<PAGE> 1
As filed with the Securities and Exchange Commission on July 12, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
Genentech, Inc.
(Exact name of issuer as specified in its charter)
Delaware 94-2347624
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 Point San Bruno Boulevard, South San Francisco, CA 94080
(Address of Principal Executive Offices)
Genentech, Inc. Tax Reduction Investment Plan
(Full Title of the Plan)
Stephen G. Juelsgaard
Vice President, General Counsel and Assistant Secretary
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080
(Name and address of agent for service)
Telephone number, including area code, of agent for service:
(415) 225-1000
Copies to:
Richard A. Gilbert
Orrick, Herrington & Sutcliffe
400 Sansome Street
San Francisco, CA 94111-3143
Calculation of Registration Fee
<TABLE>
<CAPTION>
Title of Amount to Proposed Proposed Amount of
securities to be registered maximum maximum fee*
be registered offering aggregate
price per offering
share* price*
<S> <C> <C> <C> <C>
Callable Putable
Common Stock** 500,000 shares $52.375 $26,187,500 $9,031.00
</TABLE>
* Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), on the basis of $52.375, the average of the high
and low prices of shares on the New York Stock Exchange on July 5, 1996.
** In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plan described herein.
<PAGE> 2
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this registration
statement: (i) Genentech, Inc.'s (the "Company") Annual Report on Form 10-K for
the year ended December 31, 1995 and the Genentech, Inc. Tax Reduction
Investment Plan's (the "Plan") Annual Report on Form 11-K for the year ended
December 31, 1995, filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (ii) all other reports
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since the end of the fiscal year covered by the Annual Reports referred to in
clause (i) above; and (iii) the description of the Company's Callable Putable
Common Stock filed pursuant to the Exchange Act, including any amendment or
report filed for the purpose of updating such description. All documents filed
by the Company or the Plan after the date of this registration statement
pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment (that indicates all securities offered
have been sold or deregisters 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.
ITEM 4. DESCRIPTION OF SECURITIES
Inapplicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Inapplicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the "DGCL")
provides, in summary, that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against all expenses
and liabilities (including attorneys' fees) incurred by them as a result of
suits brought against them in their capacity as a director or officer, if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, if they had no reasonable cause to believe their
conduct was unlawful; provided, that no indemnification may be made against
expenses in respect of any claim, issue or matter as to which they shall have
been adjudged to be liable to the corporation, unless and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, they are fairly and reasonably entitled to indemnity
for such expenses which the court shall deem proper. Any such indemnification
may be made by
2
<PAGE> 3
the corporation only as authorized in each specific case upon a determination by
the stockholders or disinterested directors that indemnification is proper
because the indemnitee has met the applicable standard of conduct.
Article Seventh of the Company's Certificate of Incorporation ("Article
Seventh") provides that a director of the Company is not personally liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) for paying a dividend or approving a stock repurchase in violation
of Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit.
Article Seventh also provides that directors, officers and other individuals
will be indemnified by the Company to the full extent permitted by law and shall
not be exclusive of any other right which any person may otherwise have or
acquire. It provides that each person who was or is made a party to or is
involved in, any action, suit or proceeding by reason of the fact that he is or
was a director, officer, employee or agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or agent for
another entity) while serving in such capacity shall be indemnified and held
harmless by the Company, to the full extent authorized by the DGCL, as in effect
(or, to the extent indemnification is broadened, as it may be amended), against
all expense, liability or loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred by such person in connection therewith. It allows such indemnified
persons to bring suit against the Company to recover unpaid amounts claimed
thereunder, and if such suit is successful, the expense of bringing such suit
shall be reimbursed by the Company. It further provides that while it is a
defense to such a suit that the person claiming indemnification has not met the
applicable standards of conduct making indemnification permissible under
Delaware law, the burden of proving the defense shall be on the Company and
neither the failure of the Company's Board of Directors to have made a
determination that indemnification is proper, nor an actual determination by the
Company that the claimant has not met the applicable standard of conduct, shall
be a defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
The Company's Certificate of Incorporation and By-laws provide that the Company
may maintain insurance, at its expense, to protect itself and any of its
officers, employees or agents against any expense, liability or loss, whether or
not the Company would have the power to indemnify such person against such
expense, liability or loss under Delaware law. The Company maintains such
insurance for such purposes.
3
<PAGE> 4
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Inapplicable.
ITEM 8. EXHIBITS
4.1 Genentech, Inc. Tax Reduction Investment Plan dated May 8,
1996.
4.2 Certificate of Incorporation of Genentech, Inc.
(incorporated by reference to Exhibit 3.1 to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1986, Commission File No. 2-68864).
4.3 By-Laws of Genentech, Inc. (incorporated by reference to
Exhibit 3.2 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1986, Commission File No.
2-68864).
4.4 Amended Certificate of Incorporation of Genentech, Inc.
(incorporated by reference to Exhibit 4.1 to the
registrant's Registration Statement on Form S-4, Commission
File No. 33-59949).
4.5 Restated By-Laws of Genentech, Inc. (incorporated by
reference to Exhibit 3.4 to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1990,
Commission File No. 1-9813).
5.1 Undertaking re Status of Favorable Determination Letter
Covering the Plan.
Genentech, Inc. (the "Company") has received a favorable determination
letter from the Internal Revenue Service (the "IRS") concerning the
Genentech, Inc. Tax Reduction Investment Plan's (the "Plan")
qualification under Section 401(a) and related provisions of the
Internal Revenue Code of 1986, as amended. In addition, the Company
will submit any future material amendments to the Plan to the IRS for a
favorable determination that the Plan, as amended, continues to so
qualify.
15.1 Letter From Ernst & Young LLP Regarding Unaudited Interim
Financial Information.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
4
<PAGE> 5
24.1 Power of Attorney of Directors.
24.2 Power of Attorney of the 401(k) Plan Administrative
Committee.
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;
(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 registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed 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, where applicable, each filing of the
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
5
<PAGE> 6
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.
(c) 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 Act and is, therefore, unenforceable. In the event that a claim for
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 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 Act and will
be governed by the final adjudication of such issue.
6
<PAGE> 7
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 South San Francisco, State of California on the 21st
day of June, 1996.
GENENTECH, INC.
(Registrant)
/s/ Louis J. Lavigne, Jr.
- --------------------------
Louis J. Lavigne, Jr.
Senior Vice President and
Chief Financial Officer
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
dated indicated.
Signature Title Date
Principal Executive Officer:
/s/ Arthur D. Levinson
- --------------------------
Arthur D. Levinson President and Chief
Executive Officer June 21, 1996
Principal Financial Officer:
/s/ Louis J. Lavigne, Jr.
- --------------------------
Louis J. Lavigne, Jr. Senior Vice
President and Chief June 21, 1996
Financial Officer
Principal Accounting Officer:
/s/ Bradford S. Goodwin
- --------------------------
Bradford S. Goodwin Vice President, June 21, 1996
Controller
7
<PAGE> 8
Directors:
* Director June 21, 1996
- --------------------------
Herbert W. Boyer
* Director June 21, 1996
- --------------------------
Jurgen Drews
* Director June 21, 1996
- --------------------------
Franz B. Humer
* Director June 21, 1996
- --------------------------
Arthur D. Levinson
* Director June 21, 1996
- --------------------------
Linda Fayne Levinson
* Director June 21, 1996
- --------------------------
J. Richard Munro
* Director June 21, 1996
- --------------------------
Donald L. Murfin
* Director June 21, 1996
- --------------------------
John T. Potts, Jr.
* Director June 21, 1996
- --------------------------
C. Thomas Smith, Jr.
* Director June 21, 1996
- --------------------------
Robert A. Swanson
* Director June 21, 1996
- --------------------------
David S. Tappan, Jr.
*By:/s/ John P. McLaughlin
--------------------------
John P. McLaughlin
Attorney-in-Fact
A majority of the members of the Board of Directors.
8
<PAGE> 9
THE PLAN
Pursuant to the requirements of the Securities Act of 1933, the Plan has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of South San Francisco,
State of California, on the 21st day of June, 1996.
GENENTECH, INC. TAX REDUCTION INVESTMENT PLAN
Signature Title
/s/ Janet Briggs
- --------------------------
Janet Briggs Member of the 401(k) Plan
Administrative Committee
/s/ Marty Glick
- --------------------------
Marty Glick Member of the 401(k) Plan
Administrative Committee
/s/ Louis J. Lavigne, Jr.
- --------------------------
Louis J. Lavigne, Jr. Member of the 401(k) Plan
Administrative Committee
By: /s/ John P. McLaughlin
- --------------------------
John P. McLaughlin
Attorney-in-Fact
A majority of the members of the 401(k) Plan Administrative Committee.
9
<PAGE> 10
EXHIBIT INDEX
4.1 Genentech, Inc. Tax Reduction Investment Plan dated May 8,
1996.
4.2 Certificate of Incorporation of Genentech, Inc.
(incorporated by reference to Exhibit 3.1 to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1986, Commission File No. 2-68864).
4.3 By-Laws of Genentech, Inc. (incorporated by reference to
Exhibit 3.2 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1986, Commission File No.
2-68864).
4.4 Amended Certificate of Incorporation of Genentech, Inc.
(incorporated by reference to Exhibit 4.1 to the
registrant's Registration Statement on Form S-4,
Commission File No. 33-59949).
4.5 Restated By-Laws of Genentech, Inc. (incorporated by
reference to Exhibit 3.4 to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1990,
Commission File No. 1-9813).
5.1 Undertaking re Status of Favorable Determination Letter
Covering the Plan (See Item 8 of this Registration
Statement).
15.1 Letter From Ernst & Young LLP Regarding Unaudited Interim
Financial Information.
23.1 Consent of Ernst & Young LLP.
24.1 Power of Attorney of Directors.
24.2 Power of Attorney of the 401(k) Plan Administrative
Committee.
10
<PAGE> 1
Exhibit 4.1
GENENTECH, INC.
TAX REDUCTION INVESTMENT PLAN
(MAY 8, 1996 RESTATEMENT)
<PAGE> 2
TABLE OF CONTENTS
Page
PREAMBLE .............................................................. 1
SECTION 1 - DEFINITIONS................................................ 1
SECTION 2 - ELIGIBILITY AND MEMBERSHIP................................. 11
2.1 Initial Eligibility.................................. 11
2.2 Employer Aggregation................................. 11
2.3 Membership........................................... 11
2.4 Voluntary Suspension................................. 11
2.5 Mandatory Suspension................................. 12
2.6 Termination of Membership............................ 13
SECTION 3 - SALARY DEFERRALS........................................... 13
3.1 Salary Deferrals..................................... 13
3.2 Salary Deferral Election............................. 16
3.3 Payment of Deferrals................................. 19
SECTION 4 - MATCHING CONTRIBUTIONS..................................... 19
4.1 Amount of Matching Contributions..................... 19
4.2 Timing............................................... 23
4.3 Periodic Contributions............................... 23
4.4 Profits Not Required................................. 24
4.5 After-Tax Contributions.............................. 24
SECTION 5 - ALLOCATIONS AND INVESTMENT................................. 24
5.1 Salary Deferrals..................................... 24
5.2 Matching Contributions............................... 24
5.3 Investment........................................... 25
5.4 Limitations on Allocations........................... 26
SECTION 6 - ACCOUNTS AND COMMINGLED FUNDS.............................. 30
6.1 Members' Accounts.................................... 30
6.2 Trust Fund Assets.................................... 30
6.3 Commingled Funds..................................... 31
6.4 Valuation of Members' Accounts....................... 33
6.5 Valuation of Shares.................................. 33
6.6 Statements of Members' Accounts...................... 34
(i)
<PAGE> 3
Page
6.7 Accounts Nonforfeitable.............................. 34
SECTION 7 - DISTRIBUTIONS.............................................. 34
7.1 Events Permitting Distribution....................... 34
7.2 Times for Distribution............................... 35
7.3 Consent Requirement.................................. 35
7.4 Form of Distribution................................. 36
7.5 Common Stock Restrictions............................ 37
7.6 Beneficiary Designations............................. 38
7.7 Payments to Incompetents............................. 39
7.8 Undistributable Accounts............................. 40
SECTION 8 - WITHDRAWALS, LOANS AND DOMESTIC RELATIONS
ORDERS........................................................ 40
8.1 General Rules........................................ 40
8.2 Hardship Withdrawal.................................. 41
8.3 Age 59 1/2 Withdrawal................................ 43
8.4 Loans to Members..................................... 43
8.5 Qualified Domestic Relations Orders.................. 47
SECTION 9 - ADMINISTRATION OF THE PLAN................................. 48
9.1 Plan Administrator................................... 48
9.2 Committee............................................ 48
9.3 Actions by Committee................................. 48
9.4 Powers of Committee.................................. 49
9.5 Fiduciary Responsibilities........................... 50
9.6 Investment Responsibilities.......................... 51
9.7 Voting and Tender Offer Rights in Common Stock....... 52
9.8 Decisions of Committee............................... 55
9.9 Administrative Expenses.............................. 56
9.10 Eligibility to Participate........................... 56
9.11 Indemnification...................................... 56
SECTION 10 - TRUST FUND AND ROLLOVER CONTRIBUTIONS..................... 57
10.1 Trust Fund........................................... 57
10.2 No Diversion of Assets............................... 57
10.3 Continuing Conditions................................ 58
10.4 Change of Investment Alternatives.................... 58
10.5 Rollover Contributions............................... 59
(ii)
<PAGE> 4
Page
SECTION 11 - MODIFICATION OR TERMINATION OF PLAN....................... 60
11.1 Employers' Obligations Limited....................... 60
11.2 Right to Amend or Terminate.......................... 60
11.3 Effect of Termination................................ 61
SECTION 12 - TOP-HEAVY PLAN............................................ 61
12.1 Top-Heavy Plan Status................................ 61
12.2 Top-Heavy Plan Provisions............................ 62
SECTION 13 - GENERAL PROVISIONS........................................ 64
13.1 Plan Information..................................... 64
13.2 Inalienability....................................... 64
13.3 Rights and Duties.................................... 64
13.4 No Enlargement of Employment Rights.................. 64
13.5 Apportionment of Duties.............................. 65
13.6 Merger, Consolidation or Transfer.................... 65
13.7 Applicable Law....................................... 65
13.8 Severability......................................... 66
13.9 Captions............................................. 66
EXECUTION.............................................................. 67
(iii)
<PAGE> 5
GENENTECH, INC.
TAX REDUCTION INVESTMENT PLAN
(MAY 8, 1996 RESTATEMENT)
PREAMBLE
GENENTECH, INC. (the "Company") having established the Genentech, Inc.
Tax Reduction Investment Plan (the "Plan") effective as of January 1, 1985,
amended and restated the Plan effective (most recently) as of January 1, 1994,
hereby again amends and restates the Plan in its entirety effective as of May 8,
1996.
The Plan is maintained for the benefit of Eligible Employees of the
Company and its participating Affiliates, in order (1) to provide Eligible
Employees with a means of supplementing their retirement income on a tax-favored
basis, (2) to provide Eligible Employees with an incentive to continue and
increase their efforts to contribute to the success of the Company, and (3) to
enable Eligible Employees to acquire an equity ownership interest in the
Company. The Plan is designed to constitute a qualified profit-sharing plan, as
described in section 401(a) of the Code, which includes a qualified cash or
deferred arrangement, as described in section 401(k) of the Code. The Plan is
also designed to qualify as a 404(c) plan (within the meaning of section 404(c)
of ERISA).
SECTION 1
DEFINITIONS
The following capitalized words and phrases shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "AFFILIATE" shall mean a corporation, trade or business which is,
together with any Employer, a member of a controlled group of corporations or an
affiliated service group
<PAGE> 6
or under common control (within the meaning of section 414(b), (c), (m) or (o)
of the Code), but only for the period during which such other entity is so
affiliated with any Employer.
1.2 "ALTERNATE PAYEE" shall mean any spouse, former spouse, child or
other dependent (within the meaning of section 152 of the Code) of a Member who
is recognized by a QDRO (as defined in Section 8.5) as having a right to receive
any immediate or deferred payment from a Member's Account under this Plan.
1.3 "BENEFICIARY" shall mean the person or persons entitled to receive
benefits under the Plan upon the death of a Member in accordance with Section
7.6.
1.4 "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as from time to time constituted.
1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
1.6 "COMMINGLED FUNDS" shall mean (collectively) the commingled funds
described in Section 6.3.
