Exhibit 10(e)
SCHERING-PLOUGH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AMENDED AND RESTATED TO FEBRUARY 24, 1998)
PREAMBLE
The principal purpose of this Supplemental Executive Retirement
Plan is to ensure the payment of a competitive level of
retirement income in order to attract, retain and motivate
selected executives of the Corporation and its affiliated
companies.
SECTION 1
Definitions
1.1 "Affiliate" means any corporation, partnership or other
organization controlled by or under common control with the
Corporation.
1.2 "Basic Plan" means as to any Participant or Former
Participant the qualified retirement or pension plan of the
Corporation or an Affiliate pursuant to which retirement benefits
are payable to such Participant or Former Participant or to the
Surviving Spouse or designated Beneficiary of a deceased
Participant or Former Participant.
1.3 "Basic Plan Benefit" means the amount of benefit payable
from the Basic Plan to a Participant or Former Participant.
1.4 "Board" means the Board of Directors of Schering-Plough
Corporation.
1.5 "Change of Control" means Change of Control as defined in
the Corporation's 1992 Stock Incentive Plan.
1.6 "Committee" means the Committee provided for in Section 6 of
the Plan.
1.7 "Corporation" means Schering-Plough Corporation, a New
Jersey Corporation, and any successor or assigns thereto.
1.8 "Deferral Rate" means a rate, at the option of the
Participant or the Former Participant, as the case may be, either
(a) equal to the actual yield on three-month U.S. Treasury bills
as reported in the Wall Street Journal on the first business day
of each calendar quarter, or (b) as reported in the Wall Street
Journal (or, if not reported in the Wall Street Journal, as
reported in a similar widely recognized business publication) on
the first business day following the retirement or death, as the
case may be, of the Participant or Former Participant, equal to
the actual yield on U.S. Treasury securities with a maturity
equal to the period for which a lump sum or annual installment
payment is deferred pursuant to a Participant's Lump Sum Election
or a Survivor's Lump Sum Election or action by the Committee
under Section 4.6 hereof (or, if there are no U.S. Treasury
securities of such maturity, then the functional equivalent
thereof). The Deferral Rate shall be selected by the Participant
or Former Participant, as the case may be, at or before the time
that a Participant's Lump Sum Election or Survivor's Lump Sum
Election, as applicable, is made.
1.9 "Earnings" means the base pay received as an employee as
salary or wages, including any amounts deferred under Section
401(k) of the Internal Revenue Code, and bonuses awarded under
any executive or management incentive plan of the Corporation or
an Affiliate, excluding without limitation any stock awards,
stock options and rights under any Stock Option, Employee Stock
Ownership, or Stock Incentive Plan of the Corporation, any
pensions, profit-sharing, pay in lieu of vacation, or other
special remuneration.
"Average Final Earnings" means a Participant's or Former
Participant's average annual Earnings during the sixty
consecutive months for which his Earnings were highest during the
last one hundred twenty consecutive months of his service.
1.10 "Effective Date" means January 1, 1983.
1.11 "Former Participant" means an executive employee who has
been removed from further participation in the Plan.
1.12 "Optional Survivor's Benefit Payment Date" means (a), in
the case of a Participant or Former Participant having at least
ten years of employment with the Corporation or an Affiliate, the
first day of the month coincident with or next following the date
of his death and (b), in the case of a Participant of Former
Participant having less than ten years of employment with the
Corporation or an Affiliate, the first day of the month
coincident with or next following (i) the date on which the
Participant or Former Participant would have attained age 55 or,
(ii) if later, the date on which the Participant or Former
Participant dies.
1.13 "Other Retirement Income" means retirement income payable
to a Participant or Former Participant from the following
sources:
(a) any Retirement Benefits Equalization Plan of the
Corporation or an Affiliate; and
(b) any other contract, agreement or other arrangement with
the Corporation or an Affiliate (excluding any Basic Plan) to the
extent it provides retirement or pension benefits.
