-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Er9tbLJh7hcsyDD335L2x0Wu/c8mfc+pxkRK4vGzlAhUQAH8ySiPzUaoDgi6eRlf kGYa1OrJhjFED5avqSRXXQ== /in/edgar/work/20000912/0000891618-00-004562/0000891618-00-004562.txt : 20000922 0000891618-00-004562.hdr.sgml : 20000922 ACCESSION NUMBER: 0000891618-00-004562 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20000912 EFFECTIVENESS DATE: 20000912 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATSON PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000884629 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 953872914 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-45650 FILM NUMBER: 721509 BUSINESS ADDRESS: STREET 1: 311 BONNIE CIRCLE CITY: CORONA STATE: CA ZIP: 92880 BUSINESS PHONE: 9092701400 MAIL ADDRESS: STREET 1: 311 BONNIE CIRCLE CITY: CORONA STATE: CA ZIP: 92880 S-8 1 f65522s-8.txt FORM S-8 1 As filed with the Securities and Exchange Commission on September 12, 2000 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WATSON PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) NEVADA 95-3872914 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) WATSON PHARMACEUTICALS, INC. 311 BONNIE CIRCLE, CORONA, CA 92880 (909) 270-1400 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------------- SCHEIN PHARMACEUTICAL, INC. 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN SCHEIN PHARMACEUTICAL, INC. 1999 STOCK OPTION PLAN THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. AND AFFILIATES DANBURY PHARMACAL PUERTO RICO, INC. BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN (Full title of the plan) --------------------- ROBERT C. FUNSTEN SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY WATSON PHARMACEUTICALS, INC. 311 BONNIE CIRCLE, CORONA, CA 92880 (909) 270-1400 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------- Copies to: KEITH FLAUM, ESQ. COOLEY GODWARD LLP FIVE PALO ALTO SQUARE 3000 EL CAMINO REAL PALO ALTO, CA 94306-2155 (650) 843-5000 -------------------- 2
CALCULATION OF REGISTRATION FEE ========================================================================================================================== Proposed Maximum Proposed Maximum Amount of Title of Securities Amount to be Offering Aggregate Registration to be Registered Registered (1) Price per Share(2) Offering Price(2) Fee - -------------------------------------------------------------------------------------------------------------------------- Stock Options and Common Stock, par value $.0033 per share 832,500 shares $70.16 $58,408,200 $15,420 - --------------------------------------------------------------------------------------------------------------------------
(1) Together with an indeterminate number of additional shares which may be necessary to adjust the number of shares reserved for issuance pursuant to such employee benefit plans as the result of any future stock split, stock dividend or similar adjustment of the Registrant's outstanding Common Stock. (2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(h) under the Securities Act of 1933, as amended (the "Act"). The offering price per share and aggregate offering price are based on the average of the high and low prices of Registrant's Common Stock on Friday, September 8, 2000 as reported on the New York Stock Exchange. The following chart illustrates the calculation of the registration fee:
===================================================================================================================== Proposed Maximum Proposed Maximum Title of Securities Amount to be Offering Aggregate to be Registered Registered (1) Price per Share (2) Offering Price (2) - --------------------------------------------------------------------------------------------------------------------- SCHEIN PHARMACEUTICAL, INC. 1999 STOCK OPTION PLAN Shares of Common Stock, $.0033 par value per share, issuable pursuant to outstanding options to purchase Common Stock 687,000 $70.16 $48,199,920 - --------------------------------------------------------------------------------------------------------------------- SCHEIN PHARMACEUTICAL, INC. 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN Shares of Common Stock, $.0033 par value per share, issuable pursuant to outstanding options to purchase Common Stock 38,000 $70.16 $2,666,080 - --------------------------------------------------------------------------------------------------------------------- THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. AND AFFILIATES Shares of Common Stock, $.0033 par value per share, reserved for future issuance 100,000 $70.16 $7,016,000 - --------------------------------------------------------------------------------------------------------------------- DANBURY PHARMACAL PUERTO RICO, INC. BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN Shares of Common Stock, $.0033 par value per share, reserved for future issuance 7,500 $70.16 $526,200 - ---------------------------------------------------------------------------------------------------------------------
3 PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS The information required by Part I is included in documents sent or given to participants in the Plans pursuant to Rule 428(b)(1) of the Securities Act of 1933, as amended (the "Securities Act"). PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. Watson Pharmaceuticals, Inc. ("Registrant") hereby incorporates by reference into this registration statement on Form S-8 (this "Registration Statement") the following documents that have been filed previously with the Securities and Exchange Commission (the "Commission"): (a) Definitive proxy statement for Registrant's 2000 annual meeting of stockholders, filed on April 10, 2000; (b) Annual Report on Form 10-K of Registrant for the year ended December 31, 1999, filed on March 30, 2000; (c) Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed on August 14, 2000; (d) Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, filed on May 15, 2000; (e) Registrant's Current Report on Form 8-K dated September 11, 2000; (f) Registrant's Current Report on Form 8-K dated July 7, 2000; (g) Registrant's Current Report on Form 8-K dated May 31, 2000; (h) Registrant's Current Report on Form 8-K dated May 25, 2000; and (i) Common stock description contained in Registrant's Registration Statement on Form 8-A (File No. 001-13305) filed on August 22, 1997, registering Registrant common stock under Section 12(b) of the Securities Exchange Act of 1934. All documents subsequently filed by Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated herein by reference and be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. Any such statement so modified or superseded shall not constitute a part of this Registration Statement, except as so modified or superseded. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. 4 ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Sections 78.752 and 78.751 of the Nevada Revised Statutes authorize a corporation, under certain circumstances, to indemnify its directors and officers (including reimbursement for expenses incurred). The Registrant has provided for indemnification to the fullest extent permitted by the provisions of the Nevada statute in its Articles of Incorporation and Bylaws. Set forth below is Article XII of Watson's articles of incorporation, as amended, pertaining to indemnification of officers, directors, employees and agents and insurance: 1) To the extent not prohibited by law, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Corporation, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2) To the extent not prohibited by law, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation. Indemnification may not be made for any claim issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper, all subject to the authorizations set forth in Section 78.751 of the Nevada General Corporation Law. 3) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2 of Article XII, or in defense of any claim, issue or matter therein, he must be indemnified by the Corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. 5 4) Any indemnification under subsections 1 and 2 of Article XII, unless ordered by a court or advanced pursuant to subsection 5 of Article XII, may be made by the Corporation only as authorized in the specific case upon determination that indemnification of the director, officer, employee or agent is proper in the circumstances by (a) the stockholders of the Corporation; (b) the Board of Directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (c) independent legal counsel in a written opinion if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders; or (d) independent legal counsel in a written opinion if a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained. 5) The Corporation shall, from time to time, reimburse or advance to any director or officer or other person entitled to indemnification hereunder the funds necessary for payment of expenses, including attorneys' fees and disbursements, incurred in connection with any proceeding, in advance of the final disposition of such proceeding; provided, however, that, if required by the Nevada General Corporation Law, such expenses incurred by or on behalf of any director or officer may be paid in advance of the final disposition of the action, suit or proceeding only upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. 6) The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article XII (a) does not exclude any other rights to which a person seeking indemnification or advancement of expenses maybe entitled under these Articles of Incorporation, or any Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action (b) continues as to a person who has ceased to be a director or officer (or other person indemnified hereunder) and shall inure to the benefit of the heirs, executors and administrators of such person. Set forth below is Article VI of Watson's amended and restated bylaws: Section 1. Agents, Proceedings and Expenses. For the purposes of this Article, "agent" means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending or completed action or proceeding, whether threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes , without limitation, attorneys' fees and any expenses of establishing a right to indemnification. Section 2. Actions Other Than by the Corporation. The corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding to the full extent permitted by the General Corporation Law of Nevada as may be in effect from time to time. Section 3. Insurance. Upon and in the event of a determination by the board of directors of the corporation to purchase such insurance, the corporation shall purchase and maintain, insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not the corporation would have the 6 power to indemnify the agent against such liability under the provisions of this section. Section 4. Fiduciaries of Corporate Employee Benefit Plan. This Article does not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person's capacity as such, even though such person may also be an agent of the corporation as defined in Section 1 of this Article. Nothing contained in this Article shall limit any right to indemnification to which such a trustee, investment manager or other fiduciary may be entitled by contract or otherwise, which shall be enforceable to the extent permitted by applicable law other than this Article. The Registrant maintains a directors' and officers' liability insurance policy that, subject to the terms and conditions of the policy, provides coverage up to $50,000,000 in the aggregate (subject to a $250,000 retention per loss) arising from any wrongful act (as defined by the policy) committed by a director or officer in his or her capacity as a director or officer. The policy reimburses the Registrant for amounts spent in lawful indemnification of a director or officer or amounts provided by registrant to indemnify its directors and officers as required or permitted by law. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. 4.1 Articles of Incorporation of Registrant, and all amendments thereto, filed as Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and Exhibit 3.1 (A) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and hereby incorporated by reference. 4.2 Bylaws of Registrant, as amended as of December 11, 1998, filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-8 (Reg. No. 333-70933), filed on January 21, 1999 and hereby incorporated by reference. 5.1 Opinion of Kummer Kaempfer Conner & Renshaw as to the legality of the Common Stock of Registrant covered by this Registration Statement. 23.1 Consent of Kummer Kaempfer Conner & Renshaw, contained in the opinion filed as Exhibit 5.1 to this Registration Statement. 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of Ernst & Young LLP. 23.4 Consent of Deloitte & Touche LLP. 23.5 Consent of BDO Seidman, LLP. 24.1 Power of Attorney authorizing certain persons to sign this Registration Statement on behalf of certain directors and officers of Registrant, contained on the signature page to this Registration Statement. 99.1 Schein Pharmaceutical, Inc. 1995 Non-Employee Director Stock Option Plan. 99.2 Schein Pharmaceutical, Inc. 1999 Stock Option Plan. 7 99.3 The Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates. 99.4 Danbury Pharmacal Puerto Rico, Inc. Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan. ITEM 9. UNDERTAKINGS. 1. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the issuer pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference herein. (b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling 8 precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 4. The Registrant will submit or has submitted the Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates and the Danbury Pharmacal Puerto Rico, Inc. Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan and any amendment thereto to the Internal Revenue Service ("IRS") in a timely manner and has made or will make all changes required by the IRS in order to qualify the plans. 9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Corona, State of California, on the 12th day of September, 2000. WATSON PHARMACEUTICALS, INC. By: /s/ ROBERT C. FUNSTEN -------------------------------------- Robert C. Funsten Senior Vice President, General Counsel and Secretary POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allen Y. Chao and Robert C. Funsten, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. /s/ ALLEN Y. CHAO Chairman, Chief Executive Officer - ------------------------------------ and President September 12, 2000 Allen Y. Chao, Ph.D. /s/ MICHAEL E. BOXER Senior Vice President - ------------------------------------ and Chief Financial Officer September 12, 2000 Michael E. Boxer /s/ R. CHATO ABAD Vice President - Finance - ------------------------------------ (Principal Accounting Officer) September 12, 2000 R. Chato Abad /s/ RONALD R. TAYLOR Director September 12, 2000 - ------------------------------------ Ronald R. Taylor /s/ ANDREW L. TURNER Director September 12, 2000 - ------------------------------------ Andrew L. Turner /s/ MICHEL J. FELDMAN Director September 12, 2000 - ------------------------------------- Michel J. Feldman
10 /s/ FRED G. WEISS Director September 12, 2000 - ------------------------------------ Fred G. Weiss /s/ MICHAEL J. FEDIDA Director September 12, 2000 - ------------------------------------ Michael J. Fedida /s/ ALBERT F. HUMMEL Director September 12, 2000 - ------------------------------------ Albert F. Hummel
The Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates. Pursuant to the requirements of the Securities Act, Watson Pharmaceuticals, Inc., the administrator of the Plan, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Corona, State of California, on September 12, 2000. THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. AND AFFILIATES By: /s/ ROBERT C. FUNSTEN -------------------------------- Robert C. Funsten Title: Senior Vice President, General Counsel and Secretary The Danbury Pharmacal Puerto Rico, Inc. Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan. Pursuant to the requirements of the Securities Act, Watson Pharmaceuticals, Inc., the administrator of the Plan, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Corona, State of California, on September 12, 2000. DANBURY PHARMACAL PUERTO RICO, INC. BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN By: /s/ ROBERT C. FUNSTEN -------------------------------- Robert C. Funsten Title: Senior Vice President, General Counsel and Secretary 11 EXHIBIT INDEX
Exhibit Number Page 4.1 Articles of Incorporation of Registrant, and all amendments thereto, filed as Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and Exhibit 3.1 (A) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and hereby incorporated by reference. 4.2 Bylaws of Registrant, as amended as of December 11, 1998, filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-8 (Reg. No. 333-70933), filed on January 21, 1999 and hereby incorporated by reference. 5.1 Opinion of Kummer Kaempfer Conner & Renshaw as to the legality of the Common Stock of Registrant covered by this Registration Statement. 23.1 Consent of Kummer Kaempfer Conner & Renshaw, contained in the opinion filed as Exhibit 5.1 to this Registration Statement. 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of Ernst & Young LLP. 23.4 Consent of Deloitte & Touche LLP. 23.5 Consent of BDO Seidman, LLP. 24.1 Power of Attorney authorizing certain persons to sign this Registration Statement on behalf of certain directors and officers of Registrant, contained on the signature page to this Registration Statement. 99.1 Schein Pharmaceutical, Inc. 1995 Non-Employee Director Stock Option Plan. 99.2 Schein Pharmaceutical, Inc. 1999 Stock Option Plan. 99.3 The Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates. 99.4 Danbury Pharmacal Puerto Rico, Inc. Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan.
EX-5.1 2 f65522ex5-1.txt EXHIBIT 5.1 1 EXHIBIT 5.1 [KUMMER KAEMPFER BONNER & RENSHAW LETTERHEAD] September 12, 2000 Watson Pharmaceuticals, Inc. 311 Bonnie Circle Corona, CA 92880 Ladies and Gentleman: We have acted as counsel for Watson Pharmaceuticals, Inc., a Nevada corporation (the "Company"), in connection with the registration statement on Form S-8 ("Registration Statement") to be filed by the Company with the Securities and Exchange Commission covering the offer and sale of up to 832,500 shares of the Company's common stock, $0.0033 par value per share ("Common Stock"), to be issued in connection with the Schein Pharmaceutical, Inc. 1995 Non-Employee Director Stock Option Plan, Schein Pharmaceutical, Inc. 1999 Stock Option Plan, The Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates, and the Danbury Pharmaceutical Puerto Rico, Inc. Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan. In rendering this opinion, we have examined and relied on the following documents: (i) the Company's Articles of Incorporation, as amended, and Bylaws, as amended, (ii) the resolutions adopted by the Board of Directors of the Company on May 23, 2000, (iii) the Registration Statement, and (iv) such other documents, legal opinions and precedents, corporate and other records of the Company, and certificates of public officials and officers of the Company that we have deemed necessary or appropriate to provide a basis for the opinion. Based upon and subject to the foregoing, in our opinion, the shares of Common Stock of the Company which are being offered and sold by the Company pursuant to the Registration Statement, when sold in the manner and for the consideration contemplated by the Registration Statement, will be legally issued, fully paid and non-assessable. We consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to our firm under the heading "Legal Matters." Very truly yours, /s/ Kummer Kaempfer Bonner & Renshaw EX-23.2 3 f65522ex23-2.txt EXHIBIT 23.2 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated February 4, 2000 relating to the financial statements of Watson Pharmaceuticals, Inc., which appears in Watson Pharmaceuticals, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999. /s/ PRICEWATERHOUSECOOPERS LLP Los Angeles, California September 8, 2000 EX-23.3 4 f65522ex23-3.txt EXHIBIT 23.3 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Registration Statement (Form S-8) of Watson Pharmaceuticals, Inc. of our report dated February 5, 1999, with respect to the consolidated financial statements of TheraTech, Inc. for the years ended December 31, 1998 and 1997 included in Watson Pharmaceuticals, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1999, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Salt Lake City, Utah September 8, 2000 EX-23.4 5 f65522ex23-4.txt EXHIBIT 23.4 1 EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Watson Pharmaceuticals, Inc. on Form S-8 of our report dated February 4, 1998, relating to the consolidated financial statements of Somerset Pharmaceuticals, Inc. and subsidiaries as of December 31, 1997, and for the year then ended, appearing in the Annual Report on Form 10-K of Watson Pharmaceuticals, Inc. for the year ended December 31, 1999. /s/ DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania September 8, 2000 EX-23.5 6 f65522ex23-5.txt EXHIBIT 23.5 1 EXHIBIT 23.5 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in this registration statement of our reports dated February 16, 2000, except for Note 20, which is as of March 31, 2000, relating to the consolidated financial statements and schedule of Schein Pharmaceutical, Inc. appearing in the Company's Annual Report on Form 10-K for the year ended December 25, 1999. /s/ BDO SEIDMAN, LLP New York, New York September 6, 2000 EX-99.1 7 f65522ex99-1.txt EXHIBIT 99.1 1 EXHIBIT 99.1 - -------------------------------------------------------------------------------- SCHEIN PHARMACEUTICAL, INC. 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN (AMENDED AND RESTATED AS OF AUGUST 24, 1998) - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE I. PURPOSES..............................................................2 II. DEFINITIONS...........................................................2 A. "Act"..........................................................2 B. "Board"........................................................2 C. "Committee"....................................................2 D. "Common Stock".................................................2 E. "Eligible Director"............................................2 F. "Eligible Director -- Class 1".................................2 G. "Eligible Director -- Class 2".................................2 H. "Fair Market Value"............................................2 I. "Option".......................................................3 J. "Share"........................................................3 K. "Termination of Directorship"..................................3 III. EFFECTIVE DATE........................................................3 IV. ADMINISTRATION........................................................3 A. Duties of the Committee........................................3 B. Advisors.......................................................3 C. Indemnification................................................4 D. Meetings of the Committee......................................4 V. ADJUSTMENTS...........................................................4 A. Shares to be Delivered: Fractional Shares......................4 B. Number of Shares...............................................4 C. Adjustments....................................................4 VI. AWARDS AND TERMS OF OPTIONS...........................................5 A. Grant..........................................................5 B. Date of Grant..................................................6 C. Option Terms...................................................6 D. Expiration.....................................................6 E. Acceleration of Exercisability.................................6 VII. EFFECT OF TERMINATION OF DIRECTORSHIP.................................8 VIII. NONTRANSFERABILITY OF OPTIONS.........................................8 IX. RIGHTS AS A STOCKHOLDER...............................................8 X. TERMINATION, AMENDMENT AND MODIFICATION...............................8 XI. ISSUANCE OF STOCK CERTIFICATES: LEGENDS: PAYMENT OF EXPENSE...........9
i. 3 TABLE OF CONTENTS (CONTINUED)
PAGE A. Stock Certificate..............................................9 B. Legends........................................................9 C. Payment of Expenses............................................9 XII. LISTING OF SHARES AND RELATED MATTER..................................9 XIII. WITHHOLDING TAXES.....................................................9 XIV. GENERAL...............................................................9 A. Right to Terminate Directorship................................9 B. Ng Trust.......................................................9 C. Notices........................................................9 D. Severability..................................................10 E. Costs.........................................................10 F. Controlling Law...............................................10 G. Section 16(b).................................................10
ii. 4 SCHEIN PHARMACEUTICAL, INC. 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN (AMENDED AND RESTATED AS OF AUGUST 24, 1998) I. PURPOSES The purposes of this 1995 Non-Employee Director Stock Option Plan (this "Plan"), as amended and restated effective as of August 24, 1998, are to enable Schein Pharmaceutical, Inc. (the "Company") to attract, retain and motivate directors who will be important to the success of the Company, and to increase the identity of interest between directors and stockholders of the Company by granting certain directors options to purchase common stock of the Company. II. DEFINITIONS For purposes of this Plan, the following terms have the following meanings: A. "ACT" means the Securities Exchange Act of 1934 and the rules and regulations under the Securities Exchange Act of 1934. B. "BOARD" means the board of directors of the Company. C. "COMMITTEE" means the Board or a duly appointed committee of the Board to which the Board has delegated its power and functions under this Plan. D. "COMMON STOCK" means the common stock of the Company, par value $0.01 per share, any common stock into which such common stock of the Company may be converted and any common stock resulting from any reclassification of such common stock. E. "ELIGIBLE DIRECTOR" means an Eligible Director -- Class I or an Eligible Director -- Class 2. F. "ELIGIBLE DIRECTOR -- CLASS 1" means a director of the Company who is not an Eligible Director -- Class 2 and who is not an active employee of the Company or any subsidiary of the Company. G. "ELIGIBLE DIRECTOR -- CLASS 2" means a director of the Company designated by the Board as such at the time the director is first elected to serve on the Board or, in the case of members of the Board at the time this Plan is adopted, a director of the Company designated by the Board as such at that time, and, in each case, who is not an active employee of the Company or any subsidiary of the Company (it being understood that the Board shall have the right, but shall not be required, to designate a director as an Eligible Director -- Class 2, and that the Board shall designate a director as an Eligible Director -- Class 2 only if, at the time of the designation, the director shall have waived all future annual fees for serving as a director of the Company but not fees for attending Board meetings or committee meetings or reimbursement of out-of-pocket expenses for traveling to and from and attending such meetings). H. "FAIR MARKET VALUE" means the value of a Share as of a particular date determined as follows: 1. If the Common Stock is listed or admitted to trading on that date on a national securities exchange or is quoted on the Nasdaq National Market, the closing sale price of a Share as reported on the 5 relevant composite transaction tape, if applicable, or on the principal national securities exchange or through the Nasdaq National Market, as the case may be, on that date, or, in the absence of reported sales on that date, the mean between the highest reported bid and lowest reported asked prices reported on the relevant composite transaction tape or national securities exchange or through the Nasdaq National Market, as the case may be, on that date. 2. If the Common Stock is not listed or quoted as described in clause 1, but bid and asked prices are quoted through Nasdaq, the mean between the highest reported bid and the lowest reported asked prices as quoted through Nasdaq on that date. 3. If the Fair Market Value would otherwise be determined in accordance with clause 2 but the Committee determines that that would not properly reflect the Fair Market Value, by any other method the Committee determines to be reasonable. 4. If the Common Stock is not publicly traded, an amount determined by the Committee in good faith. I. "OPTION" means the right to purchase one Share at a prescribed purchase price on the terms specified in this Plan. J. "SHARE" means a share of Common Stock. K. "TERMINATION OF DIRECTORSHIP" with respect to an individual means that individual is no longer a director of the Company. III. EFFECTIVE DATE This Plan became effective January 1, 1995 (the "Effective Date"), and was approved on September 30, 1995 by holders of a majority of the outstanding Shares at the time of approval. This Plan was amended and restated as of August 8, 1996, and further amended and restated as of August 24, 1998. IV. ADMINISTRATION A. DUTIES OF THE COMMITTEE. This Plan shall be administered by the Committee The Committee shall have full authority to interpret this Plan and to decide any questions and settle any controversies or disputes that may arise in connection with this Plan; to establish, amend and rescind rules for carrying out this Plan; to administer this Plan; to prescribe the forms of instruments evidencing Options and any other instruments required under this Plan, and to change such forms from time to time; and to make all other determinations and to take all actions in connection with this Plan and the Options as the Committee, in its sole discretion, deems necessary or desirable. The Committee shall not be bound to any standards of uniformity or similarity of action, interpretation or conduct in the discharge of its duties under this Plan. Any determination, action or conclusion of the Committee shall be final, conclusive and binding on all parties. B. ADVISORS. The Committee may employ such legal counsel, consultants and agents as it deems desirable for the administration of this Plan, and may rely upon any advice or opinion received from any such counsel or consultant and any computation received from any such consultant or agent. The Company shall pay all the expenses of any such counsel, consultant or agent. 6 C. INDEMNIFICATION. To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to this Plan or any Option granted under it. To the maximum extent permitted by applicable law and the certificate of incorporation and by-laws of the Company, the Company shall indemnify and hold harmless each officer and member or former member of the Committee and the Board against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Company) or liability (including any sum paid in settlement of a claim with the approval of the Company), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with this Plan. Such indemnification shall be in addition to any rights of an indemnitee under applicable law or the certificate of incorporation or by-laws of the Company. Notwithstanding anything to the contrary in this paragraph, however, the rights under this paragraph shall not apply to actions or determinations by an individual with regard to Options granted to that individual under this Plan. D. MEETINGS OF THE COMMITTEE. The Committee shall adopt such rules and regulations as it deems appropriate concerning its meetings and the transaction of its business. All determinations by the Committee shall be made by the affirmative vote of a majority of its members. Any such determination may be made at a meeting duly called and held at which a majority of the members of the Committee are a attendance in person or through telephonic communication. Any written determination signed by all the members of the Committee shall be as effective as if made by a majority vote of the members at a meeting duly called and held. V. ADJUSTMENTS A. SHARES TO BE DELIVERED: FRACTIONAL SHARES. Shares to be issued under this Plan shall be made available, at the sole discretion of the Board, either from authorized but unissued Shares or from issued Shares reacquired by the Company and held in treasury. No fractional Shares shall be issued or transferred upon the exercise of any Option, nor shall any compensation be paid with regard to fractional shares. B. NUMBER OF SHARES. Subject to adjustment as provided in this Article V. the maximum aggregate number of Shares that may be issued under this Plan shall be 105,000 (after giving effect to a 105-for-one stock split on April 3, 1998). Where Options are for any reason canceled, or expire or terminate unexercised, the Shares covered by those Options shall again be available for the grant of Options, subject to the preceding sentence. C. ADJUSTMENTS. The existence of this Plan and the Options granted under this Plan shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issuance of securities, whether or not senior to the Common Stock, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, but this Article V(C) shall govern outstanding Options in each such case. 1. If the Company effects a subdivision, recapitalization or consolidation of Shares or effects a stock dividend on Shares without receipt of consideration, the aggregate number and kind of shares of capital stock issuable under this Plan shall be proportionately adjusted, and each holder of a then outstanding Option shall have the right to purchase under that Option, in lieu of the number of Shares as to which the Option was then exercisable but or, the same terms and conditions of exercise set forth in that Option, the number and kind of shares of capital stock the holder would have owned after the subdivision, recapitalization, consolidation or 7 dividend, if, immediately prior to the subdivision, recapitalization, consolidation or dividend, the holder had been the holder of record of the number of Shares as to which that Option was then exercisable. 2. If the Company merges or consolidates with one or more corporations and the Company is the surviving corporation, thereafter, upon exercise of an Option theretofore granted, the holder shall be entitled to purchase under that Option, in lieu of the number of Shares as to which the Option was then exercisable, but on the same terms and conditions of exercise set forth in that Option, the number and kind of shares of capital stock or other property to which the holder would have been entitled pursuant to the agreement of merger or consolidation, if, immediately prior to the merger or consolidation, the holder had been the holder of record of the number of Shares as to which that Option was then exercisable. 3. If the Company is not the surviving corporation in any merger or consolidation, or if the Company is to be dissolved or liquidated, then, unless the surviving corporation assumes the Options or substitutes new options that are determined by the Board in its sole discretion to be substantially similar in nature and equivalent in terms and value to Options then outstanding, upon the effective date of the merger, consolidation, liquidation or dissolution, any unexercised Options shall expire without additional compensation to the holders; provided that the Committee shall give notice to each holder at least 20 days prior to the merger, consolidation, dissolution or liquidation that the Options, if unexercised, will expire upon the merger, consolidation, dissolution or liquidation, and each holder has the right to exercise in full, effective as of the consummation of the merger, consolidation, dissolution or liquidation, all the holder's then outstanding Options (without regard to limitations on exercise otherwise contained in the Options, other than pursuant to Article III) contingent on the occurrence of the merger, consolidation, dissolution or liquidation, and provided that, if the contemplated transaction does not take place within 90 days after that notice, the notice, accelerated vesting and exercise shall be null and void. Notwithstanding the foregoing, the Options held by persons subject to section 16(b) of the Act that would not have vested under this Plan except pursuant to Article VI(E) prior to the effective date of the merger, consolidation, liquidation or dissolution shall not expire upon the consummation of the merger, consummation of the merger, consolidation, liquidation or dissolution, but shall expire 30 days after they would have otherwise vested under this Plan and shall, after the merger, consolidation, liquidation or dissolution, represent the right to receive the number and kind of shares of capital stock or other property to which the holder would have been entitled, if, immediately prior to the merger, consolidation, liquidation or dissolution, the holder had been the holder of record of the number of Shares as to which that Option was then exercisable. 4. If, as a result of any adjustment pursuant to the preceding paragraphs of this Article V(C) any holder becomes entitled upon exercise of an Option to receive any shares of capital stock other than Common Stock, then the number and kind of shares of capital stock so receivable shall be subject to adjustment from time to time pursuant to this Article V(C), mutates mutandis. 5. Except as provided above, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property or services, upon direct sale, upon exercise of rights or warrants or upon conversion of shares or other securities, whether or not for fair value, shall not affect, and no adjustment by reason of the issuance shall be made with respect to, the number of Shares subject to Options granted or the purchase price per Share. VI. AWARDS AND TERMS OF OPTIONS A. GRANT. Without further action by the Board or the stockholders of the Company, each Eligible Director on each Annual Date of Grant (as defined below) shall be automatically granted Options to purchase a number of Shares determined by dividing $50,000 by the Fair Market Value on the Annual Date of Grant, in the 8 case of each Eligible Director -- Class 1, and a number of Shares determined by dividing $100,000 by the Fair Market Value on the Annual Date of Grant, in the case of each Eligible Director -- Class 2; provided that no such Option shall be granted, if, on the date of grant, the Company shall have liquidated, dissolved or merged or consolidated with another entity and is not the surviving entity (unless this Plan shall have been assumed by the surviving entity with regard to future grants). If an Eligible Director shall first become a member of the Board on a date other than an Annual Date of Grant, such Eligible Director on the date he first becomes a member of the Board shall be automatically granted Options to purchase a number of Shares equal to the number set forth above (i) multiplied by a fraction, the numerator of which shall be the number of days from the date of grant until the next following Annual Date of Grant, and the denominator of which shall be 365 and (ii) divided by the Fair Market Value on the date of grant. In addition, on August 24, 1998, each then Eligible Director -- Class I shall be automatically granted Options to purchase a number of Shares determined by dividing $18,223 by the Fair Market Value on August 24, 1998, and each then Eligible Director -- Class 2 shall be automatically granted Options to purchase a number of Shares determined by dividing $11,554 by the Fair Market Value on August 24, 1998. B. DATE OF GRANT. Grants shall be made on the Effective Date, annually on each anniversary of the Effective Date (the "Annual Date of Grant") and at such other times as provided in Article VI(A) provided that, if the Common Stock is then publicly traded and that date in any year is a date on which the national securities exchange or automated quotation system on which the Common Stock is primarily traded or through which it is primarily quoted is not open for trading or quotation, the grant shall be made on the first day thereafter on which the relevant exchange or quotation system is open for trading or quotation. C. OPTION TERMS. 1. The purchase price per Share ("Purchase Price") deliverable upon the exercise of an Option shall be 100% of the Fair Market Value at the time of the grant of the Option, or the par value of a Share, whichever is greater. 2. Except as otherwise provided in this Plan each Option (a) granted prior to August 8, 1996 shall be exercisable with respect to 20% of the Shares subject to the Option on or after the first anniversary of the date of grant and with respect to an additional 20% of the Shares subject to the Option on or after each of the next four anniversaries of the date of grant, and (b) granted on or after August 8, 1996 shall be exercisable with respect to one-third of the Shares subject to the Option on or after the first anniversary of the date of grant and with respect to an additional one-third of the Shares subject to the Option on or after each of the next two anniversaries of the date of grant. 3. An Option holder electing to exercise one or more Options shall give written notice to the secretary of the Company of the election and the number of Options the holder elects to exercise. Shares so purchased shall be paid for at the time of exercise in cash or by delivery of unencumbered Shares (valued, for these purposes, at 100% of the Fair Market Value at the time) owned by the holder for at least six months (or such longer period as required by applicable accounting standards to avoid a charge to earnings) or a combination of cash and such Shares. D. EXPIRATION. Except as otherwise provided in this Plan, if not previously exercised, each Option shall expire upon the tenth anniversary of the date of grant. E. ACCELERATION OF EXERCISABILITY. All Options granted and not previously exercisable shall become fully exercisable immediately upon a Change of Control (as defined below). A "Change of Control" shall be deemed to have occurred upon: 9 1. any individual, entity or group (within the meaning of section 13d-3 or l4d-1 of the Act) (a "Person") directly or indirectly being a beneficial owner (within the meaning of Rule 13d-3 under the Act, except that a Person shall not be deemed a beneficial owner of securities solely by virtue of that Person's rights under any voting trust or shareholders agreement in effect on the Effective Date) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); excluding, however, the following: (x) the Company, (y) any employee benefit plan (or related trust) sponsored or maintained by the Company or (z) any corporation that becomes a beneficial owner pursuant to a reorganization, merger, consolidation or similar corporate transaction (in each case, a "Corporate Transaction"), if, pursuant to the Corporate Transaction, the conditions described in clauses (a), (b) and (c) of paragraph 3 below are satisfied; or 2. a change in the composition of the Board, such that the individuals who, as of the Effective Date, constitute the Board (the Board as of the Effective Date, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided that, for purposes of this clause, any individual who becomes a member of the Board subsequent to the Effective Date and whose election, or nomination for election by the Company's stockholders, was approved by the members of the Board who also are members of the Incumbent Board (or so deemed to be pursuant to this proviso) shall be deemed a member of the Incumbent Board; but, provided further that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so deemed a member of the Incumbent Board; or 3. the approval by the stockholders of the Company of a Corporate Transaction, or, if consummation of the Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of the consent (either explicitly or implicitly by consummation); excluding, however, such a Corporate Transaction pursuant to which (a) the beneficial owners (or beneficiaries of the beneficial owners) of the outstanding Shares and Outstanding Voting Securities immediately prior to the Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock of the corporation resulting from the Corporate Transaction and the combined voting power of the outstanding voting securities of that corporation entitled to vote generally in the election of directors, in substantially the same proportions as their ownership, immediately prior to the Corporate Transaction, of the outstanding Shares and Outstanding Voting Securities, as the case may be, (b) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or the corporation resulting from the Corporate Transaction and any Person beneficially owning, immediately prior to the Corporate Transaction, directly or indirectly, 20% or more of the outstanding Shares or Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from the Corporate Transaction or the combined voting power of the then outstanding securities of that corporation entitled to vote generally in the election of directors and (c) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from the Corporate Transaction; or 4. the approval of the stockholders of the Company of (a) a complete liquidation or dissolution of the Company or (b) the sale or other disposition of all or substantially all the assets of the Company; excluding, however, such a sale or other disposition to a corporation with respect to which, following the sale or other disposition, (i) more than 60% of the then outstanding shares of common stock of that corporation and the combined voting power of the then outstanding voting securities of that corporation entitled to vote generally in the election of directors will be then beneficially owned, directly or indirectly, by the individuals and entities 10 who were the beneficial owners (or beneficiaries of the beneficial owners), respectively, of the outstanding Shares and Outstanding Voting Securities immediately prior to the sale or other disposition in substantially the same proportion as their ownership, immediately prior to the sale or other disposition, of the outstanding Shares and Outstanding Voting Securities, as the case may be, (ii) no Person (other than the Company and any employee benefit plan (or related trust) of the Company or that corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 20% or more of the outstanding Shares or Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of that corporation and the combined voting power of the then outstanding voting securities of that corporation entitled-to vote generally in the election of directors and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of that corporation. VII. EFFECT OF TERMINATION OF DIRECTORSHIP Upon Termination of Directorship for any reason other than cause, all outstanding Options shall continue to vest, and remain exercisable until the expiration of the Option, in accordance with this Plan. Upon Termination of Directorship for cause, all outstanding Options shall terminate and become null and void. VIII. NONTRANSFERABILITY OF OPTIONS No Option shall be transferable by the holder otherwise than by will or under applicable laws of descent and distribution, and, during the lifetime of the holder, may be exercised only by the holder or the holder's guardian or legal representative. In addition, except as provided above, no Option shall be assigned, negotiated, pledged or hypothecated (whether by operation of law or otherwise), and no Option shall be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, negotiate, pledge or hypothecate any Option, or in the event of any levy upon any Option by reason of any execution, attachment or similar process contrary to the provisions of this paragraph, the Option shall immediately terminate and become null and void. IX. RIGHTS AS A STOCKHOLDER A holder of an Option (or a permitted transferee of an Option) shall have no rights as a stockholder with respect to any Shares covered by the holder's Options, until the holder (or permitted transferee) shall have become the holder of record of the Shares, and no adjustments shall be made for dividends in cash or other property or distributions or other rights in respect of any Shares, except as otherwise specifically provided in this Plan. X. TERMINATION, AMENDMENT AND MODIFICATION This Plan shall terminate at the close of business on the tenth anniversary of the Effective Date (the "Termination Date"), unless terminated sooner as provided in this Plan, and no Option shall be granted under this Plan on or after that date. The termination of this Plan shall not terminate any outstanding Options that by their terms continue beyond the Termination Date. The Committee at any time or from time to time may amend this Plan to effect (A) amendments necessary or desirable in order that this Plan and the Options shall conform to all applicable laws and regulations, and (B) any other amendments deemed appropriate. Notwithstanding the foregoing, the Committee may not effect any amendment that would require the approval of the stockholders of the Company unless the approval is obtained. This Plan may be amended or terminated at any time by the stockholders of the Company. 