to make payments on Exempt Loans to the extent required to meet
any scheduled payments of principal and interest after taking into account the
use of dividends and earnings in accordance with Section A-6.
A-8 Release of Employer Stock From Suspense Account. As of the last day of each
Plan Year, of each calendar quarter in the case of the Employer Stock allocable
for the year as dividend replacements under paragraph A-9(a), or of such other
period provided under the
A4
<PAGE>
terms of an Exempt Loan, throughout the duration of an Exempt Loan, a portion of
the Employer Stock acquired with the proceeds of such Exempt Loan shall be
withdrawn from the Suspense Account and allocated to eligible Participants'
Individual Accounts in accordance with the provisions of Section A-9.
(a) Subject to the provisions of paragraph (b) below, the
number of shares of Employer Stock which shall be released
from the Suspense Account for any plan year (calculated
separately with respect to each Exempt Loan) shall be equal to
the product of:
(i) the number of shares of Employer Stock
acquired with the proceeds of the Exempt Loan
Multiplied by
(ii) a fraction, the numerator of which is
the amount of principal and interest paid on that
loan for that Plan Year and the denominator of
which is the amount of principal and interest
paid or payable on that loan for that Plan Year
and for all future years.
For purposes of determining the fraction in
(ii), if the interest rate under the Exempt Loan is variable,
the interest rate to be paid in future months shall be assumed
to be equal to the interest rate applicable as of the
applicable month.
(b) Notwithstanding the provisions of paragraph (a) above, if
provided by the terms of an Exempt Loan or directed by the
Committee prior to the first payment of interest on any Exempt
Loan, the number of shares of Employer Stock attributable to
such Exempt Loan which are withdrawn from the Suspense Account
for any Plan Year shall be proportionate to principal payments
only, provided that:
A5
<PAGE>
(i) such withdrawal is consistent with the
provisions of the Exempt Loan with respect to the
release of Employer Stock as collateral, if any,
for such loan;
(ii) the Exempt Loan provides for annual
payments of principal and interest at a
cumulative rate that is not less rapid at any
time than level annual payments of such amounts
for ten years;
(iii) interest is disregarded for purposes of
determining such release only to the extent that
it would be determined to be interest under
standard loan amortization tables; and
(iv) the term of the ESOP Loan, together with
any renewal, extension or refinancing thereof,
does not exceed ten years.
(c) Notwithstanding the foregoing, in the event such Exempt
Loan shall be repaid with the proceeds of a subsequent Exempt
Loan (the "Substitute Loan"), such repayment shall not operate
to release all such ESOP Stock in the suspense account, but,
rather, such release shall be effected pursuant to the
foregoing provisions of this Section on the basis of payments
of principal and interest on such Substitute Loan.
(d) If at any time there is more than one Exempt Loan
outstanding, then separate Suspense Accounts may be
established for each such Loan. Each Exempt Loan for which a
separate Suspense Account is maintained may be treated
separately for purposes of the provisions governing the
release of ESOP Stock from suspense under this Section and for
purposes o the provisions governing the application of
Employer contributions to repay an Exempt Loan.
A6
<PAGE>
A-9 Allocation and Crediting of Employer Stock to Individual Accounts and
Application to Plan Limitations. Employer Stock released from the Suspense
Account during any Plan Year shall be allocated and credited as follows:
(a) To the extent that dividends on Employer Stock previously
allocated to the Individual Account of a Participant have been
used to make payments on an Exempt Loan, such account shall be
credited with Employer Stock with a fair market value
determined as of the last day of the month preceding the month
of the dividend payment date equal to the amount of such
dividend.
(b) As of each calendar month, any Employer Stock released
from the Suspense Account during the Plan Year ending on that
date and not credited in accordance with paragraph (a) shall
be credited to the Individual Accounts of eligible
Participants pursuant to Section 4.23, in order to satisfy the
obligation under Section 3.13.
(ce) It is intended that the provisions of this Supplement A
shall be applied and construed in a manner consistent with the
requirements and provisions of Treasury Regulations ss.
54.4975-7(b)(8), and any successor regulation thereto. The
number of shares allocable to a Participant's Individual
Account shall be the number of shares which bears the same
ratio to the total shares released for such month and
allocable to the contribution made by or on behalf of such
Participant by his participating Employer under Section 3.1
for such month bears to the total Employer contributions under
Section 3.1 made on behalf of all such Participants for such
month, provided, however, that the fair market value of the
shares so allocated as of the date of such allocation shall
not exceed the Employer's obligation to contribute under such
Section on behalf of such Participant for such month, and any
shares in excess of said participating Employer obligations
("excess shares") for all Participants are to be then
allocated as described above in Section A-7.
