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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
MEADE INSTRUMENTS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MEADE INSTRUMENTS CORPORATION
6001 OAK CANYON, IRVINE, CALIFORNIA 92618 U.S.A.
(949) 451-1450 M FAX: (949) 451-1460 M www.meade.com
MEADE LOGO
June 12, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Meade Instruments Corp. ("Meade" or the "Company") to be held on July 12,
2001. We sincerely hope that you will be able to attend the meeting which will
be held at the Irvine Marriott Hotel, 18000 Von Karman Avenue, Irvine,
California 92612, beginning at 10:00 a.m., local time.
At this meeting you are being asked to (i) re-elect John C. Diebel and
Timothy C. McQuay to the Board of Directors for a three-year term expiring at
the 2004 Annual Meeting of Stockholders and (ii) approve an amendment to the
Company's 1997 Stock Incentive Plan (the "Plan") to increase the number of
shares of the Company's Common Stock available for issuance thereunder.
The members of the Board of Directors and management look forward to
personally greeting as many stockholders as possible at the Annual Meeting.
However, whether or not you plan to attend personally, and regardless of the
number of shares you own, it is important that your shares be represented.
Although you presently may plan to attend the Annual Meeting, please
complete, sign, date and promptly return the enclosed proxy card. If you do
attend the Annual Meeting and wish to vote in person, you may revoke your proxy
at that time.
Sincerely,
/s/ John C. Diebel
John C. Diebel
Chairman of the Board and
Chief Executive Officer
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MEADE INSTRUMENTS CORP.
6001 OAK CANYON
IRVINE, CALIFORNIA 92618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 12, 2001
The Annual Meeting of Stockholders of Meade Instruments Corp., a Delaware
corporation ("Meade" or the "Company"), will be held at the Irvine Marriott
Hotel, 18000 Von Karman Avenue, Irvine, California 92612, beginning at 10:00
a.m., local time, on Thursday, July 12, 2001 for the following purposes:
(1) To re-elect John C. Diebel and Timothy C. McQuay to the Board of
Directors for a three-year term expiring at the 2004 Annual Meeting of
Stockholders;
(2) To approve an amendment to the Company's 1997 Stock Incentive Plan
(the "Plan") to increase the number of shares of the Company's Common Stock
available for issuance thereunder; and
(3) To transact such other business as may properly come before the
Annual Meeting and at any adjournment thereof.
Shares represented by properly executed proxies will be voted in accordance
with the specifications therein. It is the intention of the Board of Directors
that shares represented by proxies, which are not limited to the contrary, will
be voted for the re-election of the directors named in the attached Proxy
Statement.
The Board of Directors has fixed the close of business on May 21, 2001 as
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting and at any adjournment thereof. A complete list of
stockholders entitled to vote at the Annual Meeting will be available for
examination by any stockholder, for any purpose germane to the Annual Meeting,
at the office of the Secretary of the Company, at 6001 Oak Canyon, Irvine,
California 92618, during the ten-day period preceding the Annual Meeting.
By Order of the Board of Directors
/s/ Mark D. Peterson
Mark D. Peterson
Vice President and General Counsel
Irvine, California
June 12, 2001
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE, PLEASE INDICATE
YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD AND DATE, SIGN AND RETURN IT
IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO
POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO AVOID THE ADDITIONAL EXPENSE
TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN PROMPTLY
MAILING IN YOUR PROXY CARD.
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MEADE INSTRUMENTS CORP.
6001 OAK CANYON
IRVINE, CALIFORNIA 92618
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is being solicited by the Board of Directors of
Meade Instruments Corp. ("Meade" or the "Company") for use at the Company's
Annual Meeting of Stockholders to be held on Thursday, July 12, 2001, at 10:00
a.m. local time, at the Irvine Marriott Hotel, 18000 Von Karman Avenue, Irvine,
California 92612, and at any adjournment thereof. This Proxy Statement and the
accompanying proxy are first being mailed to stockholders on or about June 12,
2001.
The expense of soliciting proxies will be borne by the Company. Proxies
will be solicited principally through the use of the mail, but directors,
officers and regular employees of the Company may solicit proxies personally or
by telephone or special letter without any additional compensation. The Company
also will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses in forwarding proxy materials to
beneficial owners.
OUTSTANDING SHARES AND VOTING RIGHTS
On May 21, 2001, the record date with respect to this solicitation for
determining stockholders entitled to notice of and to vote at the Annual
Meeting, 16,471,571 shares of the Company's Common Stock were outstanding. No
shares of any other class of stock were outstanding. Only stockholders of record
on such date are entitled to notice of and to vote at the Annual Meeting and at
any adjournment thereof. Each stockholder of record is entitled to one vote for
each share held on all matters to come before the Annual Meeting and at any
adjournment thereof.
All shares represented by each properly executed unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein. An
executed proxy may be revoked at any time before its exercise by filing with the
Secretary of the Company, at 6001 Oak Canyon, Irvine, California 92618, the
principal executive office of the Company, a written notice of revocation or a
duly executed proxy bearing a later date. The execution of the enclosed proxy
will not affect a stockholder's right to vote in person (upon showing proper
evidence of such stockholder's ownership of such shares) should such stockholder
find it convenient to attend the Annual Meeting and desire to vote in person.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum and for purposes of determining the
outcome of any matter submitted to the stockholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality or of "votes cast."
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees over which the broker or nominee lacks
discretionary power to vote and for which the broker or nominee has not received
specific voting instructions from the beneficial owner) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter as to
which the broker has indicated on the proxy that it does not have discretionary
authority to vote, those shares will be treated as not present and not entitled
to vote with respect to that matter (even though those shares are considered
entitled to vote for quorum purposes and may be entitled to vote on other
matters).
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Bylaws provide that the authorized number of directors of the
Company shall not be less than three nor more than fifteen, with the exact
number of directors to be determined from time to time solely by resolution
adopted by the affirmative vote of a majority of the directors then in office.
The full board currently consists of seven directors, each elected to serve
until his term has expired and until his successor has been duly elected and
qualified. The Certificate of Incorporation and Bylaws provide that the Board of
Directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Board of Directors. All
of the directors were previously elected to their present terms of office by the
stockholders of the Company with the exception of Michael P. Hoopis and Vern L.
Fotheringham. Mr. Hoopis was appointed by the Board to serve as a Class I
director in March 2000, and Mr. Fotheringham was appointed by the Board to serve
as a Class I director in May 2001. At the 2001 Annual Meeting of Stockholders,
two directors are to be elected as Class III directors for a three-year term or
until election and qualification of their successors.
The accompanying proxies solicited by the Board of Directors will be voted
for the election of the nominees named below, and for the terms listed below,
unless the proxy card is marked to withhold authority to vote for such nominees.
The nominees are presently members of the Company's Board of Directors.
The nominees for election to the Board of Directors at the 2001 Annual
Meeting of Stockholders, together with their terms, are set forth below:
CLASS NOMINEE TERM
- ----- ------- ----
III John C. Diebel Three-year term expiring at the 2004 Annual Meeting
III Timothy C. McQuay Three-year term expiring at the 2004 Annual Meeting
If either of the nominees should become unavailable for election to the
Board of Directors, the persons named in the proxy or their substitutes shall be
entitled to vote for a substitute to be designated by the Board of Directors.
Alternatively, the Board of Directors may reduce the number of directors. The
Board of Directors has no reason to believe that it will be necessary to
designate a substitute nominee or reduce the number of directors.
REQUIRED VOTE
For the purpose of electing the directors, each stockholder is entitled to
one vote for each director to be elected for each share of Common Stock owned.
The candidates receiving the highest number of votes, up to the number of
directors to be elected, will be elected. Votes cast against a candidate or
votes withheld will have no legal effect. Any unmarked proxies, including those
submitted by brokers or nominees, will be voted as indicated on the accompanying
proxy card. Stockholders do not have the right to cumulate votes in the election
of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
LISTED ABOVE.
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NOMINEES AND CONTINUING DIRECTORS
The following table provides information regarding the nominees, the three
Class I directors whose terms of office expire at the 2002 Annual Meeting of
Stockholders and the two Class II directors whose terms of office expire at the
2003 Annual Meeting of Stockholders. The ages shown are as of June 1, 2001.
DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- --------
NOMINEES:
Class III:
John C. Diebel (57)......... John C. Diebel serves as the Chairman of the Board and 1975 - 1986
Chief Executive Officer of the Company. Mr. Diebel 1991 - present
founded the Company in 1972. He has been the Chairman of
the Board and Chief Executive Officer of the Company for
the majority of the time since December 1975. Prior to
founding the Company, Mr. Diebel worked as an engineer
for TRW Inc. and Hughes Aircraft Co. Mr. Diebel received
BS and MS degrees in electrical engineering from the
California Institute of Technology and a Ph.D. degree in
electrical engineering from the University of Southern
California.
Timothy C. McQuay (49)...... Timothy C. McQuay has been a Managing 1997
Director -- Investment Banking at A.G. Edwards & Sons,
Inc. since August 1997. From May 1995 to August 1997,
Mr. McQuay was a Partner at Crowell, Weedon & Co. and
from October 1994 to August 1997 he also served as
Managing Director -- Corporate Finance. From May 1993 to
October 1994, Mr. McQuay served as Vice President,
Corporate Development with Kerr Group, Inc., a New York
Stock Exchange listed plastics manufacturing company.
From May 1990 to May 1993, Mr. McQuay served as Managing
Director -- Merchant Banking with Union Bank. Mr. McQuay
received a BA degree in economics from Princeton
University and a MBA degree in finance from the
University of California at Los Angeles. He serves as a
member of the board of directors of Keystone Automotive
Industries, Inc.
CONTINUING DIRECTORS:
Class I:
Joseph A. Gordon, Jr. Joseph A. Gordon, Jr. has served as the Company's Senior 1996
(51)...................... Vice President -- North American Sales since June 1995.
From December 1984 to June 1995, he served as the
Company's Vice President -- North American Sales. From
January 1981 to December 1984, Mr. Gordon was the Vice
President of Sales at Celestron. Mr. Gordon received a
BS degree in marketing from the University of
Cincinnati.
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DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- --------
Michael P. Hoopis (50)...... Michael P. Hoopis has served as the President and Chief 2000
Executive Officer of Water Pik Technologies, Inc. since
November 1999. From October 1998 to November 1999, Mr.
Hoopis was President and Chief Executive Officer of the
consumer products segment of Allegheny Teledyne, Inc.,
the predecessor to Water Pik Technologies, Inc. From
July 1996 to September 1998, Mr. Hoopis served as
President of Worldwide Household Products, Black &
Decker Corporation. From May 1992 to July 1996, Mr.
Hoopis served as President of Price Pfister, Inc., a
division of Black & Decker Corporation. Mr. Hoopis
received his BS degree in industrial engineering from
the University of Rhode Island. Mr. Hoopis serves as a
member of the board of directors of Doskocil
Manufacturing Company, Inc.
Vern L. Fotheringham (53)... Vern L. Fotheringham is co-founder and has served as 2001
Vice Chairman of Vectrad Networks, a wireless broadband
network infrastructure company since June 2000. From
June 1998 to January 2001, Mr. Fotheringham was the
Chairman of Bazillion, Inc. a global Integrated Service
Provider. From March 1993 to November 1997, Mr.
Fotheringham was the founder, chairman and CEO of
Advanced Radio Telecom Corporation (ART). Mr.
Fotheringham received a BA degree in fine arts from
California State University Fullerton. Mr. Fotheringham
serves on a number of other boards including those of
CAIS Internet, Lightrade and TeraBeam Corporation.
Class II:
Steven G. Murdock (49)...... Steven G. Murdock has served as the Company's President 1996
and Chief Operating Officer since October 1990 and the
Company's Secretary since April 1996. From May 1980 to
October 1990, Mr. Murdock served as the Company's Vice
President of Optics. From November 1968 to May 1980, Mr.
Murdock worked as the optical manager for Coulter
Optical, Inc., an optics manufacturer. Mr. Murdock
received a BS degree in business administration from
California State University at Northridge.
Harry L. Casari (64)........ Harry L. Casari was a Certified Public Accountant and is 1997
currently a private investor. Mr. Casari worked for
Ernst & Young LLP from 1969 until 1994 when he retired
as a Partner. Mr. Casari received a BS degree in
business administration from the University of Denver.
He serves as a member of the board of directors of Cohu,
Inc.
DIRECTORS' FEES
Directors who also are employees of the Company are reimbursed for expenses
incurred in attending meetings of the Board of Directors but do not otherwise
receive compensation for serving as directors of the Company. Each director who
is not an employee of the Company is entitled to receive (i) an annual fee of
$5,000 for his services as a director, (ii) a fee of $750 for each Board and
Committee meeting attended and (iii) reimbursement for his expenses incurred in
attending all Board and Committee meetings. In addition, each director who is
not an employee of the Company is entitled
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to receive 5,000 options to purchase the Company's Common Stock upon his initial
election to the Board together with an additional grant of 5,000 options on the
date of each annual meeting of stockholders preceding a year in which such
director will continue in office, provided that a new non-employee director will
only receive one such automatic grant during the calendar year in which such
director is elected.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Committees of the Board of Directors consist of an Audit Committee and
a Compensation Committee, each of which is comprised solely of outside
directors. During the fiscal year ended February 28, 2001, the Board of
Directors held five meetings. All directors attended 75% or more of the total
meetings of the Board of Directors and total meetings of the Committees of the
Board of Directors on which they served.
Compensation Committee. During the fiscal year ended February 28, 2001, the
Compensation Committee was comprised of Messrs. Hoopis (Chairman) and Casari.
Its functions include reviewing and approving the compensation of the Company's
Chief Executive Officer as well as making recommendations with respect to the
compensation of the Company's other officers and key employees, including the
grant of options or other awards under the Company's 1997 Stock Incentive Plan.
During the fiscal year ended February 28, 2001, the Compensation Committee held
three meetings.
Audit Committee. During the fiscal year ended February 28, 2001, the Audit
Committee was comprised of Messrs. Casari (Chairman) and Hoopis. In May 2001,
Mr. Fotheringham was also added as a member of the Audit Committee. As set forth
in the Company's Audit Committee Charter, adopted March 1, 2000, a copy of which
is attached hereto as Exhibit A, the Audit Committee's functions include
reviewing the financial reporting process, the Company's internal control
systems, the audit process, the Company's process for monitoring compliance with
laws and regulations, and recommending to the Board of Directors the engagement
of determining the independence of the Company's independent accountants. During
the fiscal year ended February 28, 2001, the Audit Committee held two meetings.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management is responsible for the Company's
internal controls and reviewing the financial reporting process. The independent
accountants are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted
accounting principles and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
During the 2001 fiscal year, the Audit Committee met and held discussions
with management and the Company's independent accountants. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with generally acceptable accounting
principles and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent accountants.
The Audit Committee discussed with the independent accountants matters
required to be discussed by Statement on Auditing Standards No. 61. The
Company's independent accountants also provided to the Audit Committee the
written disclosure required by Independence Standards Board Standard No. 1
"Independence Discussions with Audit Committees." The Committee discussed with
the independent accountants that firm's independence and considered whether the
non-audit services provided by the independent accountants are compatible with
maintaining its independence.
Based on the Audit Committee discussion with management and the independent
accountants, and the Audit Committee's review of the representation of
management and the report of the independent accountants to the Audit Committee,
the Audit Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's annual report on Form 10-K
for the year ended February 28, 2001 filed with the SEC.
