Exhibit 10(g)
JOHNSON & JOHNSON
CERTIFICATE OF EXTRA COMPENSATION PLAN
WITNESSETH - WHEREAS, Johnson & Johnson (the "Employer") wishes to
reward its employees, as well as employees of its subsidiaries (an "Employee")
for faithful service in the past and more particularly to encourage Employees in
their future work by permitting Employees to share in the growth and success of
the Employer's enterprises by issuing to them Shares of Certificates of Extra
Compensation (the "CEC Shares"), and to that end to receive as extra
compensation sums based upon and measured by (a) the amount of cash dividends
from time to time declared upon an equal number of shares of common stock of the
Employer (the "Common Stock") and (b) the formula value of such CEC Shares as
established pursuant to Article "NINTH" of this Plan (the "Formula Value") at
the time of termination of employment or death while in such employment:
NOW, THEREFORE, in consideration of the premises and the promises
herein contained, and so long as the Employee shall remain an Employee, it is
agreed that:
FIRST: The number of CEC Shares designated upon which the Employee's extra
compensation shall be based is the aggregate number of CEC Shares awarded to
such Employee in accordance with the Plan as evidenced by the written records of
Employer.
SECOND: While the Employee remains an Employee, the Employer shall pay to the
Employee on the same date on which is paid any cash dividend on the Employer's
Common Stock, a sum equivalent to such cash dividend multiplied by the total
number of CEC Shares designated for such Employee.
THIRD: In the event of the Employee's death while an Employee, the Employer
shall pay to the Employee's beneficiary (as last recorded over the Employee's
signature on the records of the Employer) a sum of money which shall be
determined as a percentage of the Formula Value of such CEC Shares. This
percentage shall be based upon the period elapsing between the date a CEC Share
has been awarded and death, as follows:
In the event of death within eighteen
(18) months of the date of an award...................... 30%
In the event of death after eighteen
(18) months but within forty-two (42)
months of the date of an award........................... 70%
In the event of death after forty-two
(42) months of the date of an award...................... 100%
In the event of the termination of the Employee's
employment because of retirement, physical or mental disability,
or otherwise (except by reason of death), the Employer shall pay
to the Employee a sum of money which shall be determined as a
percentage of the Formula Value of such CEC Shares. For the
purposes of this Plan, an Employee placed on long-term disability
is not considered to be an Employee. This percentage shall be
based upon the period elapsing between the date a CEC Share has
been awarded and such termination of employment, as follows:
In the event of such termination within
twelve (12) months of the date of an award................ 0%
In the event of such termination after
twelve (12) months but within twenty-four
(24) months of the date of an award...................... 20%
In the event of such termination after
twenty-four (24) months but within thirty-six
(36) months of the date of an award...................... 40%
In the event of such termination after
thirty-six (36) months but within forty-eight
(48) months of the date of an award...................... 60%
In the event of such termination after
forty-eight (48) months but within sixty
(60) months of the date of an award...................... 80%
In the event of such termination after
sixty (60) months from the date of an award............. 100%
The Employer shall pay any such sum of money due under this Article
"THIRD", in a single lump sum, unless Employee has duly elected, pursuant to the
provisions of Article "SEVENTH" to defer receipt of such sum upon his/her
retirement.
FOURTH: At the election of each Employee, to be made as provided for below, the
payment of any sum due to an Employee upon his/her retirement may be deferred
and paid in either a single lump sum or in installments. A lump sum payment may
be deferred for up to ten taxable years following the Employee's retirement
date. If installment payments are elected, the first installment payment may be
made immediately upon retirement or be deferred for up to ten taxable years.
Installment payments will be made annually (in the manner described below) and
in approximately equal installment amounts (i.e., the value of the CEC payout
balance, plus accrued interest, divided by the number of remaining
installments). The minimum number of annual installments is two (2) and the
maximum number is fifteen (15). An Employee may elect to defer up to 100% of the
value of his/her total CEC holdings at retirement; or, any percentage increment
less than that. The following rules shall apply with respect to all payments:
a) Immediate Lump Sum Payment - The Employee will receive the full
value of his/her CEC holdings in the calendar month of his/her retirement
effective date. Employees retiring prior to the determination of the prior years
CEC value will receive 97% of the estimated value with the remainder paid
shortly after the final value is determined.
b) Deferred Lump Sum Payment - The Employee will receive the full value
of his/her CEC holdings, plus any accrued interest, on or about January 15 of
the year he/she elects to receive payment in.
c) Immediate Commencement of Installments - The Employee will receive
the first installment in the calendar month of his/her retirement effective
date. All subsequent installments, plus any accrued interest, will be paid on or
about January 15 of each year.
d) Deferred Commencement of Installments - The Employee will receive
the first and all subsequent installments, plus any accrued interest, on or
about January 15 of each year.
