<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From ________________ to ________________
COMMISSION FILE NUMBER 0-27748
OCAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4544569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14538 KESWICK STREET
VAN NUYS, CALIFORNIA 91405
(Address of principal executive offices)
(818) 782-0711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
The number of outstanding shares of the Registrant's Common Stock,
par value $.001 per share, was 5,730,000 at November 10, 1997.
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
_______________________________
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
______________________ _____________________
1997 1996 1997 1996
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net sales $ 6,457 $ 7,193 $ 18,334 $ 18,925
Cost of goods sold 4,665 5,021 13,208 13,041
_________ _________ _________ _________
Gross margin 1,792 2,172 5,126 5,884
Selling, general and administrative expenses 1,082 1,179 3,299 3,093
_________ _________ _________ _________
Operating income 710 993 1,827 2,791
Interest expense 49 53 155 206
Interest income (65) (82) (192) (176)
_________ _________ _________ _________
Income before income taxes 726 1,022 1,864 2,761
Provision for income taxes 239 410 689 970
_________ _________ _________ _________
Net income $ 487 $ 612 $ 1,175 $ 1,791
Pro forma net income $ 1,650
Average common and common equivalent
shares outstanding 5,765 5,780 5,775 5,038
Net income per share $ 0.08 $ 0.11 $ 0.20 $ 0.36
Pro forma net income per share $ 0.33
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
OCAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
1997 1996
____________ ____________
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,485 $ 6,619
Accounts receivable, net 3,144 2,580
Inventories 8,082 6,947
Prepaid expenses and other current assets 175 171
Prepaid income taxes 346 -
Deferred income taxes 223 293
____________ ____________
Total current assets 17,455 16,610
Property, plant and equipment, at cost 3,236 2,809
Less accumulated depreciation and amortization 1,500 1,285
____________ ____________
Net property and equipment 1,736 1,524
Other assets 72 148
____________ ____________
Total Assets $ 19,263 $ 18,282
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 2,478 $ 1,167
Accrued expenses 918 588
Income taxes payable - 37
Distribution payable - stockholders - 300
Current portion of notes payable - stockholders - 1,500
____________ ____________
Total current liabilities 3,396 3,592
OTHER LIABILITIES
Long-term notes payable - stockholders 1,757 1,757
Deferred income taxes 281 218
____________ ____________
Total other liabilities 2,038 1,975
STOCKHOLDERS' EQUITY
Capital Stock
Preferred stock - -
Common stock 6 6
Additional paid-in capital 10,647 10,708
Retained earnings 3,176 2,001
____________ ____________
Total stockholders' equity 13,829 12,715
____________ ____________
Total Liabilities and Stockholders' Equity $ 19,263 $ 18,282
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
OCAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(in thousands)
(Unaudited)
<CAPTION>
1997 1996
_________ _________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,175 $ 1,791
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 235 220
Deferred income taxes 133 100
Changes in operating assets and liabilities:
Accounts receivable, net (564) (782)
Inventories (1,135) 966
Prepaid expenses and other 72 (6)
Accounts payable 1,311 (589)
Accrued expenses 330 (61)
Prepaid income taxes (383) 230
_________ _________
Net cash provided by operating activities 1,174 1,869
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (447) (176)
Repayment of loan to stockholder - 1,645
Other items, net - (97)
_________ _________
Net cash provided by (used in) investing activities (447) 1,372
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable - bank - (5,802)
Net proceeds from issuance of common stock - 10,490
Purchases of treasury stock (61) -
Distribution of S corporation retained earnings
to prior S corporation stockholders (300) (4,600)
Additions to (repayment of) notes payable -
stockholders (1,500) 3,000
_________ _________
Net cash provided by (used in) financing activities (1,861) 3,088
_________ _________
Net increase (decrease) in cash and cash equivalents (1,134) 6,329
Cash and cash equivalents at beginning of period 6,619 127
_________ _________
Cash and cash equivalents at end of period $ 5,485 $ 6,456
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 163 $ 341
Income taxes $ 908 $ 661
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
OCAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying condensed consolidated financial statements of Ocal, Inc.
("Ocal" or the "Company") and its subsidiaries are unaudited and have been
prepared in conformity with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the accompanying financial statements reflect all
adjustments (of a normal recurring nature) necessary to provide a fair
statement of the results for the interim periods presented. The interim
financial statements should be read in conjunction with the financial
statements and related notes included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily indicative
of the results of operations that may be expected for the full year ending
December 31, 1997.
2. BASIS OF PRESENTATION
Concurrent with the closing of the Company's initial public offering ("IPO") of
common stock on March 18, 1996, all of the outstanding capital stock of OCAL,
Incorporated ("Ocal Alabama"), Occidental Coating Company ("Occidental"), Ocal
Data Company ("Ocal Data"), and Ocal Transport Co. ("Ocal Transport") was
acquired by the Company through capital contributions by their respective prior
stockholders in exchange for an aggregate of 3,250,000 shares of the Company's
common stock (the "Reorganization"). The Company's Chairman, CEO and President
was the sole or majority stockholder of each of the contributed companies and
is the 53.2% stockholder of the Company as of September 30, 1997.
The accounts of Ocal Alabama, Occidental, Ocal Data and Ocal Transport are
included in the accompanying consolidated financial statements of the Company
on their historical basis. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain previously
reported amounts have been reclassified to conform to the current period
presentation.
3. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information is prepared on a basis consistent with pro
forma information appearing in the Registration Statement and Prospectus dated
March 12, 1996 related to the Company's IPO. The pro forma financial
information includes an adjustment to provide related income taxes as if all of
the Company's income prior to the IPO had been taxed at C corporation rates
based upon income before income taxes. A reconciliation between historical and
pro forma results of operations for the nine months ended September 30, 1996
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENT PRO FORMA
___________ ___________ ___________
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Income before income taxes $ 2,761 $ 2,761
Provision for income taxes 970 $ 141 1,111
________ ________ ________
Net income $ 1,791 $ (141) $ 1,650
Net income per share $ 0.36 $ 0.33
</TABLE>
4. INVENTORIES
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
____________ ____________
<S> <C> <C>
Raw materials $ 3,626 $ 3,038
Finished goods 4,456 3,909
_________ _________
8,082 6,947
</TABLE>
5. REVOLVING BANK LINE OF CREDIT
The bank line of credit was amended on June 30, 1997 to include Ocal, Inc.,
Ocal Data, and Ocal Transport as borrowers under the existing agreement, and to
add a pricing option based on the London Interbank Offered Rate ("LIBOR"). At
September 30, 1997, there were no borrowings outstanding under the bank line of
credit, which provides for maximum borrowings of $6,500,000 (subject to certain
specified percentages of the Company's accounts receivable and inventories).
Interest on borrowings outstanding under the bank line is based, at the
Company's option, on LIBOR or the bank's prime rate. At September 30, 1997, the
annual interest rate based on the LIBOR pricing option was LIBOR plus 2.0%, and
the annual interest rate based on the prime rate was prime.
6. TRANSACTIONS WITH RELATED PARTIES
As part of the Reorganization on March 18, 1996, Ocal Alabama declared a
distribution to its then stockholders of $4,600,000, which was an estimate of
all of its undistributed S corporation retained earnings as of that date. The
estimated distribution was paid in March 1996 in the form of cash and notes
payable issued to the stockholders of Ocal Alabama. On September 18, 1997,
$1,500,000 of the notes payable matured and were paid in cash to the
stockholders. The amount of undistributed S corporation retained earnings as of
March 18, 1996 was finalized as $4,900,000 after Ocal Alabama's income tax
return for the period from January 1, 1996 through March 18, 1996 was
completed. The additional $300,000 undistributed S corporation retained
earnings was paid in cash to the stockholders in February 1997.
7. INCOME TAXES
Through March 18, 1996, the date of the Reorganization and the IPO, Ocal
Alabama and Ocal Data had elected to be taxed as S corporations under the
provisions of the Internal Revenue Code. Pursuant to such elections,
stockholders of these companies included their proportionate share of the
taxable income of these companies in their personal tax returns. Accordingly,
no provision for federal income taxes was required or provided for the
operations of Ocal Alabama and Ocal Data through March 18, 1996.
As of March 18, 1996, as a result of the Reorganization, the Company and all of
its subsidiaries became C corporations subject to state and federal income
taxes at statutory rates. Such income taxes are provided on the results of
operations in the accompanying consolidated statements of income for all
periods subsequent to March 18, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 which involve risk and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, without limitation, competition, changes in product pricing and
gross margin, nominal growth in the industry, dependence on suppliers, and
risks due to potential future acquisitions, as well as those factors set forth
in the Company's 1996 Annual Report on Form 10-K, and under the caption "Risk
Factors" in the Company's Registration Statement on Form S-1 declared effective
on March 12, 1996.