The Audit Committee recommended to the Board of Directors the selection of
the Company's independent accountants.
THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Harry L. Casari (Chairman)
Michael P. Hoopis
Notwithstanding anything to the contrary set forth in the Company's previous
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate by reference previous or future
filings, including this Proxy Statement, in whole or in part, the foregoing
Report of the Audit Committee and any statements regarding the independence of
the Audit Committee members shall not be incorporated by reference into any such
filings.
FEES PAID TO INDEPENDENT AUDITORS
AUDIT FEES
The aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP for the audit of the Company's annual financial
statements for the fiscal year ended February 28, 2001, and the reviews of the
financial statements included in the Company's Form 10-Qs for such fiscal year
were approximately $102,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were billed for professional services rendered by
PricewaterhouseCoopers LLP for financial systems design and implementation
services for the fiscal year ended February 28, 2001.
ALL OTHER FEES
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP other than the services referred to above were
approximately $61,000 for the fiscal year ended February 28, 2001. The Audit
Committee considered whether the provision of these services is compatible with
maintaining the independence of PricewaterhouseCoopers LLP.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of June 1, 2001, for (i) each person
who beneficially owned more than 5% of the Common Stock, (ii) each of the
directors and Named Executive Officers (as defined in the "Summary of Executive
Compensation" section below) and (iii) all directors and executive officers as a
group. Except as otherwise indicated, beneficial ownership includes voting and
investment power with respect to the shares shown. Share quantities reflect the
two-for-one stock split effected in the form of a stock dividend payable on June
19, 2000 to all stockholders of record as of May 22, 2000 (the "Stock Split").
SECURITY OWNERSHIP TABLE
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP OF CLASS
---------------- ---------- --------
J.P. Morgan Chase & Co.(1).................................. 1,383,575 8.40%
John C. Diebel(2)(3)........................................ 2,602,289 15.80%
Steven G. Murdock(2)(4)..................................... 1,644,998 9.99%
Joseph A. Gordon, Jr.(2)(5)................................. 430,997 2.62%
Brent W. Christensen(2)(6).................................. 117,927 *
Mark D. Peterson(2)(7)...................................... 115,594 *
Robert A. Wood III(2)(8).................................... 152,747 *
Kenneth W. Baun(2)(9)....................................... 115,547 *
Timothy C. McQuay(2)(10).................................... 25,832 *
Harry L. Casari(2)(11)...................................... 28,632 *
Michael P. Hoopis(2)(12).................................... 3,333 *
Vern L. Fotheringham(2)..................................... 0 *
Meade Instruments Corp. Employee Stock Ownership
Plan(2)(13)............................................... 2,276,396 13.82%
All current directors and executive officers as a group (11
persons)(14).............................................. 5,237,896 31.80%
- ---------------
* Less than 1%
(1) According to a Schedule 13G, dated as of February 8, 2001, filed with the
Securities and Exchange Commission, J.P. Morgan Chase & Co., a Delaware
corporation ("Chase"), has sole voting power as to 1,177,375 of such
shares, sole dispositive power as to 1,383,575 of such shares, shared
voting power as to none of such shares and shared dispositive power as to
none of such shares. Chase is a Parent Holding Company as defined in Rule
13d-1(b)(1)(ii)(G) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The mailing address of Chase is 270 Park Avenue, New York,
NY 10017.
(2) The address for all directors and executive officers of the Company and the
Company's Employee Stock Ownership Plan ("ESOP") Committee is c/o Meade
Instruments Corp., 6001 Oak Canyon, Irvine, California 92618.
(3) Includes 402,289 shares subject to options that are currently exercisable
or will become exercisable on or before July 31, 2001. Also includes
2,200,000 shares held by John C. Diebel, as Trustee of the Diebel Living
Trust u/d/t dated January 12, 1995.
(4) Includes 329,998 shares subject to options that are currently exercisable
or will become exercisable on or before July 31, 2001. Excludes 2,276,396
shares held by the ESOP. Mr. Murdock is a member of the ESOP Committee and
disclaims beneficial ownership of any of the shares owned by the ESOP. If
the 2,276,396 shares owned by the ESOP were included, Mr. Murdock would be
deemed to beneficially own 3,921,394 shares, or 23.81%. Mr. Murdock is not
a participant in the ESOP. See footnote (13) below.
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(5) Includes 289,997 shares subject to options that are currently exercisable
or will become exercisable on or before July 31, 2001.
(6) Includes 95,831 shares subject to options that are currently exercisable or
will become exercisable on or before July 31, 2001. Also includes 1,990
shares held by Mr. Christensen in an IRA account and 20,106 shares
allocated to Mr. Christensen's ESOP account as an ESOP participant. Mr.
Christensen's ESOP shares are fully vested. Excludes 2,276,396 shares held
by the ESOP. Mr. Christensen is a member of the ESOP Committee and, other
than as a participant, disclaims beneficial ownership of any of the shares
owned by the ESOP. If the 2,276,396 shares owned by the ESOP were included,
Mr. Christensen would be deemed to beneficially own 2,394,323 shares, or
14.54%. See footnote (13) below.
(7) Includes 99,372 shares subject to options that are currently exercisable or
will become exercisable on or before July 31, 2001. Also includes 7,339
shares held by Mr. Peterson in an IRA account and 8,883 shares allocated to
Mr. Peterson's ESOP account as an ESOP participant. Mr. Peterson's ESOP
shares are fully vested. Excludes 2,276,396 shares held by the ESOP. Mr.
Peterson is a member of the ESOP Committee and, other than as a
participant, disclaims beneficial ownership of any of the shares owned by
the ESOP. If the 2,276,396 shares owned by the ESOP were included, Mr.
Peterson would be deemed to beneficially own 2,391,990 shares, or 14.52%.
See footnote (13) below.
(8) Includes 130,831 shares subject to options that are currently exercisable
or will become exercisable on or before July 31, 2001. Also includes 2,150
shares held by Mr. Wood in an IRA account and 19,766 shares allocated to
Mr. Wood's ESOP account as an ESOP participant. Mr. Wood's ESOP shares are
fully vested.
(9) Includes 96,713 shares subject to options that are currently exercisable or
will become exercisable on or before July 31, 2001. Also includes 1,990
shares held by Mr. Baun in an IRA account and 16,844 shares allocated to
Mr. Baun's ESOP account as an ESOP participant. Mr. Baun's ESOP shares are
fully vested.
(10) Includes 25,832 shares subject to options that are currently exercisable or
will become exercisable on or before July 31, 2001.
(11) Includes 25,832 shares subject to options that are currently exercisable or
will become exercisable on or before July 31, 2001.
(12) Includes 3,333 shares subject to options that are currently exercisable or
will become exercisable on or before July 31, 2001.
(13) Unallocated shares of Common Stock held by the ESOP are voted by the
trustee of the ESOP, Wells Fargo Bank, N.A. (the "Trustee"), as directed by
the ESOP Committee. Each participant in the ESOP is entitled to direct the
Trustee as to how to vote shares allocated to his or her ESOP account,
irrespective of whether the participant's shares are vested. Any allocated
shares of Common Stock for which participants do not provide voting
instructions are voted by the Trustee in the manner directed by the ESOP
Committee. The ESOP Committee is comprised of Steven G. Murdock, the
Company's President, Chief Operating Officer and Secretary, Brent W.
Christensen, the Company's Vice President -- Finance and Chief Financial
Officer, and Mark D. Peterson, the Company's Vice President and General
Counsel. Mr. Murdock is not a participant in the ESOP. Each of the members
of the ESOP Committee, other than as a participant with respect to Messrs.
Christensen and Peterson, disclaims beneficial ownership of any of the
shares owned by the ESOP. The Trustee's address is 707 Wilshire Boulevard,
Los Angeles, California 90017.
(14) Includes 1,500,028 shares subject to options that are currently exercisable
or will become exercisable on or before July 31, 2001. Also includes 1,990,
7,339, 2,150 and 1,990 shares held by each of Messrs. Christensen,
Peterson, Wood and Baun, respectively, in an IRA account. Also includes
20,106, 8,883, 19,766 and 16,844 shares allocated to Messrs. Christensen's,
Peterson's, Wood's and Baun's ESOP accounts respectively, as ESOP
participants. Messrs. Christensen's,
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Peterson's, Wood's and Baun's ESOP shares are fully vested. Excludes
2,276,396 shares held by the ESOP. Messrs. Murdock, Christensen and
Peterson are members of the ESOP Committee and, other than as a participant
with respect to Messrs. Christensen and Peterson, each disclaims beneficial
ownership of any of the shares owned by the ESOP. If the 2,276,396 shares
owned by the ESOP were included, all directors and officers as a group
would be deemed to beneficially own 7,514,292 shares, or 45.62%. See
footnotes (3) through (13) above.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid to the Company's Chief Executive Officer and the Company's six
other most highly compensated executive officers based on the cash compensation
paid to executive officers of the Company during the 2001 fiscal year
(collectively, the "Named Executive Officers").(1)
SUMMARY COMPENSATION TABLE
LONG-TERM(4)
ANNUAL COMPENSATION
COMPENSATION(2) SECURITIES
------------------ UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION(6)
NAME AND PRINCIPAL POSITION YEAR ($) ($)(3) (#)(5) ($)
--------------------------- ---- ------- ------- ------------ ---------------
John C. Diebel................... 2001 498,200 434,500 175,000 --
Chairman of the Board and 2000 433,700 257,600 170,000 --
Chief Executive Officer 1999 395,000 160,000 130,000 --
Steven G. Murdock................ 2001 423,200 357,500 140,000 --
President, Chief Operating 2000 356,300 212,000 120,000 --
Officer and Secretary 1999 325,000 125,000 80,000 --
Joseph A. Gordon, Jr. ........... 2001 224,300 200,000 95,000 --
Senior Vice President -- 2000 199,500 114,100 80,000 --
North American Sales 1999 175,000 30,000 40,000 --
Mark D. Peterson................. 2001 209,300 185,000 80,000 24,850
Vice President and 2000 184,300 97,800 70,000 58,000
General Counsel 1999 150,000 10,000 40,000 46,300
Brent W. Christensen............. 2001 199,300 175,000 80,000 24,850
Vice President -- Finance and 2000 174,200 88,100 70,000 58,000
Chief Financial Officer 1999 135,000 28,300 40,000 46,300
Robert A. Wood III............... 2001 199,300 175,000 80,000 24,850
Vice President -- Manufacturing 2000 174,200 88,100 70,000 65,500(7)
1999 135,000 28,300 40,000 45,100
Kenneth W. Baun.................. 2001 199,300 175,000 80,000 24,850
Vice President -- Engineering 2000 174,200 88,100 70,000 54,000
1999 135,000 20,500 40,000 38,200
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(1) The Company has included six executive officers in addition to the Chief
Executive Officer in its various executive compensation tables because the
aggregate salary and bonus amounts for Messrs. Christensen, Wood and Baun
for fiscal 2001 were identical.
(2) The aggregate amount of perquisites and other personal benefits, securities
or property paid to each of the Named Executive Officers during the 2001
fiscal year did not exceed the lesser of 10% of such officer's total annual
salary and bonus for fiscal 2001 or $50,000. Therefore, no "Other Annual
Compensation" column has been included in this table.
(3) The bonus amounts shown below represent the amount actually paid during the
first quarter of each respective fiscal year; such amounts, however, were
based primarily on the Company's and each Named Executive Officer's
performance during the previous fiscal year. The bonus amounts paid during
the first quarter of fiscal 2002, which were based primarily on the
Company's and each Named Executive Officer's performance during fiscal 2001,
were as follows: Mr. Diebel $0; Mr. Murdock $0; Mr. Gordon $22,192; Mr.
Peterson $20,713; Mr. Christensen $19,726; Mr. Wood $19,726; and Mr. Baun
$19,726.
(4) The Company has not issued stock appreciation rights or restricted stock
awards. The Company currently has no "long-term incentive plan" as that term
is defined in the applicable rules. The Compensation Committee has the
ability to create such a plan under the Company's 1997 Stock Incentive Plan.
All stock options granted to the Named Executive Officers were non-qualified
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options granted at fair market value pursuant to the Company's 1997 Stock
Incentive Plan. Please see the "Option Grants in Last Fiscal Year" table
below for information relating to each specific grant. Share quantities for
all fiscal years presented have been restated to reflect the Stock Split.
(5) The number of options listed for each Named Executive Officer granted during
fiscal 2001 represents two separate grants -- one designed primarily to
incentivize each Named Executive Officer during fiscal 2001 and one designed
primarily to incentivize each Named Executive Officer during fiscal 2002.
See "Option Grants in Last Fiscal Year" table below.
(6) Amounts represent the aggregate value of shares of the Company's Common
Stock (based upon the share price as of the end of each respective fiscal
year) allocated to each Named Executive Officer's ESOP account pursuant to
(i) the Company's matching contribution under the ESOP Plan for amounts
deferred under the Company's 401(k) Plan (see "Benefit Plans -- 401(k)
Plan") and (ii) the Company's contribution under the ESOP Plan (see "Benefit
Plans -- Employee Stock Ownership Plan").
(7) Includes additional one-time merit based compensation benefits valued at
$7,500.
SUMMARY OF OPTION GRANTS
The following table provides certain summary information concerning grants
of options to the Named Executive Officers during the 2001 fiscal year. The
information in the following table reflects the Stock Split.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN -------------------
GRANTED FISCAL YEAR EXERCISE PRICE 5% 10%
NAME # # $/SH. EXPIRATION DATE $ $
---- ---------- --------------- -------------- --------------- ------- ---------
John C. Diebel......... 100,000(1) 8.1% 11.0625 03/02/10 695,710 1,763,080
75,000(2) 6.1% 5.0000 01/08/11 235,840 597,650
Steven G. Murdock...... 80,000(1) 6.5% 11.0625 03/02/10 556,570 1,410,460
60,000(2) 4.9% 5.0000 01/08/11 188,670 478,120
Joseph A. Gordon,
Jr. ................. 50,000(1) 4.1% 11.0625 03/02/10 347,860 881,540
45,000(2) 3.7% 5.0000 01/08/11 141,500 358,590
Mark D. Peterson....... 40,000(1) 3.3% 11.0625 03/02/10 278,290 705,230
40,000(2) 3.3% 5.0000 01/08/11 125,780 318,750
Brent W. Christensen... 40,000(1) 3.3% 11.0625 03/02/10 278,290 705,230
40,000(2) 3.3% 5.0000 01/08/11 125,780 318,750
Robert A. Wood III..... 40,000(1) 3.3% 11.0625 03/02/10 278,290 705,230
40,000(2) 3.3% 5.0000 01/08/11 125,780 318,750
Kenneth W. Baun........ 40,000(1) 3.3% 11.0625 03/02/10 278,290 705,230
40,000(2) 3.3% 5.0000 01/08/11 125,780 318,750
- ---------------
(1) Each of the options are non-qualified options granted pursuant to the
Company's 1997 Stock Incentive Plan. Each option is subject to a four-year
vesting schedule: 25% of such options become exercisable one year after the
grant date and the remainder become exercisable in substantially equal
installments over the succeeding thirty-six months. Each option was granted
on March 3, 2000, and was designed primarily to incentivize each Named
Executive Officer during fiscal 2001.
(2) Each of the options are non-qualified options granted pursuant to the
Company's 1997 Stock Incentive Plan. Each option is subject to a three-year
vesting schedule: 25% of such options become exercisable six months after
the grant date, an additional 25% become exercisable one year after the
grant date and the remainder become exercisable in substantially equal
installments
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over the succeeding twenty-four months. Each option was granted on January
9, 2001, and was designed primarily to incentivize each Named Executive
Officer during fiscal 2002.
