EXHIBIT 10.5
ALLERGAN, INC.
SAVINGS AND INVESTMENT PLAN
RESTATED
2005
.
.
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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 Accounts........................................................... 3
2.2 Affiliated Company................................................. 3
2.3 After Tax Deposits................................................. 3
2.4 After Tax Deposits Account......................................... 3
2.5 Anniversary Date................................................... 3
2.6 Before Tax Deposits................................................ 3
2.7 Before Tax Deposits Account........................................ 3
2.8 Beneficiary........................................................ 3
2.9 Board of Directors................................................. 3
2.10 Break in Service................................................... 4
2.11 Code............................................................... 4
2.12 Committee.......................................................... 4
2.13 Company............................................................ 4
2.14 Company Contributions.............................................. 4
2.15 Company Contributions Accounts..................................... 4
2.16 Company Stock...................................................... 4
2.17 Compensation....................................................... 4
2.18 Credited Service................................................... 6
2.19 Disability......................................................... 7
2.20 Effective Date..................................................... 7
2.21 Eligible Employee.................................................. 7
2.22 Eligible Retirement Plan........................................... 7
2.23 Eligible Rollover Distribution..................................... 8
2.24 Employee........................................................... 8
2.25 Employment Commencement Date....................................... 9
2.26 ERISA.............................................................. 9
2.27 Forfeitures........................................................ 9
2.28 415 Suspense Account............................................... 9
2.29 Highly Compensated Employee........................................ 10
2.30 Hour of Service.................................................... 10
2.31 Investment Manager................................................. 10
2.32 Leased Employee.................................................... 10
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2.33 Leave of Absence................................................... 11
2.34 Matched Deposits................................................... 12
2.35 Matching Contributions............................................. 12
2.36 Matching Contributions Account..................................... 12
2.37 Normal Retirement Age.............................................. 12
2.38 Participant........................................................ 12
2.39 Participant Deposits............................................... 13
2.40 Period of Severance................................................ 13
2.41 Plan............................................................... 13
2.42 Plan Administrator................................................. 13
2.43 Plan Year.......................................................... 13
2.44 Reemployment Commencement Date..................................... 13
2.45 Retirement Account Participant..................................... 13
2.46 Retirement Contributions........................................... 13
2.47 Retirement Contributions Account................................... 13
2.48 Rollover Contributions............................................. 13
2.49 Rollover Contributions Account..................................... 14
2.50 Severance.......................................................... 14
2.51 Severance Date..................................................... 14
2.52 Sponsor............................................................ 14
2.53 Trust.............................................................. 15
2.54 Trust Agreement.................................................... 15
2.55 Trustee............................................................ 15
2.56 Valuation Date..................................................... 15
ARTICLE III
ELIGIBILITY AND PARTICIPATION............................................ 16
3.1 General Eligibility and Participation.............................. 16
3.2 Eligibility for Retirement Contributions........................... 16
3.3 Duration of Participation.......................................... 17
3.4 Eligibility and Participation After Normal Retirement Age.......... 17
ARTICLE IV
PARTICIPANT DEPOSITS..................................................... 18
4.1 Election........................................................... 18
4.2 Amount Subject to Election......................................... 19
4.3 Limitation on Compensation Deferrals............................... 20
4.4 Provisions for Return of Excess Before Tax Deposits................ 23
4.5 Provision for Recharacterization or Return of Excess Deferrals
by Highly Compensated Participants.............................. 25
4.6 Termination, Change in Rate, or Resumption
of Before Tax Deposits or After Tax Deposits.................... 27
4.7 Character of Deposits.............................................. 27
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4.8 Rollover Contributions............................................. 27
ARTICLE V
TRUST FUND AND COMPANY CONTRIBUTIONS..................................... 29
5.1 General............................................................ 29
5.2 Single Trust....................................................... 29
5.3 Matching Contributions............................................. 29
5.4 Retirement Contributions........................................... 30
5.5 Form of Company Contributions...................................... 30
5.6 Investment of Trust Assets......................................... 30
5.7 Irrevocability..................................................... 33
5.8 Company, Committee and Trustee Not Responsible for Adequacy of
Trust Fund...................................................... 34
5.9 Certain Offers for Company Stock................................... 34
5.10 Voting of Company Stock............................................ 37
5.11 Securities Law Limitation.......................................... 39
5.12 Distributions...................................................... 39
5.13 Taxes.............................................................. 39
5.14 Trustee Records to be Maintained................................... 40
5.15 Annual Report of Trustee........................................... 40
5.16 Appointment of Investment Manager.................................. 40
ARTICLE VI
ACCOUNTS AND ALLOCATIONS................................................. 41
6.1 Participants' Accounts............................................. 41
6.2 Allocation of Participant Deposits................................. 41
6.3 Allocation of Company Contributions and Forfeitures................ 41
6.4 Valuation of Participants' Accounts................................ 42
6.5 Valuation of Company Stock......................................... 42
6.6 Dividends, Splits, Recapitalizations, Etc.......................... 42
6.7 Stock Rights, Warrants or Options.................................. 42
6.8 Treatment of Accounts Upon Severance............................... 43
6.9 Cash Dividends..................................................... 43
6.10 Miscellaneous Allocation Rules..................................... 43
6.11 Limitations on After Tax Deposits and Matching Contributions....... 44
6.12 Provision for Disposition of Excess After Tax Deposits or Matching
Contributions on Behalf of Highly Compensated Participants...... 48
ARTICLE VII
VESTING IN PLAN ACCOUNTS................................................. 51
7.1 No Vested Rights Except as Herein Provided......................... 51
7.2 Vesting of Participant Deposits.................................... 51
7.3 Vesting of Company Contributions................................... 51
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ARTICLE VIII
PAYMENT OF PLAN BENEFITS................................................. 53
8.1 Withdrawals During Employment...................................... 53
8.2 Distributions Upon Termination of Employment or Disability......... 54
8.3 Distribution Upon Death of Participant............................. 55
8.4 Designation of Beneficiary......................................... 55
8.5 Hardship Withdrawal Rules.......................................... 56
8.6 Distribution Rules................................................. 57
8.7 Forfeitures........................................................ 63
8.8 Valuation of Accounts Upon Distribution............................ 64
8.9 Lapsed Benefits.................................................... 64
8.10 Persons Under Legal Disability..................................... 65
8.11 Additional Documents............................................... 65
8.12 Trustee-to-Trustee Transfers....................................... 66
8.13 Loans to Participants.............................................. 66
ARTICLE IX
OPERATION AND ADMINISTRATION............................................. 69
9.1 Appointment of Committee........................................... 69
9.2 Appointment of Investment Subcommittee............................. 69
9.3 Transaction of Business............................................ 69
9.4 Voting............................................................. 70
9.5 Responsibility of Committees....................................... 70
9.6 Committee Powers................................................... 71
9.7 Additional Powers of Committee..................................... 72
9.8 Investment Subcommittee Powers..................................... 72
9.9 Periodic Review of Funding Policy.................................. 73
9.10 Claims Procedures.................................................. 73
9.11 Appeals Procedures................................................. 74
9.12 Limitation on Liability............................................ 75
9.13 Indemnification and Insurance...................................... 75
9.14 Compensation of Committees and Plan Expenses....................... 75
9.15 Resignation........................................................ 76
9.16 Reliance Upon Documents and Opinions............................... 76
ARTICLE X
AMENDMENT AND ADOPTION OF PLAN........................................... 77
10.1 Right to Amend Plan................................................ 77
10.2 Adoption of Plan by Affiliated Companies........................... 77
ARTICLE XI DISCONTINUANCE OF CONTRIBUTIONS............................... 78
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ARTICLE XII
TERMINATION AND MERGER................................................... 79
12.1 Right to Terminate Plan............................................ 79
12.2 Merger Restriction................................................. 79
12.3 Effect on Trustee and Committee.................................... 79
12.4 Effect of Reorganization, Transfer of Assets or Change in Control.. 79
ARTICLE XIII
LIMITATION ON ALLOCATIONS................................................ 82
13.1 General Rule....................................................... 82
13.2 Annual Additions................................................... 82
13.3 Other Defined Contribution Plans................................... 83
13.4 Adjustments for Excess Annual Additions............................ 83
13.5 Compensation....................................................... 83
13.6 Treatment of 415 Suspense Account Upon Termination................. 84
ARTICLE XIV
TOP-HEAVY RULES.......................................................... 85
14.1 Applicability...................................................... 85
14.2 Definitions........................................................ 85
14.3 Top-Heavy Status................................................... 86
14.4 Minimum Contributions.............................................. 87
14.5 Minimum Vesting Rules.............................................. 88
14.6 Noneligible Employees.............................................. 88
ARTICLE XV
RESTRICTION ON ASSIGNMENT OR OTHER ALIENATION OF PLAN BENEFITS........... 89
15.1 General Restrictions Against Alienation............................ 89
15.2 Qualified Domestic Relations Orders................................ 89
ARTICLE XVI
MISCELLANEOUS PROVISIONS................................................. 93
16.1 No Right of Employment Hereunder................................... 93
16.2 Effect of Article Headings......................................... 93
16.3 Limitation on Company Liability.................................... 93
16.4 Gender............................................................. 93
16.5 Interpretation..................................................... 93
16.6 Withholding For Taxes.............................................. 93
16.7 California Law Controlling......................................... 93
16.8 Plan and Trust as One Instrument................................... 93
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16.9 Invalid Provisions................................................. 93
16.10 Counterparts....................................................... 94
APPENDIX A
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ALLERGAN, INC.
SAVINGS AND INVESTMENT 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. Savings and Investment Plan (Restated 2003)" and shall be known
hereafter as the "Allergan, Inc. Savings and Investment Plan (Restated 2005)."
1.2 Plan Purpose. The purpose of the Allergan, Inc. Savings and Investment
Plan (Restated 2005), hereinafter referred to as the "Plan," is to enable
Eligible Employees of Allergan, and any Affiliated Companies that are authorized
by the Board of Directors to participate in the Plan, to share in the growth and
prosperity of the Company and to provide Participants with an opportunity to
accumulate capital for their future economic security. All assets acquired under
the Plan as a result of Participant Deposits and Company Contributions, income,
and other additions to the Fund 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 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, Company Contributions made to the Plan
were enhanced by (i) increasing the Company's Matching Contributions from
an average 50% match on certain Participant Deposits not to exceed 5% of
Compensation to a 100% match on certain Participant Deposits not to exceed
4% of Compensation and (ii) adding a Retirement Contributions feature under
which Allergan will make contributions equal to 5% of Compensation for
certain Eligible Employees hired on or after October 1, 2002
and for other Eligible Employees who make a one-time irrevocable election
to cease active participation in the Allergan, Inc. Pension Plan.
(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 2.24) ceased to be
eligible to make Participant Deposits or to receive allocations of Company
Contributions, (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, and (iii) the AMO stock
received with respect to Company Stock allocated to Participants' Accounts
shall be held in a separate investment fund established by the Committee
pursuant to Section 5.6 and Participants shall have subaccounts under the
Plan corresponding to their interests in such investment fund.
(d) Effective as of January 1, 1999, the Allergan, Inc. Puerto Rico
Savings and Investment Plan was merged with and into the Plan. All account
balances of the Allergan, Inc. Puerto Rico Savings and Investment Plan were
transferred to the Plan and all account balances transferred to the Plan as
a result of the merger are to be administered, distributed, forfeited and
otherwise governed by the provisions of the Plan and Appendix A, which is
attached hereto and made a part hereof.
1.5 Plan Qualification. The Plan is an employee benefit plan that is
intended to qualify under Code Section 401(a) as a qualified profit sharing plan
and under Code Section 401(k) as a qualified cash or deferred arrangement. The
Plan's last determination letter was issued by the Internal Revenue Service on
July 22, 2002 with respect to the Allergan, Inc. Savings and Investment Plan
(Restated 2001) 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.
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ARTICLE II
DEFINITIONS
2.1. Accounts. "Accounts" or "Participant's Accounts" shall mean the After
Tax Deposits Accounts, Before Tax Deposits Accounts, Matching Contributions
Accounts, Retirement Contributions Accounts, and Rollover Contributions Accounts
maintained for the various Participants.
2.2. 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.
2.3. After Tax Deposits. "After Tax Deposits" shall mean those
contributions made by a Participant which represent after-tax contributions.
2.4. After Tax Deposits Account. "After Tax Deposits Account" shall mean a
Participant's individual account in the Trust Fund in which are held his or her
After Tax Deposits and the earnings thereon.
2.5. Anniversary Date. "Anniversary Date" shall mean the last day of each
Plan Year.
2.6. Before Tax Deposits. "Before Tax Deposits" shall mean those
contributions made by a Participant which represent pre-tax contributions.
2.7. Before Tax Deposits Account. "Before Tax Deposits Account" shall mean
a Participant's individual account in the Trust Fund in which are held his or
her Before Tax Deposits and the earnings thereon.
2.8. Beneficiary. "Beneficiary" or "Beneficiaries" shall mean the person or
persons last designated by a Participant as set forth in Section 8.4 or, if
there is no designated Beneficiary or surviving Beneficiary, the person or
persons designated pursuant to Section 8.4 to receive the interest of a deceased
Participant in such event.
2.9. 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.
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2.10. 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.
2.11. 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.
2.12. Committee. "Committee" shall mean the committee to be appointed under
the provisions of Section 9.1 to administer the Plan.
2.13. Company. "Company" shall mean collectively the Sponsor and each
Affiliated Company that adopts the Plan in accordance with Section 10.2.
2.14. Company Contributions. "Company Contributions" shall mean Matching
Contributions and Retirement Contributions (whether in cash or other property,
including Company Stock), paid by the Company pursuant to Sections 5.3 and 5.4
into the Trust Fund established and maintained under the provisions of the Plan
for the purpose of providing benefits for Participants and their Beneficiaries.
Unless expressly stated otherwise in the Plan, Company Contributions shall not
include Before Tax Deposits, After Tax Deposits, or Rollover Contributions.
2.15. Company Contributions Accounts. "Company Contributions Accounts"
shall mean a Participant's Matching Contributions Account and Retirement
Contributions Account.
2.16. 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(l).
2.17. 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 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, a
Code
4
Section 125 cafeteria plan and, solely for purposes of determining
Retirement Contributions under Section 5.4, amounts deferred under the
Executive Deferred Compensation 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; 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) Solely for purposes of determining Retirement Contributions under
Section 5.4, Compensation shall include compensation paid by Oculex
Pharmaceuticals, Inc. to an Eligible Employee prior to Oculex
Pharmaceuticals, Inc. becoming an Affiliated Company but only to the extent
provided in paragraphs (a), (b), and (c) above and only to the extent of
compensation paid by Oculex Pharmaceuticals, Inc. in 2003.
(e) 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.
(f) Notwithstanding the foregoing, for purposes of applying the
provisions of Articles XIII and XIV, a Participant's Compensation shall be
determined pursuant to the definition of "Compensation" as set forth in
Section 13.5 or 14.2(i), as the case may be.
5
2.18. 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 at any
time prior to the Original Effective Date, for the period prior to January
1, 1989 such Employee shall be credited with Credited Service under the
Plan equal to the period (if any) of service credited to such Employee
under the SmithKline Beckman Savings and Investment Plan.
(b) In the case of any Employee who is employed by the Company on or
after the Original Effective Date, an Employee shall receive Credited
Service 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 January 1, 1989, that date shall be deemed to
be an Employment Commencement Date of the Employee (with service credit for
periods prior to January 1, 1989 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 2.50.
(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, Disability, or retirement whether or not such a Severance
occurs during an approved Leave of Absence 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) 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
6
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.
(g) In accordance with paragraph (f) above, an Eligible Employee shall
receive Credited Service for any period of employment with Allergan Medical
Optics - Lenoir facility or Oculex Pharmaceuticals, Inc. prior to each
becoming an Affiliated Company but only to the extent provided in paragraph
(e) above. Notwithstanding anything therein to the contrary and for
purposes of this Plan only, the Employment Commencement Date for an
Eligible Employee under paragraph (b) shall mean the date the Employee was
first credited with an Hour of Service with Allergan Medical Optics -
Lenoir facility or Oculex Pharmaceuticals, Inc., including any date prior
to Allergan Medical Optics - Lenoir facility or Oculex Pharmaceuticals,
Inc. becoming an Affiliated Company.
(h) 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).
2.19. 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.
2.20. 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.
2.21. Eligible Employee. "Eligible Employee" shall mean any United
States-based payroll Employee and any Puerto Rico-based payroll Employee of the
Company and any expatriate Employee of the Company who is a United States
citizen or permanent resident, but excluding any non-resident alien of the
United States and Puerto Rico, any non-regular manufacturing site transition
Employee, any Leased Employee, and any Employee covered by a collective
bargaining agreement.
2.22. 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
7
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 XV).
2.23. 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 shall 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 of 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);
(c) the portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities);
(d) any hardship withdrawal made pursuant to Section 8.1(e); and
(e) any other distribution that is reasonably expected to total less
than $200 during the year.
A portion of a distribution shall not fail to be an Eligible Rollover
Distribution merely because the portion consists of After Tax Deposits or the
portion consists of rollover after tax employee contributions made pursuant to
Section 4.8.which are not includible in gross income. However, such portion(s)
may be transferred only to an individual retirement account or annuity described
in Code Section 408(a) or 408(b) or to a qualified defined contribution plan
described in Code Section 401(a) or 403(a) that agrees to separately account for
amounts so transferred, including separately accounting for the portion of such
distribution which is includible in gross income and the portion of such
distribution which is not so includible. 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 XV) with regard to the interest of the spouse or
former spouse.
2.24. 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, including any Puerto Rico-based payroll Employee of 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 agency determines that
such individual is a common-law employee and not an independent contractor;
8
(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.
2.25. 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.
2.26. 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.
2.27. Forfeitures. "Forfeitures" shall mean the nonvested portion of a
Participant's Matching Contributions Account or Retirement Contributions
Account, whichever the case may be, that is forfeited in accordance with the
provisions of Article VIII.