11 Except as otherwise required by law, no termination, amendment or modification of this Plan may, without the consent of the holder of an Option or the permitted transferee of the holder's Option, alter or impair the rights and obligations under any then outstanding Option. XI. ISSUANCE OF STOCK CERTIFICATES: LEGENDS: PAYMENT OF EXPENSE A. STOCK CERTIFICATE. Upon any exercise of an Option and payment of the exercise price as provided in the Option, a certificate or certificates for the Shares as to which the Option has been exercised shall be issued by the Company in the name of the person or persons exercising the Option and shall be delivered to or upon the order of that person or those persons, subject, however, in the case of Options exercised pursuant to clause 3 of Article V(C), to the merger, consolidation, dissolution or liquidation triggering the rights under that section. B. LEGENDS. Certificates for Shares issued upon exercise of an Option shall bear such legends as the Committee, in its sole discretion, determines to be necessary or appropriate to prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act of 1933 or to implement the provisions of any agreements between the Company and the holder of the Option with respect to the Shares. C. PAYMENT OF EXPENSES. The Company shall pay all issue or transfer taxes with respect to the issuance or transfer of Shares, as well as all fees and expenses incurred by the Company in connection with the issuance or transfer and with the administration of this Plan. XII. LISTING OF SHARES AND RELATED MATTER If at any time the Board or the Committee determines in its sole discretion that the listing, registration or qualification of the Shares covered by this Plan upon any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the grant of Options or the award or sale of Shares under this Plan, no Option grant shall be effective and no Shares shall be delivered, as the case may be, unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Board. XIII. WITHHOLDING TAXES The Company shall have the right to require, prior to the issuance or delivery of any Shares, payment by the holder of an Option of any federal, state or local taxes required by law to be withheld. XIV. GENERAL A. RIGHT TO TERMINATE DIRECTORSHIP. This Plan shall not impose any obligation on the Company to retain any Eligible Director as a director, nor shall it impose any obligation on the part of any Eligible Director to remain as a director. B. NG TRUST. Nothing in this Plan and no action taken pursuant to this Plan (including, without limitation, the grant of any Option) shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and any Option holder or the executor, administrator or other personal representative or designated beneficiary of a holder or any other person. C. NOTICES. Any notice or other communication to the Company under this Plan shall be addressed to the Company at its principal executive offices from time to time. Each Eligible Director shall be responsible for 12 furnishing the Committee with the Eligible Director's current address for the mailing to that Eligible Director of notices and other communications. Any notice or other communication to the Eligible Director shall, if the Company has received notice that the Eligible Director is then deceased, be given to the Eligible Director's personal representative, if that representative has previously informed the Company of his or her status and address (and has provided such reasonable substantiating information as the Company may request) by written notice under this section. Any notice under this Plan shall be deemed to have been given when delivered in person or when dispatched by telegram or one business day after having been dispatched by a nationally recognized overnight courier service or three business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid. D. SEVERABILITY. If any provision of this Plan is held invalid or unenforceable, the invalidity or unenforceability shall not affect any other provision of this Plan, and this Plan shall be construed and enforced as if that provision had not been included. E. COSTS. The Company shall bear all expenses included in administering this Plan, including expenses of issuing Common Stock pursuant to any Options. F. CONTROLLING LAW. This Plan shall be construed and enforced according to the laws of the state of incorporation of the Company. G. SECTION 16(b). All elections and transactions under this Plan by persons subject to section 16 of the Act involving shares of Common Stock are intended to comply with all exemptive conditions under Rule 16b-3. To the extent any provision of this Plan or action by the Committee fails so to comply, it shall be deemed null and void. The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with section 16(b) of the Act, as it may deem necessary or proper for the administration and operation of this Plan and the transaction of business under this Plan. EX-99.2 8 f65522ex99-2.txt EXHIBIT 99.2 1 EXHIBIT 99.2 - -------------------------------------------------------------------------------- SCHEIN PHARMACEUTICAL, INC. 1999 STOCK OPTION PLAN - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE 1. Purposes of the Plan..................................................1 2. Definitions...........................................................1 3. Effective Date/Expiration of Plan.....................................3 4. Administration........................................................3 5. Shares; Adjustment Upon Certain Events................................5 6. Awards and Terms of Options...........................................8 7. Effect of Termination of Employment..................................11 8. Nontransferability of Options........................................13 9. Rights as a Stockholder..............................................13 10. Determinations.......................................................13 11. Termination, Amendment and Modification..............................13 12. Non-Exclusivity......................................................14 13. Use of Proceeds......................................................14 14. General Provisions...................................................14 15. Issuance of Stock Certificates; Legends; Payment of Expenses.........16 16. Listing of Shares and Related Matters................................16 17. Withholding Taxes....................................................17
3 SCHEIN PHARMACEUTICAL, INC. 1999 STOCK OPTION PLAN 1. PURPOSES OF THE PLAN. The purposes of this Schein Pharmaceutical Inc. 1999 Stock Option Plan (the "Plan") are to enable Schein Pharmaceutical, Inc. ("SPINC") and its Affiliates (as defined herein) to attract, retain and motivate the employees who are important to the success and growth of the business of SPINC and to create a long-term mutuality of interest between those employees and the stockholders of SPINC by granting those employees options (which may be either Incentive Stock Options (as defined herein) or Non-Qualified Stock Options (as defined herein)) to purchase the Common Stock (as defined herein) of SPINC. 2. DEFINITIONS. (a) "ACT" means the Securities Exchange Act of 1934, as amended. Any reference to any section of the Act shall also be a reference to any successor provision. (b) "AFFILIATE" means each of the following: (1) any Subsidiary; (ii) any Parent; (iii) any corporation, trade or business (including, without Limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by SPINC or one of its Affiliates, (iv) any corporation, trade or business (including, without Limitation, a partnership or Limited Liability company) which directly or indirectly controls 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of SPINC or one of its Affiliates; and (v) any other entity in which SPINC or any of its Affiliates has a material equity interest and which is designated as an "Affiliate" by resolution of the Committee. (c) "BOARD" means the Board of Directors of SPINC. (d) "CODE" means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also be a reference to any successor provision. (e) "COMMITTEE" means such committee, if any, appointed by the Board to administer the Plan, consisting of two (2) or more non-employee directors, each of whom is intended to be a "non-employee director" as defined in Rule 16b-3 and an "outside director" as defined under Section 162(m) of the Code, If the Board does not appoint a committee for this purpose, "Committee" means the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance with the requirements of Rule 16b-3 and Section 162(m) of the Code shall not affect the validity of Option grants, interpretations or other actions of the Committee. 1. 4 (f) "COMMON STOCK" means the common stock of SPINC, par value $.01 per share, any Common Stock into which the Common Stock may be converted and any Common Stock resulting from any reclassification of the Common Stock. (g) "DISABILITY" means a permanent and total disability, as determined by the Committee in its sole discretion. A Disability shall be deemed to occur at the time of the determination by the Committee of the Disability. (h) "FAIR MARKET VALUE" means, for purposes of this Plan, unless otherwise required by any applicable provision of the Code or any regulations thereunder, the value of a Share (as defined herein) on a particular date, determined as follows: (i) If the Common Stock is fisted or admitted to trading on such date on a national securities exchange or quoted through the Nasdaq Stock Market, Inc. ("NASDAQ"), the closing sale price of a Share as reported on the relevant composite transaction tape, if applicable, or on the principal such exchange (determined by trading value in the Common Stock) or, if not traded on any such national securities exchange or the NASDAQ, as quoted on an automated quotation system sponsored by the National Association of Securities Dealers, Inc., on such date, or in the absence of reported sales on such date, the last reported sales price prior to such date; or (ii) If the Common Stock is not listed or quoted as described in the preceding clause, but bid and asked prices are quoted through NASDAQ, the mean between the highest reported bid and lowest reported asked prices as quoted through NASDAQ on such date; or (iii) If the Common Stock is not Listed or quoted on a national securities exchange or through NASDAQ or, if pursuant to (i) and (ii) above the Fair Market Value is to be determined based upon the mean of the highest reported bid and lowest reported asked prices and the Committee determines that such mean does not properly reflect the Fair Market Value, by such other method as the Committee determines to be reasonable and consistent with applicable law; or (iv) If the Common Stock is not publicly traded such amount as is set by the Committee in good faith. (i) "INCENTIVE STOCK OPTION" means any Option which is intended to qualify as an "incentive stock option," as defined in Section 422 of the Code. (j) "NON-QUALIFIED STOCK OPTION" means any option awarded under this Plan that is not an Incentive Stock Option. (k) "OPTION" means the right to purchase one Share at a prescribed Purchase Price (as defined in Section 6(b)) on the terms specified in the Plan. An Option may be an Incentive Stock Option or a Non-Qualified Stock Option. (l) "PARTICIPANT" means an employee of SPINC or an Affiliate who is granted an Option under the Plan. 2. 5 (m) "PARENT" shall mean any parent corporation of SPINC within the meaning of Section 424(e) of the Code. (n) "RULE 16B-3" means Rule l6b-3 under Section 16(b) of the Act as then in effect or any successor provisions. (o) "SECURITIES ACT" means the Securities Act of 1933, as amended. Any reference to any section of the Securities Act shall also be a reference to any successor provision. (p) "SHARE" means a share of Common Stock. (q) "SUBSIDIARY" means any subsidiary corporation of SPINC within the meaning of Section 424(f) of the Code. An entity shall be deemed a Subsidiary of SPINC only for such periods as the requisite ownership relationship is maintained. (r) "SUBSTANTIAL STOCKHOLDER" means any Participant who at the time of grant owns directly (or is deemed to own by reason of the attribution rules set forth in Section 424(d) of the Code) Shares possessing more than 10% of the total combined voting power of all classes of stock of SPINC or a Parent or Subsidiary as determined under Section 422 of the Code. (s) "TERMINATION OF EMPLOYMENT" with respect to an individual means that individual is no longer an employee of SPINC or any of its Affiliates. In the event an entity shall cease to be an Affiliate of SPINC, there shall be deemed a Termination of Employment of any individual who is not otherwise an employee of SPINC or another Affiliate at the time the entity ceases to be an Affiliate. A Termination of Employment shall not include a leave of absence approved for purposes of the Plan by the Committee. (t) "TRANSFER" or "TRANSFERRED" or "TRANSFERABLE" means anticipate, alienate, attach, sell, assign, pledge, encumber, charge, hypothecate or otherwise transfer and "Transferred" has a correlative meaning. 3. EFFECTIVE DATE/EXPIRATION OF PLAN. The Plan shall be effective upon its adoption by the Board, subject to stockholder approval of this Plan by the stockholders of SPINC in accordance with the requirements of the laws of the State of Delaware and any applicable exchange requirements. Grants of Options under the Plan may be made after adoption of the Plan by the Board, subject to stockholder approval to the extent required by law, provided that, in the absence of such approval, such Options shall be null and void. No Option shall be granted under the Plan on or after the tenth anniversary of the Effective Date (the "Termination Date"), but Options granted prior to the Termination Date may be exercised after the Termination Date. 4. ADMINISTRATION. (a) DUTIES OF THE COMMITTEE. The Plan shall be administered by the Committee. The Committee shall have full authority to: 3. 6 (i) interpret the Plan and, to decide any questions and settle all controversies and disputes that may arise in connection with the Plan, (ii) to establish, amend and rescind rules for carrying out the Plan; (iii) to administer the Plan, subject to its provisions; (iv) to select the employees to whom Options may from time to time be granted hereunder; (v) to determine the terms, Purchase Price (as defined in Section 6(b)), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof and the form of exercise payment for each Option granted under the Plan, including, without limitation, whether and under what circumstances an Option may be settled in cash and/or Common Stock under Section 6(f) and whether, to what extent and under what circumstances to provide loans (which shall be on a recourse basis and shall bear a reasonable rate of interest) to employees in order to exercise Options under the Plan; (vi) to determine which Options granted under the Plan shall be Incentive Stock Options; (vii) to prescribe the form or forms of instruments evidencing Options and any other instruments required under the Plan (which need not be uniform) and to change such forms from time to time; (viii) and to make all other determinations; and (ix) to take all such steps in connection with the Plan and the Options as the Committee, in its sole discretion, deems necessary or desirable. The Committee shall not be bound to any standards of uniformity or similarity of action, interpretation or conduct in the discharge of its duties hereunder, regardless of the apparent similarity of the matters coming before it. Any determination, interpretation or other action made or taken by SPINC, the Board or the Committee arising out of or in connection with the Plan shall be final, conclusive and binding on all parties. Other than with respect to an Option which was granted at a below-market Purchase Price and not intended to satisfy Section 162(m) of the Code, the Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to carry this Plan into effect, but only to the extent any such action would be permitted under the applicable provisions of Rule 16b-3 (if any) and the applicable provisions of Section 162(m) of the Code (if any). If and to the extent applicable, this Plan is intended to comply with Section 162(m) of the Code and the applicable requirements of Rule l6b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith. The Committee may adopt special guidelines and provisions for persons who are residing in, or subject to, the taxes of, countries other than the United States to comply with applicable tax and securities laws. (b) ADVISORS. The Committee may designate the Secretary of SPINC, other employees of SPINC or competent professional advisors to assist the Committee in the 4. 7 administration of the Plan, and may grant authority to such persons to execute Option Agreements (as defined herein) or other documents on behalf of the Committee. The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan, and may rely upon any advice received from any such counsel or consultant and any computation received from any such consultant or agent and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of counsel. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by SPINC. (c) INDEMNIFICATION. No officer or former officer of SPINC, member or former member of the Board or the Committee, or person designated pursuant to paragraph (b) shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. To the maximum extent permitted by applicable law or the Certificate of Incorporation or By-Laws of SPINC and to the extent not covered by insurance, each officer or former officer and member or former member of the Committee or of the Board shall be indemnified and held harmless by SPINC against any cost or expense (including reasonable fees of counsel reasonably acceptable to SPINC) or liability (including any sum paid in settlement of a claim with the approval of SPINC), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the Plan, except to the extent arising out of such officer's, former officer's, member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the officers, former officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or By-Laws of SPINC or any Affiliate. Notwithstanding anything else herein, this indemnification will not apply to the actions or determination made by an individual with regard to Options granted to him or her under this Plan. (d) MEETINGS OF THE COMMITTEE. The Committee shall select one of its members as a Chairman and shall adopt such rules and regulations, subject to the By-Laws of SPINC, as it shall deem appropriate concerning the holding of its meetings and the transaction of its business. Any member of the Committee may be removed at any time either with or without cause by resolution adopted by the Board, and any vacancy on the Committee may at any time be filled by resolution adopted by the Board. A majority of the Committee members shall constitute a quorum. All determinations by the Committee shall be made by the affirmative vote of a majority of its members. Any such determination may be made at a meeting duly called and held at which a majority of the members of the Committee are in attendance in person or through telephonic communication. Any determination set forth in writing and signed by all the members of the Committee shall be as fully effective as if ii: had been made by a majority vote of the members at a meeting duly called and held. 5. SHARES; ADJUSTMENT UPON CERTAIN EVENTS. (a) SHARES TO BE DELIVERED, FRACTIONAL SHARES. Shares to be issued under the Plan shall be made available, at the discretion of the Board, either from authorized but unissued Shares or from issued Shares reacquired by SPINC and held in treasury. No fractional Shares be issued or transferred upon the exercise of any Option. In lieu thereof, SPINC shall pay a cash 5. 8 adjustment equal to the same fraction of the Fair Market Value of one Share on the date of exercise. (b) NUMBER OF SHARES. (i) AGGREGATE SHARE LIMITATION. The maximum aggregate number of Shares that may be issued under the Plan shall be 3,250,000 (as adjusted to reflect any increase or decrease pursuant to Section 5(c)). If Options are for any reason canceled, or expire or terminate unexercised, the Shares covered by such Options shall again be available for the grant of Options, subject to the foregoing Limit. If any Option granted under this Plan expires, terminates or is canceled for any reason without having been exercised in full or SPINC repurchases any Option pursuant to Section 6(i), the number of Shares and/or the number of Shares underlying any unexercised Option shall again be available for the purposes of awards under the Plan, in determining the number of Shares available for Options, other than awards of Incentive Stock Options, if Shares have been delivered or exchanged by a Participant as full or partial payment to SPINC for the Purchase Price or for withholding taxes in connection with the exercise of an Option, or the number of shares of Common Stock otherwise deliverable has been reduced for full, or partial payment for the Purchase Price or for withholding taxes, the number of Shares delivered, exchanged or reduced shall again be available for purposes of awards under this Plan. (ii) INDIVIDUAL PARTICIPANT LIMITATIONS. The maximum number of Shares subject to any option which may be granted under this Plan to a Participant shall not exceed 750,000 (as adjusted to reflect any increase or decrease pursuant to Section 5(c)) during each fiscal year of SPINC. To the extent that Shares for which Options are permitted to be granted to a Participant during a fiscal year are not covered by a grant of an Option to an employee issued in such fiscal year, such Shares shall automatically increase the number of Shares available for grant of Options to such employee in the subsequent fiscal year during the term of the Plan. (c) ADJUSTMENTS; RECAPITALIZATION, ETC. The existence of the Plan and the Options granted hereunder shall not affect in any way the right or power of the Board or the stockholders of SPINC to make or authorize any adjustment, recapitalization, reorganization or other change in SPINC's capital structure or its business, any merger or consolidation of SPINC, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting Common Stock, the dissolution or liquidation of SPINC or any of its Subsidiaries, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding. If and whenever SPINC takes any such action, however, the following provisions, to the extent applicable, shall govern: (i) If and whenever SPINC shall effect a stock split, stock dividend, subdivision, recapitalization or combination of Shares or other changes in SPINC's capital stock, (x) the Purchase Price per Share and the number and class of Shares and/or other securities with respect to which outstanding Options thereafter may be exercised, and (y) the total number and class of Shares and/or other securities that may be issued under this Plan shall be proportionately adjusted by the Committee. The Committee may also make such other adjustments as it deems necessary to take into consideration any other event (including, without limitation, accounting changes), if the Committee determines that such adjustment is appropriate to avoid distortion in 6. 9 the operation of the Plan, to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants under this Plan. (ii) Subject to Section 5(c)(iii), if SPINC merges or consolidates with one or more corporations, then from and after the effective date of such merger or consolidation, upon exercise of Options theretofore granted, the Participant shall be entitled to purchase under such Options, in lieu of the number of Shares as to which such Options shall then be exercisable but on the same terms and conditions of exercise set forth in such options, the number and class of Shares and/or other securities or property (including cash) to which the Participant would have been entitled pursuant to the terms of the agreement of merger or consolidation, immediately prior to such merger or consolidation, the Participant had been the holder of record of the total number of Shares receivable upon exercise of such Options (whether or not then exercisable). (iii) In the event of a merger or consolidation in which SPINC is not the surviving entity or in the event of any transaction that results in the acquisition of all or substantially all of SPINC's outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all or substantially all of SPINC's assets (the foregoing being referred to as "Acquisition Events"), then the Committee may in its sole discretion terminate all outstanding Options effective as of the consummation of the Acquisition Event by delivering notice of termination to each Participant at least 20 days prior to the date of consummation of the Acquisition Event; provided that, during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each Participant shall have the right to exercise in full all the Options that are then outstanding (without regard to limitations on exercise otherwise contained in the Option Agreement), but contingent on occurrence of the Acquisition Event, and provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise shall be null and void. If an Acquisition Event occurs and the Committee does not terminate the outstanding Options pursuant to the preceding sentence, then the provisions of Section 5(c)(ii) shall apply. (iv) Subject to Section 5(b), the Committee may grant Options under the Plan in substitution for options held by employees of another corporation who concurrently become employees of SPINC as the result of a merger or consolidation of the employing entity with SPINC or an Affiliate, or as the result of the acquisition by SPINC of property or stock of the employing corporation. SPINC may direct that substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances. (v) If, as a result of any adjustment made pursuant to the preceding paragraphs of this Section 5, any Participant shall become entitled upon exercise of an Option to receive any securities other than Common Stock, then the number and class of securities so receivable thereafter shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock set forth in this Section 5, as determined by the Committee in its discretion. (vi) Except as herein before expressly provided, the issuance by SPINC of shares of stock of any class, or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe 7. 10 therefor or upon conversion of shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number and class of shares and/or other securities or property subject to Options theretofore granted or the Purchase Price. 6. AWARDS AND TERMS OF OPTIONS. (a) GRANT. The Committee may grant Options, including Options intended to be Incentive Stock Options, to employees of SPINC or an Affiliate. Each Option shall be evidenced by an Option agreement (the "Option Agreement") in such form as the Committee shall approve from time to time. To the extent that any Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Option or the portion thereof which does not qualify shall constitute a separate Non-Qualified Stock Option. Notwithstanding any other provision of this Plan to the contrary or any provision in an agreement evidencing the grant of an Option to the contrary, any Option granted to an employee of an Affiliate (other than an Affiliate which is a Parent or a Subsidiary) shall be a Non-Qualified Stock Option. (b) PURCHASE PRICE. The purchase price per Share (the "Purchase Price") deliverable upon the exercise of an Option shall be determined by the Committee, subject to the following: (i) the Purchase Price shall not be less than the par value of a Share and (ii) in the case of Incentive Stock Options, the Purchase Price shall not be less than 100% (110% for an Incentive Stock Option granted to a Substantial Stockholder) of the Fair Market Value per Share on the date the Incentive Stock Option is granted. Notwithstanding the foregoing, the Purchase Price of any Option that is intended to satisfy Section 162(m) of the Code shall not be less than 100% of the Fair Market Value per Share on the date the Option is granted. (c) EXERCISABILITY. At the time of grant, the Committee shall specify when and on what terms the Options granted shall be exercisable. In the case of Options not immediately exercisable in full, the Committee may at any time accelerate the time at which all or any part of the options may be exercised and may waive any other conditions to exercise, subject to the terms of the Option Agreement and the Plan. No Option shall be exercisable after the expiration of ten years from the date of grant (five years, in the case of an Incentive Stock option granted to a Substantial Stockholder). Each Option shall be subject to earlier termination as provided in Section 7 below. (d) SPECIAL RULE FOR INCENTIVE OPTIONS. If required by Section 422 of the Code, to the extent the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of his or her employer corporation and its parent and subsidiary corporations) exceeds $100,000, such Options shall not be treated as Incentive Stock Options. Nothing in this special rule shall be construed as limiting the exercisability of any Option, unless the Committee expressly provides for such a limitation at time of grant. Should the foregoing provision not be necessary in order for the Options to qualify is Incentive Stock Options, or should any additional provisions be required, the Committee may amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of SPINC. 8. 11 (e) ACCELERATION OF EXERCISABILITY UPON CHANGE OF CONTROL. Unless otherwise provided in an Option Agreement, Options granted and not previously exercisable shall become fully exercisable immediately upon a Change of Control (as defined herein). For this purpose, a "Change of Control" shall be deemed to have occurred upon: (i) an acquisition by any individual, entity or group (within the meaning of Section 13d-3 or 14d-1 of the Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of more than 50% of the combined voting power of the then outstanding voting securities of SPINC entitled to vote generally in the election of directors to the Board (the "Outstanding SPINC Voting Securities"); excluding, however, the following: (x) any acquisition by SPINC, (y) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by SPINC or (z) any acquisition by any corporation pursuant to a reorganization, merger, consolidation or similar corporate transaction (in each case, a "Corporate Transaction"), if, pursuant to such Corporate Transaction, the conditions described in clauses (A), (B) and (C) of paragraph (iii) of this Section 6(e) are satisfied; or (ii) a change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (the Board as of the Effective Date shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided that, for purposes of this Section 6(e)(ii), any individual who becomes a member of the Board subsequent to the Effective Date and whose election, or nomination for election by SPINC's stockholders, was approved by a majority of the members of the Board who also are members of the Incumbent Board (or so deemed to be pursuant to this proviso) shall be deemed a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office is in connection with a Change of Control described in (i), (iii) or (iv) of this Section 6(e) of whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so deemed a member of the Incumbent Board: or (iii) the approval by the stockholders of SPINC of a Corporate Transaction or, if consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Corporate Transaction pursuant to which (A) the beneficial owners (or beneficiaries of the beneficial owners) of the outstanding Shares and Outstanding SPINC Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction and the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors, in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the outstanding Shares and Outstanding SPINC Voting Securities, as the case may be, (B) no Person (other than SPINC, any employee benefit plan (or related trust) of SPINC or the corporation resulting from such Corporate Transaction and any Person beneficially owning, immediately prior to such Corporate Transaction, directly or indirectly, 20% or more of the outstanding Shares or Outstanding SPINC Voting Securities, as the case may be) will beneficially own, 9. 12 directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (iv) the approval of the stockholders of SPINC of (A) a complete Liquidation or dissolution of SPINC or (B) the sale or other disposition of all or substantially all the assets of SPINC; excluding, however, such a sale or other disposition to a corporation with respect to which, following such sale or other disposition, (x) more than 60% of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors will be then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners (or beneficiaries of the beneficial owners), respectively, of the outstanding Shares and Outstanding SPINC Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their owners, immediately prior to such sale or other disposition, of the outstanding Shares and Outstanding SPINC Voting Securities, as the case may be, (y) no Person (other than SPINC and any employee benefit plan (or related trust) of SPINC or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 20% or more of the outstanding Shares or Outstanding SPINC Voting Securities, as the case may be) will beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (z) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of such corporation. (f) EXERCISE OF OPTIONS. (i) A Participant may elect to exercise one or more Options by giving written notice to the Committee of such election and of the number of Shares with respect to which the Options are being exercised, accompanied by payment in full of the aggregate Purchase Price for such Shares. (ii) Shares purchased pursuant to the exercise of Options shall be paid for at the time of exercise as follows: (A) in cash or by check, bank draft or money order payable to the order of SPINC; (B) if so permitted by the Committee: (I) through the delivery of unencumbered Shares (including Shares being acquired pursuant to the Options then being exercised), provided such Shares (or such Options) have been owned by the Participant for such period as may be required by applicable accounting standards to avoid a charge to earnings, (II) through a combination of Shares and cash as provided above, (III) by delivery of a promissory note of the Participant to SPINC, such promissory note to be payable, in the case of an Incentive 10. 13 Stock Option, on such terms as are specified in the Option Agreement (except that, in lieu of a stated rate of interest, the Option Agreement may provide that the rate of interest on the promissory note will be such rate as is sufficient, at the time the note is given, to avoid the imputation of interest under the applicable provisions of the Code), or (IV) by a combination of cash (or cash and Shares) and the Participant's promissory note; provided, that, if the Shares delivered upon exercise of the Option is an original issue of authorized Shares, at least so much of the Purchase Price as represents the par value of such Shares shall be paid in cash or by a combination of cash and Shares; (C) through the delivery of irrevocable instructions to a broker to deliver promptly to SPINC an amount equal to the aggregate Purchase Price; or (D) on such other terms and conditions as may be acceptable to the Committee and in accordance with applicable law. (iii) Upon receipt of payment and satisfaction of the requirements, if any, as to withholding of taxes as set forth herein, SPINC shall deliver to the Participant as soon as practicable a certificate or certificates for the Shares then purchased. No Shares shall be issued until payment therefor, as provided herein, has been made or provided for. (g) BUY OUT AND SETTLEMENT PROVISIONS. The Committee may at any time on behalf of SPINC offer to buy out an option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time that such offer is made, and the Participant shall be entitled to accept or reject such offer in his or her sole discretion. (h) DEFERRED DELIVERY OF COMMON SHARES. The Committee may in its discretion permit Participants to defer delivery of Shares acquired pursuant to a Participant's exercise of an Option in accordance with the terms and conditions established by the Committee. (i) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms and conditions and within the Limitations of the Plan, the, Committee may modify, extend or renew outstanding Options granted under the Plan (provided that the rights of a Participant are not reduced without his or her consent), or accept the surrender of outstanding Options (up to the extent not theretofore exercised) and authorize the granting of new Options in substitution therefor (to the extent not theretofore exercised). (j) OTHER TERMS AND CONDITIONS. Options may contain such other provisions, which shall not be inconsistent with any of the foregoing terms of the Plan, as the Committee shall deem appropriate including, without Limitation, permitting "reloads" such that the same number of Options are granted as the number of (i) Options exercised, (ii) Shares used to pay for the purchase Price of Options or (iii) shares used to pay withholding taxes ("Reloads"). With respect to Reloads, the Purchase Price of the new Option shall be the Fair Market Value on the date of the Reload and the term of the Option shall be the same as the remaining term of the Options that are exercised, if applicable, or such other Purchase Price and term as determined by the Committee. 11. 14 7. EFFECT OF TERMINATION OF EMPLOYMENT. (a) DEATH, DISABILITY, RETIREMENT, ETC. Except as otherwise provided in the Participant's Option Agreement, upon Termination of Employment, all outstanding options then exercisable and not exercised by the Participant prior to such Termination of Employment (and any Options not previously exercisable but made exercisable by the Committee at or after the Termination of Employment) shall remain exercisable by the Participant to the extent not exercised for the following time periods (subject to Section 6(e)): (i) In the event of the Participant's death, such Options shall remain exercisable (by the legal representative of the Participant's estate or by the person given authority o exercise such Options by the Participant's will or by operation of law) for a period of one year from the date of the Participant's death, provided that the Committee, in its discretion, may at any time extend such time period to up to three years from the date of the Participant's death. (ii) In the event of the Participant's Disability, or the Participant retires at or after age 65 (or, with the consent of the Committee or under an early retirement policy of SPINC, before age 65), or if the Participant's employment is terminated by SPINC without Cause, such Options shall remain exercisable for one year from the date of the Participant's Termination of Employment, provided that the Committee, in its discretion, may at any time extend such time period to up to three years from the date of the Participant's Term of Employment. (b) CAUSE. Upon the Termination of Employment of a Participant for Cause or by the Participant in violation of an agreement between the Participant and SPINC or any of its Affiliates, or if it is discovered after such Termination of Employment that such Participant had engaged in conduct that would have justified a Termination of Employment for Cause, all outstanding Options shall immediately be canceled. Termination of Employment for "Cause" means, with respect to a Participant's Termination of Employment: (i) in the case where there is no employment agreement, change in control agreement or any other similar agreement in effect between SPINC or an Affiliate and the Participant at the time of the grant of the Option (or where there is such an agreement that does not define "cause" (or words of like import)), termination due to a Participant's fraud, dishonesty, negligence or engaging in competition or solicitations in competition with SPINC or any Affiliate; or (ii) in the case where there is an employment agreement, change in control agreement or any other similar agreement in effect between SPINC or an Affiliate and the Participant at the time of the grant of the Option that defines "cause" (or words of like import), as defined under such agreement; provided, however, that with regard to any agreement that conditions "cause" on occurrence of a change in control, such definition of "cause" shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. (c) OTHER TERMINATION. In the event of Termination of Employment for any reason other than as provided in Section 7(a) or 7(b), all outstanding Options not exercised by the Participant prior to such Termination of Employment shall remain exercisable (to the extent exercisable by such Participant immediately before such termination) for a period of three months after such termination, provided that the Committee in its discretion may extend such 12. 15 time period to up to one year from the date of the Participant's Termination of Employment, and provided further that no Options that were not exercisable during the period of employment shall thereafter become exercisable, unless the Committee determines that such Options shall be exercisable. (d) EXERCISE CERTAIN TERMINATIONS OF EMPLOYMENT. If an employee does not remain employed by SPINC, a Parent or any Subsidiary at all times from the time the Incentive Stock Option is granted until three (3) months prior to the date of exercise (or such other period as required by applicable law, including, without limitation, in the event of death or Disability), such Option shall be treated as a Non-Qualified Stock Option. Any Option held by an employee who is transferred from SPINC, a Subsidiary or a Parent to an Affiliate that is not SPINC, a Subsidiary or a Parent shall be treated as a Non-Qualified Stock Option after the end of the three (3) month period following such transfer. 