1.7 "COMMITTEE" shall mean the administrative committee appointed by
the Board of Directors (as provided in Section 9.2) and charged with the general
administration of the Plan pursuant to Section 9.
1.8 "COMMON STOCK" shall mean the redeemable common stock of the
Company, par value $0.02, while such redeemable common stock is outstanding, and
effective October 25, 1995, the callable putable common stock of the Company,
par value $0.02,
2
<PAGE> 7
while such callable putable common stock is outstanding, and the common stock of
the Company as from time to time constituted.
1.9 "COMPANY" shall mean Genentech, Inc., a Delaware corporation, and
any successor by merger, consolidation or otherwise that assumes (in writing)
the obligations of the Company under the Plan.
1.10 "COMPENSATION" shall mean all salary, wages, annual cash bonuses
and sales commissions paid by any Employer with respect to services performed
during any period by an Employee, including Salary Deferrals, but excluding
contributions made by any Employer (other than Salary Deferrals) under this Plan
or any other employee benefit plan (within the meaning of section 3(3) of
ERISA). No portion of the Compensation of any Member for a Plan Year which
exceeds $150,000 (as adjusted pursuant to sections 401(a)(17) and 415(d) of the
Code) shall be taken into account under the Plan for any Plan Year. In applying
that $150,000 limit for a Plan Year, Section 1.17(c) shall apply except that the
term "Family Member" shall only include a spouse or a lineal descendant who has
not attained age 19 before the close of the Plan Year.
1.11 "DISABILITY" shall mean the mental or physical inability of a
Member to perform his or her normal job as evidenced by the certificate of a
medical examiner satisfactory to the Committee (in its discretion) certifying
that the Member is disabled under the standards of the Company's long-term
disability plan.
1.12 "ELIGIBLE EMPLOYEE" shall mean every Employee of an Employer
except:
(a) An Employee who is employed on a temporary basis as defined by
an Employer; provided, however, that any such Employee who is
credited with at least 1,000 Hours of Service for a 12-month
period beginning on his or her date of hire or any anniversary
thereof shall become an Eligible Employee as of the Entry Date
that next follows the last day of such 12-month period;
(b) A part-time Employee who is not normally scheduled to work at
least 20 hours per week; provided, however, that any such
Employee who is credited with
3
<PAGE> 8
at least 1,000 Hours of Service for a 12-month period
beginning on his or her date of hire or any anniversary
thereof shall become an Eligible Employee as of the Entry Date
that next follows the last day of such 12-month period;
(c) An Employee who is a member of a collective bargaining unit
and who is covered by a collective bargaining agreement where
retirement benefits were the subject of good faith bargaining,
unless the agreement specifically provides for coverage of
such Employee under this Plan;
(d) An individual employed by any corporation or other business
entity that is merged or liquidated into, or whose assets are
acquired by any Employer, unless any two (2) of the officers
identified in Section 11.2 designate (in writing) the
employees of that corporation or other business entity as
Eligible Employees under the Plan; provided, however, that the
exclusion of any individual under this paragraph (c) does not
make unavailable an exemption from section 16(a) or (b) of the
1934 Act;
(e) An Employee whose Compensation is not paid from any Employer's
U.S. payroll; and
(f) Leased Employees.
For purposes of this Section 1.12, "DATE OF HIRE" shall mean the date on which
an Employee first completes an Hour of Service.
1.13 "EMPLOYEE" shall mean an individual who is a (a) employed by an
Employer or Affiliate as a common-law employee, or (b) a Leased Employee.
However, if Leased Employees constitute less than 20% of the nonhighly
compensated work force (within the meaning of section 414(n)(5)(C)(ii) of the
Code), the term "Employee" shall not include those Leased Employees who are
covered by a plan described in section 414(n)(5) of the Code.
1.14 "EMPLOYER" shall mean the Company and each Affiliate that adopts
this Plan with the approval of the Board of Directors.
1.15 "ENTRY DATE" shall mean the first day of each payroll period.
4
<PAGE> 9
1.16 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended. Reference to a specific section of ERISA shall include such
section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or superseding such
section.
1.17 "HIGHLY COMPENSATED EMPLOYEE" shall mean a Highly Compensated
Active Employee or a Highly Compensated Former Employee, as defined below:
(a) "Highly Compensated Active Employee" shall mean any Employee
who performs services for an Employer or Affiliate during the
Determination Year (as defined in Section 1.17(e)(1)) and who:
(1) During the Look-Back Year (as defined in Section
1.17(e)(2)) (A) was a 5-percent owner (within the meaning of
section 414(q)(3) of the Code) (a "5% Owner"), (B) received
Compensation in excess of $75,000 (as adjusted pursuant to
sections 414(q)(1) and 415(d) of the Code), (C) received
Compensation in excess of $50,000 (as adjusted pursuant to
sections 414(q)(1) and 415(d) of the Code) and was a member of
the top-paid group (within the meaning of section 414(q)(4) of
the Code) for that Look-Back Year, or (D) was an officer of an
Employer or Affiliate and received Compensation for that
Look-Back Year that is greater than 50% of the dollar
limitation then in effect under section 415(b)(1)(A) and (d)
of the Code or (if no officer has Compensation in excess of
that threshold) was the highest paid officer for that
Look-Back Year;
(2) (A) Would be described in clause (B), (C) or (D)
of paragraph (a)(1) above if the term "Determination Year"
were substituted for the term "Look-Back Year" and (B) is one
of the 100 Employees who received the most Compensation for
the Determination Year; or
(3) Is a 5% Owner at any time during the
Determination Year.
Subject to the satisfaction of such conditions as may be prescribed
under section 414(q)(12)(B)(ii) of the Code, the Company may elect for
any Plan Year (i) to apply paragraph (a)(1)(B) above by substituting
"$50,000" for "$75,000" and (ii) not to apply paragraph (a)(1)(C)
above.
(b) "Highly Compensated Former Employee" shall mean any Employee
who (1) separated (or was deemed to have separated) from
service prior to the Determination Year, (2) performed no
services for any Employer or Affiliate during the
Determination Year, and (3) was a Highly Compensated Active
Employee for
5
<PAGE> 10
either the Plan Year in which the separation occurred or any
Determination Year ending on or after his or her 55th birthday.
(c) If an Employee is, at any time during a Determination Year or
Look-Back Year, a spouse, lineal ascendant or descendant, or
spouse of a lineal ascendant or descendant (a "Family Member")
of either (1) a 5% Owner (as defined in Section 1.17(a)(1)(A))
who is an active or former Employee or (2) a Highly
Compensated Employee who is one of the ten most highly
compensated employees ranked on the basis of Compensation paid
for that Year (in either case, a "Family Employee"), then for
that Year the Family Member and the Family Employee shall be
aggregated and treated as one Employee receiving Compensation
and contributions under the Plan equal to the sum of such
Compensation and contributions received by the Family Member
and the Family Employee.
(d) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100 Employees and the
number of Employees treated as officers, shall be made in
accordance with section 414(q) of the Code.
(e) For purposes of applying this Section 1.17:
(1) "Determination Year" shall mean the Plan
Year for which the determination is being made;
(2) "Look-Back Year" shall mean the Plan Year
preceding the Determination Year, unless the Committee (in its
discretion) elects to make Look-Back Year calculations based
on the Determination Year; and
(3) "Compensation" shall mean Testing Compensation
(as defined in Section 3.1.6), but without regard to the last
three sentences thereof.
1.18 "HOUR OF SERVICE" means an hour credited to an Employee under this
Section 1.18:
(a) PAID HOURS. An "Hour of Service" includes each hour for which:
(1) An Employee is directly or indirectly paid
or entitled to payment by an Employer or Affiliate for the
performance of duties;
(2) An Employee is directly or indirectly paid or
entitled to payment by an Employer or Affiliate for periods
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 or Leave of Absence (with pay); and
6
<PAGE> 11
(3) Back pay (irrespective of mitigation
damages) has been awarded or agreed to by an Employer or
Affiliate.
(b) NO DUTIES PERFORMED. Except as otherwise provided in
subsection (d) below, no Hours of Service shall be credited
for periods during which no duties are performed if payment by
an Employer or Affiliate is made or due under a plan
maintained solely for the purpose of complying with applicable
worker's compensation, unemployment compensation or disability
insurance laws, or is made as reimbursement to an Employee for
medical or medically related expenses. In no event will more
than 501 Hours of Service be credited under this paragraph (b)
on account of any single continuous period during which an
Employee performs no duties.
(c) CREDITING RULES. Hours of Service shall be credited under this
Section 1.18 in accordance with U.S. Department of Labor
Regulation Section 2530.200b-2(b) and (c).
(d) FAMILY-RELATED ABSENCES. In the case of an Employee who is
absent from active employment with an Employer or Affiliate
for any period,
(1) By reason of her pregnancy or the birth of
his or her child,
(2) By reason of the placement of a child with
the Employee in connection with his or her adoption of such
child,
(3) For purposes of caring for any such child
for a period beginning immediately following such birth or
placement, or
(4) On account of a leave of absence taken
pursuant to the Family and Medical Leave Act of 1993 ("FMLA"),
"Hour of Service" shall mean any hour that is not credited as an Hour
of Service (because the Employee is not paid or entitled to payment
therefor) but which would otherwise normally have been credited to the
Employee (but for the absence) under paragraphs (a) through (c) above.
In any case in which the Committee is unable to determine the number of
hours that would otherwise normally have been credited to an Employee
(but for the absence) under this paragraph (d), the Employee shall be
credited with eight Hours of Service for each day of the absence.
Notwithstanding the foregoing, (A) no more than 501 Hours of Service
shall be credited under this paragraph (d) to any individual on account
of any single pregnancy, birth, placement or other FMLA leave, and (B)
the hours described in this paragraph (d) shall be treated as Hours of
Service (i) for the Plan Year in which the absence begins, to the
extent required to credit the Employee with 1,000 Hours of Service for
that Plan Year, and (ii) with respect to the remainder of the 501 Hours
of Service maximum, for the next following Plan Year.
7
<PAGE> 12
1.19 "INVESTMENT MANAGER" shall mean any investment manager appointed
by the Committee in accordance with Section 9.6.
1.20 "LEASED EMPLOYEE" shall mean an individual who is a leased
employee (within the meaning of section 414(n)(2) of the Code) with respect to
an Employer or Affiliate.
1.21 "LEAVE OF ABSENCE" shall mean the period of an Employee's absence
from active employment (a) authorized by any Employer in accordance with its
established and uniformly administered personnel policies, provided that the
Employee returns to active employment after the authorized absence period
expires, unless the Employee's failure to return is attributable to his or her
retirement or death; or (b) because of military service in the armed forces of
the United States, provided that the Employee returns to active employment
following discharge within the period during which he or she retains
reemployment rights under federal law.
1.22 "MATCHING CONTRIBUTIONS" shall mean as to each Member the amounts
contributed under the Plan by the Employers, excluding Salary Deferrals, in
accordance with Section 4.1.
1.23 "MEMBER" shall mean an Eligible Employee who has become a Member
of the Plan pursuant to Section 2.1 and has not ceased to be a Member pursuant
to Section 2.6.
(a) For each Plan Year a Member shall be classified as an "Active
Member" if (1) he or she has enrolled in the Plan for any
portion of the Plan Year by authorizing the required Salary
Deferrals in accordance with Sections 2.3, 3.1 and 3.2, or (2)
his or her active membership is resumed during the Plan Year
after the end of a suspension period in accordance with
Section 2.4 or 2.5.
(b) A Member who is not an Active Member shall be classified as an
"Inactive Member."
8
<PAGE> 13
1.24 "MEMBER'S ACCOUNT" OR "ACCOUNT" shall mean as to any Member the
separate account maintained in order to reflect his or her interest in the Plan.
Each Member's Account shall be comprised of up to four separate subaccounts, as
follows:
1.24.1 "Loan Account" shall mean the subaccount maintained to record
any loans made to the Member from his or her Account pursuant to Section 5.3.3.
1.24.2 "Matching Account" shall mean the subaccount maintained to
record Matching Contributions made on behalf of the Member and any adjustments
relating thereto.
1.24.3 "Rollover Account" shall mean the subaccount maintained
to record any transfers to the Plan made by or on behalf of a Member pursuant to
Section 10.5 and any adjustments relating thereto.
1.24.4 "Salary Deferral Account" shall mean the subaccount
maintained to record the Salary Deferrals made on behalf of the Member and any
adjustments relating thereto.
1.25 "1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time. Reference to a specific section of the 1934 Act shall
include any section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing or
superseding such section.
1.26 "NORMAL RETIREMENT AGE" shall mean age 55.
1.27 "PLAN" shall mean the Genentech, Inc. Tax Reduction Investment
Plan, formerly the Genentech, Inc. Tax Incentive Savings Plan, as set forth in
this instrument and as heretofore or hereafter amended from time to time in
accordance with Section 11.2.
1.28 "PLAN YEAR" shall mean the calendar year.
9
<PAGE> 14
1.29 "SALARY DEFERRALS" shall mean as to each Member the amounts
contributed under the Plan by the Employers in accordance with Section 3.3,
pursuant to the salary deferral election made by the Member in accordance with
Sections 3.1 and 3.2.
1.30 "TRUST FUND" shall mean the trust fund established by and
maintained under the Trust Agreement entered into by and between any Employer
and the Trustee, as amended from time to time, for the purpose of funding the
benefits provided by the Plan, as provided in Section 10.
1.31 "TRUSTEE" shall mean Fidelity Management Trust Company, a
Massachusetts trust company, and any additional, successor or substitute trustee
or trustees from time to time acting as Trustee of the Trust Fund.
1.32 "VALUATION DATE" shall mean:
(a) For purposes of valuing Plan assets and Members' Accounts for
periodic reports and statements, the date as of which such
reports or statements are made; and
(b) For purposes of determining the amount of assets actually
distributed to the Member, his or her Beneficiary or an
Alternate Payee (or available for loan or withdrawal), the
date on which occur the relevant transactions required to
liquidate to cash the assets allocated to the Member's
Account, provided that when such transactions occur on more
than one date, there shall be several Valuation Dates, as
appropriate.
In any other case, the Valuation Date shall be the date designated by the
Committee (in its discretion) or the date otherwise set out in this Plan. In all
cases, the Committee (in its discretion) may change the Valuation Date, on a
uniform and nondiscriminatory basis, as is necessary or appropriate.
Notwithstanding the foregoing, the Valuation Date shall occur at least annually.
10
<PAGE> 15
SECTION 2
ELIGIBILITY AND MEMBERSHIP
2.1 INITIAL ELIGIBILITY. An Employee shall become a Member of the Plan
on the date he or she becomes an Eligible Employee.
2.2 EMPLOYER AGGREGATION. The status of an Employee as an Eligible
Employee shall not be adversely affected merely by reason of his or her
employment by more than one Employer during any Plan Year. The transfer of a
Member from employment with an Employer to employment with an Affiliate which is
not an Employer shall not be an event entitling the Member to a distribution
under Section 7.
2.3 MEMBERSHIP. Each Member's decision to become an Active Member shall
be entirely voluntary.
2.3.1 ACTIVE MEMBERSHIP. An Employee who has become a Member
under Section 2.1 may elect to become an Active Member, effective as of any
Entry Date, provided that he or she enrolls in the Plan and elects to make
Salary Deferrals, in such manner and within such advance notice period as the
Committee (in its discretion) shall specify.
2.3.2 INACTIVE MEMBERSHIP. A Member who does not elect to
become an Active Member when eligible to do so shall be at all times treated as
an Inactive Member until the Entry Date as of which he or she elects to become
an Active Member.
2.4 VOLUNTARY SUSPENSION. An Active Member may voluntarily suspend his
or her active membership in the Plan, thereby suspending his or her Salary
Deferrals and becoming an Inactive Member for future payroll periods during the
suspension period, by giving notice to such person, in such manner and within
such advance notice period as the
11
<PAGE> 16
Committee (in its discretion) shall specify; provided, however, that any Member
who is subject to section 16 of the 1934 Act may suspend his or her Salary
Deferrals only as of the first day of a calendar quarter.
2.4.1 EFFECT. With respect to the period for which a Member's
active membership is suspended, he or she shall not make any Salary Deferrals
nor share in the allocation of Matching Contributions, and he or she may not
later make the Salary Deferrals that he or she might otherwise have made during
the suspension period. No distribution shall be made to a Member solely as the
result of any suspension of his or her active membership.