2.28. 415 Suspense Account. "415 Suspense Account" shall mean the account
(if any) established and maintained in accordance with the provisions of Article
XIII for the purpose of holding and accounting for allocations of excess Annual
Additions (as defined in Article XIII).
9
2.29. 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 14.2).
(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
13.5.
(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 applicable regulations
to the extent permitted thereunder. The Committee, for administrative
convenience, may establish rules and procedures for purposes of identifying
Highly Compensated Employees, which rules and procedures may result in an
Eligible Employee being deemed to be a Highly Compensated Employee for
purposes of the limitations of Article IV and Article VI, whether or not
such Eligible Employee is a Highly Compensated Employee described in Code
Section 414(q).
2.30. 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.
2.31. Investment Manager. "Investment Manager" shall mean the one or more
Investment Managers, if any, that are appointed pursuant to Section 5.16 and who
constitute investment managers under Section 3(38) of ERISA.
2.32. 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
10
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.
2.33. 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.
(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 the eligibility and participation
11
provisions of Article III (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).
2.34. Matched Deposits. "Matched Deposits" of a Participant shall mean his
or her Participant Deposits (whether Before Tax or After Tax but excluding
Rollover Contributions) not in excess of four percent (4%) of Compensation;
except, however, that Matched Deposits shall not include "catch-up" Before Tax
Deposits as described in Section 4.2(e). Matched Deposits shall participate in
allocations of Matching Contributions and Matching Contribution Forfeitures.
2.35. Matching Contributions. "Matching Contributions" shall mean all
amounts (whether in cash or other property, including Company Stock) paid by the
Company pursuant to Sections 5.3(a) and 5.3(b) into the Trust Fund established
and maintained under the provisions of the Plan for the purpose of providing
benefits for Participants and their Beneficiaries.
2.36. Matching Contributions Account. "Matching Contributions Account"
shall mean a Participant's individual account in the Trust Fund in which are
held Matching Contributions, any amounts transferred from the Participant's
account in the SmithKline Beckman Savings and Investment Plan to the Plan, and
the earnings thereon. Any amounts transferred from the Participant's account in
the SmithKline Beckman Savings and Investment Plan to the Plan shall be fully
vested.
2.37. Normal Retirement Age. "Normal Retirement Age" shall mean a
Participant's sixty-fifth (65th) birthday.
2.38. 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.
12
2.39. Participant Deposits. "Participant Deposits" shall mean all of a
Participant's deposits to the Plan, including After Tax Deposits, Before Tax
Deposits, and Rollover Contributions.
2.40. 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.
2.41. Plan. "Plan" shall mean the Allergan, Inc. Savings and Investment
Plan described herein and as amended from time to time.
2.42. 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
9.1 to administer the Plan.
2.43. Plan Year. "Plan Year" shall mean the calendar year.
2.44. 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.
2.45. Retirement Account Participant. "Retirement Account Participant"
shall mean any Eligible Employee who has met the eligibility requirements of
Section 3.2 but excluding any Eligible Employee who is an "Active Participant"
in the Allergan, Inc. Pension Plan as such term is defined therein.
2.46. Retirement Contributions. "Retirement Contributions" shall mean all
amounts (whether in cash or other property, including Company Stock) paid by the
Company pursuant to Section 5.4 into the Trust Fund established and maintained
under the provisions of the Plan for the purpose of providing benefits for
Participants and their Beneficiaries.
2.47. Retirement Contributions Account. "Retirement Contributions Account"
shall mean a Participant's individual account in the Trust Fund in which are
held Retirement Contributions and the earnings thereon.
2.48. Rollover Contributions. "Rollover Contributions" shall mean those
contributions made by a Participant pursuant to Section 4.8.
13
2.49. Rollover Contributions Account. "Rollover Contributions Account"
shall mean a Participant's individual account in the Trust Fund in which are
held Rollover Contributions made pursuant to Section 4.8.
2.50. 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. 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 2.33(c)-(d) shall apply for purposes of determining whether such a
Participant has incurred a Break in Service by reason of such Leave.
2.51. 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 2.50, provided, however, that the special rules set forth under Section
2.33(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 2.50 and who is
entitled to a subsequent payment of compensation for reasons other than future
services (e.g., as back pay for 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.
2.52. Sponsor. "Sponsor" shall mean Allergan, Inc., a Delaware corporation,
and any successor corporation or entity.
14
2.53. Trust. "Trust" or "Trust Fund" shall mean the trust maintained
pursuant to the Trust Agreement and as described in Section 5.1 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.
2.54. Trust Agreement. "Trust Agreement" shall mean the agreement between
the Trustee and the Sponsor pursuant to which the Trust is maintained.
2.55. Trustee. "Trustee" shall mean the individual or entity acting as a
trustee of the Trust Fund.
2.56. Valuation Date. "Valuation Date" shall mean the date as of which the
Trustee shall determine the value of the assets in the Trust Fund for purposes
of determining the value of each Account, which shall be each business day in
accordance with rules applied in a consistent and uniform basis.
15
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 General Eligibility and Participation. An Eligible Employee shall
participate in the Plan on the later of: (i) his or her Employment Commencement
Date or (ii) the date he or she becomes an Eligible Employee. A Participant who
incurs a Severance shall participate in the Plan immediately upon his or her
Reemployment Commencement Date so long as he or she is reemployed as an Eligible
Employee.
3.2 Eligibility for Retirement Contributions. An Eligible Employee shall be
eligible to receive allocations of Retirement Contributions as provided in
Section 5.4 only if he or she is a Retirement Account Participant as described
below:
(a) An Eligible Employee shall become a Retirement Account Participant
on the date that immediately follows the later of:
(i) The date such Eligible Employee performs an Hour of Service
as an Eligible Employee;
(ii) The date such Eligible Employee completes six (6) months of
Credited Service with the Sponsor or an Affiliated Company as an
Employee; or
(iii) The date such Eligible Employee ceases to be an "Active
Participant" in the Allergan, Inc. Pension Plan as such term is
defined therein.
(b) A Participant who becomes a Retirement Account Participant shall
remain an active Retirement Account Participant until he or she: (i) incurs
a Severance, (ii) transfers employment to an Affiliated Company that has
not adopted the Plan pursuant to Section 10.2, or (iii) is no longer an
Eligible Employee even though he or she remains an Employee of the Company,
at which time such Retirement Account Participant shall become an inactive
Retirement Account Participant and shall no longer be eligible to receive
allocations of Retirement Contributions as provided in Section 5.4.
(c) A Retirement Account Participant or an Employee who is not a
Retirement Account Participant but who has completed the service
requirement specified in paragraph (a)(i) above shall, if he or she incurs
a Severance and is subsequently reemployed as an Eligible Employee, become
a Retirement Account Participant immediately upon his or her Reemployment
Commencement Date. A Retirement Account Participant who becomes an inactive
Retirement Account Participant shall become a Retirement Account
Participant upon the date he or she resumes Eligible Employee status. An
Employee who has not completed the service requirement specified in
paragraph (a)(i) above shall, if he or she incurs a Severance and is
subsequently reemployed, become a Retirement Account Participant on the
date determined under paragraph (a) above.
16
3.3 Duration of Participation. An Eligible Employee who becomes 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
Accounts. Once such a distribution is made, such Participant shall no longer be
considered a Participant in the Plan. A 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 10.2, or (ii) remains an
Employee of the Company but is no longer an Eligible Employee, shall become an
inactive Participant.
3.4 Eligibility and Participation After Normal Retirement Age. An Eligible
Employee may become, or continue as, a Participant or a Retirement Account
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.
17
ARTICLE IV
PARTICIPANT DEPOSITS
4.1 Election.
(a) Each Eligible Employee may elect to defer the receipt of a portion
of his or her Compensation and to have the deferred amount contributed
directly by the Company to the Plan as Before Tax Deposits. Before Tax
Deposits may be made only by means of payroll deduction.
(b) Each Eligible Employee may elect to contribute to the Plan a
portion of his or her Compensation as After Tax Deposits. After Tax
Deposits may be made only by means of payroll deduction.
(c) The Committee shall prescribe procedures to implement automatic
enrollment elections, pursuant to which an Eligible Employee or, if limited
to newly hired Eligible Employees as determined by the Committee, shall be
deemed to have elected to defer the receipt of three percent (3%) of his or
her Compensation and to have such deferred amount contributed directly by
the Company to the Plan as Before Tax Deposits if such Eligible Employee
fails to change or terminate the automatic election for any Plan Year
within the time period prescribed by the Committee (or, in the case of
newly hired Eligible Employee, he or she fails to change or terminate the
automatic election within 30 days of his or her hire date). Such procedures
shall require that an Eligible Employee receive a written notice of
explanation of the automatic election informing the Eligible Employee of
the effective date of the automatic election, the automatic deferral
percentage and his or her right to terminate the automatic election or to
change the amount of his or her Before Tax Deposits made to the Plan as
well as the procedures for exercising such rights and the timing for
implementing a different election. An automatic election under this
paragraph (c) shall be effective as of the first pay period of the Plan
Year (or, in the case of newly hired Eligible Employee, the first pay
period following the 30-day period beginning on his or her date of hire)
and shall remain in effect until superseded by a subsequent election by the
Eligible Employee. Amounts contributed directly by the Company to the Plan
under this paragraph (c) shall be invested in the Balanced Fund described
in Section 5.6(b) until superseded by a subsequent election by the Eligible
Employee.
(d) Notwithstanding anything in this Section to the contrary, a
Participant who makes a withdrawal of After Tax Deposits (whether Matched
Deposits or non-Matched Deposits) pursuant to Section 8.1(a) or a hardship
withdrawal pursuant to Section 8.1(e) shall not be permitted to make Before
Tax Deposits or After Tax Deposits to the Plan during the 6-month period
beginning as soon as administratively feasible following the date of the
hardship withdrawal. The foregoing sentence shall not apply to a withdrawal
of After Tax Deposits if the After Tax Deposits can also be withdrawn under
Section 8.1(d) or the withdrawal is comprised solely of After Tax Deposits
which are not Matched Deposits and which were contributed prior to July 1,
2000.
18
(e) The Committee shall prescribe such procedures, either in writing
or in practice, and provide such forms as are necessary or appropriate for
each Participant and each Eligible Employee who will become a Participant
to make Deposits pursuant to this Article IV subject, however to the
requirement that an election by a Participant shall not be adopted
retroactively.
4.2 Amount Subject to Election.
(a) Each Participant may elect to contribute a whole percentage of his
or her Compensation to the Plan as Before Tax Deposits not to exceed the
lesser of one hundred percent (100%) when aggregated with the After Tax
Deposits contributed by such Participant pursuant to paragraph (b) below.
Notwithstanding the foregoing except to the extent permitted under the
catch-up provisions of paragraph (e) below and Code Section 414(v), no
Participant shall be permitted to make Before Tax Deposits to the Plan
during any taxable year in excess of: (i) $12,000 (or such larger amount as
may be determined by the Secretary of the Treasury pursuant to Code Section
402(g), hereinafter referred to as the "Before Tax Deposit Limit", (ii) the
Actual Deferral Percentage test limitation set forth in Section 4.3, or
(iii) the Annual Addition limitation set forth in Section 13.1. For
purposes of the Before Tax Deposit Limit described in preceding clause (i),
the Before Tax Deposits of a Participant for any taxable year is the sum of
all Before Tax Deposits under the Plan and all salary reduction amounts
under any other qualified cash or deferred arrangement (as defined in Code
Section 401(k)), a simplified employee pension (as defined in Code Section
408(k) and Code Section 402(h)(1)(B)), a deferred compensation plan under
Code Section 457, a trust described in Code Section 501(c)(18) and any
salary reduction amount used to purchase an annuity contract under Code
Section 403(b) whether or not sponsored by the Company but shall not
include any amounts properly distributed as excess annual additions.
(b) Each Participant may elect to contribute a whole percentage of his
or her Compensation to the Plan as After Tax Deposits not to exceed one
hundred percent (100%) when aggregated with the Before Tax Deposits
contributed by such Participant pursuant to paragraph (a) above.
Notwithstanding the foregoing, no Participant shall be permitted to make
After Tax Deposits to the Plan during any Plan Year in excess of the Actual
Contribution Percentage test limitation set forth in Section 6.11 or the
Annual Addition limitation set forth in Section 13.1 and the Committee may,
in its discretion, establish an "After Tax Deposit Limit" for a Plan Year.
(c) Notwithstanding paragraphs (a) and (b), a Participant's combined
Before Tax Deposits and After Tax Deposits shall not exceed a Participant's
Compensation net of his or her salary deductions or reductions (including
but not limited to, federal withholding taxes and "FICA" taxes deducted
pursuant Code Sections 3102 and 3402, respectively, withholding of state
taxes, and amounts contributed by the Company pursuant to a salary
reduction agreement which are excludable from an Employee's gross income
under Code Sections 125, 132(f)(4), 402(e)(3), 402(h)(1)(B) and 403(b)) as
determined by the payroll records of the Sponsor or an Affiliated Company.
19
(d) Notwithstanding paragraphs (a) and (b), a Participant who makes a
hardship withdrawal pursuant to Section 8.1(e) or a withdrawal of After Tax
Deposits (whether Matched Deposits or non-Matched Deposits) pursuant to
Section 8.1(a) shall not be permitted to make Before Tax Deposits or After
Tax Deposits to the Plan during the 6-month period beginning as soon as
administratively feasible following the date of the withdrawal. The
preceding sentence shall not apply to a withdrawal of After Tax Deposits if
such Deposits can also be withdrawn under Section 8.1(d) or the withdrawal
is comprised solely of After Tax Deposits which are not Matched Deposits
and which were contributed prior to July 1, 2000.
(e) Each Participant who has attained age 50 before the close of the
Plan Year may elect to contribute a percentage of his or her Compensation
to the Plan as "catch-up" Before Tax Deposits in accordance with, and
subject to the limitations of, Code Section 414(v). Such catch-up Before
Tax Deposits shall not be taken into account under subparagraph (a) above
or Section 13.1 or any other provision of the Plan implementing the
contribution limitations of Code Sections 402(g) and 415. Moreover, the
Plan shall not be treated as failing to satisfy the provisions of the plan
implementing the requirements of Code Section 401(k)(3), 401(k)(11),
401(k)(12), 410(b), or 416, as applicable, by reason of a Participant
electing to contribute catch-up Before Tax Deposits to the Plan pursuant to
this paragraph.
(f) The Committee shall prescribe such procedures, either in writing
or in practice, as it deems necessary or appropriate regarding the maximum
amount that a Participant may elect to defer and the timing of such an
election. These procedures shall apply to all individuals eligible to make
an election described in Section 4.1. The Committee may, at any time during
a Plan Year, require the suspension, reduction, or recharacterization of
Before Tax Deposits or the suspension or reduction of After Tax Deposits of
any Highly Compensated Employee such that the limitations of Section 4.2(a)
and (b) are satisfied.
4.3 Limitation on Compensation Deferrals. With respect to each Plan Year,
Compensation Deferral Contributions by a Participant for the Plan Year shall not
exceed the limitation on contributions by or on behalf of Highly Compensated
Participants under Code Section 401(k), as provided in this Section. In the
event that Compensation Deferral Contributions under the Plan by or on behalf of
Highly Compensated Participants exceed the limitations of this Section for any
reason, either such excess contributions shall be recharacterized as After Tax
Deposits or such excess contributions, adjusted for any income or loss allocable
thereto, shall be returned to the Participant, as provided in Section 4.5.
20
(a) The Compensation Deferral Contributions by Participants for a Plan
Year shall satisfy the Actual Deferral Percentage Test set forth in (i)
below, or, to the extent not precluded by applicable regulations, the
alternative Actual Deferral Percentage test set forth in (ii) below:
(i) The average Actual Deferral Percentage of Highly Compensated
Participants for the Plan Year shall not be more than the prior Plan
Year's average Actual Deferral Percentage of Participants who were not
Highly Compensated Employees for the prior Plan Year multiplied by
1.25, or
(ii) The average Actual Deferral Percentage of Highly Compensated
Participants for the Plan Year shall not be more than the prior Plan
Year's Actual Deferral Percentage of Participants who were not Highly
Compensated Employees for the prior Plan Year multiplied by 2.0,
provided that the average Actual Deferral Percentage of Highly
Compensated Participants does not exceed the average Actual Deferral
Percentage of Participants who were not Highly Compensated Employees
for the prior Plan Year by more than two (2) percentage points.
(b) Notwithstanding any other provisions of the Plan, for the purposes
of the limitations of this Section 4.3 and Section 4.5 only, the following
definitions shall apply:
(i) "Actual Deferral Percentage" shall mean, with respect to the
group of Highly Compensated Participants and the group of all other
Participants for a Plan Year, the ratios calculated separately and to
the nearest one-hundredth of one percent for each Participant in such
group, as follows:
(A) For a Highly Compensated Participant, the ratio of such
Participant's Compensation Deferral Contributions for the current
Plan Year to such Participant's Compensation for the current Plan
Year; provided, however, that the Actual Deferral Percentage of a
Highly Compensated Participant with no Compensation Deferral
Contributions made on his or her behalf shall be zero.
(B) For any other Participant, the ratio of such
Participant's Compensation Deferral Contributions for the
preceding Plan Year to such Participant's Compensation for the
preceding Plan Year; provided, however, that the Actual Deferral
Percentage of a Participant with no Compensation Deferral
Contributions made on his or her behalf shall be zero.
To the extent determined by the Committee and in accordance with
regulations issued by the Secretary of the Treasury, qualified
nonelective contributions on behalf of a Participant that satisfy the
requirements of Code Section 401(k)(3)(c)(ii) may also be taken into
account for the purpose of determining the Actual Deferral Percentage
of a Participant.
(ii) "Highly Compensated Participant" shall mean for any Plan
Year any Participant who is a Highly Compensated Employee. A
Participant is a Highly Compensated Employee for a particular Plan
Year if he or she meets the definition of a Highly Compensated
Employee in effect for that Plan Year.
21
Similarly, a Participant is not a Highly Compensated Employee for a
particular Plan Year if he or she does not meet the definition of a
Highly Compensated Employee in effect for that Plan Year.
