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

 
Exhibit 10.3

 
 
GENENTECH, INC.
 
TAX REDUCTION INVESTMENT PLAN
 
(January 1, 2006 Restatement)
 
 
 

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

 
TABLE OF CONTENTS
 

 
 
Page
 
SECTION 1 DEFINITIONS
 
2
 
1.1
 
Affiliate
 
2
 
1.2
 
Alternate Payee
 
2
 
1.3
 
Beneficiary
 
2
 
1.4
 
Board of Directors
 
2
 
1.5
 
Catch-Up Contributions
 
2
 
1.6
 
Code
 
2
 
1.7
 
Committee
 
3
 
1.8
 
Common Stock
 
3
 
1.9
 
Common Stock Fund
 
3
 
1.10
 
Company
 
3
 
1.11
 
Compensation
 
3
 
1.12
 
Compensation Limit
 
4
 
1.13
 
Disability
 
4
 
1.14
 
Eligible Bonus
 
4
 
1.15
 
Eligible Commissions
 
4
 
1.16
 
Eligible Employee
 
5
 
1.17
 
Employee
 
5
 
1.18
 
Employer
 
5
 
1.19
 
Employer Contributions
 
5
 
1.20
 
Entry Date
 
5
 
1.21
 
ERISA
 
6
 
1.22
 
Highly Compensated Employee or HCE
 
6
 
1.23
 
Hour of Service
 
7
 
1.24
 
Investment Funds
 
8
 
1.25
 
Investment Manager
 
8
 
1.26
 
Leased Employee
 
8
 
1.27
 
Leave of Absence
 
8
 
1.28
 
Matching Contributions
 
9
 
1.29
 
1934 Act
 
9
 
1.30
 
Nonelective Contributions
 
9
 
1.31
 
Normal Retirement Age
 
9
 
1.32
 
Participant
 
9
 
1.33
 
Participant’s Accounts or Accounts
 
9
 
1.34
 
Plan
 
11
 
1.35
 
Plan Year
 
11
 
1.36
 
Salary Deferrals
 
11
 
1.37
 
Trust Agreement
 
11
 
1.38
 
Trust Fund
 
11
 
1.39
 
Trustee
 
11
 
1.40
 
Valuation Date
 
12

 
 
i

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

 

TABLE OF CONTENTS
(Continued)
 

 
 
Page
 
SECTION 2 ELIGIBILITY AND PARTICIPATION
 
12
 
2.1
 
Initial Eligibility
 
12
 
2.2
 
Employer Aggregation
 
12
 
2.3
 
Participation
 
12
 
2.4
 
Voluntary Suspension
 
13
 
2.5
 
Mandatory Suspension
 
13
 
2.6
 
Provision of Information
 
14
 
2.7
 
Termination of Participation
 
14
 
2.8
 
Acquisitions
 
14
 
SECTION 3 SALARY DEFERRALS AND CATCH-UP CONTRIBUTIONS
 
15
 
3.1
 
Salary Deferrals
 
15
 
3.2
 
Catch-Up Contributions
 
18
 
3.3
 
Salary Deferral and Catch-Up Contribution Elections
 
18
 
3.4
 
Payment of Salary Deferrals and Catch-Up Contributions
 
21
 
SECTION 4 EMPLOYER CONTRIBUTIONS
 
22
 
4.1
 
Matching Contributions
 
22
 
4.2
 
Nonelective Contributions
 
25
 
4.3
 
Timing
 
26
 
4.4
 
Periodic Contributions
 
26
 
4.5
 
Reinstatements
 
26
 
4.6
 
Profits Not Required
 
26
 
4.7
 
No After-Tax Contributions
 
26
 
SECTION 5 ALLOCATION OF CONTRIBUTIONS AND INVESTMENTS
 
27
 
5.1
 
Salary Deferrals and Catch-Up Contributions
 
27
 
5.2
 
Matching Contributions
 
27
 
5.3
 
Nonelective Contributions
 
27
 
5.4
 
Investment
 
28
 
5.5
 
Limitations on Allocations
 
29
 
SECTION 6 ACCOUNTS AND INVESTMENT FUNDS
 
33
 
6.1
 
Participants’ Accounts
 
33
 
6.2
 
Trust Fund Assets
 
33
 
6.3
 
Investment Funds
 
34
 
6.4
 
Valuation of Participants’ Accounts
 
36
 
6.5
 
Valuation of Shares
 
36
 
6.6
 
Statements of Participants’ Accounts
 
36
 
6.7
 
Vesting of Participants’ Accounts
 
37
 
SECTION 7 DISTRIBUTIONS
 
37
 
7.1
 
Events Permitting Distribution
 
37
 
7.2
 
Times for Distribution
 
38
 
7.3
 
Consent Requirement and Immediate Distributions
 
39
 
7.4
 
Form of Distribution
 
40

 
 
ii

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

 

TABLE OF CONTENTS
(Continued)
 

 
 
Page
 
7.5
 
Common Stock Restrictions
 
42
 
7.6
 
Beneficiary Designations
 
42
 
7.7
 
Payments to Minors or Incompetents
 
43
 
7.8
 
Undistributable Accounts
 
44
 
SECTION 8 WITHDRAWALS, LOANS AND QUALIFIED DOMESTIC RELATIONS ORDERS
 
44
 
8.1
 
General Rules
 
44
 
8.2
 
Hardship Withdrawal
 
45
 
8.3
 
Age 59½ Withdrawal
 
47
 
8.4
 
Loans to Participants
 
48
 
8.5
 
Qualified Domestic Relations Orders
 
51
 
SECTION 9 ADMINISTRATION OF THE PLAN
 
53
 
9.1
 
Plan Administrator
 
53
 
9.2
 
Committee
 
53
 
9.3
 
Actions by Committee
 
53
 
9.4
 
Powers of Committee
 
53
 
9.5
 
Fiduciary Responsibilities
 
55
 
9.6
 
Investment Responsibilities
 
55
 
9.7
 
Voting and Tender Offer Rights in Common Stock
 
56
 
9.8
 
Decisions of Committee
 
60
 
9.9
 
Administrative Expenses
 
60
 
9.10
 
Eligibility to Participate
 
60
 
9.11
 
Indemnification
 
60
 
SECTION 10 TRUST FUND AND ROLLOVER CONTRIBUTIONS
 
61
 
10.1
 
Trust Fund
 
61
 
10.2
 
No Diversion of Assets
 
61
 
10.3
 
Continuing Conditions
 
62
 
10.4
 
Change of Investment Alternatives
 
62
 
10.5
 
Rollover Contributions
 
63
 
SECTION 11 MODIFICATION OR TERMINATION OF PLAN
 
64
 
11.1
 
Employers’ Obligations Limited
 
64
 
11.2
 
Right to Amend or Terminate
 
65
 
11.3
 
Effect of Termination
 
65
 
SECTION 12 TOP-HEAVY PLAN
 
66
 
12.1
 
Top-Heavy Plan Status
 
66
 
12.2
 
Top-Heavy Plan Provisions
 
67
 
SECTION 13 GENERAL PROVISIONS
 
68
 
13.1
 
Plan Information
 
68
 
13.2
 
Inalienability
 
68
 
13.3
 
Rights and Duties
 
68
 
13.4
 
No Enlargement of Employment Rights
 
69

 
 
iii

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

 

TABLE OF CONTENTS
(Continued)
 

 
 
Page
 
13.5
 
Apportionment of Duties
 
69
 
13.6
 
Merger, Consolidation or Transfer
 
69
 
13.7
 
Military Service
 
70
 
13.8
 
Applicable Law
 
70
 
13.9
 
Severability
 
70
 
13.10
 
Captions
 
70
 
Appendix A
 
A-1

 
 
iv

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

 

GENENTECH, INC.
TAX REDUCTION INVESTMENT PLAN
(January 1, 2006 Restatement)
 
PREAMBLE
 
GENENTECH, INC. (the “Company”), having established the Genentech, Inc. Tax
Reduction Investment Plan (the “Plan”) effective as of January 1, 1985, and
having amended and restated the Plan effective (most recently) as of January 1,
2004, hereby again amends and restates the Plan in its entirety effective as of
January 1, 2006, except as otherwise indicated herein.
 
The Plan was established and is maintained for the benefit of Eligible Employees
of the Company and its participating Affiliates in order to provide them with
(1) a means of supplementing their retirement income on a tax-favored basis,
(2) an incentive to continue and increase their efforts to contribute to the
success of the Company, and (3) the opportunity to acquire an equity ownership
interest in the Company.
 
The Plan is intended to qualify as (a) a profit-sharing plan (within the meaning
of Section 401(a) of the Code), which includes a qualified cash or deferred
arrangement (within the meaning of Section 401(k) of the Code), (b) a 404(c)
plan (within the meaning of Section 404(c) of ERISA), and (c) an eligible
individual account plan (within the meaning of Section 407(d)(3) of ERISA). This
restatement is intended to bring the Plan into compliance with the Treasury
regulations under Code Sections 401(k) and 401(m), effective as of January 1,
2006.
 
The Plan also is designed to constitute a tax-qualified plan and related
tax-exempt trust under Sections 1165(a), 1165(e) and 1101(17) of the Puerto Rico
Internal Revenue Code of 1994, as amended.
 
 

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

 
 
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. “Affiliate” means 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 the Employer.
 
1.2   Alternate Payee. “Alternate Payee” means any spouse, former spouse, child
or other dependent (within the meaning of Section 152 of the Code) of a
Participant who is recognized by a QDRO (as defined in Section 8.5) as having a
right to receive any immediate or deferred payment of all or a portion of the
balance credited to a Participant’s Account under the Plan.
 
1.3   Beneficiary. “Beneficiary” means the person or persons entitled to receive
benefits under the Plan upon the death of a Participant in accordance with
Section 7.6.
 
1.4   Board of Directors. “Board of Directors” means the Board of Directors of
the Company, as from time to time constituted.
 
1.5   Catch-Up Contributions. “Catch-Up Contributions” means as to each
Participant the “catch-up contributions” (if any) contributed under the Plan by
the Employers in accordance with Sections 3.2 and 5.1.
 
1.6   Code. “Code” means 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.
 
 
2

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

 
 
1.7   Committee. “Committee” means the administrative committee charged with
responsibility for the general administration of the Plan pursuant to Section 9,
as it may be constituted from time to time.
1.8   Common Stock. “Common Stock” means the common stock of the Company, par
value $0.02, as from time to time constituted.
 
1.9   Common Stock Fund. “Common Stock Fund” means the Investment Fund that is
wholly or primarily invested in shares of Common Stock.
 
1.10  Company. “Company” means 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.
 
1.11   Compensation. “Compensation” means all salary, wages, Eligible
Commissions and Eligible Bonuses paid by any Employer with respect to services
performed during any period by an Employee, including Salary Deferrals and
Catch-Up Contributions, but excluding (a) any contributions made by any Employer
under this Plan (other than Salary Deferrals and Catch-Up Contributions) 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 the 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, sign-on bonuses, referral bonuses, severance payments, and
relocation expenses, subject to the following:
 
(a) A Participant’s Compensation shall be determined without regard to any
increase or decrease in the amount of his or her total remuneration that is paid
in cash as the result of compensation reductions elected under Sections 125 or
132(f)(4) of the Code; and
 
 
3

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

 
 
(b) The determination of the amount of a Participant’s Compensation shall be
made by his or her Employer (or its designee), in accordance with the records of
the Employer, and shall be conclusive.
 
1.12   Compensation Limit. “Compensation Limit” means the dollar limit
prescribed in Section 401(a)(17) of the Code, as adjusted pursuant to Sections
401(a)(17) and 415(d) of the Code (e.g., $220,000 for 2006). No portion of any
Participant’s Compensation for a Plan Year that exceeds the Compensation Limit
shall be taken into account for any purpose under the Plan for any Plan Year.
 
1.13   Disability. “Disability” means the mental or physical inability of a
Participant 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 Participant is disabled under the standards of the Company’s long-term
disability plan.
 
1.14   Eligible Bonus. “Eligible Bonus” means (a) any annual cash bonus paid by
the Employer to an Employee under the Company’s Corporate Bonus Program, or (b)
any fourth calendar quarter commission payment under the Company’s Field Sales
Incentive Compensation Plan (the “4th Quarter Payout”); provided, however, that
if the Participant receives both payments described in clauses (a) and (b) above
in a given calendar year, then the term “Eligible Bonus” means the 4th Quarter
Payout. Notwithstanding the foregoing, all Eligible Bonus amounts shall be
determined net of employee stock purchase plan and mandatory deductions
including, without limitation, Employee-paid FICA and SDI withholdings.
 
