-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WS8KeJCxmZ2GqbGuKgDS1gNAyL2facJ0XOVQxV2lfM2JiCRSCzbLV+XwRYuz8VoL Mev51QFIc0Vy2qQCe/mDfw== 0000806086-96-000012.txt : 19960729 0000806086-96-000012.hdr.sgml : 19960729 ACCESSION NUMBER: 0000806086-96-000012 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19960726 EFFECTIVENESS DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED TECHNOLOGY LABORATORIES INC CENTRAL INDEX KEY: 0000806086 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 911353386 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-08881 FILM NUMBER: 96599146 BUSINESS ADDRESS: STREET 1: 22100 BOTHELL EVERETT HWY SE STREET 2: PO BOX 3003 CITY: BOTHELL STATE: WA ZIP: 98041-3003 BUSINESS PHONE: 2064877000 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED TECHNOLOGY LABORATORIES INC/ DATE OF NAME CHANGE: 19930414 S-8 1 JULY 25, 1996 FORM S-8 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on July 25, 1996 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ______________________ ADVANCED TECHNOLOGY LABORATORIES, INC. (Exact name of Registrant as specified in its charter) Washington 91-1353386 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 22100 Bothell Everett Highway P.O. Box 3003 Bothell, WA 98041-3003 (Address of principal executive offices, including zip code) AMENDED 1992 NONOFFICER EMPLOYEE STOCK OPTION PLAN AMENDED 1992 OPTION, STOCK APPRECIATION RIGHT, RESTRICTED STOCK, STOCK GRANT AND PERFORMANCE UNIT PLAN AMENDED NONEMPLOYEE DIRECTOR STOCK OPTION PLAN AMENDED AND RESTATED INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN (Full title of the plan) W. BRINTON YORKS, Jr. Vice President, General Counsel and Secretary ADVANCED TECHNOLOGY LABORATORIES, INC. 22100 Bothell-Everett Highway P.O. Box 3003 Bothell, WA 98041-3003 (206) 487-7000 (Name, address and telephone number, including area code, of agent for service) __________________ CALCULATION OF REGISTRATION FEE Title of Proposed Proposed Securities Maximum Maximum Amount to Be Number to Offering Aggregate of Registered be Price Per Offering Registra- Registered Registered Share(1) Price(1) tion Fee ---------- ---------- --------- --------- -------- Common 1,025,000(2) $33.0625 $33,889,062 $11,685.88 Stock, par value $.01 per Share (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(h). The price per share is estimated to be $33.0625 based on the average of the high and low prices for the Common Stock in the over-the-counter market on July 23, 1996 as reported on the Nasdaq National Market. (2) Of this number, 70,000 are being registered for issuance pursuant to the Amended 1992 Nonofficer Employee Stock Option Plan, 550,000 are being registered for issuance pursuant to the Amended 1992 Option, Stock Appreciation Right, Restricted Stock, Stock Grant And Performance Unit Plan, 55,000 are being registered for issuance pursuant to the Amended Nonemployee Director Stock Option Plan and 350,000 are being registered for issuance pursuant to the Amended and Restated Incentive Savings and Stock Ownership Plan. In addition to this number of shares, an indeterminate number of additional shares which may be necessary to adjust the number of shares reserved for issuance pursuant to such plans as the result of any future stock split, stock dividend or similar adjustment of the outstanding Common Stock of the Registrant. Exhibit Index is on page 6 1 REGISTRATION OF ADDITIONAL SECURITIES Pursuant to General Instruction E, this registration statement on Form S-8 is filed by Advanced Technology Laboratories, Inc. (the "Registrant") to register additional securities under the Plans described in Registration Statement Nos. 33-38217, 33-47967, 33-54757, 33-59914, 33- 61807 and 33-66298 (including post-effective Amendment No.1 thereto (the "Post-Effective Amendment")) to be issued pursuant to an amendment to the Plans approved by the Registrant's Board of Directors on February 22, 1996 and May 8, 1996, and by the Registrant's Shareholders on May 8, 1996. Portions of Registration Statement Nos. 33-38217, 33- 47967, 33-54757, 33-59914, 33-61807, 33-66298 and the Post- Effective Amendment are incorporated herein by reference. PART II INFORMATION REQUIRED IN REGISTRATION STATEMENT Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents are hereby incorporated by reference in this Registration Statement: (a) The Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 filed on March 31, 1996; (b) All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), since the end of the fiscal year covered by the Annual Report referred to in (a) above; (c) The description of the Registrant's Common Stock contained in the Current Report on Form 8-K filed on January 11, 1996; and (d) The description of the Registrant's Common Stock contained in the Registration Statement on Form 10 (Registration No. 0-15160) filed with the Commission on November 12, 1986 under Section 12(g) of the Exchange Act, and any amendment or report filed for the purpose of updating such description. All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof, and prior to the filing of a post- effective amendment which indicates that the securities offered hereby have been sold or which deregisters the securities covered hereby then remaining unsold, shall also be deemed to be incorporated by reference into this Registration Statement and to be a part hereof commencing on the respective dates on which such documents are filed. Item 4. Not Applicable Item 5. Not Applicable Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Incorporated herein by reference to the Post-Effective Amendment on Form S-8, filed with the Commission on August 11, 1995 under Registration Statement No. 33-54757. Item 7. Not Applicable 2 Item 8. EXHIBITS Exhibit Number Description - ------- --------------------------------------- 5.1 Opinion of Bogle & Gates P.L.L.C. 10.1 Amended 1992 Nonofficer Employee Stock Option Plan 10.2 Amended 1992 Option, Stock Appreciation Right, Restricted Stock, Stock Grant And Performance Unit Plan 10.3 Amended Nonemployee Director Stock Option Plan 10.4 Amended and Restated Incentive Savings and Stock Ownership Plan 23.1 Consent of KPMG Peat Marwick LLP 23.2 Consent of Bogle & Gates P.L.L.C. (included in opinion filed as Exhibit 5.1) 24.1 Power of Attorney (see signature page) Item 9. UNDERTAKINGS A. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; PROVIDED, HOWEVER, that paragraphs (A)(1)(i) and (A)(1)(ii) above do not apply if the registration statement is on Form S-8 or Form S-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. Undertakings pursuant to Regulation S-K Rule 512(b) and (h) are incorporated by reference to Registration Statement Nos. 33-38217, 33-47967, 33-54757, 33-59914, 33-61807, 33- 66298 and the Post-Effective Amendment. 3 SIGNATURES The Registrant. Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bothell, State of Washington, on this 25th day of July, 1996. ADVANCED TECHNOLOGY LABORATORIES, INC. /s/ Dennis C. Fill By ___________________ Dennis C. Fill Chairman and Chief Executive Officer The Plan. Solely with respect to the Registrant's Incentive Savings and Stock Ownership Plan and pursuant to the requirements of the Securities Act of 1933, the trustees (or other persons who administer the employee benefit plan) have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bothell, State of Washington, on this 25th day of July, 1996. INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN /s/ Harvey N. Gillis By ________________________ Harvey N. Gillis, Senior Vice President and Chief Financial Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Dennis C. Fill and W. Brinton Yorks, Jr., and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any amendments to the Registration Statements, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated on July 25, 1996. Signature Title /s/ Dennis C. Fill Chairman of the Board, Chief ------------------- Executive Officer Dennis C. Fill /s/ Harvey N. Gillis Senior Vice President, Chief -------------------- Financial Officer (Principal Harvey N. Gillis Financial Officer) 4 /s/ Phillip M. Nudelman Director --------------------- Phillip M. Nudelman, Ph.D. /s/ Kirby L. Cramer Director ---------------------- Kirby L. Cramer /s/ Harvey Feigenbaum Director ---------------------- Harvey Feigenbaum, M.D. /s/ Eugene A. Larson Director ---------------------- Eugene A. Larson /s/ John R. Miller Director ---------------------- John R. Miller /s/ Harry Woolf Director ---------------------- Harry Woolf, Ph.D. /s/ Richard S. Totorica Vice President and Corporate ---------------------- Controller (Principal Accounting Richard S. Totorica Officer) 5 INDEX TO EXHIBITS Sequentially Exhibit Numbered Number Description Page - ------- -------------------------------- ---------- 5.1 Opinion of Bogle & Gates P.L.L.C. 7 10.1 Amended 1992 Nonofficer Employee Stock 8 - 21 Option Plan 10.2 Amended 1992 Option, Stock Appreciation 22 - 37 Right, Restricted Stock, Stock Grant And Performance Unit Plan 10.3 Amended Nonemployee Director Stock Option 38 - 41 Plan 10.4 Amended and Restated Incentive Savings and 42 - 116 Stock Ownership Plan 23.1 Consent of KPMG Peat Marwick LLP 117 23.2 Consent of Bogle & Gates P.L.L.C.(included in opinion filed as Exhibit 5.1) 24.1 Power of Attorney (see signature page) 6 EX-5 2 OPINION OF BOGLE & GATES Bogle & Gates P.L.L.C. Letterhead Exhibit 5.1 Two Union Square July 24, 1996 601 Union Street Seattle, Washington 98101-2436 Advanced Technology Laboratories, Inc. 22100 Bothell Everett Highway Bothell, WA 98041-3003 Gentlemen and Ladies: We are acting as counsel to Advanced Technology Laboratories, Inc., a Washington corporation (the "Company"), in connection with the filing of a registration statement on Form S-8 (the "Registration Statement") under the Securities Act of 1933, as amended, with the Securities and Exchange Commission, relating to the proposed sale by the Company of an aggregate of 1,025,000 shares of its common stock, par value $0.01 per share (the "Common Stock"), issuable pursuant to the Company's i) Amended 1992 Nonofficer Employee Stock Option Plan, ii) Amended 1992 Option, Stock Appreciation Right, Restricted Stock, Stock Grant And Performance Unit Plan, iii) Amended Nonemployee Director Stock Option Plan and iv) Amended and Restated Incentive Savings and Stock Ownership Plan. In connection with the foregoing, we are of the opinion that the Common Stock will, when sold, be legally issued, fully paid and nonassessable. We hereby authorize and consent to the use of this opinion as Exhibit 5.1 to the Registration Statement. Very truly yours, /s/ Boble & Gates P.L.L.C. EX-10 3 Exhibit 10.1 February 22, 1996 ADVANCED TECHNOLOGY LABORATORIES, INC. Amended 1992 Nonofficer Employee Stock Option Plan 1. Definitions The following terms have the corresponding meanings for purposes of the Plan: "Change of Control" means (a) a "Board Change." For purposes of the Plan, a Board Change shall have occurred if a majority of the seats (other than vacant seats) on the Corporation's Board of Directors (the "Board") were to be occupied by individuals who were neither (i) nominated by a majority of the Incumbent Directors nor (ii) appointed by directors so nominated. An "Incumbent Director" is a member of the Board who has been either (i) nominated by a majority of the directors of the Corporation then in office or (ii) appointed by directors so nominated, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (b) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of (i) 20% or more of either (A) the then outstanding shares of common stock (the "Outstanding Corporation Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"), in the case of either (A) or (B) of this clause (i), which acquisition is not approved in advance by a majority of the Incumbent Directors or (ii) 33% or more of either (A) the Outstanding Corporation Common Stock or (B) the Outstanding Corporation Voting Securities, in the case of either (A) or (B) of this clause (ii), which acquisition is approved in advance by a majority of the Incumbent Directors; provided, however, that the following acquisitions shall not constitute a Change of Control: (x) any acquisition by the Corporation, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation, or (z) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of the following subsection (c) are satisfied; or (c) approval by the stockholders of the Corporation of a reorganization, merger or consolidation, in each case, unless, immediately following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (ii) no Person (excluding the Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 33% or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 33% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were Incumbent Directors at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) approval by the stockholders of the Corporation of (i) a complete liquidation or dissolution of the Corporation or (ii) the sale or other disposition of all or substantially all of the assets of the Corporation, other than to a corporation, with Page 1 respect to which immediately following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding the Corporation and any employee benefit plan (or related trust) of the Corporation or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 33% or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 33% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of such corporation were approved by a majority of the Incumbent Directors at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Corporation. "Committee" means the Committee provided for in Section 4, which shall administer the Plan. "Common Stock" means common stock, par value $0.01 per share, of the Corporation. "Corporation" means Advanced Technology Laboratories, Inc., a Washington corporation. "Designated Beneficiary" means any person designated in writing by a Participant as a legal recipient of payments due under an award in the event of the Participant's death, or in the absence of such designation, the Participant's estate. Such designation must be on file with the Corporation in order to be effective but, unless the Participant has made an irrevocable designation, may be changed from time to time by the Participant. "Fair Market Value" of the Common Stock as of any trading day means the average (rounded to the next highest cent in the case of fractions of a cent) of the high and low sales prices of the Common Stock as reported on such trading day by the NASDAQ National Market System. If no sales price is reported for the Common Stock on such trading day, then "Fair Market Value" shall mean the highest bid price reported for the Common Stock on such trading day by the National Quotation Bureau Incorporated or any similar nationally recognized organization. The Committee, in its sole discretion, shall make all determinations required by this definition. "Participant" means an employee who has received an award under the Plan. "Plan" means this Advanced Technology Laboratories, Inc. Amended 1992 Nonofficer Employee Stock Option Plan. "Retirement" means the termination of the services of a Participant because of early or normal retirement as defined in the Corporation's Retirement Plan. "Withholding Tax" means any tax, including any federal, state or local income tax or payroll tax, required by any governmental entity to be withheld or otherwise deducted and paid with respect to the transfer of shares of Common Stock as a result of the exercise of an option. 2. Stock Subject to the Plan There are reserved for issuance upon the exercise of options under the Plan 320,000 shares of Common Stock. Such shares may be authorized and unissued shares of Common Stock or previously outstanding shares of Common Stock then held in the Corporation's treasury. If any option granted under the Plan shall expire or terminate for any reason (including, without limitation, by reason of its surrender, pursuant to the provisions of Section 6(f) or the third paragraph of Section 6(b) or otherwise, or cancellation, in whole or in part, pursuant to the provisions of Section 6(c) or otherwise, or the substitution in place thereof of a new option) without having been exercised in full, the shares subject thereto shall again be available for the purposes of issuance under the Plan. 3. Administration (a) The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its discretion, to determine the individuals to whom, and the time or times at which options shall be granted and the number of shares to be covered by each such grant. In making such determinations, the Committee Page 2 may take into account the nature of the services rendered by the respective Participants, their present and potential contributions to the Corporation's success and such other factors as the Committee in its discretion may deem relevant. Subject to the express provisions of the Plan, the Committee shall have plenary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of option agreements (which need not be identical) and to make all other determinations necessary or advisable for the administration of the Plan. The Committee's determinations of the matters referred to in this Section 3 shall be conclusive. It is the intention of the Corporation that the Plan and the administration hereof comply in all respects with Section 16(b) of the Exchange Act, and the rules and regulations promulgated thereunder, and if any Plan provision is later found not to be in compliance with Section 16(b), the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. (b) The Committee may in its discretion delegate to a committee appointed by the Board consisting of one or more officers of the Corporation (the "Grant Committee") the authority to grant, pursuant to this Plan, options for a total number of shares of Common Stock determined by the Committee, and under terms, conditions and criteria which are approved by the Committee. Such authorization may include the ability to determine the Participants to whom, the number of shares in respect of which, and the time or times at which, such options shall be granted. In the event the Committee shall grant such authority to the Grant Committee, the Grant Committee shall report to the Committee in writing, at times determined by the Committee, (i) the names of Participants who have received any such grants, (ii) the number of shares covered by each option so granted, (iii) the date upon which each such option was granted and (iv) such other information as the committee may request. Any action of the Grant Committee pursuant to authority granted by the Committee under this Section 3(b) in accordance with the Committee resolution granting such authority shall be deemed to be the action of the Committee. 4. The Committee (a) The Board shall designate a Committee of members of the Board which shall meet the requirements of Section 16(b) of the Exchange Act. Currently, the Committee shall consist solely of two or more members of the Board who are disinterested. If at any time an insufficient number of disinterested directors is available to serve on such Committee, interested directors may serve on the Committee; however, during such time, no options shall be granted under the Plan to any person if the granting of such options would not meet the requirements of Section 16(b) of the Exchange Act. (b) For purposes of this Section 4, a "disinterested director" is a person who meets the definition of "disinterested person" as set forth in the rules and regulations promulgated under Section 16(b) of the Exchange Act. Currently, a disinterested director is a member of the Board who is not (and, during the 12-month period preceding his appointment as a member of the Committee has not been) granted or awarded stock, stock appreciation rights or other equity securities of the Corporation or any affiliated corporation pursuant to the Plan or any other plan of the Corporation or any affiliated corporation except for formula plans (as such term is defined in Rule 16b-3(c)(2)(ii) issued under the Exchange Act) or ongoing securities acquisition plans (as described in Rule 16b-3(d)(2)(i) issued under the Exchange Act). The Committee shall be appointed by the Board, which may from time to time appoint members of the Committee in substitution for members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable. 5. Eligibility The Committee may grant options only to employees of the Corporation and of its present and future subsidiary corporations ("subsidiaries") who, at the time of the grant, are not officers or directors (within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder) of the Corporation or any of its present and future subsidiary corporations. Any person eligible under the Plan may receive one or more grants of options as the Committee shall from time to time determine, and such determinations may be different as to different Participants. 6. Option Grants (a) The Committee is authorized under the Plan, in its discretion, to issue only options which do not qualify as "incentive stock options" as defined in Section 422 of the United States Internal Revenue Code of 1986, as amended ("Nonqualified Stock Options") and the options shall be designated as Nonqualified Stock Options in the applicable option agreement. The purchase price of the Common Stock under each option granted under the Plan shall be determined by the Page 3 Committee but shall be not less than the average Fair Market Value of the Common Stock over any continuous period of trading days beginning and ending no more than 30 business days before or after the date such option is granted. (b) The Committee shall be authorized in its discretion to prescribe in the option grant the installments, if any, in which an option granted under the Plan shall become exercisable, provided that no option shall be exercisable prior to the first anniversary of the date of grant thereof except as provided in Section 6(c), (d), (g), and (h) or except as the Committee otherwise determines. In no case may an option be exercised as to less than 100 shares at any one time (or the remaining shares covered by the option if less than 100) during the term of the option. The Committee shall also be authorized to establish the manner of the exercise of an option. The term of each option shall be not more than 10 years from the date of grant thereof. In general, upon exercise, the option price is to be paid in full in cash; however, the Committee can determine at any time prior to exercise that additional forms of payment will be permitted. To the extent permitted by the Committee and applicable laws and regulations (including, but not limited to, federal tax and securities laws and regulations and state corporate law), an option may be exercised (i) in Common Stock owned by the option holder having a Fair Market Value on the date of exercise equal to the aggregate option price, or in a combination of cash and stock; provided, however, that payment in stock shall not be made unless such stock shall have been owned by the option holder for a period of at least three months prior thereto; or (ii) by delivery of a properly executed exercise notice, together with irrevocable instructions to a broker designated by the Corporation, all in accordance with the regulations of the Federal Reserve Board, to deliver promptly to the Corporation the amount of sale or loan proceeds to pay the exercise price and any Withholding Tax obligations that may arise in connection with the exercise. In lieu of requiring an option holder to pay cash or stock and to receive in turn certificates for shares of Common Stock upon the exercise of an option, if the option agreement so provides, the Committee may elect to require the option holder to surrender the option to the Corporation for cancellation as to all or any portion of the number of shares covered by the intended exercise and receive in exchange for such surrender a payment, at the election of the Committee, in cash, in shares of Common Stock or in a combination of cash and shares of Common Stock, equivalent to the appreciated value of the shares covered by the option surrendered for cancellation. Such appreciated value shall be the difference between the option price of such shares (as adjusted pursuant to Section 15) and the Fair Market Value of such shares, which shall for this purpose be determined by the Committee taking into consideration all relevant factors, but which shall not be less than the Fair Market Value of such shares on the date on which the option holder's notice of exercise is received by the Corporation. Upon delivery to the Corporation of a notice of exercise of option, the Committee may avail itself of its right to require the option holder to surrender the option to the Corporation for cancellation as to shares covered by such intended exercise. The Committee's right of election shall expire, if not exercised, at the close of business on the fifth business day following the delivery to the Corporation of such notice. Should the Committee not exercise such right of election, the delivery of the aforesaid notice of exercise shall constitute an exercise by the option holder of the option to the extent therein set forth, and payment for the shares covered by such exercise shall become due immediately. (c) In the event that a Participant's services for the Corporation or one of its subsidiaries shall cease and the termination of such individual's service is for cause, the option shall automatically terminate upon first notification to the option holder of such termination of services, unless the Committee determines otherwise, and such option shall automatically terminate upon the date of such termination of services for all shares which were not purchasable upon such date. For purposes of this Section 6(c), "cause" is defined as a determination by the Committee that the option holder (i) has committed a felony, (ii) has engaged in an act or acts of deliberate and intentional dishonesty resulting or intended to result directly or indirectly in improper material gain to or personal enrichment of the individual at the Corporation's expense, or (iii) has willfully disobeyed the Corporation's appropriate rules, instructions or orders, and such willful disobedience has continued for a period of 10 days following notice thereof from the Corporation. In the event of the termination of the services of the holder of an option because of Retirement or disability, he or she may (unless such option shall have been previously terminated pursuant to the provisions of the preceding paragraph or unless otherwise provided in the option grant) exercise such option at any time prior to the expiration of the option, (i) in the event of disability or normal Retirement, to the extent of the number of shares covered by such option, whether or not such shares had become purchasable by him or her at the date of the termination of his or her services and (ii) in the event of early Retirement, to the extent of the number of shares covered by such option at such time or times as such option becomes purchasable by him or her in accordance with its terms. In the event of the death of an individual to whom an option has been granted under the Plan, while he or she is performing services for the Corporation or a subsidiary, the option theretofore granted to him or her (unless the option shall have been previously terminated pursuant to the provisions of this Section 6(c) or unless otherwise provided in the option grant) may, subject to the limitations described in Section 6(g), be exercised by his or her Designated Beneficiary, by his or her legatee or legatees of the option under his last will, or by his or her personal representatives or distributees, at any time within a period of one year after his or her death, but not after the expiration of the option, to the extent of the remaining Page 4 shares covered by the option whether or not such shares had become purchasable by such an individual at the date of death. In the event of the death of an individual (i) during the one-year period following termination of his or her services or (ii) following termination of his or her services by reason of Retirement or disability, then the option (if not previously terminated pursuant to the provisions of this Section 6(c)) may be exercised during the remainder of such one- year period or during the remaining term of the option, respectively, by his or her Designated Beneficiary, by his or her legatee under his or her last will, or by his or her personal representative or distributee, but only to the extent of the number of shares purchasable by such Participant pursuant to the provisions of Section 6(d) at the date of termination of services. In the event of the termination of the services of the holder of an option, other than by reason of Retirement, disability or death, he or she may (unless the option shall have been previously terminated pursuant to the provisions of this Section 6(c) or unless otherwise provided in the option grant) exercise the option at any time within one year after such termination but not after the expiration of the option, to the extent of the number of shares covered by the option which were purchasable by him or her at the date of the termination of services, and such option shall automatically terminate upon the date of such termination of services for all shares which were not purchasable upon such date. (d) Notwithstanding the foregoing provisions, the Committee may determine, in its sole discretion, in the case of any termination of services, that the holder of an option may exercise such option to the extent of some or all of the remaining shares covered thereby whether or not such shares had become purchasable by such an individual at the date of the termination of his services and may exercise such option at any time prior to the expiration of the original term of the option. Options granted under the Plan shall not be affected by any change of relationship with the Corporation so long as the holder continues to be an employee of the Corporation or of a subsidiary; however, a change in a Participant's status from an employee to a nonemployee shall result in the termination of an outstanding option held by such Participant in accordance with Section 6(c). The Committee, in its absolute discretion, may determine all questions of whether particular leaves of absence constitute a termination of service. Nothing in the Plan or in any option granted pursuant to the Plan shall confer on any individual any right to continue in the employ or other service of the Corporation or any other person or interfere in any way with the right of the Corporation or any other person to terminate his or her employment or other services at any time. (e) The date of grant of an option pursuant to the Plan shall be the date specified by the Committee, or the Grant Committee acting pursuant to authority granted under Section 3(b), at the time it grants such option, provided that such date shall not be prior to the date of such action by the Committee or the grant Committee, and that the price shall be determined in accordance with Section 6(a) on such date. The Committee or Grant Committee shall promptly notify a grantee of an award and a written option grant shall promptly be duly executed and delivered by or on behalf of the Corporation. (f) The Committee shall be authorized, in its absolute discretion, to permit option holders to surrender outstanding options in exchange for the grant of new options or to require option holders to surrender outstanding options as a condition precedent to the grant of new options. The number of shares covered by the new options, the option price (subject to the provisions of Section 6(a)), the option period and other terms and conditions of the new options shall all be determined in accordance with the Plan and may be different from the provisions of the surrendered options. (g) Notwithstanding any contrary waiting period, installment period or other limitation or restriction in any option agreement or in the Plan, in the event of a Change of Control, each option outstanding under the Plan shall thereupon become exercisable at any time during the remaining term of the option, but not after the term of the option, to the extent of the number of shares covered by the option, whether or not such shares had become purchasable by the Participant thereunder immediately prior to such Change of Control. (h) Anything in the Plan to the contrary notwithstanding, during the 90 calendar days from and after a Change of Control (x) an optionee (other than an optionee who initiated a Change of Control in a capacity other than as an officer or a Director of the Corporation) who is an officer or a Director of the Corporation (within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder) with respect to an option that was granted at least six months prior to the date of exercise pursuant to this sentence and (y) any other optionee who is not an officer or a Director with respect to an option shall, unless the Committee shall determine otherwise at the time of grant, have the right, in lieu of the payment of the full purchase price of the shares of Common Stock being purchased under the option and by giving written notice to the Corporation, to elect (within such 90-day period) to surrender all or part of the option to the Corporation and to receive in cash an amount equal to the amount by which the Fair Market Value of the Common Stock on the date of exercise shall exceed the purchase price per share under the option multiplied by the number of shares of Common Stock granted under the stock option as to which the right granted by this sentence shall have been exercised. Such written notice shall specify the optionee's election to purchase shares granted under the option or to receive the cash payment referred to in the immediately preceding sentence. Page 5 7. Withholding Taxes In connection with the transfer of shares of Common Stock as a result of the exercise of an option the Corporation (a) shall not issue a certificate for such shares until it has received payment from the Participant of any Withholding Tax in cash or by the retention by the Corporation or acceptance by the Corporation upon delivery thereof by the Participant of shares of Common Stock sufficient in Fair Market Value to cover the amount of such Withholding Tax and (b) shall have the right to retain or sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover any Withholding Tax. The Corporation shall have the right to withhold from any cash amounts due from the Corporation to the Participant pursuant to the Plan an amount equal to the Withholding Tax. In either case, the Corporation shall make payment (or reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the Participant. For purposes of this Section 7, the value of shares of Common Stock so retained or surrendered shall be equal to the Fair Market Value of such shares on the date that the amount of the Withholding Tax is to be determined (the "Tax Date"), and the value of shares of Common Stock so sold shall be the actual net sale price per share (after deduction of commissions) received by the Corporation. Notwithstanding the foregoing, the Participant may elect, subject to approval by the Committee, to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Corporation with funds sufficient to enable the Corporation to pay such Withholding Tax or by having the Corporation retain or accept upon delivery thereof by the Participant shares of Common Stock sufficient in Fair Market Value to cover the amount of such Withholding Tax. Each election by a Participant to have shares retained or to deliver shares for this purpose shall be subject to the following restrictions: (i) the election must be in writing and made on or prior to the Tax Date and (ii) if the Participant is subject to Section 16 of the Exchange Act, an election to have shares retained to satisfy the Withholding Tax must be an irrevocable election made at least six months prior to the Tax Date or the withholding election must become effective during the 10-business-day period beginning on the third business day following the date on which the Corporation releases for publication its annual or quarterly summary statements of sales and earnings and ending on the twelfth business day following the date of release thereof. 