--------------------------------------------------------------------------------

 

EXHIBIT 10.5

 

 

 

GENENTECH, INC.

 

TAX REDUCTION INVESTMENT PLAN

 

(January 1, 2002 Restatement)

 

 

 

--------------------------------------------------------------------------------

 

 

TABLE OF CONTENTS

             

Page

       

PREAMBLE

 

1   

SECTION 1

      DEFINITIONS

2   

SECTION 2

      ELIGIBILITY AND MEMBERSHIP

12   

 

2.1

Initial Eligibility

12   

 

2.2

Employer Aggregation

12   

 

2.3

Membership

12   

 

2.4

Voluntary Suspension

13   

 

2.5

Mandatory Suspension

14   

 

2.6

Termination of Membership

14   

SECTION 3

      SALARY DEFERRALS AND FLEX CREDITS

14   

 

3.1

Salary Deferrals and Flex Credits

14   

   

3.1.7     Catch-Up Contributions

18   

 

3.2

Salary Deferral and Flex Credit Elections

18   

 

3.3

Payment of Salary Deferrals and Excess Flex Credits

22   

SECTION 4

      MATCHING CONTRIBUTIONS

22   

 

4.1

Amount of Matching Contributions

22   

 

4.2

Timing

26   

 

4.3

Periodic Contributions

26   

 

4.4

Profits Not Required

27   

 

4.5

After-Tax Contributions

27   

SECTION 5

      ALLOCATIONS AND INVESTMENT

27   

 

5.1

Salary Deferrals, Catch-Up Contributions and Flex Credits

27   

 

5.2

Matching Contributions

27   

 

5.3

Investment

28   

 

5.4

Limitations on Allocations

29   

SECTION 6

      ACCOUNTS AND COMMINGLED FUNDS

32   

 

6.1

Members' Accounts

32   

 

6.2

Trust Fund Assets

33   

 

6.3

Commingled Funds

33   

 

6.4

Valuation of Members' Accounts

35   

 

6.5

Valuation of Shares

35   

 

-i-

--------------------------------------------------------------------------------

 

 

TABLE OF CONTENTS

(continued)

             

Page

         

6.6

Statements of Members' Accounts

36   

 

6.7

Accounts Nonforfeitable

36   

SECTION 7

      DISTRIBUTIONS

36   

 

7.1

Events Permitting Distribution

36   

 

7.2

Times for Distribution

37   

 

7.3

Consent Requirement

38   

 

7.4

Form of Distribution

38   

 

7.5

Common Stock Restrictions

40   

 

7.6

Beneficiary Designations

40   

 

7.7

Payments to Minors or Incompetents

42   

 

7.8

Undistributable Accounts

42   

SECTION 8

      WITHDRAWALS, LOANS AND DOMESTIC RELATIONS ORDERS

43   

 

8.1

General Rules

43   

 

8.2

Hardship Withdrawal

44   

 

8.3

Age 59 1/2 Withdrawal

46   

 

8.4

Loans to Members

46   

 

8.5

Qualified Domestic Relations Orders

49   

SECTION 9

      ADMINISTRATION OF THE PLAN

50   

 

9.1

Plan Administrator

50   

 

9.2

Committee

51   

 

9.3

Actions by Committee

51   

 

9.4

Powers of Committee

51   

 

9.5

Fiduciary Responsibilities

53   

 

9.6

Investment Responsibilities

53   

 

9.7

Voting and Tender Offer Rights in Common Stock

54   

 

9.8

Decisions of Committee

58   

 

9.9

Administrative Expenses

58   

 

9.10

Eligibility to Participate

58   

 

9.11

Indemnification

59   

SECTION 10

      TRUST FUND AND ROLLOVER CONTRIBUTIONS

59   

 

-ii-

--------------------------------------------------------------------------------

 

 

TABLE OF CONTENTS

(continued)

             

Page

         

10.1

Trust Fund

59   

 

10.2

No Diversion of Assets

60   

 

10.3

Continuing Conditions

60   

 

10.4

Change of Investment Alternatives

61   

 

10.5

Rollover Contributions

61   

SECTION 11

      MODIFICATION OR TERMINATION OF PLAN

62   

 

11.1

Employers' Obligations Limited

62   

 

11.2

Right to Amend or Terminate

62   

 

11.3

Effect of Termination

63   

SECTION 12

      TOP-HEAVY PLAN

63   

 

12.1

Top-Heavy Plan Status

63   

 

12.2

Top-Heavy Plan Provisions

64   

SECTION 13

      GENERAL PROVISIONS

65   

 

13.1

Plan Information

65   

 

13.2

Inalienability

65   

 

13.3

Rights and Duties

66   

 

13.4

No Enlargement of Employment Rights

66   

 

13.5

Apportionment of Duties

66   

 

13.6

Merger, Consolidation or Transfer

67   

 

13.7

Military Service

67   

 

13.8

Applicable Law

67   

 

13.9

Severability

67   

 

13.10

Captions

67   

EXECUTION

 

68   

APPENDIX A:  EFFECTIVE DATES

A-1   

 

-iii-

--------------------------------------------------------------------------------

 

 

GENENTECH, INC.
TAX REDUCTION INVESTMENT PLAN
(January 1, 2002 Restatement)

PREAMBLE

            GENENTECH, INC. (the "Company") having established the Genentech,
Inc. Tax Reduction Investment Plan (the "Plan") effective as of January 1, 1985,
amended and restated the Plan effective (most recently) as of January 1, 2000,
and amended the restated Plan on several occasions, hereby again amends and
restates the Plan in its entirety effective (generally) as of January 1, 2002,
except as otherwise indicated herein or in the attached Appendix A.

            The Plan is maintained for the benefit of Eligible Employees of the
Company and its participating Affiliates, in order (1) to provide Eligible
Employees with a means of supplementing their retirement income on a tax-favored
basis, (2) to provide Eligible Employees with an incentive to continue and
increase their efforts to contribute to the success of the Company, and (3) to
enable Eligible Employees to acquire an equity ownership interest in the
Company. The Plan is designed to constitute a qualified profit-sharing plan, as
described in section 401(a) of the Code, which includes a qualified cash or
deferred arrangement, as described in section 401(k) of the Code. The Plan is
also designed to qualify as a 404(c) plan (within the meaning of section 404(c)
of ERISA).

            With respect to any period during which GenenFlex does not permit an
option to contribute to the Plan excess Flex Credits awarded thereunder, the
provisions of the Plan related to the deferral of excess Flex Credits shall be
suspended.

 

 

--------------------------------------------------------------------------------

 

 

SECTION 1

DEFINITIONS

            The following capitalized words and phrases shall have the following
meanings unless a different meaning is plainly required by the context:

            1.1     "Affiliate" shall mean a corporation, trade or business
which is, together with any Employer, a member of a controlled group of
corporations or an affiliated service group or under common control (within the
meaning of section 414(b), (c), (m) or (o) of the Code), but only for the period
during which such other entity is so affiliated with any Employer.

            1.2     "Alternate Payee" shall mean any spouse, former spouse,
child or other dependent (within the meaning of section 152 of the Code) of a
Member who is recognized by a QDRO (as defined in Section 8.5) as having a right
to receive any immediate or deferred payment from a Member's Account under this
Plan.

            1.3     "Beneficiary" shall mean the person or persons entitled to
receive benefits under the Plan upon the death of a Member in accordance with
Section 7.6.

            1.4     "Board of Directors" shall mean the Board of Directors of
the Company, as from time to time constituted.

            1.5     "Code" shall mean the Internal Revenue Code of 1986, as
amended. Reference to a specific section of the Code shall include such section,
any valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.

            1.6     "Commingled Funds" shall mean (collectively) the commingled
funds described in Section 6.3.

 

2

--------------------------------------------------------------------------------

 

 

            1.7     "Committee" shall mean the administrative committee
appointed by the Board of Directors (as provided in Section 9.2) and charged
with the general administration of the Plan pursuant to Section 9.

            1.8     "Common Stock" shall mean the common stock of the Company,
par value $0.02, as from time to time constituted.

            1.9     "Company" shall mean Genentech, Inc., a Delaware
corporation, and any successor by merger, consolidation or otherwise that
assumes (in writing) the obligations of the Company under the Plan.

            1.10    "Compensation" shall mean all salary, wages, annual cash
bonuses, sales bonuses, and commissions paid by any Employer with respect to
services performed during any period by an Employee, including Salary Deferrals
and "catch-up contributions" made under Section 3.1.7 but excluding (a)
contributions made by any Employer (other than Salary Deferrals and "catch-up
contributions") under this Plan or any other employee benefit plan (within the
meaning of section 3(3) of ERISA), and (b) other items, even if reported as
income on an Employee's IRS Form W-2, such as income from the exercise of stock
options, proceeds from the redemption of Common Stock, tuition reimbursements,
reimbursements of health club dues, Genenchecks, referral bonuses, severance
payments (if paid on a payroll-by-payroll basis after termination), and
relocation expenses; provided, however, that the amount of an Employee's
Compensation shall not be increased or decreased by (i) compensation reductions
effected or Flex Credits awarded under GenenFlex, or (ii) amounts that are
otherwise not includible in the gross income of the Employee by reason of
section 132(f)(4) of the Code. No portion of the Compensation of any Member for
a Plan Year which exceeds the Compensation Limit (as defined below) shall be
taken into account for any purpose under the Plan for any Plan Year.
"Compensation Limit"

 

 

3

--------------------------------------------------------------------------------

 

 

shall mean $200,000 (as adjusted periodically pursuant to sections 401(a)(17)
and 415(d) of the Code).

            1.11    "Disability" shall mean the mental or physical inability of
a Member to perform his or her normal job as evidenced by the certificate of a
medical examiner satisfactory to the Committee (in its discretion) certifying
that the Member is disabled under the standards of the Company's long-term
disability plan.

            1.12    "Eligible Annual Bonus" shall mean (a) any annual
discretionary bonus paid by an Employer to an Employee under the Company's
Corporate Bonus Program (or an Employer's similar bonus program), or (b) any
fourth calendar quarter payout under any of the Bonus Plans that comprise the
Company's Field Sales Incentive Compensation Program. All Eligible Annual Bonus
amounts shall be determined net of employee stock purchase plan and mandatory
deductions including, without limitation, Employee-paid FICA and SDI
withholdings; provided, however, that the term "Eligible Annual Bonus" shall not
include any other sales incentive bonus or any special, extraordinary or
GenenCheck bonus.

            1.13    "Eligible Employee" shall mean every Employee of an Employer
except:

            (a)     An Employee who is employed on a temporary basis as defined
by an Employer; provided, however, that any such Employee who is credited with
at least 1,000 Hours of Service for a 12-month period beginning on his or her
date of hire or any anniversary thereof shall become an Eligible Employee as of
the Entry Date that next follows the last day of such 12-month period;

            (b)     A part-time Employee who is not normally scheduled to work
at least 20 hours per week; provided, however, that any such Employee who is
credited with at least 1,000 Hours of Service for a 12-month period beginning on
his or her date of hire or any anniversary thereof shall become an Eligible
Employee as of the Entry Date that next follows the last day of such 12-month
period;

            (c)     An Employee who is a member of a collective bargaining unit
and who is covered by a collective bargaining agreement where retirement
benefits were the subject of good faith bargaining, unless the agreement
specifically provides for coverage of such Employee under this Plan;

 

 

4

--------------------------------------------------------------------------------

 

 

            (d)     An individual employed by any corporation or other business
entity that is merged or liquidated into, or whose assets are acquired by any
Employer, unless any two members of the Committee, acting in their capacities as
officers of the Company rather than as fiduciaries with respect to the Plan,
designate (in writing) the employees of that corporation or other business
entity as Eligible Employees under the Plan;

            (e)     An Employee whose Compensation is not paid from any
Employer's U.S. payroll; and

            (f)     An individual who, as to any period of time, is classified
or treated by an Employer as an independent contractor, a consultant, a Leased
Employee or an employee of an employment agency or any entity other than an
Employer, even if such individual is subsequently determined to have been a
common-law employee of the Employer during such period.

For purposes of this Section 1.13, "date of hire" shall mean the date on which
an Employee first completes an Hour of Service.

            1.14    "Employee" shall mean an individual who is a (a) employed by
an Employer or Affiliate as a common-law employee, or (b) a Leased Employee.
However, if Leased Employees constitute less than 20% of the nonhighly
compensated work force (within the meaning of section 414(n)(5)(C)(ii) of the
Code), the term "Employee" shall not include those Leased Employees who are
covered by a plan described in section 414(n)(5) of the Code.

            1.15    "Employer" shall mean the Company and each Affiliate that
adopts this Plan with the approval of the Board of Directors.

            1.16    "Entry Date" shall mean the first day of each payroll
period.

            1.17    "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended. Reference to a specific section of ERISA shall include
such section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or superseding such
section.

            1.18    "Flex Credit" shall have the meaning set forth in GenenFlex.

 

5

--------------------------------------------------------------------------------

 

 

            1.19    "GenenFlex" shall mean the cafeteria plan (within the
meaning of section 125 of the Code) pursuant to which Flex Credits are awarded
to any Employee of an Employer.

            1.20    "Highly Compensated Employee" shall mean a Highly
Compensated Active Employee or a Highly Compensated Former Employee, as defined
below:

            (a)    "Highly Compensated Active Employee" shall mean any Employee
who performs services for an Employer or Affiliate during the Determination Year
and who:

            (1)    Received Compensation in excess of $80,000 (as adjusted
periodically pursuant to sections 414(q)(1) and 415(d) of the Code) during the
Look-Back Year; or

            (2)    Is or was a 5-percent owner (within the meaning of section
414(q)(2) of the Code) at any time during the Determination Year or the
Look-Back Year.

            (b)    "Highly Compensated Former Employee" shall mean any Employee
who (1) separated (or was deemed to have separated) from service prior to the
Determination Year, (2) performed no services for any Employer or Affiliate
during the Determination Year, and (3) was a highly compensated active employee
(as defined in section 414(q) of the Code as then in effect) for either the Plan
Year in which the separation occurred or any Determination Year ending on or
after his or her 55th birthday.

            (c)    The determination of who is a Highly Compensated Employee
shall be made in accordance with section 414(q) of the Code.

            (d)    For purposes of applying this Section 1.20:

            (1)    "Compensation" shall mean Total Compensation (as defined in
Section 5.4.2(d) and applied using the definition of "Affiliate" in Section 1.1
rather than in Section 5.4.2(a));

            (2)    "Determination Year" shall mean the Plan Year for which the
determination is being made; and

            (3)    "Look-Back Year" shall mean the Plan Year immediately
preceding the Determination Year.

            1.21    "Hour of Service" shall mean an hour credited to an Employee
under this Section 1.21:

            (a)    Paid Hours. An "Hour of Service" includes each hour for
which:

 

 

6

--------------------------------------------------------------------------------

 

 

            (1)    An Employee is directly or indirectly paid or entitled to
payment by an Employer or Affiliate for the performance of duties;

            (2)    An Employee is directly or indirectly paid or entitled to
payment by an Employer or Affiliate for periods 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 or Leave of Absence (with pay); and

            (3)    Back pay (irrespective of mitigation damages) has been
awarded or agreed to by an Employer or Affiliate.

            (b)    No Duties Performed. Except as otherwise provided in
subsection (d) below, no Hours of Service shall be credited for periods during
which no duties are performed if payment by an Employer or Affiliate is made or
due under a plan maintained solely for the purpose of complying with applicable
worker's compensation, unemployment compensation or disability insurance laws,
or is made as reimbursement to an Employee for medical or medically related
expenses. In no event will more than 501 Hours of Service be credited under this
paragraph (b) on account of any single continuous period during which an
Employee performs no duties.

            (c)    Crediting Rules. Hours of Service shall be credited under
this Section 1.21 in accordance with U.S. Department of Labor Regulation Section
2530.200b-2(b) and (c).

            (d)    Family-Related Absences. In the case of an Employee who is
absent from active employment with an Employer or Affiliate for any period,

            (1)    By reason of her pregnancy or the birth of his or her child,

            (2)    By reason of the placement of a child with the Employee in
connection with his or her adoption of such child,

            (3)    For purposes of caring for any such child for a period
beginning immediately following such birth or placement, or

            (4)    On account of a leave of absence taken pursuant to the Family
and Medical Leave Act of 1993 ("FMLA").

"Hour of Service" shall mean any hour that is not credited as an Hour of Service
(because the Employee is not paid or entitled to payment therefor) but which
would otherwise normally have been credited to the Employee (but for the
absence) under paragraphs (a) through (c) above. In any case in which the
Committee is unable to determine the number of hours that would otherwise
normally have been credited to an Employee (but for the absence) under this
paragraph (d), the Employee shall be credited with eight Hours of Service for
each day of the absence. Notwithstanding the foregoing, (A) no more than 501
Hours of Service shall be credited under this paragraph (d) to any individual on
account of any single pregnancy, birth, placement or other FMLA leave,

 

 

7

--------------------------------------------------------------------------------

 

 

and (B) the hours described in this paragraph (d) shall be treated as Hours of
Service (i) for the Plan Year in which the absence begins, to the extent
required to credit the Employee with 1,000 Hours of Service for that Plan Year,
and (ii) with respect to the remainder of the 501 Hours of Service maximum, for
the next following Plan Year.

