<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1997
REGISTRATION NO. 333-21123
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MEADE INSTRUMENTS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 3827 95-2988062
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
16542 MILLIKAN AVENUE
IRVINE, CALIFORNIA 92606
(714) 756-2291
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
JOHN C. DIEBEL
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
MEADE INSTRUMENTS CORP.
16542 MILLIKAN AVENUE
IRVINE, CALIFORNIA 92606
(714) 756-2291
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
J. JAY HERRON, ESQ. DHIYA EL-SADEN, ESQ.
MARK D. PETERSON, ESQ. JEFFREY B. CONNER, ESQ.
O'MELVENY & MYERS LLP HILARY J. HATCH, ESQ.
610 NEWPORT CENTER DRIVE, SUITE 1700 GIBSON, DUNN & CRUTCHER LLP
NEWPORT BEACH, CALIFORNIA 92660 333 SOUTH GRAND AVENUE
TELEPHONE NO. (714) 760-9600 LOS ANGELES, CALIFORNIA 90071
FACSIMILE NO. (714) 669-6994 TELEPHONE NO. (213) 229-7000
FACSIMILE NO. (213) 229-7520
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, FEBRUARY 27, 1997
PROSPECTUS
3,370,000 SHARES
[LOGO] MEADE INSTRUMENTS CORP.
COMMON STOCK
------------------------
Of the 3,370,000 shares of Common Stock offered hereby (the "Offering"),
2,500,000 shares are being sold by Meade Instruments Corp. ("Meade" or the
"Company"), and 870,000 shares are being sold by a stockholder of the Company
(the "Selling Stockholder"). See "Principal and Selling Stockholders." The
Company will not receive any proceeds from the sale of any shares by the Selling
Stockholder. Prior to this Offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $8.00 and $10.00 per share. See "Underwriting"
for information relating to the factors considered in determining the initial
public offering price.
Application has been made for inclusion of the Company's Common Stock on
the Nasdaq National Market under the symbol "MEAD."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
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<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Per Share......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
======================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses estimated to be $ payable by the Company,
a portion of which may be reimbursed by the Selling Stockholder. See
"Certain Transactions."
(3) The Company and the Selling Stockholder have granted to the Underwriters a
30-day option from the date of this Prospectus to purchase up to 505,500
additional shares of Common Stock (of which the first 130,000 shares will be
sold by the Selling Stockholder and the remaining 375,500 shares will be
sold by the Company) on the same terms and conditions as set forth above,
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholder will be $ ,
$ , $ and $ , respectively. See "Principal and
Selling Stockholders" and "Underwriting."
------------------------
The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by the Underwriters, subject to
their right to withdraw, cancel, modify, or reject orders in whole or in part,
and subject to other conditions. It is expected that delivery of the shares of
Common Stock offered hereby will be made on or about , 1997.
MORGAN KEEGAN & COMPANY, INC. CROWELL, WEEDON & CO.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
[PICTURES]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and the
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus (i) assumes an
initial public offering price of $9.00 per share of Common Stock, (ii) does not
give effect to the exercise of the over-allotment option granted to the
Underwriters as described in "Underwriting," (iii) except in the Financial
Statements and Notes thereto, reflects the conversion of all outstanding Series
A Common Stock and Series B Common Stock into Common Stock upon the closing of
this Offering and (iv) gives effect to the reincorporation of the Company as a
Delaware corporation to be named Meade Instruments Corp. See "Description of
Capital Stock -- Reincorporation." As used herein, the terms "Meade" and the
"Company" refer to such Delaware corporation and its predecessor.
THE COMPANY
Meade is the leading designer, manufacturer and distributor of telescopes
and accessories for the beginning to serious amateur astronomer. Recognized for
its expertise in telescope innovation and the superior quality of its products,
Meade has successfully introduced a wide range of new products, resulting in
what the Company believes to be the broadest and most complete line of
telescopes available. The Company offers more than 40 different telescope models
with several different optical configurations, as well as more than 250
accessory products. The Company's telescopes range in aperture from 2 to 16
inches and in retail price from less than $100 to $15,000.
Since its founding in 1972, Meade has strived to develop a reputation for
providing the amateur astronomer with technically sophisticated products at
competitive prices. Meade manufactures the complete line of its advanced
astronomical telescopes in Irvine, California, including the production of the
optical systems, which are critical components of telescopes. Combining its
manufacturing expertise with its dedication to innovation, quality and value,
Meade has developed and produced some of the industry's most technologically
advanced consumer telescopes at affordable prices. Although professional and
institutional applications of Meade's telescopes are not Meade's primary market,
the Company's 8-inch and 10-inch Schmidt-Cassegrain telescopes are used by many
universities, scientific laboratories and aerospace companies, including the
University of California, Los Alamos National Laboratory, Lawrence Livermore
Laboratory, National Radio Astronomy Observatory and NASA/Aames Research. The
Company has capitalized on its brand name recognition among serious amateur
astronomers to market successfully its less-expensive telescopes to beginning
and intermediate amateur astronomers. Meade has become a major supplier of
telescopes to such retailers as The Nature Company, Service Merchandise, Natural
Wonders, Wal-Mart, J.C. Penney and Discovery Channel Stores. To complement its
extensive line of telescopes and leverage its distribution system, the Company
has recently introduced a complete line of binoculars to be sold under the Meade
brand name.
Meade was sold by its founder and current Chief Executive Officer to a
private investor in 1986 and was then reacquired by the Company's current senior
management in 1991. After reacquisition, management reemphasized the importance
of research and development for new products and product enhancements. Recently,
one of Meade's newest products, the ETX Astro Telescope, was featured in a
product review in the January 1997 issue of Sky and Telescope and was referred
to as the "hottest scope ever." Meade also significantly broadened the Company's
less-expensive telescope line and has an exclusive arrangement with a Taiwanese
company to manufacture less-expensive telescopes in accordance with the
Company's proprietary designs. Meade also has increased the marketing of its
products by aggressively advertising in periodicals directed to amateur
astronomers and by providing greater support to the Company's dealers, specialty
retailers, foreign distributors, mass merchandisers, and end users of Meade's
products. Additionally, Meade publishes a comprehensive, full-color, high
quality product catalogue which provides significant product exposure.
In the United States and Canada, the Company distributes its products
through a network of more than 500 specialty retailers and mass merchandisers,
which offer Meade's products in more than 1,000 retail store
3
<PAGE> 5
locations. The Company also sells certain of its telescope models to selected
national mail order dealers. Meade sells its products internationally through a
network of approximately 30 foreign distributors, many of which service retail
locations in their respective countries. International sales accounted for
approximately 17% of the Company's net sales for the nine months ended November
30, 1996.
Meade's net sales have increased from $10.1 million for the fiscal year
ended February 28, 1992 to $29.8 million for the fiscal year ended February 29,
1996. During the same period, operating income increased from $437,000 to $3.7
million before certain charges of $300,000. For the nine months ended November
30, 1996, Meade generated net sales of $39.0 million and operating income of
$5.3 million before certain charges of $340,000, compared to $23.5 million and
$3.1 million, respectively, for the nine months ended November 30, 1995. These
represent increases in net sales and operating income before certain charges of
66.1% and 69.9%, respectively, for the nine month periods. See "Selected
Financial Information." The Company intends to continue to pursue an integrated
strategy of product line expansion, aggressive marketing, expansion into the
binocular market and expansion of the Company's distribution network.
The Company was incorporated in California on December 19, 1975 and, prior
to the closing of this Offering, the Company will reincorporate as a Delaware
corporation to be named Meade Instruments Corp. See "Description of Capital
Stock -- Reincorporation." The principal offices of the Company are located at
16542 Millikan Avenue, Irvine, California 92606, and its telephone number at
that location is (714) 756-2291.
THE OFFERING
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<S> <C>
Common Stock offered by the Company.......... 2,500,000 shares
Common Stock offered by the
Selling Stockholder........................ 870,000 shares
Common Stock to be outstanding after the
Offering: ................................. 7,500,000 shares
Use of proceeds.............................. Net proceeds to the Company will be used (i)
to redeem for approximately $6.9 million all
of the outstanding shares of the Company's
Redeemable Preferred Stock, (ii) to repay
approximately $8.2 million of term
indebtedness and (iii) for general working
capital purposes.
Proposed Nasdaq National Market symbol....... MEAD
</TABLE>
4
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND WEIGHTED AVERAGE SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
NOVEMBER 30,
FISCAL YEAR ENDED FEBRUARY 28(29), ----------------------------------------
------------------------------------------------------------- PRO FORMA(1)
1992 1993 1994 1995 1996 1995 1996 1996
----------- ----------- --------- --------- --------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
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INCOME STATEMENT DATA:
Net sales............. $ 10,149 $ 13,887 $ 16,628 $ 24,934 $ 29,770 $ 23,459 $ 38,966 $ 38,966
Gross profit.......... 2,764 3,047 4,958 7,894 9,716 7,632 12,699 12,699
Selling expenses...... 983 1,438 1,565 2,035 2,832 2,158 3,555 3,555
General and
administrative
expenses............ 1,059 986 1,378 2,118 2,651 1,966 2,664 2,664
Research and
development
expenses............ 320 274 425 423 518 396 444 444
ESOP
contribution(2)..... -- -- -- -- -- -- 750 750
Certain charges(3).... -- -- -- -- 300 -- 340 340
Operating income(4)... 437 412 1,643 3,318 3,415 3,112 4,946 4,946
Interest expense...... 329 395 493 470 659 496 1,253 344
Income before income
taxes............... 108 17 1,150 2,848 2,756 2,616 3,693 4,602
Net income............ 107 16 1,040 2,051 1,556 1,439 2,161 2,692
Accretion on
Redeemable Preferred
Stock and dividend
on Series B Common
Stock, net of tax
benefit(5).......... -- -- -- -- -- -- (1,137) --
Redemption of
Redeemable Preferred
Stock............... -- -- -- -- -- -- -- (3,500)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
available to common
stockholders........ $ 107 $ 16 $ 1,040 $ 2,051 $ 1,556 $ 1,439 $ 1,024 $ (808)
========== ========== ========== ========== ========== ========== ========== ==========
Per share information:
Net income before
adjustments to net
income available
per common
share............. 0.02 0.00 0.22 0.44 0.33 0.31 0.60 0.44
Accretion on
Redeemable
Preferred Stock
and dividend on
Series B Common
Stock, net of tax
benefit........... -- -- -- -- -- -- (0.32) --
Redemption of
Redeemable
Preferred Stock... -- -- -- -- -- -- -- (0.57)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
available per
common share...... $ 0.02 $ 0.00 $ 0.22 $ 0.44 $ 0.33 $ 0.31 $ 0.28 $ (0.13)
========== ========== ========== ========== ========== ========== ========== ==========
Weighted average
common shares
outstanding......... 4,682,472 4,682,472 4,682,472 4,682,472 4,682,472 4,682,472 3,608,335 6,108,335
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Pro forma amounts are adjusted to reflect (i) the sale by the Company of
2,500,000 shares of Common Stock offered at an assumed Offering price of
$9.00, (ii) the application of net proceeds therefrom (see "Use of
Proceeds") as if the Offering had been consummated on March 1, 1996 and
(iii) the effect of the April 23, 1996 recapitalization transactions
retroactively applied to March 1, 1996. See "Certain Transactions." Pro
forma income before income taxes reflects reduced interest expense on debt
assumed to be repaid with proceeds of the Offering. Pro forma net income is
increased by the tax-effected reduced interest expense. By assuming the
Offering was effective at the beginning of the period, both the Accretion on
Redeemable Preferred Stock and the dividend on the Series B Common Stock are
eliminated on a pro forma basis. The pro forma Redemption of Redeemable
Preferred Stock represents the difference between the carrying value ($2.5
million) and the redemption value ($6.0 million) at the beginning of the
period. The amount of this difference reduces Net income (loss) available to
common stockholders.
(2) ESOP contributions of $750,000 for the nine months ended November 30, 1996
represent contributions accrued for the period based on an expected Company
contribution of $1.0 million for the fiscal year ending February 28, 1997.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
(3) Certain charges for the fiscal year ended February 29, 1996 consist of
one-time contractual bonuses accrued on behalf of certain officers in
connection with the Company's formation of the ESOP and the related
recapitalization effected in April 1996. Certain charges for the nine months
ended November 30, 1996 consist of one-time contractual bonuses accrued on
behalf of certain members of senior management as set forth in the
Securities Purchase Agreement, dated April 23, 1996, between the Company and
Churchill ESOP Capital Partners, A Minnesota Limited Partnership.
(4) Operating income before certain charges for the year ended February 29, 1996
and for the nine months ended November 30, 1996 was $3.7 million and $5.3
million, respectively.
(5) Represents (i) accretion of $541,000 reflecting original issue discount and
accrued dividends on the Redeemable Preferred Stock and (ii) dividends of
$995,000 declared and paid on the Series B Common Stock, net of tax benefit
of $399,000.
5
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NOVEMBER 30, 1996
------------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
(UNAUDITED)
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BALANCE SHEET DATA:
Working capital.......................................................... $ 7,124 $ 13,598
Total assets............................................................. 27,447 27,447
Total current liabilities................................................ 17,556 11,082
Long-term debt, less current portion..................................... 7,732 608
Redeemable Preferred Stock............................................... 3,041 --
Stockholders' equity (deficit)........................................... (950) 15,689
</TABLE>
- ---------------
(1) As adjusted to reflect the sale by the Company of the 2,500,000 shares of
Common Stock offered at an assumed Offering price of $9.00 and the
application of the net proceeds therefrom as set forth herein. See "Use of
Proceeds" and "Capitalization."
6
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results of operations could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
Economic Conditions; Ability to Grow. The Company's business is subject to
economic cycles and changing consumer trends. Purchases of telescopes and other
discretionary spending with respect to leisure activities tend to decline in
periods of economic uncertainty. Any significant decline in general economic
conditions or uncertainties regarding future economic prospects that affect
consumer spending could have a material adverse effect on the Company. Any
general decline in the size of the telescope market or in a segment of the
telescope market in which the Company competes, whether from general economic
conditions, a decrease in the popularity of telescopes or otherwise, could have
a material adverse effect on the Company. See "Business -- Industry Overview."
Dependence on Technological Advancements and New Product
Introductions. The telescope market, in recent years, has been characterized by
technological advances and new product introductions. The Company believes that
the development and introduction of new, innovative telescope products and
accessories with features that respond to changing consumer demands and trends
will be critical to its future success. In the past, the Company generally has
been successful in the introduction of its telescope products and accessories.
No assurance can be given, however, that the Company will be able to continue to
design and manufacture products that will achieve commercial success. In
addition, prior successful designs for various telescope models may be rendered
obsolete within a relatively short period of time as new products are introduced
into the market. See "Business -- Products."
New Binocular Line. Recently, Meade has introduced a line of binoculars,
which it believes will complement its extensive line of telescopes. The Company
plans to access its current distribution network for telescopes as a means to
market its line of binoculars. Although the Company believes it will be able to
integrate the Company's new line of binoculars smoothly with its existing
product lines, the Company's experience in selling binoculars is limited, and
there can be no assurance that the Company will be able to penetrate the
binocular market and achieve meaningful sales. If the Company is unable to
successfully market this new binocular line, such inability may have a material
adverse affect on the Company's future growth. See "Business -- Growth Strategy"
and "-- Products."
Quarterly Fluctuations and Seasonality. The Company's quarterly and annual
operating results are affected by a wide variety of factors that could
materially and adversely affect net sales, gross margins and profitability.
These factors include the volume and timing of orders received, changes in the
mix of products sold, market acceptance of the Company's products, competitive
pricing pressures, the Company's ability to meet increasing demand and delivery
schedules, the timing and extent of research and development expenses, and the
timing and extent of product development costs. Accordingly, the Company may
experience material adverse fluctuations in future operating results on a
quarterly or annual basis. Such fluctuations in operating results could cause
the price of the Common Stock to fluctuate substantially. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations." A substantial portion of the
Company's net sales and operating income typically occurs in the third quarter
of the Company's fiscal year primarily due to disproportionately higher customer
demand for less-expensive telescopes during the Christmas holiday season. Mass
merchandisers purchase a considerable amount of inventory to satisfy this
seasonal consumer demand; however, their estimates of product demand for the
Christmas holiday season may exceed actual product demand. The Company has, in
certain circumstances, allowed these mass merchandisers to return their excess
inventory to the Company. Any such accommodations in the future could have a
material adverse effect on the Company.
Dependence on Key Manufacturer. Most of Meade's less-expensive telescopes
are manufactured exclusively for Meade in Taiwan. Since 1990, Meade has worked
closely with the Weidy Optical Co., Ltd., a
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<PAGE> 9
Taiwanese company (the "Taiwanese Factory"), developing proprietary telescope
designs and instructing the Taiwanese Factory's personnel in the production of
telescopes that meet the Company's quality standards. In January 1995, in order
to assure a more reliable flow of products to meet Meade's increasing
requirements, Meade and the Taiwanese Factory entered into a supply agreement
wherein the Taiwanese Factory agreed to manufacture telescopes exclusively for
Meade, and Meade agreed to buy essentially all of its less-expensive telescopes
from the Taiwanese Factory. Any interruption of the Company's manufacturing
arrangements with the Taiwanese Factory could cause a delay in delivery of the
Company's products to its customers and could have a material adverse effect on
the Company. While the Company believes that alternative manufacturers exist in
the event of a substantial interruption in these manufacturing arrangements,
there can be no assurance that alternative arrangements could be made on a
timely basis or on terms acceptable to the Company. See "Risk Factors -- Foreign
Sales; Suppliers" and "Business -- Operations."
Foreign Sales; Suppliers. International sales accounted for approximately
19%, 17% and 25% of the Company's net sales for fiscal 1994, 1995, and 1996,
respectively, and 17% for the nine months ended November 30, 1996. The Company
expects international sales to continue to represent a significant portion of
net sales. International sales are subject to inherent risks, including
variations in local economies, fluctuating exchange rates, increased difficulty
of inventory management, greater difficulty in accounts receivable collection,
costs and risks associated with localizing products for foreign countries,
changes in tariffs and other trade barriers, adverse foreign tax consequences,
cultural differences affecting product demand and customer service and burdens
of complying with a variety of foreign laws. There can be no assurance that one
or more of such factors, operating in one or more foreign countries, will not
have a material adverse effect on the Company's future international sales, and
consequently, the Company. In addition, the Company's business is dependent on
products manufactured by foreign suppliers located primarily in Taiwan, Korea,
Japan and the People's Republic of China. Purchases from foreign suppliers
subject the Company to additional risks, including, among other things,
imposition of quotas or trade sanctions, decline in the value of the United
States dollar against local currencies causing an effective increase in the cost
of finished products and components, and shipment delays. The Company cannot
predict the effect that such factors will have on its business arrangements with
foreign suppliers, but any such development could have a material adverse effect
on the Company.
Alternative suppliers exist for substantially all materials used in
manufacturing the Company's telescopes. However, the loss of any existing
supplier of the electronic components contained in certain of the Company's
products could have a material adverse effect on the Company. If an alternative
supplier is required, the Company believes that it could take up to six months
to re-engineer its products to accept the operating requirements of the
alternative supplier's components.
Customer Concentration. Although the Company sold its telescope products
to more than 500 customers during the nine months ended November 30, 1996, the
Company's seven largest customers accounted for approximately 47.0% of the
Company's net sales. The Company has no long-term contracts with any of its
customers. The loss of, or the failure to replace, any significant portion of
the sales made to any significant customer could have a material adverse effect
on the Company. See "Business -- Customers."
Dependence on Key Employees. The Company is dependent on certain key
members of its management, operations and engineering staff, including John C.
Diebel, its Chairman of the Board and Chief Executive Officer, and Steven G.
Murdock, its President and Chief Operating Officer, the loss of either of whose
services could have a material adverse effect on the Company. In addition,
failure to attract and retain key personnel could have a material adverse effect
on the Company.
Competition. The telescope and binocular industries are highly competitive
and sensitive to consumer needs and preferences. In the telescope market, Meade
competes in the United States and Canada with Celestron International
("Celestron"), Bushnell Optical Co. ("Bushnell"), Tasco Sales, Inc. ("Tasco")
and Simmons Outdoor, Inc. ("Simmons") and, to a lesser extent, with other
significantly smaller companies which service niche markets. In Europe and
Japan, the Company competes primarily with Celestron and Vixen Optical
Industries Ltd. and with other smaller regional telescope importers and
manufacturers. In addition, some of the Company's current and potential
competitors in the telescope market may possess
8
<PAGE> 10
greater financial or technical resources and competitive cost advantages due to
a number of factors, including, without limitation, lower taxes and
substantially lower costs of labor associated with manufacturing.
In the binocular market, which is generally more competitive than the
telescope market, with a greater number of competitors at each price point, the
Company competes primarily with Bushnell, Nikon Inc., Canon Inc., Minolta Camera
Co., Ltd., Pentax Corporation, Tasco, Simmons and various smaller manufacturers
and resellers. Many of these competitors in the binocular market have
significantly greater brand name recognition and financial and technical
resources than those of the Company, and many have long-standing positions,
customer relationships and established brand names in their respective markets.
See "Business -- Competition."
Intellectual Property Rights. The Company relies primarily on a
combination of patent, copyright, and trade secret protections in
confidentiality agreements to establish and protect its intellectual property
rights. There can be no assurance that the Company's measures to protect its
intellectual property rights will deter or prevent unauthorized use of the
Company's technology. In addition, the laws of certain foreign countries may not
protect the Company's intellectual property rights to the same extent as the
laws of the United States. The Company's inability to protect its proprietary
rights in the United States or internationally could have a material adverse
effect on the Company.
Claims by third parties that the Company's current or future products or
processes infringe upon their intellectual property rights may have a material
adverse effect on the Company. The Company does not normally perform any formal
surveys or studies relating to whether its products or processes infringe upon
the intellectual property rights of others, and it would be difficult to
establish whether a given product or process infringes upon the intellectual
property rights of others. Intellectual property litigation is complex and
expensive, and the outcome of such litigation is difficult to predict. Any
future potential litigation, regardless of outcome, could result in substantial
expense to the Company and significant diversion of the efforts of the Company's
management and technical personnel. An adverse determination in any such
litigation could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from such parties, if licenses
to such rights were obtainable, or require the Company to cease using such
technology. There can be no assurance that if such licenses were obtainable,
they would be obtainable at costs reasonable to the Company. If forced to cease
using such technology, there can be no assurance that the Company would be able
to develop or obtain alternative technology. Accordingly, an adverse
determination in a judicial or administrative proceeding, changes in patent or
copyright laws or failure of the Company to obtain necessary licenses may
prevent the Company from manufacturing, using or selling certain of its products
or processes, which could have a material adverse effect on the Company.
Environmental Matters. Increasing public attention has been focused on the
environmental impact of many businesses. Federal, state and local laws and
regulations impose various environmental controls on the storage, handling,
discharge and disposal of certain materials used in the Company's manufacturing
process. Although the Company has not experienced a material adverse effect on
its operations from environmental laws, there can be no assurance that changes
in such laws will not impose the need for additional capital equipment or other
requirements or restrict the Company's ability to expand its operations. Any
failure by the Company to comply with such environmental laws could subject the
Company to future liabilities or could cause its manufacturing operations to be
limited or suspended, thereby causing a material adverse effect on the Company.
Concentration of Ownership. Following the Offering, the Company's senior
management will beneficially own approximately 33.3% of the outstanding shares
of Common Stock. Additionally, the Company's Employee Stock Ownership Plan (the
"ESOP") will own 20.0% of the outstanding Common Stock after the Offering. The
committee that administers the ESOP (the "ESOP Committee") is comprised
primarily of members of senior management and generally directs the voting of
unallocated shares and shares for which participants do not provide voting
instructions. As a result, such persons will have the ability to influence the
election of the Company's directors and the outcome of corporate actions
requiring stockholder approval. This concentration of ownership may have the
effect of delaying or preventing a change in control of the Company. See
"Principal and Selling Stockholders."
9
<PAGE> 11
Absence of a Public Trading Market; Volatility of Stock Price. Prior to
the Offering, there has been no public market for the Company's Common Stock,
and there can be no assurance that a significant public trading market for the
Common Stock will develop or be sustained after the Offering. The initial public
offering price will be determined by negotiations among the Company, the Selling
Stockholder and the Underwriters. See "Underwriting." The negotiated initial
public offering price may not be indicative of the market price for the Common
Stock after the Offering. The market price of the Company's Common Stock may be
highly volatile due to factors such as fluctuations in the Company's or its
competitors' operating results, announcements of technological advances or new
products by the Company or its competitors, changes in the Company's
relationships with its suppliers or customers, reports or recommendations by
securities industry analysts or any of the other factors listed under "Risk
Factors." Moreover, broad market fluctuations and general economic or political
conditions may adversely affect the market price of the Company's Common Stock,
regardless of the Company's actual performance.
Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market after the Offering could adversely affect the
prevailing market price of the Common Stock. In addition to the 2,500,000 shares
of Common Stock offered by the Company and the 870,000 shares of Common Stock
offered by the Selling Stockholder, there will be 4,130,000 shares of Common
Stock outstanding after the Offering which will be "restricted securities" (the
"Restricted Securities") under the Securities Act of 1933, as amended (the
"Securities Act"). Beginning 270 days after the date of this Prospectus, at
least 2,500,000 Restricted Securities will become eligible for sale in the
public market pursuant to the expiration of certain lock-up agreements with the
Company, subject to the holding period, volume and other restrictions of Rule
144 promulgated under the Securities Act. In addition, the remaining 130,000
shares held by the Selling Stockholder shall become eligible for sale in the
public market 180 days after the date of this Prospectus, subject to the holding
period, volume and other restrictions of Rule 144. Contemporaneous public sales
of these shares in substantial amounts could adversely affect the trading price
of the Common Stock. See "Shares Eligible for Future Sale" and "Description of
Capital Stock."
Dilution. All of the currently outstanding shares of Common Stock were
issued at prices substantially lower than the price of the shares of Common
Stock offered hereby. Investors participating in the Offering will incur
immediate and substantial dilution of $6.91 in the net tangible book value per
share of the Common Stock from the initial public offering price. See "Dilution"
and "Principal and Selling Stockholders."
Anti-takeover Effects of Certain Certificate of Incorporation and Bylaw
Provisions and Delaware Law; Possible Issuance of Preferred Stock. The
Company's Certificate of Incorporation and Bylaws provide for (i) a classified
board of directors with staggered three year terms, (ii) advance notice
requirements for stockholder proposals and director nominations, (iii) a
prohibition on stockholder action by written consent and (iv) limitations on
calling stockholder meetings. In addition, the Company is subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which prohibits the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. These provisions, along
with certain provisions of the California General Corporation Law applicable to
the Company, could have the effect of discouraging certain attempts to acquire
the Company which could deprive the Company's stockholders of the opportunity to
sell their shares of Common Stock at prices higher than prevailing market
prices. In addition, upon completion of this Offering, the Board of Directors
will have authority to issue up to 1,000,000 shares of Preferred Stock and to
fix the price, rights, preferences, privileges and restrictions, including
voting rights, of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock could affect
adversely the voting power of holders of Common Stock and the likelihood that
such holders will receive dividend payments and payments upon liquidation.
Additionally, the issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock and
may affect adversely the market price of and the voting and other rights of the
holders of the Common Stock. See "Description of Capital Stock."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,500,000 shares of Common
Stock offered by the Company hereby are estimated to be $20.1 million (assuming
an initial public offering price of $9.00 per share and after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by the Company, a portion of which may be reimbursed by the Selling Stockholder
(see "Certain Transactions")). The Company will not receive any portion of the
proceeds from the sale of any shares by the Selling Stockholder.
The Company intends to use approximately $6.9 million of the net proceeds
to redeem all of its outstanding shares of Redeemable Preferred Stock and pay
all accrued dividends thereon. The Redeemable Preferred Stock has a cumulative
14% dividend on the $6.0 million redemption amount, a liquidation preference and
a five-year mandatory redemption provision. In addition, the Company intends to
use approximately $8.2 million of the net proceeds to repay an existing
five-year term note payable to a bank which bears interest at the bank's base
rate (equivalent to prime) plus 0.75% with annual principal of $1.6 million
payable in defined quarterly amounts for five years with any remaining principal
and interest due in full at the end of the five years. The Company intends to
use the remaining proceeds for general corporate purposes. The foregoing
reflects the Company's best estimate of the allocation of net proceeds of the
Offering based on current economic and industry conditions. The Company may find
it desirable to change the allocation of proceeds of the Offering as it deems
appropriate.
Pending use of the proceeds from the Offering, the Company will invest the
funds in investment grade interest-bearing securities, including government
obligations and other money market instruments. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
DIVIDEND POLICY
Other than dividends paid to the Company's ESOP, the Company has not paid
any cash dividends on its Common Stock and does not anticipate paying any
dividends on the Common Stock in the foreseeable future. The Company intends to
pay a dividend to the ESOP for the period from March 1, 1997 through the
completion of this Offering (approximately $60,000). Although the Company
intends to make future contributions to the ESOP upon Board approval, no future
dividends (other than dividends paid to all holders of Common Stock) will be
paid to the ESOP with respect to periods after the completion of this Offering.
The Company's ability to pay dividends is restricted under a Loan and Security
Agreement between the Company and Fleet Capital Corporation. See Note 4 of Notes
to the Financial Statements.
11
<PAGE> 13
DILUTION
As of November 30, 1996, the Company had a net tangible book value of
approximately $(950,000) or $(0.19) per share of Common Stock based upon
5,000,000 shares of Common Stock outstanding. Net tangible book value per share
is determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of shares of Common Stock.
After giving effect to the sale by the Company of the 2,500,000 shares of Common
Stock hereby at an assumed initial public offering price per share of $9.00
(after application of the net proceeds therefrom and early redemption of the
Redeemable Preferred Stock in excess of its carrying value), the Company's net
tangible book value as of November 30, 1996 would have been $15.7 million, or
$2.09 per share of Common Stock. This represents an immediate increase in net
tangible book value of $2.28 per share to existing stockholders and an immediate
dilution of $6.91 per share to new investors purchasing shares in the Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $9.00
Net tangible book value per share before the Offering............. $(0.19)
Increase per share attributable to new investors.................. 2.28
------
Pro forma net tangible book value per share after the Offering...... 2.09
-----
Dilution per share to new investors(1).............................. $6.91
=====
</TABLE>
The following table summarizes on a pro forma basis as of November 30,
1996, the relative investments of all existing stockholders and new investors
purchasing shares of Common Stock from the Company in the Offering. The
calculations are based on an assumed initial public offering price of $9.00 per
share, before deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, a portion of which may be reimbursed
by the Selling Stockholder. See "Certain Transactions."
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)............ 5,000,000 66.7% $ 3,511,000 13.5% $0.70
New investors....................... 2,500,000 33.3% 22,500,000 86.5% $9.00
--------- ------ ----------- ------
Total..................... 7,500,000 100.0% $26,011,000 100.0%
========= ====== =========== ======
</TABLE>
- ---------------
(1) Dilution is determined by subtracting the pro forma net tangible book value
per share after the Offering from the amount of cash paid by a new investor
for a share of Common Stock.
(2) Sales by the Selling Stockholder in the Offering will reduce the number of
shares held by existing stockholders to 4,130,000 shares, or 55.1% of the
total shares of Common Stock outstanding, and will increase the number of
shares held by new investors to 3,370,000 shares, or 44.9% of the total
shares of Common Stock outstanding after the Offering.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of November 30, 1996 and as adjusted to reflect the sale of 2,500,000 shares of
Common Stock offered by the Company at an assumed public offering price of $9.00
per share (net of underwriter discounts and commissions and estimated Offering
expenses payable by the Company). This table should be read in conjunction with
the Financial Statements and Notes to the Financial Statements of the Company
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," all included herein.
<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Bank line of credit................................................. $ 8,984 $ 4,094
Current portion of long-term debt................................... 1,584 --
-------- --------
Total short-term debt....................................... $ 10,568 $ 4,094
======== ========
Long-term debt, net of current portion................................ $ 7,124 --
-------- --------
Redeemable Preferred Stock: 1,000 shares authorized; 1,000 shares
issued and outstanding, actual(1)................................... 3,041 N/A
-------- --------
Stockholders' equity:
Preferred Stock: 999,000 shares authorized; none issued and
outstanding, actual; 1,000,000 shares authorized, $0.01 par value
per share, none issued and outstanding, as adjusted.............. -- --
Common Stock:
Series A Common Stock: 15,000,000 shares authorized; 3,500,000
shares issued and outstanding, actual........................... 3,511 N/A
Series B Common Stock: 5,000,000 shares authorized; 1,500,000
shares issued and outstanding, actual........................... 995 N/A
Common Stock, $0.01 par value per share; 20,000,000 shares
authorized; 7,500,000 shares issued and outstanding, as
adjusted........................................................ N/A $ 75
Additional paid in capital............................................ N/A 24,556
Retained earnings(1).................................................. 5,544 2,058
-------- --------
10,050 26,689
Unearned ESOP shares(2)............................................... (11,000) (11,000)
-------- --------
Total stockholders' equity (deficit)................................ (950) 15,689
-------- --------
Total capitalization........................................ $ 9,215 $ 15,689
======== ========
</TABLE>
- ---------------
(1) The Redeemable Preferred Stock redemption value at November 30, 1996,
including accrued dividends, was approximately $6.5 million. Assuming the
redemption of the Redeemable Preferred Stock, retained earnings, as
adjusted, have been reduced by the difference between the carrying value of
the Redeemable Preferred Stock and its redemption value.
(2) For a discussion of the Unearned ESOP shares see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources."
13
<PAGE> 15
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND WEIGHTED AVERAGE SHARE AMOUNTS)
The following data, insofar as it relates to each of the fiscal years 1994
through 1996 and the nine months ended November 30, 1996, has been derived from
audited financial statements, including the balance sheets at February 28, 1995,
February 29, 1996 and November 30, 1996 and the related statements of income and
of cash flows for the three years ended February 29, 1996 and the nine months
ended November 30, 1996, and notes thereto appearing elsewhere herein. The data
for the nine months ended November 30, 1995 has been derived from unaudited
financial statements also appearing herein and which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim period. The data for the years ended February 29, 1992 and February 28,
1993 has been derived from unaudited financial statements not included herein
and which, in the opinion of management, include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results, for the years ended February 29, 1992 and February 28, 1993,
respectively.
<TABLE>
<CAPTION>
NINE MONTHS ENDED NOVEMBER 30,
FISCAL YEAR ENDED FEBRUARY 28(29), -----------------------------------------
---------------------------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 1995 1996 1996(1)
----------- ----------- ---------- ---------- ---------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales........ $ 10,149 $ 13,887 $ 16,628 $ 24,934 $ 29,770 $ 23,459 $ 38,966 $ 38,966
Cost of sales.... 7,385 10,840 11,670 17,040 20,054 15,827 26,267 26,267
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit..... 2,764 3,047 4,958 7,894 9,716 7,632 12,699 12,699
Selling
expenses....... 983 1,438 1,565 2,035 2,832 2,158 3,555 3,555
General and
administrative
expenses....... 1,059 986 1,378 2,118 2,651 1,966 2,664 2,664
Research and
development
expenses....... 320 274 425 423 518 396 444 444
Amortization of
deferred
credit......... (35) (63) (53) -- -- -- -- --
ESOP
contribution(2)... -- -- -- -- -- -- 750 750
Certain
charges(3)..... -- -- -- -- 300 -- 340 340
--------- --------- --------- --------- --------- --------- --------- ---------
Operating
income(4)...... 437 412 1,643 3,318 3,415 3,112 4,946 4,946
Interest
expense........ 329 395 493 470 659 496 1,253 344
--------- --------- --------- --------- --------- --------- --------- ---------
Income before
income taxes... 108 17 1,150 2,848 2,756 2,616 3,693 4,602
Income taxes..... 1 1 110 797 1,200 1,177 1,532 1,910
--------- --------- --------- --------- --------- --------- --------- ---------
Net income....... 107 16 1,040 2,051 1,556 1,439 2,161 2,692
Accretion on
Redeemable
Preferred Stock
and dividend on
Series B Common
Stock, net of
tax
benefit(5)..... -- -- -- -- -- -- (1,137) --
Redemption of
Redeemable
Preferred
Stock.......... -- -- -- -- -- -- -- (3,500)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)
available to
common
stockholders... $ 107 $ 16 $ 1,040 $ 2,051 $ 1,556 $ 1,439 $ 1,024 $ (808)
========= ========= ========= ========= ========= ========= ========= =========
Per share
information:
Net income
before
adjustment to
net income
available per
common
share........ $ 0.02 $ 0.00 $ 0.22 $ 0.44 $ 0.33 $ 0.31 $ 0.60 $ 0.44
Accretion on
Redeemable
Preferred
Stock and
dividend on
Series B
Common Stock,
net of tax
benefit...... -- -- -- -- -- -- (0.32) --
Redemption of
Redeemable
Preferred
Stock........ -- -- -- -- -- -- -- (0.57)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income
(loss)
available per
common share
to common
stockholders... $ 0.02 $ 0.00 $ 0.22 $ 0.44 $ 0.33 $ 0.31 $ 0.28 $ (0.13)
========= ========= ========= ========= ========= ========= ========= =========
Supplemental net
income per
common share
(unaudited).... -- -- -- -- $ 0.37 -- $ 0.47 --
========= =========
Weighted average
common shares
outstanding.... 4,682,472 4,682,472 4,682,472 4,682,472 4,682,472 4,682,472 3,608,335 6,108,335
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28(29), NOVEMBER 30,
---------------------------------------------------------------- ------------
1992 1993 1994 1995 1996 1996
----------- ----------- ---------- ---------- ---------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working
capital........ $ 919 $ 699 $ 1,176 $ 3,358 $ 4,183 $ 7,124
Total assets..... 4,473 6,929 7,992 10,197 13,035 27,447
Total current
liabilities.... 3,231 5,797 6,153 5,827 7,364 17,556
Long-term debt,
less current
portion........ 1,064 955 571 1,054 818 7,732
Redeemable
Preferred
Stock.......... -- -- -- -- -- 3,041
Stockholders'
equity
(deficit)...... 108 124 1,164 3,215 4,771 (950)
</TABLE>
14
<PAGE> 16
- ---------------
(1) Pro forma amounts are adjusted to reflect (i) the sale by the Company of
2,500,000 shares of Common Stock offered at an assumed Offering price of
$9.00, (ii) the application of net proceeds therefrom (see "Use of
Proceeds") as if the Offering had been consummated on March 1, 1996 and
(iii) the effect of the April 23, 1996 recapitalization transactions
retroactively applied to March 1, 1996. See "Certain Transactions." Pro
forma income before income taxes reflects reduced interest expense on debt
assumed to be repaid with proceeds of the Offering. Pro forma net income is
increased by the tax-effected reduced interest expense. By assuming the
Offering was effective at the beginning of the period, both the Accretion on
the Redeemable Preferred Stock and the dividend on the Series B Common Stock
are eliminated on a pro forma basis. The pro forma Redemption of Redeemable
Preferred Stock represents the difference between the carrying value ($2.5
million) and the redemption value ($6.0 million) at the beginning of the
period. The amount of this difference reduces Net income (loss) available to
common stockholders.
(2) ESOP contributions of $750,000 for the nine months ended November 30, 1996
represent contributions accrued for the period based on an expected Company
contribution of $1.0 million for the fiscal year ending February 28, 1997.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operation -- Liquidity and Capital Resources."
(3) Certain charges for the fiscal year ended February 29, 1996 consist of
one-time contractual bonuses accrued on behalf of certain officers in
connection with the Company's formation of the ESOP and the related
recapitalization effected in April 1996. Certain charges for the nine months
ended November 30, 1996 consist of one-time contractual bonuses accrued on
behalf of certain members of senior management as set forth in the
Securities Purchase Agreement, dated April 23, 1996, between the Company and
Churchill ESOP Capital Partners, A Minnesota Limited Partnership.
(4) Operating income before certain charges for the year ended February 29, 1996
and for the nine months ended November 30, 1996 was $3.7 million and $5.3
million, respectively.
(5) Represents (i) accretion of $541,000 reflecting original issue discount and
accrued dividends on the Redeemable Preferred Stock and (ii) dividends of
$995,000 declared and paid on the Series B Common Stock, net of tax benefit
of $399,000.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
OVERVIEW
Founded in 1972, Meade designs, manufactures and distributes telescopes and
accessories for the beginning to serious amateur astronomer. The Company offers
a broad range of products, including more than 40 different telescope models
with several different optical configurations as well as more than 250 accessory
products. The Company manufactures all of its high-end advanced telescopes in
its manufacturing facility in Irvine, California, and employs seven engineers
on-site to develop new products, technological advances and improvements to
existing products. See "Business -- Competitive Strengths -- New
Products/Research and Development." The majority of the Company's less-expensive
telescopes are manufactured in Taiwan. To ensure that the telescopes produced in
Taiwan are of high quality, the Company is party to an exclusive arrangement
with the Taiwanese Factory, in which the Taiwanese Factory manufactures
telescopes only for Meade. See "Business -- Competitive Strengths -- Quality
Control." The Company sells its products domestically through a network of
direct mail order dealers, specialty retailers and mass merchandisers and
internationally through foreign distributors. To complement its extensive line
of telescopes and leverage its distribution system, Meade has recently
introduced a complete line of binoculars to be sold under the Meade brand name.
Net sales for Meade increased from $10.1 million to $29.8 million during
the fiscal years from 1992 to 1996. Furthermore, net sales for the nine months
ended November 30, 1996 increased from $23.5 million to $39.0 million, an
increase of 66.1% over the nine months ended November 30, 1995. Income from
operations increased from $437,000 to $3.4 million during the fiscal years from
1992 to 1996. Income from operations for the nine months ended November 30, 1996
increased by $1.8 million, or 58.9%, over the nine months ended November 30,
1995. In addition, income from operations before certain charges for the nine
months ended November 30, 1996 increased by $2.2 million, or 69.9% over the nine
months ended November 30, 1995. The Company attributes this increase in net
sales and income from operations primarily to its emphasis on research,
development and successful introduction of new products, enhancements to
existing products and its increase in marketing and customer service and support
activities. See "Business -- Introduction."
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's Income Statements as a percentage of net sales for the
periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
FEBRUARY 28(29), NOVEMBER 30,
------------------------- ---------------
1994 1995 1996 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 70.2 68.3 67.4 67.5 67.4
----- ----- ----- ----- -----
Gross profit....................................... 29.8 31.7 32.6 32.5 32.6
Operating expenses:
Selling expenses................................. 9.4 8.2 9.5 9.2 9.1
General and administrative expenses.............. 8.3 8.5 8.9 8.4 6.8
Research and development expenses................ 2.5 1.7 1.7 1.7 1.1
Amortization of deferred credit.................. (0.3) -- -- -- --
ESOP contribution................................ -- -- -- -- 1.9
Certain charges.................................. -- -- 1.0 -- 0.9
----- ----- ----- ----- -----
Total operating expenses................. 19.9 18.4 21.1 19.3 19.8
----- ----- ----- ----- -----
Income from operations............................. 9.9 13.3 11.5 13.2 12.8
Interest expense................................... 3.0 1.9 2.2 2.1 3.2
----- ----- ----- ----- -----
Income before income taxes......................... 6.9 11.4 9.3 11.1 9.6
Provision for income taxes......................... 0.7 3.2 4.0 5.0 3.9
----- ----- ----- ----- -----
Net income......................................... 6.2 8.2 5.3 6.1 5.7
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED NOVEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED NOVEMBER 30,
1995
Net sales increased from $23.5 million for the nine months ended November
30, 1995 to $39.0 million for the nine months ended November 30, 1996, an
increase of 66.1%. This increase was primarily due to (i) an increase of $10.1
million in net sales of less-expensive telescopes, (ii) an increase of $1.3
million in net sales of telescope accessories and (iii) an increase of $3.2
million in net sales of new products introduced in late fiscal 1996 and early
fiscal 1997, including the ETX Astro Telescope, the LX50 and LX10 lines of
Schmidt-Cassegrain and Maksutov-Cassegrain telescopes.
Gross profit increased from $7.6 million (32.5% of net sales) for the nine
months ended November 30, 1995 to $12.7 million (32.6% of net sales) for the
nine months ended November 30, 1996, an increase of 67.1%.
Selling expenses increased from $2.2 million (9.2% of net sales) for the
nine months ended November 30, 1995 to $3.6 million (9.1% of net sales) for the
nine months ended November 30, 1996, an increase of 63.6%. This increase
principally reflects (i) higher advertising and other selling expenses to
support higher sales volumes for the nine months ended November 30, 1996 as
compared to the nine months ended November 30, 1995, (ii) higher freight and
other shipping costs due to higher sales volumes for the nine months ended
November 30, 1996 as compared to the nine months ended November 30, 1995 and
(iii) higher costs due to a net increase in selling and shipping personnel for
the nine months ended November 30, 1996 as compared to the nine months ended
November 30, 1995.
General and administrative expenses increased from $2.0 million (8.4% of
net sales) for the nine months ended November 30, 1995 to $2.7 million (6.8% of
net sales) for the nine months ended November 30, 1996, an increase of 35.0%.
The increase in the general and administrative expenses principally reflects
higher personnel-related costs and general office costs for the nine months
ended November 30, 1996 as compared to the nine months ended November 30, 1995.
The decrease in general and administrative expenses as a percentage of net sales
for the nine months ended November 30, 1996 as compared to the comparable period
in the prior year was primarily due to efficiencies achieved by allocating the
Company's fixed expenses over the increased revenue base.
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<PAGE> 19
Research and development expenses increased from $396,000 (1.7% of net
sales) for the nine months ended November 30, 1995 to $444,000 (1.1% of net
sales) for the nine months ended November 30, 1996, an increase of 12.1%. This
increase was principally due to higher personnel-related costs and higher
outside consulting costs for the nine months ended November 30, 1996, as
compared to the nine months ended November 30, 1995.
The ESOP contribution expense of $750,000 for the nine months ended
November 30, 1996, represents an accrual of three quarters of the expected
Company contribution to the ESOP for the fiscal year ending February 28, 1997
(the ESOP was effective March 1, 1996 and, therefore, there is no comparable
expense for the nine months ended November 30, 1995).
Certain charges for the nine months ended November 30, 1996 represent
one-time contractual bonuses of $340,000 accrued on behalf of certain members of
senior management as described in the Securities Purchase Agreement, dated April
23, 1996, between the Company and Churchill ESOP Capital Partners, A Minnesota
Limited Partnership ("Churchill").
Interest expense increased from $496,000 for the nine months ended November
30, 1995 to $1.3 million for the nine months ended November 30, 1996, an
increase of 162.1%. This increase was principally due to (i) interest expense on
the bank term debt incurred in connection with the ESOP recapitalization in
April 1996, and (ii) increased average outstanding balances on the bank line of
credit to support higher receivables and inventory associated with increased
sales of less-expensive telescopes for the nine months ended November 30, 1996,
as compared to the nine months ended November 30, 1995.
Income taxes increased from $1.2 million (45.0% of income before income
taxes) for the nine months ended November 30, 1995 to $1.5 million (41.5% of
income before income taxes) for the nine months ended November 30, 1996. The
reduction in the tax rate for the nine months ended November 30, 1996, as
compared to the nine months ended November 30, 1995, was due to differences in
the effect of expenses not deductible for tax purposes in each period.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales increased from $24.9 million in fiscal 1995 to $29.8 million in
fiscal 1996, an increase of 19.7%. This increase was due primarily to an
increase of $3.0 million in net sales of the Company's less-expensive
telescopes.
Gross profit increased from $7.9 million (31.7% of net sales) in fiscal
1995 to $9.7 million (32.6% of net sales) in fiscal 1996, an increase of 22.8%.
The increase in the gross profit as a percentage of net sales was principally
due to the increased sales of the Company's less-expensive telescopes, which
generally have a higher gross profit margin than the Company's other products.
Selling expenses increased from $2.0 million (8.2% of net sales) in fiscal
1995 to $2.8 million (9.5% of net sales) in fiscal 1996, an increase of 40.0%.
This increase principally reflects (i) increases in advertising and freight
costs due to higher sales volumes in fiscal 1996 compared to fiscal 1995 and
(ii) higher personnel-related costs due to net increases in selling and shipping
personnel in fiscal 1996 as compared to fiscal 1995.
General and administrative expenses increased from $2.1 million (8.5% of
net sales) in fiscal 1995 to $2.7 million (8.9% of net sales) in fiscal 1996, an
increase of 28.6%. This increase principally reflects higher costs due to net
increases in general and administrative personnel and executive salary increases
in fiscal 1996 as compared to fiscal 1995.
Research and development expenses increased from $423,000 (1.7% of net
sales) in fiscal 1995 to $518,000 (1.7% of net sales) in fiscal 1996, an
increase of 22.5%. This increase principally reflects higher costs due to
increases in research and development personnel.
During fiscal 1996 the Company incurred certain charges that are not
expected to continue into future periods. These charges, totaling $300,000 in
fiscal 1996, related to management bonuses awarded in connection with the
completion of the ESOP recapitalization. There were no comparable charges in
fiscal 1995.
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<PAGE> 20
Interest expense increased from $470,000 in fiscal 1995 to $659,000 in
fiscal 1996, an increase of 40.2%. The increase was primarily due to increased
average outstanding balances on the bank line of credit to support increased
sales for less-expensive telescopes in fiscal 1996 compared to fiscal 1995.
Income taxes increased from $797,000 (28.0% of income before income taxes)
in fiscal 1995 to $1.2 million (43.5% of income before income taxes) in fiscal
1996. The tax rate in fiscal 1995 reflects the utilization of approximately
$430,000 in net operating loss carry forwards, for which no benefit had
previously been recognized. There were no net loss carry forwards available for
utilization in fiscal 1996.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales increased from $16.6 million in fiscal 1994 to $24.9 million in
fiscal 1995, an increase of 50.0%. This increase was due primarily to (i) an
increase of $3.7 million in net sales of the Company's less-expensive
telescopes, (ii) an increase of $2.4 million in net sales of LX200 model
telescopes and, (iii) an increase of $1.2 million in net sales of telescope
accessories.
Gross profit increased from $5.0 million (29.8% of net sales) in fiscal
1994 to $7.9 million (31.7% of net sales) in fiscal 1995, an increase of 58.0%.
The increase in the gross profit as a percentage of net sales was principally
due to the increased sales of the Company's less-expensive telescopes which
generally have a higher gross profit margin than the Company's other products.
Selling expenses increased from $1.6 million (9.4% of net sales) in fiscal
1994 to $2.0 million (8.2% of net sales) in fiscal 1995, an increase of 25.0%.
This increase principally reflects increases in advertising and freight costs
due to higher sales volumes in fiscal 1995 compared to fiscal 1994.
General and administrative expenses increased from $1.4 million (8.3% of
net sales) in fiscal 1994 to $2.1 million (8.5% of net sales) in fiscal 1995, an
increase of 50.0%. This increase principally reflects higher costs due to
increases in general and administrative personnel.
Research and development expenses decreased from $425,000 (2.5% of net
sales) in fiscal 1994 to $423,000 (1.7% of net sales) in fiscal 1995. Increases
in personnel related costs during fiscal 1995 were offset by decreases in
outside consulting expenses as compared to fiscal 1994.
Interest expense decreased from $493,000 in fiscal 1994 to $470,000 in
fiscal 1995, a decrease of 4.7%. This decrease was primarily due to changes in
the mix of bank and other borrowings in fiscal 1995 compared to fiscal 1994.
Income taxes increased from $110,000 (9.6% of income before income taxes)
in fiscal 1994 to $797,000 (28.0% of income before income taxes) in fiscal 1995.
The tax rate in fiscal 1994 reflects the utilization of approximately $145,000
in net operating loss carryforwards, for which no benefit had previously been
recognized and a decrease of $200,000 in the valuation allowance. The tax rate
in fiscal 1995 reflects the utilization of approximately $430,000 in net
operating loss carryforwards, for which no benefit had previously been
recognized.
QUARTERLY RESULTS OF OPERATIONS
The Company has experienced, and expects to continue to experience,
substantial fluctuations in its sales, gross margins and profitability from
quarter to quarter. Factors that influence these fluctuations include the volume
and timing of orders received, changes in the mix of products sold, market
acceptance of the Company's products, competitive pricing pressures, the
Company's ability to meet increasing demand and delivery schedules, the timing
and extent of research and development expenses, and the timing and extent of
product development costs. In addition, a substantial portion of the Company's
net sales and operating income typically occurs in the third quarter of the
Company's fiscal year primarily due to disproportionately higher customer demand
for less-expensive telescopes during the Christmas holiday season.
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<PAGE> 21
The following table presents unaudited financial results for each of the
eight quarters in the period ended November 30, 1996. The Company believes that
all necessary adjustments have been included to present fairly the quarterly
information when read in conjunction with the Financial Statements and Notes
included elsewhere in this Prospectus. The operating results for any quarter are
not necessarily indicative of the results for any subsequent quarter or for the
fiscal year ended February 28, 1997.
<TABLE>
<CAPTION>
FISCAL
1995 FISCAL 1996 FISCAL 1997
------- ------------------------------------- ---------------------------
FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........................ $5,658 $4,812 $7,260 $11,386 $6,310 $7,166 $12,031 $19,769
Gross profit..................... 1,704 1,400 2,123 4,109 2,084 2,154 3,926 6,619
ESOP contribution................ -- -- -- -- -- 250 250 250
Operating income................. 625 50 686 2,376 303 149 1,552 3,245
Net income (loss)................ $ 380 $ (48) $ 302 $ 1,225 $ 77 $ (58) $ 635 $ 1,584
</TABLE>
Quarterly results can be affected by a number of factors including the
timing of orders, production delays or inefficiencies, and raw materials
availability. See "Risk Factors -- Quarterly Fluctuations and Seasonality" and
"Business -- Operations -- Materials and Supplies."
LIQUIDITY AND CAPITAL RESOURCES
Since 1993, the Company has funded operations primarily through borrowings
from banks and financial institutions and proceeds from related party
subordinated notes. For the nine months ended November 30, 1996, the Company
funded operations principally through borrowings of $6.9 million on its bank
line of credit. At November 30, 1996, the Company had accounts receivable of
$12.9 million, inventory of $11.3 million and working capital of $7.1 million.
Increases in accounts receivable and inventory at November 30, 1996 were
primarily due to increased sales for the period and increased stocking levels to
support anticipated future sales, respectively.
Capital expenditures, including financed purchases of equipment, aggregated
$537,000, $664,000, $377,000 and $304,000 for the nine months ended November 30,
1996 and the fiscal years ended February 29, 1996 and February 28, 1995 and
1994, respectively. The Company had no material capital expenditure commitments
as of November 30, 1996.
The Company leases a 57,000 square foot manufacturing and corporate
facility and a separate 27,000 square foot distribution facility (the "Existing
Leases"). At November 30, 1996, monthly lease expenses for these facilities
aggregate approximately $34,000. In December 1996, the Company entered into a
ten year lease agreement for a new 161,000 square foot facility that the Company
expects to begin to occupy in the third quarter of fiscal 1998. Net lease
expenses on the new facility are approximately $75,000 per month, with fixed
increases of approximately 3% per year. The Company believes there will be no
material expenses incurred in connection with the termination of the Existing
Leases because (i) the Company intends to sublease its manufacturing and
corporate facility and (ii) the distribution facility lease terminates in
October 1997.
In April 1996, the Company entered into a five-year Loan and Security
Agreement with Fleet Capital Corporation (the "Loan Agreement") which provides
for (i) a $10.0 million revolving line of credit facility, secured by the
Company's accounts receivable and inventories and (ii) a $9.5 million term note
(the "term note") secured by the assets of the Company. The term note will be
repaid with the proceeds of this Offering. See "Use of Proceeds." The Loan
Agreement contains certain financial and operating covenants including
compliance with certain financial ratios, limitations on the ability of the
Company to incur additional indebtedness and restrictions on, among other
things, the Company's ability to pay cash dividends and take certain other
corporate actions.
Also in April 1996, the Company was recapitalized through the sale of
Redeemable Preferred Stock to Churchill. For proceeds of $6.0 million, the
Company sold 1,000 shares of newly-issued Redeemable Preferred
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<PAGE> 22
Stock to Churchill and issued a warrant to Churchill to purchase 1,000,000
shares of Series A Common Stock. The Redeemable Preferred Stock has a cumulative
annual 14% dividend on the $6.0 million redemption amount, a liquidation
preference and a five-year mandatory redemption provision. The Redeemable
Preferred Stock will be repurchased by the Company with the proceeds of this
Offering. See "Use of Proceeds." The warrant was exercised in April 1996 for an
aggregate purchase price of $10,000.
In April 1996, the Company made an $11.0 million term loan to the ESOP (the
"ESOP Loan"), the proceeds of which were used by the ESOP to purchase the
Company's Series B Common Stock from senior management. See "Certain
Transactions." The ESOP pledged the stock back to the Company as security for
the ESOP Loan. The ESOP Loan has a ten-year term and bears interest at 6% per
annum. Principal and interest are due semi-annually, subject to the Company
making contributions to the ESOP to fund the principal and interest payments.
Contributions to the ESOP are accounted for as a contribution expense on
the Company's income statement and are accrued quarterly based upon the expected
annual contribution amount. As quarterly contributions are accrued, the
corresponding shares are added to weighted average common shares outstanding;
however, unearned ESOP shares on the Company's Balance Sheet are reduced
annually following Board approval of the contribution. It is expected that the
Board will approve a $1.0 million ESOP contribution for fiscal 1997 which would
result in the release of approximately 135,000 shares of Common Stock from
unearned ESOP shares.
The ESOP uses the contributions to repay amounts due on the ESOP Loan. The
ESOP contribution expense is a net non-cash charge which is added back to net
income to arrive at cash flows provided by operating activities. As the Company
makes these non-cash contributions to the ESOP to fund the repayment of the ESOP
Loan, the Company will realize cash tax savings equal to the product of the
contributions made multiplied by the applicable statutory tax rates in effect at
the time. At November 30, 1996, total future planned contributions to be made to
the ESOP aggregated $10.25 million.
The Company believes that the net proceeds of this Offering, together with
internally generated cash flow and borrowing availability, will be sufficient to
meet its operating, working capital and capital expenditure requirements through
the next twelve months. In the event the Company's plans require more capital
than is presently anticipated, the Company's remaining cash balances may be
consumed and additional sources of liquidity, such as debt or equity financings,
may be required to meet its capital needs. There can be no assurance that
additional capital beyond the amounts the Company currently requires will be
available on reasonable terms, if at all.
INFLATION
The Company does not believe that inflation has had a material effect on
the results of operations during the past three years. There can be no assurance
that the Company's business will not be affected by inflation in the future.
FORWARD-LOOKING INFORMATION
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the Risk Factors and elsewhere in this Prospectus.
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<PAGE> 23
BUSINESS
INTRODUCTION
Meade is the leading designer, manufacturer and distributor of telescopes
and accessories for the beginning to serious amateur astronomer. Recognized for
its expertise in telescope innovation and the superior quality of its products,
Meade has successfully introduced a wide range of new products, resulting in
what the Company believes to be the broadest and most complete line of
telescopes available. The Company offers more than 40 different telescope models
with several different optical configurations, as well as more than 250
accessory products. The Company's telescopes range in aperture from 2 to 16
inches and in retail price from less than $100 to $15,000.
Since its founding in 1972, Meade has strived to develop a reputation for
providing the amateur astronomer with technically sophisticated products at
competitive prices. Meade manufactures the complete line of its advanced
astronomical telescopes in Irvine, California, including the production of the
optical systems, which are critical components of telescopes. Combining its
manufacturing expertise with its dedication to innovation, quality and value,
Meade has developed and produced some of the industry's most technologically
advanced consumer telescopes at affordable prices. Although professional and
institutional applications of Meade's telescopes are not Meade's primary market,
the Company's 8-inch and 10-inch Schmidt-Cassegrain telescopes are used by many
universities, scientific laboratories and aerospace companies, including the
University of California, Los Alamos National Laboratory, Lawrence Livermore
Laboratory, National Radio Astronomy Observatory and NASA/Aames Research. The
Company has capitalized on its brand name recognition among serious amateur
astronomers to market successfully its less-expensive telescopes to beginning
and intermediate amateur astronomers. Meade has become a major supplier of
telescopes to such retailers as The Nature Company, Service Merchandise, Natural
Wonders, Wal-Mart, J.C. Penney and Discovery Channel Stores. To complement its
extensive line of telescopes and leverage its distribution system, the Company
has recently introduced a complete line of binoculars to be sold under the Meade
brand name.
Meade was sold by its founder and current Chief Executive Officer to a
private investor in 1986 and was then reacquired by the Company's current senior
management in 1991. After reacquisition, management reemphasized the importance
of research and development for new products and product enhancements. Recently,
one of Meade's newest products, the ETX Astro Telescope, was the subject of a
product review in the January 1997 issue of Sky and Telescope and was referred
to as the "hottest scope ever." Meade also significantly broadened the Company's
less-expensive telescope line and has an exclusive arrangement with the
Taiwanese Factory to manufacture less-expensive telescopes in accordance with
the Company's proprietary designs. Meade also has increased the marketing of its
products by aggressively advertising in periodicals directed to amateur
astronomers and by providing greater support to the Company's dealers, specialty
retailers, foreign distributors, mass merchandisers, and the end users of
Meade's products. Additionally, Meade publishes a comprehensive, full-color,
high quality product catalogue which provides significant product exposure.
In the United States and Canada, the Company distributes its products
through a network of more than 500 specialty retailers and mass merchandisers,
which offer Meade's products in more than 1,000 retail store locations. The
Company also sells certain of its telescope models to selected national mail
order dealers. Meade sells its products internationally through a network of
approximately 30 foreign distributors, many of which service retail locations in
their respective countries. International sales accounted for approximately 17%
of the Company's net sales for the nine months ended November 30, 1996. The
Company also publishes a comprehensive product catalogue which management
believes provides extensive exposure for the Company's products.
Meade's net sales have increased from $10.1 million for the fiscal year
ended February 28, 1992, to $29.8 million for the fiscal year ended February 29,
1996. During the same period, operating income increased from $437,000 to $3.7
million before certain charges of $300,000. For the nine months ended November
30, 1996, Meade generated net sales of $39.0 million and operating income of
$5.3 million before certain charges of $340,000, compared to $23.5 million and
$3.1 million, respectively, for the nine months ended Novem-
22
<PAGE> 24
ber 30, 1995. These represent increases in net sales and operating income before
certain charges of 66.1% and 69.9%, respectively, for the nine month periods.
See "Selected Financial Information." The Company intends to continue to pursue
an integrated strategy of product line expansion, aggressive marketing,
expansion into the binocular market and expansion of the Company's distribution
network.
INDUSTRY OVERVIEW
Market-size data for the telescope and binocular industries is difficult to
obtain because many of the companies in the industries are either private or
subsidiaries or divisions of larger public companies. The Company believes that
the overall size of the telescope market is driven, in part, by the introduction
of new products.
The telescope industry is generally divided into two categories (i)
advanced astronomical telescopes for serious amateur astronomers who consider
astronomy to be an important leisure activity and (ii) less-expensive telescopes
for beginning to intermediate amateur astronomers. The market for advanced
astronomical or higher-end telescopes is characterized by frequent technological
developments, including the recent introduction of electronic and computer-aided
features. Serious amateur astronomers demand that the optical, electronic and
mechanical performance of the telescopes and accessories they purchase be of
very high quality. This high-end telescope market, while smaller than the
less-expensive telescope market, continues to drive the technological advances
in the industry. Management believes that overall consumer awareness is
increased by the advances made in the high-end telescope market.
Within the industry, manufacturers generally offer three types of
telescopes (a) refracting telescopes, which use a lens at the upper end of the
optical tube to collect light, (b) reflecting telescopes, which use a concave
mirror as the primary optical element and (c) catadioptric (mirror-lens)
telescopes, which employ a combination of mirrors and lenses to form the image.
Each type has its own advantages: refractors are easy to maintain, yield sharp
images and are relatively inexpensive in smaller apertures; reflectors generally
are the lowest-cost means of purchasing larger apertures and are well suited to
the intermediate amateur astronomer; and mirror-lens telescopes are more
portable in larger apertures and are popular among serious amateur astronomers.
COMPETITIVE STRENGTHS
Meade believes that it derives significant benefits from its position as
the leading designer, manufacturer and distributor of telescopes and related
products. These benefits include its ability to offer its customers one of the
most innovative, broadest product lines available, embodying both high quality
and value. The Company attributes its success to the following competitive
strengths:
New Products/Research and Development. Meade places a primary emphasis on
product innovation and quality through its research and development efforts. The
Company currently employs seven engineers on-site, developing new products,
technological advances and improvements to existing products, in an effort to
remain the industry leader. The Company is able to obtain additional benefits by
out-sourcing certain research and development services to supplement its
internal expertise. Because of this dedication to research and development, the
Company has been able to introduce many new products over time and has been able
to take advantage of certain market opportunities as they have occurred. See
"Business -- Products." Meade believes that the members of its senior level
management are among the most experienced in the telescope industry. The
Company's four most experienced officers have been employed in this industry for
an average of more than 21 years. The Company, its management and its employees
are dedicated to the goal of producing technically superior yet
price-competitive products for the amateur astronomer and have been responsible
for some of the industry's most technically advanced consumer telescopes.
Broadest Line of Products. The Company's strategy has been to leverage its
brand name recognition and reputation for high-end telescopes to facilitate the
sales of its less-expensive telescopes. As a result, the Company believes it
currently has the most complete line of telescopes available, including more
than 40 different telescope models with several different optical configurations
as well as more than 250 accessory products. The Company's telescopes range in
aperture from 2 to 16 inches and in retail price from less than $100 to $15,000.
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<PAGE> 25
Optical Systems Expertise. Meade has made substantial investments to
develop an expertise in optical engineering, providing it with the ability to
produce high quality optics on-site. Meade employs highly skilled opticians who
use sophisticated manufacturing techniques and equipment, including specialized
optical polishing machines and vacuum-coating machines, to produce what the
Company believes to be the highest quality optics available in the consumer
telescope market.
Quality Control. Meade's manufacturing and engineering personnel
coordinate the manufacturing process in order to ensure that product quality is
maintained at a high level within an efficient cost structure. The Company has
in place quality controls covering all aspects of the manufacturing process of
its products, from each product's precision optical system to its final assembly
and testing. The Company manufactures all of its high-end advanced telescopes in
its manufacturing facility in Irvine, California, while most of the Company's
less-expensive telescopes are manufactured for the Company in Taiwan through an
exclusive arrangement with the Taiwanese Factory. This exclusive arrangement
provides the Company with the ability to exert control over the telescope
manufacturing process to ensure the quality and performance of its less-
expensive products. To support this arrangement, Meade regularly commits one of
its United States based engineers to the Taiwanese Factory.
Broad Distribution Network. The Company's sales force works closely with
specialty retailers, distributors and mass merchandisers on product quality,
technical knowledge and customer service. Meade has its own on-site graphic arts
department to work with specialty retailers, distributors and mass merchandisers
to produce print advertising, hang-tags for displays within retail outlets, and
other point-of-sale support. This capability provides the Company's customers
with a comprehensive marketing program to assist in their sales efforts. As a
result of these efforts, Meade has become a major supplier of telescopes to such
retailers as The Nature Company, Service Merchandise, Natural Wonders, Wal-Mart,
J.C. Penney and Discovery Channel Stores. Meade also has an expanding
international presence. Its sales to foreign distributors have grown from $3.2
million for the fiscal year ended February 28, 1994 to $7.5 million for the
fiscal year ended February 29, 1996. Sales to foreign distributors reached $6.8
million for the nine months ended November 30, 1996.
Superior Customer Service. Meade believes that its high levels of customer
service and technical support are important factors that differentiate it from
its competitors. In an effort to provide each of the Company's customers with
post-sale service and to relieve them of the burden of such service, Meade has
established multiple dedicated toll-free telephone numbers so that its customers
and end users can call the Company's support personnel with any questions
relating to its products. The Company's experience is that product returns from
first-time telescope users have been historically higher than necessary for the
industry because such first-time customers are often unfamiliar with assembly
procedures and telescope operation. The Company believes that providing this
toll-free assistance reduces product returns by better educating first-time
users. In addition, in an effort to simplify assembly of the Company's products,
Meade pre-assembles a substantial portion of its telescopes prior to packaging.
Meade also makes available to telescope owners astronomical software and other
product enhancements.
GROWTH STRATEGY
Meade's objective is to expand its position in the domestic and
international marketplace for telescopes and binoculars. The key elements of the
Company's strategy to achieve this objective are as follows:
Expansion of Product Lines. The Company continually seeks to develop and
introduce new and innovative telescope products and accessories. The Company
maintains an on-site engineering staff to pursue research and development
opportunities and to respond quickly to market demands for product modification
and innovation. Recent new products the Company has introduced include (i) the
ETX Astro Telescope ("ETX"), (ii) new celestial observation software and (iii)
enhanced CCD digital cameras that permit the generation of high resolution
astronomical images from the telescope to a home personal computer. The Company
believes that the ETX will have a significant impact on certain segments of the
telescope industry permitting, for the first time, the purchase of a
high-quality, attractive, portable instrument of sufficient aperture to enable
the high resolution observation of celestial and terrestrial objects at a
reasonable price. The
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<PAGE> 26
ETX, introduced in 1996, at present has a four-month back-order. Other new
telescopes and existing product upgrades under development are scheduled for
release in calendar 1997 and 1998.
Aggressive Marketing. Meade's marketing philosophy is designed to convey
the quality and value of its products, while communicating the sophistication,
depth and breadth of selection. Meade advertises in most major domestic and
international telescope and astronomy related magazines and periodicals with
comprehensive, full color, technically informative advertisements which present
a consistent message of innovation and quality about the Company and its
products. Meade is a regular advertiser in the two largest domestic astronomy
periodicals, Sky and Telescope and Astronomy, and on average purchases eight
pages of advertising in every issue of each magazine. The Company plans to
market and advertise its binoculars in various bird watching and related
magazines and periodicals during calendar 1997. The Company also works with
specialty retailers, distributors and mass merchandisers by developing
hang-tags, print advertisements, catalogue displays and other print media in an
effort to continually provide customers with a consistent message and to assist
in their marketing efforts. In addition, the Company publishes a 100-page, full
color, high quality catalogue that has been a key component of its overall
marketing strategy. The Company believes this catalogue is the most
comprehensive and informative catalogue within the industry, with an abundance
of technical product information.