2.4.2 RESUMPTION OF ACTIVE MEMBERSHIP. A Member whose active
membership in the Plan has been suspended may voluntarily resume his or her
Salary Deferrals, effective with respect to Compensation paid for the payroll
period beginning on any Entry Date, by again electing to become an Active Member
in accordance with Section 2.3; provided, however, that with respect to any
Member who is subject to section 16 of the 1934 Act and whose active membership
has been suspended (whether voluntarily, mandatorily or in any other fashion),
such Member shall not resume active membership for a minimum of six (6) months
after the Entry Date on which such Member's suspension became effective.
2.5 MANDATORY SUSPENSION. If a Member (1) ceases to be an Eligible
Employee because he or she ceases to meet the requirements of Section 1.12, (2)
is transferred to employment with an Affiliate which is not an Employer, (3) is
granted a Leave of Absence without pay, (4) is on long-term disability, or (5)
is placed on layoff or furlough status, then:
12
<PAGE> 17
(a) His or her status as an Active Member shall be suspended (in
accordance with Section 2.4.1) for each payroll period
beginning during the continuation of such ineligible status,
and
(b) After he or she again becomes an Eligible Employee and the
conditions described in clauses (1) through (5) above cease to
apply, his or her status as an Active Member may be resumed
only in accordance with Section 2.4.2.
Notwithstanding any contrary Plan provision, a Member's Compensation which is
paid for any portion of a payroll period that includes a period of mandatory
suspension shall not be subject to any salary deferral election nor contributed
under the Plan as Salary Deferrals.
2.6 TERMINATION OF MEMBERSHIP. An Eligible Employee who has become a
Member shall remain a Member until his or her employment with all Employers and
Affiliates terminates or, if he or she remains alive, until his or her entire
Account balance is distributed (whichever is later).
SECTION 3
SALARY DEFERRALS
3.1 SALARY DEFERRALS. Each Active Member may elect to defer portions of
his or her Compensation payments and to have the amounts of such Salary
Deferrals contributed by the Employers to the Trust Fund and credited to his or
her Salary Deferral Account under the Plan. An Active Member may elect to defer
a portion of each payment of Compensation that would otherwise be made to him or
her, after the election becomes and while it remains effective, equal to any
whole percentage from 1% to 15% (inclusive) of his or her Compensation.
3.1.1 SECTION 401(K) CEILING. Notwithstanding the
foregoing, the Committee:
(a) May suspend or limit any Member's salary deferral election at
any time in order to prevent the cumulative amount of the
Salary Deferrals contributed
13
<PAGE> 18
on behalf of the Member for any calendar year from exceeding
the Section 401(k) Ceiling;
(b) Shall cause any amount allocated to the Plan as an excess
deferral (calculated by taking into account only amounts
deferred under this and any other cash or deferred arrangement
maintained by any Employer or Affiliate and qualified under
section 401(k) of the Code), together with any income
allocable to that amount for the calendar year to which the
excess deferral relates, to be distributed to the Member in
accordance with section 402(g)(2)(A) of the Code; and
(c) May cause any other amount allocated to the Member's Account
and designated by the Member as an excess deferral, together
with any income allocable thereto for the calendar year to
which the excess deferral relates, to be distributed to the
Member in accordance with section 402(g)(2)(A) of the Code.
(d) Any Matching Contributions allocated to the Member's Matching
Account by reason of any excess deferral distributed pursuant
to paragraph (b) or (c), together with any income allocable
thereto for the calendar year to which the excess deferral
relates, shall be forfeited at the time such distribution is
made and applied to reduce the next succeeding Matching
Contribution to the Plan, without regard to the extent of the
Member's vested interest in his or her Matching Account.
(e) The "Section 401(k) Ceiling" is a dollar amount equal to the
dollar limit prescribed in section 402(g)(3) of the Code (as
adjusted pursuant to sections 402(g)(5) and 415(d) of the
Code).
3.1.2 LIMITATIONS ON HCE MEMBERS. For any Plan Year, the
Committee (in its discretion) may limit the period for which, and/or specify a
lesser maximum percentage at which, Salary Deferrals may be elected by HCE
Members (as defined in Section 3.1.3) in such manner as may be necessary or
appropriate in order to assure that the limitation described in Section 3.1.4
will be satisfied.
3.1.3 HCE AND NON-HCE MEMBERS. All Members who are Eligible
Employees at any time during a Plan Year (whether or not they are Active
Members), and who are Highly Compensated Employees (as defined in Section 1.17)
with respect to the Plan Year, shall be "HCE Members" for the Plan Year. All
other Members who are
14
<PAGE> 19
Eligible Employees at any time during the Plan Year shall be "Non-HCE Members"
for the Plan Year.
3.1.4 DEFERRAL PERCENTAGE LIMITATION. In no event shall the
actual deferral percentage, determined in accordance with Section 3.1.5 (the
"ADP"), for the HCE Members for a Plan Year exceed the maximum ADP, as
determined by reference to the ADP for the Non-HCE Members, in accordance with
the following table:
If the ADP for
Non-HCE Members Then the Maximum ADP
("NHCEs' ADP") is: for HCE Members is:
Less than 2% 2.0 x NHCEs' ADP
2% to 8% NHCEs' ADP + 2%
More than 8% 1.25 x NHCEs' ADP
3.1.5 ACTUAL DEFERRAL PERCENTAGE. The actual deferral
percentage for the HCE or Non-HCE Members for a Plan Year shall be calculated by
computing the average of the percentages (calculated separately for each HCE or
Non-HCE Member) (the "Deferral Rates") determined by dividing (1) the total of
all Salary Deferrals made by the Member and credited to his or her Salary
Deferral Account for the Plan Year, by (2) the Member's Testing Compensation (as
defined in Section 3.1.6) for the Plan Year. In computing a Member's Deferral
Rate, the following special rules shall apply:
(a) If any Employer or Affiliate maintains any other cash or
deferred arrangement which is aggregated by the Company with
this Plan for purposes of applying section 401(a)(4) or 410(b)
of the Code, then all such cash or deferred arrangements shall
be treated as one plan for purposes of applying Section 3.1.4.
(b) If an HCE Member is a participant in any other cash or
deferred arrangement maintained by any Employer or Affiliate,
the separate Deferral Rates determined for the Member under
all such cash or deferred arrangements shall be aggregated
with the separate Deferral Rate determined for the Member for
purposes of applying Section 3.1.4.
15
<PAGE> 20
(c) If an HCE Member is subject to the family aggregation rules of
Section 1.17(c), the Deferral Rate of the family unit shall be
the greater of (1) the combined Deferral Rate of all Family
Members (as defined in Section 1.17(c)) who are HCE Members
without regard to family aggregation, or (2) the combined
Deferral Rate of all eligible Family Members.
3.1.6 TESTING COMPENSATION. For purposes of applying Sections
3.1, 3.2 and 4.1 and the discrimination tests of sections 401(k) and 401(m) of
the Code, "Testing Compensation" shall mean with respect to any Member:
(a) The sum of (1) his or her Total Compensation (as defined in
Section 5.4.2(d)), (2) Salary Deferrals credited to his or her
Salary Deferral Account, and (3) other amounts that are
contributed to an employee benefit plan by any Employer
pursuant to a salary reduction agreement and are not
includible in gross income under section 125, 401(k),
402(e)(3), 402(h), 403(b) or 414(h)(2) of the Code; or
(b) The amount of his or her compensation calculated by the
Committee in a manner which satisfies applicable requirements
of Treas. Reg. Section 1.401(k)-1(g)(2)(i).
Compensation for periods prior to the time that the individual becomes a Member
shall not be taken into account. No amount in excess of $150,000 (as adjusted
pursuant to sections 401(a)(17) and 415(d) of the Code) shall be taken into
account under this Section 3.1.6 for any Plan Year. In applying that $150,000
limit for a Plan Year, Section 1.17(c) shall apply except that the term "Family
Member" shall only include a spouse or lineal descendant who has not attained
age 19 before the close of the Plan Year.
3.2 SALARY DEFERRAL ELECTION. Each Active Member shall determine the
percentage of his or her Compensation that shall be deferred and contributed to
the Trust Fund as his or her Salary Deferrals, subject to the limitations of
Section 3.1, at the time he or she becomes an Active Member and thereafter may
redetermine such percentage from time to time as of any Entry Date. In either
event, (a) the Active Member shall execute and deliver a salary deferral
election with respect to his or her Salary Deferrals, in such
16
<PAGE> 21
manner and within such advance notice period as the Committee (in its
discretion) shall specify, and (b) no Salary Deferrals shall be made by any
Active Member except in accordance with his or her salary deferral election and
the limitations of Section 3.1.
3.2.1 AMOUNT. The amount of Salary Deferrals that may be made
by each Active Member for each payroll period shall be the amount in dollars and
cents that is nearest to the amount of Compensation subject to the salary
deferral election multiplied by the percentage elected by the Active Member
pursuant to Section 3.1.
3.2.2 CHANGES. An Active Member may change the percentage
determined under the first sentence of this Section 3.2, effective with respect
to Compensation paid for the payroll period beginning on any Entry Date, or such
other date as the Committee (in its discretion) may specify, by giving notice in
such manner and within such advance notice period as the Committee (in its
discretion) shall specify. The salary deferral election made by an Active Member
shall remain in effect until his or her active membership in the Plan is
terminated, except to the extent that the election is suspended in accordance
with Section 2.4, 2.5 or 8.1, changed in accordance with this Section 3.2.2, or
reduced pursuant to Section 3.1.1 or 3.1.2.
3.2.3 POTENTIAL EXCESS ADP. In the event that (but for the
application of this Section 3.2.3) the Committee determines that the ADP for HCE
Members would exceed the maximum permitted under Section 3.1.4 for a Plan Year
(the "ADP Maximum"), then the Committee (in its discretion) may reduce, in
accordance with Section 3.1.2, the percentage or amount of Salary Deferrals
subsequently to be contributed on behalf of the HCE Members by such percentage
or amount as, and for as long as, the Committee (in its discretion) may
determine is necessary or appropriate in the circumstances then prevailing.
17
<PAGE> 22
If the Committee determines that it is no longer necessary to reduce the Salary
Deferrals contributed on behalf of (current or former) HCE Members, the
Committee (in its discretion) may permit some or all HCE Members, on a uniform
and nondiscriminatory basis, to make new salary deferral elections with respect
to their Salary Deferrals and shall establish a policy as to the deferral
percentages that shall apply with respect to those HCE Members who do not make
new elections.
3.2.4 ACTUAL EXCESS ADP. In the event that the Committee
determines that the ADP for the HCE Members exceeds the ADP Maximum for any Plan
Year, then the amount of any excess contributions (within the meaning of section
401(k)(8)(B) of the Code) contributed on behalf of any HCE Member shall be
distributed, together with any income allocable thereto for the Plan Year to
which the excess contributions relate, to the HCE Member before the close of the
Plan Year that next follows that Plan Year.
(a) DETERMINATION OF EXCESS CONTRIBUTIONS. The amount of excess
contributions for a HCE Member shall be determined in the
following manner:
(1) The Salary Deferrals of the HCE Member with the
highest Deferral Rate shall be reduced to the extent necessary
to satisfy the ADP test or cause such Rate to equal the
Deferral Rate of the HCE Member with the next highest Deferral
Rate. This process shall be repeated until the ADP test is
satisfied.
(2) The amount of excess contributions for a HCE
Member shall be equal to his or her Salary Deferrals
(calculated using the Member's original Deferral Rate), minus
his or her Deferrals calculated using the Member's Deferral
Rate as reduced under paragraph (a)(1) above.
(3) The amount of excess contributions, as determined
according to the method described in this paragraph (a), shall
be reduced by any excess deferrals previously distributed to a
Member for the Plan Year under Section 3.1.1.
(b) FAMILY AGGREGATION. In the case of an HCE Member whose
Deferral Rate is determined under the family aggregation rules
of Section 3.1.5(c), the Deferral Rate shall be reduced in
accordance with the "levelling" method described
18
<PAGE> 23
in Treas. Reg. Section 1.401(k)-1(f)(2). Excess contributions for the
family unit shall be allocated among the Family Members in proportion
to the Salary Deferrals of each Family Member that have been combined.
(c) DETERMINATION OF ALLOCABLE INCOME. The income allocable to any
excess contributions for the Plan Year, excluding income for
the period between the end of the Plan Year and the date of
distribution, shall be determined in accordance with section
401(k)(8)(A)(i) of the Code.
(d) FORFEITURE OF RELATED MATCHING CONTRIBUTIONS. Any Matching
Contributions allocated to the Member's Matching Account by
reason of any excess contributions distributed pursuant to
this Section 3.2.4, together with any income allocable thereto
for the Plan Year to which the excess contributions relate,
shall be forfeited and applied to reduce the next succeeding
Matching Contribution to the Plan, without regard to the
extent of the Member's vested interest in his or her Matching
Account.
(e) INCORPORATION BY REFERENCE. The foregoing provisions of this
Section 3 are intended to satisfy the requirements of section
401(k)(3) of the Code and, to the extent not otherwise stated
above, the provisions of section 401(k)(3) and 401(m)(9) of
the Code and Treas. Reg. Sections 1.401(k)-1(b) and 1.401(m)-2
are incorporated herein by reference.
3.3 PAYMENT OF DEFERRALS. Subject to the provisions of Sections 3.1,
3.2, 10.3 and 11, the Employers shall pay to the Trust Fund the amounts elected
by Members to be contributed as Salary Deferrals pursuant to Section 3. Any
Salary Deferrals to be contributed for a payroll period in accordance with the
preceding sentence shall be paid to the Trust Fund as soon as practicable (and
in no event later than 90 days) after the end of such period.
SECTION 4
MATCHING CONTRIBUTIONS
4.1 AMOUNT OF MATCHING CONTRIBUTIONS. Subject to the provisions of this
Section 4.1 and Sections 10.3 and 11, the Employers shall contribute to the
Trust Fund as Matching Contributions amounts equal to the Matching Amount
(determined pursuant to Section 4.1.1) determined by the Salary Deferrals made
for each payroll period by each
19
<PAGE> 24
eligible Active Member (determined pursuant to Section 4.1.3). Only those Salary
Deferrals which are made pursuant to such portion of each eligible Active
Member's Deferral Rate (determined pursuant to Section 3.1) as does not exceed
the Matching Ceiling (determined pursuant to Section 4.1.2) shall be taken into
account in calculating the amount of the Matching Contribution (if any) to be
made in respect of the Member's Salary Deferrals.
4.1.1 MATCHING AMOUNT. The rate at which the amount of
Employer Matching Contributions shall be made for any Plan Year (the "Matching
Amount") shall be determined as follows:
If the Salary Deferral
Contribution Rate for an Then the Matching Amount
Eligible Active Member is: for the Member shall be:
Less than or equal to 2% Equal to the Salary Deferrals
Greater than 2% Equal to the first 2% of Salary
Deferrals plus one-half (1/2) of
Salary Deferrals greater than 2%
and less than or equal to 6%
The "Salary Deferral Contribution Rate" for an Active Member is determined on a
Plan Year basis and is (Salary Deferrals) divided by (Compensation), expressed
as a percentage. Subject to the limitations of Section 5.4, the Matching Amount
may be changed for any Plan Year to such extent (if any) as the Board of
Directors (in its discretion) may determine by resolution and without amending
the Plan pursuant to Section 11.2; provided, however, that no decrease in the
Matching Amount applicable to any Salary Deferral Contribution Rate shall take
effect before the first payroll period that begins after the decrease is
announced to eligible Active Members.
20
<PAGE> 25
4.1.2 MAXIMUM MATCHED RATE. For any Plan Year for which a
different rate is not determined in accordance with the following sentence, the
maximum Salary Deferral Contribution Rate that shall be taken into account in
determining the amount of the Matching Contribution (if any) to be made on
behalf of any eligible Active Member pursuant to this Section 4.1 (the "Matching
Ceiling") shall be 6%, i.e., the amount of Matching Contributions (if any) to be
made on behalf of any eligible Active Member shall not exceed 4% of his or her
Compensation. Subject to the limitations of Section 5.4, the Board of Directors
(in its discretion) may change for any Plan Year the maximum Salary Deferral
Contribution Rate stated in the preceding sentence; provided, however, that no
decrease in the Matching Ceiling shall take effect before the first payroll
period that begins after the decrease is announced to eligible Members.
