-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GYa5X0B2kL5ZoH11xQHTgokNAgymbeyq7IMWt+zlIyVyZwnQBSfuODgV/gPVVIIj z5BmwKpEKijyKYASMqLidw== 0000310158-97-000008.txt : 19970505 0000310158-97-000008.hdr.sgml : 19970505 ACCESSION NUMBER: 0000310158-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970502 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHERING PLOUGH CORP CENTRAL INDEX KEY: 0000310158 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221918501 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06571 FILM NUMBER: 97594131 BUSINESS ADDRESS: STREET 1: ONE GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940-1000 BUSINESS PHONE: 2018227000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 Commission file number 1-6571 SCHERING-PLOUGH CORPORATION Incorporated in New Jersey 22-1918501 One Giralda Farms (I.R.S. Employer Identification No.) Madison, N.J. 07940-1000 (201) 822-7000 (telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO Common Shares Outstanding as of March 31, 1997: 365,852,143 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (Dollars in millions, except per share figures)
Three Months Ended March 31 1997 1996 Sales . . . . . . . . . . . . . $1,568.1 $1,382.7 Costs and expenses: Cost of sales. . . . . . . . . 289.3 262.7 Selling, general and administrative. . . . . . 593.5 503.3 Research and development . . . 179.2 162.9 Other, net . . . . . . . . . . 9.0 21.2 1,071.0 950.1 Income before income taxes. . . 497.1 432.6 Income taxes. . . . . . . . . . 121.8 106.0 Net Income. . . . . . . . . . . 375.3 326.6 Earnings per common share . . . $ 1.03 $ .89 Dividends per common share. . . $ .33 $ .29 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in millions, except per share figures)
March 31, December 31, 1997 1996 Assets Cash and cash equivalents . . . . . . . . $ 757.1 $ 535.1 Accounts receivable, net. . . . . . . . . 755.7 542.0 Inventories . . . . . . . . . . . . . . . 575.9 594.1 Prepaid expenses, deferred income taxes and other current assets . . . . . 723.4 693.4 Total current assets. . . . . . . . . 2,812.1 2,364.6 Property, plant and equipment . . . . . . 3,374.8 3,362.5 Less accumulated depreciation . . . . . . 1,125.6 1,116.2 Property, net . . . . . . . . . . . . 2,249.2 2,246.3 Other assets. . . . . . . . . . . . . . . 795.0 787.2 $ 5,856.3 $ 5,398.1 Liabilities and Shareholders' Equity Accounts payable. . . . . . . . . . . . . $ 548.7 $ 560.6 Short-term borrowings and current portion of long-term debt. . . . . . . . 1,035.5 855.1 Other accrued liabilities . . . . . . . . 1,215.2 1,183.4 Total current liabilities . . . . . . 2,799.4 2,599.1 Long-term debt. . . . . . . . . . . . . . 46.0 46.4 Other long-term liabilities . . . . . . . 714.4 692.7 Shareholders' Equity: Preferred shares - $1 par value each; issued - none. . . . . . . . . . . - - Common shares - $1 par value each; shares issued: 1997 - 507,376,729 1996 - 507,368,360 . . . . . . . . . . . 507.4 507.4 Paid-in capital . . . . . . . . . . . . . 192.7 172.3 Retained earnings . . . . . . . . . . . . 5,335.4 5,080.6 Foreign currency translation adjustment and other . . . . . . . . . . (177.7) (140.6) Total . . . . . . . . . . . . . . . . 5,857.8 5,619.7 Less treasury shares, at cost - 1997, 141,524,586 shares; 1996, 142,001,799 shares . . . . . . . . 3,561.3 3,559.8 Total shareholders' equity. . . . . . 2,296.5 2,059.9 $ 5,856.3 $ 5,398.1 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31 (UNAUDITED) (Dollars in millions)
1997 1996 Operating Activities: Net Income. . . . . . . . . . . . . . . . $ 375.3 $ 326.6 Depreciation and amortization . . . . . . 46.6 42.3 Accounts receivable . . . . . . . . . . . (238.4) (149.9) Inventories . . . . . . . . . . . . . . . (4.8) (27.9) Prepaid expenses and other assets . . . . (63.7) (54.2) Accounts payable and other liabilities . 74.0 146.0 Net cash provided by operating activities 189.0 282.9 Investing Activities: Capital expenditures. . . . . . . . . . . (60.1) (48.9) Proceeds from sales of investments. . . . 28.5 .4 Purchases of investments. . . . . . . . . (31.3) (7.4) Other, net. . . . . . . . . . . . . . . . (3.0) 2.4 Net cash used for investing activities . . . . . . . . . . . . . . . (65.9) (53.5) Financing Activities: Short-term borrowings, net. . . . . . . . 205.8 (106.5) Common shares repurchased . . . . . . . . (2.7) - Dividends paid to common shareholders . . (120.5) (105.9) Other equity transactions, net. . . . . . 17.7 18.5 Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . 100.3 (193.9) Effect of exchange rates on cash and cash equivalents. . . . . . . . . . . . . (1.4) (.1) Net increase in cash and cash equivalents . 222.0 35.4 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . 535.1 321.4 Cash and cash equivalents, end of period . $ 757.1 $ 356.8 See notes to consolidated financial statements.
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in millions, except per share figures) Basis of Presentation The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The statements should be read in conjunction with the accounting policies and notes to consolidated financial statements included in the Company's 1996 Annual Report on Form 10-K. In the opinion of management, the financial statements reflect all adjustments necessary for a fair statement of the operations for the interim periods presented. Earnings Per Common Share Earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Shares issuable through the exercise of stock options and warrants and under deferred delivery agreements are not considered in the calculation, as they do not have a material effect on the determination of earnings per common share. The weighted-average number of shares used in the computation of earnings per common share for the three months ended March 31, 1997 and 1996 were 365,644,316 and 365,708,883, respectively. On April 22, 1997, the Board of Directors of the Company authorized a 2-for-1 stock split, and voted to increase the number of authorized common shares from 600 million to 1.2 billion. Distribution of the split shares will be made on June 3, 1997, to shareholders of record at the close of business on May 2, 1997. The number of shares and the per share amounts included in these consolidated financial statements are presented before giving effect to the stock split. Proforma earnings per common share on a post-split basis for the three months ended March 31, 1997 and 1996 would be $.51 and $.45, respectively. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". The new standard revises certain methodology and disclosure requirements for reporting earnings per common share. The new standard will require the reporting of two earnings per share figures on the face of income statements: basic earnings per share and diluted earnings per share. SFAS No. 128 must be adopted in the fourth quarter of 1997 with earlier adoption prohibited. Basic earnings per share, for the Company, is expected to be the same as reported earnings per share. Diluted earnings per share is expected to be substantially the same as fully diluted earnings per share reported in an Exhibit to the Company's quarterly Form 10-Q's and annual Form 10-K. Inventories Inventories consisted of: March 31, December 31, 1997 1996 Finished products . . . . . . . $ 249.1 $ 296.7 Goods in process. . . . . . . . 193.5 173.0 Raw materials and supplies. . . 133.3 124.4 Total inventories . . . . . . $ 575.9 $ 594.1 Sales Segment sales for the three months ended March 31, 1997 and 1996 were as follows: 1997 1996 Pharmaceutical products . . . . $1,371.3 $1,197.9 Health care products. . . . . . 196.8 184.8 Consolidated sales. . . . . . $1,568.1 $1,382.7 Legal and Environmental Matters The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including environmental matters and product liability cases. The recorded liabilities for these matters at March 31, 1997 were not material. Management believes that, except for the matters discussed in the following paragraph, it is remote that any material liability in excess of the amounts accrued will be incurred. The Company is a defendant in more than 160 antitrust actions commenced in state and federal courts by independent retail pharmacies, chain retail pharmacies and consumers. The plaintiffs allege price discrimination and/or conspiracy between the Company and other defendants to restrain trade by jointly refusing to sell prescription drugs at discounted prices to the plaintiffs. One of the federal cases is a class action on behalf of approximately two-thirds of all retail pharmacies in the United States alleging a price-fixing conspiracy. The Company has agreed to settle the federal class action for a total of $22.1 payable over three years. The settlement provides, among other things, that the Company shall not refuse to grant discounts on brand-name prescription drugs to a retailer based solely on its status as a retailer and that, to the extent a retailer can demonstrate its ability to affect market share of a Company brand name prescription drug in the same manner as a managed care organization with which the retailer competes, it will be entitled to negotiate similar incentives subject to the rights, obligations, exemptions and defenses of the Robinson- Patman Act and other laws and regulations. The District Court approved the settlement of the federal class action on June 21, 1996. In early July, the Seventh Circuit Court of Appeals agreed to review before trial the District Court's denial of defendants' summary judgment motion seeking dismissal of all claims by indirect purchasers of pharmaceutical products in all remaining cases before the District Court. In addition, the Seventh Circuit Court of Appeals will hear an appeal by the plaintiffs from the grant of summary judgment to the wholesaler defendants and an appeal by certain plaintiffs from the approval of the settlement by the District Court. In April 1997, certain of the plaintiffs in the federal class action commenced another purported class action in Federal District Court in Illinois against the Company and the other defendants who settled the previous federal class action. The complaint alleges that the defendants conspired not to implement the settlement commitments following the settlement discussed above. The complaint seeks solely injunctive relief and the plaintiffs have moved to have the District Court set a date for a hearing on a request for a preliminary injunction. Four of the state antitrust cases have been certified as class actions. Two are class actions on behalf of certain retail pharmacies in California and Wisconsin, and the other two are class actions in California and the District of Columbia, on behalf of certain consumers of prescription medicine. Plaintiffs seek treble damages in an unspecified amount and an injunction against the allegedly unlawful conduct. The Company believes that all the antitrust actions are without merit and is defending itself vigorously against all such claims. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - three months ended March 31, 1997 compared with the corresponding period in 1996. Sales Consolidated sales for the first quarter increased $185.4 million or 13 percent compared with the same period in 1996. Excluding the effect of foreign currency exchange rate fluctuations, consolidated sales grew 16 percent. This performance reflects worldwide CLARITIN brand sales of $353 million in the first quarter, compared with $237 million in 1996. Domestic prescription pharmaceutical sales advanced 21 percent for the first three months of 1997. Sales of allergy/respiratory products increased 24 percent, due to continued strong growth of the CLARITIN brand of nonsedating antihistamines and increases for VANCENASE allergy products. The domestic allergy/respiratory sales gain reflects a 44 percent decline in sales of the PROVENTIL (albuterol) line of asthma products, due to increased generic competition. Sales of the PROVENTIL line totaled $65 million for the quarter, with metered- dose inhalers contributing over 50 percent. The PROVENTIL line has been subject to generic competition, and in December 1995 generic metered-dose inhalers entered the market. In response, the Company's generic pharmaceutical marketing subsidiary, Warrick Pharmaceuticals, launched its generic inhaler in December 1995. In December 1996, the Company further enhanced its position in the albuterol asthma market by launching PROVENTIL HFA, a new metered-dose inhaler that uses an advanced delivery system and a propellant free of ozone-damaging chlorofluorocarbons. Competition from generic metered-dose inhalers will, however, continue to negatively affect future sales and profitability of the PROVENTIL (albuterol) line of asthma products. U.S. sales of cardiovascular products grew 16 percent for the quarter, reflecting market share gains for IMDUR, a once-daily oral nitrate for angina. Domestic sales of anti-infective and anticancer products declined 2 percent compared with 1996, primarily due to lower sales of EULEXIN, a prostate cancer therapy, reflecting branded competition. This decline in anti-infective and anticancer products was moderated by increased utilization of INTRON A, the Company's alpha interferon anticancer and antiviral agent, for hepatitis and malignant melanoma. Sales of dermatological products declined 1 percent for the quarter. International ethical pharmaceutical product sales increased 6 percent for the first three months of 1997. Excluding the impact of foreign currency exchange rate fluctuations, sales would have risen 12 percent. Sales of allergy/respiratory products advanced 23 percent for the quarter, led by CLARITIN in most world markets and other allergy products in Japan. International anti-infective and anticancer product sales gained 11 percent in the quarter, primarily due to gains for INTRON A. Sales of dermatological products grew 4 percent, benefiting from higher sales of ELOCON, a mid-potency topical corticosteriod. Cardiovascular product sales grew 3 percent. Worldwide sales of animal health products rose 33 percent in the first quarter, excluding foreign exchange rate fluctuations. The sales increase was primarily in the U.S. where NUFLOR, a broad- spectrum, multi-species antibiotic, was recently launched. Sales of health care products increased 6 percent in the first quarter. Footcare product sales rose 20 percent, primarily due to the recent introductions of DYNA STEP and gel insoles, while Suncare product sales increased 7 percent. Over-the-counter product sales declined 8 percent due to the sales decline of the CORRECTOL line of laxatives. Income before income taxes increased 15 percent for the quarter as compared with 1996, and represented 31.7 percent of sales versus 31.3 percent last year. Cost of sales as a percentage of sales declined to 18.4 percent from 19.0 in 1996, principally the result of a favorable sales mix of higher margin pharmaceutical products. Selling, general and administrative expenses represented 37.8 percent of sales in the first quarter compared with 36.4 percent last year. The increase in ratio was the result of increased selling and promotional related spending, primarily for the CLARITIN brand. Research and development spending rose 10 percent in the quarter, representing 11.4 percent of sales compared with 11.8 percent a year ago. The higher spending reflects the Company's funding of both internal research efforts and research collaborations with various partners to develop a steady flow of innovative products and line extensions. The effective tax rate was 24.5 percent in the first three months of both 1997 and 1996. Earnings per common share advanced 16 percent in the first quarter to $1.03 from $.89 in 1996. Excluding the impact of fluctuations in foreign currency exchange rates, earnings per common share would have risen approximately 18 percent in the quarter. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". For additional information, see "Earnings Per Common Share" in the Notes to Consolidated Financial Statements. Additional Factors Influencing Operations In the United States, many of the Company's pharmaceutical products are subject to increasingly competitive pricing as managed care groups, institutions, government agencies and other buying groups seek price discounts. In most international markets, the Company operates in an environment of government- mandated cost containment programs. Several governments have placed restrictions on physician prescription levels and patient reimbursements, emphasized greater use of generic drugs and enacted across-the-board price cuts as methods of cost control. Since the Company is unable to predict the final form and timing of any future domestic and international governmental or other health care initiatives, their effect on operations and cash flows cannot be reasonably estimated. The market for pharmaceutical products is competitive. The Company's operations may be affected by technological advances of competitors, patents granted to competitors, new products of competitors, and generic competition as the Company's products mature. In addition, patent positions can be highly uncertain and an adverse result in a patent dispute can preclude commercialization of products or negatively affect sales of existing products. The effect on operations of competitive factors and patent disputes cannot be predicted. Uncertainties inherent in government regulatory approval processes, including among other things delays in approval of new products, may also affect the Company's operations. The effect on operations of regulatory approval processes cannot be predicted. Liquidity and financial resources - three months ended March 31, 1997 Cash generated from operations continues to be the Company's major source of funds to finance working capital, additions to property, shareholder dividends and common share repurchases. Cash and cash equivalents increased by $222.0 million in the first three months of 1997, primarily due to cash provided by operating activities of $189.0 million and the net increase in short-term borrowings of $205.8 million which exceeded the funding required for shareholder dividends of $120.5 million and for capital expenditures of $60.1 million. In September 1996, the Board of Directors authorized the repurchase of $500 million of common shares. As of March 31, 1997 this program was approximately 74 percent complete. In April 1997, the Board of Directors increased the quarterly dividend 15 percent to $.38 per share from $.33, and authorized a 2-for-1 stock split of the Company's common shares. The distribution of the split shares will be made on June 3, 1997, to the shareholders of record at the close of business on May 2, 1997. The Company's liquidity and financial resources continue to be sufficient to meet its operating needs. Cautionary Statements for Forward Looking Information Management's discussion and analysis set forth above contains certain forward looking statements, including statements regarding the Company's financial position and results of operations. These forward looking statements are based on current expectations. Certain factors have been identified by the Company in Exhibit 99.1 of the Company's December 31, 1996, Form 10-K filed with the Securities and Exchange Commission, which could cause the Company's actual results to differ materially from expected and historical results. Exhibit 99.1 from the Form 10-K is incorporated by reference herein. PART II OTHER INFORMATION Item 1. Legal Proceedings The fourth paragraph of Item 3, Legal Proceedings, of Part I of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, relating to certain antitrust actions, is incorporated herein by reference. In April 1997, certain of the plaintiffs in the federal class action commenced another purported class action in Federal District Court in Illinois against the Company and the other defendants who settled the previous federal class action. The complaint alleges that the defendants conspired not to implement the settlement commitments following the settlement discussed in the fourth paragraph of Item 3. The complaint seeks solely injunctive relief and the plaintiffs have moved to have the District Court set a date for a hearing on a request for a preliminary injunction. The Company believes the action is without merit and is defending itself vigorously. Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on April 22, 1997. (b) Not applicable. (c) The designation by the Board of Directors of Deloitte & Touche LLP to audit the books and accounts of the Corporation for the year ended December 31, 1997 was ratified by a vote of shares as follows: FOR AGAINST ABSTAIN 324,682,098 527,777 736,936 All of the nominees for director were elected for a three year term by a vote of shares, as follows: FOR WITHHELD David C. Garfield 322,376,044 3,570,767 Robert P. Luciano 322,494,229 3,452,582 H. Barclay Morley 322,412,009 3,534,802 Carl E. Mundy, Jr. 321,457,359 4,489,452 Patricia F. Russo 321,677,997 4,268,814 The 1997 Stock Incentive Plan, adopted by the Board of Directors of the Corporation and as presented to the Shareholders on April 22, 1997, was adopted by a vote of shares as follows: FOR AGAINST ABSTAIN 306,065,396 16,774,132 3,107,283 (d) None Item 6. Exhibits and Reports on Form 8-K a) Exhibits - The following Exhibits are filed with this document: Exhibit Number Description 10(a) - Amended and Restated SERP Rabbi Trust 10(b) - Amendment to the Executive Incentive Plan Trust Agreement 11 - Computation of Earnings Per Common Share 27 - Financial Data Schedule b) Reports on Form 8-K: No report has been filed during the three months ended March 31, 1997. SIGNATURE(S) Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Schering-Plough Corporation (Registrant) Date May 2, 1997 /s/Thomas H. Kelly Thomas H. Kelly Vice President and Controller EX-10 2 Exhibit 10(a) AMENDED AND RESTATED SERP RABBI TRUST THIS AGREEMENT, made as of the 22nd day of January, 1997 (the "Trust Agreement"), among SCHERING-PLOUGH CORPORATION, a corporation organized and existing under the laws of New Jersey (the "Company"), THE NORTHERN TRUST COMPANY, having its principal offices in Chicago, Illinois (the "Trustee") and BUCK CONSULTANTS, INC. having its principal offices in New York, New York (the "Trustee's Agent"). W I T N E S S E T H WHEREAS, the Trust Agreement was originally entered into as of March 31, 1987 by and among the Company, The Chase Manhattan Bank (National Association) as trustee, and The Wyatt Company as trustee's agent (the "Original Trust Agreement"); WHEREAS, the Original Trust Agreement was amended and restated through October 1, 1993 and further amended as of October 1, 1995; WHEREAS, the Company wishes to amend and restate the Original Trust Agreement, as so amended and restated, to create an additional fund to satisfy the Company's deferred compensation liability under its Directors Deferred Stock Equivalency Program; WHEREAS, the Company has incurred and expects to continue to incur certain unfunded retirement income and deferred compensation liability to or with respect to certain key management employees and directors pursuant to the terms of the following plans and employment agreements of the Company: (i) the Supplemental Executive Retirement Plan; (ii) the Retirement Benefits Equalization Plan; (iii) the Pension Plan for Directors; (iv) the Employment Agreement with Hugh A. D'Andrade dated as of June 28, 1994, as amended by the First Amendment thereto dated as of March 1, 1995, the Second Amendment dated as of December 11, 1995, and as subsequently amended from time to time; (v) the Employment Agreement with Richard J. Kogan dated as of September 26, 1989, as amended by the First Amendment thereto dated as of June 28, 1994, the Second Amendment thereto dated as of March 1, 1995, and the Third Amendment thereto dated as of October 24, 1995, and as subsequently amended from time to time; (vi) the Employment Agreement with Robert P. Luciano dated as of September 26, 1989, as amended by the First Amendment thereto dated as of June 28, 1994, the Second Amendment thereto dated as of March 1, 1995, and as subsequently amended from time to time; (vii) the Deferred Compensation Plan (the plans and employment agreements listed in clauses (i) through (vii) being hereinafter called the "A Plans"); (viii) the Directors Deferred Stock Equivalency Program (the plan listed in clause (viii) being hereinafter sometimes referred to as the "S Plan"); and (ix) such other plans and employment agreements for the Corporation as the Executive Compensation and Organization Committee may designate from time to time as A Plans or S Plans (all such plans and employment agreements being hereinafter individually called a "Plan" or collectively the "Plans"); WHEREAS, the Company desires to provide additional assurance to some or all such key management employees and directors (the "Participants") and their surviving spouses, beneficiaries or estates under the Plans (collectively, the "Beneficiaries") that their unfunded retirement benefit and deferred compensation rights under the Plans will in the future be met or substantially met by application of the procedures set forth herein; WHEREAS, the Company wishes to establish separate accounts (hereinafter the "Accounts") with respect to some or all of the Participants in the Plans in order to provide a source of payments as such are required under the terms of such Plans; WHEREAS, amounts transferred to each separate Account, as determined by the Company from time to time in its sole discretion, and the earnings thereon shall be used by the Trustee to satisfy the liabilities of the Company under the Plan or Plans with respect to the Participant for whom such separate Account has been established and such utilization shall be in accordance with the procedures set forth herein; WHEREAS, upon satisfaction of all liabilities of the Company under the Plan or Plans with respect to a Participant and Beneficiary in respect of whom a separate Account has been established, the balance, if any, remaining in such Account shall be allocated to the Accounts of other Participants and Beneficiaries for whom such Accounts have been established in accordance with the procedures set forth herein; and WHEREAS, upon satisfaction of all liabilities of the Company under the Plans with respect to all Participants in respect of whom separate Accounts have been established, the balance, if any, remaining in such Accounts shall revert to the Company, except that all amounts in all such Accounts shall at all times be subject under this Agreement to the claims of the Company's creditors as hereinafter provided; NOW, THEREFORE, in consideration of the premises and mutual and independent promises herein, the parties hereto covenant and agree as follows: ARTICLE I 1.1 The Company hereby establishes with the Trustee a Trust consisting of such sums of money and such property acceptable to the Trustee as shall from time to time be paid or delivered to the Trustee and the earnings and profits thereon. All such money and property, all investments made therewith and proceeds thereof, less the payments or other distributions which, at the time of reference, shall have been made by the Trustee, as authorized herein, are referred to herein as the "Trust Property" and shall be held by the Trustee collectively in two separate funds (the "SERP A Fund" and "SERP S Fund"; each individually a "Fund" and collectively, the "Funds"), IN TRUST, in accordance with the provisions of this Agreement. The Trust Property relating to each Fund shall be held by the Trustee without distinction or separation by virtue of Plan Participants' interests in their Accounts maintained by the Trustee's Agent as hereinafter provided. The SERP A Fund shall be utilized to fund the retirement income and deferred compensation liability to or with respect to certain key management employees and directors pursuant to the terms of the A Plans. The SERP S Fund shall be utilized to fund the deferred compensation liability to directors pursuant to the terms of the S Plan and any other deferred compensation liability pursuant to the terms of any other S Plans. 1.2 The Trustee shall hold, manage, invest and otherwise administer each Fund pursuant to the terms of this Agreement. The Trustee shall be responsible only for con tributions actually received by it hereunder. The amount of each contribution by the Company to each Fund shall be determined in the sole discretion of the Company and the Trustee shall have no duty or responsibility with respect thereto. 1.3 The Trustee's Agent shall maintain in an equitable manner a separate Account record for each Participant under each Plan in which it shall keep a separate record of the share of such Participant under such Plan in the appropriate Fund. The Company shall certify to the Trustee's Agent at the time of each contribution to a Fund the amount of such contribution being made in respect of each Participant under each Plan and each such contribution shall be credited to the Participant's Account as of the last business day of the calendar quarter in which such contribution is made. Each Fund shall be revalued by the Trustee as of the last business day of each calendar quarter ("Valuation Date") at current market values, as determined by the Trustee, and the Trustee shall certify the value thereof to the Trustee's Agent. The Trustee's Agent shall apportion each Fund as revalued as of such Valuation Date less any contributions made by the Company during the preceding quarter among the Accounts of Participants in proportion to their respective interests in each Fund on the immediately preceding Valuation Date, except that for purposes of such apportionment the Accounts of Participants as of the Valuation Date shall not include any contributions or forfeitures credited to their Accounts as of such Valuation Date and any payments to the Participants made after the immediately preceding Valuation Date shall be charged to their Accounts as of the immediately preceding Valuation Date. Where a Participant's Account within a Fund may be applied to provide benefits to or in respect of such Participant under more than one Plan, the separate Account record for such Participant under each such Plan shall be maintained by the Trustee's Agent in such manner as the Trustee's Agent, in its sole discretion, considers to be appropriate. ARTICLE II 2.1 Notwithstanding any provision in this Agreement to the contrary, if at any time while the Trust is still in existence the Company becomes insolvent (as defined herein), the Trustee shall upon written notice thereof suspend the payment of all benefits from each Fund and shall thereafter hold each Fund in suspense for the benefit of the Company's creditors until it receives a court order directing the disposition of each Fund; provided, however, the Trustee may deduct or continue to deduct its fees and expenses and other expenses of the Trust, including taxes, pending the receipt of such court order. The Company shall be considered to be insolvent if (a) it is unable to pay its debts as they fall due or (b) bankruptcy or insolvency proceedings are initiated by its creditors or the Company or any third party under the Bankruptcy Act of the United States or the bankruptcy laws of any State alleging that the Company is insolvent or bankrupt. By its approval and execution of this Agreement, the Company represents and agrees that its Board of Directors and Chief Executive Officer, as from time to time acting, shall have the fiduciary duty and responsibility on behalf of the Company's creditors to give to the Trustee prompt written notice of any event of the Company's insolvency and the Trustee shall be entitled to rely thereon to the exclusion of all directions or claims to pay benefits thereafter made. If the Trust Department of the Trustee receives written allegations of an event of insolvency from a third party, the Trustee shall request that the Company's independent auditors determine whether the Company is insolvent; the Trustee may conclusively rely on written certification of solvency or insolvency received from such auditors. If, after an event of insolvency, the Company later becomes solvent without the entry of a court order concerning the disposition of the Trust Property or any bankruptcy or insolvency proceedings referred to in (b) above are dismissed, the Company shall by written notice so inform the Trustee and the Trustee shall thereupon resume all its duties and responsibilities under this Agreement without regard for this Section 2.1 until and unless the Company again becomes insolvent as such term is defined herein. 2.2 The Company represents and agrees that the Trust established under this Agreement does not fund and is not intended to fund the Plans or any other employee benefit plan or program of the Company. Such Trust is and is intended to be a depository arrangement with the Trustee for the setting aside of cash and other assets of the Company as and when it so determines in its sole discretion for the meeting of part or all of its future retirement obligations and deferred compensation liability to or with respect to some or all of the Participants and their Beneficiaries under the Plans. Contributions by the Company to the Trust shall be in amounts determined solely by the Company and shall be in respect of only those Plan Participants selected by the Company from time to time as it determines. The purpose of this Trust is to provide funds from which retirement benefits and deferred compensation may be payable under the Plans and as to which Plan Participants with Accounts hereunder and their Beneficiaries may, by exercising the procedures set forth herein, have access to some or all of their benefits as such become due without having the payment of such benefits subject to the administrative control of the Company unless the Company is adjudicated to be bankrupt or insolvent. The Company further represents that each of the Supplemental Executive Retirement Plan and the Deferred Compensation Plan is a deferred compensation plan for a select group of management and highly compensated employees and as such is exempt from the application of the Employee Retirement Income Security Act of 1974 ("ERISA") except for the disclosure requirements applicable to such Plan for which the Company bears full responsibility as to compliance; that the Retirement Benefits Equalization Plan is an excess benefit plan and as such is exempt from all ERISA provisions; and that each of the Directors Pension Plan, Directors Deferred Stock Equivalency Program and the employment agreements with each of Messrs. D'Andrade, Kogan and Luciano is not an employee benefit plan and is not subject to ERISA. The Company further represents that the Plans are not qualified under Section 401 of the United States Internal Revenue Code and therefore are not subject to any of the Code requirements applicable to tax-qualified plans. ARTICLE III 3.1 By their acceptance of this Trust the Trustee hereby agrees to the designation by the Company of Buck Consultants, Inc. as the Trustee's Agent and Buck Consultants, Inc. agrees to act as such Trustee's Agent under this Trust Agreement. It is herein recognized that said Trustee's Agent is also acting as the independent consulting actuary of the Company with respect to the Plans and that the Trustee shall have no responsibility hereunder for the continued retention of such Trustee's Agent and/or any responsibility assigned to said Agent or its performance thereof. In the event the Company replaces or no longer uses said firm as its independent consulting actuary, the Trustee in its sole discretion may, but need not, designate a new Trustee's Agent or may continue to use the same Trustee's Agent. Buck Consultants, Inc. and any successor Trustee's Agent appointed hereunder may resign at any time by delivering sixty (60) days advance written notice to the Company and to the Trustee, in which event the Trustee shall designate a new Trustee's Agent; provided, however, any Trustee's Agent appointed by the Trustee shall be independent of the Company. The Company shall pay or reimburse the Trustee for all fees and expenses of the Trustee's Agent and shall indemnify and hold the Trustee harmless for any liability, loss, suit or expense (including attorneys' fees) in connection with or arising out of actions or omissions of said Trustee's Agent (including any direction to or failure to direct the Trustee) and shall indemnify and hold the Trustee's Agent harmless for any actions or omissions of the Trustee. 3.2 Except for the records dealing solely with the Funds and their respective investments, which shall be maintained by the Trustee, the Trustee's Agent shall maintain all the Plan Participant records contemplated by this Agreement, including the maintenance of the separate Accounts of each Participant under this Agreement and the maintenance of the data necessary to determine, from time to time, the benefits of Participants under the Plans. The Trustee's Agent shall also prepare and distribute Participants' statements when requested by the Company or a Participant and shall be responsible for information with respect to payments to Participants and their Beneficiaries and shall perform such other duties and responsibilities as the Trustee determines is necessary or advisable to achieve the objectives of this Agreement and the Trustee shall have no responsibility therefor and shall be entitled to rely fully upon the information provided by the Trustee's Agent. 3.3 Upon the establishment of this Trust or as soon thereafter as practicable, the Company shall furnish to the Trustee's Agent all the information necessary to determine the benefits payable to or with respect to each Participant in the Plans, including any benefits payable after the Participant's death and the recipient of same. The Company shall regularly, at least annually, furnish revised up-dated information to the Trustee's Agent. Based on the foregoing information the Trustee's Agent shall prepare an annual benefits statement in respect of each Participant and shall furnish a copy of same to the Participant or his Beneficiary and to the Company. In the event the Company refuses or neglects to provide up-dated Participant information, as contemplated herein, the Trustee's Agent shall be entitled to rely upon the most recent information furnished to it by the Company. 3.4 Upon the direction of the Company or upon the proper application of a Participant or Beneficiary of a deceased Participant, the Trustee's Agent shall determine a Participant's or Beneficiary's eligibility for benefits and the amount thereof and, if benefits are payable, shall prepare a certification of same to the Trustee. Such certification shall include the amount of such benefits, the manner of payment and the name, address and social security number of the recipient and shall be updated annually and upon receipt by the Trustee's Agent of a notice of a benefit change under the Plan from the Company. Upon the receipt of such certified statement and appropriate federal, state and local tax withholding information, the Trustee shall commence cash distributions from the relevant Fund or Funds in accordance therewith to the person or persons so indicated and to the Company with respect to taxes required to be withheld and the Trustee's Agent shall charge the Participant's Account or Accounts established hereunder. The Trustee's Agent shall also furnish a copy of such certification to the Participant or to the Beneficiary of a deceased Participant. The Trustee's Agent shall also give written notice to the Trustee that a Participant's Account balance has been reduced to a certain minimum agreed to by the Trustee and the Trustee's Agent under procedures which will enable the Trustee to cease payment when such Account balance has been reduced to zero. The Company shall have full responsibility for the payment of all withholding taxes to the appropriate taxing authority and shall furnish each Participant or Beneficiary with the appropriate tax information form evidencing such payment and the amount thereof. 