EXHIBIT 10.4
ALLERGAN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
RESTATED
2005
.
.
.
TABLE OF CONTENTS
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ARTICLE I
INTRODUCTION............................................................. 1
1.1 Plan Name.......................................................... 1
1.2 Plan Purpose....................................................... 1
1.3 Effective Date of 2005 Restated Plan............................... 1
1.4 Amendments to Plan................................................. 1
1.5 Plan Qualification................................................. 2
ARTICLE II
DEFINITIONS.............................................................. 3
2.1 Affiliated Company................................................. 3
2.2 Beneficiary........................................................ 3
2.3 Board of Directors................................................. 3
2.4 Break in Service................................................... 3
2.5 Code............................................................... 3
2.6 Committee.......................................................... 3
2.7 Company............................................................ 3
2.8 Company Stock...................................................... 3
2.9 Compensation....................................................... 3
2.10 Credited Service................................................... 5
2.11 Disability......................................................... 6
2.12 Effective Date..................................................... 6
2.13 Eligible Employee.................................................. 6
2.14 Eligible Retirement Plan........................................... 7
2.15 Eligible Rollover Distribution..................................... 7
2.16 Employee........................................................... 7
2.17 Employment Commencement Date....................................... 8
2.18 ERISA.............................................................. 8
2.19 ESOP Account....................................................... 8
2.20 Exempt Loan........................................................ 8
2.21 Exempt Loan Suspense Subfund....................................... 8
2.22 415 Suspense Account............................................... 9
2.23 Highly Compensated Employee........................................ 9
2.24 Hour of Service.................................................... 10
2.25 Investment Manager................................................. 10
2.26 Leased Employee.................................................... 10
2.27 Leave of Absence................................................... 10
2.28 Normal Retirement Age.............................................. 11
2.29 Participant........................................................ 11
2.30 Period of Severance................................................ 11
2.31 Plan............................................................... 11
2.32 Plan Administrator................................................. 11
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2.33 Plan Year.......................................................... 11
2.34 Reemployment Commencement Date..................................... 12
2.35 Severance.......................................................... 12
2.36 Severance Date..................................................... 12
2.37 Sponsor............................................................ 13
2.38 Trust.............................................................. 13
2.39 Trust Agreement.................................................... 13
2.40 Trustee............................................................ 13
2.41 Valuation Date..................................................... 13
ARTICLE III
ELIGIBILITY AND PARTICIPATION............................................ 14
3.1 Participation...................................................... 14
3.2 Duration of Participation.......................................... 14
3.3 Participation after Reemployment................................... 14
3.4 Participation After Normal Retirement Age.......................... 14
ARTICLE IV
CONTRIBUTIONS AND ALLOCATION TO ACCOUNTS................................. 15
4.1 Contributions to the Trust Fund.................................... 15
4.2 Allocation of Contributions to Trust Fund.......................... 15
4.3 Forfeitures........................................................ 17
4.4 Employee Contributions and Rollovers............................... 17
ARTICLE V
VESTING AND DISTRIBUTIONS................................................ 18
5.1 No Vested Rights Except as Herein Specified........................ 18
5.2 Vesting............................................................ 18
5.3 Severance When Less Than Fully Vested.............................. 18
5.4 Distribution upon Severance........................................ 19
5.5 Distribution upon Death............................................ 19
5.6 Distribution upon Disability....................................... 20
5.7 Withdrawal upon Age 59-1/2......................................... 20
5.8 Designation of Beneficiary......................................... 20
5.9 Form of Distribution............................................... 21
5.10 Distribution Rules................................................. 22
5.11 Put Option for Company Stock Allocated to ESOP Accounts............ 25
5.12 Diversification Rule............................................... 28
5.13 Lapsed Benefits.................................................... 30
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ARTICLE VI
TRUST FUND AND INVESTMENTS............................................... 32
6.1 General............................................................ 32
6.2 Single Trust....................................................... 32
6.3 Investment of the Trust............................................ 32
6.4 Certain Offers for Company Stock................................... 34
6.5 Securities Law Limitation.......................................... 38
6.6 Accounting and Valuations.......................................... 39
6.7 Dividends.......................................................... 40
6.8 Non-Diversion of Trust Fund........................................ 42
6.9 Company, Committee and Trustee Not Responsible for Adequacy of
Trust Fund......................................................... 42
6.10 Distributions...................................................... 42
6.11 Taxes.............................................................. 43
6.12 Trustee Records to be Maintained................................... 43
6.13 Annual Report of Trustee........................................... 43
6.14 Appointment of Investment Manager.................................. 44
ARTICLE VII
OPERATION AND ADMINISTRATION............................................. 45
7.1 Appointment of Committee........................................... 45
7.2 Appointment of Investment Subcommittee............................. 45
7.3 Transaction of Business............................................ 45
7.4 Voting............................................................. 46
7.5 Responsibility of Committees....................................... 46
7.6 Committee Powers................................................... 48
7.7 Additional Powers of Committee..................................... 48
7.8 Investment Subcommittee Powers..................................... 48
7.9 Periodic Review of Funding Policy.................................. 49
7.10 Claims Procedures.................................................. 49
7.11 Appeals Procedures................................................. 50
7.12 Limitation on Liability............................................ 51
7.13 Indemnification and Insurance...................................... 51
7.14 Compensation of Committees and Plan Expenses....................... 51
7.15 Resignation........................................................ 51
7.16 Voting of Company Stock............................................ 52
7.17 Reliance Upon Documents and Opinions............................... 54
ARTICLE VIII
AMENDMENT AND ADOPTION OF PLAN........................................... 55
8.1 Right to Amend Plan................................................ 55
8.2 Adoption of Plan by Affiliated Companies........................... 55
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ARTICLE IX
DISCONTINUANCE OF CONTRIBUTIONS.......................................... 56
ARTICLE X
TERMINATION AND MERGER................................................... 57
10.1 Right to Terminate Plan............................................ 57
10.2 Effect on Trustee and Committee.................................... 57
10.3 Merger Restriction................................................. 57
10.4 Effect of Reorganization, Transfer of Assets or Change in Control.. 57
ARTICLE XI
LIMITATION ON ALLOCATIONS................................................ 61
11.1 General Rule....................................................... 61
11.2 Annual Additions................................................... 61
11.3 Other Defined Contribution Plans................................... 62
11.4 Adjustments for Excess Annual Additions............................ 62
11.5 Compensation....................................................... 62
11.6 Treatment of 415 Suspense Account Upon Termination................. 63
ARTICLE XII
TOP-HEAVY RULES.......................................................... 65
12.1 Applicability...................................................... 65
12.2 Definitions........................................................ 65
12.3 Top-Heavy Status................................................... 66
12.4 Minimum Contributions.............................................. 67
12.5 Minimum Vesting Rules.............................................. 68
12.6 Non-Eligible Employees............................................. 68
ARTICLE XIII
RESTRICTION ON ASSIGNMENT OR OTHER ALIENATION OF PLAN BENEFITS........... 69
13.1 General Restrictions Against Alienation............................ 69
13.2 Qualified Domestic Relations Orders................................ 69
ARTICLE XIV
MISCELLANEOUS PROVISIONS................................................. 72
14.1 No Right of Employment Hereunder................................... 72
14.2 Limitation on Company Liability.................................... 72
14.3 Effect of Article Headings......................................... 72
14.4 Gender............................................................. 72
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14.5 Interpretation..................................................... 72
14.6 Withholding For Taxes.............................................. 72
14.7 California Law Controlling......................................... 72
14.8 Plan and Trust as One Instrument................................... 72
14.9 Invalid Provisions................................................. 73
14.10 Counterparts....................................................... 73
v
ALLERGAN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
ARTICLE I
INTRODUCTION
1.1 Plan Name. This document, made and entered into by Allergan, Inc., a
Delaware corporation ("Allergan"), amends and restates in its entirety the
Allergan, Inc. Employee Stock Ownership Plan (Restated 2003) and shall be known
hereafter as the "Allergan, Inc. Employee Stock Ownership Plan (Restated 2005)."
1.2 Plan Purpose. The purpose of the Allergan, Inc. Employee Stock
Ownership Plan (Restated 2005), hereinafter referred to as the "Plan," is to
offer Participants a systematic program for accumulation of beneficial ownership
interests in Company Stock and to encourage and develop employee interest and
involvement in the Company. Through the beneficial ownership of Company Stock,
enhanced by means of possible debt financed acquisition of Company Stock,
Allergan intends to provide Participants with a meaningful voice in matters
affecting both it and Participants as shareholders. In order to accomplish these
objectives, the Plan is expressly authorized and directed to acquire and hold
Company Stock as its primary investment. All assets acquired under the Plan
shall be administered, distributed, forfeited and otherwise governed by the
provisions of the Plan, which is to be administered by the Committee for the
exclusive benefit of Participants in the Plan and their Beneficiaries.
1.3 Effective Date of 2005 Restated Plan. The Effective Date of this
amended and restated Plan shall be January 1, 2005 unless otherwise specified in
the Plan. The provisions of this Plan document apply generally only to Employees
who have completed at least one (1) Hour of Service for Allergan or any
Affiliated Companies on or after January 1, 2005 and the rights and benefits, if
any, of Employees or Participants whose employment with Allergan or any
Affiliated Companies terminated prior to January 1, 2005 shall be determined in
accordance with the provisions of the Plan then in effect unless otherwise
provided herein and subject to any modification provided herein that may affect
the holding or distribution of Participants' Accounts.
1.4 Amendments to Plan. The Plan has been amended from time to time since
its Original Effective Date of July 26, 1989 to reflect changes in the Plan's
operations and applicable law including, but not limited to, the following:
(a) Effective March 28, 2005, the Plan's mandatory distribution rule
shall apply to Accounts, the vested portions of which, do not exceed
$1,000. The Plan document also incorporates the amendments made under the
First, Second, and Third Amendments to the Plan (Restated 2003).
(b) Effective January 1, 2003, participation in the Plan was limited
to those Employees who were Participants in the Plan as of December 31,
2002. The Plan was also amended as necessary to comply with applicable law
and to incorporate the amendments made under the First and Second
Amendments to the Plan (Restated 2001).
(c) Effective June 29, 2002, in connection with the distribution of
the stock of Advanced Medical Optics, Inc. ("AMO") by Allergan to its
stockholders (i) AMO Employees (as defined in Section 2.16) ceased to be
"Eligible Participants" (as defined in Section 4.2(d)) and shall not be
eligible to receive allocations of Company contributions or forfeitures
pursuant to Section 4.2 and Section 4.3, respectively or any allocations of
unallocated assets pursuant to Section 10.1 upon termination of the Plan,
(ii) the assets and liabilities attributable to the Accounts of "AMO
Employees" shall be transferred to the Advanced Medical Optics, Inc. 401(k)
Plan, a qualified profit sharing plan with a qualified cash or deferred
arrangement, in accordance with Code Section 414(l), Regulation Section
1.414(1)-1, and Section 208 of ERISA, (iii) the AMO stock received with
respect to Company Stock allocated to Participants' ESOP Accounts shall be
held in a separate investment fund established by the Committee pursuant to
Section 6.3(c) and Participants shall have subaccounts under the Plan
corresponding to their interest in such investment fund, and (iv) the AMO
stock received with respect to Company Stock held in the Exempt Loan
Suspense Subfund or Company Stock not yet allocated to Participants' ESOP
Accounts shall be applied or retained as determined by the Committee in
accordance with Section 6.7(b).
1.5 Plan Qualification. The Plan is an employee benefit plan that is
intended to qualify under Code Section 401(a) as a qualified stock bonus plan
and under Code Section 4975(e)(7) as an employee stock ownership plan. The
Plan's last determination letter was issued by the Internal Revenue Service on
March 7, 2003 with respect to the Allergan, Inc. Employee Stock Ownership Plan
(Restated 2003) and its compliance with the changes to the qualification
requirements made by the Uruguay Round Agreements Act (GATT), the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue
Service Restructuring and Reform Act of 1998, and the Community Renewal Tax
Relief Act of 2000. It is intended that the Economic Growth and Tax Relief
Reconciliation Act of 2001 ("EGTRRA") provisions of the Plan are to be regarded
as good faith compliance with the requirements of EGTRRA and are to be construed
in accordance with EGTRRA and guidance issued thereunder.
2
ARTICLE II
DEFINITIONS
2.1. Affiliated Company. "Affiliated Company" shall mean (i) any
corporation, other than the Sponsor, which is included in a controlled group of
corporations (within the meaning of Code Section 414(b)) of which the Sponsor is
a member, (ii) any trade or business, other than the Sponsor, which is under
common control (within the meaning of Code Section 414(c)) with the Sponsor,
(iii) any entity or organization, other than the Sponsor, which is a member of
an affiliated service group (within the meaning of Code Section 414(m)) of which
the Sponsor is a member, and (iv) any entity or organization, other than the
Sponsor, which is affiliated with the Sponsor under Code Section 414(o). An
entity shall be an Affiliated Company pursuant to this Section only during the
period of time in which such entity has the required relationship with the
Sponsor under clauses (i), (ii), (iii) or (iv) of this Section after the
Original Effective Date of the Plan.
2.2. Beneficiary. "Beneficiary" or "Beneficiaries" shall mean the person or
persons last designated by a Participant as set forth in Section 5.8 or, if
there is no designated Beneficiary or surviving Beneficiary, the person or
persons designated pursuant to Section 5.8 to receive the interest of a deceased
Participant in such event.
2.3. Board of Directors. "Board of Directors" shall mean the Board of
Directors of the Sponsor (or its delegate) as it may from time to time be
constituted.
2.4. Break in Service. "Break in Service" shall mean, with respect to an
Employee, each period of 12 consecutive months during a Period of Severance that
commences on the Employee's Severance Date or on any anniversary of such
Severance Date.
2.5. Code. "Code" shall mean the Internal Revenue Code of 1986 and the
regulations thereunder. Reference to a specific Code Section shall be deemed
also to refer to any applicable regulations under that Section, and shall also
include any comparable provisions of future legislation that amend, supplement
or supersede that specific Section.
2.6. Committee. "Committee" shall mean the committee appointed under the
provisions of Section 7.1.
2.7. Company. "Company" shall mean collectively the Sponsor and each
Affiliated Company that adopts the Plan in accordance with Section 8.2.
2.8. Company Stock. "Company Stock" shall mean any class of stock of the
Sponsor which both constitutes "qualifying employer securities" as defined in
Section 407(d)(5) of ERISA and "employer securities" as defined in Code Section
409(1).
2.9. Compensation. "Compensation" shall mean the following:
(a) Compensation shall include amounts paid during a Plan Year to a
Participant by the Company for services rendered, including base earnings,
commissions
3
and similar incentive compensation, cost of living allowances earned within
the United States of America, holiday pay, overtime earnings, pay received
for election board duty, pay received for jury and witness duty, pay
received for military service (annual training), pay received for being
available for work, if required (call-in premium), shift differential and
premium, sickness/accident related pay, vacation pay (other than as
excluded in paragraph (c) below), vacation shift premium, and bonus amounts
paid under the (i) Sales Bonus Program, (ii) Management Bonus Plan or
Executive Bonus Plan, either in cash or in restricted stock, and (iii)
group performance sharing payments, such as the "Partners for Success."
(b) Compensation shall include amounts of salary reduction elected by
a Participant under a Code Section 401(k) cash or deferred arrangement or a
Code Section 125 cafeteria plan.
(c) Compensation shall not include business expense reimbursements;
Company gifts or the value of Company gifts; Company stock related options
and payments; employee referral awards; flexible compensation credits paid
in cash; special overseas payments, allowances and adjustments including,
but not limited to, pay for cost of living adjustments and differentials
paid for service outside of the United States, expatriate reimbursement
payments, and tax equalization payments; forms of imputed income; long-term
disability pay; payment for loss of Company car; Company car allowance;
payments for patents or for writing articles; relocation and moving
expenses; retention and employment incentive payments; severance pay;
long-term incentive awards, bonuses or payments; "Impact Award" payments;
"Employee of the Year" payments; "Awards for Excellence" payments; "Hidden
Gem Award" payments; special group incentive payments and individual
recognition payments which are nonrecurring in nature; tuition
reimbursement; lump sum amounts paid to Employees under the Company's
vacation buy-back policy on or after October 1, 2004; and contributions by
the Company under the Plan or distributions hereunder, any contributions or
distributions pursuant to any other plan sponsored by the Company and
qualified under Code Section 401(a) (other than contributions constituting
salary reduction amounts elected by the Participant under a Code Section
401(k) cash or deferred arrangement), any payments under a health or
welfare plan sponsored by the Company, or premiums paid by the Company
under any insurance plan for the benefit of Employees.
(d) Compensation for any Plan Year shall not include amounts in excess
of $210,000, as adjusted for cost-of-living increases in accordance with
Code Section 401(a)(17)(B) for purposes of determining all benefits
provided under the Plan for any Plan Year. Any cost-of-living adjustments
in effect for a calendar year shall apply to the Plan Year beginning with
or within such calendar year.
(e) Notwithstanding the foregoing, for purposes of applying the
provisions of Articles XI and XII, a Participant's Compensation shall be
determined pursuant to the definition of "Compensation" as set forth in
Section 11.5 or 12.2(i), as the case may be.
4
2.10. Credited Service. "Credited Service" shall mean, with respect to each
Employee, his or her years and months of Credited Service determined in
accordance with the following rules:
(a) In the case of any Employee who was employed by the Company on the
Original Effective Date, for the period prior to such Effective Date such
Employee shall be credited with Credited Service under the Plan equal to
the period (if any) of uninterrupted employment of such Employee with the
Company up to and including the day before the Original Effective Date. For
purposes of this paragraph (a), such a period of pre-Effective Date
employment shall not be deemed to have been interrupted by reason of (i)
any break in or interruption of employment which continued for less than
one year, or (ii) any Leave of Absence granted to such Employee under
applicable Company policies regarding Leaves of Absence.
(b) On and after the Effective Date, an Employee shall receive
Credited Service credit for the elapsed period of time between each
Employment Commencement Date (or Reemployment Commencement Date) of the
Employee and the Severance Date which immediately follows that Employment
Commencement Date (or Reemployment Commencement Date). Solely for the
purpose of determining an Employee's Credited Service under this paragraph
(b), in the case of an Employee who is employed on the Effective Date, that
date shall be deemed to be an Employment Commencement Date of the Employee
(with service credit for periods prior to the Effective Date to be
determined under paragraph (a) above). An Employee who is absent from work
on an authorized Leave of Absence shall be deemed to have incurred a
Severance (if any) in accordance with the rules of Section 2.35.
(c) An Employee shall receive Credited Service credit for periods
between a Severance and his or her subsequent Reemployment Commencement
Date in accordance with the following rules:
(i) If an Employee incurs a Severance by reason of a quit,
discharge or retirement (other than such a Severance occurring during
an approved Leave of Absence, which situation is covered under the
provisions of subparagraph (ii) below), and the Employee is later
reemployed by the Company prior to his or her incurring a Break in
Service, he or she shall receive Credited Service for the period
commencing with his or her Severance Date and ending with his or her
subsequent Reemployment Commencement Date.
(ii) If an Employee is on an approved Leave of Absence and then
incurs a Severance by reason of a quit, discharge or retirement during
the Leave of Absence, or a failure to return to work as scheduled
following such Leave, and such Employee is later reemployed by the
Company within 12 months of the date on which he or she discontinued
active employment and commenced such Leave, he or she shall receive
Credited Service for the period commencing with his or her Severance
Date and ending with his or her subsequent Reemployment
5
Commencement Date. For such purposes an Employee shall be deemed to
have incurred a Severance (if any) in accordance with the rules of
Section 2.35.
(iii) Other than as expressly set forth above in this paragraph
(c), an Employee shall receive no Credited Service with respect to
periods between a Severance and a subsequent Reemployment Commencement
Date.
(d) For all purposes of the Plan, an Employee's total Credited Service
shall be determined by aggregating any separate periods of Credited Service
separated by any Breaks in Service.
(e) An Employee shall be credited with Credited Service with respect
to a period of employment with an Affiliated Company, but only to the
extent that such period of employment would be so credited under the
foregoing rules set forth in this Section had such Employee been employed
during such period by the Company.
(f) Notwithstanding the foregoing, unless the Sponsor shall so provide
by resolution of its Board of Directors, or unless otherwise expressly
stated in the Plan, an Employee shall not receive such Credited Service
credit for any period of employment with an Affiliated Company prior to
such entity becoming an Affiliated Company, except that Employees of
Allergan Optical, Inc., Allergan Humphrey, and Allergan Medical Optics
shall receive Credited Service credit for any period of employment with
such companies prior to the time such companies became Affiliated
Companies.
