10-K
1
FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-15160
ADVANCED TECHNOLOGY LABORATORIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 91-1353386
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
22100 BOTHELL-EVERETT HIGHWAY
P.O. BOX 3003
BOTHELL, WASHINGTON 98041-3003
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 487-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
On February 24, 1995, the aggregate market value of the voting stock held by
non affiliates of the registrant was $166,399,957 based upon the closing sale
price of $14.75 per share on the Nasdaq National Market on such date.
Number of shares of Common Stock, $0.01 par value per share, of the
registrant outstanding as of February 24, 1994: 13,344,783.
DOCUMENTS INCORPORATED BY REFERENCE PART
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Annual Report to Shareholders for the fiscal year Part II (Items 6-8)
ended December 31, 1994 Part IV (Item 14)
Proxy Statement for the 1995 Annual General Meeting Part III (Items 10-13)
of Shareholders
EXHIBIT INDEX IS ON PAGE 22
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ADVANCED TECHNOLOGY LABORATORIES, INC.
TABLE OF CONTENTS
PAGE
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PART I.................................................................... 1
ITEM 1. Business.......................................................... 1
ITEM 2. Properties........................................................ 13
ITEM 3. Legal Proceedings................................................. 13
ITEM 4. Submission of Matters to a Vote of Security Holders............... 14
PART II................................................................... 14
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 14
ITEM 6. Selected Financial Data........................................... 15
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 15
ITEM 8. Financial Statements and Supplementary Data....................... 15
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................... 15
PART III.................................................................. 15
ITEMS 10-13.Directors and Executive Officers of the Registrant............ 15
PART IV................................................................... 16
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 16
2
PART I
ITEM 1. BUSINESS
STRUCTURE OF THE COMPANY
Advanced Technology Laboratories, Inc. ("ATL" or the "Company") is engaged in
the high-technology electronic medical systems business. ATL develops,
manufactures, markets and services diagnostic medical ultrasound equipment
worldwide. ATL conducts its business through two major wholly owned U.S.
subsidiaries, Advanced Technology Laboratories, Inc., a Washington corporation,
and Interspec, Inc., a Pennsylvania corporation. ATL operates through fourteen
international affiliates and through local distributors worldwide.
COMPANY HISTORY
ATL was founded in 1969 and acquired by Squibb Corporation ("Squibb") in
1980. In 1982 Squibb acquired Advanced Diagnostic Research Corporation ("ADR"),
a Tempe, Arizona company which was a leader in obstetrical and abdominal
ultrasound, and A.B. Kranzbuehler ("Kranzbuehler"), a European ultrasound
manufacturer and distributor of ADR products in Europe. In 1986 Squibb
organized its medical equipment businesses, including SpaceLabs Medical, Inc.
("SpaceLabs"), a manufacturer and supplier of patient monitoring and clinical
information systems, under a corporate holding company, Westmark International
Incorporated ("Westmark") and spun the companies off through a distribution of
Westmark common stock to Squibb shareholders on January 2, 1987. In 1992
Westmark shareholders voted to separate Westmark into two publicly traded
companies comprising its two major operating subsidiaries, ATL and SpaceLabs.
Westmark shareholders received an equal number of shares of the new separate
public company, SpaceLabs, and Westmark changed its name to Advanced Technology
Laboratories, Inc., the same name as that of its major operating subsidiary.
ATL has acquired three companies with specific ultrasound expertise, products
and markets. In 1988 the Company acquired Nova MicroSonics which manufactures
and markets real time and off-line acquisition and measurement products for use
in ultrasound data and image management by hospitals, labs, clinics and
physician offices. In 1990 the Company acquired Precision Acoustic Devices,
Inc. ("PAD") which develops, manufactures and supplies high-performance
ultrasound transducers to industrial and medical imaging markets. In 1993 the
Company relocated PAD's Fremont, California operations to Bothell, Washington
and sold the OEM transducer business of PAD to Blatek, Inc., a transducer
company in State College, Pennsylvania.
In May 1994 the Company completed the acquisition of Interspec, Inc.
("Interspec"), a manufacturer of medical diagnostic ultrasound systems and
transducers headquartered in Ambler, Pennsylvania through a stock for stock
exchange that was approved by the shareholders of both companies. This
acquisition added the Apogee (R) product lines of Interspec to those of ATL,
giving the Company an expanded presence in the mid-range price and cardiology
ultrasound markets. On February 15, 1995 the Company announced that it would
consolidate the Company's Interspec operations in Ambler Pennsylvania with
ATL's headquarters in Bothell, Washington and anticipates completing this
consolidation during the second half of 1995.
THE ULTRASOUND BUSINESS
ATL develops, manufactures, markets and services diagnostic medical
ultrasound systems that are widely used in a number of medical applications to
assist the physician in monitoring and diagnosing a variety of conditions, such
as tumors, inflammations, obstructions, cardiovascular diseases, fetal
development, and surgical assessment. Ultrasound systems provide a safe,
noninvasive and painless means of observing soft tissues and internal body
organs and assessing blood flow through the heart and vessels. ATL is one of
the leading suppliers of diagnostic ultrasound systems in the world. Its High
Definition (TM) Imaging (HDI (TM)),
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Apogee, and Ultramark (R) product lines serve all major diagnostic ultrasound
clinical markets--radiology, cardiology, obstetrics/gynecology ("OB/GYN") and
vascular medicine. These product lines span a range of system prices from mid
to premium priced ultrasound products.
Diagnostic ultrasound systems, which are sold for use in hospitals, clinics
and physicians' offices, represented an estimated $2 billion worldwide market
in 1994. The total medical imaging industry is estimated to be over $8 billion
worldwide in 1994.
ULTRASOUND TECHNOLOGY
ATL's Technology
The Company believes that it has become a worldwide leader in ultrasound
technology through its proprietary position in digital, broad bandwidth
beamforming and broad bandwidth scanhead technologies. Ultrasound systems
include three major components: a scanhead which transmits sound waves into the
body of a patient, receives returning echoes from the patient and converts the
echoes into electrical signals; a processing unit which processes the
electrical echo signals into images and measurements of physiological
conditions within the patient's body; and a monitor which displays the
resulting images or measurement information. ATL's scanheads are characterized
by the breadth of the bandwidth of ultrasonic signals which are transmitted and
received. ATL's premium system processing units are characterized by their
ability to fully process broadband signals characteristic of the body's tissues
digitally. ATL has been a pioneer in ultrasound digital technology and
introduced the industry's first digital beamforming processor in 1988.
Ultrasound Characteristics
Ultrasound offers several important advantages compared with other medical
imaging modalities.
Safety. Physicians can often diagnose disease without using invasive
procedures or materials, ionizing radiation or exploratory surgery.
Cost effectiveness. Ultrasound is generally less expensive to purchase, costs
less per patient examination, and requires little or no patient preparation
compared to other imaging modalities such as angiography, computed tomography
("CT"), magnetic resonance imaging and positron emission tomography ("P.E.T.").
Real-time. Ultrasound examinations provide the physician with live, real-time
images of anatomy and physiology, which yield more diagnostic information and
can facilitate a faster diagnosis than static images of other imaging
modalities.
Compared with high-energy modalities such as x-ray and gamma-ray systems,
ultrasound has difficulty imaging through air or bone and generally does not
image the lungs or bones. Due to acoustic properties such as scattering or
attenuation, ultrasound may not provide the clarity of more expensive
modalities such at CT and magnetic resonance imaging in certain applications.
However, by reason of its clinical efficacy, safety, versatility, ease of use
and economy, ultrasound is often the first imaging examination ordered by a
diagnosing physician and is typically the preferred imaging method for soft
tissues examination.
ATL'S PRODUCTS
HDI (TM) 3000 ULTRASOUND SYSTEM. In October 1994 ATL introduced its fourth
generation digital ultrasound system, the HDI (TM) 3000 system. The premium HDI
3000 system was designed to address the economic imperatives of the evolving
health care environment in the United States and international markets. The HDI
3000 system operates with a full array of broad bandwidth scanheads, including
the new Entos CL 10-5 Intraoperative scanhead designed for surgical use and now
reported in use for the diagnosis of musculoskeletal injuries in sports
medicine. The HDI 3000 system is lighter in weight than competitive systems,
providing greater mobility and enabling it to be easily moved to the bedside of
critical care patients.
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The HDI 3000 system also features a new, more intuitive, ergonomically designed
set of operator controls, which enable an ultrasonographer or physician to
quickly gain confidence in operating the system and performing diagnoses. The
HDI 3000 system provides interactive control screens with diagnostic procedures
selectable at the touch of a button. This feature, called Tissue Specific (TM)
Imaging, optimizes system performance for the selected diagnostic procedure.
The HDI 3000 system offers full Doppler capability, including improved Color
Power Angio imaging features.
In addition to the introduction of the HDI 3000 system and the CL10-5
scanhead in October 1994, ATL introduced two other new broadband scanheads
which expand the HDI system's clinical capabilities: the P7-4 broadband phased
array scanhead for pediatric cardiology and neonatal imaging, and the
multiplane transesophageal MPT7-4 scanhead for cardiac imaging. Shipments of
the MPT7-4 will begin in 1995. These product introductions followed the 1993
introduction of Extended Signal Processing (ESP (TM)) technology and four new
broadband scanheads for the Ultramark 9 HDI system. ESP is a standard feature
of the HDI 3000 system.
ULTRAMARK 9 HIGH DEFINITION IMAGING (HDI) SYSTEM. The Ultramark 9 system with
High Definition Imaging ("HDI") is ATL's high performance product. Introduced
in April 1991, the system contains a digital beamformer which allows high
resolution images and captures a broad bandwidth of tissue signatures. The
Ultramark 9 HDI system also offers a series of high performance scanheads,
including a line of broad bandwidth scanheads which provide a broad range of
clinical applications for the system and substantially enhance the system's
competitive performance. In 1993 the performance of the Ultramark 9 HDI system
was enhanced with the addition of the ESP performance option, providing
improved, speckle reduced image clarity and a wider variety of scanheads for
the system. That year also marked the introduction of the Ultramark 9 HDIcv
system, a high performance system specially configured for the cardiology,
shared services and internal medicine markets. The Ultramark 9 HDI system
operates with a variety of broad bandwidth scanheads including the P7-4 and P5-
3 scanheads, which extend broad bandwidth capability to pediatric cardiology
and small adult applications; the C7-4 scanhead, which is a broad bandwidth
scanhead for abdominal and obstetrical applications; the C4-2 scanhead, which
provides the penetration required for deep abdominal and obstetrical
applications; and the L7-4 scanhead, which provides broad bandwidth scanning in
vascular applications. These scanhead offerings complement the other four
members of ATL's family of broadband scanheads, including the L10-5 linear
array scanhead, the A6-3 annular array scanhead, the P3-2 cardiovascular phased
array scanhead, and the C9-5 intracavitary scanhead.
APOGEE (R) 800 SYSTEM. In 1994 the Company introduced the mid-range Apogee
800 high value imaging system for the radiology and internal medicine markets.
Manufactured by Interspec, the Apogee 800 system offers features normally found
on high performance systems. These include ease of use, and a system affording
high mobility at a moderate price. The Apogee 800 system can be configured to
address a broad array of clinical needs of the radiologist, internal medicine
specialist, and vascular physician.
APOGEE CX 200 AND CX SYSTEMS. The Apogee CX 200 and CX systems are moderately
priced echocardiography systems designed for the hospital and high-end office
markets. The systems offer full imaging, color flow mapping, spectral Doppler
scanning, and digital image archival and can be equipped to perform stress echo
examinations. The Apogee CX 200 and CX systems are also designed to support
multiplane transesophageal echo examinations.
ULTRAMARK 9 DP ULTRASOUND SYSTEM. The Ultramark 9 system was introduced in
1988 as a full featured, color Doppler, multipurpose ultrasound system
incorporating ATL's proprietary digital beamforming technology. In November
1990 the product was enhanced with a number of features known as the Digital
Plus ("DP") package. With the success of the Ultramark 9 HDI system, the
Company has discontinued the manufacture of new Ultramark 9 DP systems. ATL's
entire installed base of Ultramark 9 DP systems can be upgraded with the HDI
option, continuing ATL's commitment of upgradeability to its customers.
5
ULTRAMARK 4 ULTRASOUND SYSTEM. This highly portable gray scale and Doppler
system is the Company's principal product for private OB/GYN offices and is
also used in medical institutions worldwide. This product has various
configurations that cover a range of prices from $25,000 to $60,000. Recent
major introductions include Cineloop image review, curved-array scanhead
technology and a multifrequency intravaginal scanhead.
IMAGE MANAGEMENT PRODUCTS. The Company's Nova MicroSonics division develops,
manufactures and markets a complete line of ultrasound image management
products for use in the acquisition, storage, display and management of
ultrasound information. In 1994 the Company introduced the Access (TM) Image
Management System which provides efficient printing, automated image archival
and retrieval and reduced patient examination times through an ultrasound open
network architecture. The Access system connects to many types of ultrasound
systems, printers or other image management products, facilitating improved
diagnostic consultations within and between hospitals. Through an agreement
with Eastman Kodak Company, the Access system participates in the market for
image management systems addressing all diagnostic imaging modalities. For
cardiac applications, the Nova MicroSonics technology facilitates the review
and comparison of images produced at different times during a cardiac study,
expanding the diagnostic applications of echocardiography to the detection of
coronary artery disease. The ImageVue/DCR Workstation is a state-of-the-art
digital ultrasound image management system. This workstation performs analysis
and review of ultrasound exams conducted from a variety of ultrasound systems.
The Image LAN Network provides network connection between ultrasound systems,
workstations, printers and other medical imaging devices.
SCANHEADS. ATL believes that its internal resources devoted to development
and manufacture of ultrasonic scanheads make it one of the largest ultrasound
scanhead manufacturers in the world. ATL's capabilities in scanhead design and
manufacture were enhanced in 1994 with the addition of the Echo Ultrasound
division of Interspec. The Echo Ultrasound division produces scanheads for the
ATL and Interspec products, and also offers scanheads on an OEM basis to other
ultrasound companies.
ACCESSORIES AND SUPPLIES. The Company sells a variety of ultrasound
accessories and supplies, most of which are not manufactured by the Company.
These include disposable supplies, such as ultrasound gel and thermal paper,
and accessories, such as biopsy guides, printers, cameras and videocassette
recorders ("VCRs"). The Company markets these products through direct mail and
its customer support organization.
PRINCIPAL MARKETS
The worldwide ultrasound market is typically categorized by clinical
application, price range and geographic area.
CLINICAL APPLICATIONS. Ultrasound products are used in four primary medical
applications: radiology, cardiology, OB/GYN, and vascular applications.
Radiology. The radiology application, at approximately 45%, is the largest
market for ultrasound equipment. The major radiology markets are in the United
States, Japan and Europe. Most radiology examinations are conducted in
hospitals or large imaging centers.
In radiology, ultrasound is used to obtain diagnostic information on organs
and soft tissue, particularly in the abdomen. It is also used to ascertain
fetal development, to guide tissue biopsies and to visualize blood flow.
A substantial portion of the radiology market also requires systems which
include cardiac imaging capabilities. In the United States and Canada this
market segment is often referred to as the shared service market. Most
community or small hospitals without a dedicated cardiology department fall
into this category. In Germany, the internal medicine segment requires systems
which include cardiac imaging capability.
6
ATL's radiology product offerings include the HDI 3000 system, the Apogee 800
system, and the Ultramark 9 HDI system. Ultramark 9 HDI systems are sold as new
and as refurbished (used) systems. Ultramark 9 DP systems are sold on a
refurbished basis.
Cardiology. The cardiology ultrasound, or echocardiography, application, at
approximately 35%, is the second largest market for ultrasound systems. Most
dedicated echocardiography system sales occur in the United States, Western
Europe, and the more developed Asian and Latin American markets. While most
cardiology system sales are to hospitals, the cardiology office practice
represents a significant and growing share of the market for echocardiography
equipment.
Cardiologists use ultrasound as a noninvasive means of capturing real-time
images of the heart and its valves. These images, together with various Doppler
techniques, help the physician assess heart function as well as congenital and
valvular disease. With new advances in scanheads plus acquisition and image
display technology, echocardiography is a useful tool for the detection and
assessment of coronary artery disease. Ultrasound has also been shown to be
valuable in assessing the effectiveness of drug therapy and intervention for
the heart attack patient.
ATL's cardiology product offerings include the Ultramark 9 HDIcv system and
the Apogee CX products.
OB/GYN. The third largest market for ultrasound systems is the OB/GYN
application, at approximately 15%. The majority of OB/GYN ultrasound system
sales are to office-based practitioners in the United States, Western Europe,
and the more developed Asian markets. Perinatology is a clinical specialty in
OB/GYN dedicated to high risk obstetrics. Most perinatology ultrasound sales
are to hospitals and institutions in the United States.
Ultrasound is the preferred imaging technology for the assessment of fetal
development since it is noninvasive and involves no ionizing radiation.
Ultrasound is also used for general gynecological and infertility examinations.
The introduction of the intravaginal scanhead in the 1980s expanded the
usefulness of ultrasound for first-trimester obstetrical studies and the
diagnosis of ectopic pregnancies. The advent of ATL's broadband digital imaging
technology with the ESP option (see "ATL's Products") has enabled physicians to
visualize details of fetal development at earlier stages of pregnancy than had
previously been possible.
ATL's OB/GYN product offerings include the HDI 3000, the Ultramark 9 HDI
system, refurbished Ultramark 9 DP systems, and the Ultramark 4 system for the
office market.
Vascular. The smallest of the primary clinical markets for ultrasound
systems, at approximately 6%, is the vascular ultrasound application, primarily
practiced in the United States and Western Europe. Most vascular ultrasound
examinations are performed in hospitals.
Vascular ultrasound studies utilize real-time imaging, Doppler and color
Doppler information to identify plaque deposits and their characteristics,
clots, and valve competence in blood vessels. Most vascular examinations are
performed on the body's extremities, cerebrovascular and deep abdominal
regions.
ATL's vascular product offerings include the HDI 3000, the Ultramark 9 HDI
system, the Apogee 800 system, and refurbished Ultramark 9 DP systems. The new
Entos CL10-5 Intraoperative scanhead was specially designed for vascular
surgery, and addresses the increasing use of ultrasound in the surgical suite
to immediately assess the results of surgical procedures.
PRICE RANGES. The world ultrasound market can be divided into five segments
based on broad price ranges. Each market segment is characterized by the level
of system performance and the number of scanheads and system features.
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Premium Performance. The premium market segment is characterized by
ultrasound systems that typically sell for over $150,000 per unit. These
systems provide the physician with superior definition of subtle tissue
characteristics and incorporate high resolution gray scale imaging, advanced
color velocity, power, and spectral Doppler capability, image acquisition
storage, display and review capability, advanced automation capabilities, and
other features providing additional clinical utility. Typically, systems sold
in the premium market are equipped with a wide variety of specialty scanheads.
The HDI 3000 system is ATL's premium performance system.
High Performance. The high performance market is characterized by systems
with high resolution gray scale imaging and advanced color velocity, power and
spectral Doppler capabilities. Systems in this market segment sell between
$100,000 to $150,000 per unit and generally include advanced measurement and
analysis software, image review capabilities, and a variety of scanhead
offerings. The Ultramark 9 HDI and Ultramark 9 HDIcv systems are ATL's entries
in this market segment.
Mid-Range. The mid-range market segment is characterized by ultrasound
systems that sell between $40,000 and $100,000 per unit. These units are basic
gray scale imaging, color and spectral Doppler systems used for routine
examinations and reporting and utilize a minimum number of scanheads. Many of
these systems are sold to small hospitals and clinics and are used in
radiology, cardiology and OB/GYN applications. Refurbished premium and high
performance systems with fewer purchased optional features are also sold in
this price range. ATL's products in this market segment include the Apogee 800
system, the Apogee CX 200 and CX systems, and refurbished Ultramark 9 DP and
Ultramark 9 HDI systems.
Low-End. The low-end market segment is characterized by basic black and white
imaging systems that sell below $40,000 per unit. These systems provide limited
diagnostic information and are used primarily for monitoring fetal development
and in other radiology and OB/GYN applications. Most of these systems are sold
to private office practitioners and small hospitals. Due to the growing
acceptance and affordability of color Doppler systems, units with only
greyscale capability represent the slowest growing portion of the market. ATL's
entry in the low-end market is the Ultramark 4 system.
GEOGRAPHIC AREAS. The ultrasound market is divided into four major geographic
markets.
United States. The United States, at 38% of the market, is the largest single
ultrasound market. This market traditionally has been characterized by its
emphasis on high performance systems driven by competition for patient
referrals. These factors encourage the rapid adoption of new technology. In
1993 and 1994, with the emphasis in the United States turning to more efficient
healthcare delivery and managed care and the consolidation of healthcare
organizations, the U.S. market has become increasingly value conscious.
Europe. The European market, at 30% of the market, is the second largest
market for ultrasound systems. European health care systems are more
centralized than the United States market and are often subject to more rigid
governmental regulation. In 1994 the European markets proceeded through one of
the more pronounced recessionary cycles for healthcare in many years. This
effect has been moderated somewhat by the more regulated character of
healthcare in Europe, providing more stability to the European markets. Value
consciousness and organized healthcare has been characteristic of European
markets for a number of years, unlike the United States where these effects are
of relatively recent origin. The addition of the Interspec products to ATL's
product lines have significantly increased the presence of ATL in the European
markets.
Japan. This market accounts for approximately 16% of worldwide ultrasound
sales. Its complex distribution system is highly competitive and Japanese
manufacturers account for almost all sales.
Asia Pacific, Latin America and Canada. The remaining geographic areas of the
world account for approximately 15% of the market. The Australian and Canadian
markets are similar in structure to those of the European countries. Parts of
Asia and Latin America represent some of the fastest growing areas for high
performance and mid-range ultrasound products. The remainder of this group are
mostly developing countries with limited resources to devote to health care.
Many ultrasound systems sold in these regions are mid-range systems,
refurbished systems or new low-priced Japanese systems. The Asia Pacific and
Latin America markets are among the Company's fastest growing markets.
8
RESEARCH AND DEVELOPMENT
In 1991 the Company instituted a multi-center study at a number of
institutions in Europe and North America to evaluate the ability of the
Ultramark 9 HDI system to distinguish benign and malignant breast disease.
These studies were concluded in 1993. Based upon the findings of these studies,
in February 1994 the Company submitted a Premarket Approval ("PMA") application
to the U.S. Food and Drug Administration ("FDA") for the use of HDI technology
in the differentiation of solid breast masses. The Company believes this to be
the first PMA application submitted to the FDA for diagnostic ultrasound. The
Company has received expedited handling of the PMA application by the FDA, and
is presently awaiting the FDA's commentary on its PMA application, which is
expected to lead to a review of the application by an FDA panel. The time
required for the application to be processed by the FDA is unknown, although
such applications typically require twelve to twenty-seven months. There can be
no assurances that product clearance under the PMA will ultimately be realized.
The high technology ultrasound business is characterized by rapidly evolving
technology, resulting in relatively short product life cycles and continuing
competitive pressure to develop and market new products. Although the Company
intends to continue extensive research and development activities, there can be
no assurance that it will be able to develop and market new products on a cost-
effective and timely basis, that such products will compete favorably with
products developed by others, or that the Company's existing technology will
not be superseded by new discoveries by competitors.
MANUFACTURING
The Company manufactures its ultrasound system products at facilities in
Bothell, Washington and Ambler, Pennsylvania. On February 15, 1995 the Company
announced that it would consolidate the Company's Interspec operations in
Ambler, Pennsylvania with ATL's headquarters in Bothell, Washington and that it
anticipates completing this consolidation during the second half of 1995. The
image management systems of Nova MicroSonics are manufactured in Nova's New
Jersey facilities. The Echo Ultrasound division of Interspec is located in
Reedsville, Pennsylvania.
The Company purchases certain specialty scanheads from original equipment
manufacturers. The Company also purchases the hard-copy output devices sold
with its ultrasound systems, such as VCRs and cameras, and other materials and
component parts. The specialty scanheads and many of the materials and
components used by ATL in the manufacture of ultrasound equipment are available
from more than one source of supply. Certain components, however, are single
sourced, such as crystals and hybrid and integrated circuits which are critical
to the quality and manufacture of ultrasound equipment. While any of these
single-source items could be replaced over time, abrupt disruption in the
supply of a single-source part could have a material adverse effect on ATL's
manufacturing production of the products relying on such items. In addition,
these items generally have long order lead times, restricting the Company's
ability to respond quickly to changing market conditions.
SALES AND MARKETING
The Company's sales and marketing strategy has been to compete in all of the
major clinical, price and geographic segments of the ultrasound market with the
exception of the very low priced market segment. In the United States, with the
exception of the third-party business of Nova MicroSonics, the Company markets
its products through its direct sales organization. The United States sales
organization is organized into two geographic zones, each staffed with regional
management, sales representatives and clinical application specialists
knowledgeable in radiology, OB/GYN, and peripheral vascular applications. A
specialized sales force with its own clinical application specialists offers
the Company's cardiology products to customers in the United States. The role
of the application specialists is to demonstrate the products and train
customers in their clinical use.
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The Company markets its products internationally through its direct sales and
service operations in Argentina, Australia, Austria, Belgium, Canada, France,
Germany, Italy, the Netherlands, Hong Kong, Singapore, and the United Kingdom.
In addition, the Company markets its products in India through a joint venture
with Indchem Electronics. In January 1995 the Company announced that it had
reached an agreement to increase its position in its India joint venture to a
majority share. Other principal markets are covered through a distributor
network. European, Middle Eastern and African dealers are managed through ATL's
offices in Germany. Distributors serving the Pacific Rim countries, Latin
America and South America are managed from Bothell, Washington. Customers
outside of the United States accounted for approximately 46% of revenues in
1994.
The Company's marketing efforts emphasize the development of strong
relationships with key medical professionals, participation in national and
regional meetings and conventions for physicians and hospitals, direct mail
advertising, journal advertising and sponsorship of educational programs.
CUSTOMER SUPPORT AND WARRANTY
The Company warrants its new and used products for all parts and labor
generally for one year from the date of original delivery. The Company offers a
variety of post-warranty service agreements permitting customers to contract
for the level of equipment maintenance they require. Alternatively, customers
can contact ATL as needed and receive service at rates based on labor and cost
of parts. The Company's warranty costs are included in cost of product sales in
Item 8, Financial Statements and Supplementary Data.
The Company maintains its own customer support organization in the United
States and other countries where the Company has direct operations. Local
dealers and distributors provide service and support in other countries. The
Company provides manuals and expedites delivery of repair parts to all
geographic locations from its facility in Bothell, Washington, with the
assistance of its direct operations in Europe.
The Company's customer service organizations are an integral part of its
sales effort because a customer's decision to purchase a particular product is
based in part on the availability and reputation of the service for that
product. In addition, the customer support group sells and installs upgrades
for existing customers and provides training for biomedical technicians so that
customers can service their own systems. The customer support group also
provides customer education programs on clinical applications and the use of
the Company's products.
COMPETITION
The ultrasound market is competitive. The Company competes worldwide in the
major clinical applications of the ultrasound market, in each price range and
in each major geographic market. Four companies, ATL, Toshiba Corporation's
Medical Systems Group, Hewlett-Packard Company's Medical Products Group and
Acuson Corporation, account for approximately 60% of the worldwide ultrasound
market. The Company believes that these four companies have approximately equal
market shares. Each of the Company's primary competitors initially participated
in only one or two of the clinical ultrasound markets (such as radiology or
cardiology), but all are increasingly seeking to sell their ultrasound products
in additional markets.
In addition to the Company's primary competitors, the large, multi-modality
companies of the medical imaging industry--the Medical Systems Group of General
Electric Company, Siemens Medical Systems, Inc. and Philips Medical Systems,
Inc.--have signaled their intention to become more competitive in the
ultrasound market. General Electric stepped up its participation in ultrasound
in November 1993 with the announcement of a new digital ultrasound system, and
has recently announced that it has contracted with
one of the nation's large hospital networks to assist with the acquisition and
servicing of the network's diagnostic equipment. Philips has announced its
plans to collaborate in ultrasound with Hewlett-Packard.
10
Siemens has located its central world ultrasound facility to Issaquah,
Washington, approximately twelve miles from ATL's headquarters. Elbit, Inc., an
Israeli supplier of a broad range of diagnostic imaging equipment, increased
its presence in ultrasound in 1994 with the acquisition of Diasonics, Inc.
These companies and several of the Company's other competitors have far greater
financial, marketing, servicing, technical and research and development
resources than those of the Company.
The Company believes that significant competitive factors in the diagnostic
ultrasound market include the clinical performance of systems, depth of product
line, reputation for technology leadership, upgradeability to advanced
features, availability of Company-provided purchase financing, and reliability
and price of products and service. See "Research and Development." The Company
believes that it presently competes favorably with respect to each of these
competitive factors.
Ultrasound is only one of a number of diagnostic imaging technologies
currently available, including conventional x-ray, angiography, CT, magnetic
resonance imaging and P.E.T. A development in another diagnostic technology
could adversely affect the ultrasound industry. Nevertheless, the Company
believes that ultrasound's inherent advantages of safety, cost-effectiveness
and real-time imaging will continue to make ultrasound a primary imaging
modality.
PATENTS, TRADEMARKS AND LICENSES
The Company has obtained patents on certain of its products and has applied
for patents which are presently pending. The Company has also sought trademark
protection for the brand names of the products it currently markets. There can
be no assurance that any additional patents will be issued or that trademark
protection will be granted and maintained.
Certain critical technology incorporated in the Company's products, including
software algorithms, broad bandwidth scanhead technology and ASIC technology,
is protected by copyright laws and confidentiality and licensing agreements.
The Company's proprietary digital beamformer is protected by confidentiality
agreements, copyright and trade secret law.
Companies in high technology businesses routinely review the products of
others for possible conflict with their own patent rights. The Company has from
time to time received notices of claims from others alleging patent
infringement. While the Company believes that it does not infringe any valid
patent of any third party, there can be no assurance that the Company will not
be subject to future claims of patent infringement or that any claim will not
require that the Company pay substantial damages or delete certain features
from its products or both. While such claims could temporarily interrupt the
Company's ability to ship affected products, the Company believes that any such
interruption can be overcome by technical changes to product features. See Item
3, Legal Proceedings, below.
GOVERNMENTAL REGULATION
Product Regulation. The Company's products are subject to extensive
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign agencies, and to various domestic and foreign
electrical safety and emission standards. The Company's manufacturing
facilities and the manufacture of its products are subject to FDA regulations
respecting registration of manufacturing facilities and compliance with the
FDA's Good Manufacturing Practices regulations. The Company is also subject to
periodic on-site inspection for compliance with such regulations. The Company's
ability to obtain timely FDA export and new product approvals is dependent upon
the results of such inspections. In 1994 the FDA concluded inspections of the
Company's Allendale, New Jersey facilities of Nova MicroSonics and its Bothell,
Washington facilities. The FDA also has broad regulatory powers with respect to
preclinical and clinical testing of new medical products and the manufacturing,
marketing and advertising of medical products.
11
The FDA requires that all medical devices introduced to the market be
preceded either by a premarket notification clearance order under Section
510(k) of the Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act"),
or an approved premarket approval application. A 510(k) premarket notification
clearance order indicates FDA agreement with an applicant's determination that
the product for which clearance has been sought is substantially equivalent to
medical devices that were on the market prior to 1976 or have subsequently
received clearance. An approved premarket approval application indicates that
the FDA has determined that the device has been proven, through the submission
of clinical trial data and manufacturing quality assurance information, to be
safe and effective for its labeled indications. The process of obtaining 510(k)
clearance typically takes approximately six to nine months, while the premarket
approval application process typically lasts more than a year. All of ATL's
current products have required only 510(k) clearance. In October 1994 the
Company received 510(k) clearance to market its new HDI 3000 system.
The Company believes that its products comply generally with applicable
electrical safety standards, such as those of Underwriters Laboratories and
non-U.S. safety standards authorities.
The Company's regulatory compliance programs have been expanded to encompass
verification of the Company's compliance with international standards for
medical device design, manufacture, installation, and servicing known as ISO
9001 standards. In 1994, four of the Company's five manufacturing facilities
qualified for ISO 9001 registration. In addition, several of the Company's
international sales and service subsidiaries received certification under the
ISO 9002 standards for sales and service entities. ISO 9001 standards will
become mandatory in Europe in 1999. The FDA is in the process of adopting the
ISO 9001 standards as regulatory standards for the United States, and it is
anticipated these standards will be phased in for U.S. manufacturers of medical
devices over a period of time.
Federal, state and foreign regulations are constantly undergoing change. In
1994 the U.S. government continued its consideration of healthcare system
reform. The national focus on possible healthcare legislation has caused U.S.
ultrasound customers to become more cautious in making expenditures and
investing in capital equipment. In addition, the U.S. healthcare system has
undergone significant consolidations and restructuring in recent years. The
Company cannot predict what effect, if any, such change may have on its
business, or when the deleterious effect of these conditions on its business
will change.
Reimbursement. The Company's products are used by healthcare providers for
diagnostic testing services and other services for which the providers may seek
reimbursement from third-party payors, principally, in the United States,
Medicare, Medicaid and private health insurance plans. Such reimbursement is
subject to the regulations and policies of governmental agencies and other
third-party payors. For example, the Medicare program, which reimburses
hospitals and physicians for services provided to a significant percentage of
hospital patients, places certain limitations on the methods and levels of
reimbursement of hospitals for procedure costs and for capital expenditures
made to purchase equipment, such as that sold by the Company. The Medicare
program also limits the level of reimbursement to physicians for diagnostic
tests. The state-administered Medicaid programs and private payors also place
limitations on the reimbursement of both facilities and physicians for services
provided in connection with diagnostic and clinical procedures. Reduced
governmental expenditures in the United States and many other countries
continue to put pressure on diagnostic procedure reimbursement. The Company
cannot predict what changes may be forthcoming in these policies and
procedures, nor the effect of such changes on its business.
Third-party payors worldwide, including governmental agencies, are under
increasing pressure to contain medical costs. Limits on reimbursement or other
cost containment measures imposed by third-party payors may adversely affect
the financial condition and ability of hospitals and other users to purchase
products, such as those of the Company, by reducing funds available for capital
expenditures or otherwise. The Company is unable to forecast what additional
legislation or regulation, if any, relating to the health care industry or
third-party reimbursement may be enacted in the future or what effect such
legislation or
12
regulation would have on the Company. Many of ATL's ultrasound systems are used
in an outpatient setting, replace higher-cost imaging modalities or enable a
hospital or clinic to receive higher payments for services commensurate with
the higher level of diagnostic information provided.
Environmental. The Company is subject to Federal, state and local provisions
regulating the discharge of materials into the environment or otherwise for the
protection of the environment. Although the Company's current operations have
not been significantly affected by compliance with environmental laws or
regulations, Federal, state and local governments are becoming increasingly
sensitive to environmental issues, and the Company cannot predict what impact
future environmental regulations may have on its operations.
Employees. As of December 31, 1994, the Company had 2,630 employees. None of
the Company's United States employees is covered by collective bargaining
agreements, and the Company considers its employee relations to be
satisfactory.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Information set forth in "Geographic Segment Information" of the Notes to the
Consolidated Financial Statements contained in Note 20 on page 26 of the 1994
Annual Report to Shareholders is incorporated by reference herein.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth in Part III, Items 10-13 found on page 15 of this Form
10-K are incorporated herein by reference in response to the information
required by this item.
ITEM 2. PROPERTIES
The Company owns premises at 22100 Bothell Everett Highway, Bothell,
Washington 98041, consisting of 285,000 square feet. These premises include the
Company's corporate headquarters and a major manufacturing facility, as well as
the Company's research and development, sales, service, marketing and
administrative functions. A number of these functions are being moved to the
building on an adjoining property which the Company purchased in December 1994
for approximately $11.5 million, consisting of 80,000 square feet. The
additional space provided by the new building makes possible the consolidation
of Interspec's Ambler, Pennsylvania operations into those of the Company's
headquarters facilities, as well as the consolidation of operations occupying
another 41,000 square feet in an adjoining business park. See "Subsequent
Event" of the Notes to the Consolidated Financial Statements contained in Note
22, included in Item 8 of this Form 10-K. The Company expects to sell the
Ambler, Pennsylvania building after the consolidation of operations there has
been fully completed in late 1995.
The Company's Nova MicroSonics facility occupies approximately 33,000 square
feet in leased buildings in Allendale, New Jersey and Indianapolis, Indiana,
and the Echo Ultrasound division of Interspec occupies 63,000 square feet in a
building owned by the Company in Reedsville, Pennsylvania.
In 1994, the Company sold property formerly used as the Company's
manufacturing facility in Germany for $3.2 million. The Company's direct
business operations in the United States and other countries lease office and
warehouse space in their respective countries.
There are no significant unutilized facilities for ongoing operations which
have not yet been disposed of, other than those discussed above, and the
Company believes its existing facilities are sufficient to meet its near-term
operating requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various product liability claims and other
proceedings which arise in the ordinary course of its businesses and believes
that such proceedings, individually or in the aggregate, will not have a
material adverse effect on the business or financial condition of the Company.
Insured claims arising from ATL's businesses subsequent to 1986 are covered by
the Company's insurance policies. The Company
13
intends to maintain insurance coverage against business risks at levels that
take into account the nature and magnitude of the respective businesses to be
conducted by ATL. There can be no assurance that the Company's current
insurance coverage will prove adequate or that the amount or type of coverage
available to the Company will remain available on a cost-effective basis.
In November 1992, a U.S. District Court in California granted a motion by SRI
International, Inc. ("SRI") requesting partial summary judgment on a patent
infringement claim relating to an electrical circuit alleged to be used in the
Company's Ultramark 4 system and two discontinued products. The patent expired
in 1994. In December 1994 the U.S. Federal Circuit Court of Appeals affirmed
the summary judgment obtained by SRI. A jury trial to determine a damage award
commenced in the District Court in California in March, 1995 but was suspended
after two days of trial for assignment of the case to a new judge. SRI is
claiming royalties for past sales of these product and an enhancement of
royalties for willful infringement. There can be no assurance the Company will
not be subject to claims of patent infringement by other parties or that such
claims will not require the Company to pay substantial damages or delete
certain features from its products or both. Information set forth in Notes to
the Consolidated Financial Statements contained in Note 19 on page 26 of the
1994 Annual Report to Shareholders is incorporated by reference herein.
The Company is involved in various other legal actions and claims arising in
the ordinary course of business. The Company believes the resolution of these
matters individually and in the aggregate will not have a material adverse
effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market and Market Price for Common Stock. The Company Common Stock, $0.01 par
value, is traded over the counter under the symbol ATLI and is an authorized
security for quotation in National Association of Securities Dealers, Inc.
Automated Quotation National Market System ("Nasdaq National Market").
The market prices of the Company's Common Stock during the two-year period
ended December 31, 1994 are set forth below. The prices reflect the high and
low trading prices for each quarter as reported by Nasdaq National Market for
ATL.
ATL COMMON STOCK HIGH LOW
---------------- ------ ------
Quarter ended December 31, 1994.............................. 19 1/2 14 3/4
Quarter ended September 30, 1994............................. 17 1/4 13
Quarter ended July 1, 1994................................... 15 3/4 12 1/2
Quarter ended March 31, 1994................................. 17 1/4 15
Quarter ended December 31, 1993.............................. 17 1/2 15 3/4
Quarter ended October 1, 1993................................ 17 3/4 15 1/4
Quarter ended July 2, 1993................................... 18 3/4 15 1/2
Quarter ended April 2, 1993.................................. 19 15 3/4
Shareholders. The approximate number of shareholders of record of the
Company's Common Stock as recorded on the books of ATL's Registrar and Transfer
Agent as of February 28, 1995 was 9,269.
Dividends. The Company has not paid cash dividends on its capital stock and
does not currently have any plans to pay such dividends in the foreseeable
future. The dividend policy of ATL is reviewed from time to time by the
Company's Board of Directors. The Company's dividend policy is dependent upon
its earnings, the overall financial condition of ATL, and other factors to be
considered by the Board of Directors from time to time.
14
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to page 10 of the 1994 Annual Report to Shareholders, which
is incorporated herein by reference and made a part hereof in response to the
information required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to pages 11 through 14 of the 1994 Annual Report to
Shareholders, which is incorporated herein by reference and made a part hereof
in response to the information required by this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements are incorporated herein by
reference and made a part hereof from the 1994 Annual Report to Shareholders in
response to the information required by this item:
PAGE
-----
Independent Auditors' Report............................................. 15
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1994 and 1993.............. 16
Consolidated Statements of Operations for each of the years in the
three-year period ended December 31, 1994............................. 17
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1994............................. 18
Consolidated Statements of Shareholders' Equity for each of the years
in the three-year period ended December 31, 1994...................... 19
Notes to Consolidated Financial Statements............................. 20-27
See Part IV of Item 14 for the Financial Statement Schedules filed with
Form 10-K Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10-13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Part III (Items 10-13) is partially set forth in
ATL's definitive proxy statement which will be filed pursuant to Regulation 14A
within 120 days of December 31, 1994. Such information is incorporated herein
by reference and made a part hereof.
Debby Jo Blank M.D. Dr. Blank joined ATL as Senior Vice President, Marketing
in August 1994. She held the position of Vice President, Marketing for Syntex
Laboratories, Inc. from 1993 to July 1994. Prior to that time, Dr. Blank held
various positions as Vice President of Worldwide Marketing (1992-1993), New
Product Planning & Licensing (1992), and Strategy and Business Development
(1991-1992) at DuPont Merck Pharmaceutical Company, and other management
positions in planning and development marketing (1989-1991) at E.I. DuPont &
Company, Medical Products Department.
Donald D. Blem. Mr. Blem has served as Senior Vice President, Operations
since October 1993. He served as Vice President, Operations from February 1988
to October 1993.
Castor F. Diaz. Mr. Diaz has served as Senior Vice President, ATL Europe
since October 1993 and as Vice President, ATL Europe since October 1988. He
also held various international sales and marketing positions with ATL from May
1987 to October 1988.
Harvey N. Gillis. Mr. Gillis has served as Senior Vice President, Finance and
Administration, Chief Financial Officer and Treasurer since September 1992. He
served as Senior Vice President, Finance and Administration and Chief Financial
Officer for NeoPath, Inc. from 1991 to 1992. He served as Chief Operating
Manager of Samuel Stroum Enterprises from 1985 to 1991.
15
Victor H. Reddick. Mr. Reddick has served as Senior Vice President, U.S.
Sales since April 1994 and as Vice President, U.S. Sales since July 1991. He
also held other general management positions in sales and marketing at ATL from
December 1984 to July 1991.
Jacques Souquet Ph.D. Dr. Souquet has served as Senior Vice President,
Product Generation since October 1993. He served as Vice President, Product
Generation from October 1992 to October 1993, as Vice President, Strategic
Marketing and Product Planning from July 1990 to October 1992 and as Director
of Strategic Marketing and Product Planning from March 1989 to June 1990.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
1. FINANCIAL STATEMENTS.
As noted in Part II, Item 8, the following financial statements have been
incorporated by reference from the Company's 1994 Annual Report to
Shareholders:
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1994 and 1993
Consolidated Statements of Operations for each of the years in the
three-year period ended December 31, 1994.
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1994.
Consolidated Statements of Shareholders' Equity for each of the
years in the three-year period ended December 31, 1994.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES.
An index to the financial statement schedules required to be filed by
Part II, Item 8 of this Form 10-K is set forth immediately before the
attached financial statement schedule on page 17 of this filing.
3. MANAGEMENT CONTRACTS AND COMPENSATORY ARRANGEMENTS.
Exhibits constituting management contracts and compensatory arrangements
are indicated by footnote (M).
(B)REPORTS ON FORM 8-K:
None.
(C)EXHIBITS:
The required exhibits are included at the back of this Form 10-K and are
described in the Exhibit Index immediately preceding the first exhibit.
16
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
----
Financial Statement Schedule for each of the years in the three-year
period ended December 31, 1994:
VIII Valuation and qualifying accounts 26
All other schedules are omitted because they are not applicable, the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements and notes thereto.
17
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advanced Technology Laboratories, Inc.:
Under date of February 10, 1995 we reported the consolidated balance sheets
of Advanced Technology Laboratories, Inc. and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, as contained in the 1994 annual report to
shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedules as listed in the index referred to in Part IV, Item 14(2)
of the Form 10-K report. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
The Company changed its method of accounting for investments to adopt the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, at January 1,
1994.
KPMG Peat Marwick LLP
Seattle, Washington
February 10, 1995
18
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Advanced Technology Laboratories, Inc.:
We consent to incorporation by reference in the registration statements 33-
38218, 33-38217, 33-28830, 33-28092, 33-22434, 33-10618, 33-47967, 33-54757 and
33-66298 on Form S-8, of Advanced Technology Laboratories, Inc., of our report
dated February 10, 1995, relating to the consolidated balance sheets of
Advanced Technology Laboratories, Inc. and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of operations, shareholders'
equity and cash flows and related financial statement schedules for each of the
years in the three-year period ended December 31, 1994, which reports appear in
the December 31, 1994 annual report on Form 10-K, or are incorporated by
reference therein from the 1994 annual report to shareholders, of Advanced
Technology Laboratories, Inc.
Our reports refer to a change in the method of accounting for certain
investments in debt and equity securities, effective January 1, 1994.
KPMG Peat Marwick LLP
Seattle, Washington
March 29, 1995
19
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints DENNIS C. FILL, HARVEY N. GILLIS, and W. BRINTON
YORKS, Jr. and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution, and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents and each
of them, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Advanced Technology Laboratories,
Inc. (Registrant)
/s/ Dennis C. Fill
By __________________________________
DENNIS C. FILL
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Dennis C. Fill Chairman of the 3/29/95
------------------------------------- Board, Chief
DENNIS C. FILL Executive Officer
and Director
/s/ Harvey N. Gillis Senior Vice 3/29/95
------------------------------------- President, Chief
HARVEY N. GILLIS Financial Officer
and Treasurer
/s/ David M. Perozek President and Chief 3/29/95
------------------------------------- Operating Officer,
DAVID M. PEROZEK ATL, and Director
/s/ Edward Ray President and Chief 3/29/95
------------------------------------- Operating Officer,
EDWARD RAY Interpec, and
Director
20
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Kirby L. Cramer Director 3/29/95
-------------------------------------
KIRBY L. CRAMER
/s/ Harvey Feigenbaum Director 3/29/95
-------------------------------------
HARVEY FEIGENBAUM, M.D.
/s/ Eugene A. Larson Director 3/29/95
-------------------------------------
EUGENE A. LARSON
/s/ Phillip N. Nudelman Director 3/29/95
-------------------------------------
PHILLIP N. NUDELMAN
/s/ John R. Miller Director 3/29/95
-------------------------------------
JOHN R. MILLER
/s/ Harry Woolf Director 3/29/95
-------------------------------------
HARRY WOOLF, PH.D.
/s/ Richard S. Totorica Corporate Controller 3/29/95
------------------------------------- (Chief Accounting
RICHARD S. TOTORICA Officer)
21
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------------
(A) 3.1 Restated Certificate of Incorporation of Westmark International
Incorporated.
(B) 3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of Advanced Technology Laboratories, Inc.
(B) 3.3 Certificate of Designation of Series A. Participating Cumulative
Preferred Stock Setting Forth the Powers, Preferences, Rights,
Qualifications, Limitations and Restrictions of Such Series of
Preferred Stock of Advanced Technology Laboratories, Inc.
3.4 Amended and Restated Bylaws of Advanced Technology Laboratories,
Inc.
(C) 4.1 Amended and Restated Rights Agreement between Advanced Technology
Laboratories, Inc. and First Chicago Trust Company of New York
dated as of June 26, 1992.
(B) 4.2 Revolving Credit Loan Agreement by and among Advanced Technology
Laboratories, Inc. (Washington), Advanced Technology Laboratories,
Inc. (Delaware) and Seattle-First National Bank dated as of June
26, 1992 and supplemental letter dated February 4, 1993.
(B) 4.3 Uncommitted Line of Credit for $10 million by and among Advanced
Technology Laboratories, Inc. (Washington), Advanced Technology
Laboratories, Inc. (Delaware) and Seattle-First National Bank
dated as of June 18, 1992.
(D) 4.4 Note Purchase Agreement dated as of May 31, 1989 between Interspec
and Noteholders (incorporated by reference from Interspec, Inc.
1993 Annual Report on Form 10-K, filed as Exhibit 4.1, filed on
February 25, 1994).
(E) 4.5 Form of Amended to Note Purchase Agreement and Notes, and Guaranty
between Interspec, Noteholders and ATL.
(B) 10.1 Distribution Agreement between Westmark International Incorporated
and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(B) 10.2 Intercompany Agreement between Westmark International Incorporated
and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(B) 10.3 Tax Allocation Agreement between Westmark International
Incorporated and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(F) 10.4 Lease between Le Bien and Nova MicroSonics dated November 9, 1988
(Indianapolis facility).
10.5 Lease between Advent Realty Partnership II and Nova MicroSonics
dated December 14, 1993 (Allendale, New Jersey facility).
(G) 10.6 Lease between WRC Properties, Inc. and Advanced Technology
Laboratories, Inc. dated January 10, 1992.
(D) 10.7 Note dated November 30, 1989 in the principal amount of $2,000,000
issued by Montgomery County Industrial Development Corporation to
The Pennsylvania Industrial Development Authority (incorporated by
reference from Interspec, Inc. 1993 Annual Report on Form 10-K,
filed as Exhibit 10.27, filed on February 25, 1994)
(D) 10.8 Loan Agreement dated November 30, 1989 between Montgomery County
Industrial Development Corporation and The Pennsylvania Industrial
Development Authority (incorporated by reference from Interspec,
Inc. 1993 Annual Report on Form 10-K, filed as Exhibit 10.26,
filed on February 25, 1994)
22
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------------
(D) 10.9 Mortgage dated November 30, 1989 between Montgomery County
Industrial Development Corporation and The Pennsylvania Industrial
Development Authority (incorporated by reference from Interspec,
Inc. 1993 Annual Report on Form 10-K, filed as Exhibit 10.28,
filed on February 25, 1994)
(D) 10.10 Memorandum of Installment Sale Agreement and Amendment dated
November 30, 1989 between Montgomery County Industrial Development
Corporation and The Pennsylvania Industrial Development Authority
(incorporated by reference from Interspec, Inc. 1993 Annual Report
on Form 10-K, filed as Exhibit 10.13, filed on February 25, 1994).
(D) 10.11 Amendment to Installment Sale Agreement dated November 30, 1989
between Montgomery County Industrial Development Corporation and
The Pennsylvania Industrial Development Authority (incorporated by
reference from Interspec, Inc. 1993 Annual Report on Form 10-K,
filed as Exhibit 10.12, filed on February 25, 1994).
(D) 10.12 Assignment of Installment Sale Agreement and Amendment dated
November 30, 1989 by Montgomery County Industrial Development
Corporation to The Pennsylvania Industiral Development Authority
(incorporated by reference from Interspec, Inc. 1993 Annual Report
on Form 10-K, filed as Exhibit10.14, filed on February 25, 1994).
(D) 10.13 Consent, Subordination and Assumption Agreement dated November 30,
1989 between Montgomery County Industrial Development Corporation
and The Pennsylvania Industrial Development Authority
(incorporated by reference from Interspec, Inc. 1993 Annual Report
on Form 10-K, filed as Exhibit 10.25, filed on February 25, 1994).
(D) 10.14 Promissory Note dated May 29, 1990 in the principal amount of
$1,500,000 from Mifflin County Industrial Development to The
Pennsylvania Industrial Development Authority (incorporated by
reference from Interspec, Inc. 1993 Annual Report on Form 10-K,
filed as Exhibit 10.19, filed on February 25, 1994).
(D) 10.15 Loan Agreement dated May 29, 1990 between Mifflin County
Industrial Development and The Pennsylvania Industrial Development
Authority (incorporated by reference from Interspec, Inc. 1993
Annual Report on Form 10-K, filed as Exhibit 10.33, filed on
February 25, 1994).
(D) 10.16 Mortgage dated May 29, 1990 between Mifflin County Industrial
Development and The Pennsylvania Industrial Development Authority
(incorporated by reference from Interspec, Inc. 1993 Annual Report
on Form 10-K, filed as Exhibit 10.20, filed on February 25, 1994).
(D) 10.17 Installment Sale Agreement dated October 14, 1988 between Mifflin
County Industrial Development and Interspec, Inc.; Amendment of to
Installment Sale Agreement dated December 9, 1988; and Second
Amendment to Installment Sale Agreement dated May 29, 1990
(incorporated by reference from Interspec, Inc. 1993 Annual Report
on Form 10-K, filed as Exhibit 10.22, filed on February 25, 1994).
(D) 10.18 Assignment of Installment Sale Agreement dated May 29, 1990 by
Mifflin County Industrial Development to The Pennsylvania
Industrial Development Authority (incorporated by reference from
Interspec, Inc. 1993 Annual Report on Form 10-K, filed as Exhibit
10.23, filed on February 25, 1994).
(D) 10.19 Consent, Subordination and Assumption Agreement dated May 29, 1990
by Mifflin County Industrial Development to The Pennsylvania
Industrial Development Authority (incorporated by reference from
Interspec, Inc. 1993 Annual Report on Form 10-K, filed as Exhibit
10.32, filed on February 25, 1994).
10.20 Purchase and Sale Agreement by and between ELDEC Corporation, N.C.
ELDEC, Inc. and ATL for the sale of ELDEC Building and surrounding
property.
23
EXHIBIT NO. DESCRIPTION
----------- -----------------------------------------------------------------
10.21 Certificate and Indemnity Agreement by ATL for the benefit of
Seattle First National Bank for $11,500,000 loan for ELDEC
Building and surrounding property.
10.22 Deed of Trust, Security Agreement as of December 28, 1994, by ATL
to Rainier Trust Company for the Benefit of Seattle-First
National Bank, for ELDEC Building and surrounding property.
10.23 Promissory Note for $11,500,000 dated December 28, 1994 from ATL
to Seattle-First National Bank, for ELDEC Building and
surrounding property.
(H)(M) 10.24 1986 Amended and Restated Option, Restricted Stock, Stock
Appreciation Right and Performance Unit Plan.
(M) 10.25 Amended and Restated July 1, 1994 Advanced Technology
Laboratories, Inc. Incentive Savings and Stock Ownership Plan.
(M) 10.26 Advanced Technology Laboratories, Inc. Supplemental Benefit Plan,
Amended and Restated January 1, 1994.
10.27 Trust Agreement for Incentive Savings and Stock Ownership Plan by
and between Advanced Technology Laboratories, Inc. and First
Interstate Bank of Washington, N.A. effective June 26, 1992.
(M) 10.28 Amended and Restated Retirement Plan, effective June 26, 1992.
(M) 10.29 Amended and Restated Retirement Plan Trust Agreement by and
between Advanced Technology Laboratories, Inc. and First
Interstate Bank of Washington, N.A. effective December 29, 1993.
(A)(M) 10.30 Management Incentive Compensation Plan.
(I)(M) 10.31 Amendment to Management Incentive Compensation Plan, effective
May 5, 1993.
(B) 10.32 Employee Benefit Allocation Agreement between Westmark
International Incorporated and SpaceLabs Medical, Inc. dated as
of May 18, 1992.
(J)(M) 10.33 Amended 1992 Option, Stock Appreciation Right, Restricted Stock,
Stock Grant and Performance Unit Plan. Adopted by Shareholders on
May 5, 1993.
(B)(M) 10.34 Forms of Option Grant, Restricted Stock Award Agreement and
Restricted Stock Award Letter under the 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance
Unit Plan.
(I)(M) 10.35 Long Term Incentive Plan, effective January 1, 1993.
(D) 10.36 Interspec Supplemental Executive Retirement Plan (incorporated by
reference from Interspec, Inc. 1993 Annual Report, filed as
Exhibit 10.8 on Form 10-K, filed on February 25, 1994)
(H)(M) 10.37 Change of Control Employment Agreement with Dennis C. Fill dated
January 1, 1991.
(B)(M) 10.38 First Amendment to Employment Agreement with Dennis C. Fill dated
May 18, 1992.
(M) 10.39 Second Amendment to Employment Agreement with Dennis C. Fill
dated July 4, 1994.
(B)(M) 10.40 Change of Control Employment Agreement with David M. Perozek
dated May 18, 1992.
(B)(M) 10.41 Change of Control Employment Agreement with Harvey N. Gillis
dated September 23, 1992.
(M) 10.42 Employment Agreement with Edward Ray dated May 17, 1994.
(K) 10.43 Amended and Restated Nonofficer Employee Option, Restricted Stock
and Stock Grant Plan.
24
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------------
(J) 10.44 1992 Nonofficer Employee Stock Option Plan.
(E) 10.45 Amended and Restated Agreement and Plan of Merger as of February
10, 1994 between ATL and Interspec, Inc. and Press Releases dated
February 10, and February 24, 1994.
13 1994 Annual Report to Shareholders (Such report, except to the
extent incorporated herein by reference, is being provided for the
information of the Securities and Exchange Commission, only, and
is not deemed to be filed as a part of this Annual Report on Form
10-K).
21 Subsidiaries of ATL as of December 31, 1994.
24 Consent of KPMG Peat Marwick. Reference is made to the Consent on
page 19 of this filing in response to this item.
(L) 28 Proxy Statement to Stockholders for ATL's 1994 Annual General
Meeting of Shareholders.
(A) Previously filed with, and incorporated herein by reference to,
Westmark's Registration Statement on Form 10, File No. 0-15160.
(B) Previously filed with, and incorporated herein by reference to,
ATL's Annual Report on Form 10-K, File No. 0-15160, filed on March
25, 1993.
(C) Previously filed with, and incorporated herein by reference to,
Westmark International Incorporated's Amendment to Application
Form 8, filed on June 25, 1992.
(D) Previously filed and incorporated herein by reference from
Interspec, Inc's Annual Report on Form 10-K/A, File No. 0-15883,
filed on February 25, 1994.
(E) Previously filed with, and incorporated herein by reference to,
ATL's Current Report on Form 8-K, File No. 0-15160, filed on
February 17, 1994 and March 4, 1994.
(F) Previously filed with, and incorporated herein by reference to,
Westmark's Annual Report on Form 10-K, File No. 015160, filed on
March 21, 1989.
(G) Previously filed with, and incorporated herein by reference to,
Westmark's Annual Report on Form 10-K, File No. 015160, filed on
March 26, 1992.
(H) Previously filed with, and incorporated herein by reference to,
Westmark's Annual Report on Form 10-K, File No. 015160, filed on
March 22, 1991.
(I) Previously filed with, and incorporated herein by reference to,
ATL's Annual Report on Form 10-K, File No. 0-15160, filed on March
4, 1994.
(J) Previously filed with, and incorporated herein by reference to,
ATL's Registration Statement on Form S-8, Registration Nos. 33-
66298 and 33-54757, filed July 22, 1993 and July 24, 1994,
respectively.
(K) Previously filed with, and incorporated herein by reference to,
Westmark International Incorporated's Registration Statement on
Form S-8, Registration No. 33-38218, filed on December 14, 1990.
(L) To be filed within 120 days of the 1994 fiscal year end pursuant
to General Instruction G to Form 10-K.
(M) Management Contracts and Compensatory Arrangements.
25
SCHEDULE VIII
ADVANCED TECHNOLOGY LABORATORIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
-----------------------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- -------- ---------- ---------
(IN THOUSANDS)
Year ended December 31,
1994:
Valuation accounts de-
ducted from assets:
Allowance for doubtful
receivables and sales
returns.............. $ 7,460 $ 5,015 $ -- $ 2,047(1) $ 10,428
======== ======= ======= ======= ========
Valuation allowance for
deferred tax assets...... $ 19,709 $ 7,540 $ -- $ -- $ 27,249
======== ======= ======= ======= ========
Year ended December 31,
1993:
Valuation accounts de-
ducted from assets:
Allowance for doubtful
receivables and sales
returns.............. $ 6,301 $ 1,801 $ -- $ 642(1) $ 7,460
======== ======= ======= ======= ========
Valuation allowance for
deferred tax assets...... $ 18,565 $ 2,181 $ -- $ 1,037(2) $ 19,709
======== ======= ======= ======= ========
Year ended December 31,
1992:
Valuation accounts de-
ducted from assets:
Allowance for doubtful
receivables and sales
returns.............. $ 6,396 $ 1,744 $ -- $ 1,839(1) $ 6,301
======== ======= ======= ======= ========
Valuation allowance for
deferred tax assets...... $ 16,449 $ -- $ 3,288 $ 1,172(2) $ 18,565
======== ======= ======= ======= ========
--------
Note:
(1) Accounts charged off, net of recoveries.
(2) Adjustments to the valuation allowance for deferred tax assets, based on
the ability to realize net deferred tax assets in the future, according to
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
26
EX-3.4
2
AMENDED AND RESTATED BYL
Exhibit 3.4
AMENDED AND RESTATED BY-LAWS
OF
ADVANCED TECHNOLOGY LABORATORIES, INC.
ARTICLE I
Offices
SECTION 1. Registered office
The registered office of the Corporation in the State of Delaware shall be
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the registered agent in charge thereof is The
Corporation Trust Company.
SECTION 2. Other Offices
The Corporation may also have offices at other places either within or
without the State of Delaware.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meetings
The annual meeting of the stockholders for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held at such place, date and hour as shall be designated in the
notice thereof given by or at the direction of the Board of Directors.
SECTION 2. Special Meetings
Except as otherwise required by law and subject to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, special meetings of the stockholders
for any purpose or purposes may be called only by, and shall be held at such
place, date and hour as shall be designated by (i) holders of two-thirds or
more of the voting power of the then-outstanding shares of stock of all classes
and series of the Corporation entitled to vote generally in the election of
Directors ("Voting Stock"), (ii) the Chairman of the Board, (iii) the
President or (iv) a majority of the total number of Directors.
SECTION 3. Notice of Meetings
Except as otherwise expressly required by law, notice of each meeting of
the stockholders shall be given not less than 10 nor more than 60 days before
the date of the meeting to each stockholder entitled to vote at such meeting by
mailing such notice, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation. Every such notice shall state
the place, date and hour of the meeting and, in the case of a Special meeting,
the purpose or purposes for which the meeting is called. Except as otherwise
expressly required by law, notice of any adjourned meeting of the Stockholders
need not be given. Notice of any meeting of stockholder shall not be required
to be given to any stockholder who shall attend such meeting in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. A written waiver of
notice, signed by the person entitled thereto, whether before or after the time
stated therein, shall be deemed equivalent to the notice required by this
Section 3.
SECTION 4. List of Stockholders
It shall be the duty of the Secretary or other officer of the Corporation
who shall have charge of its stock ledger to prepare and make, at least 10 days
before every meeting of the stockholders, a complete list of the stockholder
entitled to vote thereat, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting at the place within
the city where the meeting is to be held. Such list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.
SECTION 5. Quorum
At each meeting of the stockholder, except as otherwise expressly required
by law or by the Certificate of Incorporation, stockholders holding one-third of
the shares of stock of the Corporation issued and outstanding, and entitled to
be voted thereat, shall be present in person or by proxy to constitute a quorum
for the transaction of business. In the absence of a quorum at any such meeting
or any adjournment or adjournments thereof, a majority in voting interest of
those present in person or by proxy and entitled to vote thereat, or in the
absence therefrom of all the stockholders, any officer entitled to preside at,
or to act as Secretary of, such meeting may adjourn such meeting from time to
time until stockholder holding the amount of stock requisite for a quorum shall
be present in person or by proxy. At any such
adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally
called.
SECTION 6. Organization
At each meeting of the stockholders, one of the following shall act as
chairman of the meeting and preside thereat, in the following order of
precedence:
(a) the Chairman of the Board;
(b) the President;
(c) any other officer of the Corporation designated by the Board or the
Executive Committee to act as chairman of such meeting and to preside thereat if
the Chairman of the Board and the President shall be absent from such meeting;
or
(d) a stockholder of record of the Corporation who shall be chosen
chairman of such meeting by a majority in voting interest of the stockholder
present in person or by proxy and entitled to vote thereat. The Secretary, or,
if he shall be presiding over the meeting in accordance with the provisions of
this Section, or, if he shall be absent from such meeting, the person (who shall
be an Assistant Secretary, if an Assistant Secretary shall be present thereat)
whom the chairman of such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.
SECTION 7. Order of Business
(a) Annual Meetings. At an annual meeting of the stockholders, only such
---------------
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors or (iii) brought
before the meeting by a stockholder in accordance with the procedure set forth
below. Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given written notice thereof, either by personal
delivery or by certified or registered United States mail, postage prepaid, to
the Secretary of the Corporation, not later than 90 days in advance of the
Originally Scheduled Date (as such term is defined below) of such meeting;
provided, however, that if such annual meeting of stockholders is held on a date
-------- -------
earlier than the first Tuesday in May, such written notice must
be given within 10 days after the first public disclosure (which may be by a
public filing by the Corporation with the Securities and Exchange Commission)
of the Originally Scheduled Date of the annual meeting. Any such notice shall
set forth as to each matter the stockholder proposes to bring before the
annual meeting (A) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting
and, in the event that such business includes a proposal to amend either the
Certificate of Incorporation or By-Laws of the Corporation, the language of
the proposed amendment, (B) the name and address of the stockholder proposing
such business, (C) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business and (D)
any direct or indirect material interest of the stockholder in such business.
No business shall be conducted at an annual meeting except in accordance with
this paragraph, and the chairman of any annual meeting of stockholders may
refuse to permit any business to be brought before such annual meeting without
compliance with the foregoing procedure. For purposes of these By-Laws, the
"Originally Scheduled Date" of any meeting of stockholders shall be the date
such meeting is scheduled to occur in the notice of such meeting first given
to stockholders regardless of whether such meeting is continued or adjourned
and regardless of whether any subsequent notice is given for such meeting or
the record date of such meeting is changed.
(b) Special Meetings. At a special meeting of the stockholder, only such
----------------
business as is specified in the notice of such special meeting given by or at
the direction of the person or persons calling such meeting in accordance with
Section 2 of this Article II shall come before such meeting.
SECTION 8. Voting
Except as otherwise provided in the Certificate of Incorporation, each
stockholder shall, at each meeting of the stockholders, be entitled to one vote
in person or by proxy for each share of stock of the Corporation held by him and
registered in his name on the books of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 5 of Article
VIII of these By-Laws as the record date for the determination of stockholders
who shall be entitled to receive notice of and to vote at such meeting, or
(b) if no record date shall have been so fixed, then at the close of
business on the day next preceding the day on which notice of the meeting shall
be given.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of
directors of such other corporation is held by the Corporation, shall neither
be entitled to vote nor considered as issued and outstanding for the purposes
of determining whether a quorum exists. Any vote of stock of the Corporation
may be given at any meeting of the stockholders by the stockholders entitled
thereto in person or by proxy appointed by an instrument in writing delivered
to the Secretary or an Assistant Secretary of the Corporation or the secretary
of the meeting. The attendance at any meeting of a stockholder who may
theretofore have given a proxy shall not have the effect of revoking the same
unless he shall in writing so notify the secretary of the meeting prior to the
voting of the proxy. At all meetings of the stockholders all matters, except
as otherwise provided in the Certificate of Incorporation, these By-Laws or by
law, shall be decided by the vote of a majority of the votes cast by
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Except as otherwise expressly required by law, the vote
at any meeting of the stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. On a vote by ballot each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.
ARTICLE III
Board of Directors
SECTION 1. General Powers
The business and affairs of the Corporation shall be managed by the Board.
SECTION 2. Number, Term of Office and Election
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock of the Corporation as to dividends or upon
liquidation, the number of directors which shall constitute the whole Board
shall be nine but by vote of a majority of the entire Board the number thereof
may be increased without limit, or decreased to not less than three, by
amendment of this section 2.
Each of the directors of the Corporation shall hold office until the annual
meeting next after his election and until his successor shall be elected and
shall qualify or until his earlier death or resignation or removal in the manner
hereinafter provided.
Directors need not be stockholders of the Corporation.
Except as otherwise expressly provided in the Certificate of Incorporation,
at each meeting of the stockholders for the election of directors at which a
quorum is present, the persons receiving the greatest number of votes, up to the
number of directors to be elected, shall be the directors.
SECTION 3. Notification of Nominations
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote for the election of directors. Any
stockholder entitled to vote for the election of directors at a meeting may
nominate persons for election as directors only if written notice of such
stockholder's intent to make such nomination is given, either by personal
delivery or by registered or certified United States mail, postage prepaid, to
the Secretary of the Corporation not later than (i) with respect to an election
to be held at an annual meeting of stockholders, 90 days in advance of the
Originally Scheduled Date (as such term is defined in Section 7 of Article II of
these By-Laws) of such meeting (provided that if such annual meeting of
stockholder is held on a date earlier than the first Tuesday in May, such
written notice must be given within 10 days after the first public disclosure
(which may be by a public filing by the Corporation with the Securities and
Exchange Commission) of the Originally Scheduled Date of the annual meeting),
and (ii) with respect to an election to be held at a special meeting of
stockholder for the election of directors, the close of business on the seventh
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated, (b) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors, and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
SECTION 4. Resignation, Removal and Vacancies
(a) Resignation. Any director may resign at any time by giving written
-----------
notice of his resignation to the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein, or, if the time when it shall become effective shall not
be specified therein, then it shall take effect when accepted by action of the
Board. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
(b) Vacancies. Subject to the rights of the holders of any class or
---------
series of stock having a preference over the Common Stock of the Corporation as
to dividends or upon liquidation, in case of any vacancy on the Board or in case
of any newly created directorship, a director to fill the vacancy or the newly
created directorship for the unexpired portion of the term being filed may be
elected by a majority of the directors of the Corporation then in office though
less than a quorum or by a sole remaining director.
SECTION 5. Meetings
(a) Annual Meetings. As soon as practicable after each annual election of
---------------
directors, the Board shall meet for the purpose of organization and the
transaction of other business.
(b) Regular Meetings. Regular meetings of the Board shall be held at such
----------------
times and places as the Board shall from time to time determine. Notices of
regular meetings need not be given.
(C) Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the Chairman of the Board, the President or three directors.
The Secretary shall give notice to each director of each such special meeting,
including the time and place of such meeting. Notice of each such meeting shall
be mailed to each director, addressed to him at his residence or usual place of
business, at least five days or, in the case of overnight mail, two days before
the day on which such meeting is to be held, or shall be sent to him by
telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held. Notice of any special meeting shall not be
required to be given to any director who shall attend such meeting. A written
waiver of notice, signed by the person entitled thereto, whether before or after
the time stated therein, shall be deemed equivalent to notice. Any and all
business may be transacted at a special meeting which may be transacted at a
regular meeting of the Board.
(d) Place of Meeting. The Board may hold its meetings at such place or
----------------
places within or without the State of Delaware as the Board may from time to
time by resolution determine or, in the absence of such determination, as
shall be designated in the respective notices or waivers of notice thereof as
directed by the person or persons calling such meeting.