            1.22    "Investment Manager" shall mean any investment manager
appointed by the Committee in accordance with Section 9.6.

            1.23    "Leased Employee" shall mean any person (other than a
common-law employee of the Employer or Affiliate) who, pursuant to an agreement
between the Employer or Affiliate and any other person ("leasing organization"),
has performed services for the Employer or Affiliate on a substantially full
time basis for a period of at least one year, and such services are performed
under primary direction or control by the Employer or Affiliate. Contributions
or benefits provided a Leased Employee by the leasing organization which are
attributable to services performed for the Employer or Affiliate shall be
treated as provided by the Employer or Affiliate. A Leased Employee shall not be
considered an Employee of the Employer or Affiliate if:

            (a)    Such Leased Employee is covered by a money purchase pension
plan providing (i) a nonintegrated employer contribution rate of at least 10
percent of compensation, as defined in Code Section 415(c)(3), but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the Leased Employee's gross income under Code Sections 125,
402(e)(3), 402(h)(1)(B) or 403(b), and Code Section 132(f), and (ii) immediate
participation, and (iii) full and immediate vesting; and

            (b)    Leased Employees do not constitute more than 20% of the
Employers' nonhighly compensated work force.

            1.24    "Leave of Absence" shall mean the period of an Employee's
absence from active employment (a) authorized by any Employer in accordance with
its established and uniformly administered personnel policies, provided that the
Employee returns to active employment after the authorized absence period
expires, unless the Employee's failure to return is attributable to his or her
retirement or death; or (b) because of military service in the armed forces of
the United

 

 

8

--------------------------------------------------------------------------------

 

 

States, provided that the Employee returns to active employment following
discharge within the period during which he or she retains reemployment rights
under federal law.

            1.25    "Matching Contributions" shall mean as to each Member the
amounts contributed under the Plan by the Employers, excluding Salary Deferrals,
"catch-up contributions" made under Section 3.1.7 and excess Flex Credits, in
accordance with Section 4.1.

            1.26    "Member" shall mean an Eligible Employee who has become a
Member of the Plan pursuant to Section 2.1 and has not ceased to be a Member
pursuant to Section 2.6.

            (a)    For each Plan Year a Member shall be classified as an "Active
Member" (1) if he or she has (A) enrolled in the Plan for any portion of the
Plan Year by authorizing the required Salary Deferrals in accordance with
Sections 2.3, 3.1 and 3.2, and/or (B) elected under GenenFlex (subject to the
rules in effect under GenenFlex) to have at least five dollars ($5.00) worth of
excess Flex Credits contributed to his or her GenenFlex Account; or (2) his or
her active membership is resumed during the Plan Year after the end of a
suspension period in accordance with Section 2.4 or 2.5.

            (b)    A Member who is not an Active Member shall be classified as
an "Inactive Member."

            1.27    "Member's Accounts" or "Accounts" shall mean as to any
Member the one or more separate accounts maintained in order to reflect his or
her interest in the Plan. Each Member's Accounts shall be comprised of up to
five separate subaccounts, as follows:

                        1.27.1  "GenenFlex Account" shall mean the subaccount
maintained to record any excess Flex Credits that the Member has elected under
GenenFlex (subject to the rules in effect under GenenFlex and Section 2.3.1) to
have contributed to his or her GenenFlex Account pursuant to Sections 3.1 and
3.2 and any adjustments relating thereto.

                        1.27.2  "Loan Account" shall mean the subaccount
maintained to record any loans made to the Member from his or her Accounts
pursuant to Sections 5.3.3 and 8.4.

 

9

--------------------------------------------------------------------------------

 

 

                        1.27.3  "Matching Account" shall mean the subaccount
maintained to record any Matching Contributions made on behalf of the Member
pursuant to Sections 4.1 and 4.1 and any adjustments relating thereto.

                        1.27.4  "Rollover Account" shall mean the subaccount
maintained to record any transfers to the Plan made by or on behalf of a Member
pursuant to Section 10.5 and any adjustments relating thereto.

                        1.27.5  "Salary Deferral Account" shall mean the
subaccount maintained to record any Salary Deferrals and "catch-up"
contributions made under Section 3.1.7 (which may be maintained as a separate
subaccount within the Salary Deferral Account) that the Member has elected to
have contributed to his or her Salary Deferral Account pursuant to Sections 3.1
and 3.2 and any adjustments relating thereto.

            1.28    "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time. Reference to a specific section of the 1934 Act
shall include any section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing or
superseding such section.

            1.29    "Normal Retirement Age" shall mean age 55.

            1.30    "Plan" shall mean the Genentech, Inc. Tax Reduction
Investment Plan, formerly the Genentech, Inc. Tax Incentive Savings Plan, as set
forth in this instrument and as heretofore or hereafter amended from time to
time in accordance with Section 11.2.

            1.31    "Plan Year" shall mean the calendar year.

            1.32    "Salary Deferrals" shall mean as to each Member the amounts
contributed under the Plan by the Employers in accordance with Section 3.3,
pursuant to the salary deferral election made by the Member in accordance with
Sections 3.1 and 3.2. A Member's Salary Deferrals

 

 

10

--------------------------------------------------------------------------------

 

 

shall (a) include amounts contributed in respect of his or her regular periodic
Compensation and/or Eligible Annual Bonus payments pursuant to Section 3.1(a),
but (b) exclude "catch-up contributions" made under Section 3.1.7 and excess
Flex Credits contributed pursuant to Section 3.1(b).

            1.33    "Trust Agreement" shall mean the trust agreement entered
into by and between the Company and the Trustee, as validly amended from time to
time.

            1.34    "Trust Fund" shall mean the trust fund established by and
maintained under the Trust Agreement for the purpose of funding the benefits
provided by the Plan, as provided in Section 10.

            1.35    "Trustee" shall mean Fidelity Management Trust Company, a
Massachusetts trust company, and any additional, successor or substitute trustee
or trustees from time to time acting as Trustee of the Trust Fund.

            1.36    "Valuation Date" shall mean:

            (a)    For purposes of valuing Plan assets and Members' Accounts for
periodic reports and statements, the date as of which such reports or statements
are made; and

            (b)    For purposes of determining the amount of assets actually
distributed to the Member, his or her Beneficiary or an Alternate Payee (or
available for loan or withdrawal), the date on which occur the relevant
transactions required to liquidate to cash the assets allocated to the Member's
Accounts, provided that when such transactions occur on more than one date,
there shall be several Valuation Dates, as appropriate.

In any other case, the Valuation Date shall be the date designated by the
Committee (in its discretion) or the date otherwise set out in this Plan. In all
cases, the Committee (in its discretion) may change the Valuation Date, on a
uniform and nondiscriminatory basis, as is necessary or appropriate.
Notwithstanding the foregoing, the Valuation Date shall occur at least annually.

 

 

11

--------------------------------------------------------------------------------

 

 

SECTION 2

ELIGIBILITY AND MEMBERSHIP

            2.1     Initial Eligibility. An Employee shall become a Member of
the Plan on the date he or she becomes an Eligible Employee.

            2.2     Employer Aggregation. The status of an Employee as an
Eligible Employee shall not be adversely affected merely by reason of his or her
employment by more than one Employer during any Plan Year. The transfer of a
Member from employment with an Employer to employment with an Affiliate which is
not an Employer shall not be an event entitling the Member to a distribution
under Section 7.

            2.3     Membership. Each Member's decision to become an Active
Member shall be entirely voluntary.

                        2.3.1  Active Membership. An Employee who has become a
Member under Section 2.1 may elect to become an Active Member, effective as of
any Entry Date, provided that he or she enrolls in the Plan and elects to make
Salary Deferrals, and/or to contribute excess Flex Credits (subject to the rules
in effect under GenenFlex), in such manner and within such advance notice period
as the Committee (in its discretion) shall specify. Notwithstanding any contrary
Plan provision, all Plan provisions relating to the contribution of excess Flex
Credits after that date shall be inoperative until such time as the Committee
(acting in a non-fiduciary capacity on behalf of the Company) shall determine
otherwise in a writing setting forth the date on which such provisions shall
again be operative.

                        2.3.2  Inactive Membership. A Member who does not elect
to become an Active Member when eligible to do so shall be at all times treated
as an Inactive Member until the Entry Date as of which he or she elects to
become an Active Member.

 

12

--------------------------------------------------------------------------------

 

 

            2.4     Voluntary Suspension. An Active Member may voluntarily
suspend his or her Salary Deferrals and "catch-up contributions" and/or
contributions of excess Flex Credits (subject to the rules in effect under
GenenFlex), for future payroll periods, by giving notice to such person, in such
manner and within such advance notice period as the Committee (in its
discretion) shall specify.

                        2.4.1  Effect. With respect to the period for which a
Member's Salary Deferrals are suspended, he or she shall not make any Salary
Deferrals or "catch-up contributions" under Section 3.1.7 nor share in the
allocation of Matching Contributions, and he or she may not later make the
Salary Deferrals or "catch-up contributions" that he or she might otherwise have
made during the suspension period. With respect to the period for which a
Member's contributions of excess Flex Credits are suspended, he or she shall not
contribute any excess Flex Credits, and he or she may not later contribute the
excess Flex Credits that he or she might otherwise have contributed during the
suspension period. No distribution shall be made to a Member solely as the
result of any suspension of his or her active membership.

                        2.4.2  Resuming Salary Deferrals and/or Excess Flex
Credit Contributions. A Member who voluntarily suspended his or her Salary
Deferrals or "catch-up contributions" under Section 3.1.7 and/or contributions
of excess Flex Credits (subject to the rules in effect under GenenFlex) may
voluntarily resume his or her Salary Deferrals or "catch-up contributions"
and/or contributions of excess Flex Credits (subject to the rules in effect
under GenenFlex), effective with respect to Compensation paid for the payroll
period beginning on any Entry Date, by giving notice to such person, in such
manner and within such advance notice period as the Committee (in its
discretion) shall specify.

 

13

--------------------------------------------------------------------------------

 

 

            2.5     Mandatory Suspension. If a Member (1) ceases to be an
Eligible Employee because he or she ceases to meet the requirements of
Section 1.13, (2) is transferred to employment with an Affiliate which is not an
Employer, (3) is granted a Leave of Absence without pay, (4) has been approved
for a Hardship Withdrawal pursuant to Section 8.2, (5) is on long-term
disability, or (6) is placed on layoff or furlough status, then:

            (a)     His or her status as an Active Member shall be suspended (in
accordance with Section 2.4.1) for each payroll period beginning during the
continuation of such ineligible status, and

            (b)     After he or she again becomes an Eligible Employee and the
conditions described in clauses (1) through (5) above cease to apply, his or her
status as an Active Member may be resumed only in accordance with Section 2.4.2.

Notwithstanding any contrary Plan provision, a Member's Compensation which is
paid for any portion of a payroll period that includes a period of mandatory
suspension shall not be subject to any salary deferral election nor contributed
under the Plan as Salary Deferrals or "catch-up contributions," nor shall such
Member contribute any Flex Credits to his or her GenenFlex Account during such
mandatory suspension period.

            2.6     Termination of Membership. An Eligible Employee who has
become a Member shall remain a Member until his or her employment with all
Employers and Affiliates terminates or, if he or she remains alive, until his or
her entire Account balance is distributed (whichever is later).

SECTION 3

SALARY DEFERRALS AND FLEX CREDITS

            3.1     Salary Deferrals and Flex Credits. Each Active Member may
elect to defer portions of his or her Compensation payments and to have the
amounts of such Salary Deferrals contributed by the Employers to the Trust Fund
and credited to his or her Salary Deferral Account under the Plan.

 

 

14

--------------------------------------------------------------------------------

 

 

            (a)     Salary Deferrals. An Active Member may elect under this Plan
to defer:

            (1)     A portion of each payment of Compensation (including any
Eligible Annual Bonus) that would otherwise be made to him or her, after the
election becomes and while it remains effective, equal to any whole percentage
from 1% to 25% (inclusive) of the Compensation payment; and

            (2)     In addition to any election made under paragraph (a)(1)
above, a portion of any payment of Eligible Annual Bonus that would otherwise be
made to him or her, after the election becomes and while it remains effective,
equal to any whole percentage that exceeds the deferral election percentage then
in effect under paragraph (a)(1) above but does not exceed 100% (or such lesser
percentage as is determined by the Company to comply with mandatory tax
withholding and required payroll deductions) of the Eligible Annual Bonus. Any
remaining balance attributable to the Eligible Annual Bonus payment shall be
immediately payable to the Member.

            (b)     Excess Flex Credits. Instead or in addition, an Active
Member may elect under GenenFlex (subject to the rules in effect under
GenenFlex) to have at least five dollars ($5.00) worth of excess Flex Credits
contributed to his or her GenenFlex Account. Notwithstanding any contrary Plan
provision, all Plan provisions relating to the contribution of excess Flex
Credits shall be inoperative until such time as the Committee (acting in a
non-fiduciary capacity on behalf of the Company) shall determine otherwise in a
writing setting forth the date on which such provisions shall again be
operative.

            3.1.1  Section 401(k) Ceiling. Notwithstanding the foregoing, the
Committee:

            (a)     May suspend or limit any Member's salary deferral election,
and/or election under GenenFlex to have any excess Flex Credits contributed to
his or her GenenFlex Account, at any time in order to prevent the cumulative
amount of the Salary Deferrals and excess Flex Credits contributed on behalf of
the Member for any calendar year from exceeding the Section 401(k) Ceiling;

            (b)     Shall cause any amount allocated to the Plan as an excess
deferral (calculated by taking into account only amounts deferred under this and
any other cash or deferred arrangement maintained by any Employer or Affiliate
and qualified under section 401(k) of the Code), together with any income
allocable thereto for the calendar year to which the excess deferral relates, to
be distributed to the Member no later than the April 15 that next follows the
year of deferral in accordance with section 402(g)(2)(A) of the Code; and

            (c)     May cause any other amount allocated to the Member's Salary
Deferral and/or GenenFlex Account(s) and designated by the Member as an excess
deferral, together with any income allocable thereto for the calendar year to
which the excess deferral relates, to be distributed to the Member in accordance
with section 402(g)(2)(A) of the Code; provided, however, that any such
designation shall be applied last to any

 

 

15

--------------------------------------------------------------------------------

 

 

contributions of excess Flex Credits that any HCE Member (as defined in Section
3.1.3) has elected under GenenFlex to have contributed to his or her GenenFlex
Account.

            (d)     Any Matching Contributions allocated to the Member's
Matching Account by reason of any excess deferral distributed pursuant to
paragraph (b) or (c), together with any income allocable thereto for the
calendar year to which the excess deferral relates, shall be forfeited at the
time such distribution is made and applied to reduce the next succeeding
Matching Contribution to the Plan, without regard to the extent of the Member's
vested interest in his or her Matching Account.

            (e)     The "Section 401(k) Ceiling" is a dollar amount equal to the
dollar limit prescribed in section 402(g)(1) of the Code (as adjusted
periodically pursuant to sections 402(g)(5) and 415(d) of the Code).

                        3.1.2  Limitations on HCE Members. For any Plan Year,
the Committee (in its discretion) may limit (a) the period for which, and/or
specify a lesser maximum percentage at which, Salary Deferrals may be elected by
HCE Members (as defined in Section 3.1.3) and/or (b) the period for which or the
value of the excess Flex Credits that may be contributed to HCE Members'
GenenFlex Accounts, in such manner as may be necessary or appropriate in order
to assure that the limitation described in Section 3.1.4 will be satisfied.

                        3.1.3  HCE and Non-HCE Members. All Members who are
Eligible Employees at any time during the Plan Year (whether or not they are
Active Members), and who are Highly Compensated Employees with respect to the
Plan Year, shall be "HCE Members" for the Plan Year. All other Members who were
Eligible Employees at any time during the immediately preceding Plan Year
(whether or not they were Active Members), and who were not Highly Compensated
Employees with respect to that Plan Year, shall be "Non-HCE Members" for that
Plan Year.