Expansion into Binocular Market. To complement its extensive line of
telescopes, Meade has introduced a complete line of binoculars for the consumer
market. The Company plans to access its current distribution network for
telescopes as a means to market its line of binoculars. The Company plans to
follow its sales practices in the telescope market and provide its mail order
dealers, specialty retailers, foreign distributors and mass merchandisers with a
complete line of binoculars, from entry level to high-end products, together
with the same level of marketing and point-of-sale service. See "Risk
Factors -- New Binocular Line." Meade's objective is to obtain a reputation for
high quality products in the binocular market, similar to its established
reputation in the telescope market. As with many of the Company's competitors,
Meade purchases its binoculars from manufacturers outside the United States.
Expansion of Distribution Network. The Company intends to continue to
expand its network of mass merchandisers. For example, in the Spring of 1996,
Meade added Service Merchandise, and for the Christmas holiday season, Wal-Mart,
to its distribution network for telescopes. The Company intends to market to
other mass merchandisers as well.
PRODUCTS
While the human eye is limited by its lens diameter, a telescope serves as
a larger "eye," gathering additional light and permitting the observation of
objects in tremendously increased detail. The most important operative
characteristic of a telescope in gathering light is its aperture, or diameter,
rather than its power or magnification. Generally, higher magnification
increases object resolution, but aperture ultimately determines how much one can
see. Even with the smallest Meade telescopes, one can see clearly and sharply
many celestial objects, including the ring system of Saturn as well as Saturn's
largest moon, the distinctive cloud belt structure and four principal moons of
Jupiter, the moon-like phases of the planet Venus, hundreds of craters and
mountain ranges on the Moon, and a multitude of deep-space objects.
25
<PAGE> 27
The table below describes Meade's primary product introductions, principal
features, suggested retail price and year of introduction. Generally, only
products introduced on or after 1990 continue to be marketed and sold by the
Company.
<TABLE>
<CAPTION>
APPROXIMATE
YEAR SUGGESTED
INTRODUCED PRODUCT RETAIL PRICE PRODUCT DESCRIPTION
- ---------- ----------------------------- ----------------- ----------------------------------------
<C> <S> <C> <C>
1972 Models 200 and 300 Series $ 60-250 2" to 3" small refracting telescopes
imported from Japan. Complete with
tripod and eyepieces on equatorial and
altazimuth mounts.
1977 Model 628 and Model 826 $ 400-500 6" and 8" Newtonian reflecting
telescopes on equatorial mounts. The
first telescopes manufactured by Meade.
1979 Research Series Models 880, $1,000-1,700 8", 10" and 12.5" Newtonian reflecting
1060 and 1266 telescopes. Largest, most sophisticated
mount produced by the Company up to
1979.
1980 Models 2040 and 2080 $ 500-900 4" and 8" fork mounted
Schmidt-Cassegrain telescopes with
AC-powered worm-gear drive. The
Company's first production Schmidt-
Cassegrain telescopes.
1982 Model 2120 $ 1,700 The Company's first 10"
Schmidt-Cassegrain telescope.
1983 Model 90 Series $ 300 90 mm Maksutov-Cassegrain spotting
scopes. The Company's first domestically
produced small, portable, high quality
spotting scopes.
1984 Model LX3 Series $ 1,400 8" and 10" Schmidt-Cassegrain telescopes
with integrated electronic drive systems
to automatically track objects in the
sky. The Company's first DC-powered
electronically driven
Schmidt-Cassegrains.
1986 SALE OF COMPANY BY THE FOUNDING STOCKHOLDER
1988 Model LX6 Series $ 1,600 The Company's first 8" and 10" Schmidt-
Cassegrain telescopes featuring
microprocessor control. The Company's
first telescopes to feature digital
read-out of telescope position and
Smart-Drive permanent periodic error
control.
1990 Models 226, 289 and 4450 $ 150-300 The Company's first 60mm refracting and
114mm reflecting telescopes purchased
from the Taiwanese Factory.
1991 REACQUISITION OF COMPANY BY THE FOUNDING STOCKHOLDER AND SENIOR MANAGEMENT
1992 Models 390, 395 and 4500 $ 400-600 The Company's first 90mm refracting and
114mm deluxe reflecting telescopes
purchased from the Taiwanese Factory.
6", 8", 10" and 16" Newtonian reflecting
telescopes on equatorial mounts.
Starfinder Equatorial Series $ 500-800 Redesign of the Company's Newtonian
telescopes. They have since been
upgraded to include a DC-powered
cordless drive system to track objects
in their paths across the sky.
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
APPROXIMATE
YEAR SUGGESTED
INTRODUCED PRODUCT RETAIL PRICE PRODUCT DESCRIPTION
- ---------- ----------------------------- ----------------- ----------------------------------------
<C> <S> <C> <C>
1992 8" and 10" LX200 Models $2,000-3,000 8" and 10" Schmidt-Cassegrain
(Cont.) computerized telescopes with built-in
747 celestial object library (later
updated to 64,350 objects) and automatic
go-to capabilities. The Company's first
computerized telescopes with go-to
capabilities and an object database.
Model ED Refractor Series $ 2,500-5,000 ED (Extra-low Dispersion) apochromatic
refractors with automatic slewing and
go-to capabilities. This line includes
4", 5", 6" and 7" telescopes.
1993 Starfinder Dobsonian Series $ 300-1,200 6", 8", 10", 12.5" and 16" Newtonian
reflecting telescopes on Dobsonian
mounts. The Company's first large
Newtonian telescopes on a simple
altazimuth mount.
12" LX200 Model $ 4,000 12" Schmidt-Cassegrain computerized
telescope.
1994 16" LX200 Model $ 15,000 16" Schmidt-Cassegrain computerized
telescope.
CCD Autoguider/Imagers $ 400-6,000 Digital imaging equipment. Allows user
to image celestial objects in a fraction
of the time required with traditional
astrophotography equipment.
1995 Model LX50 Series $ 1,200-2,000 7" Maksutov-Cassegrain and 8" and 10"
Schmidt-Cassegrain, DC-powered variable
speed (to guide and center) telescopes.
Saturn, Polaris, Infinity and $ 100-300 60mm refracting and 114mm reflecting
Telestar Models telescopes customized for distribution
through speciality retailers and mass
merchandisers.
7" Model LX200 $ 3,000 7" Maksutov-Cassegrain computerized
telescope.
1996 Epoch 2000 $ 150-200 Celestial and image processing software
for use with Meade's computerized
telescopes and certain other telescopes.
8" Model LX10 $ 1,000 8" Schmidt-Cassegrain, DC-powered
replacement of the Company's original
model 2080 telescope.
Magellan I and II $ 300-500 Computer-assisted telescope pointing
systems.
ETX Astro Telescope $ 500 90mm Maksutov-Cassegrain telescope.
Recognized for its optical quality and
portability at an affordable price.
Binoculars $ 50-450 The Company's introduction of a full
line of general consumer binoculars.
</TABLE>
Meade has developed and expanded its product line to include a full line of
telescopes and accessories for the beginning, intermediate and serious amateur
astronomer. Moreover, in addition to adding new products, the Company
continually refines and improves its existing products. Certain of Meade's
products are described in greater detail below:
LX Series Telescopes. Among the Company's most sophisticated products are
its Schmidt-Cassegrain and Maksutov-Cassegrain telescopes, which incorporate an
optical system that provides high-quality resolution, contrast and light
transmission. The model LX200 telescopes, available in 7, 8, 10, 12 and 16-inch
apertures, are the most popular of the Company's telescopes among serious
amateur astronomers. The LX200 telescopes feature a built-in computer library of
64,350 celestial objects. These objects are catalogued in the Company's
proprietary hand-held keypad electronic command center, which operates the
computerized control system for the LX200 telescopes. By entering any of the
celestial objects into the keypad, the telescope
27
<PAGE> 29
automatically locates and tracks the selected object. The LX series telescopes
represented approximately 2% of telescope units shipped and approximately 22% of
the Company's net sales for the nine months ended November 30, 1996.
Entry-Level Small Refracting and Reflecting Telescopes. Designed
specifically for the beginning to intermediate amateur astronomer or terrestrial
observer, the Company's less-expensive 60mm to 114mm refracting and reflecting
telescopes include some of the features of the more advanced telescopes at
economical prices. The Company also offers several variations of its small
refracting and reflecting telescopes for distribution on an exclusive basis of
selected models to specific specialty retailers. These telescope models comprise
the lower-price end of the Company's product line. Sales of these telescopes
comprised over 90% of the Company's telescope units shipped and approximately
50% of the Company's net sales for the nine months ended November 30, 1996.
ETX Series Telescopes. One of the Company's newest products is the ETX
Astro Telescope. The ETX is a Maksutov-Cassegrain telescope that has opened new
markets for beginning, intermediate and serious amateur astronomers by
permitting, for the first time, the purchase of a high-quality, portable
instrument of sufficient aperture to enable high resolution observation of
celestial and terrestrial objects at a reasonable price. There is currently a
four-month back-order for the ETX.
Starfinder Telescopes. The Starfinder Equatorial/Dobsonian Reflecting
telescopes were introduced by the Company beginning in 1992 and have been well
received by the serious amateur market. These telescopes are economically priced
and offer views of a wide range of celestial objects. The Starfinder series of
telescopes represented approximately 1% of telescope units shipped and
approximately 4% of the Company's net sales for the nine months ended November
30, 1996.
CCD Autoguider/Imagers. Another of the Company's newest product lines is
its CCD Autoguider/ Imagers. CCD technology allows users to create and transfer
high-resolution astronomical digital images directly from their telescope to a
home personal computer. This product has become increasingly popular as an
alternative to traditional astrophotography using conventional photographic
equipment, which requires longer exposure times.
Binoculars. The Company recently introduced a complete line of consumer
binoculars that will initially be sold through the Company's existing
distribution network. The binoculars sold by the Company are purchased from
manufacturers outside the United States.
Accessories. The Company also offers accessories for each of its telescope
series which range from additional eyepieces and camera adapters to celestial
observation software. Approximately 250 accessory products are currently
available from the Company. Sales of accessories represented approximately 9% of
the Company's net sales for the nine months ended November 30, 1996.
SALES AND MARKETING
The Company's telescopes and accessories are sold through a domestic
network of mail order dealers, specialty retailers and mass merchandisers and
through an international network of foreign distributors. The Company's high-end
products are generally sold through mail order retailers or single and multiple
location specialty retailers, while Meade's less-expensive products are sold in
a similar manner but are also sold through mass merchandisers. The Company
maintains direct contact with its larger domestic dealers and foreign
distributors through the Company's sales professionals. A network of independent
representatives is used to maintain contact with its smaller specialty
retailers.
The Company's sales force works closely with its dealers, specialty
retailers, distributors and mass merchandisers on product quality, technical
knowledge and customer service. The Company employs five persons in sales
positions, all of whom have significant industry experience. These individuals
advise the Company's specialty retailers about the quality features of the
Company's products and provide answers to questions from specialty retailers as
well as directly from amateur astronomers. The Company stresses service to both
its customers and end users by providing marketing assistance in the form of
hang-tags, catalogue layouts and other print media and dedicated toll free
customer service telephone numbers. The Company
28
<PAGE> 30
believes toll free telephone numbers help reduce the number of product returns
from end users who are generally unfamiliar with the assembly and operation of
telescopes. In an effort to further simplify assembly and use of the Company's
products, Meade pre-assembles a substantial portion of its telescopes prior to
packaging. See "Business -- Competitive Strengths -- Superior Customer Service."
The Company's products are regularly advertised in most major domestic and
international telescope and astronomy-related magazines and periodicals with
comprehensive, full color, technically informative advertisements which present
a consistent message of innovation and quality about the Company and its
products. The Company's dedication to providing a high level of customer service
is one factor that management believes sets Meade apart from its competition.
In an effort to gain additional expertise in the binocular market, the
Company recently hired R. Daniel George, the Company's Vice President -- Sports
Optics, from Bushnell, where he worked for 18 years in several senior sales
management positions.
The chart below shows the distribution of the Company's net sales for the
fiscal years ended February 28, 1994 and 1995, and February 29, 1996, and for
the nine months ended November 30, 1996, based on dollar value by the type of
distribution channel employed.
LOGO
CUSTOMERS
The Company markets its products domestically through a network of mail
order dealers, specialty retailers and mass merchandisers and internationally
through a network of foreign distributors. Included among the Company's
customers are the following retail outlets, mass merchandisers and foreign
distributors: The Nature Company, Natural Wonders, Service Merchandise, MIC
International Corp. (Japan), Astrocom GmbH (Germany), Wal-Mart, J.C. Penney,
Sears Canada and Discovery Channel Stores.
During fiscal 1996, the Company sold its products to mail order dealers and
to more than 500 specialty retailers and mass merchandisers which offer Meade's
products in over 1,000 retail store outlets. During that period, The Nature
Company, the Company's largest customer, accounted for approximately 12.4% of
the Company's net sales. The Company's seven largest customers, in the
aggregate, accounted for approximately 47.0% of the Company's net sales in
fiscal 1996. See "Risk Factors -- Customer Concentration." Discovery
Communications, Inc., the parent company of Discovery Channel Stores, has
acquired The Nature Company.
29
<PAGE> 31
OPERATIONS
Facilities. The Company's manufacturing and corporate operations are
located in a 57,000 square foot building in Irvine, California. The Company also
leases a separate 27,000 square foot distribution center in Irvine, California.
The Company has executed an agreement to consolidate and expand its operations
into a new 161,000 square foot facility also located in Irvine, California.
Materials and Supplies. The Company purchases high grade optical glass in
order to avoid imperfections that can degrade optical performance. Lenses and
mirrors for the Company's domestically manufactured telescopes are individually
polished and hand-figured by a master optician to achieve a high level of
resolution. The Company purchases metal telescope components from numerous
foundries, metal stamping and metal working companies. The Company's LX200
series telescopes require additional installation of the computerized drive and
celestial object database circuit board. The components of the board are
purchased from various suppliers and assembled by third party vendors and by
certain of the Company's manufacturing personnel. The boards are installed at
the Company's manufacturing facility and undergo a rigorous burn-in period prior
to shipment to customers.
Polishing and Hand Figuring. After a Schmidt-Cassegrain,
Maksutov-Cassegrain, ED-refractor or Newtonian glass surface is fine ground, the
mirror or lens is polished for up to 16 hours to obtain full transmission or
reflectivity. It is at this point that the Company's opticians perform the final
lens or mirror shaping (a process called figuring).
Optical Testing. As each of the Company's ED-refractor, Maksutov-Cassegrain
optical set, Schmidt-Cassegrain optical set, or parabolic Newtonian primary
mirror progresses through the grinding, polishing and hand-figuring stages of
development, it is repeatedly tested and retested for irregularities, smoothness
of figure and correction.
Optical Alignment and Centration. Finished, individually-matched
Maksutov-Cassegrain and Schmidt-Cassegrain optical sets and matched ED-refractor
doublet objective lenses are sent to the optical alignment and centration
department, where each optical set is placed into a special optical tube that
permits rotation of the optical elements about their optical axes. With optimal
orientation fixed, each optics set is placed into machined housings of an
optical tube or collimation lens cell. The optical system is once again tested
and only after passing this final test is an optical tube system ready to be
used.
Most of the Company's less-expensive telescopes are manufactured
exclusively for the Company in Taiwan. Since 1990, the Company has worked
closely with the Taiwanese Factory, developing proprietary telescope designs and
instructing the Taiwanese Factory's personnel in the production of telescopes
that meet the Company's quality standards. In January 1995, in order to assure a
reliable flow of products to meet the Company's increasing requirements, and in
order to ensure the Company would be able to exert sufficient control over the
manufacturing process and thus ensure that its quality standards are maintained,
the Company and the Taiwanese Factory entered into a supply agreement wherein
the Taiwanese Factory agreed to manufacture telescopes exclusively for sale
through Meade and wherein Meade agreed to purchase essentially all of its
less-expensive telescopes from the Taiwanese Factory. The Company owns the
majority of the designs and optical machine tooling used by the Taiwanese
Factory and regularly sends manufacturing and engineering personnel to the
manufacturing facility in Taiwan to ensure that high quality telescopes are
produced.
COMPETITION
The telescope and binocular industries are highly competitive and sensitive
to consumer needs and preferences. In the telescope market, Meade competes in
the United States and Canada with Celestron, Bushnell, Tasco and Simmons and, to
a lesser extent, with other significantly smaller companies which service niche
markets. In Europe and Japan, the Company competes primarily with Celestron and
Vixen Optical Industries, Ltd. and with other smaller regional telescope
importers and manufacturers. In addition, some of the Company's current and
potential competitors in the telescope market may possess greater financial or
30
<PAGE> 32
technical resources and competitive cost advantages due to a number of factors,
including, without limitation, lower taxes and substantially lower costs of
labor associated with manufacturing.
In the binocular market, which is generally more competitive than the
telescope market, with a greater number of competitors at each price point, the
Company competes primarily with Bushnell, Nikon Inc., Canon Inc., Minolta
Camera, Co., Ltd., Pentax Corporation, Tasco, Simmons and various smaller
manufacturers and resellers. Many of these competitors in the binocular market
have significantly greater brand name recognition and financial and technical
resources than those of the Company, and many have long-standing positions,
customer relationships and established brand names in their respective markets.
See "Risk Factors -- Competition."
EMPLOYEES
As of December 31, 1996, Meade had 240 full-time employees. The Company
believes that it offers competitive compensation and other benefits and that its
employee relations are good. None of the Company's employees is represented by a
union. The success of the Company's future operations depends in large part on
the Company's ability to attract and retain highly skilled technical, marketing
and management personnel. There can be no assurance that the Company will be
successful in attracting and retaining key personnel.
In order to enable its employees to share in the Company's growth and
prosperity, Meade established the ESOP, effective March 1, 1996. The ESOP
provides participating employees an opportunity to receive beneficial ownership
of Meade's Common Stock.
PROPERTIES
The Company leases a 57,000 square foot manufacturing and corporate
facility and a separate 27,000 square foot distribution center, each located in
Irvine, California. The lease for the manufacturing and corporate facility
expires in March 2000 and the lease for the distribution center expires in
October 1997. In December 1996, the Company executed a ten year lease agreement
for a new 161,000 square foot facility also located in Irvine, California that
the Company expects to occupy in the third quarter of fiscal year 1998. The
Company believes there will be no material expenses incurred in connection with
the termination of the Existing Leases because (i) the Company intends to
sublease its manufacturing and corporate facility and (ii) the distribution
facility lease terminates in October 1997.
LITIGATION
The Company is involved from time to time in litigation incidental to its
business. Management believes that the outcome of current litigation will not
have a material adverse effect on the Company.
Prior to the reacquisition of the Company by certain members of its senior
management, Meade agreed to be bound by the provisions of an order ("Order") of
the United States Federal Trade Commission ("FTC") prohibiting the Company from
making certain acquisitions. The Order provides that Meade shall not acquire,
without the prior approval of the FTC, any stock, equity interest or assets,
other than purchases of manufactured product in the ordinary course of business,
of any company engaged in the manufacture or sale of Schmidt-Cassegrain
telescopes with apertures of 8 to 11 inches in the United States. The Order is
effective until August 30, 2001.
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<PAGE> 33
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Board of Directors is divided into three classes: Class I, Class II and
Class III. After his initial term, each director serves for a term ending after
the third annual meeting following the annual meeting at which such director is
elected and until his successor is elected. The terms of office of directors in
Class I, Class II and Class III end after the annual meetings of stockholders of
the Company in 1998, 1999 and 2000, respectively. See "Description of Capital
Stock -- Application of the California General Corporation Law to Delaware
Corporations." The following table sets forth information for the directors,
executive officers and certain key employees of the Company as of November 30,
1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------------
<S> <C> <C>
John C. Diebel................... 53 Chairman of the Board and Chief Executive Officer
Steven G. Murdock................ 45 President and Chief Operating Officer, Director
Joseph A. Gordon, Jr............. 46 Senior Vice President of North American Sales,
Director
Ronald Ezra...................... 46 Chief Engineer
Brent W. Christensen............. 37 Vice President -- Finance and Chief Financial
Officer
Kenneth Baun..................... 48 Vice President -- Engineering
Robert Wood...................... 35 Vice President -- Manufacturing
R. Daniel George................. 51 Vice President -- Sports Optics
(1)(2)(3)............ Future Director
(1)(2)(3)............ Future Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Each individual named as a Future Director in the table has been elected as
a Director of the Company effective upon the completion of this Offering and
has consented to be named as such herein.
John C. Diebel founded Meade Instruments Corp. in 1972. He has been the
Chairman of the Board and Chief Executive Officer of the Company for the
majority of the time since December 1975. Prior to founding the Company, Mr.
Diebel worked as an engineer for TRW Inc. and Hughes Aircraft Co. Mr. Diebel
graduated from the California Institute of Technology with BS and MS degrees in
electrical engineering and received his Ph.D. degree in electrical engineering
from the University of Southern California.
Steven G. Murdock has been the Company's President and Chief Operating
Officer since October 1990. From May 1980 to October 1990, Mr. Murdock was the
Company's Vice President of Optics. From November 1968 to May 1980, Mr. Murdock
worked as the optical manager for Coulter Optical, Inc., an optics manufacturer.
Mr. Murdock received his BS degree in business administration from California
State University at Northridge.
Joseph A. Gordon, Jr. has been the Company's Senior Vice President of North
American Sales since June 1995. From December 1984 to June 1995, he worked as
the Company's Vice President of North American Sales. From January 1981 to
December 1984, Mr. Gordon was the Vice President of Sales at Celestron. Mr.
Gordon graduated from the University of Cincinnati with a BS degree in
marketing.
Ronald Ezra has been the Company's Chief Engineer since June 1995. From
1976 to June 1995, Mr. Ezra held various positions at the Company including
Project Engineer, Manufacturing Manager and Vice President -- Engineering. Mr.
Ezra received his BS degree in electrical engineering from California State
University at Long Beach.
Brent W. Christensen has been the Company's Vice President -- Finance since
June 1995 and Chief Financial Officer since April 1996. From August 1993 to June
1995, he worked as the Company's controller. Mr. Christensen is a Certified
Public Accountant, and from January 1985 to August 1993, he worked as an
32
<PAGE> 34
audit manager with Ernst & Young LLP. Mr. Christensen received his BA degree in
business administration from California State University at Fullerton.
Kenneth Baun has been the Company's Vice President -- Engineering since
June 1995. From March 1995 to June 1995, he worked as an engineering manager for
the Company. From 1991 to 1995, Mr. Baun was the President of Summit Instruments
Corp., a producer of disk drive test equipment. In addition, from 1973 to 1980,
Mr. Baun worked as an engineering department manager at UNISYS. Mr. Baun
received his BA degree in electrical engineering and his MS degree in computer
science from the University of California at Los Angeles.
Robert Wood has been the Company's Vice President -- Manufacturing since
June 1995. From March 1991 to June 1995, he was the Company's Manager-Optics.
From October 1988 to March 1991, he worked as a project engineer for the
Company. Mr. Wood received his BS degree in electronics engineering technology
from Brigham Young University.
R. Daniel George has been the Company's Vice President -- Sports Optics
since February 1996. From 1978 to February 1996, he was employed by Bushnell
Optical Co., holding several sales management positions including regional sales
manager and sales planning manager. Mr. George received his BS degree in
Business Administration from California State University at Long Beach.
DIRECTORS
The Certificate of Incorporation divides the Board of Directors into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected at each annual
meeting of stockholders. All directors hold office until their respective terms
expire and until their successors have been duly elected and qualified or until
such director's earlier resignation or removal. Officers serve at the discretion
of the Board of Directors. See "Management -- Directors, Executive Officers and
Key Employees."
COMMITTEES OF THE BOARD OF DIRECTORS
The Company will have an Audit Committee and a Compensation Committee, each
of which will be comprised of outside directors. The Audit Committee's functions
will include recommending to the Board of Directors the engagement of the
Company's independent accountants, reviewing with such accountants the plan and
results of their examination of the Financial Statements. The Compensation
Committee will review and make recommendations with respect to compensation of
officers and key employees, including the grant of options or other awards under
the Company's Stock Incentive Plan. See "Management -- Benefit Plans -- 1997
Stock Option Plans."
DIRECTORS' FEES
Directors who also are employees of the Company are reimbursed for expenses
incurred in attending Board or Committee meetings but do not otherwise receive
compensation for serving as directors of the Company. Each director who is not
an employee of the Company is entitled to receive (i) an annual fee of $5,000
for his services as a director, (ii) a fee of $750 for each Board or Committee
meeting attended, (iii) 5,000 options to purchase Common Stock upon his initial
election to the Board together with an additional grant of 5,000 options on the
date of each annual meeting of stockholders preceeding a year in which such
director will continue in office and (iv) reimbursement for expenses incurred in
attending Board or Committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, all matters concerning executive officer compensation
were addressed by the entire Board of Directors. The Company did not have a
Compensation Committee in fiscal 1996. John C. Diebel was both a director and an
executive officer of the Company during the fiscal year ended February 29, 1996.
See "Management -- Directors, Executive Officers and Key Employees."
33
<PAGE> 35
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer and to the other four
most highly compensated executive officers of the Company who were serving as
executive officers during the fiscal year ended February 29, 1996 (together with
the Company's Chief Executive Officer, the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)(2)
-------------------
SALARY BONUS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(3) ($) COMPENSATION(4)
- ------------------------------------------------- ---- ------- ------- ---------------
<S> <C> <C> <C> <C>
John C. Diebel................................... 1996 399,000(5) -- 1,600
Chairman of the Board and Chief Executive
Officer
Steven G. Murdock................................ 1996 223,000 -- --
President and Chief Operating Officer
Joseph A. Gordon, Jr. ........................... 1996 124,000 -- 700
Senior Vice President of North American Sales
Ronald Ezra(6)................................... 1996 108,000 -- 1,100
Chief Engineer
Brent W. Christensen............................. 1996 79,000 160,000(7) 800
Vice President -- Finance, Chief Financial
Officer
</TABLE>
- ---------------
(1) The aggregate amount of perquisites and other personal benefits, securities
or property paid to each of the Named Officers during fiscal 1996 did not
exceed the lesser of 10% of such officer's total annual salary and bonus for
fiscal 1996 or $50,000. Therefore, any such amounts are not included in the
table.
(2) In connection with the formation of the ESOP, Messrs. Diebel, Murdock,
Gordon and Ezra will be paid an aggregate contractual bonus for the fiscal
year ended February 28, 1997 of $340,000. See "Selected Financial
Information."
(3) Mr. Diebel's annual base salary for fiscal 1998 will be $295,000 and he will
be eligible for a bonus to be determined by the Compensation Committee.
(4) Contribution by the Company in the name of the individual under the
Company's 401(k) Plan.
(5) As of the completion of this Offering, Mr. Diebel's annual base salary will
be $295,000. See "Management -- Employment Agreements."
(6) Mr. Ezra is no longer an executive officer of Meade, but he continues to be
a key employee of the Company.
(7) Includes a one-time contractual bonus of $150,000 accrued in connection with
the Company's recapitalization effected in April 1996. See "Selected
Financial Information."
BENEFIT PLANS
Employee Stock Ownership Plan. The Board of Directors adopted the ESOP
effective March 1, 1996. The purpose of the ESOP is to enable participating
employees to share in the growth and prosperity of the Company and to provide an
opportunity for participating employees to accumulate capital for their future
economic advantage by receiving beneficial ownership of the Company's stock in
proportion to their relative compensation. The ESOP is intended to be a stock
bonus plan that is qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). Except for certain officers of the Company and
their families, all employees who have completed at least 1,000 hours of service
on an annual basis are eligible to participate in the ESOP. Generally, a
participant becomes fully vested in contributions to the ESOP upon completion of
five years of service with the Company or its affiliates (including service
prior to the adoption of the ESOP).
To establish the ESOP, the Company borrowed from certain lending
institutions and raised capital through the sale of its Redeemable Preferred
Stock, and then loaned a portion of such funds to the ESOP to allow it to
purchase 1,500,000 shares of the Company's Series B Common Stock from the
Company's
34
<PAGE> 36
stockholders. See "Certain Transactions." As the Company makes contributions to
the ESOP, the ESOP pays its indebtedness owed to the Company. As of November 30,
1996, the outstanding amount of the ESOP's indebtedness to the Company was
approximately $10.0 million. Distributions from the ESOP are generally made to
participants only following termination of employment. Shares of Common Stock
allocated to participants' accounts are voted in the manner directed by such
participants, and the ESOP Committee directs the voting of unallocated shares
and shares for which participants do not provide voting instructions.
1997 Stock Incentive Plan. In February 1997, the Company and its
stockholders adopted the Company's 1997 Stock Incentive Plan (the "Plan"). The
Plan provides a means to attract and retain key employees (including officers,
whether or not directors) of the Company and its subsidiaries and promote the
success of the Company.
Under the Plan, awards consist of any combination of stock options
(incentive or nonqualified), restricted stock, stock appreciation rights
("SARs") and performance share awards. The number of shares of Common Stock that
may be issued under the Plan is 750,000. Awards under the Plan may be made to
any officer or key employee of the Company and to consultants to the Company
whether or not such consultants are employees.
Participants in the Plan are selected by the Compensation Committee. The
Compensation Committee is selected by the Board of Directors and is empowered to
determine the terms and conditions of each award made under the Plan, subject to
the limitations that the exercise price of incentive stock options cannot be
less than the fair market value of the Common Stock on the date of grant (110%
if granted to an employee who owns 10% or more of the Common Stock), and no
incentive stock option can be granted to anyone other than an employee of the
Company or its subsidiaries. Non-qualified stock options may be granted under
the Plan with an exercise price determined by the Compensation Committee.
Options granted under the Plan may be exercised as determined by the
Compensation Committee, but in no event after ten years from the date of grant.
Incentive stock options that are granted to an employee who owns 10% or more of
the Common Stock may not be exercised after five years from the date of grant.
Restricted stock awards may be granted on the basis of such factors as the
Compensation Committee deems appropriate. Each restricted stock award agreement
shall specify the number of shares of Common Stock to be issued, the date of
such issuance, the price, if any, to be paid for such shares by the participant,
whether and to what extent the cash consideration paid for such shares shall be
returned upon a forfeiture and the restrictions imposed on such shares. Shares
subject to restricted stock awards are nontransferable until such shares have
vested and are subject to a risk of forfeiture unless certain conditions are
satisfied.
SARs may be granted in connection with stock options or separately. SARs
granted in connection with stock options will provide for payments to the holder
based upon increases in the price of the Common Stock over the exercise price of
the related option on the exercise date. The SARs may provide that the holder of
the SARs may exercise the SARs or the option in whole or in part. The
Compensation Committee may elect to pay SARs in cash or in Common Stock or in a
combination of cash and Common Stock. The Compensation Committee may also grant
limited SARs exercisable only upon or in respect of a change in control or any
other specified event ("Limited SARs"). The Limited SARs may relate to or
operate in tandem with other SARs, options or other awards under the Plan.
Performance share awards may be granted on the basis of such factors as the
Compensation Committee deems appropriate. Generally, these awards will be based
upon specific agreements and will specify the number of shares of Common Stock
subject to the award, the price, if any, to be paid for such shares by the
participant and the conditions upon which the issuance to the participant will
be based.
Special performance-based share awards ("Performance-Based Awards") may
also be granted to executive officers of the Company. The Performance-Based
Awards will be based upon the degree of
35
<PAGE> 37
achievement of certain performance goals relative to pre-established levels for
the Company as selected by the Compensation Committee in its discretion.
Options and SARs, which have not yet become exercisable, will lapse upon
the date a participant is no longer employed by the Company for any reason.
Options and SARs which have become exercisable must be exercised within three
months after such date if the termination of employment was for any reason other
than retirement, total disability, death or discharge for cause. In the event a
participant is discharged for cause, all options and SARs shall lapse
immediately upon such termination of employment. If the termination of
employment was due to total disability or death, the options and SARs, which are
exercisable on the date of such termination, must be exercised within twelve
months of the date of such termination or such shorter period provided in the
award agreement. If the termination of employment was due to retirement, the
non-qualified stock options, which are exercisable on the date of such
termination, must be exercised within twelve months of such date and the
incentive stock options, which are exercisable on the date of such termination,
must be exercised within three months of such date, or such shorter periods as
may be provided in the award agreement. Shares subject to restricted stock
awards that have not become vested upon the date a participant is no longer
employed by the Corporation for any reason will be forfeited in accordance with
the terms of the related award agreements. With respect to performance share
awards, the Committee may provide for full or partial credit in the event the
participant is no longer employed by the Company for any reason.
The Plan also provides for the automatic granting of stock options to
non-employee directors. Each time a new non-employee director is elected, a
stock option to purchase 5,000 shares of Common Stock will be automatically
granted to such non-employee director at the then fair market value of the
Common Stock. In addition, non-employee directors will receive an additional
grant of 5,000 options on the date of each annual meeting of stockholders
(commencing in 1998) preceding a year in which such director will continue in
office. All options granted to non-employee directors will be non-qualified
stock options. The option exercise price will be the fair market value of the
Common Stock as of the date of the grant.
In the event the stockholders of Company approve the dissolution or
liquidation of the Company, certain mergers or consolidations, or the sale of
substantially all of the business assets of the Company, unless prior to such
event the Board of Directors determines that there shall be either no
acceleration or limited acceleration of awards, each option and related SAR
shall become immediately exercisable, restricted stock shall immediately vest
and the number of shares covered by each performance share award shall be issued
to the participant.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. John C. Diebel, Steven
G. Murdock, Joseph A. Gordon, Jr., and Ronald Ezra (the "Senior Management").
Each of the employment agreements has a term of one year which is automatically
extended on a daily basis such that the remaining term of the agreement shall at
all times be one full year. The agreements provide for the payment of an annual
base salary of $400,000 to Mr. Diebel, $225,000 to Mr. Murdock, $125,000 to Mr.
Gordon and $100,000 to Mr. Ezra. The fiscal 1997 annual base salary for Mr. Ezra
has been reduced to $75,000. The fiscal 1998 annual base salary for Mr. Diebel
has been reduced to $295,000 and he will be eligible for a bonus to be
determined by the Compensation Committee. Annual base salaries will be reviewed
annually by the Company's Compensation Committee of the Board of Directors. The
Senior Management is also entitled to participate in and be covered by all
health, insurance, pension and other employee plans and benefits currently
established for the employees of the Company. In addition, the agreements
provide the Senior Management vacation benefits of three weeks per year and
reimbursement of all business expenses. If the Company terminates a Senior
Management member's employment without cause or as a result of a disability, or
if a Senior Management member terminates his employment under certain
circumstances set forth in the agreement, then the member of Senior Management
shall be entitled to continuation of employee benefits and salary continuation
for a period equal to the remainder of the term of his agreement. In addition,
Senior Management may not compete with the Company or solicit its customers,
employees, agents or independent contractors during the term of the agreement.
The Company does not currently have a bonus plan for its executive officers,
however, the Company intends to adopt such a plan for the 1998 fiscal year.
36
<PAGE> 38
CERTAIN TRANSACTIONS
On April 23, 1996, pursuant to an Exchange Agreement among the Company and
Messrs. John C. Diebel, Steven G. Murdock, Joseph A. Gordon, Jr., and Ronald
Ezra (collectively, the "Stockholders"), the Stockholders exchanged their shares
of Common Stock for 2,571,361 shares of Series A Common Stock and 1,500,000
shares of Series B Common Stock in order to facilitate their sales of Series B
Common Stock to the ESOP. Immediately following such exchange, under the Meade
Redemption Agreement, among the Stockholders and the Company, the Company
repurchased in the aggregate 71,361 shares of Series A Common Stock from the
Stockholders, at the price of $3.50 per share (an aggregate purchase price of
$250,000).
On April 23, 1996, the Company loaned the ESOP $11.0 million, which funds
were used by the ESOP to purchase a total of 1,500,000 shares of Series B Common
Stock from the Stockholders, at a price of $7.33 per share (an aggregate
purchase price of $11.0 million). This transaction was structured in a manner
intended to permit any of the Stockholders who so elected to receive tax
deferred treatment on any gain from the sale under Section 1042 of the Code.
In connection with the ESOP's purchase of the Stockholders' Series B Common
Stock, pursuant to a Securities Purchase Agreement, dated April 23, 1996, the
Company issued and sold 1,000 shares of Redeemable Preferred Stock to Churchill
for an aggregate purchase price of $6.0 million. In addition, the Company issued
to Churchill a Series A Common Stock Warrant covering 1,000,000 shares of Series
A Common Stock for an aggregate exercise price of $10,000, which Churchill
exercised in full immediately after the closing of Churchill's purchase of the
Redeemable Preferred Stock.
On April 23, 1996, the Company repaid the then outstanding $2.0 million of
indebtedness (together with the interest accrued thereon) owed to the
Stockholders ($1,788,000 owed to Mr. Diebel, $152,000 owed to Mr. Murdock,
$51,000 owed to Mr. Ezra and $25,000 owed to Mr. Gordon).
Under Incentive Compensation Agreements ("Incentive Agreements"), between
the Company and each of Mr. Robert Wood and Mr. Brent W. Christensen, each of
Messrs. Wood and Christensen was entitled to a bonus payment from the Company in
the event of certain change-in-control transactions. Pursuant to Settlement
Agreements, dated April 22, 1996, the Company paid each of Mr. Wood and Mr.
Christensen a $150,000 bonus payment in exchange for termination of their rights
under the Incentive Agreements.
In connection with this Offering, the Company and Churchill entered into a
Letter Agreement, dated as of January 31, 1997, which provides, in part, that
upon the completion of this Offering, Churchill may reimburse the Company for up
to $400,000 of its expenses related to this Offering, depending upon various
factors set forth therein, including the number of shares sold in this Offering
and the Offering price of such shares.
37
<PAGE> 39
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of January 31, 1997, as adjusted to
reflect the sale of the Common Stock offered hereby, for (i) each person who
beneficially owns more than 5% of the Common Stock, (ii) each of the directors
and Named Officers, (iii) all directors and executive officers as a group and
(iv) the Selling Stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
BEFORE THIS OFFERING NUMBER OF AFTER THIS OFFERING(1)
---------------------- SHARES ----------------------
NUMBER PERCENTAGE OFFERED(1) NUMBER PERCENTAGE
--------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
John C. Diebel(2).......................... 1,275,000 25.5% -- 1,275,000 17.0%
Steven G. Murdock(2)....................... 762,500 15.3% -- 762,500 10.2%
Ronald Ezra(2)............................. 295,000 5.9% -- 295,000 3.9%
Joseph A. Gordon, Jr.(2)................... 167,500 3.4% -- 167,500 2.2%
Brent W. Christensen(2).................... -- -- -- -- --
Future Director............................ -- -- -- -- --
Future Director............................ -- -- -- -- --
Meade Instruments Corp. Employee Stock
Ownership Plan(3)........................ 1,500,000 30.0% -- 1,500,000 20.0%
Churchill ESOP Capital Partners(4)......... 1,000,000 20.0% 870,000 130,000 1.7%
All current directors and executive
officers as a group (4 persons).......... 2,500,000 50.0% -- 2,500,000 33.3%
</TABLE>
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) The address for all officers of the Company is c/o Meade Instruments Corp.,
16542 Millikan Avenue, Irvine, California 92606.
(3) Common Stock held by the ESOP is voted by the trustee of the ESOP, Wells
Fargo Bank, N.A. (the "Trustee"), as directed by the ESOP Committee, except
that participants in the ESOP are entitled to direct the Trustee as to how
to vote shares allocated to their ESOP accounts. The Trustee's address is
707 Wilshire Boulevard, Los Angeles, California 90017.
(4) The address for Churchill ESOP Capital Partners is 2400 Metropolitan Centre,
333 South Seventh Street, Minneapolis, Minnesota 55402.
38
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
REINCORPORATION
The Company was originally incorporated in the State of California on
December 19, 1975. Prior to the completion of this Offering, the Company will
reincorporate as a Delaware corporation to be named Meade Instruments Corp.
pursuant to a merger with and into a newly-formed and wholly-owned Delaware
subsidiary, with such Delaware subsidiary to be the surviving corporation.
OUTSTANDING CAPITAL
As of the completion of this Offering, and after giving effect to the
reincorporation of the Company, the authorized capital stock of the Company
consists of two classes of capital stock, designated respectively, "Common
Stock" and "Preferred Stock." The Company is authorized to issue 20,000,000
shares of Common Stock, $.01 par value per share, and 1,000,000 shares of
Preferred Stock, $.01 par value per share. The summary description included
herein relating to the capital stock of the Company does not purport to be
complete. Reference is made to the Certificate of Incorporation of the Company,
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, for a detailed description of the provisions thereof
summarized below.
COMMON STOCK
Holders of Common Stock are entitled to receive such dividends as may from
time to time be declared by the Board of Directors of the Company out of funds
legally available therefor. Holders of Common Stock are entitled to one vote per
share on all matters on which the holders of Common Stock are entitled to vote
and do not have any cumulative voting rights. The Board of Directors is divided
into three classes. See "Description of Capital Stock -- Certain Anti-Takeover
Effects -- Classified Board of Directors." Holders of Common Stock have no
preemptive, conversion, redemption or sinking funds rights. In the event of a
liquidation, dissolution or winding-up of the Company, holders of Common Stock
are entitled to share equally and ratably in the assets of the Company, if any,
remaining after the payment of all debts and liabilities of the Company and the
liquidation preference of any outstanding Preferred Stock. The outstanding
shares of Common Stock are, and the shares of Common Stock offered by the
Company hereby when issued will be, fully paid and nonassessable. The rights,
preferences and privileges of holders of Common Stock are subject to any series
of Preferred Stock that the Company may issue in the future. As of January 31,
1997, there were six holders of the Company's Common Stock.
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of
Preferred Stock in one or more series and to fix the designations, preferences,
powers and relative, participating, optional and other rights, qualifications,
limitations and restrictions thereof, including the dividend rate, conversion
rights, voting rights, redemption price and liquidation preference, and to fix
the number of shares to be included in any such series. Any Preferred Stock so
issued may rank senior to the Common Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding-up, or both. In
addition, any such shares of Preferred Stock may have class or series voting
rights. Upon completion of this Offering, the Company will not have any shares
of Preferred Stock outstanding. Issuances of Preferred Stock, while providing
the Company with flexibility in connection with general corporate purposes, may,
among other things, have an adverse effect on the rights of holders of Common
Stock, may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the stockholders, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock, and may adversely affect the market price of and the
voting and other rights of the holders of Common Stock. At present, the Company
has no plans to issue any of the Preferred Stock. As of January 31, 1997, there
was one holder of the Company's Preferred Stock.
39
<PAGE> 41
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is U.S. Stock
Transfer Corporation.
CERTAIN ANTI-TAKEOVER EFFECTS
The provisions of the Certificate of Incorporation and the Bylaws of the
Company (the "Bylaws") summarized in the succeeding paragraphs may be deemed to
have anti-takeover effects and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider to be in such stockholder's
best interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders. However, certain of the
following provisions may be limited or prohibited by the application of Section
2115 of the California General Corporation Law described below.
Classified Board of Directors. The Certificate of Incorporation divides
the Board of Directors into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected at each annual meeting of stockholders.
The classification of directors and provisions in the Certificate of
Incorporation that limit the ability of stockholders to increase the size of the
Board of Directors, together with provisions in the Certificate of Incorporation
that limit the ability of stockholders to remove directors and that permit the
remaining directors to fill any vacancies on the Board, will have the effect of
making it more difficult for stockholders to change the composition of the Board
of Directors. As a result, two annual meetings of stockholders may be required
for the stockholders to change a majority of the directors, whether or not a
change in the Board of Directors would be beneficial to the Company and its
stockholders and whether or not a majority of the Company's stockholders
believes that such a change would be desirable.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. The Company may reject a stockholder proposal or nomination that is
not made in accordance with such procedures.
Prohibition on Stockholder Action by Written Consent and Limitations on
Calling Stockholder Meetings. The Certificate of Incorporation and Bylaws
prohibit stockholder action by written consent in lieu of a meeting, and provide
that stockholder action can be taken only at an annual or special meeting of
stockholders. The Certificate of Incorporation provide that, subject to the
rights of holders of any series of Preferred Stock to elect additional directors
under specified circumstances, special meetings of stockholders can be called
only by the Board of Directors, the Chairman of the Board of Directors or the
Chief Executive Officer of the Company. Stockholders are not permitted to call a
special meeting or to require that the Board of Directors call a special meeting
of stockholders. Such provision may have the effect of delaying consideration of
a stockholder proposal until the next annual meeting unless a special meeting is
called by the Board of Directors, the Chairman of the Board or the Chief
Executive Officer of the Company.
Section 203 of the Delaware General Corporation Law. Subject to certain
exclusions summarized below, Section 203 of the Delaware General Corporation Law
("Section 203") prohibits any interested stockholder (an "Interested
Stockholder") from engaging in a "business combination" with a Delaware
corporation for three years following the date such person became an Interested
Stockholder. Interested Stockholder generally includes (i) any person who is the
beneficial owner of 15% or more of the outstanding voting stock of the
corporation and (ii) any person who is an affiliate or associate of the
corporation and who held 15% or more of the outstanding voting stock of the
corporation at any time within three years before the date on which such
person's status as an Interested Stockholder is determined. Subject to certain
exceptions a "business combination" includes, among other things: (i) any merger
or consolidation involving the corporation; (ii) the sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets having an aggregate
market value equal to 10% or more of either the aggregate market value of all
assets of the corporation determined on a consolidated basis or the aggregate
market value of all the outstanding stock of the corporation; (iii) any
transaction that results in the issuance or transfer by the corporation of any
stock of
40
<PAGE> 42
the corporation to the Interested Stockholder, except pursuant to a transaction
that effects a pro rata distribution to all stockholders of the corporation;
(iv) any transaction involving the corporation that has the effect of increasing
the proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation that is
owned directly or indirectly by the Interested Stockholder; and (v) any receipt
by the Interested Stockholder of the benefit (except proportionately as a
stockholder) of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
Section 203 does not apply to a business combination if (i) before a person
became an Interested Stockholder, the board of directors of the corporation
approved the transaction in which the Interested Stockholder became an
Interested Stockholder or the business combination, (ii) upon consummation of
the transaction that resulted in the person becoming an Interested Stockholder,
the Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commences (other than
certain excluded shares) or (iii) following a transaction in which the person
became an Interested Stockholder, the business combination is (a) approved by
the board of directors of the corporation and (b) authorized at a regular or
special meeting of stockholders (and not by written consent) by the affirmative
vote of the holders of at least two-thirds of the outstanding voting stock of
the corporation not owned by the Interested Stockholder.
APPLICATION OF THE CALIFORNIA GENERAL CORPORATION LAW TO DELAWARE CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under the California
General Corporation Law) are placed in a special category if they have
characteristics of ownership and operation which indicate that they have
significant contacts with California. So long as a Delaware or other foreign
corporation is in this special category, and it does not qualify for one of the
statutory exemptions, it is subject to a number of key provisions of the
California General Corporation Law applicable to corporations incorporated in
California. Among the more important provisions are those relating to the
election and removal of directors, cumulative voting, classified boards of
directors, standards of liability and indemnification of directors,
distributions, dividends and repurchases of shares, stockholder meetings,
approval of certain corporate transactions, dissenters' rights and inspection of
corporate records. Exemptions from Section 2115 are provided for corporations
whose shares are listed on a major national securities exchange, such as the New
York Stock Exchange, or whose shares are listed on the Nasdaq National Market
and which have 800 or more stockholders.
LIMITATION OF LIABILITY OF DIRECTORS
The Certificate of Incorporation provides that a director will not be
personally liable for monetary damages to the Company or its stockholders for
breach of fiduciary duty as a director, except to the extent such exemption for
liability or limitation thereof is not permitted under the Delaware General
Corporation Law (i.e., liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit).
While the Certificate of Incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate of Incorporation will have no
effect on the availability of equitable remedies, such as an injunction or
rescission based on a director's breach of such director's duty of care.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation provides that each person (and the heirs,
executors, or administrators of such person) who was or is a party or is
threatened to be made a party to, or is involved in any threatened pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative, by
41
<PAGE> 43
reason of the fact that such person is or was a director or officer of the
Company or is or was serving at the request of the Company as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, will be indemnified and held harmless by the Company to the fullest
extent permitted by the Delaware General Corporation Law. The Certificate of
Incorporation further provides that the right to indemnification includes the
right to be paid by the Company for expenses incurred in connection with any
such proceeding in advance of its final disposition to the fullest extent
permitted by the Delaware General Corporation Law, and that the right to
indemnification conferred thereunder is deemed a contract right.
The Certificate of Incorporation further provides that the Company may, by
action of its Board of Directors, provide indemnification to such of the
employees and agents of the Company and such other persons serving at the
request of the Company as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise to such extent and to such
effect as is permitted by the Delaware General Corporation Law and the Board of
Directors.
Pursuant to the Certificate of Incorporation, the Company has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss incurred by such person in any such capacity or
arising out of his or her status as such, whether or not the Company would have
the power to indemnify such person against such liability under the Delaware
General Corporation Law.
The Certificate of Incorporation provides that (i) the rights and authority
described above are not exclusive of any other right that any person otherwise
may have or acquire and (ii) no amendment, modification or repeal of the
Certificate of Incorporation, or adoption of any additional provision of the
Certificate of Incorporation or the Bylaws or, to the fullest extent permitted
by the Delaware General Corporation Law, any amendment, modification or repeal
of law will eliminate or reduce the effect of the provisions in the Certificate
of Incorporation limiting liability or indemnifying certain persons or adversely
affect any right or protection then existing thereunder in respect of any acts
or omissions occurring prior to such amendments, modifications, repeal or
adoption.
The Company has entered into indemnification agreements with its directors
and officers that require the Company to indemnify the directors and officers to
the fullest extent permitted by applicable provisions of the Delaware General
Corporation Law and, to the extent necessary, the California General Corporation
Law.
The Company believes the foregoing provisions are necessary to attract and
retain qualified persons as directors and officers.
42
<PAGE> 44
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering and assuming that the over-allotment option
granted to the Underwriters is not exercised, the Company will have 7,500,000
shares of Common Stock outstanding. The 2,500,000 shares of Common Stock sold by
the Company and the 870,000 shares of Common Stock sold by the Selling
Stockholder in the Offering will be freely tradeable in the public market
without restriction or limitation under the Securities Act. Although the
remaining 4,130,000 shares of Common Stock will be deemed "restricted"
securities within the meaning of the Securities Act, the Company believes that
2,500,000 of such shares will be available for sale under Rule 144 of the
Securities Act ("Rule 144").
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted" securities
for at least one year, including persons who may be deemed "affiliates" of the
Company (as the term is defined under the Securities Act), would be entitled to
sell (in accordance with the provisions specified in Rule 144), within any
three-month period, that number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock of the Company (75,000
shares immediately after the Offering) or (ii) the average weekly trading volume
of the then outstanding shares of Common Stock during the four calendar weeks
preceding each such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and availability of current public
information about the Company.
An "affiliate" of the Company may sell securities that are not "restricted"
without regard to the period of beneficial ownership but subject to the volume
limitations described above and other conditions of Rule 144, subject to
restrictions on affiliates. A person who is not deemed an "affiliate" of the
Company (and has not been such for at least 90 days) and who has beneficially
owned his or her shares for at least two years, would be entitled to sell such
shares under Rule 144 without regard to the volume limitations described above,
manner of sale provisions, notice requirements or availability of public
information. As defined in Rule 144, an "affiliate" of an issuer is a person
that directly or indirectly controls, or is controlled by, or is under common
control with such issuer.
The Company, each of its executive officers and directors and the ESOP have
agreed that they will not, directly or indirectly, offer, sell, offer to sell,
contract to sell, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, grant of any option
to purchase or other sale or disposition) of any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock without the prior written consent of Morgan Keegan & Company, Inc.
for a period of 270 days from the date of this Prospectus. In addition, the
remaining 130,000 shares of Common Stock held by the Selling Stockholder after
the Offering shall become eligible for sale in the public market 180 days after
the date of this Prospectus, subject to the holding period, volume and other
restrictions of Rule 144. See "Underwriting" and "Principal and Selling
Stockholders."
Prior to this Offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that future sales of shares,
or the availability of such shares for future sale, will have on the market
price for the Common Stock prevailing from time to time. Nevertheless, sales by
the existing stockholders of substantial amounts of the Common Stock in the
public market could adversely affect prevailing market conditions.
43
<PAGE> 45
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by Morgan
Keegan & Company, Inc. and Crowell, Weedon & Co. (the "Representatives"), have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement (the "Underwriting Agreement"), to purchase from the
Company and the Selling Stockholder the number of shares of Common Stock
indicated below opposite their respective names at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
------------------------------------------------------------------------- ---------
<S> <C>
Morgan Keegan & Company, Inc. ...........................................
Crowell, Weedon & Co. ...................................................
-------
Total..........................................................
=======
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any of such shares are
purchased. The Company and the Selling Stockholder have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common Stock
to the public at the initial public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share of Common Stock. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share to
other dealers. The initial public offering price and the concessions and
discount to dealers may be changed by the Underwriters after the initial public
offering.
The Company and the Selling Stockholder have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to an additional 505,500 shares of Common Stock (of which the first 130,000
shares will be sold by the Selling Stockholder and the remaining 375,500 shares
will be sold by the Company) at the initial public offering price, less
underwriting discounts and commissions, as shown on the cover page of this
Prospectus. The Underwriters may exercise such option solely for the purpose of
covering over-allotments incurred in the sale of the shares of Common Stock
offered hereby.
The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters or to contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Company, each of its executive officers and directors and the ESOP have
agreed, for a period of 270 days from the date of this Prospectus, not to,
directly or indirectly, offer, sell, offer to sell, contract to sell, grant any
option to purchase, or otherwise dispose (or announce any offer, sale, grant of
any option to purchase or other disposition) of any shares of Common Stock, or
any securities convertible into, or exercisable or exchangeable for, shares of
Common Stock, in the public market, without the prior written consent of the
Representatives. In addition, the remaining 130,000 shares of Common Stock held
by the Selling Stockholder after the Offering shall become eligible for sale in
the public market 180 days after the date of this Prospectus, subject to the
holding period, volume and other restrictions of Rule 144.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price of the Common Stock will
be determined by negotiations among the Company, the Selling Stockholder and the
Representatives. Among the factors considered in determining the initial public
offering price of the Common Stock will be the history of, and the prospects
for, the Company and the industry in which it competes, an assessment of the
Company's management, the Company's past and present operations, its past and
present earnings and the trend of such earnings, the prospects for future
earnings of the Company, the general condition of the securities market at the
time of the Offering and the market prices of publicly traded companies that the
Company and the Representatives believe to be comparable to the Company.
44
<PAGE> 46
Application has been made for inclusion of the Common Stock on the Nasdaq
National Market under the symbol "MEAD." The Company has been advised by the
Representatives that each of the Representatives presently intend to make a
market in the Common Stock offered hereby; however, the Representatives are not
obligated to do so, and any market making activity may be discontinued at any
time. There can be no assurance that an active public market for the Common
Stock will develop and continue after this Offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholder by O'Melveny & Myers LLP,
Newport Beach, California. Certain legal matters will be passed upon for the
Underwriters by Gibson, Dunn & Crutcher LLP, Los Angeles, California.
EXPERTS
The financial statements of Meade Instruments Corp. as of February 28,
1995, February 29, 1996 and November 30, 1996 and for each of the three years in
the period ended February 29, 1996 and the nine months ended November 30, 1996
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect to
the Company and such Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit. The Registration
Statement, including exhibits and schedules thereto, as well as the reports and
other information filed by the Company with the Securities and Exchange
Commission, may be inspected without charge at the Public Reference Room of the
Securities and Exchange Commission's principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Securities and Exchange
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Electronic filings made through the Electronic Data Gathering Analysis
and Retrieval System are also publicly available through the Securities and
Exchange Commission's Web Site (http://www.sec.gov).
45
<PAGE> 47
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Meade Merger Corp.
Report of Independent Accountants................................................. F-2
Balance Sheet..................................................................... F-3
Note to Balance Sheet............................................................. F-4
Meade Instruments Corp.
Report of Independent Accountants................................................. F-5
Balance Sheets.................................................................... F-6
Income Statements................................................................. F-7
Statements of Stockholders' Equity (Deficit)...................................... F-8
Statements of Cash Flows.......................................................... F-9
Notes to Financial Statements..................................................... F-10
</TABLE>
F-1
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Meade Merger Corp.
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Meade Merger Corp. at February 5, 1997 in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Company's management; our responsibility
is to express an opinion on this financial statement based on our audit. We
conducted our audit of this statement in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall balance sheet presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Costa Mesa, California
February 6, 1997
F-2
<PAGE> 49
MEADE MERGER CORP.
BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 5,
1997
------------
<S> <C>
ASSETS
Cash.................................................. $100
------
$100
=========
STOCKHOLDERS' EQUITY
Stockholders' equity:
Preferred stock; $0.01 par value; 1,000,000
shares
authorized; no shares issued and outstanding...
Series A common stock; $0.01 par value;
15,000,000 shares authorized; 10 shares issued
and outstanding................................
Series B common stock; $0.01 par value; 5,000,000
shares authorized; no shares issued and
outstanding....................................
Additional paid-in capital....................... $100
------
Total stockholders' equity....................... 100
------
$100
=========
</TABLE>
F-3
<PAGE> 50
MEADE MERGER CORP.
NOTE TO BALANCE SHEET
1. THE COMPANY
Meade Merger Corp. (the Company) was incorporated in Delaware on February 4,
1997. Upon completion of the public offering of Meade Instruments Corp., a
California corporation, the Company will merge with the California corporation
and exchange at a ratio of one to one all of the outstanding shares of the
redeemable Series A preferred stock and Series A and Series B common stock of
the California corporation. Subsequently, the then outstanding shares of Series
A and Series B common stock of the Company will be converted to one series of
common stock at a ratio of one to one.
The balance sheet should be read in conjunction with the historical financial
statements of Meade Instruments Corp., a California corporation, included
elsewhere in the registration statement.
F-4
<PAGE> 51
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Meade Instruments Corp.
In our opinion, the accompanying balance sheets and related statements of
income, of stockholders' equity (deficit) and of cash flows present fairly, in
all material respects, the financial position of Meade Instruments Corp. at
February 28, 1995, February 29, 1996, and November 30, 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended February 29, 1996 and for the nine months ended November 30, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Costa Mesa, California
February 5, 1997
F-5
<PAGE> 52
MEADE INSTRUMENTS CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY FEBRUARY
28, 29, NOVEMBER 30,
1995 1996 1996
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................................ $ 42,000 $ 3,000 $ 3,000
Accounts receivable, less allowance for doubtful accounts of
$189,000 in 1995, $333,000 in 1996 and $198,000 at
November 30, 1996........................................ 3,386,000 4,539,000 12,852,000
Inventories (Note 2)........................................ 5,427,000 6,462,000 11,264,000
Deferred income taxes....................................... 226,000 330,000 513,000
Prepaid expenses and other current assets................... 104,000 213,000 48,000
----------- ----------- ------------
Total current assets................................ 9,185,000 11,547,000 24,680,000
Other assets.................................................. 151,000 263,000 1,287,000
Property and equipment, net (Note 3).......................... 861,000 1,225,000 1,480,000
----------- ----------- ------------
$10,197,000 $13,035,000 $ 27,447,000
=========== =========== ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank line of credit (Note 4)................................ $ 1,409,000 $ 2,127,000 $ 8,984,000
Notes payable to related parties (Note 5)................... 1,775,000 2,000,000
Current portion of long-term debt (Note 6).................. 200,000 200,000 1,584,000
Current portion of capital lease obligations (Note 7)....... 54,000 146,000 212,000
Accounts payable............................................ 1,252,000 1,406,000 2,796,000
Accrued liabilities......................................... 877,000 863,000 2,545,000
Income taxes payable........................................ 260,000 622,000 1,435,000
----------- ----------- ------------
Total current liabilities........................... 5,827,000 7,364,000 17,556,000
----------- ----------- ------------
Long-term debt, net of current portion (Note 6)............... 650,000 450,000 7,124,000
----------- ----------- ------------
Notes payable to related parties, net of current portion (Note
5).......................................................... 225,000
----------- ----------- ------------
Long-term capital lease obligations, net of current portion
(Note 7).................................................... 179,000 368,000 608,000
----------- ----------- ------------
Deferred rent................................................. 101,000 82,000 68,000
----------- ----------- ------------
Commitments (Note 7)
Redeemable Series A preferred stock; 1,000 shares authorized,
issued and outstanding (Note 8)............................. 3,041,000
----------- ----------- ------------
Stockholders' equity (deficit):
Preferred stock; 999,000 shares authorized, none issued and
outstanding..............................................
Series A common stock; 15,000,000 shares authorized; issued
and outstanding 2,571,361 shares at February 28, 1995 and
February 29, 1996 and 3,500,000 shares at November 30,
1996..................................................... 1,000 1,000 3,511,000
Series B common stock; 5,000,000 shares authorized;
1,500,000 shares issued and outstanding at February 28,
1995, February 29, 1996 and November 30, 1996 (Note 9)... 995,000
Retained earnings........................................... 3,214,000 4,770,000 5,544,000
----------- ----------- ------------
3,215,000 4,771,000 10,050,000
Unearned ESOP shares (Note 9)............................... (11,000,000)
----------- ----------- ------------
Total stockholders' equity (deficit)................ 3,215,000 4,771,000 (950,000)
----------- ----------- ------------
$10,197,000 $13,035,000 $ 27,447,000
=========== =========== ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 53
MEADE INSTRUMENTS CORP.
INCOME STATEMENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED FEBRUARY 28(29), NOVEMBER 30,
--------------------------------------- -------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................... $16,628,000 $24,934,000 $29,770,000 $23,459,000 $38,966,000
Cost of sales....................... 11,670,000 17,040,000 20,054,000 15,827,000 26,267,000
----------- ----------- ----------- ----------- -----------
Gross profit........................ 4,958,000 7,894,000 9,716,000 7,632,000 12,699,000
Selling expenses.................... 1,565,000 2,035,000 2,832,000 2,158,000 3,555,000
General and administrative
expenses.......................... 1,378,000 2,118,000 2,951,000 1,966,000 3,004,000
Research and development expenses... 425,000 423,000 518,000 396,000 444,000
ESOP contribution................... 750,000
Amortization of deferred credit..... (53,000)
----------- ----------- ----------- ----------- -----------
Operating income.................... 1,643,000 3,318,000 3,415,000 3,112,000 4,946,000
Interest expense.................... 493,000 470,000 659,000 496,000 1,253,000
----------- ----------- ----------- ----------- -----------
Income before income taxes.......... 1,150,000 2,848,000 2,756,000 2,616,000 3,693,000
Provision for income taxes (Note
10)............................... 110,000 797,000 1,200,000 1,177,000 1,532,000
----------- ----------- ----------- ----------- -----------
Net income.......................... 1,040,000 2,051,000 1,556,000 1,439,000 2,161,000
Deductions for accretion on
redeemable preferred stock and
dividend on Series B common stock
(Note 1).......................... 1,137,000
----------- ----------- ----------- ----------- -----------
Net income available to common
stockholders...................... $ 1,040,000 $ 2,051,000 $ 1,556,000 $ 1,439,000 $ 1,024,000
=========== =========== =========== =========== ===========
Net income per share................ $ 0.22 $ 0.44 $ 0.33 $ 0.31 $ 0.28
=========== =========== =========== =========== ===========
Weighted average number of shares
outstanding (Note 1).............. 4,682,472 4,682,472 4,682,472 4,682,472 3,608,335
=========== =========== =========== =========== ===========
Supplemental net income per share
(Note 12), unaudited.............. $ 0.37 $ 0.47
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 54
MEADE INSTRUMENTS CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON STOCK COMMON STOCK
---------------------- -------------------- RETAINED UNEARNED
SHARES AMOUNT SHARES AMOUNT EARNINGS ESOP SHARES TOTAL
--------- ---------- ---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1993....... 2,571,361 $ 1,000 1,500,000 $ $ 123,000 $ $ 124,000
Net income......................... 1,040,000 1,040,000
--------- ---------- --------- -------- ---------- ------------ ------------
Balance at February 28, 1994....... 2,571,361 1,000 1,500,000 1,163,000 1,164,000
Net income......................... 2,051,000 2,051,000
--------- ---------- --------- -------- ---------- ------------ ------------
Balance at February 28, 1995....... 2,571,361 1,000 1,500,000 3,214,000 3,215,000
Net income......................... 1,556,000 1,556,000
--------- ---------- --------- -------- ---------- ------------ ------------
Balance at February 29, 1996....... 2,571,361 1,000 1,500,000 4,770,000 4,771,000
Redemption of Series A common
stock............................ (71,361) (250,000) (250,000)
Purchase and exercise of warrant
for shares of Series A common
stock............................ 1,000,000 3,510,000 3,510,000
Unearned ESOP shares............... (11,000,000) (11,000,000)
Dividends declared and paid to
ESOP............................. (995,000) (995,000)
Tax benefit on dividends paid to
ESOP............................. 399,000 399,000
Contribution of capital by Series B
common stockholders.............. 995,000 995,000
Accretion on redeemable preferred
stock............................ (541,000) (541,000)
Net income......................... 2,161,000 2,161,000
--------- ---------- --------- -------- ---------- ------------ ------------
Balance at November 30, 1996....... 3,500,000 $3,511,000 1,500,000 $995,000 $5,544,000 $(11,000,000) $ (950,000)
========= ========== ========= ======== ========== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 55
MEADE INSTRUMENTS CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED FEBRUARY 28(29), NOVEMBER 30,
--------------------------------------- --------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 1,040,000 $ 2,051,000 $ 1,556,000 $ 1,439,000 $ 2,161,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 120,000 150,000 300,000 220,000 422,000
ESOP contribution.............................. 750,000
Amortization of deferred credit (Note 1)....... (53,000)
Changes in assets and liabilities:
Increase in accounts receivable.............. (334,000) (924,000) (1,153,000) (3,811,000) (8,313,000)
Increase in inventories...................... (312,000) (853,000) (1,035,000) (1,632,000) (4,802,000)
Increase in deferred income taxes............ (208,000) (18,000) (104,000) (183,000)
(Increase) decrease in prepaid expenses and
other current assets...................... 22,000 (23,000) (109,000) (39,000) 165,000
Increase in other assets..................... (122,000) (112,000) (79,000) (1,164,000)
(Decrease) increase in accounts payable...... (1,209,000) 21,000 154,000 413,000 1,390,000
(Decrease) increase in accrued liabilities... 507,000 201,000 (33,000) (98,000) 918,000
Increase in income taxes payable............. 210,000 50,000 362,000 569,000 1,212,000
----------- ----------- ----------- ----------- ------------
Total adjustments......................... (1,257,000) (1,518,000) (1,730,000) (4,457,000) (9,605,000)
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in) operating
activities.............................. (217,000) 533,000 (174,000) (3,018,000) (7,444,000)
----------- ----------- ----------- ----------- ------------
Cash flows from investing activities:
Capital expenditures............................. (304,000) (215,000) (247,000) (138,000) (93,000)
----------- ----------- ----------- ----------- ------------
Net cash used in investing activities..... (304,000) (215,000) (247,000) (138,000) (93,000)
----------- ----------- ----------- ----------- ------------
Cash flows from financing activities:
Payments on long-term debt....................... (591,000) (800,000) (200,000) (150,000) (1,442,000)
Proceeds from long-term debt..................... 800,000 1,000,000 9,500,000
Net borrowings (payments) under bank line of
credit......................................... (1,187,000) (307,000) 718,000 3,368,000 6,857,000
Proceeds from (payments on) notes payable to
related parties................................ 1,500,000 (2,000,000)
Redemption of common stock....................... (250,000)
Issuance of preferred stock...................... 2,500,000
Purchase and exercise of warrant for common
stock.......................................... 3,510,000
Unearned ESOP shares............................. (11,000,000)
Payment of Series B common stock dividend........ (995,000)
Contribution of capital.......................... 995,000
Payments under capital lease obligations......... (173,000) (136,000) (101,000) (138,000)
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in) financing
activities.............................. 522,000 (280,000) 382,000 3,117,000 7,537,000
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash.................... 1,000 38,000 (39,000) (39,000) -0-
Cash at beginning of period........................ 3,000 4,000 42,000 42,000 3,000
----------- ----------- ----------- ----------- ------------
Cash at end of period.............................. $ 4,000 $ 42,000 $ 3,000 $ 3,000 $ 3,000
=========== =========== =========== =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest....................................... $ 496,000 $ 455,000 $ 639,000 $ 491,000 $ 1,152,000
Income taxes................................... $ 11,000 $ 859,000 $ 940,000 $ 540,000 $ 540,000
Non-cash financing activities:
Capital lease obligations...................... $ 162,000 $ 417,000 $ 417,000 $ 444,000
Accretion on redeemable preferred stock........ $ 541,000
Tax benefit of dividends paid to ESOP.......... $ 399,000
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 56
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Meade Instruments Corp. ("the Company"), a California corporation,
manufactures, imports and distributes telescopes and telescope accessories.
On February 28, 1991, Meade Holding Corp. ("MHC") acquired all of the
outstanding common stock (17,200 shares) of the Company for $1,000 in cash. The
acquisition was accounted for using the purchase method of accounting, and the
assets and liabilities of Meade Instruments Corp. reflect the underlying basis
of Meade Holding Corp. in the Company. The fair market value of the net assets
acquired exceeded the cost. This excess over cost was allocated to reduce
noncurrent assets to zero. The remainder of the excess was classified as a
deferred credit (negative goodwill) and was amortized using the straight-line
method over three years.
On February 26, 1996, MHC was merged into Meade Instruments Corp., which
was the surviving corporation of the merger. In the merger, all 17,200 shares of
the outstanding common stock of the Company were canceled, and 1,000 shares of
the outstanding common stock of MHC (representing all of the issued and
outstanding shares of MHC) were converted, on a one to one basis, into the
common stock of the surviving Meade Instruments Corp.
In April 1996, the Company effected a recapitalization. The existing
stockholders exchanged their existing common stock for 2,571,361 shares of
Series A and 1,500,000 shares of Series B common stock. The accompanying
financial statements have been retroactively adjusted to give effect to this
transaction. The Company redeemed 71,361 shares of Series A common stock for
$250,000. The Company also issued 1,000 shares of redeemable Series A preferred
stock and a warrant to purchase 1,000,000 shares of Series A common stock at
$0.01 per share for $6.0 million in the aggregate. The warrant was exercised
immediately upon purchase of the Series A preferred stock. The Company has
allocated $2.5 million of the proceeds as the fair value of the Series A
preferred stock and $3.5 million as the fair value of the Series A common stock.