8. NONTRANSFERABILITY OF OPTIONS. No Option shall be Transferable by the Participant otherwise than by will or under applicable laws of descent and distribution, and during the lifetime of the Participant may be exercised only by the Participant or his or her guardian or legal representative. In addition, no Option shall, except as otherwise provided herein, be Transferable in any way (whether by operation of law or otherwise), and any attempt to Transfer shall be void, and no such Option shall in any manner be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Option, nor shall it be subject to attachment or legal process for or against such person. Notwithstanding the foregoing, the Committee may determine at the time of grant or thereafter, that a Non-Qualified Stock Option, that is otherwise not Transferable pursuant to this Section is Transferable in whole or part and in such circumstances, and under such conditions, as specified by the Committee. 9. RIGHTS AS A STOCKHOLDER. A Participant (or a permitted transferee of an Option) shall have no rights as a stockholder with respect to any Shares covered by such Participant's Option until such Participant (or permitted transferee) shall have become the holder of record of such Shares, and no adjustments shall be made for dividends in cash or other property or distributions or other rights in respect to any such Shares, except as otherwise specifically provided in this Plan. 10. DETERMINATIONS. Each determination, interpretation or other action made or taken pursuant to the provisions of this Plan by SPINC, the Board or the Committee shall be final, conclusive and binding for all purposes and upon all persons, including, without Limitation, the Participants, SPINC and its Subsidiaries, directors, officers and other employees of SPINC and its Subsidiaries, and the respective heirs, executors, administrators, personal representatives and other successors in interest of each of the foregoing. 11. TERMINATION, AMENDMENT AND MODIFICATION. The Plan shall terminate at the close of business on the tenth anniversary of the Effective 13. 16 Date, unless terminated sooner as hereinafter provided, and no Option shall be granted under the Plan on or after that date. The termination of the Plan shall not terminate any outstanding options that by their terms continue beyond the termination date of the Plan. At any time prior to the tenth anniversary of the Effective Date, the Board or the Committee may amend or terminate the Plan or suspend the Plan in whole or in part. Notwithstanding the foregoing, however, no such amendment may, without the approval of the stockholders of SPINC, effect any change that would require stockholder approval under applicable law. Nothing contained in this Section 11 shall be deemed to prevent the Board or the Committee from authorizing amendments of Outstanding Options of Participants, including, without Limitation, the reduction of the Purchase Price specified therein (or the granting or issuance of new Options at a lower Purchase Price upon cancellation of outstanding Options), as long as all Options outstanding at any one time shall not call for issuance of more Shares than the remaining number provided for under the Plan and as long as the provisions of any amended Options would have been permissible under the Plan if such option had been originally granted or issued as of the date of such amendment with such amended terms. Notwithstanding anything to the contrary contained in this Section 11, no termination, amendment or modification of the Plan may, without the consent of the Participant or the permitted transferee of such Participant's Option, after or impair the rights and obligations arising under any then outstanding Option. 12. NON-EXCLUSIVITY. Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of SPINC for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without Limitation, the granting or issuance of stock options, Shares and/or other incentives otherwise than under the Plan, and such arrangements may be either generally applicable or limited in application. 13. USE OF PROCEEDS. The proceeds of the sale of Shares subject to Options under the Plan are to be added to the general funds of SPINC and used for its general corporate purposes as the Board shall determine. 14. GENERAL PROVISIONS. (a) RIGHT TO TERMINATE EMPLOYMENT. Neither the adoption of the Plan nor the grant of Options shall impose any obligation on SPINC to continue the employment of any Participant, nor shall it impose any obligation on the part of any Participant to remain in the employ of SPINC, subject however to the provisions of any agreement between SPINC and the Participant. (b) PURCHASE FOR INVESTMENT. If the Board determines that the law so requires, the holder of an Option granted hereunder shall, upon any exercise or conversion thereof, execute and deliver to SPINC a written statement, in form satisfactory to SPINC, representing and warranting that such Participant is purchasing or accepting the Shares then acquired for such 14. 17 Participant's own account and not with a few to the resale or distribution thereof, that any subsequent offer for sale or sale of any such Shares shall be made either pursuant to (i) a Registration Statement on an appropriate form under the Securities Act, which Registration Statement shall have become effective and shall be current with respect to the Shares being offered and sold, or (ii) a specific exemption from the registration requirements of the Securities Act, and that in claiming such exemption the holder will, prior to any offer for sale or sale of such Shares, obtain a favorable written opinion, satisfactory in form and substance to SPINC, from counsel approved by SPINC as to the availability of such exception. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Committee deems appropriate to reflect any restriction on Transfer. (c) UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an "unfunded" plan for incentive compensation. Nothing contained in the Plan and no action taken pursuant to the Plan (including, without limitation, the grant of any Option thereunder) shall create or be construed to create a trust of any kind, or a fiduciary relationship, between SPINC and any Participant or the executor, administrator or other personal representative or designated beneficiary of such Participant, or any other persons. Any reserves that may be established by SPINC in connection with the Plan shall continue to be part of the general funds of SPINC, and no individual or entity other than SPINC shall have any interest in such funds until paid to a Participant. If and to the extent that any Participant or such Participant's executor, administrator or other personal representative, as the case may be, acquires a right to receive any payment from SPINC pursuant to the Plan, such right shall be no greater than the right of an unsecured general creditor of SPINC. (d) NOTICES. Each Participant shall be responsible for furnishing the Committee with the current and proper address for the mailing to such Participant of notices and the delivery to such Participant of agreements, Shares and payments. Any notices required or permitted to be given shall be deemed given if directed to the person to whom addressed at such address and mailed by regular United States mail, first class and prepaid. If any item mailed to such address is returned as undeliverable to the addressee, mailing will be suspended until the Participant furnishes the proper address. (e) SEVERABILITY OF PROVISIONS. If any provisions of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions of the Plan, and the Plan shall be construed and enforced as if such provisions had not been included. (f) PAYMENT TO MINORS, ETC. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefor shall be deemed paid when paid to such person's guardian or to the parry providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, SPINC and their employees, agents and representatives with respect thereto. (g) HEADINGS AND CAPTIONS. The headings and captions herein are provided for reference and convenience only. They shall not be considered part of the Plan and shall not be employed in the construction of the Plan. 15. 18 (h) CONTROLLING LAW. The Plan shall be construed and enforced according to the laws of the State of Delaware (regardless of the laws that might otherwise govern, under applicable principles of conflict of laws). 15. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES. (a) STOCK CERTIFICATES. Upon any exercise of an Option and payment of the Purchase Price as provided in such Option Agreement, a certificate or certificates for the Shares as to which such Option has been exercised shall be issued by SPINC in the name of the person or persons exercising such Option and shall be delivered to or upon the order of such person or persons. (b) LEGEND. Certificates for Shares issued upon exercise of an Option shall bear such legend or legends as the Committee, in its discretion, determines to be necessary or appropriate to prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, or to implement the provisions of any agreements between SPINC and the Participant with respect to such Shares, including, without Limitation, any right of SPINC to purchase Shares issued to the Participant upon the exercise of Options as contained in the Option Agreement. (c) PAYMENT OF EXPENSES. SPINC shall pay all issue or transfer taxes with respect to the issuance or transfer of Shares, as well as all fees and expenses necessarily incurred by SPINC in connection with such issuance or transfer and with the administration of the Plan. (d) OTHER BENEFITS. No Option granted under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of SPINC or any Affiliate nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation. (e) NO RIGHT TO SAME BENEFITS. The provisions of Options need not be the same with respect to each Participant, and such Options to individual Participants need not be the same under subsequent grants. (f) DEATH/DISABILITY. The Committee may in its discretion require the transferee of a Participant to supply it with written notice of the Participant's death or Disability and to supply it with a copy of the will (in the case of the Participant's death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Option. The Committee may also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan. (g) SECTION 16(b) OF THE ACT. All elections and transactions under the Plan by persons subject to Section 16 of the Act involving Shares are intended to comply with any applicable exemptive condition under Rule 16b-3. To the extent applicable, the Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Act, as it may deem necessary or proper for the administration and operation of this Plan and the transaction of business thereunder. 16. 19 16. LISTING OF SHARES AND RELATED MATTERS. If at any time the Board shall determine in its sole discretion that the listing, registration or qualification of the Shares covered by the Plan upon any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the award or sale of Shares under the Plan, no Shares will be delivered unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Board. 17. WITHHOLDING TAXES. SPINC shall be entitled to withhold (or secure payment from the Participant in cash or other property, including Shares already owned by the Participant (valued at the Fair Market Value thereof on the date of delivery) in lieu of withholding) the amount of any Federal, state or local taxes required by law to be withheld by SPINC for any Shares or cash payments deliverable under this Plan, and SPINC may defer such delivery unless such withholding requirement is satisfied. At the discretion of the Committee, any such withholding obligation with regard to any Participant may be satisfied by reducing the number of Shares otherwise deliverable or by delivering shares of Common Stock already owned. Any fraction of a Share required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant. 17. EX-99.3 9 f65522ex99-3.txt EXHIBIT 99.3 1 EXHIBIT 99.3 THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. AND AFFILIATES AMENDED AND RESTATED AS OF JANUARY 1, 1998 2 TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS.....................................................1 ARTICLE 2 PARTICIPATION...................................................8 ARTICLE 3 PARTICIPANT SALARY REDUCTION....................................9 ARTICLE 4 EMPLOYER CONTRIBUTIONS.........................................13 ARTICLE 5 PARTICIPANT CONTRIBUTIONS......................................18 ARTICLE 6 TERMINATION OF SERVICE.........................................19 ARTICLE 7 TIME AND METHOD OF PAYMENT OF BENEFITS.........................21 ARTICLE 8 WITHDRAWALS....................................................24 ARTICLE 9 INVESTMENT OF CONTRIBUTIONS....................................25 ARTICLE 10 LOANS..........................................................27 ARTICLE 11 EMPLOYER ADMINISTRATIVE PROVISIONS.............................29 ARTICLE 12 PARTICIPANT ADMINISTRATIVE PROVISIONS..........................30 ARTICLE 13 COMMITTEE DUTIES WITH RESPECT TO PARTICIPANT'S ACCOUNT.........32 ARTICLE 14 FIDUCIARY DUTIES AND RESPONSIBILITIES..........................34 ARTICLE 15 TOP HEAVY RULES................................................35 ARTICLE 16 EXCLUSIVE BENEFIT, AMENDMENT AND TERMINATION...................38
3 PREAMBLE Schein Pharmaceutical, Inc. (the "Company") established the Schein Pharmaceutical, Inc. Profit Sharing Plan (the "Plan") for the benefit of its eligible employees effective December 27, 1987. The Plan was subsequently amended. Effective January 1, 1992, four other plans were merged into the Plan, Danbury Pharmacal, Inc. 401(k) Plan, Danbury Pharmacal, Inc. Profit-Sharing Plan, Steris Laboratories, Inc. 401(k) Plan and Steris Laboratories, Inc. Profit-Sharing Plan, collectively (the "Merged Plans"). Each of the Merged Plans were either originally effective January 1, 1989 or amended to comply with the law in effect at the time of the merger. The Plan was also redesignated as The Retirement Plan of Schein Pharmaceutical, Inc. & Affiliates. The Plan was again amended and restated in its entirety effective January 1, 1992 in order to comply with the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Acts of 1989 and 1993, the Revenue Reconciliation Act of 1990 and the Unemployment Compensation Amendments Act of 1992. Thereafter, the Plan was amended several times. Effective as of July 1, 1996, the Marsam Pharmaceuticals, Inc. 401(k) Retirement Savings Plan merged into the Plan. Effective as of January 1, 1998, the Plan is hereby again amended and restated in its entirety, in order to comply with certain provisions of the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997. The restated Plan contained herein will apply to participants, or beneficiaries of such participants, who retire, die or terminate employment at any time on or after January 1, 1997. ARTICLE 1 DEFINITIONS Whenever the following words and phrases appear in the Plan, they shall have the respective meaning set forth below, unless the context clearly indicates otherwise: 1.1 "Accounting Date" shall be any day that the New York Stock Exchange is open for business, or any other date chosen by the Committee. The fair market value of the Trust's assets will be determined on the Accounting Date. All contributions, earnings and losses under the Plan will be allocated as of the Accounting Date. 1.2 "Account Balance" shall mean the aggregate of the amount in the Participant's Salary Reduction Contribution Account, Voluntary Contribution Account, Rollover Contribution Account, Matching Contribution Account, Historic Account, Qualified Non-Elective Contribution Account and Base Contribution Account as of any date, less any Excess Amounts which must be returned to the Participant in order to avoid exceeding the limitations of Article 4. 1.3 "Annual Addition" shall mean for any Plan Year the sum of (a) Employer contributions, (b) Employee contributions, (c) forfeitures, and (d) amounts allocated to an individual medical account, as defined in Section 415(l)(2) of the Code which is part of a pension or annuity plan maintained by the Employer, and amounts derived from contributions paid or accrued which are attributable to post-retirement medical benefits allocated to the 1. 4 separate account of a key employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit fund, as defined in Section 419(e) of the Code, maintained by the Employer. 1.4 "Base Contribution Account" shall mean the account maintained for a Participant to record base contributions made by the Employer pursuant to Article 4. 1.5 "Beneficiary" is a person designated by a Participant who is or may become entitled to a benefit under the Plan. 1.6 "Break in Service" shall mean a Plan Year during which an Employee completes less than 501 Hours of Service. 1.7 "Code" means the Internal Revenue Code of 1986, as amended. 1.8 "Committee" shall mean the Plan Committee appointed by the Company to administer this Plan pursuant to Article 8 hereof. In addition to its other duties, the Committee shall have full responsibility for compliance with the reporting and disclosure rules under ERISA as respects this Plan. Each Committee member is designated a Named Fiduciary under the Plan. 1.9 "Company" means Schein Pharmaceutical, Inc. 1.10 "Compensation" shall mean the total remuneration paid by the Employer to an Employee for services rendered to the Employer as reflected on Form W-2 for Federal income tax withholding purposes, including salary, commissions, overtime and bonuses, reduced by reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation (e.g. stock options), and welfare benefits, but including amounts deferred pursuant to Article 3. In the case of any self-employed individual, Compensation shall mean Earned Income. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the Plan shall not exceed the OBRA'93 Annual Compensation Limit. The OBRA'93 Annual Compensation Limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA'93 Annual Compensation Limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA'93 Annual Compensation Limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA'93 Annual Compensation Limit in effect for that 2. 5 prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA'93 Annual Compensation Limit is $150,000. In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the Plan Year. If, as a result of the application of such rules the OBRA'93 Annual Compensation Limit is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation prior to the application of this limitation. 1.11 "Earned Income" shall mean the net earnings from self-employment in the trade or business with respect to which the Plan is established, for which personal services of the individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items. Net earnings are reduced by (1) contributions by the Employer to a qualified plan to the extent deductible under Section 404 of the Code, and (2) the deduction allowed to the employer by Section 164(f) of the Code. 1.12 "Effective Date" of this Plan is January 1, 1998. 1.13 "Employee" shall mean any employee of the Employer or of any other employer required to be aggregated under Sections 414(b), (c), (m), (n) or (o) of the Code. 1.14 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.15 "Employer" shall mean the Company and any Participating Employer which adopts this Plan, as well as any predecessors or successors to the Employer. 1.16 "Employment Commencement Date" shall mean the date on which the Employee first performs an Hour of Service for the Employer. 1.17 "Enrollment Period" shall mean the twenty-one (21) day period preceding the Plan Entry Date. 1.18 "Highly Compensated Employee" shall mean an Employee who: (a) at any time during the Plan year or the preceding year is a more than 5% owner of the Employer (applying the constructive ownership rules of Section 318 of the Code); or (b) for the preceding year has Compensation in excess of $80,000 (as adjusted by the Commissioner of Internal Revenue for the relevant year). The term "Highly Compensated Employee" also includes any former Employee who separated from service (or has a deemed separation from service, as determined under Treasury 3. 6 regulations) prior to the Plan Year, performs no service for the Employer during the Plan Year, and was a Highly Compensated Employee either for the separation year or any Plan Year ending on or after his 55th birthday. If the former Employee's separation from service occurred prior to January 1, 1987, he is a Highly Compensated Employee only if he satisfied clause (a) of this Section 1.18 or received Compensation in excess of $50,000 during: (1) the year of his separation from service (or the prior year); or (2) any year ending after his 54th birthday. The Committee shall also have discretion to use any other definition of "Highly Compensated Employee" promulgated by the Secretary of Treasury. 1.19 "Historic Account" shall mean the account maintained for a Participant to record any interest as of December 31, 1991 in any Merged Plan, and earnings and losses thereon. 1.20 "Hour of Service" shall mean: (a) Each hour of service for which the Employer, either directly or indirectly, pays an Employee, or for which the Employee is entitled to payment, for the performance of duties during the Plan Year. The Committee shall credit Hours of Service under this subsection (a) to the Employee for the Plan Year in which the Employee performs the duties, irrespective of when paid; (b) Each hour of service for back pay, irrespective of mitigation of damages, which the Employer has agreed to pay, or for which the Employee has received an award. The Committee shall credit Hours of Service under this subsection (b) to the Employee for the Plan Year(s) to which the award of the agreement pertains, rather than for the Plan Year in which the award, agreement or payment is made; and (c) Each hour of service for which the Employer, either directly or indirectly, pays an Employee, or for which the Employee is entitled to payment (irrespective of whether the employment relationship is terminated), for reasons other than for the performance of duties during a Plan Year, such as Leave of Absence, vacation, holiday, sick leave, illness, incapacity (including disability), layoff, jury duty, Military Leave of Absence, or Maternity and Paternity Leave. The Committee shall not credit more than five hundred one (501) Hours of Service under this subsection (c) to an Employee on account of any single continuous period during which the Employee does not perform any duties (whether or not such period occurs during a single Plan Year). Notwithstanding the above, the Committee shall credit an Employee with a Military Leave of Absence to the extent required by law. The Committee shall credit Hours of Service under this subsection (c) in accordance with the rules of subsections (b) and (c) of Department of Labor Reg. Section 2530.200(b)-2, which the Plan, by this reference, specifically incorporates in full within this subsection (c). The Committee shall not credit an Hour of Service under more than one of the above subsections. Furthermore, if the Committee is to credit Hours of Service to an Employee for the twelve month period beginning with the Employee's Employment Commencement Date or with an anniversary of such date, then such twelve month period shall be substituted for the term "Plan Year" wherever the latter term appears in this Section 1.20. The Committee shall resolve any ambiguity with respect to the crediting of an Hour of Service in favor of the Employee. 4. 7 The Committee shall credit every Employee compensated on an hourly basis with Hours of Service on the basis of the "actual" method. For purposes of the Plan, "actual" method means the determination of Hours of Service from records of hours worked and hours for which the Employer makes payment or for which payment is due from the Employer. Employees compensated on other than an hourly basis and for whom hours are not required to be counted and recorded by any other federal law, such as the Fair Labor Standards Act, shall be credited with forty-five (45) hours per week for any week during which the Employee is credited with one (1) Hour of Service. 1.21 "Investment Committee" shall mean the Committee appointed by the Company to manage the assets of the Plan pursuant to Articles 9 and 13 hereof. Each Investment Committee member is designated a Named Fiduciary under the Plan.** 1.22 "Leased Employee" shall mean an individual (who otherwise is not an Employee of the Employer) who, pursuant to a leasing agreement between the Employer and any other person, has performed services for the Employer (or for the Employer and any persons related to the Employer within the meaning of Section 414(n)(6) of the Code) on a substantially full time basis for at least one year and who performs services historically performed by employees in the Employer's business field. The Plan does not treat a Leased Employee as an Employee of the Employer. 1.23 A "Leave of Absence" shall mean any absence approved by the Employer, other than absence which qualifies as a Maternity and Paternity Leave or Military Leave of Absence, including but not limited to, sick or disability time. 1.24 "Matching Contribution Account" shall mean the account maintained for a Participant to record matching contributions made by the Employer pursuant to Article 4. 1.25 "Maternity and Paternity Leave" shall mean an absence from work for any period by reason of the Employee's pregnancy, birth of the Employee's child, placement of the child with the Employee in connection with the adoption of such child, or any absence for the purpose of caring for such child for a period immediately following the birth or placement. For this purpose, Hours of Service shall be credited for the computation period in which the absence from work begins only if credit therefore is necessary to prevent the Employee from incurring a one year Break in Service, or in the immediately following computation period. The Hours of Service credited for a Maternity and Paternity Leave shall be those which would have normally been credited but for such absence, or, in any case in which the Committee is unable to determine such hours normally credited, eight (8) Hours of Service per day. The total Hours of Service required to be credited for a Maternity and Paternity Leave shall not exceed 501. 1.26 "Merged Plans" shall mean the Danbury Pharmacal, Inc. 401(k) Plan, the Danbury Pharmacal, Inc. Profit-Sharing Plan, the Schein Pharmaceutical, Inc. Profit-Sharing Plan, the Steris Laboratories, Inc. 401(k) Plan, the Steris Laboratories, Inc. Profit-Sharing Plan, and the Marsam Pharmaceuticals, Inc. 401(k) Retirement Savings Plan or any of them individually. 5. 8 1.27 "Military Leave of Absence" shall mean the absence of an Employee in military service for the United States of America, provided that the Employee returns to the employ of the Employer prior to the end of any period prescribed by the laws of the United States during which he has reemployment rights with the Employer. 1.28 "Named Fiduciary" shall mean a person designated a fiduciary under this Plan. 1.29 "Nonforfeitable" shall mean a Participant's or Beneficiary's unconditional claim, legally enforceable against the Plan, to the Participant's Account Balance. 1.30 "Normal Retirement Date" shall mean the date the Participant attains age 65 and five (5) Years of Service. 1.31 "Owner-Employee" shall mean an individual who is a sole proprietor, or who is a partner owning more than 10 percent of either the capital or profits interest of the partnership. If this Plan provides contributions or benefits for one or more Owner-Employees who control both the business for which this Plan is established and one or more other trades or businesses, this Plan and the plan established for other trades or businesses must, when looked at as a single plan, satisfy Sections 401(a) and (d) of the Code for the employees of this and all other trades or businesses. If the Plan provides contributions or benefits for one or more Owner-Employees who control one or more other trades or businesses, the employees of the other trades or businesses must be included in a plan which satisfies Sections 401(a) and (d) of the Code and which provides contributions and benefits not less favorable than provided for Owner-Employees under this plan. If an individual is covered as an Owner-Employee under the plans of two or more trades or businesses which are not controlled and the individual controls a trade or business, then the contributions or benefits of the employees under the plan of the trades or businesses which are controlled must be as favorable as those provided for him under the most favorable plan of the trade or business which is not controlled. For purposes of the preceding paragraphs, an Owner-Employee, or two or more Owner-Employees, will be considered to control a trade or businesses if the Owner-Employee, or two or more Owner-Employees together: (1) own the entire interest in an unincorporated trade or business, or (2) in the case of a partnership, own more than 50 percent of either the capital interest or the profits interest in the partnership. For purposes of the preceding sentence, an Owner-Employee, or two or more Owner-Employees shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such Owner-Employee, or such two or more Owner-Employees, are considered to control within the meaning of the preceding sentence. 6. 9 1.32 "Participant" is an Employee who is eligible to be and becomes a Participant in accordance with the provisions of Article 2. 1.33 "Participating Employer" shall mean any member of a controlled group of corporations, as defined in Section 1563(a) of the Code, of which the Company is a member, which, with the written consent of the Company, adopts this Plan. 1.34 "Payment Starting Date" shall mean the first day of the first period for which the Plan pays an amount in any form. 1.35 "Plan" shall mean The Retirement Plan of Schein Pharmaceutical, Inc. & Affiliates. 1.36 "Plan Entry Dates" shall mean the Effective Date and thereafter the first day of the first pay period coincident with, or next following, the date on which an Employee completes Six Months of Service. 1.37 "Plan Year" shall mean the twelve (12) consecutive month period commencing on January 1 and ending on December 31. 1.38 "Qualified Non-Elective Contribution Account" shall mean the account maintained for a Participant to record Qualified Non-Elective Contributions made by the Employer pursuant to Section 3.5. 1.39 "Rollover Contribution Account" shall mean the account maintained for an Employee to record any Rollover Contributions accepted pursuant to Section 5.2. 1.40 "Salary Reduction Contribution" shall mean the amount by which the Participant elects to reduce his Compensation which is then contributed to the Trust by the Employer. 1.41 "Salary Reduction Contribution Account" shall mean the account maintained for a Participant to record Salary Reduction Contributions made on his behalf by the Employer. 1.42 "Salary Reduction Agreement" shall mean the agreement between the Participant and the Employer whereby the Participant directs the Employer to contribute a designated percentage of his Compensation to the Trust. 1.43 "Self-Employed Individual" shall mean an individual who has Earned Income for the taxable year from the trade or business for which the Plan is established or an individual who would have had Earned Income but for the fact that the trade or business has no net profits for the taxable year. 1.44 "Six Months of Service" shall mean a period of six (6) consecutive calendar months during which an Employee completes at least 500 Hours of Service. 1.45 A "Temporary Employee" shall mean a Leased Employee, any agent or an independent contractor. 7. 10 1.46 "Trust" shall mean the trust created under the Plan, known as the Henry Schein, Inc. Affiliates' 401(k) Trust. Effective July 1, 1994, the Trust is known as the Employee Benefit Plan Trust, as well as any successor thereto. 1.47 "Trust Fund" shall mean all property of every kind held or acquired by the Trustee pursuant to this Plan. Trust assets will be valued at fair market value. 1.48 "Trustee" shall mean the person or entity appointed as trustee under the governing Trust document. 1.49 "Voluntary Contribution Account" shall mean the account maintained for a Participant to record any voluntary contributions made by the Participant pursuant to Section 5.1 and any amount recharacterized as voluntary contributions. 1.50 "Year of Service" shall mean a twelve-month period, beginning on an Employee's date of hire or any anniversary thereof, during which an Employee has at least one thousand (1,000) Hours of Service. For purposes of eligibility and vesting, service with SB Pharma, Ltd. shall be considered to be service with the Company. 1.51 Wherever used herein, the singular shall include the plural and the masculine shall include the feminine and the neuter, unless the context clearly indicates otherwise. ARTICLE 2 PARTICIPATION 2.1 ELIGIBILITY. Each Participant in the Plan or in any of the Merged Plans as of December 31, 1991 who is in the employ of the Employer on the Effective Date shall become a Participant on the Effective Date. Each other Employee shall become a Participant on the Plan Entry Date. Notwithstanding the foregoing, any person who is a non-resident alien (within the meaning of Code Section 7701(b)), a Temporary Employee or is a member of a collective bar-gaining unit is excluded from participation. If a Participant does not terminate employment but becomes a member of a collective bargaining unit, then unless the applicable collective bargaining agreement provides otherwise, during the period that such Participant is a member of a collective bargaining unit, the Committee shall limit that Participant's sharing in the allocation of Employer contributions and Participant forfeitures, if any, under the Plan to the extent of his Compensation paid by the Employer for services rendered while he is not a member of a collective bargaining unit. However, during such period, the Participant's Account Balance shall continue to share fully in Trust Fund earnings and losses. If an Employee who is not a Participant ceases to be a member of a collective bargaining unit, he shall participate in the Plan immediately if he has satisfied the service condition of this Section 2.1 and would have been a Participant had he not been a member of a collective bargaining unit during his period of service with the Employer. Furthermore, an Employee shall receive vesting credit under Article 6 for each included Year of Service during his period of 8. 11 service with the Employer without regard to whether the Employee is a member of a collective bargaining unit. For purposes of this Section 2.1, an Employee is a member of a collective bargaining unit if he is included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one (1) or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. The term "employee representatives" does not include an organization of which more than one half the members are owners, officers or executives of the Employer. If an individual, who is not participating in the Plan by virtue of his or her not being considered to be an Employee by the Company, is later recharacterized as an employee of the Company by the Internal Revenue Service or other governmental authority, that individual will not be entitled to benefits hereunder on a retroactive basis. Rather, he or she shall be considered for eligibility on a prospective basis only. 2.2 MONTH OF SERVICE - PARTICIPATION. For purposes of participation under Section 2.1, the Plan shall take into account all of an Employee's consecutive calendar Months of Service with the Employer. Months of Service shall include all consecutive calendar Months of Service an Employee completes with an Employer or any entity which is required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m), (n), or (o) of the Code. 2.3 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment terminates shall re-enter the Plan as a Participant on the date of his re-employment. An Employee who has satisfied the eligibility condition of Section 2.1, but who terminates employment prior to becoming a Participant, shall become a Participant in the Plan on the date of his re-employment. Any other Employee whose employment terminates and who is subsequently re-employed shall become a Participant in accordance with the provisions of Section 2.1 and Section 2.2. ARTICLE 3 PARTICIPANT SALARY REDUCTION 3.1 SALARY REDUCTION AGREEMENT. A Participant may elect to enter into a Salary Reduction Agreement with the Employer which will be applicable to all payroll periods within such Plan Year after the Plan Entry Date following execution of the Salary Reduction Agreement. The terms of any such Salary Reduction Agreement shall provide that the Participant agrees to a reduction in Compensation from the Employer equal to any whole percentage from one percent (1%) to fourteen percent (14%) of his Compensation for each payroll period within such Plan Year. A Participant who does not elect to enter into a Salary Reduction Agreement with the Employer shall continue to receive his entire amount of Compensation in cash. 3.2 CHANGE IN SALARY REDUCTION RATE. A Participant may suspend his contributions under his Salary Reduction Agreement at any time. A Participant may amend his 9. 12 Salary Reduction Agreement during any Plan Year as of the first day of the first pay period in any calendar quarter by filing twenty-one (21) days advance written notice of any change. Salary Reduction Agreement amendments shall be effective as of the first day of the first pay period after the twenty-one (21) days advance notice. Notwithstanding the above limitations, the Employer may decrease at any time the Salary Reduction Contribution of any Participant by any percentage, whether whole or fractional, if the Committee notifies the Employer that such decrease is necessary to ensure that the limitations of Sections 3.4, 3.5 or 4.7 are met for the Plan Year. 3.3 VESTING - SALARY REDUCTION CONTRIBUTION ACCOUNTS. Amounts credited to a Participant's Salary Reduction Contribution Account shall be 100% vested and Nonforfeitable at all times. The Committee shall pay all Salary Reduction Contributions over to the Trust no later than ninety (90) days after the date the funds were withheld from the Participant's Compensation. 3.4 SALARY REDUCTION CONTRIBUTION LIMITATIONS. Notwithstanding Section 3.1 hereof, the maximum amount of Compensation a Participant is permitted to defer during any calendar year is limited to $7,000 as adjusted by the Secretary of Treasury pursuant to Section 402(g)(5) of the Code. Any amount that cannot be credited to the Participant's Salary Reduction Contribution Account due to the foregoing limit shall be paid to the Participant in cash. For purposes of the limitation of this Section 3.4, the amount contributed to a Participant's Salary Reduction Contribution Account shall not include any Salary, Reduction Contributions properly returned to the Participant as excess Annual Additions under Section 4.7. If a Participant would exceed the limitation of this Section 3.4 when the amount the Participant elects to contribute to his Salary Reduction Contribution Account is aggregated with the amounts deferred by the Participant under other plans or arrangements described in Sections 401(k), 408(k), 403(b), 457 or 501(c)(18) of the Code, the Participant may request that the Committee distribute the excess deferrals to him. Such excess deferrals and income or loss allocable thereto may be distributed no later than April 15 of the year following the year in which any such excess deferrals are contributed, to Participants who claim such allocable deferral contributions for the preceding calendar year. The Participant's claim shall be in writing; shall be submitted to the Committee no later than March 1; shall specify the Participant's deferral contribution amount for the preceding calendar year; and shall be accompanied by the Participant's written statement that if such amounts are not distributed, such deferral contributions, when added to amounts deferred under other plans or arrangements described in Sections 401(k), 408(k), 403(b), 457 or 501(c)(18) of the Code, exceed the limit imposed on the Participant in accordance with the applicable provisions of the Code for the year in which the deferral occurred. To the extent the excess deferral arises under this Plan when combined with other plans of the Employer, the individual will be deemed to have notified the Committee of the excess deferral and requested distribution of the excess deferral. The income or loss allocable to the excess deferrals shall be the sum of (1) the amount determined by multiplying the income or loss allocable to the Participant's accounts containing the excess deferrals for the calendar year by a fraction, the numerator of which is the excess deferrals on behalf of the Participant for the calendar year and the denominator of which is the Participant's account balance in his accounts containing the excess deferrals as of the last day of 10. 13 the calendar year in which the excess deferrals are made without regard to any gain or loss allocable to such total amount for the calendar year; and (2) ten (10) percent of the amount determined under (1) multiplied by the number of whole calendar months between the end of the calendar year in which the excess deferrals were made and the date of distribution, counting the month of distribution if distribution occurs after the 15th day of such month. Excess deferrals shall be treated as Annual Additions, unless such amounts are distributed to the Participant no later than April 15 of the year following the year in which any such excess deferrals are contributed. 3.5 SALARY REDUCTION DISCRIMINATION LIMITATION. The Employer shall not permit a Participant to defer an amount of Compensation that would cause the Plan to not satisfy at least one of the following tests in any Plan Year: (a) The Actual Deferral Percentage for the group of Highly Compensated Employees shall not exceed the Actual Deferral Percentage of all other eligible Employees multiplied by 1.25; or (b) The Actual Deferral Percentage for the group of Highly Compensated Employees shall not exceed the Actual Deferral Percentage for all other eligible Employees multiplied by 2.0, provided that the Actual Deferral Percentage for the group of Highly Compensated Employees does not exceed the Actual Deferral Percentage of all other eligible Employees by more than two (2) percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. The Actual Deferral Percentage for a specified group of Employees for a Plan Year shall be the average of ratios (calculated separately for each Employee in such group) of (i) the amount of Salary Reduction Contributions actually paid over to the Trust on behalf of each such Employee for such Plan Year, to (ii) the Employee's Compensation for that portion of the Plan Year during which the Employee was eligible to participate. In computing the Actual Deferral Percentage, Salary Reduction Contributions shall not include any amounts properly returned to (i) the Participant as excess Annual Additions under Section 4.7; or (ii) a non-Highly Compensated Employee as excess deferrals under Section 3.4. The Actual Deferral Percentage for a Participant who makes no Salary Reduction Contributions during a Plan Year shall be 0%. Contributions taken into account for purposes of determining the Actual Deferral Percentage test must be made before the last day of the twelve-month period immediately following the Plan Year to which the contributions relate. In computing the Actual Deferral Percentage, the Committee may include in subparagraph (i) above, the amount of any Employer contributions which are 100% vested when made and are subject to the same withdrawal restrictions applicable to Salary Reduction Contributions. These contributions shall be named "Qualified Non-Elective Contributions" and shall be placed in the Qualified Non-Elective Contribution Account of only the non- Highly Compensated Employees. If matching contributions are taken into account for purposes of this subparagraph (i), they must meet the requirements applicable to Employer contributions in the preceding sentence and cannot be taken into account under Section 4.2(i). In the event Salary Reduction Contributions are used to satisfy the Annual Contribution Percentage test under Section 4.2, the Actual Deferral Percentage test must be satisfied both with and 11. 