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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-15160
ADVANCED TECHNOLOGY LABORATORIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 91-1353386
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
22100 BOTHELL-EVERETT HIGHWAY
P.O. BOX 3003
BOTHELL, WASHINGTON 98041-3003
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 487-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
On February 25, 1994, the aggregate market value of the voting stock held by
non affiliates of the registrant was $164,814,272 based upon the closing sale
price of $16.00 per share on the Nasdaq National Market on such date.
Number of shares of Common Stock, $0.01 par value per share, of the
registrant outstanding as of February 25, 1994: 10,517,736.
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DOCUMENTS INCORPORATED BY REFERENCE PART
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Proxy Statement for the 1994 Annual General Part III (Items 10-13)
Meeting of Shareholders
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ADVANCED TECHNOLOGY LABORATORIES, INC.
TABLE OF CONTENTS
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PAGE
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PART I.................................................................. 1
ITEM 1. Business................................................... 1
ITEM 2. Properties................................................. 12
ITEM 3. Legal Proceedings.......................................... 13
ITEM 4. Submission of Matters to a Vote of Security Holders ....... 14
PART II................................................................. 14
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 14
ITEM 6. Selected Financial Data.................................... 15
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
ITEM 8. Financial Statements and Supplementary Data................ 21
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 39
PART III................................................................ 39
ITEMS 10-13. Directors and Executive Officers of the Registrant......... 39
PART IV................................................................. 39
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 39
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PART I
ITEM 1. BUSINESS
STRUCTURE OF THE COMPANY
Advanced Technology Laboratories, Inc. ("ATL" or the "Company") is engaged in
the high-technology electronic medical systems business. ATL develops,
manufactures, markets and services diagnostic medical ultrasound systems
worldwide. Prior to June 26, 1992, ATL was named Westmark International
Incorporated ("Westmark"). In February 1992, Westmark announced that its Board
of Directors would recommend to its shareholders that Westmark be divided into
two separate, publicly-traded companies, one engaged in the diagnostic
ultrasound business ("ATL") and the other, SpaceLabs Medical, Inc.
("SpaceLabs"), engaged in the patient monitoring and clinical information
systems business. The recommendation was approved by the shareholders of
Westmark at the 1992 Annual General Meeting and the tax-free distribution of
SpaceLabs stock to the shareholders was effected on June 26, 1992.
Concurrently, Westmark changed its name to Advanced Technology Laboratories,
Inc., the same name as that of its major operating subsidiary.
COMPANY HISTORY
ATL was founded in 1969 and acquired by Squibb Corporation ("Squibb") in
1980. In 1982 Squibb acquired Advanced Diagnostic Research Corporation ("ADR")
and A.B. Kranzbuehler ("Kranzbuehler") and integrated these businesses with
ATL's operations. ADR, based in Tempe, Arizona, was an established leader in
the manufacture of real-time ultrasound systems for obstetrical and abdominal
applications. Kranzbuehler, based in Solingen, Germany, manufactured ultrasound
products and distributed products of ADR and its own manufacture throughout
Europe. Westmark was incorporated in 1983 as a wholly owned subsidiary of
Squibb and became the holding company for Squibb's high technology medical
equipment businesses, ATL and SpaceLabs, in November 1986. On January 2, 1987,
Squibb distributed to Squibb shareholders the shares of Westmark common stock
(the "Common Stock") as a dividend.
ATL subsequently acquired two ultrasound based businesses; Nova MicroSonics
in 1988 (which currently operates as a division of ATL), and Precision Acoustic
Devices ("PAD") in 1990. Nova MicroSonics, located in Mahwah, New Jersey,
manufactures and markets real time and off-line acquisition and measurement
products for use in ultrasound data and image management by hospitals, labs,
clinics and physician offices. PAD, located until recently in Fremont,
California, develops, manufactures and supplies high-performance ultrasound
transducers to industrial and medical imaging markets. In March 1993, the
Company decided to relocate PAD's Fremont operations to Bothell, Washington and
to sell the OEM transducer business of PAD to Blatek, Inc., a transducer
company in State College, Pennsylvania. The relocation of PAD to Bothell was
completed in August 1993. On February 10, 1994 the Company announced that it
had entered into a Merger Agreement with Interspec, Inc., a manufacturer of
medical diagnostic ultrasound systems and transducers. See ITEM 7 MANAGEMENT
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION--
Subsequent Event on page 20.
THE ULTRASOUND BUSINESS
ATL develops, manufactures, markets and services diagnostic medical
ultrasound systems that are widely used in a number of medical applications to
assist the physician in monitoring and diagnosing a variety of conditions, such
as tumors, inflammations, obstructions, cardiovascular diseases and fetal
development. Ultrasound systems provide a safe, noninvasive and painless means
of observing soft tissues and internal body organs and assessing blood flow
through the heart and vessels. ATL is one of the leading suppliers of
diagnostic ultrasound systems in the world. Its Ultramark(R) product line
serves all major diagnostic ultrasound clinical markets--radiology, cardiology,
obstetrics/gynecology ("OB/GYN") and vascular medicine.
The Company believes that it has become a worldwide leader in ultrasound
technology through its proprietary position in digital, broad bandwidth
beamforming and broad bandwidth scanhead technologies.
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Diagnostic ultrasound systems, which are sold for use in hospitals, clinics
and physicians' offices, represented an estimated $1.9 billion worldwide market
in 1993. The total medical imaging industry is estimated to be over $8.4
billion worldwide in 1993.
ULTRASOUND TECHNOLOGY
Medical Applications
Medical ultrasound systems obtain images of the interior of the body by
focusing high-frequency sound waves at the organs, soft tissues and vasculature
being examined. Echoes are created as the sound waves are reflected from
internal structures of differing acoustic properties. These echoes are gathered
and electronically processed by the transducer (scanhead) of the ultrasound
system. Repeated scanning of the interior of the body at very high speeds
produces moving, two-dimensional, black and white video images in real time.
Ultrasound information can be captured on film or paper or stored on videotape
or portable digital media such as floppy or optical discs.
In addition to black and white imaging functions (also known as grayscale or
two-dimensional imaging), ultrasound systems can analyze blood flow
characteristics using the Doppler principle. Doppler technology allows the
measurement and display of the velocity and direction of blood flow through
vessels or between chambers of the heart. This information is typically
displayed in a graphical format. Color Doppler, introduced in the mid-1980s,
permits visualization of blood flow by superimposing a color depiction of blood
flow on the grayscale image of the tissue or vessel structure. Blood flow
toward the scanhead is presented as one color and flow away from the scanhead
is presented as a different color, with velocity presented as gradations of
these colors or intensities.
Ultrasound offers several important advantages compared with other medical
imaging modalities.
Safety. Physicians can often diagnose disease without using invasive
materials, ionizing radiation or exploratory surgery.
Cost effectiveness. Ultrasound is generally less expensive to purchase, costs
less per patient examination, and requires little or no patient preparation
compared to other imaging modalities such as computed tomography ("CT"),
magnetic resonance imaging and positron emission tomography ("P.E.T.").
Real-time. Ultrasound examinations provide the physician with live, real-time
images of anatomy and physiology, which yield more diagnostic information and
can facilitate a faster diagnosis than static images of other imaging
modalities.
In contrast to high-energy modalities such as x-ray and gamma-ray systems,
ultrasound has difficulty imaging through air or bone and generally does not
image the skeletal structure. Due to acoustic properties such as scattering or
attenuation, ultrasound may not provide the clarity of more expensive
modalities in certain applications. However, by reason of its clinical efficacy
and safety, ultrasound is often the first imaging examination ordered by a
diagnosing physician and is typically the preferred imaging method for soft
tissues examination.
PRINCIPAL COMPONENTS
Beamformer. The process leading to the formation of an ultrasound image
begins in the beamformer. The beamformer acts as the acoustic "lens" and
steers, focuses and processes the ultrasound signals provided by the scanhead.
The beamformer's complex electronics can account for a significant portion of
the cost of the entire system. Historically, ultrasound systems have been based
on analog beamformers which process signals in a continuous, wave-like form.
ATL has pioneered the development of digital beamformers, which digitize the
signals returning from the body prior to processing. For a discussion of ATL's
digital beamformer technology, see "ATL's Products."
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Scanhead. The scanhead, a hand-held device placed against the patient's skin,
transmits the sound wave and receives echoes back from the body. A
piezoelectric transducer, a component within the scanhead, converts the
electrical signals from the beamformer into transmitted sound waves and the
returning sound waves (echoes) back into electrical signals for processing by
the beamformer.
Scanheads are categorized according to the five major technologies employed:
phased array, annular array, linear array, curved array and mechanical
scanheads. Images are acquired and displayed in three different image formats:
sector (pie-shaped), linear (rectangular) or trapezoidal. Scanheads are also
categorized by their ability to process a range, or bandwidth, of frequencies.
Scanheads which, in conjunction with the beamformer, are capable of
transmitting and receiving a band of frequencies which is at least 65% of a
band defined by the scanhead's fundamental frequency are considered by ATL to
be broad bandwidth scanheads. Broad bandwidth scanheads capture more acoustic
information for processing and display by the ultrasound system.
Each of the five scanhead technologies offers certain clinical advantages in
specific applications. Phased arrays, linear arrays and curved arrays are
electronically controlled, which permit the simultaneous use of Doppler, color
Doppler and grayscale imaging. Mechanical scanheads perform mechanical scanning
and generally provide a wide range of imaging frequencies at a relative low
cost. Mechanical scanheads are increasingly being replaced by high-performance
annular arrays and electronic arrays. Annular array, a type of mechanical
scanhead, offers the highest resolution of any scanning technology through its
ability to image the thinnest cross-sectional slice of anatomy. Thin slice
imaging ability may be enhanced for electronic arrays by providing two
dimensions of array elements which perform what is known as elevation focusing.
A number of specialty scanheads have been developed in recent years which
employ one or more of these scanning technologies. These include intravaginal
scanheads for imaging general pelvic anatomy, transrectal and prostate
scanheads, bi-plane scanheads (a scanhead able to alternate between two
different planes or cross-sectional views) and transesophageal echocardiography
("TEE") scanheads for cardiovascular scanning from the esophagus and stomach
without interference from ribs, lungs or surrounding cartilage.
Scanhead technology is becoming more complex and highly specialized.
Consequently, the cost of scanheads represents an increasing proportion of the
total cost of an ultrasound system.
PRINCIPAL MARKETS
The worldwide ultrasound market is typically categorized by clinical
application, price range and geographic area.
Clinical Applications. Ultrasound products are used in four primary medical
applications: radiology, cardiology, OB/GYN (including perinatology), and
vascular applications.
RADIOLOGY. The radiology application, at approximately 42%, is the largest
market for ultrasound equipment. The major radiology markets are in the United
States and Europe. Most radiology examinations are conducted in hospitals or
large imaging centers.
In radiology, ultrasound is used to obtain diagnostic information on organs
and soft tissue, particularly in the abdomen. It is also used to ascertain
fetal development, to guide tissue biopsies and to visualize blood flow. Color
Doppler is a standard feature on most high performance radiology ultrasound
systems.
A substantial portion of the radiology market also requires systems which
include cardiac imaging capabilities. In the United States and Canada this
market segment is often referred to as the shared service market. Most
community or small hospitals without a dedicated cardiology department fall
into this category. In Europe, the internal medicine segment requires systems
which include cardiac imaging capability.
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CARDIOLOGY. The cardiology ultrasound, or echocardiography, application, at
approximately 30%, is the second largest market for ultrasound systems. Most
dedicated echocardiography system sales occur in the United States, Western
Europe, and the more developed Asian and Latin American markets. While most
cardiology system sales are to hospitals, the cardiology office practice
represents a significant and growing share of the market for echocardiography
equipment.
Cardiologists use ultrasound as a noninvasive means of capturing real-time
images of the heart and its valves. These images, together with various Doppler
techniques, help the physician assess heart function as well as congenital and
valvular disease. With new advances in scanheads plus acquisition and image
display technology, echocardiography is a useful tool for the detection and
assessment of coronary artery disease. Ultrasound has also been shown to be
valuable in assessing the effectiveness of drug therapy and intervention for
the heart attack patient.
OB/GYN AND PERINATOLOGY. The third largest market for ultrasound systems is
the OB/GYN and perinatology application, at approximately 17%. The majority of
OB/GYN ultrasound system sales are to office-based practitioners in the United
States, Western Europe, and the more developed Asian markets. Perinatology is a
clinical specialty dedicated to high risk obstetrics. Most perinatology
ultrasound sales are to hospitals and institutions in the United States.
Ultrasound is the preferred imaging technology for the assessment of fetal
development since it is noninvasive and involves no ionizing radiation.
Ultrasound is also used for general gynecological and infertility examinations.
The introduction of the intravaginal scanhead in the 1980s expanded the
usefulness of ultrasound for first-trimester obstetrical studies and the
diagnosis of ectopic pregnancies. The advent of ATL's broadband digital imaging
technology with the ESP option (see "ATL's Products") has enabled physicians to
visualize details of fetal development at earlier stages of pregnancy than had
previously been possible.
VASCULAR. The smallest of the primary clinical markets for ultrasound
systems, at approximately 5%, is the vascular ultrasound application, primarily
located in the United States and Western Europe. Most vascular ultrasound
examinations are performed in hospitals.
Vascular ultrasound studies utilize real-time imaging, Doppler and color
Doppler information to identify plaque deposits and their characteristics,
clots, and valve competence in blood vessels. Most vascular examinations are
performed on the body's extremities, cerebrovascular and deep abdominal
regions.
Price Ranges. The world ultrasound market can be divided into five segments
based on broad price ranges. Each market segment is characterized by the level
of system performance and the number of scanheads and features.
PREMIUM PERFORMANCE. The premium market segment, at 13% of the world market,
is characterized by ultrasound systems that typically sell for over $150,000
per unit. These systems provide the physician with superior definition of
subtle tissue characteristics and incorporate high resolution gray scale
imaging, advanced color and spectral Doppler capability, image acquisition
storage, display and review capability, advanced automation capabilities, and
other features providing additional clinical utility. Typically, systems sold
in the premium market are equipped with a wide variety of specialty scanheads.
HIGH PERFORMANCE. The high performance market, at 35% of the world market, is
characterized by systems with high resolution gray scale imaging and advanced
color and spectral Doppler capabilities. Systems in this market segment sell
between $120,000 to $150,000 per unit and generally include advanced
measurement and analysis software, image review capabilities, and a variety of
scanhead offerings.
MID-RANGE COLOR. This mid-range market segment, at 25% of the world market,
is characterized by ultrasound systems that sell between $80,000 and $120,000
per unit. These units are basic gray scale imaging, color and spectral Doppler
systems used for standard routine examinations and utilize a minimum number of
scanheads. Refurbished premium systems and high performance systems with fewer
purchased optional features are also sold in this price range.
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MID-RANGE GRAY SCALE. This mid-range market segment, at 17% of the world
market, is characterized by black and white imaging systems with spectral
Doppler and some calculation and report features. Many of these systems are
sold to small hospitals and clinics and are used in radiology and OB/GYN
applications. Systems in this market segment sell at prices ranging from
$40,000 to $80,000.
LOW-END. The low-end market segment, at 10%, is characterized by basic black
and white imaging systems that sell below $40,000 per unit. These systems
provide limited diagnostic information and are used primarily for monitoring
fetal development and in other radiology and OB/GYN applications. Most of these
systems are sold to private office practitioners and small hospitals. Due to
the growing acceptance and affordability of color Doppler systems, units with
only greyscale capability represent the slowest growing portion of the market.
Geographic Areas. The ultrasound market is divided into four major geographic
markets.
UNITED STATES. The United States, at 38% of the market, accounts for the
largest portion of ultrasound sales. This market is characterized by its
emphasis on high performance systems driven by competition for patient
referrals. These factors encourage the rapid adoption of new technology.
EUROPE. The European market, at 29% of the market, is the second largest
market for ultrasound systems. European health care systems are more
centralized than the United States market and are often subject to more rigid
governmental regulation.
JAPAN. This market accounts for approximately 16% of worldwide ultrasound
sales. Its complex distribution system is highly competitive and Japanese
manufacturers account for almost all sales.
ASIA PACIFIC, LATIN AMERICA AND CANADA. The remaining geographic areas of the
world account for approximately 17% of the market. The Australian and Canadian
markets are similar in structure to those of the European countries. Parts of
Asia and Latin America represent some of the fastest growing areas for high
performance and mid-range ultrasound products. The remainder of this group are
mostly developing countries with limited resources to devote to health care.
Many ultrasound systems sold in these regions are mid-range systems,
refurbished systems or new low-priced Japanese systems.
Emerging Opportunities. Growth in the ultrasound industry has depended upon
and been fueled by the emergence and adoption of new technologies which
increase the diagnostic information available to the clinician, thereby
expanding the use of ultrasound for both existing and new clinical
applications. Most recently, the adoption of color Doppler technology made a
major impact on industry growth during the latter half of the 1980s. ATL
believes that numerous emerging ultrasound technologies offer future growth
opportunities. For example, broad bandwidth ultrasound imaging, if proven
effective for tumor characterization, may spur growth in oncology and radiology
applications; three-dimensional ultrasound display may assist the assessment of
heart conditions and fetal abnormalities; and miniature ultrasound scanheads
coupled with laparoscopic technology may help guide minimally invasive therapy.
There can be no assurance that the Company will pursue these opportunities or,
if it does so, that its efforts will result in viable products.
In 1993 new emerging opportunities began to become apparent. The economic and
regulatory environment of healthcare in many of the more highly industrialized
countries has created a situation where significant growth opportunities for
ultrasound are located in emerging nations and are premised upon increasing
demand for mid-range products. Companies positioned to take advantage of these
evolving market dynamics will be characterized by a distribution system of
considerable scope and an offering of a variety of value oriented products.
ATL'S PRODUCTS
The Company's focus is on developing new technologies, both to improve the
performance of its products and to advance the clinical application of
ultrasound. The performance of ultrasound products is determined primarily by
the type of beamforming and scanhead technologies utilized. ATL has established
an important proprietary position in digital beamforming and broad bandwidth
scanhead technologies. ATL believes these technologies enable physicians to
diagnose disease and other conditions with significantly greater certainty and
offer the potential to extend the use of ultrasound into new clinical
applications.
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The Company has pioneered the development of digital beamforming ultrasound
technology since the introduction of its digital Ultramark 9 system in 1988. In
November 1993, General Electric joined this exclusive category with the
introduction of its own line of digital ultrasound products, the second company
to do so.
ATL's digital beamformer can process the full bandwidth of frequencies
returning through the scanhead while exactly preserving the returning signal
information. Other manufacturers utilize analog technology to process signals
returning from the body. Analog beamformer technology limits the range or
integrity of bandwidth which the beamformer can process at one time. This
inherent limitation leads analog beamformer companies toward offerings of
multiple frequency scanheads, by which a full signal band can be acquired
through serial scans as the frequency band is changed or stepped. Analog
beamformers are also subject to variations and tolerances of analog components
which can distort and weaken the ultrasound signal.
In ATL's digital beamformer the broadband signals returning from the body are
converted into a numerical sequence of ones and zeros, or digitized, preserving
the quantity and quality of the diagnostic information contained within the
signal's broad bandwidth. The principal functions of ATL's digital beamformer
are performed by application-specific integrated circuits ("ASICs") designed by
ATL. These proprietary custom microchips, each containing approximately 160,000
transistors, replace the traditional wire windings and ferrite cores of analog
beamformers with pure digital signal control which preserves signal information
with no degradation.
ATL is also a leader in scanhead technology that complements the capability
of its digital beamforming technology to process broad bandwidth signals. Each
tissue within the body reflects ultrasound in a unique way referred to as its
"tissue signature." Tissue signature is composed of a broad bandwidth of
ultrasound frequencies that differs with tissue condition (healthy versus
diseased) and with tissue type (such as muscle, fat or gland). The Company has
developed scanheads that utilize proprietary technology to permit finer, more
precise tissue structure response and color flow images by allowing the
scanhead to receive ultrasound signals over a broad bandwidth of frequencies.
ATL's broad bandwidth scanheads, when used in conjunction with its digital
beamformer, are able to acquire and process up to twice the bandwidth of
conventional scanheads. As a result, physicians can see more of the tissue
signature with greater clarity and are therefore better able to detect subtle
changes or anomalies.
Ultrasound Systems.
ULTRAMARK 9 HIGH DEFINITION(TM) IMAGING SYSTEM. The Ultramark 9 system with
High Definition Imaging ("HDI") is the Company's premium and high performance
product. Introduced in April 1991, the system contains an ASIC-based digital
beamformer which allows higher resolution images and captures a broader
bandwidth of tissue signature. The Ultramark 9 HDI system also offers a series
of new high performance scanheads, including a line of broad bandwidth
scanheads which provide a broad range of clinical applications for the system
and substantially enhance the system's competitive advantage. In 1993, the
Company increased the value of the Ultramark 9 HDI system with the introduction
of the following broad bandwidth scanheads:
P5-3 Phased Array Scanhead. The P5-3 scanhead extends broad bandwidth
capability to pediatric cardiology and small adult applications.
C7-4 Curved Array Scanhead. The C7-4 scanhead is a broad bandwidth scanhead
for abdominal and obstetrical applications.
C4-2 Curved Array Scanhead. The C4-2 scanhead provides the penetration
required for deep abdominal and obstetrical applications.
L7-4 Linear Array Scanhead. The L7-4 scanhead provides broad bandwidth
scanning in vascular applications.
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These new scanhead offerings complement the other four members of ATL's
family of broadband scanheads, including the L10-5 Linear Array Scanhead, the
A6-3 Annular Array Scanhead, the P3-2 Cardiovascular Phased Array Scanhead, and
the C9-5 Intracavitary Scanhead.
The Ultramark 9 HDI system competes in the radiology, perinatology and
vascular segments of the ultrasound market. It is priced from $135,000 to
$230,000 per unit, depending upon the configuration of the system and the
number of scanheads. Since its introduction the Ultramark 9 HDI system has
enabled the Company to gain share in the largest premium ultrasound market,
radiology. In 1992, the installed base of Ultramark 9 HDI systems received a
free software upgrade, providing additional analysis and performance
improvements. In 1993 ATL again demonstrated the versatile upgrade capability
of the Ultramark 9 system by extending a new diagnostic capability to its
customers, Doppler Power Imaging, through a free software upgrade.
The capability of HDI technology to capture and display a broad tissue
signature has enabled physicians to visualize anatomical detail, subtle tissue
characteristics and disease processes that they could not see or confidently
identify before with ultrasound. In April 1993, the Company introduced the
Ultramark 9 HDI system with the Extended Signal Processing ("ESP") option. This
new, premium feature added additional broad bandwidth scanhead capabilities to
the HDI system. ESP also provided a new level of performance with the ability
to substantially reduce a major ultrasound imaging artifact, speckle, which has
been an enduring challenge in ultrasound.
In the fall of 1993, the Company introduced the HDIcv model of the HDI
system. The HDIcv model is a performance system for the cardiology, shared
services and internal medicine markets.
During 1993 the Company sold used, refurbished HDI systems at prices ranging
from $90,000 to $120,000.
ULTRAMARK 9 DP ULTRASOUND SYSTEM. The Ultramark 9 system was introduced in
1988 as a full featured, color Doppler, multipurpose ultrasound system
incorporating ATL's proprietary digital beamforming technology. In November
1990 the product was enhanced with a number of features known as the Digital
Plus ("DP") package. With the success of the Ultramark 9 system with the HDI
option, the company has discontinued the manufacture of new Ultramark 9 DP
systems. ATL's entire installed base of Ultramark 9 DP systems can be upgraded
with the HDI option, continuing ATL's commitment of upgradeability to its
customers. Throughout 1993, refurbished Ultramark 9 DP systems were sold at
prices below $100,000.
ULTRAMARK 4 ULTRASOUND SYSTEM. This highly portable gray scale and Doppler
system is the Company's principal product for private OB/GYN offices and is
also used in medical institutions worldwide. This product has various
configurations that cover a range of prices from $25,000 to $60,000. Recent
major introductions include Cineloop(R) image review, curved-array scanhead
technology and a multifrequency intravaginal scanhead.
Scanheads. ATL believes that its internal resources devoted to development
and manufacturing of scanheads make it one of the largest scanhead
manufacturers in the world. The Company's manufacturing capabilities allow it
to rapidly commercialize its new scanhead designs. The Company develops and
manufactures scanheads of the five major technologies to be sold with ATL's
ultrasound systems for a wide variety of clinical applications.
Other Products.
IMAGE MANAGEMENT PRODUCTS. The Company's Nova MicroSonics division develops,
manufactures and markets a complete line of ultrasound image management
products for use in the acquisition, storage, display and management of
ultrasound information. For cardiac applications, the Nova MicroSonics
technology facilitates the review and comparison of images produced at
different times during a cardiac study, expanding
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the diagnostic applications of echocardiography to the detection of coronary
artery disease. The ImageVue(R)/DCR Workstation is a state-of-the-art digital
and ultrasound image management system. This workstation performs analysis and
review of ultrasound exams conducted from a variety of ultrasound systems. The
Image LAN Network provides network connection between ultrasound systems,
workstations, printers and other medical imaging devices.
USED EQUIPMENT. The Company refurbishes and sells used ATL systems received
as trade-ins or after use by the Company's sales force as demonstration
equipment. The following systems are among the used systems sold by ATL: the
Ultramark 7 mid-range cardiology system developed under joint agreement with
Fujitsu Limited; the Ultramark 4 system, the Ultramark 9 DP system; and the
Ultramark 9 system with the HDI option. Customers who own these systems can
upgrade them or trade them in for more advanced ATL systems. A significant
portion of the Company's used discontinued equipment is sold in developing
countries.
ACCESSORIES AND SUPPLIES. The Company sells a variety of ultrasound
accessories and supplies, most of which are not manufactured by the Company.
These include disposable supplies, such as ultrasound gel and thermal paper,
and accessories, such as biopsy guides, printers, cameras and videocassette
recorders ("VCRs"). The Company markets these products through direct mail and
its customer support organization.
RESEARCH AND DEVELOPMENT
The Company conducts extensive research and development activities. Its
activities include the development of new scanheads, new system features and
new ultrasound system designs, as well as the investigation of applications for
emerging technologies and clinical procedures. The Company enters into research
agreements with the medical community, including leading physicians and
teaching institutions. Beginning in late 1989 the Company substantially
increased its investment in research and development to accelerate the
introduction of several new technologies and in particular to establish its
important proprietary position in digital beamforming and broad bandwidth
scanhead technologies.
In 1991 the Company instituted a multi-center study at a number of
institutions in Europe and North America to evaluate the ability of the
Ultramark 9 HDI system to distinguish benign and malignant breast disease.
These studies were concluded in 1993. Based upon the findings of these studies,
in February 1994 the Company submitted a Premarket Approval ("PMA") application
to the U.S. Food and Drug Administration ("FDA") for the use of HDI technology
in the differentiation of solid breast masses. The Company believes this to be
the first PMA application submitted to the FDA for diagnostic ultrasound. While
the Company has requested expedited handling of the PMA application by the FDA,
there is no assurance that this request will be granted. The time required for
the application to be processed by the FDA is unknown, although such
applications typically require twelve to twenty-seven months. There can be no
assurances that product clearance under the PMA will ultimately be realized.
The high technology ultrasound business is characterized by rapidly evolving
technology, resulting in relatively short product life cycles and continuing
competitive pressure to develop and market new products. Although the Company
intends to continue extensive research and development activities, there can be
no assurance that it will be able to develop and market new products on a cost-
effective and timely basis, that such products will compete favorably with
products developed by others, or that the Company's existing technology will
not be superseded by new discoveries by competitors.
MANUFACTURING
The Company manufactures substantially all its products at its facility in
Bothell, Washington. The image management systems of Nova MicroSonics are
manufactured in Nova's New Jersey facilities.
Over the past six years the Company has consolidated its principal
manufacturing operations from three plant locations to the Bothell facility
while doubling manufacturing output. In 1990, the Company upgraded its
manufacturing line with a major investment in state-of-the-art surface mount
technology ("SMT") for
8
<PAGE>
printed circuit board assembly. Relative to conventional "through hole"
assembly, SMT improves the reliability of printed circuit boards used in the
Company's Ultramark systems, greatly increases the electronic capacity of the
board and allows for more automated production. The SMT processing line has
been integrated with the Company's computer-aided design capability, enabling
the production of prototype printed circuit boards for potential new products
in a quarter of the time previously required.
The Company purchases certain specialty scanheads from original equipment
manufacturers. The Company also purchases the hard-copy output devices sold
with its ultrasound systems, such as VCRs and cameras, and other materials and
component parts. The specialty scanheads and many of the materials and
components used by ATL in the manufacture of ultrasound equipment are available
from more than one source of supply. Certain components, however, are single
sourced, such as crystals and hybrid and integrated circuits which are critical
to the quality and manufacture of ultrasound equipment. While any of these
single-source items could be replaced over time, abrupt disruption in the
supply of a single-source part could have a material adverse effect on ATL's
manufacturing production of the products relying on such items. In addition,
these items generally have long order lead times, restricting the Company's
ability to respond quickly to changing market conditions.
SALES AND MARKETING
The Company's sales and marketing strategy has been to compete in the major
clinical, price and geographic segments of the ultrasound market. In the United
States, with the exception of the third-party business of Nova MicroSonics, the
Company markets its products through its direct sales organization. The United
States sales organization is organized into three geographic zones, each
staffed with regional management, sales representatives and clinical
application specialists knowledgeable in radiology, cardiology, OB/GYN and
perinatology, and peripheral vascular applications. The role of the application
specialists is to demonstrate the product and train customers in its clinical
use.
The Company markets its products internationally through its direct sales and
service operations in Argentina, Australia, Austria, Belgium, Canada, France,
Germany, Italy, the Netherlands and the United Kingdom. In addition, the
Company markets its products in Sweden through a joint venture with AxTrade
East, an Axel Johnson Trade Company, and in India through a joint venture with
Indchem Electronics. Other principal markets are covered through a dealer
network. European, Middle Eastern and African dealers are managed through ATL's
European headquarters in Munich, Germany. Dealers serving the Pacific Rim
countries, Latin America and South America are managed from Bothell,
Washington. Foreign customers accounted for approximately 47% of revenues in
1993. See Note 18 on page 36.
The Company's marketing efforts emphasize the development of strong
relationships with key medical professionals, participation in national and
regional meetings and conventions for physicians and hospitals, direct mail
advertising, journal advertising and sponsorship of educational programs.
CUSTOMER SUPPORT AND WARRANTY
The Company warrants its new and used products for all parts and labor
generally for one year from the date of original delivery. Under the terms of
the warranty, the customer is assured of service and parts so that the
equipment will operate in accordance with specifications. The Company offers a
variety of post-warranty service agreements permitting customers to contract
for the level of equipment maintenance they require. Alternatively, customers
can contact ATL as needed and receive service at rates based on labor and cost
of parts. The Company's warranty costs are included in cost of product sales in
the Consolidated Financial Statements below.
The Company maintains its own customer support organization in the United
States and other countries where the Company has direct operations. Local
dealers and distributors provide service and support in most other countries.
The Company provides manuals and expedites delivery of repair parts to all
geographic locations from its facility in Bothell, Washington, with the
assistance of its direct operations in Europe.
9
<PAGE>
The Company's customer service organizations are considered an integral part
of its sales effort because a customer's decision to purchase a particular
product is based in part on the availability and reputation of the service for
that product. In addition, the customer support group provides training for
biomedical technicians so that customers can service their own systems. The
group also provides customer education programs on clinical applications and
the use of the Company products.
COMPETITION
The ultrasound market is competitive. The Company competes worldwide in each
of the four major clinical applications of the ultrasound market, in each price
range and in each major geographic market. Four companies, ATL, Toshiba
Corporation's Medical Systems Group, Hewlett-Packard Company's Medical Products
Group and Acuson Corporation, account for approximately 60% of the worldwide
ultrasound market. The Company believes that these four companies have
approximately equal market shares. Each of the Company's primary competitors
initially participated in only one or two of the clinical ultrasound markets
(such as radiology or cardiology), but all are increasingly seeking to sell
their ultrasound products in additional markets.
In addition to the Company's primary competitors, the global leaders of the
medical imaging industry--the Medical Systems Group of General Electric
Company, Siemens Medical Systems, Inc. and Philips Medical Systems, Inc.--have
signaled their intention to become more competitive in the ultrasound market.
General Electric stepped up its participation in ultrasound in November 1993
with the announcement of a new digital ultrasound system. Philips has announced
its plans to collaborate in ultrasound with Hewlett-Packard. Siemens recently
relocated its central world ultrasound facility to Issaquah, Washington,
approximately twelve miles from ATL's headquarters. These companies and several
of the Company's other competitors have far greater financial, marketing,
servicing, technical and research and development resources than those of the
Company.
The Company believes that significant competitive factors in the diagnostic
ultrasound market include the clinical performance of the systems, depth of
product line, reputation for technology leadership, upgradeability to advanced
features and reliability and price of products and service. See "Research and
Development." The Company believes that it presently competes favorably with
respect to each of these competitive factors.
Ultrasound is only one of a number of diagnostic imaging technologies
currently available, including conventional x-ray, CT, magnetic resonance
imaging and P.E.T. A development in another diagnostic technology could
adversely affect the ultrasound industry. Nevertheless, the Company believes
that ultrasound's inherent advantages of safety, cost-effectiveness and real-
time imaging will continue to make ultrasound a primary imaging modality.
PATENTS, TRADEMARKS AND LICENSES
The Company has obtained patents on certain of its products and has applied
for patents which are presently pending. The Company has also sought trademark
protection for the brand names of the products it currently markets. There can
be no assurance that any additional patents will be issued or that trademark
protection will be granted and maintained.
Certain critical technology incorporated in the Company's products, including
software algorithms, broad bandwidth scanhead technology and ASIC technology,
is protected by copyright laws and confidentiality and licensing agreements.
The Company's proprietary digital beamformer is protected by confidentiality
agreements, copyright and trade secret law.
Companies in high technology businesses routinely review the products of
others for possible conflict with their own patent rights. The Company has from
time to time received notices of claims from others
10
<PAGE>
alleging patent infringement. While the Company believes that it does not
infringe any valid patent of any third party, there can be no assurance that
the Company will not be subject to future claims of patent infringement or that
any claim will not require that the Company pay substantial damages or delete
certain features from its products or both. While such claims could temporarily
interrupt the Company's ability to ship affected products, the Company believes
that any such interruption can be overcome by technical changes to product
features. See ITEM 3, LEGAL PROCEEDINGS, below.
GOVERNMENTAL REGULATION
Product Regulation. The Company's products are subject to extensive
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign agencies, and to various domestic and foreign
electrical safety and emission standards. The Company's manufacturing
facilities and the manufacture of its products are subject to FDA regulations
respecting registration of manufacturing facilities and compliance with the
FDA's Good Manufacturing Practices regulations. The Company is also subject to
periodic on-site inspection for compliance with such regulations. The FDA also
has broad regulatory powers with respect to preclinical and clinical testing of
new medical products and the manufacturing, marketing and advertising of
medical products.
The FDA requires that all medical devices introduced to the market be
preceded either by a premarket notification clearance order under Section
510(k) of the Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act"),
or an approved premarket approval application. A 510(k) premarket notification
clearance order indicates FDA agreement with an applicant's determination that
the product for which clearance has been sought is substantially equivalent to
medical devices that were on the market prior to 1976 or have subsequently
received clearance. An approved premarket approval application indicates that
the FDA has determined that the device has been proven, through the submission
of clinical trial data and manufacturing quality assurance information, to be
safe and effective for its labeled indications. The process of obtaining 510(k)
clearance typically takes approximately six to nine months, while the premarket
approval application process typically lasts more than a year. All of ATL's
current products have required only 510(k) clearance.
The Company believes that its products comply generally with applicable
electrical safety standards, such as those of Underwriters Laboratories and
non-U.S. safety standards authorities.
Following a routine inspection by the FDA in 1992, the Company put into place
expanded programs of documentation, process control, and continuous quality
improvement to enhance regulatory compliance. During the latter half of 1993,
the FDA completed a routine follow up of its 1992 inspection. The Company is
awaiting the results of this follow up inspection and also the results of a
routine FDA inspection of the Mahwah, New Jersey facility of Nova MicroSonics.
The Company's ability to obtain timely FDA export and new product approvals is
dependent upon the results of such inspections. The Company can also incur
substantial expense in responding to process improvements and modification of
products previously sold to customers which stem from comments and new
requirements of the FDA.
The Company's FDA compliance programs have been expanded into programs which
will verify the Company's compliance with international standards for medical
device design, manufacture, installation and servicing known as the ISO 9001
standards. During 1994, the Company's facilities and products will be audited
by a European auditing service to obtain quality systems and product
certifications for the Company. This will enable the Company to continue
marketing its products in the European Community after these requirements
become law in 1995. The FDA is in the process of adopting the ISO 9001
standards as regulatory standards for the United States, and it is anticipated
these standards will be phased in for U.S. manufacturers of medical devices
over a period of time.
Federal, state and foreign regulations are constantly undergoing change. The
U.S. government is currently considering healthcare system reform. The national
focus on possible healthcare legislation has caused U.S. ultrasound customers
to become more cautious in making expenditures and investing in capital
11
<PAGE>
equipment. In addition, the U.S. healthcare system has undergone various
consolidations in recent years. The Company cannot predict what effect, if any,
such change may have on its business, or when the deleterious effect of these
conditions on its business will change.
Reimbursement. The Company's products are used by healthcare providers for
diagnostic testing services and other services for which the providers may seek
reimbursement from third-party payors, principally, in the United States,
Medicare, Medicaid and private health insurance plans. Such reimbursement is
subject to the regulations and policies of governmental agencies and other
third-party payors. For example, the Medicare program, which reimburses
hospitals and physicians for services provided to a significant percentage of
hospital patients, places certain limitations on the methods and levels of
reimbursement of hospitals for procedure costs and for capital expenditures
made to purchase equipment, such as that sold by the Company. The Medicare
program also limits the level of reimbursement to physicians for diagnostic
tests. The state-administered Medicaid programs and private payors also place
limitations on the reimbursement of both facilities and physicians for services
provided in connection with diagnostic and clinical procedures. Reduced
governmental expenditures in many countries continue to put pressure on
diagnostic procedure reimbursement. The Company cannot predict what changes may
be forthcoming in these policies and procedures, nor the effect of such changes
on its business.
Third-party payors worldwide, including governmental agencies, are under
increasing pressure to contain medical costs. Limits on reimbursement or other
cost containment measures imposed by third-party payors may adversely affect
the financial condition and ability of hospitals and other users to purchase
products, such as those of the Company, by reducing funds available for capital
expenditures or otherwise. The Company is unable to forecast what additional
legislation or regulation, if any, relating to the health care industry or
third-party reimbursement may be enacted in the future or what effect such
legislation or regulation would have on the Company. Many of ATL's ultrasound
systems are used in an outpatient setting, replace higher-cost imaging
modalities or enable a hospital or clinic to receive higher payments for
services commensurate with the higher level of diagnostic information provided.
Environmental. The Company is subject to Federal, state and local provisions
regulating the discharge of materials into the environment or otherwise for the
protection of the environment. Although the Company's current operations have
not been significantly affected by compliance with environmental laws or
regulations, Federal, state and local governments are becoming increasingly
sensitive to environmental issues, and the Company cannot predict what impact
future environmental regulations may have on its operations.
Employees. As of December 31, 1993, the Company had 1,977 employees. None of
the Company's United States employees is covered by collective bargaining
agreements, and the Company considers its employee relations to be
satisfactory.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Refer to information set forth in "Geographic Segment Information" of the
Notes to the Consolidated Financial Statements contained in Note 18, included
in Item 8 of this Form 10-K.
ITEM 2. PROPERTIES
The Company owns premises at 22100 Bothell Everett Highway, Bothell,
Washington 98041, consisting of 285,000 square feet. These premises include the
Company's corporate headquarters and a major manufacturing facility, as well as
the Company's research and development, sales, service, marketing and
administrative functions. The Company also leases another 41,000 square feet in
an adjoining business park.
12
<PAGE>
Westmark's former principal executive offices were in 10,424 square feet of
leased premises at the Columbia Center, Suite 6800, 701 Fifth Avenue, Seattle,
Washington 98104; such offices have been vacated and are fully subleased
through the term of the lease.
The Company's Nova MicroSonics division has two leased facilities, one in
Indianapolis, Indiana, and one in Mahwah, New Jersey, with a total square
footage of 26,600. The Company's PAD division has a leased manufacturing
facility in Fremont, California, with a total square footage of 18,075. The
lease on the Fremont, California facility terminates in August 1994. The
Company also rents two regional sales offices for two employees at each
location, and one regional customer service facility.
The Company's direct business operations in foreign countries lease office
and warehouse space in their respective countries. The Company also owns two
buildings in Solingen, Germany, a 28,020 square foot building which was used as
an ultrasound systems manufacturing facility and is currently a storage
facility, and a 32,765 square foot building which is used as the temporary
management and operations headquarters for ATL's German subsidiary. In 1990 the
Company transferred its manufacturing operations in Solingen to its Bothell,
Washington facility and is now offering for sale its Solingen property. The
sale of the Solingen property, with an operating lease provision for a certain
portion of the space, is expected to be completed in 1994.
There are no significant unutilized facilities for ongoing operations which
have not yet been disposed of, other than those discussed above, and the
Company believes its existing facilities are sufficient to meet its near-term
operating requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various product liability claims and other
proceedings which arise in the ordinary course of its businesses and believes
that such proceedings, individually or in the aggregate, will not have a
material adverse effect on the business or financial condition of the Company.
Insured claims arising from ATL's businesses subsequent to 1986 are covered by
the Company's insurance policies. The Company intends to maintain insurance
coverage against business risks at levels that take into account the nature and
magnitude of the respective businesses to be conducted by ATL. There can be no
assurance that the Company's current insurance coverage will prove adequate or
that the amount or type of coverage available to the Company will remain
available on a cost-effective basis.
In November 1992, a U.S. District Court in California granted a motion by SRI
International, Inc. ("SRI") requesting partial summary judgment on a patent
infringement claim relating to an electrical circuit alleged to be used in the
Company's Ultramark 4 system. In February 1993, the Court entered an order
enjoining further use of the circuit until the patent expires in April 1994.
This injunction will not pose an obstacle to continued shipment of products by
the Company through the expiry of the SRI patent. The Company has appealed the
summary judgment decision to the U.S. Federal Circuit Court of Appeals and is
awaiting the decision of this Court. Further proceedings to determine a damage
award have been stayed pending the outcome of the appeal. SRI stated in a
February 1993 press release that it is seeking over $5 million in damages. The
Company continues to believe the SRI patent is invalid and not infringed by the
Company. At this stage of the litigation, the Company cannot predict the
outcome of the suit or estimate the amount of loss, if any, but believes its
defenses are meritorious and is vigorously pursuing its rights in the Appellate
Court. There can be no assurance the Company will not be subject to claims of
patent infringement by other parties or that such claims will not require the
Company to pay substantial damages or delete certain features from its products
or both.
13
<PAGE>
The Company is involved in various other legal actions and claims arising in
the ordinary course of business, none of which is expected to have a material
effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market and Market Price for Common Stock. The Company Common Stock, $0.01 par
value, is traded over the counter under the symbol ATLI and is an authorized
security for quotation in National Association of Securities Dealers, Inc.
Automated Quotation National Market System ("Nasdaq National Market").
The market prices of a share of Westmark common stock during a six-month
period, and of the Company's Common Stock during the eighteen-month period
ended December 31, 1993 are set forth below. The prices reflect the high and
low trading prices for each quarter as reported by Nasdaq National Market for
Westmark or ATL. Stock prices quoted beginning with the quarter ended September
25, 1992 reflects stock price adjustment after the SpaceLabs stock dividend.
<TABLE>
<CAPTION>
ATL COMMON STOCK HIGH LOW
---------------- ------ ------
<S> <C> <C>
Quarter ended December 31, 1993............................. 17 1/2 15 3/4
Quarter ended October 1, 1993............................... 17 3/4 15 1/4
Quarter ended July 2, 1993.................................. 18 3/4 15 1/2
Quarter ended April 2, 1993................................. 19 15 3/4
Quarter ended December 31, 1992............................. 24 1/2 16 1/2
Quarter ended September 25, 1992............................ 28 1/4 14 1/2
<CAPTION>
WESTMARK COMMON STOCK HIGH LOW
--------------------- ------ ------
<S> <C> <C>
Quarter ended June 26, 1992................................. 59 1/2 46 3/4
Quarter ended March 27, 1992................................ 63 49 1/4
</TABLE>
Stockholders. The approximate number of stockholders of record of the
Company's Common Stock as recorded on the books of ATL's Registrar and Transfer
Agent as of February 25, 1994 was 9,900.
Dividends. The Company has not paid cash dividends on its capital stock and
does not currently have any plans to pay such dividends in the foreseeable
future. The dividend policy of ATL is reviewed from time to time by the
Company's Board of Directors. The Company's dividend policy is dependent upon
its earnings, the overall financial condition of ATL, and other factors to be
considered by the Board of Directors from time to time.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27, DECEMBER 28, DECEMBER 29,
1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $304,511 $323,711 $279,716 $287,289 $265,480
Gross profit............ 136,742 149,140 123,033 125,781 112,775
Selling, general and
administrative
expenses............... 91,952 95,343 87,430 85,717 75,421
Research and development
expenses............... 43,838 38,313 35,206 34,319 22,134
Income (loss) from oper-
ations................. (5,809) 6,071 3,872 2,041 11,917
Income (loss) before in-
come taxes............. (3,586) 9,505 7,248 4,817 14,771
Net income (loss)....... (5,106) 7,407 6,371 6,946 12,746
Net income (loss) per
share.................. $ (.46) $ .67 $ .62 $ .68 $ 1.23
PERCENT OF TOTAL REVE-
NUES:
Gross margin............ 44.9 % 46.1% 44.0% 43.8% 42.5%
Selling, general and
administrative
expenses............... 30.2 % 29.5% 31.3% 29.8% 28.4%
Research and development
expenses............... 14.4 % 11.8% 12.6% 11.9% 8.3%
Income (loss) from oper-
ations................. (1.9)% 1.9% 1.4% .7% 4.5%
Income (loss) before in-
come taxes............. (1.2)% 2.9% 2.6% 1.7% 5.6%
Net income (loss)....... (1.7)% 2.3% 2.3% 2.4% 4.8%
BALANCE SHEET DATA (END
OF PERIOD):
Cash and short-term in-
vestments.............. $ 54,635 $ 77,445 $ 76,533 $ 37,225 $ 50,659
Receivables............. 86,813 90,836 91,576 83,796 73,734
Inventories............. 74,678 69,404 65,011 72,771 74,701
Working capital......... 137,563 160,766 145,285 124,908 131,541
Marketable debt securi-
ty..................... 4,988 -- -- -- --
Total assets............ 276,698 295,611 291,608 254,719 253,192
Shareholders' equity.... 186,370 204,136 190,346 169,706 173,549
</TABLE>
The loss from operations in 1993 includes a restructuring charge of $4,275.
Income from operations in 1992 includes $4,959 of stock distribution expenses
and restructuring charges related to the Distribution of SpaceLabs.
Income from operations in 1991 includes a $6,338 award as a result of the
Company's lawsuit against a competitor.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
ATL (the "Company") develops, manufactures, markets and services medical
diagnostic ultrasound systems worldwide. These systems are used in radiology,
cardiology, obstetrics and gynecology, and peripheral vascular diagnostic
applications. The ultrasound business is competitive and market demand is
influenced by a variety of factors. These include the introduction of new
technologies which offer improved clinical capabilities and create demand for
new products, the relative cost-effectiveness and clinical utility of competing
technologies, government policies with respect to reimbursement and containment
of medical costs, and changing demographics of the populations in the Company's
markets.
Ultrasound systems are typically sold based on image quality, Doppler
sensitivity, product reliability, upgradeability, clinical versatility, and
ease of use. Price competition, however, is an important factor when the growth
rate in the market slows below historical norms, when a manufacturer seeks to
defend or increase market share, when products are perceived to be equivalent
in terms of clinical utility, or when a product line ages. The impact of price
deterioration is sometimes offset by changes in product mix, lower service
costs, and lower unit manufacturing costs due to declines in component prices,
manufacturing efficiencies, design changes to reduce cost, and volume
increases.
REVENUES AND GROSS PROFIT
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Total Revenues..................................... $304.5 $323.7 $279.7
Percent change..................................... (6)% 16% (3)%
Gross Profit....................................... $136.7 $149.1 $123.0
As a % of revenues................................. 44.9 % 46.1% 44.0 %
</TABLE>
Revenues in 1993 were $304.5 million, a decrease of 6% from revenues of
$323.7 million in 1992. The decrease in revenues primarily reflects changes in
the U.S. medical equipment market as well as changes in the Company's product
mix. Revenues from U.S. operations decreased 13% from 1992. Uncertainties in
the U.S. health care industry regarding potential health care reform
legislation and hospital consolidation trends significantly affected the
capital equipment purchases by doctors, clinics, and hospitals. The constrained
U.S. market also intensified competitive price pressures in the medical
equipment industry. International revenues increased 4% to $141.7 million in
1993 or 47% of total revenues. The increase in international revenues was led
by increases in the Asia, Pacific, and Latin America regions in 1993. Revenues
in Europe decreased slightly in 1993, reflecting the continued weakness of the
European economies, as well as the strengthening of the U.S. dollar, which
adversely affected the Company's revenues. The Company opened a new sales and
customer service subsidiary in Italy in 1993 and announced the opening of an
Argentine subsidiary in December 1993.
The Company's product mix continues to shift toward the high performance,
premium priced systems included in the Ultramark(R) 9 ("UM 9") product family.
In 1993, the Company introduced the Extended Signal Processing ("ESP") option
or upgrade for its Ultramark 9 High Definition(TM) Imaging ("HDI") systems.
Sales of the UM 9 product family now account for three quarters of product
sales, up from two thirds in 1992. The Company also sells pre-owned and
clinical marketing demonstration equipment to its customers and these sales are
becoming an increasing portion of the Company's UM 9 product family sales.
Service revenues continued to grow in 1993, up 4% over 1992 mainly due to the
growing installed base of the Company's products and the change in product mix.
In 1992, revenues increased by 16% to $323.7 million. This increase reflects
higher revenues from high performance, premium priced systems, particularly the
UM 9 HDI system which was introduced in April
16
<PAGE>
1991. International revenues grew 19% to $136.0 million in 1992 or 42% of the
total revenues compared to 41% in 1991.
Gross profit decreased to $136.7 million in 1993, compared with $149.1
million in 1992. As a percent of revenues, gross margin decreased to 44.9%
from 46.1% in 1992. The decline in gross profit primarily represents the
impact of competitive price pressures and lower volumes. These factors were
partially offset by favorable changes in product mix toward premium priced
systems, continued manufacturing efficiencies and reductions in the cost of
service.
In 1992, gross profit increased to $149.1 million reflecting higher revenues
and higher percentage gross margin on both product and service revenues.
Product margins increased due to a higher mix of the UM 9 family product sales
as a proportion of total product sales and improved manufacturing
efficiencies. Improved service margins resulted primarily from cost
containment measures and the change in mix of the installed base of ATL
products.
RESTRUCTURING OF OPERATIONS
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Number of Employees, at end of year..................... 1,977 2,136 2,124
</TABLE>
In August 1993, the Company restructured its operations which resulted in a
reduction in its worldwide workforce of approximately 11%. The restructuring
was undertaken in response to the continued uncertainty in the U.S. health
care industry and to streamline the Company's operations. As a result of this
restructuring, the Company reported a charge of $4.3 million which provided
for severance payments and other costs associated with the restructuring.
On June 26, 1992, the Company distributed to its shareholders all of the
common stock of SpaceLabs Medical, Inc., a wholly owned subsidiary, on a one-
for-one basis (the "Distribution"). The Distribution had the effect of
dividing the Company into two separate, publicly traded companies: Advanced
Technology Laboratories, Inc. (previously named Westmark International
Incorporated) and SpaceLabs Medical, Inc. In connection with the Distribution,
the Company incurred two non-recurring charges totaling $5.0 million: stock
distribution expenses totaling $1.2 million for legal, accounting, investment
advisory, printing and other fees and a restructuring charge of $3.8 million
primarily related to the closure of the former headquarters office, the
severance of certain personnel as a result of the Distribution and the write-
down to estimated market value of the Company's former ultrasound
manufacturing facilities in Germany.
OPERATING EXPENSES
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Selling, General and Administrative.................... $92.0 $95.3 $87.4
As a % of revenues..................................... 30.2% 29.5% 31.3%
Research and Development............................... $43.8 $38.3 $35.2
As a % of revenues..................................... 14.4% 11.8% 12.6%
Other Expense (Income), net............................ $ 2.5 $ 4.5 $(3.5)
As a % of revenues..................................... .8% 1.4% (1.2)%
</TABLE>
Selling, general, and administrative ("SG&A") expenses decreased 4% to $92.0
million in 1993 compared to 1992. The decrease reflects the impact of the
August 1993 restructuring discussed previously, as well as other cost
reduction programs. These savings were partially offset by selling and
marketing activities related to the introduction of the Extended Signal
Processing option for the UM 9 HDI system and expenses incurred to support the
continued growth of international sales activity. In 1992, SG&A expenses
increased 9% to
17
<PAGE>
$95.3 million, reflecting expenses incurred to support the growth in revenues
and the expansion of international sales and marketing activities.
Research and development expenses in 1993 increased 14% over 1992 to $43.8
million or 14.4% of revenues. In 1992, R&D expenses were $38.3 million or 11.8%
of revenues. In 1993, ATL introduced new product features such as the Extended
Signal Processing technology and four new broadband scanheads for the HDI
system. Management expects to continue its investment in product development
programs to enhance its position in proprietary and other technologies.
In 1993, other expense (income), net, includes a $1.1 million gain on the
sale of an investment in a third party. The equity investment was sold in the
fourth quarter of 1993 generating $3.2 million in cash proceeds. Other expense
(income), net, also includes foreign exchange gains or losses, Washington state
business and occupation (B&O) tax, and amortization of costs in excess of net
assets of businesses acquired. Foreign exchange gains and losses include
principally gains and losses on intercompany accounts of ATL's foreign
subsidiaries and on forward foreign currency exchange contracts. Net losses on
foreign currency transactions were $1.2, $1.8, and $.7 million in 1993, 1992,
and 1991, respectively. B&O tax, a gross receipts tax for products manufactured
in the state of Washington, amounted to $1.1, $1.1, and $1.0 million in 1993,
1992, and 1991, respectively. In 1991, other expense (income), net, includes a
$6.3 million arbitration award received by the Company as a result of its
lawsuit against a competitor.