Also in April 1996, the Company's newly-formed Employee Stock Ownership
Plan (ESOP) purchased all of the outstanding shares of Series B common stock
(1,500,000 shares) from the existing stockholders. The ESOP financed the
purchase through the proceeds of an $11.0 million term loan from the Company.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are stated at the lower of cost, as determined using the
first-in, first-out (FIFO) method, or market. Costs include materials, labor and
manufacturing overhead.
Property and equipment
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets which range
from three to seven years. Properties held under capital leases are recorded at
the present value of the noncancellable lease payments over the term of the
lease and are amortized over the shorter of the lease term or the estimated
useful lives of the assets.
Income taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets
F-10
<PAGE> 57
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and liabilities and are measured using the enacted tax rates that will be in
effect when the differences are expected to reverse. The Company files its tax
return for the year ending August 31, rather than for the financial reporting
period ending the last day of February.
Research and development
Expenditures for research and development costs are charged to expense as
incurred.
Net income per share
Net income per share is based upon the weighted average number of common
shares outstanding during each period, after giving retroactive effect to the
conversion of shares to Series A and B common stock (as discussed above).
Pursuant to the requirements of the Staff of the Securities and Exchange
Commission, the shares related to stock sold subsequent to November 30, 1995
have been shown as outstanding for all periods presented. Net income available
to common stockholders for the nine month period ended November 30, 1996 is
computed by deducting from net income (1) the accretion on the redeemable
preferred stock of $541,000 (Note 8) during such period and (2) the dividend of
$995,000, net of income tax benefit of $399,000, on the Series B common stock
paid during such period (Note 9).
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, are principally accounts receivable. The Company
maintains an allowance for doubtful accounts but historically has not
experienced any significant losses related to individual customers or groups of
customers in any particular industry or geographic area.
Fair value of financial instruments
The Company's financial instruments include cash, accounts receivable,
prepaid expenses and other current assets, accounts payable, accrued
liabilities, and short-term loans. The carrying value of these financial
instruments approximates fair value due to their short-term nature.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
respective reporting periods. Actual results could differ from those estimates.
New accounting pronouncements
Effective March 1, 1996, the Company adopted the Financial Accounting
Standards Board ("FASB") Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121")
and Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The adoption of SFAS No. 121 and SFAS No. 123 by the Company did not have
a material impact on the Company's financial position, results of operations or
liquidity. The Company has adopted only the disclosure provisions of SFAS No.
123 for employee stock-based compensation.
F-11
<PAGE> 58
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited interim information
The information presented for the nine months ended November 30, 1995 is
unaudited. In the opinion of management, the unaudited interim financial
information includes all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company's results of its operations
and its cash flows for the nine months ended November 30, 1995. The Company's
results of operations and cash flows for the interim period are not necessarily
indicative of the results to be expected for any other interim period or a full
year. The data disclosed in these notes to financial statements at such dates
and for such periods are also unaudited.
Reclassifications
Certain reclassifications, which have no effect on retained earnings, have
been made to conform the 1994 and 1995 information to the 1996 presentation.
2. INVENTORIES
The composition of inventories is as follows:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29, NOVEMBER 30,
1995 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials................................. $ 2,698,000 $ 2,433,000 $ 3,412,000
Work in process............................... 1,140,000 1,500,000 1,839,000
Finished goods................................ 1,589,000 2,529,000 6,013,000
----------- ----------- ------------
$ 5,427,000 $ 6,462,000 $ 11,264,000
=========== =========== ============
</TABLE>
3. PROPERTY AND EQUIPMENT
The composition of property and equipment is as follows:
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29, NOVEMBER 30,
1995 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Molds and dies................................ $ 436,000 $ 668,000 $ 720,000
Machinery and equipment....................... 362,000 866,000 1,339,000
Furniture and fixtures........................ 99,000 27,000 37,000
Leasehold improvements........................ 299,000 299,000 301,000
----------- ----------- ----------
1,196,000 1,860,000 2,397,000
Less accumulated depreciation and
amortization................................ (335,000) (635,000) (917,000)
----------- ----------- ----------
$ 861,000 $ 1,225,000 $1,480,000
=========== =========== ==========
</TABLE>
The gross value of assets under capital leases included in machinery and
equipment above is $252,000 at February 28, 1995, $669,000 at February 29, 1996,
and $1.1 million at November 30, 1996.
4. BANK DEBT
At February 29, 1996, the Company's bank line of credit extended to June
30, 1996 and was evidenced by a note payable which provided for borrowings of up
to 80% of eligible accounts receivable, as defined, plus 50% of eligible
inventory, as defined. The note, which bore interest at the bank's reference
rate (8.25% at February 29, 1996) plus 1.0%, was secured by substantially all of
the Company's assets and was guaranteed by the Company's stockholders. The
Company's $1.0 million term loan at February 29, 1996 was secured by
substantially all of the Company's assets and guaranteed by the Company's
stockholders (Note 6). The line of credit and term loan were subject to certain
restrictive covenants including certain financial statement ratios,
F-12
<PAGE> 59
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
restrictions on capital expenditures, and a minimum tangible net worth.
Furthermore, the bank agreement restricted the Company from declaring or paying
dividends.
In April 1996, the Company replaced its revolving line of credit with a
$10.0 million line of credit with a new lender secured by receivables and
inventory. The line of credit bears interest at the bank's base rate (8.25% at
November 30, 1996) plus 0.5%, interest payable monthly in arrears. In April
1996, the Company also borrowed $9.5 million evidenced by a term note (Note 6).
The Loan and Security Agreement between the bank and the Company, which governs
the line of credit and term note, contains certain financial covenants including
minimum working capital, minimum profitability, and minimum interest and debt
coverage ratios. Furthermore, the bank agreement restricts the Company from
declaring or paying dividends on its Series A common stock.
5. NOTES PAYABLE TO RELATED PARTY
In July 1993, the Company borrowed $1.5 million from a stockholder
evidenced by a promissory note payable. Interest was payable monthly at the rate
of 10.0% per annum. The note was subordinated to the bank debt and was due, as
amended, on July 8, 1996. Also, payable to stockholders were subordinated notes
payable totaling $500,000 and due on various dates between February 28, 1996 and
March 29, 1996. Interest was payable quarterly at the First National Bank of
Boston's base rate (8.25% at February 29, 1996) plus 2.0%. Payment of principal
was subordinated to the bank indebtedness. The notes payable to related parties
were repaid in full in April 1996. Interest expense on the notes payable to
related parties was $140,000, $198,000, $204,000 and $16,000 for the years ended
February 28, 1994, February 28, 1995 and February 29, 1996 and for the nine
months ended November 30, 1996, respectively.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29, NOVEMBER 30,
1995 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Note payable to bank, interest at the bank's
base rate (8.25% at November 30, 1996) plus
0.75% payable monthly, principal payments are
due in defined quarterly amounts totaling
$1,584,000 annually for five years commencing
July 1996, any remaining principal and
interest amounts are due in full at April 2001
(Note 4)...................................... $ 8,708,000
Note payable to bank, interest at the bank's
reference rate (9% at February 28, 1995 and
8.25% at February 29, 1996) plus 1.25% payable
monthly, principal payments are due in equal
monthly installments over five years
commencing June 1, 1994....................... $ 850,000 $ 650,000
---------- ---------- ------------
850,000 650,000 8,708,000
Less current portion of long-term debt.......... (200,000) (200,000) (1,584,000)
---------- ---------- ------------
$ 650,000 $ 450,000 $ 7,124,000
========== ========== ============
</TABLE>
F-13
<PAGE> 60
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, NOVEMBER 30,
FISCAL YEAR 1996 1996
---------------------------------------------------- ------------ ------------
<S> <C> <C>
1997.............................................. $200,000 $ 525,000
1998.............................................. 200,000 1,584,000
1999.............................................. 200,000 1,584,000
2000.............................................. 50,000 1,584,000
2001.............................................. 1,584,000
Thereafter........................................ 1,847,000
-------- ----------
$650,000 $8,708,000
======== ==========
</TABLE>
7. LEASES AND OTHER COMMITMENTS
The Company is obligated under certain long-term noncancellable leases and
other noncancellable agreements for its office and manufacturing facilities and
certain equipment and machinery. Aggregate future minimum commitments under
noncancellable leases and other agreements at February 29, 1996 that have
remaining terms in excess of one year are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
---------------------------------------------------- ------------ ------------
<S> <C> <C>
1997.............................................. $ 197,000 $ 292,000
1998.............................................. 173,000 292,000
1999.............................................. 137,000 292,000
2000.............................................. 121,000 292,000
2001.............................................. 4,000
---------- ----------
Net minimum lease payments.......................... 632,000 $1,168,000
==========
Less amount representing interest................... (118,000)
----------
Capital lease obligations........................... $ 514,000
==========
</TABLE>
For the years ended February 28, 1994, February 28, 1995 and February 29,
1996 and the nine months ended November 30, 1996, the Company incurred rent
expense of $387,000, $309,000, $373,000 and $261,000, respectively.
In November 1992, the Company executed a lease commencing March 1993 for
its office and manufacturing facilities. The lease term is seven years,
extendable for an additional five years at the Company's option. Aggregate
future minimum lease commitments for this lease are included in the schedule
above. Such commitments are subject to periodic upward adjustment, based upon
increases in the Consumer Price Index.
In December 1996, the Company entered into a ten-year lease agreement for
new office and manufacturing facilities that is expected to commence in October
1997 upon completion of certain tenant improvements. Aggregate future minimum
commitments under noncancellable operating leases are expected to increase
$254,000 in 1998, $610,000 in 1999 and 2000, $684,000 in 2001, and $7.2 million
in the aggregate thereafter.
8. REDEEMABLE PREFERRED STOCK
The Redeemable Series A preferred stock has a cumulative 14% dividend per
annum payable quarterly and is mandatorily redeemable in April 2001. In the
event that the Company does not declare and pay the dividends in cash which have
accumulated on any quarterly due date or the Series A preferred stock is not
redeemed when due, then thereafter additional dividends shall accrue on the
Series A preferred stock at the rate of 14% per annum, compounded quarterly,
with the amount of such additional dividends added to accrued dividend payments
or redemption value until all such amounts have been paid in full. Upon any
voluntary or
F-14
<PAGE> 61
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
involuntary liquidation, dissolution or winding up of the Company, the holders
of the Series A preferred stock will be entitled to be paid, before any payment
shall be made to the common stockholders, an amount in cash equal to $6,000 for
each share of Series A preferred stock plus all accrued and unpaid dividends to
date. If the Company does not satisfy certain covenants in the preferred stock
purchase agreement, the preferred stockholder may designate a majority of the
Company's Board of Directors. The Company recorded the Series A preferred stock
at $2.5 million, its fair value, and is recording accretion to increase the
carrying value of the Series A preferred stock to the redemption value of $6.0
million by April 23, 2001, the redemption date, plus unpaid dividends.
9. EMPLOYEE STOCK OWNERSHIP PLAN
Adoption of the Employee Stock Ownership Plan (ESOP) was effective March 1,
1996 and covers all employees of the Company who meet certain service and
eligibility requirements. The ESOP year ends on the last day of February each
year. A participant becomes 100% vested in his ESOP account if, while employed
at the Company, the participant (i) reaches his 65th birthday, (ii) becomes
disabled (as defined), (iii) dies, or (iv) achieves five years of credited
service (as defined). Distributions of a participant's vested account are
directed by the ESOP's Administrative Committee. The Company provides a put
option to any participant who receives a distribution of Company stock, unless
the stock is readily tradable on an established market.
In April 1996, the ESOP purchased all of the outstanding shares of the
Company's Series B common stock (1,500,000 shares) held by the existing
stockholders for $11.0 million. The Series B common stock has a cumulative
dividend of $0.513 per share and a liquidation preference over the Series A
common stock. The ESOP financed the purchase of the Series B common stock (the
financed shares) with the proceeds of an $11.0 million term loan (the
acquisition loan) from the Company. The financed shares are held by the Meade
Instruments Corp. Employee Stock Ownership Trust (the ESOP trust). The ESOP
pledged the financed shares to the Company as security for the acquisition loan.
The financed shares were initially credited to a suspense account on the books
of the ESOP and will be allocated to the accounts of individual ESOP
participants, as of each plan year end, for payments made on the acquisition
loan. The acquisition loan has a ten year term and bears interest at 6% per
annum. Principal and interest is due semi-annually, subject to the Company
making contributions to the ESOP to fund the principal and interest payments.
The release of financed shares from collateral is based on the ratio that the
payment of principal bears to the initial principal of the acquisition loan. The
Company accounts for its ESOP in accordance with Statement of Position 93-6.
Accordingly, the shares pledged as collateral are reported as unearned ESOP
shares in the balance sheet. As shares are released from collateral, the Company
records compensation expense, and the shares become outstanding for net income
per share purposes. Dividends on allocated shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are recorded as a
reduction of debt and accrued interest.
For the nine months ended November 30, 1996, the Company has recognized
ESOP contribution expense of $750,000. In August 1996, the Company's board of
directors (i) authorized a contribution to the ESOP in the amount of $237,000 to
fund the semi-annual interest payment due on the acquisition loan and (ii)
declared and paid a dividend on the Series B common stock in the amount of
$995,000. The ESOP trust used the proceeds of the contribution to pay the
semi-annual interest payment due on the acquisition loan. The ESOP used the
proceeds of the dividend to make a contribution of capital of $995,000. The
dividend, net of income tax benefit of $399,000, has been deducted from net
income available to common stockholders in the computation of net income per
share for the nine months ended November 30, 1996.
F-15
<PAGE> 62
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of November 30, 1996, no shares in the ESOP trust have been allocated to
individual participants. Allocations will be made as of December 31, 1996 for
the plan year ending February 28, 1997. Allocation to individual participant
accounts are made in the ratio that the compensation of each participant bears
to the total compensation of all such participants. There are no shares
committed to be released as of November 30, 1996. Shares in suspense at November
30, 1996 are 1,500,000.
The fair value of the Series B common stock upon purchase from the existing
stockholders in April 1996 was determined to be $7.33 per share. Under the terms
of the ESOP, the fair value of the stock at any plan year end is to be
determined by an independent appraiser so long as the stock is not readily
tradable on an established market. At November 30, 1996, there is no repurchase
obligation.
10. INCOME TAXES
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED FEBRUARY 28(29), ENDED
------------------------------------- NOVEMBER 30,
1994 1995 1996 1996
--------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Current:
Federal.......................... $ 259,000 $649,000 $1,094,000 $1,442,000
State............................ 59,000 166,000 210,000 273,000
--------- --------- ----------- -----------
318,000 815,000 1,304,000 1,715,000
--------- --------- ----------- -----------
Deferred:
Federal.......................... (163,000) (14,000) (87,000) (153,000)
State............................ (45,000) (4,000) (17,000) (30,000)
--------- --------- ----------- -----------
(208,000) (18,000) (104,000) (183,000)
--------- --------- ----------- -----------
$ 110,000 $797,000 $1,200,000 $1,532,000
========= ========= =========== ===========
</TABLE>
The provision for income taxes differed from the amount computed by
applying the U.S. federal statutory rate to income before income taxes due to
the effects of the following:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY NINE MONTHS
28(29), ENDED
------------------------ NOVEMBER 30,
1994 1995 1996 1996
----- ----- ---- ------------
<S> <C> <C> <C> <C>
Federal income tax rate......................... 34.0% 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit....................................... 6.1 6.1 6.1 6.1
Benefit of operating loss carryforwards......... (12.6) (15.2)
Reduction in valuation allowance................ (18.0)
Other........................................... 0.1 3.1 3.5 1.4
----- ----- ---- ----
9.6% 28.0% 43.6% 41.5%
===== ===== ==== ====
</TABLE>
Deferred tax assets at February 28, 1995, February 29, 1996 and November
30, 1996 consist of certain inventory and accounts receivable reserves as well
as differences in the bases of fixed asset which are measured differently for
tax and financial reporting purposes.
F-16
<PAGE> 63
MEADE INSTRUMENTS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. SIGNIFICANT CUSTOMERS AND FOREIGN SALES
The Company generated 13%, 16% and 12% of its revenue from one customer
during the years ended February 28, 1994, February 28, 1995, February 29, 1996,
respectively, and 24% of its revenue from two customers during the nine months
ended November 30, 1996. Export sales approximated 19%, 17%, 25% and 17% of
sales for the years ended February 28, 1994, February 28, 1995, February 29,
1996 and the nine months ended November 30, 1996, respectively. The Company
exports primarily to Europe and Japan.
12. SUBSEQUENT EVENTS
Proposed public offering
In December 1996, the Company entered into an agreement in principle with
two underwriters (the Underwriters), whereby the Underwriters have agreed in
principle to act as underwriters in an initial public offering (the Offering) of
up to 2,875,500 shares of newly-issued Company common stock (2,500,000 shares
intended to be offered to the public and 375,500 shares which the Underwriters
have the option to purchase to cover over-allotments, if any). Prior to the
closing of this Offering, the Company will reincorporate into a Delaware
corporation pursuant to a merger with and into a newly-formed and wholly-owned
Delaware subsidiary, with the Delaware subsidiary to be the surviving
corporation. All of the outstanding shares of the Series A and Series B common
stock and Series A preferred stock of the Company will be exchanged on a ratio
of one for one with shares of Series A and Series B common stock and Series A
preferred stock of the Delaware subsidiary.
The Company intends to use the proceeds to redeem all of the outstanding
shares of the redeemable preferred stock and to repay the Company's term note
and a portion of the line of credit. Supplemental net income per share is based
upon the weighted average number of common shares outstanding during the year
ended February 29, 1996 and the nine months ended November 30, 1996, after
giving retroactive effect to the beginning of the period for the redemption of
the preferred stock and the repayment of the Company's term note and a portion
of the line of credit. Pursuant to Accounting Principles Board Statement No. 15,
the number of weighted average shares outstanding has been increased by
2,077,778 shares. This is the number of shares necessary, at an assumed public
offering price of $9.00 per share, to retire $12.7 million of term and revolving
debt and to redeem $6.0 million of Series A preferred stock.
Stock Incentive Plan
In February 1997, the Company's Board of Directors adopted the 1997 Stock
Incentive Plan (the Plan). The Plan provides for the grant of incentive and
non-qualified stock options, restricted stock, stock appreciation rights (SARs),
and performance stock awards to certain key employees (including officers,
whether or not directors) of the Company. Under the Plan, the Company may grant
options and other awards with respect to 750,000 shares of common stock. Awards
under the Plan generally vest after six months and become exercisable over a
four-year period, or as determined by the Compensation Committee of the Board of
Directors. Stock options generally remain exercisable for a period of ten years
from the date of grant.
F-17
<PAGE> 64
======================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE OBTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY OF THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE INFORMATION PRESENTED HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
AS OF WHICH SUCH INFORMATION IS GIVEN. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK TO
WHICH IT RELATES, OR ANY SUCH SHARES IN ANY JURISDICTION TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 7
Use of Proceeds............................ 11
Dividend Policy............................ 11
Dilution................................... 12
Capitalization............................. 13
Selected Financial Information............. 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 16
Business................................... 22
Management................................. 32
Certain Transactions....................... 37
Principal and Selling Stockholders......... 38
Description of Capital Stock............... 39
Shares Eligible for Future Sale............ 43
Underwriting............................... 44
Legal Matters.............................. 45
Experts.................................... 45
Additional Information..................... 45
Index to Financial Statements.............. F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
3,370,000 SHARES
LOGO
LOGO
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
MORGAN KEEGAN & COMPANY, INC.
CROWELL, WEEDON & CO.
, 1997
======================================================
<PAGE> 65
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the
issuance and distribution of the Common Stock being registered. All amounts are
estimates except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........................ $11,744
NASD filing fee............................................................ 4,376
Nasdaq National Market listing fee......................................... 36,250
Accounting fees and expenses............................................... *
Legal fees and expenses.................................................... *
Blue Sky qualification fees and expenses................................... 10,000
Printing and engraving expenses............................................ *
Transfer agent and registrar fees.......................................... 2,500
Miscellaneous.............................................................. *
--------
Total............................................................ $ *(1)
========
</TABLE>
- ---------------
* To be filed by amendment.
(1) A portion of such expenses may be reimbursed by the Selling Stockholder. See
"Certain Transactions."
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION OF LIABILITY OF DIRECTORS
The Certificate of Incorporation provides that a director will not be
personally liable for monetary damages to the Company or its stockholders for
breach of fiduciary duty as a director, except to the extent such exemption for
liability or limitation thereof is not permitted under the Delaware General
Corporation Law (i.e., liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit).
While the Certificate of Incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate of Incorporation will have no
effect on the availability of equitable remedies, such as an injunction or
rescission based on a director's breach of such director's duty of care.
The Certificate of Incorporation provides that each person (and the heirs,
executors, or administrators of such person) who was or is a party or is
threatened to be made a party to, or is involved in any threatened pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative, by reason of the fact that such person is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, will be indemnified and held harmless by the Company to the
fullest extent permitted by the Delaware General Corporation Law. The
Certificate of Incorporation further provides that the right to indemnification
includes the right to be paid by the Company for expenses incurred in connection
with any such proceeding in advance of its final disposition to the fullest
extent permitted by the Delaware General Corporation Law, and that the right to
indemnification conferred thereunder is deemed a contract right.
II-1
<PAGE> 66
The Certificate of Incorporation further provides that the Company may, by
action of its Board of Directors, provide indemnification to such of the
employees and agents of the Company and such other persons serving at the
request of the Company as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise to such extent and to such
effect as is permitted by the Delaware General Corporation Law and the Board of
Directors.
The Company has entered into indemnification agreements with certain of its
directors and officers that require the Company to indemnify such directors and
officers to the fullest extent permitted by applicable provisions of law,
provided that any settlement of a third party action against a director or
officer is approved by the Company, and subject to limitations for actions
initiated by the director or officer, penalties paid by insurance and violations
of Section 16(b) of the Securities Exchange Act of 1934, as amended, and similar
laws.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its directors and officers for certain liabilities arising under the Securities
Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) On April 23, 1996, pursuant to a recapitalization of the Company, the
Stockholders exchanged their shares of Common Stock for shares of Series A
Common Stock and shares of Series B Common Stock. Immediately following such
exchange, the Stockholders sold all of such shares of Series B Common Stock. See
"Certain Transactions." The issuances described in this Item 15(a) were deemed
exempt from registration under the Securities Act in reliance upon Section
3(a)(9) of the Securities Act.
(b) On April 23, 1996, the Company issued and sold 1,000 shares of its
Redeemable Preferred Stock to Churchill ESOP Capital Partners ("Churchill") for
an aggregate purchase price of $6.0 million. In addition, the Company issued
Churchill that certain Series A Common Stock Purchase Warrant to purchase
1,000,000 shares of Series A Common Stock. Churchill exercised such warrant
immediately after the closing of its purchase of the Redeemable Preferred Stock,
and pursuant thereto the Company issued and sold 1,000,000 shares of Series A
Common Stock to Churchill for an aggregate purchase price of $10,000. The
issuances described in this Item 15 were deemed to be exempt from registration
under the Securities Act, in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving a public offering. In addition,
Churchill represented its intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates issued in
such transactions. Churchill had adequate access to information about the
Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- --------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1* Specimen stock certificate
5.1 Opinion of O'Melveny & Myers LLP
10.1 Form of Directors' and Officers' Indemnity Agreement
10.2+ Exchange Agreement, dated April 23, 1996, among Messrs. John C. Diebel, Steven
G. Murdock, Ronald Ezra and Joseph A. Gordon, Jr. (the "Stockholders") and the
Company
10.3+ Redemption Agreement, dated April 23, 1996, among the Stockholders and the
Company
10.4+ Securities Purchase Agreement, dated April 23, 1996, among Churchill ESOP
Capital Partners, A Minnesota Limited Partnership ("Churchill"), and the Company
</TABLE>
II-2
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- --------------------------------------------------------------------------------
<C> <S>
10.5+ Series A Common Stock Purchase Warrant, dated April 23, 1996, issued to
Churchill
10.6+ Shareholder Agreement, dated April 23, 1996, among the Stockholders, Churchill
and the Company
10.7+ Industrial Lease (Single Tenant; Net; Stand-Alone), dated December 20, 1996,
between The Irvine Company and the Company
10.8+ Indemnity Agreement, dated April 23, 1996, among the Stockholders, the Company
and Churchill
10.9+ Employment Agreement, dated April 23, 1996, between John C. Diebel and the
Company
10.10+ Employment Agreement, dated April 23, 1996, between Steven G. Murdock and the
Company
10.11+ Employment Agreement, dated April 23, 1996, between Ronald Ezra and the Company
10.12+ Employment Agreement, dated April 23, 1996, between Joseph A. Gordon, Jr. and
the Company
10.13 Meade Instruments Corp. Employee Stock Ownership Plan (the "ESOP"), effective as
of March 1, 1996, together with Form of Amendments No. 1 and No. 2 to the ESOP
10.14+ Employee Stock Ownership Trust Agreement, dated as of March 1, 1996, between the
Company and Wells Fargo Bank, N.A.
10.15+ Employee Stock Ownership Plan Loan and Pledge Agreement, dated April 23, 1996,
between the ESOP and the Company
10.16+ Loan and Security Agreement, dated as of April 23, 1996, between the Company and
Fleet Capital Corporation
10.17+ Purchase and Sales Agreement, dated as of December 29, 1994, between the Company
and Weidy Optical Co., Ltd.
10.18+ Standard Industrial/Commercial Single-Tenant Lease-Net, dated as of November 20,
1992, between the Company and Rossmore Enterprises
10.19+ Promissory Note, dated July 8, 1995, between the Company and John C. Diebel
10.20+ Form of Trademark Distribution Agreement for EEC Countries
10.21+ Form of Trademark Distribution Agreement for Non-EEC Countries
10.22+ Incentive Compensation Agreement, dated as of October 4, 1995, between the
Company and Brent Christensen
10.23+ Standard Industrial/Commercial Multi-Tenant Lease-Gross, dated as of January 31,
1996, by and between the Company and CNH, LLC
10.24 Celtic Master Lease, dated as of February 23, 1995, by and between the Company
and Celtic Leasing Corp.
10.25 Stock Purchase Agreement, dated as of April 23, 1996, by and among the ESOP, the
Company, the Diebel Living Trust u/d/t dated January 12, 1995 and John C. Diebel
10.26 Stock Purchase Agreement, dated as of April 23, 1996, by and among the ESOP, the
Company, the Murdock 1986 Trust u/d/t dated October 23, 1986 and Steven G.
Murdock
10.27 Stock Purchase Agreement, dated as of April 23, 1996, by and among the ESOP, the
Company and Ronald Ezra
10.28 Stock Purchase Agreement, dated as of April 23, 1996, by and among the ESOP, the
Company and Joseph A. Gordon, Jr.
10.29 Meade Instruments Corp. 1997 Stock Incentive Plan
</TABLE>
II-3
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- --------------------------------------------------------------------------------
<C> <S>
10.30 Form of Agreement of Merger, by and between the Company and the predecessor of
the Company.
10.31 Preferred Stock Redemption Agreement, dated as of January 31, 1997, by and
between the Company and Churchill
23.1* Consent of Price Waterhouse LLP (contained on page II-)
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
24.1+ Power of Attorney
27.1+ Financial Data Schedule
</TABLE>
- ---------------
* To be provided by amendment.
+ Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are not required, are not
applicable, or the information is included in the Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to the Registration Statement (No. 333-21123) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Irvine, County of Orange, State of California, on the 27th day of February,
1997.
MEADE INSTRUMENTS CORP.
By: /s/ STEVEN G. MURDOCK
-----------------------------------
Steven G. Murdock
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
the Registration Statement (No. 333-21123) has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<C> <S> <C>
* Chairman of the Board and Chief February 27, 1997
- ---------------------------------- Executive Officer (Principal
John C. Diebel Executive Officer)
/s/ STEVEN G. MURDOCK Director, President and Chief February 27, 1997
- ---------------------------------- Operating Officer
Steven G. Murdock
* Vice President -- Finance and February 27, 1997
- ---------------------------------- Chief Financial Officer
Brent W. Christensen (Principal Financial and
Accounting Officer)
* Director and Senior Vice President February 27, 1997
- ---------------------------------- of North American Sales
Joseph A. Gordon, Jr.
*By: /s/ STEVEN G. MURDOCK
-----------------------------
Steven G. Murdock
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- --------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement.......................................
3.1 Certificate of Incorporation of the Company..........................
3.2 Bylaws of the Company................................................
4.1* Specimen stock certificate...........................................
5.1 Opinion of O'Melveny & Myers LLP.....................................
10.1 Form of Directors' and Officers' Indemnity Agreement.................
10.2+ Exchange Agreement, dated April 23, 1996, among Messrs. John C.
Diebel, Steven G. Murdock, Ronald Ezra and Joseph A. Gordon, Jr. (the
"Stockholders") and the Company......................................
10.3+ Redemption Agreement, dated April 23, 1996, among the Stockholders
and the Company......................................................
10.4+ Securities Purchase Agreement, dated April 23, 1996, among Churchill
ESOP Capital Partners, A Minnesota Limited Partnership ("Churchill"),
and the Company......................................................
10.5+ Series A Common Stock Purchase Warrant, dated April 23, 1996, issued
to Churchill.........................................................
10.6+ Shareholder Agreement, dated April 23, 1996, among the Stockholders,
Churchill and the Company............................................
10.7+ Industrial Lease (Single Tenant; Net; Stand-Alone), dated December
20, 1996, between The Irvine Company and the Company.................
10.8+ Indemnity Agreement, dated April 23, 1996, among the Stockholders,
the Company and Churchill............................................
10.9+ Employment Agreement, dated April 23, 1996, between John C. Diebel
and the Company......................................................
10.10+ Employment Agreement, dated April 23, 1996, between Steven G. Murdock
and the Company......................................................
10.11+ Employment Agreement, dated April 23, 1996, between Ronald Ezra and
the Company..........................................................
10.12+ Employment Agreement, dated April 23, 1996, between Joseph A. Gordon,
Jr. and the Company..................................................
10.13 Meade Instruments Corp. Employee Stock Ownership Plan (the "ESOP"),
effective as of March 1, 1996, together with Form of Amendments No. 1
and No. 2 to the ESOP................................................
10.14+ Employee Stock Ownership Trust Agreement, dated as of March 1, 1996,
between the Company and Wells Fargo Bank, N.A. ......................
10.15+ Employee Stock Ownership Plan Loan and Pledge Agreement, dated April
23, 1996, between the ESOP and the Company...........................
10.16+ Loan and Security Agreement, dated as of April 23, 1996, between the
Company and Fleet Capital Corporation................................
10.17+ Purchase and Sales Agreement, dated as of December 29, 1994, between
the Company and Weidy Optical Co., Ltd. .............................
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- --------------------------------------------------------------------- -----------
<C> <S> <C>
10.18 Standard Industrial/Commercial Single-Tenant Lease-Net, dated as of
November 20, 1992, between the Company and Rossmore Enterprises......
10.19+ Promissory Note, dated July 8, 1995, between the Company and John C.
Diebel...............................................................
10.20+ Form of Trademark Distribution Agreement for EEC Countries...........
10.21+ Form of Trademark Distribution Agreement for Non-EEC Countries.......
10.22+ Incentive Compensation Agreement, dated as of October 4, 1995,
between the Company and Brent Christensen............................
10.23+ Standard Industrial/Commercial Multi-Tenant Lease-Gross, dated as of
January 31, 1996, by and between the Company and CNH, LLC............
10.24 Celtic Master Lease, dated as of February 23, 1995, by and between
the Company and Celtic Leasing Corp. ................................
10.25 Stock Purchase Agreement, dated as of April 23, 1996, by and among
the ESOP, the Company, the Diebel Living Trust u/d/t dated January
12, 1995 and John C. Diebel..........................................
10.26 Stock Purchase Agreement, dated as of April 23, 1996, by and among
the ESOP, the Company, the Murdock 1986 Trust u/d/t dated October 23,
1986 and Steven G. Murdock...........................................
10.27 Stock Purchase Agreement, dated as of April 23, 1996, by and among
the ESOP, the Company and Ronald Ezra................................
10.28 Stock Purchase Agreement, dated as of April 23, 1996, by and among
the ESOP, the Company and Joseph A. Gordon, Jr. .....................
10.29 Meade Instruments Corp. 1997 Stock Incentive Plan....................
10.30 Form of Agreement of Merger, by and between the Company and the
predecessor of the Company...........................................
10.31 Preferred Stock Redemption Agreement, dated as of January 31, 1997,
by and between the Company and Churchill
23.1* Consent of Price Waterhouse LLP (contained on page II-) .............
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)...........
24.1+ Power of Attorney....................................................
27.1+ Financial Data Schedule..............................................
</TABLE>
- ---------------
* To be provided by amendment.
+ Previously filed.
<PAGE> 1
EXHIBIT 1.1
_______________________, 1997
3,875,500 SHARES OF COMMON STOCK
MEADE INSTRUMENTS CORP.
UNDERWRITING AGREEMENT
MORGAN KEEGAN & COMPANY, INC.
CROWELL, WEEDON & CO.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Morgan Keegan & Company, Inc.
50 North Front Street, 20th Floor
Memphis, Tennessee 38103
Dear Sirs:
Meade Instruments Corp., a corporation organized and existing under the
laws of Delaware (the "Company"), proposes, subject to the terms and conditions
stated herein, to issue and sell to the several underwriters named in Schedule I
hereto (the "Underwriters") 2,500,000 shares of common stock, par value $.01 per
share, of the Company (the "Common Stock") and the selling stockholder of the
Company named in Schedule II hereto (the "Selling Stockholder") proposes to sell
to the Underwriters an additional 870,000 shares of Common Stock, which
aggregate of 3,370,000 shares of Common Stock are referred to herein as the
"Firm Shares." In addition, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Shares, the Selling Stockholder proposes to
sell to the Underwriters, at the option of the Underwriters, up to an additional
130,000 shares of Common Stock and the Company proposes to sell to the
Underwriters, at the option of the Underwriters, up to an additional 375,500
shares (which aggregate of 505,500 shares are referred to herein as the
"Additional Shares") of Common Stock. The Firm Shares and any Additional Shares
purchased by the Underwriters are referred to herein as the "Shares." The Shares
are more fully described in the Registration Statement referred to below. All
references herein to the Company and representations and warranties relating
thereto give effect to the merger of Meade Instruments Corp., a California
corporation (the "Predecessor"), with and into the Company, as a result of which
the Company shall be the surviving corporation, which merger shall be
consummated prior to the Closing Date (as defined below). Accordingly, all
references to the Company herein shall be deemed to include the Company and its
Predecessor.
<PAGE> 2
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
STOCKHOLDER.
A. The Company represents and warrants to, and agrees with, the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-211123)
with respect to the Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission. The
Company has prepared and has filed or proposes to file prior to the
effective date of such registration statement an amendment or
amendments to such registration statement, which amendment or
amendments have been or will be similarly prepared.
The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, (ii)
a final prospectus in accordance with Rules 430A and 424(b) of the
Rules and Regulations, or (iii) a term sheet as described in and in
accordance with Rules 434 and 424(b) of the Rules and Regulations (a
"Term Sheet"). As filed, such amendment and form of final prospectus,
or such final prospectus, or such Term Sheet, shall include all Rule
430A Information (as defined below) and, except to the extent that you
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the date and time that
this Underwriting Agreement (this "Agreement") was executed and
delivered by the parties hereto, or, to the extent not completed at
such date and time, shall contain only such specific additional
information and other changes (beyond that contained in the latest
Preliminary Prospectus) as the Company shall have previously advised
you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall
mean such registration statement at the time such registration
statement becomes or became effective including all financial schedules
and exhibits thereto and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended;
provided, however, that such term shall also include all Rule 430A
Information deemed to be included in such registration statement at the
time such registration statement becomes or became effective as
provided by Rule 430A of the Rules and Regulations. The term
"Preliminary Prospectus" shall mean any preliminary prospectus referred
to in the preceding paragraph and any preliminary prospectus included
in the Registration Statement at the time it becomes or became
effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean either (i) the
2
<PAGE> 3
prospectus relating to the Shares in the form in which it is first
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, (ii) if the Company relies on Rule 434 of the Rules and
Regulations, the Term Sheet relating to the Shares that is first filed
pursuant to Rule 424(b)(7) of the Rules and Regulations, together with
the Preliminary Prospectus identified therein that such Term Sheet
supplements, or, (iii) if a Term Sheet is not used and no filing
pursuant to Rule 424(b) of the Rules and Regulations is required, shall
mean the form of final prospectus included in the Registration
Statement at the time such registration statement becomes or became
effective. The term "Rule 430A Information" means information with
respect to the Shares and the offering thereof permitted to be omitted
from the Registration Statement when it becomes or became effective
pursuant to Rule 430A of the Rules and Regulations. Any reference to
the "date" of a Prospectus that includes a Term Sheet shall mean the
date of the Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements
of the Act and the Rules and Regulations and, as of its date, has not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at
the time the Registration Statement becomes or became effective, and at
all times subsequent thereto up to and including each Closing Date
hereinafter mentioned, the Registration Statement and the Prospectus,
and any amendments or supplements thereto, will contain or contained
all material statements and information required to be included therein
by the Act and the Rules and Regulations and will in all material
respects conform, or did in such respects conform, to the requirements
of the Act and the Rules and Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
included or will include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, no representation or warranty contained in this subsection
1.A(b) shall be applicable to information contained in or omitted from
any Preliminary Prospectus, the Registration Statement, the Prospectus
or any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter, directly or through the Representatives, reciting in
writing that it is specifically for use in the preparation thereof.
(c) The Company does not own or control, directly or indirectly,
any corporation, association or other entity. The Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of Delaware, with full power and authority (corporate
and other) to own and lease its properties and conduct its business as
described in the Prospectus;
3
<PAGE> 4
the Company is in possession of and operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders
material to the conduct of its business, all of which are valid and in
full force and effect; the Company is duly qualified to do business and
in good standing as a foreign corporation in each jurisdiction in which
the ownership or leasing of properties or the conduct of its business
requires such qualification, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect upon the
Company; and no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
(d) The Company has authorized and outstanding capital stock as
set forth under the heading "Capitalization" in the Prospectus; the
issued and outstanding shares of Common Stock have been duly authorized
and the outstanding shares of Common Stock have been validly issued,
are fully paid and nonassessable, have been duly approved for quotation
on the Nasdaq National Market; the issued and outstanding shares of
Common Stock and the outstanding options described in the Prospectus
have been issued in compliance with all federal and state securities
laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and
conform in all material respects to any description thereof contained
in the Prospectus. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company, and the related
notes thereto, included in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the
options or other rights granted and exercised thereunder, set forth in
the Prospectus, accurately and fairly presents the information required
to be shown with respect to such plans, arrangements, options and
rights.
(e) The Shares to be sold by the Company have been duly authorized
and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in
the Prospectus. The Shares to be sold by the Selling Stockholder have
been duly authorized, validly issued, fully paid and nonassessable and
conform to the description thereof contained in the Prospectus. No
preemptive rights or other rights to subscribe for or purchase exist
with respect to the issuance and sale of the Shares pursuant to this
Agreement. No holder of any securities of the Company has any right
that has not been waived to require the Company to register the sale of
any shares of Common Stock or other securities of the Company owned by
such holder under the Act in the public offering
4
<PAGE> 5
contemplated by this Agreement. No further approval or authority of the
stockholders, the Board of Directors of the Company or any other party
will be required for the transfer and sale of the Firm Shares or the
Additional Shares to be sold as contemplated herein except for
compliance with the Act, the Blue Sky laws applicable to the public
offering of the Shares by the several Underwriters and the clearance of
such offering with the National Association of Securities Dealers, Inc.
(the "NASD").
(f) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except (i) as such
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to rights
and remedies of creditors, and (ii) to the extent that rights to
indemnity or contribution hereunder may be limited by federal or state
securities laws or the public policy underlying such laws. The making
and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not violate any provisions
of the certificate of incorporation or bylaws, as amended or restated,
or other organizational documents, of the Company, and will not
conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a
default under, result in the acceleration of any indebtedness under or
performance required by, result in any right of termination of,
increase any amounts payable under, decrease any amounts receivable
under, or, to the Company's best knowledge, adversely change any other
rights pursuant to, any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the
Company is a party or by which the Company or any of its properties may
be bound or affected, or any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body, or arbitrator
(domestic or foreign) applicable to the Company or any of its
properties. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement or
the consummation of the transactions contemplated by this Agreement
except for compliance with the Act, the Blue Sky laws applicable to the
public offering of the Shares by the several Underwriters and the
clearance of such offering with the NASD.
(g) Price Waterhouse LLP, who has expressed its opinion with
respect to the financial statements and schedules of the Company, filed
with the Commission as a part of the Registration Statement and
included in the Prospectus and in the Registration Statement, are
independent accountants as required by the Act and the Rules and
Regulations.
5
<PAGE> 6
(h) The financial statements and schedules, if any, of the
Company, and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly the financial positions of
the Company as of the respective dates of such financial statements and
schedules, and the results of operations and cash flows of the Company,
respectively, for the respective periods covered thereby. Such
statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis as certified by the independent accountants named in
subsection 1.A(g). No other financial statements, schedules or
information are required by the Act or the Rules and Regulations to be
included in the Registration Statement. The financial data set forth in
the Prospectus under the captions "Capitalization" and "Selected
Financial Data" fairly present the information set forth therein on the
basis stated in the Registration Statement. The pro forma financial
statements and other pro forma financial information included in the
Registration Statement, Prospectus or Preliminary Prospectus comply in
all material respects with the applicable requirements of Rule 11-02 of
Regulation S-X of the Commission and the pro forma adjustments have
been properly applied to the historical amounts in the compilation of
such statements and the assumptions used in the preparation thereof
are, in the opinion of the Company, reasonable.
(i) Except as disclosed in the Prospectus, and except as to
violations, breaches, defaults and events of default that individually
or in the aggregate would not have a material adverse effect on the
Company, (i) the Company is not in violation or default of any
provision of its certificate of incorporation or bylaws, as amended or
restated, or other organizational documents, or is in breach of or
default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which the Company is a party
or by which the Company or any of its properties are bound; and (ii)
there does not exist any state of facts that constitutes an event of
default on the part of the Company as defined in such documents or
which, with notice or lapse of time or both, would constitute such an
event of default.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
that have not been described or filed as required. The descriptions of
the contracts in the Prospectus are accurate in all material respects
and fairly present the information required by the Act and/or the Rules
and Regulations to be presented in Form S-1; except as disclosed in the
Prospectus, the contracts so described in the Prospectus are in full
force and effect on the date hereof, and the Company or, to the best of
the Company's knowledge, any other party is not in breach of or default
under any of such contracts other than any such breach or default as
would not, individually or in the aggregate, prevent or
6
<PAGE> 7
adversely affect the transactions contemplated by this Agreement or
result in a material adverse change in the condition (financial or
other), properties, business, results of operations or prospects of the
Company.
(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of
the Company's knowledge, threatened to which the Company is or may be a
party or of which property owned or leased by the Company is or may be
the subject or related to environmental or discrimination matters, that
might, individually or in the aggregate, prevent or adversely affect
the transactions contemplated by this Agreement or result in a material
adverse change in the condition (financial or other), properties,
business, results of operations or prospects of the Company; and no
labor disturbance by the employees of the Company exists or is imminent
that might be expected to affect adversely such condition, properties,
business, results of operations or prospects. The Company is not a
party or subject to the provisions of any injunction, judgment, decree
or order of any court, regulatory body, administrative agency or other
governmental body that could be expected to result in a material
adverse change in the condition (financial or other), properties,
business, results of operations or prospects of the Company.
(l) The Company has good and marketable title to all the
properties and assets reflected as owned by it in the financial
statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such financial statements (or
elsewhere in the Prospectus), or (ii) those which are not material in
amount and do not adversely affect the use made and proposed to be made
of such property by the Company. The Company holds its leased
properties under valid and binding leases, with such exceptions as are
not materially significant in relation to the business of the Company.
Except as disclosed in the Prospectus, the Company owns or leases all
such properties as are necessary to its operations as now conducted or
as proposed to be conducted.
(m) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as described in
or specifically contemplated by the Prospectus: (i) the Company has not
incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or
other transaction that is not in the ordinary course of business or
that could result in a material reduction in the future earnings of the
Company; (ii) the Company has not sustained any loss or interference
with its business or properties from fire, flood, windstorm, accident
or other calamity, whether or not covered by insurance, that materially
and adversely affects the condition (financial or other), business,
results of operations or prospects of the Company; (iii) the Company
has not paid or
7
<PAGE> 8
declared any dividends or other distributions with respect to its
capital stock and the Company is not in default in the payment of
principal of or interest on any outstanding debt obligations; (iv)
there has not been any change in the capital stock (other than upon the
sale of the Shares hereunder and upon the exercise of options and other
rights described in the Registration Statement) or increase in
indebtedness material to the Company (other than in the ordinary course
of business); and (v) there has not been any material adverse change in
the condition (financial or other), business, properties, results of
operations or prospects of the Company.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company has sufficient trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted; the expiration
of any trademarks, trade names, patent rights, mask works, copyrights,
licenses, approvals or governmental authorizations would not have a
material adverse effect on the condition (financial or other),
business, results of operations or prospects of the Company; except as
disclosed in or specifically contemplated by the Prospectus, the
Company has no knowledge of any material infringement by it or its
customers, with respect to their use of the Company's trademarks, trade
name rights, patent rights, mask works, copyrights, licenses, trade
secrets or other similar rights of others, and there is no claim being
made against the Company or its customers with respect to their use of
the Company's products, which claims are regarding trademarks, trade
names, patents, mask works, copyrights, licenses, trade secrets or
other infringements which could have a material adverse effect on the
condition (financial or other), business, results of operations or
prospects of the Company.
(o) The Company has not been advised, and has no reason to
believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it
is conducting business, including, without limitation, all applicable
local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not materially adversely
affect the condition (financial or other), business, results of
operations or prospects of the Company.
(p) The Company has filed all necessary federal, state and foreign
income and franchise tax returns and has paid all taxes shown as due
thereon; and the Company has no knowledge of any tax deficiency which
has been or might be asserted or threatened against the Company which
could materially and adversely affect the condition (financial or
other), business, results of operations or prospects of the Company.
(q) The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
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<PAGE> 9
(r) The Company has not distributed and will not distribute prior
to the Closing Date any offering material in connection with the
offering and sale of the Shares other than the Prospectus, the
Registration Statement and the other materials permitted by the Act.
(s) The Company maintains insurance of the types, with insurers,
and in the amounts as are reasonable and customary in the business in
which it is engaged, including, but not limited to, insurance covering
real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force
and effect.
(t) The Company has not at any time during the last five years (i)
made any unlawful contribution to any candidate for foreign or domestic
office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any foreign or federal or state
governmental officer or official or other person charged with similar
public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(v) Other than the Underwriters acting in their capacity as such,
no person is or will be owed any finders fee or commission or similar
payment in connection with the transactions contemplated by this
Agreement.
B. The Selling Stockholder represents and warrants to, and agrees
with, the Underwriters that:
(a) The Selling Stockholder has, and on the Closing Date and the
Additional Closing Date hereinafter mentioned will have, good and valid
title to the Firm Shares and/or the Additional Shares, as applicable,
proposed to be sold by the Selling Stockholder hereunder on such
Closing Date and the Additional Closing Date and full right, power and
authority to enter into this Agreement and to sell, assign, transfer
and deliver such Shares hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, security interests,
restrictions and claims whatsoever; and upon delivery of and payment
for such Shares hereunder, the Underwriters will acquire good and
marketable title thereto, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting trusts or
other defects of title whatsoever.
(b) The Selling Stockholder has executed and delivered a Custody
Agreement and Power of Attorney (hereinafter referred to as the
"Stockholder
9
<PAGE> 10
Agreement") and in connection herewith has deposited in custody, under
the Stockholder Agreement, with the agent named therein (the "Agent")
as custodian, certificates in negotiable form for the Shares to be sold
hereunder by the Selling Stockholder, for the purpose of further
delivery pursuant to this Agreement. The Selling Stockholder agrees
that the Shares to be sold by the Selling Stockholder on deposit with
the Agent are subject to the interests of the Company and the
Underwriters, that the arrangements made for such custody are to that
extent irrevocable, and that the obligations of the Selling Stockholder
hereunder shall not be terminated, except as provided in this Agreement
or in the Stockholder Agreement, by any act of the Selling Stockholder,
by operation of law, by the death or incapacity of the Selling
Stockholder or by the occurrence of any other event. If the Selling
Stockholder should die or become incapacitated, or if any other event
should occur, before the delivery of the Shares hereunder, the
documents evidencing Shares then on deposit with the Agent shall be
delivered by the Agent in accordance with the terms and conditions of
this Agreement as if such death, incapacity or other event had not
occurred, regardless of whether or not the Agent shall have received
notice thereof. This Agreement and the Stockholder Agreement have been
duly executed and delivered by or on behalf of the Selling Stockholder
and the form of the Stockholder Agreement has been delivered to you.
(c) The Selling Stockholder has full legal right, power and
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed
and delivered by the Selling Stockholder and constitutes a valid and
binding obligation of the Selling Stockholder, enforceable against it
in accordance with its terms, except (i) as such enforceability may be
limited by the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to rights and remedies of
creditors, and (ii) to the extent that rights to indemnity or
contribution hereunder may be limited by federal or state securities
laws or the public policy underlying such laws. The making and
performance of this Agreement and the Stockholder Agreement and the
consummation of the transactions herein contemplated and by the
Stockholder Agreement will not result in a breach of any provisions of
the certificate of incorporation or bylaws, as amended or restated, or
other organizational documents, of the Selling Stockholder, and will
not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a
default under, result in the acceleration of any indebtedness under or
performance required by, result in any right of termination of,
increase any amounts payable under, decrease any amounts receivable
under, or, to the Selling Stockholder's best knowledge, adversely
change any other rights pursuant to, any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument
to which the Selling Stockholder is a party or by which the Selling
Stockholder or any of its properties may be bound or affected, or any
statute or any authorization, judgment, decree, order, rule or
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<PAGE> 11
regulation of any court or any regulatory body, administrative agency
or other governmental body, or arbitrator (domestic or foreign)
applicable to the Selling Stockholder or any of its properties.
(d) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted
or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(e) Each Preliminary Prospectus and the Prospectus, insofar as it
has related to the Selling Stockholder, has conformed in all material
respects to the requirements of the Act and the Rules and Regulations
and has not included any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made;
and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, as it relates to the Selling
Stockholder, included or will include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(f) The Selling Stockholder is not aware that any of the
representations and warranties set forth in Section 1.A above is untrue
or inaccurate in any material respect.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the several Underwriters and the
Underwriters, severally and not jointly, agree to purchase from the Company, at
a price per share of $_________, the number of Firm Shares set forth opposite
the respective names of the Underwriters on Schedule I hereto and (ii) the
Selling Stockholder agrees to sell to the several Underwriters and the
Underwriters, severally and not jointly, agree to purchase from the Selling
Stockholder, at the same price per share as specified in clause (i) hereof, the
number of Firm Shares set forth opposite the respective names of the
Underwriters in Schedule I hereto.
(b) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the office of Morgan Keegan &
Company, Inc., 50 North Front Street, 20th Floor, Memphis, Tennessee 38103 or
such other location as may be mutually acceptable. Such delivery and payment
shall be made at 10:00 A.M. on the third business day (unless such time and date
postponed in accordance with the provisions of Section 9 hereof) following the
date of the effectiveness of the Registration Statement (or, if the Company has
elected to rely upon Rule 430A of the Regulations, the third business day after
the determination of the initial public offering
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<PAGE> 12
price of the Shares), or such other time not later than ten business days after
such date as shall be agreed upon by you, the Selling Stockholder and the
Company (such time and date of payment and delivery being herein called the
"Closing Date"). Delivery of the certificates for the Firm Shares shall be made
to you for the respective accounts of the several Underwriters against payment
by the several Underwriters through the Representatives of the purchase price
for the Firm Shares to the order of the Company and to the Selling Stockholder
by certified or official bank checks payable in New York Clearing House Funds,
or by such other means as to which the parties may agree.
The Company shall cause certificates for the Firm Shares to be
prepared in registered form, in such name or names and in such authorized
denominations as you may request in writing at least two full business days
prior to the Closing Date. The Company and the Selling Stockholder will permit
you to examine and package such certificates for delivery at least one full
business day prior to the Closing Date.
(c) In addition, (i) the Selling Stockholder hereby grants to the
several Underwriters the option to purchase up to an aggregate of 130,000
Additional Shares (as set forth opposite the respective names of the
Underwriters on Schedule I hereto), at the same purchase price per share to be
paid by the several Underwriters to the Company and the Selling Stockholder for
the Firm Shares as set forth in this Section 2 and (ii) the Company hereby
grants to the several Underwriters the option to purchase up to an aggregate of
375,500 Additional Shares (as set forth opposite the respective names of the
Underwriters on Schedule I hereto), at the same purchase price per share to be
paid by the several Underwriters to the Company and the Selling Stockholder for
the Firm Shares as set forth in this Section 2, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the several Underwriters. The
Underwriters shall not exercise the option granted by the Company unless and
until the Underwriters have first exercised in full the option granted by the
Selling Stockholder. Subject to the preceding sentence, the options may be
exercised at any time, in whole or in part, on or before the thirtieth day
following the date of the Prospectus, by written notice by you to the Company
and the Selling Stockholder. Such notice shall set forth the aggregate number of
Additional Shares as to which the option(s) is(are) being exercised and the date
and time, as reasonably determined by you, when the Additional Shares are to be
delivered (such date and time being herein sometimes referred to as the
"Additional Closing Date"); PROVIDED, HOWEVER, that the Additional Closing Date
shall not be earlier than the Closing Date or earlier than the second full
business day after the date on which the option(s) shall have been exercised nor
later than the third full business day after the date on which the option(s)
shall have been exercised (unless such time and date are postponed in accordance
with the provisions of Section 9 hereof). The Company shall cause certificates
for the Additional Shares to be prepared in registered form in such name or
names and in such authorized denominations as you may request in writing at
least two full business days prior to the Additional Closing Date. The Company
and the Selling Stockholder will permit you to examine and package such
certificates for delivery at least one full business day prior to the Additional
Closing Date.
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<PAGE> 13
Payment for the Additional Shares shall be made by certified or
official bank check or checks, in New York Clearing House or similar next day
funds, or by such other means as to which the parties may agree, payable to the
order of the Company and the Selling Stockholder at the offices of Morgan Keegan
& Company, Inc., 50 North Front Street, 20th Floor, Memphis, Tennessee 38103, or
such other location as may be mutually acceptable, upon delivery of the
certificates for the Additional Shares to you for the respective accounts of the
Underwriters.
(d) Each of the Company and the Selling Stockholder acknowledge
that the wire transfer by or on behalf of the Underwriters of the purchase price
for any Shares does not constitute closing of a purchase and sale of the Shares.
Only execution and delivery of a receipt for the Shares by the Underwriters
indicates completion of the closing of a purchase of the Shares from the Company
and/or the Selling Stockholder. Furthermore, in the event that the Underwriters
wire funds to the Company and/or the Selling Stockholder prior to the completion
of the closing of a purchase of Shares, each of the Company and/or the Selling
Stockholder hereby acknowledges that until the Underwriters execute and deliver
a receipt for the Shares, by telecopy or otherwise, the Company and/or the
Selling Stockholder will not be entitled to the wired funds and shall return the
wired funds to the Underwriters as soon as practicable (by wire transfer of
same-day funds) upon demand. In the event that the closing of a purchase of
Shares is not completed and the wire funds are not returned by the Company
and/or the Selling Stockholder to the Underwriters on the same day wired funds
were received by the Company and/or the Selling Stockholder, each of the Company
and/or the Selling Stockholder agrees to pay to the Underwriters in respect of
each day the wired funds are not returned by it, in same-day funds, interest on
the amount of such wired funds in an amount representing the Underwriters' cost
of financing, as reasonably determined by the Underwriters.
3. OFFERING. Upon your authorization of the release of the Firm
Shares, the Underwriters propose to offer the Shares for sale to the public upon
the terms set forth in the Prospectus.
4. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDER.
A. The Company covenants and agrees with the several Underwriters
that:
(a) If the Registration Statement has not yet been declared
effective at the time of execution of this Agreement, the Company will use its
best efforts to cause the Registration Statement and any amendments thereto to
become effective as promptly as possible, and if Rule 430A is used or the filing
of the Prospectus or any Term Sheet that constitutes a part thereof is otherwise
required under Rules 424(b) and/or 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rules 424(b) and/or
434 within the prescribed time period and will provide evidence satisfactory to
you of such timely filing.
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<PAGE> 14
The Company will notify you immediately (and, if requested by you,
will confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of the initiation, or the threatening, of
any proceedings therefor, (v) of the receipt of any comments from the
Commission, and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time, the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Prospectus (including the prospectus
required to be filed pursuant to Rule 424(b) or the term sheet required to be
filed pursuant to Rule 434) that differs from the prospectus or term sheet on
file at the time of the effectiveness of the Registration Statement before or
after the effective date of the Registration Statement to which you shall
reasonably object in writing after being timely furnished in advance a copy
thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred as a result
of which the Prospectus as then amended or supplemented includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it shall be
necessary at any time to amend or supplement the Prospectus or Registration
Statement to comply with the Act or the Regulations, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement (in form and substance satisfactory to you) which will correct such
statement or omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will, without charge, promptly deliver to you a
signed copy of the Registration Statement, including exhibits and all amendments
thereto, or a conformed copy of the registration statement originally filed with
respect to the Shares, including exhibits and all amendments thereto, certified
by the Secretary of the Company to be true and complete copies thereof as filed
with the Commission by electronic transmission. The Company will promptly
deliver to each of the several Underwriters such number of copies of any
Preliminary Prospectus, the Prospectus, the Registration Statement, and all
amendments of and supplements to such documents, if any, as you may reasonably
request.
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<PAGE> 15
(d) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as required for the
distribution thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not otherwise required to be so qualified, or to execute a general
consent for service of process in any jurisdiction in which it is not otherwise
required to execute such a consent.
(e) The Company will make generally available (within the meaning
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations) to its
security holders and to you as soon as practicable, but not later than 90 days
after the end of its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement occurs, an earnings statement (in
form complying with the provisions of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration Statement.
(f) During the period of 270 days from the date of the
Prospectus, the Company will not, without the prior written consent of Morgan
Keegan & Company, Inc., on behalf of the Representatives, issue, sell, offer or
agree to sell, encumber, pledge, grant any option for the sale of, or otherwise
dispose (or announce any offer, sale, grant of an option to purchase or other
disposition) of, directly or indirectly, any Common Stock (or any securities
convertible into, exercisable for or exchangeable for Common Stock), and the
Company will obtain the undertaking of each of its officers and directors, and
such of its other stockholders as have been heretofore designated by you not to
engage in any of the aforementioned transactions on their own behalf, other than
(i) the sale by the Company and the Selling Stockholder of Shares hereunder and
(ii) the Company's issuance of Common Stock upon the exercise of presently
outstanding stock options.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to the Representatives copies
of (i) all reports to its stockholders; and (ii) all reports, financial
statements and proxy or information statements filed by the Company with the
Commission or any national securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to remain qualified,
and to cause the Shares to be included, for quotation on the Nasdaq National
Market.
(j) The Company will file with the Commission such reports on
Form SR as may be required pursuant to Rule 463 of the Rules and Regulations.
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<PAGE> 16
B. The Selling Stockholder covenants and agrees with the several
Underwriters that, during the period of 180 days from the date of the
Prospectus, it will not, without the prior written consent of Morgan Keegan &
Company, Inc., on behalf of the Representatives, sell, offer or agree to sell,
encumber, pledge, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock).
5. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
and subject to the obligations of the Selling Stockholder set forth below, the
Company hereby agrees to pay all costs and expenses incident to the performance
of the obligations of the Company and the Selling Stockholder hereunder,
including those in connection with (i) preparing, printing, duplicating, filing
and distributing the Registration Statement, as originally filed, and all
amendments thereof (including all exhibits thereto), any Preliminary Prospectus,
the Prospectus and any amendments thereof or supplements thereto (including,
without limitation, fees and expenses of the Company's accountants and counsel),
the underwriting documents (including this Agreement, the Agreement Among
Underwriters and the Selling Agreement) (excluding the legal fees incurred by
the Underwriters in connection with drafting and negotiating the underwriting
documents) and all other documents related to the public offering of the Shares
(including those supplied to the Underwriters in quantities as hereinabove
stated), (ii) the issuance, transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
qualification of the Shares under state or foreign securities or Blue Sky laws,
including the costs of printing and mailing a preliminary and final "Blue Sky
Memorandum" and the fees of counsel for the Underwriters and such counsel's
disbursements in relation thereto, (iv) quotation of the Shares on the Nasdaq
National Market, (v) filing fees of the Commission and the NASD, (vi) the cost
of printing certificates representing the Shares and (vii) the cost and charges
of any transfer agent or registrar. Pursuant to that certain letter agreement
dated as of January 31, 1997 between the Company and the Selling Stockholder,
the Selling Stockholder agreed to reimburse the Company upon the completion of
the offering for the Company's expenses related to the offering as follows: (x)
if the Selling Stockholder receives proceeds from the sale of 500,000 of its
Shares sold in the offering at a price per share of not less than $8.00 and an
underwriting discount of not more than seven percent (7%), the Selling
Stockholder shall pay the Company on the Closing Date up to $200,000 of the
expenses incurred by the Company to conduct the offering (including by not
limited to printing expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses, accounting expenses, Commission registration fees
and Nasdaq National Market listing fees) (the "Expenses"); (y) if the Selling
Stockholder receives proceeds from the sale of 1,000,000 of its Shares sold in
the offering at a price per share of not less than $8.00 and an underwriting
discount of not more than seven percent (7%), the Selling Stockholder shall pay
the Company on the Closing Date up to $400,000 of the Expenses; and (z) if the
Selling Stockholder receives proceeds from the sale of more
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<PAGE> 17
than 500,000 of its Shares but less than 1,000,000 of its Shares sold in the
offering at a price per share of not less than $8.00 and an underwriting
discount of not more than seven percent (7%), the Selling Stockholder shall pay
the Company on the Closing Date an amount of the Expenses equal to the product
of (i) $400,000 multiplied by (ii) the number of Shares sold in the offering by
the Selling Stockholder divided by 1,000,000. To the extent, if at all, that the
Selling Stockholder engages legal counsel or any other advisors or persons to
represent, counsel or advise it in connection with this offering, the fees and
expenses of such counsel shall be borne by the Selling Stockholder.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Firm Shares and the
Additional Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholder herein
contained, as of the date hereof and as of the Closing Date (for purposes of
this Section 6, "Closing Date" shall refer to the Closing Date for the Firm
Shares and any Additional Closing Date, if different, for the Additional
Shares), to the absence from any certificates, opinions, written statements or
letters furnished to you or to Gibson, Dunn & Crutcher LLP ("Underwriters'
Counsel") pursuant to this Section 6 of any material misstatement or omission,
to the performance by the Company and the Selling Stockholder of their
respective obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York time, on the date of this Agreement, or at such
later time and date as shall have been consented to in writing by you; if the
Company shall have elected to rely upon Rule 430A of the Regulations, the
Prospectus or any Term Sheet that constitutes a part thereof shall have been
filed with the Commission in a timely fashion in accordance with Section 4.A(a)
hereof; and, at or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof shall have been issued and no proceedings therefor shall have been
initiated or threatened by the Commission.
(b) At the Closing Date, you shall have received the opinion of
O'Melveny & Myers LLP, counsel for the Company, dated the Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(1) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, is duly qualified to do business as a foreign corporation
and is in good standing in all other jurisdictions where the ownership
or leasing of properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and
has full corporate power and authority to own its
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<PAGE> 18
properties and conduct its business as described in the Registration
Statement, and has no subsidiaries;
(2) The authorized, issued and outstanding capital stock of
the Company is as set forth under the caption "Capitalization" in the
Prospectus; all outstanding shares of Common Stock (including the Firm
Shares to be sold by the Selling Stockholder and the Additional Shares)
have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of or subject to any
preemptive rights and conform to the description thereof contained in
the Prospectus; without limiting the foregoing, there are no preemptive
or other rights to subscribe for or purchase any of the Shares to be
sold by the Company hereunder;
(3) The certificates evidencing the Shares to be delivered
hereunder are in due and proper form under Delaware law, and when duly
countersigned by the Company's transfer agent and registrar, and
delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of this
Agreement, the Shares represented thereby will be duly authorized and
validly issued, fully paid and nonassessable, will not have been issued
in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities and will conform in all material
respects to the description thereof contained in the Prospectus;
(4) Except as disclosed in or specifically contemplated by
the Prospectus, there are no outstanding options, warrants or other
rights calling for the issuance of, or plans or arrangements to issue,
any shares of capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company;
(5) The statements under the captions "Risk
Factors--Dependence on Key Manufacturer and --Anti-Takeover Effects of
Certain Certificate of Incorporation and Bylaw Provisions and Delaware
Law; Possible Issuance of Preferred Stock," "Management's Discussion
and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Business--Properties and
--Litigation," "Management--Benefit Plans" and --Employment
Agreements," "Certain Transactions," "Description of Capital Stock" and
"Shares Eligible for Future Sale," at the time the Registration
Statement became effective, fairly summarize, in all material respects,
the matters described therein insofar as such statements constitute a
summary of documents referred to therein or matters of law;
(6)(a) The Registration Statement has become effective under
the Act, and no stop order suspending the effectiveness of the
Registration Statement or preventing the use of the Prospectus has been
issued and no proceedings for that purpose have been instituted or are
pending or, to such
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<PAGE> 19
counsel's knowledge, contemplated by the Commission; any required
filing of the Prospectus and any supplement thereto pursuant to Rule
424(b) of the Rules and Regulations has been made in the manner and
within the time period required by such Rule 424(b);
(6)(b) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial statements
and schedules and other statistical information included therein as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations;
(6)(c) There are no franchises, leases, contracts, agreements
or documents of a character required to be disclosed in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement that are not disclosed or filed, as required;
and
(6)(d) There are no legal or governmental actions, suits or
proceedings pending or, to such counsel's knowledge, threatened against
the Company which are required to be described in the Prospectus which
are not described as required;
(7) The Company has full corporate power and authority to
enter into this Agreement and to sell and deliver the Firm Shares to be
sold by it to the several Underwriters; this Agreement has been duly
and validly authorized by all necessary corporate action by the
Company, has been duly and validly executed and delivered by and on
behalf of the Company; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body is
required for the execution and delivery of this Agreement by the
Company or the consummation of the transactions contemplated by this
Agreement except such as have been obtained and are in full force and
effect under the Act and such as may be required under applicable Blue
Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters and the clearance of such offering with the NASD;
(8) The execution and performance of this Agreement and
the consummation of the transactions herein contemplated will not
conflict with, result in the acceleration of any indebtedness under or
performance required by, result in any right of termination of,
increase any amounts payable under, decrease any amounts receivable
under, result in the breach or violation of, or constitute, either by
itself or upon notice or the passage of time or both, a default under,
result in the acceleration of any indebtedness under or performance
required by, result in any right of termination of, increase any
amounts payable under, decrease any amounts receivable under, or, to
the Company's best knowledge, adversely change any other rights
pursuant to, any
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agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument known to such counsel to which
the Company is a party or by which the Company or any of its properties
may be bound or affected, or any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body, or
arbitrator (domestic or foreign) applicable to the Company or any of
its properties or violate any of the provisions of the certificate of
incorporation or bylaws, or other organizational documents, of the
Company or violate any statute, judgment, decree, order, rule or
regulation of any court or governmental body having jurisdiction over
the Company or any of its property;
(9) The Company is not in violation of its certificate of
incorporation or bylaws, as amended or restated, or other
organizational documents, or in breach of or default with respect to
any provision of any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument known to such
counsel to which the Company is a party or by which it or any of its
properties may be bound or affected, except where such default would
not materially and adversely affect the Company; and, to the knowledge
of such counsel, the Company is in compliance with all laws, rules,
regulations, judgments, decrees, orders and statutes of any court or
jurisdiction to which they are subject, except where noncompliance
would not materially and adversely affect the Company;
(10) No holders of securities of the Company have rights that
have not been waived or satisfied to the registration of shares of
Common Stock or other securities because of the filing of the
Registration Statement by the Company or the offering contemplated
hereby;
(11) Except as set forth in the Registration Statement and
the Prospectus, such counsel has no knowledge that any patent,
trademark or copyright held by others is infringed by the activities of
the Company described in the Registration Statement or the Prospectus
or by the manufacture, use or sale of any product, device, system or
instrument made by the Company; and
(12) Except as set forth in the Registration Statement and
the Prospectus, such counsel has no knowledge of any actual or
threatened material action, suit, claim or proceeding relating to
patents, patent rights or licenses, trademarks or trademark rights,
copyrights, collaborative research, licenses or royalty arrangements or
agreements or trade secrets, know-how or proprietary techniques or
technology, including, processes and substances, owned by or affecting
the business operations of the Company that are pending or threatened
against the Company or any of its officers or directors.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company,
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<PAGE> 21
representatives of the independent public accountants for the Company and the
Underwriters at which the contents of the Prospectus and related matters were
discussed and, no facts have come to the attention of such counsel which would
lead such counsel to believe that either the Registration Statement at the time
it became effective (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable), or any amendment thereof made prior to the Closing Date as of the
date of such amendment, contained an untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus as of its date
(or any amendment thereof or supplement thereto made prior to the Closing Date
as of the date of such amendment or supplement) and as of the Closing Date
contained or contains an untrue statement of a material fact or omitted or omits
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief or opinion with respect to the financial statements and schedules and
other statistical information and financial data included or incorporated by
reference therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company and its subsidiaries, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and, in their opinion, you
and they are justified in relying thereon.
