Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment #1 to Form S-1 71 447K
2: EX-1.1 Form of Underwriting Agreement 38 155K
3: EX-3.1 Certificate of Incorporation of the Company 15 45K
4: EX-3.2 Bylaws of the Company 22 94K
5: EX-5.1 Opinion of O'Melveny & Myers LLP 2 10K
6: EX-10.1 Form of Directors' & Officers' Indemnity Agreement 9 41K
7: EX-10.13 Employee Stock Ownership Plan 60 116K
8: EX-10.18 Standard Industrial/Commercial Single-Tenant Lease 35 168K
9: EX-10.24 Celtic Master Lease 22 110K
10: EX-10.25 Stock Purchase Agreement 11 28K
11: EX-10.26 Stock Purchase Agreement 11 28K
12: EX-10.27 Stock Purchase Agreement 11 27K
13: EX-10.28 Stock Purchase Agreement 11 27K
14: EX-10.29 Meade Instruments Corp. 1997 Stock Incentive Plan 31 114K
15: EX-10.30 Form of Agreement of Merger 5 22K
16: EX-10.31 Preferred Stock Redemption Agreement 6 26K
EX-10.13 — Employee Stock Ownership Plan
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EXHIBIT 10.13
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective March 1, 1996
TABLE OF CONTENTS
SECTION PAGE
1. Nature of the Plan ............................................. 1
2. Definitions .................................................... 2
3. Eligibility and Participation .................................. 7
4. Employer Contributions ......................................... 9
5. Investment of Trust Assets ..................................... 12
6. Allocations to Participants' Accounts .......................... 15
7. Allocation Limitations ......................................... 20
8. Voting Company Stock ........................................... 23
9. Vesting and Forfeitures ........................................ 24
10. Credited Service and Break in Service .......................... 24
11. When Capital Accumulation Will Be Distributed .................. 25
12. Diversification Election ....................................... 28
13. How Capital Accumulation Will Be Distributed ................... 29
14. Rights, Options and Restrictions on Company Stock .............. 32
15. No Assignment of Benefits ...................................... 34
16. Administration ................................................. 35
17. Claims Procedure ............................................... 39
18. Limitation on Participants' Rights ............................. 40
19. Future of the Plan ............................................. 41
20. "Top-Heavy" Contingency Provisions ............................. 43
21. Governing Law .................................................. 45
22. Execution ...................................................... 45
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Nature of the Plan.
The purpose of this Plan is to enable participating Employees to share
in the growth and prosperity of Meade Instruments Corp. (the "Company") and to
provide Participants with an opportunity to accumulate capital for their future
economic security. The Plan is intended to do this without any deductions from
Participants' paychecks and without requiring them to invest their personal
savings. The primary purpose of the Plan is to enable Participants to acquire
stock ownership interests in the Company. Therefore, the Trust established under
the Plan is designed to invest primarily in Company Stock.
The Plan is also designed to be available as a technique of corporate
finance to the Company. Accordingly, it may be used to accomplish the following
objectives:
(a) To meet general financing requirements of the Company,
including capital growth and transfers in the ownership of
Company Stock;
(b) To provide Participants with beneficial ownership of Company
Stock substantially in proportion to their relative
Compensation, without requiring any cash outlay, any reduction
in pay or other personal investment on the part of
Participants; and
(c) To receive loans (or other extensions of credit) to finance
the acquisition of Company Stock, with such loans to be repaid
by Employer Contributions to the Trust and dividends received
on such Company Stock.
The Plan is hereby adopted effective as of March 1, 1996, and is a
stock bonus plan under Section 401(a) of the Internal Revenue Code (the "Code")
and an employee stock ownership plan under Section 4975(e)(7) of the Code.
All Trust Assets held under the Plan will be administered, distributed,
forfeited and otherwise governed by the provisions of this Plan and the related
Trust Agreement. The Plan is administered by an Administrative Committee for the
exclusive benefit of Participants (and their Beneficiaries).
Section 2. Definitions.
In this Plan, whenever the context so indicates, the singular or
plural number and the masculine, feminine or neuter gender shall be deemed to
include the other, the terms "he," "his" and "him" shall refer to a Participant,
and the capitalized terms shall have the following meanings:
Account.................. One of two accounts maintained to record the
interest of a Participant under the Plan. See
Section 6.
Acquisition Loan......... A loan (or other extension of credit) used by the
Trust to finance the acquisition of Company Stock,
which loan may constitute an extension of credit
to the Trust from a party in interest (as defined
in ERISA). See Section 5(b).
Affiliate................ Any corporation which is a member of a controlled
group of corporations (within the meaning of
Section 414(b) of the Code) of which the Company
is also a member or any
2
trade or business (whether or not incorporated)
which is under common control with the Company
(within the meaning of Section 414(c) of the Code).
Allocation Date.......... The December 31st of each year.
Allocation Year.......... The 12-month period ending on each Allocation Date
(and coinciding with each calendar year), which
period shall be the "limitation year" for purposes
of Section 415 of the Code.
Approved Absence......... A leave of absence from work granted to an Employee
by the Company under its established leave
policy, including unpaid leave under the Family and
Medical Leave Act of 1993. See Section 3(c).
Beneficiary.............. The person (or persons) entitled to receive any
benefit under the Plan in the event of a
Participant's death. See Section 13(c).
Board of Directors....... The Board of Directors of the Company.
Break in Service......... A period of time commencing with the date on which
an Employee's Service terminates and ending on the
date he resumes service. See Section 10(b).
Capital Accumulation..... A Participant's vested, nonforfeitable interest
in his Accounts under the Plan. Each Participant's
Capital Accumulation shall be determined in
accordance with the provisions of Section 9 and
distributed as provided in Sections 11, 12 and
13.
Code..................... The Internal Revenue Code of 1986, as amended.
Committee................ The Administrative Committee appointed by the
Board of Directors
3
to administer the Plan. See Section 16.
Company.................. Meade Instruments Corp., a California corporation.
Company Stock............ Shares of capital stock issued by the Company,
which shares must be common stock (or preferred
stock convertible into common stock) and must
constitute "employer securities" under Section
409(l) of the Code.
Company Stock Account.... The Account which reflects each Participant's
interest in Company Stock held under the Plan. See
Section 6.
Compensation............. The total wages and other compensation paid to an
Employee by the Company during each Allocation
Year, as reported on the Employee's Tax and Wage
Statement (Form W-2), plus any Elective Deferrals
made on his behalf to the 401(k) Plan and any
amounts withheld pursuant to the Company's
Cafeteria Plan (under Section 125 of the Code), but
excluding any amount in excess of $150,000 (as
adjusted for increases in the cost of living
pursuant to Section 401(a)(17) of the Code). For
purposes of applying the $150,000 dollar
limitation, the Compensation of a 5% owner or of a
Highly Compensated Employee who is one of the ten
most highly compensated Highly Compensated
Employees shall be aggregated with the Compensation
of his spouse and his lineal descendants who are
under age 19.
Credited Service......... The elapsed period of an Employee's Service,
including Service prior to March 1, 1996. See
Section 10.
Disability............... A physical or mental impairment which constitutes a
total and permanent disability entitling the
4
Participant to disability benefits under the Social
Security Act.
Discretionary Contri-
butions.................. Employer Contributions made in amounts determined
by the Board of Directors. See Section 4(a).
Elective Deferrals....... Contributions made to the 401(k) Plan at the
election of an Employee.
Employee................. Any common-law employee of the Company. A leased
employee, as described in Section 414(n) of the
Code, is not an Employee for purposes of this
Plan.
Employer Contributions... Payments made to the Trust by an Employer. See
Section 4.
ERISA.................... The Employee Retirement Income Security Act of
1974, as amended.
Fair Market Value........ The fair market value of Company Stock, as
determined for all purposes under the Plan based
upon a valuation by an independent appraiser
(within the meaning of Section 401(a)(28)(C) of the
Code) so long as Company Stock is not readily
tradable on an established market.
Financed Shares.......... Shares of Company Stock acquired by the Trust with
the proceeds of an Acquisition Loan.
Forfeiture............... A Participant's Accounts which are not vested and
which are forfeited under Section 9(b) following
his termination of Service.
401(k) Plan.............. The Meade Instruments Corporation 401(k) Plan, a
profit sharing plan qualified under Section 401(a)
of the Code that includes a "cash or deferred
arrangement" under Section 401(k) of the Code.
Highly Compensated
5
Employee................. An Employee who (1) is a 5% owner, (2) has
Compensation in excess of $100,000, (3) has
Compensation in excess of $66,000 and is in the
top-paid 20% group of Employees, or (4) is an
officer of the Company or an Affiliate and has
Compensation in excess of $60,000, as determined
in accordance with Section 414(q) of the Code. The
$100,000, $66,000 and $60,000 amounts shall be
adjusted after 1996 for increases in the cost of
living, pursuant to Section 414(q)(1) of the Code.