(iii) "Participant" shall mean any Eligible Employee who
satisfied the requirements of Section 3.1 during the Plan Year,
whether or not such Eligible Employee has elected to contribute to the
Plan for such Plan Year.
(iv) "Compensation Deferral Contributions" shall mean amounts
contributed to the Plan by a Participant as Before Tax Deposits
pursuant to Section 4.2(a), including excess Before Tax Deposits (as
defined in Section 4.4(a)) of Highly Compensated Participants but
excluding (1) excess Before Tax Deposits of all other Participants
that arise solely from Before Tax Deposits made under the Plan or
plans of the Company, (2) Before Tax Deposits that are taken into
account in the Actual Contribution Percentage test (as defined in
Section 6.11) provided that the Actual Deferral Percentage test is
satisfied both with and without exclusions of these Before Tax
Deposits, and (3) any deferrals properly distributed as excess Annual
Additions. Compensation Deferral Contributions may include, at the
election of the Company, any Company Contributions that meet the
requirements for such inclusion under Code Section 401(k)(3)(C).
(v) "Compensation" shall mean compensation as described below:
(A) Compensation means compensation determined by the
Company in accordance with the requirements of Code Section
414(s) and the regulations thereunder.
(B) For purposes of this Section 4.3, Compensation may, at
the Company's election, exclude amounts which are excludable from
a Participant's gross income under Code Section 125 (pertaining
to cafeteria plans) and Code Section 402(e)(3) (pertaining to
401(k) salary reductions). The Company may change its election
provided such change does not discriminate in favor of Highly
Compensated Employees.
(C) Compensation taken into account for any Plan Year shall
not exceed $210,000, as adjusted for cost-of-living increases in
accordance with Code Section 401(a)(17)(B). Any cost-of-living
adjustments in effect for a calendar year shall apply to the Plan
Year beginning with or within such calendar year.
(c) In the event the Plan satisfies the requirements of Code Sections
401(k), 401(a)(4) or 410(b) only if aggregated with one or more other plans
which include arrangements under Code Section 401(k), then this Section 4.3
shall be applied by determining the Actual Deferral Percentages of
Participants as if all such plans were a single plan, in accordance with
regulations prescribed by the Secretary of the
22
Treasury under Code Section 401(k). Any adjustments to the Actual Deferral
Percentage of Participants who are not Highly Compensated Employees for the
prior year shall be made in accordance with Notice 98-1 and any superseding
guidance. Plans may be aggregated in order to satisfy Code Sections 401(k)
only if they have the same Plan Year and use the same Actual Deferral
Percentage testing method.
(d) For the purposes of this Section 4.3, the "Actual Deferral
Percentage" for any Highly Compensated Participant who is a Participant
under two or more Code Section 401(k) arrangements of the Company shall be
determined by taking into account the Highly Compensated Participant's
compensation under each such arrangement and contributions under each such
arrangement which qualify for treatment under Code Section 401(k), in
accordance with regulations prescribed by the Secretary of the Treasury
under Code Section 401(k). If the arrangements have different Plan Years,
this paragraph shall be applied by treating all such arrangements ending
with or within the same calendar year as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as separate
plans if mandatorily disaggregated pursuant to regulations under Code
Section 401(k).
(e) For purposes of the Actual Deferral Percentage test, Compensation
Deferral Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which such contributions
relate.
(f) The determination and treatment of Compensation Deferral
Contributions and the Actual Deferral Percentage of any Participant shall
satisfy such other requirements as may be prescribed by the Secretary of
the Treasury.
(g) The Committee shall keep or cause to have kept such records as are
necessary to demonstrate that the Plan satisfies the requirements of Code
Section 401(k) and (m) and the regulations thereunder, in accordance with
regulations prescribed by the Secretary of the Treasury.
4.4 Provisions for Return of Excess Before Tax Deposits.
(a) In the event that due to error or otherwise, an amount of a
Participant's Compensation in excess of the Before Tax Deposit Limit (after
application of any necessary adjustment) described in Section 4.2(a) is
deferred under the Plan in any calendar year pursuant to such Participant's
Compensation deferral agreement (but without regard to amounts deferred
under any other plan) the excess Before Tax Deposits, if any, together with
income allocable to such amount shall be returned to the Participant (after
withholding applicable federal, state and local taxes due on such amounts)
on or before the first April 15 following the close of the calendar year in
which such excess contribution is made; provided, however, if there is a
loss allocable to the excess Before Tax Deposits, the amount distributed
shall be the amount of the excess as adjusted to reflect such loss. Any
Matching Contributions allocated to the Participant's Matched Deposits
pursuant to Section 6.3(b) which are attributable to any excess Before Tax
Deposits by a Participant, and any income or loss allocable to such
Matching
23
Contributions, shall either be returned to the Company or applied to reduce
any future Matching Contributions by the Company.
(b) The amount of income or loss attributable to any excess Before Tax
Deposits described in paragraph (a) above shall be equal to the sum of the
following:
(i) The income or loss allocable to the Participant's Before Tax
Deposits Account for the Plan Year multiplied by a fraction, the
numerator of which is the excess Before Tax Deposits as determined
under paragraph (a) above, and the denominator of which is the balance
of the Participant's Before Tax Deposits Account as of the last day of
the Plan Year, without regard to any income or loss allocable to such
Account during the Plan Year; and
(ii) The amount of allocable income or loss for the Gap Period
using the "safe harbor" method set forth in regulations prescribed by
the Secretary of the Treasury under Code Section 402(g). Under the
"safe harbor" method, such allocable income or loss is equal to 10% of
the amount calculated under Section 4.4(b)(i) above, multiplied by the
number of calendar months from the last day of the Plan Year until the
date of distribution of the Participant's excess Before Tax Deposits.
A distribution on or before the 15th of the month is treated as made
on the last day of the preceding month, a distribution after the 15th
of the month is treated as made on the first day of the next month.
(c) For the purpose of this Section 4.4, "Gap Period" shall mean the
period between the last day of the Plan Year and the date of distribution
of any excess Before Tax Deposits.
(d) In accordance with procedures as may be established, either in
writing or in practice, by the Committee, not later than March 1 of a
calendar year a Participant may submit a claim to the Committee in which he
or she certifies in writing the specific amount of his or her Before Tax
Deposits for the preceding calendar year which, when added to amounts
deferred for such calendar year under other plans or arrangements described
in Code Sections 401(k), 408(k) or 403(b), shall cause the Participant to
exceed the Before Tax Deposit Limit (after application of any necessary
adjustment) described in Section 4.2(a) for such preceding calendar year.
Notwithstanding the amount of the Participant's Before Tax Deposits under
the Plan for such preceding calendar year, the Committee shall treat the
amount specified by the Participant in his or her claim as a Before Tax
Deposit in excess of the Before Tax Deposit Limit (after application of any
necessary adjustment) for such calendar year and return it to the
Participant in accordance with Section 4.4(a) above. A Participant is
deemed to notify the Committee of any excess Before Tax Deposits that arise
by taking into account only those Before Tax Deposits made to the Plan and
other plans of the Company.
(e) Any Before Tax Deposits in excess of the Before Tax Deposit Limit
(after application of any necessary adjustment) described in Section 4.2(a)
which are distributed to a Participant in accordance with this Section,
shall to the extent required by regulations
24
issued by the Secretary of the Treasury be treated as Annual Additions
under Article XIII for the Plan Year for which the excess Before Tax
Deposits were made, unless such amounts are distributed no later than the
first April 15th following the close of the Participant's taxable year.
(f) The Committee shall not be liable to any Participant (or his or
her Beneficiary, if applicable) for any losses caused by a mistake in
calculating the amount of any Participant's excess Before Tax Deposits or
the income or losses attributable thereto.
4.5 Provision for Recharacterization or Return of Excess Deferrals by
Highly Compensated Participants. The provisions of this Section 4.5 shall be
applied after implementation of the provisions of Section 4.4.
(a) The Committee shall determine in accordance with the procedures
set forth in Section 4.3, as soon as is reasonably possible following the
close of each Plan Year, the extent (if any) to which deferral treatment
under Code Section 401(k) may not be available for Compensation Deferral
Contributions on behalf of any Highly Compensated Participants. If,
pursuant to these determinations by the Committee, a Highly Compensated
Participant's Compensation Deferral Contributions are not eligible for
tax-deferral treatment then, as determined by the Committee, either (i) any
excess Compensation Deferral Contributions shall be recharacterized as
After Tax Deposits in accordance with regulations issued under Code Section
401(k), or (ii) any excess Compensation Deferral Contributions together
with any income or loss allocable thereto shall be returned to the Highly
Compensated Participant (after withholding applicable federal, state, and
local taxes due on such amounts). Such return or recharacterization shall
be made within the first two and one-half (2-1/2) months following the
close of the Plan Year for which such excess deferrals were made, provided
however, that if any excess deferrals and income or loss allocable thereto
are, due to error or otherwise, not returned by such date, such amounts as
are required to be returned shall be returned not later than the end of the
first Plan Year following the Plan Year for which such excess deferrals
were made.
(b) For purposes of satisfying the Actual Deferral Percentage test of
Section 4.3(a), the amount of any excess Compensation Deferral
Contributions by a Highly Compensated Participant shall be determined by
the Committee by application of a leveling method under which the
Compensation Deferral Contributions of the Highly Compensated Participant
who has the highest dollar amount of Compensation Deferral Contributions
for such Plan Year is reduced to the extent required to cause such Highly
Compensated Participant's Compensation Deferral Contributions to equal the
Compensation Deferral Contributions of the Highly Compensated Participant
with the next highest Compensation Deferral Contributions; provided,
however, if a lesser amount, when added to the total dollar amount already
returned under this paragraph (b), equals the total excess Compensation
Deferral Contributions that are required to be returned to enable the Plan
to satisfy the Actual Deferral Percentage test, the lesser amount shall be
returned. This process shall be repeated until the Plan satisfies the
Actual Deferral Percentage test.
25
(c) The amount of income or loss attributable to any excess
Compensation Deferral Contributions by a Highly Compensated Participant for
a Plan Year shall be equal to the sum of the following:
(i) The income or loss allocable to the Highly Compensated
Participant's Compensation Deferral Contribution Accounts for the Plan
Year multiplied by a fraction, the numerator of which is the excess
Compensation Deferral Contribution as determined under Section 4.3,
and the denominator of which is the balance of the Highly Compensated
Participant's Compensation Deferral Contribution Accounts as of the
last day of the Plan Year without regard to any income or loss
allocable to such Accounts during the Plan Year; and
(ii) The amount of allocable income or loss for the Gap Period
using the "safe harbor" method set forth in the regulations prescribed
by the Secretary of the Treasury under Code Section 401(k). Under the
"safe harbor" method, such allocable income or loss is equal to 10% of
the amount calculated under Section 4.5(c)(i) above, multiplied by the
number of calendar months from the last day of the Plan Year until the
date of distribution of the Participant's excess Compensation Deferral
Contribution. A distribution on or before the 15th of the month is
treated as made on the last day of the preceding month, a distribution
after the 15th of the month is treated as made on the first day of the
next month.
(d) For the purpose of this Section 4.5 the following shall apply:
(i) "Compensation Deferral Contribution Accounts" shall mean the
Participant's Before Tax Deposits Account and shall mean any other
accounts of the Participant to which Company Contributions has been
allocated where such Company Contributions has been included as
Compensation Deferral Contributions pursuant to Section 4.3(b)(iv).
(ii) "Gap Period" shall mean the period beginning with the last
day of the Plan Year and the date of distribution of any excess
Compensation Deferral Contributions.
(e) For purposes of this Section, the amount of Compensation Deferral
Contributions by a Participant who is not a Highly Compensated Participant
for a Plan Year shall be reduced by any Before Tax Deposits which have been
distributed to the Participant under Section 4.4, in accordance with
regulations prescribed by the Secretary of the Treasury under Code Section
401(k).
(f) In the event that the Committee determines that an amount to be
deferred pursuant to the Compensation deferral agreement provided in
Section 4.1 would cause Company Contributions under this and any other
tax-qualified retirement plan maintained by the Company to exceed the
applicable deduction limitations contained in Code Section 404, or to
exceed the maximum Annual Addition determined in accordance with
26
Article XIII, the Committee may treat such amount in accordance with the
rules set forth above in Section 4.5(a).
(g) The Committee shall not be liable to any Participant (or his or
her Beneficiary, if applicable) for any losses caused by a mistake in
calculating the amount of any Participant's excess Compensation Deferral
Contribution or the income or losses attributable thereto.
(h) To the extent required by regulations under Code Sections 401(k)
or 415, any excess Compensation Deferral Contributions with respect to a
Highly Compensated Participant shall be treated as Annual Additions under
Article XIII for the Plan Year for which the excess Compensation Deferral
Contributions were made, notwithstanding the distribution of such excess in
accordance with the provisions of this Section.
4.6 Termination, Change in Rate, or Resumption of Before Tax Deposits or
After Tax Deposits.
(a) A Participant may, at any time, terminate, change the rate, or
resume Before Tax Deposits or After Tax Deposits in 1% increments.
(b) The right of a Participant to make Before Tax Deposits or After
Tax Deposits shall cease during any Period of Severance.
(c) Any termination, change in rate or resumption of Before Tax
Deposits or After Tax Deposits made by a Participant pursuant to paragraph
(a) above shall be effective as of the following pay period or, if later,
as soon as administratively feasible.
4.7 Character of Deposits. Before Tax Deposits shall be treated as Company
Contributions for purposes of Code Sections 401(k) and 414(h). After Tax
Deposits shall not constitute "qualified voluntary employee contributions" under
Code Section 219 (relating to the deductibility of those amounts).
4.8 Rollover Contributions.
(a) Pursuant to procedures as the Committee may prescribe (either in
writing or practice), an Eligible Employee may make a Direct Rollover
Contribution, a Participant Rollover Contribution, or an IRA Rollover
Contribution to the Plan.
(b) A "Direct Rollover Contribution" shall mean a contribution by an
Eligible Employee which is a direct rollover of an Eligible Rollover
Distribution from:
(i) A qualified plan described in Code Section 401(a) or 403(a)
including any portion attributable to after-tax employee contributions
which shall be separately accounted for under the Plan;
27
(ii) An annuity contract described in Code Section 403(b) but
excluding any portion attributable to after-tax employee
contributions; or
(iii) An eligible plan under 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.
(c) A "Participant Rollover Contribution" shall mean a contribution by
an Eligible Employee which is an Eligible Rollover Distribution (excluding
any portion attributable to after-tax employee contributions) received by
the Trustee not later than 60 days after such distribution was received by
the Eligible Employee; provided, such Eligible Rollover Distribution is
from:
(i) A qualified plan described in Code Section 401(a) or 403(a);
(ii) An annuity contract described in Code Section 403(b); or
(iii) An eligible plan under 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.
(d) An "IRA Rollover Contribution" shall mean a contribution by an
Eligible Employee which is a distribution (excluding any portion
attributable to after-tax employee contributions) from an individual
retirement account or annuity described in Code Section 408(a) or 408(b)
received by the Trustee not later than 60 days after such distribution was
received by the Eligible Employee or received by the Plan through a direct
trustee-to-trustee transfer from such individual retirement arrangement or
annuity.
(e) Pursuant to procedures as the Committee may prescribe (either in
writing or practice), a former Eligible Employee who commenced
participation in the Plan pursuant to Section 3.1 may make Rollover
Contributions to the Plan from his or her account in the Allergan, Inc.
Employee Stock Ownership Plan so long as he or she retains rights under the
Plan.
(f) An Eligible Employee's Rollover Contributions made pursuant the
rules of this Section 4.8 shall be held in a separate Rollover
Contributions Account for the Eligible Employee. A Rollover Contributions
Account shall not share in any allocations of Company Contributions or
Forfeitures under Section 6.3.
28
ARTICLE V
TRUST FUND AND COMPANY CONTRIBUTIONS
5.1 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.
5.2 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 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.
5.3 Matching Contributions. Subject to the limitations of Article XIII, the
suspension provisions of Section 8.1 and to the extent that the Company has
current or accumulated profits, the Company shall make Matching Contributions to
the Plan on behalf of Participants in accordance with the following rules:
(a) The Company shall contribute and allocate Matching Contributions
on a pay period basis which, when added to Matching Contribution
Forfeitures available after application of Section 6.3, is equal to 100% of
each Participant's Matched Deposits for the pay period. The Board of
Directors, acting upon the advice and direction of the Committee, may
authorize and direct that Matching Contributions (expressed as a percentage
of Participants' Matched Deposits as set forth above) be changed from time
to time from a minimum of 0% to a maximum of 100%.
(b) As of a date not later than the last day of each Plan Year, the
Company shall contribute and allocate on behalf of each Eligible
Participant, additional Matching Contributions which, when added to
Matching Contribution Forfeitures available after application of Section
6.3, is equal to the difference, if any, between the amount of each
Eligible Participant's Matching Contributions determined under paragraph
(a) and the amount of such Eligible Participant's Matching Contributions if
paragraph (a) was applied on a Plan Year basis instead of a pay period
basis. For the purpose of this paragraph (b), the term "Eligible
Participant" shall include only those Participants who are Eligible
Employees on the first and last business day of the Plan Year and who did
not incur a Severance during the Plan Year.
(c) The Company shall contribute amounts sufficient to satisfy the
Matching Contributions reinstatement requirements of Section 8.7 to the
extent Matching Contribution Forfeitures are insufficient to satisfy the
reinstatement requirement of Section 8.7 if so directed and at such times
as may be determined by the Committee.