RESULTS OF OPERATIONS
_____________________
OVERVIEW
On March 18, 1996, the Company completed an initial public offering ("IPO") of
its stock. Concurrent with the closing of the Company's IPO, all of the
outstanding capital stock of OCAL, Incorporated ("Ocal Alabama"), Occidental
Coating Company ("Occidental"), Ocal Data Company ("Ocal Data"), and Ocal
Transport Co. ("Ocal Transport") was acquired by the Company through capital
contributions by the respective stockholders in exchange for an aggregate of
3,250,000 shares of the Company's common stock (the "Reorganization").
As part of this Reorganization, Ocal Alabama declared a $4,600,000 distribution
to its former stockholders, which represented estimated undistributed S
corporation retained earnings, and the total amount of the distribution was
finalized as $4,900,000 upon completion of the final tax return for Ocal
Alabama. The estimated distribution was paid in March 1996 in the form of cash
of $1,600,000 and notes payable of $3,000,000. The additional $300,000 of
undistributed S corporation retained earnings was paid in cash to the
stockholders in February of 1997.
Prior to the IPO, Ocal Alabama and Ocal Data had elected to be taxed as S
corporations under the provisions of the Internal Revenue Code. Pursuant to
such elections, stockholders of these companies included their proportionate
share of the taxable income of these companies in their personal tax returns.
Accordingly, no provision for federal taxes was required or provided for the
operations of these entities through March 18, 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NET SALES. The Company's net sales of $6,457,000 for the third quarter of 1997
decreased $736,000 (10.2%) compared to net sales in the third quarter of the
prior year. The decrease in sales was primarily due to an unusually high level
of sales during the third quarter of the prior year, which included $500,000 of
non-recurring revenue from overseas customers.
GROSS MARGIN. The Company's gross margin for the third quarter of 1997 was
$1,792,000, which represented a decrease of $380,000 (17.5%) compared to the
gross margin of the same period of 1996. The Company's gross margin as a
percentage of sales decreased to 27.8% in 1997 from 30.2% in 1996 due primarily
to increased labor costs. The Company implemented wage increases of
approximately 20% to factory personnel at the beginning of the second quarter
of 1997 in order to remain competitive with wages paid by other local employers
and to help reduce employee turnover.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses for the third
quarter of 1997 were $1,082,000, which represented a decrease of $97,000 (8.2%)
compared to the same period of the prior year. The decrease was due in large
part to certain non-recurring legal expenses incurred during the third quarter
of 1996. Additionally, commissions during the third quarter of 1997 were lower
than those for the same period of 1996 due to reduced sales.
INTEREST EXPENSE. Interest expense for the third quarter of 1997 was $49,000,
which represented a decrease of $4,000 (7.5%). The decrease was due to the
repayment of the current portion of notes payable to stockholders, which
occurred on September 18, 1997.
INTEREST INCOME. Interest income for the third quarter of 1997 was $65,000,
which represented a decrease of $17,000 (20.7%), compared to the same period of
the prior year. During the fourth quarter of 1996, the Company decided to
invest excess cash in federally tax-free instruments, which have a lower
pre-tax yield than taxable investments.
INCOME TAX EXPENSE. The Company's effective income tax rate for the third
quarter of 1997 was 32.9%, compared to 40.1% in the same period of the prior
year. The decrease in the effective rate was due to the recognition of
approximately $35,000 of refunds due based on final 1996 state tax returns.
NET INCOME. Net income for the third quarter of 1997 was $487,000, which
represented a decrease of $125,000 (20.4%) compared to the same period of the
prior year. The decrease was due primarily to lower sales volume and reduced
gross margin, partially offset by lower selling, general and administrative
expenses.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NET SALES. The Company's net sales of $18,334,000 for the nine months ended
September 30, 1997 decreased $591,000 (3.1%) compared to the same period of
1996. The decrease in sales from 1996 to 1997 was due to the absence in 1997 of
approximately $500,000 of non-recurring revenues from overseas customers and a
reduction of approximately $700,000 in sales to a customer who underwent a
major plant expansion during early 1996, partially offset by increased sales to
smaller customers during 1997.
GROSS MARGIN. The Company's gross margin for the nine months ended September
30, 1997 was $5,126,000, which represented a decrease of $758,000 (12.9%)
compared to the gross margin of the same period of 1996. The Company's gross
margin as a percentage of sales decreased to 28.0% in 1997 from 31.1% in 1996
due primarily to increased labor costs. The Company implemented wage increases
of approximately 20% to factory personnel at the beginning of the third quarter
of 1997 in order to remain competitive with wages paid by other local employers
and to help reduce employee turnover.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses for the nine months
ended September 30, 1997 were $3,299,000, which represented an increase of
$206,000 (6.7%) compared to the same period of the prior year. The increase was
due primarily to higher marketing and administrative salaries and business
travel expenses in 1997, partially offset by the absence of certain legal
expenses incurred during the the third quarter of 1996.
INTEREST EXPENSE. Interest expense for the nine months ended September 30, 1997
was $155,000, which represented a decrease of $51,000 (24.8%) compared to the
same period in the prior year. The reduction was primarily due to the absence
of bank debt in 1997 as a result of cash generated by the IPO.
INTEREST INCOME. Interest income for the nine months ended September 30, 1997
was $192,000, which represented an increase of $16,000 (9.1%), compared to the
same period of the prior year. During the first nine months ended September
30, 1996, the Company did not earn interest income until receiving cash
generated by the IPO.
INCOME TAX EXPENSE. The Company's effective income tax rate for the nine months
ended September 30, 1997 was 37.0%, compared to 35.1% in the same period of the
prior year. As described in the Overview section above, Ocal Alabama and Ocal
Data were not subject to state and federal income taxes at statutory rates
until after the Reorganization.
NET INCOME. Net income for the nine months ended September 30, 1997 was
$1,175,000, which represented a decrease of $616,000 (34.4%) compared to the
same period of the prior year. The decrease was due primarily to reduced gross
margin and higher selling, general and administrative expenses, partially
offset by lower income taxes.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
In March and April of 1996, the Company completed its IPO of 2,530,000 shares
of its common stock, which resulted in net proceeds, after deduction of
underwriters' discounts, commissions, and expenses, of $10,000,000. A portion
of the expenses, $490,000, was paid in 1995. The net proceeds of the offering
were used principally to pay off the $3,948,000 balance remaining on the
Company's note payable to its lending bank and to pay the $1,600,000 cash
portion of Ocal Alabama's distribution of its S corporation retained earnings
to its former stockholders. The balance of the proceeds were added to the
Company's working capital during March and April of 1996.
As described in the Overview section above, Ocal Alabama declared a
distribution to its then stockholders in an amount of $4,600,000, which was an
estimate of all its undistributed S corporation retained earnings as of the
date of the Reorganization. The distribution amount was finalized as $4,900,000
after Ocal Alabama's final income tax return was completed. On March 25, 1996,
$1,600,000 of the distribution was paid in cash to the former stockholders and
notes payable bearing interest at the rate of 6.5% per annum were established
for the $3,000,000 unpaid portion of the distribution, with $1,500,000 due (and
paid in cash) on September 18, 1997 and $1,500,000 due on March 18, 1999. The
additional $300,000 of undistributed S corporation retained earnings,
classified as a distribution payable at December 31, 1996, was paid in cash to
the former stockholders in February 1997.
At September 30, 1997, the Company's debt totaled $1,757,000, which consisted
of $1,500,000 in notes payable to former stockholders of Ocal Alabama and
$257,000 of notes payable to the Company's major shareholder.
The Company has a revolving bank line of credit which provides for maximum
borrowings of $6,500,000 (subject to certain specified percentages of the
Borrower's accounts receivable and inventories). Interest is payable, at the
Company's option, at either the bank's prime interest rate or LIBOR plus 2.0%.
There were no borrowings outstanding under this line at September 30, 1997.
The Company believes that cash provided by operating activities, existing cash
and cash equivalents, and available credit will be sufficient to fund future
operating and capital cash needs for at least the next 12 to 18 months. The
Company intends to pursue a strategy of growth by selective acquisitions that
complement the Company's strengths in the electrical conduit industry. Such
acquisitions may necessitate the issuance of additional debt or equity
securities of the Company. The Company intends to pursue this strategy with
careful regard for profitability, the need for liquidity, and the potential
dilutive effect of any additional issuance of equity securities. There can be
no assurance, however, that any acquisitions will occur or that an acquisition
that does occur will not adversely affect the Company's net income or
liquidity.
Working capital increased to $14,059,000 at September 30, 1997 from $13,018,000
at December 31, 1996, an increase of $1,041,000 (8.0%). The increase was due
primarily to increases in accounts receivable and prepaid income taxes.
Increases in inventory, accounts payable and accrued expenses were offset by
reductions in cash and current notes payable to stockholders.