8. Transferability and Ownership Rights of Options No option awarded under the Plan shall be transferable otherwise than pursuant to the designation of a Designated Beneficiary or by will, descent or distribution, and an option may be exercised, during the lifetime of the holder thereof, only by him or her. The holder of an option shall have none of the rights of a stockholder until the shares subject thereto shall have been registered in the name of such holder on the transfer books of the Corporation. 9. Section 16(b) Compliance and Bifurcation of Plan It is the intention of the Corporation that, if any of the Corporation's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with such Section, the provision shall be deemed null and void, and in all events the plan shall be construed in favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to participants who are officers and directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other participants. 10. Adjustments Upon Changes in Capitalization Except as otherwise provided in Section 6(h) and Section 6(i), in the event of any changes in the outstanding stock of the Corporation by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, split- ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution to stockholders other than cash dividends, the Committee shall make such adjustments, if any, in light of the change or distribution as the Committee in its sole discretion shall determine to be appropriate, in the number and class of shares or rights subject to options and the exercise prices of the options covered thereby. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number and class of shares available under the Plan and the maximum number of shares as to which options may be granted shall be appropriately adjusted by the Committee. 11. Amendment and Termination Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no awards of options shall be made after, October 31, 2002; provided, however, that such termination shall have no effect on awards of options made prior thereto. The Plan may be terminated, modified or amended by the stockholders of the Page 6 Corporation. The Board of Directors of the Corporation may also terminate the Plan, or modify or amend the Plan in such respects as it shall deem advisable in order to conform to any change in any law or regulation applicable thereto, or in other respects. The amendment or termination of the Plan shall not, without the consent of the recipient of any award under the Plan, alter or impair any rights or obligations under any award theretofore granted under the Plan. 12. Effectiveness of the Plan The Plan shall become effective on November 1, 1992. The Committee may in its discretion authorize the granting of options, the exercise of which shall be expressly subject to the conditions that (a) the shares of Common Stock reserved for issuance under the Plan shall have been duly listed, upon official notice of issuance, upon each stock exchange in the United States upon which the Common Stock is traded and (b) a registration statement under the Securities Act of 1933, as amended, with respect to such shares shall have become effective. Page 7 EX-10 4 Exhibit 10.2 May 8, 1996 ADVANCED TECHNOLOGY LABORATORIES, INC. Amended 1992 Option, Stock Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan 1. Definitions The following terms have the corresponding meanings for purposes of the Plan: "Award Cycle" means a period of not less than three fiscal years over which performance units granted during a particular year are to be earned out. "Change of Control" means (a) a "Board Change." For purposes of the Plan, a Board Change shall have occurred if a majority of the seats (other than vacant seats) on the Corporation's Board of Directors (the "Board") were to be occupied by individuals who were neither (i) nominated by a majority of the Incumbent Directors nor (ii) appointed by directors so nominated. An "Incumbent Director" is a member of the Board who has been either (i) nominated by a majority of the directors of the Corporation then in office or (ii) appointed by directors so nominated, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (b) The acquisition by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a "Person") of "Beneficial Ownership" (within the meaning of Rule 13d3 promulgated under the Exchange Act) of (i) 20% or more of either (A) the then outstanding shares of common stock (the "Outstanding Corporation Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"), in the case of either (A) or (B) of this clause (i), which acquisition is not approved in advance by a majority of the Incumbent Directors or (ii) 33% or more of either (A) the Outstanding Corporation Common Stock or (B) the Outstanding Corporation Voting Securities, in the case of either (A) or (B) of this clause (ii), which acquisition is approved in advance by a majority of the Incumbent Directors; provided, however, that the following acquisitions shall not constitute a Change of Control: (x) any acquisition by the Corporation, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation, or (z) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of the following subsection (c) are satisfied; or (c) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting 1 Securities, as the case may be, (ii) no Person (excluding the Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 33% or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 33% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were Incumbent Directors at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the stockholders of the Corporation of (i) a complete liquidation or dissolution of the Corporation or (ii) the sale or other disposition of all or substantially all of the assets of the Corporation, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding the Corporation and any employee benefit plan (or related trust) of the Corporation or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 33% or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 33% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors of such corporation were approved by a majority of the Incumbent Directors at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Corporation. "Committee" means the Committee provided for in Section 4, which shall administer the Plan. "Common Stock" means common stock, par value $0.01 per share, of the Corporation. "Corporation" means Advanced Technology Laboratories, Inc., a Delaware corporation. "Designated Beneficiary" means any person designated in writing by a Participant as a legal recipient of payments due under an award in the event of the Participant's death, or in the absence of such designation, the Participant's estate. Such designation must be on file with the Corporation in order to be effective but, unless the Participant has made an irrevocable designation, may be changed from time to time by the Participant. "Fair Market Value" of the Common Stock as of any trading day means the average (rounded to the next highest cent in the case of fractions of a cent) of the high and low sales prices of the Common Stock as reported on such trading day by the NASDAQ National Market System. If no sales price is reported for the Common Stock on such trading day, then "Fair Market Value" shall mean the highest bid price reported for the Common Stock on such trading day by the National Quotation Bureau Incorporated or any similar nationally recognized organization. The Committee, in its sole discretion, shall make all determinations required by this definition. 2 "Participant" means an employee, consultant or independent contractor who has received an award under the Plan. "Payment Schedule" means the schedule adopted by the Committee in accordance with Section 10 with respect to an Award Cycle to govern determination of the Payment Value of a performance unit at the end of such Award Cycle in accordance with Section 10. "Payment Value" means the value, expressed in dollars, of a performance unit at the conclusion of an Award Cycle, determined in accordance with Section 10. "Plan" means this Advanced Technology Laboratories, Inc. Amended 1992 Option, Stock Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan. "Restricted Stock" means the shares of Common Stock referred to in Section 8. "Retirement" means the termination of the services of a Participant because of early or normal retirement as defined in the Westmark Retirement Plan. "Withholding Tax" means any tax, including any federal, state or local income tax, required by any governmental entity to be withheld or otherwise deducted and paid with respect to the transfer of shares of Common Stock as a result of the exercise of a Nonqualified Stock Option or stock appreciation right, the payment of performance units or the award of Restricted Stock or stock grants. 2. Stock Subject to the Plan There are reserved for issuance upon the exercise of options, for issuance of Restricted Stock and stock grant awards and for issuance upon the payment of performance units and stock appreciation rights under the Plan 2,700,000 shares of Common Stock, of which no more than an aggregate of 550,000 shares may be issued as Restricted Stock awards and stock grants under the Plan. Such shares may be authorized and unissued shares of Common Stock or previously outstanding shares of Common Stock then held in the Corporation's treasury. If any option or stock appreciation right granted under the Plan shall expire or terminate for any reason (including, without limitation, by reason of its surrender, pursuant to the provisions of Section 6(f) or the third paragraph of Section 6(b) or otherwise, or cancellation, in whole or in part, pursuant to the provisions of Section 6(c) or otherwise or pursuant to Section 7(f), or the substitution in place thereof of a new option or stock appreciation right) without having been exercised in full, the shares subject thereto shall again be available for the purposes of issuance under the Plan. If shares of Restricted Stock shall be forfeited and returned to the Corporation pursuant to the provisions of Section 8, such shares shall again be available for the purposes of issuance under the Plan. In no event shall shares of Common Stock which, under the Plan, are authorized to be used in payment of performance unit awards be deemed to be unavailable for purposes of the Plan until such shares have been issued in payment thereof in accordance with the provisions of Section 10(g). Stock appreciation rights and performance unit awards providing for payments only in cash are not subject to the overall limitations referred to above. 3. Administration The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its discretion, to determine the individuals to whom, and the time or times at which, performance units or Restricted Stock shall be awarded and stock appreciation rights or options shall be granted (including, without limitation, whether such options shall be Incentive Stock Options or Nonqualified Stock Options or a combination thereof, as such terms are defined in Section 6(a)) and the number of units and/or shares to be covered by each such award or grant. In making such determinations, the Committee may take into account the nature of the services rendered by 3 the respective Participants, their present and potential contributions to the Corporation's success and such other factors as the Committee in its discretion may deem relevant. Subject to the express provisions of the Plan, the Committee shall have plenary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of Restricted Stock, performance unit, stock appreciation right and option agreements (which need not be identical) and to make all other determinations necessary or advisable for the administration of the Plan. The Committee's determinations of the matters referred to in this Section 3 shall be conclusive. It is the intention of the Corporation that the Plan and the administration hereof comply in all respects with Section 16(b) of the Exchange Act, and the rules and regulations promulgated thereunder, and if any Plan provision is later found not to be in compliance with Section 16(b), the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to persons who are subject to Section 16 of the Exchange Act without so limiting or conditioning the Plan with respect to other persons. 4. The Committee The Board shall designate a Committee of members of the Board which shall meet the requirements of Section 16(b) of the Exchange Act. Currently, the Committee shall consist solely of two or more members of the Board who are disinterested. If at any time an insufficient number of disinterested directors is available to serve on such Committee, interested directors may serve on the Committee; however, during such time, no options, stock appreciation rights or Restricted Stock shall be granted under the Plan to any person if the granting of such options, stock appreciation rights or Restricted Stock would not meet the requirements of Section 16(b) of the Exchange Act. For purposes of this Section 4, a "disinterested director" is a person who meets the definition of "disinterested person" as set forth in the rules and regulations promulgated under Section 16(b) of the Exchange Act. Currently, a disinterested director is a member of the Board who is not (and, during the 12-month period preceding his appointment as a member of the Committee has not been) granted or awarded stock, stock appreciation rights or other equity securities of the Corporation or any affiliated corporation pursuant to the Plan or any other plan of the Corporation or any affiliated corporation except for formula plans (as such term is defined in Rule 16b-3 (c) (2) (ii) issued under the Exchange Act) or ongoing securities acquisition plans (as described in Rule 16b-3 (d) (2) (i) issued under the Exchange Act). The Committee shall be appointed by the Board, which may from time to time appoint members of the Committee in substitution for members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable. 5. Eligibility The Committee may award performance units and Restricted Stock and grant options and stock appreciation rights only to employees, consultants or independent contractors (which term as used herein includes officers) of the Corporation and of its present and future subsidiary corporations ("subsidiaries"). Any person eligible under the Plan may receive one or more awards of performance units or Restricted Stock or one or more grants of options or stock appreciation rights, or any combination thereof, as the Committee shall from time to time determine, and such determinations may be different as to different Participants and may vary as to different awards and grants. 4 The maximum number of shares of Common Stock with respect to which an option or options or a stock appreciation right or stock appreciation rights may be granted to any eligible employee in any one fiscal year of the Company shall not exceed ten percent of the aggregate number of shares of Common Stock authorized for issuance under the plan (the "Maximum Annual Employee Grant"). 6. Option Grants (a) The Committee is authorized under the Plan, in its discretion, to issue options as "Incentive Stock Options" (as defined in Section 422 of the United States Internal Revenue Code of 1986, as amended (the "Code")) or as "Nonqualified Stock Options" (all other options granted hereunder) and the options shall be designated as Incentive Stock Options or Nonqualified Stock Options in the applicable option agreement. The purchase price of the Common Stock under each option granted under the Plan shall be determined by the Committee but shall be not less than 100% of the Fair Market Value of the Common Stock at the time such option is granted. Notwithstanding the previous sentence, any Nonqualified Stock Option may provide that the purchase price be equal to the average Fair Market Value of the Common Stock over any continuous period of trading days beginning and ending no more than 30 business days before or after the date such option is granted. (b) The Committee shall be authorized in its discretion to prescribe in the option grant the installments, if any, in which an option granted under the Plan shall become exercisable, provided that no option shall be exercisable prior to the first anniversary of the date of grant thereof except as provided in Sections 6(c), (d), (h), (i) and (j) or except as the Committee otherwise determines. In no case may an option be exercised as to less than 100 shares at any one time (or the remaining shares covered by the option if less than 100) during the term of the option. The Committee shall also be authorized to establish the manner of the exercise of an option. The term of each option shall be not more than 10 years from the date of grant thereof. In general, upon exercise, the option price is to be paid in full in cash; however, the Committee can determine at the time the option is granted for Incentive Stock Options or at any time prior to exercise for Nonqualified Stock Options, that additional forms of payment will be permitted. To the extent permitted by the Committee and applicable laws and regulations (including, but not limited to, federal tax and securities laws and regulations and state corporate law), an option may be exercised (i) in Common Stock owned by the option holder having a Fair Market Value on the date of exercise equal to the aggregate option price, or in a combination of cash and stock; provided, however, that payment in stock shall not be made unless such stock shall have been owned by the option holder for a period of at least three months prior thereto; or (ii) by delivery of a properly executed exercise notice, together with irrevocable instructions to a broker designated by the Corporation, all in accordance with the regulations of the Federal Reserve Board, to deliver promptly to the Corporation the amount of sale or loan proceeds to pay the exercise price and any federal, state or local withholding tax obligations that may arise in connection with the exercise. In lieu of requiring an option holder to pay cash or stock and to receive in turn certificates for shares of Common Stock upon the exercise of a Nonqualified Stock Option, if the option so provides, the Committee may elect to require the option holder to surrender the option to the Corporation for cancellation as to all or any portion of the number of shares covered by the intended exercise and receive in exchange for such surrender a payment, at the election of the Committee, in cash, in shares of Common Stock or in a combination of cash and shares of Common Stock, equivalent to the appreciated value of the shares covered by the option surrendered for cancellation. Such appreciated value shall be the difference between the option price of such shares (as adjusted pursuant to Section 15) and the Fair Market Value of such shares, which shall for this purpose be determined by the Committee taking into consideration all relevant factors, but which shall not be less than the Fair Market Value of such shares on the date on which the option holder's notice of exercise is received by the Corporation. Upon delivery to the 5 Corporation of a notice of exercise of option, the Committee may avail itself of its right to require the option holder to surrender the option to the Corporation for cancellation as to shares covered by such intended exercise. The Committee's right of election shall expire, if not exercised, at the close of business on the fifth business day following the delivery to the Corporation of such notice. Should the Committee not exercise such right of election, the delivery of the aforesaid notice of exercise shall constitute an exercise by the option holder of the option to the extent therein set forth, and payment for the shares covered by such exercise shall become due immediately. (c) In the event that a Participant's services for the Corporation or one of its subsidiaries shall cease and the termination of such individual's service is for cause, the option shall automatically terminate upon first notification to the option holder of such termination of services, unless the Committee determines otherwise, and such option shall automatically terminate upon the date of such termination of services for all shares which were not purchasable upon such date. For purposes of this Section 6(c), "cause" is defined as a determination by the Committee that the option holder (i) has committed a felony, (ii) has engaged in an act or acts of deliberate and intentional dishonesty resulting or intended to result directly or indirectly in improper material gain to or personal enrichment of the individual at the Corporation's expense, or (iii) has willfully disobeyed the Corporation's appropriate rules, instructions or orders, and such willful disobeyance has continued for a period of 10 days following notice thereof from the Corporation. In the event of the termination of the services of the holder of an option because of Retirement or disability, he may (unless such option shall have been previously terminated pursuant to the provisions of the preceding paragraph or unless otherwise provided in his option grant) exercise such option at any time prior to the expiration of the option, (i) in the event of disability or normal Retirement, to the extent of the number of shares covered by such option, whether or not such shares had become purchasable by him at the date of the termination of his services and (ii) in the event of early Retirement, to the extent of the number of shares covered by such option at such time or times as such option becomes purchasable by him in accordance with its terms. (Although the option may be exercised after Retirement or disability, under Section 422 of the Code, if the option has been designated as an Incentive Stock Option, it must be exercised within three months after the date of Retirement or one year after the termination of employment due to disability in order to qualify for incentive stock option tax treatment.) In the event of the death of an individual to whom an option has been granted under the Plan, while he is performing services for the Corporation or a subsidiary, the option theretofore granted to him (unless his option shall have been previously terminated pursuant to the provisions of this Section 6(c) or unless otherwise provided in his option grant) may, subject to the limitations described in Section 6(g), be exercised by his Designated Beneficiary, by his legatee or legatees of the option under his last will, or by his personal representatives or distributees, at any time within a period of one year after his death, but not after the expiration of the option, to the extent of the remaining shares covered by his option whether or not such shares had become purchasable by such an individual at the date of his death. In the event of the death of an individual (i) during the one-year period following termination of his services or (ii) following termination of his services by reason of Retirement or disability, then the option (if not previously terminated pursuant to the provisions of this Section 6(c)) may be exercised during the remainder of such one-year period or during the remaining term of the option, respectively, by his Designated Beneficiary, by his legatee under his last will, or by his personal representative or distributee, but only to the extent of the number of shares purchasable by such Participant pursuant to the provisions of Section 6(d) at the date of termination of his services. In the event of the termination of the services of the holder of an option, other than by reason of Retirement, disability or death, he may (unless his option shall have been previously terminated pursuant to the provisions of this Section 6(c) or unless otherwise provided in his option grant) exercise his option at any time within one year after such termination, but not after the expiration of the option, to the extent of the number of shares covered by his option which were purchasable by him at the date of the 6 termination of his services, and such option shall automatically terminate upon the date of such termination of services for all shares which were not purchasable upon such date. (d) Notwithstanding the foregoing provisions, the Committee may determine, in its sole discretion, in the case of any termination of services, that the holder of an option may exercise such option to the extent of some or all of the remaining shares covered thereby whether or not such shares had become purchasable by such an individual at the date of the termination of his services and may exercise such option at any time prior to the expiration of the original term of the option, except that such extension shall not cause any Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option without the consent of the option holder. Options granted under the Plan shall not be affected by any change of relationship with the Corporation so long as the holder continues to be an employee, consultant or independent contractor of the Corporation or of a subsidiary; however, a change in a participant's status from an employee to a nonemployee (e.g., consultant or independent contractor) shall result in the termination of an outstanding Incentive Stock Option held by such participant in accordance with Section 6(c). The Committee, in its absolute discretion, may determine all questions of whether particular leaves of absence constitute a termination of services; provided, however, that with respect to incentive stock options, such determination shall be subject to any requirements contained in the Code. Nothing in the Plan or in any option granted pursuant to the Plan shall confer on any individual any right to continue in the employ or other service of the Corporation or any other person or interfere in any way with the right of the Corporation or any other person to terminate his employment or other services at any time. (e) The date of grant of an option pursuant to the Plan shall be the date specified by the Committee at the time it grants such option, provided that such date shall not be prior to the date of such action by the Committee and that the price shall be determined in accordance with Section 6(a) on such date. The Committee shall promptly notify a grantee of an award and a written option grant shall promptly be duly executed and delivered by or on behalf of the Corporation. (f) The Committee shall be authorized, in its absolute discretion, to permit option holders to surrender outstanding options in exchange for the grant of new options or to require option holders to surrender outstanding options as a condition precedent to the grant of new options. The number of shares covered by the new options, the option price (subject to the provisions of Section 6(a)), the option period and other terms and conditions of the new options shall all be determined in accordance with the Plan and may be different from the provisions of the surrendered options. (g) In the event an optionee is granted Incentive Stock Options that in the aggregate entitle the optionee to purchase, in the first year such options become exercisable (whether under their original terms or as a result of the occurrence of an Acceleration Event, as defined below), Common Stock of the Corporation, any parent corporation or any subsidiary of the Corporation having a Fair Market Value (determined as of the time such options are granted) in excess of $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. Such limitation shall not apply if the Internal Revenue Service publicly rules, issues a private ruling to the Corporation, any optionee of the Corporation or any legatee, personal representative or distributee of an optionee or states in proposed, temporary or final regulations that provisions which allow the full exercise of an optionee's Incentive Stock Options upon the occurrence of the relevant Acceleration Event do not violate Section 422(d) of the Code. An "Acceleration Event" means (i) a determination of the Committee to allow an optionee to exercise his options in full upon termination of his employment or other service as provided in Section 6(c) or (d), (ii) the death of an optionee while he is employed by the Corporation or a subsidiary, (iii) any Change of Control, or (iv) the optionee's termination of employment or other service under circumstances that will allow him to exercise options not otherwise exercisable pursuant to Section 6(j). (h) Notwithstanding any contrary waiting period, installment period or other limitation or restriction in any option agreement or in the Plan, in the event of a Change of Control, each option outstanding under the Plan shall thereupon become exercisable at any time during the remaining term of the option, but not after the term of the option, to the extent of the number of shares covered by the option, whether 7 or not such shares had become purchasable by the Participant thereunder immediately prior to such Change of Control, subject, however, to the limitations described in Section 6(g), by the holder of the option. (i) Anything in the Plan to the contrary notwithstanding, during the 90-day period from and after a Change of Control (x) an optionee (other than an optionee who initiated a Change of Control in a capacity other than as an officer or a Director of the Corporation) who is an officer or a Director of the Corporation (within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder) with respect to an option that was granted at least six months prior to the date of exercise pursuant to this sentence and is unaccompanied by a stock appreciation right and (y) any other optionee who is not an officer or a Director with respect to an option that is unaccompanied by a stock appreciation right shall, unless the Committee shall determine otherwise at the time of grant, have the right, in lieu of the payment of the full purchase price of the shares of Common Stock being purchased under the option and by giving written notice to the Corporation, to elect (within such 90-day period) to surrender all or part of the option to the Corporation and to receive in cash an amount equal to the amount by which the amount determined pursuant to Section 7(d) hereof on the date of exercise (determined as if the optionee had exercised a limited stock appreciation right on such date) shall exceed the purchase price per share under the option multiplied by the number of shares of Common Stock granted under the stock option as to which the right granted by this sentence shall have been exercised. Such written notice shall specify the optionee's election to purchase shares granted under the option or to receive the cash payment referred to in the immediately preceding sentence. (j) Notwithstanding the foregoing provisions, the optionee's employment or other contract with the Corporation may provide that upon termination of his employment or other services for other than cause or for "good reason" (as defined in his contract), all stock options shall become immediately exercisable. 7. Stock Appreciation Rights (a) Stock appreciation rights may be paid upon exercise in cash, Common Stock or any combination thereof, as the Committee in its sole discretion may determine. A stock appreciation right is an incentive award that permits the holder to receive (per share covered thereby) an amount equal to the amount by which the Fair Market Value of a share of Common Stock on the date of exercise exceeds the Fair Market Value of such share on the date the stock appreciation right was granted. (b) The Committee may grant a stock appreciation right separately or in tandem with a related option and may grant both "general" and "limited" stock appreciation rights. A general stock appreciation right granted in tandem with a related option will generally have the same terms and provisions as the related option with respect to exercisability, and the base price of such a stock appreciation right will generally be equal to the option price under the related option. Upon the exercise of a tandem stock appreciation right, the related option will be deemed to be exercised for all purposes of the Plan and vice versa. (c) A general stock appreciation right granted separately and not in tandem with any option will have such terms as the Committee may determine. The base price of a stand-alone stock appreciation right may not be less than the Fair Market Value of the Common Stock, determined as in Section 6(a) in the case of a Nonqualified Stock Option; the term of a stand-alone stock appreciation right may not be greater than 10 years from the date it was granted. (d) A limited stock appreciation right may be exercised only during the 90 calendar days immediately following the date of a Change in Control. For the purpose of determining the amount payable upon exercise of a limited stock appreciation right, the fair market value of the Common Stock will be equal to the higher of (x) the highest Fair Market Value of the Common Stock during the 90-day 8 period ending on the date the limited stock appreciation right is exercised and (y) whichever of the following is applicable: (i) the highest per share price paid in any tender or exchange offer which is in effect at any time during the 90 calendar days preceding the exercise of the limited right; (ii) the fixed or formula price for the acquisition of shares of Common Stock in a merger or similar agreement approved by the Corporation's stockholders or Board, if such price is determinable on the date of exercise; and (iii) the highest price per share paid to any stockholder of the Corporation in a transaction or group of transactions giving rise to the exercisability of the limited right. In no event, however, may the holder of a limited stock appreciation right granted in tandem with a related Incentive Stock Option receive an amount in excess of the maximum amount which will enable the option to continue to qualify as an Incentive Stock Option without the consent of the Participant. (e) Limited stock appreciation rights are payable only in cash. General stand-alone stock appreciation rights are payable only in cash, unless the Committee provides otherwise at the time of grant. General stock appreciation rights granted in tandem with a related option are payable in cash, Common Stock or any combination thereof, as determined in the sole discretion of the Committee. Notwithstanding the foregoing, and to the extent required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, a payment, in whole or in part, of cash upon exercise of a stock appreciation fight may be made to an optionee who is an officer or director of the Corporation (within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder) only if (i) the fight was granted at least six months prior to the date of exercise (except that in the event of the death or disability of the optionee prior to the expiration of the sixmonth period, this limitation shall not apply) and (ii) the optionee's election to receive cash in settlement of the fight and the exercise of the right are made (a) during the period beginning on the third business day following the date of release for publication of the quarterly or annual summary statements of sales and earnings of the Corporation and ending on the twelfth business day following such date, (b) six months prior to the date the stock appreciation right becomes taxable or (c) during the 90-day period from and after a Change of Control. (f) Unless otherwise provided by the Committee at the time of grant, the provisions of Section 6 relating to the termination of the service of a holder of an option shall apply equally, to the extent applicable, to the holder of a stock appreciation right. 