As filed with the Securities and Exchange Commission on September 22, 1997
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIO-TECHNOLOGY GENERAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3033811
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
70 WOOD AVENUE SOUTH, ISELIN, NEW JERSEY 08830
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES (ZIP CODE))
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BIO-TECHNOLOGY GENERAL CORP. 401(k) PROFIT SHARING PLAN
(FULL TITLE OF THE PLAN)
SIM FASS
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CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
BIO-TECHNOLOGY GENERAL CORP.
70 WOOD AVENUE SOUTH, ISELIN, NEW JERSEY 08830
(NAME AND ADDRESS OF AGENT FOR SERVICE)
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE: (908) 632-8800
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE FEE
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Common Stock, par value of
$.01 per share 100,000 shares $13.65625 $1,365,625 $413.83
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(1) This registration statement shall also cover any additional indeterminable
number of shares as may be required pursuant to the Bio-Technology General
Corp. 401(k) Profit Sharing Plan in the event of a stock dividend, stock
split, recapitalization or other similar change in the Common Stock.
(2) Estimated pursuant to Rule 457(h) of the Securities Act of 1933, as
amended (the "Act") solely for the purpose of calculating the registration
fee.
In addition, pursuant to Rule 416(c) under the Act, this registration
statement also covers an indeterminate amount of interests to be offered or sold
pursuant to the employee benefit plan described herein.
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PROSPECTUS
100,000 SHARES
BIO-TECHNOLOGY GENERAL CORP.
COMMON STOCK
UNDER THE BIO-TECHNOLOGY GENERAL CORP.
401(K) PROFIT SHARING PLAN
This Prospectus relates to the offer and sale of up to 100,000 shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Bio-Technology General Corp. ("BTG" or the "Company"). The Shares are being
offered for sale by certain stockholders of the Company (the "Selling
Stockholders") who acquired such Shares pursuant to the Company's 401(k) Profit
Sharing Plan (the "Plan"). See "Selling Stockholders." The Company's Common
Stock is traded on the Nasdaq Stock Market's National Market (the "Nasdaq
National Market") under the symbol "BTGC." On September 19, 1997, the closing
price of the Common Stock, as reported in the consolidated reporting system, was
$14.9375 per share.
The Company will not receive any of the proceeds from sales of the Shares
by the Selling Stockholders. The Shares may be offered from time to time by the
Selling Stockholders (and their donees and pledgees) through ordinary brokerage
transactions, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution."
The Selling Stockholders may be deemed to be "Underwriters" as defined in
the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used to effect sales, any commissions paid to broker-dealers
and, if broker-dealers purchase any of the Shares as principals, any profits
received by such broker-dealers on the resale of the Shares, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Stockholders may be deemed to be underwriting
commissions. All costs, expenses and fees in connection with the registration of
the Shares will be borne by the Company. Brokerage commissions, if any,
attributable to the sale of the Shares will be borne by the Selling Stockholders
(or their donees and pledgees).
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SEE "RISK FACTORS", WHICH BEGINS ON PAGE 6 OF THIS PROSPECTUS, FOR
CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 22, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Proxy statements, reports
and other information concerning the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the regional offices
of the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048, and 500 West Madison Street, Chicago, Illinois 60661, and copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and its public
reference facilities in New York, New York and Chicago, Illinois, at prescribed
rates. Copies of such information may also be inspected at the reading room of
the library of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006. The Commission maintains a World Wide Web
site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding the Company and other
registrants that file electronically with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form S-8
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the offices of the
Commission as indicated above without charge and copies thereof may be obtained
therefrom upon payment of a prescribed fee.
Private Securities Litigation Reform Act Safe Harbor Statement. This
Prospectus (including the documents incorporated by reference herein) contains
certain forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) and information relating to BTG that
are based on the beliefs of the management of BTG, as well as assumptions made
by and information currently available to the management of BTG. When used in
this Prospectus, the words "estimate," "project," "believe," "anticipate,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current views of BTG
with respect to future events and are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such
forward-looking statements, including those discussed under "Risk Factors."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which
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speak only as of the date hereof. BTG does not undertake any obligation to
publicly release any revisions to these forward looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The information in the following documents filed by BTG with the Commission
(File No. 0-15313) pursuant to the Exchange Act is incorporated by reference in
this Prospectus:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(b) The Registrant's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997.
(c) The Registrant's Form 8-A dated July 25, 1983, as amended by Amendment
No. 1 to Form 8-A dated September 29, 1983 and Amendment No. 2 to Form
8-A dated October 1, 1986.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed incorporated by reference into this Prospectus
and to be a part hereof from the date of the filing of such documents or
reports. The information relating to the Company in this Prospectus should be
read together with the information in the documents incorporated by reference.
Any statement contained in a document incorporated by reference herein,
unless otherwise indicated therein, speaks as of the date of the document. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Prospectus modifies or replaces such statement.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the documents
described above, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents. Requests should be
addressed to: Bio-Technology General Corp., 70 Wood Avenue South, Iselin, New
Jersey 08830, Attention: President (Tel. No. (908) 632-8800). The Company
furnishes its stockholders with an annual report containing audited financial
statements. In addition, the Company may furnish such other reports as may be
authorized, from time to time, by the Board of Directors.
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<PAGE>
THE COMPANY
Bio-Technology General Corp. ("BTG" or the "Company") is engaged in the
research, development, manufacture and marketing of biopharmaceutical products.
The Company has emerged as one of the few profitable publicly-traded
biopharmaceutical companies in the United States. Through a combination of
internal research and development, acquisitions, collaborative relationships and
licensing arrangements, BTG has developed a portfolio of therapeutic products,
including five products that have received regulatory approval for sale, of
which four are currently being marketed, four products in clinical trials and
three products in pre-clinical development. The Company distributes its products
on a worldwide basis through a direct sales force in the United States and
Israel and through third-party license and distribution relationships elsewhere.
The Company seeks both broad markets for its products as well as specialized
markets where it can seek Orphan Drug status and potential marketing
exclusivity.
The Company's approved products include Bio-Tropin(TM) (human growth
hormone), which is currently being marketed in Japan and in several countries in
Europe, Latin America and the Far East for the treatment of growth hormone
deficiency in children; Oxandrin(R) (oxandrolone) for the treatment of weight
loss due to severe trauma, chronic infection, extensive surgery or unknown
pathophysiology, which is primarily marketed in the United States and which to
date has been primarily used to treat weight loss in AIDS patients; BioLon(TM)
(sodium hyaluronate), which is currently marketed in several countries in North
and Latin America, Europe, Asia, Africa and the Far East for the protection of
the corneal endothelium during ophthalmic implant surgery; Delatestryl(R)
(injectable testosterone), which is currently marketed in the United States for
hypogonadism and delayed puberty; and Silkis(R), a vitamin D derivative, which
is currently approved in two European countries for the topical treatment of
recalcitrant psoriasis.
The Company's principal products in registration, advanced stages of
development and clinical testing include a higher dosage formulation of Oxandrin
for AIDS cachexia; Oxandrin for the treatment of Turner syndrome and
malnutrition in persons suffering from alcoholic hepatitis; Androtest-SL(R)
(sublingual testosterone) for the treatment of hypogonadism; Bio-Hep-B(TM), a
third generation vaccine against hepatitis-B virus; OxSODrol(TM) (human
superoxide dismutase) for the treatment of bronchopulmonary dysplasia in
premature infants; and Imagex(TM), a clot-imaging agent. BTG's current
pre-clinical research focus is on cardiovascular drugs, principally BioFlow(TM),
an anti-reocclusion agent, and Factorex(TM), an anti-coagulant, as well as on a
recombinant form of insulin.
The Company's primary objective is to become a leading biopharmaceutical
company focused on developing and commercializing a broad spectrum of
therapeutic products on a worldwide basis. To achieve this objective, the
Company is: (i) expanding acceptance of approved products by seeking broader
application within their current regulatory approvals; (ii) developing new
formulations for approved products by pursuing new dosages, formulations, and
delivery systems which will be easier to use and may provide additional
proprietary protection; (iii) continuing to develop novel and
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innovative products through internal research and development; (iv) expanding
sales and marketing capabilities, both in the United States, where the Company
utilizes a direct sales force, and outside the United States, where the Company
will continue to establish relationships with marketing partners worldwide; and
(v) acquiring complementary technologies and products that enable the Company to
broaden its product line and leverage its distribution network.
The Company was incorporated in Delaware in 1980. The Company's
headquarters are located at 70 Wood Avenue South, Iselin, New Jersey. The
Company's overall administration, licensing, human clinical studies, marketing
activities, quality assurance and regulatory affairs are primarily coordinated
at the Company's headquarters. Pre-clinical studies, research and development
activities and manufacturing of the Company's genetically engineered products
are primarily carried out through its wholly-owned subsidiary in Rehovot,
Israel. The Company's telephone number is 908-632-8800.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus. This Prospectus contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below, as well as those discussed elsewhere in this
Prospectus.
Dependence on Oxandrin. A substantial portion of the increase in the
Company's revenues in 1996 and the first half of 1997 resulted from
increasing sales of Oxandrin, which the Company relaunched in the United States
during December 1995. There can be no assurance that such sales increases will
continue. A substantial number of users of Oxandrin are patients with AIDS and
as more successful treatments for this disease, such as protease inhibitors, are
developed, the need to use Oxandrin by these patients may be reduced. Although
the Company is working to expand the use of Oxandrin to treat other conditions
covered by the product's current United States Food and Drug Administration
("FDA") approval, such as the treatment of weight loss suffered by burn victims
and persons suffering from chronic obstructive pulmonary disease and cancer,
there can be no assurance that the Company will be successful in its efforts.
Additionally, there are no patents covering Oxandrin, and there can be no
assurance that others will not introduce an oxandrolone product.
Dependence on Third-Party Suppliers. The Company is dependent on third
parties for the manufacture of Oxandrin and Delatestryl and the filling and
vialing of its Bio-Tropin product. Although the Company is a party to an
exclusive supply arrangement with G.D. Searle & Company Limited ("Searle"), and
an alternative exclusive supply agreement with Societa Prodotti Antibiotici
S.p.A. ("SPA"), covering the supply of Oxandrin to BTG through at least the year
2003, there can be no assurance that Searle will continue to, or that SPA will
be able to, provide the Company with sufficient supplies of Oxandrin to satisfy
its future needs. Bristol-Myers Squibb Company ("Bristol") has manufactured
Delatestryl for the Company pursuant to an agreement which expired in March
1997. Although Bristol has continued to honor the Company's purchase orders to
date, there can be no assurance that Bristol will continue to do so or that the
Company's supply requirements will be satisfied. In addition, the Company is
dependent on Dr. Madaus GmbH ("Dr. Madaus") to fill and vial the Company's
Bio-Tropin product. Any failure of Searle and SPA, Bristol or Dr. Madaus to
fulfill its obligations to the Company could have a material adverse effect on
the business, results of operations and financial condition of the Company.
There can be no assurance that the Company would be able to find an alternative
supplier for any of Searle and SPA, Bristol or Dr. Madaus if they were unable or
unwilling to fulfill their obligations to the Company.
Dependence on Third-Party Licensees. The Company has derived, and expects
to continue to derive over the next several years, revenues from existing and
new licensing, research and development and marketing agreements. These
agreements typically provide the Company's licensees with certain rights,
subject to an obligation to pay royalties to the Company based on any future
product sales or to purchase product from the Company, to manufacture and market
specified products developed using the Company's proprietary technology. Certain
of these agreements provide for funding by licensees of research activities
performed on their behalf by the Company. Continued funding and participation by
these licensees will depend not only on the timely achievement of milestones,
which cannot be assured, but also on each licensee's own financial, competitive,
marketing and strategic considerations. Such considerations include the relative
advantages, including patent and proprietary positions, of alternate products
being marketed or developed by others. Furthermore, the amounts of any payments
to be received by the Company under its license
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agreements from the sale of products by licensees will be dependent on the
extent to which its licensees devote resources to the development and
commercialization of the products. Although the Company believes its licensees
have an economic motivation to commercialize their products, the Company has no
effective control over the licensees' commercialization efforts.
Risk of Pending Patent Litigation. To date, the Company has been, or
currently is, party to several administrative and legal proceedings relating to
its technologies, products and patents and the patents of others. On March 16,
1993, Genentech, Inc. ("Genentech") filed a complaint with the United States
International Trade Commission (the "ITC") alleging, among other things, that
BTG's importation of its human growth hormone ("hGH") into the United States
violates Section 337 of the Tariff Act of 1930 because of the existence of
certain claims in U.S. patents of Genentech. Genentech sought an immediate
investigation and an order that BTG cease and desist from importing hGH into the
United States. The trial on the Genentech complaint was held in April 1994. In
January 1995, the ITC issued a final decision dismissing the complaint with
prejudice as a sanction for Genentech's conduct which resulted in an incomplete
record and violated the due process rights of BTG and Novo-Nordisk A/S, another
respondent in the proceeding. The ITC also found no violation by BTG of Section
337 of the Tariff Act of 1930. Genentech appealed the ITC decision to the United
States Court of Appeals for the Federal Circuit (the "CAFC"). The appeal was
heard on December 4, 1995, and in August 1997 the CAFC reversed the ITC decision
and remanded to the ITC for further proceedings. During 1993 and 1994, BTG
incurred total legal fees of approximately $4.2 million relating to the ITC
proceeding.
On December 1, 1994, Genentech filed a lawsuit against BTG in the United
States District Court for the District of Delaware alleging that BTG's
importation of hGH infringed two Genentech process patents. In January 1995, BTG
commenced an action against Genentech in the United States District Court for
the Southern District of New York seeking, among other things, declaratory
judgments as to the non-infringement, invalidity and unenforceability of such
Genentech patents as well as damages resulting from Genentech's actions in the
ITC proceedings. The Delaware action was consolidated with the New York action,
and in August 1995 the United States District Court for the Southern District of
New York granted a preliminary injunction prohibiting the commercial
introduction in the U.S. of BTG's hGH. In April 1996 the CAFC rejected BTG's
appeal of the grant of the preliminary injunction. In May 1996 the CAFC rejected
BTG's request for a rehearing and a rehearing en banc. BTG filed a petition for
a writ of certiorari with the U.S. Supreme Court, which was denied in October
1996. BTG is now precluded from marketing and distributing its human growth
hormone in the United States pending the outcome of the patent infringement
action. Although BTG believes that it does not infringe any valid Genentech
patent, there can be no assurance that BTG will not be found to be infringing
Genentech's patents. If BTG is ultimately found by the district court to
infringe one or more claims in Genentech's U.S. patents, it likely will be
precluded from selling its hGH in the United States during the life of these
Genentech patents. The Company is currently evaluating its options in light of
the district court and CAFC decisions. During 1995, the Company incurred total
legal fees relating to this litigation of approximately $824,000, which amount
was initially capitalized but subsequently written off in the first quarter of
1996 following the CAFC decision.
In September 1993, JCR Pharmaceuticals Co., Ltd. ("JCR"), the Company's
exclusive distributor of hGH in Japan, received a letter from attorneys
representing Genentech and its licensee, Kabi Pharmacia AV, claiming that JCR's
sale of the Company's hGH infringed certain Genentech patents and patent
applications and demanding that JCR cease the sale of the Company's hGH in
Japan. During 1994, JCR and BTG filed oppositions to two Genentech patent
applications in Japan that were first published for opposition in the first half
of 1994. BTG was informed in 1997 that its and JCR's oppositions were denied.
Although the Company does not believe that it is infringing or has ever
infringed any valid Genentech patent or patent application, there can be no
assurance that BTG's hGH will not be found to infringe certain Genentech patents
in Japan. If the Company's hGH is found to infringe certain Genentech
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patents in Japan, JCR and/or the Company may be obliged to pay damages, and
would need to obtain a license from Genentech in order to continue sales of hGH
in Japan. There can be no assurance that such a license will be granted by
Genentech, or that JCR will not be required to stop selling the Company's hGH in
Japan. Sales of hGH to JCR in 1996 and the first half of 1997 were approximately
$12.9 million and $9.7 million, respectively, representing approximately 32% and
33%, respectively, of the Company's total product sales in those periods and 71%
and 73%, respectively, of the Company's total hGH product sales in those
periods.
During 1991, BTG received notification from the U.S. Patent Office Board of
Patent Appeals and Interferences (the "Patent Office") of the declaration of an
interference between an issued patent assigned to BTG covering a method for
producing enzymatically active human copper/zinc superoxide dismutase ("SOD") in
bacteria and a pending application of Chiron Corp. ("Chiron") which claims an
earlier filing date. While BTG is vigorously defending its patent, it cannot
predict the outcome of such interference. However, should BTG's patent be
disallowed and a corresponding patent be issued to Chiron, BTG's present method
of producing enzymatically active human copper/zinc SOD in bacteria may need to
be altered, which may or may not be possible; alternatively, BTG could seek a
license to market under Chiron's patent, which may or may not be available.
Subsequent to the interference being declared, Chiron was issued a U.S. patent
for the bacterially produced form of recombinant human copper/zinc SOD. BTG is
seeking to have the Patent Office either expand the scope of the existing
interference action or declare a separate interference to determine that BTG
rather than Chiron should hold the patent for the bacterially produced form of
recombinant human copper/zinc SOD on the basis that BTG scientists, not Chiron
scientists, invented the method for producing recombinant human copper/zinc SOD
in bacteria. Unless BTG is able to prevail in this effort or to obtain a license
from Chiron, BTG may be unable to commercialize its OxSODrol product in the
United States. This matter is currently under consideration by the Patent
Office. In addition, the Israeli Patent Office has accepted a Chiron patent
application covering a DNA construct having certain specified functions for
expression of active copper/zinc SOD and a method for production of active
copper/zinc SOD in a microorganism harboring this construct. BTG is opposing the
grant of this patent; however, there can be no assurance that this opposition
will be successful. If the opposition is unsuccessful, BTG may be precluded from
manufacturing OxSODrol in Israel. In March 1993, the Patent Office issued a
patent exclusively licensed to BTG containing broad claims for the gene encoding
human copper/zinc SOD, related recombinant expression vectors and genetically
engineered cells containing the gene. BTG believes that Chiron could not
commercialize its yeast-produced SOD product in the United States without
infringing this patent. However, the issuance of this patent does not assure
BTG's ability to commercialize its OxSODrol product.
In September 1991, the Company received a letter from Biogen, Inc.