INVESTMENT INCOME
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Investment Income, net of interest expense................ $2.2 $3.4 $3.4
</TABLE>
Net investment income decreased to $2.2 million in 1993. The decrease
reflects lower cash balances available for investment in 1993, as well as lower
interest rates on invested cash. Net investment income remained at $3.4 million
in 1992, comparable to 1991.
TAXES AND NET INCOME (LOSS)
<TABLE>
<CAPTION>
1993 1992 1991
----- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Income (Loss) Before Income Taxes........................ $(3.6) $9.5 $7.2
Provision for income taxes:
Domestic income taxes.................................... $ .6 $1.4 $ .5
Foreign income taxes..................................... .9 .7 .4
----- ---- ----
$ 1.5 $2.1 $ .9
As a % of income (loss) before income taxes.............. (42.4)% 22.1% 12.1%
Net Income (Loss)........................................ $(5.1) $7.4 $6.4
</TABLE>
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). Under FAS 109, the provision for income taxes and the effective tax rate
are subject to volatility. Changes in statutory rates and taxable income will
affect the amount of net deferred tax assets which can be recognized under FAS
109 and the related provision for income taxes.
For the Company to realize its U.S. net deferred tax assets, its U.S. taxable
income must be comparable to or higher than recent years. Reductions in taxable
income levels will result in increased deferred income tax expense. Likewise,
significant increases in taxable income will result in the recognition of
deferred tax benefits, providing deferred tax assets have not previously been
recognized.
18
<PAGE>
Taxable income has differed from pretax earnings for financial reporting
purposes in the past due to permanent differences, the timing of recognizing
certain income and deductions, and deductions for stock option compensation.
Due to the restructuring charge and the slow U.S. ultrasound market in 1993,
the Company has not sustained the U.S. taxable income level of recent years.
This contributed significantly to the $2.2 million increase in the deferred tax
asset valuation allowance which was reported as part of deferred tax expense
for 1993.
During 1993, the Internal Revenue Service completed an examination of the
Company's tax returns for the years 1989 and 1990. The audit resulted in a net
refund of $1.1 million and allowed the Company to reduce its liability for
income taxes by $2 million in 1993. The Company believes it has made adequate
provision for income taxes that may become payable with respect to open tax
years.
The provision for income taxes includes benefits from the utilization of
foreign tax loss carryforwards. Foreign tax loss carryforwards of approximately
$6.7 million remain at the end of 1993. No benefit has been recognized for the
majority of these remaining benefits due to uncertainty surrounding their
realization.
CAPITAL RESOURCES AND LIQUIDITY
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash and short-term investments..................... $ 54.6 $ 77.4 $ 76.5
Long-term marketable debt security.................. $ 5.0 -- --
Receivables......................................... $ 86.8 $ 90.8 $ 91.6
Inventories......................................... $ 74.7 $ 69.4 $ 65.0
Shareholders' equity................................ $186.4 $204.1 $190.3
Return on shareholders' equity...................... (2.6)% 3.8% 3.5%
</TABLE>
The Company has financed operations primarily with internal resources,
including its cash and short-term investment balances. Cash and short-term
investments totaled $54.6 million at December 31, 1993. The Company also holds
$5.0 million in a marketable debt security which matures beyond 1994. Short-
term borrowings of $3.7 million at December 31, 1993 represent working capital
lines of credit maintained at several of the Company's foreign subsidiaries to
facilitate intercompany cash flow. The Company has no long-term debt.
Shareholders' equity at December 31, 1993 was $186.4 million, or 67% of total
assets.
The Company generated positive cash flow of $5.7 million from operating
activities. However, the Company's investment in inventories increased to $74.7
million at December 31, 1993, reflecting slower shipment levels and the
introduction of new feature upgrades for products during 1993. In the fourth
quarter of 1993, the Company implemented an inventory reduction program which
resulted in a $9.0 million reduction in the inventory balance during the
quarter. During 1993, the Company invested $14.2 million in additions to
property, plant and equipment, net of asset retirements. Total depreciation and
amortization expense for 1993 was $11.9 million.
The Company repurchased 794,000 shares of its own common stock in the open
market for $13.4 million under a share repurchase program which began in
February 1993. The Company is authorized to purchase up to 1,000,000 shares
under this program, subject to certain criteria. Shares purchased are used to
service the Company's employee benefit plans. The Company also purchased 12,481
shares of its common stock under a separate, oddlot shareholder program. The
oddlot program expired in December 1993.
In 1992, the Company made a $36.2 million cash contribution to SpaceLabs
Medical, Inc. in connection with the Distribution and received $28.2 million
from the exercise of employee stock options.
The Company has occasionally utilized its cash resources to make acquisitions
of technology or small technology-related businesses. The Company may undertake
further acquisitions of technology in the future.
19
<PAGE>
In addition to its cash balances, the Company has available unsecured credit
facilities of $25 million, including a committed line of credit of $15 million.
Management expects that barring any unforeseen circumstances or events,
existing cash and short-term investments together with available credit lines
and funds generated from operations should be sufficient to meet the Company's
operating requirements for 1994.
OTHER BUSINESS FACTORS
Companies in high technology businesses can from time to time experience
difficulty with the availability of technology employed in their products.
While the Company strives to develop alternate sources for the components it
requires and works closely with vendors of specialty items, the Company's
vendors of highly specialized and unique parts such as custom semiconductor
devices can occasionally experience difficulty in the manufacture of products.
Vendors can also experience difficulty in meeting quality standards the Company
requires of its vendors. Such difficulties can lead to long order lead times or
delays in the Company's manufacture of products. Manufacturing efforts can also
be impeded by third party assertions of patent infringement by the Company's
products. See ITEM 3--LEGAL PROCEEDINGS on Page 13.
The Company is subject to certain rules and regulations of the U.S. Food and
Drug Administration ("FDA") regarding the design, documentation, manufacture,
marketing, and reporting of the performance of its products. See ITEM 1--
BUSINESS--Governmental Regulation on Page 11.
IMPACT OF NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which the Company will be required to adopt prospectively
on January 1, 1994. Implementation of this accounting standard will not have a
material effect on the Company's financial statements.
SUBSEQUENT EVENT
On February 10, 1994, the Company announced it had entered into a Merger
Agreement with Interspec, Inc. ("Interspec"), a manufacturer of medical
diagnostic ultrasound systems and transducers, headquartered in Ambler,
Pennsylvania. Pursuant to the Merger Agreement, which is subject to approval by
shareholders of both companies, Interspec would become a wholly owned
subsidiary of the Company through an exchange of 0.413 shares of the Company's
common stock for each share of Interspec stock. The proposed merger plan will
be submitted to shareholders of Interspec and the Company at their respective
shareholder meetings in May 1994. The transaction is expected to be accounted
for as a pooling-of-interests.
The Company believes the merger will enable the Company and Interspec to
combine resources and product lines to expand the Company's market position in
the cardiology and mid-priced market segments of the ultrasound market.
The Company is filing a proxy statement with the Securities and Exchange
Commission relating to the merger proposal which will more fully describe the
proposed merger.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements are included herewith:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................... 22
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1993 and 1992............ 23
Consolidated Statements of Operations for each of the years in
the three-year period ended December 31, 1993....................... 24
Consolidated Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1993....................... 25
Consolidated Statements of Shareholders' Equity for each of the years
in the three-year period ended December 31, 1993.................... 26
Notes to Consolidated Financial Statements........................... 27
</TABLE>
See Item 14 for the Financial Statement Schedules filed with Form 10-K
Report.
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
ADVANCED TECHNOLOGY LABORATORIES, INC.
We have audited the accompanying consolidated balance sheets of Advanced
Technology Laboratories, Inc. and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1993. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedules as listed in
the index referred to in Part IV, Item 14(2) of the Form 10-K report. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
Technology Laboratories, Inc. and subsidiaries as of December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1993 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
Seattle, Washington
February 10, 1994
22
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and short-term investments.................... $ 54,635 $ 77,445
Receivables........................................ 86,813 90,836
Inventories........................................ 74,678 69,404
Prepaid expenses................................... 1,305 1,297
Deferred income taxes.............................. 7,403 10,406
-------- --------
Total current assets............................. 224,834 249,388
Marketable Debt Security............................. 4,988 --
Property, Plant and Equipment, Net................... 45,318 41,302
Other Assets, Net.................................... 1,558 4,921
-------- --------
$276,698 $295,611
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings.............................. $ 3,679 $ 4,528
Accounts payable and accrued expenses.............. 49,138 53,698
Deferred revenue................................... 29,691 27,667
Taxes on income.................................... 4,763 2,729
-------- --------
Total current liabilities........................ 87,271 88,622
Deferred Income Taxes................................ 3,057 2,853
Commitments, Contingencies, and Subsequent Event
Shareholders' Equity................................. 186,370 204,136
-------- --------
$276,698 $295,611
======== ========
Common shares outstanding............................ 10,508 11,250
</TABLE>
See accompanying notes to Consolidated Financial Statements.
23
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27,
1993 1992 1991
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Product sales......................... $244,604 $265,940 $229,988
Service............................... 59,907 57,771 49,728
-------- -------- --------
304,511 323,711 279,716
Cost of Sales
Cost of product sales................. 130,122 137,078 121,666
Cost of service....................... 37,647 37,493 35,017
-------- -------- --------
167,769 174,571 156,683
-------- -------- --------
Gross Profit............................ 136,742 149,140 123,033
Operating Expenses
Selling, general and administrative... 91,952 95,343 87,430
Research and development.............. 43,838 38,313 35,206
Restructuring charges................. 4,275 3,764 --
Stock distribution expenses........... -- 1,195 --
Other expense (income), net........... 2,486 4,454 (3,475)
-------- -------- --------
142,551 143,069 119,161
-------- -------- --------
Income (Loss) From Operations........... (5,809) 6,071 3,872
Investment income....................... 2,912 4,224 4,073
Interest expense........................ (689) (790) (697)
-------- -------- --------
Income (Loss) Before Income Taxes....... (3,586) 9,505 7,248
Income tax expense...................... 1,520 2,098 877
-------- -------- --------
Net Income (Loss)....................... $ (5,106) $ 7,407 $ 6,371
======== ======== ========
Net Income (Loss) Per Share............. $ (.46) $ .67 $ .62
======== ======== ========
Weighted average common shares and
equivalents outstanding................ 10,992 11,086 10,220
</TABLE>
See accompanying notes to Consolidated Financial Statements
24
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27,
1993 1992 1991
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating Activities
Net income (loss)....................... $(5,106) $ 7,407 $ 6,371
Non-cash charges (credits) to net income
(loss):
Depreciation and amortization......... 11,882 10,981 10,248
Deferred income tax expense (benefit). 3,207 (1,361) (44)
Gain on sale of investment............ (1,125) -- --
Common shares issued to benefit plan.. 289 -- --
Restructuring charge.................. -- 1,400 --
Changes in:
Receivables........................... 1,951 (1,247) (6,800)
Inventories........................... (6,652) (5,808) 7,838
Prepaid expenses...................... (49) 276 791
Accounts payable and accrued expenses. (3,408) 4,630 (3,384)
Deferred revenue...................... 2,237 3,339 4,397
Taxes on income....................... 2,072 (612) 4,104
Other................................. 368 (177) (529)
------- ------- -------
Cash provided by operations........... 5,666 18,828 22,992
Investing Activities
(Increase) decrease in short-term
investments.......................... 44,902 (18,338) (755)
Investment in marketable debt
security............................. (4,988) -- --
Investment in property, plant and
equipment, net....................... (14,169) (10,174) (8,245)
Proceeds from sale of investment...... 3,235 -- --
Other................................. -- (61) 441
------- ------- -------
Cash provided (used) by investing
activities........................... 28,980 (28,573) (8,559)
Financing Activities
Increase (decrease) in short-term
borrowings........................... (849) (3,457) 1,810
Purchases of common shares............ (13,753) -- --
Exercise of stock options............. 201 28,150 9,492
Tax effect of employee stock
transactions......................... (53) 8,107 3,357
Contribution to SpaceLabs............. -- (36,212) --
Cash received from SpaceLabs under Tax
Allocation........................... 1,055 -- --
Agreement
Increase (decrease) in payable to
SpaceLabs............................ -- (4,975) 10,973
------- ------- -------
Cash provided (used) by financing ac-
tivities............................. (13,399) (8,387) 25,632
Effect of exchange rate changes......... 845 706 (1,512)
------- ------- -------
Increase (decrease) in cash and cash
equivalents............................ 22,092 (17,426) 38,553
Cash and cash equivalents, beginning of
year................................... 30,498 47,924 9,371
------- ------- -------
Cash and cash equivalents, end of year.. $52,590 $30,498 $47,924
======= ======= =======
Short-term investments.................. $ 2,045 $46,947 $28,609
Long-term marketable debt security...... $ 4,988 -- --
</TABLE>
See accompanying notes to Consolidated Financial Statements
25
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
STOCK UNEARNED FOREIGN
AND RESTRICTED CURRENCY TOTAL
PAID-IN SHARE ACCUMULATED TRANSLATION SHAREHOLDERS'
CAPITAL COMPENSATION DEFICIT ADJUSTMENT EQUITY
-------- ------------ ----------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28,
1990................... $190,553 $(1,595) $(19,355) $ 103 $169,706
Net income.............. -- -- 6,371 -- 6,371
Issuance of restricted
shares................. 1,427 (1,427) -- -- --
Amortization of
restricted share
compensation........... -- 1,744 -- -- 1,744
Exercise of employee
stock options.......... 9,492 -- -- -- 9,492
Tax effect of employee
stock transactions..... 3,357 -- -- -- 3,357
Foreign currency trans-
lation adjustment...... -- -- -- (324) (324)
-------- ------- -------- ------- --------
BALANCE, DECEMBER 27,
1991................... 204,829 (1,278) (12,984) (221) 190,346
Net income.............. -- -- 7,407 -- 7,407
Issuance of restricted
shares................. 2,364 (2,364) -- -- --
Amortization of
restricted share
compensation........... -- 1,350 -- -- 1,350
Exercise of employee
stock options.......... 28,150 -- -- 28,150
Tax effect of employee
stock transactions..... 8,107 -- -- -- 8,107
Foreign currency trans-
lation adjustment...... -- -- -- (2,369) (2,369)
Distribution of
SpaceLabs.............. (29,148) 293 -- -- (28,855)
-------- ------- -------- ------- --------
BALANCE, DECEMBER 31,
1992................... 214,302 (1,999) (5,577) (2,590) 204,136
Net loss................ -- -- (5,106) -- (5,106)
Issuance of restricted
shares................. 584 (584) -- -- --
Amortization of
restricted share
compensation........... -- 1,241 -- -- 1,241
Exercise of employee
stock options.......... 201 -- -- -- 201
Issuance of common stock
to benefit plan........ 289 -- -- -- 289
Tax effect of employee
stock transactions..... (53) -- -- -- (53)
Repurchase of common
shares................. (13,753) -- -- -- (13,753)
Foreign currency trans-
lation adjustment...... -- -- -- (1,640) (1,640)
Cash received from
SpaceLabs under Tax
Allocation Agreement... 1,055 -- -- -- 1,055
-------- ------- -------- ------- --------
BALANCE, DECEMBER 31,
1993................... $202,625 $(1,342) $(10,683) $(4,230) $186,370
======== ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
PREFERRED COMMON
1993 SHARES SHARES
- ---- --------- ------
<S> <C> <C>
Par value per share...................................... $25.00 $ .01
Authorized shares........................................ 6,000 50,000
Issued shares............................................ -- 11,252
Outstanding shares....................................... -- 10,508
Common shares held in treasury........................... -- 744
</TABLE>
<TABLE>
<CAPTION>
PREFERRED COMMON
1992 SHARES SHARES
- ---- --------- ------
<S> <C> <C>
Par value per share...................................... $25.00 $ .01
Authorized shares........................................ 6,000 50,000
Issued shares............................................ -- 11,250
Outstanding shares....................................... -- 11,250
Common shares held in treasury........................... -- --
</TABLE>
See accompanying notes to Consolidated Financial Statements
26
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Advanced
Technology Laboratories, Inc. and its wholly-owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company's fiscal year ends on December 31. Prior to 1992, the Company's
fiscal year was a 52 or 53 week period, ending on the last Friday in December.
Fiscal years 1993 and 1991 included 52 weeks; fiscal year 1992 included 53
weeks.
Operations
The Company develops, manufactures, markets, and services medical diagnostic
ultrasound systems worldwide. These systems are used primarily in radiology,
cardiology, obstetrics and gynecology, and peripheral vascular applications.
Inventories
Inventories are valued at the lower of cost, determined by the first-in,
first-out method, or market. The Company maintains a uniform policy for its
worldwide operations to provide adequate reserves for inventory obsolescence.
Property, Plant and Equipment
The costs of significant additions and improvements to property, plant and
equipment are capitalized. Maintenance and repairs are expensed as incurred.
Buildings, machinery and equipment are depreciated primarily on the straight-
line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings......................... 40 years
Machinery and equipment........... 3-10 years
</TABLE>
Leasehold improvements are amortized over the shorter of their useful lives
or the term of the lease.
Cost in Excess of Net Assets of Businesses Acquired
The cost in excess of net assets of businesses acquired is amortized on the
straight-line method over seven years.
Foreign Currency
Revenues, costs and expenses of the Company's international operations
denominated in foreign currencies are translated to U.S. dollars at average
rates of exchange prevailing during the year. Assets and liabilities are
translated at the exchange rate on the balance sheet date. Translation
adjustments resulting from this process are accumulated and reported in
shareholders' equity.
The Company enters into foreign currency exchange contracts as a hedge
against exposure to foreign currency fluctuations associated primarily with
intercompany receivables and payables. Foreign exchange contracts generally
have maturities of less than one year. Gains and losses resulting from these
instruments
27
<PAGE>
are recognized in the same period as the underlying hedged transactions. At
December 31, 1993, foreign currency exchange contracts hedging anticipated
transactions totaled approximately $19,500, primarily denominated in Canadian,
Australian, and European currencies. The estimated fair value of these
contracts approximates the aggregate contract value, based on quoted forward
rates at December 31, 1993.
Realized and unrealized gains and losses on foreign currency transactions and
forward exchange contracts are included in other expense (income), net.
Revenue
Revenue is generally recognized upon shipment of products and delivery of
services to customers.
Deferred revenue consists of deposits received from customers and
unrecognized service contract revenue. Service contracts are generally issued
for a 12-month period and are carried as unbilled receivables from date of
issue until invoiced to the customer in accordance with the terms of the
contract. The revenue derived from these contracts is initially deferred and
subsequently recognized on the straight-line method over the lives of the
contracts.
Sales-type Leases
In 1993, the Company began a product leasing program for its customers. Under
this program, the Company leases its medical ultrasound imaging equipment to
customers under sales-type leases with terms ranging from two to five years.
The Company currently sells its lease contract receivables to outside parties
on a regular basis. At December 31, 1993, the majority of lease contract
receivables had been sold, without recourse. The remaining lease contract
receivables at December 31, 1993 are not significant.
Product Warranty
The Company provides at the time of product shipment for the estimated cost
to repair or replace products sold under warranties. Such warranties generally
cover a 12-month period.
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). FAS 109 requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements and tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to be recovered or
settled.
Pension Plans
Pension costs are funded in accordance with requirements set forth by the
Employee Retirement Income Security Act of 1974.
Diversification of Credit Risk
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash investments and trade receivables. The Company's
investment portfolio is diversified and primarily consists of investment grade
securities that approximate fair market value. Concentrations of credit risk
with respect to receivables are limited due to the Company's large customer
base, generally short payment terms, and the dispersion of customers across
geographic areas. The Company performs credit evaluations of its customers'
financial condition and requires collateral, such as letters of credit, in
certain circumstances.
28
<PAGE>
Per Share Data
Per share data is based on the weighted average number of common shares and
dilutive common share equivalents outstanding. Common share equivalents are
calculated under the treasury stock method and consist of unexercised employee
stock options.
Reclassifications
Certain amounts reported in previous years have been reclassified to conform
to the 1993 presentation.
2. DISTRIBUTION OF SPACELABS MEDICAL, INC.
On June 26, 1992, the Company (previously named Westmark International
Incorporated) distributed to its shareholders all of the common stock of
SpaceLabs Medical, Inc., a wholly owned subsidiary, on a one-for-one basis (the
"Distribution"). The Distribution had the effect of dividing the Company into
two separate, publicly traded companies: Advanced Technology Laboratories, Inc.
(previously Westmark International Incorporated) and SpaceLabs Medical, Inc.
("SpaceLabs").
The spin-off of a company, such as SpaceLabs, would normally be reported as a
discontinued operation. However, the historical consolidated financial
statements of the Company were retroactively restated to deconsolidate the
financial statements of SpaceLabs to reflect the Distribution. The Company
believes this exception to the usual method of reporting a spin-off is
appropriate given the highly unique circumstances surrounding the relationship
between SpaceLabs and the Company. These circumstances were reviewed with the
staff of the Securities and Exchange Commission. Management believes that
deconsolidation, which presents the historical financial statements of the
Company as if there never had been an affiliation between the Company and
SpaceLabs, is the most meaningful financial presentation. Corporate and
administrative expenses were allocated to the Company and SpaceLabs based on
relative revenues. Management believes this allocation method was reasonable.
Further, management believes that reported expenses, including income taxes,
would not have been materially different had the Company operated as an
unaffiliated entity.
In connection with the Distribution, the Company made a net contribution of
assets and liabilities to SpaceLabs, which reduced the Company's shareholders'
equity by $28,855. The contribution consisted of $36,212 in cash and $550 in
other assets, offset by the elimination of a $7,907 payable to SpaceLabs. At
June 26, 1992, the payable due to SpaceLabs represented cumulative cash
transfers prior to the Distribution between SpaceLabs and the Company arising
from SpaceLabs' operating and financing activities.
As part of the Distribution, the Company and SpaceLabs entered into an
Intercompany Tax Agreement that provides for payment to or reimbursement from
SpaceLabs for pre-Distribution tax matters. In 1993, the Company received a net
amount of $1,055 from SpaceLabs under this agreement as a result of the
conclusion of an Internal Revenue Service examination for the years 1989 and
1990. The amount was reported as an increase to shareholders' equity.
Expenses related to the Distribution totaling $1,195 were incurred in 1992
for legal, accounting, investment advisory, printing and other fees and are
reported as stock distribution expenses in the consolidated statements of
operations. The Company also incurred restructuring charges of $3,764 including
expenses related to the closure of the Seattle headquarters' office, severance
of certain personnel as a result of the Distribution, and a $1,400 write down
to estimated market value of the Company's former ultrasound manufacturing
facility in Germany.
3. RESTRUCTURING CHARGE
In August 1993, the Company incurred a restructuring charge of $4,275 related
to the reduction of its worldwide workforce of approximately 11%. The
restructuring was primarily undertaken in response to the
29
<PAGE>
uncertainty in the health care industry and to streamline operations. The
charge provided for severance payments and other costs associated with the
restructuring of the Company's operations.
4. CASH, SHORT-TERM INVESTMENTS AND MARKETABLE DEBT SECURITY
Short-term investments and the marketable debt security are stated at cost
which approximates fair market value. For purposes of the statement of cash
flows, cash equivalents are defined as investments with maturities of three
months or less at the date of purchase. The Company holds a marketable debt
security issued by the U.S. Government which matures in 1996. The marketable
debt security is classified as a non-current asset on the consolidated balance
sheet.
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Cash and cash equivalents................................ $52,590 $30,498
Short-term investments................................... 2,045 46,947
------- -------
54,635 77,445
Long-term marketable debt security....................... 4,988 --
------- -------
$59,623 $77,445
======= =======
</TABLE>
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", which the Company will be required to adopt prospectively
on January 1, 1994. Implementation of this accounting standard will not have a
material effect on the Company's financial statements.
5. RECEIVABLES
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Trade receivables...................................... $83,319 $88,005
Less allowance for doubtful receivables and sales re-
turns................................................. (5,864) (5,136)
------- -------
77,455 82,869
Other, primarily unbilled service contracts............ 9,358 7,967
------- -------
$86,813 $90,836
======= =======
</TABLE>
6. INVENTORIES
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Materials and work in process............................ $19,813 $19,856
Finished products........................................ 14,958 14,360
Demonstrator equipment................................... 20,061 15,543
Customer service......................................... 19,846 19,645
------- -------
$74,678 $69,404
======= =======
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT, AT COST
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Land and improvements................................. $ 4,948 $ 5,022
Buildings and leasehold improvements.................. 19,070 19,456
Machinery and equipment............................... 60,398 52,198
-------- --------
84,416 76,676
Less accumulated depreciation and amortization........ (39,098) (35,374)
-------- --------
$ 45,318 $ 41,302
======== ========
</TABLE>
30
<PAGE>
The Company has accepted an offer to sell property formerly used as a
manufacturing facility in Germany. The transaction is expected to close in
early 1994 with a small gain on the sale. The property secures a foreign line
of credit. A portion of the proceeds from the sale of the property will be used
to pay off the outstanding balance on this line of credit.
8. OTHER ASSETS
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Costs in excess of net assets of businesses acquired... $ 5,105 $ 5,117
Less accumulated amortization.......................... (4,537) (3,890)
------- -------
568 1,227
Investments, at cost................................... 47 2,248
Other.................................................. 943 1,446
------- -------
$ 1,558 $ 4,921
======= =======
</TABLE>
Amortization of costs in excess of net assets of businesses acquired was $659
in 1993, $675 in 1992, and $669 in 1991, and is included in other expense
(income), net.
During 1993, the Company sold its equity investment in a third party for
$3,235. A gain on the sale of the investment of $1,125 is included in other
expense (income), net.
9. SHORT-TERM BORROWINGS
Short-term borrowings represent foreign currency borrowings carrying interest
rates ranging from 8% to 12% under lines of credit maintained by various
foreign subsidiaries for working capital purposes. These credit lines are
primarily unsecured, except as discussed in note 7.
At December 31, 1993, the Company had available unsecured credit facilities
totaling $25,000, including a committed line of credit of $15,000. No
borrowings were outstanding under these facilities at December 31, 1993. The
loan agreement for the committed line of credit includes various covenants
relating to financial ratios and restrictions on cash dividends. The Company
was in compliance with, or had obtained waivers for, these covenants at
December 31, 1993.
Interest expense as reported in the consolidated statements of operations
approximates amounts paid each year.
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Accounts payable......................................... $17,155 $19,057
------- -------
Accrued expenses
Salaries and other compensation........................ 14,275 14,581
Warranty reserves...................................... 5,193 5,450
Taxes, other than income............................... 2,440 2,145
Other.................................................. 10,075 12,465
------- -------
31,983 34,641
------- -------
$49,138 $53,698
======= =======
</TABLE>
31
<PAGE>
11. EMPLOYEE BENEFIT PLANS
Substantially all employees of the Company's U.S. operations are covered
under a noncontributory, defined benefit pension plan. The benefits are based
on the employee's years of service and highest consecutive five-year average
compensation.
Net pension cost is comprised of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits earned during the
year........................................... $1,090 $ 912 $ 846
Interest cost on projected benefit obligation... 630 478 389
Income on plan assets........................... (740) (191) (397)
Net amortization and deferral................... 490 (7) 364
------ ------ ------
$1,470 $1,192 $1,202
====== ====== ======
</TABLE>
The funded status of the plans at December 31, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1993 1992
-------- -------
<S> <C> <C>
Accumulated benefit obligation, including vested
benefits of $5,552 at December 31, 1993 and $3,532
at December 31, 1992............................... $ 6,526 $ 4,136
-------- -------
Projected benefit obligation, including the effect
of projected future salary increases............... 11,453 6,992
Plan assets at fair value........................... 6,461 4,290
-------- -------
Excess of projected benefit obligation over plan as-
sets............................................... 4,992 2,702
Unrecognized prior service cost..................... (863) (1,032)
Unrecognized net experience loss.................... (3,685) (1,064)
Unrecognized net asset.............................. -- 31
-------- -------
Accrued pension cost................................ $ 444 $ 637
======== =======
</TABLE>
The projected benefit obligations are based on employee census information as
of the beginning of each year.
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.75% for 1993, and 8.5% for 1992
and 1991. The assumed annual rate of increase in future compensation levels was
9% for the first five years of service and 5.75% thereafter, for 1993; and 10%
and 6.5% in both 1992 and 1991. The expected long-term rate of return on plan
assets was 9% in each of 1993, 1992 and 1991.
A 401(k) retirement savings plan is maintained for all U.S. employees. The
Company's contributions to this plan were $895, $748, and $670 in 1993, 1992
and 1991, respectively.
12. SHAREHOLDERS' EQUITY
In 1992, the Company adopted the 1992 Option, Stock Appreciation Right,
Restricted Stock, Stock Grant and Performance Unit Plan and the 1992 Non-
Officer Employee Stock Option Plan (the "1992 Plans"). Under the 1992 Plans,
1,750,000 common shares are reserved primarily for issuance of stock options at
prices equal to the fair market value of the Company's common shares at the
date of grant and for issuance of restricted shares at par value. Stock options
and restricted stock granted under the 1992 Plans are generally exercisable at
25% each year over a four year vesting period. At December 31, 1993,
approximately 359,000 shares were available for grants under the 1992 Plans.
32
<PAGE>
In 1993, the Company established the Non-Employee Director Stock Option Plan.
Under this plan, 50,000 common shares were reserved for issuance of stock
options at prices equal to the fair market value of the common shares at the
date of grant. At December 31, 1993, 42,000 shares were available for grants
under this plan.
The Company also granted stock options and restricted stock under two plans
which were in effect prior to the Distribution of SpaceLabs. At the date of the
Distribution, the remaining shares available for issuance under these plans
were cancelled and the exercise price for remaining stock options outstanding
was adjusted in proportion to the relative values of the Company and SpaceLabs
stock prices at the time of the Distribution.
The following table summarizes option activity (shares in thousands). Option
prices prior to June 26, 1992, the date of the Distribution, reflect the fair
market value on the date of grant. Option prices on or subsequent to June 26,
1992 represent either the option prices adjusted to reflect the Distribution or
the fair market value of the Company's common shares for options granted
subsequent to June 26, 1992.
<TABLE>
<CAPTION>
PRICE
PER
SHARES SHARE
------ --------
<S> <C> <C>
Outstanding at December 27, 1991........................ 1,597 $16--$52
Granted............................................... 30
Exercised............................................. (1,201)
Cancelled............................................. (51)
------
Outstanding at June 26, 1992............................ 375 $ 9--$30
Granted............................................... 709
Exercised............................................. (2)
Cancelled............................................. (1)
------
Outstanding at December 31, 1992........................ 1,081 $ 9--$30
Granted............................................... 547
Exercised............................................. (4)
Cancelled............................................. (31)
------
Outstanding at December 31, 1993........................ 1,593 $ 9--$30
======
Exercisable at December 31, 1993........................ 445 $ 9--$30
======
</TABLE>
In 1993 and 1992, 33,000 and 131,000 shares, respectively, of restricted
stock were issued at par value under the 1992 plans. Deferred compensation
representing the fair market value of the shares at the date of grant is
amortized over the four year vesting period.
In February 1993, the Company's Board of Directors authorized a plan to
repurchase up to 1,000,000 shares of its own common stock in the open market
subject to certain criteria. The Company repurchased 794,000 shares totaling
$13,441 under this program in 1993. The shares purchased will be used to
service the Company's employee benefit plans.
In October 1993, the Board of Directors authorized an oddlot shareholder
program for the purpose of repurchasing oddlot share positions or allowing
oddlot shareholders to establish a position of 100 shares. Under this program
the Company made net purchases of 12,481 shares, totaling $312. The oddlot
repurchase program expired in December 1993.
33
<PAGE>
13. INCOME TAXES
The components of income (loss) before income taxes were:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
U.S. operations................................... $(6,401) $5,157 $5,354
International operations.......................... 2,815 4,348 1,894
------- ------ ------
$(3,586) $9,505 $7,248
======= ====== ======
</TABLE>
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- ----
<S> <C> <C> <C>
Current:
U.S. Federal.................................... $(2,835) $ 2,715 $ 42
U.S. State and Local............................ 275 310 483
International................................... 873 434 396
Deferred:
U.S. Federal.................................... 3,207 (1,582) (44)
International................................... -- 221 --
------- ------- ----
$1,520 $ 2,098 $877
======= ======= ====
</TABLE>
The difference between taxes computed by applying the U.S. Federal income tax
rate of 34% to income (loss) before income taxes and the actual income tax
expense follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Expected income taxes at U.S. statutory rate.. $(1,219) $ 3,232 $ 2,464
Increase (reduction) in income taxes resulting
from:
State and local income taxes................ 181 205 319
Taxes related to foreign operations......... 1,234 505 1,330
Utilization of international operating loss
carryforwards/carrybacks................... (1,088) (1,467) (1,484)
Foreign Sales Corporation benefit........... -- (536) (550)
Research and experimentation tax credits.... -- (84) (1,081)
Tax advantaged investment income............ (266) (654) (489)
Restructuring costs......................... -- 406 --
Alternative minimum tax..................... 2,510 857 710
Tax accrual adjustment...................... (2,013) -- --
Change in valuation allowance............... 2,181 (1,172) (501)
Other, net.................................. -- 806 159
------- ------- -------
$ 1,520 $ 2,098 $ 877
======= ======= =======
</TABLE>
The Company had net refunds of income taxes of $4,322, $574, and $718 in
1993, 1992, and 1991, respectively.
34
<PAGE>
The tax effects of temporary differences and carryforwards which give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1993 and December 31, 1992 are presented below.
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Deferred tax assets
Receivables......................................... $ 2,297 $ 1,449
Inventories......................................... 8,333 8,167
International net operating loss carryforwards...... 2,387 3,450
State taxes......................................... 2,087 2,053
Compensation........................................ 1,778 2,484
Research and experimentation credit carryforwards... 4,271 4,539
Other, net.......................................... 2,893 2,726
-------- --------
Gross deferred tax assets......................... 24,046 24,868
Less valuation allowance.......................... (16,643) (14,462)
-------- --------
Deferred tax assets, net.......................... 7,403 10,406
Deferred tax liabilities, primarily depreciation...... (3,057) (2,853)
-------- --------
Net deferred tax assets............................. $ 4,346 $ 7,553
======== ========
</TABLE>
For the Company to realize its U.S. net deferred tax assets, its taxable
income must be comparable to or higher than recent years. Although the Company
believes such taxable income levels will be achieved, reductions in taxable
income levels can result in an increased deferred income tax expense. Due
primarily to the restructuring charge and a slow U.S. ultrasound market, the
Company has been unable to sustain the U.S. taxable income level of recent
years. This is reflected in the increase in the total valuation allowance of
$2,181 during the year. Additional factors considered in determining the
realizability of deferred tax assets included a tax planning strategy involving
the sale/leaseback of real estate and potential carryback opportunities.
At December 31, 1993, the Company had international net operating loss
carryforwards for statutory purposes of approximately $6,700, which expire as
follows: $850 in 1994, $850 in 1995, $950 in 1996, and $4,050 indefinitely. The
Company also has U.S. research and experimentation credit carryforwards of
approximately $4,300 with expiration dates through 2008.
During 1993, the Internal Revenue Service completed an examination of the
Company's tax returns for the years 1989 and 1990. The audit resulted in a net
refund of $1,071 which allowed the Company to reduce its liability for income
taxes by $2,013. The Company believes it has made adequate provision for income
taxes that may become payable with respect to open tax years.
Provision has not been made for U.S. or additional foreign taxes on the
undistributed earnings of the Company's foreign subsidiaries which total
approximately $1,300. These earnings, which are anticipated to be reinvested,
could become subject to additional tax if they were remitted as dividends, lent
to the Company, or if the Company should sell its stock in these subsidiaries.
14. OTHER EXPENSE (INCOME), NET
Other expense (income), net, includes foreign exchange gains and losses
consisting of realized gains and losses on cash transactions involving various
foreign currencies, unrealized gains and losses resulting from exchange rate
fluctuations primarily affecting intercompany accounts and gains and losses on
forward exchange contracts. Net losses from foreign currency transactions were
$1,234, $1,839, and $712 in 1993, 1992 and 1991, respectively.
Other expense (income), net, also includes Washington State Business and
Occupation taxes of $1,086, $1,144, and $981 in 1993, 1992 and 1991,
respectively. This tax is a gross receipts tax imposed on products manufactured
in the state of Washington and is levied in lieu of a state income tax.
35
<PAGE>
In 1993, other expense (income), net, includes a $1,125 gain on the sale of
an investment and in 1991, includes a $6,338 award received as a result of the
Company's lawsuit against a competitor.
15. INVESTMENT INCOME
Investment income consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Interest income..................................... $1,942 $1,925 $1,921
Preferred share dividend income..................... 970 2,299 2,152
------ ------ ------
$2,912 $4,224 $4,073
====== ====== ======
</TABLE>
16. LEASES
The Company was obligated at December 31, 1993 under long-term operating
leases for various types of property and equipment, with minimum aggregate
rentals totaling $11,093 as follows: $3,752 in 1994, $2,122 in 1995, $1,659 in
1996, $1,338 in 1997, $1,315 in 1998 and $907 in later years.
Many of the Company's leases contain renewal options and clauses for
escalations and payment of real estate taxes, maintenance, insurance and
certain other operating expenses of the properties. Certain leases are expected
to be renewed or replaced at expiration. Total rental expense under operating
leases was $4,563, $4,599, and $4,675 in 1993, 1992 and 1991, respectively.
17. LEGAL CONTINGENCIES
In November 1992, a U.S. District Court in California granted a motion by SRI
International, Inc. ("SRI") requesting partial summary judgment on a patent
infringement claim relating to an electrical circuit alleged to be used in the
Company's Ultramark 4 system. In February 1993, the Court entered an order
enjoining further use of the circuit in dispute by the Company until the patent
expires in April 1994. This injunction will not pose an obstacle to continued
shipment of products by the Company through the expiry of the SRI patent in
April 1994. The Company has appealed the summary judgment decision to the U.S.
Federal Circuit Court of Appeals, and further proceedings to determine a damage
award have been stayed pending the outcome of the Company's appeal. SRI has
stated in a February 1993 press release that it is seeking over $5 million in
damages. The Company continues to believe the SRI patent is invalid and not
infringed by the Company. At this stage of the litigation, the Company cannot
predict the outcome of the suit or estimate the amount of loss, if any, but
believes its defenses are meritorious and is vigorously pursuing its rights in
the Appellate Court.
In addition to the foregoing proceedings, the Company is involved in various
other legal actions and claims arising in the ordinary course of business. The
Company believes the ultimate resolution of these matters will not have a
material adverse effect on the Company's financial condition.
18. GEOGRAPHIC SEGMENT INFORMATION
The Company operates in one industry segment: developing, manufacturing,
marketing and servicing medical ultrasound imaging systems. Internationally,
the Company's products are marketed through its subsidiaries and independent
distributors, with principal subsidiaries located in Europe, Canada and
Australia.
U.S. revenues in the following table include export sales to customers in
foreign countries of $44,996, $41,267, and $30,848 in 1993, 1992 and 1991,
respectively.
36
<PAGE>
A summary of the Company's operations by geographic area follows:
<TABLE>
<CAPTION>
INTERNATIONAL
-------------------------
ADJUSTMENTS/
U.S. EUROPE OTHER TOTAL ELIMINATIONS TOTAL
-------- ------- ------- ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1993
Revenues................ $207,851 $77,288 $19,372 $96,660 $ -- $304,511
Intercompany sales...... 63,959 -- -- -- (63,959) --
-------- ------- ------- ------- -------- --------
271,810 77,288 19,372 96,660 (63,959) 304,511
Income (loss) before in-
come taxes............. (4,595) 3,281 (137) 3,144 (2,135) (3,586)
Assets.................. 165,612 52,769 11,433 64,202 (4,017) 225,797
1992
Revenues................ $229,028 $75,738 $18,945 $94,683 $ -- $323,711
Intercompany sales...... 52,493 -- -- -- (52,493) --
-------- ------- ------- ------- -------- --------
281,521 75,738 18,945 94,683 (52,493) 323,711
Income (loss) before in-
come taxes............. 5,049 4,732 (397) 4,335 121 9,505
Assets.................. 170,163 50,044 10,104 60,148 (1,041) 229,270
1991
Revenues................ $196,603 $64,286 $18,827 $83,113 $ -- $279,716
Intercompany sales...... 47,922 495 -- 495 (48,417) --
-------- ------- ------- ------- -------- --------
244,525 64,781 18,827 83,608 (48,417) 279,716
Income (loss) before in-
come taxes............. 4,050 (217) 564 347 2,851 7,248
Assets.................. 149,471 50,444 11,228 61,672 423 211,566
</TABLE>
International revenues, including both international operations and export
sales, were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
European operations........................... $ 77,288 $ 75,738 $ 64,286
Other international operations................ 19,372 18,945 18,827
-------- -------- --------
96,660 94,683 83,113
Export sales.................................. 44,996 41,267 30,848
-------- -------- --------
Total international revenues................ $141,656 $135,950 $113,961
======== ======== ========
</TABLE>
Geographic assets may be reconciled to consolidated assets as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Geographic assets............................. $225,797 $229,270 $211,566
General corporate assets (principally cash and
investments)................................. 50,901 66,341 80,042
-------- -------- --------
Consolidated assets........................... $276,698 $295,611 $291,608
======== ======== ========
</TABLE>
37
<PAGE>
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS
----------------------------------
FIRST SECOND THIRD FOURTH TOTAL
----- ------ ----- ------ ------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
1993
Revenues................................... $81.4 $75.4 $65.7 $82.0 $304.5
Gross profit............................... 35.8 34.3 28.9 37.7 136.7
Income (loss) from operations.............. 1.5 (2.1) (8.6) 3.4 (5.8)
Income (loss) before income taxes.......... 2.3 (1.5) (8.2) 3.8 (3.6)
Net income (loss).......................... 1.9 (1.8) (8.7) 3.5 (5.1)
Net income (loss) per share................ $ .17 $(.16) $(.80) $ .33 $ (.46)
1992
Revenues................................... $75.9 $77.0 $78.2 $92.6 $323.7
Gross profit............................... 35.2 35.8 35.8 42.3 149.1
Income (loss) from operations.............. 2.8 (3.1) 1.0 5.4 6.1
Income (loss) before income taxes.......... 3.9 (2.2) 1.7 6.1 9.5
Net income (loss).......................... 3.1 (2.1) 1.3 5.1 7.4
Net income (loss) per share................ $ .29 $(.19) $ .11 $ .45 $ .67
</TABLE>
Quarterly per share data shown do not add to the total due to changes in the
number of weighted average shares outstanding during the year.
The loss from operations in the third quarter of 1993 includes a
restructuring charge of $4.3 million. The loss from operations in the second
quarter of 1992 includes $5.0 million of stock distribution expenses and
restructuring charges related to the Distribution of SpaceLabs.
20. SUBSEQUENT EVENT
In February 1994, the Company entered into a Merger Agreement with Interspec,
Inc. ("Interspec"), a manufacturer of medical diagnostic ultrasound systems and
transducers, headquartered in Ambler, Pennsylvania. Pursuant to the Merger
Agreement, which is subject to approval by shareholders of both companies,
Interspec would become a wholly owned subsidiary of the Company through an
exchange of 0.413 shares of the Company's common stock for each share of
Interspec stock. The proposed merger plan will be submitted to shareholders of
Interspec and the Company at their respective shareholder meetings in May 1994.
The transaction is expected to be accounted for as a pooling-of-interests.
Interspec reported revenues of $61,377, net income of $1,950, and net income
per share of $0.31 for its fiscal year ended November 30, 1993.
The Company is filing a proxy statement with the Securities and Exchange
Commission relating to the merger proposal which will more fully describe the
proposed merger.
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10-13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Part III (Items 10-13) is set forth in ATL's
definitive proxy statement which will be filed pursuant to Regulation 14A
within 120 days of December 31, 1993. Such information is incorporated herein
by reference and made a part hereof.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included
in Item 8 of this Form 10-K report:
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1993 and 1992
Consolidated Statements of Operations for each of the years in the
three-year period ended December 31, 1993
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1993
Consolidated Statements of Shareholders' Equity for each of the
years in the three-year period ended December 31, 1993
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
An index to the financial statement schedules required to be filed by Part
II, Item 8 of this Form is set forth immediately before the attached financial
statement schedules on pages 41 through 43 of this filing.
3. EXHIBITS
The required exhibits are included at the back of this Form 10-K and are
described in the Exhibit Index immediately preceding the first exhibit.
4. REPORTS ON FORM 8-K
None.
39
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
Financial Statement Schedules for each of the years
in the three-year period ended December 31, 1993:
<C> <S> <C>
VIII Valuation and qualifying accounts 41
IX Short-term borrowings 42
X Supplementary income statement information 43
</TABLE>
All other schedules are omitted because they are not applicable, the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements and notes thereto.
40
<PAGE>
SCHEDULE VIII
ADVANCED TECHNOLOGY LABORATORIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-------------------
BALANCE
BALANCE AT CHARGED TO CHARGED AT END
BEGINNING COSTS AND TO OTHER OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- -------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Valuation accounts
deducted from assets:
Allowance for doubtful
receivables and sales
returns................ $ 5,136 $1,255 $ -- $ 527(1) $ 5,864
======= ====== ====== ====== =======
Valuation allowance for
deferred tax assets.... $14,462 $2,181 $ -- $ -- $16,643
======= ====== ====== ====== =======
Year ended December 31, 1992:
Valuation accounts
deducted from assets:
Allowance for doubtful
receivables and sales
returns................ $ 5,669 $1,120 $ -- $1,653(1) $ 5,136
======= ====== ====== ====== =======
Valuation allowance for
deferred tax assets.... $11,857 $ -- $3,777 $1,172(2) $14,462
======= ====== ====== ====== =======
Year ended December 27, 1991:
Valuation accounts
deducted from assets:
Allowance for doubtful
receivables and sales
returns................ $ 5,087 $1,292 $ -- $ 710(1) $ 5,669
======= ====== ====== ====== =======
Valuation allowance for
deferred tax assets.... $12,358 $ -- $ -- $ 501(2) $11,857
======= ====== ====== ====== =======
</TABLE>
- --------
NOTE:
(1) Accounts charged off, net of recoveries.
(2) Adjustments to the valuation allowance for deferred tax assets, based on
the ability to realize net deferred tax assets in the future, according to
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
41
<PAGE>
SCHEDULE IX
ADVANCED TECHNOLOGY LABORATORIES, INC.
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
BALANCE MAXIMUM AVERAGE
AT END AMOUNT AMOUNT
CATEGORY OF AGGREGATE SHORT- OF OUTSTANDING OUTSTANDING
TERM BORROWINGS PERIOD DURING PERIOD DURING PERIOD
---------------------------- ------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
December 31, 1993:
Payable to:
Others, primarily banks....... $3,679 $4,219 $3,504
====== ====== ======
December 31, 1992:
Payable to:
Others, primarily banks....... $4,528 $5,769 $4,766
====== ====== ======
December 27, 1991:
Payable to:
Others, primarily banks....... $7,985 $7,985 $4,211
====== ====== ======
</TABLE>
- --------
NOTES:
(1) The weighted average interest rate on short-term borrowings outstanding at
fiscal year-end 1993, 1992 and 1991 was approximately 8.0%, 10.3% and
10.8%, respectively.
(2) The weighted average interest rate related to the average amount of short-
term borrowings outstanding during 1993, 1992 and 1991 was approximately
10.6%, 10.8% and 13.4%, respectively. These rates, as well as the average
amounts outstanding during the period, are based upon month-end balances.
42
<PAGE>
SCHEDULE X
ADVANCED TECHNOLOGY LABORATORIES, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27,
ITEM CHARGED TO COSTS AND EXPENSES 1993 1992 1991
---------------------------------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs................. $1,447 $1,541 $1,428
====== ====== ======
Advertising costs....................... $2,996 $2,839 $2,653
====== ====== ======
</TABLE>
As to the items omitted, the answer is none or the required information is
disclosed in the notes to the consolidated financial statements or the amounts
are not sufficient to require disclosure.
43
<PAGE>
CONSENT OF KPMG PEAT MARWICK
The Board of Directors
Advanced Technology Laboratories, Inc.:
We consent to incorporation by reference in the registration statements 33-
38218, 33-38217, 33-28830, 33-28092, 33-22434, 33-10618, 33-47967, and 33-66298
on Form S-8 of Advanced Technology Laboratories, Inc., of our report dated
February 10, 1994, relating to the consolidated balance sheets of Advanced
Technology Laboratories, Inc. and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of operations, shareholders'
equity and cash flows and related financial statement schedules for each of the
years in the three-year period ended December 31, 1993, which report appears in
the December 31, 1993 annual report on Form 10-K of Advanced Technology
Laboratories, Inc.
/s/ KPMG Peat Marwick
KPMG Peat Marwick
Seattle, Washington
February 25, 1994
44
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints DENNIS C. FILL, HARVEY N. GILLIS, and W. BRINTON
YORKS, Jr. and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution, and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents and each
of them, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Advanced Technology Laboratories, Inc.
(Registrant)
By /s/ Dennis C. Fill
-----------------------------------
Dennis C. Fill
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Dennis C. Fill Chairman of the Board, Chief 2/18/94
- ------------------------------------ Executive Officer and
Dennis C. Fill Director
/s/ Harvey N. Gillis Senior Vice President, Chief 2/18/94
- ------------------------------------ Financial Officer
Harvey N. Gillis
/s/ David M. Perozek President and Chief 2/18/94
- ------------------------------------ Operating Officer and
David M. Perozek Director
/s/ Ralph M. Barford Director 2/18/94
- ------------------------------------
Ralph M. Barford
/s/ Kirby L. Cramer Director 2/18/94
- ------------------------------------
Kirby L. Cramer
/s/ Harvey Feigenbaum, M.D. Director 2/18/94
- ------------------------------------
Harvey Feigenbaum, M.D.
/s/ Eugene A. Larson Director 2/18/94
- ------------------------------------
Eugene A. Larson
/s/ John R. Miller Director 2/18/94
- ------------------------------------
John R. Miller
/s/ Harry Woolf, Ph.D. Director 2/18/94
- ------------------------------------
Harry Woolf, Ph.D.
/s/ Richard S. Totorica Corporate Controller (Chief 2/18/94
- ------------------------------------ Accounting Officer)
Richard S. Totorica
</TABLE>
45
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
(A) 3.1 Restated Certificate of Incorporation of Westmark International
Incorporated.
(B) 3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of Advanced Technology Laboratories, Inc.
(B) 3.3 Certificate of Designation of Series A. Participating Cumulative
Preferred Stock Setting Forth the Powers, Preferences, Rights,
Qualifications, Limitations and Restrictions of Such Series of
Preferred Stock of Advanced Technology Laboratories, Inc.
3.4 Amended and Restated Bylaws of Advanced Technology Laboratories,
Inc.
(C) 4.1 Amended and Restated Rights Agreement between Advanced Technology
Laboratories, Inc. and First Chicago Trust Company of New York
dated as of June 26, 1992.
(B) 4.2 Revolving Credit Loan Agreement by and among Advanced Technology
Laboratories, Inc. (Washington), Advanced Technology Laboratories,
Inc. (Delaware) and Seattle-First National Bank dated as of June
26, 1992 and supplemental letter dated February 4, 1993.
(B) 4.3 Uncommitted Line of Credit for $10 million by and among Advanced
Technology Laboratories, Inc. (Washington), Advanced Technology
Laboratories, Inc. (Delaware) and Seattle-First National Bank
dated as of June 18, 1992.
(A) 10.1 Tax Allocation Agreement between Squibb Corporation and Westmark
International Incorporated.
(A) 10.2 Intercompany Agreement between Squibb Corporation and Westmark
International Incorporated.
(B) 10.3 Distribution Agreement between Westmark International Incorporated
and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(B) 10.4 Intercompany Agreement between Westmark International Incorporated
and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(B) 10.5 Tax Allocation Agreement between Westmark International
Incorporated and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(A) 10.6 Lease between Martin Selig Real Estate and Westmark International
Incorporated (former Seattle, Washington headquarters facility).
(D) 10.7 Lease Amendment between Seafirst Center Limited Partnership and
Westmark International Incorporated dated December 13, 1991
(former Seattle, Washington headquarters facility).
(B) 10.8 Sublease Agreement between ATL and Primer Schill & Associates,
Inc. (former Seattle, Washington headquarters facility).
(B) 10.9 Sublease Agreements between ATL and Mark Alan Johnson and Mark
Alan Johnson, Inc. P.S., Gary N. Gosanko and Gary N. Gosanko, Inc.
P.S., (former Seattle,Washington headquarters facility).
(E) 10.10 Lease between Le Bien and Nova MicroSonics, Inc. dated November 9,
1988 (Indianapolis facility).
(E) 10.11 Lease between Eugene T. Ruston and Nova MicroSonics, Inc. dated
May 25, 1988 (Mahwah, New Jersey facility).
(D) 10.12 Lease between WRC Properties, Inc. and Advanced Technology
Laboratories, Inc. dated January 10, 1992.
(F) 10.13 1986 Amended and Restated Option, Restricted Stock, Stock
Appreciation Right and Performance Unit Plan.
10.14 Amended and Restated Advanced Technology Laboratories, Inc.
Incentive Savings and Stock Ownership Plan.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.15 Advanced Technology Laboratories, Inc. Supplemental Benefit Plan,
effective June 26, 1992.
10.16 Trust Agreement for Incentive Savings and Stock Ownership Plan by
and between Advanced Technology Laboratories, Inc. and First
Interstate Bank of Washington, N.A. effective June 26, 1992.
10.17 Amended and Restated Retirement Plan, effective June 26, 1992.
10.18 Trust Agreement for Retirement Plan by and between Advanced
Technology Laboratories, Inc. and Boatman's Trust Company, effective
June 26, 1992.
(A) 10.19 Management Incentive Compensation Plan.
10.20 Amendment to Management Incentive Compensation Plan, effective May
5, 1993.