FIFTH: With respect to any payments which are deferred and/or paid in
installments, interest shall be paid by the Employer from the effective date of
retirement to the date of any such payment. The interest rate for all deferred
and/or installment payments to an Employee shall be fixed at the date of
retirement and shall be the rate (rounded to 1 decimal place) offered, as
reported in the Wall Street Journal on the effective retirement date, on a
United States Treasury Instrument for the period comparable to the length of the
period of the deferral and/or installment payments. The interest shall be
compounded semi-annually on the last calendar day of June and December of each
year. If more than one instrument is quoted, the average of such rates shall be
utilized. By way of example, if an election is made to receive installments over
eight (8) years, the comparable eight (8) year U.S. Treasury Rate shall be
utilized; if an election is made to defer the commencement of installments for
two (2) years with installments paid out over ten (10) years, the comparable
twelve (12) year U.S. Treasury Rate shall be utilized. Once established, the
interest rate shall remain fixed for the period of the deferral.
SIXTH: In the event of death of an Employee (whether or not prior to the
termination of his/her employment) the Employer will make payment in full of the
balance, plus any accrued interest, as soon as administratively practical in a
single lump sum payment to the designated beneficiary.
In the event no deferral or installment election is made, the total
amount of the CEC holdings will be paid in accordance with the provisions of
paragraph (a) of Article "FOURTH" in a lump sum payment as soon as practical
following an Employee's retirement effective date.
SEVENTH: An election by an Employee to defer payment or elect installments of
all or a part of his/her CEC holdings beyond his/her effective retirement date
must be made a minimum of twelve (12) months prior to the date of such
retirement date. Any such election may be revised or revoked up to twelve (12)
months prior to such retirement date. For the twelve month period prior to such
retirement date, any election is irrevocable and thus may not be revoked or
otherwise revised.
The Employer may disallow an Employee's desire to defer payments and/or
elect installments if it determines that such participation would jeopardize the
Plan's compliance with applicable law or the Plan's status as a "top hat plan"
under ERISA.
Notwithstanding the above, an exception has been made for Employees who
have a retirement effective date between January 1, 1997 and June 30, 1997. For
such Employees, the deferral and/or installment election must be made a minimum
of three (3) months and in the calendar year prior to the retirement date. For
example, an Employee who retires on January 1, 1997, must make the deferral
and/or installment election no later than September 30, 1996; if the retirement
date is May 1, 1997, such election must be made not later than December 31,
1996. With respect to any retirement occurring between July 1, 1997, and
December 1, 1997, an election must be made prior to December 31, 1996. Any such
election to defer and/or receive installment payments may only be
revised or revoked prior to the last permissible date for making such election.
After such time the election may not be revoked or otherwise revised.
An election to defer payment and/or be paid in installments is
effective only when filed with the administrator referred to in Article
"FIFTEENTH" on the form utilized for such purpose. Any election made after the
required deadline shall be disregarded.
AN ELECTION TO DEFER AND/OR BE PAID IN INSTALLMENTS SHOULD ONLY BE MADE
IN CONSULTATION WITH AN EMPLOYEE'S TAX AND/OR FINANCIAL ADVISOR.
EIGHTH: The number of CEC Shares designated and upon which is based and by which
is measured the extra compensation of the Employee shall be increased
proportionately from time to time to the extent that a stock split or a dividend
in Common Stock is declared and paid upon the issued and outstanding Common
Stock of the Employer. Likewise, the number of CEC Shares shall be reduced
proportionately from time to time to the extent that the number of CEC Shares of
issued and outstanding Common Stock of the Employer is reduced by
reorganization, reduction of capital, or otherwise.