1.14 "Participant" means an executive employee of the
Corporation or an Affiliate who becomes a participant in the plan
pursuant to Section 2.
1.15 "Plan" means this Supplemental Executive Retirement Plan,
as amended from time to time.
1.16 "Retirement" means the termination of a Participant's or
Former Participant's employment with the Corporation or an
Affiliate on one of the retirement dates specified in Section 3
or the deemed retirement of a Participant or a Former Participant
pursuant to an employment agreement between him and the
Corporation.
1.17 "Service" means a Participant's period of employment with
the Corporation or an Affiliate for which benefits are accrued
under the relevant Basic Plan.
1.18 "Surviving Spouse" means the spouse of a deceased
Participant or Former Participant to whom such Participant or
Former Participant has been validly married for a continuous
period of at least one year immediately preceding such
Participant or Former Participant's death.
1.19 The masculine gender, where appearing in the Plan, will be
deemed to include the feminine gender, and the singular may
include the plural, unless the context clearly indicates the
contrary.
SECTION 2
Eligibility, Participation and Vesting
2.1 An executive of the Corporation or an Affiliate in an E-
grade pay status, participating in a Basic Plan and actively
employed on the Effective Date, shall be a Participant on the
Effective Date.
Any other executive of the Corporation or an Affiliate shall
become a Participant on the date he achieves E-grade pay status
and is a participant in a Basic Plan.
2.2 An executive of the Corporation or an Affiliate who is on a
leave of absence on the date he would otherwise become a
Participant shall become a Participant on the date his leave of
absence terminates and he resumes active employment.
2.3 A Participant who is removed from an E-grade pay status
shall as of such date cease to be a Participant in the Plan and
shall accrue no further benefits under the Plan.
SECTION 3
Eligibility For Benefits
3.1 Each Participant or Former Participant is eligible to
commence receiving benefits under this Plan on one of the
following dates, as such dates are defined in the relevant Basic
Plan.
(a) "Normal Retirement Date."
(b) "Early Retirement Date."
(c) "Deferred or Postponed Retirement Date."
SECTION 4
Amount and Form of Retirement Benefit
4.1 The annual retirement benefits provided by the Plan are
designed to provide each Participant and Former Participant with
an annual pension from the Plan and certain other sources equal
to his Benefit as hereinafter specified. The annual retirement
benefits provided by Section 5 of the Plan to a Surviving Spouse
of a Participant or Former Participant are designed to provide
each such Surviving Spouse with a percentage of the Participant's
or Former Participant's Benefit at date of death and also include
benefits provided from sources other than the Plan as hereinafter
specified. Thus, the retirement benefits described hereunder as
payable to Participants, Former Participants, and Surviving
Spouses, will be offset by retirement benefits payable from
sources specified herein outside the Plan.
4.2 The Benefit of a Participant or Former Participant retiring
on his Normal Retirement Date or a Deferred or Postponed
Retirement Date shall be an annual benefit payable monthly
commencing on the first day of the calendar month coincident with
or next following his Retirement equal to:
a) 2% of his Average Final Earnings multiplied by his years
of Service in E-grade pay status or, after ten years of Service
in any pay status all Service except Service subsequent to
removal from E-grade pay status, up to twenty years plus 1% of
his Average Final Earnings for each such year of such Service in
excess of twenty years, inclusive of his Other Retirement Income
and his Basic Plan Benefit; or
b) if greater, and if he has completed 10 years of Service
in E-grade pay status on his Normal Retirement Date, 35% of his
Average Final Earnings, inclusive of his Other Retirement Income
and his Basic Plan Benefit.