Hour of Service.......... Each hour of Service for which an Employee is
credited under the Plan, as described in Section
3(d).
Matching Contributions... Employer Contributions made in amounts related to
Participants' Elective Deferrals. See Section
4(b).
Other Investments
Account.................. The Account which reflects each Participant's
interest under the Plan attributable to any Trust
Assets other than Company Stock. See Section 6.
Participant.............. Any Employee or former Employee who has met the
applicable eligibility requirements of Section 3(a)
and who has not yet received a complete
distribution of his Capital Accumulation.
Plan..................... The Meade Instruments Corp. Employee Stock
Ownership Plan, which includes this Plan and the
related Trust Agreement.
Plan Year................ The 12-month period ending on the last day of
February and coinciding with each fiscal year of
the Company.
Retirement............... Termination of Service on or after attaining age
65.
6
Service.................. Employment with the Company or with any Affiliate;
provided, however, that periods of employment with
an employer during which the employer was not an
Affiliate shall not be included as Service.
Statutory Compensation... The total remuneration paid to an Employee by the
Company during the Allocation Year for personal
services rendered to the Company, excluding
employer contributions to a plan of deferred
compensation, amounts realized in connection with
stock options and amounts which receive special tax
benefits.
Trust.................... The Meade Instruments Corp. Employee Stock
Ownership Trust, established pursuant to the
Trust Agreement entered into between the Com-
pany and the Trustee.
Trust Agreement.......... The Agreement between the Company and the Trustee
establishing the Trust and specifying the duties of
the Trustee.
Trust Assets............. The Company Stock and any other assets held in the
Trust for the benefit of Participants. See
Section 5.
Trustee................... The Trustee (and any successor Trustee) appointed
by the Board of Directors to hold the Trust Assets.
Section 3. Eligibility and Participation.
(a) Each Employee on March 1, 1996, who has then attained age 21 and
completed at least one year of Service in which he is credited with at least
1000 Hours of Service shall become a Participant on March 1, 1996. Each other
Employee shall become a Participant in the Plan on the December 31st or June
30th co-
7
inciding with or next following the date on which he has attained age 21 and
completed at least one year of Service in which he is credited with at least
1000 Hours of Service. The eligibility computation period for determining one
year of Service under this Section 3(a) shall initially be the period of 12
consecutive months beginning on the Employee's initial date of Service and
thereafter shall be each Allocation Year beginning after his initial date of
Service.
In the event that the terms of Service of any Employee are covered by a
collective bargaining agreement, the Employee shall not be eligible to
participate in the Plan unless the terms of such agreement specifically provide
for participation in this Plan.
(b) A Participant is entitled to share in the allocations of Employer
Contributions and Forfeitures under Section 6(a) and (b) for each Allocation
Year in which he is credited with at least 1000 Hours of Service and is an
Employee (or on Approved Absence) on the Allocation Date. A Participant is also
entitled to share in the allocations of Employer Contributions and Forfeitures
for the Allocation Year of his Retirement, Disability or death.
(c) A former Participant who is reemployed by the Company shall become
a Participant as of the date of his reemployment. An Employee who is on an
Approved Absence shall not become a Participant until the end of his Approved
Absence, but a Partici-
8
pant who is on an Approved Absence shall continue as a Participant during the
period of his Approved Absence.
(d) Hours of Service - For purposes of determining the Hours of Service
to be credited to an Employee under the Plan, the following rules shall be
applied:
(1) Hours of Service shall include each hour of Service for which
an Employee is paid (or entitled to payment) for the
performance of duties; each hour of Service for which an
Employee is paid (or entitled to payment) for a period during
which no duties are performed due to vacation, holiday,
illness, incapacity (including disability), lay-off, jury
duty, military duty or paid leave of absence; and each
additional hour of Service for which back pay is either
awarded or agreed to (irrespective of mitigation of damages);
provided, however, that not more than 501 Hours of Service
shall be credited for a single continuous period during which
an Employee does not perform any duties.
(2) The crediting of Hours of Service shall be determined in
accordance with the rules set forth in paragraphs (b) and (c)
of Section 2530.200b-2 of the regulations prescribed by the
Department of Labor, which rules shall be consistently
applied with respect to all Employees within the same job
classification.
(3) Hours of Service shall not be credited to an Employee for a
period during which no duties are performed if payment is
made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemploy-
ment compensation or disability insurance laws, and Hours of
Service shall not be credited on account of any payment made
or due an Employee solely in reimbursement of medical or
medically-related expenses.
(4) Each Employee for whom the Company does not maintain records
of actual Hours of Service shall be credited with 45 Hours of
Service for each weekly payroll period in which he completes
at least one Hour of Service.
9
Section 4. Employer Contributions.
(a) Discretionary Contributions - Discretionary Contributions shall be
paid to the Trustee in such amounts (or under such formula) as may be determined
by the Board of Directors. The Company shall specify the Allocation Year for
which Discretionary Contributions are made.
(b) Matching Contributions - Beginning July 1, 1996, Matching
Contributions shall be paid by the Company to the Trustee for each Participant
who is entitled to share in the allocation of Matching Contributions under
Section 3(b) for each Allocation Year in an amount equal to 100% of the Elective
Deferrals made to the 401(k) Plan (after June 30, 1996) on his behalf for the
Allocation Year, but only to the extent such Elective Deferrals do not exceed 4%
of his Compensation. The allocations of Financed Shares made as a result of
Matching Contributions shall be based upon the purchase price paid by the
Trustee to acquire such Company Stock.
Matching Contributions for Highly Compensated Employees shall be
limited for any Allocation Year to the extent necessary to satisfy one of the
contribution percentage requirements described in Section 401(m)(2) of the Code
and Section 1.401(m)-1(b) of the regulations thereunder, as computed separately
(if necessary) for the Plan and the 401(k) Plan. For this purpose, any reduction
in the Matching Contributions made on behalf of Highly Compensated Employees
will be determined in order of the
10
contribution percentages beginning with the highest of such percentages.
Matching Contributions shall not be payable with respect to any Elective
Deferrals under the 401(k) Plan which are distributed to Participants pursuant
to the provisions of the 401(k) Plan in order to satisfy Sections
401(k)(3)(A)(ii) or 402(g) of the Code.
(c) Payment of Employer Contributions - Employer Contributions shall be
paid to the Trustee not later than the due date (including extensions) for
filing the Company's Federal income tax return for the applicable taxable year
of the Company. Employer Contributions may be paid in cash and/or in shares of
Company Stock, as determined by the Board of Directors; provided, however, that
the Board of Directors may determine that Employer Contributions made for the
purpose of enabling the Trustee to make Acquisition Loan payments may be paid as
provided in Section 5(d) with written notice to the Committee and the Trustee.
Employer Contributions paid in shares of Company Stock shall be valued based
upon the Fair Market Value on the date the shares are issued to the Trustee.
(d) Additional Provisions - Employer Contributions shall not be made in
amounts which can be allocated to no Participant's Accounts by reason of the
allocation limitations described in Section 7(a) or in amounts which are not
deductible under Section 404(a) of the Code. Any Employer Contributions which
are not deductible under Section 404(a) of the Code may be returned to the
Company by the Trustee (upon the direction of the Company)
11
within one year after the deduction is disallowed or after it is determined that
the deduction is not available. In the event that Employer Contributions are
paid to the Trust by reason of a mistake of fact, such Employer Contributions
may be returned to the Company by the Trustee (upon the direction of the
Company) within one year after the payment to the Trust.
(e) No Participant Contributions - No Participant shall be required or
permitted to make contributions to the Trust.
Section 5. Investment of Trust Assets.
(a) In General - Trust Assets will be invested by the Trustee primarily
(or exclusively) in Company Stock in accordance with directions from the
Committee, except as otherwise provided in Section 5(c) and (e). Employer
Contributions (and other Trust Assets) may be used to acquire shares of Company
Stock from any Company shareholder or from the Company. All purchases of Company
Stock by the Trustee shall be made only as directed by the Committee and only at
prices which do not exceed Fair Market Value as of the date of the purchase. The
Committee may direct the Trustee to invest and hold up to 100% of the Trust
Assets in Company Stock. Pending the investment of Trust Assets in Company
Stock, the Trustee may also invest Trust Assets in such other prudent
investments as the Committee deems to be desirable for the Trust, or Trust
Assets may be held temporarily in cash.