(e) Quorum and Manner of Acting. A majority of the directors then in
---------------------------
office shall be present in person or by means of conference telephone or similar
communications equipment as permitted by the Delaware Corporation Law at any
meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting provided that such majority shall be no
less than one-third of the total number of directors. The affirmative vote of a
majority of those directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act of the
Board, except as otherwise expressly required by law, the Certificate of
Incorporation or these By-Laws and except that the Board may pass any resolution
or take any action by unanimous written consent as permitted by the Delaware
Corporation Law. In the absence of a quorum for any such meeting, a majority of
the directors present thereat may adjourn such meeting from time to time until a
quorum shall be present thereat. Notice of any adjourned meeting need not be
given.
(f) Organization. At each meeting of the Board, one of the following
------------
shall act as chairman of the meeting and preside thereat, in the following order
of precedence:
(i) the Chairman of the Board;
(ii) the President; or
(iii) any director chosen by a majority of the directors present
thereat.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary shall be present thereat) whom
the chairman of the meeting shall appoint, shall act as Secretary of
such meeting and keep the minutes thereof.
SECTION 6. Compensation
Each director, in consideration of his serving as such, shall be entitled
to receive from the Corporation such amount per annum or such fees for
attendance at meetings of the Board or of any committee, or both, as the Board
shall from time to time determine. The Board may likewise provide that the
Corporation shall reimburse each director or member of a committee for any
expenses incurred by him on account of his attendance at any such meeting.
Nothing contained in this Section shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
Committees
SECTION 1. Executive Committee
(a) Designation and Membership. The Board may, by resolution passed by a
--------------------------
majority of the whole Board, designate an Executive Committee consisting of the
Chairman of the Board, the President, a Chairman of the Executive Committee (who
may be the Chairman of the Board or President) and such additional number of
directors as the Board shall appoint. Vacancies may be filled by the Board at
any time and any member of the Executive Committee shall be subject to removal,
with or without cause, at any time by the Board.
(b) Factions and Powers. The Executive Committee, subject to any
-------------------
limitations prescribed by the Board, shall possess and may exercise, during the
intervals between meetings of the Board, the powers of the Board in the
management of the business and affairs of the Corporation, provided that neither
the Executive Committee nor any other committee may exercise the power of the
Board to act upon matters requiring a vote thereof greater than a majority of
directors present at a meeting at which a quorum is in attendance. At each
meeting of the Board, the Executive Committee shall make a report of all action
taken by it since its last report to the Board.
(c) Meetings. The Executive Committee shall meet as often as may be
--------
deemed necessary and expedient at such times and places as shall be determined
by the Executive Committee or the Board of Directors. The Secretary shall give
notice to each member of the Executive Committee of each meeting, including the
time and place of such meeting. Notice of each such meeting shall be mailed to
each member of the Executive Committee, addressed to him at his residence or
usual place of business, at least five days or, in the case of overnight mail,
two days before the day on which such meeting is to be held, or shall be sent to
him by telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held. Notice of any meeting of the Executive
Committee shall not be required to be given to any member of the Executive
Committee who shall attend such meeting. A written waiver of notice, signed by
the person entitled thereto, whether before or after the time stated therein,
shall be deemed equivalent to the notice required by this paragraph (c).
SECTION 2. Quorum and Manner of Acting
A majority of the Executive Committee present in person or by means of
conference telephone or similar communications equipment as permitted by the
Delaware Corporation Law shall constitute a quorum, and the vote of a majority
of members of the Executive Committee present at any such meeting at which a
quorum is present shall be necessary for the passage of any resolution or act of
the Executive Committee except that the Executive Committee may pass any
resolution or take any action by unanimous written consent as permitted by the
Delaware Corporation Law. The Chairman of the Executive Committee shall preside
at meetings of the Executive Committee and, in his absence, the Executive
Committee may appoint any other member of the Executive Committee to preside.
SECTION 3. Other Committees
The Board may, by resolution passed by a majority of the whole Board,
designate other committees, each committee to consist of two or more directors
and to have such duties and functions as shall be provided in such resolution.
ARTICLE V
Officers
SECTION 1. Election and Appointment and Term of office
(a) Officers. The officers of the Corporation shall be a Chairman of the
--------
Board, a President, a Chairman of the Executive Committee, such number of Vice
Presidents (including any Executive and/or Senior Vice Presidents) as the Board
may determine from time to time, a Treasurer and a Secretary. Each such officer
shall be elected by the Board at its annual meeting and shall hold office until
the next annual meeting of the Board and until his successor is elected and
qualified or until his earlier death or resignation or removal in the manner
hereinafter provided.
(b) Additional Officers. The Board may elect or appoint such other
-------------------
officers (including one or more Assistant Treasurers and one or more Assistant
Secretaries) as it deems necessary, who shall have such authority and shall
perform such duties as the Board may prescribe. If additional officers are
elected or appointed during the year, each of them shall hold office until the
next annual meeting of the Board at which officers are regularly elected or
appointed and until his successor is elected or appointed and qualified or until
his earlier death or resignation or removal in the manner hereinafter provided.
SECTION 2. Resignation, Removal and Vacancies
Any officer may resign at anytime by giving written notice to the Chairman
of the Board, the President or the Secretary of the Corporation, and such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, then it shall take
effect when accepted by action of the Board. Except as aforesaid, the
acceptance of such resignation shall not be necessary to make it effective. All
officers and agents elected or appointed by the Board shall be subject to
removal at any time by the Board with or without cause. A vacancy in any office
may be filled for the unexpired portion of the term in the same manner as
provided for election or appointment to such office.
SECTION 3. Duties and Functions
(a) Chairman of the Board. The Chairman of the Board shall be the chief
---------------------
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation and shall have the direction of all
other officers, agents and employees. He shall preside at all meetings of the
Board of Directors and of the stockholders at which he is present. The Chairman
may delegate such duties to the other officers of the Corporation as he deems
appropriate.
(b) President. The President shall be the chief operating officer of the
---------
Corporation and shall report to the Chairman of the Board. He shall preside at
meetings of the Board of Directors and of the stockholders at which he is
present in the absence of the Chairman of the Board.
(c) Chairman of the Executive Committee. The Chairman of the Executive
-----------------------------------
Committee shall preside at all meetings of the Executive Committee at which he
is present.
(d) Vice Presidents. Each Vice President shall have such powers and
---------------
duties as shall be prescribed by the Chairman of the Board or the Board.
(e) Treasurer. The Treasurer shall have charge and custody of and be
---------
responsible for all funds and securities of the Corporation.
(f) Secretary. The Secretary shall keep the records of all meetings of
---------
the stockholders and of the Board and the Executive Committee. He shall affix
the seal of the Corporation to all deeds, contracts, bonds or other instruments
requiring the corporate seal when the same shall have been signed on behalf of
the Corporation by a duly authorized officer. The Secretary shall be the
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records).
ARTICLE VI
Contracts, Deposits, Proxies, Etc.
SECTION 1. Execution of Documents
The Board shall designate the officers, employees and agents of the
Corporation who shall have power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and other orders for the payment of
money and other documents for and in the name of the Corporation and may
authorize such officers, employees and agents to delegate such power (including
authority to redelegate) by written instrument to other officers, employees or
agents of the Corporation.
SECTION 2. Deposits
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation or otherwise as the Board or the
President or any other officer of the Corporation to whom power in that respect
shall have been delegated by the Board shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations
The Board shall designate the officer of the Corporation who shall have
authority to from time to time appoint an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other secrets in any
other corporation and to vote or consent in respect of such stock or securities.
Such designated officer may instruct the person or persons so appointed as to
the manner of exercising such powers and rights and such designated officers may
execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, such written proxies, powers of attorney
or other instruments as they may deem necessary or proper in order that the
Corporation may exercise such powers and rights.
ARTICLE VII
Books and Records
The books and records of the Corporation may be kept at such places within
or without the State of Delaware as the Board may from time to time determine.
ARTICLE VIII
Shares and Their Transfer; Fixing Record Date
SECTION 1. Certificates for Stock
Every owner of stock of the Corporation shall be entitled to have a
certificate certifying the number of shares owned by him in the Corporation and
designating the class of stock to which such shares belong, which shall
otherwise be in such form as the Board shall prescribe. Each such certificate
shall be signed by, or in the name of the Corporation by, the Chairman of the
Board, the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation. In
case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may nevertheless be issued by the corporation with the same effect
as if he were such officer at the date of issue.
SECTION 2. Record
A record shall be kept of the name of the person, firm or corporation
owning the stock represented by each certificate for stock of the Corporation
issued, the number of shares represented by each Such certificate, and the date
thereof, and, in the case of cancellation, the date of cancellation. Except as
otherwise expressly required by applicable law, the person in whose name shares
of stock stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation.
SECTION 3. Transfer of Stock
Transfers of shares of the stock of the Corporation shall be made only on
the books of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the Corporation, and on the surrender of the certificate or
certificates for such shares properly endorsed.
SECTION 4. Lost, Stolen, Destroyed or Mutilated Certificates
The holder of any stock of the Corporation shall immediately notify the
Corporation of any loss, theft or mutilation of the certificate therefor. The
Corporation may issue a new certificate for stock in the place of any
certificate theretofore issued by it and alleged to have been lost, stolen,
destroyed or mutilated, and the Board may, in its discretion, require the owner
of the lost, stolen, mutilated or destroyed certificate or his legal
representatives to give the Corporation a bond in such sum, limited or
unlimited, in such form and with such surety or sureties as the Board shall in
its discretion determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft, mutilation or destruction of any such
certificate or the issuance of any such new certificate.
SECTION 5. Fixing Date for Determination of Stockholders of Record
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action.
ARTICLE IX
Seal
The Board shall provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation and the words and figures
"Corporate Seal 1983 Delaware."
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall end on the 31st of December in
each year.
ARTICLE XI
Indemnification
SECTION 1. Right to Indemnification
The Corporation shall to the fullest extent permitted by applicable law as
then in effect indemnify any person (the "Indemnitee") who was or is involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be made so involved in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (including without limitation, any action, suit
or proceeding by or in the right of the Corporation to procure a judgment in its
favor) (a "Proceeding") by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or wall serving at
the request of the Corporation as a director, officer or employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan) against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
proceeding. Such indemnification shall be a contract right and shall include
the right to receive payment in advance of any expenses incurred by the
Indemnitee in connection with such proceeding, consistent with the provisions
of applicable law as then in effect.
SECTION 2. Insurance, Contracts and Funding
The Corporation may purchase and maintain insurance to protect itself and
any Indemnitee against any expenses, judgments, fines and amounts paid in
settlement as specified in Section I of this Article XI or incurred by any
Indemnitee in connection with any proceeding referred to in Section 1 of this
Article XI, to the fullest extent permitted by applicable law as then in effect.
The Corporation may enter into contracts with any director, officer, employee or
agent of the Corporation in furtherance of the provisions of this Article XI and
may create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in this
Article XI.
SECTION 3. Indemnification; Not Exclusive Right
The right of indemnification provided in this Article XI shall not be
exclusive of any other rights to which those seeking indemnification may
otherwise be entitled, and the provisions of this Article XI shall inure to the
benefit of the heirs and legal representatives of any person entitled to
indemnity under this Article XI and shall be applicable to Proceedings commenced
or continuing after the adoption of this Article XI, whether arising from acts
or omissions occurring before or after such adoption.
SECTION 4. Advancement of Expenses; Procedures; Presumptions and
Effect of Certain Proceedings; Remedies
In furtherance, but not in limitation of the foregoing provisions, the
following procedures, presumptions and remedies shall apply with respect to
advancement of expenses and the right to indemnification under this Article XI:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
-----------------------
behalf of the Indemnitee in connection with any Proceeding shall be advanced to
the Indemnitee by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the indemnitee
requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by the Indemnitee and, if required
by law at the time of such advance, shall include or be accompanied by an
undertaking by or on behalf of the Indemnitee to repay the amounts advanced if
it should ultimately be determined that the Indemnitee is not entitled to be
indemnified against such expenses pursuant to this Article XI.
(b) Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(i) To obtain indemnification under this Article XI, an Indemnitee
shall submit to the Secretary of the Corporation a written request,
including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The determination
of the Indemnity's entitlement to indemnification shall be made not
later than 60 days after receipt by the Corporation of the written
request for indemnification together with the Supporting
Documentation. The Secretary of the Corporation shall, promptly upon
receipt of such a request for indemnification, advise the Board of
Directors in writing that the Indemnitee has requested
indemnification.
(ii) The Indemnity's entitlement to indemnification under this
Article XI shall be determined in one of the following ways: (A) by
a majority vote of the Disinterested Directors (as hereinafter
defined), if they constitute a quorum of the Board of Directors; (B)
by a written opinion of Independent Counsel (as hereinafter defined)
if (x) a Change of Control (as hereinafter defined) shall have
occurred and the Indemnitee so requests or (y) a quorum of the Board
of Directors consisting of Disinterested Directors is not obtainable
or, even if obtainable, a majority of such Disinterested Directors
so directs; (C) by the stockholders of the Corporation (but only if
a majority of the Disinterested Directors, if they constitute a
quorum of the Board of Directors, presents the issue of entitlement
to indemnification to the stockholders for their determination); or
(D) as provided in Section 4(c).
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 4(b)(ii), a majority of the Disinterested Directors shall
select the Independent Counsel, but only an Independent Counsel to
which the Indemnitee does not reasonably object; provided, however,
that if a Change of Control shall have
occurred, the Indemnitee shall select such Independent Counsel, but
only an Independent Counsel to which the Board of Directors does not
reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as otherwise
----------------------------------------------
expressly provided in this Article XI, if a Change of Control shall have
occurred, the Indemnitee shall be presumed to be entitled to indemnification
under this Article XI upon submission of a request for indemnification together
with the Supporting Documentation in accordance with Section 4(b)(i), and
thereafter the Corporation shall have the burden of proof to overcome that
presumption in reaching a contrary determination. In any event, if the person
or persons empowered under Section 4(b) to determine entitlement to
indemnification shall not have been appointed or shall not have made a
determination within 60 days after receipt by the Corporation of the request
therefor, together with the Supporting Documentation, the Indemnitee shall be
deemed to be entitled to indemnification and the Indemnitee shall be entitled to
such indemnification unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited by law. The
termination of any Proceeding described in Section 1, or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, adversely affect the
---- ----------
right of the Indemnitee to indemnification or create a presumption that the
Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal Proceeding, that the Indemnitee had reasonable
cause to believe that his conduct was unlawful.
(d) Remedies of Indemnitee.
----------------------
(i) In the event that a determination is made pursuant to
Section 4(b) that the Indemnitee is not entitled to indemnification
under this Article XI, (A) the Indemnitee shall be entitled to seek
an adjudication of his entitlement to such indemnification either,
at the Indemnity's sole option, in (x) an appropriate court of the
State of Delaware or any other court of competent jurisdiction or
(y) an arbitration to be conducted by a single arbitrator pursuant
to the rules of the American Arbitration Association; (B) any such
judicial proceeding or arbitration shall be de novo and the
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Indemnitee shall not be prejudiced by reason of such adverse
determination; and (C) if a Change of Control shall have occurred,
in any such judicial proceeding or arbitration, the Corporation
shall have the burden of proving that the Indemnitee is not entitled
to indemnification under this Article XI.
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4(b) or 4(c), that the Indemnitee is
entitled to indemnification, the Corporation shall be obligated to
pay the amounts constituting such indemnification within five days
after such determination has been made or deemed to have been made
and shall be conclusively bound by such determination unless (A) the
Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In
the event that (C) advancement of expenses is not timely made
pursuant to Section 4(a) or (D) payment of indemnification is not
made within five days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant
to Section 4(b) or 4(c), the Indemnitee shall be entitled to seek
judicial enforcement of the Corporation's obligation to pay to the
Indemnitee such advancement of expenses or indemnification.
Notwithstanding the foregoing, the Corporation may bring an action,
in an appropriate court in the State of Delaware or any other court
of competent jurisdiction, contesting the right of the Indemnitee to
receive indemnification hereunder due to the occurrence of an event
described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"); provided, however, that in any such action
the Corporation shall have the burden of proving the occurrence of
such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this
Section 4(d) that the procedures and presumptions of this Article XI
are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Corporation is
bound by all the provisions of this Article XI.
(iv) In the event that the Indemnitee, pursuant to this Section
4(d), seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this
Article XI, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against,
any expenses actually and reasonably incurred by him if the
Indemnitee prevails in such judicial adjudication or arbitration. If
it shall be determined in such judicial adjudication or arbitration
that the Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in
connection with such judicial adjudication or arbitration shall be
prorated accordingly.
(e) Definitions. For purposes of this Section 4:
-----------
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934 (the "Act"), whether or not
the Corporation is then subject to such reporting requirement;
provided that, without limitation, such a change in control shall "be
deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 20% or more
of the combined voting power of the Corporation's then outstanding
securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such
acquisition; (B) the Corporation is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors
in office immediately prior to such transaction or event constitute
less than a majority of the Board of Directors thereafter; or (C)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for
election by the Corporation's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the Corporation
who is not or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five years has been,
retained to represent: (i) the Corporation or the Indemnitee in any
matter material to either such party or (ii) any other party to the
Proceeding giving rise to a claim for indemnification under this
Article XI. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing under the law of
the State of Delaware,
would have a conflict of interest in representing either the
Corporation or the Indemnitee in an action to determine the
Indemnitee's rights under this Article XI.
SECTION 5. Severability
If any provision or provisions of this Article XI shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Article XI
(including, without limitation, all portions of any paragraph of this Article
XI containing any such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby; and (b) to the fullest extent possible,
the provisions of this Article XI (including, without limitation, all portions
of any paragraph of this Article XI containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
ARTICLE XII
Amendments
These By-Laws may be altered or repealed only in accordance with Article
EIGHTH of the Certificate of Incorporation of the Corporation.
EX-10.5
3
LEASE
Exhibit 10.5
Lease
THIS Lease, made this day of December, 1993, by and between Advent
Realty Limited Partnership II, of 45 Milk Street, Boston, Massachusetts 02109
("Landlord") and Nova MicroSonics, a division of Advanced Technology
Laboratories, Inc., ("Tenant") of 11 Leighton Place, Mahwah, New Jersey 07430.
WITNESSETH:
That Landlord, for and in consideration of the rents and all other charges and
payments hereinafter reserved and payable by Tenant, and of the covenants,
agreements, terms, provisions and conditions to be kept and performed hereunder
by Tenant, does hereby demise and Lease to Tenant, and Tenant does hereby hire
and take from Landlord, the Premises described below ("Premises"), subject to
all matters hereinafter set forth and upon the subject to the covenants,
agreements, terms, provisions and conditions of this Lease for the term
hereinafter stated.
1. PREMISES. The Premises demised by this Lease are approximately 27,900+/-
---------
square feet located at 1 Pearl Court, Allendale, New Jersey ("Building"),
together with an exclusive right to use parking and a non exclusive right to use
other common areas. The location and dimensions of the Premises and designated
80 car parking are shown on Exhibit "A", which is attached hereto and
incorporated herein by reference. No easement for light or air is incorporated
in the Premises.
2. TERM. The term of this Lease shall begin on the first day of April 1994, and
----
ends on the 31st day of March, 1999 at midnight, unless sooner terminated as
hereinafter provided, subject to Landlord's completion of demolition and
construction per plans signed off by Tenant and the obtaining of a Certificate
of Occupancy. Tenant shall review and sign off plans in a timely manner.
3. RENT. Tenant agrees to pay Landlord by payment to office as Landlord may
-----
designate, promptly on the first day of each month, in advance, during the term
of this Lease, a monthly rental ("Rent") as follows:
Year 1 - $19,060.00 per month, net,net,net
Year 2 - $19,060.00 per month, net,net,net
Year 3 - $19,060.00 per month, net,net,net
Year 4 - $20,055.00 per month, net,net,net
Year 5 - $20,055.00 per month, net,net,net
It is intended that the Rent provided for in this Lease shall be an absolutely
net return to Landlord throughout the Term hereof, free of any expense, charge
or other deduction whatsoever, with respect to the Premises, the Building
and/or the ownership, leasing operation, management, maintenance, repair,
rebuilding, use or occupation of any interest of Landlord therein, except only
as otherwise expressly provided in this Lease.
4. RENT INCREASES.
---------------
OMITTED
5. ADDITIONAL RENT.
----------------
a. In addition to the Rent, Tenant shall pay to Landlord that percent of
the total cost of the following items ("Adjustments") as the total
floor area of the Premises bears to the total floor area of the
Building as of the first day of each calendar month.
(i) All real estate taxes and insurance premiums. Said Real
estate taxes shall include all real estate taxes and assessments that
are levied upon or assessed against the Premises, including any taxes
which may be levied on rents. Said insurance premiums shall include
all insurance premiums for fire, extended coverage, public liability,
and other insurance which Landlord deems necessary. If any tenant(s)
in the Building pay taxes directly to any taxing authority or carry
their own insurance, as may be provided in their Leases, the square
footage of their Leased Premises shall not be included as part of the
floor area of the Building for purposes of calculating Tenant's share
of Adjustments:
(ii) All costs to maintain, repair, replace, supervise, insure
(including provision of public liability insurance) and administer
common areas, parking lots, landscaping, sidewalks, driveways, roof
covering, downspouts and gutters, the structural portions of the roof,
foundations and exterior walls of the Building, and other areas used
in common by the tenants or occupants of the Building. Nothing in the
foregoing sentence shall be construed to make Tenant liable for
capital improvements not reasonably required for use or occupancy by
Tenant. The cost of any capital improvement made during the term of
this Lease shall be amortized over the life of such improvement.
Tenant shall not be required to pay for the costs to repair or replace
any roof covering or the structural portions of the roof, foundations
and exterior walls of the building should such maintenance, repair, or
replacement occur during the first 24 months of the term of this
Lease. Tenant shall be responsible for its share of the amortized cost
of any capital improvement made and implemented thereafter and only
for the remainder of the term of the Lease and any option periods,
unless Tenant vacates the Premises during the said 24 month period.
(iii) Any parking charges or other costs levied, assessed or
imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any
governmental authority or insurer in connection with the use or
occupancy of the Premises or the common areas of the Building.
(iv) Management fees for the operation of the Building not to
exceed, however, any annual sum equal to four (4%) percent of the
total annual fixed rent for the Building.
b. Upon commencement of this Lease, Landlord shall submit to Tenant an
estimate of monthly Adjustments for the period between such
commencement date and the following July 1 and Tenant shall pay these
estimated Adjustments on a monthly basis concurrently with the payment
of the Rent. Tenant shall continue to make such monthly payments until
notified by Landlord of a change therein. By September 1 of each
year, Landlord shall provide to Tenant a statement showing the total
Adjustments for the prior calendar year and Tenant's allocable share
thereof, prorated from the commencement date of this Lease during the
first year. If the total monthly payments which Tenant has made for
the prior calendar year (or portion thereof during which the Lease was
in effect) is less than the Tenant's actual share of such Adjustments,
then Tenant shall pay the difference in a lump sum and ten (10) days
after receipt of such statement from Landlord. Any overpayment by
Tenant shall be credited towards the Adjustments next due. The actual
Adjustments for the prior year shall be used for purposes of
calculating the estimated monthly Adjustments for the current year
with actual determination of such Adjustments occurring after the end
of each calendar year, except that in any year in which resurfacing of
the common parking area or major roof repairs are planned, Landlord
may include the estimated cost of such work in the estimated monthly
Adjustments. Even though the term of this Lease has expired and
Tenant has vacated the Premises, when the final determination is made
of Adjustments for the year in which this Lease terminates, Tenant
shall immediately pay any increase over the estimated Adjustment
previously paid and, conversely, any overpayment shall be immediately
returned by Landlord to Tenant. Failure of Landlord to submit
statements in a timely manner as called for herein shall be deemed a
waiver of Tenant's obligation to pay Adjustments as herein provided.
Upon Tenant's request, Landlord shall make available to Tenant copies
of all invoices received by Landlord in connection with any costs
incurred by Landlord which is subject to payment by Tenant under the
provisions of this Article, and copies of the contracts between
Landlord and those used by Landlord to perform any services which are
subject to payment by Tenant under the provisions of this Article.
Upon Tenant's request, Landlord shall make available to Tenant copies
of all invoices received by Landlord in connection with any costs
incurred by Landlord which is subject to payment by Tenant under the
provisions of this Article, and copies of the contracts between
Landlord and those used by Landlord to perform any services which are
subject to payment by Tenant under the provisions of this Article.
6. PERSONAL PROPERTY TAXES. Tenant shall pay, or cause to be paid, before
-----------------------
delinquency any and all taxes levied or assessed and which become payable during
the term hereof upon all Tenant's Leasehold improvements, equipment, furniture,
fixtures, and any other personal property located on the Premises. In the event
any or all of the Tenant's Leasehold improvements, equipment, furniture,
fixtures and other personal property shall be assessed and taxed with the real
property, Tenant shall pay to Landlord its share of such taxes within ten (10)
days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount such tax is applicable to Tenant's property.
7. UTILITY BILLS. Tenant shall promptly pay all water, sewer, gas,
--------------
electricity, fuel, phone, light, heat, electric power and other utility bills
from the Premises. If Tenant does not pay these bills, Landlord may pay them
and such payment shall be added to the Rent.
8. LATE CHARGES. If any Rent or other sums due from Tenant is not received by
------------
Landlord or Landlord's designated agent within ten (10) days after its due date,
then Tenant shall pay to Landlord a late charge equal to the maximum amount
permitted by law (and in the absence of any governing law, six percent (6%) of
such overdue amount), plus reasonable attorneys' fees incurred by Landlord due
hereunder. The parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Landlord will incur by reason of Tenant's
late payment. Landlord's acceptance of such late charges shall not constitute a
waiver of Tenant's default with respect to such overdue amount or stop Landlord
from exercising any of the other rights and remedies granted hereunder.
9. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease,
----------------
Tenant has deposited with Landlord $38,000.00. Said sum shall be held by
Landlord as security for the faithful performance by Tenant of all the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults with respect to any provisions of
this Lease, including, but not limited to, the provisions relating to the
payment of Rent, Landlord may (but shall not be required to) use, apply or
retain all or any part of this security deposit for the payment of any Rent or
any other sum in default, or for the payment of any amount which Landlord may
spend or become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said security deposit is so used
or applied, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord in any amount sufficient to restore the security
deposit to its original amount and Tenant's failure to do so shall be a default
under this Lease. Landlord shall not be required to keep this security deposit
separate from its other funds, and (unless otherwise required by law) tenant
shall not be entitled to interest of such deposit. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest hereunder) within
ten (10) days following expiration of this Lease term. In the event of
termination of Landlord's interest in this Lease, Landlord shall transfer said
deposit to Landlord's successor in interest.
10. USE OF PREMISES.
----------------
a. The Premises shall be used for office, R&D, light assembly and
warehousing of personal computers to be used for the medical industry.
Tenant shall not create any nuisance or trespass or vitiate the
insurance or increase the rate of insurance of the Premises or the
building. Tenant agrees not to overload the floors of the Premises or
of the building. Tenant agrees not to use the Premises for any
purpose or business which is illegal, noxious, offensive because of
emission of noise, creates smoke, dust, or odors or which could damage
the Building or the Lands environmentally or otherwise or be a
nuisance or menace to or interfere with any other tenant or the
public. The floor load of the building is 200 lbs. per square inch.
b. Simultaneously herewith, Tenant shall furnish Landlord with all
Standard Industrial Classification numbers as issued by the United
States, the State of New Jersey or any other governmental authority
("SIC"), which relates to the business of the Tenant and the uses and
purposes for which the Premises shall be utilized. Tenant's SIC
number is 3841.
11. ABANDONMENT OF PREMISES. Tenant agrees not to vacate the Premises during
------------------------
the term of this Lease unless rent and common area charges continue and agrees
to use said Premises for the purposes stated above and only for such purpose.
12. DESTRUCTION AND DAMAGE.
----------------------
a. If the Building is damaged by fire or other perils covered by extended
coverage insurance Landlord shall, at Landlord's option:
(i) In the event of total destruction of the Building, elect either to
promptly commence repair and restoration of the Building and prosecute
the same diligently to completion, in which event this Lease shall
remain in full force and effect; or not to repair or restore said
Building, in which event this Lease shall terminate. In either case,
Landlord shall give Tenant written notice of its intention within
sixty (60) days after the occurrence of such destruction. If Landlord
elects not to restore the building, this Lease shall be deemed to have
terminated as of the date of such total destruction.
(ii) In the event of a partial destruction of the Building to an
extent not exceeding twenty-five percent (25%) of the full insurable
value thereof and if the damage thereto is such that the Building may
be repaired or restored within ninety (90) days from the date of such
destruction and Landlord will receive insurance proceeds sufficient to
cover the cost of such repairs, commence and proceed diligently with
the work or repair and restoration, in which event the Lease shall
continue in full force and effect; or if such repair and restoration
requires longer than ninety (90) days or the cost thereof exceeds
twenty-five percent (25%) of the full insurable value thereof or if
said insurance proceeds will not be sufficient to cover such costs,
Landlord may elect either to so report and restore, in which event the
Lease shall continue in full force and effect, or not repair,
reconstruct or restore, in which event the lease shall terminate. In
either case, Landlord shall give written notice to Tenant of its
intention within ninety (90) days after the destruction occurs. If
Landlord elects not to restore the Building, this Lease shall be
deemed to have terminated as of the date of such partial destruction.
b. Upon termination of this Lease under any of the provisions of this
Article, the parties shall be released thereby without further
obligation to the other from the date of the damage or destruction,
except for items which have theretofore accrued and are then unpaid,
and except for those items which by their own nature survive the
termination of the Lease.
c. In the event of repair and restoration as herein provided, the
Rent shall be abated proportionately in the ratio which the Tenant's
use of the Premises is impaired during the period of such repair,
reconstruction or restoration. Tenant shall not be entitled to any
compensation or damages from loss of use of the whole or any part of
said Premises and/or any inconvenience or annoyance occasioned by such
damage, repair, reconstruction or restoration.
d. Landlord and Tenant shall not be released from any of their
obligations under this Lease except to the extent and upon the
conditions expressly stated in this Article. Notwithstanding anything
to the contrary contained in this Article, if Landlord has elected to
repair and restore the Premises and is thereafter delayed or prevented
from repairing and restoring said Premises within 120 days after the
occurrence of such damage or destruction by reason of acts of God,
war, governmental restrictions, inability to procure the necessary
labor or materials, or other cause beyond the control of Landlord,
Landlord shall be relieved of its obligation to make such repairs and,
Tenant shall be released from its obligations under this Lease as of
the end of said 120 day period.
e. If damage to the Building or the Premises is due to any cause
other than fire or other peril covered by extended coverage insurance,
Landlord or Tenant may elect to terminate this Lease immediately.
f. If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall repair or restore only those portions
of said Building and Premises which were originally provided at
Landlord's expense, and the repair and restoration of areas or items
not provided at Landlord's expense shall be the obligation of Tenant.
g. Notwithstanding anything to the contrary contained in this
Article, Landlord shall not have any obligation to repair or restore
the Premises or the Building during the last twelve (12) months of
this Lease or any extension thereof. In such event, Tenant shall have
the right to terminate this Lease immediately.
13. CONDEMNATION. If twenty-five percent (25%) or more of the Premises is
-------------
taken for any public or quasi-public purpose by any lawful governmental power or
authority, by exercise or the right of appropriation, reverse condemnation,
condemnation or eminent domain or sold to prevent such taking, the Tenant or the
Landlord may at its option terminate this Lease as of the effective date
thereof. Tenant shall not because of such taking assert any claim against the
Landlord or the taking authority for any compensation because of such taking,
and Landlord shall be entitled to receive the entire amount of any award without
deduction for any estate or interest of Tenant. If less than twenty-five
percent (25%) of the Premises is taken, Landlord or Tenant at its option may
terminate this Lease. If Landlord or Tenant do not so elect, Landlord shall
promptly proceed to restore the Premises to substantially their same condition
prior to such partial taking, allowing for the reasonable effects of such
taking, and a proportionate allowance shall be made to Tenant for the Rent and
Additional Rent corresponding to the time during which, and to the part of the
Premises of which, Tenant is deprived on account of such taking and restoration.
14. INDEMNIFICATION. Tenant agrees, as its sole cost and expense, to
----------------
indemnify and save Landlord harmless from and against any and all claims,
actions, demands and suits, for, in connection with, or resulting from, any
accident, injury or damage whatsoever caused to any person or property arising,
directly or indirectly, in whole or in part, out of the business conducted in or
the use of the Premises, or occurring in, on or about the Premises or any part
thereof, or arising, directly or indirectly, in whole or in part, from any act
of omission of Tenant or any concessionaire of subtenant or their respective
licensees, servants, agents, employees or contractors, or arising out of the
breach or default by Tenant or any term, provisions, covenant or condition
herein contained, and from and against any and all losses, costs, expenses,
judgments and liabilities incurred in connection with any claim, action, demand,
suit or other proceeding brought thereof, except for any loss or damage caused
by negligence of the Landlord, its employees and agents. Said indemnity shall
include defending or resisting and proceeding by attorneys reasonably
satisfactory to Landlord.
Landlord agrees, at its sole cost and expense, to indemnify and save
Tenant harmless from and against any and all claims, actions, demands, and suits
for, in connection with, or resulting from design defects in the Premises or any
accident, injury, or damage whatsoever caused to any person or property arising,
directly or indirectly, in whole or in part from any act or omission of Landlord
or any of their respective licensees, servants, agents, employees, or
contractors, or arising out of the breach or default by Landlord of any term,
provisions, covenant or condition herein contained, and from and against any and
all losses, costs, expenses, judgments and liabilities incurred in connection
with any claim, action, demand, suit or other proceeding brought thereof, except
for any loss or damage caused by negligence of the Tenant, its employees,
agents, servants, or contractors.
15. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and
--------------------
keep in force during the term of this Lease policies of comprehensive public
liability insurance insuring Landlord and Tenant against any liability arising
out of the ownership, use, occupancy, or maintenance of the Premises. Such
insurance shall be in the amount of not less than Three Million Dollars
($3,000,000) for injury or death of one person in any one accident or occurrence
and in the amount of not less than Three Million Dollars ($3,000,000) for injury
or death of more than one person in any one accident or occurrence. Such
insurance shall further insure Landlord and Tenant against liability for
property damage of at least Three Million Dollars ($3,000,000). The limit of
any such insurance shall not limit the liability of the Tenant hereunder.
Tenant may provide this insurance under a blanket policy, provided that said
insurance shall have an additional insured lessor endorsement attached thereto.
If Tenant fails to procure and maintain said insurance, Landlord may, but shall
not be required to, procure and maintain same, but at the expense of Tenant.
Insurance required hereunder shall be in companies rated A:XIII or better in
"Best Key Rating Guide". Tenant shall deliver to Landlord copies of
certificates of insurance evidencing the liability insurance required herein.
No policy coverage shall lapse or be subject to reduction of coverage. All such
policies shall name Landlord and Kwartler Associates, Inc. as additional
insured, shall be written primary policies not contributing with and not in
excess of coverage which Landlord may carry and shall be written with an
insurance carrier satisfactory to Landlord.
16. FIRE INSURANCE - FIXTURES AND EQUIPMENT. Tenant shall maintain in
----------------------------------------
full force and effect on all of its fixtures and equipment on the Premises a
policy or policies of fire and extended coverage insurance with standard
coverage endorsement in amount or amounts equal to the full replacement cost of
such fixtures and equipment. During the term of this Lease the proceeds from any
such policy or policies of insurance shall be used for the repair or replacement
of the fixtures and equipment so insured. Landlord shall have no interest in
the insurance upon Tenant's equipment and fixtures and will sign all documents
reasonably necessary or proper in connection with the settlement of any claim or
loss by Tenant. Landlord will not carry insurance on Tenant's possessions.
Tenant shall furnish Landlord with a certificate evidencing such policy and
whenever required shall satisfy Landlord that such policy is in full force and
effect.
17. REPAIRS BY LANDLORD. Landlord agrees to keep in good repair the
--------------------
structural portions of the roof, foundations, and exterior walls of the Premises
(exclusive of all glass and all exterior doors) and underground utility and
sewer pipes outside the exterior walls of the Building, if any, except repairs
rendered necessary by the negligence of Tenant, its agents, customers, employees
or invitees. Landlord gives to Tenant exclusive control of the Premises and
shall be under no obligation to inspect said Premises. Tenant shall promptly
report in writing to Landlord any defective condition known to it which Landlord
is required to repair. All repairs shall commence promptly following the receipt
of the written report, and shall be implemented in a timely manner.
18. REPAIRS BY TENANT. Tenant accepts the Premises in their present
------------------
condition pursuant to the plan attached to this Lease. Tenant shall, throughout
the initial term of this Lease and all renewals thereof, at its expense, take
good care of the Premises and shall keep, repair, replace and maintain the
Premises in good order, condition and repair, reasonable wear and tear excepted,
and each and every part thereof (including, without limitation, painting and
decorating, and the repair, maintenance and replacement of any heating,
ventilating and air conditioning units or system), except only such matters that
are expressly stated herein to be within the landlord's obligation to maintain,
and shall not cause nor permit any dirt, debris or rubbish to be put, placed or
maintained on the sidewalks, driveways, parking lots, yards, entrances and
curbs, in, oh or adjacent to the Building. Tenant further agrees not to use the
Premises or permit the Premises to be used in any manner as to cause excessive
depreciation of or to the Building and improvements, and agrees not to cause nor
permit waste of or damage or nuisance to, in, or about the Premises of the
Building.
19. NO ACCESS TO ROOF. Tenant shall have no right to access to the roof
------------------
of the Premises or the Building and shall not install, repair, place or replace
any aerial, fan, air conditioner or other device on the roof of the Premises or
the Building without the prior written consent of Landlord. Any aerial, fan,
air conditioner or device installed without such written consent shall be
subject to removal at Tenant's expense, without notice, at any time. Landlord
shall repair at Tenant's expense, any damage to the Building or roof resulting
from the installation, repair, use, or replacement of any such air conditioner
or other device.
20. ASSIGNMENT AND SUBLETTING. Tenant shall not either voluntarily, or by
--------------------------
operation of law, assign, transfer, mortgage, pledge, hypothecate or encumber
this Lease or any interest therein, and shall not sublet the Premises or any
part thereof, or any right or privilege appurtenant thereto, or allow any other
person (the employees, agents, servants and invitees of Tenant excepted) to
occupy or use their Premises, or any portion thereof, without first obtaining
the written consent of Landlord, which consent shall not be unreasonably
withheld. Tenant can transfer its rights to this Lease to a related entity
provided Tenant owns in excess of 51% of the entity. When Tenant requests
Landlord's consent to such assignment or subletting, it shall notify Landlord in
writing of the name and address of the proposed assignee or subtenant and the
nature and character of the business of the proposed assignee or subtenant and
shall provide financial statements for the proposed assignee or subtenant.
Landlord shall have the option (to be exercised within thirty (30) days from the
submission of Tenant's request) to cancel this Lease as of the commencement date
stated in the proposed subLease or assignment. If Landlord shall not exercise
its option within the time set forth above, its consent to any proposed
assignment or subletting shall not be unreasonably withheld. If Landlord
approves an assignment or subletting as herein provided, Tenant shall pay to
Landlord, as Additional Rent, the difference, if any between Rent plus
assignment or subLease pursuant to the provisions of this Lease, and the Rent
and Additional Rent payable by the assignee or sublessee to Tenant. A consent
to one assignment, subletting, occupation or use shall not be deemed to be a
consent to any other or subsequent assignment, subletting, occupation or use and
consent to any assignment or subletting shall in no way relieve Tenant of any
liability under this Lease. Any assignment or subletting without landlord's
consent shall be void, and shall, at the option of the Landlord, constitute a
default under this Lease. In the event that Landlord shall consent to a
subLease or assignment hereunder, Tenant shall pay Landlord's reasonable fees,
not to exceed one hundred dollars per transaction, incurred in connection with
processing of documents necessary to the giving of such consent.
21. TENANT DEFAULT. The occurrence of any one of the following events
---------------
shall constitute an event of default ("Default") on the part of Tenant:
a. The vacating of the Premises by Tenant without the payment of rent and
additional rent during the remaining Lease term;
b. Failure to pay any installment of Rent or any other monies due and
payable hereunder;
c. Default in the performance of any of Tenant's covenants, agreements or
obligations hereunder, said Default (except Default in the payment of
any installment of Rent, or other monies) continuing for ten (10) days
after written notice thereof from Landlord to Tenant. If effort is
made to cure default but such effort is not completed within the ten
(10) days provided for above, then Tenant shall have an additional
fifteen (15) days to cure same.
d. The filing of a voluntary petition in bankruptcy by Tenant, the filing
of a voluntary petition for any arrangement, the filing of a petition,
voluntary or involuntary, for reorganization, or the filing of an
involuntary petition by Tenant's creditors, said involuntary petition
remaining undischarged for a period of sixty (60) days; unless tenant
continues to pay rent.
e. Receivership, attachment, or other judicial seizure of substantially
all of Tenant's assets on the Premises, such attachment or other
seizure remaining undismissed or undischarged for a period of sixty
(60) days after the levy thereof.
22. LANDLORD'S REMEDIES.
--------------------
a. Damages. In the event of any such Default by Tenant, Landlord shall
use its best efforts to relet the Premises. All costs of such
reletting shall be borne by Tenant and shall include but not limited
to restoration, brokerage fees, attorney's fees, and marketing of the
Premises. In addition to any other remedies available to Landlord at
law or in equity, Landlord shall have the immediate option to
terminate this Lease and all rights of Tenant hereunder by giving
written notice to such intention to terminate. In the event that
Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant:
i. the worth at the time of award of any unpaid Rent which has been
earned at the time of such termination; plus
ii. the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the end
of the Lease term is less than any rental payments due from
reletting the Premises for the balance of the Lease term; plus
iii. such reasonable attorney's fees incurred by Landlord as a result
of such Default, and costs in the event suit is filed by Landlord
to enforce such remedy; and
iv. At Landlord's election, such other amount in addition to or in
lieu of the foregoing as may be permitted from time to time by
applicable law. The term "Rent", as used in this Article 22,
shall be deemed to be and to mean the monthly Rent, Additional
Rent and all other sums required to be paid by Tenant pursuant to
the terms of this Lease.
maximum remedies under this Paragraph shall include unpaid rent,
and additional rent, plus ten percent (10%) .
As used in Subparagraphs i and ii above, the "worth at the time
of award" is computed by allowing interest at the rate of the
Federal Reserve Bank of New York at the time of award plus one
percent (1%).
b. Re-entry. In the event of any such default by Tenant, Landlord shall
---------
also have the right, with or without terminating this Lease, to
reenter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.
c. Election. In the event Landlord shall elect to relet, then rentals
---------
received by Landlord from such reletting the Premises shall be
applied, first, to reasonable attorney's fees incurred by Landlord as
a result of such Default and costs in the event suit is filed by
Landlord to enforce such remedies; second, to the payment of any
indebtedness other than Rent due hereunder from Tenant to Landlord;
third, to the payment of any cost of such reletting; fourth, to the
payment of cost of any alterations and repairs to the Premises, to
restore the Premises to the condition at the start of the Lease term
or to the condition as approved by Landlord under the terms of Article
24, reasonable wear and tear excluded; fifth, to the payment of Rent
due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future rent as the same may become
due and payable hereunder. Should that portion of such rentals
received from such reletting during any month, which is applied by the
payment of Rent hereunder, be less than the Rent payable during the
month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Tenant
shall also pay to Landlord, as soon as ascertained, any costs and
expenses incurred by Landlord in such reletting or in making such
alterations and repairs not covered by the rentals received from such
reletting.
d. Termination. No re-entry or taking of possession of the Premises by
-----------
Landlord pursuant to this Article shall be construed as an election to
terminate this Lease unless a written notice of such intention is
given to Tenant or unless the termination thereof is decreed by a
court of competent jurisdiction. Notwithstanding any reletting
without termination of Landlord because of any Default by Tenant,
Landlord may at any time after such reletting elect to terminate this
Lease for any such Default.
23. SUBORDINATION - ATTORNMENT. Upon request of Landlord, Tenant will in
---------------------------
writing subordinate its rights hereunder to the lien of any mortgage or deed of
trust now or hereafter in force against the Premises, provided the holder of
such mortgage or deed of trust grants Tenant a non-disturbance agreement, and to
all advances made or hereafter to be made upon the security thereof.
In the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by the
Landlord covering the Premises, the Tenant shall attorn to the purchaser upon
any such foreclosure or sale and recognize such purchaser as the Landlord under
this Lease.
The provisions of this Article to the contrary notwithstanding, and so long as
Tenant is not in default hereunder, this Lease shall remain in full force and
effect for full term hereof.
24. ALTERATIONS AND ADDITIONS - REMOVAL OF FIXTURES.
------------------------------------------------
a. Tenant shall not make or allow to be made any alterations, additions
or improvements to or on the Premises or any part thereof in excess of
$1,000.00 without first obtaining the consent of Landlord, which
consent shall not be unreasonably withheld and any alterations,
additions or improvements to or on said Premises, shall at once become
a part of the realty and belong to the Landlord and shall be
surrendered with the Premises. In the event any such work shall cost
in excess of Ten Thousand ($10,000) Dollars, such work shall not be
commenced until Tenant shall submit to the Landlord plans and
specifications relating to any such repairs, alterations, additions or
improvements, and all such work shall be performed in accordance with
the provisions of this Lease. Landlord shall not unreasonably
withhold its consent to any such alterations, addition or improvement,
but shall have the right to determine if such work would reduce the
value, size or general utility of the Building or any portion thereof,
or whether such work maintains the architectural harmony of the
Building. Any approval by Landlord as aforesaid may be upon condition
thereof and payment therefor, as Landlord may reasonably require,
including the furnishing of adequate security. In the event Landlord
consents to the making of any alterations, additions or improvements
to the Premises by Tenant, the same shall be made by Tenant at
Tenant's sole cost and expense and subject to the provisions of
Section 42 herein. Upon the expiration or sooner termination of the
term hereof, Tenant shall, upon written demand by Landlord, given at
least thirty (30) days after the end of the term, at Tenant's sole
cost and expense, forthwith and with all due diligence, remove any
alterations, additions, or improvements made by Tenant, designated by
Landlord to be removed, and Tenant shall, forthwith and with all due
diligence, at its sole cost and expense, restore the Premises to the
condition at the start of the Lease, reasonable wear and tear
excluded, and repair any damage to the Premises caused by such
removal. Tenant shall not be required to remove and/or restore any
alterations, additions or improvements if Landlord has specifically
excluded, in writing, any of Tenant's alterations, additions, or
improvements from Tenant's restoration obligations.
b. Any work performed by Tenant, irrespective of cost, shall be subject
to the Landlord's inspection and approval after completion to
determine whether it complies with the requirements of this Lease.
The approval or consent of the Landlord shall not relieve Tenant of
its obligation that all such repairs, alterations, improvements and/or
additions be constructed and performed in a first-class good and
workmanlike manner and in accordance with all applicable governmental
and fire underwriting requirements, nor constitute a waiver of any
rights of Landlord if Tenant fails to perform its obligations.
Tenant, at its sole cost and expense, shall procure all necessary
governmental approvals, permits or certificates in connection with all
work performed by Tenant in, on or at the Premises and shall deliver
the original of all such approvals, permits or certificates to the
Landlord, to be retained by Landlord.
c. During the course of any and all repairs, alterations, additions or
improvements which the Tenant shall either be required to perform or
which the Tenant shall elect to perform, Tenant at its sole cost and
expense, shall at all times obtain and maintain or cause to be
obtained and maintained, workmen's compensation insurance and any
other insurance which shall then be required by law, together with
public liability insurance as set forth in Section 15 hereof, to
insure against any additional hazards created in connection with the
performance of any of the aforesaid work. Prior to the commencement
of any such work, Tenant shall deliver to Landlord copies of all
policies or certificates of insurance with respect to all policies
required pursuant to this Section 24 (c).
25. EXTERIOR SIGNS. Tenant may not provide, install or maintain any exterior
---------------
signs on the roof or in the windows; nor shall the Tenant provide, install or
maintain any exterior signs on the facade or walls of the Building or on any
grounds adjacent thereto, unless: (i) such installation be made in such manner
as will not affect any roofing bond and/or other guarantee which shall then be
in force and effect; (ii) all such signs shall have been approved by Landlord in
writing before installation; and (iii) all such signs must at all times conform
to all applicable rules and regulations, codes and ordinances of any
governmental agencies having jurisdiction thereover. Any and all signs placed
on the Premises by Tenant shall comply with Landlord's rules and regulations
governing such signs and Tenant shall be responsible to Landlord for any damage
caused by installation, use, or maintenance of such signs. Tenant agrees upon
removal of said signs to repair all damage incident to such removal.
26. ENTRY FOR CARTING AND REPAIRS.
------------------------------
a. Landlord and its designees shall have the right to place and maintain
all utility equipment of any kind in and on the Premises as may be
necessary or desirable to serve the Building or any portion thereof,
provided such does not unreasonably interfere with Tenant's right of
quiet enjoyment of the Premises. If the space should be reduced, the
Rent and Adjustments will be reduced in an amount equal to the
percentage that the lost space bears in relation to the entire
building. Landlord and its designees shall have the right to enter
upon the Premises at all reasonable hours (and in emergencies at all
times): (i) to inspect the same; (ii) to make repairs, additions or
alterations to and/or to complete initial construction of, the
Premises and/or to the Building or to prevent waste or depreciation
thereof; (iii) to post "For Sale" signs on the Premises and to exhibit
the Premises to any prospective purchaser or mortgagee; or (iv) for
any other lawful purpose. This paragraph shall not be deemed to be a
covenant by Landlord nor be construed to create an obligation or duty
on the part of the Landlord to make such inspection, repairs,
additions or alterations except as otherwise herein provided. Any
performance by Landlord hereunder shall not be deemed a waiver of
Tenant's default in failing to perform same, nor shall Landlord be
liable for any inconvenience disturbance, loss of business, loss of
use of the Premises or any other damage suffered by Tenant, due to
said performance by Landlord and the obligations of Tenant pursuant to
this Lease shall not thereby be affected in any manner whatsoever.
Landlord agrees to exercise due care to cause the least possible
interference with Tenant's business, but Landlord shall not be
required to employ labor on weekends or on any overtime basis to avoid
or reduce any such interference.
b. For a period commencing one hundred eighty (180) days prior to the end
of the Term, Landlord and its designees shall have reasonable access
to the Premises with Tenant as escort for the purpose of exhibiting
the same to prospective tenants and to post any "To Let" or "To Lease"
signs upon the Premises.
c. Landlord shall have the right to carry material in and on the Premises
and to perform work in or on the Premises pursuant to the provisions
of this Lease, without the same constituting an actual or constructive
eviction to Tenant, in whole or in part, without the same permitting
any rent reduction or abatement and without the Tenant having the
right to assert any claim for damages to the Tenant's tangible
property or injury or death to persons. In no event shall the Landlord
be liable for any inconvenience, disturbance, loss of business, loss
of use of the Premises or any consequential damages which Tenant may
suffer.
27. MORTGAGEE'S RIGHTS. Tenant's rights shall be subject to any mortgage or
-------------------
deed of trust to secure debt which is now, or may hereafter be, placed upon the
Premises by Landlord. Tenant agrees to give any mortgagee and/or trust deed
holder, by registered mail, a copy of any notice of default served upon the
Landlord, provided that prior to such notice Tenant has been notified, in
writing (by way of notice of assignment of rents and Leases, or otherwise), of
the address of such mortgagee(s) and/or trust deed holder(s) . Tenant further
agrees that if Landlord shall have failed to cure such default within the time
provided for in this Lease, then the mortgagee and/or trust deed holder shall
have an additional thirty (30) days within which to cure such default or if such
default cannot be cured within that time, then such additional time as may be
necessary if within such thirty (30) days, any mortgagee and/or trust deed
holder has commenced and is diligently pursuing the remedies necessary to cure
such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued.
28. END OF TERM. Tenant agrees to promptly vacate the Premises at the
-----------
conclusion of the term of the Lease and to leave such Premises broom clean, free
of all debris, waste(s) and by-products, and in an environmentally safe
condition, in compliance with all governmental laws, rules, orders, and
regulations; however, Tenant shall have no obligation or liability for the
condition of the Premises prior to the term of this Lease. Tenant, at its sole
cost and expense, shall retain an environmental or engineering consultant or
consulting firm to verify Tenant's compliance with this provision, and Tenant
agrees to (1) provide access and reasonable assistanc to such consultant or
consulting firm at the Premises, (2) implement the recommendation of such
consultant or consulting firm, promptly upon Landlord's request therefor. Should
Landlord desire to have the Premises or any part thereof restored to the
condition in which they were originally delivered to Tenant, Landlord shall so
notify Tenant in writing within thirty (30) days after the end of the Term, and
Tenant shall have thirty (30) days after such written notice to restore the
Premises, or any part thereof, to the condition in which they were originally
delivered to Tenant, at Tenant's sole cost and expense shall so restore the
Premises, additions and improvements as may be requested by Landlord, and fix
and repair any and all damage or defacement to the Building and/or lands caused
by the installation and/or removal of alterations, additions, improvements,
furniture, equipment, trade fixtures or any other property. Any and all of such
property, alterations, additions or improvements not so removed, at Landlord's
option, shall become the exclusive property of Landlord and be disposed of by
Landlord, at Tenant's cost and expense, without further notice or demand. If
the Premises be not surrendered as and when aforesaid, Tenant shall indemnify
Landlord against any damages, loss or liability resulting therefrom, including,
without limitations, any claims made by any succeeding occupant founded on such
delay. Tenant's obligation under this paragraph shall survive the expiration or
sooner termination of the Term. Tenant shall not be required to remove and/or
restore any alterations, additions or improvements if Landlord has specifically
excluded, in writing, any of Tenant's alterations, additions, or improvements
from Tenant's restoration obligations.
29. NO ESTATE IN LAWS. This Lease shall create the relationship of Landlord
------------------
and Tenant between the parties hereto; no estate shall pass out of Landlord.
Tenant has only a usufruct, not subject to levy and sale, and not assignable by
Tenant except with Landlord's prior written consent.
30. HOLDING OVER. If Tenant remains in possession of the Premises after
-------------
expiration of, the term hereof, without the express written consent of Landlord,
Tenant's occupancy shall be a tenancy from month to month at 150% of the Rent in
effect for the last month of the term of this Lease, plus all other charges
payable hereunder, and upon the same terms and conditions herein contained. In
no event however shall Tenant be relieved of any liability to Landlord for
damages resulting from such holding over.
31. HOMESTEAD RIGHTS. Tenant waives all homestead rights and exemptions which
-----------------
it may have under any law as against any obligation lowing under this Lease.
Tenant hereby assigns to Landlord its homestead and exemption.
32. SALE OF PREMISES BY LANDLORD. In the event of any sale of the Premises by
-----------------------------
Landlord, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties of their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease. No cost of such
sale shall be paid by Tenant.
33. RULES AND REGULATIONS
---------------------
a. Tenant agrees to comply with such reasonable rules and regulations
as Landlord may adopt from time to time for the orderly and proper
operation of the Building and parking and other common areas. Such
rules may include but shall not be limited to the following: (1) the
restriction of employee parking to a limited, designated area or
areas; and (2) regulation of the removal, storage and disposal of
Tenant's refuse and other rubbish at the sole cost and expense of
Tenant. The rules and regulations shall be binding upon Tenant upon
delivery of a copy of them to Tenant. Landlord shall not be
responsible to Tenant for the nonperformance of any of said rules and
regulations by any other tenants or occupants of the Building;
however, Landlord shall enforce these rules and regulations among the
tenants. Landlord agrees to enforce the rules and regulations in a
nondiscriminatory manner.
b. Tenant agrees at all times during the Term of this Lease, and at its
sole cost and expense:
i. not to take or permit any action which would violate Landlord's
union contracts, if any, affecting the Building or the Premises,
or which would create any work stoppage, picketing labor
disruption or any work performed or to be performed by Landlord
or any other persons in or about the Building, or which would
hinder the activities or operations of the Landlord in bringing
about the cessation of any work stoppage, picketing or other
labor disruption or dispute affecting the Building any work being
performed or to be performed in or about the Building;
ii. to pay promptly and when due, all taxes, licenses, fees,
assessments or other charges levied or imposed upon the business
of Tenant or upon any fixtures, furnishings or, equipment in, on
or at the Premises;
iii. not to commit any waste or nuisance, nor use the plumbing
facilities for any purpose injurious to same or dispose of any
garbage or any foreign substance therein, nor place a load on any
floor in the Premises exceeding the floor load of 200 lbs. per
square inch, which such floor was designed to carry nor install,
operate and/or maintain in the Premises any heavy equipment
except in a location approved by Landlord, not install, operate
and/or maintain in the Premises any electrical equipment which
will overload the electrical system therein (1,000 amps/480
volts), or any part thereof, beyond its capacity for proper and
safe operation as determined by Landlord or which does not have
Underwriter's approval; or which would require any plan and/or
bond to be furnished or which would require any work to be
performed in order to cure and/or correct any condition created
by Tenant, pursuant to any applicable governmental law or
requirement;
iv. to keep the Premises in a neat, clean, orderly and sanitary
condition, free of any insects, rodents, vermin and pests of
every type and kind;
v. not to use the Premises for any purpose or business which is
illegal, noxious, offensive because of the emission of noise,
smoke, dust or odors or which could damage the Building or be a
nuisance or menace to or interfere with, any other tenants or the
public;
vi. to comply with all requirements of all suppliers of public
utility services to the Building and not to suffer or permit any
Act or omission the consequence of which could be to cause the
interruption, curtailment, limitation or cessation of any utility
service to the Building;
vii. At all times during the Term of this Lease hereof, and upon the
termination of the Term of this Lease hereof, Tenant shall comply
with all applicable environmental protection laws, rules or
requirements, and shall promptly cure all violations thereof
arising from its non-compliance including but not limited to, the
preparation, delivery and/or filing with the applicable
governmental authorities and with the Landlord, or all forms,
certificates, notices, documents, plans and other writings, and
the furnishing of such other information as may be required or
requested by the Landlord, its mortgagee or any applicable
governmental authority in connection with compliance or curing of
any applicable requirement or in connection with the sale,
Lease, transfer, mortgaging or other disposition of the Building
and/or Lands. It is specifically acknowledged and agreed that the
provisions of this sub-paragraph shall survive the termination of
the Lease, regardless of the reason or cause thereof.
c. No abatement, diminution or reduction of the Rental or other charges
required to be paid by Tenant pursuant to the terms of this Lease,
shall be claimed by or allowed to, the Tenant for the inconvenience,
interruption, cessation or loss of business or otherwise cause
directly or indirectly by any present or future laws, rules,
requirements, orders, directions, ordinances or regulations of the
federal, state, county or municipal government, or of any other
governmental or lawful authority whatsoever, or as a result of any
diminution of the amount of space used by Tenant caused by legally
required changes in the construction, equipment operation or use of
the Premises. Tenant shall have the right to terminate the Lease if
future laws substantially diminish the value of the Premises for the
Tenant's conduct of business.
d. Tenant, following notice to Landlord, shall have the right to contest
by appropriate legal proceedings, at its sole cost and expense, the
validity of any law, ordinance, order, rule, regulation or requirement
of the nature herein referred to, provided, however, that: (i) any
noncompliance shall not constitute a crime on the part of the Landlord
or otherwise adversely affect, jeopardize or threaten the interest of
Landlord; (ii) Tenant shall diligently prosecute any such contest to a
final determination by a court, department or governmental authority
having final jurisdiction and keep Landlord advised in writing as to
all changes in status and determinations in connection with any such
proceedings; and (iii) Tenant shall indemnify and save harmless
Landlord against any and all losses, costs, expenses, claims,
penalties, actions, demands, liabilities, judgments or other damages
which Landlord may sustain by reason of such contest or as a result of
Tenant's failure or delay in compliance. It is agreed however that
Landlord has the right to demand that the Tenant furnish adequate
security to ensure its ability to perform its indemnity obligations
hereunder, which security if so requested, shall be furnished to
Landlord prior to the Tenant commencing or continuing wish such
contest, as the case may be. In no event, however, shall Tenant defer
compliance if such deferment would constitute a violation of any of
the provisions of any mortgage or ground Lease to which this Lease is
or shall be subordinate. Landlord agrees to cooperate as reasonably
required for the purpose of any such contest, provided that the same
shall be without cost or expense to Landlord. Landlord shall have the
right, but not the obligation to contest by appropriate legal
proceedings, at Landlord's expense, any such law, ordinance, rule,
regulation or requirement; provided such does not unreasonably
interfere with the business and business operations of Tenant.
34. RIGHTS CUMULATIVE. All rights, power and privileges conferred hereunder
------------------
upon parties hereto shall be cumulative but not restrictive to those given by
law.
35. WAIVER OF RIGHTS. No failure of Landlord to exercise any power given
-----------------
Landlord hereunder, or to insist upon strict compliance by Tenant with his
obligation hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's right to demand exact
compliance with the terms hereof.
36. TIME OF ESSENCE. Time is of the essence of this agreement.
----------------
37. DEFINITIONS. "Landlord" as used in this Lease shall include Landlord's
------------
heirs, representatives, assigns and successors in title to Premises. "Tenant"
shall include Tenant's heirs and representatives, and if this Lease shall be
validly assigned or the Premises sublet, shall include Tenant's assignees or
sublessees, as to Premises covered by such assignment or sublease. "Landlord"
and "Tenant" include male and female, singular and plural, corporation,
partnership or individual, as may fit the particular parties.
38. NOTICES. All notices and demands which may or are to be required or
--------
permitted to be given to either party by the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States mail, postage prepaid, addressed to the Tenant at the Premises,
and to the address hereinbelow, or to such other place as Tenant may from time
to time designate in a notice to the Landlord. All notices and demands by the
Tenant to the Landlord shall be sent by United States mail, postage prepaid,
addressed to the Landlord at the address set forth herein, and to such other
person or place as the Landlord may from time to time designate in a notice to
the Tenant.
To Landlord at: c/o Kwartler Associates, Inc.
2 North Street, Waldwick, NJ 07463
To Tenant at: 1 Pearl Court
Allendale, New Jersey 07401
And a copy to: Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
Bothell, Washington 98040-3003
39. ESTOPPEL CERTIFICATES. Tenant shall, from time to time, upon written
----------------------
request of Landlord, execute, acknowledge and deliver to Landlord or its
designee a written statement stating: the date this Lease was executed and the
date it expires, the date Tenant entered into occupancy of the Premises; the
amount of minimum monthly rent and the date to which such rent has been paid;
that this Lease is in full force and effect and has not been assigned, modified,
supplemented or amended in any way (or specifying the date and terms of any
agreement so affecting this Lease); that this Lease represents the entire
agreement between the parties as to this leasing; that all conditions under this
Lease to be performed by the Landlord have been satisfied (in the event such is
the case, or specify those that have not been satisfied); that all required
contributions by Landlord to Tenant on account of Tenant's improvements have
been received (if such is the case, or specify those that have not been
received); that on this date there are no existing defenses or offsets which the
Tenant has against the enforcement of this Lease by the Landlord; that no rent
has been paid more than one (1) month in advance; and that no security has been
deposited with Landlord (or, if so, the amount thereof). It is intended that
any such statement delivered pursuant to this paragraph may be relied upon by a
prospective purchaser of Landlord's interest or a mortgage of landlord's
interest or assignee of any mortgage upon Landlord's interest in the Building.
Tenant agrees to respond within fifteen (15) days of receipt
40. SUBROGATION. As long as their respective insurers so permit, Landlord and
------------
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall apply to their insurers for such waivers and shall obtain any
special endorsements required by their insurer to evidence compliance with the
aforementioned waiver.
GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to promptly comply with
--------------------
all requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of said Premises. Landlord agrees to promptly
comply with any such requirements if not made necessary by reason of Tenant's
occupancy.
42. LIENS. Tenant shall keep the Premises and the property on which the
------
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant. Landlord
may require, at Landlord's sole option, that Tenant provide to Landlord, at
Tenant's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half (1-1/2) times the estimated cost of any improvements,
additions, or alterations which the Tenant desires to make.
43. DISPLAYS. Tenant may not display or sell merchandise or allow grocery carts
---------
or other similar devices within the control of Tenant to be stored or to remain
outside the exterior walls and doorways of the Premises. Tenant further agrees
not to install any exterior lighting, amplifiers or similar devices on the
exterior of the Building or use the Premises as an advertising medium which may
be heard or seen outside the Premises, such as flashing lights, searchlights,
loudspeaker, phonographs or radio broadcasts.
44. AUCTIONS. Tenant shall not conduct or permit to be conducted any sale by
---------
auction in, upon or from the Premises whether said auction be voluntary,
involuntary, pursuant to any assignment for the payment of creditors or pursuant
to any bankruptcy or other insolvency proceeding.
45. AUTHORITY OF TENANT. If Tenant is a corporation or partnership, each
--------------------
individual executing this Lease on behalf of said corporation or partnership
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation or partnership, and that this Lease is
binding upon said corporation or partnership.
46. NO ACCORD OR SATISFACTION. No payment by Tenant or receipt by Landlord of
--------------------------
a lesser amount than the monthly rent and other sums due hereunder shall be
deemed to be other than on account 6f the earliest rent or other sums due, nor
shall any endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
rent or other sum or pursue any other remedy provided in this Lease.
47. BROKERS. Tenant represents and warrants to Landlord that neither it nor
--------
its officers or agents nor anyone acting on its behalf has dealt with any real
estate broker other than Kwartler Associates, Inc. and Tarvin Associates, Inc.
in negotiating or making of this Lease, and Tenant agrees to indemnify and hold
Landlord harmless from any claim or claims, as well as costs and expenses
including attorneys' fees incurred by Landlord in conjunction with any claim or
claims, of Kwartler Associates, Inc. and Tarvin Associates, Inc. or any broker
or brokers claiming to have interested Tenant in the Building or Premises or
claiming to have caused Tenant to enter into this Lease.
48. NON-LIABILITY OF LANDLORD
-------------------------
a. Landlord shall not be liable for any damage or injury which may be
sustained by Tenant or by any other person, as a consequence of the
failure, breakage, leakage or obstruction of the street or sub-
surface; or of the water, plumbing, steam, sewer, waste or soil pipes;
or of the roof, walls, drains, leaders, gutters, valleys, downspouts
or the like; or of the electrical, gas, power conveyor,
refrigeration, sprinkler, air conditioning or heating systems; or of
the elevators or hoisting equipment; or of any other structural
failure; or by reason of the elements; or resulting from theft or
pilferage; or resulting from fire, explosion, or other casualty; or
resulting from the carelessness, negligence, or improper conduct on
the part of the Tenant, any other tenant, except to the extent of the
negligence of Landlord, its agents, employees, guests, licensees,
invitees, assignees or successors; or attributable to any interference
with, interruption of or failure, beyond the control of Landlord, of
any services to be furnished or supplied by Landlord. All property
kept, maintained or stored at the sole risk of the Tenant.
b. Landlord shall not be liable to Tenant or any person or entity
claiming through the Tenant, except for any breach orviolation by
Landlord, Landlord's agent(s) or by any other tenant or by any other
person or entity, of:
(i) any rule or regulation established by Landlord; or
(ii) any provision, covenant, term or condition of this or any other
agreement affecting the Building and lands or any portion
thereof.
49. UNAVOIDABLE DELAYS
------------------
a. Except as otherwise provided in this Lease, as a result of strikes,
lockouts, labor disputes, inability to obtain labor, materials or
reasonable substitutes therefore, acts of God, governmental
restrictions, regulations or controls, enemy or hostile governmental
action, civil commotion, insurrection, revolution, sabotage, fire or
other casualty, acts or failure to act by Tenant or any other tenant
or other conditions beyond the control of Landlord, whether prior to
or during the Term, Landlord shall fail punctually to perform any
Lease obligation, then and in any of such events, such obligation
shall be punctually performed as soon as practicable after such
condition shall abate. In the event that Landlord, as a result of any
such condition, shall be unable to exercise any right or option within
any time limit provided in this Lease, such time limit shall be deemed
extended for a period equal to the duration of such condition. The
failure of Landlord to perform any Lease obligation for the reasons
set forth hereinshall not affect, curtail, impair or excuse this Lease
or the obligations of Tenant hereunder.
b. No diminution or abatement of rent, or other compensation, shall be
Maimed or allowed for inconvenience or discomfort arising from the
making of repairs or improvements to the Building or to its
appliances, or arising from the construction of or repairs or
improvements to, other buildings, structures, land or appliances, to
the various "services", if any, to be furnished by the Landlord to the
Tenant, it is agreed that there shall be no diminution or abatement of
the rent, or any other compensation, for interruption or curtailment
shall be due to accident, alterations or repairs necessary to be made
or to inability or difficulty in securing supplies or labor for the
maintenance of such "service" or to some other cause, not gross
negligence on the part of the Landlord. No such interruption or
curtailment of such "service" nor any nonperformance by Landlord
pursuant to subparagraph (a) of this Paragraph, shall be deemed a
constructive eviction, nor shall there be any abatement or diminution
of rent because of making of repairs, improvements or decorations to
the Premises after the date above fixed for the commencement of the
Term, it being understood that the Rental shall in any event, commence
to run at such date as above fixed.
50. ENVIRONMENTAL PROVISIONS.
-------------------------
a. For the purposes of this Lease the following additional definitions
shall apply:
i. "Hazardous Substances" shall include any pollutants, petroleum
products, dangerous substances, toxic substances, hazardous
wastes, hazardous materials, or hazardous substances as defined
in or pursuant to the Industrial Site Recovery Act and all rules,
regulations, orders, directives and opinions promulgated
thereunder ("ISRA") N.J. S.A. 13: 1K-6 et seq.: the Spill
Compensation and Control Act, N.J.S.A. 58:10-23.11 et sea. and
all rules, regulations, orders, directives and opinions
promulgated thereunder ("Spill Act"); the Solid Waste Management
Act, N.J.S.A. 13:1E-1 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. (S)6901 et seq.; the Comprehensive
Environmental Response compensation and Liability Act, 42 U.S.C.