8. Restricted Stock Awards (a) The consideration to be received for shares of Restricted Stock issued hereunder out of authorized but unissued shares or out of treasury shares shall be equal to cash in an amount equal to the par value thereof and past services for the Corporation. The recipient of Restricted Stock shall be recorded as a stockholder of the Corporation, at which time the Corporation, at its discretion, may either issue a Restricted Stock Certificate or make a book entry credit in the Corporation's stock ledger to evidence the award of such Restricted Stock, and the Participant shall have, subject to the provisions hereof, all the rights of a stockholder with respect to such shares and receive all dividends or other distributions made or paid with respect to such shares; provided, that the shares themselves, and any new, additional or different shares or securities which the recipient may be entitled to receive with respect to such shares by virtue of a stock split or stock dividend or any other change in the corporate or capital structure of the Corporation, shall be subject to the restrictions hereinafter described. (b) During a period of years following the date of grant, as determined by the Committee, which shall in no event be less than one year (the "Restricted Period"), the Restricted Stock or any rights thereto may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of 9 by the recipient, except in the event of death or the transfer thereof to the Corporation under the provisions of the next succeeding paragraph. In the event of the death or normal Retirement of the recipient during the Restricted Period, such restrictions shall immediately lapse, and the recipient or, in the case of the recipient's death, his Designated Beneficiary, the legatee under his last will or his personal representative or distributee shall be free to transfer, encumber or otherwise dispose of the Restricted Stock. In the event of the early Retirement of the recipient during the Restricted Period, such restrictions shall continue until they lapse in accordance with the terms of the grant. Except as provided in Section 8(c), in the event that, during the Restricted Period, the service of the recipient by the Corporation or one of its subsidiaries is terminated for any reason (including termination with or without cause by the Corporation or such subsidiary or resignation by the recipient), other than termination of service due to the Retirement or death of the recipient, then the shares of Restricted Stock held by him shall be forfeited to the Corporation and the recipient shall immediately transfer and return to the Corporation the certificates, if any have been issued to him, representing all the Restricted Stock and the recipient's rights as a stockholder with respect to the Restricted Stock shall cease, effective with such termination of service. Notwithstanding the foregoing, the recipient's service contract with the Corporation may provide that upon termination of his service for other than cause or for good reason, all Restricted Stock shall cease to be subject to such restrictions. A recipient's rights to Restricted Stock may not be assigned or transferred except upon death by will, descent or distribution. In the event of any attempt by the recipient to sell, exchange, transfer, pledge or otherwise dispose of shares of Restricted Stock in violation of the provisions hereof, such shares shall be forfeited to the Corporation. (c) Notwithstanding the Restricted Period contained in the grant of Restricted Stock, in the event of a Change of Control (as defined in Section 1), all restrictions on shares of Restricted Stock shall immediately lapse and such Restricted Shares shall become immediately transferable and nonforfeitable. (d) Notwithstanding anything contained in the Plan to the contrary, the Committee may determine, in its sole discretion, in the case of any termination of a recipient's service, that the restrictions on some or all of the shares of Restricted Stock awarded to a recipient shall immediately lapse and such Restricted Shares shall become immediately transferable and nonforfeitable. 9. Stock Grant Awards (a) Each nonofficer employee of the Corporation is eligible to receive a grant of Common Stock as a stock bonus (i) at the end of each fiscal year or (ii) if the employee terminates prior to year-end, at the time of termination. The number of shares to be granted shall be determined by setting a percentage of the employee's salary at the fiscal year-end or time of termination and dividing that amount by the price per share of the Common Stock or by any other method determined by the Committee. For this purpose, the price for the Common Stock shall be the Fair Market Value on the date of grant and each grant shall be for full shares only; any fractional shares resulting from this calculation shall be disregarded. The consideration to be received for shares of Common Stock issued under this Section 9(a) shall be cash in an amount equal to the par value thereof and past services for the Corporation. (b) In addition, each recipient of a stock grant under Section 9(a) may be granted a cash award at the time the shares are issued in an amount sufficient to offset the recipient's estimated tax liabilities arising from the issuance of the Common Stock under Section 9(a). (c) Determinations regarding eligibility for grants under Section 9 (a), the amount of individual grants of Common Stock, the amount of the cash offset award, the interpretation of Section 9 and all other matters relating to the administration of Section 9 are within the sole discretion of the Committee. 10 10. Performance Unit Awards (a) Performance units which are awarded to a Participant shall have a "unit base value," expressed in dollars, determined by the Committee on the day on which the award is granted and generally determined to be the Fair Market Value of the Common Stock on such day. The performance units will also have a Payment Value at the end of the applicable Award Cycle contingent upon the performance of the Corporation and/or of such Participant's subsidiary, division or department during the Award Cycle. The performance measures may include, but shall not be limited to, cumulative growth in earnings per share or pretax profits, return on stockholders' equity, asset management, cash flow or return on capital employed. Such measures may be applied on an absolute basis or relative to industry indices and shall be defined in a manner which the Committee shall deem appropriate. For each performance unit awarded, the Committee shall determine the length of the Award Cycle, which shall be a period of not less than three fiscal years, and shall establish a Payment Schedule based upon the performance measures determined for such performance unit and the length of the Award Cycle, setting forth a range of Payment Values corresponding to performance levels targeted for the Corporation or such subsidiary, division or department. If during the course of an Award Cycle there should occur, in the opinion of the Committee, significant changes in economic conditions or in the nature of the operations of the Corporation or a subsidiary, division or department which the Committee did not foresee in establishing the performance measures for such Award Cycle and which, in the Committee's sole judgment have, or are expected to have, a substantial effect on the performance of the Corporation or of a Participant's subsidiary, division or department during such Award Cycle, the Committee may revise the Payment Schedule and performance measures formerly determined by it in such manner as the Committee, in its sole judgment, may deem appropriate except as otherwise provided in Section 10(1). (b) In determining the number of performance units to be awarded, the Committee shall take into account a person's responsibility level, performance, potential, cash compensation level and such other considerations as it deems appropriate. (c) Except as otherwise provided in Section 10(l), an award of performance units to a Participant shall terminate for all purposes if the services of the Participant for the Corporation or one of its subsidiaries ceases during the Award Cycle, except in the case of death, disability or retirement under the Corporation's pension plan (including early retirement at the request of the Corporation), in which case (and provided that the Participant at the time of death, disability or retirement as aforesaid shall have maintained his employment or other qualifying relationship with the Corporation or one of its subsidiaries continuously during the period commencing on the date the award was granted and ending on the first anniversary thereof) the Participant will be entitled to payment (such payment to be made in accordance with the provisions of Section 10(d)) of the same portion of the Payment Value of the award the Participant would otherwise have been paid (such Payment Value, if any, to be determined at the conclusion of the applicable Award Cycle in accordance with the provisions of Sections 10(a) and 10(e) unless otherwise provided in Section 10(l)) as the portion of the Award Cycle during which the Participant maintained such relationship with the Corporation bears to the full Award Cycle. Under particular circumstances, the Committee may make other determinations with respect to Participants whose services do not meet the foregoing requirements, including the waiver of any of the requirements of this subsection (c) relating to periods of continuous service. (d) Except as otherwise provided in Section 10(l), unless the Committee otherwise determines, no payment with respect to performance units will be made to a Participant prior to the end of such Participant's Award Cycle; provided, however, that if a Participant should die during an Award Cycle and his award shall not have been terminated hereunder prior to his death, such Participant's Designated Beneficiary, the legatee under the Participant's last will, his personal representative or his distributee may elect instead, subject to the approval of the Committee, to have the pro rata portion of the Participant's Payment Value determined by the Committee as of the end of the year during which such Participant's death occurred, based upon application of the Payment Schedule to the part of the Award Cycle which 11 shall have elapsed (for such purpose, the cumulative growth rate or improvement achieved in the applicable performance measures to the end of the fiscal year in which death occurs will be assumed to continue for the Award Cycle), in which event such pro rata portion shall be paid in cash or Common Stock, as provided in Section 10(g), as soon as practicable following such year (or in such number of installments as shall have been requested by the Participant and approved by the Committee) to such Participant's Designated Beneficiary or legal representative. (e) Except as otherwise provided in Section 10(d) in the case of death, or in Section 10(l) in the case of a Change in Control, a Participant's interest in any performance units awarded to him shall mature on the last day of the Award Cycle for such award. The Payment Value of a performance unit shall be the dollar amount calculated on the basis of the Payment Schedule applicable to such Award Cycle. (f) The total amount of Payment Value due a Participant at the conclusion of an Award Cycle shall be paid on such date following the conclusion of such Award Cycle as the Committee shall designate, except as specifically otherwise provided in the Plan; provided, however, that the Committee shall have authority, if it deems appropriate, to defer payment (in cash or in stock or both in specified percentages) of the Payment Value due a Participant if the Participant shall request the Committee to do so at any time prior to the last year of the Award Cycle for such award. In respect of awards made or to be made in one or more deferred installments in cash, interest shall be credited semiannually on each such award at a rate to be determined semiannually by the Committee, but in no event shall such rate be less than the average rate on 10-year AAA new industrial corporate bonds during each such semiannual period as calculated on the basis of the average of such rates for each calendar week ending during the period January 1 through June 30 and July 1 through December 31; provided that awards made during any such six-month period shall be credited on the basis of the average rate for that period; and provided further that installments paid during any six-month period shall be credited with interest on the basis of the average rate for the next preceding six-month period, in each case adjusted for the number of days such award was to be credited. Unless paid to the recipient of such award at the time credited, interest at the foregoing rate shall be credited on the interest so credited until so paid. The foregoing minimum interest rate for any award that is payable in one or more deferred installments under the Plan may not be modified without the prior written consent of the Participant. Whenever an award is made in one or more deferred installments in Common Stock, the Committee may determine that there shall be credited on such award an amount equivalent to the dividends which would have been paid with respect to such shares of Common Stock if they had been issued and outstanding. Such dividend equivalents shall be credited on the dividend record dates until certificates for such shares shall have been delivered to the recipient of such award or until such earlier date as the Committee may determine. Such interest and dividend equivalents shall be paid to the recipient of any such award in cash (or in property if the related dividend shall have been in property) at such time or times during the deferred period of such award or at the same time as the cash or shares of Common Stock to which such interest and dividend equivalents apply, all as the Committee shall determine. The Committee may also determine that any such dividend equivalents may be used to purchase additional shares of outstanding Common Stock (such shares to be valued for such purpose at Fair Market Value on the dividend record date) to be added to the shares of Common Stock covered by such award and held subject to the same terms and conditions, including provisions relating to the payment of amounts equivalent to dividends thereon. (g) Except as otherwise provided in Section 10(l), the Committee in its discretion may determine at the time of grant or at the end of the Award Cycle as to each Participant whether the payment of the Payment Value due a Participant shall be made (i) in cash, (ii) in shares of Common Stock (valued at the average Fair Market Value of the Common Stock for the five trading days immediately preceding the date of payment), or (iii) in a combination of cash and shares of Common Stock so valued. 12 (h) If the payment of any award shall be deferred until after the termination of the services of the recipient by the Corporation or one of its subsidiaries, the cash or Common Stock covered by such award, together with any deferred interest or dividend equivalents thereon, shall be delivered in not more than 20 annual installments, commencing not later than the January 31 after such termination of services (or such other date as the Committee from time to time shall determine), all as the Committee may determine. If the payment of an award under the Plan is deferred, such payment thereafter may be accelerated so that such payment shall be made immediately or at such earlier time or in such less number of installments, in each case as the Committee may from time to time determine, but only with the prior written consent of the Participant. (i) A Participant to whom any award has been made shall not have any interest beyond that of a general creditor of the Corporation in the cash or Common Stock awarded, or in any interest or dividend equivalents credited to him until the cash has been paid to him or the certificates for the Common Stock have been delivered to him, as the case may be, in accordance with the provisions of the Plan. (j) In the case of the death of the recipient of an award, before or after the termination of his services, any unpaid installments of such deferred award shall pass to the Designated Beneficiary, the legatee under the Participant's last will, his personal representative or his distributee. Unpaid installments of a deferred award shall be paid either in the same installments as originally provided or otherwise as the Committee may determine in individual cases. (k) Subject to the provisions of Section 10(l), in any case in which payment of an award is to be made in Common Stock, the Corporation shall have the right, in lieu of delivering the certificate or certificates for any or all of the stock which would otherwise be deliverable to the Participant pursuant to the Plan, to pay to such Participant on the date on which such certificate or certificates would otherwise be deliverable an amount in cash equal to the Fair Market Value of such Common Stock on such date or dates as may be determined by the Committee, but not more than five trading days prior to such date, all as the Committee may determine in individual cases. (l) Anything herein to the contrary notwithstanding, in the event of a Change of Control, with respect to any unmatured performance unit awards which a Participant held immediately prior to such Change of Control, the Participant will be entitled to immediate payment in cash (unless payment of such performance unit awards shall be deferred in accordance with Section 10(f), in which event the amount provided to be payable by this Section 10(l) shall also be so deferred) in an amount equal to the value of such units determined in accordance with the Payment Schedule applicable to such awards, based on the cumulative, growth rate in the Corporation's reported earnings per share for all previously elapsed fiscal years, if any, included in the Award Cycles for such awards and the actual or presumed cumulative growth rate in the earnings per share for the balance of each Award Cycle, determined as follows: (i) if such Change of Control occurs prior to the completion of the first fiscal year of an Award Cycle, the cumulative growth rate to be utilized for the balance of the Award Cycle shall be the cumulative growth rate in the Corporation's earnings per share in the four fiscal years preceding the first year and (ii) if such Change of Control occurs during any subsequent fiscal year of an Award Cycle, the cumulative growth rate to be utilized for the balance of the Award Cycle shall be the cumulative growth rate of the preceding fiscal year(s) in that Award Cycle prior to the fiscal year in which occurs the Change of Control. In the event that a performance measure other than earnings per share is employed, similar adjustments shall be made for such holders of unmatured performance units. The Committee may in its discretion determine that such historical financial data are not appropriate or not available and may use the latest budgets, projections, forecasts or plans for the Corporation or its business units or subsidiaries. Except as expressly set forth in this Section 10(l), upon the occurrence of a Change of Control, no change(s) shall be made in the terms of any performance unit (including, without limitation, its unit base value, Payment Value or performance criteria) or in the underlying accounting assumptions or practices for purposes of determining the amount due thereunder, which change(s) would lessen the value of any performance unit to the holder thereof. 13 11. Withholding Taxes In connection with the transfer of shares of Common Stock as a result of the exercise of a Nonqualified Stock Option or stock appreciation right, the payment of performance units or the award of Restricted Stock or stock grants, the Corporation (a) shall not issue a certificate for such shares until it has received payment from the Participant of any Withholding Tax in cash or by the retention or acceptance upon delivery thereof by the Participant of shares of Common Stock sufficient in Fair Market Value to cover the amount of such Withholding Tax and (b) shall have the right to retain or sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover any Withholding Tax. The Corporation shall have the right to withhold from any cash amounts due from the Corporation to the award recipient pursuant to the Plan an amount equal to the Withholding Tax. In either case, the Corporation shall make payment (or reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the Participant. For purposes of this Section 11, the value of shares of Common Stock so retained or surrendered shall be equal to the Fair Market Value of such shares on the date that the amount of the Withholding Tax is to be determined (the "Tax Date"), and the value of shares of Common Stock so sold shall be the actual net sale price per share (after deduction of commissions) received by the Corporation. Notwithstanding the foregoing, the Participant may elect, subject to approval by the Committee, to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Corporation with funds sufficient to enable the Corporation to pay such Withholding Tax or by having the Corporation retain or accept upon delivery thereof by the Participant shares of Common Stock sufficient in Fair Market Value to cover the amount of such Withholding Tax. Each election by a Participant to have shares retained or to deliver shares for this purpose shall be subject to the following restrictions: (i) the election must be in writing and made on or prior to the Tax Date and (ii) if the Participant is subject to Section 16 of the Exchange Act, an election to have shares retained to satisfy the Withholding Tax must be an irrevocable election made at least six months prior to the Tax Date or the withholding election must become effective during the ten-businessday period beginning on the third business day following the date on which the Corporation releases for publication its annual or quarterly summary statements of sales and earnings and ending on the twelfth business day following the date of release thereof. 12. Transferability and Ownership Rights of Options, Stock Appreciation Rights and Performance Units No option or stock appreciation fight granted or performance unit awarded under the Plan shall be transferable otherwise than pursuant to the designation of a Designated Beneficiary or by will, descent or distribution, and an option or stock appreciation fight may be exercised, during the lifetime of the holder thereof, only by him. The holder of an option, stock appreciation right or performance unit award shall have none of the rights of a stockholder until the shares subject thereto or awarded thereby shall have been registered in the name of such holder on the transfer books of the Corporation. 13. Holding Periods (a) If a director or officer subject to Section 16 of the Exchange Act sells shares of Common Stock obtained upon the exercise of a stock option within six months after the date the option was granted, the option grant will no longer be exempt from Section 16(b) and will retroactively be deemed a nonexempt purchase as of the date of the option grant. (b) In order to obtain certain tax benefits afforded to incentive stock options under Section 422 of the Code, an optionee must hold the shares issued upon the exercise of an incentive stock option for two years after the date of grant of the option and one year from the date of exercise. An optionee may be subject to the alternative minimum tax at the time of exercise of an incentive stock option. 14 The Committee may require an optionee to give the Corporation prompt notice of any disposition in advance of the required holding period of shares of Common Stock acquired by exercise of an incentive stock option. Tax advice should be obtained when exercising any option and prior to the disposition of the shares issued upon the exercise of any option. 14. Section 16(b) Compliance and Bifurcation of Plan It is the intention of the Corporation that, if any of the Corporation's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under the Exchange Act and, if any Plan provision is later found not to be in compliance with such Section, the provision shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. Notwithstanding anything in the Plan to the contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to participants who are officers and directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other participants. 15. Adjustments Upon Changes in Capitalization Except as otherwise provided in Section 6(h) and Section 10(l), in the event of any changes in the outstanding stock of the Corporation by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, split-ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution to stockholders other than cash dividends, the Committee shall make such adjustments, if any, in light of the change or distribution as the Committee in its sole discretion shall determine to be appropriate, (i) in the number and class of shares or rights subject to options and stock appreciation rights and the exercise prices of the options and stock appreciation rights covered thereby, (ii) in the number of shares of Common Stock covered by a performance unit award for which certificates have not been delivered, any dividend equivalents to which deferred awards of Common Stock are entitled, and the performance measures established by the Committee under Section 10(a), and (iii) in the Maximum Annual Employee Grant. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number and class of shares available under the Plan and the maximum number of shares as to which options may be granted and stock appreciation rights or performance units awarded and the maximum number of shares of Restricted Stock which may be awarded shall be appropriately adjusted by the Committee. 16. Amendment and Termination Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no awards of performance units, stock appreciation rights, or Restricted Stock or options shall be made after, June 26, 2002; provided, however, that such termination shall have no effect on awards of performance units, stock appreciation rights, Restricted Stock or options made prior thereto. The Plan may be terminated, modified or amended by the stockholders of the Corporation. The Board of Directors of the Corporation may also terminate the Plan, or modify or amend the Plan in such respects as it shall deem advisable in order to conform to any change in any law or regulation applicable thereto, or in other respects; however, to the extent required by applicable law or regulation, stockholder approval will be required for any amendment which will (a) materially increase the total number of shares as to which options may be granted or which may be used in payment of performance unit awards or stock appreciation right awards under the Plan or which may be issued as Restricted Stock, (b) materially change the class of persons eligible to receive awards of performance units or Restricted Stock and grants of stock appreciation rights or options, (c) materially increase the benefits accruing to participants under the Plan, or (d) otherwise require stockholder approval under any applicable law or regulation. The amendment or termination of the Plan shall not, without the consent of the recipient of any award under the Plan, alter or impair any rights or obligations under any award theretofore granted under the Plan. 15 17. Effectiveness of the Plan The Plan shall become effective on June 26, 1992. The Committee may in its discretion authorize the awarding of performance units and Restricted Stock and the granting of options and stock appreciation rights, the payments, issuance or exercise of which, respectively, shall be expressly subject to the conditions that (a) the shares of Common Stock reserved for issuance under the Plan shall have been duly listed, upon official notice of issuance, upon each stock exchange in the United States upon which the Common Stock is traded and (b) a registration statement under the Securities Act of 1933, as amended, with respect to such shares shall have become effective. 16 EX-10 5 Exhibit 10.3 May 8, 1996 ADVANCED TECHNOLOGY LABORATORIES, INC. AMENDED NONEMPLOYEE DIRECTORS STOCK OPTION PLAN ARTICLE I PURPOSES The purposes of the Advanced Technology Laboratories, Inc. Stock Option Plan for Nonemployee Directors (the "Plan") are to attract and retain the services of experienced and knowledgeable nonemployee directors of Advanced Technology Laboratories, Inc. (the "Corporation") and to provide an incentive for such directors to increase their proprietary interests in the Corporation's long-term success and progress. ARTICLE II SHARES SUBJECT TO THE PLAN Subject to adjustment in accordance with Article VI hereof, the total number of shares of the Corporation's common stock, $.0l par value per share (the "Common Stock"), for which options may be granted under the Plan is 105,000 (the "Shares"). The Shares shall be shares presently authorized but unissued or subsequently acquired by the Corporation and shall include shares representing the unexercised portion of any option granted under the Plan which expires or terminates without being exercised in full. ARTICLE III ADMINISTRATION OF THE PLAN The administrator of the Plan (the "Plan Administrator") shall be the Board of Directors of the Corporation (the "Board"). Subject to the terms of the Plan, the Plan Administrator shall have the power to construe the provisions of the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. No member of the Plan Administrator shall participate in any vote by the Plan Administrator on any matter materially affecting the rights of any such member under the Plan. ARTICLE IV PARTICIPATION IN THE PLAN Each member of the Board elected or appointed who is not otherwise an employee of the Corporation or any parent or subsidiary corporation (an "Eligible Director") shall automatically receive the grant of an option to purchase 5,000 Shares on the first day of July in each year that the Eligible Director serves. ARTICLE V OPTION TERMS Each option granted to an Eligible Director under the Plan and the issuance of Shares thereunder shall be subject to the following terms: 1. Option Agreement Each option granted under the Plan shall be evidenced by an option agreement (an "Agreement") duly executed on behalf of the Corporation. Each Agreement shall comply with and be subject to the terms and conditions of the Plan. Any Agreement may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Plan Administrator. 2. Option Exercise Price The option exercise price for an option granted under the Plan shall be the fair market value of the Shares covered by the option at the time the option is granted. For purposes of the Plan, "fair market value" shall be the average of the high and low sales prices at which the Common Stock was sold on such date as reported by the 1 NASDAQ National Market System on such date or, if no Common Stock was traded on such date, on the next preceding date on which Common Stock was so traded. 3. Vesting and Exercisability An option shall become fully vested and become nonforfeitable on July 1 of the year following the year in which the option was granted if the optionee has continued to serve as a Director until such date. 4. Time and Manner of Exercise of Option Each option may be exercised in whole or in part at any time and from time to time; provided, however, that no fewer than 100 Shares (or the remaining Shares then purchasable under the option, if less than 100 Shares) may be purchased upon any exercise of option rights hereunder and that only whole Shares will be issued pursuant to the exercise of any option. Any option may be exercised by giving written notice, signed by the person exercising the option, to the Corporation stating the number of Shares with respect to which the option is being exercised, accompanied by payment in full for such Shares, which payment may be in whole or in part (i) in cash or by check or (ii) in shares of Common Stock already owned for at least three (3) months by the person exercising the option, valued at fair market value at the time of such exercise. 5. Term of Options Each option shall expire five (5) years from the date of the granting thereof, but shall be subject to earlier termination as follows: (a) In the event that an optionee ceases to be a director of the Corporation for any reason other than the death of the optionee, the options granted to such optionee may be exercised by him or her only within one (1) year after the date such optionee ceases to be a director of the Corporation. (b) In the event of the death of an optionee, whether during the optionee's service as a director or during the one (1) year period referred to in Section 5 (a), the options granted to such optionee shall be exercisable, and such options shall expire unless exercised within one (1) year after the date of the optionee's death, by the legal representatives or the estate of such optionee, by any person or persons whom the optionee shall have designated in writing on forms prescribed by and filed with the Corporation or, if no such designation has been made, by the person or persons to whom the optionee's rights have passed by will or the laws of descent and distribution. 