<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 6, 2000
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
TELECOMUNICACIONES DE PUERTO RICO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COMMONWEALTH OF PUERTO RICO 66-0566178
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
1515 F. D. ROOSEVELT AVENUE 00968
GUAYNABO, PUERTO RICO (Zip code)
(Address of principal executive offices)
----------
EMPLOYEE STOCK OWNERSHIP PLAN
OF
TELECOMUNICACIONES DE PUERTO RICO, INC.
(FULL TITLE OF THE PLAN)
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JOSE ARROYO, ESQ COPIES TO:
TELECOMUNICACIONES DE PUERTO RICO, INC. LAWRENCE GOODMAN, ESQ.
1515 F. D. ROOSEVELT AVENUE CURTIS, MALLET-PREVOST, COLT & MOSLE LLP
GUAYNABO, PUERTO RICO 00968 101 PARK AVENUE
(787) 792-5628 NEW YORK, NEW YORK 10178
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE) (212) 696-6000
</TABLE>
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share (2) Offering Price (2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
without par value (1).................. 1,750,000 Shares $15.03 $26,302,500 $6,944
============================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this Registration Statement also covers an indeterminate number of
interests to be offered or sold pursuant to the employee benefit plan
described herein.
(2) Estimated solely for the purpose of computing the registration fee. Such
fee was calculated pursuant to Rule 457(h) based on the book value of
the shares as of November 30, 1999
================================================================================
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
The documents containing the information specified in Part I
will be sent or given to the participants in the Employee Stock Ownership Plan
of Telecomunicaciones de Puerto Rico, Inc. (the "Plan") as specified by Rule
428(b)(1) under the Securities Act of 1933, as amended (the "Securities Act").
Such documents are not being filed with the Securities and Exchange Commission
(the "Commission") as part of this Registration Statement or as prospectuses or
prospectus supplements pursuant to Rule 424 under the Securities Act. These
documents and the documents incorporated by reference in this Registration
Statement pursuant to Item 3 of Part II of this Registration Statement taken
together, constitute a prospectus that meets the requirements of Section 10(a)
of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by
Telecomunicaciones de Puerto Rico, Inc. (the "Company") are incorporated herein
by reference:
(1) The Company's Quarterly Report on Form 10-Q for the
Quarter ended September 30, 1999; and
(2) The description of the Company's common stock and
related shareholder arrangements contained in the
Company's registration statement on Form S-4 filed with
the Commission on October 27, 1999.
All documents filed by the Company or the Plan pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subsequent to the date of this Registration
Statement and prior to the filing of a post-effective amendment, which indicates
that all securities offered have been sold or which de-registers all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
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<PAGE> 3
ITEM 4. DESCRIPTION OF SECURITIES
DESCRIPTION OF THE COMPANY'S COMMON STOCK
As of December 30, 1999, the Company's authorized capital stock
consisted of 50,000,000 shares of common stock with no par value, of which
25,000,000 shares have been issued and are outstanding.
The holders of shares of the Company's common stock are entitled
to one vote per share on all matters to be voted upon by the stockholders and
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Company's board of directors. The Company's shareholders
have agreed that the Company's shares shall bear a dividend, payable on a
quarterly basis, to the extent funds are legally available therefor and subject
to any restrictions imposed by any financing, that is at least equal to 50% of
the Company's consolidated net income.
In the event of the liquidation, dissolution, or winding up of
the Company, the holders of the Company's common stock are entitled to share
ratably in all assets remaining after payment of liabilities then outstanding.
The Company's common stock has no preemptive or conversion rights. There are no
redemption or sinking fund provisions applicable to the Company's common stock.
All outstanding shares of the Company's common stock are fully paid and
nonassessable.
SHAREHOLDERS AGREEMENT
On March 2, 1999, GTE International Telecommunications
Incorporated ("GTE International"), GTE Holdings (Puerto Rico) LLC ("GTE
Holdings"), Popular, Inc., and the Puerto Rico Telephone Authority, which
collectively own all of the shares of the Company's common stock other than
those held by the Plan entered into an agreement with the Company that sets
forth, among other things, specific agreements relating to the corporate
governance of the Company (the "Shareholders Agreement").
CORPORATE GOVERNANCE
The By-laws of the Company provide that directors are elected by
a plurality vote of the shareholders of the Company. In this respect, the
Shareholders Agreement:
(a) states that the board of directors of the Company will
consist of 9 directors, so long as the Puerto Rico Telephone Authority
and other specific entities of the Government of Puerto Rico (excluding
the Plan) (collectively, the "Puerto Rico Entities") collectively own at
least 4% of the Company's issued and outstanding capital stock;
(b) entitles the Puerto Rico Entities to nominate directors in
proportion to their ownership of the Company's capital stock, thus, they
are entitled to nominate 3, 2 and/or 1 director(s) (the "Government
Directors"), for so long as they collectively own at least 25%, 15% or
4% of the Company issued and outstanding capital stock, respectively;
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<PAGE> 4
(c) grants GTE Holdings the right to nominate 5 directors so
long as it owns directly or indirectly more than 20% of the Company's
outstanding capital stock.
Under the Shareholders Agreement, for so long as the Puerto Rico
Entities collectively own at least 10% of the outstanding capital stock of the
Company, the Company may not take any of the following actions without approval
by the board and without unanimous approval by the Government Directors:
(a) any acquisition, strategic alliance or joint venture
involving a dollar amount equal to, or in excess of, 15% of the
Company's total assets;
(b) the issuance of equity securities or securities exercisable
or exchangeable for or convertible into equity securities;
(c) any amendment to the dividend policy established in the
Shareholders Agreement;
(d) transactions between the Company and any of the Company's
subsidiaries, on the one hand, and GTE Holdings, or Popular, Inc.
(collectively, the "GTE Group"), or any affiliate thereof on the other
hand, involving an aggregate dollar amount in any fiscal year of more
than $1,000,000; and
(e) any amendment to the Company's Certificate of Incorporation
or By-laws adversely affecting the rights of the Puerto Rico Entities as
shareholders or the rights of the Government Directors.
In addition, for so long as the Puerto Rico Entities
collectively own at least 10% of the outstanding capital stock of the Company,
the following shareholder actions require approval by the Puerto Rico Telephone
Authority:
(a) any amendment to the Company's Certificate of Incorporation
adversely affecting the rights of any governmental authority of Puerto
Rico as a shareholder of the Company or the rights of the Government
Directors;
(b) the liquidation, merger, consolidation or split up of the
Company (other than a merger in which the Company is the survivor or a
merger of the Company into a wholly-owned subsidiary of the Company);
and
(c) the sale of assets in any fiscal year representing 25% or
more of the Company's total assets.
SHARE TRANSFERS
GTE Holdings and GTE International entered into a tag-along
agreement with the Plan. Pursuant to this tag-along agreement, through March 2,
2009, the Plan has the right to participate in any sale by GTE Holdings, GTE
International or any of their affiliates of more than 7.5% of the total number
of the Company's outstanding shares or that would result in the transferee and
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<PAGE> 5
its affiliates owning over 20% of the Company's shares. If the Plan has the
right to participate in the sale it can sell a pro rata portion of its shares
equal to the lesser of 30,000 shares or the aggregate number of shares then
owned by it to the buyer on the same terms and conditions that are given to GTE
Holdings, GTE International or their affiliates.
REGISTRATION RIGHTS
At any time after August 2000, any of the Puerto Rico Entities
may request on three occasions the registration of shares having an aggregate
estimated disposition price of at least $50,000,000. The Company agreed to use
all commercially reasonable efforts to effect promptly the requested
registration under the Securities Act. If at any time the Company determines to
register any shares under the Securities Act in connection with the public
offering of the shares by it solely for cash, each shareholder, other than the
Plan, shall have the right to request that the Company use commercially
reasonable efforts to cause to be registered under the Securities Act any shares
that the shareholder requests to be registered.
For a more detailed description of the Shareholders Agreement
and additional information with respect to other shareholder arrangements see
the Registrant's Form S-4 filed with the Commission on October 27, 1999, which
description and information is incorporated herein by reference.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the Common Stock registered hereby is passed on
for the Company by Jose Arroyo. Mr. Arroyo is Vice President of Legal and
Regulatory Affairs of the Company, is compensated as an employee of the Company
and is eligible to participate in the Plan.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of the Commonwealth
of Puerto Rico. Section 4.08 of the General Corporation Law of the Commonwealth
of Puerto Rico provides that a Puerto Rico corporation may indemnify directors,
officers, employees or agents involved in any litigation or proceeding involving
the corporation if he or she acted in good faith and in a manner which the
person reasonably deemed consistent with the best interests of the corporation
or not opposed thereto, and with respect to any criminal proceeding, if he or
she did not have reasonable cause to believe that his or her conduct was
unlawful. The indemnity may include expenses actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit.
In the case of actions or suits other than those initiated by the corporation or
initiated to protect the interests of the corporation, the indemnity may also
include the amount of any judgement paid in settlement of such action. However,
no indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or otherwise
in the defense of any action referred to above, the corporation may indemnify
him/her against the expenses which such officer or director has actually
incurred.
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<PAGE> 6
The Certificate of Incorporation of the Company provides for the
indemnification of directors and officers to the full extent permitted by the
General Corporation Law of the Commonwealth of Puerto Rico, as it currently
exists or may be hereafter amended.
Section 4.08 further authorizes a corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against any liability asserted against him/her and incurred by
him/her in any such capacity, arising out of his/her status as such, regardless
of whether or not the corporation would otherwise have the power to indemnify
him/her under Section 4.08.
The Company maintains and has in effect insurance policies
covering all of its respective directors and officers against certain
liabilities for actions taken in such capacities. These persons are also covered
for specified liabilities under the Securities Act of 1933.
ITEM 7. EXEMPTION FROM REGISTRATION
Not applicable.
ITEM 8. EXHIBITS
Exhibit No. Description of Exhibit
4.1 Articles of Incorporation of Telecomunicaciones
de Puerto Rico, Inc. (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-4 (No. 333-85503) filed with
the Commission on October 27, 1999) and
Certificate of Amendment thereto dated December
29, 1999.
4.2 By-Laws of Telecomunicaciones de Puerto Rico,
Inc. (incorporated by reference to Exhibit 3.4
to the Registrant's Registration Statement on
Form S-4 (No. 333-85503) filed with the
Commission on October 27, 1999).
4.3 Employee Stock Ownership Plan of
Telecomunicaciones de Puerto Rico, Inc.
5.1 Opinion of Jose Arroyo, Vice President of Legal
and Regulatory Affairs of the Company.
5.2 The registrant hereby undertakes to submit the
Plan and any amendment thereto, to the Internal
Revenue Service ("IRS") in a timely manner and
will make all changes required by the IRS in
order to qualify the Plan under Section 401 of
the Internal Revenue Code.
23.1 Consent of Jose Arroyo (included in Exhibit
5.1).
24 Power of Attorney (included in this Registration
Statement under "Signatures").
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<PAGE> 7
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant 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 of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the 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; and
(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 (a)(1)(i) and (a)(1)(ii) 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 Securities and Exchange Commission by the Registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, 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.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) 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.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for
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<PAGE> 8
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person against
the Registrant in connection with the securities being registered, the
Registrant 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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SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities
Act of 1933, the Registrant 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 Guaynabo, Commonwealth of Puerto Rico,
on the 3rd day of January, 2000.
TELECOMUNICACIONES DE PUERTO RICO, INC.
By: /s/ Jon Slater
---------------------------------
Name: Jon Slater
Title: Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW CONSTITUTES AND APPOINTS JON SLATER, FRANK GATTO AND FELIPE
PIAZZA, AND EACH OF THEM INDIVIDUALLY, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, WITH FULL POWER AND IN ANY AND ALL CAPACITIES, TO SIGN THIS REGISTRATION
STATEMENT AND ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO
THIS REGISTRATION STATEMENT, AND TO FILE SUCH REGISTRATION STATEMENT AND ALL
SUCH AMENDMENTS OR SUPPLEMENTS, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS
IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY
TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE
MIGHT OR COULD DO IN PERSON, THEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTES OR
SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Jon Slater Chief Executive January 3, 2000
- -------------------------- Officer, President and Director
Jon Slater
/s/ Frank Gatto Vice-President - Finance and January 3, 2000
- -------------------------- Chief Financial Officer
Frank Gatto
/s/ Robert Huberty Comptroller January 3, 2000
- --------------------------
Robert Huberty
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<PAGE> 10
/s/ Fares Salloum Director January 3, 2000
- --------------------------
Fares Salloum
/s/ Alfred C. Giammari Director January 3, 2000
- --------------------------
Alfred C. Giammari
/s/ Michael T. Masin Director December 29, 1999
- --------------------------
Michael T. Masin
/s/ Richard Carrion Director January 3, 2000
- --------------------------
Richard Carrion
Director
- --------------------------
Angel Morey
Director
- --------------------------
Lourdes M. Rovira
THE PLAN. Pursuant to the requirements of the Securities Act of
1933, the trustees (or other persons who administer the Plan) have duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, State of California, on
the 3rd day of January, 2000.
EMPLOYEE STOCK OWNERSHIP PLAN OF
TELECOMUNICACIONES DE PUERTO RICO,
INC.
By: /s/ Charles E. Wert
----------------------------------
Name: Charles E. Wert
Title: Executive Vice President
and Senior Trust Officer,
U.S. Trust Company, N.A.
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AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following person in the capacity stated herein
on January 3, 2000.
SIGNATURE CAPACITY
- --------- --------
/s/ Donald J. Puglisi Puglisi and Associates
------------------------- Authorized Representative in the United States
Donald J. Puglisi
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INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
4.1 Articles of Incorporation of Telecomunicaciones
de Puerto Rico, Inc. (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-4 (No. 333-85503) filed with
the Commission on October 27, 1999) and
Certificate of Amendment thereto dated December
29, 1999.
4.2 By-Laws of Telecomunicaciones de Puerto Rico,
Inc. (incorporated by reference to Exhibit 3.4
to the Registrant's Registration Statement on
Form S-4 (No. 333-85503) filed with the
Commission on October 27, 1999).
4.3 Employee Stock Ownership Plan of
Telecomunicaciones de Puerto Rico, Inc.
5.1 Opinion of Jose Arroyo, Vice President of Legal
and Regulatory Affairs of the Company.
23.1 Consent of Jose Arroyo (included in Exhibit
5.1).
24 Power of Attorney (included in this Registration
Statement under "Signatures").
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CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
AFTER THE RECEIPT OF PAYMENT OF CAPITAL
FIRST: That at a meeting of the Board of Directors of TELECOMUNICACIONES DE
PUERTO RICO, INC., a resolution was adopted setting forth a proposed amendment
to the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling for the stockholders of said corporation
to consider the same. The resolution setting forth the proposed amendment reads
as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended
by changing Article FOURTH so that it reads as follows:
FOURTH: The total number of shares of Common Stock which the
Corporation shall have authority to issue is FIFTY MILLION
(50,000,000) without par value per share and all of the same
class.
SECOND: That thereafter, pursuant to the resolution of its Board of Directors,
the stockholders having the minimum numbers of votes necessary to authorize this
Amendment gave their consent in writing pursuant to Section 7.17 of the General
Corporation Law of 1995 and written notification has been given to the
stockholders who did not give their consent also pursuant to Section 7.17 of the
General Corporation Law of 1995.
IN WITNESS WHEREOF, I, Jon E. Slater, Authorized Officer who signs this
certificate, hereby swear that the facts herein stated are true, this 29 of
December,1999.
/s/ Jon E. Slater
-----------------------------
Jon E. Slater
Authorized Officer
<PAGE> 1
EXHIBIT 4.3
EMPLOYEE STOCK OWNERSHIP PLAN OF
TELECOMUNICACIONES DE PUERTO RICO, INC.