(b) Acquisition Loans - With the approval of the Board of Directors,
the Committee may direct the Trustee to incur Acquisi-
12
tion Loans from time to time to finance the acquisition of Company Stock
(Financed Shares) or to repay a prior Acquisition Loan. An installment
obligation incurred in connection with the purchase of Company Stock shall be
treated as an Acquisition Loan, and all indebtedness incurred to acquire Company
Stock in a single transaction shall be treated as one Acquisition Loan for
purposes of the Plan. An Acquisition Loan shall be for a specific term, shall
bear a reasonable rate of interest and shall not be payable on demand except in
the event of default. An Acquisition Loan may be secured by a pledge of the
Financed Shares so acquired (or acquired with the proceeds of a prior
Acquisition Loan which is being refinanced). No other Trust Assets may be
pledged as collateral for an Acquisition Loan, and no lender shall have recourse
against Trust Assets except as provided in Section 54.4975-7(b)(5) of the
Regulations under the Code. Any pledge of Financed Shares must provide for the
release of the shares so pledged as payments on the Acquisition Loan are made by
the Trustee and such Financed Shares are allocated to Participants' Company
Stock Accounts under Section 6(c). If the lender is a party in interest (as
defined in ERISA), the Acquisition Loan must provide for a transfer of Trust
Assets to the lender on default only upon and to the extent of the failure of
the Trust to meet the payment schedule of the Acquisition Loan.
(c) Initial Purchase - Notwithstanding the provisions of Section 5(a)
and (b), the initial purchase of Company Stock in April 1996 (using the proceeds
of an Acquisition Loan) and the
13
incurring of the initial Acquisition Loan shall be effected by the Trustee
(without directions from the Committee) at a price not exceeding Fair Market
Value on the purchase date based on the Trustee's determination (in the exercise
of its reasonable judgment) that such transaction is in the best interests of
the Plan and the Participants and is in compliance with all applicable
requirements of the Code and ERISA.
(d) Acquisition Loan Payments - Payments of principal and/or interest
on any Acquisition Loan shall be made by the Trustee (as directed by the
Committee) only from Employer Contributions paid to enable the Trust to repay
such Acquisition Loan, from earnings attributable to such Employer Contributions
and from any cash dividends received by the Trust on the Financed Shares
(whether allocated or unallocated) purchased with the proceeds of such
Acquisition Loan; and the payments made with respect to an Acquisition Loan for
a Plan Year must not exceed the sum of such Employer Contributions, earnings and
dividends for that Plan Year (and prior Plan Years), less the amount of such
payments for prior Plan Years. If an Employer is the lender with respect to an
Acquisition Loan, Employer Contributions may be paid in the form of cancellation
of indebtedness under the Acquisition Loan. If an Employer is not the lender
with respect to an Acquisition Loan, payments on the Acquisition Loan may be
made by the Company directly to the lender, with such payments treated as
Employer Contributions.
14
(e) Sales of Company Stock - The Committee may direct the Trustee to
sell shares of Company Stock to any person (including the Company); provided
that any such sale shall be effected by the Trustee at a price not less than
Fair Market Value on the sale date. Notwithstanding the provisions of Section
5(d), the Committee may direct the Trustee to apply the proceeds from the sale
of unallocated Financed Shares to repay the Acquisition Loan (incurred to
finance the purchase of such Financed Shares) in the event of the sale of the
Company or the termination of the Plan or if the Plan ceases to be an employee
stock ownership plan under Section 4975(e)(7) of the Code. If the Trustee is
unable to make payments of principal and/or interest on an Acquisition Loan when
due, the Committee may direct the Trustee either to sell (with the approval of
the Board of Directors) any Financed Shares that have not yet been allocated to
Participants' Company Stock Accounts or to obtain a new Acquisition Loan in an
amount sufficient to make such payments. Any sale of Company Stock under this
Section 5(e) must comply with the fiduciary requirements applicable under
Section 404(a)(1) of ERISA.
Section 6. Allocations to Participants' Accounts.
A Company Stock Account and an Other Investments Account shall be
maintained to reflect the interest of each Participant under the Plan.
Company Stock Account - The Company Stock Account maintained for each
Participant will be credited annually with his allocable
15
share of Company Stock (including fractional shares) purchased and paid for by
the Trust or contributed in kind to the Trust as a Discretionary Contribution or
Matching Contribution, with any Forfeitures from Company Stock Accounts and with
any stock dividends on Company Stock allocated to his Company Stock Account.
Other Investments Account - The Other Investments Account maintained
for each Participant will be credited annually with his allocable share of
Discretionary Contributions and Matching Contributions that are not in the form
of Company Stock, with any Forfeitures from Other Investments Accounts, with any
cash dividends on Company Stock allocated to his Company Stock Account (other
than currently distributed dividends) and any net income (or loss) of the Trust.
Such Account will be debited for the Participant's share of any cash payments
made by the Trustee for the acquisition of Company Stock or for the payment of
any principal and/or interest on an Acquisition Loan.
The allocations to Participants' Accounts for each Allocation Year will
be made as follows:
(a) Discretionary Contributions and Forfeitures - Discretionary
Contributions under Section 4(a) and Forfeitures under Section 9(b) for each
Allocation Year will be allocated as of the Allocation Date among the Accounts
of Participants so entitled under Section 3(b) in the ratio that the
Compensation of each such Participant bears to the total Compensation of all
such
16
Participants, subject to the allocation limitations described in Section 7.
(b) Matching Contributions - Matching Contributions for each
Allocation Year will be allocated as of the Allocation Date to the Accounts of
the Participants in accordance with the rules outlined in Section 4(b).
(c) Financed Shares - Any Financed Shares acquired by the Trust shall
initially be credited to a "Loan Suspense Account" and will be allocated to
Company Stock Accounts of Participants only as payments on the Acquisition Loan
are made by the Trustee. The number of Financed Shares to be released from the
Loan Suspense Account for allocation to Participants' Company Stock Accounts
shall be determined by the Committee as follows:
(1) Principal/Interest Method - The number of Financed Shares held
in the Loan Suspense Account immediately before the current release shall be
multiplied by a fraction. The numerator of the fraction shall be the current
payments of principal and/or interest on the Acquisition Loan. The denominator
of the fraction shall be the sum of the numerator plus the total payments of
principal and interest on that Acquisition Loan projected to be paid in the
future years. For this purpose, the interest to be paid in future years is to be
computed by using the interest rate in effect as of the current release date.
(2) Principal Only Method - The Committee may elect (as to each
Acquisition Loan) or the provisions of the Acquisition Loan may provide for the
release of Financed Shares from the
17
Loan Suspense Account based solely on the ratio that the current payments of
principal bear to the total principal amount of the Acquisition Loan. This
method may be used only to the extent that: (A) the Acquisition Loan provides
for annual payments of principal and interest at a cumulative rate that is not
less rapid at any time than level annual payments of such amounts for ten years;
(B) interest included in any payment on the Acquisition Loan is disregarded only
to the extent that it would be determined to be interest under standard loan
amortization tables; and (C) the entire duration of the Acquisition Loan
repayment period does not exceed ten years, even in the event of a renewal,
extension or refinancing of the Acquisition Loan.
(3) Allocation of Released Shares - When Trust Assets are applied
to make payments on an Acquisition Loan, the Financed Shares released from the
Loan Suspense Account in accordance with the provisions of this Section 6(c)
shall be allocated among Company Stock Accounts of Participants in the manner
determined by the Committee based upon the source of funds (Discretionary
Contributions, Matching Contributions, earnings attributable to such Employer
Contributions and cash dividends on Financed Shares) used to make the payments
on the Acquisition Loan. If cash dividends on Financed Shares allocated to a
Participant's Company Stock Account are used to make payments on an Acquisition
Loan, Financed Shares (representing that portion of such payments and whose Fair
Market Value is at least equal to the amount of
18
such dividends) released from the Loan Suspense Account shall be allocated to
that Participant's Company Stock Account.
(d) Net Income (or Loss) of the Trust - The net income (or loss) of the
Trust for each Allocation Year will be determined as of the Allocation Date.
Prior to the allocation of Employer Contributions and Forfeitures for the
Allocation Year, each Participant's share of any net income (or loss) will be
allocated to his Other Investments Account in the ratio that the total balances
of both his Accounts on the preceding Allocation Date (reduced by any
distribution of Capital Accumulation from such Account during the Allocation
Year) bears to the sum of such Account balances for all Participants as of that
date. The net income (or loss) of the Trust includes the increase (or decrease)
in the fair market value of Trust Assets (other than Company Stock), interest
income, dividends and other income and gains (or losses) attributable to Trust
Assets (other than any dividends on allocated Company Stock) since the preceding
Allocation Date, reduced by any expenses charged to the Trust Assets for that
Allocation Year. The determination of the net income (or loss) of the Trust
shall not take into account any interest paid by the Trust under an Acquisition
Loan.