4.1.3 ELIGIBLE MEMBERS. Notwithstanding the foregoing
provisions of this Section 4.1, no Matching Contribution shall be made on behalf
of an Active Member for a Plan Year unless (a) he or she remains an Eligible
Employee on the last Valuation Date of the Plan Year, or (b) his or her
employment with all Employers and Affiliates terminated at any time during the
Plan Year by reason of death or Disability.
4.1.4 LIMITATIONS ON HCE MEMBERS. For any Plan Year, the
Committee (in its discretion) may limit the period for which, and/or specify a
lesser Matching Amount and/or Matching Ceiling with respect to the amount of
Matching Contributions to be made on behalf of HCE Members (as defined in
Section 3.1.3) in such manner as may be necessary or appropriate in order to
assure that the limitation described in Section 4.1.5 will be satisfied.
21
<PAGE> 26
4.1.5 CONTRIBUTION PERCENTAGE LIMITATION. In no event shall
the actual contribution percentage, determined in accordance with Section 4.1.6
(the "ACP"), for the HCE Members for a Plan Year exceed the maximum ACP, as
determined by reference to the ACP for the Non-HCE Members, in accordance with
the following table:
If the ACP for
Non-HCE Members Then the Maximum ACP
("NHCEs' ACP") is: for HCE Members is:
Less than 2% 2.0 x NHCEs' ACP
2% to 8% NHCEs' ACP + 2%
More than 8% 1.25 x NHCEs' ACP
4.1.6 ACTUAL CONTRIBUTION PERCENTAGE. The actual contribution
percentage for the HCE or Non-HCE Members for a Plan Year shall be calculated by
computing the average of the percentages (calculated separately for each HCE or
Non-HCE Member) (the "Contribution Rates") determined by dividing (a) the total
of all Matching Contributions made on behalf of the Member and credited to his
or her Matching Account for the Plan Year, by (b) the Member's Testing
Compensation (as defined in Section 3.1.6) for the Plan Year. The special
aggregation rules set forth in Section 3.1.5 with respect to calculation of the
Members' ADPs shall also apply to the calculation of their ACPs.
4.1.7 POTENTIAL EXCESS ACP. In the event that (but for the
application of this Section 4.1.7) the Committee determines that the ACP for the
HCE Members would exceed the maximum permitted under Section 4.1.5 for a Plan
Year (the "ACP Maximum"), then the Committee (in its discretion) may reduce, in
accordance with Section 4.1.4, the percentage or amount of Matching
Contributions subsequently to be made on behalf of the HCE Members by such
percentage or amount as, and for as long as, the Committee (in its discretion)
may determine is necessary or appropriate in the circumstances then prevailing.
22
<PAGE> 27
4.1.8 ACTUAL EXCESS ACP. In the event that the Committee
determines that the ACP for the HCE Members exceeds the ACP Maximum for a Plan
Year, then the amount of any excess aggregate contributions (within the meaning
of section 401(m)(6)(B) of the Code) contributed on behalf of any HCE Member
shall be distributed, together with any income allocable to that amount for the
Plan Year to which the excess aggregate contributions relate, to the HCE Member
before the close of the Plan Year that next follows that Plan Year.
(a) DETERMINATION OF EXCESS AGGREGATE CONTRIBUTIONS. The amount of
excess aggregate contributions for an HCE Member, the income
allocable thereto and the application of the family
aggregation rules shall be determined in the manner provided
in Section 3.2.4 with respect to excess contributions.
(b) PROHIBITION ON MULTIPLE USE. Notwithstanding any contrary Plan
provision, multiple use of the alternative methods of
compliance with sections 401(k) and 401(m) of the Code, as set
forth in sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) of
the Code, shall not be permitted. In the event that multiple
use occurs, it shall be corrected by reducing the ADP and/or
ACP for HCE Members (in the discretion of the Committee), and
treating such reductions as excess contributions and/or excess
aggregate contributions (as appropriate) under Section 3.2.4
or this Section 4.1.8.
(c) INCORPORATION BY REFERENCE. The foregoing provisions of this
Section 4.1 are intended to satisfy the requirements of
section 401(m) of the Code and, to the extent not otherwise
stated above, the provisions of section 401(m)(2) and (9) of
the Code and Treas. Reg. Sections 1.401(m)-1(b) and 1.401(m)-2
are incorporated herein by reference.
4.2 TIMING. Subject to the provisions of Sections 4.1.4, 10.3 and 11,
Matching Contributions shall be paid to the Trust Fund within the time
prescribed by law (including extensions) for filing the Company's federal income
tax return for its taxable year that ends with or within the Plan Year for which
the Matching Contributions are made.
4.3 PERIODIC CONTRIBUTIONS. Subject to the foregoing provisions of this
Section 4, any Matching Contributions to be made for a Plan Year may be paid in
23
<PAGE> 28
installments from time to time during or after the Plan Year for which they are
made. The Employers shall specify, as to each Matching Contribution payment made
to the Trust Fund, the Plan Year to which the payment relates. The Employers
intend the Plan to be permanent, but the Employers do not obligate themselves to
make any Matching Contributions under the Plan whatsoever.
4.4 PROFITS NOT REQUIRED. Each Employer shall make any contributions
otherwise required to be made for a Plan Year without regard to its current or
accumulated earnings or profits for the taxable year that ends with or within
the Plan Year for which the contributions are made. Notwithstanding the
foregoing, the Plan is designed to constitute a qualified profit-sharing plan as
described in section 401(a) of the Code.
4.5 AFTER-TAX CONTRIBUTIONS. In no event shall any Member be permitted
to make contributions to the Plan or Trust Fund on an after-tax basis.
SECTION 5
ALLOCATIONS AND INVESTMENT
5.1 SALARY DEFERRALS. Except as provided in Section 3.2.4, the Salary
Deferrals made on behalf of an Active Member for any period shall be allocated
to his or her Salary Deferral Account on the business day that is or next
follows the date on which such Salary Deferrals are received by the Trust Fund.
5.2 MATCHING CONTRIBUTIONS. Except as provided in Section 4.1.8, the
Matching Contributions made on behalf of an Active Member for a Plan Year shall
be allocated to his or her Matching Account on the business day that is or next
follows the date on which such Matching Contributions are received by the Trust
Fund.
24
<PAGE> 29
5.3 INVESTMENT. Each Member (or, if deceased, his or her Beneficiary)
shall elect, in such manner and at such times as the Committee (in its
discretion) shall specify, the percentages of all amounts allocated to his or
her Account that are to be invested in each of the Commingled Funds. A Member
(or Beneficiary) may specify as to any Commingled Fund any percentage, provided
that the total of the percentages specified shall not exceed 100%.
5.3.1 CHANGES. The instructions of a Member (or Beneficiary),
concerning the investment of the amounts allocated to his or her Account may be
changed in accordance with such procedures as the Committee (in its discretion)
shall designate from time to time. The designated procedures at all times shall
permit Members (and Beneficiaries) to make investment changes in accordance with
designated procedures effective at a minimum of four (4) times per each Plan
Year, and more frequently if administratively feasible, all in a manner designed
to permit the Plan to qualify as a section 404(c) plan (within the meaning of
section 404(c) of ERISA).
5.3.2 FAILURE TO ELECT. If a Member (or Beneficiary) fails to
direct the manner in which the amounts allocated to his or her Account are to be
invested, such amounts shall be invested in the Short-Term Fund (as described in
Section 6.3.2).
5.3.3 MEMBER LOANS. In the event a loan is to be made to a
Member in accordance with Section 8.4, the Committee shall direct that an
amount, in cash, equal to the amount of the loan be reallocated, as directed by
the Committee (in its discretion), from the portion of the Member's Account
invested in one or more of the other Commingled Funds to a separate subaccount
within the Member's Account (the "Loan Account"), which shall be maintained for
the purpose of accounting for any loans made to the Member from
25
<PAGE> 30
his or her Account. Interest and principal payments on loans made to any Member
shall be allocated to his or her Loan Account as received by the Trustee and,
after appropriate adjustments have been made to the Loan Account to reflect such
payments, shall be reallocated to the Commingled Funds in the same percentages
as specified by the Member pursuant to the introductory paragraph of this
Section 5.3, or if there is no such designation currently in force, as the
Committee (in its discretion) shall determine.
5.4 LIMITATIONS ON ALLOCATIONS.
5.4.1 ANNUAL ADDITION LIMITATION. Notwithstanding any contrary
Plan provision, in no event shall the Annual Addition to any Member's Account
for any Plan Year exceed the lesser of (a) $30,000 or (if greater) 25% of the
dollar limitation in effect under section 415(b)(1)(A) of the Code, or (b) 25%
of the Member's Total Compensation for the Plan Year; provided, however, that
clause (b) shall not apply to Annual Additions described in clauses (5) and (6)
of Section 5.4.2(c).
5.4.2 DEFINITIONS. For purposes of this Section 5.4, the
following definitions shall apply:
(a) "Affiliate" shall mean a corporation, trade or business which
is, together with any Employer, a member of a controlled group
of corporations or an affiliated service group or under common
control (within the meaning of section 414(b), (c), (m) or (o)
of the Code, as modified by section 415(h) of the Code), but
only for the period during which such other entity is so
affiliated with any Employer.
(b) "Aggregated Plan" shall mean any defined contribution plan
which is aggregated with this Plan pursuant to Section 5.4.3.
(c) "Annual Addition" shall mean with respect to each Member the
sum for a Plan Year of (1) the Member's Salary Deferrals to be
credited to the Member's Salary Deferral Account; (2) any
Matching Contributions to be credited to the Member's Matching
Account; (3) the share of all contributions made by all
Employers and Affiliates (including salary reduction
contributions made pursuant to section 401(k) of the Code) and
any forfeitures to be credited to the Member's
26
<PAGE> 31
account under any Aggregated Plan; (4) any after-tax employee
contributions made by the Member for the Plan Year under any
Aggregated Plan; (5) any amount allocated to the Member's
individual medical account (within the meaning of section
415(l) of the Code) under a defined benefit plan maintained by
an Employer or Affiliate; and (6) any amount attributable to
post-retirement medical benefits that is allocated pursuant to
section 419A of the Code to the Member's separate account
under a welfare benefits fund (within the meaning of section
419(e) of the Code) maintained by an Employer or Affiliate.
(d) "Total Compensation" shall mean the amount of an Employee's:
(1) Wages (within the meaning of section 3401(a) of
the Code) and all other payments of compensation which an
Employer or Affiliate is required to report in Box 1 ("wages,
tips, other compensation") of IRS Form W-2, but (A) excluding
amounts paid or reimbursed by the Employer or Affiliate for
moving expenses incurred by the Member, to the extent that at
the time of payment it is reasonable to believe that such
amounts qualify as a "qualified moving expense reimbursement"
(within the meaning of section 132(a)(6) of the Code), and (B)
determined without regard to any rules that limit the
remuneration included in wages based on the nature or location
of the employment or the services performed (such as the
agricultural labor exception); or
(2) Compensation calculated by the Committee in
a manner which satisfies applicable requirements of Treas.
Reg. Section 1.415-2(d).
5.4.3 OTHER DEFINED CONTRIBUTION PLANS. All defined
contribution plans (terminated or not) maintained by any Employer or Affiliate
shall be aggregated with this Plan, and all plans so aggregated shall be
considered as one plan in applying the limitations of this Section 5.4, provided
that the special limitation applicable to employee stock ownership plans under
section 415(c)(6) of the Code shall be taken into account with respect to a
Member who participates in any such plan.
5.4.4 DEFINED BENEFIT PLANS. If any Member participates both
in this Plan and in one or more defined benefit plans maintained by any Employer
or Affiliate for the same Plan Year, then the sum of the amounts in (a) and (b)
below shall not exceed 1.0:
(a) The ratio of (1) the annual additions actually made to his or
her accounts under this Plan and all other defined
contribution plans (subject to
27
<PAGE> 32
section 415(e)(4) of the Code) for all of his or her years of
service with all Employers and Affiliates (his or her "Total
Service") to (2) the sum of the lesser of the following
amounts (determined for each Plan Year included in his or her
Total Service):
(i) An amount equal to the product of (A) 1.4 and (B)
the percentage limitation in effect under section 415(c)(1)(B)
of the Code for the Plan Year, multiplied by the Member's
Total Compensation for the Plan Year, or
(ii) An amount equal to the product of 1.25 and the
dollar limitation in effect under section 415(c)(1)(A) and (d)
of the Code for the Plan Year.
(b) The ratio of (1) the aggregate of his or her projected annual
retirement benefits under all such defined benefit plans
(determined as of the end of the Plan Year) to (2) the lesser
of (A) an amount equal to 140% of the Member's average Total
Compensation for the three (3) consecutive years included in
his or her Total Service in which he or she had the highest
Total Compensation and was an active participant in any such
defined benefit plan or (B) the product of 1.25 and the dollar
limitation in effect under section 415(b)(1)(A) of the Code
(as adjusted in accordance with section 415(d) of the Code)
for the Plan Year.
5.4.5 ADJUSTMENTS. If, as a result of (1) a reasonable error
in estimating a Member's Total Compensation, allocating forfeitures under any
Aggregated Plan or other circumstances which permit the application of the rules
stated in this Section 5.4.5, or (2) a reasonable error in determining the
amount of Salary Deferrals that may be made under the limits of this Section
5.4, any of the limitations of this Section 5.4 otherwise would be exceeded with
respect to any Member for any Plan Year, then the following actions, but only to
the extent necessary to avoid exceeding such limitations, shall be taken in the
following order:
(a) Any after-tax employee contributions made by the Member under
any Aggregated Plan for the Plan Year shall be returned to him
or her;
(b) In the circumstances described in clause (2) above, Salary
Deferrals shall be distributed to the Member to the extent
required to reduce the excess annual addition to the Member's
Account attributable to that circumstance;
28
<PAGE> 33
(c) The Member's accrued benefit under any defined
benefit plan shall be frozen and/or the rate of its future accrual
shall be reduced;
(d) Any Matching Contributions allocated to the Member's
Matching Account under this Plan and/or any employer matching
contributions allocated to his or her account under any Aggregated Plan
shall be reallocated to a suspense account, and the balance credited to
that account shall be applied to reduce the Matching Contributions or
other employer matching contributions (of the same class) otherwise to
be made for and allocated to all eligible Members or participants in
the Aggregated Plan for succeeding Plan Years in order of time;
(e) The Member's Salary Deferrals and any salary reduction
contributions made at the Member's election pursuant to section 401(k)
of the Code under any Aggregated Plan shall be reallocated to a
suspense account and applied to reduce such Salary Deferrals or other
salary reduction contributions as otherwise are to be made thereafter
at his or her election under this or any Aggregated Plan; and
(f) Any employer contributions otherwise to be allocated to
the Member's account under any Aggregated Plan shall be reallocated to
a suspense account, and the balance credited to that account shall be
applied to reduce other employer matching contributions (of the same
class) otherwise to be made for and allocated to all eligible
participants in the Aggregated Plan for succeeding Plan Years in order
of time.
5.4.6 SUSPENSE ACCOUNTS. If a suspense account is created
under Section 5.4.5(d), (e) and/or (f) and exists in a later Plan Year, the
amount allocated to the suspense account shall be reallocated to the Member's
account before any amount may be contributed to this or any Aggregated Plan on
behalf of the Member for that Plan Year. If the Member for whom a suspense
account is maintained terminates employment with all Employers and Affiliates
before the suspense account balance has been reallocated pursuant to Section
5.4.5, that balance shall be reallocated among the accounts of all Members who
remain Employees on the first day of the next following Plan Year, in direct
proportion to each such Member's share of the aggregate Total Compensation paid
to all such Members for the Plan Year of termination (subject to the limitations
of this Section 5.4), before any amount may be contributed to this or any
Aggregated Plan for the Plan Year of
29
<PAGE> 34
reallocation. Suspense accounts shall not share in allocations of earnings and
gains (or losses) of the Trust Fund. The balances credited to all suspense
accounts shall be returned to the Employers upon termination of the Plan.
5.4.7 LIMITATION YEAR. For purposes of applying the
limitations of section 415 of the Code, the limitation year shall be the Plan
Year.
SECTION 6
ACCOUNTS AND COMMINGLED FUNDS
6.1 MEMBERS' ACCOUNTS. At the direction of the Committee, there
shall be established and maintained for each Active Member, as appropriate:
(a) A Salary Deferral Account, to which shall be credited
all Salary Deferrals paid to the Trust Fund at his or her election
under Section 3;
(b) A Matching Account, to which shall be credited all
Matching Contributions paid to the Trust Fund on his or her behalf
under Section 4;
(c) A Rollover Account, to which shall be credited all
transfers made to the Trust Fund by or on behalf of the Member under
Section 10.5; and
(d) A Loan Account, to which shall be credited (pursuant
to Section 5.3.3) any amounts loaned to the Member in accordance with
Section 8.4.