6. Transferability During an optionee's lifetime, an option may be exercised only by the optionee. Options granted under the Plan and the rights and privileges conferred thereby shall not be subject to execution, attachment or similar process and may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by the applicable laws of descent and distribution except that, to the extent permitted by applicable law and Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan Administrator may permit a recipient of an option to designate in writing during the optionee's lifetime a beneficiary to receive and exercise options in the event of the optionee's death (as provided in Section 5(b)). Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any option under the Plan or of any right or privilege conferred thereby, contrary to the provisions of the Plan, or the sale or levy or any attachment or similar process upon the rights and privileges conferred hereby, shall be null and void. 7. Participant's or Successor's Rights as Stockholder Neither the recipient of an option under the Plan nor the optionee's successor(s) in interest shall have 2 any rights as a stockholder of the Corporation with respect to any Shares subject to an option granted to such person until such person becomes a holder of record of such Shares. 8. Limitation as to Directorship Neither the Plan nor the granting of an option nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express on implied, that an optionee has a right to continue as a director for any period of time or at any particular rate of compensation. 9. Regulatory Approval and Compliance The Corporation shall not be required to issue any certificate or certificates for Shares upon the exercise of an option granted under the Plan, or record as a holder of record of Shares the name of the individual exercising an option under the Plan, without obtaining to the complete satisfaction of the Plan Administrator the approval of all regulatory bodies deemed necessary by the Plan Administrator, and without complying, to the Plan Administrator's complete satisfaction, with all rules and regulations under federal, state or local law deemed applicable by the Plan Administrator. ARTICLE VI CAPITAL ADJUSTMENTS The aggregate number and class of Shares for which options may be granted under the Plan, the number and class of Shares covered by each automatic grant and each outstanding option and the exercise price per Share thereof (but not the total price) shall all be proportionately adjusted for any stock dividends, stock splits, recapitalizations, combinations or exchanges of shares, split- ups, split-offs, spinoffs, or other similar changes in capitalization. Upon the effective date of a dissolution or liquidation of the Corporation with one or more corporations which results in more than eighty percent of the outstanding voting shares of the Corporation being owned by one or more affiliated corporations or other affiliated entities, or of a transfer of all or substantially all the assets or more than eighty percent of the then outstanding shares of the Corporation to another corporation or other entity, this Plan and all options granted hereunder shall terminate. In the event of such dissolution, liquidation, reorganization, merger, consolidation, transfer of assets or transfer of stock, each optionee shall be entitled, for a period of twenty days prior to the effective date of such transaction, to purchase the full number of shares under his or her option which he or she is otherwise would have been entitled to purchase during the remaining term of such option. Adjustments under this Article IV shall be made by the Plan Administrator, whose determination shall be final. In the event of any adjustment in the number of Shares covered by any option, any fractional Shares resulting from such adjustment shall be disregarded and each such option shall cover only the number of full Shares resulting from such adjustment. ARTICLE VII EXPENSES OF THE PLAN All costs and expenses of the adoption and administration of the Plan shall be borne by the Corporation; none of such expenses shall be charged to any optionee. ARTICLE VIII EFFECTIVE DATE AND DURATION OF THE PLAN The Plan shall be effective on May 5, 1993. The Plan shall continue in effect until it is terminated by action of the Board or the Corporation's stockholders, but such termination shall not affect the then-outstanding terms of any options. ARTICLE IX TERMINATION AND AMENDMENT OF THE PLAN The Board may amend, terminate or suspend the Plan at any time, in its sole and absolute discretion; provided, however, that if required to qualify the Plan under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, no amendment may be made more than once every six (6) months that would change the amount, price, timing or vesting of the options, other than to comport with changes in the Internal Revenue Code of 1986, as 3 amended, or the rules and regulations promulgated thereunder; and provided, further, that if required to qualify the Plan under Rule 16b-3, no amendment that would (a) materially increase the number of Shares that may be issued under the Plan, (b) materially modify the requirements as to eligibility for participation in the Plan, or (c) otherwise materially increase the benefits accruing to participants under the Plan shall be made without the approval of the Corporation's stockholders. ARTICLE X COMPLIANCE WITH RULE 16b-3 It is the intention of the Corporation that the Plan comply in all respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that Plan participants remain disinterested persons ("disinterested persons") for purposes of administering other employee benefit plans of the Corporation and having such other plans be exempt from Section 16 (b) of the Exchange Act. Therefore, if any Plan provision is later found not to be in compliance with Rule 16b-3 or if any Plan provision would disqualify Plan participants from remaining disinterested persons, that provision shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. Adopted by the Corporation's Board of Directors on February 26, 1993 and approved by the Corporation's Shareholders and effective on May 5, 1993. Amended and approved by the Corporation's Directors and Shareholders effective on May 10, 1995 and May 8, 1996. EX-10 6 Exhibit 10.2 ADVANCED TECHNOLOGY LABORATORIES, INC. INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1995 Prepared for review by legal counsel. TABLE OF CONTENTS
Page ---- PREAMBLE.................................................... 1 SECTION 1 -- DEFINITIONS.................................... 2 1.1 Account....................................... 2 1.2 Affiliated Companies.......................... 2 1.3 After-Tax Contribution Account................ 2 1.4 Before-Tax Contribution Account............... 2 1.5 Beneficiary................................... 3 1.6 Board of Directors............................ 3 1.7 Code.......................................... 3 1.8 Committee..................................... 3 1.9 Company....................................... 3 1.10 Company Matching Contributions................ 4 1.11 Company Matching Contribution Account......... 4 1.12 Company Stock................................. 4 1.13 Compensation.................................. 4 1.14 Current Market Value.......................... 4 1.15 Disabled...................................... 4 1.16 Early Terminee................................ 4 1.17 Earnings...................................... 5 1.18 Effective Date................................ 5 1.19 Eligible Employee............................. 5 1.20 Employee...................................... 6 1.21 Employment Commencement Date.................. 6 1.22 ERISA......................................... 6 1.23 Highly Compensated Employee................... 6 1.24 Hour of Service............................... 7 1.25 Normal Retirement Date........................ 8 1.26 Participant................................... 8 1.27 Participating Company......................... 8 1.28 Period of Service............................. 8 1.29 Period of Severance........................... 9 1.30 Plan.......................................... 9 1.31 Plan Administrator............................ 9 1.32 Plan Year..................................... 9 1.33 Rollover Account.............................. 9 1.34 Service....................................... 9 1.35 Severance From Service Date................... 10 1.36 Supplemental Company Contribution Account..... 10 1.37 Temporary Termination......................... 10 1.38 Terminated.................................... 10 1.39 Trust or Trust Fund........................... 10 1.40 Trustee....................................... 10
TABLE OF CONTENTS (continued)
Page ---- 1.41 Valuation Date............................... 10 1.42 Additional Definitions in Plan................ 11 SECTION 2 -- PARTICIPATION.................................. 12 2.1 Participation................................. 12 2.2 Reemployment After Termination................ 12 2.3 Employees in a Bargaining Unit................ 12 SECTION 3 -- BEFORE-TAX CONTRIBUTIONS....................... 13 3.1 Salary Deferral Agreement..................... 13 3.2 Participant Modification of Salary Deferral Agreement................................... 13 3.3 Procedure for Making and Revoking Salary Deferral Agreement.......................... 14 3.4 Non-Discrimination Test For Deferrals (ADP Test)....................................... 14 SECTION 4 -- PLAN CONTRIBUTIONS............................. 16 4.1 Participant and Company Contributions......... 16 4.2 Time of Contribution.......................... 19 4.3 Non-Discrimination Test for Company Matching Contributions and After-Tax Contributions (ACP Test).................................. 19 4.4 Multiple Use of Alternative Limitations Under ADP and ACP Tests..................... 20 4.5 Corrective Procedures to Satisfy Discrimination Tests........................ 21 4.6 Return of Contributions....................... 21 4.7 Recharacterization of Excess Before-Tax Contributions............................... 24 SECTION 5 -- ACCOUNT ADMINISTRATION......................... 25 5.1 Types of Accounts............................. 25 5.2 Investment Options............................ 25 5.3 Allocation of Trust Fund Earnings and Losses to Participant Accounts..................... 27 5.4 Valuation of the Trust Fund................... 28 5.5 Account Statements............................ 28 SECTION 6 -- INVESTMENT OF CONTRIBUTIONS.................... 29 6.1 Optional Funds................................ 29 6.2 Selection of Investment Funds................. 29 6.3 Investment in Loan Repayments................. 30 6.4 Change in Investment of Future Contributions.. 30 6.5 Changes in Investment of Existing Accounts.... 30 6.6 Changes in Investment of Former Intespec, Inc. Accounts............................... 31 6.5 Investment of Company Contributions........... 31 SECTION 7 -- BENEFITS AND FORMS OF PAYMENT.................. 32 7.1 Eligibility for Benefits...................... 32 7.2 Time of Benefit Commencement.................. 32 7.3 Form of Payment............................... 34 7.4 Distributions of Stock........................ 34 7.5 Withdrawals Prior to Termination.............. 35 7.6 Hardship Withdrawal........................... 37
TABLE OF CONTENTS (continued)
Page ---- 7.7 Beneficiary Designation........................ 39 7.8 Loans.......................................... 39 7.8 Directed Rollovers............................. 42 SECTION 8 -- VESTING......................................... 44 8.1 Vesting........................................ 44 8.2 Forfeitures.................................... 45 8.3 Reemployment................................... 46 8.4 Suspension of Installment Payments............. 46 SECTION 9 -- LIMITATION ON CONTRIBUTIONS..................... 47 9.1 Maximum Annual Contribution to the Plan........ 47 9.2 Additional Limitation Relating to Defined Benefit Plans................................ 48 SECTION 10 -- TOP HEAVY PROVISIONS........................... 50 10.1 Scope.......................................... 50 10.2 Top Heavy Status............................... 50 10.3 Minimum Contribution........................... 52 10.4 Limitation to Annual Additions in Top Heavy Plan......................................... 53 10.5 Vesting........................................ 53 SECTION 11 -- ADMINISTRATION OF THE PLAN..................... 54 11.1 Plan Administrator............................. 54 11.2 Organization and Procedures.................... 54 11.3 Duties and Authority of Committee.............. 54 11.4 Expenses....................................... 56 11.5 Bonding and Insurance.......................... 56 11.6 Commencement of Benefits....................... 56 11.7 Appeal Procedure............................... 57 11.8 Plan Administration - Miscellaneous............ 58 11.9 Domestic Relations Orders...................... 61 11.10 Plan Qualification............................. 62 11.11 Deductible Contribution........................ 62 11.12 Voting of Company Stock and SpaceLabs Medical, Inc. Stock.......................... 62 SECTION 12 -- AMENDMENT AND TERMINATION...................... 63 12.1 Amendment and Termination...................... 63 12.2 Consolidation or Merger........................ 63 12.3 Termination of the Plan........................ 64 12.4 Allocation of the Trust Fund on Termination of Plan...................................... 64 12.5 Partial Termination............................ 65 SECTION 13 -- FUNDING........................................ 66 13.1 Contributions to the Trust Fund................ 66 13.2 Trust Fund for Exclusive Benefit of Participants................................. 66 13.3 Trustee........................................ 66 13.4 Investment Manager............................. 66 TABLE OF CONTENTS (continued)
Page ---- SECTION 14 -- FIDUCIARIES.................................... 68 14.1 Limitation of Liability of the Company and Others....................................... 68 14.2 Indemnification of Fiduciaries................. 68 14.3 Scope of Indemnification....................... 68 SIGNATURE PAGE............................................... 69 APPENDIX I................................................... 70
PREAMBLE THIS SAVINGS AND STOCK OWNERSHIP PLAN (hereinafter referred to as the "Plan"), formerly known as the Westmark International Incorporated Incentive Savings and Stock Ownership Plan and now known as the Advanced Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan) is amended and restated effective January 1, 1995, by Advanced Technology Laboratories, Inc., a Delaware corporation (hereinafter "Company"). WHEREAS, the Plan is a profit sharing plan and the purpose of the Plan is to attract and retain Eligible Employees by providing them with an opportunity to save for their retirement; and WHEREAS, the Plan was adopted by Westmark International Incorporated effective January 1, 1987, and was amended and restated effective January 1, 1989; and WHEREAS, effective June 26, 1992, the corporate name of Westmark International Incorporated was changed to Advanced Technology Laboratories, Inc. and the Plan was divided into two plans, with the portion of the Plan attributable to SpaceLabs, Inc. as a Participating Company becoming the SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership Plan; and WHEREAS, effective June 26, 1992, the Plan was amended and restated as the Advanced Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan; and WHEREAS, effective May 17, 1994, the Company merged with Interspec, Inc.; and WHEREAS, the Company desires to merge the Interspec, Inc. 401(k) Retirement/Savings Plan into the Plan effective January 1, 1995; and WHEREAS, the Company desires to amend and restate the Plan to effect certain changes; and WHEREAS, the Plan shall be maintained for the exclusive benefit of covered Employees, and is intended to comply with the Internal Revenue Code of 1986, as amended, including without limitation Section 401(k) thereof, the Employee Retirement Income Security Act of 1974, as amended, and other applicable law; NOW, THEREFORE, except as otherwise specified herein, the Employer does hereby amend and restate the Plan as set forth in the following pages effective January 1, 1995, except that any change required by federal law, including without limitation amendments to the Internal Revenue Code, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act and regulations or rulings issued pursuant thereto shall be effective on the latest date on which such change may become effective and comply with such laws. 1 SECTION 1 DEFINITIONS The following terms when used herein shall have the following meaning, unless a different meaning is plainly required by the context. Capitalized terms are used throughout the Plan text for terms defined by this and other sections. 1.1 Account ------- "Account" means a Participant's Before-Tax Contribution Account, Company Matching Contribution Account, Supplemental Company Contribution Account, After-Tax Contribution Account and Rollover Account. 1.2 Affiliated Companies -------------------- "Affiliated Companies" means (a) the Company, (b) any other corporation which is a member of a controlled group of corporations which includes the Company (as defined in Section 414(b) of the Code), (c) any other trade or business under common control with the Company (as defined in Section 414(c) of the Code), or (d) an affiliated service group which includes the Company (as defined in Section 414(m) of the Code). For purposes of the limitation on contributions in Section 9, the determination of whether a corporation is an Affiliated Company will be made in accordance with Sections 414(b) and (c) of the Code as modified in Section 415(h). 1.3 After-Tax Contribution Account ------------------------------ "After-Tax Contribution Account" means an account established to hold a Participant's After-Tax Contributions to the Plan. 1.4 Before-Tax Contribution Account ------------------------------- "Before-tax Contribution Account" means an account established to receive a Participant's Before-Tax Contributions to the Plan and funds formerly held in the Participant's Salary Reduction Contributions Account, if any under the Interspec, Inc. 401(k) Retirement/Savings Plan. 2 1.5 Beneficiary ----------- "Beneficiary" means the person or persons designated to be the Beneficiary by the Participant in writing to the Committee. In the event a married Participant designates someone other than his or her spouse as Beneficiary, such initial designation or subsequent change shall be invalid unless the spouse consents in a writing, which names the designated Beneficiary and is notarized, or witnessed by a Plan representative. If a Participant fails to designate a Beneficiary or no designated Beneficiary survives the Participant, the Committee may direct that payment of benefits be made in equal shares to the person or persons in the first of the following classes of successive preference Beneficiaries to survive the Participant. The Participant's: (a) spouse, (b) descendants, per stirpes, (c) parents, (d) brothers and sisters, (e) estate. 1.6 Board of Directors ------------------ "Board of Directors" means the Board of Directors of Advanced Technology Laboratories, Inc., a Delaware corporation. 1.7 Code ---- "Code" means the Internal Revenue Code of 1986, as amended and including all regulations promulgated pursuant thereto. 1.8 Committee --------- "Committee" means the Advanced Technology Laboratories, Inc. Benefits Committee as from time to time constituted and appointed by the Compensation Committee of the Board of Directors of the Company to administer the Plan. 1.9 Company ------- "Company" means Advanced Technology Laboratories, Inc., a Delaware corporation. Effective May 11, 1995 "company means Advanced Technology Laboratories, Inc., a Washington corporation. For purposes other than Sections 12, 13 and 14, the term "Company" shall also include other Participating Companies as provided from time to time in Appendix I to this Plan. 3 1.10 Company Matching Contributions ------------------------------ "Company Matching Contributions" has the meaning set forth in Section 4.1(c). 1.11 Company Matching Contribution Account ------------------------------------- "Company Matching Contribution Account" means an account established to receive a Participant's share of Company Matching Contributions to the Plan to receive funds formerly held in the Participant's Employer Matching Contributions Account, if any, and Employee Matching Contributions Account, if any, under the Interspec, Inc. 401(k) Retirement/Savings Plan, and to receive the Participants share, if any, of Supplemental Company Contributions to the Plan made before January 1, 1994. 1.12 Company Stock ------------- "Company Stock" means the common stock of the Company. 1.13 Compensation ------------ "Compensation," for any Plan Year, has the meaning set forth in Section 415(c)(3) of the Code, provided, for purposes of determining who is a Highly Compensated Employee, "Compensation" shall also include Participant Before-Tax Contributions to this Plan and elective Employee contributions to a cafeteria plan described in Code Section 125. 1.14 Current Market Value -------------------- "Current Market Value," as applied to the common stock of the Company on any day, means the closing market price of such stock on the NASDAQ National Market on such day, or if the common stock of the Company was not traded on such day, the closing price on the next preceding trading day on which the common stock of the Company is traded. 1.15 Disabled -------- "Disabled" means that a Participant is entitled to benefits under a long term disability plan sponsored by the Participating Company, or a long term disability plan to which the Participating Company contributes on behalf of the Participant. 1.16 Early Terminee -------------- "Early Terminee" means a Participant (including a retired or terminated former participant in the Interspec, Inc. 401(k) Retirement/Savings Plan) with a vested Account balance greater than $3,500, whose employment has terminated prior to age 55 by reason other than death but who has elected to defer receipt of payment of his Accounts for a period of more than ninety (90) days after termination. 4 1.17 Earnings -------- "Earnings" for any Plan Year means basic compensation and commissions paid to an Employee for services rendered to the Participating Company (calculated without regard to any reduction for Before-Tax Contributions or pre-tax contributions to a cafeteria plan pursuant to Section 125 of the Code), excluding amounts deferred pursuant to a non-qualified deferred compensation plan, and also excluding additional compensation such as shift differentials, overtime, severance payments, living and similar allowances, bonuses, and any wages paid by a foreign branch or subsidiary of the Company under a non-U.S. payroll. Notwithstanding the foregoing, annual Earnings in excess of $200,000 shall be disregarded; provided, however, that this $200,000 limit shall be automatically adjusted to the maximum permissible dollar limitation permitted by the Commissioner of the Internal Revenue Service. In determining Earnings of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If as a result of the application of such rules the adjusted $200,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's Earnings as determined under this Section 1.17 prior to the application of this limitation. Effective January 1, 1994, the $200,000 figure in the preceding paragraph shall be replaced with $150,000. 1.18 Effective Date -------------- "Effective Date" means January 1, 1987, or with respect to any company specified in appendices to this Plan, the date such Company adopted the Plan. 1.19 Eligible Employee ----------------- "Eligible Employee" means any Employee who is on the U.S. payroll of the Company and who is not: (a) a leased employee; or (b) a temporary employee; or (c) covered under a collective bargaining agreement where retirement benefits were the subject of good faith bargaining which does not provide for retirement benefits under this Plan. 5 1.20 Employee -------- "Employee" means any person (including any officer or director) who is employed by the Company as a common law employee and any leased employee within the meaning of Code Section 414(n)(2); provided, however, if leased employees constitute twenty percent or less of the Company's non-highly compensated work force, the term "Employee" shall not include a leased employee who is covered by a plan maintained by the leasing organization which meets the requirements of Code Section 414(n)(5). 1.21 Employment Commencement Date ---------------------------- "Employment Commencement Date" means the later of (a) the Effective Date, and b) the date on which during the current period of employment, an Employee first completes an Hour of Service for a Participating Company on or after the date it becomes a Participating Company. 1.22 ERISA ----- "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and including all regulations promulgated pursuant thereto. 1.23 Highly Compensated Employee --------------------------- "Highly Compensated Employee" means an Employee who, during the Plan Year or the twelve-month period preceding the Plan Year, is included in one of the following categories within the meaning of Section 414(q) of the Code and regulations thereunder: (a) an Employee who was at any time a 5% owner of a Participating Company; (b) an Employee who received aggregate Compensation from all the Affiliated Companies in excess of the dollar limitation under Section 414(q)(1)(B) of the Code ($100,000 for the Plan Year ending December 31, 1995); (c) an Employee who received aggregate Compensation from all the Affiliated Companies in excess of the dollar limitation contained in Section 414(q)(1)(C) of the Code ($66,000 for the Plan Year ending December 31, 1995) and was in the "top paid group" as defined in Section 414(q)(4) of the Code; or (d) an officer of a Participating Company whose annual Compensation exceeds 50% of the dollar limitation under Section 415(b)(1)(A) of the Code ($60,000 for the Plan Year ending December 31, 1995). An Employee described in subparagraphs (b) through (d) above for the Plan Year in question, who is not one of the 100 highest paid Employees in the current Plan Year, will not be considered a Highly Compensated Employee for the current year unless he or she 6 was a Highly Compensated Employee in the preceding Plan Year (without regard to this sentence). No more than 50 Employees shall be considered officers or if less, no more than the greater of (i) 3 or (ii) 10% of all Employees shall be considered officers. If all officers earn less than the Compensation threshold in subparagraph (d) above, then the highest paid officer shall be considered highly compensated. In determining Highly Compensated Employees, the rules of Section 414(q)(6) of the Code shall apply. The term "family" shall include only the spouse of the employee or former employee and any lineal ascendants and descendants and the spouses of such ascendants and descendants. The Company may elect, by resolution, from year to year, to make the determination of Highly Compensated Employees for the twelve-month period preceding the Plan Year, described above, with respect to the calendar year that coincides with the current plan year rather than with respect to the twelve-month period preceding the current plan year. The Company may elect, by resolution, for any year during which the Company at all times maintained significant business activities and employed employees in at least two significantly separate geographic areas, to modify the above definition by substituting the dollar amount in subparagraph (d) for the dollar amount in subparagraph (b) and by disregarding subparagraph (c). 1.24 Hour of Service --------------- "Hour of Service" means each hour for which an Employee is paid or entitled to payment by the Company or any Affiliated Companies on account of: (a) Performance of duties; (b) A period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Hours under this paragraph shall be calculated and credited pursuant to 29 CFR 2530.200b-2(b) and (c), which are incorporated herein by this reference; and (c) An award of back pay, irrespective of mitigation of damages, agreed to by the Participating Company or any Affiliated Company. However, hours credited under (a) or (b) above shall not also be credited under this subsection (c). 7 1.25 Normal Retirement Date ---------------------- "Normal Retirement Date" means the first day of the month coinciding with or immediately preceding the Participant's sixty-fifth (65th) birthday. 1.26 Participant ----------- "Participant" means any Eligible Employee who qualifies for participation pursuant to Section 2. A vested Participant shall cease to be a Participant when his or her vested Accounts are fully paid. 1.27 Participating Company --------------------- "Participating Company" means the Company or any Affiliated Company that adopts the Plan with the approval of the Board of Directors of the Company, and any successor thereto. A list of all Participating Companies is attached as Appendix I to the Plan. 1.28 Period of Service ----------------- "Period of Service" means the period of time commencing with the Employment Commencement Date and ending on the Severance From Service Date. Non- successive periods are aggregated to determine the Employee's total Period of Service. An Employee's Period of Service shall also include the following: (a) Periods not in Service due to Temporary Termination; (b) Periods of Service required to be taken into account by Section 414(a)(1) of the Code or under Treasury Regulations issued pursuant to Section 414(a)(2) of the Code, and Service with Affiliated Companies. Where the Company maintains the plan of a predecessor employer, service for such predecessor employer shall be treated as service for the Company, as may be required by the Code; (c) For any Participant who became an Employee prior to September 1, 1987, any period of employment with a Participating Company under the Squibb Corporation Incentive Savings and Stock Ownership Plan to the extent such employment was credited as "Service" under that plan; and (d) Periods of Service with Interspec, Inc. and with Echo Ultrasound, which was a division of Interspec, Inc, and before that was a division of General Electric Company, determined as if such employers were Participating Companies prior to May 17, 1994. Notwithstanding the above, with respect to an individual who was a Participant in this Plan and whose Account balances were transferred to the SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership Plan between June 25 and December 31, 1992, such Employee's Period of Service under this Plan, for participation and vesting purposes, shall begin on the first Employment Commencement Date after December 31, 1992 that follows such transfer of the Employee's Accounts. 8 1.29 Period of Severance ------------------- "Period of Severance" means the period of time commencing at the Severance From Service Date and ending on the date the Employee again performs an Hour of Service for the Participating Company; provided, however, such period shall commence one year later if a male or female Employee is absent due to pregnancy, birth or adoption of a child, or caring for a child immediately following birth or adoption. Notwithstanding any Plan provision to the contrary, a Period of Severance for an employee of Interspec, Inc. and Echo Ultrasound is determined as if they were Participating Companies prior to May 17, 1994. 1.30 Plan ---- "Plan" means the Advanced Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan either in its previous or present form or as amended from time to time. 1.31 Plan Administrator ------------------ "Plan Administrator" means the person or entity designated in Section 11 to administer the Plan. 1.32 Plan Year --------- "Plan Year" means the twelve-month period commencing each January 1 and ending each December 31. 1.33 Rollover Account ---------------- "Rollover Account" means an account established to hold a Participant's rollover contribution to the Plan and funds formerly held in the Participant's Rollover Contribution Account, if any, under Interspec, Inc. 401(k) Retirement/Savings Plan. 1.34 Service ------- "Service" with a Participating Company means periods for which an Employee is paid or entitled to payment for the performance of duties for the Participating Company. Service shall include a period of employment with a predecessor to the Participating Company to the extent (i) provided by the Board in its discretion on a non-discriminatory basis as to all Employees similarly situated or (ii) required by Section 414(a) of the Code. 9 1.35 Severance From Service Date --------------------------- "Severance From Service Date" means the earlier of the date on which an Employee quits, retires, is discharged or dies, or the first anniversary of absence from work for any other reason. An individual employed by an Affiliated Company other than the Company shall incur a Severance From Service Date on the date the individual's employer ceases to be an Affiliated Company of the Company. 1.36 Supplemental Company Contribution Account ----------------------------------------- "Supplemental Company Contribution Account" means an account established to receive a Participant's share of Supplemental Company Contributions to the Plan made after December 31, 1993. 1.37 Temporary Termination --------------------- Termination is deemed "Temporary" if the Employee is rehired and in Service within one year of the initial date of absence from work. 9 1.38 Terminated ---------- "Terminated" means no longer in Service or employed as an Employee with the Company or any Affiliated Company for reasons of resignation, retirement, discharge or death. 1.39 Trust or Trust Fund ------------------- "Trust" or "Trust Fund" means the trust fund into which shall be paid all contributions and from which all benefits shall be paid under this Plan. 1.40 Trustee ------- "Trustee" means the trustee or trustees who receive, hold, invest, and disburse the assets of the Trust in accordance with the terms and provisions set forth in a trust agreement. 1.41 Valuation Date -------------- "Valuation Date" means the last business day in each calendar quarter and any other day which the Plan Administrator may designate from time to time. 10 1.42 Additional Definitions in Plan ------------------------------ The following terms are defined in the following sections of the Plan.