(g) Notwithstanding any provision of the Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service shall be provided in accordance with Code Section 414(u).
2.11. Disability. "Disability" shall mean any mental or physical condition
which, in the judgment of the Committee, based on such competent medical
evidence as the Committee may require, renders an individual unable to engage in
any substantial gainful activity for the Company for which he or she is
reasonably fitted by education, training, or experience and which condition can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of at least 12 months. The determination by the
Committee, upon opinion of a physician selected by the Committee, as to whether
a Participant has incurred a Disability shall be final and binding on all
persons.
2.12. Effective Date. "Effective Date" of this restated Plan shall mean
January 1, 2005 unless otherwise specified in the Plan. The "Original Effective
Date" of the Plan shall mean July 26, 1989.
2.13. Eligible Employee. "Eligible Employee" shall mean any Employee who
was a Participant in the Plan on December 31, 2002 and who has not incurred a
Severance on or after January 1, 2003.
6
2.14. Eligible Retirement Plan. "Eligible Retirement Plan" shall mean (i)
an individual retirement account or annuity described in Code Section 408(a) or
408(b), (ii) a qualified retirement plan described in Code Section 401(a) or
403(a) that accepts Eligible Rollover Distributions, (iii) an annuity contract
described in Code Section 403(b) that accepts Eligible Rollover Distributions,
and (iv) an eligible plan described in Code Section 457(b) which is maintained
by a state, political subdivision of a state, or any agency or instrumentality
of a state or political subdivision of a state and which agrees to separately
account for amounts transferred into such plan from this Plan. The definition of
Eligible Retirement Plan shall also apply in the case of an Eligible Rollover
Distribution to a surviving spouse or to a spouse or former spouse who is an
Alternate Payee under a Qualified Domestic Relations Order (as defined in
Article XIII).
2.15. Eligible Rollover Distribution. "Eligible Rollover Distribution"
shall mean 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:
(a) 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;
(b) any distribution to the extent such distribution is required under
Code Section 401(a)(9); and
(c) 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).
(d) any other distribution that is reasonably expected to total less
than $200 during the year.
For purposes of this Section, "Distributee" shall mean any Employee or
former Employee receiving a distribution from the Plan. A Distributee also
includes the Employee or former Employee's surviving spouse and the Employee or
former Employee's spouse or former spouse who is the Alternate Payee under a
Qualified Domestic Relations Order (as defined in Article XIII) with regard to
the interest of the spouse or former spouse.
2.16. Employee. "Employee" shall mean, for purposes of the Plan, any
individual who is employed by the Sponsor or an Affiliated Company in any
capacity, any portion of whose income is subject to withholding of income tax
and/or for whom Social Security contributions are made by the Sponsor or an
Affiliated Company; provided, however, that such term shall not include:
(a) Any individual who performs services for the Sponsor or an
Affiliated Company and who is classified or paid as an independent
contractor as determined by the payroll records of the Sponsor or an
Affiliated Company even if a court or administrative
7
agency determines that such individual is a common-law employee and not an
independent contractor;
(b) Any individual who performs services for the Sponsor or an
Affiliated Company pursuant to an agreement between the Sponsor or an
Affiliated Company and any other person including a leasing organization
except to the extent such individual is a Leased Employee; and
(c) Any individual whose employment is transferred from the Sponsor or
an Affiliated Company to Advanced Medical Optics, Inc. ("AMO") in
connection with the distribution of the stock of AMO by the Sponsor to its
stockholders, effective as of the day following such transfer, hereinafter
referred to as an "AMO Employee." An individual is an AMO Employee if
classified or identified as such in the payroll records of the Sponsor or
an Affiliated Company or in the Employee Matters Agreement entered into
between the Sponsor and AMO.
2.17. Employment Commencement Date. "Employment Commencement Date" shall
mean the date on which an Employee is first credited with an Hour of Service for
the Sponsor or an Affiliated Company. An Employee shall not, for the purpose of
determining his or her Employment Commencement Date, be deemed to have commenced
employment with an Affiliated Company prior to the effective date on which the
entity became an Affiliated Company unless the Sponsor expressly determines
otherwise, and except as is expressly provided otherwise in the Plan or in
resolutions of the Board of Directors.
2.18. ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and the regulations thereunder. Reference to a specific ERISA Section
shall be deemed also to refer to any applicable regulations under that Section,
and shall also include any comparable provisions of future legislation that
amend, supplement or supersede that specific Section.
2.19. ESOP Account. "ESOP Account" shall mean, with respect to each
Participant, the account established and maintained for purposes of holding and
accounting for the Participant's allocated share of assets of the Plan,
including any subaccounts established thereunder from time to time (including
his or her Stock Subaccount and Non-Stock Subaccount established pursuant to
Section 6.6).
2.20. Exempt Loan. "Exempt Loan" shall mean any loan to the Plan or Trust
not prohibited by Code Section 4975(c), including a loan which meets the
requirements set forth in Code Section 4975(d)(3) and the regulations
promulgated thereunder, the proceeds of which are used to finance the
acquisition of Company Stock or to refinance such a loan.
2.21. Exempt Loan Suspense Subfund. "Exempt Loan Suspense Subfund" shall
mean the subfund established under Section 4.1 hereof as part of the Trust Fund
to hold Company Stock purchased with the proceeds of an Exempt Loan pending the
allocation of such Company Stock to individual ESOP Accounts.
8
2.22. 415 Suspense Account. "415 Suspense Account" shall mean the account
(if any) established and maintained in accordance with the provisions of Article
XI for the purpose of holding and accounting for allocations of excess Annual
Additions (as defined in Article XI).
2.23. Highly Compensated Employee. "Highly Compensated Employee" shall
mean:
(a) An Employee who performed services for the Employer during the
Plan Year or preceding Plan Year and is a member of one or more of the
following groups:
(i) Employees who at any time during the Plan Year or preceding
Plan Year were Five Percent Owners (as defined in Section 12.2).
(ii) Employees who received Compensation during the preceding
Plan Year from the Employer in excess of $80,000 (as adjusted in such
manner as permitted under Code Section 414(q)(1)).
(b) For the purpose of this Section, the term "Compensation" means
compensation as defined in Code Section 415(c)(3), as set forth in Section
11.5.
(c) The term "Highly Compensated Employee" includes a Former Highly
Compensated Employee. A Former Highly Compensated Employee is any Employee
who was (i) a Highly Compensated Employee when he or she terminated
employment with the Employer or (ii) a Highly Compensated Employee at any
time after attaining age 55. Notwithstanding the foregoing, an Employee who
separated from service prior to 1987 shall be treated as a Former 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 Compensation in excess of $50,000 or was a Five
Percent Owner.
(d) For the purpose of this Section, the term "Employer" shall mean
the Sponsor and any Affiliated Company.
(e) The determination of who is a Highly Compensated Employee,
including the determination of the Compensation that is considered, shall
be made in accordance with Code Section 414(q) and the regulations
thereunder.
2.24. Hour of Service. "Hour of Service" shall mean an hour for which an
Employee is paid or entitled to payment for the performance of duties for the
Sponsor and any Affiliated Company.
2.25. Investment Manager. "Investment Manager" shall mean the one or more
investment managers, if any, appointed pursuant to Section 6.14 and who
constitute investment managers under Section 3(38) of ERISA.
9
2.26. Leased Employee. "Leased Employee" shall mean 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 (1) year, and such services are performed under the primary
direction or control by 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 if Leased Employees do not constitute more than 20 percent of the
recipient's nonhighly compensated workforce and such Leased Employee is covered
by a money purchase pension plan providing (i) a nonintegrated employer
contribution rate of at least ten (10) percent of compensation as defined under
Code Section 415(c)(3); (ii) immediate participation; and (iii) full and
immediate vesting.
2.27. Leave of Absence.
(a) "Leave of Absence" shall mean any personal leave from active
employment (whether with or without pay) duly authorized by the Company
under the Company's standard personnel practices. All persons under similar
circumstances shall be treated alike in the granting of such Leaves of
Absence. Leaves of Absence may be granted by the Company for reasons of
health (including temporary sickness or short term disability) or public
service or for any other reason determined by the Company to be in its best
interests.
(b) In addition to Leaves of Absence as defined in paragraph (a)
above, the term Leave of Absence shall also mean a Maternity or Paternity
Leave, as defined herein, but only to the extent and for the purposes
required under paragraph (c) below. As used herein, "Maternity or Paternity
Leave" shall mean an absence from work for any period (i) by reason of the
pregnancy of the Employee, (ii) by reason of the birth of a child of the
Employee, (iii) by reason of the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or (iv) for
purposes of caring for the child for a period beginning immediately
following the birth or placement referred to in clauses (ii) or (iii)
above.
(c) Subject to the provisions of paragraph (d) below, a Maternity or
Paternity Leave described in paragraph (b) above shall be deemed to
constitute an authorized Leave of Absence for purposes of the Plan only to
the extent consistent with the following rules:
(i) For purposes of determining whether a Break in Service has
occurred, the Severance Date of a Participant who is absent by reason
of a Maternity or Paternity Leave shall not be deemed to occur any
earlier than the second anniversary of the date upon which such
Maternity or Paternity Leave commences.
10
(ii) The Maternity or Paternity Leave shall be treated as a Leave
of Absence solely for purposes of determining whether or not an
Employee has incurred a Break in Service. Accordingly, such a
Maternity or Paternity Leave shall not result in an accrual of
Credited Service for purposes of the vesting provisions of the Plan or
for purposes of determining eligibility to participate in the Plan
(except only in determining whether a Break in Service has occurred).
(iii) A Maternity or Paternity Leave shall not be treated as a
Leave of Absence unless the Employee provides such timely information
as the Committee may reasonably require to establish that the absence
is for the reasons listed in paragraph (b) above and to determine the
number of days for which there was such an absence.
(d) Notwithstanding the limitations provided in paragraph (c) above, a
Maternity or Paternity Leave described in paragraph (b) above shall be
treated as an authorized Leave of Absence, as described in paragraph (a),
for all purposes of the Plan to the extent the period of absence is one
authorized as a Leave of Absence under the Company's standard personnel
practices and thus is covered by the provisions of paragraph (a) above
without reference to the provisions of paragraph (b) above, provided,
however, that the special rule provided under this paragraph (d) shall not
apply if it would result in a Participant who is absent on a Maternity or
Paternity Leave being deemed to have incurred a Break in Service sooner
than under the rules set forth in paragraph (c).
2.28. Normal Retirement Age. "Normal Retirement Age" shall mean a
Participant's sixty-fifth (65th) birthday.
2.29. Participant. "Participant" shall mean any Eligible Employee or former
Eligible Employee who has commenced participation in the Plan pursuant to
Section 3.1 and who retains rights under the Plan.
2.30. Period of Severance. "Period of Severance" shall mean the period of
time commencing on an Employee's Severance Date and ending on the Employee's
subsequent Reemployment Commencement Date, if any.
2.31. Plan. "Plan" shall mean the Allergan, Inc. Employee Stock Ownership
Plan described herein and as amended from time to time.
2.32. Plan Administrator. "Plan Administrator" shall mean the administrator
of the Plan within the meaning of Section 3(16)(A) of ERISA. The Plan
Administrator shall be the Allergan Corporate Benefits Committee whose members
are appointed by the Board of Directors pursuant to the provisions of Section
7.1 to administer the Plan.
2.33. Plan Year. "Plan Year" shall mean the calendar year.
11
2.34. Reemployment Commencement Date. "Reemployment Commencement Date"
shall mean, in the case of an Employee who incurs a Severance and who is
subsequently reemployed by the Sponsor or an Affiliated Company, the first day
following the Severance on which the Employee is credited with an Hour of
Service for the Sponsor or an Affiliated Company with respect to which he or she
is compensated or entitled to compensation by the Sponsor or an Affiliated
Company. An Employee shall not, for the purpose of determining his or her
Reemployment Commencement Date, be deemed to have commenced employment with an
Affiliated Company prior to the effective date on which such entity becomes an
Affiliated Company unless the Sponsor shall expressly determine otherwise, and
except as is expressly provided otherwise in the Plan or in resolutions of the
Board of Directors.
2.35. Severance. "Severance" shall mean the termination of an Employee's
employment with the Sponsor or an Affiliated Company by reason of such
Employee's quit, discharge, Disability, death, retirement, or otherwise. For
purposes of determining whether an Employee has incurred a Severance, the
following rules shall apply:
(a) An Employee shall not be deemed to have incurred a Severance (i)
because of his or her absence from employment with the Sponsor or an
Affiliated Company by reason of any paid vacation or holiday period, or
(ii) by reason of any Leave of Absence, subject to the provisions of
paragraph (b) below.
(b) For purposes of the Plan, an Employee shall be deemed to have
incurred a Severance on the earlier of (i) the date on which he or she
dies, resigns, is discharged, or otherwise terminates his or her employment
with the Sponsor or an Affiliated Company; or (ii) the date on which he or
she is scheduled to return to work after the expiration of an approved
Leave of Absence, if he or she does not in fact return to work on the
scheduled expiration date of such Leave; or (iii) in the case of a Leave of
Absence for longer than one year, the first anniversary of the commencement
of such Leave, provided such Employee does not actually return to work on
or before said first anniversary date. In no event shall an Employee's
Severance be deemed to have occurred before the last day on which such
Employee performs any services for the Sponsor or an Affiliated Company in
the capacity of an Employee with respect to which he or she is compensated
or entitled to compensation by the Sponsor or an Affiliated Company.
(c) Notwithstanding the foregoing, in the case of a Participant who is
absent by reason of a Maternity or Paternity Leave, the provisions of
Section 2.27(c)-(d) shall apply for purposes of determining whether such a
Participant has incurred a Break in Service by reason of such Leave.
2.36. Severance Date. "Severance Date" shall mean, in the case of any
Employee who incurs a Severance, the day on which such Employee is deemed to
have incurred said Severance as determined in accordance with the provisions of
Section 2.35, provided, however, that the special rule set forth under Section
2.27(c)-(d) shall apply with respect to determining whether a Participant on a
Maternity or Paternity Leave has incurred a Break in Service. In the case of any
Employee who incurs a Severance as provided under Section 2.35 and who is
entitled to a subsequent payment of compensation for reasons other than future
services (e.g., as back pay for
12
past services rendered or as payments in the nature of severance pay), the
Severance Date of such Employee shall be as of the effective date of the
Severance event (e.g., the date of his or her death, effective date of a
resignation or discharge, etc.), and the subsequent payment of the
aforementioned type of post-Severance compensation shall not operate to postpone
the timing of the Severance Date for purposes of the Plan.
2.37. Sponsor. "Sponsor" shall mean Allergan, Inc., a Delaware corporation,
and any successor corporation or entity.
2.38. Trust. "Trust" or "Trust Fund" shall mean the trust maintained
pursuant to the Trust Agreement and as described in Section 6.1 hereof, which
shall hold all cash and securities and all other assets of whatsoever nature
deposited with or acquired by the Trustee in its capacity as Trustee hereunder,
together with accumulated net earnings.
2.39. Trust Agreement. "Trust Agreement" shall mean the agreement between
the Trustee and the Sponsor pursuant to which the Trust is maintained.
2.40. Trustee. "Trustee" shall mean the one or more trustees of the Trust
established pursuant to Section 6.1 hereof.
2.41. Valuation Date. "Valuation Date" shall mean the last day of each Plan
Year and any other date which the Committee may designate from time to time.
13
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1. Participation. Each Employee or former Employee who was a Participant
in the Plan as of December 31, 2002 shall continue as a Participant. Any other
Employee shall not be eligible to participate in the Plan.
3.2. Duration of Participation. A Participant shall remain an active
Participant until he or she incurs a Severance, at which time he or she shall
become an inactive Participant until he or she receives a distribution of the
entire vested portion of his or her ESOP Account. Once such a distribution is
made, such Participant shall no longer be considered a Participant in the Plan.
Any Participant who (i) transfers out of employment with the Company but who
remains an Employee of an Affiliated Company that has not adopted the Plan
pursuant to Section 8.2, or (ii) remains an Employee of the Company but is no
longer an Eligible Employee, shall become an inactive Participant.
3.3. Participation after Reemployment. A Participant who incurs a Severance
after he or she is fully vested in his or her ESOP Account and who is
subsequently reemployed prior to receiving a distribution of his or her entire
ESOP Account shall continue as an inactive Participant (but shall not be
reinstated as an Eligible Participant as defined in Section 4.2(d)). A
Participant who incurs a Severance before he or she is fully vested in his or
her ESOP Account and who is subsequently reemployed shall be reinstated as an
inactive Participant (but shall not be reinstated as an Eligible Participant as
defined in Section 4.2(d)) as of his or her Reemployment Commencement Date;
provided, that such Participant has a right to reinstatement of his or her
forfeited ESOP Account upon his or her Reemployment Commencement Date pursuant
to Section 5.3. Any other Participant who incurs a Severance and who is
subsequently reemployed, including a Participant who incurs a Severance after he
or she is fully vested in his or her ESOP Account and who receives a
distribution of his or her entire ESOP Account, shall not be eligible to
participate in the Plan.
3.4. Participation After Normal Retirement Age. An Eligible Employee may
continue as a Participant after reaching his or her Normal Retirement Age in the
same manner as an Eligible Employee who has not reached his or her Normal
Retirement Age.
14
ARTICLE IV
CONTRIBUTIONS AND ALLOCATION TO ACCOUNTS
4.1. Contributions to the Trust Fund. The Company may contribute to the
Trust Fund for each Plan Year an amount to be determined by the Board of
Directors solely in its discretion. Such amount shall be contributed in cash or
Company Stock and paid over to the Trustee for allocation to the Trust Fund not
later than the date prescribed for filing the Sponsor's federal income tax
return (including all extensions thereto) for its fiscal year corresponding to
such Plan Year. Contributions shall first be applied, if necessary, to reinstate
the ESOP Accounts of applicable reemployed Participants who had previously
forfeited their ESOP Accounts pursuant to Section 5.3 of the Plan, but only
after all forfeitures for the Plan Year have been so applied pursuant to Section
4.3. Some or all of the remaining contributions under this Section 4.1 may be
applied to repay any principal and/or interest outstanding on any Exempt Loan or
to pay Plan expenses as provided in Section 7.14. The determination of the
extent to which such contributions shall be used to repay such Exempt Loans or
pay Plan expenses shall be made at the sole discretion of the Committee. Company
Stock acquired by the Trust Fund through an Exempt Loan shall be added to and
maintained in the Exempt Loan Suspense Subfund and shall thereafter be released
from the Exempt Loan Suspense Subfund and allocated to Participants' ESOP
Accounts as provided in Section 4.2. Contributions in excess of amounts used for
other purposes described in this Section 4.1 shall be allocated to the ESOP
Accounts of Participants as provided in Section 4.2.
4.2. Allocation of Contributions to Trust Fund.
(a) As of a date not later than the last day of each Plan Year, an
allocation shall be made to the ESOP Account of the allocable share of each
"Eligible Participant" as defined in paragraph (d) below for such Plan Year
of (i) Company contributions of Company Stock contributed in kind to the
Trust Fund and (ii) Company contributions in other than Company Stock,
which are not used for other purposes described in Section 4.1. Such
allocations shall be made in the same proportion that the Compensation for
the Plan Year for such Eligible Participant bears to the total Compensation
of all Eligible Participants for such Plan Year.
(b) Company Stock acquired for the Trust Fund through an Exempt Loan
shall be released from the Exempt Loan Suspense Subfund as the Exempt Loan
is repaid, in accordance with the provisions of this Section 4.2(b).
(i) For each Plan Year until the Exempt Loan is fully repaid, the
number of shares of Company Stock released from the Exempt Loan
Suspense Subfund shall equal the number of unreleased shares
immediately before such release for the current Plan Year multiplied
by the "Release Fraction." As used herein, the Release Fraction shall
be a fraction, the numerator of which is the amount of principal and
interest paid on the Exempt Loan for such current Plan Year, and the
denominator of which is the sum of the numerator plus the principal
and interest to be paid on such Exempt Loan for all future years
during the duration of the term of such Loan (determined without
reference to any possible
15
extensions or renewals thereof). Notwithstanding the foregoing, in the
event such Loan shall be repaid with the proceeds of a subsequent
Exempt Loan (the "Substitute Loan"), such repayment shall not operate
to release all such Company Stock in the Exempt Loan Suspense Subfund,
but, rather, such release shall be effected pursuant to the foregoing
provisions of this Section 4.2(b) on the basis of payments of
principal and interest on such Substitute Loan.