Each Member's Account shall also reflect the value of its proportionate interest
in each of the Commingled Funds as of each Valuation Date. The maintenance of a
separate Account for each Member shall not be deemed to segregate for the
Member, nor to give the Member any ownership interest in, any specific assets of
the Trust Fund.
6.2 TRUST FUND ASSETS. The Trust Fund shall consist of the
Members' Salary Deferrals, Matching Contributions, rollovers made pursuant to
Section 10.5, all investments and reinvestments made therewith, and all earnings
and gains (less any losses) thereon. The Trustee shall hold and administer all
assets of the Trust Fund in the Commingled
30
<PAGE> 35
Funds, and each Member and his or her Account shall have only an undivided
interest in any of the Commingled Funds.
6.3 COMMINGLED FUNDS. All assets of the Trust Fund shall be
invested in the following Commingled Funds:
6.3.1 COMMON STOCK FUND. The Trustee shall maintain a Common
Stock Fund which shall be a commingled fund maintained for the purpose of
investing such portions of Members' Accounts as are, pursuant to Members'
investment instructions made in accordance with Section 5.3, properly allocable
to the Common Stock Fund.
(a) The Common Stock Fund shall be invested in Common Stock
and may be used to purchase shares of Common Stock in the open market.
(b) The Trustee may invest and hold up to 100% of the assets
of the Common Stock Fund in Common Stock. The Trustee may also hold
such assets in cash or cash equivalents as may be necessitated by the
cash requirements of the Common Stock Fund, as determined by the
Committee (in its discretion).
6.3.2 SHORT-TERM FUND. The Trustee shall establish or maintain
a Short-Term Fund which shall be a commingled fund maintained for the purpose
of investing such portions of Members' Accounts as are, pursuant to Members'
investment instructions made in accordance with Section 5.3, properly allocable
to the Short-Term fund. The Short-Term Fund shall be invested by the Trustee in
units, shares or other interests in one or more common, pooled or other
collective short-term investment funds which are either (a) maintained by the
Trustee or any other bank (within the meaning of section 581 of the Code), the
trustee of or investment advisor to any such fund in which any other Commingled
Fund is invested or an affiliate of such trustee or investment advisor, or (b)
registered under the Investment Company Act of 1940.
31
<PAGE> 36
6.3.3 OTHER FUNDS. In accordance with directions of the
Committee, the Trustee shall establish or maintain one or more other Commingled
Funds which shall be maintained for the purpose of investing such portions of
Members' Accounts as are, pursuant to Members' investment instructions made in
accordance with Section 5.3, properly allocable to each such Fund. Each such
other Commingled Fund shall be invested in units, shares or other interests in
one or more common, pooled or other collective investment funds which are either
(a) maintained by the Trustee, any other person described in section 3(38)(B) of
ERISA or an affiliate of such person, or (b) registered under the Investment
Company Act of 1940. At least three (3) of the Commingled Funds shall (a) be
diversified, (b) have materially different risk and return characteristics, and
(c) be structured to satisfy the broad range of investment alternatives
requirement, all in manner designed to permit the Plan to qualify as a 404(c)
plan (within the meaning of section 404(c) of ERISA).
6.3.4 DESIGNATIONS, REDESIGNATIONS AND REINVESTMENTS. Except
to the extent that investment responsibility for one or more of the Commingled
Funds (other than the Common Stock Fund) has been transferred to an Investment
Manager in accordance with Section 9.6, the Committee (in its discretion) shall
designate the common, pooled or other collective investment funds in which the
Commingled Funds (other than the Common Stock Fund) shall be invested. The
Committee (in its discretion) may from time to time change the number, identity
or composition of the Commingled Funds made available under this Section 6.3 and
redesignate the collective investment funds in which any Commingled Fund shall
be invested. All interest, dividends or other income realized from the
investments of any of the Commingled Funds shall be reinvested in the Commingled
Fund
32
<PAGE> 37
that realized such income. Temporary cash balances arising in any of the
Commingled Funds shall be invested where feasible in any collective investment
fund which would qualify as an investment medium for the Short-Term Fund.
6.4 VALUATION OF MEMBERS' ACCOUNTS. The Trustee shall determine the
fair market values of the assets of the Commingled Funds, and the Committee
shall determine the fair market value of each Member's Account, as of each
Valuation Date. In making such determinations and in crediting net earnings and
gains (or losses) in the Commingled Funds to the Members' Accounts, the
Committee (in its discretion) may employ, and may direct the Trustee to employ,
such accounting methods as the Committee (in its discretion) may deem
appropriate in order fairly to reflect the fair market values of the Commingled
Funds and each Member's Account. For this purpose the Trustee and the Committee
(as appropriate) may rely upon information provided by the Committee, the
Trustee or other persons believed by the Trustee or the Committee to be
competent. The value of the interest of any Member's Account in the Common Stock
Fund may be measured in units (rather than shares of Common Stock) in such
manner as the Committee (in its discretion) shall specify.
6.5 VALUATION OF SHARES. For all purposes of the Plan, the Trustee
shall determine the fair market value of a share of Common Stock, which, as of
any date, shall be (except as set forth below) the closing price of the Common
Stock on the New York Stock Exchange on that date, as published in The Wall
Street Journal or, if no report is available for that date, on the next
preceding date for which a report is available, except that in the case of a
transaction involving the purchase or sale of share(s) of Common
33
<PAGE> 38
Stock, the fair market value of any share of Common Stock shall be the purchase
or sale price of such share on the New York Stock Exchange.
6.6 STATEMENTS OF MEMBERS' ACCOUNTS. Each Member shall be
furnished with periodic statements of his or her interest in the Plan, at least
annually.
6.7 ACCOUNTS NONFORFEITABLE. Each Member shall at all times have
a fully (100%) vested and nonforfeitable interest in his or her Account.
SECTION 7
DISTRIBUTIONS
7.1 EVENTS PERMITTING DISTRIBUTION. Subject to Section 7.3, the
balance credited to a Member's Account shall become distributable only in the
following circumstances:
(a) Upon termination of the Member's employment at or
after Normal Retirement Age;
(b) Upon termination of the Member's active employment by
reason of Disability or death;
(c) Upon the Member's separation from service with all
Employers and Affiliates (whether by reason of resignation or
dismissal) for any reason other than those specified in paragraph (a)
or (b) above;
(d) Upon the January 1, and no later than the April 1,
that next follows the calendar year in which the Member attains age
70 1/2, if the Member attains age 70 1/2 after December 31, 1987, but
no earlier than April 1, 1990, if the Member is not a 5-percent owner
(within the meaning of section 416(i)(1) of the Code);
(e) Upon the Committee's approval of the Member's
application for a withdrawal from his or her Account, to the limited
extent provided in Section 8;
(f) In accordance with and to the limited extent provided
in Section 3.2.4 or Section 4.1.8; or
(g) Upon the creation or recognition of an Alternate
Payee's right to all or a portion of a Member's Account under a
domestic relations order which the Committee determines is a QDRO (as
defined in Section 8.5), but only as to the portion of the Member's
Account that the QDRO states is payable to the Alternate Payee.
34
<PAGE> 39
7.2 TIMES FOR DISTRIBUTION. Subject to the consent requirement of
Section 7.3 and except as provided in Section 8.5 (relating to QDROs),
distributions from a Member's Account shall occur as soon as practicable after
the Valuation Date that next follows the later of (a) the date the event
permitting the distribution occurs, or (b) the date on which any consent
required under Section 7.3 is granted in such manner and within such advance
notice period as the Committee (in its discretion) shall specify.
7.2.1 DISTRIBUTION DEADLINE. All distributions not made sooner
pursuant to one of the foregoing provisions of this Section 7.2 shall be made no
later than 60 days after the end of the Plan Year in which a distribution event
described in Sections 7.1(a) through (c) occurs or the Member attains Normal
Retirement Age (whichever is later); provided, however, that if the amount of
the distribution or the location of the Member or his or her Beneficiary (after
a reasonable search) cannot be ascertained by that date, distribution shall be
made no later than 60 days after the earliest date on which the amount or
location (as appropriate) is ascertained; and provided, further, that
distributions permitted by reason of the Member's death shall be made within
five (5) years after his or her death.
7.2.2 AGE 70 1/2 RULE. Notwithstanding the foregoing, if the
Account of a Member who continues in employment after attaining Normal
Retirement Age becomes distributable pursuant to Section 7.1(d), the Account
shall be distributed no later than the April 1 specified in Section 7.1(d), and
any subsequent allocations to the Account (after the period of suspension
described in Section 2.5) shall be distributed by the April 1 that next follows
the Plan Year to which those allocations pertain.
7.3 CONSENT REQUIREMENT. If the balance credited to a Member's
Account exceeds $3,500 as of the Valuation Date that (a) next precedes the date
of the distribution
35
<PAGE> 40
or (b) next preceded the date of any prior distribution or withdrawal from the
Account, no portion of the Member's Account shall be distributed to the Member
until he or she attains age 62, unless the Member (or, if deceased, his or her
Beneficiary) has consented to an earlier distribution in such manner and within
such advance notice period as the Committee (in its discretion) shall specify.
7.4 FORM OF DISTRIBUTION.
7.4.1 CASH. With respect to any portion of a Member's Account
as is NOT invested in the Common Stock Fund, any distribution from such portion
of the Account shall be made in the form of a single lump sum payment of cash
(or its equivalent) equal to the balance credited to such portion of the Account
as of the relevant Valuation Date, to the extent that the distributee elects, in
accordance with such procedures as the Committee (in its discretion) shall
specify, to have such portion of the Account distributed in the form of the
unliquidated assets credited to such portion of the Account as of that Valuation
Date.
7.4.2 COMMON STOCK. Any distribution from such portion of
a Member's Account as is invested in the Common Stock Fund as of the Valuation
Date shall be made in the form of a single lump sum payment, as elected by the
distributee, in--
(a) Such whole number of shares of Common Stock as is
equivalent to the full value of the units of the Common Stock Fund then
credited to such portion of the Account;
(b) Cash (or its equivalent) equal to the full value of
the units of the Common Stock Fund then credited to such portion of the
Account; or
(c) A combination of both.
7.4.3 FRACTIONAL SHARES. If shares of Common Stock are to
be distributed, only full shares shall be distributed and cash (or its
equivalent) shall be distributed in lieu of any fractional share.
36
<PAGE> 41
7.4.4 NO ANNUITIES. In no event shall any distribution
from a Member's Account be made in the form of a life annuity.
7.4.5 DIRECT ROLLOVERS. Notwithstanding any contrary Plan
provision:
(a) If a Distributee of any Eligible Rollover
Distribution (1) elects to have at least $500 of such Distribution paid
directly to an individual retirement account ("IRA") or other eligible
retirement plan (within the meaning of section 401(a)(31)(D) of the
Code), and (2) specifies such IRA or plan and the elected amount in
such manner and within such advance notice period as the Committee (in
its discretion) may specify, such Distribution (or elected portion
thereof) shall be made in the form of a direct rollover to such IRA or
plan, in accordance with and subject to the conditions and limitations
of section 401(a)(31) and related provisions of the Code; and
(b) Such Distribution may commence less than 30 days
after the notice required under Treas. Reg. Section 1.411(a)-11(c) is
given to the Distributee, provided that (1) the Distributee is clearly
informed that he or she has a right to consider, for a period of at
least 30 days after receiving the notice, a decision on whether to
elect a distribution (and, if applicable, a particular distribution
option), and (2) the Distributee, after receiving the notice,
affirmatively elects a distribution.
(c) "Distributee" shall mean a Member, a Beneficiary
(if the surviving spouse of a Member), or an Alternate Payee (as
defined in Section 1.2) (if the surviving spouse of a Member under a
QDRO (as defined in Section 8.5)).
(d) "Eligible Rollover Distribution" shall mean a
distribution of any portion of the balance credited to the Account of a
Member which is not one of a series of substantially equal periodic
payments made over (1) a specified period of ten years or (2) the life
or life expectancy of the Distributee, to the extent that it
constitutes an eligible rollover distribution (within the meaning of
section 401(a)(31)(C) of the Code).
7.5 COMMON STOCK RESTRICTIONS. Any Member or other prospective
distributee who is to receive a distribution of Common Stock may be required to
execute an appropriate stock transfer agreement, implementing and evidencing
such restrictions on transferability as may be imposed by applicable federal and
state securities laws, prior to receiving a certificate for the Common Stock.
Any shares of Common Stock held or distributed by the Trustee may include such
legend restrictions on transferability as the
37
<PAGE> 42
Company may reasonably require in order to assure compliance with applicable
federal and state securities laws.
7.6 BENEFICIARY DESIGNATIONS. Each Member may designate in
writing one or more Beneficiaries on such form and in such manner as the
Committee (in its discretion) shall specify. No such designation shall become
effective until its receipt by the Committee.
7.6.1 SPOUSAL CONSENT. If a Member designates any a person
other than his or her spouse as a primary Beneficiary, the designation shall be
ineffective unless the Member's spouse consents to the designation. Any spousal
consent required under this Section 7.6 shall be void unless it (a) is set forth
in writing, (b) acknowledges the effect of the Member's designation of another
person as his or her Beneficiary under the Plan, and (c) is signed by the spouse
and witnessed by an authorized agent of the Committee or a notary public.
Notwithstanding the foregoing, if the Member establishes to the satisfaction of
the Committee that written spousal consent may not be obtained because there is
no spouse or the spouse cannot be located, his or her designation shall be
effective without spousal consent. Any spousal consent required under this
Section 7.6.1 shall be irrevocable and valid only with respect to the spouse who
signs the consent. A Member may revoke his or her Beneficiary designation in
writing at any time, regardless of his or her spouse's previous consent to the
revoked designation, and any such revoked designation shall be void.
38
<PAGE> 43
7.6.2 CHANGES AND FAILED DESIGNATIONS. A Member may designate
different Beneficiaries (and thereby revoke all prior Beneficiary designations)
on such form and in such manner as the Committee (in its discretion) shall
specify. No such designation shall become effective until its receipt by the
Committee, and the last effective designation received by the Committee shall
supersede all prior designations. If a Member dies without having effectively
designated a Beneficiary, or if no Beneficiary survives the Member, the Member's
Account shall be payable to his or her surviving spouse or, if the Member is not
survived by his or her spouse, the Account shall be paid to one or more of the
following persons in the following priority order:
(a) The Member's surviving Children (whether or not
adopted) in equal shares or the trustees of any trust or trusts
established for the benefit of the Member's surviving Children; for the
purposes of applying this Section, "Children" shall mean the Member's
children and the issue of the Member's deceased children, by right of
representation;
(b) The Member's surviving parents or parent, in equal
shares or the trustees of any trust or trusts established for the
benefit of the Member's surviving parents or parent; or
(c) The executors and/or administrators of his or her
estate.
7.7 PAYMENTS TO INCOMPETENTS. If any individual to whom a benefit is
payable under the Plan is a minor, or if the Committee (in its discretion)
determines that any individual to whom a benefit is payable under the Plan is
physically or mentally incompetent to receive such payment or to give a valid
release therefor, payment shall be made to the guardian, committee or other
representative of the estate of such individual which has been duly appointed by
a court of competent jurisdiction. If no guardian, committee or other
representative has been appointed, payment:
39
<PAGE> 44
(a) May be made to any person as custodian for the minor
or incompetent under the California Uniform Transfers to Minors Act (or
comparable law of another state), or
(b) May be made to or applied to or for the benefit of
the minor or incompetent, his or her spouse, children or other
dependents, the institution or persons maintaining him or her, or any
of them, in such proportions as the Committee (in its discretion) from
time to time shall determine.
The release of the person or institution receiving the payment shall be a valid
and complete discharge of any liability of the Plan with respect to any benefit
so paid.
7.8 UNDISTRIBUTABLE ACCOUNTS. Each Member and (in the event of death)
his or her Beneficiary shall keep the Committee advised of his or her current
address. If the Committee is unable to locate the Member or Beneficiary to whom
a Member's Account is payable under this Section 7, (a) the Member's Account may
be closed after 24 months have passed since the date the Account first became
distributable to such Member or Beneficiary, and (b) the balance credited to any
Account so closed shall be credited as an offset against the Employers' future
Matching Contribution payment obligations. If the Member or Beneficiary whose
Account was closed under the preceding sentence subsequently files a claim for
distribution of his or her Account, and if the Committee (in its discretion)
determines that such claim is valid, then the balance previously removed upon
closure of the Account shall be restored to the Account by means of a special
contribution which shall be made to the Trust Fund by the Employers.
