<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000, 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 1-14342
NOVA CORPORATION
----------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-2209575
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE CONCOURSE PARKWAY, SUITE 300, ATLANTA, GEORGIA 30328
--------------------------------------------------------
(Address of principal executive offices)
(770) 396-1456
--------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Shares Outstanding as of May 12, 2000
- ----- -------------------------------------
Common Stock, $.01 par value 69,581,329 shares
<PAGE> 2
NOVA CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS-
March 31, 2000 (unaudited) and December 31, 1999 ..................................3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended March 31, 2000 and 1999.........................................4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)-
Three months ended March 31, 2000 and 1999 .......................................5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS....................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings........................................................................13
ITEM 4. Submission of Matters to a Vote of Security Holders......................................13
ITEM 6. Exhibits and Reports on Form 8-K.........................................................13
Signatures ........................................................................................13
</TABLE>
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOVA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000, AND DECEMBER 31, 1999
In thousands
<TABLE>
<CAPTION>
(Unaudited)
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 28,616 $ 32,574
Trade receivables, less allowance for doubtful accounts of $14,314
And $11,191 at March 31, 2000, and December 31, 1999, respectively 154,299 137,016
Current portion of net investment in finance leases 13,237 15,611
Inventory 13,749 11,255
Deferred income taxes 20,376 20,114
Other current assets 8,346 8,935
--------- ---------
Total current assets 238,623 225,505
--------- ---------
Merchant and customer contracts 364,854 331,933
Long-term portion of investment in finance leases 45,645 42,145
Property, equipment, and software, net 83,816 76,963
Excess cost of businesses acquired 14,314 14,033
Long-term note receivable 13,547 13,618
Other non-current assets 24,170 29,814
========= =========
$ 784,969 $ 734,011
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,610 $ 21,574
Accounts payable to affiliate -- 465
Accrued liabilities 32,239 19,635
Credit and fraud loss reserve 18,123 17,728
Accrued merger and consolidation charges 8,026 8,813
Long-term debt obligations due within one year 16,799 16,066
--------- ---------
Total current liabilities 100,797 84,281
--------- ---------
Deferred income taxes 12,010 11,928
Long-term debt 223,596 238,253
Minority interest in subsidiaries 5,648 8,680
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 200,000 shares authorized
73,711 shares outstanding at March 31, 2000, and December 31, 1999 737 737
Additional paid in capital 433,485 435,345
Treasury stock, at cost, 4,115 and 5,432 shares at March 31, 2000,
and December 31, 1999, respectively (110,233) (145,329)
Retained earnings 118,929 100,116
--------- ---------
Total shareholders' equity 442,918 390,869
========= =========
$ 784,969 $ 734,011
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS - CONTINUED
NOVA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In thousands, except per share amounts
<TABLE>
<CAPTION>
For the three months ended
March 31,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
REVENUES $ 370,010 $ 311,765
OPERATING EXPENSES:
Cost of service 279,978 238,442
Conversion costs 4,001 7,521
Selling, general and administrative 29,968 27,748
Depreciation and amortization 17,333 13,049
--------- ---------
Total operating expenses 331,280 286,760
--------- ---------
Operating income 38,730 25,005
OTHER INCOME (EXPENSE):
Interest income 515 538
Interest expense (4,598) (992)
Minority interest in income of subsidiaries (4,546) (2,276)
--------- ---------
(8,629) (2,730)
--------- ---------
Income before provision for income taxes 30,101 22,275
Provision for income taxes 11,288 8,257
========= =========
NET INCOME $ 18,813 $ 14,018
========= =========
PER SHARE AMOUNTS:
Basic earnings per share $ .27 $ 0.19
Diluted earnings per share $ .27 $ 0.19
SHARES USED IN PER SHARE CALCULATIONS
Weighted averages shares - basic 68,929 72,747
Weighted averages shares - diluted 70,262 74,561
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
ITEM 1. FINANCIAL STATEMENTS - CONTINUED
NOVA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the three months
In thousands Ended March 31,
------------------------
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 18,813 $ 14,018
Subsidiary fiscal year conversion -- 2,547
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 17,333 13,049
Deferred income taxes (180) 12,442
Minority interest 4,362 2,276
Interest on debt obligations -- 895
Changes in assets and liabilities, net of the effects of business
acquisitions:
Trade receivables (9,978) 99
Inventory (2,072) (2,263)
Other assets (208) (1,831)
Accounts payable (328) 8,121
Accrued liabilities 7,010 (19,605)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 34,752 29,748
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of merchant portfolios and customer contracts (19,476) (24,989)
Amounts placed in escrow related to business purchase 8,700 (8,700)
transactions
Purchase of property and equipment (10,072) (7,649)
Purchase of equipment for leasing (7,815) (6,976)
Amounts received on leases 5,732 4,322
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (22,931) (43,992)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings and long-term debt, net -- 10,503
Payments on long-term debt and capital leases (16,567) (188)
Proceeds from stock options exercised 3,084 2,985
Distribution of minority interest (2,296) (2,931)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES (15,779) 10,369
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,958) (3,875)
-------- --------
Cash and cash equivalents, beginning of period 32,574 51,131
-------- --------
Cash and cash equivalents, end of period $ 28,616 $ 47,256
======== ========
SUPPLEMENTARY INFORMATION
Income taxes paid $ 1,557 $ 1,189
Interest paid $ 4,583 $ 647
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the consolidated financial
statements reflect all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position and results of
operations of NOVA Corporation ("NOVA" or "the Company") as of the end of and
for the periods indicated. These interim financial statements should be read in
conjunction with NOVA's audited financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 1999, filed with the
Securities and Exchange Commission.
Results of interim periods are not necessarily indicative of results to be
expected for the year as a whole. The effect of seasonal business fluctuations
and the occurrence of costs and expenses in annual cycles require certain
estimations in the determination of interim results.
NOTE 2 - BUSINESS ACQUISITIONS
On February 1, 2000, NOVA acquired the assets of First Saving Bank Merchant
Division, Inc. ("FSB"). The acquisition was accounted for as a purchase
transaction and the net assets and results of operations are included in the
condensed consolidated financial statements from the date of acquisition. Total
consideration at the time of the transaction included the issuance of 1,082,969
shares of common stock valued at $27.8 million. Of the total purchase price,
$27.4 million was allocated to "Merchant and customer contracts", with the
remainder representing the fair value of the net assets purchased. Additional
consideration of up to $4.0 million, payable in the form of NOVA common stock,
may be required during fiscal 2001 and 2002 based upon future performance
thresholds set forth in the purchase agreement.
6
<PAGE> 7
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share in accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (in thousands, except per share data):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the three months
ended March 31,
----------------------
2000 1999
------- -------
<S> <C> <C>
NUMERATOR:
Numerator for basic and diluted net income
per share-income available to common $18,813 $14,018
shareholders
DENOMINATOR:
Denominator for basic net income per share-
weighted-average shares 68,929 72,747
EFFECT OF DILUTED SECURITIES:
Stock options 1,286 1,814
Contingently issuable stock 47 --
------- -------
DILUTIVE POTENTIAL COMMON SHARES:
Denominator for diluted net income per
share-adjusted weighted-average shares and
assumed conversions 70,262 74,561
------- -------
BASIC EARNINGS PER SHARE $ .27 $ 0.19
======= =======
DILUTED EARNINGS PER SHARE $ .27 $ 0.19
======= =======
- --------------------------------------------------------------------------------
</TABLE>
NOTE 4 - MERGER AND CONSOLIDATION EXPENSES
As a result of NOVA's merger with PMT and other mergers completed during 1998,
the Company recorded a $90.7 million charge in 1998. This charge was primarily
related to direct merger transaction costs, charges associated with the
consolidation and closure of PMT's corporate headquarters and certain operating
subsidiaries, contract termination costs related to unfavorable third party
processing contracts, and the decision to exit certain of PMT's sales
distribution channels. Beginning in 1998 and continuing throughout 1999,
management executed substantially all parts of the plan for PMT's integration
and consolidation, making refinements to the plan as additional facts and
circumstances became available. During 1999, revisions to the plan resulted in
the reversal of approximately $6.5 million in charges accrued in 1998 that were
not needed under the revised plan and additional costs of approximately $6.7
million to recognize the costs of executing revised elements of the plan. The
consolidation and integration charges recorded in 1999 exceeded the reversal of
1998 charges by approximately $180,000, with such excess charges reflected in
the operating results for 1999.