("Biogen") stating that it believed that the Company's recombinant surface
antigen of the hepatitis-B virus, which is an active ingredient of the Company's
Bio-Hep-B vaccine, or the Company's intermediates for the process of making such
antigen, falls within the claims of one or more of Biogen's patents and/or
patent applications. To date, the Company's activities with respect to its
Bio-Hep-B vaccine have been limited to research and clinical evaluations, which
activities the Company believes do not infringe Biogen's patent rights. The
Company has also made inquiries of Biogen and SmithKline Beecham (the exclusive
licensee of all of Biogen's hepatitis-B patents except those in Japan)
requesting that the Company be granted a license to the Biogen patents; however,
such efforts have not been successful to date.
In January 1992, Bio-Technology General (Israel) Ltd., the Company's
wholly-owned Israeli subsidiary ("BTG-Israel"), filed an application in the
Israeli Patent Office for a compulsory license to manufacture BTG's Bio-Hep-B
vaccine under Biogen's Israeli patent. In September 1995 the Registrar ruled in
an interlocutory decision that BTG-Israel is entitled to a compulsory license to
the Biogen patent. Biogen's appeal of the interlocutory decision was rejected.
In late 1996, the Israeli Registrar of Patents (the "Registrar") set the terms
of the
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license, including royalties to be paid by BTG to Biogen. This decision (and
consequently the license) was to come into effect in December 1996. Biogen
appealed the Registrar's decision to the District Court of Tel Aviv, Israel.
With its appeal Biogen also moved for a stay of the license, which was granted
ex parte pending hearings with both parties. Following hearings which took place
in December 1996, the motion was denied in January 1997; however, the ex parte
stay was left in force pending Biogen's appeal to the Supreme Court and
maintained by the Supreme Court pending the decision by the District Court on
the merits of Biogen's appeal. The District Court heard the appeal in early
March 1997, and in June 1997 the District Court denied Biogen's appeal and
subsequent motion for a stay pending Biogen's appeal of the District Court
decision on the merits. Biogen has the right to appeal the District Court's
decision to the Israeli Supreme Court. The compulsory license is now effective
and allows BTG-Israel to produce the vaccine in Israel upon receipt of
regulatory approval and to export the vaccine to countries in which neither
Biogen nor others have been granted a blocking patent. There can be no assurance
that the compulsory license will not be subsequently overturned by the Israel
Patent Office or by a court. If the compulsory license is overturned, BTG may
not be able to manufacture or sell its Bio-Hep-B vaccine in Israel or to export
such product from Israel unless the patent expires or is revoked.
In August 1992, Biogen sued BTG-Israel for allegedly infringing its Israeli
patent (which is the subject of the compulsory license) by virtue of its
preparation of BTG's Bio-Hep-B vaccine for use in clinical trials, and applied
for an interlocutory injunction restraining BTG-Israel from continuing research
and development activities and clinical trials. In June 1993, the District Court
of Tel Aviv, Israel denied Biogen's application for an interlocutory injunction
in connection with research and development and clinical trials, but enjoined
BTG-Israel from commercial marketing of its Bio-Hep-B vaccine unless permitted
by Biogen or its exclusive licensee, until a compulsory license is obtained, or
until the patent expires or is revoked. These proceedings are continuing. There
can be no assurance that the outcome of these proceedings will be favorable to
BTG, and the Company cannot predict what effect it may have on the compulsory
license or on the ability of BTG to successfully commercialize and market the
Bio-Hep-B vaccine. An outcome unfavorable to BTG may adversely affect the
ability of BTG to commercialize and market the Bio-Hep-B vaccine.
The Company has been advised by Scitech Medical Products, Pte., Ltd.
("Scitech"), its Bio-Hep-B licensee in certain countries in the Far East, that
in April 1993 Biogen initiated suit against Scitech in Singapore asserting that
Scitech's conduct of clinical trials in Singapore with respect to the Company's
hepatitis-B vaccine constitutes infringement of Biogen's patent rights in
Singapore and claiming rights in the data obtained by Scitech through its
clinical trials in Singapore and that an interlocutory hearing was held in
September 1993, although to date no final decision has been rendered. Biogen's
Singapore patent rights are based on the registration of its corresponding UK
patents, and the validity of patents in Singapore depends on the validity of the
corresponding UK patents. Biogen's broad U.K. patent (on which Singapore
registration is based) was invalidated by the U.K. Court of Appeals in October
1994, which decision was upheld by the House of Lords in October 1996. Biogen is
currently attempting to have amended claims allowed. Additionally, three claims
of a narrower UK patent were upheld. The Company believes that none of these
claims will affect commercialization of the Company's vaccine, although there
can be no assurance of this. The Company is aware that certain other patents
have been granted or are pending that may prevent the Company from selling its
vaccine in the United States, Europe and certain other countries. The Company's
failure to obtain any needed license, or a determination that its vaccine
infringes the patent rights of Biogen or others, would substantially limit, if
not prohibit, the commercialization of the Bio-Hep-B vaccine in those countries
in which Biogen or others have a patent until such patent is revoked or expires.
The ability of the Company to secure any necessary licenses or sublicenses to
these patents or applications cannot be predicted.
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Three patent applications of Genentech in Israel which cover general
methods relating to genetically engineered products and to human growth hormone
were accepted in 1983 (two) and 1985 (one). BTG is opposing the grant of these
patents. One of these three Israeli applications corresponds to the two U.S.
patents which are the subject of the complaint asserted by Genentech against BTG
in the United States District Court in Delaware (subsequently consolidated with
related proceedings in New York). Additionally, in 1984 an Israeli patent
application of Biogen which relates to expression vectors was accepted; BTG is
opposing the grant of this patent. There can be no assurance that BTG will be
successful in its opposition to the grant of these patents. If BTG is
unsuccessful in its opposition in Israel, then BTG may be unable to manufacture
its products in Israel.
The Company has also initiated proceedings in Israel and Europe to oppose
the grant to several of its competitors of patents relating to vector systems,
and may oppose corresponding patents in other jurisdictions. Additionally,
during 1991 and 1992, proceedings were initiated in Israel to oppose the grant
of patents relating to the OxSODrol and Bio-Flow products, respectively.
Although the outcome of the proceedings cannot be predicted with certainty and
will likely not be determined for several years, the Company believes that the
outcome will be favorable, although there can be no assurance of this. The
Company is aware of patent applications filed by, or patents issued to, other
entities with respect to technology potentially useful to the Company and, in
some cases, related to products and processes being developed by the Company.
The Company cannot presently assess the effect, if any, that these patents may
have on its operations. The extent to which efforts by other researchers have or
will result in patents and the extent to which the issuance of patents to others
would have a materially adverse effect on the Company or would force the Company
to obtain licenses from others are currently unknown.
In 1986, the Company licensed from the U.S. Department of Commerce a U.S.
patent relating to the sublingual delivery of sex steroids, in which the drug is
absorbed into the bloodstream through the mucosal membrane under the tongue.
Subsequently the Company licensed from the U.S. Department of Commerce one claim
of a related U.S. patent, which patent is currently the subject of an
interference action by Janssen, a division of Johnson & Johnson. The Company is
currently in negotiations to secure a license to Janssen's patents and
technology, although there can be no assurance it will be able to obtain a
license on reasonable terms or at all. If Janssen is successful in this
interference action and BTG is unable to obtain a license, BTG may be prohibited
from commercializing Androtest-SL.
Uncertainty of Protection of Patents and Proprietary Technology. The
Company has developed patentable technology and proprietary know-how and has
acquired from various universities and institutions certain basic technologies,
as to which either patents have been issued or patent applications are pending.
There can be no assurance that patent applications will result in issued
patents, that the claims allowed in such issued patents will be sufficiently
broad to protect the Company's proprietary rights or that patents will not be
challenged, circumvented or invalidated or that rights granted pursuant to such
patents will provide competitive advantages to the Company. The Company's
success depends in part on its ability to continue to obtain patent protection
in the United States and other countries for its technologies and the products,
if any, resulting from such technologies. Patent applications in the United
States are maintained in secrecy until a patent issues, and the Company cannot
be certain that others have not filed patent applications for technology covered
by the Company's pending applications or that the Company was the first to file
patent applications for such technology. The Company also relies on trade
secrets, proprietary know-how and technological innovation which it seeks to
protect with confidentiality agreements with its employees, consultants and
licensees. There can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any breach or that BTG's trade
secrets and proprietary know-how will not otherwise become known or be
independently discovered by competitors.
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BTG's commercial success will also depend in part on the Company not
infringing patents or proprietary rights of third parties. A number of companies
and research and academic institutions have developed technologies, filed patent
applications or received patents on various technologies that relate to the
Company's business, and such entities may file applications for or be issued
patents in the future with respect to technology potentially necessary or useful
to BTG. Some of these technologies, applications or patents may conflict with
the Company's technologies and existing or future patents, if any, or patent
applications. Such conflict could limit the scope of patents that BTG has
obtained or may obtain in the future or result in patent applications failing to
issue as patents. In addition, if third parties obtain patents which cover the
Company's activities, there can be no assurance that BTG would be able to
license such patents on reasonable terms, or at all, or be able to license or
develop alternative technology. As more patents are issued to third parties, the
risk that the Company's products and activities may give rise to claims that
they infringe the patents of others increases.
The Company expects that administrative hearings, litigation or both will
be necessary to determine the validity and scope of its and others' proprietary
or biotechnology patents. Such administrative proceedings or litigation have to
date required, and may in the future require, a significant commitment of the
Company's resources. Any such commitment may divert resources from other areas
of the Company.
Limited Manufacturing Capacity and Experience. The Company has limited
commercial scale manufacturing capacity and experience. While it is expected
that the Company's manufacturing facilities will allow the Company to satisfy
its current and anticipated near-term requirements, the Company will need a
larger facility within the next several years to meet anticipated increases in
demand for its products. The Company is required to obtain regulatory approval
for all of its commercial manufacturing processes and facilities, and to date
the Company has been able to obtain such approvals. Any failure to receive, or a
substantial delay in obtaining, regulatory approval for its manufacturing
processes and facilities could have a material adverse effect on the Company.
The manufacture of the Company's products involves a number of technical
steps and requires meeting stringent quality control specifications imposed by
governmental regulatory bodies and by the Company itself. Further, such products
can only be manufactured in facilities approved by the applicable regulatory
authorities. As a result, the Company may not be able to quickly and efficiently
replace its manufacturing capacity in the event that it is unable to manufacture
its products at its facilities. In the event of a natural disaster, equipment
failure, strike, war or other difficulty, BTG may be unable to manufacture its
products in a manner necessary to fulfill demand. BTG's inability to fulfill
demand may permit its licensees and distributors to terminate their agreements,
seek alternate suppliers or manufacture the products themselves. Additionally,
if the Company does not receive regulatory approval for its new facility, it
would likely be unable to meet the anticipated increased demands for its
products, which would have a material adverse effect on BTG's business, results
of operations and financial condition. The Company is dependent on third parties
to manufacture all or a portion of certain of its products. See "--Dependence
on Third-Party Suppliers."
Limited Marketing Capability and Experience. The Company established a
sales and marketing force in the United States during the second half of 1995 to
promote distribution of Oxandrin and other BTG products in the United States.
With respect to territories outside the United States, the Company does not yet
have an established sales force and relies on third parties to market its
products. There can be no assurance that the Company's marketing strategy will
be successful. The Company's ability to market its products successfully in the
future will be dependent on a number of factors, many of which are not within
its control.
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Limited Commercial Products. The Company's principal activities since its
formation in 1980 have been the research and development of products with
commercial potential. Commercialization of the Company's products is subject to
successful clinical testing and governmental approvals, the timing of which is
not within the control of the Company and has taken and may continue to take
longer than anticipated. Acceptance by the medical community of the Company's
products is also necessary for their successful commercialization.
Historical Operating Losses. Prior to 1995, the Company's revenues were
not sufficient to offset the expenses incurred in its research, development and
production activities. At June 30, 1997, the Company had an accumulated deficit
of approximately $61.3 million. To the extent the Company is unable to sustain
its recent profitability, its ability to continue its operations will depend
upon its ability to secure additional funds from other sources. Revenue has in
the past and may in the immediate future continue to display significant
variations due to the level of sales of existing products, the introduction of
new products and new research and development contracts and licensing
arrangements, the completion or termination of those contracts and arrangements,
the timing and amounts of milestone payments and the timing of regulatory
approvals of products. The Company's profitability will be dependent on its
success in developing, obtaining regulatory approvals for and effectively
marketing its products. The annual cash flows of the Company have fluctuated
significantly due to the impact of net income and losses, capital spending,
working capital requirements and issuances of Common Stock and other financings.
The Company expects that cash flow in the near future will be primarily
determined by the levels of net income (loss) less depreciation and
amortization, and financings, if any, undertaken by the Company.
Capital Needs. The development and commercialization of products requires
a substantial amount of funds. The Company's cash requirements are currently
satisfied primarily through product sales. Historically, cash requirements were
satisfied primarily through (i) product sales; (ii) funding of projects through
collaborative research and development arrangements; (iii) contract fees; (iv)
government of Israel funding of a portion of certain research and development
projects; and (v) equity and debt financings. There can be no assurance that
these financing alternatives will be available in the future to satisfy the
Company's cash requirements. The Company believes that its remaining cash
resources, together with anticipated product sales, scheduled payments to be
made to BTG under its current agreements with pharmaceutical partners and third
parties and continued funding from the Chief Scientist of the State of Israel
(the "Chief Scientist") at current levels, will be sufficient to fund the
Company's ongoing operations for the foreseeable future. There can, however, be
no assurance that product sales will occur as anticipated, that scheduled
payments will be made by third parties, that current agreements will not be
canceled, that the Chief Scientist will continue to provide funding at current
levels, or that unanticipated events requiring the expenditure of funds will not
occur.
The satisfaction of the Company's future cash requirements will depend in
large part on the status of commercialization of the Company's products, the
Company's ability to enter into additional research and development and
licensing arrangements, and the Company's ability to obtain additional equity
investments, if necessary. There can be no assurance that the Company will be
able to obtain additional funds or, if such funds are available, that such
funding will be on favorable terms. If additional funds are raised by issuing
equity securities of the Company, dilution to existing stockholders may result.
In addition, the indentures under which the Company's debt securities were
issued limit the ability of the Company to satisfy its cash requirements through
borrowings or the issuance of debt securities. The Company continues to seek
additional collaborative research and development and licensing arrangements in
order to provide revenue from sales of certain products and funding for a
portion of the research and development expenses relating to the products
covered, although there can be no assurance that the Company will be able to
obtain such agreements. If adequate funds are not available, BTG may be required
to significantly curtail one or more of
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its commercialization efforts or research and development programs or obtain
funds through arrangements with collaborative partners or others on less
favorable terms than might otherwise be available.
Effect of Governmental Regulation. The Company is subject to regulation by
numerous governmental authorities in the United States and other countries. All
of the Company's products, manufacturing processes and facilities require
governmental licensing or approval prior to commercial use. The approval process
applicable to products of the type being developed by the Company usually takes
five to seven years from the commencement of human clinical trials and typically
requires substantial expenditures. The Company and its licensees may encounter
significant delays or excessive costs in their respective efforts to secure
necessary approvals or licenses. Before obtaining regulatory approval for the
commercial sale of its products, the Company is required to conduct preclinical
and clinical trials which demonstrate that the product is safe and efficacious
for the treatment of the target disease. The results from preclinical animal
studies and early clinical trials may not be predictive of results that will be
obtained in large scale testing. A number of biotechnology companies have
recently suffered significant setbacks in advanced clinical trials, even after
experiencing promising results in preclinical and early human testing.
Additionally, the rate of completion of clinical trials is dependent upon a
number of factors, many of which are outside the Company's control, including
the rate of patient enrollment. Patient enrollment is a function of several
factors, including the size of the patient population and the proximity of
patients to clinical sites. Delays in patient enrollment could result in
increased costs and delays in completion of the clinical trials. In addition,
preclinical and clinical trials must meet regulatory and institutional
requirements. Data obtained from preclinical and clinical activities are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. In addition, the Company and its partners may encounter
delays or rejections based upon changes in the policies of regulatory
authorities.
Future United States or foreign legislative or administrative acts could
also prevent or delay regulatory approval of the Company's or its licensees'
products. Failure to obtain requisite governmental approvals, or failure to
obtain approvals of the scope requested, could delay or preclude the Company or
its licensees from marketing their products, could limit the commercial use of
the products and could also allow competitors time to introduce competing
products ahead of product introduction by the Company and thereby have a
material adverse effect on the Company's results of operations, liquidity and
financial condition. Even after regulatory approval is obtained, use of the
products could reveal side effects that, if serious, could result in suspension
of existing approvals and delays in obtaining approvals in other jurisdictions.
Regulation by governmental authorities in the United States and other
countries is a significant factor affecting the timing of the commercialization
of the Company's products and its ongoing research and development activities.
The timing of regulatory approvals is not within the Company's control. To date,
the length of time required to obtain regulatory approval of
genetically-engineered products has been significantly longer than expected,
both for the Company and the biotechnology industry in general. These delays
have had, and if they continue could have, a material adverse effect on the
results of operations and financial condition of the Company. The Company
believes that these delays have in the past negatively impacted its ability to
attract funding and that, as a result, the terms of such financings have been
less favorable to the Company than they might otherwise have been had the
Company's product revenues provided sufficient funds to finance the large costs
of taking a product from discovery through commercialization. As a result, the
Company has had to license the commercialization of many of its products to
third parties in exchange for research funding and royalties on product sales;
this will result in lower revenues than if BTG had commercialized the products
on its own.
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Failure to comply with applicable regulatory requirements can, among other
things, result in fines, suspension of regulatory approvals, product recalls,
seizure of products, imposition of operating restrictions and criminal
prosecutions. Further, FDA policy or similar policies of regulatory agencies in
other countries may change and additional governmental requirements may be
established that could prevent or delay regulatory approval of the Company's
products.
Uncertainty of Health Care Reimbursement. The Company's ability to
successfully commercialize human therapeutic products may depend in part on the
extent to which reimbursement for the cost of such products and related
treatment will be available from government health administration authorities,
private health coverage insurers and other organizations. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and there can be no assurance that adequate third-party coverage will
be available for the Company to maintain price levels sufficient for realization
of an appropriate return on its investment in product development. Government
and other third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new
therapeutic products approved for marketing by the FDA and by refusing, in some
cases, to provide any coverage for use of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third-party
payors for use of the Company's health care products, the market acceptance of
these products would be adversely affected. In addition, in recent years a
number of federal and state health care reform proposals have been introduced to
contain health care costs. There can be no assurance as to the ultimate content,
timing or effect of any health care reform legislation, nor is it possible at
this time to estimate the impact of potential legislation on the Company.