SUMMARY OF OPTIONS EXERCISED
The following table provides certain summary information concerning the
exercise of stock options by the Named Executive Officers during the 2001 fiscal
year together with the fiscal year-end value of unexercised options. The
information in the following table reflects the Stock Split.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN
SHARES OPTIONS AT THE MONEY OPTIONS AT
ACQUIRED ON VALUE(1) FISCAL YEAR END FISCAL YEAR-END(1)
EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
# $ # $
----------- --------- ------------------------- -------------------------
John C. Diebel.............. 0 0 316,873/358,127 482,740/336,010
Steven G. Murdock........... 0 0 261,665/278,335 411,460/263,540
Joseph A. Gordon, Jr. ...... 0 0 250,414/164,586 575,020/149,980
Mark D. Peterson............ 25,000 614,240 65,205/144,795 89,200/137,260
Brent W. Christensen........ 20,000 547,430 64,788/140,212 90,970/127,130
Robert A. Wood III.......... 20,000 1,149,810 99,788/140,212 167,690/127,130
Kenneth W. Baun............. 15,059 895,960 65,670/140,212 126,620/127,130
- ---------------
(1) These amounts represent the difference between the market value of the
securities underlying the options at exercise date or on February 28, 2001
(the last day of trading for the fiscal year-ended on such date), as the
case may be, and the exercise or base price of "in-the-money" options, as
adjusted to reflect the Stock Split.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the fiscal year ended February 28, 2001, the Company's Compensation
Committee consisted of Messrs. Michael P. Hoopis (Chairman) and Harry L. Casari.
Neither Messrs. Hoopis nor Casari is currently an officer or employee of the
Company or any of its subsidiaries.
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
As members of the Compensation Committee, it is our duty to review and
oversee the Company's overall compensation program for its senior management.
The Compensation Committee oversees the administration of the Meade Instruments
Corp. 1997 Stock Incentive Plan. In addition, the Compensation Committee
establishes the compensation and evaluates the performance of the Chief
Executive Officer. The Compensation Committee is comprised entirely of
non-employee directors.
The primary philosophy of the Company regarding compensation is to offer a
program which rewards each of the members of senior management commensurately
with the Company's overall growth and financial performance, including each
person's individual performance during the previous fiscal year. The Company's
compensation program for senior management is designed to attract and retain
individuals who are capable of leading the Company in achieving its business
objectives in an industry characterized by competitiveness, growth and change.
The Company believes a substantial portion of the annual compensation of
each member of senior management should relate to, and should be contingent
upon, the financial success of the Company, as
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well as the individual contribution of each particular person to that success.
As a result, a significant portion of the total compensation package consists of
variable, performance-based components, such as bonuses and stock awards, which
can increase or decrease to reflect changes in corporate and individual
performance.
The Compensation Committee establishes the compensation package for the
Company's Chief Executive Officer, Mr. John C. Diebel, and reviews the
compensation package of certain other members of senior management in light of
information collected by the Compensation Committee regarding the compensation
practices of similar companies. The Compensation Committee considers various
indicators of success on both a corporate and an individual level in determining
the overall compensation package for Mr. Diebel and for other members of senior
management. The Compensation Committee considers such corporate performance
measures, among others, as revenue, operating income and earnings per share in
its calculation of Mr. Diebel's compensation.
The Company's annual compensation package for Mr. Diebel and the other
members of senior management will typically consist of: (a) salary, (b) annual
cash bonuses and (c) long-term incentive or non-cash awards, primarily stock
options. Mr. Diebel's base salary for the 2001 fiscal year was based on his
employment agreement with the Company (the "Employment Agreement"), pursuant to
which he serves as Chairman of the Board and Chief Executive Officer. The
Employment Agreement established Mr. Diebel's minimum annual base salary at
$500,000 per year, subject to annual increases at the discretion of the Board of
Directors. Due to the Company's performance during the 2001 fiscal year, Mr.
Diebel did not receive a raise for fiscal 2002 and his base salary has remained
at $500,000. See "Employment Agreements" below.
During the 2001 fiscal year, Mr. Diebel also received a cash bonus of
$434,500. This bonus amount was paid in the first quarter of fiscal 2001 but was
based primarily on the Company's and Mr. Diebel's performance during fiscal
2000. Due to the Company's performance during fiscal 2001, the performance-based
components of Mr. Diebel's bonus agreement were not met and therefore no cash
bonus has been or will be paid to Mr. Diebel during fiscal 2002 for the
Company's performance during fiscal 2001.
For the Company's performance during the 2002 fiscal year, the Company has
entered into Performance Share Award Agreements ("Bonus Agreements") with
certain members of management and other key employees of the Company, including
Mr. Diebel. Pursuant to these Bonus Agreements, these individuals will be
entitled to receive cash bonus awards equal to a targeted percentage of each
individual's respective base salary (Mr. Diebel's Bonus Agreement will entitle
him to receive a cash bonus award ranging from 0% to 100% of his base salary
with a target percentage of 50%). These cash bonus awards are based upon the
Company and each respective officer achieving certain quantitative and
qualitative financial and business objectives. For example, the amount of Mr.
Diebel's cash bonus award for fiscal 2002, if any, is based upon the Company
achieving targeted increases in certain pre-tax income amounts together with Mr.
Diebel satisfying certain qualitative key management objectives. The
establishment of this Bonus Agreement, together with the decision not to
increase Mr. Diebel's base salary, was determined to be appropriate by the
Compensation Committee given the Company's performance.
The Compensation Committee reviews the cash compensation paid to the other
members of senior management in a similar manner as that of the Chief Executive
Officer. Each officer's overall cash compensation is based upon the Company
achieving certain financial objectives, together with each officer satisfying
certain qualitative individual management objectives.
The Company's 1997 Stock Incentive Plan provides the Company with the
ability to periodically reward key employees with options to purchase shares of
the Company's Common Stock. These long-term incentives are designed to couple
the interests of key employees with those of the stockholders of the Company.
Stock option grants provide an incentive that focuses the individual's attention
on managing the Company from the perspective of an owner, with an equity stake
in the business. The value of stock options is tied to the future performance of
the Company's Common Stock
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and provides value to the recipient only when the price of the Company's Common
Stock increases above the option grant price. Stock options reward management
for long-term strategic planning through the resulting enhancement of share
price. The Company believes that a compensation structure which includes the
periodic granting of long-term incentives such as stock options helps to attract
and retain senior managers with long-term management perspectives. During the
2001 fiscal year, the Company granted non-qualified stock options to various
members of the Company's management, including Mr. Diebel. The number of options
granted to each member of senior management was determined in accordance with
the relative position, seniority and contribution of each such officer. During
the 2001 fiscal year, Mr. Diebel was granted two separate option grants to
purchase, in the aggregate, up to 175,000 shares of the Company's Common Stock
(such amount reflects the Stock Split). The first such grant was issued
primarily to incentivize Mr. Diebel during fiscal 2001 and the second was issued
primarily to incentivize Mr. Diebel during fiscal 2002.
The Compensation Committee has considered the anticipated tax treatment of
the Company regarding the compensation and benefits paid to the executive
officers of the Company in light of the enactment of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The basic philosophy of
the Compensation Committee is to strive to provide the executive officers of the
Company with a compensation package which will preserve the deductibility of
such payments for the Company. However, certain types of compensation payments
and their deductibility (e.g., the spread on exercise of non-qualified options)
depend upon the timing of an executive officer's vesting or exercise of
previously granted rights. Moreover, interpretations of and changes in the tax
laws and other factors beyond the Compensation Committee's control may affect
the deductibility of certain compensation payments.
The Compensation Committee will consider various alternatives to preserving
the deductibility of compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with its other compensation objectives.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Michael P. Hoopis (Chairman)
Harry L. Casari
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PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns(1) for
(i) the Company, (ii) the Nasdaq U.S. Composite Index and (iii) the Russell 2000
Index(2) from the period April 14, 1997(3) until the end of the 2001 fiscal
year.
[PERFORMANCE GRAPH]
NASDAQ STOCK MARKET
(U.S.) RUSSELL 2000 INDEX MEADE INSTRUMENTS CORP.
------------------- ------------------ -----------------------
4/14/97 100 100 100
2/28/98 147.06 136.39 140.74
2/28/99 191.41 115.84 187.11
2/29/00 388.93 170.61 337.5
2/28/01 176.9 140.09 200
- -----------------------------------------------------------------
4/14/97 2/28/98 2/28/99 2/29/00 2/28/01
- -----------------------------------------------------------------
Nasdaq Stock Market
(U.S.) 100.00 147.06 191.41 388.93 176.90
Russell 2000 Index 100.00 136.39 115.84 170.61 140.09
Meade Instruments Corp. 100.00 140.74 187.11 337.50 200.00
- -----------------------------------------------------------------
- ---------------
(1) Total returns assumes reinvestment of dividends.
(2) The Russell 2000 Index is comprised of 2000 small U.S. company stocks
(companies with a median market capitalization of less than $500 million).
(3) The Company completed the initial public offering of its Common Stock on
April 14, 1997. Prior to that date, no securities of the Company were
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under the Exchange Act. Accordingly, no information has been
provided for any prior period.
(4) Assumes $100 invested on April 14, 1997.
IT SHOULD BE NOTED THAT THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE
PERFORMANCE.
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS REGARDING COMPENSATION AND THE PERFORMANCE GRAPH THAT APPEARS
IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT, OR THE EXCHANGE ACT, OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
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EMPLOYMENT AGREEMENTS
The Company has employment agreements (the "Employment Agreements") with
each of the Named Executive Officers. The material terms of those Employment
Agreements are as follows: The term of each of the Employment Agreements is one
year which automatically renews unless otherwise notified by either party. The
Employment Agreements provide for the payment of an annual base salary of not
less than $500,000 for Mr. Diebel, $425,000 for Mr. Murdock, $225,000 for Mr.
Gordon, $210,000 for Mr. Peterson and $200,000 for each of Messrs. Christensen,
Wood and Baun. The amount of these base salaries will be reviewed annually by
the Compensation Committee. The Named Executive Officers are also entitled to
participate in and be covered by all bonus, incentive and other employee health,
insurance, 401K and other plans and benefits currently established for the
employees of the Company. Except for Messrs. Diebel, Murdock and Gordon, each of
the Named Executive Officers is also entitled to participate in the Company's
ESOP. In addition, the Employment Agreements provide the Named Executive
Officers with vacation benefits of three weeks per year and reimbursement of all
business expenses. If the Company terminates a Named Executive Officer's
employment without cause, or if a Named Executive Officer terminates his
employment under certain circumstances set forth in the Employment Agreement,
then the Named Executive Officer shall be entitled to a lump sum payment equal
to one year's aggregate salary and benefits. If the Named Executive Officer is
terminated for a disability, then such Named Executive Officer is entitled to
receive 100% of his or her base salary (less any amount paid to such individual
pursuant to any disability insurance or benefit plan provided by the Company)
for up to 24 months. In the event of a change-in-control of the Company (as
defined in the Employment Agreements), each Named Executive Officer would be
entitled to the greater of (i) 2.99 times the Named Executive Officer's highest
aggregate annual amount of compensation (including base salary, bonus and
additional benefits) during the preceding three fiscal years or (ii) 2.99 times
the Named Executive Officer's base salary and additional benefits, including the
full targeted amount of any bonus or incentive agreement for the year in which
the Named Executive Officer's resignation or discharge occurs, up to the amount
allowable without penalty under Section 280G of the Internal Revenue Code, as
amended. In addition, a Named Executive Officer may not compete with the Company
or solicit its customers or employees, during the term of the Employment
Agreement or for one year after termination of employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has no reportable certain relationships or related
transactions.
BENEFIT PLANS
Employee Stock Ownership Plan. The Board of Directors adopted the Employee
Stock Ownership Plan ("ESOP") effective March 1, 1996, as amended and restated
effective January 1, 1999. The purpose of the ESOP is to enable participating
employees to share in the growth and prosperity of the Company and to provide an
opportunity for participating employees to accumulate capital for their future
economic advantage by receiving beneficial ownership of the Company's Common
Stock in proportion to their relative compensation. The ESOP is intended to be a
stock bonus plan that is qualified under Section 401(a) of the Code. Except for
certain officers of the Company, all employees who have completed at least six
months of service with, and who work a minimum of 1,000 hours a year for, the
Company are eligible to participate in the ESOP. Generally, a participant
becomes fully vested in contributions to the ESOP upon completion of three years
of service with the Company or its affiliates. Under the Company's ESOP, the
Company matches 100% (in the form of Common Stock) of the amount deferred by
employees under the 401(k) Plan, up to 4% of each employee's annual
compensation. This matching contribution vests according to the provisions of
the Company's ESOP.
Distributions from the ESOP are generally made to vested participants
following termination of employment, but in certain circumstances the ESOP
allows vested participants to receive in-service distributions of up to 50% of
the aggregate shares allocated to a vested participant's account. Shares of
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Common Stock allocated to participants' accounts are voted in the manner
directed by such participants, irrespective of whether the participants' shares
are vested. The ESOP Committee directs the voting of unallocated shares and
shares for which participants do not provide voting instructions.
401(k) Plan. The Company maintains a 401(k) Plan which is qualified under
Section 401(k) of the Code for all employees of the Company who have completed
at least six months of service with the Company and are at least 21 years of
age. The 401(k) Plan is designed for all eligible employees to save for
retirement on a tax-deferred basis. Eligible employees may contribute up to 15%
of their annual compensation up to a maximum amount allowed under the Code. The
401(k) Plan does not currently include an employer match provision. (See
"Employee Stock Ownership Plan" above).
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1997 STOCK INCENTIVE PLAN
During the last fiscal year, the Board approved, subject to stockholder
approval, an amendment (the "Amendment") to the Meade Instruments Corp. 1997
Stock Incentive Plan. Stockholders are being asked to approve the Amendment.
The Plan provides for a limit on the aggregate number of shares of the
Company's Common Stock that may be issued or delivered pursuant to awards
thereunder. The aggregate share limit is currently 4,000,000 shares (after
giving effect to the Stock Split). As of May 31, 2001, approximately 3,937,621
of the 4,000,000 shares were issued pursuant to awards granted under the Plan or
were subject to awards then outstanding under the Plan, and approximately 62,379
shares were then available for additional Plan award grants.
The Amendment, if approved by stockholders, will increase the Plan's
aggregate share limit from 4,000,000 shares to 5,500,000 shares (an increase of
1,500,000 shares). The Board approved the Amendment based, in part, on a belief
that the number of shares that remained available for additional award grants
under the Plan was insufficient to adequately provide for future incentives for
the Company's management.
The principal terms of the Plan are summarized below. The following summary
is qualified in its entirety by the full text of the Plan (as amended subject to
stockholder approval of the Amendment), which is attached as Exhibit B to the
copy of this Proxy Statement that was filed electronically with the Securities
and Exchange Commission and can be reviewed on the Securities and Exchange
Commission's Web site at http://www.sec.gov. A copy of the Plan (as amended
subject to stockholder approval of the Amendment) may also be obtained by
contacting Pamela Swanson, in the Company's Investor Relations Department, at
6001 Oak Canyon, Irvine, California 92618 (telephone number (949) 451-1450).
SUMMARY DESCRIPTION OF THE AMENDED PLAN
The purpose of the Plan is to promote the success of the Company by
providing an additional means to attract, motivate, retain and reward key
personnel, including officers, and experienced and knowledgeable independent
directors through the grant of options and other awards that provide added long
term incentives for high levels of performance and for significant efforts to
improve the financial performance of the Company.
