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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: November 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-14779
MEDIA 100 INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2532613
(State or other jurisdiction of (I.R.S. Employer
organization or incorporation) Identification Number)
100 LOCKE DRIVE
MARLBOROUGH, MASSACHUSETTS 01752-1192
(Address of principal executive offices, including zip code)
(508) 460-1600
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(NONE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Registration S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Parts III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $53,702,910 as of February 14, 1997. The number of shares of
Common Stock outstanding, $0.01 par value, as of February 14, 1997 was
8,118,602.
DOCUMENTS INCORPORATED BY REFERENCE
The information required in response to certain portions of Item 1 and
Items 5, 6, 7 and 8 of Part II is hereby incorporated by reference to the
specified portions of the registrant's Annual Report to Stockholders for the
fiscal year ended November 30, 1996. The information required in response to
certain portions of Part III of Form 10-K is hereby incorporated by reference to
the specified portions of the registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on April 16, 1997.
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PART I
ITEM 1. BUSINESS
Media 100 Inc. (the "Company"), a Delaware corporation founded in 1973 as
Data Translation, Inc., a Massachusetts corporation, changed its state of
incorporation from Massachusetts to Delaware in September 1996 and adopted its
present name on December 2, 1996. The Company is a technology and market leader
in the market for personal computer-based digital video systems. The Media
100(R) family of products are digital video systems that allow users to create
complete, broadcast-quality video programs without the use of traditional video
tape equipment.
On July 30, 1996, the Company announced its intention to separate its Media
100 digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months.
On November 11, 1996, the Company sold substantially all of the assets
associated with its networking distribution business in connection with the
winding up of that business. On December 2, 1996, the Company distributed all of
the shares of DTI, to which it had contributed its data acquisition and imaging
and commercial products businesses and the remaining assets and liabilities of
the networking distribution business, as a dividend to the Company's
stockholders (the "Spin-Off"), in a ratio of one share of DTI common stock for
every four shares of Company common stock. In connection with the Spin-Off, DTI
changed its name to Data Translation, Inc. and the Company changed its name to
Media 100 Inc.
In connection with the Spin-Off and the disposal of the networking
distribution business, the Company's historical financial statements and other
financial information set forth herein and in the Consolidated Financial
Statements on pages 8-20 of the Company's 1996 Annual Report to Stockholders,
herein incorporated by reference, reflect the financial position, results of
operations and cash flows of the Company as continuing operations; the related
financial information of the businesses contributed to DTI and the networking
distribution business has been segregated and reclassified as discontinued
operations.
The Company reports its operations within one principal industry segment:
computer peripheral equipment. The amounts of net sales, operating profit or
loss and identifiable assets attributable to each of the Company's geographic
areas for the last three fiscal years are shown in Note 8 to the Consolidated
Financial Statements included in the Company's 1996 Annual Report to
Stockholders, which information is incorporated herein by reference.
Company Overview
The Company's core competence has been in designing and developing systems
which convert analog signals to digital data for processing and manipulation on
a computer, historically for scientific and industrial data acquisition and
imaging applications, and most recently, for digital media. In 1973, the Company
began selling high-performance data acquisition boards for conversion and
processing of analog signals, such as temperature, pressure and sound, to
digital form in a computer. In 1983, the Company expanded its product line to
include imaging products that process images from a video input. In the late
1980s, the Company identified an opportunity to apply its data acquisition and
imaging expertise in audio and video to digital media. After more than three
years of research and development, the Company introduced its first Media 100
product in August 1993. On December 2, 1996, the Company disposed of all its
non-Media 100 related businesses in the Spin-Off, and changed its name to Media
100 Inc. to reflect its sole focus on the digital video business.
Media 100 products are fundamentally analog and digital conversion systems
that enable users to capture video and audio into a personal computer, perform
random-access ("nonlinear") video editing and audio mixing, and directly produce
a finished program with broadcast-quality picture and compact disc-quality
sound. By combining high output quality with simple user operation, the
Company's products are targeted to the corporate and institutional market
consisting of video program producers, including nonbroadcast users, such as
advertising agencies,
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independent producers, businesses, law firms, universities, governments and
hospitals. In addition to targeting existing users of video production
equipment, the Company is targeting new users who currently out-source their
video production requirements. By eliminating the need to use comparatively
complex and expensive mechanical videotape equipment to make a video, the
Company believes that Media 100 products empower these individuals to compose
finished videos largely on their own at relatively low cost.
Market
New digital video and audio technologies are changing how video and
multimedia programs are created and disseminated. Much as the desktop publishing
revolution changed the technology and economics of offset printing, and made it
possible for individuals to create easily and affordably their own publications,
new personal computer-based digital video systems are allowing an increasing
number of individuals to create complete, broadcast-quality video programs
themselves. The Company believes that, as the prices of digital video systems,
computers and hard disk memory decrease, increasing numbers of small companies
and individuals will adopt digital video technology, and digital video authoring
will become a core personal computer application much as desktop publishing is
today.
The Company believes that there are three general types of end-users of
digital media production systems, professional, corporate and institutional, and
mass market users, as described below. Within this market, the Company primarily
targets the corporate and institutional users. The Company believes that more
customers using costly, proprietary systems will eventually migrate to open
personal computer-based systems providing the same or better quality results,
such as the Media 100 product family. The Company also believes that users of
non-integrated digital video components, providing inferior output quality and
reliability, will want to upgrade to the Company's systems.
* Professional users are broadcast, television and film producers,
larger professional video post-production facilities and cable
television stations that create finalized video programs for others
or for broadcast. These users typically spend $50,000 or more on a
fully integrated video editing system.
* Corporate and institutional users include businesses, hospitals,
advertising agencies, law firms, government agencies, colleges,
universities and smaller independent post-production facilities.
These are users who are creating videos themselves. The average cost
of a fully integrated system for a corporate or institutional user
ranges between $10,000 and $50,000.
* Mass market users are early stage users who desire to use video for
informal presentations, for consumer-type video needs or for in-house
communication within corporations or institutions. They typically are
using non-integrated components with an aggregate purchase price of
$10,000 or less.
Media 100 products are targeted primarily at the corporate and
institutional market. Many of these corporate and institutional users currently
rely on analog video tape editing processes. Digital editing alternatives are
relatively new and currently account for a small portion of this market of
current users. The Company also believes that the corporate and institutional
market includes a potential market of new users who currently out-source their
video production requirements. The Company's future growth will depend, in part,
on the rate at which existing users convert to digital editing processes and the
rate at which new users adopt digital video systems as a communications
resource. For a further discussion of the risks and uncertainties associated
with the emerging corporate and institutional market for digital video products,
see "Certain Factors That May Affect Future Results."
Products
The Company's Media 100 products have been developed and marketed as open
systems, which means that they adhere to open systems standards such as Apple
QuickTime and the PCI bus architecture, thereby facilitating use of Media 100
products with complementary and competitive software applications, computer
peripherals and video equipment. The Company's adherence to an open system
strategy is intended to facilitate the sales of its products by allowing
customers to select off-the-shelf peripheral equipment to suit their particular
needs and to avail themselves of third party software applications in
conjunction with their Media 100 system.
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The Company introduced Media 100 in 1993 as a single product, consisting of
hardware printed circuit boards and related software that, when integrated with
an Apple Macintosh computer and related peripherals, enabled the user to capture
complete source video and audio and store it digitally in disk storage, edit the
digital media by accessing it on a nonlinear basis, and then playing the edited
material back for preview, display or final recording. The Company progressively
added additional software and support options, which it sold separately or as
bundled option packages with the basic Media 100 system.
In 1996, the Company initiated plans to replace its Media 100 base system
plus multiple software add-ons with a family of products that were intended to
offer full video program authoring capabilities over a broader price/performance
spectrum. As the first step of this strategy, the Company began shipments in
April 1996 of Media 100 qx, a lower-cost digital video system based on the
Company's Vincent(TM) digital video engine that enables users of Apple QuickTime
applications to create broadcast-quality video programs using Adobe Premiere
editing software.
On December 26, 1996, the Company began shipments of six new Media 100
products. Each of these new products is based on the Company's Vincent 601
digital video engine, which enables a software-only upgrade path throughout the
Media 100 product family to the advanced features and functionality of the
Company's higher-end systems.
The Company's current product offering is summarized below.
* Media 100 qx and Media 100 qx with Component enable users of Apple
QuickTime to create broadcast-quality programs using Adobe Premiere
editing software. Media 100 qx with Component delivers the additional
functionality of processing video signals in the broadcast industry
standard YUV color space, 4:2:2 digital component.
* Media 100 le offers users a complete digital video system using Media
100 application software. Media 100 le features JPEG 4:1 compression
(150 kb/frame NTSC video format; 180 kb/frame PAL video format),
real-time preview dissolve, real-time preview motion effects and
real-time color effects and an integrated character generator.
* Media 100 lx offers all the features of the Media 100 le, with
additional features and functionality, including processing video
signals in the broadcast industry standard YUV color space, 4:2:2
digital component, batch redigitizing, real-time waveform
monitor/vectorscope and a rack-mountable junction box.
* Media 100 xe offers all the features of the Media 100 lx with
additional features and functionality, including JPEG 3:1 compression
(200 kb/frame NTSC; 240 kb/frame PAL), real-time static titling,
real-time keying of graphics with alpha channel, real-time 6-track
compact disc-quality audio mixing and import/export industry-standard
edit decision lists.
* Media 100 xs is the Company's most advanced digital media system,
offering all the features of the Media 100 xe with additional features
and functionality, including JPEG 2:1 compression (300 kb/frame NTSC;
360 kb/frame PAL), real-time preview transitions and real-time 8-track
compact disc-quality audio mixing.
* Gaudi(TM) is a platform for creating advanced 3D digital video effects
within the foregoing Media 100 systems (other than Media 100 qx and
Media 100 qx with Component). Developed in conjunction with Pinnacle
Systems, Inc., Gaudi consists of a separate hardware board and related
software that enable the user to create sophisticated 3D digital video
effects within the Media 100 user interface.
* Platinum Support Services are a variety of technical support and
service packages offered to Media 100 users. For an annual fee, users
purchase packages with options such as toll-free telephonic technical
support (either during business hours, five days a week, or 24 hours a
day, seven days a week), automatic, free software updates, temporary
replacement hardware, extended warranty and a quarterly newsletter. In
addition, the Company has from time to time offered hardware upgrades,
replacement hardware and new products to Platinum subscribers at
preferred prices. The Company has also introduced the Platinum
One-
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Stop service, in which subscribers can obtain telephonic technical
support relating to compatible third-party components integrated with
the user's Media 100 system.
The markets for the Company's products are characterized by rapidly
changing technology, evolving industry standards and frequent new product
introductions. The Company's future success will depend in part upon its ability
to enhance its existing products and to introduce new products and features in a
timely manner to address customer requirements, respond to competitive
offerings, adapt to new emerging industry standards and take advantage of new
enabling technologies that could render the Company's existing products
obsolete. In particular, the Company intends to develop new products that will
operate under Microsoft's Windows NT operating system. For a further discussion
of the risks and uncertainties associated with new product development and
product introductions and transitions, see "Certain Factors That May Affect
Future Results."
Technology and Product Features
The Company has designed its products as integrated hardware and software
systems which offer high performance on an Apple Macintosh personal computer.
The Company believes the basic performance of its hardware and software produces
broadcast-quality picture and compact disc-quality sound, with an open system
design. The Company's control of the development, design and manufacturing of
both the hardware and the software of its products allows it to conform one to
the other, specifically and solely to support the user requirements of the
target market.
The Media 100 product family's core hardware includes broadcast-quality
video input and output decoder/encoder subsystems, a proprietary,
dynamically-variable JPEG compression subsystem, a 16-bit eight-track compact
disc-quality digital audio subsystem, and two high-speed 32-bit microprocessors
responsible for transferring digital audio and video data, at throughput rates
of up to 30 megabytes per second, inside the host computer's central processing
unit ("CPU"). The current version of this hardware, the Vincent 601 digital
video engine, is the primary technical facilitator of real-time, nonlinear
performance with output which provides broadcast-quality video and compact
disc-quality audio. The output video is 30 frames per second, 60 fields per
second (NTSC) or 25 frames per second, 50 fields per second (PAL) and
synchronized with up to eight tracks of audio.
The software features a proprietary operating system which is unseen by
users and is integrated with the standard Apple Macintosh Mac OS operating
system. This software governs base level hardware operations to ensure real-time
performance, particularly by controlling the two onboard microprocessors in
concert with the host CPU. Layered on top of this base level of software, Media
100 products incorporate a higher level of software called application software,
through which the user controls every function of the digital video system.
The Company's products currently operate only on Apple Macintosh computers,
and the Company plans to devote a significant portion of its development efforts
to enhancing its existing products and developing new products for the Macintosh
platform. For a further discussion of the risks and uncertainties associated
with the Company's current dependence on the Apple Macintosh platform, see
"Certain Factors That May Affect Future Results."
Sales and Distribution
The Company sells its products through a worldwide network of approximately
500 independent value added resellers ("VARs") in over 50 countries. In the
United States, the Company authorizes and sells through a network of specialized
VARs who integrate and support Media 100 systems sales. The Company has also
retained the services of manufacturer's representatives in order to expand its
network of VARs for the distribution of its -qx, -le and -lx models. For a
further discussion of the risks and uncertainties associated with the Company's
dependence on an indirect sales channel of independent VAR's, see "Certain
Factors That May Affect Future Results."
Internationally, the Company has adopted the same indirect sales channel.
In the United Kingdom, France, Germany and Italy, the Company has subsidiaries
which establish VAR networks or contract with distributors who in turn establish
VAR networks of their own. Elsewhere, the Company sells through distributors,
which act as VARs or establish VAR networks in their respective territories. The
Company has embarked upon a concerted effort to increase the size of its
international VAR network in order to increase international sales of its
products and services,
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and in this regard, the Company established a European headquarters in
Paris, France in October 1996. Sales of Media 100 products outside of North
America represented approximately 38%, 39% and 43% of the Company's net sales
from continuing operations for fiscal years 1996, 1995 and 1994, respectively.
For a further discussion of the risks and uncertainties associated with
international operations, see "Certain Factors That May Affect Future Results."
Competition
The digital video systems market is highly competitive with a large number
of suppliers providing different types of products, both analog-based linear
systems and digital, nonlinear systems such as the Company's products, to
different segments of the market, and is characterized by continuous pressure to
reduce prices, incorporate new features and improve functionality.
In the emerging market of corporate and institutional users, the Company
has encountered competition primarily from Avid Technology, Inc. ("Avid"), which
has greater financial resources than the Company, as well as Truevision, Inc.
("Truevision") and Radius Inc. ("Radius"). Because this market is new and still
evolving, it is difficult to predict future sources of competition; however,
competitors are likely to include larger vendors, such as Matsushita Electric
Industrial Company Ltd. ("Matsushita") and Sony Corporation ("Sony"), which
currently compete in the market for professional users and have substantially
greater financial, technical and marketing resources than the Company.
To the extent that the Company has sold into the market of professional
users, it has encountered competition primarily from Avid and Scitex Digital
Video ("Scitex"). In addition, competition in this area comes from comparably
sized or smaller competitors, such as Matrox Electronic Systems Ltd. ("Matrox")
and FAST Electronic GmbH ("FAST"), as well as much larger vendors, such as
Matsushita and Sony, which have either introduced or announced plans to
introduce digital, nonlinear systems. The Company expects that other vendors of
analog video tape editing equipment, many of which have substantially greater
financial, technical and marketing resources than the Company, will develop and
introduce competing digital, nonlinear systems.
Research and Development
The Company invests in research and development for new products and for
enhancements to its existing products. The Company employed, as of February 14,
1997, 52 full-time engineers whose primary duties relate to product development.
Outside firms and consultants are selectively engaged to develop or assist with
development of products when favorable opportunities exist. In order to compete
successfully, the Company must attract and retain qualified personnel and
maintain a program of improvement of existing products, as well as the
development of new products. For a further discussion of the risks and
uncertainties associated with new product development, see "Certain Factors That
May Affect Future Results."
For the fiscal years ended November 30, 1996, 1995 and 1994, the Company
invested approximately $6,227,000, $4,806,000 and $3,780,000 on the development
of enhancements to its Media 100 products and the development of new Media 100
products.
Manufacturing
The Company's manufacturing operations consist primarily of manufacturing
and testing of printed circuit assemblies, final product assembly, quality
assurance and shipping, and are conducted at the facility which the Company
currently shares with DTI in Marlboro, Massachusetts. The Company believes that
its control of manufacturing significantly contributes to hardware design
improvements, and allows for quicker turn-around of engineering changes for
shipment to market. The Company periodically assesses its production
efficiencies against the benefits of outsourcing certain hardware production.
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Components used in the assembly of the Company's hardware products are
generally available from several distributors and manufacturers. However, the
Company is dependent on single or limited source suppliers for several key
components used in its products that have no ready substitutes, including
various audio and video signal processing integrated circuits manufactured in
each case only by Crystal Semiconductor Corp., Raytheon Company, LSI Logic
Corp., Philips Semiconductors or Zoran Corp. The availability of many of these
components is dependent on the Company's ability to provide suppliers with
accurate forecasts of its future requirements, and certain components used by
the Company have been subject to industry-wide shortages. For a further
discussion of the risks and uncertainties associated with the Company's
dependence on single or limited source suppliers, see "Certain Factors That May
Affect Future Results."
Proprietary Rights
The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. The Company
relies on a combination of patent, copyright, trademark and trade secret laws
and other intellectual property protection methods to protect its proprietary
technology. In addition, the Company generally enters into confidentiality
agreements with its employees and with third parties with whom it shares its
proprietary information, and limits access to and distribution of such
information. The Company owns three United States patents, expiring in 2013, and
has six pending patent applications in the United States, none of which the
Company believes is material. Although the Company pursues a policy of obtaining
patents for appropriate inventions, the Company believes that its success
depends primarily on the proprietary know-how, innovative skills, technical
competence and marketing abilities of its employees, rather than upon the
ownership of patents.
Certain technology used in the Company's products is licensed from third
parties on a royalty-bearing basis. Such royalties have not been, and are not
expected to be, material. Generally, such agreements grant to the Company
non-exclusive, worldwide rights to the subject technology and are renewable on a
periodic basis. In certain cases the licensor may terminate the license for
convenience, although the Company believes that the effect of any such
termination would not be material.
For a further discussion of the risks and uncertainties associated with
proprietary rights in the Company's industry and certain pending litigation, see
"Certain Factors That May Affect Future Results" and Item 3 to this Annual
Report on Form 10-K.
Backlog
Most customers order products on an as-needed basis relying, in the case of
most products, on the Company's five-day delivery capability. As a result, the
Company believes that its backlog at any point in time is not indicative of its
future sales.
Employees
As of February 14, 1997, the Company employed approximately 190 persons
worldwide. None of the employees is represented by a labor union. The Company
believes it has good relations with its employees.
Competition for employees with the skills required by the Company is
intense in the geographic areas in which the Company's operations are located.
The Company believes that its future success will depend on its continued
ability to attract and retain qualified employees, especially in research and
development.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-K are forward-looking statements
based on current expectations, and involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those expressed in such forward-looking statements. The risks and
uncertainties associated with such statements include the following:
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All of the Company's sales relate to a single family of products, Media 100
digital video systems. A decline in demand for Media 100 systems, or a failure
of such systems to maintain market acceptance, as a result of competition,
technological change or other factors, would have a material adverse effect on
the Company's business and operating results.
The Company's products currently operate only on Apple Macintosh computers,
and the Company plans to devote a significant portion of its development efforts
to enhancing its existing products and developing new products for the Macintosh
platform. Apple Computer Inc. has recently been suffering business and financial
difficulties. The inability of resellers and customers to obtain sufficient
quantities of Macintosh computers could have a material adverse effect on the
Company's business and operating results. The Company has begun to explore the
possibility of qualifying certain manufacturers of Macintosh "clones" for use
with its Media 100 products, but there can be no assurance that such alternative
platforms will be suitably configured to operate with the Company's products.
Also, as a result of Apple's continuing difficulties, there can be no assurance
that resellers and customers will not delay purchases of Apple-based products or
purchase substitute products based on non-Macintosh operating systems, the
occurrence of any of which could have a material adverse effect on the Company's
business and operating results. In addition, changes to the Mac OS operating
system or the architecture of the Macintosh computer could require the Company
to adapt its products to those changes and any inability to do so, or delays in
doing so, could have a material adverse effect on the Company's business and
operating results. As a result in part of the risks and uncertainties
surrounding the Macintosh platform, the Company intends to develop additional
new products that will operate under Microsoft's Windows NT operating system.
Any delay or failure of the Company in developing such additional new products
or any delay or failure of such new products to achieve market acceptance could
have a material adverse effect on the Company's business and operating results.
The Company's ability to compete successfully and achieve future revenue
growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. The Company has
in the past received, and may in the future continue to receive, communications
suggesting that its products may infringe patents or other intellectual property
rights of third parties. The Company's policy is to investigate the factual
basis of such communications and negotiate licenses where appropriate. While it
may be necessary or desirable in the future to obtain licenses relating to one
or more products, or relating to current or future technologies, there can be
no assurance that the Company will be able to do so on commercially reasonable
terms or at all. There can be no assurance that these or other future
communications can be settled on commercially reasonable terms or that they will
not result in protracted and costly litigation.
There has been substantial industry litigation regarding patent, trademark
and other intellectual property rights involving technology companies. In the
future, litigation may be necessary to enforce any patents issued to the Company
or to enforce trade secrets, trademarks and other intellectual property rights
owned by the Company, to defend the Company against claimed infringement of the
rights of others and to determine the scope and validity of the proprietary
rights of others. For a description of certain pending litigation instituted
against the Company, see Item 3 of this Annual Report on Form 10-K. Any such
litigation could be costly and a diversion of management's attention, which
could adversely affect the Company's business, operating results and financial
condition. Adverse determinations in any such litigation could result in the
loss of the Company's proprietary rights, subject the Company to significant
liabilities, require the Company to seek licenses from third parties or prevent
the Company from manufacturing or selling its products, any of which could
adversely affect the Company's business, operating results and financial
condition.
The corporate and institutional market to which the Company is targeting
its products is an emerging market. Many of the current users in this market
rely on analog video tape processes. Digital editing alternatives are relatively
new and currently account for a small portion of this market of current users.
The Company also believes that this market includes a potential market of new
users who currently out-source their video production requirements. The
Company's future growth will depend, in part, on the rate at which existing
users convert to digital editing processes and the rate at which new users adopt
digital video systems as a communications resource. There can be no assurance
that the use of digital video products like Media 100 will expand among existing
users of alternative video production processes or the market for new users, and
any failure of the Company's products to achieve market acceptance in these
markets, as a result of competition, technological change or other factors,
could have a material adverse effect on the Company's business and operating
results.
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The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's future success will depend in part upon its ability to enhance its
existing products and to introduce new products and features in a timely manner
to address customer requirements, respond to competitive offerings, adapt to new
emerging industry standards and take advantage of new enabling technologies that
could render the Company's existing products obsolete. In particular, the
Company intends to develop new products that will operate under Microsoft
Corporation's Windows NT operating system. Any delay or failure of the Company
in developing enhancements or new products, or any delay or failure of such
enhancements or new products to achieve market acceptance, as a result of
competition, blocking proprietary rights of third parties or other factors,
could have a material adverse effect on the Company's business and operating
results.
New product announcements by the Company's competitors and by the Company
itself could have the effect of reducing customer demand for the Company's
existing products. The introduction of new or enhanced products by the Company
also requires the Company to manage the transitions from existing products. New
product introductions require the Company to devote time and resources to the
training of its sales channel in the features and target customers for such new
products, which efforts could result in less selling efforts being made by the
sales channel during such training period. New product announcements or
introductions could contribute to significant quarterly fluctuations in
operating results as orders for new products commence and orders for existing
products decline.
The market for the Company's products is highly competitive and
characterized by pressure to reduce prices, incorporate new features and
accelerate the release of new products. A number of companies currently offer
products that compete directly or indirectly with the Company's products,
including Avid, Truevision, Radius, Scitex, Matrox and FAST. In addition, the
Company expects much larger vendors, such as Matsushita and Sony and other
vendors of analog video tape editing equipment, to develop and introduce digital
editing systems that may compete with the Company's products. Many of these
current and potential competitors have greater financial, technical and
marketing resources than the Company. There can be no assurance that any of
these competitors will not be able to develop products comparable or superior to
the Company's products or to adapt more quickly than the Company to new
technologies or evolving industry standards or customer requirements.
The Company is dependent on single or limited source suppliers for several
key components used in its products. The availability of many of these
components is dependent on the Company's ability to provide suppliers with
accurate forecasts of its future requirements, and certain components used by
the Company have been subject to industry-wide shortages. The Company does not
carry significant inventories of these components and has no guaranteed supply
arrangements with such suppliers. There can be no assurance that the Company's
inventories would be adequate to meet the Company's production needs during any
interruption of supply. The Company's inability to develop alternative supply
sources, if required, or a reduction or stoppage in supply, could delay product
shipments until new sources of supply become available, and any such delay could
adversely affect the Company's business and operating results in any given
period.
The Company currently does not employ a direct sales force, and relies
entirely on its worldwide network of independent VAR's to distribute and sell
its products to end users. The Company's resellers generally offer products of
several different companies, including in some cases products which are
competitive with the Company's products. In addition, many of these VAR's are
small organizations with limited capital resources. There can be no assurance
that the Company's resellers will continue to purchase the Company's products or
provide them with adequate levels of support, or that the Company's efforts to
expand its VAR network will be successful, any significant failure of which
could have a material adverse effect on the Company's business and operating
results.
Sales of Media 100 products outside of North America represented
approximately 38% of the Company's net sales from continuing operations for the
fiscal year ended November 30, 1996. The Company has embarked upon a concerted
effort to increase the size of its international VAR network in order to
increase international sales of its products and services. International sales
and operations may be subject to risks such as the imposition of government
controls, export license requirements, restrictions on the export of critical
technology, less effective enforcement of proprietary rights; currency exchange
fluctuations, generally longer collection periods, political instability, trade
restrictions, changes in tariffs, difficulties in staffing and managing
international operations, potential insolvency of international resellers and
difficulty in collecting accounts receivable. There can be no
9
<PAGE> 10
assurance that these factors will not have an adverse effect on the Company's
future international operations and consequently, on the Company's business and
operating results.
The Company intends to relocate its manufacturing operations to a new
facility located in Marlboro, Massachusetts in April 1997. During the transition
to the new facility, the Company will be required to maintain an uninterrupted
supply of products in order to avoid any disruption in customer shipments. Any
failure to maintain acceptable production levels during the transition to the
new facility, or any failure by the Company to accurately forecast the amount of
finished goods inventory necessary to compensate for interruptions in production
during the transition, could have a material adverse effect on the Company's
business and operating results, particularly in the fiscal quarter of the
transition.
As a result of the Spin-Off, the Company currently obtains information
systems support from DTI. In connection with the Spin-Off and the relocation of
the Company's operations to the new facility, the Company will be implementing
new information systems over the course of the current fiscal year.
Notwithstanding the implementation of those new systems, the Company currently
anticipates that it will continue to need certain information systems support
from DTI beyond the end of the current fiscal year. Any delay in implementing
the Company's new information systems, or any delay or failure of DTI to provide
adequate information systems support prior to the time that the Company's new
systems become fully implemented, if significant, could have an adverse effect
on the Company's business and operating results, particularly during any period
that the transition from DTI's systems to the Company's new systems occurs.
Competition for employees with the skills required by the Company is
intense in the geographic areas in which the Company's operations are located.
The Company believes that its future success will depend on its continued
ability to attract and retain qualified employees, especially in research and
development.
OTHER
Media 100 is a registered trademark, and Vincent, Gaudi and Platinum are
trademarks, of Media 100 Inc. All other brand names mentioned in this report are
registered trademarks or trademarks of their respective holders, and are hereby
acknowledged.
ITEM 2. PROPERTIES
The Company's principal executive, engineering, manufacturing and sales
operations occupy approximately 31,000 square feet in a facility (the "Locke
Drive Facility") which the Company currently shares with DTI in Marlboro,
Massachusetts. The Locke Drive Facility is leased by DTI from a related party
trust, Nason Hill Trust, a nominee trust of which Alfred A. Molinari, Jr., a
director of the Company and chairman and chief executive officer of DTI, and his
wife are the sole trustees and beneficiaries. Total rental expense charged to
continuing operations with respect to the Locke Drive Facility was $546,000,
$459,000 and $360,000 for each of the fiscal years 1996, 1995 and 1994,
respectively.
Prior to December 2, 1996, the effective date of the Spin-Off, the Locke
Drive Facility was leased directly to the Company. In connection with the
Spin-Off, the Company assigned its leasehold interest in the Locke Drive
Facility to DTI, which in turn granted a license to the Company to use a portion
of the facility so as to enable the Company to conduct its operations at that
location. Such use and occupancy agreement remains in effect until April 30,
1997, and the Company pays DTI a monthly license fee for the use of the Locke
Drive Facility equal to $105,377. This fee is intended to compensate DTI for the
Company's pro rata portion of the rental charges and operating expenses
associated with the Locke Drive Facility and the use by the Company of certain
manufacturing equipment that was transferred to DTI in connection with the
Spin-Off.
In January 1997, the Company entered into an operating lease agreement for
approximately 56,500 square feet in another facility located at 290 Donald Lynch
Boulevard, Marlboro, Massachusetts. The term commencement date of the new lease
is April 1, 1997, or such earlier date as the Company commences operations in
the premises, and the lease terminates on March 31, 2002. The Company expects to
move all its operations currently located at the Locke Drive Facility to the new
facility in April 1997.
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<PAGE> 11
The Company also occupies sales and customer support facilities in Paris,
France and Brescia, Italy, consisting of 1,000 square feet and 1,200 square
feet, respectively. In addition, since December 2, 1996 the Company's UK
operations have continued to occupy a portion of a facility leased by Data
Translation Ltd., a subsidiary of DTI, for which the Company pays a monthly
license fee equal to approximately $3,500. The Company's German operations have
an agreement whereby they continue to occupy a portion of a facility leased by
Data Translation GmbH, a subsidiary of DTI, and obtain certain administrative
services, from December 2, 1996 through March 31, 1997, for which the Company
has made a lump-sum payment equal to approximately $60,000. The Company intends
to relocate its U.K. and German operations to new facilities during 1997.
ITEM 3. LEGAL PROCEEDINGS
On June 7, 1995, a lawsuit was filed against the Company by Avid in the
United States District Court for the District of Massachusetts. The complaint
generally alleges patent infringement by the Company arising from the
manufacture, sale, and use of the Company's Media 100 products. The complaint
includes requests for injunctive relief, treble damages, interest, costs and
fees. In July 1995, the Company filed an Answer and Counterclaim denying any
infringement and asserting that the Avid patent in question is invalid. The
Company intends to vigorously defend the lawsuit. In addition, Avid is seeking
reissue of the patent, including claims that it asserts are broader than in the
existing patent, and these reissue proceedings remain pending before the U.S.
Patent and Trademark Office. On July 31, 1996, the court ordered a stay of all
proceedings in the lawsuit pending conclusion of the reissue proceedings
referred to above. There can be no assurance that the Company will prevail in
the lawsuit asserted by Avid or that the expense or other effects of the
lawsuit, whether or not the Company prevails, will not have a material adverse
effect on the Company's business, operating results and financial condition.
On February 12, 1997, a lawsuit was filed in Germany against the Company's
former German subsidiary, Data Translation GmbH ("DT GmbH"), by Lex Computer and
Management Corporation ("Lex"). The complaint generally alleges patent
infringement by DT GmbH arising from the manufacture, sale and use of the
Company's Media 100 products. The complaint includes requests for injunctive
relief, damages, costs and fees. DT GmbH is currently a subsidiary of DTI. Under
the terms of the Spin-Off, the Company has agreed to indemnify DTI and its
affiliates (including DT GmbH) against liabilities arising out of the Company's
Media 100 business. The Company currently intends to vigorously defend the
lawsuit. There can be no assurance that the Company will prevail in the lawsuit
asserted by Lex or that the expense or other effects of the lawsuit, whether or
not the Company prevails, will not have a material adverse effect on the
Company's international sales and, consequently, on the Company's business and
operating results.
From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's business, operating results
or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during the fourth
quarter of fiscal year 1996.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference
to the "Quarterly Stock Prices" table appearing on page 5 of the Company's 1996
Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference
to the "Selected Financial Data" appearing on page 5 of the Company's 1996
Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference
to the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" appearing on pages 6-8 of the Company's 1996 Annual Report To
Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item and not filed with this report is
incorporated by reference to pages 8-20 of the Company's 1996 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The Company will furnish to the Securities and Exchange Commission not
later than 120 days after the close of its fiscal year ended November 30, 1996 a
definitive Proxy Statement (the "Proxy Statement") for the Annual Meeting of
Stockholders to be held on April 16, 1997. The information required by this Item
is incorporated herein by reference to "Election of Directors," "Executive
Officers" and "Section 16(b) Beneficial Ownership Reporting Compliance" in the
Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to "Election of Directors" and "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference
to "Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference
to "Certain Relationships and Related Transactions" in the Proxy Statement.
12
<PAGE> 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) (1) Consolidated Financial Statements.
Report of Independent Public Accountants*
Consolidated Balance Sheets as of November 30, 1996 and 1995*
Consolidated Statements of Operations for the Fiscal Years Ended
November 30, 1996, 1995 and 1994*
Consolidated Statement of Stockholders' Equity for the Fiscal Years
Ended November 30, 1996, 1995 and 1994*
Consolidated Statements of Cash Flows for the Fiscal Years Ended
November 30, 1996, 1995 and 1994*
Notes to Consolidated Financial Statements*
(a) (2) Financial Statement Schedules.
Not applicable.
(a) (3) List of Exhibits.
Exhibits required as part of this Annual Report on Form 10-K are
listed in the exhibit index on page 16.
(b) Reports on Form 8-K.
The following report on Form 8-K was filed during the fourth
quarter of fiscal year 1996:
Form 8-K dated September 12, 1996 and filed on September 25,
1996, consisting of the following: Item 5. Other Events (Press Release) and
Item 7. Exhibits (Exhibit 99 - Press Release).
* Referenced information is contained in the 1996 Annual Report to Stockholders,
filed as Exhibit 13 hereto.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Media 100 Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on February 28, 1997.
Media 100 Inc.
By: /S/ PETER J. RICE
----------------------------------
Peter J. Rice
Vice President and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and
directors of Media 100 Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints John A. Molinari and Peter J. Rice, and each of them,
with full power to act without the other, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities (until revoked in writing)
to sign the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996, and any and all amendments thereto, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully for all intents
and purposes as he might or could do in person, thereby ratifying and confirming
all that said attorneys-in-fact and agents or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ JOHN A. MOLINARI President and Chief Executive February 28, 1997
- --------------------------- Officer and Director
John A. Molinari (Principal Executive Officer)
/S/ PETER J. RICE Vice President and Chief February 28, 1997
- --------------------------- Financial Officer
Peter J. Rice (Principal Financial Officer)
/S/ STEVEN D. SHEA Corporate Controller and Chief February 28, 1997
- --------------------------- Accounting Officer
Steven D. Shea (Principal Accounting Officer)
/S/ ALFRED A. MOLINARI, JR. Director February 28, 1997
- ---------------------------
Alfred A. Molinari, Jr.
/S/ BRUCE SACHS Director February 28, 1997
- ---------------------------
Bruce Sachs
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<PAGE> 15
/S/ PAUL J. SEVERINO Director February 28, 1997
- ---------------------------
Paul J. Severino
/S/ MAURICE L. CASTONGUAY Director February 28, 1997
- ---------------------------
Maurice L. Castonguay
/S/ R. BRADFORD MALT Director February 28, 1997
- ---------------------------
R. Bradford Malt
15
<PAGE> 16
EXHIBIT INDEX
Exhibit Number Description
3.1 Restated Certificate of Incorporation of Media 100 Inc.;
filed herewith.
3.2 By-laws of Media 100 Inc.; filed herewith.
10.1* Key Employee Incentive Plan (1982), as amended through
November 15, 1996; filed herewith.
10.2* 1986 Employee Stock Purchase Plan, as amended through
November 15, 1996; filed herewith.
10.3* Key Employee Incentive Plan (1992), as amended through
December 16, 1996; filed herewith.
10.4.1* Media 100 Inc. Double Sheltered Retirement Plan; filed
herewith.
10.4.2* Amendment to Media 100 Inc. Double Sheltered Retirement
Plan, effective December 2, 1996; filed herewith.
10.5.1 Lease dated January 31, 1997 with Connecticut General Life
Insurance Company; filed herewith.
10.5.2 License Agreement dated as of January 31, 1997 with
Connecticut General Life Insurance Company; filed herewith.
10.6 Value Added Distribution Agreement with Software Product
Appendix dated April 18, 1996 with Adobe Systems, Inc.
(filed as Exhibit 10.13 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended May 31, 1996).
10.7.1+ OEM Agreement dated as of September 4, 1996 with Pinnacle
Systems, Inc. (filed as Exhibit 10.19.1 to Amendment No. 1
to the Quarterly Report on Form 10-Q/A for the fiscal
quarter ended September 30, 1996 of Pinnacle Systems, Inc.
(File No. 0-24784)).
10.7.2+ Amendment to OEM Agreement dated as of September 13, 1996
with Pinnacle Systems, Inc. (filed as Exhibit 10.19.2 to the
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996 of Pinnacle Systems, Inc. (File No.
0-24784)).
10.8.1 Distribution Agreement dated as of November 19, 1996 with
Data Translation II, Inc. ("DTI"); filed herewith.
10.8.2 Intellectual Property Agreement dated as of December 2,
1996 with DTI; filed herewith.
10.8.3 Corporate Services Agreement dated as of December 2, 1996
with DTI; filed herewith.
10.8.4 Use and Occupancy Agreement dated as of December 2, 1996
with DTI; filed herewith.
13 Annual Report to Stockholders for the fiscal year ended
November 30, 1996 (which is not deemed to be "filed" except
to the extent that portions thereof are expressly
incorporated by reference in this Annual Report on Form
10-K); filed herewith.
21 Subsidiaries of Media 100 Inc.
23 Consent of Arthur Andersen LLP.
24 Power of Attorney (included in the signature page of this
Annual Report on Form 10-K).
27 Financial Data Schedule.
* Identifies a management contract or compensatory plan
or arrangement in which an executive officer or
director of the Company participates.
+ Confidential treatment has been requested with
respect to certain portions of this exhibit. Omitted
portions have been filed separately with the
Securities and Exchange Commission.
16
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
MEDIA 100 INC.
Media 100 Inc., a corporation organized and existing under the laws of
the State of Delaware, does hereby certify that, pursuant to Section 245 of the
General Corporation Law of the State of Delaware, its Certificate of
Incorporation, originally filed under the name of Data Translation, Inc. with
the Secretary of State of the State of Delaware on September 10, 1996, is
restated to read in its entirety as follows:
1. The name of the corporation is Media 100 Inc.
2. The registered office of this corporation in the State of
Delaware is located at 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is Corporation
Service Company.
3. The purpose of this 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.
4. The corporation shall have two classes of stock, Common Stock, $.01
par value per share, and Preferred Stock, $.01 par value per share. The total
number of shares that the corporation shall have authority to issue is
25,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock.
Subject to the limitations prescribed by law and the provisions of this
certificate of incorporation, the board of directors of the corporation is
authorized to issue the Preferred Stock from time to time in one or more series,
each of such series to have such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and such qualifications, limitations or restrictions
thereof, as shall be determined by the board of directors in a resolution or
resolutions providing for the issue of such Preferred Stock. Subject to the
powers, preferences and rights of any Preferred Stock, including any series
thereof, having any preference or priority over, or rights superior to, the
Common Stock and except as otherwise provided by law, the holders of the Common
Stock shall have and possess all powers and voting and other rights pertaining
to the stock of this corporation and each share of Common Stock shall be
entitled to one vote.
5. Except as otherwise provided in the provisions establishing a class
of stock, the number of authorized shares of any class of stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the voting power of the
corporation entitled to vote irrespective of the provisions of Section 242(b)(2)
of the General Corporation Law of the State of Delaware.
<PAGE> 2
6. In furtherance and not in limitation of the power conferred upon the
board of directors by law, the board of directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of this corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the board of directors.
7. A director of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation from liability is not
permitted under the General Corporation Law of the State of Delaware as in
effect at the time such liability is determined. No amendment or repeal of this
paragraph 7 shall apply to or have any effect on the liability or alleged
liability of any director of the corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
8. This corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of this
corporation or while a director or officer is or was serving at the request of
this corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorneys' fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred (and not otherwise recovered) in connection
with the investigation, preparation to defend or defense of such action, suit,
proceeding or claim; PROVIDED, HOWEVER, that the foregoing shall not require
this corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on
behalf of such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any person seeking indemnification under this
paragraph 8 shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established. Any repeal or
modification of the foregoing provisions of this paragraph 8 shall not adversely
affect any right or protection of a director or officer of this corporation with
respect to any acts or omissions of such director or officer occurring prior to
such repeal or modification.
The books of this corporation may (subject to any statutory requirements) be
kept outside the State of Delaware as may be designated by the board of
directors or in the by-laws of this corporation.
9. (A) Except as set forth in Section (D) of this paragraph 9, the
affirmative vote of the holders of not less than 75% of the outstanding shares
of capital stock of the corporation entitled to vote generally in the election
of directors shall be required for the
2
<PAGE> 3
approval or authorization of any Business Combination of the corporation with
any Related Person.
(B) For purposes of this paragraph 9:
(1) The term "Business Combination" shall mean (i) any merger
or consolidation of the corporation with or into a Related Person, (ii)
any sale, lease, exchange, transfer or other disposition, including
without limitation the creation of a mortgage or any other security
device of all or any substantial part of the assets of the corporation
(including without limitation any voting securities of a subsidiary) or
of a subsidiary, to a Related Person, (iii) any merger or consolidation
of a Related Person with or into the corporation or a subsidiary of the
corporation, (iv) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of a Related
Person to the corporation or a subsidiary of the corporation, (v) the
issuance of any securities of the corporation to a Related Person, (vi)
the acquisition by the corporation or a subsidiary of the corporation
of any securities of a Related Person, (vii) any reclassification of
Common Stock of the corporation, or any recapitalization involving
Common Stock of the corporation, consummated at a time that a Related
Person exists and within two years after such Related Person becomes a
Related Person, and (viii) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of
Business Combination.
(2) The term "Related Person" shall include any individual,
corporation, partnership or other person or entity (collectively, a
"Person") that together with its affiliates and associates beneficially
owns in the aggregate 5% or more of the outstanding shares of the
capital stock of any class of the corporation, and any affiliate or
associate of any such Person; PROVIDED, HOWEVER, that the term "Related
Person" shall not include a Person that together with its affiliates
and associates beneficially owned on December 31, 1995 in the aggregate
more than 15% of the outstanding shares of any class of stock of the
corporation's predecessor, Data Translation, Inc., a Massachusetts
corporation, or any affiliate or associate of such Person.
(3) The term "substantial part" shall mean more than 10% of
the total assets of the corporation in question, as of the end of its
most recent fiscal year ending prior to the time the determination is
being made.
(4) With respect to any proposed Business Combination, the
term "continuing director" shall mean (i) directors who were members of
the board of directors at December 31, 1995 of the corporation's
predecessor corporation, Data Translation, Inc., a Massachusetts
corporation and (ii) any other director who was a member of the Board
of Directors of the corporation immediately prior to the time that any
Related Person involved in the proposed Business Combination became a
Related Person (or, if the transaction involves more than one Related
3
<PAGE> 4
Person, immediately prior to the time the first of such Persons to
become a Related Person became a Related Person).
(5) Any Person shall be deemed to be the beneficial owner of
any shares of stock of the corporation
(i) that it owns directly, whether or not of record; or
(ii) that it has the right to acquire pursuant to any
agreement or understanding or upon exercise of conversion
rights, warrants or options or otherwise; or
(iii) that are beneficially owned, directly or
indirectly (including shares deemed to be owned through
application of clause (ii) above), by an affiliate or
associate: or
(iv) that are beneficially owned, directly or
indirectly, by any other Person or (including any shares
which such other Person has the right to acquire pursuant to
any agreement or understanding or upon exercise of
conversion rights, warrants or options or otherwise) with
which it or its affiliates or associates has any agreement
or arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of stock of the
corporation.
(6) The outstanding shares of stock of the corporation shall
include shares deemed owned through the application of clauses (5)(ii),
(iii) and (iv) above, but shall not include any other shares that may
be issuable pursuant to any agreement or upon exercise of conversion
rights, warrants, options or otherwise.
(7) The term "affiliate" shall mean any individual,
corporation, partnership or other person or entity that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, such Person. The term
"control" (including the terms "controlling," "controlled by" and
"under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
(8) The term "associate" shall mean (i) any corporation or
organization (other than this corporation or a majority-owned
subsidiary of this corporation) of which such Person is an officer,
director, trustee, partner or employee or is, directly or indirectly,
the beneficial owner of 10% or more of any class of equity securities,
(ii) any trust or other estate in which such Person serves as a trustee
or in a similar fiduciary capacity, and (iii) any relative or spouse of
such Person or any relative of such spouse, who has the same home as
such Person or who is a director or officer of this corporation or of
any of its subsidiaries.
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<PAGE> 5
(C) The Board of Directors of the corporation shall have the power
to determine for the purposes of this paragraph 9, on the basis of information
known to the Board of Directors, whether (1) a Person is a Related Person, and
(2) a Person is an affiliate or associate of another. Any such determination
shall be conclusive and binding for all purposes of this paragraph 9.
(D) The provisions of this paragraph 9 shall not apply to any
Business Combination with any Person if (1) the Board of Directors of the
corporation has approved a memorandum of understanding with such other Person
with respect to such transaction prior to the time such Person became a Related
Person; (2) such transaction is otherwise approved by the Board of Directors of
the corporation, provided that a majority of the members of the Board of
Directors voting for the approval of such transaction were continuing directors;
or (3) the Business Combination involves solely the corporation and a subsidiary
greater than 50% of whose stock is owned by the corporation and none of whose
stock is beneficially owned by a Related Person (other than beneficial ownership
arising solely because of control of the corporation), provided that if the
corporation is not the surviving company, each stockholder of the corporation
receives the same type of consideration in such transaction in proportion to his
stock holdings, the provisions of paragraphs 9 through 10 of this Certificate of
Incorporation are continued in effect or adopted by such surviving company as
part of its articles of association and such articles have no provisions
inconsistent with such provisions, and the provisions of the corporation's
by-laws are continued in effect or adopted by said surviving company.
(E) This paragraph 9 may not be amended or rescinded except by the
affirmative vote of the holders of not less than 75% of the outstanding shares
of capital stock of the corporation entitled to vote generally in the election
of directors, at any regular or special meeting of the stockholders, but only if
notice of the proposed alteration or amendment was contained in the notice of
such meeting.
10. The Board of Directors of the corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the corporation or (b) to effect a Business Combination (as defined
in paragraph 9), shall, in connection with the exercise of its judgment in
determining what is in the best interest of the corporation as a whole, be
authorized to give due consideration to such factors as the Board of Directors
determines to be relevant, including, without limitation:
(i) the interest of the corporation's stockholders;
(ii) whether the proposed transaction might violate federal
or state laws;
(iii) not only the consideration being offered in the
proposed transaction, in relation to the then current market
price for the outstanding capital stock of the corporation, but
also to the market price for the capital stock of the corporation
over a period of years, the estimated price that might be
achieved in a negotiated sale of the corporation as a whole or in
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part or through orderly liquidation, the premiums over market
price for the securities of other corporations in similar
transactions, current political, economic and other factors
bearing on securities prices and the corporation's financial
condition and future prospects; and
(iv) the social, legal and economic effects upon employees,
suppliers, customers and others having similar relationships with
the corporation, and the communities in which the corporation
conducts its business.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and to engage in such legal proceedings as the Board
of Directors may determine.
11. If at any time this corporation shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of 1934,
for so long as such class is so registered, any action by the stockholders of
such class must be taken at an annual or special meeting of stockholders and may
not be taken by written consent.
12. The provisions of Section 203 of the Delaware General Corporation
law shall not apply to the corporation.
-----------------------------------
This Restated Certificate of Incorporation was duly adopted by the
directors of this Corporation, acting by unanimous written consent pursuant to
Section 141(f) of the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware. This Restated Certificate of Incorporation only restates
and integrates and does not further amend the provisions of this corporation's
certificate of incorporation as heretofore amended or supplemented, and there is
no discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
IN WITNESS WHEREOF, Media 100 Inc. has caused this Restated Certificate
of Incorporation to be signed by its President on this 24th day of February,
1997.
By: /s/ John A. Molinari
---------------------------------
John A. Molinari
President
ATTEST:
By: /s/ Craig Barrows
--------------------------------
Craig Barrows
Secretary
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EXHIBIT 3.2
BY-LAWS
OF
MEDIA 100 INC.
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. ANNUAL MEETING. The annual meeting of stockholders shall be held at
10:00 a.m. on the second Wednesday in April in each year, unless that day be a
legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may be
required by law or these by-laws or as may properly come before the meeting. At
an annual meeting of the stockholders, only such business shall be conducted as
shall have been properly brought before the meeting as (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the board of directors, (b) otherwise properly brought before the meeting by or
at the direction of the board of directors, or (c) otherwise properly brought
before the meeting by a stockholder by the stockholder's giving timely notice
thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice must be received at the principal executive offices of the
corporation: (1) not less than 60 days in advance of such meeting if such
meeting is to be held on a day which is within 30 days preceding the anniversary
of the previous year's annual meeting or 90 days in advance of such meeting if
such meeting is to be held on or after the anniversary of the previous year's
annual meeting; and (2) with respect to any other annual meeting of
stockholders, on or before the close of business on the 15th day following the
earliest date of public disclosure of the date of such meeting. For purposes of
this section, the date of public disclosure of a meeting shall include, but not
be limited to, the date on which disclosure of the date of the meeting is made
in a press release reported by the Dow Jones News Services, Associated Press or
a comparable national news service, or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) (or the rules and regulations thereunder) of the Securities Exchange
Act of 1934, as amended. A stockholder's notice to the secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(a) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting
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such business at the annual meeting, (b) the name, age and business and
residential address, as they appear on the corporation's records, of the
stockholder proposing such business, (c) the class and number of shares of the
corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in the by-laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth herein. The chairman
of the annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions hereof and if the chairman should so determine,
the chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
2.2. SPECIAL MEETINGS. A special meeting of the stockholders may be called
at any time by the president or the board of directors. A special meeting of the
stockholders shall be called by the secretary, or, in the case of the death,
absence, incapacity or refusal of the secretary, by an assistant secretary or
some other officer, upon application of a majority of the directors. Any such
application shall state the purpose or purposes of the proposed meeting. Any
such call shall state the place, date, hour, and purposes of the meeting.
2.3. PLACE OF MEETING. All meetings of the stockholders for the election of
directors or for any other purpose shall be held at such place within or without
the State of Delaware as may be determined from time to time by the president or
the board of directors. Any adjourned session of any meeting of the stockholders
shall be held at the place designated in the vote of adjournment.
2.4. NOTICE OF MEETINGS. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his address as it appears in the
records of the corporation. Such notice shall be given by the secretary, or by
an officer or person designated by the board of directors, or in the case of a
special meeting by the officer calling the meeting. As to any adjourned session
of any meeting of stockholders, notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more than thirty
days or if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be given in
the manner heretofore described. No notice of any meeting of stockholders or any
adjourned session thereof need be given to a stockholder if a written waiver of
notice, executed before or after the meeting or such adjourned session by such
stockholder, is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the
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beginning of the meeting to 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 meeting of the stockholders or any adjourned session
thereof need be specified in any written waiver of notice.
2.5. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders a quorum as
to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6. ACTION BY VOTE. When a quorum is present at any meeting, a plurality
of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7. PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that, if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
2.8. INSPECTORS. The directors or the person presiding at the meeting may,
and shall if required by applicable law, appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. Each inspector,
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before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
2.9. LIST OF STOCKHOLDERS. The secretary shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. NUMBER. The corporation shall have one or more directors, the number
of directors to be determined from time to time by vote of a majority of the
directors then in office. Except in connection with the election of directors at
the annual meeting of stockholders, the number of directors may be decreased
only to eliminate vacancies by reason of death, resignation or removal of one or
more directors. No director need be a stockholder.
3.2. TENURE. Each director shall hold office until the next annual meeting
and until his successor is elected and qualified, or until he sooner dies,
resigns, is removed or becomes disqualified.
3.3. POWERS. The business and affairs of the corporation shall be
managed by or under the direction of the board of directors who shall have and
may exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4. VACANCIES. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
holders of the particular class or series of stock entitled to elect such
director at a meeting called for the purpose, or by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director, in
each case elected by the particular class or series of stock entitled to elect
such directors. When one or more directors shall resign from the board,
effective at a future date, a majority of the directors then in office,
including those who
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have resigned, who were elected by the particular class or series of stock
entitled to elect such resigning director or directors shall have power to fill
such vacancy or vacancies, the vote or action by writing thereon to take effect
when such resignation or resignations shall become effective. The directors
shall have and may exercise all their powers notwithstanding the existence of
one or more vacancies in their number, subject to any requirements of law or of
the certificate of incorporation or of these by-laws as to the number of
directors required for a quorum or for any vote or other actions.
3.5. COMMITTEES. The board of directors may, by vote of a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, including the power to authorize
the seal of the corporation to be affixed to all papers which require it and the
power and authority to declare dividends or to authorize the issuance of stock;
excepting, however, such powers which by law, by the certificate of
incorporation or by these by-laws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and his alternate,
if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Except as the board of
directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of business by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
3.6. REGULAR MEETINGS. Regular meetings of the board of directors may
be held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7. SPECIAL MEETINGS. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the president, or by
one-third or more in number of the directors, reasonable notice thereof being
given to each director by the secretary the president or any one of the
directors calling the meeting.
3.8. NOTICE. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before
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the meeting addressed to him at his usual or last known business or residence
address or to give notice to him in person or by telephone at least twenty-four
hours before the meeting. Notice of a meeting need not be given to any director
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any director who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3.9. QUORUM. Except as may be otherwise provided by law, by the certificate
of incorporation or by these by-laws, at any meeting of the directors a majority
of the directors then in office shall constitute a quorum; a quorum shall not in
any case be less than one-third of the total number of directors constituting
the whole board. Any meeting may be adjourned from time to time by a majority of
the votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice.
3.10. ACTION BY VOTE. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.11. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.12. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.13. COMPENSATION. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.14. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership,
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association, or other organization in which one or more of the corporation's
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the board
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1. ENUMERATION; QUALIFICATION. The officers of the corporation shall
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2. POWERS. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3. ELECTION. The officers may be elected by the board of directors at
their first meeting following the annual meeting of the stockholders or at any
other time. At
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any time or from time to time the directors may delegate to any officer their
power to elect or appoint any other officer or any agents.
4.4. TENURE. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND VICE PRESIDENT.
The chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set forth
in these by-laws or as shall be designated from time to time by the board of
directors or by the president.
4.6. TREASURER AND ASSISTANT TREASURERS. Unless the board of directors
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7. CONTROLLER AND ASSISTANT CONTROLLERS. If a controller is elected,
he shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record
all proceedings of the stockholders, of the board of directors and of committees
of the board
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of directors in a book or series of books to be kept therefor and shall file
therein all actions by written consent of stockholders or directors. In the
absence of the secretary from any meeting, an assistant secretary, or, if there
be none or he is absent, a temporary secretary chosen at the meeting, shall
record the proceedings thereof. Unless a transfer agent has been appointed the
secretary shall keep or cause to be kept the stock and transfer records of the
corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
resignation in writing to the president, or the secretary or to a meeting of the
board of directors. Such resignation shall be effective upon receipt unless
specified to be effective at some other time, and without in either case the
necessity of its being accepted unless the resignation shall so state. A
director (including persons elected by stockholders or directors to fill
vacancies in the board) may be removed from office with or without cause by the
vote of the holders of a majority of the issued and outstanding shares of the
particular class or series entitled to vote in the election of such director.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent.
Section 6. VACANCIES
6.1. If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
president or a vice president and by the treasurer or an assistant treasurer or
by the secretary or an assistant secretary. Any of or all the
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signatures on the certificate may be a facsimile. In case an officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on such certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the time of its issue.
7.2. LOSS OF CERTIFICATES. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2. RECORD DATE. 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 of directors 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 of directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no such record date is fixed by the board of directors, the record date for
determining the 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 of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
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In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
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 of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
such record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
the General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. If no record date has been fixed by the board of directors and prior
action by the board of directors is required by the General Corporation Law of
the State of Delaware, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
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 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 of directors may
fix a record date, which record date 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 days prior to such payment, exercise or other action. If no such
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 of
directors adopts the resolution relating thereto.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the
corporation shall consist of a flat-faced circular die with the word "Delaware"
and the name of the corporation cut or engraved thereon, together with such
other words, dates or images as may be approved from time to time by the
directors.
Section 10. EXECUTION OF PAPERS
10.1. Except as the board of directors may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the president, a vice
president or the treasurer.
11
<PAGE> 12
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall end on November 30
of each year.
Section 12. AMENDMENTS
12.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the voting
power of the stock outstanding and entitled to vote. Any by-law, whether
adopted, amended or repealed by the stockholders or directors, may be amended or
reinstated by the stockholders or the directors.
12
<PAGE> 1
EXHIBIT 10.1
MEDIA 100 INC.
Key Employee Incentive Plan (1982),
As Amended Through November 15, 1996
------------------------------------
1. PLAN; PURPOSE; GENERAL. The purpose of this Key Employee Incentive
Plan (1982) (the "Plan") is to advance the interests of Media 100 Inc. (formerly
Data Translation, Inc.) (the "Company") by enhancing the ability of the Company
and its subsidiaries to attract and retain selected Employees, by creating for
such Employees incentives and rewards for their contributions to the success of
the Company, and by encouraging such Employees to become owners of shares of the
Company's Common Stock, par value $0.01 per share (the "common stock" or
"stock"). The term "Employees" as used herein shall include part-time employees
and directors whether or not they are employees.
Options granted pursuant to the Plan may be incentive stock options as
defined in the Internal Revenue Code of 1986, as amended (the "Code") (such
options being referred to herein as "incentive options") or non-incentive
options, or both. The proceeds received from the sale of stock pursuant to the
Plan shall be used for general corporate purposes.
2. EFFECTIVE DATE OF PLAN. This Plan will become effective upon
approval by the holders of at least a majority of the voting power of all shares
outstanding and entitled to vote thereon at the special meeting in lieu of the
Annual Meeting of Stockholders of the Company to be held on March 2, 1982 or at
any adjournment thereof.
3. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Board of Directors (the "Board") of the Company. The Board will have authority,
not inconsistent with the express provisions of the Plan, to take all action
necessary or appropriate thereunder, to interpret its provisions, and to decide
all questions and resolve all disputes which may arise in connection therewith.
Such determinations of the Board shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with respect to the
Plan to an Employee Benefit Plan Committee or any other committee (the
"Committee"), in which event all references to the Board hereunder, including
without limitation the references in Section 11, shall be deemed to refer to the
Committee. The Committee shall consist of not fewer than two members, and each
member of the Committee shall be, at the time of his appointment and at any time
he exercises discretion in administering the Plan, a "disinterested person" as
that term is defined in Rule 16b-3 adopted pursuant to the Securities Exchange
Act of 1934. A majority of the members of any such Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members.
<PAGE> 2
4. ELIGIBILITY. The Participants in the Plan will be such Employees,
whether or not they are also officers or directors, of the Company or of any of
its present or future subsidiaries (as defined in Section 10) as may be selected
from time to time by the Board in its discretion. However, members of the
Committee and directors who are not employees of the Company or one of its
subsidiaries will not be eligible except to the extent provided in Section 13
hereof.
No incentive option shall be granted to a Participant who is not an
"employee" as defined in the provisions of the Code or regulations thereunder
applicable to incentive options. No incentive option shall be granted to a
Participant who at the time of grant owns, directly or indirectly through
application or the attribution rules of the Code, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or of
its subsidiaries unless (i) the option price at the time it is granted is at
least 110 percent of the fair market value of the stock subject to the option,
and (ii) the period of the option does not exceed five years from the date of
grant.
5. GRANT OF OPTIONS. Subject to the express provisions of the Plan, the
Board shall have the sole authority and discretion (a) to determine which of the
employees of the Company and its subsidiaries will be granted options; (b) to
determine whether the options granted to any employees shall be incentive
options or non-incentive options or both; (c) to determine the time or times
when options will be granted and the number of shares of common stock to be
subject to each option; (d) to determine the option price of the shares subject
to each option in accordance with paragraph 6(a) below, and the method of
payment of such price; (3) to determine the time or times when each option
becomes exercisable and the duration of the exercise period; (f) to impose
additional conditions or restrictions on any option, such conditions or
restrictions, if any, to be set forth on the award form or other instrument
evidencing the option; (g) to prescribe the form or forms of the instruments
evidencing any options granted under the Plan and of any other instruments
required under the Plan and to make changes in such forms from time to time; and
(h) to adopt, amend and rescind rules and regulations for the administration of
the Plan and the options and for its own acts and proceedings.
No option shall be granted after April 30, 1992 but options previously
granted may extend beyond that date.
6. Terms and Conditions of Options.
-------------------------------
(a) EXERCISE PRICE. The purchase price per share for shares
issuable upon exercise of options shall be determined by the
Board and shall not be less than (i) in the case of incentive
options, 100% of the fair market value of stock on the date of
grant, and (ii) in the case of other options, not less than
90% of the fair market value of the stock on the date of
grant; nor shall the option price be less, in the case of an
original issue of authorized
2
<PAGE> 3
stock, than par value per share. For this purpose, "fair
market value" will be determined as set forth in Section 10.
(b) PERIOD OF OPTIONS. Unless earlier terminated, options shall
terminate and no longer be exercisable upon the completion of
six years from the date of grant (the "Final Exercise Date")
unless the Board at the time of granting has specified an
earlier or later Final Exercise Date in the case of a
particular option or options. The Board at any time may, in
its discretion, extend the Final Exercise Date of any or all
options for a period not exceeding four years from the date of
extension. Notwithstanding the foregoing, no incentive option
shall be exercisable after ten years from the date of its
grant.
(c) Exercise of Options.
-------------------
(1) Unless the Board at the time of grant or at any other
time otherwise specifies in the case of a particular
option or options, each option shall first become
exercisable with respect to one-fifth of the shares
covered by it upon the completion of one year from
the date of the grant of the option (the "Initial
Exercise Date"), and with respect to an additional
one-fifth each succeeding year until the option
becomes exercisable with respect to all of the shares
covered by it. Notwithstanding the foregoing, in no
event shall any option be exercisable, in whole or in
part, less than one year from its date of grant. No
incentive option granted before January 1, 1987 may
be exercisable while there is outstanding (within the
meaning of Section 422A(b)(7) of the Internal Revenue
Code as in effect prior to the enactment into law of
the Tax Reform Act of 1986) any incentive stock
option previously granted to the Participant to
purchase stock in the Company or in a corporation
which (at the time of the granting of such option) is
a parent or a subsidiary of the Company, or is a
predecessor corporation of any such corporation.
(2) In the case of options intended to be incentive
options, the award forms or other instruments
evidencing such options shall contain such provisions
relating to exercise and other matters as are
required of incentive options under the applicable
provisions of the Internal Revenue Code and Treasury
Regulations, as from time to time in effect.