                        3.1.4  Deferral Percentage Limitation. In no event shall
the actual deferral percentage, determined in accordance with Section 3.1.5 (the
"ADP"), for the HCE Members for a Plan Year exceed the maximum ADP, as
determined by reference to the preceding Plan Year's ADP for the preceding Plan
Year's Non-HCE Members, in accordance with the following table:

 

 

16

--------------------------------------------------------------------------------

 

 

If the ADP for Non-HCE

Then the Maximum ADP for

Members ("NHCEs' ADP") is:

HCE Members is:

   

Less than 2%

2.0 x NHCEs' ADP

2% to 8%

NHCEs' ADP + 2%

More than 8%

1.25 x NHCEs' ADP

                        3.1.5  Actual Deferral Percentage. The actual deferral
percentage for the HCE or Non-HCE Members for a Plan Year shall be calculated by
computing the average of the percentages (calculated separately for each HCE or
Non-HCE Member) (the "Deferral Rates") determined by dividing (1) the total for
the Plan Year of (i) all Salary Deferrals made by the Member and credited to his
or her Salary Deferral Account, and (ii) all excess Flex Credits contributed by
the Member (subject to the rules in effect under GenenFlex) and credited to his
or her GenenFlex Account, by (2) the Member's Testing Compensation (as defined
in Section 3.1.6) for the Plan Year. In computing a Member's Deferral Rate, the
following special rules shall apply:

            (a)     If any Employer or Affiliate maintains any other cash or
deferred arrangement which is aggregated by the Company with this Plan for
purposes of applying section 401(a)(4) or 410(b) of the Code, then all such cash
or deferred arrangements shall be treated as one plan for purposes of applying
Section 3.1.4.

            (b)     If an HCE Member is a participant in any other cash or
deferred arrangement maintained by any Employer or Affiliate, the separate
Deferral Rates determined for the Member under all such cash or deferred
arrangements shall be aggregated with the separate Deferral Rate determined for
the Member under this Section 3.1.5 for purposes of applying Section 3.1.4.

                        3.1.6  Testing Compensation. For purposes of applying
the discrimination tests of sections 401(k)(3) and 401(m)(2) of the Code,
"Testing Compensation" shall mean with respect to any Member:

            (a)     His or her Total Compensation (as defined in Section
5.4.2(d) and applied using the definition of "Affiliate" in Section 1.1 rather
than in Section 5.4.2(a)); or

            (b)     The amount of his or her compensation calculated by the
Committee in a manner which satisfies applicable requirements of Treas. Reg.
Section 1.401(k)-1(g)(2)(i).

 

17

--------------------------------------------------------------------------------

 

 

            (c)     Notwithstanding the foregoing, no amount in excess of the
Compensation Limit (as defined in Section 1.10) shall be taken into account
under this Section 3.1.6 for any Plan Year.

            (d)     Compensation for periods prior to the time that an Employee
became a Member shall not be taken into account.

                        3.1.6  Catch-Up Contributions. Notwithstanding any
contrary Plan provision:

            (a)     Eligible Members. All Employees who are Members eligible to
make Salary Deferrals under this Plan and who have attained age 50 before the
close of the Plan Year shall be eligible to make "catch-up contributions" in
accordance with, and subject to the limitations of, section 414(v) of the Code.

            (b)     Certain Code Limitations Inapplicable. A Member's "catch-up
contributions" shall not be taken into account for purposes of applying Plan
provisions implementing required limitations of sections 402(g) and 415 of the
Code. The Plan shall not be treated as failing to satisfy Plan provisions
implementing the requirements of section 401(k)(3), 401(k)(11), 401(k)(12),
410(b) or 416 of the Code, as applicable, by reason of "catch-up contributions"
being or having been made under the Plan.

            3.2     Salary Deferral and Flex Credit Elections. Each Active
Member shall determine the percentage(s) of his or her regular and/or Eligible
Annual Bonus Compensation payments that shall be deferred and contributed to the
Trust Fund as his or her Salary Deferrals, in accordance with Section 3.1(a), at
the time he or she becomes an Active Member and thereafter may redetermine such
percentage(s) from time to time as of any Entry Date. Subject to paragraph (c)
below, each Active Member who is also a participant in GenenFlex may also elect
under GenenFlex (subject to the rules in effect under GenenFlex) to have at
least five dollars ($5.00) worth of excess Flex Credits contributed to his or
her GenenFlex Account in accordance with Section 3.1(b). In either event -

            (a)     The Active Member shall make his or her (1) salary deferral
election with respect to his or her Compensation (including or excluding
Eligible Annual Bonus payments), in such manner and within such advance notice
period as the Committee (in its discretion) shall specify, and/or (2) election
under GenenFlex (subject to the rules in effect under GenenFlex) to have any
such excess Flex Credits contributed to his or her GenenFlex Account;

 

18

--------------------------------------------------------------------------------

 

 

            (b)     No Salary Deferrals or "catch-up contributions" under
Section 3.1.7 shall be made by any Active Member except in accordance with his
or her salary deferral election and the limitations of Section 3.1; and

            (c)     No excess Flex Credits shall be contributed by any Active
Member except subject to the limitations of Section 3.1 and in accordance with
his or her election under GenenFlex (subject to the rules in effect under
GenenFlex) to have excess Flex Credits so contributed. Notwithstanding any
contrary Plan provision, effective as of January 1, 2001, all Plan provisions
relating to the contribution of excess Flex Credits after that date shall be
inoperative until such time as the Committee (acting in a non-fiduciary capacity
on behalf of the Company) shall determine otherwise in a writing setting forth
the date on which such provisions shall again be operative.

                        3.2.1   Amounts. The amount of Salary Deferrals or
"catch-up contributions" under Section 3.1.7 that may be made by each Active
Member for each payroll period shall be the amount in dollars and cents that is
nearest to the amount of Compensation subject to the salary deferral election
multiplied by the percentage elected by the Active Member pursuant to
Section 3.1. In addition, each Active Member may elect under GenenFlex (subject
to the rules in effect under GenenFlex) to have contributed to his or her
GenenFlex Account all or any portion of those Flex Credits which the Member has
not used to purchase benefits under GenenFlex, provided that such Member elects
to contribute at least five dollars ($5.00) worth of excess Flex Credits to his
or her GenenFlex Account.

                        3.2.2   Changes. An Active Member may change the
percentage determined under the first sentence of this Section 3.2, effective
with respect to Compensation paid for the payroll period beginning on any Entry
Date, or such other date as the Committee (in its discretion) may specify, by
giving notice in such manner and within such advance notice period as the
Committee (in its discretion) shall specify. The salary deferral election made
by an Active Member shall remain in effect until his or her active membership in
the Plan is terminated, except to the extent that the election is suspended in
accordance with Section 2.4, 2.5 or 8.1, changed in accordance with this Section
3.2.2, or reduced pursuant to Section 3.1.1 or 3.1.2.

 

 

19

--------------------------------------------------------------------------------

 

 

However, changes in an Active Member's election to have excess Flex Credits
contributed to his or her GenenFlex Account shall be permitted only in
accordance with the rules in effect under GenenFlex.

                        3.2.3   Potential Excess ADP. In the event that (but for
the application of this Section 3.2.3) the Committee determines that the ADP for
HCE Members would exceed the maximum permitted under Section 3.1.4 for a Plan
Year (the "ADP Maximum"), then the Committee (in its discretion) may reduce, in
accordance with Section 3.1.2, the percentages or amounts of Salary Deferrals
and excess Flex Credits subsequently to be contributed on behalf of the HCE
Members by such percentages or amounts as, and for as long as, the Committee (in
its discretion) may determine is necessary or appropriate in the circumstances
then prevailing. If the Committee determines that it is no longer necessary to
reduce the Salary Deferrals and/or excess Flex Credits contributed on behalf of
the HCE Members, the Committee (in its discretion) may permit some or all HCE
Members, on a uniform and nondiscriminatory basis, to make (a) new salary
deferral elections with respect to their subsequent Compensation payments,
and/or (b) new elections under GenenFlex (subject to the rules in effect under
GenenFlex) to have excess Flex Credits contributed to their GenenFlex Accounts,
and shall establish a policy as to the deferral percentages and/or limitations
on the contribution of excess Flex Credits that shall apply with respect to
those HCE Members who do not make new elections.

                        3.2.4   Actual Excess ADP. In the event that the
Committee determines that the ADP for the HCE Members exceeds the ADP Maximum
for any Plan Year, then the amount of any excess contributions (within the
meaning of section 401(k)(8)(B) of the Code) contributed on behalf of any HCE
Member shall be distributed, together with any income allocable thereto

 

 

20

--------------------------------------------------------------------------------

 

 

for the Plan Year to which the excess contributions relate, to the HCE Member
before the close of the Plan Year that next follows that Plan Year.

            (a)     Determination and Allocation of Excess Contributions. The
amount of excess contributions for HCE Members for the Plan Year shall be
determined and allocated among HCE Members in the following manner:

            (1)     With respect to each HCE Member whose Deferral Rate exceeds
the ADP Maximum, the Committee shall calculate an excess contribution amount by
calculating the excess of (A) his or her Salary Deferrals and contributions of
excess Flex Credits, over (B) the product of the ADP Maximum times his or her
Testing Compensation. The aggregate of the excess contributions for all such HCE
Members shall be the total excess contributions to be distributed pursuant to
this Section 3.2.4.

            (2)     The Salary Deferrals and contributions of excess Flex
Credits of the HCE Member with the highest total dollar amount of Salary
Deferrals and excess Flex Credits contributed shall be reduced to the extent
necessary to cause the total dollar amount of his or her Salary Deferrals and
excess Flex Credits contributed to equal the lesser of the dollar amount of
excess contributions for all HCE Members calculated pursuant to paragraph (a)(1)
above or the dollar amount of Salary Deferrals and contributions of excess Flex
Credits of the HCE Member with the next highest total dollar amount of Salary
Deferrals and excess Flex Credits contributed; provided, however, that any such
reduction shall be applied last to any contributions of excess Flex Credits that
the HCE Member has elected under GenenFlex to have contributed to his or her
GenenFlex Account. This process shall be repeated until the total dollar amount
of reductions of such Salary Deferral and excess Flex Credit contributions
equals the total excess contributions calculated pursuant to paragraph (a)(1)
above.

            (3)     The amount of excess contributions to be distributed to an
HCE Member pursuant to this Section 3.2.4 shall be equal to the total amount by
which his or her actual Salary Deferrals and contributions of excess Flex
Credits is reduced under paragraph (a)(2) above, but reduced by the amount of
any excess deferrals previously distributed to the HCE Member for the Plan Year
under Section 3.1.1.

            (b)      Determination of Allocable Income. The income allocable to
any excess contributions for the Plan Year, excluding income for the period
between the end of the Plan Year and the date of distribution, shall be
determined in accordance with section 401(k)(8)(A)(i) of the Code.

            (c)      Forfeiture of Related Matching Contributions. Any Matching
Contributions allocated to the Member's Matching Account by reason of any excess
contributions distributed pursuant to this Section 3.2.4, together with any
income allocable thereto for the Plan Year to which the excess contributions
relate, shall be

 

 

21

--------------------------------------------------------------------------------

 

 

forfeited and applied to reduce the next succeeding Matching Contribution to the
Plan, without regard to the extent of the Member's vested interest in his or her
Matching Account.

            (d)      Incorporation By Reference. The foregoing provisions of
this Section 3 are intended to satisfy the requirements of section 401(k)(3) of
the Code and, to the extent not otherwise stated above, the provisions of
section 401(k)(3) of the Code, Treas. Reg. Section 1.401(k)-1(b) (to the extent
not inconsistent with amendments to the Code), and subsequent IRS guidance under
section 401(k)(3) of the Code are incorporated herein by reference.

            3.3     Payment of Salary Deferrals and Excess Flex Credits. Subject
to the provisions of Sections 3.1, 3.2, 10.3 and 11, the Employers shall pay to
the Trust Fund the amounts elected by Members to be contributed as Salary
Deferrals, "catch-up contributions" under Section 3.1.7 and excess Flex Credits
(subject to the rules in effect under GenenFlex) pursuant to Section 3. Any
Salary Deferrals, "catch-up contributions" and excess Flex Credits to be
contributed for a payroll period in accordance with the preceding sentence shall
be paid to the Trust Fund as soon as practicable and in no event later than the
15th business day of the month that next follows the month in which the
Compensation related to such Salary Deferrals, "catch-up contributions" and
excess Flex Credits was paid.

SECTION 4

MATCHING CONTRIBUTIONS

            4.1     Amount of Matching Contributions. Subject to the provisions
of this Section 4.1 and Sections 5.4, 10.3 and 11, the Employers shall
contribute to the Trust Fund as Matching Contributions amounts equal to the
Matching Amount (determined pursuant to Section 4.1.2) determined for each
payroll period by the Salary Deferrals made by, and the Compensation paid to,
each eligible Active Member (determined pursuant to Section 4.1.4).

                        4.1.1  Calculation Rules. Only those Salary Deferrals
which are made pursuant to such portion of each eligible Active Member's
deferral percentage (determined pursuant to

 

 

22

--------------------------------------------------------------------------------

 

 

Sections 3.1 and 3.2) as does not exceed the Matching Ceiling (determined
pursuant to Section 4.1.3) shall be taken into account in calculating the amount
of the Matching Contribution (if any) to be made in respect of the Member's
Salary Deferrals for any payroll period. For purposes of this Section 4
(including Section 4.1.2), the only Compensation taken into account for such
purpose is Compensation paid (or payable if deferred under Section 3) to the
eligible Active Member (a) for payroll periods for which he or she made Salary
Deferrals or after which the Section 401(k) Ceiling took effect, and (b) as an
Eligible Annual Bonus. In no event shall the amount of any (1) excess Flex
Credits contributed to any Member's GenenFlex Account, or (2) "catch-up
contributions" contributed to any Member's Salary Deferral Account, be taken
into account in determining the amount of Matching Contributions to made to the
Trust Fund and/or allocated to his or her Matching Account.

                        4.1.2  Matching Amount. The rate at which the amount of
Matching Contributions shall be made for any Plan Year (the "Matching Amount")
shall be determined as follows:

If the Salary Deferral

 

Contribution Rate for an Eligible

Then the Matching Amount for the

Active Member is

Member shall be:

   

Less than or equal to 3%

Equal to 100% of Salary Deferrals

   

Greater than 3%

Equal to 100% of Salary Deferrals up to 3%

 

plus one-half (1/2) of Salary Deferrals

 

greater than 3% and less than or equal to 5%

The "Salary Deferral Contribution Rate" for an Active Member is (Salary
Deferrals) divided by (Compensation), expressed as a percentage, and determined
on a Plan Year basis in accordance with Section 4.1.1. Subject to the
limitations of Section 5.4 and as provided in this Section 4.1.2, the Matching
Amount may be changed for any Plan Year to such extent (if any) as the Board of
Directors (in its discretion) may determine by resolution and without amending
the Plan pursuant

 

 

23

--------------------------------------------------------------------------------

 

 

to Section 11.2; provided, however, that no decrease in the Matching Amount
applicable to any Salary Deferral Contribution Rate shall take effect before the
first payroll period that begins after the decrease is announced to eligible
Active Members.

                        4.1.3  Maximum Matched Rate. For any Plan Year for which
a different rate is not determined in accordance with the following sentence,
the maximum Salary Deferral Contribution Rate that shall be taken into account
in determining the amount of the Matching Contribution (if any) to be made on
behalf of any eligible Active Member pursuant to this Section 4.1 (the "Matching
Ceiling") shall be 5%, i.e., the amount of Matching Contributions (if any) to be
made on behalf of any eligible Active Member shall not exceed 4% of his or her
Compensation (determined pursuant to Section 4.1.1). Subject to the limitations
of Section 5.4, the Board of Directors (in its discretion) may change for any
Plan Year the maximum Salary Deferral Contribution Rate stated in the preceding
sentence; provided, however, that no decrease in the Matching Ceiling shall take
effect before the first payroll period that begins after the decrease is
announced to eligible Active Members.

                        4.1.4  Eligible Members. Notwithstanding the foregoing
provisions of this Section 4.1, no Matching Contribution shall be made on behalf
of an Active Member for a Plan Year unless (a) he or she remains an Eligible
Employee on the last Valuation Date of the Plan Year, or (b) his or her
employment with all Employers and Affiliates terminated at any time during the
Plan Year by reason of death or Disability.

                        4.1.5  Limitations on HCE Members. For any Plan Year,
the Committee (in its discretion) may limit the period for which, and/or specify
a lesser Matching Amount and/or Matching Ceiling with respect to the amount of
Matching Contributions to be made on behalf of

 

 

24

--------------------------------------------------------------------------------

 

 

HCE Members (as defined in Section 3.1.3) in such manner as may be necessary or
appropriate in order to assure that the limitation described in Section 4.1.6
will be satisfied.