(Effective January 1, 2000)
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TABLE OF CONTENTS
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PREAMBLE...........................................................................1
ARTICLE I -- DEFINITIONS AND CONSTRUCTION..........................................2
Section 1.01 Meaning of Defined Terms..............................................2
Section 1.02 Construction of Plan Provisions.......................................8
ARTICLE II -- PARTICIPATION........................................................9
Section 2.01 Commencement of Participation.........................................9
Section 2.02 Termination of Participation..........................................9
ARTICLE III -- SERVICE............................................................10
Section 3.01 Applicability of Service Crediting Provisions........................10
Section 3.02 Service Crediting....................................................10
Section 3.03 Qualified Military Leave.............................................12
ARTICLE IV -- CONTRIBUTIONS.......................................................13
Section 4.01 Initial Employer Contribution........................................13
Section 4.02 Employee Contributions...............................................13
Section 4.03 Matching Contributions...............................................14
Section 4.04 Overall Limit on Contributions.......................................15
Section 4.05 Limits on Employee Contributions.....................................16
Section 4.06 Limits on Matching Contributions.....................................20
Section 4.07 Contributions Contingent Upon Deductibility..........................21
Section 4.08 Imposition of Limitations............................................21
ARTICLE V -- VESTING AND FORFEITURES..............................................22
Section 5.01 Vested Interest......................................................22
Section 5.02 Forfeitures..........................................................22
ARTICLE VI -- ACCOUNTS AND INVESTMENTS............................................24
Section 6.01 Accounts.............................................................24
Section 6.02 Investments..........................................................24
ARTICLE VII -- DISTRIBUTIONS......................................................27
Section 7.01 Benefits on Termination of Employment................................27
Section 7.02 Death Benefits.......................................................28
Section 7.03 Put Option...........................................................28
Section 7.04 Diversification Withdrawals..........................................29
Section 7.05 Direct Rollover......................................................30
ARTICLE VIII - PARTICIPANT LOANS..................................................31
Section 8.01 Loan Amount, Term, and Interest Rate.................................31
Section 8.02 Security for Loans...................................................33
Section 8.03 Repayment............................................................33
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Section 8.04 Loan Fees............................................................34
Section 8.05 Limitations on Loans.................................................34
ARTICLE IX -- EXEMPT LOANS........................................................35
Section 9.01 Exempt Loan Provisions...............................................35
Section 9.02 Payment of Dividends.................................................39
ARTICLE X -- ADMINISTRATION.......................................................40
Section 10.01 The Committee.......................................................40
Section 10.02 Delegation of Authority and Advisors................................41
Section 10.03 Expenses............................................................41
Section 10.04 Communication By Committee..........................................41
Section 10.05 Reports of the Committee............................................41
Section 10.06 Reliance and Indemnification of the Committee.......................41
Section 10.07 Required Information................................................42
Section 10.08 Qualified Domestic Relations Orders.................................42
Section 10.09 Multiple Functions..................................................42
ARTICLE XI -- CLAIMS REVIEW.......................................................43
Section 11.01 Claims for Benefits.................................................43
Section 11.02 Appeals Procedure...................................................43
ARTICLE XII -- THE TRUST FUND.....................................................44
Section 12.01 Agreement and Declaration of Trust..................................44
Section 12.02 Trustee.............................................................44
Section 12.03 Authority of Trustee................................................44
Section 12.04 Trustee Accounts....................................................44
Section 12.05 Disbursement of Assets..............................................44
Section 12.06 Return of Contributions.............................................44
Section 12.07 Authority of Trustee Generally......................................45
ARTICLE XIII -- AMENDMENT AND TERMINATION.........................................46
Section 13.01 Amendment...........................................................46
Section 13.02 Termination or Partial Termination..................................46
Section 13.03 Mergers, Consolidations, and Transfers into and out of the Plan.....46
Section 13.04 Design Decisions....................................................47
ARTICLE XIV -- MISCELLANEOUS......................................................48
Section 14.01 Incapacity of Participant...........................................48
Section 14.02 Nonalienation of Benefits...........................................48
Section 14.03 Voting and Tendering of Company Securities..........................48
Section 14.04 Employment Rights...................................................49
Section 14.05 Limitation of Employer Liability....................................50
Section 14.06 Top-Heavy Requirements..............................................50
Section 14.07 Withholding Taxes...................................................51
Section 14.08 English as Official Language........................................51
Section 14.09 Governing Law.......................................................52
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PREAMBLE
This plan shall be known as the Employee Stock Ownership Plan of
Telecomunicaciones de Puerto Rico, Inc. It is the intention of the Company:
1. That the Plan shall be both a stock bonus plan and an employee
stock ownership plan that is qualified under sections 1165(a) and 1165(h) of the
PR Code and sections 401(a) and 4975(e)(7) of the US Code;
2. That the Plan shall be an employee stock ownership plan as
described in section 407(d)(6) of ERISA; and
3. That the Trust Fund shall be tax-exempt under section 1165(a) of
the PR Code and section 501(a) of the US Code.
The object of the Plan is to provide eligible employees of the
Employer with an ownership interest in the Company. The Plan is designed to
invest primarily in qualifying employer securities of the Company.
The Plan was initially effective March 2, 1999. The Plan has
been amended and restated as set forth herein, effective as of January 1, 2000,
except as otherwise provided herein, to incorporate a cash or deferred
arrangement that is qualified under section 1165(e) of the PR Code and section
401(k) of the US Code, to modify the Plan's vesting and distribution provisions,
to incorporate a plan loan feature, and to make certain other changes.
1
<PAGE> 5
ARTICLE I
DEFINITIONS AND CONSTRUCTION
SECTION 1.01 MEANING OF DEFINED TERMS. The following capitalized words
and phrases, as used herein, shall have the following meanings unless a
different meaning is plainly required by the context:
"ACCOUNT" shall mean a Participant's Additional Employer Contribution
Account, Employee Contribution Account, Initial Employer Contribution Account,
Matching Contribution Account, or all of them, as the context requires.
"ADDITIONAL EMPLOYER CONTRIBUTION" shall mean any contribution so
designated and made pursuant to the terms of the Plan as in effect before
January 1, 2000.
"ADDITIONAL EMPLOYER CONTRIBUTION ACCOUNT" shall mean a Participant's
interest in Additional Employer Contributions and any earnings thereon.
"AFFILIATE" shall mean
(a) a member of a controlled group of corporations of which
the Company is a member, as determined under section 414(b) of the US Code,
(b) an unincorporated trade or business that is under common
control with the Company, as determined under section 414(c) of the US Code,
(c) a member of any affiliated service group that includes
the Company, as determined under section 414(m) of the US Code,
(d) except to the extent otherwise provided in United States
Treasury Regulations, a leasing organization with respect to the periods of
service performed by an individual who is a leased employee, within the meaning
of section 414(n) of the US Code, of the Company or its Affiliates (determined
without regard to this paragraph (d)), and
(e) any entity that is required to be aggregated with the
Company pursuant to section 414(o) of the US Code;
provided that an entity described in this definition of Affiliate shall not be
considered an Affiliate during the period preceding the date on which it became
an Affiliate within the meaning of this definition.
"ARTICLE" shall mean an article of the Plan.
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<PAGE> 6
"BENEFICIARY" shall mean the persons (including a trust or estate)
entitled to receive any benefit payable hereunder by reason of the death of a
Participant, as provided in Section 7.02.
"BENEFIT COMMENCEMENT DATE" shall mean the date on which a benefit under
the Plan is scheduled to commence or to be paid.
"BOARD" shall mean the Board of Directors of the Company.
"COMMITTEE" shall mean the committee established pursuant to Section
10.01.
"COMPANY" shall mean Telecomunicaciones de Puerto Rico, Inc., a Puerto
Rico corporation, or any successor corporation by merger, purchase,
consolidation or otherwise.
"COMPANY STOCK" shall mean shares of the common stock of the Company.
"COMPANY STOCK FUND" shall mean the Company Stock Fund described in
Section 6.02(a)(i).
"COMPENSATION" shall mean the annual wages paid to a Participant by the
Employer for personal services rendered to the Employer, as reported on Puerto
Rico Treasury Department Form 499R-2/W-2PR, but excluding payments (such as
separation payments) not attributable to personal services actually rendered in
the course of the Participant's employment with the Employer. A Participant's
Compensation for any Plan Year shall not be taken into account to the extent it
exceeds $160,000 (as adjusted pursuant to section 401(a)(17)(B) of the US Code).
"COMPUTATION PERIOD" shall mean the Plan Year, provided that the
Computation Period shall initially be the 12-consecutive-month period beginning
on an Employee's Employment Commencement Date, and thereafter shall be the Plan
Year (beginning with the Plan Year that includes the first anniversary of his
Employment Commencement Date).
"EFFECTIVE DATE" shall mean March 2, 1999.
"ELIGIBLE EMPLOYEE" shall mean an Employee, except that an individual
described by any of the following paragraphs shall not be an Eligible Employee:
(a) an Employee who is represented by a union unless and to
the extent the union and the Company or one of its Affiliates have entered into
a collective bargaining or other agreement that provides that the Employee shall
participate in the Plan, provided that any such agreement executed after the
Effective Date may provide that a covered Employee's participation shall be
retroactively effective as of the Effective Date;
(b) an Employee who is not actively employed, provided that
an Employee who is on layoff with recall rights, receiving worker's compensation
payments, on a paid leave of absence during a period of short-term disability,
on a leave of absence approved by the Company
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<PAGE> 7
with the right to return to active employment, or on a leave of absence covered
under the Family and Medical Leave Act of 1993 shall be deemed to be an Eligible
Employee while not actively employed if the Employee returns to active
employment with the Employer immediately upon becoming eligible to do so and in
any event before the expiration of 180 days following the Effective Date;
(c) an individual who is employed pursuant to an agreement
that provides that the individual shall not be eligible to participate in the
Plan;
(d) an Employee who is an Employee by reason of being
treated as a "leased employee" pursuant to section 414(n) or (o) of the US Code;
(e) an Employee who is not a resident of the United States
or Puerto Rico and who has no earned income sourced to the United States or
Puerto Rico;
(f) an Employee whose basic compensation for services on
behalf of the Employer is not paid directly by the Employer; or
(g) an Employee who is not initially classified as an
employee by the Company or one of its Affiliates, regardless of any subsequent
reclassification as a "common-law" employee by the Company, one of its
Affiliates, any governmental agency, or court.
"EMPLOYEE" shall mean any individual who performs services for the
Employer in an employer-employee relationship and any "leased employee" within
the meaning of section 414(n) of the US Code (other than a leased employee with
respect to whom the safe harbor requirement of US Code section 414(n)(5) is
satisfied).
"EMPLOYEE CONTRIBUTION" shall mean forgone Compensation that is
contributed to the Plan pursuant to Section 4.02.
"EMPLOYEE CONTRIBUTION ACCOUNT" shall mean a Participant's interest in
his Employee Contributions, if any, and any earnings thereon.
"EMPLOYER" shall mean the Company and any Affiliate that has adopted the
Plan with the consent of the Company.
"EMPLOYMENT COMMENCEMENT DATE" shall mean the Effective Date or, if
later, the date on which an Employee first performs services for the Employer as
an Employee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended. A reference to a particular section of ERISA shall include a
reference to any regulations issued under that section.
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<PAGE> 8
"EXEMPT LOAN" shall mean a loan or other extension of credit to the Plan
from an individual or entity (including an individual or entity that is a "party
in interest" within the meaning of section 3(14) of ERISA or a "disqualified
person" within the meaning of section 4975(e)(2) of the US Code), provided that
the proceeds of such extension of credit are used by the Trustee to finance the
purchase of Company Stock or to repay another Exempt Loan in accordance with
Section 9.01(c).
"EXEMPT LOAN SHARES FUND" shall mean any portion of the Company Stock
Fund that includes Company Stock purchased with an Exempt Loan and any earnings
thereon and the uninvested proceeds of an Exempt Loan, if any. The Exempt Loan
Shares Fund may include assets that are allocated to Participants' Matching
Contribution Accounts, Employee Contribution Accounts, and Additional Employer
Contribution Accounts, and assets that are held unallocated in a Suspense
Account.
"FINANCED SHARES" shall mean Company Stock purchased with the proceeds
of an Exempt Loan and held in a Suspense Account. The term shall not include
Company Stock that has been released from a Suspense Account and allocated to
the Matching Contribution Accounts or Employee Contribution Accounts of
Participants in accordance with Section 9.01(d) or Company Stock that has been
released from a Suspense Account and allocated to the Additional Employer
Contribution Accounts of Participants in accordance with the terms of the Plan
as in effect before January 1, 2000.
"HOUR OF SERVICE" shall mean, with respect to the eligibility of
temporary and seasonal Employees to participate in the Plan:
(a) Each hour for which an Employee is paid, or entitled to
payment, by the Company or the Affiliates for the performance of duties for the
Company or the Affiliates;
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Company or the Affiliates on account of a period of time during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or leave of absence;
provided that
(i) no more than 501 Hours of Service are required
to be credited under this paragraph (b), to an Employee on account of any single
continuous period during which the Employee performs no duties for the Company
or the Affiliates (whether or not such period occurs in a single Computation
Period);
(ii) an hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which no
duties are performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation or unemployment compensation or
disability insurance laws; and
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<PAGE> 9
(iii) hours are not required to be credited for a
payment that solely reimburses an Employee for medical or medically related
expenses incurred by the Employee.
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Company or the Affiliates,
provided that the same Hour of Service shall not be credited both under
paragraph (a), above, or paragraph (b), above, as the case may be, and also
under this paragraph (c);
The determination of Hours of Service for reasons other than the performance of
duties and the crediting of Hours of Service to the appropriate Computation
Period shall be effected by the Committee on a basis consistent with United
States Labor Regulation Section 2530.200b-2(b) and (c), as amended from time to
time, and any successor regulations. In addition to credit for Hours of Service
as described above, an employee shall receive Hours of Service for any period of
family, medical, or military leave required to be credited by law.
"INITIAL EMPLOYER CONTRIBUTION" shall mean the contribution to the Plan
made pursuant to Section 4.01.
"INITIAL EMPLOYER CONTRIBUTION ACCOUNT" shall mean a Participant's
interest in the Initial Employer Contribution and any earnings thereon.
"MATCHING CONTRIBUTION" shall mean an amount allocated to a
Participant's Account pursuant to Section 4.03.
A "BASIC MATCHING CONTRIBUTION" for a Plan Year shall be made in
accordance with Section 4.03(a)(i) in an amount equal in value to 30% of
each Participant's Employee Contributions for the Plan Year, to the
extent that such Employee Contributions, in the aggregate, were not made
at a rate that exceeded 5% of Compensation.
A "DISCRETIONARY PERFORMANCE MATCHING CONTRIBUTION" for a Plan
Year shall be made in accordance with Section 4.03(a)(ii) in such
amount, if any, as is determined by the Board, in its sole discretion
and as set forth in a written instrument, on account of Employee
Contributions for such Plan Year.
"MATCHING CONTRIBUTION ACCOUNT" shall mean a Participant's interest in
the Matching Contributions and any earnings thereon.
"NORMAL RETIREMENT AGE" shall mean, with respect to a Participant, the
later of (i) the Participant's attainment of age 65 or (ii) the fifth
anniversary of the Participant's Employment Commencement Date.
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<PAGE> 10
"PARTICIPANT" shall mean any Employee who has commenced participation in
the Plan pursuant to Section 2.01 and whose participation in the Plan has not
ceased pursuant to Section 2.02.
"PLAN" shall mean the Employee Stock Ownership Plan of
Telecomunicaciones de Puerto Rico, Inc., as set forth herein and as hereinafter
amended.
"PLAN YEAR" shall mean the calendar year, except that the first Plan
Year shall be the period commencing on the Effective Date and ending on December
31, 1999.
"PR CODE" shall mean the Puerto Rico Internal Revenue Code of 1994, as
amended. A reference to a particular section of the PR Code shall include a
reference to any regulations issued under that section.
"SECTION" shall mean a section of the Plan.
"SERVICE" shall mean the service that is credited to a Participant
pursuant to Article III and that is used to determine the extent to which the
Participant is vested in his Additional Employer Contribution Account and
Matching Contribution Account.
"SERVICE COMMENCEMENT DATE" shall mean the Effective Date or, if later,
the date on which an Employee first completes an hour of service for the Company
or an Affiliate (within the meaning of paragraph (a) of the definition of Hour
of Service, above).
"SEVERANCE FROM SERVICE DATE" shall mean the earlier of the date an
Employee resigns, retires, is discharged, or dies, or the first anniversary of
the date an Employee is absent from Service for any other reason, except as
otherwise provided in Section 3.02 with respect to leaves of absence.
"SUSPENSE ACCOUNT" shall mean an account to which Company Stock
purchased with the proceeds of an Exempt Loan (and earnings attributable to such
Company Stock) shall be allocated until such Company Stock and earnings are
released from suspense and applied as provided in Article IX.