Awards. The Plan authorizes stock options (incentive or nonqualified),
stock appreciation rights ("SARs"), restricted stock, performance share awards
and stock bonuses.
Administration. The Plan is administered by either the Board or a committee
of the Board (the "Administrator"). The Administrator determines the number of
shares that are to be subject to awards and the terms and conditions of such
awards, including the price (if any) to be paid for the shares or the award. The
Board has appointed the Compensation Committee as the Plan's Administrator.
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Eligibility. Persons eligible to receive awards under the Plan include
officers, directors, key employees and consultants of the Company or any of its
subsidiaries. Members of the Board who are not officers or employees of the
Company (each a "Non-Employee Director") are eligible to receive certain
automatic option grants under the Plan, as described more fully below.
Approximately 40 officers and key employees of the Company, including all of the
Company's Named Executive Officers, are considered eligible under the Plan at
the present time, subject to the power of the Administrator to determine
eligible persons to whom awards will be granted. Currently, there are four
Non-Employee Directors.
Limits on Awards; Authorized Shares. As referenced above, the limit on the
number of shares of Common Stock that may be issued or delivered pursuant to
awards granted under the Plan is currently 4,000,000 shares. If stockholders
approve the Amendment, this limit will be 5,500,000 shares. The maximum number
of shares of Common Stock subject to awards that may be granted to any
individual during any calendar year is 500,000 shares and the maximum number of
shares of Common Stock that may be issued pursuant to automatic option grants to
Non-Employee Directors is 250,000 shares. These limits and the other share
references in this summary give effect to the Stock Split.
As is customary in incentive plans of this nature, the number and kind of
shares available under the Plan and the then outstanding awards, as well as
exercise or purchase prices, performance targets under certain performance-based
awards and share limits, are subject to adjustment in the event of certain
reorganizations, mergers, combinations, consolidations, recapitalizations,
reclassifications, stock splits, stock dividends, asset sales or other similar
events, or extraordinary dividends or distributions of property to stockholders.
Shares that are subject to or underlie awards which expire or fail to vest or
which are cancelled, terminated, forfeited, or not paid or delivered under the
Plan for any reason, as well as reacquired shares, become available, except to
the extent prohibited by law, for additional awards under the Plan.
The Plan will not limit the authority of the Board or the Compensation
Committee to grant awards or authorize any other compensation, with or without
reference to the Common Stock, under any other plan or authority.
Transfer Restrictions. Subject to certain exceptions contained in the Plan
(which generally include transfer to the Company, a participant's designation of
a beneficiary, the exercise of a participant's award by the participant's legal
representative in the event of the participant's disability, and transfers
pursuant to certain court orders), awards under the Plan are not transferable by
the recipient other than by will or the laws of descent and distribution and are
generally exercisable, during the recipient's lifetime, only by him or her. Any
amounts payable or shares issuable pursuant to an award will be paid only to the
recipient or the recipient's beneficiary or representative. The Administrator
may, however, permit the transfer of an award if the transferor presents
satisfactory evidence that the transfer is for estate or tax planning purposes.
Stock Options. A stock option is the right to purchase shares of Common
Stock at a future date at a specified price (the "exercise price" of the
option). An option may either be an "incentive stock option" or a "nonqualified
stock option." Incentive stock option benefits are taxed differently than
nonqualified stock option benefits, as described under "Federal Income Tax
Consequences" below. Incentive stock options are also subject to more
restrictive terms and are limited in amount by the Code and the Plan.
The exercise price of options granted under the Plan will be determined by
the Administrator, but, in the case of incentive stock options, may be no less
than the fair market value of a share on the date of grant; provided, however,
that the exercise price may be no less than 110% of fair market value for
incentive stock options granted to an employee who owns 10% or more of the
outstanding Common Stock. Full payment for shares purchased on the exercise of
any option must be made at the time of such exercise in a manner approved by the
Administrator (which may include cash, a check, a promissory note, notice and
third party payment, or delivery of previously owned Common Stock, subject to
certain limitations set forth in the Plan). Options granted under the Plan may
be exercised at
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the time or times determined by the Administrator, but in no event may options
be exercised after ten years from the date of grant; provided, however, that
incentive stock options granted to an employee who owns 10% or more of the
outstanding Common Stock may not be exercised after five years from the date of
grant.
Stock Appreciation Rights. An SAR is the right to receive a number of
shares of Common Stock or an amount of cash, or a combination of shares and
cash, the aggregate amount or value of which is determined by reference to a
change in the fair market value of the Common Stock. SARs may be granted in
connection with other awards or independently. The Administrator may also grant
limited SARs exercisable only upon or in respect of a change in control or any
other specified event; such limited SARs may relate to or operate in tandem with
other SARs, options or other awards under the Plan.
Restricted Stock Awards. A restricted stock award is an award typically for
a fixed number of shares of Common Stock subject to restrictions. The
Administrator specifies the price, if any, the participant must pay for such
shares and the restrictions (which may include, for example, continued service
only and/or performance standards) imposed on such shares.
Performance-Based Awards. Performance share awards may be granted on the
basis of such factors as the Administrator deems appropriate. Generally, these
awards will be based upon specific agreements and will specify the number of
shares of Common Stock subject to the award, the consideration, if any, to be
paid for such shares by the participant and the conditions upon which the
issuance of the shares will be based.
In addition to awards under the other provisions of the Plan, the Plan
provides that the Administrator may grant to eligible officers performance-based
awards designed to satisfy the requirements for deductibility of compensation
under Section 162(m) of the Code ("Section 162(m) Performance-Based Awards").
Options with an exercise price and SARs with a base price not less than fair
market value on the date of grant will, generally speaking, be considered
Section 162(m) Performance-Based Awards. Other Section 162(m) Performance-Based
Awards must be based on performance relative to pre-established goals over
performance periods not shorter than one year nor longer than ten years. The
business criteria on which performance goals may be established include one or
more of the following as applied to the consolidated operations, or one or more
subsidiaries or business segments of the Company: (1) net cash flow (including
cash and cash equivalents) from operations or net cash flow from operations,
financing and investing activities, (2) earnings per share of Common Stock on a
fully diluted basis determined by dividing (a) net earnings less dividends on
Preferred Stock, if any, of the Company and its subsidiaries by (b) the weighted
average number of shares of Common Stock and Common Stock equivalents
outstanding, (3) consolidated net income of the Company and its subsidiaries
(less, if any, preferred dividends), divided by the average consolidated common
stockholders' equity, or (4) change in the market price of the Company's Common
Stock plus dividends and other distributions paid, divided by the beginning
market price of the Common Stock, adjusted for any changes in equity structure.
Section 162(m) Performance-Based Awards (other than options and SARs) are earned
and payable only if performance meets the specific, pre-established performance
goals approved by the Administrator in advance of applicable deadlines under the
Code and while the performance relating to the goals remains substantially
uncertain. Performance goals may be adjusted to reflect certain changes,
including reorganizations, liquidations and capitalization and accounting
changes, to the extent permitted by Section 162(m).
Grants of Section 162(m) Performance-Based Awards in any calendar year to
any individual participant may not be made with reference to more than 350,000
shares. Section 162(m) Performance-Based Awards that do not relate to shares and
are payable in cash and that are granted in any calendar year to any individual
participant can not provide for payment of more than $1,000,000. Before any of
the Section 162(m) Performance-Based Awards (other than by exercise of
qualifying options or SARs) are paid to a covered officer, the Administrator
must certify that the performance goals have been satisfied. The Administrator
will have discretion to determine the performance goals
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and restrictions or other limitations of the individual awards and is expected
to reserve "negative" discretion to reduce the number of shares delivered
pursuant to payments of awards below maximum award limits.
Stock Bonuses. The Administrator may grant a stock bonus to any eligible
person to reward exceptional or special services, contributions or achievements
in the manner and on such terms and conditions (including any restrictions on
such shares) as determined from time to time by the Administrator. The number of
shares so awarded is determined by the Administrator, and such an award may be
granted independently or in lieu of a cash bonus.
Acceleration of Awards; Possible Early Termination of Awards. Unless prior
to a Change in Control Event the Administrator determines that, upon its
occurrence, benefits will not be accelerated, then generally upon the Change in
Control Event each option and SAR will become immediately exercisable,
restricted stock will vest, and cash and performance-based awards will become
payable. A "Change in Control Event" under the Plan generally includes (subject
to certain exceptions) certain mergers or consolidations approved by the
Company's stockholders, or stockholder approval of a liquidation of the Company
or sale of substantially all of the Company's assets.
Effect of Termination of Employment. Options which have not yet become
exercisable will generally lapse upon the date a participant is no longer
employed by the Company. Options which have become exercisable must be exercised
within three months after such date if the termination of employment was for any
reason other than retirement, total disability, death or discharge for cause. In
the event a participant is discharged for cause, all options will lapse
immediately upon such termination of employment. If the termination of
employment is due to retirement, total disability or death, the options which
are exercisable on the date of such termination must generally be exercised
within twelve months of the date of such termination. In no event may an option
be exercised after its stated term. SARs generally have the same termination
provisions as the options to which they relate. In respect of each other award
granted under the Plan, a participant's rights and benefits (if any) in the
event of a termination of employment will be determined by the Administrator,
which may make distinctions based upon the cause of termination and the nature
of the award. The Administrator may increase the portion of a participant's
award available to the participant in connection with a participant's
termination of employment (other than termination by the Company for cause).
Amendments. The Board may amend or terminate the Plan at any time. If any
amendment to the Plan would (1) materially increase the benefits accruing to
participants, (2) materially increase the aggregate number of shares which may
be issued under the Plan or (3) materially modify the requirements of
eligibility for participation in the Plan, then, to the extent then required by
applicable law or deemed advisable by the Board, such amendment will be subject
to stockholder approval. Outstanding awards may be amended, subject, however, to
the consent of the holder if the amendment materially and adversely affects the
holder. Unless previously terminated by the Board, the Plan will terminate on
February 4, 2007.
Automatic Option Grants to Non-Employee Directors. The Plan provides that
each person who first becomes a Non-Employee Director is granted automatically a
nonqualified stock option to purchase 5,000 shares of Common Stock. In addition,
in each calendar year, there will be granted automatically (without any action
by the Administrator) immediately following the annual meeting of stockholders
in each such year, a nonqualified stock option to purchase 5,000 shares of
Common Stock to each Non-Employee Director who is re-elected as a member of the
Board or who continues as a member of the Board. A Non-Employee Director may not
receive more than one nonqualified stock option under the Non-Employee Director
program in any calendar year, nor more than 75,000 shares on exercise of all
options awarded under such program. The purchase price per share of Common Stock
covered by each such option will be the fair market value of the Common Stock on
the date the option is granted. The Plan provides that Non-Employee Director
Options expire on the tenth anniversary of the award date and become exercisable
at the rate of 33 1/3% on each of the first three anniversaries of the date of
grant.
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Immediately prior to the occurrence of a Change in Control, each option granted
under the Non-Employee Director program will become exercisable in full.
If a Non-Employee Director's services as a member of the Board terminate by
reason of retirement, death or total disability, any option granted under the
Non-Employee Director program held by such Non-Employee Director will
immediately become and will remain exercisable for two years after the date of
such termination or until the expiration of the option's term, whichever occurs
first. If a Non-Employee Director's services as a member of the Board terminate
for any other reason, any portion of an option granted under the Non-Employee
Director program held by such Non-Employee Director which is not then
exercisable will terminate, and any portion of an option which is then
exercisable may be exercised for three months after the date of such termination
or until the expiration of the option's term, whichever occurs first.
Securities Underlying Awards. The market value of a share of Common Stock
as of May 31, 2001 was $4.61 per share. The Company plans to register under the
Securities Act of 1933, as amended, the additional shares of Common Stock made
available under the Plan.
Federal Income Tax Consequences. With respect to nonqualified stock
options, the Company is generally entitled to deduct an amount equal to the
difference between the option exercise price and the fair market value of the
shares at the time of exercise. With respect to incentive stock options, the
Company is generally not entitled to a similar deduction either upon grant of
the option or at the time the option is exercised. If incentive stock option
shares are not held for specified qualifying periods, however, the difference
between the fair market value of the shares at the date of exercise (or, if
lower, the sale price) and the cost of such shares is taxed as ordinary income
(and the Company will receive a corresponding deduction) in the year the shares
are sold.
The current federal income tax consequences of other awards authorized
under the Plan generally follow certain basic patterns: SARs are taxed and
deductible in substantially the same manner as nonqualified stock options;
non-transferable restricted stock subject to a substantial risk of forfeiture
results in income recognition only at the time the restrictions lapse (unless
the recipient elects to accelerate recognition as of the date of grant); and
performance share awards generally are subject to tax at the time of payment. In
each of the foregoing cases, the Company will generally have a corresponding
deduction at the time the participant recognizes income.
If an award is accelerated under the Plan in connection with a change in
control (as this term is used in the Internal Revenue Code), the Company may not
be permitted to deduct the portion of the compensation attributable to the
acceleration ("parachute payments") if it exceeds certain threshold limits under
the Internal Revenue Code (and certain excise taxes may be triggered). Further,
if the compensation attributable to awards is not "performance-based" within the
meaning of Section 162(m) of the Internal Revenue Code, the Company may not be
permitted to deduct the aggregate non performance-based compensation in excess
of $1,000,000 in certain circumstances.
The above tax summary discusses general tax principles applicable to, and
income tax consequences of, the Plan under current federal law, which is subject
to change. This summary is not intended to be exhaustive and, among other
considerations, does not describe state, local, or international tax
consequences.
SPECIFIC BENEFITS
For information regarding options and other awards granted to executive
officers of the Company, see the material under the headings "Executive
Compensation and Other Information" and "Report of the Compensation Committee"
above.
The number, amount and type of awards to be received by or allocated to
eligible persons in the future under the Plan cannot be determined at this time.
At this time, the Company is not considering any additional awards under the
Plan. If the Amendment had been in effect previously, the Company
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25
expects that the grants would not have been substantially different from those
described in the sections referred to above and the "Directors' Fees" section of
this Proxy Statement.
The Board believes that the additional shares to be made available under
the Plan, if stockholders approve the Amendment, will promote the interests of
the Company and its stockholders and continue to enable the Company to attract,
retain and reward persons important to the Company's success and to provide
incentives based on the attainment of corporate objectives and increases in
stockholder value.
Approval of the Amendment requires the affirmative vote of a majority of
the Common Stock present, or represented, and entitled to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS HAS APPROVED AND RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN.
Proxies solicited by the Board will be so voted unless stockholders specify
otherwise in their proxies. Broker non-votes and abstentions on this proposal
have the effect described on page 1. All members of the Board are eligible for
awards under the Plan and therefore have an interest in the Amendment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. Directors, officers, and greater than
10% stockholders are required by the Securities and Exchange Commission to
furnish the Company with copies of the reports they file.
Based solely on its review of the copies of such reports and written
representations from certain reporting persons that certain reports were not
required to be filed by such persons, the Company believes that all of its
directors, executive officers and greater than 10% beneficial owners complied
with all filing requirements applicable to them with respect to transactions
during the 2001 fiscal year, with the exception of Mr. Wood, who inadvertently
failed to report a donation of 700 shares to a charitable organization.