(3) A person electing to exercise part or all of his
options shall give written notice to the Company, as
specified by the Board, of his election and of the
number of shares he has elected to purchase, such
notice to be accompanied by the instrument evidencing
such
3
<PAGE> 4
option and any other documents required by the
Board, and shall at the time of such exercise tender
the purchase price of the shares he has elected to
purchase. If the notice of election to exercise is
given by the executor or administrator of a deceased
Participant, or by the person or persons to whom the
option has been transferred by the Participant's will
or the applicable laws of descent and distribution,
the Company will be under no obligation to deliver
shares pursuant to such exercise unless and until the
Company is satisfied that the person or persons
giving such notice is or are entitled to exercise the
option.
(d) PAYMENT FOR DELIVERY OF SHARES. Shares which are subject to
option shall be issued only upon receipt by the company of full
payment of the purchase price for the shares as to which the
option is exercised. The purchase price shall be payable by the
Participant to the Company either (i) in cash or by check, bank
draft or money order payable to the order of the Company; or (ii)
through the delivery of shares of the common stock (duly owned by
the Participant and for which the Participant has good title free
and clear of any liens and encumbrances) having a fair market
value equal to the purchase price; or (iii) by a combination of
cash and common stock as provided in (i) and (ii) above.
The Company shall not be obligated to deliver any shares unless and until,
in the opinion of the Company's counsel, all applicable federal and state laws
and regulations have been complied with, nor, if the outstanding common stock is
at the time listed on any securities exchange, unless and until the shares to be
delivered have been listed (or authorized to be added to the list upon official
notice of issuance) upon such exchange, nor unless or until all other legal
matters in connection with the issuance and delivery of shares have been
approved by the Company's counsel. Without limiting the generality of the
foregoing, the Company may require from the person exercising an option such
investment representation or such agreement, if any, as counsel for the Company
may consider necessary in order to comply with the Securities Act of 1933 and
may require that such person agree that any sale of the shares will be made only
on a national securities exchange or in such other manner as is permitted by the
Board and that he will notify the Company before he makes any disposition of the
shares whether by sale, gift or otherwise.
A Participant shall have the rights of a shareholder only as to shares
actually acquired by him under the Plan.
(e) NONTRANSFERABILITY OF OPTIONS. No option may be sold, assigned or
otherwise transferred or disposed of in any manner whatsoever
other than by will or by the laws of descent and distribution,
and during the Participant's lifetime the option may be exercised
only by him.
4
<PAGE> 5
(f) FORFEITURE OF OPTIONS UPON TERMINATION OF EMPLOYMENT. All
previously unexercised options of any employee shall terminate
and be forfeited automatically upon the termination for any
reason whatsoever of such employee's employment with the Company.
For purposes of this subsection (f), an employee's employment
will not be considered terminated (i) in the case of sick leave
or other bona fide leave of absence approved for purposes of this
Plan by the Company or a subsidiary or in the case of a transfer
to the employment of a subsidiary or to the employment of the
Company or (ii) in the case of a transfer of employment between
the Company and its wholly-owned subsidiary Data Translation,
Inc. (formerly Data Translation II, Inc.) ("DTI") and subsequent
distribution of the stock of such subsidiary to the Company's
stockholders (the "Distribution"); provided, that this clause
(ii) shall apply only in the case of Participants whose transfer
of employment to DTI occurs in connection with the Distribution;
and further provided, that in the case of any such Participant,
post-Distribution service for DTI shall be treated for purposes
of this paragraph as service for the Company and any
post-Distribution termination of employment with DTI shall be
treated for purposes of this paragraph as a termination of
employment with the Company and its subsidiaries. The Company may
require that any Participant described in clause (ii) above
provide, prior to any post-Distribution exercise of an award
hereunder by such Participant and as a condition thereto,
evidence satisfactory to the Company as to the period of such
Participant's employment with DTI.
(g) DEATH. If a Participant dies at a time when he is entitled to
exercise an option, then at any time or times within one year
after his death (or such further period as the Board may allow)
such option may be exercised, as to all or any of the shares
which the Participant was entitled to purchase immediately prior
to his death, by his executor or administrator or the person or
persons to whom the option is transferred by will or the
applicable laws of descent and distribution, and except as so
exercised such option will expire at the end of such period. In
no event, however, may any option be exercised after the Final
Exercise Date.
(h) CONFIDENTIALITY AGREEMENT. Each employee, including an employee
of DTI who received options while an employee of the Company,
shall execute, prior to or contemporaneously with the grant of
any option to such employee hereunder, the Company's then
standard form of Employee Agreement relating to confidentiality,
inventions and the like.
(i) MAXIMUM ANNUAL LIMIT. Notwithstanding any other provision of the
Plan, the aggregate fair market value (determined as of the time
of grant) of the stock with respect to which incentive stock
options granted after
5
<PAGE> 6
December 31, 1986 are exercisable for the first time by an
employee during any calendar year (under the Plan and all other
stock option plans of the Company or its subsidiaries or any
parent corporation) shall not exceed $100,000. The provisions of
this subsection (i) shall be construed and applied in accordance
with Section 422A(d) of the Internal Revenue Code and the
regulations, if any, promulgated thereunder.
7. REPLACEMENT OPTIONS. The Company may grant options under the Plan on
terms differing from those provided in Section 6, where such options are granted
in substitution for options held by employees of other corporations who
concurrently become employees of the Company or a subsidiary as the result of a
merger or consolidation of the employing corporation with the Company or
subsidiary, or the acquisition by the Company or a subsidiary of property or
stock of the employing corporation. The Board may direct that the substitute
options be granted on the circumstances. Such options will be in addition to
those which may be granted under the Plan and will not be counted as granted
under the Plan.
8. Shares Subject to Plan.
----------------------
(a) NUMBER OF SHARES AND STOCK TO BE DELIVERED. Shares delivered
pursuant to this Plan shall in the discretion of the Board
be authorized but unissued shares of common stock or
previously issued stock acquired by the Company. Subject to
adjustment as described below, the aggregate number of
shares which may be delivered under this Plan shall not
exceed 800,000 shares of common stock of the Company.
(b) CHANGES IN STOCK. In the event of a stock dividend, stock
split or combination of shares, recapitalization, merger in
which the Company is the surviving corporation or other
change in the Company's capital stock, the number and kind
of shares of stock or securities of the Company to be
subject to the Plan and to options then outstanding or to be
granted thereunder, the maximum number of shares or
securities which may be delivered under the Plan, the option
price and other relevant provisions shall be appropriately
adjusted by the Board, whose determination shall be binding
on all persons. In the event of a consolidation or merger in
which the Company is not the surviving corporation or which
results in the acquisition of substantially the Company's
outstanding stock by a single person or entity, or in the
event of the sale or transfer of substantially all the
Company's assets, all outstanding options shall thereupon
terminate, provided that at least twenty days prior to the
effective date of any such merger, consolidation or sale of
assets, the Board shall either (a) make that portion of all
outstanding options exercisable determined by multiplying
the number of shares subject to each option by the quotient
of (i) the number of full months of employment with the
Company completed by the Participant holding such option
after one year from the grant of such
6
<PAGE> 7
option and prior to such event divided by (ii) the total
full months of employment covered by the period between the
date the option was granted and the Initial Exercise Date,
and rounding the resulting number of shares to the nearest
whole number not in excess of the number of shares covered
by the unexercised portion of such option, or (b) if there
is a surviving or acquiring corporation, arrange to have
that corporation or an affiliate of that corporation grant
to the Participants replacement options having equivalent
terms and conditions as determined by the Board. References
in the preceding sentence to months of employment shall, in
the case of non-employee directors, be deemed to be
references to months of service on the Board.
The Board may also adjust the number of shares subject to
outstanding options, the exercise price of outstanding options
and the terms of outstanding options to take into consideration
material changes in accounting practices or principles,
consolidations or mergers (except those described in the
immediately preceding paragraph), acquisitions or dispositions of
stock or property or any other event if it is determined by the
Board that such adjustment is appropriate to avoid distortion in
the operation of the Plan, including without limitation, the
special option adjustment made in connection with the
Distribution and described in Section 14 herein.
9. EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor
the grant of options shall confer upon any Participant any right to
continued employment with the Company or a subsidiary or affect in any
way the right of the Company to terminate the employment of a
Participant at any time.
10. Definitions.
-----------
(a) For purposes of the Plan a subsidiary is any corporation (i)
in which the Company owns, directly or indirectly, stock
possessing fifty percent or more of the total combined
voting power of all classes of stock or (ii) over which the
Company has effective operating control; provided, however,
that no corporation shall be deemed a subsidiary for the
purpose of any provisions applicable to incentive options,
and no incentive options shall be granted to employees of
such corporation, unless in each case, such corporation
shall constitute a subsidiary as defined in clause (i)
above. For special rules relating to DTI, see Section 14
below.
(b) The fair market value of the common stock shall be
determined in accordance with the applicable provisions of
the Code or regulations issued thereunder, or in the absence
of any such provisions or regulations, shall be deemed to be
(i) until the common stock is publicly traded on any
exchange or over the counter, the fair market value of the
common stock as determined from time to time by the Board or
in accordance with
7
<PAGE> 8
policies adopted by the Board, or (ii) thereafter, the last
sale price at which such common stock is traded on the date
in question as reported in The Wall Street Journal; or, if
The Wall Street Journal is not published at the date in
question or does not list the common stock, then in such
other appropriate newspaper of general circulation as the
Board may prescribe; or, if there is no sale of the common
stock on the date in question or the last price at which the
common stock traded is not listed, then the mean between the
bid and asked priced at the close of the market on such
date.
11. INDEMNIFICATION OF BOARD. In addition to and without
affecting such other rights of indemnification as they may have as members of
the Board or otherwise, each member of the Board shall be indemnified by the
Company to the extent legally possible against reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which he may be a party by reason of any action taken or failure to act under or
in connection the Plan, or any option granted thereunder, and against all
judgments, fines and amounts paid by him in settlement thereof; provided that
such payment of amounts so indemnified is first approved by a majority of the
members of the Board of Directors who are not parties to such action, suit or
proceeding, or by independent legal counsel selected by the Company, in either
case on the basis of a determination that such member acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Company; and except that no indemnification shall be made in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such Board member is liable for negligence or misconduct in his duties; and
provided, further that the Board member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
12. AMENDMENTS. The Board may at any time discontinue granting
options under the Plan. The Board may at any time or times amend the Plan or
amend any outstanding option or options for the purpose of satisfying the
requirements of any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law, provided that (except to the
extent explicitly required or permitted herein above) no such amendment will,
without the approval of the shareholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) reduce the option price
of outstanding options or reduce the price at which options may be granted, (c)
extend the time within which options may be granted, (d) amend the provisions of
this Section 12 of the Plan or (e) extend the period of an outstanding option
beyond ten years from the date of grant, and no such amendment will adversely
affect the rights of any Participant (without his consent) under any option
theretofore granted.
13. NON-EMPLOYEE DIRECTORS. Notwithstanding anything to the
contrary contained elsewhere herein:
(a) ELIGIBLE DIRECTORS AND GRANT. Each Company director who is
not a full-time employee of the Company or any of its
subsidiaries and who is
8
<PAGE> 9
serving as a director on September 15, 1989 is hereby
granted on that date non-incentive stock options covering
10,000 shares of common stock each, such options to be
exercisable with respect to one-fifth of the covered shares
on September 15, 1990 and with respect to an additional
one-fifth each succeeding year. Each director who is not a
full-time employee of the Company or any of its subsidiaries
and who is newly elected after September 15, 1989 and prior
to April 30, 1992 shall be automatically granted
non-incentive stock options covering 10,000 shares of common
stock each on the date of his first election to the Board,
such options to be exercisable with respect to one-fifth of
the covered shares one year from the date of grant and with
respect to an additional one-fifth each succeeding year. The
maximum number of shares of common stock which shall be
available through the exercise of options granted under this
Section 13(a) is eighty thousand.
(b) TERMS OF OPTIONS. The Final Exercise Date of options granted
pursuant to Section 13(a) hereof shall be ten years from the
date of grant. In lieu of the provisions of Section 6(f)
hereof, all previously unexercised options granted pursuant
to Section 13(a) hereof shall terminate and be forfeited
automatically on the date that is six months after the
Participant ceases to be a member of the Board, but only if
the Participant is nominated to be a director and declines
to stand for re-election. The purchase price for shares of
common stock issuable upon the exercise of options granted
pursuant to Section 13(a) hereof shall be the fair market
value of the common stock at the close of business on the
date the option is granted, determined in accordance with
Section 10(b) hereof; PROVIDED, HOWEVER, that in no event
shall the exercise price be less than par
value per share.
14. SPECIAL OPTION ADJUSTMENTS; COMPANY EMPLOYEES.
Notwithstanding any other provision of the Plan, each option outstanding under
the Plan immediately prior to the Distribution (an "affected option") shall be
adjusted in accordance with Section 8.7 of the Distribution Agreement between
the Company and DTI dated as of November 19, 1996 (the "Distribution
Agreement"). Except as otherwise provided herein, the adjusted Company option
shall have substantially the same terms as prior to the Distribution.
9
<PAGE> 1
EXHIBIT 10.2
MEDIA 100 INC.
1986 Employee Stock Purchase Plan,
as amended through November 15, 1996
------------------------------------
Section 1. Purpose of Plan.
---------------
The Media 100 Inc. ("Media 100") 1986 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method by which eligible employees of Media 100
(formerly Data Translation, Inc.) and its subsidiaries (collectively, the
"Company") may use voluntary, systematic payroll deductions to purchase shares
of Common Stock of Media 100 ("stock") and thereby acquire an interest in the
future of the Company. For purposes of the Plan, a subsidiary is any corporation
in which Media 100 owns, directly or indirectly, stock possessing 50% or more of
the total combined voting power of all classes of stock.
Section 2. Options to Purchase Stock.
-------------------------
Under the Plan, there is available an aggregate of not more than 300,000
shares of stock (subject to adjustment as provided in Section 16) for sale
pursuant to the exercise of options ("options") granted under the Plan to
employees of the Company ("employees"). The stock to be delivered upon exercise
of options under the Plan may be either shares of Media 100's authorized but
unissued stock, or shares of reacquired stock, as the Board of Directors of
Media 100 (the "Board of Directors") shall determine.
Section 3. Eligible Employees.
------------------
With respect to option periods beginning prior to July 12, 1995, except as
otherwise provided in Section 20, each employee who has completed six months or
more of continuous service in the employ of the Company shall be eligible to
participate in the Plan. With respect to option periods beginning on or after
July 12, 1995, except as otherwise provided in Section 20, each employee who has
completed one month of continuous service in the employ of the Company shall be
eligible to participate in the Plan.
Section 4. Method of Participation.
-----------------------
Subject to the second paragraph of Section 8, the periods January 1 to June
30 and July 1 to December 31 of each year shall be option periods. Each person
who will be an eligible employee on the first day of any option period may elect
to participate in the Plan by executing and delivering, at least 15 days prior
to such day, a payroll deduction authorization in accordance with Section 5.
Such employee shall thereby become a participant ("participant") on the first
day of such option period and shall remain a participant until his participation
is terminated as provided in the Plan. Each participant
<PAGE> 2
shall execute, prior to or contemporaneously with his election to participate in
the Plan, the Company's then standard form of Employee Agreement relating to
confidentiality, inventions and the like.
Section 5. Payroll Deductions.
------------------
The payroll deduction authorization shall request withholding, at a rate of
not less than 2% nor more than 10%, from the participant's compensation, by
means of substantially equal payroll deductions over the option period. With
respect to option periods prior to January 1, 1996, for purposes of the Plan,
"compensation" shall mean all compensation paid to the participant by the
Company other than as bonuses, commissions, overrides, overseas allowances, and
payments under stock option plans and other employee benefit plans. With respect
to option periods beginning on or after January 1, 1996, for purposes of the
Plan, "compensation" shall mean all compensation paid to the participant by the
Company including compensation paid as bonuses and commissions, but excluding
overrides, overseas allowances, and payments under stock option plans and other
employee benefit plans A participant may change the withholding rate of his
payroll deduction authorization by written notice delivered to the Company at
least 15 days prior to the first day of the option period as to which the change
is to be effective. All amounts withheld in accordance with a participant's
payroll deduction authorization shall be credited to a withholding account for
such participant.
Section 6. Grant of Options.
----------------
Each person who is a participant on the first day of an option period shall
as of such day be granted an option for such period. Such option shall be for
the number of shares of stock to be determined by dividing (a) the balance in
the participant's withholding account on the last day of the option period by
(b) the purchase price per share of the stock determined under Section 7, and
eliminating any fractional share from the quotient. The Company shall reduce on
a substantially proportionate basis the number of shares of stock receivable by
each participant upon exercise of his option for an option period in the event
that the number of shares then available under the Plan is otherwise
insufficient.
Section 7. Purchase Price.
--------------
The purchase price of stock issued pursuant to the exercise of an option
shall be 85% of the fair market value of the stock at (a) the time of grant of
the option or (b) the time at which the option is deemed exercised, whichever is
less. Fair market value shall be determined in accordance with the applicable
provisions of the Internal Revenue Code of 1986, as amended or restated from
time to time (the "Code") or regulations issued thereunder, or in the absence of
any such provisions or regulations, shall be deemed to be the last sale price at
which the stock is traded on the day in question or the last prior date on which
a trade occurred as reported in the Wall Street Journal; or, if the Wall Street
Journal is not published or does not list the stock, then in such other
appropriate
2
<PAGE> 3
newspaper of general circulation as the Board of Directors may prescribe; or, if
the last price at which the stock traded is not generally reported, then the
mean between the reported bid and asked prices at the close of the market on the
day in question or the last prior date when such prices were reported.
Section 8. Exercise of Options.
-------------------
If an employee is a participant in the Plan on the last business day of an
option period, he shall be deemed to have exercised the option granted to him
for that period. Upon such exercise, the Company shall apply the balance of the
participant's withholding account to the purchase of the number of whole shares
of stock determined under Section 6, and as soon as practicable thereafter shall
issue and deliver certificates for said shares to the participant and shall
return to him the balance, if any, of his withholding account in excess of the
total purchase price of the shares so issued. No fractional shares shall be
issued hereunder.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to deliver any shares unless and until, in the opinion of the
Company's counsel, all requirements of applicable federal and state laws and
regulations (including any requirements as to legends) have been complied with,
nor, if the outstanding stock is at the time listed on any securities exchange,
unless and until the shares to be delivered have been listed (or authorized to
be added to the list upon official notice of issuance) upon such exchange, nor
unless or until all other legal matters in connection with the issuance and
delivery of shares have been approved by the Company's counsel.
Section 9. Interest.
--------
No interest will be payable on withholding accounts.
Section 10. Cancellation and Withdrawal.
---------------------------
A participant who holds an option under the Plan may at any time prior to
exercise thereof under Section 8 cancel all (but not less than all) of his
option by written notice delivered to the Company. Upon such cancellation, the
balance in his withholding account shall be returned to him.
A participant may terminate his payroll deduction authorization as of any
date by written notice delivered to the Company and shall thereby cease to be a
participant as of such date. Any participant who voluntarily terminates his
payroll deduction authorization prior to the last business day of an option
period shall be deemed to have canceled his option.
3
<PAGE> 4
Section 11. Termination of Employment.
-------------------------
Except as otherwise provided in Section 12, upon the termination of a
participant's employment with the Company for any reason whatsoever, he shall
cease to be a participant, and any option held by him under the Plan shall be
deemed cancelled, the balance of his withholding account shall be returned to
him, and he shall have no further rights under the Plan. For purposes of this
Section 11, a participant's employment will not be considered terminated in the
case of sick leave or other bona fide leave of absence approved for purposes of
this Plan by Media 100 or a subsidiary or in the case of a transfer to the
employment of a subsidiary or to the employment of Media 100.
Section 12. Death or Retirement of Participant.
----------------------------------
In the event a participant holds any option hereunder at the time his
employment with the Company is terminated (1) by his retirement with the consent
of the Company, and such retirement is within three months of the time such
option becomes exercisable, or (2) by his death whenever occurring, then such
participant (or in the event of death, his legal representative) may, by a
writing delivered to the Company on or before the date such option is
exercisable, elect either (a) to cancel any such option and receive in cash the
balance in his withholding account, or (b) to have the balance in his
withholding account applied as of the last day of the option period to the
exercise of his option pursuant to Section 8. In the event such participant (or
his legal representative) does not file a written election as provided above,
any outstanding option shall be treated as if an election had been filed
pursuant to subparagraph (a) above.
Section 13. Participant's Rights Not Transferable, Etc.
------------------------------------------
All participants granted options under the Plan shall have the same rights
and privileges. Each participant's rights and privileges under any option
granted under the Plan shall be exercisable during his lifetime only by him, and
shall not be sold, pledged, assigned, or otherwise transferred in any manner
whatsoever except by will or the laws of descent and distribution. In the event
any participant violates the terms of this Section, any options held by him may
be terminated by the Company and upon return to the participant of the balance
of his withholding account, all his rights under the Plan shall terminate.
Section 14. Employment Rights.
-----------------
Neither the adoption of the Plan nor any of the provisions of the Plan
shall confer upon any participant any right to continued employment with Media
100 or a subsidiary or affect in any way the right of the Company to terminate
the employment of a participant at any time.
4
<PAGE> 5
Section 15. Rights as a Shareholder.
-----------------------
A participant shall have the rights of a shareholder only as to stock
actually acquired by him under the Plan.
Section 16. Change in Capitalization.
------------------------
In the event of a stock dividend, stock split or combination of shares,
recapitalization, merger in which Media 100 is the surviving corporation or
other change in Media 100's capital stock, the number and kind of shares of
stock or securities of Media 100 to be subject to the Plan and to options then
outstanding or to be granted hereunder, the maximum number of shares or
securities which may be delivered under the Plan, the option price and other
relevant provisions shall be appropriately adjusted by the Board of Directors,
whose determination shall be binding on all persons. In the event of a
consolidation or merger in which Media 100 is not the surviving corporation or
in the event of the sale or transfer of substantially all Media 100's assets
(other than by the grant of a mortgage or security interest), all outstanding
options shall thereupon terminate, provided that prior to the effective date of
any such merger, consolidation or sale of assets, the Board of Directors shall
either (a) return the balance in all withholding accounts and cancel all
outstanding options, or (b) accelerate the exercise date provided for in Section
8, or (c) if there is a surviving or acquiring corporation, arrange to have that
corporation or an affiliate of that corporation grant to the participants
replacement options having equivalent terms and conditions as determined by the
Board of Directors.
Section 17. Administration of Plan.
----------------------
The Plan will be administered by the Board of Directors. The Board of
Directors will have authority, not inconsistent with the express provisions of
the Plan, to take all action necessary or appropriate hereunder, to interpret
its provisions, and to decide all questions and resolve all disputes which may
arise in connection therewith. Such determinations of the Board of Directors
shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with respect to the
Plan to an Employee Benefit Plan Committee or any other committee (the
"Committee"), in which event all references to the Board of Directors hereunder,
including without limitation the references in Section 18, shall be deemed to
refer to the Committee. A majority of the members of any such Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee by a writing signed by a
majority of the Committee members.
Section 18. Amendment and Termination of Plan.
---------------------------------
The Board of Directors may at any time or times amend the Plan or amend any
outstanding option or options for the purpose of satisfying the requirements of
any
5
<PAGE> 6
changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent explicitly
required or permitted herein) no such amendment will, without the approval of
the shareholders of Media 100, (a) increase the maximum number of shares
available under the Plan, (b) reduce the option price of outstanding options or
reduce the price at which options may be granted, or (c) amend the provisions of
this Section 18 of the Plan, and no such amendment will adversely affect the
rights of any participant (without his consent) under any option theretofore
granted.
The Plan may be terminated at any time by the Board of Directors, but no
such termination shall adversely affect the rights and privileges of holders of
the outstanding options.
Section 19. Approval of Shareholders.
------------------------
The Plan shall be subject to the approval of the shareholders of the
Company, which approval shall be secured within twelve months after the date the
Plan is adopted by the Board of Directors. Notwithstanding any other provisions
of the Plan, no option shall be exercised prior to the date of such approval.
Section 20. Limitations on Eligibility.
--------------------------
Notwithstanding any other provision of the Plan,
(a) An employee shall not be eligible to receive an option pursuant to the
Plan if, immediately after the grant of such option to him, he would (in
accordance with the provisions of Sections 423 and 425(d) of the Code) own or be
deemed to own stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the employer corporation or of its parent or
subsidiary corporation, as defined in Section 425 of the Code.
(b) No employee shall be granted an option under the Plan which would
permit his rights to purchase shares of stock under all employee stock purchase
plans of the Company and any parent and subsidiary corporations to accrue at a
rate which exceeds $25,000 in fair market value of such stock (determined at the
time the option is granted) for each calendar year during which any such option
granted to such employee is outstanding at any time, as provided in Sections 423
and 425 of the Code.
6
<PAGE> 1
EXHIBIT 10.3
MEDIA 100 INC.
Key Employee Incentive Plan (1992),
-----------------------------------
as amended through December 16, 1996
------------------------------------
1. PLAN; PURPOSE; GENERAL. The purpose of this Key Employee Incentive
Plan (1992) (the "Plan") is to advance the interests of Media 100 Inc.
(formerly Data Translation, Inc.) (the "Company") by enhancing the ability
of the Company and its subsidiaries to attract and retain selected
advisers, consultants, key employees and directors, by creating for such
persons incentives and rewards for their contributions to the success of
the Company, and by encouraging such persons to become owners of shares of
the Company's Common Stock, par value $0.01 per share (the "common stock"
or "stock"). Options granted pursuant to the Plan may be incentive stock
options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") (such options being referred to herein as "incentive
options") or non-incentive options. The proceeds received from the sale of
stock pursuant to the Plan shall be used for general corporate purposes.
Except as otherwise expressly provided with respect to an option grant, no
option granted pursuant to the Plan shall be an incentive option.
2. EFFECTIVE DATE OF PLAN. This Plan will become effective upon approval
by at least a majority of the votes cast at the next duly called Annual
Meeting of Stockholders of the Company at which a quorum representing a
majority of the voting power of all outstanding voting stock of the Company
is, either in person or by proxy, present and voting thereon or at any
adjournment thereof. Grants of awards under the Plan may be made prior to
that date (but after Board adoption of the Plan), subject to approval of
the Plan by such shareholders.
3. ADMINISTRATION OF THE PLAN. The Plan will be administered by the Board
of Directors (the "Board") of the Company. The Board will have authority,
to take all action necessary or appropriate thereunder, to interpret its
provisions, and to decide all questions and resolve all disputes which may
arise in connection therewith. Such determinations of the Board shall be
conclusive and shall bind all parties.
The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to the Executive Compensation and Stock Option
Committee or any other committee (the "Committee"), in which event all
references to the Board hereunder, except the references in Section 11
hereof, shall be deemed to refer to the Committee. The Committee, if one is
appointed, shall consist of not fewer than two members, and each member of
the Committee shall be, at the time of his appointment and at any time he
exercises discretion in administering the Plan, a "non-employee director"
as that term is defined in Rule 16b-3 adopted pursuant to the Securities
Exchange Act of 1934, as amended. A majority of the
<PAGE> 2
members of any such Committee shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of its members.
Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members.
4. ELIGIBILITY. The "Participants" in the Plan will be such key
employees, including part-time employees, advisers, consultants and
directors whether or not they are employees, of the Company or of any of
its present or future subsidiaries (as defined in Section 10) as may be
selected from time to time by the Board in its discretion.
No incentive option shall be granted to a Participant who is not an
"employee" as defined in the provisions of the Code or regulations
thereunder applicable to incentive options. No incentive option shall be
granted to a Participant who at the time of grant owns, directly or
indirectly through application or the attribution rules of Section 424(d)
of the Code, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its subsidiaries (a
"Ten-Percent Shareholder") unless (i) the option price at the time it is
granted is at least 110% of the fair market value of the stock subject to
the option, and (ii) the period of the option does not exceed five years
from the date of grant.
5. GRANT OF AWARDS. Subject to the express provisions of the Plan, the
Board shall have the sole authority and discretion (a) to determine which
Participants will be granted awards; (b) to grant awards consisting of
options or stock appreciation rights ("SARs"), or both to Participants; (c)
to determine whether the options granted to any Participants shall be
incentive options or non-incentive options; (d) to determine the time or
times when awards will be granted and the number of shares of common stock
to be subject to each award; (e) to determine the option price of the
shares subject to each option in accordance with Section 6(a) hereof and
the value of the shares subject to each SAR on the exercise date of such
SAR in accordance with Section 6(d) hereof, and the method of payment of
such price; (f) to determine the time or times when each award becomes
exercisable and the duration of the exercise period; (g) to impose
additional conditions or restrictions on any award, such conditions or
restrictions, if any, to be set forth on the award form or other instrument
evidencing the award; (h) to prescribe the form or forms of any instruments
evidencing any awards granted under the Plan and of any other instruments
required under the Plan and to make changes in such forms from time to
time; (i) to determine the price, vesting schedule and other attributes of
awards granted to Participants working abroad; and (j) to adopt, amend and
rescind rules and regulations for the administration of the Plan and the
awards and for its own acts and proceedings. Subject to Section 12 hereof,
the Board shall also have the authority, in its sole discretion, both
generally and in particular instances, to waive compliance by a Participant
with any obligation to be performed by him under an award, to waive any
condition or
2
<PAGE> 3
provision of an award, and to amend or cancel any award (and if an award is
cancelled, to grant a new award on such terms as the Board shall specify)
except that the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the Participant
under such award without such Participant's consent. Nothing in the
preceding sentence shall be construed as limiting the power of the Board to
make adjustments required by Section 8(c) hereof.
No award shall be granted on or after February 20, 2002 but awards
previously granted may extend beyond that date.
6. Terms and Conditions of Awards.
------------------------------
a. EXERCISE PRICE OF OPTIONS. The purchase price per share for shares
issuable upon exercise of options shall be determined by the Board but
in the case of incentive options, shall not be less than 100% (110% in
the case of an incentive option granted to a Ten-Percent Shareholder)
of the fair market value of the stock on the date of grant; nor shall
the option price be less, in the case of an original issue of
authorized stock, than par value per share. For this purpose, "fair
market value" will be determined as set forth in Section 10 hereof.
b. PERIOD OF OPTIONS. An option shall be exercisable during such period
or periods as the Board may specify. The latest date on which an
option may be exercised (the "Final Exercise Date") shall be the date
which is ten years (five years, in the case of an incentive option
granted to a Ten-Percent Shareholder) from the date the option was
granted or such earlier date as may be specified by the Board at the
time the option is granted.
c. Exercise of Options.
-------------------
(i) Unless the Board at the time of grant or at any other time
otherwise specifies in the case of a particular option or options,
each option shall first become exercisable with respect to
one-fifth of the shares covered by it upon the completion of one
year from the date of the grant of the option (the "Initial
Exercise Date"), and with respect to an additional one-fifth each
succeeding year until the option becomes exercisable with respect
to all of the shares covered by it.
(ii) In the case of options intended to be incentive options, any award
forms or other instruments evidencing such options
3
<PAGE> 4
shall contain such provisions relating to exercise and other
matters as are required of incentive options under the applicable
provisions of the Code and Treasury Regulations, as from time to
time in effect.
(iii) A person electing to exercise part or all of his options shall
give written notice to the Company, as specified by the Board, of
his election and of the number of shares he has elected to
purchase, such notice to be accompanied by the instrument
evidencing such option and any other documents required by the
Board, and shall at the time of such exercise tender the purchase
price of the shares he has elected to purchase. If the notice of
election to exercise is given by the executor or administrator of
a deceased Participant, or by the person or persons to whom the
option has been transferred by the Participant's will or the
applicable laws of descent and distribution, the Company will be
under no obligation to deliver shares pursuant to such exercise
unless and until the Company is satisfied that the person or
persons giving such notice is or are entitled to exercise the
option.
(iv) In the case of an option that is not an incentive option, the
Board shall have the right to require that the Participant
exercising the option remit to the Company an amount sufficient to
satisfy any federal, state, or local withholding tax requirements
(or make other arrangements satisfactory to the Company with
regard to such taxes) prior to the delivery of any common stock
pursuant to the exercise of the option. If permitted by the Board,
either at the time of the grant of the option or the time of
exercise, the Participant may elect, at such time and in such
manner as the Board may prescribe, to satisfy such withholding
obligation by (i) delivering to the Company common stock owned by
such individual having a fair market value equal to such
withholding obligation, or (ii) requesting that the Company
withhold from the shares of common stock to be delivered upon
exercise of the option a number of shares of common stock having a
fair market value equal to such withholding obligation.
In the case of an incentive option, if at the time the option is
exercised the Board determines that under applicable law and
regulations the Company could be liable for the withholding of any
federal, state or local tax with respect to a disposition of the
4
<PAGE> 5
common stock received upon exercise, the Board may require as a
condition of exercise that the Participant exercising the option agree
(i) to inform the Company promptly of any disposition (within the
meaning of Section 424(c) of the Code and the regulations thereunder)
of common stock received upon exercise, and (ii) to give such security
as the Board deems adequate to meet the potential liability of the
Company for the withholding of tax, and to augment such security from
time to time in any amount reasonably deemed necessary by the Board to
preserve the adequacy of such security.
d. STOCK APPRECIATION RIGHTS. The Board in its discretion may grant SARs
either in tandem with or independent of options awarded under the
Plan. Except as hereinafter provided, each SAR will entitle the
Participant to receive upon exercise, with respect to each share of
common stock to which the SAR relates, the excess of (i) the share's
value on the date of exercise, over (ii) the share's fair market value
on the date it was granted. For purposes of clause (i), "value" shall
mean fair market value; PROVIDED, that the Board may adjust such value
to take into account dividends on the stock and may also grant SARs
that provide, in such limited circumstances following a change in
control of the Company (as determined by the Board) as the Board may
specify, that "value" for purposes of clause (i) is to be determined
by reference to a specified value (which may include an average of
values) for the common stock during a period immediately preceding the
change in control, all as determined by the Board. The amount payable
to a Participant upon exercise of an SAR shall be paid either in cash
or in shares of common stock, as the Board determines. Each SAR shall
be exercisable during such period or periods and on such terms as the
Board may specify. No SAR shall be exercisable after the date which is
ten years from the date of grant.
e. PAYMENT FOR AND DELIVERY OF SHARES. Shares which are subject to
options shall be issued only upon receipt by the Company of full
payment of the purchase price for the shares as to which the award is
exercised. The purchase price shall be payable by the option holder to
the Company either (i) in cash or by check, bank draft or money order
payable to the order of the Company; or (ii) if so permitted by the
Board (which in the case of an incentive option, shall specify such
method of payment at the time of grant), (A) through the delivery of
shares of common stock (duly owned by the option holder and for which
the option holder has good title free and clear of any liens and
encumbrances and which, in the case of common stock acquired from the
Company, shall have been held
5
<PAGE> 6
for at least six months) having a fair market value on the last
business day preceding the date of exercise equal to the purchase
price or (B) by delivery of a promissory note of the option holder to
the Company, such note to be payable on such terms as are specified by
the Board or (C) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient
funds to pay the exercise price; or (iii) by a combination of the
permissible forms of payment as provided in (i) and (ii) above;
PROVIDED, that if the common stock delivered upon exercise of the
option is an original issue of authorized common stock, at least so
much of the exercise price as represents the par value of such common
stock shall be paid other than with a personal check or promissory
note of the person exercising the option.
The Company shall not be obligated to deliver any shares unless
and until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulations have been complied with, nor,
if the outstanding common stock is at the time listed on any
securities exchange, unless and until the shares to be delivered have
been listed (or authorized to be added to the list upon official
notice of issuance) upon such exchange, nor unless or until all other
legal matters in connection with the issuance and delivery of shares
have been approved by the Company's counsel. Without limiting the
generality of the foregoing, the Company may require from the person
exercising an option such investment representation or such agreement,
if any, as counsel for the Company may consider necessary in order to
comply with the Securities Act of 1933, as amended, and may require
that such person agree that any sale of the shares will be made only
on a national securities exchange or in such other manner as is
permitted by the Board and that he will notify the Company before he
makes any disposition of the shares whether by sale, gift or
otherwise.
A Participant shall have the rights of a shareholder only as to
shares actually acquired by him under the Plan.
f. NONTRANSFERABILITY OF AWARDS. No award may be sold, assigned or
otherwise transferred or disposed of in any manner whatsoever other
than by will or by the laws of descent and distribution, and during
the Participant's lifetime the award may be exercised only by him.
6
<PAGE> 7
g. FORFEITURE OF AWARDS UPON TERMINATION OF EMPLOYMENT. If a
Participant's (other than a non-employee director's) employment or
service with the Company and its subsidiaries terminates for any
reason other than death, all awards held by the Participant shall
terminate unless the Board determines, in its sole discretion, that
such awards as were exercisable immediately prior to termination shall
continue to be exercisable for a period of time after termination (but
in no event beyond the Final Exercise Date). If the Board determines
that a post-termination exercise period for exercisable awards is
appropriate, such awards shall terminate and be forfeited after
completion of such period to the extent not previously exercised,
expired or terminated. For purposes of this Section 6(g), employment
shall not be considered terminated (i) in the case of sick leave or
other bona fide leave of absence approved for purposes of the Plan by
the Board, so long as the Participant's right to reemployment is
guaranteed either by statute or by contract, (ii) in the case of a
transfer of employment between the Company and a subsidiary or between
subsidiaries, or to the employment of a corporation (or a parent or
subsidiary corporation of such corporation) issuing or assuming an
option in a transaction to which Section 424(a) of the Code applies,
or (iii) in the case of a transfer of employment between the Company
and its wholly-owned subsidiary Data Translation, Inc. (formerly Data
Translation II, Inc.) ("DTI") and subsequent distribution of the stock
of such subsidiary to the Company's stockholders (the "Distribution");
provided, that this clause (iii) shall apply only in the case of
Participants whose transfer of employment to DTI occurs in connection
with the Distribution; and further provided, that in the case of any
such Participant, post-Distribution service for DTI shall be treated
for purposes of this paragraph as service for the Company and any
post-Distribution termination of employment with DTI shall be treated
for purposes of this paragraph as a termination of employment with the
Company and its subsidiaries. The Company may require that any
Participant described in clause (iii) above provide, prior to any
post-Distribution exercise of an award hereunder by such Participant
and as a condition thereto, evidence satisfactory to the Company as to
the period of such Participant's employment with DTI.
h. DEATH. If a Participant dies at a time when he is entitled to exercise
an option, then at the time or times within one year after his death
(or such further period as the Board may allow) such option may be
exercised, as to all or any of the shares which the Participant was
entitled to purchase immediately prior to his death, by his executor
or administrator or the person or persons to whom the option is
7
<PAGE> 8
transferred by will or the applicable laws of descent and
distribution, and except as so exercised such option will expire at
the end of such period. In no event, however, may any option be
exercised after the Final Exercise Date.
i. CONFIDENTIALITY AGREEMENT. Each Employee, including employees of DTI
who received options while employees of the Company, shall execute,
prior to or contemporaneously with the grant of any option to such
Participant hereunder, the Company's then standard form of agreement
relating to confidentiality, inventions and the like.
7. REPLACEMENT AWARDS. The Company may grant awards under the Plan on
terms differing from those provided in Section 6, where such awards are
granted in substitution for awards held by employees of another corporation
who concurrently become employees of the Company or a subsidiary as the
result of a merger or consolidation of that corporation with the Company or
a subsidiary, or the acquisition by the Company or a subsidiary of property
or stock of that corporation. The Board may direct that the substitute
awards be granted on such terms and conditions as the Board considers
appropriate in the circumstances. Such awards will be in addition to those
which may be granted under the Plan and will not be counted as granted
under the Plan.
8. Shares Subject to Plan.
----------------------
a. NUMBER OF SHARES AND STOCK TO BE DELIVERED. Shares delivered pursuant
to this Plan shall in the discretion of the Board be authorized but
unissued shares of common stock or previously issued stock acquired by
the Company. Subject to adjustment as described below and exclusive of
the shares that are subject to the options provided for in Section 13,
the aggregate number of shares which may be delivered under this Plan
shall not exceed 2,000,000 shares of common stock of the Company.
b. LIMITATIONS ON GRANTS TO INDIVIDUALS. Subject to adjustment as
described below and exclusive of the shares that are subject to the
options provided for in Section 13, the aggregate number of shares for
which options may be granted under this Plan to any individual in any
calendar year shall not exceed 250,000 shares of common stock of the
Company.
c. CHANGES IN STOCK. In the event of a stock dividend, stock split or
combination of shares, recapitalization, merger in which the Company
is the surviving corporation or other change in the Company's capital
stock, the number and kind of shares of stock or
8
<PAGE> 9
securities of the Company to be subject to the Plan and to options
then outstanding or to be granted thereunder, the maximum number of
shares or securities which may be delivered under the Plan, the option
price and other relevant provisions shall be appropriately adjusted by
the Board, whose determination shall be binding on all persons. In the
event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of
substantially all the Company's outstanding stock by a single person
or entity, or in the event of the sale or transfer of substantially
all the Company's assets, all outstanding awards shall thereupon
terminate, provided that at least twenty days prior to the effective
date of any such merger, consolidation or sale of assets, all
outstanding awards shall become exercisable immediately prior to
consummation of such merger, consolidation or sale of assets, unless
the Board shall have arranged for the surviving or acquiring
corporation or an affiliate of that corporation to assume the awards
or to grant to the Participants replacement awards having equivalent
terms and conditions as determined by the Board including, in the case
of incentive options, terms and conditions that satisfy the
requirements of Section 424(a) of the Code.
The Board may also adjust the number of shares subject to
outstanding awards granted under Sections 5 or 6 hereof, the exercise
price of outstanding options and the terms of outstanding options to
take into consideration material changes in accounting practices or
principles, consolidations or mergers (except those described in the
immediately preceding paragraph), acquisitions or dispositions of
stock or property or any other event if it is determined by the Board
that such adjustment is appropriate to avoid distortion in the
operation of the Plan, including without limitation, the special
option adjustments made in connection with the Distribution and
described in Section 14 herein.
9. EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor the grant of
awards shall confer upon any Participant any right to continued employment
with the Company or a subsidiary or affect in any way the right of the
Company to terminate the employment of a Participant at any time. Except as
specifically provided by the Board, in its sole discretion, in any
particular case, the loss of existing or potential profit in awards granted
under this Plan shall not constitute an element of damages in the event of
termination of the relationship of a Participant even if the termination is
in violation of an obligation of the Company to the Participant by contract
or otherwise.
9
<PAGE> 10
10. Definitions.
-----------
a. For purposes of the Plan a subsidiary is any corporation (i) in which
the Company owns, directly or indirectly, stock possessing 50% or more
of the total combined voting power of all classes of stock, (ii) over
which the Company has effective operating control; provided, however,
that no corporation shall be deemed a subsidiary for the purpose of
any provisions applicable to incentive options, and no incentive
options shall be granted to employees of such corporation, unless in
each case, such corporation shall constitute a subsidiary as defined
in clause (i) above. For special rules relating to DTI, see Section
14, below.
b. The fair market value of the common stock shall be determined in
accordance with the applicable provisions of the Code or regulations
issued thereunder, or in the absence of any such provisions or
regulations, shall be deemed to be the last sale price at which such
common stock is traded on the date in question as reported in the Wall
Street Journal; or, if the Wall Street Journal is not published at the
date in question or does not list the common stock, then in such other
appropriate newspaper of general circulation as the Board may
prescribe; or, if there is no sale of the common stock on the date in
question or the last price at which the common stock traded is not
listed, then the mean between the bid and asked price at the close of
the market on such day.
11. INDEMNIFICATION OF BOARD. In addition to and without affecting such
other rights of indemnification as they may have as members of the Board or
otherwise, each member of the Board shall be indemnified by the Company to
the extent legally possible against reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which he may be a party by reason of any action taken or
failure to act under or in connection with the Plan, or any option granted
thereunder, and against all judgments, fines and amounts paid by him in
settlement thereof; provided that such payment of amounts so indemnified is
first approved by a majority of the members of the Board who are not
parties to such action, suit or proceeding, or by independent legal counsel
selected by the Company, in either case on the basis of a determination
that such member acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company; and except
that no indemnification shall be made in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Board member
is liable for negligence or misconduct in his duties; and provided, further
that the Board member shall in writing offer the Company the opportunity,
at its own expense, to handle and defend the same.
10
<PAGE> 11
12. AMENDMENTS. The Board may at any time discontinue granting awards under
the Plan. The Board may at any time or times amend the Plan or amend any
outstanding award or awards for the purpose of satisfying the requirements
of Section 422 of the Code or of any changes in applicable laws or
regulations, to comply with any applicable laws and requirements of foreign
jurisdictions or for any other purpose that may at the time be permitted by
law, provided that no such amendment will adversely affect the rights of
any Participant (without his consent) under any award theretofore granted.
13. NON-EMPLOYEE DIRECTORS. Notwithstanding anything to the contrary
contained elsewhere herein:
a. ELIGIBLE DIRECTORS AND GRANT. Each director of the Company who is not
a full-time employee of the Company or any of its subsidiaries and is
a director on April 8, 1992 shall be automatically granted on such
date non-incentive stock options covering 10,000 shares of common
stock and each non-employee director who is initially elected after
April 8, 1992 and prior to February 20, 2002 shall be granted on the
date of such election non-incentive stock options covering 10,000
shares of common stock (notwithstanding the two-for-one split of the
common stock effected on July 31, 1995), all such options to be
exercisable with respect to one-fifth of the covered shares one year
from the date of grant and with respect to an additional one-fifth
each succeeding year.
b. TERMS OF OPTIONS. The Final Exercise Date of options granted pursuant
to Section 13(a) hereof shall be 10 years from the date of grant. If a
director's service with the Company terminates for any reason other
than death, in lieu of the provisions of Section 6(g) hereof, all
options held by the director that are exercisable on the date of
termination shall continue to be exercisable for a period of six
months, but shall terminate immediately if the director was removed
for cause or resigned under circumstances which in the opinion of the
Board of Directors casts such discredit on the Company or him as to
justify termination of his options. After completion of said six-month
period, such options shall terminate to the extent not previously
exercised, expired or terminated. All options held by a director that
are not exercisable on the date such director's service with the
Company terminates shall immediately terminate. The purchase price for
shares of common stock issuable upon the exercise of options granted
pursuant to Section 13(a) hereof shall be the fair market value of the
common stock at the close of business on the date the option is
granted, determined in
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<PAGE> 12
accordance with Section 10(b) hereof; PROVIDED, HOWEVER, that in no
event shall the exercise price be less than par value per share.
14. SPECIAL OPTION ADJUSTMENTS. Notwithstanding any other provision of the
Plan, each option outstanding under the Plan immediately prior to the
Distribution (an "affected option") shall be adjusted in accordance with
Section 8.7 of the Distribution Agreement between the Company and DTI dated
as of November 19, 1996 (the "Distribution Agreement"). Except as otherwise
provided herein, the adjusted option shall have substantially the same
terms as prior to the Distribution. To the extent any such adjustment shall
be treated as an option grant for purposes of Section 8.7 of such
Agreement, it shall be made in accordance with the terms of said Section
8.7 and without regard to the option-grant rules and limitations set forth
in this Plan.
12
<PAGE> 1
EXHIBIT 10.4.1
DATA TRANSLATION, INC. DOUBLE SHELTERED RETIREMENT PLAN
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS 20
2.2 DETERMINATION OF TOP HEAVY STATUS 20
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER 24
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY 25
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 25
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR 25
2.7 RECORDS AND REPORTS 27
2.8 APPOINTMENT OF ADVISERS 27
2.9 INFORMATION FROM EMPLOYER 27
2.10 PAYMENT OF EXPENSES 28
2.11 MAJORITY ACTIONS 28
2.12 CLAIMS PROCEDURE 28
2.13 CLAIMS REVIEW PROCEDURE 28
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY 29
3.2 APPLICATION FOR PARTICIPATION 30
3.3 EFFECTIVE DATE OF PARTICIPATION 30
3.4 DETERMINATION OF ELIGIBILITY 30
<PAGE> 3
3.5 TERMINATION OF ELIGIBILITY 30
3.6 OMISSION OF ELIGIBLE EMPLOYEE 31
3.7 INCLUSION OF INELIGIBLE EMPLOYEE 31
3.8 ELECTION NOT TO PARTICIPATE 31
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION 32
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION 33
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 37
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS 38
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS 44
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS 47
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS 49
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS 53
4.9 MAXIMUM ANNUAL ADDITIONS 56
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS 60
4.11 TRANSFERS FROM QUALIFIED PLANS 61
4.12 DIRECTED INVESTMENT ACCOUNT 64
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND 64
5.2 METHOD OF VALUATION 65
<PAGE> 4
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT 65
6.2 DETERMINATION OF BENEFITS UPON DEATH 65
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY 67
6.4 DETERMINATION OF BENEFITS UPON TERMINATION 67
6.5 DISTRIBUTION OF BENEFITS 71
6.6 DISTRIBUTION OF BENEFITS UPON DEATH 74
6.7 TIME OF SEGREGATION OR DISTRIBUTION 76
6.8 DISTRIBUTION FOR MINOR BENEFICIARY 77
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 77
6.10 PRE-RETIREMENT DISTRIBUTION 77
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP 78
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION 80
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 80
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 81
7.3 OTHER POWERS OF THE TRUSTEE 81
7.4 LOANS TO PARTICIPANTS 84
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 86
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 87
7.7 ANNUAL REPORT OF THE TRUSTEE 87
7.8 AUDIT 88
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 88
7.10 TRANSFER OF INTEREST 90
<PAGE> 5
7.11 DIRECT ROLLOVER 90
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT 91
8.2 TERMINATION 92
8.3 MERGER OR CONSOLIDATION 93
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS 93
9.2 ALIENATION 93
9.3 CONSTRUCTION OF PLAN 94
9.4 GENDER AND NUMBER 94
9.5 LEGAL ACTION 95
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS 95
9.7 BONDING 95
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE 96
9.9 INSURER'S PROTECTIVE CLAUSE 96
9.10 RECEIPT AND RELEASE FOR PAYMENTS 96
9.11 ACTION BY THE EMPLOYER 97
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY 97
9.13 HEADINGS 98
9.14 APPROVAL BY INTERNAL REVENUE SERVICE 98
9.15 UNIFORMITY 98
<PAGE> 6
DATA TRANSLATION, INC. DOUBLE SHELTERED RETIREMENT PLAN
THIS AGREEMENT, hereby made and entered into this __________ day of
_________________________, 19____, by and between Data Translation, Inc. (herein
referred to as the "Employer") and Gary Godin, Kimberly Gray, Ellen Harpin and
Edith Sooy (herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit Sharing Plan and
Trust effective November 15, 1985, (hereinafter called the "Effective Date")
known as Data Translation, Inc. Double Sheltered Retirement Plan (herein
referred to as the "Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustee joins in such amendment if the provisions
of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective June 30, 1993, except as otherwise provided,
the Employer and the Trustee in accordance with the provisions of the Plan
pertaining to amendments thereof, hereby amend the Plan in its entirety and
restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1
<PAGE> 7
1.4 "Aggregate Account" means, with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 2.2.
1.5 "Anniversary Date" means March 31, June 30, September 30, and December
31.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.8 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation
must be determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by:
(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions.
For a Participant's initial year of participation, Compensation shall
be recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount
2
<PAGE> 8
equal to the Compensation limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of full months in
the short Plan Year by twelve (12). In applying this limitation, the family
group of a Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is either a
"five percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, shall be treated
as a single Participant, except that for this purpose Family Members shall
include only the affected Participant's spouse and any lineal descendants who
have not attained age nineteen (19) before the close of the year. If, as a
result of the application of such rules the adjusted $200,000 limitation is
exceeded, then the limitation shall be prorated among the affected Family
Members in proportion to each such Family Member's Compensation prior to the
application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
3
<PAGE> 9
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.10(a) pro rata among all affected Family Members.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of this amendment and
restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).
1.11 "Early Retirement Date." This Plan does not provide for a retirement
date prior to Normal Retirement Date.
4
<PAGE> 10
1.12 "Elective Contribution" means the Employer's contributions to the Plan
of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.1(c) and Section
4.6 shall be considered an Elective Contribution for purposes of the Plan. Any
such contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees who are Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall not be eligible to participate in this Plan.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties will not be eligible to
participate in this Plan unless such agreement expressly provides for coverage
in this Plan or two percent or more of the Employees of the Employer who are
covered pursuant to that agreement are professionals as defined in Regulation
1.410(b)-9.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
1.15 "Employer" means Data Translation, Inc. and any successor which shall
maintain this Plan; and any predecessor which has maintained this Plan. The
Employer is a corporation, with principal offices in the Commonwealth of
Massachusetts.
5
<PAGE> 11
1.16 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions made on behalf of Highly Compensated Participants for
the Plan Year over the maximum amount of such contributions permitted under
Section 4.5(a). Excess Contributions shall be treated as an "annual addition"
pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(g), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected Participant, such
Participant's spouse and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
6
<PAGE> 12
Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on December 1st of each year and ending the following November 30th.
1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Terminated Participant's Account, or
(b) the last day of the Plan Year in which the Participant
incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(f)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement,
the definition of "415 Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.
7
<PAGE> 13
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12). In
applying this limitation, the family group of a Highly Compensated Participant
who is subject to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the Employer or one
of the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, shall be treated as a single Participant, except
that for this purpose Family Members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction,
8
<PAGE> 14
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, in connection with the adoption of this amendment and restatement,
the definition of "414(s) Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "414(s) Compensation" means compensation determined pursuant to the
Plan then in effect.
1.26 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section
1.32(c).
(b) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $50,000 and were in
the Top Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of
the Employer (as that term is defined within the meaning of the
Regulations under Code Section 416) and received "415 Compensation"
during the "look-back year" from the Employer greater than 50 percent
of the limit in effect under Code Section
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<PAGE> 15
415(b)(1)(A) for any such Plan Year. The number of officers shall be
limited to the lesser of (i) 50 employees; or (ii) the greater of 3
employees or 10 percent of all employees. For the purpose of
determining the number of officers, Employees described in Section
1.55(a), (b), (c) and (d) shall be excluded, but such Employees shall
still be considered for the purpose of identifying the particular
Employees who are officers. If the Employer does not have at least one
officer whose annual "415 Compensation" is in excess of 50 percent of
the Code Section 415(b)(1)(A) limit, then the highest paid officer of
the Employer will be treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b), (c) or (d) above
when these paragraphs are modified to substitute "determination year"
for "look-back year."
The "look-back year" shall be the calendar year ending with or within
the Plan Year for which testing is being performed, and the "determination year"
(if applicable) shall be the period of time, if any, which extends beyond the
"look-back year" and ends on the last day of the Plan Year for which testing is
being performed (the "lag period"). If the "lag period" is less than twelve
months long, the dollar threshold amounts specified in (b), (c) and (d) above
shall be prorated based upon the number of months in the "lag period."
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulations. In the case of such
an adjustment, the dollar limits which shall be applied are those for the
calendar year in which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
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Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
1.27 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year preceding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner." For purposes
of this Section, "determination year," "415 Compensation" and "five percent
owner" shall be determined in accordance with Section 1.26. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.29 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which
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the award, agreement or payment is made. The same Hours of Service shall not be
credited both under (1) or (2), as the case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a
Year of Service, a year of participation for purposes of accrued benefits, a
1-Year Break in Service, and employment commencement date (or reemployment
commencement date). In addition, Hours of Service will be credited for
employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income or losses allocable to Excess Deferred
Compensation which amount shall be allocated in the same manner as income or
losses are allocated pursuant to Section 4.4(f).
1.31 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
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1.32 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
"415 Compensation" greater than 50 percent of the amount in effect
under Code Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation
in effect under Code Section 415(c)(1)(A) for the calendar year in
which such Plan Year ends and owning (or considered as owning within
the meaning of Code Section 318) both more than one-half percent
interest and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Employer or stock possessing more than five
percent (5%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than five percent (5%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent
owner" means any person who owns (or is considered as owning within
the meaning of Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be
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aggregated under Code Sections 414(b), (c), (m) and (o) shall be
treated as separate employers. However, in determining whether an
individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
1.33 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer pursuant
to a salary reduction agreement and which are not includible in
the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee
contributions described in Code Section 414(h)(2) that are
treated as Employer contributions.
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(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer's contributions to the
Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65 birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.39 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of
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<PAGE> 21
Service shall be credited for the computation period in which the absence from
work begins, only if credit therefore is necessary to prevent the Employee from
incurring a 1-Year Break in Service, or, in any other case, in the immediately
following computation period. The Hours of Service credited for a "maternity or
paternity leave of absence" shall be those which would normally have been
credited but for such absence, or, in any case in which the Administrator is
unable to determine such hours normally credited, eight (8) Hours of Service per
day. The total Hours of Service required to be credited for a "maternity or
paternity leave of absence" shall not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the Plan
as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.42 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer's Non-Elective Contributions.
A separate accounting shall be maintained with respect to that portion
of the Participant's Account attributable to Employer matching contributions
made pursuant to Section 4.1(b) and Employer discretionary contributions made
pursuant to Section 4.1(d).
1.43 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.
1.44 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.45 "Plan" means this instrument, including all amendments thereto.
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1.46 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.47 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.1(c) and Section
4.6. Such contributions shall be considered an Elective Contribution for the
purposes of the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.8(h) which are used to satisfy the "Actual Contribution
Percentage" tests shall be considered Qualified Non-Elective Contributions and
be subject to the provisions of Sections 4.2(b) and 4.2(c).
1.48 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.49 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.50 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 6.1).
1.51 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.52 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.53 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.54 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
1.55 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2)
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<PAGE> 23
and 414(o)(2) shall be considered Employees unless such Leased Employees are
covered by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer. Employees who are non-resident aliens
and who received no earned income (within the meaning of Code Section 911(d)(2))
from the Employer constituting United States source income within the meaning of
Code Section 861(a)(3) shall not be treated as Employees. Additionally, for the
purpose of determining the number of active Employees in any year, the following
additional Employees shall also be excluded; however, such Employees shall still
be considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during
a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer
are covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.56 "Total and Permanent Disability" means totally and permanently
disabled as determined by the Plan Administrator (1) on medical evidence
furnished by a licensed physician approved by the Plan Administrator, (2) on
evidence that the Eligible Employee is eligible for disability benefits under
any long term disability plan sponsored by an Affiliated Employer but
administered by an independent third party, or (3) on evidence that the
Eligible Employee is eligible for total and permanent disability benefits under
the Social Security Act in effect at the date of disability.
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1.57 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.58 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.59 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.60 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period beginning after a 1-Year Break in
Service shall be measured from the date on which an Employee again performs an
Hour of Service. The participation computation period shall shift to the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service. An Employee who is credited with the required
Hours of Service in both the initial computation period (or the computation
period beginning after a 1-Year Break in Service) and the Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service, shall be credited with two (2) Years of Service for purposes of
eligibility to participate.
For vesting purposes, the computation period shall be the Plan Year,
including periods prior to the Effective Date of the Plan.
For all other purposes, the computation period shall be the Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c). However,
in determining whether an Employee has completed a Year of Service for benefit
accrual purposes in the short Plan Year, the number of the Hours of Service
required shall be proportionately reduced based on the number of full months in
the short Plan Year.
Years of Service with any Affiliated Employer shall be recognized.
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ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds sixty percent (60%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate
Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super Top Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top
Heavy Group). In addition, if a Participant or Former Participant has
not performed any services for any Employer maintaining the Plan at
any time during the five year period ending on the Determination Date,
any accrued benefit for such Participant or Former Participant shall
not be taken into account for the purposes of determining whether this
Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year
in which, as of the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees and (2) the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the Present Value
of Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
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(c) Aggregate Account: A Participant's Aggregate Account as of
the Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the
most recent valuation occurring within a twelve (12) month
period ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of
any contributions actually made after the valuation date but
due on or before the Determination Date, except for the
first Plan Year when such adjustment shall also reflect the
amount of any contributions made after the Determination
Date that are allocated as of a date in that first Plan
Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the Determination
Date, such distributions are not included as distributions
for top heavy purposes to the extent that such distributions
are already included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and
distributions under a terminated plan which if it had not
been terminated would have been required to be included in
an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of
life insurance policies) of a Participant's account balance
because of death shall be treated as a distribution for the
purposes of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate
Account balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both
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<PAGE> 27
initiated by the Employee and made from a plan maintained by
one employer to a plan maintained by another employer), if
this Plan provides the rollovers or plan-to-plan transfers,
it shall always consider such rollovers or plan-to-plan
transfers as a distribution for the purposes of this
Section. If this Plan is the plan accepting such rollovers
or plan-to-plan transfers, it shall not consider such
rollovers or plan-to-plan transfers as part of the
Participant's Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section.
If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or
plan-to-plan transfer as part of the Participant's Aggregate
Account balance, irrespective of the date on which such
rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers
are to be treated as the same employer in (5) and (6) above,
all employers aggregated under Code Section 414(b), (c), (m)
and (o) are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation
Group or a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in which a
Key Employee is a participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and
each other plan of the Employer which enables any plan in which a
Key Employee participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be aggregated.
Such group shall be known as a Required Aggregation Group.
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In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the Required
Aggregation Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include
any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a
whole, would continue to satisfy the provisions of Code Sections
401(a)(4) and 410. Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a
Top Heavy Plan if the Permissive Aggregation Group is a Top Heavy
Group. No plan in the Permissive Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation Group
is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated in
order to determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of
the Employer if it was maintained within the last five (5) years
ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding
Plan Year, or (b) in the case of the first Plan Year, the last day of
such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit
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<PAGE> 29
shall be determined as of the most recent valuation date that falls
within or ends with the 12-month period ending on the Determination
Date except as provided in Code Section 416 and the Regulations
thereunder for the first and second plan years of a defined benefit
plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under
all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for
all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current
need, or shall appoint a qualified person to do so. The Employer or
its delegate shall communicate such needs and goals to the Trustee,
who shall coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not,
however, constitute a directive to the Trustee as to investment of the
Trust Funds. Such "funding policy and method" shall be consistent with
the objectives of this Plan and with the requirements of Title I of
the Act.
(c) The Employer shall periodically review the performance of
any Fiduciary or other person to whom duties have been delegated or
allocated by it under the
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provisions of this Plan or pursuant to procedures established
hereunder. This requirement may be satisfied by formal periodic review
by the Employer or by a qualified person specifically designated by
the Employer, through day-to-day conduct and evaluation, or through
other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an Administrator,
shall promptly designate in writing a successor to this position. If the
Employer does not appoint an Administrator, the Employer will function as the
Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the Plan.
Any such determination by the
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Administrator shall be conclusive and binding upon all persons. The
Administrator may establish procedures, correct any defect, supply any
information, or reconcile any inconsistency in such manner and to such extent as
shall be deemed necessary or advisable to carry out the purpose of the Plan;
provided, however, that any procedure, discretionary act, interpretation or
construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan shall continue to be deemed a qualified plan under the terms of Code
Section 401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to
the amount and the kind of benefits to which any Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of
the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with
the terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which
such Contract shall be purchased;
(g) to compute and certify to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to be
contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of
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the Plan in order that the Trustee can exercise any investment
discretion in a manner designed to accomplish specific objectives;
(i) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their Compensation
deferred or paid to them in cash;
(j) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer
shall supply full and timely information to the Administrator on all matters
relating to the Compensation of all Participants, their Hours of Service, their
Years of Service, their retirement, death, disability, or termination of
employment, and such other pertinent facts as the Administrator may require; and
the Administrator shall advise the Trustee of such of the foregoing facts as may
be pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
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2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the
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<PAGE> 34
claimant shall have an opportunity to submit written and oral evidence and
arguments in support of his claim. At the hearing (or prior thereto upon 5
business days written notice to the Administrator) the claimant or his
representative shall have an opportunity to review all documents in the
possession of the Administrator which are pertinent to the claim at issue and
its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed six (6) Months of Service
shall be eligible to participate hereunder as of the date he has satisfied such
requirements. However, any Employee who was a Participant in the Plan prior to
the effective date of this amendment and restatement shall continue to
participate in the Plan. The Employer shall give each prospective Eligible
Employee written notice of his eligibility to participate in the Plan prior to
the close of the Plan Year in which he first becomes an Eligible Employee.