4.3 The Benefit of a Participant or Former Participant retiring
on an Early Retirement Date shall be an annual benefit payable
monthly commencing on the first day of the calendar month
coincident with or next following his Early Retirement Date equal
to 2% of his Average Final Earnings multiplied by his years of
Service in E-grade pay status, or after ten years of Service in
any pay status all Service except Service subsequent to removal
from E-grade pay status, up to twenty years plus 1% of his
Average Final Earnings for each such year of such Service in
excess of twenty years, inclusive of his Other Retirement Income
and his Basic Plan Benefit, and reduced by the following factors
depending upon his age on such Early Retirement Date:
Age at Early
Retirement Date Reduction Factor
64 0
63 0
62 0
61 4%
60 8%
59 12%
58 16%
57 20%
56 24%
55 28%
provided however, that the Benefit payable to a Participant or
Former Participant who retires while an active employee on an
Early Retirement Date on or after he has attained age 60 and has
at least 10 years of Service in E-grade pay status shall not be
less than an annual benefit payable monthly commencing on the
first day of the calendar month coincident with or next following
his Retirement equal to 35% of his Average Final Earnings,
inclusive of his Other Retirement Income and his Basic Plan
Benefit.
The Benefit of a Participant or Former Participant, whose
employment is terminated other than by Retirement, disability, or
death, shall be an annual benefit payable monthly commencing on
the first day of the calendar month coincident with or next
following his Normal Retirement Date, as determined under the
preceding sentence but without taking into account the reduction
factors, and if such Benefit is payable in a lump sum or annual
installments pursuant to an election made in accordance with
Section 4.6, payment thereof shall be made or commence on such
Normal Retirement Date or on the first day of any month
thereafter not later than the second anniversary of such Normal
Retirement Date.
4.4 In the event that a Participant or Former Participant has
become totally and permanently disabled for the purposes of the
relevant Basic Plan, disability retirement benefits shall be
payable under this Plan, and shall be determined pursuant to
Section 4 hereof, with Earnings (as defined herein) and Service
deemed to have continued for such period, if any, as shall be
applicable under the disability retirement benefit provisions of
the relevant Basic Plan.
4.5 For the purpose of determining Benefits under the foregoing
paragraphs of this Section 4:
a) Service prior to March 1, 1987 for all executives who
were Participants in the Plan on the Effective Date shall be
deemed to be in an E-grade pay status; and
b) in no event shall the Benefit of an actively employed
executive participating in the Plan on March 1, 1987 be less than
the Benefit which would be payable if such Benefit were
determined under the provisions of the Plan as in effect
immediately prior to such date.
4.6 The benefits under this Plan shall be payable to a
Participant or Former Participant in the normal form such
Participant's or Former Participant's retirement benefits would
be payable under the Basic Plan determined solely on the basis of
his marital status on his retirement benefit commencement date
and without regard for any optional form of benefits elected
under the Basic Plan. Notwithstanding the preceding sentence, a
Participant or Former Participant may elect that payment of any
benefits under this Plan shall be made in accordance with any
optional form of benefit available under the Basic Plan or as
hereinafter provided in this Section 4.6 A Participant or Former
Participant may elect (the "Participant's Lump Sum Election") to
receive payment of the actuarial equivalent of the aggregate of
his benefits under this Plan and any Survivor's Benefit payable
to his Surviving Spouse under this Plan in a lump sum (x) in cash
on his Early Retirement Date, Normal Retirement Date, or Deferred
or Postponed Retirement Date or the first day of any month
thereafter not later than the first day of the month coincident
with or next following the second anniversary of such Early
Retirement Date, Normal Retirement Date, or Deferred or Postponed
Retirement Date, as the case may be, or on the fifth, tenth,
fifteenth or twentieth anniversary of his Early Retirement Date,
Normal Retirement Date, or Deferred or Postponed Retirement Date,
as the case may be, or (y) in two, three, four, five, ten,
fifteen, or twenty equal annual cash installments commencing on
his Early Retirement Date, Normal Retirement Date, or Deferred or
Postponed Retirement Date or the first day of any month
thereafter not later than the first day of the month coincident