"TRUST" shall mean the trust that holds the assets of the Plan.
"TRUST AGREEMENT" shall mean the agreement between the Company and the
Trustee establishing the Trust, as amended from time to time.
"TRUST FUND" shall mean the fund established under the Trust Agreement,
together with all contributions thereto and any earnings thereon.
"TRUSTEE" shall mean the person or entity appointed and acting as
trustee of the Trust pursuant to Section 12.02.
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<PAGE> 11
"US CODE" shall mean the United States Internal Revenue Code of 1986, as
amended. A reference to a particular section of the US Code shall include a
reference to any regulations issued under that section.
"VALUATION DATE" shall mean the last day of each Plan Year and each such
other date as may be designated by the Committee in its sole discretion as a
Valuation Date.
SECTION 1.02 CONSTRUCTION OF PLAN PROVISIONS.
(a) Unless the contrary is plainly required by the context, wherever
any words are used herein in the masculine gender, they shall be construed as
though they were also used in the feminine gender, and vice versa; wherever any
words are used herein in the singular form, they shall be construed as though
they were also used in the plural form, and vice versa; and wherever the words
"herein," "hereof," "hereunder," and words of similar import are used in the
Plan, they shall be construed to refer to the Plan in its entirety and not only
to the portion of the Plan in which they appear (except as otherwise provided in
Section 14.06(b)).
(b) The headings to Sections and Articles have been inserted herein
for convenience of reference only and are to be ignored in the construction of
the Plan.
(c) If the section number of a statutory provision changes (for
instance, because a statutory section is renumbered), any reference to the
statutory provision herein shall be deemed to refer to the statute's new section
number.
(d) If any provision of the Plan should be held illegal or invalid
for any reason, such illegality or invalidity shall not affect the remaining
parts of the Plan, and the Plan shall be construed and enforced as if such
illegal or invalid provision had never been inserted herein.
(e) The Plan should be interpreted in a manner consistent with the
intention of the Company with respect to the Plan, as expressed in the Preamble
hereof.
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ARTICLE II
PARTICIPATION
SECTION 2.01 COMMENCEMENT OF PARTICIPATION.
(a) Except as otherwise provided in subsection (b), below:
(i) a person who is an Employee on the Effective Date shall
become a Participant as of the Effective Date, but only if he is an Eligible
Employee as of that date. If the Employee is not an Eligible Employee as of that
date, he shall become a Participant on the first date thereafter on which he is
an Eligible Employee; and
(ii) an Employee whose Employment Commencement Date is after
the Effective Date shall become a Participant on his Employment Commencement
Date, but only if he is an Eligible Employee on that date. If the Employee is
not an Eligible Employee on that date, he shall become a Participant on the
first date thereafter on which he is an Eligible Employee.
(b) A temporary or seasonal Employee shall become a Participant on
the January 1 or July 1 next following the date on which he is credited with
1,000 Hours of Service in a Computation Period, but only if he is an Eligible
Employee on that date. If a temporary or seasonal Employee is not an Eligible
Employee on that date, he shall become a Participant on the first January 1 or
July 1 thereafter on which he is an Eligible Employee.
SECTION 2.02 TERMINATION OF PARTICIPATION. Once an Eligible Employee has
become a Participant, he shall continue to be a Participant until his entire
nonforfeitable accrued benefit under the Plan has been distributed or until his
death, whichever occurs first. Once his entire nonforfeitable accrued benefit
under the Plan has been distributed or his death occurs, a Participant shall
cease to be a Participant.
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ARTICLE III
SERVICE
SECTION 3.01 APPLICABILITY OF SERVICE CREDITING PROVISIONS. This Article
III sets forth the rules that determine the amount of service that is credited
to a Participant for purposes of determining the extent to which the Participant
is vested in his Additional Employer Contribution Account and Matching
Contribution Account, as determined pursuant to Section 5.01(d).
SECTION 3.02 SERVICE CREDITING. Service shall be credited under the
elapsed-time method in accordance with the provisions of this Section 3.02.
(a) Hour of Service. Solely for purposes of this Section 3.02, an
Hour of Service shall mean an hour for which an Employee is paid, or entitled to
payment, by the Company or the Affiliates for the performance of duties for the
Company or the Affiliates.
(b) Period of Service. An Employee's Service shall equal his Period
of Service. An Employee's Period of Service shall be calculated in accordance
with the following rules:
(i) A Period of Service begins on the Employee's Service
Commencement Date, and ends on the Employee's Severance from Service Date.
Except as provided in the following provisions of this Section 3.02, the
Employee's Period of Service shall include the Employee's entire Period of
Service.
(ii) In determining an Employee's full years in the Period of
Service, 12 months of Service (30 days shall be a month for purposes of
aggregating fractional months) or 365 days of Service shall constitute a
one-year Period of Service.
(iii) An Employee's Period of Service shall include a leave of
absence only in accordance with the provisions of paragraph (i), above, except
to the extent otherwise provided in the following rules:
(A) Leave. An Employee's Period of Service shall
include the period of a leave of absence only in accordance with paragraph (i),
above. The employment of an Employee who fails to return to employment shall be
deemed severed, and the Period of Service shall end, as of the first anniversary
of the Employee's first date of absence for the leave, unless the Period of
Service ends earlier by reason of the Employee's retirement, discharge,
resignation, or death. Where such an Employee's period of leave is authorized to
extend beyond the period for which Service is credited, the Employee shall not
be deemed to have terminated employment for purposes of distributions following
termination of employment pursuant to Article VII until the date upon which the
authorized leave period expires and the Employee fails to return to employment
with the Company or an Affiliate.
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(B) Military Service. An Employee's Period of
Service shall include any period of service in the Armed Forces of the United
States or the United States Public Health Service under conditions entitling him
to re-employment rights as provided in the laws of the United States, provided
that the Employee returns to employment within the period his reemployment
rights are protected by law.
(C) Family or Medical Leave. An Employee's Period of
Service shall include any period of family or medical leave required to be
credited by law; provided that the Employee returns to employment with the
Company or an Affiliate at the expiration of the leave.
(iv) An Employee's Period of Service shall include a Period
of Severance if the Employee performs an Hour of Service within 12 months of the
earlier of:
(A) the date on which the Employee quits, retires or
is discharged, or
(B) the date on which the Employee is first absent
from Service, if the Employee severs from Service during the absence by
quitting, retiring, or being discharged.
(v) If an Employee's Period of Severance equals or exceeds
five years, any Period of Service after the Period of Severance shall not be
taken into account in determining the extent to which the Employee is vested in
the portion of his Additional Employer Contribution Account and Matching
Contribution Account attributable to the period before the Period of Severance.
(vi) If an Employee is not vested in any portion of his
Additional Employer Contribution Account or Matching Contribution Account, the
Employee's Period of Service before a Period of Severance shall be taken into
account in determining the extent to which the Employee is vested in the portion
of his Additional Employer Contribution Account and Matching Contribution
Account attributable to the period after the Period of Severance only if the
Period of Severance does not exceed five years.
(c) Period of Severance. The Period of Severance is used in
determining an Employee's Period of Service. Periods of Severance shall be
calculated using the elapsed time method of counting service in accordance with
the following rules:
(i) A Period of Severance commences on the Employee's
Severance from Service Date and ends on the date, if any, that the Employee next
performs an Hour of Service.
(ii) Solely for purposes of determining the length of a
Period of Severance, a Period of Severance shall commence on the first
anniversary of the Severance from Service Date (i.e., the second anniversary of
the first day of absence), rather than on the Severance from Service Date, if
the Employee timely furnishes the Committee with the information necessary to
establish that the Employee was absent from work by reason of the pregnancy of
the Employee, the birth of a child of the Employee, the placement of an adopted
child with the Employee, or the care of a newly
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<PAGE> 15
born or adopted child of the Employee for the period beginning immediately
following the birth or placement of the child and ending more than one year
later.
(iii) The period excluded from a Period of Severance under the
rule in paragraph (ii), above, shall not be included in the Employee's Period of
Service.
SECTION 3.03 QUALIFIED MILITARY LEAVE. Contributions, benefits and
service credit with respect to "qualified military service" shall be provided in
accordance with section 414(u) of the US Code. The Committee may reasonably
request that a Participant demonstrate that he has engaged in qualified military
service within the meaning of section 414(u) of the US Code.
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ARTICLE IV
CONTRIBUTIONS
SECTION 4.01 INITIAL EMPLOYER CONTRIBUTION.
(a) The Employer, by itself or together with another entity, shall
contribute to the Plan as of the Effective Date an amount of Company Stock
equivalent to 4% of the issued and outstanding Company Stock as of the Effective
Date. The contribution shall be allocated as of December 31, 1999, to the
Initial Employer Contribution Account of each individual who is a Participant as
of the Effective Date in the same proportion that his 1999 Compensation bears to
the 1999 Compensation of all individuals who are Participants as of the
Effective Date. For purposes of this subsection (a), a Participant's 1999
Compensation shall mean the Participant's Compensation for the portion of 1999
that includes and follows the Effective Date.
(b) For purposes of determining entitlement to an allocation
described in subsection (a), above, a Participant who is not actively employed
by the Employer as of the Effective Date shall share in the allocation only if,
on such date, he is on layoff with recall rights, receiving worker's
compensation payments, on a paid leave of absence during a period of short-term
disability, on a leave of absence approved by the Company with the right to
return to active employment, or on a leave of absence covered under the Family
and Medical Leave Act of 1993; provided that, if such a Participant does not
return to active employment with the Employer as soon as he is eligible to do so
and in any event before the expiration of 180 days following the Effective Date,
he shall not be eligible to share in such allocation.
SECTION 4.02 EMPLOYEE CONTRIBUTIONS.
(a) During any period in which the Plan satisfies the requirements
under the United States and Puerto Rico securities laws applicable to plans that
permit the investment of employee pre-tax or after-tax contributions in employer
stock, each Participant who is an Eligible Employee shall be eligible to make
Employee Contributions by filing a compensation deferral agreement with the
Committee in a form and manner and at a time acceptable to the Committee. The
amount of such Employee Contributions shall range each payroll period from a
minimum of 1% of the Participant's Compensation for such payroll period to a
maximum of 10% of the Participant's Compensation for such payroll period, and
shall be expressed as a whole percentage; provided that no Employee
Contributions shall be made to a Participant's Account in any payroll period in
which his Compensation is insufficient, after all statutory deductions,
deductions authorized by the Participant, and any other deductions are made, to
permit the agreed-upon Employee Contributions. A Participant may change the
percentage of Employee Contributions, discontinue Employee Contributions, or
resume Employee Contributions by filing a new compensation deferral agreement in
a form and manner acceptable to the Committee. Unless a Participant elects
otherwise by filing a new compensation deferral agreement, Employee
Contributions shall be made during any Plan Year at the rate in effect at the
end of the preceding Plan Year.
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(b) For each Plan Year, a Participant's Employee Contributions shall
be applied by the Trustee in the following manner:
(i) Employee Contributions shall be applied first in
accordance with Section 6.02(b)(v) to purchase shares of Company Stock from
participants who receive a cash distribution from the Plan or who initiate a
loan in accordance with Article VIII. The shares of Company Stock purchased with
such Employee Contributions shall be allocated directly to the Participant's
Employee Contribution Account.
(ii) For any portion of the Plan Year during which there are
Financed Shares in a Suspense Account, Employee Contributions shall be applied
to pay principal or interest on any Exempt Loan. The amount of Employee
Contributions applied to pay principal or interest on the Exempt Loan for any
Plan Year shall not exceed 15% of the principal amount of the Exempt Loan
outstanding during the Plan Year. Any Employee Contributions not used during the
Plan Year to make principal or interest payments on the Exempt Loan shall be
allocated directly to the Participant's Employee Contribution Account.
(iii) For any portion of the Plan Year during which there are
no Financed Shares in a Suspense Account, a Participant's Employee Contributions
shall be allocated directly to the Participant's Employee Contribution Account
and invested as provided in Article VI.
SECTION 4.03 MATCHING CONTRIBUTIONS.
(a) The Employer shall make a contribution to the Plan for each Plan
Year
(i) in an amount that (when increased by the total amount of
any forfeitures described in Section 5.02(c)) shall provide an allocation to
each Participant equal in value to the Basic Matching Contribution for the Plan
Year, and
(ii) in an additional amount that (when increased by the
total amount of any forfeitures described in Section 5.02(c)) shall provide an
allocation to each Participant equal in value to the Discretionary Performance
Matching Contribution (if any) for the Plan Year,
but only to the extent that the underlying Employee Contributions were not
distributed in such Plan Year or required to be distributed in the following
Plan Year in accordance with Section 4.05.
(b) For each Plan Year (or portion thereof) during which there are
Financed Shares in a Suspense Account, the Employer's contribution shall be paid
in cash and used by the Trustee to make payments of principal or interest on any
Exempt Loan (and shall be paid in one or more installments during the Plan Year
to the extent necessary to permit the Trustee to meet the payment schedule for
any Exempt Loan), provided that the Employer shall, at the direction of the
Company, make all or any portion of such contribution (or the Company may direct
the Trustee to use all or any portion of the dividends described in Section
9.02(a)) in time to permit the Trustee to pre-pay all or a portion of any
obligation under an Exempt Loan. For each Plan Year (or portion thereof)
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<PAGE> 18
during which there are no Financed Shares in a Suspense Account, the Employer's
contribution shall be paid in cash, allocated directly to Participants' Matching
Contribution Accounts, and invested as provided in Article VI.
(c) Whether any Employer contribution for a Plan Year is sufficient
to provide Participants with the allocations described in subsection (a), above,
shall be determined by the value of any Company Stock released from a Suspense
Account and allocated to a Participant's Matching Contribution Account as a
Matching Contribution by reason of an Exempt Loan payment.
(d) To the extent permitted by applicable law (including the exempt
loan requirements of section 4975(d)(2) of the US Code and section 408(b)(3) of
ERISA), the total amount of any forfeitures arising for a Plan Year under the
Plan shall be treated as part of the Matching Contribution for purposes of this
Section 4.03.
(e) Except as provided in the following two sentences, a Participant
shall not receive Matching Contributions for a Plan Year if the Participant's
active participation in the Plan terminates before the last day of such Plan
Year. A Participant who terminates employment during a Plan Year because of
death, disability, or attainment of Normal Retirement Age shall be eligible to
receive Matching Contributions for such Plan Year. A Participant who on the last
day of a Plan Year is on leave as provided in section 102 of the Family and
Medical Leave Act of 1993 shall be eligible to receive Matching Contributions
for such Plan Year.
SECTION 4.04 OVERALL LIMIT ON CONTRIBUTIONS.
(a) In addition to any other limitation set forth in the Plan, in no
event shall the annual additions to a Participant's Account under the Plan,
together with the aggregate annual additions to the Participant's accounts under
all other defined contribution plans required to be aggregated with the Plan
under the provisions of section 415 of the US Code, exceed the maximum amount
permitted under section 415 of the US Code, the provisions of which are
incorporated herein by this reference. The annual additions to the Plan
attributable to the Initial Employer Contribution shall be determined based on
the value of the underlying Company Stock on the date the Initial Employer
Contribution is made. The annual additions to the Plan attributable to any
contribution that is used to repay an Exempt Loan shall be determined by
reference to the amount of such contribution rather than by reference to the
value of the shares of Company Stock released from a Suspense Account and
allocated to a Participant's Account on account of the repayment. The term
"annual additions" shall not include any dividend paid with respect to shares of
Company Stock that are held in a Suspense Account or allocated to a
Participant's Account. The term "annual additions" also shall not include the
value of any shares of Company Stock that are allocated to a Participant's
Account in accordance with Section 9.02(b) in order to replace any dividends
that are used to make payments on an Exempt Loan.
(b) If the limitations imposed by this Section 4.04 apply to a
Participant who is entitled to annual additions under one or more tax-qualified
plans with which the Plan is aggregated for purposes of section 415 of the US
Code, the annual additions under the Plan shall be reduced first,
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to the extent necessary to prevent the Participant's annual additions from
exceeding the limitations imposed by this Section 4.04; provided that if a
reduction in the annual additions to a Participant's Account for a Plan Year is
required, Employee Contributions (and any investment gains and other income
attributable thereto) shall be returned to a Participant before any reduction is
made to the Participant's Matching Contributions, and Employee Contributions
(and any investment gains and other income attributable thereto) that are not
matched by Matching Contributions shall be returned to a Participant before any
reduction is made to the Participant's Employee Contributions that are matched.