Regulatory approval of prices is also required in most countries outside the
United States. In particular, certain European countries will condition their
approval of a product on the agreement of the seller not to sell the product for
more than a certain price in that country. There can be no assurance that the
establishment of a price in one European country will not have the practical
effect of requiring the Company's marketing partners to sell the product in
other European countries at no higher than such price. Because BTG generally
supplies product to its marketing partners for a specified percentage of net
sales, there can be no assurance that the resulting prices would be sufficient
to generate an acceptable return on the Company's investment in its products or
even cover the Company's manufacturing costs for such product.
Risk of Technical Obsolescence; Highly Competitive Industry. Biotechnology
has undergone rapid and significant technological change. The Company expects
that this technology will continue to develop rapidly, and the Company's future
success will depend, in large part, on its ability to maintain a competitive
position. Rapid technological development may result in products or processes
becoming obsolete before marketing of these products or before the Company
recovers a significant portion of the research, development and
commercialization expenses incurred with respect to those products. Numerous
companies, including well-known pharmaceutical and biotechnology companies, are
engaged in the business of researching and developing products similar to those
of the Company. Many of these companies have substantially greater capital
resources and larger research and development staffs and facilities than the
Company. Such companies may succeed in their research, developing on a more
timely basis products that may be more effective than any which may be developed
by the Company. These companies may also be more successful than the Company in
the production and marketing of such products.
Retention of Key Personnel. The Company is dependent upon the efforts of
its officers and scientists and other employees. The loss of certain of these
key employees could materially and adversely affect the Company's business.
There is a great deal of competition for the limited number of scientists with
expertise in the area of the Company's operations. The
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business of the Company is dependent upon its ability to attract and retain
qualified research and managerial personnel. The Company does not maintain, and
has no current intention of obtaining, "key man" life insurance on any of its
employees.
Risk of Operations in Israel. The Company's primary research, development
and production operations are at this time conducted in Israel and can be
affected by economic, military and political conditions in that country and in
the Middle East in general. The Company manages its Israeli operations with the
object of protecting against any material net financial loss in U.S. dollars
from the impact of Israeli inflation and currency devaluations on its non-U.S.
dollar assets and liabilities. The Bank of Israel's monetary policy has been to
manage the exchange rate while allowing the Consumer Price Index to rise by
approximately 14% in 1994, 8% in 1995, 11% in 1996 and 5% in the six month
period ended June 30, 1997. For those expenses linked to the Israeli Shekel,
such as salaries and rent, this resulted in corresponding increases in these
costs in U.S. dollars. In 1994, 1995, 1996 and the six month period ended June
30, 1997, the Shekel was devalued by approximately 1%, 4%, 4% and 10%,
respectively, against the U.S. dollar. Because of the insignificant devaluation
of the Shekel against the U.S. dollar in 1994, 1995 and 1996 despite the annual
rate of increase in the Consumer Price Index, BTG's cost of local goods and
services, to the extent linked in whole or in part to the Consumer Price Index,
increased in U.S. dollar terms. To the extent that expenses in Shekels exceed
BTG's revenues in Shekels (which to date have consisted primarily of research
funding from the Chief Scientist and product sales in Israel), the devaluations
of Israeli currency have been and will continue to be a benefit to BTG's
financial condition. However, should BTG's revenues in Shekels exceed its
expenses in Shekels in any material respect, the devaluation of the Shekel will
adversely affect BTG's financial condition. Further, to the extent the
devaluation of the Shekel with respect to the U.S. dollar does not substantially
offset the increase in the costs of local goods and services in Israel, BTG's
financial results will be adversely affected as local expenses measured in U.S.
dollars will increase. There can be no assurance that the government of Israel
will continue to devalue the Shekel from time to time to offset the effects of
inflation in Israel.
Risk of Product Liability. The testing and marketing of the Company's
products entail risk of product liability. Although the Company has so far been
able to obtain indemnification from pharmaceutical companies commercializing its
products, there can be no assurance that other such companies will agree in the
future to indemnify the Company for other of the Company's products or that such
companies will, if obligated to do so, have adequate resources to fulfill their
indemnity agreements. Further, to the extent the Company elects to test or
market products independently, it will bear the risk of product liability
directly. The Company presently has $10,000,000 of product liability insurance
coverage in place. Any successful product liability claim made against the
Company could substantially reduce or eliminate any stockholders' equity the
Company may have and could have a significant adverse impact on the future of
the Company.
Volatility of Share Price. The market prices for securities of
biotechnology companies, including the Company, have been volatile, and it is
likely that the price of the Common Stock will fluctuate in the future. Factors
such as announcements of technological innovations or new commercial products by
the Company or its competitors, announcements by the Company or its competitors
of results in preclinical testing and clinical trials, governmental regulation,
patent or proprietary rights developments, public concern as to the safety or
other implications of biotechnology products, changes in earnings estimates and
recommendations by securities analysts, and market conditions in general may
have a significant impact on the market price of the Common Stock. In addition,
the market price of the Common Stock could be adversely affected by future
exercises of outstanding warrants and options. At August 31, 1997, options and
warrants to purchase an aggregate of approximately 5,528,087 shares and
4,706,549 shares, respectively, of Common Stock were outstanding. Substantially
all of these options and warrants have exercise prices below the current market
price of the Common Stock.
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Additionally, substantially all of the shares of Common Stock issuable upon
exercise of these outstanding options and warrants have been registered for
resale under the Securities Act of 1933, as amended, and, accordingly, when
issued will be freely tradable without restriction. In addition, the Company may
issue additional stock, warrants and/or options to raise capital in the future.
The Company may also issue additional securities in connection with its employee
benefit plans. During the terms of such options and warrants, the holders
thereof are given the opportunity to profit from a rise in the market price of
the Common Stock. The exercise of such options and warrants may have an adverse
effect on the market value of the Common Stock. The existence of such options
and warrants may adversely affect the terms on which the Company can obtain
additional equity financing. To the extent the exercise prices of such options
and warrants are less than the net tangible book value of the Common Stock at
the time such options and warrants are exercised, the Company's stockholders
will experience an immediate dilution in the net tangible book value of their
investment. Further, the future sale of a substantial number of shares of Common
Stock by existing stockholders and option and warrant holders may have an
adverse impact on the market price of the Common Stock.
Absence of Dividends. No dividends have been paid on the Common Stock to
date and the Company does not anticipate paying dividends in the foreseeable
future. The indenture under which the Company's Series B 11% Senior Secured
Convertible Notes due October 15, 1998 were issued prohibits the payment of cash
dividends on the Common Stock.
Certain Anti-Takeover Effects. The Company's Board of Directors has the
authority to issue up to 4,000,000 shares of Preferred Stock and to determine
the price, rights, preferences and privileges of those shares without any
further vote or action by the Company's stockholders. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. While
the Company has no present intention to issue shares of Preferred Stock, any
such issuance, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibits the Company from engaging in a "business combination" with an
"interested stockholder" (defined generally as a person owning 15% or more of
the corporation's outstanding voting stock) for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 could have the effect of delaying or preventing a
change of control of the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
SELLING STOCKHOLDERS
The Company will supplement this Prospectus from time to time to include
certain information concerning the security ownership of the Selling
Stockholders and the position, office or other material relationship which a
Selling Stockholder has had within the past three years with the Company or any
of its predecessors or affiliates.
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PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. All costs, expenses and fees in connection with the registration
of the Shares offered hereby will be borne by the Company. Brokerage
commissions, if any, attributable to the sale of Shares will be borne by the
Selling Stockholders (or their donees or pledgees).
Sales of Shares may be effected from time to time in transactions (which
may include block transactions) on the Nasdaq National Market, in negotiated
transactions, or a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, or at
negotiated prices. The Selling Stockholders have advised the Company that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. The
Selling Stockholders may effect such transactions by selling Common Stock
directly to purchasers or to or through broker-dealers which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder and/or the
purchasers of Common Stock for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Stockholders and any broker-dealers that act in connection with the sale of the
Common Stock might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the shares of Common Stock as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act. Liabilities
under the federal securities laws cannot be waived.
Because the Selling Stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the Selling Stockholders
will be subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a "distribution" of the Shares, such Selling
Stockholder, any selling broker or dealer and any "affiliated purchasers" may be
subject to Rule 10b-6 under the Exchange Act, which Rule would prohibit, with
certain exceptions, any such person from bidding for or purchasing any security
which is the subject of such distribution until his participation in that
distribution is completed. In addition, Rule 10b-7 under the Exchange Act
prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of
pegging, fixing or stabilizing the price of Common Stock in connection with this
offering.
The Selling Stockholders may be entitled under agreements entered into with
the Company to indemnification against liabilities under the Securities Act.
LEGAL MATTERS
Legal matters relating to the Common Stock have been passed upon for the
Company by Fulbright & Jaworski L.L.P., New York, New York 10103. Partners and
Of Counsel of Fulbright & Jaworski L.L.P., as of July 15, 1997, beneficially
owned an aggregate of 4,800 shares of the Company's Common Stock.
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EXPERTS
The audited financial statements incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report dated February 28, 1997 with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
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================================================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
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TABLE OF CONTENTS
PAGE
----
Available Information .................... 2
Incorporation of Certain
Documents by Reference ................. 3
The Company .............................. 4
Risk Factors ............................. 6
Use of Proceeds .......................... 16
Selling Stockholders...................... 16
Plan of Distribution...................... 17
Legal Matters ............................ 17
Experts .................................. 18
100,000
Shares
BIO-TECHNOLOGY
GENERAL CORP.
Common Stock
----------
PROSPECTUS
----------
September 22, 1997
================================================================================
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed by Bio-Technology General Corp.
("Registrant") (File No. 0-15313) with the Securities and Exchange Commission
(the "Commission") are incorporated herein by reference:
(i) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
(ii) The Registrant's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997.
(iii) The Registrant's Form 8-A dated July 25, 1983, as amended by
Amendment No. 1 to Form 8-A dated September 29, 1983 and Amendment No. 2 to
Form 8-A dated October 1, 1986.
In addition, all documents filed by Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 subsequent to the
date of this filing and prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated herein by
reference and to be a part thereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute part of this registration statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of Delaware provides that a
Delaware corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or
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<PAGE>
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person 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 that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liabilities under
such Section 145.
The Registrant's By-laws provide that the Registrant shall indemnify
certain persons, including officers, directors, employees and agents, within the
limitations permitted by Section 145 of the General Corporation Law of the State
of Delaware. The Registrant has also entered into indemnification agreements
with its current directors and executive officers. Reference is made to the
By-laws and Form of Indemnity Agreement filed as exhibits 3(b) and 10(o),
respectively, to the Registrant's Annual Report on Form 10-K.
The Registrant maintains a policy of insurance under which the directors
and officers of the Registrant are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason
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<PAGE>
of any acts or omissions covered under such policy in their respective
capacities as directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
(a) See Index to Exhibits.
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 herein;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed herein
or any material change to such information in this
registration statement;
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of
this section do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated herein by reference;
(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; and
(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
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<PAGE>
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 an
employee benefit plan's annual report pursuant to SectionE15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Iselin, State of New Jersey, on September 19, 1997.
BIO-TECHNOLOGY GENERAL CORP.
By: /s/ SIM FASS
----------------------------------
(Sim Fass, Chairman of the Board,
Chief Executive Officer and President)
---------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints SIM FASS and YEHUDA STERNLICHT, or either
of them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting said attorney-in-fact and agent and each of
them, 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, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ SIM FASS Chairman of the Board, September 19, 1997
- -------------------------- President, CEO, and Treasurer
(Sim Fass) (Principal Executive Officer)
/s/ HERBERT J. CONRAD Director September 19, 1997
- --------------------------
(Herbert J. Conrad)
/s/ MOSES MARX Director September 19, 1997
- --------------------------
(Moses Marx)
/s/ ALLAN ROSENFIELD Director September 19, 1997
- --------------------------
(Allan Rosenfield)
/s/ DAVID TENDLER Director September 19, 1997
- --------------------------
(David Tendler)
/s/ VIRGIL THOMPSON Director September 19, 1997
- --------------------------
(Virgil Thompson)
/s/ DAN TOLKOWSKY Director September 19, 1997
- --------------------------
(Dan Tolkowsky)
/s/ FAYE WATTLETON Director September 19, 1997
- --------------------------
(Faye Wattleton)
/s/ HERBERT WEISSBACH Director September 19, 1997
- --------------------------
(Herbert Weissbach)
/s/ YEHUDA STERNLICHT Vice President-Finance and September 19, 1997
- -------------------------- Chief Financial Officer
(Yehuda Sternlicht) (Principal Financial and
Accounting Officer)
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<PAGE>
INDEX TO EXHIBITS
Exhibit No.
- -----------
4(a) The Bio-Technology General Corp. 401(k) Profit Sharing Plan
5 Opinion of Fulbright & Jaworski L.L.P.
23(a) Consent of Arthur Andersen L.L.P.
23(b) Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5)
24 Power of attorney authorizing representatives to sign this
Registration Statement and any and all amendments (including
post-effective amendments) to this Registration Statement on behalf
of Bio-Technology General Corp. and certain directors and officers
thereof (included on signature page).
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Exhibit 4(a)
BIO-TECHNOLOGY GENERAL CORP. 401(K) PROFIT SHARING PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS 24
2.2 DETERMINATION OF TOP HEAVY STATUS 24
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER 28
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY 28
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 29
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR 29
2.7 RECORDS AND REPORTS 30
2.8 APPOINTMENT OF ADVISERS 30
2.9 INFORMATION FROM EMPLOYER 31
2.10 PAYMENT OF EXPENSES 31
2.11 MAJORITY ACTIONS 31
2.12 CLAIMS PROCEDURE 31
2.13 CLAIMS REVIEW PROCEDURE 31
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY 32
3.2 APPLICATION FOR PARTICIPATION 32
3.3 EFFECTIVE DATE OF PARTICIPATION 33
3.4 DETERMINATION OF ELIGIBILITY 33
3.5 TERMINATION OF ELIGIBILITY 33
3.6 OMISSION OF ELIGIBLE EMPLOYEE 33
3.7 INCLUSION OF INELIGIBLE EMPLOYEE 34
3.8 ELECTION NOT TO PARTICIPATE 34
<PAGE>
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION 34
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION 35
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 38
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS 39
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS 44
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS 46
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS 48
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS 51
4.9 MAXIMUM ANNUAL ADDITIONS 53
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS 56
4.11 TRANSFERS FROM QUALIFIED PLANS 57
4.12 DIRECTED INVESTMENT ACCOUNT 58
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND 59
5.2 METHOD OF VALUATION 59
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT 60
6.2 DETERMINATION OF BENEFITS UPON DEATH 60
6.3 DISABILITY RETIREMENT BENEFITS 61
6.4 DETERMINATION OF BENEFITS UPON TERMINATION 61
6.5 DISTRIBUTION OF BENEFITS 65
6.6 DISTRIBUTION OF BENEFITS UPON DEATH 69
6.7 TIME OF SEGREGATION OR DISTRIBUTION 72
6.8 DISTRIBUTION FOR MINOR BENEFICIARY 72
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 72
6.10 PRE-RETIREMENT DISTRIBUTION 72
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP 73
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION 74
<PAGE>
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 75
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 75
7.3 OTHER POWERS OF THE TRUSTEE 76
7.4 LOANS TO PARTICIPANTS 79
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 80
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 80
7.7 ANNUAL REPORT OF THE TRUSTEE 81
7.8 AUDIT 81
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 82
7.10 TRANSFER OF INTEREST 83
7.11 DIRECT ROLLOVER 83
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT 84
8.2 TERMINATION 85
8.3 MERGER OR CONSOLIDATION 85
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS 86
9.2 ALIENATION 86
9.3 CONSTRUCTION OF PLAN 87
9.4 GENDER AND NUMBER 87
9.5 LEGAL ACTION 87
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS 87
9.7 BONDING 88
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE 88
9.9 INSURER'S PROTECTIVE CLAUSE 88
9.10 RECEIPT AND RELEASE FOR PAYMENTS 89
9.11 ACTION BY THE EMPLOYER 89
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY 89
9.13 HEADINGS 90
9.14 APPROVAL BY INTERNAL REVENUE SERVICE 90
9.15 UNIFORMITY 90
<PAGE>
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS 90
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS 91
10.3 DESIGNATION OF AGENT 91
10.4 EMPLOYEE TRANSFERS 91
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION 92
10.6 AMENDMENT 92
10.7 DISCONTINUANCE OF PARTICIPATION 92
10.8 ADMINISTRATOR'S AUTHORITY 93
<PAGE>
BIO-TECHNOLOGY GENERAL CORP. 401(K) PROFIT SHARING PLAN
THIS AGREEMENT, hereby made and entered into this 8th day of August, 1994,
by and between Bio-Technology General Corp. (herein referred to as the
"Employer") and Sim Fass and Matthew Pazaryna (herein referred to as the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Employer desires to recognize the contribution made to its
successful operation by its employees and to reward such contribution by means
of a 401(k) Profit Sharing Plan for those employees who shall qualify as
Participants hereunder;
NOW, THEREFORE, effective January 1, 1994 (hereinafter called the
"Effective Date"), the Employer hereby establishes a 401(k) Profit Sharing Plan
and creates this trust (which plan and trust are hereinafter called the "Plan")
for the exclusive benefit of the Participants and their Beneficiaries, and the
Trustee hereby accepts the Plan on the following terms:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 2.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
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<PAGE>
1.7 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.8 "Compensation" with respect to any Participant means such Participant's
wages as defined in Code Section 3401(a) and all other payments of compensation
by the Employer (in the course of the Employer's trade or business) for a Plan
Year for which the Employer is required to furnish the Participant a written
statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation must be
determined without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed (such as the exception for agricultural labor in Code
Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall be
made by:
(a) including amounts which are contributed by the Employer pursuant
to a salary reduction agreement and which are not includible in the gross
income of the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B),
403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall be
recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such amount shall
be adjusted at the same time and in such manner as permitted under Code Section
415(d), except that the dollar increase in effect on January 1 of any calendar
year shall be effective for the Plan Year beginning with or within such calendar
year and the first adjustment to the $200,000 limitation shall be effective on
January 1, 1990. For any short Plan Year the Compensation limit shall be an
amount equal to the Compensation limit for the calendar year in which the Plan
Year begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12). In applying this limitation, the
family group of a Highly Compensated Participant who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the year,
shall be treated as a single Participant, except that for this purpose Family
Members shall include only the affected Participant's spouse and any lineal
descendants who have not attained age nineteen (19) before the close of the
year. If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then the limitation shall be prorated among the affected
Family Members in proportion to each such Family Member's Compensation prior to
the application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
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<PAGE>
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA '93
annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.10(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
$200,000 limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
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<PAGE>
1.10 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).