(ii) If the Committee so determines in its discretion, then in
lieu of applying the provisions of Section 4.2(b)(i) hereof with
respect to such Exempt Loan or Substitute Loan, shares shall be
released from the Exempt Loan Suspense Subfund as the principal amount
of an Exempt Loan is repaid (and without regard to interest payments),
provided the following three conditions are satisfied:
(A) The Exempt Loan must provide for annual payments of
principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for
ten years.
(B) The interest portion of any payment is disregarded only
to the extent it would be treated as interest under standard loan
amortization tables.
(C) If the Exempt Loan is renewed, extended or refinanced,
the sum of the expired duration of the Exempt Loan and the
renewal, extension or new Exempt Loan period must not exceed ten
years.
(iii) It is intended that the provisions of this Section 4.2(b)
shall be applied and construed in a manner consistent with the
requirements and provisions of Treasury Regulation Section
54.4975-7(b)(8), and any successor regulation thereto. All Company
Stock released from the Exempt Loan Suspense Subfund during any Plan
Year shall be allocated among Participants as prescribed by Section
4.2(c) hereof, except to the extent provided in Section 6.7.
(c) Shares of Company Stock released from the Exempt Loan Suspense
Subfund for a Plan Year in accordance with Section 4.2(b) hereof and
Section 6.7(b)(i) shall be held in the Trust Fund on an unallocated basis
until allocated by the Committee as of not later than the last day of that
Plan Year. The allocation of such shares shall be made among the ESOP
Accounts of Eligible Participants (as that term is defined in paragraph (d)
below). The number of shares allocable to each such Eligible Participant's
ESOP Account shall be the number of shares which bears the same ratio to
the total shares released for such Plan Year as the Compensation for the
Plan Year for such Eligible Participant bears to the total Compensation of
all Eligible Participants for such Plan Year.
(d) For purposes of Section 4.2, an "Eligible Participant" shall mean
any Participant who is an Eligible Employee on the last business day of
such Plan Year or who ceased to be an Eligible Employee during such Plan
Year due to death, Disability, or
16
retirement at or after age 55 (as such retirement is determined under the
Allergan, Inc. Pension Plan). Any Eligible Participant who, on or after
January 1, 2003, (i) incurs a Severance and is subsequently reemployed or
(ii) transfers out of employment with the Company to employment with an
Affiliated Company that has not adopted the Plan pursuant to Section 8.2
and is subsequently transferred back to employment with Company, shall not
be an Eligible Participant following his or her Reemployment Commencement
Date or transfer date.
4.3. Forfeitures. Any amount which is forfeited pursuant to Section 5.3 or
5.13 during a Plan Year shall be segregated from other amounts held under the
Plan and shall first be used to reinstate the ESOP Accounts of reemployed
Participants (or Beneficiaries, if applicable) who had previously forfeited such
ESOP Accounts and who have a right to reinstatement of their forfeited ESOP
Accounts pursuant to Section 5.3 or 5.13. Should any forfeitures then remain,
they may next be used to pay Plan expenses as provided under Section 7.14.
Should any forfeitures then remain, they shall be allocated as of the last day
of the Plan Year to the ESOP Accounts of Eligible Participants (as that term is
defined in Section 4.2(d)) based on Compensation in the same manner as
allocations under Section 4.2(a) and (c).
4.4. Employee Contributions and Rollovers. No Employee contributions are
permitted under the Plan. No rollover contributions to the Plan are permitted
whether or not any such contributions would satisfy the applicable requirements
of Code Sections 402, 403, 408 or 409.
17
ARTICLE V
VESTING AND DISTRIBUTIONS
5.1. No Vested Rights Except as Herein Specified. No Employee shall have
any vested right or interest in any assets of the Trust, except as provided in
this Article V. Neither the making of any allocations nor the credit to any ESOP
Account of a Participant in the Trust shall vest in any Participant any right,
title, or interest in or to any assets of the Trust except as provided in this
Article V.
5.2. Vesting.
(a) The interest of a Participant in amounts allocated to his or her
ESOP Account, including cash dividends on shares of Company Stock allocated
to such Participant's ESOP Account, shall vest in accordance with the
following schedule:
Year of Credited Service Vested Percentage
- ------------------------ -----------------
Less than 1 0%
1 but less than 2 20%
2 but less then 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
(b) Notwithstanding the above, a Participant shall become fully vested
in his or her ESOP Account upon the occurrence of the death, Disability, or
attainment of age 62 of such Participant while an Employee, or upon the
occurrence of a Change in Control pursuant to Section 10.4(b).
5.3. Severance When Less Than Fully Vested. Subject to Section 5.10(b), a
Participant who incurs a Severance and who is not or does not become 100% vested
pursuant to Section 5.2, may elect to receive a distribution of the vested
portion of his or her ESOP Account in a single lump sum payment in the form
prescribed by Section 5.9 hereof, as soon as practicable following the
Participant's Severance Date. The non-vested portion of such Participant's ESOP
Account shall be forfeited in accordance with the following rules:
(a) In the event a distribution of the entire vested portion of such
Participant's ESOP Account is made pursuant to this Section 5.3, the
non-vested portion shall be forfeited as of such Participant's distribution
date. A Participant who incurs a Severance when no portion of his or her
ESOP Account is vested shall be deemed to have received a distribution
pursuant to this paragraph (a) as of his or her Severance Date and his or
her ESOP Account shall be forfeited as of the Participant's Severance Date.
If the Participant is rehired by the Company prior to the date such
Participant incurs five consecutive Breaks in Service, the amount forfeited
under this paragraph (a) shall be reinstated to the Participant's ESOP
Account as of the Participant's Reemployment Commencement Date (without
regard to any interest or investment earnings on such amount).
18
(b) In the event a distribution of the entire vested portion of such
Participant's ESOP Account is not made pursuant to this Section 5.3, the
non-vested portion shall be forfeited as of such Participant's Severance
Date. If the Participant is rehired by the Company prior to the date such
Participant incurs five consecutive Breaks in Service, the amount so
forfeited plus an amount equal to the rate of return that the amount
forfeited would have received but for forfeiture pursuant to this paragraph
(b) shall be reinstated to the Participant's ESOP Account as of the
Participant's Reemployment Commencement Date. The Company shall be
obligated to contribute to the Trust Fund any amounts necessary after
application of Section 4.3 to reinstate a Participant's ESOP Account if
reinstatement is required under the provisions of this paragraph.
(c) At any relevant time after Severance pursuant to paragraphs (a)
and (b) above, the Participant's vested portion of his or her ESOP Account
shall be equal to an amount ("X") determined by the following formula:
X = P*(AB + D) - D
For the purposes of applying the formula:
P = the vested percentage at any relevant time determined pursuant to
Section 5.2
AB = the ESOP Account balance at the relevant time
D = the total amount of any distributions from the ESOP Account since
such Severance
5.4. Distribution upon Severance. Subject to Section 5.10(b), a Participant
who incurs a Severance on or after becoming 100% vested pursuant to Section 5.2,
may elect to receive a distribution of his or her ESOP Account, in a single
lump-sum payment in the form prescribed by Section 5.9 hereof, as soon as
practicable following the Participant's Severance Date. Notwithstanding anything
to the contrary, upon receipt of a Qualified Domestic Relations Order on or
after a Participant is 100% vested pursuant to Section 5.2, the amount payable
to an Alternate Payee (as such terms are described in Section 13.2) shall be
distributed to the Alternate Payee as soon as administratively feasible
regardless of whether the Participant incurs a Severance.
5.5. Distribution upon Death.
(a) Upon the death of a Participant while still an Employee, the
Committee shall give such directions as may be necessary to cause a
distribution of his or her ESOP Account to be made in a single lump-sum
payment to the Beneficiary designated by the deceased Participant in the
form prescribed in Section 5.9 hereof, as soon as practicable
19
following the Participant's death, but in no event later than the last day
of the Plan Year following the Plan Year in which the Participant died.
(b) Upon the death of a Participant after he or she ceases to be an
Employee but before he or she receives his or her entire vested interest in
the Trust, the Committee shall give such directions as may be necessary to
cause a distribution, in the manner and time provided in Section 5.5(a)
hereof, of any vested balance remaining in the Participant's ESOP Account
to the Beneficiary designated by the Participant.
(c) The Committee may require the execution and delivery of such
documents, papers and receipts as the Committee may determine necessary or
appropriate in order to establish the fact of death of the deceased
Participant and of the right and identity of any Beneficiary or other
person or persons claiming any benefits under this Section 5.5.
5.6. Distribution upon Disability. Subject to Section 5.10(b), in the event
the Committee shall determine that a Participant has suffered a Disability while
an Employee, the Committee shall proceed to cause a distribution to be made of
such Participant's ESOP Account in a single lump-sum payment in the form
prescribed in Section 5.9 hereof as soon as practicable following the
Committee's determination that the Participant has incurred a Disability.
5.7. Withdrawal upon Age 59-1/2. After attaining age 59-1/2, a Participant
who is still an Employee may, following such reasonable advance notice as may be
required by the Committee, withdraw the entire vested amount credited to his or
her ESOP Account. Such a withdrawal shall be in the same form and using the same
valuation methods as provided for distributions pursuant to Section 5.9.
5.8. Designation of Beneficiary.
(a) At any time, and from time to time, each Participant shall have
the unrestricted right to designate the Beneficiary to receive the portion
of his or her death benefit and to revoke any such designation. Each such
designation shall be evidenced by a written instrument signed by the
Participant and filed with the Committee.
(b) If the Participant is married and designates a Beneficiary other
than his or her spouse, said designation shall not be honored by the
Committee unless accompanied by the written consent of said spouse to said
designation. Such consent (i) must designate a Beneficiary which may not be
changed without the consent of the spouse (or the consent of the spouse
expressly permits designation by the Participant without any further
consent by the spouse), (ii) must acknowledge the effect of the
designation, and (iii) must be witnessed by a Plan representative or a
notary public. No consent of such spouse shall be necessary if it is
established to the satisfaction of a Plan representative that the consent
required under this paragraph (b) cannot or need not be obtained because
(i) there is no spouse, (ii) the spouse cannot be located, or (iii) there
exist such other circumstances which, pursuant to regulations under Code
Section 417, permit a distribution to another Beneficiary. Any consent of a
spouse obtained pursuant to this
20
paragraph (b) or any determination that the consent of the spouse cannot
(or need not) be obtained, shall be effective only with respect to that
spouse. If a Participant becomes married following his or her designation
of a Beneficiary other than his or her spouse, such designation shall be
ineffective unless the spousal consent requirements of this paragraph are
satisfied with respect to such spouse (subject, however, to the provisions
of Article XIII regarding Qualified Domestic Relations Orders).
(c) If the Participant is married and does not designate a
Beneficiary, the Participant's spouse shall be his or her Beneficiary for
purposes of this Section. If the deceased Participant is not married and
shall have failed to designate a Beneficiary, or if the Committee shall be
unable to locate the designated Beneficiary after reasonable efforts have
been made, or if such Beneficiary shall be deceased, distribution of the
Participant's death benefit shall be made by payment of the deceased
Participant's entire interest in the Trust to his or her personal
representative in a single lump-sum payment. In the event the deceased
Participant is not a resident of California at the date of his or her
death, the Committee, in its discretion, may require the establishment of
ancillary administration in California. If the Committee cannot locate a
qualified personal representative of the deceased Participant, or if
administration of the deceased Participant's estate is not otherwise
required, the Committee, in its discretion, may pay the deceased
Participant's interest in the Trust to his or her heirs at law (determined
in accordance with the laws of the State of California as they existed at
the date of the Participant's death).
5.9. Form of Distribution.
(a) All shares of Company Stock or Advanced Medical Optics, Inc.
allocated to a Participant's ESOP Account shall be distributed in the form
of cash, unless the Participant elects under paragraph (b) below to receive
the distribution in the form of Company Stock or Advanced Medical Optics,
Inc. stock, with cash in lieu of fractional shares. To the extent that
Company Stock or Advanced Medical Optics, Inc. stock must be valued to
effect such a distribution, such valuation shall be equal to the fair
market value of such stock determined as of the last Valuation Date prior
to the date of distribution.
(b) A Participant may elect that all shares of Company Stock or
Advanced Medical Optics, Inc. allocated to his or her ESOP Account be
distributed in the form of Company Stock or in the form of Advanced Medical
Optics, Inc. stock, with cash in lieu of fractional shares. Notwithstanding
the foregoing, if applicable corporate charter or bylaw provisions restrict
ownership of substantially all outstanding Company Stock to Employees or to
a plan or trust described in Code Section 401(a), then any distribution of
a Participant's ESOP Account shall only be in cash.
(c) Notwithstanding the foregoing, in the case of an Eligible Rollover
Distribution, a Participant may elect that an Eligible Rollover
Distribution be paid directly by the Trustee to the trustee of an Eligible
Retirement Plan.
21
5.10. Distribution Rules. Notwithstanding the provisions of Sections 5.3,
5.4, 5.5, 5.6, 5.7, and 5.9 of the Plan regarding distributions of Participants'
ESOP Accounts, the following additional rules shall apply to all such
distributions.
(a) In no event shall any benefits under the Plan, including benefits
upon retirement, termination of employment, or Disability, be paid to a
Participant prior to the "Consent Date" (as defined herein) unless the
Participant consents in writing to the payment of such benefits prior to
said Consent Date. As used herein, the term "Consent Date" shall mean the
later of (i) the Participant's 62nd birthday, or (ii) the Participant's
Normal Retirement Age. Notwithstanding the foregoing, the provisions of
this paragraph shall not apply (i) following the Participant's death, or
(ii) to the extent paragraph (b) below applies.
(b) Notwithstanding anything to the contrary in the Plan, if the total
amount of the vested portion of a Participant's ESOP Account does not
exceed $1,000 ($5,000, prior to March 28, 2005), the vested portion of such
Participant's ESOP Account shall be distributed, in a single lump-sum
payment in the form prescribed by Section 5.9 hereof, as soon as
practicable following the Participant's Severance Date.
(c) Unless the Participant elects otherwise pursuant to paragraph (a)
above, distributions of the vested portion of a Participant's ESOP Accounts
shall commence no later than the 60th day after the close of the Plan Year
in which the latest of the following events occurs: (i) the Participant's
Normal Retirement Age; (ii) the tenth anniversary of the year in which the
Participant commenced participation in the Plan; or (iii) the Participant's
Severance.
(d) Minimum Required Distributions during Participant's Lifetime.
Notwithstanding anything to the contrary in the Plan, unless the entire
vested portion of a Participant's Accounts is distributed in a single sum
on or before the Required Beginning Date, distributions shall be made in
accordance with this paragraph (d) as of the first Distribution Calendar
Year and the entire vested portion of a Participant's Accounts shall be
distributed, or begin to be distributed, to the Participant no later than
the Participant's Required Beginning Date as set forth below:
(i) Amount of Minimum Required Distribution for each Distribution
Calendar Year. During the Participant's lifetime, the minimum amount
that shall be distributed for each Distribution Calendar Year is the
lesser of:
(A) the quotient obtained by dividing the Participant's
Account Balance by the distribution period in the Uniform
Lifetime Table set forth in Regulation Section 1.401(a)(9)-9,
using the Participant's age as of the Participant's birthday in
the Distribution Calendar Year; or
(B) if the Participant's sole Designated Beneficiary for the
Distribution Calendar Year is the Participant's spouse, the
quotient
22
obtained by dividing the Participant's Account Balance by the
number in the Joint and Last Survivor Table set forth in
Regulation Section 1.401(a)(9)-9, using the Participant's and
spouse's attained ages as of the Participant's and spouse's
birthdays in the Distribution Calendar Year.
(ii) Lifetime Minimum Required Distributions continue through
Year of Participant's Death. Minimum required distributions shall be
determined under this paragraph (d) beginning with the first
Distribution Calendar Year and up to and including the Distribution
Calendar Year that includes the Participant's date of death.
(iii) For purposes of this paragraph, the following definitions
shall apply:
(A) "Account Balance" shall mean the account balance of a
Participant's Account as of the last valuation date in the
calendar year immediately preceding the Distribution Calendar
Year (valuation calendar year) increased by the amount of any
contributions made and allocated or forfeitures allocated to a
Participant's Accounts as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in
the valuation calendar year after the valuation date. The Account
Balance for the valuation calendar year includes any amounts
rolled over or transferred to the plan either in the valuation
calendar year or in the Distribution Calendar Year if distributed
or transferred in the valuation calendar year.
(B) "Designated Beneficiary" shall mean the individual who
is designated as the Beneficiary under Section 5.8 and is the
Designated Beneficiary under Code Section 401(a)(9) and
Regulation Section 1.401(a)(9)-1, Q&A-4.
(C) "Distribution Calendar Year" shall mean a calendar year
for which a minimum distribution is required. For distributions
beginning before the Participant's death, the first Distribution
Calendar Year is the calendar year immediately preceding the
calendar year which contains the Participant's Required Beginning
Date. The minimum required distribution for the Participant's
first Distribution Calendar Year shall be made on or before the
Participant's Required Beginning Date. The minimum required
distribution for other Distribution Calendar Years, including the
minimum required distribution for the Distribution Calendar Year
in which the Participant's Required Beginning Date occurs, shall
be made on or before December 31 of that Distribution Calendar
Year.
23
(D) "Life expectancy" shall mean as computed by use of the
Single Life Table in Regulation Section 1.401(a)(9)-9.
(E) "Required Beginning Date" shall mean April 1 of the
calendar year immediately following the later of the calendar
year in which the Participant attains age 70-1/2 or incurs a
Severance; provided, however, if such Participant is a Five
Percent Owner (as defined in Code Section 416(i) and applicable
regulations) with respect to the Plan Year ending in the calendar
year in which such Participant attains age 70-1/2, the Required
Beginning Date shall be April 1 of the calendar year immediately
following the year in which such Participant attains age 70-1/2.
(iv) Treasury Regulations Incorporated by Reference. All
distributions required under this subsection shall be determined and
made in accordance with the Treasury Regulations under Code Section
401(a)(9).
(e) Minimum Required Distributions following Participant's Death. If a
Participant dies before the entire vested portion of his or her ESOP
Account is distributed, the entire vested portion of the Participant's ESOP
Account shall be distributed as provided in Section 5.5.
(f) If it is not administratively practical to calculate and commence
payments by the latest date specified in the rules of paragraphs (b), (c),
(d) and (e) above because the amount of the Participant's benefit cannot be
calculated, or because the Committee is unable to locate the Participant
after making reasonable efforts to do so, the payment shall be made as soon
as is administratively possible (but not more than 60 days) after the
Participant can be located and the amount of the distributable benefit can
be ascertained.
(g) If any payee under the Plan is a minor or if the Committee
reasonably believes that any payee is legally incapable of giving a valid
receipt and discharge for any payment due him, the Committee may have such
payment, or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for or supporting such
payee, or, if applicable, to any duly appointed guardian or committee or
other authorized representative of such payee. Any such payment shall be a
payment for the account of such payee and shall, to the extent thereof, be
a complete discharge of any liability under the Plan to such payee.
24
5.11. Put Option for Company Stock Allocated to ESOP Accounts.
(a) Solely in the event that a Participant receives a distribution
consisting in whole or in part of Company Stock that at the time of
distribution thereof is not readily tradable stock within the meaning of
Code Section 409(h) then such distributed Company Stock shall be made
subject to a put option in the hands of a Qualified Holder (as defined
herein below), with such put option to be subject to the following
provisions:
(i) As used herein, the term "Qualified Holder" shall mean the
Participant or Beneficiary receiving the distribution of such Company
Stock, any other party to whom such stock is transferred by gift or by
reason of death, and also any trustee of an Individual Retirement
Account (as defined under Code Section 408) to which all or any
portion of such distributed Company Stock is transferred pursuant to a
tax-free "rollover" transaction satisfying the requirements of Code
Section 402.
(ii) During the sixty (60) day period following any distribution
of such Company Stock, a Qualified Holder shall have the right to
require the Company to purchase all or any portion of said distributed
Company Stock held by said Qualified Holder. A Qualified Holder shall
exercise such right by giving written notice to the Company within the
aforesaid sixty (60) day period of the number of shares of distributed
Company Stock that such Qualified Holder intends to sell to the
Company. The purchase price to be paid for any such Company Stock
shall be its fair market value determined as of the Valuation Date
coincident with or immediately preceding the date of the distribution.