(c) For purposes of determining whether a Participant's annual
additions exceed the limits imposed by this Section 4.04, a Participant's
compensation shall be compensation within the meaning of United States Treasury
Regulation Section 1.415-2(d)(2), excluding amounts listed in United States
Treasury Regulation Section 1.415-2(d)(3) (but including amounts described in
section 415(c)(3)(D) of the US Code).
(d) If no more than one third of the Employee Contributions and
Employer contributions for a Plan Year that are deductible under section
404(a)(9) of the US Code are allocated to Participants who are highly
compensated employees (as defined in section 414(q) of the US Code), the
limitation imposed by this Section 4.04 shall not apply to:
(i) allocations of forfeited of shares of Company Stock that
were acquired with the proceeds of an Exempt Loan as described in section
404(a)(9)(A) of the US Code, or
(ii) Employee Contributions or Employer contributions that
are deductible under section 404(a)(9)(B) of the US Code and that are charged
against a Participant's Account.
If allocations for a Plan Year would cause more than one third of the Employee
Contributions and Employer contributions that are deductible under section
404(a)(9) of the Code to be allocated to highly compensated employees (as
defined in section 414(q) of the US Code), such allocations may be reduced or
eliminated, in a manner prescribed by the Committee that is consistent with
applicable laws and regulations, to the extent necessary to prevent the limit on
allocations to such highly compensated employees from being exceeded.
(e) This Section 4.04 is intended to satisfy the requirements
imposed by section 415 of the US Code and shall be construed in a manner that
will effectuate this intent. This Section 4.04 shall not be construed in a
manner that would impose limitations that are more stringent than those required
by section 415 of the US Code.
SECTION 4.05 LIMITS ON EMPLOYEE CONTRIBUTIONS.
(a) A Participant's Employee Contributions for any taxable year
beginning in the Plan Year shall not exceed the lesser of:
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<PAGE> 20
(i) (A) $10,000 (as adjusted in accordance with section
402(g)(5) of the US Code), reduced by
(B) the sum of any of the following amounts that were
contributed on behalf of the Participant for the Plan Year under a plan,
contract, or arrangement other than this Plan:
(I) any employer contribution under a
qualified cash or deferred arrangement (as defined in section 401(k) of the US
Code) to the extent not includible in the Participant's gross income for the
taxable year under section 402(e)(3) of the US Code (determined without regard
to section 402(g) of the US Code);
(II) any employer contribution to the extent
not includible in the Participant's gross income for the taxable year under
section 402(h)(1)(B) of the US Code (determined without regard to section 402(g)
of the US Code);
(III) any employer contribution to purchase an
annuity contract under section 403(b) of the US Code under a salary reduction
agreement (within the meaning of section 3121(a)(5)(D) of the US Code); and
(IV) any elective employer contribution under
section 408(p)(2)(A)(i) of the US Code;
provided that no contribution described in this paragraph (B) shall be taken
into account for the purpose of reducing the dollar limit in paragraph (A),
above, if the plan, contract, or arrangement is not maintained by Company or an
Affiliate unless the Participant has filed a notice with the Committee, in a
form and manner acceptable to the Committee; or
(ii) (A) $8,000, reduced by
(B) the sum of any of the following amounts that were
contributed on behalf of the Participant for the Plan Year under a plan,
contract, or arrangement other than this Plan:
(I) any employer contribution under a
qualified cash or deferred contribution arrangement (as defined in section
1165(e) of the PR Code) to the extent not includible in the Participant's gross
income for the taxable year under section 1165(e)(5) of the PR Code (determined
without regard to section 1165(e)(7) of the PR Code); and
(II) contributions to an individual
retirement account under the provisions of section 1169 of the PR Code
(determined without regard to contributions to an individual retirement account
attributable to the spouse of a married Participant who lives with his spouse).
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<PAGE> 21
(b) The following rules shall apply if a Participant's Employee
Contributions exceed the limits set forth in subsections (a)(i) or (a)(ii),
above, respectively:
(i) If a Participant's elective deferrals (as defined in
section 402(g)(3) of the US Code) for a Plan Year under this Plan or under any
other plan in which the Participant has participated during the Plan Year exceed
the limit imposed by section 402(g) of the US Code, as set forth in subsection
(a)(i), above, the following rules shall apply to such excess deferrals:
(A) Not later than the first March 1 following the
close of the Plan Year, the Participant may allocate to the Plan all or any
portion of the Participant's excess deferrals for the Plan Year (provided that
the amount of the excess deferrals allocated to the Plan shall not exceed the
amount of the Participant's Employee Contributions to the Plan for the Plan Year
that have not been withdrawn or distributed), and may notify the Committee, in a
form and manner acceptable to the Committee, of the amount allocated to the
Plan; and
(B) As soon as practicable, but in no event later
than the first April 15 following the close of the Plan Year, the Plan shall
distribute to the Participant the amount allocated to the Plan under paragraph
(i), above, and any income allocable to such amount. The distribution described
in this paragraph (ii) shall be made notwithstanding any other provision of the
Plan.
(ii) The following rules shall apply if a Participant's
Employee Contributions exceed the limits set forth in subsection (a)(ii), above:
(A) To the extent the Participant's Employee
Contributions exceed the limits set forth in subsection (a)(ii), above, but not
the limits set forth in subsection (a)(i), above, the Employee Contributions
shall not be distributed from the Plan other than in accordance with Article
VII, and the Employee Contributions shall be treated for purposes of the PR
Code, upon any subsequent distribution in accordance with Article VII, as an
after-tax contribution to the Plan; and
(B) If the Participant's Employee Contributions
exceed the limits set forth in subsection (a)(ii), above, and the limits set
forth in subsection (a)(i), above, the rules set forth in subsection (b)(i),
above, shall apply, to the extent the Employee Contributions exceed the limits
set forth in subsection (a)(i), above, and the rules set forth in subsection
(b)(ii)(A), above, shall apply to the extent the Employee Contributions exceed
the limits set forth in subsection (a)(ii), above, but not the limits set forth
in subsection (a)(i), above.
(c) Employee Contributions for any Plan Year shall satisfy the
actual deferral percentage test in section 401(k)(3) of the US Code, United
States Treasury Regulation Section 1.401(k)-1(b) (to the extent the regulation
is consistent with changes in applicable law since its promulgation), and
subsequent guidance issued by the United States Internal Revenue Service under
such sections. The foregoing requirements shall be applied separately to
Participants who are included in a unit of employees covered by a collective
bargaining agreement (within the meaning of United States Treasury Regulation
Section 1.401(k)-1(g)(11)(ii)(B)) and Participants who are not included in such
a collective bargaining unit. For purposes of determining whether the Plan
satisfies
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<PAGE> 22
the foregoing requirements, the Plan shall use the prior year testing method
described in Internal Revenue Service Notice 98-1. For purposes of determining
whether the Plan satisfies the foregoing requirements for the Plan Year
beginning January1, 2000, the Plan shall deem the actual deferral percentage of
nonhighly compensated employees for the preceding Plan Year to be 3%. If the
actual deferral percentage for the Plan Year of those Participants who are
highly compensated employees (as defined in section 414(q) of the US Code)
exceeds the limit imposed by this subsection (c), the amount of the excess
contributions (determined in accordance with section 401(k)(8)(B) of the US
Code), and any income allocable to such contributions, shall be distributed
before the first March 15 following the close of the Plan Year to Participants
who are highly compensated employees (as defined in section 414(q) of the US
Code) on the basis of the amount of Employee Contributions made on behalf of
each such Participant. This distribution shall be made notwithstanding any other
provision of the Plan. The amount of the excess contributions to be distributed
for a Plan Year shall be reduced by any excess deferrals previously distributed
from the Plan to such Participant for the Participant's taxable year ending with
or within such Plan Year.
(d) Employee Contributions for any Plan Year shall satisfy the
actual deferral percentage test in section 1165(e)(3)(A)(ii) of the PR Code. In
accordance with the authority granted to it in Section 4.08, the Committee shall
limit the Employee Contributions for a Plan Year of highly compensated employees
(as defined in section 1165(e)(3)(E)(iii) of the PR Code) to the extent
necessary to ensure that the limits of this subsection (d) are not exceeded. If
the actual deferral percentage for the Plan Year of those Participants who are
highly compensated employees (as defined in section 1165(e)(3)(E)(iii) of the PR
Code) nevertheless exceeds the limit imposed by section 1165(e)(3)(A)(ii) of the
PR Code, the amount of the excess contributions (determined in accordance with
section 1165(e)(6)(B) of the PR Code), and any income allocable to such
contributions, shall be distributed before the first March 15 following the
close of the Plan Year to Participants who are highly compensated employees (as
defined in section 1165(e)(3)(E)(iii) of the PR Code) on the basis of the amount
of Employee Contributions made on behalf of each such Participant, but only to
the extent those distributions are also in accordance with section 401(k)(8) of
the US Code; provided that to the extent a distribution would be made pursuant
to this sentence but for the fact that the distribution would not be in
accordance with section 401(k)(8) of the US Code, such excess contributions
shall be treated for purposes of the PR Code, upon any subsequent distribution
in accordance with Article VII, as an after-tax contribution to the Plan. The
amount of the excess contributions to be distributed or recharacterized as an
after-tax contribution, as the case may be, for a Plan Year pursuant to the
preceding sentence shall be reduced by any excess deferrals previously
distributed from the Plan to such Participant pursuant to subsection (b)(ii)(B),
above, or previously recharacterized pursuant to subsection (b)(ii)(A), above,
as the case may be, for the Participant's taxable year ending with or within
such Plan Year.
(e) To the extent that an Employee Contribution is used to repay an
Exempt Loan, whether the Plan satisfies the tests described in subsections (c)
and (d), above, shall be determined by reference to the value of the shares of
Company Stock that are released from a Suspense Account and allocated to the
Participant's Employee Contribution Account by reason of such repayment rather
than by reference to the amount of such Employee Contribution.
19
<PAGE> 23
SECTION 4.06 LIMITS ON MATCHING CONTRIBUTIONS.
(a) The Matching Contributions for any Plan Year of Participants who
are not included in a unit of employees covered by a collective bargaining
agreement (as determined in accordance with United States Treasury Regulation
Section 1.401(m)-1(a)(3)) shall satisfy the contribution percentage test in
section 401(m)(2) of the US Code, United States Treasury Regulation Section
1.401(m)-1(b) (to the extent the regulation is consistent with changes in
applicable law since its promulgation), and subsequent guidance issued by the
United States Internal Revenue Service under such sections. For purposes of
determining whether the Plan satisfies the foregoing requirements, the Plan
shall use the prior year testing method described in Internal Revenue Service
Notice 98-1. For purposes of determining whether the Plan satisfies the
foregoing requirements for the Plan Year beginning January 1, 2000, the Plan
shall deem the actual contribution percentage of nonhighly compensated employees
for the preceding Plan Year to be 3%. If the actual contribution percentage for
the Plan Year of those Participants who are highly compensated employees (as
defined in section 414(q) of the US Code) exceeds the limit imposed by this
subsection (a) (after taking into account excess deferrals under Section 4.05(a)
and excess contributions under subsections (c) and (d) of Section 4.05), the
amount of the excess aggregate contributions (determined in accordance with
section 401(m)(6)(B) of the US Code), and any income allocable to such
contributions, shall be distributed (or, if forfeitable, shall be forfeited)
before the first March 15 following the close of the Plan Year to Participants
who are highly compensated employees (as defined in section 414(q) of the US
Code) on the basis of the amount of Matching Contributions made on behalf of
each such Participant. This distribution shall be made notwithstanding any other
provision of the Plan.
(b) The Employee Contributions and Matching Contributions for any
Plan Year of Participants who are not included in a unit of employees covered by
a collective bargaining agreement (as determined in accordance with United
States Treasury Regulation Section 1.401(m)-1(a)(3)) shall satisfy the aggregate
limit in section 401(m)(9)(A) of the US Code, United States Treasury Regulation
Section 1.401(m)-2 (to the extent the regulation is consistent with changes in
applicable law since its promulgation), and subsequent guidance issued by the
United States Internal Revenue Service under such sections. If the Employee
Contributions and Matching Contributions for the Plan Year of those Participants
who are highly compensated employees (as defined in section 414(q) of the US
Code) exceed the aggregate limit, the contribution percentage of those
Participants shall be reduced to the extent necessary to satisfy the limit, and
the excess aggregate contributions shall be distributed (or if forfeitable,
shall be forfeited) in the manner described in subsection (a), above.
(c) To the extent that an Employee Contribution or Employer
contribution is used to repay an Exempt Loan, whether the Plan satisfies the
tests described in subsections (a) and (b), above, shall be determined by
reference to the value of the shares of Company Stock that are released from a
Suspense Account and allocated to the Participant's Account by reason of such
repayment rather than by reference to the amount of any such contribution.
SECTION 4.07 CONTRIBUTIONS CONTINGENT UPON DEDUCTIBILITY. Each Employee
Contribution and Employer contribution shall be made on the condition that it is
deductible under
20
<PAGE> 24
section 1023 of the PR Code and section 404 of the US Code in the taxable year
of the Employer with respect to which the contribution is made.
SECTION 4.08 IMPOSITION OF LIMITATIONS. The Committee may limit the
amount of a Participant's Employee Contributions during a Plan Year to the
extent that the Committee determines that the imposition of such a limit is
necessary or appropriate to ensure that the Plan will satisfy the requirements
of this Article IV. Any such limitation may be imposed on a Participant
regardless of whether the Participant is covered by a collective bargaining
agreement between employee representatives and the Company or one of its
Affiliates. Any such limitation may be imposed either at the beginning of the
Plan Year, during the Plan Year, or both, as determined by the Committee in its
sole discretion. The Committee shall not be required to impose only those
limitations that are absolutely necessary to satisfy the requirements of this
Article IV and may, in its sole discretion, impose more restrictive limitations
that are designed to enable the Plan to satisfy those requirements by a
reasonable margin.
21
<PAGE> 25
ARTICLE V
VESTING AND FORFEITURES
SECTION 5.01 VESTED INTEREST.
(a) A Participant shall be fully vested at all times in the Employee
Contributions allocated to his Account and in any earnings thereon.
(b) A Participant shall be fully vested at all times in 75% of the
value of any Initial Employer Contribution that is allocated to his Initial
Employer Contribution Account and any earnings thereon. Effective as of December
31, 1999, a Participant shall be fully vested in the remaining 25% of the value
of any Initial Employer Contribution that is allocated to his Initial Employer
Contribution Account and any earnings thereon.
(c) A Participant shall be fully vested in the Additional Employer
Contributions and Matching Contributions allocated to his Account and any
earnings thereon upon the Participant's
(i) death,
(ii) total disability (as determined by the Committee), or
(iii) attainment of Normal Retirement Age
while the Participant is an Eligible Employee.
(d) A Participant who is not vested in accordance with subsection
(c), above, shall become vested in the Additional Employer Contributions and
Matching Contributions allocated to his Account and any earnings thereon in
accordance with the following schedule:
<TABLE>
<CAPTION>
Year(s) of Service Vested Percentage
------------------ -----------------
<S> <C>
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
SECTION 5.02 FORFEITURES.
(a) A Participant who is not 100% vested in all amounts allocated to
his Account shall forfeit the nonvested portion of his Account as soon as
administratively practicable after his Severance from Service Date.
22
<PAGE> 26
(b) If a Participant who reaches his Severance from Service Date is
subsequently employed by the Company or an Affiliate before he incurs a
five-year Period of Severance (within the meaning of Section 3.02(c)), he shall
have the full amount that was forfeited in accordance with subsection (a),
above, restored to him if he repays to the Plan, within five years of the date
of his reemployment, the full amount distributed to him (if any) pursuant to
Article VII that was attributable to his Additional Employer Contribution
Account, Initial Employer Contribution Account, and Matching Contribution
Account.
(c) Any amounts forfeited in accordance with subsection (a), above,
for a Plan Year may be used to pay reasonable expenses of administering the Plan
in accordance with Section 10.03, to repay an Exempt Loan in accordance with
Section 9.01, or to reduce the Employer's contribution obligation for that Plan
Year.