1.11 "Early Retirement Date" means any Anniversary Date (prior to the
Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age 55th and has completed at least
10th Years of Service with the Employer (Early Retirement Age). A Participant
shall become fully Vested upon satisfying this requirement if still employed at
his Early Retirement Age.
A Former Participant who terminates employment after satisfying the service
requirement for Early Retirement and who thereafter reaches the age requirement
contained herein shall be entitled to receive his benefits under this Plan.
1.12 "Elective Contribution" means the Employer's contributions to the Plan
of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.1(c) and Section
4.6 shall be considered an Elective Contribution for purposes of the Plan. Any
such contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-l(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties will not be eligible to
participate in this Plan unless such agreement expressly provides for coverage
in this Plan or two percent or more of the Employees of the Employer who are
covered pursuant to that agreement are professionals as defined in Regulation
1.410(b)-9.
Employees of Affiliated Employers shall not be eligible to participate in
this Plan unless such Affiliated Employers have specifically adopted this Plan
in writing.
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
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<PAGE>
1.15 "Employer" means Bio-Technology General Corp. and any Participating
Employer (as defined in Section 10.1) which shall adopt this Plan; any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan. The Employer is a corporation, with principal offices in the State of New
Jersey.
1.16 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions made on behalf of Highly Compensated Participants for
the Plan Year over the maximum amount of such contributions permitted under
Section 4.5(a). Excess Contributions shall be treated as an "annual addition"
pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(h), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected Participant, such
Participant's spouse and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 31st.
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<PAGE>
1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Terminated
Participant's Account, or
(b) the last day of the Plan Year in which the Participant incurs five
(5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(e)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year.
For purposes of this Section, the determination of "414(s) Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
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calendar year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12). In
applying this limitation, the family group of a Highly Compensated Participant
who is subject to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the Employer or one
of the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, shall be treated as a single Participant, except
that for this purpose Family Members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA '93
annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
1.26 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section 1.32(c).
(b) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $75,000.
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(c) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $50,000 and were in the Top Paid Group
of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of the
Employer (as that term is defined within the meaning of the Regulations
under Code Section 416) and received "415 Compensation" during the
"look-back year" from the Employer greater than 50 percent of the limit in
effect under Code Section 415(b)(1)(A) for any such Plan Year. The number
of officers shall be limited to the lesser of (i) 50 employees; or (ii) the
greater of 3 employees or 10 percent of all employees. For the purpose of
determining the number of officers, Employees described in Section 1.56(a),
(b), (c) and (d) shall be excluded, but such Employees shall still be
considered for the purpose of identifying the particular Employees who are
officers. If the Employer does not have at least one officer whose annual
"415 Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will be
treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100 Employees
paid the greatest "415 Compensation" during the "determination year" and
are also described in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for "look-back year."
The "look-back year" shall be the calendar year ending with or within the
Plan Year for which testing is being performed, and the "determination year" (if
applicable) shall be the period of time, if any, which extends beyond the
"look-back year" and ends on the last day of the Plan Year for which testing is
being performed (the "lag period"). If the "lag period" is less than twelve
months long, the dollar threshold amounts specified in (b), (c) and (d) above
shall be prorated based upon the number of months in the "lag period."
For purposes of this Section, the determination of "415 Compensation" shall
be made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457,
and Employee contributions described in Code Section 414(h)(2) that are treated
as Employer contributions. Additionally, the dollar threshold amounts specified
in (b) and (c) above shall be adjusted at such time and in such manner as is
provided in Regulations. In the case of such an adjustment, the dollar limits
which shall be applied are those for the calendar year in which the
"determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers
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shall be taken into account as a single employer and Leased Employees within the
meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered Employees
unless such Leased Employees are covered by a plan described in Code Section
414(n)(5) and are not covered in any qualified plan maintained by the Employer.
The exclusion of Leased Employees for this purpose shall be applied on a uniform
and consistent basis for all of the Employer's retirement plans. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees
without regard to whether they performed services during the "determination
year."
1.27 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year preceding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner." For purposes
of this Section, "determination year," "415 Compensation" and "five percent
owner" shall be determined in accordance with Section 1.26. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.29 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or
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disability insurance laws; and (iii) Hours of Service are not required to be
credited for a payment which solely reimburses an Employee for medical or
medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year of
Service, a year of participation for purposes of accrued benefits, a 1-Year
Break in Service, and employment commencement date (or reemployment commencement
date). In addition, Hours of Service will be credited for employment with other
Affiliated Employers. The provisions of Department of Labor regulations
2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income or losses allocable to Excess Deferred
Compensation which amount shall be allocated in the same manner as income or
losses are allocated pursuant to Section 4.4(f)
1.31 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the ["Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section
318) both more than one-half percent interest and the largest interests in
the Employer.
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(c) a "five percent owner" of the Employer. "Five percent owner" means
any person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five percent (5%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than one percent (1%) of
the capital or profits interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers. However, in determining whether an individual has "415
Compensation" of more than $150,000, "415 Compensation" from each employer
required to be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be taken into account.
For purposes of this Section, the determination of "415 Compensation" shall
be made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457,
and Employee contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
1.33 "Late Retirement Date" means the Anniversary Date coinciding with or
next following a Participant's actual Retirement Date after having reached his
Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
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(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but including
amounts which are contributed by the Employer pursuant to a salary
reduction agreement and which are not includible in the gross income
of the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B),
403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer's contributions to the
Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.39 "Normal Retirement Date" means the Anniversary Date coinciding with or
next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1 Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
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"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means, for Plan Years beginning
after December 31, 1984, an absence from work for any period by reason of the
Employee's pregnancy, birth of the Employee's child, placement of a child with
the Employee in connection with the adoption of such child, or any absence for
the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the Plan
as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.42 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer's Non-Elective Contributions.
A separate accounting shall be maintained with respect to that portion of
the Participant's Account attributable to Employer matching contributions made
pursuant to Section 4.1(b) and Employer discretionary contributions made
pursuant to Section 4.1(d)
1.43 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.
1.44 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.45 "Plan" means this instrument, including all amendments thereto.
1.46 "Plan Year" means the Plans accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
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1.47 "Pre-Retirement Survivor Annuity" is an immediate annuity for the life
of the Participant's spouse the payments under which must be equal to the amount
of benefit which can be purchased with the accounts of a Participant used to
provide the death benefit under the Plan.
1.48 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.1(c) and Section
4.6. Such contributions shall be considered an Elective Contribution for the
purposes of the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.8(h) which are used to satisfy the "Actual Contribution
Percentage" tests shall be considered Qualified Non-Elective Contributions and
be subject to the provisions of Sections 4.2(b) and 4.2(c).
1.49 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.50 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.51 "Retirement Date" means the date as of which a Participant retires
whether such retirement occurs on a Participant's Normal Retirement Date, Early
or Late Retirement Date (see Section 6.1).
1.52 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.53 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death or retirement.
1.54 "Top Heavy Plan" means a plan described in Section 2.2(a)
1.55 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
1.56 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are nonresident aliens and who received no earned income
(within the meaning of Code Section 911(d)(2)) from the Employer constituting
United States source income within
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the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, for the purpose of determining the number of active Employees in
any year, the following additional Employees shall also be excluded; however,
such Employees shall still be considered for the purpose of identifying the
particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during a
year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer are
covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on a
uniform and consistent basis for all purposes for which the Code Section 414(q)
definition is applicable.
1.57 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.58 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.59 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.60 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period beginning after a 1-Year Break in
Service shall be measured from the date on which an Employee again performs an
Hour of Service. The participation computation period shall shift to the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service. An Employee who is credited with the required
Hours of Service in both the initial computation period (or the computation
period beginning after a 1-Year Break in Service) and the Plan Year which
includes the anniversary of the date on which
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the Employee first performed an Hour of Service, shall be credited with two (2)
Years of Service for purposes of eligibility to participate.
For vesting purposes, the computation period shall be the Plan Year,
including periods prior to the Effective Date of the Plan.
For all other purposes, the computation period shall be the Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the determination
of whether an Employee has completed a Year of Service shall be made in
accordance with Department of Labor regulation 2530.203-2(c).
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as
of the Determination Date, (1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of Key Employees under
this Plan and all plans of an Aggregation Group, exceeds sixty percent
(60%) of the Present Value of Accrued Benefits and the Aggregate Accounts
of all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit and/or Aggregate Account balance shall not be
taken into account for purposes of determining whether this Plan is a Top Heavy
or Super Top Heavy Plan (or whether any Aggregation Group which includes this
Plan is a Top Heavy Group). In addition, if a Participant or Former Participant
has not performed any services for any Employer maintaining the Plan at any time
during the five year period ending on the Determination Date, any accrued
benefit for such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a Top Heavy or
Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits
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of Key Employees and (2) the sum of the Aggregate Accounts of Key
Employees under this Plan and all plans of an Aggregation Group,
exceeds ninety percent (90%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most
recent valuation occurring within a twelve (12) month period
ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of any
contributions actually made after the valuation date but due on
or before the Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are
allocated as of a date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4) preceding
Plan Years. However, in the case of distributions made after the
valuation date and prior to the Determination Date, such
distributions are not included as distributions for top heavy
purposes to the extent that such distributions are already
included in the Participant's Aggregate Account balance as of the
valuation date. Notwithstanding anything herein to the contrary,
all distributions, including distributions made prior to January
1, 1984, and distributions under a terminated plan which if it
had not been terminated would have been required to be included
in an Aggregation Group, will be counted. Further, distributions
from the Plan (including the cash value of life insurance
policies) of a Participant's account balance because of death
shall be treated as a distribution for the purposes of this
paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified
voluntary employee contributions shall not be considered to be a
part of the Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and planto-plan transfers
(ones which are both initiated by the Employee and made from a
plan maintained by one employer to a plan maintained by another
employer), if this Plan provides the rollovers or plan-to-plan
transfers, it shall always consider such rollovers or
plan-to-plan transfers as a distribution for the
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purposes of this Section. If this Plan is the plan accepting such
rollovers or plan-to-plan transfers, it shall not consider such
rollovers or plan-to-plan transfers as part of the Participant's
Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan
maintained by the same employer), if this Plan provides the
rollover or plan-to-plan transfer, it shall not be counted as a
distribution for purposes of this Section. If this Plan is the
plan accepting such rollover or plan-to-plan transfer, it shall
consider such rollover or plan-to-plan transfer as part of the
Participant's Aggregate Account balance, irrespective of the date
on which such rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are to
be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414tb), (c), (m) and (o)
are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in which a
Key Employee is a participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and
each other plan of the Employer which enables any plan in which a
Key Employee participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be aggregated.
Such group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the Required
Aggregation Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include
any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a
whole, would continue to satisfy the provisions of Code Sections
401(a)(4) and 410. Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a
Top Heavy Plan if
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the Permissive Aggregation Group is a Top Heavy Group. No plan in
the Permissive Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is not a Top Heavy
Group.
(3) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated in
order to determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the
Employer if it was maintained within the last five (5) years
ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding
Plan Year, or (b) in the case of the first Plan Year, the last day of
such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall be determined as of the
most recent valuation date that falls within or ends with the 12-month
period ending on the Determination Date except as provided in Code
Section 416 and the Regulations thereunder for the first and second
plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under
all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group, exceeds sixty percent
(60%) of a similar sum determined for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
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(b) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current
need, or shall appoint a qualified person to do so. The Employer or
its delegate shall communicate such needs and goals to the Trustee,
who shall coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not,
however, constitute a directive to the Trustee as to investment of the
Trust Funds. Such "funding policy and method" shall be consistent with
the objectives of this Plan and with the requirements of Title I of
the Act.
(c) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct
and evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an Administrator, shall
promptly designate in writing a successor to this position. If the Employer does
not appoint an Administrator, the Employer will function as the Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the responsibilities
of each Administrator may be specified by the Employer and accepted in writing
by each Administrator. In the event that no such delegation is made by the
Employer, the Administrators may allocate the responsibilities among themselves,
in which event the Administrators shall notify the Employer and the Trustee in
writing of such action and specify the responsibilities of each Administrator.
The Trustee thereafter shall accept and rely upon any documents executed by the
appropriate Administrator until such time as the Employer or the Administrators
file with the Trustee a written revocation of such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
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The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan. The Administrator shall administer the Plan
in accordance with its terms and shall have the power and discretion to construe
the terms of the Plan and to determine all questions arising in connection with
the administration, interpretation, and application of the Plan. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan shall continue to be deemed a qualified plan under the terms of Code
Section 401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder
and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any Contract to be purchased
from any insurer, and to designate the insurer from which such Contract
shall be purchased;
(g) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to
the Plan;
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(h) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
(i) to prepare and distribute to Employees a procedure for notifying
Participants and Beneficiaries of their rights to elect joint and survivor
annuities and Pre-Retirement Survivor Annuities as required by the Act and
Regulations thereunder;
(j) to prepare and implement a procedure to notify Eligible Employees
that they may elect to have a portion of their Compensation deferred or
paid to them in cash;
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator,
may appoint counsel, specialists, advisers, and other persons as the
Administrator or the Trustee deems necessary or desirable in connection with the
administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists
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and their agents, and other costs of administering the Plan. Until paid, the
expenses shall constitute a liability of the Trust Fund. However, the Employer
may reimburse the Trust Fund for any administration expense incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of administrative
authority pursuant to Section 2.5, if there shall be more than one
Administrator, they shall act by a majority of their number, but may authorize
one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant
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and shall include specific reasons for the decision and specific references to
the pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has attained age 21 shall be eligible to
participate hereunder as of the date he has satisfied such requirements. The
Employer shall give each prospective Eligible Employee written notice of his
eligibility to participate in the Plan prior to the close of the Plan Year in
which he first becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee shall
make application to the Employer for participation in the Plan and agree to the
terms hereof. Upon the acceptance of any benefits under this Plan, such Employee
shall automatically be deemed to have made application and shall be bound by the
terms and conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the first
day of the Plan Year in which such Employee met the eligibility requirements of
Section 3.1.
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of an
Eligible Employee to an ineligible Employee, such Former Participant shall
continue to vest in his interest in the Plan for each Year of Service completed
while a noneligible Employee, until such time as his Participant's Account shall
be forfeited or distributed pursuant to the terms of the
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Plan. Additionally, his interest in the Plan shall continue to share in the
earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an eligible class
of Employees and becomes ineligible to participate but has not incurred a 1-Year
Break in Service, such Employee will participate immediately upon returning to
an eligible class of Employees. If such Participant incurs a 1-Year Break in
Service, eligibility will be determined under the break in service rules of the
Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not made
until after a contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a Forfeiture (except for Deferred
Compensation which shall be distributed to the ineligible person) for the Plan
Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect voluntarily
not to participate in the Plan. The election not to participate must be
communicated to the Employer, in writing, at least thirty (30) days before the
beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
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(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be deemed
an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share in matching
contributions for the Plan Year, a discretionary matching contribution
equal to a percentage of each such Participant's Deferred Compensation, the
exact percentage to be determined each year by the Employer, which amount
shall be deemed an Employer's Non-Elective Contribution.
(c) On behalf of each Non-Highly Compensated Participant who is
eligible to share in the Qualified Non-Elective Contribution for the Plan
Year, a discretionary Qualified Non-Elective Contribution equal to a
percentage of each eligible individual's Compensation, the exact percentage
to be determined each year by the Employer. The Employer's Qualified
Non-Elective Contribution shall be deemed an Employer's Elective
Contribution.
(d) A discretionary amount, which amount shall be deemed an Employer's
Non-Elective Contribution.
(e) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash or in
such property as is acceptable to the Trustee.
(f) Except, however, to the extent necessary to provide the top heavy
minimum allocations, the Employer shall make a contribution even if it
exceeds the amount which is deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer his Compensation which would
have been received in the Plan Year, but for the deferral election, by up
to 201. A deferral election (or modification of an earlier election) may
not be made with respect to Compensation which is currently available on or
before the date the Participant executed such election or, if later, the
latest of the date the Employer adopts this cash or deferred arrangement,
or the date such arrangement first became effective.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective Account.
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(b) The balance in each Participant's Elective Account shall be fully
Vested at all times and shall not be subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective Account may not be
distributable earlier than:
(1) a Participant's termination of employment or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or existence
of a "successor plan," as that term is described in Regulation
1.401(k)1(d)(3);
(4) the date of disposition by the Employer to an entity that is not
an Affiliated Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) used in a trade or business of such
corporation if such corporation continues to maintain this Plan after
the disposition with respect to a Participant who continues employment
with the corporation acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated Employer
who maintains the Plan of its interest in a subsidiary (within the
meaning of Code Section 409(d)(3)) to an entity which is not an
Affiliated Employer but only with respect to a Participant who
continues employment with such subsidiary; or
(6) the proven financial hardship of a Participant, subject to the
limitations of Section 6.11.
(d) For each Plan Year, a Participant's Deferred Compensation made
under this Plan and all other plans, contracts or arrangements of the
Employer maintaining this Plan shall not exceed, during any taxable year of
the Participant, the limitation imposed by Code Section 402(g), as in
effect at the beginning of such taxable year. If such dollar limitation is
exceeded, a Participant will be deemed to have notified the Administrator
of such excess amount which shall be distributed in a manner consistent
with Section 4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in accordance with
Regulations.
(e) In the event a Participant has received a hardship distribution
pursuant to Regulation 1.401(k)l(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall not be permitted to
elect to have Deferred Compensation contributed to the Plan on his behalf
for a period of
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twelve (12) months following the receipt of the distribution. Furthermore,
the dollar limitation under Code Section 402(g) shall be reduced, with
respect to the Participant's taxable year following the taxable year in
which the hardship distribution was made, by the amount of such
Participant's Deferred Compensation, if any, pursuant to this Plan (and any
other plan maintained by the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under this Plan together
with any elective deferrals (as defined in Regulation 1.402(g)-l(b)) under
another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)),
a salary reduction arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code Section 457, or a
trust described in Code Section 501(c)(18) cumulatively exceed the
limitation imposed by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section 415(d) pursuant to
Regulations) for such Participant's taxable year, the Participant may, not
later than March 1 following the close of the Participant's taxable year,
notify the Administrator in writing of such excess and request that his
Deferred Compensation under this Plan be reduced by an amount specified by
the Participant. In such event, the Administrator may direct the Trustee to
distribute such excess amount (and any Income allocable to such excess
amount) to the Participant not later than the first April 15th following
the close of the Participant's taxable year. Any distribution of less than
the entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the Participant's Deferred
Compensation under the Plan for the taxable year. Any distribution on or
before the last day of the Participant's taxable year must satisfy each of
the following conditions:
(1) the distribution must be made after the date on which the Plan
received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of
Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall be made
simultaneously from Deferred Compensation and matching contributions which
relate to such Deferred Compensation provided, however, that any such matching
contributions which are not Vested shall be forfeited in lieu of distribution.