(B) 10.21 Employee Benefit Allocation Agreement between Westmark International
Incorporated and SpaceLabs Medical, Inc. dated as of May 18, 1992.
(H) 10.22 Amended 1992 Option, Stock Appreciation Right, Restricted Stock,
Stock Grant and Performance Unit Plan. Adopted by Shareholders on
May 5, 1993.
(B) 10.23 Forms of Option Grant, Restricted Stock Award Agreement and
Restricted Stock Award Letter under the 1992 Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance
Unit Plan.
10.24 Long Term Incentive Plan, effective January 1, 1993.
(F) 10.25 Change of Control Employment Agreement with Dennis C. Fill dated
January 1, 1991.
(B) 10.26 First Amendment to Employment Agreement with Dennis C. Fill dated
May 18, 1992.
(B) 10.27 Change of Control Employment Agreement with David M. Perozek dated
May 18, 1992.
(B) 10.28 Mortgage and Promissory Note between ATL and David M. and Elizabeth
A. Perozek dated September 9, 1992.
(B) 10.29 Change of Control Employment Agreement with Harvey N. Gillis dated
September 23, 1992.
(G) 10.30 Amended and Restated Nonofficer Employee Option, Restricted Stock
and Stock Grant Plan.
(B) 10.31 1992 Nonofficer Employee Stock Option Plan.
(I) 10.32 Amended and Restated Agreement and Plan of Merger as of February 10,
1994 between ATL and Interspec, Inc. and Press Releases dated
February 10, and February 24, 1994.
22 Subsidiaries of ATL as of December 31, 1993.
24 Consent of KPMG Peat Marwick. Reference is made to the Consent on
page 44 of this filing in response to this item.
(J) 28 Proxy Statement to Stockholders for ATL's 1993 Annual General
Meeting of Stockholders.
</TABLE>
- --------
(A) Previously filed with, and incorporated herein by reference to, Westmark's
Registration Statement on Form 10, File No. 0-15160.
(B) Previously filed with, and incorporated herein by reference to, ATL's
Annual Report on Form 10-K, File No. 0-15160, filed on March 25, 1993.
(C) Previously filed with, and incorporated herein by reference to, Westmark
International Incorporated's Amendment to Application Form 8, filed on June
25, 1992.
(D) Previously filed with, and incorporated herein by reference to, Westmark's
Annual Report on Form 10-K, File No. 015160, filed on March 26, 1992.
(E) Previously filed with, and incorporated herein by reference to, Westmark's
Annual Report on Form 10-K, File No. 015160, filed on March 21, 1989.
(F) Previously filed with, and incorporated herein by reference to, Westmark's
Annual Report on Form 10-K, File No. 015160, filed on March 22, 1991.
(G) Previously filed with, and incorporated herein by reference to, Westmark
International Incorporated's Registration Statement on Form S-8,
Registration No. 33-38218, filed on December 14, 1990.
(H) Previously filed with, and incorporated herein by reference to, ATL's
Registration Statement on Form S-8, Registration No. 33-66298, filed July
22, 1993.
(I) Previously filed with, and incorporated herein by reference to, ATL's
Current Reports on Form 8-K, File No. 0-15160, filed on February 17, 1994
and [March 3, 1994].
(J) To be filed within 120 days of the 1993 fiscal year end pursuant to General
Instruction G to Form 10-K.
<PAGE>
Exhibit 3.4
AMENDED AND RESTATED BY-LAWS
OF
ADVANCED TECHNOLOGY LABORATORIES, INC.
ARTICLE I
Offices
SECTION 1. Registered office
The registered office of the Corporation in the State of Delaware shall be
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the registered agent in charge thereof is The
Corporation Trust Company.
SECTION 2. Other Offices
The Corporation may also have offices at other places either within or
without the State of Delaware.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meetings
The annual meeting of the stockholders for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held at such place, date and hour as shall be designated in the
notice thereof given by or at the direction of the Board of Directors.
SECTION 2. Special Meetings
Except as otherwise required by law and subject to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, special meetings of the stockholders
for any purpose or purposes may be called only by, and shall be held at such
place, date and hour as shall be designated by (i) holders of two-thirds or
more of the voting power of the then-outstanding shares of stock of all classes
and series of the Corporation entitled to vote generally in the election of
Directors ("Voting Stock"), (ii) the Chairman of the Board, (iii) the
President or (iv) a majority of the total number of Directors.
<PAGE>
SECTION 3. Notice of Meetings
Except as otherwise expressly required by law, notice of each meeting of
the stockholders shall be given not less than 10 nor more than 60 days before
the date of the meeting to each stockholder entitled to vote at such meeting by
mailing such notice, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation. Every such notice shall state
the place, date and hour of the meeting and, in the case of a Special meeting,
the purpose or purposes for which the meeting is called. Except as otherwise
expressly required by law, notice of any adjourned meeting of the Stockholders
need not be given. Notice of any meeting of stockholder shall not be required
to be given to any stockholder who shall attend such meeting in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. A written waiver of
notice, signed by the person entitled thereto, whether before or after the time
stated therein, shall be deemed equivalent to the notice required by this
Section 3.
SECTION 4. List of Stockholders
It shall be the duty of the Secretary or other officer of the Corporation
who shall have charge of its stock ledger to prepare and make, at least 10 days
before every meeting of the stockholders, a complete list of the stockholder
entitled to vote thereat, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting at the place within
the city where the meeting is to be held. Such list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.
SECTION 5. Quorum
At each meeting of the stockholder, except as otherwise expressly required
by law or by the Certificate of Incorporation, stockholders holding one-third of
the shares of stock of the Corporation issued and outstanding, and entitled to
be voted thereat, shall be present in person or by proxy to constitute a quorum
for the transaction of business. In the absence of a quorum at any such meeting
or any adjournment or adjournments thereof, a majority in voting interest of
those present in person or by proxy and entitled to vote thereat, or in the
absence therefrom of all the stockholders, any officer entitled to preside at,
or to act as Secretary of, such meeting may adjourn such meeting from time to
time until stockholder holding the amount of stock requisite for a quorum shall
be present in person or by proxy. At any such
<PAGE>
adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally
called.
SECTION 6. Organization
At each meeting of the stockholders, one of the following shall act as
chairman of the meeting and preside thereat, in the following order of
precedence:
(a) the Chairman of the Board;
(b) the President;
(c) any other officer of the Corporation designated by the Board or the
Executive Committee to act as chairman of such meeting and to preside thereat if
the Chairman of the Board and the President shall be absent from such meeting;
or
(d) a stockholder of record of the Corporation who shall be chosen
chairman of such meeting by a majority in voting interest of the stockholder
present in person or by proxy and entitled to vote thereat. The Secretary, or,
if he shall be presiding over the meeting in accordance with the provisions of
this Section, or, if he shall be absent from such meeting, the person (who shall
be an Assistant Secretary, if an Assistant Secretary shall be present thereat)
whom the chairman of such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.
SECTION 7. Order of Business
(a) Annual Meetings. At an annual meeting of the stockholders, only such
---------------
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors or (iii) brought
before the meeting by a stockholder in accordance with the procedure set forth
below. Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given written notice thereof, either by personal
delivery or by certified or registered United States mail, postage prepaid, to
the Secretary of the Corporation, not later than 90 days in advance of the
Originally Scheduled Date (as such term is defined below) of such meeting;
provided, however, that if such annual meeting of stockholders is held on a date
- -------- -------
earlier than the first Tuesday in May, such written notice must
<PAGE>
be given within 10 days after the first public disclosure (which may be by a
public filing by the Corporation with the Securities and Exchange Commission)
of the Originally Scheduled Date of the annual meeting. Any such notice shall
set forth as to each matter the stockholder proposes to bring before the
annual meeting (A) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting
and, in the event that such business includes a proposal to amend either the
Certificate of Incorporation or By-Laws of the Corporation, the language of
the proposed amendment, (B) the name and address of the stockholder proposing
such business, (C) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business and (D)
any direct or indirect material interest of the stockholder in such business.
No business shall be conducted at an annual meeting except in accordance with
this paragraph, and the chairman of any annual meeting of stockholders may
refuse to permit any business to be brought before such annual meeting without
compliance with the foregoing procedure. For purposes of these By-Laws, the
"Originally Scheduled Date" of any meeting of stockholders shall be the date
such meeting is scheduled to occur in the notice of such meeting first given
to stockholders regardless of whether such meeting is continued or adjourned
and regardless of whether any subsequent notice is given for such meeting or
the record date of such meeting is changed.
(b) Special Meetings. At a special meeting of the stockholder, only such
----------------
business as is specified in the notice of such special meeting given by or at
the direction of the person or persons calling such meeting in accordance with
Section 2 of this Article II shall come before such meeting.
SECTION 8. Voting
Except as otherwise provided in the Certificate of Incorporation, each
stockholder shall, at each meeting of the stockholders, be entitled to one vote
in person or by proxy for each share of stock of the Corporation held by him and
registered in his name on the books of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 5 of Article
VIII of these By-Laws as the record date for the determination of stockholders
who shall be entitled to receive notice of and to vote at such meeting, or
(b) if no record date shall have been so fixed, then at the close of
business on the day next preceding the day on which notice of the meeting shall
be given.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of
<PAGE>
directors of such other corporation is held by the Corporation, shall neither
be entitled to vote nor considered as issued and outstanding for the purposes
of determining whether a quorum exists. Any vote of stock of the Corporation
may be given at any meeting of the stockholders by the stockholders entitled
thereto in person or by proxy appointed by an instrument in writing delivered
to the Secretary or an Assistant Secretary of the Corporation or the secretary
of the meeting. The attendance at any meeting of a stockholder who may
theretofore have given a proxy shall not have the effect of revoking the same
unless he shall in writing so notify the secretary of the meeting prior to the
voting of the proxy. At all meetings of the stockholders all matters, except
as otherwise provided in the Certificate of Incorporation, these By-Laws or by
law, shall be decided by the vote of a majority of the votes cast by
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Except as otherwise expressly required by law, the vote
at any meeting of the stockholders on any question need not be by ballot,
unless so directed by the chairman of the meeting. On a vote by ballot each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.
ARTICLE III
Board of Directors
SECTION 1. General Powers
The business and affairs of the Corporation shall be managed by the Board.
SECTION 2. Number, Term of Office and Election
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock of the Corporation as to dividends or upon
liquidation, the number of directors which shall constitute the whole Board
shall be eight but by vote of a majority of the entire Board the number thereof
may be increased without limit, or decreased to not less than three, by
amendment of this section 2.
Each of the directors of the Corporation shall hold office until the annual
meeting next after his election and until his successor shall be elected and
shall qualify or until his earlier death or resignation or removal in the manner
hereinafter provided.
Directors need not be stockholders of the Corporation.
<PAGE>
Except as otherwise expressly provided in the Certificate of Incorporation,
at each meeting of the stockholders for the election of directors at which a
quorum is present, the persons receiving the greatest number of votes, up to the
number of directors to be elected, shall be the directors.
SECTION 3. Notification of Nominations
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote for the election of directors. Any
stockholder entitled to vote for the election of directors at a meeting may
nominate persons for election as directors only if written notice of such
stockholder's intent to make such nomination is given, either by personal
delivery or by registered or certified United States mail, postage prepaid, to
the Secretary of the Corporation not later than (i) with respect to an election
to be held at an annual meeting of stockholders, 90 days in advance of the
Originally Scheduled Date (as such term is defined in Section 7 of Article II of
these By-Laws) of such meeting (provided that if such annual meeting of
stockholder is held on a date earlier than the first Tuesday in May, such
written notice must be given within 10 days after the first public disclosure
(which may be by a public filing by the Corporation with the Securities and
Exchange Commission) of the Originally Scheduled Date of the annual meeting),
and (ii) with respect to an election to be held at a special meeting of
stockholder for the election of directors, the close of business on the seventh
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated, (b) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder, (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors, and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
SECTION 4. Resignation, Removal and Vacancies
<PAGE>
(a) Resignation. Any director may resign at any time by giving written
-----------
notice of his resignation to the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein, or, if the time when it shall become effective shall not
be specified therein, then it shall take effect when accepted by action of the
Board. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
(b) Vacancies. Subject to the rights of the holders of any class or
---------
series of stock having a preference over the Common Stock of the Corporation as
to dividends or upon liquidation, in case of any vacancy on the Board or in case
of any newly created directorship, a director to fill the vacancy or the newly
created directorship for the unexpired portion of the term being filed may be
elected by a majority of the directors of the Corporation then in office though
less than a quorum or by a sole remaining director.
SECTION 5. Meetings
(a) Annual Meetings. As soon as practicable after each annual election of
---------------
directors, the Board shall meet for the purpose of organization and the
transaction of other business.
(b) Regular Meetings. Regular meetings of the Board shall be held at such
----------------
times and places as the Board shall from time to time determine. Notices of
regular meetings need not be given.
(C) Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the Chairman of the Board, the President or three directors.
The Secretary shall give notice to each director of each such special meeting,
including the time and place of such meeting. Notice of each such meeting shall
be mailed to each director, addressed to him at his residence or usual place of
business, at least five days or, in the case of overnight mail, two days before
the day on which such meeting is to be held, or shall be sent to him by
telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held. Notice of any special meeting shall not be
required to be given to any director who shall attend such meeting. A written
waiver of notice, signed by the person entitled thereto, whether before or after
the time stated therein, shall be deemed equivalent to notice. Any and all
business may be transacted at a special meeting which may be transacted at a
regular meeting of the Board.
(d) Place of Meeting. The Board may hold its meetings at such place or
----------------
places within or without the State of Delaware as the Board may from time to
time by resolution determine or, in the absence of such determination, as
<PAGE>
shall be designated in the respective notices or waivers of notice thereof as
directed by the person or persons calling such meeting.
(e) Quorum and Manner of Acting. A majority of the directors then in
---------------------------
office shall be present in person or by means of conference telephone or similar
communications equipment as permitted by the Delaware Corporation Law at any
meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting provided that such majority shall be no
less than one-third of the total number of directors. The affirmative vote of a
majority of those directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act of the
Board, except as otherwise expressly required by law, the Certificate of
Incorporation or these By-Laws and except that the Board may pass any resolution
or take any action by unanimous written consent as permitted by the Delaware
Corporation Law. In the absence of a quorum for any such meeting, a majority of
the directors present thereat may adjourn such meeting from time to time until a
quorum shall be present thereat. Notice of any adjourned meeting need not be
given.
(f) Organization. At each meeting of the Board, one of the following
------------
shall act as chairman of the meeting and preside thereat, in the following order
of precedence:
(i) the Chairman of the Board;
(ii) the President; or
(iii) any director chosen by a majority of the directors present
thereat.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary shall be present thereat) whom
the chairman of the meeting shall appoint, shall act as Secretary of
such meeting and keep the minutes thereof.
SECTION 6. Compensation
Each director, in consideration of his serving as such, shall be entitled
to receive from the Corporation such amount per annum or such fees for
attendance at meetings of the Board or of any committee, or both, as the Board
shall from time to time determine. The Board may likewise provide that the
Corporation shall reimburse each director or member of a committee for any
expenses incurred by him on account of his attendance at any such meeting.
Nothing contained in this Section shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
<PAGE>
ARTICLE IV
Committees
SECTION 1. Executive Committee
(a) Designation and Membership. The Board may, by resolution passed by a
--------------------------
majority of the whole Board, designate an Executive Committee consisting of the
Chairman of the Board, the President, a Chairman of the Executive Committee (who
may be the Chairman of the Board or President) and such additional number of
directors as the Board shall appoint. Vacancies may be filled by the Board at
any time and any member of the Executive Committee shall be subject to removal,
with or without cause, at any time by the Board.
(b) Factions and Powers. The Executive Committee, subject to any
-------------------
limitations prescribed by the Board, shall possess and may exercise, during the
intervals between meetings of the Board, the powers of the Board in the
management of the business and affairs of the Corporation, provided that neither
the Executive Committee nor any other committee may exercise the power of the
Board to act upon matters requiring a vote thereof greater than a majority of
directors present at a meeting at which a quorum is in attendance. At each
meeting of the Board, the Executive Committee shall make a report of all action
taken by it since its last report to the Board.
(c) Meetings. The Executive Committee shall meet as often as may be
--------
deemed necessary and expedient at such times and places as shall be determined
by the Executive Committee or the Board of Directors. The Secretary shall give
notice to each member of the Executive Committee of each meeting, including the
time and place of such meeting. Notice of each such meeting shall be mailed to
each member of the Executive Committee, addressed to him at his residence or
usual place of business, at least five days or, in the case of overnight mail,
two days before the day on which such meeting is to be held, or shall be sent to
him by telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held. Notice of any meeting of the Executive
Committee shall not be required to be given to any member of the Executive
Committee who shall attend such meeting. A written waiver of notice, signed by
the person entitled thereto, whether before or after the time stated therein,
shall be deemed equivalent to the notice required by this paragraph (c).
<PAGE>
SECTION 2. Quorum and Manner of Acting
A majority of the Executive Committee present in person or by means of
conference telephone or similar communications equipment as permitted by the
Delaware Corporation Law shall constitute a quorum, and the vote of a majority
of members of the Executive Committee present at any such meeting at which a
quorum is present shall be necessary for the passage of any resolution or act of
the Executive Committee except that the Executive Committee may pass any
resolution or take any action by unanimous written consent as permitted by the
Delaware Corporation Law. The Chairman of the Executive Committee shall preside
at meetings of the Executive Committee and, in his absence, the Executive
Committee may appoint any other member of the Executive Committee to preside.
SECTION 3. Other Committees
The Board may, by resolution passed by a majority of the whole Board,
designate other committees, each committee to consist of two or more directors
and to have such duties and functions as shall be provided in such resolution.
ARTICLE V
Officers
SECTION 1. Election and Appointment and Term of office
(a) Officers. The officers of the Corporation shall be a Chairman of the
--------
Board, a President, a Chairman of the Executive Committee, such number of Vice
Presidents (including any Executive and/or Senior Vice Presidents) as the Board
may determine from time to time, a Treasurer and a Secretary. Each such officer
shall be elected by the Board at its annual meeting and shall hold office until
the next annual meeting of the Board and until his successor is elected and
qualified or until his earlier death or resignation or removal in the manner
hereinafter provided.
(b) Additional Officers. The Board may elect or appoint such other
-------------------
officers (including one or more Assistant Treasurers and one or more Assistant
Secretaries) as it deems necessary, who shall have such authority and shall
perform such duties as the Board may prescribe. If additional officers are
elected or appointed during the year, each of them shall hold office until the
next annual meeting of the Board at which officers are regularly elected or
appointed and until his successor is elected or appointed and qualified or until
his earlier death or resignation or removal in the manner hereinafter provided.
<PAGE>
SECTION 2. Resignation, Removal and Vacancies
Any officer may resign at anytime by giving written notice to the Chairman
of the Board, the President or the Secretary of the Corporation, and such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, then it shall take
effect when accepted by action of the Board. Except as aforesaid, the
acceptance of such resignation shall not be necessary to make it effective. All
officers and agents elected or appointed by the Board shall be subject to
removal at any time by the Board with or without cause. A vacancy in any office
may be filled for the unexpired portion of the term in the same manner as
provided for election or appointment to such office.
SECTION 3. Duties and Functions
(a) Chairman of the Board. The Chairman of the Board shall be the chief
---------------------
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation and shall have the direction of all
other officers, agents and employees. He shall preside at all meetings of the
Board of Directors and of the stockholders at which he is present. The Chairman
may delegate such duties to the other officers of the Corporation as he deems
appropriate.
(b) President. The President shall be the chief operating officer of the
---------
Corporation and shall report to the Chairman of the Board. He shall preside at
meetings of the Board of Directors and of the stockholders at which he is
present in the absence of the Chairman of the Board.
(c) Chairman of the Executive Committee. The Chairman of the Executive
-----------------------------------
Committee shall preside at all meetings of the Executive Committee at which he
is present.
(d) Vice Presidents. Each Vice President shall have such powers and
---------------
duties as shall be prescribed by the Chairman of the Board or the Board.
(e) Treasurer. The Treasurer shall have charge and custody of and be
---------
responsible for all funds and securities of the Corporation.
(f) Secretary. The Secretary shall keep the records of all meetings of
---------
the stockholders and of the Board and the Executive Committee. He shall affix
the seal of the Corporation to all deeds, contracts, bonds or other instruments
requiring the corporate seal when the same shall have been signed on behalf of
the Corporation by a duly authorized officer. The Secretary shall be the
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records).
<PAGE>
ARTICLE VI
Contracts, Deposits, Proxies, Etc.
SECTION 1. Execution of Documents
The Board shall designate the officers, employees and agents of the
Corporation who shall have power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and other orders for the payment of
money and other documents for and in the name of the Corporation and may
authorize such officers, employees and agents to delegate such power (including
authority to redelegate) by written instrument to other officers, employees or
agents of the Corporation.
SECTION 2. Deposits
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation or otherwise as the Board or the
President or any other officer of the Corporation to whom power in that respect
shall have been delegated by the Board shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations
The Board shall designate the officer of the Corporation who shall have
authority to from time to time appoint an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other secrets in any
other corporation and to vote or consent in respect of such stock or securities.
Such designated officer may instruct the person or persons so appointed as to
the manner of exercising such powers and rights and such designated officers may
execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, such written proxies, powers of attorney
or other instruments as they may deem necessary or proper in order that the
Corporation may exercise such powers and rights.
ARTICLE VII
Books and Records
The books and records of the Corporation may be kept at such places within
or without the State of Delaware as the Board may from time to time determine.
<PAGE>
ARTICLE VIII
Shares and Their Transfer; Fixing Record Date
SECTION 1. Certificates for Stock
Every owner of stock of the Corporation shall be entitled to have a
certificate certifying the number of shares owned by him in the Corporation and
designating the class of stock to which such shares belong, which shall
otherwise be in such form as the Board shall prescribe. Each such certificate
shall be signed by, or in the name of the Corporation by, the Chairman of the
Board, the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation. In
case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may nevertheless be issued by the corporation with the same effect
as if he were such officer at the date of issue.
SECTION 2. Record
A record shall be kept of the name of the person, firm or corporation
owning the stock represented by each certificate for stock of the Corporation
issued, the number of shares represented by each Such certificate, and the date
thereof, and, in the case of cancellation, the date of cancellation. Except as
otherwise expressly required by applicable law, the person in whose name shares
of stock stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation.
SECTION 3. Transfer of Stock
Transfers of shares of the stock of the Corporation shall be made only on
the books of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the Corporation, and on the surrender of the certificate or
certificates for such shares properly endorsed.
SECTION 4. Lost, Stolen, Destroyed or Mutilated Certificates
The holder of any stock of the Corporation shall immediately notify the
Corporation of any loss, theft or mutilation of the certificate therefor. The
Corporation may issue a new certificate for stock in the place of any
certificate theretofore issued by it and alleged to have been lost, stolen,
destroyed or mutilated, and the Board may, in its discretion, require the owner
of the lost, stolen, mutilated or destroyed certificate or his legal
representatives to give the Corporation a bond in such sum, limited or
unlimited, in such form and with such surety or sureties as the Board shall in
its discretion determine, to
<PAGE>
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft, mutilation or destruction of any such
certificate or the issuance of any such new certificate.
SECTION 5. Fixing Date for Determination of Stockholders of Record
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action.
ARTICLE IX
Seal
The Board shall provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation and the words and figures
"Corporate Seal 1983 Delaware."
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall end on the 31st of December in
each year.
ARTICLE XI
Indemnification
SECTION 1. Right to Indemnification
The Corporation shall to the fullest extent permitted by applicable law as
then in effect indemnify any person (the "Indemnitee") who was or is involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be made so involved in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (including without limitation, any action, suit
or proceeding by or in the right of the Corporation to procure a judgment in its
favor) (a "Proceeding") by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or wall serving at
<PAGE>
the request of the Corporation as a director, officer or employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan) against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
proceeding. Such indemnification shall be a contract right and shall include
the right to receive payment in advance of any expenses incurred by the
Indemnitee in connection with such proceeding, consistent with the provisions
of applicable law as then in effect.
SECTION 2. Insurance, Contracts and Funding
The Corporation may purchase and maintain insurance to protect itself and
any Indemnitee against any expenses, judgments, fines and amounts paid in
settlement as specified in Section I of this Article XI or incurred by any
Indemnitee in connection with any proceeding referred to in Section 1 of this
Article XI, to the fullest extent permitted by applicable law as then in effect.
The Corporation may enter into contracts with any director, officer, employee or
agent of the Corporation in furtherance of the provisions of this Article XI and
may create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in this
Article XI.
SECTION 3. Indemnification; Not Exclusive Right
The right of indemnification provided in this Article XI shall not be
exclusive of any other rights to which those seeking indemnification may
otherwise be entitled, and the provisions of this Article XI shall inure to the
benefit of the heirs and legal representatives of any person entitled to
indemnity under this Article XI and shall be applicable to Proceedings commenced
or continuing after the adoption of this Article XI, whether arising from acts
or omissions occurring before or after such adoption.
SECTION 4. Advancement of Expenses; Procedures; Presumptions and
Effect of Certain Proceedings; Remedies
In furtherance, but not in limitation of the foregoing provisions, the
following procedures, presumptions and remedies shall apply with respect to
advancement of expenses and the right to indemnification under this Article XI:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
-----------------------
behalf of the Indemnitee in connection with any Proceeding shall be advanced to
the Indemnitee by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the indemnitee
<PAGE>
requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by the Indemnitee and, if required
by law at the time of such advance, shall include or be accompanied by an
undertaking by or on behalf of the Indemnitee to repay the amounts advanced if
it should ultimately be determined that the Indemnitee is not entitled to be
indemnified against such expenses pursuant to this Article XI.
(b) Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(i) To obtain indemnification under this Article XI, an Indemnitee
shall submit to the Secretary of the Corporation a written request,
including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The determination
of the Indemnity's entitlement to indemnification shall be made not
later than 60 days after receipt by the Corporation of the written
request for indemnification together with the Supporting
Documentation. The Secretary of the Corporation shall, promptly upon
receipt of such a request for indemnification, advise the Board of
Directors in writing that the Indemnitee has requested
indemnification.
(ii) The Indemnity's entitlement to indemnification under this
Article XI shall be determined in one of the following ways: (A) by
a majority vote of the Disinterested Directors (as hereinafter
defined), if they constitute a quorum of the Board of Directors; (B)
by a written opinion of Independent Counsel (as hereinafter defined)
if (x) a Change of Control (as hereinafter defined) shall have
occurred and the Indemnitee so requests or (y) a quorum of the Board
of Directors consisting of Disinterested Directors is not obtainable
or, even if obtainable, a majority of such Disinterested Directors
so directs; (C) by the stockholders of the Corporation (but only if
a majority of the Disinterested Directors, if they constitute a
quorum of the Board of Directors, presents the issue of entitlement
to indemnification to the stockholders for their determination); or
(D) as provided in Section 4(c).
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 4(b)(ii), a majority of the Disinterested Directors shall
select the Independent Counsel, but only an Independent Counsel to
which the Indemnitee does not reasonably object; provided, however,
that if a Change of Control shall have
<PAGE>
occurred, the Indemnitee shall select such Independent Counsel, but
only an Independent Counsel to which the Board of Directors does not
reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as otherwise
----------------------------------------------
expressly provided in this Article XI, if a Change of Control shall have
occurred, the Indemnitee shall be presumed to be entitled to indemnification
under this Article XI upon submission of a request for indemnification together
with the Supporting Documentation in accordance with Section 4(b)(i), and
thereafter the Corporation shall have the burden of proof to overcome that
presumption in reaching a contrary determination. In any event, if the person
or persons empowered under Section 4(b) to determine entitlement to
indemnification shall not have been appointed or shall not have made a
determination within 60 days after receipt by the Corporation of the request
therefor, together with the Supporting Documentation, the Indemnitee shall be
deemed to be entitled to indemnification and the Indemnitee shall be entitled to
such indemnification unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited by law. The
termination of any Proceeding described in Section 1, or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, adversely affect the
- ---- ----------
right of the Indemnitee to indemnification or create a presumption that the
Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal Proceeding, that the Indemnitee had reasonable
cause to believe that his conduct was unlawful.
(d) Remedies of Indemnitee.
----------------------
(i) In the event that a determination is made pursuant to
Section 4(b) that the Indemnitee is not entitled to indemnification
under this Article XI, (A) the Indemnitee shall be entitled to seek
an adjudication of his entitlement to such indemnification either,
at the Indemnity's sole option, in (x) an appropriate court of the
State of Delaware or any other court of competent jurisdiction or
(y) an arbitration to be conducted by a single arbitrator pursuant
to the rules of the American Arbitration Association; (B) any such
judicial proceeding or arbitration shall be de novo and the
-------
Indemnitee shall not be prejudiced by reason of such adverse
determination; and (C) if a Change of Control shall have occurred,
in any such judicial proceeding or arbitration, the Corporation
shall have the burden of proving that the Indemnitee is not entitled
to indemnification under this Article XI.
<PAGE>
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4(b) or 4(c), that the Indemnitee is
entitled to indemnification, the Corporation shall be obligated to
pay the amounts constituting such indemnification within five days
after such determination has been made or deemed to have been made
and shall be conclusively bound by such determination unless (A) the
Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In
the event that (C) advancement of expenses is not timely made
pursuant to Section 4(a) or (D) payment of indemnification is not
made within five days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant
to Section 4(b) or 4(c), the Indemnitee shall be entitled to seek
judicial enforcement of the Corporation's obligation to pay to the
Indemnitee such advancement of expenses or indemnification.
Notwithstanding the foregoing, the Corporation may bring an action,
in an appropriate court in the State of Delaware or any other court
of competent jurisdiction, contesting the right of the Indemnitee to
receive indemnification hereunder due to the occurrence of an event
described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"); provided, however, that in any such action
the Corporation shall have the burden of proving the occurrence of
such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this
Section 4(d) that the procedures and presumptions of this Article XI
are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Corporation is
bound by all the provisions of this Article XI.
(iv) In the event that the Indemnitee, pursuant to this Section
4(d), seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this
Article XI, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against,
any expenses actually and reasonably incurred by him if the
Indemnitee prevails in such judicial adjudication or arbitration. If
it shall be determined in such judicial adjudication or arbitration
that the Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in
<PAGE>
connection with such judicial adjudication or arbitration shall be
prorated accordingly.
(e) Definitions. For purposes of this Section 4:
-----------
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934 (the "Act"), whether or not
the Corporation is then subject to such reporting requirement;
provided that, without limitation, such a change in control shall "be
deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 20% or more
of the combined voting power of the Corporation's then outstanding
securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such
acquisition; (B) the Corporation is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors
in office immediately prior to such transaction or event constitute
less than a majority of the Board of Directors thereafter; or (C)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for
election by the Corporation's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the Corporation
who is not or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five years has been,
retained to represent: (i) the Corporation or the Indemnitee in any
matter material to either such party or (ii) any other party to the
Proceeding giving rise to a claim for indemnification under this
Article XI. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing under the law of
the State of Delaware,
<PAGE>
would have a conflict of interest in representing either the
Corporation or the Indemnitee in an action to determine the
Indemnitee's rights under this Article XI.
SECTION 5. Severability
If any provision or provisions of this Article XI shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Article XI
(including, without limitation, all portions of any paragraph of this Article
XI containing any such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby; and (b) to the fullest extent possible,
the provisions of this Article XI (including, without limitation, all portions
of any paragraph of this Article XI containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
ARTICLE XII
Amendments
These By-Laws may be altered or repealed only in accordance with Article
EIGHTH of the Certificate of Incorporation of the Corporation.
7/16/93
<PAGE>
Exhibit 10.14
ADVANCED TECHNOLOGY LABORATORIES, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
AMENDED AND RESTATED
EFFECTIVE
JUNE 26, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREAMBLE................................................................. 1
</TABLE>
<TABLE>
<C> <S> <C>
SECTION 1 DEFINITIONS.................................................. 2
1.1 Account........................................................ 2
1.2 Affiliated Companies........................................... 2
1.3 After-Tax Contribution Account................................. 2
1.4 Before-Tax Contribution Account................................ 2
1.5 Beneficiary.................................................... 3
1.6 Board of Directors............................................. 3
1.7 Code........................................................... 3
1.8 Committee...................................................... 3
1.9 Company........................................................ 3
1.10 Company Matching Contributions................................. 3
1.11 Company Matching Contribution Account.......................... 4
1.12 Company Stock.................................................. 4
1.13 Compensation................................................... 4
1.14 Current Market Value........................................... 4
1.15 Disabled....................................................... 4
1.16 Early Terminee................................................. 4
1.17 Earnings....................................................... 4
1.18 Effective Date................................................. 5
1.19 Eligible Employee.............................................. 5
1.20 Employee....................................................... 5
1.21 Employment Commencement Date................................... 6
1.22 ERISA.......................................................... 6
1.23 Highly Compensated Employee.................................... 6
1.24 Hour of Service................................................. 7
1.25 Normal Retirement Date.......................................... 7
1.26 Participant..................................................... 7
1.27 Participating Company........................................... 7
1.28 Period of Service............................................... 8
1.29 Period of Severance............................................. 8
1.30 Plan............................................................ 8
1.31 Plan Administrator.............................................. 8
1.32 Plan Year....................................................... 9
1.33 Rollover Account................................................ 9
1.34 Service......................................................... 9
1.35 Severance From Service Date..................................... 9
1.36 Supplemental Company Contribution Account....................... 9
1.37 Temporary Termination........................................... 9
1.38 Terminated...................................................... 9
1.39 Trust or Trust Fund............................................. 9
1.40 Trustee......................................................... 10
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
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<C> <S> <C>
1.41 Valuation Date.................................................. 10
1.42 Additional Definitions in Plan.................................. 10
SECTION 2 PARTICIPATION................................................. 11
2.1 Participation................................................... 11
2.2 Reemployment After Termination.................................. 11
2.3 Employees in a Bargaining Unit.................................. 11
SECTION 3 BEFORE-TAX CONTRIBUTIONS...................................... 12
3.1 Salary Deferral Agreement....................................... 12
3.2 Participant Modification of Salary Deferral Agreement........... 12
3.3 Procedure for Making and Revoking Salary Deferral Agreement..... 13
3.4 Non-Discrimination Test For Deferrals (ADP Test)................ 13
SECTION 4 PLAN CONTRIBUTIONS........................................... 15
4.1 Participant and Company Contributions........................... 15
4.2 Time of Contribution............................................ 18
4.3 Non-Discrimination Test for Company Matching Contributions
and After-Tax Contributions (ACP Test).......................... 18
4.4 Multiple Use of Alternative Limitations Under ADP and ACP
Tests........................................................... 19
4.5 Corrective Procedures to Satisfy Discrimination Tests........... 19
4.6 Return of Contributions......................................... 20
4.7 Recharacterization of Excess Before-Tax Contributions........... 22
SECTION 5 ACCOUNT ADMINISTRATION....................................... 24
5.1 Types of Accounts............................................... 24
5.2 Investment Options.............................................. 24
5.3 Allocation of Trust Fund Earnings and Losses to Participant
Accounts........................................................ 26
5.4 Valuation of the Trust Fund..................................... 27
5.5 Account Statements.............................................. 27
SECTION 6 INVESTMENT OF CONTRIBUTIONS.................................. 28
6.1 Optional Funds.................................................. 28
6.2 Selection of Investment Funds................................... 28
6.3 Change in Investment of Future Contributions.................... 28
6.4 Changes in Investment of Existing Accounts...................... 29
6.5 Investment of Company Contributions............................. 29
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
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<C> <S> <C>
SECTION 7 BENEFITS AND FORMS OF PAYMENT................................ 31
7.1 Eligibility for Benefits........................................ 31
7.2 Time of Benefit Commencement.................................... 31
7.3 Form of Payment................................................. 33
7.4 Distributions of Stock.......................................... 33
7.5 Withdrawals Prior to Termination................................ 34
7.6 Hardship Withdrawal............................................. 36
SECTION 8 VESTING...................................................... 39
8.1 Vesting......................................................... 39
8.2 Forfeitures..................................................... 40
8.3 Reemployment.................................................... 40
8.4 Suspension of Installment Payments.............................. 41
SECTION 9 LIMITATION ON CONTRIBUTIONS ................................. 42
9.1 Maximum Annual Contribution to the Plan......................... 42
9.2 Additional Limitation Relating to Defined Benefit Plans......... 43
SECTION 10 TOP HEAVY PROVISIONS......................................... 45
10.1 Scope........................................................... 45
10.2 Top Heavy Status................................................ 45
10.3 Minimum Contribution............................................ 47
10.4 Limitation to Annual Additions in Top Heavy Plan................ 48
10.5 Vesting......................................................... 48
SECTION 11 ADMINISTRATION OF THE PLAN................................... 49
11.1 Plan Administrator.............................................. 49
11.2 Organization and Procedures..................................... 49
11.3 Duties and Authority of Committee............................... 49
11.4 Expenses........................................................ 50
11.5 Bonding and Insurance........................................... 51
11.6 Commencement of Benefits........................................ 51
11.7 Appeal Procedure................................................ 52
11.8 Plan Administration - Miscellaneous............................. 53
11.9 Domestic Relations Orders....................................... 55
11.10 Plan Qualification............................................ 56
11.11 Deductible Contribution....................................... 56
11.12 Voting of Company Stock and SpaceLabs Medical, Inc. Stock...... 56
</TABLE>
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Table of Contents
(continued)
<TABLE>
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SECTION 12 AMENDMENT AND TERMINATION................................... 58
12.1 Amendment and Termination....................................... 58
12.2 Consolidation or Merger......................................... 58
12.3 Termination of the Plan......................................... 59
12.4 Allocation of the Trust Fund on Termination of Plan............. 59
12.5 Partial Termination............................................. 60
SECTION 13 FUNDING..................................................... 61
13.1 Contributions to the Trust Fund................................. 61
13.2 Trust Fund for Exclusive Benefit of Participants................ 61
13.3 Trustee......................................................... 61
13.4 Investment Manager.............................................. 61
SECTION 14 FIDUCIARIES................................................. 63
14.1 Limitation of Liability of the Company and Others............... 63
14.2 Indemnification of Fiduciaries.................................. 63
14.3 Scope of Indemnification........................................ 63
SIGNATURE PAGE............................................................ 64
APPENDIX 1................................................................ 65
</TABLE>
<PAGE>
PREAMBLE
THIS SAVINGS AND STOCK OWNERSHIP PLAN (hereinafter referred to as the
"Plan," formerly known as the Westmark International Incorporated Incentive
Savings and Stock Ownership Plan and now known as the Advanced Technology
Laboratories, Inc. Incentive Savings and Stock Ownership Plan) is amended and
restated effective June 26, 1992 by Advanced Technology Laboratories, Inc., a
Delaware corporation (hereinafter "Company").
WHEREAS, the Plan is a profit sharing plan and the purpose of the Plan
is to attract and retain Eligible Employees by providing them with an
opportunity to save for their retirement; and
WHEREAS, the Plan was adopted by Westmark International Incorporated
effective January 1, 1987 and was amended and restated effective January 1,
1989; and
WHEREAS, effective June 26, 1992, the corporate name of Westmark
International Incorporated was changed to Advanced Technology Laboratories, Inc.
and the Plan was divided into two plans, with the portion of the Plan
attributable to SpaceLabs, Inc. as a Participating Company becoming the
SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership Plan; and
WHEREAS, the Company desires to amend and restate the Plan to change
the name of the Plan and to effect certain other changes; and
WHEREAS, the Plan shall be maintained for the exclusive benefit of
covered Employees, and is intended to comply with the Internal Revenue Code of
1986, as amended, including without limitation Section 401(k) thereof, the
Employee Retirement Income Security Act of 1974, as amended, and other
applicable law;
NOW, THEREFORE, except as otherwise specified herein, the Company does
hereby amend and restate the Plan as set forth in the following pages effective
June 26, 1992.
1
<PAGE>
SECTION 1
DEFINITIONS
The following terms when used herein shall have the following meaning, unless a
different meaning is plainly required by the context. Capitalized terms are
used throughout the Plan text for terms defined by this and other sections.
1.1 Account
-------
"Account" means a Participant's Before-Tax Contribution Account, Company
Matching Contribution Account, Supplemental Company Contribution Account,
After-Tax Contribution Account and Rollover Account.
1.2 Affiliated Companies
--------------------
"Affiliated Companies" means
(a) the Company,
(b) any other corporation which is a member of a controlled group of
corporations which includes the Company (as defined in Section 414(b)
of the Code),
(c) any other trade or business under common control with the Company (as
defined in Section 414(c) of the Code), or
(d) an affiliated service group which includes the Company (as defined in
Section 414(m) of the Code).
For purposes of the limitation on contributions in Section 9, the
determination of whether a corporation is an Affiliated Company will be
made in accordance with Sections 414(b) and (c) of the Code as modified in
Section 415(h).
1.3 After-Tax Contribution Account
------------------------------
"After-Tax Contribution Account" means an account established to hold a
Participant's After-Tax Contributions to the Plan.
1.4 Before-Tax Contribution Account
-------------------------------
"Before-Tax Contribution Account" means an account established to receive a
Participant's Before-Tax Contributions to the Plan.
2
<PAGE>
1.5 Beneficiary
-----------
"Beneficiary" means the person or persons designated to be the Beneficiary
by the Participant in writing to the Committee. In the event a married
Participant designates someone other than his or her spouse as Beneficiary,
such initial designation or subsequent change shall be invalid unless the
spouse consents in a writing, which names the designated Beneficiary and is
notarized, or witnessed by a Plan representative. If a Participant fails
to designate a Beneficiary or no designated Beneficiary survives the
Participant, the Committee may direct that payment of benefits be made in
equal shares to the person or persons in the first of the following classes
of successive preference Beneficiaries to survive the Participant. The
Participant's:
(a) spouse,
(b) descendants, per stirpes,
(c) parents,
(d) brothers and sisters,
(e) estate.
1.6 Board of Directors
------------------
"Board of Directors" means the Board of Directors of Advanced Technology
Laboratories, Inc., a Delaware corporation.
1.7 Code
----
"Code" means the Internal Revenue Code of 1986, as amended and including
all regulations promulgated pursuant thereto.
1.8 Committee
---------
"Committee" means the Advanced Technology Laboratories, Inc. Benefits
Committee as from time to time constituted and appointed by the
Compensation Committee of the Board of Directors of the Company to
administer the Plan.
1.9 Company
-------
"Company" means Advanced Technology Laboratories, Inc., a Delaware
corporation. For purposes other than Sections 12, 13 and 14, the term
"Company" shall also include other Participating Companies as provided from
time to time in Appendix I to this Plan.
1.10 Company Matching Contributions
------------------------------
"Company Matching Contributions" has the meaning set forth in Section
4.1(c).
3
<PAGE>
1.11 Company Matching Contribution Account
-------------------------------------
"Company Matching Contribution Account" means an account established to
receive a Participant's share of Company Matching Contributions to the
Plan.
1.12 Company Stock
-------------
"Company Stock" means the common stock of the Company.
1.13 Compensation
------------
"Compensation," for any Plan Year, has the meaning set forth in Section
415(c)(3) of the Code, provided, for purposes of determining who is a
Highly Compensated Employee, "Compensation" shall also include Participant
Before-Tax Contributions to this Plan and elective Employee contributions
to a cafeteria plan described in Code Section
125.
1.14 Current Market Value
--------------------
"Current Market Value," as applied to the common stock of the Company on
any day, means the closing market price of such stock on the NASDAQ
National Market on such day, or if the common stock of the Company was not
traded on such day, the closing price on the next preceding trading day on
which the common stock of the Company is traded.
1.15 Disabled
--------
"Disabled" means that a Participant is entitled to benefits under a long
term disability plan sponsored by the Participating Company, or a long term
disability plan to which the Participating Company contributes on behalf of
the Participant.
1.16 Early Terminee
--------------
"Early Terminee" means a Participant with a vested Account balance greater
than $3,500, whose employment has terminated prior to age 55 by reason
other than death but who has elected to defer receipt of payment of his
Accounts for a period of more than ninety (90) days after termination.
1.17 Earnings
--------
"Earnings" for any Plan Year means basic compensation and commissions paid
to an Employee for services rendered to the Participating Company
(calculated without regard to any reduction for Before-Tax Contributions or
pre-tax contributions to a cafeteria plan pursuant to Section 125 of the
Code), excluding amounts deferred pursuant to a non-qualified deferred
compensation plan, and also excluding additional compensation such as shift
differentials, overtime, severance payments, living and similar allowances,
4
<PAGE>
bonuses, and any wages paid by a foreign branch or subsidiary of the
Company under a non-U.S. payroll.
For purposes of determining the amount of a Supplemental Company
Contribution as provided in Section 4.1(d), in the discretion of the
Participating Company making the contribution, "Earnings" may exclude
commissions.
Notwithstanding the foregoing, annual Earnings in excess of $200,000 shall
be disregarded; provided, however, that this $200,000 limit shall be
automatically adjusted to the maximum permissible dollar limitation
permitted by the Commissioner of the Internal Revenue Service. In
determining Earnings of a Participant for purposes of this limitation, the
rules of Section 414(q)(6) of the Code shall apply, except in applying such
rules, the term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not attained age 19
before the close of the year. If as a result of the application of such
rules the adjusted $200,000 limitation is exceeded, then the limitation
shall be prorated among the affected individuals in proportion to each such
individual's Earnings as determined under this Section 1.17 prior to the
application of this limitation.
1.18 Effective Date
--------------
"Effective Date" means January 1, 1987, or with respect to any company
specified in appendices to this Plan, the date such Company adopted the
Plan.
1.19 Eligible Employee
-----------------
"Eligible Employee" means any Employee who is on the U.S. payroll of the
Company and who is not:
(a) a leased employee; or
(b) a temporary employee; or
(c) covered under a collective bargaining agreement where retirement
benefits were the subject of good faith bargaining which does not
provide for retirement benefits under this Plan.
1.20 Employee
--------
"Employee" means any person (including any officer or director) who is
employed by the Company as a common law employee and any leased employee
within the meaning of Code Section 414(n)(2); provided, however, if leased
employees constitute twenty percent or less of the Company's non-highly
compensated work force, the term "Employee" shall not include a leased
employee who is covered by a plan maintained by the leasing organization
which meets the requirements of Code Section 414(n)(5).
5
<PAGE>
1.21 Employment Commencement Date
----------------------------
"Employment Commencement Date" means the later of the Effective Date and
the date on which an Employee first completes an Hour of Service for the
Participating Company during the current period of employment.
1.22 ERISA
-----
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and including all regulations promulgated pursuant thereto.
1.23 Highly Compensated Employee
---------------------------
"Highly Compensated Employee" means an Employee who, during the Plan Year
or the twelve-month period preceding the Plan Year, is included in one of
the following categories within the meaning of Section 414(q) of the Code
and regulations thereunder:
(a) an Employee who was at any time a 5% owner of a Participating Company;
(b) an Employee who received aggregate Compensation from all the
Affiliated Companies in excess of the dollar limitation under Section
414(q)(1)(B) of the Code ($93,518 for the Plan Year ending December
31, 1992);
(c) an Employee who received aggregate Compensation from all the
Affiliated Companies in excess of the dollar limitation contained in
Section 414(q)(1)(C) of the Code ($62,345 for the Plan Year ending
December 31, 1992) and was in the "top paid group" as defined in
Section 414(q)(4) of the Code; or
(d) an officer of a Participating Company whose annual Compensation
exceeds 50% of the dollar limitation under Section 415(b)(1)(A) of the
Code ($56,111 for the Plan Year ending December 31, 1992).
An Employee described in subparagraphs (b) through (d) above for the Plan
Year in question, who is not one of the 100 highest paid Employees in the
current Plan Year, will not be considered a Highly Compensated Employee for
the current year unless he or she was a Highly Compensated Employee in the
preceding Plan Year (without regard to this sentence).
No more than 50 Employees shall be considered officers or if less, no more
than the greater of (i) 3 or (ii) 10% of all Employees shall be considered
officers. If all officers earn less than the Compensation threshold in
subparagraph (d) above, then the highest paid officer shall be considered
highly compensated.
In determining Highly Compensated Employees, the rules of Section 414(q)(6)
of the Code shall apply. The term "family" shall include only the spouse
of the employee or former employee and any lineal ascendants and
descendants and the spouses of such ascendants and descendants.
6
<PAGE>
The Company may elect, by resolution, from year to year, to make the
determination of Highly Compensated Employees for the twelve-month period
preceding the Plan Year, described above, with respect to the calendar year
that coincides with the current plan year rather than with respect to the
twelve-month period preceding the current plan year.
The Company may elect, by resolution, for any year during which the Company
at all times maintained significant business activities and employed
employees in at least two significantly separate geographic areas, to
modify the above definition by substituting the dollar amount in
subparagraph (d) for the dollar amount in subparagraph (b) and by
disregarding subparagraph (c).
1.24 Hour of Service
---------------
"Hour of Service" means each hour for which an Employee is paid or entitled
to payment by the Company or any Affiliated Companies on account of:
(a) Performance of duties;
(b) A period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury
duty, military duty, or leave of absence. No more than 501 Hours of
Service shall be credited under this paragraph for any single
continuous period (whether or not such period occurs in a single
computation period). Hours under this paragraph shall be calculated
and credited pursuant to 29 CFR 2530.200b-2(b) and (c), which are
incorporated herein by this reference; and
(c) An award of back pay, irrespective of mitigation of damages, agreed to
by the Participating Company or any Affiliated Company. However,
hours credited under (a) or (b) above shall not also be credited under
this subsection (c).
1.25 Normal Retirement Date
----------------------
"Normal Retirement Date" means the first day of the month coinciding with
or immediately preceding the Participant's sixty-fifth (65th) birthday.
1.26 Participant
-----------
"Participant" means any Eligible Employee who qualifies for participation
pursuant to Section 2. A vested Participant shall cease to be a
Participant when his or her vested Accounts are fully paid.
1.27 Participating Company
---------------------
"Participating Company" means the Company or any Affiliated Company that
adopts the Plan with the approval of the Board of Directors of the Company,
and any successor thereto. A list of all Participating Companies is
attached as Appendix I to the Plan.
7
<PAGE>
1.28 Period of Service
-----------------
"Period of Service" means the period of time commencing with the Employment
Commencement Date and ending on the Severance From Service Date. Non-
successive periods are aggregated to determine the Employee's total Period
of Service. An Employee's Period of Service shall also include the
following:
(a) Periods not in Service due to Temporary Termination;
(b) Periods of Service required to be taken into account by Section
414(a)(1) of the Code or under Treasury Regulations issued pursuant to
Section 414(a)(2) of the Code, and Service with Affiliated Companies.
Where the Company maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service for
the Company, as may be required by the Code; and
(c) For any Participant who became an Employee prior to September 1,
1987, any period of employment with a Participating Company under
the Squibb Corporation Incentive Savings and Stock Ownership Plan to
the extent such employment was credited as "Service" under that
plan.
Notwithstanding the above, with respect to an individual who was a
Participant in this Plan and whose Account balances were transferred to the
SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership Plan between
June 25 and December 31, 1992, such Employee's Period of Service under this
Plan, for participation and vesting purposes, shall begin on the first
Employment Commencement Date after December 31, 1992 that follows such
transfer of the Employee's Accounts.
1.29 Period of Severance
-------------------
"Period of Severance" means the period of time commencing at the Severance
From Service Date and ending on the date the Employee again performs an
Hour of Service for the Participating Company; provided, however, such
period shall commence one year later if a male or female Employee is absent
due to pregnancy, birth or adoption of a child, or caring for a child
immediately following birth or adoption.
1.30 Plan
----
"Plan" means the Advanced Technology Laboratories, Inc. Incentive Savings
and Stock Ownership Plan either in its previous or present form or as
amended from time to time.
1.31 Plan Administrator
------------------
"Plan Administrator" means the person or entity designated in Section 11 to
administer the Plan.
8
<PAGE>
1.32 Plan Year
---------
"Plan Year" means the twelve-month period commencing each January 1 and
ending each December 31.
1.33 Rollover Account
----------------
"Rollover Account" means an account established to hold a Participant's
rollover contribution to the Plan.
1.34 Service
-------
"Service" with a Participating Company means periods for which an Employee
is paid or entitled to payment for the performance of duties for the
Participating Company. Service shall include a period of employment with a
predecessor to the Participating Company to the extent (i) provided by the
Board in its discretion on a non-discriminatory basis as to all Employees
similarly situated or (ii) required by Section 414(a) of the Code.
1.35 Severance From Service Date
---------------------------
"Severance From Service Date" means the earlier of the date on which an
Employee quits, retires, is discharged or dies, or the first anniversary of
absence from work for any other reason. An individual employed by an
Affiliated Company other than the Company shall incur a Severance From
Service Date on the date the individual's employer ceases to be an
Affiliated Company of the Company.
1.36 Supplemental Company Contribution Account
-----------------------------------------
"Supplemental Company Contribution Account" means an account established to
receive a Participant's share of Supplemental Company Contributions to the
Plan.
1.37 Temporary Termination
---------------------
Termination is deemed "Temporary" if the Employee is rehired
and in Service within one year of the initial date of absence from work.
1.38 Terminated
----------
"Terminated" means no longer in Service or employed as an Employee with the
Company or any Affiliated Company for reasons of resignation, retirement,
discharge or death.
1.39 Trust or Trust Fund
-------------------
"Trust" or "Trust Fund" means the trust fund into which shall be paid all
contributions and from which all benefits shall be paid under this Plan.
9
<PAGE>
1.40 Trustee
-------
"Trustee" means the trustee or trustees who receive, hold, invest, and
disburse the assets of the Trust in accordance with the terms and
provisions set forth in a trust agreement.
1.41 Valuation Date
--------------
"Valuation Date" means the last business day in each calendar quarter and
any other day which the Plan Administrator may designate from time to time.
1.42 Additional Definitions in Plan
------------------------------
The following terms are defined in the following sections of the Plan.