(iii) If a Qualified Holder shall fail to exercise his or her put
option right under subparagraph (ii) above, such option right shall
temporarily lapse upon the expiration of the sixty (60) day period
thereof. As soon as is reasonably practicable following the last day
of the Plan Year in which said sixty (60) day option period expires,
the Company shall notify each such non-electing Qualified Holder who
is then a shareholder of record of the valuation of such Company Stock
as of the most recent Valuation Date. During the sixty (60) day period
following receipt of such valuation notice, any such Qualified Holder
shall have the right to require the Company to purchase all or any
portion of such distributed Company Stock. The purchase price to be
paid therefor shall be based on the valuation of such Company Stock as
of the Valuation Date coinciding with or next preceding the exercise
of the option under this Section 5.11(c). If a Qualified Holder fails
to exercise his or her option right under this subparagraph (iii) with
respect to any portion of such distributed Company Stock, no further
options shall be applicable under the Plan and the Company shall have
no further purchase obligations hereunder.
(iv) In the event that a Qualified Holder shall exercise a put
option under this Section, then the Company shall have the option of
paying the purchase price of the Company Stock which is subject to
such put option (hereafter the "Option Stock") under either of the
following methods:
(A) A lump sum payment of the purchase price within ninety
(90) days after the date upon which such put option is exercised
(the "Exercise Date") or
25
(B) A series of six equal installment payments, with the
first such payment to be made within thirty (30) days after the
Exercise Date and the five remaining payments to be made on the
five anniversary dates of the Exercise Date, so that the full
amount shall be paid as of the fifth anniversary of such Exercise
Date. If the Company elects to pay the purchase price of the
Option Stock under the installment method provided in this clause
(2), then the Company shall, within thirty (30) days after the
Exercise Date, give the Qualified Holder who is exercising the
put option the Company's promissory note for the full unpaid
balance of the option price. Such note shall, at a minimum,
provide adequate security (if required under applicable
regulations), state a rate of interest reasonable under the
circumstances (but at least equal to the imputed compound rate in
effect as of the Exercise Date pursuant to the regulations
promulgated under Code Sections 483 or 1274, whichever shall be
applicable) and provide that the full amount of such note shall
accelerate and become due immediately in the event that the
Company defaults in the payment of a scheduled installment
payment.
(v) The put options under subparagraphs (ii)and (iii) above shall
be effective solely against the Company and shall not obligate the
Plan in any manner; provided, however, with the Company's consent, the
Plan may elect to purchase any Company Stock that otherwise must be
purchased by the Company pursuant to a Qualified Holder's exercise of
any such option.
(vi) If at the time of any distribution of said Company Stock it
is known that any applicable Federal or State law would be violated by
the Company's honoring of such a put option as provided under this
Section, the Company shall designate another entity that will honor
such put option. Such other entity shall be one having a substantial
net worth at the time such loan is made and whose net worth is
reasonably expected to remain substantial.
(vii) In the event that a Qualified Holder is unable to exercise
the put option provided hereunder because the Company (or other entity
bound by such put option) is prohibited from honoring it by reason of
any applicable Federal or State law, then the sixty (60) day option
periods during which such put option is exercisable under
subparagraphs (ii) and (iii) shall not include any such time during
which said put option may not be exercised due to such reason.
(viii) Except as is expressly provided herein above with respect
to any distributed Company Stock that is readily tradeable stock
within the meaning of Code Section 409(h), no Participant shall have
any put option rights with respect to Company Stock distributed under
the Plan, and neither the Company nor the Plan shall have any
obligation whatsoever to purchase any such distributed Company Stock
from any Participant or other Qualified Holder.
(ix) At the time of distribution of Company Stock that is not
readily tradable stock within the meaning of Code Section 409(h), to a
Participant or Beneficiary, the Company shall furnish to such
Participant or Beneficiary the
26
most recent annual certificate of value prepared by the Company with
respect to such Stock. In addition, the Company shall furnish to such
Participant or Beneficiary a copy of each subsequent annual
certificate of value until the put options provided for in this
Section with respect to such distributed Company Stock shall expire.
(b) Notwithstanding any other provisions of the Plan regarding a
Participant's right to exercise a put option, the put option described in
paragraph (a) above shall be subject to the following additional
provisions:
(i) If the distribution constitutes a Total Distribution (as
defined below), in the event that a Qualified Holder exercises a put
option under this Section, then the Company shall have the right to
pay the purchase price of the Option Stock under either of the
following methods:
(A) A lump sum payment of the purchase price within thirty
(30) days after the Exercise Date; or
(B) A series of five substantially equal annual payments
with the first such payment to be made within thirty (30) days
after the Exercise Date. If the Company elects to pay the
purchase price of the Option Stock under the installment method
provided in this clause (2), then the Company shall, within 30
days after the Exercise Date, give the Qualified Holder who is
exercising the put option the Company's promissory note for the
full unpaid balance of the option price. Such note shall, at a
minimum, provide adequate security, state a rate of interest
reasonable under the circumstances (but at least equal to the
imputed compound rate in effect as of the Exercise Date pursuant
to the regulations promulgated under Code Sections 483 or 1274,
whichever shall be applicable) and provide that the full amount
of such note shall accelerate and become due immediately in the
event that the Company defaults in the payment of a scheduled
installment payment.
(ii) If the distribution does not constitute a Total Distribution
(as defined below), in the event that a Qualified Holder exercises a
put option under this Section, then the Company shall pay the purchase
price of the Option Stock in a lump sum within thirty (30) days after
the Exercise Date.
For purposes of this Section, "Total Distribution" shall mean a
distribution to a Participant (or his or her Beneficiary, if applicable)
within one taxable year of such recipient of the entire balance to the
credit of the Participant.
(c) This Section shall be applied to any securities of the Company
held by the Plan to the extent required under Code Section 401(a)(23) and
the regulations issued thereunder and its provisions shall be interpreted
and applied in accordance with all applicable requirements of Code Section
409(h) and the regulations issued thereunder.
27
5.12. Diversification Rule.
(a) For the purpose of Section 5.12 only, the following definitions
shall apply:
(i) "Qualified Participant" shall mean a Participant who is fully
vested in his or her ESOP Account as determined under Section 5.2.
(ii) "Insider" shall mean any Participant who is directly or
indirectly the beneficial owner of more than 10% of any class of any
equity security (other than an exempted security) of the Sponsor (or
the Company) which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, or who is a "director" or an
"officer" of the sponsor or the Company as those terms are interpreted
under the Securities Exchange Act of 1934 for the purpose of
determining persons subject to Section 16 of such Act.
(b) Effective as of September 1, 2002 or as soon as administratively
practicable thereafter, a Participant may elect to diversify his or her
ESOP Account as follows:
(i) Any Participant who is a Qualified Participant may elect to
diversify up to 50% of the Company Stock allocated to his or her ESOP
Account.
(ii) The number of shares of Company Stock that may be
diversified shall be determined by applying the diversification
percentage of 50% to the total number of shares allocated to a
Participant's ESOP Account and reducing such number by the number of
shares of Company Stock previously diversified under this Section.
(c) Notwithstanding the foregoing, effective as of January 1, 2002 and
ending on the effective date of the diversification rules set forth in
subsection (b) above, a Participant may elect to diversify his or her ESOP
Account as follows:
(i) Any Participant who is a Qualified Participant as of December
31, 2001 may elect to diversify up to 50% of the Company Stock
allocated to his or her ESOP Account in accordance with the following
schedule that increases the Diversification Percentage over the
following three Plan Years:
Plan Year Diversification Percentage
--------- --------------------------
2002 up to 25%
2003 up to 40%
2004 and thereafter up to 50%
28
(ii) Any Participant who becomes a Qualified Participant on or
after January 1, 2002 may elect to diversify up to 50% of the Company
Stock allocated to his or her ESOP Account in accordance with the
following schedule that increases the Diversification Percentage over
the following three Plan Years:
Plan Year Diversification Percentage
--------- --------------------------
Plan Year after becoming a Qualified Participant up to 25%
Next succeeding Plan Year up to 40%
Next succeeding Plan Year and thereafter up to 50%
(iii) The number of shares of Company Stock that may be
diversified in any given Plan Year shall be determined by applying the
Diversification Percentage in the above schedules to the total number
of shares allocated to a Participant's ESOP Account as of the
beginning of the Plan Year and reducing such number by the number of
shares of Company Stock previously diversified under this Section.
(d) For Plan Years prior to the 2002 Plan Year, each Qualified
Participant shall be permitted to direct the Plan as to the diversification
of 25 percent of the value of the vested portion of the Participant's ESOP
Account within 90 days after the last day of each Plan Year during the
Participant's Qualified Election Period. For the purpose of this paragraph
(d), the term "Qualified Participant" means a Participant who has attained
age 55 and who has completed at least 10 years of participation in the Plan
and the term "Qualified Election Period" shall mean the six Plan Year
period beginning with the Plan Year in which the Participant first becomes
a Qualified Participant. Within 90 days after the close of the last Plan
Year in the Participant's Qualified Election Period, a Qualified
Participant may direct the Plan as to the diversification of 50 percent of
the value of the vested portion of such ESOP Account. Upon such direction
by a Qualified Participant, the Plan shall transfer to the Allergan, Inc.
Savings and Investment Plan (the "SIP") that portion of the Participant's
ESOP Account that is covered by the election within 90 days after the last
day of the period during which the election can be made which shall be
allocated to a rollover account maintained on behalf of the Qualified
Participant. Under the SIP, the Qualified Participant may invest the amount
so transferred under any of the investment options available under the SIP
or may direct that the amount so transferred be distributed to him or her.
(e) A Qualified Participant who elects to diversify his or her ESOP
Account as provided under this Section shall do so by transferring
diversified amounts to any of the investment funds currently offered and
currently available to Participants as determined by the Committee pursuant
to Section 6.3(c); provided, however, that any allocations among the
investment funds shall be made in 1% increments. Any election to diversify
shall be effective as soon as administratively feasible and subject to
paragraph (f) below. A Qualified Participant shall effect a diversification
election under procedures established by the Committee for this purpose.
(f) For purposes of this Section and consistent with the requirements
of Code Section 401(a)(28) if applicable, a Qualified Participant who is an
Insider may only elect
29
to diversify his or her ESOP Account if within six (6) months before the
Participant's election, he or she has not made an election under the
Allergan, Inc. Savings and Investment Plan or the provision of any company
plan covered by Rule 16b-3 (promulgated pursuant to the Securities Exchange
Act of 1934) then in existence that would result in the transfer into a
Company equity securities fund.
5.13. Lapsed Benefits.
(a) In the event that a Participant's ESOP Account is payable under
the Plan and after reasonable efforts the Participant cannot be located for
the purpose of paying his or her ESOP Account during a period of three
consecutive years, the Participant shall be presumed dead and his or her
ESOP Account shall, upon the expiration of that three year period, be paid
to the Participant's Beneficiary. If the Participant's Beneficiary cannot
be located for the purpose of paying the Participant's ESOP Account for the
following two years, then the Participant's ESOP Account shall, upon
expiration of such two-year period, be forfeited and reallocated to the
ESOP Accounts of other Participants as provided in Section 4.3.
(b) If a Participant dies prior to receiving a distribution of the
entire vested portion of his or her ESOP Account (other than a Participant
presumed to have died as provided above) and if after reasonable efforts
the Beneficiary of the Participant cannot be located for the purpose of
paying the Participant's ESOP Account during a period of five consecutive
years, the benefit shall, upon expiration of such five-year period, be
forfeited and reallocated to the ESOP Accounts of the other Participants as
provided in Section 4.3.
(c) For purposes of this Section, the term "Beneficiary" shall include
any person entitled under Section 5.8 to receive the vested interest of a
deceased Participant or deceased designated Beneficiary. It is the
intention of this Section that during the relevant waiting period (two
years or five years) the vested portion of a Participant's ESOP Account
shall be distributed to a Beneficiary in a lower priority category under
Section 5.8 if no Beneficiary in a higher priority category can be located
by the Committee after reasonable efforts have been made.
(d) Notwithstanding the foregoing rules, if after such a forfeiture
the Participant or a Beneficiary claims the forfeited ESOP Account, the
amount forfeited shall be reinstated (without regard to any interest or
investment earnings on such amount) and paid to the Participant or
Beneficiary as soon as practical following the production of reasonable
proof of the identity of the Participant or Beneficiary and his or her
entitlement to the amounts forfeited (determined pursuant to the Plan's
normal claim procedures under Section 7.10).
30
(e) The Committee shall direct the Trustee with respect to the
procedures to be followed concerning a missing Participant (or
Beneficiary), and the Company shall be obligated to contribute to the Trust
Fund any amounts necessary after the application of Section 4.3 to pay any
reinstated benefit after it has been forfeited pursuant to the provisions
of this Section.
31
ARTICLE VI
TRUST FUND AND INVESTMENTS
6.1. General. All contributions made under the Plan and investments made
and property of any kind or character acquired with any such funds or otherwise
contributed, and all income, profits, and proceeds derived therefrom, shall be
held in Trust and shall be held and administered by the Trustee in accordance
with the provisions of the Plan and Trust Agreement.
6.2. Single Trust. Assets of the Trust shall be held in a separate fund
which shall consist of the Trust Fund. Individual Participant interests in the
Trust Fund shall be reflected in the ESOP Accounts maintained for the
Participants. Notwithstanding the foregoing, the Trust Fund shall be treated as
a single trust for purposes of investment and administration, and nothing
contained herein shall require a physical segregation of assets for any fund or
for any Account maintained under the Plan.
6.3. Investment of the Trust.
(a) Subject to paragraph (c) below and Sections 6.4 and 5.12 hereof,
the Trust Fund shall be invested primarily in Company Stock and neither the
Company nor the Committee nor the Trustee shall have any responsibility or
duty to time any transaction involving Company Stock, in order to
anticipate market conditions or changes in stock value, nor shall any such
person have any responsibility or duty to sell Company Stock held in the
Trust Fund (or otherwise to provide investment management for Company Stock
held in the Trust Fund) in order to maximize return or minimize loss. The
Committee may direct the Trustee to have the Plan enter into one or more
Exempt Loans to finance the acquisition of Company Stock for the Trust
Fund. Company contributions in cash, and other cash received or held by the
Trustee, may be used to acquire shares of Company Stock from the Company,
Company shareholders, from the ESOP Accounts of Participants about to
receive distributions under the Plan, or on the open market.
(b) Notwithstanding anything contained herein to the contrary,
proceeds of an Exempt Loan shall be used, within a reasonable time after
receipt by the Trust, only for the following purposes:
(i) to acquire Company Stock;
(ii) to repay the same Exempt Loan; or
(iii) to repay any previous Exempt Loan.
An Exempt Loan shall be repaid only from amounts loaned to the Trust
and the proceeds of such loans, from Company contributions in cash and
earnings attributable thereto, from any collateral given for the loan
(including, in the case where the Exempt Loan is a refinancing of a prior
Exempt Loan, unallocated Company Stock acquired with the proceeds of the
prior Exempt Loan), and from dividends paid on Company Stock
32
acquired with proceeds of the Exempt Loan. Except as provided in Section
5.11 or as otherwise required by applicable law, no Company Stock acquired
with the proceeds of an Exempt Loan may be subject to a put, call, or other
option or buy-sell or similar arrangement while held by and when
distributed from the Plan.
(c) Notwithstanding paragraph (a) above, the Committee may establish
separate investment funds under the Plan, with each fund representing an
investment alternative available to Participants for the investment of
their ESOP Accounts as provided in paragraph (d) below and Section 5.12.
Each Participant shall have a subaccount under the Plan corresponding to
the Participant's interest which is allocated to each investment fund. Each
such subaccount may be valued separately. The manner in which assets of the
Trust shall be invested in such investment funds, including the
establishment of alternative investment funds, the elimination of any
previously established funds, or the placement of limitations on the
availability of an investment fund to Participants, shall be chosen by the
Committee at its discretion. Amounts invested in any one of the investment
funds shall not share in gains and losses experienced by any other fund.
Notwithstanding the establishment of separate investment funds within the
Trust, the Trust shall at all times constitute a single trust.
(d) A Participant may elect at any time to transfer any cash or other
property, including shares of Advanced Medical Optics, Inc. ("non-Company
Stock assets") or amounts previously diversified under Section 5.12,
accumulated in his or her ESOP Account among any of the investment funds
currently offered and currently available to Participants as determined by
the Committee pursuant to paragraph (c) above; provided, however, the total
amount transferred shall be made in 1% increments of the amount accumulated
in such funds. Any transfer among investment funds shall be effective as
soon as administratively feasible. A Participant shall effect a transfer
election under procedures established by the Committee for this purpose.
(e) Notwithstanding anything in the Plan to the contrary, the
following additional transfer restrictions shall apply to all Participants
who are Insiders as defined in Section 5.12.
(i) Any Insider who transfers amounts invested in Company Stock
and into another fund or withdraws cash in a transaction that results
in the liquidation of Company Stock (pursuant to Sections 5.7 or to
the extent applicable under Section 5.12), may not for a period of six
months following the Participant's election to so transfer funds or
withdraw cash, as the case may be, make an election to transfer
amounts from another fund and invest in Company Stock.
(ii) Any Insider who transfers amounts invested in a non-Company
Stock fund to invest in Company Stock, may not for a period of six
months following the Participant's election to so transfer funds make
an election to (1) sell Company Stock and transfer the proceeds to
another fund, (2) withdraw cash that results in the liquidation of
Company Stock or (3) make a diversification
33
election under Section 5.12 subject to the requirements of Code
Section 401(a)(28), if applicable or (4) utilize the Allergan Inc.
Savings and Investment Plan or the provision of any Company plan
covered by Rule 16b-3 (promulgated pursuant to the Exchange Act) then
in existence that would result in the transfer out of a Company equity
securities fund.
(f) It is intended that to the extent a Participant may diversify or
direct the investment of his or her ESOP Account under the Plan that the
Plan constitute a plan described in Section 404(c) of ERISA and the
regulations thereunder, and neither the Company, Committee, nor any
fiduciary with respect to the Plan who is employed by the Company shall be
liable for investment losses sustained by any Participant or Beneficiary as
a direct and necessary result of the investment instructions given by such
Participant or Beneficiary. Such fiduciaries set forth in the preceding
sentence shall be under no duty to question the investment direction of the
Participant or Beneficiary or to advise a Participant or Beneficiary as to
the manner in which his or her ESOP Account is to be invested. The fact
that an investment option is offered shall not be construed to be a
recommendation of investment.
(g) On June 29, 2002, Allergan spun-off AMO and distributed the stock
of AMO (referred to in the Plan as "AMO Stock") to its shareholders. The
following provisions of the Plan shall apply to AMO Stock as if the term
"AMO Stock" was substituted for the term "Company Stock": Section 6.4
(Certain Offers for Company Stock); Section 6.5 (Securities Law
Limitation); Section 6.7 (Dividends); Section 6.14 (Appointment of
Investment Manager); Section 7.1 (Appointment of Committee); Section 7.2
(Appointment of Investment Subcommittee); Section 7.7 (Additional Powers of
Committee); Section 7.8 (Investment Subcommittee Powers); Section 7.14
(Compensation of Committees and Plan Expenses); and Section 7.16 (Voting of
Company Stock), as applicable.
6.4. Certain Offers for Company Stock. Notwithstanding any other provision
of the Plan to the contrary, in the event an offer shall be received by the
Trustee (including but not limited to a tender offer or exchange offer within
the meaning of the Securities Exchange Act of 1934, as from time to time amended
and in effect) to acquire any or all shares of Company Stock held by the Trust
(an "Offer"), whether or not such Company Stock is allocated to Participants'
ESOP Accounts, the discretion or authority to sell, exchange or transfer any of
such shares of Company Stock shall be determined in accordance with the
following rules:
(a) The Trustee shall have no discretion or authority to sell,
exchange or transfer any Company Stock pursuant to an Offer except to the
extent, and only to the extent that the Trustee is timely directed to do so
in writing (i) with respect to any Company Stock held by the Trustee
subject to such Offer and allocated to any Participant's ESOP Account, by
each Participant to whose ESOP Account any of such Company Stock is
allocated and (ii) with respect to any Company Stock held by the Trustee
subject to such Offer and not allocated to any Participant's ESOP Account,
by each Participant who is an Eligible Employee with respect to a number of
shares (including fractional shares) of such unallocated Company Stock
equal to the total
34
number of shares of such unallocated Company Stock multiplied by a fraction
the numerator of which is the annualized Compensation of such Participant
for the calendar year in which such Offer is made and the denominator of
which is the total annualized Compensation for the calendar year in which
such Offer is made of all such Participants who are Eligible Employees.