(e) Dividends on Company Stock - Any cash dividends received on shares
of Company Stock allocated to Participants' Company Stock Accounts will be
allocated to the respective Other Investments Accounts of such Participants. Any
cash dividends received on unallocated shares of Company Stock (including any
19
Financed Shares credited to the Loan Suspense Account) shall be included in the
computation of the net income (or loss) of the Trust. Any stock dividends
received on Company Stock shall be credited to the Accounts (including the Loan
Suspense Account) to which such Company Stock was allocated.
(f) Accounting for Allocations - The Committee shall establish
accounting procedures for the purpose of making the allocations to Participants'
Accounts provided for in this Section 6. The Committee shall maintain adequate
records of the aggregate cost basis of Company Stock allocated to each
Participant's Company Stock Account. The Committee shall also keep separate
records of Financed Shares and of Employer Contributions (and any earnings
thereon) made for the purpose of enabling the Trust to repay any Acquisition
Loan. From time to time, the Committee may modify the accounting procedures for
the purposes of achieving equitable and nondiscriminatory allocations among the
Accounts of Participants in accordance with the general concepts of the Plan,
the provisions of this Section 6 and the requirements of the Code and ERISA.
Section 7. Allocation Limitations.
(a) Limitations on Annual Additions - The Annual Additions for each
Allocation Year with respect to any Participant may not exceed the lesser of:
(1) 25% of his Statutory Compensation; or
20
(2) $30,000, as may be increased pursuant to Section 415(c)(1)(A)
of the Code.
For this purpose, "Annual Additions" shall be the total of the Employer
Contributions and Forfeitures (including any income attributable to Forfeitures)
allocated to the Accounts of a Participant for the Allocation Year, except as
provided in Section 7(b), plus any contributions (including Elective Deferrals)
or forfeitures allocated to his accounts under the 401(k) Plan. In determining
such Annual Additions, Forfeitures of Company Stock shall be included at Fair
Market Value.
If the aggregate amount that would be allocated to the Accounts of a
Participant in the absence of these limitations would exceed the amount set
forth in these limitations, his Annual Additions under the 401(k) Plan shall be
reduced prior to reducing the allocations to his Accounts under this Plan. Any
Forfeitures which can be allocated to no Participant's Accounts by reason of
these limitations shall be credited to a "Forfeiture Suspense Account" and
allocated as Forfeitures under Section 6(a) for the next succeeding Allocation
Year (prior to the allocation of Employer Contributions for such succeeding
Allocation Year).
(b) Special Acquisition Loan Rules - Any Employer Contributions which
are used by the Trust (not later than the due date, including extensions, for
filing the Company's Federal income tax return for the applicable taxable year)
to pay interest on an Acquisition Loan, and any Financed Shares which are
allocated as Forfeitures, shall not be included as Annual Additions under Sec-
21
tion 7(a); provided, however, that the provisions of this Section 7(b) shall be
applicable only if not more than one-third of any Employer Contributions applied
to pay principal and/or interest on an Acquisition Loan are allocated to
Participants who are Highly Compensated Employees; and the Committee shall
reallocate such Employer Contributions to the extent it deems it to be
appropriate to satisfy this special rule.
The Annual Additions under Section 7(a) with respect to Financed Shares
released from the Loan Suspense Account (by reason of Employer Contributions
used for payments on an Acquisition Loan) and allocated to Participants' Company
Stock Accounts shall be the lesser of (A) the amount of such Employer
Contributions (as determined after application of the preceding paragraph); or
(B) the Fair Market Value of Company Stock. Annual Additions shall not include
any allocation attributable to any proceeds from the sale of Financed Shares by
the Trust or to appreciation (realized or unrealized) in the Fair Market Value
of Company Stock.
(c) Limitation on Electing Shareholder - If a Company shareholder sells
Company Stock to the Trust and elects (with the consent of the Company)
nonrecognition of gain under Section 1042 of the Code, no portion of Company
Stock purchased in any such transaction (or any dividends or other income
attributable thereto) may be allocated prior to the later of the tenth
anniversary of the purchase or the Allocation Year following the Allocation Year
for which shares are released from the Loan Suspense Account
22
as a result of the final payment on any Acquisition Loan incurred in connection
with such purchase to the Accounts of:
(1) any Participant who has made an election under Section 1042
of the Code; or
(2) any Participant who is such selling shareholder's spouse,
brothers or sisters (whether by the whole or half blood),
ancestors or lineal descendants (except as to certain lineal
descendants, to the extent provided in Section 409(n)(3)(A)
of the Code), or any other person who bears a relationship to
him that is described in Section 267(b) of the Code.
In addition, no portion of Company Stock purchased in any such
transaction (or any dividends or other income attributable thereto) may
thereafter be allocated to the Accounts of any Participant owning (as determined
under Section 318(a) of the Code, without regard to Section 318(a)(2)(B)(i) of
the Code), during the entire one-year period preceding the purchase or on any
Allocation Date, more than 25% of any class of outstanding stock of the Company
or of the total value of any class of outstanding stock of the Company.
To the extent that a Participant is subject to the allocation
limitation described in this Section 7(c) for an Allocation Year, he shall not
share in the allocation of Employer Contributions and Forfeitures.
Section 8. Voting Company Stock.
Except as otherwise provided in this Section 8, shares of Company Stock
in the Trust shall be voted by the Trustee only as
23
directed by the Committee. In order to facilitate the voting of shares under
this Section 8, the Trustee may give a proxy to the Committee.
With respect to any corporate matter which involves the voting of such
shares at a shareholder meeting and which constitutes a merger, consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business or a similar transaction
specified in regulations under Section 409(e)(3) of the Code, however, each
Participant (or Beneficiary) will be entitled to give directions to the Trustee
as to the voting of shares of Company Stock then allocated to his Company Stock
Account. In that event, each Participant (or Beneficiary) shall be provided with
the information statement and other materials provided to Company shareholders
in connection with the shareholder meeting, together with a form upon which
confidential voting directions may be given to the Trustee. The Trustee shall
not disclose the voting directions of any individual Participant (or
Beneficiary) to the Committee or the Company. Any allocated Company Stock with
respect to which voting directions are not received from Participants (or
Beneficiaries) and any shares of Company Stock which are not then allocated to
Participants' Company Stock Accounts shall be voted by the Trustee in the manner
directed by the Committee.
Section 9. Vesting and Forfeitures.
24
(a) Vesting - A Participant's interest in his Accounts shall become
100% vested and nonforfeitable if he (1) is employed by the Company or an
Affiliate on or after his 65th birthday, (2) incurs a Disability while employed
by the Company or an Affiliate, (3) dies while employed by the Company or an
Affiliate, or (4) completes at least five years of Credited Service.
(b) Forfeitures - If a Participant who is not vested terminates
Service, the final balances in his Accounts will become a Forfeiture when he
incurs a five-consecutive-year Break in Service. All Forfeitures will be
reallocated to the Accounts of remaining Participants, as provided in Section
6(a), as of the Allocation Date coinciding with or next following the date on
which the Forfeiture occurs.
Section 10. Credited Service and Break in Service.
(a) Credited Service - An Employee's Credited Service shall include
each period of his Service computed (in full years and days) from the date he is
first credited with an Hour of Service (including Service prior to March 1,
1996) until the date on which his Service terminates. A Break in Service that
does not exceed one year shall be included in an Employee's Credited Service.
Credited Service shall also include periods of Service with an Affiliate.
(b) Break in Service - A one-year Break in Service shall occur one year
after the date of an Employee's termination of Service. A five-consecutive-year
Break in Service shall occur
25
five years after the date of an Employee's termination of Service (if he has not
been reemployed). For purposes of determining the period of an Employee's Break
in Service, the period of a maternity/paternity absence, described in Section
411(a)(6)(E)(i) of the Code, or any unpaid leave covered under the Family and
Medical Leave Act of 1993, not exceeding one year shall not be treated as a
Break in Service.
(c) Reemployment - If a former Employee is reemployed after a
five-consecutive-year Break in Service and had not attained a vested interest
under the Plan, Service prior to the Break in Service shall not be included in
determining his Credited Service. If a Participant is reemployed after a
one-year Break in Service but prior to the occurrence of a five-consecutive-year
Break in Service, his Credited Service shall not include Service prior to the
one-year Break in Service until he completes one year of Credited Service
following reemployment.
Section 11. When Capital Accumulation Will Be Distributed.
(a) Except as otherwise provided in Sections 11(c) and 12, a
Participant's Capital Accumulation will be distributed following his termination
of Service, but only at the time and in the manner determined by the Committee.
The Committee shall establish a benefit distribution policy and may modify such
policy from time to time; provided, however, that the distribution policy shall
be applied to Participants in a nondiscriminatory manner.