SECTION 8
WITHDRAWALS, LOANS AND DOMESTIC RELATIONS ORDERS
8.1 GENERAL RULES. In accordance with Sections 8.2 and 8.3, a
Member who is an Employee may withdraw, in cash (or its equivalent), from his or
her Account any amount up to 100% of the balance credited to the Account as of
the Valuation Date that
40
<PAGE> 45
next precedes the date of the withdrawal. Any application for a withdrawal shall
be submitted to such person, in such manner and within such advance notice
period as the Committee (in its discretion) shall specify. No Member shall be
permitted to make a withdrawal under this Section 8 more often than once in any
one-year period. The active membership of a Member who makes a withdrawal under
Section 8.2 or 8.3 shall be suspended, in the manner set forth in Section 2.5,
for each payroll period that begins during the period starting on the withdrawal
approval date and ending on the first anniversary of that date. Following that
suspension period, the Member may again become an Active Member and resume his
or her Salary Deferrals, effective with respect to Compensation paid for the
payroll period beginning on any Entry Date, only by again electing to become an
Active Member in accordance with Section 2.3.
8.2 HARDSHIP WITHDRAWAL. The Committee shall authorize a distribution
under this Section 8.2 if the Member provides evidence which is sufficient to
enable the Committee to determine that the withdrawal satisfies the conditions
of this Section 8.2.
8.2.1 PERMISSIBLE FINANCIAL OBLIGATIONS. A Member may
make a withdrawal under this Section 8.2 only to meet a financial obligation
for:
(a) Unreimbursed expenses for medical care (as defined in
section 213(d) of the Code) incurred by the Member, his or her spouse
or any dependent (as defined in section 152 of the Code) of the Member,
or necessary to enable any such person to obtain such care;
(b) The purchase of the Member's principal residence;
(c) Payment of tuition and related educational expenses
up to the next 12 months of post-secondary education for the Member,
his or her spouse or any dependent (as defined in section 152 of the
Code) of the Member;
(d) Prevention of the eviction of the Member from his or
her principal residence or foreclosure on the mortgage or deed of trust
on the Member's principal residence;
41
<PAGE> 46
(e) Such other expenses as may be permitted under
published documents of general applicability as provided under Treas.
Reg. Section 1.401(k)-1(d)(2)(ii)(B).
8.2.2 WITHDRAWAL NECESSARY TO MEET FINANCIAL OBLIGATION. No
withdrawal shall be made under this Section 8.2 unless the Member has elected to
receive all distributions, withdrawals and loans available under this Plan and
all other qualified plans maintained by the Employers and Affiliates.
8.2.3 CONTRIBUTION LIMITATIONS. To the extent required by
regulations, no withdrawal shall be made under this Section 8.2 unless the
Member irrevocably agrees in writing to the following limitations in his or her
hardship withdrawal application:
(a) The Member shall agree to refrain, during the period
beginning on the withdrawal approval date and ending on the first
anniversary of that date, from making contributions to, compensation
deferrals under or payments in connection with the exercise of any
rights granted under any other qualified plan or any nonqualified stock
option, stock purchase, deferred compensation or similar plan (but not
any health or welfare plan) maintained by any Employer or Affiliate.
(b) If the Member elects to become an Active Member again
following the suspension of his or her active membership pursuant to
Section 8.1, the total amount of the Member's Salary Deferrals for the
calendar year that next follows the withdrawal date shall not exceed an
amount equal to (1) the Section 401(k) Ceiling (as defined in Section
3.1) for that calendar year, minus (2) the Member's Salary Deferrals
for the calendar year of the withdrawal under this Section 8.2.
8.2.4 LIMIT ON WITHDRAWAL. No withdrawal under this
Section 8.2 shall exceed the lesser of:
(a) The amount which the Committee (in its discretion)
determines is necessary (net of income or penalty taxes reasonably
anticipated to result from the withdrawal) to satisfy the financial
obligations meeting the conditions of Section 8.2.1;
(b) The excess of (1) the value of the Member's Accounts as of
the Valuation Date that occurs on or next precedes the withdrawal date,
over (2) the total amount due (including both principal and interest)
under all outstanding loans made pursuant to Section 8.4 by the Member;
or
42
<PAGE> 47
(c) To the extent that the withdrawal is made from the
Member's Salary Deferral Account, the excess of (1) the sum of all
Salary Deferrals allocated to the Member's Salary Deferral Account on
or before the date of the withdrawal plus the amount of the earnings
credited to that Account as of December 31, 1988, over (2) the sum of
all amounts previously withdrawn or distributed from the Member's
Salary Deferral Account.
8.2.5 ORDER OF WITHDRAWAL FROM ACCOUNTS. Any amount withdrawn
under this Section 8.2 shall be deducted from the Member's Accounts in the
following order: the Rollover Account, the Matching Account, the Salary Deferral
Account, and any other Accounts. Subject to the preceding sentence, the Member
shall designate the order in which amounts invested in the Commingled Funds
shall be withdrawn.
8.3 AGE 59 1/2 WITHDRAWAL. At any time after a Member attains age 59
1/2, the Member (subject to the provisions of Section 8.1) may withdraw an
amount from his or her Account, upon application to such person, in such manner
and within such advance notice period as the Committee (in its discretion) shall
specify.
8.4 LOANS TO MEMBERS.
8.4.1 GENERAL LOAN RULES. A Member who is an Employee may,
upon application to such person, in such manner and within such advance notice
period as the Committee (in its discretion) shall specify, obtain a loan from
the portion of the Trust Fund allocated to the Member's Account in accordance
with the provisions of this Section 8.4. Loans shall be available to all Members
who are Employees, and to parties in interest (within the meaning of section
3(14) of ERISA) with respect to the Plan who are non-Employee Members or
Beneficiaries of deceased Members, on a reasonably equivalent basis.
(a) AMOUNT. The amount of the loan shall be neither less
than $1,000 nor more than the excess of (1) 50% of the Member's
Available Balance, determined as of the Valuation Date, over (2) the
sum of the outstanding balances
43
<PAGE> 48
(including both principal and accrued interest) on all prior
outstanding loans to the Member under this Plan.
(b) "AVAILABLE BALANCE" shall mean the vested balance credited
to the Member's Account as of the applicable date, reduced by amounts
allocated pursuant to Section 8.5 to any subaccount of the Member's
Account for any Alternate Payee under a QDRO (as defined in Section
8.5).
(c) ADDITIONAL LIMITS. The amount borrowed under this Section
8.4 shall not cause the sum of (i) the amount of the loan, plus (ii)
the aggregate outstanding balance (including both principal and accrued
interest) on all prior loans to the Member under this Plan or any other
qualified plan maintained by any Employer or Affiliate (an "Other
Plan"), to exceed an amount equal to $50,000, reduced by the excess (if
any) of (1) the highest aggregate outstanding balance on all loans
under this Plan and all Other Plans during the one-year period ending
on the day before the date the loan is to be made, over (2) the
aggregate outstanding balance on all such loans on the date the loan is
made.
(d) NUMBER OF LOANS. No Member shall be permitted to borrow
under this Section 8.4 if the borrowing would result in his or her
having more than two (2) loans outstanding, and an additional loan may
not be made to a Member until at least 12 months after the next
earliest loan was made; provided, however, that the Committee (in its
discretion) may nevertheless permit a Member to make a second or third
loan if the Member provides evidence sufficient to show that the second
or third loan is necessary in light of his or her immediate and heavy
financial needs.
(e) UNPAID LEAVE OF ABSENCE. If a Member is granted an unpaid
leave of absence and remains an Employee, his or her loan payments will
be suspended for the lesser of the duration of the approved leave or
one year. If the Member returns to active employment with an Employer
or Affiliate, the Committee shall recompute the monthly loan payment
amount and the recomputed amount shall be payable for the balance of
the original term of the loan in accordance with this Section 8.4. If
the Member fails to return to active employment with an Employer or
Affiliate or separates from service with all Employers and Affiliates,
the provisions of Sections 8.4.2(e)(2), 8.4.2(g) and 8.4.2(h) shall
apply.
8.4.2 MINIMUM REQUIREMENTS OF EACH LOAN. Any loan made under
this Section 8.4 shall be evidenced by a loan agreement and promissory note, and
the Member must evidence his or her agreement to the terms thereof in writing.
Such terms shall satisfy the following minimum requirements:
44
<PAGE> 49
(a) SEPARATE ACCOUNTING. Each loan shall be considered as a
separate, ear-marked investment of the Member's Loan Account and shall
be accounted for as provided in Section 5.3.3.
(b) TERM. The term of the loan shall not exceed five (5)
years. The Member may elect a term of either three (3) or five (5)
years for each loan. However, the term of the loan may be up to 15
years, provided that the Member (1) certifies in writing that the loan
proceeds will be used to purchase a dwelling unit which (within a
reasonable period of time after the loan is made) will be the Member's
principal residence, and (2) submits such certification to the
Committee together with such supporting documentary evidence (e.g., a
copy of the signed sale contract) as the Committee (in its discretion)
may request.
(c) INTEREST RATE. Each loan shall bear a reasonable rate of
interest, as determined by the Committee (in its discretion), which
shall be comparable to the interest rates charged under similar
circumstances by persons in the business of lending money.
(d) PAYMENT SCHEDULE. A definite payment schedule shall be
established for each loan which shall require level and monthly
payments of both principal and interest over the agreed term of the
loan in accordance with the provisions of this Section 8.4. A Member
may prepay at any time the entire amount remaining due under the loan,
but no partial prepayments shall be permitted.
(e) WITHHOLDING PAYMENTS. No loan shall be made unless the
Member agrees to make principal and interest payments on each loan,
together with any and all reasonable charges imposed by the Trustee at
the direction of the Committee in connection with the loan--
(1) By payroll withholding, in the case of a Member
who is receiving periodic wage payments from an Employer or
Affiliate; or
(2) By an automatic payment method which the
Committee (in its discretion) determines will provide security
comparable to that of payroll withholding, in the case of a
Member who is not receiving periodic wage payments from an
Employer or Affiliate.
(f) ON PAYROLL. If during the term of the loan, a Member who
has been making payments by the automatic payment method described in Section
8.4.2(e)(2) begins receiving periodic wage payments from an Employer or
Affiliate, the Member shall authorize in writing payroll withholding for the
remaining loan payments.
(g) OFF PAYROLL. If during the term of the loan, a Member who
has been making loan payments by payroll withholding ceases to receive periodic
wage payments from an Employer or Affiliate (and distribution of the Member's
Account
45
<PAGE> 50
has not begun), the Member shall authorize in writing an automatic
payment method described in Section 8.4.2(e)(2) for the remaining loan
payments.
(h) FAILURE TO AUTHORIZE. If any Member fails to authorize any
change in the method of payment required by Section 8.4.2(f) or (g),
the outstanding balance (including unpaid principal and interest) on
the loan shall become immediately due and payable.
(i) SECURITY. Each loan shall be adequately secured by
collateral of sufficient value to secure payment of the loan principal
and interest. Notwithstanding the provisions of Section 13.2, the
Member shall pledge 50% of his or her interest in the Member's Account,
and shall provide such other collateral as the Committee (in its
discretion) may require, to secure his or her loan payment obligations.
8.4.3 DEFAULT. If a Member defaults on his or her loan payment
obligations and does not cure the default within 30 days of the date the Member
is notified of the default, the Committee shall take, or direct the Trustee to
take, such action as shall be necessary or appropriate in the circumstances
prevailing:
(a) To realize upon the security interest of the Trust
Fund in the collateral pledged to secure the loan, and/or
(b) To reduce the balance credited to the Member's
Account by the amount required to cure the default.
(c) In applying the method of cure provided in paragraph
(a) above, if any losses are realized or expenses incurred, they shall
be allocated only to the defaulting Account.
(d) In applying the method of cure provided in paragraph
(b) above, the amount by which the Member's Account is to be reduced
shall be credited to a separate suspense account for the Member and
shall be increased with interest, at the interest rate actually
applicable to the loan pursuant to Section 8.4.2(c), for the period
from the date of the default until the earlier of the date the Member
attains age 59 1/2 or the first date on which distributions from the
Account can be made under Section 7.1; the balance credited to the
Account as of that first date shall be reduced by the amount then
credited to the suspense account; and only the remaining balance (if
any) shall be available for distribution under Section 7.
8.4.4 EFFECT OF DISTRIBUTIONS. If any amount remains
outstanding as a loan obligation of a Member when a distribution is made from
his or her Account under
46
<PAGE> 51
Section 7 (including, but not limited to, a distribution in connection with
termination of employment with all Employers and Affiliates), (a) the
outstanding loan balance (including both principal and accrued interest) shall
then become immediately due and payable, and (b) the balance credited to the
Member's Account shall be reduced to the extent necessary to discharge the
obligation.
8.5 QUALIFIED DOMESTIC RELATIONS ORDERS. The Committee shall establish
written procedures for determining whether a domestic relations orders
purporting to dispose of any portion of a Member's Account is a qualified
domestic relations order (within the meaning of section 414(p) of the Code) (a
"QDRO").
8.5.1 NO PAYMENT UNLESS A QDRO. No payment shall be made to
any Alternate Payee until the Committee (in its discretion), or a court of
competent jurisdiction reversing an initial adverse determination by the
Committee, determines that the order is a QDRO. Payment shall be made to any
Alternate Payee only as specified in the QDRO.
8.5.2 IMMEDIATE PAYMENT REQUIRED. Payment shall be made to an
Alternate Payee, in accordance with a QDRO, as soon as practicable after the
QDRO determination is made, regardless of whether the distribution, if made to a
Member at the time specified in the order, would be permitted under the terms of
the Plan.
8.5.3 DEFERRED PAYMENT. If the QDRO does not provide for
immediate payment to an Alternate Payee, the Committee shall establish a
subaccount to record the Alternate Payee's interest in the Member's Account. All
investment decision with respect to amounts credited to the subaccount shall be
made by the Alternate Payee in the manner provided in Section 5.3. Payment to
the Alternate Payee shall not be deferred beyond the
47
<PAGE> 52
date of distribution to the Member or (in the event of death) his or her
Beneficiary is made or commenced.
SECTION 9
ADMINISTRATION OF THE PLAN
9.1 PLAN ADMINISTRATOR. The Company is hereby designated as the
administrator of the Plan (within the meaning of sections 414(g) and 3(16)(A)
of the Code and ERISA, respectively).
9.2 COMMITTEE. The Plan shall be administered by a Committee consisting
of at least three (3) members, appointed by and holding office at the pleasure
of the Board of Directors. The Committee shall have the authority to control and
manage the operation and administration of the Plan as a named fiduciary under
section 402(a)(1) of ERISA. Any member of the Committee who is also an Employee
shall serve as such without additional compensation. Any member of the Committee
may resign at any time by notice in writing mailed or delivered to the Board of
Directors. The Board of Directors may remove any member of the Committee at any
time and may fill any vacancy which exists.
9.3 ACTIONS BY COMMITTEE. Each decision of a majority of the members of
the Committee then in office shall constitute the final and binding act of the
Committee. The Committee may act with or without a meeting being called or held
and shall keep minutes of all meetings held and a record of all actions taken.
Except as otherwise specifically or generally directed by the Committee, any
action of the Committee may be evidenced by a writing signed by any two (2)
members of the Committee.
