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SPECTRAN CORPORATION
EXHIBIT 10.63
SpecTran Corporation and Subsidiaries
EMPLOYEE PROFIT SHARING PLAN
1. Purpose
The SpecTran Corporation (the "Company") Employee Profit Sharing Plan
("EPSP" or the "Plan") is designed to allow employees to share in the profits
generated as a result of their work and to encourage employee actions that
contribute to increased profitability. This plan covers employees of SpecTran
Communication Fiber Technologies, Inc., SpecTran Specialty Optics Company,
Applied Photonic Devices, Inc. and Corporate employees of SpecTran Corporation.
2. Effective Date
The EPSP was originally effective as of January 1, 1990, and was modified
effective January 1, 1995, to give effect to multiple business units. It is
intended that the EPSP will be effective for future fiscal years as well.
However, the Company's Board of Directors may suspend or terminate the EPSP at
any time, and may change the terms of and amend the Plan from time to time in
such respects as the Board deems advisable for the best interests of the
Company.
3. Terms and Conditions
a) Eligibility
All full time regular employees (those working 40 or more hours per
week) are included in the EPSP, and regular part-time employees may be
included in the EPSP on a case by case basis as determined by the CEO. No
action on the part of the employee is required in order to be included in
the Plan. In order to be eligible for the annual payment made within 90
days from year end, the participant must be an employee in good standing
on the last day of the Plan year (December 31). If either the employee or
the Company terminates an employee's employment after the end of the Plan
year but before the final payment is made, the chief executive officer, at
his sole discretion, will decide whether or not the final bonus payment
will be made.
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SPECTRAN CORPORATION
b) Employment
Participation in this EPSP is not intended to be, nor should it be
accepted as an offer or contract of employment. The relationship between
the Company and its personnel is one of voluntary employment "at will."
c) Administration
The EPSP will be administered by an Administrator who will be
selected by the Chief Executive Officer. The Chief Executive Officer
shall have the sole authority to interpret the provisions of the Plan,
determine the amount of awards earned under the Plan, and to generate
payments to participants. All decisions and interpretations of the Chief
Executive Officer are final.
4. Determination of Award
a) Overview
Participants will receive a percentage of their salary based upon the
level of their individual operating unit's profitability, with Corporate
personnel based upon the level of profitability of all operating units
combined. The maximum percentage of salary that can be earned under the
EPSP is limited to 10%. In the case of individual operating units, no
awards will be earned under the Plan unless the individual operating unit
meets certain profitability goals. It is possible for awards to be earned
by one or more operating units even if the other operating units, or the
Company as a whole, is not profitable.
b) Definitions
(1) Salary: The participants' gross payroll earnings, including
overtime and shift differential, but excluding amounts paid for
other employee benefit plans such as, for example but not limited
to, Company contributions to the 401(k) Plan, disability payments,
and excess life insurance contributions.
(2) Pre-Bonus Income: The operating unit's pre-tax income plus the
provision for incentive payments, including a provision for the
Company's portion of FICA expense on the incentive payments. The
Board of Directors may, at its discretion, decide to either
include or exclude from the calculation any unusual non-operating
items included in pre-tax income.
(3) Return on Revenues: The percentage of Pre-Bonus Income divided
by revenues.
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SPECTRAN CORPORATION
(4) Performance Percentage: The percentage obtained by dividing
actual Pre-Bonus Income for the year by the year's budgeted pre-
bonus income from the operations plan approved by the Board at the
beginning of the Plan year, limited to 125%. The Performance
Percentage is used in determining the amount of the award earned
under the Plan by a participant.
(5) Adjusted Return on Revenues: The percentage obtained by
multiplying the Return on Revenues times the Performance Percentage.
(6) EPSP %: The percentage of each participant's Salary that will be
paid as an incentive award under this Plan, based upon a formula
according to the level of Adjusted Return on Revenues.
(7) Adjusted Pre-Bonus Income: Pre-bonus income less 6% times
operating unit net revenues.
c) Calculation of Operating Unit EPSP Award
The percentage of Salary to be paid to each participant of an
operating unit under this EPSP, subject to the maximum limitation of 10%,
is calculated as follows:
RETURN ON REVENUES X PERFORMANCE
PERCENTAGE = ADJUSTED RETURN ON REVENUES
The EPSP% is based upon the Adjusted Return on Revenues, as follows:
Adjusted Return on Revenues EPSP %
--------------------------- ------
Less than 8% 0%
8%-9% 1%-2%
Over 9% 2% plus 50% times excess over 9%
The dollar amount to be paid to each participant, subject to the cap of
10% and the limitations in 4(e) below, will be:
SALARY X EPSP %
d) Calculation of Corporate EPSP Award
The EPSP% for Corporate employees will be based upon the combined
Adjusted Return on Revenues for all operating units.
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SPECTRAN CORPORATION
e) Limitations
The total of all EPSP awards for an individual operating unit to be
paid under this Plan cannot exceed 25% of Adjusted Pre-Bonus Income. In
the event that the total of all EPSP awards calculated under 4(c) above
exceeds 25% of Adjusted Pre-Bonus Income, each participants' EPSP award
will be prorated, calculated as follows:
PARTICIPANT'S SALARY X 25% OF ADJUSTED PRE-BONUS INCOME
-------------------------------
SUM OF ALL PARTICIPANTS' SALARY
5. Payment
Within ninety (90) days from year end, each participant's EPSP award will
be calculated based on audited results for the entire year, and the full amount
of the EPSP award will be paid to participants.
In order to be eligible for the payment made within 90 days from year end,
the participant must be an employee in good standing on the last day of the
Plan year (December 31). If employment is terminated after the last day of the
Plan year but before final payment is made, the chief executive officer will
decide whether or not to make the payment.
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SPECTRAN CORPORATION
6. Examples
The following illustrates how the calculations are performed:
OPERATING UNIT PERSONNEL CORPORATE
CFT SSOC APD COMBINED
19XX ACTUAL RESULTS
-------------------
Revenues 30,000 14,000 10,000 54,000
Pre-Bonus Income 4,200 1,680 800 6,680
Return on Revenues 14.0% 12.0% 8.0% 12.4%
19XX BUDGET
-----------
Pre-Bonus Income 4,000 1,500 900 6,400
Performance Percentage 105.0% 112.0% 88.9% 104.4%
ADJUSTED RETURN OF REVENUES 14.7% 13.4% 7.1% 12.9%
---------------------------
EPSP % SUBJECT TO LIMITATION 4.9% 4.2% 0.0% 4.0%
----------------------------
LIMITATION:
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Pre-Bonus Income 4,200 1,680 800 6,680
6% of Net Revenues 1,800 840 600 3,240
----- --- --- -----
Adjusted Pre-Bonus Income 2,400 840 200 3,440
Limitation Rate 25% 25% 25% 25%
--- --- --- ---
Dollar Limit 600 210 50 860
Salaries & Wages 7,000 5,500 1,000 13,500
----- ----- ----- ------
EPSP % Limitation 8.6% 3.8% 5.0% 6.4%
==== ==== ==== ====
ACTUAL EPSP% 4.9% 3.8% 0.0% 4.0%
------------ ==== ==== ==== ====
Participant's Salary 25,000 30,000 20,000 40,000
------ ------ ------ ------
ACTUAL BONUS (NOT ROUNDED) 1,213 1,145 0 1,580
-------------------------- ===== ===== = =====
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