23
<PAGE> 27
ARTICLE VI
ACCOUNTS AND INVESTMENTS
SECTION 6.01 ACCOUNTS.
(a) The Committee shall establish an Additional Employer
Contribution Account on behalf of each Participant on whose behalf an Additional
Employer Contribution is made, an Employee Contribution Account on behalf of
each Participant on whose behalf an Employee Contribution is made, an Initial
Employer Contribution Account on behalf of each Participant on whose behalf an
Initial Employer Contribution is made, and a Matching Contribution Account on
behalf of each Participant on whose behalf a Matching Contribution is made. The
Committee also may establish such additional accounts as it may deem necessary
for the proper administration of the Plan.
(b) A Participant's Account shall be valued as of each Valuation
Date. As long as shares of Company Stock are not readily tradable on an
established securities market, the Committee shall cause an independent
appraiser to be retained to determine the fair market value of a share of
Company Stock as of each Valuation Date. Any increase or decrease in the value
of a Participant's Accounts since the preceding Valuation Date shall be credited
or charged to the Participant's Accounts in a manner deemed appropriate by the
Committee. Such determination shall be conclusive and binding upon all persons
having an interest, direct or indirect, in the Trust Fund.
SECTION 6.02 INVESTMENTS.
(a) The Committee shall establish the following investment funds
under the Plan:
(i) The Company Stock Fund. The Company Stock Fund shall be
invested primarily in Company Stock. A portion of the Company Stock Fund may, in
the discretion of the Trustee or as directed by the Committee, be invested in
cash, money market securities, money market funds, bankers acceptances,
repurchase agreements, corporate, government, or other bond funds, short-term
investment funds, or other investment funds, in order to meet the liquidity
needs of the Plan and for such other purposes as may be necessary or desirable
in the administration of the Plan, for example, for holding amounts prior to
investment under the Plan or prior to payment of an Exempt Loan or for meeting
the Plan's need to make transfers or distributions. Within the Company Stock
Fund, separate accounting shall be maintained of the Exempt Loan Shares Fund.
(ii) Such other investment funds as the Committee may
establish from time to time in its sole discretion.
The Committee may, in its sole discretion, eliminate and/or change the
underlying composition of any investment fund described in this subsection (a);
provided that the assets of the Plan shall at all times be invested primarily in
Company Stock.
24
<PAGE> 28
(b) For any Plan Year, to the extent that (i) a Participant elects
to receive a distribution in cash pursuant to Section 7.01(b), (ii) the Plan
assumes the obligation to purchase shares of Company Stock pursuant to Section
7.03, or (iii) a Participant initiates a participant loan pursuant to Article
VIII, the Plan shall make cash available for such purposes by applying funds in
the following order to the extent available:
(i) Dividends paid during that Plan Year on shares of
Company Stock attributable to the Initial Employer Contribution to the extent
the dividends have not previously been invested in Company Stock,
(ii) Dividends paid during that Plan Year on shares of
Company Stock that have been released from a Suspense Account and allocated to
Participants' Accounts, to the extent such dividends are not used to repay any
Exempt Loan,
(iii) Any other amount held in Participants' Account to the
extent the amount is not already invested in Company Stock,
(iv) Amounts that are attributable to the repayment during
that year of Participant loans under Article VIII, and
(v) Amounts contributed as Employee Contributions for that
Plan Year.
(c) The Company Stock Fund shall at no time hold an amount of
Company Stock exceeding 7% of the issued and outstanding Company Stock as of the
Effective Date, reduced by any shares of Company Stock distributed from (and not
subsequently repurchased by) the Plan. To the extent that the Plan receives or
holds funds at a time when no additional shares of Company Stock are available
for investment under the Plan, the Trustee shall invest the funds in one or more
alternative investment funds as directed by the Committee until such time as
additional shares of Company Stock become available for investment.
(d) The Initial Employer Contribution shall be invested in its
entirety in the Company Stock Fund. To the extent that a Participant's Employee
Contributions are used to repay an Exempt Loan in accordance with Section
9.01(f), the Participant's Employee Contribution Account shall be credited under
the Company Stock Fund with Company Stock whose value equals the value of the
Employee Contributions. To the extent that dividends that are paid on shares of
Company Stock previously allocated to a Participant's Account are used to repay
an Exempt Loan in accordance with Section 9.01(f), the Participant's Account
shall be credited under the Company Stock Fund with Company Stock whose value
equals the value of such dividends. To the extent that Employer contributions
are used to repay an Exempt Loan in accordance with Section 9.01(f), the
Participant's Matching Contribution Account (or Additional Employer Contribution
Account, as the case may be) shall be credited under the Company Stock Fund with
Company Stock whose value equals the value of the Matching Contribution (or
Additional Employer Contribution, as the case may be) for which the Participant
is eligible pursuant to Section 4.03 (or under the terms of the Plan as in
effect before January 1, 2000, as the case may be). In each case, the value of
the Company
25
<PAGE> 29
Stock shall be determined as of the Valuation Date coincident with or next
preceding the date on which the shares are allocated to the Participant's
Account.
(e) Neither the Employer nor any other person guarantees that the
total amount distributable or withdrawable with respect to any period will be
equal to or greater than the amount of the contributions for such period. Each
Participant assumes all risk of any decrease in value of the investment funds.
26
<PAGE> 30
ARTICLE VII
DISTRIBUTIONS
SECTION 7.01 BENEFITS ON TERMINATION OF EMPLOYMENT.
(a) Effective as of the Effective Date:
(i) A Participant who terminates employment with the Company
and the Affiliates shall be entitled to a distribution equal to the vested
portion of his Accounts as soon as practicable following the Valuation Date
coincident with or next following the date the Participant files an application
for benefits in a form and manner and at a time acceptable to the Committee.
(ii) If the value of the vested portion of a Participant's
Accounts does not exceed $5,000 once it becomes distributable pursuant to this
subsection (a), distribution shall be made to the Participant as soon as
practicable after the benefit becomes distributable.
(b) The distribution to which a Participant is entitled under
subsection (a), above, shall be paid in a lump sum in whole shares of Company
Stock with the balance in cash; provided that, to the extent the distribution is
subject to the put option right described in Section 7.03, the distribution
shall be paid, at the Participant's election, in a lump sum in cash. The value
of any cash distribution pursuant to this subsection (b) shall be determined as
of the Valuation Date coincident with or immediately preceding the date of the
distribution.
(c) A Participant's election to receive a distribution under the
Plan before Normal Retirement Age shall not be valid unless it is made within
the 90-day period ending on the Participant's Benefit Commencement Date and
after the Participant receives a general description of the material features
of, and an explanation of the relative values of, any optional form of benefit
available under the Plan and an explanation of his right to defer receipt of the
distribution. The explanation described in the preceding sentence must be
provided not more than 90 days before the Participant's Benefit Commencement
Date, and it must offer the Participant a period of at least 30 days in which to
consider the Participant's distribution options. The distribution may commence
less than 30 days after the Participant receives the notice if the Participant
is informed of his right to a period of at least 30 days after receiving the
notice to consider whether to elect a distribution or a particular distribution
form and if the Participant, after being informed of this right, affirmatively
consents to the distribution.
(d) Notwithstanding the foregoing provisions of this Section 7.01:
(i) Except to the extent that a Participant fails to elect a
distribution when the distribution is otherwise available under the Plan,
distribution shall be made not later than the 60th day after the latest of the
close of the Plan Year in which:
27
<PAGE> 31
(A) the date on which the Participant attains the
earlier of age 65 or Normal Retirement Age;
(B) occurs the 10th anniversary of the year in which
the Participant commenced participation in the Plan; or
(C) the Participant ceases to be employed by the
Company or an Affiliate.
(ii) Distributions shall be made under this Article VII, in
the minimum amount required pursuant to section 401(a)(9) of the US Code,
beginning not later than the April 1 of the calendar year following the year in
which the Participant attains age 70 1/2 (or if the Participant terminates
employment after the calendar year in which he attains age 70 1/2, the
next-following April 1).
SECTION 7.02 DEATH BENEFITS.
(a) If a Participant dies before he receives a full distribution of
his benefit under the Plan, the Participant's Beneficiary shall be entitled to
apply, in a form and manner and at a time acceptable to the Committee, for
payment of the benefit described in Section 7.01; provided that no distribution
shall be made until the Committee receives written notification of the
Participant's death together with any other information or documentation that
the Committee determines to be necessary; and provided further that if the value
of the benefit does not exceed $5,000 once it becomes distributable pursuant to
this subsection (a), distribution shall be made to the Beneficiary as soon as
practicable after the benefit becomes distributable.
(b) A Participant may designate a Beneficiary under the Plan at any
time by making the designation in a form and manner and at a time acceptable to
the Committee. No such designation (including any change in a prior designation)
shall be effective until and unless it is received by the Committee before the
Participant's death. A Participant's designation of a Beneficiary other than his
spouse shall be effective only with the written consent of his spouse, witnessed
by a representative of the Plan or a notary public, unless the Committee
determines that spousal consent cannot be obtained because there is no spouse,
because the spouse cannot be located, or because of other circumstances
specified by the United States Secretary of the Treasury. The consent of a
spouse to a Participant's designation of a Beneficiary shall be effective only
with respect to that spouse and shall not be effective with respect to any
subsequent spouse, unless the spouse's consent expressly permits subsequent
designations of Beneficiaries without further consent from the spouse. If a
Participant has not designated a Beneficiary in accordance with this Section
7.02 and the Participant has no spouse, the Participant's Beneficiary shall be
his estate.
SECTION 7.03 PUT OPTION. To the extent any Participant or Beneficiary
receives a distribution of Company Stock when Company Stock is not readily
tradable on an established securities market, the Participant or Beneficiary
shall have the right to sell such Company Stock to the Company at any time
during two option periods, at the fair market value of such shares. The
28
<PAGE> 32
first put option period shall be a period of at least 60 days beginning on the
date of distribution. The second put option period shall be a period of at least
60 days beginning on the date the Participant or Beneficiary is notified of the
determination of the fair market value of Company Stock by the Committee during
the Plan Year next following the Plan Year in which the Participant or
Beneficiary receives the distribution of Company Stock. However, no put option
may be exercised at a time when Company Stock is readily tradable on an
established securities market. The Company may allow the Committee to direct the
Trustee to purchase shares of Company Stock tendered to the Company under a put
option, in order to grant the Plan the option to assume the Company's rights and
obligations under the put option at the time the put option is exercised. The
payment for any Company Stock sold under a put option shall be made at the
direction of the Committee (i) in a lump sum or (ii) in substantially equal
annual installments over a period not exceeding five years, with adequate
security provided and interest payable at a reasonable rate (as determined by
the Committee) on any unpaid installment balance. The lump sum in paragraph (i)
of the preceding sentence or the first installment in paragraph (ii) of the
preceding sentence shall be paid not later than 30 days after the exercise of
the put option by the Participant or Beneficiary.
SECTION 7.04 DIVERSIFICATION WITHDRAWALS.
(a) Any Qualified Participant may elect to receive one or more
distributions from his Account in accordance with this Section 7.04, section
401(a)(28) of the US Code, and section 1165(a)(10) of the PR Code. A Qualified
Participant may receive a distribution under this Section 7.04 only in a Plan
Year in which the provisions of the Plan do not permit the Qualified Participant
to diversify his Account by transferring amounts from the Company Stock Fund to
one or more other investment funds offered under the Plan. An election to
receive a distribution under this Section 7.04 may be made only within 90 days
after the close of each Plan Year in the Qualified Election Period. The amount
eligible to be distributed under this Section 7.04 following each Plan Year in
the Qualified Election Period shall be determined as follows:
(i) Except as otherwise provided in paragraph (ii), below,
the amount eligible to be distributed shall be at least 25% of the value of the
Participant's Accounts, less any amount that has been distributed in accordance
with a prior election under this Section 7.04; and
(ii) Following the last Plan Year in the Qualified Election
Period, the amount eligible to be distributed shall be at least 50% of the value
of the Participant's Accounts, less any amount that has been distributed in
accordance with a prior election under this Section 7.04.
(b) Notwithstanding any other provision of this Section 7.04, a
Qualified Participant may not elect to receive a distribution under this Section
7.04 if the value of his Account is a "de minimis" amount (as defined in
regulations or other guidance issued by the Secretary of the United States
Treasury or by the United States Internal Revenue Service).
(c) Not later than 90 days after the end of each period during which
an election may be made under this Section 7.04, the Plan shall distribute any
amount that a Qualified Participant has elected to receive.
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(d) For purposes of this Section 7.04:
(i) "Qualified Election Period" shall mean the period
described in section 401(a)(28)(B)(iv) of the US Code and section
1165(a)(10)(A)(iv) of the PR Code, and
(ii) "Qualified Participant" shall mean any Participant who
has completed at least ten years of participation under the Plan and has
attained age 55.
SECTION 7.05 DIRECT ROLLOVER.
(a) Notwithstanding any other provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section 7.05, a
Distributee may elect, at the time and in the form and 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) For purposes of this Section 7.05, the following definitions
shall apply:
(i) "Eligible Rollover Distribution" shall mean any
distribution of all or any portion of the value of a Participant's
nonforfeitable interest in his Account, except that an Eligible Rollover
Distribution does not include any distribution to the extent such distribution
is required under section 401(a)(9) of the US Code and the portion of any
distribution that is not includible in United States gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(ii) "Eligible Retirement Plan" shall mean an individual
retirement account described in section 408(a) of the US Code, an individual
retirement annuity described in section 408(b) of the US Code, an annuity plan
described in section 403(a) of the US Code, or a qualified trust described in
section 401(a) of the US Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to a
surviving spouse, an Eligible Retirement Plan shall mean solely such an
individual retirement account or such an individual retirement annuity.
(iii) "Distributee" shall include a Participant, a surviving
spouse, or a spouse or former spouse who is an alternate payee under a qualified
domestic relations order (as that term is defined in section 206(d) of ERISA and
section 414(p) of the US Code).
(iv) "Direct Rollover" shall mean a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
This Section 7.05 is intended, and shall be construed, solely to satisfy the
direct rollover requirements of section 401(a)(31) of the US Code. It shall not
confer any rights other than those required under section 401(a)(31) of the US
Code.
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ARTICLE VIII
PARTICIPANT LOANS
SECTION 8.01 LOAN AMOUNT, TERM, AND INTEREST RATE.
(a) In the case of a financial hardship (within the meaning of
subsection (g), below), a Participant who is a "party in interest" (as defined
in section 3(14) of ERISA) with respect to the Plan may borrow from the Plan an
amount that, when added to the balance of all other outstanding loans to the
Participant from the Plan (and, in the case of paragraph (ii), below, the
balance of all other outstanding loans to the Participant from any other United
States tax-qualified plan of the Company or an Affiliate) does not exceed the
smallest of:
(i) 50% of the vested value of the Participant's Account,
determined as of the most recent Valuation Date,
(ii) the lesser of:
(A) $50,000, reduced by the excess, (if any) of (I)
the Participant's highest loan balance outstanding under all United States
tax-qualified plans of the Company and the Affiliates during the 1-year period
ending on the day before the date on which such loan is made, over (II) the
Participant's loan balance outstanding under all United States tax-qualified
plans of the Company and the Affiliates on the date on which such loan is made,
or
(B) 50% of the present value of the Participant's
nonforfeitable accrued benefits (determined without regard to accumulated
deductible employee contributions as defined in section 72(o)(5)(B) of the US
Code) under all United States tax-qualified defined benefit and defined
contribution plans of the Company and the Affiliates (but not less than
$10,000),
(iii) the amount that is necessary to meet the financial
hardship that is the basis for the loan and that is not reasonably available
from the Participant's other resources, or
(iv) such lesser maximum amount as the Committee may from
time to time establish in written loan procedures forming part of the Plan and
apply uniformly to all loans made pursuant to the terms of the Plan.
(b) A loan shall be granted in $50.00 increments; $1,000 shall be
the minimum amount of any loan.
(c) Loans shall be granted for a minimum term of six months, or for
a longer term that is expressed in whole months up to a maximum term of five
years. A loan may have a term exceeding five years if the loan is used solely to
acquire any dwelling unit that within a reasonable time is to be used
(determined at the time the loan is made) as the principal residence of the
Participant.
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(d) A Participant may not have more than two loans outstanding under
the Plan at any time.