14 without inclusion of the Salary Reduction Contributions used in the Actual Contribution Percentage test. The Actual Deferral Percentage for any Employee who is a Highly Compensated Employee for the Plan Year and who has Salary Reduction Contributions allocated to his account under two or more plans of the Employer shall be determined as if all such contributions were made under a single plan. If the above plans have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. In the event that this Plan satisfies the requirements of Sections 401(k), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Sections 401(k), 401(a)(4) or 410(b) of the Code only if aggregated with this Plan, then this Section 3.5 shall be applied by determining the Actual Deferral Percentages of Participants as if all such plans were a single plan. Plans may be aggregated to satisfy Section 4010c) of the Code only if they have the same plan year. The Employer shall maintain records sufficient to demonstrate satisfaction of the Actual Deferral Percentage test. The determination and treatment of the Actual Deferral Percentage amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 3.6 EXCESS CONTRIBUTIONS. Notwithstanding the fore-going paragraph, with respect to any Plan Year in which Salary Reduction Contributions on behalf of Highly Compensated Employees exceed the applicable limit, the Committee shall reduce the amount of the Excess Contributions made on behalf of the Highly Compensated Employees (by reducing such contributions in order of Actual Deferral Percentages beginning with the highest), and shall distribute any Excess Contributions which exist after such reduction, as adjusted by the income or loss allocable to such Excess Contributions, to the affected Highly Compensated Employees no later than March 15 of the year following the Plan Year in which any such Excess Contributions are made, but in no event shall such amounts be distributed later than the end of the Plan Year following the Plan Year in which such Excess Contributions were contributed. For purposes of Section 3.6, "Excess Contributions" shall mean, with respect to any Plan Year, the aggregate amount of Employer contributions actually taken into account in computing the Actual Deferral Percentage of the Highly Compensated Employees over the maximum amount of such contributions permitted by the Actual Deferral Percentage test. The income or loss allocable to the Excess Contributions shall be the sum of (1) the amount determined by multiplying the income or loss allocable to the Participant's accounts containing the Excess Contributions for the Plan Year by a fraction, the numerator of which is the Excess Contributions on behalf of the Participant for the Plan Year and the denominator of which is the Participant's account balance in his accounts containing the Excess Contributions as of the Accounting Date of the Plan Year in which the Excess Contribution is made without regard to any gain or loss allocable to such total amount for the Plan Year; and (2) ten (10) percent of the amount determined under (1) multiplied by the number of whole calendar months between the end of the Plan Year in which the Excess Contributions were made and the date of distribution, counting the month of distribution if distribution occurs after the 15th day of such month. 12. 15 ARTICLE 4 EMPLOYER CONTRIBUTIONS 4.1 MATCHING CONTRIBUTION. The Employer shall make a fixed matching contribution to each Participant's Matching Contribution Account equal to 50% of the first 6% of such Participant's Salary Reduction Contribution. The Employer may also elect to make a discretionary matching contribution. Although the amount to be contributed for each Plan Year by the Employer as a discretionary matching contribution under this Section 4.1 is purely discretionary, any such contributed amounts will be allocated `to the Matching Contribution Accounts of each Participant on the basis of a fraction, the numerator of which is equal to the amount of the Participant's Salary Reduction Contribution, and the denominator of which is the sum total of all Participants' Salary Reduction Contributions. 4.2 LIMITATIONS ON MATCHING CONTRIBUTIONS. The Employer shall not make matching contributions to the Plan which would cause the Plan not to satisfy at least one of the following tests in any Plan Year: (a) The Actual Contribution Percentage for the group of Highly Compensated Employees shall not exceed the Actual Contribution Percentage for all other eligible Employees multiplied by 1.25; or (b) The Actual Contribution Percentage for the group of Highly Compensated Employees shall not exceed the Actual Contribution Percentage for all other eligible Employees multiplied by 2.0, provided that the Actual Contribution Percentage for the group of Highly Compensated Employees does not exceed the Actual Contribution Percentage for all other eligible Employees by more than two (2) percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. For purposes of this Section 4.2, the Actual Contribution Percentage for a specified group of Employees shall be the average of the ratios (calculated separately as a Contribution Percentage for each Employee in the group) of (i) Employee voluntary contributions and the matching contributions under the Plan on behalf of the Employee for the Plan Year, to (ii) the Employee's Compensation for that portion of the Plan Year during which the Employee was eligible to participate. The Contribution Percentage for a Participant who is not allocated a matching contribution shall be 0%. For purposes of determining Contribution Percentages, Salary Reduction Contributions are considered to have been made in the Plan Year in which contributed to the Trust. Employer contributions will 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. In computing Contribution Percentages, the Committee may include in subparagraph (i) above, Salary Reduction Contributions, except for Salary Reduction Contributions which are properly distributed as excess Annual Additions under Section 4.7, and base contributions which are 100% vested when made and are not available for withdrawal under any circumstances. In computing Contribution Percentages, the Committee shall not include matching contributions that arc forfeited either to correct Excess Aggregate Contributions under Section 13. 16 4.3 or because the contributions to which the matching contributions relate are excess deferrals under Section 3.4, Excess Contributions under Section 3.6 or Excess Aggregate Contributions under Section 4.3. The Contribution Percentage for any Employee who is a Highly Compensated Employee for the Plan Year and who has matching contributions allocated to his account under two or more plans of the Employer shall be determined as if all such contributions were made under a single plan. If the above plans have different plan years, the plans ending with or within the same calendar year shall be treated as a single plan. In the event that this Plan satisfies the requirements of Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with this Plan, then this Section 4.2 shall be applied by determining the Contribution Percentages of Employees as if all such plans were a single plan. Plans may be aggregated in order to satisfy Section 401(m) of the Code only if they have the same plan year. The determination and treatment of the Contribution Percentage of any Employee shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. The Employer shall maintain records sufficient to demonstrate satisfaction of the Actual Contribution Percentage test. 4.3 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. Excess Aggregate Contributions and income allocable thereto shall be distributed no later than March 15 of the Plan Year following the Plan Year in which any such Excess Aggregate Contribution were made, but in no event shall the Excess Aggregate Contributions be distributed later than the last day of the Plan Year following the Plan Year in which the contributions giving rise to the Excess Aggregate Contributions were allocated. If Excess Aggregate Contributions are distributed more than 2_ months after the last day of the Plan Year in which such excess amounts arose, a ten (10) percent excise tax will be imposed on the Employer maintaining the Plan with respect to those mounts. Excess Aggregate Contributions shall be treated as Annual Additions under the Plan. For purposes of Section 4.3, "Excess Aggregate Contributions" shall mean, with respect to any Plan Year, the excess of the aggregate Contribution Percentage amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over the maximum Contribution Percentage amounts permitted by the Actual Contribution Percentage test (determined by reducing 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 Contributions pursuant to Section 3.6 and then determining Excess Aggregate Contributions pursuant to this Section 4.3. The Excess Aggregate Contributions to be distributed to a Participant shall be adjusted by the income or loss allocable to such Excess Aggregate Contribution. The income or loss allocable to the Excess Aggregate Contributions shall be the sum of (1) the amount determined by multiplying the income or loss allocable to the Participant's accounts containing the excess amounts for the Plan Year by a fraction, the numerator of which is the Excess Aggregate Contributions on behalf of the Participant for the 14. 17 Plan Year and the denominator of which is the Participant's account balance in the accounts containing the excess amounts as of the Accounting Date of the Plan Year in which the Excess Aggregate Contribution is made without regard to any gain or loss allocable to such total amount for the Plan Year; and (2) ten (10) percent of the amount determined under (1) multiplied by the number of whole calendar months between the end of the Plan Year in which the Excess Aggregate Contributions were made and the date of distribution, counting the date of distribution if distribution occurs after the 15th day of such month. 4.4 FORFEITURE OF MATCHING CONTRIBUTIONS. In the event a matching contribution relates to an excess deferral under Section 3.4, or an Excess Contribution under Section 3.6, the matching contribution and income allocable thereto shall be forfeited. The income allocable to a matching contribution shall be determined in accordance with the procedure for determining income allocable to Excess Aggregate Contributions set forth in Section 4.3. Forfeited matching contributions and the income allocable thereto shall be used first for the payment of Plan expenses, and any remaining forfeitures shall be allocated in the manner described in Section 6.5. The forfeited amounts are treated as Annual Additions under the Plan for those Participants from whose Accounts the amounts are forfeited. 4.5 DISCRETIONARY BASE CONTRIBUTIONS. For each Plan Year, the Employer may contribute to the Trust a discretionary base contribution amount if the Employer deems it advisable. The Employer's base contribution amount will be allocated only to Participants who are employed by the Employer on the last day of the Plan Year and who have been credited with one thousand (1,000) Hours of Service for that Plan Year, except that a Participant whose service with the employer terminates in a Plan Year due to: (a) retirement on or after reaching his Normal Retirement Date, (b) death or disability, or (c) upon termination of employment with the Employer pursuant to an employment reduction plan during the period November 1, 1996 through and including December 31, 1997, will also share in the allocation of the Employer's base contribution for the Plan Year. Notwithstanding the foregoing, if a Participant completes 501 or more Hours of Service, regardless of whether he is employed on the last day of the Plan Year, he will receive a base contribution if such contribution is necessary to enable the Plan to satisfy the minimum coverage test of Section 410(b) of the Code or the minimum participation test of Section 401(a)(26) of the Code. The allocation of the Employer's base contribution shall be based on a ratio, the numerator of which is the Participant's Compensation for the Plan Year, and the denominator of which is the total Compensation for all Participants for that Plan Year. 4.6 EMPLOYER CONTRIBUTIONS. This Plan is intended to be a profit sharing plan to which Employer contributions shall be made without regard to current or accumulated profits. All contributions by the Employer shall be paid to the Trustee not later than the time prescribed by law for filing the federal income tax return of the Employer, including any extensions which have been granted for the filing of such return. 15. 18 4.7 LIMITATION ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. If an Employee does not and has not ever received an allocation of Annual Additions, the amount of Annual Additions which the Committee may allocate under this Plan on a Participant's behalf for a Limitation Year shall not exceed the Maximum Permissible Amount. Prior to the determination of the Participant's actual Compensation for a Limitation Year, the Committee may determine the Maximum Permissible Amount on the basis of the Participant's estimated annual Compensation for such Limitation Year. The Committee shall make this determination on a uniform and reasonable basis for all Participants similarly situated. As soon as is administratively feasible after the end of the Limitation Year, the Committee shall determine the Maximum Permissible Amount for the Limitation Year on the basis of the Participant's Compensation for the Limitation Year. If, as a result of the Committee's estimation of the Participant's Compensation, as a result of a forfeiture allocation, or as a result of a reasonable error in determining the amount of Salary Reduction Contributions that may be made with respect to any Participant under the limits of Section 415 of the Code, an Excess Amount exists, any Salary Reduction Contributions or nondeductible voluntary contributions will be returned to the Participant. To the extent an Excess Amount still exists, the Committee shall reduce any Employer contributions and forfeitures to the Participant's Accounts at the end of the Limitation Year by the Excess Amount, and any remaining Excess Amount shall be carded over to the next Limitation Year. If the Participant is not covered by the Plan as of the end of the Limitation Year, then the Excess Amount will be allocated to the Accounts of all other Participants in the Plan for the Limitation Year before any other amounts are allocated for such Limitation Year. If an Employee is a Participant at any time in both a defined benefit plan and a defined contribution plan maintained by the Employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year may not exceed 1.0. The defined benefit plan fraction for any Plan Year is a fraction, the numerator of which is the Participant's projected annual benefit under the plan (determined at the close of the Plan Year) and the denominator of which is the lesser of (1) 1.25 multiplied by the dollar limitation in effect for such Plan Year under Section 415(b)(1)(A) of the Code as adjusted by Section 415(d) of the Code; or (2) 1.4 multiplied by one-hundred percent (100%) of the Participant's average monthly Compensation during the three consecutive years when the total Compensation paid to him was highest, including any adjustment under Section 415(b) of the Code. Notwithstanding the above, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Section 415 for all Limitation Years beginning before January 1, 1987. The defined contribution plan fraction for any Plan Year is a fraction, the numerator of which is the sum of the Annual Additions to the Participant's Account Balance as of the close of 16. 19 the Plan Year, (including the Annual Additions attributable to the Participant's nondeductible employee contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the Annual Additions attributable to all welfare benefit funds, as defined in Section 419(e) of the Code and individual medical accounts, as defined in Section 415(1)(2) of the Code, maintained by the Employer) and the denominator of which is the sum of the applicable maximum amounts of Annual Additions which could have been made under Section 415(c) of the Code for such Plan Year and for all prior years of such Participant's employment. If the employee was a Participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the defined benefit fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (1) of the excess of the sum of the fractions over 1.0 times (2) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the Plan made after May 5, 1986, but using the Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987. The applicable maximum amount for any Plan Year shall be equal to the lesser of (1) 1.25 multiplied by the dollar limitation in effect for such Plan Year under Section 415(c)(1)(A) of the Code; or (2) 1.4 multiplied by twenty-five percent (25%) of the Participant's Compensation for such Plan Year. For purposes of this limitation, all defined benefit plans of the Employer, whether or not terminated, are to be treated as one defined benefit plan and all defined contribution plans of the Employer, whether or not terminated, are to be treated as one defined contribution plan. The following definitions apply to this Section only: (a) "Maximum Permissible Amount" - For a Limitation Year, the Maximum Permissible Amount with respect to any Participant shall be the lesser of (i) $30,000 (or, if greater, 25% of the dollar limitation in effect under Section 415(b)(1)(A) of the Code), or (ii) twenty-five percent (25%) of the Participant's Compensation for the Limitation Year. (b) "Compensation" - Compensation as defined in Section 1.415-2(d)(10) of the Treasury Regulations. (c) "Employer" - The Employer which adopts this Plan as well as any entity which must be aggregated with the Employer pursuant to Sections 414(b), (c), (m), (n) or (o) of the Code. (d) "Excess Amount" - The excess of the Participant's Annual Additions credited to the Participant's Account for the Limitation Year over the Maximum Permissible Amount. Any Excess Amount shall be held in a suspense account which does not participate in the allocation of the Trust's investment gains and losses. Excess Amounts may not be distributed to Participants or former Participants, except as otherwise provided in Section 4.7. 17. 20 Any Excess Amount which is allocated shall be deemed to be an Annual Addition for the Limitation Year in which it is allocated. (e) "Limitation Year" - The Plan Year. (f) "Projected Annual Benefit" - The annual retirement benefit (adjusted if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which the Participant would be entitled under the terms of the plan assuming: (1) the Participant will continue employment until normal retirement age under the plan (or current age, if later), and (2) the Participant's Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the Plan will remain constant for all future Limitation Years. ARTICLE 5 PARTICIPANT CONTRIBUTIONS 5.1 VOLUNTARY CONTRIBUTIONS. Effective as of the Effective Date no voluntary contributions may be rendered. All voluntary contributions made after December 31, 1986 and the income allocable thereto shall be treated as a separate contract for purposes of the distribution rules under Section 72 of the Code. The Committee shall maintain records of withdrawals, contributions, earnings and losses attributable to each contract. Each Participant shall have the right to make withdrawals of his voluntary contributions from the Voluntary Contribution Account, upon prior written notice to the Plan Committee. No withdrawal shall be for less than Two Hundred Fifty Dollars ($250) and only one withdrawal may be made under this Section 5.1 in any Plan Year. For purposes of this Section 5.1, the Voluntary Contribution Account shall be deemed to include the corresponding sub-accounts, if any, of the Historic Account. Withdrawals shall be made from pre-1987 voluntary contributions first. After the contract attributable to pre-1987 voluntary contributions is depleted, withdrawals can be made from the other contract. 5.2 ROLLOVER CONTRIBUTIONS. Any Employee, with the Committee's consent, may contribute cash to the Trust Fund, if the contribution is a Rollover Contribution. For this purpose a Rollover Contribution means (a) an Eligible Rollover Distribution within the meaning of Section 402(c)(4) of the Code; (b) a contribution by an Employee of a distribution received from the qualified plan of another employer, provided the Employee makes the contribution within 60 days of his receipt of a distribution which satisfied the requirements of Section 402(a)(5) of the Code before January 1, 1993 and which satisfied the requirements of Section 402(c)(1) after December 31, 1992; (c) a contribution by an Employee under Section 408(d)(3) of the Code of the balance in an individual retirement account or annuity which amount is attributable to a prior rollover distribution which satisfied the requirements of Section 18. 21 402(a)(5) of the Code before January 1, 1993 and which satisfied the requirements of Section 402(c)(1) after December 31, 1992; or (d) a direct transfer of the Employee's interest from the trustee of a qualified plan maintained by another employer. Before accepting the Rollover Contribution, the Committee may require the Employee to furnish satisfactory evidence that the proposed transfer is in fact a Rollover Contribution that the Code permits a Employee to make to a qualified plan. The Committee shall not accept any amount from or attributable to any defined benefit plan or other plan which would require the Plan to offer or to provide automatic survivor benefits under Section 401(a)(11) of the Code. A Rollover Contribution is not an Annual Addition under Section 1.3 or Section 4.7. Rollover Contributions are 100% vested at all times and, effective April 1, 1994, follow the distribution restrictions applicable to base contributions. ARTICLE 6 TERMINATION OF SERVICE 6.1 NORMAL RETIREMENT DATE. Upon reaching his Normal Retirement Date, a Participant shall be fully vested in his Account Balance. A Participant who remains employed after reaching his Normal Retirement Date shall continue to fully participate in this Plan. Upon termination of a Participant's employment for any reason after Normal Retirement Date, the Committee shall direct the Trustee to commence payment of the Participant's Account Balance to him (or to his Beneficiary if the Participant is deceased), in accordance with the provisions of Article 7 no later than sixty (60) days after the close of the Plan Year in which the Participant's employment terminates. 6.2 PARTICIPANT DISABILITY. A Participant shall be fully vested in his Account Balance if he is deemed disabled by the Committee. The Committee shall direct the Trustee to commence payment of the Participant's Account Balance to him in accordance with the provisions of Article 7 no later than sixty (60) days after the close of the Plan Year in which the Participant is deemed disabled. The Plan shall consider a Participant disabled on the date the Committee determines the Participant, because of a physical or mental disability, will be unable to perform the duties of his customary position of employment (or is unable to engage in any substantial gainful activity) for an indefinite period which the Committee considers will be of long and continued duration. The Committee may require a Participant to submit to a physical examination in order to confirm disability. If the disabled Participant is a member of the Committee, a disinterested third party shall be appointed by the Committee to evaluate the Committee member's condition. The Committee shall apply the provisions of this Section 6.2 in a non-discriminatory, consistent and uniform manner. 6.3 TERMINATION OF SERVICE PRIOR TO NORMAL RETIREMENT DATE. Upon termination of a Participant's employment prior to Normal Retirement Date (for any reason other than death or disability), the Committee shall direct the Trustee to commence payment of the Participant's vested Account Balance to him (or to his Beneficiary if the Participant is deceased), in accordance with the provisions of Article 7, no later than sixty (60) days after the close of the Plan Year in which the Participant's employment terminates. 19. 22 6.4 VESTING-EMPLOYER CONTRIBUTIONS. Amounts credited to a Participant's Matching Contribution Account shall be one hundred percent (100%) vested at all times. A Participant's Base Contribution Account and Historic Account attributable to similar Employer base contribution amounts, shall be one hundred percent (100%) vested upon: (a) reaching his Normal Retirement Date (if employed by the Employer on or after that date), (b) termination of his employment with the Employer as a result of death or disability, or (c) termination of employment with the Employer pursuant to an employment reduction plan during the period November 1, 1996 through and including December 31, 1997. If a Participant's employment with the Employer terminates prior to his Normal Retirement Date for any reason other than those mentioned above, then for each Year of Service he shall earn a Nonforfeitable percentage of his Base Contribution Account as determined by the following vesting schedule:
Percent of Nonforfeitable Years of Service Base Contribution Account 0 0% 1 10% 2 20% 3 30% 4 40% 5 60% 6 80% 7 or more 100%
Notwithstanding the above, the Account Balance of a Participant who as of December 31, 1991 was a participant in the Danbury Pharmacal, Inc. Profit Sharing Plan and who had at least three (3) Years of Service as of such date shall be 50% vested upon completion of four (4) Years of Service. For purposes of determining Years of Service under Section 6.4, the Plan shall take into account all Years of Service an Employee completes with the Employer or any entity which is required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m), (n) or (o) of the Code. Solely for purposes of determining a Participant's Nonforfeitable percentage of his Base Contribution Account and Historic Account which accrued prior to a Forfeiture Break in Service, the Plan shall disregard any Years of Service after the Participant first incurs a Forfeiture Break in Service. A Participant incurs a Forfeiture Break in Service when he incurs five (5) consecutive one-year Breaks in Service. 20. 23 If a Participant who has no vested interest incurs a Break in Service, the Committee shall disregard the Participant's pre-break Years of Service for purposes of determining his vested interest in his post-break Account Balance if the number of the Participant's aggregate one-year Breaks in Service equals or exceeds the greater of five (5) or the number of the Participant's aggregate Years of Service. 6.5 FORFEITURE AND REPAYMENT. If a Participant terminates employment before his interest in his Base Contribution Account or Historic Account are fully vested, that portion which has not vested shall be forfeited as of the date of his termination of employment. If the value of the Participant's vested Base Contribution Account or Historic Account is zero, the Participant shall be deemed to have received a distribution of such vested Account Balance. If a Participant who has received a distribution of the Nonforfeitable portion of his Account Balance is rehired before he incurs a Forfeiture Break in Service, he may repay to the Trustees an amount equal to the distribution amount. The Participant must make repayment prior to the earlier of the date he would incur a Forfeiture Break in Service after such distribution, or five (5) years after the date on which he is re-employed. Such repayment shall be credited to his Account Balance and an additional amount equal to the forfeited portion of his Base Contribution Account and Historic Account will either be allocated to the Participant's Account Balance out of current forfeitures or contributed by the Employer as of the last day of that Plan Year. It shall be the duty of the Employer to give timely notification to any rehired Employee if such Employee is eligible to make a repayment, of his right to make such a repayment, and of the consequences of not making such repayment. In the case of a terminated Participant who is deemed to have received a distribution, or who did not receive a distribution of his vested account balance upon termination of employment, and who is rehired before he incurs a Forfeiture Break in Service, his forfeited Base Contribution Account and Historic Account shall be restored upon reemployment. In the case of a terminated Participant who does not receive a distribution of the Nonforfeitable portion of his Account Balance and whose service resumes after five (5) consecutive one-year Breaks in Service, the Nonforfeitable Account Balance shall be maintained as a fully vested subaccount within his Base Contribution Account and Historic Account. Subject to any restoration allocation of forfeited amounts on behalf of a Participant who repays a distribution as described above, and the payment of Plan expenses, remaining forfeiture amounts will be allocated to all Participants employed on the last day of the Plan Year who have completed one thousand (1,000) Hours of Service on a per capita basis. ARTICLE 7 TIME AND METHOD OF PAYMENT OF BENEFITS 7.1 TIME OF PAYMENT OF ACCOUNT BALANCE. Unless the Participant elects in writing, if distribution has not yet commenced pursuant to Sections 6.2 or 6.3, the Committee shall direct the Trustee to commence distribution of a Participant's Account Balance determined as of the Accounting Date coincident with or preceding the event causing distribution no later than sixty (60) days after the close of the Plan Year in which the later of the following events occurs: 21. 24 (a) The date the Participant reaches his Normal Retirement Date, or (b) The date the participant terminates service with the Employer. The Committee shall, however, direct the Trustee to commence distribution no later than the Participant's Required Beginning Date. The Required Beginning Date is April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2, notwithstanding the Participant's continued employment; except that any Participant who attained age 70 1/2 before January 1, 1988, and who is not a five percent owner in the Plan Year in which he attained age 66 1/2 or any later Plan Year, need not commence receiving payments hereunder until April 1 of the year following the year in which he actually retires. 7.2 DEFERRED DISTRIBUTION. A Participant who separates from service prior to attaining age 70 1/2 may request that the Committee direct the Trustee to defer commencement of his distribution until his Required Beginning Date. 7.3 FORMS OF PAYMENT. The Participant may elect one of the optional forms of payment described herein. The election of such option must be in writing, in such form as the Committee shall prescribe, signed by the Participant and filed with the Committee during the 90 day period preceding the Payment Starting Date. Any election may be revoked by written notice filed with the Committee at least 30 days prior to the Participant's Payment Starting Date. Such distribution may commence less than 30 days after the Participant is advised that he may elect an immediate distribution, provided that: (a) the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (b) the Participant, after receiving the notice, affirmatively elects a distribution. The following optional forms of distribution will be available: (a) a lump sum payment; (b) installment payments over a period of five years; or (c) installment payments over a period often years. 7.4 PAYMENT UPON DEATH. If distribution of the Participant's Account Balance has commenced in accordance with a method selected pursuant to Section 7.3 and the Participant dies before his entire interest is distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Participant as of his date of death. If a Participant dies prior to the commencement of distribution of his Account Balance, distribution of his Account Balance to his designated Beneficiary shall be completed by 22. 25 December 31 of the calendar year containing the fifth anniversary of his death, unless one of the following exceptions apply: (a) If the Participant's Account Balance is payable to or for the benefit of a designated Beneficiary, it may be distributed over a period not extending beyond the life expectancy of such Beneficiary, provided such distribution commences no later than the December 31 following the close of the calendar year in which the Participant's death occurred. (b) In the event that the Participant's spouse is his designated Beneficiary, distribution to the spouse must commence no later than the later of the December 31 of the calendar year in which the de-ceased Participant would have attained age 70 1/2 had he survived or the December 31 following the close of the calendar year in which the Participant's death occurred. If the surviving spouse dies before distribution to such spouse has commenced, then the five year distribution requirement of this Section shall apply as if the spouse were the Participant. If the Participant has not designated a method of distribution in accordance with (a) or (b) above, the Participant's designated Beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this Section, or (2) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no designated Beneficiary, or if the designated Beneficiary does not elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. For purposes of this Section, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority. For purposes of this Section only, distribution of a Participant's interest is considered to begin on the Participant's Required Beginning Date (or, if (b) above is applicable, the date distribution is required to begin to the surviving spouse). If the Trustee makes distribution in accordance with the exceptions in either clause (a) or (b), the minimum distribution for a calendar year equals the Participant's Nonforfeitable Account Balance as of the latest Accounting Date preceding the beginning of the calendar year (adjusted by distributions made after the Accounting Date but prior to the end of the calendar year), divided by the designated Beneficiary's life expectancy without recalculation. The Committee shall use the unisex life expectancy multiples under Treasury regulation Section 1.72-9 for purposes of applying this paragraph. In construing this Section 7.4, the method of distribution to the Participant's Beneficiary must satisfy Section 401(a)(9) of the Code and the applicable Treasury regulations. 7.5 MINIMUM DISTRIBUTION REQUIREMENTS. Notwithstanding anything else to the contrary herein, the Committee may not direct the Trustee to distribute the Participant's Nonforfeitable Account Balance, nor may the Participant elect to have the Trustee distribute his Account Balance over a period extending beyond the Participant's life expectancy or over a 23. 26 period extending beyond the joint life and last survivor life expectancy of the Participant and his designated Beneficiary. The minimum distribution for a calendar year equals the Participant's Nonforfeitable Account Balance as of the most recent Accounting Date preceding the calendar year (adjusted for allocations of contributions, forfeitures and distributions made after the Accounting Date but prior to the end of the calendar year, if applicable), divided by the applicable life expectancy or, if the Participant's spouse is not his designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the proposed regulations. The applicable life expectancy shall be the life expectancy (or joint and last survivor expectancy) calculated using the attained age of the Participant (or designated Beneficiary) as of the Participant's (or designated Beneficiary's) birthday in the first distribution calendar year reduced by one for each calendar year which elapsed since the date life expectancy was first calculated. Applicable life expectancies will be determined under the unisex life expectancy multiples under Treasury regulation Section 1.72-9, and will not be recomputed. The minimum distribution required for the Participant's first distribution calendar year must be made on or before the Participant's Required Beginning Date. The minimum distribution for other calendar years, including the minimum distribution for the distribution calendar year in which the Participant's Required Beginning Date occurs, must be made on or before December 31 of that distribution calendar year. The first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant's Required Beginning Date. All distributions under the Plan must be made in accordance with Section 401(a)(9) of the Code and the Treasury regulations thereunder. To the extent provisions of this Plan are inconsistent with Section 401(a)(9) of the Code, Section 401(a)(9) of the Code will override such provisions. 7.6 IMMEDIATE DISTRIBUTION. If the Participant's Nonforfeitable Account Balance is $3,500 or less, including voluntary contributions, if applicable, the Committee will immediately distribute such amount to the Participant without his consent upon his termination of employment. Effective as of January 1, 1998, the preceding reference to $3,500 will be changed to $5,000. ARTICLE 8 WITHDRAWALS 8.1 HARDSHIP WITHDRAWAL. If an Employee elects to withdraw all or any part of his Rollover, Salary Reduction Contribution Account, Qualified Non-Elective Contribution Account, Nonforfeitable Base Contribution Account and his Matching Contribution Account prior to the date he attains age 59 1/2, such withdrawal will require the consent of the Committee and such consent shall be given only if, under uniform rules of application, the Committee determines that the purpose of the withdrawal is to meet heavy and immediate financial needs of the Participant, the amount of the withdrawal does not exceed such financial needs, and the amount of the withdrawal is not reasonably available from the other resources of the Participant. Permitted withdrawals include distributions for (1) payment of college or graduate school tuition and related educational fees for college or graduate school for the next 12 months for the Participant, the Participant's spouse, children or dependents; (2) costs directly related to the purchase of a principal residence for the Participant, excluding mortgage payments; (3) payments necessary to prevent the Participant's eviction from, or foreclosure on the mortgage of, the 24. 27 Participant's principal residence; and (4) expenses for medical care, to the extent not covered by insurance, which have either been previously incurred by the Participant, the Participant's spouse or dependents or are necessary for the Participant, the Participant's spouse or dependents to obtain medical care. Other withdrawals will be approved by the Committee on the basis of uniform, nondiscriminatory standards. The foregoing definition of hardship may be altered by the Committee, as may the time, amount and manner of distributions under this Section, to the extent required by the Code or applicable regulations. No distributions may be made under this Section with respect to income allocable to Rollover, Salary Reduction Contribution Account, Qualified Non-Elective Contribution Account, Nonforfeitable Base Contribution Account or the Matching Contribution Account amounts. A hardship withdrawal must be at least $250 and limited to only one in any Plan Year. 8.2 AGE 59 1/2 WITHDRAWALS. A Participant may withdraw any portion of his Salary Reduction Contribution Account and Matching Contribution Account and his Qualified Non-Elective Contribution Account for any reason after attainment of age 59 1/2. Effective June 1, 1996, a Participant may also withdraw any portion of his Rollover Contribution Account for any reason after attainment of age 59 1/2. Only one such withdrawal will be permitted in any Plan Year. ARTICLE 9 INVESTMENT OF CONTRIBUTIONS 9.1 FUNDING VEHICLE. The Employer has entered into a Trust Agreement with the Trustee providing for the establishment of a Trust to which all Salary Reduction Contributions, matching contributions, base contributions, Qualified Non-Elective Contributions, rollover contributions, historic contributions and voluntary contributions, if any, shall be contributed and from which all benefits under the Plan shall be paid. 9.2 INVESTMENT FUNDS. The Trustee may, pursuant to the direction of the Investment Committee, establish and maintain separate subfunds into which the Participants may direct the investment of their Accounts. 9.3 INVESTMENT ELECTIONS. If the Trustee maintains separate subfunds pursuant to Section 9.2, each Participant's Account Balance attributable to Salary Reduction Contributions, matching Contributions, rollover contributions and voluntary, contributions shall be allocated to any or all of the subfunds, in multiples of five percent (5%), as the Participant shall elect. Effective as of October 1, 1997, the above reference to five percent (5%) is changed to one percent (1%). Such election shall be made by the Participant in writing and shall be filed with the Committee. A Participant's initial election shall be made during the Enrollment Period preceding his entry into the Plan. Separate accounts will be maintained reflecting the interest of each Participant attributable to each subfund. 9.4 CHANGE IN INVESTMENT ELECTION. Any investment election made by the Participant shall be deemed to be a continuing election until changed. A Participant may change 25. 28 his investment elections on a daily basis. Such change shall be effective only with respect to future amounts deferred from the Participant's Compensation, future matching contributions, and future rollover contributions. 9.5 TRANSFERS BETWEEN FUNDS. A Participant may direct the Trustee to transfer designated amounts from one subfund to another. A Participant may not direct any money in the Historic Account. A Participant may transfer all amounts on a daily basis. Notwithstanding any provision in this Plan to the contrary, investment elections, changes or transfers, loans, withdrawals decisions, and any other decision or election by a Participant (or Beneficiary) under this Plan may be accomplished by electronic or telephonic means which are not otherwise prohibited by law and which are in accordance with procedures and/or systems permitted by the Committee. 9.6 INVESTMENT OF EARNINGS. All earnings (whether denominated income, capital gain or otherwise) from investments in each subfund shall be reinvested in the same subfund. 9.7 LOAN FUNDS. Notwithstanding anything in this Article 9 to the contrary, any Employee who borrows from the Trust Fund pursuant to Article 10 will be treated as having directed the Trustee to allocate such portion of his Account Balance as is equal to the borrowed amount to the Employee's Loan Fund. The Loan Fund, and the promissory note executed by the Employee held therein, remains a part of the Trust Fund, but to the extent of the loan outstanding at any time, the borrowing Employee's Loan Fund alone shares in any interest paid on the loan, and it alone bears any expense or loss it incurs in connection with the loan. The Trustee may retain in an interest-bearing account any interest and principal paid on the borrowing Employee's loan in the Loan Fund on behalf of the borrowing Employee until the Trustee deems it appropriate to add the amount paid to the Employee's Loan Fund under the Plan (plus interest, if any) back to the Employee's Account Balance, at the same time reducing the amount treated as having been allocated to the Employee's Loan Fund by the amount of principal payments made with respect to the loan. 9.8 UNIT ACCOUNTING. The Trustee or Administrative Delegate may, for administrative purposes, establish unit values for one or more investment fund (or any portion thereof) and maintain the accounts setting forth each Participant's interest in such investment fund (or any portion there) in. terms of such units, all in accordance with such rules and procedures as such Trustee or Administrative Delegate shall deem to be fair, equitable and administratively practicable. In the event that unit accounting is thus established for any investment fund (or any portion thereof) the value of a Participant's interest in that investment fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such investment fund (or any portion thereof) multiplied by the number of units then credited to the Participant. 9.9 PASS-THROUGH OF VOTING RIGHTS. (a) To the extent that a Participant directs the investment of some portion of his Account Balance under this Article in Employer Stock, all voting, tender, and similar rights shall be passed through to the Participant, and the Participant shall direct the Trustee as to how 26. 29 said rights shall be exercised. With respect to the portion of the Participant's account which has been invested in the other investment options offered under the Plan, the Trustee shall vote all interests held by the Trust in investment options other than Employer Stock and shall do so in the sole interest of Participants and Beneficiaries. For purposes of this Section, "Employer Stock" shall mean qualifying employer securities of the Company (as defined in Section 408(e) of ERISA). (b) Procedures shall be established and maintained to ensure the confidentiality of all information regarding Participants' purchase, holding, and sale of such securities of the Company under this Article as well as Participants' exercise of appurtenant rights under this Section, except to the extent necessary to comply with federal or state law not preempted by ERISA. The Trustee is hereby designated as the fiduciary responsible for ensuring that these confidentiality procedures are adequate and are followed, and shall be further responsible for appointment of an independent fiduciary, who shall not be an affiliate of the Employer, to carry out all activities relating to securities of the Company under this Article which the Trustee determines involve the potential for undue employer influence with respect to the direct or indirect exercise of shareholder rights. ARTICLE 10 LOANS 10.1 LOAN APPLICATIONS. An Employee or a Qualified Beneficiary may make application to the Trustees to borrow from the Trust Fund, and the Trustees may, in their sole discretion, permit such loan, provided that such loans shall be made available to all such Employees and Qualified Beneficiaries on a reasonably equivalent basis. For purposes of determining the maximum loan amount available to an Employee, amounts credited to the Employee's Base Contribution Account will be considered to be a part of his or her Account Balance for purposes of Section 10.2(a)(ii) only if the Employee demonstrates that the reason for the requested loan satisfies the conditions for hardship withdrawal under Section 8.1. A Qualified Beneficiary for this purpose, is a designated Beneficiary who is a party-in-interest as defined in Section 3(14) of the Employee Retirement Income Security Act of 1974, as amended. The authority herein granted to the Trustees to approve loans from the Trust Fund shall not be used as a means of distributing benefits before they otherwise become due. A loan must be in the amount of at least two hundred fifty dollars ($250), and will be made only in multiples of fifty dollars ($50). Only one loan will be granted in any twelve consecutive month period, and no more than two loans may be outstanding at any time. 10.2 LOAN TERMS AND CONDITIONS. (a) The aggregate amount of all such loans to an Employee from this Plan shall not, at the time any such loan is made, exceed the lesser of (i) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from the Plan during the one year period ending on the day before the date on which such loan was made, over the outstanding balance of loans from the Plan on the date on which such loan was made, or (ii) fifty percent (50%) of the vested portion of the Employee's Account Balance at the time of the making of such loan. For purposes of this limitation, all loans from all qualified plans maintained by the 27. 