<TABLE>
<CAPTION>
Section
-------
<S> <C>
ACP Test 4.3
ADP Test 3.4
After-Tax Contributions 4.1(b)
Aggregate Account 10.2(e)
Aggregation Group 9.2(h)
Annual Additions 9.1
Before-Tax Contributions 3.1(a)
Company Stock Fund 5.2(a)
Company Matching Contributions 4.1(c)
Determination Date 10.2(c)
Diversified Equity Fund I 5.2(c)
Diversified Equity Fund II 5.2(d)
Domestic Relations Order 11.9
Fixed Income Fund 5.2(b)
Investment Manager 13.4
International Fund 5.2(e)
Key Employee 10.2(g)
Lump Sum Supplemental Contribution 4.1(e)
Part-Time Employee 2.1(b)
Present Value of Accrued Benefit 10.2(f)
SpaceLabs Stock Fund 5.2(f)
Super Top Heavy 10.2(b)
Supplemental Company Contributions 4.1(d)
Top Heavy 10.2(a)
Valuation Date (for Top Heavy) 10.2(d)
</TABLE>
10
<PAGE>
SECTION 2
PARTICIPATION
2.1 Participation
-------------
(a) Each Eligible Employee (other than a Part-Time Employee as described
below) who is not already a Participant shall become a Participant in
this Plan on the first day of the month coinciding with or following
completion of a one-year Period of Service provided he or she is an
Eligible Employee on such date.
(b) An Eligible Employee who is a Part-Time Employee shall become a
Participant on the first day of any subsequent month following a
twelve-month period during which he or she is credited with at least
1,000 Hours of Service. Such twelve-month period shall commence on
the Employee's Employment Commencement Date and each January 1
thereafter.
Part-Time Employee means an Employee who is employed for less than a
full-time basis based on uniform rules established by the Committee
and consistently applied to all persons similarly situated.
2.2 Reemployment After Termination
------------------------------
Upon the reemployment of a Terminated former Participant as an Eligible
Employee, he or she shall immediately become a Participant.
An Employee who Terminates prior to becoming a Participant and is later
reemployed shall become a Participant upon satisfying the requirements of
Section 2.1. A Period of Service earned prior to Termination shall not be
forfeited for purposes of this Section 2.
2.3 Employees in a Bargaining Unit
------------------------------
An Employee belonging to a collective bargaining unit, which has entered an
agreement with the Participating Company that does not provide for
retirement benefits under this Plan, shall not qualify for participation.
If such an Employee is a Participant when such an agreement is entered,
the Employee shall cease active participation on the effective date of
the bargaining agreement. If such an agreement provides for Plan
participation, a covered Employee may continue or resume participation.
11
<PAGE>
SECTION 3
BEFORE-TAX CONTRIBUTIONS
3.1 Salary Deferral Agreement
-------------------------
(a) General
-------
A Participant who desires to make salary deferrals pursuant to this
Section 3.1 shall enter a salary deferral agreement with the
Participating Company at least 15 days prior to the first day of the
month on which the salary deferral is to commence. Such agreement
shall authorize the Company to make payroll deductions equal to a
whole percentage of Earnings between 2% and 16% designated as Before-
Tax Contributions. Payroll deductions shall be based on Earnings for
each payroll period.
To the extent a Participant's salary deferral agreement is based on a
percentage of Earnings, the dollar amount of a Participant's salary
deferral shall be automatically increased or decreased to reflect
changes in the amount of the Participant's Earnings. The salary
deferral agreement shall be effective on the first day of the
payroll period coinciding with or following the later of: (1) the
date participation commences, or (2) the first day of the month
which coincides with or next follows completion of the agreement,
and shall remain in effect until such agreement is superseded by a
subsequent agreement or revoked. Deferrals shall be deducted from
Participant Earnings each payroll period, except for those periods
in which the deferral amount exceeds the amount remaining after
other payroll deductions. In the event a deduction is not taken in a
payroll period, the Committee, with sole discretion, shall determine
whether there will be a make-up deduction in a subsequent payroll
period.
(b) Maximum Dollar Contribution
---------------------------
Notwithstanding the foregoing, Before-Tax Contributions for any
calendar year to this Plan (and any other plans of Affiliated
Companies subject to Section 402(g) of the Code) shall not exceed the
maximum dollar limitation on elective deferrals under Section 402(g)
of the Code ($8,728 for 1992).
3.2 Participant Modification of Salary Deferral Agreement
-----------------------------------------------------
The payroll deduction percentages designated in the Participant's salary
deferral agreement shall continue in effect regardless of changes in
Earnings until the Participant elects in writing to change the percentage.
A Participant may change the deferral amount by completing a new salary
deferral agreement and submitting it to the Committee. The agreement will
become effective on the first day of the month after 15 days from the date
12
<PAGE>
such notice is received by the Committee. Completion of a salary deferral
agreement shall automatically revoke all prior salary deferral agreements
entered into by a Participant. No more than one such change may be made
within a six-month period.
A Participant may discontinue contributions effective on the first day of
any future month by submitting a request form to the Committee at least 15
days prior to the effective date. Contributions may be resumed on the
first day of any month after having been suspended for at least four
months, upon at least 15 days' notice to the Committee.
3.3 Procedure for Making and Revoking Salary Deferral Agreement
-----------------------------------------------------------
The salary deferral agreement and any modification or revocation thereof
shall be made by the Participant on such form, within such time and in
accordance with such rules and procedures as prescribed by the Committee.
3.4 Non-Discrimination Test For Deferrals (ADP Test)
------------------------------------------------
For each Plan Year, the Plan must meet one of the actual deferral
percentage (hereinafter "ADP") tests described below to satisfy the non-
discrimination requirement. For purposes of this ADP test, Eligible
Employees who do not qualify for participation pursuant to Section 2 shall
not be considered.
(a) The ADP for the group of Eligible Employees who are Highly Compensated
Employees does not exceed the ADP for all other Eligible Employees
multiplied by 1.25; or
(b) The ADP for the group of Eligible Employees who are Highly Compensated
Employees (i) is not more than two percentage points higher than the
ADP for all other Eligible Employees and (ii) does not exceed the ADP
for all other Eligible Employees multiplied by 2.
The ADP for a specified group of Eligible Employees shall be the average of
the ratios (calculated separately for each Employee in the group to the
nearest one-hundredth of one percent of the Employee's Compensation) of (i)
Participant Before-Tax Contributions to (ii) the Employee's Compensation
earned while eligible to participate, determined in accordance with Code
Section 401(k) and regulations pursuant thereto. For purposes of the ADP
tests, the definition of "Compensation" may be modified from year to year
to mean any definition of compensation that complies with Section 414(s) of
the Code.
In applying the foregoing tests, Compensation paid to and Before-Tax
Contributions on behalf of family members (as defined in Code Section
414(q)(6)(B)) of a Highly Compensated Employee who is a 5% owner or in the
group consisting of the ten Highly Compensated Employees paid the greatest
Compensation shall be considered together to determine a combined ADP for
the family group (which is treated as one Highly Compensated Employee).
13
<PAGE>
If for any Plan Year a Highly Compensated Employee is also eligible to
participate in another cash for deferred arrangement maintained by any
Affiliated Company, then the ADP of such Highly Compensated Employee shall
be determined by treating all the cash or deferred arrangements in which he
or she is eligible to participate and this Plan as one arrangement.
14
<PAGE>
SECTION 4
PLAN CONTRIBUTIONS
4.1 Participant and Company Contributions
-------------------------------------
(a) Participant Payroll Deduction Contributions
-------------------------------------------
The Company shall make a Participant Before-Tax Contribution on behalf
of each active Participant in an amount equal to 100% of the salary
deferral amount pursuant to the Participant's salary deferral
agreement, as provided in Section 3, for each payroll period.
Participant contributions shall be credited to the Participant's
Before-Tax Contribution Account.
To the extent a Participant's salary deferral agreement is based on a
percentage of Earnings, the dollar amount of a Participant's Before-
Tax Contributions shall be automatically increased or decreased to
reflect changes in the amount of the Participant's Earnings.
The Company shall pay the Participants' Before-Tax Contributions in
cash to the Trustee within a reasonable time after each pay-period but
not later than a reasonable time after the end of each month.
(b) Employee After-Tax Contributions
--------------------------------
A Participant may elect to contribute to the Plan, through payroll
deductions, an amount equal to a whole percentage of Earnings between
2% and 16%, reduced by the amount (if any) of the Before-Tax
Contributions to be made on his behalf. Such amounts are referred to
as After-Tax Contributions. A Participant may make such election by
filing a written application which authorizes a deduction of
contributions from his Earnings at least 15 days prior to the first
day of the month on which a deduction is to commence. After-Tax
Contributions shall be credited to the Participant's After-Tax
Contribution Account.
An election to make After-Tax Contributions may be modified or
canceled subject to the same provisions that apply to Before-Tax
Contributions pursuant to Section 3.2.
The dollar amount of a Participant's After-Tax Contributions shall be
automatically increased or decreased to reflect changes in the amount
of the Participant's Earnings.
The Company shall pay the Participants' After-Tax Contributions in
cash to the Trustee within a reasonable time after each pay-period
but not later than a reasonable time after the end of each month.
15
<PAGE>
(c) Company Matching Contributions
------------------------------
Each Company shall make the Company Matching Contribution for any Plan
Year in an amount equal to:
(i) 50% of the first 3% of each Participant's Before-Tax
Contributions and After-Tax Contributions in respect of Earnings
paid by the Company during such Plan Year; and
(ii) 25% of each Participant's Before-Tax Contributions and After-Tax
Contributions over 3% and up to 6% of Earnings paid by the
Company during such Plan Year.
Provided that, Participant Lump Sum Supplemental Contributions
pursuant to Section 4.1(e) will not be matched by a Company Matching
Contribution.
Such amounts shall be called Company Matching Contributions. The
percentage of Company Matching Contributions shall be determined
separately for the Company from time to time by the Board, subject to
the percentage limitations contained in the preceding sentence. The
rate of Company Matching Contributions shall be certified to the
Committee and shall remain effective until changed by the Board and
certified to the Committee. Company Matching Contributions shall be
credited to the Participants' Company Matching Contribution Accounts.
The amount of the Company Matching Contributions due under this
Section 4.1(c) (reduced by any Company Matching Contributions
forfeited during the month, as provided in Section 8.2) shall be
remitted to the Trustee within a reasonable time after each pay period
but not later than a reasonable time after the end of each month.
The Company may, at its option, make its contribution under this
Section 4.1(c) by delivering or causing to be delivered to the Trustee
shares of Company Stock at the aggregate Current Market Value of the
stock so delivered on the date of the delivery. Such shares shall be
treasury shares, authorized but unissued shares or shares purchased on
the open market.
(d) Supplemental Company Contributions
----------------------------------
On the last day of the Plan Year, each Participating Company may
contribute a uniform percentage of a Participant's Earnings, on behalf
of each Participant who completed 1,000 or more Hours of Service
during the Plan Year and (i) who is employed on the first and last
days of the Plan Year, (ii) who terminated employment during the Plan
Year as a result of retirement, Disability or death, or (iii) who was
employed by the Participating Company but who was transferred during
the Plan Year to the employ of an Affiliated Company that is not a
Participating Company.
16
<PAGE>
Amounts contributed by each Participating Company may be different
from the amount contributed by another Participating Company.
Amounts contributed by each Participating Company will be allocated
only to Participants employed by that Participating Company, based
on Earnings paid by that Participating Company. Such amounts are
referred to as Supplemental Company Contributions and shall be
credited to Supplemental Company Contribution Accounts. The
percentage of Supplemental Company Contributions shall be determined
separately for each Participating Company by the Board.
In the discretion of the Participating Company making the
contribution, a Supplemental Company Contribution may be based on
Earnings as defined in Section 1.17.
Supplemental Company Contributions shall be remitted to the Trustee on
or before the due date for filing the Company's Federal income tax
return for the Plan Year, including extensions.
A Participating Company may, at its option, make its contributions
under this Section 4.1(d) by delivering or causing to be delivered
to the Trustee shares of Company Stock at the aggregate Current
Market Value of the stock so delivered on the date of delivery. Such
shares shall be treasury shares, authorized but unissued shares or
shares purchased on the open market.
(e) Lump-Sum Supplemental Contributions
-----------------------------------
In addition to any other contributions made by him, a Participant who
has completed at least five years of Service with the Participating
Company may make a contribution to the Plan, effective as of the last
day of any month, by delivering a check to the Participating Company,
provided that no more than two Lump-Sum Supplemental Contributions may
be made hereunder by a Participant in any calendar year. Lump-Sum
Supplemental Contributions shall be treated as After-Tax Contributions
and credited to the Participant's After-Tax Contribution Account.
The Company shall pay the Lump-Sum Supplemental Contributions in cash
to the Trustee within a reasonable time after receipt of a
Participant's check.
(f) Rollover Contributions
----------------------
An Eligible Employee may request in writing that the Committee permit
acceptance of a rollover amount which was distributed from another
qualified plan or conduit Individual Retirement Account (IRA). The
amount must be rolled over by the Eligible Employee within 60 days of
receiving the distribution from the other plan or conduit IRA. The
Committee shall have total discretion over acceptance of such amounts
into this Plan; provided, rollovers of any type of property other than
cash will not be accepted. In the event an Eligible Employee is
permitted to contribute a rollover amount, such amount shall be
allocated to a
17
<PAGE>
separate, fully vested account and subject to the same terms of the
Plan as other amounts in a Before-Tax Contribution Account,
provided, amounts in a Rollover Account may be withdrawn in Service
at any time.
If the Eligible Employee never satisfies the participation
requirements of Section 2, the Eligible Employee shall be considered a
Participant only with respect to the rollover amount.
4.2 Time of Contribution
--------------------
In no event shall contributions for any Plan Year be made later than the
time prescribed by law (i) for the deduction of such contributions for
purposes of Federal income tax, as determined by the applicable provisions
of the Code, or (ii) for making such contributions under a cash or deferred
arrangement (within the meaning of Section 401(k) of the Code).
4.3 Non-Discrimination Test for Company Matching Contributions and After-Tax
------------------------------------------------------------------------
Contributions (ACP Test)
------------------------
For each Plan Year the Plan must meet one of the average contribution
percentage (hereinafter "ACP") tests described below to satisfy this non-
discrimination requirement. For purposes of this ACP test, Eligible
Employees who do not qualify for participation pursuant to Section 2 shall
not be considered.
(a) The ACP for the group of Eligible Employees who are Highly Compensated
Employees does not exceed the ACP for all other Eligible Employees
multiplied by 1.25; or
(b) The ACP for the group of Eligible Employees who are Highly Compensated
Employees (i) is not more than two percentage points higher than the
ACP for all other Eligible Employees and (ii) does not exceed the ACP
for all other Eligible Employees multiplied by 2.
The ACP for a specified group of Eligible Employees shall be the average of
the ratios (calculated separately for each Employee in the group to the
nearest one-hundredth of one percent of the Employee's Compensation) of (i)
Company Matching Contributions on behalf of each such Employee and the
Employee's After-Tax Contributions and Lump-Sum Supplemental Contributions,
if any, to (ii) the Employee's Compensation earned while eligible to
participate, determined in accordance with Code Section 401(m) and
regulations pursuant thereto. For purposes of the ACP tests, the
definition of "Compensation" may be modified from year to year to mean any
definition of compensation that complies with Section 414(s) of the Code.
In applying the foregoing tests, Compensation paid to and contributions on
behalf of family members (as defined in Code Section 414(q)(6)(B)) of a
Highly Compensated Employee who is a 5% owner or in the group consisting of
the ten Highly Compensated Employees paid the greatest Compensation shall
be considered together to determine a
18
<PAGE>
combined ACP for the family group (which is treated as one Highly
Compensated Employee).
If for any Plan Year a Highly Compensated Employee is also eligible to
participate in another plan offering company matching contributions and/or
after-tax contributions maintained by any Affiliated Company, the ACP of
such Highly Compensated Employee shall be determined by aggregating all
such contributions.
4.4 Multiple Use of Alternative Limitations Under ADP and ACP Tests
---------------------------------------------------------------
If the sum of the ADP and ACP for Highly Compensated Employees determined
under Section 3.4 and Section 4.3, respectively, after correcting any
excess deferrals or contributions pursuant to Section 4.5, exceeds the
Aggregate Limit defined below, then Highly Compensated Employee
contributions shall be further limited pursuant to this section. This
multiple use limitation shall be applied in accordance with the provisions
of Treas. Reg. Sections 1.401(m)-1 and 1.401(m)-2.
The Aggregate Limit means the greater of (a) or (b) below:
(a) the sum of:
(i) 1.25 multiplied by the greater of the ADP or the ACP for the
group of all Eligible Employees who are not Highly Compensated
Employees, and
(ii) two plus the lesser of the ADP or the ACP for the group of all
Eligible Employees who are not Highly Compensated Employees (in
no event shall this amount exceed twice the lesser of such ADP or
ACP).
(b) the sum of:
(i) 1.25 multiplied by the lesser of the ADP or the ACP for the group
of all Eligible Employees who are not Highly Compensated
Employees, and
(ii) two plus the greater of the ADP or the ACP for the group of all
Eligible Employees who are not Highly Compensated Employees (in
no event shall this amount exceed twice the greater of such ADP
or ACP).
4.5 Corrective Procedures to Satisfy Discrimination Tests
-----------------------------------------------------
If at any time during a Plan Year the Committee determines on a projected
basis that it is necessary to reduce the Participant Before-Tax
Contributions, After-Tax Contributions or Company Matching Contributions of
any Highly Compensated Employee to satisfy the dollar limit on annual
deferrals, the ADP non-discrimination test, the ACP non-discrimination
test, or the multiple use of alternative limitations test, it shall have
the authority to do so in such amounts and for such periods of time as it
shall deem necessary under the circumstances.
19
<PAGE>
The Committee may, in its sole discretion, elect to aggregate Company
Matching Contributions and/or Supplemental Company Contributions with
Participant Before-Tax Contributions to the extent necessary to satisfy the
ADP discrimination test provided such aggregation does not itself result
in discrimination. Notwithstanding any Plan provisions to the contrary,
any Company contributions so aggregated shall be 100% vested as of the
date contributed to the Plan and shall be subject to the withdrawal
provisions of Section 7.4 as if they are Before-Tax Contributions. The
ACP test must be passed without taking such Company contributions into
account.
The Committee may also, in its sole discretion, elect to aggregate
Supplemental Company Contributions with Company Matching Contributions to
the extent necessary to satisfy the ACP discrimination test, provided such
aggregation does not itself result in discrimination. Notwithstanding any
Plan provision to the contrary, any Company contributions so aggregated
shall be 100% vested, and shall be subject to the withdrawal provisions of
Section 7.4 as if they are Before-Tax Contributions.
4.6 Return of Contributions
-----------------------
(a) Mistake of Fact
---------------
If the amount of contribution made to the Plan by a Participating
Company for any Plan Year is in excess of the amount required under
Section 4.1, and such excess payment is due to mistake of fact, the
Participating Company shall have the right to recover such excess
contribution within one year after the date the contribution is made
to the Trustee. The return of a contribution shall be permitted
hereunder only if the amount so returned (i) is the excess of the
amount actually contributed over the amount which would have otherwise
been contributed, (ii) does not include the earnings attributable to
such contribution, and (iii) is reduced by any losses attributable to
such contribution.
(b) Excess Deferrals
----------------
An excess deferral exists for a Participant if Before-Tax
Contributions under this Plan together with any other plans subject to
the deferral limit in Code Section 402(g) (for 1992 this limit is
$8,728) exceed such dollar limitation for any calendar year.
In the event an excess deferral exists in plans maintained by the
Participating Company (and Affiliated Companies, if applicable), such
excess deferral, adjusted for investment gains or losses, less amounts
previously returned pursuant to subparagraph (c), shall be distributed
no later than April 15 following the calendar year in which the excess
deferral occurred.
In the event an excess deferral exists in plans maintained by the
Company and any unrelated employer(s), and a Participant submits a
written request for a return of excess deferrals by March 1 following
the calendar year in which an excess deferral occurs (or any other
date authorized by the Committee),
20
<PAGE>
the Committee shall distribute such excess deferral, adjusted for
investment gains or losses, less amounts previously returned
pursuant to subparagraph (c), no later than April 15 following the
calendar year in which the excess deferral occurred. Such written
request shall contain information which the Committee may require.
(c) ADP Excess Contribution
-----------------------
An ADP excess contribution exists if contributions under this Plan
on behalf of Highly Compensated Employees fail to meet the ADP test
described in Section 3.4. Within twelve months after the end of the
Plan Year for which there is an excess, contributions which exceed
the ADP limitation, adjusted for earnings and losses, less amounts
previously returned pursuant to subparagraph (b), shall be
distributed to Highly Compensated Employees by reducing each Highly
Compensated Employee's deferral in the order of deferral percentages
beginning with the highest.
In the event excess deferrals are returned to a Highly Compensated
Employee whose contributions and Compensation were aggregated with
other family members for purposes of the ADP test in Section 3.4, such
returned amounts shall be returned to each family member in the same
proportion that his or her contributions and Compensation bears to
total contributions and Compensation of the family member group.
(d) ACP Excess Contribution
-----------------------
An ACP excess contribution exists if contributions under this Plan on
behalf of Highly Compensated Employees fail to meet the ACP test
described in Section 4.3. Within twelve months after the end of the
Plan Year for which there is an excess, unmatched After-Tax
Contributions, and then matched After-Tax Contributions and Company
Matching Contributions (in equal amounts) of Highly Compensated
Employees which exceed the ACP limitation shall be reduced, beginning
with the highest contribution percentage and then continuing with each
next lower percentage as the ceiling declines, as follows:
(i) Any amount reduced from After-Tax Contributions (including
recharacterized contributions) shall be distributed with
related earnings to the Employee to whom it applies.
(ii) Any amount reduced from Company Matching Contributions shall be
distributed, with related earnings, to the extent vested, to
the Employee to whom it applies.
(iii) Any amount reduced from Company Matching Contributions not
distributed under (ii) above shall be forfeited, with related
earnings. Amounts so forfeited shall be applied to offset
future Company Matching Contributions.
21
<PAGE>
In the event excess deferrals are returned to a Highly Compensated
Employee whose contributions and Compensation were aggregated with
other family members for purposes of the ACP test in Section 4.3, such
returned amounts shall be returned to each family member in the same
proportion that his or her contributions and Compensation bears to
total contributions and Compensation of the family member group.
(e) Contributions in Excess of the Aggregate Limit
----------------------------------------------
In the event contributions exceed the Aggregate Limit (as defined in
Section 4.4), Participant unmatched After-Tax Contributions, then
unmatched Before-Tax Contributions, then matched After-Tax
Contributions, then matched Before-Tax Contributions shall be
considered excess contributions pursuant to (c) or (d) above, as
applicable, and shall be returned to Highly Compensated Employees
pursuant thereto.
(f) Adjustment for Income
---------------------
An Excess Deferral, ADP excess contribution or ACP excess contribution
distributed to a Participant shall be adjusted for income or loss for
the calendar year using the method described in Section 5.3.
(g) Vesting Exception
-----------------
Notwithstanding the vesting provisions of Section 8, a Participant
shall not have a nonforfeitable right to excess Company contributions
which are returned or adjusted pursuant to this Section 4.6.
4.7 Recharacterization of Excess Before-Tax Contributions
-----------------------------------------------------
(a) Before-Tax Contributions made to the Plan that exceed the limitations
of Section 3.1(b) (dollar limitation) or Section 3.4 (ADP test) in the
discretion of the Committee for each Plan Year may be
recharacterized as After-Tax Contributions rather than distributed
to Participants as provided in Section 4.6(b) and (d) above.
(b) Recharacterization may be combined with a distribution to correct the
excess. If part of the excess is recharacterized, the distribution
necessary for correction shall be reduced by the amount
recharacterized and related income. Income related to a
recharacterized excess shall not be treated as an amount
recharacterized, but shall remain attributed to the applicable Before-
Tax Contribution Account. Recharacterized Before-Tax Contributions
will be eligible for Company Matching Contributions.
(c) An amount recharacterized shall be treated as the Company contribution
for purposes of Sections 9 and 10. An amount recharacterized before
January 1, 1988 shall be treated as an After-Tax Contribution for
purposes of withdrawal under Section 7.5(b). Amounts recharacterized
after January 1, 1988 will be
22
<PAGE>
treated as Before-Tax Contributions for purposes of hardship
withdrawal under Section 7.5(c). Recharacterized amounts shall be
treated as Before-Tax Contributions for purposes of determining
Compensation.
23
<PAGE>
SECTION 5
ACCOUNT ADMINISTRATION
5.1 Types of Accounts
-----------------
All contributions shall be made to the Trust Fund which will have the
following types of accounts for each Participant:
(a) Before-Tax Contribution Account
(b) After-Tax Contribution Account
(c) Company Matching Contribution Account
(d) Supplemental Company Contribution Account
(e) Rollover Account
5.2 Investment Options
------------------
The Trust Fund shall be divided into the following investment subfunds:
(a) Company Stock Fund
------------------
The Company Stock Fund, including earnings thereon, shall be invested
by the Trustee in shares of Company Stock and short-term cash
investments.
(b) Fixed Income Fund
-----------------
The Fixed Income Fund, including earnings thereon, shall be invested
by the Trustee in insurance contracts guaranteed as to principal and
interest by the insurance company, obligations of the United States
Government or agencies thereof, obligations guaranteed as to payment
of principal and interest by the United States Government or agencies
thereof, corporate or municipal bonds, debentures, notes, certificates
or other evidence of indebtedness, deposits in fully insured savings
accounts, insurance contracts under which deposits received by the
insurance company under the contracts are invested primarily in
mortgages and in fixed-income securities or obligations or federal,
state or municipal governments or agencies thereof, or of
corporations, and commingled trust funds invested primarily in the
foregoing types of investments which are managed by the Trustee (or
any Investment Manager or Managers appointed by the Board) for the
investment of funds of trusts of profit sharing and pension plans
which trusts are exempt from tax under Section 501(a) of the Code by
reason of qualifying under section 401(a) of the Code.
(c) Diversified Equity Fund I
-------------------------
The Diversified Equity Fund I, including earnings thereon, shall be
invested in common or capital stocks, preferred stock, convertible
bonds, convertible notes, debentures which are convertible into
24
<PAGE>
common or capital stocks, debentures accompanied by warrants to
purchase common or capital stocks and such other types of equity
investments, including without limitation, rights and warrants to
purchase common or capital stocks and shares of beneficial interest
as may be purchased by the Trustee in its discretion including
investments in any insurance company contract or any commingled
trust fund managed by the Trustee (or any investment manager or
managers appointed by the Board) for the investment of funds of
trusts of profit sharing and pension plans which trusts are exempt
from tax under Section 501(a) of the Code by reason of qualifying
under Section 401(a) of the Code, and shall also include short-term
obligations of the United States Government and other investments of
a short-term nature, including commercial paper, purchased by the
Trustee pending the selection and purchase of other investments of
the type described in this Section 5.2(c).
(d) Diversified Equity Fund II
--------------------------
Only account balances invested in the Diversified Equity Fund II under
the Predecessor Plan and transferred to this Plan will be invested in
this Fund. The Diversified Equity Fund II, including earnings
thereon, shall be invested in investments similar to those held in the
Diversified Equity Fund I although it is anticipated that this Fund
shall be invested more aggressively to achieve long-term capital
appreciation.
This Fund will be liquidated effective December 31, 1992.
Participants may elect prior to December 15, 1992, to transfer account
balances in this Fund to another Fund in accordance with the procedure
described in Section 6.3. If no election is made, any amount
remaining in this Fund on December 31, 1992, will be transferred to
the Fixed Income Fund.
(e) International Fund
------------------
The International Fund, including earnings thereon, shall be invested
in a diversified portfolio of marketable securities of companies
domiciled and operating mainly in countries other than the United
States.
(f) SpaceLabs Stock Fund
--------------------
Effective July 1, 1992, the Trust Fund shall contain a SpaceLabs Stock
Fund, which will be invested in common stock of SpaceLabs Medical,
Inc. and short-term cash investments. Shares of common stock of
SpaceLabs Medical, Inc. distributed on June 26, 1992 with respect to
shares held in the Company Stock Fund shall be transferred to the
SpaceLabs Stock Fund effective July 1, 1992. No additional
contributions shall be invested in the SpaceLabs Stock Fund.
A Participant may elect to have all or part of his Company Matching
Contribution and Supplemental Company Contribution Accounts invested
in the SpaceLabs Stock Fund transferred to the Company Stock Fund,
and may elect to have all or part of his Before-Tax Contribution,
25
<PAGE>
After Tax Contribution and Rollover Accounts transferred to the
Diversified Equity Fund I, the Fixed Income Fund, the International
Fund, or the Company Stock Fund, in accordance with the procedure
described in Section 6.4. Participants may not elect to transfer
account balances to this Fund.
5.3 Allocation of Trust Fund Earnings and Losses to Participant Accounts
--------------------------------------------------------------------
(a) Diversified Equity Fund I and II, International Fund and Fixed Income
---------------------------------------------------------------------
Fund
----
As of each Valuation Date, any increase or decrease in the fair market
value (including interest, dividends, realized and unrealized gains
and losses) of the Diversified Equity Fund I or II, International Fund
or Fixed Income Fund shall be allocated among the Participant Accounts
on the basis of the interests in the particular Fund held in the
Accounts as of the immediately preceding Valuation Date, adjusted for
contributions, distributions and transfers made since that date, in
accordance with administrative procedures established by the
Committee.
Notwithstanding the foregoing, in the event a Terminated Participant
has received a distribution of his or her vested Account balances, the
nonvested portion of his or her Accounts shall not be credited with
Trust Fund earnings and losses pursuant to this section after the
Valuation Date which coincides with or next precedes the date of
Termination of employment.
(b) Company Stock Fund
------------------
Company Matching Contributions and Supplemental Company Contributions
shall be invested solely in the Company Stock Fund, and may be made in
cash or shares of Company Stock. The Trustee shall apply cash
contributions to the purchase of Company Stock over a period of time
as directed by the Committee. As of each Valuation Date, each
Participant's Company Matching Contribution Account (and Supplemental
Company Contribution Account, if applicable) shall be credited
with a number of shares of Company Stock that represent the Company
Matching Contribution (and Supplemental Company Contribution, if
applicable) made on the Participant's behalf, based on the average
price of the shares contributed to the Plan and purchased by the
Trustee since the Valuation Date.
If a Participant elects to transfer amounts in his or her Accounts
invested in the SpaceLabs Stock Fund to the Company Stock Fund, the
Trustee shall apply the transferred cash amount to the purchase of
Company Stock as described in the preceding paragraph. As of the
next following Valuation Date, the Participant's Accounts will be
credited with a number of shares of Company Stock that represent the
amount transferred to the Company Stock Fund, based on the average
price of the shares purchased by the Trustee since the effective
date of the transfer.
26
<PAGE>
As of each Valuation Date, dividends and other distributions received
on Company Stock held in the Company Stock Fund may be reinvested in
Company Stock or held in short-term cash investments. The
Participants' Accounts shall be credited with a proportionate amount
of shares and/or cash determined on the basis of the number of shares
in each Participant's Accounts on the record date of such
distribution.
(c) SpaceLabs Stock Fund
--------------------
If a Participant elects to transfer amounts in his or her Accounts
invested in the SpaceLabs Stock Fund to other funds as provided in
Section 5.2(f), the transfer shall be made in cash. The cash value of
common stock of SpaceLabs Medical, Inc. that is so transferred shall
be based on the actual proceeds from the sale of the stock.
As of each Valuation Date, dividends and other distributions received
on common stock of SpaceLabs Medical, Inc. held in the SpaceLabs Stock
Fund shall be reinvested in common stock of SpaceLabs Medical, Inc. or
held in short term cash investments. The Participant's Accounts shall
be credited with a proportionate number of shares and/or cash
determined on the basis of the number of shares in each Participant's
Accounts on the record date of such distribution.
5.4 Valuation of the Trust Fund
---------------------------
The fair market value of the Trust Fund shall be determined as of each
Valuation Date and at any time specifically requested by the Plan
Administrator. Any portion of the Trust Fund held under an insurance
contract or bank investment contract in which asset values are only
maintained on a book value basis shall have that portion of the Trust Fund
valued at book value rather than market value.
5.5 Account Statements
------------------
Each Participant shall be provided with a statement of his or her Accounts
under the Plan showing the Account values on dates determined by the
Committee, but not more frequently than each calendar quarter. If within
thirty (30) days after the statement is mailed the Participant makes no
objection to the statement, it shall become binding and conclusive on the
Participant and any Beneficiary.
27
<PAGE>
SECTION 6
INVESTMENT OF CONTRIBUTIONS
6.1 Optional Funds
--------------
Each Participant, at the time he elects to participate in the Plan, shall
direct that his After-Tax Contributions to the Plan and the Before-Tax
Contributions made on his behalf be invested (in multiples of 10%) in any
one of the following four investment funds, or in any combination of the
funds:
(a) the Diversified Equity Fund I;
(b) the Fixed Income Fund;
(c) the International Fund; and
(d) the Company Stock Fund, not exceeding 30% of a Participant's After-Tax
Contributions and Before-Tax Contributions.
A single investment election shall be made with respect to Before-Tax
Contributions and After-Tax Contributions.
6.2 Selection of Investment Funds
-----------------------------
The selection of an investment option pursuant to this Section 6 is the
sole responsibility of each Participant. The Trustee, the Committee, any
Participating Company, or any of their officers or supervisors are not
empowered to advise a Participant as to the manner in which his Account
should be invested. The fact that a security is available to Participants
for investment under the Plan shall not be construed as a recommendation
for the purchase of that security, nor shall designation of any option by
the Participant impose any liability on a Participating Company, its
directors, officers or employees, the Trustee, the Committee or any
Participant in the Plan.
Subject to any applicable provision of law, each Participant assumes all
risks connected with any decrease in the market value of any securities in
the funds and such funds shall be the sole source of payments to be made
under the Plan.
6.3 Change in Investment of Future Contributions
--------------------------------------------
A Participant may, upon not less than 15 days prior written notice to the
Committee, change his election made pursuant to Section 6.1, effective as
of the first day of the next calendar quarter (January 1, April 1, July 1
or October 1), with respect to contributions made after the applicable
effective date.
28
<PAGE>
6.4 Changes in Investment of Existing Accounts
------------------------------------------
A Participant who is not an Early Terminee may, upon not less than 15 days'
prior written notice to the Committee, elect, effective as of the first day
of the next calendar quarter (January 1, April 1, July 1 or October 1), to
have all or part (in 10% increments) of his existing After-Tax
Contribution Account, Before-Tax Contribution Account, Rollover Account
and earnings thereon transferred from their existing fund or funds to the
Diversified Equity Fund I, the Fixed Income Fund, or the International
Fund, based upon the values of the Accounts on the last business day of
the quarter immediately preceding the date as of which the election is
effective. Only four such elections may become effective in any calendar
year. The transfer shall be made as soon as administratively feasible
after completion of the valuation for the effective date of the transfer.
An Early Terminee's Accounts shall be transferred to the Fixed Income Fund
on the first day of the calendar quarter following 12 months after the end
of the month in which employment terminates. Until such transfer, an Early
Terminee may continue to direct the investment of his or her Accounts.
Accounts so transferred will remain invested in the Fixed Income Fund until
distributed pursuant to the Early Terminee's election under Section 7.2 or
following his or her death.
6.5 Investment of Company Contributions
-----------------------------------
(a) General Rule
------------
All Company Matching Contributions (other than those transferred from
the Predecessor Plan) and Supplemental Company Contributions shall be
invested in the Company Stock Fund, except as provided below.
(b) Change in Investment
--------------------
Any Participant, who is not an Early Terminee, who has reached his
55th birthday may make either (or both) of the following elections:
(i) He may, upon not less than 15 days prior written notice to the
Committee, elect, effective as of the first day of the next
calendar quarter, to have all or part of his Company Matching
Contributions Account and/or his Supplemental Company
Contributions Account transferred (in multiples of 10%) to one
or more of the other funds, (other than the SpaceLabs Stock Fund)
based on the values of the Account on the last day of the quarter
immediately preceding the date as of which the election is
effective. Only four such elections may become effective in any
calendar year.
(ii) He may, upon not less than 15 days' prior written notice to the
Committee, elect, effective as of the first day of the next
calendar quarter, to have future Company Matching Contributions
and/or Supplemental Company Contributions made on his behalf
29
<PAGE>
invested in any one or more of the funds (other than the
SpaceLabs Stock Fund) in the manner described in Section 6.1.
Any election made hereunder may be changed by similar written
notice.
30
<PAGE>
SECTION 7
BENEFITS AND FORMS OF PAYMENT
7.1 Eligibility for Benefits
------------------------
A Participant shall be eligible to receive a distribution of his or her
Accounts, to the extent vested, upon retirement, becoming Disabled, or upon
Termination of employment with the Company and any Affiliated Companies. A
Participant's Beneficiary shall be eligible to receive a distribution of
the balance of the Participant's accounts upon the death of the
Participant.
Notwithstanding the foregoing, in the event a Participant again becomes an
Employee before benefits commence, he or she shall no longer be eligible to
receive a distribution.
Also notwithstanding the foregoing, with respect to an individual who was a
Participant in this Plan between June 25 and December 31, 1992 and whose
Account balances were transferred to the SpaceLabs Medical, Inc. Incentive
Savings and Stock Ownership Plan ("SpaceLabs Plan") in connection
with the spin-off of that plan from this Plan, such individual's Account
balances as of the date of such transfer shall be payable from the
SpaceLabs Plan and shall not be payable from this Plan.
7.2 Time of Benefit Commencement
----------------------------
(a) Benefit Commencement
--------------------
Benefits shall be paid as soon as practical following a request for
benefit commencement and determination of the amount of payment under
subparagraph (b) below. Participants and Beneficiaries may request
benefit commencement as described below.
(i) Participant
-----------
A Participant who is eligible for benefits may request benefit
commencement by written notice to the Committee. Benefits may
commence at any time following Termination and on or before the
April 1 following the year in which the Participant attains or
would have attained age 70-1/2. If such a Participant fails to
request benefit commencement, he or she shall be deemed to have
requested that benefits commence on the April 1 following the
year in which the Participant attains age 70.
(ii) Beneficiary
-----------
A Beneficiary who is eligible for benefits may request benefit
commencement by written notice to the Committee. Benefits for a
31
<PAGE>
spouse Beneficiary may commence at any time after the
Participant's death and on or before the Participant's Normal
Retirement Date, calculated as if he or she had survived. If a
spouse Beneficiary fails to request benefit commencement,
benefits shall commence on or immediately preceding the April 1
following the calendar year in which the Participant would have
attained age 65 if he or she had survived.
Benefits for a non-spouse Beneficiary shall not be contingent on
receipt of a written request for benefit commencement, but shall
commence as soon as practical following the end of the month
which coincides with or next follows the date of the
Participant's death.
(b) Amount of Payment
-----------------
With the exception of amounts invested in the Company Stock Fund or
the SpaceLabs Stock Fund, the amount distributed shall be based on the
Account balance determined as of the last Valuation Date on which the
Accounts were valued, adjusted for earnings and losses since such
date.
If stock is distributed from the Company Stock Fund or the SpaceLabs
Stock Fund, the number of shares distributed shall be the number of
whole shares in the Participant's Account as of the date of
distribution, with any fractional shares paid in cash based on the
average of the high and low selling price on the day preceding the
date of distribution.
If stock held in the Company Stock Fund or the SpaceLabs Stock Fund is
distributed in cash, the amount distributed shall be based on the
price at which the stock held in the Participant's Accounts is sold,
or, if the stock held in the Participant's Accounts is not sold, the
average of the high and low selling price on the day preceding the
date of distribution.
The value of a distribution of the portion of the Participant's
Accounts invested in the Company Stock Fund or SpaceLabs Stock Fund
that is invested in cash shall be based on the Account balance
invested in cash as of the last Valuation Date on which the Accounts
were valued.
(c) Small Benefits
--------------
Notwithstanding any election to commence benefits or lack thereof, the
Committee shall distribute a benefit which is $3,500 or less at the
time benefits commence, in a lump sum as soon as practical following
Termination of employment, death or becoming Disabled, without
Participant or Beneficiary consent.
32
<PAGE>
7.3 Form of Payment
---------------
(a) Participant
-----------
If a Participant terminates Service and the value of his Accounts (to
the extent vested) exceeds $3,500, (a) his Accounts shall only be
distributed prior to the Participant's attainment of age 65 if the
Participant consents to the distribution, and (b) whether or not the
Participant has attained age 65, he may irrevocably elect to receive
his interest in the Plan in the form of a:
(i) lump sum, or
(ii) five, ten or fifteen annual installments, to be paid in cash
only, on or after attaining age 65.
A Participant may not elect a period over which installment payments
shall be made which is expected to exceed the joint life expectancy of
the Participant and Beneficiary.
(b) Beneficiary
-----------
If the value of a deceased Participant's Accounts (to the extent
vested) exceeds $3,500, the Beneficiary shall receive a lump sum
payment unless the Beneficiary irrevocably elects in a written
notice filed with the Committee no more than 30 days after the
Participant's death to receive payment in the form of five annual
installments, to be paid in cash only. A spouse Beneficiary may
elect five, ten or fifteen annual installments; provided, however,
that such installments may not be paid over a period that extends
beyond the life expectancy of the Participant's spouse.
7.4 Distributions of Stock
----------------------
(a) Distribution From Company Stock Fund
------------------------------------
If the vested portion of a Participant's Accounts invested in the
Company Stock Fund consists of less than 50 shares, payment shall be
made in cash only.
If the vested portion of a Participant's Accounts invested in the
Company Stock Fund consists of 50 or more shares, disbursements of the
shares held in the Accounts shall be made in full shares of Company
Stock to the extent possible, with the balance, if any, paid in cash,
unless the Participant or Beneficiary directs that all of the vested
Account balance in the Company Stock Fund be paid in cash.
33
<PAGE>
(b) Distribution from SpaceLabs Stock Fund
--------------------------------------
If the vested portion of a Participant's Accounts invested in the
SpaceLabs Stock Fund consists of less than 50 shares, distribution
shall be made in cash only.
If the vested portion of a Participant's Accounts invested in the
SpaceLabs Stock Fund consists of 50 or more shares, disbursements from
the SpaceLabs Stock Fund shall be made in full shares of common
stock of SpaceLabs Medical, Inc. to the extent possible, with the
balance, if any, paid in cash, unless the Participant or Beneficiary
directs that all of the vested Account balance in the SpaceLabs
Stock Fund be paid in cash.
7.5 Withdrawals Prior to Termination
--------------------------------
(a) Time of Withdrawal
------------------
A Participant may apply to the Committee for withdrawal of all or a
portion of the following Accounts at the following times prior to
Termination of employment. The withdrawn amount shall be paid as soon
as practical following a request for withdrawal and determination of
the amount of payment in accordance with (f) below.
(b) Withdrawal of After-Tax Contributions and Investment Earnings
-------------------------------------------------------------
A Participant may withdraw 100% of the dollar amount of his or her
After-Tax Contribution Account or any portion thereof that is an
integral multiple of $100.
A Participant may not make more than two withdrawals under this
Section 7.5(b) during any calendar year. No Company Matching
Contributions will be made for two months following a withdrawal under
this Section 7.5(b) unless the Participant has reached age 59-1/2 or
has demonstrated a financial hardship (as provided in Section 7.6) in
the same or a larger amount than the amount of the withdrawal.
(c) Withdrawal of Company Contributions and Related Investment Earnings
-------------------------------------------------------------------
A Participant who is 59-1/2 or has participated in the Plan for five
years, who has withdrawn (or is simultaneously withdrawing) 100% of
his or her After-Tax Contributions Account (if any) and whose interest
in his or her Company Matching and Supplemental Contribution Accounts
is fully vested, may withdraw 100% of the balance in the Company
Contribution Accounts or any portion thereof that is an integral
multiple of $100. A Participant may not make more than one withdrawal
under this Section 7.5(c) during any calendar year. No Company
Matching Contributions will be made for 12 months following a
withdrawal under this Section 7.5(c) unless the Participant has
reached age 59-1/2 or has demonstrated financial hardship (as provided
in Section 7.6) in the same or a larger amount than the amount of the
withdrawal.
34
<PAGE>
(d) Withdrawal of Before-Tax Contributions
--------------------------------------
A Participant may withdraw all or a portion of his or her Before-Tax
Contribution Account if he or she has reached age 59-1/2. A
Participant may also apply for a hardship withdrawal from his or her
Before-Tax Contribution Account as provided in Section 7.6 below.
(e) Withdrawal of Rollover Contributions
------------------------------------
A Participant may withdraw all or a portion of his or her Rollover
Contribution Account.
(f) Withdrawal Procedure
--------------------
Withdrawals may be made as of the last day of any month by filing a
notice in writing with the Committee at least 15 days prior to such
date. Any amount withdrawn hereunder shall be paid in cash only, in a
lump sum as promptly as possible after the applicable date.
The amount distributed shall be based on the value of the
Participant's Accounts on the effective date of the withdrawal, except
that the amount of a withdrawal representing shares held in the
Company Stock Fund or SpaceLabs Stock Fund shall be based on the price
at which the shares are sold, or, if the shares are not sold, the
average of the high and low selling price on the date preceding the
date of the distribution.
(g) Investment Funds and Withdrawals
--------------------------------
A Participant who makes a partial withdrawal of any of his or her
Accounts may request that the withdrawal be made from a specified fund
or funds. Should the Participant's Account in the specified fund or
funds prove to be inadequate to provide the amount of the required
withdrawal, the remainder of the withdrawal shall be made from the
Participant's Accounts in the other funds in an order of preference
designated by the Participant. Should the Participant fail to
designate a preference, the Trustee shall make the withdrawal from
each of the funds on a pro-rata basis.
(h) Restrictions on Withdrawals by Early Terminees
----------------------------------------------
In no event shall an Early Terminee be permitted to withdraw his
Accounts prior to attaining age 65, unless he elects to withdraw 100%
of his or her vested balance in all Accounts.
35
<PAGE>
7.6 Hardship Withdrawal
-------------------
(a) Amounts
-------
A Participant who has withdrawn (or is simultaneously withdrawing)
100% of his After-Tax Contribution Account (if any), his Company
Matching and Supplemental Contribution Accounts (if he is fully vested
and therefore eligible to do so) and his Rollover Account (if any) may
apply to the Committee for a hardship withdrawal prior to Termination
of employment and age 59-1/2 of his or her:
(i) Before-Tax Contribution Account balance as of December 31, 1988,
and
(ii) Before-Tax Contributions after December 31, 1988, excluding
earnings thereon.
(b) Availability
------------
All hardship withdrawals are subject to Committee approval. A
hardship withdrawal shall only be approved if it is for a specific
type of expense and if it is necessary to satisfy such expense.
(c) Hardship Expenses
-----------------
Hardship withdrawals are available only to pay for the following
expenses (including any penalties and taxes incurred as a result of
the hardship distribution):
(i) expenses for medical care described in Code Section 213(d)
incurred by the Participant or his or her spouse or dependents
(as defined in Code Section 152), or amounts necessary for such
person to obtain such medical care;
(ii) purchase (excluding mortgage payments) of a principal residence
for the Participant;
(iii) tuition and related educational fees for the next twelve months
of post-secondary education for the Participant, his or her
spouse, children, or dependents;
(iv) preventing eviction of the Participant from his or her
principal residence or foreclosure on the mortgage of the
Participant's principal residence;
(v) repair to the Participant's primary home to prevent decline in
value;
(vi) repair to the Participant's primary vehicle used for
commuting to and from work;
36
<PAGE>
(vii) legal expenses incident to the divorce of the Participant and
expenses of the Participant's establishing a new home after a
divorce;
(viii) expenses related to involuntary loss of employment or reduction
of work hours by the Participant's spouse; and
(ix) expenses of debt consolidation.
A hardship withdrawal will be available for an expense listed in (v)
through (ix) above only if the expense constitutes an immediate and
heavy financial need.
(d) Determination of Necessity
--------------------------
A distribution shall be deemed to be necessary to satisfy an expense
described in 7.6 above if both of the following requirements are
satisfied:
(i) the distribution is not in excess of the amount of such expense
(including any excise tax or income tax liability arising from
the distribution); and
(ii) the Participant has obtained all distributions (other than
hardship distributions), and all nontaxable loans currently
available under all plans maintained by the Participating
Company.
(e) Other Requirements
------------------
A hardship distribution shall be deducted first from the category of
available amounts described in (a)(ii) herein and then from the
category of available amounts described in (a)(i) herein.
The Participant shall enter into a written agreement not to make or
elect before-tax or after-tax contributions to this or any other
qualified retirement plan or non-qualified deferred compensation plan
maintained by the Company for twelve (12) months after a hardship
withdrawal. Following a 12-month suspension, the Participant may
resume contributions pursuant to Section 3.2. In addition, the
Participant may not make a Before-Tax Contribution to the Plan or any
other Section 401(k) plan maintained by the Company for the
Participant's taxable year immediately following the taxable year of
the hardship withdrawal, in excess of Before-Tax Contributions
allowable in Section 3.1 for the next taxable year less the amount
of such Participant's Before-Tax Contributions for the taxable year
of the hardship withdrawal.
Notwithstanding the foregoing, a Participant whose contributions
have been suspended for twelve months due to a hardship withdrawal
shall be deemed to be an Eligible Employee for purposes of the ADP
test in Section 3.4, ACP test in Section 4.3, and multiple use test
in Section 4.4.
37
<PAGE>
7.7 Beneficiary Designation
-----------------------
If payments are made to a designated Beneficiary in reasonable reliance on
(i) a written statement by the Participant that he or she was not married,
or (ii) a spousal consent that appeared to conform to the requirement in
Section 1.5, or (iii) evidence that the spouse could not be located at the
time of the Beneficiary designation, then, to the extent of such payments,
the Plan shall have no liability to a spouse.
38
<PAGE>
SECTION 8
VESTING
8.1 Vesting
-------
(a) Participant Before-Tax Contribution Account
-------------------------------------------
Each Participant shall have a 100% vested, nonforfeitable right to his
or her Before-Tax Contribution Account, After-Tax Contribution Account
and Rollover Account.
(b) Company Matching and Supplemental Contribution Accounts
-------------------------------------------------------
Each Participant shall earn a vested, nonforfeitable right to his or
her Company Matching Contribution Account and Supplemental Company
Contribution Account based on his or her Period of Service multiplied
by the appropriate vesting percentage in accordance with the following
table:
Period of Service Percent Vested
----------------- --------------
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
In addition, each Participant shall have a 100% vested, nonforfeitable
right to his or her Company Matching Contribution Account and
Supplemental Company Contribution Account upon death, becoming
Disabled, or attainment of his or her Normal Retirement Date, provided
he or she is an Employee on such date.
In the event the Participant has received a prior distribution from
his or her Company Matching or Supplemental Contribution Accounts, the
vested portion of the Account balance (including the amount which may
yet be restored pursuant to Section 8.2) following the distribution
shall be determined by application of the following formula:
X = P(AB+D) - D;
39
<PAGE>
where X equals the vested amount; P equals the Employee's vested
interest in the Company Matching Contribution Account or Supplemental
Company Contribution Account at the time of subsequent distribution;
AB equals the balance of the Account at the time of subsequent
distribution; and D equals the amount previously distributed from the
Company Matching or Supplemental Contribution Account.
Notwithstanding the foregoing, this formula does not apply if the
Participant has repaid the prior distribution pursuant to Section
8.3(b). Also, the formula does not apply if the prior distribution
may not be repaid because the Participant has incurred five or more
consecutive one year Periods of Severance, or because five years or
more have elapsed since the date of reemployment.
8.2 Forfeitures
-----------
If a Participant terminates Service and is not fully vested in his Accounts
attributable to Company Contributions in accordance with Section 8.1(b) he
shall forfeit his unvested interest in such Accounts as of the last day of
the month during which his Service terminated. Amounts held in a
Participant's Accounts attributable to Company Contributions which are thus
forfeited shall be applied first to restore Accounts as provided below, and
then to reduce subsequent contributions by the Participant's Participating
Company, based on the Current Market Value of such shares as of the date
forfeited, where applicable, provided, however, if the Plan should be
terminated, or contributions thereunder permanently discontinued, an amount
not previously so applied shall be credited on a pro-rata basis to the
Accounts of all Participants in the Company Stock Fund. Each year the
Committee shall determine in its sole discretion whether forfeitures shall
be applied to reduce Company Matching Contributions or Supplemental
Contributions or both.
If such Participant returns to Service before suffering five consecutive
one year Periods of Severance, the amount forfeited shall be restored as of
the last day of the Plan Year in which the Participant returns to Service
and repays in full any prior distribution, if any, according to Section
8.3.
Assets to restore amounts forfeited shall be taken first from current
forfeitures. In the event that current year forfeitures are inadequate to
fully reinstate the Account, the Participating Company shall make a
contribution in addition to the contributions required under Section 4.1
equal to the balance necessary to fully reinstate the Account.
8.3 Reemployment
------------
(a) Periods of Service
------------------
If a Terminated Employee later becomes a Participant again following
reemployment, all Periods of Service before and after the Period of
Severance shall be taken into account in determining the Participant's
vested interest in the Company Matching and Supplemental Contribution
Accounts established upon reemployment.
40
<PAGE>
(b) Repayment
---------
If a Participant forfeited a portion of his or her Company Matching
and Supplemental Contribution Accounts upon termination and he or she
returns to Service after receiving a distribution and prior to
incurring a five-year Period of Severance, the Participant may elect
to repay the amount previously distributed from his or her Company
Matching and Supplemental Contribution Accounts. Such Participant may
elect to repay his or her prior distribution before five years after
the date of reemployment. The forfeited amount shall be restored upon
such repayment pursuant to Section 8.2. Amounts repaid shall be 100%
vested and shall be invested in accordance with Section 6.3. Such
amounts shall be held in the Participant's After-Tax Contribution
Account if they are repaid with after-tax amounts, and shall be held
in the Participant's Pre-Tax Contribution Account if they are repaid
with pre-tax amounts transferred or rolled over from another qualified
plan or IRA.
(c) Restoration of Forfeitures
--------------------------
If a Participant forfeited a portion of his or her Company Matching
and Supplemental Contribution Accounts but did not receive a
distribution of the vested portion of such Accounts prior to
reemployment, and he or she returns to Service prior to incurring a
five-year Period of Severance, the forfeited amount shall be
reinstated as of the last day of the Plan Year in which reemployment
occurs.
8.4 Suspension of Installment Payments
----------------------------------
In the event that any person shall resume Service after a previous
termination of Service, installment payments being made to him (if any)
shall be suspended. In the event of such suspension, the amount held in
his Accounts at the time of his resumption of Service shall remain to his
credit on a fully vested basis, notwithstanding any other provision in the
Plan to the contrary.