7
<PAGE> 8
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following is a summary of the activity recorded relating to merger and
consolidation charges:
<TABLE>
<CAPTION>
===============================================================================================================================
----------------------------------------------------------------------------------
BALANCE BALANCE BALANCE
1998 1998 AT 1999 AT 2000 AT
(in thousands) CHARGES ACTIVITY 12/31/98 ACTIVITY 12/31/99 ACTIVITY 03/31/00
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct transaction
Costs Cash 15,515 (11,412) 4,103 (4,103) -- -- --
Severance packages Cash 14,050 (1,404) 12,646 (8,855) 3,791 (253) 3,538
Lease abandonment Cash 4,658 -- 4,658 364 5,022 (534) 4,488
Contract termination Charges Cash 35,506 (13,689) 21,817 (21,817) -- -- --
Asset write-down Non-cash 7,121 (7,121) -- -- -- -- --
Costs to exit a
distribution channel Non-cash 11,370 (11,370) -- -- -- -- --
Costs to exit a
distribution channel Cash 2,500 -- 2,500 (2,500) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
90,720 (44,996) 45,724 (36,911) 8,813 (787) 8,026
===============================================================================================================================
</TABLE>
The primary costs associated with consolidation and closure of facilities
include employee and executive severance, estimated unrecoverable future lease
obligations on vacated facilities, and the write-down of capital assets to their
net realizable value. The consolidation and closure actions result from the
elimination of overlapping functions, primarily customer service, accounting,
and administrative areas.
Direct Transaction Costs. Direct merger transaction costs primarily consisted of
investment banking commissions, professional fees, and regulatory filing
expenses. During 1999, approximately $241,000 of merger related professional
fees were incurred in excess of amounts accrued in 1998.
Severance Packages. During 1998, management developed and began implementing
plans to close PMT's corporate headquarters, as well as downsize certain of
PMT's operating subsidiaries. As of December 31, 1998, the only significant
employee group notified of such plans was at the corporate headquarters and
certain executives. Accordingly, the costs associated with these terminations
were the only severance costs included in the 1998 charge. The total number of
employees terminated from this group was approximately 275, with 210 having
received severance packages as of December 31, 1998. Of these employees, certain
executives' severance is being paid over two years. The remaining employees in
this group were terminated during the first quarter of 1999, with all severance
benefits paid at that time. During 1999, management was able to settle
termination related benefits associated with certain executives at amounts less
than originally agreed, accounting for substantially all of the reversal in this
merger charge category.
During 1999, decisions were made to close or downsize additional facilities to
further streamline the operating and administrative functions. These actions
resulted in the termination of approximately 183 employees, of which 179
received severance packages totaling approximately $1.4 million as of December
31, 1999. The remaining four individuals, with total severance payments of
approximately $160,000, were notified of their termination during 1999, but
received their severance payments in January 2000. The remaining severance
accrued in the March 31, 2000 merger reserve balance relates to executives whose
terminations were effective and accrued for during 1998 and whose severance will
be fully paid by mid-2001.
Lease Abandonment. The Company began the process of moving PMT's operations from
Nashville, Tennessee to other locations in December 1998, and completed this
process in the first quarter of 1999, at which time the premises in Nashville
were completely vacated. The 1998 charge included the estimated unrecoverable
future lease
8
<PAGE> 9
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
obligations for primarily PMT's Nashville headquarters. By December 1999 the
facility was fully subleased, facilitating an accurate assessment of future
unrecoverable lease obligations. Based on the updated assessment, approximately
$280,000 of the original merger and consolidation charge was reversed. During
1999, plans were made to close or downsize additional facilities. These
decisions resulted in additional accruals during 1999 of approximately $3.0
million covering ten locations, eight of which were closed or downsized during
1999. The remaining two facilities will be closed or downsized during mid-2000.
Obligations under leases included in the reserve balance will not be fully paid
out until October 2007.
Contract Termination Charges. Consistent with past practice, management
developed a plan in 1998 to convert the front-end and back-end transaction
processing of PMT's merchants to the NOVA Network. As a result of this plan, in
1998 the Company negotiated the termination of long-term processing contracts
with third parties. The majority of these terminations were finalized and paid
in 1998. During 1999, management was able to successfully terminate one of the
contracts without incurring the $2.0 million penalty recognized in 1998. Based
on new facts and circumstances, arising in 1999, management also determined that
the economic benefits of terminating another contract did not outweigh the early
termination costs. Accordingly, approximately $3.9 million of contract
termination charges were reversed to appropriately reflect these events.
Asset Write-Down. Capital asset write-downs are substantially attributable to
the computer software and equipment including PMT's management information and
financial reporting systems. Additional assets written down include telephone
systems, and office furniture and equipment that will not be redeployed for use
at another NOVA facility. Charges recorded in 1998 were associated primarily
with PMT's corporate office in Nashville. Additional charges of approximately
$1.9 million were recognized during 1999 in connection with the revised facility
consolidation plan.
Costs to Exit a Distribution Channel. In 1998 management formulated plans to
exit unique distribution channels based upon the type of merchant business
generated through these channels. Specifically, servicing and maintaining the
type of merchant generated through these channels is not compatible with NOVA's
operating philosophy and not strategically aligned with NOVA's plan of business.
The charge related to exiting this distribution channel included a contract
termination fee and the write down of certain related intangible assets
resulting from an analysis of discounted future cash flows generated from the
subject merchants. The final negotiated termination fee was approximately
$434,000 less than accrued in 1998, resulting in a reversal of the excess charge
during 1999.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this report on Form 10-Q contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 (the "Securities Act"), as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in
this report, the words "may," "could," "should," "would," "believe,"
"anticipate," "estimate," "expect," "intend," "plan" and similar expressions or
statements regarding future periods are intended to identify forward-looking
statements. All forward-looking statements are inherently uncertain as they are
based on various expectations and assumptions concerning future events, which by
their nature involve substantial risks and uncertainties beyond NOVA's control.
Forward-looking statements may also be made in NOVA's other reports filed under
the Exchange Act, press releases, and other documents; as well as by NOVA
management in oral statements. NOVA undertakes no obligation to update or revise
any forward-looking statements for events or circumstances after the date on
which such statement is made. New factors emerge from time to time, and it is
not possible for NOVA to predict all of such factors. Further, NOVA cannot
assess the impact of each such factor on its business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
9
<PAGE> 10
NOVA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's opinion as of the date of this report.
NOVA refers readers to the information set forth under the caption "Item 1.
Business--Certain Risks Associated with the Business of the Company", as well as
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a more complete discussion of certain risk factors contained
in the Annual Report on Form 10-K for the year ended December 31, 1999, filed
with the Securities and Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percentage of
revenues represented by certain line items in NOVA's condensed consolidated
statements of operations, as well as the percentage increase/(decrease) of such
items from period to period:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Three Month Period
Ended March 31, Increase/
----------------------
2000 1999 (Decrease)
-------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 0
Cost of service 75.6 76.5 (0.9)
Conversion costs 1.1 2.4 (1.3)
Selling, general and administrative 8.1 9.0 (0.9)
Depreciation and amortization 4.7 4.2 0.5
Operating expenses 89.5 92.1 (2.6)
Operating income 10.5 7.9 2.6
Interest income 0.1 0.2 (0.1)
Interest expense (1.2) (0.3) 0.9
Minority interest (1.3) (0.7) 0.6
---------------------
Income before provision for income taxes 8.1 7.1 1.0
Provision for income taxes 3.0 2.6 0.4
---------------------
Net income 5.1% 4.5% 0.6
--------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
GENERAL
NOVA is a provider of integrated transaction processing services, related
software application products and value-added services. The Company provides
transaction processing support for all major credit and charge cards and also
provides access to debit card processing and check verification services.
REVENUES
The Company's revenues increased 18.7% to $370.0 million for the quarter ended
March 31, 2000, compared to $311.8 million for the quarter ended March 31, 1999.
The principal contributors to the increase are internal growth and the
incremental effect of the increased discount related to the pass through of
higher interchange rates from credit card associations, which went into effect
April 10, 1999.