(c) At the Closing Date, you shall have received the opinion of
______________________, counsel for the Selling Stockholder, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(1) This Agreement and the Stockholder Agreement have been
duly authorized, executed and delivered by or on behalf of the Selling
Stockholder; the Agent has been duly and validly authorized to act as
the custodian of the Shares to be sold by such Selling Stockholder; the
performance of this Agreement and the Stockholder Agreement, and the
consummation of the transactions herein and therein contemplated by the
Selling Stockholder will not conflict with, result in the breach or
violation of, or constitute, either by itself
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<PAGE> 22
or upon notice or the passage of time or both, a default under, result
in the acceleration of any indebtedness under or performance required
by, result in any right of termination of, increase any amounts payable
under, decrease any amounts receivable under, or, to the Selling
Stockholder's best knowledge, adversely change any other rights
pursuant to, any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder or any of
its properties may be bound or affected, or any statute or any
authorization, judgment, decree, order, rule or regulation of any court
or any regulatory body, administrative agency or other governmental
body, or arbitrator (domestic or foreign) applicable to the Selling
Stockholder or any of its properties; and to such counsel's knowledge
no approval, authorization, order or consent of any court, regulatory
body, administrative agency or other governmental body is required for
the execution and delivery of this Agreement and the Stockholder
Agreements or the consummation by the Selling Stockholder of the
transactions contemplated herein or therein except such as have been
obtained and are in full force and effect under the Act and such as may
be required under the rules of the NASD and applicable Blue Sky laws,
as to which no opinion is expressed;
(2) The Selling Stockholder has full right, power and
authority to enter into this Agreement and the Stockholder Agreement
and to sell, transfer and deliver the Shares to be sold on such Closing
Date by the Selling Stockholder hereunder and good and marketable title
to such Shares so sold, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting trusts, or
other defects of title whatsoever, has been transferred to the
Underwriters (whom counsel may assume to be bona fide purchasers) who
have purchased such Shares hereunder;
(3) The Stockholder Agreement executed and delivered by the
Selling Stockholder is legally valid and binding;
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that no facts have come to the attention of
such counsel which would lead such counsel to believe that (i) the sections
under the caption "Principal and Selling Stockholders" in the Registration
Statement, in so far as it relates to the Selling Stockholder, at the time it
became effective under the Act (including the information deemed to be part of
the Registration Statement at the time of effectiveness pursuant to Rule
430A(b), if applicable), or any amendment thereof made prior to the Closing Date
as of the date of such amendment, contained an untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus
as of its date (or any amendment thereof or supplement thereto made prior to the
Closing Date as of the date of such amendment or supplement) and as of the
Closing Date contained or contains an untrue statement of a material fact or
omitted or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
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<PAGE> 23
circumstances under which they were made, not misleading (it being understood
that such counsel need express no belief or opinion with respect to the
financial statements and schedules and other statistical information and
financial data included or incorporated by reference therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the Selling Stockholder,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel. The opinion of such counsel for the Selling
Stockholder shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in their opinion, you and they are justified
in relying thereon.
(d) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be satisfactory in
form and substance to you and to Underwriters' Counsel, and the Underwriters
shall have received from said Underwriters' Counsel a favorable opinion, dated
as of the Closing Date, with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related matters as you
may reasonably require, and the Company and the Selling Stockholder shall have
furnished to Underwriters' Counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(e) At the Closing Date, you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date to the effect that (i) the condition set forth in subsection
(a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of
the Closing Date, the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date, the obligations of
the Company to be performed hereunder on or prior thereto have been duly
performed and (iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding,
and there has not been any material adverse change, or any development involving
a material adverse change, in the business, prospects, properties, operations,
condition (financial or otherwise), or results of operations of the Company,
except in each case as described in or contemplated by the Prospectus.
(f) At the Closing Date, you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Selling
Stockholder, dated
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<PAGE> 24
the Closing Date to the effect that (i) as of the date hereof and as of the
Closing Date, the representations and warranties of the Selling Stockholder set
forth in Section 1 hereof are accurate and (ii) as of the Closing Date, the
obligations of the Selling Stockholder to be performed hereunder on or prior
thereto have been duly performed.
(g) At the time this Agreement is executed and at the Closing
Date, you shall have received a letter, from Price Waterhouse LLP, independent
public accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance satisfactory to you, to the effect that: (i) they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the Rules and Regulations and stating that the answer to Item 10 of
the Registration Statement is correct insofar as it relates to them; (ii) in
their opinion, the financial statements and schedules and the pro forma
financial statements and schedules of the Company included in the Registration
Statement and the Prospectus and covered by their opinion therein comply as to
form in all material respects with the applicable accounting requirements of the
Act and the Rules and Regulations, including, but not limited to, the applicable
accounting requirements of Rule 11-02 of Regulation S-X; (iii) on the basis of
procedures consisting of a reading of the latest available unaudited interim
financial statements of the Company, a reading of the minutes of meetings and
consents of the stockholders and boards of directors of the Company and the
committees of such boards subsequent to February 29, 1996, inquiries of officers
and other employees of the Company and its subsidiaries who have responsibility
for financial and accounting matters of the Company and its subsidiaries with
respect to transactions and events subsequent to February 29, 1996 and other
specified procedures and inquiries to a date not more than five days prior to
the date of such letter, nothing has come to their attention that would cause
them to believe that: (A) the unaudited financial statements and schedules of
the Company presented in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and, if applicable, the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the applicable published rules and
regulations of the Commission thereunder or that such unaudited financial
statements are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements included in the Registration Statement and the
Prospectus; (B) with respect to the period subsequent to November 30, 1996 there
were, as of the date of the most recent available monthly financial statements
of the Company and its subsidiaries, if any, and as of a specified date not more
than five days prior to the date of such letter, any changes in the capital
stock or long-term indebtedness of the Company or any decrease in the net
current assets or stockholders' equity of the Company, in each case as compared
with the amounts shown in the most recent balance sheet presented in the
Registration Statement and the Prospectus, except for changes or decreases which
the Registration Statement and the Prospectus disclose have occurred or may
occur or which are set forth in such letter or (C) that during the period from
November 30, 1996 to the date of the most recent available monthly financial
statements of the
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<PAGE> 25
Company and its subsidiaries, if any, and to a specified date not more than five
days prior to the date of such letter, there was any decrease, as compared with
the corresponding period in the prior fiscal year, in total revenues, or total
or per share net income, except for decreases which the Registration Statement
and the Prospectus disclose have occurred or may occur or which are set forth in
such letter; and (iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, and other financial information
pertaining to the Company set forth in the Registration Statement and the
Prospectus, which have been specified by you prior to the date of this
Agreement, to the extent that such amounts, numbers, percentages, and
information may be derived from the general accounting and financial records of
the Company and its subsidiaries or from schedules furnished by the Company, and
excluding any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries, and
other appropriate procedures specified by you set forth in such letter, and
found them to be in agreement.
(h) Prior to the Closing Date, the Company and the Selling
Stockholder shall have furnished to you such further information, certificates
and documents as you may reasonably request including, without limitation, the
Stockholder Agreement.
(i) You shall have received from each person who is a director or
officer of the Company, the Selling Stockholder and such additional stockholders
as have been heretofore designated by you, an agreement to the effect that such
person will not, directly or indirectly, without the prior written consent of
Morgan Keegan & Company, Inc., on behalf of the Representatives, offer, sell,
offer or agree to sell, encumber, pledge, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of an option to purchase
or other disposition) of any shares of Common Stock (or any securities
convertible into, exercisable for or exchangeable or exercisable for shares of
Common Stock) for a period of 270 days after the date of the Prospectus, except
for the Selling Stockholder, in which case the period shall be 180 days after
the date of the Prospectus.
(j) At the Closing Date, the Shares shall have been approved for
quotation on the Nasdaq National Market.
(k) There shall not have occurred any change, or any development
involving a prospective change, in the condition (financial or other),
properties, business, results of operations or prospects of the Company from
that set forth in the Registration Statement, that, in your reasonable judgment,
is material and adverse and that make it, in your reasonable judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this
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<PAGE> 26
Section 6 shall not be in all material respects reasonably satisfactory in form
and substance to you and to Underwriters' Counsel, all obligations of the
Underwriters hereunder may be canceled by you at, or at any time prior to, the
Closing Date and the obligations of the Underwriters to purchase the Additional
Shares may be canceled by you at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company and the
Selling Stockholder in writing, or by telephone, telex or telegraph, confirmed
in writing.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and disbursements and any
and all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon:
(1) any untrue statement or alleged untrue statement made by the
Company in Section 2(A) of this Agreement)
(2) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto executed by the
Company or based upon written information furnished by or on behalf of
the Company or the Principal Stockholders filed in any jurisdiction in
order to qualify the Shares under the securities or blue sky laws
thereof or filed with the Commission or any securities association or
securities exchange (each, an "Application");
(3) the omission or alleged omission to state in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application,
a material fact required to be stated therein or necessary to make the
statements therein no misleading; or
(4) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Shares, including without
limitation, slides, videos, films and tape recordings;
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<PAGE> 27
PROVIDED, HOWEVER, that the Company will not be liable in any such
case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through you expressly for use
therein; and PROVIDED, FURTHER, that this indemnity agreement with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such losses, liabilities, claims, damages or
expenses purchased Shares, or any person controlling such Underwriter, if a copy
of the Prospectus (as then amended or supplemented if the Company shall have
furnished any such amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if such is required by law, at
or prior to the written confirmation of the sale of such Shares to such person
and if the Prospectus (as so amended or supplemented) would have corrected the
defect giving rise to such loss, liability, claim, damage or expense. This
indemnity will be in addition to any liability which the Company may otherwise
have, including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, the Selling Stockholder, each of the
directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, liabilities, claims, damages and
expenses whatsoever as incurred (including but not limited to attorneys' fees
and disbursements and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), jointly or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Shares, as originally filed or any amendment thereof, or any related
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein; PROVIDED,
HOWEVER, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have, including under this
Agreement. The Company and the Selling
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<PAGE> 28
Stockholder acknowledge that the statements set forth in the last paragraph of
the cover page and in the paragraphs under the caption "Underwriting" in the
Prospectus constitute the only information furnished in writing by or on behalf
of any Underwriter expressly for use in the registration statement relating to
the Shares as originally filed or in any amendment thereof, any related
Preliminary Prospectus or the Prospectus or in any amendment thereof or
supplement thereto, as the case may be.
(c) The Selling Stockholder agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and disbursements and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related Preliminary Prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein relating to the Selling Stockholder in reliance upon and in
conformity with written information relating to the Selling Stockholder
furnished to the Company by the Selling Stockholder expressly for use therein;
PROVIDED, HOWEVER, that the liability of the Selling Stockholder hereunder shall
in no event exceed the net proceeds received by the Selling Stockholder from the
sale of Common Stock pursuant to this Agreement. This indemnity will be in
addition to any liability which the Selling Stockholder may otherwise have,
including under this Agreement.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7, except to the extent
prejudiced thereby). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to
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<PAGE> 29
assume the defense thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
take charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, (y) an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld, and (z) no
indemnifying party, in the defense of any such claim or action, shall consent to
the entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release for all liability with respect to such claim or
action, without the written consent of such indemnified party.
8. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Sections 7(a), (b) or
(c) hereof is for any reason held to be unavailable from the Company, any
Underwriter or the Selling Stockholder who would otherwise be liable as an
indemnifying party under Section 7 of this Agreement, as the case may be, or is
insufficient to hold harmless a party indemnified thereunder, the Company, the
Selling Stockholder and such Underwriter shall contribute to the aggregate
losses, claims, damages, liabilities and expenses of the nature contemplated by
such indemnification provisions (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, claims, damages, liabilities and expenses suffered by the
Company, the Selling Stockholder or such Underwriter, any contribution received
by the Company, the Selling Stockholder or such Underwriter from persons other
than (i) the Underwriters or the Selling Stockholder in the case of the Company,
(ii) the Company or the Selling Stockholder in the case of the Underwriters and
(iii) the Company or any Underwriter, in the case of the Selling Stockholder,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to that the Company, the Selling
Stockholder and such Underwriter may be subject, in such proportions as is
appropriate to reflect the relative benefits received by the Company, the
Selling Stockholder and such Underwriter from the offering of the Shares or, if
such allocation is not permitted by applicable law or indemnification is not
29
<PAGE> 30
available as a result of the indemnifying party not having received notice as
provided in Section 7 hereof, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company, the Selling Stockholder and such Underwriter in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, the Selling Stockholder and such
Underwriter shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company, (y) the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Selling Stockholder and (z) the underwriting discounts
and commissions received by such Underwriter, respectively, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company, the Selling Stockholder and such Underwriter shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholder or such
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Stockholder and such Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter (except as may be provided
in the Agreement Among Underwriters entered into by and among the several
Underwriters) be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder, and (ii) in no case shall the Selling Stockholder be liable or
responsible for any amount in excess of the net proceeds received by the Selling
Stockholder from the sale of Common Stock pursuant to this Agreement, and (iii)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding the provisions of
this Section 8, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 8, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter,
each person, if any, who controls the Selling Stockholder within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same
rights to contribution as the Selling Stockholder, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration
30
<PAGE> 31
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (iii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 8, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
withheld.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, such Shares to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to the respective
proportions which the numbers of Firm Shares set forth opposite their respective
names on Schedule I hereto bear to the aggregate number of Firm Shares set forth
opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within five calendar days after
such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 9, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Selling Stockholder and the Company to sell the Additional Shares shall
thereupon terminate, without liability on the part of the Company, the Selling
Stockholder or the several Underwriters with respect thereto (except in each
case as provided in Sections 5, 7(a), (b), (c) and 8 hereof), but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters of its or
their liability, if any, to the other several Underwriters, the Company and the
Selling Stockholder for damages occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the
31
<PAGE> 32
right to postpone the Closing Date or Additional Closing Date, as the case may
be, for a period, not exceeding five business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents and arrangements, and the Company agrees to
file promptly any amendment or supplement to the Registration Statement or the
Prospectus that, in the opinion of the Underwriters and Underwriters' Counsel,
may thereby be made necessary or advisable. The term "Underwriter" as used in
this Agreement shall include any party substituted under this Section 9 with
like effect as if it had originally been a party to this Agreement with respect
to such Firm Shares and Additional Shares.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations
and warranties, covenants and agreements of the Underwriters, the Company and
the Selling Stockholder contained in this Agreement, including the
representations and warranties contained in Section 1, the agreements contained
in Section 5, the indemnity agreements contained in Section 7 and the
contribution agreements contained in Section 8, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Company, any of its officers and directors or the Selling Stockholder or any
controlling person thereof, and shall survive delivery of and payment for the
Shares to and by the several Underwriters. The representations contained in
Section 1 and the agreements contained in Sections 5, 7 and 8 hereof shall
survive the termination of this Agreement, including termination pursuant to
Sections 9 or 11 hereof.
11. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective, upon the later of (i)
when you and the Company shall have received notification of the effectiveness
of the Registration Statement or (ii) the execution of this Agreement. If either
the initial public offering price or the purchase price per Share has not been
agreed upon prior to 5:00 P.M., New York time, on the fifth full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the Underwriters
except as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you and the Selling
Stockholder or by you notifying the Company and the Selling Stockholder.
Notwithstanding the foregoing, the provisions of this Section 11 and of Sections
1, 5, 7 and 8 hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any
time prior to the Closing Date or the obligations of the Underwriters to
purchase the Additional Shares at any time prior to the Additional Closing Date,
as the case may be, if (i) any domestic or international event or act or
occurrence has materially disrupted, or in your reasonable opinion will in the
immediate future materially disrupt, the market for the Company's securities or
the securities markets in general; or (ii) if
32
<PAGE> 33
trading on the New York or American Stock Exchanges shall have been suspended or
materially limited, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York or American Stock Exchanges by the New York or American Stock
Exchanges or by order of the Commission or any other governmental authority
having jurisdiction; or (iii) if a banking moratorium has been declared by a
state or federal authority, or if a moratorium in foreign exchange trading by
major international banks or persons has been declared, or if any new
restriction materially adversely affecting the distribution of the Firm Shares
or the Additional Shares, as the case may be, shall have become effective; or
(iv) if there shall have occurred any outbreak or escalation of major
hostilities or any change in the financial markets or any calamity or crises
that, in your sole judgment, is material and adverse; or (v) if there shall have
been such a change in the market for securities in general or in political,
financial or economic conditions, in the case of each of clauses (i) through (v)
if, in your sole judgment, any such event, individually or in the aggregate with
any other such event, makes it inadvisable to proceed with the offering, sale
and delivery of the Firm Shares or the Additional Shares, as the case may be, on
the terms contemplated by the Prospectus.
(c) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b) hereof), or if the sale of
the Shares provided for herein is not consummated because any condition to the
obligations of the several Underwriters set forth herein is not satisfied or
because of any refusal, inability or failure on the part of the Company or the
Selling Stockholder to perform any agreement herein or comply with any provision
hereof, the Company will, subject to demand by you, reimburse the Underwriters
for all out-of-pocket expenses (including the fees and expenses of their
counsel), incurred by the several Underwriters in connection herewith.
12. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, telecopied or telexed or telegraphed
and confirmed in writing, to such Underwriter c/o Morgan Keegan & Company, Inc.,
50 North Front Street, 20th Floor, Memphis, Tennessee, Attention: _____________;
if sent to the Company or the Selling Stockholder, shall be mailed, delivered,
or telegraphed and confirmed in writing to the Company, 16542 Millikan Avenue,
Irvine, California 92714, Attention: Mr. John C. Diebel. All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; three business days after being deposited in the mail,
postage prepaid, if mailed; one business day after being sent by next-day
courier; when answered back, if telexed; and when receipt acknowledged, if
telecopied.
13. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Selling Stockholder and the
Company and the controlling persons, directors, officers, employees and agents
referred to in
33
<PAGE> 34
Sections 7 and 8, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Shares from any of the Underwriters.
14. WAIVER OF TRIAL BY JURY. EACH OF THE COMPANY, THE UNDERWRITERS AND
THE SELLING STOCKHOLDER HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATED TO THIS AGREEMENT
(INCLUDING THE STOCKHOLDER AGREEMENT) OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THE FOREGOING OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
JUDGE AND NOT BEFORE A JURY.
15. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE, BUT WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE COMPANY, THE UNDERWRITERS
AND THE SELLING STOCKHOLDER HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF TENNESSEE, IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, AGREES THAT ALL CLAIMS IN
RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT IN ANY OTHER COURT OR TO CONTEST THE JURISDICTION (IN
REM OR IN PERSONAM) OR POWER OR DECISION OF SUCH COURT OVER OR PERTAINING TO THE
PARTY OR WITH RESPECT TO THE SUBJECT MATTER IN ANY OTHER COURT WITHIN OR WITHOUT
THE UNITED STATES OTHER THAN APPROPRIATE APPELLATE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE
OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY, OR OTHER
SECURITY THAT MIGHT BE REQUIRED OF THE OTHER PARTIES HERETO WITH RESPECT
THERETO. EACH OF THE PARTIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY DO
SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT.
34
<PAGE> 35
If the foregoing correctly sets forth the understanding among you, the
Company and the Selling Stockholder, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
MEADE INSTRUMENTS CORP.
By: ______________________________
John C. Diebel
Chairman of the Board and Chief
Executive Officer
CHURCHILL ESOP CAPITAL
PARTNERS, A MINNESOTA LIMITED
PARTNERSHIP
By: ______________________________
Name:
Title:
35
<PAGE> 36
Accepted as of the date first above written
MORGAN KEEGAN & COMPANY, INC.
CROWELL, WEEDON & CO.
BY: MORGAN KEEGAN & COMPANY, INC.
By: ___________________________________
__________________________,
__________________________
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
36
<PAGE> 37
SCHEDULE I
Number of Shares to Be Purchased
<TABLE>
<CAPTION>
MAXIMUM NO. OF MAXIMUM NO. OF
ADDITIONAL ADDITIONAL SHARES
FROM THE SHARES TO BE TO BE PURCHASED
FROM THE SELLING PURCHASED FROM FROM THE SELLING
NAME OF UNDERWRITER COMPANY STOCKHOLDER THE COMPANY STOCKHOLDER
- ------------------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
MORGAN KEEGAN & COMPANY, INC.
CROWELL, WEEDON & CO.
TOTAL 2,500,000 870,000 375,500 130,000
========= ======= ======= =======
</TABLE>
A-1
<PAGE> 38
SCHEDULE II
Selling Stockholder
<TABLE>
<CAPTION>
MAXIMUM NO. OF
ADDITIONAL
NUMBER OF FIRM SHARES TO BE
NAME OF SELLING STOCKHOLDER SHARES TO BE SOLD PURCHASED
<S> <C> <C>
CHURCHILL ESOP CAPITAL PARTNERS, A
MINNESOTA LIMITED PARTNERSHIP 870,000 130,000
TOTAL 870,000 130,000
======= =======
</TABLE>
A-2
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
MEADE MERGER CORP.
ARTICLE I
NAME
The name of the Corporation is Meade Merger Corp.
ARTICLE II
REGISTERED AGENT AND OFFICE
The name and address of the registered agent of the
Corporation in the State of Delaware is:
The Corporation Trust Company
1209 Orange Street
Wilmington, New Castle County, Delaware 19801
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
The Corporation is authorized to issue two classes
of capital stock, designated respectively "Common Stock" and "Preferred Stock".
The total number of shares of stock which the Corporation shall have authority
to issue is Twenty-One Million (21,000,000) shares, $.01 par value per share,
consisting of Twenty Million (20,000,000) shares of Common Stock and One Million
(1,000,000) shares of Preferred Stock, $.01 par value per share. The Common
Stock shall be divided into two series. The first series shall be designated
"Series A Common Stock" and shall consist of Fifteen Million (15,000,000)
shares. The second series shall be designated "Series B Common Stock" and shall
consist of Five Million (5,000,000) shares. Upon the occurrence of a Conversion
Event (as defined below), all shares of Series A Common Stock shall thereafter
be denominated as Common Stock.
Section 4.1: Common Stock. The rights,
preferences, privileges and restrictions of each share of Series A Common Stock
and each share of Series B Common Stock shall be equal and identical in all
respects except as follows:
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<PAGE> 2
(a) Dividends.
(i) The annual rate of dividends payable on each
share of Series B Common Stock shall be $0.5133 per share. All
dividends will be paid in cash, when and as declared by the Board
of Directors in any fiscal year of the Corporation, out of any
assets legally available therefor, prior to any payment of
dividends to the Series A Common Stock. The right to such
dividends on Series B Common Stock shall be cumulative, and shall
accrue to the holder of such shares by reason of the failure of
the Board of Directors to pay such dividends thereon for such
fiscal year.
(ii) After all cumulative dividends on the
Series B Common Stock provided for in Section 4.1(a)(i) have been
paid, the Board of Directors may, but is not required to, elect
to declare in any fiscal year of the Corporation additional
dividends on each share of Series B Common Stock of up to $0.15
per share, out of any assets legally available therefor prior to
any payments of dividends on the Series A Common Stock. The
dividends authorized in this Section 4.1(a)(ii) shall not be
cumulative and no rights shall accrue to the holders of the
Series B Common Stock by reason of the fact that such dividends
have not been paid or declared and set apart for payment in any
prior year or years.
(iii) After all dividends on the Series B Common
Stock provided in Section 4.1(a)(i) have been paid, and all
additional dividends, if any, declared on the Series B Common
Stock under Section 4.1(a)(ii) have been paid, if the Board of
Directors shall elect to make further distributions of dividends,
such dividends shall be distributed in equal amounts per share to
the holders of all Series A Common Stock and Series B Common
Stock. The dividends authorized in this Paragraph (iii) shall not
be cumulative and no rights shall accrue to the holders of either
Series A Common Stock or Series B Common Stock by reason of the
fact that such dividends have not been paid or declared and set
apart for payment in any prior year or years.
(b) Liquidation Preference. Subject to the liquidation
preference of any outstanding shares of any class of Preferred
Stock, in the event of any liquidation, dissolution, or winding
up of the Corporation, either voluntary or involuntary, the
assets and funds of the Corporation available for distribution to
the outstanding shareholders of the Corporation shall be
distributed as follows:
2
<PAGE> 3
(i) The holders of Series B Common Stock shall
be entitled to receive, prior and in preference to any
distribution of any assets or funds of the Corporation to the
holders of Series A Common Stock, an amount equal to $7.3333 for
each share of Series B Common Stock then outstanding less the
amount, per share of Series B Common Stock then outstanding,
equal to (A) all principal payments made by the Corporation's
Employee Stock Ownership Plan to the Corporation after the date
of the filing of these Amended and Restated Articles of
Incorporation divided by (B) the number of shares of Series B
Common Stock then outstanding. If the assets and funds of the
Corporation available for distribution to the holders of Series B
Common Stock shall be insufficient to permit the payment of the
full preferential amount set forth in this Section 4.1(b)(i),
then all of the assets and funds of the Corporation available for
distribution shall be distributed to the holders of Series B
Common Stock pro rata on the basis of the respective amounts
which would be payable in respect of the shares of Series B
Common Stock held by them upon such distribution if all amounts
payable on or with respect to said shares by reason of this
Section 4.1(b)(i) were paid in full.
(ii) After distribution of the amounts set forth
in Section 4.1(b)(i) to the holders of the Series B Common Stock,
the holders of the Series A Common Stock shall be entitled to
receive, prior and in preference to any distribution of any
assets or funds of the Corporation to the holders of the Series B
Common Stock as provided in Section 4.1(b)(iii) below, an amount
per share equal to the preference per share of Series B Common
Stock paid under Section 4.1(b)(i). If the assets and funds of
the Corporation available for distribution to the holders of the
Series A Common Stock shall be insufficient to permit the full
payment of the preferential amount set forth in this Section
4.1(b)(ii), all of the assets and funds available for
distribution to the holders of Series A Common Stock, after
payment to the holders of Series B Common Stock of the
preferential payments set forth in Section 4.1(b)(i), shall be
distributed to the holders of Series A Common Stock pro rata
based on their respective share holdings.
(iii) After distribution of the amounts set
forth in Sections 4.1(b)(i) and (ii), the remaining assets and
funds of the Corporation available for distribution, if any, to
the shareholders of the Corporation shall be distributed to the
holders of shares
3
<PAGE> 4
of Series A Common Stock and Series B Common Stock pro rata on
the basis of their respective share holdings.
(c) Conversion Events. Upon the occurrence of a
Conversion Event (as defined below), each share of Series B
Common Stock then outstanding shall, without any further action
on the part of the holder thereof or the Corporation,
automatically be converted into one share of Series A Common
Stock. For purposes of this Article IV a "Conversion Event" shall
mean either of the following: (i) the repayment to the
Corporation of all principal and interest owed to the Corporation
by the Corporation's Employee Stock Ownership Plan and Trust; or
(ii) the closing of an underwritten public offering of the
Corporation's Series A Common Stock pursuant to the Securities
Act of 1933, as amended, covering the offer and sale of Series A
Common Stock for an aggregate consideration of at least Ten
Million Dollars ($10,000,000). The Corporation shall promptly
give written notice of the Conversion Event to all holders of
Series B Common Stock following the occurrence of a Conversion
Event. Upon the conversion of each share of Series B Common Stock
into one share of Series A Common Stock, all shares of Series A
Common Stock shall thereafter, without any further action on the
part of the holder thereof or the Corporation, be denominated as
Common Stock of the Corporation.
Section 4.2: Preferred Stock. Shares of Preferred
Stock of the Corporation may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to issue shares of Preferred Stock
in such series and to fix from time to time before issuance the number of shares
to be included in any series and the designation, relative powers, preferences
and relative, participating, optional or other rights and qualifications,
limitations or restrictions of all shares of such series. Without limiting the
generality of the foregoing, as to each such series of Preferred Stock, the
Board of Directors is authorized to fix or alter the dividend rights, dividend
rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices, the
liquidation preferences, rights to subscribe for or purchase any securities of
the Corporation or any other corporation, and the number of shares constituting
such series, or any or all of them, all as shall be determined from time to time
by the Board of Directors and shall be stated in a resolution or resolutions
providing for the issuance of such Preferred Stock. The Board of Directors may
increase or decrease the number of shares in any such series after the issue of
shares of that series, but not below the number of shares of such series then
outstanding. Should the number of shares of any series be
4
<PAGE> 5
so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
ARTICLE V
NUMBER OF DIRECTORS
The number of directors constituting the Board of
Directors shall be fixed, initially, by the Bylaws of the Corporation;
thereafter the number of directors shall be fixed or altered exclusively by
resolutions adopted by the Board of Directors. No decrease in the number of
directors shall shorten the term of any incumbent director.
ARTICLE VI
ELECTION OF DIRECTORS
Section 6.1: Classified Board. The directors who
shall first take office after the filing of the Certificate of Incorporation of
this Corporation (the "Incorporation Date") shall serve until the first annual
meeting of stockholders at which directors are elected following the
Incorporation Date (the "First Annual Meeting"). Effective at the First Annual
Meeting, the Board of Directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. Each director shall serve for a term ending on the date of
the third annual meeting of stockholders next following the annual meeting at
which such director was elected, except that directors initially designated as
Class I directors shall serve for a term ending on the date of the 1998 annual
meeting; directors initially designated as Class II directors shall serve for a
term ending on the date of the 1999 annual meeting; and directors initially
designated as Class III directors shall serve for a term ending on the date of
the 2000 annual meeting. Notwithstanding the foregoing, each director shall hold
office until such director's successor shall have been duly elected and
qualified or until such director's earlier death, resignation or removal. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes as to maintain the number of directors in each class as nearly
equal as possible, but in no event will a decrease in the number of directors
shorten the term of any incumbent director. Vacancies on the Board of Directors
resulting from death, resignation, removal or otherwise and newly created
directorships resulting from any increase in the number of directors may be
filled solely by a majority of the directors then in office (although less than
a quorum) or by a sole remaining director, and each director so
5
<PAGE> 6
elected shall hold office for a term that shall coincide with the remaining term
of the class to which such director shall have been elected.
Section 6.2: No Cumulative Voting. There shall be
no cumulative voting in the election of directors.
Section 6.3: Removal of Directors. No director may
be removed from office by the stockholders except for cause with the affirmative
vote of the holders of not less than a majority of the total voting power of all
outstanding securities of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class.
Section 6.4: Directors Elected by Preferred Stock.
Whenever the holders of one or more classes or series of Preferred Stock shall
have the right, voting separately as a class or series, to elect directors, the
nomination, election, term of office, filling of vacancies, removal and other
features of such directorships shall not be governed by this Article VI unless
otherwise provided for in the certificate of designation for such classes or
series.
ARTICLE VII
MANAGEMENT OF BUSINESS AFFAIRS
The following provisions set forth certain requirements
relating to the management of the business and the conduct of the affairs of
the Corporation and further define the powers of the Corporation and its
directors and stockholders:
Section 7.1: Amendment of Bylaws. The Board of
Directors shall have the power to adopt, amend or repeal the Bylaws of the
Corporation. The stockholders may adopt, amend or repeal the Bylaws only with
the affirmative vote of the holders of not less than 66 2/3% of the total voting
power of all outstanding securities of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
Section 7.2: Written Ballot. Elections of directors
need not be by written ballot unless the Bylaws of the Corporation so provide.
Section 7.3: Stockholder Meeting Requirement. Whenever,
and so long as, the Corporation is subject to the reporting requirements of
Section 12 or 15(d) of the Securities Exchange Act of 1934 (or successor law),
any action required or permitted to be taken at any annual or special meeting
of stockholders may be taken only upon the vote of stockholders at
6
<PAGE> 7
an annual or special meeting duly noticed and called in accordance with the
Delaware General Corporation Law, and may not be taken by written consent of
stockholders without a meeting.
Section 7.4: Call of Special Meetings. Special
meetings of stockholders may be called by the Board of Directors, the Chairman
of the Board of Directors or the Chief Executive Officer of the Corporation and
may not be called by any other person. Notwithstanding the foregoing, whenever
holders of one or more classes or series of Preferred Stock shall have the
right, voting separately as a class or series, to elect directors, such holders
may call special meetings of such holders for the purpose of electing such
directors pursuant to the certificate of designation for such classes or series.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or may hereafter be amended, a
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. No amendment, modification or repeal of this Article VIII, nor the
adoption of any provision of this Certificate of Incorporation or the Bylaws of
the Corporation, nor, to the fullest extent permitted by the Delaware General
Corporation Law, any amendment, modification, or repeal of law shall eliminate
or reduce the effect of this Article VIII or adversely affect any right or
protection then existing hereunder in respect of any acts or omissions occurring
prior to such amendment, modification, repeal or adoption.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
Section 9.1: Indemnification.
(a) Indemnification of Officers and Directors.
Each person (and the estate, heirs, executors or administrators of such person)
who was or is a party to, or is threatened to be made a party to, or is involved
in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative or otherwise, by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by the Delaware General Corporation Law against
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<PAGE> 8
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding. The right to indemnification conferred in this
Article IX shall also include the right to be paid by the Corporation the
expenses incurred in connection with any such proceeding in advance of its final
disposition to the fullest extent permitted by the Delaware General Corporation
Law. The right to indemnification conferred in this Article IX shall be deemed a
contract right.
(b) Indemnification of Other Agents. The
Corporation may, by action of its Board of Directors, provide indemnification to
such of the employees and agents of the Corporation and such other persons
serving at the request of the Corporation as employees or agents of another
corporation, partnership, joint venture, trust or other enterprise to such
extent and to such effect as is permitted by the Delaware General Corporation
Law and the Board of Directors shall determine to be appropriate.
Section 9.2: Insurance. The Corporation shall have
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss incurred by such person in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the Delaware
General Corporation Law.
Section 9.3: Non-Exclusivity. The rights and
authority conferred in this Article IX shall not be exclusive of any other right
which any person may otherwise have or hereafter acquire. Any agreement for
indemnification of or advancement of expenses to any person may provide rights
of indemnification or advancement of expenses which are broader or otherwise
different from these.
Section 9.4: No Amendment. No amendment, modification
or repeal of this Article IX, nor the adoption of any provision of this
Certificate of Incorporation or the Bylaws of the Corporation, nor, to the
fullest extent permitted by the Delaware General Corporation Law, any amendment,
modification, or repeal of law shall eliminate or reduce the effect of this
Article IX or adversely affect any right or protection then existing hereunder
in respect of any acts or omissions occurring prior to such amendment,
modification, repeal or adoption.
8
<PAGE> 9
ARTICLE X
INCORPORATOR
The name and mailing address of the incorporator of
the Corporation are as follows:
Susan Nelson
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660
I, the undersigned, being the incorporator herein-
before named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware and the acts amendatory thereof and
supplemental thereto, do make and file this Certificate of Incorporation, hereby
declaring and certifying that the facts herein stated are true this 4th day of
February, 1997.
/s/ SUSAN NELSON
---------------------------------
Susan Nelson
9
<PAGE> 10
CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES A PREFERRED STOCK
OF
MEADE MERGER CORP.,
A DELAWARE CORPORATION
John C. Diebel and Steven G. Murdock hereby certify that:
1. They are the duly elected and acting Chairman and
Secretary, respectively, of Meade Merger Corp., a Delaware corporation (the
"Corporation").
2. Pursuant to authority given by the Corporation's
Certificate of Incorporation, the Board of Directors of the Corporation has duly
adopted the following recitals and resolutions:
WHEREAS, the Board of Directors of the Corporation is
authorized to fix and determine the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, to fix the number of shares constituting any such series and to determine
the designation thereof, or any of them; and
WHEREAS, the Corporation has not issued any shares of such
Preferred Stock and the Board of Directors of the Corporation desires, pursuant
to its authority as aforesaid, to determine and fix the rights, preferences,
privileges and restrictions relating to the initial series of said Preferred
Stock and the number of shares constituting and the designation of said series;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
hereby fixes and determines the designation of, the number of shares
constituting and the rights, preferences, privileges and restrictions relating
to, said initial series of Preferred Stock as follows:
1.1 Designations. The initial series of Preferred Stock shall
be designated "Series A Preferred Stock".
2.1 Number of Shares. The number of shares constituting the
Series A Preferred Stock shall be 1,000.
3.1 Dividends.
(a) The annual rate of dividends payable on each
share of Series A Preferred Stock shall be fourteen percent (14%) per annum of
the Liquidation Value (as defined below) thereof and
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<PAGE> 11
dividends on Series A Preferred Stock shall begin to accrue and be cumulative
from April 23, 1996. All dividends on Series A Preferred Stock shall be paid in
cash out of funds legally available therefor when, as and if, declared at the
sole discretion of the Corporation's Board of Directors. Dividends on all shares
of Series A Preferred Stock shall accrue on a daily basis whether or not there
shall be funds legally available therefor and whether or not dividends are
declared and paid on the Series A Preferred Stock. As permitted, if the Board of
Directors elects not to pay dividends on the Series A Preferred Stock, then
dividends shall cumulate on the Series A Preferred Stock as provided in Section
3.1(b).
(b) In the event that (A) on the last business day of any
February, May, August or November after April 23, 1996 the Corporation does
not, as is permitted under Section 3.1(a), declare and pay the dividends in cash
which have cumulated to that date, or (B) the redemption payment obligation
provided in Section 3.4 hereof is not paid when due, then thereafter additional
dividends shall accrue on the Series A Preferred Stock in respect of all such
dividend payments or redemption payment obligations at the rate of fourteen
percent (14%) per annum, compounded quarterly, with the amount of such
additional dividends added to accrued dividend payments or redemption payment
obligations until all such dividend payments or redemption payment obligations
shall have been paid in full.
3.2 Preference on Liquidation.
(a) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation (each such event being hereafter referred
to as a "Liquidation"), the holders of Series A Preferred Stock will be
entitled to be paid, before any payment shall be made to the holders of Junior
Stock (as defined below), an amount in cash equal to six thousand dollars
($6,000) for each share of Series A Preferred Stock, subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting the Series A Preferred Stock (as so adjusted,
the "Liquidation Value"), plus all then accrued and unpaid dividends to the date
of payment, and the holders of Series A Preferred Stock will not be entitled to
any further payment in such circumstance. If, upon any Liquidation, the
Corporation's assets to be distributed among the holders of the Series A
Preferred Stock are insufficient to permit payment to such holders of the full
amount to which they are entitled hereunder, then the entire assets to be
distributed will be distributed ratably among such holders based upon the then
aggregate Liquidation Value (plus all then accrued but unpaid dividends) of the
shares of Series A Preferred Stock held by each such holder.
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<PAGE> 12
(b) After the payment of all preferential amounts required to
be paid to the holders of Series A Preferred Stock and any other class or series
of stock of the Corporation ranking on Liquidation on a parity with the Series A
Preferred Stock, the holders of Junior Stock then outstanding shall be entitled
to receive the remaining assets of the Corporation available for distribution to
its stockholders.
(c) As used in this Section 3.2, the term "Junior Stock" shall
mean and include Series B Common Stock, Series A Common Stock and any other
capital stock of the Corporation of any class or of any series of any class
which is junior to Series A Preferred Stock as to distributions upon
dissolution, liquidation, winding up or redemption.
3.3 Approval Rights. This Corporation shall not, without the
affirmative vote of the holders (acting as a class) of at least a majority of
the Series A Preferred Stock at the time outstanding given in person or by proxy
at any annual meeting, or at such special meeting called for that purpose, or,
if permitted by law, in writing without a meeting:
(a) authorize or issue any shares of capital stock
having priority over the Series A Preferred Stock or ranking on a
parity therewith as to the payment or distribution of assets upon the
liquidation or dissolution, voluntary or involuntary, of this
Corporation;
(b) increase the authorized number of shares of the
Series A Preferred Stock; and
(c) add any provision to the Corporation's
Certificate of Incorporation, or adopt any resolution, that would alter
or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Preferred Stock.
3.4 Redemption. Subject to the terms of that certain
Securities Purchase Agreement (the "Purchase Agreement") between the Corporation
(the assignee of the rights and obligations thereunder of Meade Instruments
Corp., a California corporation) and Churchill ESOP Capital Partners, A
Minnesota Limited Partnership (a copy of which is on file with the Corporation's
Secretary and is available on request), the Corporation shall redeem all
outstanding shares of Series A Preferred Stock on April 23, 2001 for a
redemption price per share equal to its Liquidation Value per share (plus all
accrued but unpaid dividends). The redemption price shall be paid by the
Corporation in cash on April 23, 2001 to the holders of Series A Preferred
Stock. Dividends on Series A Preferred Stock shall cease to accrue on the date
such payment is made. All shares of Series A Preferred Stock which have
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<PAGE> 13
been redeemed or reacquired by the Corporation at any time after the original
issuance thereof shall, upon such redemption or reacquisition, be retired and
restored to the status of authorized and unissued shares of Preferred Stock and
shall be available for reissuance by the Corporation.
3.5 Protective Provisions. Except as otherwise required by
law, the holders of the Series A Preferred Stock shall have one vote per share
for each share of Series A Preferred Stock and shall vote only on the following
matters:
(a) the holders of the Series A Preferred Stock shall have the
right to vote together as a class on each of matters set forth in Section 3.3
hereof;
(b) the holders of the Series A Preferred Stock shall have the
right to vote together as a class on each of the matters on which a vote of such
class is required by the Delaware General Corporation Law;
(c) upon the occurrence and during the continuance of any
Specified Event of Non-Compliance (as defined in the Purchase Agreement), the
holders of the Series A Preferred Stock shall be entitled to elect the majority
of the directors of the Corporation, and the holders of the Common Stock shall
be entitled to elect the remaining directors of the Corporation;
(d) Whenever under Paragraph (c) of this Section 3.5, the
holders of Series A Preferred Stock shall have the continuing right to elect a
majority of the Corporation's Board of Directors, the Board of Directors, within
two days after delivery to the Corporation at its principal office of a request
to such effect by the holders of the shares of the Series A Preferred Stock
representing at least 10% of the votes entitled to be cast by the holders of the
Series A Preferred Stock, shall call a special meeting of shareholders for the
election of directors, to be held upon ten days notice (or such shorter period
as is permitted by applicable law) to such holders. If any notice of meeting is
not given within the two days required above, the holders of the Series A
Preferred Stock requesting the calling of such meeting may also call such
meeting and shall have access to the stock books and records of the Corporation.
The terms of office of all persons who are then directors shall terminate at
such meeting upon the election of their successors; and
(e) The Board of Directors elected pursuant to Paragraph (d)
of this Section 3.5 shall use their best efforts to cause the Corporation to
cure or remedy the Specified Event of Non-Compliance giving rise to the voting
rights provided in subsection (c) of this Section 3.5.
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RESOLVED FURTHER, that the Chairman of the Board, the
President or any Vice President and the Secretary or any Assistant Secretary of
the Corporation are each authorized to execute, verify and file a certificate of
designation of rights, preferences, privileges and restrictions of preferred
stock in accordance with the corporate laws of the State of Delaware.
3. The number of shares of Series A Preferred Stock of the
Corporation is one thousand (1,000) shares, none of which has been issued.
We further declare under penalty of perjury under the laws of
the State of Delaware that the matters set forth in this certificate are true
and correct of our own knowledge.
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<PAGE> 15
IN WITNESS WHEREOF, the undersigned have executed this
Certificate on February 26, 1997.
/s/ John C. Diebel
------------------------------
John C. Diebel, Chairman
/s/ Steven G. Murdock
------------------------------
Steven G. Murdock, Secretary
6
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
MEADE MERGER CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I - Offices..................................................... 1
1.01 Registered Office............................................. 1
1.02 Principal Office.............................................. 1
1.03 Other Offices................................................. 1
ARTICLE II - Meetings of Stockholders.................................... 1
2.01 Annual Meetings............................................... 1
2.02 Special Meetings.............................................. 1
2.03 Place of Meetings............................................. 1
2.04 Notice of Meetings............................................ 2
2.05 Adjournments.................................................. 2
2.06 Quorum........................................................ 2
2.07 Conduct of Meetings........................................... 3
2.08 Voting........................................................ 3
2.09 List of Stockholders.......................................... 4
2.10 Inspectors of Election........................................ 4
2.11 No Action By Consent of Stockholders.......................... 5
2.12 Fixing Date for Determination of Stockholders of
Record........................................................ 5
2.13 Stockholder Proposals......................................... 6
2.14 Notice of Stockholder Nominees................................ 7
ARTICLE III - Board of Directors.......................................... 8
3.01 General Powers................................................ 8
3.02 Number, Classes, Term of Office............................... 8
3.03 Election of Directors......................................... 9
3.04 Resignations.................................................. 9
3.05 Vacancies..................................................... 9
3.06 Place of Meeting, Etc......................................... 9
3.07 Participation by Telephone.................................... 9
3.08 Annual Meeting................................................ 9
3.09 Regular Meetings.............................................. 10
3.10 Special Meetings.............................................. 10
3.11 Quorum and Manner of Acting................................... 10
3.12 Action by Consent............................................. 10
3.13 Compensation.................................................. 11
3.14 Committees of Directors....................................... 11
3.15 Rights of Preferred Stock..................................... 11
ARTICLE IV - Officers.................................................... 12
4.01 Corporate Officers............................................ 12
4.02 Election, Term of Office and Qualifications................... 12
4.03 Removal....................................................... 12
4.04 Resignations.................................................. 12
4.05 Vacancies..................................................... 13
4.06 Chairman of the Board......................................... 13
4.07 Chief Executive Officer....................................... 13
4.08 President and Chief Operating Officer......................... 13
4.09 Vice Presidents............................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.10 Chief Financial Officer....................................... 13
4.11 Secretary..................................................... 14
4.12 Treasurer..................................................... 14
4.13 Compensation.................................................. 14
ARTICLE V - Contracts, Checks, Drafts, Bank Accounts,
Etc........................................................... 14
5.01 Execution of Contracts........................................ 14
5.02 Checks, Drafts, Etc........................................... 14
5.03 Deposits...................................................... 14
5.04 General and Special Bank Accounts............................. 15
ARTICLE VI - Shares and Their Transfer................................... 15
6.01 Certificates for Stock........................................ 15
6.02 Transfers of Stock............................................ 16
6.03 Regulations................................................... 16
6.04 Lost, Stolen, Destroyed and Mutilated Certificates............ 16
ARTICLE VII - Indemnification............................................. 17
7.01 Authorization For Indemnification............................. 17
7.02 Advance of Expenses........................................... 17
7.03 Insurance..................................................... 17
7.04 Non-exclusivity............................................... 18
ARTICLE VIII - Miscellaneous.............................................. 18
8.01 Seal.......................................................... 18
8.02 Waiver of Notices............................................. 18
8.03 Amendments.................................................... 19
8.04 Representation of Other Corporations.......................... 19
8.05 Fiscal Year................................................... 19
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
MEADE MERGER CORP.,
A DELAWARE CORPORATION
ARTICLE I
Offices
1.01 Registered Office. The registered office of Meade Merger
Corp. (hereinafter the "Corporation") in the State of Delaware shall be at 1209
Orange Street, City of Wilmington, County of New Castle, and the name of the
registered agent in charge thereof shall be The Corporation Trust Company.
1.02 Principal Office. The principal office for the
transaction of the business of the Corporation shall be 16542 Millikan Avenue,
Irvine, California 92606. The Board of Directors (hereinafter the "Board") may
change the principal office from one location to another.
1.03 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
2.01 Annual Meetings. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other business as may properly come before such meetings may be held at
such time, date and place as the Board shall determine by resolution.
2.02 Special Meetings. A special meeting of the stockholders
for the transaction of any proper business may only be called in accordance with
the provisions of the Corporation's Certificate of Incorporation (the
"Certificate of Incorporation").
2.03 Place of Meetings. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as may from
time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
<PAGE> 5
2.04 Notice of Meetings.
(a) Written notice of each meeting of the stockholders,
whether annual or special, shall be given to each stockholder of record entitled
to vote at such meeting. Except as otherwise required by law, the written notice
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at the stockholder's
address as it appears on the records of the Corporation. Except as otherwise
required by law, no publication of any notice of a meeting of the stockholders
shall be required. Every notice of a meeting of the stockholders shall state the
place, date and hour of the meeting, and, in the case of a special meeting,
shall also state the purpose or purposes for which the meeting is called.
(b) Whenever notice is required to be given to any stockholder
to whom (i) notice of two consecutive annual meetings, and all notices of
meetings to such person between such two consecutive annual meetings, or (ii)
all, and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a twelve-month period, have been mailed addressed
to such person at such person's address as shown on the records of the
Corporation and have been returned undeliverable, the giving of such notice to
such person shall not be required. Any action or meeting which shall be taken or
held without notice to such person shall have the same force and effect as if
such notice had been duly given. If any person shall deliver to the Corporation
a written notice setting forth such person's then current address, the
requirement that notice be given to such person shall be reinstated.
2.05 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place. Notice need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken;
provided, however, if the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. At the adjourned meeting the Corporation may transact
any business which might have been transacted at the original meeting.
2.06 Quorum. Except as otherwise provided by law, the holders
of record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. A meeting at which a
quorum is initially present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shares, whether present in person or by
proxy, to leave less than
2
<PAGE> 6
a quorum, provided that any action taken (other than adjournment) is approved by
at least a majority of the shares required to constitute a quorum, or by any
greater number of shares otherwise required to take such action by applicable
law, these Bylaws or the Certificate of Incorporation. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders 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.
2.07 Conduct of Meetings. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board, or in the absence of any such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. Subject to the requirements of applicable
law, all annual and special meetings of stockholders shall be conducted in
accordance with such rules and procedures as the Board may establish and, as to
matters not governed by such rules and procedures, as the chairman of such
meeting shall determine.
2.08 Voting.
(a) Unless otherwise provided by the General Corporation Law
of the State of Delaware or the Certificate of Incorporation, each stockholder
shall be entitled to one vote for each outstanding share of stock of the
Corporation held by such stockholder. Each stockholder shall, at each meeting of
the stockholders, be entitled to vote in person or by proxy each share or
fractional share of the stock of the Corporation having voting rights on the
matter in question and which shall have been held by him and registered in his
name on the books of the Corporation on the date fixed pursuant to Section 2.12
of these Bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting.
(b) 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 in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and
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<PAGE> 7
vote thereon. Stock having voting power standing of record in the names of two
or more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise, or with respect to
which two or more persons (including proxyholders) have the same fiduciary
relationship, shall be voted in accordance with the provisions of the General
Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless such proxy
shall provide for a longer period. 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. Except as otherwise provided in the
Certificate of Incorporation, in these Bylaws or by law, at any meeting of the
stockholders the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. Shares withdrawn from a meeting prior to a
vote of stockholders shall not be deemed present for purposes of determining the
number of shares necessary to approve any action taken at the meeting subsequent
to the withdrawal of the shares. The vote at any meeting of the stockholders on
any question need not be by written 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 it shall state
the number of shares voted.
2.09 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, 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
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The 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.
2.10 Inspectors of Election. If at any meeting of the
stockholders a vote by written ballot shall be taken on any
question, the chairman of such meeting may appoint an inspector
or inspectors of election to act with respect to such vote. Each
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<PAGE> 8
inspector of election so appointed shall first subscribe an oath faithfully to
execute the duties of an inspector of election at such meeting with strict
impartiality and according to the best of his ability. Such inspectors of
election shall decide upon the qualification of the voters and shall report the
number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is completed,
shall ascertain and report the number of shares voted respectively for and
against the question. Reports of inspectors of election shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
inspectors of election need not be stockholders of the Corporation, and any
officer of the Corporation may be an inspector of election on any question other
than a vote for or against a proposal in which he shall have a material
interest.
2.11 No Action By Consent of Stockholders. Whenever, and so
long as, the Corporation is subject to the reporting requirements of Section 12
or 15(d) of the Securities Exchange Act of 1934 (or any successor law), any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken only upon the vote of stockholders at an annual or
special meeting duly noticed and called in accordance with the General
Corporation Law of the State of Delaware and may not be taken by written consent
of stockholders without a meeting.
2.12 Fixing Date for Determination of Stockholders of Record.
(a) 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, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting. If no record date
is fixed by the Board, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of such
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders 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 a record date, which record date
5
<PAGE> 9
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board adopts the resolution relating thereto.
2.13 Stockholder Proposals.
(a) At any meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors or by any stockholder of the Corporation who
is a stockholder of record at the time of giving the notice provided for in this
Section 2.13, who shall be entitled to vote at such meeting and who complies
with the procedures set forth below. For business to be properly brought before
a stockholder meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy (70) days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
10th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure thereof was made, whichever
occurred first. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.
Notwithstanding the foregoing, nothing in this Section 2.13 shall be interpreted
or construed to require the inclusion of information about any such proposal in
any proxy statement distributed by, at the direction of, or on behalf of the
Board. Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a stockholder meeting except in accordance with the
procedures set forth in this Section 2.13. For purposes of this Section 2.13,
any adjournment(s) or postponement(s) of the original meeting shall be deemed
for purposes of notice to be a continuation of the original meeting and no
business may be brought before any reconvened meeting unless such timely notice
of such business was given to the Secretary of the Corporation for the meeting
as originally scheduled.
(b) If the chairman of the meeting shall determine, based on
the facts, that business was not properly brought before
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the meeting in accordance with the provisions of this Section 2.13, the chairman
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. Notwithstanding the foregoing
provisions of Section 2.13(a) and 2.13(b), a stockholder shall also comply with
all applicable requirements of the Securities Exchange Act of 1934, and the
rules and regulations thereunder with respect to the matters set forth in this
Section 2.13.
2.14 Notice of Stockholder Nominees.
(a) Only persons who are nominated in accordance with the
procedures set forth in these Bylaws shall be eligible to serve as directors.
Nominations of persons for election to the Board of Directors of the Corporation
shall be made only at a meeting of stockholders and only (1) by or at the
direction of the Board of Directors or a committee thereof or (2) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Section 2.14, who shall be entitled to
vote for the election of directors at the meeting and who complies with the
notice procedures set forth in this Section 2.14. Such nominations, other than
those made by or at the direction of the Board, must be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy (70) days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure thereof was made, whichever occurred first. Such
stockholder's notice shall set forth: (i) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving the notice (A) the name and address, as they appear on
the Corporation's books, of such stockholder, and (B) the class and number of
shares of the Corporation which are beneficially owned by such stockholder.
Notwithstanding the foregoing, nothing in this Section 2.14 shall be interpreted
or construed to require the inclusion of information about any such nominee in
any proxy statement distributed by, at the direction of, or on behalf of the
Board. Notwithstanding anything in these Bylaws to the contrary, no person shall
be eligible to serve as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 2.14. Notwithstanding
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the foregoing provisions of this Section 2.14, a stockholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, and the
rules and regulations thereunder with respect to the matters set forth in this
Section 2.14. For purposes of this Section 2.14, any adjournment(s) or
postponement(s) of the original meeting shall be deemed for purposes of notice
to be a continuation of the original meeting and no nominations by a stockholder
of persons to be elected directors of the Corporation may be made at any such
reconvened meeting unless pursuant to a notice which was timely for the meeting
on the date originally scheduled.
(b) If the chairman of the meeting shall determine, based on
the facts, that a nomination was not made in accordance with the procedures
prescribed by this Section 2.14, the chairman shall so declare to the meeting
and the defective nomination shall be disregarded.
ARTICLE III
Board of Directors
3.01 General Powers. The property, business and
affairs of the Corporation shall be managed by or under the
direction of the Board of Directors.
3.02 Number, Classes, Term of Office.
(a) The number of directors of the Corporation shall not be
less than three (3) nor more than fifteen (15), with the exact number of
directors to be determined from time to time solely by resolution adopted by the
affirmative vote of a majority of the directors then in office. The exact number
of directors shall be five (5) until changed, within the limits specified above,
by resolution, duly approved by the Board of Directors. The maximum and minimum
number of directors permitted under these Bylaws may not be amended without a
duly adopted amendment to these Bylaws approved in accordance with the
provisions of the Corporation's Certificate of Incorporation. The directors
shall be divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. Except as
otherwise provided in the Certificate of Incorporation, each director shall
serve for a term ending on the date of the third annual meeting of stockholders
next following the annual meeting at which such director was elected.
Notwithstanding the foregoing, each of the directors of the Corporation shall
hold office until his successor shall have been duly elected and qualified or
until he shall resign or shall have been removed in the manner hereinafter
provided.
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(b) No person may stand for election to, or be elected to, the
Board of Directors or be appointed by the directors to fill a vacancy on the
Board of Directors who shall have made, or be making, improper or unlawful use
of the Corporation's confidential information, or who has interests which
conflict materially with the interests of the Corporation. Directors need not be
stockholders.
3.03 Election of Directors. The directors shall be elected by
the stockholders of the Corporation, and at each election the persons receiving
the greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including provisions for a classified Board and no cumulative voting.
3.04 Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors or
any other cause, may be filled by a majority of the remaining directors,
although less than a quorum. Each director so chosen to fill a vacancy shall
hold office until his successor shall have been elected and qualified or until
he shall resign or shall have been removed in the manner hereinafter provided.
3.06 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting.
3.07 Participation by Telephone. Directors may participate in
any regular or special meeting of the Board, or any meeting of any committee of
the Board, by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
3.08 Annual Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
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3.09 Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
otherwise required by law, notice of regular meetings need not be given.
3.10 Special Meetings. Special meetings of the Board shall be
held whenever called by the Chairman of the Board, the Chief Executive Officer
or any two or more directors. Except as otherwise provided by law or by these
Bylaws, notice of the time and place of each such special meeting shall be
mailed to each director, addressed to him at his residence or usual place of
business, at least five (5) days before the day on which the meeting is to be
held, or shall be sent to him at such place by telegraph, overnight courier,
telecopy communication or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given.
3.11 Quorum and Manner of Acting. Except as otherwise provided
in these Bylaws, the Certificate of Incorporation or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. A director who
withdraws from a meeting shall not be deemed present at the meeting for purposes
of determining the number of director votes necessary to approve any action
taken at the meeting subsequent to the withdrawal of the director. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of a sufficient number of directors to leave less
than a quorum, provided any action taken is approved by at least a majority of
the required quorum for such meeting or by such greater number as may be
required by these Bylaws, the Certificate of Incorporation or applicable law. In
the absence of a quorum, a majority of directors present at any meeting may
adjourn the same from time to time until a quorum shall be present. Notice of
any adjourned meeting need not be given. The directors shall act only as a
Board, and the individual directors shall have no power as such.
3.12 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
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3.13 Compensation. The directors shall receive such
compensation for their services as directors as may be fixed by resolution of
the Board from time to time. The Board may also provide that the Corporation
shall reimburse a director for any expense incurred by the director on account
of the director's attendance at any meetings of the Board or committees of the
Board. Neither the payment of such compensation nor the reimbursement of such
expenses shall be construed to preclude any director from serving the
Corporation or its subsidiaries in any other capacity and receiving compensation
therefor.
3.14 Committees of Directors. The Board may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board and except
as otherwise limited by law, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and
unless the resolution of the Board of Directors, the Certificate of
Incorporation or these Bylaws expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock or to adopt a certificate of ownership and merger pursuant to Delaware
law. Any such committee shall keep written minutes of its meetings and report
the same to the Board at the next regular meeting of the Board. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
3.15 Rights of Preferred Stock. Notwithstanding anything else
contained in these Bylaws, whenever the holders of one or more classes or
series of Preferred Stock shall have the right, voting separately as a class or
series, to elect directors, the nomination, election, term of office, filling
of vacancies, removal and other features of directorships shall be governed by
the terms of the certificate of designation for such class or series.
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ARTICLE IV
Officers
4.01 Corporate Officers.
(a) The officers of the Corporation shall be a Chief Executive
Officer, a President, and Chief Operating Officer, one or more Vice Presidents
(the number thereof and their respective titles to be determined by the Board),
a Secretary and a Chief Financial Officer and such other officers as may be
appointed at the discretion of the Board in accordance with the provisions of
Section 4.01(b).
(b) In addition to the officers specified in Section 4.01(a),
the Board may appoint such other officers as the Board may deem necessary or
advisable, including a Chairman of the Board, one or more Assistant Secretaries,
a Treasurer and one or more Assistant Treasurers, each of whom shall hold office
for such period, have such authority and perform such duties as the Board may
from time to time determine. The Board may delegate to any officer of the
Corporation or any committee of the Board the power to appoint, remove and
prescribe the duties of any officer provided for in this Section 4.01(b).
(c) One person may hold two or more offices, except that the
Secretary may not hold the office of President.
4.02 Election, Term of Office and Qualifications. The officers
of the Corporation, except such officers as may be appointed in accordance with
Sections 4.01(b) or 4.05, shall be appointed annually by the Board at the first
meeting thereof held after the election of the Board. Each officer shall hold
office until such officer shall resign or shall be removed or otherwise
disqualified to serve, or the officer's successor shall be appointed and
qualified.
4.03 Removal. Any officer of the Corporation may be removed,
with or without cause, at any time at any regular or special meeting of the
Board by a majority of the directors of the Board at the time in office or,
except in the case of an officer appointed by the Board, by any officer of the
Corporation or committee of the Board upon whom or which such power of removal
may be conferred by the Board.
4.04 Resignations. Any officer may resign at any time by
giving written notice of his resignation to 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 be not specified, upon receipt thereof by the
Board, President or Secretary; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
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4.05 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or other cause may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
4.06 Chairman of the Board. The Chairman of the Board, if such
an officer is elected, shall preside at all meetings of the stockholders and the
Board and shall have such other powers and duties as may from time to time be
assigned to him by the Board or prescribed by the Bylaws.
4.07 Chief Executive Officer. The Chief Executive Officer of
the Corporation shall be the chief executive officer of the Corporation unless
otherwise determined by the Board, and shall have, subject to the control of the
Board, general and active supervision and management over the business of the
Corporation and over its several officers, assistants, agents and employees. In
the absence or nonappointment of a Chairman of the Board, the Chief Executive
Officer shall preside at all meetings of the stockholders and at all meetings of
the Board if present thereat.
4.08 President and Chief Operating Officer. The President and
Chief Operating Officer of the Corporation shall be the chief operating officer
of the Corporation subject to the authority of the Chief Executive Officer, and
shall report directly to the Chief Executive Officer. The President and Chief
Operating Officer shall have such powers and perform such duties as the Board
and/or Chief Executive Officer may from time to time prescribe.
4.09 Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe.
4.10 Chief Financial Officer. The Chief Financial Officer
shall supervise, have custody of, and be responsible for all funds and
securities of the Corporation. The Chief Financial Officer shall deposit all
such funds in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board or in accordance with
authority delegated by the Board. The Chief Financial Officer shall receive, and
give receipts for, moneys due and payable to the Corporation from any source
whatsoever. The Chief Financial Officer shall exercise general supervision over
expenditures and disbursements made by officers, agents and employees of the
Corporation and the preparation of such records and reports in connection
therewith as may be necessary or desirable. The Chief Financial Officer shall,
in general, perform all other duties incident to the office of Chief Financial
Officer and such other duties as from time to time may be assigned to the Chief
Financial Officer by the Board.
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4.11 Secretary. The Secretary shall have the duty to record
the proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose. The Secretary shall see that all notices are
duly given in accordance with these Bylaws and as required by law; shall be
custodian of the seal of the Corporation and shall affix and attest the seal to
all documents to be executed on behalf of the Corporation under its seal; and,
in general, he shall perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board.
4.12 Treasurer. The Treasurer shall have such powers and
perform such duties as the Board may from time to time prescribe. Unless
otherwise provided by the Board, the Chief Financial Officer shall be the
Treasurer of the Corporation.
4.13 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
5.02 Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such person shall give such bond, if any, as
the Board may require.
5.03 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by
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any officer or officers, assistant or assistants, agent or agents, or attorney
or attorneys of the Corporation to whom such power shall have been delegated by
the Board. For the purpose of deposit and for the purpose of collection for the
account of the Corporation, the President, any Vice President or the Chief
Financial Officer, (or any other officer or officers, assistant or assistants,
agent or agents, or attorney or attorneys of the Corporation who shall from time
to time be determined by the Board) may endorse, assign and deliver checks,
drafts and other orders for the payment of money which are payable to the order
of the Corporation.
5.04 General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
6.01 Certificates for Stock.
(a) The shares of the Corporation shall be represented by
certificates, provided that the Board may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board, every holder of
stock represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate, in such form as
the Board shall prescribe, signed by, or in the name of the Corporation by the
Chairman or Vice Chairman of the Board, or the President or Vice President, and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation representing the number of shares registered in
certificate form. Any of or all of the signatures on the certificates may be a
facsimile. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, any such certificate, shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may nevertheless be issued by the Corporation with
the same effect as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereupon, were such officer,
transfer agent or registrar at the date of issue.
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(b) A record shall be kept of the respective names of the
persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 6.04.
6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such holder's attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.03, and upon surrender of
the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. 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. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so expressed in the
entry of transfer if, when the certificate or certificates shall be presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
6.03 Regulations. The Board may make such rules and
regulations as it may deem necessary or appropriate, not inconsistent with these
Bylaws, concerning the issue, transfer and registration of certificates for
shares of the stock of the Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer clerks or one or more transfer
agents and one or more registrars, and may require all certificates for stock to
bear the signature or signatures of any of them.
6.04 Lost, Stolen, Destroyed and Mutilated Certificates. In
any case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
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ARTICLE VII
Indemnification
7.01 Authorization For Indemnification. The Corporation shall
indemnify, in the manner and to the full extent permitted by law, any person (or
the estate, heirs, executors, or administrators of any person) who was or is a
party to, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that such person's
conduct was unlawful.
7.02 Advance of Expenses. Costs and expenses (including
attorneys' fees) incurred by or on behalf of a director or officer in defending
or investigating any action, suit, proceeding or investigation shall be paid by
the Corporation in advance of the final disposition of such matter, if such
director or officer shall undertake in writing to repay any such advances in the
event that it is ultimately determined that such person is not entitled to
indemnification. Notwithstanding the foregoing, no advance shall be made by the
Corporation if a determination is reasonably and promptly made by the Board by a
majority vote of a quorum of disinterested directors, or (if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel, that, based upon the facts known to the
Board or counsel at the time such determination is made, (a) the director or
officer acted in bad faith or deliberately breached such person's duty to the
Corporation or its stockholders, and (b) as a result of such actions by the
director or officer, it is more likely than not that it will ultimately be
determined that such director or officer is not entitled to indemnification.
7.03 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a
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director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise or as
a member of any committee or similar body against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Corporation would have the
power to indemnify such person against such liability under the provisions of
this Article or applicable law.
7.04 Non-exclusivity. The right of indemnity and advancement
of expenses provided herein shall not be deemed exclusive of any other rights to
which any director or officer or any other person seeking indemnification or
advancement of expenses from the Corporation may be entitled under applicable
law, any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office. Any agreement for indemnification
of or advancement of expenses to any director, officer, employee or other person
may provide rights of indemnification or advancement of expenses which are
broader or otherwise different from those set forth herein.
ARTICLE VIII
Miscellaneous
8.01 Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. It shall
not be necessary to the validity of any instrument executed by any authorized
officer or officers of the Corporation that the execution of such instrument be
evidenced by the corporate seal, and all documents, instruments, contracts and
writings of all kinds signed on behalf of the Corporation by any authorized
officer or officers shall be as effectual and binding on the Corporation without
the corporate seal, as if the execution of the same had been evidenced by
affixing the corporate seal thereto. The Board may give general authority to any
officer to affix the seal of the Corporation and to attest the affixing by
signature.
8.02 Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
Attendance of a person at a meeting (whether in person or by proxy in the case
of a meeting of stockholders) shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to
18
<PAGE> 22
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
8.03 Amendments. Except as otherwise provided herein or by
law, and subject to the Certificate of Incorporation, these Bylaws, or any of
them, may be altered, amended or repealed, and new Bylaws may be adopted, (i) by
the stockholders, at any annual meeting of stockholders, or at any special
meeting of stockholders, provided that notice of such proposed amendment,
modification, repeal or adoption is given in the notice of meeting, or (ii) by
the Board. Any Bylaws made or altered by the stockholders may be altered or
repealed by either the Board or the stockholders.
8.04 Representation of Other Corporations. The Chief Executive
Officer, President, any Vice President or the Secretary of this Corporation is
authorized to vote, represent and exercise on behalf of this Corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this Corporation. The authority herein granted to said
officers to vote or represent on behalf of this Corporation any and all shares
held by this Corporation in any other corporation or corporations may be
exercised either by such officers in person or by any person authorized so to do
by proxy or power of attorney duly executed by said officers.
8.05 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board.
19
<PAGE> 1
EXHIBIT 5.1
February
27th
1 9 9 7
569,967-5
NB1-296687.V1
Meade Instruments Corp.
16542 Millikan Avenue
Irvine, California 92714
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form S-1 (File No. 333-21123) filed by you with the Securities and Exchange
Commission in connection with the registration under the Securities Act of 1933,
as amended, of 3,370,000 shares of the Common Stock, $.01 par value per share,
of the Company. Of the 3,370,000 shares to be registered, 2,500,000 shares (the
"Company Shares") are being sold by the Company (including 375,500 additional
shares which are subject to an over-allotment option), and 870,000 shares (the
"Selling Stockholder's Shares") are being sold by one of the Company's existing
stockholders (including 130,000 additional shares which are subject to an
over-allotment option).
We are familiar with the proceedings heretofore taken, and
with the additional proceedings proposed to be taken, by you in connection with
the authorization and proposed issuance and sale of the Company Shares. We also
are familiar with the proceedings heretofore taken by you in connection with the
authorization and issuance of the Selling Stockholder's Shares.
It is our opinion that, subject to said proceedings being duly
taken and completed by you as now contemplated by us as your counsel prior to
the issuance of the Company Shares, upon the issuance and sale of the Company
Shares in the manner contemplated by the Registration Statement, the Company
Shares will be legally and validly issued, fully paid and nonassessable
securities of the Company. It is also our opinion that the Selling Stockholder's
Shares are legally and validly issued, fully paid and nonassessable securities
of the Company.
<PAGE> 2
Page 2 - Meade Instruments Corp. - February 27, 1997
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectus which
is a part of the Registration Statement under the caption "Legal Matters."
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement") is made as of
______________, 1997 by and between Meade Instruments Corp., a California
corporation (the "Company"), and _________________ (the "Indemnitee"), a
director of the Company.
BACKGROUND
A. The Indemnitee has agreed to serve as a director or officer
of the Company and in such capacity has rendered valuable services to the
Company.
B. The Company has investigated the availability and
sufficiency of liability insurance and the applicable state statutory
indemnification provisions to provide its directors and officers with adequate
protection against various legal risks and potential liabilities to which
directors and officers are subject due to their position with the Company and
has concluded that insurance and statutory provisions may provide inadequate and
unacceptable protection to certain individuals requested to serve as its
directors and officers.
C. In order to induce and encourage highly experienced and
capable persons such as the Indemnitee to serve as a director of the Company,
the Board of Directors has determined, after due consideration and investigation
of the terms and provisions of this Agreement and the various other options
available to the Company and the Indemnitee in lieu of this Agreement, that this
Agreement is not only reasonable and prudent but necessary to promote and ensure
the best interests of the Company and its shareholders.