ANNUAL REPORT
A copy of the Company's 2001 Annual Report, containing audited consolidated
balance sheets as of February 29, 2000 and February 28, 2001, and the related
consolidated statements of income, of stockholders' equity, and of cash flows
for the three years ended February 28, 2001, accompanies this Proxy Statement.
Upon written request, the Company will send you, without charge, a copy of its
Annual Report on Form 10-K (without exhibits) for the fiscal year ended February
28, 2001, which the Company has filed with the Securities and Exchange
Commission. Copies of exhibits to the Form 10-K are available, but a reasonable
fee per page will be charged to the requesting stockholder. Stockholders may
make requests in writing to the Company's Stockholders' Communications
Department, c/o Meade Instruments Corp., 6001 Oak Canyon, Irvine, California
92618.
PROPOSALS OF STOCKHOLDERS
For stockholder proposals to be considered for inclusion in the proxy
materials for the Company's 2001 Annual Meeting of Stockholders, they must be
received by the Secretary of the Company no later than February 11, 2002.
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP are the independent accountants for the Company
for the fiscal year ended February 28, 2001 and have reported on the Company's
consolidated financial statements included in the Annual Report of the Company
which accompanies this Proxy Statement. The Company's independent accountants
are appointed by the Board of Directors. The Board of Directors has reappointed
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending February 28, 2002. Representatives of PricewaterhouseCoopers
LLP are expected to be present at the Annual Meeting of Stockholders and will
have an opportunity to make a statement at the Annual Meeting if they desire to
do so. The representatives will also be available to respond to appropriate
questions.
OTHER MATTERS
PRESENTED BY MANAGEMENT
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matters which will be acted upon at the Annual
Meeting. If any other matters are presented for action at the Annual Meeting or
at any adjournment thereof, it is intended that the proxies will be voted with
respect thereto in accordance with the best judgment and in the discretion of
the proxy holders.
PRESENTED BY STOCKHOLDERS
The Company's Bylaws contain certain advance notice procedures which
stockholders must follow to submit proposals for consideration at future
stockholder meetings, including the nomination of persons for election as
directors. Such items of business must be submitted in writing to the Secretary
of the Company at the Company's headquarters (address shown on Page 1 of this
Proxy Statement) and must be received not less than 60 days nor more than 90
days prior to the scheduled annual meeting date. Thus, unless the Company
discloses a change in the scheduling of the next annual meeting, July 11, 2002,
stockholder proposals for consideration at that meeting must be received by the
Secretary of the Company by May 11, 2002. If the scheduled meeting date is
changed and the Company does not provide at least 70 days' advance notice or
public disclosure of the change, then stockholders have until the close of
business on the 10th day after the date the Company gave notice or publicly
disclosed the changed date of the annual meeting in which to submit proposals.
In addition, the notice must meet all requirements contained in the Company's
Bylaws. Stockholders may contact the Secretary of the Company at the Company's
headquarters for a copy of the relevant Bylaw provision regarding requirements
for making stockholder proposals and nominating director candidates.
By Order of the Board of Directors
/s/ MARK D. PETERSON
Mark D. Peterson
Vice President and General Counsel
Irvine, California
June 12, 2001
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE.
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EXHIBIT A
AUDIT COMMITTEE CHARTER
OF
MEADE INSTRUMENTS CORP.
THE BOARD OF DIRECTORS OF MEADE INSTRUMENTS CORP., A DELAWARE CORPORATION
(THE "CORPORATION"), HEREBY ADOPTS, AS OF THIS 1ST DAY OF MARCH 2000, THE
FOLLOWING FORMAL WRITTEN CHARTER OF THE CORPORATION'S AUDIT COMMITTEE (THE
"AUDIT COMMITTEE"). THE AUDIT COMMITTEE SHALL REVIEW AND REASSESS THE ADEQUACY
OF THIS CHARTER ON AN ANNUAL BASIS.
MISSION STATEMENT
The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities. The Audit Committee will review the financial
reporting process, the system of internal control, the audit process, and the
Corporation's process for monitoring compliance with laws and regulations. In
performing its duties, the Audit Committee will endeavor to maintain effective
working relationships with the Board of Directors, management, and any internal
and external auditors. To effectively perform his or her role, each member will
obtain an understanding of the responsibilities of committee membership as well
as the Corporation's business, operations and risks.
ORGANIZATION AND COMPOSITION
THE AUDIT COMMITTEE SHALL CONSIST OF AT LEAST TWO MEMBERS UNTIL JUNE 14,
2001, AND THEREAFTER, THE AUDIT COMMITTEE SHALL CONSIST OF AT LEAST THREE
MEMBERS. THE AUDIT COMMITTEE SHALL BE COMPRISED SOLELY OF "INDEPENDENT" (AS
DEFINED BELOW) DIRECTORS, EACH OF WHOM IS ABLE TO READ AND UNDERSTAND
FUNDAMENTAL FINANCIAL STATEMENTS, INCLUDING THE CORPORATION'S BALANCE SHEET,
INCOME STATEMENT AND CASH FLOW STATEMENT OR WILL BECOME ABLE TO DO SO WITHIN A
REASONABLE PERIOD OF TIME AFTER HIS OR HER APPOINTMENT TO THE AUDIT COMMITTEE.
THE AUDIT COMMITTEE SHALL HAVE AT LEAST ONE MEMBER THAT HAS PAST EMPLOYMENT
EXPERIENCE IN FINANCE OR ACCOUNTING, REQUISITE PROFESSIONAL CERTIFICATION IN
ACCOUNTING, OR ANY OTHER COMPARABLE EXPERIENCE OR BACKGROUND WHICH RESULTS IN
THE INDIVIDUAL'S FINANCIAL SOPHISTICATION, INCLUDING BEING OR HAVING BEEN A
CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER OR OTHER SENIOR OFFICER WITH
FINANCIAL OVERSIGHT RESPONSIBILITIES.
A member of the Audit Committee will not be considered "independent" if,
among other things, he or she has:
- been employed by the Corporation or its affiliates in the current or past
three years;
- accepted any compensation from the Corporation or its affiliates in
excess of $60,000 during the previous fiscal year (except for board
service, retirement plan benefits, or non-discretionary compensation);
- an immediate family member of an individual who is, or has been in the
past three years, employed by the Corporation or its affiliates as an
executive officer;
- been a partner, controlling shareholder or an executive officer of any
for-profit business to which the Corporation made, or from which it
received, payments (other than those which arise solely from investments
in the Corporation's securities) that exceed five percent of the
Corporation's or the organization's consolidated gross revenues for that
year, or $200,000, whichever amount is greater, in any of the past three
years; or
- been employed as an executive officer of another entity where any of the
Corporation's executive officers serve on that entity's compensation
committee.
The Audit Committee shall meet as frequently as is necessary to fulfill its
responsibilities and duties as set forth herein, and in no event less than one
time during each fiscal year. The Audit
A-1
28
Committee shall appoint a chairperson who shall preside at all meetings of the
Audit Committee and who shall have such other powers and duties as may from time
to time be assigned to the chairperson by the Audit Committee or the Board of
Directors.
ROLES AND RESPONSIBILITIES
The Audit Committee shall have the following responsibilities.
INTERNAL CONTROL
- Instruct the external auditors to keep the Audit Committee informed about
fraud, illegal acts and deficiencies in internal control; and
- Review internal control recommendations made by any internal and external
auditors and determine whether such recommendations have been implemented
by management.
FINANCIAL REPORTING
General
- Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact
on the financial statements; and
- Ask management and any internal and external auditors about significant
risks and exposures the Corporation may encounter and the plans to
monitor, control and minimize such risks and exposures.
Annual Financial Statements
- Meet with management and the external auditors of the Corporation at
least annually to review (a) the scope of the annual audit, (b) the
implementation of the audit procedures, (c) questions as to the choice of
acceptable accounting principles to be applied and their impact on
corporate financial statements and (d) all other matters relating to the
auditors' relationship with the Corporation;
- Review the MD&A and other financial sections of the annual report before
its release and consider whether the information is adequate and
consistent with members' knowledge about the Corporation and its
operations.
Interim Financial Statements
- Be briefed on how management develops and summarizes financial
information from interim periods and the extent of internal audit
involvement;
- Require external auditors to review the financial information included in
the Corporation's interim financial statements before the Corporation
files its quarterly reports with the Securities and Exchange Commission.
COMPLIANCE WITH LAWS AND REGULATIONS
- Review the effectiveness of the Corporation's system for monitoring
compliance with laws and regulations and the results of management's
investigation and follow-up (including disciplinary action) on any
fraudulent acts or accounting irregularities;
- Obtain assurances from management, auditors and counsel concerning
regulatory compliance matters and assurances that they have been
considered in the preparation of the financial statements; and
- Review the findings of any examinations by regulatory agencies.
A-2
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EXTERNAL AUDIT
- Articulate the external auditor's ultimate accountability to the Board of
Directors and the Audit Committee;
- Review the external auditors' proposed audit approach;
- Review and evaluate the performance of the external auditors and
recommend to the Board of Directors the appointment or discharge of the
external auditors;
- Review and discuss the independence of the external auditors, the
nonaudit services provided and the auditors' disclosures concerning and
assertion of their independence in accordance with professional standards
and as required by applicable standards;
REPORTING RESPONSIBILITIES
- Regularly update the Board of Directors about committee activities and
make appropriate recommendations;
- Review for inclusion in the proxy statement the disclosures about the
audit committee and its functions as well as any other disclosures or
requirements mandated by the applicable SEC rules.
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EXHIBIT B
MEADE INSTRUMENTS CORP.
1997 STOCK INCENTIVE PLAN,
AS AMENDED
B-1
31
TABLE OF CONTENTS
1. THE PLAN....................................................................... B-4
1.1 Purpose............................................................. B-4
1.2 Administration and Authorization; Power and Procedure............... B-4
1.3 Participation........................................................B-5
1.4 Shares Available for Awards; Share Limits............................B-6
1.5 Grant of Awards......................................................B-6
1.6 Award Period.........................................................B-7
1.7 Limitations on Exercise and Vesting of Awards........................B-7
1.8 Acceptance of Notes to Finance Exercise..............................B-7
1.9 No Transferability; Limited Exception to Transfer Restrictions.......B-8
2. OPTIONS........................................................................ B-9
2.1 Grants.............................................................. B-9
2.2 Option Price.........................................................B-9
2.3 Limitations on Grant and Terms of Incentive Stock Options........... B-10
2.4 Limits on 10% Holders............................................... B-10
2.5 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.... B-11
2.6 Options and Rights in Substitution for Stock Options Granted by
Other Corporations.................................................. B-11
3. STOCK APPRECIATION RIGHTS (INCLUDING LIMITED STOCK APPRECIATION RIGHTS)........ B-11
3.1 Grants.............................................................. B-11
3.2 Exercise of Stock Appreciation Rights............................... B-11
3.3 Payment B-12
3.4 Limited Stock Appreciation Rights................................... B-12
4. RESTRICTED STOCK AWARDS........................................................ B-13
4.1 Grants ............................................................. B-13
4.2 Restrictions........................................................ B-13
4.3 Return to the Corporation........................................... B-14
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES..................................... B-14
5.1 Grants of Performance Share Awards.................................. B-14
5.2 Special Performance-Based Share Awards.............................. B-14
5.3 Grants of Stock Bonuses............................................. B-16
5.4 Deferred Payments................................................... B-16
6. OTHER PROVISIONS............................................................... B-16
6.1 Rights of Eligible Persons, Participants and Beneficiaries.......... B-16
6.2 Adjustments; Acceleration........................................... B-17
6.3 Effect of Termination of Employment................................. B-18
6.4 Compliance with Laws................................................ B-19
B-2
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6.5 Tax Withholding..................................................... B-19
6.6 Plan Amendment, Termination and Suspension.......................... B-20
6.7 Privileges of Stock Ownership....................................... B-21
6.8 Effective Date of the Plan.......................................... B-21
6.9 Term of the Plan.................................................... B-21
6.10 Governing Law/Construction/Severability............................. B-21
6.11 Captions ........................................................... B-22
6.12 Effect of Change of Subsidiary Status............................... B-22
6.13 Non-Exclusivity of Plan............................................. B-22
7. DEFINITIONS ................................................................... B-22
7.1 Definitions......................................................... B-22
8. NON-EMPLOYEE DIRECTOR OPTIONS.................................................. B-27
8.1 Participation....................................................... B-27
8.2 Annual Option Grants................................................ B-28
8.3 Option Price........................................................ B-28
8.4 Option Period and Exercisability.................................... B-28
8.5 Termination of Directorship......................................... B-28
8.6 Adjustments......................................................... B-29
8.7 Acceleration Upon a Change in Control Event......................... B-29
B-3
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MEADE INSTRUMENTS CORP.
1997 STOCK INCENTIVE PLAN,
AS AMENDED
1. THE PLAN
1.1 Purpose
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of Awards to attract, motivate,
retain and reward key employees, including officers, whether or not directors,
of the Company with awards and incentives for high levels of individual
performance and improved financial performance of the Company and to attract,
motivate and retain experienced and knowledgeable independent directors through
the benefits provided under Article 8. "Corporation" means Meade Instruments
Corp., a California corporation, and "Company" means the Corporation and its
Subsidiaries, collectively. These terms and other capitalized terms are defined
in Article 7.
1.2 Administration and Authorization; Power and Procedure.
(a) Committee. This Plan shall be administered by and all Awards to
Eligible Persons shall be authorized by the Committee. Action of the Committee
with respect to the administration of this Plan shall be taken pursuant to a
majority vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee. Subject to the
express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the particular
Eligible Persons who will receive any Awards;
(ii) to grant Awards to Eligible Persons, determine the price at
which securities will be offered or awarded and the amount of securities
to be offered or awarded to any of such persons, and determine the other
specific terms and conditions of such Awards consistent with the express
limits of this Plan, and establish the installments (if any) in which
such Awards shall become exercisable or shall vest, or determine that no
delayed exercisability or vesting is required, and establish the events
of termination or reversion of such Awards;
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of award or among Participants);
B-4
34
(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Participants
under this Plan, further define the terms used in this Plan, and
prescribe, amend and rescind rules and regulations relating to the
administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Persons, subject to any required
consent under Section 6.6;
(vi) to accelerate or extend the exercisability or extend the
term of any or all such outstanding Awards within the maximum ten-year
term of Awards under Section 1.6; and
(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Article 8 relating to
Non-Employee Director Awards shall be automatic and, to the maximum extent
possible, self-effectuating.
(c) Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or, except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.
(d) Reliance on Experts. In making any determination or in taking or
not taking any action under this Plan, the Committee or the Board, as the case
may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made or
omitted in good faith.
(e) Delegation. The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or employees of the
Company.
1.3 Participation.
Awards may be granted by the Committee only to those persons that
the Committee determines to be Eligible Persons. An Eligible Person who has been
granted an Award may, if otherwise eligible, be granted additional Awards if the
Committee shall so determine.
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1.4 Shares Available for Awards; Share Limits.
(a) Shares Available. Subject to the provisions of Section 6.2, the
capital stock that may be delivered under this Plan shall be shares of the
Corporation's authorized but unissued Common Stock and any shares of its Common
Stock held as treasury shares. The shares may be delivered for any lawful
consideration.
(b) Share Limits. The maximum number of shares of Common Stock that
may be delivered pursuant to Awards (including Incentive Stock Options) granted
to Eligible Persons under this Plan shall not exceed 5,500,000 shares (the
`Share Limit'). The maximum number of shares of Common Stock that may be
delivered under the provisions of Article 8 shall not exceed 250,000 shares. The
maximum number of shares subject to those Options and Stock Appreciation Rights
that are granted during any calendar year to any individual shall be limited to
500,000 shares. Each of the three foregoing numerical limits shall be subject to
adjustment as contemplated by this Section 1.4 and Section 6.2.