29
5.4 Retirement Contributions. Subject to the limitations of Article XIII
and to the extent that the Company has current or accumulated profits, the
Company shall make Retirement Contributions to the Plan on behalf of Retirement
Account Participants in accordance with the following rules:
(a) The Company shall contribute and allocate Retirement Contributions
on a Plan Year basis for each Retirement Account Participant who is
employed by the Company or an Affiliated Company on the last day of such
Plan Year or who incurred a Severance during the Plan Year by reason of
Disability, death, or retirement on or after age 55; the amount of which,
when added to Retirement Contribution Forfeitures available after the
application of Section 6.3, shall be equal to five percent (5%) of the
Retirement Account Participant's Compensation (as adjusted pursuant to
paragraph (c) below) for such Plan Year. A Retirement Account Participant's
Compensation received while such Retirement Account Participant is an
inactive Participant as defined in Section 3.2(b) or an "Active
Participant" in the Allergan, Inc. Pension Plan as such term is defined
therein or while he or she is not an Eligible Employee shall not be taken
into account in determining such Participant's Retirement Contributions.
(b) Retirement Contributions contributed on behalf of Retirement
Account Participants shall be allocated to the Retirement Contributions
Account of such Retirement Account Participants as of the last day of each
Plan Year and shall be paid to the Trust at such times as determined by the
Sponsor.
(c) Solely for the purpose of determining Retirement Contributions
pursuant to this Section 5.4, a Retirement Account Participant's
Compensation shall include his or her "Annual Deferrals" (as defined in the
Allergan, Inc. Executive Deferred Compensation Plan) for the Plan Year.
(d) The Company shall contribute amounts sufficient to satisfy the
Retirement Contributions reinstatement requirements of Section 8.7 to the
extent Retirement Contribution Forfeitures are insufficient to satisfy the
reinstatement requirement of Section 8.7 if so directed and at such times
as may be determined by the Committee.
5.5 Form of Company Contributions. Company Contributions to the Trust Fund
shall be paid in cash, property, or Company Stock as the Sponsor may from time
to time determine.
5.6 Investment of Trust Assets.
(a) The manner in which assets of the Trust will be invested shall be
chosen by the Committee at its discretion, although the Committee may
delegate the management to one or more Investment Managers appointed
pursuant to Section 5.16. Notwithstanding the foregoing, Matching
Contributions shall be invested in Company Stock except to the extent
invested pursuant to Section 5.6(e).
(b) The Committee may establish separate investment funds under the
Plan, with each fund representing an investment alternative available to
Participants for the
30
investment of their Accounts as provided in Section 5.6(c) and (d) below.
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 Committee may, at its
discretion, establish alternative investment funds or eliminate any
previously established funds, including but not limited to the following
types of investment funds:
(i) The Interest Income Fund investing in group annuity contracts
with major insurance companies.
(ii) The Balanced Fund investing in common stocks, bonds,
government securities and similar types of investments.
(iii) The Equity Fund investing in a mutual fund which may invest
in equity securities, bonds, preferred stocks, and interest-bearing
cash investments.
(iv) The Company Stock Fund consisting exclusively of Company
Stock.
(v) The AMO Stock Fund consisting exclusively of AMO Stock.
Notwithstanding the establishment of separate investment funds, up to
one hundred percent (100%) of the assets of the Plan may be invested in
Company Stock.
(c) A Participant may elect the investment fund to which his or her
Participant Deposits or Retirement Contributions are invested under the
Plan or may change such elections at any time; provided, however, that any
allocations among the investment funds shall be made in 1% increments. Any
change in investment funds shall be effective as soon as administratively
feasible. Any investment elections shall be limited to the investment funds
currently offered and currently available to Participants as determined by
the Committee pursuant to paragraphs (a) and (b) above. A Participant shall
effect an investment election by properly completing and submitting the
form authorized by the Committee for this purpose.
(d) A Participant may elect at any time to transfer amounts
accumulated in his or her Accounts among any of the investment funds
currently offered and currently available to Participants as determined by
the Committee pursuant to paragraphs (a) and (b) above; provided, however,
the total amount transferred shall be made in 1% increments of the amount
accumulated in the investment fund. Any transfer among investment funds
shall be effective as soon as administratively feasible. A Participant
shall effect a transfer election by properly completing and submitting the
form authorized by the Committee for this purpose.
(e) Notwithstanding the requirement of paragraph (a) above that
Matching Contributions be invested in the Company Stock Fund, (i) any
Participant may elect that amounts accumulated in his or her Matching
Contributions Account which are held in the
31
Company Stock Fund be reinvested and (ii) any Participant on or after the
date he or she attains age 55 may elect that any future Matching
Contributions be invested, in any of the investment funds currently offered
and currently available to Participants as determined by the Committee
pursuant to paragraphs (a) and (b) above. An election made under this
paragraph (e) shall be effective as soon as administratively feasible. A
Participant shall make any election, and may change any election, at such
times and in accordance with the requirements imposed by paragraphs (c) and
(d) above.
(f) Amounts invested in any one of the investment funds shall not
share in gains and losses experienced by any other fund.
(g) Notwithstanding the establishment of separate investment funds
within the Trust, the Trust shall at all times constitute a single trust.
(h) Notwithstanding anything to the contrary in this Section 5.6 or
Section 4.1 or Section 8.1, the following additional transfer and
withdrawal restrictions shall apply to all Participants who are Insiders.
For the purpose of this Section 5.6, the term "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 (the "Exchange Act") or who is a
"director" or an "officer" of the Sponsor or the Company as those terms are
interpreted for the purpose of determining persons subject to Section 16 of
the Exchange Act.
(i) Any Insider who transfers amounts invested in the Company
Stock Fund out of such fund and into another fund or withdraws cash in
a transaction that results in the liquidation of amounts in the
Company Stock Fund (pursuant to Sections 8.1 or 8.13), may not for a
period of six months following the Participant's election to so
transfer funds, withdraw cash or take a loan, as the case may be, make
an election to transfer amounts from another fund into the Company
Stock Fund.
(ii) Any Insider who transfers amounts invested in a fund other
than the Company Stock Fund into the Company Stock Fund, may not for a
period of six months following the Participant's election to so
transfer funds make an election to (1) transfer amounts from the
Company Stock Fund into another fund, (2) withdraw cash or take a loan
in a transaction that results in the liquidation of amounts in the
Company Stock Fund or (3) utilize the diversification rule of Section
5.12 of the Allergan Inc. Employee Stock Ownership 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.
(i) It is intended that to the extent a Participant may direct the
investment of his or her Accounts under the Plan that the Plan constitute a
plan described in Section 404(c) of ERISA and the regulations thereunder,
and neither the Company,
32
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
Accounts is to be invested. The fact that an investment option is offered
shall not be construed to be a recommendation of investment.
(j) 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 5.9
(Certain Offers for Company Stock); Section 5.10 (Voting of Company Stock);
Section 5.11 (Securities Law Limitation); Section 5.16 (Appointment of
Investment Manager); Section 6.4 (Valuation of Participants' Accounts);
Section 6.5 (Valuation of Company Stock); Section 6.6 (Dividends, Splits,
Recapitalizations, Etc.); Section 6.7 (Stock Rights, Warrants or Options);
Section 6.9 (Cash Dividends); Section 6.10 (Miscellaneous Allocation
Rules); Section 9.1 (Appointment of Committee); Section 9.2 (Appointment of
Investment Subcommittee); Section 9.7 (Additional Powers of Committee); and
Section 9.14 (Compensation of Committees and Plan Expenses), as applicable.
5.7 Irrevocability. The Company shall have no right or title to, nor
interest in, the contributions made to the Trust Fund, and no part of the Trust
Fund shall revert to the Company except that on or after the Original Effective
Date funds may be returned to the Company as follows:
(a) In the case of Company Contributions which are made by a mistake
of fact and at the Sponsor's written request, such contributions shall be
returned to the Company as directed by the Sponsor within one (1) year
after it is made.
(b) All Company Contributions contributed to the Trust are hereby
conditioned upon the Plan satisfying all of the requirements of Code
Section 401(a). If the Plan does not qualify, the Plan may be revoked at
the Sponsor's written election and all such contributions shall be returned
to the Company as directed by the Sponsor within one year after the date of
Internal Revenue Service denial of the qualification of the Plan. Upon such
a revocation the affairs of the Plan and Trust shall be terminated and
wound up as the Sponsor shall direct.
(c) All Company Contributions to the Plan are conditioned upon the
deductibility of those contributions 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) In the event that the Plan is terminated when there are amounts
remaining in the Suspense Account, the excess funds shall revert to the
Company as directed by the Sponsor to the extent provided in Section 13.6.
33
5.8 Company, Committee and Trustee Not Responsible for Adequacy of Trust
Fund.
(a) The Company, Committee, and the Trustee shall not be liable or
responsible for the adequacy of the Trust Fund to meet and discharge any or
all payments and liabilities hereunder. All Plan benefits will be paid only
from the Trust assets, and neither the Company, the Committee nor the
Trustee shall have any duty or liability to furnish the Trust with any
funds, securities or other assets except as expressly provided in the Plan.
(b) Except as required under the Plan or Trust or under Part 4 of
Subtitle B of Title I of ERISA, the Company shall not be responsible for
any decision, act or omission of the Trustee, the Committee, or the
Investment Manager (if applicable), and shall not be responsible for the
application of any moneys, securities, investments or other property paid
or delivered to the Trustee.
5.9 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"), 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 by each Participant with respect to shares of Company Stock
that are allocated to such Participant's Accounts.
(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.
(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
34
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 paragraph (a) 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
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
35
Offer pursuant to paragraph (a). The identities of Participants, the amount
of Company Stock allocated to their 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 paragraph
(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, (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 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
36
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 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 Accounts under the Plan solely for purposes of
exercising the rights of a shareholder with respect to an Offer pursuant to
this Section 5.9 and voting rights pursuant to Section 5.10.
(n) To the extent that an Offer results in the sale of Company Stock
in the Trust, the Committee or the Participants, if so permitted under the
terms of the Plan, shall instruct the Trustee as to the investment of the
proceeds of such sale.
(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.
5.10 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 from either the Committee or Participants, depending on who has
the right to direct the voting of such Company Stock as provided in the
following provisions of this Section 5.10.
(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 5.10(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, each
37
Participant shall be entitled to direct the Trustee as to the voting
of all Company Stock allocated and credited to his or her Accounts.
(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, each Participant shall be entitled to direct
the Trustee as to the voting of all Company Stock allocated and
credited to his or her Accounts.
(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 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 any Company Stock credited to his or her Accounts, 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
5.10 or certain Offers pursuant to Section 5.9.
38
(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 Section 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.
5.11 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.
5.12 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 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.
5.13 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.
39
5.14 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 5.9(l) and
5.10(c)).
5.15 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 5.9(l) and
5.10(c)).
5.16 Appointment of Investment Manager. From time to time the Committee, in
accordance with Section 9.7 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.
40
ARTICLE VI
ACCOUNTS AND ALLOCATIONS
6.1 Participants' Accounts. In order to account for the allocated interest
of each Participant in the Trust Fund, there shall be established and maintained
for each Participant (making such form of contribution) a Before Tax Deposits
Account, an After Tax Deposits Account, a Matching Contributions Account, a
Retirement Contributions Account, and a Rollover Contributions Account.
6.2 Allocation of Participant Deposits. All Participant Deposits shall be
allocated to the separate Accounts established and maintained for that
Participant. Participant Deposits shall be paid by the Company to the Trustee as
soon as the amount can reasonably be identified and separated from the Company's
other assets, but in any event no later than the 15th business day of the month
following the month in which such amounts would otherwise be payable to the
Participant, or such other time provided in applicable regulations under the
Code or ERISA.
6.3 Allocation of Company Contributions and Forfeitures. Company
Contributions and Forfeitures shall be allocated as follows:
(a) Matching Contributions shall be allocated to the Matching
Contributions Accounts of all Participants who made Matched Deposits in
such amounts and at such times as provided in Sections 5.3(a) and 5.3(b).
(b) Retirement Contributions shall be allocated to the Retirement
Contributions Accounts of all Retirement Account Participants in such
amounts and at such times as provided in Sections 5.4(a) and 5.4(b).
(c) Matching Contribution Forfeitures and Retirement Contribution
Forfeitures shall first be used to restore the Matching Contributions
Accounts of rehired Participants and the Retirement Contributions Accounts
of rehired Retirement Account Participants, respectively, if so required
under Section 8.7 and shall then be allocated to the Matching Contributions
Accounts of Participants and Retirement Contributions Accounts of
Retirement Account Participants, respectively, to the extent necessary to
correct insufficient allocations made to such Accounts in prior months
discovered during the Plan Year to which such Forfeitures are attributable.
(d) After application of paragraph (c) above, any remaining Matching
Contribution Forfeitures and Retirement Contribution Forfeitures shall be
used to reduce Matching Contributions and Retirement Contributions,
respectively, made by the Company pursuant to Sections 5.3 and 5.4 unless
applied towards plan expenses consistent with the allocation described
under Section 9.14.
(e) Any other Company Contributions shall be used to restore the
Accounts of rehired Participants if so required under Section 8.7 and to
the extent Forfeitures are
41
unavailable. Any amounts remaining may be used to pay Plan expenses to the
extent described in Section 9.14.
The allocations of Company Contributions under this Section 6.3 shall be
made only after any allocations required by Sections 6.10 and 13.4 have been
made.
6.4 Valuation of Participants' Accounts. Within sixty (60) days after each
Valuation Date the Trustee shall value the assets of the Trust on the basis of
fair market values. Company Stock held by the Trust shall be valued in
accordance with Section 6.5. If separate investment funds are maintained under
the Trust pursuant to Section 5.6(b) then each such fund shall be valued
separately so that gains or losses of the various funds shall not be commingled.
Upon receipt of these valuations from the Trustee, the Committee shall revalue
the Accounts and subaccounts (as established pursuant to Section 5.6(b)), if
any, of each Participant as of the applicable Valuation Date so as to reflect,
among other things, a proportionate share in any increase or decrease in the
fair market value of the assets in the Trust Fund, determined by the Trustee as
of that date as compared with the value of the assets in the Trust Fund as of
the immediately preceding Valuation Date.
6.5 Valuation of Company Stock. Company Stock held by the Trust shall be
valued according to the following rules:
(a) In the case of Company Stock that is publicly traded on a national
securities exchange, such stock shall be valued by reference to the closing
price of such stock on such exchange on the last trading day of the month
for which such stock is being valued.
(b) In the case of Company Stock that is not publicly traded on a
national securities exchange, such stock shall be valued as of the first
day of each Plan Year, or such other time as established by the Committee,
by determining the fair market value of such stock through the use of an
independent appraiser. Such fair market valuation shall be used to
determine the valuation of each Participant's Company Stock Account on each
Valuation Date in such Plan Year pursuant to Section 6.4.
6.6 Dividends, Splits, Recapitalizations, Etc. Any Company Stock received
by the Trustee as a stock split, dividend, or as a result of a reorganization or
other recapitalization of the Company shall be allocated in the same manner as
the Company Stock to which it is attributable is then allocated.
6.7 Stock Rights, Warrants or Options.
(a) In the event any rights, warrants, or options are issued on
Company Stock held in the Trust Fund, the Trustee shall exercise them for
the acquisition of additional Company Stock as directed by the Committee to
the extent that cash is then available in the Trust Fund.
42
(b) Any Company Stock acquired in this fashion shall be treated as
Company Stock purchased by the Trustee for the net price paid and shall be
allocated in the same manner as the funds used to purchase the Company
Stock were or would be allocated under the provisions of the Plan. Thus, if
the funds used to purchase the stock consisted of unallocated Company
Contributions, the stock would be allocated under the terms of Section 6.3;
if the funds used consisted of the unallocated net income of the Trust, the
stock would be allocated as provided in Section 6.4; and if the funds used
consisted of funds previously allocated to the Accounts, the stock would be
allocated in the manner in which the Accounts or subaccounts are debited
and credited.
(c) Any rights, warrants, or options on Company Stock which cannot be
exercised for lack of cash may, as directed by the Committee, be sold by
the Trustee and the proceeds allocated in accordance with the source of the
Company Stock with respect to which the rights, warrants, or options were
issued in accordance with rules of paragraph (b) above.
6.8 Treatment of Accounts Upon Severance. Upon a Participant's Severance,
pending distribution of the Participant's benefit pursuant to the provisions of
Article VIII, the Participant's Accounts shall continue to be maintained and
accounted for in accordance with all applicable provisions of the Plan,
including but not limited to the allocation of Company Contributions and net
income or loss to which the Accounts are entitled under the applicable
provisions of Sections 6.3 and 6.4 as of any Valuation Date or other date
preceding the distribution of the Participant's entire benefit under the Plan.
6.9 Cash Dividends.
(a) All cash dividends paid to the Trustee with respect to Company
Stock that has been allocated to a Participant's Account as of the
quarterly date on which the dividend is received by the Trustee shall be
allocated to the Participant's Account.
(b) If a Participant (or Beneficiary) has a current right to a
distribution in Company Stock pursuant to Article VIII and such stock has
not yet been re-registered in the name of the Participant (or Beneficiary)
as of the record date of any dividend on such stock, such dividend shall be
distributed to the Participant (or Beneficiary).
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
the Committee may determine, in its discretion, that cash dividends on such
shares may be used to purchase additional shares of Company Stock, or in
whatever other manner it deems appropriate.
6.10 Miscellaneous Allocation Rules.
(a) In the event that there is more than one class of Company Stock to
be allocated to Participants' Accounts, there shall be allocated to the
Account of each Participant (entitled to share in allocations of Company
Stock as of any applicable date) the portion of each class of Company Stock
(to be allocated as of that date) which the
43
amount to be allocated to the Account of the Participant bears to the total
amount to be allocated to the Accounts of all Participants entitled to
share in such allocation.
(b) Allocations of all assets other than Company Stock shall be made
on the basis of, and expressed in terms of dollar value. Allocations of
Company Stock shall be on the basis of the number of shares of Company
Stock (including fractional shares) and valuations, as of each Valuation
Date, shall be expressed in terms of number of shares and dollar value.
(c) The Committee and the Trustee shall establish such additional
accounting procedures as may be necessary for the purpose of making the
allocations, valuations, withdrawals, and adjustments to Participants'
Accounts provided for in this Article VI. From time to time the Committee
and Trustee may modify such additional accounting procedures for the
purpose of achieving equitable, nondiscriminatory, and administratively
feasible allocations among the Accounts of Participants in accordance with
the general concepts of the Plan and the provisions of this Article VI.