41
<PAGE>
SECTION 9
LIMITATION ON CONTRIBUTIONS
9.1 Maximum Annual Contribution to the Plan
---------------------------------------
For purposes of this Section 8, the Company and any Affiliated Companies
shall be considered a single employer, to the extent required by the Code.
(a) Primary Rule
------------
Notwithstanding any other Plan provision to the contrary, the Annual
Additions to a Participant's Accounts in this Plan and any other
defined contribution plan maintained by the Company shall not exceed
the lesser of (i) $30,000 (or 25% of the Code Section 415 defined
benefit dollar limitation if greater), or (ii) 25% of the
Participant's Compensation.
(b) Annual Additions Defined
------------------------
For purposes of Section 8, the term "Annual Additions" for any
Participant in any Plan Year means the sum of:
(i) the amount of Company Contributions and Participant Before-Tax
and After-Tax Contributions allocated to a Participant's
Accounts;
(ii) forfeitures allocated to the Participant's Accounts; and
(iii) with respect only to the $30,000 limitation, amounts
attributable to retiree medical benefits on behalf of a key
Employee in a separate account in a welfare fund subject to Code
Section 419A.
(c) Cost-of-Living Adjustment
-------------------------
The $30,000 (or 25% of the Code Section 415 defined benefit dollar
limitation if greater) limit prescribed above shall be automatically
adjusted for cost-of-living increases, to the maximum permissible
dollar limitation determined by the Commissioner of Internal Revenue.
The dollar amount applicable in computing the maximum contribution for
any Participant shall be the dollar amount in effect for the calendar
year in which the contribution is made.
(d) Remedy
------
If for any Plan Year the Annual Additions exceed the foregoing
limitations because of a reasonable error in determining the amount
of a Participant's Before-Tax Contributions, the Plan Administrator
shall distribute the amount of Before-Tax Contributions in excess of
the limits. If the Annual Additions exceed the limits for any other
42
<PAGE>
reason, the Company shall allocate the excess to a suspense account.
The suspense account shall be credited with investment earnings and
losses as of each Valuation Date in the same manner as Participant
Accounts pursuant to Section 5.3. Such suspense account is for
accounting purposes only and shall remain in the Trust Fund to be
reallocated as provided below. Contents of the suspense account
shall be allocated to the affected Participant's Account in
subsequent years when that can be done without exceeding the
limitations of this Section 9.1. So long as any amount remains in
the suspense account, the Company shall not contribute to the Plan
any amount which would cause an additional allocation to the
suspense account. In the event the Participant ceases to be a
Participant when any amount remains in a suspense account, such
amount shall be reallocated to active Participants as of the end of
the Plan Year following the calendar year in which he or she ceases
to be a Participant. In the event the Plan terminates before any
amount remaining in the suspense account has been fully allocated to
Participant Accounts, the balance of the suspense account shall be
distributed to the Company.
If any Participant is also a participant in another employee retirement
plan that (a) is a defined contribution plan within the meaning of section
414(i) of the Code and (b) is sponsored by the Company or an Affiliated
Company, the foregoing limitations shall be applied on an aggregate basis.
Any reduction required to conform to such limitations shall first be made
(pro rata) in contributions by the Participant under the plans involved;
and a pro-rata reduction shall then be made in the contributions by the
Affiliated Companies (including forfeitures) allocable to the Participant
under the plans involved.
9.2 Additional Limitation Relating to Defined Benefit Plans
-------------------------------------------------------
(a) Primary Rule
------------
For Participants who participate in this Plan and a defined benefit
plan maintained by the Company, the sum of (1) and (2) below for any
calendar year may not exceed 1.0, as determined by the Committee.
(1) The defined benefit plan fraction for any year is equal to the
quotient of (i) divided by (ii) below expressed as a fraction:
(i) The projected annual benefit, (determined by projecting
service, but not earnings, to normal retirement age) of
the Participant under the Plan determined as of the close
of the year.
(ii) The lesser of: (a) 1.25 multiplied by the dollar
limitation in effect for defined benefit plans under
Section 415 of the Code for such year, or (b) 1.4
multiplied by 100% of the Participant's average annual
Compensation from the Company for the consecutive
calendar years (not in excess of three such years) during
which he was an active Participant in the Plan and for
which such average is highest.
43
<PAGE>
(2) The defined contribution plan fraction for any year is equal to
the quotient of (i) divided by (ii) below expressed as a
fraction:
(i) The sum of the Annual Additions to the Participant's
Accounts for the current year, as of the close of the year,
and for all prior years from and after the Employment
Commencement Date.
(ii) The sum of the lesser of the following amounts for such year
and for each prior year of Service with the Company
(regardless of whether a plan was in existence during those
years): (a) 1.25 multiplied by the dollar limitation in
effect for defined contribution plans under Section 415 of
the Code for such year, or (b) 1.4 multiplied by 25% of a
Participant's Compensation for such year.
(b) Remedy
------
If such sum exceeds 1.0, the Annual Additions to this defined
contribution Plan shall be reduced to the extent necessary to satisfy
the limitations of this section.
44
<PAGE>
SECTION 10
TOP HEAVY PROVISIONS
10.1 Scope
-----
Notwithstanding any Plan provision to the contrary, for any Plan Year in
which the Plan is Top Heavy within the meaning of Section 416(g) of the
Code, the provisions of this Section 10 shall govern to the extent they
conflict with or specify additional requirements to the Plan provisions
governing Plan Years which are not Top Heavy.
10.2 Top Heavy Status
----------------
(a) Top Heavy
---------
This Plan shall be "Top Heavy" if, as of the Determination Date, (1)
the Present Value of Accrued Benefits of Key Employees, or (2) the
sum of the Aggregate Accounts of Key Employees under this Plan and
any plan of an Aggregation Group, exceeds sixty percent (60%) of the
Present Value of Accrued Benefits or the Aggregate Accounts of all
Participants under this Plan and any plan of an Aggregation Group,
determined in accordance with Code Section 416(g) and regulations
thereunder.
The Present Value of Accrued Benefits and/or Aggregate Account balance
of a Participant who was previously a Key Employee but is no longer a
Key Employee (or his or her Beneficiary), shall not be taken into
account for purposes of determining Top Heavy status. Further, a
Participant's Present Value of Accrued Benefits and/or Aggregate
Account balance shall not be taken into account if he or she has not
performed services for the Affiliated Companies at any time during the
five year period ending on the Determination Date.
(b) Super Top Heavy
---------------
This Plan shall be "Super Top Heavy" if, as of the Determination Date,
(1) the Present Value of Accrued Benefits of Key Employees, or (2)
the sum of the Aggregate Accounts of Key Employees under this Plan and
any plan of an Aggregation Group, exceeds ninety percent (90%) of the
Present Value of Accrued Benefits or the Aggregate Accounts of all
Participants under this Plan and any plan of an Aggregation Group.
(c) Determination Date
------------------
Whether the Plan is Top Heavy for any Plan Year shall be determined as
of the Determination Date. "Determination Date" means (a) the last
day of the preceding Plan Year, or (b) in the case of the first Plan
Year, the last day of such Plan Year.
45
<PAGE>
(d) Valuation Date
--------------
"Valuation Date" means, for purposes of determining Top Heaviness, the
Determination Date instead of the meaning set forth in Section 1.
(e) Aggregate Account
-----------------
"Aggregate Account" means, with respect to a Participant, the sum of:
(i) his or her account balances as of the Valuation Date;
(ii) contributions after the Valuation Date due as of the
Determination Date;
(iii) distributions prior to the Valuation Date, made during the Plan
Year that contains the Determination Date and the four preceding
Plan Years.
(f) Present Value of Accrued Benefits
---------------------------------
The "Present Value of Accrued Benefits" with respect to a defined
benefit plan shall be based upon the Participant's accrued benefits
and the actuarial assumptions as determined under the provisions of
the applicable defined benefit plan.
(g) Key Employee
------------
"Key Employee" means an Employee or former Employee (and his or her
Beneficiaries) who, at any time during the Plan Year containing the
Determination Date or any of the four preceding Plan Years, is
included in one of the following categories as within the meaning of
Section 416(i)(l) of the Code and regulations thereunder:
(i) an officer of the Company whose annual aggregate Compensation
from the Affiliated Companies exceeds 50% of the dollar
limitation under Code Section 415(b)(1)(A) ($56,111 for the Plan
Year ending in 1992), provided that no more than 50 Employees
shall be considered officers, or if less, the greater of 10% of
the Employees or 3,
(ii) one of the ten Employees owning the largest interest in the
Company who owns more than a 0.5% interest of the Company, and
whose annual aggregate Compensation from the Affiliated
Companies exceeds the dollar limitation under Section
415(c)(1)(A) of the Code ($30,000 for the Plan Year ending in
1992).
(iii) an Employee who owns more than 5% of the Company, or
46
<PAGE>
(iv) an Employee who owns more than 1% of the Company with annual
aggregate Compensation from the Affiliated Companies that
exceeds $150,000.
(h) Aggregation Group
-----------------
"Aggregation Group" means the group of plans that must be considered
as a single plan for purposes of determining whether the plans within
the group are Top Heavy (Required Aggregation Group), or the group of
plans that may be aggregated for purposes of Top Heavy testing
(Permissive Aggregation Group). The Determination Date for each plan
must fall within the same calendar year in order to aggregate the
plans.
(i) The Required Aggregation Group includes each plan of the
Affiliated Companies in which a Key Employee is a participant in
the Plan Year containing the Determination Date or any of the
four preceding Plan Years, and each other plan of the Affiliated
Companies which, during this period, enables any plan in which a
Key Employee participates to meet the minimum participation
standards or non-discriminatory contribution requirements of Code
Sections 401(a)(4) and 410.
(ii) A Permissive Aggregation Group may include any plan sponsored by
an Affiliated Company, provided the group as a whole continues to
satisfy the minimum participation standards and non-
discriminatory contribution requirements of Code Sections
401(a)(4) and 410.
Each plan belonging to a Required Aggregation Group shall be deemed
Top Heavy, or non-Top Heavy in accordance with the group's status. In
a Permissive Aggregation Group that is determined Top Heavy only those
plans that are required to be aggregated shall be Top Heavy. In a
Permissive Aggregation Group that is not Top Heavy, no plan in the
group shall be Top Heavy.
10.3 Minimum Contribution
--------------------
(a) General Rule
------------
For any Plan Year in which the Plan is Top Heavy, the total Company
contribution under Section 4.1 and any forfeitures allocated to any
non-key Participant's account shall not be less than 3% of such
Participant's Compensation. Participant contributions under Section
4.1(a) are not considered when determining whether this 3% requirement
is satisfied. However, in the event the Company contributions and
forfeitures allocated to each Key Employee's account do not exceed 3%
of his or her Compensation, such Company contributions and
forfeitures for non-Key Employees are only required to equal the
highest percentage of Compensation, including Participant Before-Tax
Contributions under Section 4.1(a), allocated to any Key Employee's
47
<PAGE>
accounts for that Plan Year under any defined contribution plans
sponsored by the Affiliated Companies.
The minimum contribution must be made on behalf of all non-Key
Participants who are employed on the last day of the Plan Year
including non-Key Employees who (1) failed to complete a year of
service, or (2) declined to make any mandatory contributions to the
Plan or enter a salary deferral agreement.
(b) Special Two Plan Rule
---------------------
Where this Plan and a defined benefit plan belong to an Aggregation
Group that is determined Top Heavy, the minimum contribution required
under paragraph (a) above shall be increased to 5%.
10.4 Limitation to Annual Additions in Top Heavy Plan
------------------------------------------------
For any Top Heavy Plan Year in which the Company does not make the extra
minimum allocation provided below, 1.0 shall replace the 1.25 factor found
in the denominators of the defined benefit and defined contribution plan
fractions for purposes of calculating the combined limitation on benefits
under a defined benefit and defined contribution plan pursuant to Section
415(e) of the Code (see Section 9.3).
If this Plan is Top Heavy, but is not Super Top Heavy, the above referenced
fractions shall remain unchanged provided the Company makes an extra
minimum allocation for non-Key Participants. The extra allocation (in
addition to the minimum contribution set forth in Section 10.3) shall equal
at least one percent (1%) of a non-Key Participant's compensation (or
2-1/2% if Section 10.3(b) applies).
10.5 Vesting
-------
For any Top Heavy Plan Year, a Participant's Accounts shall remain
subject to the vesting provisions in Section 8.1.
48
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SECTION 11
ADMINISTRATION OF THE PLAN
11.1 Plan Administrator
------------------
The Plan Administrator shall be the Company. The Compensation Committee of
the Board of Directors of the Employer shall appoint a Committee composed
of one or more persons which shall carry out the general administration of
the Plan. Every member of the Committee shall be deemed a fiduciary. No
Committee member who is an Employee shall receive compensation with respect
to his or her service on the Committee. Any member of the Committee may
resign by delivering written resignation to the Compensation Committee of
the Board of Directors of the Employer and to the Committee. The
Compensation Committee of the Board of Directors may remove or replace any
member of the Committee at any time.
11.2 Organization and Procedures
---------------------------
The Compensation Committee of the Board of Directors of the Employer
shall designate a chairman from the members of the Committee. The
Committee shall appoint a secretary, who may or may not be a member of
the Committee. The secretary shall have the primary responsibility for
keeping a record of all meetings and acts of the Committee and shall have
custody of all documents, the preservation of which shall be necessary or
convenient to the efficient functioning of the Committee. The chairman of
the Committee shall be the agent of the Plan for service of process. All
reports required by law may be signed by the chairman or another member
of the Committee designated by the Committee, on behalf of all members of
the Committee.
The Committee shall act by a majority of its members in office and may
adopt such by-laws and regulations as it deems desirable for the conduct of
its affairs.
11.3 Duties and Authority of Committee
---------------------------------
(a) Administrative Duties
---------------------
The Committee shall administer the Plan in a non-discriminatory manner
for the exclusive benefit of Participants and their Beneficiaries.
The Committee shall perform all such duties as are necessary to
supervise the administration of the Plan and to control its operation
in accordance with the terms thereof, including, but not limited to,
the following:
(i) Make and enforce such rules and regulations as it shall deem
necessary or proper for the efficient administration of the Plan;
(ii) Interpret the provisions of the Plan and resolve any question
arising under the Plan, or in connection with the administration
or operation thereof;
49
<PAGE>
(iii) Make all determinations affecting the eligibility of any
Employee to be or become a Participant;
(iv) Determine eligibility for and amount of retirement benefits for
any Participant;
(v) Authorize and direct the Trustee with respect to all
disbursements of benefits under the Plan;
(vi) Employ and engage such persons, counsel and agents and to
obtain such administrative, clerical, medical, legal, audit
and actuarial services as it may deem necessary in carrying
out the provisions of the Plan;
(vii) Delegate and allocate specific responsibilities, obligations
and duties imposed by the Plan to one or more Employees,
officers, or such other persons as the Committee deems
appropriate.
(b) Investment Authority
--------------------
The Committee shall have responsibility and authority with respect to
the management, acquisition, disposition or investment of Plan assets
to the extent such responsibility and authority is not delegated to an
Investment Manager or Trustee. Participants directing investment of
their Accounts among the available investment funds shall have
responsibility and authority for such investment of their Accounts to
the extent provided by law.
(c) General Authority
-----------------
The Committee shall have all powers necessary or appropriate to carry
out its duties, including the discretionary authority to interpret the
provisions of the Plan and the facts and circumstances of claims for
benefits. Any interpretation or construction of or action by the
Committee with respect to the Plan and its administration shall be
conclusive and binding upon any and all parties and persons affected
hereby, subject to the exclusive appeal procedure set forth in
Section 11.7.
11.4 Expenses
--------
No member of the Committee shall receive any compensation for his services
as such. However, all expenses incurred by the Committee in carrying out
its responsibilities hereunder (including any bond or other security
required for any member in any jurisdiction) shall be paid by the Plan
unless such amounts are paid by the Company. Brokerage commissions,
transfer taxes and other charges and expenses in connection with the
purchase or sale of securities shall be added to the cost of such
securities or deducted from the proceeds thereof, as the case may be. A
five dollar administrative charge shall be deducted each month from each
50
<PAGE>
Early Terminee's Account. All other costs and expenses incurred in
administering the Plan shall be paid by the Plan unless such amounts are
paid by the Participating Companies.
11.5 Bonding and Insurance
---------------------
To the extent required by law, every Committee member, every fiduciary of
the Plan and every person handling Plan funds shall be bonded. The
Committee shall take such steps as are necessary to assure compliance with
applicable bonding requirements. The Committee may apply for and obtain
fiduciary liability insurance insuring the Plan against damages by reason
of breach of fiduciary responsibility at the Plan's expense and insuring
each fiduciary against liability to the extent permissible by law at the
Company's expense.
11.6 Commencement of Benefits
------------------------
(a) Conditions of Payment
---------------------
Benefit payments under the Plan shall not be payable prior to the
fulfillment of the following conditions:
(i) The Committee has been furnished with such applications,
consents, proofs of birth, address, form of benefit election,
spouse consent if required, and other information the Committee
deems necessary;
(ii) The Participant is eligible to receive benefits under the Plan as
determined by the Committee.
The amount of benefit payable to a Participant or Beneficiary shall be
determined under the terms of the Plan in effect at the time the
Participant Terminates employment. The time benefits commence to a
Participant or Beneficiary and the form of payment shall be determined
under the terms of the Plan in effect at the time benefits commence.
(b) Commencement of Payment
-----------------------
Unless a Participant elects otherwise, the payment of benefits shall
commence no later than 60 days after the end of the Plan Year in which
the latest of the following occurs:
(i) the date the Participant attains age 65,
(ii) the tenth anniversary of the year in which the Participant
commenced participation in the Plan, or
51
<PAGE>
(iii) the Participant Terminates employment with the Company,
provided that payments shall not commence later than April 1 following
the calendar year in which the Participant attains age 70-1/2,
regardless of whether he or she remains in Service after that date
(unless the Participant attained age 70-1/2 prior to January 1, 1988,
and was not a 5% owner at any time after age 66-1/2, in which case
payments shall commence no later than upon termination of employment).
If the information required in subparagraph (a) above is not available
prior to such date, the amount of payment required to commence will
not be ascertainable. In such event, the commencement of payments
shall be delayed until no more than 60 days after the date the amount
of such payment is ascertainable.
11.7 Appeal Procedure
----------------
(a) A claim for benefit payment shall be considered filed when an
application form is submitted to the Committee.
(b) Notice of Denial
----------------
Any time a claim for benefits is wholly or partially denied, the
Participant or Beneficiary (hereinafter "Claimant") shall be given
written notice of such action within 90 days after the claim is filed,
unless special circumstances require an extension of time for
processing. If there is an extension, the Claimant shall be notified
of the extension and the reason for the extension within the initial
90 day period. The extension shall not exceed 180 days after the
claim is filed. Such notice will indicate the reason for denial, the
pertinent provisions of the Plan on which the denial is based, an
explanation of the claims appeal procedure set forth herein, and a
description of any additional material or information necessary to
perfect the claim and an explanation of why such material or
information is necessary.
(c) Right to Request Review
-----------------------
Any person who has had a claim for benefits denied by the Committee,
or is otherwise adversely affected by action of the Committee, shall
have the right to request review by the Committee. Such request must
be in writing, and must be made within 60 days after such person is
advised of the Committee's action. If written request for review is
not made within such 60-day period, the Claimant shall forfeit his or
her right to review. The Claimant or a duly authorized representative
of the Claimant may review all pertinent documents and submit issues
and comments in writing.
52
<PAGE>
(d) Review of Claim
---------------
The Committee shall then review the claim. It may hold a hearing if
it deems it necessary and shall issue a written decision reaffirming,
modifying or setting aside its former action within 60 days after
receipt of the written request for review, or 120 days if special
circumstances, such as a hearing, require an extension. The Claimant
shall be notified in writing of any such extension within 60 days
following the request for review. A copy of the decision shall be
furnished to the Claimant. The decision shall set forth its reasons
and pertinent plan provisions on which it is based. The decision
shall be final and binding upon the Claimant and the Committee and all
other persons involved.
11.8 Plan Administration - Miscellaneous
-----------------------------------
(a) Limitations on Assignments
--------------------------
Benefits under the Plan may not be assigned, sold, transferred, or
encumbered, and any attempt to do so shall be void. The interest of a
Participant in benefits under the Plan shall not be subject to debts
or liabilities of any kind and shall not be subject to attachment,
garnishment or other legal process, except as provided in Section 11.9
relating to Domestic Relations Orders, or otherwise permitted by law.
Notwithstanding the above, any Participant or Beneficiary who is to
receive a distribution from the Plan in shares of Company Stock may,
subject to the provisions or Treasury Regulations 1.401(a)-13(e),
make a revocable election that such stock be issued jointly (with the
right of survivorship) to him and his spouse; provided, however, that
no such election shall be effective until the Participant's or
Beneficiary's spouse files a written acknowledgement with the
Committee, in accordance with Treasury Regulations 1.401(a)-
13(e)(2), stating that such spouse has no enforceable right in, or to,
any Plan benefit (except to the extent of payments actually received).
(b) Masculine and Feminine, Singular and Plural
-------------------------------------------
Whenever used herein, pronouns shall include the opposite gender, and
the singular shall include the plural, and the plural shall include
the singular, whenever the context shall plainly so require.
(c) No Additional Rights
--------------------
No person shall have any rights in or to the Trust Fund, or any part
thereof, or under the Plan, except as, and only to the extent,
expressly provided for in the Plan. Neither the establishment of the
Plan, the establishment of Participant Accounts nor any action of
the Company or the Committee shall be held or construed to confer
upon any person any right to be continued as an Employee, or, upon
dismissal, any right or interest
53
<PAGE>
in the Trust Fund other than as herein provided. The Company
expressly reserves the right to discharge any Employee at any time.
(d) Governing Law
-------------
This Plan shall be construed in accordance with applicable federal law
and the laws of the State of Washington.
(e) Disclosure to Participants
--------------------------
Each Participant shall be advised of the general provisions of the
Plan and, upon written request addressed to the Committee, shall be
furnished any information requested regarding the Participant's
status, rights and privileges under the Plan as may be required by
law.
(f) Income Tax Withholding Requirements
-----------------------------------
Any retirement benefit payment made under the Plan will be subject to
any applicable income tax withholding requirements. For this purpose,
the Committee shall provide the Trustee with any information the
Trustee needs to satisfy such withholding obligations and with any
other information that may be required by regulations promulgated
under the Code.
(g) Severability
------------
If any provision of this Plan shall be held illegal or invalid for any
reason, such determination shall not affect the remaining provisions
of this Plan which shall be construed as if said illegal or invalid
provision had never been included.
(h) Facility of Payment
-------------------
In the event any benefit under this Plan shall be payable to a
person who is under legal disability or is in any way incapacitated
so as to be unable to manage his or her financial affairs, the
Committee may direct payment of such benefit to a duly appointed
guardian, committee or other legal representative of such person or
in the absence of a guardian or legal representative, to a custodian
for such person under a Uniform Gift to Minors Act or to any
relative of such person by blood or marriage, for such person's
benefit. Any payment made in good faith pursuant to this provision
shall fully discharge the Company and the Plan of any liability to
the extent of such payment.
(i) Correction of Errors
--------------------
Any Company contribution to the Trust Fund made under a mistake of
fact (or investment proceed of such contribution if a lesser amount)
shall be returned to the Company within one year after payment of
the contribution.
54
<PAGE>
In the event an incorrect amount is paid to a Participant or
Beneficiary, any remaining payments may be adjusted to correct the
error. The Committee may take such other action it deems necessary
and equitable to correct any such error.
(j) Missing Persons
---------------
In the event a distribution is required to commence under Section 7.2
and the Participant or Beneficiary cannot be located, the
Participant's Account shall be forfeited on the last day of the Plan
Year following the Plan Year in which distribution was supposed to
commence. Such forfeiture shall be used to reduce Company Matching
Contributions.
If the affected Participant or Beneficiary later contacts the Company,
his or her Account shall be reinstated and distributed as soon as
practical. The Company shall reinstate the amount forfeited by making
a special contribution equal to such amount and allocating it to the
affected Participant's or Beneficiary's Account. Such reinstatement
shall not be considered an annual addition for purposes of the
limitations on contributions on benefits pursuant to Code Section 415.
Prior to forfeiting any Account, the Company shall attempt to contact
the Participant or Beneficiary by return receipt mail at his or her
last known address according to the Company's records, and by the
letter forwarding services offered through the Internal Revenue
Service, or the Social Security Administration, or such other means as
the Committee deems appropriate.
11.9 Domestic Relations Orders
-------------------------
Notwithstanding any Plan provisions to the contrary, benefits under the
Plan may be paid to someone other than the Participant or Beneficiary
pursuant to a Qualified Domestic Relations Order, in accordance with
Section 414(p) of the Code. A Qualified Domestic Relations Order is a
judgment, decree, or order ("Order") (including approval of a property
settlement agreement) that:
(a) relates to the provision of child support, alimony payments or marital
property rights to a spouse, former spouse, child or other dependent
of a Participant;
(b) is made pursuant to a state domestic relations law (including a
community property law);
(c) creates or recognizes the existence of an alternate payee's right to,
or assigns to an alternate payee the right to, receive all or a
portion of the benefits payable to a Participant under the Plan;
(d) specifies the name and last known address of the Participant and
each alternate payee;
55
<PAGE>
(e) specifies the amount or method of determining the amount of benefit
payable to an alternate payee;
(f) names each plan to which the order applies;
(g) does not require any form, type or amount of benefit not otherwise
provided under the Plan;
(h) does not conflict with a prior Domestic Relations Order that meets the
other requirements of this section.
Payments to an alternate payee pursuant to a Qualified Domestic Relations
Order shall commence within a reasonable time following qualification of
the Order. Such payment shall commence regardless of the Participant's age
or whether the Participant Terminates or continues employment.
The Committee shall determine whether an order meets the requirements of
this section within a reasonable period after receiving an order. The
Committee shall notify the Participant and any alternate payee that an
order has been received. Any amounts which are to be paid pursuant to the
order, during the period while its qualified status is being determined,
shall be held in a separate account under the Plan for any alternate payee
pending determination that an order meets the requirements of this section.
If within eighteen months after such a separate account is established, the
order has not been determined to be a qualified Order, the amount in the
separate account shall be distributed to the individual who would have been
entitled to such amount if there had been no order.
11.10 Plan Qualification
------------------
Any modification or amendment of the Plan may be made retroactive, as
necessary or appropriate, to establish and maintain a "qualified plan"
pursuant to Section 401 of the Code, and ERISA and regulations thereunder
and exempt status of the Trust Fund under Section 501 of the Code.
11.11 Deductible Contribution
-----------------------
Notwithstanding anything herein to the contrary, any contribution by the
Company to the Trust Fund is conditioned upon the deductibility of the
contribution by the Company under the Code and, to the extent any such
deduction is disallowed, the Company may within one year following a final
determination of the disallowance, demand repayment of such disallowed
contribution and the Trustee shall return such contribution less any losses
attributable thereto to the Company within one year following the
disallowance.
11.12 Voting of Company Stock and SpaceLabs Medical, Inc. Stock
---------------------------------------------------------
Before each annual or special meeting of the stockholders of the Company,
the Company shall cause to be sent to each Participant having shares in
the Company Stock Fund or the SpaceLabs Stock Fund a copy of the proxy
solicitation material therefor, together with a form requesting
confidential instructions to the Trustee on how to vote the number of
56
<PAGE>
shares of common stock in either Fund credited to such Participant. Upon
receipt of such instructions the Trustee shall vote the shares of stock
as instructed. Instructions received from individual Participants by the
Trustee shall be held in the strictest confidence and shall not be
divulged or released to any person, including officers or employees of
any Company or any Affiliated Company. The Trustee shall vote all shares
of Company Stock and SpaceLabs Medical, Inc. stock held by it under the
Plan, for which voting instructions shall not have been received for or
against proposals submitted, in the same proportions as the shares for
which instructions are received by the Trustee from Participants.
In the event of a tender or exchange offer for Company Stock or SpaceLabs
Medical, Inc. common stock, the response to such offer by the Trustee shall
be determined as though the decision constitutes the exercise of voting
rights, as described in this Section 11.12, except that any shares with
respect to which instructions are not received from Participants or
Beneficiaries shall not be tendered by the Trustee.
57
<PAGE>
SECTION 12
AMENDMENT AND TERMINATION
12.1 Amendment and Termination
-------------------------
It is the Company's intention that the Plan will continue indefinitely;
however, the Company shall have the right to amend, terminate, or partially
terminate this Plan at any time subject to any advance notice or other
requirements of ERISA. Should the Board amend the Plan, such amendment
shall apply to all Participating Companies as of the date that the
amendment applies to the Company. A participating Company may, however,
adopt for its employees a different definition of "Eligible Employee" than
is contained in Section 1 or a different standard of participation than is
contained in Section 2, by filing with the Committee a certified resolution
of its Board of Directors, provided, however, that such resolution shall
become effective only if approved by the Committee. No amendment of the
Plan shall have the effect of providing that the funds held in trust by the
Trustee or the earnings thereon may be used for, or diverted to, purposes
other than the Plan.
12.2 Consolidation or Merger
-----------------------
In the event the Plan's assets and liabilities are merged into, transferred
to or otherwise consolidated with any other retirement plan, then such must
be accomplished so as to ensure that each Participant would (if the other
retirement plan then terminated) receive a benefit immediately after the
merger, transfer or consolidation, which is equal to or greater than the
benefit the Participant would have been entitled to receive immediately
before the merger, transfer or consolidation (as if the Plan had then
terminated). This provision shall not be construed as limiting the powers
of the Company to appoint a successor Trustee.
Subject to the foregoing, if any Affiliated Company becomes a Participating
Company, and such Company had a thrift plan or similar plan or participated
in a similar plan of another organization, the Board, with the approval of
the Affiliated Company, may merge such plan into the Plan and thereupon all
employees of the Affiliated Company who were members of such plan shall
automatically become Participants hereunder, and all amounts in the
accounts of such employees of the Affiliated Company shall become accounts
under this Plan, in the manner determined by the Committee; provided,
however, that amounts so transferred shall not be subject to the
limitations imposed under Sections 3 and 4 on such contributions and no
Participating Company shall be required or permitted to make company
matching contributions based on any of the amounts transferred to the
Plan under this paragraph.
If a Participating Company maintains a trust that qualified as an exempt
trust under Section 501(a) of the Code as a part of a qualified profit-
sharing plan to which contributions have been permanently discontinued
and all rights under the trust have vested in employees and former
employees of the Participating Company, the board of directors of the
58
<PAGE>
Participating Company, with the consent of the Board, may merge such
trust into the Trust under the Plan and thereupon all employees of such
Participating Company and employees of other Participating Companies who
had a vested interest in the merged trust shall automatically become
Participants in the Plan but solely for the purposes of investing the
amounts so transferred and distributing such amounts to such employees as
hereinafter set forth in the Plan. The amounts so transferred on behalf
of each such employee shall be invested in such funds as he shall direct,
under the provisions of Section 6.1. Any amounts transferred under this
paragraph shall constitute "Special Contributions." Under no
circumstances will any Participating Company be required or permitted to
make company matching contributions to the Plan based on Special
Contributions. Special Contributions and any earnings thereon may not be
withdrawn by a Participant until such time as the Participant ceases to
be an Employee of a Participating Company on account of death,
retirement, or other voluntary or involuntary termination of employment;
provided, however, that a full withdrawal of such Special Contributions
and earnings may be made by a Participant after attainment of age 59-1/2,
if he shall at the same time make a full withdrawal of all his interest
in this Plan. Subject to the foregoing, all such distributions shall be
made in accordance with the provisions of this Plan.
12.3 Termination of the Plan
-----------------------
The termination of the Plan shall not cause or permit any part of the Trust
Fund to be diverted to purposes other than for the exclusive benefit of the
Participants, or cause or permit any portion of the Trust Fund to revert to
or become the property of the Company at any time prior to the satisfaction
of all liabilities with respect to the Participants.
Upon termination of this Plan, the Committee shall continue to act for the
purpose of complying with the preceding paragraph and shall have all power
necessary or convenient to the winding up and dissolution of the Plan as
herein provided. While so acting, the Committee shall be in the same
status and position with respect to other persons as if the Plan remained
in existence.
12.4 Allocation of the Trust Fund on Termination of Plan
---------------------------------------------------
In the event of a complete or partial termination of the Plan, or upon
complete discontinuance of contributions under the Plan, with respect to
all Participants or a specified group or groups of Participants, the
Trustee shall allocate and segregate a proportionate interest in the Trust
Fund for the benefit of affected Participants.
All Accounts accrued by the affected Participants shall be 100% vested and
non-forfeitable. The Committee shall direct the Trustee to allocate the
assets of the Trust Fund to those affected Participants.
In the event that after the termination of the Plan the Board shall
determine that continuance of the investment funds is not in the best
interest of the Participants, the Company may liquidate the funds and the
Trustee shall apply the proceeds to payment to each Participant and
Beneficiary of the value of his or her Accounts. Such payment shall be
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<PAGE>
made, in the discretion of the Committee, either wholly or in part
by the purchase of non-transferable annuity contracts or by lump-sum
payments.
12.5 Partial Termination
-------------------
If at any time the Plan is terminated with respect to any group of
Employees under such circumstances as to constitute a partial termination
of the Plan within the meaning of Section 411(d)(3) of the Code, the
amounts held in the funds that are allocable to such Employees shall be
segregated by the Trustee as a separate plan. The funds thus allocated to
such separate plan shall be applied for the benefit of such Employees in
the manner described in Section 12.4.
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SECTION 13
FUNDING
13.1 Contributions to the Trust Fund
-------------------------------
As a part of this Plan the Company shall maintain a Trust Fund. From time
to time, the Company shall make contributions to the Trust Fund in
accordance with Section 4.
13.2 Trust Fund for Exclusive Benefit of Participants
------------------------------------------------
The Trust Fund is for the exclusive benefit of Participants. Except as
provided in Sections 4.6 (Return of Contributions), 11.9 (Domestic
Relations Orders) and 11.11 (Deductible Contribution), no portion of the
Trust Fund shall be diverted to purposes other than this or revert to or
become the property of the Company at any time prior to the satisfaction of
all liabilities with respect to the Participants.
13.3 Trustee
-------
As a part of this Plan, the Company has entered into an agreement with a
Trustee who is designated by the Board of Directors. The Company has the
power and duty to appoint the Trustee and it shall have the power to remove
the Trustee and appoint successors at any time. As a condition to
exercising its power to remove any Trustee hereunder, the Company must
first enter into an agreement with a successor Trustee. The Committee may
delegate the authority to direct the investment of all or a portion of the
Trust Fund to the Trustee.
13.4 Investment Manager
------------------
The Committee has the power to appoint, remove or change from time to time
an Investment Manager to direct the investment of all or a portion of the
Trust Fund held by the Trustee. For purposes of this section "Investment
Manager" shall mean any fiduciary (other than the Trustee) who:
(a) has the power to manage, acquire, or dispose of any asset of the Plan;
(b) is either
(i) registered as an investment adviser under the Investment Advisers
Act of 1940; or
(ii) is a bank; or
(iii) is an insurance company qualified under the laws of more
than one state to perform the services described in
subparagraph (a); and
61
<PAGE>
(c) has acknowledged in writing that he, she or it is a fiduciary with
respect to the Plan.
62
<PAGE>
SECTION 14
FIDUCIARIES
14.1 Limitation of Liability of the Company and Others
-------------------------------------------------
To the extent permitted by law, no Participant shall have any claim against
the Company, or the Committee, or against their directors, officers,
members, agents or representatives, for any benefits under the Plan, and
such benefits shall be payable solely from the Trust Fund; nor shall the
Company, nor the Committee or their directors, officers, members, agents or
representatives incur any liability to any person for any action taken or
suffered or omitted to be taken by them under the Plan in good faith.
14.2 Indemnification of Fiduciaries
------------------------------
In order to facilitate the recruitment of competent fiduciaries, the
Company adopting this Plan agrees to provide the indemnification as
described herein. This provision shall apply to Employees who are
considered Plan fiduciaries including without limitation, Committee
members, any agent of the Committee, or any other officers, directors or
Employees. Notwithstanding the preceding, this provision shall not apply
and indemnification will not be provided for any Trustee or Investment
Manager appointed as provided in this Plan.
14.3 Scope of Indemnification
------------------------
The Company agrees to indemnify an Employee fiduciary as described above
for all acts taken in good faith in carrying out his or her
responsibilities under the terms of this Plan or other responsibilities
imposed upon such fiduciary by ERISA. This indemnification for all acts is
intentionally broad but shall not provide indemnification for embezzlement
or diversion of Plan assets for the benefit of the Employee fiduciary. The
Company agrees to indemnify Employee fiduciaries described herein for all
expenses of defending an action by a Participant, Beneficiary or government
entity, including all legal fees for counsel selected with the consent of
the Company and other costs of such defense. The Company will also
reimburse an Employee fiduciary for any monetary recovery in any court or
arbitration proceeding. In addition, if the claim is settled out of court
with the concurrence of the Company, the Company will indemnify an Employee
fiduciary for any monetary liability under said settlement. The Company
shall have the right, but not the obligation, to conduct the defense of
such persons in any proceeding to which this Section 14.3 applies. The
Company may satisfy its obligations under this Section 14.3 in whole or in
part through the purchase of a policy or policies of insurance providing
equivalent protection.
63
<PAGE>
The Advanced Technology Laboratories, Inc. Incentive Savings and Stock Ownership
Plan is adopted by Advanced Technology Laboratories, Inc.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed on this
31st day of December, 1993.
FOR ADVANCED TECHNOLOGY LABORATORIES, INC.
/s/ W. Brinton Yorks, Jr. /s/ Harvey N. Gillis
- ---------------------------- ----------------------------------------------
Witness Authorized Officer
Sr. Vice President and Chief Financial Officer
----------------------------------------------
Title
64
<PAGE>
APPENDIX I
TO THE ADVANCED TECHNOLOGY LABORATORIES, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
"Participating Companies" as defined in Section 1.27 shall also include the
following companies during the specified time.
<TABLE>
<CAPTION>
Company Beginning Ending
- ------- --------- ------
<S> <C> <C>
Advanced Technology Laboratories, Inc. January 1, 1987
(Washington)
</TABLE>
ACKNOWLEDGED AND ACCEPTED:
By:
------------------------------------------
Title:
------------------------------------------
Date:
------------------------------------------
65
<PAGE>
Exhibit 10.15
ADVANCED TECHNOLOGY LABORATORIES, INC.
SUPPLEMENTAL BENEFIT PLAN
AMENDED AND RESTATED
EFFECTIVE JUNE 26, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 PURPOSE ..................................................... 1
1.1 Purpose ...................................................... 1
ARTICLE 2 DEFINITIONS ................................................. 2
2.1 "Code" ....................................................... 2
2.2 "Company" .................................................... 2
2.3 "Compensation Committee" ..................................... 2
2.4 "Disability" ................................................. 2
2.5 "Earnings" ................................................... 2
2.6 "Participant" ................................................ 2
2.7 "Plan" ....................................................... 2
2.8 "Retirement," ................................................ 2
2.9 "Retirement Plan" ............................................ 2
2.10 "Subsidiaries" ............................................... 2
2.11 "Surviving Spouse"............................................ 2
2.12 "Years of Service"............................................ 2
ARTICLE 3 ADMINISTRATION .............................................. 3
3.1 Compensation Committee ....................................... 3
3.2 Benefits Committee ........................................... 3
3.3 Expenses ..................................................... 3
ARTICLE 4 PARTICIPATION ............................................... 4
4.1 Retirement Plan Participants ................................. 4
4.2 Retirement Plan Benefit ...................................... 4
4.3 Other Participants ........................................... 4
4.4 Limitation on Participation .................................. 4
ARTICLE 5 BENEFITS .................................................... 5
5.1 Supplemental Pension Benefits ................................ 5
5.2 Other Supplemental Pension Benefits .......................... 5
5.3 Death Benefits................................................ 5
ARTICLE 6 PAYMENT OF BENEFITS ......................................... 6
6.1 Payment of Benefits .......................................... 6
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 7 GENERAL PROVISIONS .......................................... 7
7.1 Unfunded Obligation........................................... 7
7.2 Nonassignment ................................................ 7
7.3 No Right to Continued Employment ............................. 7
7.4 Withholding Taxes ............................................ 7
7.5 Termination and Amendment .................................... 7
7.6 ERISA Exemption .............................................. 8
7.7 Applicable Law ............................................... 8
SIGNATURE PAGE ......................................................... 8
APPENDIX A ............................................................. 9
APPENDIX B ............................................................. 10
</TABLE>
<PAGE>
ARTICLE 1
PURPOSE
1.1 Purpose.
-------
The purpose of this Advanced Technology Laboratories, Inc.
Supplemental Benefit Plan (the "Plan") is to retain exceptional
executives by providing retirement benefits to key executives.
1
<PAGE>
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 "Code" means the Internal Revenue Code of 1986 as amended.
------
2.2 "Company" means Advanced Technology Laboratories, Inc., a Delaware
---------
Corporation.
2.3 "Compensation Committee" means the committee defined in Section 3.1
-----------------------
of this Plan.
2.4 "Disability" has the same meaning as provided in the Retirement Plan.
------------
2.5 "Earnings" has the same meaning as provided in the Retirement Plan.
----------
2.6 "Participant" means each individual who participates in the Plan in
-------------
accordance with Article IV.
2.7 "Plan" means the Advanced Technology Laboratories, Inc. Supplemental
------
Benefit Plan as set forth in this document and in any amendments made
from time to time.
2.8 "Retirement", for a Participant who is entitled to a benefit under the
------------
Retirement Plan, means his or her "Retirement Date" or "Vested
Termination Date" as defined in the Retirement Plan. In the case of
a Participant who is not entitled to a benefit under the Retirement
Plan, "Retirement" means the later of the date the Participant
attains age 55 or terminates employment with the Company and its
Subsidiaries.
2.9 "Retirement Plan" means the Advanced Technology Laboratories, Inc.
-----------------
Retirement Plan and Trust.
2.10 "Subsidiaries" means (i) wholly owned subsidiaries of the Company
--------------
and (ii) those subsidiaries of which 50% or more is owned by the
Company and which are specifically designated by the Compensation
Committee as participating employers in this Plan.
2.11 "Surviving Spouse" means the spouse of a Participant, provided
------------------
that the Participant was married to the spouse throughout the one-
year period ending on the date of the Participant's death.
2.12 "Years of Service" has the same meaning as provided in the
------------------
Retirement Plan.
2
<PAGE>
ARTICLE 3
ADMINISTRATION
3.1 Compensation Committee
----------------------
The Compensation Committee, appointed by the Company's
Board of Directors, shall, except as otherwise authorized by the
Board of Directors, consist of directors who are not employed by the
Company or its Subsidiaries. The Compensation Committee shall have
the exclusive authority to:
(a) designate individuals to participate in the Plan pursuant to
Section 4.3, in addition to those individuals who automatically
become Participants pursuant to Section 4.1,
(b) designate non-wholly owned Subsidiaries which shall be
participating employers in the Plan, which shall be listed in
Appendix B to this Plan, and
(c) engage such legal, accounting, actuarial and other professional
services as it may deem proper.
Decisions by the Compensation Committee shall be final and binding
upon all parties.
3.2 Benefits Committee
------------------
The Benefits Committee appointed by the Compensation Committee
to administer the Retirement Plan shall have the authority and
responsibility for the proper operation and administration of the Plan
according to its terms.
3.3 Expenses
--------
All benefits payable under the Plan and all expenses properly
incurred in the administration of the Plan, including all expenses
properly incurred by the Compensation Committee in exercising its
duties under the Plan, shall be borne by the Company.
3
<PAGE>
ARTICLE 4
PARTICIPATION
4.1 Retirement Plan Participants
----------------------------
Each participant in the Retirement Plan whose benefits thereunder
are limited by (a) the dollar limitation on compensation that may be
taken into account under the plan of Section 401(a)(17) of the Code
and/or (b) the benefits limitations of Section 415 of the Code
(including, without limitation, the maximum benefit payable under
Section 415(b)(1), the actuarial reduction for early retirement of
Section 415(b)(2)(C), the reduction for limited service or
participation of Section 415(b)(5), and the combined limits of
Section 415(e)) shall become a Participant in this Plan.
Participation shall begin as of the later of the effective date of
the Plan or the last day of the first Plan Year in which the
individual's accrued benefit under the Retirement Plan is limited by
Sections 401(a)(17) or 415 of the Code.
4.2 Retirement Plan Benefit
-----------------------
For purposes of determining participation in and benefits under this
Plan, the benefit to which an individual is entitled under the
Retirement Plan shall be calculated by including as "Earnings" in
the year in which earned any amounts deferred under a nonqualified
deferred compensation plan or arrangement, which are not otherwise
included in Earnings.
4.3 Other Participants
------------------
The Compensation Committee may determine and designate other select
management or highly compensated employees of the Company and its
Subsidiaries to receive additional supplemental pension benefits
under this Plan, as described in Section 5.2, whose names shall be
added to an Appendix A to this Plan. Such individuals shall become
Participants as of the date of designation by the Compensation
Committee.
4.4 Limitation on Participation
---------------------------
Employees designated for benefits under Section 4.3 shall be
members of a select group of top management or highly compensated
employees.
4
<PAGE>
ARTICLE 5
BENEFITS
5.1 Supplemental Pension Benefits
-----------------------------
Upon the Retirement or Disability of a Participant, the Company
shall pay to such Participant supplemental pension benefits which
when combined with the amounts he or she is entitled to receive
under the Retirement Plan (if any) shall equal the retirement
pension benefits which would have been payable to the Participant
had the Retirement Plan's formula been applied without regard to the
limitations of Sections 401(a)(17) and 415 of the Code.
Notwithstanding the foregoing, the supplemental pension benefits for
a Participant who receives salesman commissions or service
commissions/incentives shall be determined by disregarding any such
commissions and incentives which exceed the dollar limitation of
Section 401(a)(17) of the Code.
5.2 Other Supplemental Pension Benefits
-----------------------------------
The Compensation Committee in its discretion may establish other
supplemental pension benefits and designate the Participants who
will be entitled to receive such benefits. Any such additional
supplemental pension benefits shall be described in an Appendix to
this Plan, and, unless otherwise specified in such Appendix, shall
be payable as provided in Article VI.
5.3 Death Benefits
--------------
Upon the death of a Participant prior to Retirement, the Company
shall pay to the Surviving Spouse (if any) of such Participant a
death benefit which when combined with the death benefit which he or
she is entitled to receive under the Retirement Plan shall equal the
death benefit that would have been payable to the Surviving Spouse had
the Retirement Plan's benefit provisions been applied as provided in
Section 5.1 or 5.2 above, as applicable.
5
<PAGE>
ARTICLE 6
PAYMENT OF BENEFITS
6.1 Payment of Benefits
-------------------
Upon the Retirement or Disability of a Participant, the Company shall
pay to such Participant the benefit provided in Section 5 in the form
of a monthly annuity payable from the commencement date as provided in
Section 6.2 to the first of the month preceding death. Upon the death
of a Participant prior to commencement of benefits under this Plan,
the Company shall pay to the Surviving Spouse of such Participant one
half of the benefit provided in Section 5 in the form of a monthly
annuity payable from the commencement date as provided in Section 6.2
to the first of the month preceding the death of the Surviving Spouse.
Notwithstanding the above, the Compensation Committee in its
discretion may direct payment of the benefit for a Participant or
Surviving Spouse in the form of a lump sum cash payment if the
Compensation Committee determines that such payment is in the best
interest of the Company.
The amount of any such lump sum payment shall be determined by
calculating the benefit according to the terms of the Retirement Plan
as a whole life annuity, then calculating the present value of such
benefit using the actuarial assumptions specified in the Retirement
Plan for determining benefits of equivalent value, without regard to
the provision for use of Pension Benefit Guarantee Corporation rates
for calculating lump sums.
6.2 Commencement of Payment
-----------------------
If a Participant in this Plan is also a participant in the Retirement
Plan, benefits for the Participant or Surviving Spouse under this Plan
shall commence on the same date that benefits commence under the
Retirement Plan. If a Participant in this Plan is not also a
participant in the Retirement Plan, benefits to the Participant shall
commence as of the first day of the month coincident with or next
following the earlier of the date of Retirement or Disability.
Benefits to a Surviving Spouse shall commence as of the first of the
month following the Participant's death if the Participant was age 55
or older, or as of the first of the month following the date on which
the Participant would have reached age 55 if the Participant was
younger than age 55 at the time of death.
6
<PAGE>
ARTICLE 7
GENERAL PROVISIONS
7.1 Unfunded Obligation
-------------------
The supplemental benefits to be paid to Participants or
their Surviving Spouses pursuant to this Plan are unfunded obligations
of the Company, and shall, until actual payment, continue to be an
obligation against the general funds of the Company. The Company is
not required to segregate any monies from its general funds, or to
create any trusts, or to make any special deposits with respect to
these obligations. Nothing contained herein shall be deemed to create
a trust of any kind or create any fiduciary relationship. To the
extent that any person acquires a right to receive payments from the
Company under this Plan, such right shall be no greater than the right
of any unsecured general creditor of the Company.
7.2 Nonassignment
-------------
The right of a Participant or his or her Surviving Spouse to the
payment of any amounts under the Plan may not be assigned,
transferred, pledged or encumbered nor shall such right or other
interest be subject to attachment, garnishment, execution or other
legal process.
7.3 No Right to Continued Employment
--------------------------------
Nothing in the Plan shall be construed to confer upon any Participant
any right to continued employment with the Company or a Subsidiary,
nor interfere in any way with the right of the Company or a Subsidiary
to terminate the employment of such Participant at any time without
assigning any reason therefor.
7.4 Withholding Taxes
-----------------
Appropriate payroll taxes shall be withheld from cash payments
made to Participants pursuant to this Plan.
7.5 Termination and Amendment
-------------------------
The Board of Directors of the Company reserves the power at any time
to terminate this Plan and delegates to the Compensation Committee the
power to otherwise amend any portion of the Plan other than this
Section 7.5; provided, however, that no such action shall adversely
affect the right of any Participant (or Surviving Spouse) to a benefit
to which he or she has become entitled under the Plan. Notice of
termination or material amendment of the Plan shall be given in
writing to each Participant.
If the Plan is terminated, Participants and Surviving Spouses who have
accrued benefits under the Plan as of the date of termination will
receive payment of such benefits at the times specified in the Plan.
7
<PAGE>
7.6 ERISA Exemption
---------------
The portion of this Plan providing benefits in excess of the
limitations of Section 415 of the Code is intended to qualify for
exemption from the Employee Retirement Income Security Act of 1974
("ERISA") as an unfunded excess benefit plan under Sections 3(36) and
4(b)(5) of ERISA. The portion of this Plan providing benefits in
excess of the limitation of Section 401(a)(17) of the Code and other
supplemental benefits is intended to qualify for exemption from Parts
II, III, and IV of ERISA as a plan maintained primarily for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees under Sections 201(2),
301(a)(3) and 401(a)(1) of ERISA.
7.7 Applicable Law
--------------
The Plan shall be construed and governed in accordance with the laws
of the State of Washington.
Dated: December 31, 1993
Advanced Technology Laboratories, Inc.
By: /s/ Harvey N. Gillis
-------------------------------
Title: Senior Vice President and
Chief Financial Officer
-------------------------------
8
<PAGE>
APPENDIX A
Pursuant to Section 4.3 of the Plan, the following select management
or highly compensated Participants shall be entitled to receive
additional supplemental pension benefits under the Plan, as described
below:
<TABLE>
<CAPTION>
Name Benefit Benefit Distribution Date
---- ------- -------------------------
<S> <C> <C>
1. Robert T. deGavre Determined under an employment September, 1992
agreement entered as of
January 1, 1987.
</TABLE>
Acknowledged and Accepted
By:
----------------------
Title:
-------------------
Date:
--------------------
9
<PAGE>
APPENDIX B
TO THE
ADVANCED TECHNOLOGY LABORATORIES, INC.
SUPPLEMENTAL BENEFIT PLAN
Pursuant to Section 3.1(b) of the Plan, the following Subsidiaries
shall be participating employers in the Plan:
<TABLE>
<CAPTION>
Company Beginning Ending
------- --------- ------
<S> <C> <C>
1. Advanced Technology Laboratories 1/1/89
Inc. (Washington)
2.
</TABLE>
Acknowledged and Accepted
By:
----------------------
Title:
-------------------
Date:
--------------------
10
<PAGE>
Exhibit 10.16
ADVANCED TECHNOLOGY LABORATORIES, INC.
INCENTIVE SAVINGS AND STOCK OWNERSHIP PLAN
TRUST AGREEMENT
AMENDED AND RESTATED
EFFECTIVE
JULY 1, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREAMBLE............................................................ 1
ARTICLE 1........................................................... 2
1.1 Trustee Responsibility................................... 2
1.2 Payments from Trust Fund................................. 2
1.3 Powers of Trustee........................................ 3
1.4 Securities; Property..................................... 5
1.5 Proxies.................................................. 6
1.6 Company Securities....................................... 6
ARTICLE 2........................................................... 8
2.1 Investment Managers...................................... 8
2.2 Investment Funds......................................... 8
2.3 Annuity Contracts........................................ 9
2.4 Securities Lending....................................... 10
2.5 Insurance Valuations and Reports......................... 10
ARTICLE 3........................................................... 11
3.1 Standard of Care......................................... 11
3.2 Trust Fund Assets........................................ 11
3.3 Allocation of Responsibility............................. 11
3.4 Indemnification.......................................... 11
3.5 ERISA Controls........................................... 11
ARTICLE 4........................................................... 12
4.1 Records and Accounts..................................... 12
4.2 Settlement of Accounts................................... 12
ARTICLE 5........................................................... 13
5.1 Trustee Expenses......................................... 13
ARTICLE 6........................................................... 14
6.1 Multiple Companies....................................... 14
6.2 Multiple Plans........................................... 14
6.3 Trustee Reliance......................................... 14
6.4 Directions by Company or Committee....................... 15
6.5 Directions by Investment Manager......................... 15
6.6 Certain Securities Transactions.......................... 15
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 7........................................................... 16
7.1 Amendment and Termination................................ 16
ARTICLE 8........................................................... 17
8.1 Removal and Resignation.................................. 17
ARTICLE 9........................................................... 18
9.1 Governing Law............................................ 18
9.2 Successors and Assigns................................... 18
9.3 Loss of Qualification.................................... 18
9.4 Segregation of Assets.................................... 18
9.5 Exclusive Benefit........................................ 19
9.6 No Certificates of Ownership............................. 19
9.7 Assignability............................................ 20
SIGNATURE PAGE...................................................... 21
</TABLE>
<PAGE>
PREAMBLE
THIS TRUST AGREEMENT ("Trust Agreement") is known as the Advanced Technology
Laboratories, Inc. Incentive Savings and Stock Ownership Plan Trust Agree-ment,
and was formerly known as the Amended and Restated Trust Agreement for Defined
Contribution Plans By and Between Westmark International Incorporated and First
Interstate Bank of Washington, N.A.