AGREEMENT
In consideration of the services of the Indemnitee and in
order to induce the Indemnitee to serve as a director, the Company and the
Indemnitee agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement:
(a) A "Change in Control" shall be deemed to have
occurred if (i) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act),
<PAGE> 2
directly or indirectly, of securities of the Company representing 20% or more of
the total voting power represented by the Company's then outstanding voting
securities, or (ii) during any period of two consecutive years, individuals who
at the beginning of the two year period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the Board of Directors, or (iii) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior to such a merger or consolidation
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of the total voting
power represented by the voting securities of the Company or the surviving
entity outstanding immediately after the merger or consolidation, or the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all the
Company's assets.
(b) The term "Expenses" includes, without limitation,
attorneys' fees, disbursements and retainers, accounting and witness fees,
travel and deposition costs, expenses of investigations, judicial or
administrative proceedings or appeals, amounts paid in settlement by or on
behalf of Indemnitee, and any expenses of establishing a right to
indemnification, pursuant to this Agreement or otherwise including reasonable
compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which he or she is not otherwise compensated by the Company or any third
party. The term "Expenses" does not include the amount of judgments, fines,
penalties or ERISA excise taxes actually levied against the Indemnitee.
(c) A "Potential Change in Control" shall be deemed
to have occurred if (i) the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a Change in
Control; (iii) any person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company acting in such capacity
or a corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of stock of the
Company), who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding voting securities increases his or her
beneficial ownership of the securities by 5% or more over the percentage so
owned by that person on the date this Agreement is executed; or (iv) the Board
adopts a resolution
2
<PAGE> 3
to the effect that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(d) The term "Proceeding" shall include any
threatened, pending or completed action, suit or proceeding, whether brought by
or in the name of the Company or otherwise and whether of a civil, criminal or
administrative or investigative nature, by reason of the fact that the
Indemnitee is or was a director of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
enterprise, whether or not he or she is serving in such capacity at the time any
liability or Expense is incurred for which indemnification or reimbursement is
to be provided under this Agreement.
SECTION 2. INDEMNIFICATION
2.1 INDEMNIFICATION IN THIRD PARTY ACTIONS
The Company shall indemnify the Indemnitee in accordance with
the provisions of this subsection 2.1 if the Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any Proceeding (other
than a Proceeding by or in the name of the Corporation to procure a judgment in
its favor), by reason of the fact that the Indemnitee is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another enterprise against all Expenses,
judgments, fines, penalties and ERISA excise tax actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of the
Proceeding, to the fullest extent permitted by applicable law; provided that any
settlement be approved in writing by the Company.
2.2 INDEMNIFICATION IN PROCEEDINGS BY OR IN THE NAME OF THE
COMPANY
The Company shall indemnify the Indemnitee in accordance with
the provisions of this subsection 2.2 if the Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any Proceeding by or
in the name of the Company to procure a judgment in its favor by reason of the
fact that Indemnitee was or is a director or officer of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another enterprise, against all Expenses actually and reasonably
incurred by Indemnitee in connection with the defense or settlement of the
Proceeding, to the fullest extent permitted by applicable law.
2.3 PARTIAL INDEMNIFICATION
If the Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of, but not
the total amount of, the Expenses, judgments, fines, penalties or ERISA excise
taxes actually and reasonably incurred by him or her in the investigation,
defense, appeal or settlement of any Proceeding, the Company shall nevertheless
indemnify the Indemnitee for the portion of
3
<PAGE> 4
the Expenses, judgments, fines, penalties or ERISA excise taxes to which the
Indemnitee is entitled.
2.4 INDEMNIFICATION HEREUNDER NOT EXCLUSIVE
The indemnification provided by this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
under the Articles of Incorporation, the Bylaws, any agreement, any vote of
shareholders or disinterested directors, applicable law, or otherwise, both as
to action in his or her official capacity and as to action in another capacity
on behalf of the Company while holding office.
2.5 INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY
Notwithstanding any other provisions of this Agreement, to the
extent that the Indemnitee has been successful in defense of any Proceeding or
in defense of any claim, issue or matter in the Proceeding, on the merits or
otherwise, including the dismissal of a Proceeding without prejudice, the
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith to the fullest extent permitted by applicable law.
SECTION 3. PRESUMPTIONS
3.1 PRESUMPTION REGARDING STANDARD OF CONDUCT
The Indemnitee shall be conclusively presumed to have met the
relevant standards of conduct as defined by applicable law for indemnification
pursuant to this Agreement, unless a determination that the Indemnitee has not
met the relevant standards is made by (i) the Board of Directors of the Company
by a majority vote of a quorum consisting of directors who were not parties to
the Proceedings, (ii) the shareholders of the Company by majority vote, or (iii)
in a written opinion by independent legal counsel, selection of whom has been
approved by the Indemnitee in writing.
3.2 DETERMINATION OF RIGHT TO INDEMNIFICATION
If a claim under this Agreement is not paid by the Company
within 30 days of receipt of written notice, the right to indemnification as
provided by this Agreement shall be enforceable by the Indemnitee in any court
of competent jurisdiction. The burden of proving by clear and convincing
evidence that indemnification or advances are not appropriate shall be on the
Company. Neither the failure of the directors or shareholders of the Company or
independent legal counsel to have made a determination prior to the commencement
of the action that indemnification or advances are proper in the circumstances
because the Indemnitee has met the applicable standard of conduct, nor an actual
determination by the directors or shareholders of the Company or independent
legal counsel that the Indemnitee has not met the applicable standard of
4
<PAGE> 5
conduct, shall be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct.
(a) The Indemnitee's Expenses incurred in connection
with any Proceeding concerning his or her right to indemnification or advances
in whole or in part pursuant to this Agreement shall also be indemnified by the
Company regardless of the outcome of the Proceeding, unless a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in the Proceeding was not made in good faith or was frivolous.
SECTION 4. ADVANCES OF EXPENSES
The Expenses incurred by the Indemnitee in any Proceeding
shall be paid promptly by the Company in advance of the final disposition of the
Proceeding at the written request of the Indemnitee to the fullest extent
permitted by applicable law; provided that if applicable law requires an
undertaking, the Indemnitee shall undertake in writing to repay the amount
advanced to the extent that it is ultimately determined that the Indemnitee is
not entitled to indemnification.
SECTION 5. CHANGE IN CONTROL
The Company agrees that if there is a Change in Control of the
Company (other than a Change in Control which has been approved by a majority of
the Company's Board of Directors who were directors immediately prior to the
Change in Control) then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and Expense advances
under this Agreement or any other agreement, the Company's Articles of
Incorporation, or the Company's Bylaws in effect relating to claims for
indemnifiable events, the Company shall seek legal advice only from independent
counsel selected by Indemnitee and approved by the Company (which approval shall
not be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee within the last five years (other than in connection
with such matters) ("Special Independent Counsel"). The Special Independent
Counsel, among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent the Indemnitee would be permitted to
be indemnified under applicable law. The Company agrees to pay the reasonable
fees of the Special Independent Counsel referred to above and may fully
indemnify the Special Independent Counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement.
5
<PAGE> 6
SECTION 6. INDEMNIFICATION PROCEDURE
6.1 NOTICE
Promptly after receipt by the Indemnitee of notice of the
commencement of any Proceeding, the Indemnitee will, if a claim is to be made
against the Company under this Agreement, notify the Company of the commencement
of the Proceeding. The omission to notify the Company will not relieve it from
any liability which it may have to the Indemnitee otherwise than under this
Agreement.
6.2 COMPANY PARTICIPATION
With respect to any Proceeding for which indemnification is
requested, the Company will be entitled to participate in the Proceeding at its
own expense and, except as otherwise provided below, to the extent that it may
desire, the Company may assume the defense of the Proceeding, with counsel
satisfactory to the Indemnitee. After notice from the Company to the Indemnitee
of its election to assume the defense of a Proceeding, during the Company's good
faith active defense the Company will not be liable to the Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense of the Proceeding, other than
reasonable costs of investigation or as otherwise provided below. The Company
shall not settle any Proceeding in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written consent. The
Indemnitee shall have the right to employ his or her counsel in any Proceeding
but the fees and expenses of the counsel incurred after notice from the Company
of its assumption of the defense of the Proceeding shall be at the expense of
the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company, (ii) the Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and the Indemnitee
in the conduct of the defense of a Proceeding, or (iii) the Company shall not in
fact have employed counsel to assume the defense of a Proceeding, in each of
which cases the fees and expenses of the Indemnitee's counsel shall be at the
expense of the Company. The Company shall not be entitled to assume the defense
of any Proceeding brought by or on behalf of the Company or as to which the
Indemnitee has made the conclusion that there may be a conflict of interest
between the Company and the Indemnitee.
SECTION 7. LIMITATIONS ON INDEMNIFICATION
No payments pursuant to this Agreement shall be made by the
Company:
(a) to indemnify or advance Expenses to the Indemnitee with
respect to Proceedings initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to Proceedings brought to establish
or enforce a right to indemnification under this Agreement or any other statute
or law or otherwise as required under applicable law, but the indemnification or
advancement of Expenses may
6
<PAGE> 7
be provided by the Company in specific cases if the Board of Directors finds it
to be appropriate;
(b) to indemnify the Indemnitee for any Expenses, judgements,
fines, penalties or ERISA excise taxes for which payment is actually made to the
Indemnitee under a valid and collectible insurance policy, except in respect of
any excess beyond the amount of payment under the insurance;
(c) to indemnify the Indemnitee for any Expenses, judgements,
fines or penalties sustained in any Proceeding for an accounting of profits made
from the purchase or sale by Indemnitee of securities of the Company pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934, the
rules and regulations promulgated thereunder and amendments thereto or similar
provisions of any federal, state or local statutory law;
(d) to indemnify the Indemnitee for any Expenses, judgements,
fines, penalties or ERISA excise taxes resulting from Indemnitee's conduct which
is finally adjudged to have been willful misconduct, knowingly fraudulent or
deliberately dishonest; or
(e) if a court of competent jurisdiction shall finally
determine that any indemnification hereunder is unlawful.
SECTION 8. MAINTENANCE OF LIABILITY INSURANCE
8.1 AFFIRMATIVE COVENANT OF THE COMPANY
The Company covenants and agrees that, as long as the
Indemnitee shall continue to serve as a director of the Company and thereafter
so long as the Indemnitee shall be subject to any possible Proceeding, the
Company, subject to subsection 8.3 of this Agreement, shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.
8.2 INDEMNITEE NAMED AS INSURED
In all D&O Insurance policies, the Indemnitee shall be named
as an insured in a manner that provides the Indemnitee the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors.
8.3 EXEMPTION FROM MAINTENANCE OF INSURANCE
Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines in good
faith that insurance is not reasonably available, the premium costs for
insurance are
7
<PAGE> 8
disproportionate to the amount of coverage provided, the coverage provided by
insurance is so limited by exclusions that it provides an insufficient benefit,
or the Indemnitee is covered by similar insurance maintained by a subsidiary of
the Company.
SECTION 9. MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon, and shall inure to the
benefit of the Indemnitee and his or her heirs, personal representatives and
assigns, and the Company and its successors and assigns.
9.2 SEVERABILITY
Each provision of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision of this
Agreement shall be held to be invalid or unenforceable for any reason, the
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions of this Agreement. To the extent required, any provision
of this Agreement may be modified by a court of competent jurisdiction to
preserve its validity and to provide the Indemnitee with the broadest possible
indemnification permitted under applicable law.
9.3 SAVINGS CLAUSE
If this Agreement or any portion of it is invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee as to Expenses, judgments, fines, penalties or
ERISA excise taxes with respect to any Proceeding to the fullest extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated or by any other applicable law.
9.4 INTERPRETATION; GOVERNING LAW
This Agreement shall be construed as a whole and in accordance
with its fair meaning. Headings are for convenience only and shall not be used
in construing meaning. This Agreement shall be governed and interpreted in
accordance with the laws of the State of California.
9.5 AMENDMENTS
No amendment, waiver, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
the party against whom enforcement is sought. The indemnification rights
afforded to the Indemnitee by this Agreement are contract rights and may not be
diminished, eliminated or otherwise affected by amendments to the Company's
Articles of Incorporation, Bylaws or agreements including D&O Insurance
policies.
8
<PAGE> 9
9.6 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
9.7 NOTICES
Any notice required to be given under this Agreement shall be
directed to Meade Instruments Corp., 16542 Millikan Avenue, Irvine, California
92606, Attention: Secretary, and to Indemnitee at the address set forth below or
to another address as either shall designate in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
INDEMNITEE
____________________________________________
Name: ______________________________________
Address:______________________________
______________________________________
______________________________________
______________________________________
MEADE INSTRUMENTS CORP.,
a California corporation
____________________________________________
By: ________________________________________
Title:______________________________________
9
<PAGE> 1
EXHIBIT 10.13
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective March 1, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
1. Nature of the Plan ............................................. 1
2. Definitions .................................................... 2
3. Eligibility and Participation .................................. 7
4. Employer Contributions ......................................... 9
5. Investment of Trust Assets ..................................... 12
6. Allocations to Participants' Accounts .......................... 15
7. Allocation Limitations ......................................... 20
8. Voting Company Stock ........................................... 23
9. Vesting and Forfeitures ........................................ 24
10. Credited Service and Break in Service .......................... 24
11. When Capital Accumulation Will Be Distributed .................. 25
12. Diversification Election ....................................... 28
13. How Capital Accumulation Will Be Distributed ................... 29
14. Rights, Options and Restrictions on Company Stock .............. 32
15. No Assignment of Benefits ...................................... 34
16. Administration ................................................. 35
17. Claims Procedure ............................................... 39
18. Limitation on Participants' Rights ............................. 40
19. Future of the Plan ............................................. 41
20. "Top-Heavy" Contingency Provisions ............................. 43
21. Governing Law .................................................. 45
22. Execution ...................................................... 45
<PAGE> 3
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Nature of the Plan.
The purpose of this Plan is to enable participating Employees to share
in the growth and prosperity of Meade Instruments Corp. (the "Company") and to
provide Participants with an opportunity to accumulate capital for their future
economic security. The Plan is intended to do this without any deductions from
Participants' paychecks and without requiring them to invest their personal
savings. The primary purpose of the Plan is to enable Participants to acquire
stock ownership interests in the Company. Therefore, the Trust established under
the Plan is designed to invest primarily in Company Stock.
The Plan is also designed to be available as a technique of corporate
finance to the Company. Accordingly, it may be used to accomplish the following
objectives:
(a) To meet general financing requirements of the Company,
including capital growth and transfers in the ownership of
Company Stock;
(b) To provide Participants with beneficial ownership of Company
Stock substantially in proportion to their relative
Compensation, without requiring any cash outlay, any reduction
in pay or other personal investment on the part of
Participants; and
(c) To receive loans (or other extensions of credit) to finance
the acquisition of Company Stock, with such loans to be repaid
by Employer Contributions to the Trust and dividends received
on such Company Stock.
<PAGE> 4
The Plan is hereby adopted effective as of March 1, 1996, and is a
stock bonus plan under Section 401(a) of the Internal Revenue Code (the "Code")
and an employee stock ownership plan under Section 4975(e)(7) of the Code.
All Trust Assets held under the Plan will be administered, distributed,
forfeited and otherwise governed by the provisions of this Plan and the related
Trust Agreement. The Plan is administered by an Administrative Committee for the
exclusive benefit of Participants (and their Beneficiaries).
Section 2. Definitions.
In this Plan, whenever the context so indicates, the singular or
plural number and the masculine, feminine or neuter gender shall be deemed to
include the other, the terms "he," "his" and "him" shall refer to a Participant,
and the capitalized terms shall have the following meanings:
Account.................. One of two accounts maintained to record the
interest of a Participant under the Plan. See
Section 6.
Acquisition Loan......... A loan (or other extension of credit) used by the
Trust to finance the acquisition of Company Stock,
which loan may constitute an extension of credit
to the Trust from a party in interest (as defined
in ERISA). See Section 5(b).
Affiliate................ Any corporation which is a member of a controlled
group of corporations (within the meaning of
Section 414(b) of the Code) of which the Company
is also a member or any
2
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trade or business (whether or not incorporated)
which is under common control with the Company
(within the meaning of Section 414(c) of the Code).
Allocation Date.......... The December 31st of each year.
Allocation Year.......... The 12-month period ending on each Allocation Date
(and coinciding with each calendar year), which
period shall be the "limitation year" for purposes
of Section 415 of the Code.
Approved Absence......... A leave of absence from work granted to an Employee
by the Company under its established leave
policy, including unpaid leave under the Family and
Medical Leave Act of 1993. See Section 3(c).
Beneficiary.............. The person (or persons) entitled to receive any
benefit under the Plan in the event of a
Participant's death. See Section 13(c).
Board of Directors....... The Board of Directors of the Company.
Break in Service......... A period of time commencing with the date on which
an Employee's Service terminates and ending on the
date he resumes service. See Section 10(b).
Capital Accumulation..... A Participant's vested, nonforfeitable interest
in his Accounts under the Plan. Each Participant's
Capital Accumulation shall be determined in
accordance with the provisions of Section 9 and
distributed as provided in Sections 11, 12 and
13.
Code..................... The Internal Revenue Code of 1986, as amended.
Committee................ The Administrative Committee appointed by the
Board of Directors
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to administer the Plan. See Section 16.
Company.................. Meade Instruments Corp., a California corporation.
Company Stock............ Shares of capital stock issued by the Company,
which shares must be common stock (or preferred
stock convertible into common stock) and must
constitute "employer securities" under Section
409(l) of the Code.
Company Stock Account.... The Account which reflects each Participant's
interest in Company Stock held under the Plan. See
Section 6.
Compensation............. The total wages and other compensation paid to an
Employee by the Company during each Allocation
Year, as reported on the Employee's Tax and Wage
Statement (Form W-2), plus any Elective Deferrals
made on his behalf to the 401(k) Plan and any
amounts withheld pursuant to the Company's
Cafeteria Plan (under Section 125 of the Code), but
excluding any amount in excess of $150,000 (as
adjusted for increases in the cost of living
pursuant to Section 401(a)(17) of the Code). For
purposes of applying the $150,000 dollar
limitation, the Compensation of a 5% owner or of a
Highly Compensated Employee who is one of the ten
most highly compensated Highly Compensated
Employees shall be aggregated with the Compensation
of his spouse and his lineal descendants who are
under age 19.
Credited Service......... The elapsed period of an Employee's Service,
including Service prior to March 1, 1996. See
Section 10.
Disability............... A physical or mental impairment which constitutes a
total and permanent disability entitling the
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<PAGE> 7
Participant to disability benefits under the Social
Security Act.
Discretionary Contri-
butions.................. Employer Contributions made in amounts determined
by the Board of Directors. See Section 4(a).
Elective Deferrals....... Contributions made to the 401(k) Plan at the
election of an Employee.
Employee................. Any common-law employee of the Company. A leased
employee, as described in Section 414(n) of the
Code, is not an Employee for purposes of this
Plan.
Employer Contributions... Payments made to the Trust by an Employer. See
Section 4.
ERISA.................... The Employee Retirement Income Security Act of
1974, as amended.
Fair Market Value........ The fair market value of Company Stock, as
determined for all purposes under the Plan based
upon a valuation by an independent appraiser
(within the meaning of Section 401(a)(28)(C) of the
Code) so long as Company Stock is not readily
tradable on an established market.
Financed Shares.......... Shares of Company Stock acquired by the Trust with
the proceeds of an Acquisition Loan.
Forfeiture............... A Participant's Accounts which are not vested and
which are forfeited under Section 9(b) following
his termination of Service.
401(k) Plan.............. The Meade Instruments Corporation 401(k) Plan, a
profit sharing plan qualified under Section 401(a)
of the Code that includes a "cash or deferred
arrangement" under Section 401(k) of the Code.
Highly Compensated
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<PAGE> 8
Employee................. An Employee who (1) is a 5% owner, (2) has
Compensation in excess of $100,000, (3) has
Compensation in excess of $66,000 and is in the
top-paid 20% group of Employees, or (4) is an
officer of the Company or an Affiliate and has
Compensation in excess of $60,000, as determined
in accordance with Section 414(q) of the Code. The
$100,000, $66,000 and $60,000 amounts shall be
adjusted after 1996 for increases in the cost of
living, pursuant to Section 414(q)(1) of the Code.
Hour of Service.......... Each hour of Service for which an Employee is
credited under the Plan, as described in Section
3(d).
Matching Contributions... Employer Contributions made in amounts related to
Participants' Elective Deferrals. See Section
4(b).
Other Investments
Account.................. The Account which reflects each Participant's
interest under the Plan attributable to any Trust
Assets other than Company Stock. See Section 6.
Participant.............. Any Employee or former Employee who has met the
applicable eligibility requirements of Section 3(a)
and who has not yet received a complete
distribution of his Capital Accumulation.
Plan..................... The Meade Instruments Corp. Employee Stock
Ownership Plan, which includes this Plan and the
related Trust Agreement.
Plan Year................ The 12-month period ending on the last day of
February and coinciding with each fiscal year of
the Company.
Retirement............... Termination of Service on or after attaining age
65.
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<PAGE> 9
Service.................. Employment with the Company or with any Affiliate;
provided, however, that periods of employment with
an employer during which the employer was not an
Affiliate shall not be included as Service.
Statutory Compensation... The total remuneration paid to an Employee by the
Company during the Allocation Year for personal
services rendered to the Company, excluding
employer contributions to a plan of deferred
compensation, amounts realized in connection with
stock options and amounts which receive special tax
benefits.
Trust.................... The Meade Instruments Corp. Employee Stock
Ownership Trust, established pursuant to the
Trust Agreement entered into between the Com-
pany and the Trustee.
Trust Agreement.......... The Agreement between the Company and the Trustee
establishing the Trust and specifying the duties of
the Trustee.
Trust Assets............. The Company Stock and any other assets held in the
Trust for the benefit of Participants. See
Section 5.
Trustee................... The Trustee (and any successor Trustee) appointed
by the Board of Directors to hold the Trust Assets.
Section 3. Eligibility and Participation.
(a) Each Employee on March 1, 1996, who has then attained age 21 and
completed at least one year of Service in which he is credited with at least
1000 Hours of Service shall become a Participant on March 1, 1996. Each other
Employee shall become a Participant in the Plan on the December 31st or June
30th co-
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<PAGE> 10
inciding with or next following the date on which he has attained age 21 and
completed at least one year of Service in which he is credited with at least
1000 Hours of Service. The eligibility computation period for determining one
year of Service under this Section 3(a) shall initially be the period of 12
consecutive months beginning on the Employee's initial date of Service and
thereafter shall be each Allocation Year beginning after his initial date of
Service.
In the event that the terms of Service of any Employee are covered by a
collective bargaining agreement, the Employee shall not be eligible to
participate in the Plan unless the terms of such agreement specifically provide
for participation in this Plan.
(b) A Participant is entitled to share in the allocations of Employer
Contributions and Forfeitures under Section 6(a) and (b) for each Allocation
Year in which he is credited with at least 1000 Hours of Service and is an
Employee (or on Approved Absence) on the Allocation Date. A Participant is also
entitled to share in the allocations of Employer Contributions and Forfeitures
for the Allocation Year of his Retirement, Disability or death.
(c) A former Participant who is reemployed by the Company shall become
a Participant as of the date of his reemployment. An Employee who is on an
Approved Absence shall not become a Participant until the end of his Approved
Absence, but a Partici-
8
<PAGE> 11
pant who is on an Approved Absence shall continue as a Participant during the
period of his Approved Absence.
(d) Hours of Service - For purposes of determining the Hours of Service
to be credited to an Employee under the Plan, the following rules shall be
applied:
(1) Hours of Service shall include each hour of Service for which
an Employee is paid (or entitled to payment) for the
performance of duties; each hour of Service for which an
Employee is paid (or entitled to payment) for a period during
which no duties are performed due to vacation, holiday,
illness, incapacity (including disability), lay-off, jury
duty, military duty or paid leave of absence; and each
additional hour of Service for which back pay is either
awarded or agreed to (irrespective of mitigation of damages);
provided, however, that not more than 501 Hours of Service
shall be credited for a single continuous period during which
an Employee does not perform any duties.
(2) The crediting of Hours of Service shall be determined in
accordance with the rules set forth in paragraphs (b) and (c)
of Section 2530.200b-2 of the regulations prescribed by the
Department of Labor, which rules shall be consistently
applied with respect to all Employees within the same job
classification.
(3) Hours of Service shall not be credited to an Employee for a
period during which no duties are performed if payment is
made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemploy-
ment compensation or disability insurance laws, and Hours of
Service shall not be credited on account of any payment made
or due an Employee solely in reimbursement of medical or
medically-related expenses.
(4) Each Employee for whom the Company does not maintain records
of actual Hours of Service shall be credited with 45 Hours of
Service for each weekly payroll period in which he completes
at least one Hour of Service.
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<PAGE> 12
Section 4. Employer Contributions.
(a) Discretionary Contributions - Discretionary Contributions shall be
paid to the Trustee in such amounts (or under such formula) as may be determined
by the Board of Directors. The Company shall specify the Allocation Year for
which Discretionary Contributions are made.
(b) Matching Contributions - Beginning July 1, 1996, Matching
Contributions shall be paid by the Company to the Trustee for each Participant
who is entitled to share in the allocation of Matching Contributions under
Section 3(b) for each Allocation Year in an amount equal to 100% of the Elective
Deferrals made to the 401(k) Plan (after June 30, 1996) on his behalf for the
Allocation Year, but only to the extent such Elective Deferrals do not exceed 4%
of his Compensation. The allocations of Financed Shares made as a result of
Matching Contributions shall be based upon the purchase price paid by the
Trustee to acquire such Company Stock.
Matching Contributions for Highly Compensated Employees shall be
limited for any Allocation Year to the extent necessary to satisfy one of the
contribution percentage requirements described in Section 401(m)(2) of the Code
and Section 1.401(m)-1(b) of the regulations thereunder, as computed separately
(if necessary) for the Plan and the 401(k) Plan. For this purpose, any reduction
in the Matching Contributions made on behalf of Highly Compensated Employees
will be determined in order of the
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<PAGE> 13
contribution percentages beginning with the highest of such percentages.
Matching Contributions shall not be payable with respect to any Elective
Deferrals under the 401(k) Plan which are distributed to Participants pursuant
to the provisions of the 401(k) Plan in order to satisfy Sections
401(k)(3)(A)(ii) or 402(g) of the Code.
(c) Payment of Employer Contributions - Employer Contributions shall be
paid to the Trustee not later than the due date (including extensions) for
filing the Company's Federal income tax return for the applicable taxable year
of the Company. Employer Contributions may be paid in cash and/or in shares of
Company Stock, as determined by the Board of Directors; provided, however, that
the Board of Directors may determine that Employer Contributions made for the
purpose of enabling the Trustee to make Acquisition Loan payments may be paid as
provided in Section 5(d) with written notice to the Committee and the Trustee.
Employer Contributions paid in shares of Company Stock shall be valued based
upon the Fair Market Value on the date the shares are issued to the Trustee.
(d) Additional Provisions - Employer Contributions shall not be made in
amounts which can be allocated to no Participant's Accounts by reason of the
allocation limitations described in Section 7(a) or in amounts which are not
deductible under Section 404(a) of the Code. Any Employer Contributions which
are not deductible under Section 404(a) of the Code may be returned to the
Company by the Trustee (upon the direction of the Company)
11
<PAGE> 14
within one year after the deduction is disallowed or after it is determined that
the deduction is not available. In the event that Employer Contributions are
paid to the Trust by reason of a mistake of fact, such Employer Contributions
may be returned to the Company by the Trustee (upon the direction of the
Company) within one year after the payment to the Trust.
(e) No Participant Contributions - No Participant shall be required or
permitted to make contributions to the Trust.
Section 5. Investment of Trust Assets.
(a) In General - Trust Assets will be invested by the Trustee primarily
(or exclusively) in Company Stock in accordance with directions from the
Committee, except as otherwise provided in Section 5(c) and (e). Employer
Contributions (and other Trust Assets) may be used to acquire shares of Company
Stock from any Company shareholder or from the Company. All purchases of Company
Stock by the Trustee shall be made only as directed by the Committee and only at
prices which do not exceed Fair Market Value as of the date of the purchase. The
Committee may direct the Trustee to invest and hold up to 100% of the Trust
Assets in Company Stock. Pending the investment of Trust Assets in Company
Stock, the Trustee may also invest Trust Assets in such other prudent
investments as the Committee deems to be desirable for the Trust, or Trust
Assets may be held temporarily in cash.
(b) Acquisition Loans - With the approval of the Board of Directors,
the Committee may direct the Trustee to incur Acquisi-
12
<PAGE> 15
tion Loans from time to time to finance the acquisition of Company Stock
(Financed Shares) or to repay a prior Acquisition Loan. An installment
obligation incurred in connection with the purchase of Company Stock shall be
treated as an Acquisition Loan, and all indebtedness incurred to acquire Company
Stock in a single transaction shall be treated as one Acquisition Loan for
purposes of the Plan. An Acquisition Loan shall be for a specific term, shall
bear a reasonable rate of interest and shall not be payable on demand except in
the event of default. An Acquisition Loan may be secured by a pledge of the
Financed Shares so acquired (or acquired with the proceeds of a prior
Acquisition Loan which is being refinanced). No other Trust Assets may be
pledged as collateral for an Acquisition Loan, and no lender shall have recourse
against Trust Assets except as provided in Section 54.4975-7(b)(5) of the
Regulations under the Code. Any pledge of Financed Shares must provide for the
release of the shares so pledged as payments on the Acquisition Loan are made by
the Trustee and such Financed Shares are allocated to Participants' Company
Stock Accounts under Section 6(c). If the lender is a party in interest (as
defined in ERISA), the Acquisition Loan must provide for a transfer of Trust
Assets to the lender on default only upon and to the extent of the failure of
the Trust to meet the payment schedule of the Acquisition Loan.
(c) Initial Purchase - Notwithstanding the provisions of Section 5(a)
and (b), the initial purchase of Company Stock in April 1996 (using the proceeds
of an Acquisition Loan) and the
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<PAGE> 16
incurring of the initial Acquisition Loan shall be effected by the Trustee
(without directions from the Committee) at a price not exceeding Fair Market
Value on the purchase date based on the Trustee's determination (in the exercise
of its reasonable judgment) that such transaction is in the best interests of
the Plan and the Participants and is in compliance with all applicable
requirements of the Code and ERISA.
(d) Acquisition Loan Payments - Payments of principal and/or interest
on any Acquisition Loan shall be made by the Trustee (as directed by the
Committee) only from Employer Contributions paid to enable the Trust to repay
such Acquisition Loan, from earnings attributable to such Employer Contributions
and from any cash dividends received by the Trust on the Financed Shares
(whether allocated or unallocated) purchased with the proceeds of such
Acquisition Loan; and the payments made with respect to an Acquisition Loan for
a Plan Year must not exceed the sum of such Employer Contributions, earnings and
dividends for that Plan Year (and prior Plan Years), less the amount of such
payments for prior Plan Years. If an Employer is the lender with respect to an
Acquisition Loan, Employer Contributions may be paid in the form of cancellation
of indebtedness under the Acquisition Loan. If an Employer is not the lender
with respect to an Acquisition Loan, payments on the Acquisition Loan may be
made by the Company directly to the lender, with such payments treated as
Employer Contributions.
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<PAGE> 17
(e) Sales of Company Stock - The Committee may direct the Trustee to
sell shares of Company Stock to any person (including the Company); provided
that any such sale shall be effected by the Trustee at a price not less than
Fair Market Value on the sale date. Notwithstanding the provisions of Section
5(d), the Committee may direct the Trustee to apply the proceeds from the sale
of unallocated Financed Shares to repay the Acquisition Loan (incurred to
finance the purchase of such Financed Shares) in the event of the sale of the
Company or the termination of the Plan or if the Plan ceases to be an employee
stock ownership plan under Section 4975(e)(7) of the Code. If the Trustee is
unable to make payments of principal and/or interest on an Acquisition Loan when
due, the Committee may direct the Trustee either to sell (with the approval of
the Board of Directors) any Financed Shares that have not yet been allocated to
Participants' Company Stock Accounts or to obtain a new Acquisition Loan in an
amount sufficient to make such payments. Any sale of Company Stock under this
Section 5(e) must comply with the fiduciary requirements applicable under
Section 404(a)(1) of ERISA.
Section 6. Allocations to Participants' Accounts.
A Company Stock Account and an Other Investments Account shall be
maintained to reflect the interest of each Participant under the Plan.
Company Stock Account - The Company Stock Account maintained for each
Participant will be credited annually with his allocable
15
<PAGE> 18
share of Company Stock (including fractional shares) purchased and paid for by
the Trust or contributed in kind to the Trust as a Discretionary Contribution or
Matching Contribution, with any Forfeitures from Company Stock Accounts and with
any stock dividends on Company Stock allocated to his Company Stock Account.
Other Investments Account - The Other Investments Account maintained
for each Participant will be credited annually with his allocable share of
Discretionary Contributions and Matching Contributions that are not in the form
of Company Stock, with any Forfeitures from Other Investments Accounts, with any
cash dividends on Company Stock allocated to his Company Stock Account (other
than currently distributed dividends) and any net income (or loss) of the Trust.
Such Account will be debited for the Participant's share of any cash payments
made by the Trustee for the acquisition of Company Stock or for the payment of
any principal and/or interest on an Acquisition Loan.
The allocations to Participants' Accounts for each Allocation Year will
be made as follows:
(a) Discretionary Contributions and Forfeitures - Discretionary
Contributions under Section 4(a) and Forfeitures under Section 9(b) for each
Allocation Year will be allocated as of the Allocation Date among the Accounts
of Participants so entitled under Section 3(b) in the ratio that the
Compensation of each such Participant bears to the total Compensation of all
such
16
<PAGE> 19
Participants, subject to the allocation limitations described in Section 7.
(b) Matching Contributions - Matching Contributions for each
Allocation Year will be allocated as of the Allocation Date to the Accounts of
the Participants in accordance with the rules outlined in Section 4(b).
(c) Financed Shares - Any Financed Shares acquired by the Trust shall
initially be credited to a "Loan Suspense Account" and will be allocated to
Company Stock Accounts of Participants only as payments on the Acquisition Loan
are made by the Trustee. The number of Financed Shares to be released from the
Loan Suspense Account for allocation to Participants' Company Stock Accounts
shall be determined by the Committee as follows:
(1) Principal/Interest Method - The number of Financed Shares held
in the Loan Suspense Account immediately before the current release shall be
multiplied by a fraction. The numerator of the fraction shall be the current
payments of principal and/or interest on the Acquisition Loan. The denominator
of the fraction shall be the sum of the numerator plus the total payments of
principal and interest on that Acquisition Loan projected to be paid in the
future years. For this purpose, the interest to be paid in future years is to be
computed by using the interest rate in effect as of the current release date.
(2) Principal Only Method - The Committee may elect (as to each
Acquisition Loan) or the provisions of the Acquisition Loan may provide for the
release of Financed Shares from the
17
<PAGE> 20
Loan Suspense Account based solely on the ratio that the current payments of
principal bear to the total principal amount of the Acquisition Loan. This
method may be used only to the extent that: (A) the Acquisition Loan provides
for annual payments of principal and interest at a cumulative rate that is not
less rapid at any time than level annual payments of such amounts for ten years;
(B) interest included in any payment on the Acquisition Loan is disregarded only
to the extent that it would be determined to be interest under standard loan
amortization tables; and (C) the entire duration of the Acquisition Loan
repayment period does not exceed ten years, even in the event of a renewal,
extension or refinancing of the Acquisition Loan.
(3) Allocation of Released Shares - When Trust Assets are applied
to make payments on an Acquisition Loan, the Financed Shares released from the
Loan Suspense Account in accordance with the provisions of this Section 6(c)
shall be allocated among Company Stock Accounts of Participants in the manner
determined by the Committee based upon the source of funds (Discretionary
Contributions, Matching Contributions, earnings attributable to such Employer
Contributions and cash dividends on Financed Shares) used to make the payments
on the Acquisition Loan. If cash dividends on Financed Shares allocated to a
Participant's Company Stock Account are used to make payments on an Acquisition
Loan, Financed Shares (representing that portion of such payments and whose Fair
Market Value is at least equal to the amount of
18
<PAGE> 21
such dividends) released from the Loan Suspense Account shall be allocated to
that Participant's Company Stock Account.
(d) Net Income (or Loss) of the Trust - The net income (or loss) of the
Trust for each Allocation Year will be determined as of the Allocation Date.
Prior to the allocation of Employer Contributions and Forfeitures for the
Allocation Year, each Participant's share of any net income (or loss) will be
allocated to his Other Investments Account in the ratio that the total balances
of both his Accounts on the preceding Allocation Date (reduced by any
distribution of Capital Accumulation from such Account during the Allocation
Year) bears to the sum of such Account balances for all Participants as of that
date. The net income (or loss) of the Trust includes the increase (or decrease)
in the fair market value of Trust Assets (other than Company Stock), interest
income, dividends and other income and gains (or losses) attributable to Trust
Assets (other than any dividends on allocated Company Stock) since the preceding
Allocation Date, reduced by any expenses charged to the Trust Assets for that
Allocation Year. The determination of the net income (or loss) of the Trust
shall not take into account any interest paid by the Trust under an Acquisition
Loan.
(e) Dividends on Company Stock - Any cash dividends received on shares
of Company Stock allocated to Participants' Company Stock Accounts will be
allocated to the respective Other Investments Accounts of such Participants. Any
cash dividends received on unallocated shares of Company Stock (including any
19
<PAGE> 22
Financed Shares credited to the Loan Suspense Account) shall be included in the
computation of the net income (or loss) of the Trust. Any stock dividends
received on Company Stock shall be credited to the Accounts (including the Loan
Suspense Account) to which such Company Stock was allocated.
(f) Accounting for Allocations - The Committee shall establish
accounting procedures for the purpose of making the allocations to Participants'
Accounts provided for in this Section 6. The Committee shall maintain adequate
records of the aggregate cost basis of Company Stock allocated to each
Participant's Company Stock Account. The Committee shall also keep separate
records of Financed Shares and of Employer Contributions (and any earnings
thereon) made for the purpose of enabling the Trust to repay any Acquisition
Loan. From time to time, the Committee may modify the accounting procedures for
the purposes of achieving equitable and nondiscriminatory allocations among the
Accounts of Participants in accordance with the general concepts of the Plan,
the provisions of this Section 6 and the requirements of the Code and ERISA.
Section 7. Allocation Limitations.
(a) Limitations on Annual Additions - The Annual Additions for each
Allocation Year with respect to any Participant may not exceed the lesser of:
(1) 25% of his Statutory Compensation; or
20
<PAGE> 23
(2) $30,000, as may be increased pursuant to Section 415(c)(1)(A)
of the Code.
For this purpose, "Annual Additions" shall be the total of the Employer
Contributions and Forfeitures (including any income attributable to Forfeitures)
allocated to the Accounts of a Participant for the Allocation Year, except as
provided in Section 7(b), plus any contributions (including Elective Deferrals)
or forfeitures allocated to his accounts under the 401(k) Plan. In determining
such Annual Additions, Forfeitures of Company Stock shall be included at Fair
Market Value.
If the aggregate amount that would be allocated to the Accounts of a
Participant in the absence of these limitations would exceed the amount set
forth in these limitations, his Annual Additions under the 401(k) Plan shall be
reduced prior to reducing the allocations to his Accounts under this Plan. Any
Forfeitures which can be allocated to no Participant's Accounts by reason of
these limitations shall be credited to a "Forfeiture Suspense Account" and
allocated as Forfeitures under Section 6(a) for the next succeeding Allocation
Year (prior to the allocation of Employer Contributions for such succeeding
Allocation Year).
(b) Special Acquisition Loan Rules - Any Employer Contributions which
are used by the Trust (not later than the due date, including extensions, for
filing the Company's Federal income tax return for the applicable taxable year)
to pay interest on an Acquisition Loan, and any Financed Shares which are
allocated as Forfeitures, shall not be included as Annual Additions under Sec-
21
<PAGE> 24
tion 7(a); provided, however, that the provisions of this Section 7(b) shall be
applicable only if not more than one-third of any Employer Contributions applied
to pay principal and/or interest on an Acquisition Loan are allocated to
Participants who are Highly Compensated Employees; and the Committee shall
reallocate such Employer Contributions to the extent it deems it to be
appropriate to satisfy this special rule.
The Annual Additions under Section 7(a) with respect to Financed Shares
released from the Loan Suspense Account (by reason of Employer Contributions
used for payments on an Acquisition Loan) and allocated to Participants' Company
Stock Accounts shall be the lesser of (A) the amount of such Employer
Contributions (as determined after application of the preceding paragraph); or
(B) the Fair Market Value of Company Stock. Annual Additions shall not include
any allocation attributable to any proceeds from the sale of Financed Shares by
the Trust or to appreciation (realized or unrealized) in the Fair Market Value
of Company Stock.
(c) Limitation on Electing Shareholder - If a Company shareholder sells
Company Stock to the Trust and elects (with the consent of the Company)
nonrecognition of gain under Section 1042 of the Code, no portion of Company
Stock purchased in any such transaction (or any dividends or other income
attributable thereto) may be allocated prior to the later of the tenth
anniversary of the purchase or the Allocation Year following the Allocation Year
for which shares are released from the Loan Suspense Account
22
<PAGE> 25
as a result of the final payment on any Acquisition Loan incurred in connection
with such purchase to the Accounts of:
(1) any Participant who has made an election under Section 1042
of the Code; or
(2) any Participant who is such selling shareholder's spouse,
brothers or sisters (whether by the whole or half blood),
ancestors or lineal descendants (except as to certain lineal
descendants, to the extent provided in Section 409(n)(3)(A)
of the Code), or any other person who bears a relationship to
him that is described in Section 267(b) of the Code.
In addition, no portion of Company Stock purchased in any such
transaction (or any dividends or other income attributable thereto) may
thereafter be allocated to the Accounts of any Participant owning (as determined
under Section 318(a) of the Code, without regard to Section 318(a)(2)(B)(i) of
the Code), during the entire one-year period preceding the purchase or on any
Allocation Date, more than 25% of any class of outstanding stock of the Company
or of the total value of any class of outstanding stock of the Company.
To the extent that a Participant is subject to the allocation
limitation described in this Section 7(c) for an Allocation Year, he shall not
share in the allocation of Employer Contributions and Forfeitures.
Section 8. Voting Company Stock.
Except as otherwise provided in this Section 8, shares of Company Stock
in the Trust shall be voted by the Trustee only as
23
<PAGE> 26
directed by the Committee. In order to facilitate the voting of shares under
this Section 8, the Trustee may give a proxy to the Committee.
With respect to any corporate matter which involves the voting of such
shares at a shareholder meeting and which constitutes a merger, consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business or a similar transaction
specified in regulations under Section 409(e)(3) of the Code, however, each
Participant (or Beneficiary) will be entitled to give directions to the Trustee
as to the voting of shares of Company Stock then allocated to his Company Stock
Account. In that event, each Participant (or Beneficiary) shall be provided with
the information statement and other materials provided to Company shareholders
in connection with the shareholder meeting, together with a form upon which
confidential voting directions may be given to the Trustee. The Trustee shall
not disclose the voting directions of any individual Participant (or
Beneficiary) to the Committee or the Company. Any allocated Company Stock with
respect to which voting directions are not received from Participants (or
Beneficiaries) and any shares of Company Stock which are not then allocated to
Participants' Company Stock Accounts shall be voted by the Trustee in the manner
directed by the Committee.
Section 9. Vesting and Forfeitures.
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<PAGE> 27
(a) Vesting - A Participant's interest in his Accounts shall become
100% vested and nonforfeitable if he (1) is employed by the Company or an
Affiliate on or after his 65th birthday, (2) incurs a Disability while employed
by the Company or an Affiliate, (3) dies while employed by the Company or an
Affiliate, or (4) completes at least five years of Credited Service.
(b) Forfeitures - If a Participant who is not vested terminates
Service, the final balances in his Accounts will become a Forfeiture when he
incurs a five-consecutive-year Break in Service. All Forfeitures will be
reallocated to the Accounts of remaining Participants, as provided in Section
6(a), as of the Allocation Date coinciding with or next following the date on
which the Forfeiture occurs.
Section 10. Credited Service and Break in Service.
(a) Credited Service - An Employee's Credited Service shall include
each period of his Service computed (in full years and days) from the date he is
first credited with an Hour of Service (including Service prior to March 1,
1996) until the date on which his Service terminates. A Break in Service that
does not exceed one year shall be included in an Employee's Credited Service.
Credited Service shall also include periods of Service with an Affiliate.
(b) Break in Service - A one-year Break in Service shall occur one year
after the date of an Employee's termination of Service. A five-consecutive-year
Break in Service shall occur
25
<PAGE> 28
five years after the date of an Employee's termination of Service (if he has not
been reemployed). For purposes of determining the period of an Employee's Break
in Service, the period of a maternity/paternity absence, described in Section
411(a)(6)(E)(i) of the Code, or any unpaid leave covered under the Family and
Medical Leave Act of 1993, not exceeding one year shall not be treated as a
Break in Service.
(c) Reemployment - If a former Employee is reemployed after a
five-consecutive-year Break in Service and had not attained a vested interest
under the Plan, Service prior to the Break in Service shall not be included in
determining his Credited Service. If a Participant is reemployed after a
one-year Break in Service but prior to the occurrence of a five-consecutive-year
Break in Service, his Credited Service shall not include Service prior to the
one-year Break in Service until he completes one year of Credited Service
following reemployment.
Section 11. When Capital Accumulation Will Be Distributed.
(a) Except as otherwise provided in Sections 11(c) and 12, a
Participant's Capital Accumulation will be distributed following his termination
of Service, but only at the time and in the manner determined by the Committee.
The Committee shall establish a benefit distribution policy and may modify such
policy from time to time; provided, however, that the distribution policy shall
be applied to Participants in a nondiscriminatory manner.
26
<PAGE> 29
(b) In the event of a Participant's Retirement, Disability or death,
distribution of his Capital Accumulation shall commence not later than the Plan
Year following the Plan Year in which his Retirement, Disability or death
occurs. If a Participant's Service terminates for any other reason, distribution
of his Capital Accumulation shall commence not later than the sixth Plan Year
following the Plan Year in which his Service terminates (unless he is reemployed
by the Company or an Affiliate). Except as otherwise provided in Section 11(c),
if a Participant's Capital Accumulation includes Financed Shares, the Committee
may elect to defer the distribution of that portion of his Capital Accumulation
(attributable to such Financed Shares) until the Plan Year following the Plan
Year in which the Acquisition Loan (incurred to acquire such Financed Shares)
has been fully repaid. For this purpose, all indebtedness incurred by the
Trustee to acquire Company Stock in a single transaction shall be treated as one
Acquisition Loan.
The following alternative modes of distribution may be selected by the
Committee (after considering the available liquid assets of the Company and the
Trust):
(1) Distribution of a Participant's Capital Accumulation in a
single lump sum; or
(2) Distribution of a Participant's Capital Accumulation in
substantially equal, annual installments over a period not
exceeding five years (provided that the period over which
installments may be distributed may be extended an additional
year (up to an additional five years) for each $135,000 or
fraction thereof by which his Capital Accumulation
27
<PAGE> 30
exceeds $690,000 (as adjusted after 1996 for increases in
the cost of living pursuant to Section 409(o)(2) of the
Code)); or
(3) Any combination of the foregoing.
If the value of a Participant's Capital Accumulation at the time a distribution
would otherwise commence under this Section 11 exceeds $3,500, no portion of his
Capital Accumulation may be distributed to him without his written consent
before he attains age 65.
(c) Distribution of a Participant's Capital Accumulation shall commence
not later than 60 days after the end of the Plan Year in which occurs the latest
of (1) his 65th birthday, (2) the tenth anniversary of the date he became a
Participant, or (3) his termination of Service. The distribution of the Capital
Accumulation of any Participant who attains age 70 1/2 in an Allocation Year
must commence not later than April 1st of the next Allocation Year (even if he
has not terminated Service) and must be made in accordance with the regulations
under Section 401(a)(9) of the Code, including Section 1.401(a)(9)-2. If the
amount of a Participant's Capital Accumulation cannot be determined (by the
Committee) by the date on which a distribution is to commence, or if the
Participant cannot be located, distribution of his Capital Accumulation shall
commence within 60 days after the date on which his Capital Accumulation can be
determined or after the date on which the Committee locates the Participant.
28
<PAGE> 31
(d) If any part of a Participant's Capital Accumulation is retained in
the Trust after his Service ends, his Accounts will continue to be treated as
described in Section 6. However, except as provided in Section 3(b), such
Accounts shall not be credited with any additional Employer Contributions and
Forfeitures. If a Participant whose Capital Accumulation exceeds $3,500 fails to
consent to a distribution offered before he attains age 65, or if a Participant
cannot be located, his entire Capital Accumulation may be segregated and
invested in Trust Assets other than Company Stock (as determined by the
Committee).
Section 12. Diversification Election
Effective March 1, 2006, a Participant who has attained age 55 and
completed at least ten Years of Participation shall be notified of his right to
elect to "diversify" a portion of the balance in his Company Stock Account, as
provided in Section 401(a)(28)(B) of the Code. An election to "diversify" must
be made on the prescribed form and filed with the Committee within the 90-day
period immediately following the last day of a Plan Year in the Election Period.
For purposes of this Section 12, "Years of Participation" is the number of
Allocation Years in which the Participant is entitled to receive an allocation
of Employer Contributions or Forfeitures under Section 3(b), and the "Election
Period" means the period of six consecutive Plan Years beginning with the Plan
Year in which the Participant first becomes eligible to make an election.
29
<PAGE> 32
For each of the first five Plan Years in the Election Period, the
Participant may elect to "diversify" an amount which does not exceed 25% of the
number of shares of Company Stock allocated to his Company Stock Account since
the inception of the Plan, less all shares with respect to which an election
under this Section 12 was previously made. In the case of the sixth Plan Year in
the Election Period, the Participant may elect to "diversify" an amount which
does not exceed 50% of the number of shares of Company Stock allocated to his
Company Stock Account since the inception of the Plan, less all shares with
respect to which an election under this Section 12 was previously made. No
"diversification" shall be permitted if the balance in a Participant's Company
Stock Account as of the last day of the first Plan Year in the Election Period
has a Fair Market Value of $500 or less, unless and until the balance in his
Company Stock Account as of a subsequent Plan Year in the Election Period
exceeds $500.
So long as the 401(k) Plan then provides at least three investment
funds (other than Company Stock) among which Participants may select,
"diversification" will be effected by transferring to the 401(k) Plan funds
representing that portion of Participants' Company Stock Accounts with respect
to which a "diversification" election is made. Any transfer to the 401(k) Plan
under this Section 12 shall occur no earlier than 30 days after any required
Forms 5310-A with respect to such transfer have been filed with the Internal
Revenue Service.
30
<PAGE> 33
Section 13. How Capital Accumulation Will Be Distributed.
(a) The Trustee will make distributions from the Trust only as directed
by the Committee. Distribution of a Participant's Capital Accumulation will be
made in whole shares of Company Stock, cash or a combination of both, as
determined by the Committee; provided, however, that the Committee shall notify
the Participant of his right to demand distribution of his Capital Accumulation
entirely in whole shares of Company Stock (with only the value of any fractional
share paid in cash). Any distribution in cash shall be based upon the Fair
Market Value of Company Stock as of the last day of the Plan Year coinciding
with or immediately preceding the date of distribution.
(b) If the charter or by-laws of the Company restrict the ownership of
substantially all outstanding shares of Company Stock to current Employees and
the Trust, the distribution of a Participant's Capital Accumulation may be made
entirely in cash without granting the Participant the right to demand
distribution in Company Stock. Alternatively, Company Stock may be distributed
subject to the requirement that it be immediately resold to the Company under
payment terms that comply with Section 14(b).
(c) Distribution of a Participant's Capital Accumulation will be made
to the Participant if he is living, and if not, to his Beneficiary. In the event
of a Participant's death, his Beneficiary shall be his surviving spouse, or if
none, his estate. A Participant (with the written consent of his spouse, if any,
acknowledging the effect of the consent and witnessed by a
31
<PAGE> 34
notary public or Plan representative) may designate a different Beneficiary or
Beneficiaries from time to time by filing a written designation with the
Committee. A deceased Participant's entire Capital Accumulation shall be
distributed to his Beneficiary within five years after his death, except to the
extent that distribution has previously commenced in accordance with Section
11(b)(2).
(d) The Company shall furnish the recipient of a distribution with the
tax consequences explanation required by Section 402(f) of the Code and shall
comply with the withholding requirements of Section 3405 of the Code and of any
applicable state law with respect to distributions from the Trust. If the
Committee so elects for a Plan Year, distributions to Participants may commence
less than 30 days after the notice required under Section 1.411(a)-11(c) of the
regulations under the Code is given; provided that no such distribution to a
Participant shall be made unless (1) the Participant is informed that he has the
right to a period of at least 30 days after receiving the notice to consider
whether or not to consent to a distribution (or a particular distribution
option) and (2) the Participant affirmatively elects to receive a distribution
after receiving the notice.
(e) If a distribution of a Participant's Capital Accumulation is
neither one of a series of annual installments over a period of ten years (or
more) nor the minimum amount required to be distributed pursuant to the second
sentence of Section 11(c)
32
<PAGE> 35
(an "eligible rollover distribution"), the Committee shall notify the
Participant (or any spouse or former spouse who is his alternate payee under a
"qualified domestic relations order" (as defined in Section 414(p) of the Code))
of his right to elect to have the "eligible rollover distribution" paid directly
to an "eligible retirement plan" (within the meaning of Section 401(a)(31) of
the Code) that is an individual retirement account described in Section 408(a)
of the Code, an individual retirement annuity described in Section 408(b) of the
Code, a qualified trust described in Section 401(a) of the Code or a qualified
annuity plan described in Section 403(a) of the Code that accepts "eligible
rollover distributions." If such an "eligible rollover distribution" is to be
made to the Participant's surviving spouse, the Committee shall notify the
surviving spouse of his right to elect to have the distribution paid directly to
an "eligible retirement plan" that is either an individual retirement account
described in Section 408(a) of the Code or an individual retirement annuity
described in Section 408(b) of the Code. Any election under this Section 13(e)
shall be made and effected in accordance with such rules and procedures as may
be established from time to time by the Committee in order to comply with
Section 401(a)(31) of the Code.
33
<PAGE> 36
Section 14. Rights, Options and Restrictions on Company Stock.
(a) Any shares of Company Stock held or distributed by the Trust shall
be subject to a "right of first refusal," unless Company Stock is readily
tradable on an established market. The right of first refusal shall provide
that, prior to any subsequent transfer, the shares must first be offered for
purchase in writing to the Company, and then to the Trust, at the then Fair
Market Value. A bona fide written offer from an independent prospective buyer
shall be deemed to be the Fair Market Value for this purpose. The Company and
the Committee (on behalf of the Trust) shall have a total of 14 days to exercise
the right of first refusal on the same terms offered by a prospective buyer. The
Company may require that a Participant entitled to a distribution of Company
Stock execute an appropriate stock transfer agreement (evidencing the right of
first refusal) prior to receiving a certificate for Company Stock.
(b) The Company shall provide a "put option" to any Participant (or
Beneficiary) who receives a distribution of Company Stock, unless Company Stock
is readily tradable on an established market. The put option shall permit the
Participant (or Beneficiary) to sell such Company Stock to the Company at any
time during two option periods, at the then Fair Market Value. The first put
option period shall be for at least 60 days beginning on the date of
distribution. The second put option period shall be for at least 60 days
beginning after the new determination of Fair Market Value (and notice to the
Participant thereof) in the
34
<PAGE> 37
following Plan Year. The Company may allow the Committee to direct the Trustee
to purchase shares of Company Stock tendered to the Company under a put option.
The payment for any Company Stock sold under a put option shall be made within
30 days if the shares were distributed as part of an installment distribution.
If the shares were distributed in a lump sum distribution, payment shall
commence within 30 days and may be made in a lump sum or in substantially equal,
annual installments over a period not exceeding five years, with adequate
security provided and interest payable at a reasonable rate pursuant to the
promissory note which is issued to evidence the unpaid installment balance (as
determined by the Company or the Committee).
(c) Shares of Company Stock held or distributed by the Trustee may
include such legend restrictions on transferability as the Company may
reasonably require in order to assure compliance with applicable Federal and
state securities laws. Except as otherwise provided in Section 13(b) and this
Section 14, no shares of Company Stock held or distributed by the Trustee may be
subject to a put, call or other option, or buy-sell or similar arrangement. The
provisions of this Section 14 shall continue to be applicable to Company Stock
even if the Plan ceases to be an employee stock ownership plan under Section
4975(e)(7) of the Code.
Section 15. No Assignment of Benefits.
35
<PAGE> 38
A Participant's Capital Accumulation may not be anticipated, assigned
(either at law or in equity), alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process, except in accordance with a
"qualified domestic relations order" (as defined in Section 414(p) of the Code).
Distributions made to an alternate payee in accordance with a qualified domestic
relations order may commence no earlier than the date on which the Participant
attains his "earliest retirement age" (as defined in Section 414(p)(4)(B) of the
Code).
Section 16. Administration.
(a) Administrative Committee - The Plan will be administered by an
Administrative Committee composed of one or more individuals appointed by the
Board of Directors to serve at its pleasure and without compensation. The
members of the Committee shall be the named fiduciaries with authority to
control and manage the operation and administration of the Plan. Members of the
Committee need not be Employees or Participants. Any Committee member may resign
by giving notice, in writing, to the Board of Directors.
(b) Committee Action - Committee action will be by vote of a majority
of the members at a meeting or in writing without a meeting. A Committee member
shall not vote on any question relating specifically to himself.
The Committee shall choose from its members a Chairman and a Secretary.
The Chairman or the Secretary of the Committee shall
36
<PAGE> 39
be authorized to execute any certificate or other written direction on behalf of
the Committee. The Secretary shall keep a record of the Committee's proceedings
and of all dates, records and documents pertaining to the administration of the
Plan.
(c) Powers and Duties of the Committee - The Committee shall have all
powers necessary to enable it to administer the Plan and the Trust Agreement in
accordance with their provisions, including without limitation the following:
(1) resolving all questions relating to the eligibility of
Employees to become Participants;
(2) determining the appropriate allocations to Participants'
Accounts pursuant to Section 6;
(3) determining the amount of benefits payable to a Participant
(or Beneficiary), and the time and manner in which such
benefits are to be paid;
(4) authorizing and directing all disbursements of Trust Assets
by the Trustee;
(5) establishing procedures in accordance with Section 414(p) of
the Code to determine the qualified status of domestic
relations orders and to administer distributions under such
qualified orders;
(6) engaging any administrative, legal, accounting, clerical or
other services that it may deem appropriate;
(7) construing and interpreting the Plan and the Trust Agreement
and adopting rules for administration of the Plan that are
consistent with the terms of the Plan documents and of ERISA
and the Code;
(8) compiling and maintaining all records it determines to be
necessary, appropriate or convenient in connection with the
administration of the Plan;
(9) reviewing the performance of the Trustee with respect to the
Trustee's administrative duties,
37
<PAGE> 40
responsibilities and obligations under the Plan and Trust
Agreement;
(10) selecting an independent appraiser and determining the Fair
Market Value of Company Stock as of the last day of each Plan
Year and such other dates as it determines, in its
discretion, to be necessary or appropriate; and
(11) executing agreements and other documents on behalf of the
Plan and Trust.
Except as otherwise provided in Section 5(c) and (e), the Committee
shall be responsible for directing the Trustee as to the investment of Trust
Assets. The Committee may delegate to the Trustee the responsibility for
investing all or any portion of the Trust Assets. The Committee shall establish
a funding policy and method for directing the Trustee to acquire Company Stock
(and for otherwise investing the Trust Assets) in a manner that is consistent
with the objectives of the Plan and the requirements of ERISA.
The Committee shall perform its duties under the Plan and the Trust
Agreement solely in the interests of the Participants (and their Beneficiaries).
Any discretion granted to the Committee under any of the provisions of the Plan
or the Trust Agreement shall be exercised only in accordance with rules and
policies established by the Committee which shall be applicable on a
nondiscriminatory basis. The Committee shall have sole and exclusive
discretionary authority to construe, interpret and apply the terms of the Plan.
The Committee shall be given the
38
<PAGE> 41
greatest possible deference permitted by law in the exercise of
such discretionary authority.
(d) Expenses - All reasonable expenses of administering the Plan and
Trust shall be charged to and paid out of the Trust Assets. The Company may,
however, pay all or any portion of such expenses directly, and payment of
expenses by the Company shall not be deemed to be Employer Contributions.
(e) Information to be Submitted to the Committee - To enable the
Committee to perform its functions, the Company shall supply full and timely
information to the Committee on all matters as the Committee may require, and
shall maintain such other records as the Committee may determine are necessary
or appropriate in order to determine the benefits due or which may become due to
Participants (or Beneficiaries) under the Plan.
(f) Delegation of Fiduciary Responsibility - The Committee from time to
time may allocate to one or more of its members and/or may delegate to any other
persons or organizations any of its rights, powers, duties and responsibilities
with respect to the operation and administration of the Plan that are permitted
to be so delegated under ERISA; provided, however, that responsibility for
investment of the Trust Assets may not be allocated or delegated except as
provided in Section 16(c). Any such allocation or delegation shall be made in
writing, shall be reviewed periodically by the Committee and shall be terminable
upon such notice as the Committee in its discretion deems reasonable and proper
under the circumstances.
39
<PAGE> 42
(g) Bonding, Insurance and Indemnity - To the extent required under
Section 412 of ERISA, the Company shall secure fidelity bonding for the
fiduciaries of the Plan.
The Company (in its discretion) or the Trustee (as directed by the
Committee) may obtain a policy or policies of insurance for the Committee (and
other fiduciaries of the Plan) to cover liability or loss occurring by reason of
the act or omission of a fiduciary. If such insurance is purchased with Trust
Assets, the policy must permit recourse by the insurer against the fiduciary in
the case of a breach of a fiduciary obligation by such fiduciary. The Company
hereby agrees to indemnify each member of the Committee (to the extent permitted
by law) against any personal liability or expense resulting from his service on
the Committee, except such liability or expense as may result from his own
willful misconduct.
(h) Notices, Statements and Reports - The Company shall be the "Plan
Administrator" (as defined in Section 3(16)(A) of ERISA and Section 414(g) of
the Code) for purposes of the reporting and disclosure requirements of ERISA and
the Code. The Committee shall assist the Company, as requested, in complying
with such reporting and disclosure requirements. The Committee shall be the
designated agent of the Plan for the service of legal process.
40
<PAGE> 43
Section 17. Claims Procedure.
A Participant (or Beneficiary) who does not receive a distribution of
benefits to which he believes he is entitled may present a claim to the
Committee. The claim for benefits must be in writing and addressed to the
Committee or to the Company. If the claim for benefits is denied, the Committee
shall notify the Participant (or Beneficiary) in writing within 90 days after
the Committee initially received the benefit claim, unless special circumstances
require an extension of time for processing the claim, in which case such period
may be extended for an additional 90 days; provided, that the Committee must
provide the Participant (or Beneficiary) with written notice of such extension
prior to the expiration of the initial 90-day period. Any notice of a denial of
benefits shall advise the Participant (or Beneficiary) of the basis for the
denial, any additional material or information necessary for the Participant (or
Beneficiary) to perfect his claim and the steps which the Participant (or
Beneficiary) must take to have his claim for benefits reviewed.
Each Participant (or Beneficiary) whose claim for benefits has been
denied may file a written request for a review of his claim by the Committee.
The request for review must be filed by the Participant (or Beneficiary) within
60 days after he receives the written notice denying his claim. The decision of
the Committee will be made within 60 days after receipt of a request for review
and shall be communicated in writing to the claimant. Such written notice shall
set forth the basis for the Committee's
41
<PAGE> 44
decision. If there are special circumstances (such as the need to hold a
hearing) which require an extension of time for completing the review, the
Committee's decision shall be rendered not later than 120 days after receipt of
a request for review. Nothing contained in the Plan shall be deemed to give an
Employee the right to be retained in the Service of the Company or to interfere
with the right of the Company to discharge, with or without cause, any Employee
at any time. All decisions and interpretations of the Committee under this
Section 17 shall be conclusive and binding upon all persons with an interest in
the Plan and shall be given the greatest deference permitted by law.
Section 18. Limitation on Participants' Rights.
A Participant's Capital Accumulation will be based solely upon his
vested interest in his Accounts and will be paid only from the Trust Assets. The
Company, the Committee or the Trustee shall not have any duty or liability to
furnish the Trust with any funds, securities or other assets, except as
expressly provided in the Plan.
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract of employment or otherwise between the Company and any
Employee, or to be a consideration for, or an inducement or condition of, any
employment. Nothing contained in this Plan shall be deemed to give an Employee
the right to be retained in the Service of the Company or to interfere with the
42
<PAGE> 45
right of the Company to discharge, with or without cause, any Employee at any
time.
Section 19. Future of the Plan.
The Company reserves the right to amend or terminate the Plan (in whole
or in part) and the Trust Agreement at any time, by action of the Board of
Directors. Neither amendment nor termination of the Plan shall retroactively
reduce the vested rights of Participants or permit any part of the Trust Assets
to be diverted to or used for any purpose other than for the exclusive benefit
of the Participants (and their Beneficiaries).
The Company specifically reserves the right to amend the Plan and the
Trust Agreement retroactively in order to satisfy any applicable requirements of
the Code and ERISA.
The Company further reserves the right to terminate the Plan in the
event of a determination by the Internal Revenue Service (after a timely
Application for Determination is filed by the Company) that the Plan initially
fails to satisfy the applicable requirements of Sections 401(a) and 4975(e)(7)
of the Code. If such a determination is made, all Trust Assets shall (upon
written direction of the Company) be returned to the Company and the Plan shall
terminate.
If the Plan is terminated (or partially terminated), participation of
Participants affected by the termination will end. If Employer Contributions are
not replaced by contributions to a comparable plan which satisfies the
requirements of Sec-
43
<PAGE> 46
tion 401(a) of the Code, the Accounts of only those Participants who are
Employees on the effective date of the termination will become nonforfeitable as
of that date. A complete discontinuance of Employer Contributions shall be
deemed to be a termination of the Plan for this purpose. The Capital
Accumulations of those Participants whose Service terminated prior to the
effective date of Plan termination will continue to be determined pursuant to
Section 9(a); and, to the extent that such Participants are not vested, their
Accounts will become Forfeitures to be reallocated as of the effective date of
Plan termination (even if they have not incurred a five-consecutive-year Break
in Service).
After termination of the Plan, the Trust will be maintained until the
Capital Accumulations of all Participants have been distributed. Capital
Accumulations may be distributed following termination of the Plan or
distributions may be deferred as provided in Section 11, as the Company shall
determine. In the event that Company Stock is sold in connection with the
termination of the Plan or the amendment of the Plan to become a qualified
employee plan that is not a stock bonus plan, all Capital Accumulations may be
distributed in cash.
In the event of the merger or consolidation of this Plan with another
plan, or the transfer of Trust Assets (or liabilities) to another plan, the
Account balances of each Participant immediately after such merger,
consolidation or transfer must be at least as great as immediately before such
merger, consolidation or transfer (as if the Plan had then terminated).
44
<PAGE> 47
Section 20. "Top-Heavy" Contingency Provisions.
(a) The provisions of this Section 20 are included in the Plan
pursuant to Section 401(a)(10)(B)(ii) of the Code and shall become applicable
only if the Plan becomes a "top-heavy plan" under Section 416(g) of the Code for
any Allocation Year.
(b) The determination as to whether the Plan becomes "top-heavy" for
any Allocation Year shall be made as of the Allocation Date of the immediately
preceding Allocation Year (or as of December 31, 1996, for the Allocation Year
ending on that date) by considering the Plan together with the 401(k) Plan. The
Plan shall be "top-heavy" only if the total of the account balances under the
Plan and the 401(k) Plan for "key employees" as of the determination date
exceeds 60% of the total of the account balances for all Participants. For such
purpose, account balances shall be computed and adjusted pursuant to Section
416(g) of the Code. "Key employees" shall be certain Participants (who are
officers or shareholders of the Company) and Beneficiaries described in Section
416(i)(1) or (5) of the Code.
(c) For any Allocation Year in which the Plan is "top-heavy," each
Participant who is an Employee on the Allocation Date (and who is not a "key
employee") shall receive a minimum allocation of Employer Contributions and
Forfeitures which is equal to the lesser of:
(1) 3% of his Statutory Compensation; or
(2) the same percentage of his Statutory Compensation as the
allocation to the "key employee" for whom
45
<PAGE> 48
the percentage is the highest for that Plan Year. For this
purpose, the allocation to a "key employee" shall include any
Elective Deferrals made on his behalf for the Allocation Year
to the 401(k) Plan.
(d) As of the first day of any Allocation Year in which the Plan has
become "top-heavy," the five-year vesting provision in Section 9(a)(4) shall be
applied (with respect to any Employee who is credited with at least one Hour of
Service after the Plan has become "top-heavy") by providing for vesting after
three years of Credited Service.
If the Plan ceases to be "top-heavy," the Capital Accumulation of a
Participant who, at that time, has less than three years of Service shall
thereafter be determined under the vesting provision in Section 9(a)(4), instead
of the vesting provision of this Section 20(d). If the Plan ceases to be
"top-heavy," the Capital Accumulation of a Participant who, at that time, has
three or more years of Service shall continue to be determined using the
three-year vesting schedule in this Section 20(d).
(e) For any Allocation Year in which the Plan is "top-heavy," Statutory
Compensation of each Employee for purposes of the Plan shall not take into
account any amount in excess of $150,000 (as adjusted for increases in the cost
of living).
Section 21. Governing Law.
The provisions of this Plan and the Trust Agreement shall be construed,
administered and enforced in accordance with the laws
46
<PAGE> 49
of the State of California, to the extent such laws are not superseded by ERISA.
Section 22. Execution.
To record the adoption of the Plan, the Company has caused it to be
executed on this 23rd day of April, 1996.
MEADE INSTRUMENTS CORP.