(b) To the extent there remains any residual fiduciary responsibility
with respect to Company Stock pursuant to an Offer after application of
paragraph (a) above, the Trustee shall sell, exchange or transfer such
Company Stock as directed by the Committee or as directed by an independent
fiduciary if duly appointed by the Sponsor. To the extent the Committee or
an independent fiduciary is required to exercise any residual fiduciary
responsibility with respect to an Offer, the Committee or independent
fiduciary shall take into account in exercising its fiduciary judgment,
unless it is clearly imprudent to do so, directions timely received from
Participants, as such directions are most indicative of what action is in
the best interests of Participants. Further, the Committee or independent
fiduciary, in addition to taking into consideration any relevant financial
factors bearing on any such decision, shall take into consideration any
relevant non-financial factors, including, but not limited to, the
continuing job security of Participants as employees of the Sponsor or any
Affiliated Company, conditions of employment, employment opportunities and
other similar matters, and the prospect of the Participants and prospective
Participants for future benefits under the Plan (including any subsequent
release and allocation of Company Stock held in the Exempt Loan Suspense
Subfund).
(c) Upon timely receipt of such instructions, the Trustee shall,
subject to the provisions of paragraphs (e) and (o) of this Section, sell,
exchange or transfer pursuant to such Offer, only such shares as to which
such instructions were given. The Committee shall use its best efforts to
communicate or cause to be communicated to each Participant the
consequences of any failure to provide timely instructions to the Trustee.
(d) In the event, under the terms of an Offer or otherwise, any shares
of Company Stock tendered for sale, exchange or transfer pursuant to such
Offer may be withdrawn from such Offer, the Trustee shall follow such
instructions respecting the withdrawal of such shares from such Offer in
the same manner and the same proportion as shall be timely received by the
Trustee from the Participants entitled under this Section to give
instructions as to the sale, exchange or transfer of shares pursuant to
such Offer.
(e) In the event that an Offer for fewer than all of the shares of
Company Stock held by the Trustee in the Trust shall be received by the
Trustee, each Participant shall be entitled to direct the Trustee as to the
acceptance or rejection of such Offer (as set forth herein) with respect to
the largest portion of such Company Stock as may be possible given the
total number or amount of shares of Company Stock the Plan may sell,
exchange or transfer pursuant to the Offer based upon the instructions
received by the Trustee from all other Participants who shall timely
instruct the Trustee pursuant to this paragraph to sell, exchange or
transfer such shares pursuant to such Offer, each on a pro rata basis in
accordance with the maximum number of shares each such Participant would
35
have been permitted to direct under paragraph (a) had the Offer been for
all shares of Company Stock held in the Trust.
(f) In the event an Offer is received by the Trustee and instructions
have been solicited from Participants regarding such Offer, and prior to
termination of such Offer, another Offer is received by the Trustee for the
Company Stock subject to the first Offer, the Trustee shall inform the
Committee of such other Offer and the Committee shall use its best efforts
under the circumstances to solicit instructions from the Participants (i)
with respect to securities tendered for sale, exchange or transfer pursuant
to the first Offer, whether to withdraw such tender, if possible, and, if
withdrawn, whether to tender any Company Stock so withdrawn for sale,
exchange or transfer pursuant to the second Offer and (ii) with respect to
Company Stock not tendered for sale, exchange or transfer pursuant to the
first Offer, whether to tender or not to tender such Company Stock for
sale, exchange or transfer pursuant to the second Offer. The Trustee shall
follow all such instructions received in a timely manner from Participants
in the same manner and in the same proportion as provided in paragraph (a)
of this Section. With respect to any further Offer for any Company Stock
received by the Trustee and subject to any earlier Offer (including
successive Offers from one or more existing offers), the Trustee shall act
in the same manner as described above.
(g) With respect to any Offer received by the Trustee, the Trustee
shall inform the Sponsor of such Offer and the Sponsor shall distribute, at
its expense, copies of all relevant material including but not limited to
material filed with the Securities and Exchange Commission with such Offer
or regarding such Offer, which shall seek confidential written instructions
from each Participant who is entitled to respond to such Offer pursuant to
paragraph (a). The identities of Participants, the amount of Company Stock
allocated to their ESOP Accounts, and the Compensation of each Participant
shall be determined from the list of Participants delivered to the Sponsor
by the Committee which shall take all reasonable steps necessary to provide
the Sponsor with the latest possible information.
(h) The Sponsor shall distribute and/or make available to each
Participant who is entitled to respond to an Offer pursuant to paragraphs
(a), an instruction form to be used by each such Participant who wishes to
instruct the Trustee. The instruction form shall state that (i) if the
Participant fails to return an instruction form to the Trustee by the
indicated deadline, the Company Stock with respect to which he or she is
entitled to give instructions shall not be sold, exchanged or transferred
pursuant to such Offer unless the Trustee is directed otherwise as provided
in paragraph (b) above, (ii) the Participant shall be a named fiduciary (as
described in paragraph (m) below) with respect to all shares of Company
Stock for which he or she is entitled to give instructions, and (iii) the
Company acknowledges and agrees to honor the confidentiality of the
Participant's instructions to the Trustee.
(i) Each Participant may choose to instruct the Trustee in one of the
following two ways: (i) not to sell, exchange or transfer any shares of
Company Stock for which he or she is entitled to give instructions, or (ii)
to sell, exchange or transfer all
36
Company Stock for which he or she is entitled to give instructions. The
Sponsor shall follow up with additional mailings and postings of bulletins,
as reasonable under the time constraints then prevailing, to obtain
instructions from Participants not otherwise responding to such requests
for instructions. Subject to paragraph (e), the Trustee shall then sell,
exchange or transfer shares according to instructions from Participants,
except that shares for which no instructions are received shall not be
sold, exchanged or transferred unless directed otherwise as provided in
paragraph (b) above.
(j) The Sponsor shall furnish former Participants who have received
distributions of Company Stock so recently as to not be shareholders of
record with the information given to Participants pursuant to paragraphs
(g), (h) and (i) of this Section. The Trustee shall then sell, exchange or
transfer shares according to instructions from such former Participants,
except that shares for which no instructions are received shall not be
sold, exchanged or transferred.
(k) Neither the Company, the Committee nor the Trustee shall express
any opinion or give any advice or recommendation to any Participant
concerning the Offer, nor shall they have any authority or responsibility
to do so.
(l) The Trustee shall not reveal or release a Participant's
instructions to the Company, its officers, directors, employees, or
representatives. If some but not all Company Stock held by the Trust is
sold, exchanged, or transferred pursuant to an Offer, the Company, with the
Trustee's cooperation, shall take such action as is necessary to maintain
the confidentiality of Participant's records including, without limitation,
establishment of a security system and procedures which restrict access to
Participant records and retention of an independent agent to maintain such
records. If an independent record keeping agent is retained, such agent
must agree, as a condition of its retention by the Sponsor, not to disclose
the composition of any Participant ESOP Accounts to the Company, its
officers, directors, employees, or representatives. The Company
acknowledges and agrees to honor the confidentiality of Participants'
instructions to the Trustee.
(m) Each Participant shall be a named fiduciary (as that term is
defined in Section 402(a)(2) of ERISA) with respect to Company Stock
allocated to his or her ESOP Account under the Plan and with respect to his
or her pro-rata portion of the unallocated Company Stock for which he or
she is entitled to issue instructions in accordance with paragraph (a) of
this Section solely for purposes of exercising the rights of a shareholder
with respect to an Offer pursuant to this Section 6.4 and voting rights
pursuant to Section 7.16.
(n) To the extent that an Offer results in the sale of Company Stock
in the Trust and allocated to the ESOP Accounts of Participants, the
Committee shall instruct the Trustee as to the investment of the proceeds
of such sale. To the extent that an Offer results in the sale of Company
Stock in the Trust and not allocated to the ESOP Accounts of any
Participant, the proceeds from such sale shall first be applied to repay
the fullest extent possible, all Exempt Loans then outstanding. To effect
such repayment, the
37
Trustee shall seek such consents and approvals from lenders under any
Exempt Loans as may be necessary or convenient to permit the tender of
shares of Company Stock held in the Exempt Loan Suspense Subfund. To the
extent that proceeds from the sale of shares held in the Exempt Loan
Suspense Subfund exceed the outstanding principal and interest of all
Exempt Loans, such excess proceeds shall be allocated to each Eligible
Participant's (as defined in Section 4.2(d)) Non-Stock Subaccount in the
same manner as allocations under Section 4.2(a); provided, however, that
only an Eligible Participant who is employed on the date of the closing of
the sale pursuant to the Offer shall be deemed an Eligible Participant
entitled to an allocation of excess sale proceeds for purposes of this
Section 6.4(n) only. To the extent that less than all of the shares of
Company Stock held in the Exempt Loan Suspense Subfund are tendered in an
Offer and repayment of an Exempt Loan results in a release of shares of
Company Stock from the Exempt Loan Suspense Subfund in excess of those
tendered in such Offer, the excess released shares of Company Stock shall
be allocated to each Eligible Participant's ESOP Account in the same manner
as allocations under Section 4.2(c); provided, however, that only an
Eligible Participant who is employed on the date of the closing of the sale
pursuant to the Offer shall be deemed an Eligible Participant entitled to
an allocation of Company Stock for purposes of this Section 6.4(n) only. To
the extent that allocations to Eligible Participants under this Section
6.4(n) constitute Annual Additions, all such allocations shall be subject
to the limitations set forth in Article XI hereof. Any allocations to which
Eligible Participants would be entitled under this Section 6.4(n) but for
the limitations of Article XI, shall be held in the 415 Suspense Account
and allocated to Eligible Participants in accordance with Article XI.
(o) In the event a court of competent jurisdiction shall issue to the
Plan, the Committee, the Sponsor or the Trustee an opinion or order, which
shall, in the opinion of counsel to the Committee, the Sponsor or the
Trustee, invalidate, in all circumstances or in any particular
circumstances, any provision or provisions of this Section regarding the
determination to be made as to whether or not Company Stock held by the
Trustee shall be sold, exchanged or transferred pursuant to an Offer or
cause any such provision or provisions to conflict with securities laws,
then, upon notice thereof to the Committee, the Sponsor or the Trustee, as
the case may be, such invalid or conflicting provisions of this Section
shall be given no further force or effect. In such circumstances, the
Trustee shall continue to follow instructions received from Participants,
to the extent such instructions have not been invalidated by such order or
opinion. To the extent the Trustee is required by such opinion or order to
exercise any residual fiduciary responsibility with respect to such Offer,
the Sponsor shall appoint an independent fiduciary who shall exercise such
residual fiduciary responsibility as provided in paragraph (b) above and
shall direct the Trustee as to whether or not Company Stock held by the
Trustee shall be sold, exchanged or transferred pursuant to such Offer.
6.5. Securities Law Limitation. Neither the Committee nor the Trustee shall
be required to engage in any transaction, including without limitation,
directing the purchase or sale of Company Stock, which either determines in its
sole discretion might tend to subject itself, its members, the Plan, the
Company, or any Participant or Beneficiary to a liability under federal or state
securities laws.
38
6.6. Accounting and Valuations.
(a) The following special accounting rules shall apply to the Trust
Fund.
(i) Each Participant's ESOP Account shall consist of (1) a
portion comprised of cash and all other assets except for Company
Stock and AMO Stock (the "Non-Stock Subaccount"); (2) a portion
comprised solely of AMO Stock (the "AMO Subaccount"); and (3) a
portion comprised solely of Company Stock (the "Stock Subaccount").
(ii) Gains or losses on Non-Stock Subaccounts shall be credited
in accordance with this Section as if the Non-Stock Subaccounts
collectively constituted a separate pooled investment fund.
(iii) Stock Subaccounts shall be credited with a specific number
of shares of Company Stock rather than an individual interest in a
pool of Company Stock.
(iv) AMO Subaccounts shall be credited with a specific number of
shares of AMO Stock rather than an individual interest in a pool of
AMO Stock.
(b) Non-Stock Subaccounts may be invested in Company Stock from time
to time, and Company Stock so acquired shall be allocated among Stock
Subaccounts in proportion to the amount debited to the corresponding
Non-Stock Subaccounts.
(c) As of each Valuation Date each Participant's Non-Stock Subaccount
shall be credited (debited) with the "allocable share" of the net income
(loss) of the non-Company Stock portion of the Trust Fund valued as of such
Valuation Date in proportion to Non-Stock Subaccount balances. For this
purpose, except as provided in Section 6.7, the net income (loss) of the
Trust Fund shall not include any income with respect to securities in the
Exempt Loan Suspense Subfund acquired with the proceeds of an Exempt Loan.
(d) In making valuations required by the Plan, the Trustee shall value
all assets of the Trust at fair market value. Such fair market value shall
be determined from facts reasonably available to the Trustee. In making
said determination, the Trustee may, but need not, select and rely upon the
advice and opinions of appraisers, brokers, investment counsel, or any
other persons believed by the Trustee to be competent. Any determination of
value so made shall, for all purposes of the Plan, conclusively establish
such value.
(e) If Company Stock is readily tradeable stock (as that term is used
under Code Section 409(h)), valuation of each Participant's Stock
Subaccount shall, at any relevant times, be worth the fair market value on
that date of the shares of Company Stock credited to it. Valuations of any
Company Stock held by the Trust which is not readily tradable stock shall
be performed by an independent appraiser or valuation consultant.
39
(f) The Committee shall establish accounting procedures for the
purpose of making the allocations, valuations and adjustments to
Participants' ESOP Accounts provided for in Article VI hereof. Such
accounting procedures shall include adequate records of the cost basis of
Company Stock allocated to ESOP Accounts and the identity of shares
acquired with the proceeds of an Exempt Loan. From time to time, the
Committee may modify its accounting procedures for the purpose of achieving
equitable and nondiscriminatory allocations among the ESOP Accounts of
Participants in accordance with the provisions of the Plan.
(g) In the event any rights, warrants, or options are issued with
respect to Company Stock held in Stock Subaccounts, the Committee shall
direct the Trustee as to whether such rights, warrants, or options shall be
exercised for such Subaccounts using cash as may be available in
corresponding Non-Stock Subaccounts. Company Stock so acquired shall be
credited to corresponding Stock Subaccounts in proportion to the amount of
cash withdrawn from the corresponding Non-Stock Subaccounts. A Participant
shall have no right to request, direct, or demand that the Trust exercise
on his or her behalf rights to purchase Company Stock.
(h) The Participants and their Beneficiaries shall assume all risks in
connection with any decrease in the value of any assets invested in the
Trust Fund which are allocated to their ESOP Accounts.
(i) Paragraphs (e) and (g) of this Section 6.6 shall apply to AMO
Stock as if the term "AMO Stock" was substituted for the term "Company
Stock" and the term "AMO Subaccount" was substituted for the term "Stock
Subaccount," as applicable.
6.7. Dividends.
(a) As determined by the Committee, dividends on shares of Company
Stock allocated to ESOP Accounts shall be either (i) applied to repay an
Exempt Loan then outstanding; (ii) paid directly to Participants or
Beneficiaries; or (iii) retained in the Trust and treated as net income of
the Trust. Any resulting allocation shall be made according to the
following rules:
(i) If cash dividends are used to repay an Exempt Loan, the
appropriate number of shares of Company Stock shall be released from
the Exempt Loan Suspense Subfund pursuant to Section 4.2(b).
Notwithstanding the foregoing, if the fair market value of the shares
released pursuant to Section 4.2(b) from the application of cash
dividends to repay an Exempt Loan under this Section 6.7(a)(i) is less
than such cash dividends, additional shares shall be released from the
Exempt Loan Suspense Subfund until the fair market value of such
released shares equals the amount of such cash dividends. Such Company
Stock shall be allocated to Participants' Stock Subaccounts in
40
proportion to the number of shares of Company Stock allocated to
Participants' Stock Subaccounts for which such cash dividend was paid.
(ii) If cash dividends are retained in the Trust and are not used
to pay expenses of the Plan, such dividends shall be allocated as of
the date specified by the Committee to Non-Stock Subaccounts in
proportion to the shares of Company Stock held in corresponding Stock
Subaccounts for which such dividends were distributed to the Trust.
(iii) If stock dividends are retained in the Trust and are not
used to pay expenses of the Plan, such dividends shall be credited on
the date specified by the Committee to Stock Subaccounts in proportion
to the shares of Company Stock held in such Subaccounts for which such
dividends were distributed to the Trust.
(iv) If the Committee determines that cash or stock dividends
shall be distributed directly to Participants or Beneficiaries, such
dividends shall be distributed on the date specified by the Committee
in proportion to the shares of Company Stock held in such
Participant's or Beneficiary's Stock Subaccount for which such
dividends were distributed.
(v) If cash dividends are received by the Trust on or after
January 1, 2002, such dividends to the extent received on shares of
Company Stock allocable to a Participant's ESOP Account shall be
reinvested in Company Stock and held in such Participant's or
Beneficiary's Stock Subaccounts, or to the extent such dividends are
vested, shall be distributed to the Participant or Beneficiary not
later than 90 days after the close of the Plan Year in which such
dividends are paid if so elected by the Participant or Beneficiary.
(b) As determined by the Committee, dividends on shares of Company
Stock held in the Exempt Loan Suspense Subfund or on shares of Company
Stock contributed to the Trust Fund but not yet allocated to Participant's
ESOP Accounts shall be either (i) applied to repay an Exempt Loan then
outstanding or (ii) retained in the Trust. Any resulting allocation shall
be made according to the following rules:
(i) If cash or stock dividends are used to repay an Exempt Loan,
the appropriate number of shares of Company Stock shall be released
from the Exempt Loan Suspense Subfund pursuant to Section 4.2(b). Such
Company Stock shall be allocated to Participants Stock Subaccounts
pursuant to Section 4.2(c).
(ii) If cash dividends are not used to repay an Exempt Loan, they
shall be considered income of the Trust and, if not used to pay
expenses of the Plan, shall be allocated to Participants' ESOP
Accounts in proportion to their respective ESOP Account balances.
41
(iii) If stock dividends are not used to repay an Exempt Loan or
used to pay expenses of the Plan, they shall be retained in the Exempt
Loan Suspense Subfund until released from such Subfund pursuant to
Section 4.2(b) and allocated to Participants Stock Subaccounts
pursuant to Section 4.2(c).
6.8. Non-Diversion of Trust Fund. Except as hereinafter provided, all
assets of the Trust shall be held by the Trustee for the exclusive benefit of
Plan Participants and Beneficiaries. At no time shall any part of the Trust be
used for or diverted to purposes other than for the exclusive benefit of the
Participants and Beneficiaries under the Plan except as follows:
(a) In the case of a contribution which is made by a mistake of fact,
that contribution at the Sponsor's written request, shall be returned to
the Company as directed by the Sponsor within one (1) year after it is
made.
(b) All contributions to the Trust are hereby conditioned upon the
Plan satisfying all of the requirements of Code Section 401(a), as
evidenced by the issuance by the Internal Revenue Service of a favorable
determination letter with respect to the Plan. If the Plan does not
qualify, the Plan may be revoked at the Sponsor's written election, and any
or all such contributions with respect to the portion revoked may be
returned to the Company within one year after the date of the Internal
Revenue Service's denial of the qualification of the Plan or a portion
thereof. Upon such a revocation the affairs of the Plan and Trust shall be
terminated and wound up as the Sponsor shall direct.
(c) Contributions to the Trust Fund are conditioned on deductibility
under Code Section 404. To the extent a deduction is disallowed and at the
Sponsor's written request, such contributions shall be returned to the
Company as directed by the Sponsor within one year after the disallowance.
(d) The residue of the 415 Suspense Account that cannot be allocated
to Participants upon a Plan termination shall revert to the Company as
directed by the Sponsor in accordance with the provisions of Section 11.6.
6.9. Company, Committee and Trustee Not Responsible for Adequacy of Trust
Fund. Neither any member of the Committee, any Trustee nor the Company shall be
liable or responsible for the adequacy of the Trust to meet and discharge any or
all payments and liabilities hereunder. All Plan benefits will be paid only from
the Trust assets, and neither any member of the Committee, any Trustee, nor the
Company shall have any duty or liability to furnish the Trust with any funds,
securities or other assets except as expressly provided in the Plan. Except as
required under the Plan or Trust or under Part 4 of Subtitle B, Title I of
ERISA, the Company shall not be responsible for any decision, act, or omission
of a Trustee or a member of the Committee or any Investment Manager (if
applicable), or responsible for the application of any moneys, securities,
investments, or other property paid or delivered to the Trustee.