with or next following the second anniversary of such Early
Retirement Date, Normal Retirement Date, or Deferred or Postponed
Retirement Date, as the case may be. If a Participant or a
Former Participant terminates his employment by Retirement and
dies with a Participant's Lump Sum Election in effect but prior
to the payment of the full amount of such lump sum or annual
installments, payment of the unpaid amount thereof shall be made
to his Surviving Spouse, designated Beneficiary or estate in
accordance with such Election. Payment made in accordance with
either of the two preceding sentences to the Participant or
Former Participant, his Surviving Spouse, designated Beneficiary
or estate shall constitute full and complete satisfaction of the
Company's obligation in respect of the benefits of such
Participant or Former Participant and any Survivor's benefit of
his Surviving Spouse. If a Participant or Former Participant
dies before Retirement, the Company shall have no obligation in
respect of his benefits under this Plan and shall be obligated to
pay any Survivor's Benefit, if, but only if, his spouse shall
survive him. If the Participant or Former Participant does not
make the Participant's Lump Sum Election, he may nevertheless
elect (the "Survivor's Lump Sum Election") that if he should die
prior to termination of employment, his Surviving Spouse shall
receive the actuarial equivalent of her Survivor's Benefit, if
any, in a lump sum (x) in cash on the Optional Survivor's Benefit
Payment Date or the first day of any month thereafter not later
than the first day of the month coincident with or next following
the second anniversary of the Optional Survivor's Benefit Payment
Date or on the fifth, tenth, fifteenth, or twentieth anniversary
of the Optional Survivor's Benefit Payment Date, or (y) in two,
three, four, five, ten, fifteen, or twenty equal annual cash
installments commencing on the Optional Survivor's Benefit
Payment Date or the first day of any month thereafter not later
than the first day of the month coincident with or next following
the second anniversary of the Optional Survivor's Benefit Payment
Date. A Participant or a Former Participant may make any
election pursuant to this Section 4.6. or may modify or rescind
such an election previously made: (a), in the case of an
election of a form of benefit other than a lump sum or annual
installments pursuant to a Participant's Lump Sum Election or a
Survivor's Lump Sum Election, at any time prior to the
Participant's or Former Participant's Retirement, except that in
the case of a Participant or Former Participant whose employment
is terminated other than by Retirement, such election,
modification or rescission must be made at least 90 days prior to
his Normal Retirement Date; (b), in the case of a Participant's
Lump Sum Election by a Participant or a Former Participant whose
Retirement occurs on or after October 1, 1994, and on or before
July 1, 1995, at least 30 days prior to the date of his
Retirement; (c), in the case of a Participant's Lump Sum
Election by a Participant or a Former Participant who is not
covered by clause (b) of this sentence, not later than the end of
the calendar year preceding the calendar year in which the
termination of his employment occurs and at least six months
prior to such termination of employment; and (d), in the case of
a Survivor's Lump Sum Election by a Participant of Former
Participant, at least six months prior to his death; provided,
however, that in the event of a Change of Control, a Participant
or Former Participant may make a Participant's Lump Sum Election
or a Survivor's Lump Sum Election, or modify or rescind such an
Election previously made, within a period of 60 days following
such Change of Control but in no event later than 30 days prior
to the date of the termination of his employment. Any election
pursuant to this Section 4.6, or any modification or rescission
of a previous election, shall be made in writing and filed with
the Committee before the applicable limitation of time specified
in this Section 4.6, and any election purported to be filed after
the applicable limitation of time shall be void. Unless
otherwise specified in the written form of election, the
actuarial equivalent of the benefits payable to a Participant or
a Former Participant who has made a Participant's Lump Sum
Election, and the actuarial equivalent of any Survivor's Benefit
payable to his Surviving Spouse pursuant to a Survivor's Lump Sum
Election, shall be paid in five equal annual installments
commencing on his Early Retirement Date, Normal Retirement Date,
Deferred or Postponed Retirement Date, or the first day of the
month coincident with or next following his death, as the case