(d) The Company, the Committee and Trustee do not in any manner or to
any extent whatsoever warrant, guarantee or represent that the value of a
Participant's Account shall at any time equal or exceed the amount
previously contributed thereto.
6.11 Limitations on After Tax Deposits and Matching Contributions. With
respect to each Plan Year, After Tax Deposits and Matching Contributions under
the Plan for the Plan Year shall not exceed the limitations by or on behalf of
Highly Compensated Participants under Code Section 401(m), as provided in this
Section. In the event that After Tax Deposits and Matching Contributions under
the Plan by or on behalf of Highly Compensated Participants for any Plan Year
exceed the limitations of this Section for any reason, such excess After Tax
Deposits and Matching Contributions and any income or loss allocable thereto
shall be disposed of in accordance with Section 6.12.
(a) The After Tax Deposits by Participants and Matching Contributions
on behalf of Participants for a Plan Year shall satisfy the Actual
Contribution Percentage test set forth in (i) below, or, to the extent not
precluded by applicable regulations, the alternative Actual Contribution
Percentage test set forth in (ii) below:
(i) The Actual Contribution Percentage of Highly Compensated
Participants for the Plan Year shall not be more than the prior Plan
Year's Actual Contribution Percentage of Participants who were not
Highly Compensated Employees for the prior Plan Year multiplied by
1.25, or
(ii) The Actual Contribution Percentage of Highly Compensated
Participants for the Plan Year shall not be more than the prior Plan
Year's Actual Contribution Percentage of Participants who were not
Highly Compensated Employees for the prior Plan Year multiplied by
2.0, provided that the Actual Contribution Percentage of Highly
Compensated Participants does not exceed the Actual Contribution
Percentage of Participants who were not Highly Compensated Employees
for the prior Plan Year by more than two (2) percentage points.
44
(iii) If one or more Highly Compensated Employees participate in
both a cash or deferred arrangement and a plan subject to the Actual
Contribution Percentage test maintained by the Sponsor or an
Affiliated Company and the sum of the Actual Deferral Percentage and
Contribution Percentage of those Highly Compensated Employees subject
to either or both test exceeds the Aggregate Limit, then the
Contribution Percentages of those Highly Compensated Employees who
also participate in the cash or deferred arrangement shall be reduced
(beginning with such Highly Compensated Employee whose Actual
Contribution Percentage is the highest) so that the limit is not
exceeded. The amount by which each Highly Compensated Employee's
Contribution Percentage is reduced shall be treated as an Excess
Aggregate Contribution. The Actual Deferral Percentage and
Contribution Percentage of the Highly Compensated Employee are
determined after any corrections required to meet the Actual Deferral
Percentage and Actual Contribution Percentage tests and are deemed to
be the maximum permitted under such tests for the Plan Year.
(b) For purposes of this Section 6.11 and Section 6.12 the following
definitions shall apply:
(i) "Actual Contribution Percentage" shall mean the average of
the Contribution Percentages, with respect to the group of Highly
Compensated Participants and the group of all other Participants for a
Plan Year. The "Contribution Percentage" for any Participant shall
mean the ratio, calculated separately and to the nearest one-hundredth
of one percent for each Participant in such group, determined as
follows:
(A) For a Highly Compensated Participant, the ratio of such
Participant's After Tax Deposits and Matching Contributions for
the current Plan Year to such Participant's Compensation for the
current Plan Year; provided, however, that the Contribution
Percentage of a Highly Compensated Participant with no After Tax
Deposits and Matching Contributions made on his or her behalf
shall be zero.
(B) For any other Participant, the ratio of such
Participant's After Tax Deposits and Matching Contributions for
the preceding Plan Year to such Participant's Compensation for
the preceding Plan Year; provided, however, that the Contribution
Percentage of a Participant with no After Tax Deposits and
Matching Contributions made on his or her behalf shall be zero.
The Contribution Percentage, in each case, however, shall not
include Matching Contributions that are forfeited either to correct
Excess Aggregate Contributions or because the contribution to which
they relate are excess Before
45
Tax Deposits, excess After Tax Deposits, or Excess Aggregate
Contributions. To the extent determined by the Committee and in
accordance with regulations issued by the Secretary of the Treasury
under Code Section 401(m)(3), Before Tax Deposits and any qualified
nonelective contributions, within the meaning of Code Section
401(m)(4)(C) on behalf of a Participant may also be taken into account
for purposes of calculating the Contribution Percentage of a
Participant. However, if any Before Tax Deposits are taken into
account for purposes of determining Actual Deferral Percentages under
Section 4.3 then such Before Tax Deposits shall not be taken into
account under this Section 6.11.
(ii) "Highly Compensated Participant" shall mean for any Plan
Year any Participant who is a Highly Compensated Employee. A
Participant is a Highly Compensated Employee for a particular Plan
Year if he or she meets the definition of a Highly Compensated
Employee in effect for that Plan Year. Similarly, a Participant is not
a Highly Compensated Employee for a particular Plan Year if he or she
does not meet the definition of a Highly Compensated Employee in
effect for that Plan Year.
(iii) "Participant" shall mean any Eligible Employee who
satisfied the requirements of Section 3.1 during the Plan Year whether
or not such Eligible Employee has elected to contribute to the Plan
for such Plan Year.
(iv) "Compensation" shall mean compensation as described below:
(A) Compensation means compensation determined by the
Company in accordance with the requirements of Code Section
414(s) and the regulations thereunder.
(B) For purposes of this Section 6.11, Compensation may, at
the Company's election, exclude amounts which are excludable from
a Participant's gross income under Code Section 125 (pertaining
to cafeteria plans) and Code Section 402(e)(3) (pertaining to
401(k) salary reductions). The Company may change its election
provided such change does not discriminate in favor of Highly
Compensated Employees.
(C) Compensation taken into account for any Plan Year shall
not exceed $210,000, as adjusted for cost-of-living increases in
accordance with Code Section 401(a)(17)(B). Any cost-of-living
adjustments in effect for a calendar year shall apply to the Plan
Year beginning with or within such calendar year.
(v) "Aggregate Limit" shall mean the sum of (1) 125 percent of
the greater of the average Actual Deferral Percentage of all
Non-Highly Compensated Participants for the Plan Year or the Actual
Contribution Percentage of Non-Highly Compensated Participants under
the Plan subject to Code Section 401(m) for the Plan Year beginning
with or within the Plan Year of the cash or deferred
46
arrangement and (2) the lesser of 200% or two plus the lesser of such
average Actual Deferral Percentage or Actual Contribution Percentage.
"Lesser" is substituted for "greater" in (1) above, and "greater" is
substituted for "lesser" after "two plus the" in (2) above if it would
result in a larger Aggregate Limit.
(vi) "Excess Aggregate Contributions" shall mean, with respect to
any Plan Year, the excess of:
(A) The aggregate After Tax Deposits and Matching
Contributions taken into account in computing the numerator of
the Contribution Percentage actually made on behalf of Highly
Compensated Employees for such Plan year, over
(B) The maximum After Tax Deposits and Matching
Contributions permitted under the Actual Contribution Percentage
test as determined by reducing such Matching Contributions made
on behalf of Highly Compensated Employees in order of their
Contribution Percentages, beginning with the highest of such
percentages.
Such determination shall be made after first determining excess
Before Tax Deposits pursuant to Sections 4.2(a) and 4.3.
(c) In the event the Plan satisfies the requirements of Code Sections
401(m), 401(a)(4) or 410(b) only if aggregated with one or more other plans
which include arrangements under Code Section 401(k), then this Section
6.11 shall be applied by determining the Contribution Percentages of
Participants as if all such plans were a single plan. Any adjustments to
the Contribution Percentages of Participants who are not Highly Compensated
Employees for the prior year shall be made in accordance with Notice 98-1
and any superseding guidance. Plans may be aggregated in order to satisfy
Code Section 401(m) only if they have the same Plan Year and use the same
Actual Contribution Percentage testing method.
(d) For purposes of this Section 6.11, the Contribution Percentage for
any Highly Compensated Participants who is eligible to have After Tax
Deposits or Matching Contributions allocated to his or her account under
two or more plans maintained by the Sponsor or an Affiliated Company shall
be determined as if the total of such After Tax Deposits or Matching
Contributions was made under each plan. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements that have
different plan years, all cash or deferred arrangements that have different
plan years, all cash or deferred arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as separate
plans if mandatorily disaggregated pursuant to regulations under Code
Section 401(m).
(e) For purposes of the Actual Contribution Percentage test, After Tax
Deposits shall be considered to have been made in the Plan Year in which
contributed to
47
the Trust. Matching Contributions shall be considered made for a Plan Year
if made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(f) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(g) The Committee shall keep or cause to have kept such records as are
necessary to demonstrate that the Plan satisfies the requirements of Code
Section 401(m) and the regulations thereunder, in accordance with
regulations prescribed by the Secretary of the Treasury.
6.12 Provision for Disposition of Excess After Tax Deposits or Matching
Contributions on Behalf of Highly Compensated Participants. After application of
the provisions of Section 4.4 and 4.5, the following provisions shall be
implemented:
(a) The Committee shall determine, as soon as is reasonably possible
following the close of each Plan Year, the extent (if any) to which
contributions by or on behalf of Highly Compensated Participants may cause
the Plan to exceed the limitations of Section 6.11 for such Plan Year. If,
pursuant to the determination by the Committee and as required by the
leveling method described in paragraph (b) below, contributions by or on
behalf of a Highly Compensated Participant may cause the Plan to exceed
such limitations, then the Committee shall take the following steps:
(i) First, any excess After Tax Deposits that were not matched by
Matching Contributions, together with income or loss allocable to such
amount (determined in accordance with paragraph (c) below) shall be
returned to the Highly Compensated Participant.
(ii) Second, if any excess remains after the provisions of (i)
above are applied, to the extent necessary to eliminate the excess,
Matching Contributions with respect to the Highly Compensated
Participant, any corresponding matched After Tax Deposits, and any
income or loss allocable thereto, shall either be distributed (if
non-forfeitable) to the Highly Compensated Participant or forfeited
(to the extent forfeitable under the Plan) on a pro-rata basis.
Amounts of excess Matching Contributions forfeited by Highly
Compensated Participants under this Section 6.12, including any income
or loss allocable thereto, shall be applied to reduce Matching
Contributions by the Company or the Affiliated Company that made the
Matching Contribution on behalf of the Highly Compensated Participant
for the Plan Year for which the excess contribution was made.
(iii) If administratively feasible, any amounts distributed
pursuant to subparagraphs (i) or (ii) above shall be returned within
two and one-half (2-1/2) months following the close of the Plan Year
for which such excess After Tax Deposits or Matching Contributions
were made, but in any event no later than the
48
end of the first Plan Year following the Plan Year for which the
excess After Tax Deposits or Matching Contributions were made. After
Tax Deposits and Matching Contributions for any Plan Year shall be
made on the basis of the respective portions of such excess After Tax
Deposits and Matching Contributions attributable to each Highly
Compensated Participant.
(b) For purposes of satisfying the Actual Contribution Percentage
test, the amount of any excess After Tax Deposits or Matching Contributions
by or on behalf of Highly Compensated Participants for a Plan Year under
Section 6.11 shall be determined by application of a leveling method under
which the After Tax Deposits or Matching Contributions of the Highly
Compensated Participant who has the highest dollar amount of After Tax
Deposits or Matching Contributions for such Plan Year is reduced to the
extent required to cause such Highly Compensated Participant's After Tax
Deposits and Matching Contributions to equal the After Tax Deposits and
Matching Contributions of the Highly Compensated Participant with the next
highest After Tax Deposits and Matching Contributions; provided, however,
if a lesser amount, when added to the total dollar amount already
distributed under this paragraph (b), equals the total excess After Tax
Deposits and Matching Contributions that are required to be distributed to
enable the Plan to satisfy the Actual Contribution Percentage test, the
lesser amount shall be distributed. This process shall be repeated until
the Plan satisfies the Actual Contribution Percentage test.
(c) The amount of income or loss attributable to any excess After Tax
Deposits or Matching Contributions, as determined under this Section 6.12
(the "Excess Aggregate Contribution") by a Highly Compensated Participant
for a Plan Year shall be equal to the sum of the following:
(i) The income or loss allocable to the Highly Compensated
Participant's Excess Aggregate Contribution Accounts for the Plan Year
multiplied by a fraction, the numerator of which is the Excess
Aggregate Contribution and the denominator of which is the sum of the
balance of the Highly Compensated Participant's Excess Aggregate
Contribution Accounts without regard to any income or loss allocable
to such Accounts during the Plan Year; and
(ii) The amount of allocable income or loss for the Gap Period
using the "safe harbor" method set forth in regulations prescribed by
the Secretary of the Treasury under Code Section 401(m). Under the
"safe harbor" method, such allocable income or loss is equal to 10% of
the amount calculated under Section 6.12(c)(i) above, multiplied by
the number of calendar months from the last day of the Plan Year until
the date of distribution of the Participant's excess After Tax
Deposits or Matching Contributions. A distribution on or before the
15th of the month is treated as made on the last day of the preceding
month, a distribution after the 15th of the month is treated as made
on the first day of the next month.
49
(d) For the purpose of this Section 6.12, the following shall apply:
(i) "Excess Aggregate Contribution Accounts" shall mean the
Participant's After Tax Deposits Account and Matching Contributions
Account.
(ii) "Gap Period" shall mean the period between last day of the
Plan Year and the date of distribution of any Excess Aggregate
Contributions.
(e) Any excess After Tax Deposits and/or Matching Contributions
distributed to a Highly Compensated Participant or forfeited by a Highly
Compensated Participant in accordance with this Section 6.12, shall be
treated as Annual Additions under Article XIII for the Plan Year for which
the excess contribution was made.
(f) Neither the Committee nor the Company shall be liable to any
Participant (or his or her Beneficiary, if applicable) for any losses
caused by a mistake in calculating the amount of any Excess Aggregate
Contributions by or on behalf of a Highly Compensated Participant and the
income or loss allocable thereto.
50
ARTICLE VII
VESTING IN PLAN ACCOUNTS
7.1 No Vested Rights Except as Herein Provided. No Participant shall have
any vested right or interest to, or any right of payment of, any assets of the
Trust Fund, except as expressly provided in the Plan. Neither the making of any
allocations nor the credit to any Account of a Participant shall vest in any
Participant any right, title, or interest in or to any assets of the Trust Fund.
7.2 Vesting of Participant Deposits. A Participant shall be fully vested at
all times in the amounts allocated to his or her Before Tax Deposits Account,
After Tax Deposits Account, and Rollover Contributions Account.
7.3 Vesting of Company Contributions.
(a) A Participant's interest in his or her Matching Contributions
Account shall vest in accordance with the following schedule:
Years of Credited Service Vested Percentage
- ------------------------- -----------------
Less than 3 0%
3 or more 100%
(b) A Participant's interest in his or her Retirement Contributions
Account shall vest in accordance with the following schedule:
Years of Credited Service Vested Percentage
- ------------------------- -----------------
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
(c) A Participant shall at all times be 100% vested in all amounts
transferred from the SmithKline Beckman Corporation Savings and Investment
Plan to the Plan.
51
(d) Notwithstanding paragraphs (a) and (b) above, a Participant shall
become fully vested in his or her Matching Contributions Account and
Retirement Contributions Account upon the occurrence of any of the
following events, if such Participant is then still an Employee:
(i) Attainment of age sixty-two (62);
(ii) Death;
(iii) Severance due to a Disability; or
(iv) Occurrence of a Change in Control pursuant to Section 12.4.
52
ARTICLE VIII
PAYMENT OF PLAN BENEFITS
8.1 Withdrawals During Employment. A Participant may withdraw, once in any
calendar quarter, amounts of at least $500 from his or her Accounts while an
Employee in accordance with the following rules:
(a) A Participant may, for any reason, withdraw any portion of the
amount allocated to his or her After Tax Deposits Account (excluding any
After Tax Deposits recharacterized as such under Section 4.5). A
Participant who makes a withdrawal of After Tax Deposits (whether Matched
Deposits or non-Matched Deposits) shall not be permitted to make any After
Tax or and Before Tax Deposits during the six (6) month period beginning as
soon as administratively feasible following the date of the withdrawal
unless the After Tax Deposits can also be withdrawn under paragraph (d)
below or the withdrawal is comprised solely of After Tax Deposits which are
not Matched Deposits and which were contributed prior to July 1, 2000.
(b) A Participant may, for any reason, withdraw any portion of the
amount allocated to his or her Rollover Contributions Account.
(c) After withdrawing all After Tax Deposits pursuant to paragraph (a)
and all amounts allocated to his or her Rollover Contributions Account
under paragraph (b) above, a Participant with 3 or more years of Credited
Service may, for any reason, withdraw any portion of the amount allocated
to his or her Matching Contributions Account that was so allocated 2 or
more years prior to the date of such a withdrawal.
(d) On or after the attainment of age 59-1/2, a Participant may
withdraw any vested portion of the amounts allocated to any of his or her
Accounts.
(e) After withdrawing all amounts permitted pursuant to paragraphs
(a), (b) (c), and (d) above, a Participant may withdraw amounts from his or
her Before Tax Deposits Account (excluding any earnings attributable to
such Account after December 31, 1988), the vested portion of his or her
Matching Contributions Account, and any remaining amount in his or her
After Tax Deposits (amounts which were recharacterized as After Tax
Deposits under Section 4.5 but excluding any earnings attributable to
recharacterized After Tax Deposits after December 31, 1988) but excluding
amounts from his or her Retirement Contributions Account upon incurring a
hardship as defined in Section 8.5.
(f) Except as provided in paragraphs (a) through (e) above,
Participants may not receive a distribution of their benefits under the
Plan prior to termination of employment.
(g) Except as provided in Section 8.5(c), all withdrawals shall be
made in cash, except to the extent any of the vested portion of a
Participant's Account to be
53
withdrawn is invested in the Company Stock Fund or in the stock of Advanced
Medical Optics, Inc., then such withdrawal may be made in Company Stock or
in the stock of Advanced Medical Optics, Inc. at the election of the
Participant to the extent so invested.