Section -------- ACP Test 4.3 ADP Test 3.4 After-Tax Contributions 4.1(b) Aggregate Account 10.2(e) Aggregation Group 9.2(h) Aggresive Equity Fund 5.2(h) Annual Additions 9.1 Balanced Fund 5.2(c) Before-Tax Contributions 3.1(a) Company Stock Fund 5.2(a) Company Matching Contributions 4.1(c) Core Equity Fund 5.2(g) Determination Date 10.2(c) Diversified Equity Fund 5.2(d) Domestic Relations Order 11.9 Fixed Income Fund 5.2(b) Investment Manager 13.4 International Fund 5.2(e) Key Employee 10.2(g) Lump Sum Supplemental Contribution 4.1(e) Money Market Fund 5.2(h) Part-Time Employee 2.1(b) Present Value of Accrued Benefit 10.2(f) SpaceLabs Stock Fund 5.2(f) Super Top Heavy 10.2(b) Supplemental Company Contributions 4.1(d) Top Heavy 10.2(a) Valuation Date (for Top Heavy) 10.2(d)
11 SECTION 2 PARTICIPATION 2.1 Participation ------------- (a) Each Eligible Employee who is not already a Participant shall become a Participant in this Plan on the later of: (i) the first day of the first month coinciding with or following completion of a two consecutive-month Period of Service: and (ii) the date his or her employer becomes a Participating Company, provided he or she is an Eligible Employee on such date. (b) Each Participant in the Interspec, Inc. 401(k) Retirement/ Savings Plan as of December 31, 1994 shall become a Participant in the Plan on January 1, 1995. 2.2 Reemployment After Termination ------------------------------ Upon the reemployment of a Terminated former Participant as an Eligible Employee, he or she shall immediately become a Participant. An Employee who Terminates prior to becoming a Participant and is later reemployed shall become a Participant upon satisfying the requirements of Section 2.1. A Period of Service earned prior to Termination shall not be forfeited for purposes of this Section 2. 2.3 Employees in a Bargaining Unit ------------------------------ An Employee belonging to a collective bargaining unit, which has entered an agreement with the Participating Company that does not provide for retirement benefits under this Plan, shall not qualify for participation. If such an Employee is a Participant when such an agreement is entered, the Employee shall cease active participation on the effective date of the bargaining agreement. If such an agreement provides for Plan participation, a covered Employee may continue or resume participation. 12 SECTION 3 BEFORE-TAX CONTRIBUTIONS 3.1 Salary Deferral Agreement ------------------------- (a) General ------- A Participant who desires to make salary deferrals pursuant to this Section 3.1 shall enter a salary deferral agreement with the Participating Company at least 15 days prior to the first day of the month on which the salary deferral is to commence. Such agreement shall authorize the Company to make payroll deductions equal to a whole percentage of Earnings between 1% and 16% designated as Before- tax Contributions. Payroll deductions shall be based on Earnings for each payroll period. To the extent a Participant's salary deferral agreement is based on a percentage of Earnings, the dollar amount of a Participant's salary deferral shall be automatically increased or decreased to reflect changes in the amount of the Participant's Earnings. The salary deferral agreement shall be effective on the first day of the payroll period coinciding with or following the later of: (1) the date participation commences, or (2) the first day of the month which coincides with or next follows completion of the agreement, and shall remain in effect until such agreement is superseded by a subsequent agreement or revoked. Deferrals shall be deducted from Participant Earnings each payroll period, except for those periods in which the deferral amount exceeds the amount remaining after other payroll deductions. In the event a deduction is not taken in a payroll period, the Committee, with sole discretion, shall determine whether there will be a make-up deduction in a subsequent payroll period. (b) Maximum Dollar Contribution --------------------------- Notwithstanding the foregoing, Before-Tax Contributions for any calendar year to this Plan (and any other plans of Affiliated Companies subject to Section 402(g) of the Code) shall not exceed the maximum dollar limitation on elective deferrals under Section 402(g) of the Code ($9,240 for 1995). 3.2 Participant Modification of Salary Deferral Agreement ----------------------------------------------------- The payroll deduction percentages designated in the Participant's salary deferral agreement shall continue in effect regardless of changes in Earnings until the Participant elects in writing to change the percentage. A Participant may change the deferral amount by completing a new salary deferral agreement and submitting it to the Committee. The 13 agreement will become effective on the first day of the month after 15 days from the date such notice is received by the Committee. Completion of a salary deferral agreement shall automatically revoke all prior salary deferral agreements entered into by a Participant. A Participant may change the deferral amount or suspend deferrals as frequently as each month, as long as the salary deferral agreement is received by the Committee at least fifteen days before the effective date of the change. A Participant may discontinue contributions effective on the first day of any future month by submitting a request form to the Committee at least 15 days prior to the effective date. Contributions may be resumed on the first day of any month after having been suspended as long as the salary deferral agreement is received by the Committee at least fifteen days before the salary deferrals are to commence. 3.3 Procedure for Making and Revoking Salary Deferral Agreement ----------------------------------------------------------- The salary deferral agreement and any modification or revocation thereof shall be made by the Participant on such form, within such time and in accordance with such rules and procedures as prescribed by the Committee. 3.4 Non-Discrimination Test For Deferrals (ADP Test) ------------------------------------------------ For each Plan Year, the Plan must meet one of the actual deferral percentage (hereinafter "ADP") tests described below to satisfy the non- discrimination requirement. For purposes of this ADP test, Eligible Employees who do not qualify for participation pursuant to Section 2 shall not be considered. (a) The ADP for the group of Eligible Employees who are Highly Compensated Employees does not exceed the ADP for all other Eligible Employees multiplied by 1.25; or (b) The ADP for the group of Eligible Employees who are Highly Compensated Employees (i) is not more than two percentage points higher than the ADP for all other Eligible Employees and (ii) does not exceed the ADP for all other Eligible Employees multiplied by 2. The ADP for a specified group of Eligible Employees shall be the average of the ratios (calculated separately for each Employee in the group to the nearest one-hundredth of one percent of the Employee's Compensation) of (i) Participant Before-tax Contributions to (ii) the Employee's Compensation earned while eligible to participate, determined in accordance with Code Section 401(k) and regulations pursuant thereto. For purposes of the ADP tests, the definition of "Compensation" may be modified from year to year to mean any definition of compensation that complies with Section 414(s) of the Code. In applying the foregoing tests, Compensation paid to and Before-Tax Contributions on behalf of family members (as defined in Code Section 414(q)(6)(B)) of a Highly Compensated Employee who is a 5% owner or in the group consisting of the ten Highly 14 Compensated Employees paid the greatest Compensation shall be considered together to determine a combined ADP for the family group (which is treated as one Highly Compensated Employee). If for any Plan Year a Highly Compensated Employee is also eligible to participate in another cash for deferred arrangement maintained by any Affiliated Company, then the ADP of such Highly Compensated Employee shall be determined by treating all the cash or deferred arrangements in which he or she is eligible to participate and this Plan as one arrangement. For purposes of the foregoing test, all Before-tax Contributions made to this plan any other plan which is aggregated with this Plan for purposes of satisfying the coverage requirements of Code Section 410(b) (except the average benefits percentage test) shall be treated as made to a single plan. In addition, Before-tax Contributions to this Plan may be permissively aggregated with before-tax contributions to one or more other cash of deferred aggrangements, so long as the aggregated plans satisfy the requirements of Code Sections 401(a)(4) and 410(b) as if they were a single plan. 15 SECTION 4 PLAN CONTRIBUTIONS 4.1 Participant and Company Contributions ------------------------------------- (a) Participant Payroll Deduction Contributions ------------------------------------------- The Company shall make a Participant Before-Tax Contribution on behalf of each active Participant in an amount equal to 100% of the salary deferral amount pursuant to the Participant's salary deferral agreement, as provided in Section 3, for each payroll period. Participant contributions shall be credited to the Participant's Before-Tax Contribution Account. To the extent a Participant's salary deferral agreement is based on a percentage of Earnings, the dollar amount of a Participant's Before- Tax Contributions shall be automatically increased or decreased to reflect changes in the amount of the Participant's Earnings. The Company shall pay the Participants' Before-Tax Contributions in cash to the Trustee within a reasonable time after each pay-period but not later than a reasonable time after the end of each month. (b) Employee After-Tax Contributions -------------------------------- A Participant may elect to contribute to the Plan, through payroll deductions, an amount equal to a whole percentage of Earnings between 1% and 16%, reduced by the amount (if any) of the Before-Tax Contributions to be made on his behalf. Such amounts are referred to as After-Tax Contributions. A Participant may make such election by filing a written application which authorizes a deduction of contributions from his Earnings at least 15 days prior to the first day of the month on which a deduction is to commence. After-Tax Contributions shall be credited to the Participant's After-Tax Contribution Account. An election to make After-Tax Contributions may be modified or canceled subject to the same provisions that apply to Before-Tax Contributions pursuant to Section 3.2. The dollar amount of a Participant's After-Tax Contributions shall be automatically increased or decreased to reflect changes in the amount of the Participant's Earnings. The Company shall pay the Participants' After-Tax Contributions in cash to the Trustee within a reasonable time after each pay-period but not later than a reasonable time after the end of each month. 16 (c) Company Matching Contributions ------------------------------ Each Company shall make the Company Matching Contribution for any Plan Year in an amount equal to: (i) 50% of the first 3% of each Participant's Before-Tax Contributions and After-Tax Contributions in respect of Earnings paid by the Company during such Plan Year; and (ii) 25% of each Participant's Before-Tax Contributions and After-Tax Contributions over 3% and up to 6% of Earnings paid by the Company during such Plan Year. Provided that, Participant Lump Sum Supplemental Contributions pursuant to Section 4.1(e) will not be matched by a Company Matching Contribution. Such amounts shall be called Company Matching Contributions. The percentage of Company Matching Contributions shall be determined separately for the Company from time to time by the Board, subject to the percentage limitations contained in the preceding sentence. The rate of Company Matching Contributions shall be certified to the Committee and shall remain effective until changed by the Board and certified to the Committee. Company Matching Contributions shall be credited to the Participants' Company Matching Contribution Accounts. The amount of the Company Matching Contributions due under this Section 4.1(c) (reduced by any Company Matching Contributions forfeited during the month, as provided in Section 8.2) shall be determined each pay period during the Plan Year and shall be remitted to the Trustee within a reasonable time after each pay period but not later than a reasonable time after the end of each month. The Company may, at its option, make its contribution under this Section 4.1(c) by delivering or causing to be delivered to the Trustee shares of Company Stock at the aggregate Current Market Value of the stock so delivered on the date of the delivery. Such shares shall be treasury shares, authorized but unissued shares or shares purchased on the open market. (d) Supplemental Company Contributions ---------------------------------- On the last day of the Plan Year, each Participating Company may contribute a uniform percentage of a Participant's Earnings, on behalf of each Participant who completed 1,000 or more Hours of Service during the Plan Year and (i) who is employed on the first and last days of the Plan Year, (ii) who terminated employment during the Plan Year as a result of retirement, Disability or death, or (iii) who was employed by the Participating Company but who was transferred during the Plan Year to the employ of an Affiliated Company that is not a Participating Company. 17 Amounts contributed by each Participating Company may be different from the amount contributed by another Participating Company. Amounts contributed by each Participating Company will be allocated only to Participants employed by that Participating Company, based on Earnings paid by that Participating Company. Such amounts are referred to as Supplemental Company Contributions and shall be credited to Supplemental Company Contribution Accounts. The percentage of Supplemental Company Contributions shall be determined separately for each Participating Company by the Board. Supplemental Company Contributions shall be remitted to the Trustee on or before the due date for filing the Company's Federal income tax return for the Plan Year, including extensions. A Participating Company may, at its option, make its contributions under this Section 4.1(d) by delivering or causing to be delivered to the Trustee shares of Company Stock at the aggregate Current Market Value of the stock so delivered on the date of delivery. Such shares shall be treasury shares, authorized but unissued shares or shares purchased on the open market. (e) Lump-Sum Supplemental Contributions ----------------------------------- In addition to any other contributions made by him, a Participant who has completed at least five years of Service with the Participating Company may make a contribution to the Plan, effective as of the last day of any month, by delivering a check to the Participating Company, provided that no more than two Lump-Sum Supplemental Contributions may be made hereunder by a Participant in any calendar year. Lump-Sum Supplemental Contributions shall be treated as After-Tax Contributions and credited to the Participant's After-Tax Contribution Account. The Company shall pay the Lump-Sum Supplemental Contributions in cash to the Trustee within a reasonable time after receipt of a Participant's check. (f) Rollover Contributions ---------------------- An Eligible Employee may request in writing on one or more forms required by the Committee accept a rollover amount which was distributed from another qualified plan (other than a plan maintained by the Company or an Affiliated Company) or conduit Individual Retirement Account (IRA). Also, the Eligible Employee must provide any written assurances required by the Committee that such amounts are eligible rollover distributions. The amount must be a direct rollover or must be rolled over by the Eligible Employee within 60 days after receiving the distribution from the other plan or conduit IRA. Rollovers of any type of property other than cash will not be accepted. In the event that an Eligible Employee contributes a rollover amount, such amount shall be allocated to a separate, fully vested account and subject to the same terms of the Plan as other 18 amounts in a Before-Tax Contribution Account, provided, amounts in a Rollover Account may be withdrawn in Service at any time. If the Eligible Employee never satisfies the participation requirements of Section 2, the Eligible Employee shall be considered a Participant only with respect to the rollover amount. 4.2 Time of Contribution -------------------- In no event shall contributions for any Plan Year be made later than the time prescribed by law (i) for the deduction of such contributions for purposes of Federal income tax, as determined by the applicable provisions of the Code, or (ii) for making such contributions under a cash or deferred arrangement (within the meaning of Section 401(k) of the Code). 4.3 Non-Discrimination Test for Company Matching Contributions and After-Tax ------------------------------------------------------------------------ Contributions (ACP Test) ------------------------ For each Plan Year the Plan must meet one of the average contribution percentage (hereinafter "ACP") tests described below to satisfy this non- discrimination requirement. For purposes of this ACP test, Eligible Employees who do not qualify for participation pursuant to Section 2 shall not be considered. (a) The ACP for the group of Eligible Employees who are Highly Compensated Employees does not exceed the ACP for all other Eligible Employees multiplied by 1.25; or (b) The ACP for the group of Eligible Employees who are Highly Compensated Employees (i) is not more than two percentage points higher than the ACP for all other Eligible Employees and (ii) does not exceed the ACP for all other Eligible Employees multiplied by 2. The ACP for a specified group of Eligible Employees shall be the average of the ratios (calculated separately for each Employee in the group to the nearest one-hundredth of one percent of the Employee's Compensation) of (i) Company Matching Contributions on behalf of each such Employee and the Employee's After-Tax Contributions and Lump-Sum Supplemental Contributions, if any, to (ii) the Employee's Compensation earned while eligible to participate, determined in accordance with Code Section 401(m) and regulations pursuant thereto. For purposes of the ACP tests, the definition of "Compensation" may be modified from year to year to mean any definition of compensation that complies with Section 414(s) of the Code. For purposes of the foregoing test, all Company Matching Contributions, After-tax 19 Contributions and Lump Sum Supplemental Contributions made under this Plan may be permissively aggregated with matching contributions made to another plan, so long as the aggregated plans satisfy the requirements of Code Sections 401(a)(4) and 410(b) as if they were a single plan. In applying the foregoing tests, Compensation paid to and contributions on behalf of family members (as defined in Code Section 414(q)(6)(B)) of a Highly Compensated Employee who is a 5% owner or in the group consisting of the ten Highly Compensated Employees paid the greatest Compensation shall be considered together to determine a combined ACP for the family group (which is treated as one Highly Compensated Employee). If for any Plan Year a Highly Compensated Employee is also eligible to participate in another plan offering company matching contributions and/or after-tax contributions maintained by any Affiliated Company, the ACP of such Highly Compensated Employee shall be determined by aggregating all such contributions. 4.4 Multiple Use of Alternative Limitations Under ADP and ACP Tests --------------------------------------------------------------- If the sum of the ADP and ACP for Highly Compensated Employees determined under Section 3.4 and Section 4.3, respectively, after correcting any excess deferrals or contributions pursuant to Section 4.5, exceeds the Aggregate Limit defined below, then Highly Compensated Employee contributions shall be further limited pursuant to this section. This multiple use limitation shall be applied in accordance with the provisions of Treas. Reg. Sections 1.401(m)-1 and 1.401(m)-2. The Aggregate Limit means the greater of (a) or (b) below: (a) the sum of: (i) 1.25 multiplied by the greater of the ADP or the ACP for the group of all Eligible Employees who are not Highly Compensated Employees, and (ii) two plus the lesser of the ADP or the ACP for the group of all Eligible Employees who are not Highly Compensated Employees (in no event shall this amount exceed twice the lesser of such ADP or ACP). (b) the sum of: (i) 1.25 multiplied by the lesser of the ADP or the ACP for the group of all Eligible Employees who are not Highly Compensated Employees, and (ii) two plus the greater of the ADP or the ACP for the group of all Eligible Employees who are not Highly Compensated Employees (in no event shall this amount exceed twice the greater of such ADP or ACP). 4.5 Corrective Procedures to Satisfy Discrimination Tests ----------------------------------------------------- If at any time during a Plan Year the Committee determines on a projected basis that it is necessary to reduce the Participant Before-Tax Contributions, After-Tax Contributions or Company Matching Contributions of any Highly Compensated Employee to satisfy the dollar limit on annual deferrals, the ADP non-discrimination test, the ACP non-discrimination test, or the multiple use of alternative limitations test, it shall have the authority to do so in such amounts and for such periods of time as it shall deem necessary under the circumstances. 20 The Committee may, in its sole discretion, elect to aggregate Company Matching Contributions and/or Supplemental Company Contributions with Participant Before-Tax Contributions to the extent necessary to satisfy the ADP discrimination test provided such aggregation does not itself result in discrimination. Notwithstanding any Plan provisions to the contrary, any Company contributions so aggregated shall be 100% vested as of the date contributed to the Plan and shall be subject to the withdrawal provisions of Section 7.4 as if they are Before-Tax Contributions. The ACP test must be passed without taking such Company contributions into account. The Committee may also, in its sole discretion, elect to aggregate Supplemental Company Contributions with Company Matching Contributions to the extent necessary to satisfy the ACP discrimination test, provided such aggregation does not itself result in discrimination. Notwithstanding any Plan provision to the contrary, any Company contributions so aggregated shall be 100% vested, and shall be subject to the withdrawal provisions of Section 7.4 as if they are Before-Tax Contributions. 4.6 Return of Contributions ----------------------- (a) Mistake of Fact --------------- If the amount of contribution made to the Plan by a Participating Company for any Plan Year is in excess of the amount required under Section 4.1, and such excess payment is due to mistake of fact, the Participating Company shall have the right to recover such excess contribution within one year after the date the contribution is made to the Trustee. The return of a contribution shall be permitted hereunder only if the amount so returned (i) is the excess of the amount actually contributed over the amount which would have otherwise been contributed, (ii) does not include the earnings attributable to such contribution, and (iii) is reduced by any losses attributable to such contribution. (b) Excess Deferrals ---------------- An excess deferral exists for a Participant if Before-Tax Contributions under this Plan together with any other plans subject to the deferral limit in Code Section 402(g) (for 1995 this limit is $9,240) exceed such dollar limitation for any calendar year. In the event an excess deferral exists in plans maintained by the Participating Company (and Affiliated Companies, if applicable), such excess deferral, adjusted for investment gains or losses, less amounts previously returned pursuant to subparagraph (c), shall be distributed no later than April 15 following the calendar year in which the excess deferral occurred. In the event an excess deferral exists in plans maintained by the Company and any unrelated employer(s), and a Participant submits a written request for a return of excess deferrals by March 1 following the calendar year in which an excess deferral occurs (or any other date authorized by the Committee), the Committee 21 shall distribute such excess deferral, adjusted for investment gains or losses, less amounts previously returned pursuant to subparagraph (c), no later than April 15 following the calendar year in which the excess deferral occurred. Such written request shall contain information which the Committee may require. (c) ADP Excess Contribution ----------------------- An ADP excess contribution exists if contributions under this Plan on behalf of Highly Compensated Employees fail to meet the ADP test described in Section 3.4. Within twelve months after the end of the Plan Year for which there is an excess, contributions which exceed the ADP limitation, adjusted for earnings and losses, less amounts previously returned pursuant to subparagraph (b), shall be distributed to Highly Compensated Employees by reducing each Highly Compensated Employee's deferral in the order of deferral percentages beginning with the highest. In the event excess deferrals are returned to a Highly Compensated Employee whose contributions and Compensation were aggregated with other family members for purposes of the ADP test in Section 3.4, such returned amounts shall be returned to each family member in the same proportion that his or her contributions and Compensation bears to total contributions and Compensation of the family member group. (d) ACP Excess Contribution ----------------------- An ACP excess contribution exists if contributions under this Plan on behalf of Highly Compensated Employees fail to meet the ACP test described in Section 4.3. Within twelve months after the end of the Plan Year for which there is an excess, unmatched After-Tax Contributions, and then matched After-Tax Contributions and Company Matching Contributions (in equal amounts) of Highly Compensated Employees which exceed the ACP limitation shall be reduced, beginning with the highest contribution percentage and then continuing with each next lower percentage as the ceiling declines, as follows: (i) Any amount reduced from After-Tax Contributions (including recharacterized contributions) shall be distributed with related earnings to the Employee to whom it applies. (ii) Any amount reduced from Company Matching Contributions shall be distributed, with related earnings, to the extent vested, to the Employee to whom it applies. (iii)Any amount reduced from Company Matching Contributions not distributed under (ii) above shall be forfeited, with related earnings. Amounts so forfeited shall be applied to offset future Company Matching Contributions. 22 In the event excess deferrals are returned to a Highly Compensated Employee whose contributions and Compensation were aggregated with other family members for purposes of the ACP test in Section 4.3, such returned amounts shall be returned to each family member in the same proportion that his or her contributions and Compensation bears to total contributions and Compensation of the family member group. (e) Contributions in Excess of the Aggregate Limit ---------------------------------------------- In the event contributions exceed the Aggregate Limit (as defined in Section 4.4), Participant unmatched After-Tax Contributions, then unmatched Before-Tax Contributions, then matched After-Tax Contributions, then matched Before-Tax Contributions shall be considered excess contributions pursuant to (c) or (d) above, as applicable, and shall be returned to Highly Compensated Employees pursuant thereto. (f) Adjustment for Income --------------------- An Excess Deferral, ADP excess contribution or ACP excess contribution distributed to a Participant shall be adjusted for income or loss for the calendar year using the method described in Section 5.3. (g) Vesting Exception ----------------- Notwithstanding the vesting provisions of Section 8, a Participant shall not have a nonforfeitable right to excess Company contributions which are returned or adjusted pursuant to this Section 4.6. 4.7 Recharacterization of Excess Before-Tax Contributions ----------------------------------------------------- (a) Before-Tax Contributions made to the Plan that exceed the limitations of Section 3.1(b) (dollar limitation) or Section 3.4 (ADP test) in the discretion of the Committee for each Plan Year may be recharacterized as After-Tax Contributions rather than distributed to Participants as provided in Section 4.6(b) and (d) above. (b) Recharacterization may be combined with a distribution to correct the excess. If part of the excess is recharacterized, the distribution necessary for correction shall be calculated after determining the amount of Before-tax Contributions to be recharacterized. Income related to a recharacterized excess shall not be treated as an amount recharacterized, but shall remain attributed to the applicable Before-Tax Contribution Account. Recharacterized Before-Tax Contributions will be eligible for Company Matching Contributions. (c) An amount recharacterized shall be treated as the Company contribution for purposes of Sections 9 "Limitation on Contributions" and 10 "Top Heavy Provisions". An amount recharcterized before January 1, 1988 shall be treated as an After- tax Contribution for purposes of withdrawal under Section 7.5(b). Amounts recharacterized after January 1, 1988 shall be treated as an After-Tax Contribution for purposes of withdrawal under Section 7.5(d). Recharacterized amounts shall be treated as Before-Tax Contributions for purposes of determining Compensation. 24 SECTION 5 ACCOUNT ADMINISTRATION 5.1 Types of Accounts ----------------- All contributions shall be made to the Trust Fund which will have the following types of accounts for each Participant: (a) Before-Tax Contribution Account (b) After-Tax Contribution Account (c) Company Matching Contribution Account (d) Supplemental Company Contribution Account (e) Rollover Account 5.2 Investment Options ------------------ The Trust Fund shall be divided into the following investment subfunds: (a) Company Stock Fund ------------------ The Company Stock Fund, including earnings thereon, shall be invested by the Trustee in shares of Company Stock and short-term cash investments. (b) Fixed Income Fund ----------------- The Fixed Income Fund seeks to pay current interest rates while maintaining principal. The Fund may consist of a variety of guaranteed investment contracts with diversified maturities, bank investment contracts, and short-to-intermediate-term high-quality fixed income securities. (c) Balanced Fund ------------- The Balanced Fund attempts to provide income, conservation of principal and long-term growth of principal and income. The Fund invests in a mix of stocks and bonds. The equity style is value- oriented and the Fund may invest in both small and large capitalized companies. 