may be, with interest payable at the three-month U.S. Treasury
bill rate as reported in The Wall Street Journal on the first
business day of each calendar quarter. If benefits under this
Plan are payable to a Participant or Former Participant in a
different form than his retirement benefits under the Basic Plan,
the amount of the offset provided in this Plan for such
Participant's or Former Participant's Basic Plan Benefit shall be
actuarially converted into the form of benefit payable under this
Plan but solely for purposes of calculating the amount of such
offset. The amount of any lump sum payment shall be equal to the
actuarial present value of the benefits payable under this Plan
to a Participant, Former Participant or Surviving Spouse
calculated as of the Early Retirement Date, Normal Retirement
Date, Deferred or Postponed Retirement Date, or date of death of
the Participant or Former Participant, as the case may be, by
utilizing (a) the interest rate determined as of such Retirement
Date or date of death under the regulations of the Pension
Benefit Guaranty Corporation for determining the present value of
a lump sum distribution on plan termination that were in effect
on September 1, 1993, and (b) the other applicable actuarial
assumptions in use as of such Retirement Date or date of death
under the Basic Plan. The amount of any annual installment shall
be calculated by converting the benefits payable under this Plan
to a Participant, Former Participant or Surviving Spouse, as the
case may be, into a lump sum amount in accordance with the
preceding sentence and by dividing such amount by the number of
installments elected or deemed to have been elected by the
Participant or Former Participant. The amount of any lump sum or
annual installment of the benefit of any Participant or Former
Participant that is not paid within fifteen days after the date
of his Retirement, and the amount of any lump sum or annual
installment of any Survivor's Benefit of his Surviving Spouse
that is not paid within fifteen days after the Optional
Survivor's Benefit Payment Date, shall bear interest from such
fifteenth day after the date of Retirement or the Optional
Survivor's Benefit Payment Date, as the case may be, to but
excluding the date of payment of such amount, at the Deferral
Rate, compounded quarterly. Interest on any such amount shall be
paid on the date such amount is paid or, at the election of the
Participant or Former Participant, as the case may be, such
interest shall be paid currently on a semiannual basis (with such
election to be made on or before the last date on which a
Participant's Lump Sum Election or Survivor's Lump Sum Election,
as applicable, may be made). If the benefits under this Plan are
to continue after a Participant's or Former Participant's death
for the benefit of his spouse or a designated beneficiary, then
such Participant or Former Participant shall have the right at
any time to change the recipient of the survivorship benefit
payable under this Plan; provided, however, that any such change,
if made after the applicable deadline set forth in the Basic
Plan, shall not affect the amount of the benefit payable under
this Plan as originally calculated or the term for which such
benefit is payable, also as originally calculated. The Committee
may, in its sole discretion, defer the payment of any lump sum or
initial annual installment to a Participant or a Former
Participant who is a "covered employee" as defined in Section
162(m) of the Internal Revenue Code of 1986, as amended, if such
payment would be subject to such Section's limitation on
deductibility; provided, however, that such payment shall not be
deferred to a date later than the earliest date in the year in
which such payment would not be subject to such limitation; and
further provided that the Company shall, at the time of payment
of any amount so deferred, pay interest thereon from the due date
thereof at the Deferral Rate, compounded quarterly.
4.7 Benefits payable under the Plan shall be regularly
redetermined to reflect any changes in a Participant's, a Former
Participant's, Surviving Spouse's or beneficiary's Basic Plan
Benefit or Other Retirement Income including any payments from
any trust established by the Corporation to meets its obligations
under this Plan. If any Other Retirement Income is payable after
the Participant's or Former Participant's death to a beneficiary
other than the recipient of a survivorship benefit under this
Plan, the calculation of the survivorship benefits payable under
this Plan shall include the Other Retirement Income payable to
such beneficiary. The Committee shall be empowered to make such
additional equitable adjustments to accomplish the purposes of
the foregoing as the Committee in its sole discretion shall
determine.