1.15   Eligible Commissions. “Eligible Commissions” means any first, second or
third calendar quarter commission payments under the Company’s Field Sales
Incentive Compensation Plan.
 
 
4

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

 
 
1.16   Eligible Employee. “Eligible Employee” means every Employee of an
Employer except:

(a)   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;
 
(b)   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;
 
(c) An Employee whose Compensation is not paid from any Employer’s United States
payroll; and
 
(d) 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.

1.17   Employee. “Employee” means an individual who is (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.
 
1.18   Employer. “Employer” means the Company and each Affiliate that adopts
this Plan with the approval of the Board of Directors.
 
1.19   Employer Contributions. “Employer Contributions” means (collectively)
Matching Contributions and Nonelective Contributions.
 
1.20   Entry Date. “Entry Date” means the first day of each payroll period.
 
 
5

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

 
 
1.21   ERISA. “ERISA” means 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.
 
1.22   Highly Compensated Employee or HCE. “Highly Compensated Employee” or
“HCE” means a Highly Compensated Active Employee or a Highly Compensated Former
Employee, as defined below:
(a)   “Highly Compensated Active Employee” means any Employee who performs
services for an Employer or Affiliate during the Determination Year and who:
 
(1)   During the Look-Back Year (A) received Compensation in excess of the
dollar limit prescribed in Section 414(q)(1)(B) of the Code, as adjusted
pursuant to Sections 414(q)(1) and 415(d) of the Code (e.g., $100,000 for 2006),
and (B) was a member of the top-paid group (within the meaning of Section
414(q)(3) of the Code) for such 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” means 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 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, including the
determinations of the number and identity of Employees who are in the top-paid
group, shall be made in accordance with Section 414(q) of the Code.
 
(d)   For purposes of applying this Section 1.22:
 
(1)   “Compensation” means Total Compensation (as defined in Section 5.5.2(e)
and applied using the definition of “Affiliate” in Section 1.1 rather than in
Section 5.5.2(a));
 
(2)   “Determination Year” means the Plan Year for which the determination is
being made; and
 
(3)   “Look-Back Year” means the Plan Year immediately preceding the
Determination Year.
 
 
6

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

 
 
1.23   Hour of Service. “Hour of Service” means an hour credited to an Employee
under this Section 1.23:
 
(a)   Paid Hours. An “Hour of Service” includes each hour for which:
 
(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 subsection (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 1.23 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, as amended (“FMLA”).
 
“Hour of Service” means 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 subsections (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
subsection (d), the Employee shall be
 
 
7

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

 
 
 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 subsection (d) to any individual on account of any single
pregnancy, birth, placement or other FMLA leave, and (B) the hours described in
this subsection (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.
 
1.24   Investment Funds. “Investment Funds” means (collectively) the investment
funds described in Section 6.3.
 
1.25   Investment Manager. “Investment Manager” means any investment manager
appointed by the Committee in accordance with Section 9.6.
 
1.26   Leased Employee. “Leased Employee” means 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 (1) year, and such services are
performed under the primary direction of or control by the Employer or
Affiliate. Contributions or benefits provided a Leased Employee by a leasing
organization which are attributable to services performed for the Employer or
Affiliate shall be treated as provided by the Employer or Affiliate.
 
1.27   Leave of Absence. “Leave of Absence” means the period of an Employee’s
absence from active employment:
 
(a)   Authorized by his or her 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 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.
 
 
8

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

 
 
1.28   Matching Contributions. “Matching Contributions” means as to each
Participant the amounts (if any) contributed under the Plan by the Employers on
account of Salary Deferrals in accordance with Sections 4.1 and 5.2.
 
1.29   1934 Act. “1934 Act” means 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.
 
1.30   Nonelective Contributions. “Nonelective Contributions” means as to each
Participant the amounts (if any) contributed under the Plan by the Employers in
accordance with Sections 4.2 and 5.3.
 
1.31   Normal Retirement Age. “Normal Retirement Age” means age 55.
 
1.32   Participant. “Participant” means an Eligible Employee who has become a
Participant in the Plan pursuant to Section 2.1 and has not ceased to be a
Participant pursuant to Section 2.7, subject to the following:
 
(a)   For each Plan Year, a Participant shall be classified as an “Active
Participant” if (1) he or she has enrolled in the Plan for any portion of the
Plan Year by authorizing the required Salary Deferrals and/or Catch-Up
Contributions in accordance with Sections 2.3, 3.1, 3.2 and 3.3, or (2) his or
her active participation in the Plan is resumed during the Plan Year after the
end of a suspension period in accordance with Section 2.4, 2.5 or 8.2.3; and
 
(b)   A Participant who is not an Active Participant shall be classified as an
“Inactive Participant.”
 
1.33   Participant’s Accounts or Accounts. “Participant’s Accounts” or
“Accounts” means as to any Participant the one or more separate accounts
maintained in order to reflect his or her interest in the Plan. Each
Participant’s Accounts shall be comprised of several separate subaccounts
 
 
9

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

 
 
 (as specified by the Committee in its discretion), including, but not limited
to, the following subaccounts:
 
1.33.1   “Catch-Up Contribution Account” means the subaccount maintained to
record any Catch-Up Contributions that the Participant has elected to have
contributed to his or her Catch-Up Contribution Account pursuant to Sections 3.2
and 3.3, and any adjustments relating thereto.
 
1.33.2   “GenenFlex Account” means the subaccount maintained to record any
excess “flex credits” that the Participant previously elected under GenenFlex to
have contributed to his or her GenenFlex Account during Plan Years when such
contributions were permitted under the Plan (“Prior Excess Flex Credit
Contributions”), and any adjustments relating thereto. For this purpose,
“GenenFlex” means the cafeteria plan maintained by the Company under Section 125
of the Code.
 
1.33.3   “Loan Account” means the subaccount maintained to record any loans made
to the Participant from his or her Accounts pursuant to Sections 5.4.3 and 8.4.
 
1.33.4   “Matching Account” means the subaccount maintained to record any
Matching Contributions made on behalf of the Participant pursuant to
Sections 4.1 and 5.2, and any adjustments relating thereto.
 
1.33.5   “Nonelective Contribution Account” means the subaccount maintained to
record any Nonelective Contributions made on behalf of the Participant pursuant
to Sections 4.2 and 5.3, and any adjustments relating thereto.
 
1.33.6   “Rollover Account” means the subaccount maintained to record any
transfers to the Plan made by or on behalf of a Participant pursuant to
Section 10.5, and any adjustments relating thereto.
 
 
10

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

 
 
1.33.7   “Salary Deferral Account” means the subaccount maintained to record any
Salary Deferrals that the Participant has elected to have contributed to his or
her Salary Deferral Account pursuant to Sections 3.1 and 3.3, and any
adjustments relating thereto.
 
1.34   Plan. “Plan” means 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.
 
1.35   Plan Year. “Plan Year” means the calendar year.
 
1.36   Salary Deferrals. “Salary Deferrals” means as to each Participant the
amounts (if any) contributed under the Plan by the Employers in accordance with
Sections 3.4 and 5.1, pursuant to the salary deferral election made by the
Participant in accordance with Sections 3.1 and 3.3.
 
1.37   Trust Agreement. “Trust Agreement” means the trust agreement entered into
by and between the Company and the Trustee, as amended from time to time for the
purpose of establishing and maintaining the Trust Fund.
 
1.38   Trust Fund. “Trust Fund” means all of the assets, at any time and from
time to time, of the trust established by the Trust Agreement to hold the assets
of the Plan.
 
1.39   Trustee. “Trustee” means 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.
 
 
11

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

 
 
1.40 Valuation Date. “Valuation Date” means the last financial business day of
each Plan Year, any other financial business day where a valuation is required
under the terms of the Plan, and such other date(s) as the Committee (in its
discretion) may designate from time to time.
 
SECTION 2
 
ELIGIBILITY AND PARTICIPATION
 
2.1   Initial Eligibility.  An Employee shall become a Participant in 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 Participant from
employment with an Employer to employment with an Affiliate that is not an
Employer shall not constitute an event entitling the Participant to a
distribution under Section 7.
 
2.3   Participation.  Each Participant’s decision to become an Active
Participant shall be entirely voluntary.
 
2.3.1   Active Participation. An Employee who has become a Participant under
Section 2.1 may elect to become an Active Participant, effective as of any later
Entry Date on which he or she is then an Eligible Employee, provided that he or
she enrolls in the Plan and elects to make Salary Deferrals and/or Catch-Up
Contributions, in such manner and within such advance notice period as the
Committee (in its discretion) shall specify, in accordance with Section 3.
 
2.3.2   Inactive Participation.  A Participant who does not elect to become an
Active Participant when eligible to do so, or whose active participation in the
Plan is suspended pursuant to Section 2.4, 2.5 or 8.2.3, shall be treated as an
Inactive Participant until the Entry Date as of which he or she becomes an
Active Participant in accordance with Section 2.3.1 or Section 2.5(d).
 
 
12

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

 
 
2.3.3   Effect of Inactive Participation. An Inactive Participant shall not be
able to make any Salary Deferrals or Catch-Up Contributions 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 Participant’s period of inactive participation in the Plan.
However, an Inactive Participant’s Accounts shall continue to share in the
allocation of earnings and gains (or losses) of the Trust Fund as provided in
Section 6.4. No distribution shall be made to a Participant solely as the result
of any suspension of his or her active participation in the Plan. 
 
2.4   Voluntary Suspension.  An Active Participant may voluntarily suspend his
or her active participation in the Plan, thereby suspending his or her Salary
Deferrals and/or Catch-Up Contributions and becoming an Inactive Participant for
future payroll periods during the suspension period by giving notice to such
person, in such manner and within such advance notice period as the Committee
(in its discretion) shall specify. A Participant whose active participation in
the Plan has been voluntarily suspended pursuant to this Section 2.4 may resume
his or her status as an Active Participant only in accordance with
Section 2.3.1.
 
2.5   Mandatory Suspension.  If a Participant (1) ceases to be an Eligible
Employee because he or she ceases to meet the requirements of Section 1.16,
(2) is transferred to employment with an Affiliate which is not an Employer,
(3) is granted a Leave of Absence without pay, (4) is on long-term disability,
or (5) is placed on layoff or furlough status, then:
 
(a)   His or her active participation in the Plan shall be suspended (in
accordance with Section 2.3.3) for each payroll period beginning during the
continuation of such ineligible status;
 
(b)   He or she shall be treated as an Inactive Participant for the duration of
the suspension period; and
 
 
13

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

 
 
(c)   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 Participant may be resumed only in accordance with Section 2.3.1.
 
(d)   Notwithstanding the foregoing, if a Participant’s active participation in
the Plan is suspended because he or she is granted an unpaid Leave of Absence,
his or her status as an Active Participant automatically will resume as of the
Entry Date that coincides with or next follows his or her return to active
employment with an Employer (provided that he or she is then an Eligible
Employee).
 
2.6   Provision of Information.  Each Participant shall execute such forms as
are required by the Committee and shall make available to the Committee and the
Trustee any information they may reasonably request. By virtue of his or her
participation in the Plan, a Participant agrees, on his or her own behalf and on
behalf of all persons who may make any claim arising out of, relating to, or
resulting from his or her participation in the Plan, to be bound by all of the
provisions of the Plan, the Trust Agreement and any other related agreements.
 
2.7   Termination of Participation.  An Eligible Employee who has become a
Participant shall remain a Participant 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).
 
2.8   Acquisitions.  Notwithstanding any contrary Plan provision, if determined
by the Committee (in its discretion), an Eligible Employee who becomes an
Employee by reason of the acquisition by the Company or its Affiliate of the
assets and liabilities of, or the voting stock of, another corporation or other
business entity, or another type of business transaction effected by the Company
or its Affiliate (an “Acquired Employee”), may elect to become an Active
Participant effective as of the later of (a) the date on which he or she becomes
an Eligible Employee, and (b) such other date as may be specified by the
Committee (which shall in no event be later than the Entry Date next following
the date on which the Acquired Employee became an Eligible Employee),
 
 
14

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

 
 
provided that he or she enrolls in the Plan and elects to make Salary Deferrals
and/or Catch-Up Contributions, in such manner and within such advance notice
period as the Committee (in its discretion) shall specify, in accordance with
Section 3.
 