(S)9601 et seq. and all rules, regulations, orders, directives
and opinions promulgated thereunder ("CERCLA"); or any other
Federal, State or Local environmental law or ordinance and all
rules, regulations, orders, directives and opinions promulgated
under the foregoing, (collectively "Environmental Laws") .
ii. "Release" means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping.
iii. "Notice" means any summons, citation, directive, order, claim,
litigation, investigation, proceeding, judgment, letter or
other communication, written or oral, actual or threatened, from
the New Jersey Department of Environmental Protection and Energy
("DEPE"), the United States Environmental Protection Agency
("EPA"), any other Federal, State or Local agency or authority
pertaining to the Premises.
b. To the extent that Tenant may be permitted under applicable law to use
the Premises for the generating, manufacturing, refining,
transporting, treating, storing, handling, disposing, transferring or
processing of Hazardous Substances, Tenant shall ensure that said use
shall be conducted at all times strictly in accordance with applicable
Environmental Laws. Tenant shall not cause nor permit as a result of
any intentional or unintentional act or omission, a Release of
Hazardous Substances. If any intentional or unintentional act or
omission results in any actual or alleged Release of Hazardous
Substances, Tenant promptly shall conduct necessary sampling and
cleanup and remediate such Release in accordance with applicable
Environmental Laws.
c. Tenant, at its sole cost and expense, promptly shall apply for ISRA
approval prior to the occurrence of any event that would trigger ISRA
applicability, and pursue the matter to obtain an approved negative
declaration or an approved remedial action workplan completion. In the
event that the occurrence is the transfer of title or other action by
Landlord, Landlord shall give timely notice to Tenant of said
contemplated transfer so as to give Tenant adequate time to obtain
the approvals contemplated by this paragraph. Landlord will pay for
all costs incurred in obtaining approvals required by Landlord's acts.
d. In connection with the performance of its obligations pursuant to this
Paragraph 50, Tenant shall furnish to Landlord true and complete
copies of all documents, submissions and correspondence provided by
Tenant to DEPE and all documents, reports, directives and
correspondence provided by DEPE to Tenant, together with true and
complete copies of all sampling and test results obtained from
samples and tests taken at and around the Premises. In connection
with the performance of its obligations pursuant to this Paragraph
50, Landlord shall furnish to Tenant true and complete copies of all
documents, submissions and correspondence provided by Landlord to
DEPE and all documents, reports, directives, and correspondence
provided by DEPE to Landlord, together with true and complete copies
of all sampling and test results obtained from samples and tests
taken at and around the Premises.
e. Should DEPE determine that pursuant to ISRA, a remedial action
workplan be prepared and a cleanup be undertaken because of a Release
of a Hazardous Substance at the Premises which occurred during the
term of the Lease and was as a result of Tenant or his agents, Tenant,
at its sole cost and expense, promptly shall prepare and submit the
required plan and financial assurances and promptly shall carry out
the approved plan. Should Tenant's operations at the Premises be
outside of those industrial operations covered by ISRA, Tenant, at its
own cost and expense, shall obtain a Letter of Nonapplicability or de
minimis quantity exemption from DEPE prior to termination of the Term
if either of the above is not obtained, then, at Landlord's option,
shall hire a consultant satisfactory to Landlord to undertake sampling
at the Premises sufficient to determine whether or not Tenant's
operations have resulted in a Release of a Hazardous Substance at or
around the Premises. Tenant's sampling, at a minimum, shall establish
the integrity of all underground storage tanks at the Premises. Should
the sampling reveal any Release of a Hazardous Substance, then Tenant,
at its sole cost and expense, promptly shall cleanup the Premises in
accordance with Environmental Laws and DEPE. Landlord agrees to pay
all costs and initiate all actions in accordance with this Paragraph
for all actions resulting from the condition of the property prior to
Tenant's occupancy of the Premises and for all actions of the Landlord
or his agents during the term of this Lease.
f. Should the submission of a remedial action workplan be required
pursuant to ISRA, and caused by Tenant and/or its agents, then
notwithstanding the minimum financial security requirements pursuant
to ISRA, Tenant, at its sole cost and expense, shall furnish to DEPE
security satisfactory to DEPE, in the amount of at least 100% of the
cleanup cost estimate obtained, in the form of a bond or letter of
credit issued by a financial surely authorized to do business in the
State of New Jersey, guaranteeing the performance and completion of
Tenant's obligations pursuant to ISRA. The security furnished by
Tenant shall be renewed and kept in force by Tenant, at Tenant's sole
cost and expense, until such time as Tenant shall have received final
approval of the cleanup and a release of the financial assurances from
DEPE.
g. Tenant hereby assumes and agrees to indemnify and hold harmless
Landlord from and against all obligations, liabilities, damages,
costs, fines, penalties, losses and expenses under, in connection
with, arising from or relating to, Tenant's compliance or failure to
comply with ISRA as set forth above, including but not limited to,
reasonable attorney, consultant and expert fees. Such obligation to
comply with ISRA shall be discharged when the DEPE approves a negative
declaration or has issued written confirmation that a remedial action
workplan has been implemented and completed to the satisfaction of the
DEPE.
Landlord hereby assumes and agrees to indemnify and hold harmless
Tenant from and against all obligations, liabilities, damages, costs,
fines, penalties, losses and expenses under, in connection with,
arising from or relating to, Landlord's compliance or failure to
comply with ISRA as set forth above, including but not limited to,
reasonable attorney, consultant and expert fees. Such obligation to
comply with ISRA shall be discharged when the DEPE approves a negative
declaration or has issued written confirmation that a remedial action
workplan has been implemented and completed to the satisfaction of the
DEPE.
h. In the event Tenant is unable to obtain either (a) a non-
applicability letter; (b) an approval of a negative declaration; or
(c) an approval of a remedial action workplan prior to the occurrence
of the event triggering applicability of ISRA, then Tenant, at its
sole cost and expense, shall do everything necessary in order to
obtain agreement with DEPE, authorizing the occurrence of the event
triggering ISRA and obligating Tenant to comply, at its sole cost and
expense, with all requirements of ISRA on terms and conditions
satisfactory to Landlord and without imposing any restrictions or
prohibitions against the Premises.
i. Notwithstanding anything in this Lease to the contrary, and without
limiting any other provisions of this Paragraph 50, Tenant, at its
sole cost and expense, shall observe, comply and fulfill all of the
terms and provisions of all applicable Environmental Laws, as the same
may be amended from time to time, as they relate to Tenant's use and
occupancy of the Premises during the term of this Lease, unless caused
by Landlord.
j. In the event there shall be filed a lien against the Premises arising
out of a claim(s) by DEPE pursuant to the provisions of the Spill Act
or by EPA pursuant to the provisions of CERCLA caused by Tenant,
Tenant immediately either shall: 1) pay the claim and remove the lien
from the Premises; or, 2) furnish a bond, cash receipt or other
security satisfactory to discharge the claim out of which the lien
arises.
k. Tenant hereby covenants and agrees to indemnify and, hold Landlord
harmless from and against any and all losses of whatever nature,
including lost rentals, claims, costs, fines, penalties, losses and
expenses, including but not limited to, reasonable attorney,
consultant and expert fees that Landlord may sustain as a result of
Tenant's non-compliance or failure to comply in a timely fashion with
the provisions of this Paragraph 50 or any Environmental Law or by
Tenant's Release of Hazardous Substances at the Premises.
Landlord hereby covenants and agrees to indemnify and hold Tenant
harmless from and against any and all losses of whatever nature,
including lost rentals, claims, costs, fines, penalties, losses and
expenses, including but not limited to, reasonable attorney,
consultant and expert fees that Tenant may sustain as a result. of
Landlord's non-compliance or failure to comply in a timely fashion
with the provisions of this Paragraph 50 or any Environmental Law or
by Landlord's Release of Hazardous Substances at the Premises, or the
condition of the Premises prior to the commencement of the lease.
1. i. Tenant promptly shall provide Landlord with all documentation and
correspondence provided to DEPE pursuant to the Worker and Community
Right to Know Act, N.J.S.A. 34:5A-1 et sea., and all rules,
regulations, orders, directives and opinions promulgated thereunder.
ii. Tenant promptly shall supply Landlord with all reports and
notices made by Tenant pursuant to the Hazardous Substance Discharge
Reports and Notices Act, N.J.S.A. 13:lK-15, et seq. and all rules,
regulations, orders, directives and opinions promulgated thereunder.
iii. Tenant promptly shall provide Landlord with a copy of all
permits obtained pursuant to any Environmental Law,
m. Tenant acknowledges that for Landlord to comply with the requirements
of Environmental Laws, Landlord from time to time, may have to enter
the Premises. Landlord and/or its agents shall have an irrevocable
license and right to enter the Premises for such purposes, as well as
for removing soil, installing test and/or monitoring wells, such other
equipment and undertaking such other work as may be required by DEPE.
All such entry by Landlord and/or its agents shall be upon reasonable
notice to Tenant, and shall not unreasonably interfere with the
conduct of Tenant's business.
n. Tenant shall cooperate fully in allowing, from time to time, such
examinations, tests, inspections, and reviews of the Premises as
Landlord, in its sole and absolute discretion, shall determine to be
advisable in order to evaluate any potential environmental problems.
Landlord expressly reserves the right, but without any obligation, to
conduct examinations, tests, (including but not limited to a
geohydrological survey of soil and subsurface conditions), inspections
and reviews of the Premises as Landlord, in its sole and absolute
discretion, may determine to be necessary, as long as such actions
shall not unreasonably interfere with the conduct of Tenant's
business.
o. Landlord and Tenant agree to cooperate with each other to provide any
information necessary to the other in order to effect compliance with
any Environmental Law.
p. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not be responsible for complying with any Environmental
Law in connection with any spill or ReLease of Hazardous Substances
which occurred prior to the Commencement Date of this Lease or which
was caused by Landlord.
q. In the event Tenant shall fail to comply in full with this Paragraph,
Landlord, at its option, may perform any and all of Tenant's
obligations as aforesaid, and all costs and expenses incurred by
Landlord, in the exorcise of its rights shall be deemed a claim
against Tenant as Additional Rent payable on demand.
r. The provisions of this Paragraph 50 shall survive the expiration or
earlier termination of this Lease, regardless of the reason for such
termination and compliance with the provisions of this Paragraph 50
may require Tenant to expend funds or perform acts after the
expiration or termination of this Lease. Tenant agrees to expend such
funds and/or perform such acts and shall not be excused therefrom
notwithstanding any expiration or termination of this Lease, it being
agreed and acknowledged that Landlord would not have entered into this
Lease but for the provisions of this Paragraph 50 and the survival
thereof.
s. During, at the end of, or after the term of this Lease, Tenant agrees
to execute any or all documents required by Landlord in connection
with compliance with any Environmental Law.
51. GENERAL PROVISIONS
------------------
a. Joint obligation. If there be more than one Tenant, the obligations
----------------
hereunder imposed shall be joint and several.
b. Marginal Headings, etc. The marginal headings index, Lease summary
-----------------------
sheet and titles to the articles of this Lease are not a part of the
Lease and shall have no effect upon the construction or interpretation
of any part hereof.
c. Choice of Law. This Lease shall be governed by and construed in
--------------
accordance with the laws of the State in which the Premises are
located.
d. Successors and Assigns. The covenants and conditions herein
-----------------------
contained, subject to the provisions as to assignment, inure to and
bind the heirs, successors, executors, administrators and assigns of
the parties hereto.
e. Recordation. Neither Landlord nor Tenant shall record this Lease, but
------------
a short-form memorandum hereof may be recorded at the request of
Landlord.
f. Quiet Possession. Upon Tenant's paying the rent reserved hereunder and
observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder,
Tenant shall have quiet possession of the Premises for the entire term
hereof, subject to all the provisions of this Lease.
g. Inability to Perform. This Lease and the obligations of the Tenant
hereunder shall not be affected or impaired because the Landlord is
unable to fulfill any of its obligations hereunder or is delayed in
doing so, if such inability or delay is caused by reason of strike,
labor troubles, acts of God, or any other cause beyond the reasonable
control of the Landlord.
h. Partial Invalidity. Any provision of this Lease which shall prove to
be invalid, void, or illegal shall in no way affect, impair or
invalidate any other provision hereof and such other provision(s)
shall remain in full force and effect.
i. Cumulative Remedies. No remedy or election hereunder shall be deemed
-------------------
exclusive but shall, whenever possible, be cumulative with all other
remedies at law or in equity.
j. Entire Agreement. This Lease contains the entire agreement and no
-----------------
representations, inducements, promises or agreements, oral or
otherwise, between the parties, not embodied herein, shall be of any
force or effect.
k. No Option. The submission of this Lease for examination does not
----------
constitute a reservation of or option for the Premises, and this Lease
becomes effective only upon execution and delivery thereof by
Landlord.
52. EXPANSION. Tenant shall have the right of first offer on all
---------
contiguous space in the building.
53. OPTION TO RENEW. Tenant shall have the option t6 renew this Lease
----------------
for one additional term of five (5) years under the following terms and
conditions, at a rental to be negotiated.
a. Commencement. The next day following the termination date of the
-------------
initial term.
b. Notice. Tenant shall notify Landlord, or its agents or assigns, in
------
writing, by certified mail, no later than nine (9) months prior to the
expiration of the initial term of this Lease.
C. Tenant shall have an option to renew this Lease for an additional term
of five (5) years following the termination date of the first five (5)
year option at a rental to be negotiated.
d. Other Terms. In each and every other respect and matter, all of the
-----------
terms, conditions, provisions and covenants of the original Lease
shall be binding upon and inure to the benefit of the parties hereto,
their successors and assigns, in the same manner and to the same
extent as if each of the parties hereto had been the initial parties
to the original Lease.
IN WITNESS WHEREOF, the parties herein have hereunto set their
hands and seals in triplicate, the day and year first above written.
DATE LANDLORD: ADVENT REALTY LIMITED PARTNERSHIP II
----
BY:/s/ Michael Ruane
-------------------------------
ATTEST:
---------------------------
DATE: TENTANT: NOVA MICROSONICS, INC.
12/14/94 BY:/s/ Thomas J. Williams
-------- -------------------------------
ATTEST: /s/ Jack N. Bergen
----------------------------
SCHEDULE A
Graph - Allendale Park Site Plan
SCHEDULE B
LANDLORD'S WORK
In keeping with and as part of the lease between Advent Realty Limited
Partnership II, a Boston corporation ("Landlord") and Nova MicroSonics, a
division of Advanced Technology Laboratories ("Tenant"), Landlord agrees at
his sole cost and expense to the demolition and rebuilding of interior spaces of
the premises in accordance with this Schedule B and the attached Exhibit B.
Landlord and Tenant further agree and acknowledge that Exhibit B is subject to
change by mutual agreement of Landlord and Tenant as final construction drawings
are developed. Landlord and Tenant further agree that final drawings will be
substantially equivalent to Exhibit B.
1. 100% of the Premises will be provided with gas heating and electric air
conditioning designed to provide 72.F at 50% relative humidity when outdoor
temperature is 90.F during cooling season and 72.F when outdoor temperature
is l0.. This will be accomplished through the installation of 3 or more
new high efficiency HVAC units of up to 36 tons capacity and the
reconditioning of 4 existing units of 42.5 tons capacity. Zone control
will be accomplished through the establishment of a minimum of 8 zones with
separate thermostatic control units.
2. Office and other areas designated on Exhibit B will have nine (9) foot
height clear ceilings. Assembly and similar areas designated on Exhibit B
will have ten (10) foot clear ceiling height. Warehouse ceiling height
designated on Exhibit i3 will be full building height. Ceiling will be
installed as 2x4 standard acoustic panel with exposed metal grid and will
be continuous over tops of interior partition walls with the exception of
perimeter offices and fire code partitions between office, assembly, and
warehouse areas as shown on Exhibit B.
3. Provide full kitchen with wet sink, range top, dishwasher, full size
refrigerator, cabinetry per drawing to be provided by architect. Full
electric and plumbing to be included for all appliances, sinks and kitchen
components.
4. A mechanically operable dividing wall from Modern Fold Styles, Inc., will
be provided and installed in appropriate recessed opening in
lunchroom/conference room, acceptable to Tenant.
5. The entire south facing exterior wall will be outfitted with double
glazed insulated high efficiency glass windows comparable in size to
existing East facing windows with operable lower panels.
6. Two (2) loading docks to be equipped with new interior levelators
equivalent to Model-608-K, manufacturer - Kelly, and new electrically
powered overhead doors with positive OSHA approved safety interlocks or
sensors.
7. All permanent building fixtures and all building construction/features will
be in compliance with Americans with Disabilities Act Accessibility
Guidelines for buildings and facilities in effect at time of occupancy and
lease commencement.
8. Main restroom facilities will be installed to meet construction code for 80
people (an equal mix of men and women) complete with ceramic tile on floor
and to wainscot height on wall, mirrors, vanities, liquid soap dispensers,
and roll towel fixtures, etc.
9. Install industrial grade low pile carpeting in all areas with the exception
of warehouse and loading docks with an allowance of $11/sq.yd installed.
Warehouse and loading docks to have concrete floors coated with an
appropriate sealant at a cost to Tenant of $400. Landlord to provide an
offset of $11 per sq. yd. installed for all areas designated by Tenant on
attached plan (Exhibit B).
10. Lighting to be installed with new building standard grade fixtures
sufficient to provide 55 foot candles of light minimum throughout the
facility. Fixtures to be mounted internal to ceiling in office and assembly
areas and free hanging in warehouse and loading areas. Landlord to provide
quotation to Tenant for Total Installed cost of USI Columbia T8-HC-242G-
4139 2'x4' Parabolic lighting fixtures. Quotation to show cost of USI
fixtures and allowance for building standard fixtures being replaced.
Tenant would have the right to request the use of the USI fixtures up until
a time specified in writing by Landlord with Tenant providing payment for
incremental expense of USI fixtures.
11. Glass partitions to be provided as specified in architectural drawings at
$20.00 per sq. ft. up to an allowance of $8,000 total.
12. One inch horizontal aluminum window blinds will be provided for all
exterior windows and glass doors up to an allowance of $6,000.
13. Existing shower and toilet facility will be refurbished and remodeled to
provide two single use facilities, one with a shower, as specified in
architectural drawings.
14. Sprinkler system to be installed according to Factory mutual requirements:
a. Sprinkler protection for the proposed office areas should be designed
to provide 0.10 gpm/sq. ft. over the most remote 1,500 sq. ft.
including a 250 gpm hose allowance.
b. Sprinkler protection for the electronic manufacturing, testing and
assembly areas (test lab, development lab, controlled stock area, P.C.
testing and assembly and 0.20 gpm over 2,500 sq. ft., including a 500
gpm hose allowance.
c. An up-to-date water test should be performed prior to the design of
these systems to provide a water supply for the basis of design. once
developed, plans and hydraulic calculations for these systems should
be submitted to Factory Mutual Engineering Association, 30 Vreeland
Road, Florham Park, New Jersey 07932-1993 for review and comment
prior to the fabrication and installation of materials.
d. The sprinkler control valve to. the facility should be locked with a
nonbreakable lock in the wide open position. Additionally, a
procedure should be established which requires building management
and/or the adjacent tenant to notify Nova MicroSonics if the valve
will be shut for any reason.
15. Electrical service provided at 480 volt/3 phase/1000 Amps with appropriate
step down transformers and panels to provide:
a. Electrical outlets per code with a maximum of 6 duplex outlets per 20
A/115V line in walls in offices, conference rooms, file rooms,
assembly, and laboratory areas.
b. Electrical circuits pre-wired and accessible in ceiling of open areas
in the ratio of one circuit per 400 sq. ft. or part thereof.
c. 10 each dedicated electrical circuits 115V or 230V AC as specified in
architectural plans.
16. Sound proofing insulation to be installed in interior walls of Conference
and Demo rooms, and five designated exterior offices.
17. All doors to be installed pet architectural drawings are solid core wood
veneer doors in off ices and steel full height, 1 hour fire rated normally
closed doors in assembly and warehouse areas.
18. All interior partitions to be constructed with 5/8th thick gypsum wall
board to underside of hung ceiling except as designated on plans for
demising wall to adjacent tenant and wall separating office/assembly areas
and assembly/warehouse areas. These designated walls will be of 1 hour
fire rated construction. All walls to be finished with enamel paint with
eggshell or satin finish.
EX-10.20
4
ELDEC/ATL PUR/SALE AGREE
EX.10.20
ELDEC/ATL
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is by and between ELDEC
CORPORATION and N.C. ELDEC, INC., both Washington corporations (collectively
"Seller"), and ADVANCED TECHNOLOGY LABORATORIES, INC., a Washington corporation
("Purchaser").
Seller is the owner of that certain property situated in the County of
Snohomish, State of Washington (as hereinafter defined). Seller desires to sell
and Purchaser desires to purchase the property on the following terms and
conditions.
Therefore, in consideration of the mutual promises and covenants contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Seller and Purchaser agree:
1. The Property. Subject to the terms and conditions in this Agreement,
------------
Seller shall sell and convey to Purchaser, and Purchaser shall purchase from
Seller the following:
(a) the real property described on Exhibit A attached hereto and
incorporated herein by this reference located in Snohomish County, Washington,
together with all of Seller's right, title, and interest in and to any rights,
licenses, privileges, reversions, and easements appurtenant to the real property
including, without limitation, all mineral, oil, gas, and other hydrocarbon
substances on and under the real property, all development rights, air rights,
water, water rights and water stock relating to the real property, and any
easements, rights-of-way, or appurtenances used in connection with the
beneficial use and enjoyment of the real property (hereinafter, collectively
referred to as the "Real Property");
(b) the two-story building located on the Real Property (hereinafter
referred to as the "Building") of approximately eighty-six thousand (86,000)
square feet, the adjacent building pad, all structures and parking facilities
located on the Real Property, all systems, equipment, and fixtures in the
Building or structures, all improvements and fixtures owned by Seller located in
the Building or structures including, without limitation, all apparatus,
equipment, and appliances used in connection with the operation or occupancy of
the Building or structure, the plumbing, heating, air-conditioning, and
electrical equipment facilities used to provide any utility services or other
services to the Building or structures, and elevators (hereinafter referred to
collectively as the "Improvements"), excluding all engineering, manufacturing,
and business process systems, equipment, gear, and materials and excluding the
systems, equipment, and fixtures listed in Exhibit B attached hereto and
incorporated herein by this reference (collectively the "Retained Equipment")
all of which shall be retained by Seller and removed by Seller following the
Closing Date (as defined below); and,
(c) all transferable licenses, permits, certificates, and franchises
issued by any federal, state, or local authorities relating to the use,
maintenance, occupancy or operation of the Real Property, the Building, and the
Improvements, reports and studies, including, but not limited to, physical and
engineering inspections, soil studies, utility and zoning studies, traffic
studies, wetland studies, plans and specifications, correspondence, surveys and
any other
documented information relating to the Real Property (hereinafter referred to
collectively as the "Documents".
The items mentioned above purchased by Purchaser collectively shall be referred
to as the "Property".
2. Purchase and Sale
-----------------
2.1 Purchase Price. Seller shall sell and Purchaser shall purchase the
--------------
Property for a purchase price of Eleven Million Three Hundred Thousand and
No/100 Dollars ($11,300,000.00) (the "Purchase Price"). The Purchaser Price is
allocated among the components of the Property as follows:
a. Real Property: $3,600,000.00
b. Building: $7,700,000.00
2.2 Payment of Purchase Price. The Purchase Price shall be payable as
-------------------------
follows:
2.2.1 Earnest Money. Purchaser has deposited with First American
-------------
Title Insurance Company ("Escrow Agent") Purchaser's earnest money deposit in
the form of two promissory notes (hereinafter, "Promissory Note One", and
"Promissory Note Two"), each in the amount of Two Hundred Seventy-Five
Thousand and No/100 Dollars ($275,000.00) (all promissory notes, cash and any
interest accrued thereon are referred to collectively as the "Earnest Money").
Upon execution of this Agreement by the parties, Purchaser shall deposit with
Escrow Agent a copy of this Agreement and a cash deposit in the amount of Two
Hundred Seventy-Five Thousand and No/100 Dollars ($275,000.00), and Escrow
Agent shall return to Purchaser Promissory Note One. The Earnest Money shall
be retained by Escrow Agent in an interest-bearing account. The Escrow Agent
shall immediately pay to Seller the Earnest Money if Purchaser defaults under
the terms of this Agreement through no fault of Seller. If Seller fails to
sell the Property to Purchaser through no fault of Purchaser, the Escrow Agent
immediately shall return the Earnest Money to Purchaser free and clear of all
claims of Seller and any real estate brokers.
2.2.2 Balance of Purchase Price. The balance of the Purchase Price,
-------------------------
less the Earnest Money paid by Purchaser, shall be payable on the Closing Date
by wire transfer, to an account to be specified by Seller on the Closing Date.
3. Title
-----
3.1 Seller's Title. At the Closing Date, Seller shall convey to Purchaser
--------------
fee simple title to the Property by duly executed and acknowledged statutory
warranty deed (hereinafter, the "Deed"), free and clear of all defects and
encumbrances and subject only to those exceptions that Purchaser shall approve
pursuant to this Agreement.
3.2 Title Report. Seller has delivered to Purchaser a preliminary
------------
commitment for an ALTA owner's extended coverage title insurance policy, issued
by First American Title Insurance Company (the "Title Company"), describing the
state of title of the Real Property (the "Title Report") together with copies of
all exceptions and encumbrances referred to in the Title
2
Report relating to the Real Property. Seller shall assume any cancellation
fee for such Title Report.
3.3 Survey. Seller has delivered to Purchaser an ALTA Survey of the Real
------
Property prepared by Bush Roed & Hitchings (the "Survey"). Purchaser shall pay
any additional survey costs, including costs to re-certify the Survey, if
required for Purchaser's purposes, including obtaining ALTA extended coverage
title insurance.
3.4 Approval of Title Report. Purchaser has approved the Title Report and
------------------------
the Survey.
3.5 Title Policy. Seller shall cause Title Company to issue to Purchaser
------------
at the Closing Date an ALTA extended coverage policy of title insurance insuring
Purchaser's title to the Real Property in the full amount of the Purchase Price
subject only to the permitted exceptions (hereinafter referred to as the "Title
Policy"). The Title Policy shall be dated as of the Closing Date and shall
contain any special endorsements that Purchaser may reasonably request. On or
before the date this Agreement is executed, Purchaser shall provide to Seller a
list of all special endorsements and additional coverages that Purchaser will
request from the Title Company. If the Title Company informs Seller, in
writing, that the Title Company is unwilling or unable to issue any of the
listed special endorsements or additional coverages, Seller shall have the right
to terminate this Agreement in which event the Earnest Money shall be delivered
to Purchaser, all documents deposited with the Escrow Agent shall be returned to
the depositing party, and the parties shall have no further obligations or
liabilities to each other except as otherwise provided in this Agreement. If,
on the Closing Date, the Title Company is unwilling or unable to issue any
special endorsements or additional coverages reasonably requested by Purchaser
beyond the standard terms of an extended coverage policy, then Purchaser may
proceed to close without the endorsements or additional coverages, or elect to
terminate this Agreement by providing written notice to Seller. If Purchaser
elects to terminate this Agreement, the escrow shall be terminated, the Earnest
Money immediately shall be returned to Purchaser, all documents shall be
returned to the party who deposited them, and neither party shall have any
further obligations or liabilities to each other except as otherwise provided in
this Agreement.
4. Representations, Warranties, and Covenants.
------------------------------------------
4.1 Representations of Seller. Seller hereby represents and warrants to
-------------------------
Purchaser as follows:
(a) Except as set forth on Exhibit C attached hereto and incorporated
herein by this reference to the best of Seller's knowledge, there are not now
any material physical, structural, design or mechanical defects of the Property
including, the plumbing, heating, air conditioning and electrical systems and,
to the best of Seller's knowledge all such items are in good operating condition
and repair, normal wear and tear excepted.
(b) To the best of Seller's knowledge, the use and operation of the
Property are in full compliance with applicable zoning, land-use, and
subdivision laws and regulations.
3
(c) To the best of Seller's knowledge, there are no condemnation
proceedings or zoning or other land use proceedings that apply only to the
Property either instituted or planned to be instituted, that would detrimentally
affect the use and operation of the Property for its intended purpose or the
value of the Property, and Seller has not received notice of any special
assessment proceedings affecting the Property.
(d) To the best of Seller's knowledge, all water, sewer, gas,
electric, telephone and drainage facilities required for the normal use and
operation of the Property are connected pursuant to valid permits and are
adequate to service the Property for Seller's purposes.
(e) To the best of Seller's knowledge, Seller has obtained all
licenses, permits, easements, and rights-of-way from all governmental
authorities having jurisdiction over the Property or from private parties for
the normal use and operation of the Property as presently used and to ensure
vehicular and pedestrian ingress to and egress from the Property.
(f) To the best of Seller's knowledge, there is no litigation pending
or threatened against Seller or the Property that arises out of the ownership of
the Property or that might detrimentally affect the use or operation of the
Property for its intended purpose, the value of the Property or the ability of
Seller to perform its obligations under this Agreement.
(g) Each Seller is a corporation duly organized and validly existing
under the laws of Washington State; this Agreement and all documents executed
by each Seller that are to be delivered to Purchaser at the Closing Date are
or at the time of the Closing Date will be (i) duly authorized, executed and
delivered by each Seller, (ii) legal, valid and binding obligations of each
Seller, (iii) sufficient to convey title (if they purport to do so) and in
compliance with all provisions of all agreements and judicial orders to which
each Seller is a party or to which each Seller or all or any portion of the
Property is subject.
(h) Seller shall pay when due all payments required by outstanding
contracts made by Seller relating to the Property that have not been fully paid,
and Seller shall cause to be discharged all mechanics' and materialmen's liens
arising from any labor or materials furnished to the Property prior to the time
of the Closing Date.
(i) Except as set forth in the documents listed on Exhibit D attached
hereto and incorporated herein by this reference to the best of Seller's
knowledge, the Property is in compliance with all State and federal laws
regulating Hazardous Substances, and there is no proceeding or inquiry by any
governmental body with respect thereto. A "Hazardous Substance" is any
substance, in any form, whether located in soil, water, air or building
materials or equipment, that is generated, stored, transported, released,
deposited, spilled, used, put or disposed of on, in or under the Property and
that is currently defined as a hazardous substance, material or waste pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. (S) 9601 et seq.), or any current and applicable Washington State
-------
equivalents of that Act.
4
4.2 Representations of Purchaser. Purchaser hereby represents and
----------------------------
warrants to Seller as follows:
(a) Purchaser is a Washington corporation duly organized and validly
existing under the laws of the State of Washington and is in good standing under
the laws of the State of Washington.
(b) This Agreement and all documents executed by Purchaser that are
to be delivered to Seller at the Closing Date are or at the time of the Closing
Date will be (i) duly authorized, executed, and delivered by Purchaser, (ii)
legal, valid, and binding obligations of Purchaser, and (iii) in compliance
with all provisions of all agreements and judicial orders to which Purchaser
is a party or to which it is subject.
5. Limitation of Warranties. Except as otherwise expressly set forth in
------------------------
Section 4.1, neither Seller nor any agent, representative, or employee of Seller
has made or is now making any other representations or warranties of any kind
whatsoever related to the physical condition of the Property, and if there are
any problems with the Property that are discovered subsequent to the Closing
Date, Seller shall have no responsibility and shall not be liable in any way for
such defects unless such defects constitute a breach of a representation
contained in Section 4.1 in which case Seller's obligation to indemnify
Purchaser shall be as set forth in Section 16.1. Purchaser is conducting its
own inspections and "due diligence" with respect to all physical and other
aspects of the Property. Seller shall allow Purchaser reasonable access to
Seller's books records, and the Property to enable Purchaser to complete such
inspections. Purchaser shall be responsible for all costs of such inspection
and studies.
6. Closing
-------
6.1 Closing Date and Location. This sale shall be closed in the offices
-------------------------
of the Escrow Agent in Seattle, Washington on a date which is the later of (i)
December 28, 1994, or (ii) three days following the date of the Seller's vacancy
of the second floor of the Building (the "Closing Date"). As used in this
Agreement, the term "vacancy" shall mean the applicable floor of the Building is
ready for delivery to the Purchaser in broom clean condition (normal wear and
tear excluded) and the items mutually agreed between the parties prior to the
Closing Date have been repaired; however, the repair of any items identified
prior to the Closing Date which can be repaired for less than Ten Thousand and
No/100 Dollars ($10,000.00) in the aggregate will not delay the Closing Date,
and those items shall be repaired by the Seller as soon as possible following
the Closing Date. If the Closing does not occur by January 13, 1995, through no
fault or delay caused by the Purchaser, the Seller shall pay the Purchaser the
amount of Sixty-Six Thousand and No/100 Dollars ($66,000.00) for each calendar
month or portion thereof beginning on January 13, 1995, that Seller has not
vacated the second floor of the Building, which amount the Seller agrees
reflects the damage incurred by the Purchaser as a result of the Seller's
holdover. Purchaser's sole remedy in the event of Seller's failure to vacate by
January 13, 1995, shall be the collection of the money specified in this Section
6.1. Closing shall mean the consummation of this Agreement by the recording of
all instruments requiring recording, the rendering of all performances necessary
to the consummation of the purchase and sale, and delivery of other documents
and proceeds to the parties entitled thereto.
5
6.2 Closing Instruments. Seller shall convey title to the Property in the
-------------------
condition described in Section 3.1 by statutory warranty deed, duly delivered,
ready for recording. Any warranties associated with any such deed shall be
deemed included in Seller's representations and warranties hereunder. Seller
shall further deliver a Certificate of Non-Foreign Status in form and substance
reasonably acceptable to Purchaser. Seller, at Seller's expense, shall provide
owner's standard coverage title insurance with liability in the amount of the
Purchase Price to Purchaser. Purchaser shall pay the cost of the premiums
attributable to the extended coverage title policy and any endorsements. Seller
and Purchaser each shall deposit any other instruments and documents that are
reasonably required by the Escrow Agent or otherwise required to close the
escrow and consummate the purchase and sale of the Property in accordance with
this Agreement.
6.3 Closing Costs and Expenses. At Closing, Seller shall pay: (a) one-
--------------------------
half (1/2) of the escrow fee; (b) any real estate excise or transfer taxes; (c)
the premium for the policy of title insurance described in Section 3.2
attributable to standard coverage; (d) recording and miscellaneous charges
customarily attributable to sellers in similar transactions; (e) all attorneys'
fees incurred by Seller with respect to negotiating this Agreement and in
consummating the transaction contemplated herein; and (f) the brokerage
commission of Cushman & Wakefield, if any. Purchaser shall pay: (a) one-half
(1/2) of the escrow fee; (b) all necessary recording and miscellaneous charges
customarily attributable to purchasers in similar transactions; (c) the premium
for the policy of title insurance described in Section 3.2 attributable to
extended coverage and the premium, fee, or charge attributable to any
endorsements requested by Purchaser; (d) all attorneys' fees incurred by
Purchaser with respect to negotiating this Agreement and in consummating the
transactions contemplated herein; and (e) the brokerage fees of CB Commercial.
Any other costs of Closing not specifically covered hereby shall be shared
equally by the parties.
6.4 Prorations. Taxes for the current year, any utilities constituting
----------
liens, local improvement district assessments, and all similar assessments shall
be prorated between Purchaser and Seller as of the Closing Date.
7. Possession. On the Closing Date, Seller shall deliver possession to
----------
Purchaser; however, the first floor of the Building shall continue to be
occupied by Seller as provided in Section 9.1(c). Seller understands and
acknowledges Purchaser's desire to obtain full occupancy as soon as possible
after Closing. Seller will be responsible for the costs to secure and segregate
mutually acceptable access to the second floor from the first floor prior to the
Closing Date as follows: (a) Seller shall be responsible for the first Ten
Thousand and No/100 Dollars ($10,000.00) of the cost; (b) Seller and Purchaser
shall share equally in the next Ten Thousand Dollars and No/Dollars ($10,000.00)
of cost; and (c) Purchaser shall be responsible for all costs thereafter.
8. Joint Occupancy of Building. From the Closing Date until the date
---------------------------
Seller vacates the Building, the facilities personnel of Seller and Purchaser
each shall have access to the following areas, systems, and components of the
Building on an as-needed basis: roof, telephone switch. data room, electrical
and mechanical rooms, roof top HVAC units, sprinkler systems,
6
electrical systems, water systems, and compressed air systems. In addition, from
the Closing Date until the date Seller vacates the Building, the facilities
personnel of Seller and Purchaser shall conduct informal weekly joint occupancy
meetings to discuss and coordinate the renovations planned to the Building by
the Purchaser during the following week, or to discuss and resolve joint
occupancy issues that arose during the prior week.
From the Closing Date until the date Seller vacates the Building, each
party shall be responsible for its own noise control, dust/dirt control, odor
control, prevention of utilities disruption (to the extent the party can control
the disruption), delivery of its materials, telephone service, and insurance.
From the Closing Date until the date Seller vacates the Building, Purchaser
shall maintain responsibility for the HVAC systems, landscape maintenance, road
maintenance, parking lot maintenance, security, and garbage/sewer/water service.
The costs of those items shall be shared by Purchaser and Seller on a pro-rata
basis as may be agreed to by Purchaser and Seller. The cost for snow removal
will be shared by Purchaser and Seller on a pro-rata basis.
From the Closing Date until the date Seller vacates the Building, each
party shall indemnify, defend, and hold harmless the other party from and
against any claims, demands, costs and expenses arising out of or connected with
the damage to property of the other party, or injury to employees, and/or
business invitees of the other party to the extent caused by the negligent acts
of the other party.
9. Conditions Precedent. Purchaser has determined that the other
--------------------
conditions set forth in Section 9.2 have been satisfied. Purchaser shall remain
responsible for all costs incurred in undertaking any and all such studies
contemplated by Section 9.2 below. Therefore, the Earnest Money shall be non-
refundable, subject to satisfaction of any conditions set forth in this
Agreement.
9.1 Conditions Precedent to Seller's Obligations. The obligations of the
--------------------------------------------
Seller hereunder shall be subject to the fulfillment and satisfaction of the
following conditions, which conditions are for the benefit of the Seller and may
be waived only by prior written consent of the Seller.
(a) The Purchaser's agreement to convey to the Seller any necessary
and reasonably acceptable easements for roads or utilities to access and
service the real property adjacent to the Real Property and retained by the
Seller;
(b) The Purchaser's execution of a lease to the Seller for the first
floor of the Building, along with sufficient surface parking to serve Seller's
needs, under the following terms:
(i) The Seller will be permitted to lease the first floor of the
Building from the Closing Date until July 31, 1995.
(ii) The Seller retains the option to terminate the lease of the
first floor prior to July 31, 1995, with thirty (30) days written notice to the
Purchaser; however,
7
Seller shall commit to paying costs for leasing the first floor of the Building
in accordance with the provisions in (iii) below through May 31, 1995.
(iii) From the Closing Date until July 31, 1995, a rental payment
of $45,000 triple net per month (customary triple net expenses including an
equal share of the property tax for the Property, and a proportional share by
usage of the utilities for the Building), for the first floor of the Building.
(iv) After July 31, 1995, the rental payment for the first floor
shall double that from the previous month for each month or portion thereof
until the Seller vacates the first floor of the Building, not to exceed
$200,000 per month.
(c) The Purchaser's agreement to assume the obligations set forth in
that certain Agreement dated November 15, 1983, among Helmut and Sigrid K.
Hornung and Eldec Corporation.
9.2 Condition Precedent to the Purchaser's Obligations. The obligations
--------------------------------------------------
of the Purchaser hereunder shall be subject to the fulfillment and satisfaction
of the following conditions at the Purchaser's expense, which conditions are for
the benefit of the Purchaser and may be waived only by prior written consent of
the Purchaser.
(a) The satisfactory review of the Building, including the inspection
of the structural, plumbing, mechanical, electrical systems, and other physical
components of the Building.
(b) The satisfactory review of such environmental investigations and
site assessments of the Property as the Purchaser shall deem appropriate using
consultants of the Purchaser's choice, and with the Seller making available to
the Purchaser full and complete copies of all prior environmental reports,
studies, assessments, permits, and related documents.
(c) The satisfactory review of such investigations of financial
information relating to the Property and its operations as the Purchaser deems
appropriate, and the Seller has available, including financial data and
reports, property tax records, management agreements, leases, licenses,
concessions, and other contracts relating in any respect to the Property.
(d) The satisfactory review of all available development plans,
surveys, lot line or boundary line adjustment applications (and Seller's
recording the boundary line adjustment prior to the Closing Date with the
applicable authorities), plans and specifications for the Property, as-built
plans, specifications and surveys.
(e) The satisfactory review of the title report and any other
documentation relating to the Property as the Purchaser reasonably may request.
(f) The mutual agreement by the Purchaser and the Seller of an
appropriate restrictive covenant/easement covering the real property retained
by the Seller under
8
which the Seller (or any successor in interest to Seller) would share equally in
the maintenance of any roadways on the Property used by the Seller following the
Closing Date to access the real property retained by the Seller, and under which
the Seller (or any successor in interest to the Seller) would maintain the
landscaping existing on September 27, 1994, on the real property retained by the
Seller to separate, shield and differentiate the Property from the real property
retained by the Seller. In addition, Seller (and any successor in interest to
Seller) would provide (and maintain) landscape of a similar nature to that
existing on September 27, 1994, to separate, shield and differentiate the
Property from the real property retained by the Seller in the event any changes
are made to the real property retained by Seller following the Closing Date.
(g) Purchaser's determination that any renovations planned to the
Building by the Purchaser will not require any portion of the Building
(excluding the renovated portion) to be in compliance with the most recent
building codes applicable to the Building.
(h) The approval of this Agreement by the Board of Directors of the
Purchaser by no later than December 5, 1994.
(i) The Seller's agreement to convey to the Purchaser any necessary
and reasonably acceptable easements on the real property retained by the Seller
for roads, walkways, utilities, drainage that serve the Property.
9.3 Costs. Purchaser shall pay all costs incurred in securing any studies
-----
undertaken pursuant to Section 9.2 and shall indemnify and hold Seller harmless
from and against any and all costs, damages, loss, injury, or other expenses
that may be incurred in connection with Purchaser's undertaking of such studies.
Reasonable alteration to the Property consistent with the undertaking of such
studies shall be permitted by Seller without indemnification by Purchaser
provided that the Property is returned to its original state as much as possible
after Purchaser completes the studies. Purchaser shall further indemnify and
hold Seller harmless from and against any and all liens, attorneys' fees, and
costs in clearing any such liens which may be filed against the Property as a
result of or in connection with Purchaser's undertaking of such studies.
9.4 Delivery of Information. The Seller has provided or shall provide, at
-----------------------
the Seller's sole costs and expense, copies of the documents listed in Section
9.2 and all available surveys, soils studies, plans and specifications,
schematics, drawings, service contracts, and other contracts or agreements in
the Seller's possession or control or about which the Seller has knowledge which
relates to the Property including a preliminary title insurance commitment
covering the Property (with copies of all recorded exceptions), and a current
ALTA survey of the Real Property prepared by Bush Roed & Hitchings. Upon
termination of this Agreement, Purchaser shall return to Seller the copies of
documents delivered by Seller to Purchaser or Purchaser's agents, consultants,
accountants, or attorneys pursuant to Section 9.2 and this Section 9.4. Upon
termination, Purchaser shall deliver to Seller copies of all studies in progress
and/or completed by Purchaser regarding the status of the Property, including
but not limited to wetland studies, reports regarding Hazardous Substances, and
reports regarding the structural integrity of the Building.
9
9.5 Condition Precedent to Closing. Purchaser shall have the right to
------------------------------
terminate this Agreement on the Closing Date if the representations of Seller
set forth in Section 4.1 are not true and correct in all respects on the Closing
Date, or if Purchaser has not received a letter from Crane Co. in form and
substance substantially the same as the draft letter attached hereto as Exhibit
E and incorporated herein by this reference. If Purchaser terminates this
Agreement pursuant to this Section 9.5, the Earnest Money shall be returned to
Purchaser, all documents deposited with the Escrow Agent shall be returned to
the depositing party, and the parties shall have no further obligations or
liabilities to each other except as otherwise provided in this Agreement.
9.6 Soils Study by Seller. Seller shall conduct a soils study of the Real
---------------------
Property in order to determine whether there has been any contamination from
Hazardous Substances. The scope of the study and the consultant to perform the
study shall be agreed upon by Seller and Purchaser, and the study shall be
completed prior to the Closing Date. If Purchaser or Seller is not satisfied
with the results of the study because environmental contamination on the
Property is disclosed, either Party may terminate this Agreement in which event
the Earnest Money shall be returned to Purchaser, all documents deposited with
the Escrow Agent shall be returned to the depositing party, and the parties
shall have no further obligations or liabilities to each other except as
otherwise provided in this Agreement.
10. Risk of Loss. If prior to the Closing Date the Property is damaged as
------------
the result of fire or other casualty or all or a portion of the Property is
condemned, Purchaser shall have the option to (a) accept title to the Property
without any abatement of the Purchase Price, in which event at the Closing all
of the insurance proceeds and condemnation proceeds shall be assigned by Seller
to Purchaser and any moneys theretofore received by Seller in connection with
such fire or other casualty or condemnation shall be paid over to Purchaser, or
(b) terminate this Agreement, in which event the Earnest Money shall be returned
to Purchaser and thereupon neither party shall have any further liability to the
other. From the date this Agreement is signed by the parties, Seller shall
maintain property damage insurance in the amount of the full replacement value
of the Building.
During the existence of this Agreement, Seller shall not settle any fire or
casualty loss claims or agree to any award or payment in condemnation or eminent
domain or any award or payment in connection with the change in grade or any
street, road, highway or avenue in respect of or in connection with the Property
without obtaining Purchaser's prior consent in each case.
Any damage to the Property caused by the removal of the items listed on
Exhibit B shall be repaired by Seller, unless waived in writing by Purchaser.
10
11. Remedies
--------
11.1 Seller's Default. If there is an event of default under this
----------------
Agreement by Seller (including a breach of any representation, warranty, or
covenant), Purchaser shall be entitled, in addition to all other remedies
available at law or in equity, (a) to seek specific performance of Seller's
obligations under this Agreement, or (b) to terminate this Agreement by written
notice to Seller and Escrow Agent. If Purchaser terminates this Agreement, the
escrow shall be terminated, the Earnest Money immediately shall be returned to
Purchaser, all documents shall immediately be returned to the party who
deposited them, and neither party shall have any further rights or obligations
under this Agreement, except as otherwise provided in this Agreement, and except
that Seller shall pay any costs of terminating the escrow.
11.2 Purchaser's Default. In the event Purchaser fails without legal
-------------------
excuse to complete the purchase of the Property, the Earnest Money deposit made
by Purchaser shall be forfeited to Seller as the sole and exclusive remedy
available to Seller for such failure. Purchaser acknowledges and agrees that
such Earnest Money is not liquidated damages but is money earned by the Seller
for agreeing to sell the Property to the Purchaser and for agreeing to hold the
Property off the market.
12. Attorneys' Fees. In any proceeding brought to enforce this Agreement
---------------
or to determine the rights of the parties under this Agreement, the
substantially prevailing party shall be entitled to collect, in addition to any
judgment awarded by a court, a reasonable sum as attorneys' fees, and all costs
and expenses incurred in connection with such a lawsuit, including attorneys'
fees, expenses of litigation, and costs of appeal. The term "proceeding" shall
mean and include arbitration, administrative, bankruptcy, and judicial
proceedings including appeals.
13. Assignability. Neither party shall have the right to convey,
-------------
transfer, or assign all or any part of its interest and its rights and
privileges under the terms of this Agreement without the prior written consent
of the other party, which consent will not be withheld unreasonably.
14. Concurrent Disclosure. Neither Seller nor Purchaser shall release any
---------------------
story or new release to a wire service without first providing a copy of the
story or news release to the other party. The failure to provide the story or
news release, as required by this Section 14, shall not constitute a breach of
this Agreement.
15. Notices. All notices required or permitted hereunder shall be in
-------
writing and shall either be delivered in person or sent by certified or
registered mail, return receipt requested, and shall be deemed received on the
sooner of actual receipt or three (3) days after deposit in the mail, postage
prepaid, addressed to Seller or Purchaser at the address set forth below:
11
Purchaser: Advanced Technology Laboratories, Inc.
22100 Bothell-Everett Highway
P.O. Box 3003
Bothell, Washington 98041-3003
Attention: Harvey N. Gillis
with copy to attention of: Vice President and General Counsel
Seller: Eldec Corporation
16700 - 13th Avenue West
Lynnwood, Washington 98046-0100
Attention: President and Vice President of Finance
Copy to: Cairncross & Hempelmann, P.S.
70th Floor, Columbia Center
701 Fifth Avenue
Seattle, Washington 98101
Attention: Donald E. Marcy
Copy to: Crane Co.
100 First Stamford Place
Stamford, CT 06902
Attention: Corporate Secretary
Notice of a change of address shall be given by written notice in the manner
detailed above.
16. Indemnification
---------------
16.1 General. Each party shall indemnify, defend and hold harmless the
-------
other party from and against any and all claims, demands, liabilities, costs,
expenses, penalties, damages and losses (including, without limitation,
reasonable attorney's fees) resulting from any misrepresentation, breach of
warranty or breach of covenant made by such party under this Agreement or in any
document given or delivered to the other pursuant to or in connection with this
Agreement.
If either party receives notice of a claim or demand against which it is
entitled to indemnification pursuant to this Section, that party immediately
shall give notice thereof to the other party. The party obligated to indemnify
immediately shall take such measures as may be reasonably required to properly
and effectively defend such claim, and may defend the same with counsel of its
own choosing. If the party obligated to indemnify fails to defend such claim,
then the party entitled to indemnification may defend such claim with counsel of
its own choosing at the expense of the party obligated to indemnify.
In the event of a claim or demand based upon a breach of a representation
made by Seller in Section 4.1, in addition to the foregoing, the Purchaser shall
provide written notice to Seller within thirty (30) days after discovery of the
problem which may lead to a potential claim or demand by Purchaser.
12
Except for indemnification related to the statutory warranties associated
with the Deeds, the indemnification provisions of this Section shall survive for
a period of 18 months beyond the delivery of the Deeds and transfer of title.
Provided, however, this indemnification provision as it relates to the
representation contained in Section 4.1(i) of this Agreement shall survive for a
period of two years beyond the delivery of the Deeds and transfer of title.
Neither Seller nor Purchaser shall be required to pay, in the aggregate, more
than Two Million Two Hundred Thousand and No/100 Dollars ($2,200,000) to fulfill
their obligations pursuant to this Section 16.1. In addition, until a party's
losses, liabilities, damages, and/or expenses exceed Fifty Thousand and No/100
Dollars ($50,000), individually or in the aggregate, that party shall have no
right to invoke the provisions of this Section 16.1 and only to the extent of
such excess.
16.2 Cooperation. Seller and Purchaser shall cooperate at all times from
-----------
and after the date hereof with respect to the supplying of any information
requested by the other regarding any of the matters set forth in this Agreement.
Seller and Purchaser agree to execute any and all other instruments and
documents as may be reasonably required in order to consummate the purchase and
sale contemplated herein.
16.3 Binding Effect. The covenants, agreements, representations, and
--------------
warranties contained herein shall extend to and be obligatory upon the
successors and assigns of the respective parties hereto.
16.4 Amendment. This Agreement may be amended only by written instrument
---------
executed by Seller and Purchaser.
16.5 Entire Understanding. This Agreement, and the documents
--------------------
incorporated herein, embody the entire agreement between the parties with
relation to the transactions contemplated hereby. There have been and are no
covenants, agreements, representations, warranties, or restrictions between
the parties with regard thereto other than those set forth herein or for which
there has been provision made herein. The provisions of this Agreement cannot
be waived except by the written agreement of the party against whom a waiver
shall be asserted.
16.6 Counterparts. This Agreement may be executed simultaneously in
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
16.7 Time of Essence. Time is of the essence of this Agreement.
---------------
16.8 Severability. The unenforceability, invalidity, illegality, or
------------
termination of any provision of this Agreement shall not render any other
provision of this Agreement unenforceable, invalid, or illegal and shall not
terminate this Agreement or impair the rights or obligations of the parties
hereto.
16.9 Captions. Section or paragraph titles or other headings contained
--------
in this Agreement are for convenience only and shall not be a part of this
Agreement, or considered in its interpretation.
13
16.10 Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Washington.
16.11 Brokerage Commissions. Seller and Purchaser each represent to the
---------------------
other that there are no individuals or entities entitled to brokerage
commissions or other fees in connection with the transaction other than Cushman
& Wakefield, whose commission, if any, shall be paid by Seller and CB Commercial
whose fees shall be paid by Purchaser; and that if any claims for brokerage
commissions or fees or like payments arise out of or in connection with this
transaction, all such claims shall be defended by and if sustained, paid by, the
party whose alleged actions or commitment form the basis of such claims.
16.12 Non-market. From the date of this Agreement is signed by the
----------
parties until the Closing Date or any termination of this Agreement, Seller or
its agents shall not enter into any sale or lease agreement or other contract
relating to the Property.
16.13 Maintenance of Property. From the date this Agreement is signed by
-----------------------
the parties until the Closing Date, Seller shall maintain the Property in its
current operating condition and repair (reasonable wear and tear excluded) and
otherwise operate the Property in the same manner as before the making of this
Agreement.
16.14 New Contracts. From the date this Agreement is signed by the
-------------
parties until the Closing Date, Seller or any agent for Seller shall not: (a)
enter into any lease, lease amendment, contract, contract amendment, agreement
or agreement amendment relating to the Property that requires performance, other
than the payment of money, beyond the Closing Date or waive any right of Seller
under any of the foregoing (b) take any action or inaction to cause a defect,
lien, encumbrance, or adverse claim on the Property which is not shown on the
preliminary commitment for an ALTA owner's extended title insurance policy
furnished to Purchaser by Title Company under this Agreement without Purchaser's
prior written consent.
16.15 Confidentiality. Any information disclosed by one party to the
---------------
other under the terms of this Agreement, including, but not limited to, the
terms of this Agreement, and any documentation or other material delivered by
one party to the other under the terms of this Agreement shall be held and
maintained confidential by the receiving party to the same extent the receiving
party holds and maintains its own information confidential. The information
shall not be used or disclosed by the receiving party except as permitted under
the terms of this Agreement, or except as authorized in writing by the
disclosing party.
The provisions of this Section shall not apply to information which is:
(i) already known by the recipient without an obligation of confidentiality;
(ii) publicly known or becomes publicly known through no unauthorized act of the
recipient; (iii) rightfully received by the recipient from a third party; (iv)
independently developed by the recipient without the use of the disclosing
party's information; (v) disclosed to a third party by the discloser without
similar restrictions; (vi) approved for disclosure by the disclosing party; or
(vii) required to be disclosed pursuant to a requirement of a governmental
agency or by law as long as the recipient provides the discloser with notice of
the requirement prior to any disclosure.
14
DATED this 21 day of December, 1994.
SELLER: ELDEC CORPORATION
------
By /s/ David S. Snyder
------------------------------------
Its Vice President, Finance
------------------------------------
N.C. ELDEC, INC.
By /s/ David S. Snyder
------------------------------------
Its Vice President
------------------------------------
PURCHASER: ADVANCED TECHNOLOGY
--------- LABORATORIES, INC.
By /s/ Harvey N. Gillis
------------------------------------
Its Sr. V.P. Finance and Administration
------------------------------------
and Chief Financial Officer
------------------------------------
207480J2.M24
15
EXHIBIT A
That portion of the following described Parcel "X" lying Westerly of a line
described as follows:
Commencing at the Southwest corner of the North half of the Southeast quarter of
the Northeast quarter of Section 30, Township 27 North, Range 5 East, W.M., in
Snohomish County, Washington;
thence North 00(Degree)35'50" West 180.01 feet along the West line thereof to
the Northwest corner of Tract described in Deed to Barbara McCurdy recorded in
Volume 550 of Deeds, page 1, records of said Snohomish county;
thence South 27(Degree)12'35" East 77.91 feet along the Westerly line of said
McCurdy Tract to the true point of beginning of the line described herein:
thence South 88(Degree)49'31" West 244.82 feet along the Westerly prolongation
of the South line of said McCurdy Tract;
thence at right angles to said prolongation South 01(Degree)10'29" East 292.22
feet;
thence South 73(Degree)26'46" West 4.76 feet;
thence South 49(Degree)43'26" West 14.89 feet;
thence South 43(Degree)51'11" West 13.46 feet;
thence South 29(Degree)00'08" West 11.98 feet;
thence South 27(Degree)49'25" West 14.13 feet;
thence South 33(Degree)03'37" West 9.82 feet;
thence South 43(Degree)10'30" West 8.10 feet;
thence South 44(Degree)58'09" West 17.01 feet;
thence South 40(Degree)45'05" West 20.21 feet;
thence South 70(Degree)27'47" West 19.21 feet;
thence South 57(Degree)25'32" East 26.11 feet to the beginning of a curve
concave Southwesterly having a radius of 185.00 feet;
thence Southeasterly and Southerly 166.13 feet along said curve through a
central angle of 51(Degree)27'08";
thence South 05(Degree)58'24" East 31.02 feet;
thence South 04(Degree)31'39" East 30.55 feet to the beginning of a curve
concave Northeasterly having a radius of 108.00 feet;
thence Southerly and Southeasterly 81.31 feet along said curve through a central
angle of 43(Degree)08'09";
thence South 47(Degree)39'48" East 30.09 feet to the beginning of a curve
concave Northeasterly having a radius of 111.00 feet;
thence Southeasterly and Easterly 61.94 feet along said curve through a central
angle of 31(Degree)58'16";
thence non-tangent to the preceding curve North 80(Degree)56'26" East 21.35
feet; thence North 85(Degree)32'25" East 132.33 feet to the beginning of a curve
concave Southerly having a radius of 329.22 feet;
thence Easterly 124.13 feet along said curve through a central angle of
21(Degree)36'12" to the beginning of a reverse curve concave Northerly having a
radius of 20.00 feet;
thence Easterly and Northeasterly 14.42 feet along said curve through a central
angle of 41(Degree)19'01" to the Northwesterly margin of SR 527 as described in
Deed to the State of Washington recorded under Snohomish County Recording No.
9009130330 and the terminus of said line described herein and from said terminus
the most Southerly corner of the right of way parcel described in last said deed
bears South 68(Degree)52'11" East. 16.75 feet distant.
PARCEL X DESCRIPTION:
The Southwest quarter of the Northeast quarter of Section 30, Township 27 North,
Range 5 East, W.M., and that portion of the Southeast quarter of the Northeast
quarter of said Section 30 lying Westerly of SR 527 (AKA The Old Bothell Everett
Road) as it existed prior to 1982 and Southerly of a line described as follows:
Beginning at the Southwest corner of the North half of the Southeast quarter of
the Northeast quarter of said Section 30;
thence North 01(Degree)15'51" East along the West line of said subdivision a
distance of 180.01 feet and the point of beginning of said line description;
running thence South 25(Degree)20'54" East 77.55 feet;
thence South 89(Degree)14'57" East to the Westerly line of SR 527 (Old Bothell
Everett Highway) and the terminus of said line description.
Except that portion of the southeast quarter of the Northeast quarter of said
Section 30, lying East of the following described line: Beginning at a point
where the South line of the North half of the Southeast quarter of the Northeast
quarter of said Section 30, intersects with the Westerly margin line of
Secondary State Highway (AKA Old Bothell-Everett Highway);
thence West 170 feet;
thence South 90 feet;
thence West 75 feet and the beginning of said line description;
thence North 160 feet to the termination of said line;
Also excepting therefrom those portions conveyed to the State of Washington for
highway purposes by deeds recorded under Auditor's File Nos. 8312020251,
8410310097, 85081301346, 8706010288 and 9009130330.
EXHIBIT B
Leave with Building Retain by ELDEC
------------------- ---------------
Paging System Northern Telecom SL1NT Phone Switch
Battery Back up System
Voice and Data Distribution Racks GTE Fiber Equipment and Service
(Owned by GTE)
Voice and Data Termination Equipment HP Data Terminal Controllers Wiring
Telltone T-1 Multiplexer Welfleet Routers
GTE Voice Demark 10-Base-T Hubs, Bridges, Fiber
Repeaters, and other networking
equipment
Data Equipment Stands and Racks
Data UPS Devices
2-400 Hz MG Sets and Transfer Switches
Bus Track, end tap boxes and bus cans
Exhaust hoods and scuppers for
ventilation
Cooling tower used for burn-in power
amplifiers
All engineering and manufacturing
process systems including the
associated interface and communications
equipment listed herein
1 emergency mobile generator unit.
The retained Equipment is more specifically delineated in that certain booklet
entitled "North Creek Site Hardware" which is incorporated herein by reference
and has been delivered to and reviewed by Purchaser.
EXHIBIT C
Schedule of Defects to the Property
-----------------------------------
1. Report prepared by independent consultant for Advanced Technology
Laboratories and provided to Eldec Corporation to substantiate claims of
building code problems
Eldec Building #1
Due Diligence Analysis
Dated November 8, 1994
EXHIBIT D
Schedule of Noncompliance with Hazardous Substance Law
------------------------------------------------------
1. Log of Chemical Spills for 1990, 1991, 1992, 1993, and 1994.
2. Letter dated January 31, 1994
Rachel Scown of Eldec to David Marshall of Davis Wright Tremaine
3. Regulatory Conformance Assessment
Prepared by Hart Crowser for
Eldec Corporation
North Creek Facility
February 22, 1991
J-3124
4. Letter dated March 12, 1991
David Marshall of Davis Wright Tremaine to Art Finlon of Eldec
5. Memorandum dated July 31, 1991
Rachel Scown of Eldec to Art Finlon of Eldec
6. Limited Subsurface Investigation
Prepared by Hart Crowser for
Eldec Corporation
December 16, 1994
J-4221
EXHIBIT E
December , 1994
Advanced Technology Laboratories, Inc.
22100 Bothell-Everett Highway
P.O. Box 3003
Bothell, Washington 98041-3003
Attention: Harvey N. Gillis, Senior V.P. Finance and Administration and Chief
Financial Officer.
Dear Mr. Gillis:
This letter is to confirm, as required by the Purchase Agreement dated
December , 1994, (the "Purchase Agreement") by and between Advanced Technology
Laboratories, Inc. ("ATL"), Eldec Corporation, and N.C. Eldec, Inc.
(collectively "Eldec") that Crane Co. shall stand behind and guarantee the
performance of certain obligations of Eldec under the Purchase Agreement.
Specifically, Crane Co. shall indemnify, defend and hold ATL harmless on account
of: (1) either Eldec Corporation or N.C. Eldec, Inc. not being a corporation
duly organized and validly existing under the laws of Washington state; (2) the
Purchase Agreement and all documents executed and delivered, legal, valid, and
binding obligations sufficient to convey title (if they purport to do so) and in
compliance with all provisions of all agreements and judicial orders to which
Eldec Corporation or N.C. Eldec, Inc. is a party or to which Eldec Corporation
or N.C. Eldec, Inc. or all or any portion of the Property is subject.
In addition, if at any time during the time periods set forth below, the
net worth of Eldec Corporation (as defined under normal customary accounting
standards and practices) is ever less than $60,000,000, or if Eldec Corporation
is reorganized, merged with Crane (or any other entity), or disposed of or
otherwise transferred by Crane Co., Crane Co. will stand behind the
indemnification obligations of Eldec contained in Section 16.1 of the Purchase
Agreement:
(1) For 18 months following the date the transaction contemplated by the
Purchase Agreement closes, as to indemnification for breaches of the
representations contained in Sections 4(a) through 4(h) of the Purchase
Agreement; and
(2) For 24 months following the date the transaction contemplated by the
Purchase Agreement closes, as to indemnification for breach of the
representation contained in Section 4(i) of the Purchase Agreement.
Very truly yours,
CRANE CO.
-------------------------------
EX-10.21
5
CERT. AND INDEMNITY AGRE
Exhibit 10.21
Loan No. 186603-7
CERTIFICATE AND INDEMNITY AGREEMENT
REGARDING BUILDING LAWS AND HAZARDOUS SUBSTANCES
This Agreement is made as of December 28, 1994 by ADVANCED TECHNOLOGY
LABORATORIES, INC., a Washington corporation ("Indemnitor"), for the benefit of
SEATTLE-FIRST NATIONAL BANK, a national banking association ("Lender"), to
induce Lender to make a loan (the "Loan") to Indemnitor in the amount of
$11,500,000.
In consideration of Lender agreeing to make the Loan, Indemnitor certifies,
represents, warrants, covenants and agrees as follows for the benefit of Lender:
1. Due Investigation. Indemnitor or its agents have duly investigated
-----------------
(a) the present and past uses of the "Property" (defined below) and has made due
inquiry of the appropriate governmental agencies and offices having jurisdiction
over the Property as to whether the Property or any "Other Property" (defined
below) is or has been the site of storage or contamination by any "Hazardous
Substances", (defined below) and Indemnitor has examined or been advised of all
"Environmental Laws" (defined below) applicable to the Property; and (b) the
condition of all buildings and other improvements on the Property and been
advised of all "Building Laws" (defined below) applicable to the Property. Upon
Lender's request, Indemnitor will provide Lender with a written summary of its
investigations and copies of all inquiries and responses.
2. Hazardous Substances. Indemnitor has no knowledge of (a) the presence
--------------------
of any Hazardous Substances on the Property or (b) any spills, releases,
discharges or disposal of Hazardous Substances that have occurred or are
presently occurring on or onto the Property or any Other Property, other than
the presence, use, storage and disposal of Hazardous Substances generally used
in the ordinary course of operating, maintaining or developing properties such
as the Property or in the ordinary course of operating the business of
Indemnitor (or any prior owner of all or part of the Property), all of which
Indemnitor covenants have (to its knowledge) and will be used, stored and
disposed of in accordance with commercially reasonable practices and all
applicable Environmental Laws.
3. Compliance with Laws. Indemnitor has no knowledge (a) of any failure
--------------------
by any person or entity to comply with all currently applicable Environmental
Laws with respect to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of Hazardous Substances on or from the Property; or (b)
of any failure of the Property to comply with all applicable Building
1
Laws. Indemnitor shall cause the Property to be continuously in compliance with
all applicable Building Laws and Environmental Laws. All certificates of
occupancy and other governmental permits and approvals necessary for the
occupancy of the Property have been obtained. All buildings and other
improvements currently located on the Property are located outside a 100-year
flood plain, or are covered by adequate flood insurance.
4. Future Buildings and Improvements. All buildings, structures and
---------------------------------
other improvements to be built or constructed on the Property shall be
constructed in accordance with and shall fully comply with all applicable
Building Laws and shall be located outside of any 100-year flood plain or will
be continuously covered by adequate flood insurance. With respect to all
buildings or improvements to the Property, if any, to be constructed and paid
for with Loan proceeds, Indemnitor represents and warrants no changes to the
plans and specifications for such buildings or improvements, submitted to and
approved by Lender, have been required by governmental authorities, and all
permits necessary to construct such buildings and improvements have been issued
on the basis of the plans and specifications submitted to and approved by
Lender.
5. No Release or Waiver. Except as provided in the purchase and sale
--------------------
agreement among Indemnitor, Eldec Corporation and N.C. Eldec, Inc., pursuant to
which Indemnitor is acquiring a portion of the Property, Indemnitor has not and
will not release or waive the liability of any previous owner, lessee or
operator of the Property, or any other person or entity potentially responsible
under applicable Environmental Laws for the presence or removal of Hazardous
Substances on or from the Property, and Indemnitor has made no promises of
indemnification regarding Hazardous Substances to any person or entity other
than Lender.
6. Notice to Lender. Indemnitor will immediately notify Lender if
----------------
Indemnitor receives notice or otherwise becomes aware of (a) any environmental
problem or liability with respect to the Property or Other Property, (b) any
lien, action or notice resulting from the violation of any Environmental Laws or
any Building Laws, or (c) the Property being in violation of any applicable
Building Law or Environmental Law. At its own cost, Indemnitor will take all
actions which are necessary or desirable to clean up any Hazardous Substances
affecting the Property, including removal, containment or other remedial action
required by applicable law, or cause the Property to be in compliance with any
applicable Environmental Law or Building Law. Any notice sent to Lender
pursuant to this paragraph will describe with particularity any actual,
potential or alleged violation of Building Laws or Environmental Laws, and shall
contain Indemnitor's plan or recommendations for correcting the violations.
2
7. Indemnification. Indemnitor shall indemnify, defend and hold Lender
---------------
harmless from and against any and all claims, demands, damages, losses, liens,
liabilities, penalties, fines, lawsuits and other proceedings and costs and
expenses (including attorneys' fees and disbursements, and architectural,
engineering and accounting costs and all repair and clean-up costs) which accrue
to or are made against or incurred by Lender, or are in any way connected with
(a) the inaccuracy of any of the certifications, representations or warranties
of Indemnitor contained in this Agreement, (b) any activities on the Property
during Indemnitor's ownership, possession or control of the Property which
directly or indirectly result in the Property or any Other Property being
contaminated with Hazardous Substances, or the Property being in violation of
any applicable Building Laws or Environmental Laws, or (c) the discovery and/or
cleanup of Hazardous Substances deposited or existing on the Property or any
Other Property, and (d) any breach by Indemnitor of any of its covenants or
agreements set forth in this Agreement. If Lender becomes the owner of or
acquires an interest in or rights to the Property by foreclosure or by a
conveyance in lieu of foreclosure of the deed of trust (the "Deed of Trust") or
any other instruments securing the Loan, or by any other means, the foregoing
indemnification obligation of Indemnitor shall survive such foreclosure or
conveyance in lieu of foreclosure or other acquisition of the Property.
Notwithstanding the preceding sentence, Indemnitor shall have no obligation to
defend, indemnify or hold Lender harmless from any claim, demand, damage, loss,
lien, liability, etc. arising from or out of the activities of Lender or its
agents on the Property on or after transfer of the Property to Lender pursuant
to foreclosure proceedings or in lieu thereof.
8. Unconditional and Unsecured Obligations. Indemnitor's obligations
---------------------------------------
under this Agreement are unconditional and shall not be limited by any
limitations on liability provided for in any document or instrument evidencing
or securing the Loan (collectively the "Loan Documents"). The certifications,
representations, warranties, covenants and agreements of Indemnitor set forth in
this Agreement (including without limitation the indemnity provided for in
Paragraph 7 above), (a) are separate and distinct obligations from Indemnitor's
obligations with respect to the Loan and under the Loan Documents, (b) are not
secured by the Deed of Trust or any other Loan Document, (c) shall not be
discharged or satisfied by foreclosure of the lien of the Deed of Trust or any
lien or security interest created by any other Loan Document, and (d) shall
continue in effect after any transfer of the Property, including without
limitation transfers pursuant to foreclosure proceedings (whether judicial or
nonjudicial), or by any conveyance in lieu of foreclosure.
3
9. Definitions. For purposes of this Agreement:
-----------
(a) "Building Laws" means all federal, state and local laws, statutes,
regulations, ordinances and requirements, now or hereafter in effect, applicable
to the ownership, development or operation of the Property, including all
building, zoning, planning, subdivision, fire, traffic, safety, health, labor,
air quality, wetlands, shoreline and flood plain laws, statutes, regulations,
ordinances and requirements, and specifically includes all applicable
requirements of the Fair Housing Act of 1968, and the Americans With
Disabilities Act of 1990, and all government and private covenants, conditions
and restrictions applicable to the Property, all as now or hereafter amended.