COST OF SERVICE
Cost of service increased 17.4% to $280.0 million for the quarter ended March
31, 2000, compared to $238.4 million for the quarter ended March 31, 1999. The
increase resulted from the interchange, assessment fees and other direct
operating costs associated with the higher merchant sales volume processed. As a
percentage of revenues, cost of service was 75.7% compared to 76.5% in the
previous year reflecting increased efficiencies achieved from 1999 conversion
efforts.
CONVERSION COSTS
Conversion costs decreased to $4.0 million for the quarter ended March 31, 2000,
compared to $7.5 million for the quarter ended March 31, 1999. The decrease
relates to the magnitude of the conversion efforts last year, particularly for
the conversion of the PMT merchants.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 8.0% to $30.0 million for
the quarter ended March 31, 2000, compared to $27.7 million for the same period
in 1999. The increase is attributable to expenses of business acquisitions
during the first quarter of 2000 and opening a major new operations center in
Atlanta, Georgia in February 2000. The Atlanta operations center enables the
Company to complete the consolidation of operations from the former PMT
subsidiaries, as well as absorb operating needs of more recent acquisitions. As
a percentage of revenue, selling, general and administrative expenses declined
to 8.1% for the quarter ended March 31, 2000, compared to 9.0% for the same
period last year.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 32.8% to $17.3 million for the quarter
ended March 31, 2000, compared to $13.0 million last year. This increase is due
largely to additional amortization expense associated with portfolio purchases.
In addition, depreciation expense has increased associated with infrastructure
expansion necessitated by the Company's growth.
OPERATING INCOME
For the foregoing reasons, operating income for the quarter ended March 31,
2000, increased $13.7 million, or 54.9%, to $38.7 million from prior year
results of $25.0 million.
INTEREST INCOME AND EXPENSE
Interest income decreased approximately $23,000, or 4.3%, to $515,000, for the
quarter ended March 31, 2000. Interest expense increased approximately $3.6
million for the quarter ended March 31, 2000 to $4.6 million, compared to the
$992,000 in the quarter ended March 31, 1999. The principal reason for this
increase is the higher average debt obligations outstanding, primarily due to
the stock repurchase program.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
INCOME TAXES
Income tax expense of $11.3 million for the quarter ended March 31, 2000,
increased 36.7%, or $3.0 million, compared to $8.3 million for the same period
in 1999. This increase is attributable to the increase of taxable income for the
first quarter of 2000. In addition, the effective tax rate increased from 37.1%
last year to 37.5% in the current quarter due to an increase in non-deductible
expenses.
NET INCOME
Due to the factors discussed above, net income increased 34.2% to $18.8 million,
for the quarter ended March 31, 2000, compared to $14.0 million for the quarter
ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of its capital resources include purchases of
merchant portfolios, capital expenditures, equipment for leasing, and working
capital.
Net cash provided by operating activities was $34.8 million for the three months
ended March 31, 2000, as compared to $29.7 million for the same period in the
prior year. Net income adjusted for non-cash expenses accounted for
substantially all cash generated from operations.
Net cash used in investing activities was $22.9 million for the three months
ended March 31, 2000, as compared to $44.0 million for the three months ended
March 31, 1999. This decrease is substantially attributable to lower cash
requirements for portfolio purchases, as the Company used common stock for its
major purchases during the current quarter.
Net cash used for financing activities was $15.8 million during the three months
ended March 31, 2000, compared to net cash generated from financing activities
of $10.4 million for the same period in 1999. This comparison reflects the
Company's favorable generation of cash during 2000, which was used to pay down
debt, compared to increased borrowings during the previous fiscal year.
NOVA has available a credit facility of $250.0 million. At March 31, 2000,
approximately $197.0 million in borrowings were outstanding under the credit
facility.
The Company typically has relatively low working capital requirements because
discount fees charged to merchants are collected in an average of thirty days,
while normal payables are paid in an average of thirty days or longer. In
addition, increasing acquisition activity may cause variations in working
capital due to conversion-period operating costs and the transition in the
payment of expenses and the collection of receivables from the former processor.
Because of the seasonality of NOVA's business, capital requirements may be
greater in certain months than others.
At March 31, 2000, the Company had cash and cash equivalents of $28.6 million.
NOVA believes its existing cash and cash equivalents, cash generated from
operations, and available borrowing facilities are sufficient to fund merchant
portfolio purchases and capital asset investments and to meet working capital
requirements for the foreseeable future.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company has been involved from time to time in litigation in the normal
course of its business. While management is aware of and dealing with certain
pending or threatened litigation, management does not believe that such matters,
individually or in the aggregate, will have a material adverse affect on the
financial condition of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.52* Fifth Amendment to the NOVA Corporation
1996 Employees Stock Incentive Plan
10.53* NOVA Corporation 2000 Employees Stock Incentive Plan
27* Financial Data Schedule (for SEC use only)
* Filed herewith
(b) Reports on Form 8-K
The Company did not file any Current Report(s) on Form 8-K during the quarter
ended March 31, 2000.
SIGNATURES
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.
NOVA Corporation
(Registrant)
By: /s/ Edward Grzedzinski
-----------------------
Edward Grzedzinski
May 15, 2000 Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
May 15, 2000 By: /s/ F. David Rice
-----------------
F. David Rice
Senior Vice President
(Principal Accounting Officer)
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EXHIBIT 10.52
FIFTH AMENDMENT
TO THE
NOVA CORPORATION
1996 EMPLOYEES STOCK INCENTIVE PLAN
This Fifth Amendment to the NOVA Corporation 1996 Employees Stock
Incentive Plan (the "Plan"), made as of the day and year noted on the last page
hereof, by NOVA Corporation (the "Company"), to be effective as noted below.
WITNESSETH:
WHEREAS, the Company sponsors and maintains the Plan for the exclusive
benefit of its eligible employees and their beneficiaries, and pursuant to
Section 12.1 thereof, the Company has the right to amend the Plan at any time,
subject to Section 12.2 of the Plan; and
WHEREAS, the Company wishes to amend the Plan at this time for the
purpose of adding a definition of "continuing director," which definition was
intended to be included in the final version of the Plan as adopted by the
Board of Directors and the shareholders of the Company, but which was
inadvertently omitted;
NOW, THEREFORE, the Plan is amended as follows effective as of January
1, 2000:
1.
Article 2 of the Plan is amended by adding a new Section 2.11 to read
as follows (with the remaining sections of Article 2 to be sequentially
renumbered accordingly):
2.11 CONTINUING DIRECTOR shall mean a Director (i) who was a
Director as of the Effective Date, or (ii) who becomes a
Director subsequent to the Effective Date and whose election or
nomination for election by the Board was Duly Approved by
Directors at the time of such election or nomination who were
Directors as of the Effective Date, whether by a specific vote
or by approval of the proxy statement issued by the Company on
behalf of the Board of Directors.
2.
All other provisions of the Plan not inconsistent herewith are hereby
confirmed and ratified.
ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 24, 2000.
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EXHIBIT 10.53
NOVA CORPORATION
2000 EMPLOYEES STOCK INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 General Purpose. The purpose of this Plan is to further the
growth and development of the Company and Related Entities by encouraging their
employees to obtain a proprietary interest in the Company by owning its stock.
The Company and Related Entities intend that the Plan will provide their
employees with an added incentive to continue in their employ and will
stimulate their efforts in promoting the growth, efficiency and profitability
of the Company and Related Entities. The Company and Related Entities also
intend that the Plan will afford them a means of attracting to their service
persons of outstanding quality.
1.2 Intended Tax Effects of Options. The tax effects of any
Options granted hereunder should be determined under Code ss.83.
ARTICLE 2
DEFINITIONS
2.1 1933 Act shall mean the Securities Act of 1933, as amended.
2.2 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
2.3 Beneficiary shall mean, with respect to an Optionee, the
individual or entity to whom the Optionee's Options shall be transferred upon
the Optionee's death.
(a) Designation of Beneficiary. An Optionee's Beneficiary
shall be the individual or entity whom the Optionee last designated in
writing as such Optionee's Beneficiary hereunder. An Optionee shall
designate his or her original Beneficiary in writing on his or her
Option Agreement. Any subsequent modification of the Optionee's
Beneficiary shall be in a written, executed, notarized letter
addressed to the Committee and shall be effective when the Committee
receives it and in its sole discretion accepts it.