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(g) Notwithstanding Section 4.2(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any
distribution of Excess Contributions pursuant to Section 4.6(a) for the
Plan Year beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other date when the Participant
shall be entitled to receive benefits, the fair market value of the
Participant's Elective Account shall be used to provide additional benefits
to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective Account may be
treated as a Directed Investment Account pursuant to Section 4.12.
(j) Employer Elective Contributions made pursuant to this Section may
be segregated into a separate account for each Participant in a federally
insured savings account, certificate of deposit in a bank or savings and
loan association, money market certificate, or other short-term debt
security acceptable to the Trustee until such time as the allocations
pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall implement the salary
reduction elections provided for herein in accordance with the following:
(1) A Participant may commence making elective deferrals to the
Plan only after first satisfying the eligibility and
participation requirements specified in Article III. However, the
Participant must make his initial salary deferral election within
a reasonable time, not to exceed thirty (30) days, after entering
the Plan pursuant to Section 3.3. If the Participant fails to
make an initial salary deferral election within such time, then
such Participant may thereafter make an election in accordance
with the rules governing modifications. The Participant shall
make such an election by entering into a written salary reduction
agreement with the Employer and filing such agreement with the
Administrator. Such election shall initially be effective
beginning with the pay period following the acceptance of the
salary reduction agreement by the Administrator, shall not have
retroactive effect and shall remain in force until revoked.
(2) A Participant may modify a prior election at any time during
the Plan Year and concurrently make a new election by filing a
written notice with the Administrator within a reasonable time
before the pay period for which such modification is to be
effective. Any modification shall not have retroactive effect and
shall remain in force until revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan
Year by providing the
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Administrator with thirty (30) days written notice of such
revocation (or upon such shorter notice period as may be
acceptable to the Administrator). Such revocation shall become
effective as of the beginning of the first pay period coincident
with or next following the expiration of the notice period.
Furthermore, the termination of the Participant's employment, or
the cessation of participation for any reason, shall be deemed to
revoke any salary reduction agreement then in effect, effective
immediately following the close of the pay period within which
such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the
Plan for each Plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer's general assets,
but in any event within ninety (90) days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the close of such Plan
Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such Participant as set
forth herein.
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the Employer's
contributions for each Plan Year. Within a reasonable period of time after
the date of receipt by the Administrator of such information, the
Administrator shall allocate such contribution as follows:
(1) With respect to the Employer's Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective
Account in an amount equal to each such Participant's Deferred
Compensation for the year.
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(2) With respect to the Employer's Non-Elective Contribution made
pursuant to Section 4.1(b), to each Participant's Account in
accordance with Section 4.1(b).
Any Participant actively employed during the Plan Year shall be
eligible to share in the matching contribution for the Plan Year.
However, with respect to Plan Years beginning after December 31,
1989, in lieu of the foregoing, only Participants who are
actively employed during the Plan Year shall be eligible to share
in the matching contribution for the year.
(3) With respect to the Employer's Qualified Non-Elective
Contribution made pursuant to Section 4.1(c), to each
Participant's Elective Account in accordance with Section 4.1(c).
Any Non-Highly Compensated Participant actively employed during
the Plan Year shall be eligible to share in the Qualified
Non-Elective Contribution for the Plan Year. However, with
respect to Plan Years beginning after December 31, 1989, in lieu
of the foregoing, only Non-Highly Compensated Participants who
are actively employed during the Plan Year shall be eligible to
share in the Qualified Non-Elective Contribution for the year.
(4) With respect to the Employer's Non-Elective Contribution made
pursuant to Section 4.1(d), to each Participant's Account in the
same proportion that each such Participant's Compensation for the
year bears to the total Compensation of all Participants for such
year.
Any Participant actively employed during the Plan Year shall
be eligible to share in the discretionary contribution for the
year. However, with respect to Plan Years beginning after
December 31, 1989, in lieu of the foregoing, only Participants
who are actively employed during the Plan Year shall be eligible
to share in the discretionary contribution for the year.
(c) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any, in
accordance with Section 6.4(e)(2). The remaining Forfeitures, if any, shall
be allocated to Participants' Accounts and used to reduce the contribution
of the Employer hereunder for the Plan Year in which such Forfeitures occur
in the following manner:
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(1) Forfeitures attributable to Employer matching contributions
made pursuant to Section 4.1(b) shall be used to reduce the
Employer's contribution for the Plan Year in which such
Forfeitures occur.
(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.1(d) shall be allocated
among the Participants' Accounts of Participants otherwise
eligible to share in the allocation of discretionary
contributions for the year in the same proportion that each such
Participant's Compensation for the year bears to the total
Compensation of all such Participants for the year.
Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as
defined in Section 4.9) to any Participant's Account to exceed
the amount allowable by the Code, the excess shall be reallocated
in accordance with Section 4.10.
(d) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions and Forfeitures as
provided above, shall receive the minimum allocation provided for in
Section 4.4(h) if eligible pursuant to the provisions of Section 4.4(j).
(e) Participants who are not actively employed on the last day of the
Plan Year due to Retirement (Early, Normal or Late) or death shall share in
the allocation of contributions and Forfeitures for that Plan Year only if
otherwise eligible in accordance with this Section.
(f) As of each Anniversary Date or other valuation date, before
allocation of one-half of the Employer contributions for the entire Plan
Year and after allocation of Forfeitures, any earnings or losses (net
appreciation or net depreciation) of the Trust Fund shall be allocated in
the same proportion that each Participant's and Former Participant's
nonsegregated accounts bear to the total of all Participants' and Former
Participants' nonsegregated accounts as of such date.
Participants' transfers from other qualified plans deposited in
the general Trust Fund shall share in any earnings and losses (net
appreciation or net depreciation) of the Trust Fund in the same manner
provided above. Each segregated account maintained on behalf of a
Participant shall be credited or charged with its separate earnings
and losses.
(g) Participants' accounts shall be debited for any insurance or
annuity premiums paid, if any, and credited with any dividends received on
insurance contracts.
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(h) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer's contributions and Forfeitures allocated to the Participant's
Combined Account of each Non-Key Employee shall be equal to at least three
percent (3%) of such Non-Key Employee's "415 Compensation" (reduced by
contributions and forfeitures, if any, allocated to each Non-Key Employee
in any defined contribution plan included with this plan in a Required
Aggregation Group). However, if (1) the sum of the Employer's contributions
and Forfeitures allocated to the Participant's Combined Account of each Key
Employee for such Top Heavy Plan Year is less than three percent (3%) of
each Key Employee's "415 Compensation" and (2) this Plan is not required to
be included in an Aggregation Group to enable a defined benefit plan to
meet the requirements of Code Section 401(a)(4) or 410, the sum of the
Employer's contributions and Forfeitures allocated to the Participant's
Combined Account of each Non-Key Employee shall be equal to the largest
percentage allocated to the Participant's Combined Account of any Key
Employee. However, in determining whether a Non-Key Employee has received
the required minimum allocation, such Non-Key Employee's Deferred
Compensation and matching contributions needed to satisfy the "Actual
Contribution Percentage" tests pursuant to Section 4.7(a) shall not be
taken into account.
However, no such minimum allocation shall be required in this Plan for
any Non-Key Employee who participates in another defined contribution plan
subject to Code Section 412 providing such benefits included with this Plan
in a Required Aggregation Group.
(i) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
Employee shall be equal to the ratio of the sum of the Employer's
contributions and Forfeitures allocated on behalf of such Key Employee
divided by the "415 Compensation" for such Key Employee.
(j) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Combined Account of all
Non-Key Employees who are Participants and who are employed by the Employer
on the last day of the Plan Year, including Non-Key Employees who have (1)
failed to complete a Year of Service; and (2) declined to make mandatory
contributions (if required) or, in the case of a cash or deferred
arrangement, elective contributions to the Plan.
(k) For the purposes of this Section, "415 Compensation" shall be
limited to $200,000. Such amount shall be adjusted at the same time and in
the same manner as permitted under Code Section 415(d), except that the
dollar increase in effect on January 1 of any calendar year shall be
effective for the Plan
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Year beginning with or within such calendar year and the first adjustment
to the $200,000 limitation shall be effective on January 1, 1990. For any
short Plan Year the "415 Compensation" limit shall be an amount equal to
the "415 Compensation" limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12).
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The O BRA 893
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 32 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current
Plan Year, the Compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination
periods beginning before the first day of the first Plan Year
beginning on or after January 1, 1994, the O BRA '93 annual
compensation limit is $150,000.
(l) Notwithstanding anything herein to the contrary, Participants who
terminated employment for any reason during the Plan Year shall share in
the salary reduction contributions made by the Employer for the year of
termination without regard to the Hours of Service credited.
(m) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
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(2) one account representing his status in the Plan attributable
to post-break service.
(n) Notwithstanding anything to the contrary, if this is a Plan that
would otherwise fail to meet the requirements of Code Sections 401(a)(26),
410(b)(1) or 410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a sufficient number or
percentage of Participants for a Plan Year, then the following rules shall
apply:
(1) The group of Participants eligible to share in the Employer's
contribution and Forfeitures for the Plan Year shall be expanded to
include the minimum number of Participants who would not otherwise be
eligible as are necessary to satisfy the applicable test specified
above. The specific Participants who shall become eligible under the
terms of this paragraph shall be those who are actively employed on
the last day of the Plan Year and, when compared to similarly situated
Participants, have completed the greatest number of Hours of Service
in the Plan Year.
(2) If after application of paragraph (1) above, the applicable
test is still not satisfied, then the group of Participants eligible
to share in the Employer's contribution and Forfeitures for the Plan
Year shall be further expanded to include the minimum number of
Participants who are not actively employed on the last day of the Plan
Year as are necessary to satisfy the applicable test. The specific
Participants who shall become eligible to share shall be those
Participants, when compared to similarly situated Participants, who
have completed the greatest number of Hours of Service in the Plan
Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated to
satisfy these requirements. In such event, the Employer shall make an
additional contribution equal to the amount such affected Participants
would have received had they been included in the allocations, even if
it exceeds the amount which would be deductible under Code Section
404. Any adjustment to the allocations pursuant to this paragraph
shall be considered a retroactive amendment adopted by the last day of
the Plan Year.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year, the annual
allocation derived from Employer Elective Contributions to a Participant's
Elective Account shall satisfy one of the following tests:
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(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group multiplied
by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group shall not be more
than two percentage points. Additionally, the "Actual Deferral
Percentage" for the Highly Compensated Participant group shall not
exceed the "Actual Deferral Percentage" for the Non-Highly Compensated
Participant group multiplied by 2.
The provisions of Code Section 401(k)(3) and Regulation
1.401(k)-l(b) are incorporated herein by reference.
However, in order to prevent the multiple use of the alternative
method described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective deferrals
pursuant to Section 4.2 and to make Employee contributions or to
receive matching contributions under this Plan or under any other plan
maintained by the Employer or an Affiliated Employer shall have his
actual contribution ratio reduced pursuant to Regulation 1.401(m)-2,
the provisions of which are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group for a Plan Year, the average of
the ratios, calculated separately for each Participant in such group, of
the amount of Employer Elective Contributions allocated to each
Participant's Elective Account for such Plan Year, to such Participant's
"414(s) Compensation" for such Plan Year. The actual deferral ratio for
each Participant and the "Actual Deferral Percentage" for each group shall
be calculated to the nearest one-hundredth of one percent. Employer
Elective Contributions allocated to each Non-Highly Compensated
Participant's Elective Account shall be reduced by Excess Deferred
Compensation to the extent such excess amounts are made under this Plan or
any other plan maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio of a
Highly Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Participant is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, the
following shall apply:
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(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall
be determined by aggregating Employer Elective Contributions and
"414(s) Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000 limit to
"414(s) Compensation," Family Members shall include only the affected
Employee's spouse and any lineal descendants who have not attained age
19 before the close of the Plan Year.
(2) The Employer Elective Contributions and "414(s) Compensation"
of all Family Members shall be disregarded for purposes of determining
the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in paragraph
(1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are members
of those family groups that include the Participant are aggregated as
one family group in accordance with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election pursuant to Section 4.2,
whether or not such deferral election was made or suspended pursuant to
Section 4.2.
(e) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or
not such arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k).
In such a case, the cash or deferred arrangements included in such plans
and the plans including such arrangements shall be treated as one
arrangement and as one plan for purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k). Plans may be aggregated under this paragraph
(e) only if they have the same plan year.
Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be combined with
this Plan for purposes of determining whether the employee stock
ownership plan or this Plan satisfies this Section and Code Sections
401(a)(4), 410(b) and 401(k).
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<PAGE>
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is
part of an employee stock ownership plan as defined in Code Section
4975(e)(7) or 409) of the Employer or an Affiliated Employer, all
such cash or deferred arrangements shall be treated as one cash or
deferred arrangement for the purpose of determining the actual
deferral ratio with respect to such Highly Compensated Participant.
However, if the cash or deferred arrangements have different plan
years, this paragraph shall be applied by treating all cash or
deferred arrangements ending with or within the same calendar year
as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a), the Administrator shall adjust Excess Contributions
pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month following the
end of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him until one of the tests set forth in
Section 4.5(a) is satisfied, or until his actual deferral ratio equals the
actual deferral ratio of the Highly Compensated Participant having the
second highest actual deferral ratio. This process shall continue until one
of the tests set forth in Section 4.5(a) is satisfied. For each Highly
Compensated Participant, the amount of Excess Contributions is equal to the
Elective Contributions on behalf of such Highly Compensated Participant
(determined prior to the application of this paragraph) minus the amount
determined by multiplying the Highly Compensated Participant's actual
deferral ratio (determined after application of this paragraph) by his
"414(s) Compensation." However, in determining the amount of Excess
Contributions to be distributed with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be reduced
by any Excess Deferred Compensation previously distributed to such affected
Highly Compensated Participant for his taxable year ending with or within
such Plan Year.
(1) With respect to the distribution of Excess Contributions pursuant
to (a) above, such distribution:
(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are allocable;
(ii) shall be made simultaneously from Deferred Compensation
and matching contributions which relate to such Deferred
Compensation provided, however, that any such matching
contributions which are not Vested shall be forfeited in lieu of
distribution;
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(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of Excess
Contributions and Income.
(3) The determination and correction of Excess Contributions of a
Highly Compensated Participant whose actual deferral ratio is determined
under the family aggregation rules shall be accomplished by reducing the
actual deferral ratio as required herein, and the Excess Contributions for
the family unit shall then be allocated among the Family Members in
proportion to the Elective Contributions of each Family Member that were
combined to determine the group actual deferral ratio.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective Contribution on behalf
of NonHighly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 4.5(a). Such contribution shall be
allocated to the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants.
(c) If during a Plan Year the projected aggregate amount of Elective
Contributions to be allocated to all Highly Compensated Participants under
this Plan would, by virtue of the tests set forth in Section 4.5(a), cause
the Plan to fail such tests, then the Administrator may automatically
reduce proportionately or in the order provided in Section 4.6(a) each
affected Highly Compensated Participant's deferral election made pursuant
to Section 4.2 by an amount necessary to satisfy one of the tests set
forth in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for the Highly Compensated
Participant group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group, or such percentage for the
Non-Highly Compensated Participant group plus 2 percentage points.
However, to prevent the multiple use of the alternative method
described in this paragraph and Code
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Section 401(m)(9)(A), any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2 or any other cash or
deferred arrangement maintained by the Employer or an Affiliated
Employer and to make Employee contributions or to receive matching
contributions under this Plan or under any other plan maintained by
the Employer or an Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation 1.401(m)-2. The
provisions of Code Section 401(m) and Regulations 1.401(m)l(b) and
1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated Participant group,
the average of the ratios (calculated separately for each Participant in
each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b) on behalf of each such Participant for such Plan Year;
to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution Percentage"
and the amount of Excess Aggregate Contributions pursuant to Section
4.8(d), only Employer matching contributions (excluding Employer matching
contributions forfeited or distributed pursuant to Sections 4.2(f) and
4.6(a)(1) or forfeited pursuant to Section 4.8(a)) contributed to the Plan
prior to the end of the succeeding Plan Year shall be considered. In
addition, the Administrator may elect to take into account, with respect to
Employees eligible to have Employer matching contributions pursuant to
Section 4.1(b) allocated to their accounts, elective deferrals (as defined
in Regulation 1.402(g)-l(b)) and qualified non-elective contributions (as
defined in Code Section 401(m)(4)(C)) contributed to any plan maintained by
the Employer. Such elective deferrals and qualified nonelective
contributions shall be treated as Employer matching contributions subject
to Regulation 1.401(m)l(b)(5) which is incorporated herein by reference.
However, the Plan Year must be the same as the plan year of the plan to
which the elective deferrals and the qualified non-elective contributions
are made.
(d) For the purpose of determining the actual contribution ratio of a
Highly Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Employee is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, the
following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall
be determined by aggregating Employer matching contributions made
pursuant to Section 4.1(b) and "414(s) Compensation" of all eligible
Family Members (including Highly
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Compensated Participants). However, in applying the $200,000 limit to
"414(s) Compensation", Family Members shall include only the affected
Employee's spouse and any lineal descendants who have not attained age
19 before the close of the Plan Year.
(2) The Employer matching contributions made pursuant to Section
4.1(b) and "414(s) Compensation" of all Family Members shall be
disregarded for purposes of determining the "Actual Contribution
Percentage" of the Non-Highly Compensated Participant group except to
the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are members
of those family groups that include the Participant are aggregated as
one family group in accordance with paragraphs (1) and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as one
plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii)), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or both,
are made may be considered as a single plan for purposes of determining
whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and
401(m). In such a case, the aggregated plans must satisfy this Section and
Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans
were a single plan. Plans may be aggregated under this paragraph (e) only
if they have the same plan year.