Westmark International Incorporated established the Westmark International
Incorpo-rated Incentive Savings and Stock Ownership Plan, and an associated
trust fund ("Trust Fund") governed by the Trust Agreement for Defined
Contribution Plans, effective January 2, 1987, in connection with the
distribution of shares of Westmark International Incorporated to shareholders of
Squibb Corporation.
The Plan was amended and restated effective January 1, 1989, and the Trust
Agreement was amended and restated effective February 1, 1991.
The corporate name of Westmark International Incorporated was changed to
Advanced Technology Laboratories, Inc. effective June 26, 1992. The Plan was
amended and restated, and the name of the Plan was changed to the Advanced
Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan. The
Trust Agreement is hereby renamed and restated effective June 26, 1992.
Advanced Technology Laboratories, Inc. ("Company") and the undersigned
trustee ("Trustee") intend that the Plan and Trust will comply with the Employee
Retirement Income Security Act of 1974, as amended, Section 401(a) of the
Internal Revenue Code of 1986, as amended, and related Treasury Regulations and
that the Trust qualifies as a tax-exempt trust under Section 501(a) of the Code.
The Plan is administered by a committee appointed by the Company (the
"Committee").
The Company and the Trustee now enter into this Trust Agreement on the
following terms:
1
<PAGE>
ARTICLE 1
1.1 Trustee Responsibility
----------------------
The Trustee shall hold the assets of and collect the income and make
payments from the Trust Fund, all as hereinafter provided. Subject to the
conditions and limitations set forth herein, the Trustee shall be
responsible for the property received by it as Trustee, but, except as
otherwise specifically agreed to by the Trustee, shall not be responsible
for the administration of any Plan (including without limitation the
determination of Plan participation rights of employees of any Company
and the determination of benefits of members of any Plan) or for those
assets of any Plan which have not been delivered to and accepted by the
Trustee; provided, however, that the Trustee shall maintain the
participant accounting for a plan if so directed by the Company. The
Trustee shall not have any authority or obligation to determine the
adequacy of or to enforce the collection from the Company or from any
Company of any contribution to the Trust Fund. Except to the extent that
assets of the Trust Fund have been deposited in a collective investment
fund maintained by the Trustee or that the Trustee has been designated as
an Investment Manager (as defined in Article II hereof), the Trustee
shall not be responsible, directly or indirectly, for the investment or
reinvestment of the assets of the Trust Fund, which investment and
reinvestment shall be the sole responsibility of the Company unless
otherwise delegated by the Company as provided in ARTICLE II hereof.
1.2 Payments from Trust Fund
------------------------
Subject to the provisions of Section 9.5, the Trustee shall make payments
from the portion of the Trust Fund attributed to each Plan as directed by
the respective Committee which administers such Plan. Such Committee, in
directing the Trustee to make payments, shall follow the provisions of
the Plan so that it shall be impossible for any part of the Trust Fund to
be used for, or diverted to, purposes other than for the exclusive
benefit of employees covered under such Plan or their beneficiaries
except to the extent permitted by this Agreement or any Plan. Subject to
the foregoing, each such Committee may direct such payments to be made to
any person, including any member of such Committee, or to the applicable
Company, or to any paying agent designated by an Company, in such amounts
and in such form (including, without limitation, shares of Company stock
and shares of SpaceLabs Medical, Inc. Stock) as the Committee shall
direct. The Trustee shall have no responsibility with respect to any
payment made, pursuant to such a direction, to any Company, any Committee
or any member thereof, to any paying agent, or to any other person, and
any payment so made shall be held in trust by the recipient until
disbursed in accordance with the Plan. Each direction of each such
Committee shall be in writing and shall be deemed to include a
certification that any payment directed thereby is one which the
Committee is authorized to direct, and the Trustee may conclusively rely
on such certification without further investigation. Unless otherwise
specified by the Committee, payments by the Trustee may be made by its
check to the order of the payee and mailed to the payee at the address
last furnished to the Trustee
2
<PAGE>
by the Committee or by the payee, or, if no such address has been so
furnished, to the payee in care of the Company. The establishment of the
Trust Fund created by this Agreement shall not be considered as giving
any Plan member or any other person any legal or equitable rights as
against the Company, any Company, any Committee, the Trustee or the
property, whether corpus or income, of the Trust Fund unless such right
is specifically provided for in this Agreement or the applicable Plan,
nor shall it be considered as giving any Plan member or other employee
the right to continue in the service of a Company in any capacity.
1.3 Powers of Trustee
-----------------
Subject to the provisions and limitations contained elsewhere herein, in
administering the Trust Fund the Trustee shall be specifically authorized:
(a) except as otherwise specified in Section 1.6, to vote in person or
by proxy, or to refrain from voting, in respect of any securities
held by the Trust Fund, and to give general or special proxies or
powers of attorney, with or without power of substitution, and to
exercise any conversion privileges, subscription rights or other
options; to participate in reorganizations, recapitalizations,
consolidations, mergers and similar transactions with respect to
such securities; and generally to exercise any of the powers of an
owner with respect to securities held by the Trust Fund;
(b) with respect to any investment, to consent or object to or otherwise
request any action or nonaction on the part of any corporation,
association or trust or of the directors, officers, stockholders or
trustees of any such corporation, association or trust;
(c) to settle, compromise or submit to arbitration any claims, debts or
damages due or owing to or from the Trust Fund;
(d) to deposit any property in any voting trust, or with any protective,
reorganization or similar committee, or with depositories
designated thereby; to delegate power thereto; and to pay or agree
to pay part of its expenses and compensation and any assessments
levied with respect to any property so deposited;
(e) to deposit securities with stock clearing corporations or
depositories or similar organizations, whether located within the
state of Washington or in another state of the United States of
America;
(f) to commence or defend suits or legal proceedings and to represent
the Trust Fund in all suits or legal proceedings in any court or
before any other body or tribunal (provided, however, that the
Trustee shall have no obligation to take any legal action for the
benefit of the Trust Fund unless it shall be first
3
<PAGE>
indemnified for all expenses in connection therewith, including
without limitation counsel fees);
(g) to register or cause to be registered any securities or other
property in its name or in the name of any nominee with or without
indication of the capacity in which the securities shall be held,
or to hold securities in bearer form;
(h) to employ suitable agents and legal counsel, who may be counsel for a
Company, and, as a part of this reimbursable expenses under this
Agreement, to pay their reasonable compensation and expenses;
(i) to appoint one or more individuals or corporations as a custodian
of any property and, as a part of its reimbursable expenses under
this Agreement, to pay the reasonable compensation and expenses of
any such custodian;
(j) to form any corporation, association, partnership, or joint venture
under the laws of any jurisdiction, or to participate in the
forming of any such corporation, association, partnership, or joint
venture or to acquire an interest in or otherwise make use of any
corporation, association, partnership, or joint venture for the
purpose of facilitating the Trust Fund's investing in and holding
title to any property;
(k) for the purpose of facilitating the Trust Fund's investing in and
holding title to real or personal property or part interests
therein, wherever situate, to appoint one or more individuals or
corporations as a subtrustee or subtrustees, or to join with one or
more individuals or corporations (including itself) acting as
trustees of other pension trusts, profit sharing trusts or employee
benefit trusts in the establishment of one or more such subtrusts,
and to pay the reasonable compensation and expenses of each such
subtrustee. Any such subtrustee, upon being appointed, shall act
with such one or more or all of the powers, authorities,
discretions, duties and functions of the Trustee under this Article
I as shall be designated in the instrument establishing such
subtrust including, without limitation, the power to receive and
hold property, real or personal, or part interest therein, oil,
mineral or gas properties, royalty interests or rights, including
equipment pertaining thereto, leaseholds, mortgages and other
interests in realty, situated in any state of the United States of
America in which the subtrustee is authorized to act as trustee of
pension trusts, profit sharing trusts or other employee benefit
trusts;
(l) to lease any property, to sell or acquire any property (at public
or private sale and for cash or on credit), to grant or acquire
options for the purchase of property and generally to make,
execute, acknowledge and deliver any and all deeds, leases,
assignments and instruments whenever such action may be required to
perform its obligations hereunder;
(m) to write or purchase call or put options;
(n) to enter into commodity contracts and to take appropriate actions in
connection with such contracts;
4
<PAGE>
(o) to lend to the members of a Plan such amount or amounts, and upon
such terms and conditions, as the Committee may direct in
accordance with the provisions of the Plan; and
(p) generally to do all acts, exclusive of acts involving investment
management discretion, which the Trustee may deem necessary or
desirable for the protection of the Trust Fund;
provided, however, that the powers specified in subsections (a)
through (d) and (j) through (o) above shall be exercised by the
Trustee only upon the specific direction of the Company, the
Committee or an Investment Manager (as defined in ARTICLE II
hereof) in accordance with the provisions of the Plan and this
Agreement.
No person dealing with the Trustee shall be required to take any notice
of this Agreement, but all persons so dealing shall be protected in
treating the Trustee as the absolute owner with full power of disposition
of all the moneys, securities and other property of the Trust Fund, and
all persons dealing with the Trustee are released from inquiry into the
decisions or authority of the Trustee and from seeing to the application
of the moneys, securities or other property paid or delivered to the
Trustee.
1.4 Securities; Property
--------------------
Wherever used in this Agreement the term "securities" shall include
bonds, mortgages, notes, obligations, warrants and stocks of any class
(including stocks issued by the Company to the extent authorized by the
Plan), certificates of participation or shares of any mutual investment
company, trust or fund, and such other evidences of indebtedness and
certificates of interest as are usually referred to by the term
"securities," and the term "property" shall include real, personal and
mixed property, tangible or intangible, of any kind and wherever located,
including without limitation securities, depository accounts in the
banking department of the Trustee, and interests in any fund which has
been or may be created and administered by the Trustee, or by an
Investment Manager, for the collective investment of the property of
employee benefit trusts. The investment of the assets of the Trust Fund
in any such depository account or collective investment fund is hereby
specifically authorized. To the extent that property of the Trust Fund is
so invested in a collective investment fund, the declaration of trust
pertaining to such collective investment fund and the trust thereby
created shall be a part of this Agreement and of each Plan whose assets
are so invested; and for the purposes of any valuation of the Trust Fund
or any valuation of the interest or of the account of any employee or
beneficiary under a Plan, the interest of the Trust Fund in such
collective investment fund shall be valued at the times and in the manner
prescribed by the declaration by which such collective investment fund
was created.
5
<PAGE>
1.5 Proxies
-------
Subject to the provisions of Section 1.6, in order to permit the Company
or an Investment Manager, as the case may be, to make timely and informed
decisions regarding the management of those assets in the Trust Fund
subject to its respective control, the Trustee shall forward to the
Company or each such Investment Manager, as the case may be, for
appropriate action any and all proxies, proxy statements, notices,
requests, advice or other communications received by the Trustee (or its
nominee) as the record owner of such assets.
1.6 Company Securities
------------------
Notwithstanding anything herein to the contrary, if a Plan provides that
the Trustee shall exercise voting rights with respect to shares of the
stock of the Company at the direction of the Committee or the members of
the Plan, the Trustee shall utilize its best efforts to deliver, or cause
to be delivered, to the Committee or the members of the Plan, as the case
may be, a copy of all proxies, notices and other information which the
Company generally distributes to the shareholders of the Company. The
Trustee shall establish such procedures for the collection of the
instructions of the Committee or Plan members on the voting of such
Company stock as it shall determine to be appropriate. The Trustee shall
vote specifically in accordance with the Committee's or each member's
instructions, as applicable, to the extent of the number of whole shares
designated to be voted by the Committee or allocated to such member's
account. Any Company stock designated to be voted by the Committee or
allocated to members' account for which no signed voting-direction
instrument is timely received from the Committee or any member and any
other remaining unallocated shares held in the Trust Fund shall be voted
by the Trustee for or against the proposals submitted, in the same
proportion as shares of Company stock held in the Trust Fund for which
voting directions have been timely received; provided, however, that if
the Plan is a tax credit employee stock ownership plan within the meaning
of Section 409 of the Code, the Trustee shall not vote any allocated
shares with respect to which no signed voting-direction instrument has
been timely received.
If a Plan provides that, in the event of a tender offer or exchange offer
by any person (including the Company) for any or all shares of Company
stock held in the Trust Fund, each member under the Plan or the Committee
shall have the right to instruct the Trustee as to the manner in which to
respond with respect to any or all shares of stock allocated to such
member's account or designated to be under the direction of the
Committee, the Trustee shall act with respect to such stock specifically
in accordance with the written instructions submitted by the Plan members
or the Committee, as applicable, to the extent of the number of whole
shares allocated to such member's account or designated to be under the
direction of the Committee. To the extent such materials are not
distributed to the members by the Company, the Trustee shall utilize its
best efforts to distribute or cause to be distributed to each member
and/or the Committee substantially the same information as may be
distributed to the stockholders of the Company in connection with such
offer. The Trustee shall establish such procedures for the collection of
members' instructions with respect to the disposition of such Company
stock as it shall deem appropriate.
6
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Any such Company stock with respect to which written instructions have
not been timely received by the Trustee and any other remaining
unallocated shares held in the Trust Fund shall not be voted by the
Trustee.
For purposes of this Section 1.6, "shares of Company stock" shall refer to
shares of Advanced Technology Laboratories, Inc. stock, and to shares of
SpaceLabs Medical, Inc. stock.
The Trustee shall not incur any liability on account of actions taken by
the Trustee in accordance with directions received pursuant to this
Section 1.6.
7
<PAGE>
ARTICLE 2
2.1 Investment Managers
-------------------
The Company may from time to time appoint one or more Investment
Managers, as that term is defined in the Employee Retirement Income
Security Act of 1974, as from time to time amended (hereinafter referred
to as the "Act"), to manage (including the power to acquire and dispose
of) any portion of the Trust Fund and, with respect to such portion, to
direct the Trustee with respect to effecting investment transactions on
behalf of the Trust Fund and exercising such other powers as may be
granted to Investment Managers hereunder. The Company shall give prompt
written notice to the Trustee of any such appointment, upon which the
Trustee shall rely until it receives from the Company written notice of
the termination of such appointment. Any such Investment Manager may
direct the Trustee to invest and reinvest through the medium of any
collective investment fund maintained by the Investment Manager or by the
Trustee which is exempt from tax under the provisions of Section 501(a)
of the Code and, during such period of time as an investment through any
such medium shall exist, the declaration of trust of such fund shall
constitute a part of this Agreement. In each case where such an
appointment is made, the Company shall determine the assets of the Trust
Fund (which may include all or any portion of one or more of the
Investment Funds established pursuant to Section 2.2) to be allocated to
the Investment Manager from time to time and shall issue appropriate
instructions to the Trustee with respect thereto. The Trustee shall not
be liable for the acts or omissions of such Investment Manager, shall be
under no duty to question any direction of an Investment Manager with
respect to the portion of the Trust Fund managed by such Investment
Manager, to review any securities or property held in such portion, to
make any suggestions with respect to the investment and reinvestment of
such portion, or to evaluate the performance of any Investment Manager,
and shall be fully protected in acting in accordance with the directions
of an Investment Manager or for failing to act in the absence of such
directions.
2.2 Investment Funds
----------------
A Committee, from time to time and in accordance with the provisions of
the Plan, may direct the Trustee to establish one or more separate
investment accounts (including without limitation insurance company
contracts or accounts, mutual funds, or collective investment funds)
under the Plan (each such separate account hereinafter referred to as an
"Investment Fund"). The Trustee shall transfer to each such Investment
Fund such portion of the assets of the Plan held in the Trust Fund as the
Committee directs in accordance with the specific provisions of the Plan.
The assets which have been allocated to an Investment Fund shall be
invested and reinvested in accordance with the provisions of the Plan and
with such investment guidelines, objectives and restrictions as may be
established by the Committee for that Investment Fund. The Trustee shall
be under no duty to question, and shall not incur any liability on
account of following any direction of the Committee, nor to review the
investment guidelines, objectives and restrictions established, or the
specific investment directions given by the Committee for any Investment
Fund, nor to make
8
<PAGE>
suggestions to the Committee in connection therewith. To the extent that
directions from the Committee to the Trustee represent investment
elections of the members under the Plan, the Committee and the Trustee
shall not have any responsibility for such investment elections and shall
incur no liability on account of investing the assets of the Trust Fund
in accordance with such directions.
Unless the Trustee is otherwise directed by the Committee, all interest,
dividends and other income received with respect to, and any proceeds
received from the sale or other disposition of securities or other
property held in an Investment Fund shall be credited to and reinvested
in such Investment Fund, and all expenses of the Trust Fund which are
properly allocable to a particular Investment Fund shall be so allocated
and charged. Subject to the provisions of the Plan, the Committee may
direct the Trustee to eliminate an Investment Fund or Funds, and the
Trustee shall thereupon dispose of the assets of such Investment Fund and
reinvest the proceeds thereof in accordance with the directions of the
Committee.
Pending investment of the Investment Funds in accordance with the
directions of the Committee, the Trustee may invest assets of the Trust
Fund, in whole or in part, at any time or from time to time, in interest-
bearing accounts or certificates of deposit (including depository
accounts in the banking department of the Trustee which bear a reasonable
interest rate), treasury bills, commercial paper, money market funds,
collective investment funds (including any such collective investment
fund maintained by the Trustee), short-term investment funds or other
short-term obligations and the investment return thereon shall be
allocated among the Plan members whose assets have been so invested and
added to their respective investments in the Investment Funds.
If, and to the extent, specifically authorized by the Plan, the Committee
may direct the Trustee to establish an Investment Fund all of the assets
of which shall be invested in shares of the common stock of the Company,
and in the event the Committee directs the establishment of such an
Investment Fund, the Trustee shall invest all amounts allocated to such
Investment Fund in such shares as promptly as is reasonably practicable.
Except as otherwise provided in this Agreement or the Plan, in the event
that any such shares which are allocable to the account of a Plan member
are sold, the proceeds thereof shall be invested by the Trustee as
promptly as is reasonably practicable in the other Investment Funds in
accordance with the directions of the Committee. Notwithstanding the
foregoing, the Trustee shall be under no duty or obligation to invest any
assets of the Trust Fund in shares of common stock of the Company unless
such shares constitute "qualifying employer securities" within the
meaning of Section 407 of the Act and such investment is not prohibited
by Section 406 or 407 of the Act.
2.3 Annuity Contracts
-----------------
A Committee may direct the Trustee to receive and hold or apply assets of
the Trust Fund attributable to its Plan to the purchase of individual or
group insurance or annuity contracts or policies issued by any insurance
company and in a form approved by the Committee, including contracts
under which the contract holder is granted
9
<PAGE>
options to purchase insurance or annuity benefits. The Trustee shall be
under no duty to question any direction of the Committee or to review the
form of any such policies or contracts or of the selection of the issuer
thereof, or to make suggestions to the Committee with respect to the form
of such policies or contracts or to the issuer thereof. The Committee may
direct the Trustee to exercise or may exercise directly the powers of the
contract holder under any such policies or contracts, and the Trustee
shall exercise such powers only upon the direction of the Committee.
Notwithstanding anything to the contrary contained in the Plan, the
Trustee shall be fully protected in acting in accordance with written
directions of the Committee, and shall be under no liability for any loss
of any kind which may result by reason of any action taken or omitted by
it in accordance with any direction of the Committee, or by reason of
inaction in the absence of written directions from the Committee. In the
event that the Committee directs that any moneys or property be paid or
delivered to the contract holder other than for the benefit of specific
individual beneficiaries, the Trustee agrees to accept such moneys or
property as assets of the Trust Fund subject to all the terms hereof. No
insurance carrier shall for any purpose be deemed a party to this
Agreement or be responsible for the validity or sufficiency hereof.
Notwithstanding the fact that it may have knowledge of the terms of this
Trust Fund, the obligations of such insurance carrier shall be measured
and determined solely by the terms and conditions of the policies or
contracts issued by it, and there shall be no obligations to any person,
partnership, corporation, trust or association other than as stated in
such policies or contracts. In the event that the Company desires to
direct the purchase of individual or group insurance or annuity policies
or contracts for the benefit of some or all of the Plans, the foregoing
powers and responsibilities of a Committee under this Section 2.3 may be
exercised by the Company.
2.4 Securities Lending
------------------
The Company may appoint the Trustee as Securities Lending Fiduciary, if
the Trustee consents to such appointment, to establish, manage and
administer a securities lending program on behalf of the Trust Fund,
pursuant to which the Trustee shall have authority to cause any or all
securities held in the Trust Fund (excluding both stock of the Company
and securities held in any portion of the Trust Fund allocated to an
Investment Manager appointed pursuant to Section 2.1 or to an Investment
Fund established under Section 2.2 which the Company identifies in
writing to the Trustee as not being eligible to participate in said
program) to be lent to such one or more brokers as the Trustee may
determine. The Company shall enter into a written agreement with the
Trustee setting forth the terms and conditions of this appointment,
including without limitation the compensation to be paid to the Trustee
for its services with respect to such securities lending program.
2.5 Insurance Valuations and Reports
--------------------------------
The Company shall arrange for each insurance company issuing contracts
held by the Trustee pursuant to Section 2.3, to furnish the Trustee with
such valuations and reports as are necessary to enable the Trustee to
fulfill its obligations under ARTICLE IV, and the Trustee shall be fully
protected in relying upon such valuations and reports.
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<PAGE>
ARTICLE 3
3.1 Standard of Care
----------------
The Trustee, the members of each Committee, and each Investment Manager
appointed pursuant to Section 2.1 shall discharge their respective duties
with respect to the Trust Fund solely in the interest of the employees of
the Companies which have adopted a Plan and their beneficiaries, and with
the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of like character
and with like aims. The duties of the Trustee shall only be those
specifically undertaken pursuant to this Agreement or by means of a
separate written agreement.
3.2 Trust Fund Assets
-----------------
The Company shall determine whether all or any portion of the assets of a
Plan shall be deposited in the Trust Fund, and the Trustee shall have no
responsibility for any such assets until such time as they are in fact
received by the Trustee for deposit.
3.3 Allocation of Responsibility
----------------------------
Except as otherwise provided in the Act, no "fiduciary" (as such term is
defined in Section 3(21) of the Act, or any successor statutory
provision) under this Agreement shall be liable for an act or omission of
another person in carrying out any fiduciary responsibility where such
fiduciary responsibility is allocated to such other person by this
Agreement or pursuant to a procedure established in this Agreement.
3.4 Indemnification
---------------
The Company hereby agrees to indemnify and hold the Trustee harmless from
and against any loss, costs, damages or expenses, including without
limitation reasonable attorneys' fees, which the Trustee may incur or pay
out by reason of any alleged or actual act, or failure to act, on the
part of the Company, any Company, Committee, Investment Manager,
custodian or trustee other than this Trustee, or any other person.
3.5 ERISA Controls
--------------
Anything in this Agreement to the contrary notwithstanding, no provision
of this Agreement shall be so construed as to violate the requirements of
Part 4 of Title I of the Act.
11
<PAGE>
ARTICLE 4
4.1 Records and Accounts
--------------------
The Trustees shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions hereunder,
and all accounts, books and records relating thereto shall be open to
inspections and audit at all reasonable times by any persons designated
by the Company. Within ninety (90) days following the close of each
fiscal year of this Trust Fund, which shall be the twelve-month period
ending on December 31 of each year, and within ninety (90) days after the
removal or resignation of the Trustee as provided in ARTICLE VIII hereof,
the Trustee shall file with the Company a written account setting forth
all investments, receipts, disbursements and other transactions effected
by the Trustee or reported to it by such Investment Managers as may be
appointed hereunder during each fiscal year or during the period from the
close of the last such fiscal year to the date of such removal or
resignation. Within sixty (60) days from the date of filing such annual
or other account, the Trustee, if requested by the Company, shall also
serve copies of such account upon any persons designated by the Company
as having administrative responsibility with respect to any Plan. Upon
the expiration of 150 days from the date of filing such annual or other
account, the Trustee shall be forever released and discharged from all
liability and accountability to anyone with respect to the propriety of
all acts and transactions shown in such account, except with respect to
any such acts or transactions as to which the Company, or any person upon
whom the account has been served pursuant to provisions of this Section
4.1, shall within such 150 day period file with the Trustee written
objections.
The Trustee shall from time to time make such other reports and furnish
such other information concerning the Trust Fund (including valuations of
each Investment Fund established pursuant to Section 2.2) as the Company
may reasonably request or as may be required by a Plan.
4.2 Settlement of Accounts
----------------------
Notwithstanding the foregoing Section 4.1, the Trustee, each Committee,
and each Company, or any of them, shall have the right to apply at any
time to a court of competent jurisdiction for the judicial settlement of
the Trustee's account, and in any case it shall be necessary to join as
parties thereto only the Trustee, any applicable Committee and any
applicable Company; and any judgment or decree which may be entered
therein shall, subject to the provisions of the Act, be conclusive upon
all persons having or claiming to have any interest in the Trust Fund or
under a Plan.
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<PAGE>
ARTICLE 5
5.1 Trustee Expenses
----------------
The expenses incurred by the Trustee in the performance of its duties, or
otherwise in its capacity as Trustee of the Trust Fund (including,
without limitation, fees for legal services rendered to the Trustee in
any context directly or indirectly pertaining to the Trust Fund), such
compensation to the Trustee (in its capacity as Trustee of the Trust
Fund, for the maintenance of participant accounts if it has been so
directed pursuant to Section 2.4) as may be agreed upon in writing from
time to time between the Trustee and the Company, and all other proper
charges and disbursements of the Trustee shall be paid from the Trust
Fund unless paid by the Company in its sole discretion. The Company may
direct the Trustee to pay from the Trust Fund the compensation of any
Investment Manager appointed pursuant to Section 2.1 and the
administrative expenses of any Plan. All taxes of any and all kinds
whatsoever that may be levied or assessed under existing or future laws
upon the Trust Fund or the income thereof shall be paid from the Trust
Fund or the income thereof shall be paid from the Trust Fund. Any amount
paid from the Trust Fund (including taxes) which is specifically
allocable to a particular Plan shall be charged to such Plan; any amount
paid from the Trust Fund which is allocable to all of the Plans shall be
charged against the Trust Fund without allocation.
If Investment Funds have been established pursuant to Section 2.2, all
amounts (including taxes) paid from the Trust Fund which are allocable to
an Investment Fund shall be charged to such Investment Fund. All such
expenses which are not so allocable shall be charged against each of the
Investment Funds in the same proportion as the value of the total assets
held in such Investment Fund bears to the value of the total assets in
the Trust Fund.
In the case of a loan from a Plan to a member under the Plan, all
expenses (including taxes) of the Trust Fund, other than those expenses
which are paid by the Company or a Company, which are allocable to such
loan, shall be charged against the interest of such member under the
Plan.
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<PAGE>
ARTICLE 6
6.1 Multiple Companies
------------------
Each Company whose Plan shall be designated by resolution of the Board of
Directors of the Company as eligible to participate in the Trust Fund may
become a party to this Agreement by delivering to the Trustee (i) a
certified copy of such resolution, and (ii) a copy, certified by such
Company's secretary or one of its assistant secretaries under its
corporate seal, of a resolution adopted by its Board of Directors joining
in this Agreement and authorizing the Company to exercise the powers
conferred upon it by this Agreement. Upon receipt by the Trustee of both
of such certified copies and a copy of such Company's plan, such Company
shall be and become a party to this Agreement in all respects as if it
had executed this Agreement at the foot hereof. Each Company shall
provide the Trustee with a copy of a current determination letter from
the United States Internal Revenue Service to the effect that such Plan
is qualified under Section 401(a) of the Code and exempt from federal
income tax under Section 501(a) of the Code.
6.2 Multiple Plans
--------------
The Trustee shall maintain a separate account reflecting the equitable
share in the Trust Fund of each Plan. Such equitable share shall be used
solely for the payment of benefits under and expenses and other charges
properly allocable to each such Plan, and shall not be used for payment
of benefits under and expenses and other charges properly allocable to
any other Plan. The equitable share of each Plan in the Trust Fund shall
be debited or credited (as the case may be) (a) for the entire amount of
every contribution received on behalf of such Plan, every benefit payment
or other expense allocable to such Plan, and every other transaction
relating solely to such Plan, and (b) for its equitable share of every
item of collected or accrued income, gain or loss, and general expenses
and other transactions allocable to the Trust Fund as a whole. The
Trustee shall determine the value of the assets of the Trust Fund as of
such dates as the Trustee may deem appropriate or as a Committee with the
assent of the Trustee may direct. Assets shall be valued at their market
values at the close of business on the date of valuation, or, in the
absence of readily ascertainable market values, at such values as the
Trustee shall determine, in accordance with methods consistently followed
and uniformly applied. In determining market values of assets, the
Trustee may rely on values recommended by the Investment Manager or
Investment Trustee responsible for the investment of such assets.
6.3 Trustee Reliance
----------------
The Company shall certify to the Trustee the names and specimen
signatures of the members of each Committee appointed to administer a
Plan. The Company shall promptly give notice to the Trustee of changes in
the membership of each such Committee, and, until such notices are
received by the Trustee, the Trustee shall be fully protected in assuming
that the membership of such Committee is unchanged and in acting
accordingly. Each Committee may certify to the Trustee the names of
14
<PAGE>
persons authorized to act for it in relation to the Trustee and the
Trustee may act upon any certificate, notice or direction purporting to
have been signed on behalf of a Committee which the Trustee believes to
be genuine and to have been executed by the Committee or by any person
whose authority to act for the Committee has been certified to the
Trustee by the Committee. The Trustee may rely upon any certificate,
notice or direction of the Company which the Trustee believes to be
genuine and to have been signed by a duly authorized officer of the
Company. Communications from the Company and from each Committee to the
Trustee shall be sent to the Trustee's office as stated above or to such
other address as the Trustee shall specify, and such communications shall
be binding upon the Trust Fund and the Trustee, when received by the
Trustee.
6.4 Directions by Company or Committee
----------------------------------
All orders, requests, instructions and objections of any of the persons
authorized to act on behalf of a Company or any Committee in accordance
with the provisions of Section 6.3, or designated to direct the Trustee
under Section 1.2 to make payment for the purpose of distributing
benefits, shall be in writing (provided that the Trustee may, in its
discretion, accept oral orders, requests, instructions and objections
subject to confirmation in writing), and the Trustee shall be fully
protected in acting in accordance therewith.
6.5 Directions by Investment Manager
--------------------------------
All directions to the Trustee of any Investment Manager appointed
pursuant to Section 2.1 shall be in writing (provided that the Trustee
may, in its discretion, accept oral direction subject to confirmation in
writing) and shall be signed by an officer (or partner) of the Investment
Manager or by a person specifically designated to act for the Investment
Manager by an officer (or partner) thereof.
6.6 Certain Securities Transactions
-------------------------------
Notwithstanding anything herein to the contrary, the Trustee shall be
fully protected in acting in accordance with directions with respect to
securities transactions (including, without limitation, the affirmation
and/or confirmation of such transactions) received by it through a system
or arrangement for the coordination of securities transaction settlements
operated by Depository Trust Company or by any other central securities
depository, securities clearing organization or book entry system which
serves to link investment managers, securities brokers and custodian
banks, pursuant to an agreement entered into by the Trustee, and an
Investment Manager appointed pursuant to Section 2.1 or the Company, as
the case may be, to the same extent as if the directions were in writing.
15
<PAGE>
ARTICLE 7
7.1 Amendment and Termination
-------------------------
The Company may, at any time and from time to time, by instrument in
writing executed pursuant to authorization of this Board of Directors,
(a) amend in whole or in part any or all of the provisions of this
Agreement, or (b) terminate this Agreement and the trust created hereby;
provided, however, that no amendment which affects the rights, duties or
responsibilities of the Trustee may be made without the Trustee's consent
and provided further that no such amendment shall divert any part of the
Trust Fund to purposes other than for the exclusive benefit of the
employees of an Company or their beneficiaries except to the extent
permitted by this Agreement or any Plan. Any such amendment shall become
effective upon receipt by the Trustee of the instrument of amendment or,
subject to the consent of the Trustee, as of the date specified therein,
and endorsement thereon by the Trustee of its consent thereto, if such
consent is required. Any such termination shall become effective upon the
receipt by the Trustee of the instrument of termination; thereafter the
Trustee, upon the direction of the Company, shall liquidate the Trust
Fund to the extent required for distribution and, after the final account
of the Trustee has been approved and settled, shall distribute the
balance of the Trust Fund remaining in its hands as directed by the
Company or appropriate Committee, or in the absence of such direction, as
may be directed by a judgment or decree of a court of competent
jurisdiction. Upon termination of the Trust Fund as provided herein, the
Trustee shall not be required to make any payments hereunder in excess of
the net realizable value of the assets of the Trust Fund at the time of
such payment. The Trustee shall not be required to make any payments in
cash unless there shall be in the Trust Fund at the time an amount of
cash sufficient for the purpose. In case of a deficiency in cash, the
Trustee shall take such action as to the disposition of securities or
other property forming a part of the Trust as will provide the amount of
cash necessary for such payments. Following any such termination, the
powers of the Trustee hereunder shall continue as long as any of the
Trust Fund remains in its hands, but only as to those assets which during
such time remain in the Trust Fund.
16
<PAGE>
ARTICLE 8
8.1 Removal and Resignation
-----------------------
The Trustee may be removed by the company at any time upon thirty (30)
days' notice in writing to the Trustee. The Trustee may resign at any
time upon thirty (30) days' notice in writing to the Company. The
parties, however, may by written instrument waive such notice. Upon such
removal or resignation of the Trustee, the Company shall appoint a
successor trustee who shall have the same powers and duties as those
conferred upon the Trustee hereunder subject to such changes as the
Company may then determine. If a successor trustee is not appointed
within thirty (30) days after the Trustee gives notice of its
resignation, the Trustee may apply to any court of competent jurisdiction
for appointment of a successor. Upon acceptance of such appointment by
the successor trustee, the Trustee shall assign, transfer and pay over to
such successor trustee the assets then constituting the Trust Fund. The
Trustee is authorized, however, to reserve such sum of money as may be
reasonable for payment of its compensation and expenses (including legal
expenses) in connection with the settlement of its account or otherwise,
and any balance of such reserve remaining after the payment of such
compensation and expenses shall be promptly paid over to the successor
trustee.
17
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ARTICLE 9
9.1 Governing Law
-------------
To the extent permitted by applicable law this Agreement shall be
administered, construed and enforced according to the laws of the state
of Washington.
9.2 Successors and Assigns
----------------------
This Agreement shall be binding upon, and the powers granted to the
Company and the Trustee, respectively, shall be exercisable by, the
respective successors and assigns of the Company and the Trustee. Any
corporation which shall, by merger, consolidation, purchase or otherwise,
succeed to substantially all the trust business of the Trustee shall,
upon such succession and without any appointment or other action by the
Company, be and become successor trustee hereunder, upon notification to
the Company.
9.3 Loss of Qualification
---------------------
The Company shall immediately notify the Trustee if any Plan ceases to be
qualified under Section 401(a) of the Code. That part of the Trust Fund
which is attributable to any such Plan shall be immediately segregated
and withdrawn from the Trust Fund. The Company may at any time direct the
Trustee to segregate and withdraw the part of the Trust Fund which is
attributable to any Plan or to any specified group or groups of employees
or beneficiaries as certified to the Trustee by the Company. Whenever
segregation is to be effected pursuant to this Section, the Trustee shall
withdraw from the Trust Fund such assets as the Company shall direct.
Such assets shall be equal in value to the part of the Trust Fund to be
segregated. Such withdrawal from the Trust Fund shall be in cash or in
any property held in the Trust Fund, or in a combination of both, as
directed by the Company, and the Trustee's valuation of the assets of the
Trust Fund for such purpose shall be conclusive and binding on all
persons. The Trustee shall thereafter hold the assets so withdrawn as a
separate trust fund in accordance with the provisions either of this
Agreement or of a separate trust agreement. Such segregation shall not
preclude later readmission to the Trust Fund.
9.4 Segregation of Assets
---------------------
The Company may, if it so determines, at any time and from time to time,
designate any group or groups of the eligible employees or other
beneficiaries covered by a Plan as a separate class and may direct the
Trustee to segregate in a separate fund, to be held for the benefit of
such class, the part of the Trust Fund allocable to such class as
determined by the Company. The Company shall cause the Trustee to effect
such segregation by delivering to the Trustee a certified copy of the
Company's determination, together with a certified copy of a resolution
or resolutions of the Board of Directors of the Company directing such
segregation. The Trustee may rely conclusively and without investigation
upon any such certified copy of such determination and such resolution
and shall segregate such assets as the Company
18
<PAGE>
may direct. The Trustee's valuation of such assets for that purpose shall
be conclusive. The Trustee shall hold all of the assets so segregated
under this provision, together with such payments as shall thereafter be
made to the Trust Fund in behalf of such class, and the income therefrom,
as a subpart of the Trust Fund and subject to the terms of this
Agreement, or shall dispose of the same as directed by the Company. In
the event that the Trust or any subpart thereof created by this Agreement
shall be terminated as to such class, the Company shall direct the
disposition of the assets held by the Trustee for such class through
transfer to a successor trust, the purchase of annuities, or other means,
as the Company shall determine, and thereafter such employees and other
beneficiaries shall not have any rights in the Trust Fund, or against the
Trustee.
9.5 Exclusive Benefit
-----------------
Except as specifically permitted by this Agreement or any Plan, at no
time shall any part of the Trust Fund which is attributable to such Plan
ever revert to or be used or enjoyed by the Company or any Company or be
used for, or diverted to, any purposes other than for the exclusive
purpose of providing benefits to eligible employees and their
beneficiaries and the payment of the reasonable expenses of the Plan.
Notwithstanding any provision hereof to the contrary, contributions by an
Company may be returned to the Company under the following circumstances,
but only if requested by the Company by written certification to the
Trustee that the return of property to the Company is in compliance with
the provisions of this Agreement and the applicable Plan:
(a) if a contribution is made by a Company by reason of a mistake of
fact, provided that such repayment to the Company is made within
one (1) year after the payment by the Company of such contribution
to the Trust, or
(b) if a contribution, or any portion thereof, was made upon the
condition that it be fully deductible for federal tax purposes but
in fact it is not deductible to the Company under Section 404 of
the Code (or any successor provision thereto), provided that the
contribution so made, to the extent so disallowed, is repaid to the
Company within one (1) year after the date of disallowance of the
deduction.
Any contribution returned to a Company pursuant to this Section 9.5 shall
be adjusted to reflect its share of the Trust Fund's loss, if any, but
not of the Trust Fund's gain. The Trustee shall be entitled to rely
completely on such written certification and shall be under no obligation
to investigate or otherwise determine its propriety. The Trustee shall
not incur any liability or other loss or damage on account of its
reliance on such certification.
9.6 No Certificates of Ownership
----------------------------
No document shall be issued evidencing any interest in the Trust Fund and
no Plan shall have power to assign all or any part of the Trust Fund
attributable to it.
19
<PAGE>
9.7 Assignability
-------------
To the maximum extent permitted by law, beneficial interests in the Trust
Fund of members or former members under a Plan or their beneficiaries
shall not be assignable or subject to alienation, sale, transfer, pledge,
encumbrance, mortgage, attachment, execution, levy or receivership, nor
shall they pass to any trustee in bankruptcy or be reached or applied by
any legal process for the payment of any obligations of any such person;
provided, however, that nothing herein shall prevent a member from
assigning his interest in the Trust Fund as security for the repayment of
any loan made to him from the Trust Fund pursuant to a Plan or prevent
the payment of amounts pursuant to a qualified domestic relations order.
Any attempt at such a prohibited assignment, alienation, sale, transfer,
pledge, encumbrance, mortgage, attachment, execution or levy shall be
void and unenforceable.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
ADVANCED TECHNOLOGY LABORATORIES, INC.
By: /s/ Harvey N. Gillis
----------------------------------
Its: Senior Vice President and Chief Financial Officer
---------------------------------
FIRST INTERSTATE BANK OF WASHINGTON, NA
By:
----------------------------------
Its:
---------------------------------
21
<PAGE>
Exhibit 10.17
ADVANCED TECHNOLOGY LABORATORIES, INC.
RETIREMENT PLAN
AMENDED AND RESTATED
EFFECTIVE
JUNE 26, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
----
PREAMBLE.................................... 1
SECTION 1 -- DEFINITIONS ................... 2
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Accrued Benefit..................... 2
1.2 Actuarially Equivalent/Actuarially.. 2
1.3 Affiliated Companies................ 2
1.4 Annuity Starting Date............... 2
1.5 Beneficiary 3
1.6 Code 3
1.7 Committee 3
1.8 Compensation........................ 3
1.9 Credited Service 3
1.10 Disabled 3
1.11 Earnings 3
1.12 Effective Date...................... 5
1.13 Eligible Employee 5
1.14 Employee 5
1.15 Employer 6
1.16 Employment Commencement Date........ 6
1.17 ERISA............................... 6
1.18 Final Average Monthly Earnings...... 6
1.19 Foreign Employee.................... 6
1.20 Participant 6
1.21 Period of Service................... 7
1.22 Period of Severance................. 7
1.23 Plan 7
1.24 Plan Administrator 7
1.25 Plan Year 7
1.26 Service 8
1.27 Severance From Service Date......... 8
1.28 Social Security Retirement Age...... 8
1.29 Temporarily Terminated.............. 8
1.30 Terminated 8
1.31 Trust or Trust Fund................. 8
1.32 Trustee 9
1.33 Additional Definitions in Plan...... 9
</TABLE>
SECTION 2 -- PARTICIPATION .................. 10
<TABLE>
<CAPTION>
<C> <S> <C>
2.1 Eligibility for Participation 10
2.2 Reemployment After a Termination.. 10
2.3 Employees in a Bargaining Unit.... 10
2.4 Waiver of Participation........... 10
</TABLE>
<PAGE>
SECTION 3 -- RETIREMENT DATES.......................................... 12
<TABLE>
<CAPTION>
<C> <S> <C>
3.1 Normal Retirement Date.................................... 12
3.2 Early Retirement Date..................................... 12
3.3 Deferred Retirement Date.................................. 12
3.4 Retirement Date........................................... 12
3.5 Vested Termination Date................................... 12
</TABLE>
SECTION 4 -- RETIREMENT BENEFITS....................................... 13
<TABLE>
<CAPTION>
<C> <S> <C>
4.1 Accrued Benefit........................................... 13
4.2 Normal Retirement Benefit................................. 14
4.3 Early Retirement Benefit.................................. 14
4.4 Deferred Retirement Benefi................................ 14
4.5 Vested Termination Benefit................................ 15
4.6 Reemployment After Retirement............................. 15
4.7 Benefits For Terminated Participants...................... 15
4.8 Benefits Payable From SpaceLabs Medical, Inc. Retirement
Plan..................................................... 15
</TABLE>
SECTION 5 -- FORMS OF PAYMENT.......................................... 16
<TABLE>
<CAPTION>
<C> <S> <C>
5.1 Forms of Payment.......................................... 16
5.2 Automatic Form of Benefit................................. 16
5.3 Limitation on Forms of Payment............................ 17
5.4 Explanation of Forms of Payment........................... 17
</TABLE>
SECTION 6 -- DEATH AND DISABILITY BENEFITS ............................ 18
<TABLE>
<CAPTION>
<S> <C> <C>
6.1 Spouse's Death Benefit................................... 18
6.2 Disability Benefits ..................................... 29
</TABLE>
SECTION 7 -- VESTING.................................................. 20
<TABLE>
<CAPTION>
<C> <S> <C>
7.1 Vesting.................................................. 20
7.2 Termination Prior to Vesting............................. 20
7.3 Forfeitures.............................................. 21
</TABLE>
SECTION 8 -- LIMITATIONS ON BENEFITS.................................. 21
<TABLE>
<CAPTION>
<C> <S> <C>
8.1 Limitation on Benefits.................................... 21
8.2 Maximum Annual Benefit Payable Under the Plan............. 22
8.3 Additional Limitation Relating to Defined
Contribution Plans....................................... 24
</TABLE>
<PAGE>
SECTION 9 -- TOP HEAVY PROVISIONS.................................... 25
<TABLE>
<C> <S> <C>
9.1 Scope........................................................ 25
9.2 Top Heavy Status............................................. 25
9.3 Minimum Benefit.............................................. 27
9.4 Benefit Limitation........................................... 28
9.5 Vesting...................................................... 28
</TABLE>
SECTION 10 -- ADMINISTRATION OF THE PLAN............................. 30
<TABLE>
<C> <S> <C>
10.1 Plan Administrator........................................ 30
10.2 Organization and Procedures............................... 30
10.3 Duties and Authority of the Committee..................... 30
10.4 Expenses.................................................. 31
10.5 Bonding and Insurance..................................... 31
10.6 Commencement of Benefits.................................. 32
10.7 Appeal Procedure 32
10.8 Plan Administration - Miscellaneous....................... 33
10.9 Domestic Relations Orders................................. 35
10.10 Plan Qualification 36
10.11 Deductible Contribution 36
10.12 Payment of Benefits Through Purchase of Annuity Contract.. 37
</TABLE>
SECTION 11 -- AMENDMENT AND TERMINATION............................. 38
<TABLE>
<C> <S> <C>
11.1 Amendment General.......................................... 38
11.2 Amendment - Consolidation or Merger........................ 38
11.3 Termination of the Plan.................................... 38
11.4 Allocation of the Trust Fund on Termination of Plan........ 38
</TABLE>
SECTION 12 -- FUNDING............................................... 40
<TABLE>
<C> <S> <C>
12.1 Contributions to the Trust................................. 40
12.2 Trust Fund for Exclusive Benefit of Participants........... 40
12.3 Disposition of Credits and Forfeitures..................... 40
12.4 Trustee.................................................... 40
12.5 Investment Manager......................................... 40
</TABLE>
SECTION 13 -- FIDUCIARIES........................................... 42
<TABLE>
<S> <C> <C>
13.1 Limitation of Liability of the Employer and Others....... 42
13.2 Indemnification of Fiduciaries........................... 42
13.3 Scope of Indemnification................................. 42
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SIGNATURE PAGE...................................................... 43
APPENDIX I.......................................................... 44
</TABLE>
<PAGE>
PREAMBLE
THIS RETIREMENT PLAN (hereinafter referred to as the "Plan," formerly
known as the Westmark International Incorporated Retirement Plan and now known
as the Advanced Technology Laboratories, Inc. Retirement Plan) is amended and
restated effective June 26, 1992 by Advanced Technology Laboratories, Inc., a
Delaware corporation (hereinafter "Employer").
WHEREAS, the purpose of the Plan is to provide retirement benefits to
Employees who become covered under the Plan; and
WHEREAS, the Plan was originally known as the Advanced Technology
Laboratories Floor Retirement Plan, and was adopted effective January 1, 1981 by
Advanced Technology Laboratories, Inc.; and
WHEREAS, the Plan was amended and restated effective January 1, 1987,
the name was changed to the Westmark International Incorporated Floor Retirement
Plan, and Westmark International Incorporated became the plan sponsor, in
connection with the distribution of shares of Westmark International
Incorporated to the shareholders of Squibb Corporation; and
WHEREAS, the Plan was amended and restated effective January 1, 1990
and the name was changed to the Westmark International Incorporated Retirement
Plan; and
WHEREAS, effective June 26, 1992, the corporate name of Westmark
International Incorporated was changed to Advanced Technology Laboratories,
Inc., and assets and liabilities of the Plan attributable to SpaceLabs, Inc. as
a participating employer in this Plan were spun off to form the SpaceLabs
Medical, Inc. Retirement Plan; and
WHEREAS, the Employer desires to amend and restate the Plan to change
the name to the Advanced Technology Laboratories, Inc. Retirement Plan and to
effect certain other changes; and
WHEREAS, the Plan shall be maintained for the exclusive benefit of
covered Employees, and is intended to comply with the Internal Revenue Code of
1986, as amended, the Employee Retirement Income Security Act of 1974, as
amended, and other applicable law;
NOW, THEREFORE, effective June 26, 1992 the Employer does hereby amend
and restate the Plan as set forth in the following pages.
1
<PAGE>
SECTION 1
DEFINITIONS
The following terms when used herein shall have the following meaning, unless a
different meaning is plainly required by the context. Capitalized terms are
used throughout the Plan text for terms defined by this and other sections.
1.1 Accrued Benefit
"Accrued Benefit" means, on any date, the benefit determined under the
formula specified in Section 4.1 as of such date.
1.2 Actuarially Equivalent/Actuarially
"Actuarially Equivalent" and similar terms (for purposes other than
determining contributions to the Trust Fund) means that the present value
of two payments or series of payments shall be of equal value when computed
at an 8% rate of interest and on the basis of the 1984 Unisex Pension
Mortality Table; provided, however, that the interest rate for calculating
lump sum benefits shall be the Pension Benefit Guaranty Corporation (PBGC)
interest rate for immediate or deferred annuities from a single employer
plan in effect on the first day of the Plan Year which contains the
proposed distribution date.
1.3 Affiliated Companies
"Affiliated Companies" means:
(a) the Employer,
(b) any other corporation which is a member of a controlled group of
corporations which includes the Employer (as defined in Section 414(b)
of the Code),
(c) any other trade or business under common control with the Employer (as
defined in Section 414(c) of the Code), or
(d) any other member of an affiliated service group which includes the
Employer (as defined in Section 414(m) of the Code).
For purposes of the limitation on benefits in Sections 8.2 and 8.3, the
determination of whether an entity is an Affiliated Company will be made by
modifying Sections 414(b) and (c) of the Code as specified in Section
415(h) of the Code.
1.4 Annuity Starting Date
"Annuity Starting Date" means the first day of the first period for which a
Plan benefit is payable as an annuity, or any other form.
2
<PAGE>
1.5 Beneficiary
"Beneficiary" means the person or persons designated to be the Beneficiary
by the Participant in writing to the Benefits Committee. In the event a
married Participant designates someone other than his or her spouse as
Beneficiary, such initial designation or subsequent change shall be invalid
unless the spouse consents in a writing which names the designated
Beneficiary and is notarized or witnessed by a Plan representative.
1.6 Code
"Code" means the Internal Revenue Code of 1986, as amended and including
all regulations promulgated pursuant thereto.
1.7 Committee
"Committee" means the Advanced Technology Laboratories, Inc. Benefits
Committee as from time to time constituted and appointed by the
Compensation Committee of the Board of Directors of the Employer to
administer the Plan.
1.8 Compensation
"Compensation" for any tax year has the meaning set forth in Section
415(c)(3) of the Code.
1.9 Credited Service
"Credited Service" means all completed years and fractions of years of
Service for the Employer during a Period of Service, excluding Periods of
Service forfeited due to a Period of Severance.
Notwithstanding the foregoing, Service while a Foreign Employee which is
completed before January 1, 1987 shall be disregarded for purposes of
determining a Participant's Credited Service.
1.10 Disabled
"Disabled" means a Participant is entitled to benefits under an Employer-
sponsored long term disability plan, or a long term disability plan to
which the Employer contributes on behalf of the Participant.
1.11 Earnings
"Earnings" for each Plan Year means:
(a) for all Participants who are not Foreign Employees, for Credited
Service prior to January 1, 1989: the straight-time pay earned by an
Employee from the Employer prior to reduction for any contributions
determined on a salary
3
<PAGE>
reduction basis under a flexible benefit plan established pursuant to
Section 125 of the Code or under the Westmark International
Incorporated Incentive Savings and Stock Ownership Plan, including
shift differentials, special geographical location allowances, holiday
pay, sick leave pay (exempt and non-exempt), short-term disability
(exempt and non-exempt), retroactive pay as it applies to any of the
above, and pay for vacation hours taken. Earnings will not include
non-refundable draw, bonuses, commissions, employee referral bonuses,
stock option payments, special bonuses, lump-sum payments or cash
payoffs for unused vacation, severance pay, hiring bonus, long-term
disability payments (exempt and non-exempt), finder's fees, any
relocation payments in the form of reimbursement or relocation bonus
and overtime.
(b) for all Participants who are not Foreign Employees, for Credited
Service after December 31, 1988: the straight-time pay earned by an
Employee from the Employer prior to reduction for any contributions
determined on a salary reduction basis under a flexible benefit plan
established pursuant to Section 125 of the Code or under the Westmark
International Incorporated Incentive Savings and Stock Ownership Plan
or Advanced Technology Laboratories, Inc. Incentive Savings and Stock
Ownership Plan, including:
(i) special geographical location allowances, holiday pay, sick leave
pay (exempt and non-exempt), short-term disability (exempt and
non-exempt), retroactive pay as it applies to any of the above,
and pay for vacation hours taken;
(ii) overtime pay, shift differentials, and bonuses (including MICP
and bullet bonuses), not in excess of 50% of annualized straight-
time pay prior to reduction as described above;
(iii) for Credited Service after December 31, 1988 and before January
1, 1993: salesman commissions and service commissions/incentives
to the extent such amounts when added to the amount determined
under (ii) above do not exceed 125% of annualized straight-time
pay prior to reduction as described above; and
(iv) for Credited Service after December 31, 1992, salesman
commissions and service commissions/incentives.
Earnings will not include non-refundable draw, employee referral
bonuses, Performance Unit Plan awards, car allowances, stock option
payments, restricted stock awards, lump-sum payments or cash payoffs
for unused vacation, severance pay, retention bonus, hiring bonus,
long-term disability payments (exempt and non-exempt), and any
relocation payments in the form of reimbursement or relocation bonus.
(c) For all Foreign Employees, the annual notional salary and the actual
bonus, if any, stated in U.S. dollars established in a uniform and
nondiscriminatory manner
4
<PAGE>
for each Foreign Employee, on or after January 1, 1987. Notional
salary shall not include any special relocation or foreign assignment
allowances.