A7
<PAGE>
(d) Notwithstanding the foregoing provisions of this Section,
if more than one-third of the total allocations to
Participants' accounts with respect to a Plan Year would be
allocated in the aggregate to the accounts of Highly
Compensated Employees and attributable to the Employer
Matching Contribution allocated to Employer Stock, then the
allocations to the accounts of Highly Compensated Employees
shall be reduced, pro rata, in an amount sufficient to reduced
the amounts allocated to the accounts of such Participants to
an amount not in excess of one-third of the total allocations
to Participants' accounts with respect to such Plan Year and
any shares of Employer Stock which are prevented from being
allocated due to said restriction shall be allocated as though
Highly Compensated Employees did not participate in the Plan.
A-10 Diversification Election By Participants. A Qualified Participant is
eligible to elect a diversification of Employer Stock under the conditions
specified in Section 2.6.
A-11 Put Option. Employer Stock acquired with the proceeds of an Exempt Loan
must be subject to a put option, if at the time of its distribution it is either
subject to a trading limitation, or is not publicly traded. For purposes of this
paragraph (b), a "trading limitation" on a security is a restriction under any
Federal or state securities law, any regulation thereunder, or an agreement, not
prohibited by Treasury regulations Section 54.4975-7(b) affecting the security
so as to make the security not as freely tradable as one not subject to such a
restriction. The put option must be exercisable only by a Participant, a
Beneficiary or by any donee of the Participant or by a person to whom the
security passes by reason of a Participant's death. The put option must permit a
Participant to put the security to the Corporation, and it may grant the trust
an option to assume the rights and obligations of the Corporation at the time
that the put option is exercised, but under no circumstances may the put option
bind the Trust. If it is known at the time an Exempt Loan is made that Federal
or state law will be violated by the Corporation's honoring such a put option,
the put option must permit the security to be put, in a manner consistent with
such law, to a third party (for
A8
<PAGE>
example but without limitation, to an Affiliate or a shareholder other than the
Trust) that has substantial net worth at the time the Exempt Loan is made and
whose net worth is reasonably expected to remain substantial. A put option must
be exercisable at any time during a period or periods which include at least (A)
sixty (60) days beginning on the date the security subject to the put option is
distributed by the Trustee and (B) sixty (60) days in the next following Plan
Year, in accordance with regulations issued pursuant to Section 409 of the Code.
In the case of a security that is publicly traded without restriction when
distributed, but ceases to be so traded within the put option period(s) set
forth above, the Corporation must notify each security holder in writing on or
before the tenth (10th) day after the date the security ceases to be so traded
that during the remainder of such period(s) the security is subject to put
option. The number of days between such tenth (10th) day and the date on which
notice is actually given, if later than the tenth (10th) days, must be added to
the duration of the put option. The notice must inform distributees of the terms
of the put options that they are to hold. The price at which a put option must
be exercisable is the value of the security, as determined under Treasury
Regulations Section 54.4975-11(d)(5). The provisions for payment under a put
option must provide that the Corporation, or the Trust, if the Plan so elects,
shall repurchase the Employer Securities as follows:
(A) If the distribution constitutes a total distribution
within the meaning of Section 409(h)(5) of the Code, payment of
the fair market value of the repurchased Employer Securities
shall be made in five (5) substantially equal annual payments,
of which the first shall be paid not later than thirty (30) days
after the Participant exercises the put option. The purchaser
will pay a reasonable rate of interest and provide adequate
security on amounts not paid after thirty (30) days;
(B) If the distribution does not constitute a total
distribution, the purchaser shall pay the Participant an amount
equal to the fair market value of the Employer Stock repurchased
no later than thirty (30) days after the Participant exercises
the put option.
A9
<PAGE>
SUPPLEMENT B
TO
THE COVANCE INC. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
SUPPLEMENTAL LIST OF PARTICIPATING EMPLOYEES
<TABLE>
<S> <C>
Participating Employer Formerly Known As
Covance Inc. (Parent) Corning Pharmaceutical Services Inc.
Covance Clinical and Periapproval Services Inc. Corning Besselaar Inc.
Covance Clinical Research Unit Inc. Corning Besselaar Clinical Research Unit
Inc.
Covance Periapproval Services Inc. Corning Pact Inc.
Covance Preclinical Corporation Hazleton Corporation
Covance Laboratories Inc. Corning Hazleton Inc.
Covance Research Products Inc. HRP Inc.
Covance Central Laboratory Services Inc. Corning SciCor Inc.
Covance Central Laboratory Limited Corning SciCor Limited Partnership
Partnership (dba Covance Central
Laboratory Services Inc.)
Covance Pharmaceutical Packaging Services Inc. Corning National Packaging Inc.
Covance Health Economics and Outcome Services Corning HTA Inc.