Notwithstanding the above, an employee stock ownership plan described in
Code Section 4975(e)(7) or 409 may not be aggregated with this Plan for purposes
of determining whether the employee stock ownership plan or this Plan satisfies
this Section and Code Sections 401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a Participant under two or
more plans (other than an employee stock ownership plan as defined in Code
Section 4975(e)(7) or 409) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of such
Highly Compensated Participant shall be aggregated for purposes of
determining such Highly Compensated Participant's actual contribution
ratio. However, if the plans have different plan years, this paragraph
shall be applied by treating all plans ending with or within the same
calendar year as a single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated
Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have
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Employer matching contributions pursuant to Section 4.1(b) (whether or not
a deferral election was made or suspended pursuant to Section 4.2(e))
allocated to his account for the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that the "Actual Contribution Percentage" for the
Highly Compensated Participant group exceeds the "Actual Contribution
Percentage" for the NonHighly Compensated Participant group pursuant to
Section 4.7(a), the Administrator (on or before the fifteenth day of the
third month following the end of the Plan Year, but in no event later than
the close of the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having the highest actual
contribution ratio, his Vested portion of Excess Aggregate Contributions
(and Income allocable to such contributions) and, if forfeitable, forfeit
such non-Vested Excess Aggregate Contributions attributable to Employer
matching contributions (and Income allocable to such forfeitures) until
either one of the tests set forth in Section 4.7(a) is satisfied, or until
his actual contribution ratio equals the actual contribution ratio of the
Highly Compensated Participant having the second highest actual
contribution ratio. This process shall continue until one of the tests set
forth in Section 4.7(a) is satisfied.
If the correction of Excess Aggregate Contributions attributable to
Employer matching contributions is not in proportion to the Vested and
non-Vested portion of such contributions, then the Vested portion of the
Participant's Account attributable to Employer matching contributions after
the correction shall be subject to Section 6.5(g).
(b) Any distribution and/or forfeiture of less than the entire amount
of Excess Aggregate Contributions (and Income) shall be treated as a pro
rata distribution and/or forfeiture of Excess Aggregate Contributions and
Income. Distribution of Excess Aggregate Contributions shall be designated
by the Employer as a distribution of Excess Aggregate Contributions (and
Income). Forfeitures of Excess Aggregate Contributions shall be treated in
accordance with Section 4.4.
(c) Excess Aggregate Contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to Participants'
Accounts for the Plan Year in which the forfeiture occurs shall be treated
as an "annual addition" pursuant to Section 4.9(b) for the Participants to
whose Accounts they are reallocated and for the Participants from whose
Accounts they are forfeited.
(d) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the Employer matching contributions
made pursuant to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account
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pursuant to Section 4.7(c) on behalf of the Highly Compensated Participant
(determined prior to the application of this paragraph) minus the amount
determined by multiplying the Highly Compensated Participant's actual
contribution ratio (determined after application of this paragraph) by his
"414(s) Compensation." The actual contribution ratio must be rounded to the
nearest one-hundredth of one percent. In no case shall the amount of Excess
Aggregate Contribution with respect to any Highly Compensated Participant
exceed the amount of Employer matching contributions made pursuant to
Section 4.1(b) and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c) on behalf of such
Highly Compensated Participant for such Plan Year.
(e) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining the
Excess Contributions, if any, to be treated as voluntary Employee
contributions due to recharacterization for the plan year of any other
qualified cash or deferred arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the Plan Year.
(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual contribution
ratio is determined under the family aggregation rules, then the actual
contribution ratio shall be reduced and the Excess Aggregate Contributions
for the family unit shall be allocated among the Family Members in
proportion to the sum of Employer matching contributions made pursuant to
Section 4.1(b) and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c) of each Family
Member that were combined to determine the group actual contribution ratio.
(g) If during a Plan Year the projected aggregate amount of Employer
matching contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.7(a), cause the Plan to fail such tests, then the Administrator
may automatically reduce proportionately or in the order provided in
Section 4.8(a) each affected Highly Compensated Participant's projected
share of such contributions by an amount necessary to satisfy one of the
tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve (12) months after the end
of the Plan Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in Section 4.7(a). Such
contribution shall be allocated to the Participant's Elective Account of
each Non-Highly Compensated Participant in the same proportion that each
Non-Highly Compensated Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 4.5(a).
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4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall equal
the lesser of: (1) $30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b)(1)(A)) or (2) twenty-five
percent (25%) of the Participant's "415 Compensation" for such "limitation
year." For any short "limitation year," the dollar limitation in (1) above
shall be reduced by a fraction, the numerator of which is the number of
full months in the short "limitation year" and the denominator of which is
twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(1)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit plan (as defined in Code Section 419(e)) maintained by the
Employer. Except, however, the "415 Compensation" percentage limitation
referred to in paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition," or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(1)(1).
(c) For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions for
the purposes of Section 4.9(b)(2): (1) rollover contributions (as defined
in Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Participant from the Plan; (3) repayments of
distributions received by an Employee pursuant to Code Section 411(a)(7)(B)
(cash-outs); (4) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(3)(D) (mandatory contributions); and (5)
Employee contributions to a simplified employee pension excludable from
gross income under Code Section 408(k)(6)
(d) For purposes of applying the limitations of Code Section 415, the
"limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A) stated in
paragraph (a)(1) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
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(f) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined benefit plan, and all qualified defined contribution
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined contribution plan.
(g) For the purpose of this Section, if the Employer is a member of a
controlled group of corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section 414(b) and (c) as
modified by Code Section 415(h)), is a member of an affiliated service
group (as defined by Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to Regulations under Code
Section 414(o), all Employees of such Employers shall be considered to be
employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, all Employers of a Participant who maintain this Plan will be
considered to be a single Employer.
(i) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited to such Participant's accounts
during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan not
subject to Code Section 412 maintained by the Employer which have the
same Anniversary Date, "annual additions" will be credited to the
Participant's accounts under the defined contribution plan subject to
Code Section 412 prior to crediting "annual additions" to the
Participant's accounts under the defined contribution plan not subject
to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the maximum
"annual additions" for the "limitation year" minus any "annual
additions" previously credited under subparagraphs (1) or (2) above,
multiplied by (B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's accounts
under this Plan without regard to the limitations of Code Section 415
and (ii) the denominator of which is such "annual additions" for all
plans described in this subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans maintained
by the Employer,
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the sum of the defined benefit plan fraction and the defined contribution
plan fraction for any "limitation year" may not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of the
highest average compensation, including any adjustments under Code Section
415(b).
Notwithstanding the above, if the Participant was a Participant as of the
first day of the first "limitation year" beginning after December 31, 1986, in
one or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be less than
125 percent of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last "limitation year" beginning
before January 1, 1987, disregarding any changes in the terms and conditions of
the plan after May 5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the requirements of
Code Section 415 for all "limitation years" beginning before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the annual additions to
the Participant's Account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
"limitation years" (including the annual additions attributable to the
Participant's nondeductible Employee contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
annual additions attributable to all welfare benefit funds, as defined in
Code Section 419(e), and individual medical accounts, as defined in Code
Section 415(1)(2), maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code Sections 415(b) and
(d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the
first "limitation year" beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0 times (2) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last "limitation
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year" beginning before January 1, 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 5, 1986, but using the Code
Section 415 limitation applicable to the first "limitation year" beginning on or
after January 1, 1987. The annual addition for any "limitation year" beginning
before January 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in which
the Plan is a Top Heavy Plan, 100 percent shall be substituted for 125
percent in Sections 4.9(k) and 4.9(1) unless the extra minimum allocation
is being provided pursuant to Section 4.4. However, for any "limitation
year" in which the Plan is a Super Top Heavy Plan, 100 percent shall be
substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in
this Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code
Section 402(g)(3)) that may be made with respect to any Participant under
the limits of Section 4.9 or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the "annual additions" under
this Plan would cause the maximum "annual additions" to be exceeded for any
Participant, the Administrator shall (1) distribute any elective deferrals
(within the meaning of Code Section 402(g)(3)) or return any voluntary
Employee contributions credited for the "limitation year" to the extent
that the return would reduce the "excess amount" in the Participant's
accounts (2) hold any "excess amount" remaining after the return of any
elective deferrals or voluntary Employee contributions in a "Section 415
suspense account" (3) use the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if necessary) to
reduce Employer contributions for that Participant if that Participant is
covered by the Plan as of the end of the "limitation year," or if the
Participant is not so covered, allocate and reallocate the "Section 415
suspense account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to all Participants in the Plan before any Employer or
Employee contributions which would constitute "annual additions" are made
to the Plan for such "limitation year" (4) reduce Employer contributions to
the Plan for such "limitation year" by the amount of the "Section 415
suspense account" allocated and reallocated during such "limitation year."
(b) For purposes of this Article, "excess amount" for any Participant
for a "limitation year" shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under the terms of the
Plan without regard to the limitations
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of Code Section 415 over (2) the maximum "annual additions" determined
pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415 suspense account" shall
mean an unallocated account equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year."
The "Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be transferred
from other qualified plans by Employees, provided that the trust from which
such funds are transferred permits the transfer to be made and the transfer
will not jeopardize the tax exempt status of the Plan or Trust or create
adverse tax consequences for the Employer. The amounts transferred shall be
set up in a separate account herein referred to as a "Participant's
Rollover Account." Such account shall be fully Vested at all times and
shall not be subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be withdrawn
by, or distributed to the Participant, in whole or in part, except as
provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as defined in
Regulation 1.401(k)l(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-l(d).
(d) At Normal Retirement Date, or such other date when the Participant
or his Beneficiary shall be entitled to receive benefits, the fair market
value of the Participant's Rollover Account shall be used to provide
additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover Account shall be
made in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder. Furthermore, such amounts shall be considered as part of a
Participant's benefit in determining whether an involuntary cash-out of
benefits without Participant consent may be made.
(e) The Administrator may direct that employee transfers made after a
valuation date be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a bank or
savings and loan association,
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money market certificate, or other short term debt security acceptable to
the Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as part
of the general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account may be
treated as a Directed Investment Account pursuant to Section 4.12.
(g) For purposes of this Section, the term "qualified plan" shall mean
any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts transferred
to this Plan directly from another qualified plan; (ii) distributions from
another qualified plan which are eligible rollover distributions and which
are either transferred by the Employee to this Plan within sixty (60) days
following his receipt thereof or are transferred pursuant to a direct
rollover; (iii) amounts transferred to this Plan from a conduit individual
retirement account provided that the conduit individual retirement account
has no assets other than assets which (A) were previously distributed to
the Employee by another qualified plan as a lump-sum distribution (B) were
eligible for tax-free rollover to a qualified plan and (C) were deposited
in such conduit individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets; and (iv) amounts
distributed to the Employee from a conduit individual retirement account
meeting the requirements of clause (iii) above, and transferred by the
Employee to this Plan within sixty (60) days of his receipt thereof from
such conduit individual retirement account.
(h) Prior to accepting any transfers to which this Section applies,
the Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and may
also require the Employee to provide an opinion of counsel satisfactory to
the Employer that the amounts to be transferred meet the requirements of
this Section.
(i) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction having
the effect of such a transfer) shall only be permitted if it will not
result in the elimination or reduction of any "Section 411(d)(6) protected
benefit" as described in Section 8.1.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine that all
Participants be permitted to direct the Trustee as to the investment of all
or a portion of the interest in any one or more of their individual account
balances. If such authorization is given, Participants may, subject to a
procedure established by the Administrator and applied in a uniform
nondiscriminatory manner, direct the Trustee in writing to invest any
portion of their account in specific assets, specific funds or other
investments permitted under the Plan and the directed investment procedure.
That portion of the
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account of any Participant so directing will thereupon be considered a
Directed Investment Account, which shall not share in Trust Fund earnings.
(b) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and his Directed Investment Account shall be
charged and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund earnings, but it shall be
charged or credited as appropriate with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in market value during
each Plan Year attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date," to determine the net worth of the assets comprising the
Trust Fund as it exists on the "valuation date." In determining such net worth,
the Trustee shall value the assets comprising the Trust Fund at their fair
market value as of the "valuation date" and shall deduct all expenses for which
the Trustee has not yet obtained reimbursement from the Employer or the Trust
Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund
which are listed on a registered stock exchange, the Administrator shall direct
the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date." If such
securities were not traded on the "valuation date," or if the exchange on which
they are traded was not open for business on the "valuation date," then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date." Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date," which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
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ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and retire
for the purposes hereof on his Normal Retirement Date or Early Retirement Date.
However, a Participant may postpone the termination of his employment with the
Employer to a later date, in which event the participation of such Participant
in the Plan, including the right to receive allocations pursuant to Section 4.4,
shall continue until his Late Retirement Date. Upon a Participant's Retirement
Date or attainment of his Normal Retirement Date without termination of
employment with the Employer, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such Participant's Combined
Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The Administrator
shall direct the Trustee, in accordance with the provisions of Sections 6.6
and 6.7, to distribute the value of the deceased Participant's accounts to
the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute any remaining Vested amounts credited to the accounts of
a deceased Former Participant to such Former Participant's Beneficiary.
(c) Any security interest held by the Plan by reason of an outstanding
loan to the Participant or Former Participant shall be taken into account
in determining the amount of the Pre-Retirement Survivor Annuity.
(d) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of the
account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(e) Unless otherwise elected in the manner prescribed in Section 6.6,
the Beneficiary of the death benefit shall be the Participant's spouse, who
shall receive such benefit in the form of a Pre-Retirement Survivor Annuity
pursuant to Section 6.6. Except, however, the Participant may designate a
Beneficiary other than his spouse if:
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(1) the Participant and his spouse have validly waived the
Pre-Retirement Survivor Annuity in the manner prescribed in Section
6.6, and the spouse has waived his or her right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic relations
order" as defined in Code Section 414(p) which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a form
satisfactory to the Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary by filing written notice
of such revocation or change with the Administrator. However, the Participant's
spouse must again consent in writing to any change in Beneficiary unless the
original consent acknowledged that the spouse had the right to limit consent
only to a specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary exists
at the time of the Participant's death, the death benefit shall be payable to
his estate.
6.3 DISABILITY RETIREMENT BENEFITS
No disability benefits, other than those payable upon termination of
employment, are provided in this Plan.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or subsequent to
the termination of a Participant's employment for any reason other than
death or retirement, the Administrator may direct the Trustee to segregate
the amount of the Vested portion of such Terminated Participant's Combined
Account and invest the aggregate amount thereof in a separate, federally
insured savings account, certificate of deposit, common or collective trust
fund of a bank or a deferred annuity. In the event the Vested portion of a
Participant's Combined Account is not segregated, the amount shall remain
in a separate account for the Terminated Participant and share in
allocations pursuant to Section 4.4 until such time as a distribution is
made to the Terminated Participant.
In the event that the amount of the Vested portion of the
Terminated Participant's Combined Account equals or exceeds the fair
market
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value of any insurance Contracts, the Trustee, when so directed by the
Administrator and agreed to by the Terminated Participant, shall
assign, transfer, and set over to such Terminated Participant all
Contracts on his life in such form or with such endorsements so that
the settlement options and forms of payment are consistent with the
provisions of Section 6.5. In the event that the Terminated
Participant's Vested portion does not at least equal the fair market
value of the Contracts, if any, the Terminated Participant may pay
over to the Trustee the sum needed to make the distribution equal to
the value of the Contracts being assigned or transferred, or the
Trustee, pursuant to the Participant's election, may borrow the cash
value of the Contracts from the insurer so that the value of the
Contracts is equal to the Vested portion of the Terminated
Participant's Account and then assign the Contracts to the Terminated
Participant.
Distribution of the funds due to a Terminated Participant shall
be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Early or Normal
Retirement). However, at the election of the Participant, the
Administrator shall direct the Trustee to cause the entire Vested
portion of the Terminated Participant's Combined Account to be payable
to such Terminated Participant. Any distribution under this paragraph
shall be made in a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited to, all notice
and consent requirements of Code Sections 417 and 411(a)(11) and the
Regulations thereunder.
If the value of a Terminated Participant's Vested benefit derived
from Employer and Employee contributions does not exceed $3,500 and
has never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the Trustee to cause the entire Vested
benefit to be paid to such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall
be deemed to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
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Vesting Schedule
Years of Service Percentage
---------------- ----------
Less than 1 0%
1 100%
(c) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any full or
partial termination of the Plan, all amounts credited to the account of any
affected Participant shall become 100% Vested and shall not thereafter be
subject to Forfeiture.
(d) The computation of a Participant's nonforfeitable percentage of his
interest in the Plan shall not be reduced as the result of any direct or
indirect amendment to this Plan. For this purpose, the Plan shall be treated as
having been amended if the Plan provides for an automatic change in vesting due
to a change in top heavy status. In the event that the Plan is amended to change
or modify any vesting schedule, a Participant with at least three (3) Years of
Service as of the expiration date of the election period may elect to have his
nonforfeitable percentage computed under the Plan without regard to such
amendment. If a Participant fails to make such election, then such Participant
shall be subject to the new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment and shall end 60 days after
the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the amendment
from the Employer or Administrator.
(e)(1) If any Former Participant shall be reemployed by the Employer before
a 1-Year Break in Service occurs, he shall continue to participate in the Plan
in the same manner as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five (5) consecutive 1-Year Breaks in Service, and such Former
Participant had received, or was deemed to have received, a distribution of
his entire Vested interest prior to his reemployment, his forfeited account
shall be reinstated only if he repays the full amount distributed to him
before the earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer or the close of the
first period of five (5) consecutive 1-Year Breaks in Service
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commencing after the distribution, or in the event of a deemed
distribution, upon the reemployment of such Former Participant. In the
event the Former Participant does repay the full amount distributed to him,
or in the event of a deemed distribution, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by any gains or
losses occurring subsequent to the Anniversary Date or other valuation date
coinciding with or preceding his termination. The source for such
reinstatement shall first be any Forfeitures occurring during the year. If
such source is insufficient, then the Employer shall contribute an amount
which is sufficient to restore any such forfeited Accounts provided,
however, that if a discretionary contribution is made for such year
pursuant to Section 4.1(d), such contribution shall first be applied to
restore any such Accounts and the remainder shall be allocated in
accordance with Section 4.4.
(3) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a 1-Year Break in Service,
his pre-break and postbreak service shall be used for computing
Years of Service for eligibility and for vesting purposes only
after he has been employed for one (1) Year of Service following
the date of his reemployment with the Employer;
(ii) Any Former Participant who under the Plan does not have
a nonforfeitable right to any interest in the Plan resulting from
Employer contributions shall lose credits otherwise allowable
under (i) above if his consecutive 1-Year Breaks in Service equal
or exceed the greater of (A) five (5) or (B) the aggregate number
of his pre-break Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to
prebreak service shall not be increased as a result of post-break
service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant to
(ii) above completes one (1) Year of Service for eligibility
purposes following his reemployment with the Employer, he shall
participate in the Plan retroactively from his date of
reemployment;
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(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant to
(ii) above completes a Year of Service (a 1-Year Break in Service
previously occurred, but employment had not terminated), he shall
participate in the Plan retroactively from the first day of the
Plan Year during which he completes one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant who is
married on the "annuity starting date" and who does not die before the "annuity
starting date" shall receive the value of all of his benefits in the form of a
joint and survivor annuity. The joint and survivor annuity is an annuity that
commences immediately and shall be equal in value to a single life annuity. Such
joint and survivor benefits following the Participant's death shall continue to
the spouse during the spouse's lifetime at a rate equal to 50% of the rate at
which such benefits were payable to the Participant. This joint and 50% survivor
annuity shall be considered the designated qualified joint and survivor annuity
and automatic form of payment for the purposes of this Plan. However, the
Participant may elect to receive a smaller annuity benefit with continuation of
payments to the spouse at a rate of seventy-five percent (75%) or one hundred
percent (100%) of the rate payable to a Participant during his lifetime, which
alternative joint and survivor annuity shall be equal in value to the automatic
joint and 50% survivor annuity. An unmarried Participant shall receive the value
of his benefit in the form of a life annuity. Such unmarried Participant,
however, may elect in writing to waive the life annuity. The election must
comply with the provisions of this Section as if it were an election to waive
the joint and survivor annuity by a married Participant, but without the spousal
consent requirement. The Participant may elect to have any annuity provided for
in this Section distributed upon the attainment of the "earliest retirement age"
under the Plan. The "earliest retirement age" is the earliest date on which,
under the Plan, the Participant could elect to receive retirement benefits.