(b) Share Reservation; Replenishment and Reissue of Unvested Awards.
No Award may be granted under this Plan unless, on the date of grant, the sum of
(i) the maximum number of shares issuable at any time pursuant to such Award,
plus (ii) the number of shares that have previously been issued pursuant to
Awards granted under this Plan, other than reacquired shares available for
reissue consistent with any applicable legal limitations, plus (iii) the maximum
number of shares that may be issued at any time after such date of grant
pursuant to Awards that are outstanding on such date, does not exceed the Share
Limit. Shares that are subject to or underlie Awards which expire or for any
reason are cancelled or terminated, are forfeited, fail to vest, or for any
other reason are not paid or delivered under this Plan, as well as reacquired
shares, shall again, except to the extent prohibited by law, be available for
subsequent Awards under the Plan. Except as limited by law, if an Award is or
may be settled only in cash, such Award need not be counted against any of the
limits under this Section 1.4.
1.5 Grant of Awards.
Subject to the express provisions of this Plan, the Committee shall
determine the number of shares of Common Stock subject to each Award, the price
(if any) to be paid for the shares or the Award and, in the case of Performance
Share Awards, in addition to matters addressed in Section 1.2(b), the specific
objectives, goals and performance criteria (such as an increase in sales, market
value, earnings or book value over a base period, the years of service before
vesting, the relevant job classification or level of responsibility or other
factors) that further define the terms of the Performance Share Award. Each
Award shall be evidenced by an Award Agreement signed by the Corporation and, if
required by the Committee, by the Participant.
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1.6 Award Period.
Each Award and all executory rights or obligations under the related
Award Agreement shall expire on such date (if any) as shall be determined by the
Committee, but in the case of Options or other rights to acquire Common Stock
not later than ten (10) years after the Award Date.
1.7 Limitations on Exercise and Vesting of Awards.
(a) Provisions for Exercise. Unless the Committee otherwise
expressly provides, no Award shall be exercisable or shall vest until at least
six months after the initial Award Date, and once exercisable an Award shall
remain exercisable until the expiration or earlier termination of the Award.
(b) Procedure. Any exercisable Award shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such exercise
from the Participant, together with any required payment made in accordance with
Section 2.2(a) or 8.4, as the case may be.
(c) Fractional Shares/Minimum Issue. Fractional share interests
shall be disregarded, but may be accumulated. The Committee, however, may
determine in the case of Eligible Persons that cash, other securities, or other
property will be paid or transferred in lieu of any fractional share interests.
No fewer than 100 shares may be purchased on exercise of any Award at one time
unless the number purchased is the total number at the time available for
purchase under the Award.
1.8 Acceptance of Notes to Finance Exercise.
The Corporation may, with the Committee's approval, accept one or
more notes from any Eligible Person in connection with the exercise or receipt
of any outstanding Award; provided that any such note shall be subject to the
following terms and conditions:
(a) The principal of the note shall not exceed the amount required
to be paid to the Corporation upon the exercise or receipt of one or more Awards
under the Plan and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions, shall not
exceed a period of five years.
(c) The note shall provide for full recourse to the Participant and
shall bear interest at a rate determined by the Committee but not less than the
interest rate necessary to avoid the imputation of interest under the Code.
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(d) If the employment of the Participant terminates, the unpaid
principal balance of the note shall become due and payable on the 10th business
day after such termination; provided, however, that if a sale of such shares
would cause such Participant to incur liability under Section 16(b) of the
Exchange Act, the unpaid balance shall become due and payable on the 10th
business day after the first day on which a sale of such shares could have been
made without incurring such liability assuming for these purposes that there are
no other transactions (or deemed transactions in securities of this Corporation)
by the Participant subsequent to such termination.
(e) If required by the Committee or by applicable law, the note
shall be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform with
applicable rules and regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability; Limited Exception to Transfer Restrictions.
(a) Limit On Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this Section 1.9, by applicable law and by the
Award Agreement, as the same may be amended, (i) all Awards are non-transferable
and shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge; Awards shall be exercised
only by the Participant; and (ii) amounts payable or shares issuable pursuant to
an Award shall be delivered only to (or for the account of) the Participant.
(b) Exceptions. The Committee may permit Awards to be exercised by
and paid only to certain persons or entities related to the Participant,
including but not limited to members of the Participant's family, charitable
institutions, or trusts or other entities whose beneficiaries or beneficial
owners are members of the Participant's family and/or charitable institutions,
or to such other persons or entities as may be approved by the Committee,
pursuant to such conditions and procedures as the Committee may establish. Any
permitted transfer shall be subject to the condition that the Committee receive
evidence satisfactory to it that the transfer is being made for estate and/or
tax planning purposes on a gratuitous or donative basis and without
consideration (other than nominal consideration). Notwithstanding the foregoing,
Incentive Stock Options and Restricted Stock Awards shall be subject to any and
all additional transfer restrictions under the Code.
(c) Further Exceptions to Limits On Transfer. The exercise and
transfer restrictions in Section 1.9(a) shall not apply to:
(i) transfers to the Corporation,
(ii) the designation of a beneficiary to receive benefits in the
event of the Participant's death or, if the Participant has
died, transfers to or exercise by
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the Participant's beneficiary, or, in the absence of a validly
designated beneficiary, transfers by will or the laws of
descent and distribution,
(iii) transfers pursuant to a QDRO order if approved or ratified by
the Committee,
(iv) if the Participant has suffered a disability, permitted
transfers or exercises on behalf of the Participant by his or
her legal representative, or
(v) the authorization by the Committee of "cashless exercise"
procedures with third parties who provide financing for the
purpose of (or who otherwise facilitate) the exercise of
Awards consistent with applicable laws and the express
authorization of the Committee.
Notwithstanding the foregoing, Incentive Stock Options and Restricted Stock
Awards shall be subject to any and all additional transfer restrictions under
the Code.
2. OPTIONS.
2.1 Grants.
One or more Options may be granted under this Article to any
Eligible Person. Each Option granted shall be designated in the applicable Award
Agreement, by the Committee as either an Incentive Stock Option, subject to
Section 2.3, or a Non-Qualified Stock Option; provided, however, that Incentive
Stock Options may only be granted to Eligible Persons who are employees of the
Company.
2.2 Option Price.
(a) Pricing Limits. The purchase price per share of the Common Stock
covered by each Option shall be determined by the Committee at the time of the
Award, but in the case of Incentive Stock Options shall not be less than 100%
(110% in the case of a Participant described in Section 2.4) of the Fair Market
Value of the Common Stock on the date of grant.
(b) Payment Provisions. The purchase price of any shares purchased
on exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by the Committee or specified in the applicable
Award Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8; (iv) by notice and third party payment in such
manner as may be authorized by the Committee; or (v) by the delivery of shares
of Common Stock of the Corporation already owned by the Participant, provided,
however, that the Committee may in its absolute discretion limit the
Participant's ability to exercise an Award by delivering such shares,
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and provided further that any shares delivered which were initially acquired
upon exercise of a stock option must have been owned by the Participant at least
six months as of the date of delivery. Shares of Common Stock used to satisfy
the exercise price of an Option shall be valued at their Fair Market Value on
the date of exercise.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
(a) $100,000 Limit. To the extent that the aggregate "Fair Market
Value" of stock with respect to which incentive stock options first become
exercisable by a Participant in any calendar year exceeds $100,000, taking into
account both Common Stock subject to Incentive Stock Options under this Plan and
stock subject to incentive stock options under all other plans of the Company,
such options shall be treated as Nonqualified Stock Options. For this purpose,
the "Fair Market Value" of the stock subject to options shall be determined as
of the date the options were awarded. In reducing the number of options treated
as incentive stock options to meet the $100,000 limit, the most recently granted
options shall be reduced first. To the extent a reduction of simultaneously
granted options is necessary to meet the $100,000 limit, the Committee may, in
the manner and to the extent permitted by law, designate which shares of Common
Stock are to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
(b) Option Period. Each Option and all rights thereunder shall
expire no later than 10 years after the Award Date.
(c) Other Code Limits. Incentive Stock Options may only be granted
to Eligible Employees of the Corporation or a Subsidiary that satisfies the
other eligibility requirements of the Code. There shall be imposed in any Award
Agreement relating to Incentive Stock Options such other terms and conditions as
from time to time are required in order that the Option be an "incentive stock
option" as that term is defined in Section 422 of the Code.
2.4 Limits on 10% Holders.
No Incentive Stock Option may be granted to any person who, at the
time the Option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such Option is at least 110% of the Fair Market Value of
the stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
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2.5 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.
Subject to Section 1.4 and Section 6.6 and the specific limitations
on Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Person any
adjustment in the exercise or purchase price, the vesting schedule, the number
of shares subject to, the restrictions upon or the term of, an Award granted
under this Article by cancellation of an outstanding Award and a subsequent
regranting of an Award, by amendment, by substitution of an outstanding Award,
by waiver or by other legally valid means. Such amendment or other action may
result among other changes in an exercise or purchase price which is higher or
lower than the exercise or purchase price of the original or prior Award,
provide for a greater or lesser number of shares subject to the Award, or
provide for a longer or shorter vesting or exercise period.
2.6 Options and Rights in Substitution for Stock Options Granted by
Other Corporations. Options and Stock Appreciation Rights may be granted to
Eligible Persons under this Plan in substitution for employee stock options
granted by other entities to persons who are or who will become Eligible Persons
in respect of the Company, in connection with a distribution, merger or
reorganization by or with the granting entity or an affiliated entity, or the
acquisition by the Company, directly or indirectly, of all or a substantial part
of the stock or assets of the other entity.
3. STOCK APPRECIATION RIGHTS (INCLUDING LIMITED STOCK APPRECIATION RIGHTS).
3.1 Grants.
In its discretion, the Committee may grant Stock Appreciation Rights
to any Eligible Person either concurrently with the grant of another Award or in
respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder, unless the holder otherwise agrees.
3.2 Exercise of Stock Appreciation Rights.
(a) Exercisability. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another Award shall be
exercisable at such time or times, and to the extent, that the related Award
shall be exercisable.
(b) Effect on Available Shares. To the extent that a Stock
Appreciation Right is exercised, only the actual number of delivered shares of
Common Stock shall be charged against the maximum amount of Common Stock that
may be delivered pursuant to Awards under this Plan. The number of shares
subject to the Stock Appreciation Right and the related Option
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of the Participant shall, however, be reduced by the number of underlying shares
as to which the exercise related, unless the Award Agreement otherwise provides.
(c) Stand-Alone SARs. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms of
the Award Agreement but in no event earlier than six months after the Award
Date, except in the case of death or Total Disability.
3.3 Payment.
(a) Amount. Unless the Committee otherwise provides, upon exercise
of a Stock Appreciation Right and the attendant surrender of an exercisable
portion of any related Award, the Participant shall be entitled to receive
payment of an amount determined by multiplying
(i) the difference obtained by subtracting the exercise price per
share of Common Stock under the related Award (if applicable) or the
initial share value specified in the Award from the Fair Market Value of
a share of Common Stock on the date of exercise of the Stock
Appreciation Right, by
(ii) the number of shares with respect to which the Stock
Appreciation Right shall have been exercised.
(b) Form of Payment. The Committee, in its sole discretion, shall
determine the form in which payment shall be made of the amount determined under
paragraph (a) above, either solely in cash, solely in shares of Common Stock
(valued at Fair Market Value on the date of exercise of the Stock Appreciation
Right), or partly in such shares and partly in cash, provided that the Committee
shall have determined that such exercise and payment are consistent with
applicable law. If the Committee permits the Participant to elect to receive
cash or shares (or a combination thereof) on such exercise, any such election
shall be subject to such conditions as the Committee may impose.
3.4 Limited Stock Appreciation Rights.
The Committee may grant to any Eligible Person Stock Appreciation
Rights exercisable only upon or in respect of a change in control or any other
specified event ("Limited SARs") and such Limited SARs may relate to or operate
in tandem or combination with or substitution for Options, other Stock
Appreciation Rights or other Awards (or any combination thereof), and may be
payable in cash or shares based on the spread between the base price of the
Stock Appreciation Right and a price based upon the Fair Market Value of the
Shares during a specified period or at a specified time within a specified
period before, after or including the date of such event.
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4. RESTRICTED STOCK AWARDS.
4.1 Grants.
The Committee may, in its discretion, grant one or more Restricted
Stock Awards to any Eligible Person. Each Restricted Stock Award Agreement shall
specify the number of shares of Common Stock to be issued to the Participant,
the date of such issuance, the consideration for such shares (but not less than
the minimum lawful consideration under applicable state law) by the Participant,
the extent (if any) to which and the time (if ever) at which the Participant
shall be entitled to dividends, voting and other rights in respect of the shares
prior to vesting, and the restrictions (which may be based on performance
criteria, passage of time or other factors or any combination thereof) imposed
on such shares and the conditions of release or lapse of such restrictions. Such
restrictions shall not lapse earlier than six months after the Award Date,
except to the extent the Committee may otherwise provide. Stock certificates
evidencing shares of Restricted Stock pending the lapse of the restrictions
("Restricted Shares") shall bear a legend making appropriate reference to the
restrictions imposed hereunder and shall be held by the Corporation or by a
third party designated by the Committee until the restrictions on such shares
shall have lapsed and the shares shall have vested in accordance with the
provisions of the Award and Section 1.7. Upon issuance of the Restricted Stock
Award, the Participant may be required to provide such further assurance and
documents as the Committee may require to enforce the restrictions.
4.2 Restrictions.
(a) Pre-Vesting Restraints. Except as provided in Section 4.1 and
1.9, restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until the restrictions on such shares have lapsed
and the shares have become vested.
(b) Dividend and Voting Rights. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
shall be entitled to vote such shares but shall not be entitled to dividends on
any of the shares until the shares have vested. Such dividends shall be retained
in a restricted account until the shares have vested and shall revert to the
Corporation if they fail to vest.
(c) Cash Payments. If the Participant shall have paid or received
cash (including any dividends) in connection with the Restricted Stock Award,
the Award Agreement shall specify whether and to what extent such cash shall be
returned (with or without an earnings factor) as to any restricted shares which
cease to be eligible for vesting.
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4.3 Return to the Corporation.
Unless the Committee otherwise expressly provides, Restricted Shares
that remain subject to restrictions at the time of termination of employment or
are subject to other conditions to vesting that have not been satisfied by the
time specified in the applicable Award Agreement shall not vest and shall be
returned to the Corporation in such manner and on such terms as the Committee
shall therein provide.
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES.
5.1 Grants of Performance Share Awards.
The Committee may, in its discretion, grant Performance Share Awards
to Eligible Persons based upon such factors as the Committee shall deem relevant
in light of the specific type and terms of the award. An Award Agreement shall
specify the maximum number of shares of Common Stock (if any) subject to the
Performance Share Award, the consideration (but not less than the minimum lawful
consideration) to be paid for any such shares as may be issuable to the
Participant, the duration of the Award and the conditions upon which delivery of
any shares or cash to the Participant shall be based. The amount of cash or
shares or other property that may be deliverable pursuant to such Award shall be
based upon the degree of attainment over a specified period of not more than 10
years (a "performance cycle") as may be established by the Committee of such
measure(s) of the performance of the Company (or any part thereof) or the
Participant as may be established by the Committee. The Committee may provide
for full or partial credit, prior to completion of such performance cycle or the
attainment of the performance achievement specified in the Award, in the event
of the Participant's death, Retirement, or Total Disability, a Change in Control
Event or in such other circumstances as the Committee may specify.