(b) "Environmental Laws" means all federal, state and local statutes,
regulations, ordinances, and requirements, now or hereafter in effect,
pertaining to environmental protection, contamination or cleanup, including
without limitation (i) the Federal Water Pollution Control Act (33 U.S.C.
(section)1251 et. seq.), (ii) the Federal Resource Conservation and Recovery
Act of 1976 (42 U.S.C. (section)6901 et. seq.), (iii) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
(section)9601 et. seq.), (iv) the Washington Model Toxics Control Act (RCW
Chapter 70.105(d)), and (v) the Washington Underground Petroleum Storage Tanks
Act (RCW Chapter 70.148), all as now or hereafter amended.
(c) "Hazardous Substances" means any chemical, substance or material
classified or designated as hazardous, toxic or radioactive, or other similar
term, and now or hereafter regulated under any Environmental Law, including
without limitation, asbestos, petroleum and hydrocarbon products.
(d) "Lender" means Seattle-First National Bank and its universal
successors and assigns, and any person or entity designated or appointed by
Lender to acquire the Property through foreclosure or by transfer in lieu of
foreclosure, and any and all other financial institutions participating in the
Loan.
(e) "Other Property" means any property which becomes contaminated
with Hazardous Substances as a result of the construction, development,
operation or other activities on, or the contamination of, the Property.
(f) "Property" means the real property situated in Snohomish County,
Washington, legally described in Schedule A attached and all buildings,
----------
structures and other improvements now or hereafter located thereon.
10. General. If Indemnitor is composed of more than one person or entity,
-------
the term "Indemnitor" shall refer to each and
4
every such person or entity and all of such persons and entities shall be
jointly and severally liable under this Agreement. This Agreement shall be
binding upon and inure to the benefit of Lender, Indemnitor and their respective
heirs, representatives, successors and assigns. This Agreement shall be
governed by and construed under the laws of the State of Washington. In any
lawsuit, action or appeal therefrom, including proceedings in bankruptcy court,
to enforce or interpret this Agreement, the prevailing party shall be entitled
to recover its costs and expenses incurred therein, including attorneys' fees
and disbursements.
DATED as of the day and year first written above.
INDEMNITOR:
ADVANCED TECHNOLOGY LABORATORIES, INC.,
a Washington corporation
By /s/ Harvey N. Gellis
___________________________________
Its Senior VP & CFO
___________________________________
5
EX-10.22
6
DEED OF TRUST
Exhibit 10.22
AFTER RECORDING RETURN TO:
SEATTLE-FIRST NATIONAL BANK Loan No. 186603-7
CREG, LOAN ADMINISTRATION Title Co. & No. FATCO; 73016-3
P.O. BOX 3686 (CSC-15)
SEATTLE, WA 98124-3686
Attention: Jolene Tingelstad
DEED OF TRUST, SECURITY AGREEMENT
AND FIXTURE FILING WITH ASSIGNMENT
OF LEASES AND RENTS
THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING WITH ASSIGNMENT
OF LEASES AND RENTS ("Deed of Trust") is made as of December 28, 1994 by
ADVANCED TECHNOLOGY LABORATORIES, INC., a Washington corporation, as "Grantor",
whose address is 22100 Bothell Everett Highway, P.O. Box 3003, Bothell,
Washington 98041-3003; to RAINIER CREDIT COMPANY, as "Trustee", whose address is
P.O. Box 33828, FAB-19, Seattle, WA 98124-3828; for the benefit of SEATTLE-FIRST
NATIONAL BANK, a national banking association, as "Beneficiary", whose address
is 701 Fifth Avenue, 14th Floor, Seattle, WA 98104, Attention: Real Estate Loan
Administration.
ARTICLE I
---------
1. GRANTING CLAUSE. Grantor irrevocably grants, bargains, sells and
conveys to Trustee and its successors and assigns in trust, with power of sale
and with right of entry and possession as provided herein, all Grantor's estate,
right, title, interest, claim and demand, now owned or hereafter acquired, in
and to the following (the "Property"):
(a) The real property in Snohomish County, Washington, described in
Schedule A attached and any and all improvements now or hereafter located
----------
thereon (the "Real Property").
(b) All land lying in streets and roads adjoining the Real Property,
and all access rights and easements pertaining to the Real Property.
(c) All the lands, tenements, privileges, reversions, remainders,
irrigation and water rights and stock, oil and gas rights, royalties, minerals
and mineral rights, all development rights and credits, air rights,
hereditaments and appurtenances belonging or in any way pertaining to the Real
Property.
(d) All buildings, structures, improvements, fixtures, equipment and
machinery and property now or hereafter attached to the Real Property including,
but not limited to, heating and incinerating apparatus and equipment, boilers,
engines, motors,
1
generating equipment, piping and plumbing fixtures, built-in ranges, cooking
apparatus and mechanical kitchen equipment, built-in refrigerators, cooling,
ventilating, sprinkling and vacuum cleaning systems, fire extinguishing
apparatus, gas and electric fixtures, irrigation equipment, carpeting,
underpadding, elevators, escalators, partitions, mantles, built-in mirrors,
window shades, blinds, screens, storm sash, awnings, and shrubbery and plants.
All property mentioned in this subsection (d) shall be deemed part of the realty
and not severable wholly or in part without material injury to the Real
Property.
(e) All rents, issues and profits of the Real Property, all existing
and future leases of the Real Property (including extensions, renewals and
subleases), all agreements for use and occupancy of the Real Property (all such
leases and agreements whether written or oral, are hereafter referred to as the
"Leases"), and all guaranties of lessees' performance under the Leases, together
with the immediate and continuing right to collect and receive all of the rents,
income, receipts, revenues, issues, profits and other income of any nature now
or hereafter due (including any income of any nature coming due during any
redemption period) under the Leases or from or arising out of the Real Property
including minimum rents, additional rents, percentage rents, parking or common
area maintenance contributions, tax and insurance contributions, deficiency
rents, liquidated damages following default in any Lease, all proceeds payable
under any policy of insurance covering loss of rents resulting from
untenantability caused by destruction or damage to the Real Property, all
proceeds payable as a result of exercise of an option to purchase the Real
Property, all proceeds derived from the termination or rejection of any Lease in
a bankruptcy or other insolvency proceeding, all security deposits or other
deposits for the performance of any lessee's obligations under the Leases, and
all proceeds from any rights and claims of any kind which Grantor may have
against any lessee under the Leases or any occupants of the Real Property (all
of the above are hereafter collectively referred to as the "Rents"). This
subsection (e) is subject to the right, power and authority given to the
Beneficiary in the Loan Documents (as defined herein) to collect and apply the
Rents.
(f) All of Grantor's rights to further encumber said Real Property for
debt and all Grantor's rights to enter into any lease agreement which would
create a tenancy that is or may become subordinate in any respect to any
mortgage or deed of trust other than this Deed of Trust.
2. COLLATERAL. The following described estate, property and rights of
Grantor are also included as security for the performance of each covenant and
agreement of Grantor contained herein and the payment of all sums of money
secured hereby:
2
(a) All compensation, awards, damages, rights of action and proceeds
(including insurance proceeds and any interest on any of the foregoing) arising
out of or relating to a taking or damaging of the Property by reason of any
public or private improvement, condemnation proceeding (including change of
grade), fire, earthquake or other casualty, injury or decrease in the value of
the Property, to the extent of the amounts owing under the "Note" (defined
below) and the other "Loan Documents" (defined below) including this Deed of
Trust.
(b) All contracts and agreements pertaining to the ownership,
maintenance or operation of the Property including, but not limited to,
management, operating and maintenance agreements, and governmental licenses and
permits.
(c) All of Grantor's interest in and to the proceeds of the loan (the
"Loan") evidenced by the Note (defined below), whether disbursed or not, any
account into which Loan proceeds are deposited.
(d) All books and records pertaining to the ownership, operation or
maintenance of the Property and the other collateral described above, including
copies of computer readable memory.
(e) All additions, accessions, replacements, substitutions, proceeds
and products of the Property described in this Section 2 and of any of the
Property above which is personal property.
The Property and all of the property and rights described in Sections 1 and 2
above are referred to collectively in this Deed of Trust as the "Collateral".
The Collateral is intended only to include property and rights related to the
ownership, maintenance or operation of the Property and not property and rights
related to the manufacturing business from time to time operated by Grantor from
the Property.
3. SECURITY AGREEMENT. If any of the Collateral is determined to be
personal property, Grantor as Debtor hereby grants to Beneficiary as Secured
Party a security interest in all such personal property to secure payment and
performance of the Secured Obligations. This Deed of Trust constitutes a
security agreement between Grantor and Beneficiary pursuant to the Uniform
Commercial Code as adopted in the State of Washington, as now or hereafter
amended, with respect to the Collateral, and any and all property affecting or
related to the use and enjoyment of the Property, now or hereafter described in
any Uniform Commercial Code Financing Statement naming Grantor as Debtor and
Beneficiary as Secured Party. The remedies of Beneficiary for any violation of
the covenants, terms and conditions of this Deed of Trust or any other
3
Loan Document (defined below) shall include all remedies available to secured
parties under the Uniform Commercial Code. Grantor agrees the filing of a
financing statement in the records normally having to do with personal property
shall not be construed as in anywise derogating from or impairing the intention
of Grantor and Beneficiary that the Collateral is, and at all times and for all
purposes and in all proceedings both legal or equitable shall be, regarded as
part of the real estate irrespective of whether (i) any such item is physically
attached to the improvements, (ii) serial numbers are used for the better
identification of certain equipment items capable of being thus identified in
any list filed with the Beneficiary, or (iii) any such item is referred to or
reflected in any such financing statement so filed at any time.
4. FINANCING STATEMENT. This Deed of Trust shall also constitute a
financing statement filed for record in the real estate records as a fixture
filing pursuant to the Uniform Commercial Code.
5. OBLIGATIONS SECURED. The following obligations ("Secured Obligations")
are secured by this Deed of Trust:
(a) Payment of the sum of Eleven Million Five Hundred Thousand Dollars
($11,500,000) or so much thereof as may be advanced with interest thereon
according to the terms of a promissory note of even date herewith, payable to
Beneficiary or order and made by Grantor, including all renewals, amendments,
modifications, extensions and substitutions therefor (the "Note"). THE NOTE MAY
CONTAIN PROVISIONS ALLOWING FOR CHANGES IN THE INTEREST RATE.
(b) Payment of any further sums now or hereafter advanced or loaned by
Beneficiary to Grantor, or any of its successors or assigns, and payment of
every other present and future obligation owing by Grantor to Beneficiary of any
kind, and all renewals, modifications, and extensions thereof, including any
interest, fees, costs, service charges, indemnifications and expenses connected
with such obligations, regardless of whether such sums exceed the amount stated
above in subparagraph (a), if (i) the promissory note or other written document
evidencing the future advance or loan or other obligation specifically states
that it is secured by this Deed of Trust, or (ii) the advance, including costs
and expenses incurred by Beneficiary, is made pursuant to the Note, this Deed of
Trust or any other documents executed by Grantor evidencing, securing, or
relating to the Loan, and/or the Collateral, whether executed prior to,
contemporaneously with, or subsequent to this Deed of Trust (this Deed of Trust,
the Note and all such other documents, including any agreement evidencing an
existing or future "swap transaction" (as referred to below), and all renewals,
amendments, modifications or extensions thereof, are
4
hereafter collectively referred to as the "Loan Documents"), together with
interest thereon at the rate set forth in the Note, unless otherwise specified
in the Loan Documents or agreed in writing.
(c) Performance of each agreement, term and condition set forth or
incorporated by reference in the Loan Documents, as such may be amended.
(d) Performance and payment of the obligations of Grantor (or any
other obligor under the Note) under each and every existing or future "swap
transaction" (i.e., any transactions governed by an ISDA master agreement) to
which Grantor (or the obligor under the Note) and Beneficiary are parties, if
this Deed of Trust is referenced in such transaction as a credit support
document.
Notwithstanding any of the foregoing, the Secured Obligations shall not include
the obligations of Grantor under any Certificate and Indemnity Agreement
Regarding Building Laws and Hazardous Substances now or hereafter executed by
Grantor (or any other person or entity) in connection with the loan evidenced by
the Note.
ARTICLE II
----------
1. ASSIGNMENT OF RENTS AND LEASES. Grantor hereby absolutely and
irrevocably assigns to Beneficiary all Grantor's interest in the Rents and
Leases. The foregoing assignment is subject to the terms and conditions of any
separate assignment of the Leases and/or Rents, whenever executed, in favor of
Beneficiary and covering the Property. Grantor warrants it has made no prior
assignment of the Rents or the Leases and will make no subsequent assignment
(other than to Beneficiary) without the prior written consent of Beneficiary.
At Beneficiary's request, Grantor shall execute and deliver to Beneficiary a
separate assignment of rents containing such terms and conditions as Beneficiary
may reasonably require.
(a) Unless otherwise provided in any separate assignment of the Leases
and/or the Rents, and so long as Grantor is not in default under the Loan
Documents, Grantor may collect the Rents as the Rents become due. Grantor shall
use the Rents to pay normal operating expenses for the Property and sums due and
payments required under the Loan Documents. No Rents shall be collected for a
period subsequent to the current one month rental period and first or last
month's rent. Grantor's right to collect the Rents shall not constitute
Beneficiary's consent to the use of cash collateral in any bankruptcy
proceeding.
5
(b) If Grantor is in default under this Deed of Trust or any other
Loan Document, without notice to Grantor, Beneficiary or its agents, or a court
appointed receiver, may collect the Rents. In doing so, Beneficiary may (i)
evict lessees for nonpayment of rent, (ii) terminate in any lawful manner any
tenancy or occupancy, (iii) lease the Property in the name of the then owner on
such terms as it may deem best, (iv) institute proceedings against any lessee
for past due rent, and (v) do all other acts and things as Beneficiary deems
necessary or desirable. The Rents received shall be applied to payment of the
costs and expenses of collecting the Rents, including a reasonable fee to
Beneficiary, a receiver or an agent, operating expenses for the Property and any
sums due or payments required under the Loan Documents, in such order as
Beneficiary may determine. Any excess shall be paid to Grantor, however,
Beneficiary may withhold from any excess a reasonable amount to pay sums
anticipated to become due which exceed the anticipated future Rents.
Beneficiary's failure to collect or discontinuing collection at any time shall
not in any manner affect the subsequent enforcement by Beneficiary of its rights
to collect the Rents. The collection of the Rents by or for Beneficiary shall
not cure or waive any default under the Loan Documents. Any Rents paid to
Beneficiary or a receiver shall be credited against the amount due from the
lessees under the Leases. In the event any lessee under a Lease becomes the
subject of any proceeding under the Bankruptcy Code or any other federal, state
or local statute which provides for the possible termination or rejection of any
Lease assigned hereby, Grantor covenants and agrees that in the event any of the
Leases are so rejected, no damages settlement shall be made without the prior
written consent of Beneficiary; any check in payment of damages for rejection or
termination of any such Lease will be made payable both to the Grantor and
Beneficiary; and Grantor hereby assigns any such payment to Beneficiary and
further covenants and agrees that upon request of Beneficiary, it will duly
endorse to the order of Beneficiary any such check, the proceeds of which will
be applied to any portion of the indebtedness secured hereunder in such manner
as Beneficiary may elect.
(c) Regardless of whether or not Beneficiary, in person or by agent,
takes actual possession of the Property or any part thereof, Beneficiary is not
and shall not be deemed to be: (i) "a mortgagee in possession" for any purpose;
(ii) responsible for performing any of the obligations of the lessor under any
Lease; (iii) responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any negligence
in the management, upkeep, repair or control of the Property; or (iv) liable in
any manner for the Property or the use, occupancy, enjoyment or operation of all
or any part of it. In exercising its rights under this Section 1 Beneficiary
shall be
6
liable only for the proper application of and accounting for the Rents collected
by Beneficiary or its agents.
2. LEASES. Grantor shall fully comply with all of the terms, conditions
and provisions of the Leases so that the same shall not become in default and do
all things necessary to preserve the Leases in force. Unless otherwise agreed
in writing by Beneficiary, without Beneficiary's prior written consent, Grantor
will not enter into any Lease (i) for a term of three (3) years or more, or (ii)
containing an option or right to purchase all or any part of the Collateral in
favor of any lessee. With respect to any Lease of the whole or any part of the
Property involving an initial term of three (3) years or more, Grantor shall
not, without the prior written consent of Beneficiary, (a) permit the assignment
or subletting of all or part of the lessee's rights under the Lease unless the
right to assign or sublet is expressly reserved by the lessee under the Lease,
(b) modify or amend the Lease for a lesser rental or term, or (c) accept
surrender of the Lease or terminate the Lease except in accordance with the
terms of the Lease providing for termination in the event of a default. After a
default under the Note or any other Loan Document, any proceeds or damages
resulting from a lessee's default under any Lease, at Beneficiary's option,
shall be paid to Beneficiary and applied against sums owed under the Loan
Documents even though such sums may not be due and payable. Except for real
estate taxes and assessments, without Beneficiary's prior written consent,
Grantor shall not permit any lien to be created against the Property which may
be or may become prior to any Lease. If the Property is partially condemned or
suffers a casualty, Grantor shall promptly repair and restore the Property in
order to comply with the Leases.
ARTICLE III
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1. NON-AGRICULTURAL USE. Grantor represents and warrants to Beneficiary
that neither the Property nor any other Collateral is used principally or
primarily for agricultural or farming purposes.
2. PERFORMANCE OF OBLIGATIONS. Grantor shall promptly and timely pay all
sums due pursuant to the Loan Documents, strictly comply with all the terms and
conditions of the Loan Documents, and perform each Secured Obligation in
accordance with its terms.
3. WARRANTY OF TITLE. Grantor warrants that it has good and marketable
title to an indefeasible fee simple estate in the Property (unless Grantor's
present interest in the Property is described in Schedule A as a leasehold
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interest, in which case Grantor warrants that it lawfully possesses and holds a
valid leasehold interest in the Property as described in Schedule A), and good
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marketable title to the personal property Collateral, subject to no liens,
encumbrances, easements, assessments, security
7
interests, claims or defects of any kind prior or subordinate to the lien of
this Deed of Trust, except those listed in Beneficiary's title insurance policy
or approved by Beneficiary in writing (the "Exceptions") and real estate taxes
and assessments for the current year. Grantor warrants the Exceptions and the
real estate taxes and assessments are not delinquent or in default, and Grantor
has the right to convey the Property to Trustee for the benefit of Beneficiary,
and the right to grant a security interest in the personal property Collateral.
Grantor will warrant and defend title to the Collateral and will defend the
validity and priority of the lien of this Deed of Trust and the security
interests granted herein against any claims or demands.
4. PROHIBITED LIENS.
(a) Subject to Grantor's rights under subsection (b) below, Grantor
shall not permit any governmental or statutory liens (including taxes,
mechanic's or materialmen's liens) to be filed against the Collateral except for
real estate taxes and assessments not yet due and liens permitted by the Loan
Documents or approved by Beneficiary in writing.
(b) Grantor will have the right to contest in good faith by
appropriate legal or administrative proceeding the validity of any prohibited
lien, encumbrance or charge so long as (i) no default exists under the Loan
Documents, (ii) with respect to any lien other than a mechanic's or
materialmen's lien, Grantor first deposits with Beneficiary a bond or other
security satisfactory to Beneficiary in the amount reasonably required by
Beneficiary; (iii) Grantor immediately commences its contest of such lien,
encumbrance or charge, applies to court for a show cause as provided for in RCW
60.04.221(9), as now or hereafter amended, and continuously pursues the contest
in good faith and with due diligence; (iv) foreclosure of the lien, encumbrance
or charge is stayed; and (v) Grantor pays any judgment rendered for the lien
claimant or other third party within ten (10) days after the entry of the
judgment. If the contested item is a mechanic's or materialmen's lien, Grantor
will furnish Beneficiary with an endorsement to its title insurance policy which
insures the priority of this Deed of Trust over the lien being contested.
Grantor will discharge or elect to contest and post an appropriate bond or other
security within twenty (20) days of written demand by Beneficiary.
5. PAYMENT OF TAXES AND OTHER ENCUMBRANCES. Grantor shall pay the real
estate taxes and any assessments or ground rents prior to delinquency unless
otherwise provided for in the reserve account described in Section 15 below.
All other encumbrances, charges and liens affecting the Collateral, including
mortgages and deeds of trust, whether prior to or subordinate to the lien of
this Deed of
8
Trust, shall be paid when due and shall not be in default. On request Grantor
shall furnish evidence of payment of these items.
6. MAINTENANCE--NO WASTE. Grantor shall protect and preserve the
Collateral and maintain it in good condition and repair. Grantor shall do all
acts and take all precautions which, from the character and use of the
Collateral, are reasonable, proper or necessary to so maintain, protect and
preserve the Collateral. Grantor shall not commit or permit any waste of the
Collateral.
7. ALTERATIONS, REMOVAL AND DEMOLITION. Unless otherwise agreed in
writing by Beneficiary, Grantor shall not alter, remove or demolish any of the
structural elements of the building or improvements on the Property without
Beneficiary's prior written consent. Grantor shall not remove any fixture or
other item of property which is part of the Collateral without Beneficiary's
prior written consent unless the fixture or item of property is replaced by an
article of equal suitability, owned by Grantor free and clear of any lien or
security interest.
8. COMPLETION, REPAIR AND RESTORATION. Grantor shall promptly complete or
repair and restore in good workmanlike manner any building or improvement on the
Property which may be constructed or damaged or destroyed and shall pay all
costs incurred therefor. With respect to alterations or construction subject to
Beneficiary's approval, prior to commencement of any construction Grantor shall
submit the plans and specifications for Beneficiary's approval and furnish
evidence of sufficient funds to complete the work.
9. COMPLIANCE WITH LAWS. Grantor shall comply with all laws, ordinances,
regulations, covenants, conditions, and restrictions affecting the Collateral,
as applicable, including, without limitation, all applicable requirements of the
Fair Housing Act of 1968 (as amended) and the Americans With Disabilities Act of
1990 (as the same may be amended from time to time), and shall not commit or
permit any act upon or concerning the Collateral in violation of any such laws,
ordinances, regulations, covenants, conditions, and restrictions, as applicable.
Grantor shall defend, indemnify and hold Beneficiary harmless from and against
all liability threatened against or suffered by Beneficiary by reason of a
breach by Grantor of the foregoing representations, warranties, covenants and
agreements. The foregoing indemnity shall include the cost of all alterations
to the Collateral (including architectural, engineering, legal and accounting
costs), all fines, fees and penalties, and all legal and other expenses
(including attorneys' fees) incurred in connection with the Property being in
violation of any such laws, ordinances, regulations, covenants, conditions and
restrictions. If
9
Beneficiary or its designee shall become the owner of or acquire an interest in
or rights to the Collateral by foreclosure or deed in lieu of foreclosure of
this Deed of Trust or by other means, the foregoing indemnification obligation
shall survive such foreclosure or deed in lieu of foreclosure or other
acquisition of the Collateral. Notwithstanding the preceding sentence, Grantor
shall have no obligation to defend, indemnify or hold Beneficiary harmless from
any liability arising from or out of the activities of Beneficiary or its agents
with respect to the Collateral on or after the transfer of the Collateral to
Beneficiary pursuant to foreclosure proceedings or in lieu thereof.
10. IMPAIRMENT OF COLLATERAL. Grantor shall not, without Beneficiary's
prior written consent, change the general nature of the occupancy of the
Property, initiate, acquire or permit any change in any public or private
restrictions (including without limitation a zoning reclassification) limiting
the uses which may be made of the Collateral, or take or permit any action which
would impair the Collateral or Beneficiary's lien or security interest in the
Collateral.
11. INSPECTION OF COLLATERAL. Beneficiary and/or its representative may
inspect the Collateral at reasonable times after reasonable notice.
12. GRANTOR'S DEFENSE OF COLLATERAL. Grantor shall appear in and defend
any action or proceeding which may affect the Collateral or the rights or powers
of Beneficiary or Trustee under this Deed of Trust.
13. BENEFICIARY'S RIGHT TO PROTECT COLLATERAL. Beneficiary may commence,
appear in, and defend any action or proceeding which may affect the Collateral
or the rights or powers of Beneficiary or Trustee under this Deed of Trust.
Beneficiary may pay, purchase, contest or compromise any encumbrance, charge or
lien not listed as an Exception which in its judgment appears to be prior or
superior to the lien of this Deed of Trust. If Grantor fails to make any
payment or do any act required under the Loan Documents, Beneficiary, without
any obligation to do so and without releasing Grantor from any obligations under
the Loan Documents, may make the payment or cause the act to be performed in
such manner and to such extent as Beneficiary may deem necessary to protect the
Collateral. Beneficiary is authorized to enter upon the Property for such
purposes. In exercising any of these powers Beneficiary may incur such
expenses, in its absolute discretion, it deems necessary.
14. HAZARDOUS SUBSTANCES.
(a) Grantor represents and warrants to Beneficiary, to the best of
Grantor's knowledge after due and diligent inquiry, no
10
hazardous or toxic waste or substances are being stored on the Property nor have
any such waste or substances been stored or used in, on, under, over or about
the Property prior to or during Grantor's ownership, possession or control of
the Property, other than the use or storage of hazardous or toxic waste or
substances generally used in the ordinary course of operating, maintaining or
developing properties such as the Property or in the ordinary course of
operating the business of Grantor (or any prior owner of all or part of the
Property), all of which Grantor covenants have (to its knowledge) and will be
used, stored and disposed of in accordance with all applicable federal, state
and local laws, regulations and ordinances. Grantor shall provide written
notice to Beneficiary immediately upon Grantor becoming aware that the Property
is being or has been contaminated with hazardous or toxic waste or substances.
Grantor will not cause nor permit any activities on the Property which directly
or indirectly could result in the Property or any other property becoming
contaminated with hazardous or toxic waste or substances; provided the foregoing
shall not preclude Grantor from using or generating hazardous or toxic wastes or
other substances in the ordinary course of operating the business of Grantor on
the Property if such use is in accordance with commercially reasonable practices
and all applicable federal, state or local laws, regulations and ordinances.
For purposes of this Deed of Trust, the term "hazardous or toxic waste or
substances" means any chemical, substance or material classified or designated
as hazardous, toxic or radioactive, or similar term, and now or hereafter
regulated under any applicable federal, state or local statute, regulation,
ordinance or requirement, now or hereafter in effect, pertaining to
environmental protection, contamination or cleanup.
(b) Grantor shall comply, at Grantor's expense, with all applicable
statutes, regulations and ordinances which apply to Grantor or the Collateral,
and with all orders, decrees or judgments of governmental authorities or courts
having jurisdiction which Grantor is bound by, relating to the use, collection,
storage, treatment, control, removal or cleanup of hazardous or toxic substances
in, on, under, over or about the Property or in, on, under, over or about any
adjacent property that becomes contaminated with hazardous or toxic substances
as a result of construction, operations or other activities on, or the
contamination of, the Property. Beneficiary may, but is not obligated to, enter
upon the Property to inspect it for compliance and to take such actions and
incur such costs and expenses to effect such compliance as it deems advisable to
protect its interest as Beneficiary; and whether or not Grantor has actual
knowledge of the existence of hazardous or toxic substances in, on, under, over
or about the Property or any adjacent property as of the date hereof, Grantor
shall reimburse Beneficiary on demand for the full amount of all reasonable
costs and expenses incurred by
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Beneficiary prior to Beneficiary acquiring title to the Property through
foreclosure or deed in lieu of foreclosure, in connection with such compliance
activities.
(c) Grantor's obligations under this Section 14 are unconditional and
shall not be limited by a non-recourse or other limitations of liability
provided for in this Deed of Trust or any other Loan Document.
15. RESERVE ACCOUNT.
(a) Subject to subsection (d) below, if Beneficiary so requires,
Grantor shall pay to Beneficiary monthly, together with and in addition to any
payments due under the Note, a sum, as estimated by Beneficiary, equal to the
ground rents, if any, the real estate taxes and assessments next due on the
Property and the premiums next due on insurance policies required under the Loan
Documents, less all sums already paid therefor, divided by the number of months
to elapse before two (2) months prior to the date when the ground rents, real
estate taxes, assessments and insurance premiums will become delinquent. The
monthly reserve accounts payments and any other payments due under the Note
shall be paid in a single payment and applied by Beneficiary, at its option, in
the following order: (1) ground rents, real estate taxes, assessments and
insurance premiums, (2) expenditures made pursuant to the Loan Documents and
interest thereon, (3) interest on the Note, and (4) principal due on the Note.
Grantor shall promptly deliver to Beneficiary all bills and notices pertaining
to the ground rents, taxes, assessments and insurance premiums.
(b) The reserve account is solely for the protection of Beneficiary.
Beneficiary shall have no responsibility except to credit properly the sums
actually received by it. No interest will be paid on the funds in the reserve
account and Beneficiary shall have no obligation to deposit the funds in an
interest-bearing account. Upon assignment of this Deed of Trust by Beneficiary,
any funds in the reserve account shall be turned over to the assignee and any
responsibility of Beneficiary with respect thereto shall terminate. Each
transfer of the Property shall automatically transfer to the grantee all rights
of Grantor to any funds in the reserve account.
(c) If the total of the payments to the reserve account exceeds the
amount of payments actually made by Beneficiary, plus such amounts as have been
reasonably accumulated in the reserve account toward payments to become due,
such excess may, at Beneficiary's election, be (1) credited by Beneficiary
against sums then due and payable under the Loan Documents, or (2) refunded to
Grantor as its name appears on the records of Beneficiary. If, however, the
reserve account does not have sufficient funds to make
12
the payments when they become due, Grantor shall pay to Beneficiary the amount
necessary to make up the deficiency within fifteen (15) days after written
notice to Grantor. If this Deed of Trust is foreclosed or if Beneficiary
otherwise acquires the Collateral, the Beneficiary shall, at the time of
commencement of the proceedings or at the time the Collateral is otherwise
acquired, apply the remaining funds in the reserve account, less such sums as
will become due during the pendency of the proceedings, against the sums due
under the Loan Documents and/or to make payments required under the Loan
Documents.
(d) Unless required by the terms of Beneficiary's loan commitment or
any other Loan Document, Grantor shall not be required to pay monthly reserve
account payments so long as there has been no more than four (4) late payments
due under the Note throughout the term of the Loan and there is no other default
under the Loan and so long as Grantor remains in ownership of the Collateral,
provided receipted bills evidencing the payment of all taxes and/or assessments
and insurance premiums are exhibited to Beneficiary within fifteen (15) days
after Beneficiary's request therefor. Upon any change in any of these
conditions, Beneficiary may, at its option then or thereafter exercised, require
the payment of reserves pursuant to this Section 15.
16. REPAYMENT OF BENEFICIARY'S EXPENDITURES. Grantor shall pay within ten
(10) days after written notice from Beneficiary all sums expended by Beneficiary
and all costs and expenses incurred by Beneficiary in taking any actions
pursuant to the Loan Documents including attorneys' fees, accountants' fees,
appraisal and inspection fees, and the costs for title reports. If any laws or
regulations are passed subsequent to the date of this Deed of Trust which
require Beneficiary to incur out-of-pocket expenses in order to maintain,
modify, extend or foreclose this Deed of Trust, revise the terms of the Loan or
consent to an Accelerating Transfer (as defined below), Grantor shall reimburse
Beneficiary for such expenses within fifteen (15) days after written notice from
Beneficiary. Expenditures by Beneficiary shall bear interest from the date of
such advance or expenditure at the default interest rate in the Note, shall
constitute advances made under this Deed of Trust and shall be secured by and
have the same priority as the lien of this Deed of Trust. If Grantor fails to
pay any such expenditures, costs and expenses and interest thereon, Beneficiary
may, at its option, without foreclosing the lien of this Deed of Trust, commence
an independent action against Grantor for the recovery of the expenditures
and/or advance any undisbursed Loan proceeds to pay the expenditures.
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17. ACCELERATING TRANSFERS.
(a) "Accelerating Transfer" means any sale, contract to sell,
conveyance, encumbrance, transfer of full possessory rights, or other transfer
of all or any material part of the Collateral or any interest in it, whether
voluntary, involuntary, by operation of law or otherwise and whether or not for
record or for consideration. If Grantor is a corporation, "Accelerating
Transfer" also means any transfer or transfers of shares possessing, in the
aggregate, more than fifty percent (50%) of the voting power. If Grantor is a
partnership, "Accelerating Transfer" also means withdrawal or removal of any
general partner, dissolution of the partnership under Washington law, or any
transfer or any transfers of, in the aggregate, more than fifty percent (50%) of
the partnership interests. If Grantor is the majority owner of a business,
either through ownership of shares of a corporation or interest in a partnership
or otherwise, which occupies seventy-five percent (75%) or more of the
improvements on the Property, "Accelerating Transfer" also means any sale,
contract to sell, or other transfer of the business or substantial assets of the
business, other than in the ordinary course, or the failure of the business to
continue to occupy the Property.
(b) Grantor acknowledges Beneficiary is taking actions in reliance on
the expertise, skill, experience and reliability of Grantor, and the obligations
secured hereby include material elements similar in nature to a personal service
contract or ownership interest. In consideration of Beneficiary's reliance,
Grantor agrees that Grantor shall not make any Accelerating Transfer without
Beneficiary's prior written consent, which Beneficiary may withhold in its sole
discretion. If Beneficiary consents, it may charge the Grantor a fee as
consideration for such consent and condition its consent on such changes to the
terms and conditions of the Note and other Loan Documents as Beneficiary may
require, including without limitation increasing the interest rate on the Note.
Grantor shall pay Beneficiary's actual costs incurred in making its decision to
consent to an Accelerating Transfer, including but not limited to the cost of
credit reports, an updated appraisal of the Property, an updated environmental
assessment and documentation. If any Accelerating Transfer occurs without
Beneficiary's prior written consent, Beneficiary in its sole discretion may
declare an immediate default and all sums secured by this Deed of Trust to be
immediately due and payable, and Beneficiary may invoke any rights and remedies
provided herein. This provision shall apply to each and every Accelerating
Transfer regardless of whether or not Beneficiary has consented or waived its
rights, whether by action or nonaction, in connection with any previous
Accelerating Transfer(s).
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(c) If all or any part of this Section 17 relevant to a particular
Accelerating Transfer is unenforceable according to the law in effect at the
time of the Accelerating Transfer, then Grantor shall reimburse Beneficiary for
its actual costs incurred in processing the Accelerating Transfer on its
records, including but not limited to the cost of modifications of Loan
Documents, an appraisal, and obtaining relevant credit and financial
information.
(d) By the acceptance of this Deed of Trust, the Beneficiary agrees it
will, upon request of the Grantor, if no default exists under this Deed of Trust
and no event has occurred which through the passage of time, the giving of
notice or both, could constitute a default, join with the Grantor in requesting
the Trustee to partially reconvey a portion of the Property, consisting of
approximately 17 acres (including approximately 7.7 acres of wetlands) of
unimproved real property, if the following conditions are met:
(1) Grantor delivers to Beneficiary evidence that (i) the partial
reconveyance will not have any adverse effect upon the priority position of the
remaining security as evidenced by the title insurance held by the Beneficiary,
and (ii) the remaining Property constitutes one or more "legal lots" under
applicable zoning and subdivision laws.
(2) The Property shall have been short platted or otherwise
subdivided in accordance with regulations of the local government authority, and
Beneficiary must receive evidence of final short plat (or other subdivision)
approval from the government authority. Any such short plat or subdivision
shall be subject to the reasonable approval of Beneficiary.
(3) The release, in Beneficiary's reasonable opinion, will not
result in the loss by any other part of the Property of reasonable access to a
public street or the use of any necessary easements or utility services.
18. RELEASE OF PARTIES OR COLLATERAL. Without affecting the obligations
of any party under the Loan Documents and without affecting the lien of this
Deed of Trust and Beneficiary's security interest in the Collateral, Beneficiary
and/or Trustee may, without notice (a) release all or any Grantor and/or any
other party now or hereafter liable for any of the Secured Obligations
(including guarantors), (b) release all or any part of the Collateral, (c)
subordinate the lien of this Deed of Trust or Beneficiary's security interest in
the Collateral, (d) take and/or release any other security for or guarantees of
the Secured Obligations, (e) grant an extension of time for performance of the
Secured Obligations, (f) modify, waive, forbear, delay or fail to enforce any of
the Secured Obligations, (g) sell or otherwise realize on
15
any other security or guaranty prior to, contemporaneously with or subsequent to
a sale of all or any part of the Collateral, (h) make advances pursuant to the
Loan Documents including advances in excess of the Note amount, (i) consent to
the making of any map or plat of the Property, and (j) join in the grant of any
easement on the Property. Any subordinate lienholder shall be subject to all
such releases, extensions or modifications without notice to or consent from the
subordinate lienholder. Grantor shall pay any Trustee's, attorneys', title
insurance, recording, inspection or other fees or expenses incurred in
connection with release of Collateral, the making of a map, plat or the grant of
an easement.
ARTICLE IV
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1. INSURANCE.
(a) Grantor shall maintain such insurance on the Collateral as may be
reasonably required from time to time by Beneficiary, with premiums prepaid,
providing replacement cost coverage and insuring against loss by fire and such
other risks covered by extended coverage insurance, and such other perils and
risks as Beneficiary may reasonably require from time to time, including
earthquake, loss of rents and business interruption. Grantor also shall
maintain comprehensive general public liability insurance and if the Property is
located in a designated flood hazard area, flood insurance. All insurance shall
be with companies reasonably satisfactory to Beneficiary and in such amounts and
with such coverages as Beneficiary may reasonably require from time to time,
with lender's loss payable clauses in favor of and in form reasonably
satisfactory to Beneficiary. At least thirty (30) days prior to the expiration
of the term of any insurance policy, Grantor shall furnish Beneficiary with
written evidence of renewal or issuance of a satisfactory replacement policy.
If requested Grantor shall deliver copies of all polices to Beneficiary. Each
policy of insurance shall provide Beneficiary with no less than forty-five (45)
days prior written notice of any cancellation, expiration, non-renewal or
modification.
(b) In the event of foreclosure of this Deed of Trust all interest of
Grantor in any insurance policies pertaining to the Collateral and in any claims
against the policies and in any proceeds due under the policies shall pass to
Beneficiary.
(c) If under the terms of any Lease the lessee is required to maintain
insurance of the type required by the Loan Documents and if the insurance is
maintained for the benefit of both the lessor and Beneficiary, Beneficiary will
accept such policies provided all of the requirements of Beneficiary and the
Loan Documents are met. In the event the lessee fails to maintain
16
such insurance, Grantor shall promptly obtain such policies as are required by
the Loan Documents.
(d) If Grantor fails to maintain any insurance required of it by
Beneficiary, or fails to pay any premiums with respect to such insurance,
Beneficiary may obtain such replacement insurance as it deems necessary or
desirable, or pay the necessary premium on behalf of Grantor, and any sums
expended by Beneficiary in so doing shall be added to the principal balance of
the Note and bear interest at the default interest rate set forth in the Note.
2. DAMAGES AND CONDEMNATION AND INSURANCE PROCEEDS.
(a) Grantor hereby absolutely and irrevocably assigns to Beneficiary,
and authorizes the payor to pay to Beneficiary, the following claims, causes of
action, awards, payments and rights to payment: (i) all awards of damages and
all other compensation payable directly or indirectly because of a condemnation,
proposed condemnation or taking for public or private use which affects all or
part of the Collateral or any interest in it; (ii) all other awards, claims and
causes of action, arising out of any warranty affecting all or any part of the
Collateral, or for damage or injury to or decrease in value of all or part of
the Collateral or any interest in it; (iii) all proceeds of any insurance
policies payable because of loss sustained to all or part of the Collateral up
to the amount of the indebtedness and obligations of Grantor under the Note and
the other Loan Documents; and (iv) all interest which may accrue on any of the
foregoing.
(b) Grantor shall immediately notify Beneficiary in writing if: (i)
any damage occurs or any injury or loss is sustained in the amount of $25,000 or
more to all or part of the Collateral, or any action or proceeding relating to
any such damage, injury or loss is commenced; or (ii) any offer is made, or any
action or proceeding is commenced, which relates to any actual or proposed
condemnation or taking of all or part of the Collateral. If Beneficiary chooses
to do so, it may in its own name appear in or prosecute any action or proceeding
to enforce any cause of action based on warranty, or for damage, injury or loss
to all or part of the Collateral, and if Grantor is in default under the Note or
any other Loan Document, it may make any compromise or settlement of the action
or proceeding. Beneficiary, if it so chooses, may participate in any action or
proceeding relating to condemnation or taking of all or part of the Collateral,
and may join Grantor in adjusting any loss covered by insurance.
(c) All proceeds of these assigned claims, other property and rights
which Grantor may receive or be entitled to shall be paid to Beneficiary. In
each instance, Beneficiary shall apply those proceeds first toward reimbursement
of all of
17
Beneficiary's costs and expenses of recovering the proceeds, including
attorneys' fees.
(d) If, in any instance, each and all of the following conditions are
satisfied in Beneficiary's reasonable judgment, Beneficiary shall permit Grantor
to use the balance of the proceeds ("Net Claims Proceeds") to pay costs of
repairing or reconstructing the Collateral in the manner described below: (i)
the plans and specifications, cost breakdown, construction contract,
construction schedule, contractor and payment and performance bond for the work
of repair or reconstruction must all be acceptable to Beneficiary; (ii)
Beneficiary must receive evidence satisfactory to it that after repair or
reconstruction, the Collateral will be at least as valuable as it was
immediately before the damage or condemnation occurred; (iii) the Net Claims
Proceeds must be sufficient in Beneficiary's determination to pay for the total
cost of repair or reconstruction, including all associated development costs and
interest projected to be payable on the Note until the repair or reconstruction
is complete; or Grantor must provide its own funds in an amount equal to the
difference between the Net Claims Proceeds and a reasonable estimate, made by
Grantor and found acceptable by Beneficiary, of the total cost of repair or
reconstruction; (iv) Beneficiary must receive evidence satisfactory to it that
all Leases which it may find acceptable will continue after the repair or
reconstruction is complete; (v) Beneficiary has received evidence satisfactory
to it, that reconstruction and/or repair can be completed at least three (3)
months prior to the date the Note secured by this Deed of Trust is due and
payable; and (vi) no default under any of the Loan Documents shall have occurred
and be continuing. If the foregoing conditions are met to Beneficiary's
satisfaction, Beneficiary shall hold the Net Claims Proceeds and any funds which
Grantor is required to provide and shall disburse them to Grantor to pay costs
of repair or reconstruction upon presentation of evidence reasonably
satisfactory to Beneficiary that repair or reconstruction has been completed
satisfactorily and lien-free. However, if Beneficiary finds that one or more of
the conditions are not satisfied, it may apply the Net Claims Proceeds to pay or
prepay some or all of the Note.
ARTICLE V
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1. DEFAULT--REMEDIES.
(a) Grantor will be in default under this Deed of Trust if (i) Grantor
fails to make any payment when due under the Note, this Deed of Trust or any
other Loan Document; (ii) Grantor fails to perform any other covenant, agreement
or obligation to be performed by Grantor under this Deed of Trust or any other
Loan Document; (iii) any representation or warranty contained in this
18
Deed of Trust or any other Loan Document, or any financial information furnished
by Grantor or its agents to Beneficiary in connection with the Loan, proves to
be false or misleading in any material respect; (iv) Grantor defaults under any
lease or other contract or agreement relating to the Collateral, and such
default is not cured within the applicable cure period, if any; (v) Grantor
defaults under any other Loan Document; (vi) Grantor or any guarantor of the
Loan fails to pay his, her or its debts generally as they become due, or files a
petition or action for relief under any bankruptcy, reorganization or insolvency
laws or makes an assignment for the benefit of creditor; or (vii) an involuntary
petition is filed against Grantor or any guarantor of the Loan under any
bankruptcy, reorganization or other insolvency laws, or a custodian, receiver or
trustee is appointed to take possession, custody or control of the Collateral or
any other properties of Grantor, or the assets of any guarantor of the Loan, and
such petition or appointment is not set aside, withdrawn or dismissed within
thirty (30) days from the date of filing or appointment.
(b) In the event of a default Beneficiary may declare the Secured
Obligations, including the Loan and all other indebtedness evidenced by the Note
or any other Loan Document, immediately due and payable after notice as set
forth in Section 2 below, and/or exercise its rights and remedies under the Loan
Documents and applicable law including foreclosure of this Deed of Trust
judicially as a mortgage or non-judicially pursuant to the power of sale.
Beneficiary's exercise of any of its rights and remedies shall not constitute a
waiver or cure of a default. Beneficiary's failure to enforce any default shall
not constitute a waiver of the default or any subsequent default. In the event
of foreclosure, the cost of the title premium for the trustee's sale guarantee
(or equivalent title policy or report) shall be paid for by Grantor. If the
Loan Documents are referred to an attorney for enforcement or preservation of
Beneficiary's rights or remedies, whether or not suit is filed or any
proceedings are commenced, Grantor shall pay all Beneficiary's costs and
expenses including Trustee's and attorneys' fees (including attorneys' fees for
any appeal, bankruptcy proceeding or any other proceeding), accountants' fees,
appraisal and inspection fees and cost of title report.
2. NOTICE AND OPPORTUNITY TO CURE. Notwithstanding any other provision of
this Deed of Trust, Beneficiary shall not accelerate the maturity of one or more
of the Secured Obligations (a) because of a monetary default (defined below) by
Grantor unless Grantor fails to cure the default within ten (10) days of the
date on which Beneficiary mails or delivers written notice of the default to
Grantor, or (b) because of a nonmonetary default (defined below) by Grantor
unless Grantor fails to cure the default within thirty (30) days of the date on
which Beneficiary mails or
19
delivers written notice of the default to Grantor. For purposes of this Deed of
Trust, the term "monetary default" means a failure by Grantor to make any
payment required of it pursuant to the Note or any other Loan Document, and the
term "nonmonetary default" means a failure by Grantor or any other person or
entity to perform any obligation contained in the Note or any other Loan
Document, other than the obligation to make payments provided for in the Note or
any other Loan Document. If a nonmonetary default is capable of being cured and
the cure cannot reasonably be completed within the thirty (30) day cure period,
the cure period shall be extended up to ninety (90) days so long as Grantor has
commenced action to cure within the thirty (30) day cure period, and in
Beneficiary's opinion, Grantor is proceeding to cure the default with due
diligence. None of the foregoing shall be construed to obligate Beneficiary to
forebear in any other manner from exercising its remedies and Beneficiary may
pursue any other rights or remedies which Beneficiary may have because of a
default.
3. CUMULATIVE REMEDIES. To the fullest extent allowed by law, all
Beneficiary's and Trustee's rights and remedies specified in the Loan Documents
(including this Deed of Trust) are cumulative, not mutually exclusive and not in
substitution for any rights or remedies available at law or in equity. Without
waiving its rights in the Collateral, Beneficiary may proceed against Grantor or
may proceed against any other security or guaranty for the Secured Obligations,
in such order and manner as Beneficiary may elect. The commencement of
proceedings to enforce a particular remedy shall not preclude the discontinuance
of the proceedings and the commencement of proceedings to enforce a different
remedy.
4. ENTRY. After a default, Beneficiary, in person, by agent or by court
appointed receiver, may enter, take possession of, manage and operate all or any
part of the Collateral, and may also do any and all other things in connection
with those actions that Beneficiary may consider necessary and appropriate to
protect the security of this Deed of Trust, including taking and possessing all
of Grantor's or the then owner's books and records pertaining to the ownership,
operation or maintenance of the Property and the other collateral described
above; entering into, enforcing, modifying, or canceling Leases on such terms
and conditions as Beneficiary may consider proper; obtaining and evicting
tenants; fixing or modifying Rents; collecting and receiving any payment of
money owing to Grantor; completing any unfinished construction; and/or
contracting for and making repairs and alterations.
5. APPOINTMENT OF RECEIVER. In the event of a default, Grantor consents
to, and Beneficiary, to the fullest extent permitted by applicable law, shall be
entitled, without notice, bond or regard to the adequacy of the Collateral, to
the appointment of a receiver for the Collateral. The receiver shall
20
have, in addition to all the rights and powers customarily given to and
exercised by a receiver, all the rights and powers granted to Beneficiary by the
Loan Documents. The receiver shall be entitled to receive a reasonable fee for
management of the Property. If Grantor is an occupant of the Property,
Beneficiary has the right to require Grantor to pay rent at fair market rates
and the right to remove Grantor from Property if Grantor fails to pay rent.
6. SALE OF PROPERTY AFTER DEFAULT. Following a default and the
foreclosure of this Deed of Trust, either judicially or non-judicially, the
Collateral may be sold separately or as a whole, at the option of Beneficiary.
In the event of a trustee's sale of the Collateral pursuant to the power of sale
granted herein, Beneficiary hereby assigns its security interest in the personal
property Collateral to the trustee. Beneficiary may also realize on the
personal property Collateral in accordance with the remedies available to
secured parties under the Uniform Commercial Code or at law. In the event of a
trustee's sale, Grantor, and the holder of any subordinate liens or security
interest with actual or constructive notice hereof, waive any equitable,
statutory or other right they may have to require marshaling of assets in
connection with the exercises of any of the remedies permitted by applicable law
or provided herein, or to direct the order in which any of the Collateral will
be sold in the event of any sale under this Deed of Trust or foreclosure in the
inverse order of alienation.
7. FORECLOSURE OF LESSEE'S RIGHT--SUBORDINATION. Beneficiary shall have
the right, at its option, to foreclose this Deed of Trust subject to the rights
of any lessees of the Property. Beneficiary's failure to foreclose against any
lessee shall not be asserted as a claim against Beneficiary or as a defense
against any claim by Beneficiary in any action or proceeding. Beneficiary at
any time may subordinate this Deed of Trust to any or all of the Leases except
that Beneficiary shall retain its priority claim to any condemnation or
insurance proceeds.
8. REPAIRS DURING REDEMPTION. In the event of a judicial foreclosure the
purchaser during any redemption period may make such repairs and alterations to
the Property as may be reasonably necessary for the proper operation, care,
preservation, protection and insuring of the Property. Any sums so paid,
together with interest from the date of the expenditure at the rate provided in
the judgment, shall be added to the amount required to be paid for redemption of
the Property.
ARTICLE VI
----------
1. ADDITIONAL SECURITY DOCUMENTS. Grantor shall within fifteen (15) days
after request by Beneficiary execute and deliver any financing statement,
renewal, affidavit, certificate,
21
continuation statement, or other document Beneficiary may request in order to
perfect, preserve, continue, extend, or maintain security interests or liens
granted herein to Beneficiary and the priority of such security interests or
liens. Grantor shall pay all costs and expenses incurred by Beneficiary in
connection with the preparation, execution, recording, filing, and refiling of
any such document.
2. RECONVEYANCE AFTER PAYMENT. Upon written request of Beneficiary
stating that all obligations secured by this Deed of Trust have been paid,
Trustee shall reconvey, without warranty, the Collateral then subject to the
lien of this Deed of Trust. Grantor shall pay any costs, trustee's fees and
recording fees incurred in so reconveying the Property.
3. NONWAIVER OF TERMS AND CONDITIONS. Time is of the essence with respect
to performance of the obligations under the Loan Documents. Beneficiary's
failure to require prompt enforcement of any such obligation shall not
constitute a waiver of the obligation or any subsequent required performance of
the obligation. No term or condition of this Deed of Trust or any other Loan
Documents may be waived, modified or amended except by a written agreement
signed by Grantor and Beneficiary. Any waiver of any term or condition of the
Loan Documents shall apply only to the time and occasion specified in the waiver
and shall not constitute a waiver of the term or condition at any subsequent
time or occasion.
4. WAIVERS BY GRANTOR. Without affecting any of Grantor's obligations
under the Loan Documents, Grantor waives the following: (a) any right to
require Beneficiary to proceed against any specific party liable for sums due
under the Loan Documents or to proceed against or exhaust any specific security
for sums due under the Loan Documents; (b) notice of new or additional
indebtedness of any Grantor or any other party liable for sums due under the
Loan Documents to Beneficiary; (c) any defense arising out of Beneficiary
entering into additional financing or other arrangements with any Grantor or any
other party liable for sums due under the Loan Documents and any action taken by
Beneficiary in connection with any such financing or other arrangements or any
pending financing or other arrangements; (d) any defense arising out of the
absence, impairment, or loss of any or all rights of recourse, reimbursement,
contribution or subrogation or any other rights or remedies of Beneficiary
against any Grantor or any other party liable for sums due under the Loan
Documents or any Collateral; and (e) any obligation of Beneficiary to see to the
proper use and application of any proceeds advanced pursuant to the Loan
Documents.
22
5. RIGHT OF SUBROGATION. Beneficiary is subrogated to the rights, whether
legal or equitable, of all beneficiaries, mortgagees, lienholders and owners
directly or indirectly paid off or satisfied in whole or in part by any proceeds
advanced by Beneficiary under the Loan Documents, regardless of whether such
parties assigned or released of record their rights or liens upon payment.
6. JOINT AND SEVERAL LIABILITY. If there is more than one Grantor of this
Deed of Trust, their obligations shall be joint and several.
7. STATEMENT OF AMOUNT OWING. Grantor within fifteen (15) days after
request by Beneficiary will furnish Beneficiary a written statement of the
amount due under the Loan Documents, any offsets or defenses against the amount
claimed by Grantor, and such other factual matters as Beneficiary may reasonably
request.
8. BOOKS AND RECORDS; FINANCIAL STATEMENTS.
(a) Grantor will keep and maintain at Grantor's address stated above,
or such other place as Beneficiary may approve in writing, books of accounts and
records adequate to reflect correctly the results of the operation of the
Property and copies of all written contracts, leases and other instruments which
affect the Property. Such books, records, contracts, leases and other
instruments shall be subject to examination, inspection and copying at any
reasonable time by Beneficiary. Except as otherwise agreed in writing by
Beneficiary, Grantor shall provide to Beneficiary within ninety (90) days after
the end of each of Grantor's fiscal years (or within twenty (20) days of
Beneficiary's written request therefor if Grantor is in default), for each
Grantor, for each general partner of Grantor if Grantor is a partnership, and
for each guarantor of all or any of the Secured Obligations, a complete and
current financial statement, together with a statement of income and expenses of
the Property and a statement of changes in financial position with respect to
the Property for the prior year, each in reasonable detail and certified by
Grantor, the general partner or the guarantor, as the case may be. At the same
time, Grantor shall also furnish a current rent roll for the Property, certified
by Grantor, which shall include such information as Beneficiary may require,
including the name of each tenant, the lease expiration date, the monthly rent,
the date to which rent has been paid, and any deposits or prepaid rent Grantor
is holding.
(b) All financial statements shall be prepared in accordance with
generally accepted accounting principles, consistently applied, or such other
accounting practices as Beneficiary may approve. Grantor's compliance with
these provisions shall not limit or affect Grantor's obligations to
23
comply with financial, tax and operation covenants and reporting requirements
under any other agreement between Grantor and Beneficiary whether or not such
other agreement is related to the Secured Obligations. If any of the reporting
requirements in this Section 8 are inconsistent with the reporting requirements
in any such other agreement, the reporting requirements in such other agreement
shall control.
9. APPRAISALS. In the event of a default Beneficiary may obtain a current
regulatory conforming appraisal of the Collateral. In addition, appraisals may
be commissioned by Beneficiary when required by laws and regulations which
govern Beneficiary's lending practices. The cost of all such appraisals (and
related internal review fees and costs) will be paid by Grantor within fifteen
(15) days after request by Beneficiary.
10. EVASION OF PREPAYMENT FEE. If Grantor is in default, whether
Beneficiary has accelerated the maturity of the indebtedness or not, any tender
of payment sufficient to satisfy all sums due under the Loan Documents made at
any time prior to foreclosure sale shall constitute an evasion of the prepayment
terms of the Note, if any, and shall be deemed a voluntary prepayment. Any such
payment, to the extent permitted by law, shall include the additional payment
required under the prepayment fee provision in the Note, if any, or if at that
time prepayment is not permitted, then such payment, to the extent permitted by
law, will include an additional payment of five percent (5%) of the then
principal balance.
11. PAYMENT OF NEW TAXES. If any federal, state or local law is passed
subsequent to the date of this Deed of Trust which requires Beneficiary to pay
any tax because of this Deed of Trust or the sums due under the Loan Documents
(excluding income taxes), then Grantor shall pay to Beneficiary on demand any
such taxes if it is lawful for Grantor to pay them, or, in the alternative
Grantor may repay all sums due under the Loan Documents plus any prepayment fee
within thirty (30) days of such demand.
12. INTENTIONALLY OMITTED.
13. NOTICES. Any notice given by Grantor, Trustee or Beneficiary shall be
in writing and shall be effective (1) on personal delivery to the party
receiving the notice or (2) on the third day after deposit in the United States
mail, postage prepaid with return receipt requested, addressed to the party at
the address set forth above (or such other address as a party may specify by
written notice given pursuant to this paragraph), or with respect to the
Grantor, to the address at which Beneficiary customarily or last communicated
with Grantor.
24
14. CONTROLLING DOCUMENT. In the event of a conflict or inconsistency
between the terms and conditions of this Deed of Trust and the terms and
conditions of any other of the Loan Documents (except for any separate
assignment of the Rents and/or the Leases and any loan agreement which shall
prevail over this Deed of Trust), the terms and conditions of this Deed of Trust
shall prevail.
15. INVALIDITY OF TERMS AND CONDITIONS. If any term or condition of this
Deed of Trust is found to be invalid, the invalidity shall not affect any other
term or condition of the Deed of Trust and the Deed of Trust shall be construed
as if not containing the invalid term or condition.
16. LEGISLATION AFFECTING BENEFICIARY'S RIGHTS. If enactment or
expiration of applicable laws has the effect of rendering any provision of the
Note or this Deed of Trust unenforceable according to its terms, and Beneficiary
in good faith believes the affect of such change in laws will adversely impact
the security for the Note or Grantor's obligation or ability to repay the Loan,
Beneficiary, at its option, may require immediate payment in full of all sums
secured by this Deed of Trust and may invoke any remedies permitted herein.
17. RULES OF CONSTRUCTION. This Deed of Trust shall be construed so that,
whenever applicable, the use of the singular shall include the plural, the use
of the plural shall include the singular, and the use of any gender shall be
applicable to all genders and shall include corporations, partnerships and
limited partnerships. This Deed of Trust inures to the benefit of, and binds
all parties named herein and their successors and assigns. The headings to the
various sections have been inserted for convenience of reference only and shall
not be used to construe this Deed of Trust.
18. APPLICABLE LAW. The Loan Documents shall be governed by and construed
in accordance with the laws of the State of Washington.
GRANTOR
ADVANCED TECHNOLOGY LABORATORIES, INC.,
a Washington corporation
By /s/ Harvey N. Gillis
___________________________________
Its Senior VP & CFO
___________________________________
25
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 28th day of December, 1994, before me, the undersigned, a Notary
Public in and for the State of Washington, duly commissioned and sworn
personally appeared Harvey N. Gillis, known to me to be the Senior V.P. CFO &
Treasurer of ADVANCED TECHNOLOGY LABORATORIES, INC., the corporation that
executed the foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation, for the purposes
therein mentioned, and on oath stated that he/she was authorized to execute
said instrument.
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgment is the person whose true
signature appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
/s/ Kevin J. Grady
_____________________________________
Signature
KEVIN J. GRADY
_____________________________________
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle.
My commission expires 6/15/95.
26
REQUEST FOR FULL RECONVEYANCE
To be used only when all obligations have been paid
under the Note and this Deed of Trust
TO: TRUSTEE
The undersigned is the legal owner and holder of the Note and all other
indebtedness secured by the within Deed of Trust. Said Note, together with all
other indebtedness secured by said Deed of Trust, has been fully paid and
satisfied; and you are hereby requested and directed, on payment to you of any
sums owing to you under the terms of said Deed of Trust, to cancel said Note
above mentioned and all other evidence of indebtedness secured by said Deed of
Trust delivered to you herewith, together with said Deed of Trust, and to
reconvey, without warranty, to the parties designated by the terms of said Deed
of Trust, all the estate now held by you thereunder.
Dated ________________________, 19__. _____________________
_____________________
Mail reconveyance to:_____________________________________________
27
SCHEDULE A
----------
PARCEL A:
That portion of the following described Parcel "X" lying Westerly of a line
described as follows:
Commencing at the Southwest corner of the North half of the Southeast quarter
of the Northeast quarter of Section 30, Township 27 North, Range 5 East,
W. M., in Snohomish County, Washington;
thence North 00(degrees)35'50"West 180.01 feet along the West line thereof
to the Northwest corner of Tract described in Deed to Barbara McCurdy recorded
in Volume 550 of Deeds, page 1, records of said Snohomish County;
thence South 27(degrees)12'35"East 77.91 feet along the Westerly line of
said McCurdy Tract to the true point of beginning of the line described
herein;
thence South 88(degrees)49'31"West 244.82 feet along the Westerly prolongation
of the South line of said McCurdy Tract;
thence at right angles to said prolongation South 01(degrees)10'29"East 292.22
feet;
thence South 73(degrees)26'46"West 4.76 feet;
thence South 49(degrees)43'26"West 14.89 feet;
thence South 43(degrees)51'11"West 13.46 feet;
thence South 29(degrees)00'08"West 11.98 feet;
thence South 27(degrees)49'25"West 14.13 feet;
thence South 33(degrees)03'37"West 9.82 feet;
thence South 43(degrees)10'30"West 8.10 feet;
thence South 44(degrees)58'09"West 17.01 feet;
thence South 40(degrees)45'05"West 20.21 feet;
thence South 70(degrees)27'47"West 19.21 feet;
thence South 57(degrees)25'32"East 26.11 feet to the beginning of a curve
concave Southwesterly having a radius of 185.00 feet;
thence Southeasterly and Southerly 166.13 feet along said curve through
a central angle of 51(degrees)27'08";
thence South 05(degrees)58'24"East 31.02 feet;
thence South 04(degrees)31'39"East 30.55 feet to the beginning of a curve
concave Northeasterly having a radius of 108.00 feet;
thence Southerly and Southeasterly 81.31 feet along said curve through a
central angle of 43(degrees)08'09";
thence South 47(degrees)39'48"East 30.09 feet to the beginning of a curve
concave Northeasterly having a radius of 111.00 feet;
thence Southeasterly and Easterly 61.94 feet along said curve through
a central angle of 31(degrees)58'16";
thence non-tangent to the preceding curve North 80(degrees)56'26"East 21.35
feet;
thence North 85(degrees)32'25"East 132.33 feet to the beginning of a curve
concave Southerly having a radius of 329.22 feet;
thence Easterly 124.13 feet along said curve through a central angle of
21(degrees)36'12" to the beginning of a reverse curve concave Northerly
having a radius of 20.00 feet;
thence Easterly and Northeasterly 14.42 feet along said curve through a
central angle of 41(degrees)19'01" to the Northwesterly margin of SR 527
as described in Deed to the State of Washington recorded under Snohomish
County Recording No. 9009130330 and the terminus of said line described herein
and from said terminus the most Southerly corner of the right of way parcel
described in last said deed bears South 68(degrees)52'11"East, 16.75 feet
distant.
PARCEL X DESCRIPTION:
The Southwest quarter of the Northeast quarter of Section 30, Township 27
North, Range 5 East, W.M., and that portion of the Southeast quarter of
the Northeast quarter of said Section 30 lying Westerly of SR 527 (AKA The
Old Bothell Everett Road) as it existed prior to 1982 and Southerly of a
line described as follows:
Beginning at the Southwest corner of the North half of the Southeast quarter
of the Northeast quarter of said Section 30;
thence North 01(degrees)15'51"East along the West line of said subdivision
a distance of 180.01 feet and the point of beginning of said line description;
running thence South 25(degrees)20'54"East 77.55 feet;
thence South 89(degrees)14'57"East to the Westerly line of SR 527 (Old Bothell
Everett Highway) and the terminus of said line description.
Except that portion of the Southeast quarter of the Northeast quarter of
said Section 30, lying East of the following described line; Beginning at
a point where the South line of the North half of the Southeast quarter
of the Northeast quarter of said Section 30, intersects with the Westerly
margin line of Secondary State Highway (Aka Old Bothell-Everett Highway);
thence West 170 feet;
thence South 90 feet;
thence West 75 feet and the beginning of said line description;
thence North 160 feet to the termination of said line;
Also excepting therefrom those portions conveyed to the State of Washington
for highway purposes by deeds recorded under Auditor's File Nos. 8312020251,
8410310097, 8508130146, 8706010288 and 9009130330.
PARCEL B:
Lots A & B. Survey recorded in Volume 18 of Surveys, page 289, recorded under
Auditor's File No. 8403015003 being a portion of the North half of the
Southeast quarter of Section 30, Township 27 North, Range 5 East, W.M.;
Except any portion lying within that portion conveyed to State of Washington
under Auditor's File No. 1910167, 8407190177, 8601270196 and 9009120407.
Situate in the County of Snohomish, State of Washington.
EX-10.23
7
PROMISSORY NOTE
Exhibit 10.23
Loan No. 186603-7
PROMISSORY NOTE
$11,500,000 December 28, 1994
Seattle, Washington
FOR VALUE RECEIVED, the undersigned ("Maker") promise(s) to pay to the
order of SEATTLE-FIRST NATIONAL BANK, a national banking association ("Lender"),
at its principal office in Seattle, Washington, or at such other place or places
or to such other party as the "Holder" (defined below) may from time to time
designate in writing, the principal sum of Eleven Million Five Hundred Thousand
Dollars ($11,500,000), or so much thereof as may be advanced, in lawful money of
the United States of America, together with interest thereon, on the following
agreements, terms and conditions. The term "Holder" as used in this Note means
Lender or any future holder of this Note, and their successors and assigns.
1. TERM. The unpaid principal balance of this Note and all unpaid
----
accrued interest thereon and other sums payable by Maker in connection with this
Note shall be due and payable in full one hundred twenty (120) months from the
first day of the first calendar month following the initial advance by the
Holder under this Note (the "Maturity Date").
2. INTEREST. Interest shall commence to run on each advance under this
--------
Note from the date of the advance and will be computed on the outstanding
balance of this Note as it exists from time to time. Interest shall accrue on
the principal balance of this Note either at a variable interest rate as
provided in subparagraph 2(a) below (the "Variable Rate"), or at a fixed
interest rate as provided in subparagraph 2(b) below (the "Fixed Rate"). If
Maker elects a Fixed Rate pursuant to subparagraph 2(b) below for a "Fixed Rate
Period" (defined below) less then full term of this Note (or the remainder
thereof, as applicable), after the expiration of the applicable Fixed Rate
Period, interest on this Note shall be calculated at a Variable Rate unless
Maker again elects to have interest calculated at a Fixed Rate pursuant to
subparagraph 2(b) below. The Holder still shall have no duty or obligation to
notify Maker that a Fixed Rate Period is about to expire and that the interest
rate on this Note is about to revert to the Variable Rate. After maturity, or
after default, interest shall accrue on the outstanding principal balance of
this Note at an annual rate equal to four percentage points (4%) per annum above
the interest rate otherwise applicable to this Note. Interest on this Note
shall be calculated using a 30-day month and a 360-day year.
1
(a) Variable Rate. Unless Maker elects to have interest calculated at
-------------
the Fixed Rate pursuant to subparagraph 2(b) below, interest shall accrue on the
principal balance of this Note at the Variable Rate. The initial Variable Rate
shall be equal to the "LIBOR Index" (defined below) as of the date of the
initial advance under this Note, plus one and one-quarter percentage points
(1.25%) per annum, rounded to the next highest one-eighth of one percent
(0.125%). The Variable Rate, if applicable, will change five (5) months after
the first payment date at the applicable Variable Rate, as stated in Paragraph 3
below, and every sixth (6th) month thereafter (each such date being referred to
in this Note as an "Interest Change Date").
(i) LIBOR Index - Current Index - Changes in the Variable Rate
will be based on changes in the 180-day LIBOR as defined below (the "LIBOR
Index"). If the LIBOR Index is no longer available, the Holder will choose a
new index based upon comparable information and give Maker notice of the
choice. The most recently available LIBOR Index fifteen (15) Business Days
before each Interest Change Date is the "Current Index".
(ii) Calculation of Variable Rate - Before each Interest Change
Date, if applicable, the Holder will calculate the new Variable Rate which
shall be equal to the Current Index, plus one and one-quarter percentage points
(1.25%) per annum, rounded to the next highest one-eighth of one percent
(0.125%). This new interest rate will be the new Variable Rate until the next
Interest Change Date.
(iii) LIBOR means the London Interbank Offer Rate, adjusted at
the Holder's option for governmentally mandated statutory reserves, deposit
insurance, regulatory capital, taxes and assessments, if any, and is the average
of the rates of interest, on a per annum basis, at which deposits in United
States dollars having a term of 180 days are offered by major banks in
immediately available funds to prime banks in the London Interbank market at
11:00 A.M. (London time) on the date of the initial advance, or the day which is
fifteen (15) Business Days prior to the applicable Interest Change Date, as
applicable. This rate is reported on Telerate, a national and international
medium which provides interest rate quotations daily, as quoted by the British
Bankers Association as Interest Settlement Rates on page 3750 (or such other
page as may replace it). Such interest rate quotation, as provided by Telerate,
shall be deemed conclusive and final with respect to LIBOR determinations for so
long as Telerate continues to make such interest rate reports. If Telerate or
the British Bankers Association report is no longer available for 180-day
maturities, a comparable publication or report containing such information
selected by the Holder will be used. If there is no such publication or
comparable publication containing such information, the 180-day LIBOR shall be
the average rate (rounded
2
if necessary to the nearest one-thousandth of a percent) at which dollar
deposits having a maturity of 180 days are offered by at least two major banks
in an interbank market where Eurodollars are being traded, to prime banks in
immediately available funds on the LIBOR determination date described above or
as soon thereafter as such offer quotes can be obtained.
(iv) Business Day means a day on which commercial banks are
generally open for business in Seattle, Washington and London, England.
(v) The amount of adjustment for reserves, deposit insurance,
regulatory capital, taxes and assessments may change on any Interest Change Date
depending on such charges being assessed against the Holder at that time. Such
charges may change due to various factors, including but not limited to, changes
in the requirements for reserves and capital adequacy promulgated by the Federal
Reserve System of the United States and/or other state and federal regulatory
agencies, statutory changes affecting the Holder, and/or imposition of taxes,
FDIC fees and/or assessments. Each determination of an adjustment amount shall
be made by the Holder in its sole and absolute discretion and shall be
conclusive and binding upon Maker and shall be determined without benefit of or
credit for prorations, exceptions or offsets that may be available to the Holder
from time to time.