(2) Any election to waive the joint and survivor annuity must be made
by the Participant in writing during the election period and be consented
to by the Participant's spouse. If the spouse is legally incompetent to
give consent, the spouse's legal guardian, even if such guardian is the
Participant, may give consent. Such election shall designate a Beneficiary
(or a form of benefits) that may not be changed without spousal consent
(unless the consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the spouse). Such
spouse's consent shall be irrevocable and must acknowledge the effect of
such election and be witnessed by a Plan representative or a notary public.
Such consent shall not be required if it is established to the
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satisfaction of the Administrator that the required consent cannot be
obtained because there is no spouse, the spouse cannot be located, or other
circumstances that may be prescribed by Regulations. The election made by
the Participant and consented to by his spouse may be revoked by the
Participant in writing without the consent of the spouse at any time during
the election period. The number of revocations shall not be limited. Any
new election must comply with the requirements of this paragraph. A former
spouse's waiver shall not be binding on a new spouse.
(3) The election period to waive the joint and survivor annuity shall
be the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section, the "annuity starting date" means
the first day of the first period for which an amount is paid as an
annuity, or, in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which entitle the
Participant to such benefit.
(5) With regard to the election, the Administrator shall provide to
the Participant no less than 30 days and no more than 90 days before the
"annuity starting date" a written explanation of:
(i) the terms and conditions of the joint and survivor annuity,
and
(ii) the Participant's right to make, and the effect of, an
election to waive the joint and survivor annuity, and
(iii) the right of the Participant's spouse to consent to any
election to waive the joint and survivor annuity, and
(iv) the right of the Participant to revoke such election, and
the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to paragraph
(a)(2) above not to receive his benefit in the form of a joint and survivor
annuity, or if such Participant is not married, in the form of a life annuity,
the Administrator, pursuant to the election of the Participant, shall direct the
Trustee to distribute to a Participant or his Beneficiary any amount to which he
is entitled under the Plan in one lump-sum payment in cash or in property.
(c) The present value of a Participant's joint and survivor annuity derived
from Employer and Employee contributions may not be paid without his written
consent if the value exceeds, or has ever exceeded, $3,500 at the time of
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any prior distribution. Further, the spouse of a Participant must consent in
writing to any immediate distribution. If the value of the Participant's benefit
derived from Employer and Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution, the Administrator
may immediately distribute such benefit without such Participant's consent. No
distribution may be made under the preceding sentence after the "annuity
starting date" unless the Participant and his spouse consent in writing to such
distribution. Any written consent required under this paragraph must be obtained
not more than 90 days before commencement of the distribution and shall be made
in a manner consistent with Section 6.5(a)2.
(d) Any distribution to a Participant who has a benefit which exceeds, or
has ever exceeded, $3,500 at the time of any prior distribution shall require
such Participant's consent if such distribution commences prior to the later of
his Normal Retirement Age or age 62. With regard to this required consent:
(1) No consent shall be valid unless the Participant has received a
general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the Plan
that would satisfy the notice requirements of Code Section 417.
(2) The Participant must be informed of his right to defer receipt of
the distribution. If a Participant fails to consent, it shall be deemed an
election to defer the commencement of payment of any benefit. However, any
election to defer the receipt of benefits shall not apply with respect to
distributions which are required under Section 6.5(e).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the "annuity
starting date".
(4) Written consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be made more
than 90 days before the "annuity starting date".
(5) No consent shall be valid if a significant detriment is imposed
under the Plan on any Participant who does not consent to the distribution.
(e) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits, whether under the Plan or through the
purchase of an annuity contract, shall be made in accordance with the following
requirements and shall otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder (including Regulation 1.401(a)(9)-2), the provisions of
which are incorporated herein by reference:
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(1) A Participant's benefits shall be distributed to him not later
than April 1st of the calendar year following the later of (i) the calendar
year in which the Participant attains age 70 1/2 or (ii) the calendar year
in which the Participant retires, provided, however, that this clause (ii)
shall not apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5) Plan Year period ending in the
calendar year in which he attains age 70 1/2 or, in the case of a
Participant who becomes a "five (5) percent owner" during any subsequent
Plan Year, clause (ii) shall no longer apply and the required beginning
date shall be the April 1st of the calendar year following the calendar
year in which such subsequent Plan Year ends. Alternatively, if the
distribution is to be in the form of a joint and survivor annuity or single
life annuity as provided in paragraph (a)(1) above, then distributions must
begin no later than the applicable April 1st as determined under the
preceding sentence and must be made over the life of the Participant (or
the lives of the Participant and the Participant's designated Beneficiary)
in accordance with Regulations. Notwithstanding the foregoing, clause (ii)
above shall not apply to any Participant unless the Participant had
attained age 70 1/2 before January 1, 1988 and was not a "five (5) percent
owner" at any time during the Plan Year ending with or within the calendar
year in which the Participant attained age 66 1/2 or any subsequent Plan
Year.
(2) Distributions to a Participant and his Beneficiaries shall only be
made in accordance with the incidental death benefit requirements of Code
Section 401(a)(9)(G) and the Regulations thereunder.
(f) All annuity Contracts under this Plan shall be non-transferable when
distributed. Furthermore, the terms of any annuity Contract purchased and
distributed to a Participant or spouse shall comply with all of the requirements
of the Plan.
(g) If a distribution is made at a time when a Participant is not fully
Vested in his Participant's Account (employment has not terminated) and the
Participant may increase the Vested percentage in such account:
(1) a separate account shall be established for the Participant's
interest in the Plan as of the time of the distribution; and
(2) at any relevant time, the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by the
formula:
X equals P(AB plus (R x D)) - (R x D)
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For purposes of applying the formula: P is the Vested percentage at the
relevant time, AB is the account balance at the relevant time, D is the amount
of distribution, and R is the ratio of the account balance at the relevant time
to the account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested Participant who
dies before the annuity starting date and who has a surviving spouse shall have
his death benefit paid to his surviving spouse in the form of a Pre-Retirement
Survivor Annuity. The Participant's spouse may direct that payment of the
Pre-Retirement Survivor Annuity commence within a reasonable period after the
Participant's death. If the spouse does not so direct, payment of such benefit
will commence at the time the Participant would have attained the later of his
Normal Retirement Age or age 62. However, the spouse may elect a later
commencement date. Any distribution to the Participant's spouse shall be subject
to the rules specified in Section 6.6(g)
(b) Any election to waive the Pre-Retirement Survivor Annuity before the
Participant's death must be made by the Participant in writing during the
election period and shall require the spouse's irrevocable consent in the same
manner provided for in Section 6.5(a)(2). Further, the spouse's consent must
acknowledge the specific nonspouse Beneficiary. Notwithstanding the foregoing,
the nonspouse Beneficiary need not be acknowledged, provided the consent of the
spouse acknowledges that the spouse has the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elects to relinquish such
right.
(c) The election period to waive the Pre-Retirement Survivor Annuity shall
begin on the first day of the Plan Year in which the Participant attains age 35
and end on the date of the Participant's death. An earlier waiver (with spousal
consent) may be made provided a written explanation of the Pre-Retirement
Survivor Annuity is given to the Participant and such waiver becomes invalid at
the beginning of the Plan Year in which the Participant turns age 35. In the
event a Vested Participant separates from service prior to the beginning of the
election period, the election period shall begin on the date of such separation
from service.
(d) With regard to the election, the Administrator shall provide each
Participant within the applicable period, with respect to such Participant (and
consistent with Regulations), a written explanation of the Pre-Retirement
Survivor Annuity containing comparable information to that required pursuant to
Section 6.5(a)(5). For the purposes of this paragraph, the term "applicable
period" means, with respect to a Participant, whichever of the following periods
ends last:
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(1) The period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
(2) A reasonable period after the individual becomes a Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity with respect to
the Participant;
(4) A reasonable period ending after Code Section 401(a)(11) applies
to the Participant; or
(5) A reasonable period after separation from service in the case of a
Participant who separates before attaining age 35. For this purpose, the
Administrator must provide the explanation beginning one year before the
separation from service and ending one year after such separation. If such
a Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
For purposes of applying this Section 6.6(d), a reasonable period ending
after the enumerated events described in paragraphs (2), (3) and (4) is the end
of the two year period beginning one year prior to the date the applicable event
occurs, and ending one year after that date.
(e) If the present value of the Pre-Retirement Survivor Annuity derived
from Employer and Employee contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution, the Administrator shall
direct the immediate distribution of such amount to the Participant's spouse. No
distribution may be made under the preceding sentence after the annuity starting
date unless the spouse consents in writing. If the value exceeds, or has ever
exceeded, $3,500 at the time of any prior distribution, an immediate
distribution of the entire amount may be made to the surviving spouse, provided
such surviving spouse consents in writing to such distribution. Any written
consent required under this paragraph must be obtained not more than 90 days
before commencement of the distribution and shall be made in a manner consistent
with Section 6.5(a)(2).
(f) In the event the death benefit is not paid in the form of a
Pre-Retirement Survivor Annuity, it shall be paid to the Participant's
Beneficiary in one lump sum in cash or in property.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance with
the
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following requirements and shall otherwise comply with Code Section 401(a)(9)
and the Regulations thereunder. If the death benefit is paid in the form of a
Pre-Retirement Survivor Annuity, then distributions to the Participant's
surviving spouse must commence on or before the later of: (1) December 31st of
the calendar year immediately following the calendar year in which the
Participant died; or (2) December 31st of the calendar year in which the
Participant would have attained age 70 1/2. If it is determined pursuant to
Regulations that the distribution of a Participant's interest has begun and the
Participant dies before his entire interest has been distributed to him, the
remaining portion of such interest shall be distributed at least as rapidly as
under the method of distribution selected pursuant to Section 6.5 as of his date
of death. If a Participant dies before he has begun to receive any distributions
of his interest under the Plan or before distributions are deemed to have begun
pursuant to Regulations (and distributions are not to be made in the form of a
Pre-Retirement Survivor Annuity), then his death benefit shall be distributed to
his Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, the 5-year distribution requirement of the preceding paragraph
shall not apply to any portion of the deceased Participant's interest which is
payable to or for the benefit of a designated Beneficiary. In such event, such
portion may, at the election of the Participant (or the Participant's designated
Beneficiary), be distributed over the life of such designated Beneficiary (or
over a period not extending beyond the life expectancy of such designated
Beneficiary) provided such distribution begins not later than December 31st of
the calendar year immediately following the calendar year in which the
Participant died. However, in the event the Participant's spouse (determined as
of the date of the Participant's death) is his Beneficiary, the requirement that
distributions commence within one year of a Participant's death shall not apply.
In lieu thereof, distributions must commence on or before the later of: (1)
December 31st of the calendar year immediately following the calendar year in
which the Participant died; or (2) December 31st of the calendar year in which
the Participant would have attained age 70 1/2. If the surviving spouse dies
before distributions to such spouse begin, then the 5-year distribution
requirement of this Section shall apply as if the spouse was the Participant.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to make
a distribution or to commence a series of payments on or as of an Anniversary
Date, the distribution may be made or begun on such date or as soon thereafter
as is practicable. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not later
than the 60th day after the close of the Plan Year in which the latest of the
following events occurs: (a)
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the date on which the Participant attains the earlier of age 65 or the Normal
Retirement Age specified herein; (b) the 10th anniversary of the year in which
the Participant commenced participation in the Plan; or (c) the date the
Participant terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 59-1/2 years,
the Administrator, at the election of the Participant, shall direct the Trustee
to distribute all or a portion of the amount then credited to the accounts
maintained on behalf of the Participant. However, no distribution from the
Participant's Account shall occur prior to 100% vesting. In the event that the
Administrator makes such a distribution, the Participant shall continue to be
eligible to participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59-1/2 except as otherwise permitted under the terms of the Plan.
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6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall direct the
Trustee to distribute to any Participant in any one Plan Year up to the lesser
of 100% of his Participant's Elective Account valued as of the last Anniversary
Date or other valuation date or the amount necessary to satisfy the immediate
and heavy financial need of the Participant. Any distribution made pursuant to
this Section shall be deemed to be made as of the first day of the Plan Year or,
if later, the valuation date immediately preceding the date of distribution, and
the Participant's Elective Account shall be reduced accordingly. The
determination of whether an immediate and heavy financial need exists shall be
based on all relevant facts and circumstances including, but not limited to, any
amounts necessary to pay any federal, state, or local income taxes or penalties
reasonably anticipated to result from the distribution. A need shall not be
disqualified because it was reasonably foreseeable or voluntarily incurred.
Withdrawal under this Section shall be authorized if the distribution is on
account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or necessary for these persons
to obtain medical care;
(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Funeral expenses for a member of the Participant's family;
(4) Payment of tuition and related educational fees for the next
twelve (12) months of postsecondary education for the Participant, his
spouse, children, or dependents; or
(5) Payments necessary to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of the Participant's
principal residence.
(b) No distribution shall be made pursuant to this Section unless the
Administrator determines, based upon all relevant facts and circumstances, that
the amount to be distributed is not in excess of the amount required to relieve
the financial need and that such need cannot be satisfied from other resources
reasonably available to the Participant. For this purpose, the Participant's
resources shall be deemed to include those assets of his spouse and minor
children that are reasonably available to the Participant. A distribution may be
treated as necessary to satisfy a financial need if the Administrator relies
upon the Participant's representation that the need cannot be relieved:
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(1) Through reimbursement or compensation by insurance or otherwise;
(2) By reasonable liquidation of the Participant's assets, to the
extent such liquidation would not itself increase the amount of the need;
(3) By cessation of elective deferrals under the Plan; or
(4) By other distributions or loans from the Plan or any other
qualified retirement plan, or by borrowing from commercial sources on
reasonable commercial terms, to the extent such amounts would not
themselves increase the amount of the need.
(c) Notwithstanding the above, distributions from the Participant's
Elective Account pursuant to this Section shall be limited solely to the
Participant's total Deferred Compensation as of the date of distribution,
reduced by the amount of any previous distributions pursuant to this Section and
Section 6.10.
(d) Any distribution made pursuant to this Section shall be made in a
manner which is consistent with and satisfies the provisions of Section 6.5,
including, but not limited to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by the
Employer, to invest, manage, and control the Plan assets subject, however,
to the
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direction of an Investment Manager if the Trustee should appoint such
manager as to all or a portion of the assets of the Plan;
(b) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to Participants, or, in the event of their death,
to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish to
the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the Trust
Fund invested without distinction between principal and income and in such
securities or property, real or personal, wherever situated, as the Trustee
shall deem advisable, including, but not limited to, stocks, common or
preferred, bonds and other evidences of indebtedness or ownership, and real
estate or any interest therein. The Trustee shall at all times in making
investments of the Trust Fund consider, among other factors, the short and
long-term financial needs of the Plan on the basis of information furnished by
the Employer. In making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by the
applicable law for trust investments; however, the Trustee shall give due regard
to any limitations imposed by the Code or the Act so that at all times the Plan
may qualify as a qualified Profit Sharing Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical and
record-keeping nature.
(c) At the election of each Participant, the Trustee, at the direction
of the Administrator, shall apply for, own, and pay premiums on Contracts
on the lives of the Participants. If a life insurance Policy is to be
purchased for a Participant, the aggregate premium for ordinary life
insurance for each Participant must be less than 50% of the aggregate of
the contributions and Forfeitures to the credit of the Participant at any
particular time. If term insurance is purchased with such contributions,
the aggregate premium must be less than 25% of the aggregate contributions
and Forfeitures allocated to a Participant's Combined
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Account. If both term insurance and ordinary life insurance are purchased
with such contributions, the amount expended for term insurance plus
one-half (1/2) of the premium for ordinary life insurance may not in the
aggregate exceed 25% of the aggregate contributions and Forfeitures
allocated to a Participant's Combined Account. The Trustee must convert the
entire value of the life insurance Contracts at or before retirement into
cash or provide for a periodic income so that no portion of such value may
be used to continue life insurance protection beyond retirement, or
distribute the Contracts to the Participant. In the event of any conflict
between the terms of this Plan and the terms of any insurance Contract
purchased hereunder, the Plan provisions shall control.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of the Plan, shall
have the following powers and authorities, to be exercised in the Trustee's sole
discretion:
(a) To purchase, or subscribe for, any securities or other property
and to retain the same. In conjunction with the purchase of securities,
margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the Trustee,
by private contract or at public auction. No person dealing with the
Trustee shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency, or propriety of any such sale or
other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose, or
to consent to, or otherwise participate in, corporate reorganizations or
other changes affecting corporate securities, and to delegate discretionary
powers, and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities, or other property;
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees,
and to hold any investments in bearer form, but the books and records of
the Trustee shall at all times show that all such investments are part of
the Trust Fund;
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(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any part,
of the Trust Fund; and no person lending money to the Trustee shall be
bound to see to the application of the money lent or to inquire into the
validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash balances as
the Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as Trustee
hereunder, whether or not such securities or other property would normally
be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all suits
and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance companies, to
be selected by the Administrator, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or from time to
time, whatever rights and privileges may be granted under such annuity, or
other Contracts; to collect, receive, and settle for the proceeds of all
such annuity or other Contracts as and when entitled to do so under the
provisions thereof;
(l) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
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(n) To invest in shares of investment companies registered under the
Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, or, if
the options are not traded on a national securities exchange, are
guaranteed by a member firm of the New York Stock Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or an affiliated company of the Employer, and to
commingle such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and such other trust or trusts, allocating
undivided shares or interests in such investments or accounts or any pooled
assets of the two or more trusts in accordance with their respective
interests;
(r) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem
necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the Trustee
shall be exercised in the sole fiduciary discretion of the Trustee.