3.5 All benefits payable from either Fund to a Participant or his Beneficiary under a Plan or Plans shall be charged solely against the relevant Account of such Participant. When the Trustee's Agent determines that all Company liabilities under all Plans to a Participant and Beneficiary have been satisfied, the Trustee's Agent shall prepare a certification to the Trustee and to the Company showing the balance, if any, remaining in such Participant's Account or Accounts (the "Balance"). In making such determination the Trustee's Agent may rely upon written certification from the Company that the Participant or his Beneficiary has died or that such Company liabilities have been satisfied by cash payments made by the Company or otherwise; provided, however, the Trustee's Agent may require additional documentation of any such Company confirmation if the Trustee's Agent considers such to be appropriate under the circumstances. Any Balance remaining in such Participant's Account or Accounts shall be reallocated by the Trustee's Agent to the Accounts of the other Participants and Beneficiaries in the manner set forth below; provided, however, in no event shall any Balance be allocated to the Account of any Participant or Beneficiary established after the Company delivers a written notice to the Trustee and the Trustee's Agent that Accounts established after the date of such notice shall not be entitled to share in any reallocations under this Section 3.5. Any such notice shall be irrevocable by the Company notwithstanding any amendments to this Trust Agreement made thereafter and any attempt to revoke such notice shall be disregarded by the Trustee and the Trustee's Agent. Each Balance determined in accordance with the preceding paragraph shall be maintained as a separate Participant's Account subject to quarterly revaluation pursuant to Section 1.3 until the following or coinciding December 31st, as of which date the Trustee's Agent shall aggregate and revalue all such Balances and reallocate such amount ("Total Balances") to the eligible Accounts of the remaining Participants and Beneficiaries in both Funds, including Accounts which may have previously been reduced to a zero balance. Such reallocation shall be made: a) by determining the amount by which the value of each Participant's and Beneficiary's accrued benefits under the Plan or Plans exceed the value of his Account or Accounts as of such December 31st; b) by adding all the amounts determined under (a); and c) by allocating to each Participant's and Beneficiary's Account or Accounts the amount of the Total Balances (not in excess of the amount computed under (b)) in the ratio of the amount computed for each Account under (a) to the total amount computed under (b). If the amount of the Total Balances exceeds the amount computed under (b), the excess shall be maintained as a separate Account until the following December 31st or until any earlier termination of the Trust, at which date the value of such Account shall be treated as an additional Balance for purposes of this Section 3.5. For defined benefit type plans, the value of each Participant's and Beneficiary's accrued benefits under the Plan or Plans shall be calculated using the procedures and actuarial assumptions used in terminating a single employer plan under 29 CFR Part 4044, Subpart B of the Pension Benefit Guaranty Corporation regulations. For defined contribution type plans, the value of each Participant's and Beneficiary's accrued benefits shall be determined in accordance with the relevant Plan or Plans. Upon the satisfaction of all liabilities of the Company under the Plans to Participants and Beneficiaries for whom Accounts have been established hereunder, the Trustee's Agent shall prepare a certification to the Trustee and to the Company and the Trustee shall thereupon hold or distribute the Trust Property in accordance with the written instructions of the Company. At no time except to the extent used to satisfy claims of the Company's creditors in the event of the Company's insolvency, as defined in Section 2.1, or the satisfaction of all liabilities of the Company under the Plans in respect of Participants and Beneficiaries having Accounts hereunder shall any part of the Trust Property revert to the Company. The Trustee and the Trustee's Agent shall have no responsibility for determining whether any Participant or Beneficiary has died and shall be entitled to rely upon information furnished by the Company. 3.6 Nothing provided in this Agreement shall relieve the Company of its liabilities to pay the retirement benefits and deferred compensation liabilities provided under the Plans except to the extent such liabilities are met by application of Fund assets. It is the intent of the Company to have each Account established hereunder treated as a separate trust designed to satisfy in whole or in part the Company's legal liability under the Plans in respect of the Participant for whom such Account has been established and to have the balance of each Fund revert to the Company only after its legal liability under the relevant Plan or Plans has been met. The Company, therefore, agrees that all income, deductions and credits of each such Account belong to it as owner for income tax purposes and will be included on the Company's income tax returns. ARTICLE IV 4.1 The Company shall provide the Trustee's Agent with a certified copy of the Plans and all amendments thereto and of the resolutions of the Board of Directors of the Company or the relevant subsidiary approving the Plans and all amendments thereto, promptly upon their adoption. Any action by the Company pursuant to the terms of this Trust Agreement shall, except as otherwise provided herein, be by written instrument signed by an officer of the Company authorized to act hereunder or any delegee authorized to act for the Company. After the execution of this Agreement, the Company shall promptly file with the Trustee and the Trustee's Agent a certified list of the names and specimen signatures of the officers of the Company and any delegee authorized to act for it. The Company shall promptly notify the Trustee and the Trustee's Agent of the addition or deletion of any person's name to or from such list, respectively. Until receipt by the Trustee and/or the Trustee's Agent of notice that any person is no longer authorized so to act, the Trustee or the Trustee's Agent may continue to rely on the authority of the person. All certifications, notices and directions by any such person or persons to the Trustee or the Trustee's Agent shall be in writing signed by such person or persons. The Trustee and the Trustee's Agent may rely on any such certification, notice or direction purporting to have been signed by or on behalf of such person or persons that the Trustee or the Trustee's Agent believes to have been signed thereby. The Trustee and the Trustee's Agent may rely on any certification, notice or direction of the Company that the Trustee or the Trustee's Agent believes to have been signed by a duly authorized officer or agent of the Company. The Trustee and the Trustee's Agent shall have no responsibility for acting or not acting in reliance upon any notification believed by the Trustee or the Trustee's Agent to have been so signed by a duly authorized officer or agent of the Company. The Company shall be responsible for keeping accurate books and records with respect to the employees and Directors of the Company, their compensation and their rights and interests in the Funds under the Plans. 4.2 The Company shall make its contributions to the Trust in accordance with appropriate corporate action and the Trustee shall have no responsibility with respect thereto, except to add such contributions to the appropriate Fund or Funds. 4.3 The Company shall indemnify and hold harmless the Trustee for any liability or expenses, including without limitation reasonable attorneys' fees, incurred by the Trustee with respect to holding, managing, investing or otherwise administering the Funds or carrying out its duties hereunder, except to the extent that such liabilities or expenses arise from actions constituting gross negligence or willful misconduct by the Trustee under this Agreement. 4.4 The Company shall indemnify and hold harmless the Trustee's Agent for any liability or expenses, including without limitation reasonable attorneys' fees, incurred by the Trustee's Agent with respect to keeping the records for Participants' Accounts, reporting thereon to Participants, certifying benefit information to the Trustee, determining the status of Accounts and benefits hereunder and otherwise carrying out its obligations under this Agreement, except to the extent that such liabilities or expenses arise from actions constituting negligence or willful misconduct by the Trustee's Agent. ARTICLE V 5.1 The Trustee shall not be liable in discharging its duties hereunder, including without limitation its duty to invest and reinvest the Trust Property relating to each Fund, if it acts in good faith and in accordance with the terms of this Agreement with respect to the Trustee's responsibilities under this Agreement. 5.2 Subject to investment guidelines agreed to in writing from time to time by the Company and the Trustee, the Trustee shall have the power in investing and reinvesting the Trust Property with respect to each Fund, in its sole discretion: (a) To invest and reinvest in any property, real, personal or mixed, wherever situated and whether or not productive of income or consisting of wasting assets, including without limitation, common and preferred stocks, bonds, notes, debentures (including convertible stocks and securities but not including any stock or security of the Trustee, the Company or any affiliate thereof), futures, option and forward contracts, leaseholds, mortgages, certificates of deposit or demand or time deposits (including any such deposits with the Trustee), shares of investment companies and mutual funds, interests in partnerships and trusts, insurance policies and annuity contracts, and oil, mineral or gas properties, royalties, interests or rights, without being limited to the classes of property in which trustees are authorized to invest by any law or any rule of court of any state and without regard to the proportion any such property may bear to the entire amount of each Fund; provided, however, the Trustee is authorized to receive and hold any stock or security of the Company which is contributed by the Company to either Fund and the Trustee shall not sell any such stock or security of the Company until the Company so directs; (b) To invest and reinvest all or any portion of the Trust Property held in the Funds collectively through the medium of any common, collective or commingled trust fund that may be established and maintained by the Trustee, subject to the instrument or instruments establishing such trust fund or funds and with the terms of such instrument or instruments, as from time to time amended, being incor porated into this Agreement to the extent of the equitable share of the Funds in any such common collective or commingled trust fund; (c) To retain any property at any time received by the Trustee; (d) Subject to subsection (a) above, to sell or exchange any property held by it at public or private sale, for cash or on credit, to grant and exercise options for the purchase or exchange thereof, to exercise all conversion or subscription rights pertaining to any such property and to enter into any covenant or agreement to purchase any property in the future; (e) To participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to