(b) Fixed Rate. Prior to the date of the initial advance by Lender
----------
under this Note, Maker may elect by written notice (a "Fixed Rate Notice") to
the Holder to have interest on the entire principal amount of this Note
calculated at a Fixed Rate for a Fixed Rate Period, the duration of which is the
entire term of this Note or a lesser period of three (3) years, five (5) years
or seven (7) years. Further, so long as Maker is not in default under the terms
of this Note or any other documents or instruments executed by Maker in
connection with the loan (the "Loan") evidenced by this Note (collectively with
this Note, the "Loan Documents"), Maker, at its option, may elect by a Fixed
Rate Notice to the Holder to have interest calculated on the entire principal
balance of this Note at a Fixed Rate calculated as provided below for a Fixed
Rate Period, the duration of which is the remainder of the term of this Note or
a lesser period of three (3) years, five (5) years or seven (7) years; provided
no Fixed Rate Period may extend beyond the Maturity Date. Notwithstanding any
of the foregoing, Maker's option to fix the interest rate on this Note is
subject to the availability to the Holder of matchfunding opportunities for a
time period equivalent to the applicable Fixed Rate Period. For purposes of
this Note, the term "Fixed Rate Period" means the period of time for which a
Fixed Rate applies as specified in a Fixed Rate Notice from Maker to the Holder.
3
(i) Calculation of Fixed Rate - If Maker elects to have a Fixed Rate
apply to this Note, interest shall accrue on the principal balance of this Note
at a per annum rate equal to Lender's reserve adjusted "Fixed Rate Index" as
quoted by Lender on the date the interest rate is fixed, for a period equivalent
to the applicable Fixed Rate Period, plus one and one-quarter percentage points
(1.25%) per annum, rounded upward to the next highest one-eighth of one percent
(0.125%). The Fixed Rate Index may be adjusted at the Holder's option to
reflect governmentally mandated statutory reserves, deposit insurance,
regulatory capital, taxes and assessments, if any, as set forth in subparagraph
2(a)(v) above.
(ii) Date of Conversion - The interest rate applicable to this Note
will be converted to the Fixed Rate on the date the Holder receives a Fixed Rate
Notice, provided the Fixed Rate Notice is received before noon, Seattle time, on
a Business Day. If a Fixed Rate Notice is received by Holder after noon,
Seattle time, on a Business Day, the interest rate applicable to this Note will
convert to a Fixed Rate on the next Business Day. For purposes of this
subparagraph 2(b)(ii) only, the term "Business Day" means a day on which
commercial banks are generally open for business in Seattle, Washington.
3. PAYMENTS. Maker shall make monthly payments of principal and interest
--------
to the Holder in amounts sufficient to fully amortize the principal balance of
this Note over a twenty-five (25) year amortization period in substantially
equal monthly payments, based on the interest rate applicable to this Note,
calculated as provided below. Such monthly payments of principal and interest
shall be due on the first day of each calendar month during the term of this
Note, commencing on the first day of the second calendar month following the
month in which the Holder initially disburses funds under this Note, or if the
interest rate reverts to a Variable Rate after the expiration of a Fixed Rate
Period, on the first day of the second calendar month following the month in
which the Fixed Rate Period expires. On the Maturity Date, the unpaid principal
balance of this Note, all unpaid accrued interest and all other sums then due
and owing pursuant to this Note or any other Loan Documents shall be due and
payable in full. Each payment shall be applied first, at Holder's option, to
any unpaid late charges or other sums payable by Maker under this Note or any
other Loan Document, then to interest to the due date of the payment, and then
to the principal balance of this Note. At the option of the Holder, all
payments under this Note, including payments at maturity, shall be made in same
day funds. The monthly payments required on this Note shall be calculated as
follows:
(a) Variable Rate Payments. If interest is accruing on this Note at a
----------------------
Variable Rate, the amount of the monthly payments shall be sufficient to fully
amortize the principal balance of this
4
Note at the applicable Variable Rate, in substantially equal monthly payments
over the amortization period specified above, or the balance thereof as
applicable. At or promptly after the closing of the Loan (or after the
expiration of a Fixed Rate Period, as applicable), the Holder will provide Maker
with a closing statement (or other written notice) which will confirm the
Variable Rate and the amount of the principal and interest payments due under
this Note. The monthly payment will change after each Interest Change Date to
an amount sufficient to repay the then unpaid principal balance of this Note in
full at the then current interest rate, in substantially equal monthly payments
over the balance of the amortization period specified above. Until the payment
is again changed, Maker shall pay the new monthly payment each month beginning
on the first day of the first calendar month after the applicable Interest
Change Date. The Holder will mail or deliver to Maker a notice of any changes
in the Variable Rate applicable to this Note, and any resulting changes in the
monthly payments required under this Note, prior to the date the first payment
is due after the applicable Interest Change Date.
(b) Fixed Rate Payments. If interest is accruing on this Note at a
-------------------
Fixed Rate, the amount of the monthly payments shall be in an amount sufficient
to fully amortize the principal balance of this Note at the applicable Fixed
Rate, in substantially equal monthly payments over the amortization period
specified above, or the remainder thereof, as applicable. The applicable Fixed
Rate and the amount of the monthly principal and interest payments due under
this Note shall be confirmed in writing by the Holder (either pursuant to a
closing statement or other written notice) after the rate is fixed and before
the date the first payment at the Fixed Rate is due.
4. LATE CHARGES; RETURNED ITEM FEE. If any payment due hereunder is not
-------------------------------
received by the Holder within fifteen (15) days of the due date, at the option
of the Holder without waiving such default or any of its remedies, a late charge
shall be added to the delinquent payment in the amount of four percent (4%) of
the full payment not timely paid. Any such late charge shall be due and payable
on demand, and the Holder, at its option, may (a) refuse any late payment or any
subsequent payment unless accompanied by the applicable late charge, (b) add the
late charge to the principal balance of this Note, (c) pay any late charge with
advances of the undisbursed proceeds of the Loan, if any, or (d) treat the
failure to pay the late charge as demanded as a default under this Note. If a
late charge is added to the principal balance of this Note, it shall bear
interest at the same rate as the principal balance of this Note. Any payment to
Holder by check, draft or other item shall be received by Holder subject to
collection and will constitute payment when collected not when received. For
each "nsf" or returned check, draft or other item, in addition to any applicable
late charge, Maker shall pay to the
5
Holder on demand a returned item fee in accordance with the Holder's schedule of
such fees then in effect.
5. PREPAYMENT. So long as interest is calculated on this Note at a
----------
Variable Rate, this Note may be prepaid in whole or in part at any time without
the payment of a prepayment fee. During any period when a Fixed Rate is
applicable to this Note, this Note may be prepaid only as set forth in Exhibit A
---------
attached. Partial prepayments, if permitted, shall not postpone nor reduce the
amount of the monthly payments required under this Note, provided the amount of
the required monthly payments will be recalculated at the end of the applicable
LIBOR period or Fixed Rate Period to reflect the reduction in the principal
balance of this Note.
6. DEFAULT. After a default under any of the Loan Documents, or if Maker
-------
fails to make any payment under this Note when due, the then Holder, at its
option, without notice to Maker (except as provided below), may declare the
entire principal balance of this Note and all unpaid accrued interest thereon
and other charges payable by Maker pursuant to this Note or any other Loan
Document, immediately due and payable in full, and the Holder may exercise any
and all other rights or remedies available to it under any Loan Document, at law
or in equity. Any additional interest due because of a default shall accrue
from the date of default and shall be paid as a condition to the curing of the
default. Notwithstanding the foregoing, the Holder will not accelerate the
Maturity Date (a) because of a monetary default by Maker under this Note or any
other Loan Document unless the default is not cured within ten (10) days of the
date on which the Holder mails or delivers written notice of the default to
Maker, or (b) because of a nonmonetary default by Maker under this Note or any
other Loan Document unless the default is not cured within thirty (30) days of
the date on which the Holder mails or delivers written notice of the default to
Maker. For purposes of this Note, the term "monetary default" means a failure
by Maker to make any payment required pursuant to this Note or any other Loan
Document, and the term "nonmonetary default" shall mean a failure by Maker to
perform any obligation contained in this Note or any other Loan Document, other
than the obligation to make the payments provided for in this Note or any other
Loan Document. If the nonmonetary default is capable of being cured and cannot
reasonably be made within the thirty (30) day cure period, the cure period shall
be extended up to ninety (90) days so long as Maker has commenced action to cure
within the thirty (30) day cure period, and in the Holder's opinion, Maker is
proceeding to cure the default with due diligence. None of the foregoing shall
be construed to obligate the Holder to forbear in any other manner from
exercising its remedies and the Holder may pursue any other rights or remedies
which the Holder may have because of the default.
6
7. CUMULATIVE REMEDIES. The rights and remedies of any Holder under this
-------------------
Note or any other Loan Document, or at law or in equity, shall be cumulative and
concurrent, may be pursued singly, successively or together against Maker, any
guarantor of this Note, or any security for this Note. A failure by any Holder
to exercise its option to accelerate this Note upon the occurrence of a default
or to exercise any other rights to which it may be entitled shall not constitute
a waiver of the right to exercise such option or any such rights in the event of
any subsequent default, whether of the same or a different nature.
8. WAIVERS. Maker and all endorsers, guarantors and all other persons or
-------
entities who may become liable for all or any part of the obligations evidenced
by this Note, jointly and severally: waive diligence, presentment, protest and
demand, and also notice of protest, demand, non-payment, dishonor or maturity
and also recourse to suretyship defenses generally; and consent to any and all
renewals, extensions and modifications of the terms of this Note or any other
Loan Document, including the time for payment, and agree any such renewal,
extension or modification or the release or substitution of any security for the
indebtedness evidenced by this Note or any other indulgences, shall not affect
the liability of said parties for the indebtedness evidenced by this Note. Any
such renewals, extensions, modifications, releases or indulgences may be made
without notice to such parties.
9. COSTS AND EXPENSES. Whether or not suit is brought Maker shall pay on
------------------
demand all costs and expenses, including attorneys' fees and costs incurred by
or on behalf of the Holder in connection with this Note, including without
limitation costs incurred in the collection of this Note, in protecting the
security for this Note or in foreclosing or enforcing this Note or any other
Loan Document, or resulting from the Holder being made a party to any litigation
because of the existence of this Note or any other Loan Document. Without
limiting the generality of the foregoing, if Maker becomes the subject of any
bankruptcy or insolvency proceeding, Maker shall pay all fees and expenses
incurred by the Holder in connection with such bankruptcy or insolvency
proceeding.
10. MAXIMUM INTEREST. Maker represents and warrants the proceeds of this
----------------
Note shall be used solely for commercial, investment and business purposes, and
not for personal, family or household purposes. Notwithstanding any other
provision of this Note or any other Loan Document, interest, loan fees and
charges payable by reason of the indebtedness evidenced by this Note shall not
exceed the maximum, if any, permitted by applicable law. If by virtue of
applicable law, sums in excess of such maximum would otherwise be payable, then
such excess sums shall be construed as having been immediately applied by the
Holder to the principal balance of this Note when received. If at the time any
such sum is received by the Holder, the principal balance of this Note has been
7
paid in full, such sums shall be promptly refunded by the Holder to Maker, less
any sums due to the Holder.
11. SECURITY. This Note is secured by a deed of trust of even date (the
--------
"Deed of Trust") encumbering certain real property located in Snohomish County,
Washington (the "Property"). Unless otherwise specified in this Note, all
notices given pursuant to this Note must be in writing and will be effectively
given if given in accordance with the terms of the Deed of Trust.
12. GENERAL. This Note shall be binding upon Maker and Maker's successors
-------
and assigns. If Maker consists of more than one person or entity, all of such
persons and entities shall be jointly and severally liable for Maker's
obligations under this Note. This Note is governed by and shall be construed in
accordance with the laws of the State of Washington. Each person or entity
executing this Note consents to the non-exclusive personal jurisdiction and
venue of the courts of the State of Washington and the United States federal
courts located therein, in any action relating to or arising out of the
enforcement or interpretation of this Note or any other Loan Document. Each
such person or entity further agrees not to assert in any such action that the
proceeding has been brought in an inconvenient forum.
13. ARBITRATION. Any dispute relating to this Note or the Loan (whether
-----------
in contract or tort) shall be settled by arbitration if requested by Maker, the
Holder or any other party to the dispute (such as a guarantor); provided, both
--------
Maker and the Holder must consent to a request for arbitration relating to an
obligation secured by real property. The arbitration proceedings shall be held
in Seattle, Washington in accordance with the commercial arbitration rules of
the American Arbitration Association, and the United States Arbitration Act
(i.e., Title 9, U.S.C.). There shall be one arbitrator who shall decide whether
an issue is arbitrable or whether any claim is barred by a statute of
limitations. Judgment on the arbitration award may be entered in any court
having jurisdiction. Commencement of a lawsuit shall not constitute a waiver of
the right of any party to request arbitration if the lawsuit is contested. Each
party shall have the right before, during and after the commencement of any
arbitration proceeding to exercise any of the following remedies, in any order
or concurrently: (i) self-help remedies such as setoff or repossession; (ii)
judicial or nonjudicial foreclosure against real or personal property
collateral; and (iii) provisional remedies including injunction, appointment of
receiver, attachment, claim and delivery and replevin. The exercise of any such
remedy shall not waive a party's right to request arbitration. Nothing in this
paragraph shall limit in any way any right the Holder may have to foreclose the
Deed of Trust judicially as a mortgage, or nonjudicially pursuant to the power
of sale.
8
14. DISPUTED OBLIGATIONS. All communications concerning disputed debts
--------------------
and obligations of Maker under this Note or any other Loan Document, including
without limitation disputes as to the amount of any payment, fee or charge, and
including an instrument tendered as full satisfaction of a disputed debt, must
be sent to the following address, or to such other address as the Holder may
hereafter specify:
Seattle-First National Bank
Attention: Loan Servicing Manager
Real Estate Group (CSC-14)
701 Fifth Avenue, Floor 14
Seattle, Washington 98104
Any such communication should include the name of Maker, the applicable loan
number, a description of the dispute, and an address and telephone number where
the person sending the notice can be contacted.
15. LOAN FEE. In consideration of Lender's agreement to make the Loan,
--------
Maker shall pay Lender a loan fee in the amount of five-eighths percent (%) of
the amount advanced hereunder (the "Loan Fee"). The Loan Fee shall be due and
payable without condition on the date of the first disbursement hereunder.
16. CROSS DEFAULT. Maker, Lender and Advanced Technology Laboratories,
-------------
Inc., a Delaware corporation ("ATL"), are parties to a Revolving Credit Loan
Agreement and Guaranty dated June 26, 1992, as amended from time to time (the
"Loan Agreement"). Maker agrees if Maker or ATL defaults under the Loan
Agreement and does not cure the default prior to the expiration of the
applicable cure period, if any, such default will constitute a default under
this Note and the other Loan Documents and no additional notice of default shall
be required under Paragraph 6 of this Note.
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
MAKER:
ADVANCED TECHNOLOGY LABORATORIES, INC.,
a Washington corporation
By /s/ Harvey N. Gellis
___________________________________
Its Senior VP & CFO
___________________________________
9
EXHIBIT A
---------
PREPAYMENT
If the interest rate converts to the Fixed Rate the principal balance of
this Note may be prepaid in whole or in part, at any time provided (i) a
prepayment fee is paid as set forth below, (ii) each partial prepayment is in an
amount of $10,000 or more, and (iii) partial prepayments may be no more frequent
than once per month. The prepayment fee shall be due and payable whether the
prepayment is by voluntary prepayment, operation of law, acceleration or
otherwise. The amount of the prepayment fee depends on the following:
1. The amount by which certain "Reference Rates", as defined below, have
changed between the time this Note is prepaid and the date the interest rate
converts to the Fixed Rate.
2. A prepayment fee factor (see "Prepayment Fee Factor Schedule" below).
3. The amount of principal prepaid.
DEFINITION OF REFERENCE RATES
The "Reference Rate" used to represent interest rate levels shall be the
bond equivalent yield of the average U.S. Treasury Securities having maturities
equivalent to the remaining period to maturity of the Loan or the last day of
the Fixed Rate Period, as applicable, rounded upward to the nearest month. The
"Initial Reference Rate" shall be the Reference Rate assigned to the Loan by the
Holder at the time the interest rate converts to the Fixed Rate. The "Final
Reference Rate" shall be the Reference Rate assigned to the Loan by the Holder
at the time of the prepayment.
The applicable Reference Rates shall be determined from the Federal Reserve
Statistical Release (Publication H.15) as displayed on Page 119 of the Dow Jones
Telerate Service (or such other page or service as may replace that page or
service for the purpose of displaying rates comparable to said U.S. Treasury
Securities). If the publishing of the foregoing Statistical Release is ever
discontinued, the applicable Reference Rate shall be based on the publication by
the Board of Governors of the United States Federal Reserve System in
replacement thereof, or if none, the publication which in the Holder's
discretion most nearly corresponds.
CALCULATION OF PREPAYMENT FEE
1. If the Initial Reference Rate is less than or equal to the Final
Reference Rate, there is no prepayment fee.
1
2. If the Initial Reference Rate is greater than the Final Reference Rate,
the prepayment fee shall be equal to the difference between the Initial
Reference Rate and the Final Reference Rate (expressed as a decimal), multiplied
by the appropriate factor from the Prepayment Fee Factor Schedule, multiplied by
the principal amount of the Loan being prepaid.
EXAMPLE OF PREPAYMENT FEE CALCULATION
An amortizing loan with remaining principal of $250,000 is fully prepaid
with twenty-four (24) months remaining until maturity. An Initial Reference
Rate of 9.000% was assigned to the loan at the time the loan was closed. The
Final Reference Rate (as determined by the current 24-month U.S. Treasury Rate
on Page 119 of Telerate) is 7.500%. Rates therefore have dropped 1.500% since
the loan was closed and a prepayment fee applies. A prepayment fee factor of
1.3% is determined from Table 1 below and the prepayment fee is computed as
follows:
Prepayment Fee = (0.09 - 0.075) x (1.3) x ($250,000) = $4,875.00
PREPAYMENT FEE FACTOR SCHEDULES
TABLE 1 - FULLY AMORTIZING LOANS
Proportion of Remaining
Principal Amount
Being Prepaid Months Remaining to Maturity or Expiration of the Applicable
Fixed Rate Period/1/
0 3 6 9 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------------------------------
90 - 100% 0 .21 .36 .52 .67 1.3 1.9 2.5 3.1 4.3 5.9 10.3 13.1
60 - 89% 0 .24 .44 .63 .83 1.6 2.4 3.1 3.9 5.4 7.5 13.2 17.0
30 - 59% 0 .28 .53 .78 1.02 2.0 3.0 4.0 5.0 7.0 9.9 18.5 24.4
0 - 29% 0 .31 .63 .92 1.22 2.4 3.7 5.0 6.3 9.0 13.4 28.3 41.8
TABLE 2 - PARTIALLY AMORTIZING LOANS
Proportion of Remaining
Principal Amount
Being Prepaid Months Remaining to Maturity or Expiration of the Applicable
Fixed Rate Period/1/
0 3 6 9 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------------------------------
90 - 100% 0 .26 .49 .71 .94 1.8 2.7 3.4 4.2 5.6 7.4 11.6 14.0
60 - 89% 0 .30 .59 .86 1.15 2.2 3.3 4.3 5.3 7.1 9.4 15.0 18.1
30 - 59% 0 .31 .63 .95 1.27 2.6 3.9 5.3 6.6 9.1 12.6 21.2 26
0 - 29% 0 .31 .63 .95 1.27 2.6 4.0 5.4 7.0 10.2 15.7 33.4 46.0
/ 1/If the remaining Fixed Rate Period is between any two time periods
shown in the above schedules, interpolate between the corresponding factors to
the closest month.
2
The Holder of this Note is not required to actually reinvest the prepaid
principal in any U.S. Government Treasury Securities, or otherwise prove its
actual losses, as a condition to receiving a prepayment fee as calculated above.
Maker agrees this prepayment fee is the bargained-for consideration to the
Holder for permitting prepayment and the above is not a liquidated damages
provision. This prepayment fee provision is to be interpreted in a manner that
would make it enforceable to the fullest extent permitted by law, with any
portion of the fee that is unenforceable being stricken or otherwise changed to
cause the fee, as revised, to be enforced.
3
EX-10.25
8
INC. SAV. AND STOCK PLAN
Exhibit 10.25
ADVANCED TECHNOLOGY LABORATORIES, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
AMENDED AND RESTATED
EFFECTIVE
JULY 1, 1994
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................ 3
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...................................... 4
1.18 Effective Date................................ 5
1.19 Eligible Employee............................. 5
1.20 Employee...................................... 5
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........................ 7
1.26 Participant................................... 7
1.27 Participating Company......................... 8
1.28 Period of Service............................. 8
1.29 Period of Severance........................... 8
1.30 Plan.......................................... 8
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................... 9
1.36 Supplemental Company Contribution Account..... 9
1.37 Temporary Termination......................... 9
1.38 Terminated.................................... 10
1.39 Trust or Trust Fund........................... 10
1.40 Trustee....................................... 10
1.41 Valuation Date................................ 10
TABLE OF CONTENTS
(continued)
Page
----
1.42 Additional Definitions in Plan................ 10
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........................ 20
4.6 Return of Contributions....................... 21
4.7 Recharacterization of Excess Before-Tax
Contributions............................... 23
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 Change in Investment of Future Contributions.. 30
6.4 Changes in Investment of Existing Accounts.... 30
6.5 Investment of Company Contributions........... 30
TABLE OF CONTENTS
(continued)
Page
----
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
7.8 Directed Rollovers............................. 39
SECTION 8 -- VESTING......................................... 41
8.1 Vesting........................................ 41
8.2 Forfeitures.................................... 42
8.3 Reemployment................................... 42
8.4 Suspension of Installment Payments............. 43
SECTION 9 -- LIMITATION ON CONTRIBUTIONS..................... 44
9.1 Maximum Annual Contribution to the Plan........ 44
9.2 Additional Limitation Relating to Defined
Benefit Plans................................ 45
SECTION 10 -- TOP HEAVY PROVISIONS........................... 47
10.1 Scope.......................................... 47
10.2 Top Heavy Status............................... 47
10.3 Minimum Contribution........................... 49
10.4 Limitation to Annual Additions in Top Heavy
Plan......................................... 50
10.5 Vesting........................................ 50
SECTION 11 -- ADMINISTRATION OF THE PLAN..................... 51
11.1 Plan Administrator............................. 51
11.2 Organization and Procedures.................... 51
11.3 Duties and Authority of Committee.............. 51
11.4 Expenses....................................... 53
11.5 Bonding and Insurance.......................... 53
11.6 Commencement of Benefits....................... 53
11.7 Appeal Procedure............................... 54
11.8 Plan Administration - Miscellaneous............ 55
11.9 Domestic Relations Orders...................... 57
11.10 Plan Qualification............................. 58
11.11 Deductible Contribution........................ 59
11.12 Voting of Company Stock and SpaceLabs
Medical, Inc. Stock.......................... 59
TABLE OF CONTENTS
(continued)
Page
----
SECTION 12 -- AMENDMENT AND TERMINATION...................... 60
12.1 Amendment and Termination...................... 60
12.2 Consolidation or Merger........................ 60
12.3 Termination of the Plan........................ 61
12.4 Allocation of the Trust Fund on Termination
of Plan...................................... 61
12.5 Partial Termination............................ 62
SECTION 13 -- FUNDING........................................ 63
13.1 Contributions to the Trust Fund................ 63
13.2 Trust Fund for Exclusive Benefit of
Participants................................. 63
13.3 Trustee........................................ 63
13.4 Investment Manager............................. 63
SECTION 14 -- FIDUCIARIES.................................... 65
14.1 Limitation of Liability of the Company and
Others....................................... 65
14.2 Indemnification of Fiduciaries................. 65
14.3 Scope of Indemnification....................... 65
SIGNATURE PAGE............................................... 66
APPENDIX I................................................... 67
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 July 1, 1994, 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, 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, the Company does hereby amend and restate the June 26,
1992 Plan as set forth in the following pages effective July 1, 1994, unless
otherwise specified herein.
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.
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. 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.
1.10 Company Matching Contributions
------------------------------
"Company Matching Contributions" has the meaning set forth in Section
4.1(c).
3
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
and to receive a Participant's 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 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.
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
4
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.
For purposes of determining the amount of a Supplemental Company
Contribution as provided in Section 4.1(d), in the discretion of the
Participating Company making the contribution, "Earnings" may exclude
commissions.
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.
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
5
"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 the Effective Date and
the date on which an Employee first completes an Hour of Service for the
Participating Company during the current period of employment.
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 ($93,518 for the Plan Year ending December
31, 1992);
(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 ($62,345 for the Plan Year ending
December 31, 1992) 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 ($56,111 for the Plan Year ending December 31, 1992).
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 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.
6
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).
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.
7
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; and
(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.
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.
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.
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.
8
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.
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.
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.
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)
Annual Additions 9.1
Before-Tax Contributions 3.1(a)
Company Stock Fund 5.2(a)
Company Matching Contributions 4.1(c)
Determination Date 10.2(c)
Diversified Equity Fund I 5.2(c)
Diversified Equity Fund II 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)
10
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 (other than a Part-Time Employee as described
below) who is not already a Participant shall become a Participant in
this Plan on the first day of the month coinciding with or following
completion of a one-year Period of Service provided he or she is an
Eligible Employee on such date.
(b) An Eligible Employee who is a Part-Time Employee shall become a
Participant on the first day of any subsequent month following a
twelve-month period during which he or she is credited with at least
1,000 Hours of Service. Such twelve-month period shall commence on
the Employee's Employment Commencement Date and each January 1
thereafter.
Part-Time Employee means an Employee who is employed for less than a
full-time basis based on uniform rules established by the Committee
and consistently applied to all persons similarly situated.
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 2% 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 ($8,728 for 1992).
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 agreement will
become effective on the first day of the month after 15 days from the date
13
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 Compensated Employees paid the greatest
Compensation shall be considered together to
14
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.
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
2% 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
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.
In the discretion of the Participating Company making the
contribution, a Supplemental Company Contribution may be based on
Earnings as defined in Section 1.17.
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 that the Committee permit
acceptance of a rollover amount which was distributed from another
qualified plan or conduit Individual Retirement Account (IRA). The
amount must be rolled over by the Eligible Employee within 60 days of
receiving the distribution from the other plan or conduit IRA. The
Committee shall have total discretion over acceptance of such amounts
into this Plan; provided, rollovers of any type of property other than
cash will not be accepted. In the event an Eligible Employee is
permitted to contribute a rollover amount, such amount shall be
allocated to a
18
separate, fully vested account and subject to the same terms of the
Plan as other 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.
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
19
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 1992 this limit is
$8,728) 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 reduced by the amount
recharacterized and related income. 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 and 10. An amount recharacterized 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 will be
23
treated as Before-Tax Contributions for purposes of hardship
withdrawal under Section 7.5(c). 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.
(d) Diversified Equity Fund II
--------------------------
Only account balances invested in the Diversified Equity Fund II under
the Predecessor Plan and transferred to this Plan will be invested in
this Fund. The Diversified Equity Fund II, including earnings
thereon, shall be invested in investments similar to those held in the
Diversified Equity Fund I although it is anticipated that this Fund
shall be invested more aggressively to achieve long-term capital
appreciation.
25
This Fund will be liquidated effective December 31, 1992.
Participants may elect prior to December 15, 1992, to transfer
account balances in this Fund to another Fund in accordance with the
procedure described in Section 6.3. If no election is made, any
amount remaining in this Fund on December 31, 1992, will be
transferred to the Fixed Income Fund.
(e) 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 Diversified
Equity Fund I, the Fixed Income Fund, the International Fund, or the
Company Stock Fund, in accordance with the procedure described in
Section 6.4. Participants may not elect to transfer account balances
to this Fund.
(g) 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.
(h) 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.
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, and International 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, and the International Fund
shall be allocated among 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, 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
27
basis of the 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 the funds:
(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.
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.
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.
29
6.3 Change in Investment of Future Contributions
--------------------------------------------
A Participant may, upon not less than 15 days prior written notice to the
Committee, change his election made pursuant to Section 6.1, effective as
of the first day of the next calendar quarter (January 1, April 1, July 1
or October 1), with respect to contributions made after the applicable
effective date.
6.4 Changes in Investment of Existing Accounts
------------------------------------------
Upon not less than 15 days prior written 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 their existing
fund or funds to the Fixed Income Fund, the Balanced Fund, the Core Equity
Fund, the Aggressive Equity Fund, or the International Fund 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 to the Fixed Income Fund
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 election under Section 7.2 or
following his or her death.
6.5 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, who has reached his
55th birthday may make either (or both) of the following elections:
30
(i) He 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 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)
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 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 manner described in Section 6.1.
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.
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 Participant's spouse.
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.
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.
34
(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 or
has demonstrated a financial hardship (as provided in Section 7.6) in
the same or a larger amount than the amount of the withdrawal.
(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 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 Accounts or any portion thereof that is an integral
multiple of $100. A Participant may not 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 or has demonstrated financial hardship (as provided
in Section 7.6) in the same or a larger amount than the amount of the
withdrawal.
35
(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.
(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 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;
(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;
37
(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.
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.
38
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 Directed Rollovers
------------------
(a) General Rule
------------
Effective January 1, 1994, a Participant or spouse Beneficiary who
elects a lump sum distribution or annual installments for a number of
years less than ten (10) under Section 7.3, or a hardship withdrawal
under Section 7.6, or receives a distribution of a small benefit under
Section 7.2(c) 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 Participant or Beneficiary may only direct such a rollover if
the expected benefit payment during the Plan Year is $200 or
more;
(ii) A Participant or Beneficiary may not request a directed rollover
of an amount distributed due to the minimum required distribution
provision under Section 11.6(b);
(iii)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 Participant or Beneficiary 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 rollover direction regarding installments shall apply to all
installments, unless the direction is changed by the Participant
or Beneficiary;
(vi) A surviving spouse Beneficiary or a former spouse who is an
alternate payee pursuant to Section 11.9 may direct a rollover
under the same terms and conditions as a Participant, except that
such spouse or former spouse may only direct a rollover to an
IRA;
(vii)A non-spouse Beneficiary may not direct a rollover pursuant to
this section; and
39
(viii) A Participant or Beneficiary provides the information or
documentation reasonably requested by the Committee.
(b) Notice to Participants
----------------------
The Committee shall furnish each Participant and Beneficiary eligible
for a directed rollover under this Section 7.8 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 Participant's or Beneficiary's Annuity Starting
Date; provided, however, that a Participant or Beneficiary may waive
in writing the thirty (30) day period with respect to a distribution
of small benefits equal to $3,500 or less.
40
SECTION 8
VESTING
8.1 Vesting
-------
(a) Participant Before-Tax Contribution 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%
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:
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.
41
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) he
shall forfeit his unvested interest in such Accounts as of the last day of
the month during which his 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.
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
42
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 Pre-Tax
Contribution Account if they are repaid with pre-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.
43
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 Contributions in excess of the
limits. If the Annual Additions exceed the
44
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.
(1) The defined benefit plan fraction for any year is equal to the
quotient of (i) divided by (ii) below expressed as a fraction:
(i) 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.
(ii) 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 was an active Participant in the
Plan and for which such average is highest.
45
(2) The defined contribution plan fraction for any year is equal to
the quotient of (i) divided by (ii) below expressed as a
fraction:
(i) 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.
(ii) 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.
46
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.
47
(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) ($56,111 for the Plan
Year ending in 1992), 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 1992).
(iii)an Employee who owns more than 5% of the Company, or
48
(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 any Key Employee's
accounts for
49
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.
50
SECTION 11
ADMINISTRATION OF THE PLAN
11.1 Plan Administrator
------------------
The Plan Administrator shall be the Company. The Compensation Committee of
the Board of Directors of the Employer 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 of the Employer 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 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 Interactive Voice Response System in
addition to or in lieu of written notification required under the
Plan;
51
(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;
(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.
(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.
52
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 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.
53
(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).
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 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.
54
(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).
55
(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.
(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
56
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.
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:
57
(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.
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.
58
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.
59
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
60
directors of the Participating 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
61
shall be made, in the 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.
62
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
63
(c) has acknowledged in writing that he, she or it is a fiduciary with
respect to the Plan.
64
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.
65
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
5 th day of May , 1992.
------------ -----------------------
FOR ADVANCED TECHNOLOGY
LABORATORIES, INC.
/s/ W. Brinton Yorks, Jr. /s/ Harvey N. Gillis
--------------------------- -----------------------------------
Witness Authorized Officer
Chief Financial Officer
-----------------------------------
Title
66
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)
ACKNOWLEDGED AND ACCEPTED:
By: __________________________________________
Title: _______________________________________
Date: ________________________________________
67
EX-10.26
9
SUP. BENEFIT PLAN
Exhibit 10.26
ADVANCED TECHNOLOGY LABORATORIES, INC.
SUPPLEMENTAL BENEFIT PLAN
AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1994
Prepared for review by legal counsel.
TABLE OF CONTENTS
Page
----
PREAMBLE......................................... 1
ARTICLE 1 -- PURPOSE............................. 2
1.1 Purpose............................ 2
ARTICLE 2 -- DEFINITIONS......................... 3
2.1 "Code" 3
2.2 "Company" 3
2.3 "Compensation Committee"........... 3
2.4 "Disability"....................... 3
2.5 "Earnings"......................... 3
2.6 "Participant"...................... 3
2.7 "Plan"............................. 3
2.8 "Retirement"....................... 3
2.9 "Retirement Plan".................. 3
2.10 "Subsidiaries"..................... 3
2.11 "Surviving Spouse"................. 3
2.12 "Years of Service"................. 3
ARTICLE 3 -- ADMINISTRATION...................... 4
3.1 Compensation Committee............. 4
3.2 Benefits Committee................. 4
3.3 Expenses........................... 4
ARTICLE 4 -- PARTICIPATION....................... 5
4.1 Retirement Plan Participants....... 5
4.2 Retirement Plan Benefit............ 5
4.3 Other Participants................. 5
4.4 Limitation on Participation........ 5
ARTICLE 5 -- BENEFITS............................ 6
5.1 Supplemental Pension Benefits...... 6
5.2 Other Supplemental Pension
Benefits.......................... 6
5.3 Death Benefits..................... 6
ARTICLE 6 -- PAYMENT OF BENEFITS................. 7
6.1 Payment of Benefits................ 7
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE 7 -- GENERAL PROVISIONS.................. 8
7.1 Unfunded Obligation................ 8
7.2 Nonassignment...................... 8
7.3 No Right to Continued Employment... 8
7.4 Withholding Taxes.................. 8
7.5 Termination and Amendment.......... 8
7.6 ERISA Exemption.................... 9
7.7 Applicable Law..................... 9
SIGNATURE PAGE................................... 9
APPENDIX A....................................... 10
APPENDIX B....................................... 11
PREAMBLE
THIS ADVANCED TECHNOLOGY LABORATORIES, INC. SUPPLEMENTAL BENEFIT PLAN (the
"Plan") formerly known as the Westmark International Incorporated Supplemental
Benefit Plan and now known as the Advanced Technology Laboratories, Inc.
Supplemental Benefits Plan is amended and restated effective January 1, 1994, by
Advanced Technology Laboratories, Inc. (the "Company"), a Delaware corporation.
WHEREAS, the Plan was adopted by Westmark International Incorporated
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 amended and restated as the Advanced Technology
Laboratories, Inc. Supplemental Benefit Plan; and
WHEREAS, the Company desires to amend and restate the Plan to effect certain
changes;
NOW THEREFORE, the Company does hereby amend and restate the June 26, 1992
Plan as set forth in the following pages, effective January 1, 1994, except as
otherwise specified herein.
1
ARTICLE 1
PURPOSE
1.1 Purpose.
-------
The purpose of this Advanced Technology Laboratories, Inc. Supplemental
Benefit Plan (the "Plan") is to retain exceptional executives by
providing retirement benefits to key executives.
2
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 "Code" means the Internal Revenue Code of 1986 as amended.
------
2.2 "Company" means Advanced Technology Laboratories, Inc., a Delaware
---------
Corporation.
2.3 "Compensation Committee" means the committee defined in Section 3.1 of this
------------------------
Plan.
2.4 "Disability" has the same meaning as provided in the Retirement Plan.
------------
2.5 "Earnings" has the same meaning as provided in the Retirement Plan.
----------
2.6 "Participant" means each individual who participates in the Plan in
-------------
accordance with Article IV.
2.7 "Plan" means the Advanced Technology Laboratories, Inc. Supplemental
------
Benefit Plan as set forth in this document and in any amendments made from
time to time.
2.8 "Retirement", for a Participant who is entitled to a benefit under the
------------
Retirement Plan, means his or her "Retirement Date" or "Vested Termination
Date" as defined in the Retirement Plan. In the case of a Participant who
is not entitled to a benefit under the Retirement Plan, "Retirement" means
the later of the date the Participant attains age 55 or terminates
employment with the Company and its Subsidiaries.
2.9 "Retirement Plan" means the Advanced Technology Laboratories, Inc.
-----------------
Retirement Plan and Trust.
2.10 "Subsidiaries" means (i) wholly owned subsidiaries of the Company and
--------------
(ii) those subsidiaries of which 50% or more is owned by the Company and
which are specifically designated by the Compensation Committee as
participating employers in this Plan.
2.11 "Surviving Spouse" means the spouse of a Participant, provided that the
------------------
Participant was married to the spouse throughout the one-year period
ending on the date of the Participant's death.
2.12 "Years of Service" has the same meaning as provided in the Retirement
------------------
Plan.
3
ARTICLE 3
ADMINISTRATION
3.1 Compensation Committee
----------------------
The Compensation Committee, appointed by the Company's Board of Directors,
shall, except as otherwise authorized by the Board of Directors, consist
of directors who are not employed by the Company or its Subsidiaries. The
Compensation Committee shall have the exclusive authority to:
(a) designate individuals to participate in the Plan pursuant to Section
4.3, in addition to those individuals who automatically become
Participants pursuant to Section 4.1;
(b) designate non-wholly owned Subsidiaries which shall be participating
employers in the Plan, which shall be listed in Appendix B to this
Plan;
(c) engage such legal, accounting, actuarial and other professional
services as it may deem proper; and
(d) approve documents and amendments to the Plan that may be required from
time to time to keep the Plan in compliance with relevant law or to
facilitate administration of the Plan.
Decisions by the Compensation Committee shall be final and binding upon
all parties. The Chairman of the Committee is authorized to execute any
documents and amendments to the Plan on behalf of the Company.
3.2 Benefits Committee
------------------
The Benefits Committee appointed by the Compensation Committee to
administer the Retirement Plan shall have the authority and responsibility
for the proper operation and administration of the Plan according to its
terms.
3.3 Expenses
--------
All benefits payable under the Plan and all expenses properly incurred in
the administration of the Plan, including all expenses properly incurred
by the Compensation Committee in exercising its duties under the Plan,
shall be borne by the Company.
4
ARTICLE 4
PARTICIPATION
4.1 Retirement Plan Participants
----------------------------
Each participant in the Retirement Plan whose benefits thereunder are
limited by (a) the dollar limitation on compensation that may be taken
into account under the plan of Section 401(a)(17) of the Code and/or (b)
the benefits limitations of Section 415 of the Code (including, without
limitation, the maximum benefit payable under Section 415(b)(1), the
actuarial reduction for early retirement of Section 415(b)(2)(C), the
reduction for limited service or participation of Section 415(b)(5), and
the combined limits of Section 415(e)) shall become a Participant in this
Plan. Participation shall begin as of the later of the effective date of
the Plan or the last day of the first Plan Year in which the individual's
accrued benefit under the Retirement Plan is limited by Sections
401(a)(17) or 415 of the Code.
4.2 Retirement Plan Benefit
-----------------------
For purposes of determining participation in and benefits under this Plan,
the benefit to which an individual is entitled under the Retirement Plan
shall be calculated by including as "Earnings" in the year in which earned
any amounts deferred under a nonqualified deferred compensation plan or
arrangement, which are not otherwise included in Earnings.
4.3 Other Participants
------------------
The Compensation Committee may determine and designate other select
management or highly compensated employees of the Company and its
Subsidiaries to receive additional supplemental pension benefits under
this Plan, as described in Section 5.2, whose names shall be added to an
Appendix A to this Plan. Such individuals shall become Participants as of
the date of designation by the Compensation Committee.
4.4 Limitation on Participation
---------------------------
Employees designated for benefits under Section 4.3 shall be members of a
select group of top management or highly compensated employees.
5
ARTICLE 5
BENEFITS
5.1 Supplemental Pension Benefits
-----------------------------
Upon the Retirement or Disability of a Participant, the Company shall pay
to such Participant supplemental pension benefits which when combined with
the amounts he or she is entitled to receive under the Retirement Plan (if
any) shall equal the retirement pension benefits which would have been
payable to the Participant had the Retirement Plan's formula been applied
without regard to the limitations of Sections 401(a)(17) and 415 of the
Code.
For years before calendar year 1994, the supplemental pension benefits for
a Participant who received salesman commissions or service
commissions/incentives during the calendar year shall be determined, as to
that year, by disregarding any such commissions and incentives which
exceed the dollar limitation of Section 401(a)(17) of the Code.
For all years subsequent to calendar year 1993, the supplemental pension
benefits for a Participant who is not the Chief Executive Officer or one
of the other four most highly compensated executive officers of the
Company who were serving as executive officers at the end of the last
completed fiscal year, as specified in Item 402 of Regulation S-K of the
Securities and Exchange Act of 1934 and reported in the Company's proxy
statement for the applicable year (the "Five Highest Compensated
Officers") shall be determined, as to such years subsequent to 1993, by
disregarding any Earnings which are in excess of the average of the
Earnings of the Five Highest Compensated Officers for such year.
5.2 Other Supplemental Pension Benefits
-----------------------------------
The Compensation Committee in its discretion may establish other
supplemental pension benefits and designate the Participants who will be
entitled to receive such benefits. Any such additional supplemental
pension benefits shall be described in an Appendix to this Plan, and,
unless otherwise specified in such Appendix, shall be payable as provided
in Article VI.
5.3 Death Benefits
--------------
Upon the death of a Participant prior to Retirement, the Company shall pay
to the Surviving Spouse (if any) of such Participant a death benefit which
when combined with the death benefit which he or she is entitled to
receive under the Retirement Plan shall equal the death benefit that would
have been payable to the Surviving Spouse had the Retirement Plan's
benefit provisions been applied as provided in Section 5.1 or 5.2 above,
as applicable.
6
ARTICLE 6
PAYMENT OF BENEFITS
6.1 Payment of Benefits
-------------------
Upon the Retirement or Disability of a Participant, the Company shall pay
to such Participant the benefit provided in Section 5 in the form of a
monthly annuity payable from the commencement date as provided in Section
6.2 to the first of the month preceding death. Upon the death of a
Participant prior to commencement of benefits under this Plan, the Company
shall pay to the Surviving Spouse of such Participant one half of the
benefit provided in Section 5 in the form of a monthly annuity payable
from the commencement date as provided in Section 6.2 to the first of the
month preceding the death of the Surviving Spouse.
Notwithstanding the above, the Compensation Committee in its discretion
may direct payment of the benefit for a Participant or Surviving Spouse in
the form of a lump sum cash payment if the Compensation Committee
determines that such payment is in the best interest of the Company.
The amount of any such lump sum payment shall be determined by calculating
the benefit according to the terms of the Retirement Plan as a whole life
annuity, then calculating the present value of such benefit using the
actuarial assumptions specified in the Retirement Plan for determining
benefits of equivalent value, without regard to the provision for use of
Pension Benefit Guarantee Corporation rates for calculating lump sums.
6.2 Commencement of Payment
-----------------------
If a Participant in this Plan is also a participant in the Retirement
Plan, benefits for the Participant or Surviving Spouse under this Plan
shall commence on the same date that benefits commence under the
Retirement Plan. If a Participant in this Plan is not also a participant
in the Retirement Plan, benefits to the Participant shall commence as of
the first day of the month coincident with or next following the earlier
of the date of Retirement or Disability. Benefits to a Surviving Spouse
shall commence as of the first of the month following the Participant's
death if the Participant was age 55 or older, or as of the first of the
month following the date on which the Participant would have reached age
55 if the Participant was younger than age 55 at the time of death.
7
ARTICLE 7
GENERAL PROVISIONS
7.1 Unfunded Obligation
-------------------
The supplemental benefits to be paid to Participants or their Surviving
Spouses pursuant to this Plan are unfunded obligations of the Company, and
shall, until actual payment, continue to be an obligation against the
general funds of the Company. The Company is not required to segregate
any monies from its general funds, or to create any trusts, or to make any
special deposits with respect to these obligations. Nothing contained
herein shall be deemed to create a trust of any kind or create any
fiduciary relationship. To the extent that any person acquires a right to
receive payments from the Company under this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company.
7.2 Nonassignment
-------------
The right of a Participant or his or her Surviving Spouse to the payment
of any amounts under the Plan may not be assigned, transferred, pledged or
encumbered nor shall such right or other interest be subject to
attachment, garnishment, execution or other legal process.
7.3 No Right to Continued Employment
--------------------------------
Nothing in the Plan shall be construed to confer upon any Participant any
right to continued employment with the Company or a Subsidiary, nor
interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of such Participant at any time without assigning
any reason therefor.
7.4 Withholding Taxes
-----------------
Appropriate payroll taxes shall be withheld from cash payments made to
Participants pursuant to this Plan.
7.5 Termination and Amendment
-------------------------
The Board of Directors of the Company reserves the power at any time to
terminate this Plan and delegates to the Compensation Committee the power
to otherwise amend any portion of the Plan other than this Section 7.5;
provided, however, that no such action shall adversely affect the right of
any Participant (or Surviving Spouse) to a benefit to which he or she has
become entitled under the Plan. Notice of termination or material
amendment of the Plan shall be given in writing to each Participant.
If the Plan is terminated, Participants and Surviving Spouses who have
accrued benefits under the Plan as of the date of termination will receive
payment of such benefits at the times specified in the Plan.
8
7.6 ERISA Exemption
---------------
The portion of this Plan providing benefits in excess of the limitations
of Section 415 of the Code is intended to qualify for exemption from the
Employee Retirement Income Security Act of 1974 ("ERISA") as an unfunded
excess benefit plan under Sections 3(36) and 4(b)(5) of ERISA. The
portion of this Plan providing benefits in excess of the limitation of
Section 401(a)(17) of the Code and other supplemental benefits is intended
to qualify for exemption from Parts II, III, and IV of ERISA as a plan
maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees under
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
7.7 Applicable Law
--------------
The Plan shall be construed and governed in accordance with the laws of
the State of Washington.
Dated: May 5 , 1994
------------------------- ----
Advanced Technology Laboratories, Inc.
By: /s/ Harvey N. Gillis
---------------------------------------------
Title: Chief Financial Officer
------------------------------------------
9
APPENDIX A
Pursuant to Section 4.3 of the Plan, the following select management or highly
compensated Participants shall be entitled to receive additional supplemental
pension benefits under the Plan, as described below:
Name Benefit Benefit Distribution Date
---- ------- -------------------------
1. Robert T. deGavre Determined under an employment September, 1992
agreement entered as of
January 1, 1987.
Acknowledged and Accepted
By:______________________________
Title:___________________________
Date:____________________________
10
APPENDIX B
TO THE
ADVANCED TECHNOLOGY LABORATORIES, INC.
SUPPLEMENTAL BENEFIT PLAN
Pursuant to Section 3.1(b) of the Plan, the following Subsidiaries shall be
participating employers in the Plan:
Company Beginning Ending
------- --------- ------
1. Advanced Technology Laboratories 1/1/89
Inc. (Washington)
Acknowledged and Accepted
By:______________________________
Title:___________________________
Date:____________________________
11
EX-10.27
10
ISSOP TRUST AGREEMENT
Exhibit 10.27
ADVANCED TECHNOLOGY LABORATORIES, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
TRUST AGREEMENT
AMENDED AND RESTATED
EFFECTIVE
JULY 1, 1992
Prepared for review by legal counsel.
TABLE OF CONTENTS
Page
----
PREAMBLE............................................ 1
ARTICLE 1........................................... 2
1.1 Trustee Responsibility................ 2
1.2 Payments from Trust Fund.............. 2
1.3 Powers of Trustee..................... 3
1.4 Securities; Property.................. 5
1.5 Proxies............................... 6
1.6 Company Securities.................... 6
ARTICLE 2........................................... 8
2.1 Investment Managers................... 8
2.2 Investment Funds...................... 8
2.3 Annuity Contracts..................... 9
2.4 Securities Lending.................... 10
2.5 Insurance Valuations and Reports...... 10
ARTICLE 3........................................... 11
3.1 Standard of Care...................... 11
3.2 Trust Fund Assets..................... 11
3.3 Allocation of Responsibility.......... 11
3.4 Indemnification....................... 11
3.5 ERISA Controls........................ 11
ARTICLE 4........................................... 12
4.1 Records and Accounts.................. 12
4.2 Settlement of Accounts................ 12
ARTICLE 5........................................... 13
5.1 Trustee Expenses...................... 13
ARTICLE 6........................................... 14
6.1 Multiple Companies.................... 14
6.2 Multiple Plans........................ 14
6.3 Trustee Reliance...................... 14
6.4 Directions by Company or Committee.... 15
6.5 Directions by Investment Manager...... 15
6.6 Certain Securities Transactions....... 15
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE 7........................................... 16
7.1 Amendment and Termination............. 16
ARTICLE 8........................................... 17
8.1 Removal and Resignation............... 17
ARTICLE 9........................................... 18
9.1 Governing Law......................... 18
9.2 Successors and Assigns................ 18
9.3 Loss of Qualification................. 18
9.4 Segregation of Assets................. 18
9.5 Exclusive Benefit..................... 19
9.6 No Certificates of Ownership.......... 19
9.7 Assignability......................... 20
SIGNATURE PAGE...................................... 21
PREAMBLE
THIS TRUST AGREEMENT ("Trust Agreement") is known as the Advanced Technology
Laboratories, Inc. Incentive Savings and Stock Ownership Plan Trust Agreement,
and was formerly known as the Amended and Restated Trust Agreement for Defined
Contribution Plans By and Between Westmark International Incorporated and First
Interstate Bank of Washington, N.A.
Westmark International Incorporated established the Westmark International
Incorporated Incentive Savings and Stock Ownership Plan, and an associated trust
fund ("Trust Fund") governed by the Trust Agreement for Defined Contribution
Plans, effective January 2, 1987, in connection with the distribution of shares
of Westmark International Incorporated to shareholders of Squibb Corporation.
The Plan was amended and restated effective January 1, 1989, and the Trust
Agreement was amended and restated effective February 1, 1991.
The corporate name of Westmark International Incorporated was changed to
Advanced Technology Laboratories, Inc. effective June 26, 1992. The Plan was
amended and restated, and the name of the Plan was changed to the Advanced
Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan. The
Trust Agreement is hereby renamed and restated effective June 26, 1992.
Advanced Technology Laboratories, Inc. ("Company") and the undersigned
trustee ("Trustee") intend that the Plan and Trust will comply with the Employee
Retirement Income Security Act of 1974, as amended, Section 401(a) of the
Internal Revenue Code of 1986, as amended, and related Treasury Regulations and
that the Trust qualifies as a tax-exempt trust under Section 501(a) of the Code.
The Plan is administered by a committee appointed by the Company (the
"Committee").
The Company and the Trustee now enter into this Trust Agreement on the
following terms:
1
ARTICLE 1
1.1 Trustee Responsibility
----------------------
The Trustee shall hold the assets of and collect the income and make
payments from the Trust Fund, all as hereinafter provided. Subject to the
conditions and limitations set forth herein, the Trustee shall be
responsible for the property received by it as Trustee, but, except as
otherwise specifically agreed to by the Trustee, shall not be responsible
for the administration of any Plan (including without limitation the
determination of Plan participation rights of employees of any Company and
the determination of benefits of members of any Plan) or for those assets
of any Plan which have not been delivered to and accepted by the Trustee;
provided, however, that the Trustee shall maintain the participant
accounting for a plan if so directed by the Company. The Trustee shall
not have any authority or obligation to determine the adequacy of or to
enforce the collection from the Company or from any Company of any
contribution to the Trust Fund. Except to the extent that assets of the
Trust Fund have been deposited in a collective investment fund maintained
by the Trustee or that the Trustee has been designated as an Investment
Manager (as defined in Article II hereof), the Trustee shall not be
responsible, directly or indirectly, for the investment or reinvestment of
the assets of the Trust Fund, which investment and reinvestment shall be
the sole responsibility of the Company unless otherwise delegated by the
Company as provided in ARTICLE II hereof.
1.2 Payments from Trust Fund
------------------------
Subject to the provisions of Section 9.5, the Trustee shall make payments
from the portion of the Trust Fund attributed to each Plan as directed by
the respective Committee which administers such Plan. Such Committee, in
directing the Trustee to make payments, shall follow the provisions of the
Plan so that it shall be impossible for any part of the Trust Fund to be
used for, or diverted to, purposes other than for the exclusive benefit of
employees covered under such Plan or their beneficiaries except to the
extent permitted by this Agreement or any Plan. Subject to the foregoing,
each such Committee may direct such payments to be made to any person,
including any member of such Committee, or to the applicable Company, or
to any paying agent designated by a Company, in such amounts and in such
form (including, without limitation, shares of Company stock and shares of
SpaceLabs Medical, Inc. Stock) as the Committee shall direct. The Trustee
shall have no responsibility with respect to any payment made, pursuant to
such a direction, to any Company, any Committee or any member thereof, to
any paying agent, or to any other person, and any payment so made shall be
held in trust by the recipient until disbursed in accordance with the
Plan. Each direction of each such Committee shall be in writing and shall
be deemed to include a certification that any payment directed thereby is
one which the Committee is authorized to direct, and the Trustee may
conclusively rely on such certification without further investigation.
Unless otherwise specified by the Committee, payments by the Trustee may
be made by its check to the order of the payee and mailed to the payee at
the address last furnished to the Trustee by the
2
Committee or by the payee, or, if no such address has been so furnished,
to the payee in care of the Company.
The establishment of the Trust Fund created by this Agreement shall not be
considered as giving any Plan member or any other person any legal or
equitable rights as against the Company, any Company, any Committee, the
Trustee or the property, whether corpus or income, of the Trust Fund
unless such right is specifically provided for in this Agreement or the
applicable Plan, nor shall it be considered as giving any Plan member or
other employee the right to continue in the service of a Company in any
capacity.
1.3 Powers of Trustee
-----------------
Subject to the provisions and limitations contained elsewhere herein, in
administering the Trust Fund the Trustee shall be specifically authorized:
(a) except as otherwise specified in Section 1.6, to vote in person or by
proxy, or to refrain from voting, in respect of any securities held by
the Trust Fund, and to give general or special proxies or powers of
attorney, with or without power of substitution, and to exercise any
conversion privileges, subscription rights or other options; to
participate in reorganizations, recapitalizations, consolidations,
mergers and similar transactions with respect to such securities; and
generally to exercise any of the powers of an owner with respect to
securities held by the Trust Fund;
(b) with respect to any investment, to consent or object to or otherwise
request any action or nonaction on the part of any corporation,
association or trust or of the directors, officers, stockholders or
trustees of any such corporation, association or trust;
(c) to settle, compromise or submit to arbitration any claims, debts or
damages due or owing to or from the Trust Fund;
(d) to deposit any property in any voting trust, or with any protective,
reorganization or similar committee, or with depositories designated
thereby; to delegate power thereto; and to pay or agree to pay part of
its expenses and compensation and any assessments levied with respect
to any property so deposited;
(e) to deposit securities with stock clearing corporations or depositories
or similar organizations, whether located within the state of
Washington or in another state of the United States of America;
(f) to commence or defend suits or legal proceedings and to represent the
Trust Fund in all suits or legal proceedings in any court or before
any other body or tribunal (provided, however, that the Trustee shall
have no obligation to take any legal action for the benefit of the
Trust Fund unless it shall be first
3
indemnified for all expenses in connection therewith, including
without limitation counsel fees);
(g) to register or cause to be registered any securities or other
property in its name or in the name of any nominee with or without
indication of the capacity in which the securities shall be held, or
to hold securities in bearer form;
(h) to employ suitable agents and legal counsel, who may be counsel for a
Company, and, as a part of this reimbursable expenses under this
Agreement, to pay their reasonable compensation and expenses;
(i) to appoint one or more individuals or corporations as a custodian of
any property and, as a part of its reimbursable expenses under this
Agreement, to pay the reasonable compensation and expenses of any such
custodian;
(j) to form any corporation, association, partnership, or joint venture
under the laws of any jurisdiction, or to participate in the forming
of any such corporation, association, partnership, or joint venture or
to acquire an interest in or otherwise make use of any corporation,
association, partnership, or joint venture for the purpose of
facilitating the Trust Fund's investing in and holding title to any
property;
(k) for the purpose of facilitating the Trust Fund's investing in and
holding title to real or personal property or part interests therein,
wherever situate, to appoint one or more individuals or corporations
as a subtrustee or subtrustees, or to join with one or more
individuals or corporations (including itself) acting as trustees of
other pension trusts, profit sharing trusts or employee benefit trusts
in the establishment of one or more such subtrusts, and to pay the
reasonable compensation and expenses of each such subtrustee. Any
such subtrustee, upon being appointed, shall act with such one or more
or all of the powers, authorities, discretions, duties and functions
of the Trustee under this Article I as shall be designated in the
instrument establishing such subtrust including, without limitation,
the power to receive and hold property, real or personal, or part
interest therein, oil, mineral or gas properties, royalty interests or
rights, including equipment pertaining thereto, leaseholds, mortgages
and other interests in realty, situated in any state of the United
States of America in which the subtrustee is authorized to act as
trustee of pension trusts, profit sharing trusts or other employee
benefit trusts;
(l) to lease any property, to sell or acquire any property (at public or
private sale and for cash or on credit), to grant or acquire options
for the purchase of property and generally to make, execute,
acknowledge and deliver any and all deeds, leases, assignments and
instruments whenever such action may be required to perform its
obligations hereunder;
(m) to write or purchase call or put options;
4
(n) to enter into commodity contracts and to take appropriate actions in
connection with such contracts;
(o) to lend to the members of a Plan such amount or amounts, and upon such
terms and conditions, as the Committee may direct in accordance with
the provisions of the Plan; and
(p) generally to do all acts, exclusive of acts involving investment
management discretion, which the Trustee may deem necessary or
desirable for the protection of the Trust Fund;
provided, however, that the powers specified in subsections (a)
through (d) and (j) through (o) above shall be exercised by the
Trustee only upon the specific direction of the Company, the Committee
or an Investment Manager (as defined in ARTICLE II hereof) in
accordance with the provisions of the Plan and this Agreement.
No person dealing with the Trustee shall be required to take any notice of
this Agreement, but all persons so dealing shall be protected in treating
the Trustee as the absolute owner with full power of disposition of all
the moneys, securities and other property of the Trust Fund, and all
persons dealing with the Trustee are released from inquiry into the
decisions or authority of the Trustee and from seeing to the application
of the moneys, securities or other property paid or delivered to the
Trustee.
1.4 Securities; Property
--------------------
Wherever used in this Agreement the term "securities" shall include bonds,
mortgages, notes, obligations, warrants and stocks of any class (including
stocks issued by the Company to the extent authorized by the Plan),
certificates of participation or shares of any mutual investment company,
trust or fund, and such other evidences of indebtedness and certificates
of interest as are usually referred to by the term "securities," and the
term "property" shall include real, personal and mixed property, tangible
or intangible, of any kind and wherever located, including without
limitation securities, depository accounts in the banking department of
the Trustee, and interests in any fund which has been or may be created
and administered by the Trustee, or by an Investment Manager, for the
collective investment of the property of employee benefit trusts. The
investment of the assets of the Trust Fund in any such depository account
or collective investment fund is hereby specifically authorized. To the
extent that property of the Trust Fund is so invested in a collective
investment fund, the declaration of trust pertaining to such collective
investment fund and the trust thereby created shall be a part of this
Agreement and of each Plan whose assets are so invested; and for the
purposes of any valuation of the Trust Fund or any valuation of the
interest or of the account of any employee or beneficiary under a Plan,
the interest of the Trust Fund in such collective investment fund shall be
valued at the times and in the manner prescribed by the declaration by
which such collective investment fund was created.
5
1.5 Proxies
-------
Subject to the provisions of Section 1.6, in order to permit the Company
or an Investment Manager, as the case may be, to make timely and informed
decisions regarding the management of those assets in the Trust Fund
subject to its respective control, the Trustee shall forward to the
Company or each such Investment Manager, as the case may be, for
appropriate action any and all proxies, proxy statements, notices,
requests, advice or other communications received by the Trustee (or its
nominee) as the record owner of such assets.
1.6 Company Securities
------------------
Notwithstanding anything herein to the contrary, if a Plan provides that
the Trustee shall exercise voting rights with respect to shares of the
stock of the Company at the direction of the Committee or the members of
the Plan, the Trustee shall utilize its best efforts to deliver, or cause
to be delivered, to the Committee or the members of the Plan, as the case
may be, a copy of all proxies, notices and other information which the
Company generally distributes to the shareholders of the Company. The
Trustee shall establish such procedures for the collection of the
instructions of the Committee or Plan members on the voting of such
Company stock as it shall determine to be appropriate. The Trustee shall
vote specifically in accordance with the Committee's or each member's
instructions, as applicable, to the extent of the number of whole shares
designated to be voted by the Committee or allocated to such member's
account. Any Company stock designated to be voted by the Committee or
allocated to members' account for which no signed voting-direction
instrument is timely received from the Committee or any member and any
other remaining unallocated shares held in the Trust Fund shall be voted
by the Trustee for or against the proposals submitted, in the same
proportion as shares of Company stock held in the Trust Fund for which
voting directions have been timely received; provided, however, that if
the Plan is a tax credit employee stock ownership plan within the meaning
of Section 409 of the Code, the Trustee shall not vote any allocated
shares with respect to which no signed voting-direction instrument has
been timely received.
If a Plan provides that, in the event of a tender offer or exchange offer
by any person (including the Company) for any or all shares of Company
stock held in the Trust Fund, each member under the Plan or the Committee
shall have the right to instruct the Trustee as to the manner in which to
respond with respect to any or all shares of stock allocated to such
member's account or designated to be under the direction of the Committee,
the Trustee shall act with respect to such stock specifically in
accordance with the written instructions submitted by the Plan members or
the Committee, as applicable, to the extent of the number of whole shares
allocated to such member's account or designated to be under the direction
of the Committee. To the extent such materials are not distributed to the
members by the Company, the Trustee shall utilize its best efforts to
distribute or cause to be distributed to each member and/or the Committee
substantially the same information as may be distributed to the
stockholders of the Company in connection with such offer. The Trustee
shall establish such procedures for the collection of members'
instructions with respect to the disposition of such Company stock as it
shall deem appropriate.
6
Any such Company stock with respect to which written instructions have not
been timely received by the Trustee and any other remaining unallocated
shares held in the Trust Fund shall not be voted by the Trustee.
For purposes of this Section 1.6, "shares of Company stock" shall refer to
shares of Advanced Technology Laboratories, Inc. stock, and to shares of
SpaceLabs Medical, Inc. stock.
The Trustee shall not incur any liability on account of actions taken by
the Trustee in accordance with directions received pursuant to this
Section 1.6.
7
ARTICLE 2
2.1 Investment Managers
-------------------
The Company may from time to time appoint one or more Investment Managers,
as that term is defined in the Employee Retirement Income Security Act of
1974, as from time to time amended (hereinafter referred to as the "Act"),
to manage (including the power to acquire and dispose of) any portion of
the Trust Fund and, with respect to such portion, to direct the Trustee
with respect to effecting investment transactions on behalf of the Trust
Fund and exercising such other powers as may be granted to Investment
Managers hereunder. The Company shall give prompt written notice to the
Trustee of any such appointment, upon which the Trustee shall rely until
it receives from the Company written notice of the termination of such
appointment. Any such Investment Manager may direct the Trustee to invest
and reinvest through the medium of any collective investment fund
maintained by the Investment Manager or by the Trustee which is exempt
from tax under the provisions of Section 501(a) of the Code and, during
such period of time as an investment through any such medium shall exist,
the declaration of trust of such fund shall constitute a part of this
Agreement. In each case where such an appointment is made, the Company
shall determine the assets of the Trust Fund (which may include all or any
portion of one or more of the Investment Funds established pursuant to
Section 2.2) to be allocated to the Investment Manager from time to time
and shall issue appropriate instructions to the Trustee with respect
thereto. The Trustee shall not be liable for the acts or omissions of
such Investment Manager, shall be under no duty to question any direction
of an Investment Manager with respect to the portion of the Trust Fund
managed by such Investment Manager, to review any securities or property
held in such portion, to make any suggestions with respect to the
investment and reinvestment of such portion, or to evaluate the
performance of any Investment Manager, and shall be fully protected in
acting in accordance with the directions of an Investment Manager or for
failing to act in the absence of such directions.
2.2 Investment Funds
----------------
A Committee, from time to time and in accordance with the provisions of
the Plan, may direct the Trustee to establish one or more separate
investment accounts (including without limitation insurance company
contracts or accounts, mutual funds, or collective investment funds) under
the Plan (each such separate account hereinafter referred to as an
"Investment Fund"). The Trustee shall transfer to each such Investment
Fund such portion of the assets of the Plan held in the Trust Fund as the
Committee directs in accordance with the specific provisions of the Plan.
The assets which have been allocated to an Investment Fund shall be
invested and reinvested in accordance with the provisions of the Plan and
with such investment guidelines, objectives and restrictions as may be
established by the Committee for that Investment Fund. The Trustee shall
be under no duty to question, and shall not incur any liability on account
of following any direction of the Committee, nor to review the investment
guidelines, objectives and restrictions established, or the specific
investment directions given by the Committee for any Investment Fund, nor
to make
8
suggestions to the Committee in connection therewith. To the extent that
directions from the Committee to the Trustee represent investment
elections of the members under the Plan, the Committee and the Trustee
shall not have any responsibility for such investment elections and shall
incur no liability on account of investing the assets of the Trust Fund in
accordance with such directions.
Unless the Trustee is otherwise directed by the Committee, all interest,
dividends and other income received with respect to, and any proceeds
received from the sale or other disposition of securities or other
property held in an Investment Fund shall be credited to and reinvested in
such Investment Fund, and all expenses of the Trust Fund which are
properly allocable to a particular Investment Fund shall be so allocated
and charged. Subject to the provisions of the Plan, the Committee may
direct the Trustee to eliminate an Investment Fund or Funds, and the
Trustee shall thereupon dispose of the assets of such Investment Fund and
reinvest the proceeds thereof in accordance with the directions of the
Committee.
Pending investment of the Investment Funds in accordance with the
directions of the Committee, the Trustee may invest assets of the Trust
Fund, in whole or in part, at any time or from time to time, in
interest-bearing accounts or certificates of deposit (including depository
accounts in the banking department of the Trustee which bear a reasonable
interest rate), treasury bills, commercial paper, money market funds,
collective investment funds (including any such collective investment fund
maintained by the Trustee), short-term investment funds or other
short-term obligations and the investment return thereon shall be
allocated among the Plan members whose assets have been so invested and
added to their respective investments in the Investment Funds.
If, and to the extent, specifically authorized by the Plan, the Committee
may direct the Trustee to establish an Investment Fund all of the assets
of which shall be invested in shares of the common stock of the Company,
and in the event the Committee directs the establishment of such an
Investment Fund, the Trustee shall invest all amounts allocated to such
Investment Fund in such shares as promptly as is reasonably practicable.
Except as otherwise provided in this Agreement or the Plan, in the event
that any such shares which are allocable to the account of a Plan member
are sold, the proceeds thereof shall be invested by the Trustee as
promptly as is reasonably practicable in the other Investment Funds in
accordance with the directions of the Committee. Notwithstanding the
foregoing, the Trustee shall be under no duty or obligation to invest any
assets of the Trust Fund in shares of common stock of the Company unless
such shares constitute "qualifying employer securities" within the meaning
of Section 407 of the Act and such investment is not prohibited by Section
406 or 407 of the Act.
2.3 Annuity Contracts
-----------------
A Committee may direct the Trustee to receive and hold or apply assets of
the Trust Fund attributable to its Plan to the purchase of individual or
group insurance or annuity contracts or policies issued by any insurance
company and in a form approved by the Committee, including contracts under
which the contract holder is granted
9
options to purchase insurance or annuity benefits. The Trustee shall be
under no duty to question any direction of the Committee or to review the
form of any such policies or contracts or of the selection of the issuer
thereof, or to make suggestions to the Committee with respect to the form
of such policies or contracts or to the issuer thereof. The Committee may
direct the Trustee to exercise or may exercise directly the powers of the
contract holder under any such policies or contracts, and the Trustee
shall exercise such powers only upon the direction of the Committee.
Notwithstanding anything to the contrary contained in the Plan, the
Trustee shall be fully protected in acting in accordance with written
directions of the Committee, and shall be under no liability for any loss
of any kind which may result by reason of any action taken or omitted by
it in accordance with any direction of the Committee, or by reason of
inaction in the absence of written directions from the Committee. In the
event that the Committee directs that any moneys or property be paid or
delivered to the contract holder other than for the benefit of specific
individual beneficiaries, the Trustee agrees to accept such moneys or
property as assets of the Trust Fund subject to all the terms hereof. No
insurance carrier shall for any purpose be deemed a party to this
Agreement or be responsible for the validity or sufficiency hereof.
Notwithstanding the fact that it may have knowledge of the terms of this
Trust Fund, the obligations of such insurance carrier shall be measured
and determined solely by the terms and conditions of the policies or
contracts issued by it, and there shall be no obligations to any person,
partnership, corporation, trust or association other than as stated in
such policies or contracts. In the event that the Company desires to
direct the purchase of individual or group insurance or annuity policies
or contracts for the benefit of some or all of the Plans, the foregoing
powers and responsibilities of a Committee under this Section 2.3 may be
exercised by the Company.
2.4 Securities Lending
------------------
The Company may appoint the Trustee as Securities Lending Fiduciary, if
the Trustee consents to such appointment, to establish, manage and
administer a securities lending program on behalf of the Trust Fund,
pursuant to which the Trustee shall have authority to cause any or all
securities held in the Trust Fund (excluding both stock of the Company and
securities held in any portion of the Trust Fund allocated to an
Investment Manager appointed pursuant to Section 2.1 or to an Investment
Fund established under Section 2.2 which the Company identifies in writing
to the Trustee as not being eligible to participate in said program) to be
lent to such one or more brokers as the Trustee may determine. The
Company shall enter into a written agreement with the Trustee setting
forth the terms and conditions of this appointment, including without
limitation the compensation to be paid to the Trustee for its services
with respect to such securities lending program.
2.5 Insurance Valuations and Reports
--------------------------------
The Company shall arrange for each insurance company issuing contracts
held by the Trustee pursuant to Section 2.3, to furnish the Trustee with
such valuations and reports as are necessary to enable the Trustee to
fulfill its obligations under ARTICLE IV, and the Trustee shall be fully
protected in relying upon such valuations and reports.