25 (d) International Fund ------------------ The International Fund focuses on long-term capital growth. The Fund invests primarily in stocks and debt securities of companies outside the United States. It may also invest in bonds and money market instruments. (f) SpaceLabs Stock Fund -------------------- Effective July 1, 1992, the Trust Fund shall contain a SpaceLabs Stock Fund, which will be invested in common stock of SpaceLabs Medical, Inc. and short-term cash investments. Shares of common stock of SpaceLabs Medical, Inc. distributed on June 26, 1992 with respect to shares held in the Company Stock Fund shall be transferred to the SpaceLabs Stock Fund effective July 1, 1992. No additional contributions shall be invested in the SpaceLabs Stock Fund. A Participant may elect to have all or part of his Company Matching Contribution and Supplemental Company Contribution Accounts invested in the SpaceLabs Stock Fund transferred to the Company Stock Fund, and may elect to have all or part of his Before-Tax Contribution, After Tax Contribution and Rollover Accounts transferred to the Core Equity Fund, the Fixed Income Fund, the International Fund, the Aggressive Equity Fund, the Balance Fund, the Company Stock Fund, or effective July 1, 1995, the Money Market Fund in accordance with the procedure described in Section 6.4. Participants may not elect to transfer account balances to this Fund. (f) Core Equity Fund ---------------- The Core Equity Fund seeks capital appreciation and current income utilizing a value-oriented style. The Fund invests primarily in U.S. stocks which pay dividends. (g) Aggressive Equity Fund ---------------------- The Aggressive Equity Fund is a growth equity fund which seeks capital appreciation. The Fund invests primarily in U.S. stocks of small and large capitalized companies. The Fund may periodically invest in bonds and money market instruments. (h) Money Market Fund ----------------- Effective July 1, 1995, the Trust Fund shall include a Money Market Fund. The Money Market Fund seeks to provide interest income while preserving the original investment and maintaining liquidity. The Fund seeks to invest primarily in high-quality money market instruments. 26 5.3 Allocation of Trust Fund Earnings and Losses to Participant Accounts -------------------------------------------------------------------- (a) Fixed Income Fund, Balanced Fund, Core Equity Fund, Aggressive Equity --------------------------------------------------------------------- Fund, International Fund, and Money Market Fund ----------------------------------------------- As of each Valuation Date, any increase or decrease in the fair market values (including interest, dividends, realized and unrealized gains and losses) of the Fixed Income Fund, the Balanced Fund, the Core Equity Fund, the Aggressive Equity Fund, the International Fund, and effective July 1, 1995, the Money Market Fund shall be allocated the Participant Accounts on the basis of the interests in the particular Fund held in the Accounts as of the immediately preceding Valuation Date, adjusted for contributions, distributions and transfers made since that date, in accordance with administrative procedures established by the Committee. Notwithstanding the foregoing, in the event a Terminated Participant has received a distribution of his or her vested Account balances, the nonvested portion of his or her Accounts shall not be credited with Trust Fund earnings and losses pursuant to this section after the Valuation Date which coincides with or next precedes the date of Termination of employment. (b) Company Stock Fund ------------------ Company Matching Contributions and Supplemental Company Contributions shall be invested solely in the Company Stock Fund, except as otherwise provided in Section 6.7, and may be made in cash or shares of Company Stock. The Trustee shall apply cash contributions to the purchase of Company Stock over a period of time as directed by the Committee. As of each Valuation Date, each Participant's Company Matching Contribution Account (and Supplemental Company Contribution Account, if applicable) shall be credited with a number of shares of Company Stock that represent the Company Matching Contribution (and Supplemental Company Contribution, if applicable) made on the Participant's behalf, based on the average price of the shares contributed to the Plan and purchased by the Trustee since the Valuation Date. If a Participant elects to transfer amounts in his or her Accounts invested in the SpaceLabs Stock Fund to the Company Stock Fund, the Trustee shall apply the transferred cash amount to the purchase of Company Stock as described in the preceding paragraph. As of the next following Valuation Date, the Participant's Accounts will be credited with a number of shares of Company Stock that represent the amount transferred to the Company Stock Fund, based on the average price of the shares purchased by the Trustee since the effective date of the transfer. As of each Valuation Date, dividends and other distributions received on Company Stock held in the Company Stock Fund may be reinvested in Company Stock or held in short-term cash investments. The Participants' Accounts shall be credited with a proportionate amount of shares and/or cash determined on the basis of the 27 number of shares in each Participant's Accounts on the record date of such distribution. (c) SpaceLabs Stock Fund -------------------- If a Participant elects to transfer amounts in his or her Accounts invested in the SpaceLabs Stock Fund to other funds as provided in Section 5.2(f), the transfer shall be made in cash. The cash value of common stock of SpaceLabs Medical, Inc. that is so transferred shall be based on the actual proceeds from the sale of the stock. As of each Valuation Date, dividends and other distributions received on common stock of SpaceLabs Medical, Inc. held in the SpaceLabs Stock Fund shall be reinvested in common stock of SpaceLabs Medical, Inc. or held in short term cash investments. The Participant's Accounts shall be credited with a proportionate number of shares and/or cash determined on the basis of the number of shares in each Participant's Accounts on the record date of such distribution. 5.4 Valuation of the Trust Fund --------------------------- The fair market value of the Trust Fund shall be determined as of each Valuation Date and at any time specifically requested by the Plan Administrator. Any portion of the Trust Fund held under an insurance contract or bank investment contract in which asset values are only maintained on a book value basis shall have that portion of the Trust Fund valued at book value rather than market value. 5.5 Account Statements ------------------ Each Participant shall be provided with a statement of his or her Accounts under the Plan showing the Account values on dates determined by the Committee, but not more frequently than each calendar quarter. If within thirty (30) days after the statement is mailed the Participant makes no objection to the statement, it shall become binding and conclusive on the Participant and any Beneficiary. 28 SECTION 6 INVESTMENT OF CONTRIBUTIONS 6.1 Optional Funds -------------- Each Participant, at the time the Participant elects to participate in the Plan, shall direct that the Participant's After-Tax Contributions to the Plan and the Before-Tax Contributions made on the Participant's behalf be invested (in multiples of 10%) in any one of the following investment funds, or in any combination of funds. Each Eligible Employee, at the time he or she requrest to make a Rollover Contribution, shall direct the Participant's Rollover Contributions (if any) be invested (in multiples of 10%) in any one or combination of the following investment funds other than the Company Stock Fund: (a) the Fixed Income Fund; (b) the Balanced Fund; (c) the Core Equity Fund; (d) the Aggressive Equity Fund; (e) the International Fund; and (f) the Company Stock Fund, not exceeding thirty percent (30%) of a Participant's After-Tax Contributions and Before-Tax Contributions. (g) the Money Market Fund. A single investment election shall be made with respect to Before-Tax Contributions and After-Tax Contributions, and a separate investment election shall be made with respect to Rollover Contributions. 6.2 Selection of Investment Funds ----------------------------- The selection of an investment option pursuant to this Section 6 is the sole responsibility of each Participant. The Trustee, the Committee, any Participating Company, or any of their officers or supervisors are not empowered to advise a Participant as to the manner in which his Account should be invested. The fact that a security is available to Participants for investment under the Plan shall not be construed as a recommendation for the purchase of that security, nor shall designation of any option by the Participant impose any liability on a Participating Company, its directors, officers or employees, the Trustee, the Committee or any Participant in the Plan. 29 Subject to any applicable provision of law, each Participant assumes all risks connected with any decrease in the market value of any securities in the funds and such funds shall be the sole source of payments to be made under the Plan. 6.3 Investment of Loan Repyments ---------------------------- If a Participant is not making contributions at the time that loan repayments pursuant to Section 7.8 begin, the Participant shall direct investment of the loan repayments among the optional Funds under Section 6.1 by written notice to the Committee at least 15 days before the first repayment. 6.4 Change in Investment of Future Contributions and Loan Repayments ---------------------------------------------------------------- A Participant may, upon not less than 15 days prior written notice to the Committee, change the Participant's investment election with respect to contibutions and loan repayments, if any, made after the applicable effective date. The change shall be effective as of the first day of the next month following receipt of written notice by the Committee. 6.5 Changes in Investment of Existing Accounts ------------------------------------------ Upon not less than 15 days prior notice to the Committee, a Participant, including an Early Terminee except as provided below, may elect to have all or part (in 10% increments) of the Participant's existing After-Tax Contribution Account, Before-Tax Contribution Account, and Rollover Account and any earnings thereon transferred from the fund or funds in which they are invested to the Fixed Income Fund, the Balanced Fund, the Core Equity Fund, the Aggressive Equity Fund, the Money Market Fund or the International Fund, except that amounts invested in the Fixed Income Fund, cannot be transferred directly to the Money Market Fund. The transfer shall be effective as of the first day of the next calendar quarter (the first day of calendar quarters being January 1, April 1, July 1, and October 1). The transfer shall be based upon the values of the Accounts on the last business day of the quarter immediately preceding the date as of which the election is effective. A single investment election shall be made with respect to Before-Tax Contributions and After-Tax Contributions, and a separate investment election shall be made with respect to Rollover Contributions. No more than four elections with respect to Before-Tax Contributions and After-Tax Contributions and four elections with respect to Rollover Contributions may become effective in any calendar year. The transfer shall be made as soon as administratively feasible after completion of the valuation for the effective date of the transfer. An Early Terminee's Accounts shall be transferred on behalf of the Participant to one or more available funds as directed by the Company, the Trustee, or the Investment Manager on the first day of the calendar quarter following 12 months after the end of the month in which employment terminates. Until such transfer, an Early Terminee may continue to direct the investment of his or her Accounts. Accounts so transferred will remain invested in the Fixed Income Fund until distributed pursuant to the Early Terminee's 30 election under Section 7.2 or following his or her death. A Participant who is not an Early Terminee and who reaches age 55 may change investments pursuant to Section 6.7. 6.6 Changes in Investment of Former Interspec, Inc. Accounts -------------------------------------------------------- A participant in the Interspec, Inc. 401(k) Retirement/Savings Plan may, upon written notice to the Committee before December 16, 1994, elect to have all or part (in ten percent (10%) increments) of the Participant's accounts in the Interspec, Inc. 401(k) Retirement/Savings Plan transferred form the fund or funds in which they are invested under the Interspec, Inc. 401(k) Retirement/Savings Plan to the Fixed Income Fund, the Balanced Fund, the Core Equity Fund, the Aggressive Equity Fund, or the Internaitional Fund effective February 1, 1995. Accounts of a Participant who fails to make an election prior to December 16, 1994 shall be invested in one or more of those funds as directed by the Company, the Trustee, or the Investment Manager on behalf of the Participant. 6.7 Investment of Company Contributions ----------------------------------- (a) General Rule ------------ All Company Matching Contributions (other than those transferred from the Predecessor Plan) and Supplemental Company Contributions shall be invested in the Company Stock Fund, except as provided below. (b) Change in Investment -------------------- Any Participant, who is not an Early Terminee, and who has reached his or her fifty-fifth (55th) birthday may make either (or both) of the following elections: (i) He or she may, upon not less than 15 days prior written notice to the Committee, elect, effective as of the first day of the next calendar quarter, to have all or part of his or her Company Matching Contributions Account and/or his Supplemental Company Contributions Account transferred (in multiples of 10%) to one or more of the other funds, (other than the SpaceLabs Stock Fund and the Company Stock Fund), based on the values of the Account on the last day of the quarter immediately preceding the date as of which the election is effective. Only four such elections may become effective in any calendar year. (ii) He or she may, upon not less than 15 days' prior written notice to the Committee, elect, effective as of the first day of the next calendar quarter, to have future Company Matching Contributions and/or Supplemental Company Contributions made on his behalf invested in any one or more of the funds (other than the SpaceLabs Stock Fund) in the same manner as Before- tax and After-tax Contributions. Any election made hereunder may be changed by similar written notice. 31 SECTION 7 BENEFITS AND FORMS OF PAYMENT 7.1 Eligibility for Benefits ------------------------ A Participant shall be eligible to receive a distribution of his or her Accounts, to the extent vested, upon retirement, becoming Disabled, or upon Termination of employment with the Company and any Affiliated Companies. A Participant's Beneficiary shall be eligible to receive a distribution of the balance of the Participant's accounts upon the death of the Participant. Notwithstanding the foregoing, in the event a Participant again becomes an Employee before benefits commence, he or she shall no longer be eligible to receive a distribution. Also notwithstanding the foregoing, with respect to an individual who was a Participant in this Plan between June 25 and December 31, 1992 and whose Account balances were transferred to the SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership Plan ("SpaceLabs Plan") in connection with the spin-off of that plan from this Plan, such individual's Account balances as of the date of such transfer shall be payable from the SpaceLabs Plan and shall not be payable from this Plan. 7.2 Time of Benefit Commencement ---------------------------- (a) Benefit Commencement -------------------- Benefits shall be paid as soon as practical following a request for benefit commencement and determination of the amount of payment under subparagraph (b) below. Participants and Beneficiaries may request benefit commencement as described below. (i) Participant ----------- A Participant who is eligible for benefits may request benefit commencement by written notice to the Committee. Benefits may commence at any time following Termination and on or before the April 1 following the year in which the Participant attains or would have attained age 70-1/2. If such a Participant fails to request benefit commencement, he or she shall be deemed to have requested that benefits commence on the April 1 following the year in which the Participant attains age 70-1/2. (ii) Beneficiary ----------- A Beneficiary who is eligible for benefits may request benefit commencement by written notice to the Committee. Benefits for a spouse 32 Beneficiary may commence at any time after the Participant's death and on or before the Participant's Normal Retirement Date, calculated as if he or she had survived. If a spouse Beneficiary fails to request benefit commencement, benefits shall commence on or immediately preceding the April 1 following the calendar year in which the Participant would have attained age 65 if he or she had survived. Benefits for a non-spouse Beneficiary shall not be contingent on receipt of a written request for benefit commencement, but shall commence as soon as practical following the end of the month which coincides with or next follows the date of the Participant's death. (b) Amount of Payment ----------------- With the exception of amounts invested in the Company Stock Fund or the SpaceLabs Stock Fund, the amount distributed shall be based on the Account balance determined as of the last Valuation Date on which the Accounts were valued, adjusted for earnings and losses since such date. If stock is distributed from the Company Stock Fund or the SpaceLabs Stock Fund, the number of shares distributed shall be the number of whole shares in the Participant's Account as of the date of distribution, with any fractional shares paid in cash based on the average of the high and low selling price on the day preceding the date of distribution. If stock held in the Company Stock Fund or the SpaceLabs Stock Fund is distributed in cash, the amount distributed shall be based on the price at which the stock held in the Participant's Accounts is sold, or, if the stock held in the Participant's Accounts is not sold, the average of the high and low selling price on the day preceding the date of distribution. The value of a distribution of the portion of the Participant's Accounts invested in the Company Stock Fund or SpaceLabs Stock Fund that is invested in cash shall be based on the Account balance invested in cash as of the last Valuation Date on which the Accounts were valued. (c) Small Benefits -------------- Notwithstanding any election to commence benefits or lack thereof, the Committee shall distribute a benefit which is $3,500 or less at the time benefits commence, in a lump sum as soon as practical following Termination of employment, death or becoming Disabled, without Participant or Beneficiary consent. 33 7.3 Form of Payment --------------- (a) Participant ----------- If a Participant terminates Service and the value of his Accounts (to the extent vested) exceeds $3,500, (a) his Accounts shall only be distributed prior to the Participant's attainment of age 65 if the Participant consents to the distribution, and (b) whether or not the Participant has attained age 65, he may irrevocably elect to receive his interest in the Plan in the form of a: (i) lump sum, or (ii) five, ten or fifteen annual installments, to be paid in cash only, on or after attaining age 65. (iii) with respect to the balance as of December 31, 1994 in a Participant's account, if any, that were transferred from the Interspec, Inc. 401(k) Retirement/Savings plan, payments over a period certain in monthly, quarterly, semiannual, or annual cash installments. A Participant may not elect a period over which installment payments shall be made which is expected to exceed the joint life expectancy of the Participant and Beneficiary. (b) Beneficiary ----------- If the value of a deceased Participant's Accounts (to the extent vested) exceeds $3,500, the Beneficiary shall receive a lump sum payment unless the Beneficiary irrevocably elects in a written notice filed with the Committee no more than 30 days after the Participant's death to receive payment in the form of five annual installments, to be paid in cash only. A spouse Beneficiary may elect five, ten or fifteen annual installments; provided, however, that such installments may not be paid over a period that extends beyond the life expectancy of the spouse Beneficiary and provided further that if distributions were deemed to have commenced under Section 7.2(a)(i) before a Participant's death (due to the Particiant's attainment of age 70- 1/2), the remaining benefits will be distributed at least as rapidly as under the method of distribution being used as of the date of the Participant's death. 7.4 Distributions of Stock ---------------------- (a) Distribution From Company Stock Fund ------------------------------------ If the vested portion of a Participant's Accounts invested in the Company Stock Fund consists of less than 50 shares, payment shall be made in cash only. 34 If the vested portion of a Participant's Accounts invested in the Company Stock Fund consists of 50 or more shares, disbursements of the shares held in the Accounts shall be made in full shares of Company Stock to the extent possible, with the balance, if any, paid in cash, unless the Participant or Beneficiary directs that all of the vested Account balance in the Company Stock Fund be paid in cash. (b) Distribution from SpaceLabs Stock Fund -------------------------------------- If the vested portion of a Participant's Accounts invested in the SpaceLabs Stock Fund consists of less than 50 shares, distribution shall be made in cash only. If the vested portion of a Participant's Accounts invested in the SpaceLabs Stock Fund consists of 50 or more shares, disbursements from the SpaceLabs Stock Fund shall be made in full shares of common stock of SpaceLabs Medical, Inc. to the extent possible, with the balance, if any, paid in cash, unless the Participant or Beneficiary directs that all of the vested Account balance in the SpaceLabs Stock Fund be paid in cash. 7.5 Withdrawals Prior to Termination -------------------------------- (a) Time of Withdrawal ------------------ A Participant may apply to the Committee for withdrawal of all or a portion of the following Accounts at the following times prior to Termination of employment. The withdrawn amount shall be paid as soon as practical following a request for withdrawal and determination of the amount of payment in accordance with (f) below. (b) Withdrawal of After-Tax Contributions and Investment Earnings ------------------------------------------------------------- A Participant may withdraw 100% of the dollar amount of his or her After-Tax Contribution Account or any portion thereof that is an integral multiple of $100. A Participant may not make more than two withdrawals under this Section 7.5(b) during any calendar year. No Company Matching Contributions will be made for two months following a withdrawal under this Section 7.5(b) unless the Participant has reached age 59-1/2. (c) Withdrawal of Company Contributions and Related Investment Earnings ------------------------------------------------------------------- A Participant who is 59-1/2 or has participated in the Plan for five years, who has withdrawn (or is simultaneously withdrawing) 100% of his or her After-Tax Contributions Account (if any) and Rollover Account (if any), and whose interest in his or her Company Matching and Supplemental Contribution Accounts is fully vested, may withdraw 100% of the balance in the Company Contribution Account or any portion thereof that is an integral multiple of $100. A Participant may not 35 make more than one withdrawal under this Section 7.5(c) during any calendar year. No Company Matching Contributions will be made for 12 months following a withdrawal under this Section 7.5(c) unless the Participant has reached age 59-1/2. (d) Withdrawal of Before-Tax Contributions -------------------------------------- A Participant may withdraw all or a portion of his or her Before-Tax Contribution Account if he or she has reached age 59-1/2. A Participant may also apply for a hardship withdrawal from his or her Before-Tax Contribution Account as provided in Section 7.6 below. (e) Withdrawal of Rollover Contributions ------------------------------------ A Participant may withdraw all or a portion of his or her Rollover Contribution Account. (f) Withdrawal Procedure -------------------- Withdrawals may be made as of the last day of any month by filing a notice in writing with the Committee at least 15 days prior to such date. Any amount withdrawn hereunder shall be paid in cash only, in a lump sum as promptly as possible after the applicable date. The amount distributed shall be based on the value of the Participant's Accounts on the effective date of the withdrawal, except that the amount of a withdrawal representing shares held in the Company Stock Fund or SpaceLabs Stock Fund shall be based on the price at which the shares are sold, or, if the shares are not sold, the average of the high and low selling price on the date preceding the date of the distribution. (g) Investment Funds and Withdrawals -------------------------------- A Participant who makes a partial withdrawal of any of his or her Accounts may request that the withdrawal be made from a specified fund or funds. Should the Participant's Account in the specified fund or funds prove to be inadequate to provide the amount of the required withdrawal, the remainder of the withdrawal shall be made from the Participant's Accounts in the other funds in an order of preference designated by the Participant. Should the Participant fail to designate a preference, the Trustee shall make the withdrawal from each of the funds on a pro-rata basis. (h) Restrictions on Withdrawals by Early Terminees ---------------------------------------------- In no event shall an Early Terminee be permitted to withdraw his Accounts prior to attaining age 65, unless he elects to withdraw 100% of his or her vested balance in all Accounts. 36 7.6 Hardship Withdrawal ------------------- (a) Amounts ------- A Participant who has withdrawn (or is simultaneously withdrawing) 100% of his After-Tax Contribution Account (if any), his Company Matching and Supplemental Contribution Accounts (if he is fully vested and therefore eligible to do so) and his Rollover Account (if any) may apply to the Committee for a hardship withdrawal prior to Termination of employment and age 59-1/2 of his or her: (i) Before-Tax Contribution Account balance as of December 31, 1988, and (ii) Before-Tax Contributions after December 31, 1988, excluding earnings thereon. Provided however, that a Participant may not withdraw more than the amount necessary to meet the expense that causes hardship, and, in the event that a loan is outstanding, the amount specified above that exceeds the amount pledged as collateral for the loan. (b) Availability ------------ All hardship withdrawals are subject to Committee approval. A hardship withdrawal shall only be approved if it is for a specific type of expense and if it is necessary to satisfy such expense. (c) Hardship Expenses ----------------- Hardship withdrawals are available only to pay for the following expenses (including any penalties and taxes incurred as a result of the hardship distribution): (i) expenses for medical care described in Code Section 213(d) incurred by the Participant or his or her spouse or dependents (as defined in Code Section 152), or amounts necessary for such person to obtain such medical care; (ii) purchase (excluding mortgage payments) of a principal residence for the Participant; (iii)tuition and related educational fees and room and board expenses for the next twelve months of post-secondary education for the Participant, his or her spouse, children, or dependents; (iv) preventing eviction of the Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence; 37 (v) repair to the Participant's primary home to prevent decline in value; (vi) repair to the Participant's primary vehicle used for commuting to and from work; (vii) legal expenses incident to the divorce of the Participant and expenses of the Participant's establishing a new home after a divorce; (viii) expenses related to involuntary loss of employment or reduction of work hours by the Participant's spouse; and (ix) expenses of debt consolidation. A hardship withdrawal will be available for an expense listed in (v) through (ix) above only if the expense constitutes an immediate and heavy financial need. (d) Determination of Necessity -------------------------- A distribution shall be deemed to be necessary to satisfy an expense described in 7.6 above if both of the following requirements are satisfied: (i) the distribution is not in excess of the amount of such expense (including any excise tax or income tax liability arising from the distribution); and (ii) the Participant has obtained all distributions (other than hardship distributions), and all nontaxable loans currently available under all plans maintained by the Participating Company. (e) Other Requirements ------------------ A hardship distribution shall be deducted first from the category of available amounts described in (a)(ii) herein and then from the category of available amounts described in (a)(i) herein. The Participant shall enter into a written agreement not to make or elect Before-Tax or After-Tax contributions to this or any other qualified retirement plan or non-qualified deferred compensation plan maintained by the Company for twelve (12) months after a hardship withdrawal. Following a 12-month suspension, the Participant may resume contributions pursuant to Section 3.2. In addition, the Participant may not make a Before-Tax Contribution to the Plan or any other Section 401(k) plan maintained by the Company for the Participant's taxable year immediately following the taxable year of the hardship withdrawal, in excess of Before-Tax Contributions allowable in Section 3.1 for the next taxable year less the amount of such Participant's Before-Tax Contributions for the taxable year of the hardship withdrawal. 38 Notwithstanding the foregoing, a Participant whose contributions have been suspended for twelve months due to a hardship withdrawal shall be deemed to be an Eligible Employee for purposes of the ADP test in Section 3.4, ACP test in Section 4.3, and multiple use test in Section 4.4. 7.7 Beneficiary Designation ----------------------- If payments are made to a designated Beneficiary in reasonable reliance on (i) a written statement by the Participant that he or she was not married, or (ii) a spousal consent that appeared to conform to the requirement in Section 1.5, or (iii) evidence that the spouse could not be located at the time of the Beneficiary designation, then, to the extent of such payments, the Plan shall have no liability to a spouse. 