SECTION 3
 
SALARY DEFERRALS AND CATCH-UP CONTRIBUTIONS
 
3.1 Salary Deferrals.
 
3.1.1 General. Each Active Participant may elect to defer portions of his or her
Compensation payments and to have the amounts of such Salary Deferrals
contributed by the Employer to the Trust Fund and credited to his or her Salary
Deferral Account under the Plan, provided that he or she elects to make Salary
Deferrals in accordance with Section 3.3. Subject to Section 5.5, an Active
Participant may elect to defer:
 
(a)   For Plan Years prior to 2007:
 
(1)   A portion of each payment of Compensation 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 50% (inclusive) of such payment; 
 
(2)   Subject to the issuance of a Compliance Statement by the Internal Revenue
Service under its Employee Plans Compliance Resolution System, for the Plan
Years beginning January 1, 2004, January 1, 2005 and January 1, 2006, in
addition to any election made under subsection (1) above, a portion of any
Eligible Bonus payment 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 subsection
(1) above but does not exceed 99% (or such lesser percentage as is determined by
the Company to comply with mandatory tax withholding and applicable payroll
deductions) of such payment; and
 
(b)   For Plan Years Beginning January 1, 2007 and after:
 
(1)   A portion of each payment of Compensation, other than any Eligible 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 50% (inclusive)
of such payment;
 
(2)   In addition to any election made under subsection (1) above, a portion of
any Eligible Bonus payment 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 99% (inclusive)
 
 
15

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

(or such lesser percentage as is determined by the Company to comply with
mandatory tax withholding and applicable payroll deductions) of such payment.

3.1.2   Section 401(k) Ceiling. Notwithstanding any contrary Plan provision, the
Committee:
 
(a)   May suspend or limit any Participant’s salary deferral election at any
time in order to prevent the cumulative amount of the Salary Deferrals
contributed on behalf of the Participant for any calendar year from exceeding
the Section 401(k) Ceiling.
 
(b)   Shall cause any amount allocated to the Participant’s Salary Deferral
Account 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, as well as, for the Gap Period, to be distributed to the
Participant no later than the April 15 that next follows the year of deferral in
accordance with Section 402(g)(2)(A) of the Code. For this purpose, the “Gap
Period” means the period beginning on the first day of the subsequent Plan Year
and ending on either the day before the date of distribution or on a date
selected in accordance with the safe harbor method set forth in Treas. Reg. §
1.401(k)-2(b)(2)(iv)(D).
 
(c)   May cause any other amount allocated to the Participant’s Salary Deferral
Account and designated by the Participant as an excess deferral, together with
any income allocable thereto for the calendar year to which the excess deferral
relates, as well as for the Gap Period, to be distributed to the Participant in
accordance with Section 402(g)(2)(A) of the Code.
 
(d)   Shall cause any Matching Contributions allocated to the Participant’s
Matching Account by reason of any excess deferral distributed pursuant to
subsection (b) or (c), together with any income allocable thereto for the
calendar year to which the excess deferral relates, as well as for the Gap
Period, to be forfeited at the time such distribution is made and applied to
reduce the next succeeding Matching Contribution to the Plan.

For purposes of this Section 3.1.2 and Section 4.1.2, 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 (e.g., $15,000 in 2006).
 
3.1.3   Limitations on HCE Participants. For any Plan Year, the Committee (in
its discretion) may limit the period for which, and/or specify a lesser maximum
percentage at which, Salary Deferrals may be elected by HCE Participants (as
defined in Section 3.1.4) in such manner as
 
 
16

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

may be necessary or appropriate in order to assure that the limitation described
in Section 3.1.5 will be satisfied.
 
3.1.4   HCE and Non-HCE Participants. All Participants who are Eligible
Employees at any time during a Plan Year (whether or not they are Active
Participants), and who are Highly Compensated Employees with respect to the Plan
Year, shall be “HCE Participants” for the Plan Year. All other Participants who
are Eligible Employees at any time during the Plan Year shall be “Non-HCE
Participants” for the Plan Year.
 
3.1.5   Deferral Percentage Limitation. In no event shall the actual deferral
percentage, determined in accordance with Section 3.1.6 (the “ADP”), for the HCE
Participants for a Plan Year exceed the maximum ADP, as determined by reference
to the ADP for the Non-HCE Participants, in accordance with the following table:
 
If the ADP for the Non-HCE
Participants (“NHCEs’ ADP”) is:
Then the Maximum ADP for
the HCE Participants is:
 
Less than 2%
 
2.0 x NHCEs’ ADP
2% to 8%
NHCEs’ ADP + 2%
More than 8%
1.25 x NHCEs’ ADP

 
3.1.6   Actual Deferral Percentage. The actual deferral percentage for the HCE
or Non-HCE Participants for any Plan Year shall be calculated by computing the
average of the deferral percentages (calculated separately for each HCE or
Non-HCE Participant) (the “Deferral Rates”) determined by dividing (1) the total
for the Plan Year of all Salary Deferrals made by the Participant and credited
to his or her Salary Deferral Account, by (2) the Participant’s Testing
Compensation (as defined in Section 3.1.7) for the Plan Year. In computing a
Participant’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
 
 
17

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

 
 
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 3.1.5.
 
(b)   If an HCE Participant is a participant in any other cash or deferred
arrangement maintained by any Employer or Affiliate and qualified under Section
401(k) of the Code, the separate deferral rates determined for the Participant
under all such cash or deferred arrangements shall be aggregated with the
separate Deferral Rate determined for the Participant under this Section 3.1.6
for purposes of applying Section 3.1.5.
 
3.1.7   Testing Compensation. For purposes of applying Sections 3.1, 3.3 and 4.1
and the non-discrimination tests of Sections 401(k)(3) and 401(m)(2) of the
Code, “Testing Compensation” means with respect to any Participant, his or her
Total Compensation (as defined in Section 5.5.2(e) and applied using the
definition of “Affiliate” in Section 1.1 rather than in Section 5.5.2(a)),
subject to the following:
 
(a)   For any Plan Year, the Committee may specify an alternate definition of
Testing Compensation, provided that such alternate definition satisfies the
applicable requirements of Treas. Reg. § 1.401(k)-6;
 
(b)   No amount in excess of the Compensation Limit shall be taken into account
under this Section 3.1.7 for any Plan Year; and
 
(c)   Compensation for periods prior to the time that the individual became a
Participant shall not be taken into account.
 
3.2   Catch-Up Contributions.  Notwithstanding any contrary Plan provision: 
 
(a)   Eligible Participants. All Employees who are Participants eligible to make
Salary Deferrals under this Plan and who have attained age fifty (50) before the
close of the Plan Year shall be eligible to make “catch-up contributions” for
the Plan Year in accordance with, and subject to the limitations of, Section
414(v) of the Code.
 
(b)   Certain Code Limitations Inapplicable. A Participant’s “catch-up
contributions” shall not be taken into account for purposes of applying Plan
provisions implementing the required limitations of Sections 402(g) and 415 of
the Code, and 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.
 
3.3 Salary Deferral and Catch-Up Contribution Election.  Each Active Participant
shall determine the percentage(s) of his or her Compensation that shall be
deferred and contributed to the
 
 
18

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

 
Trust Fund as his or her Salary Deferrals and/or Catch-Up Contributions in
accordance with Sections 3.1.1 and 3.2, respectively, at the time he or she
becomes an Active Participant and thereafter may redetermine such percentage(s)
from time to time in accordance with 3.3.2. In either event -
 
(a)   The Active Participant shall make such Salary Deferral and/or Catch-Up
Contribution elections, in such manner and within such advance notice period as
the Committee (in its discretion) shall specify;
 
(b)   No Salary Deferrals shall be made by any Active Participant except in
accordance with his or her Salary Deferral election and the limitations of
Sections 3.1 and 5.5; and
 
(c)   No Catch-Up Contributions shall be made by any Active Participant except
in accordance with his or her Catch-Up Contribution election and the limitations
of Section 3.2.

3.3.1   Amounts. The amount of Salary Deferrals or Catch-Up Contributions that
may be made by each Active Participant for each payroll period shall be the
amount in dollars and cents that is nearest to the amount of Compensation
subject to the deferral election multiplied by the percentage elected by the
Participant pursuant to Section 3.1.1 or 3.2, as applicable.
 
3.3.2   Changes. An Active Participant may change the percentage(s) determined
under the first sentence of this Section 3.3 by giving notice in such manner and
within such advance notice period as the Committee (in its discretion) shall
specify, effective with respect to applicable Compensation paid on such date as
the Committee (in its discretion) may specify. The Salary Deferral and/or
Catch-Up Contribution elections made by an Active Participant shall remain in
effect until his or her active participation in the Plan is terminated, except
to the extent that the election is suspended in accordance with Sections 2.4,
2.5 or 8.2.3, changed in accordance with this Section 3.3.2, or reduced pursuant
to Section 3.1.2 or 3.1.3 (as applicable).
 
3.3.3   Potential Excess ADP. In the event that (but for the application of this
Section 3.3.3) the Committee determines that the ADP for HCE Participants would
exceed the
 
 
19

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

maximum permitted under Section 3.1.5 for a Plan Year (the “ADP Maximum”), then
the Committee (in its discretion) may reduce, in accordance with Section 3.1.3,
the percentages or amounts of Salary Deferrals subsequently to be contributed on
behalf of the HCE Participants 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 contributed on
behalf of the HCE Participants, the Committee (in its discretion) may permit
some or all HCE Participants, on a uniform and nondiscriminatory basis, to make
new Salary Deferral elections with respect to their subsequent Compensation
payments, and shall establish a policy as to the deferral percentages that shall
apply with respect to those HCE Participants who do not make new elections.
 
3.3.4   Actual Excess ADP. In the event that the Committee determines that the
ADP for the HCE Participants 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 Participant shall be distributed,
together with any income allocable thereto for the Plan Year to which the excess
contributions relate as well as for the Gap Period (as defined in Section
3.1.2(b)), to the HCE Participant 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 Participants for the Plan Year shall be determined and
allocated among HCE Participants in the following manner:
 
(1)   With respect to each HCE Participant 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, over (B) the product
of the ADP Maximum times his or her Testing Compensation. The aggregate of the
excess contributions for all such HCE Participants shall be the total excess
contributions to be distributed pursuant to this Section 3.3.4.
 
(2)   The Salary Deferrals of the HCE Participant with the highest total dollar
amount of Salary Deferrals contributed shall be reduced to the extent necessary
to cause the total dollar amount of his or her Salary Deferrals contributed to
equal the lesser of the dollar
 
 
20

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

 
 
amount of excess contributions for all HCE Participants calculated pursuant to
subsection (a)(1) above or the dollar amount of Salary Deferrals of the HCE
Participant with the next highest total dollar amount of Salary Deferrals
contributed. This process shall be repeated until the total dollar amount of
reductions of such Salary Deferral contributions equals the total excess
contributions calculated pursuant to subsection (a)(1) above.
 
(3)   The amount of excess contributions to be distributed to an HCE Participant
pursuant to this Section 3.3.4 shall be equal to the total amount by which his
or her actual Salary Deferrals is reduced under subsection (a)(2) above, but
reduced by the amount of any excess deferrals previously distributed to the HCE
Participant for the Plan Year under Section 3.1.2.
 
(b)   Forfeiture of Related Matching Contributions. Any Matching Contributions
allocated to the HCE Participant’s Matching Account by reason of any excess
contributions distributed pursuant to this Section 3.3.4, together with any
income allocable thereto for the Plan Year to which the excess contributions
relate, shall be forfeited and applied to reduce the next succeeding Matching
Contribution to the Plan.
 
(c)   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. § 1.401(k)-1(a)(iv) (to the extent not inconsistent with
amendments to the Code), and subsequent Internal Revenue Service guidance under
Section 401(k)(3) of the Code are incorporated herein by reference.
 
3.4   Payment of Salary Deferrals and Catch-Up Contributions.  Subject to the
foregoing provisions of this Section 3, Sections 5.5, 10.3 and Section 11, the
Employers shall pay to the Trust Fund the amounts elected by Active Participants
to be contributed as Salary Deferrals and/or Catch-Up Contributions. Any Salary
Deferrals and/or Catch-Up Contributions 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 and/or Catch-Up Contributions was paid.
 
 
21

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

 
 
SECTION 4
 
EMPLOYER CONTRIBUTIONS
 
4.1   Matching Contributions.  Subject to the provisions of this Section 4.1,
Sections 5.5, 10.3 and Section 11, the Employers shall contribute to the Trust
Fund as Matching Contributions amounts equal to the following:
 
4.1.1   Basic Matching Contributions. Effective as of October 1, 2006, the
Employer will make Matching Contributions for each eligible Active Participant
on a payroll by payroll basis equal to 100% of the eligible Active Participant’s
Salary Deferral Contributions for the pay period, but not to exceed 5% of the
eligible Active Participant’s Compensation for the pay period.
 