                        4.1.6  Contribution Percentage Limitation. In no event
shall the actual contribution percentage, determined in accordance with Section
4.1.7 (the "ACP"), for the HCE Members for a Plan Year exceed the maximum ACP,
as determined by reference to the preceding Plan Year's ACP for the preceding
Plan Year's Non-HCE Members, in accordance with the following table:

If the ACP for Non-HCE

Then the Maximum ACP for

Members ("NHCEs' ACP

") is:

HCE Members is

   

Less than 2%

2.0 x NHCEs' ACP

2% to 8%

NHCEs' ACP + 2%

More than 8%

1.25 x NHCEs' ACP

                        4.1.7  Actual Contribution Percentage. The actual
contribution percentage for the HCE or Non-HCE Members for a Plan Year shall be
calculated by computing the average of the percentages (calculated separately
for each HCE or Non-HCE Member) (the "Contribution Rates") determined by
dividing (a) the total of all Matching Contributions made on behalf of the
Member and credited to his or her Matching Account for the Plan Year, by (b) the
Member's Testing Compensation (as defined in Section 3.1.6) for the Plan Year.
The special testing and aggregation rules set forth in Section 3.1.5 with
respect to calculation of the Members' Deferral Rates shall also apply to the
calculation of their Contribution Rates.

                        4.1.8  Potential Excess ACP. In the event that (but for
the application of this Section 4.1.8) the Committee determines that the ACP for
the HCE Members would exceed the maximum permitted under Section 4.1.6 for a
Plan Year (the "ACP Maximum"), then the Committee (in its discretion) may
reduce, in accordance with Section 4.1.4, the percentages or amounts of Matching
Contributions subsequently to be made on behalf of the HCE Members by

 

 

25

--------------------------------------------------------------------------------

 

 

such percentages or amounts as, and for as long as, the Committee (in its
discretion) may determine is necessary or appropriate in the circumstances then
prevailing.

                        4.1.8  Actual Excess ACP. In the event that the
Committee determines that the ACP for the HCE Members exceeds the ACP Maximum
for any Plan Year, then the amount of any excess aggregate contributions (within
the meaning of section 401(m)(6)(B) of the Code) contributed on behalf of any
HCE Member shall be distributed, together with any income allocable thereto for
the Plan Year to which the excess aggregate contributions relate, to the HCE
Member before the close of the Plan Year that next follows that Plan Year.

            (a)     Determination and Allocation of Excess Aggregate
Contributions. The amount of excess aggregate contributions for HCE Members for
the Plan Year shall be determined and allocated among HCE Members in the manner
provided in Section 3.2.4 with respect to excess contributions.

            (b)     Determination of Allocable Income. The income allocable to
any excess aggregate contributions for the Plan Year shall be determined in the
manner provided in Section 3.2.4 with respect to excess contributions.

            (c)     Incorporation By Reference. The foregoing provisions of this
Section 4.1 are intended to satisfy the requirements of section 401(m) of the
Code and, to the extent not otherwise stated above, the provisions of section
401(m)(2) of the Code, Treas. Reg. Section 1.401(m)-1(b) (to the extent not
inconsistent with amendments to the Code), and subsequent IRS guidance under
section 401(m)(2) of the Code are incorporated herein by reference.

            4.2     Timing. Subject to the provisions of Sections 4.1.5, 10.3
and 11, Matching Contributions shall be paid to the Trust Fund within the time
prescribed by law (including extensions) for filing the Company's federal income
tax return for its taxable year that ends with or within the Plan Year for which
the Matching Contributions are made.

            4.3     Periodic Contributions. Subject to the foregoing provisions
of this Section 4, any Matching Contributions to be made for a Plan Year may be
paid in installments from time to time during or after the Plan Year for which
they are made. The Employers shall specify, as to each Matching Contribution
payment made to the Trust Fund, the Plan Year to which the

 

 

26

--------------------------------------------------------------------------------

 

 

payment relates. The Employers intend the Plan to be permanent, but the
Employers do not obligate themselves to make any Matching Contributions under
the Plan whatsoever

            4.4     Profits Not Required. Each Employer shall make any
contributions otherwise required to be made for a Plan Year without regard to
its current or accumulated earnings or profits for the taxable year that ends
with or within the Plan Year for which the contributions are made.
Notwithstanding the foregoing, the Plan is designed to constitute a qualified
profit-sharing plan as described in section 401(a) of the Code.

            4.5     After-Tax Contributions. In no event shall any Member be
permitted to make contributions to the Plan or Trust Fund on an after-tax basis.

SECTION 5

ALLOCATIONS AND INVESTMENT

            5.1     Salary Deferrals, Catch-Up Contributions and Flex Credits.
Except as provided in Sections 3.1.1 or 3.2.4, the Salary Deferrals or "catch-up
contributions" made on behalf of an Active Member for any period shall be
allocated to his or her Salary Deferral Account on the business day that is or
next follows the date on which such Salary Deferrals or "catch-up contributions"
are received by the Trust Fund. In addition, except as provided in Section
3.2.4, the excess Flex Credits contributed on behalf of any Active Member for
any period (subject to the rules in effect under GenenFlex) shall be allocated
to his or her GenenFlex Account on the business day that is or next follows the
date on which such excess Flex Credits are received by the Trust Fund.

            5.2     Matching Contributions. Except as provided in Section 4.1.9,
the Matching Contributions made on behalf of an Active Member for a Plan Year
shall be allocated to his or her Matching Account on the business day that is or
next follows the date on which such Matching Contributions are received by the
Trust Fund.

 

 

27

--------------------------------------------------------------------------------

 

 

            5.3     Investment. Each Member (or, if deceased, his or her
Beneficiary) shall elect, in such manner and at such times as the Committee (in
its discretion) shall specify, the percentages of all amounts allocated to his
or her Accounts that are to be invested in each of the Commingled Funds. A
Member (or Beneficiary) may specify as to any Commingled Fund any percentage,
provided that the total of the percentages specified shall not exceed 100%.

                        5.3.1  Changes. The instructions of a Member (or
Beneficiary), concerning the investment of the amounts allocated to his or her
Accounts may be changed in accordance with such procedures as the Committee (in
its discretion) shall designate from time to time. The designated procedures at
all times shall permit Members (and Beneficiaries) to make investment changes in
accordance with designated procedures effective at a minimum of four times per
each Plan Year, and more frequently if administratively feasible, all in a
manner designed to permit the Plan to qualify as a section 404(c) plan (within
the meaning of section 404(c) of ERISA).

                        5.3.2  Failure to Elect. If a Member (or Beneficiary)
fails to direct the manner in which the amounts allocated to his or her Accounts
are to be invested, such amounts shall be invested in the Short-Term Fund (as
described in Section 6.3.2).

                        5.3.3  Member Loans. In the event a loan is to be made
to a Member in accordance with Section 8.4, the Committee shall direct that an
amount, in cash, equal to the amount of the loan be reallocated, as directed by
the Committee (in its discretion), from the portions of the Member's Accounts
invested in one or more of the other Commingled Funds to a separate subaccount
within the Member's Accounts (the "Loan Account"), which shall be maintained for
the purpose of accounting for any loans made to the Member from his or her
Accounts. Interest and principal payments on loans made to any Member shall be
allocated to his or her Loan Account as received by the Trustee and, after
appropriate adjustments have been

 

 

28

--------------------------------------------------------------------------------

 

 

made to the Loan Account to reflect such payments, shall be reallocated to the
Commingled Funds in the same percentages as specified by the Member pursuant to
the introductory paragraph of this Section 5.3, or if there is no such
designation currently in force, as the Committee (in its discretion) shall
determine.

            5.4     Limitations on Allocations.

                        5.4.1  Annual Addition Limitation. Notwithstanding any
contrary Plan provision, in no event shall the Annual Addition to any Member's
Accounts for any Plan Year exceed the lesser of (a) $40,000 (as adjusted
periodically pursuant to section 415(d) of the Code), or (b) 100% of the
Member's Total Compensation for the Plan Year; provided, however, that clause
(b) shall not apply to Annual Additions described in clauses (5) and (6) of
Section 5.4.2(c).

                        5.4.2  Definitions. For purposes of this Section 5.4,
the following definitions shall apply:

            (a)     "Affiliate" shall mean a corporation, trade or business
which is, together with any Employer, a member of a controlled group of
corporations or an affiliated service group or under common control (within the
meaning of section 414(b), (c), (m) or (o) of the Code, as modified by section
415(h) of the Code), but only for the period during which such other entity is
so affiliated with any Employer.

            (b)     "Aggregated Plan" shall mean any defined contribution plan
which is aggregated with this Plan pursuant to Section 5.4.3.

            (c)     "Annual Addition" shall mean with respect to each Member the
sum for a Plan Year of (1) the Member's Salary Deferrals and excess Flex Credits
to be credited to the Member's Salary Deferral Account and GenenFlex Account;
(2) any Matching Contributions to be credited to the Member's Matching Account;
(3) the share of all contributions made by all Employers and Affiliates
(including salary reduction contributions made pursuant to section 401(k) of the
Code) and any forfeitures to be credited to the Member's account under any
Aggregated Plan; (4) any after-tax employee contributions made by the Member for
the Plan Year under any Aggregated Plan; (5) any amount allocated to the
Member's individual medical account (within the meaning of section 415(l) of the
Code) under a defined benefit plan maintained by an Employer or Affiliate; and
(6) any amount attributable to post-retirement medical benefits that is
allocated pursuant to section 419A of the Code to the Member's separate account
under a welfare benefits fund (within the meaning of section 419(e) of the Code)
maintained by an Employer or Affiliate.

 

 

29

--------------------------------------------------------------------------------

 

 

            (d)     "Total Compensation" shall mean the amount of an Employee's:

            (1)     Wages (within the meaning of section 3401(a) of the Code)
and all other payments of compensation which an Employer or Affiliate is
required to report in Box 1 ("wages, tips, other compensation") of IRS Form W-2-

            (A)     Including the aggregate of any Salary Deferrals, "catch-up
contributions" and excess Flex Credits credited to his or her Salary Deferral
Account and GenenFlex Account and any other amounts that are (i) contributed by
any Employer or Affiliate on his or her behalf to an employee benefit plan by
reason of the Employee's elective deferrals (within the meaning of section
402(g)(3) of the Code), or (ii) otherwise not includible in the gross income of
the Employee by reason of section 132(f)(4) of the Code or pursuant to the
Employee's compensation reduction agreement under section 125 of the Code; but

            (B)     Excluding amounts paid or reimbursed by the Employer or
Affiliate for moving expenses incurred by the Member, to the extent that at the
time of payment it is reasonable to believe that such amounts qualify as a
"qualified moving expense reimbursement" (within the meaning of section
132(a)(6) of the Code); and

            (C)     Determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed (such as the agricultural labor exception); or

            (2)     Compensation calculated by the Committee in a manner which
satisfies applicable requirements of Treas. Reg. &sect; 1.415-2(d).

                        5.4.3  Other Defined Contribution Plans. All defined
contribution plans (terminated or not) maintained by any Employer or Affiliate
shall be aggregated with this Plan, and all plans so aggregated shall be
considered as one plan in applying the limitations of this Section 5.4, provided
that the special limitation applicable to employee stock ownership plans under
section 415(c)(6) of the Code shall be taken into account with respect to a
Member who participates in any such plan.

                        5.4.4  Adjustments. If, as a result of (1) a reasonable
error in estimating a Member's Total Compensation, allocating forfeitures under
any Aggregated Plan or other circumstances which permit the application of the
rules stated in this Section 5.4.4, or (2) a

 

 

30

--------------------------------------------------------------------------------

 

 

reasonable error in determining the amount of Salary Deferrals and excess Flex
Credits that may be made or contributed under the limits of this Section 5.4,
any of the limitations of this Section 5.4 otherwise would be exceeded with
respect to any Member for any Plan Year, then the following actions, but only to
the extent necessary to avoid exceeding such limitations, shall be taken in the
following order:

            (a)     Any after-tax employee contributions made by the Member
under any Aggregated Plan for the Plan Year shall be returned to him or her;

            (b)     In the circumstances described in clause (2) above, Salary
Deferrals and the value of excess Flex Credits contributed shall be distributed
to the Member to the extent required to reduce the excess annual addition to the
Member's Accounts attributable to that circumstance, provided that any such
distribution shall be made last from any excess Flex Credits that the Member has
elected under GenenFlex to have contributed to his or her GenenFlex Account;

            (c)     Any Matching Contributions allocated to the Member's
Matching Account under this Plan and/or any employer matching contributions
allocated to his or her account under any Aggregated Plan shall be reallocated
to a suspense account, and the balance credited to that account shall be applied
to reduce the Matching Contributions or other employer matching contributions
(of the same class) otherwise to be made for and allocated to all eligible
Members or participants in the Aggregated Plan for succeeding Plan Years in
order of time;

            (d)     The Member's Salary Deferrals, excess Flex Credits
contributed and any salary reduction contributions made at the Member's election
pursuant to section 401(k) of the Code under any Aggregated Plan shall be
reallocated to a suspense account and applied to reduce such Salary Deferrals,
excess Flex Credits or other salary reduction contributions as otherwise are to
be made thereafter at his or her election under this or any Aggregated Plan; and

            (e)     Any employer contributions otherwise to be allocated to the
Member's account under any Aggregated Plan shall be reallocated to a suspense
account, and the balance credited to that account shall be applied to reduce
other employer contributions (of the same class) otherwise to be made for and
allocated to all eligible participants in the Aggregated Plan for succeeding
Plan Years in order of time.

                        5.4.4  Suspense Accounts. If a suspense account is
created under Section 5.4.4(c), (d) and/or (e) and exists in a later Plan Year,
the amount allocated to the suspense account shall be reallocated to the
Member's Accounts before any amount may be contributed to

 

 

31

--------------------------------------------------------------------------------

 

 

this or any Aggregated Plan on behalf of the Member for that Plan Year. If the
Member for whom a suspense account is maintained terminates employment with all
Employers and Affiliates before the suspense account balance has been
reallocated pursuant to Section 5.4.4, that balance shall be reallocated among
the Accounts of all Members who remain Employees on the first day of the next
following Plan Year, in direct proportion to each such Member's share of the
aggregate Total Compensation paid to all such Members for the Plan Year of
termination (subject to the limitations of this Section 5.4), before any amount
may be contributed to this or any Aggregated Plan for the Plan Year of
reallocation. Suspense accounts shall not share in allocations of earnings and
gains (or losses) of the Trust Fund. The balances credited to all suspense
accounts shall be returned to the Employers upon termination of the Plan.

Limitation Year

. For purposes of applying the limitations of section 415 of the Code, the
limitation year shall be the Plan Year.

SECTION 6

ACCOUNTS AND COMMINGLED FUNDS

            6.1     Members' Accounts. At the direction of the Committee, there
shall be established and maintained for each Member, as appropriate:

            (a)     A Salary Deferral Account, to which shall be credited all
Salary Deferrals and "catch-up contributions" paid to the Trust Fund at his or
her election under Section 3;

            (b)     A Matching Account, to which shall be credited all Matching
Contributions paid to the Trust Fund on his or her behalf under Section 4;

            (c)     A Rollover Account, to which shall be credited all transfers
made to the Trust Fund by or on behalf of the Member under Section 10.5;

            (d)     A Loan Account, to which shall be credited (pursuant to
Section 5.3.3) any amounts loaned to the Member in accordance with Section 8.4;
and

            (e)     A GenenFlex Account, to which shall be credited all excess
Flex Credits paid to the Trust Fund at his or her election under GenenFlex in
accordance with Section 3.

 

 

32

--------------------------------------------------------------------------------

 

 

Each of a Member's Accounts shall also reflect the value of such Account's
proportionate interest in each of the Commingled Funds as of each Valuation
Date. The maintenance of one or more separate Accounts for each Member shall not
be deemed to segregate for the Member, nor to give the Member any ownership
interest in, any specific assets of the Trust Fund.

            6.2     Trust Fund Assets. The Trust Fund shall consist of the
Members' Salary Deferrals, Matching Contributions, "catch-up contributions" made
under Section 3.1.7, contributions of excess Flex Credits, rollovers made
pursuant to Section 10.5, all investments and reinvestments made therewith, and
all earnings and gains (less any losses) thereon. The Trustee shall hold and
administer all assets of the Trust Fund in the Commingled Funds, and each Member
and his or her Accounts shall have only an undivided interest in any of the
Commingled Funds.

            6.3     Commingled Funds. All assets of the Trust Fund shall be
invested in the following Commingled Funds:

                        6.3.1  Common Stock Fund. The Trustee shall maintain a
Common Stock Fund which shall be a commingled fund maintained for the purpose of
investing such portions of Members' Accounts as are, pursuant to Members'
investment instructions made in accordance with Section 5.3, properly allocable
to the Common Stock Fund.

            (a)     The Common Stock Fund shall be invested in Common Stock.

            (b)     The Trustee may purchase shares of Common Stock for the
Common Stock Fund in the open market.

            (c)     The Trustee may invest and hold up to 100% of the assets of
the Common Stock Fund in Common Stock. The Trustee may also hold such assets in
cash or cash equivalents as may be necessitated by the cash requirements of the
Common Stock Fund, as determined by the Committee (in its discretion).