(b) No Designated Beneficiary. If, at any time, an Optionee
has not validly designated a Beneficiary, or the Beneficiary whom the
Optionee designated is no longer living or in existence at the time of
the Optionee's death, then the Optionee's Beneficiary shall be deemed
to be the individual or individuals in the first of the following
classes of individuals with one or more members of such class
surviving at the Optionee's death, and in the absence thereof, the
Optionee's estate: (A) the Optionee's surviving spouse; or (B) the
Optionee's then living lineal descendants, per stirpes.
(c) Designation of Multiple Beneficiaries. An Optionee may
not designate more than one individual or entity as a Beneficiary. To
the extent that a designation
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purports to designate more than one individual or entity as a
Beneficiary, the designation shall be null and void.
(d) Contingent Beneficiaries. An Optionee may designate a
contingent Beneficiary to receive the Optionee's Option in the event
that the Optionee's original Beneficiary should not be in existence at
the time of Optionee's death or should predecease the Optionee;
otherwise, in the event a Beneficiary should not be in existence at
the time of Optionee's death or should predecease the Optionee, then
the individual or individuals specified in subsection (b) above shall
be the Optionee's Beneficiary.
2.4 Board shall mean the Board of Directors of the Company.
2.5 Cause shall mean an act or acts by an individual involving
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, breach of contract with the Company or a Related
Entity or violation of Company or Related Entity policy, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses), and the unlawful trading in the
securities of the Company, a Related Entity or of another corporation based on
information gained as a result of the performance of services for the Company,
a Related Entity or such other corporation.
2.6 Change of Control shall mean the occurrence of any one of the
following events:
(a) Acquisition By Person of Substantial Percentage. The
acquisition by any individual or entity (including "affiliates" and
"associates" of such individual or entity, but excluding the Company,
any "parent" or "subsidiary" of the Company, or any employee benefit
plan of the Company or of any "parent" or "subsidiary" of the Company)
of a sufficient number of shares of Common Stock, or securities
convertible into shares of Common Stock, and whether through direct
acquisition of shares or by merger, consolidation, share exchange,
reclassification of securities or recapitalization of or involving the
Company or any "parent" or "subsidiary" of the Company or similar
event, to constitute the individual or entity the actual or beneficial
owner (within the meaning of the term as it is used in Section 13(d)
of the 1934 Act and the rules promulgated thereunder) of 30% or more
of the Common Stock, but only if such acquisition occurs without the
prior approval of the Company's Continuing Directors;
(b) Substantial Change of Board Members. The Company's
Continuing Directors fail to constitute at least a majority of the
members of the Board;
(c) Disposition of Assets. Any sale or other transfer of all
or substantially all of the assets of the Company or any "significant
subsidiary" (as Rule 1-02 of the Regulation S-X promulgated under the
1934 Act defines such term) without the prior approval of the
Company's Continuing Directors; or
(d) Transactions Requiring Regulatory Approval. The filing by
an individual or entity of an application with any regulatory
authority having jurisdiction over the ownership of the Company in
connection with any transaction by which such individual
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or entity is to acquire 20% or more of the combined voting power of
the Company's then outstanding securities without the prior approval
of the Company's Continuing Directors.
For purposes of this Plan, the terms "affiliate," "associate,"
"parent" and "subsidiary" shall have the respective meanings ascribed to such
terms in Rule 12b-2 under Section 12 of the 1934 Act. For purposes of this
subsection 2.6, the term "Continuing Directors" shall mean the individuals who,
as of the date hereof, constitute members of the Board; provided, however, that
any individual becoming a member of the Board after the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the Continuing Directors then
shall be considered as a Continuing Director, but excluding for this purpose
any such individual whose initial assumption of membership on the Board occurs
as a result of either an actual or threatened election contest or other actual
or threatened solicitation of proxies or consents by or on behalf of an
individual or entity other than the Board.
2.7 Code shall mean the Internal Revenue Code of 1986, as amended.
2.8 Committee shall mean the committee the Board appoints to
administer and interpret the Plan in accordance with Article 3 below.
2.9 Common Stock shall mean the common stock, par value $0.01 per
share, of the Company.
2.10 Company shall mean NOVA Corporation.
2.11 Director shall mean individuals who are serving as a member of
the Board (i.e., a director of the Company) or who are serving as a member of
the board of directors or comparable group of any Related Entity.
2.12 Disability shall mean, with respect to an individual, the
total and permanent disability of such individual as the Committee determines
in its sole discretion.
2.13 Effective Date shall mean the date on which the Board adopts
the Plan.
2.14 Fair Market Value of the Common Stock as of a date of
determination shall mean the following:
(a) Stock Listed and Shares Traded. If the Common Stock is
listed and traded on a national securities exchange (as the 1934 Act
defines the term) or on the NASDAQ National Market System on the date
of determination, the Fair Market Value per share shall be the closing
price of a share of the Common Stock on said national securities
exchange or National Market System on the date of determination. If
the Common Stock is traded in the over-the-counter market, the Fair
Market Value per share shall be the average of the closing bid and
asked prices on the date of determination.
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(b) Stock Listed But No Shares Traded. If the Common Stock is
listed on a national securities exchange or on the National Market
System but no Common Stock is traded on the date of determination but
was traded on dates within a reasonable period before the date of
determination, the Fair Market Value per share shall be the closing
price of a share of Common Stock on the most recent date before the
date of determination. If the Common Stock is regularly traded in the
over-the-counter market but no Common Stock is traded on the date of
determination (or if records of such trades are unavailable or
burdensome to obtain) but Common Stock was traded on dates within a
reasonable period before the date of determination, the Fair Market
Value per share shall be the average of the closing bid and asked
prices of the Common Stock on the most recent date before the date of
determination.
(c) Stock Not Listed. If the Common Stock is not listed on a
national securities exchange or on the National Market System and is
not regularly traded in the over-the-counter market, then the
Committee shall determine the Fair Market Value per share from all
relevant available facts, which may include the average of the closing
bid and ask prices reflected in the over-the-counter market on a date
within a reasonable period either before or after the date of
determination or opinions of independent experts as to value and may
take into account any recent sales and purchases of such Common Stock
to the extent they are representative.
(d) Good Faith Determination. Notwithstanding the preceding
provisions of this Section 2.14 to the contrary, the Committee may use
a method of determining Fair Market Value per share different from
those specified above to determine Fair Market Value for purposes of
pricing an option if the Committee determines that such different
method of determining Fair Market Value is reasonable, based on all
pertinent facts and circumstances, and any such determination to use
such different method is made in good faith by the Committee.
The Committee's determination of Fair Market Value, which shall be made
pursuant to the foregoing provisions, shall be final and binding for all
purposes of this Plan. The Committee will determine Fair Market Value without
regard to any restriction other than a restriction which, by its terms, will
never lapse.
2.15 Option shall mean an option granted to an individual pursuant
to the terms and provisions of this Plan that entitles the holder to purchase
from the Company a stated number of shares of Common Stock at the Option Price
set forth in the Option Agreement and that specifies the other terms and
conditions of the Option.
2.16 Option Agreement shall mean a written agreement that the
Company and an Optionee execute and date, evidencing an Option granted under
the terms and provisions of this Plan, setting forth the terms and conditions
of such Option, and specifying the name of the Optionee and the number of
shares of Common Stock subject to such Option.
2.17 Option Price shall mean the purchase price of the shares of
Common Stock underlying an Option.
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2.18 Optionee shall mean an individual who is granted an Option
pursuant to the terms and provisions of this Plan.
2.19 Plan shall mean this NOVA Corporation 2000 Employees Stock
Incentive Plan.
2.20 Related Entity shall mean (i) any entity that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with the Company (including any such entity that
becomes such after the adoption of this Plan) or (ii) any entity that the Board
designates as a participating company in the Plan.
ARTICLE 3
ADMINISTRATION
3.1 General Administration. The Committee shall administer and
interpret the Plan. Subject to the express provisions of the Plan, the
Committee shall have the authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine the
individuals to receive Options and the terms and provisions of the Option
Agreements by which such Options shall be evidenced (which shall not be
inconsistent with the terms of the Plan), and to make all other determinations
necessary or advisable for the administration of the Plan, all of which
determinations shall be final, binding and conclusive. The express grant in the
Plan of any specific power to the Committee shall not be construed as limiting
any power or authority of the Committee. The Company shall bear all expenses of
administering this Plan.