26
(b) In the event of a Participant's Retirement, Disability or death,
distribution of his Capital Accumulation shall commence not later than the Plan
Year following the Plan Year in which his Retirement, Disability or death
occurs. If a Participant's Service terminates for any other reason, distribution
of his Capital Accumulation shall commence not later than the sixth Plan Year
following the Plan Year in which his Service terminates (unless he is reemployed
by the Company or an Affiliate). Except as otherwise provided in Section 11(c),
if a Participant's Capital Accumulation includes Financed Shares, the Committee
may elect to defer the distribution of that portion of his Capital Accumulation
(attributable to such Financed Shares) until the Plan Year following the Plan
Year in which the Acquisition Loan (incurred to acquire such Financed Shares)
has been fully repaid. For this purpose, all indebtedness incurred by the
Trustee to acquire Company Stock in a single transaction shall be treated as one
Acquisition Loan.
The following alternative modes of distribution may be selected by the
Committee (after considering the available liquid assets of the Company and the
Trust):
(1) Distribution of a Participant's Capital Accumulation in a
single lump sum; or
(2) Distribution of a Participant's Capital Accumulation in
substantially equal, annual installments over a period not
exceeding five years (provided that the period over which
installments may be distributed may be extended an additional
year (up to an additional five years) for each $135,000 or
fraction thereof by which his Capital Accumulation
27
exceeds $690,000 (as adjusted after 1996 for increases in
the cost of living pursuant to Section 409(o)(2) of the
Code)); or
(3) Any combination of the foregoing.
If the value of a Participant's Capital Accumulation at the time a distribution
would otherwise commence under this Section 11 exceeds $3,500, no portion of his
Capital Accumulation may be distributed to him without his written consent
before he attains age 65.
(c) Distribution of a Participant's Capital Accumulation shall commence
not later than 60 days after the end of the Plan Year in which occurs the latest
of (1) his 65th birthday, (2) the tenth anniversary of the date he became a
Participant, or (3) his termination of Service. The distribution of the Capital
Accumulation of any Participant who attains age 70 1/2 in an Allocation Year
must commence not later than April 1st of the next Allocation Year (even if he
has not terminated Service) and must be made in accordance with the regulations
under Section 401(a)(9) of the Code, including Section 1.401(a)(9)-2. If the
amount of a Participant's Capital Accumulation cannot be determined (by the
Committee) by the date on which a distribution is to commence, or if the
Participant cannot be located, distribution of his Capital Accumulation shall
commence within 60 days after the date on which his Capital Accumulation can be
determined or after the date on which the Committee locates the Participant.
28
(d) If any part of a Participant's Capital Accumulation is retained in
the Trust after his Service ends, his Accounts will continue to be treated as
described in Section 6. However, except as provided in Section 3(b), such
Accounts shall not be credited with any additional Employer Contributions and
Forfeitures. If a Participant whose Capital Accumulation exceeds $3,500 fails to
consent to a distribution offered before he attains age 65, or if a Participant
cannot be located, his entire Capital Accumulation may be segregated and
invested in Trust Assets other than Company Stock (as determined by the
Committee).
Section 12. Diversification Election
Effective March 1, 2006, a Participant who has attained age 55 and
completed at least ten Years of Participation shall be notified of his right to
elect to "diversify" a portion of the balance in his Company Stock Account, as
provided in Section 401(a)(28)(B) of the Code. An election to "diversify" must
be made on the prescribed form and filed with the Committee within the 90-day
period immediately following the last day of a Plan Year in the Election Period.
For purposes of this Section 12, "Years of Participation" is the number of
Allocation Years in which the Participant is entitled to receive an allocation
of Employer Contributions or Forfeitures under Section 3(b), and the "Election
Period" means the period of six consecutive Plan Years beginning with the Plan
Year in which the Participant first becomes eligible to make an election.
29
For each of the first five Plan Years in the Election Period, the
Participant may elect to "diversify" an amount which does not exceed 25% of the
number of shares of Company Stock allocated to his Company Stock Account since
the inception of the Plan, less all shares with respect to which an election
under this Section 12 was previously made. In the case of the sixth Plan Year in
the Election Period, the Participant may elect to "diversify" an amount which
does not exceed 50% of the number of shares of Company Stock allocated to his
Company Stock Account since the inception of the Plan, less all shares with
respect to which an election under this Section 12 was previously made. No
"diversification" shall be permitted if the balance in a Participant's Company
Stock Account as of the last day of the first Plan Year in the Election Period
has a Fair Market Value of $500 or less, unless and until the balance in his
Company Stock Account as of a subsequent Plan Year in the Election Period
exceeds $500.
So long as the 401(k) Plan then provides at least three investment
funds (other than Company Stock) among which Participants may select,
"diversification" will be effected by transferring to the 401(k) Plan funds
representing that portion of Participants' Company Stock Accounts with respect
to which a "diversification" election is made. Any transfer to the 401(k) Plan
under this Section 12 shall occur no earlier than 30 days after any required
Forms 5310-A with respect to such transfer have been filed with the Internal
Revenue Service.
30
Section 13. How Capital Accumulation Will Be Distributed.
(a) The Trustee will make distributions from the Trust only as directed
by the Committee. Distribution of a Participant's Capital Accumulation will be
made in whole shares of Company Stock, cash or a combination of both, as
determined by the Committee; provided, however, that the Committee shall notify
the Participant of his right to demand distribution of his Capital Accumulation
entirely in whole shares of Company Stock (with only the value of any fractional
share paid in cash). Any distribution in cash shall be based upon the Fair
Market Value of Company Stock as of the last day of the Plan Year coinciding
with or immediately preceding the date of distribution.
(b) If the charter or by-laws of the Company restrict the ownership of
substantially all outstanding shares of Company Stock to current Employees and
the Trust, the distribution of a Participant's Capital Accumulation may be made
entirely in cash without granting the Participant the right to demand
distribution in Company Stock. Alternatively, Company Stock may be distributed
subject to the requirement that it be immediately resold to the Company under
payment terms that comply with Section 14(b).
(c) Distribution of a Participant's Capital Accumulation will be made
to the Participant if he is living, and if not, to his Beneficiary. In the event
of a Participant's death, his Beneficiary shall be his surviving spouse, or if
none, his estate. A Participant (with the written consent of his spouse, if any,
acknowledging the effect of the consent and witnessed by a
31
notary public or Plan representative) may designate a different Beneficiary or
Beneficiaries from time to time by filing a written designation with the
Committee. A deceased Participant's entire Capital Accumulation shall be
distributed to his Beneficiary within five years after his death, except to the
extent that distribution has previously commenced in accordance with Section
11(b)(2).
(d) The Company shall furnish the recipient of a distribution with the
tax consequences explanation required by Section 402(f) of the Code and shall
comply with the withholding requirements of Section 3405 of the Code and of any
applicable state law with respect to distributions from the Trust. If the
Committee so elects for a Plan Year, distributions to Participants may commence
less than 30 days after the notice required under Section 1.411(a)-11(c) of the
regulations under the Code is given; provided that no such distribution to a
Participant shall be made unless (1) the Participant is informed that he has the
right to a period of at least 30 days after receiving the notice to consider
whether or not to consent to a distribution (or a particular distribution
option) and (2) the Participant affirmatively elects to receive a distribution
after receiving the notice.
(e) If a distribution of a Participant's Capital Accumulation is
neither one of a series of annual installments over a period of ten years (or
more) nor the minimum amount required to be distributed pursuant to the second
sentence of Section 11(c)
32
(an "eligible rollover distribution"), the Committee shall notify the
Participant (or any spouse or former spouse who is his alternate payee under a
"qualified domestic relations order" (as defined in Section 414(p) of the Code))
of his right to elect to have the "eligible rollover distribution" paid directly
to an "eligible retirement plan" (within the meaning of Section 401(a)(31) of
the Code) that is an individual retirement account described in Section 408(a)
of the Code, an individual retirement annuity described in Section 408(b) of the
Code, a qualified trust described in Section 401(a) of the Code or a qualified
annuity plan described in Section 403(a) of the Code that accepts "eligible
rollover distributions." If such an "eligible rollover distribution" is to be
made to the Participant's surviving spouse, the Committee shall notify the
surviving spouse of his right to elect to have the distribution paid directly to
an "eligible retirement plan" that is either an individual retirement account
described in Section 408(a) of the Code or an individual retirement annuity
described in Section 408(b) of the Code. Any election under this Section 13(e)
shall be made and effected in accordance with such rules and procedures as may
be established from time to time by the Committee in order to comply with
Section 401(a)(31) of the Code.
33
Section 14. Rights, Options and Restrictions on Company Stock.
(a) Any shares of Company Stock held or distributed by the Trust shall
be subject to a "right of first refusal," unless Company Stock is readily
tradable on an established market. The right of first refusal shall provide
that, prior to any subsequent transfer, the shares must first be offered for
purchase in writing to the Company, and then to the Trust, at the then Fair
Market Value. A bona fide written offer from an independent prospective buyer
shall be deemed to be the Fair Market Value for this purpose. The Company and
the Committee (on behalf of the Trust) shall have a total of 14 days to exercise
the right of first refusal on the same terms offered by a prospective buyer. The
Company may require that a Participant entitled to a distribution of Company
Stock execute an appropriate stock transfer agreement (evidencing the right of
first refusal) prior to receiving a certificate for Company Stock.