                        6.3.2  Short-Term Fund. The Trustee shall establish or
maintain a Short-Term Fund which shall be a commingled fund maintained for the
purpose of investing such portions of

 

 

33

--------------------------------------------------------------------------------

 

 

Members' Accounts as are, pursuant to Members' investment instructions made in
accordance with Section 5.3, properly allocable to the Short-Term Fund. The
Short-Term Fund shall be invested by the Trustee in units, shares or other
interests in one or more common, pooled or other collective short-term
investment funds which are either (a) maintained by the Trustee or any other
bank (within the meaning of section 581 of the Code), the trustee of or
investment advisor to any such fund in which any other Commingled Fund is
invested or an affiliate of such trustee or investment advisor, or (b)
registered under the Investment Company Act of 1940.

                        6.3.3  Other Funds. In accordance with directions of the
Committee, the Trustee shall establish or maintain one or more other Commingled
Funds which shall be maintained for the purpose of investing such portions of
Members' Accounts as are, pursuant to Members' investment instructions made in
accordance with Section 5.3, properly allocable to each such Fund. Each such
other Commingled Fund shall be invested in units, shares or other interests in
one or more common, pooled or other collective investment funds which are either
(a) maintained by the Trustee, any other person described in section 3(38)(B) of
ERISA or an affiliate of such person, or (b) registered under the Investment
Company Act of 1940. At least three of the Commingled Funds shall (a) be
diversified, (b) have materially different risk and return characteristics, and
(c) be structured to satisfy the broad range of investment alternatives
requirement, all in manner designed to permit the Plan to qualify as a 404(c)
plan (within the meaning of section 404(c) of ERISA).

                        6.3.4  Designations, Redesignations and Reinvestments.
Except to the extent that investment responsibility for one or more of the
Commingled Funds (other than the Common Stock Fund) has been transferred to an
Investment Manager in accordance with Section 9.6, the Committee (in its
discretion) shall designate the common, pooled or other

 

 

34

--------------------------------------------------------------------------------

 

 

collective investment funds in which the Commingled Funds (other than the Common
Stock Fund) shall be invested. The Committee (in its discretion) may from time
to time change the number, identity or composition of the Commingled Funds made
available under this Section 6.3 and redesignate the collective investment funds
in which any Commingled Fund shall be invested. All interest, dividends or other
income realized from the investments of any of the Commingled Funds shall be
reinvested in the Commingled Fund that realized such income. Temporary cash
balances arising in any of the Commingled Funds shall be invested where feasible
in any collective investment fund which would qualify as an investment medium
for the Short-Term Fund.

            6.4     Valuation of Members' Accounts. The Trustee shall determine
the fair market values of the assets of the Commingled Funds, and the Committee
shall determine the fair market value of each Member's Accounts, as of each
Valuation Date. In making such determinations and in crediting net earnings and
gains (or losses) in the Commingled Funds to the Members' Accounts, the
Committee (in its discretion) may employ, and may direct the Trustee to employ,
such accounting methods as the Committee (in its discretion) may deem
appropriate in order fairly to reflect the fair market values of the Commingled
Funds and each Member's Accounts. For this purpose the Trustee and the Committee
(as appropriate) may rely upon information provided by the Committee, the
Trustee or other persons believed by the Trustee or the Committee to be
competent. The value of the interest of any Member's Accounts in the Common
Stock Fund may be measured in units (rather than shares of Common Stock) in such
manner as the Committee (in its discretion) shall specify.

            6.5     Valuation of Shares. For all purposes of the Plan, the
Trustee shall determine the fair market value of a share of Common Stock, which,
as of any date, shall be (except as set forth

 

 

35

--------------------------------------------------------------------------------

 

 

below) the closing price of the Common Stock on the New York Stock Exchange on
that date, as published in The Wall Street Journal or, if no report is available
for that date, on the next preceding date for which a report is available,
except that in the case of a transaction involving the purchase or sale of
share(s) of Common Stock, the fair market value of any share of Common Stock
shall be the purchase or sale price of such share on the New York Stock
Exchange.

            6.6     Statements of Members' Accounts. Each Member shall be
furnished with periodic statements of his or her interest in the Plan, at least
annually.

            6.7     Accounts Nonforfeitable. Each Member shall at all times have
a fully (100%) vested and nonforfeitable interest in his or her Accounts.

SECTION 7

DISTRIBUTIONS

            7.1     Events Permitting Distribution. Subject to Section 7.3, the
balance credited to a Member's Accounts shall become distributable only in the
following circumstances:

            (a)     Upon termination of the Member's employment at or after
Normal Retirement Age;

            (b)     Upon termination of the Member's active employment by reason
of Disability or death;

            (c)     Upon the Member's separation from employment (within the
meaning of section 401(k)(2)(B)(i)(I) of the Code) with all Employers and
Affiliates (whether by reason of resignation or dismissal) for any reason other
than those specified in paragraph (a) or (b) above;

            (d)     If the Member is a 5-percent owner (as described in Section
1.20(a)(2)), at any time during (and no later than) the April 1 that next
follows the calendar year in which the Member attains age 70 1/2;

            (e)     If and to the extent permitted by section 401(k)(10) of the
Code in connection with an Employer's or Affiliate's disposition of corporate
assets or a subsidiary;

            (f)     Upon the Committee's approval of the Member's application
for a withdrawal from his or her Account, to the limited extent provided in
Section 8;

 

 

36

--------------------------------------------------------------------------------

 

 

            (g)     In accordance with and to the limited extent provided in
Sections 3.1.1, 3.2.4, 4.1.8, or 5.4.4; or

            (h)     Upon the creation or recognition of an Alternate Payee's
right to all or a portion of a Member's Account under a domestic relations order
which the Committee determines is a QDRO (as defined in Section 8.5), but only
as to the portion of the Member's Account that the QDRO states is payable to the
Alternate Payee.

            7.2     Times for Distribution. Subject to all other provisions of
this Section 7 and except as provided in Section 8.5 (relating to QDROs),
distributions from a Member's Accounts shall occur as soon as practicable after
the Valuation Date that coincides with or next follows the later of (a) the date
the event permitting the distribution occurs, or (b) the date on which any
consent required under Section 7.3 is granted in such manner and within such
advance notice period as the Committee (in its discretion) shall specify.

                        7.2.1  Distribution Deadline. Subject to all other
provisions of this Section 7, all distributions not made sooner pursuant to the
first sentence of this Section 7.2 shall be made no later than 60 days after the
end of the Plan Year in which a distribution event described in Sections 7.1(a)
through (c) occurs with respect to the Member, or the Member attains Normal
Retirement Age (whichever is later), subject also to the following:

            (a)     A Member's failure to consent to a distribution (if such
consent is required under Section 7.3) shall be deemed to be an election to
defer distribution of his or her Accounts; provided, however, that the Member's
Accounts shall be distributed or begin to be distributed no later than his or
her Deadline Date (as defined in Section 7.2.2).

            (b)     If the amount of the distribution or the location of the
Member or his or her Beneficiary (after a reasonable search) cannot be
ascertained by the deadline described above, distribution shall be made no later
than 60 days after the earliest date on which the amount or location (as
appropriate) is ascertained, subject to the other provisions of this Section 7.

            (c)     Distributions permitted by reason of the Member's death
shall be made within five years after his or her death.

                        7.2.2  For purposes of applying this Section 7.2,
"Deadline Date" means:

 

 

37

--------------------------------------------------------------------------------

 

 

            (a)     With respect to a Member who is a 5-percent owner (as
defined in Section 1.20(a)(2)), the April 1 that next follows the calendar year
in which the Member attains age 70 1/2.

            (b)     With respect to a Member who is not a 5-percent owner (as
defined in Section 1.20(a)(2)), the April 1 that next follows the later of (i)
the calendar year in which the Member attains age 70 1/2, or (ii) the calendar
year in which the Member's employment with all Employers and Affiliates
terminates.

                        7.2.3  Age 70 1/2 Rule for 5-Percent Owners. If the
Accounts of a Member who continues in employment after attaining Normal
Retirement Age becomes distributable pursuant to Sections 7.1(d) and 7.2.2, the
Accounts shall be distributed no later than the April 1 specified in Section
7.1(d), and any subsequent allocations to the Account shall be distributed by
the April 1 that next follows the Plan Year to which those allocations pertain.

            7.3     Consent Requirement. If the balance credited to a Member's
Accounts exceeds $5,000 (the "Threshold Amount") as of the Valuation Date that
next precedes the date of the distribution, no portion of the Member's Accounts
shall be distributed to the Member until he or she attains age 62, unless the
Member (or, if deceased, his or her Beneficiary) has consented to an earlier
distribution in such manner and within such advance notice period as the
Committee (in its discretion) shall specify. The Threshold Amount (as defined in
this Section 7.3) shall be adjusted periodically pursuant to section
411(a)(11)(A) of the Code.

            7.4     Form of Distribution.

                        7.4.1  Cash. With respect to any portion of a Member's
Accounts as is not invested in the Common Stock Fund, any distribution from such
portion of the Accounts shall be made in the form of a single lump sum payment
of cash (or its equivalent) equal to the balance credited to such portion of the
Accounts as of the relevant Valuation Date, except to the extent that the
distributee elects, in accordance with such procedures as the Committee (in its

 

 

38

--------------------------------------------------------------------------------

 

 

discretion) shall specify, to have such portion of the Accounts distributed in
the form of the unliquidated assets credited to such portion of the Accounts as
of that Valuation Date.

                        7.4.2  Common Stock. Any distribution from such portion
of a Member's Accounts as is invested in the Common Stock Fund as of the
Valuation Date shall be made in the form of a single lump sum payment, as
elected by the distributee, in-

            (a)     Such whole number of shares of Common Stock as is equivalent
to the full value of the units of the Common Stock Fund then credited to such
portion of the Accounts;

            (b)     Cash (or its equivalent) equal to the full value of the
units of the Common Stock Fund then credited to such portion of the Accounts; or

            (c)     A combination of both.

                        7.4.3  Fractional Shares. If shares of Common Stock are
to be distributed, only full shares shall be distributed and cash (or its
equivalent) shall be distributed in lieu of any fractional share.

                        7.4.4  No Annuities. In no event shall any distribution
from a Member's Accounts be made in the form of a life annuity.

                        7.4.5  Direct Rollovers. Notwithstanding any contrary
Plan provision:

            (a)     If a Distributee of any Eligible Rollover Distribution (1)
elects to have at least $500 of such Distribution or, if less, the entire
Distribution, paid directly to an individual retirement account ("IRA"), an
annuity contract described in section 403(b) of the Code, an eligible plan under
section 457(b) of the Code maintained by a state, political subdivision of a
state, or any agency or instrumentality of a state or political subdivision of a
state or an eligible defined contribution plan (within the meaning of section
401(a)(31)(D) of the Code), and (2) specifies such IRA, 403(b) plan, 457 plan or
eligible defined contribution plan and the elected amount in such manner and
within such advance notice period as the Committee (in its discretion) may
specify, such Distribution (or elected portion thereof) shall be made in the
form of a direct rollover to such IRA, 403(b) plan, 457 plan or eligible defined
contribution plan, in accordance with and subject to the conditions and
limitations of section 401(a)(31) and related provisions of the Code; and

            (b)     Such Distribution may commence less than 30 days after the
notice required under Treas. Reg. Section 1.411(a)-11(c) is given to the
Distributee, provided that (1)

 

 

39

--------------------------------------------------------------------------------

 

 

the Distributee is clearly informed that he or she has a right to consider, for
a period of at least 30 days after receiving the notice, a decision on whether
to elect a distribution (and, if applicable, a particular distribution option),
and (2) the Distributee, after receiving the notice, affirmatively elects a
distribution.

            (c)     "Distributee" shall mean a Member, a Beneficiary (if the
surviving spouse of a Member), or an Alternate Payee (if the spouse or former
spouse of a Member under a QDRO (as defined in Section 8.5)).

            (d)     "Eligible Rollover Distribution" shall mean a distribution
of any portion of the balance credited to the Accounts of a Member which is not:

            (1)     One of a series of substantially equal periodic payments
made over (A) a specified period of ten years or more, or (B) 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;

            (2)     Any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code;

            (3)     Any hardship distribution described in Section
410(k)(2)(B)(i)(IV) of the Code; and

            (4)     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),

to the extent that it constitutes an eligible rollover distribution (within the
meaning of section 401(a)(31)(C) of the Code).

            7.5     Common Stock Restrictions. Any Member or other prospective
Distributee who is to receive a distribution of Common Stock may be required to
execute an appropriate stock transfer agreement, implementing and evidencing
such restrictions on transferability as may be imposed by applicable federal and
state securities laws, prior to receiving a distribution of the Common Stock.
Any shares of Common Stock held or distributed by the Trustee may include such
legend restrictions on transferability as the Company may reasonably require in
order to assure compliance with applicable federal and state securities laws.

            7.6     Beneficiary Designations. Each Member may designate in
writing one or more Beneficiaries on such form and in such manner as the
Committee (in its discretion) shall specify.

 

 

40

--------------------------------------------------------------------------------

 

 

No such designation shall become effective until its receipt by the Company (as
the Committee's delegate under Section 9.4(t)) in the manner specified.

                        7.6.1     Spousal Consent. If a Member designates any a
person other than his or her spouse as a primary Beneficiary, the designation
shall be ineffective unless the Member's spouse consents to the designation. Any
spousal consent required under this Section 7.6.1 shall be void unless it (a) is
set forth in writing, (b) acknowledges the effect of the Member's designation of
another person as his or her Beneficiary under the Plan, and (c) is signed by
the spouse and witnessed by an authorized agent of the Committee or a notary
public. Notwithstanding the foregoing, if the Member establishes to the
satisfaction of the Committee that written spousal consent may not be obtained
because there is no spouse or the spouse cannot be located, or because of other
circumstances specified under section 417(a)(2) of the Code, his or her
designation shall be effective without spousal consent. Any spousal consent
required under this Section 7.6.1 shall be irrevocable and valid only with
respect to the spouse who signs the consent. A Member may revoke his or her
Beneficiary designation in writing at any time, regardless of his or her
spouse's previous consent to the revoked designation, and any such revoked
designation shall be void.

                        7.6.2     Changes and Failed Designations. A Member may
designate different Beneficiaries (and thereby revoke all prior Beneficiary
designations) on such form and in such manner as the Committee (in its
discretion) shall specify. No such designation shall become effective until its
receipt by the Company (as the Committee's delegate under Section 9.4(t)) in the
manner specified, and the last effective designation received by the Company
shall supersede all prior designations. If a Member dies without having
effectively designated a Beneficiary, or if no Beneficiary survives the Member,
the Member's Accounts shall be payable to his or her

 

 

41

--------------------------------------------------------------------------------

 

 

surviving spouse or, if the Member is not survived by his or her spouse, the
Accounts shall be paid to one or more of the following persons in the following
priority order:

            (a)     The Member's surviving Children (whether or not adopted) in
equal shares or the trustees of any trust or trusts established for the benefit
of the Member's surviving Children; for the purposes of applying this Section
7.6.2, "Children" shall mean the Member's natural or legally adopted children
and the issue of the Member's deceased children, by right of representation;

            (b)     The Member's surviving parents or parent, in equal shares or
the trustees of any trust or trusts established for the benefit of the Member's
surviving parents or parent; or

            (c)     The executors and/or administrators of his or her estate.

            7.7     Payments to Minors or Incompetents. If any individual to
whom a benefit is payable under the Plan is a minor, or if the Committee (in its
discretion) determines that any individual to whom a benefit is payable under
the Plan is physically or mentally incompetent to receive such payment or to
give a valid release therefor, payment shall be made to the guardian, committee
or other representative of the estate of such individual which has been duly
appointed by a court of competent jurisdiction. If no guardian, committee or
other representative has been appointed, payment:

            (a)     May be made to any person as custodian for the minor or
incompetent under the California Uniform Transfers to Minors Act (or comparable
law of another state), or

            (b)     May be made to or applied to or for the benefit of the minor
or incompetent, his or her spouse, children or other dependents, the institution
or persons maintaining him or her, or any of them, in such proportions as the
Committee (in its discretion) from time to time shall determine.

            (c)     The release of the person or institution receiving the
payment shall be a valid and complete discharge of any liability of the Plan
with respect to any benefit so paid.

            7.8     Undistributable Accounts. Each Member and (in the event of
death) his or her Beneficiary shall keep the Committee advised of his or her
current address. If the Committee is

 

 

42

--------------------------------------------------------------------------------

 

 

unable to locate the Member or Beneficiary to whom a Member's Accounts are
payable under this Section 7, (a) the Member's Accounts may be closed after 24
months have passed since the date the Account first became distributable to such
Member or Beneficiary, and (b) the balance credited to any Accounts so closed
shall be credited as an offset against the Employers' future Matching
Contribution payment obligations. If the Member or Beneficiary whose Accounts
were closed under the preceding sentence subsequently files a claim for
distribution of his or her Accounts, and if the Committee (in its discretion)
determines that such claim is valid, then the balance previously removed upon
closure of the Accounts shall be restored to the Accounts by means of a special
contribution which shall be made to the Trust Fund by the Employers.