By /s/ JOHN C. DIEBEL
--------------------------------------
Chairman & CEO
By /s/ STEVE MURDOCK
--------------------------------------
President
<PAGE> 50
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Amendment No. 1
WHEREAS, Meade Instruments Corp. (the "Company") maintains the Meade
Instruments Corp. Employee Stock Ownership Plan ("Plan") for the benefit of its
eligible Employees;
WHEREAS, the Internal Revenue Service has requested that certain
technical amendments be made to the Plan as a condition for the issuance of a
favorable determination letter relating to the qualified status of the Plan
under the Internal Revenue Code of 1986, as amended; and
WHEREAS, it is desirable to amend the Plan to modify certain provisions
relating to limitations on Annual Additions and to conform with certain
requirements of the Small Business Job Protection Act of 1996;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The definition of "Compensation" in Section 2 is restated, effective
as of March 1, 1997, to read as follows:
Compensation ......... The total wages and other compensa-
tion paid to an Employee by the
Company during each Allocation
Year, as reported on the Employee's
Tax and Wage Statement (Form W-2),
plus any Elective Deferrals made on
<PAGE> 51
his behalf to the 401(k) Plan and any
amounts withheld pursuant to the Company's
Cafeteria Plan (under Section 125 of the
Code), but excluding any amount in excess of
$160,000 (as adjusted after 1997 for
increases in the cost of living pursuant to
Section 401(a)(17) of the Code).
2. The definition of "Highly Compensated Employee" is restated,
effective as of March 1, 1997, to read as follows:
Highly Compensated
Employee ............ An Employee who (1) was a 5% owner
at any time during the year or the
preceding year, or (2) had Compen-
sation in excess of $80,000 in the
preceding year and, if so elected
by the Company, was in the top-paid
20% group of Employees for such
preceding year. The $80,000 amount
shall be adjusted for increases in
the cost of living pursuant to
Section 414(q)(1) of the Code.
3. The definition of "Statutory Compensation" in Section 2 is restated,
effective as of January 1, 1998, to read as follows:
Statutory
Compensation ........ The total remuneration paid to an
Employee by the Company during the
Allocation Year for personal ser-
vices rendered to the Company, plus
the amount of any Elective
Deferrals made on his behalf to the
401(k) Plan and any amount withheld
pursuant to the Company's Cafeteria
Plan (under Section 125 of the
Code) and excluding employer con-
tributions to a plan of deferred
compensation, amounts realized in
connection with stock options and
amounts which receive special tax
benefits.
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<PAGE> 52
4. Section 3(c) is modified, effective as of March 1, 1996, by adding
the following sentence at the end thereof:
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of
the Code.
5. The second paragraph of Section 4(b) is restated, effective as of
March 1, 1996, to read as follows:
Matching Contributions for Highly Compensated Employees shall be
limited for any Allocation Year to the extent necessary to satisfy one of
the contribution percentage requirements described in Section 401(m)(2) of
the Code and Section 1.401(m)-1(b) of the regulations thereunder, as
computed separately (if necessary) for the Plan and the 401(k) Plan. The
actual contribution percentage of the Highly Compensated Employee with the
highest such percentage shall be reduced until it equals that of the
Highly Compensated Employee with the next highest percentage. This process
shall be repeated until one of the above tests is passed. For the 1996
Allocation Year only, if a Highly Compensated Employee is aggregated with
family members who are Highly Compensated Employees (without regard to
aggregation) then his actual contribution percentage shall be reduced in
accordance with Section 1.401(m)-1(e)(2)(iii) of the regulations, and
excess aggregate contributions shall be
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<PAGE> 53
allocated among family members in proportion to the Matching Contributions
of each family member. For this purpose, any reduction in the Matching
Contributions made on behalf of Highly Compensated Employees shall be
determined in order of the actual dollar amounts of Matching Contributions
beginning with the highest of such dollar amounts (however, for the 1996
Allocation Year, any such reduction shall be determined in order of the
contribution percentages beginning with the highest of such percentages).
Matching Contributions shall not be payable with respect to any Elective
Deferrals under the 401(k) Plan which are distributed to Participants
pursuant to the provisions of the 401(k) Plan in order to satisfy Sections
401(k)(3)(A)(ii) or 402(g) of the Code.
6. The last paragraph of Section 7(a) is restated, effective as of
March 1, 1996, to read as follows:
If the aggregate amount that would be allocated to the Accounts of a
Participant in the absence of these limitations would exceed the amount
set forth in these limitations, the allocation of Discretionary
Contributions and Forfeitures under this Plan shall be reduced prior to
reducing the allocations to his accounts under the 401(k) Plan. Any
Forfeitures which can be allocated to no Participant's Accounts by reason
of these limitations shall be credited to a "Forfeiture Suspense Account"
and allocated as Forfeitures
- 4 -
<PAGE> 54
under Section 6(a) for the next succeeding Allocation Year (prior to the
allocation of Employer Contributions for such succeeding Allocation Year).
7. Section 11(c) is restated, effective as of January 1, 1997, to read
as follows:
(c) Distribution of a Participant's Capital Accumulation shall
commence not later than 60 days after the end of the Plan Year in which
occurs the latest of (1) his 65th birthday, (2) the tenth anniversary of
the date he became a Participant, or (3) his termination of Service. The
distribution of the Capital Accumulation of any Participant who attains
age 70-1/2 in any calendar year and either (i) has terminated Service or
(ii) is a "5% owner" of Company Stock (as defined in Section
416(i)(1)(B)(i) of the Code) must commence not later than April 1st of the
next calendar year and must be made in accordance with the regulations
under Section 401(a)(9) of the Code, including Section 1.401(a)(9)-2. If
the amount of a Participant's Capital Accumulation cannot be determined
(by the Committee) by the date on which a distribution is to commence, or
if the Participant cannot be located, distribution of his Capital
Accumulation shall commence within 60 days after the date on which his
Capital Accumulation can be determined or after the date on which the
Committee locates the Participant.
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<PAGE> 55
8. The fourth paragraph of Section 19 is restated, effective as of
January 1, 1996, to read as follows:
If the Plan is terminated (or partially terminated), participation
of Participants affected by the termination will end. If Employer
Contributions are not replaced by contributions to a comparable plan which
satisfies the requirements of Section 401(a) of the Code, the Accounts of
all affected Participants shall become nonforfeitable. A complete
discontinuance of Employer Contributions shall be deemed to be a
termination of the Plan for this purpose.
To record the adoption of this Amendment No. 1, the Company has caused
it to be executed this _____ day of __________, 1997.
MEADE INSTRUMENTS CORP.
By
-----------------------------
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<PAGE> 56
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
Amendment No. 2
WHEREAS, Meade Instruments Corp. (the "Company") maintains the Meade
Instruments Corp. Employee Stock Ownership Plan (the "Plan") for the benefit of
its eligible Employees;
WHEREAS, it is necessary to amend the Plan in connection with the
initial public offering ("IPO") of stock of the Company;
NOW, THEREFORE, the Plan is hereby amended, effective upon consummation
of the IPO, to read as follows:
1. The definitions of "Company," "Company Stock" and "Fair Market
Value" in Section 2 are restated to read as follows:
Company ................... Meade Instruments Corp., a
Delaware corporation.
Company Stock ............. Shares of Common Stock issued
by the Company, which stock is
readily tradable on an estab-
lished securities market and
constitutes "employer securi-
ties" under Section 409(l)(1)
of the Code.
Fair Market Value ........ The fair market value of Company
Stock, as determined for all
purposes under the Plan by reference
to prevailing market prices.
<PAGE> 57
2. Section 7(c) is restated to read as follows:
If a Company shareholder sold Company Stock to the
Trust in the transaction described in Section 5(c) and elected (with the
consent of the Company) nonrecognition of gain under Section 1042 of the
Code, no portion of the Com-
pany Stock purchased in that transaction (or any dividends or other income
attributable thereto) may be allocated prior to the later of the tenth
anniversary of the purchase or the Allocation Year following the
Allocation Year for which shares are released from the Loan Suspense
Account as a result of the final payment on the Acquisition Loan incurred
in connection with such purchase to the Accounts of:
(1) any Participant who has made an election under
Section 1042 of the Code; or
(2) the selling shareholder's spouse, brothers or sisters (whether
by the whole or half blood), ancestors or lineal descendants
(except as to certain lineal descendants, to the extent
provided in Section 409(n)(3)(A) of the Code), or any other
person who bears a relationship to him that is described in
Section 267(b) of the Code.
In addition, no portion of the Company Stock purchased by the Trust
in the 1996 transaction (or any dividends or other income attributable
thereto) may thereafter be allocated to the Accounts of any Participant
owning (as determined under Section 318(a) of the Code, without regard to
Section 318(a)(2)(B)(i) of the Code), during the entire one-year period
preceding the purchase or on any Allocation Date, more than 25% of any
class of outstanding Company
- 2 -
<PAGE> 58
Stock or of the total value of any class of outstanding Company Stock.
To the extent that a Participant is subject to the allocation
limitation described in this Section 7(c) for an Allocation Year, he shall
not share in the allocation of Employer Contributions and Forfeitures.
3. Section 8 is restated to read as follows:
Each Participant (or Beneficiary) will be entitled to give
directions to the Trustee as to the voting of shares of Company Stock
allocated to his Company Stock Account on all matters presented for a vote
of stockholders. Each Partici- pant (or Beneficiary) having shares
allocated to his Company Stock Account as of the record date for voting at
a stock- holder meeting shall be provided with the proxy statement and
other materials provided to Company stockholders in connection with such
meeting, together with a form upon which confidential voting directions
may be given to the Trustee. The Trustee shall not disclose the voting
direc- tions of any individual Participant (or Beneficiary) to the
Committee or the Company. Any allocated Company Stock with respect to
which voting directions are not received from Participants (or
Beneficiaries) and any shares of Company Stock which are not then
allocated to Participants' Company Stock Accounts shall be voted by the
Trustee in the manner directed by the Committee.
- 3 -
<PAGE> 59
4. Section 13(a) is amended by restating the third sentence thereof to
read as follows:
Shares of Company Stock distributed by the Trustee shall be
readily tradable on an established securities market.
5. Section 14 is restated to read as follows:
Section 14. Rights, Options and Restrictions on Company Stock.
Shares of Company Stock held or distributed by the Trustee may
include such legend restrictions on transfer- ability as the Company may
reasonably require in order to assure compliance with applicable Federal
and state securi- ties laws, but no shares of Company Stock held or
distri- buted by the Trustee may be subject to a put, call or other
option, or buy-sell or similar arrangement. The provisions of this Section
14 shall continue to be applicable to Com- pany Stock even if the Plan
ceases to be an employee stock ownership plan under Section 4975(e)(7) of
the Code.
6. Section 16(c) is amended by deleting paragraph (10) and by
redesignating paragraph (11) as paragraph (10).
- 4 -
<PAGE> 60
To record the adoption of this Amendment No. 2, the Company has caused it
to be executed this _____ day of __________, 1997.
MEADE INSTRUMENTS CORP.
By
----------------------------------
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<PAGE> 1
EXHIBIT 10.18
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
(Do not use this form for Multi-Tenant Property)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only,
November 20, 1992, is made by and between ROSSMORE ENTERPRISES, a California
Corporation ("LESSOR") and MEADE INSTRUMENTS CORPORATION, a California
Corporation ("LESSEE"), (collective the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 16542 Millikan Avenue, Irvine, California 92714,
located in the County of Orange, State of California, and generally described as
an approximate 56,484 square foot industrial building on approximately 3.1
acres. Assessor's Parcel Number 435-093-03 ("Premises"). See Paragraph 2 for
further provisions.
1.3 TERM: Seven (7) years and 0 months ("ORIGINAL TERM") commencing
March 1, 1993 ("COMMENCEMENT DATE") and ending February 29, 2000 ("EXPIRATION
DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION: Upon full execution of lease and delivery of
security deposit ("Early Possession Date"). (See Paragraphs 3.2 and 3.3 for
further provisions.)
1.5 BASE RENT: $22,500.00 per month ("BASE RENT"), payable on the first
(1st) day of each month commencing March 1, 1993. (See Paragraph 4 for further
provisions.)
1.6 BASE RENT PAID UPON EXECUTION: $22,500.00 as Base Rent for the
period March 1, 1993 through March 31, 1993.
1.7 SECURITY DEPOSIT: $22,500.00 ("Security Deposit"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: General offices, manufacturing, sales and
distribution of instruments, and related items. (See Paragraph 6 for further
provisions.)
1.9 INSURING PARTY: Lessor is the "Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
Collins Fuller Corporation represents both Lessor and Lessee,
and Collins Fuller Corporation represents both Lessee and Lessor. (See
Paragraph 15 for further provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by None ("GUARANTOR"). (See Paragraph 37 for further provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 68 and Exhibits A all of which constitute a part of this
Lease.
2. PREMISES.
<PAGE> 2
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based therein is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense, If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE AND COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.
2.5 LESSEE PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3 See Addendum #49.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the Original Term. See Addendum #50.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date
2
<PAGE> 3
is specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. RENT. See Addendum #51.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent
or charges, as the same may be adjusted from time to time, to be received by
Lessor in lawful money of the United States, without offset or deduction, on or
before the day on which it is due under the terms of this Lease. Base Rent and
all other rent and charges for any period during the term hereof which is for
less than one (1) full calendar month shall be prorated based upon the actual
number of days of the calendar month involved. Payment of Base Rent and other
charges shall be made to Lessor at its address stated herein or to such other
persons or at such other addresses as Lessor may from time to time designate in
writing to Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor sufficient to maintain the same ratio between the
Security Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the Security
Deposit separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not used
or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any moneys to
be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties.
6.2 HAZARDOUS SUBSTANCES. See Addendum #52.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in
3
<PAGE> 4
combination with other materials expected to be on the Premises, is either: (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for liability of Lessor to any governmental agency or third party
under any applicable statute or common law theory. Hazardous Substance shall
include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or
any products, by-products or fractions thereof. Lessee shall not engage in any
activity in, on or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior written
consent of Lessor and compliance in a timely manner (at Lessee's sole cost and
expense) with all Applicable Law (as defined in Paragraph 6.3). "REPORTABLE USE"
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or disposal
of a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, Reportable Use shall also include Lessee's being
responsible for the presence in, on or about the Premises of Hazardous Substance
with respect to which any Applicable Law requires that a notice be given to
persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but
in compliance with all Applicable Law, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of Lessee's
business permitted on the Premises, so long as such use is not a Reportable Use
and does not expose the Premises or neighboring properties to any meaningful
risk of contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so) condition its consent
to the use or presence of any Hazardous Substance, activity or storage tank by
Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefrom or therefor, including, but not limited to, the installation
(and removal on or before Lease expiration or earlier termination) of reasonably
necessary protective modifications to the Premises (such as concrete
encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance, or a condition involving or resulting from
same, has come to be located in, on, under or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice
of such fact to Lessor. Lessee shall also immediately give Lessor a copy of any
statement, report, notice, registration, application, permit, business plan,
license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release discharge of, or exposure to,
any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production,
4
<PAGE> 5
installation, maintenance, removal, transportation, storage, spill or release of
any Hazardous Substance or storage tank), now in effect or which may hereafter
come into effect, and whether or not reflecting a change in policy from any
previously existing policy. Lessee shall, within five (5) days after receipt of
Lessor's written request, provide Lessor with copies of all documents and
information, including, but not limited to, permits, registrations, manifests,
applications, reports and certificates, evidencing Lessee's compliance with any
Applicable Law specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or
involving failure by Lessee or the Premises to comply with any Applicable Law.
SEE ADDENDUM #53
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in
the case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS. SEE ADDENDUM #54
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc), 7.2 (Lessor's obligations to repair), 9 (damage and
destruction), and 14 (condemnation), Lessee shall, at Lessee's sole cost and
expense and at all times, keep the Premises and every part thereof in good
order, condition and repair, structural and non-structural (whether or not such
portion of the Premises requiring repair, or the means of repairing the same,
are reasonably or readily accessible to Lessee, and whether or not the need for
such repairs occurs as a result Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities serving the Premises, such as
plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire sprinkler and/or
standpipe and hose or other automatic fire extinguishing system, including fire
alarm and/or smoke detection systems and equipment, fire hydrants, fixtures,
walls (interior and exterior), foundations, ceilings, roofs, floors, windows,
doors, plate glass, skylights, landscaping, driveways, parking lots, fences,
retaining walls, signs, sidewalks and parkways located in, on, about, or
adjacent to the Premises. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of, the
Premises, the elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance and/or storage tank brought onto the Premises by or for
Lessee or under its control. Lessee, in keeping the Premises in good order,
condition and repair shall exercise and perform good maintenance practices.
Lessee's obligations shall include restorations, replacements or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition and state of repair. If Lessee occupies the Premises for
seven (7) years or more, Lessor may require Lessee to repaint the exterior of
the buildings on the Premises as reasonably required, but not more frequently
than once every seven (7) years.
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(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain contracts, with copies to Lessor, in customary form and substance
for, and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems (v) roof covering and drain maintenance and (vi) asphalt and parking lot
maintenance.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. It is the intention of the Parties that the terms of
this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to, or which affords Lessee the right to make
repairs at the expense of Lessor or to terminate this Lease by reason of, any
needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all carpeting, window
coverings, air lines power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "ALTERATIONS" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof), as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
the term of this Lease as extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises,
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and Lessor shall have the right to post notices of non-responsibility in or on
the Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises. If Lessor
shall require, Lessee shall furnish to Lessor a surety bond satisfactory to
Lessor in an amount equal to one and one-half times the amount of such contested
lien claim or demand indemnifying Lessor against liability for the same, as
required by law for the holding of the Premises free from the effect of such
lien or claim. In addition, Lessor may require Lessee to pay Lessor's attorney's
fees and costs in participating in such action if Lessor shall decide it is to
its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal or become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee shall
be the property of and owned by Lessee, but considered a part of the Premises.
Lessor may, at any time and at its option, elect in writing to Lessee to be the
owner of all or any specified part of the Lessee Owned Alterations, and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
their installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises
by the end of the last day of the Lease term or any earlier termination date,
with all of the improvements, parts and surfaces thereof clean and free of
debris and in good operating order, condition and state of repair, ordinary wear
and tear excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified in writing by Lessor, the Premises, as surrendered, shall
include the Utility Installations. The obligation of Lessee shall include the
repair of any damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee
is the Insuring Party. Lessee shall pay for all Insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of Insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an
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occurrence basis providing single limit coverage in an amount not less than
$1,000,000 per occurrence with an "Additional Insured-Managers or Lessors of
Premises" Endorsement and contain the "Amendment of the Pollution Exclusion" for
damage caused by heat, smoke or fumes from a hostile fire. The policy shall not
contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance required by this Lease or as
carried by Lessee shall not, however, limit the liability of Lessee nor relieve
Lessee of any obligation hereunder. All insurance to be carried by Lessee shall
be primary to and not contributory with any similar insurance carried by Lessor,
whose insurance shall be considered excess insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring
Party, Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to the holders of any mortgages,
deeds of trust or ground leases on the Premises ("LENDER(S)"), insuring loss or
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake),
including coverage for any additional costs resulting from debris removal and
reasonable amounts of coverage for the enforcement of any ordinance or law
regulating the reconstruction or replacement of any undamaged sections of the
Premises required to be demolished or removed by reason of the enforcement of
any building, zoning, safety or land use laws as the result of a covered cause
of loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $1,000 per occurrence, and Lessee shall
be liable for such deductible amount in the event of an Insured Loss, as defined
in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition,
obtain and keep in force during the term of this Lease a policy or policies in
the name of Lessor, with loss payable to Lessor and Lender(s), insuring the loss
of the full rental and other charges payable by Lessee to Lessor under this
Lease for one (1) year (including all real estate taxes, insurance costs, and
any scheduled rental increases). Said insurance shall provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnify
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
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(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring
Party, the Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease. If Lessee is the Insuring Party, the
policy carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force. SEE ADDENDUM #55
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide" Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If the
Insuring Party shall fail to procure and maintain the insurance required to be
carried by the Insuring Party under this Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results
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from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom. SEE ADDENDUM #56
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or more of
the then Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence
or discovery of a condition involving the presence of, or a contamination by a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE--INSURED LOSS. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs
in the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within ten (10) days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said ten (10) day
period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written
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notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in proceeds
in which case this Lease shall remain in full force and effect. If in such case
Lessor does not so elect, then this Lease shall terminate sixty (60) days
following the occurrence of the damage or destruction. Unless otherwise agreed,
Lessee shall in no event have any right to reimbursement from Lessor for any
funds contributed by Lessee to repair any such damage or destruction. Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3
rather than Paragraph 9.2, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for
the repairs if made by either Party.
9.3 PARTIAL DAMAGE--UNINSURED LOSS. If a Premises Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and eject, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the dale specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6. SEE ADDENDUM #5
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee falls to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary. SEE ADDENDUM #58
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES. SEE ADDENDUM #59
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums,
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and other charges, if any, payable by Lessee hereunder for the period during
which such damage, its repair or the restoration continues (not to exceed the
period for which rental value insurance is required under Paragraph 8.3(b)),
shall be abated in proportion to the degree to which Lessee's use of the
Premises is impaired. Except for abatement of Base Rent, Real Property Taxes
insurance premiums, and other charges, if any, as aforesaid, all other
obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days aver receipt of such police, this Lease shall
continue in full force and effect. "Commence" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, it required, as soon as
reasonably possible at Lessors expense, in which event this Lease shall continue
in full force and effect, or (ii) if the estimated cost to investigate and
remediate such condition exceeds twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater, give written notice to Lessee within thirty (30)
days after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the giving of such notice. In the event Lessor elects
to give such notice of Lessor's intention to terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the investigation and
remediation of such Hazardous Substance Condition totally at Lessee's expense
and without reimbursement from Lessor except to the extent of an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible and the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the times
specified above, this Lease shall terminate as of the dale specified in Lessor's
notice of termination. If a Hazardous Substance Condition occurs for which
Lessee is not legally responsible, there shall be abatement of Lessee's
obligations under this Lease to the same extent as provided in Paragraph 9.6(a)
for a period of not to exceed twelve months.
9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
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10. REAL PROPERTY TAXES. SEE ADDENDUM #60
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premises, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessors work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When ______________________
shall cause its Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property or, at Lessor's option, as provided in Paragraph
10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heal, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
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12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. SEE ADDENDUM #61
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of Lessee,
as hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at the
time of the execution by Lessor of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a nondurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent to
fair market rental value or one hundred ten percent (110%) of the Base Rent then
in effect, whichever is greater. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING. SEE
ADDENDUM #62
(a) Regardless of Lessor's consent, any assignment or
subletting shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right
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to exercise its remedies for the Default or Breach by Lessee of any of the
terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee.
(d) In the event of any Default or Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a non-refundable deposit of $1,000 or ten percent (10%) of the
current monthly Base Rent, whichever is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees to
provide Lessor with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph
12.1(c) shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all or
a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's obligations under
this Lease; provided, however, that until a Breach (as defined in Paragraph
13.1) shall occur in the performance of Lessee's obligations under this Lease,
Lessee may, except as otherwise provided in this Lease, receive, collect and
enjoy the rents accruing under such sublease. Lessor shall not, by reason of
this or any other assignment of such sublease to Lessor, nor by reason of the
collection of the rents from a sublessee, be deemed liable to the sublessee for
any failure of Lessee to perform and comply with any of Lessee's obligations to
such sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of
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said option to the expiration of such sublease; provided, however, Lessor shall
not be liable for any prepaid rents or security deposit paid by such sublessee
to such sublessor or for any other prior Defaults or Breaches of such sublessor
under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, it any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES. SEE ADDENDUM # 63
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "DEFAULT" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "BREACH"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, and shall entitle Lessor to pursue the remedies set forth in Paragraphs
13.2 and/or 13.3:
(a) The abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, it applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
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(e) The occurrence of any of the following events: (i) The
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section 101
or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement given
to Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at the
time of the award of the unpaid rent which had been earned at the time of
termination; (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 time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay rent or quit, or to perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(b), (c) or (d) and under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two such grace periods shall constitute both an unlawful detainer and a Breach
of this Lease entitling Lessor to the remedies provided for in this Lease and/or
by said statute.
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(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided Lessee
has the right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, Inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%) of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such date charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder, whether
or not collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "CONDEMNATION"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than ten percent (10%) of
the floor area of the Premises, or more than twenty-five percent (25%)
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of the land area not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be reduced in
the same proportion as the rentable floor area of the Premises taken bears to
the total rentable floor area of the building located on the Premises. No
reduction of Base Rent shall occur if the only portion of the Premises taken is
land on which there is no building. Any award for the taking of all or any part
of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages, provided,
however, that Lessee shall be entitled to any compensation, separately awarded
to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade
Fixtures. In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of its net severance damages received,
over and above the legal and other expenses incurred by Lessor in the
condemnation matter, repair any damage to the Premises caused by such
condemnation, except to the extent that Lessee has been reimbursed therefor by
the condemning authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.
15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of $_____________) for brokerage services
rendered by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in Paragraph
39.1) or any Option subsequently granted which is substantially similar to an
Option granted to Lessee in this Lease, or (b) if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Brokers a fee in accordance with the schedule of said Brokers in effect at
the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed to
have assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
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15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LABILITY. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
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23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, codified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
Party may by written notice to the other specify a different address for notice
purposes, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postage Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
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30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
such subordination or non-subordination, attornment and/or non-disturbance
agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) or Broker in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorney's fees. Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term, "PREVAILING
PARTY" shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may
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at any time during the last one hundred twenty (120) days of the term hereof
place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations).
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's request. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
imposition by Lessor at the time of consent of such further or other conditions
as are then reasonable with reference to the particular matter for which consent
is being given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor shall be in
the form most recently published by the American Industrial Real Estate
Association, and each said Guarantor shall have the same obligations as Lessee
under this Lease, including but not limited to the obligation to provide the
Tenancy Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor to give:
(a) evidence of the due execution of the guaranty called for by this
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Lease, including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessor gives to Lessee three or more notices of Default under Paragraph 13.1
during any twelve month period, whether or not the Defaults are cured, or (iii)
if Lessee commits a Breach of this Lease.
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40. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entitles named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
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TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF ASBESTOS, STORAGE TANKS
OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR
THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER
THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD
BE CONSULTED.
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The Parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Laguna Hills, California Executed at Costa Mesa, California
--------------------------- ---------------------------
on November 25, 1992 on November 24, 1992
------------------------------------ ------------------------------------
by LESSOR: by LESSEE:
ROSSMORE ENTERPRISES MEADE INSTRUMENTS CORPORATION
- --------------------------------------- ---------------------------------------
A California Corporation A California Corporation
- --------------------------------------- ---------------------------------------
By /s/ PHILLIP S. SIRIANNI By /s/ JOHN C. DIEBEL
----------------------------------- -----------------------------------
Name Printed: PHILLIP S. SIRIANNI Name Printed: JOHN C. DIEBEL
------------------------- -------------------------
Title: President Title: Chairman and Chief Executive
-------------------------------- --------------------------------
Officer
- --------------------------------------- ---------------------------------------
By By
------------------------------------ -------------------------------------
Name Printed: Name Printed:
-------------------------- -------------------------
Title: Title:
--------------------------------- --------------------------------
Address: 23041 Avenida de la Carlota, Address: 1675 Toronto Way,
------------------------------- ------------------------------
Suite 210, Laguna Hills, CA 92653 Costa Mesa, CA 92626
- --------------------------------------- ---------------------------------------
Tel. No. (714) 707-5400 Tel. No. (714) 556-2291
------------------------------ ------------------------------
Fax No. (714) 707-5546 Fax No. (714) 556-4604
------------------------------ ------------------------------
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ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE TENANT LEASE-NET
DATED NOVEMBER 20, 1992
BY AND BETWEEN
ROSSMORE ENTERPRISES, A CALIFORNIA CORPORATION AS "LESSOR" AND
MEADE INSTRUMENTS CORPORATION,
A CALIFORNIA CORPORATION AS "LESSEE"
This LEASE ADDENDUM ("Addendum") is attached to, made a part of, incorporated
into and amends and supplements that certain Standard Industrial/Commercial
Single-Tenant Lease - Net ("the Lease") entered into as of the 20th day of
November, 1992 by and between ROSSMORE ENTERPRISES, A California Corporation
("Lessor"), and MEADE INSTRUMENTS CORPORATION, A California Corporation
("Lessee"). Lessor and Lessee agree that notwithstanding anything contained in
the Lease to the contrary, the provisions set forth in this Addendum will be
deemed to be a part of the Lease and will supersede any contrary provision in
the Lease and prevail and control for all purposes. It is the intention of the
parties that the use of this Addendum will eliminate for the most part the need
to strike through and interlineate portions of the Lease in order to reflect the
changes to the Lease desired by the parties as set forth in this Addendum. All
references to the Lease and in this Addendum to "Lease" are to be construed to
mean the Lease as amended and supplemented by this Addendum, have the same
meaning as the terms used in the Lease.
49. PARAGRAPH 3.1 OPTION TO EXTEND TERM. Notwithstanding anything to
the contrary contained in Paragraphs 1.3, 3.1 or elsewhere in the Lease, subject
to the terms of Paragraph 39 of the Lease, Lessor hereby grants Lessee a one
time option to extend the Term ("Option to Extend") for an additional period of
five (5) years ("Option Period"). Such right shall apply only to Lessee's entire
Premises, shall be for a term that shall begin immediately following Lessee's
initial Term and shall be exercised by Lessee by giving written notice to Lessor
at lease nine (9) months prior to the expiration of the initial Term. If Lessee
exercises its Option to Extend the Term, Lessee shall continue to lease the
Premises for such extended period upon the same terms and conditions set forth
in this Lease except that the Base Rent payable by Lessee to Lessor during the
Option Period shall be at 95% of the prevailing fair market rental rate for the
Premises based upon the prevailing fair market rental rate for similar space in
similar industrial buildings within the vicinity of the building. Lessor shall
provide Lessee with written notice of the fair market rental rate for the
Premises, not later than thirty (30) days following receipt of Lessee's exercise
notice. Lessee shall have twenty (20) days ("Lessee's Review Period") after
receipt of Lessor's notice of the fair market rental rate within which to accept
such fair market rental rate or to reasonable object thereto in writing. If
Lessee objects to the fair market rental rate submitted by Lessor, Lessor and
Lessee shall attempt in good faith to agree upon such fair market rental rate,
using their best good faith efforts. If Lessor and Lessee fail to reach
agreement on such fair market rental rate within fifteen (15) days following
Lessee's Review Period (the "Outside Agreement Date") then, at Lessee's election
delivered to Lessor in writing, Lessee may either cancel its exercise of its
Option to Extend the
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<PAGE> 29
Term or require that each party's determination of the fair market rental rate
for the Premises be submitted to appraisal in accordance with the following:
(i) Lessor and Lessee shall each appoint one appraiser who
shall, by profession, be a real estate appraiser who shall have been active over
the five (5) year period ending on the date of such appointment in the appraisal
of industrial properties in the Irvine, California area. The determination of
the appraisers shall be limited solely to the issue of whether Lessor's of
Lessee's submitted fair market rental rate for the Premises is the closest to
the actual fair market rental rate for the Premises as determined by the
appraisers, taking into account the requirements of this Item 2. Each such
appraiser shall be appointed within fifteen (15) days after the Outside
Agreement Date.
(ii) The two appraisers so appointed shall within fifteen (15)
days of the date of the appointment of the last appointed appraiser agree upon
and appoint a third appraiser who shall be qualified under the same criteria set
forth hereinabove for qualification of the initial two appraisers.
(iii) If the two appraisers are unable to agree upon a third
appraiser within fifteen (15) days, then they shall in lieu thereof each select
the names of two willing persons qualified to be appraisers hereunder and from
the four persons so named, one name shall be drawn by lot by a representative of
Lessor in the presence of a representative of Lessee, and the person whose name
is so drawn shall be the third appraiser. If either of the first two appraisers
fails to select the names of two willing appraisers and to cooperate with the
other appraiser so that a third appraiser can be selected by lot, the third
appraiser shall be selected by lot from the two appraisers which were selected
by the other appraiser for the drawing. Any vacancy in the office of the first
appraisers shall be filled by the party who initially selected that appraiser,
and if the appropriate party fails to fill any vacancy within fifteen (15) days
after such vacancy occurs, then such vacancy shall be filled by the other party.
Any vacancy in the office of the third appraiser shall be filled by the first
two appraisers in the manner specified above for the selection of a third
appraiser.
(iv) The three appraisers shall within thirty (30) days of the
appointment of the third appraiser reach a decision as to whether the parties
shall use Lessor's or Lessee's submitted fair market rental rate to establish
the new Base Rent for the Option Period, and shall notify Lessor and Lessee
thereof. Such decision shall be based upon the projected prevailing fair market
rentals being paid for similar industrial buildings in the Irvine, California
area.
(v) The decision of the majority of the three appraisers shall
be used to establish the new Base Rent for the Option Period unless either
Lessor or Lessee fails to appoint an appraiser within the time period specified
in Paragraph 3(i) hereinabove, in which event, the decision of the appraiser
appointed by one of them shall be used to establish the new Base Rent for the
Option Period.
(vi) Once the new Base Rent has been established, Lessee shall
have a period of five (5) days within which to either (1) accept such new Base
Rent by entering into a lease
2
<PAGE> 30
amendment with Lessor which will reflect the extension of the Lease Term and the
new Base Rent, or (2) rescind its election to extend the Lease Term in which
case the Lease will terminate as of the expiration of the initial Lease Term.
(vii) The cost of appraisal (and, if necessary, arbitration)
shall be paid by the party against whom the decision is rendered.
(viii) In determining the fair market rental rate, the
appraisers shall take into account the rates charged by Lessor for other
comparable space in other buildings in the finish-out requirements imposed upon
the Lessor and shall disregard any excess over "building standard" of the
quality of the existing improvements and finish-out in the Premises. The
appraisers must be independent third parties, neither (or none) of whom may be a
present of former or prospective business partner or employee of the Lessor or
Lessee.
50. PARAGRAPH 3.2 EARLY POSSESSION. Lessee will take early possession
on execution of the lease for purposes of tenant improvements, in conjunction
with Lessor's improvements, but that Lessee will not have beneficial occupancy
to conduct its business operations (ie., that Lessee is not liable for property
taxes, insurance, or maintenance) until March 1, 1993.
51. PARAGRAPH 4.1 BASE RENT. Notwithstanding anything to the contrary
contained in Paragraphs 1.5, 4.1 or elsewhere in the Lease:
(a) Lessee shall not be required to pay monthly installments
of Base Rent for month two (2) and shall only be required to pay one-half (1/2)
of each monthly installment of Base Rent ($11,250.00) for Months Three (3)
through Twelve (12) and shall pay the Base Rent for Months Thirteen (13) through
Twenty-Four (24) ($22,500.00) of the Lease Term. Notwithstanding the foregoing,
Lessee shall pay all other amounts of additional rent including taxes and
insurance during such abated rent periods.
(b) On March 1, 1995, March 1, 1997 and March 1, 1999
(hereafter collectively the "Adjustment Dates"), the rent due and payable by
Lessee to Lessor hereunder shall be adjusted upward to reflect any increase in
the Consumer Price Index for all urban consumers in the Los
Angeles-Anaheim-Riverside, California area (base, 1982-1984=100), as published
in the Monthly Labor Review by the Bureau of Labor Statistics, U.S. Department
of Labor (the "Index").
Implementation of any such cost of living rent increase may be made as of or at
any time after an Adjustment Date during "Lease Year" and, if implemented after
the Adjustment Date, such increase shall be retroactive back to said Adjustment
Date with Lessee being liable for the payment in full of the aggregate of all
accrued, but unpaid amounts of rent (as the same may have been increased) on the
first day of the month following notification from Lessor of the cost of living
adjustment. Such adjustment shall be computed by multiplying the monthly rent in
effect at the commencement of Lease term, ie., ($22,500.00 per month), by a
fraction, the numerator of which is the Index figure published most nearly prior
to the respective Adjustment
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<PAGE> 31
Date and the denominator of which is the Index figure published most nearly
prior to the Commencement Date. Any of the foregoing notwithstanding, in no
event shall any such adjustment result in the rent by Lessee hereunder being
increased by less than eight and 16/100 percent (8.16%) nor greater than
thirteen and 42/100 percent (13.42%) of the rent previously in effect
immediately preceding the respective Adjustment Date. If the Index has changed
so that the days differ from that which is identified herein, the Index shall be
converted in accordance with conversion factors published by the U.S. Department
of Labor, Bureau of Labor Statistics. If the Index ceases to be published, the
parties shall agree upon another source of information to determine changes in
the purchasing power of the United States currency in the area in which the
Premises are located, and if they are unable to agree, such issue shall be
submitted to binding arbitration pursuant to the rules of the American
Arbitration Association for selection of a substitute index.
52. PARAGRAPH 6.2 HAZARDOUS SUBSTANCES. Notwithstanding any other
provision contained in the Lease or this Addendum, Lessee shall not be liable or
responsible for any condition arising out of the presence of any Hazardous
Substance located in, on, under, or about the Premises, on or prior to the date
Lessee occupies the Premises or for any condition that occurs during the term of
the Lease arising from Hazardous Substances caused by the migration of Hazardous
Substances onto the Premises through soil, groundwater or air from adjacent
properties so long as Lessee did not cause the migration or could have
reasonably prevented the same. Lessor further agrees to indemnify, protect,
defend and hold Lessee, its agents, employees, lenders and sublessees, if any,
harmless from and against all damages, liabilities, judgments, costs, claims,
liens, expenses, penalties, permits and attorney's and consultant's fees arising
out of or involving any Hazardous Substance condition described above. Lessor's
obligation shall include, but not be limited to, the affects of any
contamination or injury to person, property or the environment and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or any contamination therein
involved shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessor from its obligation under this provision, unless
specifically so agreed by Lessee in writing at the time of such agreement."
53. PARAGRAPH 6.3 LESSEE'S COMPLIANCE WITH LAW. Notwithstanding
anything to the contrary contained in Paragraph 6.3 or elsewhere in the Lease,
Lessee's obligation to comply with "Applicable Law" with respect to industrial
hygiene shall be limited to industrial hygiene matters relating to Lessee's
operations from the Premises.
54. PARAGRAPH 7.1(a) LESSEE'S OBLIGATIONS. LESSOR SHALL DELIVER THE
ROOF IN WATER-TIGHT CONDITION ON THE COMMENCEMENT DATE AND LESSEE WILL BE
RESPONSIBLE FOR REPAIR AND MAINTENANCE OF THE SAME THROUGHOUT THE LEASE TERM OR
ANY EXTENSIONS THEREOF, PROVIDED, HOWEVER, LESSOR WILL BE RESPONSIBLE FOR
REPLACEMENT OF THE ROOF.
55. PARAGRAPH 8.4 LESSEE'S PROPERTY INSURANCE. Notwithstanding anything
to the contrary contained in Paragraph 8.4 or elsewhere in the Lease, Lessee's
insurance for
4
<PAGE> 32
Lessee's personal property shall be in an amount equal to full insurable value
of such property, not full replacement cost.
56. PARAGRAPH 8.8 EXEMPTION OF LESSOR FROM LIABILITY. Notwithstanding
anything to the contrary contained in paragraph 8.8 or elsewhere in the Lease,
the limitations on Lessor's liability contained in the first two sentences of
Paragraph 8.8 shall not apply in the event of the gross negligence or willful
misconduct of Lessor.
57. PARAGRAPH 9.4 TOTAL DESTRUCTION. Notwithstanding anything to the
contrary contained in Paragraph 9.4 or elsewhere in the Lease, in the event this
Lease shall terminate due to a Premises Total Destruction, such termination
shall occur as of the date of such Premises Total Destruction. Furthermore,
Lessor shall not have the right to recover Lessor's damages from Lessee in the
event of a Premises Total Destruction unless the damage or destruction was
intentionally caused by Lessee or due to the negligence of Lessee.
58. PARAGRAPH 9.5 DAMAGE NEAR END OF TERM. Notwithstanding anything to
the contrary contained in Paragraph 9.5, termination of the Lease pursuant to
Paragraph 9.5 shall be effective as of the date of occurrence of such damage or
destruction.
59. PARAGRAPH 9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES. In the event
Lessor or a Lender commences the repair or restoration of the Premises within
thirty (30) days after receipt of notice from Lessee as provided in Paragraph
9.6(b) and this Lease is to continue in full force and effect as provided in
Paragraph 9.6(b), rent shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired. Any abatement of rent and other
charges under Paragraph 9.6(a) of the Lease shall commence as of the date of the
damage or destruction and continue for the period described in Paragraph 9.6(a)
of the Lease.
60. PARAGRAPH 10.1 REAL PROPERTY TAXES. Lessee shall not be responsible
for any increases in property taxes incurred as a result of a sale or transfer
in ownership of the Property occurring on or after the date of this Lease.
61. PARAGRAPH 12.1 ASSIGNMENT AND SUBLETTING. Notwithstanding anything
to the contrary contained in Paragraph 12.1(b), only a transfer, on a cumulative
basis, of forty-nine percent (49%) or more of the voting control of Lessee shall
constitute a change in control for purposes of Paragraph 12.1. Paragraph 12.1(d)
is hereby deleted in its entirety and is replaced with the following:
"(d) An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific written consent shall be a Default curable after
notice per Paragraph 13.1(c)."
62. PARAGRAPH 12.2 TERNS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND
SUBLETTING. Notwithstanding anything to the contrary contained in paragraph
12.2(e):
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(a) The amount of the non-refundable deposit to be paid by
Lessee to Lessor in connection with each request for a consent to an assignment
or subletting shall be Five Hundred Dollars ($500.00).
(b) The occurrence of a transaction described in Paragraph
12.1(c) shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to two (2) times the then
monthly base rent, not six (6) times the then monthly base rent.
(c) Subparagraph (h) of Paragraph 12.2 is hereby deleted in
its entirety.
63. PARAGRAPH 13. DEFAULT; BREACH; REMEDIES. Notwithstanding anything
to the contrary contained in Paragraph 13.1 or elsewhere in the Lease:
(a) The first sentence of Paragraph 13.1(a) shall read "The
abandonment of the Premises".
(b) Lessee shall not be in Default under the Lease by reason
of vacating the Premises unless Lessee is at the time of such vacation otherwise
in monetary default under the Lease.
(c) Lessee shall not be in Default with respect to the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee under the Lease, whether to Lessor or to a third
party, unless Lessee shall fail to make payment within ten (10) days following
written notice to Lessee. Payment by Lessee to Lessor shall cure any default
under the terms of this paragraph.
(d) Lessee shall not be in Default by reason of the failure of
Lessee to provide Lessor with reasonable evidence of insurance or any surety
bond required under this Lease unless Lessee shall fail to cure such failure
within twenty (20) days after receipt of written notice from Lessor.
(e) Lessee shall not be in Default under the Lease by reason
of the failure of Lessee to perform any other non-monetary obligation under this
Lease other than an obligation which endangers or threatens life or property,
unless such failure continues for a period of twenty (20) days following written
notice thereof by or on behalf of Lessor to Lessee.
(f) Lessee shall have twenty (20) days following written
notice by or on behalf of Lessor to Lessee to cure a failure described in
Subparagraph (viii) of Paragraph 13.1(c).
64. PARAGRAPH 13.2 REMEDIES. Notwithstanding anything to the contrary
contained in Paragraph 13.2 or elsewhere in the Lease, Lessor shall not have the
right to exercise its remedies in the Lease, unless Lessee shall fail to perform
an affirmative duty or obligation under the Lease within the applicable cure or
grace period described in the Lease or, if no cure or grace period is stated,
unless Lessee shall fail to perform such affirmative duty or
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obligation within ten (10) days following written notice to Lessee.
Notwithstanding any of the foregoing, Lessor shall not have the right to delete
or cancel the "Inducement Provisions" of Paragraph 13.3 in the Lease unless
Lessee has been in Default per Addendum Paragraph 63(c) above for more than
thirty (30) days.
65. PARAGRAPH 13.5 BREACH BY LESSOR. In the event Lessor shall fail to
pay current Real Property Taxes to be maintained by Lessor under the Lease
subsequent to Lessor's receipt of Lessee's payment, before the same became
delinquent, Lessee shall have the right, notwithstanding anything to the
contrary contained in the Lease, including without limitation, Paragraphs 13.5
and 30.1, following written notice to Lessor and the passage of five (5)
business pays without cure by Lessor, to pay such Real Property Taxes directly
to the taxing authority in which event Lessor shall promptly reimburse Lessee
for the actual and reasonable costs which are incurred by Lessee based upon
written invoices to be submitted by Lessee to Lessor and if Lessor shall fail to
so reimburse Lessee, Lessee shall have the right to deduct one hundred five
percent (105%) such costs from Lessee's next due installment(s) of rent.
66. TENANT IMPROVEMENTS.
A. Lessor, at Lessor's sole cost and expense, shall
complete the following work to the Premises:
1. Paint building's exterior.
2. Paint all offices and warehouse interior.
3. Install new carpeting to replace existing
carpeting on the first floor and install new
carpeting throughout the mezzanine and
stairways, and replace damaged floor tiles
in the entry lobby.
4. Deliver roof, plumbing and electricity in
good working order.
5. Repair and slurry coat the parking area.
6. Enclose mezzanine area (approximately 7,252
square feet) with dry wall and install drop
ceiling, lighting, air conditioning and
electricity.
B. Lessor shall grant to Lessee an improvement allowance
of $80,000.00 which shall be used toward he cost of
installing a truck well at rear of building and a
7,000 square foot optical lab area on the ground
floor ("Lessee's tenant improvements"). The
improvement allowance will be paid to Lessee in
installments in amounts equal to billings or
construction draw requests Lessee receives from its
contractors during the course of construction of
Lessee's tenant improvements. Lessor will pay the
installments to Lessee within thirty (30) days of
receipt from Lessee of the billings or construction
draw requests. Payment will also be contingent upon
inspection and approval by Lessor of the improvements
relating to the respective billing or draw request,
said approval not to be unreasonably withheld.
Notwithstanding the foregoing, Lessor's total
contribution towards Lessee's tenant improvements
shall not exceed
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<PAGE> 35
$80,000.00 irrespective of the total cost of the
same. Lessee shall provide a space plan and
construction drawings of Lessee's tenant improvements
for Lessor's approval before commencement of the
improvements. All tenant improvements shall be built
to city code and comply with all necessary
governmental agencies.
67. SIGNS. Lessee's signage shall be subject to review and approval by
Lessor. Lessee, at its sole cost and expense, shall be responsible for the
installation and removal of Lessee's signs. Lessee shall restore any part or
parts of the Premises to which Lessee's signs are attached to their original
condition after the removal of Lessee's signs.
68. INSURING PARTY. The insuring party under this lease shall be the
Lessee (see Paragraph 8 for further provisions).
All other terms and conditions of the lease shall remain the same and in full
force and effect.
AGREED AND ACCEPTED:
LESSOR LESSEE
ROSSMORE ENTERPRISES, MEADE INSTRUMENTS CORPORATION,
A CALIFORNIA CORPORATION A CALIFORNIA CORPORATION
By: /s/ PHILLIP S. SIRIANNI, JR. By: /s/ JOHN C. DIEBEL
----------------------------------- -----------------------------------
Phillip S. Sirianni, Jr. John C. Diebel
Its: President Its: Chairman and CEO
----------------------------------- -----------------------------------
Date: November 25, 1992 Date: November 24, 1992
--------------------------------- -------------------------------
8
<PAGE> 1
EXHIBIT 10.24
[CELTIC MASTER LEASE LETTERHEAD]
Number CML-0224-A
CELTIC LEASING CORP.-Lessor
Lessee: MEADE INSTRUMENTS CORPORATION
Corporate Address: 16542 Millikan Avenue, Irvine, CA 92714
This is a MASTER LEASE AGREEMENT (herein called "Lease"). Lessor hereby
agrees to lease to Lessee, and Lessee hereby agrees to lease from
Lessor, the items of personal property (collectively called "Equipment"
and individually called an "Item") described on any Lease Schedule(s)
("Schedule") now or in the future annexed hereto and made a part hereof,
subject to the terms and conditions set forth herein.
1. QUIET ENJOYMENT: So long as Lessee is not in default hereunder, Lessor shall
not disturb Lessee's quiet enjoyment of the Equipment subject to the terms and
conditions of this Lease.
2. NO WARRANTIES BY LESSOR: Lessee acknowledges that Lessor is not the
manufacturer, developer, distributor, publisher or licensor (for purposes of
this Lease, all of which are called "Manufacturer", both collectively and
individually) of any of the Equipment. Lessee further acknowledges and agrees
that LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE
MERCHANTABILITY, FITNESS FOR ANY PURPOSE, CONDITION, DESIGN, CAPACITY,
SUITABILITY OR PERFORMANCE OF ANY OF THE EQUIPMENT, OR ANY OTHER REPRESENTATION
OR WARRANTY WITH RESPECT THERETO, IT BEING AGREED THAT THE EQUIPMENT IS LEASED
"AS IS". LESSEE FURTHER REPRESENTS THAT ALL ITEMS OF EQUIPMENT ARE OF A SIZE,
DESIGN AND CAPACITY SELECTED BY IT, AND THAT IT IS SATISFIED THE SAME IS
SUITABLE FOR LESSEE'S PURPOSES.
3. ASSIGNMENT OF WARRANTIES: Lessor assigns to Lessee any and all
Manufacturer/vendor warranties, to the extent assignable, for the term of the
Lease with respect to any and all Items of Equipment. Lessor shall have no
liability to Lessee or anyone claiming through Lessee for the breach of any
such warranty or for any claim, loss, damage or expense of any kind or nature
resulting, directly or indirectly, from the delivery, installation, use,
operation, performance, or lack or inadequacy thereof, of any Items of
Equipment. Lessee acknowledges that Lessor has hereby notified Lessee that
Lessee may have rights and warranties under any applicable Equipment supply
contracts and that Lessee may contact the vendor for a description of those
rights and warranties, if any. Lessor, at its sole option, may choose the
vendor for any Items of Equipment provided Lessor so notifies Lessee of the
vendor's name and address and provided the Item(s), whether new or used, meet
the exact specifications delineated on the Schedule. For vendors not chosen by
Lessor, Lessee acknowledges it has their names and addresses.
4. TERM: The lease term for each Item of Equipment shall commence on the day
the Manufacturer or vendor certifies that the Item has been delivered to and is
usable by Lessee ("Commencement Date"). The "Base Term" as indicated on any
Schedule shall mean the period beginning on the first day of the calendar
quarter (January 1, April 1, July 1, or October 1) following the final
Commencement Date ("Final Commencement Date") of the respective Schedule, or, if
the Final Commencement Date falls on the first day of a calendar quarter, then
that day, and continuing for the number of months specified therein. Each
Schedule now or in the future annexed hereto shall be deemed to incorporate
therein these specific terms and conditions and shall have an independent Base
Term and Extension Term(s).
5. RENT: The monthly rent as shown on each Schedule shall be due and payable by
Lessee in the amount of the monthly rent multiplied by the number of months in
the billing cycle indicated on the respective Schedule (one month in a monthly
billing cycle, three in a quarterly cycle, six in a biannual cycle, etc.) on
the first day of the Base Term and on the first day of each billing cycle (if
the billing cycle is monthly, then the first day of each month; if quarterly,
then the first day of every third month; etc.) thereafter for the remainder of
the Base Term and any Extension Term(s). For Items of Equipment having a
Commencement Date prior to the first day of the Base Term, rent shall be due on
a pro rata basis only in the amount of one-thirtieth of the Item's proportional
monthly rent for each day from the Item's Commencement Date until, but not
including, the first day of the Base Term and shall be payable by Lessee five
days after receipt of invoice from Lessor. If any rental or other amounts
payable hereunder are not paid within five days of their due date then Lessee
shall pay to Lessor upon demand the "Delinquency Charges" which shall equal
interest compounded monthly at the rate of eighteen percent per annum on the
delinquent balance from the date due until the date paid, plus a monthly
administrative fee of five percent of the cumulative delinquent balance to
offset Lessor's collection and accounting costs. Unless otherwise delineated on
the respective Schedule, any deposit paid by Lessee to Lessor shall be
refundable if the Schedule is not accepted by Lessor, less, at Lessor's sole
discretion, a credit processing fee not to exceed one percent of the
anticipated cost of the proposed Equipment. This is a net lease and Lessee's
obligation to pay all rental charges and other amounts due hereunder shall be
absolute and unconditional under all circumstances and shall not be subject to
any abatement, defense, counterclaim, setoff, recoupment or reduction for any
reason whatsoever except as otherwise provided herein, it being the express
intention of Lessor and Lessee that all rental and other amounts payable by
Lessee hereunder shall be and continue to be payable in all events. Lessee
hereby waives any and all rights it may have to reject or cancel this Lease, to
revoke acceptance of any of the Equipment, and/or to grant a security interest
in any of the Equipment for any reason except as required herein.
6. USE, MAINTENANCE AND LOCATION: Lessee, at its own cost and expense, shall at
all times properly use the Equipment, shall keep all Equipment in good working
order, repair and condition, shall not alter the Equipment without Lessor's
prior written consent, and shall use the Equipment for business purposes only.
Lessee shall comply with any and all Manufacturers'/vendors' instructions
(including, in the event any of the Equipment is software, any software license
terms, conditions and restrictions) relating to the Equipment, and with any and
all applicable laws, rules, regulations or orders of any governmental agency
with respect to the Equipment or the use, maintenance or storage thereof.
<PAGE> 2
Throughout the lease term, Lessee shall keep the Equipment at the location set
forth on the Schedule and shall retain uninterrupted possession, control and use
of the Equipment. Lessee shall not relocate any of the Equipment without
Lessor's prior written consent. Lessee shall pay all costs and expenses
associated with the delivery, installation, use, relocation, deinstallation, and
return of the Equipment. If Lessor supplies Lessee with labels or tags stating
that the Equipment is owned by Lessor, Lessee shall affix such labels or tags to
and keep them in a prominent place on the Equipment. Subject to Lessee's
reasonable security requirements, Lessee shall permit Lessor to enter the
premises where any of the Equipment is located in order to inspect such
Equipment.
7. TITLE; PERSONAL PROPERTY: Except as otherwise provided in this Lease or any
Schedule hereto, title to the Equipment shall at all times remain in Lessor. In
the event any of the Equipment is software governed by a software license,
Lessee shall keep said license current for the entire lease term and, to the
extent the license allows title to the software to pass to licensee, such title
shall vest and remain in Lessor. To the extent that such vesting requires a
written conveyance from Lessee, Lessee hereby conveys to Lessor any title it
has or may hereafter acquire in the software and forgoes any future claim to
the software including any right to purchase and/or use the software beyond the
lease term except as otherwise provided in this Lease or the related Schedule.
If the software license restricts any provision of this Lease without the
licensor's consent, then Lessee shall assist Lessor, if so requested, in
obtaining such consent. Lessee shall at all times keep the Equipment free and
clear of all liens, claims, levies, and legal processes, except those inherent
to this Lease, and shall at its expense protect and defend Lessor's title
and/or license rights in the Equipment against all persons claiming against or
through Lessee. Lessee hereby authorizes Lessor to cause this Lease or other
instruments necessary, in Lessor's determination, to be filed or recorded at
Lessee's expense in order to protect Lessor's interest in the Equipment, and
grants Lessor the right to execute and deliver such instruments for and on
behalf of Lessee. If requested by Lessor, then Lessee agrees to execute and
deliver any such instruments and agrees to pay or reimburse Lessor for any
searches, filings, recordings, or stamp fees or taxes incurred as necessary to
protect Lessor's interest in the Equipment. Lessee also authorizes Lessor to
insert on any Schedule and on related supplemental lease documentation
information commonly determined after execution by Lessee such as: serial
numbers and other Equipment identification data, Equipment locations, and
Commencement Dates. Lessee shall take all steps necessary to ensure that the
Equipment is and remains personal property. Unless otherwise provided in
writing, immediately upon the termination or expiration of the term of this
Lease with respect to any Schedule, Lessee shall: discontinue its use of the
Equipment including any Items constituting software; return the Equipment,
including any Items constituting tangible software, to Lessor at such place as
Lessor shall designate within the continental United States; destroy any Items
constituting intangible software or records thereof; not retain any Items
constituting software in any form; and grant Lessor the right (which shall
survive termination), at Lessor's request and subject to Lessee's reasonable
security requirements, to inspect all of Lessee's locations to insure
compliance with the provisions of this sentence. In the event Lessee fails to
comply with any of the foregoing upon the termination or expiration of the
lease term with respect to any Schedule, then rent for said Schedule shall
continue to be due and payable in full by Lessee for each month until Lessee
has complied with all of the foregoing.
8. ALTERATIONS: Lessee shall make no alterations, modifications, attachments,
improvements, enhancements, revisions or additions to any of the Equipment
(collectively called "Alterations"), without Lessor's prior written consent.
All Alterations that are made shall become part of the Equipment and shall be
the property of Lessor. Lessor may, at its sole option and subject to the then
prevailing interest rates and the Lessee's credit standing, lease to Lessee any
Alterations desired by Lessee during the lease term. If requested in writing by
Lessor, Alterations not leased hereunder shall be removed and the Equipment
shall be restored to its original condition, normal wear and tear excepted, at
Lessee's sole expense, prior to the return of the Equipment.
9. TAXES: Lessee shall pay all taxes (except those based solely on Lessor's net
income), fees and assessments accrued or imposed on the purchase, ownership,
possession or use of the Equipment during the lease term, or imposed on Lessor
or Lessee with respect to the rental payments hereunder, including but not
limited to sales, use, personal property, excise, stamp and documentary taxes,
license and registration fees, and any other similar charges, together with any
penalties, interest or fines relating thereto. LESSEE SHALL FILE ALL REQUIRED
PERSONAL PROPERTY TAX RETURNS RELATING TO THE EQUIPMENT.
10. LOSS OR DAMAGE; Lessee shall bear the entire risk of loss, damage, theft,
destruction, confiscation, requisition, inoperability, erasure, or incapacity,
for or from any cause whatsoever (except Lessor's gross negligence), of any or
all Items of Equipment during the period the Equipment is in transit to or from,
or in the possession of, Lessee ("Event of Loss") and shall hold Lessor harmless
against same. Immediately upon its discovery, shall fully inform Lessor of an
Event of Loss. Except as herein provided, no Event of Loss shall relieve Lessee
of any obligation hereunder, and all Schedules shall remain in full force and
effect without any abatement or interruption of rent. In an Event of Loss,
Lessee, at its option provided no event of default has occurred hereunder
otherwise at Lessor's option, shall, within a commercially expedient time frame:
(a) place the Equipment in good working order, repair and condition; and/or (b)
replace the effected Equipment with identical equipment or, upon consent of
Lessor, with similar equipment of equal or greater value and utility, in good
working order, repair and condition, and with documentation creating clear title
thereto in Lessor; or (c) terminate the term of the Lease with respect to the
affected Schedule by paying to Lessor within sixty days the "Casualty Value"
which is defined as the sum of: (i) the present value of the unpaid balance of
the aggregate rent reserved under the related Schedule calculated using a
discount rate of six percent per annum, plus (ii) all accrued but unpaid taxes,
Delinquency Charges, penalties, interest and all or any other sums then due and
owing under the related Schedule, plus (iii) the amount of any applicable end of
term purchase option or other end of term payment or, in the absence thereof,
the fair market value of the Equipment as reasonably determined by Lessor, and
plus (iv) an amount reasonably determined by Lessor to make Lessor whole on an
after tax basis for any loss, recapture, or unavailability of any tax credit
and/or deduction. Upon Lessor's receipt of the Casualty Value payment, Lessee
shall be entitled to any and all of Lessor's right, title and interest in the
related Equipment for salvage purposes, in its then condition and location, as
is, without any warranties, express or implied.
11. INSURANCE: Lessee, at its expense, shall provide and maintain in full force
and effect at all times that this Lease is in force and effect such casualty,
property damage, comprehensive public liability and other insurance in such
form and amounts as is customarily secured by prudent entities engaged in a
business similar to Lessee's, or using equipment of a character similar to the
Equipment leased hereunder, and as is reasonably acceptable to Lessor. All such
insurance shall provide that it may not be cancelled or materially altered
without at least thirty days prior written notice to Lessor, shall name Lessor
as additional insured and loss payee, and shall not be rescinded, impaired or
invalidated by any act or neglect of Lessee.
12. INDEMNITY: Lessee shall indemnify, defend, protect, save and hold harmless
Lessor, its employees, officers, directors, agents, assigns and successors from
and against any and all claims, actions, costs, expenses (including reasonable
attorneys' fees), damages (including any interruption of service, loss of
business or other consequential damages), liabilities, penalties, losses,
obligations, injuries, demands and liens (including any of the foregoing arising
or imposed under the doctrines of "strict liability" or "product liability") of
any kind or nature arising out of, connected with, relating to or resulting from
the manufacture, purchase, sale, lease, ownership, installation, location,
maintenance, operation, condition (including latent and other defects, whether
or not discoverable), selection, delivery, return, or any accident in connection
therewith, of any Item or Items of Equipment, or by operation of law (including
any claim for patent, trademark or copyright infringement) regardless of where,
how or by whom
Language indicated as being shown by strike-out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
<PAGE> 3
operated, excluding however, any of the foregoing resulting from the gross
negligence or willful misconduct of Lessor. The provisions of this paragraph
shall survive the termination or expiration of this Lease.
13. AUTHORITY OF LESSEE TO ENTER LEASE: With respect to this Lease and each
Schedule now or in the future annexed hereto, Lessee hereby represents,
warrants and covenants that: (i) the execution, delivery and performance
thereof have been duly authorized by Lessee; (ii) the individuals executing
such have been duly authorized to do so; (iii) the execution and/or performance
thereof will not result in any default under, or breach of, any judgement,
order, law or regulation applicable to Lessee, or of any provision of Lessee's
articles of incorporation, bylaws, or any agreement to which Lessee is a party;
and (iv) all financial statements and other information submitted by Lessee
herewith or at any other time is true and correct without any misleading
omissions.
14. ASSIGNMENT: Lessee hereby agrees and acknowledges that Lessor may without
notice to Lessee assign all or any part of Lessor's rights, title and interest
in and to this Lease, any Schedule, the Equipment, and any of the rentals or
other sums payable hereunder, to any assignee ("Assignee") provided any such
assignment shall be made subject to the rights of Lessee herein and shall not
relieve Lessor of any of its obligations hereunder. Lessee hereby acknowledges
that any such assignment would not materially change the duties of, nor the
burden of risk imposed on the Lessee and that Lessee shall not look to Assignee
to perform any of Lessor's obligations hereunder and shall not assert against
Assignee any defense, counterclaim or setoff it may have against Lessor. Lessee
agrees that after receipt of written notice from Lessor of any such assignment
Lessee shall pay, if directed by Lessor, any assigned rental and other sums
payable hereunder directly to Assignee and will execute and deliver to
Assignee such documents as Assignee may reasonably request in order to confirm
the interest of Assignee in this Lease. WITHOUT LESSOR'S PRIOR WRITTEN
CONSENT, LESSEE SHALL NOT ASSIGN, TRANSFER, ENCUMBER, SUBLET OR SELL THIS
LEASE, ANY SCHEDULE, ANY OF THE EQUIPMENT, OR ANY OF ITS INTEREST THEREIN, IN
ANY FORM OR MANNER.
15. FURTHER ASSURANCES: Upon Lessor's request, Lessee, promptly and at its
expense, shall execute and/or deliver such documents, instruments and/or
assurances, and shall take such further action, as Lessor deems prudent in
order to establish and/or protect the rights, interests and remedies of Lessor,
and for the confirmation, assignment and/or perfection of this Lease and any
Schedule hereto, and for the assurance of performance of Lessee's obligations
hereunder, such as (but not limited to): a secretary's certificate certifying
the authority of the person(s) signing, and/or the resolutions authorizing,
this Lease and/or any Schedule; delivery and/or acceptance certificates;
insurance certificates; an opinion of Lessee's counsel; financial statements
and other credit information as reasonably requested by Lessor; and a
landlord/mortgagee waiver of rights and interests in the Equipment. If Lessee
fails to complete when due any such requested item, Lessor, in its sole
discretion and notwithstanding the provisions of Section 4. (Term) herein, may
elect to delay the Final Commencement Date of the affected Schedule until any
or all such requested items are completed. Until duly executed by an authorized
officer of Lessor, Lessee agrees that this Lease and any Schedule executed by
Lessee shall constitute an offer by Lessee to enter into the Lease with Lessor
and that Lessee shall not withdraw its offer for a period of at least twenty
business days after Lessor's receipt of such offer and that, during such time,
Lessee shall assist Lessor in obtaining any financial and/or other information
prudently requested for use in its review of the proposed transaction.
16. DEFAULT: The occurrence of any of the following shall constitute an event
of default hereunder ("Event of Default"): (a) Lessee fails to pay when due
any installment of rent or any other amount due hereunder and such failure
continues for a period of ten days after receipt of written notice thereof; (b)
any financial or other information or any other representation or warranty
given to Lessor herein or in connection herewith proves to be false or
misleading in any material respect; (c) Lessee assigns, transfers, encumbers,
sublets or sells this Lease, any Schedule, any of the Equipment, or any of its
interest therein, in any form or manner, without Lessor's prior written
consent; (d) Lessee fails to observe or perform any other covenant, condition
or obligation to be preserved or performed by it under this Lease and such
failure continues for a period of fifteen days after receipt of written notice
thereof; (e) Lessee's credit worthiness materially deteriorates as a result of
a leveraged buyout, sale, merger, leveraged equity dilution, leveraged
acquisition, or any other substantial change in ownership, without Lessor's
prior written consent which consent will not be unreasonably withheld; (f)
Lessee ceases doing business as a going concern, makes an assignment for the
benefit of creditors, admits in writing its insolvency, files a voluntary
petition in bankruptcy, is adjudicated bankrupt or insolvent, files a petition
seeking for itself any reorganization, liquidation, dissolution or similar
arrangement under any present or future statute, law or regulation, or files
an answer admitting the material allegations of a petition filed against it in
any such proceeding, consents to or acquiesces in the appointment of a trustee,
receiver, or liquidator of it or of any substantial part of its assets, or it
or its shareholders take any action looking to its dissolution or liquidation;
or (g) within sixty days after the commencement of any proceedings against
Lessee seeking reorganization, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, such proceedings shall not
have been dismissed, or if within sixty days after the appointment without
Lessee's consent or acquiescence of any trustee, receiver or liquidator of it
or of any substantial part of its assets, such appointment shall not be vacated.
17. REMEDIES: If an Event of Default shall occur and be continuing, Lessor
may, at its option but not limited thereto, do any or all of the following:
(a) proceed, by appropriate court action either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Lease and to recover
damages for the breach thereof; (b) by written notice to Lessee, terminate this
Lease and/or all or any Schedules hereto and Lessee's rights hereunder and/or
thereunder; (c) personally or by its agents enter the premises where any of the
Equipment is located and take immediate possession of the Equipment without
court order or other process of law and free from all claims by Lessee; and (d)
by written notice to Lessee, recover all amounts then due and owing plus, as
liquidated damages for loss of a bargain and not as a penalty, accelerate and
declare to be immediately due and payable the present value calculated using a
discount rate of six percent per annum of the unpaid balance of the aggregate
rent and other sums payable reserved hereunder, without any presentment,
demand, protest or further notice (all of which are expressly waived by
Lessee). In the event Lessor repossesses any of the Equipment, Lessor may sell,
lease or otherwise dispose of said Equipment in such manner, at such times, and
upon such terms as Lessor may reasonably determine, and apply to the account of
Lessee (to the extent of Lessee's obligations with respect to the Event of
Default), or reimburse to Lessee (to the extent of liquidated damages paid by
Lessee with respect to the Event of Default) if all of Lessee's obligations
have been fulfilled, after deducting all costs and expenses, including
attorneys' fees, in connection with such disposition: (i) in the case of a
sale, the sale proceeds less the fair market value of said Equipment when the
Event of Default occurred, as reasonably determined by Lessor; or (ii) in the
case of a re-lease, the proceeds from the re-lease rental charges which are
applicable for the remainder of the lease term in effect under this Lease when
said Equipment was repossessed. In addition to the remedies set forth herein,
Lessor may pursue any other remedy available at law or in equity. The exercise
of any of the foregoing remedies by Lessor shall not constitute a termination
of this Lease or of any Schedule unless Lessor so notifies Lessee in writing.
All remedies of Lessor shall be deemed cumulative and may be exercised
concurrently or separately. The waiver by Lessor of any breach of any
obligation of Lessee shall not be deemed a waiver of a breach of any other
obligation or of any future breach of the same obligation. The subsequent
acceptance of rental payments hereunder by Lessor shall not be deemed a waiver
of any prior or existing breach by Lessee regardless of Lessor's knowledge of
such breach.
18. PERFORMANCE OF LESSEE'S OBLIGATIONS BY LESSOR: If Lessee fails to perform
any of its obligations hereunder, then, upon ten days prior written notice to
Lessee, Lessor shall have the right, but shall not be obligated, to perform the
same for the account of Lessee without thereby waiving Lessee's default. Any
amount paid and any expense, penalty or other liability incurred by Lessor in
such performance shall become due and payable by Lessee to Lessor upon demand.
19. PURCHASE AGREEMENTS: In the event any of the Equipment is subject to any
"Acquisition Agreement" between Lessee
<PAGE> 4
and the Manufacturer and/or vendor, then Lessee, as part of this Lease and upon
approval by Lessor of the applicable Schedule, transfers and assigns to Lessor
any and all of Lessee's rights, title and interest (excepting that which is
inherent to or granted by this Lease), but none of its obligations (except
Lessee's obligation to pay for the Equipment which Lessor shall do within thirty
days, or longer if allowed by the Acquisition Agreement, of Lessee's acceptance
of the Equipment provided all documentation required by Lessor has been
completed and that Lessor's approval remains valid), in and to the Acquisition
Agreement(s) and the subject Equipment. In the event Lessee issues a purchase
order to Lessor with respect to this Lease, any Schedule, or any of the
Equipment, it is agreed that any such purchase order is issued for Lessee's
internal purposes only and that none of its terms and conditions shall modify
this Lease or any related documentation, or affect either parties'
responsibilities as defined in this Lease.
21. NOTICES: All notices hereunder shall be in writing and shall be given by
personal delivery or sent by certified mail, return receipt requested, or
reputable overnight courier service, postage/expense prepaid, to the address of
the other party as set forth herein or to any later address last known to the
sender. All notices to Lessor shall be addressed to the attention of Vice
President, Contracts. Notice shall be effective upon signed receipt or other
evidence of delivery.
22. TERMINATION BY LESSOR: Time is of the essence of this Lease. If the
Commencement Date for any Item of Equipment does not occur for any reason within
sixty days of the date of Lessor's approval of the respective Schedule, then
Lessor, anytime thereafter until the Final Commencement Date with respect to
said Schedule, may elect, in its sole discretion, and upon ten days prior
written notice to Lessee, to terminate this Lease and its obligations to Lessee
with respect to any or all Items of Equipment subject to said Schedule wherein
the Commencement Date has not yet occurred, in which event the rental amount
shall be adjusted accordingly in order to reflect only those Items still subject
to said Schedule.