For purposes of this Section, an Eligible Employee will be deemed to
have completed six (6) Months of Service if he is in the employ of the Employer
at any time six (6) months after his employment commencement date. Employment
commencement date shall be the first day that he is entitled to be credited with
an Hour of Service for the performance of duty.
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3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee
shall make application to the Employer for participation in the Plan and agree
to the terms hereof. Upon the acceptance of any benefits under this Plan, such
Employee shall automatically be deemed to have made application and shall be
bound by the terms and conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
first day of the calendar quarter coinciding with or next following the date on
which such Employee met the eligibility requirements of Section 3.1, provided
said Employee was still employed as of such date (or if not employed on such
date, as of the date of rehire if a 1-Year Break in Service has not occurred).
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of
an Eligible Employee to an ineligible Employee, such Former
Participant shall continue to vest in his interest in the Plan for
each Year of Service completed while a noneligible Employee, until
such time as his Participant's Account shall be forfeited or
distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings of the
Trust Fund.
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(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate but
has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of the
Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as
a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has been
made, the Employer shall not be entitled to recover the contribution made with
respect to the ineligible person regardless of whether or not a deduction is
allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year.
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ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be
deemed an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share in
matching contributions for the Plan Year, a discretionary matching
contribution equal to a percentage of each such Participant's Deferred
Compensation, the exact percentage to be determined each year by the
Employer, which amount shall be deemed an Employer's Non-Elective
Contribution.
(c) On behalf of each Non-Highly Compensated Participant who is
eligible to share in the Qualified Non-Elective Contribution for the
Plan Year, a discretionary Qualified Non-Elective Contribution equal
to a percentage of each eligible individual's Compensation, the exact
percentage to be determined each year by the Employer. The Employer's
Qualified Non-Elective Contribution shall be deemed an Employer's
Elective Contribution.
(d) A discretionary amount, which amount shall be deemed an
Employer's Non-Elective Contribution.
(e) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash
or in such property as is acceptable to the Trustee.
(f) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution even
if it exceeds the amount which is deductible under Code Section 404.
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4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 16% of his
Compensation which would have been received in the Plan Year, but for
the deferral election. A deferral election (or modification of an
earlier election) may not be made with respect to Compensation which
is currently available on or before the date the Participant executed
such election.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer
Elective Contribution and allocated to that Participant's Elective
Account.
(b) The balance in each Participant's Elective Account shall be
fully Vested at all times and shall not be subject to Forfeiture for
any reason.
(c) Amounts held in the Participant's Elective Account may not
be distributable earlier than:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan," as that term is described in
Regulation 1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to an entity that is
not an Affiliated Employer of substantially all of the assets
(within the meaning of Code Section 409(d)(2)) used in a trade or
business of such corporation if such corporation continues to
maintain this Plan after the disposition with respect to a
Participant who continues employment with the corporation
acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a subsidiary
(within the meaning of Code Section 409(d)(3)) to an entity which
is not an Affiliated Employer but only with respect to a
Participant who continues employment with such subsidiary; or
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(6) the proven financial hardship of a Participant, subject to
the limitations of Section 6.11.
(d) For each Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed, during any taxable year of the Participant, the
limitation imposed by Code Section 402(g), as in effect at the
beginning of such taxable year. If such dollar limitation is exceeded,
a Participant will be deemed to have notified the Administrator of
such excess amount which shall be distributed in a manner consistent
with Section 4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in accordance
with Regulations.
(e) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to
Section 6.11 or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from
any other plan maintained by the Employer, then such Participant shall
not be permitted to elect to have Deferred Compensation contributed to
the Plan on his behalf for a period of twelve (12) months following
the receipt of the distribution. Furthermore, the dollar limitation
under Code Section 402(g) shall be reduced, with respect to the
Participant's taxable year following the taxable year in which the
hardship distribution was made, by the amount of such Participant's
Deferred Compensation, if any, pursuant to this Plan (and any other
plan maintained by the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation
1.402(g)-1(b)) under another qualified cash or deferred arrangement
(as defined in Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction arrangement
(within the meaning of Code Section 3121(a)(5)(D)), a deferred
compensation plan under Code Section 457, or a trust described in Code
Section 501(c)(18) cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the method
provided in Code Section 415(d) pursuant to Regulations) for such
Participant's
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taxable year, the Participant may, not later than March 1 following
the close of the Participant's taxable year, notify the Administrator
in writing of such excess and request that his Deferred Compensation
under this Plan be reduced by an amount specified by the Participant.
In such event, the Administrator may direct the Trustee to distribute
such excess amount (and any Income allocable to such excess amount) to
the Participant not later than the first April 15th following the
close of the Participant's taxable year. Distributions in accordance
with this paragraph may be made for any taxable year of the
Participant which begins after December 31, 1986. Any distribution of
less than the entire amount of Excess Deferred Compensation and Income
shall be treated as a pro rata distribution of Excess Deferred
Compensation and Income. The amount distributed shall not exceed the
Participant's Deferred Compensation under the Plan for the taxable
year. Any distribution on or before the last day of the Participant's
taxable year must satisfy each of the following conditions:
(1) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution
of Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall
be made simultaneously from Deferred Compensation and matching
contributions which relate to such Deferred Compensation
provided, however, that any such matching contributions which are
not Vested shall be forfeited in lieu of distribution.
(g) Notwithstanding Section 4.2(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any
distribution of Excess Contributions pursuant to Section 4.6(a) for
the Plan Year beginning with or within the taxable year of the
Participant.
(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market
value of the Participant's
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<PAGE> 41
Elective Account shall be used to provide additional benefits to the
Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective Account
may be treated as a Directed Investment Account pursuant to Section
4.12.
(j) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a
bank or savings and loan association, money market certificate, or
other short-term debt security acceptable to the Trustee until such
time as the allocations pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall implement the
salary reduction elections provided for herein in accordance with the
following:
(1) A Participant may commence making elective deferrals to the
Plan only after first satisfying the eligibility and
participation requirements specified in Article III. However, the
Participant must make his initial salary deferral election within
a reasonable time, not to exceed thirty (30) days, after entering
the Plan pursuant to Section 3.3. If the Participant fails to
make an initial salary deferral election within such time, then
such Participant may thereafter make an election in accordance
with the rules governing modifications. The Participant shall
make such an election by entering into a written salary reduction
agreement with the Employer and filing such agreement with the
Administrator. Such election shall initially be effective
beginning with the pay period following the acceptance of the
salary reduction agreement by the Administrator, shall not have
retroactive effect and shall remain in force until revoked.
(2) A Participant may modify a prior election during the Plan
Year and concurrently make a new election by filing a written
notice with the Administrator within a reasonable time before the
pay period for which such modification is to be effective.
However, modifications to a salary deferral election shall only
be permitted
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<PAGE> 42
quarterly, during election periods established by the
Administrator prior to the first day of each Plan Year quarter.
Any modification shall not have retroactive effect and shall
remain in force until revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan
Year by providing the Administrator with thirty (30) days written
notice of such revocation (or upon such shorter notice period as
may be acceptable to the Administrator). Such revocation shall
become effective as of the beginning of the first pay period
coincident with or next following the expiration of the notice
period. Furthermore, the termination of the Participant's
employment, or the cessation of participation for any reason,
shall be deemed to revoke any salary reduction agreement then in
effect, effective immediately following the close of the pay
period within which such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to
the Plan for each Plan Year within the time prescribed by law, including
extensions of time, for the filing of the Employer's federal income tax return
for the Fiscal Year.
However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer's general assets,
but in any event within ninety (90) days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the close of such Plan
Year.
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4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit
as of each Anniversary Date all amounts allocated to each such
Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation
of the Employer's contributions for each Plan Year. Within a
reasonable period of time after the date of receipt by the
Administrator of such information, the Administrator shall allocate
such contribution as follows:
(1) With respect to the Employer's Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective
Account in an amount equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(b), to each Participant's Account in
accordance with Section 4.1(b).
Any Participant actively employed during the Plan Year shall be
eligible to share in the matching contribution for the Plan Year.
(3) With respect to the Employer's Qualified Non-Elective
Contribution made pursuant to Section 4.1(c), to each
Participant's Elective Account in accordance with Section 4.1(c).
Any Non-Highly Compensated Participant actively employed during
the Plan Year shall be eligible to share in the Qualified
Non-Elective Contribution for the Plan Year.
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<PAGE> 44
(4) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(d), to each Participant's Account in
the same proportion that each such Participant's Compensation for
the year bears to the total Compensation of all Participants for
such year.
Only Participants who have completed a Year of Service during the
Plan Year and are actively employed on the last day of the Plan
Year shall be eligible to share in the discretionary contribution
for the year. However, with respect to Plan Years beginning after
December 31, 1989, in lieu of the foregoing, only Participants
who are actively employed on the last day of the Plan Year or who
complete more than 500 Hours of Service during the Plan Year
prior to terminating employment shall be eligible to share in the
discretionary contribution for the year. In determining whether a
Participant has completed more than 500 Hours of Service during a
short Plan Year, the number of the Hours of Service required
shall be proportionately reduced based on the number of full
months in the short Plan Year.
(c) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balances of Former
Participants, if any, in accordance with Section 6.4(f)(2). The
remaining Forfeitures, if any, shall be used to reduce the
contribution of the Employer hereunder for the Plan Year in which such
Forfeitures occur in the following manner:
(1) Forfeitures attributable to Employer matching contributions
made pursuant to Section 4.1(b) shall be used to reduce the Plan
Expenses for the Plan Year in which such Forfeitures occur.
(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.1(d) shall be used to
reduce the Plan expenses for the Plan Year in which
such Forfeitures occur.
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(d) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions as provided
above, shall receive the minimum allocation provided for in Section
4.4(g) if eligible pursuant to the provisions of Section 4.4(i).
(e) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Retirement
(Normal or Late), Total and Permanent Disability or death shall share
in the allocation of contributions for that Plan Year.
(f) As of each Anniversary Date or other valuation date, before
one-half of the current valuation period allocation of Employer
contributions, any earnings or losses (net appreciation or net
depreciation) of the Trust Fund shall be allocated in the same
proportion that each Participant's and Former Participant's
nonsegregated accounts bear to the total of all Participants' and
Former Participants' nonsegregated accounts as of such date.
Participants' transfers from other qualified plans deposited in
the general Trust Fund shall share in any earnings and losse (net
appreciation or net depreciation) of the Trust Fund in the same
manner provided above. Each segregated account maintained on behalf of
a Participant shall be credited or charged with its separate earnings
and losses.
(g) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to at least three
percent (3%) of such Non-Key Employee's "415 Compensation". However,
if (1) the sum of the Employer's contributions allocated to the
Participant's Combined Account of each Key Employee for such Top Heavy
Plan Year is less than three percent (3%) of each Key Employee's "415
Compensation" and (2) this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to meet the
requirements of Code Section 401(a)(4) or 410, the sum of the
Employer's
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contributions allocated to the Participant's Combined Account of each
Non-Key Employee shall be equal to the largest percentage allocated to
the Participant's Combined Account of any Key Employee. However, in
determining whether a Non-Key Employee has received the required
minimum allocation, such Non-Key Employee's Deferred Compensation and
matching contributions needed to satisfy the "Actual Contribution
Percentage" tests pursuant to Section 4.7(a) shall not be taken into
account.
However, no such minimum allocation shall be required in
this Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(h) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
Employee shall be equal to the ratio of the sum of the Employer's
contributions allocated on behalf of such Key Employee divided by the
"415 Compensation" for such Key Employee.
(i) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Combined Account
of all Non-Key Employees who are Participants and who are employed by
the Employer on the last day of the Plan Year, including Non-Key
Employees who have (1) failed to complete a Year of Service; and (2)
declined to make mandatory contributions (if required) or, in the case
of a cash or deferred arrangement, elective contributions to the Plan.
(j) For the purposes of this Section, "415 Compensation" shall
be limited to $200,000. Such amount shall be adjusted at the same time
and in the same manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any calendar year
shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation
shall be effective on January 1, 1990. For any short Plan Year the
"415 Compensation" limit shall be an amount equal to the "415
Compensation" limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12). However, for Plan Years
41
<PAGE> 47
beginning prior to January 1, 1989, the $200,000 limit shall apply
only for Top Heavy Plan Years and shall not be adjusted.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the OBRA '93 annual compensation limit in effect
for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first Plan
Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
(k) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during the Plan
Year shall share in the salary reduction contributions made by the
Employer for the year of termination without regard to the Hours of
Service credited.
(l) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be
maintained as follows:
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<PAGE> 48
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
(m) Notwithstanding anything to the contrary, for Plan Years
beginning after December 31, 1989, if this is a Plan that would
otherwise fail to meet the requirements of Code Sections 401(a)(26),
410(b)(1) or 410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a sufficient number
or percentage of Participants for a Plan Year, then the following
rules shall apply:
(1) The group of Participants eligible to share in the
Employer's contribution for the Plan Year shall be expanded to
include the minimum number of Participants who would not
otherwise be eligible as are necessary to satisfy the applicable
test specified above. The specific Participants who shall become
eligible under the terms of this paragraph shall be those who are
actively employed on the last day of the Plan Year and, when
compared to similarly situated Participants, have completed the
greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the applicable
test is still not satisfied, then the group of Participants
eligible to share in the Employer's contribution for the Plan
Year shall be further expanded to include the minimum number of
Participants who are not actively employed on the last day of the
Plan Year as are necessary to satisfy the applicable test. The
specific Participants who shall become eligible to share shall be
those Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours of
Service in the Plan Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated
to satisfy these requirements. In such event, the Employer shall
make an additional contribution
43
<PAGE> 49
equal to the amount such affected Participants would have
received had they been included in the allocations, even if it
exceeds the amount which would be deductible under Code Section
404. Any adjustment to the allocations pursuant to this paragraph
shall be considered a retroactive amendment adopted by the last
day of the Plan Year.
(4) Notwithstanding the foregoing, for any Top Heavy Plan Year
beginning after December 31, 1992, if the portion of the Plan
which is not a Code Section 401(k) or 401(m) plan would fail to
satisfy Code Section 410(b) if the coverage tests were applied by
treating those Participants whose only allocation (under such
portion of the Plan) would otherwise be provided under the top
heavy formula as if they were not currently benefiting under the
Plan, then, for purposes of this Section 4.4(m), such
Participants shall be treated as not benefiting and shall
therefore be eligible to be included in the expanded class of
Participants who will share in the allocation provided under the
Plan's non top heavy formula.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning
after December 31, 1986, the annual allocation derived from Employer
Elective Contributions to a Participant's Elective Account shall
satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group
multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the
Highly Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
shall not be more than two percentage points. Additionally, the
"Actual Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
multiplied by 2.
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<PAGE> 50
The provisions of Code Section 401(k)(3) and Regulation
1.401(k)-1(b) are incorporated herein by reference.
However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method
described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions under this
Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2, the provisions of
which are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated Participant
group and Non-Highly Compensated Participant group for a Plan Year,
the average of the ratios, calculated separately for each Participant
in such group, of the amount of Employer Elective Contributions
allocated to each Participant's Elective Account for such Plan Year,
to such Participant's "414(s) Compensation" for such Plan Year. The
actual deferral ratio for each Participant and the "Actual Deferral
Percentage" for each group shall be calculated to the nearest
one-hundredth of one percent for Plan Years beginning after December
31, 1988. Employer Elective Contributions allocated to each Non-Highly
Compensated Participant's Elective Account shall be reduced by Excess
Deferred Compensation to the extent such excess amounts are made under
this Plan or any other plan maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio of
a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant
is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be
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<PAGE> 51
determined by aggregating Employer Elective Contributions and
"414(s) Compensation" of all eligible Family Members (including
Highly Compensated Participants). However, in applying the
$200,000 limit to "414(s) Compensation," for Plan Years beginning
after December 31, 1988, Family Members shall include only the
affected Employee's spouse and any lineal descendants who have
not attained age 19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect to Plan Years
beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance with
this paragraph.
(2) The Employer Elective Contributions and "414(s)
Compensation" of all Family Members shall be disregarded for
purposes of determining the "Actual Deferral Percentage" of the
Non-Highly Compensated Participant group except to the extent
taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1)
and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly
Compensated Participant and a Non-Highly Compensated Participant shall
include any Employee eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was made or
suspended pursuant to Section 4.2.
(e) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include cash
or deferred arrangements are considered one plan for the purposes of
Code Section 401(a)(4) or 410(b) (other than Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December
31, 1988), the cash or deferred arrangements included in such plans
shall be treated as one arrangement. In addition, two or more cash or
deferred arrangements may be considered as a single arrangement for
purposes of determining whether or not such arrangements satisfy Code
Sections 401(a)(4), 410(b) and 401(k). In such a case, the cash or
deferred
46
<PAGE> 52
arrangements included in such plans and the plans including such
arrangements shall be treated as one arrangement and as one plan for
purposes of this Section and Code Sections 401(a)(4), 410(b) and
401(k). Plans may be aggregated under this paragraph (e) for Plan
Years beginning after December 31, 1989 only if they have the same
plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) or 409 may not be combined with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and Code Sections 401(a)(4), 410(b)
and 401(k).
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part
of an employee stock ownership plan as defined in Code Section
4975(e)(7) or 409 for Plan Years beginning after December 31, 1988) of
the Employer or an Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred arrangement for
the purpose of determining the actual deferral ratio with respect to
such Highly Compensated Participant. However, for Plan Years beginning
after December 31, 1988, if the cash or deferred arrangements have
different plan years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same calendar
year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a) for Plan Years beginning after December 31, 1986, the
Administrator shall adjust Excess Contributions pursuant to the options set
forth below:
(a) On or before the fifteenth day of the third month following
the end of each Plan Year, the Highly Compensated Participant having
the highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him until one of the tests set forth in
Section 4.5(a) is satisfied, or until his
47
<PAGE> 53
actual deferral ratio equals the actual deferral ratio of the Highly
Compensated Participant having the second highest actual deferral
ratio. This process shall continue until one of the tests set forth in
Section 4.5(a) is satisfied. For each Highly Compensated Participant,
the amount of Excess Contributions is equal to the Elective
Contributions on behalf of such Highly Compensated Participant
(determined prior to the application of this paragraph) minus the
amount determined by multiplying the Highly Compensated Participant's
actual deferral ratio (determined after application of this paragraph)
by his "414(s) Compensation." However, in determining the amount of
Excess Contributions to be distributed with respect to an affected
Highly Compensated Participant as determined herein, such amount shall
be reduced by any Excess Deferred Compensation previously distributed
to such affected Highly Compensated Participant for his taxable year
ending with or within such Plan Year.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are
allocable;
(ii) shall be made simultaneously from Deferred
Compensation and matching contributions which relate to such
Deferred Compensation provided, however, that any such
matching contributions which are not Vested shall be
forfeited in lieu of distribution;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of
Excess Contributions and Income.
(3) The determination and correction of Excess Contributions of
a Highly Compensated Participant
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<PAGE> 54
whose actual deferral ratio is determined under the family
aggregation rules shall be accomplished by reducing the actual
deferral ratio as required herein, and the Excess Contributions
for the family unit shall then be allocated among the Family
Members in proportion to the Elective Contributions of each
Family Member that were combined to determine the group actual
deferral ratio. Notwithstanding the foregoing, with respect to
Plan Years beginning prior to January 1, 1990, compliance with
the Regulations then in effect shall be deemed to be compliance
with this paragraph.
(b) Within twelve (12) months after the end of the Plan Year,
the Employer may make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an amount sufficient
to satisfy one of the tests set forth in Section 4.5(a). Such
contribution shall be allocated to the Participant's Elective Account
of each Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated
Participants.
(c) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth
in Section 4.5(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order
provided in Section 4.6(a) each affected Highly Compensated
Participant's deferral election made pursuant to Section 4.2 by an
amount necessary to satisfy one of the tests set forth in Section
4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years
beginning after December 31, 1986 for the Highly Compensated
Participant group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
49
<PAGE> 55
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group, or such percentage for
the Non-Highly Compensated Participant group plus 2 percentage
points. However, for Plan Years beginning after December 31,
1988, to prevent the multiple use of the alternative method
described in this paragraph and Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 or any other cash or deferred
arrangement maintained by the Employer or an Affiliated Employer
and to make Employee contributions or to receive matching
contributions under this Plan or under any other plan maintained
by the Employer or an Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation 1.401(m)-2. The
provisions of Code Section 401(m) and Regulations 1.401(m)-1(b)
and 1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separately
for each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b) on behalf of each such Participant for such Plan
Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions pursuant
to Section 4.8(d), only Employer matching contributions (excluding
Employer matching contributions forfeited or distributed pursuant to
Sections 4.2(f) and 4.6(a)(1) or forfeited pursuant to Section 4.8(a))
contributed to the Plan prior to the end of the succeeding Plan Year
shall be considered. In addition, the Administrator may elect to take
into account, with respect to Employees eligible to have Employer
matching contributions pursuant to Section 4.1(b) allocated to their
accounts, elective deferrals (as defined in Regulation
50
<PAGE> 56
1.402(g)-1(b)) and qualified non-elective contributions (as defined in
Code Section 401(m)(4)(C)) contributed to any plan maintained by the
Employer. Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching contributions
subject to Regulation 1.401(m)-1(b)(5) which is incorporated herein by
reference. However, for Plan Years beginning after December 31, 1988,
the Plan Year must be the same as the plan year of the plan to which
the elective deferrals and the qualified non-elective contributions
are made.
(d) For the purpose of determining the actual contribution ratio
of a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Employee is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating Employer matching
contributions made pursuant to Section 4.1(b) and "414(s)
Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000
limit to "414(s) Compensation" for Plan Years beginning after
December 31, 1988, Family Members shall include only the affected
Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect to Plan Years
beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance with
this paragraph.
(2) The Employer matching contributions made pursuant to Section
4.1(b) and "414(s) Compensation" of all Family Members shall be
disregarded for purposes of determining the "Actual Contribution
Percentage" of the Non-Highly Compensated Participant group
except to the extent taken into account in paragraph (1) above.
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<PAGE> 57
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1)
and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(m), if two or more plans of the Employer to which
matching contributions, Employee contributions, or both, are made are
treated as one plan for purposes of Code Sections 401(a)(4) or 410(b)
(other than the average benefits test under Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December
31, 1988), such plans shall be treated as one plan. In addition, two
or more plans of the Employer to which matching contributions,
Employee contributions, or both, are made may be considered as a
single plan for purposes of determining whether or not such plans
satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case,
the aggregated plans must satisfy this Section and Code Sections
401(a)(4), 410(b) and 401(m) as though such aggregated plans were a
single plan. Plans may be aggregated under this paragraph (e) for Plan
Years beginning after December 31, 1988, only if they have the same
plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) or 409 may not be aggregated with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and Code Sections 401(a)(4), 410(b)
and 401(m).
(f) If a Highly Compensated Participant is a Participant under
two or more plans (other than an employee stock ownership plan as
defined in Code Section 4975(e)(7) or 409 for Plan Years beginning
after December 31, 1988) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of
such Highly Compensated Participant shall be aggregated for purposes
of determining such Highly Compensated Participant's actual
contribution ratio. However, for Plan Years beginning after December
31, 1988, if the plans have different plan years, this paragraph shall
be applied by treating all plans ending with or within the same
calendar year as a single plan.
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<PAGE> 58
(g) For purposes of Sections 4.7(a) and 4.8, a Highly
Compensated Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have Employer matching contributions
pursuant to Section 4.1(b) (whether or not a deferral election was
made or suspended pursuant to Section 4.2(e)) allocated to his account
for the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning after December
31, 1986, the "Actual Contribution Percentage" for the Highly
Compensated Participant group exceeds the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group pursuant
to Section 4.7(a), the Administrator (on or before the fifteenth day
of the third month following the end of the Plan Year, but in no event
later than the close of the following Plan Year) shall direct the
Trustee to distribute to the Highly Compensated Participant having the
highest actual contribution ratio, his Vested portion of Excess
Aggregate Contributions (and Income allocable to such contributions)
and, if forfeitable, forfeit such non-Vested Excess Aggregate
Contributions attributable to Employer matching contributions (and
Income allocable to such forfeitures) until either one of the tests
set forth in Section 4.7(a) is satisfied, or until his actual
contribution ratio equals the actual contribution ratio of the Highly
Compensated Participant having the second highest actual contribution
ratio. This process shall continue until one of the tests set forth in
Section 4.7(a) is satisfied.
If the correction of Excess Aggregate Contributions
attributable to Employer matching contributions is not in proportion
to the Vested and non-Vested portion of such contributions, then the
Vested portion of the Participant's Account attributable to Employer
matching contributions after the correction shall be subject to
Section 6.5(f).
(b) Any distribution and/or forfeiture of less than the entire
amount of Excess Aggregate Contributions (and Income) shall be treated
as a pro rata distribution and/or forfeiture of Excess Aggregate
Contributions and Income. Distribution of Excess Aggregate
Contributions shall be designated by the Employer as a distribution of
Excess Aggregate
53
<PAGE> 59
Contributions (and Income). Forfeitures of Excess Aggregate
Contributions shall be treated in accordance with Section 4.4.
(c) Excess Aggregate Contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes
of Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to
Participants' Accounts for the Plan Year in which the forfeiture
occurs shall be treated as an "annual addition" pursuant to Section
4.9(b) for the Participants to whose Accounts they are reallocated and
for the Participants from whose Accounts they are forfeited.
(d) For each Highly Compensated Participant, the amount of
Excess Aggregate Contributions is equal to the Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of the Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after application
of this paragraph) by his "414(s) Compensation." The actual
contribution ratio must be rounded to the nearest one-hundredth of one
percent for Plan Years beginning after December 31, 1988. In no case
shall the amount of Excess Aggregate Contribution with respect to any
Highly Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of such Highly Compensated
Participant for such Plan Year.
(e) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as
voluntary Employee contributions due to recharacterization for the
plan year of any other qualified cash or deferred arrangement (as
defined in Code Section 401(k)) maintained by the Employer that ends
with or within the Plan Year.
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<PAGE> 60
(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules,
then the actual contribution ratio shall be reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) of each Family Member that were combined to
determine the group actual contribution ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning prior to January 1,
1990, compliance with the Regulations then in effect shall be deemed
to be compliance with this paragraph.
(g) If during a Plan Year the projected aggregate amount of
Employer matching contributions to be allocated to all Highly
Compensated Participants under this Plan would, by virtue of the tests
set forth in Section 4.7(a), cause the Plan to fail such tests, then
the Administrator may automatically reduce proportionately or in the
order provided in Section 4.8(a) each affected Highly Compensated
Participant's projected share of such contributions by an amount
necessary to satisfy one of the tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve (12) months after
the end of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests set
forth in Section 4.7(a). Such contribution shall be allocated to the
Participant's Elective Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 4.5(a).
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4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation
year" shall equal the lesser of: (1) $30,000 (as adjusted from time to
time under Code Section 415(c)(1)(A)) (or, if greater, one-fourth of
the dollar limitation in effect under Code Section 415(b)(1)(A)) or
(2) twenty-five percent (25%) of the Participant's "415 Compensation"
for such "limitation year." For any short "limitation year," the
dollar limitation in (1) above shall be reduced by a fraction, the
numerator of which is the number of full months in the short
"limitation year" and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section
415, "annual additions" means the sum credited to a Participant's
accounts for any "limitation year" of (1) Employer contributions, (2)
Employee contributions for "limitation years" beginning after December
31, 1986, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date,
which are attributable to post-retirement medical benefits allocated
to the separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition" under Code Section
415(l)(1).
(c) For purposes of applying the limitations of Code Section
415, the transfer of funds from one qualified plan to another is not
an "annual addition." In addition, the following are not Employee
contributions for the purposes of Section 4.9(b)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a
Participant from the Plan; (3) repayments of distributions received by
an
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Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4)
repayments of distributions received by an Employee pursuant to Code
Section 411(a)(3)(D) (mandatory contributions); and (5) Employee
contributions to a simplified employee pension excludable from gross
income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section
415, the "limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A) stated
in paragraph (a)(1) above shall be adjusted annually as provided in
Code Section 415(d) pursuant to the Regulations. The adjusted
limitation is effective as of January 1st of each calendar year and is
applicable to "limitation years" ending with or within that calendar
year.
(f) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined benefit plan, and all
qualified defined contribution plans (whether terminated or not) ever
maintained by the Employer shall be treated as one defined
contribution plan.
(g) For the purpose of this Section, if the Employer is a member
of a controlled group of corporations, trades or businesses under
common control (as defined by Code Section 1563(a) or Code Section
414(b) and (c) as modified by Code Section 415(h)), is a member of an
affiliated service group (as defined by Code Section 414(m)), or is a
member of a group of entities required to be aggregated pursuant to
Regulations under Code Section 414(o), all Employees of such Employers
shall be considered to be employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.
(i)(1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan
shall equal
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the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited to such Participant's accounts
during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan
not subject to Code Section 412 maintained by the Employer which
have the same Anniversary Date, "annual additions" will be
credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the
defined contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by
the Employer which have the same Anniversary Date, the maximum
"annual additions" under this Plan shall equal the product of (A)
the maximum "annual additions" for the "limitation year" minus
any "annual additions" previously credited under subparagraphs
(1) or (2) above, multiplied by (B) a fraction (i) the numerator
of which is the "annual additions" which would be credited to
such Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which
is such "annual additions" for all plans described in this
subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any
"limitation year" may not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d) or 140
percent
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of the highest average compensation, including any adjustments under
Code Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year"
beginning after December 31, 1986, in one or more defined benefit
plans maintained by the Employer which were in existence on May 6,
1986, the denominator of this fraction will not be less than 125
percent of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans individually and in
the aggregate satisfied the requirements of Code Section 415 for all
"limitation years" beginning before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior "limitation years" (including
the annual additions attributable to the Participant's nondeductible
Employee contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in Code Section
415(l)(2), maintained by the Employer), and the denominator of which
is the sum of the maximum aggregate amounts for the current and all
prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer).
The maximum aggregate amount in any "limitation year" is the lesser of
125 percent of the dollar limitation determined under Code Sections
415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35 percent
of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first
day of the first "limitation year" beginning after December 31, 1986,
in one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator
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of this fraction will be adjusted if the sum of this fraction and the
defined benefit fraction would otherwise exceed 1.0 under the terms of
this Plan. Under the adjustment, an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
"limitation year" beginning before January 1, 1987, and disregarding
any changes in the terms and conditions of the Plan made after May 5,
1986, but using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after January 1, 1987. The
annual addition for any "limitation year" beginning before January 1,
1987 shall not be recomputed to treat all Employee contributions as
annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be substituted
for 125 percent in Sections 4.9(k) and 4.9(l) unless the extra minimum
allocation is being provided pursuant to Section 4.4. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements
prescribed in this Section shall at all times comply with the
provisions of Code Section 415 and the Regulations thereunder, the
terms of which are specifically incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a
Participant's Compensation, a reasonable error in determining the
amount of elective deferrals (within the meaning of Code Section
402(g)(3)) that may be made with respect to any Participant under the
limits of Section 4.9 or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the "annual additions"
under this Plan would cause the maximum "annual additions" to be
exceeded for any Participant, the Administrator shall (1) distribute
any elective deferrals (within the meaning of Code Section 402(g)(3))
or return any voluntary Employee
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contributions credited for the "limitation year" to the extent that
the return would reduce the "excess amount" in the Participant's
accounts (2) hold any "excess amount" remaining after the return of
any elective deferrals or voluntary Employee contributions in a
"Section 415 suspense account" (3) use the "Section 415 suspense
account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to reduce Employer contributions for that
Participant if that Participant is covered by the Plan as of the end
of the "limitation year," or if the Participant is not so covered,
allocate and reallocate the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if necessary) to
all Participants in the Plan before any Employer or Employee
contributions which would constitute "annual additions" are made to
the Plan for such "limitation year" (4) reduce Employer contributions
to the Plan for such "limitation year" by the amount of the "Section
415 suspense account" allocated and reallocated during such
"limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account
under the terms of the Plan without regard to the limitations of Code
Section 415 over (2) the maximum "annual additions" determined
pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amounts"
for all Participants in the Plan during the "limitation year." The
"Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be
transferred from other qualified plans by Employees, provided that the
trust from which such funds are transferred permits the transfer to be
made and the transfer will not jeopardize the tax exempt status of the
Plan or Trust or create adverse tax consequences for the Employer. The
amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account." Such account shall
be fully Vested at all times and shall not be subject to Forfeiture
for any reason.
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(b) A Participant may withdraw his or her Rollover
Contributions plus attributable earnings at any time.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as
defined in Regulation 1.401(k)-1(g)(3)), including amounts treated as
elective contributions, which are transferred from another qualified
plan in a plan-to-plan transfer shall be subject to the distribution
limitations provided for in Regulation 1.401(k)-1(d).
(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Participant's Rollover Account shall be
used to provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a Participant's
Rollover Account shall be made in a manner which is consistent with
and satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code Section
411(a)(11) and the Regulations thereunder. Furthermore, such amounts
shall be considered as part of a Participant's benefit in determining
whether an involuntary cash-out of benefits without Participant
consent may be made.
(e) The Administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account
may be treated as a Directed Investment Account pursuant to Section
4.12.
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(g) For purposes of this Section, the term "qualified plan"
shall mean any tax qualified plan under Code Section 401(a). The term
"amounts transferred from other qualified plans" shall mean: (i)
amounts transferred to this Plan directly from another qualified plan;
(ii) distributions from another qualified plan which are eligible
rollover distributions and which are either transferred by the
Employee to this Plan within sixty (60) days following his receipt
thereof or are transferred pursuant to a direct rollover; (iii)
amounts transferred to this Plan from a conduit individual retirement
account provided that the conduit individual retirement account has no
assets other than assets which (A) were previously distributed to the
Employee by another qualified plan as a lump-sum distribution (B) were
eligible for tax-free rollover to a qualified plan and (C) were
deposited in such conduit individual retirement account within sixty
(60) days of receipt thereof and other than earnings on said assets;
and (iv) amounts distributed to the Employee from a conduit individual
retirement account meeting the requirements of clause (iii) above, and
transferred by the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement account.
(h) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of
this Section and may also require the Employee to provide an opinion
of counsel satisfactory to the Employer that the amounts to be
transferred meet the requirements of this Section.
(i) This Plan shall not accept any direct or indirect transfers
(as that term is defined and interpreted under Code Section 401(a)(11)
and the Regulations thereunder) from a defined benefit plan, money
purchase plan (including a target benefit plan), stock bonus or profit
sharing plan which would otherwise have provided for a life annuity
form of payment to the Participant.
(j) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction
having the effect of such a transfer) shall only be permitted if it
will not result in the elimination or reduction of any "Section
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411(d)(6) protected benefit" as described in Section 8.1.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine
that all Participants be permitted to direct the Trustee as to the
investment of all or a portion of the interest in any one or more of
their individual account balances. If such authorization is given,
Participants may, subject to a procedure established by the
Administrator and applied in a uniform nondiscriminatory manner,
direct the Trustee in writing to invest any portion of their account
in specific assets, specific funds or other investments permitted
under the Plan and the directed investment procedure. That portion of
the account of any Participant so directing will thereupon be
considered a Directed Investment Account, which shall not share in
Trust Fund earnings.
(b) A separate Directed Investment Account shall be established
for each Participant who has directed an investment. Transfers between
the Participant's regular account and his Directed Investment Account
shall be charged and credited as the case may be to each account. The
Directed Investment Account shall not share in Trust Fund earnings,
but it shall be charged or credited as appropriate with the net
earnings, gains, losses and expenses as well as any appreciation or
depreciation in market value during each Plan Year attributable to
such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary
Date, and at such other date or dates deemed necessary by the Administrator,
herein called "valuation date," to determine the net worth of the assets
comprising the Trust Fund as it exists on the "valuation date." In determining
such net worth, the Trustee shall value the assets comprising the Trust Fund at
their fair market value as of the "valuation date" and shall deduct all expenses
for which the Trustee has not yet obtained reimbursement from the Employer or
the Trust Fund.
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5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust
Fund which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date." If such
securities were not traded on the "valuation date," or if the exchange on which
they are traded was not open for business on the "valuation date," then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date." Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date," which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date. However, a
Participant may postpone the termination of his employment with the Employer to
a later date, in which event the participation of such Participant in the Plan,
including the right to receive allocations pursuant to Section 4.4, shall
continue until his Late Retirement Date. Upon a Participant's Retirement Date,
or as soon thereafter as is practicable, the Trustee shall distribute all
amounts credited to such Participant's Combined Account in accordance with
Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute the value of the
deceased Participant's accounts to the Participant's Beneficiary.
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(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of
Sections 6.6 and 6.7, to distribute any remaining Vested amounts
credited to the accounts of a deceased Former Participant to such
Former Participant's Beneficiary.
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be
taken into account in determining the amount of the death benefit.
(d) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the
value of the account of a deceased Participant or Former Participant
as the Administrator may deem desirable. The Administrator's
determination of death and of the right of any person to receive
payment shall be conclusive.
(e) The Beneficiary of the death benefit payable pursuant to
this Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic
relations order" as defined in Code Section 414(p) which provides
otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be
made on a form satisfactory to the Administrator. A Participant may at
any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Administrator. However, the Participant's spouse must again
consent in writing to any change in Beneficiary unless the original
consent acknowledged that the spouse had the right to limit consent
only to a specific Beneficiary and that the spouse voluntarily
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elected to relinquish such right. In the event no valid designation of
Beneficiary exists at the time of the Participant's death, the death
benefit shall be payable to his estate.
(f) Any consent by the Participant's spouse to waive any rights
to the death benefit must be in writing, must acknowledge the effect
of such waiver, and be witnessed by a Plan representative or a notary
public. Further, the spouse's consent must be irrevocable and must
acknowledge the specific nonspouse Beneficiary.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior
to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Combined Account shall become fully Vested. In
the event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of
the Vested portion of such Terminated Participant's Combined Account
and invest the aggregate amount thereof in a separate, federally
insured savings account, certificate of deposit, common or collective
trust fund of a bank or a deferred annuity. In the event the Vested
portion of a Participant's Combined Account is not segregated, the
amount shall remain in a separate account for the Terminated
Participant and share in allocations pursuant to Section 4.4 (f) until
such time as a distribution is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability or Normal Retirement). However, at the election of the
Participant, the Administrator shall direct the Trustee to cause the
entire Vested portion of the Terminated Participant's Combined
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Account to be payable to such Terminated Participant. Any
distribution under this paragraph shall be made in a manner which is
consistent with and satisfies the provisions of Section 6.5,
including, but not limited to, all notice and consent requirements of
Code Section 411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed
$3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in a single lump
sum.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of
Service according to the following schedule:
Vesting Schedule
Years of Service Percentage
less than 2 0 %
2 15 %
3 30 %
4 60 %
5 or more 100 %
Notwithstanding the schedule above, Participants with three years of
vesting service as of July 1, 1990 are fully vested in their accounts
at all times. All Employer contributions made prior to 1990 are fully
vested.
Notwithstanding the general vesting schedule provided for in this
paragraph, for any Top Heavy Plan Year, the Vested portion of the
Participant's Account of any Participant who has an Hour of Service
after the Plan becomes top heavy shall be a percentage of the total
amount credited to his Participant's Account determined on the basis
of the Participant's number of Years of Service according to the
following schedule:
Vesting Schedule
Years of Service Percentage
less than 2 0 %
2 20 %
3 40 %
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4 60 %
5 or more 100 %
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy
Plan, the Administrator shall revert to the vesting schedule in effect
before this Plan became a Top Heavy Plan. Any such reversion shall be
treated as a Plan amendment pursuant to the terms of the Plan.
(c) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the
Vested percentage attained as of the later of the effective date or
adoption date of this amendment and restatement.
(d) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer's contributions to the Plan or
upon any full or partial termination of the Plan, all amounts credited
to the account of any affected Participant shall become 100% Vested
and shall not thereafter be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result of any
direct or indirect amendment to this Plan. For this purpose, the Plan
shall be treated as having been amended if the Plan provides for an
automatic change in vesting due to a change in top heavy status. In
the event that the Plan is amended to change or modify any vesting
schedule, a Participant with at least three (3) Years of Service as of
the expiration date of the election period may elect to have his
nonforfeitable percentage computed under the Plan without regard to
such amendment. If a Participant fails to make such election, then
such Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of
the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(f)(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the
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Plan in the same manner as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service,
and such Former Participant had received a distribution of his
entire Vested interest prior to his reemployment, his forfeited
account shall be reinstated only if he repays the full amount
distributed to him before the earlier of five (5) years after the
first date on which the Participant is subsequently reemployed by
the Employer or the close of the first period of five (5)
consecutive 1-Year Breaks in Service commencing after the
distribution. In the event the Former Participant does repay the
full amount distributed to him, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Anniversary Date or
other valuation date coinciding with or preceding his
termination. The source for such reinstatement shall first be any
Forfeitures occurring during the year. If such source is
insufficient, then the Employer shall contribute an amount which
is sufficient to restore any such forfeited Accounts provided,
however, that if a discretionary contribution is made for such
year pursuant to Section 4.1(d), such contribution shall first be
applied to restore any such Accounts and the remainder shall be
allocated in accordance with Section 4.4.
(3) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the
following rules:
(i) If a Former Participant has a 1-Year Break in
Service, his pre-break and post-break service shall be used
for computing Years of Service for eligibility and for
vesting purposes only after he has been employed for one (1)
Year of Service following the date of his reemployment with
the Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan
resulting from
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Employer contributions shall lose credits otherwise
allowable under (i) above if his consecutive 1-Year Breaks
in Service equal or exceed the greater of (A) five (5) or
(B) the aggregate number of his pre-break Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service,
a Former Participant's Vested Account balance attributable
to pre-break service shall not be increased as a result of
post-break service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively
from his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes a Year of Service (a 1-Year
Break in Service previously occurred, but employment had not
terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he
completes one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant
or his Beneficiary any amount to which he is entitled under the Plan
in one or more of the following methods:
(1) One lump-sum payment in cash;
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide such
installment payments, the Administrator may (A) segregate the
aggregate amount thereof in a separate, federally insured savings
account, certificate of deposit in a bank or savings and loan
association, money market certificate or other liquid short-term
security or (B) purchase a nontransferable annuity contract for a
term certain (with no life contingencies) providing for such
payment. The period over which such
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payment is to be made shall not extend beyond the Participant's
life expectancy (or the life expectancy of the Participant and
his designated Beneficiary).
(b) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such
distribution commences prior to the later of his Normal Retirement Age
or age 62. With regard to this required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent,
it shall be deemed an election to defer the commencement of
payment of any benefit. However, any election to defer the
receipt of benefits shall not apply with respect to distributions
which are required under Section 6.5(c).
(2) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
first day on which all events have occurred which entitle the
Participant to such benefit.
(3) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must
not be made more than 90 days before the first day on which all
events have occurred which entitle the Participant to such
benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to
the distribution.
If a distribution is one to which Code Sections 401(a)(11)
and 417 do not apply, such distribution may commence less than 30
days after the notice required under Regulation 1.411(a)-11(c) is
given, provided that: (1) the Administrator clearly informs the
Participant that the Participant has a right to a period of at
least 30 days after receiving the notice to consider the decision
of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and (2) the Participant, after
receiving the notice, affirmatively elects a distribution.
(c) Notwithstanding any provision in the Plan to
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the contrary, the distribution of a Participant's benefits shall be
made in accordance with the following requirements and shall otherwise
comply with Code Section 401(a)(9) and the Regulations thereunder
(including Regulation 1.401(a)(9)-2), the provisions of which are
incorporated herein by reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later of
(i) the calendar year in which the Participant attains age 70 1/2
or (ii) the calendar year in which the Participant retires,
provided, however, that this clause (ii) shall not apply in the
case of a Participant who is a "five (5) percent owner" at any
time during the five (5) Plan Year period ending in the calendar
year in which he attains age 70 1/2 or, in the case of a
Participant who becomes a "five (5) percent owner" during any
subsequent Plan Year, clause (ii) shall no longer apply and the
required beginning date shall be the April 1st of the calendar
year following the calendar year in which such subsequent Plan
Year ends. Alternatively, distributions to a Participant must
begin no later than the applicable April 1st as determined under
the preceding sentence and must be made over a period certain
measured by the life expectancy of the Participant (or the life
expectancies of the Participant and his designated Beneficiary)
in accordance with Regulations. Notwithstanding the foregoing,
clause (ii) above shall not apply to any Participant unless the
Participant had attained age 70 1/2 before January 1, 1988 and
was not a "five (5) percent owner" at any time during the Plan
Year ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
Additionally, for calendar years beginning before 1989,
distributions may also be made under an alternative method which
provides that the then present value of the payments to be made
over the period of the Participant's life expectancy exceeds
fifty percent (50%) of the then present
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value of the total payments to be made to the Participant and his
Beneficiaries.
(d) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the
Participant or the Participant's spouse, be redetermined in accordance
with Regulations. The election, once made, shall be irrevocable. If no
election is made by the time distributions must commence, then the
life expectancy of the Participant and the Participant's spouse shall
not be subject to recalculation. Life expectancy and joint and last
survivor expectancy shall be computed using the return multiples in
Tables V and VI of Regulation 1.72-9.
(e) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any
annuity Contract purchased and distributed to a Participant or spouse
shall comply with all of the requirements of the Plan.
(f) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account (employment has not
terminated) and the Participant may increase the Vested percentage in
such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X") determined
by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested percentage
at the relevant time, AB is the account balance at the relevant
time, D is the amount of distribution, and R is the ratio of the
account balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a)(1) The death benefit payable pursuant to Section 6.2 shall
be paid to the Participant's Beneficiary within a reasonable time
after the Participant's death by either of the following methods,
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as elected by the Participant (or if no election has been made prior
to the Participant's death, by his Beneficiary) subject, however, to
the rules specified in Section 6.6(b):
(i) One lump-sum payment in cash;
(ii) Payment in monthly, quarterly, semi-annual, or annual
cash installments over a period to be determined by the
Participant or his Beneficiary. After periodic installments
commence, the Beneficiary shall have the right to direct the
Trustee to reduce the period over which such periodic
installments shall be made, and the Trustee shall adjust the
cash amount of such periodic installments accordingly.
(2) In the event the death benefit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the
Participant, the Administrator may direct the Trustee to
segregate the death benefit into a separate account, and the
Trustee shall invest such segregated account separately, and the
funds accumulated in such account shall be used for the payment
of the installments.
(b) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder. If it is
determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 6.5 as of his date
of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of his date of death
occurs.
However, the 5-year distribution requirement of the preceding
paragraph shall not apply to any portion of the deceased Participant's
interest which is payable to or for the benefit of a designated
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Beneficiary. In such event, such portion shall be distributed over a
period not extending beyond the life expectancy of such designated
Beneficiary provided such distribution begins not later than December
31st of the calendar year immediately following the calendar year in
which the Participant died. However, in the event the Participant's
spouse (determined as of the date of the Participant's death) is his
Beneficiary, the requirement that distributions commence within one
year of a Participant's death shall not apply. In lieu thereof,
distributions must commence on or before the later of: (1) December
31st of the calendar year immediately following the calendar year in
which the Participant died; or (2) December 31st of the calendar year
in which the Participant would have attained age 70 1/2. If the
surviving spouse dies before distributions to such spouse begin, then
the 5-year distribution requirement of this Section shall apply as if
the spouse was the Participant.
(c) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the
Participant or the Participant's spouse, be redetermined in accordance
with Regulations. The election, once made, shall be irrevocable. If no
election is made by the time distributions must commence, then the
life expectancy of the Participant and the Participant's spouse shall
not be subject to recalculation. Life expectancy and joint and last
survivor expectancy shall be computed using the return multiples in
Tables V and VI of Regulation 1.72-9.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution or to commence a series of payments on or as of an
Anniversary Date, the distribution or series of payments may be made or begun on
such date or as soon thereafter as is practicable. However, unless a Former
Participant elects in writing to defer the receipt of benefits (such election
may not result in a death benefit that is more than incidental), the payment of
benefits shall begin not later than the 60th day after the close of the Plan
Year in which the latest of the following events occurs: (a) the date on which
the Participant attains the earlier of age 65 or the Normal Retirement Age
specified herein; (b) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or (c) the date the Participant terminates
his service with the Employer.
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6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to
a Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 59 1/2
years, the Administrator, at the election of the Participant, shall direct the
Trustee to distribute all or a portion of the Vested amount then credited to the
accounts maintained on behalf of the Participant. In the event that the
Administrator makes such a distribution, the Participant shall continue to be
eligible to participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Section 6.5, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59 1/2 except as otherwise permitted under the terms of the Plan.
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6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute to any Participant in any one Plan
Year up to the lesser of 100% of his Participant's Elective Account
and the Vested portion of his Participant's Account valued as of the
last Anniversary Date or other valuation date or the amount necessary
to satisfy the immediate and heavy financial need of the Participant.
Any distribution made pursuant to this Section shall be deemed to be
made as of the first day of the Plan Year or, if later, the valuation
date immediately preceding the date of distribution, and the
Participant's Elective Account and his Participant's Account shall be
reduced accordingly. Withdrawal under this Section shall be
authorized only if the distribution is on account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or necessary for
these persons to obtain medical care;
(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(b) No distribution shall be made pursuant to this Section
unless the Administrator, based upon the Participant's representation
and such other facts as are known to the Administrator, determines
that all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The amount
of the immediate and heavy financial need may include any amounts
necessary to pay any federal, state, or local
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income taxes or penalties reasonably anticipated to result from
the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and voluntary
Employee contributions will be suspended for at least twelve (12)
months after receipt of the hardship distribution or, the
Participant, pursuant to a legally enforceable agreement, will
suspend his elective deferrals and voluntary Employee
contributions to the Plan and all other plans maintained by the
Employer for at least twelve (12) months after receipt of the
hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals for
the Participant's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable
limit under Code Section 402(g) for such next taxable year less
the amount of such Participant's elective deferrals for the
taxable year of the hardship distribution.
(c) Notwithstanding the above, for Plan Years beginning after
December 31, 1988, distributions from the Participant's Elective
Account pursuant to this Section shall be limited, as of the date of
distribution, to the Participant's Elective Account as of the end of
the last Plan Year ending before July 1, 1989, plus the total
Participant's Deferred Compensation after such date, reduced by the
amount of any previous distributions pursuant to this Section and
Section 6.10.
(d) Any distribution made pursuant to this Section shall be made
in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Regulations
thereunder.
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6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For the purposes of this Section, "alternate
payee," "qualified domestic relations order" and "earliest retirement age" shall
have the meaning set forth under Code Section 414(p).
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined
by the Employer, to invest, manage, and control the Plan assets
subject, however, to the direction of an Investment Manager if the
Trustee should appoint such manager as to all or a portion of the
assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event
of their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and
furnish to the Employer and/or Administrator for each Plan Year a
written annual report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to
sign papers on their behalf.
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7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep
the Trust Fund invested without distinction between principal and
income and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, bonds and other evidences of
indebtedness or ownership, and real estate or any interest therein.
The Trustee shall at all times in making investments of the Trust Fund
consider, among other factors, the short and long-term financial needs
of the Plan on the basis of information furnished by the Employer. In
making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by
the applicable law for trust investments; however, the Trustee shall
give due regard to any limitations imposed by the Code or the Act so
that at all times the Plan may qualify as a qualified Profit Sharing
Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to
the terms of its usual and customary bank agency agreement, under
which the duties of such bank or trust company shall be of a
custodial, clerical and record-keeping nature.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common
law, statutory authority, including the Act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property
held by the Trustee, by private contract or at public auction. No
person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition, with
or without advertisement;
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(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power
of substitution; to exercise any conversion privileges, subscription
rights or other options, and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and
to delegate discretionary powers, and to pay any assessments or
charges in connection therewith; and generally to exercise any of the
powers of an owner with respect to stocks, bonds, securities, or other
property;
(d) To cause any securities or other property to be registered
in the Trustee's own name or in the name of one or more of the
Trustee's nominees, and to hold any investments in bearer form, but
the books and records of the Trustee shall at all times show that all
such investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in
such amount, and upon such terms and conditions, as the Trustee shall
deem advisable; and for any sum so borrowed, to issue a promissory
note as Trustee, and to secure the repayment thereof by pledging all,
or any part, of the Trust Fund; and no person lending money to the
Trustee shall be bound to see to the application of the money lent or
to inquire into the validity, expediency, or propriety of any
borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
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(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or
defend suits or legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of
the Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at
any time or from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect, receive,
and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under
the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time,
with assets belonging to any other qualified employee pension benefit
trust created by the
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Employer or an affiliated company of the Employer, and to commingle
such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and such other trust or trusts,
allocating undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts in accordance
with their respective interests;
(r) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the
Trustee shall be exercised in the sole fiduciary discretion of the
Trustee. However, if Participants are so empowered by the
Administrator, each Participant may direct the Trustee to separate and
keep separate all or a portion of his account; and further each
Participant is authorized and empowered, in his sole and absolute
discretion, to give directions to the Trustee pursuant to the
procedure established by the Administrator and in such form as the
Trustee may require concerning the investment of the Participant's
Directed Investment Account. The Trustee shall comply as promptly as
practicable with directions given by the Participant hereunder. The
Trustee may refuse to comply with any direction from the Participant
in the event the Trustee, in its sole and absolute discretion, deems
such directions improper by virtue of applicable law. The Trustee
shall not be responsible or liable for any loss or expense which may
result from the Trustee's refusal or failure to comply with any
directions from the Participant. Any costs and expenses related to
compliance with the Participant's directions shall be borne by the
Participant's Directed Investment Account.
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make loans to
Participants and Beneficiaries under the following circumstances: (1)
loans shall be made available to all Participants and Beneficiaries on
a reasonably equivalent basis; (2) loans shall not be made available
to Highly Compensated Employees in an amount greater than the amount
made available to other Participants and Beneficiaries; (3) loans
shall bear a reasonable rate of interest; (4) loans shall be
adequately secured; and
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(5) shall provide for repayment over a reasonable period of time.
(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date on
which such loan is made, over the outstanding balance of loans
from the Plan to the Participant on the date on which such loan
was made, or
(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
For purposes of this limit, all plans of the Employer shall
be considered one plan. Additionally, with respect to any loan made
prior to January 1, 1987, the $50,000 limit specified in (1) above
shall be unreduced.
(c) Loans shall provide for level amortization with payments to
be made not less frequently than quarterly over a period not to exceed
five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the time
the loan is made) as a principal residence of the Participant shall
provide for periodic repayment over a reasonable period of time that
may exceed five (5) years. Notwithstanding the foregoing, loans made
prior to January 1, 1987 which are used to acquire, construct,
reconstruct or substantially rehabilitate any dwelling unit which,
within a reasonable period of time is to be used (determined at the
time the loan is made) as a principal residence of the Participant or
a member of his family (within the meaning of Code Section 267(c)(4))
may provide for periodic repayment over a reasonable period of time
that may exceed five (5) years. Additionally, loans made prior to
January 1, 1987, may provide for periodic payments which are made less
frequently than quarterly and which do not necessarily result in level
amortization.
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(d) Any loans granted or renewed on or after the last day of the
first Plan Year beginning after December 31, 1988 shall be made
pursuant to a Participant loan program. Such loan program shall be
established in writing and must include, but need not be limited to,
the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans
offered;
(5) the procedure under the program for determining a reasonable
rate of interest;
(6) the types of collateral which may secure a Participant loan;
and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program shall be contained in a
separate written document which, when properly executed, is hereby
incorporated by reference and made a part of the Plan. Furthermore,
such Participant loan program may be modified or amended in writing
from time to time without the necessity of amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
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7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of any
kind and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof, shall
be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer's contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales
or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each
such statement of account, shall acknowledge receipt thereof in
writing and advise the Trustee and/or Administrator of its approval or
disapproval thereof. Failure by the Employer to disapprove any such
statement of account within thirty (30) days after its receipt thereof
shall be deemed an approval thereof. The approval by the Employer of
any statement of account shall be binding as to all matters embraced
therein as between the Employer and the Trustee to the same extent as
if the account of the Trustee had been settled by judgment or decree
in an action for a judicial settlement of its account in a court of
competent jurisdiction in which
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the Trustee, the Employer and all persons having or claiming an
interest in the Plan were parties; provided, however, that nothing
herein contained shall deprive the Trustee of its right to have its
accounts judicially settled if the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the
Administrator shall direct the Trustee to engage on behalf of all
Participants an independent qualified public accountant for that
purpose. Such accountant shall, after an audit of the books and
records of the Plan in accordance with generally accepted auditing
standards, within a reasonable period after the close of the Plan
Year, furnish to the Administrator and the Trustee a report of his
audit setting forth his opinion as to whether any statements,
schedules or lists that are required by Act Section 103 or the
Secretary of Labor to be filed with the Plan's annual report, are
presented fairly in conformity with generally accepted accounting
principles applied consistently. All auditing and accounting fees
shall be an expense of and may, at the election of the Administrator,
be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised
and subject to periodic examination by a state or federal agency, it
shall transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a
written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered
or certified mail, addressed to
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such Trustee at his last known address, at least thirty (30) days
before its effective date, a written notice of his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with
all the estate, rights, powers, discretions, and duties of his
predecessor with like respect as if he were originally named as a
Trustee herein. Until such a successor is appointed, the remaining
Trustee or Trustees shall have full authority to act under the terms
of the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part
of the annual statement of account for the Plan Year required under
Section 7.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than
the due date of the annual statement of account for the Plan Year. The
procedures set forth in Section 7.7 for the approval by the Employer
of annual statements of account shall apply to any special statement
of account rendered hereunder and approval by the Employer of any such
special statement in the manner provided in Section 7.7 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty
or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 7.7 and this subparagraph.
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7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the
Trustee at the direction of the Administrator shall transfer the Vested
interest, if any, of such Participant in his account to another trust forming
part of a pension, profit sharing or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting the requirements of Code Section 401(a), provided that the trust to
which such transfers are made permits the transfer to be made.
7.11 DIRECT ROLLOVER
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under
this Section, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and the
portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(2) An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity
plan
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described in Code Section 403(a), or a qualified trust described
in Code Section 401(a), that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are distributees with
regard to the interest of the spouse or former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. Any such amendment
shall be adopted by formal action of the Employer's board of directors
and executed by an officer authorized to act on behalf of the
Employer. However, any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be made
with the Trustee's and Administrator's written consent. Any such
amendment shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute any such
amendment unless the Trust provisions contained herein are a part of
the Plan and the amendment affects the duties of the Trustee
hereunder.
(b) No amendment to the Plan shall be effective if it authorizes
or permits any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any
reduction in the amount credited to the
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account of any Participant; or causes or permits any portion of the
Trust Fund to revert to or become property of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any full or partial termination, all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested as provided in Section 6.4 and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be allocated
to the accounts of all Participants in accordance with the provisions
hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to
Participants in a manner which is consistent with and satisfies the
provisions of Section 6.5. Distributions to a Participant shall be
made in cash or through the purchase of irrevocable nontransferable
deferred commitments from an insurer. Except as permitted by
Regulations, the termination of the Plan shall not result in the
reduction of "Section 411(d)(6) protected benefits" in accordance with
Section 8.1(c).
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8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to the extent a Participant
or Beneficiary is indebted to the Plan, as a result of a loan from the
Plan. At the time a
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distribution is to be made to or for a Participant's or Beneficiary's
benefit, such proportion of the amount distributed as shall equal such
loan indebtedness shall be paid by the Trustee to the Trustee or the
Administrator, at the direction of the Administrator, to apply against
or discharge such loan indebtedness. Prior to making a payment,
however, the Participant or Beneficiary must be given written notice
by the Administrator that such loan indebtedness is to be so paid in
whole or part from his Participant's Combined Account. If the
Participant or Beneficiary does not agree that the loan indebtedness
is a valid claim against his Vested Participant's Combined Account, he
shall be entitled to a review of the validity of the claim in
accordance with procedures provided in Sections 2.12 and 2.13.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the Commonwealth of Massachusetts, other than its laws
respecting choice of law, to the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
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9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan or
of the Trust, by termination of either, by power of revocation or
amendment, by the happening of any contingency, by collateral
arrangement or by any other means, for any part of the corpus or
income of any trust fund maintained pursuant to the Plan or any funds
contributed thereto to be used for, or diverted to, purposes other
than the exclusive benefit of Participants, Retired Participants, or
their Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount not
less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current
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year. The bond shall provide protection to the Plan against any loss by reason
of acts of fraud or dishonesty by the Fiduciary alone or in connivance with
others. The surety shall be a corporate surety company (as such term is used in
Act Section 412(a)(2)), and the bond shall be in a form approved by the
Secretary of Labor. Notwithstanding anything in the Plan to the contrary, the
cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
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9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
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9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification,
then the Plan may return such contributions to the Employer within one
year after such determination, provided the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(f), any contribution by the Employer to the
Trust Fund is conditioned upon the deductibility of the contribution
by the Employer under the Code and, to the extent any such deduction
is disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but
any losses attributable thereto must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Data Translation, Inc.
By /s/ Ellen W. Harpin
------------------------
EMPLOYER
ATTEST
---------------------
---------------------------
TRUSTEE
---------------------------
TRUSTEE
---------------------------
TRUSTEE
---------------------------
TRUSTEE
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AMENDMENT TO DATA TRANSLATION, INC.
DOUBLE SHELTERED RETIREMENT PLAN
WHEREAS, Data Translation, Inc. (the Employer) desires to amend the Data
Translation, Inc. Double Sheltered Retirement Plan pursuant the right reserved
to it under Section 8.1 of the Plan,
NOW, THEREOF, the Employer does hereby amend Section 3.1 of the Plan effective
July 1, 1995 as follows:
"3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed three (3) Months of Service shall be
eligible to participate hereunder as of the latter of July 1, 1995 and the date
he has satisfied such requirements. However, any Employee who was a Participant
in the Plan prior to July 1, 1995 shall continue to participate in the plan.
The Employer shall give each prospective Eligible Employee written notice of his
eligibility to participate in the Plan prior to the close of the Plan Year in
which he first becomes an Eligible Employee.
For purposes of this Section, an Eligible Employee will be deemed to have
completed three (3) Months of Service if he is in the employ of the Employer at
any time three (3) months after his employment commencement date. Employment
commencement date shall be the first day that he is entitled to be credited with
an Hour of Service for the performance of duty."
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of this
Amendment, the Employer has caused this Amendment to be executed on its behalf
and its corporate seal to be affixed as of this 28th day of June, 1995.
ATTEST: DATA TRANSLATION, INC.
/s/ Hilary Barrett /s/ Ellen Harpin
- -------------------------- ----------------------------
<PAGE> 106
RESOLUTION OF
THE BOARD OF DIRECTORS
OF
DATA TRANSLATION, INC.
At a duly constituted meeting of the Board of Directors of Data Translation,
Inc. (the "Company") held on June 28, 1995, at which a quorum was present and
voting throughout, it was:
VOTED: To adopt the Amendment to the Data Translation, Inc. Double
Sheltered Retirement Plan as attached to this Resolution and made an
official part of the records of the Company.
VOTED: To authorize Ellen W. Harpin, a duly appointed officer of the Company
to make any and all actions necessary to effectuate the adoption of
the above-mentioned Amendment as attached hereto.