Notional salary shall include an equitable adjustment to reflect any
retirement benefit which is expected to be earned under a foreign
retirement plan to the extent attributable to contributions by an
Employer or any foreign subsidiary of an Employer.
Notional salary for each Foreign Employee shall be approved by the
President of the applicable business unit.
Notwithstanding the foregoing, annual Earnings in excess of $200,000 shall
be disregarded; provided, however, that this $200,000 limit shall be
automatically adjusted to the maximum permissible dollar limitation
permitted by the Commissioner of the Internal Revenue Service. In
determining Earnings of a Participant for purposes of this limitation, the
family aggregation rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants of the Participant who
have not attained age 19 before the close of the year. If as a result of
the application of such rules the adjusted $200,000 limitation is exceeded,
then the limitation shall be prorated among the affected individuals in
proportion to each such individual's Earnings as determined under this
Section 1.11 prior to the application of this limitation.
1.12 Effective Date
"Effective Date" means January 1, 1981, or with respect to any Employer
specified in appendices to this Plan, the date such Employer adopted the
Plan.
1.13 Eligible Employee
"Eligible Employee" means any Employee who is on the active, regular
payroll of the Employer, provided, however, the term "Eligible Employee"
does not include any temporary, cooperative or leased employee.
1.14 Employee
"Employee" means any person (including any officer or director) who is
employed by, and as such is enrolled on the active payroll of the Employer
and is performing services in the United States, and any person who is a
Foreign Employee.
"Employee" shall include any leased employee within the meaning of Code
Section 414(n)(2); provided, however, if leased employees constitute twenty
percent or less of the Employer's non-highly compensated work force, the
term "Employee" shall not include a leased employee who is covered by a
plan maintained by the leasing organization which meets the requirements of
Code Section 414(n)(5).
5
<PAGE>
1.15 Employer
"Employer" means Advanced Technology Laboratories, Inc., a Delaware
corporation. For purposes other than sections 10, 11 and 12, the term
"Employer" shall also include other Affiliated Companies that adopt the
Plan with the approval of the Board of Directors of Advanced Technology
Laboratories, Inc. (Delaware), as provided from time to time in Appendix I
to this Plan.
1.16 Employment Commencement Date
"Employment Commencement Date" means the later of the Effective Date and
the date on which an Employee first completes an Hour of Service for the
Employer or an Affiliated Company during the current period of employment.
"Hour of Service" for purposes of this definition means each hour for which
an Employee is paid or entitled to payment for the performance of duties
for the Employer or any Affiliated Companies.
1.17 ERISA
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including all regulations thereunder.
1.18 Final Average Monthly Earnings
"Final Average Earnings" means one twelfth of the highest average Earnings
received by the Participant during any 60 consecutive month period. In the
event the Participant has less than 60 consecutive months of employment,
the computation period shall be based upon (1) the most recent 60 months of
employment (whether or not consecutive), or (2) the total Period of Service
with the Employer, whichever is less. Earnings for partial years are pro-
rated.
1.19 Foreign Employee
"Foreign Employee" means any person (including an officer or director) who
is employed by, and as such is on the active payroll of the Employer or a
foreign subsidiary or branch of an Employer, who relocates to a country
outside the United States and outside such individual's country of
citizenship to complete a temporary assignment for an Employer or a foreign
subsidiary or branch of an Employer which is expected to be completed
within five years from the initial date of the assignment.
1.20 Participant
"Participant" means any Eligible Employee who qualifies for participation
pursuant to Section 2.1 or 2.2. A nonvested Participant shall cease
to be a Participant on the date he or she incurs a one-year Period of
Severance. A vested Participant shall cease to be a Participant when
his or her benefit payments from the Plan are completed.
6
<PAGE>
1.21 Period of Service
"Period of Service" means the period of time commencing with the Employment
Commencement Date and ending on the Severance From Service Date. Non-
successive periods are aggregated to determine the Employee's total Period
of Service. For vesting and participation purposes, an Employee's Period
of Service shall also include the following:
(a) Periods not in Service due to Temporary Terminations; and
(b) Periods of Service with an Affiliated Company.
Notwithstanding the above, for an individual with respect to whom assets
and liabilities are transferred to the SpaceLabs Medical, Inc. Retirement
Plan between June 26 and December 31, 1992, the individual's Period of
Service for all purposes under the Plan shall begin on the individual's
first Employment Commencement Date following the date of such transfer.
1.22 Period of Severance
"Period of Severance" means the period of time commencing at the Severance
From Service Date and ending on the date the Employee again performs an
Hour of Service for the Employer; provided however, such period shall
commence one year later if a male or female Employee is absent due to
pregnancy, birth or adoption of a child, or caring for a child immediately
following birth or adoption.
1.23 Plan
"Plan" means the Advanced Technology Laboratories, Inc. Retirement Plan
either in its previous or present form or as amended from time to time.
1.24 Plan Administrator
"Plan Administrator" means the person or entity designated in Section 10 to
administer the Plan.
1.25 Plan Year
"Plan Year" means the twelve month period commencing each January 1 and
ending each December 31.
7
<PAGE>
1.26 Service
"Service" means periods for which an Employee is paid or entitled to
payment for the performance of duties for the Employer or an Affiliated
Company.
For purposes of Section 2 (Participation) and Section 7(Vesting) only,
Service for an Employee who transfers employment from an employing company
under the Squibb Corporation Pension Plan to the Employer on or before
August 31, 1987, without intervening employment with another employer,
shall also include any prior period of employment with an employing company
under the Squibb Corporation Pension Plan to the extent such employment was
credited as "service" for vesting purposes under the Squibb Corporation
Pension Plan.
1.27 Severance From Service Date
"Severance From Service Date" means the earlier of the date on which an
Employee quits, retires, is discharged or dies, or the first anniversary of
absence from work for any other reason. An individual employed by an
Affiliated Company other than the Employer shall incur a Severance from
Service Date if the individual's employer ceases to be an Affiliated
Company of the Employer.
1.28 Social Security Retirement Age
"Social Security Retirement Age" means the following ages depending on the
Participant's year of birth: age 65 for Participants born prior to 1938,
age 66 for Participants born after 1937 but prior to 1959, and age 67 for
Participants born after 1959.
1.29 Temporarily Terminated
Termination is deemed "Temporary" if the Employee is rehired and in Service
within one year of the initial date of absence from work.
1.30 Terminated
"Terminated" means no longer in Service or employed as an Employee with the
Employer for reasons of quit, retirement, discharge or death. An Employee
shall also be deemed Terminated on the first anniversary of the initial
date of absence for any other reason, provided such absence lasts at least
twelve months.
1.31 Trust or Trust Fund
"Trust" or "Trust Fund" means the trust fund into which shall be paid all
contributions and from which all benefits shall be paid under this Plan.
8
<PAGE>
1.32 Trustee
"Trustee" means the trustee or trustees who receive, hold, invest and
disburse the assets of the Trust in accordance with the terms and
provisions set forth in a trust agreement.
1.33 Additional Definitions in Plan
The following terms are defined in the following sections of the Plan:
<TABLE>
<CAPTION>
<S> <C>
Section
- -------
Aggregate Account 9.2
Aggregation Group 9.2
Deferred Retirement Benefit 4.5
Deferred Retirement Date 3.3
Determination Date 9.2
Early Retirement Benefit 4.4
Early Retirement Date 3.2
Investment Manager 12.5
Joint and Survivor Annuity 5.1(b)
Key Employee 9.2
Lump Sum 5.1(d)
Normal Retirement Benefit 4.3
Normal Retirement Date 3.1
Present Value of Accrued Benefits 9.2
Qualified Domestic Relations Order 10.9
Retirement Date 3.4
Statutory 50% Joint and Survivor Annuity Option 5.2(a)
Super Top Heavy 9.2
Top Heavy 9.2
Valuation Date (for Top Heavy) 9.2
Vested Termination Date 3.5
Vested Termination Benefit 4.6
Whole Life Annuity 5.1(a)
</TABLE>
9
<PAGE>
SECTION 2
PARTICIPATION
2.1 Eligibility for Participation
Each Eligible Employee who is regularly scheduled to work at least 30 hours
per week, and who is not already a Participant shall become a Participant
under this Plan on the later of the first of the month coinciding with or
next following completion of a one-year Period of Service and the date his
or her employer becomes an Employer for Plan purposes.
Notwithstanding the foregoing, a Foreign Employee must complete an
enrollment form prior to the date participation commences.
2.2 Reemployment After a Termination
Upon the reemployment of a Terminated former Participant as an Eligible
Employee, he or she shall immediately become a Participant.
An Employee who Terminates prior to becoming a Participant and is later
reemployed shall become a Participant upon satisfying the requirements of
Section 2.1. If the Employee's Period of Severance equals or exceeds five
years, the Period of Service preceding the Period of Severance shall be
disregarded. If the Employee's Period of Severance is less than five
years, the Period of Service before the Period of Severance shall be
aggregated with the subsequent Period of Service.
2.3 Employees in a Bargaining Unit
An Employee belonging to a collective bargaining unit, which has entered an
agreement with the Employer which does not provide for retirement benefits
under this Plan, shall not qualify for participation and the period of
employment shall not be included in determining his or her Credited
Service. If such an Employee is a Participant when such an agreement is
entered, the Employee shall cease to accrue Credited Service on the
effective date of the bargaining agreement. If such an agreement provides
for Plan participation, a covered Employee may continue or resume
participation and accrual of Credited Service.
2.4 Waiver of Participation
A Foreign Employee may elect in writing to waive his or her right to be a
Participant in this Plan by submitting a form to the Committee. A waiver
of participation shall be effective on the first day of the Plan Year
preceding the date of election. A Foreign Employee may prospectively
rescind a waiver in writing to the Committee at any time, effective on the
date of rescission. During such period of non-participation, the Foreign
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Employee shall accrue no Periods of Service or Credited Service, nor shall
he or she have any other rights inherent with participation in the Plan.
11
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SECTION 3
RETIREMENT DATES
3.1 Normal Retirement Date
The Normal Retirement Date for a Participant shall be the first day of the
month coinciding with or next following the attainment of age 65.
3.2 Early Retirement Date
Each Participant who attains age 55 and completes a five year Period of
Service may elect, in writing, an Early Retirement Date. Such Early
Retirement Date shall be before the Normal Retirement Date and after
Termination on the first day of any month coinciding with or following the
date the early retirement requirements are met.
3.3 Deferred Retirement Date
The Deferred Retirement Date for a Participant who continues working after
the Normal Retirement Date shall be the first day of the month coinciding
with or next following his or her Termination date; provided, however, the
Deferred Retirement Date shall not be later than April 1 following the
calendar year in which the Participant attains age 70-1/2.
3.4 Retirement Date
The Retirement Date for a Participant shall be one of the dates specified
in Sections 3.1, 3.2 or 3.3 above, on which benefits are to commence. The
Retirement Date for a Participant who Terminates prior to retirement with a
vested Accrued Benefit shall be Normal Retirement Date, unless such
Participant qualifies for and elects to receive benefits at an Early
Retirement Date.
3.5 Vested Termination Date
A vested Participant, whose Accrued Benefit has an Actuarially Equivalent
present value not in excess of $10,000, who Terminates employment with the
Employer and any Affiliated Companies prior to Early Retirement Date may
elect in writing to receive the Vested Termination Benefit either as a lump
sum or an annuity on a Vested Termination Date, which is the first day of
any month following the date of Termination and prior to his or her
earliest Retirement Date. In the event a married Participant elects to
receive benefits on a Vested Termination Date and his or her Vested
Termination Benefit exceeds $3,500, such election shall be void unless the
election is signed by the Participant's spouse, acknowledges the effect of
the election, and the spouse's signature is notarized or witnessed by a
Plan representative.
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SECTION 4
RETIREMENT BENEFITS
4.1 Accrued Benefit
The Accrued Benefit for any Participant shall be the excess, if any, of the
monthly benefit (as described in (a) below) over the frozen monthly amount
determined by reference to the former Westmark Discretionary Contribution
Retirement Plan offset (as described in (b) below), and then adjusted for
any prior distribution (Section 4.6) and/or form of payment (Section 5.1).
(a) Monthly Benefit
The monthly benefit payable to a Participant at Normal Retirement Date
shall equal:
(i) 1.0% of Final Average Monthly Earnings, multiplied by
(ii) the Participant's Credited Service.
(b) Frozen Discretionary Contribution Plan Offset
The monthly frozen discretionary contribution plan offset shall equal
the amount determined under subparagraph (i) less the amount
determined under subparagraph (ii) below, accumulated with 8% interest
compounded annually to the later of January 1, 1989 and the Normal
Retirement Date and then divided by 100:
(i) The Participant's account balance in the Westmark International
Incorporated Discretionary Contribution Plan on December 31,
1988.
(ii) The greater of (A) or (B) below:
(A) the amount determined under subparagraph (1) less the amount
determined under subparagraph (2) below, accumulated with 8%
interest compounded annually from December 31, 1982 through
December 31, 1988.
(i) the Participant's account balance in the Westmark
International Incorporated Discretionary Contribution
Plan as of December 31, 1982.
(ii) the maximum amount of the Participant's account balance
in the Westmark International Incorporated
Discretionary Contribution Plan (exceeding any rollover
or transfer
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amount), as of December 31, 1982, which, when
accumulated with 8% interest compounded annually to the
later of January 1, 1989 and the Normal Retirement Date
and then divided by 100, does not exceed the
Participant's floor benefit under the Predecessor Plan
as of December 31, 1982.
(B) The amount determined under subparagraph (1) less the amount
determined under subparagraph (2) below:
(1) the Participant's account balance in the Westmark
International Incorporated Discretionary Contribution
Plan as of December 31, 1988.
(2) the maximum amount of the Participant's account balance
in the Westmark International Incorporated
Discretionary Contribution Plan (excluding any rollover
or transfer amount), as of December 31, 1988, which,
when accumulated with 8% interest compounded annually
to the later of January 1, 1989 and the Normal
Retirement Date and then divided by 100, does not
exceed the Participant's monthly benefit under this
Plan as of December 31, 1988.
Notwithstanding the foregoing, a Participant's Accrued Benefit shall not be
less than his or her Accrued Benefit on the date immediately preceding the
date on which any Plan term that affects the Accrued Benefit is amended.
The Accrued Benefit is payable in the form of a Whole Life Annuity
commencing at Normal Retirement Date.
4.2 Normal Retirement Benefit
A Participant's monthly Normal Retirement Benefit shall equal his or her
vested Accrued Benefit as of the date of Termination, and then adjusted for
form of payment.
4.3 Early Retirement Benefit
A Participant's monthly Early Retirement Benefit shall equal his or her
vested Accrued Benefit as of the date of Termination, reduced by 1/2 of 1%
for each month that the Early Retirement Date precedes the Normal
Retirement Date, and then adjusted for form of payment.
4.4 Deferred Retirement Benefit
A Participant's monthly Deferred Retirement Benefit shall equal his or her
vested Accrued Benefit as of the date of Termination, and then adjusted for
form of payment. Service and Earnings beyond the Normal Retirement Date
shall be taken into
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<PAGE>
consideration. In no event shall the benefit provided under this paragraph
be less than the retirement benefit to which the Participant would have
been entitled if he or she had actually retired on the Normal Retirement
Date, Actuarially increased to reflect the deferred commencement of
payments.
In the event a Participant continues working after the date benefits are
required to commence following age 70-1/2 pursuant to Section 10.6, the
Deferred Retirement Benefit shall be recalculated and adjusted annually.
4.5 Vested Termination Benefit
A Participant's Vested Termination Benefit shall equal his or her Accrued
Benefit as of the date of Termination, Actuarially reduced to reflect the
early commencement of payment of benefits, and then adjusted for form of
payment.
4.6 Reemployment After Retirement
Upon reemployment, a retired Participant shall cease receiving retirement
benefits under the Plan, until the earlier of subsequent Termination or the
date benefits are required to commence following age 70-1/2 pursuant to
Section 10.6. At the Participant's subsequent retirement, benefits payable
shall be based on his or her total Credited Service and Earnings at the
time of subsequent retirement, and shall be reduced by the Actuarially
Equivalent value of benefits previously received by the Participant. In no
event shall the benefit upon subsequent retirement, after any reduction for
previously received benefits, be less than the initial retirement benefit.
4.7 Benefits For Terminated Participants
Benefits under the Plan shall be determined and paid in accordance with the
provisions of the Plan as in effect on the most recent date of a
Termination of employment.
4.8 Benefits Payable From SpaceLabs Medical, Inc. Retirement Plan
Notwithstanding anything herein to the contrary, if an individual was a
Participant in this Plan and assets and liabilities attributable to the
individual's Accrued Benefit under this Plan were transferred from this
Plan to the SpaceLabs Medical, Inc. Retirement Plan between June 26 and
December 31, 1992, the Accrued Benefit of such individual with respect to
Credited Service earned prior to such transfer shall be payable from the
SpaceLabs Medical, Inc. Retirement Plan and shall not be payable from this
Plan.
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SECTION 5
FORMS OF PAYMENT
5.1 Forms of Payment
The following forms of benefit payments are available under this Plan:
(a) Whole Life Annuity:
A Whole Life Annuity shall be payable monthly from the Retirement Date
to the first of the month preceding death. The amount of the monthly
benefit shall equal the monthly Normal, Early or Deferred Retirement
Benefit, whichever applies.
(b) Joint and Survivor Annuity:
A reduced Joint and Survivor Annuity shall be payable monthly to a
retired Participant from the Retirement Date or Vested Termination
Date to the first of the month preceding death. Following the
Participant's death, a retirement benefit equal to 50% or 100% of the
reduced amount payable to the retired Participant shall be payable for
life to the joint annuitant, if living at the time of the
Participant's death. A Participant may elect, before benefits
commence, which percentage shall be payable to the joint annuitant.
If the joint annuitant dies after the Participant's retirement income
begins, the Participant's payments will be in the same reduced amount
as is otherwise payable under the Joint and Survivor Annuity. If the
joint annuitant dies prior to the date as of which the Participant's
retirement income begins, any election of a form of benefit under this
Section 5.1(b) shall be automatically canceled. If the Participant
dies prior to the date as of which his or her retirement income is to
begin, the joint annuitant shall not be entitled to receive any
payments under this Section 5.1(b). However, a spouse joint annuitant
may be entitled to a benefit under Section 6.1.
The Joint and Survivor Annuity shall be Actuarially Equivalent to the
Participant's retirement benefit payable in the form of a Whole Life
Annuity.
(c) Lump Sum:
A Lump Sum distribution shall be a single sum payment. The Lump Sum
distribution shall be Actuarially Equivalent to the Participant's
retirement benefit payable in the form of a Whole Life Annuity, and
shall represent the Participant's entire interest in the Plan. Lump
sum distributions may not exceed $10,000.
5.2 Automatic Form of Benefit
Unless a Participant elects otherwise, benefits shall be paid as
provided below:
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(a) Married Participants
Any Participant who is married on his or her Annuity Starting Date or
Vested Termination Date shall automatically be deemed to have elected
the 50% Joint and Survivor Annuity option, effective as of such date,
with his or her spouse on the Annuity Starting Date as the joint
annuitant (the "Statutory 50% Joint and Survivor Annuity Option").
A married Participant may reject the Statutory 50% Joint and Survivor
Annuity Option, or elect a nonspouse joint annuitant pursuant to
Section 5.3, by filing a written notice with the Committee within
ninety days prior to his or her Annuity Starting Date. Such notice
must specify the form of payment elected, name the non-spouse joint
annuitant if any, acknowledge the effect of the election, and must be
signed by the Participant's spouse. The spouse's signature must be
notarized or witnessed by a Plan representative.
A married Participant may file a rejection or joint annuitant election
notice or revoke any such notice at any time during the ninety-day
election period immediately preceding the Annuity Starting Date.
(b) Other Participants
An unmarried Participant shall receive his or her retirement benefits
in the form of a Whole Life Annuity.
An unmarried Participant may reject the Whole Life Annuity option and
elect either a Joint and Survivor Annuity or a Lump Sum option by
filing a written notice with the Committee within ninety days prior to
his or her Annuity Starting Date. An unmarried Participant may file
or revoke such a notice at any time during the ninety-day period
immediately preceding the Annuity Starting Date.
5.3 Limitation on Forms of Payment
A Participant may elect a joint annuitant other than his or her spouse. A
Participant must elect a form of payment under which payments will be
completed within the Participant's and Beneficiary's life times or within
their life expectancies. If a Participant elects a joint annuitant other
than his or her spouse, the percentage selected by the Participant to be
payable to the joint annuitant cannot exceed the percentage in the table
set forth in Q&A A-6 of Section 1.401(a)(9)-2 of the proposed Income Tax
Regulations, determined according to the age difference between the
Participant and the joint annuitant.
5.4 Explanation of Forms of Payment
The Committee shall furnish each Participant with a written explanation of
the terms and conditions of the forms of payment within a reasonable period
(at least thirty but not more than ninety days) prior to the Participant's
Annuity Starting Date.
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<PAGE>
SECTION 6
DEATH AND DISABILITY BENEFITS
6.1 Spouse's Death Benefit
In the event a vested Participant dies before commencing to receive
retirement benefits or Vested Termination Benefits under the Plan, his or
her spouse shall receive a pre-retirement death benefit provided they were
married throughout the one year period ending on the date of death. The
amount of the spouse's benefit and time of commencement is described below.
The spouse of a nonvested Participant, or a Participant who has started to
receive benefits, or a spouse who was married to the Participant less than
one year, is not entitled to this death benefit.
(a) Death Following Early Retirement Date
If the Participant dies after he or she becomes eligible to elect an
Early Retirement Date, the spouse's benefit shall be paid monthly from
the first of the month coinciding with or following the Participant's
death through the first of the month preceding the spouse's death.
The benefit shall equal the amount payable to the surviving spouse
under a 50% Joint and Survivor Annuity form of payment if the
Participant had commenced receiving retirement benefit payments as of
the date spouse benefits commence, based upon the Participant's vested
Accrued Benefit at the date of death.
(b) Death Prior to Early Retirement Date
If the Participant dies prior to becoming eligible to elect an Early
Retirement Date, the spouse's benefit shall be paid monthly from the
Participant's earliest Retirement Date (determined as if he or she had
survived) through the first of the month preceding the spouse's death.
The benefit shall equal the amount payable to the surviving spouse
under a 50% Joint and Survivor Annuity form of payment if the
Participant had Terminated on the date of death, survived to the date
spouse benefits commence and commenced receiving retirement benefit
payments on such date.
Notwithstanding the foregoing, in the event a Participant dies prior to
Normal Retirement Date, a spouse entitled to benefits under (a) or (b)
above, may elect prior to the date benefits commence thereunder, to
postpone commencement of benefits to the first day of any month on or
before the Participant's Normal Retirement Date determined as if he or she
had survived. The benefit payable at such delayed commencement date shall
be the Actuarial Equivalent of the spouse's death benefit payable at the
terms specified under (a) or (b) above.
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<PAGE>
6.2 Disability Benefits
A Participant who becomes Disabled shall be deemed to be in Service for
purposes of vesting and benefit accrual until the earlier of (i) the date
of recovery from Disability, (ii) an Early Retirement Date elected by the
Participant, or (iii) Normal Retirement Date. For purposes of determining
a Participant's Accrued Benefit, average Earnings for the twelve months
preceding the date of Termination are deemed to be in effect during
Disability.
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SECTION 7
VESTING
7.1 Vesting
Each Participant shall have a vested, nonforfeitable right to his or her
Accrued Benefit multiplied by the appropriate vesting percentage in
accordance with the following table:
Periods of Service Percent Vested
Less than 5 years 0%
5 years or more 100%
In addition, each Participant shall have a 100% nonforfeitable right to his
or her Accrued Benefit on the first day of the month preceding his or her
Normal Retirement Date, provided he or she is an Employee on such date. An
Employee who Terminates with 0% vested shall be deemed "nonvested."
7.2 Termination Prior to Vesting
(a) Forfeiture of Service
In the event a nonvested Participant incurs a Period of Severance, and
the number of years in such Period of Severance equals or exceeds five
consecutive years, his or her Period of Service and Credited Service
preceding the Severance from Service Date shall be disregarded, and
any Accrued Benefit earned prior to the Severance from Service Date
shall be forfeited. If a vested Participant incurs a Period of
Severance, all Periods of Service and Credited Service before and
after the Period of Severance shall be aggregated.
(b) Deemed Cash-Out of Accrued Benefit
If an Employee Terminates at a time when the present value of the
Employee's vested Accrued Benefit is zero, the Employee shall be
deemed to have received a distribution of such vested Accrued Benefit,
and shall no longer be a Participant. If the individual resumes
employment with the Employer before incurring a five-consecutive-year
Period of Severance, the Accrued Benefit will be restored to the
amount of such Accrued Benefit on the date of the deemed distribution.
7.3 Forfeitures
Any forfeitures arising under this Plan shall be used only to offset future
Employer contributions and shall not affect any Participant's Accrued
Benefit.
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SECTION 8
LIMITATIONS ON BENEFITS
8.1 Limitation on Benefits
(a) General Rule
In the event the Plan terminates, the benefit of any highly
compensated employee (and any highly compensated former employee)
shall be limited to a benefit that is nondiscriminatory under Code
Section 401(a)(4).
(b) Limit on Annual Payments
Annual payments to an Employee in the "Restricted Group" (as defined
below) are restricted to an amount equal to the payments that would be
made on behalf of the Employee under a single life annuity that is
Actuarially Equivalent to the sum of the Employee's Accrued Benefit
and the Employee's other benefits under the Plan (other than a Social
Security supplement), plus the amount of the payments that the
Employee is entitled to receive under a Social Security supplement.
This restriction will not apply if:
(1) After payment to an Employee in the Restricted Group of all
"Benefits" (as defined below), the value of Plan assets equals or
exceeds 110% of the value of current liabilities, as defined in
Code Section 412(l)(7),
(2) The value of the Benefits for an Employee in the Restricted Group
is less than 1% (one percent) of the value of current
liabilities, or
(3) The value of the Benefits for an Employee in the Restricted Group
does not exceed the amount described in Code Section
411(a)(11)(A).
(c) Definitions
(1) the Restricted Group consists of the twenty-five highest-paid
current and former Highly Compensated Employees (as defined in
Code Section 414(q)), or all current and former Highly
Compensated Employees if less than twenty-five.
(2) Benefit means loans in excess of the amounts set forth in Code
Section 72(p)(2)(A), any periodic income, any withdrawal values
payable to a living employee, and any death benefits not provided
for by insurance on the Employee's life.
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(d) Regulatory Authority
This Section 81 is intended to comply with Treasury regulation
(S)1.401(a)(4)-5(b), and shall be superseded to the extent any
provision of such regulation in final form conflicts with the
limitations stated herein.
8.2 Maximum Annual Benefit Payable Under the Plan
For purposes of this Section 8.2, the Employer and any Affiliated Companies
shall be considered a single employer, to the extent required by the Code.
(a) Primary Rule
Notwithstanding any other Plan provision to the contrary, the annual
Employer provided benefit payable to or on behalf of a Participant
under the Plan (after any adjustments required under the Plan to
reflect commencement of benefits other than at Normal Retirement Date,
an optional form of payment or death benefit coverage) after 1982
shall not exceed the lesser of:
(i) $90,000 (adjusted in accordance with this Section 8.2) or, if
greater, the Participant's current Accrued Benefit on December
31, 1982, or
(ii) the Participant's average annual Compensation from the
Employer for the consecutive calendar years (not in excess of
three such years) during which he was an active Participant in
the Plan and for which such average is highest.
(b) Cost-of-Living Adjustment
The $90,000 limit prescribed above shall be automatically adjusted for
cost-of-living increases, to the maximum permissible dollar limitation
determined by the Commissioner of Internal Revenue. The dollar amount
applicable in computing the benefit payable to any Participant shall
be the dollar amount in effect for the calendar year in which the
benefit commences. For 1992, the limit is $112,221.
(c) Adjustment for Early or Late Retirement
For purposes of 8.2 and 8.3, if the Participant's benefit commences
before Social Security Retirement Age, the limit prescribed in Section
8.2(a)(1) shall be Actuarially reduced to reflect such early
commencement. If the Participant's benefit commences after Social
Security Retirement Age, the limit prescribed in Section 8.2(a)(1)
shall be Actuarially increased for purposes of Section 8.2 and Section
8.3 to reflect such late commencement.
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(d) Annual Benefit
Notwithstanding the foregoing, if the benefit to be paid to a
Participant under the Plan is not in the form of an Annual Benefit as
described below, the benefit considered to be payable to a Participant
under the Plan for purposes of Sections 8.2 and 8.3 shall be
Actuarially adjusted to the extent required under Section 415(b)(2) of
the Code. For purposes of the foregoing, Annual Benefit means the
benefit payable annually in the form of a straight life annuity
without ancillary benefits or in the Statutory 50% Joint and Survivor
Annuity Option.
(e) Interest Rate
Any Actuarial adjustments under this Section 8.2 shall be based on the
Actuarial factors applicable for comparable purposes under the Plan on
the applicable date, except that
(i) the interest rate assumption for purposes of adjusting the
$90,000 limitation for benefits commencing before Social Security
Retirement Age shall be the greater of 5% or the Plan rate; and
(ii) the interest rate assumption for purposes of adjusting the
$90,000 limitation for benefits commencing after Social Security
Retirement Age shall be the lesser of 5% or the Plan rate.
(f) Special Provisions Regarding Participants With Fewer Than Ten Years of
Participation or Service
In the case of any Participant who participated in the Plan for fewer
than ten years, the maximum dollar benefit otherwise applicable under
Section 8.2(a)(i) shall be multiplied by a fraction whose numerator is
the Participant's years of participation in the Plan (including
fractions thereof, but not less than one) and whose denominator is
ten.
In the case of any Participant who was employed by the Employer for
fewer than ten years, the maximum benefit otherwise applicable under
Sections 8.2(a)(ii) and 8.3 shall be multiplied by a fraction whose
numerator is the Participant's years of employment with the Employer
(including fractions thereof, but not less than one) and whose
denominator is ten.
(g) Transition Rule
The limitations of this Section 8.2 shall not reduce a Participant's
annual benefit to less than his or her Accrued Benefit as of December
31, 1986, disregarding any change in the terms of the Plan and any
cost-of-living adjustments after May 5, 1986.
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(h) Aggregation With Other Defined Benefit Plans
If a Participant also participates in any other defined benefit
pension plan maintained by the Employer, the provisions of Section 8.2
and 8.3 shall be applied on an aggregate basis to the benefits payable
under this Plan and each such other plan. Any reduction in the
aggregate benefits payable under this Plan and any such other plan due
to the application of this Section shall be made on a pro rata basis.
8.3 Additional Limitation Relating to Defined Contribution Plans
(a) Primary Rule
For Participants who participate in this Plan and a defined
contribution plan maintained by the Employer, the sum of (1) and (2)
below for any calendar year may not exceed 1.0.
(i) The defined benefit plan fraction for any year is equal to the
quotient of (i) divided by (ii) below expressed as a fraction:
(i) The projected annual benefit (determined by projecting
service, but not Earnings, to normal retirement age) of the
Participant under the Plan determined as of the close of the
year.
(ii) The lesser of: (a) 1.25 multiplied by the limitation
determined under Section 8.2(a)(1) in effect for such year,
or (b) 1.4 multiplied by the limitation determined under
Section 8.2(a)(2) (generally 100% of the Participant's
average annual Compensation).
(ii) The defined contribution plan fraction for any year is equal to
the quotient of (i) divided by (ii) below expressed as a
fraction:
(i) The sum of the "annual additions" to the Participant's
accounts for the current year, as of the close of the year,
and for all prior years.
(ii) The sum of the lesser of the following amounts for such year
and for each prior year of service with the Employer
(regardless of whether a plan was in existence during those
years): (a) 1.25 multiplied by the dollar limitation in
effect for defined contribution plans under Section 415 of
the Code for such year, or (b) 1.4 multiplied by 25% of a
Participant's Compensation for such year.
(b) Remedy
If such sum exceeds 1.0, the benefit under this defined benefit Plan
shall be reduced to the extent necessary to satisfy the limitations of
this section.
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SECTION 9
TOP HEAVY PROVISIONS
9.1 Scope
Notwithstanding any Plan provision to the contrary, for any Plan Year in
which the Plan is Top Heavy within the meaning of Section 416(g) of the
Code, the provisions of this Section 9 shall govern to the extent they
conflict with or specify additional requirements to the Plan provisions
governing Plan Years which are not Top Heavy.
9.2 Top Heavy Status
(a) Top Heavy
This Plan shall be "Top Heavy" if, as of the Determination Date, (1)
the sum of the Aggregate Accounts of Key Employees, or (2) the Present
Value of Accrued Benefits of Key Employees under this Plan and any
plan of an Aggregation Group, exceeds 60% of the Aggregate Accounts or
the Present Value of Accrued Benefits of all Participants under this
Plan and any plan of an Aggregation Group.
The Present Value of Accrued Benefits and/or Aggregate Account balance
of a Participant who was previously a Key Employee but is no longer a
Key Employee (or his or her Beneficiary), shall not be taken into
account for purposes of determining Top Heavy status. Further, a
Participant's Present Value of Accrued Benefits and/or Aggregate
Account balance shall not be taken into account if he or she has not
performed services for the Affiliated Companies during the five year
period ending on the Determination Date.
(b) Super Top Heavy
This Plan shall be "Super Top Heavy" if, as of the Determination Date,
(1) the sum of the Aggregate Accounts of Key Employees, or (2) the
Present Value of Accrued Benefits of Key Employees under this Plan and
any plan of an Aggregation Group, exceeds 90% of the Aggregate
Accounts or the Present Value of Accrued Benefits of all Participants
under this Plan and any plan of an Aggregation Group.
(c) Determination Date
Whether the Plan is Top Heavy for any Plan Year shall be determined as
of the Determination Date. "Determination Date" means (a) the last
day of the preceding Plan Year, or (b) in the case of the first Plan
Year, the last day of such Plan Year.
(d) Valuation Date
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<PAGE>
"Valuation Date" means, for purposes of determining Top Heaviness, the
Determination Date.
(e) Aggregate Account
"Aggregate Account" means, with respect to a Participant, his or her
adjusted account balance in a defined contribution plan, as determined
under the top heavy provisions of such plan.
(f) Present Value of Accrued Benefits
"Present Value of Accrued Benefits" means the sum of:
(i) the Actuarial Equivalent present value of the accrued normal
retirement benefit under the Plan as of the Valuation Date, and
(ii) distributions prior to the Valuation Date, made during the
Plan Year that contains the Determination Date and the four
preceding Plan Years. Unrelated rollovers or transfers from this
plan shall be considered distributions. A related rollover or
transfer from this Plan shall not be considered a distribution.
An unrelated rollover or transfer is one which is both initiated by
the Employee and made between plans of different employers. A related
rollover or transfer is one which is either not initiated by the
Employee or made between plans of the same employer.
(g) Key Employee
"Key Employee" means an Employee or former Employee (and his or her
Beneficiaries) who, at any time during the Plan Year containing the
Determination Date or any of the four preceding Plan Years, is
included in one of the following categories as within the meaning of
Section 416(i) of the Code and regulations thereunder.
(i) an officer of the Employer whose annual aggregate Compensation
from the Affiliated Companies exceeds 50% of the dollar
limitation under Section 415(c)(1)(A) of the Code ($56,111 for
the Plan Year ending in 1992), provided that no more than 50
Employees shall be considered officers, or if less, the greater
of 10% of the Employees or 3,
(ii) one of the ten Employees owning the largest interest in the
Employer who owns more than a 0.5% interest of the Employer, and
whose annual aggregate Compensation from the Affiliated Companies
exceeds the dollar limitation under Section 415(c)(1)(A) of the
Code ($30,000 for the Plan Year ending in 1992),
(iii) an Employee who owns more than 5% of the Employer, or
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(iv) an Employee who owns more than 1% of the Employer with annual
aggregate Compensation from the Affiliated Companies that exceeds
$150,000.
(h) Aggregation Group
"Aggregation Group" means the group of plans that must be considered
as a single plan for purposes of determining whether the plans within
the group are Top Heavy (Required Aggregation Group), or the group of
plans that may be aggregated for purposes of Top Heavy testing
(Permissive Aggregation Group). The Determination Date for each plan
must fall within the same calendar year in order to aggregate the
plans.
(i) The Required Aggregation Group includes each plan of the
Affiliated Companies in which a Key Employee is a participant
in the Plan Year containing the Determination Date or any of
the four preceding Plan Years, and each other plan of the
Affiliated Companies which, during this period, enables any
plan in which a Key Employee participates to meet the minimum
participation standards or nondiscriminatory contribution
requirements of Code Sections 401(a)(4) and 410.
(ii) A Permissive Aggregation Group may include any plan sponsored
by an Affiliated Company, provided the group as a whole
continues to satisfy the minimum participation standards and
nondiscriminatory contribution requirements of Code Sections
401(a)(4) and 410.
Each plan belonging to a Required Aggregation Group shall be deemed
Top Heavy or non-Top Heavy in accordance with the group's status. In
a Permissive Aggregation Group that is determined Top Heavy only those
plans that are required to be aggregated shall be Top Heavy. In a
Permissive Aggregation Group that is not Top Heavy, no plan in the
group shall be Top Heavy.
9.3 Minimum Benefit
(a) General Rule
For any Top Heavy Plan Year, a non-Key Employee who completes a Year
of Service shall have an Accrued Benefit at least equal to the minimum
benefit described herein. The minimum Accrued Benefit at any point in
time equals the lesser of:
(i) two percent multiplied by Top Heavy Years of Service, or
(ii) twenty percent,
multiplied by such Participant's "average Compensation." "Average
Compensation" means a Participant's average Compensation for the five
consecutive years when such Participant had the highest aggregate
Compensation
27
<PAGE>
from the Employer. However, Compensation received for non-Top Heavy
Plan Years shall be disregarded. The benefit described herein is
expressed as an annual benefit in the form of a single life annuity
(with no ancillary benefits), commencing at normal retirement age.
A non-Key Employee shall not be denied this minimum benefit because he
or she was not employed on a specified date, failed to make any
mandatory Employee contribution, or failed to earn a specified amount
of Compensation.
(b) Special Two Plan Rule
Where this Plan and a defined contribution plan belong to an
Aggregation Group that is determined Top Heavy, the Employer shall not
be required to provide the minimum benefit under (a) above on behalf
of any non-Key Participant who also participates in the defined
contribution plan if the Employer contributions and forfeitures under
the defined contribution plan equal 5% of each non-Key Participant's
Compensation.
9.4 Benefit Limitation
For any Top Heavy Plan Year in which the Employer does not make the extra
minimum allocation provided below, 1.0 shall replace the 1.25 factor found
in the denominators of the defined benefit and defined contribution plan
fractions for purposes of calculating the combined limitation on benefits
under a defined benefit and defined contribution plan pursuant to Section
415(e) of the Code (see Section 8.3).
If this Plan is Top Heavy, but is not Super Top Heavy, the above referenced
fractions shall remain unchanged provided the Employer provides an extra
minimum Accrued Benefit for each non-Key Employee. The extra benefit (in
addition to the minimum benefit set forth in Section 9.3) shall equal the
lesser of:
(i) one percent multiplied by Top Heavy years of Service, or
(ii) ten percent,
multiplied by such Participant's "average Compensation", as defined in
Section 9.3.
9.5 Vesting
(a) Top Heavy Schedule
For any Top Heavy Plan Year, each Participant who completes an Hour of
Service in such Year shall become vested and have a nonforfeitable
right to retirement benefits he or she has earned under the Plan in
accordance with the following table:
28
<PAGE>
Periods of Service Vesting Percentage
------------------ ------------------
Less than 2 Years 0%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 100%
Provided, however, that a Participant's vesting percentage shall not
be less than the percentage determined under the table in Section 7.1.
(b) Return to Non-Top Heavy Status
If the Plan becomes Top Heavy and ceases to be Top Heavy in any
subsequent Plan Year, the vesting schedule shall automatically revert
to the vesting schedule in effect before the Plan became Top Heavy.
Such reversion shall be treated as a Plan amendment pursuant to the
terms of the Plan, and shall not cause a reduction of any
Participant's nonforfeitable interest in the Plan on the date of such
amendment.
A Participant with three or more Years of Service with the Employer as
of the end of the election period, may elect to remain covered by the
Top Heavy vesting schedule. The Participant's election period shall
commence on the adoption date of the amendment and shall end 60 days
after the latest of:
(i) the adoption date of the amendment,
(ii) the effective date of the amendment, or
(iii) the date the Participant receives written notice of the
amendment from the Committee.
29
<PAGE>
SECTION 10
ADMINISTRATION OF THE PLAN
10.1 Plan Administrator
The Plan Administrator shall be the Employer. The Compensation Committee
of the Board of Directors of the Employer shall appoint a Committee
composed of one or more persons which shall carry out the general
administration of the Plan. Every member of the Committee shall be deemed
a fiduciary. No Committee member who is an Employee shall receive
compensation with respect to his or her service on the Committee. Any
member of the Committee may resign by delivering written resignation to
the Compensation Committee of the Board of Directors of the Employer and to
the Committee. The Compensation Committee of the Board of Directors of the
Employer may remove or replace any member of the Committee at any time.
10.2 Organization and Procedures
The Compensation Committee of the Board of Directors of the Employer shall
designate a chairman from the members of the Committee. The Committee
shall appoint a secretary, who may or may not be a member of the Committee.
The secretary shall have the primary responsibility for keeping a record of
all meetings and acts of the Committee and shall have custody of all
documents, the preservation of which shall be necessary or convenient to
the efficient functioning of the Committee. The chairman of the Committee
shall be the agent of the Plan for service of legal process. All reports
required by law may be signed by the chairman on behalf of all members of
the Committee.
The Committee shall act by a majority of its members in office and may
adopt such by-laws and regulations as it deems desirable for the conduct of
its affairs.
10.3 Duties and Authority of the Committee
(a) Administrative Duties
The Committee shall administer the Plan in a nondiscriminatory manner
for the exclusive benefit of Participants and their Beneficiaries.
The Committee shall perform all such duties as are necessary to
supervise the administration of the Plan and to control its operation
in accordance with the terms thereof, including, but not limited to,
the following:
(i) Make and enforce such rules and regulations as it shall deem
necessary or proper for the efficient administration of the Plan;
(ii) Interpret the provisions of the Plan and determine any question
arising under the Plan, or in connection with the administration
or operation thereof;
30
<PAGE>
(iii) Determine all considerations affecting the eligibility of any
Employee to be or become a Participant;
(iv) Determine eligibility for and amount of retirement benefits for
any Participant;
(v) Authorize and direct the Trustee with respect to all
disbursements of benefits under the Plan;
(vi) Employ and engage such persons, counsel and agents and obtain
such administrative, clerical, medical, legal, audit and
actuarial services as it may deem necessary in carrying out the
provision of the Plan;
(vii) Delegate and allocate specific responsibilities and duties
imposed by the Plan to one or more Employees, officers or such
other persons as the Committee deems appropriate.
(b) Investment Authority
The Trustee and/or designated Investment Manager shall have
responsibility or authority with respect to the management,
acquisition, disposition or investment of Plan assets.
(c) General Authority
The Committee shall have all powers necessary or appropriate to carry
out its duties, including the discretionary authority to interpret the
provisions of the Plan and the facts and circumstances of claims for
benefits. Any interpretation or construction of or action by the
Committee with respect to the Plan and its administration shall be
conclusive and binding upon any and all parties and persons affected
hereby, subject to the exclusive appeal procedure set forth in Section
10.7.
10.4 Expenses
All reasonable expenses which are necessary to operate and administer the
Plan may be deducted from the Trust Fund or, at the election of the
Employer, paid directly by the Employer.
10.5 Bonding and Insurance
To the extent required by law, every Committee member, every fiduciary of
the Plan and every person handling Plan funds shall be bonded. The
Committee shall take such steps as are necessary to assure compliance with
applicable bonding requirements. The Committee may apply for and obtain
fiduciary liability insurance insuring the Plan against damages by reason
of breach of fiduciary responsibility at the Plan's expense and insuring
each fiduciary against liability to the extent permissible by law at the
Employer's expense.
31
<PAGE>
10.6 Commencement of Benefits
(a) Conditions of Payment
Benefit payments under the Plan shall not be payable prior to the
fulfillment of the following conditions:
(i) The Committee has been furnished with such applications, proofs
of birth or death, address, form of benefit election, spouse
consent if required, and other information the Committee deems
necessary;
(ii) The Participant has Terminated employment with the Employer,
reached age 70-1/2 or died; and
(iii) The Participant or Beneficiary is eligible to receive benefits
under the Plan as determined by the Committee.
(b) Commencement of Payment
The payment of benefits shall commence no later than 60 days after the
retirement date specified herein for commencement of such benefits,
provided that payments shall not commence later than the April 1
following the calendar year in which the Participant reaches age 70-
1/2.
In no event shall payments commence in a form other than the automatic
form described in Section 5.2 prior to the Participant's Normal
Retirement Age if the Actuarially Equivalent present value of the
Participant's Accrued Benefit at the time benefits commence exceeds
$3,500 without the written consent of the Participant and the spouse.
Spouse consent must acknowledge the effect of such election and must
be notarized or witnessed by a Plan representative.
If the information required in Section 10.6(a) above is not available
prior to such date, the amount of payment will not be ascertainable.
In such event, the commencement of payment shall be delayed until no
more than 60 days after the date the amount of such payment is
ascertainable, at which time a lump-sum payment retroactive to the
applicable date shall be made and monthly payments commenced.
10.7 Appeal Procedure
(a) Submission of Claim
A claim for benefit payment shall be considered filed when an
application form is submitted to the Committee.
32
<PAGE>
(b) Notice of Denial
Any time a claim for benefits is wholly or partially denied, the
Participant or Beneficiary (hereinafter "Claimant") shall be given
written notice of such action within 90 days after the claim is filed,
unless special circumstances require an extension of time for
processing. (If there is an extension, the Claimant shall be notified
of the extension and the reason for the extension within the initial
90 day period. The extension shall not exceed 180 days after the
claim is filed.) Such notice will indicate the reason for denial, the
pertinent provisions of the Plan on which the denial is based, an
explanation of the claims appeal procedure set forth herein, and a
description of any additional material or information necessary to
perfect the claim and an explanation of why such material or
information is necessary.
(c) Right to Request Review
Any person who has had a claim for benefits denied by the Committee,
who disputes the amount of benefit payment determined by the
Committee, or who is otherwise adversely affected by action of the
Committee, shall have the right to request review by the Committee.
Such request must be in writing, and must be made within 60 days after
such person is advised of the Committee's action. If written request
for review is not made within such 60-day period, the Claimant shall
forfeit his or her right to review. The Claimant or a duly authorized
representative of the Claimant may review all pertinent documents and
submit issues and comments in writing.
(d) Review of Claim
The Committee shall then review the claim. It may hold a hearing if
it deems it necessary and shall issue a written decision reaffirming,
modifying or setting aside its former action within 60 days after
receipt of the written request for review, or 120 days if special
circumstances, such as a hearing, require an extension. The Claimant
shall be notified in writing of any such extension within 60 days
following the request for review. A copy of the decision shall be
furnished to the Claimant. The decision shall set forth its reasons
and pertinent Plan provisions on which it is based. The decision
shall be final and binding upon the Claimant and the Committee and all
other persons involved.
10.8 Plan Administration - Miscellaneous
(a) Limitations on Assignments
Benefits under the Plan may not be assigned, sold, transferred, or
encumbered, and any attempt to do so shall be void. The interest of a
Participant in benefits under the Plan shall not be subject to debts
or liabilities of any kind and shall not be subject to attachment,
garnishment or other legal process, except as provided in Section 10.8
relating to Domestic Relations Orders, or otherwise permitted by law.
33
<PAGE>
(b) Masculine and Feminine, Singular and Plural
Whenever used herein, pronouns shall include the opposite gender, and
the singular shall include the plural and the plural shall include the
singular whenever the context shall plainly so require.
(c) Small Benefits
In cases where the Actuarially Equivalent present value of a vested or
payable benefit is less than or equal to the maximum permissible
amount under the Code which may be distributed without the consent of
a Participant or his or her spouse (in 1990, this amount was $3,500),
the Committee shall direct such present value be paid in a lump sum
distribution as soon as practical following termination and prior to
the Annuity Starting Date. No payment shall be made pursuant to this
Section 10.8(c) after a Participant's Annuity Starting Date unless the
Participant and his spouse consent to such payment in a written
document filed with the Committee.
(d) No Additional Rights
No person shall have any rights in or to the Trust Fund, or any part
thereof, or under the Plan, except as, and only to the extent,
expressly provided for in the Plan. Neither the establishment of the
Plan, the accrual of benefits under the Plan nor any action of the
Employer or the Committee shall be held or construed to confer upon
any person any right to be continued as an Employee, or, upon
dismissal, any right or interest in the Trust Fund other than as
herein provided. The Employer expressly reserves the right to
discharge any Employee at any time.
(e) Governing Law
This Plan shall be construed in accordance with applicable federal law
and the laws of the State of Washington, wherein venue shall lie for
any dispute arising hereunder.
(f) Disclosure to Participants
Each Participant shall be advised of the general provisions of the
Plan and, upon written request addressed to the Committee, shall be
furnished any information requested regarding the Participant's
status, rights and privileges under the Plan as may be required by
law.
(g) Income Tax Withholding Requirements
Any retirement benefit payment made under the Plan shall be subject to
any applicable income tax withholding requirements. For this purpose,
the Committee shall provide the Trustee with any information the
Trustee needs to satisfy such
34
<PAGE>
withholding obligations and with any other information that may be
required by regulations promulgated under the Code.
(h) Severability
If any provision of this Plan shall be held illegal or invalid for any
reason, such determination shall not affect the remaining provisions
of this Plan which shall be construed as if said illegal or invalid
provision had never been included.
(i) Facility of Payment
In the event any benefit under this Plan shall be payable to a person
who is under legal disability or is in any way incapacitated so as to
be unable to manage his or her financial affairs, the Committee may
direct payment of such benefit to a duly appointed guardian, committee
or other legal representative of such person, or in the absence of a
guardian or legal representative, to a custodian for such person under
a Uniform Gifts to Minors Act or to any relative of such person by
blood or marriage, for such person's benefit. Any payment made in
good faith pursuant to this provision shall fully discharge the
Employer and the Plan of any liability to the extent of such payment.
(j) Correction of Errors
Any Employer contribution to the Trust Fund made under a mistake of
fact (or investment proceeds of such contribution if a lesser amount)
shall be returned to the Employer within one year after payment of the
contribution. In the event an incorrect amount is paid to a
Participant or Beneficiary, any remaining payments may be adjusted to
correct the error. The Committee may take such other action it deems
necessary and equitable to correct any such error.
10.9 Domestic Relations Orders
Notwithstanding any Plan provisions to the contrary, benefits under the
Plan may be paid to someone other than the Participant, Beneficiary or
joint annuitant, pursuant to a Qualified Domestic Relations Order, in
accordance with Section 414(p) of the Code. A Qualified Domestic Relations
Order is a judgement, decree, or order ("Order") (including approval of a
property settlement agreement) that:
(a) relates to the provision of child support, alimony payments or marital
property rights to a spouse, former spouse, child or other dependent
of a Participant;
(b) is made pursuant to a state domestic relations law (including a
community property law);
(c) creates or recognizes the existence of an alternate payee's right to,
or assigns to an alternate payee the right to, receive all or a
portion of the benefits payable to a Participant under the Plan;
35
<PAGE>
(d) specifies the name and last known address of the Participant and each
alternate payee;
(e) specifies the amount or method of determining the amount of benefit
payable to an alternate payee;
(f) specifies the number of payments or period during which payments are
to be made;
(g) names each plan to which the order applies;
(h) does not require any form, type or amount of benefit not otherwise
provided under the Plan; and
(i) does not conflict with a prior Domestic Relations Order that meets the
requirements of this section.
Payments to an alternate payee pursuant to a Qualified Domestic Relations
Order may commence at the earliest date on which a Participant is eligible
to elect an Early Retirement Date as if the Participant retired on such
earliest date, regardless of whether the Participant continues working
after that date.
The Committee shall determine whether an order meets the requirements of
this section within a reasonable period after receiving an order. The
Committee shall notify the Participant and any alternate payee that an
order has been received and with respect to benefits which are in pay
status shall establish a separate account under the Plan for any alternate
payee pending determination that an order meets the requirements of this
section. If within eighteen months after such separate account is
established the order has not been determined to be a qualified Order, the
amount in the separate account shall be distributed to the individual who
would have been entitled to such amount if there had been no order.
10.10 Plan Qualification
Any modification or amendment of the Plan may be made retroactive, as
necessary or appropriate, to establish and maintain a "qualified plan"
pursuant to Section 401 of the Code, and ERISA and regulations thereunder
and the exempt status of the Trust Fund under Section 501 of the Code.
10.11 Deductible Contribution
Notwithstanding anything herein to the contrary, any contribution by the
Employer to the Trust Fund is conditioned upon the deductibility of the
contribution by the Employer under the Code and, to the extent any such
deduction is disallowed, the Employer may within one year following a final
determination of the disallowance, demand repayment of such disallowed
contribution and the Trustee shall return such contribution less any losses
attributable thereto to the Employer within one year following the
disallowance.
36
<PAGE>
10.12 Payment of Benefits Through Purchase of Annuity Contract
In lieu of paying benefits directly from the Trust Fund to a Participant or
his Beneficiary, the Trustee may purchase, with Trust Fund assets, an
individual annuity contract from an insurance company rated A+ by A.M. Best
Company, Inc. which, as far as possible, provides benefits equal to (or
Actuarially Equivalent to) those provided in the Plan for such Participant
or Beneficiary, but provides no optional form of retirement income or
benefit which would not be permitted under the Plan, whereupon the
liability of the Trust Fund and of the Plan will cease and terminate with
respect to such benefits that are so purchased and for which the premiums
are duly paid. Such an individual annuity contract may be purchased by the
Trustee on a single-premium basis or on the basis of annual premiums
payable over a period of years and may be purchased at any time on or after
the Participant's Vested Termination Date, Retirement Date or death to
provide the benefits due under the Plan to the Participant or Beneficiary
on or after the date of such purchase.