(b) The Company shall provide a "put option" to any Participant (or
Beneficiary) who receives a distribution of Company Stock, unless Company Stock
is readily tradable on an established market. The put option shall permit the
Participant (or Beneficiary) to sell such Company Stock to the Company at any
time during two option periods, at the then Fair Market Value. The first put
option period shall be for at least 60 days beginning on the date of
distribution. The second put option period shall be for at least 60 days
beginning after the new determination of Fair Market Value (and notice to the
Participant thereof) in the
34
following Plan Year. The Company may allow the Committee to direct the Trustee
to purchase shares of Company Stock tendered to the Company under a put option.
The payment for any Company Stock sold under a put option shall be made within
30 days if the shares were distributed as part of an installment distribution.
If the shares were distributed in a lump sum distribution, payment shall
commence within 30 days and may be made in a lump sum or in substantially equal,
annual installments over a period not exceeding five years, with adequate
security provided and interest payable at a reasonable rate pursuant to the
promissory note which is issued to evidence the unpaid installment balance (as
determined by the Company or the Committee).
(c) Shares of Company Stock held or distributed by the Trustee may
include such legend restrictions on transferability as the Company may
reasonably require in order to assure compliance with applicable Federal and
state securities laws. Except as otherwise provided in Section 13(b) and this
Section 14, no shares of Company Stock held or distributed by the Trustee may be
subject to a put, call or other option, or buy-sell or similar arrangement. The
provisions of this Section 14 shall continue to be applicable to Company Stock
even if the Plan ceases to be an employee stock ownership plan under Section
4975(e)(7) of the Code.
Section 15. No Assignment of Benefits.
35
A Participant's Capital Accumulation may not be anticipated, assigned
(either at law or in equity), alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process, except in accordance with a
"qualified domestic relations order" (as defined in Section 414(p) of the Code).
Distributions made to an alternate payee in accordance with a qualified domestic
relations order may commence no earlier than the date on which the Participant
attains his "earliest retirement age" (as defined in Section 414(p)(4)(B) of the
Code).
Section 16. Administration.
(a) Administrative Committee - The Plan will be administered by an
Administrative Committee composed of one or more individuals appointed by the
Board of Directors to serve at its pleasure and without compensation. The
members of the Committee shall be the named fiduciaries with authority to
control and manage the operation and administration of the Plan. Members of the
Committee need not be Employees or Participants. Any Committee member may resign
by giving notice, in writing, to the Board of Directors.
(b) Committee Action - Committee action will be by vote of a majority
of the members at a meeting or in writing without a meeting. A Committee member
shall not vote on any question relating specifically to himself.
The Committee shall choose from its members a Chairman and a Secretary.
The Chairman or the Secretary of the Committee shall
36
be authorized to execute any certificate or other written direction on behalf of
the Committee. The Secretary shall keep a record of the Committee's proceedings
and of all dates, records and documents pertaining to the administration of the
Plan.
(c) Powers and Duties of the Committee - The Committee shall have all
powers necessary to enable it to administer the Plan and the Trust Agreement in
accordance with their provisions, including without limitation the following:
(1) resolving all questions relating to the eligibility of
Employees to become Participants;
(2) determining the appropriate allocations to Participants'
Accounts pursuant to Section 6;
(3) determining the amount of benefits payable to a Participant
(or Beneficiary), and the time and manner in which such
benefits are to be paid;
(4) authorizing and directing all disbursements of Trust Assets
by the Trustee;
(5) establishing procedures in accordance with Section 414(p) of
the Code to determine the qualified status of domestic
relations orders and to administer distributions under such
qualified orders;
(6) engaging any administrative, legal, accounting, clerical or
other services that it may deem appropriate;
(7) construing and interpreting the Plan and the Trust Agreement
and adopting rules for administration of the Plan that are
consistent with the terms of the Plan documents and of ERISA
and the Code;
(8) compiling and maintaining all records it determines to be
necessary, appropriate or convenient in connection with the
administration of the Plan;
(9) reviewing the performance of the Trustee with respect to the
Trustee's administrative duties,
37
responsibilities and obligations under the Plan and Trust
Agreement;
(10) selecting an independent appraiser and determining the Fair
Market Value of Company Stock as of the last day of each Plan
Year and such other dates as it determines, in its
discretion, to be necessary or appropriate; and
(11) executing agreements and other documents on behalf of the
Plan and Trust.
Except as otherwise provided in Section 5(c) and (e), the Committee
shall be responsible for directing the Trustee as to the investment of Trust
Assets. The Committee may delegate to the Trustee the responsibility for
investing all or any portion of the Trust Assets. The Committee shall establish
a funding policy and method for directing the Trustee to acquire Company Stock
(and for otherwise investing the Trust Assets) in a manner that is consistent
with the objectives of the Plan and the requirements of ERISA.
The Committee shall perform its duties under the Plan and the Trust
Agreement solely in the interests of the Participants (and their Beneficiaries).
Any discretion granted to the Committee under any of the provisions of the Plan
or the Trust Agreement shall be exercised only in accordance with rules and
policies established by the Committee which shall be applicable on a
nondiscriminatory basis. The Committee shall have sole and exclusive
discretionary authority to construe, interpret and apply the terms of the Plan.
The Committee shall be given the
38
greatest possible deference permitted by law in the exercise of
such discretionary authority.
(d) Expenses - All reasonable expenses of administering the Plan and
Trust shall be charged to and paid out of the Trust Assets. The Company may,
however, pay all or any portion of such expenses directly, and payment of
expenses by the Company shall not be deemed to be Employer Contributions.
(e) Information to be Submitted to the Committee - To enable the
Committee to perform its functions, the Company shall supply full and timely
information to the Committee on all matters as the Committee may require, and
shall maintain such other records as the Committee may determine are necessary
or appropriate in order to determine the benefits due or which may become due to
Participants (or Beneficiaries) under the Plan.
(f) Delegation of Fiduciary Responsibility - The Committee from time to
time may allocate to one or more of its members and/or may delegate to any other
persons or organizations any of its rights, powers, duties and responsibilities
with respect to the operation and administration of the Plan that are permitted
to be so delegated under ERISA; provided, however, that responsibility for
investment of the Trust Assets may not be allocated or delegated except as
provided in Section 16(c). Any such allocation or delegation shall be made in
writing, shall be reviewed periodically by the Committee and shall be terminable
upon such notice as the Committee in its discretion deems reasonable and proper
under the circumstances.
39
(g) Bonding, Insurance and Indemnity - To the extent required under
Section 412 of ERISA, the Company shall secure fidelity bonding for the
fiduciaries of the Plan.
The Company (in its discretion) or the Trustee (as directed by the
Committee) may obtain a policy or policies of insurance for the Committee (and
other fiduciaries of the Plan) to cover liability or loss occurring by reason of
the act or omission of a fiduciary. If such insurance is purchased with Trust
Assets, the policy must permit recourse by the insurer against the fiduciary in
the case of a breach of a fiduciary obligation by such fiduciary. The Company
hereby agrees to indemnify each member of the Committee (to the extent permitted
by law) against any personal liability or expense resulting from his service on
the Committee, except such liability or expense as may result from his own
willful misconduct.
(h) Notices, Statements and Reports - The Company shall be the "Plan
Administrator" (as defined in Section 3(16)(A) of ERISA and Section 414(g) of
the Code) for purposes of the reporting and disclosure requirements of ERISA and
the Code. The Committee shall assist the Company, as requested, in complying
with such reporting and disclosure requirements. The Committee shall be the
designated agent of the Plan for the service of legal process.
40
Section 17. Claims Procedure.
A Participant (or Beneficiary) who does not receive a distribution of
benefits to which he believes he is entitled may present a claim to the
Committee. The claim for benefits must be in writing and addressed to the
Committee or to the Company. If the claim for benefits is denied, the Committee
shall notify the Participant (or Beneficiary) in writing within 90 days after
the Committee initially received the benefit claim, unless special circumstances
require an extension of time for processing the claim, in which case such period
may be extended for an additional 90 days; provided, that the Committee must
provide the Participant (or Beneficiary) with written notice of such extension
prior to the expiration of the initial 90-day period. Any notice of a denial of
benefits shall advise the Participant (or Beneficiary) of the basis for the
denial, any additional material or information necessary for the Participant (or
Beneficiary) to perfect his claim and the steps which the Participant (or
Beneficiary) must take to have his claim for benefits reviewed.
Each Participant (or Beneficiary) whose claim for benefits has been
denied may file a written request for a review of his claim by the Committee.