VOTED: To make matching contributions equal to 15% of the 1st 6% of eligible
employee contributions for the period April 1, 1995 through
December 31, 1995. Matching contributions will be determined on a
quarterly basis.
I certify that the foregoing is a true copy of the acts of the Board of
Directors this 30th day of June, 1995.
ATTEST: /s/ R. Bradford Malt
--------------------
<PAGE> 1
EXHIBIT 10.4.2
AMENDMENT TO
DATA TRANSLATION, INC. DOUBLE SHELTERED RETIREMENT PLAN
Pursuant to Section 8.1 of the Data Translation, Inc. Double Sheltered
Retirement Plan, the following amendments are made, effective December 2, 1996:
1. Section 1.15, shall be deleted in its entirety and replaced with the
following:
"1.15 "Employer" means Media 100 Inc. and any Participating Employer, as
defined in Section 10.1, which shall adopt this Plan; any successor
which shall maintain this Plan; and any predecessor which has
maintained this Plan. The Employer is a corporation, with principal
offices in the Commonwealth of Massachusetts."
2. In Section 1.45, after the first sentence add the following sentence:
"Effective December 2, 1996, the Plan shall be referred to as the
Media 100 Inc. Double Sheltered Retirement Plan."
3. Add a new Article X as follows:
"ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of
the Employer and Trustee, any other corporation or entity, whether an
affiliate or subsidiary or not, may adopt this Plan and all of the
provisions hereof, and participate herein and be known as a
Participating Employer, by a properly executed document evidencing
said intent and will of such Participating Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one Trust Fund all contributions made by Participating
Employers, as well as all increments thereof. However, the assets of
the Plan shall, on an ongoing basis, be available to pay benefits to
all Participants and Beneficiaries under the Plan without regard to
the Employer or Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer
or a Participating Employer, shall not affect such Participant's
rights under the Plan, and all
<PAGE> 2
amounts credited to such Participant's Combined Account as well as his
accumulated service time with the transferor or predecessor, and his
length of participation in the Plan, shall continue to his credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Participants of the Employer or
Participating Employer by which the forfeiting Participant was
employed.
(e) Any expenses of the Trust which are to be paid by the Employer or
borne by the Trust Fund shall be paid by each Participating Employer
in the same proportion that the total amount standing to the credit of
all Participants employed by such Employer bears to the total standing
to the credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this
Plan; provided, however, that with respect to all of its relations
with the Trustee and Administrator for the purpose of this Plan, each
Participating Employer shall be deemed to have designated irrevocably
the Employer as its agent. Unless the context of the Plan clearly
indicates the contrary, the word "Employer" shall be deemed to include
each Participating Employer as related to its adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the
Employee involved shall carry with him his accumulated service and
eligibility. No such transfer shall effect a termination of employment
hereunder, and the Participating Employer to which the Employee is
transferred shall thereupon become obligated hereunder with respect to
such Employee in the same manner as was the Participating Employer
from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
All contributions made by a Participating Employer, as provided for in
this Plan, shall be determined separately by each Participating
Employer, and shall be allocated only among the Participants eligible
to share of the Employer or Participating Employer making the
contribution. On the basis of the information furnished by the
Administrator, the Trustee shall keep separate books and records
concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating
Employer.
The Trustee may, but need not, register Contracts so as to evidence
that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one
Participating Employer
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<PAGE> 3
to another, the employing Employer shall immediately notify the
Trustee thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be
a Participating Employer hereunder shall only be by the written action
of each and every Participating Employer and with the consent of the
Trustee where such consent is necessary in accordance with the terms
of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke
its participation in the Plan. At the time of any such discontinuance
or revocation, satisfactory evidence thereof and of any applicable
conditions imposed shall be delivered to the Trustee. The Trustee
shall thereafter transfer, deliver and assign Contracts and other
Trust Fund assets allocable to the Participants of such Participating
Employer to such new Trustee as shall have been designated by such
Participating Employer, in the event that it has established a
separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or
reduction of any "Section 411(d)(6) protected benefits" in accordance
with Section 8.1(c). If no successor is designated, the Trustee shall
retain such assets for the Employees of said Participating Employer
pursuant to the provisions of Article VII hereof. In no such event
shall any part of the corpus or income of the Trust as it relates to
such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating
Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article."
The Employer consents to and approves the foregoing amendment.
Except as herein amended, the Plan is ratified and confirmed.
MEDIA 100 INC.
BY: /s/ Peter J. Rice WITNESS: /s/ Craig Barrows
----------------------------- ----------------------
12/2/96 12/2/96
----------------------------- ----------------------
DATE DATE
3
<PAGE> 1
EXHIBIT 10.5.1
DATE OF LEASE EXECUTION: January 31, 1997
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
LANDLORD: CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation
MANAGING AGENT: Spaulding and Slye Services Limited Partnership
LANDLORD'S & MANAGING AGENT'S ADDRESS:
Spaulding and Slye Services Limited Partnership
c/o Spaulding and Slye Company
125 High Street
Boston, Massachusetts 02110
Attn: Peter A. DeLuca
LANDLORD'S CONSTRUCTION REPRESENTATIVE: Peter A. DeLuca
TENANT: MEDIA 100 INC., a Delaware corporation
TENANT'S ADDRESS (FOR NOTICE AND BILLING):
Media 100 Inc.
290 Donald J. Lynch Boulevard
Marlborough, Massachusetts 01752
Attn: Chief Financial Officer
TENANT'S CONSTRUCTION
REPRESENTATIVE: William Jackson Associates, Inc.
LOT: The land known and numbered as 290 Donald J. Lynch Boulevard, Marlborough,
Massachusetts.
BUILDING: The building located on the Lot.
PREMISES: The space located on the first (1st) and second (2nd) floors of the
Building as shown on Exhibit A.
RENTABLE FLOOR AREA
OF THE PREMISES: 56,508 square feet
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 87,861 square feet
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DELIVERY DATE: February 5, 1997
TERM COMMENCEMENT DATE: The earlier of (a) April 1, 1997 or (b) the date on
which Tenant commences to use the Premises for business purposes
TERM: Commencing on the Term Commencement Date and continuing until March 31,
2002, unless sooner terminated as provided herein
ANNUAL BASE RENT: (a) $480,318 based on $8.50 per square foot of Rentable
Floor Area ("p.r.s.f.") for the first year of the Term,
plus the partial month at the beginning of the Term if
any ("Year 1")
(b) $508,572 based on $9.00 p.r.s.f. for the second year of
the Term, ("Year 2")
(c) $536,826 based on $9.50 p.r.s.f. for the third year of
the Term, ("Year 3")
(d) $565,080 based on $10.00 p.r.s.f. for the fourth year
of the Term, ("Year 4")
(e) $593,334 based on $10.50 p.r.s.f. for the remainder of
the original Term ending March 31, 2002 ("Year 5")
ANNUAL ESTIMATED
OPERATING COSTS
FOR THE BUILDING: $483,235.50 based on $5.50 p.r.s.f.
ANNUAL ESTIMATED OPERATING
COSTS FOR THE PREMISES
(included in Annual Rent): $310,794
ANNUAL ESTIMATED ELECTRICAL
COST FOR THE PREMISES
(included in Annual Rent): $50,857.20 based on $0.90 p.r.s.f.
ANNUAL RENT (subject to annual adjustment as provided in Article IV):
Year 1: $841,969.20 computed as follows:
$ 8.50 Annual Base Rent (p.r.s.f.)
+ $ 5.50 Annual Estimated Operating
Costs (p.r.s.f.)
+ $ .90 Annual Estimated Electrical
Costs to Tenant's Space
----------- (p.r.s.f.)
= $ 14.90 Total Rate (p.r.s.f.)
X 56,508 rentable square feet
-----------
= $841,969.20 Annual Rent
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Year 2: $870,223.20 computed as follows:
$ 9.00 Annual Base Rent (p.r.s.f.)
+ $ 5.50 Annual Estimated Operating
Costs (p.r.s.f.)
+ $ .90 Annual Estimated Electrical
Costs to Tenant's Space
----------- (p.r.s.f.)
= $ 15.40 Total Rate (p.r.s.f.)
X 56,508 rentable square feet
-----------
= $870,223.20 Annual Rent
Year 3: $898,477.20 computed as follows:
$ 9.50 Annual Base Rent (p.r.s.f.)
+ $ 5.50 Annual Estimated Operating
Costs (p.r.s.f.)
+ $ .90 Annual Estimated Electrical
Costs to Tenant's Space
----------- (p.r.s.f.)
= $ 15.90 Total Rate (p.r.s.f.)
X 56,508 rentable square feet
-----------
= $898,477.20 Annual Rent
Year 4: $926,731.20 computed as follows:
$ 10.00 Annual Base Rent (p.r.s.f.)
+ $ 5.50 Annual Estimated Operating
Costs (p.r.s.f.)
+ $ .90 Annual Estimated Electrical
Costs to Tenant's Space
----------- (p.r.s.f.)
= $ 16.40 Total Rate (p.r.s.f.)
X 56,508 rentable square feet
-----------
= $926,731.20 Annual Rent
Year 5: $954,985.20 computed as follows:
$ 10.50 Annual Base Rent (p.r.s.f.)
+ $ 5.50 Annual Estimated Operating
Costs (p.r.s.f.)
+ $ .90 Annual Estimated Electrical
Costs to Tenant's Space
----------- (p.r.s.f.)
= $ 16.90 Total Rate (p.r.s.f.)
X 56,508 rentable square feet
-----------
= $954,985.20 Annual Rent
PERMITTED USES: Subject to applicable zoning regulations, general office
purposes, the design and manufacture of computer hardware and software, and the
assembly, storage and distribution of same.
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COMMERCIAL GENERAL LIABILITY INSURANCE:
$2,000,000 combined single limit per occurrence,
$5,000,000 annual aggregate.
BROKERS: Spaulding and Slye Properties Limited Partnership and Fallon Hines &
O'Connor
SECURITY DEPOSIT: $300,000, subject to the provisions of Section 10.16.
1.2 EXHIBITS.
The exhibits listed below in this section are incorporated in this Lease by
reference and are to be construed as part of this Lease:
EXHIBIT A Plan showing Premises.
EXHIBIT B Landlord's Work.
EXHIBIT C Permitted Structural Alterations.
EXHIBIT D Cleaning Schedule
EXHIBIT E Rules and Regulations.
EXHIBIT F Hazardous Substances Used in Tenant's Business.
1.3 TABLE OF CONTENTS PAGE
ARTICLE II -- PREMISES AND TERM.............................................. 7
Section 2.1 Description of Premises................................ 7
Section 2.2 Term................................................... 7
Section 2.3 Option to Extend....................................... 7
Section 2.4 Right of First Refusal................................. 9
ARTICLE III - CONSTRUCTION................................................... 11
Section 3.1 Delivery of Premises................................... 11
Section 3.2 Preparation of Premises for Occupancy.................. 12
Section 3.3 General Provisions Applicable to
Construction......................................... 13
Section 3.4 Construction Representatives........................... 13
Section 3.5 Alterations and Additions.............................. 14
ARTICLE IV -- RENT........................................................... 15
Section 4.1 Rent................................................... 15
Section 4.2 Operating Costs........................................ 15
Section 4.3 Estimated Premises Expense Payments.................... 19
Section 4.4 Electricity and Water.................................. 19
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Section 4.5 Change of Calendar Year................................ 21
Section 4.6 Payments............................................... 21
ARTICLE V -- LANDLORD'S COVENANTS............................................ 21
Section 5.1 Landlord's Covenants During the Term................... 21
5.1.1 Building Services...................................... 21
5.1.2 Additional Building Services........................... 22
5.1.3 Repairs................................................ 22
5.1.4 Tenant Signage......................................... 22
5.1.5 Quiet Enjoyment........................................ 23
5.1.6 Insurance.............................................. 23
Section 5.2 Interruptions.......................................... 23
ARTICLE VI -- TENANT'S COVENANTS............................................. 24
Section 6.1 Tenant's Covenants During the Term..................... 24
6.1.1 Tenant's Payments...................................... 24
6.1.2 Repairs and Yielding Up................................ 24
6.1.3 Occupancy and Use...................................... 24
6.1.4 Rules and Regulations.................................. 25
6.1.5 Safety Appliances...................................... 26
6.1.6 Assignment and Subletting.............................. 26
6.1.7 Indemnity.............................................. 28
6.1.8 Tenant's Insurance..................................... 28
6.1.9 Tenant's Worker's Compensation
Insurance............................................ 29
6.1.10 Landlord's Right of Entry.............................. 29
6.1.11 Loading................................................ 30
6.1.12 Landlord's Costs....................................... 30
6.1.13 Tenant's Property...................................... 30
6.1.14 Labor or Materialmen's Liens........................... 31
6.1.15 Changes or Additions................................... 31
6.1.16 Holdover............................................... 31
6.1.17 Security............................................... 31
ARTICLE VII -- DAMAGE AND DESTRUCTION; CONDEMNATION.......................... 32
Section 7.1 Fire or Other Casualty................................. 32
Section 7.2 Eminent Domain......................................... 35
ARTICLE VIII -- RIGHTS OF MORTGAGEE.......................................... 36
Section 8.1 Priority of Lease...................................... 36
Section 8.2 Rights of Mortgage Holders; Limitation
of Mortgagee's Liability............................. 37
Section 8.3 Mortgagee's Election................................... 37
Section 8.4 No Prepayment or Modification, Etc..................... 38
Section 8.5 No Release or Termination.............................. 38
Section 8.6 Continuing Offer....................................... 38
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ARTICLE IX -- DEFAULT........................................................ 39
Section 9.1 Events of Default...................................... 39
Section 9.2 Tenant's Obligations after Termination................. 40
ARTICLE X - MISCELLANEOUS.................................................... 41
Section 10.1 Notice of Lease........................................ 41
Section 10.2 Notices from One Party to the Other.................... 41
Section 10.3 Bind and Inure......................................... 42
Section 10.4 No Surrender........................................... 42
Section 10.5 No Waiver, Etc......................................... 42
Section 10.6 No Accord and Satisfaction............................. 43
Section 10.7 Cumulative Remedies.................................... 43
Section 10.8 Right to Cure; Landlord's Default...................... 43
Section 10.9 Estoppel Certificate................................... 44
Section 10.10 Waiver of Subrogation.................................. 44
Section 10.11 Acts of God............................................ 44
Section 10.12 Brokerage.............................................. 45
Section 10.13 Submission Not an Offer................................ 45
Section 10.14 Applicable Law and Construction........................ 45
Section 10.15 Authority.............................................. 46
Section 10.16 Security Deposit....................................... 46
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ARTICLE II
PREMISES AND TERM
2.1 DESCRIPTION OF PREMISES.
Subject to and with the benefit of the provisions of this Lease, Landlord
hereby leases to Tenant, and Tenant leases from Landlord, the Premises.
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
Building or on the Lot, including without limitation the parking areas (but not
more than 3.75 spaces per 1,000 square feet of rentable floor area), and (b) the
building service fixtures and equipment serving the Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises, to other parts of the Building, or
both, building service fixtures and equipment wherever located in the Building
or on the Lot and (b) to alter or relocate any common facilities, it being
understood that if any parking spaces are provided, the same may be relocated
from time to time by Landlord, provided that in all events substitutions are
substantially equivalent.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the Term
Commencement Date and continuing for the Term, unless sooner terminated as
provided herein.
2.3 OPTION TO EXTEND.
Tenant shall have the right and option to extend the Term for an additional
period of five (5) years (the "Extension Term") commencing the day after the
expiration of the original Term referred to in Section 1.1 (the "Original
Term"), provided that Tenant shall give Landlord notice of Tenant's exercise of
such option at least nine (9) months prior to the expiration of the Original
Term, and provided further that no event of default, or condition which with the
giving of notice or the passage of time, or both, would constitute an event of
default, exists at the time of giving such notice, unless such condition is
removed or corrected within the applicable cure period, if any. If an event of
default, or condition which with the giving of notice or the passage of time, or
both, would constitute an event of default, exists at the time of commencement
of the Extension Term, Tenant's exercise of such option shall, at the option of
Landlord, be null and void and of no further force and
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effect unless such condition is removed or corrected within the applicable cure
period, if any. Prior to the exercise by Tenant of such option, the expression
"Term" shall mean the Original Term, and after the exercise by Tenant of such
option, the expression "Term" shall mean the Original Term as it has been then
extended by the Extension Term. Except for this Option to Extend which shall not
apply to the Extension Term and except as expressly otherwise provided in the
following paragraph, all the terms, covenants, conditions, provisions and
agreements in the Lease contained shall be applicable to the additional period
to which the Original Term shall be extended as aforesaid. Subject to the terms
of this Lease, if Tenant shall give notice of its exercise of said option to
extend in the manner and within the time period provided aforesaid, the Term
shall be extended upon the giving of such notice without the requirement of any
further action on the part of either Landlord or Tenant. If Tenant shall fail to
give timely notice of the exercise of any such option as aforesaid, Tenant shall
have no right to extend the Term of this Lease, time being of the essence of the
foregoing provisions.
The Annual Base Rate payable during the Extension Term shall be the amount
being the greater of (i) the Annual Base Rate in effect for the Lease Year
immediately preceding the commencement of the Extension Term or (ii) the Fair
Market Rent for the Premises as of the commencement of the Extension Term. The
Fair Market Rent shall be determined in accordance with the provisions set forth
below. If for any reason the Annual Base Rate payable during the Extension Term
has not been determined as of the commencement of the Extension Term, Tenant
shall pay the Annual Base Rate payable during the Original Term until the Annual
Base Rate for the Extension Term is determined, at which time, an appropriate
adjustment, if any, shall be made.
Fair Market Rent shall mean the then current rent, including provisions for
subsequent increases and other adjustments, as of the commencement of the period
in question under market conditions then existing for new leases then currently
being negotiated or executed in comparable space used for office purposes
located in comparable buildings located in Marlborough, Massachusetts and the
so-called MetroWest market area of Massachusetts. In determining Fair Market
Rent, the following factors, among others, shall be taken into account and given
effect: size, location of premises, lease term, and services provided by the
Landlord. Landlord shall initially designate the Fair Market Rent and shall
furnish copies of the data, if any, on which it based such designation. If
Tenant disagrees with Landlord's designation of Fair Market Rent, Landlord and
Tenant agree to negotiate in good faith a mutually agreeable Annual Base Rent to
be payable during the Extension Term; provided that if Landlord and Tenant are
unable to agree upon the Fair Market Rent in the period between Tenant's
exercise of its option to extend and that date which is at least eight (8)
months prior to the commencement of the Extension Term
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(the "Discussion Period"), then Tenant shall have the right, by written notice
given on or before the last day of the Discussion Period, to either withdraw its
exercise of its option to extend or, by failing to so withdraw, to submit the
determination of Fair market Rent to an appraisal made as hereinafter provided
by a board of three reputable commercial real estate consultants, appraisers, or
brokers, each of whom shall have at least ten years of experience in the eastern
Massachusetts office rental market and each of whom is hereinafter referred to
as "appraiser". Tenant and Landlord shall each appoint one such appraiser and
the two appraisers so appointed shall appoint the third appraiser. The cost and
expenses of each appraiser appointed separately by Tenant and Landlord shall be
borne by the party who appointed the appraiser. The cost and expenses of the
third appraiser shall be shared equally by Tenant and Landlord. Landlord and
Tenant shall appoint their respective appraisers no later than ten days after
the end of the Discussion Period and shall designate the appraisers so appointed
by notice to the other party. The two appraisers so appointed and designated
shall appoint the third appraiser no later than ten days after both of them have
been appointed and shall designate such appraiser by notice to Landlord and
Tenant. The board of three appraisers shall determine the Fair Market Rent of
the space in question as of the commencement of the Extension Term and shall
notify Landlord and Tenant of their determinations at least six months prior to
the commencement of the Extension Term. If the determinations of the Fair Market
Rent of any two or all three of the appraisers shall be identical in amount,
said amount shall be deemed to be the Fair Market Rent of the subject space. If
the determinations of all three appraisers shall be different in amount, the
average of the two values nearest in amount shall be deemed the Fair Market
Rent. The Fair Market Rent of the subject space determined in accordance with
the provisions of this Section shall be binding and conclusive on Tenant and
Landlord.
Notwithstanding the foregoing, if the determination of Fair Market Rent is
to be made by an appraisal as provided herein and either party shall fail to
appoint its appraiser within the period specified above (such party referred to
hereinafter as the "failing party"), the other party may serve notice on the
failing party requiring the failing party to appoint its appraiser within ten
days of the giving of such notice and if the failing party shall not respond by
appointment of its appraiser within said ten-day period, then the appraiser
appointed by the other party shall be the sole appraiser whose determination of
the Fair Market Rent shall be binding and conclusive upon Tenant and Landlord.
2.4 RIGHT OF FIRST REFUSAL.
Subject to the conditions subsequently set forth, and provided this Lease
is in full force and effect, and provided that no event of default, or condition
which with the giving of
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notice or the passage of time, or both, would constitute an event of default,
exists at the time Tenant exercises its right of first refusal or at the
commencement of the term for the Additional Space (as defined herein) (other
than the existence of a mechanic's lien provided the same attached to the
Premises less than 30 days prior to such time and that such lien is released of
record by payment or posting of proper bond within 30 days after the lien
attached to the Premises) and provided further that Tenant has not assigned or
sublet the Premises or any portion thereof and Tenant is the then occupant of
the entire Premises, Tenant shall have the right of first refusal (the "Right of
First Refusal") to lease the remaining rentable space in the Building (the
"Additional Space") in accordance with the provisions hereof. Tenant understands
that, in the event Tenant leases the remainder of the Building, the Total
Rentable Floor Area of the Building will increase to 90,972 (which shall also be
the Total Floor Area of the Premises) as a result of the inclusion of additional
areas (such as demising walls between the existing Premises and other tenant
areas) in the Premises. Tenant's right to lease the Additional Space shall arise
only upon the execution of a letter of intent or instrument of similar import
between Landlord and another party unaffiliated with Landlord setting forth the
business terms on which Landlord and such other party have agreed to a lease of
the Additional Space or any portion thereof.
In such event, if this Right of First Refusal is applicable in accordance
with the foregoing, Landlord shall give notice to Tenant of the business terms
upon which Landlord and such other party have agreed to a lease of the
Additional Space or portion thereof. Tenant shall have ten (10) days from the
giving of such notice in which to elect to lease (a) if Landlord's agreement
with such other party is for forty percent (40%) or more of the Additional
Space, either (i) all of the Additional Space (even if Landlord's agreement with
such other party is for less than all of the Additional Space) or (ii) all of
the remaining Additional Space which is not subject to Landlord's agreement with
such other party, or (b) if Landlord's agreement with such other party is for
less than forty percent (40%) of the Additional Space, the Additional Space
which is subject to Landlord's agreement with such other party. In any case, if
Tenant elects to lease Additional Space in accordance with the foregoing, such
lease shall be on the same business terms set forth in Landlord's notice, with
an appropriate adjustment to reflect the square feet of rentable floor area of
space included in the Additional Space to be leased by Tenant, and otherwise on
the terms set forth in this Lease with respect to the Premises, except that if
the term with respect to the Additional Space commences before the third
anniversary of the Term Commencement Date, the term with respect to the
Additional Space shall be coterminous with the Term hereunder, and if the term
with respect to the Additional Space commences on or after the third anniversary
date of the Term Commencement Date, the term with respect to the Additional
Space shall be as set forth in
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Landlord's Notice. If Tenant fails to notify Landlord within the time specified
herein or chooses not to so lease the Additional Space, then the Right of First
Refusal shall terminate and Landlord shall be free to lease the Additional
Space, in its sole discretion, to such other party or any other party or
parties without first offering it to Tenant, on monetary terms which are not
substantially more favorable to the Tenant than the monetary terms set forth in
Landlord's notice, it being understood that the Right of First Refusal is a
one-time only opportunity only. For purposes hereof, monetary terms shall not
be considered substantially more favorable to the Tenant if the value of all
monetary terms of the Lease of the Additional Space, as executed, considered as
a whole, are not less than ninety-five percent (95%) of the value of all
monetary terms as set forth in Landlord's notice, considered as a whole. If
Tenant chooses to so lease the Additional Space, then the Additional Space
shall become a part of the Premises hereunder under the terms specified above,
and Tenant shall execute an amendment to the Lease to include the Additional
Space under such terms; provided, however, that in such event Tenant shall have
the election, exercisable by at least 60 days prior notice to Landlord, (i) to
pay all electricity charges directly to the utility responsible therefor, in
which event Tenant shall pay all bills therefor before they become due, and
(ii) to contract directly for all interior janitorial services, in which event
Tenant shall be responsible for keeping the Premises neat and clean and for
paying all charges therefor before they become due.
ARTICLE III
CONSTRUCTION
3.1 DELIVERY OF PREMISES.
Tenant acknowledges that Tenant has had a reasonable opportunity to inspect
the Premises. The Premises, shall be delivered to Tenant As Is, Where Is with
all faults and without representation, warranty or guaranty of any kind by
Landlord to Tenant, except that base building systems shall be in good working
condition on the Delivery Date. Notwithstanding the foregoing, Landlord shall be
responsible for the cost of repainting and recarpeting lobbies and lavatories
located in common areas on the first and second floors of the Building using
Building standard materials and upgrading the Building's life safety system
within the common areas of the Building and demising the Premises in accordance
with applicable fire safety requirements as specified on Exhibit B ("Landlord's
Work"). Landlord shall either (a) bid Landlord's Work for construction and
completion by Tenant's contractor and pay Tenant's contractor directly therefor
or (b) provide an allowance to Tenant sufficient for Tenant's contractor to do
such work, the
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amount of such allowance to be subject to Tenant's reasonable concurrence and to
be payable to Tenant upon presentation to Landlord by Tenant of invoices from
Tenant's Contractor therefor.
The Premises shall be delivered to Tenant on the Delivery Date in order
that Tenant may prepare the Premises for Tenant's occupancy in accordance with
plans and specifications theretofore approved by Landlord in accordance with the
provisions hereof. Tenant's occupancy for such purposes prior to the Term
Commencement Date shall nonetheless be subject to all of the terms and
provisions hereof (including the payment of charges for Tenant's electricity in
accordance with Section 4.3 hereof), other than the payment of Annual Base Rent,
Annual Estimated Operating Costs for the Premises and Tenant's Share of Premises
Expenses. All of Tenant's construction, installation of furnishings, and later
changes or additions shall be coordinated with any work being performed by
Landlord in such manner as to maintain harmonious labor relations and not to
damage the Building or Lot or interfere with Building operations.
Landlord will not approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal office use on lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services called for by Section 5.1 unless Tenant first
gives assurances reasonably acceptable to Landlord that such readaptation will
be made prior to such termination without expense to Landlord and makes
provisions reasonably acceptable to Landlord for payment of such increased cost.
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.
As soon as practicable, Tenant shall provide to Landlord for its reasonable
approval (such approval not to be unreasonably withheld or delayed) complete
sets of construction drawings and specifications (the "Complete Plans"),
including but not limited to:
a. Dimensioned Partition Plans;
b. Dimensioned Electrical and Telephone Outlet Plans;
c. Reflected Ceiling Plans;
d. Door and Hardware Schedules;
e. Room Finish Schedules, including wall, carpet and floor tile colors;
f. Electrical, mechanical and structural engineering plans; and
g. All necessary construction details and specifications for work not
specified in Exhibit B.
Tenant may submit partial plans for review and approval by Landlord.
Landlord shall consult with Tenant on an ongoing basis about the plans submitted
by Tenant and shall cooperate
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with Tenant in order that the Complete Plans may be approved in a reasonably
diligent manner. The Complete Plans shall also provide for the installation of
check meters to measure (a) Tenant's lights and outlet consumption in the
Premises and (b) Tenant's water usage in its production facilities and cafeteria
to be located at the Premises.
Landlord and Tenant shall initial the Complete Plans after the same have
been submitted by Tenant and approved by Landlord as set forth above except for
installation of furnishings and the installation of telephone outlets; provided
that if Landlord shall not have submitted to Tenant a written approval to the
Complete Plans or a written objection to the Complete Plans or any revised
version thereof within five (5) business days of being provided such plans by
Tenant (which written objection shall set forth with reasonable specificity each
reason for such objection), Tenant may provide written notice to Landlord
indicating that Landlord has failed to approve or object to the Complete Plans
within such five-day period, in which case Landlord shall conclusively be deemed
to have approved such plans if Landlord shall not have submitted to Tenant a
written objection to the Complete Plans or any revised version thereof within
five (5) business days of being provided such notice by Tenant (which written
objection shall set forth with reasonable specificity each reason for such
objection). All work described in the Complete Plans shall be performed by
Tenant by a general contractor approved by Landlord, such approval not to be
unreasonably withheld or delayed.
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building and the Lot.
Either party may inspect the work of the other at reasonable times and promptly
shall give notice of observed defects. Landlord's obligations under Section 3.1
shall be deemed to have been performed when Tenant commences to occupy any
portion of the Premises for the Permitted Uses except for items which are
incomplete or do not conform with the requirements of Section 3.1 and as to
which Tenant shall in either case have given written notice to Landlord within
ten (10) days after written notice from Landlord to Tenant that Landlord's Work
has been completed or substantially completed.
3.4 CONSTRUCTION REPRESENTATIVES.
Each party authorizes the other to rely in connection with their respective
rights and obligations under this Article III upon approval and other actions on
the party's behalf by any person designated as its construction representative
in Section 1.1 hereof or by any other person designated by such
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party as its construction representative by notice to the party relying.
3.5 ALTERATIONS AND ADDITIONS.
This Section 3.5 shall apply before and during the Term. Tenant shall not
make any alterations and additions to the Premises exceeding the cost of $25,000
in any one calendar year except in accordance with plans and specifications
first approved by Landlord, such approval not to be unreasonably withheld or
delayed; provided that in no event shall any alterations or additions be made by
Tenant without Landlord's prior written approval, which approval may be withheld
in Landlord's sole discretion, which (a) involve or might affect any structural
or exterior element of the Building or Building mechanical, electrical or other
base Building systems, including the common facilities of the Building, except
as set forth in Exhibit C, or (b) will require unusual expense to readapt the
Premises to normal office use on Lease termination or increase the cost of
construction or of insurance or taxes on the Building or the Lot unless Tenant
first gives assurances reasonably acceptable to Landlord that such readaptation
will be made prior to such termination without expense to Landlord and makes
provisions reasonably acceptable to Landlord for payment of such increased cost.
All alterations and additions shall become a part of the Premises, unless and
until Landlord, at its option, shall specify the same for removal pursuant to
Section 6.1.2. All of Tenant's alterations and additions and installation and
delivery of telephone systems, furnishings, and equipment shall be coordinated
with any work being performed by Landlord and shall be performed in such manner,
and by such persons as shall maintain harmonious labor relations and not cause
any damage to the Building or interference with Building construction or
operation and, except for installation of furnishings, equipment and telephone
systems, and except as otherwise expressly set forth herein, shall be performed
by general contractors first approved by Landlord, such approval not to be
unreasonably withheld or delayed. Before commencing any work Tenant shall:
secure all licenses and permits necessary therefor; deliver to Landlord a
statement of the names of all its contractors and subcontractors (the identity
of which must have been previously approved by Landlord as hereinabove
contemplated) and the estimated cost of all labor and material to be furnished
by them; and cause each contractor to carry (i) workmen's compensation insurance
in statutory amounts covering all the contractor's and subcontractor's employees
and (ii) comprehensive public liability insurance with such limits as Landlord
may reasonably require, but in no event less than a combined single limit of
$1,000,000 or such higher amount as may be reasonable under the circumstances
(all such insurance to be written in companies approved by Landlord, such
approval not to be unreasonably withheld or delayed, and naming Landlord and
Tenant as additional insureds), and to deliver to Landlord
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certificates of all such insurance. Tenant shall pay within fourteen (14) days
after being billed therefor by Landlord, as additional rent, one hundred percent
(100%) of any increase in real estate taxes on the Premises not otherwise billed
to Tenant which shall, at any time after the commencement of the Term, result
from any alteration, addition or improvement to the Premises made by or on
behalf of Tenant.
ARTICLE IV
RENT
4.1 RENT.
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever, except as expressly provided in this Lease, equal to 1/12th of the
Annual Rent in equal monthly installments in advance on the first day of each
calendar month included in the Term after the Term Commencement Date; and for
any portion of a calendar month at the beginning or end of the Term, at the
proportionate rate payable for such portion, in advance.
Notwithstanding the foregoing, if the Term Commencement Date begins prior
to April 1, 1997, and Tenant has not then occupied the entire Premises for
business purposes, Tenant shall only pay Annual Rent (other than electricity
charges which shall be paid with respect to the entire Premises) with respect to
the Floor Segments (as defined hereinafter) which Tenant has occupied in whole
or in part for business purposes, until April 1, 1997, at which time Annual Rent
and all other charges with respect to the Premises shall be due and payable. For
purposes hereof, a "Floor Segment" shall equal approximately one-half of each
floor of the Premises, divided roughly by the elevator bank on each floor. If
Tenant occupies any portion of a Floor Segment for business purposes, Tenant
shall be deemed to occupy the entire Floor Segment for business purposes and
shall thereupon, with respect to each Floor Segment so occupied, commence paying
Annual Rent and all other charges relating thereto with respect to one-half of
the square feet of rentable floor area on the floor on which the Floor Segment
is located.
4.2 OPERATING COSTS.
A. Tenant shall pay to Landlord, as additional rent, Tenant's Share of
Premises Expenses (as defined below), if any, on or before the 30th day
following receipt by Tenant of Landlord's Statement (as defined below). As soon
as practicable after the end of each fiscal year ending during the Term and
after Lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
according to GAAP certified by Landlord and showing for the preceding calendar
year or fraction thereof, as the case may be, Landlord's Operating Costs,
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EXCLUDING the interest and amortization on mortgages for the Building and
the Lot or leasehold interests therein, depreciation on the Building and the
lot, real estate brokers' commissions, capital expenditures (except as
specifically set forth below) or tenant finish expenses for other tenants, and
the cost of special services rendered to tenants (including Tenant) for which a
special charge is made,
BUT INCLUDING, without limitation: real estate taxes (as defined below) on
the Building and the Lot; installments and interest on assessments for public
betterments or public improvements; expenses of any proceedings for abatement of
taxes and assessments with respect to any fiscal year or fraction of a fiscal
year; premiums for insurance (including, without limitation, fire, casualty and
liability insurance); fees payable to third parties for financial audits of
Landlord's Operating Costs; compensation and all fringe benefits, worker's
compensation insurance premiums and payroll taxes paid by Landlord to, for or
with respect to all persons engaged in the operating, maintaining, or cleaning
of the Building and the Lot, including, without limitation, a superintendent
available to the Building; all electricity charges related to the common areas
of the Building and heat pumps servicing the Building, and all utility charges
incurred in the operation and maintenance of the Premises, the Building and the
Lot not billed directly to tenants by Landlord or by the utility company; all
costs of cleaning the common areas of the Building and all windows on the
exterior of the Building; all costs of maintenance, repairing, managing and
operating the Building (including without limitation, all structural components
and common facilities of the Building); payments to independent contractors
under service contracts for cleaning the common areas and windows of the
Building as aforesaid and for operating, managing, maintaining and repairing the
Building and the Lot (which payments may be to affiliates of Landlord or
Managing Agent provided the same are at reasonable rates consistent with the
type of occupancy); management fees at the prevailing rate for management
services charged by professional management companies for the operation of
similar buildings (such fees in any event not to exceed the rate of five percent
(5%) of the aggregate fixed rent for the Building); all charges, costs and
expenses assessed to or incurred by Landlord under the Declaration of Covenants
and Easements for Marlborough Business Centre dated April 29, 1991 and recorded
with Middlesex South Registry of Deeds in Book 21127, Page 3 and filed for
registration with Middlesex South Registry District of the Land Court as
Document No. 841886; and all charges to Landlord allocable to the Building and
the Lot for services performed by the manager of the office park in which the
Building and the Lot are located or costs incurred with respect to such office
park and, to the extent Landlord incurs additional charges applicable to the
Building and another building or buildings located in the office park, the
Building's pro rata share (as reasonably determined by Landlord) of such
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charges; and all other reasonable and necessary expenses paid in connection with
the cleaning, operating, managing, maintaining and repairing of the Building and
the Lot, or either, and properly chargeable against income, it being agreed that
if Landlord installs a new or replacement capital item for the purpose of
reducing Landlord's Operating Costs or which is required by law or the purpose
of which is to maintain the Building as a first-class office building, the cost
thereof as reasonably amortized by Landlord, with interest at the prime
commercial rate in effect from time to time at BankBoston in Boston,
Massachusetts on the unamortized amount, shall be included in Landlord's
Operating Costs; provided, however, that in any fiscal year in which the average
annual occupancy of the Building is less than 95%, Landlord's Operating Costs as
defined herein shall also include such additional costs as would reasonably have
been incurred by Landlord with respect to the operating, administration,
cleaning, repair, maintenance and management of the Property with 95% average
annual occupancy.
The term "real estate taxes" as used above shall mean all taxes of every
kind and nature assessed by any governmental authority on the Lot, Building and
improvements, which Landlord shall become obligated to pay because of or in
connection with the ownership, leasing and operation of the Lot, Building and
improvements, subject to the following: There shall be excluded from such taxes
all income taxes, excess profits taxes, excise taxes, franchise taxes, and
estate, succession, inheritance and transfer taxes, provided, however, that if
at any time during the Term the present system of ad valorem taxation of real
property shall be changed so that in lieu of the whole or any part of the ad
valorem tax on real property, there shall be assessed on Landlord a capital levy
or other tax on the gross rents received with respect to the Lot, Building and
improvements, or both, or a federal, state, county, municipal, or other local
income, franchise, excise or similar tax, assessment, levy or charge (distinct
from any now in effect) measured by or based, in whole or in part, upon any such
gross rents, then any and all of such taxes, assessments, levies or charges, to
the extent so measured or based, shall be deemed to be included within the term
"real estate taxes", except that such shall not be deemed to include any
enhancement of said tax attributable to other income or other ownerships of
Landlord.
If Tenant provides written notice to Landlord that it intends to seek an
abatement of the real estate taxes, and Landlord does not within ten (10)
business days of such notice provide written notice to Tenant that it will seek
such abatement, Tenant shall have the right, by itself or together with other
tenants of the Building, and at its sole expense, to contest the validity of and
seek an abatement of the real estate taxes in the name of Landlord, and Landlord
agrees to cooperate with Tenant in any such contest at no out-of-pocket expense
to Landlord and in connection therewith shall make available to Tenant such
information and shall execute such authorizations or
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instruments as Tenant may reasonably request. The proceeds of any abatement
award shall be applied first to reimburse the parties for the costs and
expenses, including attorneys' fees, of obtaining such abatement; second, to
reimburse Tenant and other tenants in the Building for any payments made to
landlord which were attributable to the increased taxes; and third, to Landlord.
B. "Premises Expenses" shall mean one hundred (100%) percent of
Landlord's Operating Costs attributable to the Building and the Lot.
C. If with respect to any fiscal year falling within the Term or for any
fraction of any fiscal year falling at the beginning or end of the Term,
Premises Expenses for a full fiscal year exceed the Annual Estimated Operating
Costs for the Building or for any such fraction of a fiscal year, exceed the
corresponding fraction of the Annual Estimated Operating Costs for the Building,
then Tenant shall pay to Landlord, as additional rent, an amount equal to the
product of (i) the amount of such excess and (ii) a fraction, the numerator of
which shall be the Rentable Floor Area of the Premises and the denominator of
which shall be the Total Rentable Floor Area of the Building (such amount being
referred to as "Tenant's Share of Premises Expenses"). In the event that Tenant
leases all Rentable Floor Area of the Building, Tenant shall pay all of such
excess.
D. If with respect to any fiscal year falling within the Term or for any
fraction of any fiscal year falling at the beginning or end of the Term,
Premises Expenses for a full fiscal year are less than the Annual Estimated
Operating Costs for the Building or for any such fraction of a fiscal year, are
less than the corresponding fraction of the Annual Estimated Operating Costs for
the Building, then Tenant shall receive a credit from Landlord against future
payments of Annual Rent equal to the product of (i) the amount of such shortfall
and (ii) a fraction, the numerator of which shall be the Rentable Floor Area of
the Premises and the denominator of which shall be the Total Rentable Floor Area
of the Building. In the event that Tenant leases all Rentable Floor Area of the
Building, Tenant shall receive a credit for all of such shortfall.
E. Notwithstanding any other provision of this Section 4.2, if the Term
expires or is terminated as of a date other than the last day of a fiscal year,
then for such fraction of a fiscal year at the end of the Term, Tenant's last
payment to Landlord under this Section 4.2 shall be made on the basis of
Landlord's best estimate of the items otherwise includable in Landlord's
Statement and shall be made on or before the later of (a) 10 days after Landlord
delivers such estimate to Tenant or (b) the last day of the Term, with an
appropriate payment or refund to be made upon submission of Landlord's
Statement.
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F. Landlord agrees to keep books and records with respect to Premises
Expenses. Tenant, its authorized agent or representative, or a public accounting
firm selected by Tenant, shall have the right upon advance written notice to
Landlord to inspect those portions of the books of Landlord relating to Premises
Expenses at the offices of Landlord's Managing Agent during business hours for
the purpose of verifying information set forth in Landlord's Statements. In the
event that, as a result of Tenant's inspection, it is determined that Landlord's
Statement overstated Landlord's Operating Costs for any fiscal year by more than
ten percent (10%) of the actual amount of such costs, Landlord shall reimburse
Tenant for all reasonable costs incurred in conjunction with such inspection.
4.3 ESTIMATED PREMISES EXPENSE PAYMENTS.
If, with respect to any fiscal year or fraction thereof during the Term
(other than 1997), Landlord estimates in good faith that Tenant shall be
obligated to pay Tenant's Share of Premises Expenses, then Tenant shall pay, as
additional rent, on the first day of each month of such fiscal year and each
ensuing fiscal year thereafter, estimated monthly Premises Expense payments
(hereinafter "Estimated Monthly Premises Expense Payments") equal to 1/12th of
the Tenant's Share of Premises Expenses for the respective calendar year, with
an appropriate additional payment (or credit by Landlord against Tenant's future
payments of Annual Rent) to be made within 30 days after Landlord's Statement is
delivered to Tenant. Landlord shall, in good faith, make such an estimate each
year, it being understood that the amount of Premises Expenses may increase or
decrease in any given year. Landlord may adjust such Estimated Monthly Premises
Expense Payments from time to time and at any time during a fiscal year, and
Tenant shall pay, as additional rent, on the first day of each month following
receipt of Landlord's notice thereof, the adjusted Estimated Monthly Premises
Expense Payment.
4.4 ELECTRICITY AND WATER.
Tenant will be billed for electricity for Tenant's lights and outlet
consumption on a monthly basis based on an annual estimate of $0.90 per rentable
square foot with respect to fiscal year 1997. With respect to each fiscal year
thereafter during the Term, if Landlord determines in good faith that the annual
estimates for such electrical charges should be adjusted based upon the check
meters for Tenant's electrical consumption to be installed in the Premises as
part of Tenant's initial construction work in the Premises, Landlord shall give
to Tenant on or before the first day of such fiscal year a written good faith
estimate of the average expense to Landlord per square foot for Tenant's
electricity for such fiscal year, and Tenant will be billed for electricity for
Tenant's lights and outlet
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consumption on a monthly basis based on such updated annual estimate. Should the
actual average expense to Landlord per square foot for Tenant's electricity be
different, an additional charge or a credit will be made at the end of each
year's occupancy to be paid with or credited against the next monthly charge for
Tenant's electricity (or after the conclusion of the Term, to be paid by
Landlord to Tenant or Tenant to Landlord, as the case may be, within 30 days
after Landlord determines the same and provides notice thereof to Tenant).
Notwithstanding the foregoing, Landlord reserves the right to, in good faith,
from time to time during each fiscal year to adjust the annual estimates for
such electrical charges based on the check meters. Such charges for Tenant's
electricity shall be paid by Tenant as additional rent at the same time and in
the same manner as payments of Annual Base Rent. In the event that Tenant leases
all Rentable Floor Area of the Building, Tenant shall pay for all electricity
charges relating to the Building and the Lot.
Tenant covenants and agrees that its use of electric current shall not
exceed 5.0 watts per square foot of usable floor area and that its total
connected lighting load will not exceed the maximum load from time to time
permitted by applicable governmental regulations. In the event Tenant introduces
into the Premises personnel or equipment which overloads the capacity of the
Building system or in any other way interferes with the system's ability to
perform adequately its proper functions, supplementary systems including check
meters may, if and as needed, at Landlord's option, be provided by Landlord, at
Tenant's expense. Landlord shall not in any way be liable or responsible to
Tenant for any loss or damage or expense which Tenant may sustain or incur if,
during the Term of this Lease, either the quantity or character of electric
current is changed or electric current is no longer available or suitable for
Tenant's requirements due to a factor or cause beyond Landlord's control.
Tenant also covenants to pay as additional rent Landlord's usage of water
in its production facilities and cafeteria based upon the check meters for such
usage by Tenant to be installed as part of Tenant's initial construction work in
the Premises. Such payment shall be made no later than ten (10) days after
invoice by Landlord to Tenant from time to time, but not more often than
monthly.
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4.5 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the periods of
accounting under Section 4.2 to any annual period other than a calendar year
(excepting, however, during the current calendar year), and upon any such change
all items referred to in this Section 4.4 shall be appropriately apportioned. In
all Landlord's Statements rendered under this Section 4.4, amounts for periods
partially within and partially without the accounting periods shall be
appropriately apportioned, and any items which are not determinable at the time
of a Landlord's Statement shall be included therein on the basis of Landlord's
estimate, and with respect thereto Landlord shall render promptly after
determination a supplemental Landlord's Statement, and appropriate adjustment
shall be made according thereto. All Landlord's Statements shall be prepared on
an accrual basis of accounting.
4.6 PAYMENTS.
All payments of Annual Rent and additional rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate in
writing. If any installment of Annual Base Rent or additional rent is paid more
than 10 days after the due date thereof, at Landlord's election, it shall bear
interest at a rate equal to the average prime commercial rate from time to time
established by the BankBoston in Boston, Massachusetts plus 4% per annum from
such due date, which interest shall be immediately due and payable as further
additional rent.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish during normal working hours heat,
air-conditioning, cleaning service in accordance with the schedule set forth in
Exhibit D, hot and chilled water service during the Term. "Normal working hours"
shall mean the hours of 8:00 A.M. through 6:00 P.M. Monday through Friday and
the hours of 8:00 A.M. through 1:00 P.M. on Saturdays, and no hours on legal
holidays and Sundays; provided, however, that Tenant shall have access to the
Building (including access to at least one loading dock) 24 hours a day, 365
days a year, by means of a key or keys or other access device or devices to the
main lobby of the Building and the loading dock to be provided
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to Tenant by Landlord. Landlord shall also keep all common areas in clean and
orderly condition. During all times that Tenant shall have access to the
Building, Landlord shall maintain utility services for the Building (subject to
Sections 4.4 and 5.2), and shall furnish elevator service and reasonable
lighting to all common areas (including without limitation lobbies, lavatories,
stairs, sidewalks and parking areas), and shall not (except as may be required
in an emergency, or in connection with use of the Loading Dock by other tenants
and Landlord, from time to time, or a repair to the Building) in any way
obstruct Tenant's use of the loading dock. Landlord is not and shall not be
required to furnish to Tenant or any other occupant of the Premises telephone or
other communication service.
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services (including heat or air-conditioning during hours other than normal
working hours) upon reasonable advance request of Tenant at equitable rates from
time to time established by Landlord to be paid by Tenant;
5.1.3 Maintenance and Repairs - Except as otherwise provided in Article
VII, to maintain and make such repairs to the roof, exterior walls, floor slabs,
windows, sidewalks, parking areas, driveways, other structural components and
common facilities of the Building and the Lot as may be necessary to keep them
in serviceable condition as a first class office building, including without
limitation snow removal with respect to the sidewalks, parking areas and
driveways on the Lot; and
5.1.4 Tenant Signage - To include Tenant's name on the Tenant directory
maintained by Landlord in the main lobby of the Building. So long as Tenant
occupies not less than 50% of the rentable area of the Building, Landlord shall
also permit Tenant to install and maintain at Tenant's sole cost and expense,
and provided that the same are maintained by Tenant in good condition and repair
and that Tenant first obtains Landlord's approval, which approval shall not be
unreasonably withheld or delayed, (a) one exterior sign on the facade of the
Building facing Route I-290 and (b) one monument sign at the entrance to the
Building, provided that such monument sign is designed in a manner which will
permit up to two (2) additional tenants to be named thereon, which Landlord
shall have the election to do, from time to time, at the expense of Landlord or
such other tenant or tenants. All such signage shall be consistent with other
signage in the office park and subject to zoning, municipal and other applicable
legal requirements. No other tenant of the Building shall have more favorable
signage rights than Tenant does hereunder so long as Tenant occupies not less
than 50% of the rentable floor area of the Building.
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5.1.5 Quiet Enjoyment - That Landlord has the right to make this Lease and
that Tenant on paying the rent and performing its obligations hereunder shall
peacefully and quietly have, hold and enjoy the Premises throughout the Term
without any manner of hindrance or molestation from Landlord or anyone claiming
under Landlord, subject however to all the terms and provisions hereof.
5.1.6 Insurance - Landlord shall carry during the Term of this Lease "all
risk" insurance for the full replacement cost of the Building and liability
insurance having coverage amounts and deductibles consistent with similar
first-class office buildings in the metropolitan Boston area.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any compensation or reduction of
rent by reason of inconvenience or annoyance or for loss of business arising
from any failure or interruption of utility systems or services due to a factor
or cause beyond Landlord's control; provided that Landlord shall diligently
pursue the restoration of such systems or services. Landlord shall not be liable
for such failure or interruption, nor shall the same be construed as a
constructive eviction of Tenant, provided, however, that if such failure shall
prevent Tenant from doing business in the ordinary course for a period of five
(5) consecutive business days, Annual Rent shall equitably abate until such
systems or services are restored. Landlord shall not be liable to Tenant for any
compensation or reduction of rent by reason of inconvenience or annoyance or
loss of business arising from the necessity of Landlord's entering the Premises
for any of the purposes in this Lease authorized, or for repairing the Premises
or any portion of the Building or the Lot. In case Landlord is prevented or
delayed from making any repairs, alterations or improvements, or furnishing any
service or performing any other covenant or duty to be performed on Landlord's
part, by reason of any cause beyond Landlord's reasonable control, Landlord
shall not be liable to Tenant therefor, nor, except as expressly otherwise
provided in Article VII and in this Section 5.2, shall Tenant be entitled to any
abatement or reduction of rent by reason thereof, nor shall the same give rise
to a claim in Tenant's favor that such failure constitutes actual or
constructive total or partial, eviction from the Premises. The provisions hereof
are subject to the provisions of Article VII of the Lease.
Subject to the other provisions of this Section 5.2, Landlord reserves the
right to stop any service or utility system when necessary by reason of accident
or emergency or until necessary repairs have been completed. Except in case of
emergency repairs, Landlord will give Tenant reasonable advance notice of any
contemplated stoppage and will in all events use reasonable efforts to avoid
unnecessary inconvenience to Tenant
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by reason thereof.
Landlord also reserves the right to institute such reasonable policies,
programs and measures as may be necessary, required or expedient for the
conservation or preservation of energy or energy services or as may be necessary
or required to comply with applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) all charges by public utilities
for electricity, telephone (including service inspections therefor) and other
services rendered to the Premises not otherwise required hereunder to be
furnished by Landlord without charge and not consumed in connection with any
services required to be furnished by Landlord without charge, and (d) as
additional rent, all charges to Landlord for services rendered pursuant to
Section 5.1.2 hereof.
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article VII
and Section 5.1.3, to keep the Premises in good order, repair and condition,
reasonable wear only excepted; and at the expiration or termination of this
Lease peaceably to yield up the Premises and all alterations and additions
therein in such order, repair and condition, first removing all goods and
effects of Tenant and any alterations and additions, the removal of which
alterations and additions is required by agreement or specified to be removed by
Landlord by notice to Tenant, and repairing all damage caused by such removal
and restoring the Premises and leaving them broom clean and neat.
6.1.3 Occupancy and Use - Continuously from the Term Commencement Date, to
use and occupy the Premises only for the Permitted Uses; not to injure or deface
the Building or the Lot; to keep the Premises clean and in a neat and orderly
condition; and not to permit in the Building any use thereof which is improper,
offensive, contrary to law or ordinances, or liable to create a nuisance or to
invalidate or increase the premiums for any insurance on the Building or its
contents or liable to render necessary any alteration or addition to the
Building; not
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to dump, flush, or in any way introduce any hazardous substances or any other
toxic substances into the septic, sewage or other waste disposal system serving
the Premises; not to generate, store or dispose of hazardous substances in or on
the Premises, or the Lot or dispose of hazardous substances from the Premises to
any other location, other than those required in connection with Tenant's
business (as set forth on Exhibit F attached hereto and made a part hereof or
otherwise approved by Landlord in writing from time to time, such approval not
to be unreasonably withheld or delayed) and then only pursuant to any required
permits and otherwise in compliance with the Resource Conservation and Recovery
Act of 1976, as amended, 42 U.S.C. ss.6901 et seq., and all other applicable
laws, ordinances and regulations; to notify Landlord of any incident which would
require the filing of a notice under applicable federal, state, or local law; to
provide to Landlord upon written request copies of any permits required in
connection with Tenant's handling, storage or disposal of hazardous substances;
and to comply with the orders and regulations of all governmental authorities
with respect to zoning, building, fire, health and other codes, regulations,
ordinances or laws applicable to the Premises. "Hazardous substances" as used in
this paragraph shall mean "hazardous substances" as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.9601 and regulations adopted pursuant to said Act, and "hazardous
substances", "hazardous wastes", "toxic substances", "toxic wastes" and terms of
similar import under other applicable federal and state statutes and regulations
adopted pursuant thereto. Landlord shall endeavor to include a provision in the
leases of all other tenants of the Building which does not deviate materially
from this Section 6.1.3, or if a provision which does deviate materially from
this Section 6.1.3 is included in any such lease, shall provide a copy of such
provision to Tenant.
The provisions of this Section 6.1.3 shall not prohibit the use, storage
and disposal by Tenant of reasonable and necessary quantities of office
equipment, supplies and other substances normally utilized by businesses for
office purposes, provided such use, storage and disposal shall comply with all
applicable environmental laws.
6.1.4 Rules and Regulations - To comply with the Rules and Regulations set
forth in Exhibit E and all other reasonable Rules and Regulations hereafter made
by Landlord, of which Tenant has been given notice, for the care and use of the
Building and the Lot and their facilities and approaches, it being understood
that Landlord shall not be liable to Tenant for the failure of other tenants of
the Building to conform to such Rules and Regulations.
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6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant and to procure all licenses and
permits so required because of such use and, if requested by Landlord, to do any
work so required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's Permitted Uses.
6.1.6 Assignment and Subletting.
A. Not without the prior written consent of Landlord to assign,
mortgage, pledge, encumber, sell or transfer this Lease, in whole or in part, to
make any sublease, or to permit occupancy of the Premises or any part thereof by
anyone other than Tenant, voluntarily or by operation of law; as additional
rent, to reimburse Landlord promptly for reasonable legal and other expenses
incurred by Landlord in connection with any request by Tenant for consent to
assignment or subletting; no assignment or subletting shall affect the
continuing primary liability of Tenant (which, following assignment, shall be
joint and several with the assignee); no consent to any of the foregoing in a
specific instance shall operate as a waiver in any subsequent instance.
Landlord's consent to any proposed assignment or subletting is required both as
to the terms and conditions thereof, and (subject to the provisions of
Subsection C of this Section 6.1.6 below) as to the creditworthiness of the
proposed assignee or subtenant and the consistency of the proposed assignee's or
subtenant's business with other uses and tenants in the Building. In the event
that any assignee or subtenant pays to Tenant any amounts in excess of the
Annual Base Rent and additional rent then payable hereunder, or pro rata portion
thereof on a square footage basis for any portion of the Premises, Tenant shall
promptly pay an amount equal to seventy-five (75%) of said excess, after
deducting therefrom Tenant's out-of-pocket costs incurred in procuring such
assignee or subtenant, to Landlord as and when received by Tenant. If Tenant
requests Landlord's consent to assign this Lease or sublet more than 25% of the
Premises, Landlord shall have the option, exercisable by written notice to
Tenant given within 10 days after receipt of such request, to terminate this
Lease in its entirety, with respect to a proposed assignment, or with respect to
any proposed sublease, as to that portion of the Premises proposed to be sublet,
as of a date specified in such notice which shall be not less than 30 or more
than 60 days after the date of such notice.
If, at any time during the Term of this Lease, Tenant is:
(i) a corporation or a trust (whether or not having shares of beneficial
interest) and there shall occur any change in the identity of any of the persons
then having power to participate in the election or appointment of the
directors, trustees or other persons exercising like functions and managing the
affairs
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of Tenant; or
(ii) a partnership or association or otherwise not a natural person (and is
not a corporation or a trust) and there shall occur any change in the identity
of any of the persons who then are members of such partnership or association or
who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by notice
to Tenant given within 90 days thereafter if, in Landlord's reasonable judgment,
the credit of Tenant is thereby materially impaired. This paragraph shall not
apply if the initial Tenant named herein is a corporation and the outstanding
voting stock thereof is listed on a recognized securities exchange, including
without limitation the NASDAQ Stock Market.
B. The foregoing provisions of subparagraph (A) of this Section 6.1.6
shall not be deemed violated by an assignment of this Lease to any parent,
wholly-owned subsidiary of such parent corporation or affiliate of Tenant
("affiliate of Tenant" shall mean any corporation which directly controls,
beneficially owns or is under common control with Tenant); provided however,
that no such assignment shall be binding upon Landlord unless the assignee shall
execute, acknowledge and deliver to Landlord an agreement in recordable form,
whereby the assignee agrees unconditionally to be bound by and to perform all
the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed, whether or not accruing prior to or after the date of
such assignment and whether or not relating to matters arising prior to such
assignment and further agrees that, notwithstanding such assignment, the
provisions of this Section 6.1.6 shall continue to be binding upon such assignee
with respect to all future assignments.
Not to assign this Lease to a party which results from a consolidation,
merger, acquisition or sale of substantially all of the assets and stock of
Tenant without obtaining, on each occasion, the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed, provided
that such consent shall not be required if such party will have a net worth
after such consolidation, merger, acquisition, or sale equal to or exceeding the
greater of Tenant's net worth as of the date hereof or Tenant's net worth
immediately proceeding the proposed assignment (the "Net Worth Requirement"),
but only if Tenant provides prior notice of the assignment to Landlord,
accompanied by sufficient information to validate that the Net Worth Requirement
will be satisfied to Landlord's reasonable satisfaction.
C. Landlord agrees not to withhold or delay its consent to an
assignment of this Lease or a sublease of a portion of the Premises by Tenant
provided that (a) Tenant is not in default of any obligation hereunder, (b)
Landlord determines in its sole reasonable discretion that the proposed
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assignee or sublessee (i) will use the Premises for office purposes, and (ii)
has a financial standing acceptable to Landlord as evidenced by financial
statements in scope and substance satisfactory to Landlord and in conformity
with generally accepted accounting principles and, if requested by Landlord,
certified by a certified public accountant acceptable to Landlord (provided that
Landlord agrees that if the Net Worth Requirement is satisfied, such financial
standing shall be acceptable to Landlord), (c) the rent charged by Tenant on a
square footage basis shall not be less than the Annual Rent and additional rent
due hereunder, on a square footage basis, and (d) the proposed assignee or
sublessee shall not be (i) a tenant (or an affiliate of a tenant) of the
Building or another building in the office park owned by Landlord or an
affiliate of Landlord or (ii) an entity (or an affiliate of any entity) with
which Landlord was negotiating for space in the Building or another building in
the office park owned by Landlord or an affiliate of Landlord during the
preceding eighteen (18) months. In the case of an assignment, the proposed
assignee must specifically assume and agree in writing to be bound by all of the
obligations of the Tenant hereunder.
6.1.7 Indemnity - To defend, with counsel approved by Landlord (such
approval not to be unreasonably withheld or delayed), all actions against
Landlord, any partner, trustee, stockholder, officer, director, employee or
beneficiary of Landlord, holders of mortgages secured by the Premises or the
Building and Lot and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and to pay, protect, indemnify and save
harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature arising from Tenant's use of the Premises,
except if caused by Landlord's negligence or the negligence of any person or
entity for whom Landlord is legally responsible, or any claims arising from any
breach or default on Tenant's part under the terms of this Lease, or from any
act, fault, omission or other misconduct of Tenant, or its agents, employees,
contractors, licensees, sublessees, invitees, or any person or entity for whom
Tenant is legally responsible, or from injury to or death of any person or
damage to or loss of property, on the Premises, except if caused by Landlord's
negligence or the negligence of any person or entity for whom Landlord is
legally responsible, or from Tenant's generation, storage, disposal or use of
hazardous substances in, upon or about the Premises. Tenant assumes all risk of
damage to or loss of property or injury to or death of persons in, upon or about
the Premises, from any cause other than Landlord's negligence or the negligence
of any person or entity for whom Landlord is legally responsible.
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6.1.8 Tenant's Insurance - To maintain (a) all risk property insurance in
amounts sufficient to fully cover Tenant's improvements and all property in the
Premises which is not owned by Landlord and (b) commercial general liability
insurance on the Premises, with Landlord named as an additional insured, in
respect of such commercial general liability insurance indemnifying Landlord and
Tenant against all claims and demands for (i) injury to or death of any person
or damage to or loss of property, on the Premises or connected with the use,
condition or occupancy of the Premises unless caused by the negligence of
Landlord or its servants or agents, (ii) violation of this Lease, or (iii) any
act, fault or omission, or other misconduct of Tenant or its agents, employees,
contractors, licensees, sublessees or invitees, in amounts which shall, at the
beginning of the Term, be at least equal to the limits set forth in Section 1.1,
and from time to time during the Term, shall be for such higher limits, if any,
as are customarily carried in the area in which the Premises are located on
property similar to the Premises and used for similar purposes, and shall be
written on the "Occurrence Basis", and to furnish Landlord with certificates
thereof. Such insurance shall be effected under valid and enforceable policies
with insurers authorized to do business in Massachusetts as stock or mutual
companies that are rated in the current edition of BEST'S KEY RATING GUIDE,
PROPERTY AND CASUALTY as A and as Class VII or higher. Not later than the first
to occur of (a) the Term Commencement Date or (b) the commencement of any
activities by Tenant in or about the Premises and thereafter not less than 30
days prior to the expiration dates of the expiring policies theretofore
furnished pursuant to this Section 6.1.8, Tenant shall deliver to Landlord
certificates of insurance issued by the insurers evidencing all such policies in
form satisfactory to Landlord, accompanied by evidence satisfactory to Landlord
of payment of the first installment of the premiums. Each such policy shall
provide that it may not be cancelled and that its form, terms or conditions may
not be materially changed without at least 30 days prior written notice to each
insured named therein.
6.1.9 Tenant's Worker's Compensation Insurance - To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
statutory amounts and to furnish Landlord with certificates thereof.
6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's agents
entry at all reasonable times during normal business hours and upon reasonable
advance notice (except that no notice is required in the event of an emergency,
in which case Landlord shall be permitted to enter at any time): to examine the
Premises and, if Landlord shall so elect, to make repairs, replacements,
alterations or substitutions as Landlord may deem necessary or desirable
provided that Landlord will not unreasonably interfere with Tenant's business;
to remove, at Tenant's expense, any changes or additions not consented to in
writing by Landlord if such consent was required under the
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provisions of this Lease; and to show the Premises to prospective tenants during
the 9 months (or if Tenant has given notice of exercise of Tenant's Option to
Extend in accordance with Section 2.3 hereof, 8 months) preceding expiration of
the Term and to prospective purchasers and mortgagees at all reasonable times
during normal business hours.