property held by it and to consent to or oppose any such plan or any action thereunder or any contract, lease, mortgage, purchase, sale or other action by any person; (f) To deposit any property held by it with any protective, reorganization or similar committee, to delegate discretionary power thereto, and to pay part of the expenses and compensation thereof and any assessments levied with respect to any such property so deposited; (g) To extend the time of payment of any obligation held by it; (h) To hold uninvested any moneys received by it, without liability for interest thereon, until such moneys shall be invested, reinvested or disbursed; (i) To exercise all voting or other rights with respect to any property held by it and to grant proxies, discretionary or otherwise; (j) For the purposes of the Trust, to borrow money from others, to issue its promissory note or notes therefor, and to secure the repayment thereof by pledging any property held by it; (k) To manage, administer, operate, insure, repair, improve, develop, preserve, mortgage, lease or otherwise deal with, for any period, any real property or any oil, mineral or gas properties, royalties, interests or rights held by it directly or through any corporation, either alone or by joining with others, using other Trust assets for any such purposes, to modify, extend, renew, waive or otherwise adjust any provision of any such mortgage or lease and to make provision for amortization of the investment in or de preciation of the value of such property; (l) To employ suitable agents and counsel, who may be counsel to the Company or the Trustee and to pay their reasonable expenses and compensation from the relevant Fund to the extent not paid by the Company; (m) To cause any property held by it to be registered and held in the name of one or more nominees, with or without the addition of words indicating that such securities are held in a fiduciary capacity, and to hold securities in bearer form; (n) To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust, respectively, to commence or defend suits or legal proceedings to protect any interest of the Trust, and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; provided, however, that the Trustee shall not be required to take any such action unless it shall have been indemnified by the Company to its reasonable satisfaction against liability or expenses it might incur therefrom; (o) To organize under the laws of any state a corporation or trust for the purpose of acquiring and holding title to any property which it is authorized to acquire hereunder and to exercise with respect thereto any or all of the powers set forth herein; and (p) Generally, to do all acts, whether or not ex pressly authorized, that the Trustee may deem necessary or desirable for the protection of the Trust Property. Notwithstanding the foregoing, the Trustee shall upon the written direction of the Company invest all or part of the amount to the credit of any Participant's Account in a commercial annuity or insurance contract selected by the Company and the Trustee shall have no responsibility for any such investment other than as owner and custodian thereof. 5.3 The Company may at any time direct the Trustee to segregate all or a portion of each Fund in a separate investment account or accounts and may appoint one or more investment managers to direct the investment and reinvestment of each such investment account or accounts. In such event, the Company shall notify the Trustee of the appointment of each such investment manager. Thereafter, the Trustee shall make every sale or investment with respect to such investment account as directed in writing by the investment manager. It shall be the duty of the Trustee to act strictly in accordance with each direction. The Trustee shall be under no duty to question any such direction of the investment manager, to review any securities or other prop erty held in any such investment account or accounts acquired by it pursuant to such directions or to make any recommendations to the investment managers with respect to such securities or other property. Notwithstanding the foregoing, the Trustee, without obtaining prior approval or direction from an investment manager, shall invest cash balances held by it from time to time in short term cash equivalents including, but not limited to, through the medium of any short term common, collective or commingled trust fund established and maintained by the Trustee subject to the instrument establishing such trust fund, U.S. Treasury Bills, commercial paper (including such forms of commercial paper as may be available through the Trustee's Trust Department), certificates of deposit, and similar type securities, with a maturity not to exceed fifteen months; and, furthermore, sell such short term investments as may be necessary to carry out the instructions of an investment manager regarding more permanent type investment and directed distributions. The Trustee shall not be liable or responsible for any loss resulting to either Fund by reason of any sale or purchase of an investment directed by an investment manager nor by reason of the failure to take any action with respect to any investment which was acquired pursuant to any such direction in the absence of further directions of such investment manager, or solely as a result of the performance by the Trustee or its officers, employees or agents, of any custodial, reporting, recording or bookkeeping functions with respect to any such investment account, except to the extent that such performance constituted gross negligence or willful misconduct on the part of the Trustee. Notwithstanding anything in this Agreement to the contrary, the Trustee shall be indemnified and saved harmless by the Company from and against any and all personal liability to which the Trustee may be subjected by carrying out any directions of an investment manager issued pursuant hereto or for failure to act in the absence of directions of the investment manager including all expenses reasonably incurred in its defense in the event the Company fails to provide such defense; provided, however, the Trustee shall not be so indemnified if it participates knowingly in, or knowingly undertakes to conceal, an act or omission of an investment manager, having actual knowledge that such act or omission is a breach of a fiduciary duty; provided further, however, that the Trustee shall not be deemed to have knowingly participated in or knowingly undertaken to conceal an act or omission of an investment manager with knowledge that such act or omission was a breach of fiduciary duty by merely complying with directions of an investment manager or for failure to act in the absence of directions of an investment manager. The Trustee may rely upon any order, certificate, notice, direction or other documentary confirmation purporting to have been issued by the investment manager which the Trustee believes to be genuine and to have been issued by the investment manager. The Trustee shall not be charged with knowledge of the termination of the appointment of any investment manager until it receives written notice thereof from the Company. 5.4 No person dealing with the Trustee shall be under any obligation to see to the proper application of any money paid or property delivered to the Trustee or to inquire into the Trustee's authority as to any transaction. The Trustee's Agent's obligations are limited solely to those explicitly set forth herein and the Trustee's Agent shall have no responsibility, authority or control, direct or indirect, over the maintenance or investment of the Trust Property and shall have no obligation in respect of the Trustee or the Trustee's compliance with the Trustee's Agent's certifications to the Trustee. 5.5 The Trustee shall distribute cash or property from the Funds in accordance with Article III hereof. The Trustee may make any distribution required hereunder by mailing its check for the specified amount, or delivering the specified property, to the person to whom such distribution or payment is to be made, at such address as may have been last furnished to the Trustee, or if no such address shall have been so furnished, to such person in care of the Company, or (if so directed by the Company) by crediting the Account of such person or by transferring funds to such person's Account by bank or wire transfer. 5.6 If at any time there is no person authorized to act under this Agreement in behalf of the Company, the Board of Directors of the Company shall have the authority to act hereunder. ARTICLE VI 6.1 The Company shall pay any Federal, state or local taxes on the Trust Property, or any part thereof, and on the income therefrom. 6.2 The Company shall pay to the Trustee its reasonable expenses for the management and administration of the Funds, including without limitation reasonable expenses of counsel and other agents employed by the Trustee, and reasonable compensation for its services as Trustee hereunder in accordance with its Published Schedule of Compensation in effect from time to time. The Company shall also pay to the Trustee for transmission to the Trustee's Agent the fees and expenses of the Trustee's Agent, unless the Company pays such directly to the Trustee's Agent. Such expenses, fees and compensation shall be a charge on the Funds and shall constitute a lien in favor of the Trustee and Trustee's Agent until paid by the Company. ARTICLE VII 7.1 The Trustee shall maintain records with respect to each Fund that show all its receipts and disbursements hereunder. The records of the Trustee with respect to the Funds shall be open to inspection by the Company, or its representatives, at all reasonable times during normal business hours of the Trustee and may be audited not more frequently than once each fiscal year by an independent certified public accountant engaged by the Company; provided, however, the Trustee shall be entitled to additional compensation from the Company in respect of audits or auditors' requests which the Trustee determines to exceed the ordinary course of the usual scope of such examinations of its records. 