6.10. Distributions. Money and property of the Trust shall be paid out,
disbursed, or applied by the Trustee for the benefit of Participants and
Beneficiaries under the Plan in
42
accordance with directions received by the Trustee from the Committee. Upon
direction of the Committee, the Trustee may pay money or deliver property from
the Trust for any purpose authorized under the Plan. The Trustee shall be fully
protected in paying out money or delivering property from the Trust from time to
time upon written order of the Committee and shall not be liable for the
application of such money or property by the Committee.
The Trustee shall not be required to determine or to make any investigation
to determine the identity or mailing address of any person entitled to benefits
hereunder and shall have discharged its obligation in that respect when it shall
have sent checks or other property by first-class mail to such persons at their
respective addresses as may be certified to it by the Committee.
6.11. Taxes. If the whole or any part of the Trust, or the proceeds
thereof, shall become liable for the payment of any estate, inheritance, income
or other tax, charge, or assessment which the Trustee shall be required to pay,
the Trustee shall have full power and authority to pay such tax, charge, or
assessment out of any moneys or other property in its hands for the account of
the person whose interests hereunder are so liable, but at least ten (10) days
prior to making any such payment, the Trustee shall mail notice to the Committee
of its intention to make such payment. Prior to making any transfers or
distributions of any of the Trust, the Trustee may require such releases or
other documents from any lawful taxing authority as it shall deem necessary.
6.12. Trustee Records to be Maintained. The Trustee shall keep accurate and
detailed accounts of all investments, receipts, disbursements, and other
transactions hereunder, and all accounts, books, and records relating thereto
shall be open to inspection and audit at all reasonable times by any person
designated by the Company (subject to the provisions of Sections 6.4(1) and
7.13(c)).
6.13. Annual Report of Trustee. Promptly following the close of each Plan
Year (or such other period as may be agreed upon between the Trustee and
Committee), or promptly after receipt of a written request from the Company, the
Trustee shall prepare for the Company a written account which will enable the
Company to satisfy the annual financial reporting requirements of ERISA, and
which will set forth among other things all investments, receipts,
disbursements, and other transactions effected by the Trustee during such Plan
Year or during the period from the close of the last Plan Year to the date of
such request. Such account shall also describe all securities and other
investments purchased and sold during the period to which it refers, the cost of
acquisition or net proceeds of sale, the securities and investments held as of
the date of such account, and the cost of each item thereof as carried on the
books of the Trustee. All accounts so filed shall be open to inspection during
business hours by the Company, the Committee, and by Participants and
Beneficiaries of the Plan (subject to the provisions of Sections 6.4(1) and
7.13(c)).
43
6.14. Appointment of Investment Manager. From time to time the Committee,
in accordance with Section 7.7 hereof, may appoint one or more Investment
Managers who shall have investment management and control over assets of the
Trust not invested or to be invested in Company Stock. The Committee shall
notify the Trustee of such assets of the appointment of the Investment Manager.
In the event more than one Investment Manager is appointed, the Committee shall
determine which assets shall be subject to management and control by each
Investment Manager and shall also determine the proportion in which funds
withdrawn or disbursed shall be charged against the assets subject to each
Investment Manager's management and control. As shall be provided in any
contract between an Investment Manager and the Committee, such Investment
Manager shall hold a revocable proxy with respect to all securities which are
held under the management of such Investment Manager pursuant to such contract
(except for Company Stock), and such Investment Manager shall report the voting
of all securities subject to such proxy on an annual basis to the Committee.
44
ARTICLE VII
OPERATION AND ADMINISTRATION
7.1. Appointment of Committee. There is hereby created a committee (the
"Committee") which shall exercise such powers and have such duties in
administering the Plan as are hereinafter set forth. The Board of Directors
shall determine the number of members of such Committee. The members of the
Committee shall be appointed by the Board of Directors and such Board shall from
time to time fill all vacancies occurring in said Committee. The members of the
Committee shall constitute the Named Fiduciaries of the Plan within the meaning
of Section 402(a)(2) of ERISA; provided that solely for purposes of Section 6.4
hereof, Participants shall be Named Fiduciaries with respect to shares of
Company Stock for which they have the right to sell, transfer, or exchange
pursuant to Section 6.4 and solely for purposes of Section 7.16, Participants
shall be Named Fiduciaries with respect to shares of Company Stock on matters as
to which they are entitled to provide voting directions pursuant to Section
7.16.
7.2. Appointment of Investment Subcommittee. There is hereby created an
investment subcommittee of the Committee (hereinafter referred to as the
"Investment Subcommittee" for purposes of this Article VII) which shall exercise
management and control over the assets of the Trust. The Board of Directors,
acting through its Organization and Compensation Committee, shall determine the
number of members of the Investment Subcommittee. The members of the Investment
Subcommittee shall be appointed by the Board of Directors, acting through its
Organization and Compensation Committee, and shall from time to time appoint
such members to or fill any vacancies in the Investment Subcommittee. The
members of the Investment Subcommittee shall constitute the Named Fiduciaries of
the Plan within the meaning of Section 402(a)(2) of ERISA with respect to the
management and control of the assets of the Trust; provided that solely for
purposes of Section 6.4 hereof, Participants shall be Named Fiduciaries with
respect to shares of Company Stock for which they have the right to sell,
transfer, or exchange pursuant to Section 6.4 and solely for purposes of Section
7.16, Participants shall be Named Fiduciaries with respect to shares of Company
Stock on matters as to which they are entitled to provide voting directions
pursuant to Section 7.16.
7.3. Transaction of Business. The Committee and Investment Subcommittee
shall transact business as provided in paragraphs (a) and (b), respectively:
(a) A majority of the Committee shall constitute a quorum for the
transaction of business. Actions of the Committee may be taken either by
vote at a meeting or in writing without a meeting. All action taken by the
Committee at any meeting shall be by a vote of the majority of those
present at such meeting. All action taken in writing without a meeting
shall be by a vote of the majority of those responding in writing. All
notices, advices, directions and instructions to be transmitted by the
Committee shall be in writing and signed by or in the name of the
Committee. In all its communications with the Trustee, the Committee may,
by either of the majority actions specified above, authorize any one or
more of its members to execute any document or documents on behalf of the
Committee, in which event it shall notify the Trustee in writing of such
action and the name or names of its members so designated and the Trustee
shall
45
thereafter accept and rely upon any documents executed by such member or
members as representing action by the Committee until the Committee shall
file with the Trustee a written revocation of such designation.
(b) A majority of the Investment Subcommittee shall constitute a
quorum for the transaction of business. Actions of the Investment
Subcommittee may be taken either by vote at a meeting or in writing without
a meeting. All action taken by the Investment Subcommittee at any meeting
shall be by a vote of the majority of those present at such meeting. All
action taken in writing without a meeting shall be by a vote of the
majority of those responding in writing. All notices, advices, directions
and instructions to be transmitted by the Investment Subcommittee shall be
in writing and signed by or in the name of the Investment Subcommittee. In
all its communications with the Trustee, the Investment Subcommittee may,
by action specified above, authorize any one or more of its members to
execute any document or documents on behalf of the Investment Subcommittee,
in which event it shall notify the Trustee in writing of such action and
the name or names of its members so designated and the Trustee shall
thereafter accept and rely upon any documents executed by such member or
members as representing action by the Investment Subcommittee until the
Investment Subcommittee shall file with the Trustee a written revocation of
such designation.
7.4. Voting. Any member of the Committee who is also a Participant
hereunder shall not be qualified to act or vote on any matter relating solely to
himself or herself, and upon such matter his or her presence at a meeting shall
not be counted for the purpose of determining a quorum. If, at any time a member
of the Committee is not so qualified to act or vote and the qualified members of
the Committee shall be reduced below two (2), the Board of Directors shall
promptly appoint one or more special members to the Committee so that there
shall be at least one qualified member to act upon the matter in question. Such
special Committee members shall have power to act only upon the matter for which
they were especially appointed and their tenure shall cease as soon as they have
acted upon the matter for which they were especially appointed.
7.5. Responsibility of Committees. The responsibilities of the Committee
and Investment Subcommittee shall be as provided in paragraphs (a) and (b),
respectively:
(a) The authority to manage and control the operation and
administration of the Plan, the general administration of the Plan, the
responsibility for carrying out the Plan, and to the extent provided in
Section 7.7(f), the authority and responsibility to manage and control the
assets of the Trust are hereby delegated by the Board of Directors to and
vested in the Committee except to the extent reserved to the Board of
Directors, the Sponsor, or the Company. Subject to the limitations of the
Plan, the Committee shall, from time to time, establish rules for the
performance of its functions and the administration of the Plan. In the
performance of its functions, the Committee shall not discriminate in favor
of Highly Compensated Employees.
(b) The authority and responsibility to manage and control the assets
of the Trust are hereby delegated by the Board of Directors, acting through
its Organization and Compensation Committee, to and vested in the
Investment Subcommittee except to the
46
extent reserved to the Board of Directors or the Board of Directors, acting
through its Organization and Compensation Committee, or the Sponsor.
Subject to the limitations of the Plan, the Investment Subcommittee shall,
from time to time, establish rules for the performance of its functions.
7.6. Committee Powers. The Committee shall have all discretionary powers
necessary to supervise the administration of the Plan and control its
operations. In addition to any discretionary powers and authority conferred on
the Committee elsewhere in the Plan or by law, the Committee shall have, but not
by way of limitation, the following discretionary powers and authority:
(a) To designate agents to carry out responsibilities relating to the
Plan, other than fiduciary responsibilities as provided in Section 7.7.
(b) To employ such legal, actuarial, medical, accounting, clerical,
and other assistance as it may deem appropriate in carrying out the
provisions of the Plan, including one or more persons to render advice with
regard to any responsibility any Named Fiduciary or any other fiduciary may
have under the Plan.
(c) To establish rules and regulations from time to time for the
conduct of the Committee's business and the administration and effectuation
of the Plan.
(d) To administer, interpret, construe, and apply the Plan and to
decide all questions which may arise or which may be raised under the Plan
by any Employee, Participant, former Participant, Beneficiary or other
person whatsoever, including but not limited to all questions relating to
eligibility to participate in the Plan, the amount of Credited Service of
any Participant, and the amount of benefits to which any Participant or his
or her Beneficiary may be entitled.
(e) To determine the manner in which the assets of the Plan, or any
part thereof, shall be disbursed.
(f) Subject to provisions (a) through (d) of Section 8.1, to make
administrative amendments to the Plan that do not cause a substantial
increase or decrease in benefit accruals to Participants and that do not
cause a substantial increase in the cost of administering the Plan.
(g) To perform or cause to be performed such further acts as it may
deem to be necessary, appropriate or convenient in the efficient
administration of the Plan.
Any action taken in good faith by the Committee in the exercise of
discretionary power conferred upon it by the Plan shall be conclusive and
binding upon the Participants and their Beneficiaries. All discretionary powers
conferred upon the Committee shall be absolute; provided, however, that all such
discretionary power shall be exercised in a uniform and nondiscriminatory
manner.
47
7.7. Additional Powers of Committee. In addition to any discretionary
powers or authority conferred on the Committee elsewhere in the Plan or by law,
such Committee shall have the following discretionary powers and authority:
(a) To appoint one or more Investment Managers to manage and control
any or all of the assets of the Trust not invested or to be invested in
Company Stock.
(b) To designate persons (other than the members of the Committee) to
carry out fiduciary responsibilities, other than any responsibility to
manage or control the assets of the Trust;
(c) To allocate fiduciary responsibilities among the members of the
Committee, other than any responsibility to manage or control the assets of
the Trust;
(d) To cancel any such designation or allocation at any time for any
reason;
(e) To direct the voting of any Company Stock or any other security
held by the Trust subject to Section 7.16 hereof; and
(f) To exercise management and control over the assets of the Trust to
the extent provided in paragraph (a) above and in Section 7.9 (relating to
review by the Committee of the long-run and short-run financial needs of
the Plan and the determination of the funding policy for the Plan).
Any action under this Section 7.7 shall be taken in writing, and no
designation or allocation under Subsection (a), (b) or (c) shall be effective
until accepted in writing by the indicated responsible person.
7.8. Investment Subcommittee Powers. The Investment Subcommittee shall have
all discretionary powers necessary to manage and control the assets of the
Trust, including but not limited to, the following:
(a) To exercise management and control over the assets of the Trust
except to the extent the Committee appoints an Investment Manager pursuant
to Section 7.7(a) and subject to the requirement that all action taken by
the Investment Subcommittee shall be in accordance and consistent with the
funding policy established by the Committee and shall be communicated to
the Committee at periodic intervals.
(b) To employ consulting, actuarial, and other assistance as it may
deem appropriate in carrying out its responsibilities under the Plan,
including one or more persons to render advice with regard to any fiduciary
responsibility the Investment Subcommittee may have under the Plan.
(c) To establish rules and regulations from time to time for the
conduct of the Investment Subcommittee's business.
48
(d) To direct the Trustee, in writing, from time to time, to invest
and reinvest the Trust Fund, or any part thereof, or to purchase, exchange,
or lease any property, real or personal, which the Investment Subcommittee
may designate. This shall include the right to direct the investment of all
or any part of the Trust in any one security or any one type of securities
permitted hereunder.
(e) To direct the purchase and sale of Company Stock (and any other
securities that are "qualifying employer securities" as defined in Code
Section 4975(e)) for the Trust.
Any action taken in good faith by the Investment Subcommittee in the
exercise of discretionary powers conferred upon it by the Plan shall be
conclusive and binding upon the Participants and their Beneficiaries.
7.9. Periodic Review of Funding Policy. Notwithstanding the delegation of
authority and responsibility to manage and control the assets of the Trust to
the Investment Subcommittee, the Committee, at periodic intervals, shall review
the long-run and short-run financial needs of the Plan and shall determine a
funding policy for the Plan consistent with the objectives of the Plan and the
minimum funding standards of ERISA, if applicable. In determining such funding
policy the Committee shall take into account, at a minimum, not only the
long-term investment objectives of the Trust Fund consistent with the prudent
management of the assets thereof, but also the short-run needs of the Plan to
pay benefits. All actions taken by the Committee with respect to the funding
policy of the Plan, including the reasons therefor, shall be fully reflected in
the minutes of the Committee.
7.10. Claims Procedures. If a Participant or his or her Beneficiary
believes that he or she is being denied any rights or benefits under the Plan,
the Participant, Beneficiary, or in either case, his or her authorized
representative (the "Claimant") shall follow the administrative procedures for
filing a claim for benefits as set forth in this Section. A claim for benefits
shall be in writing and shall be reviewed by the Committee or a claims official
designated by the Committee. The Committee or claims official shall review a
claim for benefits in accordance with the procedures established by the
Committee subject to the following administrative procedures set forth in this
Section.
(a) The Committee shall furnish the Claimant with written or
electronic notice of the decision rendered with respect to a claim for
benefits within 90 days following receipt by the Committee (or its
delegate) of the claim unless the Committee determines that special
circumstances require an extension of time for processing the claim. In the
event an extension is necessary, written or electronic notice of the
extension shall be furnished to the Claimant prior to the expiration of the
initial 90 day period. The notice shall indicate the special circumstances
requiring an extension of time and the date by which a final decision is
expected to be rendered. In no event shall the period of the extension
exceed 90 days from the end of the initial 90 day period.
(b) In the case of a denial of the Claimant's claim, the written or
electronic notice of such denial shall set forth (i) the specific reasons
for the denial, (ii) references
49
to the Plan provisions upon which the denial is based, (iii) a description
of any additional information or material necessary for perfection of the
claim (together with an explanation why such material or information is
necessary), (iv) an explanation of the Plan's appeals procedures, and (v) a
statement of the Claimant's right to bring a civil action under Section
502(a) of ERISA if his or her claim is denied upon appeal.
(c) In the case of a denial of a claim, a Claimant who wishes to
appeal the decision shall follow the administrative procedures for an
appeal as set forth in Section 7.11 below.
7.11. Appeals Procedures. A Claimant who wishes to appeal the denial of his
or her claim for benefits shall follow the administrative procedures for an
appeal as set forth in this Section and shall exhaust such administrative
procedures prior to seeking any other form of relief. Appeals shall be reviewed
in accordance with the procedures established by the Committee subject to the
following administrative procedures set forth in this Section.
(a) In order to appeal a decision rendered with respect to his or her
claim for benefits, a Claimant must file an appeal with the Committee in
writing within 60 days following his or her receipt of the notice of denial
with respect to the claim.
(b) The Claimant's appeal may include written comments, documents,
records and other information relating to his or her claim. The Claimant
may review all pertinent documents and, upon request, shall have reasonable
access to or be provided free of charge, copies of all documents, records,
and other information relevant to his or her claim.
(c) The Committee shall provide a full and fair review of the appeal
and shall take into account all claim related comments, documents, records,
and other information submitted by the Claimant without regard to whether
such information was submitted or considered under the initial
determination or review of the initial determination. Where appropriate,
the Committee will overturn a notice of denial if it determines that an
error was made in the interpretation of the controlling plan documents or
if the Committee determines that an existing interpretation of the
controlling plan documents should be changed on a prospective basis. In the
event the Claimant is a subordinate, as determined by the Committee, to an
individual conducting the review, such individual shall recuse himself or
herself from the review of the appeal.
(d) The Committee shall furnish the Claimant with written or
electronic notice of the decision rendered with respect to an appeal within
60 days following receipt by the Committee of the appeal unless the
Committee determines that special circumstances require an extension of
time for processing the appeal. In the event an extension is necessary,
written or electronic notice of the extension shall be furnished to the
Claimant prior to the expiration of the initial 60 day period. The notice
shall indicate the special circumstances requiring an extension of time and
the date by which a final decision is expected to be rendered. In no event
shall the period of the extension exceed 60 days from the end of the
initial 60 day period.
50
(e) In the case of a denial of an appeal, the written or electronic
notice of such denial shall set forth (i) the specific reasons for the
denial, (ii) references to the Plan provisions upon which the denial is
based, (iii) a statement that the Claimant is entitled to receive, upon
request and free of charge, reasonable access to, and copies of, all
documents, records, and other information relating to his or her claim for
benefits, and (iv) a statement of the Claimant's right to bring a civil
action under Section 502(a) of ERISA.
7.12. Limitation on Liability. Each of the fiduciaries under the Plan shall
be solely responsible for its own acts and omissions and no fiduciary shall be
liable for any breach of fiduciary responsibility resulting from the act or
omission of any other fiduciary or person to whom fiduciary responsibilities
have been allocated or delegated pursuant to Section 7.2 or 7.7, except as
provided in Sections 405(a) and 405(c)(2)(A) or (B) of ERISA. Neither the
Committee nor the Investment Subcommittee shall have responsibility over assets
as to which management and control has been delegated to an Investment Manager
appointed pursuant to Section 6.14 hereof or as to which management and control
has been retained by the Trustee.
7.13. Indemnification and Insurance. To the extent permitted by law, the
Company shall indemnify and hold harmless the Committee, the Investment
Subcommittee and each member thereof, the Board of Directors and each member
thereof, and such other persons as the Board of Directors may specify, from the
effects and consequences of his or her acts, omissions, and conduct in his or
her official capacity in connection with the Plan and Trust. To the extent
permitted by law, the Company may also purchase liability insurance for such
persons.
7.14. Compensation of Committees and Plan Expenses. Members of the
Committee and the Investment Subcommittee shall serve as such without
compensation unless the Board of Directors shall otherwise determine, but in no
event shall any member of the Committee or Investment Subcommittee who is an
Employee receive compensation from the Plan for his or her services as a member
of the Committee or the Investment Subcommittee. All members shall be reimbursed
for any necessary expenditures incurred in the discharge of duties as members of
the Committee or the Investment Subcommittee. The compensation or fees, as the
case may be, of all officers, agents, counsel, the Trustee or other persons
retained or employed by the Committee or the Investment Subcommittee shall be
fixed by the Committee, subject to approval by the Board of Directors. The
expenses incurred in the administration and operation of the Plan, including but
not limited to the expenses incurred by the members of the Committee or the
Investment Subcommittee in exercising their duties, shall be paid by the Plan
from the Trust Fund, unless paid by the Company, provided, however, that the
Plan and not the Company shall bear the cost of interest and normal brokerage
charges which are included in the cost of securities purchased by the Trust Fund
(or charged to proceeds in the case of sales). If such expenses are to be paid
by the Plan from the Trust Fund, the Investment Subcommittee may direct the
Trustee to use forfeitures and dividends (and to sell the shares of Company
Stock that represent such forfeitures or dividends) to pay such expenses.
7.15. Resignation. Any member of the Committee or Investment Subcommittee
may resign by giving fifteen (15) days notice to the Board of Directors, and any
member shall resign
51
forthwith upon receipt of the written request of the Board of Directors, whether
or not said member is at that time the only member of the Committee or the
Investment Subcommittee.