7.8 Loans ----- (a) General ------- Effective April 1, 1995, a Participant who is a "party-in-interest" under ERISA may apply to the Committee for a loan from his or her vested Accounts, other than the Participant's Company Matching Contribution Account and other than amounts invested in the Company Stock Fund and the SpaceLabs Stock Fund. The Committee has authority to administer all loans, and shall administer loans in a manner that does not discriminate in favor of Highly Compensated Employees, officers or shareholders. The Committee shall approve all loans that meet the requirements set forth in this section. For recordkeeping purposes, the loan amount shall be deducted from the Participant's Accounts in the following order: (i) from the Rollover Account; (ii) from the After-tax Contnribution Account; and (iii) from the Before-tax Contribution Account. In the event that the amount in an Account exceeds the amount needed to fund the loan and the Account is invested in more than one fund, the loan amount shall be deducted from the investment funds in which the Account is invested (other than the Company Stock Fund and the SpaceLabs Stock Fund) in the same proportion that the Account is invested in each fund. Only one loan may be outstanding at any time, and all loans must be secured by the Participant's Accounts. A Participant must submit a loan request to the Committee. Loan documents, including a promissory note, will be provided to the Participant in response to the 39 loan request. A loan request expires 30 days after it is made. If the loan request is not approved before it expires, the Participant may make another loan request. Loan proceeds shall not be dispersed unless a promissory note, authorization of payroll deduction of loan repayments, consent of the Particpant's spouse (if any), and any other loan documents in the form approved by the Committee are executed by the Participant and the Participant's spouse (if any). (b) Loan Fee ------- A loan fee of $100 will be charged for each loan to pay the Plan's cost of administering loan repayments. The loan fee will be added to the amount of the loan. (c) Hardship Loan ------------- In no event shall a loan be approved unless the loan is for the payment of one or more of the hardship expenses listed in Section 7.6, and the amount of the loan does not exceed the amount necessary to satisfy the hardship expense and to pay the loan fee. (d) Minimum and Maximum Loan Amounts -------------------------------- The minimum amount which may be borrowed is $1,000. In no event shall a loan at the time it is made, when added to the outstanding balance of any other loans from any Employer-sponsored plan, exceed the lesser of: (i) 50 percent of the total vested Account balance as of the Valuation Date immediately preceding the date of the loan application; (ii) $50,000 reduced by the excess (if any) of: (1) the highest outstanding loan balance during the one-year period ending on the day before the date on which the current loan is made; over (2) the outstanding loan balance (if any) on the date on which the current loan is made; or (3) 100 percent of the total vested Account balance invested in funds other than the Company Stock Fund and SpaceLabs Stock Fund. (e) Repayments ---------- The Participant may elect to repay the loan over any whole-year term which does not exceed 5 years; except that the term for a loan used to purchase a primary residence for the Participant may be as long as 20 years. 40 Once the loan is made, the repayment term may not be changed, provided however, that the Participant may elect to prepay the full outstanding loan balance at any time during the repayment term. All loans shall be repaid in level payments in an amount no less than $12.50, and except as otherwise provided in this Section, shall be made through payroll deduction each pay period until the loan is repaid. Loan repayments are due each pay period and are considered made when received by the Plan. Payroll deductions shall commence with the first pay period following the loan distribution. New financing or refinancing of an outstanding loan is not permitted. Loan repayments for a Participant: (i) who is on an approved, unpaid leave of absence; (ii) who dies, or (iii) whose employment terminates involuntarily due to layoff or reduction in force shall be suspended, provided that the period of suspension does not exceed one year and does not exceed the maximum repayment period stated above. Upon return to Service following a period of loan repayment suspension, the remaining loan balance shall be reamortized over the remaining loan period, and the amount of the remaining repayments shall be adjusted accordingly. Each repayment shall be credited to each Account of the Participant in the same porportion that amounts were deducted from each Account to fund the loan. Repayments will be invested in the investment funds (other than the Company Stock Fund and the SpaceLabs Stock Fund) in the same manner as new contributions are invested. If new contributions are not being made, the Participant will be required to direct investment of the loan repayments pursuant to Section 6. (f) Interest Rate ------------- A fixed reasonable rate of interest shall be charged for the term of the loan. The interest rate shall be the prime corporate lending rate offered by local commercial lending institutions on the day on which the loan request is made; provided that the completed loan documents are received by the Committee no later than 30 days after the date of the loan request. Notwithstanding the preceding sentence, if the Committee determines that such rate is not reasonable, the interest rate shall be another rate which the Committee determines is reasonable considering the prevailing interest rate charged on similar commercial loans by persons in the business of lending money, current economic conditions, and the facts and circumstances of the loan application. 41 In the event the reasonable interest rate determined by the Committee under the preceding paragraph would violate usury laws, the Committee shall deny the loan application. (g) Default ------- A loan shall be in default if: (i) a loan repayment remains unpaid for thirty (30) days after the due date for the repayment; (ii) the Participant's pay is insufficient during any pay period to cover the entire amount of the loan repayment; (iii) the Participant revokes the authorization for payroll deduction of loan repayments; or (iv) distribution to an alternate payee pursuant to a Qualified Domestic Relations Order under Section 11.9 of any amount that secures the outstanding loan balance as of the date of distribution. If a loan is in default, the outstanding loan balance becomes immediately due and payable in full, and the Plan shall forclose upon the Participant's Account balance to the extent of the outstanding loan balance as of the earliest date on which the Participant is eligible for a distribution from the Plan. The outstanding loan balance shall be treated as a distribution for federal income tax purposes for the year in which the default occurs. 7.9 Directed Rollovers ------------------ (a) General Rule ------------ A Participant, spouse Beneficiary or former spouse alternate payee (each referred to as a "distributee") who is entitled to or elects a lump sum distribution or annual installments over a period of less than ten (10) years or obtains a hardship withdrawal may direct the Committee to pay part or all of the benefit to a trustee or custodian of another employer's qualified plan which accepts such directed rollovers or an individual retirement account (IRA), subject to the following provisions: (i) A distributee may only direct such a rollover if the expected benefit payment during the Plan Year is $200 or more; (ii) A distributee may not request a directed rollover of an amount distributed due to the minimum required distribution provision under Section 11.6(b); 42 (iii)the Rollover of a distribution may only be directed to no more than two (2) qualified plans, two (2) IRAs, or one (1) IRA and one (1) qualified plan; (iv) A distributee may direct the rollover of a portion of the distribution and elect to receive the remaining portion of a distribution only if the rollover amount is at least $200; (v) A distributee may not elect a direct rollover of an outstanding loan balance which is treated as distributed upon termination of the Participant's employment, or in the event of default; (vi) A rollover direction regarding installments shall apply to all installments, unless the direction is changed by the Participant or Beneficiary; (vii) A spouse Beneficiary or a former spouse alternate payee may direct a rollover under the same terms and conditions as a Participant, except that such Beneficiary may only direct a rollover to an IRA; (viii) A distributee provides the information or documentation reasonably requested by the Committee. (b) Notice to Participants ---------------------- The Committee shall furnish each Participant and Beneficiary and alternate payee eligible for a directed rollover under this Section with a written explanation of the directed rollover opportunity and related withholding consequences of not choosing a directed rollover within a reasonable period (at least thirty (30) but not more than ninety (90) days) prior to the Annuity Starting Date; provided, however, notice recpient may waive in writing the thirty (30) day period. 43 SECTION 8 VESTING 8.1 Vesting ------- (a) Participant Before-Tax Contribution Account, After-tax Contribution ------------------------------------------------------------------- Account and Rollover Account ---------------------------- Each Participant shall have a 100% vested, nonforfeitable right to his or her Before-Tax Contribution Account, After-Tax Contribution Account and Rollover Account. (b) Company Matching and Supplemental Contribution Accounts ------------------------------------------------------- Each Participant shall earn a vested, nonforfeitable right to his or her Company Matching Contribution Account and Supplemental Company Contribution Account based on his or her Period of Service multiplied by the appropriate vesting percentage in accordance with the following table: Period of Service Percent Vested ----------------- -------------- Less than 1 year 0% 1 year 20% 2 years 40% 3 years 60% 4 years 80% 5 years or more 100%
Notwithstanding the preceding, a Participant who has completed, as of July 1, 1991, at least three Years of Service with Interspec, Inc. shall have a 100 percent vested nonforfeitable right to his or her Company Matching Contribution Account. For purposes of the preceding sentence "Years of Service" has the same meaning as the term defined under the Interspec, Inc. 401(k) Retirement/Savings Plan. In addition, each Participant shall have a 100% vested, nonforfeitable right to his or her Company Matching Contribution Account and Supplemental Company Contribution Account upon death, becoming Disabled, or attainment of his or her Normal Retirement Date, provided he or she is an Employee on such date. In the event the Participant has received a prior distribution from his or her Company Matching or Supplemental Contribution Accounts, the vested portion of the Account balance (including the amount which may yet be restored pursuant to Section 8.2) following the distribution shall be determined by application of the following formula: 44 X = P(AB+D) - D; where X equals the vested amount; P equals the Employee's vested interest in the Company Matching Contribution Account or Supplemental Company Contribution Account at the time of subsequent distribution; AB equals the balance of the Account at the time of subsequent distribution; and D equals the amount previously distributed from the Company Matching or Supplemental Contribution Account. Notwithstanding the foregoing, this formula does not apply if the Participant has repaid the prior distribution pursuant to Section 8.3(b). Also, the formula does not apply if the prior distribution may not be repaid because the Participant has incurred five or more consecutive one year Periods of Severance, or because five years or more have elapsed since the date of reemployment. 8.2 Forfeitures ----------- If a Participant terminates Service and is not fully vested in his Accounts attributable to Company Contributions in accordance with Section 8.1(b) the Participant shall forfeit his or her unvested interest in such Accounts as of the last day of the month during which his or her Service terminated. Amounts held in a Participant's Accounts attributable to Company Contributions which are thus forfeited shall be applied first to restore Accounts as provided below, and then to reduce subsequent contributions by the Participant's Participating Company, based on the Current Market Value of such shares as of the date forfeited, where applicable, provided, however, if the Plan should be terminated, or contributions thereunder permanently discontinued, an amount not previously so applied shall be credited on a pro-rata basis to the Accounts of all Participants in the Company Stock Fund. Each year the Committee shall determine in its sole discretion whether forfeitures shall be applied to reduce Company Matching Contributions or Supplemental Contributions or both. If such Participant returns to Service before suffering five consecutive one year Periods of Severance, the amount forfeited shall be restored as of the last day of the Plan Year in which the Participant returns to Service and repays in full any prior distribution, if any, according to Section 8.3. Assets to restore amounts forfeited shall be taken first from current forfeitures. In the event that current year forfeitures are inadequate to fully reinstate the Account, the Participating Company shall make a contribution in addition to the contributions required under Section 4.1 equal to the balance necessary to fully reinstate the Account. 45 8.3 Reemployment ------------ (a) Periods of Service ------------------ If a Terminated Employee later becomes a Participant again following reemployment, all Periods of Service before and after the Period of Severance shall be taken into account in determining the Participant's vested interest in the Company Matching and Supplemental Contribution Accounts established upon reemployment. (b) Repayment --------- If a Participant forfeited a portion of his or her Company Matching and Supplemental Contribution Accounts upon termination and he or she returns to Service after receiving a distribution and prior to incurring a five-year Period of Severance, the Participant may elect to repay the amount previously distributed from his or her Company Matching and Supplemental Contribution Accounts. Such Participant may elect to repay his or her prior distribution before five years after the date of reemployment. The forfeited amount shall be restored upon such repayment pursuant to Section 8.2. Amounts repaid shall be 100% vested and shall be invested in accordance with Section 6.3. Such amounts shall be held in the Participant's After-Tax Contribution Account if they are repaid with After-tax amounts, and shall be held in the Participant's Before-Tax Contribution Account if they are repaid with Before- tax amounts transferred or rolled over from another qualified plan or IRA. (c) Restoration of Forfeitures -------------------------- If a Participant forfeited a portion of his or her Company Matching and Supplemental Contribution Accounts but did not receive a distribution of the vested portion of such Accounts prior to reemployment, and he or she returns to Service prior to incurring a five-year Period of Severance, the forfeited amount shall be reinstated as of the last day of the Plan Year in which reemployment occurs. 8.4 Suspension of Installment Payments ---------------------------------- In the event that any person shall resume Service after a previous termination of Service, installment payments being made to him (if any) shall be suspended. In the event of such suspension, the amount held in his Accounts at the time of his resumption of Service shall remain to his credit on a fully vested basis, notwithstanding any other provision in the Plan to the contrary. 46 SECTION 9 LIMITATION ON CONTRIBUTIONS 9.1 Maximum Annual Contribution to the Plan --------------------------------------- For purposes of this Section 8, the Company and any Affiliated Companies shall be considered a single employer, to the extent required by the Code. (a) Primary Rule ------------ Notwithstanding any other Plan provision to the contrary, the Annual Additions to a Participant's Accounts in this Plan and any other defined contribution plan maintained by the Company shall not exceed the lesser of (i) $30,000 (or 25% of the Code Section 415 defined benefit dollar limitation if greater), or (ii) 25% of the Participant's Compensation. (b) Annual Additions Defined ------------------------ For purposes of Section 8, the term "Annual Additions" for any Participant in any Plan Year means the sum of: (i) the amount of Company Contributions and Participant Before-Tax and After-Tax Contributions allocated to a Participant's Accounts; (ii) forfeitures allocated to the Participant's Accounts; and (iii)with respect only to the $30,000 limitation, amounts attributable to retiree medical benefits on behalf of a key Employee in a separate account in a welfare fund subject to Code Section 419A. (c) Cost-of-Living Adjustment ------------------------- The $30,000 (or 25% of the Code Section 415 defined benefit dollar limitation if greater) limit prescribed above shall be automatically adjusted for cost-of-living increases, to the maximum permissible dollar limitation determined by the Commissioner of Internal Revenue. The dollar amount applicable in computing the maximum contribution for any Participant shall be the dollar amount in effect for the calendar year in which the contribution is made. (d) Remedy ------ If for any Plan Year the Annual Additions exceed the foregoing limitations because of a reasonable error in determining the amount of a Participant's Before-Tax Contributions, the Plan Administrator shall distribute the amount of Before-Tax 47 Contributions in excess of the limits. If the Annual Additions exceed the limits for any other reason, the Company shall allocate the excess to a suspense account. The suspense account shall be credited with investment earnings and losses as of each Valuation Date in the same manner as Participant Accounts pursuant to Section 5.3. Such suspense account is for accounting purposes only and shall remain in the Trust Fund to be reallocated as provided below. Contents of the suspense account shall be allocated to the affected Participant's Account in subsequent years when that can be done without exceeding the limitations of this Section 9.1. So long as any amount remains in the suspense account, the Company shall not contribute to the Plan any amount which would cause an additional allocation to the suspense account. In the event the Participant ceases to be a Participant when any amount remains in a suspense account, such amount shall be reallocated to active Participants as of the end of the Plan Year following the calendar year in which he or she ceases to be a Participant. In the event the Plan terminates before any amount remaining in the suspense account has been fully allocated to Participant Accounts, the balance of the suspense account shall be distributed to the Company. If any Participant is also a participant in another employee retirement plan that (a) is a defined contribution plan within the meaning of section 414(i) of the Code and (b) is sponsored by the Company or an Affiliated Company, the foregoing limitations shall be applied on an aggregate basis. Any reduction required to conform to such limitations shall first be made (pro rata) in contributions by the Participant under the plans involved; and a pro-rata reduction shall then be made in the contributions by the Affiliated Companies (including forfeitures) allocable to the Participant under the plans involved. 9.2 Additional Limitation Relating to Defined Benefit Plans ------------------------------------------------------- (a) Primary Rule ------------ For Participants who participate in this Plan and a defined benefit plan maintained by the Company, the sum of (1) and (2) below for any calendar year may not exceed 1.0, as determined by the Committee. (i) The defined benefit plan fraction for any year is equal to the quotient of (i) divided by (ii) below expressed as a fraction: (1) The projected annual benefit, (determined by projecting service, but not earnings, to normal retirement age) of the Participant under the Plan determined as of the close of the year. (2) The lesser of: (a) 1.25 multiplied by the dollar limitation in effect for defined benefit plans under Section 415 of the Code for such year, or (b) 1.4 multiplied by 100% of the Participant's average annual Compensation from the Company for the consecutive calendar years (not in excess of three such years) during which he 48 was an active Participant in the Plan and for which such average is highest. (ii) The defined contribution plan fraction for any year is equal to the quotient of (i) divided by (ii) below expressed as a fraction: (1) The sum of the Annual Additions to the Participant's Accounts for the current year, as of the close of the year, and for all prior years from and after the Employment Commencement Date. (2) The sum of the lesser of the following amounts for such year and for each prior year of Service with the Company (regardless of whether a plan was in existence during those years): (a) 1.25 multiplied by the dollar limitation in effect for defined contribution plans under Section 415 of the Code for such year, or (b) 1.4 multiplied by 25% of a Participant's Compensation for such year. (b) Remedy ------ If such sum exceeds 1.0, the Annual Additions to this defined contribution Plan shall be reduced to the extent necessary to satisfy the limitations of this section. 49 SECTION 10 TOP HEAVY PROVISIONS 10.1 Scope ----- Notwithstanding any Plan provision to the contrary, for any Plan Year in which the Plan is Top Heavy within the meaning of Section 416(g) of the Code, the provisions of this Section 10 shall govern to the extent they conflict with or specify additional requirements to the Plan provisions governing Plan Years which are not Top Heavy. 10.2 Top Heavy Status ---------------- (a) Top Heavy --------- This Plan shall be "Top Heavy" if, as of the Determination Date, (1) the Present Value of Accrued Benefits of Key Employees, or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Benefits or the Aggregate Accounts of all Participants under this Plan and any plan of an Aggregation Group, determined in accordance with Code Section 416(g) and regulations thereunder. The Present Value of Accrued Benefits and/or Aggregate Account balance of a Participant who was previously a Key Employee but is no longer a Key Employee (or his or her Beneficiary), shall not be taken into account for purposes of determining Top Heavy status. Further, a Participant's Present Value of Accrued Benefits and/or Aggregate Account balance shall not be taken into account if he or she has not performed services for the Affiliated Companies at any time during the five year period ending on the Determination Date. (b) Super Top Heavy --------------- This Plan shall be "Super Top Heavy" if, as of the Determination Date, (1) the Present Value of Accrued Benefits of Key Employees, or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Benefits or the Aggregate Accounts of all Participants under this Plan and any plan of an Aggregation Group. (c) Determination Date ------------------ Whether the Plan is Top Heavy for any Plan Year shall be determined as of the Determination Date. "Determination Date" means (a) the last day of the preceding Plan Year, or (b) in the case of the first Plan Year, the last day of such Plan Year. 50 (d) Valuation Date -------------- "Valuation Date" means, for purposes of determining Top Heaviness, the Determination Date instead of the meaning set forth in Section 1. (e) Aggregate Account ----------------- "Aggregate Account" means, with respect to a Participant, the sum of: (i) his or her account balances as of the Valuation Date; (ii) contributions after the Valuation Date due as of the Determination Date; (iii)distributions prior to the Valuation Date, made during the Plan Year that contains the Determination Date and the four preceding Plan Years. (f) Present Value of Accrued Benefits --------------------------------- The "Present Value of Accrued Benefits" with respect to a defined benefit plan shall be based upon the Participant's accrued benefits and the actuarial assumptions as determined under the provisions of the applicable defined benefit plan. (g) Key Employee ------------ "Key Employee" means an Employee or former Employee (and his or her Beneficiaries) who, at any time during the Plan Year containing the Determination Date or any of the four preceding Plan Years, is included in one of the following categories as within the meaning of Section 416(i)(l) of the Code and regulations thereunder: (i) an officer of the Company whose annual aggregate Compensation from the Affiliated Companies exceeds 50% of the dollar limitation under Code Section 415(b)(1)(A) ($59,400 for the Plan Year ending in 1994), provided that no more than 50 Employees shall be considered officers, or if less, the greater of 10% of the Employees or 3, (ii) one of the ten Employees owning the largest interest in the Company who owns more than a 0.5% interest of the Company, and whose annual aggregate Compensation from the Affiliated Companies exceeds the dollar limitation under Section 415(c)(1)(A) of the Code ($30,000 for the Plan Year ending in 1994). (iii)an Employee who owns more than 5% of the Company, or 51 (iv) an Employee who owns more than 1% of the Company with annual aggregate Compensation from the Affiliated Companies that exceeds $150,000. (h) Aggregation Group ----------------- "Aggregation Group" means the group of plans that must be considered as a single plan for purposes of determining whether the plans within the group are Top Heavy (Required Aggregation Group), or the group of plans that may be aggregated for purposes of Top Heavy testing (Permissive Aggregation Group). The Determination Date for each plan must fall within the same calendar year in order to aggregate the plans. (i) The Required Aggregation Group includes each plan of the Affiliated Companies in which a Key Employee is a participant in the Plan Year containing the Determination Date or any of the four preceding Plan Years, and each other plan of the Affiliated Companies which, during this period, enables any plan in which a Key Employee participates to meet the minimum participation standards or non-discriminatory contribution requirements of Code Sections 401(a)(4) and 410. (ii) A Permissive Aggregation Group may include any plan sponsored by an Affiliated Company, provided the group as a whole continues to satisfy the minimum participation standards and non- discriminatory contribution requirements of Code Sections 401(a)(4) and 410. Each plan belonging to a Required Aggregation Group shall be deemed Top Heavy, or non-Top Heavy in accordance with the group's status. In a Permissive Aggregation Group that is determined Top Heavy only those plans that are required to be aggregated shall be Top Heavy. In a Permissive Aggregation Group that is not Top Heavy, no plan in the group shall be Top Heavy. 10.3 Minimum Contribution -------------------- (a) General Rule ------------ For any Plan Year in which the Plan is Top Heavy, the total Company contribution under Section 4.1 and any forfeitures allocated to any non-key Participant's account shall not be less than 3% of such Participant's Compensation. Participant contributions under Section 4.1(a) are not considered when determining whether this 3% requirement is satisfied. However, in the event the Company contributions and forfeitures allocated to each Key Employee's account do not exceed 3% of his or her Compensation, such Company contributions and forfeitures for non-Key Employees are only required to equal the highest percentage of Compensation, including Participant Before-Tax Contributions under Section 4.1(a), allocated to 52 any Key Employee's accounts for that Plan Year under any defined contribution plans sponsored by the Affiliated Companies. The minimum contribution must be made on behalf of all non-Key Participants who are employed on the last day of the Plan Year including non-Key Employees who (1) failed to complete a year of service, or (2) declined to make any mandatory contributions to the Plan or enter a salary deferral agreement. (b) Special Two Plan Rule --------------------- Where this Plan and a defined benefit plan belong to an Aggregation Group that is determined Top Heavy, the minimum contribution required under paragraph (a) above shall be increased to 5%. 10.4 Limitation to Annual Additions in Top Heavy Plan ------------------------------------------------ For any Top Heavy Plan Year in which the Company does not make the extra minimum allocation provided below, 1.0 shall replace the 1.25 factor found in the denominators of the defined benefit and defined contribution plan fractions for purposes of calculating the combined limitation on benefits under a defined benefit and defined contribution plan pursuant to Section 415(e) of the Code (see Section 9.3). If this Plan is Top Heavy, but is not Super Top Heavy, the above referenced fractions shall remain unchanged provided the Company makes an extra minimum allocation for non-Key Participants. The extra allocation (in addition to the minimum contribution set forth in Section 10.3) shall equal at least one percent (1%) of a non-Key Participant's compensation (or 2-1/2% if Section 10.3(b) applies). 10.5 Vesting ------- For any Top Heavy Plan Year, a Participant's Accounts shall remain subject to the vesting provisions in Section 8.1. 53 SECTION 11 ADMINISTRATION OF THE PLAN 11.1 Plan Administrator ------------------ The Plan Administrator and named fiduciary shall be the Company. The Compensation Committee of the Board of Directors shall appoint a Committee composed of one or more persons which shall carry out the general administration of the Plan. Every member of the Committee shall be deemed a fiduciary. No Committee member who is an Employee shall receive compensation with respect to his or her service on the Committee. Any member of the Committee may resign by delivering written resignation to the Compensation Committee of the Board of Directors of the Employer and to the Committee. The Compensation Committee of the Board of Directors may remove or replace any member of the Committee at any time. 11.2 Organization and Procedures --------------------------- The Compensation Committee of the Board of Directors shall designate a chairman from the members of the Committee. The Committee shall appoint a secretary, who may or may not be a member of the Committee. The secretary shall have the primary responsibility for keeping a record of all meetings and acts of the Committee and shall have custody of all documents, the preservation of which shall be necessary or convenient to the efficient functioning of the Committee. The chairman of the Committee shall be the agent of the Plan for service of process. All reports required by law may be signed by the chairman or another member of the Committee designated by the Committee, on behalf of all members of the Committee. The Committee shall act by a majority of its members in office, and such actions may be taken by a vote at a meeting or in writing without a meeting. The Committee may adopt such by-laws and regulations as it deems desirable for the conduct of its affairs. 