5.2 Special Performance-Based Share Awards.
Without limiting the generality of the foregoing, and in addition to
Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "performance-based
compensation" under Section 162(m) of the Code (with such Awards hereinafter
referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right,"
respectively), other performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), whether in the form of
restricted stock, performance stock, phantom stock or other rights, the grant,
vesting, exercisability or payment of which depends on the degree of achievement
of the Performance Goals relative to preestablished targeted levels for the
Corporation or the Corporation and one or more of its Subsidiaries, may be
granted under this Plan. Any Qualifying Option or Qualifying Stock Appreciation
Right shall be subject only to the requirements of subsections (a) and (c) below
in order for such Awards to satisfy the requirements for Performance-Based
Awards under this Section 5.2. With the exception of any Qualifying Option or
Qualifying Stock Appreciation
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Right, an Award that is intended to satisfy the requirements of this Section 5.2
shall be designated as a Performance-Based Award at the time of grant.
(a) Eligible Class. The eligible class of persons for
Performance-Based Awards under this Section shall be the executive officers of
the Corporation.
(b) Performance Goal Alternatives. The specific performance goals
for Performance-Based Awards granted under this Section (other than Qualifying
Options and Qualifying Stock Appreciation Rights) shall be, on an absolute or
relative basis, one or more of the Performance Goals, as selected by the
Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific targets shall be
determined within the time period permitted under Section 162(m) of the Code
(and any regulations issued thereunder) so that such targets are considered to
be preestablished and so that the attainment of such targets is substantially
uncertain at the time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10 years.
(c) Maximum Performance-Based Award. Notwithstanding any other
provision of the Plan to the contrary, the maximum number of shares of Common
Stock which may be delivered pursuant to options, stock appreciation rights,
restricted stock or other share-based awards that are granted as
Performance-Based Awards to any Participant in any calendar year shall not
exceed 350,000 shares, either individually or in the aggregate, subject to
adjustment as provided in Section 6.2. Awards that are cancelled during the year
shall be counted against this limit to the extent required by Section 162(m) of
the Code. In addition, the aggregate amount of compensation to be paid to any
Participant in respect of any Cash-Based Awards that are granted during any
calendar year as Performance-Based Awards shall not exceed $1,000,000.
(d) Committee Certification. Before any Performance-Based Award
under this Section 5.2 (other than Qualifying Options or Qualifying Stock
Appreciation Rights) is paid, the Committee must certify in writing that the
Performance Goal(s) and any other material terms of the Performance-Based Award
were satisfied; provided, however, that a Performance-Based Award may be paid
without regard to the satisfaction of the applicable Performance Goal in the
event of a Change in Control Event in accordance with Section 6.2(d).
(e) Terms and Conditions of Awards. The Committee will have the
discretion to determine the restrictions or other limitations of the individual
Awards granted under this Section 5.2 including the authority to reduce Awards,
payouts or vesting or to pay no Awards, in its sole discretion, if the Committee
preserves such authority at the time of grant by language to this effect in its
authorizing resolutions or otherwise.
(f) Adjustments for Changes in Capitalization and other Material
Changes. In the event of a change in corporate capitalization, such as a stock
split or stock dividend, or a corporate transaction, such as a merger,
consolidation, spinoff, reorganization or similar event, or
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any partial or complete liquidation of the Corporation, or any similar event
consistent with regulations issued under Section 162(m) of the Code including,
without limitation, any material change in accounting policies or practices
affecting the Corporation and/or the Performance Goals or targets, then the
Committee may make adjustments to the Performance Goals and targets relating to
outstanding Performance-Based Awards to the extent such adjustments are made to
reflect the occurrence of such an event; provided, however, that adjustments
described in this subsection may be made only to the extent that the occurrence
of an event described herein was unforeseen at the time the targets for a
Performance-Based Award were established by the Committee.
5.3 Grants of Stock Bonuses.
The Committee may grant a Stock Bonus to any Eligible Person to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of shares
so awarded shall be determined by the Committee. The Award may be granted
independently or in lieu of a cash bonus.
5.4 Deferred Payments.
The Committee may authorize for the benefit of any Eligible Person
the deferral of any payment of cash or shares that may become due or of cash
otherwise payable under this Plan, and provide for accredited benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
6. OTHER PROVISIONS.
6.1 Rights of Eligible Persons, Participants and Beneficiaries.
(a) Employment Status. Status as an Eligible Person shall not be
construed as a commitment that any Award will be made under this Plan to an
Eligible Person or to Eligible Persons generally.
(b) No Employment Contract. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award) shall confer upon any
Eligible Person or other Participant any right to continue in the employ or
other service of the Company or constitute any contract or agreement of
employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause, but nothing
contained in this Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her consent thereto.
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(c) Plan Not Funded. Awards payable under this Plan shall be payable
in shares or from the general assets of the Corporation, and (except as provided
in Section 1.4) no special or separate reserve, fund or deposit shall be made to
assure payment of such Awards. No Participant, Beneficiary or other person shall
have any right, title or interest in any fund or in any specific asset
(including shares of Common Stock, except as expressly otherwise provided) of
the Company by reason of any Award hereunder. Neither the provisions of this
Plan (or of any related documents), nor the creation or adoption of this Plan,
nor any action taken pursuant to the provisions of this Plan shall create, or be
construed to create, a trust of any kind or a fiduciary relationship between the
Company and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive payment
pursuant to any Award hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Company.
6.2 Adjustments; Acceleration.
(a) Adjustments. If there shall occur any extraordinary dividend or
other extraordinary distribution in respect of the Common Stock (whether in the
form of cash, Common Stock, other securities, or other property), or any
reclassification, recapitalization, stock split (including a stock split in the
form of a stock dividend), reverse stock split, reorganization, merger,
combination, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock or other securities of the Corporation, or there shall
occur any similar, unusual or extraordinary corporate transaction or event in
respect of the Common Stock or a sale of substantially all the assets of the
Corporation as an entirety, then the Committee shall, in such manner and to such
extent (if any) as it deems appropriate and equitable (1) proportionately adjust
any or all of (a) the number and type of shares of Common Stock (or other
securities) which thereafter may be made the subject of Awards (including the
specific maxima and numbers of shares set forth elsewhere in this Plan), (b) the
number, amount and type of shares of Common Stock (or other securities or
property) subject to any or all outstanding Awards, (c) the grant, purchase, or
exercise price of any or all outstanding Awards, (d) the securities, cash or
other property deliverable upon exercise of any outstanding Awards, or (e) the
performance standards appropriate to any outstanding Awards, or (2) in the case
of an extraordinary dividend or other distribution, recapitalization,
reclassification, merger, reorganization, consolidation, combination, sale of
assets, split up, exchange, or spin off, make provision for a cash payment or
for the substitution or exchange of any or all outstanding Awards or the cash,
securities or property deliverable to the holder of any or all outstanding
Awards based upon the distribution or consideration payable to holders of the
Common Stock of the Corporation upon or in respect of such event; provided,
however, in each case, that with respect to Awards of Incentive Stock Options,
no such adjustment shall be made which would cause the Plan to violate Section
424(a) of the Code or any successor provisions thereto without the written
consent of holders materially adversely affected thereby. In any of such events,
the Committee may take such action sufficiently prior to such event if necessary
to permit the Participant to realize the benefits intended to be conveyed with
respect to the underlying shares in the same manner as is available to
shareholders generally.
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(b) Acceleration of Awards Upon Change in Control. As to any
Participant, unless prior to a Change in Control Event the Board determines
that, upon its occurrence, there shall be no acceleration of benefits under
Awards or determines that only certain or limited benefits under Awards shall be
accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Event for such acceleration,
then upon the occurrence of a Change in Control Event: (i) each Option and Stock
Appreciation Right shall become immediately exercisable, (ii) Restricted Stock
shall immediately vest free of restrictions, and (iii) each Performance Share
Award shall become payable to the Participant. The Committee may override the
limitations on acceleration in this Section 6.2(b) by express provision in the
Award Agreement and may accord any Eligible Person a right to refuse any
acceleration, whether pursuant to the Award Agreement or otherwise, in such
circumstances as the Committee may approve. Any acceleration of Awards shall
comply with applicable regulatory requirements, including without limitation
Section 422 of the Code.
(c) Possible Early Termination of Accelerated Awards. If any Option
or other right to acquire Common Stock under this Plan (other than under Article
8) has been fully accelerated as permitted by Section 6.2(b) but is not
exercised prior to (i) a dissolution of the Corporation, or (ii) an event
described in Section 6.2(a) that the Corporation does not survive, or (iii) the
consummation of an event described in Section 6.2(a) that results in a Change of
Control approved by the Board, such Option or right shall thereupon terminate,
subject to any provision that has been expressly made by the Committee for the
survival, substitution, exchange or other settlement of such Option or right.
6.3 Effect of Termination of Employment.
(a) Options - Resignation or Dismissal. If the Participant's
employment by (or other service specified in the Award Agreement to) the Company
terminates for any reason (the date of such termination being referred to as the
"Severance Date") other than Retirement, Total Disability or death, or "for
cause" (as determined in the discretion of the Committee), the Participant shall
have, unless otherwise provided in the Award Agreement and subject to earlier
termination pursuant to or as contemplated by Section 1.6 or 6.2, three months
after the Severance Date to exercise any Option to the extent it shall have
become exercisable on the Severance Date. In the case of a termination "for
cause", the Option shall terminate on the Severance Date. In other cases, the
Option, to the extent not exercisable on the Severance Date, shall terminate.
(b) Options - Death or Disability. If the Participant's employment
by (or specified service to) the Company terminates as a result of Total
Disability or death, the Participant, Participant's Personal Representative or
his or her Beneficiary, as the case may be, shall have, unless otherwise
provided in the Award Agreement and subject to earlier termination pursuant to
or as contemplated by Section 1.6 or 6.2, until 12 months after the Severance
Date to exercise any Option to the extent it shall have become exercisable by
the Severance Date. Any Option to the extent not exercisable on the Severance
Date shall terminate.
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(c) Options - Retirement. If the Participant's employment by (or
specified service to) the Company terminates as a result of Retirement, the
Participant, Participant's Personal Representative or his or her Beneficiary, as
the case may be, shall have, unless otherwise provided in the Award Agreement
and subject to earlier termination pursuant to or as contemplated by Section 1.6
or 6.2, until 12 months after the Severance Date to exercise any Nonqualified
Stock Option (three months after the Severance Date in the case of an Incentive
Stock Option) to the extent it shall have become exercisable by the Severance
Date. The Option, to the extent not exercisable on the Severance Date, shall
terminate.
(d) Certain SARs. Any SAR granted concurrently or in tandem with an
Option shall have the same post-termination provisions and exercisability
periods as the Option to which it relates, unless the Committee otherwise
provides.
(e) Other Awards. The Committee shall establish in respect of each
other Award granted hereunder the Participant's rights and benefits (if any) in
the event of a termination of employment and in so doing may make distinctions
based upon the cause of termination and the nature of the Award.
(f) Committee Discretion. Notwithstanding the foregoing provisions
of this Section 2.6, in the event of, or in anticipation of, a termination of
employment with the Company for any reason, other than discharge for cause, the
Committee may, in its discretion, increase the portion of the Participant's
Award available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or, subject to the provisions of Section
1.6, extend the exercisability period upon such terms as the Committee shall
determine and expressly set forth in or by amendment to the Award Agreement.
6.4 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan and
the offer, issuance and delivery of shares of Common Stock and/or the payment of
money under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
6.5 Tax Withholding.
(a) Cash or Shares. Upon any exercise, vesting, or payment of any
Award or upon the disposition of shares of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option prior to satisfaction of the holding
period requirements of Section 422 of the Code, the Company shall have the right
at its option to (i) require the Participant (or Personal
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Representative or Beneficiary, as the case may be) to pay or provide for payment
of the amount of any taxes which the Company may be required to withhold with
respect to such Award event or payment or (ii) deduct from any amount payable in
cash the amount of any taxes which the Company may be required to withhold with
respect to such cash payment. In any case where a tax is required to be withheld
in connection with the delivery of shares of Common Stock under this Plan, the
Committee may in its sole discretion grant (either at the time of the Award or
thereafter) to the Participant the right to elect, pursuant to such rules and
subject to such conditions as the Committee may establish, to have the
Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares valued at their then Fair Market
Value, to satisfy such withholding obligation.
(b) Tax Loans. If so provided in the Award Agreement, the Company
may, in its discretion and to the extent permitted by law, authorize a loan to
an Eligible Person in the amount of any taxes which the Company may be required
to withhold with respect to shares of Common Stock received (or disposed of, as
the case may be) pursuant to a transaction described in Section 6.5 (a). Such a
loan shall be for a term, at a rate of interest and pursuant to such other terms
and conditions as the Company, under applicable law may establish and such loan
need not comply with the provisions of Section 1.8.
6.6 Plan Amendment, Termination and Suspension.
(a) Board Authorization. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in part. No
Awards may be granted during any suspension of this Plan or after termination of
this Plan, but the Committee shall retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
(b) Shareholder Approval. Any amendment that would (i) materially
increase the benefits accruing to Participants under this Plan, (ii) materially
increase the aggregate number of securities that may be issued under this Plan,
or (iii) materially modify the requirements as to eligibility for participation
in this Plan, shall be subject to shareholder approval only to the extent then
required by Section 422 of the Code or applicable law, or deemed necessary or
advisable by the Board.
(c) Amendments to Awards. Without limiting any other express
authority of the Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of or limitations
on Awards to Eligible Persons that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and may make other
changes to the terms and conditions of Awards that do not affect in any manner
materially adverse to the Participant, his or her rights and benefits under an
Award.
(d) Limitations on Amendments to Plan and Awards. No amendment,
suspension or termination of this Plan or change of or affecting any outstanding
Award shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Corporation under any
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Award granted under this Plan prior to the effective date of such change.
Changes contemplated by Section 6.2 shall not be deemed to constitute changes or
amendments for purposes of this Section 6.6.
6.7 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership as
to any shares of Common Stock not actually delivered to and held of record by
him or her. No adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to such date of delivery.
6.8 Effective Date of the Plan.
This Plan shall be effective as of February 4, 1997, the date of
Board approval, subject to shareholder approval within 12 months thereafter.
6.9 Term of the Plan.
No Award shall be granted under this Plan after more than ten years
after the effective date of this Plan (the "termination date"). Unless otherwise
expressly provided in this Plan or in an applicable Award Agreement, any Award
granted prior to the termination date may extend beyond such date, and all
authority of the Committee with respect to Awards hereunder, including the
authority to amend an Award, shall continue during any suspension of this Plan
and in respect of Awards outstanding on the termination date.
6.10 Governing Law/Construction/Severability.
(a) Choice of Law. This Plan, the Awards, all documents evidencing
Awards and all other related documents shall be governed by, and construed in
accordance with the laws of the state of incorporation of the Corporation.
(b) Severability. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.
(c) Plan Construction.