Any annuity contract distributed by the Trustee to a Participant or
Beneficiary under the provisions of the Plan shall bear on the face thereof
the designation "NOT TRANSFERABLE", and such contract shall contain a
provision to the effect that the contract may not be sold, assigned,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other
than the issuer thereof.
37
<PAGE>
SECTION 11
AMENDMENT AND TERMINATION
11.1 Amendment General
The Employer shall have the right to amend, terminate, or partially
terminate this Plan at any time subject to any advance notice or other
requirements of ERISA.
11.2 Amendment - Consolidation or Merger
In the event the Plan's assets and liabilities are merged into, transferred
to or otherwise consolidated with any other retirement plan, then such must
be accomplished so as to ensure that each Participant would (if the other
retirement plan then terminated) receive a benefit immediately after the
merger, transfer or consolidation, which is equal to or greater than the
benefit the Participant would have been entitled to receive immediately
before the merger, transfer or consolidation (as if the Plan had then
terminated). This provision shall not be construed as limiting the powers
of the Employer to appoint a successor Trustee.
11.3 Termination of the Plan
The termination of the Plan shall not cause or permit any part of the Trust
Fund to be diverted to purposes other than for the exclusive benefit of the
Participants, or cause or permit any portion of the Trust Fund to revert to
or become the property of the Employer at any time prior to the
satisfaction of all liabilities with respect to the Participants.
Upon termination of this Plan, the Committee shall continue to act for the
purpose of complying with the preceding paragraph and shall have all power
necessary or convenient to the winding up and dissolution of the Plan as
herein provided. While so acting, the Committee shall be in the same
status and position with respect to other persons as if the Plan remained
in existence.
11.4 Allocation of the Trust Fund on Termination of Plan
In the event of a complete Plan termination, the right of each Participant
to benefits accrued to the date of such termination that would be vested
under the provisions of the Plan in the absence of such termination shall
continue to be vested and nonforfeitable; and the right of each Participant
to any other benefits accrued to the date of termination shall be fully
vested and nonforfeitable to the extent then funded under the priority
rules set forth in Section 4044 of ERISA. In any event, a Participant or a
Beneficiary shall have recourse only against Plan assets for the payment of
benefits thereunder, subject to any applicable guarantee provisions of
Title IV of ERISA. The Committee shall direct the Trustee to allocate
Trust assets to those affected Participants to the extent and in the order
of preference set forth in Section 4044 of ERISA. The assets so allocated
shall be distributed, as determined by the Committee, either wholly or in
part by purchase of
38
<PAGE>
nontransferable annuity contracts or lump-sum payments. If Trust Fund
assets as of the date of Plan termination exceed the amounts required under
the priority rules set forth in Section 4044 of ERISA, such excess shall,
after all liabilities of the Plan have been satisfied, revert to the
Employer to the extent permitted by applicable law.
If at any time the Plan is terminated with respect to any group of
Participants under such circumstances as to constitute a partial Plan
termination within the meaning of Section 411(d)(3) of the Code, each
affected Participant's right to benefits that have accrued to the date of
partial termination that would be vested under the provisions of the Plan
in the absence of such termination shall continue to be so vested; and the
right of each affected Participant to any other benefits accrued to the
date of such termination shall be vested to the extent assets would be
allocable to such benefits under the priority rules set forth in Section
4044 of ERISA in the event of a complete Plan termination. In any event,
affected Participants shall have recourse only against Plan assets for
payment of benefits thereunder, subject to any applicable guarantee
provisions of Title IV of ERISA. Subject to the foregoing, the vested
benefits of such Participants shall be payable as though such termination
had not occurred; provided, however, that the Committee, in its discretion,
subject to any necessary governmental approval, may direct that the amounts
held in the Trust Fund that are allocable to the Participants as to whom
such termination occurred be segregated by the Trustee as a separate plan.
The assets thus allocated to such separate plan shall be applied for the
benefit of such Participants in the manner described in the preceding
paragraph.
39
<PAGE>
SECTION 12
FUNDING
12.1 Contributions to the Trust
As a part of this Plan the Employer shall maintain a Trust. From time to
time, the Employer shall make such contributions to the Trust as the
Committee determines, with the advice of its actuary, are required to
maintain the Plan on a sound actuarial basis.
12.2 Trust Fund for Exclusive Benefit of Participants
The Trust is for the exclusive benefit of Participants. Except as provided
in Sections 10.7(j) (Correction of Errors), 10.9 (Domestic Relations
Orders) and 10.11 (Deductible Contributions), no portion of the Trust shall
be diverted to purposes other than this or revert to or become the property
of the Employer at any time prior to the satisfaction of all liabilities
with respect to the Participants.
12.3 Disposition of Credits and Forfeitures
In no event shall any credits or forfeitures which may arise under the Plan
be used to increase benefits under the Plan.
12.4 Trustee
As a part of this Plan, the Employer has entered into a trust agreement
with a Trustee. The Employer has the power and duty to appoint the Trustee
and it shall have the power to remove the Trustee and appoint successors at
any time. As a condition to exercising its power to remove any Trustee
hereunder, the Employer must first enter into an agreement with a successor
Trustee.
12.5 Investment Manager
The Employer has the power to appoint, remove or change from time to time
an Investment Manager to direct the investment of all or a portion of the
Trust Fund held by the Trustee. For purposes of this section "Investment
Manager" shall mean any fiduciary (other than the Trustee) who:
(a) has the power to manage, acquire, or dispose of any asset of the Plan;
(b) is either
(i) registered as an investment adviser under the Investment Advisers
Act of 1940, or
(ii) is a bank, or
40
<PAGE>
(iii) is an insurance company qualified under the laws of more than
one state to perform the services described in subparagraph (a);
and
(c) has acknowledged in writing that he, she or it is a fiduciary with
respect to the plan.
41
<PAGE>
SECTION 13
FIDUCIARIES
13.1 Limitation of Liability of the Employer and Others
No Participant shall have any claim against the Employer, or the Committee,
or against their directors, officers, members, agents or representatives,
for any benefits under the Plan, and such benefits shall be payable solely
from the Trust; nor, to the extent permitted by law, shall the Employer,
the Committee or their directors, officers, members, agents or
representatives incur any liability to any person for any action taken or
suffered or omitted to be taken by them under the Plan in good faith.
13.2 Indemnification of Fiduciaries
In order to facilitate the recruitment of competent fiduciaries, the
Employer adopting this Plan agrees to provide the indemnification as
described herein. This provision shall apply to Employees who are
considered Plan fiduciaries including without limitation, Committee
members, any agent of the Committee, or any other officers, directors or
Employees. Notwithstanding the preceding, this provision shall not apply
and indemnification will not be provided for any Trustee or Investment
Manager appointed as provided in this Plan.
13.3 Scope of Indemnification
The Employer agrees to indemnify an Employee fiduciary as described above
for all acts taken in good faith in carrying out his or her
responsibilities under the terms of this Plan or other responsibilities
imposed upon such fiduciary by ERISA. This indemnification for all acts is
intentionally broad but shall not provide indemnification for embezzlement
or diversion of Plan assets for the benefit of the Employee fiduciary. The
Employer agrees to indemnify Employee fiduciaries described herein for all
expenses of defending an action by a Participant, Beneficiary or government
entity, including all legal fees for counsel selected with the consent of
the Employer and other costs of such defense. The Employer will also
reimburse an Employee fiduciary for any monetary recovery in any court or
arbitration proceeding. In addition, if the claim is settled out of court
with the concurrence of the Employer, the Employer will indemnify an
Employee fiduciary for any monetary liability under said settlement. The
Employer shall have the right, but not the obligation, to conduct the
defense of such persons in any proceeding to which this Section 13.3
applies. The Employer may satisfy its obligations under this Section 13.3
in whole or in part through the purchase of a policy or policies of
insurance providing equivalent protection.
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<PAGE>
The Advanced Technology Laboratories, Inc. Retirement Plan is adopted by
Advanced Technology Laboratories, Inc.
IN WITNESS WHEREOF, the Employer has caused this Plan to be duly executed on
this 31st day of December, 1993.
FOR ADVANCED TECHNOLOGY LABORATORIES, INC.
/s/ W. Brinton Yorks, Jr. /s/ Harvey N. Gillis
- ------------------------- ----------------------------------------------
Witness Authorized Officer
Sr. Vice President and Chief Financial Officer
----------------------------------------------
Title
llk\atc\atc.dbe
43
<PAGE>
APPENDIX I
TO THE
ADVANCED TECHNOLOGY LABORATORIES, INC.
RETIREMENT PLAN
"Employer" as defined in Section 1.15 of the Advanced Technology Laboratories,
Inc. Retirement Plan shall also include the following companies during the
specified period of time.
<TABLE>
<CAPTION>
Company Beginning Ending
- ------- --------- ------
<S> <C> <C>
1. Advanced Technology Laboratories, 1/1/81
Inc. (Washington)
ACKNOWLEDGED AND ACCEPTED:
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
44
</TABLE>
<PAGE>
Exhibit 10.18
ADVANCED TECHNOLOGY LABORATORIES, INC.
RETIREMENT PLAN
TRUST AGREEMENT
AMENDED AND RESTATED
EFFECTIVE
JUNE 26, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREAMBLE................................................................. 1
ARTICLE 1 - DEFINITIONS.................................................. 2
1.1 Agreement........................................................ 2
1.2 Committee........................................................ 2
1.3 Effective Date................................................... 2
1.4 Employer......................................................... 2
1.5 Participating Employers.......................................... 2
1.6 Plan............................................................. 2
1.7 Trust Year....................................................... 2
ARTICLE 2 - TRUST FUND................................................... 3
2.1 Payments to Trustee.............................................. 3
2.2 Trust............................................................ 3
2.3 Qualification.................................................... 3
ARTICLE 3 - INVESTMENT AND ADMINISTRATION................................ 4
3.1 Administering the Plan........................................... 4
3.2 Managing the Trust............................................... 4
3.3 Instructions to Trustee.......................................... 4
3.4 Permissible Investments.......................................... 4
3.5 Collective Investment Fund....................................... 4
3.6 Deposit With Insurance Company................................... 5
3.7 Investment Managers.............................................. 5
3.8 Duties of the Trustee............................................ 5
3.9 Powers of the Trustee............................................ 7
3.10 Borrow and Settle Claims......................................... 7
3.11 Litigation....................................................... 7
3.12 Distributions.................................................... 7
3.13 Expenses and Fees................................................ 8
ARTICLE 4 - RECORDS; VALUATION; ACCOUNTINGS.............................. 9
4.1 Records.......................................................... 9
4.2 Information...................................................... 9
4.3 Valuation........................................................ 9
4.4 Accountings...................................................... 9
ARTICLE 5 - TRUSTEE LIABILITY............................................ 11
5.1 Indemnity........................................................ 11
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
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Page
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<S> <C>
5.2 Bonding.......................................................... 11
ARTICLE 6 - REPLACING THE TRUSTEE........................................ 12
6.1 Resignation...................................................... 12
6.2 Removal.......................................................... 12
6.3 Appointment of Successor......................................... 12
6.4 Rights and Powers of Successor Trustee........................... 12
6.5 Duties of Outgoing Trustee....................................... 12
6.6 Effect on Plan or Trust.......................................... 13
ARTICLE 7 - AMENDMENT AND TERMINATION.................................... 14
7.1 Amendment...................................................... 14
7.2 Termination.................................................... 14
ARTICLE 8 - GENERAL PROVISIONS........................................... 15
8.1 Applicable Law................................................... 15
8.2 Agreement Binding on All Parties................................. 15
8.3 Notices and Directions........................................... 15
8.4 No Implied Duties................................................ 15
8.5 Reliance on Information.......................................... 15
SIGNATURE PAGE........................................................... 16
</TABLE>
<PAGE>
PREAMBLE
THIS TRUST AGREEMENT is known as the Advanced Technology Laboratories, Inc.
Retirement Plan Trust Agreement, and was formerly known as the Westmark
International Incorporated Retirement Plan Trust Agreement (the "Trust
Agreement").
Advanced Technology Laboratories, Inc. ("Employer") adopted the Advanced
Technology Laboratories Floor Retirement Plan (the "Plan") with an associated
trust effective January 1, 1981.
The Plan was amended and restated effective January 1, 1987, the name was
changed to the Westmark International Incorporated Floor Retirement Plan, and
Westmark International Incorporated became the plan sponsor, in connection with
the distribution of shares of Westmark International Incorporated to the
shareholders of Squibb Corporation. The associated trust was amended and
restated as of the same date and renamed the Trust Agreement for Westmark
International Incorporated Floor Retirement Plan.
The Plan was amended and restated effective January 1, 1990 and the name
was changed to the Westmark International Incorporated Retirement Plan. The
Trust Agreement was not restated at such time.
The corporate name of Westmark International Incorporated was changed to
Advanced Technology Laboratories, Inc. effective June 26, 1992. The Plan was
amended and restated, and the name of the Plan was changed to the Advanced
Technology Laboratories, Inc. Retirement Plan. The Trust Agreement is hereby
renamed and restated effective June 26, 1992.
The Employer and the undersigned trustee or trustees ("Trustee") intend
that the Plan and Trust will comply with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), Section 401(a) of the Internal Revenue Code
of 1986, as amended, ("Code") and related Treasury Regulations and that the
Trust qualifies as a tax exempt trust under Section 501(a) of the Code.
The Employer and the Trustee now enter into this Trust Agreement on the
following terms:
1
<PAGE>
ARTICLE 1
DEFINITIONS
1.1 Agreement
---------
"Agreement" means this Advanced Technology Laboratories, Inc. Retirement
Plan Trust Agreement, as now or hereafter in effect.
1.2 Committee
---------
"Committee" means the Advanced Technology Laboratories, Inc. Benefits
Committee as from time to time constituted and appointed by the
Compensation Committee of the Board of Directors of the Employer to
administer the Plan.
1.3 Effective Date
--------------
"Effective Date" means January 1, 1981.
1.4 Employer
--------
"Employer" means Advanced Technology Laboratories, Inc.
1.5 Participating Employers
------------- ---------
"Participating Employers" means the Employer and any other company
designated as an Employer as provided in appendices to the Plan.
1.6 Plan
----
"Plan" shall mean the Advanced Technology Laboratories, Inc. Retirement
Plan as now or hereafter in effect, the provisions of which are expressly
incorporated herein as if fully set forth.
1.7 Trust Year
----------
The "Trust Year" shall be the 12-month period corresponding with the "plan
year" (as now or hereafter defined in the Plan) which shall be January 1 to
December 31.
2
<PAGE>
ARTICLE 2
TRUST FUND
2.1 Payments to Trustee
-------------------
The Participating Employers shall pay to the Trustee from time to time such
contribution amounts as are required by the Plan. The Trustee shall accept
the sums so paid and shall have no duty to make or inquire as to, and shall
not be responsible for, the determination of any such amount nor to collect
any contribution not voluntarily paid.
2.2 Trust
-----
The Participating Employers shall deliver or cause to be delivered to the
Trustee all Participating Employers' contributions to the Plan, and the
portion of any existing assets of a predecessor plan and trust that are
attributable to benefits payable under the Plan. Assets acquired with such
contributions or assets, the income and earnings from the investment and
reinvestment of such contributions and assets, and all other property and
assets of the Trust delivered to or coming into the hands of the Trustee
shall constitute the "trust fund," and shall be held in trust by the
Trustee pursuant to the terms of this Agreement. The assets of the Trust
shall not be segregated for the accounts of individual Plan participants or
their beneficiaries until they become entitled to a distribution under the
terms of the Plan but may be commingled, divided or segregated by the
Trustee for purposes of this Trust for investment and providing benefits
required by the Plan.
2.3 Qualification
-------------
If the Commissioner of the Internal Revenue Service initially rules that
this Trust is not exempt from tax under Section 501(a) of the Code, the
Employer and Trustee may retroactively or prospectively amend this Trust so
as to qualify.
3
<PAGE>
ARTICLE 3
INVESTMENT AND ADMINISTRATION
3.1 Administering the Plan
----------------------
The Committee has the responsibility for administering the Plan, including
the responsibility to authorize and direct the Trustee to make all
distributions of benefits under the Plan.
3.2 Managing the Trust
------------------
Except as provided otherwise in this Agreement, the Trustee has the sole
responsibility for the management, acquisition, disposition (for purposes
of investment and reinvestment) and investment of the assets of the Plan,
to the extent such assets are transferred to the Trustee.
3.3 Instructions to Trustee
-----------------------
The Employer shall give the Trustee the names and specimen signatures of
the chairman and members of the Committee to enable the Trustee to act upon
the directions of the Committee. The Trustee shall accept and rely upon the
names and signatures so provided until notified in writing of change.
Instructions to the Trustee shall be signed for the Committee by the
chairman or such other person as the Committee may designate.
3.4 Permissible Investments
-----------------------
The Trust shall be held, invested and reinvested by the Trustee without
distinction between principal and income, in property, both real and
personal (wherever situated), and common or preferred stocks, bonds,
mortgages, securities and other evidences of indebtedness or ownership in
accordance with applicable law and the provisions of this Agreement. The
Trustee, if a bank or similar financial institution, may invest assets of
the Trust in deposits with itself.
3.5 Collective Investment Fund
--------------------------
All or any portion of the Trust may be invested in a collective investment
fund maintained by the Trustee exclusively for investment of funds held in
qualified employee benefit trusts. During such period of time as an
investment through any such collective investment fund shall exist, the
declaration of trust of any such fund shall constitute a part of this
Agreement. Assets of this Trust may be commingled with assets of other
qualified trusts in any such collective investment fund so long as such
investment fund does not violate this Agreement.
4
<PAGE>
3.6 Deposit With Insurance Company
------------------------------
The Employer may require the Trustee, upon written notice, to deposit all
or part of the Trust for investment with one or more insurance companies
under a group annuity, deposit administration or other contract
("Contract"). Any insurance company to which such assets are transferred
shall, subject to the Contract, have exclusive responsibility for control
over all assets deposited with it.
3.7 Investment Managers
-------------------
(a) Appointment and Authority
-------------------------
The Employer may appoint one or more investment managers for all or
part of the Trust. Subject to subsection 3.7(b), any such investment
manager shall have exclusive responsibility for and control over the
investment of the Trust assets for which responsibility is allocated
to the manager by the Employer.
(b) Rights Reserved by Employer
---------------------------
The Employer may, as to the Trustee or any investment manager, reserve
any or all of the following rights:
(1) to specify investment objectives and guidelines;
(2) to specify permissible investments;
(3) to require consultation by the Trustee or investment manager at
regular intervals or with respect to certain kinds of
transactions;
(4) to receive notification of all transactions before or after
consummation; and
(5) to have proposed transactions submitted in advance and not
consummated if disapproved by notice given within 15 days after
submission.
(c) Fiduciary Duties
----------------
The investment manager shall be and act as a fiduciary with respect to
the Trust assets for which it is responsible. The Trustee shall act
upon the investment instructions given to it by the investment manager
with respect to those Trust assets for which such manager is
responsible, and in so doing the Trustee shall be only an
administrative agent in carrying out such directed investment
transactions. The Trustee shall have no duty to investigate any
transaction directed by such investment manager and shall not be
responsible for any such investment decision. If a directed
transaction violates any duty to diversify, to maintain liquidity or
to meet any other trust standard under this Trust or
5
<PAGE>
applicable law, the investment manager shall be solely responsible and
liable for any loss, tax or penalty resulting from any such breach.
(d) Authority of the Trustee
------------------------
Unless the Employer directs otherwise, the Trustee shall have
authority to do the following even though Trust assets are being
managed by an investment manager:
(1) dispose of fractional shares;
(2) roll over treasury obligations, commercial paper and similar
investments; and
(3) make short-term investments of otherwise uninvested Trust assets
in highly liquid interest-bearing deposits or securities.
(e) Qualifications
--------------
Each investment manager shall be qualified under ERISA. Each
investment manager shall verify to the Employer and the Trustee, in
writing, that the manager is:
(1) a registered investment adviser under the Investment Advisers Act
of 1940, a bank as defined in that Act or a qualified insurance
company;
(2) bonded for the protection of the Trust in conformance with
applicable law; and
(3) a fiduciary with respect to the Plan and this Trust.
(f) Notice to the Trustee
---------------------
The Employer shall notify the Trustee of the appointment, removal or
resignation of any investment manager and until so notified, the
Trustee shall not accept or execute any investment or other directions
from any person or entity other than the Employer or the Committee as
provided herein. The Trustee may rely upon the continued authority of
an appointed investment manager until notified of resignation or
removal. Each investment manager shall, on request, give the Trustee,
the Committee and the Employer the names and specimen signatures of
persons authorized to act for the investment manager.
3.8 Duties of the Trustee
---------------------
The Trustee shall have responsibility for and control over the investment
of Trust assets not deposited with an insurance company or allocated to
an investment manager. The Employer may elect to direct the Trustee as to
the investment of some or all of the Trust assets.
6
<PAGE>
3.9 Powers of the Trustee
---------------------
Subject to the investment authority allocated to any insurance company or
investment manager, or reserved to the Employer, the Trustee shall have all
necessary powers to discharge its duties under this Trust, including,
without limitation, the power to do the following:
(a) own and hold all Trust assets and retain and exercise all incidences
of such ownership, subject to the terms of this Trust, either directly
or through nominees, with or without disclosing the Trust;
(b) deal in any way with any Trust assets through a public or private
transaction and receive all proceeds from the Trust assets;
(c) as the holder of any security in the Trust, exercise any right or
power to take any action that could be exercised or taken by the
beneficial owner holding the security of record;
(d) write covered call options on securities in the Trust and deal in
other options directly related to an outstanding covered call option;
and
(e) employ agents for assistance and consult and rely upon the advice of
counsel, who may be counsel for Participating Employers.
3.10 Borrow and Settle Claims
------------------------
If authorized in writing by the Employer, the Trustee may borrow money for
Trust purposes on the security of Trust assets. The Trustee may compromise
claims on terms approved by the Employer, which shall be binding on all
parties.
3.11 Litigation
----------
The Trustee's cost in any litigation arising from the Trustee's act or
failure to act and relating to the Trust assets shall not be an expense of
the Trust. The Trustee shall indemnify and defend the Employer from any
claim, loss, liability or exposure arising by reason of the Trustee's gross
negligence or wilful misconduct.
3.12 Distributions
-------------
(a) Recipients
----------
The Trustee shall pay benefits for a participant, contingent annuitant
or beneficiary in one of the following manners as directed by the
Committee or, in the absence of such direction, as considered
appropriate under the terms of the Plan by the Trustee:
(1) to the participant, annuitant or beneficiary;
7
<PAGE>
(2) to a spouse or parent or child of legal age of a person listed in
subparagraph (l) if such person is then under a mental or
physical disability which renders him incapable of handling his
own affairs;
(3) to one having actual custody of the person;
(4) to a legal guardian; or
(5) to one furnishing maintenance, support or hospitalization of a
person listed in subparagraph (1).
In making distributions, the Trustee may rely wholly on the direction
of the Committee.
(b) Record of Payment
-----------------
A receipt from an authorized recipient or canceled check shall be
sufficient voucher for the Trustee. Neither the Trustee, the
Committee, nor Participating Employers need obtain from the recipient
an accounting for the payment.
(c) Conflicting Claims
------------------
If a dispute arises over a distribution, the Trustee may withhold the
distribution until the dispute is determined by a court of competent
jurisdiction or settled by the parties concerned.
3.13 Expenses and Fees
-----------------
The Trustee shall be reimbursed for all reasonable expenses and shall be
paid a reasonable fee approved from time to time in writing by the
Employer; provided, however, that a Trustee who is an employee of the
-------- -------
Participating Employers shall not be eligible for such fees and expenses
for serving as a Trustee of this Plan. The Trustee shall notify the
Committee periodically of expenses and fees and the Participating Employers
may elect to pay them. Otherwise, the expenses and fees shall be charged to
the Trust.
8
<PAGE>
ARTICLE 4
RECORDS; VALUATION; ACCOUNTINGS
4.1 Records
-------
The Trustee shall keep complete records of the Trust open to inspection by
the Committee and the Employer at all reasonable times.
4.2 Information
-----------
In addition to reports required below, the Trustee shall furnish the
Employer or the Committee any information about the Trust that they
request.
4.3 Valuation
---------
As of each valuation date specified by the Employer, the Trustee shall
value the Trust in accordance with applicable law and report the value to
the Committee. The value of any Trust assets transferred to or deposited
with an insurance company under Section 3.6 shall be the amount
withdrawable to pay benefits at any time as determined by the Committee.
4.4 Accountings
-----------
(a) Yearly Accounting
-----------------
The Trustee shall furnish the Employer and the Committee with a
complete accounting within 60 days after the end of each Trust Year
showing assets and liabilities and income and expenses of the Trust
for the Trust Year. The form and content of the accounting shall be
sufficient for the Committee to comply with reporting and disclosure
requirements under applicable law.
(b) Objection and Audit
-------------------
The Employer or the Committee may object to an accounting within 60
days after it is furnished and require that it be settled by audit by
a qualified, independent certified public accountant. The auditor
shall be chosen by the Trustee from a list of at least five such
accountants furnished by the objecting Employer or Committee at the
time the audit is requested. Either the Employer, the Committee or the
Trustee may require that the account be settled by a court of
competent jurisdiction in lieu of or in conjunction with the audit.
All expenses of any audit or court proceedings including reasonable
attorneys' fees, shall be allowed as administrative expenses of the
Trust.
(c) Acceptance
----------
9
<PAGE>
If the Employer or the Committee does not object to an accounting
within the time provided, the account shall be settled for the period
covered by it.
(d) Settled Account
---------------
To the extent permitted by applicable law, when an account is settled,
it shall be final and binding on all parties including the Trustee,
Participating Employers and the Committee and all participants and
persons claiming through them.
10
<PAGE>
ARTICLE 5
TRUSTEE LIABILITY
5.1 Indemnity
---------
The Employer shall indemnify and defend the Trustee from any claim, loss,
liability or expense arising from any action or inaction in administration
of this Trust in reliance on information or in response to direction from
the Employer or the Committee in the absence of willful misconduct or bad
faith. The undertaking of this Section shall survive the amendment or
termination of this Trust agreement or the resignation or removal of the
Trustee.
5.2 Bonding
-------
The Trustee shall be bonded as required by applicable law. However, the
Trustee need not give any bond or other security for performance of its
duties under this Trust for all times during which the Trustee is exempt
from the bonding requirements of Section 412 of ERISA and the provisions of
any other applicable law.
11
<PAGE>
ARTICLE 6
REPLACING THE TRUSTEE
6.1 Resignation
-----------
A Trustee may resign at any time by giving 60 days' written notice to the
Employer, unless the Employer and the Trustee agree in writing that the
Trustee may resign earlier. If the resigning Trustee is the sole Trustee,
the Employer shall designate a successor Trustee within the 60-day notice
period. If the Employer fails to name a successor in that time, such sole
Trustee shall petition the Superior Court of the State of Washington to
designate a successor.
6.2 Removal
-------
The Trustee may be removed by the Employer with or without cause on 60
days' written notice or shorter notice accepted by the Trustee. If the
Employer seeks to remove the sole Trustee, the Employer shall designate a
successor Trustee within the 60-day notice period. If the Employer fails to
name a successor in that time, such sole Trustee shall petition the
Superior Court of the State of Washington to designate a successor.
6.3 Appointment of Successor
------------------------
There shall be at least one Trustee at all times and the Employer may
appoint more than one Trustee for any given period. The Employer may
appoint any qualified person(s), national or state bank or trust company or
other qualified entity as a Trustee. The appointment of a Trustee shall be
effective when accepted in writing by such Trustee.
6.4 Rights and Powers of Successor Trustee
--------------------------------------
A successor Trustee shall have all of the rights and powers of the Trustee,
including ownership of the Trust assets. A successor Trustee need not
examine the records and acts of any prior Trustee and may retain or dispose
of existing Trust assets pursuant to the provisions of this Trust. A
successor Trustee shall not be responsible for any claim or liability
resulting from any action or inaction of any prior Trustee or any other
past event, or any condition of assets existing at the time of appointment
of such successor Trustee.
6.5 Duties of Outgoing Trustee
--------------------------
(a) Transfer Assets
---------------
The outgoing Trustee shall execute any instruments necessary or
reasonably requested by the Employer or the successor Trustee to
evidence the transfer of Trust assets.
12
<PAGE>
(b) Provide Accounting
------------------
The outgoing Trustee shall submit a final Trust accounting to the
Employer and the Committee as soon as reasonably practicable. The
accounting shall be received and settled as provided in Section 4.4
for regular accountings.
6.6 Effect on Plan or Trust
-----------------------
No resignation or removal of the Trustee or change in identity of the
Trustee for any reason shall terminate the Plan or this Trust.
13
<PAGE>
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
---------
The Employer may amend this Trust at any time by written instrument signed
by an officer of the Employer acting upon authorization of the Employer's
Board of Directors and delivered to the Trustee, with the following
limitations:
(a) amendments shall be effective when signed by the Trustee; and
(b) except as permitted under Section 7.2(c) below, no amendment shall
revest any of the Trust assets in Participating Employers or otherwise
modify the Trust so that it would not be for the exclusive benefit of
eligible employees.
The provisions of this section are in addition to and shall not limit the
Employer's rights otherwise provided in this Agreement and the Plan.
7.2 Termination
-----------
(a) Duties of Employer
------------------
The Employer may wholly or partially terminate the Plan at any time.
In such event, the Employer shall give the Trustee written notice of
the termination and shall promptly notify the Pension Benefit Guaranty
Corporation and request a ruling from the Internal Revenue Service
concerning the effect of termination on the qualification of the Plan
and this Trust. The Trustee may decline to distribute under Section
7.2(b) until such notice has been given and appropriate rulings
issued.
(b) Continuation or Liquidation of Trust
------------------------------------
Upon termination of the Plan, the Employer may direct that the Trust
be continued to pay benefits as they mature or be liquidated and the
Trust assets distributed. If the Trust is liquidated, it shall be
allocated by the Committee among participants, beneficiaries and, if
permissible, to Participating Employers in Accordance with the Plan.
(c) Exclusive Benefit of Participants
---------------------------------
In no event shall any part of the contributions or the principal or
income of this Trust be paid to or revested in Participating Employers
or be used other than for the exclusive benefit of the participants
and the beneficiaries, except as permitted under Sections 403(c) or
4044(d) of ERISA or Section 7.2(b) of this Agreement or under Section
12.2 of the Advanced Technology Laboratories, Inc. Retirement Plan.
14
<PAGE>
ARTICLE 8
GENERAL PROVISIONS
8.1 Applicable Law
--------------
This Trust shall be construed according to the laws of Washington and
Federal law to the extent Federal law preempts Washington law. Venue for
any dispute arising hereunder shall be in the State of Washington.
8.2 Agreement Binding on All Parties
--------------------------------
This Agreement shall be binding upon the successors and assigns of any and
all present and future parties.
8.3 Notices and Directions
----------------------
Any notice or direction under this Trust shall be in writing and shall be
effective when actually delivered or, if mailed, when deposited as
registered or certified mail directed to such address as either party may
specify by notice to the other party.
8.4 No Implied Duties
-----------------
The duties of the Trustee shall be those stated in this Trust, and no other
duties shall be implied.
8.5 Reliance on Information
-----------------------
The Trustee may accept as correct and rely on any information furnished by
the Employer or the Committee. The Trustee may not require an audit or
disclosure of the records of Participating Employers.
8.6 Nondiscrimination
-----------------
Participating Employers, the Committee and the Trustee shall to the fullest
extent possible treat all persons similarly situated alike under this
Trust.
15
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee cause this Plan to be duly executed
on this 31st day of December, 1993.
ADVANCED TECHNOLOGY LABORATORIES, INC.
By /s/ Harvey N. Gillis
------------------------------------------------
Its Sr. Vice President and Chief Financial Officer
-----------------------------------------------
BOATMEN'S TRUST COMPANY
By
------------------------------------------------
Its
-----------------------------------------------
16
<PAGE>
Exhibit 10.20
Advanced Technology Laboratories, Inc.
May 5, 1993, Compensation Committee Minutes (Excerpt)
Management Incentive Compensation Plan
RESOLVED, that the Management Incentive Compensation Plan adopted December 23,
1986 (the "Plan") is hereby amended to provide that paragraph 1 states: "The
purpose of this Plan is to provide incentive compensation to officers and key
employees of Advanced Technology Laboratories, Inc. and its subsidiaries and
affiliates (hereinafter collectively called the Corporation) who contribute to
the achievement by the Corporation of its growth and profit objectives." and
FURTHER RESOLVED, that paragraphs 4(a) and 4(b) of the Plan are hereby amended
to provide:
"(a) The Committee shall determine the total amount available for awards,
the Employees and the surviving spouses or estates of deceased Employees to
receive awards, and the amount, terms, form and time of payment of each award.
"(b) Awards may be made in cash or stock of Advanced Technology
Laboraotries, Inc. or both. In any case in which payment of an award is to be
made in stock, such stock shall be valued for such purpose at the mean of its
high and low sales prices quoted on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) on such date or dates as may be
determined by the Committee, but not more than five business days prior to the
date of the grant of the award."
<PAGE>
Exhibit 10.24
ADVANCED TECHNOLOGY LABORATORIES, INC.
LONG TERM INCENTIVE PLAN
1. Definitions
The following terms have the corresponding meanings for purposes of the
LTIP:
"Award Cycle" means a period in unitary increments of one or more fiscal
years over which incentive awards granted during a particular year are to be
earned out.
"Change of Control" means
(a) a "Board Change." For purposes of the LTIP, a Board Change shall have
occurred if a majority of the seats (other than vacant seats) on the
Corporation's Board of Directors (the "Board") were to be occupied by
individuals who were neither (i) nominated by a majority of the Incumbent
Directors nor (ii) appointed by directors so nominated. An "Incumbent Director"
is a member of the Board who has been either (i) nominated by a majority of the
directors of the Corporation then in office or (ii) appointed by directors so
nominated, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(b) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of (i) 20% or more of either (A) the then outstanding shares of common stock
(the "Outstanding Corporation Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Corporation Voting
Securities"), in the case of either (A) or (B) of this clause (i), which
acquisition is not approved in advance by a majority of the Incumbent Directors
or (ii) 33% or more of either (A) the Outstanding Corporation Common Stock or
(B) the Outstanding Corporation Voting Securities, in the case of either (A) or
(B) of this clause (ii), which acquisition is approved in advance by a majority
of the Incumbent Directors; provided, however, that the following acquisitions
shall not constitute a Change of Control: (x) any acquisition by the
Corporation, (y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation
controlled by the Corporation, or (z) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if, following such
reorganization,
<PAGE>
-2-
merger or consolidation, the conditions described in clauses (i), (ii) and
(iii) of the following subsection (c) are satisfied; or
(c) Approval by the stockholders of the Corporation of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Corporation Common Stock
and Outstanding Corporation Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities, as the case may be, (ii) no Person (excluding the
Corporation, any employee benefit plan (or related trust) of the Corporation or
such corporation resulting from such reorganization, merger or consolidation and
any Person beneficially owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, 33% or more of the Outstanding
Corporation Common Stock or Outstanding Corporation Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 33% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were Incumbent Directors at
the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities, as the
case may be, (B) no Person (excluding the Corporation and any employee benefit
plan (or related trust) of the Corporation or such corporation and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 33% or more of the Outstanding Corporation Common
<PAGE>
-3-
Stock or Outstanding Corporation Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 33% or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (C) at least a
majority of the members of the board of directors of such corporation were
approved by a majority of the Incumbent Directors at the time of the execution
of the initial agreement or action of the Board providing for such sale or other
disposition of assets of the Corporation.
"Committee" means the Committee provided for in Section 3, which shall
administer the Plan.
"Corporation" means Advanced Technology Laboratories, Inc., a Delaware
corporation.
"Designated Beneficiary" means any person designated in writing by a
Participant as a legal recipient of payments due under an award in the event of
the Participant's death, or in the absence of such designation, the
Participant's estate. Such designation must be on file with the Corporation in
order to be effective but, unless the Participant has made an irrevocable
designation, may be changed from time to time by the Participant.
"Incentive Award Level" means the numerical measure, expressed in dollars,
percentage of salary, or some other parameter designated by the Committee for a
particular Participant to govern determination of the payment due the
Participant at the end of an Award Cycle in accordance with Section 5.
"Participant" means an employee, consultant or independent contractor who is
qualified for and has received an incentive award under the LTIP.
"Payment Schedule" means the schedule adopted by the Committee in accordance
with Section 5 with respect to an Award Cycle to govern determination of the
payment due a Participant during or at the end of such Award Cycle in accordance
with Section 5.
"Payment Value" means the value, expressed in dollars, of an incentive award
at the conclusion of an Award Cycle, determined in accordance with Section 5(e).
"LTIP" means this Advanced Technology Laboratories, Inc. Long Term Incentive
Plan.
"Retirement" means the termination of the services of a Participant because
of early or normal retirement as defined in the Westmark Retirement Plan or
Advanced Technology Laboratories, Inc. Retirement Plan.
<PAGE>
-4-
"Withholding Tax" means any tax, including any federal, state or local
income tax, required by any governmental entity to be withheld or otherwise
deducted and paid with respect to any payment made to a Participant under this
LTIP.
2. Administration
The LTIP shall be administered by the Committee. Subject to the express
provisions of the LTIP, the Committee shall have plenary authority, in its
discretion, to determine the individuals who are to be Participants under this
LTIP, any applicable qualifications, the Incentive Award Levels to be designated
for such Participants, the commencement and duration of an Award Cycle, Award
Schedules, and the performance measures to be used in determining the amounts of
any payments to be made under the LTIP. In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective Participants, their present and potential contributions to the
Corporation's success, levels of responsibility, and such other factors as the
Committee in its discretion may deem relevant. Subject to the express
provisions of the LTIP, the Committee shall have plenary authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to it,
to determine the terms and provisions of participation in the LTIP and to make
all other determinations necessary or advisable for the administration of the
LTIP. The Committee's determinations of the matters referred to in this Section
2 shall be conclusive.
It is the intention of the Corporation that the LTIP and the administration
hereof comply in all respects with Section 16(b) of the Exchange Act, and the
rules and regulations promulgated thereunder, and if any LTIP provision is later
found not to be in compliance with Section 16(b), the provision shall be deemed
null and void, and in all events the LTIP shall be construed in favor of its
meeting the requirements of Rule 16b-3. Notwithstanding anything in the LTIP to
the contrary, the Board, in its absolute discretion, may bifurcate the Plan so
as to restrict, limit or condition the use of any provision of the LTIP to
persons who are subject to Section 16 of the Exchange Act without so limiting or
conditioning the LTIP with respect to other persons.
3. The Committee
The Board shall designate a Committee of members of the Board which shall
meet the requirements of Section 16(b) of the Exchange Act. Currently, the
Committee shall comprise the Compensation Committee of the Board, including two
or more members of the Board who are disinterested. If at any time an
insufficient number of disinterested directors is available to serve on such
Committee, interested directors may serve on the Committee in the positions to
be held by the disinterested director or directors; however, during such time,
no incentive award shall be made under the LTIP to any person if the inclusion
of such person as an LTIP Participant would not meet the requirements of Section
16(b) of the Exchange Act.
<PAGE>
-5-
For purposes of this Section 3, a "disinterested director" is a person who
meets the definition of "disinterested person" as set forth in the rules and
regulations promulgated under Section 16(b) of the Exchange Act. Currently, a
disinterested director is a member of the Board who is not (and, during the 12-
month period preceding his appointment as a member of the Committee has not)
been granted or awarded stock, stock appreciation rights or other equity
securities of the Corporation or any affiliated corporation pursuant to any
other plan of the Corporation or any affiliated corporation except for formula
plans (as such term is defined in Rule 16b-3(c)(2)(ii) issued under the Exchange
Act) or ongoing securities acquisition plans (as described in Rule 16b-
3(d)(2)(i) issued under the Exchange Act). The Committee shall be appointed by
the Board, which may from time to time appoint members of the Committee in
substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by not less than a majority of its
members. Any decision or determination reduced to writing and signed by all the
members shall be fully as effective as if it had been made by a majority vote at
a meeting duly called and held. The Committee may appoint a secretary to keep
minutes of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
4. Eligibility
The Committee may designate as Participants under the LTIP only employees,
consultants or independent contractors (which term as used herein includes
officers) of the Corporation and of its present and future subsidiary
corporations ("subsidiaries"). The Committee may set other qualifications for
eligibility as it deems advisable to be attained or maintained by such
individuals as conditions of continued participation under the LTIP. Any person
eligible under the LTIP may be Participants in one or more Award Cycles or any
combination thereof, as the Committee shall from time to time determine, and
such determinations may be different as to different Participants and may vary
as to different Award Cycles or Incentive Award Levels.
5. Incentive Awards
(a) Incentive awards which are awarded to a Participant shall have an
Incentive Award Level determined by the Committee and generally determined to be
a percentage of the annual base salary of a Participant. The incentive award
will have a Payment Value payable at the end of the applicable Award Cycle or
incrementally payable at the end of one or more fiscal year increments of the
Award Cycle which is contingent upon the performance of the Corporation and/or
of such Participant's subsidiary, division or department during the Award Cycle
and the Participant's Incentive Award Level. Measures of performance may
include, but shall not be limited to, cumulative or average growth in earnings
per share or pretax profits, revenue, net income as a percentage of sales,
return on stockholders' equity, sales gross margin, asset management, cash flow
or
<PAGE>
-6-
return on capital employed. Such measures may be applied on an absolute
basis or relative to industry indices and shall be defined in a manner which the
Committee shall deem appropriate. For each incentive award, the Committee shall
determine the length of the Award Cycle, which shall be a period of not less
than one fiscal year, and shall establish a Payment Schedule based upon the
performance measures determined for such incentive award and the length of the
Award Cycle, setting forth a range of payment measures corresponding to
performance levels targeted for the Corporation or such subsidiary, division or
department. If during the course of an Award Cycle there should occur, in the
opinion of the Committee, significant changes in economic conditions or in the
nature of the operations of the Corporation or a subsidiary, division or
department which the Committee did not foresee in establishing the performance
measures for such Award Cycle and which, in the Committee's sole judgment have,
or are expected to have, a substantial effect on the performance of the
Corporation or of a Participant's subsidiary, division or department during such
Award Cycle, the Committee may revise the Payment Schedule and performance
measures formerly determined by it in such manner as the Committee, in its sole
judgment, may deem appropriate except as otherwise provided in Section 5(j).
(b) In determining the Incentive Award Level to be designated for a
particular Participant, the Committee shall take into account a person's
responsibility level, performance, potential, cash compensation level and such
other considerations as it deems appropriate.
(c) Except as otherwise provided in Section 5(j), an incentive award to a
Participant shall terminate for all purposes if the services of the Participant
for the Corporation or one of its subsidiaries ceases during the Award Cycle,
except in the case of death, disability or Retirement , in which case (and
provided that the Participant at the time of death, disability or Retirement as
aforesaid shall have maintained his employment or other qualifying relationship
with the Corporation or one of its subsidiaries continuously during the period
commencing on the date the award was granted and ending on the first anniversary
thereof) the Participant will be entitled to payment (such payment to be made in
accordance with the provisions of Section 5(d)) of the same portion of the
Payment Value of the award the Participant would otherwise have been paid (such
Payment Value, if any, to be determined at the conclusion of the applicable
Award Cycle in accordance with the provisions of Sections 5(a) and 5(e) unless
otherwise provided in Section 5(j)) as the portion of the Award Cycle during
which the Participant maintained such relationship with the Corporation bears to
the full Award Cycle. A person may receive only a portion of the full Payment
Value of an incentive award if that person does not become a Participant in a
given Award Cycle until after the commencement of the Award Cycle, or the person
fails to attain or maintain a qualification for eligibility set by the
Committee, in which event such person will be entitled to payment (such payment
to be made in accordance with the provisions of Section 5(d)) of the same
portion of the Payment Value of the award the person would otherwise have been
paid (such Payment Value, if any, to be determined at the conclusion of the
applicable Award Cycle in accordance with the provisions of Sections 5(a) and
5(e) unless otherwise provided in Section 5(j)) as the portion of the Award
Cycle during which the person maintained the status of Participant
<PAGE>
-7-
bears to the full Award Cycle. Under particular circumstances, the Committee
may make other determinations with respect to Participants whose services do not
meet the foregoing requirements, including the waiver of any of the requirements
of this subsection 5(c) relating to periods of continuous service.
(d) Except as otherwise provided in Section 5(j), unless the Committee
otherwise determines, no payment with respect to an incentive award will be made
to a Participant prior to the end of such Participant's Award Cycle or, if so
determined by the Committee, the end of a fiscal year increment of an Award
Cycle; provided, however, that if a Participant should die during an Award Cycle
and his award shall not have been terminated hereunder prior to his death, such
Participant's Designated Beneficiary, the legatee under the Participant's last
will, his personal representative or his distributee may elect instead, subject
to the approval of the Committee, to have the pro rata portion of the
Participant's Payment Value determined by the Committee as of the end of the
year during which such Participant's death occurred, based upon application of
the Payment Schedule to the part of the Award Cycle which shall have elapsed
(for such purpose, the cumulative growth rate or improvement achieved in the
applicable performance measures to the end of the fiscal year in which death
occurs will be assumed to continue for the Award Cycle), in which event such pro
rata portion shall be paid in cash as soon as practicable following such year
(or in such number of installments as shall have been requested by the
Participant and approved by the Committee) to such Participant's Designated
Beneficiary or legal representative.
(e) Except as otherwise provided in Section 5(d) in the case of death, or in
Section 5(j) in the case of a Change in Control, a Participant's interest in any
incentive award granted to him shall mature on the last day of the Award Cycle
for such award or, if the Committee has so provided, shall incrementally mature
on the last day of one or more fiscal years of the Award Cycle. The Payment
Value of an incentive award shall be the dollar amount calculated on the basis
of the Payment Schedule applicable to such Award Cycle and the Incentive Award
Level of the Participant.
(f) The total amount of the Payment Value due a Participant at the
conclusion of an Award Cycle or fiscal year increment shall be paid on such date
following the conclusion of such Award Cycle or fiscal year increment as the
Committee shall designate, except as specifically otherwise provided in the
LTIP; provided, however, that the Committee shall have authority, if it deems
appropriate, to defer payment of the Payment Value due a Participant if the
Participant shall request the Committee to do so at any time prior to the last
year of the Award Cycle for such award. In respect of awards made or to be made
in one or more deferred installments in cash, interest shall be credited
semiannually on each such award at a rate to be determined semiannually by the
Committee, but in no event shall such rate be less than the average rate on 5-
year AAA new industrial corporate bonds during each such semiannual period as
calculated on the basis of the average of such rates for each calendar week
ending during the period January 1 through June 30 and July 1 through December
31; provided that awards made during any such six-month period shall be credited
on the basis of the average rate for that period; and provided further that
<PAGE>
-8-
installments paid during any six-month period shall be credited with interest on
the basis of the average rate for the next preceding six-month period, in each
case adjusted for the number of days such award was to be credited. Unless paid
to the recipient of such award at the time credited, interest at the foregoing
rate shall be credited on the interest so credited until so paid. The foregoing
minimum interest rate for any award that is payable in one or more deferred
installments under the LTIP may not be modified without the prior written
consent of the Participant. Such interest shall be paid to the recipient of any
such award in cash at such time or times during the deferred period of such
award or at the same time as the cash to which such interest applies, all as the
Committee shall determine.
(g) If the payment of any award shall be deferred until after the
termination of the services of the recipient by the Corporation or one of its
subsidiaries, the Payment Value of such award, together with any deferred
interest thereon, shall be delivered in not more than 20 annual installments,
commencing not later than the January 31 after such termination of services (or
such other date as the Committee from time to time shall determine), all as the
Committee may determine. If the payment of an award under this LTIP is
deferred, such payment thereafter may be accelerated so that such payment shall
be made immediately or at such earlier time or in such less number of
installments, in each case as the Committee may from time to time determine, but
only with the prior written consent of the Participant.
(h) A Participant to whom any award has been made shall not have any
interest beyond that of a general creditor of the Corporation in the cash
awarded, or in any interest credited to him until the cash has been paid to him
in accordance with the provisions of the LTIP.
(i) In the case of the death of the recipient of an award, before or after
the termination of his services, any unpaid installments of such deferred award
shall pass to the Designated Beneficiary, the legatee under the Participant's
last will, his personal representative or his distributee. Unpaid installments
of a deferred award shall be paid either in the same installments as originally
provided or otherwise as the Committee may determine in individual cases.
(j) Anything herein to the contrary notwithstanding, in the event of a
Change of Control, with respect to any unmatured incentive awards which a
Participant held immediately prior to such Change of Control, the Participant
will be entitled to immediate payment in cash (unless payment shall be deferred
in accordance with Section 5(f), in which event the amount provided to be
payable by this Section 5(j) shall also be so deferred) in an amount equal to
the value of such units determined in accordance with the Payment Schedule and
Incentive Award Level applicable to such awards, based on the cumulative growth
rate in the Corporation's reported earnings per share for all previously elapsed
fiscal years, if any, included in the Award Cycles for such awards and the
actual or presumed cumulative growth rate in the earnings per share for the
balance of each Award Cycle, determined as follows: (i) if such Change of
Control occurs prior to the completion
<PAGE>
-9-
of the first fiscal year of an Award Cycle, the cumulative growth rate to be
utilized for the balance of the Award Cycle shall be the cumulative growth rate
in the Corporation's earnings per share in the four fiscal years preceding the
first year and (ii) if such Change of Control occurs during any subsequent
fiscal year of an Award Cycle, the cumulative growth rate to be utilized for the
balance of the Award Cycle shall be the cumulative growth rate of the preceding
fiscal year(s) in that Award Cycle prior to the fiscal year in which occurs the
Change of Control. In the event that a performance measure other than earnings
per share is employed, similar adjustments shall be made for such holders of
unmatured incentive awards. The Committee may in its discretion determine that
such historical financial data are not appropriate or not available and may use
the latest budgets, projections, forecasts or plans for the Corporation or its
business units or subsidiaries. Except as expressly set forth in this Section
5(j), upon the occurrence of a Change of Control, no change(s) shall be made in
the terms of any incentive award (including, without limitation, its Incentive
Award Level, Payment Value, Payment Schedule or performance criteria) or in the
underlying accounting assumptions or practices for purposes of determining the
amount due thereunder, which change(s) would lessen the value of any incentive
award to the holder thereof.
6. Withholding Taxes
In connection with any payment pursuant to an incentive award, the
Corporation shall have the right to withhold from any cash amounts due the award
recipient an amount equal to the Withholding Tax. The Corporation shall make
payment (or reimburse itself for payment made) to the appropriate taxing
authority of an amount in cash equal to the amount of such Withholding Tax,
remitting any balance to the Participant. Notwithstanding the foregoing, the
Participant may elect, subject to approval by the Committee, to satisfy the
obligation to pay any Withholding Tax, in whole or in part, by providing the
Corporation with funds sufficient to enable the Corporation to pay such
Withholding Tax.
7. Transferability and Ownership Rights of Incentive Awards
No incentive award granted under the LTIP shall be transferable otherwise
than pursuant to the designation of a Designated Beneficiary or by will, descent
or distribution.
8. Adjustments Upon Changes in Capitalization
Except as otherwise provided in Section 5(j), in the event of any changes in the
outstanding stock of the Corporation by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
split-ups, split-offs, spin-offs, liquidations or other similar changes in
capitalization, or any distribution to stockholders other than cash dividends,
the Committee shall make such adjustments, if any, in light of the change or
distribution as the Committee in its sole discretion shall determine to be
appropriate in the performance measures and/or the Payment Schedule established
by the Committee under Section 5(a).
<PAGE>
-10-
9. Amendment and Termination
Unless the LTIP shall theretofore have been terminated as hereinafter
provided, the LTIP shall terminate on, and no awards shall be made after,
December 31, 2002; provided, however, that such termination shall have no effect
on awards made prior thereto. The Board of Directors of the Corporation may
terminate the LTIP, or modify or amend the LTIP in such respects as it shall
deem advisable in order to conform to any change in any law or regulation
applicable thereto, or in other respects. The amendment or termination of the
LTIP shall not, without the consent of the recipient of any award under the
LTIP, alter or impair any rights or obligations under any award theretofore
granted under the LTIP.
10. Effectiveness of the LTIP
The LTIP shall become effective on January 1, 1993.
/s/ W. Brinton Yorks, Jr.
---------------------------
W. Brinton Yorks, Jr.
Secretary
Correct:
/s/ Dennis C. Fill
- ------------------------
Dennis C. Fill
Chairman & CEO
<PAGE>
Exhibit 22
ADVANCED TECHNOLOGY LABORATORIES, INC.
(Delaware Corporation)
PARENTS & SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Percentage of
Registrant Incorporation Voting Control
- ---------- -------------- --------------
<S> <C> <C>
Advanced Technology Laboratories, Inc. Delaware Public Company
Advanced Technology Laboratories, Inc. Washington 100
Scientific Medical Systems, Inc. Washington 100
Advanced Technology Laboratories Australia 100
Australia Pty., Ltd.
Advanced Technology Laboratories Belgium 99(1)
-- Belgium N.V.
Scientific Medical Systems Far Japan 100
East,Inc. (Branch: Singapore)
Advanced Technology Laboratories Netherlands 100
Nederland B.V.
Advanced Technology Laboratories Canada 100
(Canada), Inc.
Advanced Technology Laboratories Italy 100
S.p.A.
ATL Medizinische Gerate Service und Austria 100
Handelgesellschaft m.b.H.
Advanced Technology Laboratories Sweden 100
AB
Advanced Technology Laboratories Germany 98(2)
(Deutschland) GmbH
Advanced Technology Laboratories England 99(1)
-- United Kingdom -- Limited
Advanced Technology Laboratories France 99.9997(3)
S.A.R.L.
Atlantis Diagnostics International, Inc. Washington 100
Scientific Medical Systems Delaware 100
International,Inc.
WMRK Scientific East, Inc. Delaware 100
WMRK Scientific West, Inc. Washington 100
Indchem ATL Ltd India 40(4)
ATL Trading Company Guam 100
</TABLE>
(1) 1% held by WMRK Scientific East, Inc.
(2) 2% held by Scientific Medical Systems International, Inc.
(3) 432,869 parts held by ATL (Washington) and 1 part owned by Scientific
Medical Systems, Inc.
(4) 60% held by Sanmar Electrotech Holdings Ltd. & five nominees.
12/31/93