(h) Except as provided in Section 8.5(c), all withdrawals shall be
made to Participants as soon as reasonably practicable following the
Valuation Date in the month for which a properly completed withdrawal
request is deemed perfected. All withdrawals shall be based on the Account
balances of a Participant as of such Valuation Date. If a properly
completed withdrawal request is received by the Company during any month
and on or before the fifteenth day of such month, the withdrawal request
shall be deemed perfected in such month, otherwise such withdrawal request
shall be deemed perfected in the immediately following month.
(i) Notwithstanding anything to the contrary in this Section 8.1 or
Section 4.1, the additional withdrawal restrictions stated in Section
5.6(h) shall apply to all Participants who are Insiders, as that term is
defined Section 5.6(h).
8.2 Distributions Upon Termination of Employment or Disability.
(a) Subject to the provisions of Section 8.6, if a Participant incurs
a Severance for any reason (including Disability) other than death, all or
a portion of such Participant's entire vested portion of his or her
Accounts under the Plan shall be (i) distributed directly to such
Participant or (ii) at the election of the Participant, distributed as an
Eligible Rollover Distribution and paid directly by the Trustee to the
trustee of an Eligible Retirement Plan.
(b) Any distribution made pursuant to paragraph (a) shall be paid no
more than once in any calendar quarter in amounts of at least $500 (or the
Participant's entire vested portion of his or her Accounts under the Plan
if lesser) and shall be made in cash except to the extent any of the vested
portion of such Participant's Accounts is invested in the Company Stock
Fund or in the stock of Advanced Medical Optics, Inc. then, to the extent
so invested, such distribution may be made in Company Stock or in the stock
of Advanced Medical Optics, Inc. at the election of the Participant.
(c) Notwithstanding the provisions contained in the foregoing
paragraphs of this Section 8.2 or Section 8.1, any provision which
restricts or would deny a Participant through the withholding of consent or
the exercise of discretion by some person or persons other than the
Participant (and where relevant, other than the Participant's spouse) of an
alternative form of benefit, in violation of Code Section 411(d)(6) and the
regulation promulgated thereunder, is hereby amended by the deletion of the
consent and/or discretion requirement.
(d) Notwithstanding the provisions contained in the foregoing
paragraphs of this Section 8.2 or Section 8.1, upon receipt of a Qualified
Domestic Relations Order, the amount payable to an Alternate Payee (as such
terms are described in Section 15.2) may be distributed to the Alternate
Payee as soon as administratively feasible.
54
8.3 Distribution Upon Death of Participant. Subject to the provisions of
Section 8.6, in the event of the death of a Participant, the entire vested
portion of the Participant's Accounts shall be distributed to the surviving
spouse as Beneficiary (if still alive) unless the Participant designated another
Beneficiary pursuant to Section 8.4. If the Beneficiary is the surviving spouse
of the Participant, he or she may elect to have an Eligible Rollover
Distribution paid directly by the Trustee to the trustee of an Eligible
Retirement Plan. Distributions to the Beneficiary pursuant to this Section 8.3
shall be in the same form as specified in Section 8.2(b) above, as elected by
the Beneficiary. All such distributions shall be made as soon as practicable
after the death of the Participant. A Beneficiary may not elect to defer such a
distribution.
8.4 Designation of Beneficiary. At any time, and from time to time, each
Participant shall have the unrestricted right to designate the Beneficiary or
Beneficiaries to receive the entire vested portion of his or her Accounts upon
his or her death and to revoke any such designation subject to paragraphs (a)
and (b) below. Each such designation shall be evidenced by a written instrument
signed by the Participant and filed with the Committee.
(a) 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 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 XV regarding
Qualified Domestic Relations Orders).
(b) 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
55
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).
8.5 Hardship Withdrawal Rules. A hardship withdrawal shall be made to a
Participant only if the Committee (or its representative) determines that the
Participant has an immediate and heavy financial need and that a withdrawal from
the Plan is necessary to satisfy such need as set forth in paragraphs (a) and
(b) below.
(a) A hardship withdrawal shall be authorized by the Committee only if
the Committee, based upon the Participant's representation and such other
facts as are known to the Committee, determines that the requested
withdrawal is on the account of:
(i) Medical expenses described in Code Section 213(d) incurred by
the Participant, the Participant's spouse, or any dependents of the
Participant (as defined in Code Section 152);
(ii) The purchase (excluding mortgage payments) of a principal
residence for the Participant only;
(iii) The payment of tuition and related educational fees for the
next twelve (12) months of post-secondary education for the
Participant, his or her spouse, children, or dependents;
(iv) The need to prevent the eviction of the Participant from his
or her principal residence or foreclosure on the mortgage of the
Participant's principal residence; and
(v) Any other situation deemed as immediate and heavy financial
needs by the Internal Revenue Service through the publication of
revenue rulings, notices, and other documents of general
applicability.
(b) A hardship withdrawal shall be authorized by the Committee only if
the Committee, based upon the Participant's representation and such other
facts as are known to the Committee, determines that all of the following
conditions are or will be satisfied:
(i) The amount of the withdrawal is not in excess of the amount
required to relieve the financial need (including amounts necessary to
pay any federal, state, or local income taxes or penalties reasonably
anticipated to result from the withdrawal).
(ii) The Participant has obtained all distributions, other than
hardship withdrawals, and all nontaxable (at the time of the loan)
loans from the Plan or any other plan maintained by the Company.
56
(iii) The Participant shall not be permitted to make Before Tax
Deposits or After Tax Deposits during the 6-month period beginning as
soon as administratively feasible following the date of the hardship
withdrawal from the Plan or any other plan maintained by the Company.
(iv) The Participant shall not be permitted to make Before Tax
Deposits during the Participant's taxable year immediately following
the taxable year of the hardship withdrawal that is in excess of the
applicable limit under Code Section 402(g) for such immediately
following taxable year less the amount of such Participant's Before
Tax Deposits for the taxable year in which such Participant made the
hardship withdrawal.
(c) Notwithstanding the provisions of Section 8.1(g), all hardship
withdrawals shall be made in cash regardless of the fund from which such
withdrawal is made. The Committee may, at its discretion, establish written
procedures whereby Participants may receive an estimated prepayment of a
hardship withdrawal based on the last available valuation of such
Participant's Accounts with a reconciling adjustment made to such
Participant's Accounts after current valuation data is available.
8.6 Distribution Rules. Notwithstanding any other provisions of this
Article VIII of the Plan regarding distributions of Participant's 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, Severance, or Disability, be paid (or commence to be paid)
to a Participant prior to the "Consent Date" (as defined herein) unless the
Participant consents in writing to the payment (or commencement of 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 Accounts does not exceed
$1,000 ($5,000, prior to March 28, 2005), the vested portion of such
Participant's Accounts shall be distributed, in a single lump-sum payment,
as soon as practicable following the Participant's Severance Date. For
purposes of this paragraph (b), Rollover Contributions and the earnings
thereon, shall be included in determining the value of the vested portion
of a Participant's Accounts for distributions made after December 31, 2001
with respect to Participants who incur a Severance after December 31, 2001.
(c) Unless a Participant elects otherwise pursuant to paragraph (a)
above, distributions of the vested portion of a Participant's 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
57
the year in which the Participant commenced participation in the Plan; or
(iii) the termination of the Participant's employment with the Company.
(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 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) Minimum Required Distributions for the 2002 Distribution
Calendar Year. Notwithstanding the foregoing, with respect to
distributions made for the 2002 Distribution Calendar Year, the Plan
will apply the minimum distribution requirements of Code Section
401(a)(9) in accordance with the regulations under Code Section
401(a)(9) that were proposed on January 17, 2001, notwithstanding any
provision of the Plan to the contrary.
(iv) Treasury Regulations Incorporated by Reference. All
distributions required under this paragraph shall be determined and
made in accordance with the Treasury Regulations under Code Section
401(a)(9).
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(e) Minimum Required Distributions following Participant's Death.
Notwithstanding anything to the contrary in the Plan if a Participant dies
before the entire vested portion of his or her Accounts is distributed, the
following rules shall apply:
(i) Required Distribution Dates. If a Participant dies before the
entire vested portion of his or her Accounts is distributed,
distributions shall be made, or begin to be made, no later than as
follows:
(A) If the Participant's surviving spouse is the
Participant's sole Designated Beneficiary, then, except as
provided in subparagraph (iv) below, distributions to the
surviving spouse shall begin by December 31 of the calendar year
immediately following the calendar year in which the Participant
died, or by December 31 of the calendar year in which the
Participant would have attained age 70-1/2, if later.
(B) If the Participant's surviving spouse is not the
Participant's sole Designated Beneficiary, then, except as
provided in subparagraph (iv) below, distributions to the
Designated Beneficiary shall begin by December 31 of the calendar
year immediately following the calendar year in which the
Participant died.
(C) If there is no Designated Beneficiary as of September 30
of the year following the year of the Participant's death, the
Participant's entire interest shall be distributed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death.
(D) If the Participant's surviving spouse is the
Participant's sole Designated Beneficiary and the surviving
spouse dies after the Participant but before distributions to the
surviving spouse begin, this subparagraph (i), other than clause
(A), shall apply as if the surviving spouse were the Participant.
For purposes of this subparagraph (i) and subparagraphs (ii) and
(iii) below, unless clause (D) above applies, distributions are
considered to begin on the Participant's Required Beginning Date. If
clause (D) applies, distributions are considered to begin on the date
distributions are required to begin to the surviving spouse under
clause (A).
59
(ii) Forms of Distribution if Participant Dies On or After
Distributions Begin. Unless the entire vested portion of a
Participant's Accounts is distributed in a single sum on or before the
dates set forth in subparagraph (i) above, the entire vested portion
of a Participant's Accounts shall be distributed, or begin to be
distributed, as set forth below:
(A) Participant Survived by Designated Beneficiary. If the
Participant dies on or after the date distributions begin and
there is a Designated Beneficiary, the minimum amount that shall
be distributed for each Distribution Calendar Year after the year
of the Participant's death is the quotient obtained by dividing
the Participant's Account Balance by the longer of the remaining
life expectancy of the Participant or the remaining life
expectancy of the Participant's Designated Beneficiary,
determined as follows:
(1) The Participant's remaining life expectancy is
calculated using the age of the Participant in the year of
death, reduced by one for each subsequent year.
(2) If the Participant's surviving spouse is the
Participant's sole Designated Beneficiary, the remaining
life expectancy of the surviving spouse is calculated for
each Distribution Calendar Year after the year of the
Participant's death using the surviving spouse's age as of
the spouse's birthday in that year. For Distribution
Calendar Years after the year of the surviving spouse's
death, the remaining life expectancy of the surviving spouse
is calculated using the age of the surviving spouse as of
the spouse's birthday in the calendar year of the spouse's
death, reduced by one for each subsequent calendar year.
(3) If the Participant's surviving spouse is not the
Participant's sole Designated Beneficiary, the Designated
Beneficiary's remaining life expectancy is calculated using
the age of the beneficiary in the year following the year of
the Participant's death, reduced by one for each subsequent
year.
(B) No Designated Beneficiary. If the Participant dies on or
after the date distributions begin and there is no Designated
Beneficiary as of September 30 of the year after the year of the
Participant's death, the minimum amount that shall be distributed
for each Distribution Calendar Year after the year of the
Participant's death is the quotient obtained by dividing the
Participant's Account Balance by the Participant's remaining life
expectancy calculated using the age of the Participant in the
year of death, reduced by one for each subsequent year.
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(iii) Forms of Distribution if Participant Dies Before
Distributions Begin. Unless the entire vested portion of a
Participant's Accounts is distributed in a single sum on or before the
dates set forth in subparagraph (i) above, the entire vested portion
of a Participant's Accounts shall be distributed, or begin to be
distributed, as set forth below:
(A) Participant Survived by Designated Beneficiary. Except
as provided in subparagraph (iv) below, if the Participant dies
before the date distributions begin and there is a Designated
Beneficiary, the minimum amount that shall be distributed for
each Distribution Calendar Year after the year of the
Participant's death is the quotient obtained by dividing the
Participant's Account Balance by the remaining life expectancy of
the Participant's Designated Beneficiary, determined as provided
in subparagraph (ii)(A) above.
(B) No Designated Beneficiary. If the Participant dies
before the date distributions begin and there is no Designated
Beneficiary as of September 30 of the year following the year of
the Participant's death, distribution of the Participant's entire
interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
(C) Death of Surviving Spouse Before Distributions to
Surviving Spouse Are Required to Begin. If the Participant dies
before the date distributions begin, the Participant's surviving
spouse is the Participant's sole Designated Beneficiary, and the
surviving spouse dies before distributions are required to begin
to the surviving spouse under subparagraph (i)(A) above, this
subparagraph (iii) shall apply as if the surviving spouse were
the Participant.
(iv) Election to Apply 5-Year Rule to Distributions to Designated
Beneficiaries. If the Participant dies before the entire vested
portion of his or her Accounts is distributed and there is a
Designated Beneficiary, distribution to the Designated Beneficiary is
not required to begin by the date specified in subparagraph (i) if the
Participant or Designated Beneficiary elects that the entire vested
portion of the Participant's Accounts be distributed to the Designated
Beneficiary by December 31 of the calendar year containing the fifth
anniversary of the Participant's death. If the Participant's surviving
spouse is the Participant's sole Designated Beneficiary and the
surviving spouse dies after the Participant but before distributions
to either the Participant or the surviving spouse begin, an election
under this subparagraph shall apply as if the surviving spouse were
the Participant. The election must be made no later than the earlier
of September 30 of the calendar year in which distribution would be
required to begin under subparagraph (i), or by September 30 of the
calendar year which contains the fifth anniversary of the
Participant's (or, if applicable, surviving spouse's) death. If
neither the Participant nor Designated Beneficiary makes an election
under this subparagraph, distributions shall be made in accordance
with subparagraphs (i) and (iii).
(v) Election to Allow Designated Beneficiary Receiving
Distributions under 5-Year Rule to Elect Life Expectancy
Distributions. A Designated
61
Beneficiary who is receiving payments under the 5-year rule described
in subparagraph (iv) above, may make a new election to receive
payments under the life expectancy rule until December 31, 2003,
provided that all amounts that would have been required to be
distributed under the life expectancy rule for all Distribution
Calendar Years before 2004 are distributed by the earlier of December
31, 2003 or the end of the 5-year period.
(vi) Minimum Required Distributions for the 2002 Distribution
Calendar Year. Notwithstanding the foregoing, with respect to
distributions made for the 2002 Distribution Calendar Year, the Plan
shall apply the minimum distribution requirements of Code Section
401(a)(9) in accordance with the regulations under Code Section
401(a)(9) that were proposed on January 17, 2001, notwithstanding any
provision of the Plan to the contrary.
(vii) Treasury Regulations Incorporated by Reference. All
distributions required under this paragraph shall be determined and
made in accordance with the Treasury Regulations under Code Section
401(a)(9).
(f) Definitions for Minimum Required Distribution Rules. For purposes
of paragraphs (d) and (e) above, the following definitions shall apply:
(i) "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.
(ii) "Designated Beneficiary" shall mean the individual who is
designated as the Beneficiary under Section 8.4 and is the Designated
Beneficiary under Code Section 401(a)(9) and Regulation Section
1.401(a)(9)-1, Q&A-4.
(iii) "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. For distributions
beginning after the Participant's death, the first Distribution
Calendar Year is the calendar year in which distributions are required
to begin under paragraph (e). 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
62
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.
(iv) "Life expectancy" shall mean as computed by use of the
Single Life Table in Regulation Section 1.401(a)(9)-9.
(v) "Required Beginning Date" shall mean the 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.
(g) 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
(or eligible Beneficiary) 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 amount of the benefit can be ascertained or the
Participant (or Beneficiary) can be located.
8.7 Forfeitures. The non-vested portion of a Participant's Accounts shall
be forfeited in accordance with the following rules:
(a) In the event a Participant who incurs a Severance receives a
distribution of the entire vested portion of his or her Accounts when he or
she is not fully vested in such Accounts, the non-vested portion of the
Participant's Accounts shall be forfeited as of the Participant's
distribution date. A Participant who incurs a Severance when no portion of
his or her Accounts are 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 Accounts shall be forfeited as of the Participant's
Severance Date. If the Participant is rehired by the Company prior to the
date he or she incurs five consecutive Breaks in Service, the amounts
forfeited shall be reinstated to the Participant's Accounts as of the
Participant's Reemployment Commencement Date (without regard to any
interest or investment earnings on such amount).
(b) In the event a Participant who incurs a Severance does not receive
a distribution of the entire vested portion of his or her Accounts when he
or she is not fully vested in such Accounts, the Participant's Accounts
shall be held by the Trustee as provided in Section 6.8 for 90 days at
which time, the nonvested portion of the Participant's Accounts shall be
forfeited as of the last day of the month in which the 90-day period ends.
If the Participant is rehired by the Company prior to the date he or she
incurs five consecutive Breaks in Service, the amount so forfeited plus an
amount
63
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 Accounts 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 6.3 to
reinstate a Participant's Accounts if reinstatement is required under the
provisions of this paragraph.
(c) At any relevant time after application of paragraphs (a) and (b)
above, a Participant's vested portion of his or her Accounts 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 7.2
AB = the Account balance at the relevant time
D = the total amount of any distributions from the Accounts since
such Severance
(d) Forfeitures shall be allocated in the manner provided in Section
6.3 at such times as determined by the Committee and to the extent
available shall be used to reduce contributions made by the Company
pursuant to Sections 5.3 and 5.4.
8.8 Valuation of Accounts Upon Distribution. For the purpose of any
distribution of Accounts under this Article VIII, the amount of such
distribution shall be based on the value of a Participant's Accounts as of the
Valuation Date in the month in which the application for such distribution is
deemed perfected. If a properly completed distribution application is received
by the Committee during any month and on or before the fifteenth day of such
month, the distribution application shall be deemed perfected in such month,
otherwise such distribution application shall be deemed perfected in the
immediately following month.