11.3 Duties and Authority of Committee --------------------------------- (a) Administrative Duties --------------------- The Committee shall administer the Plan in a non-discriminatory manner for the exclusive benefit of Participants and their Beneficiaries. The Committee shall perform all such duties as are necessary to supervise the administration of the Plan and to control its operation in accordance with the terms thereof, including, but not limited to, the following: (i) Make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan, including authorizing an 54 Interactive Voice Response System in addition to or in lieu of written notification required under the Plan; (ii) Interpret the provisions of the Plan and resolve any question arising under the Plan, or in connection with the administration or operation thereof; (iii)Make all determinations affecting the eligibility of any Employee to be or become a Participant, Beneficiary or alternate payee pursuant to a domestic relations order (including determining the qualified status of a domestic relations order); (iv) Determine eligibility for and amount of retirement benefits for any Participant; (v) Authorize and direct the Trustee with respect to all disbursements of benefits under the Plan; (vi) Employ and engage such persons, counsel and agents and to obtain such administrative, clerical, medical, legal, audit and actuarial services as it may deem necessary in carrying out the provisions of the Plan; (vii)Delegate and allocate specific responsibilities, obligations and duties imposed by the Plan to one or more Employees, officers, or such other persons as the Committee deems appropriate. (b) Investment Authority -------------------- The Committee shall have responsibility and authority with respect to the management, acquisition, disposition or investment of Plan assets to the extent such responsibility and authority is not delegated to an Investment Manager or Trustee. Participants directing investment of their Accounts among the available investment funds shall have responsibility and authority for such investment of their Accounts to the extent provided by law. (c) General Authority ----------------- The Committee shall have all powers necessary or appropriate to carry out its duties, including the discretionary authority to interpret the provisions of the Plan and the facts and circumstances of claims for benefits. Any interpretation or construction of or action by the Committee with respect to the Plan and its administration shall be conclusive and binding upon any and all parties and persons affected hereby, subject to the exclusive appeal procedure set forth in Section 11.7. 55 (d) Amendment Authority ------------------- The Committee shall have responsibility and authority to approve documents for the Plan and to approve amendments that may be required to the Plan from time to time to keep the Plan in compliance with relevant law or to facilitate the administration of the Plan. The Chairman of the Committee is authorized to execute any such documents or amendments on behalf of the Company. 11.4 Expenses -------- No member of the Committee shall receive any compensation for his services as such. However, all expenses incurred by the Committee in carrying out its responsibilities hereunder (including any bond or other security required for any member in any jurisdiction) shall be paid by the Plan unless such amounts are paid by the Company. Brokerage commissions, transfer taxes and other charges and expenses in connection with the purchase or sale of securities shall be added to the cost of such securities or deducted from the proceeds thereof, as the case may be. A five dollar administrative charge shall be deducted each month from each Early Terminee's Account. All other costs and expenses incurred in administering the Plan shall be paid by the Plan unless such amounts are paid by the Participating Companies. 11.5 Bonding and Insurance --------------------- To the extent required by law, every Committee member, every fiduciary of the Plan and every person handling Plan funds shall be bonded. The Committee shall take such steps as are necessary to assure compliance with applicable bonding requirements. The Committee may apply for and obtain fiduciary liability insurance insuring the Plan against damages by reason of breach of fiduciary responsibility at the Plan's expense and insuring each fiduciary against liability to the extent permissible by law at the Company's expense. 11.6 Commencement of Benefits ------------------------ (a) Conditions of Payment --------------------- Benefit payments under the Plan shall not be payable prior to the fulfillment of the following conditions: (i) The Committee has been furnished with such applications, consents, proofs of birth, address, form of benefit election, spouse consent if required, and other information the Committee deems necessary; (ii) The Participant is eligible to receive benefits under the Plan as determined by the Committee. The amount of benefit payable to a Participant or Beneficiary shall be determined under the terms of the Plan in effect at the time the Participant Terminates 56 employment. The time benefits commence to a Participant or Beneficiary and the form of payment shall be determined under the terms of the Plan in effect at the time benefits commence. (b) Commencement of Payment ----------------------- Unless a Participant elects otherwise, the payment of benefits shall commence no later than 60 days after the end of the Plan Year in which the latest of the following occurs: (i) the date the Participant attains age 65, (ii) the tenth anniversary of the year in which the Participant commenced participation in the Plan, or (iii)the Participant Terminates employment with the Company, provided that payments shall not commence later than April 1 following the calendar year in which the Participant attains age 70-1/2, regardless of whether he or she remains in Service after that date (unless the Participant attained age 70-1/2 prior to January 1, 1988, and was not a 5% owner at any time after age 66-1/2, in which case payments shall commence no later than upon termination of employment). The amount of any payments required following age 70-1/2 or Termination shall at least satisfy the minimum required distribution amount under Code Section 401(a)(9)(A)(ii) and related requlations. If the information required in subparagraph (a) above is not available prior to such date, the amount of payment required to commence will not be ascertainable. In such event, the commencement of payments shall be delayed until no more than 60 days after the date the amount of such payment is ascertainable. 11.7 Appeal Procedure ---------------- (a) A claim for benefit payment shall be considered filed when an application form is submitted to the Committee. (b) Notice of Denial ---------------- Any time a claim for benefits is wholly or partially denied, the Participant or Beneficiary (hereinafter "Claimant") shall be given written notice of such action within 90 days after the claim is filed, unless special circumstances require an extension of time for processing. If there is an extension, the Claimant shall be notified of the extension and the reason for the extension within the initial 90 day period. The extension shall not exceed 180 days after the claim is filed. Such notice will indicate the reason for denial, the pertinent provisions of the Plan on which the denial is based, an explanation of the claims appeal procedure set forth 57 herein, and a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary. (c) Right to Request Review ----------------------- Any person who has had a claim for benefits denied by the Committee, or is otherwise adversely affected by action of the Committee, shall have the right to request review by the Committee. Such request must be in writing, and must be made within 60 days after such person is advised of the Committee's action. If written request for review is not made within such 60-day period, the Claimant shall forfeit his or her right to review. The Claimant or a duly authorized representative of the Claimant may review all pertinent documents and submit issues and comments in writing. (d) Review of Claim --------------- The Committee shall then review the claim. It may hold a hearing if it deems it necessary and shall issue a written decision reaffirming, modifying or setting aside its former action within 60 days after receipt of the written request for review, or 120 days if special circumstances, such as a hearing, require an extension. The Claimant shall be notified in writing of any such extension within 60 days following the request for review. A copy of the decision shall be furnished to the Claimant. The decision shall set forth its reasons and pertinent plan provisions on which it is based. The decision shall be final and binding upon the Claimant and the Committee and all other persons involved. 11.8 Plan Administration - Miscellaneous ----------------------------------- (a) Limitations on Assignments -------------------------- Benefits under the Plan may not be assigned, sold, transferred, or encumbered, and any attempt to do so shall be void. The interest of a Participant in benefits under the Plan shall not be subject to debts or liabilities of any kind and shall not be subject to attachment, garnishment or other legal process, except as provided in Section 11.9 relating to Domestic Relations Orders, or otherwise permitted by law. Notwithstanding the above, any Participant or Beneficiary who is to receive a distribution from the Plan in shares of Company Stock may, subject to the provisions or Treasury Regulations (S)1.401(a)-13(e), make a revocable election that such stock be issued jointly (with the right of survivorship) to him and his spouse; provided, however, that no such election shall be effective until the Participant's or Beneficiary's spouse files a written acknowledgement with the Committee, in accordance with Treasury Regulations (S)1.401(a)- 13(e)(2), stating that such spouse has no enforceable right in, or to, any Plan benefit (except to the extent of payments actually received). 58 (b) Masculine and Feminine, Singular and Plural ------------------------------------------- Whenever used herein, pronouns shall include the opposite gender, and the singular shall include the plural, and the plural shall include the singular, whenever the context shall plainly so require. (c) No Additional Rights -------------------- No person shall have any rights in or to the Trust Fund, or any part thereof, or under the Plan, except as, and only to the extent, expressly provided for in the Plan. Neither the establishment of the Plan, the establishment of Participant Accounts nor any action of the Company or the Committee shall be held or construed to confer upon any person any right to be continued as an Employee, or, upon dismissal, any right or interest in the Trust Fund other than as herein provided. The Company expressly reserves the right to discharge any Employee at any time. (d) Governing Law ------------- This Plan shall be construed in accordance with applicable federal law and the laws of the State of Washington. (e) Disclosure to Participants -------------------------- Each Participant shall be advised of the general provisions of the Plan and, upon written request addressed to the Committee, shall be furnished any information requested regarding the Participant's status, rights and privileges under the Plan as may be required by law. (f) Income Tax Withholding Requirements ----------------------------------- Any retirement benefit payment made under the Plan will be subject to any applicable income tax withholding requirements. For this purpose, the Committee shall provide the Trustee with any information the Trustee needs to satisfy such withholding obligations and with any other information that may be required by regulations promulgated under the Code. (g) Severability ------------ If any provision of this Plan shall be held illegal or invalid for any reason, such determination shall not affect the remaining provisions of this Plan which shall be construed as if said illegal or invalid provision had never been included. 59 (h) Facility of Payment ------------------- In the event any benefit under this Plan shall be payable to a person who is under legal disability or is in any way incapacitated so as to be unable to manage his or her financial affairs, the Committee may direct payment of such benefit to a duly appointed guardian, committee or other legal representative of such person or in the absence of a guardian or legal representative, to a custodian for such person under a Uniform Gift to Minors Act or to any relative of such person by blood or marriage, for such person's benefit. Any payment made in good faith pursuant to this provision shall fully discharge the Company and the Plan of any liability to the extent of such payment. (i) Correction of Errors -------------------- Any Company contribution to the Trust Fund made under a mistake of fact (or investment proceed of such contribution if a lesser amount) shall be returned to the Company within one year after payment of the contribution. In the event an incorrect amount is paid to a Participant or Beneficiary, any remaining payments may be adjusted to correct the error. The Committee may take such other action it deems necessary and equitable to correct any such error. (j) Missing Persons --------------- In the event a distribution is required to commence under Section 7.2 and the Participant or Beneficiary cannot be located, the Participant's Account shall be forfeited on the last day of the Plan Year following the Plan Year in which distribution was supposed to commence. Such forfeiture shall be used to reduce Company Matching Contributions. If the affected Participant or Beneficiary later contacts the Company, his or her Account shall be reinstated and distributed as soon as practical. The Company shall reinstate the amount forfeited by making a special contribution equal to such amount and allocating it to the affected Participant's or Beneficiary's Account. Such reinstatement shall not be considered an annual addition for purposes of the limitations on contributions on benefits pursuant to Code Section 415. Prior to forfeiting any Account, the Company shall attempt to contact the Participant or Beneficiary by return receipt mail at his or her last known address according to the Company's records, and by the letter forwarding services offered through the Internal Revenue Service, or the Social Security Administration, or such other means as the Committee deems appropriate. 60 11.9 Domestic Relations Orders ------------------------- Notwithstanding any Plan provisions to the contrary, benefits under the Plan may be paid to someone other than the Participant or Beneficiary pursuant to a Qualified Domestic Relations Order, in accordance with Section 414(p) of the Code. A Qualified Domestic Relations Order is a judgment, decree, or order ("Order") (including approval of a property settlement agreement) that: (a) relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant; (b) is made pursuant to a state domestic relations law (including a community property law); (c) creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable to a Participant under the Plan; (d) specifies the name and last known address of the Participant and each alternate payee; (e) specifies the amount or method of determining the amount of benefit payable to an alternate payee; (f) names each plan to which the order applies; (g) does not require any form, type or amount of benefit not otherwise provided under the Plan; (h) does not conflict with a prior Domestic Relations Order that meets the other requirements of this section. Payments to an alternate payee pursuant to a Qualified Domestic Relations Order shall commence within a reasonable time following qualification of the Order. Such payment shall commence regardless of the Participant's age or whether the Participant Terminates or continues employment. The Committee shall determine whether an order meets the requirements of this section within a reasonable period after receiving an order. The Committee shall notify the Participant and any alternate payee that an order has been received. Any amounts which are to be paid pursuant to the order, during the period while its qualified status is being determined, shall be held in a separate account under the Plan for any alternate payee pending determination that an order meets the requirements of this section. If within eighteen months after such a separate account is established, the order has not been determined to be a qualified Order, the amount in the separate account shall be distributed to the individual who would have been entitled to such amount if there had been no order. 61 11.10 Plan Qualification ------------------ Any modification or amendment of the Plan may be made retroactive, as necessary or appropriate, to establish and maintain a "qualified plan" pursuant to Section 401 of the Code, and ERISA and regulations thereunder and exempt status of the Trust Fund under Section 501 of the Code. 11.11 Deductible Contribution ----------------------- Notwithstanding anything herein to the contrary, any contribution by the Company to the Trust Fund is conditioned upon the deductibility of the contribution by the Company under the Code and, to the extent any such deduction is disallowed, the Company may within one year following a final determination of the disallowance, demand repayment of such disallowed contribution and the Trustee shall return such contribution less any losses attributable thereto to the Company within one year following the disallowance. 11.12 Voting of Company Stock and SpaceLabs Medical, Inc. Stock --------------------------------------------------------- Before each annual or special meeting of the stockholders of the Company, the Company shall cause to be sent to each Participant having shares in the Company Stock Fund or the SpaceLabs Stock Fund a copy of the proxy solicitation material therefor, together with a form requesting confidential instructions to the Trustee on how to vote the number of shares of common stock in either Fund credited to such Participant. Upon receipt of such instructions the Trustee shall vote the shares of stock as instructed. Instructions received from individual Participants by the Trustee shall be held in the strictest confidence and shall not be divulged or released to any person, including officers or employees of any Company or any Affiliated Company. The Trustee shall vote all shares of Company Stock and SpaceLabs Medical, Inc. stock held by it under the Plan, for which voting instructions shall not have been received for or against proposals submitted, in the same proportions as the shares for which instructions are received by the Trustee from Participants. In the event of a tender or exchange offer for Company Stock or SpaceLabs Medical, Inc. common stock, the response to such offer by the Trustee shall be determined as though the decision constitutes the exercise of voting rights, as described in this Section 11.12, except that any shares with respect to which instructions are not received from Participants or Beneficiaries shall not be tendered by the Trustee. 62 SECTION 12 AMENDMENT AND TERMINATION 12.1 Amendment and Termination ------------------------- It is the Company's intention that the Plan will continue indefinitely; however, the Company, by action of its Board of Directors, shall have the right to amend, terminate, or partially terminate this Plan at any time subject to any advance notice or other requirements of ERISA. Should the Board amend the Plan, such amendment shall apply to all Participating Companies as of the date that the amendment applies to the Company. A participating Company may, however, adopt for its employees a different definition of "Eligible Employee" than is contained in Section 1 or a different standard of participation than is contained in Section 2, by filing with the Committee a certified resolution of its Board of Directors, provided, however, that such resolution shall become effective only if approved by the Committee. No amendment of the Plan shall have the effect of providing that the funds held in trust by the Trustee or the earnings thereon may be used for, or diverted to, purposes other than the Plan. 12.2 Consolidation or Merger ----------------------- In the event the Plan's assets and liabilities are merged into, transferred to or otherwise consolidated with any other retirement plan, then such must be accomplished so as to ensure that each Participant would (if the other retirement plan then terminated) receive a benefit immediately after the merger, transfer or consolidation, which is equal to or greater than the benefit the Participant would have been entitled to receive immediately before the merger, transfer or consolidation (as if the Plan had then terminated). This provision shall not be construed as limiting the powers of the Company to appoint a successor Trustee. Subject to the foregoing, if any Affiliated Company becomes a Participating Company, and such Company had a thrift plan or similar plan or participated in a similar plan of another organization, the Board, with the approval of the Affiliated Company, may merge such plan into the Plan and thereupon all employees of the Affiliated Company who were members of such plan shall automatically become Participants hereunder, and all amounts in the accounts of such employees of the Affiliated Company shall become accounts under this Plan, in the manner determined by the Committee; provided, however, that amounts so transferred shall not be subject to the limitations imposed under Sections 3 and 4 on such contributions and no Participating Company shall be required or permitted to make company matching contributions based on any of the amounts transferred to the Plan under this paragraph. If a Participating Company maintains a trust that qualified as an exempt trust under Section 501(a) of the Code as a part of a qualified profit- sharing plan to which contributions have been permanently discontinued and all rights under the trust have vested in employees and former employees of the Participating Company, the board of directors of the Participating 63 Company, with the consent of the Board, may merge such trust into the Trust under the Plan and thereupon all employees of such Participating Company and employees of other Participating Companies who had a vested interest in the merged trust shall automatically become Participants in the Plan but solely for the purposes of investing the amounts so transferred and distributing such amounts to such employees as hereinafter set forth in the Plan. The amounts so transferred on behalf of each such employee shall be invested in such funds as he shall direct, under the provisions of Section 6.1. Any amounts transferred under this paragraph shall constitute "Special Contributions." Under no circumstances will any Participating Company be required or permitted to make company matching contributions to the Plan based on Special Contributions. Special Contributions and any earnings thereon may not be withdrawn by a Participant until such time as the Participant ceases to be an Employee of a Participating Company on account of death, retirement, or other voluntary or involuntary termination of employment; provided, however, that a full withdrawal of such Special Contributions and earnings may be made by a Participant after attainment of age 59-1/2, if he shall at the same time make a full withdrawal of all his interest in this Plan. Subject to the foregoing, all such distributions shall be made in accordance with the provisions of this Plan. 12.3 Termination of the Plan ----------------------- The termination of the Plan shall not cause or permit any part of the Trust Fund to be diverted to purposes other than for the exclusive benefit of the Participants, or cause or permit any portion of the Trust Fund to revert to or become the property of the Company at any time prior to the satisfaction of all liabilities with respect to the Participants. Upon termination of this Plan, the Committee shall continue to act for the purpose of complying with the preceding paragraph and shall have all power necessary or convenient to the winding up and dissolution of the Plan as herein provided. While so acting, the Committee shall be in the same status and position with respect to other persons as if the Plan remained in existence. 12.4 Allocation of the Trust Fund on Termination of Plan --------------------------------------------------- In the event of a complete or partial termination of the Plan, or upon complete discontinuance of contributions under the Plan, with respect to all Participants or a specified group or groups of Participants, the Trustee shall allocate and segregate a proportionate interest in the Trust Fund for the benefit of affected Participants. All Accounts accrued by the affected Participants shall be 100% vested and non-forfeitable. The Committee shall direct the Trustee to allocate the assets of the Trust Fund to those affected Participants. In the event that after the termination of the Plan the Board shall determine that continuance of the investment funds is not in the best interest of the Participants, the Company may liquidate the funds and the Trustee shall apply the proceeds to payment to each Participant and Beneficiary of the value of his or her Accounts. Such payment shall be made, in the 64 discretion of the Committee, either wholly or in part by the purchase of non-transferable annuity contracts or by lump-sum payments. 12.5 Partial Termination ------------------- If at any time the Plan is terminated with respect to any group of Employees under such circumstances as to constitute a partial termination of the Plan within the meaning of Section 411(d)(3) of the Code, the amounts held in the funds that are allocable to such Employees shall be segregated by the Trustee as a separate plan. The funds thus allocated to such separate plan shall be applied for the benefit of such Employees in the manner described in Section 12.4. 65 SECTION 13 FUNDING 13.1 Contributions to the Trust Fund ------------------------------- As a part of this Plan the Company shall maintain a Trust Fund. From time to time, the Company shall make contributions to the Trust Fund in accordance with Section 4. 13.2 Trust Fund for Exclusive Benefit of Participants ------------------------------------------------ The Trust Fund is for the exclusive benefit of Participants. Except as provided in Sections 4.6 (Return of Contributions), 11.9 (Domestic Relations Orders) and 11.11 (Deductible Contribution), no portion of the Trust Fund shall be diverted to purposes other than this or revert to or become the property of the Company at any time prior to the satisfaction of all liabilities with respect to the Participants. 13.3 Trustee ------- As a part of this Plan, the Company has entered into an agreement with a Trustee who is designated by the Board of Directors. The Company has the power and duty to appoint the Trustee and it shall have the power to remove the Trustee and appoint successors at any time. As a condition to exercising its power to remove any Trustee hereunder, the Company must first enter into an agreement with a successor Trustee. The Committee may delegate the authority to direct the investment of all or a portion of the Trust Fund to the Trustee. 13.4 Investment Manager ------------------ The Committee has the power to appoint, remove or change from time to time an Investment Manager to direct the investment of all or a portion of the Trust Fund held by the Trustee. For purposes of this section "Investment Manager" shall mean any fiduciary (other than the Trustee) who: (a) has the power to manage, acquire, or dispose of any asset of the Plan; (b) is either (i) registered as an investment adviser under the Investment Advisers Act of 1940; or (ii) is a bank; or (iii)is an insurance company qualified under the laws of more than one state to perform the services described in subparagraph (a); and 66 (c) has acknowledged in writing that he, she or it is a fiduciary with respect to the Plan. 67 SECTION 14 FIDUCIARIES 14.1 Limitation of Liability of the Company and Others ------------------------------------------------- To the extent permitted by law, no Participant shall have any claim against the Company, or the Committee, or against their directors, officers, members, agents or representatives, for any benefits under the Plan, and such benefits shall be payable solely from the Trust Fund; nor shall the Company, nor the Committee or their directors, officers, members, agents or representatives incur any liability to any person for any action taken or suffered or omitted to be taken by them under the Plan in good faith. 14.2 Indemnification of Fiduciaries ------------------------------ In order to facilitate the recruitment of competent fiduciaries, the Company adopting this Plan agrees to provide the indemnification as described herein. This provision shall apply to Employees who are considered Plan fiduciaries including without limitation, Committee members, any agent of the Committee, or any other officers, directors or Employees. Notwithstanding the preceding, this provision shall not apply and indemnification will not be provided for any Trustee or Investment Manager appointed as provided in this Plan. 14.3 Scope of Indemnification ------------------------ The Company agrees to indemnify an Employee fiduciary as described above for all acts taken in good faith in carrying out his or her responsibilities under the terms of this Plan or other responsibilities imposed upon such fiduciary by ERISA. This indemnification for all acts is intentionally broad but shall not provide indemnification for embezzlement or diversion of Plan assets for the benefit of the Employee fiduciary. The Company agrees to indemnify Employee fiduciaries described herein for all expenses of defending an action by a Participant, Beneficiary or government entity, including all legal fees for counsel selected with the consent of the Company and other costs of such defense. The Company will also reimburse an Employee fiduciary for any monetary recovery in any court or arbitration proceeding. In addition, if the claim is settled out of court with the concurrence of the Company, the Company will indemnify an Employee fiduciary for any monetary liability under said settlement. The Company shall have the right, but not the obligation, to conduct the defense of such persons in any proceeding to which this Section 14.3 applies. The Company may satisfy its obligations under this Section 14.3 in whole or in part through the purchase of a policy or policies of insurance providing equivalent protection. 68 The Advanced Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan is adopted by Advanced Technology Laboratories, Inc. IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed on this 25 th day of July , 1996. - ------------ ----------------------- FOR ADVANCED TECHNOLOGY LABORATORIES, INC. /s/ Annette King /s/ Harvey N. Gillis - --------------------------- ----------------------------------- Witness Authorized Officer Chief Financial Officer ----------------------------------- Title 69 APPENDIX I TO THE ADVANCED TECHNOLOGY LABORATORIES, INC. INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN "Participating Companies" as defined in Section 1.27 shall also include the following companies during the specified time.
Company Beginning Ending - ------- --------- ------ Advanced Technology Laboratories, Inc. January 1, 1987 (Washington) Interspec, Inc. January 1, 1995
ACKNOWLEDGED AND ACCEPTED: By: __________________________________________ Title: _______________________________________ Date: ________________________________________ 70 EX-23 7 KPMG Peat Marwick Letterhead EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS - ----------------------------------------------------------------------- The Board of Directors Advanced Technology Laboratories, Inc.: We consent to the use of our reports incorporated herein by reference in the registration statement. /s/KPMG PEAT MARWICK LLP Seattle, Washington July 24, 1996 -----END PRIVACY-ENHANCED MESSAGE-----