The Company generated net cash of $1,174,000 and $1,869,000 from operating
activities in the nine months ended September 30, 1997 and 1996, respectively.
The primary source of operating cash in the nine months ended September 30,
1997 was the Company's net income; increased accounts payable and accrued
expenses were offset by increased inventories, accounts receivable and prepaid
income taxes. During the nine months ended September 30, 1996, the primary
sources of operating cash were the Company's net income and a reduction in
inventory, offset by an increase in accounts receivable and a decrease in
accounts payable.
Net cash used by investing activities was $447,000 in the nine months ended
September 30, 1997, compared to net cash provided by investing activities of
$1,372,000 in the same period of the prior year. The Company's capital
expenditures for the nine months ending September 30, 1997 were $447,000,
compared to $176,000 for the same period of the prior year. The increased
expenditures were made to upgrade and expand the Company's manufacturing
equipment to further automate production processes. During March of 1996, in
conjunction with the Reorganization, the Company's major stockholder repaid a
loan of $1,645,000 to the Company. The loan was originally made in 1995 in
order to allow such major stockholder to furnish a personally owned certificate
of deposit as security on the Company's revolving line of credit.
Net cash used by financing activities during the nine months ended September
30, 1997 was $1,861,000, which consisted of the repayment of the portion of
notes payable to stockholders which was due on September 18, 1997, the February
1997 payment of the previously undistributed S corporation earnings after the
finalization of Ocal Alabama's March 18, 1996 tax return, and the Company's
repurchase of 20,000 shares of its common stock. During the same period in
1996, the Company generated $3,088,000 of net cash from financing activities,
consisting of proceeds from the IPO of $10,490,000 offset in part by repayment
of the note to the bank of $5,802,000 and the distribution of $1,600,000 of
Ocal Alabama's S corporation earnings to the former stockholders (net of notes
payable issued to the former stockholders).
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Amendment to Loan and Security Agreement dated June 30, 1997 with
SouthTrust Bank, National Association.
10.2 1995 Stock Option Plan, As Amended.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
OCAL, INC.
(Registrant)
Date: November 13, 1997 By: /s/Lida R. Frankel
__________________
Lida R. Frankel
Chief Financial Officer
<PAGE>
AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND NOTE MODIFICATION AGREEMENT
________________________________________
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT AND NOTE MODIFICATION AGREEMENT
made this 30TH day of JUNE, 1997, by and between OCAL, INC., a Delaware
corporation, OCCIDENTAL COATING COMPANY, INC., a California corporation, OCAL,
INCORPORATED, an Alabama corporation, OCAL DATA COMPANY, a California
corporation, and OCAL TRANSPORT CO., a California corporation (jointly and
severally, the "Borrower"), and SOUTHTRUST BANK, NATIONAL ASSOCIATION, a
national banking association formerly known as SouthTrust Bank of Alabama,
National Association, having its principal office in Birmingham, Alabama (the
"Bank").
R E C I T A L S :
_________________
Ocal, Inc., an Alabama corporation and Occidental Coating Company, a
California Corporation ("Original Borrowers") entered into a Loan and Security
Agreement with Bank dated as of July 28, 1992, whereby Bank established in
favor of Borrower a line of credit and a term note in the aggregate initial
principal amount of $4,000,000. Said agreement, as amended by instruments dated
July 1, 1994, December 8, 1994, and June 27, 1995, is herein referred to as the
"Loan Agreement". Capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed to them in the Loan
Agreement. The indebtedness referred to in the Loan Agreement is represented by
a promissory note in the initial principal amount of $4,000,000, said note
having been amended by instrument dated June 27, 1995, so that the maximum
outstanding principal balance is now $6,500,000 (the "Note").
Pursuant to a series of transactions consummated on March 18, 1996, Original
Borrowers were a party to a reorganization transaction in which they were
acquired by Ocal, Inc., a Delaware corporation ("Parent Corporation") (the
"Reorganization"). The Reorganization included the acquisition by Parent
Corporation of all issued and outstanding shares of Ocal Data Company, a
California corporation, and Ocal Transport Co., a California corporation
(collectively, the "Additional Subsidiaries").
Original Borrowers have requested that the Loan Agreement and the Note be
amended to include Parent and the Additional Subsidiaries as obligors with
respect to the Obligations. Original Borrowers have further requested that
Borrower have the option to price the interest rate applicable to the Loan
based on the London Interbank Offered Rate. Borrower and Bank desire to set
forth their agreement with respect to these matters on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the Borrower and the Bank agree as follows:
1. The Loan Agreement is amended by adding in the initial paragraph to the
list of entities constituting "Borrower" the names "Ocal, Inc., a Delaware
corporation", "Ocal Data Company, a California corporation", and "Ocal
Transport Co., a California corporation", and from and after the date hereof,
said entities shall be deemed principal obligors with respect to all of the
Obligations and other undertakings and agreements of Borrower set forth in the
Loan Agreement.
2. The Loan Agreement is hereby amended by adding the following additional
definitions as Sections 1.52 through 1.67 respectively:
1.52. Adjusted LIBOR Rate - with respect to any Interest Period for a
LIBOR Rate Advance, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16th of 1%) equal to the quotient of (i) the LIBOR Rate in effect
for such Interest Period divided by (ii) a percentage (expressed as a decimal)
equal to 100% minus Statutory Reserves.
1.53. Advance - any principal amount advanced and remaining outstanding at
any time with respect to any Loan, which advance shall be made or outstanding
as a Base Rate Advance or a LIBOR Rate Advance.
1.54. Applicable Law - all laws, rules, and regulations applicable to the
person, conduct, transaction, covenant, or Loan Documents in question,
including, but not limited to, all applicable common law and equitable
principles; all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; and orders,
judgments and decrees of all courts and arbitrators.
1.55. Base Rate Advance - an Advance made or outstanding as a Loan with
interest based on the Base Rate as provided in Section 2 hereof.
1.56. Board of Governors - the Board of Governors of the Federal Reserve
System of the United States.
1.57. Business Day - any day excluding Saturday, Sunday, any day which is
a legal holiday in the State of Alabama, and any day on which banks are
authorized to close in the State of Alabama; provided, however, that when used
with reference to a LIBOR Rate Advance (including the making, continuing,
prepaying or repaying of any LIBOR Rate Advance or an Interest Period), the
term "Business Day" shall also exclude any day on which banks are not opened
for dealings in dollar deposits on the London Interbank Market.
1.58. Dollar, U.S. Dollar and $ - lawful money of the United States of
America.
1.59. Eurocurrency Liabilities - shall have the meaning ascribed thereto
in Regulation D.
1.60. Interest Period - shall have the meaning ascribed thereto in Section
2.2.3.
1.61. LIBOR Rate - the rate at which Dollar deposits approximately equal
in principal amount to the LIBOR Rate Advance for which the LIBOR Rate is being
determined and for a maturity comparable to the Interest Period for which such
LIBOR Rate would apply are offered to Bank in immediately available funds in
the London Interbank Market at approximately 11:00 A.M., London time, two
Business Days prior to the commencement of such Interest Period.
1.62. LIBOR Rate Advance - an Advance made or outstanding as a Loan
bearing interest based on the Applicable Adjusted LIBOR Rate as provided in
Section 2 hereof.
1.63. Notice of Borrowing - as defined in Section 2.3.1 of this Agreement.
1.64. Notice of Conversion/Continuation - as defined in Section 2.3.3 of
this Agreement.
1.65. Regulation D - Regulation D of the Board of Governors.
1.66. Statutory Reserves - on any date, the percentage (expressed as a
decimal) established by the Board of Governors which is the then stated maximum
rate for all reserves (including, but not limited to, any emergency,
supplemental or other marginal reserve requirements) applicable to any member
bank of the Federal Reserve System of the United States in respect to
Eurocurrency Liabilities (or any successor category of liabilities under
Regulation D). Such reserve percentage shall include, without limitation, those
imposed pursuant to said Regulation D. The Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in such percentage.
1.67. Taxes - any present or future taxes, levies, imposts, duties, fees,
deductions, withholdings or other charges of whatever nature, including,
without limitation, withholding, social security, income, sales, excise,
property, payroll, franchise and license taxes, now or hereafter imposed or
levied by the United States or any state or political subdivision thereof or by
any foreign government or other taxing authority, and all interest, penalties,
additions to tax and similar liabilities with respect thereto.