7.16. Voting of Company Stock. Notwithstanding any other provision of the
Plan to the contrary, the Trustee shall have no discretion or authority to vote
Company Stock held in the Trust on any matter presented for a vote by the
stockholders of the Company except in accordance with timely directions received
by the Trustee either from the Committee or from Participants, depending on who
has the right to direct the voting of such Company Stock as provided in the
following provisions of this Section 7.16.
(a) All Company Stock held in the Trust Fund shall be voted by the
Trustee as the Committee directs in its absolute discretion, except as
provided in this Section 7.16(a).
(i) If the Sponsor has a registration-type class of securities
(as defined in Code Section 409(e)(4)), then with respect to all
corporate matters, (1) each Participant shall be entitled to direct
the Trustee as to the voting of all Company Stock allocated and
credited to his or her ESOP Account and (2) each Participant who is an
Eligible Employee shall be entitled to direct the Trustee as to the
voting of a portion of all Company Stock not allocated to the ESOP
Accounts of Participants, with such portion equal to the total number
of shares of such unallocated stock multiplied by a fraction the
numerator of which is the number of shares of Company Stock allocated
and credited to his or her ESOP account and the denominator of which
is the total number of shares of Company Stock allocated and credited
to all ESOP Accounts of Participants.
(ii) If the Sponsor does not have a registration-type class of
securities, then only with respect to such matters as the approval or
disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of trade or business, or such similar
transactions as may be prescribed in Code Section 409(e)(4) and the
regulations thereunder, (1) each Participant shall be entitled to
direct the Trustee as to the voting of all Company Stock allocated and
credited to his or her ESOP Account and (2) each Participant who is an
Eligible Employee shall be entitled to direct the Trustee as to the
voting of a portion of all Company Stock not allocated to the ESOP
Accounts of Participants, with such portion determined in the same
manner as under paragraph (a)(i) above.
(b) To the extent there remains any residual fiduciary responsibility
with respect to the voting of Company Stock after application of paragraph
(a) above, the Trustee shall vote such Company Stock as directed by the
Committee or as directed by an independent fiduciary if duly appointed by
the Sponsor. To the extent the Committee or an independent fiduciary is
required to exercise any residual fiduciary responsibility with respect to
the voting of Company Stock, the Committee or independent fiduciary shall
take into account in exercising its fiduciary judgment, unless it is
clearly imprudent to do so, directions timely received from Participants,
as such directions are most indicative of
52
what action is in the best interests of Participants. Further, the
Committee or independent fiduciary, in addition to taking into
consideration any relevant financial factors bearing on any such decision,
shall take into consideration any relevant non-financial factors,
including, but not limited to, the continuing job security of Participants
as employees of the Sponsor or any Affiliated Company, conditions of
employment, employment opportunities and other similar matters, and the
prospect of the Participants and prospective Participants for future
benefits under the Plan.
(c) All Participants entitled to direct such voting shall be notified
by the Sponsor, pursuant to its normal communications with shareholders, of
each occasion for the exercise of such voting rights within a reasonable
time before such rights are to be exercised. Such notification shall
include all information distributed to shareholders either by the Sponsor
or any other party regarding the exercise of such rights. Such Participants
shall be so entitled to direct the voting of fractional shares (or
fractional interests in shares); provided, however, that the Trustee may,
to the extent possible, vote the combined fractional shares (or fractional
interests in shares) so as to reflect the aggregate direction of all
Participants giving directions with respect to fractional shares (or
fractional interests in shares). To the extent that a Participant shall
fail to direct the Trustee as to the exercise of voting rights arising
under Company Stock credited to his or her ESOP Account, such Company Stock
shall not be voted unless the Trustee is directed otherwise as provided in
paragraph (b) above. The Trustee shall maintain confidentiality with
respect to the voting directions of all Participants.
(d) Each Participant shall be a named fiduciary (as that term is
defined in Section 402(a)(2) of ERISA) with respect to Company Stock for
which he or she has the right to direct the voting under the Plan but
solely for the purpose of exercising voting rights pursuant to this Section
7.16 or certain Offers pursuant to Section 6.4.
(e) In the event a court of competent jurisdiction shall issue an
opinion or order to the Plan, the Committee, the Sponsor or the Trustee,
which shall, in the opinion of counsel to the Committee, the Sponsor or the
Trustee, invalidate under ERISA, in all circumstances or in any particular
circumstances, any provision or provisions of this paragraph regarding the
manner in which Company Stock held in the Trust shall be voted or cause any
such provision or provisions to conflict with ERISA, then, upon notice
thereof to the Committee, the Sponsor or the Trustee, as the case may be,
such invalid or conflicting provisions of this Section shall be given no
further force or effect. In such circumstances the Trustee shall continue
to follow instructions received from Participants, to the extent such
instructions have not been invalidated by such order or opinion. To the
extent the Trustee is required by such opinion or order to exercise any
residual fiduciary responsibility with respect to voting, the Sponsor shall
appoint an independent fiduciary who shall exercise such residual fiduciary
responsibility as provided in paragraph (b) above and shall direct the
Trustee as to the manner in which Company Stock held by the Trustee shall
be voted.
53
7.17. Reliance Upon Documents and Opinions. The members of the Committee,
the Investment Subcommittee, the Board of Directors, the Company and any person
delegated to carry out any fiduciary responsibilities under the Plan
(hereinafter a "delegated fiduciary"), shall be entitled to rely upon any
tables, valuations, computations, estimates, certificates and reports furnished
by any consultant, or firm or corporation which employs one or more consultants,
upon any opinions furnished by legal counsel, and upon any reports furnished by
the Trustee or any Investment Manager. The members of the Committee, the
Investment Subcommittee, the Board of Directors, the Company and any delegated
fiduciary shall be fully protected and shall not be liable in any manner
whatsoever for anything done or action taken or suffered in reliance upon any
such consultant, or firm or corporation which employs one or more consultants,
Trustee, Investment Manager, or counsel. Any and all such things done or such
action taken or suffered by the Committee, the Investment Subcommittee, the
Board of Directors, the Company and any delegated fiduciary shall be conclusive
and binding on all Employees, Participants, Beneficiaries, and any other persons
whomsoever, except as otherwise provided by law. The Committee, the Investment
Subcommittee, and any delegated fiduciary may, but are not required to, rely
upon all records of the Company with respect to any matter or thing whatsoever,
and may likewise treat such records as conclusive with respect to all Employees,
Participants, Beneficiaries, and any other persons whomsoever, except as
otherwise provided by law.
54
ARTICLE VIII
AMENDMENT AND ADOPTION OF PLAN
8.1. Right to Amend Plan. The Sponsor, by resolution of the Board of
Directors, shall have the right to amend the Plan and Trust Agreement at any
time and from time to time and in such manner and to such extent as it may deem
advisable, including retroactively, subject to the following provisions:
(a) No amendment shall have the effect of reducing any Participant's
vested interest in the Plan or eliminating an optional form of
distribution.
(b) No amendment shall have the effect of diverting any part of the
assets of the Plan to persons or purposes other than the exclusive benefit
of the Participants or their Beneficiaries.
(c) No amendment shall have the effect of increasing the duties or
responsibilities of a Trustee without its written consent.
(d) No amendment shall result in discrimination in favor of officers,
shareholders, or other highly compensated or key employees.
The Committee shall have the right to amend the Plan, subject to paragraphs
(a) through (d), in accordance with the provisions of Section 7.6(f).
8.2. Adoption of Plan by Affiliated Companies. Subject to approval by the
Board of Directors and consistent with the provisions of ERISA, an Affiliated
Company may adopt the Plan for all or any specified group of its Eligible
Employees by entering into an adoption agreement in the form and substance
prescribed by the Committee. The adoption agreement may include such
modification of the Plan provisions with respect to such Eligible Employees as
the Committee approves after having determined that no prohibited discrimination
or other threat to the qualification of the Plan is likely to result. The Board
of Directors may prospectively revoke or modify an Affiliated Company's
participation in the Plan at any time and for any or no reason, without regard
to the terms of the adoption agreement, or terminate the Plan with respect to
such Affiliated Company's Eligible Employees and Participants. By execution of
an adoption agreement (each of which by this reference shall become part of the
Plan), the Affiliated Company agrees to be bound by all the terms and conditions
of the Plan.
55
ARTICLE IX
DISCONTINUANCE OF CONTRIBUTIONS
In the event the Company decides it is impossible or inadvisable for
business reasons to continue to make contributions under the Plan, it may, by
resolution of the Board of Directors, discontinue contributions to the Plan.
Upon the permanent discontinuance of contributions to the Plan and
notwithstanding any other provisions of the Plan, the rights of Participants
shall become fully vested and nonforfeitable unless replaced by a comparable
plan. The permanent discontinuance of contributions on the part of the Company
shall not terminate the Plan as to the funds and assets then held in the Trust,
or operate to accelerate any payments of distributions to or for the benefit of
Participants or Beneficiaries, and the Trust shall continue to be administered
in accordance with the provisions hereof until the obligations hereunder shall
have been discharged and satisfied. If, at the time of discontinuance, there is
any amount outstanding on an Exempt Loan, any amount remaining in the Exempt
Loan Suspense Subfund shall be disposed of as provided in any applicable loan
agreement.
56
ARTICLE X
TERMINATION AND MERGER
10.1. Right to Terminate Plan. In the event the Board of Directors decides
it is impossible or inadvisable for business reasons to continue the Plan, then
it may, by resolution, terminate the Plan. Upon and after the effective date of
such termination, the Company shall not make any further contributions under the
Plan. Upon the termination or partial termination of the Plan for any reason,
the interest in the Trust of each affected Participant shall automatically
become fully vested unless the Plan is continued after its termination by
conversion of the Plan into a comparable Plan through Plan amendment or through
merger. If, at the time of termination, there is any amount outstanding in an
Exempt Loan, any amount remaining in the Exempt Loan Suspense Subfund shall be
disposed of in a manner that provides for the repayment of amounts outstanding
in any such Exempt Loan. After the satisfaction of all outstanding liabilities
of the Plan to persons other than Participants and Beneficiaries, all
unallocated assets shall be allocated to the ESOP Accounts of Eligible
Participants as defined in Section 4.2(d) to the maximum extent permitted by
law. The Trust Fund may not be fully or finally liquidated until all assets are
allocated to ESOP Accounts; alternatively any unallocated assets may be
transferred to another defined contribution plan maintained by the Sponsor or an
Affiliated Company qualified under Code Section 401 where such assets shall be
allocated among the accounts of Participants herein who are participants in such
transferee plan. In no event, however, shall any part of the Plan revert to or
be recoverable by the Company, or be used for or diverted to purposes other than
for the exclusive benefit of the Participants or their Beneficiaries.
Notwithstanding the foregoing, amounts held in the 415 Suspense Account may
revert to the Company in accordance with Section 11.6.
10.2. Effect on Trustee and Committee. The Trustee and the Committee shall
continue to function as such for such period of time as may be necessary for the
winding up of the Plan and for the making of distributions in the manner
prescribed by the Board of Directors at the time of termination of the Plan.
10.3. Merger Restriction. Notwithstanding any other provision in the Plan,
the Plan shall not in whole or in part merge or consolidate with, or transfer
its assets or liabilities to, any other plan unless each affected Participant in
the Plan would (if such other plan then terminated) receive a benefit
immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan had then
terminated).
10.4. Effect of Reorganization, Transfer of Assets or Change in Control.
(a) In the event of a consolidation or merger of the Company, or in
the event of a sale and/or any other transfer of the operating assets of
the Company, any ultimate successor or successors to the business of the
Company may continue the Plan in full force and effect by adopting the same
by resolution of its board of directors and by executing a proper
supplemental or transfer agreement with the Trustee.
57
(b) In the event of a Change in Control (as herein defined), all
Participants who were Participants on the date of such Change in Control
shall become 100% vested in any amounts allocated to their ESOP Accounts on
the date of such Change in Control and in any amounts allocated to their
ESOP Accounts subsequent to the date of the Change in Control.
Notwithstanding the foregoing, the Board of Directors may, at its
discretion, amend or delete this paragraph (b) in its entirety prior to the
occurrence of any such Change in Control. For the purpose of this paragraph
(b) and prior to January 1, 2000, a "Change in Control" shall be as defined
in the Plan prior to this restatement. On or after January 1, 2000, a
"Change in Control" shall mean the following and shall be deemed to occur
if any of the following events occur:
(i) Any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person"), is or becomes the "beneficial owner," as
defined in Rule 13d-3 under the Exchange Act (a "Beneficial Owner"),
directly or indirectly, of securities of the Sponsor representing (1)
20% or more of the combined voting power of the Sponsor's then
outstanding voting securities, which acquisition is not approved in
advance of the acquisition or within 30 days after the acquisition by
a majority of the Incumbent Board (as hereinafter defined) or (2) 33%
or more of the combined voting power of the Sponsor's then outstanding
voting securities, without regard to whether such acquisition is
approved by the Incumbent Board;
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board of Directors, provided
that any person becoming a director subsequent to the date hereof
whose election, or nomination for election by the Sponsor's
stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the directors of the Sponsor, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall, for the purposes of THE Plan, be considered as though such
person were a member of the Incumbent Board of the Sponsor;
(iii) The consummation of a merger, consolidation or
reorganization involving the Sponsor, other than one which satisfies
both of the following conditions:
(A) a merger, consolidation or reorganization which would
result in the voting securities of the Sponsor outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of another entity) at least 55% of the combined voting
power of the
58
voting securities of the Sponsor or such other entity resulting
from the merger, consolidation or reorganization (the "Surviving
Corporation") outstanding immediately after such merger,
consolidation or reorganization and being held in substantially
the same proportion as the ownership in the Sponsor's voting
securities immediately before such merger, consolidation or
reorganization, and
(B) a merger, consolidation or reorganization in which no
Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Sponsor representing 20% or more
of the combined voting power of the Sponsor's then outstanding
voting securities; or
(iv) The stockholders of the Sponsor approve a plan of complete
liquidation of the Sponsor or an agreement for the sale or other
disposition by the Sponsor of all or substantially all of the
Sponsor's assets.
Notwithstanding the preceding provisions of this paragraph (b), a
Change in Control shall not be deemed to have occurred if the Person
described in the preceding provisions of this paragraph (b) is (i) an
underwriter or underwriting syndicate that has acquired any of the
Sponsor's then outstanding voting securities solely in connection with a
public offering of the Sponsor's securities, (ii) the Sponsor or any
subsidiary of the Sponsor or (iii) an employee stock ownership plan or
other employee benefit plan maintained by the Company or an Affiliated
Company that is qualified under the provisions of the Code. In addition,
notwithstanding the preceding provisions of this paragraph (b), a Change in
Control shall not be deemed to have occurred if the Person described in the
preceding provisions of this paragraph (b) becomes a Beneficial Owner of
more than the permitted amount of outstanding securities as a result of the
acquisition of voting securities by the Company or an Affiliated Company
which, by reducing the number of voting securities outstanding, increases
the proportional number of shares beneficially owned by such Person,
provided, that if a Change in Control would occur but for the operation of
this sentence and such Person becomes the Beneficial Owner of any
additional voting securities (other than through the exercise of options
granted under any stock option plan of the Sponsor or through a stock
dividend or stock split), then a Change in Control shall occur.
(c) In the event of a Change in Control (as defined in Section 10.4(b)
above), the Company shall be required to repay in full, solely from its own
funds and within thirty (30) days following the date of such Change in
Control, all Exempt Loans and Substitute Loans outstanding on the date of
the Change in Control. Notwithstanding any other provision of the Plan to
the contrary, all assets (including Company Stock) and funds that released
from the Exempt Loan Suspense Subfund on account of repayment by the
Company under this Section 10.4(c) shall be allocated, for the Plan Year in
which the Change in Control occurs, in accordance with the formula set
forth herein (consistent
59
with the requirements imposed under Article XI and other requirements of
the Code). Under the formula for allocation set forth herein, assets and
funds that are released shall be allocated to Employees who are Eligible
Participants (as defined in Section 4.2(d)) as of the date of the Change in
Control (or who would have been Eligible Participants but for their death,
Disability or retirement at or after age 55 during the Plan Year) in the
same ratio that each such Participant's Compensation for the Plan Year
through the last pay period ending on or before the date of such Change in
Control bears to the total Compensation of all such Participants for the
Plan Year through their last pay periods ending on or before the date of
such Change in Control.
(d) For purposes of this Section 10.4, a Change of Control shall not
be deemed to have occurred upon the distribution of the stock of Advanced
Medical Optics, Inc. on June 29, 2002 by the Sponsor to its stockholders.
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ARTICLE XI
LIMITATION ON ALLOCATIONS
11.1. General Rule.
(a) The total Annual Additions under the Plan to a Participant's ESOP
Account shall not exceed the lesser of:
(i) Forty Thousand Dollars ($40,000), as adjusted for increases
in the cost-of-living under Code Section 415(d); or
(ii) One Hundred Percent (100%) of the Participant's Compensation
(as defined in Section 11.5), from the Company for the Limitation
Year.
Notwithstanding the foregoing sentence, the compensation limit set forth in
subparagraph (ii) shall not apply to any contribution for medical benefits
after separation from service (within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)) which is otherwise treated as an Annual Addition.
(b) For the purpose of this Article XI, the term "Company" shall mean
the Sponsor and any Affiliated Company (determined by reference to Code
Section 415(h)) whether or not such Affiliated Company has adopted the Plan
pursuant to Section 8.2 and the term "Limitation Year" shall mean the Plan
Year.
11.2. Annual Additions. For purposes of Section 11.1, the term "Annual
Additions" shall mean with respect to a Participant, for any Limitation Year
with respect to the Plan, the sum of the amounts described below:
(a) All amounts contributed or deemed contributed by the Company,
except that the Annual Addition shall exclude the portion of the Company
contribution representing interest on an Exempt Loan, provided that no more
than one-third of the Company's contributions to the Trust Fund deductible
under Code Section 404(a)(9) for a Limitation Year are allocated to Highly
Compensated Employees.
(b) All amounts contributed by the Participant.
(c) Forfeitures allocated to such Participant. For purposes of this
Section 11.2, forfeitures shall not include forfeitures of Company Stock
acquired through the Trust Fund with the proceeds of an Exempt Loan,
provided that no more than one-third of the Company's contributions to the
Trust Fund deductible under Code Section 404(a)(9) for a Limitation Year
are allocated to Highly Compensated Employees.
(d) Any amounts allocated, after March 31, 1984, to an individual
medical account as defined in Code Section 415(l)(2) established under a
pension or annuity plan maintained by the Company.
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(e) Any amounts allocated for such Plan Year which amounts are 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 fund (as
defined in Code Section 419(e)) maintained by the Company.
11.3. Other Defined Contribution Plans. If the Company maintains any other
defined contribution plan, then each Participant's Annual Additions under such
defined contribution plan shall be aggregated with the Participant's Annual
Additions under the Plan for the purposes of applying the limitations of Section
11.1.
11.4. Adjustment for Excess Annual Additions. If as a result of the
allocation of forfeitures, a reasonable error in estimating a Participant's
Compensation, or under other limited facts and circumstances that the
Commissioner of Internal Revenue finds justify the availability of the rules set
forth in Regulation Section 1.415-6(b)(6), the Annual Additions on behalf of any
Participant in a Limitation Year to the Plan and all other defined contribution
plans maintained by the Company exceed the limitations set forth in Section
11.1, then excess Annual Additions shall be eliminated in accordance with the
following rules and in the following order:
(a) Excess Annual Additions shall be eliminated by reducing the
allocation to the Participant's ESOP Account by the amount of the excess
and treating such amount as a forfeiture under Section 5.3 hereof and
reallocating such amount proportionately to the ESOP Accounts of other
Participants receiving allocations for the Limitation Year up to the limits
set forth in Section 11.1.
(b) After each Participant's ESOP Account has been credited under
paragraph (a) with an amount bringing his or her ESOP Account up to his or
her maximum Annual Addition (determined under the provisions of this
Article XI), any remaining excess Annual Addition shall be transferred and
credited to a 415 Suspense Account established for the purpose of this
Section 11.4.
(c) Any amounts held in the 415 Suspense Account shall be treated as
Company contributions and allocated to the ESOP Accounts of Eligible
Participants (as defined in Section 4.2(d)) as of the last day of the next
succeeding Plan Year in accordance with the allocation formula applicable
to Company contributions provided in Section 4.2. The 415 Suspense Account
shall be exhausted before any Company contributions shall be allocated to
the ESOP Accounts of Participants subsequent to the date upon which any
residue excess Annual Addition as described in paragraph (c) is credited to
the 415 Suspense Account.