4.8 Subject to the foregoing limitations, the Benefit of each
Participant and Former Participant under the Plan shall at all
times be 100% vested and nonforfeitable.
SECTION 5
Surviving Spouse Benefit
5.1 Upon the death of a Participant or Former Participant while
employed by the Corporation or an Affiliate who has at least ten
years of employment with the Corporation or an Affiliate, his
Surviving Spouse will be entitled to an immediate Survivors
Benefit under this Plan based upon his Benefit immediately prior
to his death, but without any reduction factor, in accordance
with the following schedule:
Age and service at Time of Death Survivor's Benefit
a. Age 55 or more with 10 or more 50% of the Participant's
years of employment or Former Participant's
Benefit.
b. Ages 50 through 54 with 10 or 50% of the Participant's or
more years of employment, and Former Participant's
age plus years of employment Benefit.
equal 65 multiplied by 80.0%.
c. Below age 50 with 10 or more 50% of the Participant's
years of employment, and age or Former Participant's
plus years of employment Benefit.
equal 65 multiplied by 53.1%.
less any Basic Plan Benefit payable to the Surviving Spouse
whether or not the Participant or Former Participant has elected
or has been deemed to have elected to have such benefit paid to
his Surviving Spouse under the Basic Plan, and less any Other
Retirement Income.
5.2 Upon the death of any other Participant or Former
Participant his Surviving Spouse will be entitled to a survivors
benefit under this Plan based upon his Benefit immediately prior
to his death and computed as if he had retired on the day before
his death and had elected a 50% Qualified Joint and Survivors
Annuity (as defined in the relevant Basic Plan) for the benefit
of his Surviving Spouse. Such survivors benefit under this Plan
shall be reduced by any Basic Plan Benefit payable to the
Surviving Spouse whether or not the Participant or Former
Participant has elected or has been deemed to have elected to
have such benefit paid to his Surviving Spouse under the Basic
Plan, and any other Retirement Income.
5.3 A Surviving Spouse's benefits provided under Section 5.1
will be payable monthly, and will commence on the first day of
the month coincident with or next following the month in which
the Participant or Former Participant dies, and will continue to
the first day of the month in which the Surviving Spouse dies.
5.4 A Surviving Spouse's benefits provided under Section 5.2
will be payable monthly, and will commence on the first day of
the month coincident with or next following (a) the month in
which the Participant or Former Participant would have attained
age 55 or, (b) if later, the month in which the Participant or
Former Participant dies, and will continue to the first day of
the month in which the Surviving Spouse dies.
SECTION 6
Committee
6.1 The Committee shall consist of such persons as may be
appointed by the Chief Executive Officer of the Corporation and
shall be responsible for the administration of the Plan. The
Committee shall have the authority to interpret the Plan, to
adopt, amend, and rescind rules and regulations for the
administration of the Plan, and generally to conduct and
administer the Plan and to make all determinations in connection
with the Plan as may be necessary or advisable and all such
actions of the Committee shall be conclusive and binding upon all
Participants, Former Participants, Beneficiaries, and Surviving
Spouses.
SECTION 7
Miscellaneous
7.1 The Board may, in its sole discretion, terminate, suspend or
amend this Plan at any time or from time to time, in whole or in
part. However, no amendment or suspension of the Plan may
adversely affect a Participant's or Former Participant's vested
Benefit under the Plan, or a retired Participant's or Former
Participant's right or the right of a Beneficiary or a Surviving
Spouse to receive or to continue to receive a benefit in
accordance with the Plan as in effect on the date immediately
preceding the date of such termination, suspension or amendment.
7.2 Nothing contained herein will confer upon any Participant or
Former Participant the right to be retained in the service of the
Corporation or any Affiliate, nor will it interfere with the
right of the Corporation or any Affiliate to discharge or
otherwise deal with Participants or Former Participants without
regard to the existence of the Plan.