3. Article 2 of the Loan Agreement is hereby amended and restated to read in
its entirety as follows:
2. THE LOANS.
2.1. LINE OF CREDIT LOAN -
2.1.1. Subject to all terms set forth herein and for so long as the
bank has not demanded payment of the Loan and for so long as no Event of
Default exists, Bank agrees, from time to time and on the terms hereinafter set
forth, to loan to Borrower, when requested by Borrower, principal amounts
aggregating up to the lesser of (i) $6,500,000 or (ii) the Aggregate Loan
Values as determined by the Bank from the periodic reports submitted by
Borrower to the Bank. Notwithstanding any other provision hereof, the Loan
Value of Inventory shall not at any time exceed the sum of $1,500,000. Within
the aforesaid limits, the Borrower may borrow, make payments, and reborrow
under this Agreement, subject to the provisions hereof.
2.1.2. The obligation to repay the Loan shall be evidenced by a Note
dated the date of this Agreement payable to the order of the Bank and, subject
to the notice provisions of Section 2.1.7, maturing ON DEMAND, and amounts due
under the Note and otherwise under this Agreement and under the Loan Documents
shall be reflected in the Loan Account.
2.1.3. Borrower shall submit a Borrower's Report in the form attached
hereto as Exhibit "A" (or in such other form as may be furnished by Bank from
time to time) on the date of this Agreement and at least monthly thereafter
during the term of this Agreement, except that during such time as there is no
outstanding principal balance on the Loan, the report need be submitted only on
a quarterly basis. Each advance made under the Loan shall be effected by the
presentation to Bank of said Borrower's Report and a Notice of Borrowing in
accordance with Section 2.3 hereof, and subject to availability of loan
proceeds under this Agreement, compliance by Borrower with the terms of this
Agreement, and the absence of an Event of Default, Bank shall make such
advance.
2.1.4. If the outstanding principal amount of the Loan at any time
exceeds the Aggregate Loan Values, Borrower shall immediately pay Bank an
amount equal to such excess as a payment on the principal amount of the Loan.
Without limiting the foregoing, which provision may be enforced by Bank at any
time and which provision, as well as the other provisions hereof, may not under
any circumstance be waived or altered by a course of dealing or otherwise,
insofar as Borrower may request and Bank may be willing in its sole and
absolute discretion to make Overadvances, Bank shall enter such Overadvances as
debits in the Loan Account. All Overadvances shall be payable on demand, shall
be secured by the Collateral and shall bear interest as provided in this
Agreement for Base Rate Advances. Bank may in its sole discretion honor any
request (or deemed request) for a Loan even though an Overadvance Condition
then exists, or would exist with the making of such Loan, and without regard to
the existence of, and without waiving, any default or Event of Default.
2.1.5. Each borrowing under the Loan shall be effected by crediting the
amount thereof to the regular checking account of Borrower maintained with the
Bank or with another bank approved by the Bank.
2.1.6. Borrower shall use the proceeds of the Loan for working capital
needs, and for no other purpose.
2.1.7. Notwithstanding the other provisions of this Agreement, the
obligation of Bank to make the loans hereunder shall cease and all remaining
principal, interest and other charges and fees due with respect to the Loans
and the Notes shall be immediately due and payable by Borrower at any time UPON
DEMAND BY BANK, provided Bank shall be required to give to Borrower one hundred
and eighty (180) days prior notice of said demand. Said demand shall be given
in accordance with the provisions of Section 12.5 hereof regarding notices. The
notice provisions of this Section 2.1.7 shall apply only in the case of a
demand not accompanied by an Event of Default, it being understood that upon
the occurrence of an Event of Default no such demand shall be required nor
shall any notice be given in connection with acceleration or the exercise of
Bank's rights and remedies hereunder except as expressly set forth in Section
10 hereof.
2.2. INTEREST.
2.2.1. RATES OF INTEREST. Interest shall accrue on the principal amount
of the Loan outstanding at the end of each day from the respective dates such
principal amounts are advanced until paid (whether at stated maturity,
acceleration, or otherwise) at a variable rate per annum equal to the
applicable rate indicated below:
(i) For each Base Rate Advance, the Base Rate in effect from
time to time PLUS the applicable Base Rate Margin; or
(ii) For each LIBOR Rate Advance, the relevant Adjusted LIBOR
Rate for the applicable Interest Period selected by Borrower in conformity with
this Agreement PLUS the applicable LIBOR Margin.
2.2.2. BASE RATE MARGIN. The Base Rate Margin shall be equal to one
percent (1%), except that during such time as Borrower maintains certain
financial ratios, the Base Rate Margin may be lower as follows:
If Borrower's Tangible Net Worth is greater than $10,000,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1 to 1, then the Base Rate Margin shall be 0%.
If Borrower's Tangible Net Worth is greater than $9,500,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1.25 to 1, then the Base Rate Margin shall be .25%.
If Borrower's Tangible Net Worth is greater than $9,000,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1.5 to 1, then the Base Rate Margin shall be .5%.
If Borrower's Tangible Net Worth is greater than $9,000,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1.75 to 1, then the Base Rate Margin shall be .75%.
If any of the criteria set forth above are not met for a particular interest
rate, then the Base Rate Margin shall be the next highest rate for which both
criteria have been met by Borrower.
2.2.3. LIBOR MARGIN. The LIBOR Margin shall be equal to three percent
(3%), except that during such time as Borrower maintains certain financial
ratios, the LIBOR Margin may be lower as follows:
If Borrower's Tangible Net Worth is greater than $10,000,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1 to 1, then the LIBOR Margin shall be 2%.
If Borrower's Tangible Net Worth is greater than $9,500,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1.25 to 1, then the LIBOR Margin shall be 2.25%.
If Borrower's Tangible Net Worth is greater than $9,000,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1.50 to 1, then the LIBOR Margin shall be 2.5%.
If Borrower's Tangible Net Worth is greater than $9,000,000 AND
Borrower's ratio of Debt to Tangible Net Worth is less than or equal to
1.75 to 1, then the LIBOR Margin shall be 2.75%.
If any of the criteria set forth above are not met for a particular interest
rate, then the LIBOR Margin shall be the next highest rate for which both
criteria have been met by Borrower.
2.2.4. DETERMINATION OF BASE RATE MARGIN AND LIBOR MARGIN. The
applicable Base Rate Margin and LIBOR Margin shall be determined on a trailing
quarter-by-quarter basis with the applicable margin for any calendar quarter
being based on financial information available for the second preceding
quarterly period. For example, the margins applicable to the third calendar
quarter will be determined by the published financial information for Borrower
for the first calendar quarter. All said financial data shall be taken from the
Borrower's 10-Q quarterly statement released by Borrower and filed with the
Securities and Exchange Commission. Should Borrower fail to file its 10-Q
quarterly statement in a timely manner so that the margins cannot be determined
based on the second preceding quarter financial information, the applicable
Base Rate Margin and LIBOR Rate Margin shall be the highest rate permitted by
the preceding Sections 2.2.2 and 2.2.3.
2.2.5. CALCULATION OF INTEREST.
(i) Upon determining the Adjusted LIBOR Rate for any Interest
Period requested by Borrower, Bank shall promptly notify Borrower thereof by
telephone or in writing. Such determination shall, absent manifest error, be
final, conclusive and binding on all parties and for all purposes. The
applicable rate of interest for all Loans bearing interest based upon the Base
Rate shall be increased or decreased, as the case may be, by an amount equal to
any increase or decrease in the Base Rate, with such adjustments to be
effective as of the opening of business on the day that any such change in the
Base Rate becomes effective.
(ii) Interest on each Loan shall accrue from and including the
date of such Loan to but excluding the date of any repayment thereof; PROVIDED,
HOWEVER, that, if a Loan is repaid on the same day made, one day's interest
shall be paid on such Loan. Accrued interest on all Loans shall be paid upon
the earliest of (1) the first day of each month (for the immediately preceding
month), computed through the last calendar day of the preceding month, (2) the
occurrence of an Event of Default in consequence of which Bank elects to
accelerate the maturity and payment of the Loan, (3) the last day of an
Interest Period in respect of a LIBOR Rate Advance, or (4) demand by Bank.
With respect to any Base Rate Advance converted into a LIBOR Rate Advance on a
day when interest would not otherwise have been payable with respect to such
Base Rate Advance, accrued interest to the date of such conversion on the
amount of such Base Rate Advance shall be paid by Borrower on the conversion
date.
2.2.6. INTEREST PERIODS. In connection with the making or continuation
of, or conversion into, a LIBOR Rate Advance, Borrower shall select an interest
period (each an "Interest Period") to be applicable to such LIBOR Rate Advance,
which interest period shall commence on the date such LIBOR Rate Advance is
made and shall end on the date that is 90 days thereafter; PROVIDED, HOWEVER,
that:
(i) the initial Interest Period for a LIBOR Rate Advance shall
commence on the date of such borrowing (including the date of any conversion
from an Advance of another type) and each Interest Period occurring thereafter
in respect of such Advance shall commence on the date on which the next
preceding Interest Period expires; and
(ii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day.