11.5. Compensation. For the purpose of this Article XIII, Compensation
shall mean a Participant's earned income, wages, salaries, fees for professional
services, and other amounts received (without regard to whether or not an amount
is paid in cash) for personal services actually rendered in the course of
employment with the Company maintaining the Plan and shall be determined as
described below:
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(a) Compensation shall include to the extent that the amounts are
includible in gross income (including, but not limited to, commissions paid
salespeople, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe benefits,
and reimbursements or other expense allowances under a nonaccountable plan
as described in Regulation 1.62-2(c)).
(b) Compensation shall include any elective deferral as defined in
Code Section 402(g)(3), any amount which is contributed or deferred by the
Company at the election of the Employee that is excludable from an
Employee's gross income under Code Sections 125 or 457 and, for Plan Years
beginning on or after January 1, 1998, any elective amount that is
excludable from an Employee's gross income under Code Section 132(f)(4).
(d) Compensation shall not include (i) any employer contributions to a
plan of deferred compensation which are not included in the Employee's
gross income for the taxable year in which contributed, (ii) any
distributions from a plan of deferred compensation, (iii) any amounts
realized from the exercise of a non-qualified stock option or when
restricted stock or property held by the Employee becomes either freely
transferable or is no longer subject to a substantial risk of forfeiture
under Code Section 83 if such option, stock, or property was granted to the
Employee by the Company, (iv) any amounts realized from the sale, exchange,
or other disposition of stock acquired under a qualified stock option, (v)
any contribution for medical benefits (within the meaning of Code Section
419(f)(2) after termination of employment which is otherwise treated as an
Annual Addition, and (vi) any amount otherwise treated as an Annual
Addition under Code Section 415(l)(1).
(d) Notwithstanding anything in the Plan to the contrary, Compensation
shall be determined in accordance with Code Section 415(c)(3) as in effect
for Plan Years beginning prior to January 1, 1998 where required by
applicable law.
11.6. Treatment of 415 Suspense Account Upon Termination. In the event the
Plan shall terminate at a time when all amounts in the 415 Suspense Account have
not been allocated to the ESOP Accounts of the Participants, the 415 Suspense
Account amounts shall be applied as follows:
(a) The amount in the 415 Suspense Account shall first be allocated,
as of the Plan termination date, to Participants in accordance with the
allocation formula applicable to Company contributions provided under
Section 4.2(a).
(b) If, after those allocations have been made, any further residue
funds remain in the 415 Suspense Account, the residue may revert to the
Company in accordance with applicable provisions of the Code, ERISA, and
the regulations thereunder.
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(c) Notwithstanding paragraphs (a) and (b) above, in the event that
termination of the plan occurs after a Change in Control, all amounts in
the 415 Suspense Account shall be allocated to Participants only in
accordance with Section 10.4 hereof, and no part of the 415 Suspense
Account shall revert to or be recoverable by the Company, or be used for or
diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries.
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ARTICLE XII
TOP-HEAVY RULES
12.1. Applicability. Notwithstanding any provision in the Plan to the
contrary, and subject to the limitations set forth in Section 12.6, the
requirements of Sections 12.4 and 12.5 shall apply under the Plan in the case of
any Plan Year in which the Plan is determined to be a Top-Heavy Plan under the
rules of Section 12.3. For the purpose of this Article XII, the term "Company"
shall mean the Sponsor and any Affiliated Company whether or not such Affiliated
Company has adopted the Plan.
12.2. Definitions. For purposes of this Article XII, the following special
definitions and rules shall apply:
(a) The term "Key Employee" means any Employee or former Employee
(including any deceased Employee) who, at any time during the Plan Year
that includes the Determination Date, was an officer of the Company having
annual Compensation greater than $130,000 (as adjusted under Code Section
416(i)(1) for Plan Years beginning after December 31, 2002), a Five Percent
Owner of the Company, or an One Percent Owner of the Company having annual
Compensation of more than $150,000.
(b) The term "Five Percent Owner" means any person who owns (or is
considered as owning within the meaning of Code Section 318) more than 5%
of the outstanding stock of the Company or stock possessing more than 5% of
the total combined voting power of all stock of the Company.
(c) The term "One Percent Owner" means any person who would be
described in paragraph (b) if "1%" were substituted for "5%" each place
where it appears therein.
(d) The term "Non-Key Employee" means any Employee who is not a Key
Employee.
(e) The term "Determination Date" means, with respect to any plan
year, the last day of the preceding plan year. In the case of the first
plan year of any plan, the term "Determination Date" shall mean the last
day of that plan year.
(f) The term "Aggregation Group" means (i) each qualified plan of the
Company in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the plan
has terminated), and (ii) any other qualified plan of the Company which
enables a plan described in clause (i) to meet the requirements of Code
Sections 401(a)(4) or 410. Any plan not required to be included in an
Aggregation Group under the preceding rules may be treated as being part of
such group if the group would continue to meet the requirements of Code
Sections 401(a)(4) and 410 with the plan being taken into account.
65
(g) For purposes of determining ownership under paragraphs (a), (b)
and (c) above, the following special rules shall apply: (i) Code Section
318(a)(2)(C) shall be applied by substituting "5%" for "50%", and (ii) the
aggregation rules of Code Sections 414(b), (c) and (m) shall not apply,
with the result that the ownership tests of this Section 12.2 shall apply
separately with respect to each Affiliated Company.
(h) The terms "Key Employee" and "Non-Key Employee" shall include
their Beneficiaries, and the definitions provided under this Section 12.2
shall be interpreted and applied in a manner consistent with the provisions
of Code Section 416(i) and the regulations thereunder.
(i) For purposes of this Article XII, an Employee's Compensation shall
be determined in accordance with the rules of Section 11.5.
12.3. Top-Heavy Status
(a) The term "Top-Heavy Plan" means, with respect to any Plan Year:
(i) Any defined benefit plan if, as of the Determination Date,
the present value of the cumulative accrued benefits under the plan
for Key Employees exceeds 60% of the present value of the
(ii) cumulative accrued benefits under the plan for all
Employees; and
(iii) Any defined contribution plan if, as of the Determination
Date, the aggregate of the account balances of Key Employees under the
plan exceeds 60% of the aggregate of the account balances of all
Employees under the plan.
In applying the foregoing provisions of this paragraph (a), the
valuation date to be used in valuing Plan assets shall be (i) in the case
of a defined benefit plan, the same date which is used for computing costs
for minimum funding purposes, and (ii) in the case of a defined
contribution plan, the most recent valuation date within a 12-month period
ending on the applicable Determination Date.
(b) Each plan maintained by the Company required to be included in an
Aggregation Group shall be treated as a Top-Heavy Plan if the Aggregation
Group is a Top-Heavy Group.
(c) The term "Top-Heavy Group" means any Aggregation Group if the sum
(as of the Determination Date) of (i) the present value of the cumulative
accrued benefits for Key Employees under all defined benefit plans included
in the group, and (ii) the aggregate of the account balances of Key
Employees under all defined contribution plans included in the group
exceeds 60% of a similar sum determined for all Employees. For purposes of
determining the present value of the cumulative accrued benefit of any
Employee, or the amount of the account balance of any Employee, such
present value or amount shall be increased by the aggregate distributions
made with respect to the
66
Employee under the plan (including a terminated plan which, had it not been
terminated, would have been aggregated with the plan under Code Section
416(g)(2)(A)(i))during the one year period ending on the Determination
Date. In the case of distributions made for a reason other than separation
from service, death, or disability, the preceding sentence shall be applied
by substituting "5-year period" for "l -year period." Any rollover
contribution or similar transfer initiated by the Employee and made after
December 31, 1983, to a plan shall not be taken into account with respect
to the transferee plan for purposes of determining whether such plan is a
Top-Heavy Plan (or whether any Aggregation Group which includes such plan
is a Top-Heavy Group).
(d) If any individual is a Non-Key Employee with respect to any plan
for any plan year, but the individual was a Key Employee with respect to
the plan for any prior plan year, any accrued benefit for the individual
(and the account balance of the individual) shall not be taken into account
for purposes of this Section 12.3.
(e) If any individual has not performed services for the Company at
any time during the one year period ending on the Determination Date, any
accrued benefit for such individual (and the account balance of the
individual) shall not be taken into account for purposes of this Section
12.3.
(f) In applying the foregoing provisions of this Section, the accrued
benefit of a Non-Key Employee shall be determined (i) under the method, if
any, which is used for accrual purposes under all plans of the Company and
any Affiliated Companies, or (ii) if there is no such uniform method, as if
such benefit accrued not more rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C).
(g) For all purposes of this Article XII, the definitions provided
under this Section 12.3 shall be applied and interpreted in a manner
consistent with the provisions of Code Section 416(g) and the regulations
thereunder.
12.4. Minimum Contributions. For any Plan Year in which the Plan is
determined to be a Top-Heavy Plan, the minimum Company Contributions for that
year shall be determined in accordance with the rules of this Section 12.4.
(a) Except as provided below, the minimum contribution for each
Non-Key Employee shall be not less than 3% of his or her compensation.
(b) Subject to the following rules of this paragraph (b), the
percentage set forth in paragraph (a) above shall not be required to exceed
the percentage at which contributions are made (or are required to be made)
under the Plan for the year for the Key Employee for whom the percentage is
the highest for the year. This determination shall be made by dividing the
contributions for each Key Employee by so much of his or her total
compensation for the Plan Year as does not exceed the applicable
Compensation limit. For purposes of this paragraph (b), all defined
contribution plans required to be included in an Aggregation Group shall be
treated as one plan. Notwithstanding the foregoing, the exceptions to
paragraph (a) as provided under this paragraph (b) shall not
67
apply to any plan required to be included in an Aggregation Group if the
plan enables a defined benefit plan to meet the requirements of Code
Sections 401(a)(4) or 410.
(c) The Participant's minimum contribution determined under this
Section 12.4 shall be calculated without regard to any Social Security
benefits payable to the Participant.
(d) In the event a Participant is covered by both a defined
contribution and a defined benefit plan maintained by the Company, both of
which are determined to be Top-Heavy Plans, the Company shall satisfy the
minimum benefit requirements of Code Section 416 by providing (in lieu of
the minimum contribution described in paragraph (a) above) a minimum
benefit under the defined benefit plan so as to prevent the duplication of
required minimum benefits hereunder.
12.5. Minimum Vesting Rules. For any Plan Year in which it is determined
that the Plan is a Top-Heavy Plan, the vesting schedule shall be the vesting
schedule set forth in Section 5.2.
12.6. Non-Eligible Employees. The rules of this Article XII shall not apply
to any Employee included in a unit of employees covered by a collective
bargaining agreement between employee representatives and one or more employers
if retirement benefits were the subject of good faith bargaining between such
employee representatives and the employer or employers.
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ARTICLE XIII
RESTRICTION ON ASSIGNMENT OR OTHER
ALIENATION OF PLAN BENEFITS
13.1. General Restrictions Against Alienation.
(a) The interest of any Participant or his or her Beneficiary in the
income, benefits, payments, claims or rights hereunder, or in the Trust
Fund, shall not in any event be subject to sale, assignment, hypothecation,
or transfer. Each Participant and Beneficiary is prohibited from
anticipating, encumbering, assigning, or in any manner alienating his or
her interest under the Trust Fund, and is without power to do so, except as
may be permitted in connection with providing security for a loan from the
Plan to the Participant pursuant to the provisions of the Plan as it may be
amended from time to time. The interest of any Participant or Beneficiary
shall not be liable or subject to his or her debts, liabilities, or
obligations, now contracted, or which may hereafter be contracted, and such
interest shall be free from all claims, liabilities, or other legal process
now or hereafter incurred or arising. Neither the interest of a Participant
or Beneficiary, nor any part thereof, shall be subject to any judgment
rendered against any such Participant or Beneficiary. Notwithstanding the
foregoing, a Participant's or Beneficiary's interest in the Plan may be
subject to the enforcement of a Federal tax levy made pursuant to Code
Section 6331 or the collection by the United States on a judgment resulting
from an unpaid tax assessment.
(b) In the event any person attempts to take any action contrary to
this Article XIII, such action shall be null and void and of no effect, and
the Company, the Committee, the Trustee and all Participants and their
Beneficiaries, may disregard such action and are not in any manner bound
thereby, and they, and each of them, shall suffer no liability for any such
disregard thereof, and shall be reimbursed on demand out of the Trust Fund
for the amount of any loss, cost or expense incurred as a result of
disregarding or of acting in disregard of such action.
(c) The foregoing provisions of this Section shall be interpreted and
applied by the Committee in accordance with the requirements of Code
Section 401(a)(13) and Section 206(d) of ERISA as construed and interpreted
by authoritative judicial and administrative rulings and regulations.
13.2. Qualified Domestic Relations Orders. The rules set forth in Section
13.1 above shall not apply with respect to a "Qualified Domestic Relations
Order" as described below.
(a) A "Qualified Domestic Relations Order" is a judgment, decree, or
order (including approval of a property settlement agreement) that:
(i) Creates or recognizes the existence of an Alternate Payee's
right to, or assigns to an Alternate Payee the right to, receive all
or a portion of the benefits payable under the Plan with respect to a
Participant,
69
(ii) Relates to the provision of child support, alimony payments,
or marital property rights to a spouse, former spouse, child or other
dependent of a Participant,
(iii) Is made pursuant to a State domestic relations law
(including a community property law), and
(iv) Clearly specifies: (1) the name and last known mailing
address (if any) of the Participant and the name and mailing address
of each Alternate Payee covered by the order (if the Committee does
not have reason to know that address independently of the order); (2)
the amount or percentage of the Participant's benefits to be paid to
each Alternate Payee, or the manner in which the amount or percentage
is to be determined; (3) the number of payments or period to which the
order applies; and (4) each plan to which the order applies.
For purposes of this Section 13.2, "Alternate Payee" means any spouse,
former spouse, child or other dependent of a Participant who is recognized
by a domestic relations order as having a right to receive all, or a
portion of, the benefits payable with respect to the Participant.
(b) A domestic relations order is not a Qualified Domestic Relations
Order if it requires:
(i) The Plan to provide any type or form of benefit, or any
option, not otherwise provided under the Plan;
(ii) The Plan to provide increased benefits; or
(iii) The payment of benefits to an Alternate Payee that are
required to be paid to another Alternate Payee under a previous
Qualified Domestic Relations Order.
(c) A domestic relations order shall not be considered to fail to
satisfy the requirements of paragraph (b)(i) above with respect to any
payment made before a Participant has separated from service solely because
the order requires that payment of benefits be made to an Alternate Payee:
(i) On or after the date on which the Participant attains (or
would have first attained) his or her earliest retirement age (as
defined in Code Section 414(p)(4)(B));
(ii) As if the Participant had retired on the date on which such
payment is to begin under such order (but taking into account only the
present value of accrued benefits and not taking into account the
present value of any subsidy for early retirement benefits); and
70
(iii) In any form in which such benefits may be paid under the
Plan to the Participant (other than in the form of a joint and
survivor annuity with respect to the Alternate Payee and his or her
subsequent spouse).
Notwithstanding the foregoing, if the Participant dies before his or
her earliest retirement age (as defined in Section 414(p)(4)(B)), the
Alternate Payee is entitled to benefits only if the Qualified Domestic
Relations Order requires survivor benefits to be paid to the Alternate
Payee.
(d) To the extent provided in any Qualified Domestic Relations Order,
the former spouse of a Participant shall be treated as a surviving Spouse
of the Participant for purposes of applying the rules (relating to minimum
survivor annuity requirements) of Code Sections 401(a)(11) and 417, and any
current spouse of the Participant shall not be treated as a spouse of the
Participant for such purposes.
(e) In the case of any domestic relations order received by the Plan,
the Committee shall promptly notify the Participant and any Alternate Payee
named in the order that an order has been received and shall provide a copy
of the Plan's procedures for determining the qualified status of domestic
relations orders. An Alternate Payee may designate a representative for
receipt of copies of notices and plan information that are sent to the
Alternate Payee with respect to domestic relations order. Within a
reasonable period after the receipt of the order, the Committee shall
determine whether the order is a Qualified Domestic Relations Order and
shall notify the Participant and each Alternate Payee of such
determination.
(f) The Committee shall establish reasonable procedures to determine
the qualified status of domestic relations orders and to administer
distributions under Qualified Domestic Relations Orders. During any period
in which the issue of whether a domestic relations order is a Qualified
Domestic Relations Order is being determined (by the Committee, by a court
of competent jurisdiction, or otherwise), the Committee shall direct the
Trustee to segregate in a separate account in the Plan (or in an escrow
account) the amounts which would have been payable to the Alternate Payee
during the period if the order had been determined to be a Qualified
Domestic Relations Order. If within the 18 Month Period (as defined below),
the order (or modification thereof) is determined to be a Qualified
Domestic Relations Order, the Committee shall direct the Trustee to pay the
segregated amounts (plus any interest thereon) to the person or persons
entitled thereto. However, if within the 18 Month Period (i) it is
determined that the order is not a Qualified Domestic Relations Order, or
(ii) the issue as to whether the order is a Qualified Domestic Relations
Order is not resolved, then the Committee shall direct the Trustee to pay
the segregated amounts (plus any interest thereon) to the person or persons
who would have been entitled to the amounts if there had been no order
(assuming such benefits were otherwise payable). Any determination that an
order is a Qualified Domestic Relations Order that is made after the close
of the 18 Month Period shall be applied prospectively only. For purposes of
this Section 13.2, the "18 Month Period" shall mean the 18 month period
beginning with the date on which the first payment would be required to be
made under the domestic relations order.
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ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1. No Right of Employment Hereunder. The adoption and maintenance of the
Plan and Trust shall not be deemed to constitute a contract of employment or
otherwise between the Company and any Employee or Participant, or to be a
consideration for, or an inducement or condition of, any employment. Nothing
contained herein shall be deemed to give any Employee the right to be retained
in the service of the Company or to interfere with the right of the Company to
discharge, with or without cause, any Employee or Participant at any time, which
right is hereby expressly reserved.
14.2. Limitation on Company Liability. Any benefits payable under the Plan
shall be paid or provided for solely from the Plan and the Company assumes no
liability or responsibility therefor.
14.3. Effect of Article Headings. Article headings are for convenient
reference only and shall not be deemed to be a part of the substance of this
instrument or in any way to enlarge or limit the contents of any Article.
14.4. Gender. Masculine gender shall include the feminine and the singular
shall include the plural unless the context clearly indicates otherwise.
14.5. Interpretation. The provisions of the Plan shall in all cases be
interpreted in a manner that is consistent with the Plan satisfying (a) the
requirements of Code Section 401(a) and related statutes for qualification as a
stock bonus plan and (b) the requirements of Code Section 4975(e)(7) and related
statutes for qualification as an employee stock ownership plan and eligibility
for the prohibited transaction exemption provided under Code Section 4975(d)(3)
and its related statutes under ERISA.
14.6. Withholding For Taxes. Any payments from the Trust Fund may be
subject to withholding for taxes as may be required by any applicable federal or
state law.
14.7. California Law Controlling. All legal questions pertaining to the
Plan which are not controlled by ERISA shall be determined in accordance with
the laws of the State of California and all contributions made hereunder shall
be deemed to have been made in that State.
14.8. Plan and Trust as One Instrument. The Plan and the Trust Agreement
shall be construed together as one instrument. In the event that any conflict
arises between the terms and/or conditions of the Trust Agreement and the Plan,
the provisions of the Plan shall control, except that with respect to the duties
and responsibilities of the Trustee, the Trust Agreement shall control.
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14.9. Invalid Provisions. If any paragraph, section, sentence, clause or
phrase contained in the Plan shall become illegal, null or void or against
public policy, for any reason, or shall be held by any court of competent
jurisdiction to be incapable of being construed or limited in a manner to make
it enforceable, or is otherwise held by such court to be illegal, null or void
or against public policy, the remaining paragraphs, sections, sentences, clauses
or phrases contained in the Plan shall not be affected thereby.
14.10. Counterparts. This instrument may be executed in one or more
counterparts each of which shall be legally binding and enforceable.
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IN WITNESS WHEREOF, Allergan, Inc. hereby executes this instrument,
evidencing the terms of the Allergan, Inc. Employee Stock Ownership Plan as
restated this 14th day of June, 2005.
ALLERGAN, INC.
By /s/ Roy J. Wilson
----------------------------------
Roy J. Wilson
Executive Vice President,
Human Resources
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