SECTION 8

WITHDRAWALS, LOANS AND DOMESTIC RELATIONS ORDERS

            8.1     General Rules. In accordance with Sections 8.2 and 8.3, a
Member who is an Employee may make a withdrawal from his or her Accounts in cash
(or its equivalent). Any application for a withdrawal shall be submitted to such
person, in such manner and within such advance notice period as the Committee
(in its discretion) shall specify. No Member shall be permitted to make a
withdrawal under this Section 8 more often than once in any one-year period. The
active membership of a Member who makes a withdrawal under Section 8.2 shall be
suspended, in the manner set forth in Section 2.5, for each payroll period that
begins during the period starting on the withdrawal approval date and ending six
months following that date. Following that suspension period, the Member may
again become an Active Member and resume his or her Salary Deferrals or
"catch-up contributions" under Section 3, and/or contributions of excess Flex
Credits (subject to the rules in effect under GenenFlex), effective with respect
to Compensation paid for the payroll period beginning on any Entry Date, only by
again electing to become an Active Member in accordance with Section 2.3.

 

 

43

--------------------------------------------------------------------------------

 

 

            8.2     Hardship Withdrawal. The Committee shall authorize a
distribution under this Section 8.2 (subject to the provisions of Section 8.1)
if the Member provides evidence which is sufficient to enable the Committee to
determine that the withdrawal satisfies the conditions of this Section 8.2.

                        8.2.1     Permissible Financial Obligations. A Member
may make a withdrawal under this Section 8.2 only to meet a financial obligation
for:

            (a)     Unreimbursed expenses for medical care (as defined in
section 213(d) of the Code) incurred by the Member, his or her spouse or any
dependent (as defined in section 152 of the Code) of the Member, or necessary to
enable any such person to obtain such care;

            (b)     Down payment and closing costs (excluding mortgage payments)
directly related to the purchase of the Member's principal residence;

            (c)     Payment of tuition, room and board and related educational
expenses for up to the next 12 months of post-secondary education for the
Member, his or her spouse, children or any dependent (as defined in section 152
of the Code) of the Member;

            (d)     Prevention of the eviction of the Member from his or her
principal residence or foreclosure on the mortgage or deed of trust on the
Member's principal residence;

            (e)     Such other expenses as may be permitted under published
documents of general applicability as provided under Treas. Reg.
Section 1.401(k)-1(d)(2)(iv)(C).

                        8.2.2     Withdrawal Necessary to Meet Financial
Obligation. No withdrawal shall be made under this Section 8.2 unless the Member
has elected to receive all distributions, withdrawals and loans available under
this Plan and all other qualified plans maintained by the Employers and
Affiliates.

                        8.2.3     Contribution Limitations. To the extent
required by regulations, no withdrawal shall be made under this Section 8.2
unless the Member irrevocably agrees, evidenced in such manner as the Committee
(in its discretion) may specify, to the following limitations in his or her
hardship withdrawal application:

 

 

44

--------------------------------------------------------------------------------

 

 

            (a)     During the period beginning on the withdrawal approval date
and ending six months after that date, the Member shall neither (1) make
contributions to, compensation deferrals under or payments in connection with
the exercise of any rights granted under any other qualified plan or any
nonqualified stock option, stock purchase, deferred compensation or similar plan
(but not any health or welfare plan) maintained by any Employer or Affiliate;
nor (2) elect under GenenFlex to have any excess Flex Credits contributed to his
or her GenenFlex Account.

            (b)     Any election under GenenFlex to have excess Flex Credits
contributed to his or her GenenFlex Account shall be suspended until the end of
the withdrawal suspension period described in paragraph (a) above.

                        8.2.4     Limit on Withdrawal. No withdrawal under this
Section 8.2 shall exceed the lesser of:

            (a)     The amount which the Committee (in its discretion)
determines is necessary to satisfy the financial obligations meeting the
conditions of Section 8.2.1 (net of income or penalty taxes reasonably
anticipated to result from the withdrawal); or

            (b)     The excess of (1) the value of the Member's Accounts as of
the Valuation Date that occurs on the withdrawal date reduced by amounts
allocated pursuant to Section 8.5 to any subaccount of the Member's Account for
any Alternate Payee under a QDRO (as defined in Section 8.5), over (2) the total
amount due (including both principal and interest) under all outstanding loans
made to the Member pursuant to Section 8.4.

            (c)     Notwithstanding the foregoing, the maximum amount that may
be withdrawn from a Member's Salary Deferral Account and GenenFlex Account for
this purpose shall be equal to the excess of (1) the sum of all Salary
Deferrals, "catch-up contributions" and excess Flex Credits allocated to the
Member's Salary Deferral Account and/or GenenFlex Account on the date of the
withdrawal plus the amount of earnings credited to his or her Salary Deferral
Account as of December 31, 1988, over (2) the sum of all amounts previously
withdrawn or distributed from the Member's Salary Deferral Account and GenenFlex
Account.

                        8.2.5     Order of Withdrawal From Accounts. Any amount
withdrawn under this Section 8.2 shall be deducted from the Member's Accounts in
the following order: the Salary Deferral Account, the GenenFlex Account, the
Matching Account and the Rollover Account. Subject to the preceding sentence,
amounts invested in the Commingled Funds shall be withdrawn prorata to fund the
withdrawal.

 

 

45

--------------------------------------------------------------------------------

 

 

            8.3     Age 59 1/2 Withdrawal. At any time after a Member attains
age 59 1/2, the Member (subject to the provisions of Section 8.1) may withdraw
any amount up to the excess of (1) the value of his or her Accounts as of the
Valuation Date that occurs on the withdrawal date, reduced by amounts allocated
pursuant to Section 8.5 to any subaccount of the Member's Accounts for any
Alternate Payee under a QDRO (as defined in Section 8.5), over (2) the total
amount due (including both principal and interest) under all outstanding loans
made to the Member pursuant to Section 8.4.

            8.4     Loans to Members.

                        8.4.1     General Loan Rules. A Member who is an
Employee may, upon application to such person, in such manner and within such
advance notice period as the Committee (in its discretion) shall specify, obtain
a loan from the portion of the Trust Fund allocated to the Member's Accounts in
accordance with the provisions of this Section 8.4. Loans shall be available to
all Members who are Employees, and to parties in interest (within the meaning of
section 3(14) of ERISA) with respect to the Plan who are non-Employee Members or
Beneficiaries of deceased Members, on a reasonably equivalent basis.

            (a)     Amount. The amount of the loan shall be neither less than
$1,000 nor more than the excess of (1) 50% of the Member's Available Balance (as
defined below), determined as of the Valuation Date that occurs on the date the
loan is processed, over (2) the sum of the outstanding balances (including both
principal and accrued interest) on all prior outstanding loans to the Member
under this Plan.

            (b)     "Available Balance" shall mean the vested total balance
credited to the Member's Accounts as of the applicable date, reduced by amounts
allocated pursuant to Section 8.5 to any subaccount of the Member's Accounts for
any Alternate Payee under a QDRO (as defined in Section 8.5).

            (c)     Additional Limits. The amount borrowed under this
Section 8.4 shall not cause the sum of (i) the amount of the loan, plus (ii) the
aggregate outstanding balance (including both principal and accrued interest) on
all prior loans to the Member under this Plan or any other qualified plan
maintained by any Employer or Affiliate (an "Other Plan"), to exceed an amount
equal to $50,000, reduced by the excess (if any) of (1) the highest aggregate
outstanding balance on all loans under this Plan and all Other Plans

 

 

46

--------------------------------------------------------------------------------

 

 

during the one-year period ending on the day before the date the loan is to be
made, over (2) the aggregate outstanding balance on all such loans on the date
the loan is made.

            (d)     Number of Loans. No Member shall be permitted to borrow
under this Section 8.4 if the borrowing would result in his or her having more
than two (2) loans outstanding, and an additional loan may not be made to a
Member until at least 12 months after the next earliest loan was made; provided,
however, that the Committee (in its discretion) may nevertheless permit a Member
to make a second or third loan if the Member provides evidence sufficient to
show that the second or third loan is necessary in light of his or her immediate
and heavy financial needs.

            (e)     Unpaid Leave of Absence. If a Member is granted an unpaid
leave of absence and remains an Employee, his or her loan payments will be
suspended for the lesser of the duration of the approved leave or one year. If
the Member returns to active employment with an Employer or Affiliate, the
Committee shall recompute the monthly loan payment amount and the recomputed
amount shall be payable for the balance of the original term of the loan in
accordance with this Section 8.4. If the Member fails to return to active
employment with an Employer or Affiliate or separates from service with all
Employers and Affiliates, the provisions of Sections 8.4.2(e)(2), 8.4.2(g),
8.4.2(h), 8.4.2(i), 8.4.3 and 8.4.4 shall apply.

                        8.4.2     Minimum Requirements of Each Loan. Any loan
made under this Section 8.4 shall be evidenced by a loan agreement and
promissory note, and the Member must evidence his or her agreement to the terms
thereof in writing. Such terms shall satisfy the following minimum requirements:

            (a)     Separate Accounting. Each loan shall be considered as a
separate, earmarked investment of the Member's Loan Account and shall be
accounted for as provided in Section 5.3.3.

            (b)     Term. The term of the loan shall not exceed five years. The
Member may elect a term of either three or five years for each loan. However,
the term of the loan may be up to 15 years, provided that the Member (1)
certifies in writing that the loan proceeds will be used to purchase a dwelling
unit which (within a reasonable period of time after the loan is made) will be
the Member's principal residence, and (2) submits such certification to the
Committee together with such supporting documentary evidence (e.g., a copy of
the signed sale contract) as the Committee (in its discretion) may request.

            (c)     Interest Rate. Each loan shall bear a reasonable rate of
interest, as determined by the Committee (in its discretion), which shall be
comparable to the interest rates charged under similar circumstances by persons
in the business of lending money.

            (d)     Payment Schedule. A definite payment schedule shall be
established for each loan which shall require level and monthly payments of both
principal and interest

 

 

47

--------------------------------------------------------------------------------

 

 

over the agreed term of the loan in accordance with the provisions of this
Section 8.4. A Member may prepay at any time the entire amount remaining due
under the loan, but no partial prepayments shall be permitted.

            (e)     Withholding Payments. No loan shall be made unless the
Member agrees to make principal and interest payments on each loan, together
with any and all reasonable charges imposed by the Trustee at the direction of
the Committee in connection with the loan-

            (1)     By payroll withholding, in the case of a Member who is
receiving periodic wage payments from an Employer or Affiliate; or

            (2)     By an automatic payment method which the Committee (in its
discretion) determines will provide security comparable to that of payroll
withholding, in the case of a Member who is not receiving periodic wage payments
from an Employer or Affiliate.

            (f)     On Payroll. If during the term of the loan, a Member who has
been making payments by the automatic payment method described in Section
8.4.2(e)(2) begins receiving periodic wage payments from an Employer or
Affiliate, the Member shall authorize in writing payroll withholding for the
remaining loan payments.

            (g)     Off Payroll. If during the term of the loan, a Member who
has been making loan payments by payroll withholding ceases to receive periodic
wage payments from an Employer or Affiliate (and distribution of the Member's
Account has not begun), the Member shall authorize in writing an automatic
payment method described in Section 8.4.2(e)(2) for the remaining loan payments.

            (h)     Failure to Authorize. If any Member fails to authorize any
change in the method of payment required by Section 8.4.2(f) or (g), the
outstanding balance (including unpaid principal and interest) on the loan shall
become immediately due and payable.

            (i)     Security. Each loan shall be adequately secured by
collateral of sufficient value to secure payment of the loan principal and
interest. Notwithstanding the provisions of Section 13.2, the Member shall
pledge 50% of his or her Available Balance (as defined in Section 8.4.1(b)), and
shall provide such other collateral as the Committee (in its discretion) may
require, to secure his or her loan payment obligations.

                        8.4.3     Default. If a Member defaults on his or her
loan payment obligations and does not cure the default within 30 days of the
date the Member is notified of the default, the Committee shall take, or direct
the Trustee to take, such action as shall be necessary or appropriate in the
circumstances prevailing:

            (a)     To realize upon the security interest of the Trust Fund in
the collateral pledged to secure the loan, and/or

 

 

48

--------------------------------------------------------------------------------

 

 

            (b)     To reduce the balance credited to the Member's Accounts by
the amount required to cure the default.

            (c)     In applying the method of cure provided in paragraph (a)
above, if any losses are realized or expenses incurred, they shall be allocated
only to the defaulting Accounts.

            (d)     In applying the method of cure provided in paragraph (b)
above, the amount by which the Member's Accounts is to be reduced shall be
credited to a separate suspense account for the Member and shall be increased
with interest, at the interest rate actually applicable to the loan pursuant to
Section 8.4.2(c), for the period from the date of the default until the earlier
of the date the Member attains age 59 1/2 or the first date on which
distributions from the Account can be made under Section 7.1; the balance
credited to the Accounts as of that first date shall be reduced by the amount
then credited to the suspense account; and only the remaining balance (if any)
shall be available for distribution under Section 7.

                        8.4.4     Effect of Distributions. If any amount remains
outstanding as a loan obligation of a Member when a distribution is made from
his or her Account in connection with the Member's termination of employment
with all Employers and Affiliates, (a) the outstanding loan balance (including
both principal and accrued interest) shall then become immediately due and
payable, and (b) the balance credited to the Member's Accounts shall be reduced
to the extent necessary to discharge the obligation.

            8.5     Qualified Domestic Relations Orders. The Committee shall
establish written procedures for determining whether a domestic relations order
purporting to dispose of any portion of a Member's Account is a qualified
domestic relations order (within the meaning of section 414(p) of the Code) (a
"QDRO").

                        8.5.1     No Payment Unless a QDRO. No payment shall be
made to any Alternate Payee until the Committee (in its discretion), or a court
of competent jurisdiction reversing an initial adverse determination by the
Committee, determines that the order is a QDRO. Payment shall be made to any
Alternate Payee only as specified in the QDRO.

 

 

49

--------------------------------------------------------------------------------

 

 

                        8.5.2     Immediate Payment Required. Payment shall be
made to an Alternate Payee, in accordance with a QDRO, as soon as practicable
after the QDRO determination is made, regardless of whether the distribution, if
made to a Member at the time specified in the order, would be permitted under
the terms of the Plan.

                        8.5.3     Deferred Payment. If the QDRO does not provide
for immediate payment to an Alternate Payee, the Committee shall establish a
subaccount to record the Alternate Payee's interest in the Member's Accounts.
All investment decision with respect to amounts credited to the subaccount shall
be made by the Alternate Payee in the manner provided in Section 5.3. Payment to
the Alternate Payee shall not be deferred beyond the date of distribution to the
Member or (in the event of death) his or her Beneficiary is made or commenced.

                        8.5.4     Hold Procedures. Notwithstanding any contrary
Plan provision, at any time the Committee (in its discretion) may place a hold
upon all or a portion of a Member's Accounts for a reasonable period of time (as
determined by the Committee) if the Committee receives notice that (a) a
domestic relations order is being sought by the Member, his or her spouse,
former spouse, child or other dependent and (b) the Member's Accounts are a
source of payment under such order. For purposes of this Section 8.5.4, a "hold"
shall mean that no withdrawals, loans or distributions may be made from a
Member's Accounts. The Committee shall notify the Member if a hold is placed
upon his or her Accounts pursuant to this Section 8.5.4.

SECTION 9

ADMINISTRATION OF THE PLAN

            9.1     Plan Administrator. The Company is hereby designated as the
administrator of the Plan (within the meaning of sections 414(g) and 3(16)(A) of
the Code and ERISA, respectively).

 

 

50

--------------------------------------------------------------------------------

 

 

            9.2     Committee. The Plan shall be administered by a Committee
consisting of at least three members, appointed by and holding office at the
pleasure of the Board of Directors. The Committee shall have the authority to
control and manage the operation and administration of the Plan as a named
fiduciary under section 402(a)(1) of ERISA. Any member of the Committee who is
also an Employee shall serve as such without additional compensation. Any member
of the Committee may resign at any time by notice in writing mailed or delivered
to the Board of Directors. The Board of Directors may remove any member of the
Committee at any time and may fill any vacancy which exists.

            9.3     Actions by Committee. Each decision of a majority of the
members of the Committee then in office shall constitute the final and binding
act of the Committee. The Committee may act with or without a meeting being
called or held and shall keep minutes of all meetings held and a record of all
actions taken. Except as otherwise specifically or generally directed by the
Committee, any action of the Committee may be evidenced by a writing signed by
any two (2) members of the Committee.