(e) A loan shall not be made from, or secured by, the portion of a
Participant's Account that is allocated to the Exempt Loan Shares Fund. The
Participant's entire vested interest in the portion of his Account that is
allocated to the Exempt Loan Shares Fund shall be taken into account in
determining the amount available for borrowing pursuant to subsection (a),
above, but only to the extent the portion of his Account that is allocated to
the Exempt Loan Shares Fund does not exceed 50% of the vested value of the
Participant's Account.
(f) Each loan shall bear the rate of interest that applies to loans
under the Plan that is in effect as of the date the loan is made. The rate of
interest applicable to loans shall be determined as of the first business day of
each calendar quarter and shall be equal to the "prime rate" that is published
in the Money Rates column of the Wall Street Journal on that date (or the
average of such rates if more than one rate is indicated), provided that the
Committee may, in its discretion, adjust the rate of interest at any time to
ensure that the applicable rate of interest is at all times reasonable within
the meaning of section 4975(d)(1)(D) of the US Code and section 408(b)(1)(D) of
ERISA and not in violation of any other applicable law. No loan shall be made to
the extent applicable law would prevent the loan from bearing a reasonable rate
of interest within the meaning of ERISA.
(g) For purposes of subsection (a), above, "financial hardship"
shall be deemed to exist if the Participant establishes to the satisfaction of
the Committee in accordance with procedures established by the Committee that
the loan is on account of:
(i) medical expenses described in section 213(d) of the US
Code or section 1023(aa)(2)(P) of the PR Code that are incurred by the
Participant, the Participant's spouse, or any dependent of the Participant (as
defined in section 152 of the US Code); or
(ii) the purchase (excluding mortgage payments) of a
principal residence for the Participant; or
(iii) the payment of tuition, related educational fees, and
room and board expenses for the next 12 months of post-secondary education for
the Participant or his spouse, children, or dependents; or
(iv) the need to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of the Participant's
principal residence; or
(v) any other event that has been identified in regulations
or other guidance of general applicability under section 401(k) of the US Code
and section 1165(e) of the PR Code as an event that is deemed to impose an
immediate and heavy financial need upon the Participant (regardless of whether
the need was reasonably foreseeable or voluntarily incurred by the Participant).
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SECTION 8.02 SECURITY FOR LOANS.
(a) A Participant shall file an application for any loan in the form
and manner and at the time established by the Committee. In order to receive a
loan, a Participant must execute a note in a form prescribed by the Committee,
payable to the Trustee, on which the Participant shall be personally liable for
the amount of the loan, and the Participant must authorize repayment of the loan
through payroll deductions.
(b) Cash equal to the value of any loan granted shall be transferred
from the investment fund(s) in which the Participant's Account is invested, in
proportion to the percentage invested in each such fund, to a loan account
established on behalf of the Participant; provided that a Participant may not
borrow any portion of his Account that is invested in the Company Stock Fund
unless he has first borrowed all available amounts that are invested in any
other investment fund under the Plan. Except to the extent prohibited by Section
14.02, the Participant's loan account shall have a first lien on the balance of
the Participant's Account. The Committee shall identify, in written procedures
forming part of the Plan, each event that shall constitute a default on a loan,
and the manner in which the Plan shall attach the portion of the Participant's
Account attributable to the loan. When a Participant defaults on a loan, the
Committee may not attach the Participant's Employee Contribution Account to
satisfy an outstanding loan before the earliest date on which the Participant
would have been eligible to withdraw such Employee Contributions pursuant to
section 401(k)(2)(B) of the US Code and section 1165(e)(2)(B) of the PR Code.
SECTION 8.03 REPAYMENT.
(a) Except as provided in loan procedures established by the
Committee, a loan shall be amortized in substantially level payments, made not
less frequently than quarterly, over the term of the loan; provided, however,
that the level amortization of the loan shall not preclude repayment or
acceleration of the loan prior to the end of the commitment period. Except as
provided in subsection (b), below, repayment shall be accomplished through
regular payroll deductions, which shall be deemed "deductions authorized by the
Participant" for purposes of Section 4.02(a). Payments of principal shall be
applied to reduce the outstanding principal balance of the loan. Payments of
principal and interest shall be allocated to a Participant's Additional Employer
Contribution Account, Employee Contribution Account, Initial Employer
Contribution Account, and Matching Contribution Account in proportion to the
amount of the loan that was derived from each such Account. A Participant shall
be entitled to prepay without penalty the total outstanding principal amount of
and interest accrued on any loan under the Plan.
(b) A Participant with an outstanding loan who is not actively
employed and who is not otherwise in default on his loan shall make installment
payments equal in value to the payments deducted from his paycheck for any
period during which his loan remains outstanding in accordance with the terms of
the Plan. If a Participant has elected to keep a loan outstanding as provided in
this subsection (b), but has not repaid the total amount of principal and
accrued interest on the note as of the close of the period during which his loan
is outstanding, he shall be treated in all respects in the
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manner specified in subsection (c), below, as if he had retired on the date
immediately following the close of the period during which his loan is
outstanding.
(c) Except as provided in subsection (b), above, a Participant who,
prior to his repayment of the total principal amount of and accrued interest on
a note held in his loan account, either resigns, retires, is terminated, or
becomes disabled, and who is not a "party in interest" (as defined section 3(14)
of ERISA) with respect to the Plan immediately following his resignation,
retirement, termination or becoming disabled, shall be deemed to have elected a
distribution, equal to the principal amount of and accrued interest on the note
as of the date that is 90 days after the date of occurrence of the event. Said
distributed amount then shall be applied to satisfy the note held in his loan
account and to reduce the Participant's Account balance. If a Participant dies
or retires prior to repayment of the total principal amount of and accrued
interest on a note held in his loan account, the Participant's Account balance
shall be reduced proportionately by the amount of said total outstanding
principal amount and accrued interest prior to the payment of any benefits to
the Participant or his Beneficiary pursuant to Article VII. To the extent that
the Participant's Account is insufficient to pay all amounts due and owing on
the note, the Participant shall be personally liable for the deficiency. The
Committee may from time to time, in written procedures forming part of the Plan,
identify other events that will cause an acceleration of a loan.
SECTION 8.04 LOAN FEES.
(a) The Committee shall set a "loan establishment fee" for expenses
related to initiating a loan. The Committee may from time to time change the
amount of the loan establishment fee, provided that the fee shall not exceed the
reasonable expense of initiating a loan. A Participant shall pay a loan
establishment fee for each loan that the Participant receives under the Plan.
The loan establishment fee shall be debited from the Participant's Account in
the manner determined by the Committee.
(b) The Committee shall set an annual "loan maintenance fee" for
expenses related to maintaining and servicing an outstanding loan. The Committee
may from time to time change the amount of the loan maintenance fee, provided
that the fee shall not exceed the reasonable expense of maintaining a loan. The
applicable loan maintenance fee shall be debited from the Participant's Account
in the manner determined by the Committee.
(c) The Committee may establish a "loan repayment fee" for expenses
related to maintaining and servicing an outstanding loan to Participants who
cease to be Employees. The applicable loan repayment fee shall be debited from
the Participant's Account in the manner determined by the Committee.
SECTION 8.05 LIMITATIONS ON LOANS. The Committee reserves the right at
any time and from time to time and for any reason to further limit the amount
that may be borrowed hereunder, to further limit the terms and conditions under
which loans will be made, or to declare a moratorium on the granting of loans to
Participants.
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ARTICLE IX
EXEMPT LOANS
SECTION 9.01 EXEMPT LOAN PROVISIONS.
(a) AUTHORITY TO OBTAIN AN EXEMPT LOAN. The Company may direct the
Trustee to obtain an Exempt Loan from time to time in order to finance the
acquisition of Company Stock or to refinance a prior Exempt Loan. An Exempt Loan
shall be primarily for the benefit of Participants and their Beneficiaries and
shall satisfy the conditions set forth in this Section 9.01.
(b) TERMS OF THE EXEMPT LOAN. An Exempt Loan shall bear a reasonable
rate of interest, shall be for a specific term, and shall not be payable on
demand except in the event of default. Any collateral pledged to the lender by
the Trustee shall consist only of the Financed Shares purchased with the
proceeds of the Exempt Loan, or Financed Shares purchased with the proceeds of a
prior Exempt Loan that is being refinanced. Any pledge of Financed Shares shall
provide for the release of the shares so pledged as the Trustee makes payments
on the Exempt Loan and allocates the shares to Participants' Matching
Contribution Accounts and Employee Contribution Accounts (or, before January 1,
2000, Additional Employer Contribution Accounts), as the case may be. Under the
terms of the Exempt Loan, the lender shall have no recourse against assets of
the Plan except with respect to (i) the Financed Shares pledged to secure the
Exempt Loan, (ii) contributions (other than contributions made in the form of
Company Stock) that are made to the Plan to meet its obligations under the
Exempt Loan, and (iii) earnings attributable to the Financed Shares or to the
investment of the contributions (other than contributions made in the form of
Company Stock) that are made to the Plan to meet its obligations under the
Exempt Loan.
(c) USE OF LOAN PROCEEDS. The Trustee shall use the proceeds of an
Exempt Loan, within a reasonable time after their receipt by the Plan, only for
one or more of the following purposes: (i) to acquire Company Stock; (ii) to
repay the Exempt Loan; or (iii) to repay a prior Exempt Loan. Until the proceeds
of an Exempt Loan are used as described in the preceding sentence, the Trustee
may invest such proceeds in cash or cash equivalents or other short-term
investments in accordance with subsection (j), below. The Trustee shall pay no
more than "adequate consideration" (within the meaning of section 3(18) of
ERISA) for any Company Stock acquired with the proceeds of an Exempt Loan.
(d) SUSPENSE ACCOUNT. Financed Shares acquired by the Plan with the
proceeds of an Exempt Loan shall be allocated to a Suspense Account. Such
Financed Shares shall be released from the Suspense Account only as the Trustee
makes payments on the Exempt Loan, and (to the extent not used to pay Plan
expenses in accordance with subsection (g)(vi), below) shall be allocated to:
(i) the Employee Contribution Accounts of Participants (but
only to the extent Employee Contributions are used to repay the Exempt Loan),
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(ii) the Matching Contribution Accounts of Participants who
are eligible for a Matching Contribution under Section 4.03, and
(iii) to the Matching Contribution Account, Employee
Contribution Account, or Additional Employer Contribution Account, as the case
may be, of Participants who are eligible under Section 9.02(b) to receive an
allocation to replace dividends that were used to repay the Exempt Loan.
In addition, before January 1, 2000, such Financed Shares may have been
allocated to the Additional Employer Contribution Accounts of Participants on
whose behalf an Additional Employer Contribution was made (but only to the
extent Additional Employer Contributions were used to repay the Exempt Loan).
(e) AMOUNT OF RELEASE. The number of Financed Shares to be released
from the Suspense Account in each Plan Year for allocation pursuant to
subsections (d) and (g) of this Section 9.01 shall be determined according to
the method set forth in paragraph (i), below, unless the Company expressly
provides that the method set forth in paragraph (ii), below, shall apply with
respect to a particular Exempt Loan.
(i) GENERAL RULE. The number of Financed Shares held in the
Suspense Account immediately before the release for the current Plan Year shall
be multiplied by a fraction, the numerator of which is the amount of principal
and interest paid on the Exempt Loan for that Plan Year, and the denominator of
which is the sum of the numerator plus the total payments of principal and
interest on the Exempt Loan projected to be made for all future Plan Years. The
number of future Plan Years under the Exempt Loan shall be determined without
regard to possible extensions or renewal periods, and the interest to be paid in
future Plan Years shall be computed by using the interest rate in effect as of
the end of the current Plan Year.
(ii) SPECIAL RULE. The Company may direct at the time the
Exempt Loan is obtained (or the terms of the Exempt Loan may provide) that
Financed Shares will be released from the Suspense Account based solely on the
ratio that the payments of principal for each Plan Year bear to the total
principal amount of the Exempt Loan. This method may be used only to the extent
that the following conditions are satisfied: (A) 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; (B)
interest included in any payment on the Exempt Loan is disregarded only to the
extent that it would be determined to be interest under standard loan
amortization tables; and (C) the entire duration of the Exempt Loan repayment
period does not exceed ten years, even in the event of a renewal, extension, or
refinancing of the Exempt Loan.
The mere refinancing of an Exempt Loan shall not cause the release of Financed
Shares from a Suspense Account.
(f) REPAYMENT OF EXEMPT LOAN. The payments of principal and interest
on an Exempt Loan (other than payments made pursuant to subsection (h), below,
by reason of a default)
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shall be made by the Trustee (as directed by the Committee) only from Employer
contributions made pursuant to Section 4.03 (other than contributions of Company
Stock), from Employee Contributions, from earnings attributable to such Employer
contributions and Employee Contributions, and from any dividends received by the
Trust on the Company Stock acquired with the proceeds of the Exempt Loan and
held by the Plan (including earnings on such dividends). The Trustee shall
account separately for such Employer contributions, Employee Contributions,
earnings, and dividends until the Exempt Loan is repaid. To the extent that
dividends on Company Stock are used to repay the Exempt Loan in accordance with
Section 9.02, such dividends shall be used first to repay the principal amount
of the Exempt Loan; dividends shall be used to pay interest on the Exempt Loan
only to the extent that the aggregate amount of the dividends used to repay the
Exempt Loan in any Plan Year exceeds the amount of the principal payment due on
the Exempt Loan for that Plan Year.
(g) ALLOCATIONS TO ACCOUNTS. The Company Stock that is released from
a Suspense Account for any Plan Year shall be allocated to Participants'
Accounts (as of the end of the Plan Year for which they are released) as
follows:
(i) Each Participant's Employee Contribution Account shall
be credited with Company Stock whose value (determined as of the Valuation Date
coincident with or next preceding the date of allocation to the Employee
Contribution Account) equals the value of the Participant's Employee
Contributions during such Plan Year that were used to repay the Exempt Loan;
(ii) Each Participant's Matching Contribution Account shall
be credited with Company Stock whose value (determined as of the Valuation Date
coincident with or next preceding the date of allocation to the Matching
Contribution Account) equals the value of the Matching Contribution that such
Participant is eligible to receive under Section 4.03 for the Plan Year;
(iii) Each Participant's Employee Contribution Account shall
be credited with Company Stock whose value (determined as of the Valuation Date
coincident with or next preceding the date of allocation to the Employee
Contribution Account), equals the value of the cash dividends used to repay an
Exempt Loan, to the extent that such dividends were paid with respect to the
Company Stock allocated to the Participant's Employee Contribution Account as of
the record date for such dividend;
(iv) Each Participant's Matching Contribution Account shall
be credited with Company Stock whose value (determined as of the Valuation Date
coincident with or next preceding the date of allocation to the Matching
Contribution Account), equals the value of the cash dividends used to repay an
Exempt Loan, to the extent that such dividends were paid with respect to the
Company Stock allocated to the Participant's Matching Contribution Account for
the Plan Year;
(v) Each Participant's Additional Employer Contribution
Account shall be credited with Company Stock whose value (determined as of the
Valuation Date coincident with or
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next preceding the date of allocation to the Additional Employer Contribution
Account), equals the value of the cash dividends used to repay an Exempt Loan,
to the extent that such dividends were paid with respect to the Company Stock
allocated to the Participant's Additional Employer Contribution Account as of
the record date for such dividend; and
(vi) Any remaining Company Stock shall be used to pay
expenses of the Plan as provided in Section 10.03. Any remaining Company Stock
that is not used to pay expenses shall be used to provide an additional Matching
Contribution for the Plan Year, calculated by increasing the matching percentage
specified in Section 4.03(a) to the extent necessary to provide for the
allocation of the Company Stock to Participants' Accounts. Any such remaining
Company Stock that cannot be allocated to a Participant as described in the
preceding sentence on account of the contribution limits set forth in Section
4.04 or 4.06 shall be allocated to each other Participant (regardless of whether
he made Employee Contributions for the Plan Year), in the same proportion that
his Compensation for such Plan Year bears to the Compensation for such Plan Year
of all other Participants eligible for an allocation pursuant to this sentence.