23. APPLICABLE LAW: This Lease shall be construed in accordance with and shall
be governed by the laws of the State of California. The prevailing party in any
legal action to enforce any of the terms of this Lease or to recover for any
breach of this Lease shall be entitled to recover all attorneys' fees and costs
of suit from the other party. The Lessee agrees that any litigation arising out
of this Lease or any breach thereof shall be filed and conducted in the
California Superior Court for the County of Orange, unless Lessor or its
Assignee selects an alternative venue of litigation. If any provision of this
Lease or any Schedule is held by applicable jurisdiction to be invalid, illegal,
unenforceable or otherwise prohibited, then such provision, as to such
jurisdiction, shall be: (a) ineffective to the extent of such prohibition
without invalidating the remaining provisions hereof; and (b) replaced with a
mutually acceptable, valid, legal and enforceable provision which comes closest
to the intention of the parties. Any such prohibition in any jurisdiction shall
not invalidate such provision in any other jurisdiction, and, where the
provisions of any such applicable law may be waived, they are hereby waived by
Lessee and Lessor to the full extent permitted to the end that this Lease and
any Schedule shall be deemed a valid and binding agreement in accordance with
its terms. No rental, delinquency, liquidated damage or any other charges herein
or with respect to any Schedule are intended to exceed the maximum amount
permitted by applicable law. If any such charges exceed such maximum, then such
charges shall be reduced to the legally permitted maximum charge and Lessee will
not be obligated to pay any amount in excess of that permitted by law or, if
already paid, such excess shall be refunded.
24. GENERAL: NEITHER THIS LEASE NOR ANY SCHEDULE SHALL BIND LESSOR IN ANY
MANNER, AND NO OBLIGATIONS OF LESSOR SHALL ARISE, UNTIL THE RESPECTIVE
INSTRUMENT IS DULY EXECUTED BY AN AUTHORIZED OFFICER OF LESSOR. If more than one
Lessee is named in this Lease, the liability of each shall be joint and several.
This Lease and each Schedule shall inure to the benefit of and be binding upon
Lessor, Lessee and their respective successors except as expressly provided for
herein. All representations, warranties, indemnities and covenants contained
herein, or in any document now or at any other time delivered in connection
herewith, which by their nature would continue beyond the termination or
expiration of this Lease, shall continue in full force and effect and shall
survive the termination or expiration of this Lease.
25. ENTIRE AGREEMENT: This Lease, together with all duly executed Schedules,
constitutes the entire agreement between Lessee and Lessor with respect to the
Equipment and shall supersede any and all prior proposals, negotiations and/or
other communications, oral or written, with respect to the Equipment. NO
MODIFICATION TO THIS AGREEMENT SHALL BE EFFECTIVE UNLESS MADE IN WRITING AND
DULY EXECUTED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR. No oral or written
guaranty, promise, condition, representation or warranty shall be binding unless
made a part of this Lease by duly executed addendum. Unless specified otherwise,
in the event any such duly executed modification is attached to and made a part
of any specific Schedule, the terms and conditions of such modification shall
apply only to that specific Schedule and shall not apply to any other Schedule.
Lessee: Meade Instruments Corporation Lessor: CELTIC LEASING CORP.
Signature: /s/ BRENT W. CHRISTENSEN Signature:
------------------------ -----------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Title: Vice President
Date Offered: 2/23/95 Date Accepted:
------------
PLEASE INITIAL BELOW TO CERTIFY YOUR ACKNOWLEDGMENT AND AGREEMENT
THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
Lessee Initials: Lessor Initials:
---------- -----------
<PAGE> 5
CELTIC LEASE SCHEDULE No. 01 ANNEXED TO AND MADE A PART OF MASTER
LEASE NO. CML-0224-A DATED 2/23/95
CELTIC LEASING CORP.--Lessor
2061 Business Center Drive, Suite 200 - Irvine, California 92715
(714) 263-3880 - FAX: (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
Corporate
Address: 16542 Millikan Avenue, Irvine, CA 92714
Contact: Brent W. Christensen Title: Controller Phone No. 714-756-1450
Equipment
Location: SAME
Contact: ___________________ Title: __________ Phone No. ____________
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- ------------------------------------------------------
Vendor: Kitamura Machinery of U.S.A., Inc.
1. (01) 01140 "New" Kitamura Mycenter Zero 2APC Machine
- --------------------------------------------------------------------------------
MONTHLY BASE TERM DEPOSIT APPLIED TO FINAL
RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
- ------------ --------- ------------------ ------------- -----------------
[ ] MONTHLY
$2,078.13 sixty (60) ONE MONTH'S RENT [ ] BIANNUALLY
[X] QUARTERLY
(APPLICABLE TAXES TO BE BILLED) [ ] ANNUALLY
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE PARTIES HEREBY REAFFIRM THEIR ACKNOWLEDGMENT AND
AGREEMENT THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
OFFER ACCEPTANCE
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
Signature: /s/ BRENT W. CHRISTENSEN Signature:
------------------------ -------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Date: 2/23/95 Title: Vice President Date: ______
<PAGE> 6
Addendum "A"
to
Lease Schedule No. 01 (the "Schedule"),
dated 2/23/95,
to
Master Lease Agreement No. CML-0224-A,
dated 2/23/95,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
--------------------------- ----------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
------------------------------ -------------------------------
Title: Controller Title: Vice President
------------------------------ -------------------------------
Date: 2/23/95 Date:
------------------------------ -------------------------------
<PAGE> 7
CELTIC LEASE SCHEDULE No. 02 ANNEXED TO AND MADE A PART OF MASTER
LEASE NO. CML-0224-A DATED _____________
CELTIC LEASING CORP.--Lessor
2061 Business Center Drive, Suite 200 - Irvine, California 92715
(714) 263-3880 - FAX: (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
Corporate
Address: 16542 Millikan Avenue, Irvine, CA 92714
Contact: Brent W. Christensen Title: Controller Phone No. 714-756-1450
Equipment
Location: SAME
Contact: ___________________ Title: __________ Phone No. ____________
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- ------------------------------------------------------
Vendor: Ellison Machinery Company
1. (01) C143 Okuma LB-25 CNC Lathe
- --------------------------------------------------------------------------------
MONTHLY BASE TERM DEPOSIT APPLIED TO FINAL
RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
- --------- --------------- ------------------ ------------- -----------------
[ ] MONTHLY
$2,831.73 sixty (60) ONE MONTH'S RENT [ ] BIANNUALLY
[X] QUARTERLY
(APPLICABLE TAXES TO BE BILLED) [ ] ANNUALLY
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE PARTIES HEREBY REAFFIRM THEIR ACKNOWLEDGMENT AND
AGREEMENT THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
OFFER ACCEPTANCE
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
Signature: /s/ BRENT W. CHRISTENSEN Signature:
------------------------ -----------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Date: 2/20/95 Title: Vice President Date: ________
<PAGE> 8
Addendum "A"
to
Lease Schedule No. 02 (the "Schedule"),
dated 2/23/95,
to
Master Lease Agreement No. CML-0224-A,
dated 2/23/95,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
--------------------------- ----------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Title: Vice President
Date: 2/23/95 Date:
------------------------------ -------------------------------
<PAGE> 9
[CELTIC LEASING CORP. LETTERHEAD]
- -------------------------------------------------------------------------------
Equipment Financing Specialist
March 17, 1995
MEADE INSTRUMENTS CORPORATION
16542 Millikan Avenue
Irvine, CA 92714-5032
RE: Master Lease Agreement No. CML-0224-A, dated February 23, 1995, by and
between Celtic Leasing Corp., as Lessor, and MEADE INSTRUMENTS
CORPORATION, as Lessee (the "Lease"), and its annexed Lease Schedule No.
02, dated February 23, 1995 (the "Schedule"), and all related
supplemental documentation (collectively, all said documentation
is herein referred to as the "Transaction").
Gentlemen and/or Ladies:
Notwithstanding anything to the contrary contained in the above referenced
Transaction, and to the limited extent hereof, this Letter Agreement amends and
supersedes said Transaction and is hereby incorporated by reference therein.
It is hereby acknowledged that the equipment cost for the above referenced
transaction has increased. Accordingly, the monthly rent as currently set
forth on said schedule is hereby revised as follows:
LEASE SCHEDULE NO. 2 AS CURRENTLY STATED AS REVISED HEREIN
- -------------------- ------------------- -----------------
Monthly Rent $2,831.73 $2,855.00
In all other respects, the terms and conditions of the Transaction as
previously set forth shall remain in full force and effect. Please acknowledge
your acceptance of this Letter Agreement by your authorized signature below and
return the original to Celtic Leasing Corp. within five days from the date
hereof.
Sincerely,
CELTIC LEASING CORP.
ACKNOWLEDGED AND ACCEPTED:
MEADE INSTRUMENTS CORPORATION
- -------------------------------
Todd R. Meyer
Vice President
By: /s/ BRENT W. CHRISTENSEN
----------------------------
Name: Brent W. Christensen
----------------------------
Title: Controller Date: 3/21/95
------------ ----------
TRM/JJ
<PAGE> 10
CELTIC LEASE SCHEDULE No. 03 ANNEXED TO AND MADE A PART OF MASTER
LEASE NO. CML-0224-A DATED 2/23/95
CELTIC LEASING CORP.--Lessor
2061 Business Center Drive, Suite 212 - Irvine, California 92715
(714) 263-3880 - FAX: (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
Corporate
Address: 16542 Millikan Avenue, Irvine, CA 92714
Contact: Brent W. Christensen Title: Controller Phone No. 714-756-2291
Equipment
Location: SAME
Contact: ___________________ Title: __________ Phone No. ____________
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- ------------------------------------------------------
VENDOR: Adair Office Furniture
1. (see attached) Office Furniture--descriptions, quantities and serial
numbers of which are set forth on the attached copies
of Adair Office Furniture's invoices no. 11895,
217628, 217636, 217753, 218038, 218038A, 21800,
218370, 218427, 218427S, 218577, 218970, CM219018,
219489, CM219492, 220209, 219535, 219503, 220136,
218970A, 219929, CM219970.
2. VENDOR: Best Blinds of Orange County
(see attached) Vertical Blinds--descriptions, and quantities and of
which are set forth on the attached copies of Best
Blinds of Orange County's invoice no. 14267.
3. VENDOR: DLS Builders
(see attached) Building Equipment--descriptions and quantities of
which are set forth on the attached copies of DLS
Builders's invoices no. 3507, 3544, 3562, 1533
4. VENDOR: Tom Campos
(see attached) Building Services--description and quantities of
which are set forth on the attached copy of
Tom Campos' invoice no. 5120
- --------------------------------------------------------------------------------
MONTHLY BASE TERM DEPOSIT APPLIED TO FINAL
RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
- --------- --------------- ------------------ ------------- -----------------
[ ] MONTHLY
$3,377.92 thirty-six (36) ONE MONTH'S RENT [ ] BIANNUALLY DATE OF FUNDING
[X] QUARTERLY
(APPLICABLE TAXES TO BE BILLED) [ ] ANNUALLY
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE PARTIES HEREBY REAFFIRM THEIR ACKNOWLEDGMENT AND
AGREEMENT THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
OFFER ACCEPTANCE
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
Signature: /s/ BRENT W. CHRISTENSEN Signature: /s/ TODD R. MEYER
------------------------ -----------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Date: 4/24/95 Title: Vice President Date: 04/24/95
<PAGE> 11
Addendum "A"
to
Lease Schedule No. 03 (the "Schedule"),
dated April 24, 1995,
to
Master Lease Agreement No. CML-0224-A,
dated 02/23/95,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature: /s/ TODD R. MEYER
--------------------------- ----------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Title: Vice President
Date: 4/24/95 Date: 04/24/95
------------------------------ -------------------------------
<PAGE> 12
CELTIC LEASE SCHEDULE No. 04 ANNEXED TO AND MADE A PART OF MASTER
LEASE NO. CML-0224-A DATED 2/23/95
CELTIC LEASING CORP.--Lessor
2061 Business Center Drive, Suite 200 - Irvine, California 92715
- (714) 263-3880 - FAX: (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
---------------------------------------------------------------------
Corporate
Address: 16542 Millikan Avenue, Irvine, CA 92714
---------------------------------------------------------------------
Contact: Brent W. Christensen Title: Controller Phone No. 714-756-1450
-------------------- ----------- ------------
Equipment
Location: SAME
---------------------------------------------------------------------
---------------------------------------------------------------------
Contact: Title: Phone No.
----------------------- -------------- --------------
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- ------------------------------------------------------
Vendor: Marubeni-Citizen
1. (01) L20 Type VII Cincom Control
Vendor: CNC Systems, Inc.
2. (01) LNS Super Hydrobar
3. (01) Spindle Liner Tubes
4. (01) Installation
*Inclusive of Sales tax paid upfront.
- --------------------------------------------------------------------------------
MONTHLY BASE TERM DEPOSIT APPLIED TO FINAL
RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
- --------- --------------- ------------------ ------------- -----------------
[ ] MONTHLY
$3,737.35* sixty (60) ONE MONTH'S RENT [ ] BIANNUALLY
[X] QUARTERLY
(APPLICABLE TAXES TO BE BILLED) [ ] ANNUALLY
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE PARTIES HEREBY REAFFIRM THEIR ACKNOWLEDGMENT AND
AGREEMENT THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
OFFER ACCEPTANCE
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ----------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
------------------------ -------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
----------------------------- ------------------------------
Title: Controller Title: Vice President
---------------------------- -----------------------------
Date: 5/4/95 Date:
---------------------------- ------------------------------
<PAGE> 13
Addendum "A"
to
Lease Schedule No. 04 (the "Schedule"),
dated , 199
------------ --,
to
Master Lease Agreement No. CML-0224-A,
dated February 23, 1995,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
--------------------------- ----------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
------------------------------ -------------------------------
Title: Controller Title: Vice President
------------------------------ -------------------------------
Date: 5/4/95 Date:
------------------------------ -------------------------------
<PAGE> 14
CELTIC LEASE SCHEDULE No. 05 ANNEXED TO AND MADE A PART OF MASTER
LEASE NO. CML-0224-A DATED 2/23/95
CELTIC LEASING CORP.--Lessor
2061 Business Center Drive, Suite 200 - Irvine, California 92612
- (714) 263-3880 - FAX: (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
Corporate
Address: 16542 Millikan Avenue, Irvine, CA 92714
---------------------------------------
Contact: Brent W. Christensen Title: Controller Phone No. 714-756-1450
-------------------- ---------- ------------
Equipment
Location: SAME
---------------------------------------------------------------------
Contact: Title: Phone No.
-------------------- ---------- ------------
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- ------------------------------------------------------
VENDOR: Ellison Machinery Company
1. (01) Okuma Cadet w/Big Bore
2. (01) Parts Catcher for Sub Spindle
3. (01) Chip Conveyor
4. (01) Touchsetter M
5. (01) Monochrome Graphics
6. (01) Lap4
7. (01) User Task II
8. (01) Barfeeder Interface
9. (01) SMW Spacesaver
10. (01) Spindle Filler Tube
*Inclusive of sales tax paid upfront.
- --------------------------------------------------------------------------------
MONTHLY BASE TERM DEPOSIT APPLIED TO FINAL
RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
- --------- --------------- ------------------ ------------- -----------------
[X] MONTHLY
$3,927.00* sixty (60) ONE MONTH'S RENT [ ] BIANNUALLY
[ ] QUARTERLY
(APPLICABLE TAXES TO BE BILLED) [ ] ANNUALLY
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE PARTIES HEREBY REAFFIRM THEIR ACKNOWLEDGMENT AND
AGREEMENT THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
OFFER ACCEPTANCE
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
Signature: /s/ BRENT W. CHRISTENSEN Signature:
------------------------ -----------------
Name: Brent W. Christensen Name: Todd R. Meyer
----------------------------- ----------------------
Title: Controller Date: 7/31/96 Title: Vice President Date:
<PAGE> 15
[ELLISON LETTERHEAD]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
CUST. CODE SALESMAN PROJECT/SALES ORDER
20039 3301 100179/100141
--------------------------------------------------------------------------
CUSTOMER P.O. NUMBER RELEASE NUMBER CUSTOMER ORDER DATE
CONTRACT 6/11/1996
--------------------------------------------------------------------------
ORIGINAL INVOICE
SHIP F.O.B. SHIPPING TERMS
TO MEADE INSTRUMENTS CHARLOTTE, NC PREPAY & CHARGE
16542 MILLIKAN AVENUE
IRVINE, CA 92714 SHIP VIA SHIP DATE
Best Way 07/01/1996
INVOICE NO. INVOICE DATE
CELTIC LEASING CORPORATION BM/10000152 07/11/1996
ATTN: MARK CAMPBELL
2061 BUSINESS CENTER DRIVE TERMS: DUE UPON CUSTOMER ACCEPTANCE
SUITE #200
IRVINE, CA 92612
- ----------------------------------------------------------------------------------------------------------------------------------
ITEM /ORDERED/ SHIPPED / B/O / UNIT / PART NUMBER / DESCRIPTION / UNIT PRICE / EXTENSION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 1 1 0 ea CADET-W/BB OKUMA CNC LATHE 169,500.00 169,500.00
S/N D243
20 1 1 0 ea :LNC8-SSPC PARTS CATCHER FOR SUB SPINDLE .00 .00
30 1 1 0 ea :LNC8-2001 CHIP CONVEYOR, REAR DISCHARGE .00 .00
40 1 1 0 ea :LNC8-8259 SMW BARFEED INTERFACE .00 .00
50 1 1 0 ea :LNC8-2801 TOUCH SETTER-M, CADET .00 .00
60 1 1 0 ea :LNC8-8331 MONOCHROME GRAPHICS .00 .00
70 1 1 0 ea :LNC8-8115 LAP4, LNC-8 (CADET) .00 .00
80 1 1 0 ea :LNC8-8348 USER TASK II LNC8 .00 .00
90 1 1 0 ea SPACESAVER 12.65 SMW BARFEED, 0.5" - 2.60" CAP .00 .00
100 1 1 0 ea SMW INSTALL INSTALLATION OF SMW SPACESAVER .00 .00
110 2 2 0 ea FILL TUBE SPINDLE FILLER TUBE .00 .00
1 1 0 ea TNS1100 T-NUT, KITAGAWA B-05 CHUCK .00 .00
- ---------------------------------------------------------------------------------------------------------------------------------
PLEASE NOTE TERMS AND GROSS SALE SALES TAX FREIGHT INVOICE TOTAL
CONDITIONS ON REVERSE SIDE 169,500.00 13,136.25 INVOICE TOTAL 182,636.25
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
Addendum "A"
to
Lease Schedule No. 05 (the "Schedule"),
dated , 199 .
--------------- --
to
Master Lease Agreement No. CML-0224-A,
dated February 23, 1995,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
--------------------------- ----------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
------------------------------ -------------------------------
Title: Controller Title: Vice President
------------------------------ -------------------------------
Date: 7/31/96 Date:
------------------------------ -------------------------------
<PAGE> 17
CELTIC LEASE SCHEDULE No. 06 ANNEXED TO AND MADE A PART OF MASTER
LEASE NO. CML-0224-A DATED
CELTIC LEASING CORP.--Lessor
2061 BUSINESS CENTER DRIVE, SUITE 200 - IRVINE, CALIFORNIA 92715
(714) 263-3880 - FAX: (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
---------------------------------------------------------------------
Corporate
Address: 16542 Millikan Avenue, Irvine, CA 92714-5032
---------------------------------------------------------------------
Contact: Brent Christensen Title: Controller Phone No. 714-556-2291
------------------- ------------- ------------
Equipment
Location: SAME
---------------------------------------------------------------------
---------------------------------------------------------------------
Contact: Title: Phone No.
------------------- ------------- ------------
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- ------------------------------------------------------
VENDOR: Kitamura Machinery Sales, Inc.
------------------------------
1. (01) KITAMURA MYCENTER-ZERO 2 APC SPARKCHANGER/YZANAC
I 80 CONTROL
VENDOR: Ellison Machinery Company
-------------------------
2. (01) OKUMA CADET-C WITH OSP TOOL CONTROL
*Amounts financed included taxes
* Inclusive of sales tax paid upfront.
- --------------------------------------------------------------------------------
MONTHLY BASE TERM DEPOSIT APPLIED TO FINAL
RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
- --------- --------------- ------------------ ------------- -----------------
[X] MONTHLY
$3,803.00* Sixty months(60) ONE MONTH'S RENT [ ] BIANNUALLY
[ ] QUARTERLY
(APPLICABLE TAXES TO BE BILLED)* [ ] ANNUALLY
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE PARTIES HEREBY REAFFIRM THEIR ACKNOWLEDGMENT AND
AGREEMENT THAT NO MODIFICATION TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
OFFER ACCEPTANCE
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
------------------------------ -----------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
--------------------------- --------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
-------------------------------- ------------------------------
Title: Vice President Date: 10/28/96 Title: Vice President Date:
-------------- -------- -------------- --------
<PAGE> 18
KITAMURA MACHINERY SALES, INC. C 2044
5656 CORPORATE AVENUE o CYPRESS, CA 90630 PHONE: 1-714-821-0980
FAX: 1-714-821-1862
Date 09/30/96
--------------
Your Order # 0996126
---------
Sold To Shipped To
MEADE INSTRUMENTS CORP. SAME
16542 MILLIKAN AVE.
IRVINE, CA 92714-5032
- -------------------------------------------------------------------------------
Date Shipped Shipped Via F.O.B. Terms 5% DOWN BAL. 60 DAYS
09/18/96 DUNKEL BROS. DESTINATION FROM INST. DATE
- -------------------------------------------------------------------------------
Quantity Quantity Back Unit
Ordered Shipped Order Description Price Unit Amount
- -------------------------------------------------------------------------------
1 1 0 NEW KITAMURA MYCENTER $89,501.00
2 APC "SPARKCHANGER"
WITH YASNAC I80 CONTROL.
INCLUDES 30 KVA
TRANSFORMER
2,500.00 LIST PRICE
TOOLING CREDIT
SALES TAX (7.75%) 6,936.33
----------
TOTAL $96,437.33
LESS DEPOSIT (4,475.00)
----------
BALANCE DUE ................... $91,962.33
<PAGE> 19
<TABLE>
<CAPTION>
ELLISON -----------------------------------------------------------
machinery company 018 CUST.CODE SALESMAN PROJECT/SALES ORDER
9912 S. Pioneer Blvd. 20039 3301 100341/100250
P.O. Box 3508 -----------------------------------------------------------
Santa Fe Springs, CA 90670 CUSTOMER P.O. NUMBER RELEASE NUMBER CUSTOMER ORDER DATE
310.949.8311 / FAX 310.942.8084 0996127 09/12/1996
-----------------------------------------------------------
ORIGINAL INVOICE
F.O.B. SHIPPING TERMS
SHIP [ MEADE INSTRUMENTS CHARLOTTE, NC PREPAY & CHARGE
TO [ 16542 MILLIKAN AVENUE
[ IRVINE, CA 92714 SHIP VIA SHIP DATE
Best Way 09/17/1996
INVOICE NO. INVOICE DATE
[ MEADE INSTRUMENTS BM/10000286 09/17/1996
[ 16542 MILLIKAN AVENUE
[ IRVINE, CA 92714 TERMS: NET 20 DAYS
- -------------------------------------------------------------------------------------------------
TEM ORDERED SHIPPED B/O UNIT PART NUMBER DESCRIPTION UNIT PRICE EXTENSION
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 1 1 0 ea. LNC-8C OKUMA CADET LATHE W/ 79,154.00 79,154.00
TAILSTOCK
S/N D671
INCLUDES:
OSP 700L CONTROL
LAP 4
USER TASK II
MONO GRAPHICS (ANIMATION)
- -------------------------------------------------------------------------------------------------
PLEASE NOTE TERMS AND GROSS SALE SALES TAX FREIGHT INVOICE TOTAL INVOICE TOTAL
CONDITIONS ON REVERSE SIDE 79,154.00 6,134.44 85,288.44
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
Addendum "A"
to
Lease Schedule No. 06 (the "Schedule"),
dated , 1996,
--------------
to
Master Lease Agreement No. CML-0224-A,
dated February 23, 1995,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT CHRISTENSEN Signature:
--------------------------- ----------------------------
Name: Brent Christensen Name: Todd R. Meyer
Title: Vice President Title: Vice President
Date: 10/28/96 Date:
------------------------------ -------------------------------
<PAGE> 21
<TABLE>
<CAPTION>
CELTIC ACCEPTANCE CERTIFICATE TO LEASE SCHEDULE NO. 06 DATED
CELTIC LEASING CORP. -- Lessor ---- ---------
ANNEXED TO AND MADE A PART OF MASTER LEASE NO. CML- 0224-A DATED 2/23/95
---------
2061 Business Center Drive, Suite 200 o Irvine, California 92612 o (714) 263-3880 o FAX (714) 263-1331
Lessee: MEADE INSTRUMENTS CORPORATION
------------------------------------------------------------------------------------------------------------
Lessee hereby certifies that, pursuant to the Lease Schedule and Master Lease referenced above, the Items of
Equipment set forth below, as are enumerated and further described in the related Lease Schedule, have been,
as of the indicated Commencement Date, delivered to, inspected by, found to be in good order and accepted by
Lessee as ready for use, and billing pursuant to the Lease is appropriate. Lessee understands that Lessor is
relying on this certification in making payment for the Items listed below.
- ---------------------------------------------------------------------------------------------------------------------
COMMENCEMENT ADDITIONAL DESCRIPTION INCLUDING SERIAL NO. AND LOCATION
ITEM(S) QTY DATE (necessary only if information on the related Lease Schedule is insufficient)
- ------- --- ------------ ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALL ALL 10/15/96
- ---------------------------------------------------------------------------------------------------------------------
ACCEPTED BY:
Lessee: MEADE INSTRUMENTS CORPORATION
-----------------------------
Signature: /s/ BRENT CHRISTENSEN
--------------------------
Name: Brent Christensen
--------------------------------
Title: Vice President
-------------------------------
</TABLE>
<PAGE> 22
Addendum "A"
to
Lease Schedule No. 06 (the "Schedule"),
dated , 199 ,
--------------- --
to
Master Lease Agreement No. CML-0224-A,
dated February 23, 1995,
by and between
CELTIC LEASING CORP., as Lessor,
and
MEADE INSTRUMENTS CORPORATION, as Lessee (the "Lease")
Notwithstanding the terms and conditions contained in the above-referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above-referenced Schedule:
1. Modify Paragraph 4. TERM:
(a) Line 3. Replace "quarter (January 1, April 1, July 1, or
October 1)" with "month".
(b) Line 5. Replace "quarter" with "month".
2. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the Lease,
Lessee may purchase the Equipment subject to the Schedule for $1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
Lessee: MEADE INSTRUMENTS CORPORATION Lessor: CELTIC LEASING CORP.
----------------------------- ------------------------------
Signature: /s/ BRENT W. CHRISTENSEN Signature:
--------------------------- ----------------------------
Name: Brent W. Christensen Name: Todd R. Meyer
Title: Controller Title: Vice President
Date: 10/28/96 Date:
------------------------------ -------------------------------
<PAGE> 1
EXHIBIT 10.25
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 23rd day of April,
1996, by and among the MEADE INSTRUMENTS CORP. EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST (the "ESOP"), MEADE INSTRUMENTS CORP., a California corporation (the
"Company"), the DIEBEL LIVING TRUST u/d/t dated January 12, 1995 ("Seller") and
JOHN DIEBEL, individually ("Diebel").
W I T N E S S E T H:
1. Recitals.
(a) The Company has adopted the ESOP to provide stock
ownership interests in the Company to eligible employees, and the ESOP is
designed to be an employee stock ownership plan under Section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Section 407(d)(6) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(b) The Seller owns 765,000 shares (the "Shares") of Series B
Common Stock of the Company ("Series B Stock") and desires to sell all of the
Shares to the ESOP, and the ESOP desires to purchase the Shares.
(c) The Company is willing to make a loan to the ESOP to
provide the ESOP with funds to finance its purchase of the Shares, subject to
the condition that the ESOP pledge the Shares to the Company as security for the
repayment of such loan.
<PAGE> 2
(d) After the purchase of the Shares, the contemporaneous
purchases by the ESOP of 735,000 shares of Series B Stock from other selling
shareholders and the contemporaneous redemption of 71,361 shares of Series A
Common Stock of the Company, the ESOP will own no less than 30% of the total
value of all common stock of the Company on a fully-diluted basis.
2. Purchase and Sale of Shares. The Seller hereby agrees to sell the
Shares to the ESOP, and the ESOP hereby agrees to purchase the Shares from the
Seller. The purchase price for the Shares shall be $5,609,974.50 (or $7.3333 per
share) and shall be paid to the Seller by certified check, wire transfer or
other immediately available funds. Delivery of properly endorsed certificates
representing the Shares shall occur contemporaneously with the payment of the
purchase price. The purchase and sale of the Shares shall occur
contemporaneously with the satisfaction of the conditions in Section 5 or as
soon thereafter as possible, at a time and place mutually agreeable to the
parties ("Closing Date").
3. Representations and Warranties.
(a) Diebel and the Seller hereby represent and warrant
that as of the Closing Date:
(i) The Seller holds good title to the Shares, free
and clear of all liens, proxies, encumbrances, security interests,
contractual rights or any other known claims of any kind whatsoever;
- 2 -
<PAGE> 3
(ii) The Seller has the power and authority to sell the
Shares to the ESOP, and this Agreement is his legal, valid and binding
obligation, enforceable in accordance with its terms; and
(iii) Diebel has no knowledge of any material adverse change
occurring since February 28, 1995, in the business, properties,
condition (financial or other) or operations, present or prospective,
of the Company that has not been disclosed to Wells Fargo Bank, N.A.,
as trustee of the ESOP (the "Trustee") and to FMV Opinions, Inc.
("FMV"), the ESOP's independent appraiser.
(b) The Trustee, in its capacity as such, on behalf of the
ESOP, hereby represents and warrants that as of the Closing Date, the execution
and delivery of this Agreement by the undersigned Trustee have been duly and
validly authorized, and all necessary action has been taken to make this
Agreement a legal, valid and binding obligation of the ESOP, enforceable in
accordance with its terms.
(c) The Company hereby represents and warrants that as of the
Closing Date:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
California.
(ii) The execution and delivery of this Agreement have been
duly and validly authorized, and all necessary action has been taken,
to make this Agreement a legal, valid
- 3 -
<PAGE> 4
and binding obligation of the Company, enforceable in accor-
dance with its terms.
(iii) There has been no material adverse change since
February 28, 1995, in the business, properties, condition (financial or
other) or operations, present or prospective, of the Company that has
not been disclosed to the Trustee and to FMV.
(iv) The ESOP has been duly adopted and establish ed by
the Company, and the Trustee has been duly appointed by the Company.
(v) Each of the representations and warranties in
Section 7.1 of the Loan and Security Agreement ("Fleet Loan Agreement")
by and between Fleet Capital Corporation and the Company with respect
to the Company and each of the representations and warranties in
Section 4 of the Churchill Agreement with respect to the Company is
hereby incorporated by reference herein mutatis mutandis (without
regard as to any waiver or amendment thereto from the form of the Fleet
Loan Agreement or the Securities Purchase Agreement ("Churchill
Agreement") by and between the Company and Churchill ESOP Capital
Partners ("Churchill") in the form existing on the date most recently
delivered to the ESOP (whether or not executed or delivered), other
than those waivers and amendments of which the ESOP has been advised a
reasonable time prior to the Closing Date and that are subsequently
confirmed to the ESOP in writing).
- 4 -
<PAGE> 5
4. Covenants.
(a) As the Seller may wish to elect the application of Section
1042(a) of the Code with respect to the sale of the Shares, the Company agrees
to supply to it, upon written request from Diebel, the verified written
statement of the Company required by Section 1042(b)(3) of the Code and the
regulations thereunder, consenting to the possible application of Section
4978(a) of the Code ("Tax on Certain Dispositions by Employee Stock Ownership
Plans and Certain Cooperatives") and Section 4979A of the Code ("Tax on Certain
Prohibited Allocations of Qualified Securities").
(b) The ESOP agrees that no disposition of any of the Shares
will be made by the ESOP within the three-year period following the closing of
the purchase, except as permitted under Section 4978(d) of the Code, unless the
Company specifically consents in writing thereto.
(c) The ESOP agrees that no allocations will be made under the
ESOP in a manner which would violate the provisions of Section 409(n) of the
Code. Diebel hereby agrees that he will be waiving any right he (or certain
other members of his family) may otherwise have to be a participant in the ESOP,
to the extent required under Section 409(n) of the Code, if he requests the
Company to supply him with the statement of consent referred to in Section 4(a).
(d) The Company and the ESOP agree (so long as any interest or
principal amount under the loan referred to in Section 1(c) remains payable) to
use reasonable efforts to cause the
- 5 -
<PAGE> 6
ESOP to be operated and administered as a qualified plan under Sections 401(a)
and 4975(e)(7) of the Code and in material compliance with all applicable
requirements of ERISA, and regulations thereunder as from time to time in effect
and applicable to the ESOP.
(e) The ESOP makes no express or implied representation
hereunder to the Seller that the stock purchase contemplated under this
Agreement meets the requirements of Section 1042 of the Code.
(f) The Company hereby agrees to use its best efforts to, at
the request of the ESOP, elect to the Board of Directors of the Company one
person designated by the Administrative Committee of the ESOP. This obligation
of the Company shall terminate upon the earliest to occur of (i) a Qualified
Public Offering (as defined in the Churchill Agreement), (ii) the repayment in
full of the loan made, in the original principal amount of $11 million, to the
ESOP by the Company, and (iii) the ESOP owns less than 10% of the outstanding
common stock (all classes) of the Company.
(g) It is intended that the stock purchase hereunder,
including all terms and provisions of this Agreement, the ESOP Loan and Pledge
Agreement and the Secured Promissory Note shall qualify for exemptions under
Section 4975(d)(3) and (13) of the Code from being prohibited transactions under
Section 4975(c) of the Code, and shall qualify for exemptions under Section
408(b)(3) and (e) of ERISA from being prohibited transactions under Section 406
of ERISA. Notwithstanding anything herein or
- 6 -
<PAGE> 7
in any of the aforementioned documents to the contrary, (i) neither the Company,
the ESOP nor the Seller shall take any action or fail to take any action the
result of which would cause any portion or all of the transaction contemplated
hereby to be a prohibited transaction under Section 4975(c) of the Code or
Section 406 of ERISA, (ii) any action in contravention of this provision shall
be null and void and unenforceable, and (iii) in the event that any portion of
the transaction contemplated hereby is determined to be or it appears reasonably
certain to be such a prohibited transaction, the parties shall take such action
as shall be reasonably necessary and appropriate to correct any such prohibited
transaction.
5. Conditions.
(a) It shall be a condition to the ESOP's obligation
to purchase the Shares hereunder that:
(i) The Trustee obtain from FMV, a valuation opinion,
dated as of the Closing Date, to the effect that $7.3333 per share does
not exceed the fair market value of the Shares as of the Closing Date
and that the terms of the transaction contemplated hereunder are fair
to the ESOP from a financial point of view;
(ii) The ESOP obtain from the Company a loan in the
amount of $11,000,000 on terms acceptable to the Company and the
Trustee;
(iii) The purchase of the Shares occurs simulta-
neously with the purchase by the ESOP of the additional
- 7 -
<PAGE> 8
shares of Series B Stock being sold by other Company share-
holders, as described in Section 1(d);
(iv) The Trustee obtain from O'Melveny & Myers a letter
permitting the Trustee to rely on the opinion letter to be delivered by
O'Melveny & Myers in connection with the closing of the loan under the
Fleet Loan Agreement and the stock purchase under the Churchill
Agreement;
(v) The Trustee obtain a certificate dated as of the
Closing Date, signed by a duly authorized officer of the Company, the
truth and accuracy of which shall be a condition to the ESOP's
obligation to purchase the Shares, and to the effect that (1) the
representations and warranties of the Company set forth in Section 3(c)
are to the best of his knowledge, after due inquiry, true and correct
on and with respect to the Closing Date and (2) the Company has
performed all of its obligations hereunder which are to be performed on
or prior to the Closing Date; and
(vi) The Trustee shall have determined that the ESOP's
purchase of the Shares does not violate ERISA.
(b) It shall be a condition to the Seller's obligation to sell
the Shares hereunder that:
(i) the purchase of the Shares occurs simultaneously
with the purchase by the ESOP of the additional shares of Series B
Stock being sold by other Company shareholders, and the contemporaneous
redemption of the Series A stock, as described in Section 1(d); and
- 8 -
<PAGE> 9
(ii) the Trustee obtain from FMV the valuation opinion
described in Section 5(a)(1).
(c) It shall be a condition to the Company's obliga-
tions hereunder that:
(i) the Company obtain a term loan in the amount of
$9,500,000 pursuant to the terms of the Fleet Loan Agree-
ment; and
(ii) the Company obtain $6 million from the sale of
preferred stock pursuant to the terms of the Churchill Agreement.
(d) It shall be a condition to each party's obligations
hereunder that as of the Closing Date, each other party's representations and
warranties made under Section 3 are true and correct in all material respects.
Any violation of this condition not known prior to the date the ESOP purchases
the Shares shall constitute grounds for rescission.
6. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
the principles of conflicts of law thereof), except to the extent superseded by
ERISA.
(b) This Agreement shall be binding upon the respective
successors and assigns of the parties hereto.
(c) In the event that any provision of this Agreement is
adjudicated invalid, illegal or unenforceable, such adjudication shall not
affect the validity, legality or enforceability of
- 9 -
<PAGE> 10
any other provision, and this Agreement shall be construed as though such
invalid, illegal or unenforceable provision had never been contained herein.
(d) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST
By: Wells Fargo Bank, N.A.,
not in an individual or
corporate capacity, but solely
in its capacity as Trustee
By /s/ Elyse Weise
-----------------------------------
MEADE INSTRUMENTS CORP.
By /s/ Steve Murdock
---------------------------------------
President
SELLER
/s/ John Diebel
------------------------------------------
John Diebel, in his capacity as
trustee of the Diebel Living Trust
u/d/t dated January 12, 1985
/s/ John Diebel
------------------------------------------
John Diebel, in his individual capacity
- 11 -
<PAGE> 1
EXHIBIT 10.26
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 23rd day of April,
1996, by and among the MEADE INSTRUMENTS CORP. EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST (the "ESOP"), MEADE INSTRUMENTS CORP., a California corporation (the
"Company"), the MURDOCK 1986 TRUST u/d/t dated October 23, 1986 ("Seller") and
STEVE MURDOCK, individually ("Murdock").
W I T N E S S E T H:
1. Recitals.
(a) The Company has adopted the ESOP to provide stock
ownership interests in the Company to eligible employees, and the ESOP is
designed to be an employee stock ownership plan under Section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Section 407(d)(6) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(b) The Seller owns 457,500 shares (the "Shares") of Series B
Common Stock of the Company ("Series B Stock") and desires to sell all of the
Shares to the ESOP, and the ESOP desires to purchase the Shares.
(c) The Company is willing to make a loan to the ESOP to
provide the ESOP with funds to finance its purchase of the Shares, subject to
the condition that the ESOP pledge the Shares to the Company as security for the
repayment of such loan.
<PAGE> 2
(d) After the purchase of the Shares, the contemporaneous
purchases by the ESOP of 1,043,000 shares of Series B Stock from other selling
shareholders and the contemporaneous redemption of 71,361 shares of Series A
Common Stock of the Company, the ESOP will own no less than 30% of the total
value of all common stock of the Company on a fully-diluted basis.
2. Purchase and Sale of Shares. The Seller hereby agrees to sell the
Shares to the ESOP, and the ESOP hereby agrees to purchase the Shares from the
Seller. The purchase price for the Shares shall be $3,354,984.75 (or $7.3333 per
share) and shall be paid to the Seller by certified check, wire transfer or
other immediately available funds. Delivery of properly endorsed certificates
representing the Shares shall occur contemporaneously with the payment of the
purchase price. The purchase and sale of the Shares shall occur
contemporaneously with the satisfaction of the conditions in Section 5 or as
soon thereafter as possible, at a time and place mutually agreeable to the
parties ("Closing Date").
3. Representations and Warranties.
(a) Murdock and the Seller hereby represent and war-
rant that as of the Closing Date:
(i) The Seller holds good title to the Shares, free
and clear of all liens, proxies, encumbrances, security interests,
contractual rights or any other known claims of any kind whatsoever;
- 2 -
<PAGE> 3
(ii) The Seller has the power and authority to sell the
Shares to the ESOP, and this Agreement is his legal, valid and binding
obligation, enforceable in accordance with its terms; and
(iii) Murdock has no knowledge of any material adverse change
occurring since February 28, 1995, in the business, properties,
condition (financial or other) or operations, present or prospective,
of the Company that has not been disclosed to Wells Fargo Bank, N.A.,
as trustee of the ESOP (the "Trustee") and to FMV Opinions, Inc.
("FMV"), the ESOP's independent appraiser.
(b) The Trustee, in its capacity as such, on behalf of the
ESOP, hereby represents and warrants that as of the Closing Date, the execution
and delivery of this Agreement by the undersigned Trustee have been duly and
validly authorized, and all necessary action has been taken to make this
Agreement a legal, valid and binding obligation of the ESOP, enforceable in
accordance with its terms.
(c) The Company hereby represents and warrants that as
of the Closing Date:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
California.
(ii) The execution and delivery of this Agreement have been
duly and validly authorized, and all necessary action has been taken,
to make this Agreement a legal, valid
- 3 -
<PAGE> 4
and binding obligation of the Company, enforceable in accor-
dance with its terms.
(iii) There has been no material adverse change since
February 28, 1995, in the business, properties, condition (financial or
other) or operations, present or prospective, of the Company that has
not been disclosed to the Trustee and to FMV.
(iv) The ESOP has been duly adopted and established by the
Company, and the Trustee has been duly appointed by the Company.
(v) Each of the representations and warranties in
Section 7.1 of the Loan and Security Agreement ("Fleet Loan Agreement")
by and between Fleet Capital Corporation and the Company with respect
to the Company and each of the representations and warranties in
Section 4 of the Churchill Agreement with respect to the Company is
hereby incorporated by reference herein mutatis mutandis (without
regard as to any waiver or amendment thereto from the form of the Fleet
Loan Agreement or the Securities Purchase Agreement ("Churchill
Agreement") by and between the Company and Churchill ESOP Capital
Partners ("Churchill") in the form existing on the date most recently
delivered to the ESOP (whether or not executed or delivered), other
than those waivers and amendments of which the ESOP has been advised a
reasonable time prior to the Closing Date and that are subsequently
confirmed to the ESOP in writing).
- 4 -
<PAGE> 5
4. Covenants.
(a) As the Seller may wish to elect the application of Section
1042(a) of the Code with respect to the sale of the Shares, the Company agrees
to supply to it, upon written request from Murdock, the verified written
statement of the Company required by Section 1042(b)(3) of the Code and the
regulations thereunder, consenting to the possible application of Section
4978(a) of the Code ("Tax on Certain Dispositions by Employee Stock Ownership
Plans and Certain Cooperatives") and Section 4979A of the Code ("Tax on Certain
Prohibited Allocations of Qualified Securities").
(b) The ESOP agrees that no disposition of any of the Shares
will be made by the ESOP within the three-year period following the closing of
the purchase, except as permitted under Section 4978(d) of the Code, unless the
Company specifically consents in writing thereto.
(c) The ESOP agrees that no allocations will be made under the
ESOP in a manner which would violate the provisions of Section 409(n) of the
Code. Murdock hereby agrees that he will be waiving any right he (or certain
other members of his family) may otherwise have to be a participant in the ESOP,
to the extent required under Section 409(n) of the Code, if he requests the
Company to supply him with the statement of consent referred to in Section 4(a).
(d) The Company and the ESOP agree (so long as any interest or
principal amount under the loan referred to in Section 1(c) remains payable) to
use reasonable efforts to cause the
- 5 -
<PAGE> 6
ESOP to be operated and administered as a qualified plan under Sections 401(a)
and 4975(e)(7) of the Code and in material compliance with all applicable
requirements of ERISA, and regulations thereunder as from time to time in effect
and applicable to the ESOP.
(e) The ESOP makes no express or implied representation
hereunder to the Seller that the stock purchase contemplated under this
Agreement meets the requirements of Section 1042 of the Code.
(f) The Company hereby agrees to use its best efforts to, at
the request of the ESOP, elect to the Board of Directors of the Company one
person designated by the Administrative Committee of the ESOP. This obligation
of the Company shall terminate upon the earliest to occur of (i) a Qualified
Public Offering (as defined in the Churchill Agreement), (ii) the repayment in
full of the loan made, in the original principal amount of $11 million, to the
ESOP by the Company, and (iii) the ESOP owns less than 10% of the outstanding
common stock (all classes) of the Company.
(g) It is intended that the stock purchase hereunder,
including all terms and provisions of this Agreement, the ESOP Loan and Pledge
Agreement and the Secured Promissory Note shall qualify for exemptions under
Section 4975(d)(3) and (13) of the Code from being prohibited transactions under
Section 4975(c) of the Code, and shall qualify for exemptions under Section
408(b)(3) and (e) of ERISA from being prohibited transactions under Section 406
of ERISA. Notwithstanding anything herein or
- 6 -
<PAGE> 7
in any of the aforementioned documents to the contrary, (i) neither the Company,
the ESOP nor the Seller shall take any action or fail to take any action the
result of which would cause any portion or all of the transaction contemplated
hereby to be a prohibited transaction under Section 4975(c) of the Code or
Section 406 of ERISA, (ii) any action in contravention of this provision shall
be null and void and unenforceable, and (iii) in the event that any portion of
the transaction contemplated hereby is determined to be or it appears reasonably
certain to be such a prohibited transaction, the parties shall take such action
as shall be reasonably necessary and appropriate to correct any such prohibited
transaction.
5. Conditions.
(a) It shall be a condition to the ESOP's obligation
to purchase the Shares hereunder that:
(i) The Trustee obtain from FMV, a valuation opinion,
dated as of the Closing Date, to the effect that $7.3333 per share does
not exceed the fair market value of the Shares as of the Closing Date
and that the terms of the transaction contemplated hereunder are fair
to the ESOP from a financial point of view;
(ii) The ESOP obtain from the Company a loan in the amount
of $11,000,000 on terms acceptable to the Company and the Trustee;
(iii) The purchase of the Shares occurs simulta-
neously with the purchase by the ESOP of the additional
- 7 -
<PAGE> 8
shares of Series B Stock being sold by other Company share-
holders, as described in Section 1(d);
(iv) The Trustee obtain from O'Melveny & Myers a letter
permitting the Trustee to rely on the opinion letter to be delivered by
O'Melveny & Myers in connection with the closing of the loan under the
Fleet Loan Agreement and the stock purchase under the Churchill
Agreement;
(v) The Trustee obtain a certificate dated as of the
Closing Date, signed by a duly authorized officer of the Company, the
truth and accuracy of which shall be a condition to the ESOP's
obligation to purchase the Shares, and to the effect that (1) the
representations and warranties of the Company set forth in Section 3(c)
are to the best of his knowledge, after due inquiry, true and correct
on and with respect to the Closing Date and (2) the Company has
performed all of its obligations hereunder which are to be performed on
or prior to the Closing Date; and
(vi) The Trustee shall have determined that the ESOP's
purchase of the Shares does not violate ERISA.
(b) It shall be a condition to the Seller's obligation
to sell the Shares hereunder that:
(i) the purchase of the Shares occurs simultaneously
with the purchase by the ESOP of the additional shares of Series B
Stock being sold by other Company shareholders, and the contemporaneous
redemption of the Series A stock, as described in Section 1(d); and
- 8 -
<PAGE> 9
(ii) the Trustee obtain from FMV the valuation opinion
described in Section 5(a)(1).
(c) It shall be a condition to the Company's obliga-
tions hereunder that:
(i) the Company obtain a term loan in the amount of
$9,500,000 pursuant to the terms of the Fleet Loan Agreement; and
(ii) the Company obtain $6 million from the sale of
preferred stock pursuant to the terms of the Churchill Agreement.
(d) It shall be a condition to each party's obligations
hereunder that as of the Closing Date, each other party's representations and
warranties made under Section 3 are true and correct in all material respects.
Any violation of this condition not known prior to the date the ESOP purchases
the Shares shall constitute grounds for rescission.
6. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
the principles of conflicts of law thereof), except to the extent superseded by
ERISA.
(b) This Agreement shall be binding upon the respective
successors and assigns of the parties hereto.
(c) In the event that any provision of this Agreement is
adjudicated invalid, illegal or unenforceable, such adjudication shall not
affect the validity, legality or enforceability of
- 9 -
<PAGE> 10
any other provision, and this Agreement shall be construed as though such
invalid, illegal or unenforceable provision had never been contained herein.
(d) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST
By: Wells Fargo Bank, N.A.,
not in an individual or
corporate capacity, but solely
in its capacity as Trustee
By /s/ Elyse Weise
-------------------------------
MEADE INSTRUMENTS CORP.
By /s/ John Diebel
------------------------------------
Chairman & CEO
SELLER
/s/ Steve Murdock
--------------------------------------
Steve Murdock, in his capacity as
trustee of the Murdock 1986 Trust u/d/t
dated 10-23, 1986
/s/ Steve Murdock
--------------------------------------
Steve Murdock, in his individual
capacity
- 11 -
<PAGE> 1
EXHIBIT 10.27
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 23rd day of April,
1996, by and among the MEADE INSTRUMENTS CORP. EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST (the "ESOP"), MEADE INSTRUMENTS CORP., a California corporation (the
"Company") and RONALD EZRA (the "Seller").
W I T N E S S E T H:
1. Recitals.
(a) The Company has adopted the ESOP to provide stock
ownership interests in the Company to eligible employees, and the ESOP is
designed to be an employee stock ownership plan under Section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Section 407(d)(6) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(b) The Seller owns 177,000 shares (the "Shares") of Series B
Common Stock of the Company ("Series B Stock") and desires to sell all of the
Shares to the ESOP, and the ESOP desires to purchase the Shares.
(c) The Company is willing to make a loan to the ESOP to
provide the ESOP with funds to finance its purchase of the Shares, subject to
the condition that the ESOP pledge the Shares to the Company as security for the
repayment of such loan.
(d) After the purchase of the Shares, the contempora-
neous purchases by the ESOP of 1,323,000 shares of Series B Stock
<PAGE> 2
from other selling shareholders and the contemporaneous redemption of 71,361
shares of Series A Common Stock of the Company, the ESOP will own no less than
30% of the total value of all common stock of the Company on a fully-diluted
basis.
2. Purchase and Sale of Shares. The Seller hereby agrees to sell the
Shares to the ESOP, and the ESOP hereby agrees to purchase the Shares from the
Seller. The purchase price for the Shares shall be $1,297,994.10 (or $7.3333 per
share) and shall be paid to the Seller by certified check, wire transfer or
other immediately available funds. Delivery of properly endorsed certificates
representing the Shares shall occur contemporaneously with the payment of the
purchase price. The purchase and sale of the Shares shall occur
contemporaneously with the satisfaction of the conditions in Section 5 or as
soon thereafter as possible, at a time and place mutually agreeable to the
parties ("Closing Date").
3. Representations and Warranties.
(a) The Seller hereby represents and warrants that as of the
Closing Date:
(i) He holds good title to the Shares, free and clear
of all liens, proxies, encumbrances, security interests, contractual
rights or any other known claims of any kind whatsoever;
(ii) He has the power and authority to sell the
Shares to the ESOP, and this Agreement is his legal, valid
- 2 -
<PAGE> 3
and binding obligation, enforceable in accordance with its terms; and
(iii) He has no knowledge of any material adverse change
occurring since February 28, 1995, in the business, properties,
condition (financial or other) or operations, present or prospective,
of the Company that has not been disclosed to Wells Fargo Bank, N.A.,
as trustee of the ESOP (the "Trustee") and to FMV Opinions, Inc.
("FMV"), the ESOP's independent appraiser.
(b) The Trustee, in its capacity as such, on behalf of the
ESOP, hereby represents and warrants that as of the Closing Date, the execution
and delivery of this Agreement by the undersigned Trustee have been duly and
validly authorized, and all necessary action has been taken to make this
Agreement a legal, valid and binding obligation of the ESOP, enforceable in
accordance with its terms.
(c) The Company hereby represents and warrants that as
of the Closing Date:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
California.
(ii) The execution and delivery of this Agreement have
been duly and validly authorized, and all necessary action has been
taken, to make this Agreement a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms.
- 3 -
<PAGE> 4
(iii) There has been no material adverse change since
February 28, 1995, in the business, properties, condition (financial or
other) or operations, present or prospective, of the Company that has
not been disclosed to the Trustee and to FMV.
(iv) The ESOP has been duly adopted and established by the
Company, and the Trustee has been duly appointed by the Company.
(v) Each of the representations and warranties in
Section 7.1 of the Loan and Security Agreement ("Fleet Loan Agreement")
by and between Fleet Capital Corporation and the Company with respect
to the Company and each of the representations and warranties in
Section 4 of the Churchill Agreement with respect to the Company is
hereby incorporated by reference herein mutatis mutandis (without
regard as to any waiver or amendment thereto from the form of the Fleet
Loan Agreement or the Securities Purchase Agreement ("Churchill
Agreement") by and between the Company and Churchill ESOP Capital
Partners ("Churchill") in the form existing on the date most recently
delivered to the ESOP (whether or not executed or delivered), other
than those waivers and amendments of which the ESOP has been advised a
reasonable time prior to the Closing Date and that are subsequently
confirmed to the ESOP in writing).
- 4 -
<PAGE> 5
4. Covenants.
(a) As the Seller may wish to elect the application of Section
1042(a) of the Code with respect to the sale of the Shares, the Company agrees
to supply to him, upon written request, the verified written statement of the
Company required by Section 1042(b)(3) of the Code and the regulations
thereunder, consenting to the possible application of Section 4978(a) of the
Code ("Tax on Certain Dispositions by Employee Stock Ownership Plans and Certain
Cooperatives") and Section 4979A of the Code ("Tax on Certain Prohibited
Allocations of Qualified Securities").
(b) The ESOP agrees that no disposition of any of the Shares
will be made by the ESOP within the three-year period following the closing of
the purchase, except as permitted under Section 4978(d) of the Code, unless the
Company specifically consents in writing thereto.
(c) The ESOP agrees that no allocations will be made under the
ESOP in a manner which would violate the provisions of Section 409(n) of the
Code. The Seller hereby agrees that he will be waiving any right he (or certain
other members of his family) may otherwise have to be a participant in the ESOP,
to the extent required under Section 409(n) of the Code, if he requests the
Company to supply him with the statement of consent referred to in Section 4(a).
(d) The Company and the ESOP agree (so long as any interest or
principal amount under the loan referred to in Section 1(c) remains payable) to
use reasonable efforts to cause the
- 5 -
<PAGE> 6
ESOP to be operated and administered as a qualified plan under Sections 401(a)
and 4975(e)(7) of the Code and in material compliance with all applicable
requirements of ERISA, and regulations thereunder as from time to time in effect
and applicable to the ESOP.
(e) The ESOP makes no express or implied representation
hereunder to the Seller that the stock purchase contemplated under this
Agreement meets the requirements of Section 1042 of the Code.
(f) The Company hereby agrees to use its best efforts to, at
the request of the ESOP, elect to the Board of Directors of the Company one
person designated by the Administrative Committee of the ESOP. This obligation
of the Company shall terminate upon the earliest to occur of (i) a Qualified
Public Offering (as defined in the Churchill Agreement), (ii) the repayment in
full of the loan made, in the original principal amount of $11 million, to the
ESOP by the Company, and (iii) the ESOP owns less than 10% of the outstanding
common stock (all classes) of the Company.
(g) It is intended that the stock purchase hereunder,
including all terms and provisions of this Agreement, the ESOP Loan and Pledge
Agreement and the Secured Promissory Note shall qualify for exemptions under
Section 4975(d)(3) and (13) of the Code from being prohibited transactions under
Section 4975(c) of the Code, and shall qualify for exemptions under Section
408(b)(3) and (e) of ERISA from being prohibited transactions under Section 406
of ERISA. Notwithstanding anything herein or
- 6 -
<PAGE> 7
in any of the aforementioned documents to the contrary, (i) neither the Company,
the ESOP nor the Seller shall take any action or fail to take any action the
result of which would cause any portion or all of the transaction contemplated
hereby to be a prohibited transaction under Section 4975(c) of the Code or
Section 406 of ERISA, (ii) any action in contravention of this provision shall
be null and void and unenforceable, and (iii) in the event that any portion of
the transaction contemplated hereby is determined to be or it appears reasonably
certain to be such a prohibited transaction, the parties shall take such action
as shall be reasonably necessary and appropriate to correct any such prohibited
transaction.
5. Conditions.
(a) It shall be a condition to the ESOP's obligation
to purchase the Shares hereunder that:
(i) The Trustee obtain from FMV, a valuation opinion,
dated as of the Closing Date, to the effect that $7.3333 per share does
not exceed the fair market value of the Shares as of the Closing Date
and that the terms of the transaction contemplated hereunder are fair
to the ESOP from a financial point of view;
(ii) The ESOP obtain from the Company a loan in the amount
of $11,000,000 on terms acceptable to the Company and the Trustee;
(iii) The purchase of the Shares occurs simultaneously
with the purchase by the ESOP of the additional
- 7 -
<PAGE> 8
shares of Series B Stock being sold by other Company shareholders, as
described in Section 1(d);
(iv) The Trustee obtain from O'Melveny & Myers a letter
permitting the Trustee to rely on the opinion letter to be delivered by
O'Melveny & Myers in connection with the closing of the loan under the
Fleet Loan Agreement and the stock purchase under the Churchill
Agreement;
(v) The Trustee obtain a certificate dated as of the Closing
Date, signed by a duly authorized officer of the Company, the truth and
accuracy of which shall be a condition to the ESOP's obligation to
purchase the Shares, and to the effect that (1) the representations and
warranties of the Company set forth in Section 3(c) are to the best of
his knowledge, after due inquiry, true and correct on and with respect
to the Closing Date and (2) the Company has performed all of its
obligations hereunder which are to be performed on or prior to the
Closing Date; and
(vi) The Trustee shall have determined that the ESOP's
purchase of the Shares does not violate ERISA.
(b) It shall be a condition to the Seller's obligation sell the
Shares hereunder that:
(i) the purchase of the Shares occurs simultaneously with the
purchase by the ESOP of the additional shares of Series B Stock being
sold by other Company shareholders, and the contemporaneous redemption
of the Series A stock, as described in Section 1(d); and
- 8 -
<PAGE> 9
(ii) the Trustee obtain from FMV the valuation opinion
described in Section 5(a)(1).
(c) It shall be a condition to the Company's obligations
hereunder that:
(i) the Company obtain a term loan in the amount of
$9,500,000 pursuant to the terms of the Fleet Loan Agreement; and
(ii) the Company obtain $6 million from the sale of
preferred stock pursuant to the terms of the Churchill Agreement.
(d) It shall be a condition to each party's obligations
hereunder that as of the Closing Date, each other party's representations and
warranties made under Section 3 are true and correct in all material respects.
Any violation of this condition not known prior to the date the ESOP purchases
the Shares shall constitute grounds for rescission.
6. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
the principles of conflicts of law thereof), except to the extent superseded by
ERISA.
(b) This Agreement shall be binding upon the respective
successors and assigns of the parties hereto.
(c) In the event that any provision of this Agreement is
adjudicated invalid, illegal or unenforceable, such adjudication shall not
affect the validity, legality or enforceability of
- 9 -
<PAGE> 10
any other provision, and this Agreement shall be construed as though such
invalid, illegal or unenforceable provision had never been contained herein.
(d) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST
By: Wells Fargo Bank, N.A.,
not in an individual or
corporate capacity, but solely
in its capacity as Trustee
By /s/ Elyse Weise
-----------------------------------
MEADE INSTRUMENTS CORP.
By /s/ Steve Murdock
----------------------------------------
President
SELLER
/s/ Ronald Ezra
----------------------------------------
Ronald Ezra
- 11 -
<PAGE> 1
EXHIBIT 10.28
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 23rd day of April,
1996, by and among the MEADE INSTRUMENTS CORP. EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST (the "ESOP"), MEADE INSTRUMENTS CORP., a California corporation (the
"Company") and JOSEPH A. GORDON, JR. (the "Seller").
W I T N E S S E T H:
1. Recitals.
(a) The Company has adopted the ESOP to provide stock
ownership interests in the Company to eligible employees, and the ESOP is
designed to be an employee stock ownership plan under Section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Section 407(d)(6) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(b) The Seller owns 100,500 shares (the "Shares") of Series B
Common Stock of the Company ("Series B Stock") and desires to sell all of the
Shares to the ESOP, and the ESOP desires to purchase the Shares.
(c) The Company is willing to make a loan to the ESOP to
provide the ESOP with funds to finance its purchase of the Shares, subject to
the condition that the ESOP pledge the Shares to the Company as security for the
repayment of such loan.
(d) After the purchase of the Shares, the contemporaneous
purchases by the ESOP of 1,399,500 shares of Series B Stock
<PAGE> 2
from other selling shareholders and the contemporaneous redemption of 71,361
shares of Series A Common Stock of the Company, the ESOP will own no less than
30% of the total value of all common stock of the Company on a fully-diluted
basis.
2. Purchase and Sale of Shares. The Seller hereby agrees to sell the
Shares to the ESOP, and the ESOP hereby agrees to purchase the Shares from the
Seller. The purchase price for the Shares shall be $736,996.65 (or $7.3333 per
share) and shall be paid to the Seller by certified check, wire transfer or
other immediately available funds. Delivery of properly endorsed certificates
representing the Shares shall occur contemporaneously with the payment of the
purchase price. The purchase and sale of the Shares shall occur
contemporaneously with the satisfaction of the conditions in Section 5 or as
soon thereafter as possible, at a time and place mutually agreeable to the
parties ("Closing Date").
3. Representations and Warranties.
(a) The Seller hereby represents and warrants that as of the
Closing Date:
(i) He holds good title to the Shares, free and clear
of all liens, proxies, encumbrances, security interests, contractual
rights or any other known claims of any kind whatsoever;
(ii) He has the power and authority to sell the Shares
to the ESOP, and this Agreement is his legal, valid
- 2 -
<PAGE> 3
and binding obligation, enforceable in accordance with its
terms; and
(iii) He has no knowledge of any material adverse change
occurring since February 28, 1995, in the business, properties,
condition (financial or other) or operations, present or prospective,
of the Company that has not been disclosed to Wells Fargo Bank, N.A.,
as trustee of the ESOP (the "Trustee") and to FMV Opinions, Inc.
("FMV"), the ESOP's independent appraiser.
(b) The Trustee, in its capacity as such, on behalf of the
ESOP, hereby represents and warrants that as of the Closing Date, the execution
and delivery of this Agreement by the undersigned Trustee have been duly and
validly authorized, and all necessary action has been taken to make this
Agreement a legal, valid and binding obligation of the ESOP, enforceable in
accordance with its terms.
(c) The Company hereby represents and warrants that as of
the Closing Date:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
California.
(ii) The execution and delivery of this Agreement have
been duly and validly authorized, and all necessary action has been
taken, to make this Agreement a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms.
- 3 -
<PAGE> 4
(iii) There has been no material adverse change since
February 28, 1995, in the business, properties, condition (financial or
other) or operations, present or prospective, of the Company that has
not been disclosed to the Trustee and to FMV.
(iv) The ESOP has been duly adopted and established by the
Company, and the Trustee has been duly appointed by the Company.
(v) Each of the representations and warranties in
Section 7.1 of the Loan and Security Agreement ("Fleet Loan Agreement")
by and between Fleet Capital Corporation and the Company with respect
to the Company and each of the representations and warranties in
Section 4 of the Churchill Agreement with respect to the Company is
hereby incorporated by reference herein mutatis mutandis (without
regard as to any waiver or amendment thereto from the form of the Fleet
Loan Agreement or the Securities Purchase Agreement ("Churchill
Agreement") by and between the Company and Churchill ESOP Capital
Partners ("Churchill") in the form existing on the date most recently
delivered to the ESOP (whether or not executed or delivered), other
than those waivers and amendments of which the ESOP has been advised a
reasonable time prior to the Closing Date and that are subsequently
confirmed to the ESOP in writing).
- 4 -
<PAGE> 5
4. Covenants.
(a) As the Seller may wish to elect the application of Section
1042(a) of the Code with respect to the sale of the Shares, the Company agrees
to supply to him, upon written request, the verified written statement of the
Company required by Section 1042(b)(3) of the Code and the regulations
thereunder, consenting to the possible application of Section 4978(a) of the
Code ("Tax on Certain Dispositions by Employee Stock Ownership Plans and Certain
Cooperatives") and Section 4979A of the Code ("Tax on Certain Prohibited
Allocations of Qualified Securities").
(b) The ESOP agrees that no disposition of any of the Shares
will be made by the ESOP within the three-year period following the closing of
the purchase, except as permitted under Section 4978(d) of the Code, unless the
Company specifically consents in writing thereto.
(c) The ESOP agrees that no allocations will be made under the
ESOP in a manner which would violate the provisions of Section 409(n) of the
Code. The Seller hereby agrees that he will be waiving any right he (or certain
other members of his family) may otherwise have to be a participant in the ESOP,
to the extent required under Section 409(n) of the Code, if he requests the
Company to supply him with the statement of consent referred to in Section 4(a).
(d) The Company and the ESOP agree (so long as any interest or
principal amount under the loan referred to in Section 1(c) remains payable) to
use reasonable efforts to cause the
- 5 -
<PAGE> 6
ESOP to be operated and administered as a qualified plan under Sections 401(a)
and 4975(e)(7) of the Code and in material compliance with all applicable
requirements of ERISA, and regulations thereunder as from time to time in effect
and applicable to the ESOP.
(e) The ESOP makes no express or implied representation
hereunder to the Seller that the stock purchase contemplated under this
Agreement meets the requirements of Section 1042 of the Code.
(f) The Company hereby agrees to use its best efforts to, at
the request of the ESOP, elect to the Board of Directors of the Company one
person designated by the Administrative Committee of the ESOP. This obligation
of the Company shall terminate upon the earliest to occur of (i) a Qualified
Public Offering (as defined in the Churchill Agreement), (ii) the repayment in
full of the loan made, in the original principal amount of $11 million, to the
ESOP by the Company, and (iii) the ESOP owns less than 10% of the outstanding
common stock (all classes) of the Company.
(g) It is intended that the stock purchase hereunder,
including all terms and provisions of this Agreement, the ESOP Loan and Pledge
Agreement and the Secured Promissory Note shall qualify for exemptions under
Section 4975(d)(3) and (13) of the Code from being prohibited transactions under
Section 4975(c) of the Code, and shall qualify for exemptions under Section
408(b)(3) and (e) of ERISA from being prohibited transactions under Section 406
of ERISA. Notwithstanding anything herein or
- 6 -
<PAGE> 7
in any of the aforementioned documents to the contrary, (i) neither the Company,
the ESOP nor the Seller shall take any action or fail to take any action the
result of which would cause any portion or all of the transaction contemplated
hereby to be a prohibited transaction under Section 4975(c) of the Code or
Section 406 of ERISA, (ii) any action in contravention of this provision shall
be null and void and unenforceable, and (iii) in the event that any portion of
the transaction contemplated hereby is determined to be or it appears reasonably
certain to be such a prohibited transaction, the parties shall take such action
as shall be reasonably necessary and appropriate to correct any such prohibited
transaction.
5. Conditions.
(a) It shall be a condition to the ESOP's obligation to
purchase the Shares hereunder that:
(i) The Trustee obtain from FMV, a valuation opinion,
dated as of the Closing Date, to the effect that $7.3333 per share does
not exceed the fair market value of the Shares as of the Closing Date
and that the terms of the transaction contemplated hereunder are fair
to the ESOP from a financial point of view;
(ii) The ESOP obtain from the Company a loan in the amount
of $11,000,000 on terms acceptable to the Company and the Trustee;
(iii) The purchase of the Shares occurs simultaneously with
the purchase by the ESOP of the additional
- 7 -
<PAGE> 8
shares of Series B Stock being sold by other Company shareholders, as
described in Section 1(d);
(iv) The Trustee obtain from O'Melveny & Myers a letter
permitting the Trustee to rely on the opinion letter to be delivered by
O'Melveny & Myers in connection with the closing of the loan under the
Fleet Loan Agreement and the stock purchase under the Churchill
Agreement;
(v) The Trustee obtain a certificate dated as of the
Closing Date, signed by a duly authorized officer of the Company, the
truth and accuracy of which shall be a condition to the ESOP's
obligation to purchase the Shares, and to the effect that (1) the
representations and warranties of the Company set forth in Section 3(c)
are to the best of his knowledge, after due inquiry, true and correct
on and with respect to the Closing Date and (2) the Company has
performed all of its obligations hereunder which are to be performed on
or prior to the Closing Date; and
(vi) The Trustee shall have determined that the ESOP's
purchase of the Shares does not violate ERISA.
(b) It shall be a condition to the Seller's obligation to sell
the Shares hereunder that:
(i) the purchase of the Shares occurs simultaneously with
the purchase by the ESOP of the additional shares of Series B Stock
being sold by other Company shareholders, and the contemporaneous
redemption of the Series A stock, as described in Section 1(d); and
- 8 -
<PAGE> 9
(ii) the Trustee obtain from FMV the valuation opinion
described in Section 5(a)(1).
(c) It shall be a condition to the Company's obligations
hereunder that:
(i) the Company obtain a term loan in the amount of
$9,500,000 pursuant to the terms of the Fleet Loan Agreement; and
(ii) the Company obtain $6 million from the sale of
preferred stock pursuant to the terms of the Churchill Agreement.
(d) It shall be a condition to each party's obligations
hereunder that as of the Closing Date, each other party's representations and
warranties made under Section 3 are true and correct in all material respects.
Any violation of this condition not known prior to the date the ESOP purchases
the Shares shall constitute grounds for rescission.
6. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
the principles of conflicts of law thereof), except to the extent superseded by
ERISA.
(b) This Agreement shall be binding upon the respective
successors and assigns of the parties hereto.