6.1.11 Loading - Not to place Tenant's Property, as defined in Section
6.1.13, upon the Premises so as to exceed a rate of 75 pounds of live load per
square foot with respect to any floor of the Building other than the ground
floor; not to move any safe, vault or other heavy equipment in, about or out of
the Premises except in such manner as Landlord shall in each instance approve
(such approval not to be unreasonably withheld or delayed); and not to leave
Tenant's personal property or equipment in or about the common loading area
serving the Building; Tenant's business machines and mechanical equipment which
cause vibration or noise that may be transmitted to the Building structure shall
be placed and maintained by Tenant in settings of cork, rubber, spring, or other
types of vibration eliminators sufficient to eliminate such vibration or noise.
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
additional rent, all costs including, without implied limitation, reasonable
counsel fees incurred by or imposed upon Landlord in connection with such
litigation (except in connection with litigation involving an alleged breach or
default by Landlord under the terms of this Lease to the extent that Landlord is
held to be in breach or default or litigation involving the alleged negligence
or willful misconduct of Landlord or of any person or entity for whom Landlord
is legally responsible to the extent that Landlord or anyone for whom Landlord
is legally responsible is found to have engaged in negligence or willful
misconduct), and, as additional rent, also to pay all such costs and fees
incurred by Landlord in connection with the successful enforcement by Landlord
of any obligations of Tenant under this Lease.
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall
be at the sole risk and hazard of Tenant, and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft, or from any
other cause, no part of said loss or damage is to be charged to or to be borne
by Landlord unless due to the negligence or willful misconduct of Landlord or of
any person or entity for whom Landlord is legally responsible.
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6.1.14 Labor or Materialmen's Liens - To pay promptly when due, and to
defend and indemnify Landlord from and against, the entire cost of any work done
on the Premises by Tenant, its agents, employees, or independent contractors,
subject to Tenant's right to contest any claim in good faith so long as
Landlord's interest in the Building or the Lot is not impaired thereby; and to
cause any liens for labor or materials performed or furnished in connection with
any work done on the Premises by or on behalf of Tenant that may attach to the
Premises to be immediately released of record by payment or posting of proper
bond.
6.1.15 Changes or Additions - Only to make changes or additions to the
Premises in accordance with Article III hereto, provided that Tenant shall
reimburse Landlord for all reasonable out-of-pocket costs incurred by Landlord
in reviewing Tenant's proposed changes or additions.
6.1.16 Holdover - To pay to Landlord the greater of one hundred fifty
percent (150%) of (a) the then fair market rent as conclusively determined by
Landlord in its reasonable judgement or (b) the total of the Annual Base Rent
and additional rent then applicable for each month or portion thereof Tenant
shall retain possession of the Premises or any part thereof after the
termination of this Lease, whether by lapse of time or otherwise, and also to
pay all damages sustained by Landlord on account thereof; the provisions of this
subsection shall not operate as a waiver by Landlord of the right of re-entry
provided in this Lease.
6.1.17 Security - To indemnify, and save Landlord harmless from any claim
for injury to person or damage to property asserted by any personnel, employee,
guest, invitee or agent of Tenant which is suffered or occurs within the
Premises by reason of the act of any intruder or any other person within the
Premises, unless such intruder's access to the Premises is caused by or the
result of the negligence of Landlord or of any person or entity for whom
Landlord is legally responsible.
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ARTICLE VII
DAMAGE AND DESTRUCTION; CONDEMNATION
7.1 FIRE OR OTHER CASUALTY
7.1.1 Subject to the provisions of Section 7.1.2 hereof, in the event
during the Term hereof the Premises shall be partially damaged (as distinguished
from "substantially damaged" as such term is hereinafter defined) by fire,
explosion, casualty or any other occurrence covered or as may be required to be
covered, as herein provided, by Landlord's insurance or by such casualty plus
required demolition, or by action taken to reduce the impact of any such event,
Landlord shall forthwith proceed to repair such damage and restore the Premises,
or so much thereof as was originally constructed or delivered by Landlord to
substantially its condition at the time of such fire, explosion, casualty or
occurrence, provided that Landlord shall not be obligated to expend for such
repair an amount in excess of the insurance proceeds recovered as a result of
such damage and, further provided that Tenant is not then in default of any of
its obligations under this Lease beyond any applicable cure period. Landlord
shall not be responsible for any delay which may result from any cause beyond
Landlord's reasonable control. If Landlord is not obligated to undertake or to
complete the repair of such damage and the restoration of the Premises, or so
much thereof as was originally constructed or delivered by Landlord, to
substantially its condition at the time of such fire, explosion, casualty or
occurrence, as a result of the unavailability of insurance proceeds in an amount
sufficient to complete such repair and restoration, and Landlord does not elect
to do so, Landlord shall provide written notice to Tenant that it will not so
repair such damages and restore the Premises as soon as practicable after
Landlord determines that it will not so repair such damage and restore the
Premises, and thereupon Tenant shall have the right to terminate this Lease by
notice to Landlord given no later than 30 days after Landlord's notice to
Tenant.
7.1.2 If, however, (i) the Premises should be damaged or destroyed (a) by
fire or other casualty (1) to the extent of 25% or more of the cost of
replacement, or (2) so that 25% or more of the principal area contained in the
Premises shall be rendered untenantable, or (b) by any casualty other than those
covered by insurance policies required to be maintained by Landlord under this
Lease (hereinafter "substantially damaged"), or (ii) the Premises shall be
damaged in whole or in part during the last 2 years of the Term, or (iii) there
shall be damage to the Premises of a character as cannot reasonably be expected
to be repaired within 12 months from the date of casualty, or (iv) such
restoration involves the demolition of or repair of damage to 25% percent or
more of the Premises, or (v) applicable law requires the demolition of the
Building or forbids the
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rebuilding of the damaged portion of the Building, or (vi) such restoration
requires repairs in an amount in excess of the insurance proceeds recovered or
recoverable, or (vii) Landlord's mortgagee shall require that the insurance
proceeds from such damage or destruction be applied against the principal
balance due on any mortgage, Landlord may, at its option, either terminate this
Lease or elect to repair the Premises and Landlord shall notify Tenant as to its
election within 60 days after such fire or casualty. If Landlord elects to
terminate this Lease, the Term hereof shall end on the date specified in the
notice (which shall be the end of a calendar month and not sooner than 30 days
after such election was made). If Landlord does not elect to terminate this
Lease, then Landlord shall perform such repairs set forth in Section 7.1.3
hereof and Tenant shall perform such repairs in the Building as set forth in
Section 7.1.4 hereof, and the Term shall continue without interruption and this
Lease shall remain in full force and effect.
If Landlord has not elected to terminate this Lease and if there shall be
damage to the Premises of a character as cannot (in the reasonable judgment of
Landlord's engineer) reasonably be expected to be repaired within 12 months from
the date of casualty (which judgment shall be made and notice thereof given to
Tenant within 60 days of the fire or other casualty), then Tenant may, at its
option, terminate this Lease provided that Tenant's election shall be made
within 30 days of Landlord's delivery of the estimate of Landlord's engineer as
to the time period required for restoration.
7.1.3 If neither Landlord nor Tenant elects to terminate this Lease as
provided in Section 7.1.2 hereof and if Tenant is not then in default of any of
its obligations under the Lease beyond any applicable cure period provided for
herein, Landlord shall work diligently to reconstruct as much of the Premises as
was originally constructed or delivered by Landlord (it being understood by
Tenant that Landlord shall not be responsible for any reconstruction of
leasehold improvements, which reconstruction is the sole responsibility of
Tenant) to substantially its condition at the time of such damage. Landlord
shall not be responsible for any delays which may result from any cause beyond
Landlord's reasonable control; provided that if Landlord, for any reason, fails
to substantially complete such reconstruction within twelve (12) months from the
date of the fire or casualty, Tenant, at its option, may terminate this Lease at
the end of such twelve month period by written notice given to Landlord,
provided, however, that so long as Landlord has been and continues to diligently
and continuously pursue such reconstruction to completion, such termination
shall only be effective sixty (60) days after the giving of such notice and then
only if Landlord does not substantially complete such reconstruction within such
sixty-day period. If Landlord has been diligently and continuously pursuing such
reconstruction to completion and does
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substantially complete such reconstruction within such sixty-day period, such
termination shall be null and void and this Lease shall continue in full force
and effect for the remainder of the Term, subject to the provisions of the
Lease. For purposes hereof, substantial completion shall mean that the
reconstruction has been completed with the exception of (a) minor items which
can be fully completed without material interference with the use of the
Premises by Tenant for the Permitted Uses, and (b) items which are incomplete
because of delays caused by Tenant.
7.1.4 If Landlord does not elect to terminate this Lease as provided in
Section 7.1.2 hereof, Tenant shall, at its own cost and expense, repair and
restore the Premises in accordance with the provisions of Section 6.1.15 hereof
to the extent not required to be repaired by Landlord pursuant to the provisions
of this Section 7.1, including, but not limited to, the repairing and/or
replacement of its merchandise, trade fixtures, furnishings and equipment in a
manner and to at least a condition equal to that prior to its damage or
destruction. Tenant agrees to commence the performance of its work when notified
by Landlord that the work to be performed by Tenant can, in accordance with good
construction practices, then be commenced and Tenant shall complete such work as
promptly thereafter as is practicable, but in no event more than 120 days
thereafter.
7.1.5 All proceeds payable from Landlord's insurance policies with respect
to the Premises shall belong to and shall be payable to Landlord. If Landlord
does not elect to terminate this Lease as provided in Section 7.1.2 hereof,
Landlord shall disburse and apply so much of any insurance recovery as shall be
necessary against the cost to Landlord of restoration and rebuilding of
Landlord's work referred to in Section 7.1.3 hereof, subject to the prior rights
of any lessor under a ground or underlying lease covering the Building and/or
the holder of any mortgage liens against the Building.
7.1.6 In the event that the provisions of Section 7.1.1 or Section 7.1.2
shall become applicable, the Annual Base Rent and additional rent shall be
abated or reduced proportionately during any period in which, by reason of such
damage or destruction, there is substantial interference with the operation of
the business of Tenant in the Premises, having regard to the extent to which
Tenant may be required to discontinue its business in the Premises, and such
abatement or reduction shall continue for the period commencing with such
destruction or damage and ending with the completion by Landlord of such work of
repair and/or reconstruction as Landlord is obligated to do (or elects to do in
accordance with Section 7.1.1) and the earliest of (i) completion by Tenant of
such work as Tenant is obligated to do, (ii) Tenant's use of the Premises for
the Permitted Uses (provided that the expiration of any such abatement or
reduction as a result of Tenant's use of
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the Premises for the Permitted Uses shall be subject to the same phasing of
payments of Annual Rent and other charges in connection with Tenant's occupancy
of Floor Segments as Tenant's initial occupancy of the Premises described in
Section 4.1 hereof), and (iii) provided that Tenant diligently and continuously
pursues Tenant's work to completion, 120 days after the date Tenant is obligated
to commence Tenant's work.
7.2 EMINENT DOMAIN.
If, after the execution and before termination of this Lease, the entire
Premises or the parking area on the Lot (unless reasonably equivalent substitute
parking is provided) shall be taken by eminent domain or destroyed by the action
of any public or quasi-public authority, or in the event of conveyance in lieu
thereof, the Term shall cease as of the day possession shall be taken by such
authority, and Tenant shall pay rent up to that date with a pro-rata refund by
Landlord of such rent and additional rent as shall have been paid in advance for
a period subsequent to the date of the taking of possession.
If less than 25% of the Premises or the parking area on the Lot (with due
credit for reasonably equivalent substitute parking provided by Landlord) shall
be so taken or conveyed, this Lease shall cease only as respects the parts so
taken or conveyed, as of the day possession shall be taken, and Tenant shall pay
rent up to that day, with an appropriate refund by Landlord of such rent as may
have been paid in advance for a period subsequent to the date of the taking of
possession, and thereafter the Annual Base Rent shall be equitably adjusted.
Pending agreement of such rental adjustment, Tenant agrees to pay to Landlord
the Annual Base Rent in effect immediately prior to the taking by eminent
domain. Landlord shall at its expense make all necessary repairs or alterations
so as to constitute the remaining premises a complete architectural unit.
If more than 25% of the Premises shall be so taken or conveyed, then at
Landlord's or Tenant's option upon notice to the other party, the Lease shall
terminate on the date specified in such notice (which shall be the end of a
calendar month and not sooner than thirty (30) days after such election was
made). If neither party elects to terminate the Lease, the Term shall cease only
as respects the part so taken or conveyed, from the day possession shall be
taken, and Tenant shall pay rent to that date with an appropriate refund by
Landlord of such rent as may have been paid in advance for a period subsequent
to the date of the taking of possession. If neither Landlord nor Tenant elects
to terminate the Lease, all of the terms herein provided shall continue in
effect except that the Annual Base Rent shall be equitably adjusted, and
Landlord shall make all necessary repairs or alterations so as to constitute the
remaining premises a complete architectural unit.
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All compensation awarded for any such taking or conveyance, whether for the
whole or a part of the Premises, shall be the property of Landlord, whether such
damages shall be awarded as compensation for diminution in the value of the
leasehold or of the fee of or underlying leasehold interest in the Premises, and
Tenant hereby assigns to Landlord all of Tenant's right, title and interest in
and to any and all such compensation; provided, however, that Tenant shall be
entitled to seek a separate award for Tenant's stock, trade fixtures and
relocation expense.
In the event of any taking of the Premises or any part thereof for
temporary use, this Lease shall be and remain unaffected thereby and rent shall
not abate.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
The Building and the Lot are not subject to any presently existing mortgage
or deed of trust covering the Lot or Building or both.
Unless the option provided for in the next following sentence shall be
exercised, this Lease shall be superior to and shall not be subordinate to, any
mortgage, deed of trust or other voluntary lien hereafter placed on the Lot or
Building or both (the "mortgaged premises"). The holder of any such mortgage,
deed of trust or other voluntary lien shall have the option to subordinate this
Lease to the same, provided that such holder enters into an agreement with
Tenant by the terms of which the holder will agree to recognize the rights of
Tenant under this Lease and to accept Tenant as tenant of the Premises under the
terms and conditions of this Lease in the event of acquisition of title by such
holder through foreclosure proceedings or otherwise and Tenant will agree to
recognize the holder of such mortgage as Landlord in such event, which agreement
shall be made to expressly bind and inure to the benefit of the successors and
assigns of Tenant and of the holder and upon anyone purchasing the mortgaged
premises at any foreclosure sale. Any such mortgage to which this Lease shall be
subordinated may contain such terms, provisions and conditions as the holder
deems usual or customary.
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8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY.
The word "mortgage" as used herein includes mortgages, deeds of trust or
other similar instruments evidencing other voluntary liens or encumbrances, and
modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee, and any
subsequent holder or holders of a mortgage. Until the holder of a mortgage shall
enter and take possession of the Premises for the purpose of foreclosure, such
holder shall have only such rights of Landlord as are necessary to preserve the
integrity of this Lease as security. Upon entry and taking possession of the
Premises for the purpose of foreclosure, such holder shall have all the rights
of Landlord. Notwithstanding any other provision of this Lease to the contrary,
including without limitation Section 10.4, no such holder of a mortgage shall be
liable, either as mortgagee or as assignee, to perform, or be liable in damages
for failure to perform any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Premises for the purpose of
foreclosure, and such holder shall not in any event be liable to perform or for
failure to perform the obligations of Landlord under Section 3.1. Upon entry for
the purpose of foreclosure, such holder shall be liable to perform all of the
obligations of Landlord (except for the obligations under Section 3.1), subject
to and with the benefit of the provisions of Section 10.4, provided that a
discontinuance of any foreclosure proceeding shall be deemed a conveyance under
said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this
Lease, if prior to substantial completion of Landlord's obligations under
Article III, any holder of a first mortgage on the mortgaged premises enters and
takes possession thereof for the purpose of foreclosing the mortgage, such
holder may elect, by written notice given to Tenant and Landlord at any time
within 90 days after such entry and taking of possession, not to perform
Landlord's obligations under Article III, and in such event such holder and all
persons claiming under it shall be relieved of all obligations to perform, and
all liability for failure to perform, said Landlord's obligations under Article
III, and Tenant may terminate this Lease and all its obligations hereunder by
written notice to Landlord and such holder given within 30 days after the day on
which such holder shall have given its notice as aforesaid.
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8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Base Rent, additional rent, or any other charge
more than 10 days prior to the due date thereof. No prepayment of Annual Base
Rent, additional rent or other charge, no assignment of this Lease and no
agreement to modify so as to reduce the rent, change the Term, or otherwise
materially change the rights of Landlord under this Lease, or to relieve Tenant
of any obligations or liability under this Lease, shall be valid unless
consented to in writing by Landlord's mortgagees of record, if any.
8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result in a release or termination
of such obligations or a termination of this Lease unless (i) Tenant shall have
first given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of the
mortgaged premises, if the mortgagee elects to do so, and a reasonable time to
correct or cure the condition if such condition is determined to exist.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
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ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT.
If any default by Tenant continues, in case of Annual Base Rent, additional
rent or any other monetary obligation to Landlord for more than 5 days after
written notice to Tenant of the default (provided that if two such notices have
been given in any twelve-month period, notice of any such subsequent default
shall not be required hereunder), or in any other case for more than 30 days
after written notice and such additional time, if any, as is reasonably
necessary to cure the default if the default is of such a nature that it cannot
reasonably be cured in 30 days and Tenant promptly commences to cure such
default and diligently pursues such cure without interruption to completion; or
if Tenant becomes insolvent, fails to pay its debts as they fall due, files a
petition under any chapter of the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq.,
as it may be amended (or any similar petition under any insolvency law of any
jurisdiction), or if such petition is filed against Tenant and not dismissed
within sixty (60) days thereafter; or if Tenant proposes any dissolution,
liquidation, composition, financial reorganization or recapitalization with
creditors, makes an assignment or trust mortgage for benefit of creditors, or if
a receiver, trustee, custodian or similar agent is appointed or takes possession
with respect to any property of Tenant; or if the leasehold hereby created is
taken on execution or other process of law in any action against Tenant; then,
and in any such case, Landlord and the agents and servants of Landlord may, in
addition to and not in derogation of any remedies for any preceding breach of
covenant, immediately or at any time thereafter while such default continues and
without further notice, at Landlord's election, do any one or more of the
following: (1) give Tenant written notice stating that the Lease is terminated,
effective upon the giving of such notice or upon a date stated in such notice,
as Landlord may elect, in which event the Lease shall be irrevocably
extinguished and terminated as stated in such notice without any further action,
or (2) with or without process of law, in a lawful manner enter and repossess
the Premises as of Landlord's former estate, and expel Tenant and those claiming
through or under Tenant, and remove its and their effects, without being guilty
of trespass, in which event the Lease shall be irrevocably extinguished and
terminated at the time of such entry, or (3) pursue any other rights or remedies
permitted by law. Any such termination of the Lease shall be without prejudice
to any remedies which might otherwise be used for arrears of rent or prior
breach of covenant, and in the event of such termination Tenant shall remain
liable under this Lease as hereinafter provided. Tenant hereby waives all
statutory rights (including, without
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limitation, rights of redemption, if any) to the extent such rights may be
lawfully waived, and Landlord, without notice to Tenant, may store Tenant's
effects and those of any person claiming through or under Tenant at the expense
and risk of Tenant and, if Landlord so elects, may sell such effects at public
auction or private sale and apply the net proceeds to the payment of all sums
due to Landlord from Tenant, if any, and pay over the balance, if any, to
Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION.
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, (i) the present value, discounted at a reasonable discount
determined by Landlord, of the excess of the total rent reserved for the residue
of the Term over the rental value of the Premises for said residue of the Term
and (ii) the unamortized portion of the actual out-of-pocket costs and expenses
incurred by Landlord in completing Landlord's Work, amortized on a straight-line
reduction basis from 100% to 0% over a five (5) year period commencing on the
Term Commencement Date. In calculating the rent reserved, there shall be
included, in addition to the Annual Base Rent and all additional rent, the value
of all other consideration agreed to be paid or performed by Tenant for said
residue. Tenant further covenants as an additional and cumulative obligation
after any such ending to pay punctually to Landlord all the sums and perform all
the obligations which Tenant covenants in this Lease to pay and to perform in
the same manner and to the same extent and at the same time as if this Lease had
not been terminated. In calculating the amounts to be paid by Tenant under the
next foregoing covenant, Tenant shall be credited with any amount paid to
Landlord as compensation as provided in the first sentence of this Section 9.2
and also with the net proceeds of any rents obtained by Landlord by reletting
the Premises, after deducting all Landlord's expenses in connection with such
reletting, including, without implied limitation, all repossession costs,
brokerage commissions, fees for legal services and expenses of preparing the
Premises for such reletting, it being agreed by Tenant that Landlord may (i)
relet the Premises or any part or parts thereof for a term or terms which may at
Landlord's option be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Term and may grant such
concessions and free rent as Landlord in its sole judgment considers advisable
or necessary to relet the same and (ii) make such alterations, repairs and
decorations in the Premises as Landlord in its sole judgment considers advisable
or necessary to relet the same, and no action of Landlord in accordance with the
foregoing or failure to relet or to collect rent under reletting shall operate
or be construed to release or reduce Tenant's liability as aforesaid.
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So long as at least 12 months of the Term remain unexpired at the time of
such termination, in lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 9.2, Landlord may by written notice to Tenant, at any time after
this Lease is terminated under any of the provisions contained in Section 9.1,
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Annual Base Rent and
additional rent accrued under Article IV in the 12 months ended next prior to
such termination plus the amount of Annual Base Rent and additional rent of any
kind accrued and unpaid at the time of termination and less the amount of any
recovery by Landlord under the foregoing provisions of this Section 9.2 up to
the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver,
after the Term begins, a short form of this Lease in form appropriate for
recording or registration, and if this Lease is terminated before the Term
expires, an instrument in such form acknowledging the date of termination.
10.2 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to Tenant. Any notice shall have been deemed
duly given if mailed to such address postage prepaid, registered or certified
mail, return receipt requested,
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when deposited with the U.S. Postal Service, or if delivered to such address by
hand, when so delivered.
10.3 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Building and the Lot
but not upon other assets of Landlord. No individual partner, trustee,
stockholder, officer, director, employee or beneficiary of Landlord shall be
personally liable under this Lease and Tenant shall look solely to Landlord's
interest in the Building and the Lot in pursuit of its remedies upon an event of
default hereunder, and the general assets of the individual partners, trustees,
stockholders, officers, employees or beneficiaries of Landlord shall not be
subject to levy, execution or other enforcement procedure for the satisfaction
of the remedies of Tenant.
10.4 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent
or any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.5 NO WAIVER, ETC.
The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this Lease or any of
the Rules and Regulations referred to in Section 6.1.4, whether heretofore or
hereafter adopted by Landlord, shall not be deemed a waiver of such violation
nor prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation, nor
shall the failure of Landlord to enforce any of said Rules and Regulations
against any other tenant in the Building be deemed a waiver of any such Rules or
Regulations. The receipt by Landlord of Annual Base Rent or additional rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach by Landlord, unless such waiver be in writing and signed
by Landlord. No consent or waiver, express or implied, by Landlord to or of any
breach of any agreement or duty shall be construed as a waiver or consent to or
of any other breach of the same or any other agreement or duty.
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10.6 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Base Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.7 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully entitled in case of any
breach or threatened breach by Tenant of any provisions of this Lease. In
addition to the other remedies provided in this Lease, Landlord shall be
entitled to the restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of this
Lease or to a decree compelling specific performance of any such covenants,
conditions or provisions.
10.8 RIGHT TO CURE; LANDLORD'S DEFAULT.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated, to
enter upon the Premises and to perform such obligation, notwithstanding the fact
that no specific provision for such substituted performance by Landlord is made
in this Lease with respect to such default. In performing such obligation,
Landlord may make any payment of money or perform any other act. All sums so
paid by Landlord (together with interest at the rate of 4% per annum in excess
of the then prime commercial rate of interest being charged by the BankBoston in
Boston, Massachusetts) and all necessary incidental costs and expenses in
connection with the performance of any such act by Landlord, shall be deemed to
be additional rent under this Lease and shall be payable to Landlord immediately
on demand. Landlord may exercise the foregoing rights without waiving any other
of its rights or releasing Tenant from any of its obligations under this Lease.
Landlord shall not be deemed to be in default in the performance of any
of its obligations hereunder unless it shall fail to perform such obligations
and such failure shall continue for a period of thirty (30) days or such
additional time as is reasonably required to commence or complete the correction
of, and thereafter correct, any such default after notice has been
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given by Tenant to Landlord specifying the nature of Landlord's alleged default.
10.9 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than 15 days' prior
written request by Landlord, to execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease is unmodified and in full force
and effect; that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Annual Base Rent and additional rent and to perform its
other covenants under this Lease; that there are no uncured defaults of Landlord
or Tenant under this Lease (or, if there have been modifications, that this
Lease is in full force and effect as modified and stating the modifications,
and, if there are any defenses, offsets, counterclaims, or defaults, setting
them forth in reasonable detail); and the dates to which the Annual Base Rent,
additional rent and other charges have been paid. Any such statement delivered
pursuant to this Section 10.10 shall be in a form reasonably acceptable to and
may be relied upon by any prospective purchaser or mortgagee of premises which
include the Premises or any prospective assignee of any such mortgagee.
10.10 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.11 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time", and such time shall be deemed to be
extended by the period of such delay.
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10.12 BROKERAGE.
Tenant and Landlord represent and warrant that they dealt with no brokers
in connection with this transaction other than the Brokers and agree to defend,
with counsel approved by the other, indemnify and save the other harmless from
and against any and all cost, expense or liability for any compensation,
commissions or charges claimed by a broker or agent claiming through the
indemnitor, other than the Brokers in connection with this Lease. Landlord
hereby agrees to pay the brokerage fees to the Brokers in connection with the
execution and delivery of this Lease.
10.13 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of
its provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
10.14 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws
of the state in which the Premises are located. If any term, covenant, condition
or provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors,
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administrators, successors and assigns, and those claiming through or under them
respectively. If there be more than one tenant, the obligations imposed by this
Lease upon Tenant shall be joint and several.
10.15 AUTHORITY
Each of Landlord and Tenant represents and warrants to the other party
(which representations and warranties shall survive the delivery of this Lease)
that: (a) such party (i) is duly organized, validly existing and in good
standing under the laws of its state of incorporation, (ii) has the corporate
power and authority to carry on businesses now being conducted and is qualified
to do business in every jurisdiction where such qualification is necessary and
(iii) has the corporate power to execute and deliver and perform its obligations
under this Lease and (b) the execution, delivery and performance by such party
of its obligations under this Lease have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the corporate charter or by-laws of the
such party or any indenture, agreement or other instrument to which it is a
party or by which it is bound.
10.16 SECURITY DEPOSIT
Upon execution of the Lease, Tenant shall provide to Landlord either a
cash deposit in the amount of the Security Deposit, or, at Tenant's election, an
irrevocable and unconditional standby documentary letter of credit in the amount
of the Security Deposit (in either case, the "Security Deposit") issued by a
bank or other institution satisfactory to Landlord in its sole discretion,
naming Landlord, its successors and assigns as the beneficiary, expiring no less
than one (1) year from the Term Commencement Date and renewing automatically
each year (or at the end of the applicable term thereof) unless the issuing bank
has given Landlord notice at least 45 days prior to expiration that the same
will not be renewed, and otherwise in form and substance satisfactory to
Landlord in its sole discretion (the "Letter of Credit"). Landlord shall be
permitted to draw upon the Security Deposit, whether in the form of cash or
Letter of Credit, in the event of (i) default by Tenant in the payment of Annual
Rent or additional rent or otherwise in any obligation hereunder beyond all
applicable cure periods, in which event Landlord may draw upon all or a portion
of the Security Deposit and apply the proceeds as described below, or (ii)
failure by Tenant to provide to Landlord either a cash deposit in the amount of
the Security Deposit or a replacement or substitute Letter of Credit in the
amount of the Security Deposit, as the same may reduce as set forth below, and
otherwise subject to the conditions set forth above, no less than thirty (30)
days prior to the expiration date of the Letter of Credit then held by Landlord,
in which event Landlord may
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draw upon all of the Letter of Credit and, in such event, shall hold the cash
proceeds thereof as the Security Deposit hereunder. If the Security Deposit is
provided to or held by Landlord in cash, and the same is not the result of a
default by Tenant, it shall be held in an interest-bearing account to be
selected by Landlord in its sole discretion, with interest to be added to the
Security Deposit, and to be deemed a part of the Security Deposit. If the
Security Deposit is held by Landlord in cash as the result of a default by
Tenant, the Security Deposit shall be held in an account to be selected by
Landlord in its sole discretion, with no interest thereon to Tenant, and may be
commingled with other funds of Landlord.
The Security Deposit is being delivered by Tenant to Landlord as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this Lease. It is understood and agreed that if any default by
Tenant occurs hereunder and continues beyond all applicable cure periods,
Landlord may (but shall not be required to) use, apply or retain the whole or
any part of the Security Deposit so deposited to the extent required for payment
of any sum as to which Tenant is in default beyond applicable cure periods, if
any, or for any sum which Landlord may expend or may be required to expend by
reason of any default by Tenant hereunder beyond applicable cure periods, if
any, including, but not limited to, any damage or deficiency accrued before or
after summary proceedings or other reentry by Landlord. Any cash portion of the
Security Deposit not so applied shall be held by Landlord as further security
hereunder. It is agreed that Landlord shall always have the right (but not the
obligation) to apply the Security Deposit or any part thereof, as aforesaid,
without prejudice to any other remedy or remedies which Landlord may have, or
Landlord may pursue any other such remedy or remedies in lieu of applying the
Security Deposit or any part thereof.
Provided that on each date on which the Security Deposit would otherwise
be reduced in accordance with the provisions hereof, Tenant is not then in
default of any of its obligations under the Lease beyond any applicable cure
period provided for herein, or if any condition exists which with the giving of
notice, or the passage of time, or both, would constitute a default exists, if
such condition is not removed or corrected within the applicable cure period, if
any, then the Security Deposit shall be reduced to (a) $250,860.76 on the first
anniversary of the Term Commencement Date, (b) $196,807.60 on the second
anniversary of the Term Commencement Date and (c) $137,944.79 on the third
anniversary of the Term Commencement Date; provided, however, that in the event
(i) Tenant shall be in default of any of its obligations under the Lease beyond
any applicable cure period provided for herein on any date on which the Security
Deposit would otherwise be reduced hereunder, or Tenant does not so remove or
correct any such condition which exists on any such date within the applicable
cure period, if any, or (ii) Landlord has drawn upon
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the Security Deposit to cure a default of Tenant and Tenant has not restored the
Security Deposit to the required amount prior to a scheduled reduction in the
amount of the Security Deposit, then in either of such events there shall be no
further reductions in the Security Deposit hereunder. If a condition exists on
any date on which the Security Deposit would otherwise be reduced hereunder
which with the giving of notice, or the passage of time, or both, would
constitute an event of default hereunder, and Tenant removes or corrects such
condition within the applicable cure period, if any, then the Security Deposit
shall be reduced in accordance with the foregoing within ten (10) days of the
completion of such cure. If the Security Deposit is given in the form of a
Letter of Credit, the Letter of Credit shall by its terms provide that scheduled
reductions in the amount of the Letter of Credit shall themselves be
ineffective, as provided above, pursuant to instructions from Landlord to the
issuer of the Letter of Credit, provided, however, that upon Tenant's cure of
all defaults and restoration of the Security Deposit, if applicable, on or
before the date of a scheduled reduction in the amount of the Security Deposit,
or upon removal or correction of a condition which with the giving of notice, or
the passage of time, or both, would constitute an event of default on or before
the expiration of the applicable cure period, if any, Landlord shall direct the
issuer of the Letter of Credit to allow the scheduled reduction in the amount of
the Letter of Credit to occur. In the event the Security Deposit consists partly
of cash and partly of a letter of credit, the reductions contemplated hereunder
shall be made from the cash portion first until the same has been fully
disbursed and thereafter shall be effected under the Letter of Credit.
If Landlord shall apply the Security Deposit or any part thereof, as
aforesaid, Tenant shall upon demand pay to Landlord an amount of cash or restore
the Letter of Credit to the amount required prior to such application or deliver
to Landlord a replacement Letter of Credit in such amount in order, in all
cases, to restore the Security Deposit to the amount required prior to such
application. The Security Deposit, if any, or any balance thereof after
application of the Security Deposit to uncured defaults of Tenant, shall be
returned to Tenant within 30 days after the expiration of the Lease Term or
termination of the same and after delivery of possession of the entire Premises
to Landlord.
In the event of a sale or other transfer of the Premises or leasing of
the Premises, Landlord shall transfer the Security Deposit to the grantee,
transferee or lessee and upon acceptance and assumption by such grantee,
transferee or lessee of the Security Deposit and Landlord's obligations
hereunder, Landlord shall be released by Tenant from any and all liability with
respect to the Security Deposit, its application and return, and Tenant agrees
in such case to look solely to the grantee, transferee or lessee. It is further
understood that the provisions of the immediately preceding sentence shall also
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apply to subsequent grantees, transferees and lessees. Tenant covenants that it
will not assign or encumber nor attempt to assign or encumber the Security
Deposit and that neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. Any assignment or encumbrance of the Security Deposit by Tenant
shall be null and void and without force or effect at law or in equity.
EXECUTED as a sealed instrument in two or more counterparts on the day
and year first above written.
LANDLORD:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By: CIGNA Investments, Inc.
By: /s/ James H. Rogers
------------------------
Its: Managing Director
TENANT:
MEDIA 100 INC.
By: /s/ John A. Molinari
------------------------
Name: John A. Molinari
Title: President
Hereunto duly authorized
A copy of Tenant's corporate
authorization for such execution is
attached hereto.
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EXHIBIT 10.5.2
LICENSE AGREEMENT
-----------------
This LICENSE Agreement (the "Agreement") is dated as of January 31, 1997 by
and between Connecticut General Life Insurance Company, ("Licensor"), and Media
100 Inc., a Delaware corporation ("Licensee").
R E C I T A L S
- - - - - - - -
WHEREAS, Licensor as landlord and Licensee as tenant hereof entered into a
lease dated January 31, 1997 (the "Lease") for premises (the "Leased Premises")
located in the building at 290 Donald J. Boulevard, Marlborough, Massachusetts
(the "Building"); and
WHEREAS, Licensee wishes to locate a liquified natural gas tank, air
compressors and associated facilities and other equipment on the lot of land on
which the Building is located (the "Lot") and Licensor has agreed to permit the
same, subject to the terms and provisions hereof.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and agreed, Licensor and Licensee hereby agree as follows:
1. LICENSE. Provided Licensee is not in default under the terms and
conditions of this Lease beyond any applicable cure period, Licensor hereby
grants to Licensee the privilege to use the portion of the Lot shown on EXHIBIT
A attached hereto (the "Licensed Premises") for the installation, operation,
maintenance and repair of the liquefied natural gas tank, air compressors and
associated facilities and other equipment described in EXHIBIT B attached
hereto, together with the privilege to connect the same to the Premises
(collectively, all such facilities are referred to herein as the "Facilities").
2. TERM. The term of this Agreement shall be coterminous with the term of
the Lease, provided that Licensor shall have the right to revoke this Agreement
upon a default by Licensee hereunder in accordance with Section 13 below.
Promptly upon termination or revocation of this License, Licensee shall remove
the Facilities from the Licensed Premises and shall restore the Licensed
Premises and the Building to the same condition as exists on the date hereof.
<PAGE> 2
3. USE. Licensee shall be permitted to use the Licensed Premises for the
installation, operation, use, maintenance and repair of the Facilities only in
strict compliance with all applicable laws, ordinances and regulations and, to
the extent applicable, the rules and regulations appended to the Lease. Licensee
will not make or permit or suffer to be made any use of the Licensed Premises,
the Facilities or any part thereof (i) which would violate any of the covenants,
agreements, terms, provisions and conditions of this License; (ii) which is
directly or indirectly forbidden by public law, ordinance or government
regulation; (iii) which may be unreasonably dangerous to life, limb, or
property; (iv) which may invalidate or increase the premium of any policy of
insurance carried on the Building or covering its operations, unless, in the
case of any increase, Tenant makes provisions reasonably acceptable to Landlord
for payment of such increased cost; (v) which will suffer or permit the Licensed
Premises, the Building or any part thereof to be used in any manner which, in
the sole judgment of Licensor, shall in any way impair or tend to impair the
character, reputation or appearance of the Building; or (vi) which would impair
or interfere with or tend to impair or interfere with Licensor's use of the
Building or the use of the Building by the other tenants or occupants thereof,
if any.
4. LICENSOR'S PRIOR APPROVAL. Prior to installing the Facilities, Licensee
shall submit the following to Licensor for Licensee's approval, which approval
shall not be unreasonably withheld or delayed: (1) a site plan and plans and
specifications for the Facilities (including size, location, screening, height,
weight, and color) and specifications for installation thereof; (2) copies of
all required governmental and quasi-governmental permits, licenses, zoning
variances, and authorizations, all of which Licensee shall obtain at its own
cost and expense; and (3) a policy or certificate of insurance evidencing such
insurance coverage as may reasonably be required by Licensor for the
installation, operation and maintenance of the Facilities to the extent not
sufficiently covered by insurance maintained by Licensee under the Lease.
Licensor may withhold approval if the installation, operation or removal of the
Facilities may damage the Licensed Premises, interfere with any services
provided by Licensor, interfere with another tenant in the Building, if any, or
any other tenant located in Marlborough Business Center (the "Office Center"),
cause a violation of any zoning ordinance or other governmental regulation
applicable to the Building or the Office Center. Licensee shall be strictly
responsible for compliance with all applicable laws, ordinances and regulations
in connection with the installation, operation, use, maintenance, repair and
removal of the Facilities.
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<PAGE> 3
5. INSTALLATION EXPENSES. Installation, operation, maintenance and repair
of the Facilities shall be performed solely by Licensee or its qualified agents
or contractors. Licensor shall have no obligation to alter, improve or otherwise
prepare the Licensed Premises for Licensee's use and occupancy. Licensee shall
bear all costs and expenses incurred in connection with the installation,
operation, use, maintenance, repair and removal of the Facilities.
6. LICENSE PAYMENTS. If Licensor's insurance premium or real estate tax
assessment increases as a result of the Facilities, or if any governmental or
quasi-governmental authority shall levy, assess or impose any tax, license fee,
use fee or other sum against Licensor, the Building or the Office Center as a
result of the Facilities, Licensee shall pay all such amounts promptly upon
receipt of a bill from Licensor for any such amount. Licensee shall have no
right to an abatement or reduction in the amount of Annual Base Rent, Additional
Rent or any other sums due and payable under the Lease if for any reason
Licensee is unable to obtain any required approval for installation of the
Facilities, or is thereafter unable to use the Facilities for any reason, it
being understood that this License is entirely separate from the Lease and shall
not affect Licensee's obligations thereunder in any manner.
7. LICENSEE'S INDEMNIFICATION. Licensee covenants and agrees that the
installation, operation, use, maintenance, repair and removal of the Facilities
will be at its sole risk and hazard and that the Facilities and all personal
property of Licensee in the Licensed Premises shall be at the sole risk and
hazard of Licensee and if the whole or any part thereof shall be lost, destroyed
or damaged by fire, theft or otherwise, no part of said loss or damage is to be
charged to or borne by Licensor unless such loss or damaged is caused by or is
the result of the gross negligence or willful misconduct of Licensor or of any
person or entity for whom Licensor is legally responsible. Licensee agrees to
indemnify, protect, defend and hold Licensor, its partners, officers, directors,
shareholders, trustees, beneficiaries, contractors, advisors, consultants,
agents, employees and other parties for whom Licensor is responsible, together
with any mortgagee of the Licensed Premises (collectively, the "Indemnified
Parties") harmless from and against all claims, suits, demands, actions,
damages, liabilities, judgments, settlements, costs, fines, penalties, interest
and expenses (including, without limitation, reasonable attorneys' and experts'
fees and expenses) (collectively, "Liabilities") in connection with the loss of
life, personal or bodily injury, damage to property or business (including any
loss of use thereof) or any other loss or injury arising directly or indirectly
and in whole or in part out of the installation,
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operation, use, maintenance, repair or removal of the Facilities, or in any
other manner related to the Facilities, whether caused by an act or omission or
otherwise, or whether or not involving negligence or other fault of Licensee or
Licensee's agents, employees, contractors, officers, or other parties for whom
Licensee is responsible, provided, however, this indemnification shall not apply
to any such loss or injury to the extent resulting from the gross negligence or
willful misconduct of Licensor or of any person or entity for whom Licensor is
legally responsible. The foregoing indemnification, which shall include the cost
of enforcement, shall survive the expiration or earlier termination of this
Agreement.
8. ENVIRONMENTAL INDEMNIFICATION. Licensee hereby agrees to indemnify,
protect and hold the Indemnified Parties harmless from and against any and all
Liabilities, of any kind or of any nature whatsoever which may at any time be
imposed upon, incurred by or asserted or awarded against the Indemnified Parties
except to the extent resulting from the gross negligence or willful misconduct
of Licensor or of any person or entity for whom Licensor is legally responsible,
and arising, directly or indirectly from or out of the use, generation, storage
or disposal of Hazardous Materials in connection with the installation,
operation, use, maintenance, repair or removal of the Facilities, or the
presence of the Facilities on the Licensed Premises, or the presence or
incorporation of any Hazardous Materials in, on, under or affecting the Licensed
Premises, the Lot, the Building or the Office Center directly attributable to
the installation, operation, use, maintenance, repair or removal of the
Facilities, or the presence of the Facilities on the Licensed Premises including
without limitation, (a) the cost of any required or necessary repair, removal,
clean-up or detoxification of the Licensed Premises, the Lot, the Building or
Office Center or any surrounding areas and the preparation of any closure or
other required plans to protect against the release of Hazardous Materials on,
in, under or affecting the Licensed Premises, the Lot, the Building, or the
Office Center, or release into the air, any body of water, any other public
domain or any surrounding areas of Hazardous Materials, in each case arising out
of or resulting from the installation, operation, use, maintenance, repair or
removal of the Facilities, or the presence of the Facilities on the Licensed
Premises and (b) costs incurred to comply, in connection with all or any portion
of all the Licensed Premises, the Lot, the Building, the Office Center or any
surrounding areas, with all applicable Laws (as hereinafter defined) with
respect to Hazardous Materials arising out of or resulting from the
installation, operation, use, maintenance, repair or removal of the Facilities,
or the presence of the Facilities on the Licensed Premises, whether such action
is required or necessary prior to or following the date of this
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Agreement. The foregoing indemnification, which shall include the cost of
enforcement, shall survive the expiration or earlier termination of this
Agreement; provided, however, if the Facilities are not removed with the
written consent of Landlord (which consent may be withheld in Landlord's sole
discretion), this indemnification shall not extend to Liabilities which arise
from occurrences after the termination of this Agreement, but shall extend to
Liabilities which arise from occurrences before such termination or from the
acts or omissions of Licensee or of any person or entity for whom Licensee is
legally responsible, whether or not such Liabilities are imposed upon, incurred
by or asserted or awarded before or after such termination.
For the purposes of this Agreement, "Hazardous Materials" shall include,
but shall not be limited to, substances defined as "hazardous substances",
"hazardous materials", "toxic materials", "toxic substances" or "oil" in any
federal, state or local laws, rules or regulations whether now existing or
hereafter enacted or promulgated (collectively, "Laws"), including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C., Section 1802, the Resource Conservation and
Recovery Act, 42 U.S.C., Section 6901, ET. SEQ., and Massachusetts General Laws,
Chapter 21E, and the regulations thereunder and any judicial or administrative
interpretation thereof, including any judicial or administrative orders or
judgments, which definition shall include without limitation, polychlorinated
byphenyls and petroleum products and shall also include asbestos and any
asbestos-containing materials, whether such asbestos is in a friable or
non-friable state.
9. LICENSOR NOT LIABLE. To the fullest extent permitted by law, Licensor
shall not be liable or responsible to Licensee (i) for any injury or damage
resulting from the acts or omissions of Licensor's employees, trustees,
stockholders, officers, directors, beneficiaries, agents, or other parties for
whom Licensor is legally responsible, or persons leasing or otherwise occupying
any part of the Building; (ii) for any failure of services provided, such as
water, gas, electricity, or telephone; or (iii) for any injury or damage to
person or property caused by any person, except in each case to the extent
caused by the willful misconduct or gross negligence of Licensor or any party
for whom Licensor is legally responsible. The obligations of Licensor shall be
binding upon the assets of Licensor which comprise the Building and the lot but
not upon other assets of Licensor. In no event shall any partner, trustee,
stockholder, officer, director, employee, beneficiary or agent of Licensor have
any liability hereunder, and Licensee shall not seek personal recourse against
any such parties or their personal assets. To the extent that the provisions
hereof are
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inconsistent with the provisions of the Lease, the provisions of the Lease shall
govern.
10. ASSIGNMENT AND SUBLETTING. No assignment of this Agreement or
sublicensing of the Licensed Premises or any part thereof shall be made by
Licensee, except in connection with an assignment or sublease of the Lease made
in strict compliance with the provisions of the Lease. Neither all nor any part
of Licensee's interest in the Licensed Premises granted hereunder may be
encumbered, assigned, or transferred, in whole or in part, either by any act of
Licensee or by operation of law, except as provided herein. Licensee shall not
permit or suffer the Licensed Premises to be used by anyone other than the
employees of Licensee.
11. LICENSOR'S TERMINATION RIGHTS. Licensor, at its sole option and
reasonable discretion, may require Licensee, at any time prior to the expiration
of the Lease, to relocate the Facilities or to terminate the operation of the
Facilities if it is causing physical damage to the Licensed Premises, the Lot or
the Building, interfering with any other service provided by the Building,
interfering with the business of another tenant in the Building, if any, or in
the Office Center, as such business is being conducted, or causing the violation
of any condition or provision of the Lease or any law, regulation or ordinance
promulgated by any governmental or quasi-governmental authority now or hereafter
in effect, even if any or all other tenants in the Building or in the Office
Center are permitted to continue any similar use or operation. If Licensor or
another tenant in the Building, if any, or in the Office Center shall require
that the Facilities be moved to another location for the foregoing reasons,
Licensor shall have the right to require Licensee, at its sole expense, to
relocate the Facilities to another location on the Lot. Licensor shall notify
Licensee of its election to require the termination or relocation of the
Facilities by giving written notice to Licensee of its election, stating a date
upon which the term of this License shall terminate or upon which the relocation
shall be complete, as the case may be. In the case of relocation, if the
Facilities are not completely relocated and the Licensed Premises and the
Building otherwise restored to their original condition within sixty (60) days
of the date designated in the written notice delivered to Licensee by Licensor,
Licensor, at its sole option, may terminate the License.
12. REMOVAL OF FACILITIES. Licensee hereby agrees that time shall be of the
essence with respect to Licensee's obligation to vacate and surrender possession
of the Licensed Premises upon the expiration or earlier termination of the term
of this License and Licensee shall vacate and surrender
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possession of the Licensed Premises at such time and remove the Facilities so
that the Licensed Premises and the Building are in the original condition that
existed prior to the commencement of the term of this License. Upon such
expiration or termination, if Licensee has not commenced to remove the
Facilities and thereafter diligently proceeded to remove the Facilities until
they are completely removed, Licensee hereby authorizes Licensor to remove and
dispose of the Facilities and charge Licensee for all costs and expenses
incurred in connection therewith, including reasonable attorneys' fees and
expenses, together with interest thereon at an annual rate equal to the
so-called prime rate of interest of the Bank of Boston, plus four percent (4%)
which amount shall be paid by Licensee to Licensor on demand.
13. DEFAULT. If (a) Licensee shall default in the performance of an
obligation hereunder which poses imminent danger to life or property and if
Licensee shall not immediately cure such default, or (b) within thirty (30) days
after notice from Licensor to Licensee specifying any other default or defaults
Licensee has not commenced thereafter diligently pursued such correction to
completion, or (c) a default beyond any applicable grace period shall occur
under the Lease, then this License Agreement may be terminated immediately by
Licensor by written notice to Licensee. Any default hereunder by Licensee shall
also constitute a default under the Lease and any default under the Lease shall
constitute a default hereunder.
14. NOTICES. All notices required or permitted hereunder shall be in
writing and addressed, if to the Licensee, to:
Media 100 Inc.
290 Donald J. Lynch Boulevard
Marlborough, Massachusetts 01752
Attn: Chief Financial Officer
or such other address as Licensee shall have last designated by notice in
writing to Licensor and, if to Licensor, to:
Spaulding & Slye Services Limited Partnership
c/o Spaulding & Slye Company
125 High Street
Boston, Massachusetts 02110
Attn: Peter A. DeLuca
or such other address as Licensor shall have last designated by notice in
writing to Licensee. Any notice shall have been deemed duly given if mailed to
such address postage prepaid, registered or certified mail, return receipt
requested, when deposited with the U.S. Postal Service, or if delivered to such
address by hand, when so delivered.
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15. ACCESS. Licensor shall have access to the Licensed Premises at all
times and at any time.
16. ACTS OF GOD. In any case where either party hereto is required to do
any act, delays caused by or resulting from Acts of God, war, civil commotion,
fire, flood or other casualty, labor difficulties, shortages of labor, materials
or equipment, government regulations, unusually severe weather, or other causes
beyond such party's reasonable control shall not be counted in determining the
time during which work shall be completed, whether such time be designated by a
fixed date, a fixed time or a "reasonable time", and such time shall be deemed
to be extended by the period of such delay.
17. MISCELLANEOUS. This instrument embodies the entire agreement between
the parties relative to the subject matter hereof, and shall not be modified,
changed, or altered in any respect, except in writing. This Agreement shall be
construed and enforced in all respects in accordance with the laws of the
Commonwealth of Massachusetts. Licensee recognizes that the occupancy hereby
allowed is permissive only and that no tenancy or lease is created hereby.
LICENSOR:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc.
By: /s/ James H. Rogers
----------------------
Its: Managing Director
LICENSEE:
MEDIA 100 INC.
By: /s/ John A. Molinari
--------------------
Name: John A. Molinari
Title: President
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EXHIBIT 10.8.1
DISTRIBUTION AGREEMENT
----------------------
This Agreement is dated as of November 19, 1996, between Data Translation, Inc.,
a Delaware corporation ("Parent"), and Data Translation II, Inc., a Delaware
corporation ("Sub") and a wholly owned subsidiary of Parent.
WHEREAS, Parent has, among other endeavors, been engaged in (i) the design,
development, manufacture and sale of products in its data acquisition and
imaging and commercial products businesses and (ii) the distribution of
networking products in the United Kingdom through its wholly owned subsidiary
Data Translation Networking Limited (collectively, the "Contributed
Businesses"); and
WHEREAS, the Board of Directors of Parent has determined that the interests of
Parent's businesses and stockholders would be best served by separating its
businesses into two companies, one consisting of the Contributed Businesses and
the other consisting of Parent's Media 100 digital media business (the "Retained
Business"); and
WHEREAS, in furtherance of the foregoing, Parent wishes to transfer and assign
to Sub substantially all of the assets and properties of the Contributed
Businesses specified in this Agreement in exchange for (i) the assumption by Sub
of substantially all of the liabilities and obligations relating to the
Contributed Businesses specified in this Agreement and (ii) the issuance to
Parent of shares of its common stock, par value $.01 per share (the "Sub Common
Stock"); and
WHEREAS, Sub is willing to assume such liabilities and obligations and to issue
such shares of Sub to Parent in exchange for such assets and properties; and
WHEREAS, Parent intends to distribute all of the outstanding shares of Sub
Common Stock, on a pro rata basis, to the holders of the common stock of Parent,
par value $.01 per share (the "Parent Common Stock") (such distribution
hereinafter referred to as the "Distribution"); and
WHEREAS, in connection with the Distribution, Media 100 Inc., a wholly owned
subsidiary of Parent, will merge with and into Parent, with Parent being the
surviving corporation and assuming all the rights and obligations of Media 100
Inc. in accordance with Section 253 of the General Corporation Law of the State
of Delaware and, as a result of such merger, the name of Parent will be changed
to Media 100 Inc.; and
WHEREAS, as promptly as practicable following the foregoing merger, Sub will
change its name to "Data Translation, Inc."; and
WHEREAS, Parent and Sub have determined that it is necessary and desirable to
set forth the principal corporate transactions required to effect the
Distribution and to set forth other agreements that will govern certain other
matters in connection with the Distribution;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1 DEFINITIONS.
-----------
SECTION 1.1 GENERAL. As used in this Agreement, capitalized terms defined
immediately after their use shall have the respective meanings thereby provided
and the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
ACTION: any action, claim, suit, arbitration, inquiry, subpoena, discovery
request, proceeding or investigation by or before any court or grand jury, any
governmental or other regulatory or administrative agency or commission or any
arbitration tribunal.
ADJUSTED OPTIONS: shall have the meaning set forth in Section 8.7.1 hereof.
ADJUSTMENT: any proposed or final change in any Pre-Distribution Income Tax
Liabilities (whether creating a tax benefit or tax detriment) initiated by the
IRS or any other relevant taxing authority.
AFFILIATE: with respect to any specified person or entity, a person or entity
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under the common control with, such specified person or
entity; provided, however, that Parent and Sub shall not be deemed to be
Affiliates of each other for purposes of this Agreement.
AFFILIATED GROUP: an affiliated group of corporations within the meaning of Code
section 1504(a) for the taxable period in question.
AGENT: Boston EquiServe Limited Partnership, the distribution agent appointed by
Parent to distribute shares of Sub Common Stock pursuant to the Distribution.
ASSUMED LIABILITIES: collectively, all of the Liabilities and other obligations
of Parent listed on ANNEX II hereto.
BIDS, QUOTATIONS AND PROPOSALS: the bids, quotations or proposals which have
been submitted or made by the Contributed Businesses, or Parent on behalf of the
Contributed Businesses, which are outstanding as of the Distribution Date.
BOOKS AND RECORDS: the books and records of Parent (or true and complete copies
thereof), including all computerized books and records owned by Parent, which
relate principally to the Contributed Businesses, including without limitation
all such books and records relating to Transferred Employees, the purchase of
materials, supplies and services, the manufacture and sale of products by the
Contributed Businesses or dealings with customers of the Contributed Businesses
and all files relating to any Action being assumed by Sub as part of the Assumed
Liabilities.
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CARRYBACK ITEM: any net operating loss, unused general business tax credit, or
any other Tax Item of the Sub Affiliated Group which under the Code or any other
applicable Income Tax law can be used to generate a tax benefit for the Parent
Affiliated Group.
CASH AMOUNT: an amount of cash and cash equivalents equal to $10,000,000,
increased by the sum of cash generated, or decreased by the sum of cash used, as
the case may be, during the period from September 1, 1996 through the
Distribution Date, by the Contributed Businesses by operations, investing
activities, and the effect of exchange rate changes on cash in accordance with
generally accepted accounting principles consistent with the guidance of
Statement of Financial Accounting Standards ("SFAS") No. 95, increased by fifty
percent (50%) of the amount of DTN Expenses paid by Parent prior to the
Distribution Date, and decreased by the net proceeds paid to Data Translation
Ltd. and Data Translation GmbH in connection with the transfers provided for in
Section 2.3 hereof.
COBRA: the Consolidated Omnibus Budget Reconciliation Act of 1985.
CODE: the Internal Revenue Code of 1986, as amended.
CONTRIBUTED ASSETS: collectively, all of the assets and properties of Parent
identified on ANNEX I hereto.
CONTRIBUTED BUSINESSES: the businesses referred to as such in the first WHEREAS
clause of this Agreement.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: collectively, the various agreements,
instruments and other documents to be entered into in order to effect the
transfer to Sub of the Contributed Assets, and the assumption by Sub of the
Assumed Liabilities in the manner contemplated by this Agreement.
CORPORATE SERVICES AGREEMENT: the Corporate Services Agreement, substantially in
the form of EXHIBIT A hereto, pursuant to which Sub will provide to Parent
certain corporate services specified therein.
DISCLOSING PARTY: shall have the meaning set forth in Section 7.5.2 hereof.
DISPUTE: shall have the meaning set forth in Section 10.1 hereof.
DISTRIBUTION: the distribution as a dividend to holders of Parent Common Stock
of Sub Common Stock on the basis provided in Section 4.1 hereof, which shall be
effective on the Distribution Date.
DISTRIBUTION DATE: the date as of which the Distribution shall be effected as
determined by Parent's Board of Directors.
DTN EXPENSES: shall have the meaning set forth in Section 6.11 hereof.
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<PAGE> 4
ESTABLISHMENT DATE: shall have the meaning set forth in Section 8.2.1 hereof.
EVENT OF LOSS: the incurrence by Parent or any member of the Parent Affiliated
Group of any liability for Income Tax as a result of the failure of the
Distribution to qualify as a transaction described in Code section 355.
FINAL DETERMINATION: the final resolution of any tax liability (including all
related interest and penalties) for a taxable period. A Final Determination
shall result from the first to occur of: (a) the expiration of thirty (30) days
after the official IRS acceptance of a Waiver of Restrictions on Assessment and
Collection of Deficiency in Tax and Acceptance of Overassessment on Federal
Revenue Form 870 or 870-AD (or any successor comparable form or the expiration
of a comparable period with respect to any comparable agreement or form under
the laws of other jurisdictions), unless, within such period, the taxpayer gives
notice to the other party of the taxpayer's intention to attempt to recover all
or part of any amount paid pursuant to the Waiver by the filing of a timely
claim for refund; (b) a decision, judgment, decree or other order by a court of
competent jurisdiction with respect to any tax liability that is not subject to
further judicial review (by appeal or otherwise) has become final; (c) the
execution of a closing agreement under section 7121 of the Code or the official
acceptance by the IRS of an offer in compromise under section 7122 of the Code,
or comparable agreements under the laws of other jurisdictions; (d) the
expiration of the time for filing a claim for refund or for instituting suit in
respect of a claim for refund disallowed in whole or part by the IRS; (e) any
other final disposition of the tax liability for any taxable period by reason of
the expiration of the applicable statute of limitations; or (f) any other event
that the parties agree is a final and irrevocable determination of the liability
at issue.
FORM 10: the registration statement on Form 10 filed by Sub with the Securities
and Exchange Commission to effect the registration of the Sub Common Stock
pursuant to the Securities Exchange Act of 1934, as amended.
INCOME TAXES: all Federal, state and local taxes imposed upon, or measured by,
income and such related franchise, excise and similar taxes as have been
customarily included in the provision for income taxes on Parent's financial
statements, together with all related interest, penalties and additions to tax.
INDEMNIFIABLE LOSSES: with respect to any claim by an Indemnified Party for
indemnification authorized pursuant to Section 5 hereof, any and all losses,
liabilities, claims, damages, obligations, payments, costs and expenses
(including without limitation the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable attorneys' fees and disbursements in connection therewith)
suffered by such Indemnified Party with respect to such claim.
INDEMNIFIED PARTY: any person or entity who is entitled to receive payment from
an Indemnifying Party pursuant to Section 5 hereof.
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INDEMNIFYING PARTY: any party who is required to pay any other person or entity
pursuant to Section 5 hereof.
INDEMNITY PAYMENT: the amount an Indemnifying Party is required to pay an
Indemnified Party pursuant to Section 5 hereof.
INFORMATION: shall have the meaning set forth in Section 7.2 hereof.
INFORMATION STATEMENT: the information statement to be sent to the holders of
Parent Common Stock in connection with the Distribution.
INSURANCE PROCEEDS: those monies received by an insured from an insurance
carrier or paid by an insurance carrier on behalf of the insured.
INTELLECTUAL PROPERTY AGREEMENT: the Intellectual Property Agreement,
substantially in the form of EXHIBIT B hereto, pursuant to which Parent and Sub
are providing for certain matters involving intellectual property.
IRS: the United States Internal Revenue Service or any successor thereto,
including, but not limited to, its agents, representatives and attorneys.
LIABILITIES: any and all debts, liabilities and obligations, whether or not
accrued, contingent (known or unknown) or reflected on a balance sheet,
including without limitation those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
OTHER TAXES: all taxes (including all related interest and penalties) other than
Income Taxes or Transfer Taxes.
PARENT ADJUSTMENT OPTIONS: Parent Stock Options as adjusted as set forth in
Section 8.7.1 hereof.
PARENT AFFILIATED GROUP: for each taxable period, the Affiliated Group of which
Parent or any successor of Parent is the common parent.
PARENT ASSETS: all assets held by any member of the Parent Group, or a direct or
indirect foreign subsidiary of any such member, immediately after the
Distribution Date.
PARENT COMMON STOCK: the common stock of Parent, par value $.01 per share.
PARENT GROUP: with respect to any taxable period, the corporations that were
members of the Parent Affiliated Group during such period, exclusive of the
corporations that are included in the Sub Affiliated Group immediately after the
Distribution Date.
PARENT INSURANCE POLICIES: all policies and contracts of any kind pursuant to
which insurance carriers provide insurance coverage to Parent in respect of
claims or
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<PAGE> 6
occurrences relating to, without limitation, property damage, business
interruption, transit, extended coverage, fiduciary liability, employee crime,
general liability, products liability, errors and omissions, automobile
liability, employer's liability and workers' compensation.
PARENT PARTY: shall have the meaning set forth in Section 5.5 hereof.
PARENT RETIREMENT PLAN: shall have the meaning set forth in Section 8.2.1
hereof.
PARENT STOCK OPTION PLANS: Parent's Key Employee Incentive Plan (1982) and Key
Employee Incentive Plan (1992).
PARENT STOCK OPTIONS: options to acquire Parent Common Stock granted under the
Parent Stock Option Plans, prior to adjustment as set forth in Section 8.7
hereof.
PRE-DISTRIBUTION INCOME TAX LIABILITIES: the liability of members of the Parent
Affiliated Group for Income Taxes for all taxable periods beginning before the
day following the Distribution Date. A liability described in the previous
sentence is a Pre-Distribution Income Tax Liability whether the liability has
been previously assessed in whole or in part or is assessed in whole or in part
after the date of this Agreement, and whether the liability is or was imposed on
the Parent Affiliated Group collectively or on any member of the Parent
Affiliated Group separately.
PRIVILEGE: shall have the meaning set forth in Section 7.6.1 hereof.
PRIVILEGED INFORMATION: shall have the meaning set forth in Section 7.6.1
hereof.
RECEIVING PARTY: shall have the meaning set forth in Section 7.5.2 hereof.
RECORD DATE: the date determined by Parent's Board of Directors as the record
date for the Distribution.
RELATED AGREEMENTS: the Conveyancing and Assumption Instruments, the Corporate
Services Agreement, the Intellectual Property Agreement and the Use and
Occupancy Agreement.
RETAINED BUSINESS: the business referred to as such in the second WHEREAS clause
of this Agreement.
RETAINED LIABILITIES: collectively, all of the Liabilities and obligations of
Parent listed on ANNEX III hereto.
RETIREMENT PLAN TRANSFER DATE: shall have the meaning set forth in Section 8.2.2
hereof.
SALE OF BUSINESS AGREEMENT: that certain Sale of Business Agreement made on
November 11, 1996 among Data Translation Networking Limited, Parent, Applied
Training Limited and Specialist Computer Holdings Limited.
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SECURITIES ACT: the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
SUB ADJUSTMENT OPTIONS: options to purchase Sub Common Stock issued as part of
an adjustment to Parent Stock Options as set forth in Section 8.7.1 hereof.