If the Common Stock released from a Suspense Account for any Plan Year is not
sufficient to provide the allocations described in paragraph (ii), (iii), (iv),
or (v), above, the Employer shall make an additional contribution to the Plan in
an amount sufficient to complete such allocations. The total amount of any
forfeitures arising pursuant to Section 5.02 for a Plan Year, to the extent that
such forfeitures have not previously been allocated to a Participant's Account
or used to repay an Exempt Loan, shall be treated as part of the additional
contribution described in the preceding sentence. An additional contribution
made in order to provide the allocation described in paragraph (ii), above,
shall be treated as a Matching Contribution, in accordance with Section 4.03; an
additional contribution made in order to provide the allocation described in
paragraph (iii), (iv), or (v), above, shall be treated as a dividend.
(h) REQUIREMENTS IN THE EVENT OF DEFAULT. In the event of default on
the Exempt Loan, the value of the Plan assets transferred in satisfaction of the
Exempt Loan shall not exceed the amount of the default. If the lender is a party
in interest (as defined in section 3(14) of ERISA) or a disqualified person (as
defined in section 4975(e)(2) of the US Code), the Exempt Loan shall provide for
a transfer of Plan assets on default only upon and to the extent of the failure
of the Plan to meet the payment schedule of the Exempt Loan; provided that a
party in interest or disqualified person shall not be considered a "lender" for
the purposes of this sentence solely because such party in interest or
disqualified person guaranteed the Exempt Loan.
(i) PUT OPTIONS. Except as otherwise provided in Section 7.03, no
employer security acquired with the proceeds of an Exempt Loan shall be subject
to a put, call, or other option, or to a buy-sell or similar arrangement, while
it is held by and when it is distributed from the Plan. The provisions of this
subsection (i) shall apply whether or not the Plan is an employee stock
ownership plan at the time the security is held or distributed.
(j) LIMITATION. Nothing in this Section 9.01 or otherwise in this
Article IX shall be construed to prevent the Trustee from retaining in cash or
cash equivalents or other short-term
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investments (i) the proceeds of any Exempt Loan, until such proceeds are used to
acquire Company Stock, or to repay all or any portion of an Exempt Loan; (ii)
cash dividends received on Company Stock held in the Exempt Loan Shares Fund
until such dividends are applied to repay an Exempt Loan or are invested in
Company Stock; and (iii) such other amounts as may be required for the proper
administration of the Trust.
SECTION 9.02 PAYMENT OF DIVIDENDS.
(a) To the extent determined by the Company, cash dividends on
shares of Company Stock held under the Plan shall be used to make payments on an
Exempt Loan, provided that the cash dividend is paid with respect to Company
Stock that (i) is held by the Plan on the record date for such dividend and (ii)
was acquired with the proceeds of the Exempt Loan (or with the proceeds of a
prior Exempt Loan that has been refinanced by the current Exempt Loan). This
subsection (a) shall apply both to dividends paid with respect to Company Stock
that is allocated to the Exempt Loan Shares Fund portion of the Company Stock
Fund and to dividends paid with respect to Company Stock that is held in a
Suspense Account.
(b) To the extent that any dividend is paid with respect to Company
Stock that is allocated to a Participant's Account on the record date for such
dividend, and such dividend is used to make a payment on an Exempt Loan in
accordance with subsection (a), above, Company Stock with a fair market value
not less than the amount of the dividend shall be allocated to the Participant's
Account for the Plan Year for which the dividend would have been allocated to
the Participant's Account.
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ARTICLE X
ADMINISTRATION
SECTION 10.01 THE COMMITTEE.
(a) The Board shall appoint a Committee consisting of at least five
persons and may adopt rules for the operation of the Committee. Any member of
the Committee may resign or be removed by the Board and new members may be
appointed by the Board. Any person appointed to be a member of the Committee
shall signify his acceptance in writing to the Board. Any member of the
Committee may resign by delivering his written resignation to the Board and such
resignation shall become effective upon such delivery or upon any date specified
therein. The Board shall select the Committee Chairman, Vice Chairman and
Secretary (who may, but need not, be a member of the Committee) to keep its
records and to assist it in the doing of any act or thing to be done or
performed by the Committee. A member of the Committee shall serve until a
successor is appointed, until he is removed by the Board, or until he resigns
from the Committee.
(b) The Committee shall have authority to adopt such further rules,
not inconsistent with any rules adopted by the Board, as the Committee may find
appropriate. A majority of the members of the Committee, at the time in office,
shall constitute a quorum for the transaction of business at any meeting. Any
determination or action of the Committee may be made or taken by a majority of
the members present at any meeting thereof, or without a meeting by a resolution
or written memorandum concurred in by a majority of the members then in office.
The members of the Committee shall not receive compensation from assets of the
Plan, or otherwise, for serving as Committee members.
(c) The Committee shall be the administrator of the Plan within the
meaning of section 3(16)(A) of ERISA. The Committee is a named fiduciary as that
term is used in ERISA with respect to the particular duties and responsibilities
herein allocated to it.
(d) The Committee shall have such powers as may be necessary or
appropriate to enable it to administer the Plan, except for powers vested in the
Company, the Trustee, or any investment managers appointed under the Plan. The
powers of the Committee shall include, but shall not be limited to, the
discretionary authority to interpret the Plan, to make findings of fact under
the Plan, to adopt rules and regulations for the administration of the Plan, and
to decide any and all matters arising hereunder, including without limitation
the right to determine eligibility for participation, benefits, and other rights
under the Plan; the right to determine whether any election or notice
requirement or other administrative procedure under the Plan has been adequately
observed; the right to determine the proper recipient of any distribution under
the Plan; the right to remedy possible ambiguities, inconsistencies, or
omissions by general rule or particular decision; and the right otherwise to
interpret the Plan in accordance with its terms. The Committee's determination
on any and all questions arising out of the interpretation or administration of
the Plan shall be final, conclusive, and binding on all parties.
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(e) To the extent that the administrative powers or duties of the
Committee are properly delegated to any other individual or entity pursuant to
Section 10.02, such other individual or entity shall have discretionary
authority, as described in subsection (d), above, to exercise such powers or
duties.
SECTION 10.02 DELEGATION OF AUTHORITY AND ADVISORS. The Committee may
delegate authority with respect to certain matters to officers or employees of
the Company or the Affiliates, to the Trustee, or to any other person, and the
Committee may allocate its responsibilities among its members. Any delegation or
allocation pursuant to this Section 10.02 shall be made in writing. The
Committee also may employ one or more persons to render advice to it with regard
to any responsibility it has under the Plan or Trust. The compensation of such
person or persons shall be fixed by the Committee.
SECTION 10.03 EXPENSES. Any reasonable expenses of administering the
Plan, including the fees and expenses of the Trustee, shall be paid from the
Trust Fund except to the extent that such expenses are paid by the Company or an
Affiliate. Expenses paid from the Trust shall be paid from amounts attributable
to Employer contributions, forfeitures arising pursuant to Section 5.02 (to the
extent that such forfeitures have not previously been allocated to a
Participant's Account or used to repay an Exempt Loan), and from investment
earnings of the Trust.
SECTION 10.04 COMMUNICATION BY COMMITTEE. Decisions and directions of
the Committee may be communicated to the Trustee, a Participant, a Beneficiary,
the Company, or any other person who is to receive such decision or direction by
a written document signed by a person so authorized, and such decision or
direction of the Committee may be relied upon by the recipient as being the
decision or direction of the Committee.
SECTION 10.05 REPORTS OF THE COMMITTEE. The Committee shall report to
the Board, no less often than annually, on the performance of its
responsibilities and on the performance of any persons to whom any of it powers
and responsibilities may have been delegated pursuant to Section 10.02.
SECTION 10.06 RELIANCE AND INDEMNIFICATION OF THE COMMITTEE.
(a) The Committee, its members, and its appointed delegates shall be
entitled to rely upon all information, data, statistics, and analyses furnished
by any consultant or recordkeeper, upon all certificates and reports made by any
accountant or investment counsel, and upon all opinions given by legal counsel.
(b) The Company shall indemnify the Committee, each member of the
Board, and any employee of the Company or an Affiliate to whom a fiduciary
responsibility with respect to the Plan is allocated or delegated, from and
against all liabilities, costs and expenses incurred by such person as a result
of an act omission or conduct in connection with the performance of his
fiduciary duties, responsibilities and obligations under the Plan and under
ERISA, except with respect to liabilities and claims arising from such person's
own willful misconduct or gross negligence. The Company
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may obtain, pay for and maintain a policy or policies of insurance, the proceeds
of which may be used in satisfying its obligations under this Section 10.06.
SECTION 10.07 REQUIRED INFORMATION. Any person eligible to receive
benefits hereunder shall furnish to the Committee any information or proof
requested by the Committee and reasonably required for the proper administration
of the Plan. Failure on the part of any person to comply with any such request
within a reasonable period of time shall be sufficient grounds for delay in the
payment of any benefits that may be due under the Plan until such information or
proof is received by the Committee. If any person claiming benefits under the
Plan makes a false statement that is material to a claim for benefits, any
amount paid to such person to which he was not entitled under the provisions of
the Plan may be offset against any future payments to such person.
SECTION 10.08 QUALIFIED DOMESTIC RELATIONS ORDERS. The Committee shall
establish written procedures to determine the qualified status of domestic
relations orders and to administer distributions under qualified domestic
relations orders (as that term is defined in section 206(d) of ERISA and section
414(p) of the US Code). Such procedures shall be consistent with any regulations
prescribed under section 206(d) of ERISA and sections 401(a)(13) and 414(p) of
the US Code. A determination by the Committee that a domestic relations order
constitutes a qualified domestic relations order shall be binding and conclusive
as to all parties thereto.
SECTION 10.09 MULTIPLE FUNCTIONS. Any person or group of persons may
serve in more than one fiduciary capacity with respect to the Plan in accordance
with section 402(c)(1) of ERISA. Except as otherwise provided herein or required
by law, each person or entity shall have only those powers and duties that are
specifically assigned to it herein or in the Trust Agreement, and no person or
entity shall incur liability because of improper performance or nonperformance
of powers or duties assigned to another person or entity.
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ARTICLE XI
CLAIMS REVIEW
SECTION 11.01 CLAIMS FOR BENEFITS. Any claim for benefits by a
Participant or anyone claiming through a Participant under the Plan shall be
delivered in writing by the claimant (or his authorized representative) to the
Committee. The claim shall identify the benefits being requested and shall
include a statement of the reasons why the benefits should be granted. The
Committee shall grant or deny the claim. If the claim is denied in whole or in
part, the Committee shall give written notice to the claimant setting forth: (a)
the reasons for the denial, (b) specific reference to pertinent Plan provisions
on which the denial is based, (c) a description of any additional material or
information necessary to request a review of the claim and an explanation of why
such material or information is necessary, and (d) an explanation of the Plan's
claim review procedure. The notice shall be furnished to the claimant within a
period of time not exceeding 90 days after receipt of the claim; provided that
such period of time may be extended, if special circumstances should require,
for an additional 90 days commencing at the end of the initial 90-day period.
Written notice of any such extension shall be given to the claimant before the
expiration of the initial 90-day period and shall indicate the special
circumstances requiring the extension and the date by which the final decision
is expected to be rendered.
SECTION 11.02 APPEALS PROCEDURE. A claimant who has been denied a claim
for benefits, in whole or in part, may, within a period of 60 days following his
receipt of the denial, request a review of such denial by filing a written
notice of appeal with the Committee. In connection with an appeal, the claimant
(or his authorized representative) may review pertinent documents and may submit
evidence and arguments in writing to the Committee. The Committee may decide the
questions presented by the appeal, either with or without holding a hearing, and
shall issue to the claimant a written notice setting forth: (a) the specific
reasons for the decision and (b) specific reference to the pertinent Plan
provisions on which the decision is based. The notice shall be issued within a
period of time not exceeding 60 days after receipt of the request for review;
except that, if special circumstances (including, but not limited to, the need
to hold a hearing) should require, such period of time may be extended for an
additional 60 days commencing at the end of the initial 60-day period. Written
notice of any such extension shall be provided to the claimant prior to the
expiration of the initial 60-day period. The decision of the Committee shall be
final and conclusive on all persons.
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ARTICLE XII
THE TRUST FUND
SECTION 12.01 AGREEMENT AND DECLARATION OF TRUST. The Company shall
enter into a Trust Agreement with the Trustee, and any and all rights or
benefits accruing to any person under the Plan with respect to any contributions
deposited pursuant to the Trust Agreement shall be subject to all the terms and
provisions of the Trust Agreement. Except to the extent otherwise permitted by
applicable law, all the assets of the Plan held by the Trustee pursuant to the
Trust Agreement shall be held for the exclusive benefit of Participants and
their Beneficiaries under the Plan and the payment of reasonable expenses of
administering the Plan in accordance with Section 10.03, and no part of the
Trust Fund shall revert to the Employer or be used for or diverted to any other
purpose, except as provided in Section 12.06 or 14.02, prior to the satisfaction
of all liabilities in respect of Participants and their Beneficiaries under the
Plan.
SECTION 12.02 TRUSTEE. The Trustee shall be appointed from time to time
by the Company by appropriate instrument, with such powers in the Trustee as to
investment, reinvestment, control and disbursement of the funds of the Plan as
the Company shall approve and as shall be in accordance with the Plan. The
Company may remove any Trustee at any time, upon reasonable notice, and upon
such removal or upon the resignation of any Trustee, the Company shall designate
a successor Trustee, subject to the terms of the Trust Agreement.
SECTION 12.03 AUTHORITY OF TRUSTEE. The Trustee may temporarily hold the
monies applicable to the purchase of assets for the investment funds under the
Plan pending investment in the types of assets of each such fund in cash, or it
may deposit them at reasonable rates of interest with banks, including deposits
with a fiduciary of the Plan, and may invest in short-term United States
Government obligations, commercial paper, or other instruments selected by the
Committee or the Trustee or identified in the Trust Agreement.
SECTION 12.04 TRUSTEE ACCOUNTS. The Trustee shall be directed by the
Committee or its designee to segregate the assets of the Plan into separate
accounts such as shall enable the Committee to administer properly the
provisions of the Plan.
SECTION 12.05 DISBURSEMENT OF ASSETS. The Committee shall determine the
manner in which the assets of the Plan shall be disbursed, including the form of
voucher or warrant to be used in making disbursements and the due qualification
of persons authorized to approve and sign the same, subject to the provisions of
the Trust Agreement.
SECTION 12.06 RETURN OF CONTRIBUTIONS. To the extent permitted by ERISA,
the Trustee shall return assets of the Plan to the Employer in the following
circumstances:
(a) All contributions to the Plan made directly by the Employer are
conditioned on their deductibility under section 1023(n) of the PR Code and
section 404 of the US Code for the taxable year with respect to which the
contributions are made. If a current deduction is disallowed with
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respect to any portion of a contribution for such taxable year, the Trustee
shall, at the request of the Company, return the nondeductible portion of the
contribution within one year after the disallowance of the deduction. Earnings
attributable to the nondeductible contribution shall not be returned to the
Employer, and any losses attributable to such contribution shall reduce the
amount returned.
(b) If any portion of a contribution is made by the Employer by
mistake of fact, the Trustee shall, at the request of the Company, return the
mistaken portion of the contribution within one year after the Trust receives
the contribution. Earnings attributable to the mistaken contribution shall not
be returned to the Employer, and any losses attributable to such contribution
shall reduce the amount returned.
(c) All contributions to the Plan are conditioned on and subject to
determinations as to the initial qualification of the Plan under section 1165(a)
of the PR Code and section 401(a) of the US Code. In the event that the Plan
fails to receive such determinations of initial qualification, all contributions
shall be returned to the Employer within one year after the denial of
qualification or the refusal to issue a determination of qualification.
SECTION 12.07 AUTHORITY OF TRUSTEE GENERALLY. Except as otherwise
provided herein, the authority of the Trustee with respect to the Trust Fund
shall be subject to the terms of the Trust Agreement.
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ARTICLE XIII
AMENDMENT AND TERMINATION
SECTION 13.01 AMENDMENT. The Company reserves the right at any time, and
from time to time, by action of the Board, to modify or amend in whole or in
part, any or all of the provisions of the Plan, either prospectively or
retroactively. Except as permitted by applicable law, no such amendment or
modification shall have the effect of reducing the accrued benefits of
Participants or their Beneficiaries or of diverting any part of the Trust Fund
to any purpose other than for the exclusive benefit of Participants and their
Beneficiaries and the payment of reasonable Plan administration expenses prior
to the satisfaction of all liabilities in respect of Participants and their
Beneficiaries under the Plan. Except to the extent otherwise required by
applicable law, or to the extent expressly provided in a particular amendment to
the Plan, any individual who does not complete at least one hour of active
employment with the Company or an Affiliate on or after the effective date of
any amendment to the Plan shall have his benefits, if any, determined only in
accordance with the provisions of the Plan as in effect before the effective
date of such amendment. The Committee's modification of any written
administrative procedures under the Plan (including, but not limited to, claims
procedures, and qualified domestic relations order procedures) shall not be
deemed to be an amendment of the Plan.