(c) In the event that any provision of this Agreement is
adjudicated invalid, illegal or unenforceable, such adjudication shall not
affect the validity, legality or enforceability of
- 9 -
<PAGE> 10
any other provision, and this Agreement shall be construed as though such
invalid, illegal or unenforceable provision had never been contained herein.
(d) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
MEADE INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST
By: Wells Fargo Bank, N.A.,
not in an individual or
corporate capacity, but solely
in its capacity as Trustee
By /s/ Elyse Weise
--------------------------------
MEADE INSTRUMENTS CORP.
By /s/ Steve Murdock
------------------------------------
President
SELLER
/s/ Joseph A. Gordon, Jr.
---------------------------------------
Joseph A. Gordon, Jr.
- 11 -
<PAGE> 1
EXHIBIT 10.29
MEADE INSTRUMENTS CORP.
1997 STOCK INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. THE PLAN.............................................................................. 1
1.1 Purpose............................................................... 1
1.2 Administration and Authorization; Power and Procedure................. 1
1.3 Participation......................................................... 3
1.4 Shares Available for Awards; Share Limits............................. 3
1.5 Grant of Awards....................................................... 4
1.6 Award Period.......................................................... 4
1.7 Limitations on Exercise and Vesting of Awards......................... 4
1.8 Acceptance of Notes to Finance Exercise............................... 4
1.9 No Transferability; Limited Exception to Transfer Restrictions........ 5
2. OPTIONS............................................................................... 6
2.1 Grants................................................................ 6
2.2 Option Price.......................................................... 7
2.3 Limitations on Grant and Terms of Incentive Stock Options............. 7
2.4 Limits on 10% Holders................................................. 8
2.5 Option Repricing/Cancellation and Regrant/Waiver of
Restrictions.......................................................... 8
2.6 Options and Rights in Substitution for Stock Options Granted
by Other Corporations................................................. 8
3. STOCK APPRECIATION RIGHTS (INCLUDING LIMITED STOCK
APPRECIATION RIGHTS).................................................................. 8
3.1 Grants................................................................ 8
3.2 Exercise of Stock Appreciation Rights................................. 9
3.3 Payment............................................................... 9
3.4 Limited Stock Appreciation Rights..................................... 10
4. RESTRICTED STOCK AWARDS............................................................... 10
4.1 Grants................................................................ 10
4.2 Restrictions.......................................................... 11
4.3 Return to the Corporation............................................. 11
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES............................................ 11
5.1 Grants of Performance Share Awards.................................... 11
5.2 Special Performance-Based Share Awards................................ 12
5.3 Grants of Stock Bonuses............................................... 13
5.4 Deferred Payments..................................................... 14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
6. OTHER PROVISIONS............................................................... 14
6.1 Rights of Eligible Persons, Participants and Beneficiaries..... 14
6.2 Adjustments; Acceleration...................................... 15
6.3 Effect of Termination of Employment............................ 16
6.4 Compliance with Laws........................................... 17
6.5 Tax Withholding................................................ 17
6.6 Plan Amendment, Termination and Suspension..................... 18
6.7 Privileges of Stock Ownership.................................. 19
6.8 Effective Date of the Plan..................................... 19
6.9 Term of the Plan............................................... 19
6.10 Governing Law/Construction/Severability........................ 19
6.11 Captions....................................................... 20
6.12 Effect of Change of Subsidiary Status.......................... 20
6.13 Non-Exclusivity of Plan........................................ 20
7. DEFINITIONS.................................................................... 20
7.1 Definitions.................................................... 20
8. NON-EMPLOYEE DIRECTOR OPTIONS.................................................. 26
8.1 Participation.................................................. 26
8.2 Annual Option Grants........................................... 26
8.3 Option Price................................................... 26
8.4 Option Period and Exercisability............................... 27
8.5 Termination of Directorship.................................... 27
8.7 Acceleration Upon a Change in Control Event.................... 27
</TABLE>
ii
<PAGE> 4
MEADE INSTRUMENTS CORP.
1997 STOCK INCENTIVE PLAN
1. THE PLAN
1.1 Purpose
The purpose of this Plan is to promote the success of the
Company by providing an additional means through the grant of Awards to attract,
motivate, retain and reward key employees, including officers, whether or not
directors, of the Company with awards and incentives for high levels of
individual performance and improved financial performance of the Company and to
attract, motivate and retain experienced and knowledgeable independent directors
through the benefits provided under Article 8. "Corporation" means Meade
Instruments Corp., a California corporation, and "Company" means the Corporation
and its Subsidiaries, collectively. These terms and other capitalized terms are
defined in Article 7.
1.2 Administration and Authorization; Power and Procedure.
(a) Committee. This Plan shall be administered by and all
Awards to Eligible Persons shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee. Subject
to the express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the
particular Eligible Persons who will receive any Awards;
(ii) to grant Awards to Eligible Persons, determine the price
at which securities will be offered or awarded and the amount of
securities to be offered or awarded to any of such persons, and
determine the other specific terms and conditions of such Awards
consistent with the express limits of this Plan, and establish the
installments (if any) in which such Awards shall become exercisable or
shall vest, or determine that no delayed exercisability or vesting is
required, and establish the events of termination or reversion of such
Awards;
(iii) to approve the forms of Award Agreements (which need not
be identical either as to type of award or among Participants);
<PAGE> 5
(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Participants
under this Plan, further define the terms used in this Plan, and
prescribe, amend and rescind rules and regulations relating to the
administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Persons, subject to any required
consent under Section 6.6;
(vi) to accelerate or extend the exercisability or extend the
term of any or all such outstanding Awards within the maximum ten-year
term of Awards under Section 1.6; and
(vii) to make all other determinations and take such other
action as contemplated by this Plan or as may be necessary or advisable
for the administration of this Plan and the effectuation of its
purposes.
Notwithstanding the foregoing, the provisions of Article 8 relating to
Non-Employee Director Awards shall be automatic and, to the maximum extent
possible, selfeffectuating.
(c) Binding Determinations. Any action taken by, or inaction
of, the Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan shall be within the absolute discretion of that entity or
body and shall be conclusive and binding upon all persons. No member of the
Board or Committee, or officer of the Corporation or any Subsidiary, shall be
liable for any such action or inaction of the entity or body, of another person
or, except in circumstances involving bad faith, of himself or herself. Subject
only to compliance with the express provisions hereof, the Board and Committee
may act in their absolute discretion in matters within their authority related
to this Plan.
(d) Reliance on Experts. In making any determination or in
taking or not taking any action under this Plan, the Committee or the Board, as
the case may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made or
omitted in good faith.
(e) Delegation. The Committee may delegate ministerial, non-
discretionary functions to individuals who are officers or employees of the
Company.
2
<PAGE> 6
1.3 Participation.
Awards may be granted by the Committee only to those persons
that the Committee determines to be Eligible Persons. An Eligible Person who has
been granted an Award may, if otherwise eligible, be granted additional Awards
if the Committee shall so determine.
1.4 Shares Available for Awards; Share Limits.
(a) Shares Available. Subject to the provisions of Section
6.2, the capital stock that may be delivered under this Plan shall be shares of
the Corporation's authorized but unissued Common Stock and any shares of its
Common Stock held as treasury shares. The shares may be delivered for any lawful
consideration.
(b) Share Limits. The maximum number of shares of Common Stock
that may be delivered pursuant to Awards (including Incentive Stock Options)
granted to Eligible Persons under this Plan shall not exceed 750,000 shares (the
"Share Limit"). The maximum number of shares of Common Stock that may be
delivered pursuant to options qualified as Incentive Stock Options granted under
this Plan is 750,000 shares. The maximum number of shares of Common Stock that
may be delivered under the provisions of Article 8 shall not exceed 150,000
shares. The maximum number of shares subject to those Options and Stock
Appreciation Rights that are granted during any calendar year to any individual
shall be limited to 350,000 shares. Each of the four foregoing numerical limits
shall be subject to adjustment as contemplated by this Section 1.4 and Section
6.2.
(c) Share Reservation; Replenishment and Reissue of Unvested
Awards. No Award may be granted under this Plan unless, on the date of grant,
the sum of (i) the maximum number of shares issuable at any time pursuant to
such Award, plus (ii) the number of shares that have previously been issued
pursuant to Awards granted under this Plan, other than reacquired shares
available for reissue consistent with any applicable legal limitations, plus
(iii) the maximum number of shares that may be issued at any time after such
date of grant pursuant to Awards that are outstanding on such date, does not
exceed the Share Limit. Shares that are subject to or underlie Awards which
expire or for any reason are cancelled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under this Plan, as well
as reacquired shares, shall again, except to the extent prohibited by law, be
available for subsequent Awards under the Plan. Except as limited by law, if an
Award is or may be settled only in cash, such Award need not be counted against
any of the limits under this Section 1.4.
3
<PAGE> 7
1.5 Grant of Awards.
Subject to the express provisions of this Plan, the Committee
shall determine the number of shares of Common Stock subject to each Award, the
price (if any) to be paid for the shares or the Award and, in the case of
Performance Share Awards, in addition to matters addressed in Section 1.2(b),
the specific objectives, goals and performance criteria (such as an increase in
sales, market value, earnings or book value over a base period, the years of
service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
Performance Share Award. Each Award shall be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
1.6 Award Period.
Each Award and all executory rights or obligations under the
related Award Agreement shall expire on such date (if any) as shall be
determined by the Committee, but in the case of Options or other rights to
acquire Common Stock not later than ten (10) years after the Award Date.
1.7 Limitations on Exercise and Vesting of Awards.
(a) Provisions for Exercise. Unless the Committee otherwise
expressly provides, no Award shall be exercisable or shall vest until at least
six months after the initial Award Date, and once exercisable an Award shall
remain exercisable until the expiration or earlier termination of the Award.
(b) Procedure. Any exercisable Award shall be deemed to be
exercised when the Secretary of the Corporation receives written notice of such
exercise from the Participant, together with any required payment made in
accordance with Section 2.2(a) or 8.4, as the case may be.
(c) Fractional Shares/Minimum Issue. Fractional share
interests shall be disregarded, but may be accumulated. The Committee, however,
may determine in the case of Eligible Persons that cash, other securities, or
other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 shares may be purchased on exercise of any Award at
one time unless the number purchased is the total number at the time available
for purchase under the Award.
1.8 Acceptance of Notes to Finance Exercise.
The Corporation may, with the Committee's approval, accept one
or more notes from any Eligible Person in connection with the exercise or
receipt of any outstanding Award; provided that any such note shall be subject
to the following terms and conditions:
4
<PAGE> 8
(a) The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of one or
more Awards under the Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions, shall not
exceed a period of five years.
(c) The note shall provide for full recourse to the
Participant and shall bear interest at a rate determined by the Committee but
not less than the interest rate necessary to avoid the imputation of interest
under the Code.
(d) If the employment of the Participant terminates, the
unpaid principal balance of the note shall become due and payable on the 10th
business day after such termination; provided, however, that if a sale of such
shares would cause such Participant to incur liability under Section 16(b) of
the Exchange Act, the unpaid balance shall become due and payable on the 10th
business day after the first day on which a sale of such shares could have been
made without incurring such liability assuming for these purposes that there are
no other transactions (or deemed transactions in securities of this Corporation)
by the Participant subsequent to such termination.
(e) If required by the Committee or by applicable law, the
note shall be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform with
applicable rules and regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability; Limited Exception to Transfer Restrictions.
(a) Limit On Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this Section 1.9, by applicable law and by the
Award Agreement, as the same may be amended, (i) all Awards are non-transferable
and shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge; Awards shall be exercised
only by the Participant; and (ii) amounts payable or shares issuable pursuant to
an Award shall be delivered only to (or for the account of) the Participant.
(b) Exceptions. The Committee may permit Awards to be
exercised by and paid only to certain persons or entities related to the
Participant, including but not limited to members of the Participant's family,
charitable institutions, or trusts or other entities whose beneficiaries or
beneficial owners are members of the Participant's family and/or charitable
institutions, or to such other persons or entities as may be approved by
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the Committee, pursuant to such conditions and procedures as the Committee may
establish. Any permitted transfer shall be subject to the condition that the
Committee receive evidence satisfactory to it that the transfer is being made
for estate and/or tax planning purposes on a gratuitous or donative basis and
without consideration (other than nominal consideration). Notwithstanding the
foregoing, Incentive Stock Options and Restricted Stock Awards shall be subject
to any and all additional transfer restrictions under the Code.
(c) Further Exceptions to Limits On Transfer. The exercise and
transfer restrictions in Section 1.9(a) shall not apply to:
(i) transfers to the Corporation,
(ii) the designation of a beneficiary to receive benefits
in the event of the Participant's death or, if the
Participant has died, transfers to or exercise by the
Participant's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or
the laws of descent and distribution,
(iii) transfers pursuant to a QDRO order if approved or
ratified by the Committee,
(iv) if the Participant has suffered a disability,
permitted transfers or exercises on behalf of the
Participant by his or her legal representative, or
(v) the authorization by the Committee of "cashless
exercise" procedures with third parties who provide
financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with
applicable laws and the express authorization of the
Committee.
Notwithstanding the foregoing, Incentive Stock Options and Restricted Stock
Awards shall be subject to any and all additional transfer restrictions under
the Code.
2. OPTIONS.
2.1 Grants.
One or more Options may be granted under this Article to any
Eligible Person. Each Option granted shall be designated in the applicable Award
Agreement, by the Committee as either an Incentive Stock Option, subject to
Section 2.3, or a NonQualified Stock Option; provided, however, that Incentive
Stock Options may only be granted to Eligible Persons who are employees of the
Company.
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2.2 Option Price.
(a) Pricing Limits. The purchase price per share of the Common
Stock covered by each Option shall be determined by the Committee at the time of
the Award, but in the case of Incentive Stock Options shall not be less than
100% (110% in the case of a Participant described in Section 2.4) of the Fair
Market Value of the Common Stock on the date of grant.
(b) Payment Provisions. The purchase price of any shares
purchased on exercise of an Option granted under this Article shall be paid in
full at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by check payable to
the order of the Corporation; (iii) if authorized by the Committee or specified
in the applicable Award Agreement, by a promissory note of the Participant
consistent with the requirements of Section 1.8; (iv) by notice and third party
payment in such manner as may be authorized by the Committee; or (v) by the
delivery of shares of Common Stock of the Corporation already owned by the
Participant, provided, however, that the Committee may in its absolute
discretion limit the Participant's ability to exercise an Award by delivering
such shares, and provided further that any shares delivered which were initially
acquired upon exercise of a stock option must have been owned by the Participant
at least six months as of the date of delivery. Shares of Common Stock used to
satisfy the exercise price of an Option shall be valued at their Fair Market
Value on the date of exercise.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
(a) $100,000 Limit. To the extent that the aggregate "Fair
Market Value" of stock with respect to which incentive stock options first
become exercisable by a Participant in any calendar year exceeds $100,000,
taking into account both Common Stock subject to Incentive Stock Options under
this Plan and stock subject to incentive stock options under all other plans of
the Company, such options shall be treated as Nonqualified Stock Options. For
this purpose, the "Fair Market Value" of the stock subject to options shall be
determined as of the date the options were awarded. In reducing the number of
options treated as incentive stock options to meet the $100,000 limit, the most
recently granted options shall be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
(b) Option Period. Each Option and all rights thereunder shall
expire no later than 10 years after the Award Date.
(c) Other Code Limits. Incentive Stock Options may only be
granted to Eligible Employees of the Corporation or a Subsidiary that satisfies
the other eligibility requirements of the Code. There shall be imposed in any
Award Agreement relating to
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Incentive Stock Options such other terms and conditions as from time to time are
required in order that the Option be an "incentive stock option" as that term is
defined in Section 422 of the Code.
2.4 Limits on 10% Holders.
No Incentive Stock Option may be granted to any person who, at
the time the Option is granted, owns (or is deemed to own under Section 424(d)
of the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such Option is at least 110% of the Fair Market Value of
the stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.5 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.
Subject to Section 1.4 and Section 6.6 and the specific
limitations on Awards contained in this Plan, the Committee from time to time
may authorize, generally or in specific cases only, for the benefit of any
Eligible Person any adjustment in the exercise or purchase price, the vesting
schedule, the number of shares subject to, the restrictions upon or the term of,
an Award granted under this Article by cancellation of an outstanding Award and
a subsequent regranting of an Award, by amendment, by substitution of an
outstanding Award, by waiver or by other legally valid means. Such amendment or
other action may result among other changes in an exercise or purchase price
which is higher or lower than the exercise or purchase price of the original or
prior Award, provide for a greater or lesser number of shares subject to the
Award, or provide for a longer or shorter vesting or exercise period.
2.6 Options and Rights in Substitution for Stock Options Granted
by Other Corporations. Options and Stock Appreciation Rights may be granted
to Eligible Persons under this Plan in substitution for employee stock
options granted by other entities to persons who are or who will become Eligible
Persons in respect of the Company, in connection with a distribution, merger or
reorganization by or with the granting entity or an affiliated entity, or the
acquisition by the Company, directly or indirectly, of all or a substantial part
of the stock or assets of the other entity.
3. STOCK APPRECIATION RIGHTS (INCLUDING LIMITED STOCK APPRECIATION RIGHTS).
3.1 Grants.
In its discretion, the Committee may grant Stock Appreciation
Rights to any Eligible Person either concurrently with the grant of another
Award or in respect of an outstanding Award, in whole or in part, or
independently of any other Award. Any
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Stock Appreciation Right granted in connection with an Incentive Stock Option
shall contain such terms as may be required to comply with the provisions of
Section 422 of the Code and the regulations promulgated thereunder, unless the
holder otherwise agrees.
3.2 Exercise of Stock Appreciation Rights.
(a) Exercisability. Unless the Award Agreement or the
Committee otherwise provides, a Stock Appreciation Right related to another
Award shall be exercisable at such time or times, and to the extent, that the
related Award shall be exercisable.
(b) Effect on Available Shares. To the extent that a Stock
Appreciation Right is exercised, only the actual number of delivered shares of
Common Stock shall be charged against the maximum amount of Common Stock that
may be delivered pursuant to Awards under this Plan. The number of shares
subject to the Stock Appreciation Right and the related Option of the
Participant shall, however, be reduced by the number of underlying shares as to
which the exercise related, unless the Award Agreement otherwise provides.
(c) Stand-Alone SARs. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms of
the Award Agreement but in no event earlier than six months after the Award
Date, except in the case of death or Total Disability.
3.3 Payment.
(a) Amount. Unless the Committee otherwise provides, upon
exercise of a Stock Appreciation Right and the attendant surrender of an
exercisable portion of any related Award, the Participant shall be entitled to
receive payment of an amount determined by multiplying
(i) the difference obtained by subtracting the
exercise price per share of Common Stock under the related Award (if
applicable) or the initial share value specified in the Award from the
Fair Market Value of a share of Common Stock on the date of exercise of
the Stock Appreciation Right, by
(ii) the number of shares with respect to which the
Stock Appreciation Right shall have been exercised.
(b) Form of Payment. The Committee, in its sole discretion,
shall determine the form in which payment shall be made of the amount determined
under paragraph (a) above, either solely in cash, solely in shares of Common
Stock (valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right), or partly in such shares and partly in cash, provided that
the Committee shall have determined that
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such exercise and payment are consistent with applicable law. If the Committee
permits the Participant to elect to receive cash or shares (or a combination
thereof) on such exercise, any such election shall be subject to such conditions
as the Committee may impose.
3.4 Limited Stock Appreciation Rights.
The Committee may grant to any Eligible Person Stock
Appreciation Rights exercisable only upon or in respect of a change in control
or any other specified event ("Limited SARs") and such Limited SARs may relate
to or operate in tandem or combination with or substitution for Options, other
Stock Appreciation Rights or other Awards (or any combination thereof), and may
be payable in cash or shares based on the spread between the base price of the
Stock Appreciation Right and a price based upon the Fair Market Value of the
Shares during a specified period or at a specified time within a specified
period before, after or including the date of such event.
4. RESTRICTED STOCK AWARDS.
4.1 Grants.
The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Person. Each Restricted Stock Award
Agreement shall specify the number of shares of Common Stock to be issued to the
Participant, the date of such issuance, the consideration for such shares (but
not less than the minimum lawful consideration under applicable state law) by
the Participant, the extent (if any) to which and the time (if ever) at which
the Participant shall be entitled to dividends, voting and other rights in
respect of the shares prior to vesting, and the restrictions (which may be based
on performance criteria, passage of time or other factors or any combination
thereof) imposed on such shares and the conditions of release or lapse of such
restrictions. Such restrictions shall not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("Restricted Shares") shall bear a legend making appropriate
reference to the restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award and Section 1.7. Upon issuance of
the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.
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4.2 Restrictions.
(a) Pre-Vesting Restraints. Except as provided in Section 4.1
and 1.9, restricted shares comprising any Restricted Stock Award may not be
sold, assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until the restrictions on such shares have
lapsed and the shares have become vested.
(b) Dividend and Voting Rights. Unless otherwise provided in
the applicable Award Agreement, a Participant receiving a Restricted Stock Award
shall be entitled to vote such shares but shall not be entitled to dividends on
any of the shares until the shares have vested. Such dividends shall be retained
in a restricted account until the shares have vested and shall revert to the
Corporation if they fail to vest.
(c) Cash Payments. If the Participant shall have paid or
received cash (including any dividends) in connection with the Restricted Stock
Award, the Award Agreement shall specify whether and to what extent such cash
shall be returned (with or without an earnings factor) as to any restricted
shares which cease to be eligible for vesting.
4.3 Return to the Corporation.
Unless the Committee otherwise expressly provides, Restricted
Shares that remain subject to restrictions at the time of termination of
employment or are subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation in such manner and on such terms as the
Committee shall therein provide.
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES.
5.1 Grants of Performance Share Awards.
The Committee may, in its discretion, grant Performance Share
Awards to Eligible Persons based upon such factors as the Committee shall deem
relevant in light of the specific type and terms of the award. An Award
Agreement shall specify the maximum number of shares of Common Stock (if any)
subject to the Performance Share Award, the consideration (but not less than the
minimum lawful consideration) to be paid for any such shares as may be issuable
to the Participant, the duration of the Award and the conditions upon which
delivery of any shares or cash to the Participant shall be based. The amount of
cash or shares or other property that may be deliverable pursuant to such Award
shall be based upon the degree of attainment over a specified period of not more
than 10 years (a "performance cycle") as may be established by the Committee of
such measure(s) of the performance of the Company (or any part thereof) or the
Participant as may be established by the Committee. The Committee may provide
for
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full or partial credit, prior to completion of such performance cycle or the
attainment of the performance achievement specified in the Award, in the event
of the Participant's death, Retirement, or Total Disability, a Change in Control
Event or in such other circumstances as the Committee may specify.
5.2 Special Performance-Based Share Awards.
Without limiting the generality of the foregoing, and in
addition to Options and Stock Appreciation Rights granted under other provisions
of this Plan which are intended to satisfy the exception for "performance-based
compensation" under Section 162(m) of the Code (with such Awards hereinafter
referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right,"
respectively), other performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), whether in the form of
restricted stock, performance stock, phantom stock or other rights, the grant,
vesting, exercisability or payment of which depends on the degree of achievement
of the Performance Goals relative to preestablished targeted levels for the
Corporation or the Corporation and one or more of its Subsidiaries, may be
granted under this Plan. Any Qualifying Option or Qualifying Stock Appreciation
Right shall be subject only to the requirements of subsections (a) and (c) below
in order for such Awards to satisfy the requirements for Performance-Based
Awards under this Section 5.2. With the exception of any Qualifying Option or
Qualifying Stock Appreciation Right, an Award that is intended to satisfy the
requirements of this Section 5.2 shall be designated as a Performance-Based
Award at the time of grant.
(a) Eligible Class. The eligible class of persons for
Performance-Based Awards under this Section shall be the executive officers of
the Corporation.
(b) Performance Goal Alternatives. The specific performance
goals for Performance-Based Awards granted under this Section (other than
Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an
absolute or relative basis, one or more of the Performance Goals, as selected by
the Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific targets shall be
determined within the time period permitted under Section 162(m) of the Code
(and any regulations issued thereunder) so that such targets are considered to
be preestablished and so that the attainment of such targets is substantially
uncertain at the time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10 years.
(c) Maximum Performance-Based Award. Notwithstanding any other
provision of the Plan to the contrary, the maximum number of shares of Common
Stock which may be delivered pursuant to options, stock appreciation rights,
restricted stock or other share-based awards that are granted as
Performance-Based Awards to any Participant in any calendar year shall not
exceed 350,000 shares, either individually or in
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the aggregate, subject to adjustment as provided in Section 6.2. Awards that are
cancelled during the year shall be counted against this limit to the extent
required by Section 162(m) of the Code. In addition, the aggregate amount of
compensation to be paid to any Participant in respect of any Cash-Based Awards
that are granted during any calendar year as Performance-Based Awards shall not
exceed $100,000.
(d) Committee Certification. Before any Performance-Based
Award under this Section 5.2 (other than Qualifying Options or Qualifying Stock
Appreciation Rights) is paid, the Committee must certify in writing that the
Performance Goal(s) and any other material terms of the Performance-Based Award
were satisfied; provided, however, that a Performance-Based Award may be paid
without regard to the satisfaction of the applicable Performance Goal in the
event of a Change in Control Event in accordance with Section 6.2(d).
(e) Terms and Conditions of Awards. The Committee will have
the discretion to determine the restrictions or other limitations of the
individual Awards granted under this Section 5.2 including the authority to
reduce Awards, payouts or vesting or to pay no Awards, in its sole discretion,
if the Committee preserves such authority at the time of grant by language to
this effect in its authorizing resolutions or otherwise.
(f) Adjustments for Changes in Capitalization and other
Material Changes. In the event of a change in corporate capitalization, such as
a stock split or stock dividend, or a corporate transaction, such as a merger,
consolidation, spinoff, reorganization or similar event, or any partial or
complete liquidation of the Corporation, or any similar event consistent with
regulations issued under Section 162(m) of the Code including, without
limitation, any material change in accounting policies or practices affecting
the Corporation and/or the Performance Goals or targets, then the Committee may
make adjustments to the Performance Goals and targets relating to outstanding
Performance-Based Awards to the extent such adjustments are made to reflect the
occurrence of such an event; provided, however, that adjustments described in
this subsection may be made only to the extent that the occurrence of an event
described herein was unforeseen at the time the targets for a Performance-Based
Award were established by the Committee.
5.3 Grants of Stock Bonuses.
The Committee may grant a Stock Bonus to any Eligible Person
to reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of shares
so awarded shall be determined by the Committee. The Award may be granted
independently or in lieu of a cash bonus.
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5.4 Deferred Payments.
The Committee may authorize for the benefit of any Eligible
Person the deferral of any payment of cash or shares that may become due or of
cash otherwise payable under this Plan, and provide for accredited benefits
thereon based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
6. OTHER PROVISIONS.
6.1 Rights of Eligible Persons, Participants and Beneficiaries.
(a) Employment Status. Status as an Eligible Person shall not
be construed as a commitment that any Award will be made under this Plan to an
Eligible Person or to Eligible Persons generally.
(b) No Employment Contract. Nothing contained in this Plan (or
in any other documents related to this Plan or to any Award) shall confer upon
any Eligible Person or other Participant any right to continue in the employ or
other service of the Company or constitute any contract or agreement of
employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause, but nothing
contained in this Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her consent thereto.
(c) Plan Not Funded. Awards payable under this Plan shall be
payable in shares or from the general assets of the Corporation, and (except as
provided in Section 1.4) no special or separate reserve, fund or deposit shall
be made to assure payment of such Awards. No Participant, Beneficiary or other
person shall have any right, title or interest in any fund or in any specific
asset (including shares of Common Stock, except as expressly otherwise provided)
of the Company by reason of any Award hereunder. Neither the provisions of this
Plan (or of any related documents), nor the creation or adoption of this Plan,
nor any action taken pursuant to the provisions of this Plan shall create, or be
construed to create, a trust of any kind or a fiduciary relationship between the
Company and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive payment
pursuant to any Award hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Company.
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6.2 Adjustments; Acceleration.
(a) Adjustments. If there shall occur any extraordinary
dividend or other extraordinary distribution in respect of the Common Stock
(whether in the form of cash, Common Stock, other securities, or other
property), or any reclassification, recapitalization, stock split (including a
stock split in the form of a stock dividend), reverse stock split,
reorganization, merger, combination, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Stock or other securities of the
Corporation, or there shall occur any similar, unusual or extraordinary
corporate transaction or event in respect of the Common Stock or a sale of
substantially all the assets of the Corporation as an entirety, then the
Committee shall, in such manner and to such extent (if any) as it deems
appropriate and equitable (1) proportionately adjust any or all of (a) the
number and type of shares of Common Stock (or other securities) which thereafter
may be made the subject of Awards (including the specific maxima and numbers of
shares set forth elsewhere in this Plan), (b) the number, amount and type of
shares of Common Stock (or other securities or property) subject to any or all
outstanding Awards, (c) the grant, purchase, or exercise price of any or all
outstanding Awards, (d) the securities, cash or other property deliverable upon
exercise of any outstanding Awards, or (e) the performance standards appropriate
to any outstanding Awards, or (2) in the case of an extraordinary dividend or
other distribution, recapitalization, reclassification, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin off,
make provision for a cash payment or for the substitution or exchange of any or
all outstanding Awards or the cash, securities or property deliverable to the
holder of any or all outstanding Awards based upon the distribution or
consideration payable to holders of the Common Stock of the Corporation upon or
in respect of such event; provided, however, in each case, that with respect to
Awards of Incentive Stock Options, no such adjustment shall be made which would
cause the Plan to violate Section 424(a) of the Code or any successor provisions
thereto without the written consent of holders materially adversely affected
thereby. In any of such events, the Committee may take such action sufficiently
prior to such event if necessary to permit the Participant to realize the
benefits intended to be conveyed with respect to the underlying shares in the
same manner as is available to shareholders generally.
(b) Acceleration of Awards Upon Change in Control. As to any
Participant, unless prior to a Change in Control Event the Committee determines
that, upon its occurrence, there shall be no acceleration of benefits under
Awards or determines that only certain or limited benefits under Awards shall be
accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Event for such acceleration,
then upon the occurrence of a Change in Control Event (i) each Option and Stock
Appreciation Right shall become immediately exercisable, (ii) Restricted Stock
shall immediately vest free of restrictions, and (iii) each Performance Share
Award shall become payable to the Participant; provided, however, that in no
event shall any Award be accelerated as to any Section 16 Person to a date less
than six months after the Award Date of such Award. The Committee may override
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the limitations on acceleration in this Section 6.2(b) by express provision in
the Award Agreement and may accord any Eligible Person a right to refuse any
acceleration, whether pursuant to the Award Agreement or otherwise, in such
circumstances as the Committee may approve. Any acceleration of Awards shall
comply with applicable regulatory requirements, including without limitation
Section 422 of the Code.
(c) Possible Early Termination of Accelerated Awards. If any
Option or other right to acquire Common Stock under this Plan (other than under
Article 8) has been fully accelerated as permitted by Section 6.2(b) but is not
exercised prior to (i) a dissolution of the Corporation, or (ii) an event
described in Section 6.2(a) that the Corporation does not survive, or (iii) the
consummation of an event described in Section 6.2(a) that results in a Change of
Control approved by the Board, such Option or right shall thereupon terminate,
subject to any provision that has been expressly made by the Committee for the
survival, substitution, exchange or other settlement of such Option or right.
6.3 Effect of Termination of Employment.
(a) Options - Resignation or Dismissal. If the Participant's
employment by (or other service specified in the Award Agreement to) the Company
terminates for any reason (the date of such termination being referred to as the
"Severance Date") other than Retirement, Total Disability or death, or "for
cause" (as determined in the discretion of the Committee), the Participant shall
have, unless otherwise provided in the Award Agreement and subject to earlier
termination pursuant to or as contemplated by Section 1.6 or 6.2, three months
after the Severance Date to exercise any Option to the extent it shall have
become exercisable on the Severance Date. In the case of a termination "for
cause", the Option shall terminate on the Severance Date. In other cases, the
Option, to the extent not exercisable on the Severance Date, shall terminate.
(b) Options - Death or Disability. If the Participant's
employment by (or specified service to) the Company terminates as a result of
Total Disability or death, the Participant, Participant's Personal
Representative or his or her Beneficiary, as the case may be, shall have, unless
otherwise provided in the Award Agreement and subject to earlier termination
pursuant to or as contemplated by Section 1.6 or 6.2, until 12 months after the
Severance Date to exercise any Option to the extent it shall have become
exercisable by the Severance Date. Any Option to the extent not exercisable on
the Severance Date shall terminate.
(c) Options - Retirement. If the Participant's employment by
(or specified service to) the Company terminates as a result of Retirement, the
Participant, Participant's Personal Representative or his or her Beneficiary, as
the case may be, shall have, unless otherwise provided in the Award Agreement
and subject to earlier termination pursuant to or as contemplated by Section 1.6
or 6.2, until 12 months after the Severance Date to exercise any Nonqualified
Stock Option (three months after the Severance Date in the case of an Incentive
Stock Option) to the extent it shall have
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become exercisable by the Severance Date. The Option, to the extent not
exercisable on the Severance Date, shall terminate.
(d) Certain SARs. Any SAR granted concurrently or in tandem
with an Option shall have the same post-termination provisions and
exercisability periods as the Option to which it relates, unless the Committee
otherwise provides.
(e) Other Awards. The Committee shall establish in respect of
each other Award granted hereunder the Participant's rights and benefits (if
any) in the event of a termination of employment and in so doing may make
distinctions based upon the cause of termination and the nature of the Award.
(f) Committee Discretion. Notwithstanding the foregoing
provisions of this Section 2.6, in the event of, or in anticipation of, a
termination of employment with the Company for any reason, other than discharge
for cause, the Committee may, in its discretion, increase the portion of the
Participant's Award available to the Participant, or Participant's Beneficiary
or Personal Representative, as the case may be, or, subject to the provisions of
Section 1.6, extend the exercisability period upon such terms as the Committee
shall determine and expressly set forth in or by amendment to the Award
Agreement.
6.4 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan
and the offer, issuance and delivery of shares of Common Stock and/or the
payment of money under this Plan or under Awards granted hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
6.5 Tax Withholding.
(a) Cash or Shares. Upon any exercise, vesting, or payment of
any Award or upon the disposition of shares of Common Stock acquired pursuant to
the exercise of an Incentive Stock Option prior to satisfaction of the holding
period requirements of Section 422 of the Code, the Company shall have the right
at its option to (i) require the Participant (or Personal Representative or
Beneficiary, as the case may be) to pay or provide for payment of the amount of
any taxes which the Company may be required to withhold with respect to such
Award event or payment or (ii) deduct from any amount payable in cash the amount
of any taxes which the Company may be
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required to withhold with respect to such cash payment. In any case where a tax
is required to be withheld in connection with the delivery of shares of Common
Stock under this Plan, the Committee may in its sole discretion grant (either at
the time of the Award or thereafter) to the Participant the right to elect,
pursuant to such rules and subject to such conditions as the Committee may
establish, to have the Corporation reduce the number of shares to be delivered
by (or otherwise reacquire) the appropriate number of shares valued at their
then Fair Market Value, to satisfy such withholding obligation.
(b) Tax Loans. If so provided in the Award Agreement, the
Company may, in its discretion and to the extent permitted by law, authorize a
loan to an Eligible Person in the amount of any taxes which the Company may be
required to withhold with respect to shares of Common Stock received (or
disposed of, as the case may be) pursuant to a transaction described in Section
6.5 (a). Such a loan shall be for a term, at a rate of interest and pursuant to
such other terms and conditions as the Company, under applicable law may
establish and such loan need not comply with the provisions of Section 1.8.
6.6 Plan Amendment, Termination and Suspension.
(a) Board Authorization. The Board may, at any time, terminate
or, from time to time, amend, modify or suspend this Plan, in whole or in part.
No Awards may be granted during any suspension of this Plan or after termination
of this Plan, but the Committee shall retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
(b) Shareholder Approval. Any amendment that would (i)
materially increase the benefits accruing to Participants under this Plan, (ii)
materially increase the aggregate number of securities that may be issued under
this Plan, or (iii) materially modify the requirements as to eligibility for
participation in this Plan, shall be subject to shareholder approval only to the
extent then required by Section 422 of the Code or applicable law, or deemed
necessary or advisable by the Board.
(c) Amendments to Awards. Without limiting any other express
authority of the Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of or limitations
on Awards to Eligible Persons that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and may make other
changes to the terms and conditions of Awards that do not affect in any manner
materially adverse to the Participant, his or her rights and benefits under an
Award.
(d) Limitations on Amendments to Plan and Awards. No
amendment, suspension or termination of this Plan or change of or affecting any
outstanding Award shall, without written consent of the Participant, affect in
any manner materially adverse to the Participant any rights or benefits of the
Participant or obligations of the
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Corporation under any Award granted under this Plan prior to the effective date
of such change. Changes contemplated by Section 6.2 shall not be deemed to
constitute changes or amendments for purposes of this Section 6.6.
6.7 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee or
this Plan, a Participant shall not be entitled to any privilege of stock
ownership as to any shares of Common Stock not actually delivered to and held of
record by him or her. No adjustment will be made for dividends or other rights
as a shareholder for which a record date is prior to such date of delivery.
6.8 Effective Date of the Plan.
This Plan shall be effective as of February 4, 1997, the date
of Board approval, subject to shareholder approval within 12 months thereafter.
6.9 Term of the Plan.
No Award shall be granted under this Plan after more than ten
years after the effective date of this Plan (the "termination date"). Unless
otherwise expressly provided in this Plan or in an applicable Award Agreement,
any Award granted prior to the termination date may extend beyond such date, and
all authority of the Committee with respect to Awards hereunder, including the
authority to amend an Award, shall continue during any suspension of this Plan
and in respect of Awards outstanding on the termination date.
6.10 Governing Law/Construction/Severability.
(a) Choice of Law. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the state of incorporation of the
Corporation.
(b) Severability. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.
(c) Plan Construction.
(1) Rule 16b-3. It is the intent of the Corporation
that transactions in and affecting Awards in the case of Participants who are or
may be subject to Section 16 of the Exchange Act satisfy any then applicable
requirements of Rule 16b-3 so that such persons (unless they otherwise agree)
will be entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act in respect of those transactions and will not be
subjected to avoidable liability thereunder.
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If any provision of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed above, that provision to the extent possible
shall be interpreted as to avoid such conflict. If the conflict remains
irreconcilable, the Committee may disregard the provision if it concludes that
to do so furthers the interest of the Corporation and is consistent with the
purposes of this Plan as to such persons in the circumstances.
(2) Section 162(m). It is the further intent of the
Company that Options or SARs with an exercise or base price not less than Fair
Market Value on the date of grant and performance awards under Section 5.2 of
this Plan that are granted to or held by a Section 16 Person shall qualify as
performance-based compensation under Section 162(m) of the Code, and this Plan
shall be interpreted consistent with such intent.
6.11 Captions.
Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
6.12 Effect of Change of Subsidiary Status.
For purposes of this Plan and any Award hereunder, if an
entity ceases to be a Subsidiary a termination of employment and service shall
be deemed to have occurred with respect to each Eligible Person in respect of
such Subsidiary who does not continue as an Eligible Person in respect of
another entity within the Company.
6.13 Non-Exclusivity of Plan.
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority.
7. DEFINITIONS.
7.1 Definitions.
(a) "Award" shall mean an award of any Option, Stock
Appreciation Right, Restricted Stock, Stock Bonus, Performance Share Award,
dividend equivalent or deferred payment right or other right or security that
would constitute a "derivative security" under Rule 16a-1(c) of the Exchange
Act, or any combination thereof, whether alternative or cumulative, authorized
by and granted under this Plan.
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(b) "Award Agreement" shall mean any writing setting forth the
terms of an Award that has been authorized by the Committee.
(c) "Award Date" shall mean the date upon which the Committee
took the action granting an Award or such later date as the Committee designates
as the Award Date at the time of the Award or, in the case of Awards under
Article 8, the applicable dates set forth therein.
(d) "Award Period" shall mean the period beginning on an Award
Date and ending on the expiration date of such Award.
(e) "Beneficiary" shall mean the person, persons, trust or
trusts designated by a Participant or, in the absence of a designation, entitled
by will or the laws of descent and distribution, to receive the benefits
specified in the Award Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is designated and able to act under the circumstances.
(f) "Board" shall mean the Board of Directors of the
Corporation.
(g) "Cash Flow" shall mean cash and cash equivalents derived
from either (i) net cash flow from operations or (ii) net cash flow from
operations, financings and investing activities, as determined by the Committee
at the time an Award is granted.
(h) "Change in Control Event" shall mean any of the following:
(1) Approval by the shareholders of the Corporation
of the dissolution or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation
of an agreement to merge or consolidate, or otherwise reorganize, with
or into one or more entities that are not Subsidiaries or other
affiliates, as a result of which less than 50% of the outstanding
voting securities of the surviving or resulting entity immediately
after the reorganization are, or will be, owned, directly or
indirectly, by shareholders of the Corporation immediately before such
reorganization (assuming for purposes of such determination that there
is no change in the record ownership of the Corporation's securities
from the record date for such approval until such reorganization and
that such record owners hold no securities of the other parties to such
reorganization), but including in such determination any securities of
the other parties to such reorganization held by affiliates of the
Corporation);
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(3) Approval by the shareholders of the Corporation
of the sale of substantially all of the Corporation's business and/or
assets to a person or entity which is not a Subsidiary or other
affiliate; or;
(4) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act but excluding any person described
in and satisfying the conditions of Rule 13d-1(b)(1) thereunder)
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Corporation
representing more than 50% of the combined voting power of the
Corporation's then outstanding securities entitled to then vote
generally in the election of directors of the Corporation; or
(5) During any period not longer than two consecutive
years, individuals who at the beginning of such period constituted the
Board cease to constitute at least a majority thereof, unless the
election, or the nomination for election by the Corporation's
shareholders, of each new Board member was approved by a vote of at
least three-fourths of the Board members then still in office who were
Board members at the beginning of such period (including for these
purposes, new members whose election or nomination was so approved).
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(j) "Commission" shall mean the Securities and Exchange
Commission.
(k) "Committee" shall mean the Board or a committee appointed
by the Board to administer this Plan, which committee shall be comprised only of
two or more directors or such greater number of directors as may be required
under applicable law, each of whom, (i) in respect of any decision at a time
when the Participant affected by the decision may be subject to Section 162(m)
of the Code, shall be an "outside director" within the meaning of Section 162(m)
of the Code, and/or (ii) in respect of any decision at a time when the
Participant affected by the decision may be subject to Section 16 of the
Exchange Act, shall be a "Non-Employee Director" within the meaning of Rule 16b-
3(b)(3).
(l) "Common Stock" shall mean the Common Stock of the
Corporation and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 6.2 of this Plan.
(m) "Company" shall mean, collectively, the Corporation and
its Subsidiaries.
(n) "Corporation" shall mean Meade Instruments Corp., a
California corporation, and its successors.
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(o) "Eligible Employee" shall mean an officer (whether or not
a director) or key employee of the Company.
(p) "Eligible Person" means an Eligible Employee, or any Other
Eligible Person, as determined by the Committee in its discretion.
(q) "EPS" shall mean earnings per common share on a fully
diluted basis determined by dividing (i) net earnings, less dividends on
preferred stock of the Corporation by (ii) the weighted average number of common
shares and common shares equivalents outstanding (all as determined in
accordance with generally accepted accounting principles).
(r) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(s) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(t) "Fair Market Value" on any date shall mean (i) if the
stock is listed or admitted to trade on a national securities exchange, the
closing price of the stock on the Composite Tape, as published in the Western
Edition of The Wall Street Journal, of the principal national securities
exchange on which the stock is so listed or admitted to trade, on such date, or,
if there is no trading of the stock on such date, then the closing price of the
stock as quoted on such Composite Tape on the next preceding date on which there
was trading in such shares; (ii) if the stock is not listed or admitted to trade
on a national securities exchange, the last price for the stock on such date, as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the NASDAQ National Market Reporting System or a similar organization if
the NASD is no longer reporting such information; (iii) if the stock is not
listed or admitted to trade on a national securities exchange and is not
reported on the National Market Reporting System, the mean between the bid and
asked price for the stock on such date, as furnished by the NASD or a similar
organization; or (iv) if the stock is not listed or admitted to trade on a
national securities exchange, is not reported on the National Market Reporting
System and if bid and asked prices for the stock are not furnished by the NASD
or a similar organization, the value as established by the Committee at such
time for purposes of this Plan.
(u) "Incentive Stock Option" shall mean an Option which is
intended, as evidenced by its designation, as an incentive stock option within
the meaning of Section 422 of the Code, the award of which contains such
provisions (including but not limited to the receipt of shareholder approval of
this Plan, if the Award is made prior to such approval) and is made under such
circumstances and to such persons as may be necessary to comply with that
section.
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(v) "Nonqualified Stock Option" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
(w) "Non-Employee Director" shall mean a member of the Board
of Directors of the Corporation who is not an officer or employee of the
Company.
(x) "Non-Employee Director Participant" shall mean a
Non-Employee Director who holds an outstanding Award under the provisions of
Article 8.
(y) "Option" shall mean an option to purchase Common Stock
granted under this Plan. The Committee shall designate any Option granted to an
Eligible Person as a Nonqualified Stock Option or an Incentive Stock Option.
(z) "Other Eligible Person" shall mean any Non-Employee
Director or any individual consultant or advisor who renders or has rendered
bona fide services (other than services in connection with the offering or sale
of securities of the Company in a capital raising transaction) to the Company,
and who is selected to participate in this Plan by the Committee.
(aa) "Participant" shall mean an Eligible Person who has been
granted an Award under this Plan and a Non-Employee Director who has been
received an Award under Article 8 of this Plan.
(ab) "Performance Goals" shall mean Cash Flow, EPS, ROE, Total
Stockholder Return and any other criterion established by the Committee.
(ac) "Performance Share Award" shall mean an Award of a right
to receive shares of Common Stock or other compensation (including cash) under
Section 5.2, the issuance or payment of which is contingent upon, among other
conditions, the attainment of performance objectives specified by the Committee.
(ad) "Personal Representative" shall mean the person or
persons who, upon the disability or incompetence of a Participant, shall have
acquired on behalf of the Participant, by legal proceeding or otherwise, the
power to exercise the rights or receive benefits under this Plan and who shall
have become the legal representative of the Participant.
(ae) "Plan" shall mean this Stock Incentive Plan.
(af) "QDRO" shall mean a qualified domestic relations order.
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(ag) "Restricted Shares" or "Restricted Stock" shall mean
shares of Common Stock awarded to a Participant under this Plan, subject to
payment of such consideration, if any, and such conditions on vesting (which may
include, among others, the passage of time, specified performance objectives or
other factors) and such transfer and other restrictions as are established in or
pursuant to this Plan and the related Award Agreement, for so long as such
shares remain unvested under the terms of the applicable Award Agreement.
(ah) "Retirement" shall mean retirement with the consent of
the Company or, from active service as an employee or officer of the Company on
or after attaining age 55 with 10 or more years of service or after age 65.
(ai) "ROE" shall mean consolidated net income of the
Corporation (less preferred dividends), divided by the average consolidated
common shareholders equity.
(aj) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act, as amended from time to time.
(ak) "Section 16 Person" shall mean a person subject to
Section 16(a) of the Exchange Act.
(al) "Securities Act" shall mean the Securities Act of 1933,
as amended from time to time.
(am) "Stock Appreciation Right" shall mean a right authorized
under this Plan to receive a number of shares of Common Stock or an amount of
cash, or a combination of shares and cash, the aggregate amount or value of
which is determined by reference to a change in the Fair Market Value of the
Common Stock.
(an) "Stock Bonus" shall mean an Award of shares of Common
Stock granted under this Plan for no consideration other than past services and
without restriction other than such transfer or other restrictions as the
Committee may deem advisable to assure compliance with law.
(ao) "Subsidiary" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
(ap) "Total Disability" shall mean a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code and such other
disabilities, infirmities, afflictions or conditions as the Committee by rule
may include.
(aq) "Total Stockholder Return" shall mean with respect to the
Corporation or other entities (if measured on a relative basis), the (i) change
in the market price of its common stock (as quoted in the principal market on
which it is
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traded as of the beginning and ending of the period) plus dividends and other
distributions paid, divided by (ii) the beginning quoted market price, all of
which is adjusted for any changes in equity structure, including but not limited
to stock splits and stock dividends.
8. NON-EMPLOYEE DIRECTOR OPTIONS
8.1 Participation.
Awards under this Article 8 shall be made only to Non-Employee
Directors and shall be evidenced by Award Agreements substantially in the form
of Exhibit A hereto.
8.2 Annual Option Grants.
(a) Time of Initial Award. Persons who are Non-Employee
Directors in office at the time this Plan is first approved by the shareholders
of the Corporation shall be granted without further action a Nonqualified Stock
Option to purchase 5,000 shares of Common Stock. After approval of this Plan by
the shareholders of the Corporation, if any person who is not then an officer or
employee of the Company shall become a director of the Corporation, there shall
be granted automatically to such person (without any action by the Board or
Committee) a Non-qualified Stock Option (the Award Date of which shall be the
date such person takes office) to purchase 5,000 shares of Common Stock.
(b) Subsequent Annual Awards. Immediately following the annual
shareholders meeting in each year during the term of the Plan commencing 1998,
there shall be granted automatically (without any action by the Committee or the
Board) a Nonqualified Stock Option (the Award Date of which shall be such date)
to each NonEmployee Director then continuing in office to purchase 5,000 shares
of Common Stock.
(c) Maximum Number of Shares. A Non-Employee Director shall
not receive more than one Nonqualified Stock Option under this Section 8.2 in
any calendar year, nor more than 50,000 shares on exercise of all Options
awarded under this Section 8.2.
8.3 Option Price.
The purchase price per share of the Common Stock covered by
each Option granted pursuant to Section 8.2 hereof shall be 100 percent of the
Fair Market Value of the Common Stock on the Award Date (or the initial public
offering price for any grants made to Non-Employee Directors on or prior to the
closing date of the Corporation's initial public offering). The exercise price
of any Option granted under this Article shall be paid in full at the time of
each purchase in cash or by check or in
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shares of Common Stock valued at their Fair Market Value on the date of exercise
of the Option, or partly in such shares and partly in cash, provided that any
such shares used in payment shall have been owned by the Participant at least
six months prior to the date of exercise.
8.4 Option Period and Exercisability.
Each Option granted under this Article 8 and all rights or
obligations thereunder shall expire ten years after the Award Date and shall be
subject to earlier termination as provided below. Each Option granted under
Section 8.2 shall become exercisable at the rate of 33-1/3% per annum
commencing on the first anniversary of the Award Date and each of the next
two anniversaries thereafter.
8.5 Termination of Directorship.
If a Non-Employee Director's services as a member of the Board
of Directors terminate by reason of death, Disability or Retirement, an Option
granted pursuant to this Article held by such Participant shall immediately
become and shall remain exercisable for two years after the date of such
termination or until the expiration of the stated term of such Option, whichever
first occurs. If a Non-Employee Director's services as a member of the Board of
Directors terminate for any other reason, any portion of an Option granted
pursuant to this Article which is not then exercisable shall terminate and any
portion of such Option which is then exercisable may be exercised for three
months after the date of such termination or until the expiration of the stated
term whichever first occurs.
8.6 Adjustments.
Options granted under this Article 8 shall be subject to
adjustment as provided in Section 6.2, but only to the extent that (a) such
adjustment and the Committee's actions in respect thereof satisfy any applicable
criteria in respect of formula plans under Rule 16, (b) such adjustment in the
case of a Change in Control Event is effected pursuant to the terms of a
reorganization agreement approved by shareholders of the Corporation, and (c)
such adjustment is consistent with adjustments to Options held by persons other
than executive officers or directors of the Corporation.
8.7 Acceleration Upon a Change in Control Event
Upon the occurrence of a Change in Control Event, each Option
granted under Section 8.2 hereof shall become immediately exercisable in full;
provided, however, that none of the Options granted under Section 8.2 shall be
accelerated to a date less than six months after the Award Date of such Option.
To the extent that any Option granted under this Article 8 is not exercised
prior to (i) a dissolution of the Corporation or (ii) a merger or other
corporate event that the Corporation does not survive, and no provision is (or
consistent with the provisions of Section 8.7 can be)
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made for the assumption, conversion, substitution or exchange of the Option, the
Option shall terminate upon the occurrence of such event.
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EXHIBIT 10.30
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement"), dated as of March ___,
1997, is entered into between Meade Instruments Corp., a California corporation
("Meade California"), and Meade Merger Corp., a Delaware corporation and
wholly-owned subsidiary of Meade California ("Meade Delaware"). Meade California
and Meade Delaware are hereinafter sometimes collectively referred to as the
"Constituent Corporations."
W I T N E S S E T H:
WHEREAS, Meade California is a corporation duly organized and
existing under the laws of the State of California;
WHEREAS, Meade Delaware is a corporation duly organized and
existing under the laws of the State of Delaware;
WHEREAS, on the date of this Agreement, Meade California has
authority to issue 21,000,000 shares of capital stock, consisting of: (i)
15,000,000 shares of Series A Common Stock, no par value ("California Series A
Common Stock"), of which 4,250,000 shares are issued and outstanding or reserved
for issuance; (ii) 5,000,000 shares of Series B Common Stock, no par value
("California Series B Common Stock"), of which 1,500,000 shares are issued and
outstanding or reserved for issuance; and (iii) 1,000,000 shares of Preferred
Stock, no par value, of which 1,000 shares of Series A Preferred Stock
("California Series A Preferred Stock") are issued and outstanding;
WHEREAS, on the date of this Agreement, Meade Delaware has
authority to issue 21,000,000 shares of capital stock, consisting of: (i)
15,000,000 shares of Series A Common Stock, par value $0.01 per share ("Delaware
Series A Common Stock"), 10 of which shares are issued and outstanding and owned
by Meade California; (ii) 5,000,000 shares of Series B Common Stock, par value
$0.01 per share ("Delaware Series B Common Stock"), of which no shares are
issued and outstanding; and (iii) 1,000,000 shares of Preferred Stock, par value
$0.01 per share, of which 1,000 shares have been designated Series A Preferred
Stock ("Delaware Series A Preferred Stock") and no shares are issued and
outstanding;
WHEREAS, the respective Boards of Directors of Meade
California and Meade Delaware have determined that it is advisable and in the
best interests of each of such corporations that Meade California merge with and
into Meade Delaware upon the terms and subject to the conditions set forth in
this Agreement for the purpose of effecting the change of the state of
incorporation of Meade California from California to Delaware;
WHEREAS, the respective Boards of Directors of Meade
California and Meade Delaware have, by resolutions duly adopted, approved this
Agreement;
WHEREAS, Meade California has approved this Agreement as the
sole stockholder of Meade Delaware; and
<PAGE> 2
WHEREAS, the shareholders of Meade California have approved
this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, Meade California and Meade Delaware hereby agree as
follows:
1. Merger. Subject to the conditions of this Agreement, Meade
California shall be merged with and into Meade Delaware (the "Merger"), and
Meade Delaware shall be the surviving corporation (hereinafter sometimes
referred to as the "Surviving Corporation"). The Merger shall become effective
upon the date and at the time of filing of a copy of this Agreement of Merger
or an appropriate Certificate of Merger, providing for the Merger, with the
Secretary of State of the State of Delaware (the "Effective Time"). There shall
also be filed a copy of this Agreement of Merger with appropriate certificates
of merger, providing for the Merger, with the Secretary of State of the State
of California before, on or after the Effective Time.
2. Governing Documents. The Certificate of Incorporation of
Meade Delaware, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation without change or
amendment until thereafter amended in accordance with the provisions thereof and
applicable laws, except that such Certificate of Incorporation shall hereby be
amended to change the name of the Surviving Corporation to "Meade Instruments
Corp." and the Bylaws of Meade Delaware, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation without change
or amendment until thereafter amended in accordance with the provisions thereof,
of the Certificate of Incorporation of the Surviving Corporation and applicable
law.
3. Succession. At the Effective Time, the separate corporate
existence of Meade California shall cease, and Meade Delaware shall possess all
the rights, privileges, powers and franchises of a public and private nature and
be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular, the rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to each of the Constituent Corporations on
whatever account, as well for stock subscriptions as all other things in action
belonging to each of the Constituent Corporations, shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of such Constituent Corporations shall not revert or be in
any way impaired by reason of the Merger; but all rights of creditors and all
liens upon any property of Meade California shall be preserved unimpaired. To
the extent permitted by law, any claim existing or action or proceeding pending
by or against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place. All debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it. All corporate acts, plans,
policies, agreements, arrangements, approvals and authorizations of Meade
California, its shareholders, Board of Directors and committees thereof,
officers and agents which were valid and effective immediately prior to the
Effective Time, shall be taken for all purposes as the acts, plans,
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policies, agreements, arrangements, approvals and authorizations of the
Surviving Corporation and shall be as effective and binding thereon as the same
were with respect to Meade California. The employees and agents of Meade
California shall become the employees and agents of the Surviving Corporation
and continue to be entitled to the same rights and benefits which they enjoyed
as employees and agents of Meade California. The requirements of any plans or
agreements of Meade California involving the issuance or purchase by Meade
California of certain shares of its capital stock shall be satisfied by the
issuance or purchase of a like number and same class of shares of the Surviving
Corporation.
4. Directors and Officers. The Directors and Officers of Meade
California on the Effective Time shall be and become the sole Directors and
Officers, holding the same titles and positions, of the Surviving Corporation on
the Effective Time, and after the Effective Time shall serve in accordance with
the Bylaws of the Surviving Corporation.
5. Further Assurances. From time to time, as and when required
by the Surviving Corporation or by its successors or assigns, there shall be
executed and delivered on behalf of Meade California such deeds and other
instruments, and there shall be taken or caused to be taken by it all such
further and other action, as shall be appropriate, advisable or necessary in
order to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation the title to and possession of all property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of Meade
California, and otherwise to carry out the purposes of this Agreement, and the
officers and directors of the Surviving Corporation are fully authorized in the
name and on behalf of Meade California or otherwise, to take any and all such
action and to execute and deliver any and all such deeds and other instruments.
6. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
(a) each share of California Series A Common Stock outstanding
immediately prior to the Effective Time shall be changed and converted
into and shall be one fully paid and nonassessable share of Delaware
Series A Common Stock;
(b) each share of California Series B Common Stock outstanding
immediately prior to the Effective Time shall be changed and converted
into and shall be one fully paid and nonassessable share of Delaware
Series B Common Stock;
(c) each share of California Series A Preferred Stock
outstanding immediately prior to the Effective Time shall be changed
and converted into and shall be one fully paid and nonassessable share
of Delaware Series A Preferred Stock; and
(d) the 10 shares of Delaware Series A Common Stock presently
issued and outstanding in the name of Meade California shall be
cancelled and retired and resume the status of authorized and unissued
shares of Delaware Series A Common Stock, and no shares of Delaware
capital stock or other securities of Meade Delaware shall be issued in
respect thereof.
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7. Conditions to Obligations. The obligations of each party to
complete the Merger are subject to the following conditions:
(a) Meade California Shareholder Approval. The Merger shall
have received the requisite approval of the shareholders of Meade
California pursuant to the General Corporation Law of the State of
California.
(b) Approval from Government Agencies. All governmental
approvals and other actions required to effect the Merger and related
transactions shall have been obtained, without conditions or
restrictions that the affected party reasonably considers unduly
burdensome.
8. Stock Certificates. At and after the Effective Time, all of
the outstanding certificates which, immediately prior to the Effective Time,
represented shares of California capital stock shall, respectively, be deemed
for all purposes to evidence ownership of, and to represent, shares of Delaware
capital stock into which the shares of California capital stock, formerly
represented by such certificates, have been converted as herein provided. The
registered owner on the books and records of the Surviving Corporation or its
transfer agents of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to the Surviving Corporation or its transfer agents, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of Delaware capital stock
evidenced by such outstanding certificate as above provided.
9. Options. The same number of shares of Delaware Series A
Common Stock shall be reserved for purposes of the Meade California 1997 Stock
Incentive Plan (the "Plan") as is equal to the number of shares of California
Series A Common Stock so reserved as of the Effective Time. As of the Effective
Time, Meade Delaware hereby assumes the Plan and all obligations of Meade
California under the Plan.
10. Other Employee Benefit Plans. As of the Effective Time,
Meade Delaware hereby assumes all obligations under any and all employee benefit
plans of Meade California in effect as of the Effective Time or with respect to
which employee rights or accrued benefits are outstanding as of the Effective
Time.
11. Amendment. Subject to applicable law, this Agreement may
be amended, modified or supplemented by written agreement of the parties hereto
at any time prior to the Effective Time with respect to any of the terms
contained herein; provided, however, that no such amendment, modification or
supplement not adopted and approved by the shareholders of Meade California and
Meade Delaware shall affect the rights of either or both of such shareholders in
a manner which is materially adverse to either or both of them or change any of
the principal terms of this Agreement of Merger.
12. Abandonment. At any time prior to the Effective Time, this
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of Meade California, notwithstanding approval of this Agreement by the
stockholder of Meade Delaware or by the shareholders of Meade California, or
both, if, in the opinion of the
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Board of Directors of Meade California, circumstances arise which, in the
opinion of such Board of Directors, make the Merger for any reason inadvisable.
13. Counterparts. In order to facilitate the filing and
recording of this Agreement, the same may be executed in two or more
counterparts, each of which shall be deemed to be an original and the same
agreement.
IN WITNESS WHEREOF, Meade California and Meade Delaware have
caused this Agreement to be signed by their respective duly authorized officers
as of the date first above written.
MEADE INSTRUMENTS CORP.,
a California corporation
By: ________________________________
John C. Diebel
Chief Executive Officer
ATTEST:
By: _________________________
Steven G. Murdock
Secretary
MEADE MERGER CORP.,
a Delaware corporation
By: ________________________________
John C. Diebel
Chief Executive Officer
ATTEST:
By: _________________________
Steven G. Murdock
Secretary
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EXHIBIT 10.31
PREFERRED STOCK REDEMPTION AGREEMENT
THIS PREFERRED STOCK REDEMPTION AGREEMENT (this "Agreement")
is entered into effective as of the 31st day of January, 1997, by and between
Meade Instruments Corp., a California corporation (the "Company"), and Churchill
ESOP Capital Partners, A Minnesota Limited Partnership ("Churchill").
RECITALS
WHEREAS, pursuant to that certain Securities Purchase
Agreement ("Purchase Agreement") dated as of April 23, 1996, between Churchill
and the Company, Churchill purchased from the Company and the Company issued and
sold to Churchill, 1,000 shares of the Company's Series A Preferred Stock (the
"Preferred Shares"); and
WHEREAS, the Company desires to repurchase from Churchill, and
Churchill desires to sell to the Company, the Preferred Shares on the terms and
conditions set forth below; and
WHEREAS, pursuant to Section 7.24 of the Purchase Agreement,
if the Company repurchases the Preferred Shares prior to April 23, 2001, the
Company is obligated to pay an early redemption premium of up to 5% of the
liquidation value of the Preferred Shares ("Early Redemption Premium").
AGREEMENT
In consideration of the foregoing and the representations,
warranties and covenants set forth in this Agreement, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of Shares. Subject to the terms and
conditions set forth in this Agreement, Churchill hereby agrees to sell,
transfer and deliver to the Company, and the Company hereby agrees to purchase,
acquire and accept from Churchill, the Preferred Shares for the Purchase Price
as determined below.
1.2 Purchase Price. The Purchase Price shall be the amount
equal to the sum of (a) $6,000,000 plus (b) all accrued, but unpaid dividends on
the Preferred Shares, through and including the Closing Date (as defined below).
The Purchase Price shall not include the Early Redemption Premium under
<PAGE> 2
Section 7.4 of the Purchase Agreement and Churchill hereby waives any right to
such payment.
1.3 Closing. The closing of the purchase and sale of the
Purchased Securities (the "Closing") will be effective as of the earlier of (i)
three days after notice (at the location specified in the Purchase Agreement) of
a Closing date is given by the Company to Churchill and (ii) April 14, 1997, or
at such other time, date and place as the parties hereto may agree upon (the
"Closing Date").
1.4 Conditions to Purchase. The Company's obligation to
purchase the Purchased Securities pursuant to this Agreement is expressly
subject to the Company being able to obtain the consent of the Company's
principal lender, Fleet Capital Corporation ("Fleet") to the redemption.
ARTICLE II
DELIVERIES
2.1 Delivery by Churchill. On the Closing Date, Churchill
shall deliver to the Company the following: the stock certificate representing
the Preferred Shares, which certificate shall be either duly endorsed in blank
or accompanied by stock powers duly executed in blank.
2.2 Delivery by the Company. On the Closing Date, the Company
shall deliver to Churchill the following: (i) the Purchase Price in immediately
available funds by wire transfer to an account specified by Churchill; and (ii)
resolutions of the Board of Directors of the Company approving and authorizing
this Agreement and the transactions contemplated hereby, certified as of the
Closing Date by the Company's secretary or assistant secretary as being in full
force and effect without modification or amendment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants to Churchill as
follows:
3.1 Authority. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and the Company has full corporate power and authority to execute and deliver
this Agreement and to perform its obligations under and to consummate the
transactions contemplated by the Agreement, and all corporate action of the
Company necessary for such execution, delivery and performance
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has been or will be duly and validly taken and remains or will remain in full
force and effect. This Agreement has been duly and validly executed and
delivered by the Company.
3.2 Binding Obligation. This Agreement constitutes the legal,
valid, and binding obligation of the Company enforceable in accordance with its
terms against the Company, except that (i) such enforcement may be limited by
the effect of applicable bankruptcy, reorganization, insolvency, moratorium, or
other laws of general application to or affecting the enforcement of creditors,
rights from time to time in effect; and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
3.3 No Violation. The consummation of the transactions
contemplated by this Agreement and fulfillment of the terms hereof will not
breach any of the terms and provisions of, or constitute a default by the
Company under, any agreement or instrument to which it is a party or by which it
is bound, or any statute, ruling, decree, judgment, order or regulation of any
governmental authority having jurisdiction over the Company or its property; and
no consent (other than the consent of Fleet), approval, authorization or order
of any court or governmental agency or body is required for the consummation by
the Company of the transactions on its part contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF CHURCHILL
Churchill hereby represents and warrants to the Company as
follows:
4.1 Title to Shares. Churchill is the owner of the Preferred
Shares. No other person or entity has any right, title, or interest,
beneficially or of record, in or to the Preferred Shares owned by Churchill, and
such Preferred Shares are free and clear of any claims, liens, encumbrances,
security agreements, equities, options, charges, restrictions, or other adverse
interests created or suffered to exist by Churchill, and can be delivered and
surrendered to the Company pursuant hereto without obtaining the consent or
approval of any other person or governmental authority. Upon the transfer and
delivery of such Preferred Shares to the Company in accordance with this
Agreement, the Company will become the owner and holder of all of such Preferred
Shares free and clear of all liens, encumbrances, pledges, claims, charges,
restrictions, and other adverse interest (to the extent that such Preferred
Shares do not revert to unissued shares of the authorized capital of the Company
pursuant to this Agreement).
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4.2 Authority. Churchill is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Minnesota,
and has full partnership power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated by the Agreement. All partnership action of Churchill
necessary for such execution, delivery and performance has been duly and validly
taken and remains in full force and effect. This Agreement has been duly and
validly executed and delivered by Churchill.
4.3 Binding Obligation. This Agreement constitutes the legal,
valid, and binding obligation of Churchill enforceable in accordance with its
terms, except that (i) such enforcement may be limited by the effect of
applicable bankruptcy, reorganization, insolvency, moratorium, or other laws of
general application to or affecting the enforcement of creditors, rights from
time to time in effect; and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
4.4 No Violation. The consummation of the transactions
contemplated by this Agreement and fulfillment of the terms hereof will not
breach any of the terms and provisions of, or constitute a default by Churchill
under, any agreement or instrument to which it is a party or by which it is
bound, or any statute, ruling, decree, judgment, order or regulation of any
governmental authority having jurisdiction over Churchill or its property; and
no consent, approval, authorization or order of any court or governmental agency
or body is required for the consummation by Churchill of the transactions on its
part contemplated hereby.
ARTICLE V
GENERAL PROVISIONS
5.1 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
5.2 Governing Law. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with the laws of the
State of California applicable to agreements made and to be performed wholly
within the State of California.
5.3 Entire Agreement. This Agreement hereto contains all of
the agreements between the parties with respect to the matters contained herein
and supersede all prior written or oral and all contemporaneous oral agreements
or understandings between the parties pertaining to any such matters. No
provision of this
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Agreement may be amended or added to except by an agreement in writing signed by
the parties to this Agreement or their respective successors in interest and
expressly stating that it is an amendment of this Agreement. If Fleet has not
consented to the Company's purchase of the Preferred Shares on the terms
specified herein on or before April 14, 1997, then this Agreement, including the
waiver of the Early Redemption Premium shall thereafter be of no further force
and effect.
5.4 Third Party Rights. The parties do not intend to confer
any benefit hereunder on any person, firm or corporation other than the parties
hereto.
5.5 Further Assurances. The parties agree to do such further
acts and things and to execute and deliver such additional agreements and
instruments as the other may reasonably require to consummate, evidence or
confirm the agreements contained herein in the manner contemplated hereby.
5.6 Assignment. This Agreement and the rights, duties, and
obligations hereunder may not be assigned by any party without the prior written
consent of the other parties, and any attempted assignment is void.
5.7 Successors and Assigns. Subject to Section 5.6 hereof,
this Agreement shall be binding upon each of the parties to it and their
respective permitted successors and assigns.
5.8 Severability. In the event any provision of this Agreement
shall finally be determined to be unlawful, such provision shall be deemed to be
severed from this Agreement and every other provision of this Agreement shall
remain in full force and effect.
5.9 Costs and Expenses. Each Party shall pay the costs and
expenses incurred by it in connection with the entering and the completion of
this Agreement.
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The parties hereto have executed this Agreement as of the day
and year first above written.
"THE COMPANY"
MEADE INSTRUMENTS CORP., a
California corporation
By: /s/ STEVE MURDOCK
-------------------------------------
Title:President
----------------------------------
"CHURCHILL"
CHURCHILL ESOP CAPITAL PARTNERS,
A Minnesota Limited Partnership
By: CHURCHILL CAPITAL INVESTMENT
PARTNERS, A Minnesota Limited
Partnership
Its: General Partner
By: CHURCHILL CAPITAL, INC.
Its: General Partner
By: /s/ ROBERT L. DAVIS
---------------------
Title: Vice President
-------------------
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