            9.4     Powers of Committee. The Committee shall have all powers
necessary to supervise the administration of the Plan and to control its
operation in accordance with its terms, including, but not by way of limitation,
the following discretionary powers:

            (a)     To interpret the provisions of the Plan (and the documents
governing GenenFlex, insofar as they relate to the relationships between
GenenFlex and this Plan) and to determine any question arising under, or in
connection with the administration or operation of, the Plan (or arising under,
or in connection with the administration or operation of GenenFlex, insofar as
they relate to the relationship between GenenFlex and this Plan);

            (b)     To determine all questions concerning the eligibility of any
Employee to become or remain a Member and/or an Active Member of the Plan;

            (c)     To cause one or more separate Accounts to be maintained for
each Member;

 

 

51

--------------------------------------------------------------------------------

 

 

            (d)     To establish and revise an accounting method or formula for
the Plan, as provided in Section 6.4;

            (e)     To determine the manner and form, and to notify the Trustee,
of any distribution to be made under the Plan;

            (f)     To grant or deny withdrawal and loan applications under
Section 8;

            (g)     To determine the status and rights of Members and their
spouses, Beneficiaries or estates under this Plan, including the ability of
Members to have excess Flex Credits contributed to their GenenFlex Accounts
under this Plan (subject to the rules in effect under GenenFlex);

            (h)     To instruct the Trustee with respect to matters within the
jurisdiction of the Committee;

            (i)     To direct the Trustee, in accordance with Section 6.3, as to
the establishment of Commingled Funds and the investment of the Plan assets held
in the Commingled Funds (other than the Common Stock Fund);

            (j)     To employ such counsel, agents and advisors, and to obtain
such legal, clerical and other services, as it may deem necessary or appropriate
in carrying out the provisions of the Plan;

            (k)     To prescribe the form and manner in which any member, or his
or her spouse or other Beneficiary, shall make any election or designation
required under the Plan;

            (l)     To establish rules for the performance of its powers and
duties and for the administration of the Plan;

            (m)     To arrange for annual distribution to each Member of a
statement of benefits accrued under the Plan;

            (n)     To establish rules and regulations by which requests for
Plan information from Members are processed expeditiously and completely;

            (o)     To provide to each terminated Member notice of his or her
vested interest under the Plan and to provide to each Member in advance of the
Member's receipt of an Eligible Rollover Distribution (as defined in Section
7.4.5(d)) the written explanation described in section 402(f) of the Code;

            (p)     To publish a claims and appeal procedure satisfying the
minimum standards of section 503 of ERISA pursuant to which Members or their
spouses, Beneficiaries or estates may claim Plan benefits and appeal denials of
such claims;

            (q)     To determine the liabilities of the Plan, to establish and
communicate a funding policy to the Trustee and any Investment Manager appointed
pursuant to

 

 

52

--------------------------------------------------------------------------------

 

 

Section 9.6, and in accordance with such funding policy, to coordinate the
Plan's investment policy with the Plan's requirements for funds to pay expenses
and benefits as they become due;

            (r)     To act as agent for the Company in keeping all records and
assisting with the preparation of all reports and disclosures necessary for
purpose of complying with the reporting and disclosure requirements of ERISA and
the Code;

            (s)     To arrange for the purchase of any bond required of the
Committee members or others under section 412 of ERISA;

            (t)     To delegate to the Trustee, the Company's Payroll or Human
Resources Department, or any other (including third-party) recordkeeper the
authority, acting as an agent of the Committee, to give or receive notices,
elections and other directions to or from Members and Beneficiaries as provided
in the Plan; and

            (u)     To delegate to any one or more of its members or to any
other person, severally or jointly, the authority to perform for and on behalf
of the Committee one or more of the fiduciary and/or ministerial functions of
the Committee under the Plan.

            9.5     Fiduciary Responsibilities. To the extent permissible under
ERISA, any person may serve in more than one fiduciary capacity with respect to
the Plan. Except as required by specific provisions of ERISA, no person who is a
fiduciary with respect to the Plan shall be under any obligation to perform any
duty or responsibility with respect to the Plan which has been specifically
allocated to another fiduciary.

            9.6     Investment Responsibilities. The Committee shall direct the
Trustee to invest the Commingled Funds (other than the Common Stock Fund) in one
or more common, pooled or other collective investment funds. Subject to the
provisions of this Section 9.6 and any contrary provision of the Plan or Trust
Agreement, exclusive authority and discretion to manage and control the assets
of the Trust Fund shall be vested in the Trustee, and the Trustee from time to
time shall review the assets and make its determinations as to the investments
of the Trust Fund.

                        9.6.1     Investment Manager Appointment. The Committee
(in its discretion) may appoint, and thereafter may discharge, one or more
investment managers (the "Investment Managers") to manage the investment of the
one or more of the Commingled Funds and other

 

 

53

--------------------------------------------------------------------------------

 

 

designated portions of the Trust Fund (other than the Common Stock Fund). In the
event of any such appointment, the Trustee shall follow the instructions of the
Investment Manager in investing and administering Trust Fund assets managed by
the Investment Manager. Alternatively, the Committee (in its discretion) may
delegate investment authority and responsibility with respect to any Commingled
Fund (other than the Common Stock Fund) directly to any Investment Manager which
has investment management responsibility for any collective investment fund in
which the Commingled Fund is invested.

                        9.6.2     Eligibility. Any person, firm or corporation
appointed as Investment Manager (a) shall be a person described in section
3(38)(B) of ERISA, (b) shall make such representations from time to time as the
Committee (in its discretion) may require in order to determine its
qualifications to be appointed and to continue to serve in such capacity, and
(c) shall acknowledge in writing its status as a fiduciary with respect to the
Plan upon acceptance of its appointment.

            9.7     Voting and Tender Offer Rights in Common Stock.

                        9.7.1     Pass-Through Issues. All Common Stock held in
the Trust Fund shall be voted, tendered or exchanged, with respect to
Pass-Through Issues, in accordance with Sections 9.7.3 through 9.7.6. For
purposes of this Section 9.7, a "Pass-Through Issue" with respect to Common
Stock is an issue which concerns:

            (a)     The voting of shares of Common Stock with respect to the
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business or any transaction which the
Committee (in its discretion) determines to be similar to the foregoing;

            (b)     Any tender or exchange offer for Common Stock or any
transaction that the Committee (in its discretion) determines to be similar to
the foregoing;

            (c)     Any proposal by a shareholder pursuant to Rule 14a-8 under
the 1934 Act;

 

 

54

--------------------------------------------------------------------------------

 

 

            (d)     Any election contest governed by Rule 14a-11 under the 1934
Act;

            (e)     Any proposal with respect to which there is any solicitation
in opposition (within the meaning of Rule 14a-6 under the 1934 Act); or

            (f)     Any such other event that the Committee (in its discretion)
designates as a Pass-Through Issue. It is anticipated that generally the
Committee will designate all but nonsubstantive issues as Pass-Through Issues.
The Committee shall have the authority (in its discretion) to determine which
issues are nonsubstantive issues.

                        9.7.2     Voting On Issues Other Than Pass-Through
Issues. Except with respect to Pass-Through Issues, Common Stock held in the
Trust Fund shall be voted by the Trustee only in accordance with instructions
received from the Committee. However, if with respect to some matter other than
a Pass-Through Issue the Committee shall fail to give, or shall notify the
Trustee in writing of its decision not to give, timely voting instructions to
the Trustee, the Trustee (in its discretion) shall have the authority to vote
such Common Stock in its sole discretion. The functions of the Committee and the
Trustee with respect to other rights pertaining to such Common Stock on matters
other than Pass-Through Issues shall be allocated between them in like manner.

                        9.7.3     Named Fiduciary Status. For purposes of this
Section 9.7, each Member (or, if deceased, his or her Beneficiary) shall be a
named fiduciary (within the meaning of, but not limited to, sections 402(a) and
403(a)(1) of ERISA) with respect to Pass-Through Issues for all shares of Common
Stock as to which the Member has the right of direction with respect to voting,
tender and any other rights appurtenant to such Stock. That named fiduciary
status shall apply with respect to Pass-Through Issues for such whole number of
shares of Common Stock (if any) actually held for the benefit of any Member (or
Beneficiary) and allocable to his or her Account by reason of the Account's
investment (if any) in the Company Stock Fund (for purposes of this Section 9.7,
"Allocable Shares").

 

 

55

--------------------------------------------------------------------------------

 

 

                        9.7.4     Confidentiality. In implementing this
Section 9.7, each appropriate fiduciary shall take all steps necessary or
appropriate to ensure that each Member's (or Beneficiary's) instructions shall
be kept in strictest confidence and shall not be divulged or released to any
person, except as provided in the next sentence, including officers, directors
or employees of the Company or any Affiliate. To the extent necessary for the
operation of the Plan, however, the instructions may be provided to the Trustee
and to a recordkeeper, auditor or other person providing services to the Plan if
the person (a) is not the Company or an Affiliate, and (b) agrees not to divulge
the instructions to any other person, including officers, directors or employees
of the Company or any Affiliate.

                        9.7.5     Directed Voting and Consents.

            (a)     Notwithstanding any contrary Plan provision, whenever any
proxies or consents are solicited from the holders of Common Stock with respect
to Pass-Through Issues, the Trustee shall exercise voting or other rights solely
as directed in written instructions timely received from Members (or if
deceased, their Beneficiaries) and in accordance with this Section 9.7.

            (b)     Each Member (or if deceased, his or her Beneficiary) shall
have the right, with respect to Pass-Through Issues for Allocable Shares, to
instruct the Trustee, in accordance with procedures established by the Committee
(in its discretion), as to the manner in which to vote such Allocable Shares at
any stockholders' meeting of the Company, or the manner in which the Trustee
shall give or withhold consent with respect to such Allocable Shares.

            (1)     The Trustee shall pool the results of instructions received
from all Members (and Beneficiaries) as to their Allocable Shares and shall vote
or otherwise act accordingly on Pass-Through Issues with respect to such
Allocable Shares and the aggregate of all fractional shares of Common Stock
allocable to the Members' Accounts;

            (2)     In the case of a deceased Member who has more than one
Beneficiary, the Trustee shall vote or otherwise act on Pass-Through Issues in
accordance with the instructions of the Member's Beneficiaries in respect of the
deceased Member's Allocable Shares in proportion to the Beneficiaries'
respective interests in the Member's Account in accordance with rules
established by the Committee (in its discretion).

 

 

56

--------------------------------------------------------------------------------

 

 

            (3)     If and to the extent that no instructions are timely
received from any Member (or Beneficiary) with a right to instruct with respect
to his or her Allocable Shares, (A) such person shall be deemed to have timely
instructed the Trustee not to vote the relevant Allocable Shares, and (B) the
Trustee shall not vote such Allocable Shares nor take any other actions under
this Section 9.7 with respect to such Allocable Shares on Pass-Through Issues.

            (c)     The Company shall use its best efforts to timely distribute
or cause to be distributed to each Member (or Beneficiary) such information
concerning Pass-Through Issues as will be distributed to stockholders of the
Company in connection with any stockholders' meeting or any solicitation of
voting or consents, together with a request for confidential instructions to the
Trustee or its designee on how shares of Common Stock shall be voted on each
such matter or how consents shall be given or withheld.

                        9.7.6     Tender or Exchange Offers.

            (a)     Notwithstanding any contrary Plan provision, whenever (i)
any tender or exchange offer is made for shares of Common Stock, or (ii) there
occurs any transaction that the Committee (in its discretion) determines to be
similar to the foregoing (as described in Section 9.7.1(b)), the Trustee shall
tender or exchange (or refrain from tendering or exchanging) shares of Common
Stock solely as directed in instructions timely received from Members (or if
deceased, their Beneficiaries) and in accordance with this Section 9.7.

            (b)    Each Member (or, if deceased, his or her Beneficiary) shall
have the right, with respect to his or her Allocable Shares, to instruct the
Trustee, in accordance with procedures established by the Committee (in its
discretion), as to the manner in which to respond to such tender or exchange
offer with respect to such Allocable Shares.

            (1)    The Trustee shall pool the results of instructions received
from all Members (and Beneficiaries) as to their Allocable Shares and shall
respond to such tender or exchange offer accordingly with respect to such
Allocable Shares and the aggregate of all fractional shares of Common Stock
allocable to the Members' Accounts.

            (2)    In the case of a deceased Member who has more than one
Beneficiary, the Trustee shall respond to such tender or exchange offer in
accordance with the instructions of the Member's Beneficiaries in respect of the
deceased Member's Allocable Shares in proportion to the Beneficiaries'
respective interests in the Member's Account in accordance with rules
established by the Committee (in its discretion).

            (3)    If and to the extent that no instructions are timely received
from any Member (or Beneficiary) with a right to instruct with respect to his or
her Allocable Shares, (A) such person shall be deemed to have timely instructed
the Trustee not to tender or exchange the relevant Allocable Shares, and (B) the
Trustee shall not tender or exchange such Allocable Shares nor take any other

 

 

57

--------------------------------------------------------------------------------

 

 

actions under this Section 9.7 with respect to such Allocable Shares on the
Pass-Through Issue qualifying as such under Section 9.7.1(b).

            (c)     The Company shall use its best efforts to timely distribute
or cause to be distributed to each Member (or Beneficiary) such information as
will be distributed to stockholders of the Company in connection with any
Pass-Through Issue qualifying as such under Section 9.7.1(b), together with a
request for confidential instructions to the Trustee or its designee on how to
respond to such Issue.

            9.8     Decisions of Committee. All decisions of the Committee, and
any action taken by it in respect of the Plan and within the powers granted to
it under the Plan, and any interpretation of provision of the Plan or the Trust
Agreement by the Committee, shall be conclusive and binding on all persons, and
shall be given the maximum possible deference allowed by law.

            9.9     Administrative Expenses. All reasonable expenses actually
incurred in connection with the administration of the Plan by the Employers, the
Committee or otherwise, including legal, Trustee's and investment management
fees and expenses ("Administrative Expenses"), shall be payable from the Trust
Fund, except to the extent paid by the Employers under clause (a) below.
Notwithstanding the foregoing, Administrative Expenses shall be paid from the
Trust Fund only to the extent that such payments (to the extent prohibited by
section 406) are exempt under section 408 of ERISA. The Committee (in its
discretion) shall determine which Administrative Expenses are not payable from
the Trust Fund under the foregoing rules. The Company (in its discretion) may
(a) direct the Employers to pay any or all Administrative Expenses, and/or (b)
direct the Employers not to pay a greater share, portion or amount of such
Expenses which would otherwise be allocable to the Accounts of Members who are
no longer employed by any Employer or Affiliate.

            9.10   Eligibility to Participate. No member of the Committee, who
is also an Eligible Employee and otherwise eligible under Section 2, shall be
excluded from membership in the

 

 

58

--------------------------------------------------------------------------------

 

 

Plan, but he or she, as a member of the Committee, shall not act or pass upon
any matters pertaining specifically to his or her own Accounts under the Plan.

            9.11   Indemnification. Each of the Employers shall, and hereby
does, indemnify and hold harmless any of its Employees, officers or directors
who may be deemed to be a fiduciary of the Plan, and the members of the
Committee, from and against any and all losses, claims, damages, expenses and
liabilities (including reasonable attorneys' fees and amounts paid, with the
approval of the Board of Directors, in settlement of any claim) arising out of
or resulting from the implementation of a duty, act or decision with respect to
the Plan, so long as such duty, act or decision does not involve gross
negligence or willful misconduct on the part of any such individual.

SECTION 10

TRUST FUND AND ROLLOVER CONTRIBUTIONS

            10.1    Trust Fund. The Company shall establish a Trust Agreement
with the Trustee in order to provide for the safekeeping, administration and
investment of Salary Deferrals, Matching Contributions, "catch-up contributions"
made under Section 3.1.7, contributions of excess Flex Credits, and rollover
contributions made under the Plan, the maintenance of Members' Accounts, and the
payment of benefits as provided in the Plan. The Trustee shall receive and place
in the Trust Fund all such contributions and shall hold, invest, reinvest and
distribute the Trust Fund in accordance with provisions of the Plan and Trust
Agreement. Assets of this Plan may be commingled with the assets of other
qualified plans through one or more collective investment funds described in
Section 6.3; provided, however, that the assets of this Plan shall not be
available to provide any benefits under any other such plan. The benefits
provided under the Plan shall be only such as can be provided by the assets of
the Trust Fund, and no liability for payment of benefits shall be imposed upon
the Employers or any of their

 

 

59

--------------------------------------------------------------------------------

 

 

shareholders, directors or Employees. The Trust Fund shall continue for such
time as may be necessary to accomplish the purposes for which it is created.

            10.2    No Diversion of Assets. Notwithstanding any contrary Plan
provision, at no time shall any assets of the Plan be used for, or diverted to,
purposes other than for the exclusive benefit of Eligible Employees, Members,
Beneficiaries and other persons receiving or entitled to receive benefits or
payments under the Plan. Except to the limited extent permitted by Sections
5.4.5, 7.8 and 10.3, no assets of the Plan shall ever revert to or become the
property of the Employers.