NINTH: For the purposes of Article "THIRD" of this agreement, the Formula Value
of the CEC Shares shall be determined by the Employer's Board of Directors which
shall, except in the event mentioned below, determine such Formula Value as the
sum of one-half of the asset value per share of Common Stock plus one-half of
the earning-power value per share of Common Stock calculated as follows:
The sum of one-half of the consolidated net asset value per share of
Common Stock (being assets per share, less liabilities (including
reserves, other than surplus reserve) per share, as such assets and
liabilities appear on the books of the Employer and its subsidiaries as
of the fiscal year end immediately preceding the date of valuation)
plus one-half of the consolidated earning-power value per share of
Common Stock (determined as the average of annual net earnings per
share of Common Stock after all taxes as such net earnings appear on
the books of the Employer and its subsidiaries for five (5) fiscal
years preceding the date of valuation, capitalized as a return on
capital invested at eight percent (8%), i.e., a multiple of twelve and
one-half (12-1/2) times such average earnings per share).
For the purpose of the foregoing calculation, the books of the Employer and its
subsidiaries shall be conclusive. The method of consolidation shall be that
adopted by the Employer in preparing the last previous annual report to its
stockholders, including appropriate provision for taxes both foreign and
domestic which might be incurred in remitting income of the subsidiaries to the
Employer. The decisions of the Employer's Treasurer at all times, and from time
to time, as to procedures to be adopted in maintaining the books of the Employer
and its subsidiaries, preparation of balance sheets and income statements,
method of and adjustments made in consolidation, and all matters of accounting
practice and procedures shall be conclusive.
In the event that it shall be the opinion of the Board of Directors of
the Employer that the calculation made as provided above does not result in a
true value, as of any date at which under Article "THIRD" such determination is
necessary, the Board may but shall not be obligated to vary the formula to the
extent of modifying the multiple by which the average earnings per share shall
be multiplied.
The Board of Directors shall, on or before May fifteenth of each year,
determine and announce the Formula Value of the Employer's common stock as of
the immediately preceding fiscal year end for the purposes of this Plan.
TENTH: Dividends and share values are used herein only as measures of the extra
compensation to be paid hereunder. Nothing herein contained shall be construed
as an agreement to transfer to the Employee, or to his/her beneficiary, nor
shall either acquire, by virtue of his/her being awarded CEC Shares, any right,
title, or interest whatsoever in or to, any of the Employer's Common Stock.
ELEVENTH: No right of benefit to CEC Shares awarded under the Plan is
assignable. The Employer does not fund the obligations created by the Employee
participation in the CEC Plan. Rather, the Employer makes an unsecured promise
to pay these obligations out of general corporate assets. This applies to
obligations for both active and retired participants. Commencing with awards
made at year end 1996, certificates representing CEC shares will no longer be
issued. Instead the number of CEC shares awarded shall be recorded on the books
of the Employer.
TWELFTH: Regular part-time employees (those working 20 hours or more a week)
shall be considered Employees under this Plan. Any change to part-time status of
less than 20 hours a week shall be considered a termination, provided, however,
that in the event such employee is over the age of 55, such employee shall, for
purposes of this Plan only, be deemed to have retired. Nothing contained in the
Plan shall be construed to alter the present employment for an indefinite term,
which is terminable by either Employee or Employer without prior advance notice
to the other.
THIRTEENTH: An Employee may designate one or more beneficiaries to receive the
value of his/her payout upon death. Should a beneficiary predecease the
Employee, or should a beneficiary not be named, the amount designated for such
beneficiary or the Employee's payout balance, as the case may be, will be
distributed to the Employee's Estate. Beneficiary designations may be made or
revised at any time by submitting a Beneficiary Designation Form to the
Employer. The beneficiary or beneficiaries indicated in such Form shall
supersede any prior designation, including designations appearing on any
certificates representing CEC Shares.
FOURTEENTH: In the first quarter of each calendar year, statements will be sent
to active Employees participating in the CEC Plan as well as to retirees with
deferred CEC holdings. The report for active Employees will provide the value of
CEC holdings based on the prior years' final CEC value. The statement will also
include previously made deferral elections and beneficiary designations. The
report for retirees will provide the deferred CEC payout balance plus interest,
as well as the deferred and/or installment election and beneficiary
designations.
FIFTEENTH: The CEC Plan is administered by the Extra Compensation Services
Department at the Corporate Headquarters of Employer. Questions in regard to the
administration of the CEC Plan should be addressed to it.
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