7.2 Within a reasonable time after the close of each fiscal year of the Company (or as agreed to by the Company and Trustee), or upon termination of the duties of the Trustee hereunder, the Trustee shall prepare and deliver to the Company a statement of transactions reflecting its acts and transactions as Trustee during such fiscal year, portion thereof or during such period from the close of the last fiscal year or last statement period to the termination of the Trustee's duties, respectively, including a statement of the then current value of each Fund. The Trustee's Agent shall also prepare and furnish to the Company a statement of the then current value of each Account. Any such statement shall be deemed an Account stated and accepted and approved by the Company, and the Trustee shall be relieved and discharged, as if such Account had been settled and allowed by a judgment or decree of a court of competent jurisdiction, unless protested by written notice to the Trustee within sixty (60) days of receipt thereof by the Company. The Trustee shall have the right to apply at any time to a court of competent jurisdiction for judicial settlement of any Account of the Trustee not previously settled as herein provided or for the determination of any question of construction or for instructions. In any such action or proceeding it shall be necessary to join as parties only the Trustee and the Company (although the Trustee may also join such other parties as it may deem appropriate), and any judgment or decree entered therein shall be conclusive. ARTICLE VIII 8.1 The Trustee may resign at any time by delivering written notice thereof to the Company; provided, however, that no such resignation shall take effect until the earlier of (i) sixty (60) days from the date of delivery of such notice to the Company or (ii) the appointment of a successor trustee. 8.2 The Trustee may be removed at any time by the Company, pursuant to a resolution of the Board of Directors of the Company, upon delivery to the Trustee of a certified copy of such resolution and sixty (60) days' written notice, unless such notice period is waived in whole or in part by the Trustee, of (i) such removal and (ii) the appointment of a successor trustee. 8.3 Upon the resignation or removal of the Trustee, a successor trustee shall be appointed by the Company. Such successor trustee shall be a bank or trust company which is established under the laws of the United States or a State within the United States and which is not related, directly or indirectly, to the Company. Such appointment shall take effect upon the delivery to the Trustee of (a) a written appointment of such successor trustee, duly executed by the Company, and (b) a written acceptance by such successor trustee, duly executed thereby. Any successor trustee shall have all the rights, powers and duties granted the Trustee hereunder. 8.4 If, within sixty (60) days of the delivery of the Trustee's written notice of resignation, a successor trustee shall not have been appointed, the Trustee may apply to any court of competent jurisdiction for the appointment of a successor trustee. 8.5 Upon the resignation or removal of the Trustee and the appointment of a successor trustee, and after the acceptance and approval of the Trustee's accounting of the Trust Property, the Trustee shall transfer and deliver the Trust Property to such successor. Under no circumstances shall the Trustee transfer or deliver the Trust Property to any successor which is not a bank or trust company as hereinabove defined. ARTICLE IX 9.1 The Trust established pursuant to this Agreement may not be terminated by the Company prior to the satisfaction of all liabilities with respect to all Participants in the Plans and their Beneficiaries. Upon receipt of a written certification from the Trustee's Agent that all liabilities have been satisfied with respect to all Participants in the Plans and their Beneficiaries, the Company pursuant to a resolution of its Board of Directors may terminate the Trust upon delivery to the Trustee of (a) a certified copy of such resolution, (b) an original certification of the Trustee's Agent that all such liabilities have been satisfied and (c) a written instrument of termination duly executed and acknowledged in the same form as this Agreement. 9.2 Upon the termination of the Trust in accordance with Section 9.1, the Trustee shall, after the acceptance and approval of its account, distribute the Trust Property to the Company. Upon completing such distribution, the Trustee shall be relieved and discharged. The powers of the Trustee shall continue as long as any part of either Fund remains in its possession. 9.3 The Company may at any time liquidate the Account of any Participant under this Agreement in the event the amount to the credit of such Account falls below $3,000. In such event, the Trustee, upon receipt of written instructions from the Company, shall distribute in cash the amount to the credit of any such terminated Account, as determined by the Trustee's Agent, to the Participant in respect of whom such Account was established or, if such Participant is dead or incompetent, to his Beneficiary. ARTICLE X 10.1 This Agreement may be amended, in whole or in part, at any time and from time to time, by the Company, pursuant to a resolution of the Board of Directors thereof by delivery to the Trustee and the Trustee's Agent of a certified copy of such resolution and a written instrument duly executed and acknowledged in the same form as this Agreement, except that the duties and responsibilities of the Trustee and the Trustee's Agent shall not be increased without the Trustee's or the Trustee's Agent's written consent; provided, however, any such amendment affecting any Account, the procedures for distribution thereof or the reallocation of Balances under Section 3.5 shall not become effective until sixty (60) days after a copy of such amendment has been delivered by registered mail by the Company or the Trustee's Agent to each Participant or his Beneficiary. In the event the Company, Trustee or Trustee's Agent receives written objections to such amendment from such person within such sixty (60) day period, the party receiving such objections shall provide a copy of same to the other parties and such amendment shall be ineffective and void in respect of the Participant or Beneficiary so objecting to the amendment. ARTICLE XI 11.1 This Agreement shall be construed and interpreted under, and the Trust hereby created shall be governed by, the laws of the State of Illinois insofar as such laws do not contravene any applicable Federal laws, rules or regulations. 11.2 Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. 11.3 No right or interest of any Participant under a Plan in either Fund shall be transferable or assignable or shall be subject to alienation, anticipation or encumbrance, and no right or interest of any Participant or Beneficiary in any Plan or in either Fund shall be subject to any garnishment, attachment or execution. Notwithstanding the foregoing, the Trust Property shall at all times remain subject to claims of creditors of the Company in the event the Company is adjudicated to be bankrupt or insolvent as provided herein and Participants and Beneficiaries shall have no claims to either Fund superior to that of any other unsecured creditors in such event. 11.4 The Company agrees that by the establishment of this Trust it hereby forgoes any judicial review of certifications by the Trustee's Agent as to the benefit payable to any persons hereunder. If a dispute arises as to the amounts or timing of any such benefits or the persons entitled thereto under a Plan or this Agreement, the Company agrees that such dispute shall be resolved by binding arbitration proceedings initiated in accordance with the rules of the American Arbitration Association and that the results of such proceedings shall be conclusive and shall not be subject to judicial review. It is expressly understood that pending the resolution of any such dispute, payment of benefits shall be made and continued (except in the event of the Company's insolvency) by the Trustee in accordance with the certification of the Trustee's Agent and that the Trustee and the Trustee's Agent shall have no liability with respect to such payments. The Company also agrees to pay the entire cost of any arbitration or legal proceeding including the legal fees of the Trustee, the Trustee's Agent and the Plan Participant or the Beneficiary of any deceased Plan Participant regardless of the outcome of any such proceeding and until so paid the expenses thereof shall be a charge on and lien against the Funds. 11.5 This Agreement shall be binding upon and inure to the benefit of any successor to the Company or its business as the result of merger, consolidation, reorganization, transfer of assets or otherwise and any subsequent successor thereto. In the event of any such merger, consolidation, reorganization, transfer of assets or other similar transaction, the successor to the Company or its business or any subsequent successor thereto shall promptly notify the Trustee and Trustee's Agent in writing of its successorship and furnish the Trustee and the Trustee's Agent with the information specified in Section 4.1 of this Agreement. In no event shall any such transaction described herein suspend or delay the rights of Plan Participants or the Beneficiaries of deceased Participants to receive benefits hereunder. 11.6 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one Agreement. 11.7 Communications to the Trustee shall be sent to The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675 or to such other address as the Trustee may specify in writing. Communications to the Trustee's Agent shall be sent to Buck Consultants, Inc., Two Pennsylvania Plaza, New York, New York 10121-0047 or to such other address as the Trustee's Agent may specify in writing. No communication shall be binding upon the Trustee or Trustee's Agent until it is received by the Trustee or Trustee's Agent. Communications to the Company shall be sent to the Company's principal offices or to such other address as the Company may specify in writing. 