            10.3    Continuing Conditions. Any obligation to contribute Salary
Deferrals, "catch-up contributions" or excess Flex Credits and/or to make
Matching Contributions under the Plan after initial qualification is hereby
conditioned upon the continued qualification of the Plan under section 401(a) of
the Code and the exempt status of the Trust Fund under section 501(a) of the
Code and upon the deductibility of such Salary Deferrals, "catch-up
contributions," excess Flex Credits and/or Matching Contributions under section
404(a) of the Code. That portion of any Salary Deferral, "catch-up
contribution," excess Flex Credit or Matching Contribution which is contributed
or made by reason of a good faith mistake of fact, or by reason of a good faith
mistake in determining the deductibility of such portion, shall be returned to
the Employers as promptly as practicable, but not later than one year after the
contribution was made or the deduction was disallowed (as the case may be). The
amount returned pursuant to the preceding sentence shall be an amount equal to
the excess of the amount actually contributed over the amount that would have
been contributed if the mistake had not been made; provided, however, that gains
attributable to the returnable portion shall be retained in the Trust Fund; and
provided, further, that the returnable portion shall be reduced (a) by any
losses attributable thereto and (b)

 

 

60

--------------------------------------------------------------------------------

 

 

to avoid a reduction in the balance of any Member's Accounts below the balance
that would have resulted if the mistake had not been made.

            10.4    Change of Investment Alternatives. The Company reserves the
right to change at any time the means through which the Plan is funded,
including adding or substituting one or more contracts with an insurance company
or companies, and thereupon may make suitable provision for the use of a
designated portion of the assets of the Trust Fund to provide for the funding
and/or payment of Plan benefits under any such insurance contract. No such
change shall constitute a termination of the Plan or result in the diversion to
the Employers of any portion of the Trust Fund. Notwithstanding the
implementation of any such change of funding medium, all references in the Plan
to the Trust Fund shall also refer to the Plan's interest in or the assets held
under any other such funding medium.

            10.5    Rollover Contributions. Notwithstanding any contrary Plan
provision, the Committee (in its discretion) may direct the Trustee to accept a
transfer of assets to the Trust Fund by or on behalf of a Member of this Plan,
but only if the transfer qualifies as an eligible rollover distribution as
described in section 402(c) or 408(d)(3)(A)(ii) of the Code. Any assets
transferred to the Trust Fund in accordance with the preceding sentence must be
in the form of cash (or its equivalent).

                        10.5.1    Rollover Account. Assets transferred to the
Trust Fund pursuant to this Section 10.5 shall be credited to the Member's
Rollover Account. A Member's interest in his or her Rollover Account shall be
fully (100%) vested and nonforfeitable at all times. The Member shall indicate,
in such manner and within such advance notice period as the Committee (in its
discretion) shall specify, the percentages of the amounts allocated to his or
her Rollover Account

 

 

61

--------------------------------------------------------------------------------

 

 

that are to be invested in each of the Commingled Funds. In all other respects
Rollover Account investments shall be subject to Section 5.3.

                        10.5.2    Nonqualifying Rollovers. If it is later
determined that a transfer to the Trust Fund made pursuant to this Section 10.5
did not in fact qualify as an eligible rollover distribution as described in
section 402(c) or 408(d)(3)(A)(ii) of the Code, then the balance credited to the
Member's Rollover Account shall immediately be (a) segregated from all other
Plan assets, (b) treated as a nonqualified trust established by and for the
benefit of the Member, and (c) distributed to the Member. Such a nonqualifying
rollover shall be deemed never to have been a part of the Trust Fund.

SECTION 11

MODIFICATION OR TERMINATION OF PLAN

            11.1    Employers' Obligations Limited. The Plan is voluntary on the
part of the Employers, and the Employers shall have no responsibility to satisfy
any liabilities under the Plan. Furthermore, the Employers do not guarantee to
continue the Plan, and the Company may, by appropriate amendment of the Plan,
discontinue contributions of Salary Deferrals, "catch-up contributions," excess
Flex Credits and/or Matching Contributions for any reason at any time. Complete
discontinuance of all contributions of Salary Deferrals, "catch-up
contributions," excess Flex Credits and Matching Contributions shall be deemed a
termination of the Plan.

            11.2    Right to Amend or Terminate. The Company reserves the right
to alter, amend or terminate the Plan, or any part thereof, in such manner as it
may determine. Amendments which do not add materially to the Company's cost
under the Plan and which are (i) necessary to comply with the Code, ERISA or
other applicable law, (ii) technical, or (iii) intended to ease administration
may be adopted if approved in writing by any two members of the Committee,
acting in their capacities as officers of the Company rather than as fiduciaries
with respect to the

 

 

62

--------------------------------------------------------------------------------

 

 

Plan. All other amendments shall be approved by the Board of Directors. Any such
alteration, amendment or termination shall take effect upon the date indicated
in the document embodying such alteration, amendment or termination; provided,
however, that:

            (a)     No such alteration or amendment shall (1) divest any portion
of an Account that is then vested under the Plan, or (2) except as may be
permitted by regulations or other IRS guidance, eliminate any optional form of
benefit (within the meaning of section 411(d)(6)(B)(ii) of the Code) with
respect to benefits accrued prior to the adoption of the amendment; and

            (b)     Any alteration, amendment or termination of the Plan or any
part thereof, shall be subject to the restrictions in Section 10.2 which
prohibit any diversion of the assets of the Plan.

            11.3     Effect of Termination. If the Plan is terminated or
partially terminated, or if there is a complete discontinuance of all
contributions of Salary Deferrals, "catch-up contributions," excess Flex Credits
and Matching Contributions, the interests of all Members affected by such
termination or discontinuance in their Accounts shall remain fully (100%) vested
and nonforfeitable. In the event the Plan is terminated, the balance credited to
the Matching Accounts and Rollover Accounts and, to the extent permitted by
section 401(k)(2)(B) of the Code, the Salary Deferral Accounts, and/or GenenFlex
Accounts, of any Members who are affected by the termination may be distributed
prior to the occurrence of a distribution event described in Section 7.1.

SECTION 12

TOP-HEAVY PLAN

            12.1     Top-Heavy Plan Status. Notwithstanding any contrary Plan
provision, the provisions of this Section 12 shall apply with respect to any
Plan Year for which the Plan is a top-heavy plan (within the meaning of section
416(g) of the Code) (a "Top-Heavy Plan").

                        12.1.1   60% Rule. The Plan shall be a Top-Heavy Plan
with respect to any Plan Year if, as of the Determination Date, the value of the
aggregate of the Accounts under the Plan

 

 

63

--------------------------------------------------------------------------------

 

 

for key employees (within the meaning of sections 416(i)(1) and (5) of the Code)
exceeds 60% of the value of the aggregate of the Accounts under the Plan for all
Members. For purposes of determining the value of the Accounts, the provisions
of section 416(g)(4)(E) of the Code and Treas. Reg. Section 1.416-1 (Q&A T-1)
are incorporated herein by reference.

                        12.1.1   Top-Heavy Determinations. The Committee, acting
on behalf of the Employers, shall determine as to each Plan Year whether or not
the Plan is a Top-Heavy Plan for that Plan Year. For purposes of making that
determination as to any Plan Year:

            (a)     "Determination Date" shall mean the last day of the
immediately preceding Plan Year;

            (b)     The Plan shall be aggregated with each other qualified plan
of any Employer or any Affiliate (1) in which a key employee (within the meaning
of sections 416(i)(1) and (5) of the Code) participates, and/or (2) which
enables the Plan or any plan described in clause (1) above to meet the
requirements of section 401(a)(4) or 410(b) of the Code;

            (c)     The Plan may be aggregated with any other qualified plan of
any Employer or Affiliate, which plan is not required to be aggregated under
paragraph (b)(1) above, if the resulting group of plans would continue to meet
the requirements of sections 401(a)(4) and 410(b) of the Code; and

            (d)     In determining which Employees are key and non-key
employees, an Employee's compensation for the Plan Year shall be his or her
Total Compensation (as defined in Section 5.4.2(d) and applied using the
definition of "Affiliate" in Section 1.1 rather than in Section 5.4.2(a)).

            12.2     Top-Heavy Plan Provisions. For any Plan Year for which the
Plan is a Top-Heavy Plan, the following provisions shall apply:

                        12.2.1    Minimum Allocation. The Employers shall make
an additional contribution to the Accounts of each Member who is a non-key
employee (within the meaning of sections 416(i)(2) and (5) of the Code), and who
is employed on the last day of the Plan Year, in an amount which equals 3% of
his or her Top-Heavy Compensation (as defined in Section 12.2.2) for the Plan
Year; provided, however, that if the Key Employee Percentage (as defined in

 

 

64

--------------------------------------------------------------------------------

 

 

paragraph (a) below) is less than 3%, then the percentage rate at which that
additional Employer contribution shall be made for that Plan Year shall be
reduced from 3% to the Key Employee Percentage.

            (a)     "Key Employee Percentage" shall mean the largest percentage
computed by dividing (a) the total amount of Salary Deferrals, excess Flex
Credits and Matching Contributions allocated for that Plan Year to the Accounts
of each Member who is a key employee (within the meaning of sections 416(i)(1)
and (5) of the Code), by (b) his or her Top-Heavy Compensation.

            (b)     The additional contribution required under this Section
12.2.1 shall be made without regard to the level of the Member's Top-Heavy
Compensation for the Plan Year.

            (c)     Notwithstanding the foregoing, if a Member is also covered
under any Other Plan (as defined in Section 8.4.1(c)) and the minimum allocation
of benefit requirement applicable to Top-Heavy Plans will be met under such
Other Plan or Plans, no additional contribution will be made for the Member
under this Plan.

                        12.2.2   "Top-Heavy Compensation" shall mean, with
respect to any Member for a Plan Year, his or her Total Compensation (as defined
in Section 5.4.2(d) and applied using the definition of "Affiliate" in Section
1.1 rather than in Section 5.4.2(a)) and except that, for this purpose, no
amount in excess of the Compensation Limit (as defined in Section 1.10) shall be
taken into account for any Plan Year.

SECTION 13

GENERAL PROVISIONS

            13.1     Plan Information. Each Member shall be advised of the
general provisions of the Plan and, upon written request addressed to the
Committee, shall be furnished with any information requested, to the extent
required by applicable law, regarding his or her status, rights and privileges
under the Plan.

            13.2     Inalienability. Except to the extent otherwise provided in
Sections 8.4 and 8.5 or mandated by applicable law, or permitted pursuant to the
special rules of section 401(a)(13)(C)

 

 

65

--------------------------------------------------------------------------------

 

 

of the Code, in no event may any Member, former Member or his or her spouse,
Beneficiary or estate sell, transfer, anticipate, assign, hypothecate, or
otherwise dispose of any right or interest under the Plan; and such rights and
interests shall not at any time be subject to the claims of creditors nor be
liable to attachment, execution or other legal process.

            13.3     Rights and Duties. No person shall have any rights in or to
the Trust Fund or other assets of the Plan, or under the Plan, except as, and
only to the extent, expressly provided for in the Plan. To the maximum extent
permissible under section 410 of ERISA, neither the Employers, the Trustee nor
the Committee shall be subject to any liability or duty under the Plan except as
expressly provided in the Plan, or for any other action taken, omitted or
suffered in good faith.

            13.4     No Enlargement of Employment Rights. Neither the
establishment or maintenance of the Plan, the making of any contributions nor
any action of any Employer, the Trustee or Committee, shall be held or construed
to confer upon any individual any right to be continued as an Employee nor, upon
dismissal, any right or interest in the Trust Fund or any other assets of the
Plan other than as provided in the Plan. Each Employer expressly reserves the
right to discharge any Employee at any time.

            13.5     Apportionment of Duties. All acts required of the Employers
under the Plan may be performed by the Company for itself and its Affiliates.
Any costs incurred by the Company for itself or its Affiliates in connection
with the Plan and the costs of the Plan, if not paid from the Trust Fund
pursuant to Section 9.9, shall be equitably apportioned among the Company and
the other Employers, as determined by the Committee (in its discretion).
Whenever an Employer is permitted or required under the terms of the Plan to do
or perform any act, matter or thing, it

 

 

66

--------------------------------------------------------------------------------

 

 

shall be done and performed by any officer or Employee of the Employer who is
thereunto duly authorized by the board of directors of the Employer.

            13.6     Merger, Consolidation or Transfer. This Plan shall not be
merged or consolidated with any other plan, nor shall there be any transfer of
any assets or liabilities from this Plan to any other plan, unless immediately
after such merger, consolidation or transfer, each Member's accrued benefit, if
such other plan were then to terminate, is at least equal to the accrued benefit
to which the Member would have been entitled if this Plan had been terminated
immediately before such merger, consolidation or transfer.

            13.7     Military Service. Notwithstanding any provision of this
Plan to the contrary, Salary Deferrals, "catch-up contributions" and Matching
Contributions with respect to qualified military service will be provided in
accordance with section 414(u) of the Code. Member loan repayments under Section
8.4.2 shall be suspended as permitted under section 414(u) of the Code.

            13.8     Applicable Law. The provisions of the Plan shall be
construed, administered and enforced in accordance with ERISA and, to the extent
applicable, the laws of the State of California.

            13.9     Severability. If any provision of the Plan is held invalid
or unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included.

            13.10    Captions. The captions contained in and the table of
contents prefixed to the Plan are inserted only as a matter of convenience and
for reference and in no way define, limit, enlarge or describe the scope or
intent of the Plan nor in any way shall affect the construction of any provision
of the Plan.

 

 

67

--------------------------------------------------------------------------------

 

 

EXECUTION

            In Witness Whereof, Genentech, Inc., by its duly authorized
officers, has executed this January 1, 2002 Restatement of the Plan on the date
indicated below.

 

GENENTECH, INC.

       

By

  /s/ LOUIS J. LAVIGNE

   

  Louis J. Lavigne

 

Title

  Executive Vice President and
    Chief Financial Officer

 

Dated

  December 18, 2002

             

And by

  /s/ THOMAS T. THOMAS

   

  Thomas T. Thomas

 

Title

  Treasurer

 

Dated

  December 18, 2002

 

 

68

--------------------------------------------------------------------------------

 

 

APPENDIX A:  EFFECTIVE DATES

            This Appendix A lists those provisions of the January 1, 2002
Restatement of the Genentech, Inc. Tax Reduction Investment Plan (the "Plan")
that have an effective date that is neither January 1, 2002 nor specified in the
Plan text.

Effective Date

Plan Provision

   

January 1, 1985

Section 1.13 - Definition of eligible employee

   

January 1, 1985

Section 8.5.4 - Hold procedures relating to QDRO's

   

December 12, 1994(1)

Section 13.7 - Addition of provision to comply with USERRA

   

January 1, 1995

Section 5.4.1 - Change in determination of $30,000 Annual Addition Limitation

   

January 1, 1997

Section 1.10 - Change in definition of "Compensation" to eliminate family
aggregation rule

     

Section 1.20 - Change in definition of "Highly Compensated Employee" including
elimination of the family aggregation rule

     

Section 3.1.4 - Change in determination of deferral percentage limitation

     

Section 3.1.5 - Elimination of application of family aggregation rule in
determination of actual deferral percentage

     

Section 3.2.4 - Change in the manner of allocation of excess contributions among
HCE Members

     

Section 4.1.5 - Change in determination of contribution percentage limitation

     

Section 4.1.6 - Elimination of application of family aggregation rule in
determination of actual contribution percentage

     

Section 4.1.8 - Change in the manner of allocation of excess aggregate
contributions among HCE Members

                                               

(1)

      For Employers who return to service with an Employer or Affiliate on or
after December 12, 1994.

 

 

A-1

--------------------------------------------------------------------------------

 

 

Effective Date

Plan Provision

         

Sections 7.1.(d) and 7.2.2 - Limit application of required distributions to
Members while in-service on or after attainment of age 70 1/2 to only a Member
who is a 5-percent owner

   

February 3, 1997

Section 3.3 - Change to the deadline for payment of Salary Deferrals and
contributions of excess Flex Credits to the Trust Fund

   

August 5, 1997

Section 13.2 - Addition of section 401(a)(13)(C) exception to non-alienation
rule

   

January 1, 1998

Section 5.4.2(d) - Change in definition of "Total Compensation"

   

January 1, 2001

Section 1.10 - Change in definition of "Compensation" to reflect section
132(f)(4) with regards to the amount of compensation reduction elected from
qualified transportation fringes not includable in gross income

     

Sections 2.3.1, 3.1(b) and 3.2(c) - Addition of language rendering provisions
permitting contribution of excess Flex Credits inoperative pending future
Committee action

 

A-2

--------------------------------------------------------------------------------