SECTION 13.02 TERMINATION OR PARTIAL TERMINATION. While the Company has
established the Plan with the expectation that it will be continued
indefinitely, the Company reserves the right, by action of the Board, to
terminate or partially terminate the Plan at any time. Upon the termination or
partial termination of the Plan, or upon the complete discontinuance of
contributions under the Plan, the Accounts of Participants or their
Beneficiaries affected by the termination, partial termination, or complete
discontinuance of contributions, as the case may be, shall be nonforfeitable. If
the Plan shall be terminated by the Company, the interest of each Participant or
Beneficiary in his Accounts shall be distributed at the time and in the manner
determined by the Committee; provided that if an Exempt Loan remains outstanding
upon the complete termination of the Plan, the Company shall direct the Trustee,
prior to making final allocations of Plan assets, to pay the accrued principal
and interest on the Exempt Loan and to prepay the remaining principal balance of
the Exempt Loan with the shares of Company Stock held in the Suspense Account or
with the proceeds of a sale or other disposition of such Company Stock.. No
termination or partial termination of the Plan shall have the effect of reducing
the accrued benefits of Participants or their Beneficiaries or of diverting any
part of the Trust Fund to any purpose other than for the exclusive benefit of
Participants and their Beneficiaries and the payment of reasonable Plan
administration expenses prior to the satisfaction of all liabilities in respect
of Participants and their Beneficiaries under the Plan.
SECTION 13.03 MERGERS, CONSOLIDATIONS, AND TRANSFERS INTO AND OUT OF THE
PLAN. The Plan may be merged into or consolidated with another plan, its assets
or liabilities may be transferred to another plan, or the assets or liabilities
of another plan may be transferred to this Plan. To the extent that section
401(a)(12) or 414(l) of the US Code is applicable and in accordance therewith,
no such merger, consolidation, or transfer shall be consummated unless each
Participant
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and Beneficiary under the Plan would, if the resulting plan then terminated,
receive a benefit immediately after the merger, consolidation, or transfer that
is equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer, if the Plan had then
terminated. The preceding sentence shall not apply if such alternative
requirements that may be imposed by the regulations under section 414(l) of the
US Code are satisfied.
SECTION 13.04 DESIGN DECISIONS. Decisions regarding the design of the
Plan (including any decision to amend or terminate the Plan in accordance with
Article XIII, any decision to obtain, modify, or refinance an Exempt Loan, and
any decision regarding the extent to which dividends on shares of Company Stock
shall be used to repay an Exempt Loan pursuant to Section 9.02) shall be made in
a settlor capacity and shall not be governed by the fiduciary responsibility
provisions of ERISA.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 INCAPACITY OF PARTICIPANT. If the Committee shall find
that a Participant or other person entitled to receive payment of benefits under
the Plan is unable to manage his own affairs because of illness or accident or
is a minor, the Committee may direct that any benefit payment due him, unless a
claim shall have been made therefor by a duly appointed legal representative, be
paid to a court of general jurisdiction. Any such payment shall be a complete
discharge of the liabilities of the Plan therefor.
SECTION 14.02 NONALIENATION OF BENEFITS. Except as otherwise provided by
law or pursuant to a "qualified domestic relations order" (as defined in section
206(d) of ERISA and section 414(p) of the US Code), the interest of any
Participant or Beneficiary in the Trust Fund shall not be subject in any manner
to anticipation, alienation sale, transfer, assignment, pledge, encumbrance or
charge, whether voluntary or involuntary, and any attempt to so anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge the same shall be
void; nor shall any such distribution or payment be in any way liable for or
subject to the debts, contracts, liabilities, engagements or torts of any person
entitled to such distribution or payment. If any Participant or Beneficiary is
adjudicated bankrupt or purports to anticipate, sell, transfer, assign pledge,
encumber or charge any such distribution payment voluntarily or involuntarily,
the Committee, in its discretion, may hold or cause to be held or applied such
distribution or payment or any part thereof to or for the benefit of such
Participant or Beneficiary in such manner as the Committee shall direct. This
Section 14.02 shall not be construed in a manner that would impose limitations
that are more stringent than those required by section 206(d) of ERISA and
sections 401(a)(13) and 414(p) of the US Code. Thus, this Section 14.02 shall
not restrict the alienation, transfer, assignment, or encumbrance of any benefit
or payment under the Plan to the extent such alienation, transfer, assignment,
or encumbrance is permitted under section 206(d) of ERISA and sections
401(a)(13) and 414(p) of the US Code.
SECTION 14.03 VOTING AND TENDERING OF COMPANY SECURITIES.
(a) For the purposes of voting or responding to bona fide offers
with respect to the Company securities held by the Plan (including Company
securities that are held in the Trust or in a suspense account and are not
allocated to a Participant's Account), each Participant and Beneficiary whose
account is invested in whole or in part in Company securities shall be a "named
fiduciary" within the meaning of section 403(a)(1) of ERISA. The Trustee shall
follow the proper directions of the Participants and Beneficiaries with respect
to such securities in the manner described in this Section 14.03.
(b) Before each annual or special meeting of shareholders of the
Company, there shall be sent to each Participant or Beneficiary to whom Company
securities are allocated under the Plan a copy of the proxy solicitation
material for the meeting, if any, together with a form requesting instructions
to the Trustee on how to vote the Company Stock and other voting securities of
the
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Company credited to his Account. Upon receipt of such instructions, the Trustee
shall vote the securities as instructed.
(c) To the extent permitted by applicable law, the Trustee shall
vote the securities for which no voting instructions are received (including
securities that are not allocated to the Account of a Participant or
Beneficiary) in accordance with the voting instructions it receives with respect
to a plurality of the securities for which it receives voting instructions.
(d) In the event that a bona fide offer (such as a tender offer or
exchange offer) shall be made to acquire any equity securities of the Company
held by the Trustee, each Participant and Beneficiary shall be entitled to
direct the Trustee as to the disposition of the securities (including fractional
shares) credited to his Account and to direct the Trustee to take other
solicited action on his behalf (excluding the voting of such securities) with
respect to the securities allocated to his Account. The Company, with the
cooperation of the Trustee, shall use its best efforts to provide each
Participant and Beneficiary to whom this subsection (d) may apply with a copy of
any offer solicitation material generally available to members of the public, if
any, who hold the securities affected by the offer, or with such other written
information as the offeror may provide. Such material shall be provided with a
form requesting instructions to the Trustee as to the disposition under the
offer of the securities allocated to each Account. Upon receipt of such
instructions from the Participant or Beneficiary, the Trustee shall respond to
the offer in accordance with such instructions with respect to the securities
allocated to the Participant's or Beneficiary's Account.
(e) To the extent permitted by applicable law, the Trustee shall
respond to an offer described in subsection (d), above, with respect to
securities for which no instructions are received (including securities that are
not allocated to a Participant's or Beneficiary's Account) in accordance with
the voting instructions it receives with respect to a plurality of the
securities for which it receives voting instructions.
(f) In the case of Company securities that previously had been
allocated to an Account under the Plan, the proceeds received upon the
acceptance of any offer described in subsection (d), above, shall be invested by
the Trustee as directed by the Committee. In the case of Company securities that
previously had not been allocated to an Account under the Plan, the proceeds
received upon the acceptance of an offer described in subsection (d), above,
shall be used to repay an outstanding Exempt Loan, reinvested in Company
securities, or allocated to Participants or Beneficiaries in a manner directed
by the Committee.
(g) To the extent not inconsistent with the foregoing provisions of
this Section 14.03, Company securities shall be voted in accordance with the
terms of the Trust Agreement.
SECTION 14.04 EMPLOYMENT RIGHTS. The Plan shall not be deemed to
constitute a contract between the Company or any Affiliate and any Employee or
other person, whether or not in the employ of the Company or an Affiliate, nor
shall anything herein contained be deemed to give an Employee or any other
person, whether or not in the employ of the Company or an Affiliate, any right
to be retained in the employ of the Company or an Affiliate, or to interfere
with the right of the
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Company or an Affiliate to discharge an Employee at any time and to treat him
without any regard to the effect which such treatment might have upon him as a
Participant in the Plan, or any right to any payment whatsoever, except to the
extent expressly provided for herein.
SECTION 14.05 LIMITATION ON EMPLOYER LIABILITY. No person shall have any
right or interest in the Trust Fund other than as provided herein. All benefits
under the Plan shall be paid or provided solely from the Trust Fund and neither
the Company nor any Affiliate assumes any responsibility therefor. Any final
payment or final distribution to any Participant or Beneficiary in accordance
with the provisions of the Plan shall be in full satisfaction of all claims
against the Trust Fund, the Trustee, the Committee, the Company, the Affiliates,
the Board and any fiduciary with respect to the Plan or Trust. The Trustee or
the Committee may require any Participant or Beneficiary to execute a receipt
and a general release of any and all such claims upon a final payment or final
distribution, or a receipt to the extent of any partial payment or partial
distribution.
SECTION 14.06 TOP-HEAVY REQUIREMENTS.
(a) This Section 14.06 shall apply only if the Plan becomes
Top-Heavy. The Plan shall be deemed to be "Top-Heavy" if, as of the
Determination Date and Valuation Date coincident therewith, either (1) the
aggregate of the Accounts of Key Employees under the Plan exceeds 60% of the
aggregate of the Accounts of all Employees, or (2) it is included in a Required
Aggregation Group for which the sum of the present value of the cumulative
accrued benefits for Key Employees under all defined benefit plans included in
such group, and the aggregate of the accounts of Key Employees under all defined
contribution plans included in such group, exceeds 60% of the analogous sum
determined for all Employees. The determination of whether a Plan is Top-Heavy
shall be made in accordance with section 416(g) of the US Code and the
regulations thereunder. If the Plan is Top-Heavy as of any Determination Date,
subsections (c) through (f) of this Section 14.06 shall become effective as of
the first day of the Plan Year following that Determination Date.
(b) DEFINITIONS. For purposes of this Section 14.06, the following
definitions shall apply, and shall be interpreted in accordance with section 416
of the US Code: "Compensation" means compensation within the meaning of United
States Treasury Regulation Section 1.415-2(d)(2), excluding amounts listed in
United States Treasury Regulation Section 1.415-2(d)(3) (but including amounts
described in section 415(c)(3)(D) of the US Code). "Determination Date" means,
with respect to any Plan Year, the last day of the next preceding Plan Year.
"Company" means the Company (as defined in Article II and any Affiliate. "Key
Employee" means any participant (or, for purposes of subsections (a) and (b) of
this Section 14.06), any beneficiary thereof) in a Company Plan who, at any time
during the Plan Year or any of the four next preceding Plan Years, meets the
criteria set forth in section 416(i)(1) of the US Code. "Required Aggregation
Group" means one or more Company Plans comprising each Company Plan in which a
Key Employee is a participant and each Company Plan that enables any Company
Plan in which a Key Employee is a participant to meet the requirements of
section 401(a)(4) or 410 of the US Code. "Top-Heavy Year" means a Plan Year for
which the Plan is deemed to be Top-Heavy. "Company Plan" means any defined
contribution plan or defined benefit plan (including any terminated plan) of the
Company. Unless otherwise specified herein, other terms used in this Section
14.06 have the respective meanings ascribed
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thereto by the other provisions of the Plan. References in this Section 14.06 to
provisions "hereof" refer to the provisions of this Section 14.06.
(c) MINIMUM CONTRIBUTION REQUIREMENTS. As of the last day of each
Top-Heavy Year, the Employer shall make, for each Participant, (1) the Employer
contributions it otherwise would have made under the Plan for such Top-Heavy
Year, or if greater, (2) contributions for such Top-Heavy Year that, when added
to the contributions made by the Company for such Participant (and any
forfeitures allocated to his accounts) for such Top-Heavy Year under all other
defined contribution plans of the Company, aggregate the lesser of (i) 3% of his
Compensation or (ii) the percentage of Compensation at which contributions are
made under the Plan for the Top-Heavy Year for the Key Employee for whom the
percentage is the highest for such Top-Heavy Year; provided that the Plan shall
meet the requirements of subsections (c) and (d) hereof without taking into
account Employee Contributions or other Employer contributions attributable to a
salary reduction or similar arrangement, and the Employer shall not make
contributions to the Plan that, in the aggregate, exceed its then current or
accumulated earnings.
(d) VESTING REQUIREMENTS. Effective as of the first day of any
Top-Heavy Year, a Participant who has completed three years of continuous
service, and who is credited with an hour of service in such Top-Heavy Year,
shall be fully vested in his Additional Employer Contribution Account and
Matching Contribution Account. Any amount vested pursuant to this subsection (d)
shall not be forfeitable under provisions that otherwise would be permitted by
section 411(a)(3)(B) (relating to suspension of benefits upon reemployment) or
411(a)(3)(D) (relating to forfeitures upon withdrawal of mandatory
contributions) of the US Code. Further, if the Plan ceases to be Top-Heavy, thus
necessitating a change in the Plan's benefit structure (including the vesting
schedule outlined in the first sentence of this subsection (d)), any Participant
who has three or more years of service shall be permitted to elect to remain
under the vesting schedule outlined in the first sentence of this subsection
(d).
(e) MODIFICATION OF AGGREGATE LIMITATIONS. For each Top-Heavy Year,
in determining the "defined benefit plan fraction" and "defined contribution
plan fraction" under Section 4.04(b), paragraphs (2)(B) and (3)(B) of section
415(e) of the US Code shall be applied by substituting "1.0" for "1.25" therein.
This subsection (e) shall cease to apply with respect to Plan Years beginning
after December 31, 1999.
SECTION 14.07 WITHHOLDING TAXES. The Committee may make any appropriate
arrangements to deduct or to have deducted from all amounts paid under the Plan
any taxes reasonably determined to be required to be withheld by any government
or government agency. The Participant, Beneficiary, or other recipient, as the
case may be, shall bear all taxes on amounts paid under the Plan to the extent
that no taxes are withheld, irrespective of whether withholding is required.
SECTION 14.08 ENGLISH AS OFFICIAL LANGUAGE. For the convenience of
Participants and Beneficiaries and any and all other persons with rights,
powers, or duties under the Plan, the English language Plan document text may be
translated from time to time at the direction of the Committee
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into Spanish or other languages. However, the language of the official Plan
document text shall be English, and the rights, powers, and duties of any person
under the Plan shall be determined solely by reference to the official Plan
document text.
SECTION 14.09 GOVERNING LAW. The Plan shall be construed, administered
and regulated in accordance with the provisions of ERISA and, to the extent not
preempted thereby, in accordance with the laws of Puerto Rico, determined
without regard to its choice of law rules.
* * * * *
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EXHIBIT 5.1
TELECOMUNICACIONES DE PUERTO RICO, INC.
P.O. BOX 360998, SAN JUAN, PR 00936-0998
January 3, 2000
Telecomunicaciones de
Puerto Rico, Inc.
PO Box 360998
San Juan, PR 00936-0998
RE: TELECOMUNICACIONES DE PUERTO RICO, INC.
REGISTRATION STATEMENT ON FORM S-8
Gentlemen and Ladies:
I am issuing this opinion in my capacity as General Counsel to
Telecomunicaciones de Puerto Rico, Inc., a Puerto Rico 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, with no par value (the "Common Stock"), on a Registration
Statement on Form S-8 (the "Registration Statement").
The Registration Statement relates to the issuance or sale of up to One
Million Seven Hundred and Fifty Thousand (1,750,000) shares of Common Stock
pursuant to the Employee Stock Ownership Plan of the Company 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, delivered and paid for in the manner described in the Plan, will
be validly issued, fully paid and non-assessable.
The opinions contained herein relate solely to the Commonwealth of
Puerto Rico 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 SEC pursuant to the
Securities Act and is solely for the benefit of the Company in connection
with such filing. The opinion 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 or prior written consent, except as noted below.
I hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
Jose E. Arroyo
General Counsel