Inc.
Covance Biotechnology Services Inc. Corning Bio Inc.
</TABLE>
B1
<PAGE>
SUPPLEMENT C
TO
THE COVANCE INC. EMPLOYEE STOCK OWNERSHIP PLAN
1996 DOMESTIC AND INTERNATIONAL ALLOCATION FORMULA
This document describes the allocation of certain share of common stock
("Shares") of Covance Inc. ("CPS") between the various employee stock
ownership programs being implemented as a result of the spin-off of CPS
from Corning Life Sciences Inc. (renamed as Corning Clinical Laboratories
Inc.). The 1996 Total Allocation shall be determined and allocated as
follows:
1. The 1996 Total Allocation: The 1996 total allocation shall be determined as
follows: The total allocation of shares to the Covance Inc. Employee Stock
Ownership Plan ("ESOP") and the International Stock Ownership Plan shall
equal 1.5% of the Shares outstanding on 31 December 1996, with the
allocation between the two plans being made as follows.
2. Aggregate International Base Compensation and Aggregate US Base
Compensation. Aggregate International Base Compensation shall equal the sum
of the Annualized Base Compensation (converted to US dollars) for each
individual who is an International Eligible Employee on December 31, 1996.
The Aggregate US Base Compensation shall equal the sum of the Annualized
Base Compensation for each individual who is a US Eligible Employee on
December 31, 1996. Total Aggregate Base Compensation shall be the sum of
the Aggregate International Base Compensation and the Aggregate US Base
Compensation.
3. Allocation Between Plans. The portion of the 1996 Total Allocation shall be
divided into the International Portion and the US Portion as follows: (I)
first, shares having a value equal to 1% of Aggregate International
Compensation shall be allocated to the International Portion and, (II)
next, the remainder of the 1996 Total Allocation shall be
C1
<PAGE>
allocated to the International Portion and the US Portion in the
proportions represented by Aggregate International Compensation and
Aggregate US Compensation respectively.
4. Award to International Eligible Employees Under the International Stock
Ownership Plan. The International Portion shall be allocated to
International Eligible Employees under that Plan in accordance with Rule
2.2(a) thereof.
5. Award US Eligible Employees. The Awards to US Employees shall be determined
as follows:
(a) For each US Eligible Employee, determine the amount of Award, based
on the US Portion (as determined above) that would be provided under
the ESOP without regard to the limitations imposed by Sections 415 and
401(a)(17) of the Code.
(b) For each US Eligible Employees, determine the amount of award,
based on the US Portion (as determined above) that would be provided
under the ESOP, after application of the limitations imposed by Section
415 and 401(a)(17) of the Code. This amount shall be awarded under the
ESOP to such individuals.
C2
September 26, 1997
Covance Inc.
210 Carnegie Center
Princeton, New Jersey 08540
Re: Covance Inc.
Employee Stock Ownership Plan
Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
I am issuing this opinion in my capacity as General Counsel of
Covance Inc., a Delaware corporation (the "Company"), in connection with the
registration by the Company under the Securities Act of 1933, as amended (the
"Securities Act"), of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), on a Registration Statement on Form S-8 (the "Registration
Statement"). The Registration Statement relates to the issuance of up to 511,572
shares of Common Stock pursuant to the Covance Inc. Employee Stock Ownership
Plan and comprising an employee benefit plan (the "Plan"). Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed to them
in the Registration Statement.
As such counsel, I have made such legal and factual
examinations and inquiries as I have deemed advisable for the purpose of
rendering this opinion. Based upon the foregoing, it is my opinion that the
Common Stock, when issued and delivered in the manner described in the Plan,
will be validly issued, fully paid and non-assessable.
The opinions contained herein relate solely to the Delaware
General Corporation Law, and I express no opinion herein concerning the laws of
any other jurisdiction. This opinion is rendered to the Company in connection
with the filing by the Company of the Registration Statement with the Securities
and Exchange Commission pursuant to the Securities Act and is solely for the
benefit of the Company in connection with such filing. The opinions expressed
herein may not be used or relied on by any other person, nor may this letter or
any copies thereof be furnished to a third party, filed with a government
agency, quoted, cited or otherwise referred to without our prior written
consent, except as noted below.
<PAGE>
September 26, 1997
Page 2
I hereby consent to the reference to myself under the caption
"Legal Matters" in the prospectus included in the Registration Statement. I
hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement.
Very truly yours,
/s/ Jeffrey S. Hurwitz
---------------------------------
Jeffrey S. Hurwitz
Corporate Senior Vice President,
General Counsel and
Secretary
September 26, 1997
Consent of Independent Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 27, 1997, appearing on page 39
of Covance Inc.'s 1996 Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