30 Employer or by any entity which is required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m) or (o) of the Code must be aggregated. (b) Loans shall be made pursuant to notes approved by the Trustees which shall bear a reasonable interest rate equal to the prevailing rate charged by lenders for similar loans and shall specify the time and manner of repayment, as determined by the Trustees. (c) Loans shall not be made available to Employees who are Highly Compensated Employees in an amount greater than the amount made available to other Employees. (d) For all loans, the Employee must consent in writing within the 90 day period before the making of the loan, to the possible reduction in the Employee's Account Balance if the terms of the loan are not properly fulfilled and fully executed. The consent must be in writing, must acknowledge the effect of the loan, and must be witnessed by a Plan representative or notary public. A new consent shall be required if the Account Balance is used for renegotiation, extension, renewal, or other revision of the loan. Notwithstanding any other provisions of this Plan, the portion of the Employee's vested Account Balance used as a security interest held by the Plan by reason of a loan outstanding to the Employee shall be taken into account for purposes of determining the amount of the Account Balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Employee's vested Account Balance (determined without regard to the preceding sentence) is payable to the Beneficiary, then the Account Balance shall be adjusted by first reducing the vested Account Balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the Beneficiary. (e) All loans shall be adequately secured. A loan shall be deemed to be adequately secured if the aggregate amount of all such loans to an Employee does not exceed fifty percent (50%) of the vested amount of the Employee's Account Balance at the time of the making of such loan. If, at any time, the aggregate amount of outstanding loans to an Employee does exceed that limitation, then the Trustees shall require the Employee to repay the amount of principal balance due on such loans to an amount not in excess of such limitation, or to adequately secure with collateral other than the vested amount of the Employee's Account Balance the amount by which such loans exceed the limitation. The Trustees shall have sole discretion to determine the nature and amount of security required. (f) The period for repayment of a loan issued pursuant to this Section must, by the terms of the note, not exceed five (5) years. Notwithstanding the above, if the purpose or use of the loan, as determined at the time of issuance, is to acquire any dwelling unit which within a reasonable time is to be used as the principal residence of the Employee, the period for repayment of the loan may be extended to ten (10) years. Repayment of a loan shall be made through payroll deduction, or if an Employee's employment terminates, the Employee may elect, in the manner prescribed by the Trustees, to make loan repayments directly to the Plan on a substantially level basis (not less frequently than quarterly) within the time period set forth in the promissory note representing the loan. Any loan may be prepaid in full or part at any time. Any 28. 31 loan shall, by its terms, require that repayment of principal and interest be amortized at least quarterly over the period of the loan on a substantially level basis. (g) In the event the Employee's employment terminates, the loan shall be accelerated and any amount due shall be paid from the Loan Fund, unless the Employee elects, in the manner prescribed by the Trustees to make, and does make in accordance with such election, loan repayments on a substantially level basis to the Plan (not less frequently than quarterly). Any loan shall be subject to such additional acceleration provisions as shall be determined by the Trustees to be commercially reasonable. (h) In the event of default of an active Employee, foreclosure on the note and attachment of security will not occur until a distributable event occurs in the Plan. In the event of default of a terminated Employee, the Trustee shall deduct the total amount of the loan outstanding and any interest and other charges then due and owing from the terminated Employee's Loan Fund securing the Loan. (i) No loans will be made to any shareholder-employee or Owner-Employee. For purposes of this requirement, a shareholder-employee means an employee or officer of an electing small business (Subchapter S) corporation who owns (or is considered as owning within the meaning of Section 318(a)(1) of the Code), on any day during the taxable year of such corporation, more than 5% of the outstanding stock of the corporation. (j) Except to the extent otherwise prohibited by law, the deduction of the loan shall be made from the Employee's Account Balance in the following order of priority: Rollover Contribution Account, Salary Reduction Contribution Account, Matching Contribution Account, and Base Contribution Account. For purposes of this Section 10.2(j), the Rollover Contribution Account, Salary Reduction Contribution Account, Matching Contribution Account and Base Contribution Account shall be deemed to include the corresponding subaccounts, if any, of the Historic Account. ARTICLE 11 EMPLOYER ADMINISTRATIVE PROVISIONS 11.1 INFORMATION TO COMMITTEE. The Employer shall supply current information to the Committee as to the name, date of birth, date of employment, annual Compensation, leaves of absence and date of termination of employment of each Employee who is, or who will be eligible to become, a Participant under the Plan, together with any other information which the Committee considers necessary. The Employer's records as to the current information the Employer furnishes to the Committee shall be conclusive as to all persons. 11.2 NO LIABILITY. The Employer assumes no obligation or responsibility to any of its Employees, Participants or Beneficiaries for any act of, or failure to act, on the part of its Committee or the Trustees. 11.3 INDEMNITY OF COMMITTEE. The Employer indemnifies and holds harmless the members of the Committee, and each of them, from and against any and all loss resulting from liability to which the Committee or members of the Committee may be subjected by reason 29. 32 of any act or conduct (except willful misconduct or gross negligence) in their official capacities in the administration of this Plan or Trust or both, including all expenses reasonably incurred in their defense in case the Employer fails to provide such defense. The indemnification provisions of this Section 11.3 shall not relieve any Committee member from any liability he may have under the Code or ERISA for breach of a fiduciary duty. 11.4 FACILITY OF PAYMENT. If satisfactory evidence is received that a person entitled to receive any benefits is physically incapable or mentally incompetent to receive such payment and give a valid release therefor, and another person or institution has been maintaining or has custody of such person, payment of such benefit may be made to such person or institution and the release of such person or institution shall be a valid and complete discharge of any liability under this Plan. 11.5 MISSING RECIPIENTS. If the Committee is unable, within three years after any benefit becomes due under the Plan to a Participant or Beneficiary, to make payment because the identity and/or whereabouts of such person cannot be ascertained notwithstanding the mailing of due notice to any last known address or addresses, the Committee shall direct that any such benefits shall be forfeited and used to reduce future contributions; provided, however, that such benefit shall be restored (in an amount equal to the amount forfeited) upon proper claim made by such Participant or Beneficiary prior to the termination of the Plan. In the event a proper claim is made, benefits under this Section shall be restored first from forfeitures, and then from additional Employer contributions made in order to restore such benefits. ARTICLE 12 PARTICIPANT ADMINISTRATIVE PROVISIONS 12.1 BENEFICIARY DESIGNATION. The Beneficiary of a married Participant shall be the surviving spouse. A married Participant may designate a Beneficiary other than the spouse only if the Participant obtains the written consent of the spouse to the alternate beneficiary, the spouse acknowledges the effect of the consent and the spouse's signature is witnessed by a notary public or Plan representative. Subject to the foregoing limitation, any Participant may from time to time designate, in writing, any person or persons, contingently or successively, to whom the Trustees shall pay his Account Balance in the event of his death. The Committee shall prescribe the form for the written designation of Beneficiary and, upon the Participant's filing the form with the Committee, it effectively shall revoke all designations filed prior to that date by the same Participant. 12.2 NO BENEFICIARY DESIGNATION. If a Participant fails to name a Beneficiary, or if the Beneficiary named by a Participant predeceases him, then the Trustees shall pay the Participant's Account Balance (subject to the provisions of Articles 6 and 7) in the following order of priority to: (a) The Participant's surviving spouse: (b) The Participant's surviving children, including adopted children, in equal shares; 30. 33 (c) The Participant's surviving parents, in equal shares; or (d) The legal representative of the estate of the last to die of the Participant and his Beneficiary. The Committee shall direct the Trustees as to whom the Trustees shall make payment under this Section 12.2. 12.3 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of a deceased Participant must furnish to the Committee such evidence, data or information as the Committee considers necessary or desirable for the purpose of administering the Plan. The provisions of this Plan are effective for the benefit of each Participant upon the condition precedent that each Participant will furnish promptly full, true and complete evidence, data and information when requested by the Committee, provided that the Committee shall advise each Participant of the effect of his failure to comply with its request. 12.4 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a deceased Participant shall file with the Committee from time to time, in writing, his post office address and any change of post office address. Any communication, statement or notice addressed to a Participant or Beneficiary at his last post office address filed with the Committee, or as shown on the records of the Employer, shall bind the Participant, or Beneficiary, for all purposes of this Plan. 12.5 ASSIGNMENT OR ALIENATION. Neither a Participant nor a Beneficiary shall anticipate, assign or alienate (either at law or in equity) any benefit provided under the Plan, and the Trustees shall not recognize any such anticipation, assignment or alienation. Furthermore, a benefit under the Plan is not subject to attachment, garnishment, levy, execution or other legal or equitable process. The Committee shall, however, abide by any Qualified Domestic Relations Order as defined in Section 414(p) of the Code and Section 206(d)(3) of ERISA which is served upon the Plan. Procedures relating to any Qualified Domestic Relations Order received by the Committee shall be administered pursuant to Appendix A, attached to this Plan document. 12.6 NOTICE OF CHANGE IN TERMS. The Committee, within the time prescribed by ERISA and the applicable regulations thereunder, shall furnish all Participants and Beneficiaries with a summary description of any material amendment to the Plan or notice of discontinuance of the Plan and all other information required by ERISA to be furnished without charge. 12.7 INFORMATION AVAILABLE. Any Participant in the Plan or any Beneficiary may examine copies of the Plan description, latest annual report, any bargaining agreement, this Plan and Trust, as well as any contract or other instrument under which the Plan was established or is operated. The Committee will maintain all of the items listed in this Section 12.7 in its office, or in such other place or places as it may designate from time to time in order to comply with the regulations issued under ERISA, for examination during reasonable business hours. Upon the written request of a Participant or Beneficiary the Committee shall furnish him with a copy of any item listed in this Section 12.7. The Committee may make a reasonable charge to the requesting person for the copy so furnished. 31. 34 12.8 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Committee shall provide adequate notice in writing to any Participant or to any Beneficiary ("Claimant") whose claim for benefits under the Plan the Committee has denied. The Committee's notice to the Claimant shall set forth: (a) The specific reason for the denial; (b) Specific references to pertinent Plan provisions on which the Committee based its denial; (c) A description of any additional material and information that is needed; and (d) That any appeal the Claimant wishes to make of the adverse determination must be in writing to the Committee within seventy-five (75) days after receipt of the Committee's notice of denial of benefits. The Committee's notice must further advise the Claimant that his failure to appeal the action to the Committee in writing within the seventy-five (75) day period will render the Committee's determination final, binding and conclusive. If the Claimant should appeal to the Committee, he, or his duly authorized representative, may submit, in writing, whatever issues and comments he or his duly authorized representative feels are pertinent. The Claimant, or his duly authorized representative, may review pertinent Plan documents. The Committee shall re-examine all facts to the appeal and make a final determination as to whether the denial of benefits is justified under the circumstances. The Committee shall advise the Claimant of its decision within sixty (60) days of the Claimant's written request for review, unless special circumstances (such as a heating) would make the rendering of a decision within the sixty (60) day limit unfeasible, but in no event shall the Committee render a decision respecting a denial for a claim for benefits later than one hundred twenty (120) days after its receipt of a request for review. The Committee's notice of denial of benefits shall identify the name and address of each member of the Committee to whom the Claimant may forward his appeal. ARTICLE 13 COMMITTEE DUTIES WITH RESPECT TO PARTICIPANT'S ACCOUNT 13.1 MEMBERS' COMPENSATION AND EXPENSES. The Company shall appoint a Committee to administer the Plan, and an Investment Committee to manage the assets of the Plan, the members of which may or may not be Participants in the Plan. The members of the Committee and the Investment Committee shall serve without compensation for services as such, but the Employer shall pay all expenses of the Committee and the Investment Committee, including the expense for any bond required under ERISA. 13.2 TERM. Each member of the Committee and the Investment Committee shall serve until his successor is appointed. 32. 35 13.3 POWERS. In case of a vacancy in the membership of the Committee and Investment Committee, the remaining members of the Committee may exercise any and all of the powers, authority, duties and discretion conferred upon the Committee and Investment Committee pending the filling of the vacancy. 13.4 GENERAL. The Committee shall have the following powers and duties: (a) To select a Secretary, who need not be a member of the Committee; (b) To determine the rights of eligibility of an Employee to participate in the Plan; (c) To adopt rules of procedure and regulations necessary for the proper and efficient administration of the Plan; (d) To enforce the terms of the Plan and the rules and regulations it adopts; (e) To direct the Trustee as respects the crediting and distribution of the Trust; (f) To review and render decisions respecting a claim for (or denial of a claim for) a benefit under the Plan; (g) To furnish the Employer with information which the Employer may require for tax or other purposes; (h) To engage the services of agents whom it may deem advisable to assist it with the performance of its duties; and (i) To exercise broad discretionary authority to determine Employees' and Participants' eligibility for benefits as well as to construe the terms of the Plan. The Committee shall exercise all of its powers, duties and discretion under the Plan in a uniform and nondiscriminatory manner. 13.5 MANNER OF ACTION. The decision of a majority of the members appointed and qualified shall control. 13.6 DELEGATION OF FIDUCIARY DUTIES. In accordance with Section 405(c) of ERISA, the Committee is authorized to delegate to specific persons or officers any of its fiduciary responsibilities. Without limiting the foregoing grant of authority, the Committee is specifically authorized to delegate the duties assigned to it under Section 13.4(b)-(i) hereof. Any delegation of fiduciary duty pursuant to this Section must be made in writing and agreed to by a majority of the Committee's members. Such delegation shall not be effective unless and until it is consented to in writing by the persons appointed to perform the fiduciary duty being delegated. Any person or entity to whom the Committee has delegated any administrative functions pursuant to a written agreement shall be referred to as an Administrative Delegate. 33. 36 13.7 INDIVIDUAL STATEMENT. As soon as practicable after each calendar quarter of the Plan Year but within the time prescribed by ERISA and the regulations under ERISA, the Committee will deliver to each Participant a statement reflecting the condition of his Account Balance in the Trust as of that date and such other information ERISA requires be furnished to the Participant or Beneficiary. No Participant, except a member of the Committee, shall have the right to inspect the records reflecting the Account Balance of any other Participant. 13.8 LOAN POLICY. This Section 13.8 specifically authorizes the Trustee of the Plan to establish an Employee loan program and to make loans on a nondiscriminatory basis in accordance with this Plan and the loan policy established by the Committee. The loan policy must be a written document and must include the identity of the person authorized to administer the Employee loan program, a procedure for applying for a loan, the criteria for approving or denying a loan, the limitations, if any, on the types and amounts of loans available, the procedure for determining a reasonable rate of interest, the types of collateral which may secure a loan, and the events constituting default and the steps the Plan will take to preserve Plan assets in the event of default. ARTICLE 14 FIDUCIARY DUTIES AND RESPONSIBILITIES 14.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall discharge his duties hereunder solely in the interest of the Participants and their Beneficiaries and for the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan. Each Fiduciary shall act with the care, skill, prudence and diligence under the circumstances that a prudent man acting in a like capacity and familiar with such matters would use in conducting an enterprise of like character and with like aims, in accordance with the documents and instruments governing this Plan, insofar as such documents and instruments are consistent with this standard. 14.2 SERVICE IN MULTIPLE CAPACITIES. Any person or group of persons may serve in more than one Fiduciary capacity with respect to this Plan. 14.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be construed to prevent any Fiduciary from receiving any benefit to which he may be entitled as a Participant or Beneficiary under this. Plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of this Plan as applied to all other Participants and Beneficiaries. This Plan shall not be interpreted to prevent any Fiduciary from receiving any reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred in the performance of his duties with the Plan; except that no person so serving who already receives full-time pay from the Employer shall receive compensation from this Plan, except for reimbursement of expenses properly and actually incurred. ARTICLE 15 TOP HEAVY RULES 34. 37 15.1 MINIMUM EMPLOYER CONTRIBUTION. If this Plan becomes top heavy, the Plan guarantees a minimum contribution of three percent (3%) of Compensation for each Non-Key Employee who is a Participant employed by the Employer on the Accounting Date of the Plan Year. For purposes of determining whether the minimum contribution is satisfied, Salary Reduction Contributions and matching contributions shall be disregarded. The minimum contribution shall not be forfeited under Sections 411(a)(3)(B) or (D) of the Code. The Plan satisfies the guaranteed minimum contribution for the Non-Key Employee if the Non-Key Employee's contribution rate is at least equal to the minimum contribution. Notwithstanding the above, if the contribution rate for the Key Employee with the highest contribution rate is less than three percent (3%), the guaranteed minimum contribution for Non-Key Employees shall equal the highest contribution rate received by a Key Employee (provided that the Employer does not also sponsor a defined benefit plan which has designated this Plan to provide the top heavy minimum). The contribution rate is the sum of Employer contributions (not including Employer contributions to Social Security) and forfeitures allocated to the Participant's account for the Plan Year divided by his Compensation for the Plan Year. To determine the contribution rate, the Committee shall consider all qualified defined contribution plans maintained by the Employer as a single plan. 15.2 ADDITIONAL CONTRIBUTION. If the contribution rate for the Plan Year with respect to a Non-Key Employee described in Section 15.1 is less than the minimum contribution the Employer will increase its contribution for such Employee to the extent necessary so that his contribution rate for the Plan Year will equal the guaranteed minimum contribution. The Committee shall allocate the additional contribution to the Base Contribution Account of the Non-Key Employee for whom the Employer makes the contribution. 15.3 DETERMINATION OF TOP HEAVY STATUS. The Plan is top heavy for a Plan Year if the top heavy ratio as of the Determination Date exceeds sixty percent (60%). The top heavy ratio is a fraction, the numerator of which is the sum of the present value of the Account Balances of all Key Employees as of the Determination Date and distributions made within the five (5) Plan Year period ending on the Determination Date, and the denominator of which is a similar sum determined for all Employees. The Committee shall calculate the top heavy ratio without regard to the Account Balance attributable to any Non-Key Employee who was formerly a Key Employee. The Committee shall calculate the top heavy ratio, including the extent to which it must take into account contributions not made as of the Determination Date, distributions, rollovers and transfers, in accordance with Section 416 of the Code and the regulations thereunder. If the Employer maintains other qualified plans (including a simplified employee pension plan) this Plan is top heavy only if it is part of the Required Aggregation Group, and the top heavy ratio for both the Required Aggregation Group and the Permissive Aggregation Group exceeds sixty percent (60%). The Committee will calculate the top heavy ratio in the same manner as required by the first paragraph of this Section 15.3, taking into account all plans within the aggregation group. The Committee shall calculate the present value of accrued benefits and the other amounts the Committee must take into account under defined benefit plans or simplified employee pension plans included within the group in accordance with the terms of those plans, Section 416 of the Code and the regulations thereunder. The Committee shall 35. 38 calculate the top heavy ratio with reference to the Determination Dates that fall within the same calendar year. 15.4 LIMITATION ON ALLOCATIONS. If, during any Limitation Year, the Participant is a participant in both a defined contribution plan and a defined benefit plan which are a part of a top heavy group, the Committee shall apply the limitations of Article 4 to such Participant by substituting "1.0" for "1.25" each place it appears in Section 4.7. This Section 15.4 shall not apply if: (a) The Plan would satisfy Section 15.1 if the guaranteed minimum contribution was one percent (1%) greater than the guaranteed minimum contribution the Committee otherwise would calculate; and (b) The top heavy ratio does not exceed ninety percent (90%). 15.5 TOP HEAVY VESTING SCHEDULE. Notwithstanding the vesting schedule set forth in Section 6.4, if the Plan becomes top heavy as defined in Section 15.3 for any top heavy Plan Year, a Participant shall earn a Nonforfeitable percentage of his Base Contribution Account as determined by the following vesting schedule:
Percent of Nonforfeitable Years of Service Base Contribution Account 0 0% 1 10% 2 20% 3 40% 4 60% 5 80% 6 or more 100%
This Section 15.5 does not apply to any Participant who does not have an Hour of Service after the Plan has initially become top heavy. Therefore, such Participant's Nonforfeitable percentage of his Base Contribution Account shall be determined without regard to this Section 15.5. If the Plan subsequently ceases to be top heavy, the vesting schedule set forth in Section 6.4 shall again become applicable to all benefits accruing thereafter. Notwithstanding the foregoing, any Participant who has three (3) or more Years of Service when the Plan ceases to be top heavy may elect to have the vesting schedule set forth in this Section 15.5 continue to apply to benefits accruing in the future. The Participant's election shall be made in accordance with Section 16.2. In no event will the change from the vesting schedule set forth in this Section 15.5 to the vesting schedule set forth in Section 6.4 operate to reduce the Nonforfeitable benefits the Participant accrued while the Plan was in top heavy status. 15.6 DEFINITIONS. For purposes of applying the provisions of this Article 15: 36. 39 (a) "Key Employee" shall mean, as of any Determination Date, any Employee or former Employee, or any Beneficiary thereof, who, at any time during the Plan Year (which includes the Determination Date) or during the preceding four Plan Years, (i) is an officer of the Employer who has annual Compensation in excess of 50% of the amount in effect under Section 415(b)(1)(A) of the Code; (ii) one of the ten Employees owning the largest interests in the Employer with annual Compensation in excess of the dollar limit on Annual Additions to a defined contribution plan under Section 415 of the Code; (iii) a more than five percent (5%) owner of the Employer; or (iv) a more than one percent (1%) owner of the Employer who has annual Compensation of more than $150,000. The constructive ownership rules of Section 318 of the Code will apply to determine ownership in the Employer. The Committee will make the determination of who is a Key Employee in accordance with Section 416(i)(1) of the Code and the regulations thereunder. (b) "Non-Key Employee" is an Employee who does not meet the definition of Key Employee. (c) "Required Aggregation Group" means: (1) Each qualified plan of the Employer in which at least one Key Employee participates; and (2) Any other qualified plan of the Employer which enables a plan described in (1) to meet the requirements of Sections 401(a)(4) or 410 of the Code. Any terminated plan that covered a Key Employee and was maintained within the five year period ending on the Determination Date shall also be included in the Required Aggregation Group. (d) "Permissive Aggregation Group" is the Required Aggregation Group plus any other qualified plans maintained by the Employer, but only if such group would satisfy in the aggregate the requirements of Sections 401(a)(4) and 410 of the Code. The Committee shall determine which plan to take into account in determining the Permissive Aggregation Group. (e) "Determination Date" for any Plan Year is the Accounting Date of the preceding Plan Year or, in the case of the first Plan Year of the Plan, the Accounting Date of that Plan Year. ARTICLE 16 EXCLUSIVE BENEFIT, AMENDMENT AND TERMINATION 16.1 EXCLUSIVE BENEFIT. The Employer shall have no beneficial interest in any asset of the Trust and no part of any asset in the Trust shall ever revert to or be repaid to an Employer, either directly or indirectly; nor prior to the satisfaction of all liabilities with respect to the Participants and their Beneficiaries under the Plan, shall any part of the corpus or income of the Trust Fund, or any asset of the Trust, be used for, or diverted to, purposes other than for the 37. 40 exclusive benefit of the Participants or their Beneficiaries. Notwithstanding anything else herein to the contrary, expenses of administering the Plan, to the extent not paid by the Employer or otherwise, may be satisfied by payment from the Trust Fund. Notwithstanding the foregoing, if the Commissioner of Internal Revenue, upon the Employer's timely request for initial approval of this Plan, determines that the Trust created under the Plan is not a qualified trust exempt from Federal income tax, then the Trustees, upon written notice from the Employer, shall return the Employer's contributions and increments attributable to the contributions to the Employer. The Trustees must make the return of the Employer contribution under this Section 16.1 within one (1) year of a final disposition of the Employer's request for initial approval of the Plan. The Plan and Trust shall terminate upon the Trustees' return of the Employer's contributions. The Employer contributes to this Plan on the condition that its contribution is deductible under Section 404 of the Code. If the Employer's contribution is disallowed as a deduction, or if the Employer's contribution is attributable to a mistake of fact, the Trustee shall return to the Employer the amount contributed over, as relevant, the amount that would have been contributed had no mistake of fact occurred, or the amount of the deductible contribution. Earnings attributable to the excess contribution may not be returned to the Employer, but losses attributable thereto must reduce the amount returned. The excess contributions must be returned within one year of the disallowance or mistake. Further, if the amount returned to the Employer would cause any Participant's Account Balance to be reduced to less than the balance which would have been in his Account had the mistaken or nondeductible amount not been contributed, then the amount to be returned to the Employer must be limited so as to avoid the reduction. The Trustee may require the Employer to furnish it with whatever evidence the Trustee deems necessary to enable the Trustee to confirm that the amount the Employer has demanded be returned as properly returnable under the Code and ERISA. 16.2 AMENDMENT BY COMPANY. The Company, through duly authorized action of its Board of Directors, shall have the right at any time and from time to time to amend this Agreement in any manner it deems necessary or advisable including any amendment in order to qualify (or maintain qualification of) this Plan and the Trust created under it under the appropriate provisions of the Code. An amendment to the Plan's vesting shall not decrease any Participant's Nonforfeitable Account Balance as of the later of the date the amendment is adopted or becomes effective. If the Plan's vesting schedule is amended, each Participant with three (3) or more Years of Service may elect to have the vesting schedule applicable immediately prior to the amendment continue to apply. The period during which such election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of: (1) 60 days after the amendment is adopted; (2) 60 days after the amendment becomes effective; or (3) 60 days after the Participant is issued written notice of the amendment by the Employer or Committee. 38. 41 No amendment shall authorize or permit any of the Trust Fund (other than the part required to pay taxes and administrative expenses) to be used for or diverted to purposes other than for the exclusive benefit of the Participants or their Beneficiaries or estates. No amendment shall cause or permit any portion of the Trust Fund to revert to or become the property of the Employer; and the Company shall not make any amendment which affects the rights, duties or responsibilities of the Trustees or the Committee without the written consent of the affected Trustee or the affected member of the Committee. No amendment shall decrease a Participant's Account Balance or eliminate an optional form of benefit to which the Participant is entitled as a result of service prior to the amendment. The Company shall make all amendments in writing. Each amendment shall state the date to which it is either retroactively or prospectively effective. 16.3 DISCONTINUANCE. The Company, through duly authorized action of its Board of Directors, shall have the right, at any time, to suspend or discontinue its contributions under the Plan, and to terminate, at any time, this Plan. Upon complete discontinuance of contributions, the Account Balance of each affected Participant shall be one hundred (100%) percent Nonforfeitable. 16.4 FULL VESTING ON TERMINATION. Notwithstanding any other provision of this Plan to the contrary, upon either full or partial termination of the Plan, an affected Participant's right to his Account Balance shall be one hundred percent (100%) Nonforfeitable. The Plan shall terminate upon the first to occur of the following: (a) The date terminated by action of the Employer provided the Employer gives the Trustee thirty (30) days' prior notice of termination; (b) The date the Employer shall be judicially declared bankrupt or insolvent; or (c) The dissolution, merger, consolidation or reorganization of the Employer or the sale by the Employer of all or substantially all of its assets, unless the successor or purchaser makes provision to continue the Plan, in which event the successor or purchaser shall substitute itself as the Employer under this Plan. 16.5 MERGER. The Trustee shall not consent to, or be a party to, any merger or consolidation with another plan, or to a transfer of assets or liabilities to another plan, unless immediately after the merger, consolidation or transfer, the surviving plan provides each Participant a benefit equal to or greater than the benefit each Participant would have received had the Plan terminated immediately before the merger or consolidation or transfer. The Trustee possesses the specific authority to enter into merger agreements or direct transfer of assets agreements with the trustees of other retirement plans described in Section 401(a) of the Code and to accept the direct transfer of plan assets, or to transfer plan assets, as a party to any such agreement. 16.6 DIRECT ROLLOVERS. This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the 39. 42 manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. Definitions: (a) Eligible rollover distributions: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan' specified by the distributee. 16.7 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan or any modification or amendment to the Plan, or in the creation of any Salary Reduction Contribution Account, or the payment of any benefit, shall give any Participant the right to continued employment, or any legal or equitable right against the Employer, an Employee of the Employer, the Trustee, or their agents or employees, except as expressly provided by the Plan, the Trust, ERISA or the Code or by a separate agreement. 16.8 STATE LAW. New Jersey law shall determine all questions arising with respect to the provisions of this Plan, except to the extent Federal statute supersedes New Jersey law. 40. 43 AMENDMENT NO. 1 TO THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. AND AFFILIATES AS AMENDED AND RESTATED AS OF JANUARY 1, 1998 Reference is made to the restated Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates (the "Plan"). Capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Plan. I. Section 6.4 of the Plan is amended to include the following: A. Delete the fourth paragraph which begins with the text "For purposes of determining Years of Service..." and ends with the text "...Sections 414(b), (c), (m), (n) or (o) of the Code." B. Include the following text in place of the text deleted 1. "Effective as of January 1, 1996, for purposes of determining Years of Service under Section 6.4, the Plan shall take into account all Years of Service an Employee completes with i) the employer or any entity which is required to be aggregated with the Employer pursuant to Sections 414(b), (c), (m), (n), or (o) of the Code or ii) Bayer AG or any subsidiary thereof which is controlled by at least 50% of the voting rights therein, provided such employment occurred immediately prior to employment with the Company or its subsidiaries." Except as amended hereby, the Plan shall continue in full force and effect. 41. 44 AMENDMENT NO. 2 TO THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. & AFFILIATES (Amended and Restated as of January 1, 1998) Effective as of the dates set forth herein, the Retirement Plan of Schein Pharmaceutical, Inc. & Affiliates (Amended and Restated as of January 1, 1998) (the "Plan"), is amended as follows: Effective as of September 1, 1998, Section 6.4 of the Plan is amended by deleting the word "or" from subsection (b), deleting the period at the end of subsection (c) and adding ", or" to the end of such subsection (c), and adding the following new subsection (d): "(d) termination of employment with the Employer pursuant to an employment reduction plan during the period September 1, 1998 through and including August 31, 1999." 42. 45 AMENDMENT NO. 3 TO THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. & AFFILIATES (Amended and Restated as of January 1, 1998) Effective as of the dates set forth herein, the Retirement Plan of Schein Pharmaceutical, Inc. & Affiliates (Amended and Restated as of January 1, 1998) (the "Plan"), is amended as follows: Effective as of September 1, 1999, Section 6.4 of the Plan is amended by deleting the word "or" from subsection (b), deleting the period at the end of subsection (c) and adding ", or" to the end of such subsection (c), and adding the following new subsection (d): "(d) termination of employment with the Employer pursuant to an employment reduction plan or a voluntary employee reduction plan during the period September 1, 1999 through and including August 31, 2000." 43. 46 The Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates Amendment No. 4 Effective as of the dates set forth herein, The Retirement Plan of Schein Pharmaceutical, Inc. and Affiliates (the "Plan") is amended as follows: 1. Effective as of January 1, 1998, Section 1.10 of the Plan is amended by adding the following to the end of the first sentence thereof: "and including amounts contributed by the Employer pursuant to a salary reduction agreement that are excluded from a Participant's gross income under Section 125 of the Code." 2. Effective as of January 1 2000, Section 1.36 is deleted in its entirety, and the following is substituted in its place: "1.36 "Plan Entry Date" shall mean, for purposes of making salary reduction deferrals under Article 3, the first day of the first pay period coincident with, or next following, the date on which an Employee completes three Months of Service. For purposes of eligibility for Employer Contributions under Article 4, Plan Entry Date shall mean the first day of the first pay period coincident with, or next following, the date on which the Employee completes Six Months of Service. Salary deferrals made prior to the Plan Entry Date for purposes of Article 4 will not be considered for matching contributions." 3. Effective as of January 1, 2000, Section 6.4 is amended by deleting the vesting schedule in the second paragraph thereof and replacing it with the following:
Percent of Nonforfeitable Years of Service Base Contribution Account 0 0% 1 20% 2 40% 3 60% 4 80% 5 100%