48
<PAGE> 53
9.4 POWERS OF COMMITTEE. The Committee shall have all powers necessary
to supervise the administration of the Plan and to control its operation in
accordance with its terms, including, but not by way of limitation, the
following discretionary powers:
(a) To interpret the provisions of the Plan and to
determine any question arising under, or in connection with the
administration or operation of, the Plan;
(b) To determine all questions concerning the eligibility
of any Employee to become or remain a Member and/or an Active Member of
the Plan;
(c) To cause one or more separate Accounts to be
maintained for each Member;
(d) To establish and revise an accounting method or
formula for the Plan, as provided in Section 6.4;
(e) To determine the manner and form, and to notify the
Trustee, of any distribution to be made under the Plan;
(f) To grant or deny hardship withdrawal and loan
applications under Section 8;
(g) To determine the status and rights of Members and
their spouses, Beneficiaries or estates;
(h) To instruct the Trustee with respect to matters
within the jurisdiction of the Committee;
(i) To direct the Trustee, in accordance with Section 6.3, as
to the establishment of Commingled Funds and the investment of the Plan
assets held in the Commingled Funds (other than the Common Stock Fund);
(j) To employ such counsel, agents and advisors, and to obtain
such legal, clerical and other services, as it may deem necessary or
appropriate in carrying out the provisions of the Plan;
(k) To prescribe the form and manner in which any member,
or his or her spouse or other Beneficiary, shall make any election or
designation required under the Plan;
(l) To establish rules for the performance of its powers
and duties and for the administration of the Plan;
49
<PAGE> 54
(m) To arrange for annual distribution to each Member of
a statement of benefits accrued under the Plan;
(n) To establish rules and regulations by which requests
for Plan information from Members are processed expeditiously and
completely;
(o) To provide to each terminated Member notice of his or
her vested interest under the Plan and the written explanation
described in section 402(f) of the Code;
(p) To publish a claims and appeal procedure satisfying
the minimum standards of section 503 of ERISA pursuant to which Members
or their spouses, Beneficiaries or estates may claim Plan benefits and
appeal denials of such claims;
(q) To determine the liabilities of the Plan, to
establish and communicate a funding policy to the Trustee and any
Investment Manager appointed pursuant to Section 9.6, and in accordance
with such funding policy, to coordinate the Plan's investment policy
with the Plan's requirements for funds to pay expenses and benefits as
they become due;
(r) To act as agent for the Company in keeping all
records and assisting with the preparation of all reports and
disclosures necessary for purpose of complying with the reporting and
disclosure requirements of ERISA and the Code;
(s) To arrange for the purchase of any bond required of
the Committee members or others under section 412 of ERISA;
(t) To delegate to the Trustee, the Company's Payroll or Human
Resources Department, or any third-party recordkeeper the authority,
acting as an agent of the Committee, to give or receive notices,
elections and other directions to or from Members and Beneficiaries;
and
(u) To delegate to any one or more of its members or to any
other person, severally or jointly, the authority to perform for and on
behalf of the Committee one or more of the fiduciary and/or ministerial
functions of the Committee under the Plan.
9.5 FIDUCIARY RESPONSIBILITIES. To the extent permissible under ERISA,
any person may serve in more than one fiduciary capacity with respect to the
Plan. Except as required by specific provisions of ERISA, no person who is a
fiduciary with respect to the Plan shall be under any obligation to perform any
duty or responsibility with respect to the Plan which has been specifically
allocated to another fiduciary.
50
<PAGE> 55
9.6 INVESTMENT RESPONSIBILITIES. The Committee shall direct the Trustee
to invest the Commingled Funds (other than the Common Stock Fund) in one or more
common, pooled or other collective investment funds. Subject to the provisions
of this Section 9.6 and any contrary provision of the Plan or Trust Agreement,
exclusive authority and discretion to manage and control the assets of the Trust
Fund shall be vested in the Trustee, and the Trustee from time to time shall
review the assets and make its determinations as to the investments of the Trust
Fund.
9.6.1 INVESTMENT MANAGER APPOINTMENT. The Committee (in its
discretion) may appoint, and thereafter may discharge, one or more investment
managers (the "Investment Managers") to manage the investment of the one or more
of the Commingled Funds and other designated portions of the Trust Fund (other
than the Common Stock Fund). In the event of any such appointment, the Trustee
shall follow the instructions of the Investment Manager in investing and
administering Trust Fund assets managed by the Investment Manager.
Alternatively, the Committee (in its discretion) may delegate investment
authority and responsibility with respect to any Commingled Fund (other than the
Common Stock Fund) directly to any Investment Manager which has investment
management responsibility for any collective investment fund in which the
Commingled Fund is invested.
9.6.2 ELIGIBILITY. Any person, firm or corporation appointed
as Investment Manager (a) shall be a person described in section 3(38)(B) of
ERISA, (b) shall make such representations from time to time as the Committee
(in its discretion) may require in order to determine its qualifications to be
appointed and to continue to serve in such capacity, and
51
<PAGE> 56
(c) shall acknowledge in writing its status as a fiduciary with respect to the
Plan upon acceptance of its appointment.
9.7 VOTING AND TENDER OFFER RIGHTS IN COMMON STOCK.
9.7.1 PASS-THROUGH ISSUES. All Common Stock held in the Trust
Fund shall be voted, tendered or exchanged, with respect to Pass-Through Issues,
in accordance with Sections 9.7.3 through 9.7.6. For purposes of this Section
9.7, a "Pass-Through Issue" with respect to Common Stock is an issue which
concerns:
(a) The voting of shares of Common Stock with respect to the
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business or any transaction
which the Committee (in its discretion) determines to be similar to the
foregoing;
(b) Any tender or exchange offer for Common Stock or any
transaction that the Committee (in its discretion) determines to be
similar to the foregoing;
(c) Any proposal by a shareholder pursuant to Rule 14a-8 under
the 1934 Act;
(d) Any election contest governed by Rule 14a-11 under the
1934 Act;
(e) Any proposal with respect to which there is any
solicitation in opposition (within the meaning of Rule 14a-6 under the
1934 Act); or
(f) Any such other event that the Committee (in its
discretion) designates as a Pass-Through Issue. It is anticipated that
generally the Committee will designate all but nonsubstantive issues as
Pass-Through Issues. The Committee shall have the authority (in its
discretion) to determine which issues are nonsubstantive issues.
9.7.2 VOTING ON ISSUES OTHER THAN PASS-THROUGH ISSUES. Except
with respect to Pass-Through Issues, Common Stock held in the Trust Fund shall
be voted by the Trustee only in accordance with instructions received from the
Committee. However, if with respect to some matter other than a Pass-Through
Issue the Committee shall fail to give, or shall notify the Trustee in writing
of its decision not to give, timely voting
52
<PAGE> 57
instructions to the Trustee, the Trustee shall have the authority (in its
discretion) to vote such Common Stock in its sole discretion. The functions of
the Committee and the Trustee with respect to other rights pertaining to such
Common Stock on matters other than Pass-Through Issues shall be allocated
between them in like manner.
9.7.3 NAMED FIDUCIARY STATUS. For purposes of this Section
9.7, each Member (or, if deceased, his or her Beneficiary) shall be a named
fiduciary (within the meaning of, but not limited to, sections 402(a) and
403(a)(1) of ERISA) with respect to Pass-Through Issues for all shares of Common
Stock as to which the Member has the right of direction with respect to voting,
tender and any other rights appurtenant to such Stock. That named fiduciary
status shall apply with respect to Pass-Through Issues for such whole number of
shares of Common Stock (if any) actually held for the benefit of any Member (or
Beneficiary) and allocable to his or her Account by reason of the Account's
investment (if any) in the Company Stock Fund (for purposes of this Section 9.7,
"Allocable Shares").
9.7.4 CONFIDENTIALITY. In implementing this Section 9.7, each
appropriate fiduciary shall take all steps necessary or appropriate to ensure
that each Member's (or Beneficiary's) instructions shall be kept in strictest
confidence and shall not be divulged or released to any person, except as
provided in the next sentence, including officers, directors or employees of the
Company or any Affiliate. To the extent necessary for the operation of the Plan,
however, the instructions may be provided to the Trustee and to a recordkeeper,
auditor or other person providing services to the Plan if the person (a) is not
the Company or an Affiliate, and (b) agrees not to divulge the instructions to
any other person, including officers, directors or employees of the Company or
any Affiliate.
53
<PAGE> 58
9.7.5 DIRECTED VOTING AND CONSENTS.
(a) Notwithstanding any contrary Plan provision, whenever any
proxies or consents are solicited from the holders of Common Stock with
respect to Pass- Through Issues, the Trustee shall exercise voting or
other rights solely as directed in written instructions timely received
from Members (or if deceased, their Beneficiaries) and in accordance
with this Section 9.7.
(b) Each Member (or if deceased, his or her Beneficiary) shall
have the right, with respect to Pass-Through Issues for Allocable
Shares, to instruct the Trustee, in accordance with procedures
established by the Committee (in its discretion), as to the manner in
which to vote such Allocable Shares at any stockholders' meeting of the
Company, or the manner in which the Trustee shall give or withhold
consent with respect to such Allocable Shares.
(1) The Trustee shall pool the results of
instructions received from all Members (and Beneficiaries) as
to their fractional Allocable Shares and shall vote or
otherwise act accordingly with respect to such Allocable
Shares on Pass-Through Issues;
(2) In the case of a deceased Member who has more
than one Beneficiary, the Trustee shall vote or otherwise act
on Pass-Through Issues in accordance with the instructions of
the Member's Beneficiaries in respect of the deceased Member's
Allocable Shares in proportion to the respective interests of
the Beneficiaries in the Member's Account in accordance with
rules established by the Committee (in its discretion).
(3) If and to the extent that no instructions are
timely received from any Member (or Beneficiary) with a right
to instruct with respect to his or her Allocable Shares, (i)
such person shall be deemed to have timely instructed the
Trustee not to vote the relevant Allocable Shares, and (ii)
the Trustee shall not vote such Allocable Shares nor take any
other actions under this Section 9.7 with respect to such
Allocable Shares on Pass-Through Issues.
(c) The Company shall use its best efforts to timely
distribute or cause to be distributed to each Member (or Beneficiary)
such information concerning Pass-Through Issues as will be distributed
to stockholders of the Company in connection with any stockholders'
meeting or any solicitation of voting or consents, together with a
request for confidential instructions to the Trustee or its designee on
how shares of Common Stock shall be voted on each such matter or how
consents shall be given or withheld.
54
<PAGE> 59
9.7.6 TENDER OR EXCHANGE OFFERS.
(a) Notwithstanding any contrary Plan provision, whenever (i)
any tender or exchange offer is made for shares of Common Stock, or
(ii) there occurs any transaction that the Committee (in its
discretion) determines to be similar to the foregoing (as described in
Section 9.7.1(b), the Trustee shall tender or exchange (or refrain from
tendering or exchanging) shares of Common Stock solely as directed in
instructions timely received from Members (or if deceased, their
Beneficiaries) and in accordance with this Section 9.7.
(b) Each Member (or, if deceased, his or her Beneficiary)
shall have the right, with respect to his or her Allocable Shares, to
instruct the Trustee, in accordance with procedures established by the
Committee (in its discretion), as to the manner in which to respond to
such tender or exchange offer with respect to such Allocable Shares.
(1) The Trustee shall pool the results of
instructions received from all Members (or Beneficiaries) as
to their fractional Allocable Shares and shall respond to such
tender or exchange offer accordingly with respect to such
Allocable Shares.
(2) In the case of a deceased Member who has more
than one Beneficiary, the Trustee shall respond to such tender
or exchange offer in accordance with the instructions of the
Member's Beneficiaries in respect of the deceased Member's
Allocable Shares in proportion to the Beneficiaries'
respective interests in the Member's Account in accordance
with rules established by the Committee (in its discretion).
(3) If and to the extent that no instructions are
timely received the from any Member (or Beneficiary) with a
right to instruct with respect to his or her Allocable Shares,
(i) such person shall be deemed to have timely instructed the
Trustee not to tender or exchange the relevant Allocable
Shares, and (ii) the Trustee shall not tender or exchange such
Allocable Shares nor take any other actions under this Section
9.7 with respect to such Allocable Shares.
(c) The Company shall use its best efforts to timely
distribute or cause to be distributed to each Member (or Beneficiary)
such information as will be distributed to stockholders of the Company
in connection with any such tender or exchange offer, together with a
request for confidential instructions to the Trustee or its designee on
how to respond to such tender or exchange offer.
9.8 DECISIONS OF COMMITTEE. All decisions of the Committee, and
any action taken by it in respect of the Plan and within the powers granted to
it under the Plan, and
55
<PAGE> 60
any interpretation of provision of the Plan or the Trust Agreement by the
Committee, shall be conclusive and binding on all persons, and shall be given
the maximum possible deference allowed by law.
9.9 ADMINISTRATIVE EXPENSES. All reasonable expenses actually incurred
in connection with the administration of the Plan by the Employers, the
Committee or otherwise, including legal, Trustee's and investment management
fees and expenses ("Administrative Expenses"), shall be payable from the Trust
Fund, except to the extent paid by the Employers under clause (a) below.
Notwithstanding the foregoing, Administrative Expenses shall be paid from the
Trust Fund only to the extent that such payments (to the extent prohibited by
section 406) are exempt under section 408 of ERISA. The Committee (in its
discretion) shall determine which Administrative Expenses are not payable from
the Trust Fund under the foregoing rules. The Company (in its discretion) may
(a) direct the Employers to pay any or all Administrative Expenses, and/or (b)
direct the Employers not to pay a greater share, portion or amount of such
Expenses which would otherwise be allocable to the Accounts of Members who are
no longer employed by any Employer or Affiliate.
9.10 ELIGIBILITY TO PARTICIPATE. No member of the Committee, who is
also an Eligible Employee and otherwise eligible under Section 2, shall be
excluded from membership in the Plan, but he or she, as a member of the
Committee, shall not act or pass upon any matters pertaining specifically to his
or her own Account under the Plan.
9.11 INDEMNIFICATION. Each of the Employers shall, and hereby
does, indemnify and hold harmless any of its Employees, officers or directors
who may be deemed to be a fiduciary of the Plan, and the members of the
Committee, from and against any and all
56
<PAGE> 61
losses, claims, damages, expenses and liabilities (including reasonable
attorneys' fees and amounts paid, with the approval of the Board of Directors,
in settlement of any claim) arising out of or resulting from the implementation
of a duty, act or decision with respect to the Plan, so long as such duty, act
or decision does not involve gross negligence or willful misconduct on the part
of any such individual.
SECTION 10
TRUST FUND AND ROLLOVER CONTRIBUTIONS
10.1 TRUST FUND. The Company shall establish a Trust Agreement with the
Trustee in order to provide for the safekeeping, administration and investment
of Salary Deferrals, Matching Contributions and rollover contributions made
under the Plan, the maintenance of Members' Accounts, and the payment of
benefits as provided in the Plan. The Trustee shall receive and place in the
Trust Fund all such contributions and shall hold, invest, reinvest and
distribute the Trust Fund in accordance with provisions of the Plan and Trust
Agreement. Assets of this Plan may be commingled with the assets of other
qualified plans through one or more collective investment funds described in
Section 6.3; provided, however, that the assets of this Plan shall not be
available to provide any benefits under any other such plan. The benefits
provided under the Plan shall be only such as can be provided by the assets of
the Trust Fund, and no liability for payment of benefits shall be imposed upon
the Employers or any of their shareholders, directors or employees. The Trust
Fund shall continue for such time as may be necessary to accomplish the purposes
for which it is created.
10.2 NO DIVERSION OF ASSETS. Notwithstanding any contrary Plan
provision, at no time shall any assets of the Plan be used for, or diverted to,
purposes other than for the
57
<PAGE> 62
exclusive benefit of Eligible Employees, Members, Beneficiaries and other
persons receiving or entitled to receive benefits or payments under the Plan.
Except to the limited extent permitted by Sections 5.4.6, 7.8 and 10.3, no
assets of the Plan shall ever revert to or become the property of the Employers.
10.3 CONTINUING CONDITIONS. Any obligation to contribute Salary
Deferrals and/or to make Matching Contributions under the Plan after initial
qualification is hereby conditioned upon the continued qualification of the Plan
under section 401(a) of the Code and the exempt status of the Trust Fund under
section 501(a) of the Code and upon the deductibility of such Salary Deferrals
and/or Matching Contributions under section 404(a) of the Code. That portion of
any Salary Deferral or Matching Contribution which is contributed or made by
reason of a good faith mistake of fact, or by reason of a good faith mistake in
determining the deductibility of such portion, shall be returned to the
Employers as promptly as practicable, but not later than one year after the
contribution was made or the deduction was disallowed (as the case may be). The
amount returned pursuant to the preceding sentence shall be an amount equal to
the excess of the amount actually contributed over the amount that would have
been contributed if the mistake had not been made; provided, however, that gains
attributable to the returnable portion shall be retained in the Trust Fund; and
provided, further, that the returnable portion shall be reduced (a) by any
losses attributable thereto and (b) to avoid a reduction in the balance of any
Member's Account below the balance that would have resulted if the mistake had
not been made.