4.1.2   True-Up Matching Contributions. 
 
(a)   True-Up for Quarter Ending September 30, 2006. In addition to the Matching
Contributions set forth in Section 4.1.1, the Employer will make additional
Matching Contributions for the 2006 Plan Year, to be allocated as of September
29, 2006 (the Valuation Date immediately preceding the last day of the calendar
quarter ending September 30, 2006) to eligible Active Participants as an
adjustment to take into account any changes in Compensation or Participant
Salary Deferral elections which may have occurred during the period from January
1, 2006 through September 29, 2006. The amount of the additional Matching
Contributions for each eligible Active Participant shall be equal to the
difference, if any, between (i) the Matching Contributions allocated to the
eligible Active Participant pursuant to Section 4.1.1 for the period from
January 1, 2006 through September 29, 2006, and (ii) a Matching Contribution
equal to 100% of the eligible Active Participant’s Salary Deferrals but not to
exceed 5% of the eligible Active Participant’s Compensation for the period from
January 1, 2006 through September 29, 2006. Notwithstanding the foregoing, the
only Compensation that shall be taken into account for purposes of this
additional Matching Contribution shall be Compensation paid (or payable if
deferred under Section 3) to the eligible Active Participant (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 Bonus. In order to be
eligible for this additional Matching Contribution, a Participant must be an
Eligible Employee on September 29, 2006, or his or her employment with the
Employer must have been terminated during the period from January 1, 2006
through September 29, 2006 due to Disability or death.
 
(b)   2006 Year-End True-Up. In addition to the Matching Contributions set forth
in Sections 4.1.1 and 4.1.2(a), the Employers will make additional Matching
Contributions for the 2006 Plan Year, to be allocated as of December 29, 2006
(the last Valuation Date in the 2006 Plan Year) to eligible Active Participants
as an adjustment to take into account any changes in
 
 
22

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

 
 
Compensation or Participant Salary Deferral elections which may have occurred
during the period from October 1, 2006 through December 29, 2006. The amount of
the additional Matching Contributions for each eligible Active Participant shall
be equal to the difference, if any, between (i) the Matching Contributions
allocated to the eligible Active Participant pursuant to Sections 4.1.1 and
4.1.2(a) for the Plan Year, and (ii) a Matching Contribution equal to 100% of
the eligible Active Participant’s Salary Deferrals for the Plan Year but not to
exceed 5% of the eligible Active Participant’s Compensation for the Plan Year.
Notwithstanding the foregoing, the only Compensation that shall be taken into
account for purposes of this additional Matching Contribution shall be
Compensation paid (or payable if deferred under Section 3) to the eligible
Active Participant (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 Bonus. In order to be eligible for this additional Matching
Contribution, a Participant must be an Eligible Employee on December 29, 2006,
or his or her employment with the Employer must have been terminated during the
Plan Year due to Disability or death.
 
(c)   True-Up for Plan Years Beginning January 1, 2007 and After. In addition to
the Matching Contributions set forth in Section 4.1.1, the Employers will make
additional Matching Contributions for the Plan Year, to be allocated as of the
last Valuation Date of the Plan Year to eligible Active Participants as an
adjustment to take into account any changes in Compensation or Participant
Salary Deferral elections which may have occurred during the Plan Year. The
amount of the additional Matching Contributions for each eligible Active
Participant shall be equal to the difference, if any, between (i) the Matching
Contributions allocated to the eligible Active Participant pursuant to Section
4.1.1 for the Plan Year, and (ii) a Matching Contribution equal to 100% of the
eligible Active Participant’s Salary Deferrals for the Plan Year but not to
exceed 5% of the eligible Active Participant’s Compensation for the Plan Year.
Notwithstanding the foregoing, the only Compensation that shall be taken into
account for purposes of this additional Matching Contribution shall be
Compensation paid (or payable if deferred under Section 3) to the eligible
Active Participant (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 Bonus. In order to be eligible for this additional Employer Matching
Contribution, a Participant must be an Eligible Employee on the last Valuation
Date of the Plan Year, or his or her employment with the Employer must have been
terminated during the Plan Year due to Disability or death.
 
4.1.3   Calculation Rules. Only those Salary Deferrals which are made pursuant
to Sections 3.1 and 3.3) shall be taken into account in calculating the amount
of the Matching Contribution (if any) to be made in respect of the Participant’s
Salary Deferrals for any payroll period. In no event shall the amount of any
Catch-Up Contributions contributed to any Participant’s Catch-Up Contribution
Account, be taken into account in determining the amount of Matching
Contributions to be made to the Trust Fund and/or allocated to his or her
Matching Account.
 
 
23

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

 
 
4.1.4   Limitations on HCE Participants. For any Plan Year, the Committee (in
its discretion) may limit the Matching Contributions to be made on behalf of HCE
Participants (as defined in Section 3.1.4) in such manner as may be necessary or
appropriate in order to assure that the limitation described in Section 4.1.5
will be satisfied.
 
4.1.5   Contribution Percentage Limitation. In no event shall the actual
contribution percentage, determined in accordance with Section 4.1.6 (the
“ACP”), for the HCE Participants for a Plan Year exceed the maximum ACP, as
determined by reference to the ACP for the Non-HCE Participants (as defined in
Section 3.1.4), in accordance with the following table:
 
If the ACP for the Non-HCE
Participants (“NHCEs’ ACP”) is:
Then the Maximum ACP for
the HCE Participants is
 
Less than 2%
 
2.0 x NHCEs’ ACP
2% to 8%
NHCEs’ ACP + 2%
More than 8%
1.25 x NHCEs’ ACP

 
4.1.6   Actual Contribution Percentage. The actual contribution percentage for
the HCE or Non-HCE Participants for a Plan Year shall be calculated by computing
the average of the percentages (calculated separately for each HCE or Non-HCE
Participant) (the “Contribution Rates”) determined by dividing (a) the total of
all Matching Contributions made on behalf of the Participant and credited to his
or her Matching Account for the Plan Year, by (b) the Participant’s Testing
Compensation (as defined in Section 3.1.7) for the Plan Year. The special
testing and aggregation rules set forth in Section 3.1.6 with respect to
calculation of the Participants’ Deferral Rates shall also apply to the
calculation of their Contribution Rates.
 
4.1.7   Potential Excess ACP. In the event that (but for the application of this
Section 4.1.7) the Committee determines that the ACP for the HCE Participants
would exceed the maximum permitted under Section 4.1.5 for a Plan Year (the “ACP
Maximum”), then the Committee
 
 
24

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

 
 
(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 Participants 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.
 
4.1.8   Actual Excess ACP. In the event that the Committee determines that the
ACP for the HCE Participants 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 Participant
shall be distributed, together with any income allocable thereto for the Plan
Year to which the excess aggregate contributions relate, as well as for the Gap
Period (as defined in Section 3.1.2(b)), to the HCE Participant 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 Participants for the Plan Year shall
be determined and allocated among HCE Participants in the manner provided in
Section 3.3.4 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 3.3.4 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. §1.401(m)-1(b) (to the extent not inconsistent with
amendments to the Code), and subsequent Internal Revenue Service guidance under
Section 401(m)(2) of the Code are incorporated herein by reference.
 
4.2   Nonelective Contributions.  Subject to the provisions of Sections 5.3 and
Section 11, for any Plan Year each Employer shall also contribute to the Trust
Fund such amount (if any) as the Board of Directors (in its discretion) may
direct be contributed (a “Nonelective Contribution”) on
 
 
25

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

 
 
behalf of those Participants who are eligible to share in the allocation of the
Nonelective Contribution pursuant to Section 5.3.
 
4.3   Timing.  Subject to the foregoing provisions of this Section 4, Section
10.3 and Section 11, Employer 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 Contributions are made.
 
4.4   Periodic Contributions.  Subject to the foregoing provisions of this
Section 4, Sections 5.4 and Section 11, any Employer 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
Employer Contribution payment made to the Trust Fund, the Plan Year to which the
payment relates. The Employers intend the Plan to be permanent, but the
Employers do not obligate themselves to make any Employer Contributions under
the Plan whatsoever.
 
4.5   Reinstatements.  The Employers shall also contribute to the Trust Fund any
amount necessary to reinstate closed Accounts pursuant to Section 7.8.
 
4.6   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.
 
4.7   No After-Tax Contributions.  In no event shall any Participant be
permitted to make contributions to the Plan or Trust Fund on an after-tax basis.
 
 
26

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

 
 
SECTION 5
 
ALLOCATION OF CONTRIBUTIONS AND INVESTMENTS
 
5.1   Salary Deferrals and Catch-Up Contributions.  Except as provided in
Sections 3.1.2 and 3.3.4, the Salary Deferrals and/or Catch-Up Contributions
made on behalf of an Active Participant for any period shall be allocated to his
or her Salary Deferral Account and/or Catch-Up Contribution Account, as
applicable, on the business day that coincides with or next follows the date on
which such Salary Deferrals or Catch-Up Contributions are received by the Trust
Fund.
 
5.2   Matching Contributions.  Except as provided in Section 4.1.8, the Matching
Contributions made on behalf of an Active Participant for a Plan Year shall be
allocated to his or her Matching Account on the business day that coincides with
or next follows the date on which such Matching Contributions are received by
the Trust Fund.
 
5.3   Nonelective Contributions.  Any Nonelective Contribution made by an
Employer for a Plan Year shall be allocated, on the business day that coincides
with or next follows the date on which such Nonelective Contribution is received
by the Trust Fund, to the Nonelective Contribution Accounts of:
 
(a)   All Active or Inactive Participants (as determined under Section 2) who
are Eligible Employees as of the last Valuation Date of the Plan Year for which
the Nonelective Contribution was made; and
 
(b)   Those Participants who, during such Plan Year, ceased to be Employees on
account of death or Disability.
 
The portion of the Employer’s Nonelective Contribution to be allocated to the
Nonelective Contribution Account of each Participant who is eligible to share in
the allocation pursuant to the preceding sentence shall be determined by
multiplying the total amount of the Nonelective Contribution by a fraction, of
which (1) the numerator is the total Compensation received by the
 
 
27

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

 
 
Participant while employed by the Employer during the Plan Year, and (2) the
denominator is the aggregate total Compensation of all such Participants
eligible to share in the allocation for such Plan Year.
 
5.4   Investment.  Each Participant (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 Investment Funds. A
Participant (or Beneficiary) may specify as to any Investment Fund any
percentage that is a whole multiple of 1%, provided that the total of the
percentages specified shall not exceed 100%.
 
5.4.1   Changes. The elections of a Participant (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 may include such rules
and limitations (e.g., with respect to the timing and frequency of elections) as
the Committee may specify from time to time, but at all times shall permit
Participants (and Beneficiaries) to make investment changes in a manner designed
to permit the Plan to qualify as a 404(c) plan (within the meaning of Section
404(c) of ERISA).
 
5.4.2   Failure to Elect. If a Participant (or Beneficiary) fails to direct the
manner in which the amounts allocated (or to be allocated) to his or her
Accounts are to be invested, such amounts shall be invested in the Investment
Fund designated by the Committee for such purpose. Whenever the Committee
discontinues an Investment Fund and the Participant (or Beneficiary) does not
make a new election with respect to amounts allocated (or to be allocated) to
the discontinued Investment Fund, such amounts shall be invested in the
Investment Fund designated by the Committee for such purpose.
 
 
28

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

 
 
5.4.3   Participant Loans. In the event a loan is to be made to a Participant 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 Participant’s Accounts that are
invested in one or more of the other Investment Funds to a separate subaccount
within the Participant’s Accounts (the “Loan Account”), which shall be
maintained for the purpose of accounting for any loans made to the Participant
from his or her Accounts. Interest and principal payments on loans made under
the Plan to any Participant shall be allocated to his or her Loan Account as
received by the Trustee and, after appropriate adjustments have been made to the
Loan Account to reflect such payments, shall be reallocated to the Investment
Funds in the same percentages as specified by the Participant pursuant to the
introductory paragraph of this Section 5.4, or if there is no such designation
currently in force, as the Committee (in its discretion) shall determine.
 
5.5   Limitations on Allocations.
 
5.5.1   Annual Addition Limitation. Notwithstanding any contrary Plan provision,
in no event shall the Annual Addition to any Participant’s Accounts for any Plan
Year exceed (a) the Defined Contribution Dollar Limit, or (b) 100% of the
Participant’s Total Compensation for the Plan Year; provided, however, that
clause (b) above shall not apply to any Annual Additions described in clauses
(5) and (6) of Section 5.5.2(c).
 
5.5.2   Definitions. For purposes of this Section 5.5, the following definitions
shall apply:
 
(a)   “Affiliate” means 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.
 
 
29

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

 
 
(b)   “Aggregated Plan” means any defined contribution plan that is aggregated
with this Plan pursuant to Section 5.5.3.
 