7.3 The Plan is unfunded, and the Corporation will make Plan
benefit payments solely on a current disbursement basis,
provided, however, the Corporation reserves the right to
establish one or more trusts to provide alternative sources of
benefit payments under this Plan. The existence of any such
trust or trusts shall not relieve the Corporation of any
liability to make benefit payments under this Plan, but to the
extent any benefit payments are made from any such trust, such
payment shall be in satisfaction of and shall reduce the
Corporation's liabilities under this Plan. Further, in the event
of the Corporation's bankruptcy or insolvency, all benefits
accrued under this Plan shall immediately become due and payable
in a lump sum and all Participants, Former Participants,
Surviving Spouses and Beneficiaries shall be entitled to share in
the Corporation's assets in the same manner and to the same
extent as general unsecured creditors of the Corporation.
7.4 If any dispute arises under the Plan between the Corporation
and a Participant, Former Participant, Surviving Spouse or
Beneficiary (collectively or individually referred to as
"Participant" in this Section 7.4) as to the amount or timing of
any benefit payable under the Plan or as to the persons entitled
thereto, such dispute shall be resolved by binding arbitration
proceedings initiated by either party to the dispute in
accordance with the rules of the American Arbitration Association
and the results of such proceedings shall be conclusive on both
parties and shall not be subject to judicial review. If the
disputed benefits involve the benefits of a Participant or Former
Participant who is no longer employed by the Corporation, the
Corporation shall pay or continue to pay the benefits claimed by
the Participant until the results of the arbitration proceedings
are determined unless such claim is patently without merit;
provided, however, if the results of the arbitration proceedings
are adverse to the Participant, then in such event the recipient
of the benefits shall be obligated to repay the excess benefits
to the Corporation. The Corporation expressly acknowledges that
the amounts payable under the Plan are necessary to the
livelihood of Participants, Former Participants and their family
members and that any refusal or neglect to pay benefits under the
preceding sentence prior to the resolution of any dispute shall
be prima facie evidence of bad faith on its part and will be
conclusive grounds for an arbitration award resulting in an
immediate lump sum payment of the Participant's or Former
Participant's total benefits under the Plan to the person
entitled thereto, unless the arbitrator determines that the claim
for the disputed benefits was patently without merit. The amount
of such lump sum payment shall be equal to the then actuarial
value of such benefits (a) calculated by utilizing the assumed
earnings rate and the other actuarial assumptions then in use
under the Basic Plan for the calculation of lump sum
distributions from such Basic Plan but (b) adjusted for the fact
that a lump sum distribution under this Plan will be immediately
depleted by application of income tax and that the earnings on
the depleted amount will also be subject to income tax, as
earned, whereas a lump sum distribution from the Basic Plan would
be eligible for tax-free rollover to a tax exempt individual
retirement account. Such adjustment for income tax, including
Federal, state and local tax, if applicable, shall be computed on
the basis of an assumed 50% combined tax rate and shall also take
into consideration the income tax payable in respect of the
adjustment amount. In order to assure uniformity of treatment
and clarity in the operation of this provision, the Corporation
agrees that the adjustment amount shall be 100% of the actuarial
value of the benefits payable in a lump sum as calculated on the
assumptions described above. In addition, in the event of any
dispute covered by this Section 7.4 the Corporation agrees to pay
the entire costs of any arbitration proceeding or legal
proceeding brought hereunder, including the fees and expenses of
counsel and pension experts engaged by a Participant and that
such expenses shall be reimbursed promptly upon evidence that
such expenses have been incurred without awaiting the outcome of
the arbitration proceedings; provided, however, such costs and
expenses shall be repaid to the Corporation by the recipient of
same if it is finally determined by the arbitrators that the
position taken by such person was without merit.
7.5 To the maximum extent permitted by law, no benefit under the
Plan shall be assignable or subject in any manner to alienation,
sale, transfer, claims of creditors, pledge, attachment or
encumbrances of any kind.
7.6 The Plan is established under and will be construed
according to the laws of the State of New Jersey.