(1) Rule 16b-3. It is the intent of the Corporation that
transactions in and affecting Awards in the case of Participants who are or may
be subject to Section 16 of the Exchange Act satisfy any then applicable
requirements of Rule 16b-3 so that such persons (unless they otherwise agree)
will be entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act in respect of those transactions and will not be
subjected to avoidable liability thereunder. If any provision of this Plan or of
any Award would otherwise frustrate or conflict with the intent expressed above,
that provision to the extent possible shall be interpreted as to avoid such
conflict. If the conflict remains irreconcilable, the
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Committee may disregard the provision if it concludes that to do so furthers the
interest of the Corporation and is consistent with the purposes of this Plan as
to such persons in the circumstances.
(2) Section 162(m). It is the further intent of the Company that
Options or SARs with an exercise or base price not less than Fair Market Value
on the date of grant and performance awards under Section 5.2 of this Plan that
are granted to or held by a Section 16 Person shall qualify as performance-based
compensation under Section 162(m) of the Code, and this Plan shall be
interpreted consistent with such intent.
6.11 Captions.
Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of this Plan or any provision thereof.
6.12 Effect of Change of Subsidiary Status.
For purposes of this Plan and any Award hereunder, if an entity
ceases to be a Subsidiary a termination of employment and service shall be
deemed to have occurred with respect to each Eligible Person in respect of such
Subsidiary who does not continue as an Eligible Person in respect of another
entity within the Company.
6.13 Non-Exclusivity of Plan.
Nothing in this Plan shall limit or be deemed to limit the authority
of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority.
7. DEFINITIONS.
7.1 Definitions.
(a) "Award" shall mean an award of any Option, Stock Appreciation
Right, Restricted Stock, Stock Bonus, Performance Share Award, dividend
equivalent or deferred payment right or other right or security that would
constitute a "derivative security" under Rule 16a-1(c) of the Exchange Act, or
any combination thereof, whether alternative or cumulative, authorized by and
granted under this Plan.
(b) "Award Agreement" shall mean any writing setting forth the terms
of an Award that has been authorized by the Committee.
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(c) "Award Date" shall mean the date upon which the Committee took
the action granting an Award or such later date as the Committee designates as
the Award Date at the time of the Award or, in the case of Awards under Article
8, the applicable dates set forth therein.
(d) "Award Period" shall mean the period beginning on an Award Date
and ending on the expiration date of such Award.
(e) "Beneficiary" shall mean the person, persons, trust or trusts
designated by a Participant or, in the absence of a designation, entitled by
will or the laws of descent and distribution, to receive the benefits specified
in the Award Agreement and under this Plan in the event of a Participant's
death, and shall mean the Participant's executor or administrator if no other
Beneficiary is designated and able to act under the circumstances.
(f) "Board" shall mean the Board of Directors of the Corporation.
(g) "Cash Flow" shall mean cash and cash equivalents derived from
either (i) net cash flow from operations or (ii) net cash flow from operations,
financings and investing activities, as determined by the Committee at the time
an Award is granted.
(h) "Change in Control Event" shall mean any of the following:
(1) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or into
one or more entities that are not Subsidiaries or other affiliates, as a
result of which less than 50% of the outstanding voting securities of
the surviving or resulting entity immediately after the reorganization
are, or will be, owned, directly or indirectly, by shareholders of the
Corporation immediately before such reorganization (assuming for
purposes of such determination that there is no change in the record
ownership of the Corporation's securities from the record date for such
approval until such reorganization and that such record owners hold no
securities of the other parties to such reorganization), but including
in such determination any securities of the other parties to such
reorganization held by affiliates of the Corporation);
(3) Approval by the shareholders of the Corporation of the sale
of substantially all of the Corporation's business and/or assets to a
person or entity which is not a Subsidiary or other affiliate; or;
(4) Any `person' (as such term is used in Sections 13(d) and
14(d) of the Exchange Act but excluding any person described in and
satisfying the conditions of Rule 13d-1(b)(1) thereunder) becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
30% or more of the combined voting power of the Corporation's then
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outstanding securities entitled to then vote generally in the election
of directors of the Corporation; or
(5) During any period not longer than two consecutive years,
individuals who at the beginning of such period constituted the Board
cease to constitute at least a majority thereof, unless the election, or
the nomination for election by the Corporation's shareholders, of each
new Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Board members at the
beginning of such period (including for these purposes, new members
whose election or nomination was so approved).
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(j) "Commission" shall mean the Securities and Exchange Commission.
(k) "Committee" shall mean the Board or a committee appointed by the
Board to administer this Plan, which committee shall be comprised only of two or
more directors or such greater number of directors as may be required under
applicable law, each of whom, (i) in respect of any decision at a time when the
Participant affected by the decision may be subject to Section 162(m) of the
Code, shall be an "outside director" within the meaning of Section 162(m) of the
Code, and/or (ii) in respect of any decision at a time when the Participant
affected by the decision may be subject to Section 16 of the Exchange Act, shall
be a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3).
(l) "Common Stock" shall mean the Common Stock of the Corporation
and such other securities or property as may become the subject of Awards, or
become subject to Awards, pursuant to an adjustment made under Section 6.2 of
this Plan.
(m) "Company" shall mean, collectively, the Corporation and its
Subsidiaries.
(n) "Corporation" shall mean Meade Instruments Corp., a California
corporation, and its successors.
(o) "Eligible Employee" shall mean an officer (whether or not a
director) or key employee of the Company.
(p) "Eligible Person" means an Eligible Employee, or any Other
Eligible Person, as determined by the Committee in its discretion.
(q) "EPS" shall mean earnings per common share on a fully diluted
basis determined by dividing (i) net earnings, less dividends on preferred stock
of the Corporation by (ii) the weighted average number of common shares and
common shares equivalents outstanding (all as determined in accordance with
generally accepted accounting principles).
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(r) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(t) "Fair Market Value" on any date shall mean (i) if the stock is
listed or admitted to trade on a national securities exchange, the closing price
of the stock on the Composite Tape, as published in the Western Edition of The
Wall Street Journal, of the principal national securities exchange on which the
stock is so listed or admitted to trade, on such date, or, if there is no
trading of the stock on such date, then the closing price of the stock as quoted
on such Composite Tape on the next preceding date on which there was trading in
such shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished by
the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information; (iii) if the stock is not listed or admitted
to trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD or a similar organization; or (iv) if the
stock is not listed or admitted to trade on a national securities exchange, is
not reported on the National Market Reporting System and if bid and asked prices
for the stock are not furnished by the NASD or a similar organization, the value
as established by the Committee at such time for purposes of this Plan.
(u) "Incentive Stock Option" shall mean an Option which is intended,
as evidenced by its designation, as an incentive stock option within the meaning
of Section 422 of the Code, the award of which contains such provisions
(including but not limited to the receipt of shareholder approval of this Plan,
if the Award is made prior to such approval) and is made under such
circumstances and to such persons as may be necessary to comply with that
section.
(v) "Nonqualified Stock Option" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
(w) "Non-Employee Director" shall mean a member of the Board of
Directors of the Corporation who is not an officer or employee of the Company.
(x) "Non-Employee Director Participant" shall mean a Non-Employee
Director who holds an outstanding Award under the provisions of Article 8.
(y) "Option" shall mean an option to purchase Common Stock granted
under this Plan. The Committee shall designate any Option granted to an Eligible
Person as a Nonqualified Stock Option or an Incentive Stock Option.
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(z) "Other Eligible Person" shall mean any Non-Employee Director or
any individual consultant or advisor who renders or has rendered bona fide
services (other than services in connection with the offering or sale of
securities of the Company in a capital raising transaction) to the Company, and
who is selected to participate in this Plan by the Committee.
(aa) "Participant" shall mean an Eligible Person who has been
granted an Award under this Plan and a Non-Employee Director who has been
received an Award under Article 8 of this Plan.
(bb) "Performance Goals" shall mean Cash Flow, EPS, ROE, Total
Stockholder Return and any other criterion established by the Committee.
(cc) "Performance Share Award" shall mean an Award of a right to
receive shares of Common Stock or other compensation (including cash) under
Section 5.2, the issuance or payment of which is contingent upon, among other
conditions, the attainment of performance objectives specified by the Committee.
(dd) "Personal Representative" shall mean the person or persons who,
upon the disability or incompetence of a Participant, shall have acquired on
behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(ee) "Plan" shall mean this Stock Incentive Plan.
(ff) "QDRO" shall mean a qualified domestic relations order.
(gg) "Restricted Shares" or "Restricted Stock" shall mean shares of
Common Stock awarded to a Participant under this Plan, subject to payment of
such consideration, if any, and such conditions on vesting (which may include,
among others, the passage of time, specified performance objectives or other
factors) and such transfer and other restrictions as are established in or
pursuant to this Plan and the related Award Agreement, for so long as such
shares remain unvested under the terms of the applicable Award Agreement.
(hh) "Retirement" shall mean retirement with the consent of the
Company or, from active service as an employee or officer of the Company on or
after attaining age 55 with 10 or more years of service or after age 65.
(ii) "ROE" shall mean consolidated net income of the Corporation
(less preferred dividends), divided by the average consolidated common
shareholders equity.
(jj) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act, as amended from time to time.
(kk) "Section 16 Person" shall mean a person subject to Section
16(a) of the Exchange Act.
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(ll) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(mm) "Stock Appreciation Right" shall mean a right authorized under this
Plan to receive a number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Common
Stock.
(nn) "Stock Bonus" shall mean an Award of shares of Common Stock granted
under this Plan for no consideration other than past services and without
restriction other than such transfer or other restrictions as the Committee may
deem advisable to assure compliance with law.
(oo) "Subsidiary" shall mean any corporation or other entity a majority
of whose outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Corporation.
(pp) "Total Disability" shall mean a "permanent and total disability"
within the meaning of Section 22(e)(3) of the Code and such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
(qq) "Total Stockholder Return" shall mean with respect to the
Corporation or other entities (if measured on a relative basis), the (i) change
in the market price of its common stock (as quoted in the principal market on
which it is traded as of the beginning and ending of the period) plus dividends
and other distributions paid, divided by (ii) the beginning quoted market price,
all of which is adjusted for any changes in equity structure, including but not
limited to stock splits and stock dividends.
8. NON-EMPLOYEE DIRECTOR OPTIONS
8.1 Participation.
Awards under this Article 8 shall be made only to Non-Employee
Directors and shall be evidenced by Award Agreements substantially in the form
of Exhibit A hereto.
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8.2 Annual Option Grants.
(a) Time of Initial Award. Persons who are Non-Employee Directors in
office at the time this Plan is first approved by the shareholders of the
Corporation shall be granted without further action a Nonqualified Stock Option
to purchase 5,000 shares of Common Stock. After approval of this Plan by the
shareholders of the Corporation, if any person who is not then an officer or
employee of the Company shall become a director of the Corporation, there shall
be granted automatically to such person (without any action by the Board or
Committee) a Non-qualified Stock Option (the Award Date of which shall be the
date such person takes office) to purchase 5,000 shares of Common Stock.
(b) Subsequent Annual Awards. Immediately following the annual
shareholders meeting in each year during the term of the Plan commencing 1998,
there shall be granted automatically (without any action by the Committee or the
Board) a Nonqualified Stock Option (the Award Date of which shall be such date)
to each Non-Employee Director then continuing in office to purchase 5,000 shares
of Common Stock.
(c) Maximum Number of Shares. A Non-Employee Director shall not
receive more than one Nonqualified Stock Option under this Section 8.2 in any
calendar year, nor more than 75,000 shares on exercise of all Options awarded
under this Section 8.2.
8.3 Option Price.
The purchase price per share of the Common Stock covered by each
Option granted pursuant to Section 8.2 hereof shall be 100 percent of the Fair
Market Value of the Common Stock on the Award Date (or the initial public
offering price for any grants made to Non-Employee Directors on or prior to the
closing date of the Corporation's initial public offering). The exercise price
of any Option granted under this Article shall be paid in full at the time of
each purchase in cash or by check or in shares of Common Stock valued at their
Fair Market Value on the date of exercise of the Option, or partly in such
shares and partly in cash, provided that any such shares used in payment shall
have been owned by the Participant at least six months prior to the date of
exercise.
8.4 Option Period and Exercisability.
Each Option granted under this Article 8 and all rights or
obligations thereunder shall expire ten years after the Award Date and shall be
subject to earlier termination as provided below. Each Option granted under
Section 8.2 shall become exercisable at the rate of 33 1/3% per annum commencing
on the first anniversary of the Award Date and each of the next two
anniversaries thereof.
8.5 Termination of Directorship.
If a Non-Employee Director's services as a member of the Board of
Directors terminate by reason of death, Disability or Retirement, an Option
granted pursuant to this Article
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held by such Participant shall immediately become and shall remain exercisable
for two years after the date of such termination or until the expiration of the
stated term of such Option, whichever first occurs. If a Non-Employee Director's
services as a member of the Board of Directors terminate for any other reason,
any portion of an Option granted pursuant to this Article which is not then
exercisable shall terminate and any portion of such Option which is then
exercisable may be exercised for three months after the date of such termination
or until the expiration of the stated term whichever first occurs.
8.6 Adjustments.
Options granted under this Article 8 shall be subject to adjustment
as provided in Section 6.2, but only to the extent that (a) such adjustment and
the Committee's actions in respect thereof satisfy any applicable criteria in
respect of formula plans under Rule 16, (b) such adjustment in the case of a
Change in Control Event is effected pursuant to the terms of a reorganization
agreement approved by shareholders of the Corporation, and (c) such adjustment
is consistent with adjustments to Options held by persons other than executive
officers or directors of the Corporation.
8.7 Acceleration Upon a Change in Control Event
Upon the occurrence of a Change in Control Event, each Option
granted under Section 8.2 hereof shall become immediately exercisable in full.
To the extent that any Option granted under this Article 8 is not exercised
prior to (i) a dissolution of the Corporation or (ii) a merger or other
corporate event that the Corporation does not survive, and no provision is (or
consistent with the provisions of Section 8.7 can be) made for the assumption,
conversion, substitution or exchange of the Option, the Option shall terminate
upon the occurrence of such event.
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MEADE INSTRUMENTS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Mark D. Peterson and Robert L. Davis, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of Meade Instruments Corp. (the "Company") held of record by the
undersigned on May 21, 2001, the record date with respect to this solicitation,
at the Annual Meeting of Stockholders of the Company to be held at the Irvine
Marriott Hotel, 18000 Von Karman Avenue, Irvine, CA 92612, beginning at 10:00
A.M., local time on Thursday, July 12, 2001, and at any adjournment thereof,
upon the following matters:
(1) ELECTION OF CLASS III DIRECTORS
NOMINEE TERM
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John C. Diebel Three-year term expiring at the 2004 Annual Meeting [ [
] FOR ] WITHHELD
Timothy C. McQuay Three year term expiring at the 2004 Annual Meeting [ [
] FOR ] WITHHELD
(2) APPROVAL OF AMENDMENT TO 1997 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment thereof.
(Continued and to be signed on the reverse side)
60
(continued from other side)
MARK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
MARK HERE FOR CHANGE OF ADDRESS AND NOTE AT LEFT [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSAL (1) AND (2) ABOVE AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR AT ANY ADJOURNMENTS THEREOF.
IF ANY NOMINEE LISTED IN PROPOSAL (1) DECLINES OR IS UNABLE TO SERVE AS A
DIRECTOR, THEN THE PERSONS NAMED AS PROXIES SHALL HAVE FULL DISCRETION TO VOTE
FOR ANY OTHER PERSON DESIGNATED BY THE BOARD OF DIRECTORS.
Dated:
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2001
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Signature(s) of
stockholder(s)
(Your signature(s) should
conform to your name(s)
as printed hereon.
Co-owners should all
sign.)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.