(c)   “Annual Addition” means with respect to each Participant the sum for a
Plan Year of (1) the Participant’s Salary Deferrals to be credited to the
Participant’s Salary Deferral Account; (2) the share of any Matching
Contributions and/or Nonelective Contributions to be credited to the
Participant’s Matching Account and/or Nonelective Contribution Account (as
applicable); (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
Participant’s account under any Aggregated Plan; (4) any after-tax employee
contributions made by the Participant for the Plan Year under any Aggregated
Plan; (5) any amount allocated to the Participant’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 Participant’s separate account under a welfare benefits fund
(within the meaning of Section 419(e) of the Code) maintained by an Employer or
Affiliate.
 
(d)   “Defined Contribution Dollar Limit” means the dollar limit prescribed in
Section 415(c)(1)(A) of the Code, as adjusted in accordance with Section 415(d)
of the Code (e.g., $44,000 for 2006).
 
(e)   “Total Compensation” means 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 (or its successor):
 
(A)   Including the aggregate of his or her elective deferrals (within the
meaning of Section 402(g)(3) of the Code) and any other amounts that are
(i) contributed by any Employer or Affiliate at his or her election, and
(ii) not includible in his or her gross income under Section 125, 132(f)(4) or
457 of the Code; but
 
(B)   Excluding amounts paid or reimbursed by the Employer or Affiliate for
moving expenses incurred by the Participant, 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 Section 415(c)(3) of the Code and Treas. Reg.
§1.415-2(d).
 
 
30

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

 
 
5.5.3   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 5.5, 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 Participant who
participates in any such plan.
 
5.5.4   Adjustments. If, as a result of (1) a reasonable error in estimating a
Participant’s Total Compensation, allocating forfeitures under any Aggregated
Plan or other circumstances which permit the application of the rules stated in
this Section 5.5.4, or (2) a reasonable error in determining the amount of
Salary Deferrals that may be made or contributed under the limits of this
Section 5.5, any of the limitations of this Section 5.5 otherwise would be
exceeded with respect to any Participant 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 Participant 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 made
on the Participant’s behalf for the Plan Year shall be distributed to the
Participant to the extent required to reduce the excess Annual Addition to the
Participant’s Accounts attributable to that circumstance;
 
(c)   Any Matching Contributions allocated to the Participant’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 Participants or
participants in the Aggregated Plan for succeeding Plan Years in order of time;
 
(d)   Any Nonelective Contributions allocated to the Participant’s Nonelective
Contribution Account under this Plan and/or any employer nonelective
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 Nonelective Contributions or other employer
nonelective contributions (of the same class) otherwise to be made for and
allocated
 
 
31

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

to all eligible Participants or participants in the Aggregated Plan for
succeeding Plan Years in order of time; and
 
(e)   The Participant’s Salary Deferrals and any salary reduction contributions
made at the Participant’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 or other salary reduction contributions as
otherwise are to be made thereafter at his or her election under this or any
Aggregated Plan.
 
5.5.5   Suspense Accounts. If a suspense account is created under Section 5.5.4
and exists in a later Plan Year, the amount allocated to the suspense account
shall be reallocated to the Participant’s Accounts before any amount may be
contributed to this or any Aggregated Plan on behalf of the Participant for that
Plan Year. If the Participant 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 5.5.4, that balance
shall be reallocated among the Accounts of all Participants who remain Employees
on the first day of the next following Plan Year, in direct proportion to each
such Participant’s share of the aggregate Total Compensation paid to all such
Participants for the Plan Year of termination (subject to the limitations of
this Section 5.5), 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.
 
5.5.6   Limitation Year. For purposes of applying the limitations of Section 415
of the Code, the limitation year shall be the Plan Year.
 
 
32

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

 
 
SECTION 6
 
ACCOUNTS AND INVESTMENT FUNDS
 
6.1   Participants’ Accounts.  At the direction of the Committee, there shall be
established and maintained for each Participant, as appropriate:
 
(a)   A Catch-Up Contribution Account, to which shall be credited all Catch-Up
Contributions paid to the Trust Fund at his or her election under Section 3;
 
(b)   A GenenFlex Account, which shall continue to hold any Prior Excess Flex
Credit Contributions (as defined in Section 1.33.2);
 
(c)   A Loan Account, to which shall be credited (pursuant to Section 5.4.3) any
amounts loaned to the Participant in accordance with Section 8.4;
 
(d)   A Matching Account, to which shall be credited all Matching Contributions
paid to the Trust Fund on his or her behalf under Section 4;
 
(e)   A Nonelective Contribution Account, to which shall be credited all
Nonelective Contributions paid to the Trust Fund on his or her behalf under
Section 4;
 
(f)   A Rollover Account, to which shall be credited all transfers made to the
Trust Fund by or on behalf of the Participant under Section 10.5;
 
(g)   A Salary Deferral Account, to which shall be credited all Salary Deferrals
paid to the Trust Fund at his or her election under Section 3; and
 
(h)   Such other Account(s) as the Committee shall deem necessary or
appropriate, from time to time.
 
Each Participant’s Account also shall reflect the total value of its
proportionate interest in each of the Investment Funds as of each Valuation
Date. The maintenance of a separate Account for each Participant shall not be
deemed to segregate for the Participant, nor to give the Participant any
ownership interest in, any specific assets of the Trust Fund.
 
6.2   Trust Fund Assets.  The Trust Fund shall consist of the Participants’
Salary Deferrals, Catch-Up Contributions, Matching Contributions, Nonelective
Contributions, Prior Excess Flex Credit Contributions (as defined in
Section 1.33.2), rollovers or transfers made pursuant to
 
 
33

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

 
 
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 Investment Funds, and each Participant and his
or her Account shall have only an undivided interest in any of the Investment
Funds.
 
6.3   Investment Funds.  The Trustee shall establish three or more Investment
Funds which shall be maintained for the purpose of investing such portions of
Participants’ Accounts as are properly allocable to each such Fund pursuant to
Section 5.4. At least three of the Investment Funds shall (a) be diversified,
(b) have materially different risk and return characteristics, and (c) be
designed to satisfy the broad range of investment alternatives requirement of 29
C.F.R. § 2550.404c-1(b)(3), all in a manner designed to permit the Plan to
qualify as a 404(c) plan (within the meaning of Section 404(c) of ERISA).
 
6.3.1   Investment Media. Except to the extent that such investment
responsibility has been transferred to the Trustee or an Investment Manager in
accordance with Section 9.6, the Committee (in its discretion) shall direct the
Trustee to invest each Investment Fund in (a) units, shares or other interests
in one or more common, pooled, collective or other investment media that are
(1) designated by the Committee, and (2) either (A) maintained by any 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, as amended, or (b)
prior to October 1, 2006, shares of Company Stock and, if applicable, short-term
investments (as described in clause (a) above).
 
6.3.2   Changes. The Committee may from time to time change the number, identity
or composition of the Investment Funds made available under this Section 6.3.
Except to the extent that such investment responsibility has been transferred to
the Trustee or an Investment Manager in
 
 
34

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

 
 
accordance with Section 9.6, the Committee also may select different investment
media for the investment of any Investment Fund.
 
6.3.3   Reinvestments and Cash. All interest, dividends or other income realized
from the investments of any of the Investment Funds shall be reinvested in the
Investment Fund that realized such income. Temporary cash balances arising in
any of the Investment Funds shall be invested in a manner that produces a
reasonable rate of return and is consistent with the liquidity needs of the
Fund.
 
6.3.4   Company Stock Fund. Effective as of October 1, 2006, and notwithstanding
the foregoing provisions of this Section 6.3, one of the Investment Funds shall
be a Company Stock Fund.
 
6.3.5   Limitation on Investment in Company Stock Fund. Effective as of October
1, 2006, and notwithstanding anything in the Plan to the contrary, the following
restrictions on investment in the Company Stock Fund shall apply:
 
(a)   Investment of future contributions (Salary Deferrals, Matching
Contributions, Nonelective Contributions and Rollovers) in the Company Stock
Fund shall be limited to 30% of new money invested;
 
(b)   No Participant will be permitted to direct the transfer of assets invested
in any other investment option under the Plan from that other investment option
to the Company Stock Fund; and
 
(c)   Existing investments in the Company Stock Fund may be sold at any time
(subject to any applicable trading restrictions) but once sold, may not be
reinvested in the Company Stock Fund.
 
 
35

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

 
 
6.4   Valuation of Participants’ Accounts.  The Trustee shall determine the fair
market values of the assets of the Investment Funds, and the Committee shall
determine the fair market value of each Participant’s Account, as of each
Valuation Date. In making such determinations and in crediting net earnings and
gains (or losses) in the Investment Funds to the Participants’ Accounts, the
Committee (in its discretion) may employ, and may direct the Trustee to employ,
such accounting methods as the Committee (in its discretion) deems appropriate
in order fairly to reflect the fair market values of the Investment Funds and
each Participant’s Account. 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 Participant’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 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 Participants’ Accounts.  Each Participant shall be furnished
with periodic statements reflecting his or her interest in the Plan at least
annually. Within sixty (60) days of receipt of any such statement, each
Participant must notify the Committee (or its designee) of any
 
 
36

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

 
 
error in the statement and provide any documents and/or information as the
Committee (or its designee) may require.
 
6.7   Vesting of Participants’ Accounts.  Each Participant shall at all times be
100% vested in his or her Accounts under the Plan.
 
SECTION 7
 
DISTRIBUTIONS
 
7.1   Events Permitting Distribution.  Subject to Section 7.3, the balance
credited to a Participant’s Accounts shall become distributable only in the
following circumstances:
 
(a)   Upon the Participant’s severance from employment with all Employers and
Affiliates at or after Normal Retirement Age;
 
(b)   Upon the Participant’s severance from employment with all Employers and
Affiliates by reason of Disability or death;
 
(c)   Upon the Participant’s severance from employment with all Employers and
Affiliates in any circumstances other than those specified in subsection (a) or
(b) above;
 
(d)   If the Participant is a 5-percent owner within the meaning of
Section 416(i)(1)(B) of the Code (a “5-Percent Owner”), at any time during (and
no later than) the April 1 that next follows the calendar year in which the
Participant attains age 70½;
 
(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 Participant’s application for a
withdrawal from his or her Account, but only to the limited extent provided in
Section 8;
 
(g)   In accordance with and to the limited extent provided in Sections 3.1.2,
3.3.4, 4.1.8 or 5.5.4; or
 
(h)   Upon the creation or recognition of an Alternate Payee’s right to all or a
portion of a Participant’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 Participant’s Account that the QDRO states is payable to the
Alternate Payee.

For purposes of determining whether a Participant has met the foregoing
requirements, if a Participant experiences a change in employment status to that
of a Leased Employee (as defined in
 
 
37

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

 
 
Section 1.26) and he or she continues to work for the Employer or any Affiliate,
such change will not be treated as a severance from employment with all
Employers and Affiliates for purposes of receiving a distribution under the
Plan.
 
7.2   Times for Distribution.
 
7.2.1   General Rule. Subject to the consent requirements of Section 7.3 and
except as provided in Section 8.5 (relating to QDROs), distributions from a
Participant’s Accounts shall normally be made or commenced as soon as
practicable after the Valuation Date that coincides with or next follows the
later of (a) the date on which 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.
 
7.2.2   Distribution Deadline. Subject to all other provisions of this
Section 7, all distributions not made sooner pursuant to the first sentence of
Section 7.2.1 shall be made no later than sixty (60) days after the end of the
Plan Year in which a distribution event described in Sections 7.1(a) through
7.1(c) occurs with respect to the Participant, or the Participant attains Normal
Retirement Age (whichever is later), subject also to the following:
 
(a)   A Participant’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 Participant’s
Accounts shall be distributed no later than his or her Deadline Date (as defined
in Section 7.2.3).
 
(b)   If the amount of the distribution or the location of the Participant or
his or her Beneficiary (after a reasonable search) cannot be ascertained by the
deadline described above, distribution shall be made no later than sixty (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 Participant’s death shall be made
within five (5) years after his or her death.
 
 
38

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

 
 
7.2.3   For purposes of applying this Section 7.2, “Deadline Date” means:
 
(a)   With respect to a Participant who is a 5-Percent Owner (as defined in
Section 7.1(d)), the April 1 that next follows the calendar year in which the
Participant attains age 70½.
 
(b)   With respect to a Participant who is not a 5-Percent Owner, the April 1
that next follows the later of (i) the calendar year in which the Participant
attains age 70½, or (ii) the calendar year in which the Participant’s employment
with all Employers and Affiliates terminates.
 
7.2.4   Age 70½ Rule for 5-Percent Owners. If the Accounts of a Participant who
continues in employment after attaining Normal Retirement Age become
distributable pursuant to Section 7.1(d), the Accounts shall be distributed no
later than the Deadline Date, 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 and Immediate Distributions. 
 