2.2.7. INTEREST RATE NOT ASCERTAINABLE. If Bank shall determine (which
determination shall, absent manifest error, be final, conclusive and binding
upon all parties) that on any date for determining the Adjusted LIBOR Rate for
any Interest Period, by reason of any changes arising after the date of this
Agreement affecting the London Interbank Market or Bank's position in such
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Adjusted LIBOR
Rate, then, and in any such event, Bank shall forthwith give notice (by
telephone confirmed in writing) to Borrower of such determination. Until Bank
notifies Borrower that the circumstances giving rise to the suspension
described herein no longer exist, the obligation of Bank to make LIBOR Rate
Advances shall be suspended, and such affected Loans then outstanding shall, at
the end of the then applicable Interest Period or at such earlier time as may
be required by Applicable Law, bear the same interest as Base Rate Advances.
2.2.8. DEFAULT RATE OF INTEREST. Upon and after the occurrence of an
Event of Default, including without limitation, the failure at any time by
Borrower to meet the financial covenants and ratios set forth in Section 6.22
hereof, and during the continuation thereof, the principal amount of all Loans
shall bear interest at a rate per annum equal to four percent (4%) above the
Base Rate, said rate to change as and when the Base Rate changes (the "Default
Rate").
2.3. LOAN REQUESTS.
2.3.1. Whenever Borrower desires to borrow pursuant to this Agreement
(other than a borrowing resulting from a conversion or continuation pursuant to
Section 2.3.3 below), Borrower shall give Bank prior written or telephonic
notice of such borrowing request (a "Notice of Borrowing"). Such Notice of
Borrowing shall be given by Borrower no later than 12:00 Noon, Central Time, at
the office of Bank designated by Bank from time to time (i) on the Business Day
of the requested date of such borrowing in the case of Base Rate Advances, and
(ii) at least two Business Days prior to the requested date of such borrowing
in the case of LIBOR Rate Advances. Notices received after 12:00 Noon shall be
deemed received on the next Business Day. All Loans made on the date of initial
funding of the Loan shall be made as Base Rate Advances and thereafter may be
made, continued as or converted into Base Rate Advances or LIBOR Rate Advances.
Each Notice of Borrowing shall be irrevocable and shall specify (i) the
principal amount of the borrowing (which in the case of each LIBOR Rate
Advance, shall be in minimum advances of at least $1,000,000 each and integral
multiples of $500,000 in excess of $1,000,000), (ii) the date of borrowing
(which shall be a Business Day), and (iii) whether the borrowing is to consist
of Base Rate Advances, or LIBOR Rate Advances and the amount of each such
Advance. Without limiting Bank's right to cease making any Advances when a
default or Event of Default exists, it is expressly understood that Borrower
may not request any LIBOR Rate Advances if demand has been made or if a default
or Event of Default exists. All amounts outstanding with respect to which there
has been no request by Borrower and approval by Bank of a LIBOR Rate Advance
shall be deemed Base Rate Advances. The requirement of written notice of
borrowings under this Section shall benefit Bank only and Bank may waive said
requirement in one or more instances without waiving its rights to insist on
strict compliance with this Section at any time thereafter.
2.3.2. Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement, the Note
or any of the other Loan Documents, as principal, accrued interest, fees or
other charges, including, without limitation, any amount due with respect to
the Loan, shall be deemed irrevocably to be a request by Borrower from Bank for
a Loan on the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges and the proceeds of each
such Loan may be disbursed by Bank by way of direct payment of the relevant
obligation and shall bear interest as a Base Rate Advance.
2.3.3. Whenever Borrower desires to convert all or a portion of an
outstanding Base Rate Advance or LIBOR Rate Advance into one or more Advances
of another type, or to continue outstanding a LIBOR Rate Advance for a new
Interest Period, Borrower shall give Bank written notice (or telephonic notice
promptly confirmed in writing) at least one Business Day before the conversion
into or continuation of a Base Rate Advance and at least two Business Days
before the conversion into or continuation of a LIBOR Rate Advance. Such notice
(a "Notice of Conversion/Continuation") shall be irrevocable and shall specify
the aggregate principal amount of the Advance to be converted or continued, the
date of such conversion or continuation, whether the Advance is being converted
into or continued as a LIBOR Rate Advance (and, if so, the duration of the
Interest Period to be applicable thereto) or a Base Rate Advance. If, upon the
expiration of any Interest Period in respect of any LIBOR Rate Advance,
Borrower shall have failed, or pursuant to the following sentence be unable, to
deliver the Notice of Coverage/Continuation, Borrower shall be deemed to have
elected to convert such LIBOR Rate Advance to a Base Rate Advance and said
Advance shall automatically convert to a Base Rate Advance without further
action of the parties. So long as any default or Event of Default shall have
occurred and be continuing, no Advance may be converted into or continued as
(upon expiration of the current Interest Period) a LIBOR Rate Advance. No
conversion of any LIBOR Rate Advance shall be permitted except on the last day
of the Interest Period in respect thereof.
2.3.4. In no event shall the number of LIBOR Rate Advances outstanding
at any time exceed four (4) nor shall the aggregate principal balance of all
outstanding LIBOR Rate Advances exceed $6,500,000, nor shall Borrower be
entitled to request the making of a LIBOR Rate Advance after demand or if the
LIBOR period selected would exceed the maturity date (whether resulting from
demand or otherwise) or during such time as an Event of Default has occurred
and is continuing.
2.3.5. As an accommodation to Borrower, Bank may permit telephonic
requests for loans and electronic transmittal of instructions, authorizations,
agreements or reports to Bank by Borrower. Unless Borrower specifically directs
Bank in writing not to accept or act upon telephonic or electronic
communications from Borrower, Bank shall have no liability to Borrower for any
loss or damage suffered by Borrower as a result of Bank's honoring of any
requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to Bank telephonically or electronically
and purporting to have been sent to Bank by Borrower and Bank shall have no
duty to verify the origin of any such communication or the authority of the
person sending it.
2.4. COMPUTATION OF INTEREST AND FEES. Interest hereunder shall be
calculated daily and shall be computed on the actual number of days elapsed
over a year of 360 days.
2.5. ILLEGALITY. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful for Bank to make or maintain a
LIBOR Rate Advance or to give effect to its obligations as contemplated hereby
with respect to a LIBOR Rate Advance or (ii) at any time Bank determines that
the making or continuance of any LIBOR Rate Advance has become impracticable as
a result of a contingency occurring after the date hereof which adversely
effects the London Interbank Market or the position of Bank in such market,
then, by written notice to Borrower, Bank may (1) declare that LIBOR Rate
Advances will not thereafter be made by Bank, whereupon any request by Borrower
for a LIBOR Rate Advance shall be deemed a request for a Base Rate Advance
unless Bank's declaration shall be subsequently withdrawn; and (2) require that
all outstanding LIBOR Rate Advances made by Bank be converted to Base Rate
Advances, in which event all such LIBOR Rate Advances shall be automatically
converted to Base Rate Advances as of the date of Borrower's receipt of the
aforesaid notice from Bank.
2.6. INCREASED COSTS. If, by reason of (i) after the date hereof, the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of Statutory Reserves or other reserve requirements)
in or in the interpretation of any law or regulation, or (ii) the compliance
with any guideline or request for any central bank or other governmental
authority or quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force of law);
(1) Bank shall be subject to any Tax or other charge with respect
to any LIBOR Rate Advance or its obligation to make LIBOR Rate Advances, or
shall change the basis of taxation of payment to Bank of the principal of or
interest on its LIBOR Rate Advances or its obligation to make LIBOR Rate
Advances (except for changes in the rate of tax on the overall net income of
Bank imposed by the jurisdiction in which Bank's principal executive office is
located); or
(2) any reserve (including, without limitation, any imposed by the
Board of Governors), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, Bank shall be
imposed or deemed applicable or any other condition affecting its LIBOR Rate
Advances or its obligation to make LIBOR Rate Advances shall be imposed on Bank
or the London Interbank Market;
and as a result thereof there shall be any increase in the cost to Bank of
agreeing to make or making, funding or maintaining LIBOR Rate Advances (except
to the extent already included in the determination of the applicable Adjusted
LIBOR Rate for LIBOR Rate Advances), or there shall be a reduction in the
amount received or receivable by Bank, then Borrower shall from time to time,
upon written notice from and demand by Bank (with a copy of such notice and
demand to Bank), pay to Bank, within ten (10) Business Days after the date
specified in such notice and demand, an additional amount sufficient to
indemnify Bank against such increased cost. A certificate as to the amount of
such increased cost, submitted to Borrower by Bank, shall, except for manifest
error, be final, conclusive and binding for all purposes.