10
ARTICLE 3
3.1 Standard of Care
----------------
The Trustee, the members of each Committee, and each Investment Manager
appointed pursuant to Section 2.1 shall discharge their respective duties
with respect to the Trust Fund solely in the interest of the employees of
the Companies which have adopted a Plan and their beneficiaries, and with
the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of like character
and with like aims. The duties of the Trustee shall only be those
specifically undertaken pursuant to this Agreement or by means of a
separate written agreement.
3.2 Trust Fund Assets
-----------------
The Company shall determine whether all or any portion of the assets of a
Plan shall be deposited in the Trust Fund, and the Trustee shall have no
responsibility for any such assets until such time as they are in fact
received by the Trustee for deposit.
3.3 Allocation of Responsibility
----------------------------
Except as otherwise provided in the Act, no "fiduciary" (as such term is
defined in Section 3(21) of the Act, or any successor statutory provision)
under this Agreement shall be liable for an act or omission of another
person in carrying out any fiduciary responsibility where such fiduciary
responsibility is allocated to such other person by this Agreement or
pursuant to a procedure established in this Agreement.
3.4 Indemnification
---------------
The Company hereby agrees to indemnify and hold the Trustee harmless from
and against any loss, costs, damages or expenses, including without
limitation reasonable attorneys' fees, which the Trustee may incur or pay
out by reason of any alleged or actual act, or failure to act, on the part
of the Company, any Company, Committee, Investment Manager, custodian or
trustee other than this Trustee, or any other person.
3.5 ERISA Controls
--------------
Anything in this Agreement to the contrary notwithstanding, no provision
of this Agreement shall be so construed as to violate the requirements of
Part 4 of Title I of the Act.
11
ARTICLE 4
4.1 Records and Accounts
--------------------
The Trustees shall keep accurate and detailed accounts of all investments,
receipts, disbursements and other transactions hereunder, and all
accounts, books and records relating thereto shall be open to inspections
and audit at all reasonable times by any persons designated by the
Company. Within ninety (90) days following the close of each fiscal year
of this Trust Fund, which shall be the twelve-month period ending on
December 31 of each year, and within ninety (90) days after the removal or
resignation of the Trustee as provided in ARTICLE VIII hereof, the Trustee
shall file with the Company a written account setting forth all
investments, receipts, disbursements and other transactions effected by
the Trustee or reported to it by such Investment Managers as may be
appointed hereunder during each fiscal year or during the period from the
close of the last such fiscal year to the date of such removal or
resignation. Within sixty (60) days from the date of filing such annual
or other account, the Trustee, if requested by the Company, shall also
serve copies of such account upon any persons designated by the Company as
having administrative responsibility with respect to any Plan. Upon the
expiration of 150 days from the date of filing such annual or other
account, the Trustee shall be forever released and discharged from all
liability and accountability to anyone with respect to the propriety of
all acts and transactions shown in such account, except with respect to
any such acts or transactions as to which the Company, or any person upon
whom the account has been served pursuant to provisions of this Section
4.1, shall within such 150 day period file with the Trustee written
objections.
The Trustee shall from time to time make such other reports and furnish
such other information concerning the Trust Fund (including valuations of
each Investment Fund established pursuant to Section 2.2) as the Company
may reasonably request or as may be required by a Plan.
4.2 Settlement of Accounts
----------------------
Notwithstanding the foregoing Section 4.1, the Trustee, each Committee,
and each Company, or any of them, shall have the right to apply at any
time to a court of competent jurisdiction for the judicial settlement of
the Trustee's account, and in any case it shall be necessary to join as
parties thereto only the Trustee, any applicable Committee and any
applicable Company; and any judgment or decree which may be entered
therein shall, subject to the provisions of the Act, be conclusive upon
all persons having or claiming to have any interest in the Trust Fund or
under a Plan.
12
ARTICLE 5
5.1 Trustee Expenses
----------------
The expenses incurred by the Trustee in the performance of its duties, or
otherwise in its capacity as Trustee of the Trust Fund (including, without
limitation, fees for legal services rendered to the Trustee in any context
directly or indirectly pertaining to the Trust Fund), such compensation to
the Trustee (in its capacity as Trustee of the Trust Fund, for the
maintenance of participant accounts if it has been so directed pursuant to
Section 2.4) as may be agreed upon in writing from time to time between
the Trustee and the Company, and all other proper charges and
disbursements of the Trustee shall be paid from the Trust Fund unless paid
by the Company in its sole discretion. The Company may direct the Trustee
to pay from the Trust Fund the compensation of any Investment Manager
appointed pursuant to Section 2.1 and the administrative expenses of any
Plan. All taxes of any and all kinds whatsoever that may be levied or
assessed under existing or future laws upon the Trust Fund or the income
thereof shall be paid from the Trust Fund or the income thereof shall be
paid from the Trust Fund. Any amount paid from the Trust Fund (including
taxes) which is specifically allocable to a particular Plan shall be
charged to such Plan; any amount paid from the Trust Fund which is
allocable to all of the Plans shall be charged against the Trust Fund
without allocation.
If Investment Funds have been established pursuant to Section 2.2, all
amounts (including taxes) paid from the Trust Fund which are allocable to
an Investment Fund shall be charged to such Investment Fund. All such
expenses which are not so allocable shall be charged against each of the
Investment Funds in the same proportion as the value of the total assets
held in such Investment Fund bears to the value of the total assets in the
Trust Fund.
In the case of a loan from a Plan to a member under the Plan, all expenses
(including taxes) of the Trust Fund, other than those expenses which are
paid by the Company or a Company, which are allocable to such loan, shall
be charged against the interest of such member under the Plan.
13
ARTICLE 6
6.1 Multiple Companies
------------------
Each Company whose Plan shall be designated by resolution of the Board of
Directors of the Company as eligible to participate in the Trust Fund may
become a party to this Agreement by delivering to the Trustee (i) a
certified copy of such resolution, and (ii) a copy, certified by such
Company's secretary or one of its assistant secretaries under its
corporate seal, of a resolution adopted by its Board of Directors joining
in this Agreement and authorizing the Company to exercise the powers
conferred upon it by this Agreement. Upon receipt by the Trustee of both
of such certified copies and a copy of such Company's plan, such Company
shall be and become a party to this Agreement in all respects as if it had
executed this Agreement at the foot hereof. Each Company shall provide
the Trustee with a copy of a current determination letter from the United
States Internal Revenue Service to the effect that such Plan is qualified
under Section 401(a) of the Code and exempt from federal income tax under
Section 501(a) of the Code.
6.2 Multiple Plans
--------------
The Trustee shall maintain a separate account reflecting the equitable
share in the Trust Fund of each Plan. Such equitable share shall be used
solely for the payment of benefits under and expenses and other charges
properly allocable to each such Plan, and shall not be used for payment of
benefits under and expenses and other charges properly allocable to any
other Plan. The equitable share of each Plan in the Trust Fund shall be
debited or credited (as the case may be) (a) for the entire amount of
every contribution received on behalf of such Plan, every benefit payment
or other expense allocable to such Plan, and every other transaction
relating solely to such Plan, and (b) for its equitable share of every
item of collected or accrued income, gain or loss, and general expenses
and other transactions allocable to the Trust Fund as a whole. The
Trustee shall determine the value of the assets of the Trust Fund as of
such dates as the Trustee may deem appropriate or as a Committee with the
assent of the Trustee may direct. Assets shall be valued at their market
values at the close of business on the date of valuation, or, in the
absence of readily ascertainable market values, at such values as the
Trustee shall determine, in accordance with methods consistently followed
and uniformly applied. In determining market values of assets, the
Trustee may rely on values recommended by the Investment Manager or
Investment Trustee responsible for the investment of such assets.
6.3 Trustee Reliance
----------------
The Company shall certify to the Trustee the names and specimen signatures
of the members of each Committee appointed to administer a Plan. The
Company shall promptly give notice to the Trustee of changes in the
membership of each such Committee, and, until such notices are received by
the Trustee, the Trustee shall be fully protected in assuming that the
membership of such Committee is unchanged and in acting accordingly. Each
Committee may certify to the Trustee the names of
14
persons authorized to act for it in relation to the Trustee and the
Trustee may act upon any certificate, notice or direction purporting to
have been signed on behalf of a Committee which the Trustee believes to be
genuine and to have been executed by the Committee or by any person whose
authority to act for the Committee has been certified to the Trustee by
the Committee. The Trustee may rely upon any certificate, notice or
direction of the Company which the Trustee believes to be genuine and to
have been signed by a duly authorized officer of the Company.
Communications from the Company and from each Committee to the Trustee
shall be sent to the Trustee's office as stated above or to such other
address as the Trustee shall specify, and such communications shall be
binding upon the Trust Fund and the Trustee, when received by the Trustee.
6.4 Directions by Company or Committee
----------------------------------
All orders, requests, instructions and objections of any of the persons
authorized to act on behalf of a Company or any Committee in accordance
with the provisions of Section 6.3, or designated to direct the Trustee
under Section 1.2 to make payment for the purpose of distributing
benefits, shall be in writing (provided that the Trustee may, in its
discretion, accept oral orders, requests, instructions and objections
subject to confirmation in writing), and the Trustee shall be fully
protected in acting in accordance therewith.
6.5 Directions by Investment Manager
--------------------------------
All directions to the Trustee of any Investment Manager appointed pursuant
to Section 2.1 shall be in writing (provided that the Trustee may, in its
discretion, accept oral direction subject to confirmation in writing) and
shall be signed by an officer (or partner) of the Investment Manager or by
a person specifically designated to act for the Investment Manager by an
officer (or partner) thereof.
6.6 Certain Securities Transactions
-------------------------------
Notwithstanding anything herein to the contrary, the Trustee shall be
fully protected in acting in accordance with directions with respect to
securities transactions (including, without limitation, the affirmation
and/or confirmation of such transactions) received by it through a system
or arrangement for the coordination of securities transaction settlements
operated by Depository Trust Company or by any other central securities
depository, securities clearing organization or book entry system which
serves to link investment managers, securities brokers and custodian
banks, pursuant to an agreement entered into by the Trustee, and an
Investment Manager appointed pursuant to Section 2.1 or the Company, as
the case may be, to the same extent as if the directions were in writing.
15
ARTICLE 7
7.1 Amendment and Termination
-------------------------
The Company may, at any time and from time to time, by instrument in
writing executed pursuant to authorization of this Board of Directors, (a)
amend in whole or in part any or all of the provisions of this Agreement,
or (b) terminate this Agreement and the trust created hereby; provided,
however, that no amendment which affects the rights, duties or
responsibilities of the Trustee may be made without the Trustee's consent
and provided further that no such amendment shall divert any part of the
Trust Fund to purposes other than for the exclusive benefit of the
employees of an Company or their beneficiaries except to the extent
permitted by this Agreement or any Plan. Any such amendment shall become
effective upon receipt by the Trustee of the instrument of amendment or,
subject to the consent of the Trustee, as of the date specified therein,
and endorsement thereon by the Trustee of its consent thereto, if such
consent is required. Any such termination shall become effective upon the
receipt by the Trustee of the instrument of termination; thereafter the
Trustee, upon the direction of the Company, shall liquidate the Trust Fund
to the extent required for distribution and, after the final account of
the Trustee has been approved and settled, shall distribute the balance of
the Trust Fund remaining in its hands as directed by the Company or
appropriate Committee, or in the absence of such direction, as may be
directed by a judgment or decree of a court of competent jurisdiction.
Upon termination of the Trust Fund as provided herein, the Trustee shall
not be required to make any payments hereunder in excess of the net
realizable value of the assets of the Trust Fund at the time of such
payment. The Trustee shall not be required to make any payments in cash
unless there shall be in the Trust Fund at the time an amount of cash
sufficient for the purpose. In case of a deficiency in cash, the Trustee
shall take such action as to the disposition of securities or other
property forming a part of the Trust as will provide the amount of cash
necessary for such payments. Following any such termination, the powers of
the Trustee hereunder shall continue as long as any of the Trust Fund
remains in its hands, but only as to those assets which during such time
remain in the Trust Fund.
16
ARTICLE 8
8.1 Removal and Resignation
-----------------------
The Trustee may be removed by the company at any time upon thirty (30)
days' notice in writing to the Trustee. The Trustee may resign at any
time upon thirty (30) days' notice in writing to the Company. The
parties, however, may by written instrument waive such notice. Upon such
removal or resignation of the Trustee, the Company shall appoint a
successor trustee who shall have the same powers and duties as those
conferred upon the Trustee hereunder subject to such changes as the
Company may then determine. If a successor trustee is not appointed
within thirty (30) days after the Trustee gives notice of its resignation,
the Trustee may apply to any court of competent jurisdiction for
appointment of a successor. Upon acceptance of such appointment by the
successor trustee, the Trustee shall assign, transfer and pay over to such
successor trustee the assets then constituting the Trust Fund. The
Trustee is authorized, however, to reserve such sum of money as may be
reasonable for payment of its compensation and expenses (including legal
expenses) in connection with the settlement of its account or otherwise,
and any balance of such reserve remaining after the payment of such
compensation and expenses shall be promptly paid over to the successor
trustee.
17
ARTICLE 9
9.1 Governing Law
-------------
To the extent permitted by applicable law this Agreement shall be
administered, construed and enforced according to the laws of the state of
Washington.
9.2 Successors and Assigns
----------------------
This Agreement shall be binding upon, and the powers granted to the
Company and the Trustee, respectively, shall be exercisable by, the
respective successors and assigns of the Company and the Trustee. Any
corporation which shall, by merger, consolidation, purchase or otherwise,
succeed to substantially all the trust business of the Trustee shall, upon
such succession and without any appointment or other action by the
Company, be and become successor trustee hereunder, upon notification to
the Company.
9.3 Loss of Qualification
---------------------
The Company shall immediately notify the Trustee if any Plan ceases to be
qualified under Section 401(a) of the Code. That part of the Trust Fund
which is attributable to any such Plan shall be immediately segregated and
withdrawn from the Trust Fund. The Company may at any time direct the
Trustee to segregate and withdraw the part of the Trust Fund which is
attributable to any Plan or to any specified group or groups of employees
or beneficiaries as certified to the Trustee by the Company. Whenever
segregation is to be effected pursuant to this Section, the Trustee shall
withdraw from the Trust Fund such assets as the Company shall direct.
Such assets shall be equal in value to the part of the Trust Fund to be
segregated. Such withdrawal from the Trust Fund shall be in cash or in
any property held in the Trust Fund, or in a combination of both, as
directed by the Company, and the Trustee's valuation of the assets of the
Trust Fund for such purpose shall be conclusive and binding on all
persons. The Trustee shall thereafter hold the assets so withdrawn as a
separate trust fund in accordance with the provisions either of this
Agreement or of a separate trust agreement. Such segregation shall not
preclude later readmission to the Trust Fund.
9.4 Segregation of Assets
---------------------
The Company may, if it so determines, at any time and from time to time,
designate any group or groups of the eligible employees or other
beneficiaries covered by a Plan as a separate class and may direct the
Trustee to segregate in a separate fund, to be held for the benefit of
such class, the part of the Trust Fund allocable to such class as
determined by the Company. The Company shall cause the Trustee to effect
such segregation by delivering to the Trustee a certified copy of the
Company's determination, together with a certified copy of a resolution or
resolutions of the Board of Directors of the Company directing such
segregation. The Trustee may rely conclusively and without investigation
upon any such certified copy of such determination and such resolution and
shall segregate such assets as the Company
18
may direct. The Trustee's valuation of such assets for that purpose shall
be conclusive. The Trustee shall hold all of the assets so segregated
under this provision, together with such payments as shall thereafter be
made to the Trust Fund in behalf of such class, and the income therefrom,
as a subpart of the Trust Fund and subject to the terms of this Agreement,
or shall dispose of the same as directed by the Company. In the event
that the Trust or any subpart thereof created by this Agreement shall be
terminated as to such class, the Company shall direct the disposition of
the assets held by the Trustee for such class through transfer to a
successor trust, the purchase of annuities, or other means, as the Company
shall determine, and thereafter such employees and other beneficiaries
shall not have any rights in the Trust Fund, or against the Trustee.
9.5 Exclusive Benefit
-----------------
Except as specifically permitted by this Agreement or any Plan, at no time
shall any part of the Trust Fund which is attributable to such Plan ever
revert to or be used or enjoyed by the Company or any Company or be used
for, or diverted to, any purposes other than for the exclusive purpose of
providing benefits to eligible employees and their beneficiaries and the
payment of the reasonable expenses of the Plan. Notwithstanding any
provision hereof to the contrary, contributions by a Company may be
returned to the Company under the following circumstances, but only if
requested by the Company by written certification to the Trustee that the
return of property to the Company is in compliance with the provisions of
this Agreement and the applicable Plan:
(a) if a contribution is made by a Company by reason of a mistake of fact,
provided that such repayment to the Company is made within one (1) year
after the payment by the Company of such contribution to the Trust, or
(b) if a contribution, or any portion thereof, was made upon the condition
that it be fully deductible for federal tax purposes but in fact it is
not deductible to the Company under Section 404 of the Code (or any
successor provision thereto), provided that the contribution so made,
to the extent so disallowed, is repaid to the Company within one (1)
year after the date of disallowance of the deduction.
Any contribution returned to a Company pursuant to this Section 9.5 shall
be adjusted to reflect its share of the Trust Fund's loss, if any, but not
of the Trust Fund's gain. The Trustee shall be entitled to rely
completely on such written certification and shall be under no obligation
to investigate or otherwise determine its propriety. The Trustee shall
not incur any liability or other loss or damage on account of its reliance
on such certification.
9.6 No Certificates of Ownership
----------------------------
No document shall be issued evidencing any interest in the Trust Fund and
no Plan shall have power to assign all or any part of the Trust Fund
attributable to it.
19
9.7 Assignability
-------------
To the maximum extent permitted by law, beneficial interests in the Trust
Fund of members or former members under a Plan or their beneficiaries
shall not be assignable or subject to alienation, sale, transfer, pledge,
encumbrance, mortgage, attachment, execution, levy or receivership, nor
shall they pass to any trustee in bankruptcy or be reached or applied by
any legal process for the payment of any obligations of any such person;
provided, however, that nothing herein shall prevent a member from
assigning his interest in the Trust Fund as security for the repayment of
any loan made to him from the Trust Fund pursuant to a Plan or prevent the
payment of amounts pursuant to a qualified domestic relations order. Any
attempt at such a prohibited assignment, alienation, sale, transfer,
pledge, encumbrance, mortgage, attachment, execution or levy shall be void
and unenforceable.
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
ADVANCED TECHNOLOGY LABORATORIES, INC.
By: Harvey N. Gillis
---------------------------------
Its: Sr. Vice President, Financial & Admin., CFO
--------------------------------------------
FIRST INTERSTATE BANK OF WASHINGTON, NA
By: Julia A. Northrup
---------------------------------
Its: Vice President
--------------------------------
21
EX-10.28
11
RETIREMENT PLAN
Exhibit 10.28
ADVANCED TECHNOLOGY LABORATORIES, INC.
RETIREMENT PLAN
AMENDED AND RESTATED
EFFECTIVE
JANUARY 1, 1994
Prepared for review by legal counsel.
TABLE OF CONTENTS
Page
----
PREAMBLE..................................................................... 1
SECTION 1 -- DEFINITIONS..................................................... 2
1.1 Accrued Benefit................................................ 2
1.2 Actuarially Equivalent/Actuarially............................. 2
1.3 Affiliated Companies........................................... 2
1.4 Annuity Starting Date.......................................... 2
1.5 Beneficiary.................................................... 3
1.6 Code........................................................... 3
1.7 Committee...................................................... 3
1.8 Compensation................................................... 3
1.9 Credited Service............................................... 3
1.10 Disabled....................................................... 3
1.11 Earnings....................................................... 3
1.12 Effective Date................................................. 5
1.13 Eligible Employee.............................................. 5
1.14 Employee....................................................... 5
1.15 Employer....................................................... 6
1.16 Employment Commencement Date................................... 6
1.17 ERISA.......................................................... 6
1.18 Final Average Monthly Earnings................................. 6
1.19 Foreign Employee............................................... 6
1.20 Hour of Service................................................ 7
1.21 Participant.................................................... 7
1.22 Period of Service.............................................. 7
1.23 Period of Severance............................................ 8
1.24 Plan........................................................... 8
1.25 Plan Administrator............................................. 8
1.26 Plan Year...................................................... 8
1.27 Service........................................................ 8
1.28 Severance From Service Date.................................... 8
1.29 Social Security Retirement Age................................. 9
1.30 Temporarily Terminated......................................... 9
1.31 Terminated..................................................... 9
1.32 Trust or Trust Fund............................................ 9
1.33 Trustee........................................................ 9
1.34 Additional Definitions in Plan................................. 9
SECTION 2 -- PARTICIPATION................................................... 11
2.1 Eligibility for Participation.................................. 11
2.2 Reemployment After a Termination............................... 11
TABLE OF CONTENTS
(continued)
Page
----
2.3 Employees in a Bargaining Unit................................. 12
2.4 Waiver of Participation........................................ 12
SECTION 3 -- RETIREMENT DATES................................................ 13
3.1 Normal Retirement Date......................................... 13
3.2 Early Retirement Date.......................................... 13
3.3 Deferred Retirement Date....................................... 13
3.4 Retirement Date................................................ 13
3.5 Vested Termination Date........................................ 13
SECTION 4 -- RETIREMENT BENEFITS............................................. 14
4.1 Accrued Benefit................................................ 14
4.2 Normal Retirement Benefit...................................... 15
4.3 Early Retirement Benefit....................................... 15
4.4 Deferred Retirement Benefit.................................... 16
4.5 Vested Termination Benefit..................................... 16
4.6 Reemployment After Retirement.................................. 16
4.7 Benefits For Terminated Participants........................... 16
4.8 Benefits Payable From SpaceLabs Medical, Inc. Retirement Plan.. 16
SECTION 5 -- FORMS OF PAYMENT................................................ 17
5.1 Forms of Payment............................................... 17
5.2 Automatic Form of Benefit...................................... 18
5.3 Limitation on Forms of Payment................................. 18
5.4 Explanation of Forms of Payment................................ 19
5.5 Directed Rollovers............................................. 19
SECTION 6 -- DEATH AND DISABILITY BENEFITS................................... 21
6.1 Spouse's Death Benefit......................................... 21
6.2 Disability Benefits............................................ 22
SECTION 7 -- VESTING........................................................ 23
7.1 Vesting........................................................ 23
7.2 Termination Prior to Vesting................................... 23
7.3 Forfeitures.................................................... 23
SECTION 8 -- LIMITATIONS ON BENEFITS......................................... 24
8.1 Limitation on Benefits......................................... 24
TABLE OF CONTENTS
(continued)
Page
----
8.2 Maximum Annual Benefit Payable Under the Plan.................. 25
8.3 Additional Limitation Relating to Defined Contribution Plans... 27
SECTION 9 -- TOP HEAVY PROVISIONS........................................... 28
9.1 Scope.......................................................... 28
9.2 Top Heavy Status............................................... 28
9.3 Minimum Benefit................................................ 30
9.4 Benefit Limitation............................................. 31
9.5 Vesting........................................................ 31
SECTION 10 -- ADMINISTRATION OF THE PLAN..................................... 33
10.1 Plan Administrator............................................. 33
10.2 Organization and Procedures.................................... 33
10.3 Duties and Authority of the Committee.......................... 33
10.4 Expenses....................................................... 34
10.5 Bonding and Insurance.......................................... 35
10.6 Commencement of Benefits....................................... 35
10.7 Appeal Procedure............................................... 36
10.8 Plan Administration - Miscellaneous............................ 37
10.9 Domestic Relations Orders...................................... 38
10.10 Plan Qualification............................................. 40
10.11 Deductible Contribution........................................ 40
10.12 Payment of Benefits Through Purchase of Annuity Contract....... 40
SECTION 11 -- AMENDMENT AND TERMINATION...................................... 41
11.1 Amendment General.............................................. 41
11.2 Amendment - Consolidation or Merger............................ 41
11.3 Termination of the Plan........................................ 41
11.4 Allocation of the Trust Fund on Termination of Plan............ 41
SECTION 12 -- FUNDING........................................................ 43
12.1 Contributions to the Trust..................................... 43
12.2 Trust Fund for Exclusive Benefit of Participants............... 43
12.3 Disposition of Credits and Forfeitures......................... 43
12.4 Trustee........................................................ 43
12.5 Investment Manager............................................. 43
SECTION 13 -- FIDUCIARIES.................................................... 45
13.1 Limitation of Liability of the Employer and Others............. 45
TABLE OF CONTENTS
(continued)
Page
----
13.2 Indemnification of Fiduciaries................................. 45
13.3 Scope of Indemnification....................................... 45
SIGNATURE PAGE............................................................... 46
APPENDIX I................................................................... 47
PREAMBLE
THIS RETIREMENT PLAN (hereinafter referred to as the "Plan," formerly known
as the Westmark International Incorporated Retirement Plan and now known as the
Advanced Technology Laboratories, Inc. Retirement Plan) is amended and restated
effective January 1, 1994, by Advanced Technology Laboratories, Inc., a Delaware
corporation (hereinafter "Employer").
WHEREAS, the purpose of the Plan is to provide retirement benefits to
Employees who become covered under the Plan; and
WHEREAS, the Plan was originally known as the Advanced Technology
Laboratories Floor Retirement Plan, and was adopted effective January 1, 1981 by
Advanced Technology Laboratories, Inc.; and
WHEREAS, the Plan was amended and restated effective January 1, 1987, the
name was changed to the Westmark International Incorporated Floor Retirement
Plan, and Westmark International Incorporated became the plan sponsor, in
connection with the distribution of shares of Westmark International
Incorporated to the shareholders of Squibb Corporation; and
WHEREAS, the Plan was amended and restated effective January 1, 1990 and
the name was changed to the Westmark International Incorporated Retirement Plan;
and
WHEREAS, effective June 26, 1992, the corporate name of Westmark
International Incorporated was changed to Advanced Technology Laboratories,
Inc., and assets and liabilities of the Plan attributable to SpaceLabs, Inc. as
a participating employer in this Plan were spun off to form the SpaceLabs
Medical, Inc. Retirement Plan; and
WHEREAS, effective June 26, 1992 the Plan was amended and restated to
change the name to the Advanced Technology Laboratories, Inc. Retirement Plan
and to effect certain other changes; and
WHEREAS, the Employer 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, the Employee Retirement Income Security Act of 1974, as amended, and
other applicable law;
NOW, THEREFORE, effective January 1, 1994 unless otherwise specified
herein, the Employer does hereby amend and restate the June 26, 1992 Plan as set
forth in the following pages.
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 Accrued Benefit
---------------
"Accrued Benefit" means, on any date, the benefit determined under the
formula specified in Section 4.1 as of such date.
1.2 Actuarially Equivalent/Actuarially
----------------------------------
"Actuarially Equivalent" and similar terms (for purposes other than
determining contributions to the Trust Fund) means that the present value
of two payments or series of payments shall be of equal value when computed
at an 8% rate of interest and on the basis of the 1984 Unisex Pension
Mortality Table; provided, however, that the interest rate for calculating
lump sum benefits shall be the Pension Benefit Guaranty Corporation (PBGC)
interest rate for immediate or deferred annuities from a single employer
plan in effect on the first day of the Plan Year which contains the
proposed distribution date.
1.3 Affiliated Companies
--------------------
"Affiliated Companies" means:
(a) the Employer,
(b) any other corporation which is a member of a controlled group of
corporations which includes the Employer (as defined in Section 414(b)
of the Code),
(c) any other trade or business under common control with the Employer (as
defined in Section 414(c) of the Code), or
(d) any other member of an affiliated service group which includes the
Employer (as defined in Section 414(m) of the Code).
For purposes of the limitation on benefits in Sections 8.2 and 8.3, the
determination of whether an entity is an Affiliated Company will be made by
modifying Sections 414(b) and (c) of the Code as specified in Section
415(h) of the Code.
1.4 Annuity Starting Date
---------------------
"Annuity Starting Date" means the first day of the first period for which a
Plan benefit is payable as an annuity, or any other form.
2
1.5 Beneficiary
-----------
"Beneficiary" means the person or persons designated to be the Beneficiary
by the Participant in writing to the Benefits 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.
1.6 Code
----
"Code" means the Internal Revenue Code of 1986, as amended and including
all regulations promulgated pursuant thereto.
1.7 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 Employer to
administer the Plan.
1.8 Compensation
------------
"Compensation" for any tax year has the meaning set forth in Section
415(c)(3) of the Code.
1.9 Credited Service
----------------
"Credited Service" means all completed years and fractions of years of
Service for the Employer during a Period of Service, excluding Periods of
Service forfeited due to a Period of Severance.
Notwithstanding the foregoing, Service while a Foreign Employee which is
completed before January 1, 1987 shall be disregarded for purposes of
determining a Participant's Credited Service.
1.10 Disabled
--------
"Disabled" means a Participant is entitled to benefits under an Employer-
sponsored long term disability plan, or a long term disability plan to
which the Employer contributes on behalf of the Participant.
1.11 Earnings
--------
"Earnings" for each Plan Year means:
(a) for all Participants who are not Foreign Employees, for Credited
Service prior to January 1, 1989: the straight-time pay earned by an
Employee from the Employer prior to reduction for any contributions
determined on a salary
3
reduction basis under a flexible benefit plan established pursuant to
Section 125 of the Code or under the Westmark International
Incorporated Incentive Savings and Stock Ownership Plan, including
shift differentials, special geographical location allowances, holiday
pay, sick leave pay (exempt and non-exempt), short-term disability
(exempt and non-exempt), retroactive pay as it applies to any of the
above, and pay for vacation hours taken. Earnings will not include
non-refundable draw, bonuses, commissions, employee referral bonuses,
stock option payments, special bonuses, lump-sum payments or cash
payoffs for unused vacation, severance pay, hiring bonus, long-term
disability payments (exempt and non-exempt), finder's fees, any
relocation payments in the form of reimbursement or relocation bonus
and overtime.
(b) for all Participants who are not Foreign Employees, for Credited
Service after December 31, 1988: the straight-time pay earned by an
Employee from the Employer prior to reduction for any contributions
determined on a salary reduction basis under a flexible benefit plan
established pursuant to Section 125 of the Code or under the Westmark
International Incorporated Incentive Savings and Stock Ownership Plan
or Advanced Technology Laboratories, Inc. Incentive Savings and Stock
Ownership Plan, including:
(i) special geographical location allowances, holiday pay, sick leave
pay (exempt and non-exempt), short-term disability (exempt and
non-exempt), retroactive pay as it applies to any of the above,
and pay for vacation hours taken;
(ii) overtime pay, shift differentials, and bonuses (including MICP
and bullet bonuses), not in excess of 50% of annualized straight-
time pay prior to reduction as described above;
(iii)for Credited Service after December 31, 1988 and before January
1, 1993: salesman commissions and service commissions/incentives
to the extent such amounts when added to the amount determined
under (ii) above do not exceed 125% of annualized straight-time
pay prior to reduction as described above; and
(iv) for Credited Service after December 31, 1992, salesman
commissions and service commissions/incentives.
Earnings will not include non-refundable draw, employee referral
bonuses, Performance Unit Plan awards, car allowances, stock option
payments, restricted stock awards, lump-sum payments or cash payoffs
for unused vacation, severance pay, retention bonus, hiring bonus,
long-term disability payments (exempt and non-exempt), and any
relocation payments in the form of reimbursement or relocation bonus.
(c) For all Foreign Employees, the annual notional salary and the actual
bonus, if any, stated in U.S. dollars established in a uniform and
nondiscriminatory manner
4
for each Foreign Employee, on or after January 1, 1987. Notional
salary shall not include any special relocation or foreign assignment
allowances.
Notional salary shall include an equitable adjustment to reflect any
retirement benefit which is expected to be earned under a foreign
retirement plan to the extent attributable to contributions by an
Employer or any foreign subsidiary of an Employer.
Notional salary for each Foreign Employee shall be approved by the
President of the applicable business unit.
Notwithstanding the foregoing, annual Earnings in excess of the limit
indicated below shall be disregarded; provided, however, that the $150,000
limit for 1994 shall be automatically adjusted for future years to the
maximum permissible dollar limitation permitted by the Commissioner of the
Internal Revenue Service.
Plan Year Dollar Limitation
--------- -----------------
1989 - 1993 $235,840
1994 and later $150,000 (indexed)
In determining Earnings of a Participant for purposes of this limitation,
the family aggregation 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 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 1.11
prior to the applications of this limitation.
1.12 Effective Date
--------------
"Effective Date" means January 1, 1981, or with respect to any Employer
specified in appendices to this Plan, the date such Employer adopted the
Plan.
1.13 Eligible Employee
-----------------
"Eligible Employee" means any Employee who is on the active, regular
payroll of the Employer, provided, however, the term "Eligible Employee"
does not include any temporary, cooperative or leased employee.
1.14 Employee
--------
"Employee" means any person (including any officer or director) who is
employed by, and as such is enrolled on the active payroll of the Employer
and is performing services in the United States, and any person who is a
Foreign Employee.
5
"Employee" shall include any leased employee within the meaning of Code
Section 414(n)(2); provided, however, if leased employees constitute twenty
percent or less of the Employer'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).
1.15 Employer
--------
"Employer" means Advanced Technology Laboratories, Inc., a Delaware
corporation. For purposes other than sections 10, 11 and 12, the term
"Employer" shall also include other Affiliated Companies that adopt the
Plan with the approval of the Board of Directors of Advanced Technology
Laboratories, Inc. (Delaware), as provided from time to time in Appendix I
to this Plan.
1.16 Employment Commencement Date
----------------------------
"Employment Commencement Date" means the later of the Effective Date and
the date on which an Employee first completes an Hour of Service for the
Employer or an Affiliated Company during the current period of employment.
"Hour of Service" for purposes of this definition means each hour for which
an Employee is paid or entitled to payment for the performance of duties
for the Employer or any Affiliated Companies.
1.17 ERISA
-----
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including all regulations thereunder.
1.18 Final Average Monthly Earnings
------------------------------
"Final Average Earnings" means one twelfth of the highest average Earnings
received by the Participant during any 60 consecutive month period. In the
event the Participant has less than 60 consecutive months of employment,
-----------
the computation period shall be based upon (1) the most recent 60 months of
employment (whether or not consecutive), or (2) the total Period of Service
with the Employer, whichever is less. Earnings for partial years are pro-
rated.
1.19 Foreign Employee
----------------
"Foreign Employee" means any person (including an officer or director) who
is employed by, and as such is on the active payroll of the Employer or a
foreign subsidiary or branch of an Employer, who relocates to a country
outside the United States and outside such individual's country of
citizenship to complete a temporary assignment for an Employer or a foreign
subsidiary or branch of an Employer which is expected to be completed
within five years from the initial date of the assignment.
6
1.20 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).
1.21 Participant
-----------
"Participant" means any Eligible Employee who qualifies for participation
pursuant to Section 2.1 or 2.2. A nonvested Participant shall cease to be
a Participant on the date he or she incurs a one-year Period of Severance.
A vested Participant shall cease to be a Participant when his or her
benefit payments from the Plan are completed.
1.22 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. For vesting and participation purposes, an Employee's Period
of Service shall also include the following:
(a) Periods not in Service due to Temporary Terminations; and
(b) Periods of Service with an Affiliated Company.
Notwithstanding the above, for an individual with respect to whom assets
and liabilities are transferred to the SpaceLabs Medical, Inc. Retirement
Plan between June 26 and December 31, 1992, the individual's Period of
Service for all purposes under the Plan shall begin on the individual's
first Employment Commencement Date following the date of such transfer.
7
1.23 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 Employer; 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.
1.24 Plan
----
"Plan" means the Advanced Technology Laboratories, Inc. Retirement Plan
either in its previous or present form or as amended from time to time.
1.25 Plan Administrator
------------------
"Plan Administrator" means the person or entity designated in Section 10 to
administer the Plan.
1.26 Plan Year
---------
"Plan Year" means the twelve month period commencing each January 1 and
ending each December 31.
1.27 Service
-------
"Service" means periods for which an Employee is paid or entitled to
payment for the performance of duties for the Employer or an Affiliated
Company.
For purposes of Section 2 (Participation) and Section 7 (Vesting) only,
Service for an Employee who transfers employment from an employing company
under the Squibb Corporation Pension Plan to the Employer on or before
August 31, 1987, without intervening employment with another employer,
shall also include any prior period of employment with an employing company
under the Squibb Corporation Pension Plan to the extent such employment was
credited as "service" for vesting purposes under the Squibb Corporation
Pension Plan.
1.28 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 Employer shall incur a Severance from
Service Date if the individual's employer ceases to be an Affiliated
Company of the Employer.
8
1.29 Social Security Retirement Age
------------------------------
"Social Security Retirement Age" means the following ages depending on the
Participant's year of birth: age 65 for Participants born prior to 1938,
age 66 for Participants born after 1937 but prior to 1959, and age 67 for
Participants born after 1959.
1.30 Temporarily Terminated
----------------------
Termination is deemed "Temporary" if the Employee is rehired and in Service
within one year of the initial date of absence from work.
1.31 Terminated
----------
"Terminated" means no longer in Service or employed as an Employee with the
Employer for reasons of quit, retirement, discharge or death. An Employee
shall also be deemed Terminated on the first anniversary of the initial
date of absence for any other reason, provided such absence lasts at least
twelve months.
1.32 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.
1.33 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.
1.34 Additional Definitions in Plan
------------------------------
The following terms are defined in the following sections of the Plan:
Section
--------
Aggregate Account 9.2
Aggregation Group 9.2
Deferred Retirement Benefit 4.5
Deferred Retirement Date 3.3
Determination Date 9.2
Early Retirement Benefit 4.4
Early Retirement Date 3.2
Investment Manager 12.5
Joint and Survivor Annuity 5.1(b)
Key Employee 9.2
Lump Sum 5.1(d)
Normal Retirement Benefit 4.3
9
Normal Retirement Date 3.1
Present Value of Accrued Benefits 9.2
Qualified Domestic Relations Order 10.9
Retirement Date 3.4
Statutory 50% Joint and Survivor Annuity Option 5.2(a)
Super Top Heavy 9.2
Top Heavy 9.2
Valuation Date (for Top Heavy) 9.2
Vested Termination Date 3.5
Vested Termination Benefit 4.6
Whole Life Annuity 5.1(a)
10
SECTION 2
PARTICIPATION
2.1 Eligibility for Participation
-----------------------------
(a) Full-Time Employees
-------------------
Each Eligible Employee (other than a Part-time Employee as described
below) who is not already a Participant shall become a Participant
under this Plan on the later of the first of the month coinciding with
or next following completion of a one-year Period of Service and the
date his or her employer becomes an Employer for Plan purposes.
(b) Part-Time Employees
-------------------
An Eligible Employee who is a Part-Time Employee shall become a
Participant on the first day of any subsequent month following a
twelve-month period during which he or she is credited with at least
1,000 Hours of Service. Such twelve-month period shall commence on
the Employee's Employment Commencement Date and each January 1
thereafter.
Part-Time Employee means an Employee who is employed for less than a
full-time basis based on uniform rules established by the Committee
and consistently applied to all persons similarly situated.
(c) Foreign Employees
-----------------
Notwithstanding the foregoing, a Foreign Employee must complete an
enrollment form prior to the date participation commences.
2.2 Reemployment After a 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. If the Employee's Period of Severance equals or exceeds five
years, the Period of Service preceding the Period of Severance shall be
disregarded. If the Employee's Period of Severance is less than five
years, the Period of Service before the Period of Severance shall be
aggregated with the subsequent Period of Service.
11
2.3 Employees in a Bargaining Unit
------------------------------
An Employee belonging to a collective bargaining unit, which has entered an
agreement with the Employer which does not provide for retirement benefits
under this Plan, shall not qualify for participation and the period of
employment shall not be included in determining his or her Credited
Service. If such an Employee is a Participant when such an agreement is
entered, the Employee shall cease to accrue Credited Service on the
effective date of the bargaining agreement. If such an agreement provides
for Plan participation, a covered Employee may continue or resume
participation and accrual of Credited Service.
2.4 Waiver of Participation
-----------------------
A Foreign Employee may elect in writing to waive his or her right to be a
Participant in this Plan by submitting a form to the Committee. A waiver
of participation shall be effective on the first day of the Plan Year
preceding the date of election. A Foreign Employee may prospectively
rescind a waiver in writing to the Committee at any time, effective on the
date of rescission. During such period of non-participation, the Foreign
Employee shall accrue no Periods of Service or Credited Service, nor shall
he or she have any other rights inherent with participation in the Plan.
12
SECTION 3
RETIREMENT DATES
3.1 Normal Retirement Date
----------------------
The Normal Retirement Date for a Participant shall be the first day of the
month coinciding with or next following the attainment of age 65.
3.2 Early Retirement Date
---------------------
Each Participant who attains age 55 and completes a five year Period of
Service may elect, in writing, an Early Retirement Date. Such Early
Retirement Date shall be before the Normal Retirement Date and after
Termination on the first day of any month coinciding with or following the
date the early retirement requirements are met.
3.3 Deferred Retirement Date
------------------------
The Deferred Retirement Date for a Participant who continues working after
the Normal Retirement Date shall be the first day of the month coinciding
with or next following his or her Termination date; provided, however, the
Deferred Retirement Date shall not be later than April 1 following the
calendar year in which the Participant attains age 70-1/2.
3.4 Retirement Date
---------------
The Retirement Date for a Participant shall be one of the dates specified
in Sections 3.1, 3.2 or 3.3 above, on which benefits are to commence. The
Retirement Date for a Participant who Terminates prior to retirement with a
vested Accrued Benefit shall be Normal Retirement Date, unless such
Participant qualifies for and elects to receive benefits at an Early
Retirement Date.
3.5 Vested Termination Date
-----------------------
A vested Participant, whose Accrued Benefit has an Actuarially Equivalent
present value not in excess of $10,000, who Terminates employment with the
Employer and any Affiliated Companies prior to Early Retirement Date may
elect in writing to receive the Vested Termination Benefit either as a lump
sum or an annuity on a Vested Termination Date, which is the first day of
any month following the date of Termination and prior to his or her
earliest Retirement Date. In the event a married Participant elects to
receive benefits on a Vested Termination Date and his or her Vested
Termination Benefit exceeds $3,500, such election shall be void unless the
election is signed by the Participant's spouse, acknowledges the effect of
the election, and the spouse's signature is notarized or witnessed by a
Plan representative.
13
SECTION 4
RETIREMENT BENEFITS
4.1 Accrued Benefit
---------------
The Accrued Benefit for any Participant shall be the excess, if any, of the
monthly benefit (as described in (a) below) over the frozen monthly amount
determined by reference to the former Westmark Discretionary Contribution
Retirement Plan offset (as described in (b) below), and then adjusted for
any prior distribution (Section 4.6) and/or form of payment (Section 5.1).
(a) Monthly Benefit
---------------
The monthly benefit payable to a Participant at the Normal Retirement
Date shall equalthe greater of (i) or (ii) below:
(i) 1.0% of Final Average Monthly Earnings as of December 31, 1993,
multiplied by Credited Service as of December 31, 1993, plus 1.0%
of Final Average Monthly Earnings taking into account all periods
multiplied by Credited Service earned after December 31, 1993, or
(ii) 1.0% of Final Average Monthly Earnings, multiplied by the
Participant's Credited Service.
(b) Frozen Discretionary Contribution Plan Offset
---------------------------------------------
The monthly frozen discretionary contribution plan offset shall equal
the amount determined under subparagraph (i) less the amount
determined under subparagraph (ii) below, accumulated with 8% interest
compounded annually to the later of January 1, 1989 and the Normal
Retirement Date and then divided by 100:
(i) The Participant's account balance in the Westmark International
Incorporated Discretionary Contribution Plan on December 31,
1988.
(ii) The greater of (A) or (B) below:
(A) the amount determined under subparagraph (1) less the amount
determined under subparagraph (2) below, accumulated with 8%
interest compounded annually from December 31, 1982 through
December 31, 1988.
(1) the Participant's account balance in the Westmark
International Incorporated Discretionary Contribution
Plan as of December 31, 1982.
14
(2) the maximum amount of the Participant's account
balance in the Westmark International Incorporated
Discretionary Contribution Plan (exceeding any
rollover or transfer amount), as of December 31, 1982,
which, when accumulated with 8% interest compounded
annually to the later of January 1, 1989 and the
Normal Retirement Date and then divided by 100, does
not exceed the Participant's floor benefit under the
Predecessor Plan as of December 31, 1982.
(B) The amount determined under subparagraph (1) less the amount
determined under subparagraph (2) below:
(1) the Participant's account balance in the Westmark
International Incorporated Discretionary Contribution
Plan as of December 31, 1988.
(2) the maximum amount of the Participant's account balance
in the Westmark International Incorporated
Discretionary Contribution Plan (excluding any rollover
or transfer amount), as of December 31, 1988, which,
when accumulated with 8% interest compounded annually
to the later of January 1, 1989 and the Normal
Retirement Date and then divided by 100, does not
exceed the Participant's monthly benefit under this
Plan as of December 31, 1988.
Notwithstanding the foregoing, a Participant's Accrued Benefit shall not be
less than his or her Accrued Benefit on the date immediately preceding the
date on which any Plan term that affects the Accrued Benefit is amended.
The Accrued Benefit is payable in the form of a Whole Life Annuity
commencing at Normal Retirement Date.
4.2 Normal Retirement Benefit
-------------------------
A Participant's monthly Normal Retirement Benefit shall equal his or her
vested Accrued Benefit as of the date of Termination, and then adjusted for
form of payment.
4.3 Early Retirement Benefit
------------------------
A Participant's monthly Early Retirement Benefit shall equal his or her
vested Accrued Benefit as of the date of Termination, reduced by 1/2 of 1%
for each month that the Early Retirement Date precedes the Normal
Retirement Date, and then adjusted for form of payment.
15
4.4 Deferred Retirement Benefit
---------------------------
A Participant's monthly Deferred Retirement Benefit shall equal his or her
vested Accrued Benefit as of the date of Termination, and then adjusted for
form of payment. Service and Earnings beyond the Normal Retirement Date
shall be taken into consideration. In no event shall the benefit provided
under this paragraph be less than the retirement benefit to which the
Participant would have been entitled if he or she had actually retired on
the Normal Retirement Date, Actuarially increased to reflect the deferred
commencement of payments.
In the event a Participant continues working after the date benefits are
required to commence following age 70-1/2 pursuant to Section 10.6, the
Deferred Retirement Benefit shall be recalculated and adjusted annually.
4.5 Vested Termination Benefit
--------------------------
A Participant's Vested Termination Benefit shall equal his or her Accrued
Benefit as of the date of Termination, Actuarially reduced to reflect the
early commencement of payment of benefits, and then adjusted for form of
payment.
4.6 Reemployment After Retirement
-----------------------------
Upon reemployment, a retired Participant shall cease receiving retirement
benefits under the Plan, until the earlier of subsequent Termination or the
date benefits are required to commence following age 70-1/2 pursuant to
Section 10.6. At the Participant's subsequent retirement, benefits payable
shall be based on his or her total Credited Service and Earnings at the
time of subsequent retirement, and shall be reduced by the Actuarially
Equivalent value of benefits previously received by the Participant. In no
event shall the benefit upon subsequent retirement, after any reduction for
previously received benefits, be less than the initial retirement benefit.
4.7 Benefits For Terminated Participants
------------------------------------
Benefits under the Plan shall be determined and paid in accordance with the
provisions of the Plan as in effect on the most recent date of a
Termination of employment.
4.8 Benefits Payable From SpaceLabs Medical, Inc. Retirement Plan
-------------------------------------------------------------
Notwithstanding anything herein to the contrary, if an individual was a
Participant in this Plan and assets and liabilities attributable to the
individual's Accrued Benefit under this Plan were transferred from this
Plan to the SpaceLabs Medical, Inc. Retirement Plan between June 26 and
December 31, 1992, the Accrued Benefit of such individual with respect to
Credited Service earned prior to such transfer shall be payable from the
SpaceLabs Medical, Inc. Retirement Plan and shall not be payable from this
Plan.
16
SECTION 5
FORMS OF PAYMENT
5.1 Forms of Payment
----------------
The following forms of benefit payments are available under this Plan:
(a) Whole Life Annuity:
------------------
A Whole Life Annuity shall be payable monthly from the Retirement Date
to the first of the month preceding death. The amount of the monthly
benefit shall equal the monthly Normal, Early or Deferred Retirement
Benefit, whichever applies.
(b) Joint and Survivor Annuity:
--------------------------
A reduced Joint and Survivor Annuity shall be payable monthly to a
retired Participant from the Retirement Date or Vested Termination
Date to the first of the month preceding death. Following the
Participant's death, a retirement benefit equal to 50% or 100% of the
reduced amount payable to the retired Participant shall be payable for
life to the joint annuitant, if living at the time of the
Participant's death. A Participant may elect, before benefits
commence, which percentage shall be payable to the joint annuitant.
If the joint annuitant dies after the Participant's retirement income
begins, the Participant's payments will be in the same reduced amount
as is otherwise payable under the Joint and Survivor Annuity. If the
joint annuitant dies prior to the date as of which the Participant's
retirement income begins, any election of a form of benefit under this
Section 5.1(b) shall be automatically canceled. If the Participant
dies prior to the date as of which his or her retirement income is to
begin, the joint annuitant shall not be entitled to receive any
payments under this Section 5.1(b). However, a spouse joint annuitant
may be entitled to a benefit under Section 6.1.
The Joint and Survivor Annuity shall be Actuarially Equivalent to the
Participant's retirement benefit payable in the form of a Whole Life
Annuity.
(c) Lump Sum:
--------
A Lump Sum distribution shall be a single sum payment. The Lump Sum
distribution shall be Actuarially Equivalent to the Participant's
retirement benefit payable in the form of a Whole Life Annuity, and
shall represent the Participant's entire interest in the Plan. Lump
sum distributions may not exceed $10,000.
17
5.2 Automatic Form of Benefit
-------------------------
Unless a Participant elects otherwise, benefits shall be paid as provided
below:
(a) Married Participants
--------------------
Any Participant who is married on his or her Annuity Starting Date or
Vested Termination Date shall automatically be deemed to have elected
the 50% Joint and Survivor Annuity option, effective as of such date,
with his or her spouse on the Annuity Starting Date as the joint
annuitant (the "Statutory 50% Joint and Survivor Annuity Option").
A married Participant may reject the Statutory 50% Joint and Survivor
Annuity Option, or elect a nonspouse joint annuitant pursuant to
Section 5.3, by filing a written notice with the Committee within
ninety days prior to his or her Annuity Starting Date. Such notice
must specify the form of payment elected, name the non-spouse joint
annuitant if any, acknowledge the effect of the election, and must be
signed by the Participant's spouse. The spouse's signature must be
notarized or witnessed by a Plan representative.
A married Participant may file a rejection or joint annuitant election
notice or revoke any such notice at any time during the ninety-day
election period immediately preceding the Annuity Starting Date.
(b) Other Participants
------------------
An unmarried Participant shall receive his or her retirement benefits
in the form of a Whole Life Annuity.
An unmarried Participant may reject the Whole Life Annuity option and
elect either a Joint and Survivor Annuity or a Lump Sum option by
filing a written notice with the Committee within ninety days prior to
his or her Annuity Starting Date. An unmarried Participant may file
or revoke such a notice at any time during the ninety-day period
immediately preceding the Annuity Starting Date.
5.3 Limitation on Forms of Payment
------------------------------
A Participant may elect a joint annuitant other than his or her spouse. A
Participant must elect a form of payment under which payments will be
completed within the Participant's and Beneficiary's life times or within
their life expectancies. If a Participant elects a joint annuitant other
than his or her spouse, the percentage selected by the Participant to be
payable to the joint annuitant cannot exceed the percentage in the table
set forth in Q&A A-6 of Section 1.401(a)(9)-2 of the proposed Income Tax
Regulations, determined according to the age difference between the
Participant and the joint annuitant.
18
5.4 Explanation of Forms of Payment
-------------------------------
The Committee shall furnish each Participant with a written explanation of
the terms and conditions of the forms of payment within a reasonable period
(at least thirty but not more than ninety days) prior to the Participant's
Annuity Starting Date.
5.5 Directed Rollovers
------------------
(a) General Rule
------------
A Participant or spouse Beneficiary who is entitled to a lump sum
benefit pursuant to Section 10.8(c), or who elects a Lump Sum
distribution pursuant to Section 5.1(c) 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 Participant or Beneficiary may only direct such a rollover if
the expected benefit payment during the Plan Year is $200 or
more.
(ii) A Participant or Beneficiary may not request a directed rollover
of an amount distributed due to the minimum required distribution
provision under Section 10.6(b).
(iii)The rollover of a distribution may only be directed to one
qualified plan or IRA.
(iv) A Participant or Beneficiary 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 surviving spouse Beneficiary or a former spouse who is an
alternate payee pursuant to Section 10.9 may direct a rollover
under the same terms and conditions as a Participant, except that
such spouse or former spouse may only direct a rollover to an
IRA.
(vi) A non-spouse Beneficiary may not direct a rollover pursuant to
this section.
(vii)A Participant or Beneficiary provides the information or
documentation reasonably requested by the Committee.
(b) Notice to Participants
----------------------
The Committee shall furnish each Participant and Beneficiary eligible
for a directed rollover under this Section 5.5 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
19
ninety (90) days) prior to the Participant's or Beneficiary's Annuity
Starting Date; provided, however, that a Participant or Beneficiary
may waive in writing the thirty (30) day period with respect to a
distribution of small benefits equal to $3,500 or less.
20
SECTION 6
DEATH AND DISABILITY BENEFITS
6.1 Spouse's Death Benefit
----------------------
In the event a vested Participant dies before commencing to receive
retirement benefits or Vested Termination Benefits under the Plan, his or
her spouse shall receive a pre-retirement death benefit provided they were
married throughout the one year period ending on the date of death. The
amount of the spouse's benefit and time of commencement is described below.
The spouse of a nonvested Participant, or a Participant who has started to
receive benefits, or a spouse who was married to the Participant less than
one year, is not entitled to this death benefit.
(a) Death Following Early Retirement Date
-------------------------------------
If the Participant dies after he or she becomes eligible to elect an
Early Retirement Date, the spouse's benefit shall be paid monthly from
the first of the month coinciding with or following the Participant's
death through the first of the month preceding the spouse's death.
The benefit shall equal the amount payable to the surviving spouse
under a 50% Joint and Survivor Annuity form of payment if the
Participant had commenced receiving retirement benefit payments as of
the date spouse benefits commence, based upon the Participant's vested
Accrued Benefit at the date of death.
(b) Death Prior to Early Retirement Date
------------------------------------
If the Participant dies prior to becoming eligible to elect an Early
Retirement Date, the spouse's benefit shall be paid monthly from the
Participant's earliest Retirement Date (determined as if he or she had
survived) through the first of the month preceding the spouse's death.
The benefit shall equal the amount payable to the surviving spouse
under a 50% Joint and Survivor Annuity form of payment if the
Participant had Terminated on the date of death, survived to the date
spouse benefits commence and commenced receiving retirement benefit
payments on such date.
Notwithstanding the foregoing, in the event a Participant dies prior to
Normal Retirement Date, a spouse entitled to benefits under (a) or (b)
above, may elect prior to the date benefits commence thereunder, to
postpone commencement of benefits to the first day of any month on or
before the Participant's Normal Retirement Date determined as if he or she
had survived. The benefit payable at such delayed commencement date shall
be the Actuarial Equivalent of the spouse's death benefit payable at the
terms specified under (a) or (b) above.
21
6.2 Disability Benefits
-------------------
A Participant who becomes Disabled shall be deemed to be in Service for
purposes of vesting and benefit accrual until the earlier of (i) the date
of recovery from Disability, (ii) an Early Retirement Date elected by the
Participant, or (iii) Normal Retirement Date. For purposes of determining
a Participant's Accrued Benefit, average Earnings for the twelve months
preceding the date of Termination are deemed to be in effect during
Disability.
22
SECTION 7
VESTING
7.1 Vesting
-------
Each Participant shall have a vested, nonforfeitable right to his or her
Accrued Benefit multiplied by the appropriate vesting percentage in
accordance with the following table:
Periods of Service Percent Vested
------------------ --------------
Less than 5 years 0%
5 years or more 100%
In addition, each Participant shall have a 100% nonforfeitable right to his
or her Accrued Benefit on the first day of the month preceding his or her
Normal Retirement Date, provided he or she is an Employee on such date. An
Employee who Terminates with 0% vested shall be deemed "nonvested."
7.2 Termination Prior to Vesting
----------------------------
(a) Forfeiture of Service
---------------------
In the event a nonvested Participant incurs a Period of Severance, and
the number of years in such Period of Severance equals or exceeds five
consecutive years, his or her Period of Service and Credited Service
preceding the Severance from Service Date shall be disregarded, and
any Accrued Benefit earned prior to the Severance from Service Date
shall be forfeited. If a vested Participant incurs a Period of
Severance, all Periods of Service and Credited Service before and
after the Period of Severance shall be aggregated.
(b) Deemed Cash-Out of Accrued Benefit
----------------------------------
If an Employee Terminates at a time when the present value of the
Employee's vested Accrued Benefit is zero, the Employee shall be
deemed to have received a distribution of such vested Accrued Benefit,
and shall no longer be a Participant. If the individual resumes
employment with the Employer before incurring a five-consecutive-year
Period of Severance, the Accrued Benefit will be restored to the
amount of such Accrued Benefit on the date of the deemed distribution.
7.3 Forfeitures
-----------
Any forfeitures arising under this Plan shall be used only to offset future
Employer contributions and shall not affect any Participant's Accrued
Benefit.
23
SECTION 8
LIMITATIONS ON BENEFITS
8.1 Limitation on Benefits
----------------------
(a) General Rule
------------
In the event the Plan terminates, the benefit of any highly
compensated employee (and any highly compensated former employee)
shall be limited to a benefit that is nondiscriminatory under Code
Section 401(a)(4).
(b) Limit on Annual Payments
------------------------
Annual payments to an Employee in the "Restricted Group" (as defined
below) are restricted to an amount equal to the payments that would be
made on behalf of the Employee under a single life annuity that is
Actuarially Equivalent to the sum of the Employee's Accrued Benefit
and the Employee's other benefits under the Plan (other than a Social
Security supplement), plus the amount of the payments that the
Employee is entitled to receive under a Social Security supplement.
This restriction will not apply if:
(1) After payment to an Employee in the Restricted Group of all
"Benefits" (as defined below), the value of Plan assets equals or
exceeds 110% of the value of current liabilities, as defined in
Code Section 412(l)(7),
(2) The value of the Benefits for an Employee in the Restricted Group
is less than 1% (one percent) of the value of current
liabilities, or
(3) The value of the Benefits for an Employee in the Restricted Group
does not exceed the amount described in Code Section
411(a)(11)(A).
(c) Definitions
-----------
(1) the Restricted Group consists of the twenty-five highest-paid
current and former Highly Compensated Employees (as defined in
Code Section 414(q)), or all current and former Highly
Compensated Employees if less than twenty-five.
(2) Benefit means loans in excess of the amounts set forth in Code
Section 72(p)(2)(A), any periodic income, any withdrawal values
payable to a living employee, and any death benefits not provided
for by insurance on the Employee's life.
24
(d) Regulatory Authority
--------------------
This Section 81 is intended to comply with Treasury regulation
(S)1.401(a)(4)-5(b), and shall be superseded to the extent any
provision of such regulation in final form conflicts with the
limitations stated herein.
8.2 Maximum Annual Benefit Payable Under the Plan
---------------------------------------------
For purposes of this Section 8.2, the Employer 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
Employer provided benefit payable to or on behalf of a Participant
under the Plan (after any adjustments required under the Plan to
reflect commencement of benefits other than at Normal Retirement Date,
an optional form of payment or death benefit coverage) after 1982
shall not exceed the lesser of:
(i) $90,000 (adjusted in accordance with this Section 8.2) or, if
greater, the Participant's current Accrued Benefit on December
31, 1982, or
(ii) the Participant's average annual Compensation from the
Employer for the consecutive calendar years (not in excess of
three such years) during which he was an active Participant in
the Plan and for which such average is highest.
(b) Cost-of-Living Adjustment
-------------------------
The $90,000 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 benefit payable to any Participant shall
be the dollar amount in effect for the calendar year in which the
benefit commences. For 1992, the limit is $112,221.
(c) Adjustment for Early or Late Retirement
---------------------------------------
For purposes of 8.2 and 8.3, if the Participant's benefit commences
before Social Security Retirement Age, the limit prescribed in Section
8.2(a)(1) shall be Actuarially reduced to reflect such early
commencement. If the Participant's benefit commences after Social
Security Retirement Age, the limit prescribed in Section 8.2(a)(1)
shall be Actuarially increased for purposes of Section 8.2 and Section
8.3 to reflect such late commencement.
25
(d) Annual Benefit
--------------
Notwithstanding the foregoing, if the benefit to be paid to a
Participant under the Plan is not in the form of an Annual Benefit as
described below, the benefit considered to be payable to a Participant
under the Plan for purposes of Sections 8.2 and 8.3 shall be
Actuarially adjusted to the extent required under Section 415(b)(2) of
the Code. For purposes of the foregoing, Annual Benefit means the
benefit payable annually in the form of a straight life annuity
without ancillary benefits or in the Statutory 50% Joint and Survivor
Annuity Option.
(e) Interest Rate
-------------
Any Actuarial adjustments under this Section 8.2 shall be based on the
Actuarial factors applicable for comparable purposes under the Plan on
the applicable date, except that
(i) the interest rate assumption for purposes of adjusting the
$90,000 limitation for benefits commencing before Social Security
------
Retirement Age shall be the greater of 5% or the Plan rate; and
-------
(ii) the interest rate assumption for purposes of adjusting the
$90,000 limitation for benefits commencing after Social Security
-----
Retirement Age shall be the lesser of 5% or the Plan rate.
------
(f) Special Provisions Regarding Participants With Fewer Than Ten Years of
----------------------------------------------------------------------
Participation or Service
------------------------
In the case of any Participant who participated in the Plan for fewer
than ten years, the maximum dollar benefit otherwise applicable under
Section 8.2(a)(i) shall be multiplied by a fraction whose numerator is
the Participant's years of participation in the Plan (including
fractions thereof, but not less than one) and whose denominator is
ten.
In the case of any Participant who was employed by the Employer for
fewer than ten years, the maximum benefit otherwise applicable under
Sections 8.2(a)(ii) and 8.3 shall be multiplied by a fraction whose
numerator is the Participant's years of employment with the Employer
(including fractions thereof, but not less than one) and whose
denominator is ten.
(g) Transition Rule
---------------
The limitations of this Section 8.2 shall not reduce a Participant's
annual benefit to less than his or her Accrued Benefit as of December
31, 1986, disregarding any change in the terms of the Plan and any
cost-of-living adjustments after May 5, 1986.
26
(h) Aggregation With Other Defined Benefit Plans
--------------------------------------------
If a Participant also participates in any other defined benefit
pension plan maintained by the Employer, the provisions of Section 8.2
and 8.3 shall be applied on an aggregate basis to the benefits payable
under this Plan and each such other plan. Any reduction in the
aggregate benefits payable under this Plan and any such other plan due
to the application of this Section shall be made on a pro-rata basis.
8.3 Additional Limitation Relating to Defined Contribution Plans
------------------------------------------------------------
(a) Primary Rule
------------
For Participants who participate in this Plan and a defined
contribution plan maintained by the Employer, the sum of (1) and (2)
below for any calendar year may not exceed 1.0.
(i) The defined benefit plan fraction for any year is equal to the
quotient of (i) divided by (ii) below expressed as a fraction:
(i) 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.
(ii) The lesser of: (a) 1.25 multiplied by the limitation
determined under Section 8.2(a)(1) in effect for such year,
or (b) 1.4 multiplied by the limitation determined under
Section 8.2(a)(2) (generally 100% of the Participant's
average annual Compensation).
(ii) The defined contribution plan fraction for any year is equal to
the quotient of (i) divided by (ii) below expressed as a
fraction:
(i) 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.
(ii) The sum of the lesser of the following amounts for such year
and for each prior year of service with the Employer
(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 benefit under this defined benefit Plan
shall be reduced to the extent necessary to satisfy the limitations of
this section.
27
SECTION 9
TOP HEAVY PROVISIONS
9.1 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 9 shall govern to the extent they
conflict with or specify additional requirements to the Plan provisions
governing Plan Years which are not Top Heavy.
9.2 Top Heavy Status
----------------
(a) Top Heavy
---------
This Plan shall be "Top Heavy" if, as of the Determination Date, (1)
the sum of the Aggregate Accounts of Key Employees, or (2) the Present
Value of Accrued Benefits of Key Employees under this Plan and any
plan of an Aggregation Group, exceeds 60% of the Aggregate Accounts or
the Present Value of Accrued Benefits of all Participants under this
Plan and any plan of an Aggregation Group.
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 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 sum of the Aggregate Accounts of Key Employees, or (2) the
Present Value of Accrued Benefits of Key Employees under this Plan and
any plan of an Aggregation Group, exceeds 90% of the Aggregate
Accounts or the Present Value of Accrued Benefits 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.
28
(d) Valuation Date
--------------
"Valuation Date" means, for purposes of determining Top Heaviness, the
Determination Date.
(e) Aggregate Account
-----------------
"Aggregate Account" means, with respect to a Participant, his or her
adjusted account balance in a defined contribution plan, as determined
under the top heavy provisions of such plan.
(f) Present Value of Accrued Benefits
---------------------------------
"Present Value of Accrued Benefits" means the sum of:
(i) the Actuarial Equivalent present value of the accrued normal
retirement benefit under the Plan as of the Valuation Date, and
(ii) distributions prior to the Valuation Date, made during the
Plan Year that contains the Determination Date and the four
preceding Plan Years. Unrelated rollovers or transfers from
this plan shall be considered distributions. A related
rollover or transfer from this Plan shall not be considered
a distribution.
An unrelated rollover or transfer is one which is both initiated by
the Employee and made between plans of different employers. A related
rollover or transfer is one which is either not initiated by the
Employee or made between plans of the same employer.
(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) of the Code and regulations thereunder.
(i) an officer of the Employer whose annual aggregate Compensation
from the Affiliated Companies exceeds 50% of the dollar
limitation under Section 415(c)(1)(A) of the Code ($56,111 for
the Plan Year ending in 1992), 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
Employer who owns more than a 0.5% interest of the Employer, 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 1992),
29
(iii)an Employee who owns more than 5% of the Employer, or
(iv) an Employee who owns more than 1% of the Employer 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 nondiscriminatory 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
nondiscriminatory 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.
9.3 Minimum Benefit
---------------
(a) General Rule
------------
For any Top Heavy Plan Year, a non-Key Employee who completes a Year
of Service shall have an Accrued Benefit at least equal to the minimum
benefit described herein. The minimum Accrued Benefit at any point in
time equals the lesser of:
(i) two percent multiplied by Top Heavy Years of Service, or
(ii) twenty percent,
30
multiplied by such Participant's "average Compensation." "Average
Compensation" means a Participant's average Compensation for the five
consecutive years when such Participant had the highest aggregate
Compensation from the Employer. However, Compensation received for
non-Top Heavy Plan Years shall be disregarded. The benefit described
herein is expressed as an annual benefit in the form of a single life
annuity (with no ancillary benefits), commencing at normal retirement
age.
A non-Key Employee shall not be denied this minimum benefit because he
or she was not employed on a specified date, failed to make any
mandatory Employee contribution, or failed to earn a specified amount
of Compensation.
(b) Special Two Plan Rule
---------------------
Where this Plan and a defined contribution plan belong to an
Aggregation Group that is determined Top Heavy, the Employer shall not
be required to provide the minimum benefit under (a) above on behalf
of any non-Key Participant who also participates in the defined
contribution plan if the Employer contributions and forfeitures under
the defined contribution plan equal 5% of each non-Key Participant's
Compensation.
9.4 Benefit Limitation
------------------
For any Top Heavy Plan Year in which the Employer 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 8.3).
If this Plan is Top Heavy, but is not Super Top Heavy, the above referenced
fractions shall remain unchanged provided the Employer provides an extra
minimum Accrued Benefit for each non-Key Employee. The extra benefit (in
addition to the minimum benefit set forth in Section 9.3) shall equal the
lesser of:
(i) one percent multiplied by Top Heavy years of Service, or
(ii) ten percent,
multiplied by such Participant's "average Compensation", as defined in
Section 9.3.
9.5 Vesting
-------
(a) Top Heavy Schedule
------------------
For any Top Heavy Plan Year, each Participant who completes an Hour of
Service in such Year shall become vested and have a nonforfeitable
right to retirement benefits he or she has earned under the Plan in
accordance with the following table:
31
Periods of Service Vesting Percentage
------------------ ------------------
Less than 2 Years 0%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 100%
Provided, however, that a Participant's vesting percentage shall not
be less than the percentage determined under the table in Section 7.1.
(b) Return to Non-Top Heavy Status
------------------------------
If the Plan becomes Top Heavy and ceases to be Top Heavy in any
subsequent Plan Year, the vesting schedule shall automatically revert
to the vesting schedule in effect before the Plan became Top Heavy.
Such reversion shall be treated as a Plan amendment pursuant to the
terms of the Plan, and shall not cause a reduction of any
Participant's nonforfeitable interest in the Plan on the date of such
amendment.
A Participant with three or more Years of Service with the Employer as
of the end of the election period, may elect to remain covered by the
Top Heavy vesting schedule. The Participant's election period shall
commence on the adoption date of the amendment and shall end 60 days
after the latest of:
(i) the adoption date of the amendment,
(ii) the effective date of the amendment, or
(iii)the date the Participant receives written notice of the
amendment from the Committee.
32
SECTION 10
ADMINISTRATION OF THE PLAN
10.1 Plan Administrator
------------------
The Plan Administrator shall be the Employer. The Compensation Committee
of the Board of Directors of the Employer 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 of the
Employer may remove or replace any member of the Committee at any time.
10.2 Organization and Procedures
---------------------------
The Compensation Committee of the Board of Directors of the Employer 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 legal process. All reports
required by law may be signed by the chairman on behalf of all members of
the Committee.
The Committee shall act by a majority of its members in office and may
adopt such by-laws and regulations as it deems desirable for the conduct of
its affairs.
10.3 Duties and Authority of the Committee
-------------------------------------
(a) Administrative Duties
---------------------
The Committee shall administer the Plan in a nondiscriminatory 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;
(ii) Interpret the provisions of the Plan and determine any question
arising under the Plan, or in connection with the administration
or operation thereof;
33
(iii)Determine all considerations affecting the eligibility of any
Employee to be or become a Participant;
(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 obtain
such administrative, clerical, medical, legal, audit and
actuarial services as it may deem necessary in carrying out the
provision of the Plan;
(vii)Delegate and allocate specific responsibilities 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 Trustee and/or designated Investment Manager shall have
responsibility or authority with respect to the management,
acquisition, disposition or investment of Plan assets.
(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
10.7.
(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.