7.3.1   Consent Required Over Threshold Amount. If the balance credited to a
Participant’s Accounts exceeds $5,000 (the “Threshold Amount”) as of the
Valuation Date that next precedes the date of distribution from the Accounts,
then no portion of the Participant’s Accounts shall be distributed to the
Participant until he or she attains age 62, unless the Participant (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
7.3.1) shall be adjusted periodically pursuant to Section 411(a)(11)(A) of the
Code.
 
7.3.2   Immediate Distributions of Small Accounts Permitted. Notwithstanding any
contrary Plan provision:
 
(a)   Subject to paragraph (b) below, if the balance credited to a Participant’s
Accounts does not exceed the Threshold Amount (as defined in Section 7.3.1) as
of the
 
 
39

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

 
 
Valuation Date that next precedes the date of distribution from the Accounts,
and if the Participant does not elect to have such distribution paid directly to
an eligible retirement plan specified by the Participant in a direct rollover or
to receive the distribution directly in accordance with this Section 7, then the
distribution shall be paid in a single lump sum as soon as administratively
practicable in accordance with the procedures prescribed by the Committee.
 
(b)   If a mandatory distribution that exceeds $1,000 is to be made to a
Participant in accordance with the provisions of paragraph (a) above, then the
Committee shall pay such distribution in cash (or its equivalent) in a direct
rollover to an individual retirement plan (as defined in Section 7701(a)(37) of
the Code) designated by the Committee for such purpose.
 
7.4   Form of Distribution. 
 
7.4.1   Cash. With respect to any portion of a Participant’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 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 Participant’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.
 
 
40

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

 
 
7.4.4   No Annuities. In no event shall any distribution from a Participant’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. § 1.411(a)-11(c) is given to the Distributee, provided that
(1) 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” means a Participant, a Beneficiary (if the surviving spouse
of a Participant), or an Alternate Payee (if the spouse or former spouse of a
Participant under a QDRO (as defined in Section 8.5)).
 
(d)   “Eligible Rollover Distribution” means a distribution of any portion of
the balance credited to the Accounts of a Participant 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),
 
 
41

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

 
 
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 Participant 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 Participant may designate one or more
Beneficiaries 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(u)) in the manner specified.
 
7.6.1   Spousal Consent. If a Participant designates any a person other than his
or her spouse as a primary Beneficiary, the designation shall be ineffective
unless the Participant’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 Participant’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 Participant 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
 
 
42

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

 
 
be irrevocable and valid only with respect to the spouse who signs the consent.
A Participant may revoke his or her Beneficiary designation 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 Participant may designate different
Beneficiaries (or revoke a prior Beneficiary designation) at any time by making
a new designation (or a revocation of a prior designation) 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(u)) in the manner specified, and the last effective designation
received by the Company shall supersede all prior designations. If a Participant
dies without having effectively designated a Beneficiary, or if no Beneficiary
survives the Participant, the Participant’s Accounts shall be payable to his or
her surviving spouse or, if the Participant is not survived by his or her
spouse, the Accounts shall be paid to the individual representative of the
Participant’s 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 therefore, 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
 
 
43

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

 
 
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 Participant 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 unable to locate the Participant or Beneficiary to
whom a Participant’s Accounts are payable under this Section 7, (a) the
Participant’s Accounts may be closed after 24 months have passed since the date
the Account first became distributable to such Participant or Beneficiary, and
(b) the balance credited to any Accounts so closed shall be credited as an
offset against future Employer Contribution payments. If the Participant 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 QUALIFIED DOMESTIC RELATIONS ORDERS
 
8.1   General Rules.  In accordance with Sections 8.2 and 8.3, a Participant 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 Participant shall be permitted to make a
withdrawal under Section 8.2 more often than once in any calendar year, and no
Participant shall be permitted to make a withdrawal under Section 8.3 more often
than once in any calendar year.
 
 
44

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

 
 
8.2   Hardship Withdrawal.  The Committee shall authorize a withdrawal under
this Section 8.2 (subject to the provisions of Section 8.1) if the Participant
provides evidence that 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 Participant may make a withdrawal
under this Section 8.2 only to meet a financial obligation for:
 
(a)   For hardship withdrawal requests made prior to October 1, 2006:
 
(1)   Unreimbursed expenses for medical care (as defined in Section 213(d) of
the Code) incurred by the Participant or his or her spouse or dependents as
defined in Section 152 of the Code (“Dependents”), or necessary to enable any
such person to obtain such care;
 
(2)   Down payment and closing costs (excluding mortgage payments) directly
related to the purchase of the Participant’s principal residence;
 
(3)   Payment of tuition, room and board and related educational expenses for up
to the next 12 months of post-secondary education for the Participant or his or
her spouse, children or Dependents;
 
(4)   Prevention of the eviction of the Participant from his or her principal
residence or foreclosure on the mortgage or deed of trust on the Participant’s
principal residence; or
 
(5)   Such other expenses as may be permitted under published documents of
general applicability as provided under Treas. Reg. § 1.401(k)-1(d)(2)(iv)(C).
 
(b)   For hardship withdrawal requests made on or after October 1, 2006:
 
(1)   Expenses incurred for medical care that would be deductible under
Section 213(d) of the Code (determined without regard to whether the expenses
exceed 7½% of adjusted gross income);
 
(2)   Costs (excluding mortgage payments) relating to the purchase of a
principal residence for the Participant;
 
(3)   Payment of tuition, related educational fees and room and board expenses,
for up to the next 12 months of post-secondary education for the Participant,
his or her Spouse, children or dependents (as defined in Section 152 of the
Code, without regard to Section 152(b)(1), (b)(2) and (d)(1)(B) of the Code);
 
 
45

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

 
 
(4)   Payments necessary to prevent the eviction of the Participant from his or
her principal residence or foreclosure on the mortgage or deed of trust on that
principal residence;
 
(5)   Payments for burial or funeral expenses for the Participant’s deceased
parent, Spouse, children or dependents (as defined in Section 152 of the Code,
without regard to Section 152(d)(1)(B) of the Code); or
 
(6)   Expenses for the repair of damage to the Participant’s principal residence
that would qualify for the casualty deduction under Section 165 of the Code
(determined without regard to whether the loss exceeds 10% of adjusted gross
income).
 
8.2.2   Withdrawal Necessary to Meet Financial Obligation. No withdrawal shall
be made under this Section 8.2 unless the Participant 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   Mandatory Suspension and Contribution Limitations. To the extent
required by regulations, no withdrawal shall be made under this Section 8.2
unless the Participant irrevocably agrees, evidenced in such manner as the
Committee (in its discretion) may specify, in his or her hardship withdrawal
application that during the period beginning on the Entry Date that next follows
the withdrawal approval date and ending six (6) months after that date, the
Participant shall not make contributions to, compensation deferrals under or
payments in connection with the exercise of any rights granted under this Plan
or 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. The Participant may elect to resume his
or her active participation in the Plan as of any Entry Date coinciding with or
following the end of the suspension period described above, provided that he or
she elects to become an Active Participant in accordance with Section 2.3.1.
 
 
46

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

 
 
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 obligation 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 Participant’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 Participant’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 Participant pursuant to Section 8.4.
 
(c)   Notwithstanding the foregoing, the maximum amount that may be withdrawn
from a Participant’s Salary Deferral Account, Catch-Up Contribution 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 Prior Excess Flex Credit
Contributions (as defined in Section 1.33.2) allocated to the Participant’s
Salary Deferral Account, Catch-Up Contribution Account and/or GenenFlex Account
(as applicable) on the date of the withdrawal plus the amount of any 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
Participant’s Salary Deferral Account, Catch-Up Contribution 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 Participant’s Accounts in such order as
may be determined by the Committee from time to time.
 
8.3   Age 59½ Withdrawal.  At any time after a Participant attains age 59½, the
Participant (subject to the provisions of Section 8.1) may withdraw any amount
up to the excess of (a) 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 Participant’s Accounts for any Alternate
Payee under a QDRO (as defined in Section 8.5), over (b) the total amount due
(including both principal and interest) under all outstanding loans made to the
Participant pursuant to Section 8.4. Any amount withdrawn under this Section 8.3
shall be deducted from the Participant’s Accounts in such order as may be
determined by the Committee from time to time.
 
 
47

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

 
8.4 Loans to Participants. 
 
8.4.1   General Loan Rules. A Participant 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 Participant’s Accounts in accordance
with the provisions of this Section 8.4. Loans shall be available to all
Participants 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
Participants or Beneficiaries of deceased Participants, 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 Participant’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
Participant under this Plan.
 
(b)   “Available Balance” means the total balance credited to the Participant’s
Accounts as of the applicable date, reduced by amounts allocated pursuant to
Section 8.5 to any subaccount of the Participant’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 Participant 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 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)   Maximum Number of Loans. No Participant shall be permitted to borrow under
this Section 8.4 if the borrowing would result in his or her having more than
three (3) loans outstanding.
 
(e)   Twelve Months Required Between Loans. Notwithstanding the foregoing, no
additional loan may be made to a Participant under this Section 8.4 until at
least 12 months after the next earliest loan was made.
 
(f)   Unpaid Leave of Absence. If a Participant is granted an unpaid Leave of
Absence and remains an Employee, he or she may elect to have his or her loan
payments be
 
 
48

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

 
 
suspended for the lesser of the duration of the approved Leave of Absence or one
year. If the Participant’s loan payments are so suspended and he or she 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 Participant fails to return to active employment with an
Employer or Affiliate or terminates his or her employment 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; provided, however, that 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 if the Participant
authorizes an automatic payment method described in Section 8.4.2(e)(2) for such
remaining loan payments. 
 
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 Participant
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 Participant’s Loan Account and shall be accounted
for as provided in Section 5.4.3.
 
(b)   Term. The term of the loan shall not exceed five years. The Participant
may elect a term of either three or five years for each loan. However, the term
of the loan may be fifteen years, provided that the Participant (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
Participant’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 over the agreed term of the loan in accordance with the provisions of
this Section 8.4. A Participant 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 Participant 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:
 
 
49

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

 
 
(1)   By payroll withholding, in the case of a Participant 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 Participant who is not receiving periodic wage payments from an
Employer or Affiliate.
 
(f)   On Payroll. If during the term of the loan, a Participant 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
Participant shall authorize in writing payroll withholding for the remaining
loan payments.
 
(g)   Off Payroll. Subject to Section 8.4.1(f), if during the term of the loan,
a Participant who has been making loan payments by payroll withholding ceases to
receive periodic wage payments from an Employer or Affiliate (and distribution
of the Participant’s Account has not begun), the Participant 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 Participant 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 Participant 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 Participant defaults on his or her loan payment
obligations and does not cure the default within thirty days of the date the
Participant 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
 
(b)   To reduce the balance credited to the Participant’s Accounts by the amount
required to cure the default.
 
(c)   In applying the method of cure provided in subsection (a) above, if any
losses are realized or expenses incurred, they shall be allocated only to the
defaulting Accounts.
 
 
50

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

 
 
(d)   In applying the method of cure provided in subsection (b) above, the
amount by which the Participant’s Accounts is to be reduced shall be credited to
a separate suspense account for the Participant 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 Participant attains age 59½ 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 Participant when a distribution is made from his or her Account
in connection with the Participant’s severance from 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 Participant’s Accounts shall be reduced to
the extent necessary to discharge the obligation.
 
8.4.5   Transferred participant Loans. Notwithstanding any contrary Plan
provision, any Participant loans that are transferred to the Trust Fund pursuant
to Section 10.5.3 shall be administered under this Plan in accordance with such
loans’ terms and conditions in effect as of the date of the transfer or as may
be otherwise modified to conform to the administrative and/or payroll procedures
of the Employer.
 
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 Participant’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
 
 
51

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

 
 
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.
 
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 Participant 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 Participant’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 5.4. Payment to the Alternate
Payee shall not be deferred beyond the date of distribution to the Participant
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 Participant’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 Participant, his or her spouse, former spouse, child or
other dependent and (b) the Participant’s Accounts are a source of payment under
such order. For purposes of this Section 8.5.4, a “hold” means that no
withdrawals, loans or distributions may be made from a Participant’s Accounts.
The Committee shall notify the Participant if a hold is placed upon his or her
Accounts pursuant to this Section 8.5.4.
 
 
52

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

 
 
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).
 