If Bank shall advise Borrower at any time that, because of the circumstances
described hereinabove in this Section 2.6 or any other circumstances arising
after the date of this Agreement affecting Bank or the London Interbank Market
or Bank's position in such market, the Adjusted LIBOR Rate, as determined by
Bank, will not adequately and fairly reflect the cost to Bank of funding LIBOR
Rate Advances, then, and in any such event:
(i) Bank shall forthwith give notice (by telephone confirmed in
writing) to Borrower of such advance;
(ii) Borrower's right to request and Bank's obligation to make
LIBOR Rate Advances shall be immediately suspended and Borrower's right to
continue a LIBOR Rate Advance as such beyond the then applicable Interest
Period shall also be suspended; and
(iii) Bank shall make an Advance as part of the requested
borrowing of LIBOR Rate Advances as a Base Rate Advance, which Base Rate
Advance shall, for all purposes, be considered part of such borrowing.
For purposes of this Section 2.6, all references to Bank shall be deemed to
include Bank's holding company or a bank parent of Bank.
2.7. CAPITAL ADEQUACY. If after the date hereof Bank determines that
with respect to any or all LIBOR Rate Advances (a) the adoption of any
Applicable Law, rule or regulation regarding capital requirements for banks or
bank holding companies or the subsidiaries thereof, (b) any change in the
interpretation or administration of any such law, rule or regulation by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or (c) compliance by Bank or its
holding company with any request or directive of any such governmental
authority, central bank or comparable agency regarding capital adequacy
(whether or not having the force of law), has the effect of reducing the return
on Bank's capital to a level below that which Bank could have achieved (taking
into consideration Bank's and its holding company's policies with respect to
capital adequacy immediately before such adoption, change or compliance and
assuming that Bank's capital was fully utilized prior to such adoption, change
or compliance) but for such adoption, change or compliance as a consequence of
Bank's commitment to make LIBOR Rate Advances by any amount deemed by Bank to
be material:
(i) Bank shall promptly, after Bank's determination of such
occurrence, give notice thereof to Borrower; and
(ii) Borrower shall pay to Bank, as an additional fee from time to
time within ten (10) days of Bank's request therefor, such amount as Bank
certifies to be the amount that will compensate Bank for such reduction.
A certificate of Bank claiming entitlement to compensation as set forth above
will be conclusive in the absence of manifest error. Such certificate will set
forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to Bank, and the method by which such
amounts were determined. In determining such amount, Bank may use any
reasonable averaging and attribution method. For purposes of this Section 2.7
all references to Bank shall be deemed to include Bank's bank holding company
or bank parent of Bank.
2.8. FUNDING LOSSES. Borrower shall compensate Bank, upon Bank's
written request (which request shall set forth the basis for requesting such
amounts and which request shall, absent manifest error, be final, conclusive
and binding upon all of the parties hereto), for all losses, expenses and
liabilities (including, without limitation, any interest paid by Bank to
lenders of funds borrowed by Bank to make or carry its LIBOR Rate Advances to
the extent not recovered by Bank in connection with the re-employment of such
funds), which Bank may sustain: (i) if for any reason (other than a default by
Bank) a borrowing of, or conversion to or continuation of, LIBOR Rate Advances
does not occur on the date specified therefor in a Notice of Borrowing or
Notice of Conversion/Continuation (whether or not withdrawn), (ii) if any
repayment (including any conversions pursuant to Section 2.3.3 hereof) of any
its LIBOR Rate Advances occurs on a date that is not the last day of an
Interest Period applicable thereto, or (iii) if, for any reason, Borrower
defaults in its obligation to repay LIBOR Rate Advances when required by the
terms of this Agreement. For purposes of this Section 2.8, all references to
Bank shall be deemed to include Bank's bank holding company or bank parent of
Bank.
2.9. LOAN ACCOUNT. Bank shall enter disbursements hereunder or under
the Notes as debits to Loan Accounts maintained in the name of Borrower and
shall also record in said Loan Accounts all payments made by any Borrower and
all proceeds of Collateral which are finally paid to Bank, and may record
therein, in accordance with customary accounting practice, all charges and
expenses properly chargeable to Borrower hereunder.
2.10. PREPAYMENT. Borrower shall have the right at any time and from
time to time to prepay the Loan, in whole or in part, without premium or
penalty, except that with respect to any LIBOR Rate Advance then outstanding
Borrower shall not be entitled to repay the same until expiration of the then
applicable Interest Period. Any such prepayments shall be made to Bank in
immediately available funds and shall be applied to the last of the
installment(s) to mature. Any such prepayment shall not affect or vary the
obligation of such Borrower to pay any installment when due.
2.11. TERM. This Agreement shall remain in force and effect until the
Loans, and any renewals or extensions, and all interest thereon and costs
provided for herein with regard to any of them have been indefeasibly paid or
satisfied in full, and until the Bank has no further obligation to advance
funds to Borrower hereunder.
2.12. PAYMENTS. All sums paid to the Bank by Borrower hereunder shall
be paid directly to the Bank in immediately available funds. The Bank shall
send Borrower statements of all amounts due hereunder, which statements shall
be considered correct and conclusively binding on the Borrower unless the
Borrower notifies the Bank to the contrary within ten (10) days of its receipt
of any statement which it deems to be incorrect. The Bank may, in its sole
discretion, charge against any deposit account of the Borrower all or any part
of any amount due hereunder.
2.13. [Reserved]
2.14. [Reserved]
2.15. DEMAND OBLIGATION. Notwithstanding any provision in this
Agreement, the Bank may, in its sole discretion, at any time, but subject to
the notice provisions of Section 2.1.7, limit the amount of the Loan advanced
to the Borrower to an amount less than the Aggregate Loan Values and/or
terminate its obligation to make future loans or advances with respect to the
Loan. SUBJECT TO THE NOTICE PROVISIONS OF SECTION 2.1.7, THE LOAN SHALL,
NOTWITHSTANDING ANY COURSE OF DEALING OR CONDUCT ON THE PART OF THE PARTIES
HERETO, OR ANY OTHER COVENANTS OR UNDERTAKINGS OF THE PARTIES HEREUNDER, REMAIN
AT ALL TIMES A DEMAND OBLIGATION.
4. Section 6.13 of the Agreement is hereby amended to read in its entirety as
follows:
6.13. COLLATERAL REPORTS. Furnish to Bank at least monthly (and more
frequently if requested by Bank, but if there is no outstanding principal
balance on the Loan, then such reports need be made only on a quarterly basis)
a detailed accounts receivable aging report, a detailed accounts payable aging
report, and an inventory report, all in form and substance, and containing such
detail and information, as Bank shall request, and furnish to Bank copies of
all physical inventory listings when prepared by Borrower.
5. The Note is hereby amended by adding in the initial paragraph to the list
of entities constituting "Borrower" the names "Ocal, Inc., a Delaware
corporation", "Ocal Data Company, a California corporation", and "Ocal
Transport Co., a California corporation", and from and after the date hereof,
said entities shall be deemed principal obligors with respect to all of the
obligations, undertakings and agreements of Borrower set forth in the Note the
same as if original parties thereto. The liability of said entities shall be
joint and several with that of the Original Borrowers thereunder.
6. Borrower represents and affirms that no default or Event of Default exists
with respect to the indebtedness referred to herein or will exist as a result
of the amendments set forth herein, and Borrower further represents that no
fact or circumstance presently exists, or will exist as a result of the
amendments set forth herein, which could, with notice, or lapse of time, or
otherwise, result in the occurrence of a default or Event of Default under the
Loan Agreement or any related financing document. Borrower further represents
and warrants that all representations and warranties of Borrower herein, in the
Loan Agreement, and in notes, security agreements, and other writings,
evidencing or securing the Loan (the "Loan Documents"), are true and correct as
of the date hereof the same as if repeated on this date.
7. Notwithstanding the provisions of this Amendment to Loan and Security
Agreement, and notwithstanding any course of dealing or conduct on the part of
the parties hereto, or any other covenants or undertakings of the parties
hereunder or under the Loan Documents, Borrower acknowledges that the Loan, the
Note(s) and the other Obligations reflected in the Loan Agreement, are PAYABLE
ON DEMAND, subject only to the notice provisions set forth in Section 2.1.7 of
the Loan Agreement.
8. Borrower represents and warrants to the Bank that it has no defenses,
setoffs, rights of recoupment, counterclaims or claims of any nature whatsoever
in respect to the Loan Documents or the obligations due thereunder or secured
thereby, and to the extent any such defenses, setoffs, rights of recoupment,
counterclaims or claims may exist, the same are hereby expressly waived,
released and discharged.
9. Except as herein amended, the Loan Agreement shall remain in full force
and effect, and the Loan Agreement, as so amended, and each of the Loan
Documents are hereby ratified and affirmed in all respects.
10. Borrower, and the officers of Borrower executing this agreement, jointly
and severally, represent and warrant to the Bank that the Borrower has full
power and authority to enter into this Agreement, that the execution and
delivery of this Agreement has been authorized by all requisite corporate
action, and that this Agreement constitutes the valid and legally binding
obligation of the Borrower enforceable against Borrower in accordance with its
terms.