8.9 Lapsed Benefits.
(a) In the event that a Participant's Accounts is payable under the
Plan and after reasonable efforts the Participant cannot be located for the
purpose of paying his or her Accounts during a period of three consecutive
years, the Participant shall be presumed dead and his or her Accounts
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 Accounts for the
following two years, then the Participant's Accounts shall, upon expiration
of such two-year period, be forfeited and reallocated to the Accounts of
other Participants in accordance with Section 6.3.
64
(b) If a Participant dies prior to receiving a distribution of the
entire vested portion of his or her Accounts (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 Accounts during a period of five consecutive
years, the benefit shall, upon expiration of such five-year period, be
forfeited and reallocated to the Accounts of the other Participants in
accordance with Section 6.3.
(c) For purposes of this Section, the term "Beneficiary" shall include
any person entitled under Section 8.4 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 Accounts shall
be distributed to a Beneficiary in a lower priority category under Section
8.4 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 Accounts, 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 9.10).
(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 6.3 to pay any
reinstated benefit after it has been forfeited pursuant to the provisions
of this Section.
8.10 Persons Under Legal Disability.
(a) 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/her, the Committee may have
the payment, or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for or supporting the
payee, unless it has received due notice of claim therefor from a duly
appointed guardian or committee of the payee.
(b) Any such payment shall be a payment from the Accounts of the payee
and shall, to the extent thereof, be a complete discharge of any liability
under the Plan to the payee.
8.11 Additional Documents.
(a) The Committee or the Company may require satisfactory proof of any
matter under the Plan from or with respect to any Employee, Participant, or
Beneficiary,
65
and no person shall be entitled to receive any benefits under the Plan
until the required proof shall be furnished.
(b) The Committee or Trustee, or both, may require the execution and
delivery of such documents, papers and receipts as the Committee or Trustee
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
Article VIII.
(c) The Committee or the Trustee, or both, may, as a condition
precedent to the payment of death benefits hereunder, require an
inheritance tax release and/or such security as the Committee or Trustee,
or both, may deem appropriate as protection against possible liability for
State or Federal death taxes attributable to any death benefits.
8.12 Trustee-to-Trustee Transfers. In the case of any Participant or
Participants who have terminated employment with the Company and all Affiliated
Companies and subsequently become employed by an unrelated successor employer,
the Committee, shall at the request of such Participant or Participants, direct
the Trustee to transfer the assets in the Accounts of such Participant or
Participants directly to the trustee of any retirement plan maintained by such
successor employer or employers in lieu of any distribution described in the
preceding provisions of this Article VIII but only if (i) the retirement plan
maintained by such successor employer is determined to the satisfaction of the
Committee to be qualified under Code Section 401, (ii) the sponsor and trustee
of such plan consent to the transfer, and (iii) such transfer satisfies the
conditions of Section 12.2 hereof.
8.13 Loans to Participants. A Participant may borrow from his or her
Accounts except from his or her Retirement Contributions Account while an
Employee in accordance with the following rules:
(a) Subject to minimum and maximum loan requirements, a Participant
may borrow up to 50% of his or her After Tax Deposits Account, Before Tax
Deposits Account, Rollover Contributions Account, and the vested portion of
his or her Matching Contributions Account. Only one loan may be outstanding
to a Participant any time. The minimum loan amount shall be $1,000 and the
maximum loan amount shall be $50,000. The $50,000 maximum loan amount shall
be reduced by the excess, if any, of the highest outstanding balance of
loans from the Plan to the Participant during the one-year period ending on
the day before the loan is made over the outstanding balance of loans on
the date the loan is made.
(b) A loan to a Participant shall be made solely from his or her
Account(s) and shall be considered an investment directed by the
Participant. Loan amounts shall be funded from the Participant's Accounts
as determined under procedures established by the Committee; provided,
however, that principal repayments shall be credited to the Participant's
Accounts in the inverse of the order used to fund the loan and interest
66
payments shall be credited to the Participant's Accounts in direct
proportion to the principal repayments.
(c) A loan to a Participant shall bear an interest rate equal to the
prime rate reported in the Wall Street Journal on first business day of the
month in which the loan is granted (the last business day of the previous
month for loans made prior to July 1, 2000) plus one percent (1%) and shall
remain fixed throughout the term of the loan. Notwithstanding the preceding
sentence, if the Committee determines that such rate is not reasonable or
otherwise not in accordance with applicable requirements under the Code or
ERISA, the Committee shall set an alternate interest rate at the time that
the loan is taken.
(d) A loan to a Participant shall have a definite maturity date.
Loans, other than loans made for the purpose of acquiring the principal
residence of the Participant, shall be made for a period not to exceed five
(5) years. Loans made for the purpose of acquiring the principal residence
of the Participant shall be made for a period not to exceed fifteen (15)
years.
(e) A loan to a Participant shall have a definite repayment schedule
and shall be amortized on a substantially level basis with repayments
occurring not less frequently than quarterly. Notwithstanding the
foregoing, the loan repayments shall be suspended during an unpaid Leave of
Absence not to exceed one year at which time loan repayments shall resume.
In the case of a Leave of Absence due to qualified military service, loan
repayments shall be suspended as permitted under Code Section 414(u)(4).
(f) A loan to a Participant shall be secured by the vested portion of
the Participant's Account(s). No more than 50% of the Participant's vested
Account(s) as determined on the date the loan is issued shall be considered
by the Plan as security for a loan. A Participant who borrows from the Plan
hereby agrees that, unless expressly provided otherwise in loan documents,
any such loan is automatically secured by 50% of his or her vested
Account(s).
(g) A loan to a Participant shall be evidenced by a promissory note
and/or such other documentation as required by the Committee.
(h) A loan to a Participant shall be treated as a distribution unless
the entire principal amount and any interest accrued thereon is repaid
within ninety (90) days after the occurrence of a Participant's Severance.
Absent repayment by the Participant, the Committee shall instruct the
Trustee to distribute the note to the Participant as part of his or her
distribution and the Participant's vested Account(s) shall be reduced to
the extent of such distribution.
67
(i) The Committee shall establish the participant loan program and
have the duty to manage and administer the participant loan program in
accordance with the terms and provisions of this Section. The Committee
shall have, but not by way of limitation, the following discretionary
powers and authority:
(i) To determine the manner in which loan repayments shall occur
whether it be through automatic payroll deductions or otherwise.
(ii) To determine the amount of loan repayments following
suspension due to an unpaid Leave of Absence subject to the
requirement that the loan must be repaid by the latest date permitted
under paragraph (d).
(iii) To establish any fees, including but not limited to
application fees and maintenance fees, and the manner in which such
fees are collected from the Participant.
(iv) To consider only those factors which would be considered in
a normal commercial setting by persons in the business of making
similar types of loans in establishing the participant loan program.
Such factors may include the applicant's credit worthiness and
financial need, but may not include any factor which would
discriminate against Participants who are not Highly Compensated
Employees. Loans shall be made available to all Participants without
regard to a Participant's race, color, religion, sex, age or national
origin and shall not be made available to Participants who are Highly
Compensated Employees in an amount greater than the amount made
available to Participants who are not Highly Compensated Employees.
68
ARTICLE IX
OPERATION AND ADMINISTRATION
9.1 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 5.9
hereof, Participants shall be Named Fiduciaries with respect to shares of
Company Stock allocated to their respective Accounts and solely for purposes of
Section 5.10, Participants shall be Named Fiduciaries with respect to shares of
Company Stock allocated to their respective Accounts on matters as to which they
are entitled to provide voting directions.
9.2 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 IX) 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 5.9 hereof, Participants shall be Named Fiduciaries with
respect to shares of Company Stock allocated to their respective Accounts and
solely for purposes of Section 5.10, Participants shall be Named Fiduciaries
with respect to shares of Company Stock allocated to their respective Accounts
on matters as to which they are entitled to provide voting directions.
9.3 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
69
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.
9.4 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, the qualified members of the
Committee shall be reduced below two (2) and 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.
9.5 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 9.7(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
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Compensation Committee, to and vested in the Investment Subcommittee except
to the 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.
9.6 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 9.7.
(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 10.1, 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 powers 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.
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9.7 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 pursuant to Section
5.16 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 Sections 5.10 and 9.16 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 9.9 (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 9.7 shall be taken in writing, and no
designation or allocation under paragraphs (a), (b) or (c) shall be effective
until accepted in writing by the indicated responsible person.
9.8 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 9.7(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.
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(c) To establish rules and regulations from time to time for the
conduct of the Investment Subcommittee's business.
(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.
9.9 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.
9.10 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.
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(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 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 9.11 below.
9.11 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
74
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.
(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.
9.12 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 9.2 or 9.7, 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 5.16 hereof or as to which management and control
has been retained by the Trustee.
9.13 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.
9.14 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). With respect to the expenses that
are paid by the Plan from the Trust Fund, such expenses shall be allocated among
Participants' Accounts in a manner determined by the Committee. Any Forfeitures
remaining after application of Section 6.3(c) shall share in such allocation to
the extent required under applicable law. The Investment Subcommittee shall
direct the Trustee to use Plan assets (and, if necessary, to sell the shares of
Company Stock that represent such Plan assets) to pay such expenses.
75
9.15 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 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.
9.16 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.
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ARTICLE X
AMENDMENT AND ADOPTION OF PLAN
10.1 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 9.6(f).
10.2 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.
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ARTICLE XI
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.
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ARTICLE XII
TERMINATION AND MERGER
12.1 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. 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 Accounts of Participants to the maximum extent permitted by
law. The Trust Fund may not be fully or finally liquidated until all assets are
allocated to 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 13.6.
12.2 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).
12.3 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.
12.4 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.
(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 Company
Contributions
79
Accounts on the date of such Change in Control and in any amounts allocated
to their Company Contributions 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), "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 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
80
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
Sponsor 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 Sponsor 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) For purposes of this Section 12.4, 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 XIII
LIMITATION ON ALLOCATIONS
13.1 General Rule.
(a) The total Annual Additions under the Plan to a Participant's
Accounts 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 13.5), from the Company for the Limitation
Year,
except to the extent "catch-up" contributions are permitted under Section
4.2(e) and Code Section 414(v). 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 XIII, 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 10.2 and the term "Limitation Year" shall mean the
Plan Year.
13.2 Annual Additions. For purposes of Section 13.1, 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.
(b) All amounts contributed by the Participant.
(c) Forfeitures allocated to such Participant.
(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.
(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.
82
(f) Excess deferral amounts determined pursuant to Sections 4.5 and
6.12.
(g) Excess deferral amounts determined pursuant to Section 4.4 to the
extent such amounts are distributed after the first April 15th following
the close of the Participant's taxable year.
Notwithstanding the foregoing, a Participant's Rollover Contributions shall
not be considered an Annual Addition.
13.3 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
13.1.
13.4 Adjustments 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 limitation set forth in Section 13.1,
such Participant's Annual Additions for the Plan shall be reduced in the
following order: (i) After Tax Deposits that are not Matched Deposits, (ii)
After Tax Deposits that are Matched Deposits, (iii) Before Tax Deposits that are
not Matched Deposits, (iv) Before Tax Deposits that are Matched Deposits, (v)
Matching Contributions, and (vi) Retirement Contributions. The portion of the
reduction attributable to After Tax Deposits and Before Tax Deposits shall be
refunded to the Participants and the balance attributable to Matching
Contributions, if any, shall be held unallocated in a 415 Suspense Account
established for the purpose of this Section 13.4 and shall be used to reduce
Company Contributions for the next limitation year (and succeeding limitation
year, as necessary) for all Participants in the Plan. The 415 Suspense Account
shall be exhausted before any Company contributions shall be allocated to the
Accounts of Participants.
13.5 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:
(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
83
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).
(c) 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).
13.6 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 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 6.3.
(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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ARTICLE XIV
TOP-HEAVY RULES
14.1 Applicability. Notwithstanding any provision in the Plan to the
contrary, and subject to the limitations set forth in Section 14.6, the
requirements of Sections 14.4 and 14.5 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 14.3. For the purpose of this Article XIV, the term "Company"
shall mean the Sponsor and any Affiliated Company whether or not such Affiliated
Company has adopted the Plan.
14.2 Definitions. For purposes of this Article XIV, 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.
85
(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 14.2 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 14.2
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 XIV, an Employee's Compensation shall
be determined in accordance with the rules of Section 13.5.
14.3 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 cumulative
accrued benefits under the plan for all Employees; and
(ii) 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 Employee under the plan (including a terminated
plan which, had it not been terminated,
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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 "five year period" for "one 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 14.3.
(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
14.3.
(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 XIV, the definitions provided
under this Section 14.3 shall be applied and interpreted in a manner
consistent with the provisions of Code Section 416(g) and the regulations
thereunder.
14.4 Minimum Contributions. For any Plan Year in which the Plan is
determined to be a Top-Heavy Plan, the minimum employer contributions for that
year shall be determined in accordance with the rules of this Section 14.4.
(a) Except as provided below, the minimum contribution for each
Non-Key Employee shall be not less than 3% of his or her compensation.
Before Tax Deposits shall not be taken into account but Matching
Contributions as defined in Section 6.11 shall be taken into account for
purposes of satisfying the minimum contribution requirement. Matching
Contributions that are used to satisfy the minimum contribution requirement
shall be treated as matching contributions for purposes of the actual
contribution percentage test and other requirements of Code Section 401(m).
(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 (including amounts deferred under a
cash or deferred arrangement under Code Section 401(k)) 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
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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 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 14.4 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.
14.5 Minimum Vesting Rules.. For any Plan Year in which it is determined
that the Plan is a Top-Heavy Plan, the vesting schedule for Matching
Contributions shall be the vesting schedule set forth in Section 7.2(a) and the
vesting schedule for Retirement Contributions shall be the vesting schedule set
forth in Section 7.2(b).
14.6 Noneligible Employees.. The rules of this Article XIV 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 XV
RESTRICTION ON ASSIGNMENT OR
OTHER ALIENATION OF PLAN BENEFITS
15.1 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 XV, 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.
15.2 Qualified Domestic Relations Orders. The rules set forth in Section
15.1 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,
89
(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: (A) 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); (B)
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; (C) the number of payments or period to which the
order applies; and (D) each plan to which the order applies.
For purposes of this Section 15.2, "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));
90
(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
(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 Code 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
91
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 15.2, 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 XVI
MISCELLANEOUS PROVISIONS
16.1 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.
16.2 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.
16.3 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.
16.4 Gender. Masculine gender shall include the feminine and the singular
shall include the plural unless the context clearly indicates otherwise.
16.5 Interpretation. The provisions of the Plan shall in all cases be
interpreted in a manner that is consistent with the Plan satisfying (i) the
requirements of Code Section 401(a) and related statutes for qualification as a
defined contribution plan and (ii) the requirements of Code Section 401(k) and
related statutes for qualification as a cash or deferred arrangement.
16.6 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.
16.7 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.
16.8 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.
16.9 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
93
or void or against public policy, the remaining paragraphs, sections, sentences,
clauses or phrases contained in the Plan shall not be affected thereby.
16.10 Counterparts. This instrument may be executed in one or more
counterparts each of which shall be legally binding and enforceable.
94
IN WITNESS WHEREOF, Allergan, Inc. hereby executes this instrument,
evidencing the terms of the Allergan, Inc. Savings and Investment 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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APPENDIX A
SPECIAL PROVISIONS FOR PUERTO RICO-BASED PAYROLL EMPLOYEES
PART I
INTRODUCTION
1.1 Effective Date. The effective date of this Appendix A is January 1,
2005.
1.2 Purpose of Appendix A. The provisions of the Plan shall apply to all
Puerto Rico-based payroll Employees except as specifically provided in this
Appendix A.
1.3 Plan Qualification. The Plan is an employee benefit plan that is
intended to qualify under PR-Code Section 1165(a) as a qualified profit sharing
plan and under PR-Code Section 1165(e) as a qualified cash or deferred
arrangement.
PART II
DEFINITIONS
The Definitions of Article II of the Plan shall apply to all Puerto
Rico-based Employees and shall have the same meaning for the purpose of this
Appendix A except as set forth below:
2.1 Plan Section 2.17. "Compensation" shall have the same meaning as set
forth in Plan Section 2.17 except that in the case of a Puerto Rico-based
Employee, Compensation shall also include cost of living allowances earned
within Puerto Rico, amounts paid under the Christmas bonus program, and amounts
of salary reduction elected by a Puerto Rico-based Participant under a PR-Code
Section 1165(e) cash or deferred arrangement, but shall exclude contributions or
distributions pursuant to any other plan sponsored by the Company and qualified
under PR-Code Section 1165(a).
2.2 Plan Section 2.18. "Credited Service" shall have the same meaning as
set forth in Plan Section 2.18 except that in the case of a Puerto Rico-based
Employee who was employed by the Company at any time prior to the Original
Effective Date, for the period prior to January 1, 1989, Credited Service shall
include service, if any, credited to such Employee under the Savings and
Investment Plan for Employees of Subsidiaries of SmithKline Beckman Corporation
Whose Principal Office is Located in Puerto Rico.
2.3 Plan Section 2.21. For the purpose of this Appendix A only, the
definition of "Eligible Employee" as defined in Plan Section 2.21 shall not
apply and "Eligible Employee" or "Eligible Puerto Rico-based Employee" shall
mean any Puerto Rico-based Employee but shall exclude any non-regular
manufacturing site transition employee, any non-resident alien of Puerto Rico
and the United States, any Leased Employee, and any Employee covered by a
collective bargaining agreement.
96
2.4 Plan Section 2.24. For the purpose of this Appendix A only, the
definition of "Employee" as defined in Plan Section 2.24 shall not apply and
"Employee" or "Puerto Rico-based Employee" shall mean any person who is employed
in any capacity by the Sponsor or any Affiliated Company at its Puerto Rico
locations, any portion of whose income is subject to withholding of income tax
and/or for whom Social Security contribution are made by the Sponsor or an
Affiliated Company except that such term shall not include (i) 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 agency determines that such individual is a common-law employee
and not an independent contractor, (ii) 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
(iii) 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.