The request for review must be filed by the Participant (or Beneficiary) within
60 days after he receives the written notice denying his claim. The decision of
the Committee will be made within 60 days after receipt of a request for review
and shall be communicated in writing to the claimant. Such written notice shall
set forth the basis for the Committee's
41
decision. If there are special circumstances (such as the need to hold a
hearing) which require an extension of time for completing the review, the
Committee's decision shall be rendered not later than 120 days after receipt of
a request for review. Nothing contained in the Plan shall be deemed to give an
Employee the right to be retained in the Service of the Company or to interfere
with the right of the Company to discharge, with or without cause, any Employee
at any time. All decisions and interpretations of the Committee under this
Section 17 shall be conclusive and binding upon all persons with an interest in
the Plan and shall be given the greatest deference permitted by law.
Section 18. Limitation on Participants' Rights.
A Participant's Capital Accumulation will be based solely upon his
vested interest in his Accounts and will be paid only from the Trust Assets. The
Company, the Committee or the Trustee shall not have any duty or liability to
furnish the Trust with any funds, securities or other assets, except as
expressly provided in the Plan.
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract of employment or otherwise between the Company and any
Employee, or to be a consideration for, or an inducement or condition of, any
employment. Nothing contained in this Plan shall be deemed to give an Employee
the right to be retained in the Service of the Company or to interfere with the
42
right of the Company to discharge, with or without cause, any Employee at any
time.
Section 19. Future of the Plan.
The Company reserves the right to amend or terminate the Plan (in whole
or in part) and the Trust Agreement at any time, by action of the Board of
Directors. Neither amendment nor termination of the Plan shall retroactively
reduce the vested rights of Participants or permit any part of the Trust Assets
to be diverted to or used for any purpose other than for the exclusive benefit
of the Participants (and their Beneficiaries).
The Company specifically reserves the right to amend the Plan and the
Trust Agreement retroactively in order to satisfy any applicable requirements of
the Code and ERISA.
The Company further reserves the right to terminate the Plan in the
event of a determination by the Internal Revenue Service (after a timely
Application for Determination is filed by the Company) that the Plan initially
fails to satisfy the applicable requirements of Sections 401(a) and 4975(e)(7)
of the Code. If such a determination is made, all Trust Assets shall (upon
written direction of the Company) be returned to the Company and the Plan shall
terminate.
If the Plan is terminated (or partially terminated), participation of
Participants affected by the termination will end. If Employer Contributions are
not replaced by contributions to a comparable plan which satisfies the
requirements of Sec-
43
tion 401(a) of the Code, the Accounts of only those Participants who are
Employees on the effective date of the termination will become nonforfeitable as
of that date. A complete discontinuance of Employer Contributions shall be
deemed to be a termination of the Plan for this purpose. The Capital
Accumulations of those Participants whose Service terminated prior to the
effective date of Plan termination will continue to be determined pursuant to
Section 9(a); and, to the extent that such Participants are not vested, their
Accounts will become Forfeitures to be reallocated as of the effective date of
Plan termination (even if they have not incurred a five-consecutive-year Break
in Service).
After termination of the Plan, the Trust will be maintained until the
Capital Accumulations of all Participants have been distributed. Capital
Accumulations may be distributed following termination of the Plan or
distributions may be deferred as provided in Section 11, as the Company shall
determine. In the event that Company Stock is sold in connection with the
termination of the Plan or the amendment of the Plan to become a qualified
employee plan that is not a stock bonus plan, all Capital Accumulations may be
distributed in cash.
In the event of the merger or consolidation of this Plan with another
plan, or the transfer of Trust Assets (or liabilities) to another plan, the
Account balances of each Participant immediately after such merger,
consolidation or transfer must be at least as great as immediately before such
merger, consolidation or transfer (as if the Plan had then terminated).
44
Section 20. "Top-Heavy" Contingency Provisions.
(a) The provisions of this Section 20 are included in the Plan
pursuant to Section 401(a)(10)(B)(ii) of the Code and shall become applicable
only if the Plan becomes a "top-heavy plan" under Section 416(g) of the Code for
any Allocation Year.
(b) The determination as to whether the Plan becomes "top-heavy" for
any Allocation Year shall be made as of the Allocation Date of the immediately
preceding Allocation Year (or as of December 31, 1996, for the Allocation Year
ending on that date) by considering the Plan together with the 401(k) Plan. The
Plan shall be "top-heavy" only if the total of the account balances under the
Plan and the 401(k) Plan for "key employees" as of the determination date
exceeds 60% of the total of the account balances for all Participants. For such
purpose, account balances shall be computed and adjusted pursuant to Section
416(g) of the Code. "Key employees" shall be certain Participants (who are
officers or shareholders of the Company) and Beneficiaries described in Section
416(i)(1) or (5) of the Code.
(c) For any Allocation Year in which the Plan is "top-heavy," each
Participant who is an Employee on the Allocation Date (and who is not a "key
employee") shall receive a minimum allocation of Employer Contributions and
Forfeitures which is equal to the lesser of:
(1) 3% of his Statutory Compensation; or
(2) the same percentage of his Statutory Compensation as the
allocation to the "key employee" for whom
45
the percentage is the highest for that Plan Year. For this
purpose, the allocation to a "key employee" shall include any
Elective Deferrals made on his behalf for the Allocation Year
to the 401(k) Plan.
(d) As of the first day of any Allocation Year in which the Plan has
become "top-heavy," the five-year vesting provision in Section 9(a)(4) shall be
applied (with respect to any Employee who is credited with at least one Hour of
Service after the Plan has become "top-heavy") by providing for vesting after
three years of Credited Service.
If the Plan ceases to be "top-heavy," the Capital Accumulation of a
Participant who, at that time, has less than three years of Service shall
thereafter be determined under the vesting provision in Section 9(a)(4), instead
of the vesting provision of this Section 20(d). If the Plan ceases to be
"top-heavy," the Capital Accumulation of a Participant who, at that time, has
three or more years of Service shall continue to be determined using the
three-year vesting schedule in this Section 20(d).
(e) For any Allocation Year in which the Plan is "top-heavy," Statutory
Compensation of each Employee for purposes of the Plan shall not take into
account any amount in excess of $150,000 (as adjusted for increases in the cost
of living).
Section 21. Governing Law.
The provisions of this Plan and the Trust Agreement shall be construed,
administered and enforced in accordance with the laws
46
of the State of California, to the extent such laws are not superseded by ERISA.
Section 22. Execution.
To record the adoption of the Plan, the Company has caused it to be
executed on this 23rd day of April, 1996.
MEADE INSTRUMENTS CORP.
By /s/ JOHN C. DIEBEL
--------------------------------------
Chairman & CEO
By /s/ STEVE MURDOCK
--------------------------------------
President
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Amendment No. 1
WHEREAS, Meade Instruments Corp. (the "Company") maintains the Meade
Instruments Corp. Employee Stock Ownership Plan ("Plan") for the benefit of its
eligible Employees;
WHEREAS, the Internal Revenue Service has requested that certain
technical amendments be made to the Plan as a condition for the issuance of a
favorable determination letter relating to the qualified status of the Plan
under the Internal Revenue Code of 1986, as amended; and
WHEREAS, it is desirable to amend the Plan to modify certain provisions
relating to limitations on Annual Additions and to conform with certain
requirements of the Small Business Job Protection Act of 1996;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The definition of "Compensation" in Section 2 is restated, effective
as of March 1, 1997, to read as follows:
Compensation ......... The total wages and other compensa-
tion paid to an Employee by the
Company during each Allocation
Year, as reported on the Employee's
Tax and Wage Statement (Form W-2),
plus any Elective Deferrals made on
his behalf to the 401(k) Plan and any
amounts withheld pursuant to the Company's
Cafeteria Plan (under Section 125 of the
Code), but excluding any amount in excess of
$160,000 (as adjusted after 1997 for
increases in the cost of living pursuant to
Section 401(a)(17) of the Code).
2. The definition of "Highly Compensated Employee" is restated,
effective as of March 1, 1997, to read as follows:
Highly Compensated
Employee ............ An Employee who (1) was a 5% owner
at any time during the year or the
preceding year, or (2) had Compen-
sation in excess of $80,000 in the
preceding year and, if so elected
by the Company, was in the top-paid
20% group of Employees for such
preceding year. The $80,000 amount
shall be adjusted for increases in
the cost of living pursuant to
Section 414(q)(1) of the Code.
3. The definition of "Statutory Compensation" in Section 2 is restated,
effective as of January 1, 1998, to read as follows:
Statutory
Compensation ........ The total remuneration paid to an
Employee by the Company during the
Allocation Year for personal ser-
vices rendered to the Company, plus
the amount of any Elective
Deferrals made on his behalf to the
401(k) Plan and any amount withheld
pursuant to the Company's Cafeteria
Plan (under Section 125 of the
Code) and excluding employer con-
tributions to a plan of deferred
compensation, amounts realized in
connection with stock options and
amounts which receive special tax
benefits.