However, if Participants are so empowered by the Administrator, each
Participant may direct the Trustee to separate and keep separate all or a
portion of his account; and further each Participant is authorized and
empowered, in his sole and absolute discretion, to give directions to the
Trustee pursuant to the procedure established by the Administrator and in
such form as the Trustee may require concerning the investment of the
Participant's Directed Investment Account. The Trustee shall comply as
promptly as practicable with directions given by the Participant hereunder.
The Trustee may refuse to comply with any direction from the Participant in
the event the Trustee, in its sole and absolute discretion, deems such
directions improper by virtue of applicable law. The Trustee shall not be
responsible or liable for any loss or expense which may result from the
Trustee's refusal or failure to comply with any directions from the
Participant. Any costs and expenses related to compliance with the
Participant's directions shall be borne by the Participant's Directed
Investment Account.
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7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make loans to
Participants and Beneficiaries under the following circumstances: (1) loans
shall be made available to all Participants and Beneficiaries on a reasonably
equivalent basis; (2) loans shall not be made available to Highly Compensated
Employees in an amount greater than the amount made available to other
Participants and Beneficiaries; (3) loans shall bear a reasonable rate of
interest; (4) loans shall be adequately secured; and (5) shall provide for
repayment over a reasonable period of time.
(b) Loans made pursuant to this Section (when added to the outstanding
balance of all other loans made by the Plan to the Participant) shall be limited
to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest outstanding
balance of loans from the Plan to the Participant during the one year
period ending on the day before the date on which such loan is made, over
the outstanding balance of loans from the Plan to the Participant on the
date on which such loan was made, or
(2) one-half (1/2) of the present value of the non-forfeitable accrued
benefit of the Participant under the Plan.
(c) Loans shall provide for level amortization with payments to be made not
less frequently than quarterly over a period not to exceed five (5) years.
However, loans used to acquire any dwelling unit which, within a reasonable
time, is to be used (determined at the time the loan is made) as a principal
residence of the Participant shall provide for periodic repayment over a
reasonable period of time that may exceed five (5) years.
(d) Any loan made pursuant to this Section where the Vested interest of the
Participant is used to secure such loan shall require the written consent of the
Participant's spouse in a manner consistent with Section 6.5(a). Such written
consent must be obtained within the 90-day period prior to the date the loan is
made. However, no spousal consent shall be required under this paragraph if the
total accrued benefit subject to the security is not in excess of $3,500.
(e) Any loans granted or renewed shall be made pursuant to a Participant
loan program. Such loan program shall be established in writing and must
include, but need not be limited to, the following:
(1) the identity of the person or positions authorized to administer
the Participant loan program;
(2) a procedure for applying for loans;
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(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans offered;
(5) the procedure under the program for determining a reasonable rate
of interest;
(6) the types of collateral which may secure a Participant loan; and
(7) the events constituting default and the steps that will be taken
to preserve Plan assets.
Such Participant loan program shall be contained in a separate written
document which, when properly executed, is hereby incorporated by reference and
made a part of the Plan. Furthermore, such Participant loan program may be
modified or amended in writing from time to time without the necessity of
amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from time
to time be agreed upon in writing by the Employer and the Trustee. An individual
serving as Trustee who already receives full-time pay from the Employer shall
not receive compensation from the Plan. In addition, the Trustee shall be
reimbursed for any reasonable expenses, including reasonable counsel fees
incurred by it as Trustee. Such compensation and expenses shall be paid from the
Trust Fund unless paid or advanced by the Employer. All taxes of any kind and
all kinds whatsoever that may be levied or assessed under existing or future
laws upon, or in respect of, the Trust Fund or the income thereof, shall be paid
from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary Date
or receipt of the Employer's contribution for each Plan Year, the Trustee shall
furnish to the Employer and Administrator a written statement of account with
respect to the Plan Year for which such contribution was made setting forth:
(a) the net income, or loss, of the Trust Fund;
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(b) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator deems
appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be deemed
an approval thereof. The approval by the Employer of any statement of
account shall be binding as to all matters embraced therein as between the
Employer and the Trustee to the same extent as if the account of the
Trustee had been settled by judgment or decree in an action for a judicial
settlement of its account in a court of competent jurisdiction in which the
Trustee, the Employer and all persons having or claiming an interest in the
Plan were parties; provided, however, that nothing herein contained shall
deprive the Trustee of its right to have its accounts judicially settled if
the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and the
regulations thereunder for any Plan Year, the Administrator shall direct the
Trustee to engage on behalf of all Participants an independent qualified public
accountant for that purpose. Such accountant shall, after an audit of the books
and records of the Plan in accordance with generally accepted auditing
standards, within a reasonable period after the close of the Plan Year, furnish
to the Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are required by
Act Section 103 or the Secretary of Labor to be filed with the Plan's annual
report, are presented fairly in conformity with generally accepted accounting
principles applied consistently. All auditing and accounting fees shall be an
expense of and may, at the election of the Administrator, be paid from the Trust
Fund.
(b) If some or all of the information necessary to enable the Administrator
to comply with Act Section 103 is maintained by a bank, insurance company, or
similar institution, regulated and supervised and subject to periodic
examination by a state or federal agency, it shall transmit and certify the
accuracy of that information to the Administrator as provided in Act Section
103(b) within one hundred twenty (120) days after the end of the Plan Year or by
such other date as may be prescribed under regulations of the Secretary of
Labor.
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7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer, at
least thirty (30) days before its effective date, a written notice of his
resignation.
(b) The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at least
thirty (30) days before its effective date, a written notice of his removal.
(c) Upon the death, resignation, incapacity, or removal of any Trustee, a
successor may be appointed by the Employer; and such successor, upon accepting
such appointment in writing and delivering same to the Employer, shall, without
further act, become vested with all the estate, rights, powers, discretions, and
duties of his predecessor with like respect as if he were originally named as a
Trustee herein. Until such a successor is appointed, the remaining Trustee or
Trustees shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to the death,
resignation, incapacity, or removal of a Trustee. In the event a successor is so
designated by the Employer and accepts such designation, the successor shall,
without further act, become vested with all the estate, rights, powers,
discretions, and duties of his predecessor with the like effect as if he were
originally named as Trustee herein immediately upon the death, resignation,
incapacity, or removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of account with
respect to the portion of the Plan Year during which he served as Trustee. This
statement shall be either (i) included as part of the annual statement of
account for the Plan Year required under Section 7.7 or (ii) set forth in a
special statement. Any such special statement of account should be rendered to
the Employer no later than the due date of the annual statement of account for
the Plan Year. The procedures set forth in Section 7.7 for the approval by the
Employer of annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such special
statement in the manner provided in Section 7.7 shall have the same effect upon
the statement as the Employer's approval of an annual statement of account. No
successor to the Trustee shall have any duty or responsibility to investigate
the acts or transactions of any predecessor who has rendered all statements of
account required by Section 7.7 and this subparagraph.
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7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee at
the direction of the Administrator shall transfer the Vested interest, if any,
of such Participant in his account to another trust forming part of a pension,
profit sharing or stock bonus plan maintained by such Participant's new employer
and represented by said employer in writing as meeting the requirements of Code
Section 401(a), provided that the trust to which such transfers are made permits
the transfer to be made.
7.11 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Section, a distributee may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
(b) For purposes of this Section the following definitions shall apply:
(1) An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(2) An eligible retirement plan is an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code Section
403(a), or a qualified trust described in Code Section 401(a), that accepts
the distributee's eligible rollover distribution. However, in the case of
an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
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Code Section 414(p), are distributees with regard to the interest of the
spouse or former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the Plan,
subject to the limitations of this Section. Any such amendment shall be adopted
by formal action of the Employer's board of directors and executed by an officer
authorized to act on behalf of the Employer. However, any amendment which
affects the rights, duties or responsibilities of the Trustee and Administrator
may only be made with the Trustee's and Administrator's written consent. Any
such amendment shall become effective as provided therein upon its execution.
The Trustee shall not be required to execute any such amendment unless the Trust
provisions contained herein are a part of the Plan and the amendment affects the
duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes or permits
any part of the Trust Fund (other than such part as is required to pay taxes and
administration expenses) to be used for or diverted to any purpose other than
for the exclusive benefit of the Participants or their Beneficiaries or estates;
or causes any reduction in the amount credited to the account of any
Participant; or causes or permits any portion of the Trust Fund to revert to or
become property of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or transaction
having the effect of a Plan amendment (such as a merger, plan transfer or
similar transaction) shall be effective to the extent it eliminates or reduces
any "section 411(d)(6) protected benefit" or adds or modifies conditions
relating to "Section 411(d)(6) protected benefits" the result of which is a
further restriction on such benefit unless such protected benefits are preserved
with respect to benefits accrued as of the later of the adoption date or
effective date of the amendment. "Section 411(d)(6) protected benefits" are
benefits described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
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8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the Plan by
delivering to the Trustee and Administrator written notice of such termination.
Upon any full or partial termination, all amounts credited to the affected
Participants' Combined Accounts shall become 100% Vested as provided in Section
6.4 and shall not thereafter be subject to forfeiture, and all unallocated
amounts shall be allocated to the accounts of all Participants in accordance
with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall direct the
distribution of the assets of the Trust Fund to Participants in a manner which
is consistent with and satisfies the provisions of Section 6.5. Distributions to
a Participant shall be made in cash or in property or through the purchase of
irrevocable nontransferable deferred commitments from an insurer. Except as
permitted by Regulations, the termination of the Plan shall not result in the
reduction of "Section 411(d)(6) protected benefits" in accordance with Section
8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the Employer
and any Participant or to be a consideration or an inducement for the employment
of any Participant or Employee. Nothing contained in this Plan shall be deemed
to give any Participant or Employee the right to be retained in the service of
the Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of this Plan.
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9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall be
payable out of the Trust Fund to any person (including a Participant or his
Beneficiary) shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the
same shall be void; and no such benefit shall in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or against
such person, and the same shall not be recognized by the Trustee, except to such
extent as may be required by law.
(b) This provision shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan, as a result of a loan from the Plan. At the
time a distribution is to be made to or for a Participant's or Beneficiary's
benefit, such proportion of the amount distributed as shall equal such loan
indebtedness shall be paid by the Trustee to the Trustee or the Administrator,
at the direction of the Administrator, to apply against or discharge such loan
indebtedness. Prior to making a payment, however, the Participant or Beneficiary
must be given written notice by the Administrator that such loan indebtedness is
to be so paid in whole or part from his Participant's Combined Account. If the
Participant or Beneficiary does not agree that the loan indebtedness is a valid
claim against his Vested Participant's Combined Account, he shall be entitled to
a review of the validity of the claim in accordance with procedures provided in
Sections 2.12 and 2.13.
(c) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic relations orders
permitted to be so treated by the Administrator under the provisions of the
Retirement Equity Act of 1984. The Administrator shall establish a written
procedure to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the extent
provided under a "qualified domestic relations order," a former spouse of a
Participant shall be treated as the spouse or surviving spouse for all purposes
under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act
and the laws of the State of New Jersey, other than its laws respecting choice
of law, to the extent not preempted by the Act.
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9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party, and such claim, suit, or proceeding is resolved in favor of the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by law,
it shall be impossible by operation of the Plan or of the Trust, by termination
of either, by power of revocation or amendment, by the happening of any
contingency, by collateral arrangement or by any other means, for any part of
the corpus or income of any trust fund maintained pursuant to the Plan or any
funds contributed thereto to be used for, or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants, or their
Beneficiaries.
(b) In the event the Employer shall make an excessive contribution under a
mistake of fact pursuant to Act Section 403(c)(2)(A), the Employer may demand
repayment of such excessive contribution at any time within one (1) year
following the time of payment and the Trustees shall return such amount to the
Employer within the one (1) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud
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or dishonesty by the Fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in Act Section
412(a)(2)), and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything in the Plan to the contrary, the cost of such bonds
shall be an expense of and may, at the election of the Administrator, be paid
from the Trust Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (l) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the
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Employer shall have the sole responsibility for making the contributions
provided for under Section 4.1; and shall have the sole authority to appoint and
remove the Trustee and the Administrator; to formulate the Plan's "funding
policy and method"; and to amend or terminate, in whole or in part, the Plan.
The Administrator shall have the sole responsibility for the administration of
the Plan, which responsibility is specifically described in the Plan. The
Trustee shall have the sole responsibility of management of the assets held
under the Trust, except those assets, the management of which has been assigned
to an Investment Manager, who shall be solely responsible for the management of
the assets assigned to it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information furnished, or action
taken by it shall be in accordance with the provisions of the Plan, authorizing
or providing for such direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or action of another
named Fiduciary as being proper under the Plan, and is not required under the
Plan to inquire into the propriety of any such direction, information or action.
It is intended under the Plan that each named Fiduciary shall be responsible for
the proper exercise of its own powers, duties, responsibilities and obligations
under the Plan. No named Fiduciary shall guarantee the Trust Fund in any manner
against investment loss or depreciation in asset value. Any person or group may
serve in more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be empowered to
interpret the Plan and Trust and to resistencies and omissions, which findings
shall be binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions to this
Plan are conditioned upon the initial qualification of the Plan under Code
Section 401. If the Plan receives an adverse determination with respect to its
initial qualification, then the Plan may return such contributions to the
Employer within one year after such determination, provided the application for
the determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted, or such
later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except Sections 3.6,
3.7, and 4.1(f), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer under the
Code and, to the extent any such deduction is disallowed, the Employer may,
within one (1) year following the disallowance of the deduction, demand
repayment of such disallowed contribution and the Trustee shall return such
contribution within one (1) year following the disallowance. Earnings of the
Plan
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attributable to the excess contribution may not be returned to the Employer, but
any losses attributable thereto must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner. In the event of any conflict between the terms of this
Plan and any Contract purchased hereunder, the Plan provisions shall control.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one Trust Fund all contributions made by Participating Employers, as
well as all increments thereof. However, the assets of the Plan shall, on an
ongoing basis, be available to pay benefits to all Participants and
Beneficiaries under the Plan without regard to the Employer or Participating
Employer who contributed such assets.
(c) The transfer of any Participant from or to an Employer participating in
this Plan, whether he be an Employee of the Employer or a Participating
Employer, shall not affect such Participant's rights under the Plan, and all
amounts credited to such Participant's Combined Account as well as his
accumulated service time with the transferor or predecessor, and his length of
participation in the Plan, shall continue to his credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Participants of the Employer or Participating
Employer by which the forfeiting Participant was employed.
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(e) Any expenses of the Trust which are to be paid by the Employer or borne
by the Trust Fund shall be paid by each Participating Employer in the same
proportion that the total amount standing to the credit of all Participants
employed by such Employer bears to the total standing to the credit of all
Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved shall
carry with him his accumulated service and eligibility. No such transfer shall
effect a termination of employment hereunder, and the Participating Employer to
which the Employee is transferred shall thereupon become obligated hereunder
with respect to such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
All contributions made by a Participating Employer, as provided for in this
Plan, shall be determined separately by each Participating Employer, and shall
be allocated only among the Participants eligible to share of the Employer or
Participating Employer making the contribution. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer. The
Trustee may, but need not, register Contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Trustee thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
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<PAGE>
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable conditions imposed shall be
delivered to the Trustee. The Trustee shall thereafter transfer, deliver and
assign Contracts and other Trust Fund assets allocable to the Participants of
such Participating Employer to such new Trustee as shall have been designated by
such Participating Employer, in the event that it has established a separate
pension plan for its Employees, provided however, that no such transfer shall be
made if the result is the elimination or reduction of any "Section 411(d)(6)
protected benefits" in accordance with Section 8.1(c). If no successor is
designated, the Trustee shall retain such assets for the Employees of said
Participating Employer pursuant to the provisions of Article VII hereof. In no
such event shall any part of the corpus or income of the Trust as it relates to
such Participating Employer be used for or diverted to purposes other than for
the exclusive benefit of the Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all Participants,
to effectuate the purpose of this Article.
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<PAGE>
IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Signed, sealed, and delivered in the presence of:
Bio-Technology General Corp.
/s/ DOUGLAS MARTIN By /s/ MATTHEW PAZARYNA
- -------------------------------- ----------------------------
EMPLOYER
/s/ KENNETH H. SPENCER
- --------------------------------
WITNESSES AS TO EMPLOYER
/s/ DOUGLAS MARTIN By /s/ MATTHEW PAZARYNA
- -------------------------------- ----------------------------(SEAL)
TRUSTEE
/s/ KENNETH H. SPENCER
- --------------------------------
WITNESSES AS TO TRUSTEE
/s/ DOUGLAS MARTIN By /s/ SIM FASS
- -------------------------------- ----------------------------(SEAL)
TRUSTEE
/s/ KENNETH H. SPENCER
- --------------------------------
WITNESSES AS TO TRUSTEE
-86-
FULBRIGHT & JAWORSKI
L.L.P.
TELEPHONE: 212/318-3000 A REGISTERED LIMITED LIABILITY HOUSTON
FACSIMILE: 212/752-5958 PARTNERSHIP WASHINGTON, D.C.
666 FIFTH AVENUE AUSTIN
NEW YORK, NEW YORK 10103-3198 SAN ANTONIO
DALLAS
NEW YORK
LOS ANGELES
LONDON
HONG KONG
Exhibit 5
September 19, 1997
Bio-Technology General Corp.
70 Wood Avenue South
Iselin, New Jersey 08830
Dear Sirs:
We refer to the Registration Statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), on behalf of Bio-Technology
General Corp., a Delaware corporation (the "Company"), relating to 100,000
shares of the Company's Common Stock, $.01 par value (the "Common Stock"), to be
issued pursuant to the Bio-Technology General Corp. 401(k) Profit Sharing Plan
(the "Plan").
As counsel to the Company, we have examined such corporate records, other
documents and such questions of law as we have deemed necessary or appropriate
for the purposes of this opinion and, upon the basis of such examinations,
advise you that in our opinion all necessary corporate proceedings by the
Company have been duly taken to authorize the issuance of the Common Stock and
the shares of Common Stock being registered pursuant to the Registration
Statement, when issued and paid for in accordance with the terms of the Plan,
will be duly authorized, validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement. This consent is not to be construed as an admission that we are a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Act.
Very truly yours,
/s/ FULBRIGHT & JAWORSKI L.L.P.
----------------------------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 28, 1997
included in Bio-Technology General Corp.'s Form 10-K for the year ended December
31, 1996 and to all references to our Firm included in this registration
statement on Form S-8 registering 100,000 shares of common stock.
/s/ ARTHUR ANDERSEN LLP
New York, New York
September 17, 1997