11. Borrower agrees to pay to the Bank all expenses, including attorney's
fees, incurred by the Bank in connection with the negotiation and preparation
of this Amendment and the documents contemplated hereby.
12. This Agreement may be executed in two or more counterparts, each of which
when executed and delivered shall constitute an original, but all such
counterparts together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this agreement of
amendment to be executed by its duly authorized officer as of year and date
first above written.
BORROWER:
_________
OCAL, INC.
(a Delaware corporation)
By: /s/Ilan Bender
________________
Its: President
________________
Attest:
/s/Lida R. Frankel
___________________
Its: Secretary
___________________
OCCIDENTAL COATING COMPANY, INC.
(a California corporation)
By: /s/Ilan Bender
________________
Its: President
________________
Attest:
/s/Lida R. Frankel
___________________
Its: Secretary
___________________
OCAL, INCORPORATED
(an Alabama corporation)
By: /s/Ilan Bender
________________
Its: President
________________
Attest:
/s/Lida R. Frankel
___________________
Its: Secretary
___________________
OCAL DATA COMPANY
(a California corporation)
By: /s/Ilan Bender
________________
Its: President
________________
Attest:
/s/Lida R. Frankel
___________________
Its: Secretary
___________________
OCAL TRANSPORT COMPANY
(a California corporation)
By: /s/Ilan Bender
________________
Its: President
________________
Attest:
/s/Lida R. Frankel
___________________
Its: Secretary
___________________
BANK:
_____
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By: /s/Shane McBride
_______________________________
Its: Assistant Vice President
_______________________________
<PAGE> 1
OCAL, INC.
1995 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Ocal, Inc. 1995 Stock Option Plan (the "Plan")
is to provide an incentive to officers, directors and employees of Ocal, Inc.
(sometimes referred to as the "Parent") and its subsidiaries (individually and
collectively, the "Company") and to other persons providing significant
services to the Company to remain in the employ of the Company or provide
services to the Company and contribute to its success.
As used in the Plan, the term "Code" shall mean the Internal Revenue Code of
1986, as amended, and any successor statute, and the terms "Parent" and
"Subsidiary" shall have the meaning set forth in Sections 424(e) and (f) of the
Code.
2. ADMINISTRATION. The Plan shall be administered by a Plan Committee which
shall be established by the Board of Directors of the Company (the "Board"),
which shall appoint and remove members of the Plan Committee in its discretion
subject only to the requirements set forth herein. The Plan Committee shall be
comprised of two or more non-employee directors of the Board as defined in Rule
16b-3 (or any successor rule) promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended. It
shall determine the meaning and application of the provisions of the Plan and
all option agreements executed pursuant thereto, and its decisions shall be
conclusive and binding upon all interested persons. Subject to the provisions
of the Plan, the Plan Committee shall have the sole authority to determine:
(a) The persons to whom options to purchase Stock shall be granted;
(b) The number of options to be granted to each person;
(c) The price to be paid for the Stock upon the exercise of each option;
(d) The period within which each option shall be exercised and, with the
consent of the optionee, any extensions of such period (provided, however, that
the original period and all extensions shall not exceed the maximum period
permissible under the Plan); and
(e) The terms and conditions of each stock option agreement entered into
between the Company and persons to whom the Company has granted an option and
of any amendments thereto (provided that the optionee consents to each such
amendment).
3. ELIGIBILITY. Officers, directors and employees of the Company and persons
providing significant services to the Company shall be eligible to receive
grants of options under the Plan.
(1)
<PAGE> 2
4. STOCK SUBJECT TO PLAN. There shall be reserved for issue upon the exercise
of options granted under the Plan 400,000 shares of Common Stock of the Parent
("Stock") or the number of shares of Stock, which, in accordance with the
provisions of Section 10 hereof, shall be substituted therefor. Such shares
may be treasury shares. If an option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, unpurchased
shares subject thereto shall again be available for the purposes of the Plan.
5. TERMS OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. It is intended that options granted pursuant
to this Section 5(a) qualify as incentive stock options as defined in Section
422 of the Code. Incentive stock options shall be granted only to employees of
the Company. Each stock option agreement evidencing an incentive stock option
shall provide that the option is subject to the following terms and conditions
and to such other terms and conditions not inconsistent therewith as the Plan
Committee may deem appropriate in each case:
(1) OPTION PRICE. The price to be paid for each share of Stock upon the
exercise of each incentive stock option shall be determined by the Plan
Committee at the time the option is granted, but shall in no event be less than
100% of the fair market value of the shares on the date the option is granted,
or not less than 110% of the fair market value of such shares on the date such
option is granted in the case of an individual then owning (within the meaning
of Section 424(d) of the Code) more than 10% of the total combined voting
power of all classes of stock of the Company or of its Parent or Subsidiaries.
As used in this Plan the term "date the option is granted" means the date on
which the Plan Committee authorizes the grant of an option hereunder or any
later date specified by the Plan Committee. Fair market value of the shares
shall be (i) the mean of the high and low prices of shares of Stock sold on the
New York or American Stock Exchange on the date the option is granted (or if
there was no sale on such date, the highest asked price for the Stock on such
date), or (ii) if the Stock is not listed on either of those exchanges on the
date the option is granted, the mean between the "bid" and "asked" prices of
the Stock in the National Over-The-Counter Market on the date the option is
granted, or (iii) if the Stock is not traded in any market, the price
determined by the Plan Committee to be fair market value, based upon such
evidence as it may deem necessary or desirable.
(2) PERIOD OF OPTION AND EXERCISE. The period or periods within which an
option may be exercised shall be determined by the Plan Committee at the time
the option is granted, but in no event shall any option granted hereunder be
exercised more than ten years from the date the option was granted nor more
than five years from the date the option was granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or of its Parent or Subsidiaries.
(2)
<PAGE> 3
(3) PAYMENT FOR STOCK. The option exercise price for each share of Stock
purchased under an option shall be paid in full at the time of purchase. The
Plan Committee may provide that the option price be payable, at the election of
the holder of the option and with the consent of the Plan Committee, in whole
or in part either in cash or by delivery of Stock in transferable form, such
Stock to be valued for such purpose at its fair market value on the date on
which the option is exercised. No share of Stock shall be issued upon exercise
until full payment therefor has been made, and no optionee shall have any
rights as an owner of Stock until the date of issuance to him of the stock
certificate evidencing such Stock.
(4) LIMITATION ON AMOUNT BECOMING EXERCISABLE IN ANY ONE CALENDAR YEAR.
Subject to the overall limitations of Section 4 hereof (relating to the
aggregate shares subject to the Plan), the aggregate fair market value
(determined as of the time the option is granted) of Stock with respect to
which incentive stock options are exercisable for the first time by the
optionee during any calendar year (under the Plan and all other incentive stock
option plans of the Company, the Parent, and Subsidiaries) shall not exceed
$100,000.
(b) NONQUALIFIED STOCK OPTIONS. Nonqualified stock options may be granted
not only to employees but also to directors who are not employees of the
Company and to persons who provide substantial services to the Company. Each
nonqualified stock option granted under the Plan shall be evidenced by a stock
option agreement between the person to whom such option is granted and the
Company. Such stock option agreement shall provide that the option is subject
to the following terms and conditions and to such other terms and conditions
not inconsistent therewith as the Plan Committee may deem appropriate in each
case:
(1) OPTION PRICE. The price to be paid for each share of Stock upon the
exercise of an option shall be determined by the Plan Committee at the time the
option is granted. As used in this Plan, the term "date the option is granted"
means the date on which the Plan Committee authorizes the grant of an option
hereunder or any later date specified by the Plan Committee. To the extent that
the fair market value of Stock is relevant to the pricing of the option by the
Plan Committee, fair market value of the Stock shall be determined as set forth
in Section 5(a)(1) hereof.
(2) PERIOD OF OPTION AND EXERCISE. The period or periods within which an
option may be exercised shall be determined by the Plan Committee at the time
the option is granted, but in no event shall such period exceed 10 years from
the date the option is granted.
(3)
<PAGE> 4
(3) PAYMENT FOR STOCK. The option exercise price for Stock purchased
under an option shall be paid in full at the time of purchase. The Plan
Committee may provide that the option exercise price be payable at the election
of the holder of the option, with the consent of the Plan Committee, in whole
or in part either in cash or by delivery of Stock in transferable form, such
Stock to be valued for such purpose at its fair market value on the date on
which the option is exercised. No share of Stock shall be issued until full
payment therefor has been made, and no optionee shall have any rights as an
owner of shares of Stock until the date of issuance to him of the stock
certificate evidencing such Stock.