SUB ADJUSTMENT STOCK OPTION PLAN: a stock option plan, substantially in the form
of EXHIBIT C hereto, pursuant to which Sub will issue the Sub Adjustment
Options.
SUB AFFILIATED GROUP: for each taxable period beginning after the Distribution
Date, the Affiliated Group of which Sub is the common parent, or if Sub is not
the common parent of an Affiliated Group, then Sub.
SUB ASSETS: all of the assets held by any member of the Sub Affiliated Group, or
a direct or indirect foreign subsidiary of any such member, immediately after
the Distribution Date.
SUB CLAIMS: any claim with respect to injury, loss, Liability, damage or expense
that (a) is or was incurred or asserted by a third party to have been incurred
on or prior to the Distribution Date in, or in connection with, the conduct of
the Contributed Businesses or the operation of the Contributed Assets and (b)
arose or may have arisen out of one or more occurrences or events that are or
may be insured or insurable under one or more of Parent's Insurance Policies.
SUB COMMON STOCK: the common stock of Sub, par value $.01 per share.
SUB PARTY: shall have the meaning set forth in Section 5.5 hereof.
SUB RETIREMENT PLAN: shall have the meaning set forth in Section 8.2.1 hereof.
SUB WELFARE/FRINGE BENEFIT PLANS: shall have the meaning set forth in Section
8.3.1 hereof.
TAX INDEMNITEE: shall have the meaning set forth in Section 11.5.1.1 hereof.
TAX INDEMNITOR: shall have the meaning set forth in Section 11.5.1.1 hereof.
THIRD PARTY CLAIMS: shall have the meaning set forth in Section 5.3.1 hereof.
TRANSACTION TAXES: all U.S. and foreign taxes (including without limitation all
patent, copyright and trademark transfer taxes and recording fees, and all
interest and penalties related thereto), other than Income Taxes, incurred by
any member of the Parent Affiliated Group or the Sub Affiliated Group or any
direct or indirect foreign subsidiary of the foregoing in consummating the
transactions provided for in this Agreement; provided, however, Transaction
Taxes shall not include any costs (as determined in Section 6.11 hereof) or
taxes incurred in connection with Data Translation Networking Limited.
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TRANSFERRED EMPLOYEES: the employees of Parent listed on SCHEDULE 1.1 hereof, as
such schedule shall be amended and updated as of the Distribution Date.
USE AND OCCUPANCY AGREEMENT: the Use and Occupancy Agreement, substantially in
the form of EXHIBIT D hereto, relating to the continued use and occupancy of a
portion of the facilities located at 100 Locke Drive, Marlboro, MA by Parent for
a transition period following the Distribution Date.
SECTION 2 REORGANIZATION AND RELATED TRANSACTIONS.
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SECTION 2.1 THE REORGANIZATION.
------------------
SECTION 2.1.1 Subject to the terms and conditions of this Agreement, Parent and
Sub shall use their respective best efforts to cause, on or prior to the
Distribution Date, (a) all of Parent's right, title and interest in and to the
Contributed Assets to be conveyed, assigned, transferred and delivered to Sub,
free and clear of all liens or encumbrances in favor of Parent and (b) all of
Parent's duties, obligations and responsibilities under the Assumed Liabilities
to be assumed by Sub.
SECTION 2.1.2 At the time of the contribution of the Contributed Assets to Sub
as provided in Section 2.1.1 hereof, Parent shall transfer to Sub an amount in
cash and cash equivalents determined as if October 31, 1996 had been the
Distribution Date for purposes of calculating the Cash Amount (the "Interim Cash
Amount"). As promptly as practicable after the Distribution Date (but in any
event within twenty (20) days following the Distribution Date), Parent and Sub
shall jointly determine, and shall cause Sub's independent public accountants,
Arthur Andersen LLP, to certify, the Cash Amount. If the Interim Cash Amount is
less than the Cash Amount, then Parent shall pay to Sub, within five business
days after the final determination of the Cash Amount, the full amount by which
the Cash Amount exceeds the Interim Cash Amount, in cash or cash equivalents,
without interest thereon. If the Interim Cash Amount is greater than the Cash
Amount, then Sub shall pay to Parent, within five business days after the final
determination of the Cash Amount, the full amount by which the Interim Cash
Amount exceeds the Cash Amount, in cash or cash equivalents, without interest
thereon.
SECTION 2.1.3 Subject to Section 6.3 hereof, to the extent that any such
conveyances, assignments, transfers and deliveries shall not have been so
consummated on the Distribution Date, Parent and Sub shall cooperate to effect
such consummation as promptly thereafter as shall be practicable, it nonetheless
being understood and agreed by Parent and Sub that neither shall be liable in
any manner to any person who is not a party to this Agreement for any failure of
any of the transfers contemplated by this Section 2 to be consummated on or
subsequent to the Distribution Date. Whether or not all of the Contributed
Assets or the Assumed Liabilities shall have been legally transferred to Sub as
of the Distribution Date, Parent and Sub agree that, as of the Distribution
Date, Sub shall have, and shall be deemed to have acquired, complete and sole
beneficial ownership over all of the Contributed Assets, except as described
herein with respect to assets which are non-assignable, together with all of
Parent's rights, powers and privileges (except as
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provided in Section 7.6 hereof) incident thereto, and shall be deemed to have
assumed in accordance with the terms of this Agreement all of the Assumed
Liabilities and all of Parent's duties, obligations and responsibilities
incident thereto.
SECTION 2.1.4 In furtherance of the transfers and assumptions contemplated by
the foregoing Section 2.1.1 and subject to the terms of Section 5 hereof, Parent
and Sub, as between the two of them, acknowledge and agree as follows: (a)
Parent and its Affiliates shall have no obligation or liability of any kind to
Sub or its Affiliates for any condition existing at or prior to the Distribution
Date or for any conduct, act or omission by or on behalf of Parent, its
Affiliates or any other person on, or at any time prior to, the Distribution
Date, and Sub and its Affiliates shall have no claims, or right to bring a claim
or Action, against Parent or its Affiliates with respect thereto, including
without limitation any claim or Action arising out of (i) the operation of the
Contributed Businesses on or before the Distribution Date, (ii) any advice,
rights, products or services made available to the Contributed Businesses, on or
before the Distribution Date, by Parent, its Affiliates or any other person,
(iii) the Assumed Liabilities or (iv) the formation of Sub; except for, and to
the extent of, any responsibilities specifically retained by Parent or any of
its Affiliates pursuant to the terms of this Agreement or any of the Related
Agreements; and (b) Sub and its Affiliates shall have no obligation or liability
of any kind to Parent or its Affiliates for any condition existing at or prior
to the Distribution Date or for any conduct, act or omission by or on behalf of
Sub, its Affiliates or any other person on, or at any time prior to, the
Distribution Date, and Parent and its Affiliates shall have no claims, or right
to bring a claim or Action, against Sub or its Affiliates with respect thereto,
including without limitation any claim or Action arising out of (i) the
operation of the Retained Business on or before the Distribution Date, (ii) any
advice, rights, products or services made available to Parent or its Affiliates,
on or before the Distribution Date, by the Contributed Businesses or any other
person or (iii) the Retained Liabilities; except for, and to the extent of, any
responsibilities specifically assumed by Sub or any of its Affiliates pursuant
to the terms of this Agreement or any of the Related Agreements.
SECTION 2.2 CONSIDERATION. In consideration of the conveyance, assignment,
transfer and delivery of the Contributed Assets being made pursuant to Section
2.1 hereof, Sub agrees to assume the Assumed Liabilities and to issue and
deliver to the Agent for delivery to stockholders of Parent as of the Record
Date certificates representing the number of shares of Sub Common Stock provided
for in Section 4.1 hereof.
SECTION 2.3 FOREIGN TRANSFERS. On or prior to the Distribution Date, (a) all of
the assets and liabilities of Data Translation Ltd. and Data Translation GmbH
relating to the Retained Business will be transferred to newly-formed
corporations incorporated under the laws of the respective countries as
subsidiaries of Parent and (b) the stock of Data Translation Networking Limited,
Data Translation Ltd. and Data Translation GmbH will be contributed by Parent to
the capital of Sub.
SECTION 2.4 PARENT APPROVAL. Parent shall cooperate with Sub in effecting, and
if so requested by Sub, Parent shall, as the sole stockholder of Sub, approve or
ratify any
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actions which are reasonably necessary or desirable to be taken by
Sub to effectuate the transactions contemplated by this Agreement in a manner
consistent with the terms of this Agreement, including without limitation (a)
the election or appointment of directors and officers of Sub to serve in such
capacities following the Distribution Date and (b) the approval of appropriate
plans, agreements and arrangements for Transferred Employees and non-employee
members of Sub's board of directors (including without limitation plans,
agreements or arrangements pursuant to which Sub Common Stock would be acquired
by Transferred Employees).
SECTION 3 ASSUMPTION AND RETENTION OF LIABILITIES.
---------------------------------------
SECTION 3.1 ASSUMED LIABILITIES. Upon the terms and subject to the conditions
set forth in this Agreement and in addition to any other Liabilities otherwise
expressly assumed by Sub pursuant to this Agreement, the Related Agreements or
any other agreement contemplated by this Agreement, Sub hereby agrees with
Parent to assume, pay, perform and discharge in due course any and all Assumed
Liabilities.
SECTION 3.2 RETAINED LIABILITIES. Upon the terms and subject to the conditions
set forth in this Agreement and in addition to any other Liabilities otherwise
expressly retained by Parent pursuant to this Agreement, the Related Agreements
or any other agreement contemplated by this Agreement, Parent hereby agrees with
Sub that Parent shall pay, perform and discharge in due course any and all
Retained Liabilities.
SECTION 4 THE DISTRIBUTION.
----------------
SECTION 4.1 THE DISTRIBUTION. On the Distribution Date, Parent shall deliver to
the Agent the certificate for 100 shares of Sub Common Stock which were owned by
Parent prior to the Distribution. Upon receipt from Parent of a certificate as
to the number of shares of Parent Common Stock outstanding on the Record Date,
Sub shall deliver to the Agent, for the benefit of holders of record of Parent
Common Stock on the Record Date, a stock certificate representing, in the
aggregate (and rounded down to the nearest whole share), a number of shares
representing one share of Sub Common Stock for every 4 shares of Parent Common
Stock outstanding on the Record Date (less the 100 shares of Sub Common Stock
owned prior to the Distribution Date), and shall instruct the Agent to
distribute as promptly as practicable following the Distribution Date to holders
of record of Parent Common Stock on the Record Date one share of Sub Common
Stock for every 4 shares of Parent Common Stock and cash in lieu of fractional
shares of Sub Common Stock obtained in the manner provided in Section 4.2
hereof. Sub agrees to provide to the Agent sufficient certificates in such
denominations as the Agent may request in order to effect the Distribution. All
of the shares of Sub Common Stock issued in the Distribution shall be fully
paid, nonassessable and free of preemptive rights.
SECTION 4.2 FRACTIONAL SHARES. No certificate or scrip representing fractional
shares of Sub Common Stock shall be issued as part of the Distribution and in
lieu of receiving fractional shares, each holder of Parent Common Stock who
would otherwise be entitled to receive a fractional share of Sub Common Stock
pursuant to the Distribution will
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receive cash for such fractional share. Parent and Sub agree that Parent shall
instruct the Agent to determine the number of whole shares and fractional shares
of Sub Common Stock allocable to each holder of record of Parent Common Stock as
of the Record Date, to aggregate all such fractional shares into whole shares
and to sell the whole shares obtained thereby in the open market at then
prevailing prices on behalf of holders who otherwise would be entitled to
receive fractional share interests and to distribute to each such holder such
holder's ratable share of the total proceeds of such sales (net of any
commissions incurred in connection with such sales), net of any amount required
to be withheld under applicable law.
SECTION 4.3 PARENT BOARD ACTION.
-------------------
SECTION 4.3.1 This Agreement and the Related Agreements have been approved by
the Board of Directors of Parent and the consummation of the transactions
provided for herein or therein shall only be effected after the Distribution has
been declared by the Board of Directors of Parent and the satisfaction of any
other conditions as determined by the Board of Directors of Parent.
SECTION 4.3.2 The Board of Directors of Parent, in its discretion, shall
establish the Record Date and the Distribution Date and all appropriate
procedures to be followed by Parent's stockholders in connection with the
Distribution.
SECTION 5 SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS.
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SECTION 5.1 SURVIVAL OF AGREEMENTS.
----------------------
SECTION 5.1.1 All covenants and agreements of the parties in this Agreement
shall survive the Distribution Date.
SECTION 5.1.2 Except as specifically provided herein, the provisions of this
Section 5 shall terminate and be of no further force and effect on the tenth
anniversary of the Distribution Date. Such termination shall in no way limit the
obligations of Sub with respect to the Assumed Liabilities or the obligations of
Parent with respect to the Retained Liabilities and related indemnification
rights under this Agreement, which shall survive indefinitely.
SECTION 5.1.3 The obligations under Sections 5, 6, 7 and 11 of this Agreement of
Sub and Parent shall survive the sale or other transfer by either of them of any
assets or businesses or the assignment by either of them or any Liabilities. To
the extent that Parent transfers to another party any of its Retained
Liabilities (except for such amounts of Retained Liabilities which in any
individual instance are not material), Parent shall cause such transferee of
such Retained Liabilities to assume specifically its obligations with respect
thereto under this Agreement and to fulfill its obligations related to such
Retained Liabilities. To the extent Sub transfers to another party any of the
Assumed Liabilities (except for such amounts of Assumed Liabilities which in any
individual
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instance are not material), Sub shall cause such transferee to assume
specifically its obligations with respect thereto under this Agreement and to
fulfill its obligations related to such Assumed Liabilities. The failure of the
transferee to fulfill its obligations with respect to the Retained Liabilities
or the Assumed Liabilities shall not relieve Parent or Sub, as the case may be,
of its obligations hereunder with respect thereto.
SECTION 5.2 INDEMNIFICATION.
---------------
SECTION 5.2.1 Parent shall indemnify, defend and hold harmless Sub, each of its
directors, officers, employees and agents and each Affiliate of Sub from and
against any and all Indemnifiable Losses of Sub or any of its Affiliates arising
out of or due to, directly or indirectly, (a) any Third Party Claims in
connection with any of the Retained Liabilities, (b) Third Party Claims that the
information included in the Information Statement or the Form 10 under the
captions set forth on SCHEDULE 5.2.1 hereto is false or misleading with respect
to any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (c) Third Party Claims
that Parent or its Affiliates failed to perform, or violated, any provision of
this Agreement which is to be performed or complied with by Parent or its
Affiliates or (d) breaches of this Agreement by Parent or its Affiliates.
SECTION 5.2.2 Sub shall indemnify, defend and hold harmless Parent, each of its
directors, officers, employees and agents and each Affiliate of Parent from and
against any and all Indemnifiable Losses of Parent or any of its Affiliates
arising out of or due to, directly or indirectly, (a) any Third Party Claims in
connection with any of the Assumed Liabilities, (b) Third Party Claims that the
information included in the Information Statement or the Form 10 under the
captions set forth on SCHEDULE 5.2.2 hereto is false or misleading with respect
to any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (c) Third Party Claims
that Sub or its Affiliates failed to perform, or violated, any provision of this
Agreement which is to be performed or complied with by Sub or its Affiliates,
(d) breaches of this Agreement by Sub or its Affiliates, (e) subject to Section
6.11 hereof, claims or obligations in connection with the winding down of the
business and affairs of Data Translation Networking Limited, including without
limitation claims or obligations related to or arising out of the Sale of
Business Agreement and the transactions contemplated thereby (excluding any
breach by Parent or its Affiliates of Parent's covenants set forth in clause 12
of such agreement) or (f) subject to Section 6.11 hereof, any guarantees or
similar undertakings which may have been granted prior to the Distribution Date
on behalf of Sub or one of its Affiliates or for the benefit of the Contributed
Businesses.
SECTION 5.2.3 Amounts required to be paid pursuant to this Section 5 are
hereinafter sometimes collectively called "Indemnity Payments" and are
individually called an "Indemnity Payment." The amount by which any party (an
"Indemnifying Party") is required to pay to any other party (an "Indemnified
Party") pursuant to Section 5.2.1 or
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Section 5.2.2 shall be reduced (including retroactively) by any insurance
proceeds or other amounts actually recovered by such Indemnified Party in
reduction of the related Indemnifiable Loss. If an Indemnified Party shall have
received an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently actually receive insurance proceeds or other amounts (such as
judgment or settlement amounts) in respect of such Indemnifiable Loss, then such
Indemnified Party shall pay to such Indemnifying Party a sum equal to the lesser
of the amount of such insurance proceeds or other amounts actually received or
the net amount of Indemnity Payments actually received previously. The
Indemnified Party agrees that the Indemnifying Party shall be subrogated to such
Indemnified Party under any insurance policy.
SECTION 5.2.4 PARENT'S AND SUB'S RESPECTIVE OBLIGATIONS PURSUANT TO SECTION
5.2.1(d) AND SECTION 5.2.2(d) SHALL BE LIMITED TO DIRECT AND ACTUAL DAMAGES, TO
THE EXCLUSION OF INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES. THIS SECTION
5.2.4 SHALL NOT APPLY TO (a) ANY FAILURE BY SUB OR ITS AFFILIATES TO ASSUME,
PAY, PERFORM OR DISCHARGE ANY AND ALL ASSUMED LIABILITIES OR (b) ANY FAILURE BY
PARENT OR ITS AFFILIATES TO PAY, PERFORM OR DISCHARGE ANY AND ALL RETAINED
LIABILITIES OR (c) ANY BREACH BY PARENT OR SUB OF THEIR RESPECTIVE INDEMNITY
OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING THE INDEMNITY OBLIGATIONS SET FORTH
IN THIS SECTION 5.
SECTION 5.2.5 Indemnification obligations contained elsewhere in this Agreement
shall be subject to the provisions of this Section 5.
SECTION 5.3 PROCEDURE FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
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SECTION 5.3.1 If either party shall receive notice of any claim or Action
brought, asserted, commenced or pursued by any person or entity not a party to
this Agreement (herein referred to as a "Third Party Claim"), with respect to
which the other party is or may be obligated to make an Indemnity Payment, it
shall give such other party prompt written notice thereof (including any
pleadings relating thereto) after becoming aware of such Third Party Claim,
specifying in reasonable detail the nature of the Third Party Claim and the
amount or estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim); provided, however,
that the failure of a party to give notice as provided in this Section 5.3.1
shall not relieve the other party of its indemnification obligations under this
Section 5, except to the extent that such other party is actually prejudiced by
such failure to give notice.
SECTION 5.3.2 The Indemnifying Party may elect to defend or seek to settle or
compromise any Third Party claim as to which a claim for indemnification
hereunder has been asserted, at the Indemnifying Party's own expense and by
counsel selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party, by so notifying the Indemnified Party within thirty (30) days
after the Indemnified Party has given notice of the Third Party Claim in
accordance with Section 5.3.1 hereof (or such earlier time as
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may be necessary for the Indemnified Party to submit a responsive pleading
required in connection with the Third Party Claim). Unless the Indemnifying
Party fails to assume the defense or to seek to settle or compromise the Third
Party Claim in a timely manner, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense, settlement or compromise
of the Third Party Claim; provided, however, that if, in the reasonable judgment
of the Indemnified Party, based on the advice of counsel, a conflict of interest
between the Indemnified Party and the Indemnifying Party exists with respect to
the Third Party Claim, the Indemnified Party shall have the right to employ one
counsel selected by it and reasonably acceptable to the Indemnifying Party, and
in that event, the reasonable fees and expenses of such separate counsel shall
be paid by the Indemnifying Party. Once the Indemnifying Party has assumed the
defense of any Third Party Claim, it must actively and diligently defend or seek
to settle or compromise the Third Party Claim until conclusion of the matter,
unless the Indemnified Party agrees to the Indemnifying Party's withdrawal.
SECTION 5.3.3 If the Indemnifying Party responds to a notice of Third Party
Claim by denying its obligation to indemnify the person or entity claiming a
right of defense and indemnification under this Agreement, or if the
Indemnifying Party fails to defend in a timely manner, the Indemnified Party
shall be entitled to defend or seek to settle or compromise such Third Party
Claim by counsel selected by it. In addition, if it is later determined, through
procedures referenced in Section 10 of this Agreement, or by agreement of the
parties, that the Indemnifying Party wrongly denied its indemnification
obligation with respect to, or failed to timely defend, such claim, then the
Indemnifying Party shall (a) reimburse the Indemnified Party for all costs and
expenses (other than salaries of officers and employees) reasonably incurred by
the Indemnified Party in connection with its defense, settlement or compromise
of the Third Party Claim and (b) be estopped from challenging a judgment, order,
settlement or compromise resolving the Third Party Claim entered into in good
faith by the Indemnified Party (if such claim has been resolved prior to the
conclusion of the proceeding between the Indemnified Party and the Indemnifying
Party). The Indemnifying Party, after initially rejecting a claim for defense or
indemnification by the Indemnified Party, may, at any time prior to the
resolution of the Third Party Claim, assume the defense of, or seek to settle or
compromise said claim, provided that (i) the Indemnifying Party reimburses the
Indemnified Party for all costs and expenses (other than salaries of officers
and employees) reasonably incurred by the Indemnified Party in connection with
the defense of such claim (including costs incurred in the transition of the
defense from the Indemnified Party to the Indemnifying Party) and (ii) the
assumption of the defense of the Third Party Claim will not prejudice or cause
harm to the Indemnified Party.
SECTION 5.3.4 With respect to any Third Party Claim relating to any matter
subject to a claim for indemnification hereunder, no party shall enter into any
compromise or settlement or consent to the entry of any judgment which (a) does
not include as a term thereof the giving by the third party of a release to the
Indemnified Party of all further liability in respect of such Third Party Claim
or (b) imposes any obligation on the Indemnified Party without said Indemnified
Party's written consent (which consent shall
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not be unreasonably withheld), except an obligation to pay money which the
Indemnifying Party has agreed to pay on behalf of the Indemnified Party. In the
event that an Indemnified Party enters into any such compromise, settlement or
consent without the written consent of the Indemnifying Party (other than as
contemplated by Section 5.3.3 hereof), the entry of such compromise, settlement
or consent shall relieve the Indemnifying Party of its indemnification
obligation related to the Third Party Claim underlying such compromise,
settlement or consent.
SECTION 5.3.5 Upon final judgment, determination, settlement or compromise of
any Third Party Claim, and unless otherwise agreed to by the parties in writing,
the Indemnifying Party shall pay promptly on behalf of the Indemnified Party, or
to the Indemnified Party in reimbursement of any amount theretofore required to
be paid by it, the amount so determined by final judgment, determination,
settlement or compromise. Upon the payment in full by the Indemnifying Party of
such amount, the Indemnifying Party shall succeed to the rights of such
Indemnified Party to the extent not waived in settlement, against the third
party who made such Third Party Claim and any other person who may have been
liable to the Indemnified Party with respect to the indemnified matter.
SECTION 5.3.6 If the Indemnifying Party elects to defend or to seek to settle or
compromise the Third Party Claim, the Indemnified Party shall make available to
the Indemnifying Party any personnel or any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense, settlement or compromise, and
shall otherwise cooperate in the defense, settlement or compromise of the Third
Party Claim; provided, however, that nothing in this Section 5.3.6 shall be
deemed to require the waiver of any privilege, including attorney-client
privilege, or protection afforded by the attorney work product doctrine. In
addition, regardless of the party actually defending a Third Party Claim for
which there is an indemnity obligation under Section 5.2 hereof, the parties
shall give each other regular status reports relating to such action with detail
sufficient to permit the other party to assert and protect its rights and
obligations under this Agreement.
SECTION 5.3.7 The provisions of this Section 5.3 shall survive in perpetuity and
shall be the exclusive procedures for any Third Party Claims subject to the
provisions of Section 5.2.1 or 5.2.2 hereof.
SECTION 5.4 OTHER CLAIMS. Any claim on account of an Indemnifiable Loss which
does not result from a Third Party Claim shall be asserted by written notice
from the Indemnified Party to the Indemnifying Party. The Indemnifying Party
shall have a period of sixty (60) days (or such shorter time period as may be
required by law as indicated by the Indemnified Party in the written notice)
within which to respond. If the Indemnifying Party does not respond within such
sixty (60) day (or lesser) period, the Indemnifying Party shall be deemed to
have accepted responsibility to make payment and shall have no further right to
contest the validity of such claim. If the Indemnifying Party does respond
within such sixty (60) day (or lesser) period and rejects such claim in whole or
in part, the
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Indemnified Party shall be free to pursue resolution of the matter
as provided in Section 10 hereof.
SECTION 5.5 CERTAIN LOSSES. If the indemnification provided for in Section 5.2
is unavailable to an Indemnified Party in respect of any Indemnifiable Loss
arising out of or related to information contained in the Information Statement
of the Form 10, then the Indemnifying Party, in lieu of indemnifying the
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Indemnifiable Loss, in such proportion as
is appropriate to reflect the relative fault of Sub, each of its directors, each
of its officers who have signed any registration statement and each Affiliate of
Sub (a "Sub Party") on the one hand and Parent and each Affiliate of Parent (a
"Parent Party") on the other hand in connection with the statements or omissions
which resulted in such Indemnifiable Loss. The relative fault of a Sub Party on
the one hand and of a Parent Party on the other hand 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 a Sub Party on the one hand or a Parent Party
on the other hand.
SECTION 5.6 NO BENEFICIARIES. Except to the extent expressly provided otherwise
in this Section 5, the indemnification provided for by this Section 5 shall not
inure to the benefit of any third party or parties and shall not relieve any
insurer who would otherwise be obligated to pay any claim of the responsibility
with respect thereto or, solely by virtue of the indemnification provisions
hereof, provide any subrogation rights with respect thereto and each party
agrees to waive such rights against the other to the fullest extent permitted.
SECTION 5.7 NAMED PARTIES. The parties hereto acknowledge that it may not be
feasible to substitute Sub (or one of its Affiliates) for Parent (or one of its
Affiliates) as a named party in Actions, whether domestic or foreign,
constituting Assumed Liabilities. In such event, Parent (or one of its
Affiliates) shall remain as a named party, but, following the Distribution Date,
Sub (or one of its Affiliates) shall assume the defense of any such Action in
accordance with the provisions of Section 5.3 hereof and Parent and its
Affiliates shall cooperate with Sub as contemplated by Section 5.3 and Section 7
hereof. Parent shall as promptly as practicable seek to have its name changed to
"Media 100 Inc." in all Actions, whether domestic or foreign, constituting
Retained Liabilities.
SECTION 6 CERTAIN ADDITIONAL MATTERS.
--------------------------
SECTION 6.1 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection with the
transfer, conveyance, assignment and delivery of the Contributed Assets and the
assumption of the Assumed Liabilities contemplated by this Agreement, Parent and
Sub agree to execute or cause to be executed by the appropriate parties and to
deliver to each other, as appropriate, the Conveyancing and Assumption
Instruments.
SECTION 6.2 NO REPRESENTATIONS OR WARRANTIES. Except as provided in Section 2.1
hereof, Sub understands and agrees that Parent is not in this Agreement or in
any other
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agreement or document contemplated by this Agreement, representing or
warranting in any way (a) as to the value or freedom from encumbrance of, or as
to any other matter concerning, any Contributed Assets or (b) as to the legal
sufficiency to convey title to any Contributed Assets of the execution, delivery
and filing of the Conveyancing Instruments, IT BEING UNDERSTOOD THAT ALL SUCH
ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and without any representation or
warranty of any kind, express or implied (the implied warranties of
merchantability and fitness for a particular purpose being hereby specifically
disclaimed), and that Sub shall bear the economic and legal risk that any
conveyance of such assets shall prove to be insufficient or that Sub's title to
any such assets shall be other than good and marketable and free from
encumbrances. Similarly, Sub understands and agrees that Parent is not in this
Agreement or in any other agreement or document contemplated by this Agreement
representing or warranting in any way that the obtaining of the consents or
approvals, the execution and delivery of any amendatory agreements and the
making of the filings and applications contemplated by this Agreement shall
satisfy the provisions of all applicable laws or judgments, it being understood
and agreed that, subject to Section 6.3 hereof, Sub shall bear the economic and
legal risk that any necessary consents or approvals are not obtained or that any
requirements of law or judgments are not complied with. The foregoing, however,
shall not limit any responsibilities which Parent may have to use its
commercially reasonable efforts to effect transfers under the other provisions
of this Agreement.
SECTION 6.3 FURTHER ASSURANCES; SUBSEQUENT TRANSFERS.
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SECTION 6.3.1 Each of Parent and Sub will execute and deliver such further
instruments of conveyance, transfer and assignment and will take such other
actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Distribution Date, at the request of Sub and without the payment
of any further consideration, Parent will execute and deliver to Sub such other
instruments of transfer, conveyance, assignment and confirmation and take such
action as Sub may reasonably deem necessary or desirable in order to more
effectively transfer, convey and assign to Sub and to confirm Sub's title to all
of the Contributed Assets, to put Sub in actual possession and operating control
thereof and to permit Sub to exercise all rights with respect thereto (including
without limitation rights under contracts and other arrangements as to which the
consent of any third party to the transfer thereof shall not have previously
been obtained) and Sub will execute and deliver to Parent all instruments,
undertakings or other documents and take such other action as Parent may
reasonably deem necessary or desirable in order to have Sub fully assume and
discharge the Assumed Liabilities and relieve Parent of any Liability or
obligations with respect thereto and evidence the same to third parties.
Notwithstanding the foregoing, Parent and Sub shall not be obligated, in
connection with the foregoing, to expend monies other than reasonable
out-of-pocket expenses and attorneys' fees.
SECTION 6.3.2 Parent and Sub will use their best efforts to obtain any consent,
approval or amendment required to novate and/or assign all agreements, leases,
licenses and other rights of any nature whatsoever relating to the Contributed
Assets to Sub; provided,
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however, that Parent shall not be obligated to pay any consideration therefor
(except for filing fees and other administrative charges) to the third party
from whom such consents, approvals and amendments are requested. In the event
and to the extent that Parent is unable to obtain any such required consent,
approval or amendment, (a) Parent shall continue to be bound thereby and (b)
unless not permitted by law or the terms thereof, Sub shall pay, perform and
discharge fully all the obligations of Parent thereunder from and after the
Distribution Date and indemnify Parent for all Indemnifiable Losses arising out
of such performance by Sub. Parent shall, without the payment of any further
consideration, pay and remit to Sub promptly any monies, rights and other
considerations received in respect of such performance. Parent shall exercise or
exploit its rights and options under all such agreements, leases, licenses and
other rights and commitments referred to in this Section 6.3.2 only as
reasonably directed by Sub and at Sub's expense. If and when any such consent
shall be obtained or such agreement, lease, license or other right shall
otherwise become assignable or able to be novated, Parent shall promptly assign
and novate all its rights and obligations thereunder to Sub without payment of
further consideration and Sub shall, without the payment of any further
consideration, assume such rights and obligations. To the extent that the
assignment of any contract or agreement (or their proceeds) pursuant to this
Section 6.3 is prohibited by law or not otherwise obtained, the assignment
provisions of this Section shall operate to create a subcontract with Sub to
perform each relevant unassignable Parent contract at a subcontract price equal
to the monies, rights and other considerations received by Parent with respect
to the performance by Sub under such subcontract.
SECTION 6.3.3 All Bids, Quotations and Proposals included in the Contributed
Assets shall be transferred to Sub to the extent permitted by law. Parent and
Sub shall work together and use their best efforts to preserve such Bids,
Quotations and Proposals and facilitate the award of contracts pursuant thereto
consistent with applicable laws and regulations. Any contracts awarded pursuant
to an outstanding Bid, Quotation or Proposal shall be considered an agreement
and treated in the same manner as provided for in the last two sentences of
Section 6.3.2 hereof.
SECTION 6.4 SUB OFFICERS AND DIRECTORS. Sub and Parent shall take all actions
which may be required to elect or otherwise appoint, as of the Distribution
Date, those individuals designated in the Information Statement to be directors
or officers of Sub.
SECTION 6.5 RESIGNATIONS. On or prior to the Distribution Date, Parent shall
cause all directors and officers of Parent who are not designated in the
Information Statement to be directors or officers of Sub following the
Distribution Date to resign from their position as a director or officer of Sub.
SECTION 6.6 CHANGE OF NAME. Immediately following the Distribution, Media 100
Inc. shall be merged with and into Parent in accordance with, and with the
effects set forth in, Section 253 of the General Corporation Law of the State of
Delaware, and as a result of such merger, the name of Parent shall be changed to
"Media 100 Inc." As promptly as practicable following the foregoing merger, Sub
shall change its name to "Data Translation, Inc."
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SECTION 6.7 RELATED AGREEMENTS. As of the Distribution Date, Parent and Sub
shall enter, and if applicable shall cause their Affiliates to enter, into the
Related Agreements.
SECTION 6.8 CERTAIN INTERCOMPANY ARRANGEMENTS. Following the Distribution Date,
the parties agree to discuss in good faith the provision of any services and
products to be provided by the other, but which inadvertently were not the
subject of a written agreement. Nothing in this Section 6.8, however, shall
require or authorize Parent or Sub to provide and charge each other for any
services other than on the terms and conditions specified in the Corporate
Services Agreement or the other Related Agreements.
SECTION 6.9 SUPPLIES AND DOCUMENTS. Parent shall have the right to use existing
supplies and documents (including without limitation invoices, purchase orders,
forms, labels, shipping materials, catalogues, sales brochures, operating
manuals, instructional documents and similar materials, and advertising
material) which have imprinted thereon the name "Data Translation" or
trademarks, logotypes or variations comprising the name "Data Translation," for
a period not to exceed six (6) months following the Distribution Date; provided,
however, that Parent agrees (a) to use only such supplies and documents existing
in inventory as of the Distribution Date, to conspicuously state on such
supplies and documents when used that they are not documents of Sub and (c) not
to order or utilize in any manner any additional supplies and documents
containing the name "Data Translation."
SECTION 6.10 LETTERS OF CREDIT. Sub shall use all commercially reasonable
efforts to substitute Sub letters of credit for any Parent letters of credit
outstanding on the Distribution Date with respect to obligations of the
Contributed Businesses. In addition, Sub shall reimburse Parent for any costs
incurred or funds advanced by Parent following the Distribution Date in respect
of any such letters of credit.
SECTION 6.11 REIMBURSEMENT OF CERTAIN EXPENSES RELATING TO DATA TRANSLATION
NETWORKING LIMITED. Parent hereby agrees to reimburse Sub for fifty percent
(50%) of the net cost incurred by Sub in completing the winding up of the
business of Data Translation Networking Limited ("DTN"); provided that the
aggregate amount Parent shall be obligated to reimburse Sub as provided in this
Section 6.11 shall in no event exceed $500,000. For purposes of this Section
6.11, all amounts paid by Parent prior to the Distribution, and all amounts paid
by Sub after the Distribution, directly or indirectly to DTN or to its creditors
or to others claiming by or through any of them in connection with the sale of
DTN's business or any of its assets or the winding up of DTN's business through
a members' voluntary liquidation or otherwise, shall be deemed to be costs
incurred by Sub in completing the winding-up of DTN's business (collectively,
"DTN Expenses"). In calculating the net cost incurred by Sub in completing such
winding-up, the foregoing costs shall be reduced by the aggregate amount
received by DTN from the collection or assignment of its receivables or from the
recovery by DTN of any other amounts from third parties which is not applied to
the payment of DTN's obligations to third parties in connection with the winding
up of its business (collectively, "DTN Proceeds"). Parent's obligations under
this Section 6.11 with respect to DTN Expenses incurred prior to the
Distribution Date shall be satisfied by appropriate adjustments in
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connection with the determination of the Cash Amount. Within fifteen (15) days
of the end of each calendar month following the Distribution Date, Sub shall
certify to Parent in writing as to the aggregate amount of DTN Expenses
incurred, and the aggregate amount of DTN Proceeds received, during the
preceding month. If the aggregate amount of DTN Expenses is greater than the
aggregate amount of DTN Proceeds during such month, Parent will promptly
reimburse Sub for fifty percent (50%) of the amount of such excess, subject to
the overall limitations on Parent's obligations under this Section 6.11. If the
aggregate amount of DTN Proceeds exceeds the aggregate amount of DTN Expenses
during such month, Sub will promptly pay over to Parent an amount equal to fifty
percent (50%) of such excess. Upon completion of the winding up of the business
of DTN, Sub shall certify to Parent in writing that, to the best of its
knowledge, all of DTN's obligations have been discharged, and that no further
DTN Proceeds are reasonably likely to be collected.
SECTION 7 ACCESS TO INFORMATION AND SERVICES.
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SECTION 7.1 PROVISION OF CORPORATE RECORDS. As soon as practicable after the
Distribution Date, Parent shall deliver to Sub all Books and Records. Such Books
and Records shall be the property of Sub, but shall be retained and made
available readily to Parent for review and duplication until the earlier of (a)
notice from Parent that such records are no longer needed by Parent or (b) the
eighth anniversary of the Distribution Date.
SECTION 7.2 ACCESS TO INFORMATION. From and after the Distribution Date, Parent
and Sub shall afford to each other and to each other's authorized accountants,
counsel and other designated representatives reasonable access and duplicating
rights (with copying costs to be borne by the requesting party) during normal
business hours to all Books and Records and documents, communications, items and
matters (collectively, "Information") within each other's knowledge, possession
or control and relating to the Contributed Assets, the Contributed Businesses,
the Assumed Liabilities, the Retained Liabilities and the Transferred Employees,
insofar as such access is reasonably required by Parent or Sub, as the case may
be (and shall use reasonable efforts to cause persons or firms possessing
relevant Information to give similar access). Information may be requested under
this Section 7 for, without limitation, audit, accounting, claims, Actions,
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations, but not for competitive purposes.
SECTION 7.3 PRODUCTION OF WITNESSES AND INDIVIDUALS. From and after the
Distribution Date, Parent and Sub shall use reasonable efforts to make available
to each other, upon written request, its officers, directors, employees and
agents for fact finding, consultation and interviews and as witnesses to the
extent that any such person may reasonably be required in connection with any
Actions in which the requesting party may from time to time be involved relating
to the conduct of the Contributed Businesses or Parent's other businesses prior
to the Distribution Date. Except as otherwise agreed between the parties, Parent
and Sub agree to reimburse each other for reasonable out-of-
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pocket expenses (but not labor charges or salary payments) incurred by the other
in connection with providing individuals and witnesses pursuant to this Section
7.3.
SECTION 7.4 RETENTION OF RECORDS. Except when a longer retention period is
otherwise required by law or agreed to in writing, Parent and Sub shall retain,
for a period of at least eight (8) years following the Distribution Date, all
material Information relating to the Contributed Businesses. Notwithstanding the
foregoing, in lieu of retaining any specific Information, Parent or Sub may
offer in writing to deliver such Information to the other and, if such offer is
not accepted within ninety (90) days, the offered Information may be destroyed
or otherwise disposed of at any time. If the recipient of such offer shall
request in writing prior to the scheduled date for such destruction or disposal
that any of the Information proposed to be destroyed or disposed of be delivered
to such requesting party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the Information as was requested
(at the cost of the requesting party).
SECTION 7.5 CONFIDENTIALITY.
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SECTION 7.5.1 Each of Parent and Sub shall, and shall use its best efforts to
cause its officers, employees, agents, consultants, advisors and Affiliates to,
hold, in strict confidence and not disclose to another person, except as
provided herein or unless compelled to disclose by judicial or administrative
process or, in the opinion of counsel (which may be in-house counsel), by other
requirements of law, confidential information concerning the other party.
SECTION 7.5.2 For purposes of this Section 7.5, confidential information about a
particular party (referred to herein as the "disclosing party") shall mean
information known by the other party (referred to herein as the "receiving
party") on the Distribution Date and reasonably understood by the receiving
party to be confidential and related to the disclosing party's business
interests, or disclosed confidentially by the disclosing party to the receiving
party after the Distribution Date under the terms and for the purposes of this
Agreement or any of the Related Agreements except for: (a) information which is
or becomes generally available to the public other than as a result of a
disclosure by the disclosing party; (b) information learned by the receiving
party on a non-confidential basis for the first time after the Distribution
Date, but prior to any disclosure by the disclosing party; (c) information
developed by the receiving party independent of any confidential information of
the disclosing party which is known by the receiving party on the Distribution
Date or disclosed by the disclosing party thereafter; and (d) information which
becomes available to the receiving party on a non-confidential basis from a
source other than the disclosing party if such source was not subject to any
prohibition against transmitting the information to the receiving party.
SECTION 7.5.3 Each party shall protect confidential information of the other
party by using the same degree of care, but no less than a reasonable degree of
care, to prevent the unauthorized disclosure of the other party's confidential
information as the party uses to protect its own confidential information of a
like nature.
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SECTION 7.5.4 Each party shall use its best efforts to insure that its officers,
employees, agents, consultants, advisors and Affiliates agree to be bound by the
foregoing restrictions on use and disclosure of confidential information as a
condition to receiving such information; provided, that such party will be
responsible for any breach of such confidentiality provisions by any such
person.
SECTION 7.6 PRIVILEGED MATTERS.
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SECTION 7.6.1 Parent and Sub agree to maintain, preserve and assert all
privileges that either party may have, including without limitation any
privilege or protection arising under or relating to any attorney-client
relationship that existed prior to the Distribution Date ("Privilege" or
"Privileges"). Parent and Sub shall be entitled in perpetuity to require the
assertion or decide whether to consent to the waiver of any and all Privileges
which, in the case of Sub, relate to the Contributed Businesses and, in the case
of Parent, relate to the Retained Business. Parent and Sub shall each use the
same degree of care as it would with respect to itself so as not to waive any
Privilege which could be asserted by the other party under applicable law,
without the prior written consent of the other party. The rights and obligations
created by this Section 7.6 shall apply to all information as to which, but for
the Distribution, Parent or Sub would have been entitled to assert or did assert
the protection of a Privilege ("Privileged Information"), including but not
limited to (a) all information generated prior to the Distribution Date but
which, after the Distribution, is in the possession of the other party or its
Affiliates, (b) all communications subject to a Privilege occurring prior to the
Distribution Date between counsel for Parent and any person who, at the time of
the communication, was an employee of Parent, regardless of whether such
employee is or becomes an employee of Sub, and (c) all information generated,
received or arising after the Distribution Date that refers or relates to
Privileged Information generated, received or arising prior to the Distribution
Date.
SECTION 7.6.2 Upon the receipt by either party of any subpoena, discovery or
other request which arguably calls for production or disclosure of Privileged
Information of the other party and whenever either party obtains knowledge that
any current or former employee of such party has received any subpoena,
discovery or other request which arguably calls of the production or disclosure
of Privileged Information of the other party, such party shall promptly notify
the other party of the existence of the request and shall provide the other
party with a reasonable opportunity to review the information and to assert any
rights it may have under this Section 7.6 or otherwise to prevent the production
or disclosure of Privileged Information. Neither party will produce or disclose
any information covered by a Privilege of the other party under this Section 7.6
unless (a) the other party has provided its express written consent to such
production or disclosure or (b) a court of competent jurisdiction has entered a
final, non-appealable order finding that the information is not entitled to
protection under any applicable Privilege.
SECTION 7.6.3 Parent's transfer of Books and Records and any other information
to Sub, and each party's agreement to permit the other party to possess
Privileged Information occurring or generated prior to the Distribution Date,
are made in reliance on each party's
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agreement, as set forth in this Section 7.6, to maintain the confidentiality of
Privileged Information and to maintain, preserve and assert all applicable
Privileges. The access to information granted or permitted by this Agreement,
the agreement to provide witnessees and individuals pursuant to Section 7.3
hereof and transfer of Privileged Information to Sub pursuant to this Agreement
shall not be deemed a waiver of any Privilege that has been or may be asserted
under this Section 7.6 or otherwise. Nothing in this Agreement shall operate to
reduce, minimize or condition the rights granted to either party in, or the
obligations imposed upon either party by, this Section 7.6.
SECTION 7.7 MAIL AND OTHER COMMUNICATIONS. Each of Parent and Sub agrees to
forward or direct (as appropriate) to the other party any mail or other
communications intended for such other party which is received by it.
SECTION 7.8 ORDER OF PRECEDENCE. To the extent that the provisions of this
Section 7 are inconsistent with the provisions of Section 11 hereof with respect
to the subject matter thereof, the provisions of Section 11 shall control.
SECTION 8 EMPLOYEE MATTERS AND BENEFITS.
-----------------------------
SECTION 8.1 EMPLOYMENT. At the Distribution Date, Sub shall employ each
Transferred Employee at an annual compensation rate no less than such
Transferred Employee's current annual compensation rate with Parent. Following
the Distribution, such compensation shall be subject to Sub's normal review
procedures with respect to compensation. Sub shall continue the status of a
Transferred Employee on leave of absence or short or long term disability
absence, and shall recall, reinstate or terminate the employment of such
Transferred Employee in accordance with the leave of absence policy applicable
to the Transferred Employee that was in effect when the Transferred Employee's
leave of absence began. Anything contained in this Section 8.1 to the contrary
notwithstanding, Sub shall not be obligated to employ any person who declines
employment with Sub and such person shall not be considered a Transferred
Employee.
SECTION 8.2 RETIREMENT PLAN.
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SECTION 8.2.1 Not later than January 1, 1997 (the "Establishment Date"), Sub
shall establish a defined contribution plan for the benefit of its employees
(the "Sub Retirement Plan") intended to qualify under Sections 401(a) and 401(k)
of the Code and a trust under the Sub Retirement Plan intended to qualify under
Section 501(a) of the Code. Prior to the Establishment Date, Sub shall continue
to participate in Parent's Double Sheltered Retirement Plan (the "Parent
Retirement Plan") as a participating employer, and Parent shall cause the Parent
Retirement Plan to be amended as necessary to accommodate such continued
participation. Sub shall be responsible for all contributions with respect to
its employees under the Parent Retirement Plan and shall cooperate fully with
Parent, to the extent requested by Parent, in the preparation, distribution or
filing of all participant communications and governmental filings relating to
the Parent Retirement Plan, in each case with respect to those periods during
which Sub continues to participate in the Parent Retirement Plan.
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SECTION 8.2.2 On or as soon as practicable after the Establishment Date, Parent
shall direct the Trustees of the Parent Retirement Plan to transfer from the
trust established thereunder to the trust under the Sub Retirement Plan, and Sub
shall cause the trustee(s) of the Sub Retirement Plan to accept and receive, an
amount (in the form determined by Parent) equal to the sum of the account
balances (including liabilities associated with outstanding participant loans)
as of the date of transfer (the "Retirement Plan Transfer Date") with respect to
each participant who is a Transferred Employee (or the beneficiary of any such
participant) or who is employed by Sub immediately prior to the Establishment
Date, including such participant who is on leave of absence or disability. If
any Form 5310A is required to be filed with respect to such transfer, Sub and
Parent shall cooperate in the filing of the necessary Forms 5310A. Effective as
of the Retirement Plan Transfer Date, Sub and the Sub Retirement Plan shall
assume and become solely responsible for the satisfaction of all liabilities
under the Parent Retirement Plan in respect of the Transferred Employees (or the
beneficiaries of any such participants) or any other participants who are
employed by Sub, and Parent and the Parent Retirement Plan shall be relieved of
and shall cease to have any responsibility for the satisfaction of such
liabilities, other than for any reconciliations required after the Retirement
Plan Transfer Date.
SECTION 8.2.3 Parent and Sub shall provide each other such records and
information as may be necessary or appropriate to carry out their respective
obligations under this Section 8.2 or for purposes of administration of the
Parent Retirement Plan and the Sub Retirement Plan, and they shall cooperate in
the filing of documents required by the transfer of assets and liabilities
described herein.
SECTION 8.3 WELFARE PLANS.
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SECTION 8.3.1 Effective as of the Distribution Date, Sub shall establish welfare
and fringe benefit plans and programs for the benefit of the Transferred
Employees (the "Sub Welfare/Fringe Benefit Plans") that are substantially
similar in the case of each such plan or program to the corresponding plan or
program maintained prior to the Distribution Date by Parent. Upon the
Distribution Date, each Transferred Employee and his or her dependents (if any)
who were participating in a welfare or fringe benefit plan of Parent immediately
prior to the Distribution Date shall cease participating therein and shall
thereafter participate in the corresponding successor Sub Welfare/Fringe Benefit
Plan, without limitation for any preexisting conditions or exclusions.
SECTION 8.3.2 Parent agrees to be solely responsible for all liabilities and
obligations whatsoever of Parent in connection with covered claims for benefits
incurred before the Distribution Date by or in respect of Transferred Employees
under and covered by the welfare and fringe benefit plans maintained by Parent
for employees and the workers' compensation, unemployment compensation and other
legally required employee benefits programs maintained by Parent. For purposes
of applying this Section 8.3.2 to medical and dental benefits and to death
benefits, "incurred" shall mean (a) with respect to medical and dental benefits,
the date that services are performed, and (b) with respect to survivor benefits,
the date of death. Sub shall be solely responsible for, and shall
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indemnify Parent against, any and all other claims under such plans or the Sub
Welfare/Fringe Benefit Plans with respect to Transferred Employees and their
dependents. Nothing in this Section 8.3.2 shall be construed as an assumption by
Parent or Sub of any liability of an insurer with respect to either party or
with respect to either party's plans or programs.
SECTION 8.3.3 Sub and the Sub Welfare/Fringe Benefit Plans shall recognize all
employment service and earnings of a Transferred Employee recognized by Parent
as employment service and earnings of Sub for purposes of applying the
provisions of any Sub Welfare/Fringe Benefit Plan or similar program, including
any vacation plan or program, where the Transferred Employee's benefits
thereunder are a function of the employee's employment service or earnings or a
combination thereof. Under its successor dependent care program, Sub shall
credit to the account of each Transferred Employee participating in that program
all amounts credited under the corresponding Parent program and such Transferred
Employees shall look solely to the Sub program for dependent care reimbursement
benefits.
SECTION 8.3.4 Sub agrees to assume and be solely responsible for all liabilities
and obligations whatsoever of Parent, as of the Distribution Date, in connection
with (a) the Tuition Assistance Policy obligations of Parent for courses or
degrees which were approved for Transferred Employees prior to the Distribution
Date and (b) any requirement under COBRA to provide continuation of health care
coverage to any Transferred Employee or "qualified beneficiary" (as defined in
COBRA) of a Transferred Employee who loses coverage as a result of a "qualifying
event" (as defined in COBRA) that occurs on or after the Distribution Date.
SECTION 8.4 OTHER LIABILITIES AND OBLIGATIONS. As of the Distribution Date, Sub
shall assume and be solely responsible for all liabilities and obligations
whatsoever of Parent with respect to claims made by or with respect to
Transferred Employees, relating to their employment with the Contributed
Businesses not otherwise provided for in this Agreement, including without
limitation earned salary, wages and other incentive or bonus compensation earned
but not paid on or before the Distribution Date and accrued holiday, vacation
and other termination (including severance) benefits. Without limiting the
foregoing, nothing in this Agreement or in the transactions contemplated hereby
shall be construed as giving any Transferred Employee rights to termination
(including severance) benefits on account of the Distribution.
SECTION 8.5 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. No provision of
this Agreement, including without limitation the agreement of Parent or Sub that
it will make a contribution or payment to or under any plan referred to herein
for any period, shall be construed as a limitation on the right of Parent or Sub
to amend or terminate such plan which Parent or Sub would otherwise have under
the terms of such plan or otherwise; provided, however, that no amendment shall
reduce the Transferred Employees' unused vacation benefits as of the
Distribution Date.
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SECTION 8.6 REIMBURSEMENT. Parent and Sub acknowledge that each may incur costs
and expenses (including without limitation contributions to plans and the
payment of insurance premiums) pursuant to any of the employee benefit or
compensation plans, programs or arrangements which are, as set forth in this
Agreement, the responsibility of the other party. Accordingly, Parent and Sub
agree to reimburse each other, as soon as practicable but in any event within
thirty (30) days of receipt from the other of appropriate verification, for all
such costs and expenses, except to the extent that such reimbursement would be
duplicative.
SECTION 8.7 STOCK OPTION PLANS.
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SECTION 8.7.1 Parent and Sub shall cooperate and take all action necessary to
amend or otherwise provide for adjustments of outstanding awards under the
Parent Stock Option Plans, to adopt the Sub Adjustment Stock Option Plan and to
grant the Sub Adjustment Options, so that effective as of the Distribution Date,
each Parent Stock Option which is outstanding and not exercised will have been
adjusted, immediately prior to the Distribution, so as to represent two
separately exercisable options consisting of a Parent Adjustment Option for the
same number of shares as the related Parent Stock Option, and a Sub Adjustment
Option for one quarter (1/4) of the number of shares as the related Parent Stock
Option (rounded down to the nearest whole share) (collectively, the "Adjusted
Options").
SECTION 8.7.2 If there is an ex-dividend market for the Parent Common Stock
prior to the Distribution Date, (a) the exercise price per share of each Parent
Adjustment Option shall be determined, in accordance with Treasury Regulations
Section 1.425-1(e)(5)(ii)(b), by multiplying the exercise price per share of the
related Parent Stock Option by a fraction, the numerator of which is the fair
market value of the Parent Common Stock on the ex-dividend date and the
denominator of which is the fair market value of the Parent Common Stock on the
last trading day immediately preceding the ex-dividend date, provided that such
fraction shall not be greater than one, and the resulting price shall be rounded
up to the nearest whole cent; and (b) the exercise price per share of each Sub
Adjustment Option shall be determined, in accordance with Treasury Regulation
1.425-1(a)(4) and (7), by multiplying the fair market value of the Sub Common
Stock on the first trading day following the Distribution Date by a fraction,
the numerator of which is the exercise price per share of the related Parent
Adjustment Option and the denominator of which is the fair market value of the
Parent Common Stock on the last trading day prior to the Distribution Date, and
the resulting price shall be rounded up to the nearest whole cent.
SECTION 8.7.3 If there is no ex-dividend market for the Parent Common Stock
prior to the Distribution Date, (a) the exercise price per share of each Parent
Adjustment Option shall be determined, in accordance with Treasury Regulations
Section 1.425-1(e)(5)(ii)(b), by multiplying the exercise price per share of the
related Parent Stock Option by a fraction, the numerator of which is the fair
market value of the Parent Common Stock on the first trading day that the Parent
Common Stock begins trading on the Nasdaq National Market without the Sub
dividend (i.e., without due bills) and the denominator of which is the fair
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market value of the Parent Common Stock on the last trading day immediately
preceding the date on which the Parent Common Stock begins trading on the Nasdaq
National Market without the Sub dividend (i.e., without due bills), provided
that such fraction shall not be greater than one, and the resulting price shall
be rounded up to the nearest whole cent; and (b) the exercise price per share of
each Sub Adjustment Option shall be determined, in accordance with Treasury
Regulation 1.425-1(a)(4) and (7), by multiplying the fair market value of the
Sub Common Stock on the first trading day on which the Parent Common Stock
begins trading on the Nasdaq National Market without the Sub dividend (i.e.,
without due bills) by a fraction, the numerator of which is the exercise price
per share of the related Parent Stock Option and the denominator of which is the
fair market value of the Parent Common Stock on the last trading day immediately
preceding the date on which the Parent Common Stock begins trading on the Nasdaq
National Market without the Sub dividend (i.e., without due bills), and the
resulting price shall be rounded up to the nearest whole cent.
SECTION 8.7.4 The boards of directors of Parent and Sub shall jointly determine
the fair market values referred to in Sections 8.7.2 and 8.7.3 hereof based on
the trading prices of the Parent Common Stock and Sub Common Stock or, in the
event that an adequate trading market in the Sub Common Stock does not develop,
in such manner as they determine to be equitable and appropriate for valuing the
Sub Common Stock. To the extent possible, the adjustments required by this
Section 8.7 shall be effected as follows: (a) for holders of Parent Stock
Options other than Transferred Employees, the adjustments described in this
Section 8.7 shall be effected in a manner that does not adversely affect the
continued qualification of Parent Adjustment Options as incentive stock options
under Section 422 of the Code; and (b) for holders of Parent Stock Options who
are Transferred Employees, the Adjusted Options shall be effected as (i) a
substitution of the Sub Adjustment Options for a portion of the related Parent
Adjustment Options or Parent Stock Options, as the case may be, qualifying under
Section 424(a) of the Code, so as to result in the continued qualification of
Sub Adjustment Options as incentive stock options, and (ii) a simultaneous
issuance of additional Parent Adjustment Options. Subject to the foregoing, the
Adjusted Options shall have terms, including expiration dates and vesting
provisions, substantially equivalent to those of the related Parent Stock
Options, with appropriate alterations to the Sub Adjustment Options to reflect
Sub's substitution for Parent as the issuer of the stock subject to the Sub
Adjustment Options and, in the case of Sub Adjusted Options issued to
Transferred Employees, as the employer of the Transferred Employees.
SECTION 8.7.5 Parent shall cause the Parent Stock Option Plans to be interpreted
so that employment of the Transferred Employees with Sub shall be treated as
employment with Parent for purposes of the Parent Stock Option Plans' provisions
causing outstanding Parent Adjustment Options to expire upon the termination of
employment of the option holder. Sub agrees to promptly notify Parent of the
termination of employment for any reason of each Transferred Employee who is a
holder of Adjusted Options for Parent's use in administering the Parent Stock
Option Plans with respect to outstanding Parent Adjustment Options. Parent
agrees to promptly notify Sub of the termination of employment for any reason of
each of its employees who is a holder of Adjusted Options
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for Sub's use in administering the Sub Adjustment Stock Option Plan. For so long
as any Parent Adjustment Options remain outstanding, Parent shall provide to
Sub, and Sub shall deliver to the Transferred Employees who are holders of
Parent Adjustment Options, copies of the prospectus or prospectuses and all
amendments and supplements thereto prepared in accordance with the Securities
Act relating to the Parent Adjustment Options. Prior to the Distribution Date,
Sub shall register the shares of Sub Common Stock issuable upon exercise of the
Sub Adjustment Options on Form S-8 under the Securities Act, and shall use its
best efforts to keep such registration continuously effective until all the Sub
Adjustment Options have been exercised or have expired or been cancelled. For so
long as any Sub Adjustment Options remain outstanding, Sub shall provide to
Parent, and Parent shall deliver to its employees who are holders of Sub
Adjustment Options, copies of the prospectus or prospectuses and all amendments
and supplements thereto prepared in accordance with the Securities Act relating
to the Sub Adjustment Options.
SECTION 8.7.6 If the exercise of a Parent Adjustment Option by a Transferred
Employee would have qualified for incentive stock option treatment under the
Code if such person had at all times through the time of such exercise remained
an employee of Parent, Sub shall pay to the Transferred Employee an amount in
cash intended to compensate such person for the loss of such treatment as a
result of failing to satisfy the employment requirements of Section 422(a)(2) of
the Code with respect to such option, such amount to be determined by Sub in its
discretion, but not to exceed the value of the corresponding tax benefit to Sub.
If the exercise of a Sub Adjustment Option by an employee of Parent would have
qualified for incentive stock option treatment under the Code if such person had
at all times through the time of such exercise been an employee of Sub, Parent
shall pay to the employee an amount in cash intended to compensate such person
for the loss of such treatment as a result of failing to satisfy the employment
requirements of Section 422(a)(2) of the Code with respect to such option, such
amount to be determined by Parent in its discretion, but not to exceed the value
of the corresponding tax benefit to Parent. In either of the foregoing cases,
payment will be made no later than three months following the date of exercise,
and will be conditioned upon the receipt of an undertaking from the holder not
to dispose of the stock underlying the option in a disposition described in
Section 422(a)(1) of the Code (in each case treating the date of grant of the
related Parent Stock Option as the date of grant of such option).
SECTION 8.7.7 Any and all tax withholding and employment taxes (including the
paying over of such taxes to the government) and related reporting required in
connection with the exercise of an Adjusted Option or in connection with a
payment described in Section 8.7.6 hereof shall be the responsibility of the
employer (Parent or Sub, as the case may be) of the individual to whom the
Adjusted Option was granted, and the employer shall be entitled to claim any tax
deduction arising in connection with such Adjusted Option. The issuer of the
shares subject to the Adjusted Option shall promptly notify the employer of the
exercise and shall not be required to deliver any such shares upon exercise of
the option until it shall have received satisfactory evidence that the person
exercising the option has remitted all required tax withholding to the employer.
Sub shall hold Parent harmless against any employment tax liabilities,
including interest and penalties, asserted against
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Parent by reason of any failure of Sub properly and timely to withhold
and pay over, pay or report any amounts described in this paragraph as being the
responsibility of Sub, and Parent shall hold Sub harmless against any employment
tax liabilities, including interest and penalties, asserted against Sub by
reason of any failure of Parent properly and timely to withhold and pay over,
pay or report any amounts described in this paragraph as being the
responsibility of Parent. Parent and Sub agree to share relevant information and
otherwise cooperate with respect to tax matters pertaining to Adjusted Options,
so that the employers' withholding, reporting and employment tax payment
obligations relating thereto are satisfied and any tax benefits or liabilities
associated therewith are properly allocated between Parent and Sub.
SECTION 8.7.8 The provisions of Sections 8.7.1, 8.7.2, 8.7.3, 8.7.4, 8.7.5 and
8.7.6 hereof shall not apply with respect to any Parent Stock Options awarded
pursuant to the Parent Stock Option Plans' UK Addendums.
SECTION 8.8 STOCK PURCHASE PLANS.
--------------------
SECTION 8.8.1 Transfer of employment of the Transferred Employees from Parent to
Sub on the Distribution Date shall be deemed to be termination of employment
with Parent for purposes of the Parent Stock Purchase Plan, resulting in the
cancellation of all options held by Transferred Employees who are participants
in such plan and entitling all such Transferred Employees to a return of any
balances in such participants' withholding accounts under the plan.
SECTION 8.8.2 Sub shall adopt a stock purchase plan (the "Sub Stock Purchase
Plan") pursuant to which its eligible employees will be entitled to purchase Sub
Common Stock on substantially the same terms as set forth in the Parent Stock
Purchase Plan. Sub shall recognize all employment service of a Transferred
Employee recognized by Parent as employment service for purposes of determining
employee eligibility under the Sub Stock Purchase Plan.
SECTION 8.9 LIMITATION ON ENFORCEMENT. This Section 8 is an agreement solely
between Parent and Sub. Nothing in this Agreement or any Related Agreement,
whether express or implied, confers upon any employee of Parent or Sub, any
Transferred Employee, any former employee of Parent, any beneficiary of a
Transferred Employee or former employee of Parent or any other person, any
rights or remedies, including without limitation (a) any right to employment,
(b) any right to continued employment for any specified period or (c) any right
to claim any particular compensation, benefit or aggregation of benefits, of any
kind or nature whatsoever, as a result of this Section 8.
SECTION 9 INSURANCE.
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SECTION 9.1 GENERAL. Parent shall keep in effect all policies under the Parent
Insurance Policies in effect as of the date hereof insuring the Contributed
Assets and operations of the Contributed Businesses until the end of the day on
which the Distribution occurs, unless Sub shall have earlier obtained
appropriate coverage and
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notified Parent in writing to that effect. Beginning at 12:01 a.m. on the day
following the Distribution Date, Sub and its Affiliates will cease to be covered
under the Parent Insurance Policies with respect to any injury, loss, Liability,
damages or expense that is incurred or asserted by a third party to have been
incurred after the Distribution Date in, or in connection with, the conduct of
the Contributed Businesses or the operation of the Contributed Assets. Sub will
obtain an Incurred But Not Reported ("IBNR") policy extending to Sub the rights
of Parent, if any, as an insured party under Parent's Insurance Policies with
respect to Sub Claims. Parent shall pay the initial cost of obtaining the IBNR
policy.
SECTION 10 DISPUTE RESOLUTION.