- 2 -
4. Section 3(c) is modified, effective as of March 1, 1996, by adding
the following sentence at the end thereof:
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of
the Code.
5. The second paragraph of Section 4(b) is restated, effective as of
March 1, 1996, to read as follows:
Matching Contributions for Highly Compensated Employees shall be
limited for any Allocation Year to the extent necessary to satisfy one of
the contribution percentage requirements described in Section 401(m)(2) of
the Code and Section 1.401(m)-1(b) of the regulations thereunder, as
computed separately (if necessary) for the Plan and the 401(k) Plan. The
actual contribution percentage of the Highly Compensated Employee with the
highest such percentage shall be reduced until it equals that of the
Highly Compensated Employee with the next highest percentage. This process
shall be repeated until one of the above tests is passed. For the 1996
Allocation Year only, if a Highly Compensated Employee is aggregated with
family members who are Highly Compensated Employees (without regard to
aggregation) then his actual contribution percentage shall be reduced in
accordance with Section 1.401(m)-1(e)(2)(iii) of the regulations, and
excess aggregate contributions shall be
- 3 -
allocated among family members in proportion to the Matching Contributions
of each family member. For this purpose, any reduction in the Matching
Contributions made on behalf of Highly Compensated Employees shall be
determined in order of the actual dollar amounts of Matching Contributions
beginning with the highest of such dollar amounts (however, for the 1996
Allocation Year, any such reduction shall be determined in order of the
contribution percentages beginning with the highest of such percentages).
Matching Contributions shall not be payable with respect to any Elective
Deferrals under the 401(k) Plan which are distributed to Participants
pursuant to the provisions of the 401(k) Plan in order to satisfy Sections
401(k)(3)(A)(ii) or 402(g) of the Code.
6. The last paragraph of Section 7(a) is restated, effective as of
March 1, 1996, to read as follows:
If the aggregate amount that would be allocated to the Accounts of a
Participant in the absence of these limitations would exceed the amount
set forth in these limitations, the allocation of Discretionary
Contributions and Forfeitures under this Plan shall be reduced prior to
reducing the allocations to his accounts under the 401(k) Plan. Any
Forfeitures which can be allocated to no Participant's Accounts by reason
of these limitations shall be credited to a "Forfeiture Suspense Account"
and allocated as Forfeitures
- 4 -
under Section 6(a) for the next succeeding Allocation Year (prior to the
allocation of Employer Contributions for such succeeding Allocation Year).
7. Section 11(c) is restated, effective as of January 1, 1997, to read
as follows:
(c) Distribution of a Participant's Capital Accumulation shall
commence not later than 60 days after the end of the Plan Year in which
occurs the latest of (1) his 65th birthday, (2) the tenth anniversary of
the date he became a Participant, or (3) his termination of Service. The
distribution of the Capital Accumulation of any Participant who attains
age 70-1/2 in any calendar year and either (i) has terminated Service or
(ii) is a "5% owner" of Company Stock (as defined in Section
416(i)(1)(B)(i) of the Code) must commence not later than April 1st of the
next calendar year and must be made in accordance with the regulations
under Section 401(a)(9) of the Code, including Section 1.401(a)(9)-2. If
the amount of a Participant's Capital Accumulation cannot be determined
(by the Committee) by the date on which a distribution is to commence, or
if the Participant cannot be located, distribution of his Capital
Accumulation shall commence within 60 days after the date on which his
Capital Accumulation can be determined or after the date on which the
Committee locates the Participant.
- 5 -
8. The fourth paragraph of Section 19 is restated, effective as of
January 1, 1996, to read as follows:
If the Plan is terminated (or partially terminated), participation
of Participants affected by the termination will end. If Employer
Contributions are not replaced by contributions to a comparable plan which
satisfies the requirements of Section 401(a) of the Code, the Accounts of
all affected Participants shall become nonforfeitable. A complete
discontinuance of Employer Contributions shall be deemed to be a
termination of the Plan for this purpose.
To record the adoption of this Amendment No. 1, the Company has caused
it to be executed this _____ day of __________, 1997.
MEADE INSTRUMENTS CORP.
By
-----------------------------
- 6 -
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Amendment No. 2
WHEREAS, Meade Instruments Corp. (the "Company") maintains the Meade
Instruments Corp. Employee Stock Ownership Plan (the "Plan") for the benefit of
its eligible Employees;
WHEREAS, it is necessary to amend the Plan in connection with the
initial public offering ("IPO") of stock of the Company;
NOW, THEREFORE, the Plan is hereby amended, effective upon consummation
of the IPO, to read as follows:
1. The definitions of "Company," "Company Stock" and "Fair Market
Value" in Section 2 are restated to read as follows:
Company ................... Meade Instruments Corp., a
Delaware corporation.
Company Stock ............. Shares of Common Stock issued
by the Company, which stock is
readily tradable on an estab-
lished securities market and
constitutes "employer securi-
ties" under Section 409(l)(1)
of the Code.
Fair Market Value ........ The fair market value of Company
Stock, as determined for all
purposes under the Plan by reference
to prevailing market prices.
2. Section 7(c) is restated to read as follows:
If a Company shareholder sold Company Stock to the
Trust in the transaction described in Section 5(c) and elected (with the
consent of the Company) nonrecognition of gain under Section 1042 of the
Code, no portion of the Com-
pany Stock purchased in that transaction (or any dividends or other income
attributable thereto) may be allocated prior to the later of the tenth
anniversary of the purchase or the Allocation Year following the
Allocation Year for which shares are released from the Loan Suspense
Account as a result of the final payment on the Acquisition Loan incurred
in connection with such purchase to the Accounts of:
(1) any Participant who has made an election under
Section 1042 of the Code; or
(2) the selling shareholder's spouse, brothers or sisters (whether
by the whole or half blood), ancestors or lineal descendants
(except as to certain lineal descendants, to the extent
provided in Section 409(n)(3)(A) of the Code), or any other
person who bears a relationship to him that is described in
Section 267(b) of the Code.
In addition, no portion of the Company Stock purchased by the Trust
in the 1996 transaction (or any dividends or other income attributable
thereto) may thereafter be allocated to the Accounts of any Participant
owning (as determined under Section 318(a) of the Code, without regard to
Section 318(a)(2)(B)(i) of the Code), during the entire one-year period
preceding the purchase or on any Allocation Date, more than 25% of any
class of outstanding Company
- 2 -
Stock or of the total value of any class of outstanding Company Stock.
To the extent that a Participant is subject to the allocation
limitation described in this Section 7(c) for an Allocation Year, he shall
not share in the allocation of Employer Contributions and Forfeitures.
3. Section 8 is restated to read as follows:
Each Participant (or Beneficiary) will be entitled to give
directions to the Trustee as to the voting of shares of Company Stock
allocated to his Company Stock Account on all matters presented for a vote
of stockholders. Each Partici- pant (or Beneficiary) having shares
allocated to his Company Stock Account as of the record date for voting at
a stock- holder meeting shall be provided with the proxy statement and
other materials provided to Company stockholders in connection with such
meeting, together with a form upon which confidential voting directions
may be given to the Trustee. The Trustee shall not disclose the voting
direc- tions of any individual Participant (or Beneficiary) to the
Committee or the Company. Any allocated Company Stock with respect to
which voting directions are not received from Participants (or
Beneficiaries) and any shares of Company Stock which are not then
allocated to Participants' Company Stock Accounts shall be voted by the
Trustee in the manner directed by the Committee.
- 3 -
4. Section 13(a) is amended by restating the third sentence thereof to
read as follows:
Shares of Company Stock distributed by the Trustee shall be
readily tradable on an established securities market.
5. Section 14 is restated to read as follows:
Section 14. Rights, Options and Restrictions on Company Stock.
Shares of Company Stock held or distributed by the Trustee may
include such legend restrictions on transfer- ability as the Company may
reasonably require in order to assure compliance with applicable Federal
and state securi- ties laws, but no shares of Company Stock held or
distri- buted by the Trustee may be subject to a put, call or other
option, or buy-sell or similar arrangement. The provisions of this Section
14 shall continue to be applicable to Com- pany Stock even if the Plan
ceases to be an employee stock ownership plan under Section 4975(e)(7) of
the Code.
6. Section 16(c) is amended by deleting paragraph (10) and by
redesignating paragraph (11) as paragraph (10).
- 4 -
To record the adoption of this Amendment No. 2, the Company has caused it
to be executed this _____ day of __________, 1997.
MEADE INSTRUMENTS CORP.
By
----------------------------------
- 5 -
Dates Referenced Herein and Documents Incorporated by Reference
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