6. NONTRANSFERABILITY. The options granted pursuant to the Plan shall be
nontransferable except by will or the laws of descent and distribution of the
state or country of the optionee's domicile at the time of death or, for
options other than incentive stock options, pursuant to a qualified domestic
relations order as defined in the Code or Title I of the Employee Retirement
Income Security Act and shall be exercisable during the optionee's lifetime
only by him (or, in the case of a transfer pursuant to a qualified domestic
relations order, by the transferee under such qualified domestic relations
order) and after his death, by his personal representative or by the person
entitled thereto under his will or the laws of intestate succession.
7. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Upon termination of the
optionee's employment or other relationship with the Company, his rights to
exercise options then held by him shall be only as follows (in no case do the
time periods referred to below extend the term specified in any option):
(a) DEATH OR DISABILITY. Upon the death of an optionee, any option which he
holds may be exercised (to the extent exercisable at his death), unless it
otherwise expires, within such period after the date of his death (not to
exceed twelve (12) months) as the Plan Committee shall prescribe in his option
agreement, by the employee's representative or by the person entitled thereto
under his will or the laws of intestate succession. Upon the disability (within
the meaning of Section 22(e)(3) of the Code) of an employee, any option which
he holds may be exercised (to the extent exercisable as of the date of
disability), unless it otherwise expires, within such period after the date of
his disability (not to exceed twelve (12) months) as the Plan Committee shall
prescribe in his option agreement.
(b) RETIREMENT. Upon the retirement of an officer, director or employee or
the cessation of services provided by a nonemployee (either pursuant to a
Company retirement plan, if any, or pursuant to the approval of the Plan
Committee), an option may be exercised (to the extent exercisable at the date
of such termination or cessation) by him within such period after the date of
his retirement or cessation of services (not to exceed three (3) months) as the
Plan Committee shall prescribe in his option agreement.
(4)
<PAGE> 5
(c) OTHER TERMINATION. In the event an officer, director or employee ceases
to serve as an officer or director or leaves the employ of the Company or a
nonemployee ceases to provide services to the Company for any reason other than
as set forth in (a) and (b), above, any option which he holds shall terminate
at (i) the earlier of 30 days after the date (A) his employment terminates, or
(B) he ceases providing services to the Company or the date he receives written
notice that his employment or rendering of services is or will be terminated,
or (ii) such later date as determined by the Plan Committee not to exceed the
maximum period under Section 7(b) hereof with respect to incentive stock
options. The foregoing shall not extend any option beyond the term specified
therein and such option shall be exercisable only to the extent exercisable at
the date of termination of employment or cessation of services.
(d) PLAN COMMITTEE DISCRETION. The Plan Committee may in its sole
discretion accelerate the exercisability of any or all options upon termination
of employment or cessation of services.
8. DISCRETIONARY ACCELERATION ON MERGER OR SALE OF THE PARENT. In the event
the Parent or its shareholders enter into an agreement to dispose of all or
substantially all of the assets or capital stock of the Parent by means of a
sale, merger, consolidation, reorganization, liquidation or otherwise, an
option granted under the Plan will, in the discretion of the Plan Committee, if
so authorized by the Board of Directors and conditioned upon consummation of
such disposition of assets or stock, become immediately exercisable in full
during the period commencing as of the date of the execution of such agreement
and ending as of the earlier of the stated termination date of the option or
the date on which the disposition of assets or stock contemplated by the
agreement is consummated.
9. TRANSFER TO RELATED CORPORATION. In the event an employee leaves the
employ of the Parent to become an employee of a Subsidiary or any employee
leaves the employ of a Subsidiary to become an employee of the Parent or
another Subsidiary, such employee shall be deemed to continue as an employee
for purposes of this Plan.
10. ADJUSTMENT OF SHARES; TERMINATION OF OPTIONS.
(a) ADJUSTMENT OF SHARES. In the event of changes in the outstanding Stock
by reason of stock dividends, split-ups, consolidations, recapitalizations,
reorganizations or like events (as determined by the Plan Committee), an
appropriate adjustment shall be made by the Plan Committee in the number of
shares reserved under the Plan, in the number of shares set forth in Section 4
hereof, and in the number of shares and the option price per share specified in
any stock option agreement with respect to any unpurchased shares. The
determination of the Plan Committee as to what adjustments shall be made shall
be conclusive. Adjustments for any options to purchase fractional shares shall
also be determined by the Plan Committee. The Plan Committee shall give prompt
notice to all optionees of any adjustment pursuant to this Section.
(5)
<PAGE> 6
(b) TERMINATION OF OPTIONS ON MERGER; SALE OR LIQUIDATION OF PARENT.
Notwithstanding anything to the contrary in this Plan, in the event of any
merger, consolidation or other reorganization of the Parent in which the Parent
is not the surviving or continuing corporation (as determined by the Plan
Committee) or in the event of the liquidation or dissolution of the Parent, all
options granted hereunder shall terminate on the effective date of the merger,
consolidation, reorganization, liquidation, or dissolution unless there is an
agreement with respect thereto which expressly provides for the assumption of
such options by the continuing or surviving corporation.
11. SECURITIES LAW REQUIREMENTS. The Company's obligation to issue shares of
its Stock upon exercise of an option is expressly conditioned upon the
completion by the Company of any registration or other qualification of such
shares under any state and/or federal law or rulings and regulations of any
government regulatory body or the making of such investment representations or
other representations and undertakings by the optionee (or his legal
representative, heir or legatee, as the case may be) in order to comply with
the requirements of any exemption from any such registration or other
qualification of such shares which the Company in its sole discretion shall
deem necessary or advisable. The Company may refuse to permit the sale or other
disposition of any shares acquired pursuant to any such representation until it
is satisfied that such sale or other disposition would not be in contravention
of applicable state or federal securities law.
12. TAX WITHHOLDING. As a condition to exercise of an option or otherwise,
the Company may require an optionee to pay over to the Company all applicable
federal, state and local taxes which the Company is required to withhold with
respect to the exercise of an option granted hereunder. At the discretion of
the Plan Committee and upon the request of an optionee, the minimum statutory
withholding tax requirements may be satisfied by the withholding of shares of
Stock otherwise issuable to the optionee upon the exercise of an option.
13. AMENDMENT. The Board of Directors may amend the Plan at any time, except
that without shareholder approval:
(a) The number of shares of Stock which may be reserved for issuance under
the Plan shall not be increased except as provided in Section 10(a) hereof;
(b) The option price per share of Stock subject to incentive options may
not be fixed at less than 100% of the fair market value of a share of Stock on
the date the option is granted;
(c) The maximum period of ten (10) years during which the options may be
exercised may not be extended;
(d) The class of persons eligible to receive options under the Plan as set
forth in Section 3 shall not be changed; and
(6)
<PAGE> 7
(e) This Section 13 may not be amended in a manner that limits or reduces
the amendments which require shareholder approval.
14. EFFECTIVE DATE. The Plan shall be effective upon its adoption by the
Board of Directors of the Company. Options may be granted but not exercised
prior to shareholder approval of the Plan. If any options are so granted and
shareholder approval shall not have been obtained within 12 months of the date
of adoption of this Plan by the Board of Directors, such options shall
terminate retroactively as of the date they were granted.
15. TERMINATION. The Plan shall terminate automatically as of the close of
business on the day preceding the 10th anniversary date of its adoption by the
Board of Directors or earlier by resolution of the Board of Directors or upon
consummation of the disposition of capital stock or assets of the Parent, as
described in Sections 8 and 10(b) hereof. Unless otherwise provided herein,
the termination of the Plan shall not affect the validity of any option
agreement outstanding at the date of such termination.
16. STOCK OPTION AGREEMENT. Each option granted under the Plan shall be
evidenced by a written agreement ("Stock Option Agreement") executed by the
Company and accepted by the optionee, which (i) shall contain each of the
provisions and agreements herein specifically required to be contained therein,
(ii) shall indicate whether such option is to be an incentive stock option or a
nonqualified stock option, and if it is to be an incentive stock option, such
Stock Option Agreement shall contain terms and conditions permitting such
option to qualify for treatment as an incentive stock option under Section 422
of the Code, (iii) may contain the agreement of the optionee to remain in the
employ of, and/or to render services to, the Company or any Parent or
Subsidiary for a period of time to be determined by the Plan Committee, and
(iv) may contain such other terms and conditions as the Plan Committee deems
desirable and which are not inconsistent with the Plan.
17. NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any option granted
hereunder shall confer upon any optionee any right to continue in the employ of
the Company or to continue to perform services for the Company or any Parent or
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company to discharge or terminate any officer, director, employee, independent
contractor or consultant at any time for any reason whatsoever, with or without
good cause.
(7)
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<PERIOD-END> SEP-30-1997
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<CURRENT-ASSETS> 17,455
<PP&E> 3,236
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0
0
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<SALES> 18,334
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