10.4 Expenses
--------
All reasonable expenses which are necessary to operate and administer the
Plan may be deducted from the Trust Fund or, at the election of the
Employer, paid directly by the Employer.
34
10.5 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
Employer's expense.
10.6 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, proofs
of birth or death, address, form of benefit election, spouse
consent if required, and other information the Committee deems
necessary;
(ii) The Participant has Terminated employment with the Employer,
reached age 70-1/2 or died; and
(iii)The Participant or Beneficiary is eligible to receive benefits
under the Plan as determined by the Committee.
(b) Commencement of Payment
-----------------------
The payment of benefits shall commence no later than 60 days after the
retirement date specified herein for commencement of such benefits,
provided that payments shall not commence later than the April 1
following the calendar year in which the Participant reaches age
70-1/2.
In no event shall payments commence in a form other than the automatic
form described in Section 5.2 prior to the Participant's Normal
Retirement Age if the Actuarially Equivalent present value of the
Participant's Accrued Benefit at the time benefits commence exceeds
$3,500 without the written consent of the Participant and the spouse.
Spouse consent must acknowledge the effect of such election and must
be notarized or witnessed by a Plan representative.
If the information required in Section 10.6(a) above is not available
prior to such date, the amount of payment will not be ascertainable.
In such event, the commencement of payment shall be delayed until no
more than 60 days after the date the amount of such payment is
ascertainable, at which time a lump-sum payment retroactive to the
applicable date shall be made and monthly payments commenced.
35
10.7 Appeal Procedure
----------------
(a) Submission of Claim
-------------------
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 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,
who disputes the amount of benefit payment determined by the
Committee, or who 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.
36
10.8 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 10.8
relating to Domestic Relations Orders, or otherwise permitted by law.
(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) Small Benefits
--------------
In cases where the Actuarially Equivalent present value of a vested or
payable benefit is less than or equal to the maximum permissible
amount under the Code which may be distributed without the consent of
a Participant or his or her spouse (in 1990, this amount was $3,500),
the Committee shall direct such present value be paid in a lump sum
distribution as soon as practical following termination and prior to
the Annuity Starting Date. No payment shall be made pursuant to this
Section 10.8(c) after a Participant's Annuity Starting Date unless the
Participant and his spouse consent to such payment in a written
document filed with the Committee.
(d) 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 accrual of benefits under the Plan nor any action of the
Employer 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 Employer expressly reserves the right to
discharge any Employee at any time.
(e) Governing Law
-------------
This Plan shall be construed in accordance with applicable federal law
and the laws of the State of Washington, wherein venue shall lie for
any dispute arising hereunder.
37
(f) 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.
(g) Income Tax Withholding Requirements
-----------------------------------
Any retirement benefit payment made under the Plan shall 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.
(h) 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.
(i) 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 Gifts 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
Employer and the Plan of any liability to the extent of such payment.
(j) Correction of Errors
--------------------
Any Employer contribution to the Trust Fund made under a mistake of
fact (or investment proceeds of such contribution if a lesser amount)
shall be returned to the Employer 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.
10.9 Domestic Relations Orders
-------------------------
Notwithstanding any Plan provisions to the contrary, benefits under the
Plan may be paid to someone other than the Participant, Beneficiary or
joint annuitant, pursuant to a Qualified Domestic Relations Order, in
accordance with Section 414(p) of the Code. A
38
Qualified Domestic Relations Order is a judgement, 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) specifies the number of payments or period during which payments are
to be made;
(g) names each plan to which the order applies;
(h) does not require any form, type or amount of benefit not otherwise
provided under the Plan; and
(i) does not conflict with a prior Domestic Relations Order that meets the
requirements of this section.
Payments to an alternate payee pursuant to a Qualified Domestic Relations
Order may commence after the Participant becomes vested and on or after the
earlier of (a) the date the Participant attains age 55, or (b) the date the
Participant is eligible to elect to receive a Vested Termination Benefit.
The Alternate Payee may elect any form of payment available under the Plan
at the time benefit payments commence other than a joint and survivor
annuity, provided that a lump sum form of payment is available only if the
Alternate Payee's benefit does not exceed $10,000.
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 and with respect to benefits which are in pay
status shall establish 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 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.
39
10.10 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 the exempt status of the Trust Fund under Section 501 of
the Code.
10.11 Deductible Contribution
-----------------------
Notwithstanding anything herein to the contrary, any contribution by
the Employer to the Trust Fund is conditioned upon the deductibility of
the contribution by the Employer under the Code and, to the extent any
such deduction is disallowed, the Employer 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 Employer within one year
following the disallowance.
10.12 Payment of Benefits Through Purchase of Annuity Contract
--------------------------------------------------------
In lieu of paying benefits directly from the Trust Fund to a Participant
or his Beneficiary, the Trustee may purchase, with Trust Fund assets, an
individual annuity contract from an insurance company rated A+ by A.M.
Best Company, Inc. which, as far as possible, provides benefits equal
to (or Actuarially Equivalent to) those provided in the Plan for such
Participant or Beneficiary, but provides no optional form of retirement
income or benefit which would not be permitted under the Plan,
whereupon the liability of the Trust Fund and of the Plan will cease and
terminate with respect to such benefits that are so purchased and for
which the premiums are duly paid. Such an individual annuity contract
may be purchased by the Trustee on a single-premium basis or on the
basis of annual premiums Payable over a period of years and may be
purchased at any time on or after the Participant's Vested Termination
Date, Retirement Date or death to provide the benefits due under the
Plan to the Participant or Beneficiary on or after the date of such
purchase.
Any annuity contract distributed by the Trustee to a Participant or
Beneficiary under the provisions of the Plan shall bear on the face
thereof the designation "NOT TRANSFERABLE", and such contract shall
contain a provision to the effect that the contract may not be sold,
assigned, discounted or pledged as collateral for a loan or as security
for the performance of an obligation or for any other purpose to any
person other than the issuer thereof.
40
SECTION 11
AMENDMENT AND TERMINATION
11.1 Amendment General
-----------------
The Employer shall have the right to amend, terminate, or partially
terminate this Plan by action of its Board of Directors at any time subject
to any advance notice or other requirements of ERISA.
11.2 Amendment - 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 Employer to appoint a successor Trustee.
11.3 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 Employer 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.
11.4 Allocation of the Trust Fund on Termination of Plan
---------------------------------------------------
In the event of a complete Plan termination, the right of each Participant
to benefits accrued to the date of such termination that would be vested
under the provisions of the Plan in the absence of such termination shall
continue to be vested and nonforfeitable; and the right of each Participant
to any other benefits accrued to the date of termination shall be fully
vested and nonforfeitable to the extent then funded under the priority
rules set forth in Section 4044 of ERISA. In any event, a Participant or a
Beneficiary shall have recourse only against Plan assets for the payment of
benefits thereunder, subject to any applicable guarantee provisions of
Title IV of ERISA. The Committee shall direct the Trustee to allocate
Trust assets to those affected Participants to the extent and in the order
of preference set forth in Section 4044 of ERISA. The assets so allocated
shall be
41
distributed, as determined by the Committee, either wholly or in part by
purchase of nontransferable annuity contracts or lump-sum payments. If
Trust Fund assets as of the date of Plan termination exceed the amounts
required under the priority rules set forth in Section 4044 of ERISA, such
excess shall, after all liabilities of the Plan have been satisfied, revert
to the Employer to the extent permitted by applicable law.
If at any time the Plan is terminated with respect to any group of
Participants under such circumstances as to constitute a partial Plan
termination within the meaning of Section 411(d)(3) of the Code, each
affected Participant's right to benefits that have accrued to the date of
partial termination that would be vested under the provisions of the Plan
in the absence of such termination shall continue to be so vested; and the
right of each affected Participant to any other benefits accrued to the
date of such termination shall be vested to the extent assets would be
allocable to such benefits under the priority rules set forth in Section
4044 of ERISA in the event of a complete Plan termination. In any event,
affected Participants shall have recourse only against Plan assets for
payment of benefits thereunder, subject to any applicable guarantee
provisions of Title IV of ERISA. Subject to the foregoing, the vested
benefits of such Participants shall be payable as though such termination
had not occurred; provided, however, that the Committee, in its discretion,
subject to any necessary governmental approval, may direct that the amounts
held in the Trust Fund that are allocable to the Participants as to whom
such termination occurred be segregated by the Trustee as a separate plan.
The assets thus allocated to such separate plan shall be applied for the
benefit of such Participants in the manner described in the preceding
paragraph.
42
SECTION 12
FUNDING
12.1 Contributions to the Trust
--------------------------
As a part of this Plan the Employer shall maintain a Trust. From time to
time, the Employer shall make such contributions to the Trust as the
Committee determines, with the advice of its actuary, are required to
maintain the Plan on a sound actuarial basis.
12.2 Trust Fund for Exclusive Benefit of Participants
------------------------------------------------
The Trust is for the exclusive benefit of Participants. Except as provided
in Sections 10.7(j) (Correction of Errors), 10.9 (Domestic Relations
Orders) and 10.11 (Deductible Contributions), no portion of the Trust shall
be diverted to purposes other than this or revert to or become the property
of the Employer at any time prior to the satisfaction of all liabilities
with respect to the Participants.
12.3 Disposition of Credits and Forfeitures
--------------------------------------
In no event shall any credits or forfeitures which may arise under the Plan
be used to increase benefits under the Plan.
12.4 Trustee
-------
As a part of this Plan, the Employer has entered into a trust agreement
with a Trustee. The Employer 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 Employer must first enter into an agreement with a successor
Trustee.
12.5 Investment Manager
------------------
The Employer 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
43
(iii) is an insurance company qualified under the laws of more than
one state to perform the services described in subparagraph
(a); and
(c) has acknowledged in writing that he, she or it is a fiduciary with
respect to the plan.
44
SECTION 13
FIDUCIARIES
13.1 Limitation of Liability of the Employer and Others
--------------------------------------------------
No Participant shall have any claim against the Employer, 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; nor, to the extent permitted by law, shall the Employer,
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.
13.2 Indemnification of Fiduciaries
------------------------------
In order to facilitate the recruitment of competent fiduciaries, the
Employer 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.
13.3 Scope of Indemnification
------------------------
The Employer 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
Employer 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 Employer and other costs of such defense. The Employer 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 Employer, the Employer will indemnify an
Employee fiduciary for any monetary liability under said settlement. The
Employer shall have the right, but not the obligation, to conduct the
defense of such persons in any proceeding to which this Section 13.3
applies. The Employer may satisfy its obligations under this Section 13.3
in whole or in part through the purchase of a policy or policies of
insurance providing equivalent protection.
45
The Advanced Technology Laboratories, Inc. Retirement Plan is adopted by
Advanced Technology Laboratories, Inc.
IN WITNESS WHEREOF, the Employer has caused this Plan to be duly executed on
this 5 th day of May , 1994 .
------------ ----------------------- ---
FOR ADVANCED TECHNOLOGY
LABORATORIES, INC.
/s/ W. Brinton Yorks, Jr. /s/ Harvey N. Gillis
-------------------------- --------------------------------
Witness Authorized Officer
Chief Financial Officer
--------------------------------
Title
46
APPENDIX I
TO THE
ADVANCED TECHNOLOGY LABORATORIES, INC.
RETIREMENT PLAN
"Employer" as defined in Section 1.15 of the Advanced Technology Laboratories,
Inc. Retirement Plan shall also include the following companies during the
specified period of time.
Company Beginning Ending
------- --------- ------
1. Advanced Technology Laboratories, 1/1/81
Inc. (Washington)
ACKNOWLEDGED AND ACCEPTED:
By:________________________
Title:_____________________
Date:______________________
47
EX-10.29
12
RETIREMENT PLAN.TRUST AG
Exhibit 10.29
[LOGO OF ADVANCED TECHNOLOGY LABORATORIES, INC.]
ADVANCED TECHNOLOGY LABORATORIES, INC.
RETIREMENT PLAN
TRUST AGREEMENT
AMENDED AND RESTATED
EFFECTIVE DECEMBER 29, 1993
TABLE OF CONTENTS
Page
--------
PREAMBLE......................................................... 1
ARTICLE 1 - DEFINITIONS.......................................... 2
1.1 Agreement............................................. 2
1.2 Committee............................................. 2
1.3 Effective Date........................................ 2
1.4 Employer.............................................. 2
1.5 Participating Employers............................... 2
1.6 Plan.................................................. 2
1.7 Trust Year............................................ 2
ARTICLE 2 - TRUST FUND........................................... 3
2.1 Payments to Trustee................................... 3
2.2 Trust................................................. 3
2.3 Qualification......................................... 3
ARTICLE 3 - INVESTMENT AND ADMINISTRATION........................ 4
3.1 Administering the Plan................................ 4
3.2 Managing the Trust.................................... 4
3.3 Instructions to Trustee............................... 4
3.4 Permissible Investments............................... 4
3.5 Collective Investment Fund............................ 4
3.6 Deposit With Insurance Company........................ 5
3.7 Investment Managers................................... 5
3.8 Duties of the Trustee................................. 6
3.9 Powers of the Trustee................................. 7
3.10 Borrow and Settle Claims.............................. 7
3.11 Litigation............................................ 7
3.12 Distributions......................................... 7
3.13 Expenses and Fees..................................... 8
ARTICLE 4 - RECORDS; VALUATION; ACCOUNTINGS...................... 9
4.1 Records............................................... 9
4.2 Information........................................... 9
4.3 Valuation............................................. 9
4.4 Accountings........................................... 9
ARTICLE 5 - TRUSTEE LIABILITY....................................11
5.1 Indemnity.............................................11
Table of Contents
(continued) Page
--------
5.2 Bonding...............................................11
ARTICLE 6 - REPLACING THE TRUSTEE................................12
6.1 Resignation...........................................12
6.2 Removal...............................................12
6.3 Appointment of Successor..............................12
6.4 Rights and Powers of Successor Trustee................12
6.5 Duties of Outgoing Trustee............................12
6.6 Effect on Plan or Trust...............................13
ARTICLE 7 - AMENDMENT AND TERMINATION............................14
7.1 Amendment.............................................14
7.2 Termination...........................................14
ARTICLE 8 - GENERAL PROVISIONS...................................15
8.1 Applicable Law........................................15
8.2 Agreement Binding on All Parties......................15
8.3 Notices and Directions................................15
8.4 No Implied Duties.....................................15
8.5 Reliance on Information...............................15
8.6 Nondiscrimination.....................................15
SIGNATURE PAGE...................................................16
PREAMBLE
THIS TRUST AGREEMENT is known as the Advanced Technology Laboratories,
Inc. Retirement Plan Trust Agreement, and was formerly known as the Westmark
International Incorporated Retirement Plan Trust Agreement (the "Trust
Agreement").
Advanced Technology Laboratories, Inc. ("Employer") adopted the
Advanced Technology Laboratories Floor Retirement Plan (the "Plan") with an
associated trust effective January 1, 1981.
The Plan was amended and restated effective January 1, 1987, the name
was changed to the Westmark International Incorporated Floor Retirement Plan,
and Westmark International Incorporated became the plan sponsor, in connection
with the distribution of shares of Westmark International Incorporated to the
shareholders of Squibb Corporation. The associated trust was amended and
restated as of the same date and renamed the Trust Agreement for Westmark
International Incorporated Floor Retirement Plan.
The Plan was amended and restated effective January 1, 1990 and the
name was changed to the Westmark International Incorporated Retirement Plan.
The Trust Agreement was not restated at such time.
The corporate name of Westmark International Incorporated was changed
to Advanced Technology Laboratories, Inc. effective June 26, 1992. The Plan was
amended and restated, and the name of the Plan was changed to the Advanced
Technology Laboratories, Inc. Retirement Plan. The Trust Agreement is hereby
renamed and restated effective June 26, 1992.
The Trustee for the Advanced Technology Laboratories, Inc. Retirement
Plan was changed from Boatmen's Trust Company to First Interstate Bank of
Washington, NA effective December 29, 1993. The Trust Agreement is hereby
amended and restated effective December 29, 1993.
The Employer and the undersigned trustee or trustees ("Trustee") intend
that the Plan and Trust will comply with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), Section 401(a) of the Internal Revenue Code
of 1986, as amended, ("Code") and related Treasury Regulations and that the
Trust qualifies as a tax exempt trust under Section 501(a) of the Code.
The Employer and the Trustee now enter into this trust Agreement on the
following terms:
1
ARTICLE 1
DEFINITIONS
1.1 Agreement
-----------
"Agreement" means this Advanced Technology Laboratories, Inc.
Retirement Plan Trust Agreement, as now or hereafter in effect.
1.2 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 Employer to
administer the Plan.
1.3 Effective Date
----------------
"Effective Date" means January 1, 1981.
1.4 Employer
----------
"Employer" means Advanced Technology Laboratories, Inc.
1.5 Participating Employers
-------------------------
"Participating Employers" means the Employer and any other company
designated as an Employer as provided in appendices to the Plan.
1.6 Plan
------
"Plan" shall mean the Advanced Technology Laboratories, Inc. Retirement
Plan as now or hereafter in effect, the provisions of which are expressly
incorporated herein as if fully set forth.
1.7 Trust Year
------------
The "Trust Year" shall be the 12-month period corresponding with the
"plan year" (as now or hereafter defined in the Plan) which shall be
January 1 to December 31.
2
ARTICLE 2
TRUST FUND
2.1 Payments to Trustee
---------------------
The Participating Employers shall pay to the Trustee from time to time
such contribution amounts as are required by the Plan. The Trustee shall
accept the sums so paid and shall have no duty to make or inquire as to,
and shall not be responsible for, the determination of any such amount nor
to collect any contribution not voluntarily paid.
2.2 Trust
-------
The Participating Employers shall deliver or cause to be delivered to
the Trustee all Participating Employers' contributions to the Plan, and the
portion of any existing assets of a predecessor plan and trust that are
attributable to benefits payable under the Plan. Assets acquired with such
contributions or assets, the income and earnings from the investment and
reinvestment of such contributions and assets, and all other property and
assets of the Trust delivered to or coming into the hands of the Trustee
shall constitute the "trust fund," and shall be held in trust by the
Trustee pursuant to the terms of this Agreement. The assets of the Trust
shall not be segregated for the accounts of individual Plan participants or
their beneficiaries until they become entitled to a distribution under the
terms of the Plan but may be commingled, divided or segregated by the
Trustee for purposes of this Trust for investment and providing benefits
required by the Plan.
2.3 Qualification
---------------
If the Commissioner of the Internal Revenue Service initially rules
that this Trust is not exempt from tax under Section 501(a) of the Code,
the Employer and Trustee may retroactively or prospectively amend this
Trust so as to qualify.
3
ARTICLE 3
INVESTMENT AND ADMINISTRATION
3.1 Administering the Plan
------------------------
The Committee has the responsibility for administering the Plan,
including the responsibility to authorize and direct the Trustee to make
all distributions of benefits under the Plan.
3.2 Managing the Trust
--------------------
Except as provided otherwise in this Agreement, the Trustee has the
sole responsibility for the management, acquisition, disposition (for
purposes of investment and reinvestment) and investment of the assets of
the Plan, to the extent such assets are transferred to the Trustee.
3.3 Instructions to Trustee
-------------------------
The Employer shall give the Trustee the names and specimen signatures
of the chairman and members of the Committee to enable the Trustee to act
upon the directions of the Committee. The Trustee shall accept and rely
upon the names and signatures so provided until notified in writing of
change. Instructions to the Trustee shall be signed for the Committee by
the chairman or such other person as the Committee may designate.
3.4 Permissible Investments
-------------------------
The Trust shall be held, invested and reinvested by the Trustee without
distinction between principle and income, in property, both real and
personal (wherever situated), and common or preferred stocks, bonds,
mortgages, securities and other evidences of indebtedness or ownership in
accordance with applicable law and the provisions of this Agreement. The
Trustee, if a bank or similar financial institution, may invest assets of
the Trust in deposits with itself.
3.5 Collective Investment Fund
----------------------------
All or any portion of the Trust may be invested in a collective
investment fund maintained by the Trustee exclusively for investment of
funds held in qualified employee benefit trusts. During such period of
time as an investment through any such collective investment fund shall
exist, the declaration of trust of any such fund shall constitute a part of
this Agreement. Assets of this Trust may be commingled with assets of
other qualified trusts in any such collective investment fund so long as
such investment fund does not violate this agreement.
4
3.6 Deposit with Insurance Company
--------------------------------
The Employer may require the Trustee, upon written notice, to deposit
all or part of the Trust for investment with one or more insurance
companies under a group annuity, deposit administration or other contract
("Contract"). Any insurance company to which such assets are transferred
shall, subject to the Contract, have exclusive responsibility for control
over all assets deposited with it.
3.7 Investment Managers
---------------------
(a) Appointment and Authority
---------------------------
The Employer may appoint one or more investment managers for all
or part of the Trust. Subject to subsection 3.7(b), any such
investment manager shall have exclusive responsibility for and control
over the investment of the Trust assets for which responsibility is
allocated to the manager by the Employer.
(b) Rights Reserved by Employer
-----------------------------
The Employer may, as to the Trustee or any investment manager,
reserve any or all of the following rights:
(1) to specify investment objectives and guidelines;
(2) to specify permissible investments;
(3) to require consultation by the Trustee or investment manager
at regular intervals or with respect to certain kinds of
transactions;
(4) to receive notification of all transactions before or after
consummation; and
(5) to have proposed transactions submitted in advance and not
consummated if disapproved by notice given within 15 days after
submission.
(c) Fiduciary Duties
------------------
The investment manager shall be and act as a fiduciary with
respect to the Trust assets for which it is responsible. The Trustee
shall act upon the investment instructions given to it by the
investment manager with respect to those Trust assets for which such
manager is responsible, and in so doing the Trustee shall be only an
administrative agent in carrying out such directed investment
transactions. The Trustee shall have no duty to investigate any
transaction directed by such investment manager and shall not be
responsible for any such investment decision. If a directed
transaction violates any duty to diversify, to maintain liquidity or
to meet any other trust standard under this Trust or applicable law,
the investment manager shall be solely responsible and liable for any
loss, tax or penalty resulting from any such breach.
5
(d) Authority of the Trustee
--------------------------
Unless the Employer directs otherwise, the Trustee shall have
authority to do the following even though Trust assets are being
managed by an investment manager:
(1) dispose of fractional shares;
(2) roll over treasury obligations, commercial paper and similar
investments; and
(3) make short-term investments of otherwise uninvested Trust
assets in highly liquid interest-bearing deposits or
securities.
(e) Qualifications
----------------
Each investment manager shall be qualified under ERISA. Each
investment manager shall verify to the Employer and Trustee, in
writing, that the manager is:
(1) a registered investment adviser under the Investment
Advisers Act of 1940, a bank as defined in that Act or a
qualified insurance company;
(2) bonded for the protection of the Trust in conformance with
applicable law; and
(3) a fiduciary with respect to the Plan and this Trust.
(f) Notice to the Trustee
-----------------------
The Employer shall notify the Trustee of the appointment,
removal or resignation of any investment manager and until so
notified, the Trustee shall not accept or execute any investment or
other directions from any person or entity other than the Employer or
the Committee as provided herein. The Trustee may rely upon the
continued authority of an appointed investment manager until notified
of resignation or removal. Each investment manager shall, on request,
give the Trustee, the Committee and the Employer the names and
specimen signatures of persons authorized to act for the investment
manager.
3.8 Duties of the Trustee
-----------------------
The Trustee shall have responsibility for and control over the
investment of Trust assets not deposited with an insurance company or
allocated to an investment manager. The Employer may elect to direct the
Trustee as to the investment of some or all of the Trust assets.
6
3.9 Powers of the Trustee
-----------------------
Subject to the investment authority allocated to any insurance company
or investment manager, or reserved to the Employer, the Trustee shall have
all necessary powers to discharge its duties under this Trust, including,
without limitation, the power to do the following:
(a) own and hold all Trust assets and retain and exercise all
incidences of such ownership, subject to the terms of this Trust,
either directly or through nominees, with or without disclosing the
Trust;
(b) deal in any way with any Trust assets through a public or private
transaction and receive all proceeds from the Trust assets;
(c) as the holder of any security in the Trust, exercise any right or
power to take any action that could be exercised or taken by the
beneficial owner holding the security of record;
(d) write covered call options on securities in the Trust and deal in
other options directly related to an outstanding covered call option;
and
(e) employ agents for assistance and consult and rely upon the advice
of counsel, who may be counsel for Participating Employers.
3.10 Borrow and Settle Claims
--------------------------
If authorized in writing by the Employer, the Trustee may borrow money
for Trust purposes on the security of Trust assets. The Trustee may
compromise claims on terms approved by the Employer, which shall be
binding on all parties.
3.11 Litigation
------------
The Trustee's cost in any litigation arising from the Trustee's act or
failure to act and relating to the Trust assets shall not be an expense of
the Trust. The Trustee shall indemnify and defend the Employer from any
claim, loss, liability or exposure arising by reason of the Trustee's
gross negligence or willful misconduct.
3.12 Distributions
---------------
(a) Recipients
------------
The Trustee shall pay benefits for a participant, contingent
annuitant or beneficiary in one of the following manners as directed
by the Committee or, in the absence of such direction, as considered
appropriate under the terms of the Plan by the Trustee:
(1) to the participant, annuitant or beneficiary;
7
(2) to a spouse or parent or child of legal age of a person
listed in subparagraph (1) if such person is then under a mental
or physical disability which renders him incapable of handling
his own affairs;
(3) to one having actual custody of the person;
(4) to a legal guardian; or
(5) to one furnishing maintenance, support or hospitalization of
a person listed in subparagraph (1).
In making distributions, the Trustee may rely wholly on the
direction of the Committee.
(b) Record of Payment
-------------------
A receipt from an authorized recipient or canceled check shall
be sufficient voucher for the Trustee. Neither the Trustee, the
Committee, nor Participating Employers need obtain from the recipient
an accounting for the payment.
(c) Conflicting Claims
--------------------
If a dispute arises over a distribution, the Trustee may
withhold the distribution until the dispute is determined by a court
of competent jurisdiction or settled by the parties concerned.
3.13 Expenses and Fees
-------------------
The Trustee shall be reimbursed for all reasonable expenses and shall
be paid a reasonable fee approved from time to time in writing by the
Employer; provided, however, that a Trustee who is an employee of
-------- -------
the Participating Employers shall not be eligible for such fees and
expenses for serving as a Trustee of this Plan. The Trustee shall notify
the Committee periodically of expenses and fees and the Participating
Employers may elect to pay them. Otherwise, the expenses and fees shall
be charged to the Trust.
8
ARTICLE 4
RECORDS; VALUATION; ACCOUNTINGS
4.1 Records
---------
The Trustee shall keep complete records of the Trust open to inspection
by the Committee and the Employer at all reasonable times.
4.2 Information
-------------
In addition to reports required below, the Trustee shall furnish the
Employer or the Committee any information about the Trust that they
request.
4.3 Valuation
-----------
As of each valuation date specified by the Employer, the Trustee shall
value the Trust in accordance with applicable law and report the value to
the Committee. The value of any Trust assets transferred to or deposited
with an insurance company under Section 3.6 shall be the amount
withdrawable to pay benefits at any time as determined by the Committee.
4.4 Accountings
-------------
(a) Yearly Accounting
-------------------
The Trustee shall furnish the Employer and the Committee with a
complete accounting within 60 days after the end of each Trust Year
showing assets and liabilities and income and expenses of the Trust
for the Trust Year. The form and content of the accounting shall be
sufficient for the Committee to comply with reporting and disclosure
requirements under applicable law.
(b) Objection and Audit
---------------------
The Employer or the Committee may object to an accounting within
60 days after it is furnished and require that it be settled by audit
by a qualified, independent certified public accountant. The auditor
shall be chosen by the Trustee from a list of at least five such
accountants furnished by the objecting Employer or Committee at the
time the audit is requested. Either the Employer, the Committee or
the Trustee may require that the account by settled by a court of
competent jurisdiction in lieu of or in conjunction with the audit.
All expenses of any audit or court proceedings including reasonable
attorneys' fees, shall be allowed as administrative expenses of the
Trust.
(c) Acceptance
------------
If the Employer or the Committee does not object to an accounting
within the time provided, the account shall be settled for the period
covered by it.
9
(d) Settled Account
-----------------
To the extent permitted by applicable law, when an account is
settled, it shall be final and binding on all parties including the
Trustee, Participating Employers and the Committee and all
participants and persons claiming through them.
10
ARTICLE 5
TRUSTEE LIABILITY
5.1 Indemnity
-----------
The Employer shall indemnify and defend the Trustee from any claim,
loss, liability or expense arising from any action or inaction in
administration of this Trust in reliance on information or in response to
direction from the Employer or the Committee in the absence of willful
misconduct or bad faith. The undertaking of this Section shall survive the
amendment or termination of this Trust agreement or the resignation or
removal of the Trustee.
5.2 Bonding
---------
The Trustee shall be bonded as required by applicable law. However,
the Trustee need not give any bond or other security for performance of its
duties under this Trust for all times during which the Trustee is exempt
from the bonding requirements of Section 412 of ERISA and the provisions of
any other applicable law.
11
ARTICLE 6
REPLACING THE TRUSTEE
6.1 Resignation
-------------
A Trustee may resign at any time by giving 60 days' written notice to
the Employer, unless the Employer and the Trustee agree in writing that the
Trustee may resign earlier. If the resigning Trustee is the sole Trustee,
the Employer shall designate a successor Trustee within the 60-day notice
period. If the Employer fails to name a successor in that time, such sole
Trustee shall petition the Superior Court of the State of Washington to
designate a successor.
6.2 Removal
---------
The Trustee may be removed by the Employer with or without cause on 60
days' written notice or shorter notice accepted by the Trustee. If the
Employer seeks to remove the sole Trustee, the Employer shall designate a
successor Trustee within the 60-day notice period. If the Employer fails
to name a successor in that time, such sole Trustee shall petition the
Superior Court of the State of Washington to designate a successor.
6.3 Appointment of Successor
--------------------------
There shall be at least one Trustee at all times and the Employer may
appoint more than one Trustee for any given period. The Employer may
appoint any qualified person(s), national or state bank or trust company or
other qualified entity as a Trustee. The appointment of a Trustee shall be
effective when accepted in writing by such Trustee.
6.4 Rights and Powers of Successor Trustee
----------------------------------------
A successor Trustee shall have all of the rights and powers of the
Trustee, including ownership of the Trust assets. A successor Trustee need
not examine the records and acts of any prior Trustee and may retain or
dispose of existing Trust assets pursuant to the provisions of this Trust.
A successor Trustee shall not be responsible for any claim or liability
resulting from any action or inaction of any prior Trustee or any other
past event, or any condition of assets existing at the time of appointment
of such successor Trustee.
6.5 Duties of Outgoing Trustee
----------------------------
(a) Transfer Assets
-----------------
The outgoing Trustee shall execute any instruments necessary or
reasonably requested by the Employer or the successor Trustee to
evidence the transfer of Trust assets.
12
(b) Provide Accounting
--------------------
The outgoing Trustee shall submit a final Trust accounting to the
Employer and the Committee as soon as reasonably practicable. The
accounting shall be received and settled as provided in Section 4.4
for regular accountings.
6.6 Effect on Plan or Trust
-------------------------
No resignation or removal of the Trustee or change in identity of the
Trustee for any reason shall terminate the Plan or this Trust.
13
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
-----------
The Employer may amend this Trust at any time by written instrument
signed by an officer of the Employer acting upon authorization of the
Employer's Board of Directors and delivered to the Trustee, with the
following limitations:
(a) amendments shall be effective when signed by the Trustee; and
(b) except as permitted under Section 7.2(c) below, no amendment shall
revest any of the Trust assets in Participating Employers or
otherwise modify the Trust so that it would not be for the exclusive
benefit of eligible employees.
The provisions of this section are in addition to and shall not limit
the Employer's rights otherwise provided in this Agreement and the Plan.
7.2 Termination
-------------
(a) Duties of Employer
--------------------
The Employer may wholly or partially terminate the Plan at any
time. In such event, the Employer shall give the Trustee written
notice of the termination and shall promptly notify the Pension
Benefit Guaranty Corporation and request a ruling from the Internal
Revenue Service concerning the effect of termination on the
qualification of the Plan and this Trust. The Trustee may decline to
distribute under Section 7.2(b) until such notice has been given and
appropriate rulings issued.
(b) Continuation or Liquidation of Trust
--------------------------------------
Upon termination of the Plan, the Employer may direct that the
Trust be continued to pay benefits as they mature or be liquidated and
the Trust assets distributed. If the Trust is liquidated, it shall be
allocated by the Committee among participants, beneficiaries and, if
permissible, to Participating Employers in Accordance with the Plan.
(c) Exclusive Benefit of Participants
-----------------------------------
In no event shall any part of the contributions or the principal
or income of this Trust be paid to or revested in Participating
Employers or be used other than for the exclusive benefit of the
participants and the beneficiaries, except as permitted under Sections
403(c) or 4044(d) of ERISA or Section 7.2(b) of this Agreement or
under Section 12.2 of the Advanced Technology Laboratories, Inc.
Retirement Plan.
14
ARTICLE 8
GENERAL PROVISIONS
8.1 Applicable Law
----------------
This Trust shall be construed according to the laws of Washington and
Federal law to the extend Federal law preempts Washington law. Venue for
any dispute arising hereunder shall be in the State of Washington.
8.2 Agreement Binding on All Parties
----------------------------------
This Agreement shall be binding upon the successors and assigns of any
and all present and future parties.
8.3 Notices and Directions
------------------------
Any notice or direction under this Trust shall be in writing and shall
be effective when actually delivered or, if mailed, when deposited as
registered or certified mail directed to such address as either party may
specify by notice to the other party.
8.4 No Implied Duties
-------------------
The duties of the Trustee shall be those stated in this Trust, and no
other duties shall be implied.
8.5 Reliance on Information
-------------------------
The Trustee may accept as correct and rely on any information furnished
by the Employer or the Committee. The Trustee may not require an audit or
disclosure of the records of Participating Employers.
8.6 Nondiscrimination
-------------------
Participating Employers, the Committee and the Trustee shall to the
fullest extent possible treat all persons similarly situated alike under
this Trust.
15
IN WITNESS WHEREOF, the Employer and Trustee cause this Plan to be duly
executed on this 29th day of December, 1993.
ADVANCED TECHNOLOGY LABORATORIES, INC.
By /s/ Harvey N. Gillis
-------------------------
Its Sr. Vice President, Finance and Administration, CFO
---------------------------------------------------
FIRST INTERSTATE BANK OF WASHINGTON, NA
By /s/ Julia Northrup
---------------------------
Its Vice President
--------------------------
16
EX-10.39
13
2ND AMEND. EMPLOY. AGREE
EX10.39
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
SECOND AMENDMENT to employment agreement by and between Advanced Technology
Laboratories, Inc., a Delaware corporation (the "Company"), and Dennis C. Fill
(the "Executive") effective as of the 4th day of July, 1994.
WITNESSETH:
WHEREAS, the Executive has for the past eight years served the Company as
its Chairman of the Board and Chief Executive Officer; and
WHEREAS, the Executive has long intended that he would retire from these
positions at age sixty-five, the age he attained in July, 1994; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the benefit of the continued services of the
Executive through the end of 1996 so as to best enable the Company to achieve
its current business and financial objectives for the good of the Company, its
shareholders and employees;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Definitions
a. A "Change of Control" shall mean a change of control of the Company as
defined in section 2 of the "EMPLOYMENT AGREEMENT" between the Company and the
Executive, dated November 2, 1990, as amended by the FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT, dated May 18, 1992 (together, the "Employment Agreement").
2. Employment Period
The Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company, in accordance
with the terms and provisions of this Second Amendment, for the period
commencing July 4, 1994 and ending on December 31, 1996 (the "Employment
Period") in the executive capacity of Chairman of the Board (subject to election
by the shareholders of the Company at its 1995 and 1996 annual general meetings)
and Chief Executive Officer of the Company, subject to the general supervision
of the Board as required by the General Corporation Law of Delaware. Removal of
the Executive from,
2
or non-election of the Executive to the Board by the Company's shareholders or
the Board, as provided in the Company's by-laws and certificate of
incorporation, shall in no event be deemed a breach of this Second Amendment by
the Company, provided, however that if the Executive continues to be an
employee of the Company but ceases to be a member of the Board, the Company
shall thereafter invite the Executive to all meetings of the Board, provided
the Executive with written notice thereof as with each such meeting and provide
the Executive with access, upon request, to all information, records and
documents of the Company to which a director of the Company is legally
entitled.
3. Terms of Employment
a. Position and Duties. During the Employment Period, the Executive's
-------------------
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be in accordance with Section 2
above. During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Second Amendment for the Executive to (a) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (c) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Second Amendment. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Employment Period, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) during the Employment
Period shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
b. Compensation.
------------
(i) Base Salary. During the Employment Period, The Executive shall
-----------
receive an annual base salary set by the Compensation Committee of the Board
(the "Compensation Committee") which, at the effective date of this Second
Amendment, is Four Hundred and Fifty Thousand Dollars ($450,000) (the "Base
Salary") which shall be paid in equal installments in accordance with the
Company's regular payroll practices.
3
(ii) Bonuses. The Executive shall receive an annual bonus for each
-------
fiscal year during the Employment Period at the time bonuses to other officers
of the Company are paid or payable for such fiscal years as determined by the
Compensation Committee.
(iii) Employee Benefits. The Executive shall be entitled to participate
-----------------
in the incentive, savings, retirement, fringe benefit, vacation, and welfare
benefit plans of the Company, receive prompt reimbursement of expenses, and an
office and support staff, all as specified in Section 4(b)(iii) through
4(b)(viii) of the Employment Agreement which are incorporated herein as Section
3(b)(iii) of this Second Amendment.
In consideration of the continued provision of his services to the Company
during the Employment Period, the Executive shall also receive:
(iv) a grant of 50,000 shares of the Company's restricted common stock
with a grant date of July 4, 1994. This grant will vest in its entirety on
January 1, 1997 subject to the provision of services by the Executive through
such date, except that, if a Change of Control shall occur during the term of
this Second Amendment, then this grant will vest on the date on which the Change
of Control occurs; and
(v) a five year consulting agreement with the Company commencing January
1, 1997 and at a rate of $375,000 per annum, payable quarterly, and subject to
maintenance by the Executive of his availability to provide consulting services
at reasonable times and places to the Company and to his continued agreement not
to compete with the Company by serving an entity which is in the same business
as the Company during such five year period; and
(vi) during the term of this Second Amendment and for the remainder of
the Executive's life, life insurance coverage in the amount of $300,000, and
payable to a beneficiary or beneficiaries designated by the Executive or,
failing such designation, to the Executive's estate.
4. Termination of Employment
a. In the event of the death or disability of the Executive, this Second
Amendment shall terminate in accordance with the provisions of Section 5(a) of
the Employment Agreement, which is incorporated herein as Section 4a of this
Second Amendment. In addition thereto,
4
(i) if the termination is due to the Executive's death, the Executive
shall receive an immediate vesting as of the date of death of a pro rata portion
of the restricted stock of Section 3(b)(iv) which is in proportion to the
portion of the Employment Period served by the Executive prior to the date of
death.
(ii) If the termination is due to disability of the Executive, the
Executive shall receive:
(1) a vesting as of the Disability Effective Date of a pro rata
portion of the restricted stock of Section 3(b)(iv) which is in proportion to
the portion of the Employment Period served by the Executive prior to the
Disability Effective Date; and
(2) the five year consulting agreement of Section 3(b)(v) shall
commence as of the Disability Effective Date and shall be subject to the ability
of the Executive to provide such consulting services; and
(3) the life insurance coverage of Section 3(b)(vi) shall be provided
by the Company.
b. The Company may terminate the Executive's employment during the
Employment Period only for Cause in accordance with the provisions of Section
5(b) of the Employment Agreement, which is incorporated herein as Section 4b of
this Second Amendment.
c. Section 5(d), Notice of Termination, and Section 5(e), Date of
--------------------- -------
Termination, of the Employment Agreement are incorporated herein as Section 4c
-----------
of this Second Amendment. Reference therein to Section 12(b) for the manner of
serving notice shall be taken to refer to Section 7 of this Second Amendment.
5. Successors
Section 11, Successors, of the Employment Agreement is incorporated herein
as Section 5 of this Second Amendment.
6. Miscellaneous
The following paragraphs of Section 12, Miscellaneous, of the Employment
agreement are incorporated herein as Section 6 of this Second Amendment: 12(a)
("choice of law"), 12(c) ("severability"), 12(d) ("tax withholding"), and 12(e)
("no waiver").
7. Notice
All notices and other communications permitted or required hereunder shall
be in writing and shall be given by
5
hand delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Dennis C. Fill
Unit 2A
5505 Lake Washington Blvd. NE
Kirkland, WA 98033
If to the Company:
W. Brinton Yorks, Jr., Corporate Secretary
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway SE
P.O. Box 3003
Bothell, WA 98041-3003
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
8. Exhibits
The Employment Agreement is attached hereto as an exhibit to this Second
Amendment.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Dennis C. Fill
___________________________
Dennis C. Fill
ADVANCED TECHNOLOGY
LABORATORIES, INC.
/s/ Kirby L. Cramer
By: _______________________
Kirby L. Cramer
Chairman
Compensation Committee
Board of Directors of
Advanced Technology
Laboratories, Inc.
EX-10.42
14
EMPLOYMENT AGREEMENT
EX10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 17th day of May, 1994,
---- ---
and is by and between Advanced Technology Laboratories, Inc., a corporation
of the State of Washington (hereinafter, "ATL"), and Edward Ray, an individual
residing in Villanova, Pennsylvania (hereinafter, "Employee").
RECITAL:
-------
WHEREAS, the Employee is presently an employee of Interspec, Inc.
("Interspec") and holds the position of President and Chief Executive Officer
and as such has been and is expected to be a significant factor in the future
growth and success of Interspec; and
WHEREAS, ATL desires to induce the Employee to become employed by ATL
in an executive capacity for a term certain commencing on the day of the
"Effective Time of the Merger" as defined in the Agreement and Plan of Merger,
dated February 10, 1994, among Advanced Technology Laboratories, Inc., ATL Sub
Acquisition Corp., and Interspec (hereinafter referred to as the "Merger
Agreement"), and based on the inducements hereinafter provided by ATL, the
Employee desires to be employed by ATL on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and covenants set
forth herein, and intending to be legally bound, the parties have agreed as
follows:
1. Duties. ATL agrees to employ Employee, and Employee agrees to
------
enter the employment of ATL. During the term of this agreement, Employee shall
be employed by ATL in the capacity as the President and Chief Operating Officer
of Interspec, reporting to the Chairman and Chief Executive Officer of ATL, and
responsible for, among other things, the business affairs of Interspec and such
other duties and responsibilities as are not inconsistent with the terms and
conditions in this Agreement. Employee shall devote reasonable attention and
time during normal business hours to the business and affairs of Interspec, and,
to the extent necessary, to use reasonable best efforts to perform faithfully
and efficiently those responsibilities.
2. Term. Subject to Sections 4 and 5 hereof, the employment of
----
Employee by ATL shall commence on the day of the "Effective Time of the Merger"
as defined in the Merger Agreement (hereinafter referred to as the "Effective
Date"), and shall continue through April 14, 1997 unless terminated earlier in
accordance with the provisions of this Agreement.
2
3. Compensation.
-------------
(a) Base Salary. During the period of his employment during the term
-----------
of this agreement, Employee shall receive an annual base salary of not less than
Three Hundred Thousand Dollars ($300,000) (the "Base Salary") which shall be
paid in equal installments in accordance with ATL's regular payroll practices.
The Base Salary may be increased from time to time by the Compensation Committee
of ATL's Board of Directors (the "Compensation Committee"). The Compensation
Committee shall review the Base Salary at least annually. Any increase in Base
Salary shall not serve to limit or reduce any other obligation to Employee under
this Agreement. Base Salary shall not be reduced after any such increase and
the term Base Salary as utilized in this Agreement shall refer to Base Salary as
so increased.
(b) Bonuses. Employee shall receive an annual bonus of not less than
-------
$140,000 for each fiscal year at the time bonuses to other officers of ATL are
paid or payable for such fiscal year as determined by the Compensation Committee
of the Board of Directors of ATL; provided however, that each annual bonus shall
be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless Employee
shall elect to defer the receipt of such Annual Bonus, and provided further that
such Annual Bonus shall be pro rated for the fiscal year in which this Agreement
expires or otherwise terminates. For purposes of this Agreement, the portion of
the Employee's annual bonus equal to $140,000 shall hereinafter be referred to
as the "Annual Bonus" and the portion, if any, of the Employee's annual bonus in
excess of $140,000 shall hereinafter be referred to as the "Additional Bonus".
(c) Fringe Benefits. The Employee shall be entitled to participate
---------------
in the same insurance, vacation and other fringe benefit programs of ATL as are
provided to ATL's other executive officers. Nothing in this Agreement shall be
construed to prevent ATL from amending its benefit programs from time to time,
including an amendment to eliminate all or any portion of its programs. The
Employee shall also be entitled to continue to participate in Interspec's
Supplemental Executive Retirement Plan (the "SERP") which is incorporated into
the Merger Agreement; however, the portion, if any, of the benefit accrued by
the Employee under the SERP at his termination of employment which is in excess
of his benefit accrued on the Effective Date shall be reduced (but not below
zero) by the benefits accrued by the Employee after the Effective Date as a
beneficiary under ATL's retirement plans. In addition, ATL shall provide to
Employee a term life insurance policy in the face amount of $1,000,000 payable
to such beneficiary or beneficiaries as shall be designated by Employee, and a
long-term
3
disability insurance policy providing annual benefits to the Employee
equal to 60% of the Employee's Base Salary in the event of the long-term
disability of the Employee. ATL shall also provide to Employee the full-time
use of an automobile of a type satisfactory to Employee and substantially
similar to the automobile provided to Employee under his December 23, 1993
employment agreement with Interspec.
(d) Equity Compensation. The Employee shall be eligible to receive
-------------------
options to purchase ATL common stock and to receive restricted stock awards of
ATL common stock commensurate with those granted to the key employees of ATL.
(e) Reimbursement of Expenses. Employee shall be entitled to incur
-------------------------
reasonable business expenses in the performance of services for ATL. ATL will
reimburse Employee for such expenses provided Employee shall complete an
itemized expense report on forms provided by ATL, and furnish the report
together with related receipts to ATL. If at any time ATL makes advances to
Employee for any purpose, including advances for business expenses or for
personal purposes, Employee hereby authorizes ATL to deduct, withhold, or divert
from his compensation an amount equal to such advances outstanding on his last
day of employment. If any outstanding advances relate to business expenses
incurred in accordance with this Section of this Agreement, upon submission of a
properly completed and substantiated expense report, ATL will release any
amounts so deducted to Employee.
(f) Entire Compensation. The compensation provided for in this
-------------------
Agreement is in full payment of the services to be rendered by the Employee to
ATL hereunder.
4. Death or Total Disability of the Employee.
-----------------------------------------
(a) Death. In the event of the death of the Employee, this Agreement
-----
shall terminate effective as of the date of the Employee's death, ATL shall not
have any further obligation or liability under this Agreement except that ATL
shall pay to the Employee's estate: (i) the portion of the Base Salary earned
by Employee but unpaid for the current or any prior year, prior to the date of
death; and (ii) the pro rata portion of any Annual Bonus and Additional Bonus
which Employee had earned for the current or any prior year, but not received
prior to the date of death; and (iii) any other payments or benefits that the
Employee is eligible to receive under any benefit or retirement plans or other
arrangements that would, by their terms, apply.
4
(b) Total Disability. In the event of the Total Disability (as that
----------------
term is hereinafter defined) of the Employee for a period of 90 consecutive
days, ATL shall have the right to terminate the Employee's employment hereunder
by giving the Employee 20 days' written notice thereof, and upon expiration of
such 20-day period, ATL shall not have any further obligation or liability under
this agreement, except that ATL shall pay to the Employee: (i) the portion of
the Base Salary earned by Employee but unpaid prior to the date of termination;
and (ii) the pro rata portion of any Annual Bonus and Additional Bonus which
Employee had earned for the current or any prior year, but not received prior to
the date of termination; and (iii) any other payments or benefits that the
Employee is eligible to receive under any benefit or retirement plans or other
arrangements that would, by their terms, apply. Notwithstanding anything to the
contrary set forth in this Section 4(b), the Employee shall continue to be paid
his Base Salary until he becomes eligible to receive benefits under the long-
term disability insurance policy referred to in Section 3(c) hereof. The term
"Total Disability," when used herein, shall mean a mental or physical condition
which in the reasonable opinion of the Compensation Committee renders the
Employee unable or incompetent to carry out the job responsibilities held or
tasks assigned at the time the condition was incurred, and which entitles
Employee to receive payments under the long-term disability insurance policy
referred to in Section 3(c) hereof.
5. Discharge by ATL.
----------------
(a) Discharge for Cause. ATL may discharge the Employee and thereby
-------------------
terminate his employment hereunder for the following reasons (hereinafter
referred to as a "discharge for cause"): (i) the demonstrably willful and
deliberate failure by Employee substantially to perform his material duties and
obligations to ATL under this Agreement (other than a failure resulting from any
illness, sickness, or physical or mental incapacity) which failure continues
after ATL has given notice of the failure to Employee; or, (ii) the demonstrably
willful and deliberate engaging by Employee in misconduct which materially is
injurious to ATL. In the event that ATL shall discharge the Employee pursuant
to this Section 5(a), ATL shall not have any further obligation or liability
under this agreement, except that ATL shall pay to the Employee: (i) the
portion of the Base Salary earned by Employee but unpaid prior to the date of
termination; and (ii) the pro rata portion of any Annual Bonus and Additional
Bonus which Employee had earned for the current or any prior year, but not
received prior to the date of termination; and (iii) any other payments or
benefits that the Employee is eligible to receive under any benefit or
retirement plans or other arrangements that would, by their terms, apply.
Notwithstanding the foregoing, the Employee shall have the notice period
provided for in Section 5(e) hereof
5
within which to cure the stated reason for the discharge for cause to the
reasonable satisfaction of ATL.
(b) Other Discharge by ATL. If ATL shall discharge the Employee for
----------------------
any reason other than one specified in Section 5(a) above (hereinafter referred
to as a "discharge without cause"), the Employee shall be entitled to receive:
(i) the portion of the Base Salary earned by Employee but unpaid prior to the
date of termination; and (ii) the pro rata portion of any Annual Bonus and
Additional Bonus which Employee had earned for the current or any prior year,
but not received prior to the date of termination; and (iii) any other payments
or benefits that the Employee is eligible to receive under any benefit or
retirement plans or other arrangements that would, by their terms, apply; and
(iv) a termination payment equal to the Base Salary and Annual and Additional
Bonuses that Employee would have been entitled to receive hereunder after the
date of termination had this Agreement remained in effect through the end of the
term specified in Section 2 above. At the election of Employee, such amount
shall be payable either in a lump sum or in substantially equal monthly
installments through April 14, 1997. During the balance of the period ending
April 14, 1997 Employee shall also be entitled to continue to receive fringe and
welfare benefits, described in Section 3(c) above, which are at least comparable
to those to which he was entitled immediately prior to the termination of his
employment, and shall continue to receive service credit for purposes of the
SERP. If the terms of any welfare benefit plan of ATL does not permit continued
participation by the Employee, then ATL shall arrange to provide to the Employee
a benefit substantially similar to and materially no less favorable than the
benefit he was entitled to receive under such plan at the end of the period of
coverage. Finally, ATL will permit the Employee during a period of three months
following his termination, upon written request, to execute a cashless exercise
of all outstanding stock options previously granted to the Employee under any
stock option plan maintained by ATL, whether or not such options are then
exercisable, and to have all restricted stock grants and other forms of equity
compensation, whether or not vested, vest immediately.
(c) Termination for Good Reason. The Employee may terminate his
---------------------------
employment hereunder for Good Reason (as defined below). Upon any such
termination, the Employee shall receive from ATL the same salary, bonus and
other payments and employee fringe and welfare benefits that would be payable to
the Employee pursuant to Section 5(b) hereof upon a discharge of the Employee
without cause. For purposes of this Agreement, the term "Good Reason" shall
mean the occurrence of any of the following events without the Employee's
express written consent: (i) any failure by ATL to comply with any of the
provisions of Section 3, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by ATL promptly after
6
receipt of notice thereof given by Employee; or (ii) ATL's requiring the
Employee to be based at any office or location other than the location where
Employee was employed immediately preceding the Effective Date or any office
which is less than 30 miles from such location; or (iii) the assignment to the
Employee of any duties materially inconsistent in any respect with the
Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
1 or any other action by ATL which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee; or (iv) any purported termination by ATL of Employee's employment
otherwise than as expressly permitted by this Agreement; or (v) any failure by
ATL to comply with and satisfy Section 9; provided that such successor has
received at least ten days prior written notice from ATL or Employee of the
requirements of Section 9. For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by Employee shall be conclusive.
(d) No Mitigation Required. Upon a termination of the Employee's
----------------------
employment by ATL without cause or by Employee for Good Reason, the Employee
shall have no obligation to seek other employment but shall not be prohibited
from doing so, and no compensation paid to the Employee as the result of any
other employment shall reduce any payment required to be made by ATL hereunder.
(e) Notice of Termination. Any termination of the Employee's
---------------------
employment by ATL or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 10 hereof. A
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Employee's employment. The Notice of Termination shall also specify a date
of termination which shall be no earlier than 30 days after the Notice of
Termination is given.
(f) No Set-Off. ATL's obligation to make the payments provided for
----------
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which ATL may have against Employee or others.
6. Expense Reimbursement; Payment of Disputed Amounts.
--------------------------------------------------
7
(a) Expense Reimbursement. In the event that any person asserts the
---------------------
invalidity of all or any part of this agreement and the Employee incurs legal
fees or expenses in connection with defending the validity of all or a portion
of this Agreement, ATL shall reimburse the Employee for all legal fees and costs
the Employee so incurs.
(b) Payment of Disputed Amounts. If there shall be any dispute
---------------------------
between ATL and Employee (i) in the event of any termination of Employee's
employment by ATL, whether such termination was for Cause, or (ii) in the event
of any termination of employment by Employee, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by Employee of the existence of Good Reason was not made in good
faith, ATL shall pay all amounts, and provide all benefits, to Employee and/or
Employee's family or other beneficiaries, as the case may be, that ATL would be
required to pay or provide pursuant to Section 3 as though such termination were
by ATL without Cause or by Employee with Good Reason; provided however, that ATL
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of Employee to repay all
such amounts to which Employee is ultimately adjudged by such court not to be
entitled.
7. Assignment Prohibited. This Agreement is personal to Employee and
---------------------
may not be assigned by Employee either directly or indirectly or by operation of
law without the prior written consent of ATL.
8. Binding Effect. This Agreement inures to the benefit of the
--------------
parties and is binding upon the parties, their heirs, personal representatives,
successors and assigns. If the Employee should die while any amount would still
be payable to the Employee hereunder if the Employee had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this agreement to the Employee's devisee, legatee or other designee
or, if there is no such designee, to the Employee's estate.
9. Successors. ATL will require any successor (whether direct or
----------
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of ATL to expressly assume and agree
to perform this agreement in the same manner and to the same extent that ATL
would be required to perform it if no such succession had taken place. Failure
of ATL to obtain such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this agreement and shall entitle the
Employee to compensation from ATL in the same amount and on the same terms as
the
8
Employee would be entitled hereunder if the Employee terminated his
employment for Good Reason.
10. Notices. Any notices required or permitted under this Agreement
-------
may be delivered in person or may be sent to the parties at the addresses set
forth below by certified or registered U.S. mail, postage prepaid, or by
personal delivery to the party.
If to the Employee:
Edward Ray
c/o Interspec, Inc.
110 West Butler Avenue
Ambler, PA 19002-5795
If to ATL:
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, Washington 98041-3003
Attn: General Counsel
Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.
11. Enforceability. If any provision of this Agreement shall be
--------------
invalid or unenforceable, in whole or in part, then such provision shall be
deemed to be modified or restricted to the extent and in the manner necessary to
render the same valid and enforceable, or shall be deemed excised from this
agreement, as the case may require, and this agreement shall be construed and
enforced to the maximum extent permitted by law, as if such provision had been
originally incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case may be.
12. Entire Agreement. This agreement together with ATL's Employment
----------------
Agreement Relating to Inventions, Patents, and Confidential Information
constitutes the entire understanding and agreement by and between the parties
with respect to Employee's employment, and supersedes any other agreements or
understandings between the parties either written or oral.
9
13. Amendments. Any amendment to this Agreement, including any
----------
extension or renewal of the term of employment of the Employee, shall be made in
writing and signed by the parties hereto.
14. Construction. This Agreement shall be construed and enforced in
------------
accordance with the laws of the State of Washington, and shall be enforced in
the State of Washington.
15. Waiver. No claim or right arising out of a breach or default
------
under this agreement shall be discharged in whole or in part by a waiver of that
claim or right unless the waiver is in writing and executed by the aggrieved
party hereto or his or its duly authorized agent. A waiver by any party hereto
of a breach or default by the other party hereto of any provision of this
agreement shall not be deemed a waiver of future compliance therewith, and such
provisions shall remain in full force and effect.
10
16. Counterparts. This agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
Executed by the parties as of the day and year first above written.
/s/ Edward Ray
Advanced Technology ____________________________
Laboratories, Inc. Edward Ray
/s/ Dennis C. Fill
By: ____________________________
Title: Chief Executive Officer
_______________________
EX-13
15
1994 ANNUAL REPORT
EX. 13
[Triangle map of Western Europe and Northern Africa,
ATL Logo and cut out showing image described in caption on Page 1]
ATL 1994 ANNUAL REPORT
ATL is a worldwide leader in the development, manufacture, distribution and
service of diagnostic medical ultrasound systems. These systems are used in
radiology, cardiology, obstetrics and gynecology, vascular, musculoskeletal and
intraoperative applications. The Company is dedicated to the innovation and
development of ultrasound technology that broadens its clinical application
while reducing the cost and trauma of diagnosis and treatment.
[Image: Digital ultrasound image of transplanted kidney]
Page 1 CAPTION: A new color Doppler technology, Color Power Angio/TM/,
illuminates intricate vascular detail in a transplanted kidney.
FINANCIAL SUMMARY
---------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
---------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Revenues $366,152 $360,497 $380,405
Gross Profit 163,583 165,849 177,409
Selling, general and administrative expenses 115,595 110,752 111,883
Research and development expenses 56,426 51,265 46,051
Net income (loss)* (20,204)* (3,321)* 10,729*
Excluding one-time charges (8,191) 954 15,688
BALANCE SHEET
Cash and short-term investments $ 22,901 $ 54,758 $ 81,717
Marketable debt security 4,988 4,988 --
-------- -------- --------
Total cash and investments 27,889 59,746 81,717
Total assets 331,521 329,397 344,523
Long-term debt 17,688 11,600 12,077
Shareholders' equity 191,176 210,835 227,234
---------------------------------------------------------------------------------
Common shares outstanding 13,330 13,101 13,838
---------------------------------------------------------------------------------
*1994 Loss includes $12,013 of merger and related costs, restructuring expenses
and a provision for litigation claim; 1993 Loss includes restructuring
expenses of $4,275, and 1992 Income includes $4,959 of stock distribution
expenses and restructuring expenses related to the Distribution of SpaceLabs.
CHAIRMAN'S LETTER
Fellow Shareholders,
ATL faced a challenging and difficult year in 1994. Fundamental
restructuring of the U.S. health care market and soft economic trends in Europe
created unfavorable conditions in our two largest markets. Nevertheless, the
Company made important progress toward its strategic goal of becoming a leader
in all clinical segments of the worldwide ultrasound market. As a result, we
believe we have established the foundation for significantly improved future
financial performance.
During the year, we broadened our participation in the $2 billion worldwide
ultrasound market through the acquisition of Interspec, Inc., a leading U.S.
cardiology ultrasound company. We now offer a product line that expands our
strong position in the premium performance, general imaging markets to the
large cardiology market as well as to the growing market for high quality,
mid-priced systems.
In the fourth quarter, we introduced our single most important product advance
to date, the HDI(TM) 3000. ATL's fourth generation all-digital system represents
a decade of investment and clinical leadership in digital ultrasound. The HDI
3000 delivers superior performance, shorter examination times, unparalleled ease
of use and the ability to move easily to wherever it is needed in the hospital.
We believe the HDI 3000 superbly addresses the economic imperatives of the new
health care environment in the United States and international markets.
Today's worldwide health care market is undergoing sweeping change driven by
economic and political forces. For the past two years, the U.S. ultrasound
market has contracted significantly as hospitals coped with massive
restructuring and consolidation. Federal and state activity on health care
reform created further uncertainty and postponement of some medical equipment
expenditures. For all of its near term turmoil, we believe that the emerging
health care delivery system with its focus on patient outcomes and cost
containment will favor the use of noninvasive technologies such as ultrasound.
With our strong market position and broad product line, we believe that we are
increasingly well positioned to take advantage of this trend.
Approximately half of ATL's revenues are generated internationally. We enjoy
a market leadership position in Europe, a region now emerging from its worst
recession in over 20 years. Our expansion into the mid-range market with the
newly acquired Apogee (Registration Mark) products showed strong momentum as we
closed the year. We believe this product line will be a key strategic asset in
1995.
The Asia Pacific and Latin American markets continued to demonstrate
excellent growth throughout 1994. We opened our first Latin American subsidiary
in Argentina as well as a regional office in Singapore to support growth
throughout Asia. Most recently we reached agreement to increase our equity
position to a majority share in our joint venture in India.
Financial Performance
The year's financial performance reflected the investments required for the
Interspec acquisition, expansion of international distribution, development and
launch of new products as well as constrained, competitive market conditions.
Worldwide revenues increased 1.6% over 1993 to $366.2 million. Gross margin
declined from 46.0% in 1993 to 44.7% in 1994 due to market pricing pressures.
Operating expenses rose 5.2% to $173.2 million for the reasons noted above. We
had two non-recurring charges totalling $7.0 million for the acquisition of
Interspec and severance costs associated with continuing corporate streamlining
activities. In addition we accrued $5.0 million for ongoing patent litigation
with SRI International, Inc. Excluding these one-time charges, the net loss for
1994 was $8.2 million or $0.62 per share. Including the charges, the loss was
$20.2 million or $1.53 per share. Our balance sheet is strong and continues to
reflect a low level of debt.
We recently announced plans to consolidate Interspec's operations with those
of our headquarters during 1995. This consolidation will bring important
benefits, saving an estimated $8.0 million annually. We expect to accrue
one-time charges of approximately $5.0 million for employee relocation and
severance expenses in 1995.
Dedicated to Ultrasound
As the worldwide economy strengthens, demand for improved health care
increases. ATL is leading in opening new frontiers of ultrasound application
that contribute to improved patient care by reducing the need for more
expensive, invasive diagnostic procedures. It is our dedicated focus on
ultrasound that keeps ATL at the forefront of technology development and
challenges us to respond to clinical and diagnostic demands of health care
environments worldwide.
We would like to thank Ralph M. Barford, who retired from the Board, for his
years of distinguished service to ATL. We welcome new board member Phillip M.
Nudelman, Ph.D., president and CEO of Group Health Cooperative of Puget Sound.
Dr. Nudelman is a nationally recognized expert on the organization and delivery
of cost-effective health care. To ATL employees, I extend my appreciation for
the many contributions throughout the year. We thank you, our shareholders, for
your continued support.
/s/ Dennis C. Fill
Dennis C. Fill
Chairman and Chief Executive Officer
February 17, 1995
ATL WORLDWIDE
From the earliest days of medical practice, physicians have sought to
understand and heal the human body while causing no harm. Technologies such as
ultrasound that offer a means of looking into the body with virtually no risk
to the patient have become an essential health care need throughout the world.
Since 1991, ATL's all-digital High Definition/TM/ Imaging (HDI) has stood as a
hallmark of excellence in diagnostic ultrasound. Today, over 3,000 major
medical research institutions, hospitals and clinics worldwide use HDI systems
to better understand and define anatomical structures, disease states, blood
flow and fetal status. Its advanced capabilities are helping to open new areas
of ultrasound diagnosis. The following examples highlight the impressive
potential of ATL's High Definition ultrasound to provide better health care
while reducing its cost.
[Graphic: Employees assembling ultrasound units, over background of
Northern Hemisphere]
Page 4 CAPTION: SEATTLE, WASHINGTON Design and manufacture of HDI 3000 has
achieved certification to the rigorous ISO 9001 international quality standard.
Appendectomies are one of the most common forms of emergency surgery. Yet
studies have determined that the appendix was normal in 10-20 percent of men
undergoing an appendectomy and in as many as 46 percent of women who are
ovulating. A major factor contributing to these unnecessary surgeries is the
difficulty of confirming--or ruling out--appendicitis, a potentially life
threatening situation. Until recently, ultrasound could not routinely
differentiate appendicitis from other causes of pelvic pain. Now, with the
advanced imaging capabilities of HDI technology, clinicians report they can
successfully evaluate the appendix in almost all cases. Visualizing a normal
appendix significantly reduces the number of unnecessary
appendectomies and allows more accurate diagnosis of the actual underlying
problem.
Vascular surgery is another important area where ATL is contributing to
improved patient outcomes while lowering health care costs. Recent studies have
shown that ultrasound used during vascular surgery can reduce the incidence of
post-operative complications requiring corrective surgery. A new scanhead
introduced by ATL is gaining rapid acceptance in this emerging clinical
application. The miniature, lightweight Entos/TM/ CL10-5 broadband scanhead is
designed to be placed directly on the blood vessel allowing the surgeon to
inspect the technical quality of repairs--and perform a surgical revision
immediately if a defect is identified--prior to closure of the incision. This
not only saves patients the trauma and risk of repeat surgery, but potentially
saves hundreds of thousands of dollars annually in health care costs per
hospital.
Musculoskeletal injuries--injuries to muscles, tendons and ligaments--affect
tens of thousands of people each year and are difficult to diagnose and treat.
A variety of expensive, invasive diagnostic techniques are currently used to
evaluate these conditions, from magnetic resonance imaging to arthroscopy to
x-ray. Physicians report that ATL's new CL10-5 scanhead can successfully image
the small superficial structures involved in sports medicine and repetitive
motion injuries such as carpal tunnel syndrome--a new capability that could
help launch ultrasound into orthopedic radiology. In addition to its cost
advantages, ultrasound offers the added benefit of displaying function and
blood flow in real time, allowing evaluation of important diagnostic indicators
such as inflammation and subtle soft tissue changes.
[Graphic: Frontal view of heart within body, over background of Northern
Hemisphere]
Page 5 CAPTION: MUNICH, GERMANY Diagnostic ultrasound is a leading technique
worldwide for the noninvasive assessment of cardiovascular disease.
Ultrasound makes possible the dynamic imaging of musculoskeletal anatomy through
its full range of motion, something not possible with other imaging
technologies.
Breast cancer is a leading cause of death in women worldwide. ATL's work in
women's health continues with the initiation of a breast imaging study in
conjunction with the French government. This study will further assess the
potential of high resolution ultrasound to help differentiate mammographically
indeterminate solid breast lesions, thereby reducing the need for breast
biopsies.
[Graphic: Pregnant woman being scanned by ultrasound technician, over background
of Southern Hemisphere]
Page 6 CAPTION: SAO PAULO, BRAZIL The Apogee 800 system safely reveals vital
information during pregnancy.
Surgical breast biopsies are highly invasive, remove an average of 2.4 cubic
inches of tissue, cause scarring and sometimes deform the breast. A high
percentage are found to be benign. The French study is patterned after ATL's
international, multi-site breast study completed in 1993. In that study,
clinical investigators reported that approximately 37 percent of breast biopsies
could potentially be avoided with the adjunctive use of High Definition
ultrasound following a mammogram with indeterminate findings. In 1994, the U.S.
Food and Drug Administration (FDA) granted expedited review to the Company's
Premarket Approval (PMA) application for this new ultrasound indication. ATL is
currently working with the FDA as they review the study. The French study will
add significantly to the science of breast ultrasound imaging with preliminary
findings expected in a year.
A Demanding New Level of Diagnostic Performance
Health care systems worldwide face increased pressure for both clinical
productivity and diagnostic accuracy. Advances in ultrasound technology are
providing physicians with resolution of anatomical detail that is often
competitive with and sometimes unmatched by more expensive, invasive and time
consuming diagnostic techniques. For reasons of cost and quality, demand for
ultrasound is rising in hospital intensive care units, surgical suites,
emergency rooms and outpatient facilities. As physicians and health care
administrators seek to improve overall patient management, imaging protocols
relying on ultrasound will become more prevalent. These trends are shaping and
changing the use of ultrasound around the world.
[Graphic: Tennis players highlighting ankle and shoulder joints, over background
of Southern Hemisphere]
Page 7 CAPTION: SYDNEY, AUSTRALIA Clinicians report that HDI technology has
the potential to make a major contribution in the management of sports injuries.
In October 1994, ATL introduced its fourth generation all-digital ultrasound
system, the HDI 3000, a system designed to address the increasingly demanding
requirements of the changing health care environment, now and into the next
century. In clinical meetings attended by over 1,500 leading clinicians in
North America, Europe, Latin America and Asia Pacific, the performance,
usability and mobility of the HDI 3000 were hailed as major advances. The
system incorporates the latest in digital technology with the clinical
experience gained from many millions of HDI examinations performed all over the
world. Its proprietary all-digital architecture enables total software control
of image formation, automatically adjusting over 500 individual parameters for
a selected clinical application. This new capability, called Tissue
Specific(TM) Imaging, decreases patient examination time and assists in
obtaining uniformly excellent diagnostic results from patient to patient.
Clinicians report that the new user interface with its intuitive controls
further enhances productivity by sharply reducing the learning time required
when compared with other high performance systems.
The HDI 3000 operates at speeds equivalent to the processing power of a
supercomputer, delivering sharper images and more diagnostic data. It weighs up
to one-third less than other premium performance systems, bringing high
performance ultrasound easily and efficiently to the patient's bedside.
Previously, clinicians were often forced to undertake the risk and expense of
transporting critically ill patients to the imaging department, even when
connected to life support systems, to use the best ultrasound equipment.
The HDI 3000 joined two other important product introductions during the
year, the Apogee 800 and the Access/TM/ Image Management System. The Apogee 800
creates a new class of ultrasound--High Value Imaging. Designed to bring
excellent image quality and clinical versatility at an affordable price, the
Apogee 800 combines premium features, ease of use and mobility. The system can
be configured to address a broad array of clinical needs and has met with
enthusiastic acceptance, especially in international markets.
ATL's Access Image Management System addresses the need to reduce operating
costs and improve productivity by electronically networking the ultrasound
department. This ultrasound image management system provides more efficient
printing processes, automated image archival and retrieval, reduced patient
examination times and improved diagnostic consultations within and between
hospitals. Based on an open network architecture, the Access system connects to
many types of ultrasound systems, printers or other image management products.