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SECTION 10.1 MEDIATION AND BINDING ARBITRATION. Except with respect to matters
involving Section 7.6 hereof ("Privileged Matters") and except as may be
expressly provided in any other agreement between the parties entered into
pursuant hereto, if a dispute, controversy or claim (collectively, a "Dispute")
between Parent and Sub or any of their respective Affiliates arises out of or
relates to this Agreement, the Related Agreements or any other agreement entered
into pursuant hereto or thereto, including without limitation the breach,
interpretation or validity of any such agreement or any matter involving an
Indemnifiable Loss, Parent and Sub agree to use the following procedures, in
lieu of either party pursuing other available remedies and as the sole remedy,
to resolve the Dispute.
SECTION 10.2 MEDIATION.
---------
SECTION 10.2.1 A party seeking to initiate the procedures shall give written
notice to the other party, describing briefly the nature of the Dispute. A
meeting shall be held between the parties within ten (10) days of the receipt of
such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the Dispute.
SECTION 10.2.2 If, within thirty (30) days after such meeting, the parties have
not succeeded in negotiating a resolution of the Dispute, they agree to submit
the Dispute at the earliest possible date to mediation in accordance with the
Center for Public Resources Model ADR Procedures - Mediation of Business
Disputes, as modified herein, and to bear equally the costs of the mediation.
The parties will jointly appoint a mutually acceptable mediator. If they are
unable to agree upon such appointment within twenty (20) days from the
conclusion of the negotiation period, either party may request the Center for
Public Resources or another mutually agreed-upon organization to appoint the
mediator. The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of thirty (30) days or such longer
period as they may mutually agree following the initial mediation session.
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SECTION 10.3 ARBITRATION.
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SECTION 10.3.1 In the event that one party fails to participate in mediation,
the Dispute may be referred immediately to arbitration and the time of such
failure shall constitute the end of the mediation period. If the parties are not
successful in resolving the Dispute by the end of the mediation period, then the
parties agree to submit the matter to binding arbitration in Boston,
Massachusetts pursuant to the Commercial Rules of Arbitration of the American
Arbitration Association (the "AAA"), as modified herein, by a sole arbitrator
selected in accordance with the provisions of Section 10.3.2 hereof. In the
arbitration, (a) the parties may require reasonable discovery, pursuant to the
Massachusetts Rules of Civil Procedure then in effect, (b) each party shall have
the right to cross-examine witnesses of other parties, (c) testimony shall be
transcribed and (d) any award shall be accompanied by written findings of fact
and statement of reasons. Any arbitration proceeding shall be concluded in a
maximum of sixty (60) days from the commencement of such proceeding. Any
arbitration award shall be final and binding on the parties and judgment may be
entered thereon, upon the application of either party by any court of competent
jurisdiction.
SECTION 10.3.2 The parties shall have ten (10) days from the end of the
mediation period to agree upon a mutually acceptable neutral person not
affiliated with either of the parties to act as arbitrator. If no arbitrator has
been selected within such time, either party may request the AAA or another
mutually agreed-upon organization to supply within ten (10) days of such request
a list of potential arbitrators with qualifications reasonably required to
settle the dispute. Within five (5) days of each party receiving the list, the
parties shall independently rank the proposed candidates, shall simultaneously
exchange rankings, and shall be deemed to have selected as the arbitrator the
individual receiving the highest combined ranking who is available to serve. If
there is a tie, then the tie shall be broken by lot. If one party shall not
cooperate in the selection of the arbitrator, the other party may solely select
the arbitrator utilizing the procedures set forth in this Section 10.3.2.
SECTION 10.3.3 The costs of arbitration shall be apportioned between Parent and
Sub as determined by the arbitrator in such manner as the arbitrator deems
reasonable taking into account the circumstances of the case, the conduct of the
parties during the proceeding, and the result of the arbitration.
SECTION 10.4 TREATMENT OF NEGOTIATION AND MEDIATION. All negotiations and
mediations pursuant to this Section 10 shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable state rules of evidence. All negotiation, mediation and
arbitration proceedings under this Section 10 shall be treated as confidential
information in accordance with the provisions of Section 7.5 hereof. Any
mediator or arbitrator shall be bound by an agreement containing confidentiality
provisions at least as restrictive as those contained in Section 7.5 hereof.
SECTION 10.5 EQUITABLE RELIEF. Nothing contained herein shall preclude either
party from seeking equitable relief to prevent any immediate, irreparable harm
to its interests,
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including multiple breaches of this Agreement or the relevant Related Agreement
by the other party. Otherwise, these procedures are exclusive and shall be fully
exhausted prior to the initiation of any litigation. Either party may seek
specific enforcement of any arbitrator's decision under this Section 10. The
other party's only defense to such a request for specific enforcement shall be
fraud by or on the arbitrator.
SECTION 10.6 CONSOLIDATION. The arbitrator may consolidate an arbitration under
this Agreement with any arbitration arising under or relating to the Related
Agreements or any other agreement between the parties entered into pursuant
hereto, as the case may be, if the subject of the Disputes thereunder arise out
of or relate essentially to the same set of facts or transactions. Such
consolidated arbitration shall be determined by the arbitrator appointed for the
arbitration proceeding that was commenced first in time.
SECTION 11 TAX MATTERS.
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SECTION 11.1.1 TAX RETURNS. Parent shall file all consolidated Federal income
tax returns (and combined or consolidated state and local tax returns) for each
member of the Parent Affiliated Group that are required to be filed for periods
beginning before (or beginning and ending on) the Distribution Date. All returns
with respect to Other Taxes for a period beginning before (or beginning and
ending on) the Distribution Date shall be filed or caused to be filed by the
party that under Section 11.2.2 is responsible for paying the tax to which the
return relates. For all other taxable periods relating to taxes other than
Transaction Taxes (a) Parent shall be responsible for filing tax returns
relating to members of the Parent Group and (b) Sub shall be responsible for
filing tax returns relating to members of the Sub Affiliated Group. Parent shall
file or cause to be filed all tax returns relating to Transfer Taxes.
SECTION 11.1.2 INCOME TAX RETURN POSITIONS. Parent and Sub agree that, except as
otherwise required by a Final Determination, the transactions contemplated in
this Agreement, except those transactions described in Section 2.3 hereof and
transfers of stock in any foreign corporations, shall be treated by Parent and
Sub as being described in Section 355 of the Code.
SECTION 11.2 RESPONSIBILITY FOR TAXES GENERALLY.
----------------------------------
SECTION 11.2.1 PRE-DISTRIBUTION INCOME TAXES. Except as otherwise provided
herein, the Parent Group shall pay, and shall indemnify and hold harmless each
member of the Sub Affiliated Group from, all Pre-Distribution Income Tax
Liabilities, and the Parent Group shall be entitled to receive and retain all
refunds of Income Taxes for which the Parent Group would have been responsible
hereunder in the absence of the refund.
SECTION 11.2.2 OTHER TAXES. Except as otherwise provided herein, the Parent
Group shall pay, and shall indemnify and hold harmless each member of the Sub
Affiliated Group and each foreign subsidiary thereof from, all Other Taxes (and
shall be entitled to receive and retain all refunds of Other Taxes) attributable
to Parent Assets or the operation of the business of any member of the Parent
Group or any direct or indirect
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foreign subsidiary thereof immediately after the Distribution Date. Except as
otherwise provided herein, Sub shall pay, and shall indemnify and hold harmless
each member of the Parent Group and each foreign subsidiary thereof from, all
Other Taxes (and shall be entitled to receive and retain all refunds of Other
Taxes) attributable to Sub Assets or the operation of the business of any member
of the Sub Affiliated Group or any direct or indirect foreign subsidiary thereof
immediately after the Distribution.
SECTION 11.2.3 CARRYBACKS. Sub agrees that, to the extent that any carryback
period for a Carryback Item would include any taxable period beginning on or
before the Distribution Date, Sub shall elect (under Code section 172(b)(3) and
any other applicable Code provision relating to the carry back of any Carryback
Item and, to the extent feasible, any similar provision of any applicable state
or local Income Tax law) to relinquish such carryback period as to any Carryback
Item which can thereby be used to create or carry forward a tax benefit. In no
event shall Parent have any obligation to pay to Sub any amount in respect of a
Carryback Item.
SECTION 11.2.4 TRANSACTION TAXES. The Parent Group shall pay, and shall
indemnify and hold harmless each member of the Sub Affiliated Group and each
direct or indirect foreign subsidiary thereof from, all liabilities for
Transaction Taxes, and the Parent Group shall be entitled to receive and retain
all refunds of Transaction Taxes for which the Parent Group would have been
responsible hereunder in the absence of the refund.
SECTION 11.3 RESPONSIBILITY FOR AN EVENT OF LOSS.
-----------------------------------
SECTION 11.3.1 SUB RESPONSIBILITY. Sub and any successor shall be responsible
for, and shall indemnify and hold harmless Parent and each member of the Parent
Group from, Income Taxes, Other Taxes and all reasonable out-of-pocket costs and
expenses directly caused by an Event of Loss which is attributable to one or
more of the following described events or transactions occurring after the
Distribution Date and within two years after the Distribution Date with respect
to Sub or any successor: a reorganization, consolidation, merger or acquisition
by any person of a fifty percent (50%) or greater interest in Sub as determined
under Section 355(d)(4) of the Code, applying the aggregation and attribution
rules under subparagraphs (d)(7) and (8) of that Section, which is in any way
solicited or approved by the Board of Directors of Sub (other than in connection
with a hostile takeover); the sale or disposition of Sub Assets other than those
assets relating to Sub's networking business and other than in the ordinary
course of business; Sub's ceasing to conduct its data acquisition and imaging
business as an active trade or business within the purview of Section 355 of the
Code; the issuance, redemption or repurchase of shares of Sub Common Stock by
Sub or any successor or any subsidiary of the foregoing; the purchase of Parent
Common Stock by Sub or any successor or any subsidiary of the foregoing; the
recapitalization or other reclassification of the shares of Sub or any
successor; or the complete or partial liquidation of Sub or any successor.
SECTION 11.3.2 PARENT RESPONSIBILITY. Parent and any successor shall be
responsible for, and shall indemnify and hold harmless Sub and each member of
the Sub Affiliated Group from, Income Taxes, Other Taxes and all reasonable
out-of-pocket costs and
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expenses directly caused by an Event of Loss which is attributable to one or
more of the following described events or transactions occurring within two
years of the Distribution Date with respect to Parent or any successor: a
reorganization, consolidation, merger or acquisition by any person of a fifty
percent (50%) or greater interest in Parent as determined under Section
355(d)(4) of the Code, applying the aggregation and attribution rules under
subparagraphs (d)(7) and (8) of that Section, which is in any way solicited or
approved by the Board of Directors of Parent (other than in connection with a
hostile takeover); the sale or disposition of assets of any member of Parent,
other than in the ordinary course of business; Parent's ceasing to conduct its
digital media business as an active trade or business within the purview of
Section 355 of the Code; the issuance, redemption or repurchase of shares of
Parent Common Stock by Parent or any successor or any subsidiary of the
foregoing; the purchase of Sub Common Stock by Parent or any successor or any
subsidiary of the foregoing; the recapitalization or other reclassification of
the shares of Parent or any successor; or the complete or partial liquidation
of Parent or any successor.
SECTION 11.3.3 SHARED RESPONSIBILITY. If an Event of Loss shall occur and
responsibility for the Event of Loss under Section 11.3.1 and Section 11.3.2
rests either with both parties or neither party, each party shall share the
Income Taxes, Other Taxes and reasonable out-of-pocket costs and expenses
directly caused by such Event of Loss in the ratio of seventy-five percent (75%)
for Parent and twenty-five percent (25%) for Sub, and each party shall indemnify
and hold harmless the other party for its share of that liability.
SECTION 11.4 PAYMENTS. If Parent is required to make a payment to Sub under this
Section 11, such payment shall be made to Sub or any successor, and any payment
due under this Section 11 from Sub to Parent shall be made by Sub to Parent or
any successor. The payment shall be made by the earlier of (a) twenty (20) days
after Parent (or a member of Sub, as applicable) makes a tax payment (including
without limitation any payment made in connection with either an estimated or
annual tax liability) or (b) twenty (20) days after a Final Determination with
respect to such tax. The amount of any payment required to be made by any party
to another under this Section 11 shall be an amount which, after subtraction of
any additional federal, state or local taxes payable by the recipient in respect
of the receipt of such payment (the "Gross-Up Amount"), is equal to the amount
payable hereunder; provided, however, if a payment is made pursuant to Section
11.3.3 hereof and if a Gross-Up Amount is includable in the payment, the
Gross-Up Amount so includable in the payment shall be reduced by seventy-five
percent (75%) in the case of payments from Sub to Parent or twenty-five percent
(25%) in the case of payments from Parent to Sub. Parent and Sub agree that,
without limiting the ultimate payment obligation of the payor set forth in the
preceding sentence, any payment shall be reported for U.S. Federal income tax
purposes as non-deductible and non-taxable unless, by reason of changes in the
law or new interpretations of the law by the Internal Revenue Service, there is
not substantial authority (within the meaning Code section 6662(d)(2)(B)(i)) for
such position or such position is otherwise not permissible under applicable
law.
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SECTION 11.5 COOPERATION AND EXCHANGE OF INFORMATION.
---------------------------------------
SECTION 11.5.1 MATTERS GIVING RISE TO INDEMNITY.
--------------------------------
SECTION 11.5.1.1 NOTICE. If during the course of an audit any tax authority
indicates an intention to propose an Adjustment to the tax liability of either
the Sub Affiliated Group or the Parent Group (the "Tax Indemnitee") which would
result, if such Adjustment were to be confirmed by a Final Determination, in a
loss against which the other party (the "Tax Indemnitor") may be required to
indemnify the Tax Indemnitee pursuant to this Section 11, the Tax Indemnitee
shall promptly notify the Tax Indemnitor thereof in writing. Such notice to the
Tax Indemnitor shall include sufficient information with respect to the issues
as to which indemnity may be sought to enable Tax Indemnitor to determine
whether to request the Tax Indemnitee to contest the Adjustment.
SECTION 11.5.1.2 CONTEST RIGHTS AND CONDITIONS. If the Tax Indemnitor shall
request that the Tax Indemnitee contest the Adjustment in writing within twenty
(20) days of the receipt of the notification referred to in Section 11.5.1.1
hereof, the Tax Indemnitee will contest the Adjustment; provided that in no
event shall the Tax Indemnitee be required to contest any Adjustment unless
coincident with the Tax Indemnitor's request (a) the Tax Indemnitee shall have
received (i) a written acknowledgment from the Tax Indemnitor of its obligation
to indemnify the Tax Indemnitee hereunder in the event it does not prevail in
such contest and (ii) an opinion of independent tax counsel to the Tax
Indemnitor (which counsel shall be reasonably acceptable to the Tax Indemnitee)
to the effect that a reasonable basis exists for contesting the Adjustment; and
(b) if such contest is to be conducted in a manner requiring payment of a
proposed tax deficiency, the Tax Indemnitor shall have advanced to the Tax
Indemnitee, on an interest-free basis, an amount sufficient to make payment of
the amount attributable to the issues being contested, together with any
required interest or penalties. If any funds are advanced by the Tax Indemnitor
in connection with any tax contest, any refund received to the extent fairly
attributable to such advance shall be returned to the Tax Indemnitor, together
with any interest thereon paid by the relevant taxing authority, promptly upon
Parent's receipt of such funds. If the Tax Indemnitor shall have requested the
Tax Indemnitee to contest an Adjustment and complied with each of the terms and
conditions set forth above, such contest shall be conducted, at the direction of
the Indemnitor, by independent tax counsel selected by the Tax Indemnitor and
reasonably acceptable to the Tax Indemnitee. If the Tax Indemnitor or counsel
selected by the Tax Indemnitor shall advocate, propose to advocate or fail to
protest before any taxing authority a position which would result in a tax
detriment to the Tax Indemnitee not subject to indemnification in order to
reduce the Tax Indemnitor's obligation hereunder, the Tax Indemnitee may replace
such counsel with counsel of its own selection and any tax detriment suffered by
the Tax Indemnitee attributable to such position shall be included among Income
Taxes, Other Taxes and related expenses for which the Tax Indemnitee is entitled
to indemnification hereunder.
SECTION 11.5.1.3 SETTLEMENT; RELEASE OF INDEMNIFICATION. If the Tax Indemnitor
shall have requested the Tax Indemnitee to contest an Adjustment and complied
with each of the terms and conditions set forth above, the Tax Indemnitee shall
not settle or
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compromise any Adjustment for which indemnity is sought hereunder
without the consent of the Tax Indemnitor unless it simultaneously releases the
Tax Indemnitor from its obligations to indemnify and reimburse the Tax
Indemnitee with respect to the issues so settled or compromised. If the Tax
Indemnitor shall fail to request the Tax Indemnitee to contest any Adjustment or
shall fail to comply with the terms and conditions entitling it to make such
request as set forth in Section 11.5.1.2 hereof, the Tax Indemnitee may in its
sole discretion elect to contest (or not contest) such Adjustment with counsel
selected by it and may at any time settle or compromise the matter without the
consent of the Tax Indemnitor and without releasing its rights to indemnity from
the Tax Indemnitor.
SECTION 11.5.1.4 JOINT RESPONSIBILITY. If for the reasons described in Section
11.3.3 hereof an Event of Loss shall occur or is proposed by the IRS (or other
taxing authority) to have occurred, the notice provisions in Section 11.5.1.1
hereof shall apply, and notwithstanding Sections 11.5.1.2 and 11.5.1.3 hereof,
Parent shall have control over decisions regarding any contest, dispute,
litigation or settlement relating to the Event of Loss (the "Proceeding") and
the incurrence of related reasonable expenses, including without limitation the
choice of tax counsel to represent it before any tax authority in matters
relating to the Event of Loss; provided, however, that Parent shall keep Sub
informed of the Proceeding and shall consult with Sub regarding the material
issues relating to the Event of Loss raised in the Proceeding; and provided,
further, that (a) the choice of forum for such Proceeding, and any decision to
appeal and (b) any settlement relating to the Event of Loss by Parent with any
tax authority shall each be subject to the approval of Sub, which approval shall
not be unreasonably withheld.
SECTION 11.5.2 TAX RETURN INFORMATION. Without limiting Section 11.5.1 hereof,
Parent and Sub agree to cooperate fully with each other in connection with the
preparation of any tax return or claim for refund or in defending any audit or
other proceeding in respect of taxes for all open taxable periods. Such
cooperation shall include making personnel and records available promptly and
within thirty (30) days (or such other period as may be reasonable under the
circumstances) after a request for such personnel or records is made by the
tax-imposing authority or the other party. If Parent or Sub, as the case may be,
fails to provide any information requested pursuant to this Section 11.5.2, then
the requesting party shall have the right to engage a public accountant of its
choice to gather such information. Parent and Sub agree to permit any such
public accountant full access to all appropriate records or other information in
the possession of any member of the Parent Affiliated Group or the Sub
Affiliated Group, as the case may be, during reasonable business hours, and to
reimburse or pay directly all costs and expenses in connection with the
engagement of such public accountant. Parent agrees to indemnify and hold
harmless each member of the Sub Affiliated Group and its officers and employees,
and Sub agrees to indemnify and hold harmless each member of the Parent
Affiliated Group and its officers and employees against any cost, fine, penalty
or other expense of any kind attributable to the negligence or misconduct of a
member of the Parent Affiliated Group or the Sub Affiliated Group, as the case
may be, in supplying a member of the other group with inaccurate or incomplete
information; provided, that, nothing set forth in this Section 11.5.2 shall
require either party to permit the other to
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participate in any audit even though issues are raised for which an indemnity
may be sought if such issues result in an Adjustment at the conclusion of such
audit.
SECTION 11.5.3 RECORD RETENTION. Parent and Sub agree to retain all records
which may contain information or provide evidence relevant to the determination
of the Income Tax liability of the Parent Affiliated Group or the Sub Affiliated
Group or the stockholders of either for any taxable period until such time as a
Final Determination occurs with respect to such taxable period; provided,
however, that such records need not be retained longer than fifteen (15) years
after the end of the latest taxable period to which they relate so long as such
records do not relate to an ongoing contest.
SECTION 12 MISCELLANEOUS.
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SECTION 12.1 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
SECTION 12.2 EXPENSES. Except as otherwise provided in this Agreement, any
Related Agreement or any other agreement being entered into by Parent and Sub
pursuant to this Agreement, Parent shall pay all investment banking, legal,
accounting, printing, governmental filing, listing, distribution agent and
similar fees, costs and expenses incurred in connection with the Distribution
(whether or not payable as of the Distribution Date) and with the consummation
of the transactions contemplated by this Agreement.
SECTION 12.3 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the party to whom
notice is given, (b) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, provided that telephonic
confirmation of receipt is obtained promptly after completion of the
transmission, (c) on the business day after delivery to a nationally recognized
overnight courier service or the Express Mail service maintained by the United
States Postal Service, provided receipt of delivery has been confirmed, or (d)
on the fifth day after mailing, provided receipt of delivery is confirmed, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed and return receipt
requested, to the party as follows:
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If to Parent, at:
Media 100 Inc.
100 Locke Drive
Marlboro, MA 01752-1192
Attn.: General Counsel
Fax: (508) 481-5670
If to Sub, at:
Data Translation, Inc.
100 Locke Drive
Marlboro, MA 01752-1192
Attn.: President
Fax: (508) 481-8620
Either party may change its address for receiving notices by written notice
given to the other party in the manner provided above.
SECTION 12.4 TERMINATION. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Distribution Date by and in the sole
discretion of Parent without the approval of Sub. In the event of such
termination, no party shall have any liability of any kind to any other party.
SECTION 12.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by either party without the prior written consent of the other party, and any
attempt to assign any rights or obligations hereunder without such consent shall
be void.
SECTION 12.6 ENTIRE AGREEMENT; PARTIES IN INTEREST. This Agreement (including
the schedules, annexes and exhibits hereto) comprises the entire agreement
between the parties hereto as to the subject matter hereof and supersedes all
prior agreements and understandings between them relating thereto and, except as
provided in Section 5.2 hereof, is not intended to confer upon any person other
than the parties hereto (including their successors and permitted assigns) any
rights or remedies hereunder.
SECTION 12.7 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
SECTION 12.8 CAPTIONS. Captions and headings are supplied herein for convenience
only and shall not be deemed a part of this Agreement for any purpose.
38
<PAGE> 39
SECTION 12.9 ANNEXES, ETC. The Annexes, Schedules and Exhibits shall be
construed with and as part of this Agreement to the same extent as if the same
had been set forth verbatim herein.
SECTION 12.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
SECTION 12.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
DATA TRANSLATION, INC.
By: /s/ John A. Molinari
--------------------
Name: John A. Molinari
Title: Vice President
DATA TRANSLATION II, INC.
By: /s/ Alfred A. Molinari, Jr.
--------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
39
<PAGE> 40
ANNEX I
-------
CONTRIBUTED ASSETS
------------------
Contributed Assets: all tangible and intangible assets owned by Parent relating
principally to the Contributed Businesses as of the Distribution Date, including
but not limited to:
(a) all assets and properties which should be set forth or reflected on a
balance sheet for Sub as of the Distribution Date prepared in the same
manner as the August 31, 1996 balance sheet of Sub included in the
Information Statement (after giving effect to the pro forma adjustments
reflected or described in the Information Statement);
(b) all of Parent's right and interest in, to, under and relating to all
agreements, contracts and leases, whether written or oral, of Parent
relating to the Contributed Businesses, including without limitation the
Lease dated as of December 1, 1979 between Alfred A. Molinari, Jr. and
Maureen K. Molinari, Trustees of Nason Hill Trust under a Declaration of
Trust dated November 15, 1979 and recorded with the Middlesex County
Registry of Deeds (Southern District) in Book 13839, Page 406, on November
16, 1979, as Landlord, and Parent, as Tenant, as amended (the "Locke Drive
Lease");
(c) all of Parent's right and interest in, to and under all outstanding Bids,
Quotations and Proposals pertaining to the Contributed Businesses to the
extent that such Bids, Quotations and Proposals can be transferred or
assigned; all of Parent's right and interest in, to and under all contracts
and agreements awarded to Parent before or after the Distribution Date
pertaining to the Contributed Businesses, as assignee if those contracts
are assignable and assigned or transferred by operation of law; or as a
right to payment by Parent to Sub of a subcontract price equal to the
monies, rights and other considerations received by Parent under contracts
and agreements awarded to Parent before or after the Distribution Date
pertaining to the Contributed Businesses if assignment of those contracts
and/or agreements and/or the proceeds therefrom is prohibited by law or not
otherwise obtained;
(d) all machinery, equipment and other items of tangible personal property
owned by Parent other than those items which are utilized principally by
the Retained Business and are listed in Exhibit A to this Annex I, as such
exhibit shall be amended and updated as of the Distribution Date;
(e) all of Parent's rights with respect to receivables relating to the
Contributed Businesses;
(f) all rights and interests of Parent in and with respect to the patents,
trademarks, copyrights, trade secrets, know-how and other intellectual
property concerning the Contributed Businesses to the extent, but only to
the extent, such rights are being
40
<PAGE> 41
licensed and assigned to Sub pursuant to, and in accordance with, the
Intellectual Property Agreement;
(g) all of the Books and Records;
(h) all inventories of raw materials, work-in-process, finished products,
supplies and spare parts which at the Distribution Date are owned by Parent
and relate principally to the Contributed Businesses and any property under
bailment relating to the Contributed Businesses;
(i) all permits and licenses held by Parent which are transferable and which
relate principally to the Contributed Businesses or the use or occupancy of
the Locke Drive premises (other than those permits or licenses which relate
principally to Parent's conduct of the Retained Business at such premises);
(j) all intangible assets, other than intellectual property rights, of Parent
used in the Contributed Businesses, including customer lists, marketing and
other data;
(k) employee receivables, temporary and permanent travel advances and funds
advanced for travel not yet taken relating to Transferred Employees;
(l) all supplies, purchase orders, forms, labels, shipping material,
catalogues, sales brochures, operating manuals, instructional documents and
advertising material held for use by the Contributed Businesses;
(m) all shares of Data Translation Networking Limited, Data Translation Ltd.
and Data Translation GmbH owned by Parent immediately prior to the
Distribution; and
(n) all trucks, automobiles and other vehicles owned by Parent which are used
in the Contributed Businesses.
ANYTHING CONTAINED IN THIS ANNEX I TO THE CONTRARY NOTWITHSTANDING, TRANSFERRED
ASSETS SHALL NOT INCLUDE:
(i) cash and cash equivalents, including cash on hand or in bank accounts,
certificates of deposit, commercial paper and other similar securities or
other marketable securities other than the Cash Amount;
(ii) any books and records relating to the Contributed Businesses which Parent
is required by law to retain in its possession; and
(iii) any right, title or interest of Parent in any Federal, state or local tax
refund (including any income in respect thereto) relating to the
operations of the Contributed Businesses prior to the Distribution Date.
41
<PAGE> 42
ANNEX II
--------
ASSUMED LIABILITIES
-------------------
Assumed Liabilities: all Liabilities and obligations relating to or arising from
the operation of the Contributed Businesses (other than Retained Liabilities),
whether before or after the Distribution Date, including but not limited to:
(a) all Liabilities and obligations which should be set forth, reflected,
disclosed or reserved for on a balance sheet (including the footnotes
thereto) for Sub as of the Distribution Date prepared in the same manner as
the August 31, 1996 balance sheet of Sub included in the Information
Statement (after giving effect to any pro forma adjustments reflected or
described in the Information Statement);
(b) all Liabilities and obligations of Parent pursuant to, under or relating to
all agreements, contracts and leases, whether written or oral, of Parent
relating to the Contributed Businesses, including without limitation all
Liabilities and obligations as Tenant under the Locke Drive Lease;
(c) all outstanding Bids, Quotations and Proposals pertaining to the
Contributed Businesses to the extent such Bids, Quotations and Proposals
can be transferred or assigned; and all contracts awarded to Parent before
or after the Distribution Date pertaining to the Contributed Businesses, as
(i) an assignee if those contracts are assignable and assigned or
transferred by operation of law, or (ii) subcontractor if assignment of
those contracts and/or proceeds therefrom is prohibited by law or not
otherwise obtained;
(d) all warranty, performance and similar obligations entered into or made in
the course of business of the Contributed Businesses with respect to their
products;
(e) all Liabilities and obligations to or with respect to Transferred Employees
not specifically retained by Parent pursuant to the Agreement, including
without limitation withholding, payroll and employment taxes pursuant to
Section 8 of the Agreement;
(f) the Liabilities and obligations being assumed by or agreed to be performed
by Sub pursuant to any other agreement being entered into in connection
with the Agreement, including without limitation the Related Agreements;
(g) all Liabilities and obligations relating to all Actions relating
principally to or arising principally out of the operations of the
Contributed Businesses; and
(h) all Liabilities and obligations under corporate credit cards which had been
issued by Parent to Transferred Employees.
42
<PAGE> 43
ANNEX III
---------
RETAINED LIABILITIES
--------------------
Retained Liabilities: all Liabilities and obligations of Parent and its
subsidiaries (other than Sub and its subsidiaries), except those set forth in
Annex II, including without limitation:
(a) all Liabilities and obligations to or with respect to Transferred Employees
provided in Section 8 of the Agreement as being Liabilities and obligations
of Parent;
(b) all Liabilities and obligations being assumed by or agreed to be performed
by Parent pursuant to any other agreement being entered into in connection
with this Agreement, including without limitation the Related Agreements;
(c) all Liabilities and obligations arising out of checks which have been
mailed, but not presented for payment, prior to the Distribution Date; and
(d) all Liabilities and obligations relating to all Actions other than those
referred to in Annex II, including without limitation the litigation
entitled AVID TECHNOLOGY, INC. V. DATA TRANSLATION, INC., Civil Action
No. 95-11193 JLT, pending in the United States District Court for the
District of Massachusetts.
43
<PAGE> 44
SCHEDULE 5.2.1
--------------
The information contained under the following captions of the Information
Statement and Form 10 is subject to the indemnification provisions of Section
5.2.1 of the Agreement:
INFORMATION STATEMENT COVER PAGE
SUMMARY - Distributing Corporation; Principal Business to be Retained by DTI;
Primary Purpose of the Distribution; Shares to be Distributed; Distribution
Ratio; Fractional Share Interests; Record Date; Distribution Date; Mailing Date;
Distribution Agent; Tax Consequences; Relationship with DTI after the
Distribution*
SUMMARY HISTORICAL FINANCIAL DATA*
INTRODUCTION
THE DISTRIBUTION - Background and Reasons for the Distribution; Manner of
Effecting the Distribution; No Fractional Shares; Federal Income Tax Aspects of
the Distribution; Listing and Trading of Common Stock
SPECIAL FACTORS - Certain Tax Considerations; Relationship Between the Company
and DTI; Conflicts of Interest*; Listing and Trading of DTI Stock; Accounting
Treatment
RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE DISTRIBUTION - All
subheadings*
PRO FORMA CAPITALIZATION OF THE COMPANY*
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY*
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY*
BUSINESS OF THE COMPANY - Data Acquisition and Imaging (including subheadings
thereunder)*, Manufacturing*, Proprietary Rights*, Properties*, Legal
Proceedings*
TREATMENT OF EMPLOYEE OPTIONS IN THE DISTRIBUTION*
* Liability to be shared with Sub on a 50/50 basis.
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<PAGE> 45
SCHEDULE 5.2.2
--------------
All information contained in the Information Statement and Form 10 other
than the information contained under the captions set forth in SCHEDULE 5.2.1 is
subject to the indemnification provisions of Section 5.2.2 of the Agreement,
except that liability is to be shared with Parent on a 50/50 basis where
indicated in SCHEDULE 5.2.1.
45
<PAGE> 1
EXHIBIT 10.8.2
INTELLECTUAL PROPERTY AGREEMENT
-------------------------------
This Agreement is dated as of December 2, 1996, between Media 100 Inc. (f/k/a
Data Translation, Inc.), a Delaware corporation ("Parent"), and Data
Translation, Inc. (f/k/a Data Translation II, Inc.), a Delaware corporation
("Sub").
WHEREAS, Parent and Sub have entered into a Distribution Agreement dated as of
November 19, 1996 (the "Distribution Agreement"), pursuant to which Parent is
assigning and transferring to Sub certain businesses and assets associated with
Parent's data acquisition and imaging, commercial products and networking
distribution businesses (the "Contributed Businesses") in exchange for the
assumption by Sub of certain liabilities and obligations associated with such
businesses and the issuance by Sub to Parent of shares of Sub common stock on
such terms and conditions as are contained therein; and
WHEREAS, on November 15, 1996 the Board of Directors of Parent declared a
dividend of all outstanding shares of Sub to the holders of record of the
outstanding common stock of Parent, such dividend to be made on December 2, 1996
(the "Distribution Date"); and
WHEREAS, in connection with the transactions contemplated by the Distribution
Agreement, Parent and Sub desire that certain of Parent's intellectual property
rights relating to the Contributed Businesses be assigned and transferred to
Sub, and that Parent and Sub each grant licenses to the other covering the use
of their respective intellectual property rights, all as more particularly set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1 ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS.
-------------------------------------------
SECTION 1.1 PATENTS AND PATENT APPLICATIONS. Subject to the terms and
conditions of this Agreement, Parent does hereby assign and transfer to Sub its
entire right, title and interest in and to the patents and patent applications
listed on SCHEDULE A hereto, including without limitation, income, royalties,
damages, claims and payments now and hereafter due and/or payable in respect
thereto and rights to sue and collect damages for past, present and future
infringements thereof. Parent shall promptly execute assignments contemplated by
the foregoing sentence and requested by Sub, and shall provide the same to Sub
for filing by Sub, as Sub deems appropriate.
SECTION 1.2 TRADEMARKS. Subject to the terms and conditions of this
Agreement, Parent does hereby assign and transfer to Sub its entire right, title
and interest in and to the trademarks (and corresponding registrations and
applications for registration) listed on SCHEDULE B hereto, including without
limitation, income, royalties, damages, claims and payments now or hereafter due
and/or payable with respect thereto and rights to sue and collect damages for
past, present and future infringements thereof, together with the
<PAGE> 2
goodwill of the businesses symbolized by such trademarks, and that portion of
the ongoing and existing business to which the marks pertain, as required by 15
U.S.C. 1060. Parent shall promptly execute assignments contemplated by the
foregoing sentence and requested by Sub, and shall provide the same to Sub for
filing by Sub, as Sub deems appropriate.
SECTION 1.3 OTHER ASSIGNMENTS. Subject to the terms and conditions of this
Agreement, Parent does hereby assign and transfer to Sub its entire right, title
and interest in and to all trade secrets, know-how, proprietary information and
other similar intellectual property relating primarily to the Contributed
Businesses, including without limitation, income, royalties, damages, claims and
payments now and hereafter due and/or payable in respect thereto and rights to
sue and collect damages for past, present and future infringements thereof.
Parent shall be under no obligation to provide Sub with any documentation with
respect to any of the intellectual property referred to in this Section 1.3 not
already in existence as of the Distribution Date. The intellectual property
being assigned and transferred pursuant to Sections 1.1, 1.2 and 1.3 of this
Agreement is hereinafter referred to collectively as the "Assigned Intellectual
Property."
SECTION 1.4 DISCLAIMER OF WARRANTIES. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO BE A REPRESENTATION OR WARRANTY BY PARENT OF THE SCOPE, VALIDITY,
ENFORCEABILITY, VALUE OR FREEDOM FROM INFRINGEMENT OF THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS OF ANY OF THE ASSIGNED INTELLECTUAL PROPERTY. PARENT SHALL HAVE
NO LIABILITY WHATSOEVER TO SUB OR ANY OTHER PERSON ON ACCOUNT OF ANY INJURY,
LOSS OR DAMAGE, OF ANY KIND OR NATURE, SUSTAINED BY, OR ANY DAMAGE ASSESSED OR
ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR IMPOSED UPON SUB OR ANY
OTHER PERSON, ARISING OUT OF OR IN CONNECTION WITH OR RESULTING FROM (a) THE
PRODUCTION, USE OR SALE OF ANY APPARATUS OR PRODUCT THROUGH THE USE OR PRACTICE
OF ANY OF THE ASSIGNED INTELLECTUAL PROPERTY, (b) THE OTHER USE OF ANY OF THE
ASSIGNED INTELLECTUAL PROPERTY OR (c) ANY ADVERTISING OR OTHER PROMOTIONAL
ACTIVITIES WITH RESPECT TO ANY OF THE FOREGOING.
SECTION 1.5 INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. In no
event shall Parent be required to assume the defense of or pay any costs of
settlement of any alleged unauthorized use or infringement of any third party
patent, trademark or other intellectual property rights arising out of or in
connection with or resulting from any use of the Assigned Intellectual Property
by the Contributed Businesses or by Sub, either before or after the Distribution
Date, and Sub shall hold Parent harmless from any damages, costs or liabilities
incurred by any of them arising from or in connection with any such alleged
unauthorized use or infringement; provided, however, that Parent shall
reasonably cooperate with Sub in the defense of any such alleged unauthorized
use or infringement and Sub shall reimburse Parent for all reasonable attorneys'
fees and other out-of-pocket expenses incurred by Parent in connection
therewith.
2
<PAGE> 3
SECTION 1.6 PAYMENT OF COSTS OF ASSIGNMENT. From and after the Distribution
Date, Sub assumes all responsibility for paying any costs, including but not
limited to legal fees and government fees, associated with the Assigned
Intellectual Property, excluding any costs associated with the filing of
assignments with the appropriate patent or trademark offices for any of the
Assigned Intellectual Property.
SECTION 2 CROSS-LICENSES.
---------------
SECTION 2.1 GRANT OF LICENSE BY PARENT. Subject to the terms and conditions
of this Agreement, Parent, as licensor, does hereby grant to Sub, as licensee, a
non-exclusive, perpetual, fully paid-up, royalty-free, world-wide license to
make, have made, import, export, use, sell or otherwise dispose of products or
services using or embodying (a) the patents, patent applications, trade secrets,
know-how, proprietary information and other similar intellectual property owned
by Parent as of the Distribution Date other than the Assigned Intellectual
Property, including, with respect to the patents and patent applications
included therein, any re-issues, continuations, continuations-in-part,
divisionals and patents of addition thereof and corresponding foreign patents,
and excluding any trademarks otherwise included therein, and (b) any patents
issuing from patent applications filed by Parent within two years of the
Distribution Date, and any re-issues, continuations, continuations-in-part,
divisionals and patents of addition thereof and corresponding foreign patents
(collectively, the "Parent Licensed Intellectual Property"). Parent shall be
under no obligation to provide Sub with any documentation with respect to the
any of the Parent Licensed Intellectual Property.
SECTION 2.2 GRANT OF LICENSE BY SUB. Subject to the terms and conditions of
this Agreement, Sub, as licensor, does hereby grant to Parent, as licensee, a
non-exclusive, perpetual, fully paid-up, royalty-free, world-wide license to
make, have made, import, export, use, sell or otherwise dispose of products or
services using or embodying (a) the Assigned Intellectual Property, including,
with respect to the patents and patent applications included therein, any
re-issues, continuations, continuations-in-part, divisionals and patents of
addition thereof and corresponding foreign patents, and excluding the trademarks
otherwise included therein, and (b) any patents issuing from patent applications
filed by Sub within two years of the Distribution Date, and any re-issues,
continuations, continuations-in-part, divisionals and patents of addition
thereof and corresponding foreign patents (collectively, the "Sub Licensed
Intellectual Property"). Sub shall be under no obligation to provide Parent with
any documentation with respect to the any of the Sub Licensed Intellectual
Property. References herein to the "Licensed Intellectual Property" shall refer
to the Parent Licensed Intellectual Property in the context where Parent is the
licensor and Sub is the licensee, and to the Sub Intellectual Property in the
context where Sub is the licensor and Parent is the licensee.
SECTION 2.3 DISCLAIMER OF WARRANTIES. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO BE A REPRESENTATION OR WARRANTY BY EITHER PARENT OR SUB, AS LICENSOR,
OF THE SCOPE, VALIDITY, ENFORCEABILITY, VALUE OR FREEDOM FROM INFRINGEMENT OF
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS OF ANY OF THE LICENSED INTELLECTUAL
PROPERTY.
3
<PAGE> 4
NEITHER PARENT OR SUB, AS LICENSOR, SHALL HAVE ANY LIABILITY WHATSOEVER TO THE
OTHER PARTY HERETO, AS LICENSEE, OR TO ANY OTHER PERSON ON ACCOUNT OF ANY
INJURY, LOSS OR DAMAGE, OF ANY KIND OR NATURE, SUSTAINED BY, OR ANY DAMAGE
ASSESSED OR ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR IMPOSED UPON
SUB OR PARENT, AS LICENSEE, OR ANY OTHER PERSON, ARISING OUT OF OR IN CONNECTION
WITH OR RESULTING FROM (a) THE PRODUCTION, USE OR SALE OF ANY APPARATUS OR
PRODUCT THROUGH THE USE OR PRACTICE OF ANY OF THE LICENSED INTELLECTUAL
PROPERTY, (b) THE OTHER USE OF ANY OF THE LICENSED INTELLECTUAL PROPERTY OR (c)
ANY ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT TO ANY OF THE
FOREGOING.
SECTION 2.4 INFRINGEMENT OF LICENSED INTELLECTUAL PROPERTY. In the event that
the licensee or licensor hereunder of Licensed Intellectual Property learns that
any entity is or may be infringing in any way on any of the Licensed
Intellectual Property licensed to the licensee hereunder, or is engaged in
conduct which is liable to cause deception or confusion to the public, or is
diluting or infringing any right of the licensee or the licensor, the licensee
or licensor, as the case may be, shall notify the other party. The licensor
shall have the sole initial right to determine whether or not any action shall
be taken against such unauthorized use or infringement. The licensor shall
promptly notify the licensee of its determination and shall briefly describe the
action, if any, which it shall take. In the event that the licensor initiates
litigation against any entity, the licensor shall choose the attorneys, control
the litigation, pay the litigation expenses, and retain any settlement amount or
damages recovered as a result of any judgment in favor of the licensor. In the
event that the licensor takes no action to stop such alleged unauthorized use or
infringement within sixty (60) days following notice by the licensee or the
licensor, as the case may be (or such earlier date as the licensee reasonably
determines is necessary to avoid prejudicing the licensor's or the licensee's
ability to bring an action with respect to such alleged unauthorized use or
infringement), of such unauthorized use or infringement, then the licensee may
by written notice to the licensor request that the licensor bring an action with
respect to such alleged unauthorized use or infringement at the expense of the
licensee, in which event the licensor shall promptly commence such action, but
only if the licensee certifies to the licensor that in the licensee's good faith
judgment failure to take action against the unauthorized use or infringement in
question is likely to have a material adverse effect on the business of the
licensee. Any settlement amount or damages awarded in any such suit referenced
in the preceding sentence shall, after payment of expenses incurred by the
parties, be paid to the licensee. In any action taken pursuant to this Section
2.4, the licensee shall reasonably cooperate with the licensor in all respects,
to have the appropriate employees of the licensee assist in the preparation of
the suit and testify if requested by the licensor, and to make available any
records, papers, information, specimens and the like. Except as expressly
provided herein, all expenses incurred in connection with actions taken pursuant
to this Section 2.4 shall be borne independently by each of the parties, with
each party being liable solely for the fees and expenses it incurs in connection
with such action.
4
<PAGE> 5
SECTION 2.5 INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. In no
event shall the licensor hereunder be required to assume the defense of or pay
any costs of settlement of any alleged unauthorized use or infringement of any
third party patent or other intellectual property rights arising out of or in
connection with or resulting from any use of the Licensed Intellectual Property
by the licensee hereunder, and the licensee shall hold the licensor harmless
from any damages, costs or liabilities incurred by the licensor arising from or
in connection with any such alleged unauthorized use or infringement; provided,
however, that the licensor shall reasonably cooperate with the licensee in the
defense of any such alleged unauthorized use or infringement and the licensee
shall reimburse the licensor for all reasonable attorneys' fees and other
out-of-pocket expenses incurred by the licensor in connection therewith.
Notwithstanding the foregoing, nothing contained in this Agreement shall be
deemed to limit Parent's indemnification obligations, as set forth in the
Distribution Agreement, with respect to the litigation entitled AVID TECHNOLOGY,
INC. V. DATA TRANSLATION, INC., Civil Action No. 95-11193 JLT, pending in the
United States District Court for the District of Massachusetts.
SECTION 2.6 PROSECUTION OF LICENSED PATENT APPLICATIONS AND MAINTENANCE OF
ISSUED PATENTS. It is understood and agreed between the parties hereto that
nothing contained in this Agreement creates any obligation on Parent or Sub, in
each case as licensor hereunder, to further prosecute before the U.S. Patent and
Trademark Office or before any foreign patent office any patent application
included in the Licensed Intellectual Property, or to file a corresponding
patent application in any foreign country based on any such U.S. patent
application, or to pay any maintenance fee which is due or which may become due
in respect of any patent or patent application included in the Licensed
Intellectual Property. In the event that the licensor decides to cease
prosecution of any patent application or to cease paying maintenance fees on any
issued patent, the licensor shall notify the licensee hereunder in writing at
least sixty (60) days prior to taking any such action, and, in the event that
the licensee desires that the licensor continue the prosecution of any such
patent application or that the licensor pay such maintenance fee and the
licensee reimburses the licensor for all costs thereafter incurred, the licensor
shall continue the prosecution of such patent application or pay the maintenance
fee for such issued patent. In the event that the licensor later earns any
royalty income from any such patent for which the licensee incurred any such
costs, the licensor shall pay to the licensee an amount equal to the lesser of
(a) the amount of such royalty income and (b) the amount of such costs incurred
by the licensee with respect to such patent.
SECTION 2.7 TRANSFERABILITY. The license granted to Sub or Parent pursuant to
Section 2.1 or 2.2 hereof, respectively, shall not be sublicensed, sold or
otherwise transferable by the licensee in whole or in part other than in
connection with (a) the distribution and sale by the licensee of its products
and services in the ordinary course of business or (b) a sale or transfer, on a
going concern basis, by the licensee of its entire business, through merger or
sale of stock or substantially all of the assets related thereto; provided that
any sale or transfer permitted by clause (b) above shall be subject to the
provisions of Section 2.8 hereof; and provided, further, that no such transfer
shall be effective unless the transferee
5
<PAGE> 6
shall have agreed in writing to be bound by the terms and provisions of this
Agreement applicable to the transferor.
SECTION 2.8 TERMINATION. The license granted to Sub or Parent, as licensee,
under Section 2.1 or 2.2 hereof, respectively, will terminate automatically,
without notice, with respect to any patents issuing from patent applications
filed after August 31, 1996 and included in the Licensed Intellectual Property
(unless such application claims the benefit of the filing date of an application
filed on or before August 31, 1996 under 35 U.S.C. 120 or 121), in the event
that there is a change in control of the licensee or the licensee's business;
provided, however, that such patents may continue to be used or embodied in
products which have been shipped commercially, or with respect to which the
licensee is substantially near completion of development prior to first
commercial shipment, on or prior to the date the license would otherwise
terminate as provided above. The license granted to Sub or Parent, as licensee,
under Section 2.1 or 2.2 hereof will terminate automatically, without notice,
with respect to all the Licensed Intellectual Property licensed thereby (a) upon
the institution by or against the licensee of insolvency, receivership or
bankruptcy proceedings, or any other proceedings for the settlement of the
licensee's debts, (b) upon the licensee's making an assignment for the benefit
of creditors, or (c) upon the licensee's dissolution. In the event that any
license granted to Sub or Parent is terminated pursuant to this Section 2.8, the
applicable licensee shall promptly return any documentation reflecting or
embodying the Licensed Intellectual Property with respect to which such
termination applies. Each of Sub and Parent, as licensee, shall notify the
licensor immediately upon becoming aware of any change in ownership or control
of the licensee which could result in a termination of the applicable license.
SECTION 3 NON-DISCLOSURE AGREEMENTS.
--------------------------
Parent and Sub shall cause their respective employees, promptly after the
Distribution Date, to enter into and execute non-disclosure agreements, in form
and substance reasonably satisfactory to the other company, governing the use by
such employees of confidential information relating to the other company,
including without limitation confidential information relating to the Assigned
Intellectual Property and the Licensed Intellectual Property, and shall take all
reasonable steps necessary to enforce each such non-disclosure agreement after
its execution.
SECTION 4 MISCELLANEOUS.
-------------
SECTION 4.1 CONFIDENTIALITY. The provisions of the Distribution Agreement
relating to confidentiality shall apply with respect to any information obtained
or learned by either party from the other party in connection with the
assignments and licenses contemplated hereby. This Section shall survive the
termination of this Agreement.
SECTION 4.2 DISPUTE RESOLUTION. All disputes, controversies or claims between
Parent and Sub arising out of or relating to this Agreement, including without
limitation the breach, interpretation or validity of any term or condition
hereof, shall be resolved in
6
<PAGE> 7
accordance with the provisions of the Distribution Agreement relating to dispute
resolution.
SECTION 4.3 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
SECTION 4.4 NOTICES. Any notice to any party hereto given pursuant to this
Agreement shall be in writing and shall be given by the means, and to the
addresses, set forth in the "Notices" section of the Distribution Agreement.
SECTION 4.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that, except as expressly provided in
Section 2.7 hereof, this Agreement may not be assigned by either party without
the prior written consent of the other party, and any attempt to assign any
rights or obligations hereunder without such consent shall be void.
SECTION 4.6 ENTIRE AGREEMENT; PARTIES IN INTEREST. This Agreement (including
the Schedules hereto and the provisions of the Distribution Agreement
incorporated herein by reference) comprises the entire agreement between the
parties hereto as to the subject matter hereof and supersedes all prior
agreements and understandings between them relating thereto and is not intended
to confer upon any person other than the parties hereto (including their
successors and permitted assigns) any rights or remedies hereunder.
SECTION 4.7 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
SECTION 4.8 CAPTIONS. Captions and headings are supplied herein for
convenience only and shall not be deemed a part of this Agreement for any
purpose.
SECTION 4.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
7
<PAGE> 8
SECTION 4.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
MEDIA 100 INC.
By: /s/ John A. Molinari
-----------------------------------------
Name: John A. Molinari
Title: President and Chief Executive Officer
DATA TRANSLATION, INC.
By: /s/ Alfred A. Molinari, Jr.
-----------------------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
8
<PAGE> 9
<TABLE>
SCHEDULE A
TO
INTELLECTUAL PROPERTY AGREEMENT
BETWEEN
MEDIA 100 INC. AND DATA TRANSLATION, INC.
ASSIGNED PATENTS AND PATENT APPLICATIONS
----------------------------------------
<CAPTION>
TITLE OF APPLICATION SERIAL NO. PATENT NO.
(INVENTOR AND COUNTRY) STATUS FILING DATE ISSUE DATE
==============================================================================================================
<S> <C> <C> <C>
Color Video Processing Circuitry Issued 07/172,017 4,916,531
(Genz - U.S.) 03/23/88 04/10/90
Circuitry for Conditioning Analog Issued 07/618,722 5,111,203
Signals and Converting to Digital Form 11/27/90 05/05/92
(Calkins - U.S.)
Calkins - Canada Pending 2050093
08/28/91
System for Locating Failure Signals Issued 07/603,791 5,185,883
by Comparing Input Data, etc. 10/26/90 02/09/93
(Ianni - U.S.)
Data Acquisition Apparatus Issued 06/242,840 4,380,764
(Connors - U.S.) 03/12/81 04/19/83
Continuous Data Transfer System Issued 06/470,402 4,599,689
(Berman - U.S.) 02/28/83 07/08/86
Interrupt Driven Multi-Buffer DMA Circuit for Issued 06/868,257 4,703,449
Enabling Continuous Sequential Data Transfers 05/28/86 10/27/87
(Berman - U.S.)
Oscillator and Voltage-to-Frequency Converter Issued 07/724,528 5,168,247
Employing the Same 06/28/91
(Tarr - U.S.)
Storing a Digitized Stream of Interlaced Video Issued 08/111,390 5,406,311
Image Data in a Memory in Non-Interlaced Form 08/25/93 04/11/95
(Michelson - U.S.)
Reprogrammable PCMCIA Card Pending 08/397,390
(Michelson - U.S.) 03/02/95
Computer Based Video System Pending 08/666,960
(Walsh - U.S.) 06/20/96
</TABLE>
9
<PAGE> 10
<TABLE>
SCHEDULE B
TO
INTELLECTUAL PROPERTY AGREEMENT
BETWEEN
MEDIA 100 INC. AND DATA TRANSLATION, INC.
ASSIGNED TRADEMARKS
-------------------
<CAPTION>
MARK JURISDICTION SERIAL NUMBER
================================================================================
<S> <C> <C>
Broadway United States 75/006,321
Broadway European Union 17848
Broadway Japan 8-503
Colorcapture United States 73/753,301
Data Translation United States 73/358,372
Data Translation Canada 498,887
Data Translation France 643,945
Data Translation Japan 95114/1982
Data Translation & Design United States 74/059,156
DT-Connect United States 74/180,184
DT-Open Layers United States 74/229,369
Global Lab United States 74/008,545
Global Lab & Design United States 74/118,765
Vision-EZ United States 74/403,329
</TABLE>
10
<PAGE> 1
EXHIBIT 10.8.3
CORPORATE SERVICES AGREEMENT
----------------------------
This Agreement is dated as of December 2, 1996, between Media 100 Inc. (f/k/a
Data Translation, Inc.), a Delaware corporation ("Parent"), and Data
Translation, Inc. (f/k/a Data Translation II, Inc.), a Delaware corporation
("Sub").
WHEREAS, Parent and Sub have entered into a Distribution Agreement dated as of
November 19, 1996 (the "Distribution Agreement"), pursuant to which Parent is
assigning and transferring to Sub certain businesses and assets associated with
Parent's data acquisition and imaging, commercial products and networking
distribution businesses in exchange for the assumption by Sub of certain
liabilities and obligations associated with such businesses and the issuance by
Sub to Parent of shares of Sub common stock on such terms and conditions as are
contained therein; and
WHEREAS, on November 15, 1996 the Board of Directors of Parent declared a
dividend of all outstanding shares of Sub to the holders of record of the
outstanding common stock of Parent, such dividend to be made on December 2, 1996
(the "Distribution Date"); and
WHEREAS, the Distribution Agreement provides that Parent and Sub shall enter
into an agreement relating to certain transition services to be provided by Sub
to Parent with respect to Parent's retained business after the Distribution
Date, and this Agreement is entered into in order to fulfill that provision;
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1 SERVICES TO BE PROVIDED.
-----------------------
SECTION 1.1 TYPES OF SERVICES. During the term of this Agreement, Sub agrees
to provide or to cause to be provided to Parent, and Parent agrees to purchase
from Sub, on the terms provided herein the services described in Schedule A
hereto (collectively, the "Services").
SECTION 1.2 ADDITIONAL SERVICES. During a period of transition following the
Distribution Date, Parent may request that Sub provide additional administrative
and support services to Parent until it is able to otherwise contract or arrange
for such services. Upon a request for such additional services, Parent and Sub
shall negotiate in good faith as to the scope of such services and the terms and
conditions under which such services may be provided; provided that, unless
otherwise agreed to by the parties, such services will be provided only to the
extent, and on a basis comparable to that provided by Sub with respect to its
own operations. A brief description of any mutually agreed-upon additional
services to be provided will be added to Schedule A, and such additional
services will be deemed to be a "Service" for all purposes under this Agreement
unless expressly stated otherwise in such Schedule.
<PAGE> 2
SECTION 1.3 SCOPE OF SERVICES. Each Service furnished pursuant to this
Agreement shall be in all material respects equivalent to and limited to the
same type, quality, quantity and timeliness of such service that Sub provides to
its own organization and personnel, and to those of its other divisions. Parent
acknowledges that such Services will be performed by those employees of Sub who
perform similar services for Sub in the normal course of their employment.
Accordingly, Sub shall not be obligated to make available any incremental
Services to the extent that doing so would unreasonably interfere with the
performance of any employee of Sub in connection with his or her
responsibilities to Sub, require additional staff or otherwise cause an
unreasonable burden to Sub. Duly authorized agents of Sub shall have the right
to enter the premises of Parent to the extent reasonably necessary or convenient
to provide the Services.
If Sub ceases to provide any of the Services to its own business units or if the
level of such Services is reduced for any reason, Sub may also cease to provide
or reduce the level of such Services provided to Parent under this Agreement. In
the event of any substantial reduction or a substantial increase or other
material change in the level or scope of any of the Services required by Parent
during the term of this Agreement, the parties agree to negotiate in good faith
an equitable adjustment of the fee payable therefor. Sub agrees to provide
Parent as promptly as practicable notice of any substantial change in the level
of such Services provided under this Agreement, but in no event shall Sub
provide less than thirty (30) days advance notice of such date of any service
discontinuance.
SECTION 2 CHARGES AND PAYMENTS.
--------------------
SECTION 2.1 CHARGES FOR SERVICES. It is the intention of the parties hereto
that the charges for Services to be provided pursuant to this Agreement shall be
determined and allocated according to methods consistent with past practices and
procedures observed by Parent prior to the Distribution Date concerning
intercompany services and accounts, with a view in every case toward providing
Sub with a reimbursement of fully allocated direct and indirect costs of
providing Services but without any profit to Sub, or as may otherwise be
mutually agreed upon by the parties. Charges for each Service shall be
determined on a monthly basis. With respect to any Services which are provided
for a period which is less than a full calendar month, or where the scope of
such services is changed in accordance with Section 1.3 during such period, the
charges with respect to such Service shall be appropriately pro-rated.
SECTION 2.2 PAYMENTS FOR SERVICES. As soon as practicable, but in no event
more than fifteen (15) days, following the last business day of a calendar month
during which this Agreement is in effect, Sub shall submit to Parent a written
invoice for the aggregate amount to be charged to Parent for Services rendered
during the just completed month; provided that each such invoice shall indicate
the amount of charges being assessed for each Service provided and shall include
such documentation as is reasonably necessary to substantiate such amounts.
Parent shall pay to Sub the invoiced amount within thirty (30) days after
receipt of an invoice.
2
<PAGE> 3
Whenever the provision of any Service pursuant to this Agreement is terminated
for any reason, Sub shall, as promptly as practicable, but in no event more than
fifteen (15) business days, after the termination of such Service, submit to
Parent a written invoice for the aggregate amount still owed to Sub with respect
to such Service, together with such documentation as is reasonably necessary to
substantiate such amounts. Parent shall pay to Sub the invoiced amount within
thirty (30) days after receipt of an invoice.
SECTION 2.3 TAXES OR OTHER GOVERNMENTAL CHARGES. All federal, state and local
taxes, charges, fees and similar liabilities, except taxes based on Sub's net
income, which are levied on either party in connection with the provision of any
Services hereunder, shall be for Parent's account and paid directly by Parent
or, if required to be paid by Sub, shall be added to the next invoice. Sub shall
provide Parent with evidence of the payment of any such taxes by Sub with such
invoice.
SECTION 2.4 OUT-OF-POCKET/DIRECT EXPENSES. Parent agrees to pay directly or
to reimburse Sub for all reasonable out-of-pocket and direct expenses incurred
by Sub in respect of the provision of any Services, including all reasonable
expenses for outside accounting, legal, recruiting, consulting, marketing and
other professional services. All payments or reimbursements to be made under
this Section 2.4 by Parent shall, except as otherwise provided herein, be made
not later than thirty (30) days following receipt by Parent of an invoice
therefor.
SECTION 3 INDEPENDENT CONTRACTOR STATUS.
-----------------------------
In carrying out the provisions of this Agreement, each party is and shall be
deemed to be for all purposes separate and independent entities. Sub shall
select its employees and agents, and such employees and agents shall be under
the exclusive and complete supervision and control of Sub. Sub hereby
acknowledges responsibility for full payment of wages and other compensation to
all employees and agents engaged in the performance of the Services hereunder.
It is the express intent of this Agreement that Sub shall render and perform the
Services as an independent contractor in accordance with its own standards,
subject to its compliance with the provisions of this Agreement.
SECTION 4 LIMITED LIABILITY; INDEMNIFICATION.
----------------------------------
SECTION 4.1 LIMITED LIABILITY. Neither party shall be liable to the other
party for any special, indirect, incidental, exemplary or consequential damages,
or for loss of profits or revenues, whether arising in contract, tort (including
negligence), under any warranty or otherwise, arising out of its performance or
non-performance under this Agreement or the termination of this Agreement, even
if Parent or Sub, as the case may be, has been advised of the possibilities of
such damages.
SECTION 4.2 DISCLAIMER OF WARRANTY. SUB MAKES NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES TO BE
PROVIDED BY IT UNDER THIS AGREEMENT. In the event the performance or
non-performance of any Service to be provided hereunder results in direct
3
<PAGE> 4
damages to Parent, Sub shall be liable only to the extent such performance or
non-performance was the result of Sub's gross negligence or willful misconduct,
and Sub's maximum, cumulative and sole liability to Parent for such direct
damages shall be limited to an amount up to the aggregate amount actually paid
by Parent to Sub for such Service up to the date of the performance or
non-performance giving rise to the direct damages. Parent acknowledges that such
payment constitutes fair and reasonable compensation for any direct damages.
Notice of any claim for direct damages must be made within one (1) year of the
date of the event giving rise to such claim and such claim must specify the
damage amount claimed and a description of the Service and the act or omission
giving rise to the claim.
SECTION 4.3 INDEMNIFICATION. Parent hereunder agrees to indemnify and hold
harmless Sub, its directors, officers, employees, agents, representatives,
shareholders, transferees, successors and assigns against any claims, actions,
demands, judgments, losses, costs, expenses, damages and liabilities (including
reasonable attorneys' fees and disbursements) related to or arising out of or
connected with such Services, regardless of the legal theory asserted. The
foregoing indemnity applies to claims, actions and demands for which Sub may be,
or may be claimed to be, partially or solely liable; provided that the foregoing
indemnity will not apply with respect to any claim for direct damages asserted
by Parent against Sub as provided in Section 4.2 above.
SECTION 5 TERM OF AGREEMENT.
-----------------
SECTION 5.1 TERM. This Agreement shall become effective on the Distribution
Date and shall remain in effect until the earlier of (a) the discontinuance or
termination of all Services to be provided hereunder in accordance with the
terms of this Agreement and (b) December 31, 1997.
SECTION 5.2 DISCONTINUATION OR TERMINATION OF SERVICES. Parent may
discontinue its use of any such Service upon written notice given to Sub not
less than thirty (30) days prior to the proposed date of service discontinuance.
In addition, upon the occurrence and continuance of a default by either party in
connection with the provision of, or payment for, any Service hereunder for a
period of ten (10) days after written notice thereof has been given to the
defaulting party, the non-defaulting party may terminate such Service and shall
have no further obligation to the other party with respect thereto.
Notwithstanding any termination of this Agreement or any Services to be provided
hereunder, the provisions of Sections 2 and 4 shall remain in effect
indefinitely or until such time as the obligations of both parties hereunder
shall have been fully discharged.
Once a Service is discontinued or terminated in accordance with the terms of
this Agreement, Sub shall not again be obligated to later reinstate such
Service; provided, however, that to the extent Sub is thereafter requested to
provide any discontinued or terminated Service to Parent, including any
transition-related assistance necessary for any other organization to perform
the discontinued or terminated Service, and Sub consents to provide such
Service, Sub shall be entitled to compensation reflecting incurred costs with
respect thereto.
4
<PAGE> 5
SECTION 6 MISCELLANEOUS.