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 that 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 grant or deny benefits under the Plan;
 
 
53

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

 
 
(b)   To interpret the provisions of the Plan and to determine any question
arising under, or in connection with the administration or operation of, the
Plan;
 
(c)   To determine all questions concerning the eligibility of any Employee to
become or remain a Participant and/or an Active Participant in the Plan;
 
(d)   To cause one or more separate Accounts to be maintained for each
Participant;
 
(e)   To establish and revise an accounting method or formula for the Plan, as
provided in Section 6.4;
 
(f)   To determine the manner and form, and to notify the Trustee, of any
distribution to be made under the Plan;
 
(g)   To grant or deny withdrawal and loan applications under Section 8;
 
(h)   To determine the status and rights of Participants and their spouses,
Beneficiaries or estates under this Plan;
 
(i)   To instruct the Trustee with respect to matters within the jurisdiction of
the Committee;
 
(j)   To direct the Trustee, in accordance with Section 6.3, as to the
establishment of Investment Funds and the investment of the Plan assets held in
the Investment Funds;
 
(k)   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;
 
(l)   To prescribe the form, manner and/or notice period in which any
Participant, or his or her spouse or other Beneficiary, may make any election or
designation provided under the Plan;
 
(m)   To establish rules for the performance of its powers and duties and for
the administration of the Plan;
 
(n)   To arrange for annual distribution to each Participant of a statement of
benefits accrued under the Plan;
 
(o)   To establish rules, regulations and/or procedures by which requests for
Plan information from Participants are processed expeditiously and completely;
 
(p)   To provide to each terminated Participant notice of his or her vested
interest under the Plan and to provide to each Participant in advance of the
Participant’s receipt of an Eligible Rollover Distribution (as defined in
Section 7.4.5(d)) the explanation described in Section 402(f) of the Code;
 
 
54

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

 
 
(q)   To publish a claims and appeal procedure satisfying the minimum standards
of Section 503 of ERISA pursuant to which Participants or their spouses,
Beneficiaries or estates may claim Plan benefits and appeal any denials of such
claims;
 
(r)   To determine the liabilities of the Plan, to establish and communicate a
funding policy to the Trustee and any Investment Manager appointed pursuant to
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;
 
(s)   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;
 
(t) To arrange for the purchase of any bond required of the Committee members or
others under Section 412 of ERISA;
 
(u) 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 Participants and Beneficiaries as provided in the
Plan; and
 
(v) 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 Investment Funds in the investment media specified in Section 6.3.1.
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.
 
 
55

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

 
 
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 one or more of the Investment
Funds and/or other designated portions of the Trust 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 Investment
Fund directly to any Investment Manager that has investment management
responsibility for any collective investment fund in which the Investment 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;
 
 
56

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

 
 
(c)   Any proposal by a shareholder pursuant to Rule 14a-8 under the 1934 Act;
 
(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
Participant (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 Participant 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 Participant (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”).
 
 
57

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

 
 
9.7.4   Confidentiality. In implementing this Section 9.7, each appropriate
fiduciary shall take all steps necessary or appropriate to ensure that each
Participant’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 Participants (or if
deceased, their Beneficiaries) and in accordance with this Section 9.7.
 
(b)   Each Participant (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
Participants (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 Participants’ Accounts;
 
(2)   In the case of a deceased Participant who has more than one Beneficiary,
the Trustee shall vote or otherwise act on Pass-Through Issues in accordance
with the instructions of the Participant’s Beneficiaries in respect of the
deceased Participant’s Allocable Shares in proportion to the Beneficiaries’
respective interests in the Participant’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
Participant (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
 
 
58

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

 
 
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 Participant (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 Participants (or if deceased,
their Beneficiaries) and in accordance with this Section 9.7.
 
(b)   Each Participant (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
Participants (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 Participants’ Accounts.
 
(2)   In the case of a deceased Participant who has more than one Beneficiary,
the Trustee shall respond to such tender or exchange offer in accordance with
the instructions of the Participant’s Beneficiaries in respect of the deceased
Participant’s Allocable Shares in proportion to the Beneficiaries’ respective
interests in the Participant’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
Participant (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
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 Participant (or Beneficiary) such information as will be
distributed to stockholders of the Company in connection with any Pass-Through
Issue qualifying as such under
 
 
59

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

 
 
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 Participants 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
participating in the 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
 
 
60

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

 
 
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 all amounts contributed or transferred to the Plan 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 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, Participants,
Beneficiaries and other persons receiving or entitled to receive
 
 
61

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

 
 
benefits or payments under the Plan. Except to the limited extent permitted by
Sections 5.5.5, 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 of the Employer to contribute
Salary Deferrals, Catch-Up Contributions, Matching Contributions and/or
Nonelective Contributions under the Plan is hereby conditioned upon the
deductibility of such Salary Deferrals, Catch-Up Contributions, Matching
Contributions and/or Nonelective Contributions under Section 404(a) of the Code.
That portion of any Salary Deferral, Catch-Up Contribution, Matching
Contribution or Nonelective Contribution that 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) to avoid a reduction in the balance of any
Participant’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.
 
 
62

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

 
 
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 for the benefit of a Participant or group of
Participants. Such transfer may be in the form of a trust-to-trust transfer from
the trustee of a tax-qualified plan under Section 401(a) of the Code and related
tax-exempt trust under Section 501(a) of the Code that is not subject to the
funding requirements of Section 412 of the Code, or in the form of a rollover by
the Eligible Employee or a direct rollover from: (i) a qualified plan described
in Section 401(a) or 403(a) of the Code (a “Qualified Plan”), excluding
after-tax employee contributions; or (ii) an individual retirement account or
annuity described in Section 408(a)or 408(b) of the Code that is eligible to be
rolled over and would otherwise be includible in gross income, as described in
Section 408(d)(3)(A)(ii), but only if no amount in the account and no part of
the value of the annuity is attributable to any source other than a rollover
contribution from a Qualified Plan, plus any earnings thereon.
 
10.5.1   Rollover Account. Assets transferred to the Trust Fund pursuant to this
Section 10.5 shall be credited to the Participant’s Rollover Account. A
Participant’s interest in his or her Rollover Account shall be fully (100%)
vested and nonforfeitable at all times. The Participant 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 that are to be invested in each of the Investment Funds. In
all other respects Rollover Account investments shall be subject to Section 5.4.
 
 
63

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

 
 
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 contribution as described in Section 10.5 above, then the
balance credited to the Participant’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 Participant, and (c) distributed to
the Participant. Such a nonqualifying rollover shall be deemed never to have
been a part of the Trust Fund.
 
10.5.3   Rollover of Certain Participant Loans Permitted. At the direction of
the Committee (in its discretion), in the case of a Participant who becomes an
Eligible Employee by reason of the acquisition by the Company or its Affiliate
of the assets and liabilities of, or the voting stock of, another corporation or
other business entity, or another type of business transaction effected by the
Company or its Affiliate, assets may be transferred to the Trust Fund pursuant
to Section 10.5 above in a direct rollover from the Qualified Plan maintained by
the Participant’s prior employer (the “Prior Plan”) in the form of loan
promissory notes, provided that the Participant elects to directly rollover his
or her entire Prior Plan account balance that qualifies as an eligible rollover
contribution to this Plan as described in Section 10.5.
 
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, Matching
Contributions and/or Nonelective Contributions for any reason at any time.
Complete
 
 
64

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

 
 
discontinuance of all contributions of Salary Deferrals, Catch-Up Contributions,
Matching Contributions and Nonelective 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 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 and Employer Contributions, the
interests of all affected Participants in their Accounts shall remain fully
(100%) vested and nonforfeitable. In the event the Plan is terminated, the
balance credited to the Matching Accounts, Nonelective Contribution Account and
Rollover Accounts and, to the extent permitted by Section 401(k)(2)(B) of the
Code, the Salary Deferral Accounts, Catch-Up Contribution Accounts and/or
GenenFlex Accounts, of any Participants who are affected by the
 
 
65

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

 
 
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 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 Participants. For purposes of
determining the value of the Accounts, the provisions of Section 416(g)(4)(E) of
the Code and Treas. Reg. § 1.416-1 (Q&A T-1) are incorporated herein by
reference.
 
12.1.2   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” means 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 subsection (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
 
 
66

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

 
 
(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 5.5.2(e) and applied using the definition of “Affiliate” in
Section 1.1 rather than in Section 5.5.2(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 Participant 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 for the Plan Year; provided, however, that if the Key Employee
Percentage (as defined in subsection (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. Matching
Contributions shall be taken into account for purposes of satisfying the minimum
contribution requirements of Section 416(c)(2) of the Code and the Plan.
Matching Contributions that are used to satisfy such minimum contribution
requirements shall be treated as Matching Contributions for purposes of the
actual contribution percentage limitation in Section 4.1.5 and other
requirements of Section 401(m) of the Code.
 
(a)   The determination of who is a key employee will be made in accordance with
Section 416(i)(1) of the Code and the applicable regulations and other guidance
of general applicability thereunder.
 
(b)   “Key Employee Percentage” means the largest percentage computed by
dividing (a) the total amount of all Employer contributions allocated for that
Plan Year to the Accounts of each Participant 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.
 
(c)   The additional contribution required under this Section 12.2.1 shall be
made without regard to the level of the Participant’s Top-Heavy Compensation for
the Plan Year.
 
 
67

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

 
 
(d) Notwithstanding the foregoing, if a Participant 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 Participant under
this Plan.
 
12.2.2   “Top-Heavy Compensation” means, with respect to any Participant for a
Plan Year, his or her Total Compensation (as defined in Section 5.5.2(e) and
applied using the definition of “Affiliate” in Section 1.1 rather than in
Section 5.5.2(a)) and except that, for this purpose, no amount in excess of the
Compensation Limit shall be taken into account for any Plan Year.
 
SECTION 13
 
GENERAL PROVISIONS
 
13.1   Plan Information.  Each Participant 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 Section 401(a)(13)(C) of the Code or other applicable
law, in no event may any Participant, former Participant 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
 
 
68

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

 
 
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 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 Participant’s accrued benefit, if such
other plan were then to terminate, is at least equal to the accrued benefit to
which the Participant would have been entitled if this Plan had been terminated
immediately before such merger, consolidation or transfer. Subject to the
foregoing, the Board of Directors shall have the power (in its discretion) to
direct that this Plan shall participate in any such transaction.
 
 
69

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

 
 
13.7   Military Service.  Notwithstanding any contrary Plan provision, Salary
Deferrals, Catch-Up Contributions and Employer Contributions with respect to the
qualified military service of an Employee on a Leave of Absence pursuant to
Section 1.27(b) will be provided in accordance with Section 414(u) of the Code.
In addition, Participant loan repayments under Section 8.4.2 shall be suspended
as permitted under Section 414(u) of the Code, and interest on Participant loans
shall be adjusted, if necessary, to conform to the requirements of the
Servicemembers Civil Relief Act of 2003 or other applicable law.
 
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.

 
70

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

 
EXECUTION
In Witness Whereof, Genentech, Inc., by its duly authorized officers, has
executed this restated Plan on the date indicated below.
 

 
GENENTECH, INC.
 
By
/s/ DAVID A. EBERSMAN
   
David A. Ebersman
       
Title
Executive Vice President and Chief Financial Office
 
Date
September 1, 2006
             
And by
/s/ DENISE SMITH-HAMS
   
Denise Smith-Hams
       
Title
Vice President, Human Resources
 
Date
September 1, 2006

 
 
71

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

APPENDIX A
PUERTO RICO SUPPLEMENT TO THE
GENENTECH, INC. TAX REDUCTION INVESTMENT PLAN

This Puerto Rico Supplement (the “Supplement”) pertains only to Puerto Rico
Employees who are Participants (“Puerto Rico Participants”) in the Genentech,
Inc. Tax Reduction Investment Plan (the “Plan”). Except as otherwise specified
in this Supplement, (1) the provisions of the Plan shall apply to Puerto Rico
Employees, and (2) all defined terms used in this Supplement shall have the
meaning set forth in the Plan.
 
A.   Purpose. The purpose of this Supplement is to comply with the qualification
requirements of Section 1165(a) of the PR Code. Accordingly, to the extent
inconsistent with the general provisions of the Plan, the following provisions
shall apply to Puerto Rico Employees. In the event of an amendment to the PR
Code or enactment of a successor statute that replaces or renumbers a section of
the PR Code references in this Supplement, all such references shall
automatically be renumbered or replaced, as applicable.
 
B.   Applicable Trust. Plan assets attributable to Puerto Rico Participants
shall be held by the Trustee and invested under the Plan in the Trust Fund. The
Trust Fund, to the extent of assets attributable to Puerto Rico Participants,
shall be exempt from Puerto Rico income taxes in accordance with PR Code Section
1165(a) and exempt from United States income taxes pursuant to Section 501(a) of
the US Code and Section 1022(i) of ERISA.
 
C.   Definitions.
 
1.   Affiliate. “Affiliate” and/or “member of a controlled group” means a
related employer of the Company that belongs to the Company’s “controlled group”
(as that term is defined by PR Code Section 1028).
 