This advanced connectivity led to an agreement with Eastman Kodak Company to
interface the Access system and Kodak's multi-modality Ektascan Imagelink/TM/
system. Through this agreement, ATL now participates in the market for image
management systems addressing all diagnostic imaging modalities.
[Graphic: Display of eight scanheads]
Page 8 CAPTION: A range of broadband scanheads gives exceptional clinical
performance.
The evolution of ultrasound technology continues to unfold at an astonishing
pace. From small village clinics to the most sophisticated medical
institutions, ATL ultrasound is helping physicians deliver the highest quality
care, cost-effectively. Twenty years ago, ATL began shipping its first
ultrasound system, the first pulsed Doppler device for noninvasively measuring
blood flow through the chambers of the heart. Now advances capable of detecting
blood flow in vessels too small to be seen by the naked eye are just on the
horizon. The accelerating contributions to human health of this remarkable tool
appear almost limitless.
[Graphic: Artistic rendering of HDI 3000]
Page 9 CAPTIONS: HDI 3000
Easy-to-use interface reduces learning curve, expedites examinations.
Fourth generation, all-digital broadband beamforming increases diagnostic
accuracy.
Advanced software provides self diagnostic testing and easy upgrades,
reducing operating costs.
Proprietary microchips increase performance, speed, and decrease system size
and weight.
Unibody frame and unique caster assembly for high maneuverability.
Ergonomic, intuitive control panel adapts system to user's expertise.
Software optimizes entire system for each selected application.
FINANCIAL REVIEW
---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
----------------------------------------------------------------------------
December 31, December 31, December 31, December 27, December 28,
(Dollars in thousands, except per share data) 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
Revenues $366,152 $360,497 $380,405 $336,392 $347,130
Gross profit 163,583 165,849 177,409 148,925 152,125
Selling, general and
administrative expenses 115,595 110,752 111,883 103,105 102,144
Research and development expenses 56,426 51,265 46,051 42,403 43,033
Income (loss) from operations (21,616) (3,106) 10,438 14,354 3,489
Income (loss) before income taxes (20,858) (1,735) 12,922 16,200 3,323
Net income (loss)* (20,204) (3,321) 10,729 15,237 5,421
Net income (loss) per share $(1.53) $(.24) $.78 $1.19 $.42
PERCENT OF TOTAL REVENUES:
Gross margin 44.7% 46.0% 46.6% 44.3% 43.8%
Selling, general and
administrative expenses 31.6% 30.7% 29.4% 30.7% 29.4%
Research and development expenses 15.4% 14.2% 12.1% 12.6% 12.4%
Income (loss) from operations (5.9%) (.9%) 2.7% 4.3% 1.0%
Income (loss) before income taxes (5.7%) (.5%) 3.4% 4.8% 1.0%
Net income (loss) (5.5%) (.9%) 2.8% 4.5% 1.6%
BALANCE SHEET DATA (END OF PERIOD):
Cash and short-term investments $22,901 $54,758 $81,717 $80,282 $38,802
Receivables 115,871 101,792 102,483 104,892 97,900
Inventories 96,065 88,692 81,546 74,811 87,650
Working capital 127,490 154,062 178,497 164,414 134,976
Marketable debt security 4,988 4,988 -- -- --
Total assets 331,521 329,397 344,523 337,239 306,724
Short-term borrowings, including
current portion of long-term debt 3,818 5,749 4,985 8,501 16,469
Long-term debt 17,688 11,600 12,077 16,047 18,404
Shareholders' equity 191,176 210,835 227,234 209,715 180,222
----------------------------------------------------------------------------------------------------------------------------
*The loss from operations in 1994 includes $12,013 of merger and related costs,
restructuring expenses and a provision for litigation claim.
The loss from operations in 1993 includes restructuring expenses of $4,275.
Income from operations in 1992 includes $4,959 of stock distribution expenses
and restructuring expenses related to the Distribution of SpaceLabs.
Income from operations in 1991 includes a $6,338 award as the result of a
lawsuit against a competitor and a $7,393 gain on the sale of a subsidiary.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MERGER WITH INTERSPEC, INC.
ATL (the Company) merged with Interspec, Inc. (Interspec), a manufacturer of
diagnostic medical ultrasound systems and transducers headquartered in Ambler,
Pennsylvania, in May 1994. The merger was accounted for as a pooling of
interests business combination. Therefore, the Company's consolidated financial
statements and information reported for periods prior to the merger have been
restated to include Interspec as if the companies had been combined for all
periods presented.
RESULTS OF OPERATIONS
The Company operates in the worldwide diagnostic medical ultrasound imaging
systems industry. Like many high-technology electronic medical systems
industries, the ultrasound industry is highly competitive and market demand is
influenced by a variety of factors. These include the introduction of new
technologies which offer improved clinical capabilities and create demand for
new products, the relative cost-effectiveness and clinical utility of competing
technologies, the structure of health-care delivery organizations, government
policies with respect to regulation, reimbursement and containment of health
care costs and the economies and demographics of the countries where the
Company markets its products. ATL sells its products to hospitals, clinics and
physicians worldwide for use in radiology, cardiology, obstetrics and
gynecology, vascular, musculoskeletal and intraoperative applications. Although
ultrasound systems are typically sold based on image quality, Doppler
sensitivity, product reliability, upgradeability, clinical versatility and ease
of use, price competition is an important factor. Changes in the health care
environment in recent years leading to an increased focus on cost containment
as well as slow economic growth in many countries have resulted in increased
competition in the ultrasound industry.
The Company's competitive position and financial results are influenced by
fluctuations in foreign currency exchange rates. In 1994, international
revenues accounted for 46% of total revenues, most of which were denominated in
foreign currencies. Some of ATL's competitors are foreign companies whose
production costs are incurred in foreign currencies. As a result, a
strengthening of the value of the U.S. dollar against other major currencies
may adversely impact the Company's competitive position and financial results.
This impact, however, will be partially offset by the translation of operating
expenses incurred in foreign currencies by the Company's international sales
and service operations into U.S. dollars. The Company hedges foreign exchange
exposure related to its intercompany accounts payable and receivable balances
which are denominated in foreign currencies through the use of forward exchange
contracts. The Company does not otherwise hedge foreign exchange exposures.
In 1994, the Company reported a net loss of $20.2 million or $1.53 per
share. The 1994 net loss reflects the depressed U.S. health care market and
soft European economic conditions, higher operating expenses related to new
product development and introduction, and three non-recurring charges totaling
$12.0 million or $0.91 per share discussed later in this report. In 1993, the
Company reported a net loss of $3.3 million or $.24 per share, which included
restructuring expenses of $4.3 million.
REVENUES AND GROSS PROFIT
-----------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992
-----------------------------------------------------------------------------
Total revenues $366.2 $360.5 $380.4
Percent change 2% (5%) 13%
Gross profit $163.6 $165.8 $177.4
As a % of revenues 44.7% 46.0% 46.6%
-------------------------------------------------------------------------------
In 1994, revenues increased 2% from 1993 to $366.2 million, primarily the
result of higher service revenues attributable to the growing installed base of
the Company's products and the expansion of its service operations in
international markets. International revenues increased 5% to $167.2 million or
45.7% of total revenues, as sales in the Asia Pacific and Latin America regions
continued to grow. In Europe, revenues decreased slightly from 1993. The
softness of the European economies continued in 1994 and ATL experienced
competitive pressures on unit prices on the Ultramark(TM) 9 and High
Definition Imaging (HDI) products. However, the Company realized benefits from
the integration of Interspec's mid-range Apogee product lines into the Company's
established distribution network in Europe during the second half of 1994 which
partially offset the impact of the competitive price pressures. U.S. revenues
remained nearly flat compared with 1993, as the market for medical equipment
continued to be affected by the uncertainties created by ongoing restructuring
of health care delivery systems and debates over federal health care reform
legislation and associated competitive pressures.
In October 1994, the Company introduced the HDI 3000, ATL's fourth
generation all-digital ultrasound system. The HDI 3000 is a high performance,
premium priced system which the Company believes will provide improved
diagnostic performance and clinical productivity in a lighter-weight, more
mobile system. The Company believes this product addresses many of the changing
needs of the diagnostic medical systems market. Revenue shipments of the HDI
3000 began in November 1994.
In 1993, revenues were $360.5 million, down 5% from the previous year. The
decrease in 1993 revenues primarily reflects the constrained U.S. medical
equipment market discussed earlier, as U.S. revenues decreased 12% from 1992.
International revenues increased 4% from 1992 to $159.7 million or 44.3% of
total revenues with expansion occurring primarily in the Asia Pacific and Latin
America regions. The Company's product mix continued to shift toward the high
performance, premium priced systems included in the HDI product line, which
constituted nearly two-thirds of product sales in 1993.
GRAPH - REVENUES ($ in millions)
1992 1993 1994
U.S. $228 $201 $199
Europe $110 $106 $105
APLAC* $ 42 $ 53 $ 62
*Asia Pacific, Latin America, and Canada
Gross profit was $163.6 million in 1994 or 44.7% of revenues. In 1993, gross
profit was $165.8 million or 46.0% of revenues. The reduction in gross profit
reflects lower product margins due to the adverse impact of competitive price
pressures, lower priced configurations and an overall decline in unit volumes.
However, the Company benefited from a favorable change in product mix from the
older Ultramark 4 and Ultramark 9 products to newer products in the Ultramark 9
HDI, HDI 3000, Apogee 800 and CX product families and, during 1994, product
gross margins increased sequentially each quarter. Gross margin on service
revenues continued to increase in 1994 to 37.5% from 35.8% in 1993 and 34.3% in
1992 on improving operating efficiencies.
GRAPH - GROSS MARGIN
1992 1993 1994
Gross Margin 46.6% 46.0% 44.7%
OPERATING EXPENSES
------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992
------------------------------------------------------------------
Selling, General
and Administrative $115.6 $110.8 $111.9
As a % of revenues 31.6% 30.7% 29.4%
Research
and Development $ 56.4 $ 51.3 $ 46.1
As a % of revenues 15.4% 14.2% 12.1%
Other Expense, net $ 1.2 $ 2.7 $ 4.1
As a % of revenues .3% .7% 1.1%
Non-recurring Costs
and Expenses $ 12.0 $ 4.3 $ 5.0
As a % of revenues 3.3% 1.2% 1.3%
Selling, general and administrative (SG&A) expenses for 1994 were $115.6
million, a 4% increase from 1993. The Company continued to expand its
international operations, including the opening of two new direct sales and
service subsidiaries in Argentina and Singapore. The introduction of the HDI
3000 in fourth quarter 1994 also resulted in increased sales and marketing
expenses compared with 1993. In 1993, SG&A expenses decreased slightly to
$110.8 million from the previous year, reflecting the impact of the August 1993
restructuring discussed later, partially offset by the continued growth of
international sales and marketing operations and expenses related to the
introduction of the Extended Signal Processing (ESP) option or upgrade for the
Ultramark 9 HDI system.
Research and development (R&D) expenses in 1994 increased 10% to $56.4
million or 15.4% of revenue. In 1993, R&D expenses were $51.3 million or 14.2%
of revenue. ATL continues to invest in product development programs to enhance
its position in proprietary and other technologies. Higher R&D expenses, in
part, reflected the development program for HDI 3000. In addition to the
introduction of the HDI 3000 in October 1994, ATL introduced three new
broadband scanheads which expand the HDI system's clinical capabilities: the
Entos CL10-5 intraoperative scanhead for vascular surgery, the P7-4 phased
array scanhead for pediatric cardiology and neonatal imaging, and the
multiplane transesophageal MPT7-4 scanhead for cardiac imaging. Shipments of
the MPT7-4 will begin in 1995. The Company also introduced Color Power
Angio(TM) Imaging, a new color Doppler technology for the detection and
visualization of small vessel blood flow. These product introductions followed
the 1993 introduction of the ESP technology and four new broadband scanheads
for the HDI system.
GRAPH - RESEARCH AND DEVELOPMENT
($ in millions)
1992 1993 1994
Research and development expenses $46.1 $51.3 $56.4
Other expense, net totaled $1.2 million in 1994, including foreign exchange
losses of $0.1 million, primarily related to intercompany accounts of ATL's
foreign subsidiaries and forward foreign currency exchange contracts, and
Washington state business and occupation (B&O) tax of $0.7 million. B&O tax is
a gross receipts tax for products manufactured in the State of Washington. In
1993, other expense, net was $2.7 million, including $1.3 million in foreign
exchange losses and $1.1 million for B&O tax. In 1993, other expense, net also
included a $1.1 million gain on the sale of an investment in a third party.
RESTRUCTURING OF OPERATIONS
As the competitive pressures in the ultrasound market intensified during
1993 and 1994, the Company undertook two restructurings of operations to
streamline processes and improve productivity across all areas of the Company,
including manufacturing, customer service, sales and marketing, engineering and
administration. In the fourth quarter of 1994, the Company reduced its
workforce by approximately 80 full-time and temporary positions, or about three
percent, and reported restructuring expenses of $1.6 million which provided for
severance and outplacement costs.
In August 1993, the Company reduced its worldwide workforce by approximately
11%. As a result of this restructuring, the Company reported a charge of $4.3
million which provided for severance and other costs associated with the
restructuring.
The Company employed 2,630 and 2,492 employees at December 31, 1994 and
1993, respectively, reflecting growth in direct manufacturing,
corporate marketing, the transducer and image management units and
international sales operations.
MERGER AND OTHER COSTS
The Company incurred non-recurring charges in 1994 of $5.4 million for
merger and other costs. The non-recurring charges included $2.3 million for
legal, accounting, investment advisory, printing and other professional
services; $1.6 million primarily for the consolidation of Interspec's
international personnel and facilities into the Company's operations; and $1.5
million associated with the bankruptcy of Interspec's former distributor in
Italy which resulted in accounts receivable being garnished in a bankruptcy
proceeding.
PROVISION FOR LITIGATION CLAIM
The Company accrued a provision in 1994 of $5.0 million for a litigation
claim. In December 1994, the U.S. Court of Appeals for the Federal Circuit
affirmed a November 1992 partial summary judgment order of a U.S. District
Court in California which determined that the Company infringed a U.S. patent
of SRI International, Inc. related to an electrical circuit alleged to be used
in the Company's Ultramark 4 system and two discontinued products. The patent
has since expired. In a February 1993 press release, SRI stated it is seeking
over $5.0 million in damages. The actual amount of the claim will be determined
by a jury trial in the California District Court scheduled to commence in March
1995. The jury trial will consider the computation of damages and whether the
patent was willfully infringed by the Company. If willful infringement is found
the court may enhance damages by up to three times. Interest will be imposed on
the amount of actual damages found. There are no assurances that the jury trial
will not result in substantial damages against the Company or that such damages
will not be enhanced by the court. The Company believes it has meritorious
defenses to allegations of willful infringement and will continue to vigorously
assert its positions at trial and any subsequent proceedings.
INVESTMENT INCOME AND INTEREST EXPENSE
---------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992
---------------------------------------------------------------------
Investment Income $ 2.1 $ 3.1 $ 4.6
Interest Expense (1.4) (1.7) (2.1)
---------------------------------------------------------------------
Investment income decreased in 1994 and 1993, reflecting lower cash balances
available for investment in these periods. This decrease is offset by a
reduction in interest expense in both periods as in May 1994 the Company paid
the outstanding balances of a bank line of credit and two long-term building
mortgages utilized by Interspec prior to the merger and repurchased $3.5 million
of 11% subordinated long-term debt in the fourth quarter of 1992.
TAXES AND NET INCOME (LOSS)
(Dollars in millions) 1994 1993 1992
-----------------------------------------------------------------------
Income (Loss) Before
Income Taxes* $(20.9) $(1.7) $12.9
Income tax expense (benefit):
Domestic income taxes $ (1.3) $ .7 $ 1.5
Foreign income taxes .6 .9 .7
------ ----- -----
$ (.7) $ 1.6 $ 2.2
As a % of income (loss)
before income taxes 3.4% (94.1%) 17.0%
Net Income (Loss) $(20.2) $(3.3) $10.7
-------------------------------------------------------------------------
*1994 Loss includes $12,013 of merger and related costs, restructuring expenses
and a provision for litigation claim; 1993 Loss includes restructuring
expenses of $4,275; and 1992 Income includes $4,959 of stock distribution
expenses and restructuring expenses related to the Distribution of SpaceLabs.
-------------------------------------------------------------------------
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). Under FAS 109, the provision for income taxes and the effective tax rate
are subject to volatility. Changes in statutory rates and taxable income will
affect the amount of net deferred tax assets which can be recognized under FAS
109 and the related provision for income taxes.
In determining the realizability of deferred tax assets, the Company
assessed its deferred tax liabilities, tax planning strategies and potential
carryback opportunities.
During 1994 and 1993, the Internal Revenue Service completed examinations of
the Company for the years 1991 and 1992, and 1989 and 1990, respectively. The
results of the examinations allowed the Company to reduce its liability for
income taxes by approximately $2 million in both 1994 and 1993. The Company
believes it has made adequate provision for income taxes that may become
payable with respect to open tax years.
The provision for income taxes includes benefits from the utilization of
foreign tax loss carryforwards. U.S. and foreign tax loss carryforwards of
approximately $7.9 million remain at the end of 1994. No benefit has been
recognized for these remaining carryforwards due to uncertainty surrounding
their realization.
GRAPH - NET INCOME (LOSS)
($ in millions) 1992 1993 1994
As reported $10.7 $(3.3) $(20.2)
Excluding one-time charges $15.7 $ 1.0 $ (8.2)
CAPITAL RESOURCES AND LIQUIDITY
---------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992
---------------------------------------------------------------------------
Cash and short-term
investments $22.9 $54.8 $81.7
Long-term marketable
debt security 5.0 5.0 --
Receivables 115.9 101.8 102.5
Inventories 96.1 88.7 81.5
Short-term borrowings,
including current portion
of long-term debt 3.8 5.7 5.0
Long-term debt 17.7 11.6 12.1
Shareholders' equity 191.2 210.8 227.2
Return on shareholders'
equity (10.1%) (1.5%) 4.9%
---------------------------------------------------------------------------
The Company continues to finance its operations primarily with internal
resources, including cash and short-term investments. The Company had $22.9
million in cash and cash equivalents at December 31, 1994 and holds a $5.0
million marketable debt security which matures in 1996. In May 1994, the
Company paid the outstanding balance of Interspec's short-term borrowings at
the time of the merger with ATL. At December 31, 1994, short-term borrowings
represent working capital lines of credit maintained at several of the
Company's foreign subsidiaries to facilitate intercompany cash flow.
Cash used by operating activities was $12.0 million in 1994. At December 31,
1994, receivables were $115.9 million, an increase of $14.1 million from
December 31, 1993 due to higher fourth quarter revenues, increased lease
contract receivables which the Company expects to sell to outside funding
sources in 1995, higher installment receivables in South America and higher
unbilled service maintenance contracts. Inventory levels increased in 1994 to
support the introduction of new products.
In 1994, the Company sold property formerly used as the Company's
manufacturing facility in Germany for $3.2 million. Normal additions to
property, plant and equipment totaled $15.0 million in 1994. Depreciation and
amortization expense for 1994 was $15.9 million.
Long-term debt at December 31, 1994 was $17.7 million, up $6.1 million from
1993. In December 1994, the Company purchased land and a building adjacent to
the corporate headquarters and main manufacturing plant in Bothell, Washington.
The purchase of the building was financed with an $11.5 million long-term
variable interest mortgage. The interest rate is based on LIBOR plus 1.25%. The
new facility will be used to consolidate operations at the Company's corporate
headquarters campus. In May 1994, the Company paid the $2.8 million outstanding
balance of two mortgages on Interspec facilities. In addition, $0.5 million of
the outstanding subordinated convertible debentures were converted by the
holders into the Company's common shares in December 1994 and $0.2 million was
paid in cash in accordance with the repayment schedule.
In 1994 and 1993, the Company repurchased 22,500 and 794,000 shares,
respectively, of its own common stock in the open market for $13.8 million
under a share repurchase program intended to service the Company's benefit
plans. The Company was authorized in 1993 to purchase up to 1,000,000 shares
under this program, subject to certain criteria.
The Company has occasionally utilized its cash resources to make
acquisitions of technology or small technology-related businesses. The Company
may undertake further acquisitions of technology in the future.
In addition to its cash balances, the Company has available unsecured credit
facilities of $25 million, including a committed line of credit of $15 million.
Barring any unforeseen circumstances or events, management expects existing
cash and available credit lines and funds generated from operations should be
sufficient to meet the Company's operating requirements for 1995.
OTHER BUSINESS FACTORS
Companies in high technology businesses can from time to time experience
difficulty with the availability of technology employed in their products.
While the Company strives to develop alternate sources for the components it
requires and works closely with vendors of specialty items, the Company's
vendors of highly specialized and unique parts such as custom semiconductor
devices can occasionally experience difficulty in the manufacture of products.
Vendors can also experience difficulty in meeting quality standards the Company
requires of its vendors. Such difficulties can lead to long order lead times or
delays in the Company's manufacture of products. Manufacturing efforts can
also be impeded by third party assertions of patent infringement by the
Company's products, such as the litigation claim previously discussed. There
can be no assurance the Company will not be subject to claims of patent
infringement by other parties or that such claims will not require
the Company to pay substantial damages or delete certain features from its
products or both.
The Company is subject to certain laws and regulations of the U.S. Food and
Drug Administration (FDA) regarding the design, documentation, manufacture,
marketing and reporting of the performance of its products. In March 1994, the
Company received the FDA's observations from the follow-up to a routine 1992
inspection, which the Company believes will not lead to further regulatory
action by the FDA. The Company also received observations from a routine FDA
inspection of its Allendale, New Jersey facility, which the Company also
believes will not lead to further regulatory actions by the FDA. The Company's
ability to obtain timely FDA export and new product approvals is dependent upon
the results of such inspections. The Company can also incur substantial expense
in responding to process improvements and modification of products previously
sold to customers which stem from comments and new requirements of the FDA.
The Company's regulatory compliance programs have been expanded to encompass
verification of the Company's compliance with international standards for
medical device design, manufacture, installation and servicing known as ISO
9001 quality standards. In 1994, four of the Company's five manufacturing
facilities, including its primary facility in Bothell, obtained ISO 9001
registration. In addition, several of the Company's international sales and
service subsidiaries received certification under the ISO 9002 standards for
sales and service entities. ISO 9001 quality standards will become mandatory in
Europe in 1999. The FDA is in the process of adopting the ISO 9001 standards as
regulatory medical device standards for the United States, and it is
anticipated these standards will be phased in for U.S. manufacturers of medical
devices over a period of time.
SUBSEQUENT EVENT
On February 15, 1995, the Company announced a new corporate structure that
will consolidate the Interspec operations located in Ambler, Pennsylvania with
the Company's headquarters operations in Bothell, Washington. The consolidation
will result in relocation of Apogee products manufacturing to Bothell, closure
of the Ambler facility and an estimated net reduction of full-time positions of
approximately four percent of the Company's workforce. The Company expects to
incur approximately $5 million in 1995 for employee retention incentives,
severance payments and relocation expenses associated with the consolidation
and plant closure. The Company has preliminary plans to sell the Ambler real
estate, which has a net book value of $7 million, in late 1995 or early 1996
after operations are transitioned to Bothell. The approximate $5 million charge
for consolidation excludes any loss that might be realized on the disposition
of the Ambler real estate.
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
ADVANCED TECHNOLOGY LABORATORIES, INC.
We have audited the accompanying consolidated balance sheets of Advanced
Technology Laboratories, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
Technology Laboratories, Inc. and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in note 1, the Company changed its method of accounting for
investments to adopt the provisions of the Financial Accounting Standards
Board's SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities, at January 1, 1994.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Seattle, Washington
February 10, 1995
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
December 31, December 31,
(In thousands) 1994 1993
-------------------------------------------------------------------------
ASSETS
Current Assets
Cash and short-term investments $ 22,901 $ 54,758
Receivables 115,871 101,792
Inventories 96,065 88,692
Prepaid expenses 2,261 2,180
Deferred income taxes 8,577 8,974
-------- --------
Total current assets 245,675 256,396
Marketable Debt Security 4,988 4,988
Property, Plant and Equipment, Net 70,338 59,811
Other Assets, Net 10,520 8,202
-------- --------
$331,521 $329,397
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,842 $ 5,279
Current portion of long-term debt 1,976 470
Accounts payable and accrued expenses 75,704 60,928
Deferred revenue 36,309 30,711
Taxes on income 2,354 4,946
-------- --------
Total current liabilities 118,185 102,334
Long-Term Debt 17,688 11,600
Deferred Income Taxes 4,472 4,628
Commitments, Contingencies and Subsequent Event
Shareholders' Equity 191,176 210,835
-------- --------
$331,521 $329,397
-------------------------------------------------------------------------
Common shares outstanding 13,330 13,101
-------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------------------
YEAR ENDED
----------------------------------------------
December 31, December 31, December 31,
(In thousands, except per share data) 1994 1993 1992
-------------------------------------------------------------------------------------------
Revenues
Product sales $288,294 $289,561 $312,664
Service 77,858 70,936 67,741
-------- -------- --------
366,152 360,497 380,405
-------- -------- --------
Cost of Sales
Cost of product sales 153,944 149,110 158,502
Cost of service 48,625 45,538 44,494
-------- -------- --------
202,569 194,648 202,996
-------- -------- --------
Gross Profit 163,583 165,849 177,409
Operating Expenses
Selling, general and administrative 115,595 110,752 111,883
Research and development 56,426 51,265 46,051
Merger and other costs 5,391 -- --
Provision for litigation claim 5,000 -- --
Restructuring charges 1,622 4,275 3,764
Stock distribution expenses -- -- 1,195
Other expense, net 1,165 2,663 4,078
-------- -------- --------
185,199 168,955 166,971
-------- -------- --------
Income (Loss) From Operations (21,616) (3,106) 10,438
Investment income 2,129 3,088 4,633
Interest expense (1,371) (1,717) (2,149)
-------- -------- --------
Income (Loss) Before Income Taxes (20,858) (1,735) 12,922
Income tax expense (benefit) (654) 1,586 2,193
-------- -------- --------
Net Income (Loss) $(20,204) $ (3,321) $ 10,729
-------------------------------------------------------------------------------------------
Net Income (Loss) Per Share $ (1.53) $ (.24) $ .78
-------------------------------------------------------------------------------------------
Weighted average common shares and
equivalents outstanding 13,178 13,587 13,692
-------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------------------
YEAR ENDED
----------------------------------------------
December 31, December 31, December 31,
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $(20,204) $ (3,321) $ 10,729
Non-cash charges (credits) to net income (loss):
Depreciation and amortization 15,928 14,501 13,479
Deferred income tax expense (benefit) 241 3,207 (1,361)
Gain on sale of investment -- (1,125) --
Restructuring charge -- -- 1,400
Changes in:
Receivables (14,827) (2,662) 550
Inventories (4,492) (8,812) (8,079)
Prepaid expenses (242) (240) (558)
Accounts payable and accrued expenses 13,231 (1,676) 7,262
Deferred revenue 5,389 1,833 4,028
Taxes on income (2,669) 2,056 (518)
Other (4,366) 657 (335)
-------- -------- --------
Cash provided (used) by operations (12,011) 4,418 26,597
-------- -------- --------
INVESTING ACTIVITIES
Purchases of short-term investments (11,973) (8,968) (67,722)
Proceeds from maturing short-term investments 14,018 53,870 49,384
Investment in marketable debt security -- (4,988) --
Investment in property, plant and equipment (14,958) (15,187) (11,991)
Proceeds from sale of building 3,224 -- --
Proceeds from sale of investment -- 3,235 --
Other (389) (3,171) (1,702)
-------- -------- --------
Cash provided (used) by investing activities (10,078) 24,791 (32,031)
-------- -------- --------
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings (4,687) 751 (3,457)
Repayment of long-term debt (3,377) (464) (4,028)
Purchases of common shares (369) (13,753) --
Exercise of stock options 801 223 28,514
Tax effect of employee stock transactions -- (53) 8,107
Contribution to SpaceLabs -- -- (36,212)
Intercompany settlement with Spacelabs -- 1,055 (4,975)
-------- -------- --------
Cash used by financing activities (7,632) (12,241) (12,051)
-------- -------- --------
Effect of exchange rate changes (91) 975 582
-------- -------- --------
Increase (decrease) in cash and cash equivalents (29,812) 17,943 (16,903)
Cash and cash equivalents, beginning of year 52,713 34,770 51,673
-------- -------- --------
Cash and cash equivalents, end of year $ 22,901 $ 52,713 $ 34,770
-------------------------------------------------------------------------------------------------
Short-term investments -- $ 2,045 $ 46,947
Long-term marketable debt security $ 4,988 $ 4,988 --
-------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------
Common Unearned Foreign
Stock and Restricted Currency Total
Paid-in Share Accumulated Translation Shareholders'
(In thousands, except per share data) Capital Compensation Deficit Adjustment Equity
-------------------------------------------------------------------------------------------------------------------
Balance, December 27, 1991 $232,461 $(1,278) $(21,121) $ (347) $209,715
Net income -- -- 10,729 -- 10,729
Issuance of restricted shares 2,364 (2,364) -- -- --
Amortization of restricted share
compensation -- 1,350 -- -- 1,350
Exercise of employee stock options 28,514 -- -- -- 28,514
Tax effect of employee stock
transactions 8,107 -- -- -- 8,107
Foreign currency translation
adjustment -- -- -- (2,326) (2,326)
Distribution of SpaceLabs (29,148) 293 -- -- (28,855)
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 242,298 (1,999) (10,392) (2,673) 227,234
Net loss -- -- (3,321) -- (3,321)
Issuance of restricted shares 584 (584) -- -- --
Amortization of restricted share
compensation -- 1,241 -- -- 1,241
Exercise of employee stock options 223 -- -- -- 223
Tax effect of employee stock
transactions (53) -- -- -- (53)
Issuance of shares to benefit plan 289 -- -- -- 289
Repurchase of common shares (13,753) -- -- -- (13,753)
Foreign currency translation
adjustment -- -- -- (2,080) (2,080)
Cash received from SpaceLabs
under Tax Allocation Agreement 1,055 -- -- -- 1,055
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 230,643 (1,342) (13,713) (4,753) 210,835
Net loss -- -- (20,204) -- (20,204)
Issuance of restricted shares 1,439 (1,439) -- -- --
Amortization of restricted share
compensation -- 1,002 -- -- 1,002
Exercise of employee stock options 801 -- -- -- 801
Issuance of shares to benefit plan 322 -- -- -- 322
Conversion of long-term debt to
common shares 492 -- -- -- 492
Repurchase of common shares (369) -- -- -- (369)
Foreign currency translation
adjustment -- -- -- 2,477 2,477
Adjustment due to change of
Interspec's fiscal year -- -- (4,180) -- (4,180)
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $233,328 $(1,779) $(38,097) $(2,276) $191,176
-------------------------------------------------------------------------------------------------------------------
---------------------------------------------- --------------------------------------------
Preferred Common Preferred Common
1994 Shares Shares 1993 Shares Shares
---------------------------------------------- --------------------------------------------
Par value per share $25.00 $.01 Par value per share $25.00 $.01
Authorized shares 6,000 50,000 Authorized shares 6,000 50,000
Issued shares -- 13,330 Issued shares -- 13,845
Outstanding shares -- 13,330 Outstanding shares -- 13,101
Common shares held Common shares held
in treasury -- -- in treasury -- 744
---------------------------------------------- --------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Advanced
Technology Laboratories, Inc. and its wholly-owned subsidiaries (the Company).
All significant intercompany accounts and transactions have been eliminated in
consolidation.
As described further in Note 2, the Company merged with Interspec, Inc.
(Interspec) in May 1994. The merger was accounted for as a pooling of interests
business combination. Therefore, the Company's consolidated financial
statements and information reported for periods prior to the merger have been
restated to include Interspec as if the companies had been combined for all
periods presented.
Operations
The Company develops, manufactures, markets and services diagnostic medical
ultrasound imaging systems worldwide. These systems are used primarily in
radiology, cardiology, obstetrics and gynecology, vascular, musculoskeletal and
intraoperative applications.
Inventories
Inventories are valued at the lower of cost, determined by the first-in,
first-out method, or market. The Company maintains a uniform policy for its
worldwide operations to provide adequate reserves for inventory obsolescence.
Property, Plant and Equipment
The costs of significant additions and improvements to property, plant and
equipment are capitalized. Maintenance and repair costs are expensed as
incurred. Buildings, machinery and equipment are depreciated primarily on the
straight-line method over the following estimated useful lives:
Buildings 40 years
Machinery and equipment 3-10 years
Leasehold improvements are amortized over the shorter of their useful lives
or the term of the lease.
Cost in Excess of Net Assets of Businesses Acquired
The cost in excess of net assets of businesses acquired is included in Other
Assets and is amortized on the straight-line method over periods ranging from
six to nine years.
Foreign Currency
Revenues, costs and expenses of the Company's international operations
denominated in foreign currencies are translated to U.S. dollars at average
rates of exchange prevailing during the year. Assets and liabilities are
translated at the exchange rate on the balance sheet date. Translation
adjustments resulting from this process are accumulated and reported in
shareholders' equity.
Realized and unrealized gains and losses on foreign currency transactions
and forward exchange contracts are included in other expense, net.
Revenue
Revenue is generally recognized upon shipment of products and delivery of
services to customers.
Deferred revenue consists of deposits received from customers and
unrecognized service contract revenue. Service contracts are generally issued
for a 12-month period and are carried as unbilled receivables from date of
issue until invoiced to the customer in accordance with the terms of the
contract. The revenue derived from these contracts is initially deferred and
subsequently recognized on the straight-line method over the lives of the
contracts.
Sales-type Leases
In 1993, the Company began a product leasing program for its customers.
Under this program, the Company leases its medical ultrasound imaging equipment
to customers under sales-type leases with terms ranging from two to five years.
The Company currently sells its lease contract receivables to outside parties
on a regular basis, without recourse. Lease contract receivables which have not
been sold as of the balance sheet date are included in Trade Receivables.
Product Warranty
At the time of shipment, the Company provides for the estimated cost to
repair or replace products sold under warranties. Such warranties generally
cover a 12-month period.
Advertising Expenses
Advertising and promotion costs are expensed when incurred. The Company
incurred advertising costs of $4,442, $3,246 and $3,089 in 1994, 1993 and 1992,
respectively.
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). FAS 109 requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements and tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to be recovered or
settled.
Pension Plans
Pension costs are funded in accordance with requirements set forth by the
Employee Retirement Income Security Act of 1974.
Financial Instruments
The Company enters into foreign currency exchange contracts to hedge against
exposure to foreign currency fluctuations associated with intercompany
receivables and payables denominated in foreign currencies. Foreign exchange
contracts generally have maturities of less than one year. Gains and losses
resulting from these instruments are recognized in the same period as the
underlying hedged transactions. At December 31, 1994 and 1993, the Company had
foreign currency exchange contracts totalling $24,646 and $19,500,
respectively. The Company does not use foreign currency exchange contracts or
other derivative financial instruments for speculative or trading purposes.
The Company has other financial instruments consisting of cash and
short-term investments, trade receivables, marketable debt security, long-term
installment receivables, accounts payable, short-term borrowings and long-term
debt. The fair value of the Company's financial instruments based on current
market indicators approximates their carrying amount.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash investments, foreign currency exchange contracts and
trade receivables. The Company's investment portfolio is diversified and
consists primarily of investment grade securities that approximate fair market
value. The Company concentrates its foreign currency exchange contracts
primarily with one major U.S. financial institution. Credit loss from
nonperformance by this counterparty is not anticipated.
Concentrations of credit risk with respect to receivables are limited due to
the Company's large customer base, generally short payment terms and the
dispersion of customers across geographic areas. The Company generally performs
credit evaluations of its customers' financial condition and requires
collateral, such as letters of credit, in certain circumstances. In response to
market conditions, the Company expanded sales in certain South American
countries where extended credit terms are offered. The long-term installment
receivables created from these sales are subject to greater risk of loss than
the remainder of the Company's trade accounts. The Company believes it has
adequately provided for these risks in the allowance for doubtful accounts.
Investment Securities
In January 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115 (FAS 115) which addresses accounting for
certain investments in debt and equity securities. Under FAS 115, the
accounting methodology is based on the classification of marketable debt and
equity securities into three categories: held-to-maturity, trading securities
and available-for-sale. The Company intends to hold its marketable debt
security to maturity and therefore carries the balance at cost as specified by
FAS 115.
Per Share Data
Per share data is based on the weighted average number of common shares and
dilutive common share equivalents outstanding. Common share equivalents are
calculated under the treasury stock method and consist of unexercised employee
stock options.
Reclassifications
Certain amounts reported in previous years have been reclassified to conform
to the 1994 presentation.
2. ACQUISITION OF INTERSPEC, INC.
On May 17, 1994, the Company completed its merger with Interspec. Interspec
develops, manufactures, markets and services diagnostic medical ultrasound
imaging systems and related supplies and accessories for physicians' offices,
clinics and hospitals. To effect the merger, the Company issued approximately
2,593,000 shares of common stock for all of the outstanding common stock of
Interspec, based on an exchange ratio of 0.413 share of the Company's stock for
each share of Interspec stock (Exchange Ratio). The merger was accounted for as
a pooling of interests business combination.
Combined and separate results of operations of ATL and Interspec prior to
the merger are presented below. Intercompany revenues and cost of sales are
eliminated in the combined results.
--------------------------------------------------------------------------------
ATL Interspec Eliminations Combined
--------------------------------------------------------------------------------
First fiscal quarter of 1994
Revenues $ 75,896 $15,666 $(2,205) $ 89,357
Net income 742 201 (642) 301
Fiscal year - 1993
Revenues $304,511 $61,377 $(5,391) $360,497
Net income (5,106) 1,950 (165) (3,321)
Fiscal year - 1992
Revenues $323,711 $60,343 $(3,649) $380,405
Net income 7,407 3,232 90 10,729
-------------------------------------------------------------------------------
Prior to the merger, Interspec reported its financial statements based on a
November 30 fiscal year end. To conform Interspec's financial reporting period
to the Company's December 31 year-end, the results of Interspec's operations
for the one-month period ended March 31, 1994 have been excluded from the
Consolidated Statements of Operations and Cash Flows and accounted for as an
adjustment to retained earnings. Therefore, the Consolidated Statements of
Operations and Cash Flows include 12 months of Interspec's operations for all
years presented. For the one month ended March 31, 1994, Interspec had revenues
of $3,320, costs and expenses of $7,500 and a net loss of $4,180. These results
included $2,148 of expenses related to the termination of dealer arrangements
in countries outside the United States.
In the second quarter of 1994, the Company recorded non-recurring charges of
$5,391 for merger and other costs. The non-recurring charges included $2,302
for legal, accounting, investment advisory, printing and other professional
services; $1,561 primarily for the consolidation of Interspec's international
personnel and facilities into the Company's operations; and $1,528 associated
with the bankruptcy of Interspec's former distributor in Italy which resulted
in accounts receivable being garnished in a bankruptcy proceeding. The $5,391
total is reported separately as "Merger and Other Costs".
3. DISTRIBUTION OF SPACELABS MEDICAL, INC.
On June 26, 1992, the Company (previously named Westmark International
Incorporated) distributed to its shareholders all of the common stock of
SpaceLabs Medical, Inc., a wholly-owned subsidiary, on a one-for-one basis (the
Distribution). The Distribution had the effect of dividing the Company into two
separate, publicly traded companies: Advanced Technology Laboratories, Inc. and
SpaceLabs Medical, Inc. (SpaceLabs).
The spin-off of a company, such as SpaceLabs, would normally be reported as
a discontinued operation. However, the historical consolidated financial
statements of the Company were retroactively restated to deconsolidate the
financial statements of SpaceLabs to reflect the Distribution. The Company
believes this exception to the usual method of reporting a spin-off is
appropriate given the highly unique circumstances surrounding the relationship
between SpaceLabs and the Company. These circumstances were reviewed with the
staff of the Securities and Exchange Commission. Management believes that
deconsolidation, which presents the historical financial statements of the
Company as if there never had been an affiliation between the Company and
SpaceLabs, is the most meaningful financial presentation. Corporate and
administrative expenses were allocated to the Company and SpaceLabs based on
relative revenues. Management believes this allocation method was reasonable.
Further, management believes that reported expenses, including income taxes,
would not have been materially different had the Company operated as an
unaffiliated entity.
In connection with the Distribution, the Company made a net contribution of
assets and liabilities to SpaceLabs, which reduced the Company's shareholders'
equity by $28,855. The contribution consisted of $36,212 in cash and $550 in
other assets, offset by the elimination of a $7,907 payable to SpaceLabs. At
June 26, 1992, the payable due to SpaceLabs represented cumulative cash
transfers prior to the Distribution between SpaceLabs and the Company arising
from SpaceLabs' operating and financing activities.
As part of the Distribution, the Company and SpaceLabs entered into an
Intercompany Tax Agreement that provides for payment to or reimbursement from
SpaceLabs for pre-Distribution tax matters. In 1993, the Company received a net
amount of $1,055 from SpaceLabs under this agreement as a result of the
conclusion of an Internal Revenue Service examination for the years 1989 and
1990. The amount was reported as an increase to shareholders' equity.
In 1992, the Company incurred a total of $4,959 of non-recurring expenses
related to the Distribution including Stock Distribution expenses of $1,195 for
legal, accounting, investment advisory, printing and other fees; and
Restructuring Charges of $3,764 related to the closure of the Seattle
headquarters' office, severance of certain personnel as a result of the
Distribution and the write down to estimated market value of the Company's
former ultrasound manufacturing facility in Germany. These charges are reported
separately in the Consolidated Statement of Operations.
4. RESTRUCTURING
In the fourth quarter of 1994, the Company incurred restructuring expenses
of $1,622 related to a reduction of its workforce by approximately 80 full-time
and temporary positions. In August 1993, the Company incurred a restructuring
charge of $4,275 related to the reduction of its worldwide workforce of
approximately 11%. These restructurings were taken to streamline the Company's
operations and enhance productivity.
Restructuring expenses include primarily severance, outplacement and other
costs associated with the restructuring of the Company's operations. At
December 31, 1994 and 1993, accrued expenses related to the restructuring of
operations were $1,482 and $562, respectively. No adjustments have been made to
the amounts accrued subsequent to the restructurings.
5. CASH, SHORT-TERM INVESTMENTS AND MARKETABLE DEBT SECURITY
Cash equivalents, short-term investments and the marketable debt security
are stated at cost. For purposes of the statement of cash flows, cash
equivalents are defined as investments with maturities of three months or less
at the date of purchase.
The marketable debt security issued by the U.S. Government matures in 1996
and the Company intends to hold the security until maturity.
-------------------------------------------------------
1994 1993
-------------------------------------------------------
Cash and cash equivalents $22,901 $52,713
Short-term investments -- 2,045
------- -------
22,901 54,758
Long-term marketable
debt security 4,988 4,988
------- -------
$27,889 $59,746
-------------------------------------------------------
6. RECEIVABLES
-------------------------------------------------------
1994 1993
-------------------------------------------------------
Trade receivables $109,360 $ 99,494
Less allowance for doubtful
accounts and sales returns (8,700) (7,150)
-------- --------
100,660 92,344
Other, primarily unbilled
service contracts 15,211 9,448
-------- --------
$115,871 $101,792
-------------------------------------------------------
Lease contract receivables of $4,498 and South American installment
receivables of $4,675, net of allowance, at December 31, 1994 are included in
Trade Receivables.
7. INVENTORIES
-------------------------------------------------------
1994 1993
-------------------------------------------------------
Materials and work in process $33,477 $27,995
Finished products 15,561 17,497
Demonstrator equipment 29,190 23,354
Customer service 17,837 19,846
------- -------
$96,065 $88,692
-------------------------------------------------------
8. PROPERTY, PLANT AND EQUIPMENT, AT COST
-------------------------------------------------------
1994 1993
-------------------------------------------------------
Land and improvements $ 8,429 $ 5,642
Buildings and leasehold
improvements 34,866 30,822
Machinery and equipment 85,234 71,254
-------- --------
128,529 107,718
Less accumulated depreciation
and amortization (58,191) (47,907)
-------- --------
$ 70,338 $ 59,811
-------------------------------------------------------
In 1994, the Company sold its former manufacturing facility in Germany for
$3,224 resulting in a $105 gain. In 1994, the Company also purchased a building
and land adjacent to its corporate headquarters and manufacturing plant in
Bothell, Washington. The new facility will be used to consolidate operations at
the Company's corporate headquarters campus. The purchase price of the land and
building of approximately $11,500 was financed with long-term debt.
Land and buildings with a net book value of $33,128 serve as collateral on
long-term debt.
9. OTHER ASSETS
---------------------------------------------------------------
1994 1993
---------------------------------------------------------------
Long-term installment receivables $ 5,667 $1,033
Less allowance for doubtful accounts (1,730) (310)
------- ------
3,937 723
Other, net 6,583 7,479
------- ------
$10,520 $8,202
---------------------------------------------------------------
Long-term installment receivables represent scheduled monthly, quarterly or
semi-annual payments due from South American customers beyond one year (see
Note 1, Concentration of Credit Risk). Payment terms on extended term
receivables generally range from one to four years and the Company generally
charges interest at rates of 8% to 10%.
Amortization of intangible assets included in other assets was $1,839 in
1994, $1,607 in 1993 and $1,435 in 1992.
10. SHORT-TERM BORROWINGS
At December 31, 1994, short-term borrowings represent foreign currency
borrowings carrying interest rates ranging from 8% to 12% under lines of credit
maintained by various foreign subsidiaries for working capital purposes. These
credit lines are primarily unsecured or are guaranteed by the parent company.
At December 31, 1993, short-term borrowings also included borrowings on
Interspec's line of credit. The balance on this line of credit was paid in 1994
and the line of credit was not renewed. The weighted average interest rate on
short-term borrowings was 11% and 7% at December 31, 1994 and 1993,
respectively.
At December 31, 1994, the Company had available unsecured credit facilities
totaling $25,000, including a committed line of credit of $15,000. No
borrowings were outstanding under these facilities at December 31, 1994. The
loan agreement for the committed line of credit includes various covenants
relating to financial ratios and restrictions on cash dividends. The Company
was in compliance with or had obtained waivers for these covenants at December
31, 1994.
Interest expense as reported in the Consolidated Statements of Operations
approximates amounts paid each year.
11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
Accounts payable $28,075 $22,146
------- -------
Accrued expenses
Salaries and other compensation 17,507 18,444
Warranty reserves 5,625 5,659
Provision for litigation claim 5,000 --
Other 19,497 14,679
------- -------
47,629 38,782
------- -------
$75,704 $60,928
-------------------------------------------------------------
12. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1993 consisted of the following:
--------------------------------------------------------------
1994 1993
--------------------------------------------------------------
Bank term loan at LIBOR plus 1.25%
(8.25% at December 31, 1994),
twenty-five year amortization
commencing February 1995,
secured by land and buildings,
matures February 2005 $11,500 $ --
Fifteen year 3% PIDA loans,
commencing in 1990, secured by
second lien on land and buildings 2,477 2,707
Bank term loans at prime plus 1%,
fifteen year repayments commencing
December 1, 1989, secured by land
and buildings. Balance paid
in May 1994 -- 2,863
Subordinated convertible debentures
at 11%, due in eight semi-annual
installments commencing
December 31, 1994 5,687 6,500
------- -------
19,664 12,070
Less current portion 1,976 470
------- -------
Long-term debt, less current portion $17,688 $11,600
--------------------------------------------------------------
The holders of the subordinated convertible debentures may convert them at
any time into the Company's common stock at $16.95 per share, up to a maximum
of 383,480 shares. In December 1994, holders converted $492 of the subordinated
convertible debentures into 29,064 shares of the Company's common stock. The
Company may convert all or part of the debentures into common stock at any time
provided the market price of the Company's common stock is at least 20% greater
than the conversion price on each of the immediately preceding 15 trading days.
The bank term loan and debenture agreements include various covenants
relating to financial ratios and restrictions on cash dividends. The Company
was in compliance with or had obtained waivers for these covenants at December
31, 1994.
At December 31, 1994, the aggregate maturities of long-term debt for the
five years ending December 31, 1999 and thereafter are as follows: $1,976 in
1995, $2,006 in 1996, $2,025 in 1997, $1,236 in 1998, $447 in 1999 and $11,974
thereafter.
13. EMPLOYEE BENEFIT PLANS
Substantially all employees of the Company's U.S. operations are covered
under a noncontributory, defined benefit pension plan. The benefits are based
on each employee's years of service and highest consecutive five year average
compensation. Employees of Interspec with one year of service became
participants in the pension plan on the date of the merger.
Net pension cost is comprised of the following:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
Service cost for benefits
earned during the year $1,508 $1,090 $ 912
Interest cost on projected
benefit obligation 896 630 478
(Income) loss on plan assets 68 (740) (191)
Net amortization
and (deferral) (335) 490 (7)
Effect of Interspec merger 265 -- --
------- ------ ------
$2,402 $1,470 $1,192
----------------------------------------------------------------------
The funded status of the plans at December 31, 1994 and 1993 follows:
---------------------------------------------------------------
1994 1993
---------------------------------------------------------------
Accumulated benefit obligation,
including vested benefits of
$6,466 at December 31, 1994 and
$5,552 at December 31, 1993 $ 7,222 $ 6,526
------- -------
Projected benefit obligation,
including the effect of projected
future salary increases 11,950 11,453
Plan assets at fair value 7,931 6,461
------- -------
Excess of projected benefit
obligation over plan assets 4,019 4,992
Unrecognized prior service cost (695) (863)
Unrecognized net experience loss (2,230) (3,685)
------- -------
Accrued pension cost $ 1,094 $ 444
---------------------------------------------------------------
The projected benefit obligations are based on employee census information
as of the beginning of each year.
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 8.5% for 1994, 7.75% for 1993 and
8.5% for 1992. The assumed annual rate of increase in future compensation
levels was 9% for the first five years of service and 5.75% thereafter. The
expected long-term rate of return on plan assets was 9% in each of 1994, 1993
and 1992.
A 401(k) retirement savings plan is maintained for all U.S. employees. The
Company's contributions to this plan were $1,025, $895 and $748 in 1994, 1993
and 1992, respectively.
In 1994, the Company established a profit sharing plan which provides for
employee incentive awards when pre-tax return on sales exceeds 7%. No awards
have been made under this plan.
14. SHAREHOLDERS' EQUITY
The Company has the following stock plans: the 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance Unit Plan and
the 1992 Non-Officer Employee Stock Option Plan (the 1992 Plans), the 1986
Management Incentive Plan and the 1993 Non-Employee Director Stock Option Plan.
Under the 1992 Plans, 2,300,000 common shares are reserved primarily for
issuance of stock options at prices equal to the fair market value of the
Company's common shares at the date of grant and for issuance of restricted
shares at par value. Stock options and restricted stock granted under the 1992
Plans are generally exercisable at 25% each year over a four year vesting
period. At December 31, 1994, approximately 212,000 shares were available for
grants under the 1992 Plans.
Under the 1986 Management Incentive Plan, 100,000 common shares were
authorized for issuance of stock under the Company's management incentive
plans. Approximately 14,000 common shares were issued under this plan in 1994.
At December 31, 1994, approximately 71,000 shares were available for grants
under this plan.
Under the 1993 Non-Employee Director Stock Option Plan, 50,000 common shares
were reserved for issuance of stock options at prices equal to the fair market
value of the common shares at the date of grant. At December 31, 1994,
approximately 34,000 shares were available for grants under this plan.
In connection with the merger, all Interspec stock options held by Interspec
employees were adjusted, based on the Exchange Ratio, to the Company's stock
options resulting in the issuance of 232,500 options from the 1992 Plan.
The following table summarizes option activity (shares in thousands).
------------------------------------------------------------
Price
Shares Per Share
------------------------------------------------------------
Outstanding at December 31, 1992 1,081 $ 9 - $30
Granted 547 $16 - $18
Exercised (4) $10 - $15
Cancelled (31) $ 9 - $28
-----
Outstanding at December 31, 1993 1,593 $ 9 - $30
Granted 436 $13 - $16
Exchanged from Interspec 233 $ 6 - $15
Exercised (92) $ 6 - $17
Cancelled (61) $ 7 - $28
-----
Outstanding at December 31, 1994 2,109 $ 6 - $30
-----
Exercisable at December 31, 1994 867 $ 6 - $30
------------------------------------------------------------
In 1994 and 1993, 99,000 and 33,000 shares, respectively, of restricted
stock were issued at par value under the 1992 plans. Deferred compensation
representing the fair market value of the shares at the date of grant is
amortized over the vesting period (typically two to four years).
In February 1993, the Company's Board of Directors authorized a plan to
repurchase up to 1,000,000 shares of its own common stock in the open market,
subject to certain criteria, to be used in servicing the Company's benefit
plans. The Company repurchased 22,500 shares totaling $369 in 1994 and 794,000
shares totaling $13,441 in 1993 under this program.
15. INCOME TAXES
The components of income (loss) before income taxes were:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
U.S. operations $(17,091) $(4,541) $ 8,445
International operations (3,767) 2,806 4,477
-------- ------- ------
$(20,858) $(1,735) $12,922
----------------------------------------------------------------------
Income tax expense (benefit) consists of the following:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
Current:
U.S. Federal $(2,000) $(2,796) $ 2,691
U.S. State and Local 248 292 392
International 857 883 471
Deferred:
U.S. Federal 533 3,207 (1,582)
International (292) -- 221
------- ------- -------
$ (654) $ 1,586 $ 2,193
----------------------------------------------------------------------
The difference between taxes computed by applying the U.S. Federal income
tax rate of 34% to income (loss) before income taxes and the actual income tax
expense (benefit) follows:
----------------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------
Expected income taxes
at U.S. statutory rate $(7,092) $ (590) $ 4,394
Increase (reduction) in
income taxes resulting from:
State and local income taxes 164 192 259
Taxes related to foreign
operations 2,913 1,234 505
Utilization of tax operating
loss carryforwards (1,457) (1,783) (2,419)
Foreign Sales Corporation benefit -- -- (536)
Tax advantaged investment
income (44) (266) (654)
Restructuring costs -- -- 406
Alternative minimum tax -- 2,510 857
Tax accrual adjustment (2,000) (2,013) --
Change in valuation allowance 7,540 2,181 (1,172)
Other, net (678) 121 553
------- ------- -------
$ (654) $ 1,586 $ 2,193
----------------------------------------------------------------------------
The Company had net payments (refunds) of income taxes of $1,689, $(4,322)
and $(574) in 1994, 1993 and 1992, respectively.
The tax effects of temporary differences and carryforwards which give rise
to significant portions of the deferred tax assets and deferred tax liabilities
at December 31, 1994 and December 31, 1993 are presented below.
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
Deferred tax assets
Receivables $ 3,230 $ 2,936
Inventories 11,564 8,800
Net operating loss carryforwards 3,969 3,157
State taxes 3,106 2,087
Compensation 2,623 2,171
Provision for litigation claim 1,700 --
Research and experimentation
credit carryforwards 6,602 6,425
Other 3,032 3,107
-------- --------
Gross deferred tax assets $ 35,826 28,683
Less valuation allowance (27,249) (19,709)
-------- --------
Net deferred tax assets $ 8,577 $ 8,974
Deferred tax liabilities, primarily
depreciation and intangible assets (4,472) (4,628)
-------- --------
Net deferred income taxes $ 4,105 $ 4,346
-------------------------------------------------------------
In determining the realizability of deferred tax assets, the Company
assessed its deferred tax liabilities, tax planning strategies and potential
carryback opportunities.
At December 31, 1994, the Company had net operating loss carryforwards for
statutory purposes of approximately $7,900, which begin to expire in 1998 or
have no expiration date. The Company also has U.S. research and experimentation
credit carryforwards of approximately $6,600 with expiration dates from 1997
through 2008. Utilization of approximately $4,000 of net operating loss
carryforwards and $2,400 of research and experimentation credit carryforwards
are subject to certain members of the U.S. consolidated group having future
taxable income.
During 1994 and 1993, the Internal Revenue Service completed examinations of
the Company for the years 1991 and 1992, and 1989 and 1990, respectively. The
results of the examinations allowed the Company to reduce its liability for
income taxes by approximately $2,000 in both 1994 and 1993. The Company
believes it has made adequate provision for income taxes that may become
payable with respect to open tax years.
Provision has not been made for U.S. or additional foreign taxes on the
undistributed earnings of the Company's foreign subsidiaries which total
approximately $1,700. These earnings, which are anticipated to be reinvested,
could become subject to additional tax if they were remitted as dividends, lent
to the Company, or if the Company should sell its stock in these subsidiaries.
16. OTHER EXPENSE, NET
Other expense, net, includes foreign exchange gains and losses consisting of
realized gains and losses on cash transactions involving various foreign
currencies, unrealized gains and losses resulting from exchange rate
fluctuations primarily affecting intercompany accounts and gains and losses on
forward exchange contracts. Net losses from foreign currency transactions were
$144, $1,259 and $1,839 in 1994, 1993 and 1992, respectively.
Other expense, net, also includes Washington State Business and Occupation
taxes of $744, $1,086, and $1,144 in 1994, 1993 and 1992, respectively. This
tax is a gross receipts tax imposed on products manufactured in the State of
Washington and is levied in lieu of a state income tax.
In 1993, the Company sold its equity investment in a third party for $3,235.
A gain on the sale of the investment of $1,125 is included in other expense,
net.
17. INVESTMENT INCOME
Investment income consists of the following:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
Interest income $1,961 $2,118 $2,334
Preferred share
dividend income 168 970 2,299
------ ------ ------
$2,129 $3,088 $4,633
----------------------------------------------------------------------
18. LEASES
The Company was obligated at December 31, 1994 under long-term operating
leases for various types of property and equipment, with minimum aggregate
rentals totaling $14,375 as follows: $3,847 in 1995, $3,159 in 1996, $2,532 in
1997, $2,184 in 1998, $1,756 in 1999 and $897 in later years.
Many of the Company's leases contain renewal options and clauses for
escalations and payment of real estate taxes, maintenance, insurance and
certain other operating expenses of the properties. Certain leases are expected
to be renewed or replaced at expiration. Total rental expense under operating
leases was $5,276, $4,882 and $4,838 in 1994, 1993 and 1992, respectively.
19. LEGAL CONTINGENCIES
In December 1994, the U.S. Federal Circuit Court of Appeals affirmed a
decision of the District Court in California granting a motion by SRI
International, Inc. (SRI) for partial summary judgment on a patent infringement
claim relating to an electrical circuit alleged to be used in the Company's
Ultramark 4 system and two discontinued products. The SRI patent expired in
April 1994. SRI has stated in a February 1993 press release that it is seeking
over $5 million in damages. The District Court has scheduled a jury trial to
commence on March 21, 1995 on the issues of damages and willful infringement.
If the jury returns a verdict of willful infringement the judge may at his
discretion grant an enhancement of damages of up to three times the amount
actually determined. Interest will be applied to actual damages. The Company
will vigorously assert its positions on these issues. At this stage of the
litigation, the Company cannot predict the outcome of the suit or estimate the
amount of loss, but believes its defenses are meritorious and will continue to
vigorously pursue its rights at trial and in any subsequent proceedings. There
are no assurances that the jury trial will not result in substantial damages
against the Company or that such damages will not be enhanced by the court. A
provision for the litigation claim was accrued in the fourth quarter of 1994
for $5,000.
In addition to the foregoing proceedings, the Company is involved in various
other legal actions and claims arising in the ordinary course of business. The
Company believes the ultimate resolution of these matters individually and in
the aggregate will not have a material adverse effect on the Company's
financial condition.
20. GEOGRAPHIC SEGMENT INFORMATION
The Company operates in one industry segment: developing, manufacturing,
marketing and servicing diagnostic medical ultrasound imaging systems and
related accessories. Internationally, the Company's products are marketed
through its subsidiaries and independent distributors, with principal
subsidiaries located in Europe, Canada, Argentina, Australia and Singapore.
U.S. revenues in the following table include U.S. export sales to customers
in foreign countries of $51,466, $55,980 and $56,326 in 1994, 1993 and 1992,
respectively.
A summary of the Company's operations by geographic area follows:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
REVENUES:
U.S. $250,443 $256,792 $283,114
Transfers between
geographic areas 76,890 70,876 55,703
-------- -------- --------
Total U.S. 327,333 327,668 338,817
International:
Europe 88,585 84,333 78,346
Other 27,124 19,372 18,945
-------- -------- --------
Total International 115,709 103,705 97,291
Eliminations (76,890) (70,876) (55,703)
-------- -------- --------
$366,152 $360,497 $380,405
-------- -------- --------
INCOME (LOSS) BEFORE
INCOME TAXES:
U.S. $(19,273) $ (2,041) $ 8,337
International:
Europe (2,431) 2,943 4,874
Other (1,336) (137) (397)
-------- -------- --------
Total International (3,767) 2,806 4,477
Adjustments/eliminations 2,182 (2,500) 108
-------- -------- --------
$(20,858) $ (1,735) $ 12,922
-------- -------- --------
GEOGRAPHIC ASSETS:
U.S. $238,319 $218,958 $220,079
International:
Europe 63,564 60,946 52,774
Other 22,082 11,433 10,104
-------- -------- --------
Total International 85,646 72,379 62,878
Adjustments/eliminations (7,115) (12,841) (4,775)
-------- -------- --------
$316,850 $278,496 $278,182
----------------------------------------------------------------------
International revenues, including both international operations and U.S.
export sales, were as follows:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
European operations $ 88,585 $ 84,333 $ 78,346
Other international
operations 27,124 19,372 18,945
-------- -------- --------
115,709 103,705 97,291
U.S. export sales 51,466 55,980 56,326
-------- -------- --------
Total international
revenues $167,175 $159,685 $153,617
----------------------------------------------------------------------
Geographic assets may be reconciled to consolidated assets as follows:
----------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------
Geographic assets $316,850 $278,496 $278,182
General corporate assets
(principally cash
and investments) 14,671 50,901 66,341
-------- -------- --------
Consolidated assets $331,521 $329,397 $344,523
----------------------------------------------------------------------
21. QUARTERLY FINANCIAL DATA (Unaudited)
-------------------------------------------------------------------------------------------------
QUARTERS
-----------------------------------------------------
(In millions, except per share data) First Second Third Fourth Total
-------------------------------------------------------------------------------------------------
1994
Revenues $89.4 $84.8 $87.3 $104.7 $366.2
Gross profit 38.8 37.3 39.5 48.0 163.6
Income (loss) from operations .6 (9.9) (4.6) (7.7) (21.6)
Income (loss) before income taxes .7 (9.7) (4.4) (7.5) (20.9)
Net income (loss) .3 (9.9) (4.8) (5.8) (20.2)
Net income (loss) per share $ .02 $(.76) $(.36) $ (.44) $(1.53)
-------------------------------------------------------------------------------------------------
1993
Revenues $94.2 $89.2 $78.6 $ 98.5 $360.5
Gross profit 42.4 41.4 36.2 45.8 165.8
Income (loss) from operations 2.4 (1.7) (8.2) 4.4 (3.1)
Income (loss) before income taxes 2.8 (1.3) (7.9) 4.7 (1.7)
Net income (loss) 2.4 (1.6) (8.5) 4.4 (3.3)
Net income (loss) per share $ .18 $(.12) $(.63) $ .33 $ (.24)
-------------------------------------------------------------------------------------------------
Quarterly per share data shown do not add to the total in 1994 due to
changes in the number of weighted average shares outstanding during the year.
The 1994 results include non-recurring expenses totaling $5.4 million
associated with the acquisition of Interspec during the second quarter and $6.6
million for the restructuring of operations and a provision for litigation
claim in the fourth quarter. The 1993 results include a restructuring charge of
$4.3 million related to the restructuring of operations in the third quarter.
22. SUBSEQUENT EVENT
On February 15, 1995, the Company announced a new corporate structure that
will consolidate the Interspec operations located in Ambler, Pennsylvania with
the Company's headquarters operations in Bothell, Washington. The consolidation
will result in relocation of Apogee products manufacturing to Bothell, closure
of the Ambler facility and an estimated net reduction of full-time positions of
approximately four percent of the Company's workforce. The Company expects to
incur approximately $5 million in 1995 for employee retention incentives,
severance payments and relocation expenses associated with the consolidation
and plant closure. The Company has preliminary plans to sell the Ambler real
estate, which has a net book value of $7 million, in late 1995 or early 1996
after operations are transitioned to Bothell. The approximate $5 million charge
for consolidation excludes any loss that might be realized on the disposition
of the Ambler real estate.
DIRECTORS AND CORPORATE OFFICERS
BOARD OF DIRECTORS CORPORATE OFFICERS
Dennis C. Fill Dennis C. Fill
Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
Kirby L. Cramer David M. Perozek
Chairman of the President and
Compensation Committee; Chief Operating Officer
Chairman Emeritus,
Hazleton Laboratories Corporation Harvey N. Gillis
Senior Vice President,
Harvey Feigenbaum, M.D. Finance and Administration and
Chairman of the Chief Financial Officer
Audit Committee;
Distinguished Professor Edward Ray
of Medicine, Indiana President and
University Medical Center Chief Operating Officer
ATL Interspec Cardiology
Eugene A. Larson
Scientific Consultant and Senior Vice Presidents:
former President of ATL
Debby Jo Blank, M.D.
John R. Miller
Senior Advisor, Chanen, Donald D. Blem
Painter & Company, Ltd.
Investment Bankers Cass F. Diaz
Seattle, Washington
Victor H. Reddick
Phillip M. Nudelman, Ph.D.
President and Chief Executive Jacques Souquet, Ph.D.
Officer, Group Health
Cooperative of Puget Sound Vice Presidents:
Seattle, Washington
Anne Marie Bugge
David M. Perozek
President and Sanjoy Chatterji
Chief Operating Officer
Kevin M. Goodwin
Edward Ray
President and Ken A. Likkel
Chief Operating Officer
ATL Interspec Edward J. Parker
Harry Woolf, Ph.D. Peter Pellerito
Professor Emeritus and Former
Director, The Institute for Lourens B. Steger
Advanced Study
Princeton, New Jersey Thomas J. Williams
W. Brinton Yorks, Jr.
GENERAL INFORMATION
ADVANCED TECHNOLOGY LABORATORIES, INC.
Worldwide Headquarters:
ATL
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, Washington 98041-3003
European Headquarters:
ATL Munich
Ohmstrasse 3
85716 Unterschleissheim
Germany
Principal International Subsidiaries and Field Operations:
Buenos Aires, Argentina
Sydney, Australia
Vienna, Austria
Brussels, Belgium
Toronto, Canada
Letchworth, England
Paris, France
Solingen, Germany
Hong Kong
Madras, India
Milan, Italy
Woerden, Netherlands
Singapore
Stockholm, Sweden
SHAREHOLDER INFORMATION
A report on the company's financial performance and other corporate activities
is sent to shareholders semiannually. A copy of ATL's Form 10-K may be obtained
by contacting the Corporate and Investor Relations Department, ATL, P.O. Box
3003, Bothell, WA 98041-3003, (800) 426-2670 Ext. 7427.
STOCK LISTING
ATL Common Stock is listed on the Nasdaq National Market System under the
symbol ATLI.
TRANSFER AGENT/REGISTRAR
First Chicago Trust Company of New York
Inquiries regarding change of address, stock transfer or your shareholder
account should be sent directly to:
First Chicago Trust Company of New York
Shareholder Relations Dept.
P.O. Box 2500
Jersey City, NJ 07303-2500
Telephone (201) 324-0498
It is helpful to include your social security or tax ID number.
EX-21
16
PARENTS AND SUBSIDIARIES
EX.21
ADVANCED TECHNOLOGY LABORATORIES, INC.
--------------------------------------
(Delaware Corporation)
----------------------
PARENTS & SUBSIDIARIES
Jurisdiction of Percentage of
Registrant Incorporation Voting Control
---------- ------------- -------------
Advanced Technology Laboratories, Inc.................................................... Delaware
Subsidiaries included in the consolidated financial statements contained herein:
Advanced Technology Laboratories, Inc.................................................... Washington 100
ATL Medizinische Gerate Service........................................................ Austria 100
und Handelgesellschaft m.b.H...........................................................
Advanced Technology Laboratories....................................................... Germany 98/2/
(Deutschland) GmbH.....................................................................
Advanced Technology Laboratories....................................................... England 99/1/
United Kingdom - Limited...............................................................
Advanced Technology Laboratories S.A.R.L............................................... France 99.9997/3/
Interspec Sarl........................................................................ France 100
Advanced Technology Laboratories AB.................................................... Sweden 100
Advanced Technology Laboratories S.p.A................................................. Italy 100
Advanced Technology Laboratories Singapore............................................. Singapore
Private Limited........................................................................
Advanced Technology Laboratories....................................................... Argentina 99/5/
Argentina S.A..........................................................................
Scientific Medical Systems............................................................. Delaware 100
International, Inc.....................................................................
WMRK Scientific East, Inc.............................................................. Delaware 100
WMRK Scientific West, Inc.............................................................. Washington 100
Indchem ATL Ltd........................................................................ India 40/4/
ATL International, Inc................................................................. Washington 100
Advanced Technology Laboratories..................................................... Australia 99.99/6/
Australia Pty., Ltd..................................................................
Advanced Technology Laboratories..................................................... Belgium 99/1/
- Belgium N.V........................................................................
Advanced Technology Laboratories..................................................... Netherlands 100
Nederland B.V........................................................................
Advanced Technology Laboratories..................................................... Canada 100
Canada), Inc.........................................................................
Atlantis Diagnostics International, Inc................................................ Washington 100
Interspec, Inc........................................................................... Pennsylvania 100
Delspec, Inc. ......................................................................... Delaware 100
Interspec U.K. Ltd................................................................... United Kingdom 100
Interspec USVI, Inc.................................................................. St. Thomas USVI 100
Interspec srl........................................................................ Italy 100
Westinghouse Bahamas................................................................... Bahamas 100
/1/1% held by WMRK Scientific East, Inc.
/2/2% held by Scientific Medical Systems International, Inc.
/3/432,869 parts held by ATL (Washington)and 1 part owned by ATL International,
Inc.
/4/60% held by Sanmar Electrotech Holdings Ltd. & five nominees
/5/1% held by ATL International, Inc.
/6/.01 held by Gregory John Brand
12/31/94
EX-27
17
FINANCIAL DATA SCHEDULE
5
1,000
US Dollars
YEAR
DEC-31-1994
JAN-01-1994
DEC-31-1994
1
22,901
0
109,360
8,700
96,065
245,675
128,529
58,191
331,521
118,185
17,688
0
0
133
191,043
331,521
288,294
366,152
153,944
202,569
185,199
0
(1,371)
(20,858)
(654)
(20,204)
0
0
0
(20,204)
(1.53)
(1.53)
The Company also holds a long-term marketable debt security of $4,988
which is reported as a non-current asset.
The Company also has long-term installment receivables of $5,667 and
a related allowance of $1,730 which are reported as non-current assets.