10.4 CHANGE OF INVESTMENT ALTERNATIVES. The Company reserves the
right to change at any time the means through which the Plan is funded,
including adding or substituting one or more contracts with an insurance company
or companies, and thereupon
58
<PAGE> 63
may make suitable provision for the use of a designated portion of the assets of
the Trust Fund to provide for the funding and/or payment of Plan benefits under
any such insurance contract. No such change shall constitute a termination of
the Plan or result in the diversion to the Employers of any portion of the Trust
Fund. Notwithstanding the implementation of any such change of funding medium,
all references in the Plan to the Trust Fund shall also refer to the Plan's
interest in or the assets held under any other such funding medium.
10.5 ROLLOVER CONTRIBUTIONS. Notwithstanding any contrary Plan
provision, the Committee (in its discretion) may direct the Trustee to accept a
transfer of assets to the Trust Fund by a Member of this Plan, but only if the
transfer qualifies as a rollover under section 402(c) or 408(d)(3)(A)(ii) of the
Code. Any assets transferred to the Trust Fund in accordance with the preceding
sentence must be in the form of cash (or its equivalent).
10.5.1 ROLLOVER ACCOUNT. Assets transferred to the Trust Fund
pursuant to this Section 10.5 shall be credited to the Member's Rollover
Account. A Member's interest in his or her Rollover Account shall be fully
(100%) vested and nonforfeitable at all times. The Member shall indicate, in
such manner and within such advance notice period as the Committee (in its
discretion) shall specify, the percentages of the amounts allocated to his or
her Rollover Account that are to be invested in each of the Commingled Funds. In
all other respects Rollover Account investments shall be subject to Section 5.3.
10.5.2 NONQUALIFYING ROLLOVERS. If it is later determined that
a transfer to the Trust Fund made pursuant to this Section 10.5 did not in fact
qualify as a rollover under section 402(c) or 408(d)(3)(A)(ii) of the Code, then
the balance credited to the Member's Rollover Account shall immediately be (a)
segregated from all other Plan assets,
59
<PAGE> 64
(b) treated as a nonqualified trust established by and for the benefit of the
Member, and (c) distributed to the Member. Such a nonqualifying rollover shall
be deemed never to have been a part of the Trust Fund.
SECTION 11
MODIFICATION OR TERMINATION OF PLAN
11.1 EMPLOYERS' OBLIGATIONS LIMITED. The Plan is voluntary on the part
of the Employers, and the Employers shall have no responsibility to satisfy any
liabilities under the Plan. Furthermore, the Employers do not guarantee to
continue the Plan, and the Company may, by appropriate amendment of the Plan,
discontinue Salary Deferrals and/or Matching Contributions for any reason at any
time. Complete discontinuance of all Salary Deferral and Employer contributions
shall be deemed a termination of the Plan.
11.2 RIGHT TO AMEND OR TERMINATE. The Company reserves the right to
alter, amend or terminate the Plan, or any part thereof, in such manner as it
may determine. Amendments which do not add materially to the Company's cost
under the Plan and which are either necessary to comply with the Code, ERISA or
other applicable law, are technical or intended to ease administration may be
adopted if approved in writing by any two (2) of the following officers of the
Company:
Vice-President, Human Resources
Treasurer
Chief Financial Officer
All other amendments shall be approved by the Board of Directors. Any such
alteration, amendment or termination shall take effect upon the date indicated
in the document embodying such alteration, amendment or termination; provided,
however, that:
(a) No such alteration or amendment shall (1) divest any
portion of an Account that is then vested under the Plan, or (2) except
as may be permitted by
60
<PAGE> 65
regulations or other IRS guidance, eliminate any optional form of
benefit (within the meaning of section 411(a)(6)(B)(ii) of the Code)
with respect to benefits accrued prior to the adoption of the
amendment; and
(b) Any alteration, amendment or termination of the Plan or
any part thereof, shall be subject to the restrictions in Section 10.2
which prohibit any diversion of the assets of the Plan.
11.3 EFFECT OF TERMINATION. If the Plan is terminated or partially
terminated, or if there is a complete discontinuance of all Salary Deferral and
Matching Contributions, the interests of all Members affected by such
termination or discontinuance in their Accounts shall remain fully (100%) vested
and nonforfeitable. Notwithstanding the foregoing, the balances credited to the
Salary Deferral Accounts of any Members who are affected by the termination may
be distributed prior to the occurrence of a distribution event described in
Section 7.1, but only to the extent permitted by section 401(k)(2)(B) of the
Code.
SECTION 12
TOP-HEAVY PLAN
12.1 TOP-HEAVY PLAN STATUS. Notwithstanding any contrary Plan
provision, the provisions of this Section 12 shall apply with respect to any
Plan Year for which the Plan is a top-heavy plan (within the meaning of section
416(g) of the Code) (a "Top-Heavy Plan").
12.1.1 60% RULE. The Plan shall be a Top-Heavy Plan with
respect to any Plan Year if, as of the Determination Date, the value of the
aggregate of the Accounts under the Plan for key employees (within the meaning
of section 416(i) of the Code) exceeds 60% of the value of the aggregate of the
Accounts under the Plan for all Members. For purposes of determining the value
of the Accounts, the provisions of section 416(g)(4)(E) of the Code and Treas.
Reg. Section 1.416-1, (Q&A T-1) are incorporated herein by reference.
61
<PAGE> 66
12.1.2 TOP-HEAVY DETERMINATIONS. The Committee, acting on
behalf of the Employers, shall determine as to each Plan Year whether or not the
Plan is a Top- Heavy Plan for that Plan Year. For purposes of making that
determination as to any Plan Year:
(a) "Determination Date" shall mean the last day of the
immediately preceding Plan Year;
(b) The Plan shall be aggregated with each other qualified
plan of any Employer or any Affiliate (1) in which a key employee
(within the meaning of section 416(i)(1) and (5) of the Code)
participates, and/or (2) which enables the Plan or any plan described
in clause (1) above to meet the requirements of section 401(a)(4) or
410(b) of the Code;
(c) The Plan may be aggregated with any other qualified plan
of any Employer or Affiliate, which plan is not required to be
aggregated under paragraph (b)(1) above, if the resulting group of
plans would continue to meet the requirements of sections 401(a)(4) and
410(b) of the Code; and
(d) In determining which employees are key and non-key
employees, an Employee's compensation for the Plan Year shall be his or
her Total Compensation (as defined in Section 5.4.2(d)).
12.2 TOP-HEAVY PLAN PROVISIONS. For any Plan Year for which the
Plan is a Top-Heavy Plan, the following provisions shall apply:
12.2.1 MINIMUM ALLOCATION. The Employers shall make an
additional contribution to the Account of each Member who is a non-key employee
(within the meaning of section 416(i)(2) and (5) of the Code), and who is
employed on the last day of the Plan Year, in an amount which equals 3% of his
or her Top-Heavy Compensation (as defined in Section 12.2.2) for the Plan Year;
provided, however, that if the Key Employee Percentage is less than 3%, then the
percentage rate at which that additional Employer contribution shall be made for
that Plan Year shall be reduced from 3% to the Key Employee Percentage.
62
<PAGE> 67
(a) "Key Employee Percentage" shall mean the largest
percentage computed by dividing (a) the total amount of Salary
Deferrals and Matching Contributions allocated for that Plan Year to
the Account of each Member who is a key employee (within the meaning of
section 416(i)(1) and (5) of the Code), by (b) his or her Top-Heavy
Compensation.
(b) The additional contribution required under this Section
12.2.1 shall be made without regard to the level of the Member's
Top-Heavy Compensation for the Plan Year.
(c) Notwithstanding the foregoing, if a Member is also covered
under any Other Plan (as defined in Section 8.4.1(c)) and the minimum
allocation of benefit requirement applicable to Top-Heavy Plans will be
met under such Other Plan or Plans, no additional contribution will be
made for the Member under this Plan.
12.2.2 "TOP-HEAVY COMPENSATION", with respect to any Member
for a Plan Year, shall mean the sum of (a) his or her Total Compensation (as
defined in Section 5.4.2(d)), (b) Salary Deferrals credited to his or her Salary
Deferral Account, and (c) other amounts that are contributed to an employee
benefit plan by any Employer pursuant to a salary reduction agreement and are
not includible in gross income under section 125, 401(k), 402(e)(3), 402(h),
403(b) or 414(h)(2) of the Code. No amount in excess of $150,000 (as adjusted
pursuant to sections 401(a)(17) and 415(d) of the Code) shall be taken into
account under this Section 12.2.2 for any Plan Year. In applying that $150,000
limit, Section 1.17(c) shall apply except that the term "Family Member" shall
only include a spouse or a lineal descendant who has not attained age 19 before
the close of the Plan Year.
12.2.3 DEFINED BENEFIT PLAN. With respect to each Member who
is also a participant in a qualified defined benefit plan maintained by any
Employer or Affiliate which is also a top-heavy plan (within the meaning of
section 416(g) of the Code), then, provided that the aggregation group of which
the Plan is a member is not super top-heavy (within the meaning of section
416(h)(2)(B) of the Code), the additional Employer
63
<PAGE> 68
contribution required to be made to the Account of each non-key employee (within
the meaning of section 416(i)(2) and (5) of the Code) under Section 12.2.1 shall
be in an amount which equals 7.5% of his or her Top-Heavy Compensation.
SECTION 13
GENERAL PROVISIONS
13.1 PLAN INFORMATION. Each Member shall be advised of the general
provisions of the Plan and, upon written request addressed to the Committee,
shall be furnished with any information requested, to the extent required by
applicable law, regarding his or her status, rights and privileges under the
Plan.
13.2 INALIENABILITY. Except to the extent otherwise provided in
Sections 8.4 and 8.5 or mandated by applicable law, in no event may any Member,
former Member or his or her spouse, Beneficiary or estate sell, transfer,
anticipate, assign, hypothecate, or otherwise dispose of any right or interest
under the Plan; and such rights and interests shall not at any time be subject
to the claims of creditors nor be liable to attachment, execution or other legal
process.
13.3 RIGHTS AND DUTIES. No person shall have any rights in or to the
Trust Fund or other assets of the Plan, or under the Plan, except as, and only
to the extent, expressly provided for in the Plan. To the maximum extent
permissible under section 410 of ERISA, neither the Employers, the Trustee nor
the Committee shall be subject to any liability or duty under the Plan except as
expressly provided in the Plan, or for any other action taken, omitted or
suffered in good faith.
13.4 NO ENLARGEMENT OF EMPLOYMENT RIGHTS. Neither the establishment or
maintenance of the Plan, the making of any contributions nor any action of any
Employer,
64
<PAGE> 69
the Trustee or Committee, shall be held or construed to confer upon any
individual any right to be continued as an Employee nor, upon dismissal, any
right or interest in the Trust Fund or any other assets of the Plan other than
as provided in the Plan. Each Employer expressly reserves the right to discharge
any Employee at any time.
13.5 APPORTIONMENT OF DUTIES. All acts required of the Employers under
the Plan may be performed by the Company for itself and its Affiliates. Any
costs incurred by the Company for itself or its Affiliates in connection with
the Plan and the costs of the Plan, if not paid from the Trust Fund pursuant to
Section 9.9, shall be equitably apportioned among the Company and the other
Employers, as determined by the Committee (in its discretion). Whenever an
Employer is permitted or required under the terms of the Plan to do or perform
any act, matter or thing, it shall be done and performed by any officer or
employee of the Employer who is thereunto duly authorized by the board of
directors of the Employer.
13.6 MERGER, CONSOLIDATION OR TRANSFER. This Plan shall not be merged
or consolidated with any other plan, nor shall there be any transfer of any
assets or liabilities from this Plan to any other plan, unless immediately after
such merger, consolidation or transfer, each Member's accrued benefit, if such
other plan were then to terminate, is at least equal to the accrued benefit to
which the Member would have been entitled if this Plan had been terminated
immediately before such merger, consolidation or transfer.
13.7 APPLICABLE LAW. The provisions of the Plan shall be construed,
administered and enforced in accordance with ERISA and, to the extent
applicable, the laws of the State of California.
65
<PAGE> 70
13.8 SEVERABILITY. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included.
13.9 CAPTIONS. The captions contained in and the table of contents
prefixed to the Plan are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or intent
of the Plan nor in any way shall affect the construction of any provision of the
Plan.
66
<PAGE> 71
EXECUTION
IN WITNESS WHEREOF, Genentech, Inc., by its duly authorized
officers, has executed this May 8, 1996 Restatement of the Plan on the date
indicated below.
GENENTECH, INC.
By /s/ Marty Glick
------------------------------
Title VP & Treasurer
------------------------------
Dated 4/26/96
------------------------------
And by /s/ Louis J. Lavigne, Jr.
-----------------------------
Title SVP & CFO
-----------------------------
Dated 4/30/96
-----------------------------
67
<PAGE> 1
Exhibit 15.1
July 11, 1996
The Board of Directors and Stockholders
Genentech, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Tax Reduction Investment Plan of Genentech, Inc. of
our report dated April 9, 1996 relating to the unaudited condensed consolidated
interim financial statements of Genentech, Inc. which are included in its Form
10-Q for the quarter ended March 31, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Very truly yours,
/s/ Ernst & Young LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Tax Reduction Investment Plan of Genentech, Inc. of our
reports (a) dated January 17, 1996, with respect to the consolidated financial
statements of Genentech, Inc. incorporated by reference in its Annual Report
(Form 10-K) and the related financial statement schedule included therein and
(b) dated June 5, 1996, with respect to the financial statements and
supplemental schedules of the Genentech, Inc. Tax Reduction Investment Plan
included in Plan's Annual Report (Form 11-K), both for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
July 11, 1996
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY OF DIRECTORS
KNOW BY ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints Louis
J. Lavigne, Jr. and John P. McLaughlin, and each of them with power to act
alone, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on Form
S-8 relating to 500,000 shares of Callable Putable Common Stock issuable under
the Genentech, Inc. Tax Reduction Investment Plan, and any and all amendments of
such Registration Statement, including post-effective amendments, and to file
the same, together with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises hereof,
as fully to all intents and purposes as he or she might do or could do in
person, thereby ratifying and confirming all that said attorney-in-fact or his
or her substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Herbert W. Boyer Date: June 21, 1996
- ------------------------------
Herbert W. Boyer
/s/ Jurgen Drews Date: June 21, 1996
- ------------------------------
Jurgen Drews
/s/ Franz B. Humer Date: June 21, 1996
- ------------------------------
Franz B. Humer
/s/ Arthur D. Levinson Date: June 21, 1996
- ------------------------------
Arthur D. Levinson
/s/ Linda Fayne Levinson Date: June 21, 1996
- ------------------------------
Linda Fayne Levinson
<PAGE> 2
/s/ J. Richard Munro Date: June 21, 1996
- -----------------------------
J. Richard Munro
/s/ Donald L. Murfin Date: June 21, 1996
- -----------------------------
Donald L. Murfin
/s/ John T. Potts, Jr. Date: June 21, 1996
- -----------------------------
John T. Potts, Jr.
/s/ C. Thomas Smith, Jr. Date: June 21, 1996
- -----------------------------
C. Thomas Smith, Jr.
/s/ Robert A. Swanson Date: June 21, 1996
- -----------------------------
Robert A. Swanson
/s/ David S. Tappan, Jr. Date: June 21, 1996
- -----------------------------
David S. Tappan, Jr.
2
<PAGE> 1
Exhibit 24.2
POWER OF ATTORNEY OF THE 401(k) PLAN ADMINISTRATIVE COMMITTEE
KNOW BY ALL PERSONS BY THESE PRESENTS:
Each of the undersigned hereby constitutes and appoints
Louis J. Lavigne, Jr. and John P. McLaughlin, and each of them with power to act
alone, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on Form
S-8 relating to 500,000 shares of Callable Putable Common stock and an
indeterminate number of interests issuable under the Genentech, Inc. Tax
Reduction Investment Plan, and any and all amendments of such Registration
Statement, including post-effective amendments, and to file the same, together
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises hereof, as fully to all intents
and purposes as he or she might do or could do in person, thereby ratifying and
confirming all that said attorney-in-fact or his or her substitutes may lawfully
do or cause to be done by virtue hereof.
/s/ Janet Briggs Date: June 21, 1996
- -----------------------------
Janet Briggs
/s/ Marty Glick Date: June 21, 1996
- -----------------------------
Marty Glick
/s/ Louis J. Lavigne, Jr. Date: June 21, 1996
- -----------------------------
Louis J. Lavigne, Jr.