3.2 Appointment. The Board shall appoint the Committee from among
its members to serve at the pleasure of the Board. The Board from time to time
may remove members from, or add members to, the Committee and shall fill all
vacancies thereon. The Committee at all times shall be composed of two or more
directors who shall meet the following requirements hereinafter described.
During the period any director is serving on the Committee, he must be a
director who (i) is not currently an officer (as defined in Rule 16a-1(f) of
the 1934 Act) of the Company or a parent or subsidiary of the Company, or
otherwise currently an employee of the Company or a parent or subsidiary of the
Company; (ii) does not receive compensation, either directly or indirectly,
from the Company or a parent or subsidiary of the Company, for services
rendered as a consultant or in any capacity other than as a director except for
an amount that does not exceed the dollar amount for which disclosure would be
required pursuant to Rule 404(a); (iii) does not possess an interest in any
other transaction for which disclosure would be required pursuant to Rule
404(a); and (iv) is not engaged in a business relationship for which disclosure
would be required pursuant to Rule 404(b). The requirements of this subsection
are intended to comply with the "Non-Employee Director" requirements of Rule
16b-3 of the 1934 Act or any successor regulation, and shall be interpreted and
construed in a manner which assures compliance with the "Non-Employee Director"
requirement of such regulation.
3.3 Organization. The Committee may select one of its members as
its chairman and shall hold its meetings at such times and at such places as it
shall deem advisable. A majority of the Committee shall constitute a quorum,
and such majority shall determine its actions. The Committee shall keep minutes
of its proceedings and shall report the same to the Board at the meeting next
succeeding.
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3.4 Indemnification. In addition to such other rights of
indemnification as they have as directors or as members of the Committee, the
members of the Committee, to the extent applicable law permits, shall be
indemnified by the Company against reasonable expenses (including, without
limitation, attorneys' fees) that they or any of them actually and necessarily
incur in connection with the defense of any action, suit or proceeding, or in
connection with any appeal, to which they or any of them may be a party by
reason of any action taken or not taken under or in connection with the Plan or
any Options granted hereunder, and against all amounts they or any of them pay
in settlement thereof (provided such settlement is approved to the extent
required by and in the manner provided by the articles or certificate of
incorporation or the bylaws of the Company relating to indemnification of
directors) or pay in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member or members did not
act in good faith and in a manner he or they reasonably believed to be in or
not opposed to the best interest of the Company.
ARTICLE 4
STOCK
The shares of Common Stock subject to the Options and other provisions
of the Plan shall be authorized but unissued or reacquired shares of Common
Stock. Subject to readjustment in accordance with Article 8, the total number
of shares of Common Stock for which Options may be granted to individuals
participating in the Plan shall not exceed in the aggregate 3,500,000 shares of
Common Stock. Notwithstanding the foregoing, shares of Common Stock allocable
to the unexercised portion of any expired or terminated Option again may become
subject to Options under the Plan.
ARTICLE 5
ELIGIBILITY TO RECEIVE AND GRANT OF OPTIONS
5.1 Individuals Eligible for Grants of Options. The individuals
eligible to receive Options hereunder shall be employees of the Company or any
Related Entity, including such employees who are also Directors of the Company
or any Related Entity; provided, no non-employee Directors shall be eligible to
receive any Options pursuant to this Plan.
5.2 Grants of Options. Subject to the provisions of the Plan, the
Committee shall have the authority and sole discretion to determine and
designate, from time to time, those employees (from among the employees
eligible for a grant of Options under the Plan pursuant to Section 5.1 above)
to whom Options will actually be granted, the Option Price of the shares
covered by any Options, the manner in and conditions under which Options are
exercisable (including, without limitation, any limitations or restrictions
thereon), and the time or times at which Options shall be granted. In making
such determinations, the Committee may take into account the nature of the
services rendered by the respective employees to whom Options may be granted,
their present and potential contributions to the Company's or Related Entity's
success and such other factors as the Committee, in its sole discretion, shall
deem relevant. In its authorization of the grant of an Option hereunder, the
Committee shall specify the name of the
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Optionee and the number of shares subject to such Option . The Committee may,
at any time, grant new Options to an Optionee who has previously received
Options, whether such Options still are outstanding, have been previously
exercised in whole or in part, have expired or are canceled in connection with
the issuance of new Options. No employee shall have any claim or right to
receive Options under the Plan.
ARTICLE 6
TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder and Option Agreements shall comply with and
be subject to the following terms and conditions:
6.1 Requirement of Option Agreement. Upon the grant of an Option
hereunder, the Committee shall prepare (or cause to be prepared) an Option
Agreement. The Committee shall present such Option Agreement to the Optionee.
The failure of the Optionee to execute the Option Agreement within 30 days
after the date of the receipt of same shall render the Option Agreement and the
underlying Option null and void ab initio.
6.2 Optionee and Number of Shares. Each Option Agreement shall
state the name of the Optionee and the total number of shares of Common Stock
to which it pertains, the Option Price, the Beneficiary of the Optionee and the
date as of which the Option was granted under this Plan.
6.3 Vesting.
(a) An Option may be exercised in whole at any time or in
part from time to time at such times and in compliance with such
requirements as the Committee shall determine and set forth in the
Option Agreement. An Option granted under the Plan may be exercised
with respect to a number of whole shares less than the full number of
shares for which the Option could be exercised. A partial exercise of
the Option shall not affect the right to exercise the Option from time
to time in accordance with this Plan and the Option Agreement with
respect to the remaining shares of Common Stock subject to the Option.
(b) Notwithstanding the provisions of subsection (a) above,
all Options previously granted to an Optionee shall become immediately
vested and exerciseable with respect to 100 percent of the shares of
Common Stock subject to the Option in the event the Optionee incurs a
Disability or dies while an employee of the Company or a Related
Entity.
(c) Notwithstanding any provision of this Plan or any Option
Agreement, in the event of or in anticipation of a Change of Control,
the Committee in its discretion may but need not declare that any or
all outstanding Options previously granted under the Plan shall be
exercisable in whole or in part, as of the consummation of the Change
of Control, and all such Options that become exercisable shall remain
exercisable thereafter in accordance with the terms of the Plan and
the applicable Option Agreement.
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(d) Other than as provided above, if an Optionee ceases to be
an employee of the Company and any Related Entity, the Optionee may
not exercise after such time any non-vested Option or portion thereof
that is not then exercisable at the time of termination of employment.
6.4 Option Price. The Option Price of the shares of Common Stock
underlying each Option shall be no less than 75% of the Fair Market Value of
such shares on the date the Option is granted. The date as of which the
Committee granted the Option as specified in the Option Agreement shall be
considered the date on which such Option is granted.
6.5 Terms of Options. Terms of Options granted under the Plan
shall commence on the date of grant and shall expire on such date as the
Committee may determine for each Option; provided, in no event shall any Option
be exercisable after ten years from the date the Option is granted. No Option
shall be granted hereunder after ten years from the date the Board adopts the
Plan.
6.6 Terms of Exercise. The exercise of an Option may be for less
than the full number of shares of Common Stock subject to such Option, but such
exercise shall not be made for less than (i) 50 shares or (ii) the total
remaining shares subject to the Option, if such total is less than 50 shares.
Subject to the other restrictions on exercise set forth herein, the Optionee
may exercise the unexercised portion of an Option at a later date.
6.7 Method of Exercise. All Options granted hereunder shall be
exercised by giving written notice directed to the Secretary of the Company at
its principal place of business or to such other person as the Committee may
direct. Each notice of exercise shall identify the Option which the Optionee is
exercising (in whole or in part) and shall be accompanied by payment of the
Option Price for the number of shares specified in such notice, by any
documents Section 8.1 requires and by any applicable tax withholdings. The
Company shall make delivery of such shares within a reasonable period of time;
provided, if any law or regulation requires the Company to take any action
(including, but not limited to, the filing of a registration statement under
the 1933 Act and causing such registration statement to become effective) with
respect to the shares specified in such notice before the issuance thereof,
then the date of delivery of such shares shall be extended for the period
necessary to take such action.