44. 47 AMENDMENT NO. 5 TO THE RETIREMENT PLAN OF SCHEIN PHARMACEUTICAL, INC. & AFFILIATES (Amended and Restated as of January 1, 1998) Effective as of the dates set forth herein, the Retirement Plan of Schein Pharmaceutical, Inc. & Affiliates (Amended and Restated as of January 1, 1998) (the "Plan"), is amended as follows: Effective as of January 27, 2000, Sections 6.4 of the Plan is amended by deleting the word "or" from subsection (c), deleting the period at the end of subsection (d) and adding ", or" to the end of such subsection (d), and adding the following new subsection (e): "(e) termination of employment with the Employer pursuant to an employment reduction plan during the period January 27, 2000 through and including December 31, 2000." 45. EX-99.4 10 f65522ex99-4.txt EXHIBIT 99.4 1 EXHIBIT 99.4 BANKCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN - -------------------------------------------------------------------------------- 2 BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN DOCUMENT The Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan may be adopted through an adoption agreement as either a money purchase pension plan or a profit-sharing plan, which may, or may not, contain a cash or deferred arrangement. The Plan is intended to qualify under sections 165(a), (e) and (g) of the Puerto Rico Income Tax Act of 1954 and to comply with all applicable requirements of both Title I of the Employee Retirement Income Security Act of 1974 and the Puerto Rico Income Tax Act. By executing the Adoption Agreement, the Employer has established a retirement plan governed by the provisions of the Adoption Agreement and this Plan document, if an Employer is interested in establishing more than one type of plan, a separate Adoption Agreement must be executed for each plan. The purpose of the Plan is to create a retirement fund intended to help provide for the future security of the Participants and their Beneficiaries. In no event shall any portion of the principal or income of the Master Trust, established by the Banco Popular de Puerto Rico and forming part of this Plan, be used for, or diverted to, any purpose other than the exclusive benefit of the Participants and their Beneficiaries, except as and to the limited extent otherwise specifically permitted under the Employee Retirement Income Security Act and the Puerto Rico Income Tax Act. The Plan consists of this Master Defined Contribution Retirement Plan Document, the Adoption Agreement executed by the Employer, and the Master Trust established by Banco Popular de Puerto Rico, as each may be amended from lime to time. The Plan Sponsor is Banco Popular de Puerto Rico, 209 Ponce de Leon Avenue, Hato Rey, Puerto Rico 00917. ARTICLE 1 CONSTRUCTION, INTENT AND APPLICABLE LAW 1.1 CONSTRUCTION. Whenever used in the Plan, unless the context clearly indicates otherwise, the masculine pronoun shall include the feminine, the singular shall include the plural and the plural the singular. The conjunction "or" shall include both the conjunctive and disjunctive, and the adjective "any" shall mean one or more or all. Unless the context indicates otherwise, the words "herein," "hereof', "hereunder" and words of similar import refer to the Plan as a whole and not only to the section in which they appear. Article, section and paragraph headings have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. If any provision of the Plan shall for any reason be invalid or unenforceable, the remaining provisions shall nevertheless be valid, enforceable and fully effective. 1.2 INTENT. It is the intent that the Plan shall at all times be a qualified plan under section 165(a) and (g) of the ITA and the Trust shall at all times be exempt from taxation under section 165(a) of the ITA and section 501(a) of the Code (as provided in section 1022(i)(1) of 1. 3 ERISA). It is also intended that the cash or deferred arrangement contained in the Plan meet the requirements of section 165(e) of the ITA. 1.3 GOVERNING LAW. The Plan and all rights hereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Puerto Rico to the extent such laws have not been preempted by applicable federal law. ARTICLE 2 DEFINITIONS Whenever used in the Plan, unless the context clearly indicates otherwise, the following terms shall have the following meanings: 2.1 "ACTUAL DEFERRAL PERCENTAGE" shall mean, the ratio (expressed as a percentage to the nearest one-hundredth of one percent) of (1) the sum of Pre-Tax Contributions and Qualified Employer Deferral Contributions actually paid over to the Trust on behalf of each Participant for the Plan Year to (2) the Participant's Compensation for such Plan Year (whether or not the Employee was a Participant for the entire Plan Year). For purposes of computing actual deferral percentages, an Employee who would be a Participant but for the failure to make Pre-Tax Contributions shall be treated as a Participant on whose behalf zero (0) Pre-Tax Contributions are made. 2.2 "ADOPTION AGREEMENT" shall mean the Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan Adoption Agreement executed by the Employer to establish of amend the Employer's Plan and to specify optional provisions as part of the Employer's Plan. 2.3 "AFTER-TAX CONTRIBUTIONS" shall mean voluntary contributions made by a Participant-to the Plan during the Plan Year as described in Article 5. 2.4 "AFTER-TAX CONTRIBUTIONS ACCOUNT," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the After-Tax Contributions plus any gains or losses allocated to such account in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. Such account will be fully vested and nonforfeitable at all times. 2.5 "ANNUITY STARTING DATE" shall mean the first day of the first period for which an amount is payable as an annuity or, in the case of a benefit not payable in the form of an annuity, the first day in which all events have occurred which entitle the Participant to such benefit 2.6 "AVERAGE ACTUAL DEFERRAL PERCENTAGE" shall mean the average (expressed as a percentage to the nearest one-hundredth of one percent) of the Actual Deferral Percentages of Participants in a group. 2.7 "BENEFICIARY" shall mean the person or persons (natural or otherwise) designated by a Participant or Beneficiary, or by the Plan, to receive any benefit payable upon the death of the Participant or Beneficiary. 2. 4 2.8 "COMPENSATION" unless elected otherwise in the Adoption Agreement, shall mean with respect to any Participant, total compensation paid by the Employer during the Plan Year that is currently includible in income for income tax purposes. Amounts contributed by the Employer under the Plan, except for Pre-Tax Contributions, and any nontaxable fringe benefits shall not be considered as Compensation. 2.9 "DISABILITY" shall mean a physical or mental condition which in the judgment of the Plan Administrator, based upon medical reports and other evidence satisfactory to the Plan Administrator, presumably permanently prevents an Employee from satisfactorily performing usual duties for the Employer or the duties of such other position or job which the Employer makes available and for which such Employee is qualified by reason of training, education, or experience. Qualification by an Employee for permanent Disability benefits under the social security system shall be deemed adequate evidence of Disability for purposes of this Plan. 2.10 "EARLY RETIREMENT AGE" shall mean the early retirement date selected by the Employer in the Adoption Agreement 2.11 "EARLY RETIREMENT DATE" shall mean the first day of any month coinciding with or following a Participant's attainment of Early Retirement Age. 2.12 "EARNED INCOME" shall mean, with respect to a Self-Employed Individual, the net earnings from self employment in the trade or business with respect to which the Plan is established, for which the personal services of the individual are a material income producing factor. Net earnings will be determined without regard to items excluded from gross income and the deductions allocable to such items. Net earnings are reduced by contributions by the Employer to a qualified plan to the extent deductible under ITA section 23(p). 2.13 "EFFECTIVE DATE" shall mean the date elected in the Adoption Agreement. 2.14 "ELIGIBLE SPOUSE" shall mean that spouse to whom a Participant is married on either the Annuity Starting Date or the date of his death, whichever occurs earlier. 2.15 "EMPLOYEE" shall mean any person employed by the Employer, but excludes any person who is employed as an independent contractor. Employee includes a Self-Employed Individual and an Owner-Employee. 2.16 "EMPLOYER" shall mean the Employer or Employers named in the Adoption Agreement. 2.17 "EMPLOYER CONTRIBUTIONS" shall mean Profit-Sharing Contributions or Money Purchase Contributions made by the Employer to the Plan pursuant to the provisions of Article 6. 2.18 "EMPLOYER CONTRIBUTIONS ACCOUNTS," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the Employer Contributions (and any forfeitures) plus any gains or losses allocated to such account in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. 3. 5 2.19 "ENTRY DATE" shall mean the date(s) elected in the Adoption Agreement on which Participants may commence participation in the Plan. 2.20 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 2.21 "EXCESS CONTRIBUTIONS" shall mean, with respect to any Plan Year, the excess of: a. The aggregate amount of Pre-Tax Contributions and Qualified Employer Deferral Contributions actually taken into account in computing the Actual Deferral Percentage of Highly Compensated Employees for such Plan Year, over b. The maximum amount of such contributions permitted by the actual deferral percentage test. 2.22 "EXCESS DEFERRALS" shall mean those Pre-Tax Contributions that are includible in a Participant's gross income under ITA section 165(e)(7) to the extent such Participant's Pre-Tax Contributions for a taxable year exceed the lesser of 10% of the Participant's Compensation or $7,000. 2.23 "HIGHLY COMPENSATED EMPLOYEE" shall mean, with respect to a Plan Year, any Employee who, determined on the basis of Compensation for such Plan Year, has Compensation greater than two-thirds (2/3) of all other Participants. 2.24 "ITA" shall mean the Puerto Rico Income Tax Act of 1954, as amended. 2.25 "MATCHING CONTRIBUTIONS" shall mean contributions made by the Employer to the Plan on behalf of a Participant on account of a Participant's After-Tax or Pre-Tax Contributions. 2.26 "MATCHING CONTRIBUTIONS ACCOUNT," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the Matching Contributions plus any gains or losses allocated to such account in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. 2.27 "MONEY PURCHASE CONTRIBUTIONS" shall mean contributions made by the Employer pursuant to a Money Purchase Pension Plan using the formula established by the Employer in the Adoption Agreement. 2.28 "NON-HIGHLY COMPENSATED EMPLOYEE" shall mean those Participants that are not Highly Compensated Employees. 2.29 "NORMAL RETIREMENT AGE" shall mean the latter of: a. Age sixty-five (65); or b. The Participant's age on the fifth anniversary of the first day of the Plan Year in which he/she commenced participation in the Plan. 4. 6 2.30 "NORMAL RETIREMENT DATE" shall mean the first day of the month following the end of the Plan Year in which a Participant has attained Normal Retirement Age. 2.31 "OWNER-EMPLOYEE" shall mean an individual who is a sole proprietor, or who is a partner owning more than 10 percent of either the capital or profits interest of a special partnership. 2.32 "PARTICIPANT" shall mean any Employee who has become eligible to participate in the Plan and has not for any reason become ineligible to participate in the Plan. 2.33 "PLAN" shall mean the Employer's Plan set forth in this Banco Popular de Puerto Rico Defined Contribution Retirement Plan Document and the Adoption Agreement executed by the Employer, including all amendments to either document. 2.34 "PLAN ADMINISTRATOR" shall mean the person or persons designated in the Adoption Agreement to control and manage the operation and administration of the Employer's Plan as provided in Article 14. 2.35 "PLAN SPONSOR" shall mean Banco Popular de Puerto Rico. 2.36 "PLAN YEAR" shall mean the calendar year unless another Plan Year is specified in the Adoption Agreement. 2.37 "PRE-TAX CONTRIBUTIONS" shall mean any Employer contributions made to the Plan at the election of the Participant, in lieu of cash compensation, pursuant to a salary reduction agreement or other deferral mechanism. 2.38 "PRE-TAX CONTRIBUTIONS ACCOUNT," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the Pre-Tax Contributions plus any gains or losses allocated to such account in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. Such account will be fully vested and nonforfeitable at all times. 2.39 "PROFIT-SHARING CONTRIBUTIONS" shall mean contributions made by the Employer pursuant to a Profit-Sharing Plan. 2.40 "QUALIFIED EMPLOYER DEFERRAL CONTRIBUTIONS" shall mean Qualified Non-Elective Contributions and Qualified Matching Contributions which are taken into account under this Plan, and any other qualified plans that are maintained by the Employer which are aggregated with this Plan under section 4.5(b) and (c), in determining a Participant's Actual Deferral Percentage. 2.41 "QUALIFIED MATCHING CONTRIBUTIONS" shall mean Matching Contributions which are taken into account under the Plan in determining a Participant's Actual Deferral Percentage. In order for Matching Contributions to be considered as Qualified Matching Contributions, the Matching Contributions must be one hundred percent (100%) vested and nonforfeitable when made and must not be distributable under the Plan to Participants or their Beneficiaries earlier than provided in section 4.4c. 5. 7 2.42 "QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the Qualified Matching Contributions plus any gains or losses allocated to such account in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. Such account will be fully vested and nonforfeitable at all times. 2.43 "QUALIFIED NON-ELECTIVE CONTRIBUTIONS" shall mean contributions made by the Employer to this Plan (other than Pre-Tax Contributions and Matching Contributions) which are taken into account in determining a Participant's Actual Deferral Percentage and which the Participant may not elect to receive in cash until distributed from the Plan. In order for such contributions to be considered as Qualified Non-Elective Contributions, they must be one hundred percent (100%) vested and nonforfeitable when made and must not be distributable under the terms of the Plan to Participants or their Beneficiaries earlier than provided in section 4.4c. 2.44 "QUALIFIED NON-ELECTIVE CONTRIBUTIONS ACCOUNT," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the Qualified Non-Elective Contributions plus any gains or losses allocated to such account in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. Such account will be fully vested and nonforfeitable at all times. 2.45 "ROLLOVER CONTRIBUTIONS" shall mean contributions to the Plan as described in Article 7. 2.46 "ROLLOVER CONTRIBUTIONS ACCOUNT," with respect to a Participant, shall mean the account established under the Plan for such Participant representing the Rollover Contributions plus any gains or losses allocated thereto, in accordance with the provisions of the Plan, as adjusted to reflect distributions therefrom. Such account will be fully vested and nonforfeitable at all times. 2.47 "SELF-EMPLOYED INDIVIDUAL" shall mean an individual who has Earned Income for the taxable year from the trade or business for which the Plan is established, or an individual who would have had Earned Income but for the fact that the trade or business had no net profits for the taxable year. 2.48 "SPOUSAL CONSENT" shall mean an Eligible Spouse's written consent which acknowledges the effect of the Participant's election and is witnessed by the Plan Administrator (or any Plan representative appointed by the Plan Administrator for such purposes) or a notary public. The written consent shall specify the nonspouse Beneficiary, if any (and, in the case of a Participant's election to waive a qualified joint and survivor annuity, the alternate form of distribution elected). A Spousal Consent shall be irrevocable unless the Participant changes his Beneficiary designation or revokes his election to waive the qualified joint and survivor annuity or the qualified pre-retirement survivor annuity, as applicable; upon such event, a consent shall be deemed to be revoked. Notwithstanding the foregoing, Spousal Consent is not required if the Participant establishes to the satisfaction of a Plan Administrator that such written consent may not be obtained because there is no Eligible Spouse or that the Eligible Spouse cannot be located. In addition, no Spousal Consent is necessary if the Participant has been legally separated or 6. 8 abandoned within the meaning of local law and the Participant provides the Plan Administrator with a court order to that effect, so long as such court order does not conflict with a qualified domestic relations order as defined in Article 17. If the Eligible Spouse is legally incompetent to consent, the Eligible Spouse's legal guardian may consent on his/her behalf, even if the legal guardian is the Participant. 2.49 "TRUST" shall mean the Master Trust established under the Plan by Banco Popular de Puerto Rico, and adopted by the Employer through the Adoption Agreement, for the payment of the benefits provided by the Plan. 2.50 "TRUSTEE" shall mean Banco Popular de Puerto Rico. 2.51 "VALUATION DATE" shall mean the last business day of the Plan Year. The Plan Sponsor or Employer may designate other valuation dates. 2.52 "165(e) PLAN" shall mean a profit sharing plan containing a cash or deferred arrangement qualified under Section 165(e) of the ITA. ARTICLE 3 PARTICIPATION 3.1 INITIAL PARTICIPATION. An Employee shall become a Participant in the Plan in accordance with the following requirements: a. Each Employee who, on the Effective Date of the Plan, has complied with the minimum age and service requirements specified by the Employer in the Adoption Agreement will become a Participant as of such date. b. Each Employee (other than one who is a Participant under subsection above) will become a Participant on the Entry Date immediately following the date in which he complies with the minimum age and service requirements specified by the Employer in the Adoption Agreement. c. Employees who are included in a unit of Employees covered by a collective bargaining agreement between the Employer and Employee representatives, where retirement benefits were the subject of good faith bargaining with the Employer and the agreement does not call for his inclusion in the Plan or Employees who are nonresidents of Puerto Rico are not allowed to participate in the Plan. d. Unless specified otherwise in the Adoption Agreement, the Entry Dates will be the first day of the first and seventh months of the Plan Year (January I and July 1 for calendar year Plans). If the Adoption Agreement provides for additional or other Entry Dates, the Entry Dates will be as so specified; provided that the first day of the Plan Year will always be an Entry Date. e. If the Employer's Plan permits Pre-Tax Contributions or After-Tax Contributions, each Employee who has become a Participant under the preceding subsections of 7. 9 this section may make Pre-Tax Contributions and/or After-Tax Contributions subject to the applicable provisions of the Plan and the Adoption Agreement, and such an Employee will be considered a Participant even if he elects not to make Pre-Tax Contributions or After-Tax Contributions. However, an Employee may not make Pre-Tax Contributions and/or After-Tax Contributions before the date the Employer signs the Adoption Agreement. 3.2 TERMINATION OF PARTICIPATION. An Employee will cease to be a Participant when he is no longer eligible to participate in the Plan due either to a change in his employment status or to the termination of his service as an Employee because of Disability, death, retirement or any other reason. 3.3 RESUMED PARTICIPATION. If a former Participant returns to service with the Employer, he will resume participation in the Plan immediately upon his return. 3.4 RULES RELATING TO SERVICE. The rules and definitions regarding the computation of years of service for purposes of determining eligibility to participate in the Plan and vesting will be as follows: a. HOURS OF SERVICE METHOD. The definitions and rules in this subsection will apply to Employers who in the Adoption Agreement elected to have Employees' service determined under the hours of service method. (1) Employment Commencement Date means the date on which an Employee first performs an hour of service; or, in the case of an Employee who has incurred in one or more breaks in service, as defined below, such Employee's employment commencement date shall mean the date on which such Employee first performs an hour of service following such breach in service. (2) Eligibility Computation Period, with respect to an Employee, means the period of twelve (12) consecutive months commencing on an Employee's most recent employment commencement date, or any anniversary thereof, in which he is credited with at least 1,000 hours of service. (3) Year of Service, with respect to an Employee, means an eligibility computation period during which an Employee completes at least 1,000 hours of service regardless of whether such Employee is in service continuously during all of such eligibility computation period. An Employee who completes one thousand (1,000) hours of service during an eligibility computation period shall not be deemed to have completed a year of service until the last day of such eligibility computation period regardless of when such Employee completes such one thousand (1,000) hours of service. (4) HOURS OF SERVICE. Hours of service shall mean: (a) each hour for which an Employee is paid, or entitled to payment, by the Employer for the performance of duties for the Employer during any eligibility computation period. These hours will be credited to the Employee for the eligibility computation period in which the duties are performed; 8. 10 (b) each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence, no more than 501 hours of service shall be credited under this subsection (b) to au Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs within a single eligibility computation period). Hours under this subsection (b) will be calculated and credited under Department of Labor Regulations, 29 C.F.R. Section 2530.200b-2(b) and (c), which are incorporated herein by this reference; (c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same hours of service shall not be credited both under subsection (a) or subsection (b), as the case may be, and under this subsection (c); and no more than 501 hours of service shall be credited under this subsection (c) with respect to payments of back pay, to the extent that such pay is agreed to or awarded for a period of time described in subsection (b) during which the Employee did not perform or would not have performed any duties. These hours will be credited to the Employee for the eligibility computation period(s) to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made; (d) In addition to hours credited to an Employee under subsections (a) through (c) above, an Employee will be credited with the number of hours (not exceeding 40 for a full week or a pro rata portion of 40 for a partial week) he normally would have worked except for the fact that he was absent on one of the following types of unpaid absence: (i) leave of absence for a period authorized by the Employer under a leave policy applied uniformly to all Employees, provided he returns to service with the Employer at or before the expiration of such period; or (ii) leave of absence for service in the armed forces of the United States, provided he returns to service with the Employer within the period during which his reemployment rights are protected by law, and (e) Solely for purposes of determining whether a break in service, as defined in subsection (5), has occurred in an eligibility computation period, an Employee who is absent from work for maternity or paternity reasons will receive credit for the hours of service which would otherwise have been credited to such Employee but for such absence, (or in any case in which such hours cannot be determined, eight hours of service per day of such absence). For purposes of this subsection (e), an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the Employee, (ii) by reason of a birth of a child of the Employee, (iii) by reason of the placement of a child with the Employee in connection with the Employee's adoption of such child, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. No more than 501 hours of service shall be credited under this subsection (e). The hours of service credited under this subsection (e) will be credited (i) in the eligibility computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period, or (ii) in all other 9. 11 cases, in the following eligibility computation period if necessary to prevent a break in service in that eligibility computation period. (5) BREAK IN SERVICE, with respect to an Employee, means an eligibility computation period during which such Employee does not complete more than five hundred (500) hours of service. (6) VESTING COMPUTATION PERIOD. For purposes of computing an Employee's nonforfeitable right to his Employer Contributions Account and/or Matching Contributions Account, an Employee's vesting computation period(s) will be the period of twelve (12) consecutive months commencing on an Employee's most recent employment commencement date, or any anniversary thereof, in which he is credited with at least 1000 hours of service. (7) COUNTING YEARS OF SERVICE FOR PARTICIPATION. All of an Employee's years of service with the Employer are counted toward meeting the Plan's anticipation eligibility requirement (if any), except that, if the Plan provides for 100% vesting after two years or less of service, service before a break in service which occurs before the Employee satisfies the Plan's requirement for eligibility will be disregarded. However, the preceding sentence will not apply if the Employer's Plan is a 165(e) Plan. If the service requirement to become a Participant as specified in the Adoption Agreement includes a fractional year, an Employee will not be required to complete any minimum number of hours of service to receive credit for such fractional year. (8) COUNTING YEARS OF SERVICE FOR VESTING. For purposes of determining a Participant's vested percentage, all of his years of service will be counted, except that, if the Plan Administrator specifically so provides, the following years of service will not be counted: (a) years of service completed before age 18; (b) years of service before the Employer maintained this Plan or a predecessor plan. A plan is a predecessor plan if it was terminated on or after the date it was required to comply with ERISA and within five years before or after the Effective Date of this Plan. A plan is not treated as a predecessor plan with respect to an Employee unless he was a participant in such plan. (9) SERVICE WITH OTHER ORGANIZATIONS. (a) To determine whether an Employee is a Participant and to determine his vested percentage, if the Employer maintains a plan of a predecessor employer, service with the predecessor employer will be treated as service with the Employer. 10. 12 (b) If not treated as service with the Employer under subsection (a) above, service with any entity specifically so designated in the Adoption Agreement will be treated as service with the Employer. b. ELAPSED TIME METHOD. The definitions and rules in this subsection will apply to Employers who in the Adoption Agreement elected to have Employees' service determined under the elapsed time method. (1) SERVICE. (a) IN GENERAL. Service of an Employee includes all of the following: (i) any period of service, as defined below, whether or not continuous; and (ii) for a reemployed Employee, any period of severance provided that his reemployment commencement date occurs within one year after his severance date. (b) YEAR OF SERVICE. To determine an Employee's years of service, all of his service will be aggregated and each 365 days of such aggregated service will constitute a year of service. If any provision of the Plan calls for completion of a fractional year of service, such fraction of 365 days of the Employee's aggregated service will satisfy the provision; for example, if one-half year of service is required, then such requirement will be met when the Employee's aggregated service equals 183 days. (2) DEFINITIONS RELATING TO SERVICE. (a) PERIOD OF SERVICE shall mean an Employee's service, beginning on his employment commencement date or reemployment commencement date and ending on his severance date. (b) EMPLOYMENT COMMENCEMENT DATE. An Employee's employment commencement date is the date on which he first completes an hour of service, as defined below. (c) REEMPLOYMENT COMMENCEMENT DATE. In the case of an Employee who has a period of severance which is not taken into account under subsection (1)(a)(ii), the reemployment date is the date on which he first completes an hour of service after such period of severance. (d) PERIOD OF SEVERANCE. A period of severance of an Employee means a period beginning on his severance date and, if applicable, ending on his reemployment commencement date. 11. 13 In the case of an Employee who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the date of such absence will constitute a year of service; the first anniversary of the first date of such absence will be treated as neither a period of service nor a period of severance; any period after the 24-consecutive month beginning on the date of such absence will constitute a period of severance. For purposes of this section, an absence, from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the Employee's adoption of such child, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. Each Employee will share in Employer Contributions and Matching Contributions for the period beginning on the date the Employee commences participation under the Plan and ending on the date on which such Employee severs employment with the Employer or is no longer a Participant. (e) SEVERANCE FROM SERVICE DATE. An Employee's severance from service date is the earlier of: (i) the date on which he quits, retires, is discharged or dies, or (ii) the first anniversary of the first day of a period during which he is absent (with or without compensation) from performing duties for the Employer for any reason other than quit, retirement, discharge or death, such as vacation, holiday, sickness, leave of absence or layoff. (f) HOUR OF SERVICE. Hour of service is an hour for which the Employee is paid or entitled to payment for the performance of duties for the Employer. (3) COUNTING YEARS OF SERVICE FOR PARTICIPATION. All of an Employee's years of service with the Employer are counted toward meeting the Plan's participation requirement (if any), except that, if the Plan provides for 100% vesting after two years or less of service, service will be disregarded if it was completed before a period of severance of one year or more which occurs before the Employee satisfied the Plan's service requirement for eligibility. However, the preceding sentence apply if the Employer's Plan is a 165(e) Plan. (4) COUNTING YEARS OF SERVICE FOR VESTING. For purposes of determining a Participant's vested percentage, all of his years of service will be counted except that, if the Plan Administrator so provides, the following years of service will not be counted: (a) service completed before age 18; (b) service before the Employer maintained this Plan or a predecessor Plan. 12. 14 A plan is a predecessor plan if it was terminated on or after the date it was required to comply with ERISA and within five years before or after the Effective Date of this Plan. A plan is not treated as a predecessor plan with respect to an Employee unless he was a participant in such plan. (5) SERVICE WITH OTHER ORGANIZATIONS. (a) To determine whether an Employee is a Participant and to determine his vested percentage, if the Employer maintains a plan of a predecessor employer, service with a predecessor employer will count as service with the Employer. (b) If not treated as service with the Employer under subsection (a) above, service with any entity specifically so designated in the Adoption Agreement will be treated as service with the Employer. 3.5 BENEFITS FOR OWNER-EMPLOYEES. If the Plan provides contributions or benefits for one or more Owner-Employees who together control the trade or business with respect to which the Plan is established, and who also control as Owner-Employees, one or more other trades or businesses, the Plan and plans established with respect to such other trades or businesses must, when looked at as a single plan, satisfy Sections 165(a), and (g) of the ITA with respect to the Employees of this and all such other trades or businesses. If the Plan provides contributions or benefits for one or more Owner-Employees who control one or more other trades or businesses, the Employees of each such other trade or business must be included in a plan which satisfies Sections 165(a) and (g) of the IRA and which provides contributions and benefits not less favorable than those provided for such Owner-Employee under the plans of two or more trades or businesses which he does not control and such individual controls a trade or business, then the contributions or benefits of the Employees under the plan of the trade or business which he does control must be as favorable as those provided for him under the most favorable plan of the trade or business which he does not control. For purposes of this subsection, an Owner-Employee, or two or more Owner-Employees, shall be considered to control a trade or business if such Owner-Employee, or such two or more Owner-Employees together. a. own the entire interest in an unincorporated trade or business, or b. in the case of a special partnership, own more than 50 percent of either the capital interest or the profits interest in such partnership. For purposes of the preceding sentence, an Owner-Employee or two or more Owner-Employees shall be treated as owning any interest in a special partnership which is owned, directly or indirectly, by a special partnership which such Owner-Employee or such two or more Owner-Employees are considered to control within the meaning of the preceding sentence. ARTICLE 4 PRE-TAX CONTRIBUTIONS 13. 15 4.1 ELIGIBILITY. If the Employer's Plan is a profit-sharing plan and the Adoption Agreement so provides, an Employee who meets the participation requirements of section 3.1 may elect to make Pre-Tax Contributions under ITA section 165(e). Pre-Tax Contributions are voluntary and no Employee is required to make such contributions. Pre-Tax Contributions Accounts are fully vested and nonforfeitable at all times. 4.2 PRE-TAX CONTRIBUTION ELECTION. The Participant must file a written election form with the Plan Administrator indicating the amount of Pre-Tax Contributions he wishes to make and agreeing to reduce his Compensation by such amount. Subject to any rules specified in the Adoption Agreement or established by the Plan Administrator, a Participant may increase, decrease, discontinue or resume his Pre-Tax Contributions during a Plan Year by filing an appropriate form with the Plan Administrator. A discontinuance of Pre-Tax Contributions will be effective as soon as reasonably practicable after the Plan Administrator's receipt of the Participant's election form. An increase or decrease of Pre-Tax Contributions, or a resumption after a discontinuance, will be effective as of the Entry Date next following the Participant's timely election. No change under the preceding paragraph may cause a Participant's Pre-Tax Contributions to exceed the maximum provided for under section 4.4. The Plan Administrator, with the approval of the Plan Sponsor, may establish reasonable rules of uniform application governing Participants' elections and changes. Such rules include the number and of elections Plan Year, may frequency or changes during any effective dates for elections or changes (for example, the first day of the payroll period coinciding with or next following the applicable election or change date), cutoff dates for timely filing of elections or changes, and other rules to facilitate operation of this article. Notwithstanding the preceding, a Participant will be permitted to change his election at least once each year. 4.3 COLLECTION OF PRE-TAX CONTRIBUTIONS. The Employer will collect Participants' Pre-Tax Contributions using payroll procedures. The Employer will transfer the amounts collected to the Trustee as of the earliest date when such contributions can reasonably be segregated from the Employer's general assets, but not later than 90 days from the date on which such amounts would otherwise have been payable to the Participant in cash. 4.4 LIMITATIONS ON PRE-TAX CONTRIBUTIONS. a. LIMITS ON PRE-TAX CONTRIBUTIONS. The minimum amount of Pre-Tax Contributions the Participant may elect is 1 percent of his Compensation. Pre-Tax Contributions may not exceed the lesser of: (1) 10% of the Participant's Compensation up to a maximum of $7,000 in any calendar year; (2) the maximum amount permitted under section 4.5 for Highly Compensated Employees for any Plan Year, or (3) any maximum or other limitation imposed by the Plan Administrator. If a Participant makes Pre-Tax Contributions in a calendar year equal to the lesser of 10% of his compensation or $7,000, his Pre-Tax Contributions will immediately cease. 14. 16 b. LIMITS ON WITHDRAWALS. Notwithstanding section 4.1 and section 4.4.a. above, a Participant who makes a withdrawal on account of a financial hardship under section 9.1 may not make Pre-Tax Contributions or After-Tax Contributions hereunder (or under any other Plan maintained by the Employer) for a period of 12 months following the date of the in-service withdrawal. Also, in the taxable year following the date of the withdrawal, such a Participant may not make Pre-Tax Contributions which, when added to his Pre-Tax Contributions during the taxable year of the withdrawal, exceed the amount specified in subsection a. above. c. LIMITS ON DISTRIBUTIONS. Pre-Tax Contributions may not be distributed to Participants or their Beneficiaries earlier than: (1) separation from service, death or Disability, (2) termination of the Plan without the establishment of a successor plan, (3) the date of the sale or other disposition to an unrelated entity of substantially all of the assets used by the Employer in a trade or business, provided the Employee continues in employment with the purchaser of the assets, (4) the date of sale or other disposition to an unrelated entity of a subsidiary of the Employer, provided the Employee continues in employment with the subsidiary, (5) reaching the age of fifty-nine and a half (591/2) years, or (6) a case of financial hardship, as defined in Section 9.1. 4.5 ACTUAL DEFERRAL PERCENTAGE TEST. a. As of the last day of each Plan Year, the Average Actual Deferral Percentages of Highly Compensated Employees (such average is called the HCE-ADP in this section) may not exceed the Average Actual Deferral Percentages of Non-Highly Compensated Employees (such average is called the NHCE-ADP in this section) by more than the amount specified in the following table: If NHCE-ADP is: NCE-ADP may not exceed: less than 2% two times NHCE-ADP 2% but less than 8% two percentage points more than NHCE-ADP 8% or higher 1.25 times NHCE-ADP 15. 17 The determination and treatment of Participants' Actual Deferral Percentages will be subject to the requirements of any applicable regulations under ERISA or the ITA. b. The Actual Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to make Pre-Tax Contributions (and, if applicable, to receive Qualified Employer Deferral Contributions) allocated to his accounts under two or more arrangements described in ITA section 165(e), that are maintained by the Employer, shall be determined as if such Pre-Tax Contributions (and, if applicable, such Qualified Employer Deferral Contributions) were made under a single arrangement. If a Highly Compensated Employee participates in two or more 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. c. In the event that this Plan satisfies the requirements of ITA sections 165(e), 165(a)(3) or 165(a)(4) only if aggregated with one or more other Plans, or if one or more other Plans satisfy the requirements of such sections of the ITA only if aggregated with this Plan, then this section shall be applied by determining the Actual Deferral Percentage of Employees as if all such Plans were a single Plan. d. For purposes of determining the Actual Deferral Percentage test, Pre-Tax Contributions and Qualified Employer Deferral Contributions must be made before the 4.4 last day of the twelve-month period immediately following the Plan Year to which contributions relate. e. The Employer shall maintain records sufficient to demonstrate satisfaction of the Actual Deferral Percentage test and the amount of Qualified Employer Deferral Contributions used in such test. 4.6 QUALIFIED NON-ELECTIVE CONTRIBUTIONS. If the Employer's Plan provides for Profit-Sharing Contributions and such contributions meet the requirements of this section, then, subject to the requirements of applicable regulations, the Plan Administrator may elect to treat all or part of such contributions as Qualified Non-Elective Contributions which will be considered Qualified Employer Deferral Contributions for purposes of the Actual Deferral Percentage test of section 4.5, above. Profit-Sharing Contributions meet the requirements of this section if they are always fully vested when made, and they are subject to the limitations on distribution of section 4.4c. Also, any Profit-Sharing Contributions not treated as Qualified Employer Deferral Contributions under the preceding paragraph must be nondiscriminatory under ITA section 165(a)(4). In lieu of distributing Excess Contributions as provided in section 4.8a. of the Plan, the Employer may make Qualified Non-Elective Contributions under the Plan on behalf of Non-Highly Compensated Employees in an amount as is needed to meet the Actual Deferral Percentage test in such case, the allocation of Qualified Non-Elective Contributions shall be made only to the accounts of Participants who are Non-Highly Compensated Employees in the 16. 18 ratio that each Participant's Compensation for the Plan Year bears to the Compensation of all such Participants for such Plan Year. 4.7 QUALIFIED MATCHING CONTRIBUTIONS. Generally, Matching Contributions will not be included in determining a Participant's Deferral Percentage. However, if the Plan provides for Matching Contributions and such contributions meet the requirements of this section, the Plan Administrator may elect to treat all or part of such contributions as Qualified Matching Contributions which will be considered Qualified Employer Deferral Contributions for purposes of the Actual Deferral Percentage tests of section 4.5 above. Matching Contributions meet the requirements of this section if they are fully vested when made, and they are subject to the limitations on distribution of section 4.4c. Qualified Matching Contributions will be taken into account as Qualified Employer Deferral Contributions for purposes of calculating the Actual Deferral Percentages, subject to such other requirements as may be prescribed by the Puerto Rico Secretary of the Treasury and shall be made as are needed to meet the Actual Deferral Percentage test. The Employer will make Qualified Matching Contributions to the Plan on behalf of Participants who are Non-Highly Compensated Employees who make either Pre-Tax Contributions and/or After-Tax Contributions to the Plan. 4.8 MONITORING PARTICIPANTS' ACTUAL DEFERRAL PERCENTAGES. The Plan Administrator (or an administrative services provider - which may be the Trustee or the Plan Sponsor - retained by the Plan Administrator to perform recordkeeping and other administrative duties) will monitor Participants' Actual Deferral Percentages to insure compliance with the requirements of section 4.5 above. Any adjustments in Participants' elections or Actual Pre-Tax Contributions necessary to meet the requirements of section 4.5 win be made as follows: The Plan Administrator will reduce the Actual Deferral Percentage of the participating Highly Compensated Employee who has the highest Actual Deferral Percentage until it reaches the Actual Deferral Percentage of the next participating Highly Compensated Employee(s) with the next highest Actual Deferral Percentage; then the Plan Administrator will reduce the Actual Deferral Percentages of both or all such participating Highly Compensated Employees until they reach that of the Highly Compensated Employee(s) with the then next highest Actual Deferral Percentage; and so on. The foregoing reductions will be made only to the extent necessary to meet the requirements of section 4.5. a. EXCESS CONTRIBUTIONS. The Plan Administrator will adjust Pre-Tax Contributions elections by Highly Compensated Employees in accordance with the preceding paragraph at such time or times before or during a Plan Year as the Plan Administrator deems advisable to insure that the requirements of section 4.5 are met as of the last day of the Plan Year. If, notwithstanding the preceding sentence, the requirements of section 4.5 are not met as of the last day of a Plan Year, such adjustments may be made after the end of a Plan Year in one or a combination of the following ways: (i) paying to a Participant the amount of his Excess Contributions plus earnings (or losses) on such excess, (ii) recharacterizing the Excess Contributions of such a Participant as After-Tax Contributions during such year, or (iii) in the 17. 19 Employer's discretion, by making Qualified Non-Elective Contributions or Qualified Matching Contributions that meet the requirements of section 4.6 or 4.7, respectively, on behalf of Non-Highly Compensated Employees in the amount needed so that the requirements of section 4.5 are met. For purposes of the preceding sentence, any such payment or recharacterization of Excess Contributions will be designated as such by the Employer, and will be made by the end of the succeeding Plan Year. However, the amount to be paid or recharacterized will be reduced by any amounts relating to such Plan Year previously withdrawn by the Participant. For purposes of clause (ii) of this paragraph, recharacterizing will be available only if the Adoption Agreement permits After-Tax Contributions. Recharacterized amounts will remain nonforfeitable and subject to the same distribution requirements as Pre-Tax Contributions. Amounts may not be recharacterized by a Highly Compensated Employee to the extent that such amount in combination with other After-Tax Contributions made by that Employee would exceed any stated limit provided in the Adoption Agreement, or by the Puerto Rico Secretary of the Treasury, on After-Tax Contributions. Recharacterized amounts will be taxable to the Participant in the tax year in which the Participant would have received them in cash. Recharacterization must occur no later than two and one-half months after the last day of the Plan Year in which such Excess Contributions arose and is deemed to occur no earlier than the date the last Highly Compensated Employee is informed in writing of the amount recharacterized and the consequences thereof. Excess Contributions shall be distributed from the Participant's Pre-Tax Contributions Account and Qualified Matching Contributions Account (if applicable) in proportion to the Participant's Pre-Tax Contributions and Qualified Matching Contributions (to the extent used in the Actual Deferral Percentage test) for the Plan Year. Excess Contributions shall be distributed from the Participant's Qualified Non-Elective Contributions Account only to the extent that such Excess Contributions exceed the balance in the Participant's Pre-Tax Contributions Account and Qualified Matching Contributions Account. A distribution of Excess Contributions under this section may be made notwithstanding any otherwise applicable restrictions or spousal consent requirements on in-service withdrawals or distributions. 4.9 EXCESS DEFERRALS. Notwithstanding any other provision of the Plan, Excess Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose account Excess Deferrals were assigned for the preceding year and who claims Excess Deferrals for such taxable year. A withdrawal of an Excess Deferral under this section may be made notwithstanding any otherwise applicable restrictions or spousal consent requirement on in-service withdrawals. The amount of any Excess Deferrals to be withdrawn under this section will be reduced by any amounts previously distributed or recharacterized under section 4.8. ARTICLE 5 AFTER-TAX CONTRIBUTIONS 18. 20 5.1 ELIGIBILITY. If the Adoption Agreement so provides, an Employee may elect to make After-Tax Contributions. After-Tax Contributions are voluntary and no Employee will be required to make such contributions. After-Tax Contributions Accounts are fully vested and nonforfeitable at all times. 