2.5 Plan Section 2.38. For the purpose of this Appendix A only,
"Participant" as defined in Plan Section 2.38 shall not apply and "Participant"
or "Puerto Rico-based Participant" shall mean a Puerto Rico-based Employee or
former Puerto Rico-based Employee who has commenced participation in the Plan
pursuant to Section 3.1 and who retains rights under the Plan.
2.6 Additional Terms. Additional terms shall have the following meaning:
(a) "PR-Code" shall mean the Puerto Rico Internal Revenue Code of
1994, as amended. Where the context so requires a reference to a particular
PR-Code Section shall also refer to any successor provision of the PR-Code
to such PR-Code Section.
(b) "Top One-Third Highly Compensated Employee" shall mean any
Eligible Puerto Rico-based Employee who has Compensation for a Plan Year
that is greater than the Compensation for such Plan Year of two-thirds
(2/3) of all Eligible Puerto Rico-based Employees.
PART III
ELIGIBILITY AND PARTICIPATION
The provisions of Article III of the Plan shall apply to all Puerto
Rico-based Employees.
A-2
PART IV
PARTICIPANT DEPOSITS
The provisions of Article IV of the Plan shall apply to all Puerto
Rico-based Employees except as set forth below:
4.1 Plan Section 4.1. The provisions of Plan Section 4.1(d) shall apply to
all Puerto Rico-based Participants except that Puerto Rico-based Participants
who make hardship withdrawals pursuant to Plan Section 8.1(e) shall not be
permitted to make Before Tax Deposits or After Tax Deposits to the Plan during
the 12-month period beginning as soon as administratively feasible following the
date of the hardship withdrawal. Also, to the extent permissible by ERISA and
the Code, each contribution made by the Company to the Plan under Plan Section
4.1 with respect to the Before Tax Deposits of a Puerto Rico-based Participant
shall be made only to the extent that the Company has current or accumulated
earnings and profits, as determined under the PR-Code, and is expressly
conditioned on the deductibility of such contribution under Section 1023(n) of
the PR-Code for the taxable year for which contributed. If the Puerto Rico
Secretary of the Treasury disallows the deduction, or if the contribution was
made by a mistake of fact, such contribution shall be returned to the Company
within one (1) year after the disallowance of the deduction (to the extent
disallowed), or after the payment of such contribution, respectively. Such
contributions to the Plan by the Company shall be paid to the Trustee not later
than the date for filing the Company's Puerto Rico income tax return for the
taxable year in which such payroll period falls, including any extensions
thereof.
4.2 Plan Section 4.2. The provisions of Plan Section 4.2 shall apply to all
Puerto Rico-based Employees except as set forth below:
(a) Notwithstanding the provisions of paragraph (a) of Plan Section 4.2, a
Puerto Rico-based Participant may elect to contribute a whole percentage of his
or her Compensation to the Plan as Before Tax Deposits; provided, however, that
no Puerto Rico-based Participant shall be permitted to make Before Tax Deposits
to the Plan during any taxable year in excess of: (i) ten percent (10%) of
Compensation up to a maximum of $8,000, or such larger amount as may be
determined by the Puerto Rico Secretary of the Treasury pursuant to the PR-Code;
provided that, if a Puerto Rico-based Participant contributes to a Puerto Rico
individual retirement account as described in PR-Code Section 1169, the maximum
amount of his or her Before Tax Deposits may not exceed the difference, if any,
between the amount available as a contribution up to the limit of $8,000 and the
contribution made to a Puerto Rico individual retirement account, or as
otherwise provided by the PR-Code, (ii) the Actual Deferral Percentage test
limitation set forth in Plan Section 4.3 and Section 4.3 of this Appendix, and
(iii) the Annual Addition limitation set forth in Plan Section 13.1.
(b) The provisions of paragraph (e) of Plan Section 4.2 pertaining to
"catch-up" Before Tax Deposits shall not apply to Puerto Rico-based
Participants.
4.3 Additional Contribution Deferral Limitation. In addition to the
limitations on Compensation Deferral Contributions set forth in Plan Section
4.3, Compensation Deferral Contributions by a Puerto Rico-based Participant
shall not exceed the limitation on contributions
A-3
by or on behalf of the Top One-Third Highly Compensation Employees under PR-Code
Section 1165(e), as provided in this Section 4.3 with respect to each Plan Year.
In the event that Compensation Deferrals Contributions under the Plan by or on
behalf of the Top One-Third Highly Compensated Employees exceed the limitations
of this Section for any reason, such excess contributions shall be
recharacterized as After Tax Deposits or such excess contributions, adjusted for
any income or loss allocable thereto, shall be returned to such Participant, as
provided in Plan Section 4.5.
(a) The Compensation Deferral Contributions by Participants for a Plan
Year shall satisfy the Actual Deferral Percentage test under the PR-Code as
set forth in subparagraph (i) below, or to the extent not precluded by
applicable regulations, the alternate Actual Deferral Percentage test as
set forth in (ii) below:
(i) The average "Actual Deferral Percentage" for the Top
One-Third Highly Compensated Employees shall not be more than the
average Actual Deferral Percentage of all non-Top One-Third Highly
Compensated Employees multiplied by 1.25, or
(ii) The excess of the average Actual Deferral Percentage for the
Top One-Third Highly Compensated Employees over the average Actual
Deferral Percentage for all non-Top One-Third Highly Compensated
Employees shall not be more than two (2) percentage points and the
average Actual Deferral Percentage for the Top One-Third Highly
Compensated Employee shall not be more than the average Actual
Deferral Percentage of all non-Top One-Third Highly Compensated
Employees multiplied by 2.0.
(b) For the purpose of this Section 4.3 only, the following
definitions shall apply:
(i) "Actual Deferral Percentage" shall mean, with respect to the
group of all Top One-Third Highly Compensated Employees and the group
of all non-Top One-Third Highly Compensated Employees for a Plan Year,
the ratio, calculated separately for each Participant in such group,
of the amount of the Participant's Compensation Deferral Contribution
for such Plan Year, to such Participant's Compensation for such Plan
Year, in accordance with regulations prescribed by the Puerto Rico
Secretary of the Treasury under PR-Code Section 1165(e). For purposes
of computing the Actual Deferral Percentage, an Eligible Employee who
would be a Participant but for the failure to make Before Tax Deposits
shall be treated as a Participant on whose behalf no Before Tax
Deposits are made.
(ii) "Participant" shall mean any Eligible Puerto Rico-based
Employee who satisfied the requirements under Plan Article III during
the Plan Year, whether or not such Eligible Employee elected to
contribute to the Plan for such Plan Year.
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(iii) "Compensation Deferral Contributions" shall mean amounts
contributed to the Plan by a Participant as Before Tax Deposits
pursuant to Section 4.1 of this Appendix, including any other amounts
prescribed under PR-Code Section 1165(e) and applicable regulations.
To the extent determined by the Committee and in accordance with
regulations issued by the Puerto Rico Secretary of the Treasury,
matching contributions and qualified nonelective contributions on
behalf of a Participant that satisfy the requirements of PR-Code
Section 1165(e)(3)(D)(ii) may also be taken into account for the
purpose of determining the Actual Deferral Percentage of such
Participant.
(iv) "Compensation" shall mean compensation as defined in PR-Code
Section 1165(e) and applicable regulations.
(c) In the event that as of the first day of Plan Year, the Plan
satisfies the requirements of PR-Code Section 1165(a) only if aggregated
with one or more other plans which include arrangements under PR-Code
Section 1165(e), then this Section 4.3 shall be applied by determining the
Actual Deferral Percentages of Participants as if all such plans were a
single plan, in accordance with regulations prescribed by the Secretary of
the Treasury under PR-Code Section 1165(e). Plans may be considered one
plan for purposes of satisfying PR-Code Section 1165(e) only if they have
the same Plan Year.
(d) For the purpose of this Section 4.3, the "Actual Deferral
Percentage" for any Top One-Third Highly Compensated Employee who is a
Participant under two or more PR-Code Section 1165(e) arrangements of the
Company shall be determined by taking into account the Top One-Third Highly
Compensated Employee's Compensation under each such arrangement and
contributions under each such arrangement which qualify for treatment under
PR-Code Section 1165(e) in accordance with regulations prescribed by the
Puerto Rico Secretary of the Treasury under PR-Code Section 1165(e). If the
arrangements have different Plan Years, this paragraph shall be applied by
treating all such arrangements ending with or within the same calendar year
as a single arrangement. Notwithstanding the foregoing, certain plans shall
be treated as separate plans if mandatorily disaggregated pursuant to
regulations under Code Section 401(k).
(e) For purposes of the Actual Deferral Percentage test under the
PR-Code, Compensation Deferral Contributions must be made before the last
day of the twelve-month period immediately following the Plan Year to which
such contributions relate.
(f) The determination and treatment of Compensation Deferral
Contributions and the Actual Deferral Percentage of any Participant under
this Section 4.3 shall satisfy such other requirements as may be prescribed
by the Puerto Rico Secretary of the Treasury.
(g) The Committee shall keep or cause to have kept such records as are
necessary to demonstrate that the Plan satisfies the requirements of
PR-Code Section 1165(e) and the regulations thereunder, in accordance with
regulations prescribed by the Puerto Rico Secretary of the Treasury.
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(h) Notwithstanding any provision of this Appendix A to the contrary,
to the extent permitted by the PR-Code and its regulations, all Employees
employed by the Sponsor and any Affiliated Company that participates in the
Plan may be aggregated for purposes of determining compliance by the Plan
with the Actual Deferral Percentage test under the PR-Code and the
determination of Top One-Third Highly Compensated Employees.
4.4 Plan Section 4.4. The provisions of Plan Section 4.4 entitled
"Provisions for Return of Excess Before Tax Deposits" shall be applied by
substituting the dollar limitation contained in Section 4.2 of this Appendix for
the "Before Tax Deposit Limit" in each place it appears.
4.5 Plan Section 4.5. The provisions of Plan Section 4.5 entitled
"Provision for Recharacterization or Return of Excess Deferrals by Highly
Compensated Participants" shall be applied as follows:
(a) "Highly Compensated Participant and Top One-Third Highly
Compensated Employee" shall be substituted for "Highly Compensated
Participant" in each place it appears.
(b) For purposes of satisfying the Actual Deferral Percentage test
under the PR-Code, the amount of any excess Compensation Deferral
Contributions by a Top One-Third Highly Compensated Employee shall be
determined by the Committee taking into account the leveling method applied
under the PR-Code and its regulations that provide that the leveling method
shall begin with the Top One-Third Highly Compensated Employee who has the
highest deferral percentage.
(c) Any reference to Code Sections shall include reference to the
corresponding PR-Code Section unless the context clearly indicates
otherwise. For example, references to "Code Section 401(k)" and "Code
Section 404" shall include references to PR-Code Section 1165(e) and
PR-Code Section 1023(n), respectively.
4.6 Reserved for Future Modification.
4.7 Plan Section 4.7. In addition to the provisions of Plan Section 4.7
entitled "Character of Deposits," Before Tax Deposits shall be treated as
employer contributions for purposes of PR-Code Section 1165(e).
4.8 Plan Section 4.8. For purposes of Plan Section 4.8, a "Direct Rollover
Contribution" or a "Participant Rollover Contribution" from a retirement plan
qualified under PR-Code Section 1165(a) (unless such plan is also qualified
under Code Section 401(a)) or an "IRA Rollover Contribution" from a Puerto-Rico
individual retirement account or annuity shall not be permitted under the Plan.
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PART V
TRUST FUND AND MATCHING CONTRIBUTIONS
The provisions of Article V shall apply to all Puerto Rico-based Employees
except as set forth below:
5.1 Plan Section 5.6. The provisions of Plan Section 5.6 entitled
"Irrevocability" shall be applied by including a corresponding reference to
"PR-Code Section 1165(a)" and "PR-Code Section 1023(n)" in each place "Code
Section 401(a)" and "Code Section 404" appears, respectively.
PART VI
ACCOUNTS AND ALLOCATIONS
The provisions of Article VI of the Plan shall apply to all Puerto
Rico-based Employees.
PART VII
VESTING IN PLAN ACCOUNTS
The provisions of Article VII of the Plan shall apply to all Puerto
Rico-based Employees.
PART VIII
PAYMENT OF PLAN BENEFITS
The provisions of Article VIII of the Plan shall apply to all Puerto
Rico-based Employees except as set forth below:
8.1 Plan Section 8.2(a). For purposes of Plan Section 8.2(a), a Puerto
Rico-based Participant may elect, at the time and in the manner prescribed by
the Committee, to have the entire portion of a lump-sum distribution from the
Plan paid directly to a qualified trust described in PR-Code Section 1165(a)
that accepts the Puerto Rico-based Participant's distribution or an individual
retirement account or annuity described in PR-Code Sections 1169(a) and (b),
respectively.
8.2 Plan Section 8.4. In addition to the provisions of Plan Section 8.4
entitled "Designation of Beneficiary," the following rules shall apply to a
Participant, as defined in Section 2.6 of this Appendix:
(a) In the event a deceased Participant is not a resident of Puerto
Rico at the date of his or her death, the Committee, in its discretion, may
require the establishment of ancillary administration in Puerto Rico.
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(b) 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 Fund
to his or her heirs at law (determined in accordance with the laws of the
Commonwealth of Puerto Rico) as they existed at the date of the
Participant's death.
8.3 Plan Section 8.5. Notwithstanding the provisions of Plan Section 8.5, a
hardship withdrawal shall be made to a Puerto Rico-based Participant only if the
Committee (or its representative), based upon the Participant's representation
and such other facts as are known to the Committee, determines that the
requested withdrawal is on the account of:
(a) A deductible medical expense (within the meaning of PR-Code
Section 1023(aa)(2)(p)) incurred by the Participant, his or her spouse,
children or dependents;
(b) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(c) The payment of tuition for the next twelve (12) months of
post-secondary education for the Participant, the Participant's spouse,
children, or dependents;
(d) The need to prevent the eviction of the Participant from his or
her principal residence or foreclosure on the mortgage of the Participant's
principal residence; and
(e) Such other events as the PR-Code, regulations or the Puerto Rico
Secretary of the Treasury may allow.
Notwithstanding anything in the Plan to the contrary, Puerto Rico-based
Participants who make hardship withdrawals pursuant to Plan Section 8.1(e) shall
not be permitted to make Before Tax Deposits or After Tax Deposits to the Plan
during the 12-month period beginning as soon as administratively feasible
following the date of the hardship withdrawal.
8.4 Plan Section 8.6(a). Notwithstanding the provisions of Plan Section
8.6(a) entitled "Distribution Rules," in the case of a Puerto Rico-based
Participant in no event shall any benefits under the Plan, including benefits
upon retirement, Severance, or Disability, be paid (or commence to be paid) to a
participant prior to the "Consent Date" (as defined herein) unless the
Participant consents in writing to the payment (or commencement of 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) with respect to a lump sum distribution of the vested portion of
a Participant's Account if the total amount of such vested portion does not
exceed $1,000 ($5,000 for lump sum distributions made prior to March 28, 2005).
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8.5 Plan Section 8.11(c). The provisions of Plan Section 8.11(c) entitled
"Additional Documents" shall be applied by including reference to "Puerto Rico"
in each place "State or Federal" appears.
8.6 Plan Section 8.12. The provisions of Plan Section 8.12 entitled
"Trustee-Trustee Transfers" shall be applied by including a corresponding
reference to "PR-Code Section 1165" in each place "Code Section 401" appears.
PART IX
PLAN ARTICLES IX THROUGH XI
The provisions of Articles IX through XI of the Plan shall apply to all
Puerto Rico-based Employees.
PART X
TERMINATION AND MERGER
The provisions of Articles XII of the Plan shall apply to all Puerto
Rico-based Employees except as follows:
10.1 Plan Section 12.1. In addition to the provisions of Plan Section 12.1,
the Committee may determine that no distributions shall be made to a Puerto
Rico-based Participant in the event the Plan is terminated, until such time as
the Puerto Rico Department of the Treasury shall have determined in writing that
such termination will not adversely affected the prior qualification of the Plan
under the PR-Code.
10.2 Plan Section 12.2. In addition to the provisions of Plan Section 12.2,
any merger or consolidation of the Plan with, or transfer in whole or in part of
the assets and liabilities of the Trust to, another trust fund as applied to a
Puerto Rico-based Participant will be limited to the extent such other plan and
trust are qualified under PR-Code Section 1165(a).
PART XI
PLAN ARTICLES XIII THROUGH XV
The provisions of Articles XIII through XV of the Plan shall apply to all
Puerto Rico-based Employees.
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PART XII
MISCELLANEOUS PROVISIONS
The provisions of Article XVI of the Plan shall apply to all Puerto
Rico-based Employees except as follows:
12.1 Plan Section 16.5. In addition to the provisions of Plan Section 16.5
entitled "Interpretation," the provisions of the Plan shall be interpreted in a
manner consistent with the Plan satisfying (i) the requirements of PR-Code
Section 1165(a) and related statutes for qualification as a defined contribution
plan and (ii) the requirements of PR-Code Section 1165(e) and related statutes
for qualification as a cash or deferred arrangement to the extent such
interpretation would not violate (i) the requirements of Code Section 401(a) and
related statutes for qualification as a defined contribution plan and (ii) the
requirements of Code Section 401(k) and related statutes for qualification as a
cash or deferred arrangement.
12.2 Plan Section 16.6. In addition to the provisions of Plan Section 16.6
entitled "Withholding for Taxes," any payments from the Trust Fund may be
subject to withholding for taxes as may be required by any applicable Puerto
Rico law.
12.3 Plan Section 16.7. In addition to the provisions of Plan Section 16.7
entitled "California Law Controlling," the Committee shall determine whether all
legal questions pertaining to the Plan which are not controlled by ERISA shall
be determined in accordance with the laws of the Commonwealth of Puerto Rico or
the laws of the State of California in the case of a Puerto Rico-based Employee
or Participant.
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