6.8 Medium and Time of Payment.
(a) The Option Price shall be payable upon the exercise of
the Option in an amount equal to the number of shares then being
purchased times the per share Option Price. Payment, at the election
of the Optionee (or his Beneficiary as provided in subjection (c) of
Section 6.9), shall be (A) in cash; (B) by delivery to the Company of
a certificate or certificates for shares of the Common Stock duly
endorsed for transfer to the Company with signature guaranteed by a
member firm of a national securities exchange or by a national or
state bank or a federally chartered thrift institution (or guaranteed
or notarized in such other manner as the Committee may require); or
(C) by a combination of (A) and (B).
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(b) If all or part of the Option Price is paid by delivery of
shares of Common Stock, on the date of such payment the Optionee must
have held such shares for at least six months, and the value of such
Common Stock (which shall be the Fair Market Value of such shares of
Common Stock on the date of exercise) shall be less than or equal to
the total Option Price. If the Optionee delivers shares of Common
Stock with a value that is less than the total Option Price, then the
Optionee shall pay the balance of the total Option Price in cash as
provided in subsection (a) above.
(c) In addition to the payment of the purchase price of the
shares then being purchased, an Optionee also shall pay in cash (or
have withheld from his pay) an amount equal to, or, by instructing the
Company to retain shares of Common Stock upon the exercise of the
Option with a Fair Market Value equal to, the amount, if any, which
the Company or Related Entity at the time of exercise is required to
withhold under the income tax or Federal Insurance Contributions Act
tax withholding provisions of the Code, of the income tax laws of the
state of the Optionee's residence, and of any other applicable law.
6.9 Effect of Termination of Employment, Disability or Death.
Except as provided in subsections (a), (b) and (c) below, no Option shall be
exercisable unless the Optionee thereof shall have been an employee of the
Company from the date of the granting of the Option until the date of exercise;
provided, the Committee, in its sole discretion, may waive the application of
this Section 6.9 with respect to any Option granted hereunder and, instead, may
provide a different expiration date or dates in an Option Agreement.
(a) Termination of Employment. In the event an Optionee
ceases to be an employee of the Company or any Related Entity for any
reason other than death or Disability, the Option or unexercised
portion thereof granted to him shall terminate on and shall not be
exercisable after the earliest to occur of (i) the expiration date of
the Option, (ii) three months after termination of employment or (iii)
the date on which the Company or Related Entity gives notice to such
Optionee of termination of employment if the Company or a Related
Entity is terminating the employment of an Optionee for Cause (an
Optionee's resignation in anticipation of termination of employment by
the Company or Related Entity for Cause shall constitute a notice of
termination by the Company or Related Entity); provided, the Committee
may provide in the Option Agreement that such Option or any
unexercised portion thereof shall terminate sooner. Notwithstanding
the foregoing, in the event that an Optionee's employment terminates
for a reason other than death or Disability at any time after a Change
of Control, the term of all Options of that Optionee shall be extended
through the end of the three-month period immediately following the
date of such termination. Prior to the earlier of the dates specified
in the preceding sentences of this subsection (a), the Option shall be
exercisable only in accordance with its terms and only for the number
of shares exercisable on the date of termination of employment.
(b) Disability. Upon the termination of an Optionee's
employment due to Disability, any Option or unexercised portion
thereof granted to him which is otherwise
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exercisable shall terminate on and shall not be exercisable after the
earlier to occur of (i) the expiration date of such Option, or (ii)
one year after the date on which such Optionee ceases to be an
employee of the Company and any Related Company due to Disability;
provided, the Committee may provide in the Option Agreement that such
Option or any unexercised portion thereof shall terminate sooner.
Prior to the earlier of such dates, such Option shall be exercisable
only in accordance with its terms and only for the number of shares
exercisable on the date such Optionee's employment ceases due to
Disability.
(c) Death. In the event of the death of the Optionee (i)
while he is an employee of the Company or any Related Entity, (ii)
within three months after the date on which such Optionee's employment
terminated (for a reason other than Cause) as provided in subsection
(a) above, or (iii) within one year after the date on which such
Optionee's employment terminated due to his Disability as provided in
subsection (b), his Beneficiary may exercise any Option or unexercised
portion thereof granted to him which is otherwise exercisable at any
time prior to the expiration of one year from the date of death of
such Optionee, but in no event later than the date of expiration of
the Option; provided, the Committee may provide in the Option
Agreement that such Option or any unexercised portion thereof shall
terminate sooner. Such exercise shall be effected pursuant to the
terms of this Section 6.9 as if such Beneficiary is the named
Optionee. Prior to the earliest of such dates, such Option shall be
exercisable only in accordance with its terms and only for the number
of shares exercisable on the date such Optionee's employment ceases
due to death.
6.10 Restrictions on Transfer and Exercise of Options. No Option
shall be assignable or transferable by the Optionee except (i) by transfer to a
Beneficiary upon the death of the Optionee, or (ii) by transfer from the
Optionee to a spouse, lineal ascendant or lineal descendant of the Optionee or
a spouse of a lineal ascendant or lineal descendant of the Optionee or to one
or more trusts for the benefit of the Optionee's spouse, lineal ascendants or
lineal descendants or a spouse of a lineal ascendant or lineal descendant of
the Optionee or a partnership in which such individuals are the only partners
and only if the Optionee does not receive any consideration for the transfer
and the Committee expressly approves the transfer; and any purported transfer
(other than as excepted above) shall be null and void. The holder of a
transferred Option shall be bound by the same terms and conditions that
governed the Option during the period the Optionee held it; provided, however,
that such transferee may not transfer such Option except by will or the laws of
descent or distribution. Any such transfer shall be evidenced by an appropriate
written document the Optionee executes, and a copy thereof shall be delivered
to the Committee on or prior to the effective date of the transfer. After the
death of an Optionee, and upon the death of the Optionee's Beneficiary, an
Option shall be transferred only by will or by the laws of descent and
distribution. During the lifetime of an Optionee, only he can exercise the
Option; provided, however, that in the event the Optionee is incapacitated and
unable to exercise the Option, such Optionee's legal guardian, legal
representative, fiduciary or other representative whom the Committee deems
appropriate based on applicable facts and circumstances can exercise such
Option.
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6.11 Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to shares of Common Stock covered by his Option until
the date of issuance of the shares to him and only after the Option Price of
such shares and all applicable tax withholdings are paid in full. Unless
specified in Article 7, no adjustment will be made for dividends or other
rights for which the record date is prior to the date of such issuance. The
Company may include on any certificates representing shares of Common Stock
issued pursuant to an Option such legends referring to any representations,
restrictions or any other applicable statements as the Company, in its
discretion, shall deem appropriate.
6.12 No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon the Optionee to exercise such Option.
6.13 Acceleration. The Committee shall at all times have the power
to accelerate the vesting date of Options previously granted under this Plan.
6.14 Liabilities of Optionee. No right or interest of an Optionee
in any Option shall be liable for or subject to any lien, obligation or
liability of such Optionee.
6.15 Employee Status. In the event that the terms of any Option
provide that it may be exercised only during employment or within a specified
period of time after termination of employment, the Committee may decide to
what extent leaves of absence for governmental or military service, illness,
temporary disability or other reasons shall not be deemed interruptions of
employment.
6.16 Other Conditions. The Committee, in its discretion, may, as a
condition to the grant of an Option, require the Optionee on or before the day
of grant of the Option to enter into (i) a covenant not to compete (including a
confidentiality, non-solicitation or other similar agreement) with the Company
or a Related Entity, which shall become effective upon the date of termination
of employment of the Optionee with the Company or a Related Entity or another
date and contain such terms and conditions as the Committee shall otherwise
specify or (ii) an agreement to cancel any employment agreement, fringe benefit
or other compensation arrangement in effect between the Company or a Related
Entity and such Optionee. If the Optionee shall fail to enter into any such
agreement or agreements at the Committee's request, then no Option shall be
granted to the Optionee and the number of shares of Common Stock that would
have been subject to such Option shall be added to the remaining shares of
Common Stock available under the Plan.