5.2 LIMITS ON AMOUNT. The minimum amount of After-Tax Contributions a Participant may elect is 1 percent of his Compensation. His After-Tax Contributions for any Plan Year may not exceed any maximum limitation imposed by the Plan Administrator, within any limits prescribed by the ITA and Regulations thereunder. Additional restrictions on After-Tax Contributions may apply in certain cases to Participants who make a in-service withdrawal on account of a financial hardship under Section 9.1. (See the first sentence of section 4.4b.) 5.3 AFTER-TAX CONTRIBUTION ELECTION. The procedures for electing and changing After-Tax Contributions will be similar to those described in section 4.2. 5.4 COLLECTION OF AFTER-TAX CONTRIBUTIONS. The Employer will collect Participants' After-Tax Contributions using payroll or other procedures. The Employer will transfer the amounts collected to the Trustee as of the earliest date on which such contributions can reasonably be segregated from the Employer's general assets, but not later than 90 days from the date on which such amounts are received by the Employer or the date on which such amounts would otherwise have been payable to the Participant in cash. ARTICLE 6 EMPLOYER AND MATCHING CONTRIBUTIONS 6.1 ELIGIBILITY. If the Adoption Agreement so provides, the Employer will make Employer Contributions (Money Purchase Contributions or Profit-Sharing Contributions) and/or Matching Contributions to all Participants pursuant to the provisions of this Article 6. Participants will have a vested and nonforfeitable interest in their Employer Contributions Account and Matching Contributions Account in accordance with the vesting schedule specified by the Employer in the Adoption Agreement. 6.2 EMPLOYER CONTRIBUTIONS. a. IN GENERAL. For each Plan Year that the Plan is in effect, the Employer will make Employer Contributions (Money Purchase Contributions or Profit-Sharing Contributions) in cash, the amount (if any) determined according to the provisions of this Article. If, due to miscalculation or error, the Employer Contributions exceed the amount prescribed or determined by the Employer, such excess may, at the election of the Employer, bi treated as a contribution for the succeeding Plan Year or years. The Employer Contribution may be paid in a single sum or installments, but the total amount will be paid to the Trustee not later than the earlier of the time (including extensions thereof) prescribed by law for filing the Employer's Puerto Rico income tax return for its taxable year ending with or within the Plan Year. 19. 21 b. MONEY PURCHASE PENSION PLANS. If pursuant to the Adoption Agreement the Plan is a money purchase pension plan, the following provisions will apply: (1) MONEY PURCHASE CONTRIBUTION. For each Plan Year the Employer will contribute an amount which will equal the contribution required for all Participants entitled to receive an allocation for such year under the contribution formula elected by the Employer in the Adoption Agreement. (2) MAXIMUM CONTRIBUTION. Employer Contributions to the Plan shall not exceed the maximum amount which the Employer may deduct under ITA section 23(I2), or any successor provision or similar statutory provisions hereafter enacted. (3) FORFEITURES. Forfeitures will be allocated to the accounts of Participants during such Plan Year in the proportion that each such Participant's Compensation during such Plan Year bears to the total Compensation during such Plan Year of all such Participants. No forfeitures will occur solely as a result of an Employee's withdrawal of Employee contributions. c. PROFIT-SHARING PLANS. If pursuant to the Adoption Agreement the Plan is a profit-sharing plan, the following provisions will apply: (1) PROFIT-SHARING CONTRIBUTION. If specified in the Adoption Agreement, for each Plan Year in which the Plan is in effect, the Employer shall make contributions to the Trust in such amounts as it may determine; the Employer will not be obligated to contribute any particular amount in a Plan Year or to make any contribution at all in any particular Plan Year. (2) MAXIMUM CONTRIBUTION. All Employer Contributions to the Plan shall be made out of Net Profits and shall not exceed the lesser of: (a) The Employer's Net Profits; or (b) The maximum amount permitted to be deducted by the Employer under IFA section 23(p), or any successor or similar statutory provisions hereafter enacted. (3) NET PROFITS DEFINED. "Net Profits" for purposes of this formula shall mean the taxable income of the Employer as determinable for Puerto Rico income tax purposes, such taxable income to be exclusive of capital gains and capital losses and without any deduction for taxes based upon income or for contributions made by the Employer under this Plan or to any other qualified plans maintained by the Employer. Net Profits shall also include any undistributed Net Profits from prior years, after deduction of taxes based upon income and contributions made by the Employer under this Plan or any other qualified plans maintained by the Employer. (4) FORFEITURES. Forfeitures will be allocated to the accounts of Participants during such Plan Year in the proportion that each such Participant's Compensation during such Plan Year bears to the total Compensation during such Plan Year of all such Participants. No forfeitures will occur solely as a result of an Employee's withdrawal of Employee contributions. 20. 22 6.3 ALLOCATION OF EMPLOYER CONTRIBUTIONS. Employer Contributions for each Plan Year shall be allocated as of the last day of such Plan Year (even though receipt of the Employer Contributions by the Trustee may take place after the close of such Plan Year) among the Employer Contributions Accounts of those Participants who either completed more than 500 hours of service or were actively employed by the Employer at the end of such Plan Year. Notwithstanding the above, a Participant whose employment with the Employer terminates because of his retirement, Disability or death during the Plan Year is not required to fulfill the foregoing employment requirement to share in the allocation of Employer Contributions for such Plan Year. Employer Contributions will be allocated so that each Participant receives a proportionate amount of the total Employer Contribution equal to the ratio of his Compensation over the Compensation of all Participants for the Plan Year (Employer Contributions to a profit-sharing plan), or so that each Participant receives the percentage of his Compensation for the Plan Year specified in the Adoption Agreement (money purchase pension plan). 6.4 MATCHING CONTRIBUTIONS. a. AMOUNT OF CONTRIBUTION. If the Employer so chooses in the Adoption Agreement, for each matching period, as defined below, the Employer will make a Matching Contribution in cash on behalf of each Participant who makes Pre-Tax Contributions under t Article 4 and/or After-Tax Contributions under Article 5 during such period. A Participant will be required to be an Employee on the last day of a matching period (or to have left employment during such period because of retirement, death or Disability) in order to receive a Matching Contribution for such period. The amount of such Matching Contribution will be as specified in the Adoption Agreement. The Employer will not make a Matching Contribution with respect to any Excess Contributions under section 4.8. The Plan Administrator will select the matching period, which may be the Plan Year or a period shorter than the Plan Year such as each month, three months (quarterly), four months (tri-annual) or six months (semi-annual). Matching contributions for a matching period will be transferred to the Trustee within a reasonable time after the end of such period. However, the total amount of the Employer's matching contributions for a Plan Year will be paid to the Trustee by the time specified in section 6.2. Matching Contributions shall be vested in accordance with the vesting schedule selected in the Adoption Agreement. In any event, Matching Contributions shall be fully vested at Normal Retirement Age, upon the complete or partial termination of the Plan, or upon the complete discontinuance of contributions by the Employer. b. SOURCE OF CONTRIBUTIONS. In a profit-sharing or 165(e) plan, the Matching Contributions required under this section will be limited to the Employer's net profits, as defined in section 6.2.c.(3). 21. 23 c. USE OF FORFEITURES. Any forfeitures occurring during a matching period will be allocated to the accounts of Participants during such Plan Year in the proportion that each such Participant's Compensation during such Plan Year bears to the total Compensation during such Plan Year of all such Participants. ARTICLE 7 ROLLOVERS 7.1 ROLLOVER CONTRIBUTIONS. a. With the approval of the Plan Administrator, an Employee may: (1) make a rollover transfer to the Plan of cash in an amount which constitutes all of a qualifying rollover distribution, as defined in IFA section 165(b)(2); or (2) cause any amount which could be rolled over to the Plan under subsection (1) to be transferred directly to the Trustee of the Plan from the Trustee or custodian of a Puerto Rico qualified plan or annuity. In the case of such transfers directly from another Puerto Rico qualified plan funded through a trust or annuity contract, amounts consisting of the following will be accounted for separately: employer contributions to a money purchase plan, employer contributions to a profit-sharing or 165(e) plan, pre-tax contributions and after-tax contributions. The Employee will be responsible for providing the Plan Administrator with records that will reflect such amounts separately. b. The Employer, the Plan Administrator and the Trustee have no responsibility for determining the propriety of, proper amount or time of, or status as a tax free transaction of any transfer under subsection a. above. c. If an Employee who is not yet a Participant makes a transfer under subsection a. above, he will be considered to be a Participant with respect to administering such transferred amount only. He will not be a Participant for any other purpose of the Plan until he completes the participation requirements under Article 3. d. The Employer, Plan Administrator or Trustee in its discretion may direct the return to the Employee (or the retransfer to another Trustee or custodian designated by the Employee) of any transfer to the extent that such return is deemed necessary to insure the continued qualification of this Plan under ITA section 165(a) or that holding such contribution hereunder would be administratively burdensome. e. The Plan Administrator will credit any Rollover Contribution to the Participant's Rollover Contributions Account as soon as practicable after receipt thereof by the Trustee. Any amounts separately accounted for under subsection a.(2) above will be separately accounted for hereunder as subaccounts within the Employee's Rollover Contributions Account. ARTICLE 8 VESTING 22. 24 8.1 VESTING. A Participant will have a vested and nonforfeitable interest in that percentage of his Employer Contributions Account and/or Matching Contributions Account determined under the vesting schedule specified by the Employer in the Adoption Agreement. 8.2 FULL VESTING. Notwithstanding section 8.1, Participants will become fully vested in their Employer Contributions Account and/or Matching Contributions Account upon the earlier of (i) reaching Normal Retirement Age while still employed by the Employer; (ii) upon retirement at their Normal Retirement Date or at an Early Retirement Date as specified in the Adoption Agreement; (iii) upon Disability as defined in section 2.9; or (iv) upon death while still an Employee. 8.3 PAYMENT OF VESTED INTEREST. A Participant's vested interest in his accrued benefit will be paid to him, or payments will begin, on a date elected by the Participant and will be paid to him in one or more of the methods described in section 10.1 as elected by the Participant. The Participant's election as to either time or form of payment will be subject to the rules of Article 10. 8.4 FORFEITURE OF NON-VESTED INTEREST. A Participant will forfeit the non-vested portion of his accrued benefit on the day after he incurs a period of five consecutive breaks in service (as explained in section 3.4a. if the Employer's Plan counts service for vesting purposes using the hours of service method, or as explained in section 3.4b. if the Employer's Plan counts service for vesting purposes using the elapsed time method). 8.5 RESUMPTION OF EMPLOYMENT. A former Participant who returns to employment with the Employer after a period of less than five consecutive breaks in service will receive credit for all his prior years of service for vesting purposes. 8.6 CALCULATING VESTED INTEREST AFTER WITHDRAWAL OR DISTRIBUTION. This section applies only in cases in which the Employer chooses in the Adoption Agreement the graded vesting schedule. Where a Participant's Employer Contributions Account and/or Matching Contributions Account is charged with a withdrawal or distribution at a time when he is not fully vested in such account, the remaining balance of the Participant in such account will be credited to a separate suspense account within the Participant's Employer Contributions Account and/or Matching Contributions Account, or accounting records will be maintained in a manner which has the same effect as establishing a separate suspense account. The Participant's vested interest in such separate suspense account will be determined in accordance with the following formula: X = P(AB + W/D)- W/D For purposes of the formula: a. "X" is the Participant's vested interest in the separate suspense account at the time the formula is applied; b. "P" is the Participant's vested percentage in his/her Employer Contributions Account and/or Matching Contributions Account at the time the formula is applied; 23. 25 c. "AB" is the balance in the separate suspense account at the time the formula is applied; and d. "W/D" is the amount withdrawn by, or distributed to, the Participant at the time the formula is applied. The term remaining balance as used in this section means a Participant's interest in his Employer Contributions Account and/or Matching Contributions Account remaining after a withdrawal or distribution of a portion or all of his vested interest therein. ARTICLE 9 IN-SERVICE WITHDRAWALS 9.1 WITHDRAWAL OF PRE-TAX CONTRIBUTIONS. a. AMOUNT. A Participant may make in-service withdrawals from his Pre-Tax Contributions Account in the event of financial hardship only. The maximum withdrawal from the Participant's Pre-Tax Contributions Account is the smaller of the amount of his Pre-Tax Contributions, without earnings or investment gains, or the amount needed to alleviate his financial hardship. b. FINANCIAL HARDSHIP. (1) An in-service withdrawal will be on account of financial hardship only if the Participant has an immediate and heavy financial need and the withdrawal is necessary to meet such need. (2) A withdrawal will be deemed to be on account of an immediate and heavy-financial need if it is occasioned by: (a) a deductible medical expense incurred by the Participant or his spouse, children or dependent; (b) purchase of the Participant's principal residence (not including mortgage payments); (c) tuition payments for the next semester or quarter of post-secondary education for the Participant or his spouse, child or dependent; (d) rent or mortgage payments to prevent the Participant's eviction from or the foreclosure of the mortgage on his principal residence; or (e) such other event or circumstance as the Puerto Rico Secretary of the Treasury through regulations may permit. 24. 26 (3) A withdrawal will be deemed necessary to satisfy the Participant's financial needs if either: (a) the Participant has made all non-financial hardship withdrawals and obtained all nontaxable loans available under all of the Employer's qualified retirement Plans; and each such other Plan which provides for Pre-Tax Contributions contains restrictions similar to those in section 4.4b.; or (b) the Participant satisfies such other requirements as may be prescribed by the Puerto Rico Secretary of the Treasury. (4) A Participant must establish to the Plan Administrator's satisfaction both that the Participant has an immediate and heavy financial need and that the withdrawal is necessary to meet the need, as provided in subsections (2) and (3) above. A Participant's application for a financial hardship withdrawal will be in writing on such form and containing such information (or other evidence or materials establishing the Participant's financial hardship) as the Plan Administrator may require. The Plan Administrator's determination of the existence of and the amount needed to meet a financial hardship will be binding on the Participant. c. WITHDRAWALS AFTER AGE 59 1/2. Notwithstanding subsection b. above, (1) to the extent provided in the Adoption Agreement, a Participant may make in-service withdrawals from his Pre-Tax Contributions Account after he has reached age 59 1/2; and (2) a Participant may make in-service withdrawals from his Pre-Tax Contributions Account under the following circumstances: (i) termination of the Plan without the establishment of a successor Plan; (ii) the sale or other disposition to an unrelated entity of substantially all of the assets used by the Employer in a trade or business, provided the Employee continues in employment with the purchaser of the assets; (iii) the sale or other disposition to an unrelated entity of a subsidiary of the Employer, provided the Employee continues in employment with the subsidiary. d. SPOUSAL CONSENT TO IN-SERVICE WITHDRAWALS. Married Participant's spouse must consent to an in-service withdrawal under this section. Such consent must be in writing and witnessed by a notary public or the Plan Administrator (or any Plan representative appointed by the Plan Administrator for such purposes). e. PAYMENT. Any withdrawal under this section will be paid to the Participant as soon as practicable after the valuation date next following the Plan Administrator's receipt of the Participant's withdrawal form; however the Plan Administrator may approve an earlier payment of some or all of the amount to be withdrawn if such earlier payment would not be detrimental to the interests of the other Participants. 25. 27 f. LIMITATION ON FUTURE CONTRIBUTIONS. A Participant who makes an in-service withdrawal under this section may not make a Pre-Tax Contribution or After-Tax Contribution for a period of up to 12 months following such in-service withdrawal. 9.2 WITHDRAWAL OF AFTER-TAX CONTRIBUTIONS. a. AMOUNT. A Participant whose employment has not terminated may upon reasonable advance written notice to the Plan Administrator withdraw all or any portion of his After-Tax Contributions Account to the extent not previously withdrawn. b. PAYMENT. Any withdrawal under this section will be paid to the Participant as soon as practicable after the valuation date next following the Plan Administrator's receipt of the Participant's withdrawal form; however the Plan Administrator may approve an earlier payment of some or all of the amount to be withdrawn if such earlier payment would not be detrimental to the interests of the other Participants. c. LIMITATION ON FUTURE WITHDRAWALS. If so provided by the Plan Administrator, a Participant who makes an in-service withdrawal under this section may not make a Pre-Tax Contribution or After-Tax Contribution for a period of up to 12 months following the date of such in-service withdrawal. The Plan Sponsor and the Plan Administrator may establish reasonable minimum withdrawal amounts and reasonable limitations on the frequency or number of withdrawals during a Plan Year. No forfeitures will occur solely as a result of an Employee's making an in-service withdrawal. 9.3 WITHDRAWAL OF MATCHING CONTRIBUTIONS. a. AMOUNT. A Participant may make in-service withdrawals from his vested portion of his Matching Contributions Account, to the extent provided in the Adoption Agreement. The Adoption Agreement may limit such in-service withdrawals to financial hardship situations, or may permit in-service withdrawals for reasons other than financial hardship. 9.4 WITHDRAWALS OF PROFIT-SHARING CONTRIBUTIONS. In-service withdrawals of Profit-Sharing Contributions are not permitted. 9.5 WITHDRAWALS OF MONEY PURCHASE CONTRIBUTIONS. In-service withdrawals of Money Purchase Contributions are not permitted. 9.6 WITHDRAWALS OF ROLLOVER CONTRIBUTIONS. a. AMOUNTS. A Participant may upon reasonable advance written notice to the Plan Administrator withdraw all or any portion of his Rollover Contributions Account. The Plan Administrator may establish reasonable minimum withdrawal amounts. Notwithstanding the preceding paragraph, amounts separately accounted for under section 7.1a.(2) will be subject to restrictions on withdrawal as follows: employer contributions 26. 28 to a money purchase plan or profit-sharing plan are not available for in-service withdrawal; pre-tax contributions are available for in-service withdrawal only under section 9.1; Qualified Employer Deferral Contributions are not available for in-service withdrawal; matching and after-tax contributions are available for in-service withdrawal, as provided in the Adoption Agreement. b. PAYMENT. Any withdrawal under this section will be paid to the Participant as soon as practicable after the valuation date next following the Plan Administrator's receipt of the Participant's withdrawal form; however, the Plan Administrator may approve an earlier payment of all or some of the amount to be withdrawn if such earlier payment would not be detrimental to the interests of the other Participants. ARTICLE 10 DISTRIBUTION OF BENEFITS 10.1 METHODS OF DISTRIBUTION. a. The distribution of benefits to which a Participant may become entitled shall be made in accordance with this Article 10. (1) The benefits provided by the Plan shall be distributed under whichever of the following methods the Participant shall elect: (a) The purchase of a nontransferable, conventional fixed or variable annuity contract, providing payments at least annually, of such type and from such insurance company approved by the Plan Administrator; (b) A single distribution of the entire vested balance then standing in the Participant's accounts; or (c) Payments in monthly, quarterly, semiannual or annual installments of substantially equal designated amounts over a period of years certain. Except in the case of a Participant in a profit sharing or 165(e) version of this Master Plan, retirement benefits to a married Participant will be paid in the form of a qualified joint and survivor annuity unless the Participant elects otherwise as provided in subsection a.(2)(b), below. Under a profit sharing or 165(e) version of this Master Plan, the Participant will receive his benefits in the form of a lump sum payment. An election to receive a Plan distribution under any method set forth in this subsection a.(1) for an Annuity Starting Date which occurs on or after the Participant's Normal Retirement Age, Early Retirement Age or Disability shall apply to all subsequent distributions made from the Participant's accounts. Except with respect to the payment of a qualified joint and survivor annuity pursuant to subsection a.(2) below, the Participant shall in all cases elect a distribution method which requires that the present value of the payments to be made to the Participant 27. 29 exceed fifty percent (50%) of the present value of the total payments to be made to the Participant and his Beneficiary, determined as of the date such payments commence. (2) If at any time the Participant elects or has elected that his benefits be paid through the purchase of an annuity, the Plan Administrator shall direct the Trustee to purchase an annuity contract in the form of a qualified joint and survivor annuity for all distributions to the Participant. (a) The term `qualified joint and survivor annuity means an annuity that commences immediately for the life of the Participant if he does not have an Eligible Spouse or, if he has an Eligible Spouse, an annuity that commences immediately, which is at least as valuable as any other alternate form of benefit payable under the Plan, for the life of the Participant with a survivor annuity for the life of his Eligible Spouse. Upon the election of the Participant, which may be made at any time and any number of times, the survivor annuity shall be fifty percent (50%) or one hundred percent (100%) of the amount of the annuity payable during the joint lives of the Participant and his Eligible Spouse, both of which shall be actuarially equivalent; provided that in the event no election is made, the survivor annuity shall be fifty percent (50%) of the amount payable during the Participant's and his Eligible Spouse's joint lives. In determining the Participant's interest subject to the qualified joint and survivor annuity requirement, any security interest held by the Plan by reason of a loan outstanding to the Participant shall reduce the Participant's interest if the security interest is treated as payment in satisfaction of the Plan loan to the Participant. (b) Notwithstanding the foregoing, a Participant may elect to waive the qualified joint and survivor annuity and thereby receive an alternate form of distribution. Such waiver must be made within the ninety (90) day period ending on the Participant's Annuity Starting Date with respect to such benefit. A Participant may subsequently revoke an election to waive a qualified joint and survivor annuity and elect again to waive the qualified joint and survivor annuity at any time and any number of times prior to such Annuity Starting Date. All such elections and revocations shall be in writing. Any election to waive a qualified joint and survivor annuity (1) must specify the alternate form of distribution elected, (2) must be accompanied by the designation of a specific beneficiary (including any class of beneficiaries or any contingent beneficiaries) who will receive the benefit upon the Participant's death, if applicable, and (3) must be accompanied by a Spousal Consent, to the extent required under section 2.48. b. If a Participant dies before the Annuity Starting Date with respect to such benefits, the portion of his vested accounts balances which are not currently being distributed in the form of a qualified joint and survivor annuity shall be distributed as provided in this subsection b. (1) If the Participant is unmarried on the date of his death, his entire interest (reduced by any security interest held by the Plan by reason of a loan outstanding 28. 30 to the Participant) shall be distributed to his Beneficiary in a single distribution or in installments at the time set forth in section 10.3. (2) Except as provided in subsection (3) below, if the Participant is married on the date of his death, his entire interest (reduced by any security interest held by the Plan by reason of a loan outstanding to the Participant) shall be distributed to his Beneficiary in a single distribution or in installments at the time set forth in section 10.3. (3) If the Participant is married on the date of his death and the Plan is, with respect to the Participant, an offset plan or a direct or indirect transferee (in a transfer after December 31, 1984) of a defined benefit plan, a money purchase pension plan (including a target benefit plan), or a stock bonus or profit-sharing plan which otherwise would be required to provide for a life annuity form of payment to the Participant, then fifty percent (50%) of the Participant's vested interest as of the date of his death (or fifty percent (50%) of the amount of the Participant's accounts attributable to the transferred amount, if such transferred amount is separately accounted for and gains, losses, withdrawals, contributions, forfeitures, and other credits or charges are allocated on a reasonable basis between the transferred amount and other assets in the Participant's accounts) shall be applied toward the purchase of an annuity for the life of his Eligible Spouse (a "qualified pre-retirement survivor annuity") unless otherwise elected as provided below. This Plan shall be considered to be an offset plan if it is used to offset benefits in a plan which is subject to the survivor annuity requirements with respect to the Participant whose benefits are offset. In determining the Participant's interest, any security interest held by the Plan by reason of a loan outstanding to the Participant shall reduce the Participant's interest if the security interest is treated as payment in satisfaction of the Plan loan to the Participant. The portion of the Participant's vested interest not applied to the purchase of the qualified pre-retirement survivor annuity shall be distributed to the Participant's Beneficiary as provided in subsection b: (a) Within the applicable notice period, each Participant shall be furnished with a written "notice of the qualified pre-retirement survivor annuity" in such terms and in such manner as would be comparable to the "general notice of distribution" provided pursuant to section 10.2a. This notice must be accompanied by a general description of the eligibility conditions, relative values, and other material features of each method of distribution - under section 10.1a.(1). The "applicable notice period" means, with respect to each Participant, whichever of the following periods ends last: (1) the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (2) the period commencing one year before an ending one year after the individual becomes a Participant; or (3) the period commencing one year before and ending one year after the annuity requirement of section 10.1a.(1)(a) first applies to such Participant. In addition, the applicable notice period for a Participant who separates from service before attaining age 35 shall be the period beginning one year before and ending one year after the Participant's separation from service. Such notice shall be given to the Participant in person, by mailing, by posting, or by placing it in an Employer publication 29. 31 which is distributed in such a manner as to be reasonably available to such Participant. If the explanation is to be posted, it shall be posted at the location within the Participant's principal place of employment which is customarily used for employer notices to employees with regard to labor-management relations matters. (b) A Participant may elect to waive a qualified pre-retirement survivor annuity, revoke such election, and elect again to waive the qualified pre-retirement survivor annuity at any time and any number of times during the applicable election period. All such elections and revocations shall be in writing. Any election to waive a qualified pre-retirement survivor annuity must be accompanied by (1) the designation of a specific nonspouse beneficiary (including any class of beneficiaries or any contingent beneficiaries) who will receive the benefit upon the Participant's death, if applicable, and (2) a Spousal Consent to the extent required under section 2.48. The "applicable election period" for the waiver of the qualified pre-retirement survivor annuity shall commence once the Participant receives a written explanation of such annuity as set forth in section 10.1b,(3)(a) above or on the first day of the Plan Year in which the Participant attains age 35, whichever occurs earlier. Any waiver of the qualified pre-retirement survivor annuity made prior to the first day of the Plan Year in which the Participant attained age 35 shall become invalid as of such date and a new waiver must be issued in order for a waiver of a qualified pre-retirement survivor annuity to be effective. (c) Except as provided in subsection (d) below, the qualified pre-retirement survivor annuity benefit shall only apply to a Participant if he is credited with at least one Hour of Service with the Employer on or after August 23, 1984. (d) If a Participant dies with an effective waiver of the qualified pre-retirement survivor annuity in force or the Eligible Spouse so elects after the Participant's death, his account shall be distributed in the manner specified for unmarried Participants in section 10.1b.(1) above. 10.2 TIME OF DISTRIBUTION TO PARTICIPANT. a. The Plan Administrator must provide the Participant with "general notice of distribution" no less than thirty (30) and no more than ninety (90) days before the Participant's Annuity Starting Date. Such notice must be in writing and must set forth the following information: (i) an explanation of the eligibility requirements for, the material features of, and the relative values of the alternate forms of benefits available under section 10.la., and (ii) the Participant's right to defer receipt of a Plan distribution under sections 10.2c. and d. If the Plan is a transferee or offset plan with respect to the Participant as set forth in section l0.la.()(a), the general notice also shall include (a) the terms and conditions of a qualified joint and survivor annuity; (b) the Participant's right to make, and the effect of, an election to waive the qualified joint and survivor annuity; (c) the rights of the Participant's Eligible Spouse; and (d) the right to make, and the effect of, a revocation of an election to waive a qualified joint and survivor 30. 32 annuity. Such notice shall be given to the Participant in person, by mailing, by posting, or by placing it in an Employer publication which is distributed in such a manner as to be reasonably available to such Participant. If the notice is to be posted, it shall be posted at the location within the Participant's principal place of employment which is customarily used for Employer notices to employees with regard to labor-management relation matters. b. Upon receipt of the general notice of distribution, a Participant may consent to receive a distribution of his vested accounts as soon as practicable after his termination of service. A Participant's vested accounts shall be distributed in the manner set forth in section 10.la. If at any time the Participant elects or has elected that his benefits be paid through the purchase of an annuity, the Participant's consent to receive such distribution prior to his Normal Retirement Age must be accompanied by the written consent of the Participant's Eligible Spouse, if married, which is comparable to the Spousal Consent requirements in section 2.48, unless the distribution is to be made in the form of a qualified joint and survivor annuity. c. Subject to the maximum deferral requirements of sections 10.2e. and f., a Participant may elect to defer receipt of a Plan distribution, provided that such election is in writing, describes the form of benefit payment, indicates the date the distribution is to commence, and is signed by the Participant. To the extent not inconsistent with section 10.2d. below, in the event that the Participant does not elect to defer receipt of his distribution, payment of the vested balance in the Participant's accounts shall begin no later than the 60th day after the latest of the close of the Plan Year in which: (1) The Participant attains the earlier of age sixty-five (65) or Normal Retirement Age; (2) Occurs the tenth (10th) anniversary of the year in which the Participant entered the Plan; or (3) The Participant terminates service with the Employer. d. In the event that the Participant has terminated service and the Participant (and the Eligible Spouse, if applicable) neither consents to receive a Plan distribution nor elects to defer receipt of a Plan distribution, the Participant's accounts shall be distributed in the normal benefit form as soon as practicable thereafter, but in no event before the date the Participant attains Normal Retirement Age, if such vested accounts exceed $3,500 (or, if the Participant's vested accounts balances exceeded $3,500 prior to such distribution, is less than or equal to $3,500 for distributions made after the initial distribution date). For purposes of this section, "normal benefit form" shall mean a single distribution or, if the Plan is a transferee or offset plan with respect to the Participant as set forth in section 10.1a.(1)(a), a qualified joint and survivor annuity as set forth in section 10.1a.(1)(b) and 10.1a.(2), respectively. e. If the form of distribution is other than a single distribution, then the Participant's entire interest shall be paid over a period not extending beyond the life (or the life expectancy) of the Participant and his Beneficiary. For purposes of this subsection, a Participant may elect (other than in the case of a life annuity) to have the life expectancy of either he or his spouse, or both, redetermined; provided, however, that if a timely election is not made, such 31. 33 redetermination shall not be made. A Participant's election to redetermine life expectancy shall be made no later than the time distributions are required to commence under subsection f. below, shall be irrevocable, shall specify the frequency with which redeterminations are to be made (not more frequently than annually), and shall require that such redeterminations be made from that date forward. f. Notwithstanding anything to the contrary contained in this Plan, distribution of the vested balance in the Participant's accounts, or the first installment of such distribution, shall be made no later than April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 If the amount of the required payment cannot be ascertained by the date payment is to commence, or if it is not possible to make such payment because of the Plan Administrator's inability to locate the Participant after making reasonable efforts to do so, a payment retroactive to the required commencement date shall be made no later than sixty (60) days after the date the amount of such payment can be ascertained or the Participant is located. 10.3 TIME OF DISTRIBUTION TO BENEFICIARY. a. A Participant's Beneficiary may consent to receive a distribution of the Participant's vested accounts balances which shall commence within ninety (90) days (or within such longer period as is reasonable based on the particular facts and circumstances) after the Participant's death, to be distributed in the manner set forth in section 10.lb. If the Beneficiary is the Participant's Eligible Spouse, such consent must be comparable to the Spousal Consent requirements in section 2.48. b. A Beneficiary may elect to defer such distribution beyond the time specified in subsection a. above, provided that such election is in writing, describes the form of benefit payment to be received, indicates the date distributions are to commence, is signed by the Beneficiary, and satisfies the requirements of subsection d. below. c. In the event that the Beneficiary neither consents to receive a Plan distribution nor elects to defer receipt of a Plan distribution, the Beneficiary shall receive a Plan distribution in the normal benefit form within ninety (90) days (or within such longer period as is reasonable based on the particular facts and circumstances) after the Participant's death. For purposes of this subparagraph, "normal benefit form" shall mean a single distribution and, to the extent required by section 10.lb.(3), a qualified pre-retirement survivor annuity. Notwithstanding the foregoing but subject to subsection d. below, if the Beneficiary is the Participant's Eligible Spouse and the Plan is a transferee or offset plan with respect to the Participant as set forth in section 10.1a.(1)(a), the Beneficiary shall not receive a Plan distribution before the date the Participant attained or would have attained Normal Retirement Age if the Participant's vested accounts balances exceed $3,500 at the time of distribution (or, if the Participant's vested accounts balances exceeded $3,500 prior to such distribution, is less than or equal to $3,500 for distributions made after the initial distribution date). d. Notwithstanding any provision of this Article to the contrary, any distribution to a Participant's Beneficiary must comply with the following requirements: 32. 34 (1) If distributions to a Participant have begun and the Participant dies before his entire interest has been distributed to him, the remaining portion shall be distributed at least as rapidly as under the distribution method being utilized on the date of his death. (2) Except as provided in subsection d.(3) below, in no event shall distributions be made later than December 31 of the calendar year which contains the fifth anniversary of the Participant's death unless the Participant's designated Beneficiary elects to receive payments in substantially equal installments at least annually for a period not exceeding the Beneficiary's life expectancy, in which case the first installment must be made by December 31 of the calendar year immediately following the calendar year of the Participant's death. Any such election shall be made prior to the date the distribution is scheduled to commence. (3) An Eligible Spouse who elects to receive installment payments as set forth in subsection d.2. above, over such Eligible Spouse's life expectancy (which may be redetermined no more frequently than annually) may defer commencement of payments until December 31 of the calendar year the deceased Participant would have attained age 70 1/2. Such an election shall be made by the earlier of (a) the date the distribution is required to commence under the preceding sentence, or (b) December 31 of the calendar year which contains the fifth anniversary of the Participant's death. An Eligible Spouse who elects to have her life expectancy redetermined must do so no later than the time distributions are required to commence under this subsection, at which time the election will be irrevocable and shall apply to all subsequent years; provided, however, that if no election is made by the time distribution is required to commence, life expectancy may not be redetermined. If the Eligible Spouse elects to defer such distribution in accordance with this subsection and the Eligible Spouse dies leaving an unpaid balance, the balance shall be distributed no later than December 31 of the calendar year which contains the fifth anniversary of the Eligible Spouse's death to the Beneficiary designated by the Participant or, in the absence of such designation, to the estate of the Eligible Spouse. 10.4 SMALL ACCOUNT BALANCES. Notwithstanding anything to the contrary in sections 10.1, 10.2 and 10.3, if the Participant has terminated service or has died with vested accounts balances of $3,500 or less on the date distributions commence, the entire vested accounts balances shall be distributed in a single sum distribution as soon as practicable to the Participant, or, in the event of his death, to his Beneficiary. No distribution may be made under the preceding sentence after the Participant's Annuity Starting Date unless the Participant and his Eligible Spouse consent thereto in a manner which is comparable to the Spousal Consent requirements in section 2.48. 10.5 NONLIABILITY. Any payment to any Participant, or to his legal representative or Beneficiary, in accordance with the provisions of the Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Trustee, the Plan Administrator and the Employer, any of whom may require such Participant, legal representative or Beneficiary, as a condition precedent to such payment, to execute a receipt therefor in such form as shall be determined by the Trustee, the Plan Administrator, or the Employer, as the case may be. The 33. 35 Employer does not guarantee the Trust, the Participants, former Participants or their Beneficiaries against loss of or depreciation in value of any right or benefit that any of them may acquire under the terms of this Plan. All benefits payable hereunder shall be paid or provided for solely from the Trust, and the Employer does not assume any liability or responsibility therefor. 10.6 MISSING PERSONS. In the case of any benefit payable to a person under this Plan, if the Plan Administrator is unable to locate the person within six (6) months from the date a certified letter was mailed to such person notifying him of the benefit, the Plan Administrator shall direct the Trustee to establish a segregated account. This account shall share in the allocations of Trust income or loss on a segregated basis. The Trustee shall continue to maintain this segregated account until: (a) the person entitled to the benefit makes application therefor; or (2) the benefit reverts by escheat to the state, whichever occurs first. 10.7 BENEFICIARIES. a. DESIGNATION OF BENEFICIARY. Subject to the qualified pre-retirement survivor annuity and qualified joint and survivor annuity requirements set forth in this Article 10, a Participant shall have the right to designate, on forms provided by the Employer, a Beneficiary or Beneficiaries to receive the benefits herein provided in the event of his death (reduced by any security interest held by the Plan by reason of a loan outstanding to the Participant) and to revoke such designation or to substitute another Beneficiary or Beneficiaries at any time. Notwithstanding the preceding sentence, if this Plan is not a transferee or offset plan with respect to the Participant, a married Participant's initial designation of a Beneficiary or change in Beneficiary designation to someone other than or in addition to his Eligible Spouse shall not be effective unless Spousal Consent is obtained. b. ABSENCE OF VALID DESIGNATION OF BENEFICIARIES. If, upon the death of a Participant, former participant or Beneficiary, there is no valid designation of Beneficiary on file with the Employer, the following shall be designated by the Plan Administrator as the Beneficiary or Beneficiaries, in order of priority: (1) The surviving spouse; (2) Surviving children, including adopted children, in equal shares; (3) Surviving parents, in equal shares; (4) The Participant's estate; (5) The Beneficiaries estate. The determination of the Plan Administrator as to which persons, if any, qualify within the categories listed above shall be final and conclusive upon all persons. 