-------------
SECTION 6.1 FORCE MAJEURE. Anything contained in this Agreement to the
contrary notwithstanding, Sub's performance of its duties and obligations
hereunder shall be excused to the extent that failure of performance is caused
by any act of force majeure, including but not limited to acts of God or the
public enemy, acts of the government in its sovereign capacity, fires, floods,
epidemics, quarantine restrictions, freight embargoes, strikes, unusually severe
weather, sabotage or any other or similar event or casualty beyond the
reasonable control of Sub; provided that Parent shall not be obligated to pay
such party for such Services to the extent that Sub is unable to perform as a
result of a force majeure condition. Sub shall promptly notify Parent of such
events and make every reasonable effort to restore such Services.
Notwithstanding the foregoing, Parent shall be responsible for making its own
alternative arrangements with respect to interrupted Services during the
pendency of any force majeure condition.
SECTION 6.2 ACCESS TO INFORMATION; CONFIDENTIALITY. The provisions of the
Distribution Agreement relating to the access to information and confidentiality
shall apply with respect to any information obtained or learned by either party
from the other party in connection with the parties' performance of their
respective obligations hereunder. This Section shall survive the termination of
this Agreement.
SECTION 6.3 DISPUTE RESOLUTION. All disputes, controversies or claims between
Parent and Sub arising out of or relating to this Agreement, including without
limitation the breach, interpretation or validity of any term or condition
hereof, shall be resolved in accordance with the provisions of the Distribution
Agreement relating to dispute resolution.
SECTION 6.4 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
SECTION 6.5 NOTICES. Any notice to any party hereto given pursuant to this
Agreement shall be in writing and shall be given by the means, and to the
addresses, set forth in the "Notices" section of the Distribution Agreement.
SECTION 6.6 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by either party without the prior written consent of the other party, and any
attempt to assign any rights or obligations hereunder without such consent shall
be void.
5
<PAGE> 6
SECTION 6.7 ENTIRE AGREEMENT; PARTIES IN INTEREST. This Agreement (including
the Schedules hereto and the provisions of the Distribution Agreement
incorporated herein by reference) comprises the entire agreement between the
parties hereto as to the subject matter hereof and supersedes all prior
agreements and understandings between them relating thereto and, except as
provided Section 4.3, is not intended to confer upon any person other than the
parties hereto (including their successors and permitted assigns) any rights or
remedies hereunder.
SECTION 6.8 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
SECTION 6.9 CAPTIONS. Captions and headings are supplied herein for
convenience only and shall not be deemed a part of this Agreement for any
purpose.
SECTION 6.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
SECTION 6.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
MEDIA 100 INC.
By: /s/ John A. Molinari
----------------------------------------
Name: John A. Molinari
Title: President and Chief Executive Officer
DATA TRANSLATION, INC.
By: /s/ Alfred A. Molinari, Jr.
----------------------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
6
<PAGE> 7
SCHEDULE A
TO
CORPORATE SERVICES AGREEMENT
BETWEEN
MEDIA 100 INC. AND DATA TRANSLATION, INC.
1. Accounting and Finance:
----------------------
Cost accounting - tracking of inventory accounts (record work order
variances, purchase order variances, material transactions and consignment
usage; reclassify no charge items; verify scrap costs; record closed for
manufacturing work orders; reclassify direct labor from indirect labor -
assembly and test; and standards revaluation); Accounts payable (track, pay
and file invoices); Payroll (maintain payroll function and train new
personnel)
2. Information Systems Service and Support:
---------------------------------------
VAX hardware, software support services, Net connections, dial-in access,
back-ups; Intervoice IVR use, maintenance; offsite storage; Internet
connectivity; use of telephone system, installation of telephones and voice
mail and related maintenance and support; e-mail systems support and
maintenance
3. Purchasing Support (Dept. 423):
------------------------------
Provide procurement and delivery for all Media 100 materials and equipment,
including manufacturing inventory, capital equipment and miscellaneous
support items; maintain all corporate agreements and follow-up corrective
actions with outside suppliers; identify and execute cost reduction
opportunities
4. Material Planning (Dept. 428):
-----------------------------
Provide forecasting and planning support for Media 100 materials and
manufacturing, including loading material forecasts into MRP, verifying
material availability, reviewing ECO's for material impact and periodically
programming parts
5. Mail, Shipping and Receiving, Invoicing (Dept. 428):
---------------------------------------------------
Provide shipping and receiving support for all Media 100 material including
manufacturing and miscellaneous equipment; incoming inspection to be
performed as required on PCB's, cables, junction boxes, etc.; distribution
of out-going mail; preparation of invoices
6. Document Control (Dept. 535):
----------------------------
Provide complete document control services to Media 100, including LOM and
price file maintenance, master document and disk control and duplication,
and MRP data entry; conduct weekly ECO reviews and ensure ECO's are
properly reviewed and authorized
7
<PAGE> 8
7. Second Shift Supervision:
------------------------
Provide administrative support to Parent second shift manufacturing
operations at Sub's facilities
8. Environmental Stress Screening (ESS):
------------------------------------
Provide ESS service to Media 100 including maintenance of equipment and
loading and unloading of chambers when necessary
8
<PAGE> 1
EXHIBIT 10.8.4
USE AND OCCUPANCY AGREEMENT
---------------------------
This Agreement is dated as of December 2, 1996, between Media 100 Inc. (f/k/a
Data Translation, Inc.), a Delaware corporation ("Parent"), and Data
Translation, Inc. (f/k/a Data Translation II, Inc.), a Delaware corporation
("Sub").
WHEREAS, Alfred A. Molinari, Jr. and Maureen K. Molinari, Trustees of Nason Hill
Trust under a Declaration of Trust dated November 15, 1979 and recorded with the
Middlesex County Registry of Deeds (Southern District) in Book 13839, Page 406,
on November 16, 1979, as Landlord ("Landlord"), and Parent, as Tenant, entered
into a Lease dated as of December 1, 1979, as amended (the "Lease"), pursuant to
which Parent has leased its facilities located at 100 Locke Drive, Marlboro,
Massachusetts (the "Leased Premises"), including the building located thereon
(the "Building"); and
WHEREAS, the Parent and Sub have entered into a Distribution Agreement dated as
of November 19, 1996 (the "Distribution Agreement"), pursuant to which Parent is
assigning and transferring to Sub certain businesses and assets associated with
Parent's data acquisition and imaging, commercial products and networking
distribution businesses (including all of Parent's rights in, to and under the
Lease) in exchange for the assumption by Sub of certain liabilities and
obligations associated with such businesses (including all of Parent's
obligations under the Lease) and the issuance by Sub to Parent of shares of Sub
common stock on such terms and conditions as are contained therein; and
WHEREAS, on November 15, 1996 the Board of Directors of Parent declared a
dividend of all outstanding shares of Sub to the holders of record of the
outstanding common stock of Parent, such dividend to be made on December 2, 1996
(the "Distribution Date"); and
WHEREAS, Parent's remaining Media 100 digital media business has heretofore
occupied a portion of the Leased Premises; and
WHEREAS, the Distribution Agreement provides that Parent and Sub shall enter
into an agreement relating to the continued use and occupancy of a portion of
the Leased Premises by Parent for a transition period following the Distribution
Date, and this Agreement is entered into in order to fulfill that provision;
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1 LICENSE.
-------
SECTION 1.1 LICENSE OF SUB SPACE. Sub hereby grants Parent a license to (a)
use and occupy approximately 24,770 square feet of office space and 6,000 square
feet of manufacturing space located in the Building, such space to be demarcated
by the mutual agreement of the parties (the "Parent Space"), (b) utilize all
rest rooms, cafeteria and
<PAGE> 2
fitness center facilities, outdoor facilities generally available to employees
of Sub, sidewalks, driveways and parking lots (the "Common Areas") and (c) cross
other portions of the Building to maintain convenient access to, from and
between the Parent Space and the Common Areas, subject in all cases to the
provisions of this Agreement. Parent hereby acknowledges that Sub is licensing
the Parent Space to Parent "as is," and that Sub makes no warranty, covenant or
representation that the Parent Space shall be other than in its present
condition. The parties expressly acknowledge that this Agreement does not
constitute a demise by Sub of any real property interest in the Leased Premises
(including without limitation the Parent Space) and, consequently, Parent shall
not be entitled to any rights or remedies to which a subtenant may be entitled
at law or in equity, unless Parent shall have been expressly afforded such
rights and remedies pursuant to the provisions of this Agreement. This Agreement
is subject and subordinate to the Lease and, consequently, if the Lease expires
or terminates for any reason whatsoever, this Agreement shall immediately
terminate and Parent's license hereunder shall expire.
SECTION 1.2 MODIFICATIONS TO PARENT SPACE. Sub and Parent agree to negotiate
in good faith any reconfigurations of the Parent Space reasonably requested from
time to time by either party that improve the efficient utilization of the
Building by both parties (but in no event resulting in a reduction of the
aggregate square footage of the Parent Space). Each party will bear its own
moving expenses incurred in connection with any reconfiguration of the Parent
Space. If Parent requests the use of additional space in the Building, Sub and
Parent agree to negotiate in good faith the availability and configuration of
such additional space. The monthly License Fee (as hereinafter defined) for any
such additional space will be $3.47 per square foot.
SECTION 1.3 CAFETERIA AND FITNESS CENTER FACILITIES. The cafeteria and
fitness center facilities located in the Building will be made available to
employees of Parent and their guests to the same extent that such facilities are
made available to employees of Sub and their guests. All users of the fitness
center will be required to give such releases and obtain such medical clearances
in connection with such use as Sub shall from time to time require in its sole
discretion. If Sub ceases to provide the service of the cafeteria or fitness
center facilities to its own employees or if the level of such service is
reduced for any reason, Sub may also cease to provide or reduce the level of
such service provided to Parent under this Agreement. Sub agrees to provide
Parent will reasonable advance notice of any substantial change in the level of
such services to be provided hereunder.
SECTION 1.4 SHARED EQUIPMENT. The parties recognize that certain
manufacturing equipment heretofore utilized by Parent in the manufacture of its
Media 100(R) products has been has been included in the Contributed Assets (as
defined in the Distribution Agreement) (the "Shared Equipment"). Sub hereby
agrees that, during the term of this Agreement, Parent and its employees shall
have access to the Shared Equipment in connection with Parent's manufacturing
requirements, and Sub will use commercially reasonable efforts to repair and
maintain the Shared Equipment in good operating condition suitable for Parent's
requirements. Utilization of the Shared Equipment by the respective
manufacturing operations of Parent and Sub shall be consistent with historical
practice, provided that the parties agree to negotiate in good faith any
adjustments to their
2
<PAGE> 3
respective utilization to accommodate any future material change in their
respective manufacturing requirements. Sub's provision of access and maintenance
with respect to the Shared Equipment as described above shall be deemed for all
purposes under this Agreement to be a Service provided by Sub to Parent.
In the event Sub desires to sell or otherwise dispose of any of the Shared
Equipment or Sub is either unwilling or unable to repair and maintain the Shared
Equipment in good operating condition suitable for Parent's requirements, Sub
shall first provide written notice thereof to Parent, which notice shall
constitute an offer to sell such equipment to Parent free of any liens and
encumbrances, but otherwise on an "as is, where is" basis, for a purchase price
equal to the net book value of such equipment as shown in Sub's financial
records. If Parent elects to purchase the offered equipment, it shall so notify
Sub in writing within fifteen (15) days following receipt of Sub's offer notice,
and the parties shall consummate such purchase and sale as promptly as
practicable thereafter. Failure of Parent to so notify Sub of its election shall
be deemed to be a determination by Parent not to purchase the offered equipment.
SECTION 1.5 RELATED SERVICES. During the term of this Agreement, Sub will
provide, or cause to be provided, the following services (the "Related
Services") related to Parent's use and occupancy of the Parent Space:
(a) all utilities consumed on or in connection with the use and
occupancy of the Parent Space, including but not limited to water,
sewer, gas, electricity, heat, ventilation and air conditioning;
(b) maintenance services for the Building (e.g., janitorial/custodial,
repairs, elevators, plants) and for the grounds on the Leased
Premises (e.g., landscaping, snow removal, paving) with respect to
the Parent Space (including all rest rooms located in the Building
and all parking lots and walkways, sidewalks, and driveways
providing for access to and from the Parent Space);
(c) receipt and distribution of Parent's incoming mail;
(d) use of the Building's photocopy center for photocopy and binding
services for business documents and printing services; and
(e) reception and security services.
Sub will provide, or cause to be provided, each of the Related Services with
respect to the Parent Space and Parent's operations conducted therein to the
extent required to accommodate Parent's reasonable needs, and in the same manner
of quality, quantity and timeliness as such services are provided to the rest of
the Building and the Leased Premises and the operations conducted therein, but
in no event in a materially lesser manner than such services were provided prior
to the date hereof.
3
<PAGE> 4
SECTION 2 LICENSE FEE.
-----------
Parent agrees to pay to Sub a monthly license fee (the "License Fee") for the
use and occupancy of the Parent Space, the use of the Common Areas and the
provision of the Related Services in the amount of $102,977.00, and for the use
of the Shared Equipment in the amount of $2,400, in each case payable on the
first business day of each calendar month during the term of this Agreement.
With respect to any period of use or occupancy of the Parent Space which is less
than a full calendar month, the License Fee with respect to such period shall be
appropriately pro-rated. In the event any of the Shared Equipment is sold to
Parent or otherwise disposed of by Sub, the parties agree that the License Fee
with respect thereto shall be equitably adjusted.
SECTION 3 INDEMNIFICATION.
---------------
Each of Parent and Sub shall indemnify and hold harmless the other against any
claims, liability, loss, damage or expense (including reasonable attorneys' fees
and disbursements) incurred or sustained by such other party arising out of any
personal injury or property damage caused by the fault of the invitees, agents,
servants or employees of such party in connection with their activities under or
related to this Agreement.
SECTION 4 TERM OF AGREEMENT.
-----------------
SECTION 4.1 TERM. This Agreement shall become effective on the Distribution
Date and shall remain in effect until April 30, 1997.
SECTION 4.2 TERMINATION. Upon the occurrence and continuance of a default by
either party hereunder, including the defaulting party's failure to keep,
observe or perform any covenant, agreement, term or provision of this Agreement,
for a period of ten (10) days after written notice thereof has been given to the
defaulting party, the non-defaulting party may terminate this Agreement and
shall have no further obligation to the defaulting party hereunder.
Notwithstanding any termination of this Agreement, the provisions of Section 3
shall remain in effect indefinitely or until such time as the obligations of
both parties hereunder shall have been fully discharged.
SECTION 5 ADDITIONAL COVENANTS.
--------------------
SECTION 5.1 NO ALTERATIONS; SURRENDER. Parent may not make any physical
alterations to the Parent Space (including without limitation structural
alterations, construction or removal of interior walls, painting or other
decoration) without the prior written consent of Sub, which consent shall not be
unreasonably withheld or delayed. Parent shall surrender the Parent Space upon
termination of this Agreement in the same condition as it now exists, except for
normal wear and tear, damage caused by fire or other casualty, and other
alterations made with Sub's approval. Sub agrees to provide reasonable
assistance to Parent in connection with Parent's vacating of the Parent Space
and the removal of its property therefrom.
4
<PAGE> 5
SECTION 5.2 ACCESS TO PARENT SPACE. Sub, its agents and representatives shall
have the right to enter the Parent Space without prior notice to inspect the
same, to exercise such rights as Sub may have under the Lease or this Agreement
with respect to such space, to permit the Landlord, its agents or
representatives to access such space to the extent permitted under the Lease, or
for any other purpose which Sub may reasonably determine to be necessary or
desirable; provided, however, that Sub shall not unreasonably interfere with
Parent's use and enjoyment of the Parent Space. Parent shall not be entitled to
any abatement of any portion of the License Fee by reason of the exercise of any
such right of entry.
SECTION 5.3 FIRE, CASUALTY AND EMINENT DOMAIN. In the event of a fire,
casualty or taking that affects the Parent Space to the extent that Parent is
unable to operate its business therein without unreasonable interference or
additional expense, but that does not result in termination of the Lease, Parent
may elect to terminate this Agreement by giving written notice to Sub within
fifteen (15) days of said event.
SECTION 6 MISCELLANEOUS.
-------------
SECTION 6.1 ACCESS TO INFORMATION; CONFIDENTIALITY. The provisions of the
Distribution Agreement relating to the access to information and confidentiality
shall apply with respect to any information obtained or learned by either party
from the other party in connection with the parties' performance of their
respective obligations hereunder. This Section shall survive the termination of
this Agreement.
SECTION 6.2 DISPUTE RESOLUTION. All disputes, controversies or claims between
Parent and Sub arising out of or relating to this Agreement, including without
limitation the breach, interpretation or validity of any term or condition
hereof, shall be resolved in accordance with the provisions of the Distribution
Agreement relating to dispute resolution.
SECTION 6.3 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
SECTION 6.4 NOTICES. Any notice to any party hereto given pursuant to this
Agreement shall be in writing and shall be given by the means, and to the
addresses, set forth in the "Notices" section of the Distribution Agreement.
SECTION 6.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by either party without
5
<PAGE> 6
the prior written consent of the other party, and any attempt to assign any
rights or obligations hereunder without such consent shall be void.
SECTION 6.6 ENTIRE AGREEMENT; PARTIES IN INTEREST. This Agreement comprises
the entire agreement between the parties hereto as to the subject matter hereof
and supersedes all prior agreements and understandings between them relating
thereto and is not intended to confer upon any person other than the parties
hereto (including their successors and permitted assigns) any rights or remedies
hereunder.
SECTION 6.7 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
SECTION 6.8 CAPTIONS. Captions and headings are supplied herein for
convenience only and shall not be deemed a part of this Agreement for any
purpose.
SECTION 6.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
6
<PAGE> 7
SECTION 6.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
MEDIA 100 INC.
By: /s/ John A. Molinari
-----------------------------------
Name: John A. Molinari
Title: President and Chief Executive Officer
DATA TRANSLATION, INC.
By: /s/ Alfred A. Molinari, Jr.
-----------------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
CONSENT OF LANDLORD
-------------------
The undersigned, as Landlord under the Lease referred to in the foregoing Use
and Occupancy Agreement, hereby consent to all of the terms and conditions of
such Use and Occupancy Agreement, approve its execution and delivery by the
parties, and waive any and all notice of such execution and delivery.
NASON HILL TRUST
By: /s/ Alfred A. Molinari, Jr.
-----------------------------------
By: /s/ Maureen K. Molinari
-----------------------------------
As Trustees of Nason Hill Trust
but not individually
7
<PAGE> 1
EXHIBIT 13
SELECTED FINANCIAL DATA AND QUARTERLY STOCK PRICES 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 6-8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 8
CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 30, 1996 AND 1995 9
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS
ENDED NOVEMBER 30, 1996, 1995, AND 1994 10
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
FISCAL YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994 11
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS 12
ENDED NOVEMBER 30, 1996, 1995, AND 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13-20
4
<PAGE> 2
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Fiscal years ended November 30,
- -----------------------------------------------------------------------------------------------------
(in thousands, except per share data 1996 1995 1994 1993 1992
and employees)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $50,826 $30,278 $12,415 $ 1,118 $ 0
Income (loss) from continuing 4,833 2,345 (2,031) (4,328) (1,816)
operations
Income (loss) from discontinued (6,672) 2,426 2,351 30 (642)
operations
- -----------------------------------------------------------------------------------------------------
Net income (loss) (1,839) 4,771 320 (4,298) (2,458)
Income (loss) per share from continuing 0.57 0.35 (0.43) (2.03) (0.87)
operations
Income (loss) per share from (0.79) 0.36 0.49 0.01 (0.31)
discontinued operations
- -----------------------------------------------------------------------------------------------------
Net income (loss) per share (0.22) 0.71 0.06 (2.02) (1.18)
Gross margin percentage 60.6% 58.0% 58.7% 52.1% na
Research and development
expenses as a percentage of net sales 12.3% 15.9% 30.4% 288.6% na
Selling, marketing, general, and
administrative expenses as a
percentage of net sales 39.5% 36.7% 44.8% 173.9% na
Operating income (loss) as a percentage
of net sales 8.8% 5.4% (16.5)% (410.4)% na
Income (loss) from continuing
operations as a percentage of net sales 9.5% 7.7% (16.3)% (387.1)% na
Income (loss) from discontinued
operations as a percentage of net sales (13.1)% 8.0% 18.9% 2.7% na
- -----------------------------------------------------------------------------------------------------
Net income (loss) as a percentage of
net sales (3.6)% 15.8% 2.6% (384.4)% na
Total assets $59,990 $51,123 $11,430 $ 7,807 $ 9,313
Employees at year-end * 172 77 43 30 16
=====================================================================================================
<FN>
* Prior to the end of fiscal year 1996 the Company shared resources with the
Company's non-Media 100 related businesses. These employees have not been
included in fiscal years 1995, 1994, 1993 and 1992.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
QUARTERLY STOCK PRICES
Fiscal year ended November 30,
- --------------------------------------------------------------------------------
1995 HIGH LOW
- --------------------------------------------------------------------------------
<S> <C> <C>
First Quarter 11 1/4 7 1/8
Second Quarter 16 1/4 10 3/4
Third Quarter 17 5/8 13 1/16
Fourth Quarter 19 3/4 16
1996
- --------------------------------------------------------------------------------
First Quarter 21 10 3/4
Second Quarter 28 3/4 13 1/4
Third Quarter 28 1/4 7 3/4
Fourth Quarter 12 1/2 7 7/8
</TABLE>
The common stock of the Company trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol: MDEA. Prior to December 3, 1996, the
Company traded under the symbol: DATX. The preceding table sets forth, for the
periods indicated, the last reported high and low sales prices per share of the
Company's common stock as reported on the Nasdaq National Market. The Company
has never paid a cash dividend on its common stock, and the Board of Directors
does not anticipate paying cash dividends in the foreseeable future. As of
February 14, 1997, there were 273 stockholders of record and approximately 2,200
beneficial owners of the Company's common stock. The last sale price per share
of the Company's common stock as reported on the Nasdaq National Market on
February 14, 1997 was $7.50. All share and per share data have been
retroactively restated to reflect the Company's two-for-one stock split in the
form of a stock dividend, effective on July 31, 1995.
5
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Media 100 Inc. is a technology and market leader in the market for personal
computer-based digital video systems. The Media 100 family of products are
analog and digital conversion systems that enable users to capture video and
audio into a personal computer, perform random-access ("nonlinear") video
editing and audio mixing, and directly produce a finished program with
broadcast-quality picture and compact disc-quality sound, all without the use of
traditional video tape equipment.
On July 30, 1996, the Company announced its intention to separate its Media
100 digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months.
On November 11, 1996, the Company sold substantially all of the assets
associated with its networking distribution business in connection with the
winding up of that business. On December 2, 1996, the Company distributed all of
the shares of DTI, to which it had contributed its data acquisition and imaging
and commercial products businesses and the remaining assets and liabilities of
the networking distribution business, as a dividend to the Company's
stockholders (the "Spin-Off"), in the ratio of one share of DTI common stock for
every four shares of Company common stock. In connection with the Spin-Off, the
Company retained only its Media 100 related business and changed its name to
Media 100 Inc.
In connection with the Spin-Off and the disposal of the networking
distribution business, the Company's historical financial statements and other
financial information reflect the financial position, results from operations
and cash flows of the Company as continuing operations; the related financial
information of the businesses contributed to DTI and the networking distribution
business has been segregated and reclassified as discontinued operations.
The Company believes that there are three general types of end-users of
digital media production systems, professional, corporate and institutional, and
mass market users. Within this market, the Company primarily targets the
corporate and institutional users. Many of these corporate and institutional
users currently rely on analog video tape editing processes. Digital editing
alternatives are relatively new and currently account for a small portion of
this market of current users. The Company also believes that the corporate and
institutional market includes a potential market of new users who currently
out-source their video production requirements.
To address the target market of corporate and institutional users the
Company initiated a plan in 1996 to introduce a family of products that were
intended to offer full video program authoring capabilities over a broad
price/performance spectrum. As a first step of this strategy, the Company began
shipments in April 1996 of Media 100 qx, a lower-cost digital video system
<PAGE> 5
based on the Company's Vincent digital video engine that enables users of Apple
QuickTime applications to create broadcast-quality video programs using Adobe
Premiere editing software.
On December 26, 1996, the Company began shipments of six new Media 100
products, each of which is based on the Company's Vincent 601 digital video
engine, and which are differentiated by software-enabled features and
functionality. The reliance on a single hardware platform for all products
enables a software-only upgrade path throughout the Media 100 product family to
the advanced features and functionality of the Company's higher-end systems.
The Company sells its products through a worldwide network of approximately
500 independent value added resellers ("VAR's") in over 50 countries. In 1996,
the Company embarked upon a concerted effort to increase the size of its
international VAR network in order to increase international sales of its
products and services, and in this regard, the Company established a new
European headquarters in Paris, France in October 1996.
As a result of the Spin-Off, the Company intends to relocate its principal
executive, engineering, manufacturing and sales operations to a new facility
located in Marlboro, Massachusetts in April 1997. There may be a risk of
disruption in customer shipments if the Company is not able to maintain an
uninterrupted supply of products during the period of transition to the new
facility.
<TABLE>
RESULTS OF CONTINUING OPERATIONS
The following table shows certain consolidated statements of
operations data as a percentage of net sales.
Fiscal years ended November 30,
- --------------------------------------------------------------------------------
<CAPTION>
1996 1995 1994
Continuing operations
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross margin 60.6 58.0 58.7
Research and development expenses 12.3 15.9 30.4
Selling and marketing expenses 29.6 30.0 37.5
General and administrative expenses 9.9 6.7 7.3
- --------------------------------------------------------------------------------
Operating income (loss) 8.8 5.4 (16.5)
Interest income (expense) and other, net 3.1 2.5 0.5
Provision for income taxes 2.4 0.2 0.3
- --------------------------------------------------------------------------------
Income (loss) from continuing operations 9.5% 7.7% (16.3)%
================================================================================
</TABLE>
6
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (cont.)
COMPARISON OF FISCAL 1996 TO 1995
Net sales from continuing operations for the fiscal year ended November 30,
1996 were $50,826,000, an increase of $20,548,000, or 67.9%, over the same
period a year ago. The increase was due to higher unit sales of Media 100, the
introduction of a new lower cost product, Media 100 qx, and initial shipments of
Gaudi, the Company's advanced digital video effects product. Shipments of Media
100 qx began in April 1996 and Gaudi in November 1996.
Gross margin for fiscal 1996 was 60.6% compared to 58.0% in the comparable
period a year ago. This increase reflects improvement in the Company's product
mix as the Company realized more revenue from software products sold together
with the Company's hardware product. In addition, higher utilization of the
Company's manufacturing capacity due to higher unit volumes and reductions in
the cost of key component parts used in the manufacture of the Media 100
hardware also contributed to the gross margin improvement.
Operating income for fiscal 1996 was $4,453,000, an increase of $2,804,000,
or 170%, over the same period of last year. Operating income reflects the higher
net sales and gross margin, partially offset by operating expenses of
$26,327,000 in fiscal 1996, an increase of $10,409,000, or 65.4%, over the same
period of last year. Research and development costs increased to $6,227,000 in
support of the Company's continued focus on improving existing products and the
introduction of Media 100 qx and Gaudi. Selling and marketing expenses increased
to $15,066,000 as the Company continued to expand its support for the sales
channel, including establishing a European headquarters in Paris, France, and
increasing marketing activities to broaden brand awareness for its products. In
addition, rollout costs associated with Media 100 qx also contributed to higher
sales and marketing expenses. General and administrative expenses increased to
$5,034,000 to support the Company's rapid growth in net sales and for the
defense of patent infringement litigation (See Note 6 to the Consolidated
Financial Statements).
Interest income in fiscal 1996 was $1,588,000, an increase of $817,000, or
106%, over the same period of last year, reflecting an increase in cash balances
including cash equivalents and marketable securities on hand in 1996.
The tax provision of $1,208,000 for fiscal 1996 compares to a $75,000 tax
provision in fiscal 1995. The Company's effective tax rate was 20% in fiscal
1996 reflecting the utilization of net operating loss and research and
development credit carryforwards. The Company's effective tax rate in 1995 was
3% reflecting the utilization of the net operating loss carryforwards. The
Company anticipates higher effective tax rates in the future due to lower
research and development credit carryforwards (See Note 7 to the Consolidated
Financial Statements).
Income from continuing operations for fiscal 1996 was $4,833,000, or $0.57
per share, compared to $2,345,000, or $0.35 per share, for the prior fiscal
year. Loss from discontinued
<PAGE> 7
operations for fiscal 1996 was $6,672,000, or $0.79 per share, compared to net
income of $2,426,000, or $0.36 per share, for the prior fiscal year. Of the
$6,672,000 loss from discontinued operations, expenses related to the Spin-Off
accounted for $1,500,000 and the loss on disposal of the networking
distribution business was estimated at $2,513,000.
COMPARISON OF FISCAL 1995 TO 1994
Net sales from continuing operations for the fiscal year ended November 30,
1995 were $30,278,000, an increase of $17,863,000, or 143.9%, over the same
period a year ago. The increase was due to higher unit shipments of Media 100
products.
Gross margin for fiscal 1995 was 58.0% compared to 58.7% in the comparable
period a year ago. The decline was due primarily to changes in the Company's
product mix.
Operating income for fiscal 1995 was $1,649,000, compared to an operating
loss of $2,054,000 for fiscal 1994. Profitability was achieved through higher
net sales of Media 100. Research and development expenses increased by
$1,026,000, or 27.1%, from the comparable period, due to continued engineering
investment in Media 100 products. Total selling and marketing expenses increased
by $4,431,000, or 95.1%, from the comparable period, demonstrating the Company's
commitment to promoting Media 100 products and expanding its sales distribution
channel. General and administrative expenses increased by $1,119,000, or 123.6%,
compared to the prior period, to support the Company's expansion.
Interest income in fiscal 1995 was $771,000, an increase of $620,000 from
fiscal 1994, reflecting the Company's increased cash balances due primarily to
public offerings of the Company's common stock.
The tax provision of $75,000 for fiscal 1995 compares to a tax provision
for fiscal 1994 of $36,000. The Company's utilized net operating loss
carryforwards in 1995 that were not benefited in the 1994 financial statements.
Income from continuing operations for fiscal 1995 was $2,345,000, or $0.35
per share, compared to a loss of $2,031,000, or $0.43 per share, for the prior
fiscal year. Income from discontinued operations for fiscal 1995 was $2,426,000,
or $0.36 per share, compared to $2,351,000, or $0.49 per share, for the prior
fiscal year.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (cont.)
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, net cash provided by continuing operating activities
was $5,897,000, primarily comprised of income from continuing operations of
$4,833,000. Net cash provided by financing activities was $4,812,000, of which
$3,450,000 was the proceeds from the overallotment option exercise associated
with the Company's public offering of common stock in November 1995 and
$1,362,000 was the proceeds from the Company's stock plans. The net purchase of
equipment of $1,951,000 was primarily for capital equipment for new employees
to support the growth in sales. In addition, the Company had net purchases of
marketable securities of $21,336,000. Net cash used in discontinued operating
activities was $13,560,000.
The Company believes its existing cash balance and cash generated from
future operations will be sufficient to meet the Company's cash requirements for
the foreseeable future.
CERTAIN FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis and elsewhere in this
Annual Report to Stockholders are forward-looking statements based on current
expectations, and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from those expressed in
such forward-looking statements. The risks and uncertainties associated with
such statements include the following: the dependence of the Company on a single
product family; the uncertainty as to the market acceptance of digital video
products generally or the Company's products in the emerging commercial and
institutional market; the high level of competition and rapid technological
change characteristic of the Company's industry; the risks associated with the
development and introduction of new products and the management of product
transitions; the risks associated with sole source suppliers; the risks
associated with the Company's dependence on an indirect sales channel of
independent resellers; the risks associated with international operations; the
uncertainty of patent and proprietary technology protection; the risks of third
party claims of infringement, particularly with respect to certain pending
litigation described in Note 6 to the Consolidated Financial Statements; the
Company's dependence on the retention and attraction of key employees,
especially in research and development; the risks associated with the relocation
of the Company's facilities and implementation of new information systems; and
general economic and business conditions.
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Media 100 Inc.:
We have audited the accompanying consolidated balance sheets of Media 100
Inc. (a Delaware corporation) and subsidiaries as of November 30, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended November 30, 1996.
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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Media 100 Inc. and
subsidiaries as of November 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 9, 1997 (except with respect
to the matter discussed in
Note 6(b)(ii), as to which the date
is February 12, 1997)
8
<PAGE> 10
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
November 30, November 30,
in thousands except share amounts 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,733 $28,602
Marketable securities 27,983 6,559
Accounts receivable, net of reserves of 11,665 6,062
$328 in 1996 and $203 in 1995
Inventories 1,473 1,900
Prepaid expenses 567 339
Prepaid income taxes -- 60
- --------------------------------------------------------------------------------
Total current assets 44,421 43,522
Equipment, net 2,467 1,414
Other assets, net 112 85
Net assets of discontinued operations (Note 12) 12,990 6,102
- --------------------------------------------------------------------------------
Total assets $59,990 $51,123
================================================================================
Current liabilities:
Accounts payable $ 1,981 $ 516
Accrued expenses 5,791 2,853
Deferred revenue 2,153 1,010
- --------------------------------------------------------------------------------
Total current liabilities 9,925 4,379
Commitments and contingencies (Note 6)
Deferred income taxes - 3
Stockholders' equity:
Preferred stock, $.01 par value,
Authorized - 1,000,000 shares, none - -
issued
Common stock, $.01 par value,
Authorized - 25,000,000 shares,
Issued - 8,087,884 in 1996 and
8,491,208 in 1995 81 85
Capital in excess of par value 40,035 37,062
Retained earnings 9,826 11,665
Cumulative translation adjustment 123 (173)
Treasury stock, at cost,0 shares in 1996
and 869,096 shares in 1995 - (1,843)
Unrealized holding loss on available for
sale securities - (55)
- --------------------------------------------------------------------------------
Total stockholders' equity 50,065 46,741
Total liabilities and stockholders' equity $59,990 $51,123
================================================================================
[/FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal years ended November 30,
- --------------------------------------------------------------------------------
in thousands except per share amounts
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $50,826 $30,278 $12,415
Cost of sales 20,046 12,711 5,127
- --------------------------------------------------------------------------------
Gross profit 30,780 17,567 7,288
Research and development
expenses 6,227 4,806 3,780
Selling and marketing expenses 15,066 9,088 4,657
General and administrative
expenses 5,034 2,024 905
- --------------------------------------------------------------------------------
Operating income (loss) 4,453 1,649 (2,054)
Interest income 1,588 771 151
Other expense -- -- 92
- --------------------------------------------------------------------------------
Income (loss) from continuing
operations before tax provision 6,041 2,420 (1,995)
Tax provision 1,208 75 36
- --------------------------------------------------------------------------------
Income (loss) from continuing 4,833 2,345 (2,031)
operations
Income (loss) from discontinued
operations, net of tax of $318,
$10 and $163 in 1996, 1995 and
1994, respectively (Note 12) (6,672) 2,426 2,351
- --------------------------------------------------------------------------------
Net income (loss) $(1,839) $ 4,771 $ 320
================================================================================
Income (loss) per common and $ 0.57 $ 0.35 $ (0.43)
common equivalent share from
continuing operations
Income (loss) per common and $ (0.79) $ 0.36 $ 0.49
common equivalent share from
discontinued operations
- --------------------------------------------------------------------------------
Net income (loss) per common and $ (0.22) $ 0.71 $ 0.07
common equivalent share
================================================================================
Weighted average number of common 8,470 6,701 4,764
and common equivalent shares
outstanding
================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE> 12
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
in thousands except Common Stock Capital in Retained Cumulative Treasury Unrealized
share amounts $.01 Par Value Excess of Earnings Translation Stock Holding Gain
------------------------- Par Value Adjustment (Loss) on
Shares Amount Available
for Sale
Securities
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, November 30,
1993 6,563,450 $66 $ 8,289 $ 6,574 $(106) $(4,781) $ -
Proceeds from issuance
of common stock under
stock plans 248,986 2 761 - - - -
Effect of
stock-for-stock
exercise (46,964) - (311) - - - -
Translation adjustment - - - - 143 - -
Net income - - - 320 - - -
- --------------------------------------------------------------------------------------------------------------
Balance, November 30,
1994 6,765,472 $68 $ 8,739 $ 6,894 $ 37 $(4,781) $ -
Proceeds from issuance
of common stock under
stock plans 325,736 3 1,166 - - - -
Public sale of
treasury stock, net of
issuance costs of $375 - - 5,864 - - 2,938 -
Public sale of common
stock, net of issuance
costs of $400 1,400,000 14 21,293 - - - -
Translation adjustment - - - - (210) - -
Net income - - - 4,771 - - -
Unrealized holding
loss on available for
sale securities - - - - - - (55)
- --------------------------------------------------------------------------------------------------------------
Balance, November 30,
1995 8,491,208 $85 $37,062 $11,665 $(173) $(1,843) $(55)
Proceeds from issuance
of common stock under
stock plans 242,272 3 1,359 - - - -
Retirement of treasury
stock (869,096) (9) (1,834) - - 1,843 -
Issuance of common
stock 223,500 2 3,448 - - - -
Translation adjustment - - - - 296 - -
Net loss - - - (1,839) - - -
Unrealized holding
gain on available for
sale securities - - - - - - 55
- ---------------------------------------------------------------------------------------------------------------
Balance, November 30,
1996 8,087,884 $81 $40,035 $ 9,826 $ 123 $ - $ -
===============================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended November 30,
- --------------------------------------------------------------------------------
in thousands 1996 1995 1994
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (1,839) $ 4,771 $ 320
(Income) loss from discontinued operations 6,672 (2,426) (2,351)
-----------------------------------
Income (loss) from continuing operations 4,833 2,345 (2,031)
Adjustments to reconcile income (loss) from
operations to net cash provided by (used in)
operating activities
Depreciation and amortization 898 878 820
Deferred income taxes (3) 1 --
Loss on sale of equipment -- 2 4
(Gain) loss on sale of marketable securities (33) 35 3
Changes in assets and liabilities
Accounts receivable (5,603) (3,035) (2,401)
Inventories 427 (1,248) (367)
Prepaid income taxes (61) 1 182
Accounts payable, accruals and prepaid expenses 4,296 1,383 1,249
Deferred revenue 1,143 785 225
-----------------------------------
Net cash provided by (used in) continuing 5,897 1,147 (2,316)
operating activities
Net cash provided by (used in) discontinued (13,560) 1,274 2,423
operating activities
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating $ (7,663) $ 2,421 $ 107
activities
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of equipment (1,951) (1,425) (1,179)
Increase in other assets (27) (68) (54)
Purchases of marketable securities (78,620) (13,270) (943)
Proceeds from sales of marketable securities 57,284 9,108 1,042
- --------------------------------------------------------------------------------
Net cash used in investing activities $(23,314) $(5,655) $(1,134)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock plans 1,362 1,169 452
Net proceeds from public sale of treasury
stock -- 8,802
Net proceeds from public sale of common
stock 3,450 21,307
- --------------------------------------------------------------------------------
Net cash provided by financing activities $ 4,812 $31,278 $ 452
- --------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 296 (220) 139
NET INCREASE (DECREASE) IN CASH AND CASH (25,869) 27,824 (436)
EQUIVALENTS
CASH AND CASH EQUIVALENTS,
beginning of period 28,602 778 1,214
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 2,733 $28,602 $ 778
================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 743 $ 46 $ 11
================================================================================
OTHER TRANSACTIONS NOT PROVIDING
(USING) CASH:
Retirement of treasury stock $ 1,843 $ -- $ --
Change in value of marketable securities $ (55) $ 55 $ --
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
12
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Media 100 Inc. designs, develops, manufactures and markets personal
computer-based digital video system products. The Media 100 family of products
are analog and digital conversion systems that enable users to capture video
and audio into a personal computer, perform random-access ("nonlinear") video
editing and audio mixing, and directly produce a finished program with
broadcast-quality picture and compact disc-quality sound, all without the use
of traditional video tape equipment.
On July 30, 1996, the Company announced its intention to separate its Media
100 digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months.
On November 11, 1996, the Company sold substantially all of the assets
associated with its networking distribution business in connection with the
winding up of that business. On December 2, 1996, the Company distributed all of
the shares of DTI, to which it had contributed its data acquisition and imaging
and commercial products businesses and the remaining assets and liabilities of
the networking distribution business, as a dividend to the Company's
stockholders (the "Spin-Off"), in the ratio of one share of DTI common stock for
every four shares of Company common stock. In connection with the Spin-Off, the
Company retained only its Media 100 related business and changed its name to
Media 100 Inc.
In connection with the Spin-Off and the disposal of the networking
distribution business, the Company's historical financial statements and other
financial information reflect the financial position, results from operations
and cash flows of the Company as continuing operations; the related financial
information of the businesses contributed to DTI and the networking distribution
business has been segregated and reclassified as discontinued operations. (Note
12).
The consolidated financial statements reflect the application of certain
significant accounting policies as described in this note and elsewhere in the
accompanying consolidated financial statements and notes.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.
(b) Cash and Cash Equivalents and Marketable Securities
<PAGE> 15
Cash equivalents are carried at cost, which approximates market value, and
have original maturities of less than three months. Cash equivalents include
money market accounts and repurchase agreements with overnight maturities.
Effective December 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under this standard, the Company is
required to classify all investments in debt and equity securities into one or
more of the following three categories: held-to-maturity, available-for-sale or
trading. Available-for-sale securities are recorded at fair market value with
unrealized gains and losses excluded from earnings and reported to
stockholders' equity. All of the Company's marketable securities are
classified as available-for-sale.
<TABLE>
Marketable securities held as of November 30, 1996, consist of the
following (in thousands):
<CAPTION>
Maturity Market Value
<S> <C> <C>
Investments available for sale:
U.S. Treasury Bonds less than 1 $ 399
year
U.S. Treasury Bonds 1 - 3 years 760
- --------------------------------------------------------------------------------
Total U.S. Treasury Bonds 1,159
U.S. Treasury Notes less than 1 4,012
year
U.S. Treasury Notes 1 - 5 years 2,973
- --------------------------------------------------------------------------------
Total U.S. Treasury Notes 6,985
Municipal Bonds less than 2 2,997
years
Municipal Bonds more than 2 years 2,502
- --------------------------------------------------------------------------------
Total Municipal Bonds 5,499
Asset-Backed Securities less than 2 1,010
years
Asset-Backed Securities more than 2 years 5,710
- --------------------------------------------------------------------------------
Total Asset-Backed Securities 6,720
Corporate Bonds 1 - 5 years 7,620
- --------------------------------------------------------------------------------
Total investments available for sale $27,983
================================================================================
</TABLE>
Marketable securities had a cost of $27,983 and $6,614 at November 30, 1996
and 1995, respectively, and a market value of $27,983 and $6,559, respectively.
To reduce the carrying amount of the 1995 marketable securities portfolio to
market value, a valuation allowance has been reflected as a separate component
of stockholders' equity on November 30, 1995 pursuant to the provisions of
SFAS No. 115.
13
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
(c) Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and consist of the following (in thousands):
<CAPTION>
November 30,
- --------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
Raw Materials $ 780 $1,087
Work-in-Process 302 444
Finished Goods 391 369
- --------------------------------------------------------------------------------
$1,473 $1,900
================================================================================
</TABLE>
Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing plan.
(d) Depreciation and Amortization
<TABLE>
The Company provides for depreciation and amortization, using the
straight-line and declining balance methods, by charges to operating expenses in
amounts that allocate the cost of the equipment over the following estimated
useful lives:
<CAPTION>
Description Useful Lives
------------------------------------------------------
<S> <C>
Machinery and equipment 3 to 7 years
Furniture and fixtures 7 years
Vehicles 3 years
</TABLE>
(e) Equipment, net
<TABLE>
Equipment, net is stated at cost, less accumulated depreciation and
amortization, and consists of the following (in thousands):
<CAPTION>
November 30,
- ---------------------------------------------------------------------------
1996 1995
<S> <C> <C>
Machinery and equipment $4,251 $2,731
Furniture and fixtures 480 63
Vehicles 14 -
- ---------------------------------------------------------------------------
$4,745 $2,794
Less accumulated depreciation
and amortization 2,278 1,380
- ---------------------------------------------------------------------------
$2,467 $1,414
===========================================================================
</TABLE>
(f) Foreign Currency
The Company translates the assets and liabilities of its foreign
subsidiaries at the rates of exchange in effect at year-end. Revenues and
expenses are translated using exchange rates in effect during the year. Gains
and losses from foreign currency translation are credited or charged to
"Cumulative translation adjustment" included in stockholders' equity in the
accompanying consolidated balance sheets. Net realized foreign currency
transaction gains for the year ended November 30, 1996 were $144,000 and are
classified in general and administrative expenses. For fiscal years ended
November 30, 1995 and 1994 these gains and losses were not significant.
(g) Revenue Recognition
The Company recognizes revenue when products are shipped or, for
postcontract support agreements, ratably over the terms of the agreements. The
Company's policy is to defer the revenue associated with any vendor and
postcontract support obligations remaining at the time of shipment until the
related obligations are satisfied. Costs of service and warranty are not
significant and are charged to operations as incurred. Revenues from hardware
systems with other than incidental software components and stand alone software
sales are recognized upon shipment, provided that no significant vendor or
postcontract support obligations remain outstanding and collection of the
resulting receivable is deemed probable.
14
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(h) Capitalized Software Development Costs
The Company capitalizes certain computer software development costs.
Capitalization of costs commences upon establishing technological feasibility.
Capitalized costs, net of accumulated amortization, were approximately $104,000
and $84,000 as of November 30, 1996 and 1995, respectively, and are included in
other assets. These costs are amortized on a straight-line basis over two years,
which approximates the economic life of the product. Amortization expense,
included in cost of sales in the accompanying consolidated statements of
operations, was $40,000, $81,000 and $80,000 in 1996, 1995 and 1994,
respectively.
(i) 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
reporting period. Actual results could differ from those estimates.
(j) Disclosure About the Fair Value of Financial Instruments
SFAS No. 107, Disclosures About the Fair Value of Financial Instruments,
which was adopted by the Company effective December 1, 1995, requires that
disclosure be made of estimates of the fair value of each class of financial
instrument. Financial instruments held by the Company as of November 30, 1996
consist primarily of short-term trade receivables and payables, for which the
carrying amounts approximate fair values, cash equivalents and marketable
securities.
2. NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per common and common equivalent share is determined by
dividing net income (loss) by the weighted average number of common and common
equivalent shares outstanding during each period. Common equivalent shares have
been calculated in accordance
with the treasury stock method and are included for all periods where their
effect is dilutive. Fully diluted net income (loss) per common and common
equivalent share has not been separately presented, as the amounts would not be
materially different from net income (loss) per common and common equivalent
share.
3. STOCKHOLDERS' EQUITY
(a) Stock Split
On June 28, 1995, the Board of Directors approved a 2-for-1 stock split
effected in the form of a dividend for all shareholders of record as of July 17,
1995. All share and per share data included in these financial statements have
been retroactively restated to reflect the stock split.
(b) Stock Options
Prior to April 1992, options were granted under the Company's 1982 Key
Employee Incentive Plan (the "1982 Plan"). Subject to certain limitations
imposed by the 1982 Plan, options were granted at a price determined by the
Board. The Board resolved to issue options under the 1982 Plan at not less than
100% of fair market value. The options expire six years from the date of grant
and become exercisable at the rate of 20% per year beginning one year from the
date of grant. No further options may be granted under the 1982 Plan.
In 1992, the Company adopted the 1992 Key Employee Incentive Plan (the
"1992 Plan"), and 1,000,000 shares of common stock were reserved for issuance.
At the Company's Annual Meeting on April 10, 1996 an increase of 1,000,000
shares for a total of 2,000,000 shares were approved for grant. Options granted
pursuant to the 1992 Plan may, at the discretion of the Board, be incentive
stock options as defined by the Internal Revenue Code. Subject to the provisions
of the 1992 Plan, options granted are at a price as specified by the Board. The
Board has, to date, issued options under the 1992 plan at not less than 100% of
fair market value. The options become exercisable at a rate of 20% per year
beginning one year from the date of grant unless otherwise specified by the
Board. The Board will determine when the options will expire, but in no event
will the option period exceed ten years. No options may be granted under the
1992 Plan on or after February 20, 2002.
15
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
Information concerning stock options for each of the three years ended
November 30, 1996 follows:
- --------------------------------------------------------------------------------
<CAPTION>
Number of Option
Options Price Ranges
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at November 30, 1993 972,202 $1.38 - 6.75
Granted 356,700 4.13 - 7.38
Exercised (208,490) 1.38 - 6.75
Expired/canceled (90,436) 1.38 - 7.00
- --------------------------------------------------------------------------------
Outstanding at November 30, 1994 1,029,976 $1.38 - 7.38
</TABLE>
<TABLE>
<S> <C> <C> <C>
Granted 338,000 7.50 - 17.00
Exercised (305,806) 1.38 - 7.38
Expired/canceled (15,290) 1.50 - 11.00
- --------------------------------------------------------------------------------
Outstanding at November 30, 1995 1,046,880 $1.38 - 17.00
Granted 595,000 8.13 - 17.75
Exercised (215,310) 1.38 - 11.19
Expired/canceled (210,740) 1.50 - 17.75
- --------------------------------------------------------------------------------
Outstanding at November 30, 1996 1,215,830 1.38 - 17.75
================================================================================
Exercisable at November 30, 1996 215,031 $1.81 - 17.00
================================================================================
Available for grant at
November 30, 1996 618,960
================================================================================
</TABLE>
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
In 1994, the Company amended the 1986 Employee Stock Purchase Plan (the
"Plan") pursuant to which an additional 200,000 shares of common stock were
reserved for issuance for a total of 600,000 shares. Effective July 1, 1995,
employees who have worked for the Company for at least one month are eligible to
participate in the Plan. The Plan allows participants to purchase common stock
of the Company at 85% of the fair market value as defined. Under the Plan, the
Company issued 26,962, 22,930 and 38,222 shares in fiscal years 1996, 1995 and
1994, respectively. At November 30, 1996, there were 166,642 shares available
for issuance under the Plan.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which requires the measurement of
the fair value of stock options or warrants to be included in the statement of
income or disclosed in the notes to the financial statements. The Company has
determined that it will continue to account for stock-based compensation for
employees under Accounting Principles Board Opinion No. 25 and elect the
disclosure-only alternative under SFAS No. 123. The Company does not expect this
adoption to have a material effect on the Company's financial position or
results of operations.
4. RETIREMENT PLAN
In November 1985, the Company adopted an employee savings plan (the
"Savings Plan") in compliance with Section 401(k) of the Internal Revenue Code.
Effective April 1, 1995, the Savings Plan provides for annual Company
contributions of up to 15% of the first 6% of total compensation per
participant. On July 1, 1993, the Company suspended Company contributions to the
Savings Plan. The Company resumed contributions to the Savings Plan in fiscal
year 1995. These contributions vest incrementally over a five-year period. The
Company's contributions to the Savings Plan were $50,000, $16,000 and $0 in
1996, 1995 and 1994, respectively.
The Company does not provide postretirement benefits to any employees as
defined under SFAS No. 106, Employer's Accounting for Postretirement Benefits
Other Than Pensions.
5. BANK FACILITIES
The Company entered into an irrevocable standby letter of credit agreement
for a sum not to exceed $300,000 effective January 16, 1997 and terminating
March 31, 1998. This facility was entered into in connection with the lease of
Company's new office and manufacturing facility (Note 6(a)). This letter of
credit is automatically extended without amendment annually from the termination
date, unless written notice is provided electing not to renew for any such
additional period. Notwithstanding the above, this letter of credit expires on
March 31, 2002. The Company's obligation is secured by a pledge of cash in the
amount of $350,000.
16
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
6. LEASE COMMITMENTS AND CONTINGENCIES
(a) Lease Commitments
The Company's principal executive, engineering, manufacturing and sales
operations occupy approximately 31,000 square feet in a facility (the "Locke
Drive Facility") which the Company currently shares with DTI. Prior to December
2, 1996, the effective date of the Spin-Off, the Locke Drive Facility was leased
directly to the Company under a lease with a related party trust. In connection
with the Spin-Off, the Company assigned its leasehold interest in the Locke
Drive Facility to DTI, which in turn granted a license to the Company to use a
portion of the facility so as to enable the Company to conduct its operations at
that location. Such use and occupancy agreement remains in effect until April
30, 1997, and the Company pays DTI a monthly license fee for the use and
occupancy of the Locke Drive Facility and the use of certain manufacturing
equipment transferred to DTI. Total rental expense for the Locke Drive Facility
charged to continuing operations was $546,000, $459,000 and $360,000 for each of
the fiscal years ended November 30, 1996, 1995 and 1994.
In January, the Company entered into an operating lease agreement expiring
on March 31, 2002 for approximately 56,500 square feet in a new facility, into
which the Company intends to relocate all the operations currently conducted in
the Locke Drive Facility, beginning in April 1997.
<TABLE>
Future minimum lease payments excluding operating costs, under all operating
leases including the new operating lease agreement are as follows
(in thousands):
<CAPTION>
Fiscal years ended November 30,
Amount
<S> <C>
1997 $873
1998 525
1999 527
2000 556
2001 584
Thereafter 198
</TABLE>
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Total minimum lease payments $3,263
================================================================================
</TABLE>
(b) Contingencies
(i) On June 7, 1995, a lawsuit was filed against the Company by Avid
Technology, Inc. ("Avid") in the United States District Court for the District
of Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July 1995, the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On July 31, 1996,
the court ordered a stay of all proceedings in the lawsuit pending conclusion of
the reissue proceedings referred to above. There can be no assurance that the
Company will prevail in the lawsuit asserted by Avid or that the expense or
other effects of the lawsuit, whether or not the Company prevails, will not have
a material adverse effect on the Company's business, operating results and
financial condition.
(ii) On February 12, 1997, a lawsuit was filed in Germany against the
Company's former German subsidiary, Data Translation GmbH ("DT GmbH") and its
managing director, by Lex Computer and Management Corporation ("Lex"). The
complaint generally alleges patent infringement by DT GmbH arising from the
manufacture, sale and use of the Company's Media 100 products. The complaint
includes requests for injunctive relief, damages, costs and fees. DT GmbH is
currently a subsidiary of DTI. Under the terms of the Spin-Off, the Company has
agreed to indemnify DTI and its affiliates (including DT GmbH) against
liabilities arising out of the Company's Media 100 business. The Company
currently intends to vigorously defend the lawsuit. There can be no assurance
that the Company will prevail in the lawsuit asserted by Lex or that the expense
or other effects of the lawsuit, whether or not the Company prevails, will not
have a material adverse effect on the Company's international operations and,
consequently, on the Company's business and operating results.
(iii) From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's business, operating results
or financial condition.
7. INCOME TAXES
<TABLE>
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. The components of the net deferred
tax liability recognized in the accompanying consolidated balance sheets are as
follows (in thousands):
<CAPTION>
November 30,
- ---------------------------------------------------------------------------
1996 1995
<S> <C> <C>
Deferred tax assets $ 1,595 $2,372
</TABLE>
<TABLE>
<S> <C> <C>
Deferred tax liabilities (27) (27)
- ---------------------------------------------------------------------------
subtotal 1,568 2,345
===========================================================================
Valuation allowance $(1,568) $(2,345)
===========================================================================
</TABLE>
Due to the uncertainty surrounding the realization of the benefits of its
favorable tax attributes in future income tax returns, the Company has placed a
valuation allowance against its deferred tax assets.
17
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
The approximate tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is summarized as
follows (in thousands):
November 30,
- ---------------------------------------------------------------------------
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carryforwards $ - $508
Other temporary differences, principally 1,096 374
nondeductible reserves
Research and development credits 447 1,438
Alternative minimum tax credits 25 25
- ---------------------------------------------------------------------------
$1,568 $2,345
===========================================================================
</TABLE>
The tax credits carryforwards expire at various dates through 2008. The Tax
Reform Act of 1986 contains provisions that may limit the tax credit
carryforwards available to be used in any given year in the event of significant
changes in ownership, as defined.
<TABLE>
The income (loss) from continuing operations before tax provision in the
accompanying consolidated statements of operations consisted of the following
(in thousands):
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
United States $6,819 $2,761 $(1,965)
Foreign (778) (341) (30)
------------------------------------------------------
$6,041 $2,420 $(1,995)
======================================================
</TABLE>
<TABLE>
The income tax provision shown in the accompanying consolidated statements
of operations is comprised of the following (in thousands):
<CAPTION>
Fiscal years ended November 30,
- ----------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Federal:
Current $1,008 $70 $ -
Deferred - - -
- ----------------------------------------------------------------------------
1,008 70 -
- ----------------------------------------------------------------------------
State:
Current 100 1 -
Deferred - - -
- ----------------------------------------------------------------------------
100 1 -
- ----------------------------------------------------------------------------
Foreign - Current 100 4 36
</TABLE>
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
<S> <C> <C> <C>
$1,208 $75 $36
============================================================================
</TABLE>
<TABLE>
The effective income tax rate varies from the amount computed using the
statutory U.S. income tax rate as follows:
<CAPTION>
Fiscal years ended November 30,
- ---------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision (benefit) at statutory rate 34.0% 34.0% (34.0)%
Federal benefit from loss carryforward (5.6) (33.0) -
Federal losses not benefited - - 34.0
Utilization of research and development (14.8) - -
credits
State taxes 1.6 - -
Foreign taxes 1.6 0.2 1.8
Other 3.2 1.9 -
- --------------------------------------------------------------------------
20.0% 3.1% 1.8%
==========================================================================
</TABLE>
18
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
8. GEOGRAPHIC INFORMATION
Operations in various geographic areas for the three years ended November
30, 1996 are summarized as follows (in thousands):
<CAPTION>
United States Europe Eliminations Consolidated
<S> <C> <C> <C> <C>
FISCAL 1994
Sales to unaffiliated customers (1) $10,692 $1,723 $ - $12,415
Sales or transfers between geographic areas 1,224 - (1,224) -
- -------------------------------------------------------------------------------------------------------
Net sales $11,916 $1,723 $(1,224) $12,415
- -------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $(2,049) $ (30) $ 25 $(2,054)
Identifiable assets of continuing $ 7,488 $1,619 $(1,121) $ 7,986
operations
=======================================================================================================
FISCAL 1995
Sales to unaffiliated customers (1) $26,651 $3,627 $ - $30,278
Sales or transfers between geographic areas 2,507 - (2,507) -
- -------------------------------------------------------------------------------------------------------
Net sales $29,158 $3,627 $(2,507) $30,278
- -------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 1,983 $ (341) $ 7 $ 1,649
Identifiable assets of continuing $44,892 $1,876 (1,747) 45,021
operations
=======================================================================================================
FISCAL 1996
Sales to unaffiliated customers (1) $44,677 $6,149 $ - $50,826
Sales or transfers between geographic areas 4,780 - (4,780) -
- -------------------------------------------------------------------------------------------------------
Net sales $49,457 $6,149 $ (4,780) $50,826
- -------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 5,314 $ (778) $ (83) $ 4,453
Identifiable assets of continuing $46,601 $3,647 $ (3,248) $47,000
operations
=======================================================================================================
<FN>
(1) Export sales from the United States to unaffiliated customers for the years
ended November 30, 1996, 1995 and 1994 were approximately $13,317, $8,243 and
$3,606, respectively.
</TABLE>
9. ACCRUED EXPENSES
<TABLE>
Accrued expenses consist of the following (in thousands):
<CAPTION>
November 30,
- ------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
Accrued commissions $ 133 $ 111
Payroll and related taxes 1,190 599
Expenses relating to Spin-Off of 737 -
Data Translation II, Inc.
Accrued marketing, legal and other
expense 3,731 2,143
==============================================================================
$5,791 $2,853
==============================================================================
</TABLE>
10. VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
The following table sets forth activity in the Company's accounts
receivable reserve account (in thousands):
- --------------------------------------------------------------------------------
<CAPTION>
Balance at Charges to Deductions Balance at
Beginning of Cost and End of Year
Year Expense
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year Ended $107 $ 18 $ 2 $123
November 30, 1994
================================================================================
For the Year Ended $123 $ 85 $ 5 $203
November 30, 1995
================================================================================
For the Year Ended $203 $177 $52 $328
November 30, 1996
================================================================================
</TABLE>
19
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
11. SELECTED QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
For the fiscal quarter ended (in thousands except per share amounts):
- ---------------------------------------------------------------------------------------------------------
1996 February 29 May 31 August 31 November 30
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $10,690 $12,921 $13,066 $14,149
Gross profit 6,377 7,673 8,119 8,611
Income from continuing operations 1,001 1,211 1,232 1,389
=======================================================================================================
Income per share from continuing operations $ 0.12 $ 0.13 $ 0.15 $ 0.17
=======================================================================================================
1995 February 28 May 31 August 31 November 30
- ----------------------------------------------------------------------------------------------------------
Net sales $ 5,212 $ 6,978 $ 8,137 $ 9,951
Gross profit 2,700 4,179 4,761 5,927
Income (loss) from continuing operations (159) 526 585 1,393
=======================================================================================================
Income (loss) per share from continuing operations $(0.02) $ 0.08 $ 0.09 $ 0.20
=======================================================================================================
</TABLE>
12. DISCONTINUED OPERATIONS
<TABLE>
The components of net assets of discontinued operations included in the
accompanying consolidated balance sheets at November 30, 1996 and 1995 follow
(in thousands):
<CAPTION>
November 30,
- -------------------------------------------------------------------------
<S> <C>
1996 1995
</TABLE>
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
<S> <C> <C>
Current assets $14,090 $ 4,722
Equipment, net 2,351 2,250
Other assets, net 260 133
Current liabilities (2,317) (3,067)
Net assets (liabilities) of networking
distribution business (1,424) 2,232
Cumulative translation adjustment 30 (168)
=================================
$12,990 $ 6,102
=================================
</TABLE>
<TABLE>
The components of discontinued operations included in the accompanying
consolidated statements of operations for fiscal 1996, 1995 and 1994,
respectively, follow (in thousands):
<CAPTION>
November 30,
- --------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales $21,201 $21,826 $22,440
Income (loss) from operations of
discontinued businesses (2,659) 2,426 2,351
Loss on disposal of networking
distribution business (2,513) - -
Spin-Off transaction costs (1,500) - -
-------------------------------------
Income (loss) from discontinued
operations $(6,672) $2,426 $ 2,351
-------------------------------------
</TABLE>
The loss for the year ended November 30, 1996 also reflects an allocation of
$560 of interest income relating to the $9,168 of cash contributed to DTI by
the Company.
20
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF MEDIA 100 INC.
State or other
jurisdiction of
Subsidiary organization
---------- ------------
Media 100 Investments, Inc. Massachusetts
Media 100 GmbH Germany
Media 100 Ltd. United Kingdom
Media 100 S.A.R.L. France
Media 100 S.r.l. Italy
Media 100 International, Inc. U.S. Virgin Islands
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8, File Nos. 33-00346,
33-06609, 33-50692 and 33-59937.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-1-1995
<PERIOD-END> NOV-30-1996
<CASH> 2,733
<SECURITIES> 27,983
<RECEIVABLES> 11,651
<ALLOWANCES> 328
<INVENTORY> 1,473
<CURRENT-ASSETS> 44,421
<PP&E> 4,745
<DEPRECIATION> 2,278
<TOTAL-ASSETS> 59,990
<CURRENT-LIABILITIES> 9,925
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 49,984
<TOTAL-LIABILITY-AND-EQUITY> 59,990
<SALES> 50,826
<TOTAL-REVENUES> 50,826
<CGS> 20,046
<TOTAL-COSTS> 46,373
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 328
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,041
<INCOME-TAX> 1,208
<INCOME-CONTINUING> 4,833
<DISCONTINUED> (6,672)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,839)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