ARTICLE 7
ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR CHANGE OF CONTROL
7.1 Recapitalization. In the event that the outstanding shares of
the Common Stock of the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:
11
<PAGE> 12
(a) The Committee shall make an appropriate adjustment in the
number and kind of shares available for the granting of Options under
the Plan and in any limit to the aggregate Options that can be granted
to an Optionee in any calendar year.
(b) The Committee also shall make an appropriate adjustment
in the number and kind of shares as to which outstanding Options, or
portions thereof then unexercised, shall be exercisable; any such
adjustment in any outstanding Options shall be made without change in
the total price applicable to the unexercised portion of such Option
and with a corresponding adjustment in the Option Price per share. No
fractional shares shall be issued or optioned in making the foregoing
adjustments, and the number of shares available under the Plan or the
number of shares subject to any outstanding Options shall be the next
lower number of shares, rounding all fractions downward.
(c) If any rights or warrants to subscribe for additional
shares are given pro rata to holders of outstanding shares of the
class or classes of stock then set aside for the Plan, each Optionee
shall be entitled to the same rights or warrants on the same basis as
holders of the outstanding shares with respect to such portion of his
Option as is unexercised on or prior to the record date for
determining shareholders entitled to receive or exercise such rights
or warrants.
(d) In addition, the Committee may make such other
adjustments to the terms of an outstanding Option to the extent
equitable and necessary to prevent an enlargement or dilution of the
Optionee's rights thereunder as a result of any similar transaction.
7.2 Reorganization. Subject to any required action by the
shareholders, if the Company shall be a party to any reorganization involving a
merger, consolidation, acquisition of the stock or acquisition of the assets of
the Company which does not constitute a Change of Control, the Committee, in
its discretion, may declare that:
(a) any or all outstanding Options granted but not yet
exercised shall pertain to and apply, with appropriate adjustment as
the Committee determines, to the securities of the resulting
corporation to which a holder of the number of shares of the Common
Stock subject to such Option would have been entitled;
(b) any or all outstanding Options granted hereunder shall
become immediately nonforfeitable and fully exercisable (to the extent
federal or state securities laws permit); and/or
(c) any or all outstanding Options granted hereunder shall
become immediately nonforfeitable and fully exercisable (to the extent
the federal or state securities laws permit) and shall be terminated
after giving at least 30 days' notice to the Optionees to whom such
Options have been granted.
7.3 Dissolution and Liquidation. If the Board adopts a plan of
dissolution and liquidation that the shareholders of the Company approve, the
Committee shall give each Optionee written notice of such event at least 30
days prior to its effective date, and the rights of
12
<PAGE> 13
all Optionees shall become immediately nonforfeitable and fully exercisable or
vested (to the extent the federal or state securities laws permit).
7.4 Limits on Adjustments. Any issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or Option Price of shares of the Common Stock subject to
any Option, except as this Article specifically provides otherwise. The
issuance by the Company of either shares of stock of any class or securities
convertible into shares of stock of any class, for cash or property or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefore, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason therefor shall be made with respect to, the maximum
number of shares of the Common Stock as to which Options may be granted or any
other limitations in this Plan or the terms of outstanding Options. The grant
of Options pursuant to the Plan shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, consolidate or
dissolve, or to liquidate, sell or transfer all or any part of its business or
assets. All adjustments the Committee makes under this Article shall be final
and conclusive on all parties.
7.5 Change of Control. Notwithstanding any provision of any Option
Agreement, in the event of or in anticipation of a Change of Control , the
Committee, in its discretion, may declare that:
(a) any or all outstanding Options granted hereunder shall
become immediately nonforfeitable and fully exercisable or vested (to
the extent the federal or state securities laws permit);
(b) any or all outstanding Options granted hereunder are to
be terminated after giving at least 30 days' notice to the Optionees
to whom such Options have been granted; and/or
(c) any or all outstanding Options previously granted under
the Plan are terminated in consideration of payment to the holder of
the Option, with respect to each share of Common Stock to which the
Option is then exercisable, of the excess of the Fair Market Value on
such date of the Common Stock subject to the exercisable portion of
the Option over the Option Price; the payment described in this
subsection (c) shall be made in any manner the Committee determines,
including in cash, stock or other property.
The preceding sentences to the contrary notwithstanding, outstanding
Options shall not be terminated to the extent that the successor employer or
its parent or subsidiary makes written provision for their continuance,
assumption or substitution in connection with the Change of Control.
7.6 Limitation on Benefits. Despite any other provisions of this
Plan to the contrary, if the receipt of any payments (including accelerated
vesting) under this Plan would subject an
13
<PAGE> 14
Optionee to tax under Code ss. 4999, the Committee may determine whether some
amount of payments (including accelerated vesting) would meet the definition of
a "Reduced Amount" (as defined below). If the Committee determines that there
is a Reduced Amount, the total payments (including accelerated vesting) to the
Optionee hereunder must be reduced to such Reduced Amount, but not below zero.
If the Committee determines that the payments must be reduced to the Reduced
Amount, the Company must promptly notify the Optionee of that determination,
with a copy of the detailed calculations by the Committee. All determinations
of the Committee under this Section 7.6 are binding upon the Company and the
Optionee. It is the intention of the Company and the Optionee to reduce the
payments under this Plan only if the aggregate Net After Tax Receipt (as
defined below) to the Optionee would thereby be increased. As a result of the
uncertainty in the application of Code Section 4999 at the time of the initial
determination by the Committee under this Section 7.6, however, it is possible
that amounts will have been paid under the Plan to or for the benefit of an
Optionee which should not have been so paid ("Overpayment") or that additional
amounts which will not have been paid under the Plan to or for the benefit of
an Optionee could have been so paid ("Underpayment") - in each case, consistent
with the calculation of the Reduced Amount. If the Committee, based either upon
the assertion of a deficiency by the Internal Revenue Service against the
Company or the Optionee which the Committee believes has a high probability of
success or upon controlling precedent or other substantial authority,
determines that an Overpayment has been made, it must be treated for all
purposes as a loan which the Optionee must repay to the Company together with
interest at the applicable federal rate under Code Section 7872(f)(2);
provided, however, that no such loan may be deemed to have been made and no
amount shall be payable by Optionee to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which the
Optionee is subject to tax under Code Section 1, 3101 or 4999 or generate a
refund of such taxes. If the Committee, based upon controlling precedent or
other substantial authority, determines that an Underpayment has occurred, the
Committee must promptly notify the Optionee of the amount of the Underpayment,
which the Company then shall pay to the Optionee. For purposes of this section,
(i) "Net After Tax Receipt" means the Present Value of a payment under this
Plan reduced by all taxes imposed on Optionee with respect thereto under Code
Sections 1, 3101 and 4999, determined by applying the highest marginal rate
under Code section 1 which applied to the Optionee's taxable income for the
immediately preceding taxable year; (ii) "Present Value" means the value
determined in accordance with Code Section 280G(d)(4); and (iii) "Reduced
Amount" means the smallest aggregate amount of all payments under this Plan
which (a) is less than the sum of all payments under this Plan and (b) results
in aggregate Net After Tax Receipts which are equal to or greater than the Net
After Tax Receipts which would result if the aggregate payments under this Plan
were any other amount less than the sum of all payments to be made under this
Plan.
ARTICLE 8
AGREEMENT BY OPTIONEE AND SECURITIES REGISTRATION
8.1 Agreement. If, in the opinion of counsel to the Company, such
action is necessary or desirable, no Options shall be granted to any Optionee
and no Option shall be exercisable and no shares of Common Stock will be
issuable under an Option, unless, at the time of grant or exercise, as
applicable, the Optionee (i) represents and warrants that he will acquire the
Common
14
<PAGE> 15
Stock for investment only and not for purposes of resale or distribution, and
(ii) makes such further representations and warranties as are deemed necessary
or desirable by counsel to the Company with regard to holding and resale of the
shares of Common Stock. The Optionee shall, upon the request of the Committee,
execute and deliver to the Company an agreement or affidavit to such effect.
Should the Committee have reasonable cause to believe that such Optionee did
not execute such agreement or affidavit in good faith, the Company shall not be
bound by the grant of the Option or by the exercise of the Option. All
certificates representing shares of Common Stock issued pursuant to the Plan
shall be marked with the following restrictive legend or similar legend, if
such marking, in the opinion of counsel to the Company, is necessary or
desirable:
The shares represented by this certificate [have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state] [and] [are held by an
"affiliate" (as such term is defined in Rule 144 promulgated
by the Securities and Exchange Commission under the
Securities Act of 1933, as amended) of the Corporation].