2.   Compensation. “Compensation” for a Puerto Rico Participant, shall:
 
 a.   for purposes of Salary Deferrals, Matching Contributions and Nonelective
Contributions, have the same meaning as set forth in Section 1.11 of the Plan,
except that references to IRS Form W-2 shall mean Puerto Rico Form 499R-2/W-2PR;
and

b.   for all other purposes, have the same meaning as set forth in Section
5.5.2(e) of the Plan, consistent with PR Code Section 1165(h)(9).

3.   Direct Rollover. “Direct Rollover” means, with respect to a Puerto Rico
Participant, a Direct Rollover as defined in Section 7.4.5 of the Plan, but with
the following applicable definitions:
 
 

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

 
 
a.   Distributee: A Distributee includes a Puerto Rico Participant.

b.   Eligible Retirement Plan: An Eligible Retirement Plan refers to an
individual retirement account described in PR Code Section 1169(a), an annuity
plan described in PR Code Section 1165(a), or a qualified trust described in PR
Code Section 1165(a), that accepts the Distributee’s Eligible Rollover
Distribution.

c.   Eligible Rollover Distribution: An Eligible Rollover Distribution includes
any distribution of all of the balance to the credit of the Distributee, except
that an Eligible Rollover Distribution does not include: any distribution that
is one of a series of substantially-equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the Distributee or the
joint lives (or joint life expectancies) of the Distributee and the
Distributee’s designated beneficiary, or for a specified period of 10 years or
more; and the portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized appreciation with
respect to employer securities).

4.   Highly Compensated Puerto Rico Employees. “Highly Compensated Puerto Rico
Employees” for each Plan Year means Puerto Rico Employees who have greater
Compensation than two-thirds of all other Puerto Rico Employees for that Plan
Year (as set forth in Section 1165(e)(3)(E)(iii) of the PR Code).
 
5.   Non-Highly Compensated Puerto Rico Employees. “Non-Highly Compensated
Puerto Rico Employees” for each Plan Year means Puerto Rico Employees who are
not Highly Compensated Puerto Rico Employees.
 
6.   PR Code. “PR Code” means the Puerto Rico Internal Revenue Code of 1994, as
amended. Reference to any Section or Subsection of the PR Code and the
regulations promulgated thereunder includes reference to any comparable or
succeeding provisions of any legislation that amends, supplements, or replaces
such section or subsection.
 
7.   Puerto Rico Employee. “Puerto Rico Employee” means an Employee whose
compensation is subject to Puerto Rico income tax and who is a bona fide
resident of Puerto Rico.
 
8.   Puerto Rico Participant. “Puerto Rico Participant” means a Puerto Rico
Employee who is an Eligible Employee, who has become a Participant in the Plan
pursuant to Section 2.1 and who has not ceased to be a Participant pursuant to
Section 2.7.
 
8. Rollover Contribution. “Rollover Contribution” means, with respect to a
Puerto Rico Participant, a Rollover contribution that fulfills the requirements
of PR Code Section 1165(b)(2).
 
9.   US Code. “US Code” means the United States Internal Revenue Code of 1986,
as amended.
 
 
2

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

 
D.   Effective Date. The provisions of this Supplement are amended effective as
of January 1, 2006.
 
E.   Rollover Contributions. A Puerto Rico Participant may elect to make a
Rollover Contribution into the Plan, subject to the requirements of
Section 1165(b)(2) of the PR Code. In addition, if so directed by the Plan
Administrator, the Trustee will accept a direct transfer from another retirement
plan qualified under Section 1165 of the PR Code on behalf of Puerto Rico
Participants. Such transferred amounts will be treated as Rollover
Contributions.
 
F.   Salary Deferrals.
 
1.   A Puerto Rico Participant may elect to defer a portion of his or her
Compensation and to have the amounts of such Salary Deferrals contributed by his
or her Employer to the Trust Fund. A Puerto Rico Participant may elect to defer
an amount not less than 1% and not more than 10% (the maximum currently
permissible under the PR Code), in whole increments of 1%.
 
2.   In addition to the above, the Actual Deferral Percentage for any Highly
Compensated Puerto Rico Employee for the Plan Year who is eligible to have
Salary Deferrals allocated to his or her account under two or more plans or
arrangements described in PR Code Section 1165(e) that are maintained by the
Employer, shall be determined as if such Salary Deferrals were made under a
single arrangement.
 
G.   Annual Limitation on Salary Deferrals.
 
1.   Notwithstanding Section 3.1 of the Plan, a Puerto Rico Participant’s Salary
Deferrals are limited to the amount specified under the PR Code. As of the
Effective Date, that is the lesser of 10% of his or her Compensation or $8,000.
These limits may be adjusted from time to time in accordance with applicable
Puerto Rico tax laws.
 
2.   Furthermore, and until further notice, no ‘catch-up contributions,’ as
referenced in US Code Section 414(v), are currently allowed under the PR Code.
 
H.   Minimum Coverage Requirements. In applying the statutory minimum coverage
requirements to Puerto Rico Employees, which as to Employees other than Puerto
Rico Employees are governed by US Code Section 410(b), the applicable provisions
of the PR Code shall govern. In accordance with such provisions:

1.   at least 70% or more of Non-Highly Compensated Puerto Rico Employees are
covered or eligible to participate in the Plan;

2.   the Plan shall benefit a percentage of Non-Highly Compensated Puerto Rico
Employees that is at least 70% of the percentage of Highly Compensated Puerto
Rico Employees who benefit under the Plan; or
 
3.   the Plan shall pass the ‘average benefit test’ (as described in PR Code
Section 1165(a)(3)(B)).
 
 
3

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

 
 
I.   Nondiscrimination Testing Rules. Notwithstanding Section 3.1 of the Plan,
which sets out the nondiscrimination provisions of the Plan with respect to
Eligible Employees other than Puerto Rico Employees, the following
nondiscrimination requirements shall apply to Puerto Rico Employees:

1.   ‘Puerto Rico Actual Deferral Percentage Test’ means the Puerto Rico Actual
Deferral Percentage (as defined in subsection b below) of Highly Compensated
Puerto Rico Employees for any Plan Year as compared to the Puerto Rico Actual
Deferral Percentage for Non-Highly Compensated Puerto Rico Employees that must
meet either of the following tests:
 
a.   The Puerto Rico Actual Deferral Percentage of Highly Compensated Puerto
Rico Employees shall not be more than the Puerto Rico Actual Deferral Percentage
of Non-Highly Compensated Puerto Rico Employees multiplied by 1.25; or
 
b.   The Puerto Rico Actual Deferral Percentage of Highly Compensated Puerto
Rico Employees shall not be more than the Puerto Rico Actual Deferral Percentage
of Non-Highly Compensated Puerto Rico Employees multiplied by 2.0 and the excess
of the Puerto Rico Actual Deferral Percentage of Highly Compensated Puerto Rico
Employees over the Actual Deferral Percentage for Non-Highly Compensated Puerto
Rico Employees is not more than 2 percentage points.
 
2.   ‘Puerto Rico Actual Deferral Percentage’ means a percentage calculated
separately for each of the following groups (i) Highly Compensated Puerto Rico
Employees, and (ii) Non-Highly Compensated Puerto Rico Employees.
 
3.   Determination of Puerto Rico Actual Deferral Percentage. For each group
being tested, the Puerto Rico Actual Deferral Percentage shall be the average of
the ‘Employer Contributions’ (as defined in subsection 4 below) actually
deposited in the Trust on behalf of each Puerto Rico Participant for the Plan
Year, divided by his or her Compensation for the Plan Year (calculated
separately for each member of each group).
 
4.   ‘Employer Contributions’ mean Salary Deferrals and Qualified Nonelective
Contributions (defined in subsection 5.b below) made on behalf of a Puerto Rico
Participant with respect to the Plan Year being tested.
 
5.   Corrective Procedures. If the Puerto Rico Actual Deferral Percentage Test
is not met as of the end of the Plan Year, then the Committee may, in its sole
and absolute discretion, take either of the following actions:
 
a.   cause the Salary Deferrals for Highly Compensated Puerto Rico Employees to
be reduced and refunded to Highly Compensated Puerto Rico Employees until the
Puerto Rico Actual Deferral Percentage Test is satisfied. The sequence of such
reductions and refunds shall begin with Highly Compensated Puerto Rico
Employee(s) who deferred the greatest percentage starting with the unmatched
Salary Deferrals, then the second greatest percentage, continuing until the
Puerto Rico Actual Deferral Percentage Test is satisfied. This process shall
continue through the remaining unmatched Salary Deferrals until all such
applicable unmatched
 
 
4

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

 
 
Salary Deferrals have been reduced. Next, the matched Salary Deferrals shall be
reduced until the Puerto Rico Actual Deferral Percentage Test is satisfied. Once
the Puerto Rico Actual Deferral Percentage Test is met, then the Committee shall
direct the Trustee to distribute to each affected Highly Compensated Puerto Rico
Employee the amount of the reduction of his or her Salary Deferrals, and to
treat as forfeitures the proportionate amount of Matching Contributions, if any,
together with the earnings (gains or losses) allocable thereto. The Committee
shall designate such distribution and forfeiture as a distribution and
forfeiture of excess contributions, determine the amount of the allocable
earnings (gains or losses) to be distributed as it deems appropriate in it sole
and absolute discretion, and cause such distributions and forfeitures to occur
prior to the end of the Plan Year following the Plan Year in which the excess
Salary Deferrals and related Matching Contributions were made; or
 
b.   require the Employer to make “Qualified Nonelective Contributions” (as such
amounts are contemplated in Article 1165-8(b)(3) of the Puerto Rico Tax
Regulations) on behalf of each Non-Highly Compensated Puerto Rico Employee for
the Plan Year in which the Puerto Rico Actual Deferral Percentage Test was not
met. If made, a Qualified Nonelective Contribution shall be consistent with the
provisions of Article 1165-8(b)(3) of the Puerto Rico Tax Regulations, and shall
be in such amount as will cause the Puerto Rico Average Deferral Percentage Test
to be met. Any such Qualified Nonelective Contributions will be allocated, in
the sole discretion of the Committee, to the Account of Non-Highly Compensated
Puerto Rico Employees (1) in an equal dollar amount based on the number of
Non-Highly Compensated Puerto Rico Employees eligible to receive an allocation
of the Qualified Nonelective Contributions, or (2) to such Non-Highly
Compensated Puerto Rico Employees and in such amounts as are necessary to
satisfy the Puerto Rico Actual Deferral Percentage Test.
 
J.   Company Contributions. The Plan Administrator, in its discretion, may elect
to have all or a portion of the Company contributions (that meet the
requirements of the applicable Puerto Rico Treasury Regulations) for a calendar
year taken into account in calculating the PR Code Section 1165(a)(3) tests for
that year.
 
K.   In-Service Withdrawals. In accordance with Sections 8.2 and 8.3 of the
Plan, a Puerto Rico Participant 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. The
active membership of a Puerto Rico Participant who makes a withdrawal under
Section 8.2 shall be suspended, in the manner set forth in Section 8.2.3, for
each payroll period that begins during the period starting on the withdrawal
approval date and ending 12 months following that date. Following that
suspension period, the Puerto Rico Participant may again become an Active
Participant and resume his or her Salary Deferrals by again electing to become
an Active Participant in the Plan.
 
 
5

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

 
 
L.   Distributions. Notwithstanding anything in the Plan to the contrary, for
Puerto Rico Participants the Threshold Amount, as defined in Section 7.3.1 of
the Plan, shall mean $1,000. Further, the provisions of Section 7.3.2(b) of the
Plan shall not apply to Puerto Rico Participants.
 
M.   Plan Provisions and Terms. All terms and provisions of the Plan shall apply
to this Supplement, except that where the terms and provisions of the Plan and
this Supplement conflict, the terms and provisions of this Supplement shall
govern.
 
N.   Miscellaneous
 
1.   Information between Plan Administrator and Trustee. The Plan Administrator
(or, as applicable, the Committee) and Trustee will furnish each other such
information relating to the Plan and Trust as may be required under the PR Code
and any regulations issued or forms adopted by the Puerto Rico Treasury
Department thereunder or under ERISA and any regulations issued or forms adopted
by the US Labor Department thereunder.
 
2.   Governing Law. With respect to Puerto Rico Employees, the Plan will be
construed, administered and enforced according to the laws of the Commonwealth
of Puerto Rico to the extent such laws are not inconsistent with and preempted
by ERISA and/or any applicable Section of the US Code. Notwithstanding any
provision of this Supplement, to the extent that any provision described herein
is modified by applicable Puerto Rico law, any such applicable modification
shall be deemed to be incorporated herein by reference.
 
 
6

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