34. 36 ARTICLE 11 LOANS 11.1 IN GENERAL. If the Adoption Agreement so provides, loans will be available from the Plan. If loans are available, the Plan Administrator will establish guidelines and procedures for loans from the Plan to Participants in specific instances, which guidelines may include limitations on the number of loans that may be outstanding to a Participant at any time or on the frequency of loans. Each loan must be approved by the Plan Administrator and must conform to the loan guidelines and procedures. The guidelines and procedures must be formulated and administered so that they conform with ERISA section 408(b)(1) and ERISA Reg. Section 2550.408-1(d). In addition, the following requirements of this section must be satisfied. a. Loans are available to all Participants and any other person required by the United States Department of Labor on a reasonably equivalent basis. However, no loan will be made to a Participant who is an Owner-Employee or a shareholder-employee unless such person has at his expense obtained an administrative exemption from ERISA's prohibited transaction rules from the United States Department of Labor with respect to such loan, unless the United States Department of Labor has issued a prohibited transaction class exemption Covering such loans. Any loan will be evidence by a promissory note signed by the Participant. b. Loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to Non-Highly Compensated Employees. c. Loans are adequately secured and bear a reasonable rate of interest. However, no more than 50% of a Participant's nonforfeitable accrued benefit may be pledged as collateral. Each loan hereunder will be a Participant-directed investment for the benefit of the Participant requesting such loan; accordingly, any default in the repayment of principal or interest of any loan hereunder will reduce the amount available for distribution to such Participant (or his Beneficiary). Thus, any loan hereunder will be effectively and adequately secured by the Participant's accounts. d. A loan to a Participant (when added to the outstanding balance of all other loans from this Plan and any other qualified plan maintained by the Employer) shall not be in an amount that exceeds the lesser of: (1) $50,000 reduced by the excess, if any, of: (i) the highest outstanding balance of loans from the plan during the one-year period ending on the day before such loan is made, over (ii) the outstanding balance of loans from the Plan on the date such loan is made; or (2) 50% of the vested Participant's account balances. 35. 37 e. Except as provided in the next sentence, the maximum term of a loan will be five years. If a Participant requests a loan for the acquisition of the principal residence of the Participant, the maximum repayment period will be determined by reference to bank loans for the same purpose. f. A Participant must obtain the consent of his or her spouse, if any, within the 90 day period before the time the account balance is used as security for the loan. A new consent is required if the account balance is used as security for any increase in the loan balance, for renegotiation, extension, renewal, or other revision of the loan. However, spousal consent is not necessary if the total amount of loans outstanding hereunder does not exceed $3,500. The consent of any subsequent spouse will not be necessary in order to foreclose the Plan's security interest in the Participant's account balance if the Participant's then spouse validly consented to the original use of the account balance as security (or if the Participant was unmarried at such time). If a valid spousal consent has been obtained in accordance with this section, then, notwithstanding any other provision of this Plan, the portion of the Participant's vested account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant's vested account balance (determined without regard to the preceding sentence) is payable to the surviving spouse, then the account balance shall be adjusted by first reducing the vested account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse. g. The Plan Administrator may require a Participant to agree to repay the principal and interest of a loan through regular payroll deduction payments. The Plan Administrator may establish back-up-repayment procedures for Participants who do not make payroll deduction repayment; except as may otherwise be permitted under ERISA or the ITA, any such back-up procedures will provide for substantially level amortization payments made quarterly or more frequently. Any loan hereunder may be prepaid, in whole or in part, at any time without penalty. If a Participant's service as an Employee is terminated for any reason, the entire unpaid principal and interest of any loan then outstanding to such Participant will become immediately due and payable. If a Participant defaults on any payment of interest or principal of a loan hereunder or defaults upon any other obligation relating to such loan, the Plan Administrator may take (or direct the Trustee to take) such action or actions as it determines to be necessary to protect the interest of the Plan. Such actions may include commencing legal proceedings against the Participant, or foreclosing on any security interest in the Participant's account or other security given in connection with a loan hereunder. In the event of a default, foreclosure on the Participant's note and attachment of one or more of the Participant's accounts given as security will not occur until a distributable event occurs in the Plan. 36. 38 An assignment or pledge of any portion of the Participant's interest in the Plan and a loan, pledge, or assignment with respect to any insurance contract purchased under the Plan, will be treated as a loan under this section. h. In the case of any Participant with one or more loans outstanding hereunder, the amount available for distribution to such Participant (or his Beneficiary) will consist of the Participant's vested account balance(s) (not including the outstanding principal and accrued but unpaid interest on such loans), plus the notes representing such loans. ARTICLE 12 INVESTMENTS 12.1 IN GENERAL. a. INVESTMENT FUNDS shall mean any investment fund chosen by the Employer in the Adoption Agreement as an investment media for the Trust. The Plan Sponsor and Plan Administrator shall have the discretion to make available and terminate such funds as they shall deem appropriate. b. The Plan Sponsor may impose requirements concerning the investment funds in which contributions to the Plan must be invested, and the Employer agrees to observe such requirements as a condition of participating in this Master Plan. Subject to such requirements, the Employer may permit each Participant to direct the investment of some or all of the contributions to his accounts. To the extent that Participants do direct the investment of their accounts, ERISA section 404(c) will apply to the Employer's Plan, and neither the Employer, the Plan Administrator, the Trustee, the Plan Sponsor nor any other fiduciary will have any responsibility or liability for the Participant's exercise of such investment control or for any loss of diminution in value occasioned thereby. 12.2 PARTICIPANT INVESTMENT DIRECTIONS. a. If the Employer allows, amounts credited to a Participant's accounts will be invested in the investment funds selected by the Employer in the Adoption Agreement for the Plan in accordance with the Participant's directions. Such Participant investment control may be permitted with respect to certain types of contributions but no others. Where allowed, a Participant's investment directions will govern the investment of contributions to his accounts and the transfer of amounts in one investment fund to another. Participants' exercise of investment control over their accounts will be subject to any rules of the Plan Administrator under section 12.3. b. Subject to the Plan Sponsor's requirements under section 12.lb. above, the Employer will determine the investment of any account over which the Participant does not exercise investment control under subsection a. above. In making such investment determinations, the Employer will establish investment policies or rules of general application which do not discriminate among Participants. 37. 39 12.3 RULES FOR EXERCISE OF INVESTMENT OPTIONS. Any designation of investments by Participants will be subject to nondiscriminatory general rules established by the Plan Administrator and the Trustee; such rules may include: (a) restrictions on the minimum amount or percentage of any contribution which may be placed in any particular investment fund; (b) restrictions on the use of different amounts or percentages for different types of contributions; (c) minimums or maximums (or both) on the amount which may be invested or transferred to or from any particular investment fund; and (d) restrictions on the time and frequency of designations, changes in designations and transfers from one investment fund to another including the required advance notice. These rules may differ for different types of contributions. The effective date of any change in a Participant's election respecting allocation of contributions among investment funds or any transfer from one fund to another must coincide with a valuation date for each fund, unless the Plan Administrator, Plan Sponsor and Trustee provide otherwise. ARTICLE 13 ACCOUNTS 13.1 SEPARATE ACCOUNTS. a. The Plan Administrator and the Trustee shall establish and maintain, where appropriate, separate accounts for each Participant, including Pre-Tax Contributions Account, After-Tax Contributions Account, Employer Contributions Account, Matching Contributions Account, and Rollover Contributions Account; a Participant's Rollover Contributions Account may contain subaccounts as provided in section 7.1 earnings will be credited to such accounts (and subaccounts) in accordance with the provisions of this Article. Since these individual accounts are maintained only for accounting purposes, a segregation of the Trust assets within each account is not required. b. The Plan Administrator may itself maintain records of Participants' accounts or may arrange for such records to be maintained by an outside service provider (which may be the Plan Sponsor or Trustee or a person contracted by the Plan Sponsor or Trustee). If the Plan Administrator arranges with a service provider to maintain records of Participants' accounts, the Plan Administrator will provide such information as is necessary for the service provider to maintain such accounts as required herein. 13.2 VALUATION AND ALLOCATION OF EARNINGS AND LOSSES TO PARTICIPANTS ACCOUNTS. As of each Valuation Date, the assets of the Trust will be valued at their fair market value. The Plan Administrator, with the assistance of the Trustee, shall allocate the net earnings and gains or losses of each investment fund of the Trust since the preceding Valuation Date to each account in the same proportion that the market value of the Participant's account in such investment fund bears to the total market value of all Participant's accounts in such investment fund; and, for this purpose, the Plan Administrator shall adopt uniform rules which conform to applicable law and generally accepted accounting practices. 38. 40 13.3 ALLOCATION OF EXPENSES. Any fees and expenses will be paid by the Employer unless it elects not to pay any or all such fees and expenses; in such event, any fee or expense not paid by the Employer will be paid from the Trust and will be allocated to the accounts of Participants or to collective investment funds in which accounts are invested in a manner which reasonably reflects the accounts and investment funds that generated such fees and expenses. Approximations may be used whenever its is not feasible to allocate such expenses on an exact basis. ARTICLE 14 PLAN ADMINISTRATION 14.1 PLAN ADMINISTRATOR. The Employer will be the Plan Administrator for purposes of section 3(16) of ERISA, and any reference in this document or the Adoption Agreement to the Plan Administrator means the Employer. The Employer may in the Adoption Agreement designate an individual or a group of individuals acting as a committee to act of the Employer's behalf in carrying out its duties as Plan Administrator. Such persons may, but need not, be Participants or Employees, partners, or officers of the Employer. The Employer will notify the Trustee of any such appointment The Employer may remove any such individual or committee member at any time with or without cause, by filing written notice of his removal with the Trustee. Any such individual or committee member may resign at any time by filing his written resignation with the Employer and the Trustee. A vacancy however arising, will be filled by the Employer. If the Employer does not appoint an individual or committee to act for the Employer, the Employer will carry out the responsibilities of the Plan Administrator. If the Employer is a sole proprietorship, in the event of the sole proprietor's death, his executor or administrator will be the Plan Administrator. If the Employer is a partnership, in the event of the death of all the partners, the executor or administrator of the last to die will be the Plan Administrator. 14.2 PLAN ADMINISTRATION. The Plan Administrator is a named fiduciary of the Plan. In addition, the Plan Administrator shall have the power and the duty to perform the following administrative functions according to the policies, interpretations, rules, practices and procedures established by the Employer in accordance with the respective areas of named fiduciary responsibilities: a. Apply Plan rules determining eligibility for participation or benefits; b. Calculate service and compensation credits for benefits; c. Prepare employee communications material; d. Maintain Participants' service and employment records; e. Prepare reports required by government agencies, which shall include maintaining records to demonstrate compliance with the Actual Deferral Percentage test of Article 4 of the Plan that indicate the extent that Qualified Non-Elective Contributions and Qualified Matching Contributions were taken into account to satisfy such requirements; 39. 41 f. Calculate benefits; g. Orient new Participants and advise Participants regarding their rights and options under the Plan; h. Collect contributions and apply contributions as provided in the Plan; i. Prepare reports concerning Participants' benefits; and j. Process claims. The Plan Administrator (and those to whom it has delegated its authority) shall have vested in it under the terms of this Plan full discretionary and final authority when exercising its duties hereunder. 14.3 COMPENSATION AND EXPENSES. The Plan Administrator will serve without compensation unless otherwise determined by the Employer, but no Employee of the Employer will be compensated for his service as Plan Administrator. All reasonable expenses of operating and administering the Plan will be paid by the Employer or from the assets of the Trust, as provided in section 13.4. Such expenses include the compensation of all persons employed or retained by the Plan Administrator (such as attorneys, accountants, actuaries, trustee or other consultants or specialists), premiums for insurance or bonds protecting the Plan and required by law or deemed advisable by the Plan Administrator, and all other fees, expenses or costs of Plan administration. 14.4 CLAIMS PROCEDURES. a. FILING OF CLAIM. A Participant or Beneficiary who believes has entitled to a benefit which he has net received may file a claim in writing with the Plan Administrator. The Plan Administrator may require a claimant to submit additional information, if necessary to process the claim. The Plan Administrator shall review the claim and render its decision within ninety (90) days from the date the claim is filed (or the requested additional information is submitted, if later), unless special circumstances require an extension of time for processing the claim. If such an extension is required, written notice of the extension shall be furnished the claimant within the initial ninety (90) day period. The notice shall indicate the special circumstances requiring the extension and the date by which the Plan Administrator expects to reach a decision on the claim. In no event shall the extension exceed a period of ninety (90) days from the end of the initial period. b. NOTICE OF CLAIM DENIED. If the Plan Administrator denies a claim, in whole or in part, it shall provide the claimant with written notice of the denial within the period specified in subparagraph a. The notice shall be written in language calculated to be understood by the claimant, and shall include the following information: (1) The specific reason for such denial; (2) Specific reference to pertinent Plan provisions upon which the denial is based; 40. 42 (3) A description of any additional material or information which may be needed to clarify or perfect the request, and an explanation of why such information is required; and (4) An explanation of the Plan's review procedure with respect to the denial of benefits. c. REVIEW PROCEDURE. Any claimant whose claim has been denied, in whole or in part, shall follow those review procedures as set forth herein. (1) A claimant whose claim has been denied, in whole or in part, may request a full and fair review of the claim by the Plan Administrator by making written request therefor within sixty (60) days of receipt of the notification of denial. The Plan Administrator, for good cause shown, may extend the period during which the request may be filed. The claimant shall be permitted to examine all documents pertinent to the claim and shall be permitted to submit issues and comments regarding the claim to the Plan Administrator in writing. (2) The Plan Administrator shall render its decision within sixty (60) days after receipt of the application for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case the decision shall be rendered as soon as possible but not later than one hundred and twenty (120) days after receipt of a request for review, if an extension of time is necessary, written notice shall be furnished the claimant before the extension period commences. (3) The Plan Administrator shall decide whether a hearing shall be held on the claim. If so, it shall notify the claimant in writing of the time and place for the hearing. Unless the claimant agrees to a shorter period, the hearing shall be scheduled at least fourteen (14) days after the date of the notice of hearing. The claimant and/or his authorized representative may appear at any such hearing. (4) The Plan Administrator shall send its decision on review to the claimant in writing within the time specified in this section. If the claim is denied, in whole or in part, the decision shall specify the reasons for the denial in a manner calculated to be understood by the claimant, referring to the specific Plan provisions on which the decision is based. The Plan Administrator shall not be restricted in its review to those provisions of the Plan cited in the original denial of the claim. (5) If the Plan Administrator does not furnish its decision on review within the time specified in this subsection c., the claim shall be deemed denied on review. 14.5 AGENT FOR LEGAL PROCESS. The Employer shall be the agent for service of legal process. 41. 43 ARTICLE 15 AMENDMENT, TERMINATION OR MERGER OF PLAN 15.1 AMENDMENT BY PLAN SPONSOR. The Plan Sponsor may amend any or all provisions of this Plan at any time without obtaining the consent of the Employer, and the Employer hereby expressly delegates authority to amend this Plan to the Plan Sponsor. 15.2 AMENDMENT BY EMPLOYER. Except for (a) changes of design options selected in the Adoption Agreement, and (b) adding certain amendments to ERISA or the ITA that will not cause the Plan to be treated as an individually designed plan, if the Employer amends the Plan or non-elective portions of the Adoption Agreement, for any other reason, it will no longer participate in this Plan and will be considered to have an individually designed Plan. 15.3 RESTRICTIONS ON AMENDMENTS. No amendment under section 15.1 or 15.2 will: a. cause or permit any part of the assets of the Trust to be diverted to purposes other than the exclusive benefit of Participants and their Beneficiaries, or cause or permit any portion of such assets to revert to or become the property of-the Employer; b. retroactively deprive any Participant of any benefit to which he was entitled hereunder by reason of contributions made by the Employer or the Participant before the amendment, unless such amendment is necessary to conform the Trust or Plan to, or satisfy the conditions of any law, governmental regulation or ruling or to permit the Plan and Trust to meet the requirements of ERISA and the ITA; c. decrease a Participant's account balance. For purposes of this paragraph, a Plan amendment which has the effect of decreasing a Participant's account balance or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing an accrued benefit; d. if the vesting schedule of a Plan is amended, for an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective, cause the nonforfeitable percentage (determined as of such date) of such Employee's right to his Employer-derived accrued benefit to be less than his percentage computed under the Plan without regard to such amendment; e. eliminate an optional form of distribution; or f. increase or otherwise affect the duties, liabilities or rights of the Trustee unless the Trustee consents thereto in writing. 15.4 NONREVERSION. Except as provided in this section, the assets of the Plan shall never inure to the benefit of an Employer; such assets shall be held for the exclusive purpose of providing benefits to Participants and their Beneficiaries and for defraying the reasonable administrative expenses of the Plan. 42. 44 a. If an Employer Contribution is made by virtue of a mistake of fact, this section shall not prohibit the return of such contribution to the Employer within one (1) year after the payment of the contribution. b. If a deduction for an Employer Contribution is disallowed under ITA section 23(p), or any successor provision thereto, the contribution shall be returned to the Employer (to the extent disallowed) within one (1) year after such disallowance. 15.5 TERMINATION OF PLAN. Although the Employer has established the Plan with the bona fide intention and expectation that it will be able to make contributions indefinitely, nevertheless the Employer is not and shall not be under any obligation or liability whatsoever to continue its contributions or to maintain the Plan for any given length of time. An Employer may, in its sole and absolute discretion, discontinue such contributions or terminate the Plan with respect to its Employees, in accordance with the provisions of me Plan, at any time with no liability whatsoever for such discontinuance or termination. If the Plan is terminated or partially terminated, or if contributions of an Employer are completely discontinued, the rights of all affected Participants in their accounts shall thereupon become nonforfeitable, notwithstanding any other provisions of the Plan. However, the Trust shall continue until all Participants' accounts have been completely distributed to or for the benefit of the Participants, in accordance with the Plan. 15.6 DISPOSITION AND TERMINATION OF THE PLAN. a. Upon complete or partial termination of the Plan, the Plan Administrator will determine, subject to the joint and survivor rules of this Plan, whether to direct the Trustee to continue to hold the accounts of Participants affected by the termination or partial termination, to disburse them as immediate benefit payments, to purchase immediate or deferred annuity contracts, or to follow any other procedure he deems advisable. The Trustee will follow the directions of the Plan Administrator. b. For purposes of each Employer adopting the Plan, the Trust created hereunder will terminate when all the assets in the Trust related to such Employer have been distributed. 15.7 MERGER OF PLANS. a. If the Employer merges or consolidates with or into a corporation, or if substantially all of the assets of the Employer are transferred to another business, the Plan hereby created shall terminate on the effective date of such merger, consolidation or transfer. However, if the surviving corporation resulting from such merger or consolidation, or the business to which the Employer's assets have been transferred, adopts this Plan, it shall continue and such corporation or business shall succeed to all rights, powers and duties of the Employer hereunder. The employment of any Employee who continues in the employ of such successor corporation or business shall not be deemed to have been terminated for any purpose hereunder. b. In no event shall this Plan be merged or consolidated with any other plan, nor shall there be any transfer of assets or liabilities from this Plan to any other plan, unless immediately after such merger, consolidation or transfer, each Participant's benefits, if such other plan were then to terminate, are at least equal to or greater than the benefits to which the 43. 45 Participant would have been entitled, had this Plan been terminated immediately before such merger, consolidation, or transfer. ARTICLE 16 TRANSFERS FROM OR TO OTHER QUALIFIED PLANS 16.1 TRANSFERS FROM ANOTHER PLAN OF THE EMPLOYER. a. Notwithstanding any other provision hereof, the Employer, with the approval of the Plan Sponsor, may cause to be transferred to the Trustee all or any of the assets held (whether by a Trustee, custodian, or otherwise) under any other defined contribution Plan which satisfies the requirements of ITA section 165(a) and which is maintained by the Employer for the benefit of any of the Participants hereunder. If the Trustee is keeping separate accounts for each Participant, any such assets so transferred will be accompanied by written instructions from the Employer or Plan Administrator naming the Participants for whose benefit such assets have been transferred and showing separately the respective contributions by the Employer and by the Participants and the current value of the assets attributable thereto. b. Upon receipt of any assets transferred to it under subsection (a), the Trustee may sell any non-cash assets and invest the proceeds and any cash transferred to it. The Trustee will make appropriate credits to the proper accounts in accordance with the Employer's or Plan Administrator's instructions. 16.2 TRANSFERS TO OTHER PLANS. Upon the written request of the Employer, the Trustee will transfer an amount designated by the Employer to the Trustee or custodian of any other qualified Plan under which Plan Participants are covered. ARTICLE 17 QUALIFIED DOMESTIC RELATIONS ORDER 17.1 GENERAL. The provisions of section 18.1 shall not be applicable to a Qualified Domestic Relations Order (as defined in section 17.2), and payment of benefits under the Plan shall be made in accordance with the terms of such order, provided that such order: a. creates or recognizes the existence of an alternate payee's (as defined in section 17.2) right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable to a Participant under the Plan; b. clearly specifies: (1) the name and the last known mailing address (if any) of the Participant and the name and mailing address of each alternate payee covered by the order; 44. 46 (2) the amount or percentage of the Participant's benefits to be paid by the Plan to each such alternate payee or the manner in which such amount or percentage is to be determined; (3) the number of payments or the period to which the order applies; and (4) the name of each plan to which such order applies; c. does not require the Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan; d. does not require the Plan to provide increased benefits (determined on the basis of actuarial value); and e. does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a Qualified Domestic Relations Order. 17.2 DEFINITIONS. The following terms shall have the following meanings for purposes of this Article: a. "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 under the Plan with respect to such Participant b. "QUALIFIED DOMESTIC RELATIONS ORDER" means any judgment, decree or order (including approval of a property settlement agreement) which: (1) 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; (2) is made pursuant to a state domestic relations law (including a community property law); and (3) which meets the requirements of the foregoing section 17.1. 17.3 PAYMENTS AFTER THE EARLIEST RETIREMENT AGE. In the case of any payment made before a Participant has separated from service, a Qualified Domestic Relations Order shall not be considered as failing to meet the requirements of section 17.1c. solely because such order requires that payment of benefits be made to an alternate payee: a. on or after the date on which the Participant first attains (or would have attained) the earliest retirement age; b. 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 benefits accrued); and 45. 47 c. in any form in which such benefits may be paid under the Plan to the Participant. 17.4 TREATMENT OF FORMER SPOUSE AS SURVIVING SPOUSE. To the extent provided in any Qualified Domestic Relations Order: a. the former spouse of a Participant shall be treated as a "surviving spouse" of such Participant for purposes of section 205 of ERISA; and b. if married for at least one (1) year to the Participant, such former spouse shall be treated as meeting the requirements of section 205(f) of ERISA. 17.5 PROCEDURES. The Plan Administrator shall promptly notify a Participant and any other alternate payee of the receipt of a domestic relations order and of the Plan's procedure for determining whether the order meets the requirements of a Qualified Domestic Relations Order under this Article. Within a reasonable period of time after the receipt of such order, the Plan Administrator, in accordance with such procedures as it shall from time to time establish, shall determine whether such order meets the requirements of a Qualified Domestic Relations Order under this Article and shall notify the Participant and each alternate payee of such determination. 17.6 PROCEDURES DURING PERIOD OF DETERMINATION. During any period of time in which the issue of whether a domestic relations order meets the requirements of a Qualified Domestic Relations Order under this Article is being determined by a court of competent jurisdiction, the Plan Administrator shall 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 such period if the order had been determined to be a Qualified Domestic Relations Order under this Article. If within eighteen (18) months such order is determined to be a Qualified Domestic Relations Order under this Article, the Plan Administrator shall instruct the Trustee to pay the segregated amounts (plus any interest thereon) to the person or persons entitled thereto. If within eighteen (18) months it is determined that such order is not a Qualified Domestic Relations Order under this Article, or the issue as to whether such order so qualifies is not resolved, then the Plan Administrator shall instruct the Trustee to pay the segregated amounts (plus any interest thereon) to the person or persons who would have been entitled to such amounts if there had been no order. Any determination that an order is a Qualified Domestic Relations Order under this Article which is made after the end of the eighteen (18) month period, shall be applied prospectively only. ARTICLE 18 MISCELLANEOUS 18.1 NON-ALIENATION AND NON-ASSIGNMENT OF BENEFITS. Except as provided in Article 17, no benefit under this Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to do shall be void, nor shall any benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to such benefit; and in the event that the Plan Administrator shall find that any 46. 48 Participant or other person entitled to a benefit under this Plan has become bankrupt or that any attempt has been made to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any of his benefits under this Plan, then such benefit shall cease and terminate and in that event the Plan Administrator shall hold or apply the same to or for the benefit of such Participant or such other person, his spouse, children, parents or other blood relatives, or any of them. 18.2 LIMITATION ON RIGHTS CREATED BY PLAN. a. The adoption and maintenance of the Plan and Trust will not be construed to give a Participant the right to continue in the employ of the Employer or to interfere with the right of the Employer to discharge, lay off or discipline a Participant at any time, or give the Employer the right to require any Participant to remain in its employ or to interfere with the Participant's right to terminate his employment. b. The adoption and maintenance of the Plan and Trust, the creation of any account or the payment of any benefit will not be construed as creating any legal or equitable right against the Employer or the Trust except as this Plan specifically provides. c. The Employer, the Trustee, the Plan Administrator and the Rollover Contributions Account do not guaranty the payment of benefits hereunder and benefits will be paid only to the extent of the assets of the Trust. It is a condition of participation in the Plan that each participant (and his Beneficiary or anyone else claiming through him) will look only to the assets of the Trust for the payment of any benefit to which he or his Beneficiary or other person is entitled. 18.3 ALLOCATION OF RESPONSIBILITIES. The Employer, the Trustee and the Plan Administrator will each have only those duties and responsibilities specifically allocated to each of them under the Plan. There will be no joint fiduciary responsibility between or among fiduciaries unless specifically stated otherwise. Any person may serve in more than one fiduciary capacity. 18.4 CURRENT ADDRESS OF PAYEE. The Plan Administrator, the Trustee and the Employer have no obligation to locate any person entitled to payments hereunder and will be fully protected if all payments, notices and other papers are mailed to the last address of which such person has notified the Plan Administrator in writing, or are withheld pending receipt of proof of his current address and proof that he is alive. 18.5 APPLICATION OF PLAN'S TERMS. a. If an Employee retired, died or otherwise terminated his service before the Effective Date of the Employer's Plan, the Employee and his beneficiaries will receive no benefits and will have no rights under the Plan. b. If an Employee retires, dies or otherwise terminates his service on or after the Effective Date of the Employer's Plan, the benefits and rights of the Employee and his beneficiaries will be determined in accordance with the terms of the Plan that are in effect on the date of such termination of service. 47. 49 c. The allocations to a Participant's account for any year of reference will be determined in accordance with the terms of the Plan that are in effect for such year. January 28, 1993 48. 50 BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN 165 (e) PROFIT SHARING PLAN ADOPTION AGREEMENT 51 BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN PROFIT SHARING PLAN ADOPTION AGREEMENT By executing this Adoption Agreement the Employer is adopting a profit sharing plan with a cash or deferred arrangement under Section 165(e) of the Puerto Rico Income Tax Act of 1954, as amended, (hereinafter "Pre-Tax Contribution's") plan for the benefit of its Employees. The Employer's Plan is comprised of the Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan Document, the Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan Master Trust and this Adoption Agreement. The terms used in this Adoption Agreement, as well as the rules to be complied with in connection with the Plan, are fully explained in the Master Plan Document. When signing this Adoption Agreement, the Employer has received copy of the Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan and the Master Plan's Summary Plan Description. The Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan Master Trust is available upon request at Banco Popular's main offices in Hato Rey, Puerto Rico. I. EMPLOYER INFORMATION Name of Employer DANBURY PHARMACAL PUERTO RICO, INC. Address: ROUTE 3 KM. 76.9 BOX 886 HUMACAO, PUERTO RICO 00792 Person for Banco Popular de Puerto Rico to Contact: MR. MIGUEL CANDELARIO Employer tax identification number: 52-1760757 Type of business: CORPORATION Employer's taxable year: CALENDAR YEAR (52-53 WEEK) II. GENERAL PLAN INFORMATION Plan Name: DANBURY PHARMACAL PUERTO RICO, INC. Adoption or Amendment of Plan 1. 52 By signing this Adoption Agreement the Employer: ADOPTS THE BANCO POPULAR DE PUERTO RICO MASTER DEFINED CONTRIBUTION RETIREMENT PLAN. Effective Date The effective date of this Plan or amendment is: JANUARY 1, 1994 (cannot be earlier than the first day of the Plan Year in which the Employer signs this Adoption Agreement). Plan Year The Plan Year shall begin on January 1 and end on December 31. III. ELIGIBILITY FOR PLAN PARTICIPATION Age Requirement: An employee must fulfill the following age requirement to become a Participant: No minimum age required Service Requirements. An employee must fulfill the following service requirement to become a Participant: Six consecutive calendar months. Method for calculating year of service: Hours of Service Method. An employee's service will be determined by using the Hours of Service method as described in Article 3 of the Master Plan Document. IV. ENTRY DATES Indicate the Plan's entry dates: Monthly Entry Dates. The first day of each month is an entry date. 2. 53 V. COMPENSATION Compensation A Participant's Compensation shall mean the total compensation that is currently includible in income for income tax purposes paid to him by the Employer during a Plan Year. However, Compensation will exclude the following items (Note: the exclusions of any of the following items will not be permitted if such exclusions would result in using a higher percentage of total Compensation for Highly Compensated Employees than for Non-Highly Compensated Employees): [X] AWARDS AND OTHER EMPLOYEE BENEFITS VI. CONTRIBUTIONS Profit Sharing Contributions: For each Plan Year in which this Plan is in effect the Employer may make contributions to the Trust in one or more installments out of its Net Profits (as defined in section 6.2c.(3) of the Plan) for the Plan Year, in such amounts as the Employer may determine (if any). The Plan Year for which each contribution is made shall be designated at the time of the contribution. Profit-Sharing Contributions may not exceed the lesser of Employer's Net Profits or 15% of a Participant's Compensation in any Plan Year. Employee Contributions: Pre-Tax Contributions and/or After-Tax Contributions, at the election of the Participant. Pre-Tax Contribution in a Plan Year may not exceed 10% of Compensation or $7,000, whichever is less. Pre-Tax Contributions and/or After-Tax Contributions may not commence prior to the date the Plan is adopted. Matching Contributions: The Employer will make a Matching Contribution equal to 25 cents for each dollar of a Participant's Pre-Tax Contributions. 3. 54 However, the Employer will not make Matching Contributions above 3% of the Participant's Compensation. VII. VESTING Pre-Tax, After-Tax and/or Matching Contributions. Pre-Tax, After-Tax and or Matching Contributions Account are always 100% vested. Profit Sharing Contributions Profit Sharing Contributions will vest in accordance with the following vesting schedule: Grading Vesting. Participants are vested in accordance with the following vesting schedule. (A participant's vested percentage is the percentage in column (2) or the percentage in column (3), whichever is greater.
(1) (2) (3) Years Required Vested Minimum of Service Percentage Percentage ----------------- -------------- -------------- Less than 1 0 0 At least 1 10 0 At least 2 20 0 At least 3 30 20 At least 4 40 40 At least 5 60 60 At least 6 80 80 At least 7 100 100
VIII. LOANS Loans to Participants from the Plan are not permitted. 4. 55 IX. IN-SERVICE WITHDRAWALS The following provisions will govern the availability of in-service withdrawals from a Participant's accounts. See Article 9 of the Plan document for additional details, including definitions and limitations. Profit Sharing Contributions. In-service withdrawals from Profit Sharing Contributions will not be allowed. Pre-Tax Contributions. In-service withdrawals from Pre-Tax Contributions will only be allowed in case of a financial hardships. After-Tax Contributions. In-service withdrawals from After-Tax Contributions will be allowed for any reason. Matching Contributions. In-service withdrawals from Matching Contributions will only be allowed in case of a financial hardship. Rollover Contributions. Refer to Article 9 of the Master Plan document. Withdrawals after Age 59 1/2 After age 59 1/2, a Participant may make in-service withdrawals from his Pre-Tax Contributions and, if applicable, Matching Contributions Accounts without financial hardship (up to the vested percentage of each such accounts). X. RETIREMENT AGE Normal Retirement Age. A Participant will be fully vested and may retire after the latter of: reaching age 65 or the fifth anniversary of the first day of the Plan Year in which he/she commenced participation in the Plan. Disability Retirement. A Participant will be fully vested and may retire before normal retirement age upon becoming disabled. Early Retirement Age A Participant will be fully vested and may retire prior to Normal Retirement Age upon reaching age 55 and completing 7 years of service. 5. 56 XI. INVESTMENT FUNDS The Employer selects the following funding vehicles for the Employer's Plan(s): 1. LaSalle National Trust 2. Columbia Fixed Income 3. Vanguard Quantitative Fund 4. PBHG Growth Fund 5. T. Rowe Price International Stock Fund All investment instructions as to each Participant's accounts will be directed by the Participant. XII. PLAN ADMINISTRATION Plan Administrator. The Employer is the legal plan administrator under ERISA. Specify one or more officers, partners, Employees or other persons to perform the functions of the Plan Administrator. [X] MIGUEL CANDELARIO [X] OLIVER ESMAN [X] MICHELLE OSTERWISE Each person selected should submit a specimen signature. Any such appointment may be changed by written notice. XIII. MASTER TRUST By executing this Adoption Agreement, the Employer adopts the Master Trust established by the Banco Popular de Puerto Rico to carry out the purposes of the Plan and thus retains Banco Popular as Trustee. The terms of the Trust and corresponding fees are contained in the Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan and Fee Schedule, respectively, which are incorporated by reference into this Adoption Agreement. 6. 57 XIV. RECORDKEEPER By executing this Adoption Agreement, the Employer retains Banco Popular de Puerto Rico as Recordkeeper of the Plan pursuant to the Recordkeeping Agreement and Fee Schedule incorporated by reference into this Adoption Agreement. Recordkeeping and Trustee's Fees and Conditions: The Employer agrees to retain Banco Popular de Puerto Rico as Trustee and Recordkeeper for an initial minimum period of three (3) years. The Adoption Agreement shall renew automatically for an indefinite period of time. The Employer may terminate this Adoption Agreement at any time subject to a written termination notice received by Banco Popular at least thirty (30) days prior to the effective date of termination. If termination occurs during the initial three (3) year period, the Employer agrees to compensate Banco Popular with a termination fee equal to three times the total annual fees minus any amount already satisfied in connection with the services rendered since the effective date of this Adoption Agreement. Banco Popular may change the Fee Schedule from time to time subject to the approval of the Employer, upon receipt of written notification to the Employer. The identifying number for the Banco Popular de Puerto Rico Master Defined Contribution Retirement Plan document is 01 and for this Adoption Agreement is 100. The Plan Sponsor is Banco Popular de Puerto Rico, 209 Ponce de Leon Avenue, Hato Rey, Puerto Rico 00917. The Plan Sponsor will notify you if it amends or discontinues this Master Plan. The Employer should insure that this Adoption Agreement has been filled out completely and properly. Failure to do so may result in Plan disqualification. XV. EXECUTION OF ADOPTION AGREEMENT Responsibilities of Employer The Employer understands that, by establishing this Plan, it will have certain legal responsibilities for which neither the Trustee nor the Plan Sponsor will be responsible. The Employer also understands that it will be solely responsible for any taxes, costs or expenses arising from the disqualification of the Employer's Plan. The Employer warrants that it has obtained legal and tax advice to the extent the Employer deems necessary before signing this Adoption Agreement. Employer 7. 58 Name of Employer DANBURY PHARMACAL PUERTO RICO, INC. Signed ------------------------------------------------------------------ Print name and title ---------------------------------------------------- Date -------------------------------------------------------------------- Trustee Name of Trustee BANCO POPULAR DE PUERTO RICO Address 209 Ponce de Leon Avenue Hato Rey, Puerto Rico 00917 Signed ------------------------------------------------------------------ Print name and title Luis R. Cintron Senior Vice President & Trust Officer Date 06-28-94 8. -----END PRIVACY-ENHANCED MESSAGE-----