11.8 In the event any Participant or his Beneficiary is determined to be subject to Federal income tax on any amount to the credit of his Account under this Agreement prior to the time of payment hereunder, the entire amount so taxable shall be distributed by the Trustee as of the next Valuation Date to such Participant or Beneficiary. Such distribution shall be at the direction of the Company or the Trustee's Agent upon receipt of documentation from the Company or the Trustee's Agent indicating that an amount to the credit of a Participant's account is subject to Federal income tax. An amount to the credit of a Participant's Account shall be determined to be subject to Federal income tax upon the earliest of: (a) a final determination by the United States Internal Revenue Service addressed to the Participant or his Beneficiary which is not appealed to the courts; (b) a final determination by the United States Tax Court or any other Federal Court affirming any such determination by the Internal Revenue Service; or (c) an opinion by counsel, satisfactory to the Company, addressed to the Company, the Trustee and the Trustee's Agent, that, by reason of Treasury Regulations, amendments to the Internal Revenue Code, published Internal Revenue Service rulings, court decisions or other substantial precedent, amounts to the credit of Participants' Accounts hereunder are subject to Federal income tax prior to payment. The Company shall undertake at its sole expense to defend any tax claims described herein which are asserted by the Internal Revenue Service against any Participant or Beneficiary, including attorney fees and costs of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Service or by a lower court. The Company also agrees to reimburse any Participant or Benefi ciary for any interest or penalties in respect of tax claims hereunder upon receipt of documentation of same. Any dis tributions from either Fund to a Participant or Beneficiary under this Section 11.8 shall be applied in accordance with the provisions of the relevant Plan or Plans to reduce Company liabilities to such Participant and/or Beneficiary under such Plan or Plans; provided, however, that in no event shall any Participant, Beneficiary or estate of any Participant or Benefi ciary have any obligation to return all or any part of such distribution to the Company if such distribution exceeds benefits payable under the relevant Plan or Plans. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed and their respective corporate seals to be hereto affixed this 22nd day of January, 1997. Attest: THE NORTHERN TRUST COMPANY By /s/Christopher J. Grimm Its Vice President Attest: SCHERING-PLOUGH CORPORATION By /s/E. Kevin Moore Its Vice President Attest: BUCK CONSULTANTS, INC. By /s/Gregory J. Weiber Its Group Executive and Principal STATE OF NEW JERSEY ) : ss.: COUNTY OF MORRIS Personally appeared E. Kevin Moore, Vice President and Treasurer of SCHERING-PLOUGH CORPORATION, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and Treasurer and the free act and deed of said Company, before me. Notary Public STATE OF ) : ss.: COUNTY OF ) Personally appeared , Vice President of THE NORTHERN TRUST COMPANY, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and the free act and deed of said Corporation, before me. Notary Public STATE OF ) : ss.: COUNTY OF ) Personally appeared , of BUCK CONSULTANTS, INC. signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such and the free act and deed of said Corporation, before me. Notary Public EX-10 3 Exhibit 10(b) AMENDMENT TO TRUST AGREEMENT Schering-Plough Corporation, a corporation organized and existing under the laws of New Jersey ("Company"), pursuant to a resolution of its Board of Directors, hereby amends the trust agreement entered into on January 1, 1989 between it and The First National Bank of Chicago, as trustee ("Trust"), and under which The Northern Trust Company has been appointed as successor trustee, as follows: 1. By adding the following sentence to the beginning of Section 1.4: "The Company shall be responsible for maintaining records for individual Participant Accounts within the Trust. The Company may appoint a third-party recordkeeper (the Company, in such capacity, or such third-party being hereinafter referred to as the "Recordkeeper") to carry out various recordkeeping responsibilities as indicated in this Agreement." 2. By substituting "Recordkeeper" for "Trustee" wherever such word appears in Section 1.4, with the exception of line 19 and the first reference to "Trustee" in line 21, of such section. 3. By adding "("Insolvency Notice")" after the words "prompt written notice of any event of the Company's insolvency" in the third sentence of Section 2.1. 4. By substituting the following for the fourth sentence of Section 2.1: "If the Trust Department of the Trustee receives written allegations of an event of insolvency from a third party considered by the Trustee to be reliable and responsible, the Trustee shall promptly forward a copy of such allegations to the Company. If the Trustee does not receive an Insolvency Notice from the Company within fifteen days following receipt by the Company of such allegations, then the Trustee shall request that the Company's independent auditors determine whether the Company is insolvent. The Trustee may conclusively rely on written certification of solvency or insolvency received from such auditors." 5. By substituting the following for the first sentence of Section 3.1: "Except for the records dealing solely with the aggregate Trust Fund and the aggregate Investment Funds hereunder, which shall be maintained by the Trustee, the Recordkeeper shall maintain all Plan Participant records contemplated by this Agreement, including the Participants' Accounts and the maintenance of Participants' Plan interests." 6. By modifying Section 3.2 to read as follows: "Upon the establishment of this Trust or as soon thereafter as practicable, the Company shall furnish to the Recordkeeper, with a copy to the Trustee, all the information necessary for the Recordkeeper to determine the benefits payable to with respect to each Participant in the Plans, including any benefits payable after the Participant's death and the recipient of same. The Company shall regularly, at least annually, furnish revised updated information to the Recordkeeper, with a copy to the Trustee. In addition, the Company shall prepare an annual benefits statement in respect of each Participant and shall furnish a copy of same to the Participant or his beneficiary, the Recordkeeper and the Trustee. In the event the Company refuses or neglects to provide updated Participant information, as contemplated herein, the Recordkeeper shall be entitled to rely upon the most recent information furnished to it by the Company in making its determinations of benefits payable." 7. By substituting "Recordkeeper" for "Trustee" in Sections 3.3 and 3.4, provided that: (a) line 17 of Section 3.3 shall be amended to read as follows: "mation, the Recordkeeper shall direct the Trustee to commence cash distributions from", and that (b) line 4 of the last paragraph of Section 3.4 shall be amended to read as follows: "established hereunder, the recordkeeper shall direct the Trustee to hold or distribute." 8. By substituting "Trustee" for "Company" in the last sentence of Section 3.3. 9. By adding to Section 4.1: "The Trustee shall be fully protected in acting in accordance with directions of the Recordkeeper." 10. By modifying Section 4.3 to read as follows: "The Company shall indemnify and hold harmless the Trustee for any liability or expense, including without limitation reasonable attorneys' fees, incurred by the Trustee with respect to holding, managing, investing or otherwise administering the Fund or carrying out its duties hereunder, except to the extent that such liabilities or expenses arise from actions constituting negligence or willful misconduct by the Trustee under this Agreement." 11. By inserting the following between "year;" and "and" in line 28 of Section 5.3: "in addition, the Trustee may for such short term purposes invest in money market portfolios of mutual funds, including those for which the Trustee serves as advisor;". 12. By adding the following language to the end of the seventh sentence of Section 5.3: "or solely as a result of the performance of the Trustee or its officers, employees or agents, of any custodial, reporting, recording or bookkeeping functions with respect to any such investment account, except to the extent that such performance constituted negligence or willful misconduct on the part of the Trustee." 13. By substituting "Recordkeeper" for "Trustee" in lines 3 and 14 in Section 11.4. 14. By adding the following sentence after the second sentence of Section 11.8: "The Trustee shall act in accordance with the Company or Recordkeeper's instructions in making any such distribution hereunder." The Company executes this amendment to the Trust effective this 31st day of January, 1997. SCHERING-PLOUGH CORPORATION By: /s/Wayne L. Miller Acknowledged: Its: Staff V.P. - Assistant Treasurer THE NORTHERN TRUST COMPANY, as Trustee By: /s/Christopher J. Grimm Its: Vice President EX-11 4 Exhibit 11 SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (Amounts in millions, except per share figures)
Three Months Ended March 31, 1997 1996 Earnings per Common Share, As Reported: Net income applicable to common shares. $ 375.3 $ 326.6 Average Number of Common Shares Outstanding . . . . . . . . . . . . . . 365.6 365.7 Earnings per Common Share . . . . . . . $ 1.03 $ .89 Earnings per Common Share, Assuming Full Dilution: (a) Average Number of Common Shares Outstanding . . . . . . . . . . . . . . 365.6 365.7 Shares Contingently Issuable for Stock Incentive Plans and Warrant Agreements. . . . . . . . . . . . . . . 3.5 4.1 Average Number of Common Shares and Common Share Equivalents Outstanding. . 369.1 369.8 Earnings per Common Share, Assuming Full Dilution . . . . . . . . . . . . $ 1.02 $ .88 (a) This calculation is submitted in accordance with the regulations of the Securities and Exchange Commission although not required by APB Opinion No. 15 because it results in dilution of less than 3%.
EX-27 5
5 This schedule contains summary financial information extracted from Schering-Plough Corporation and subsidiaries consolidated Financial Statements, and related Exhibits for the three months ended March 31, 1997 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 MAR-31-1997 757100 0 755700 0 575900 2812100 3374800 1125600 5856300 2799400 46000 0 0 507400 1789100 5856300 1568100 1568100 289300 289300 179200 0 0 497100 121800 375300 0 0 0 375300 1.03 1.02
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