Accordingly, these shares may not be sold, hypothecated,
pledged or otherwise transferred except (i) pursuant to an
effective registration statement under the Securities Act of
1933, as amended, and any applicable securities laws or
regulations of any state with respect to such shares, (ii) in
accordance with Securities and Exchange Commission Rule 144,
or (iii) upon the issuance to the Corporation of a favorable
opinion of counsel or the submission to the Corporation of
such other evidence as may be satisfactory to the Corporation
that such proposed sale, assignment, encumbrance or other
transfer will not be in violation of the Securities Act of
1933, as amended, or any applicable securities laws of any
state or any rules or regulations thereunder. Any attempted
transfer of this certificate or the shares represented hereby
which is in violation of the preceding restrictions will not
be recognized by the Corporation, nor will any transferee be
recognized as the owner thereof by the Corporation.
If the Common Stock is (A) held by an Optionee who is not an "affiliate," as
that term is defined in Rule 144 of the 1933 Act, or who ceases to be an
"affiliate," or (B) registered under the 1933 Act and all applicable state
securities laws and regulations as provided in Section 8.2, the Committee, in
its discretion and with the advice of counsel, may dispense with or authorize
the removal of the restrictive legend set forth above or the portion thereof
which is inapplicable.
8.2 Registration. In the event that the Company in its sole
discretion shall deem it necessary or advisable to register under the 1933 Act
or any state securities laws or regulations, any shares of Common Stock with
respect to which Options have been granted hereunder, then the Company shall
take such action at its own expense before delivery of the certificates
representing such shares to an Optionee. In such event, and if the shares of
Common Stock of the Company shall be listed on any national securities exchange
or on NASDAQ at the time of
15
<PAGE> 16
the exercise of any Option, the Company shall make prompt application at its
own expense for the listing on such stock exchange or NASDAQ of the shares of
Common Stock to be issued.
8.3 Compliance with the Securities Law. No Option shall be
exercisable, no Common Stock shall be issued, no certificates for shares of
Common Stock shall be delivered, and no payment shall be made except in
compliance with all applicable federal and state laws and regulations
including, without limitation, withholding tax requirements and securities
laws, any listing agreement with any stock exchange to which the Company is a
party, and the rules of all domestic stock exchanges on which the Company's
shares of Common Stock may be listed. The Company shall have the right to rely
on an opinion of its counsel as to such compliance. Any certificates issued to
evidence Common Stock for which an Option is exercised may bear such legends
and statements as the Committee may deem advisable to assure compliance with
federal and state laws and regulations. No Option shall be exercisable, no
Common Stock shall be issued, no certificate for shares of Common Stock shall
be delivered, and no payment shall be made under this Plan until the Company
has obtained such consent or approval as the Committee may deem advisable from
regulatory bodies having jurisdiction over such matters.
8.4 Postponement of Exercise. The Committee may postpone any
exercise of an Option for such time as the Committee in its sole discretion may
deem necessary in order to permit the Company (i) to effect, amend or maintain
any necessary registration of the Plan or the shares of Common Stock issuable
upon the exercise of any Option under the securities laws; (ii) to permit any
action to be taken in order to (A) list such shares of Common Stock on an
exchange if shares of Common Stock are then listed on such exchange or (B)
comply with restrictions or regulations incident to the maintenance of a public
market for its shares of Common Stock, including any rules or regulations of
any exchange on which the shares of Common Stock are listed, or (iii) to
determine that such shares of Common Stock in the Plan are exempt from such
registration or that no action of the kind referred to in subsection (ii)(B)
above needs to be taken; and the Company shall not be obligated by virtue of
any terms and conditions of any Option Agreement or any provision of the Plan
to recognize the exercise of an Option or to sell or issue shares of Common
Stock in violation of the securities laws or the laws of any government having
jurisdiction thereof. Any such postponement shall not extend the term of the
Option and neither the Company nor its directors or officers shall have any
obligation or liability to any Optionee or to any other person with respect to
shares of Common Stock as to which the Option shall lapse because of such
postponement.
ARTICLE 9
EFFECTIVE DATE
The Plan shall be effective as of the Effective Date, and no Options
shall be granted hereunder prior to said date.
ARTICLE 10
AMENDMENT AND TERMINATION
10.1 Amendment and Termination By the Board. Subject to Section
10.2 below, the Board shall have the power at any time to add to, amend or
repeal any of the provisions of the
16
<PAGE> 17
Plan, to suspend the operation of the entire Plan or any of its provisions for
any period or periods or to terminate the Plan in whole or in part. In the
event of any such action, the Committee shall prepare written procedures which,
when the Board approves them, shall govern the administration of the Plan
resulting from such addition, amendment, repeal, suspension or termination.
10.2 Restrictions on Amendment and Termination. Notwithstanding the
provisions of Section 10.1 above, no addition, amendment, repeal, suspension or
termination shall adversely affect, in any way, the rights of the Optionees who
have outstanding Options without the consent of such Optionees.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Application of Funds. The proceeds the Company receives from
the sale of the Common Stock subject to the Options granted hereunder will be
used for general corporate purposes.
11.2 Notices. All notices or other communications by an Optionee to
the Committee pursuant to or in connection with the Plan shall be deemed to
have been duly given when received in the form the Committee specifies at the
location, or by the person, the Committee designates for the receipt thereof.
11.3 Term of Plan. Subject to the terms of Article 10, the Plan
shall terminate upon the later of (i) the complete exercise or lapse of the
last outstanding Option, or (ii) the last date upon which Options may be
granted hereunder.
11.4 Governing Law. The Plan shall be governed by and construed
in accordance with the laws of the State of Georgia.
11.5 Additional Provisions By Committee. The Option Agreements
authorized under the Plan may contain such other provisions, including, without
limitation, restrictions upon the exercise of an Option, as the Committee shall
deem advisable.
11.6 Plan Document Controls. In the event of any conflict
between the provisions of an Option Agreements and the Plan, the Plan shall
control.
11.7 Gender and Number. Wherever applicable, the masculine pronoun
shall include the feminine pronoun, and the singular shall include the plural.
11.8 Headings. The titles in this Plan are inserted for
convenience of reference; they constitute no part of the Plan and are not to be
considered in the construction hereof.
11.9 Legal References. Any references in this Plan to a provision
of law which is, subsequent to the Effective Date of this Plan, revised,
finalized or redesignated, shall automatically be deemed a reference to such
revised, finalized or redesignated provision of law.
17
<PAGE> 18
11.10 No Rights to Employment. Nothing contained in the Plan, or
any modification thereof, shall be construed to give any individual any rights
to employment with the Company or a Related Entity. Neither the adoption of
this Plan, its operation nor any Option Agreement shall in any way affect the
right and power of the Company or a Related Entity to terminate the employment
or service of any employee at any time with or without assigning a reason
therefor.
11.11 Unfunded Arrangement. The Plan shall not be funded, and except
for reserving a sufficient number of authorized shares of Common Stock to the
extent the law requires to meet the requirements of the Plan, the Company shall
not be required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any grant under the Plan. Any
liability of the Company to any person with respect to any grant of Options
under the Plan shall be based solely upon any contractual obligations that may
be created thereunder. No such obligation of the Company shall be deemed to be
secured by any pledge of or other encumbrance on any property of the Company.
11.12 Reservation of Shares. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of the Plan.
Additionally, the Company, during the term of this Plan, shall use its best
efforts to seek to obtain from appropriate regulatory agencies any requisite
authorizations needed in order to issue and to sell such numbers of shares of
Common Stock as shall be sufficient to satisfy the requirements of the Plan.
However, the inability of the Company to obtain from any such regulatory agency
the requisite authorizations the Company's counsel deems to be necessary for
the lawful issuance and sale of any shares of Common Stock hereunder, or the
inability of the Company to confirm to its satisfaction that any issuance and
sale of any shares of Common Stock hereunder will meet applicable legal
requirements, shall relieve the Company of any liability with respect to the
failure to issue or to sell such shares of Common Stock as to which such
requisite authority shall not have been obtained.
ADOPTED BY BOARD OF DIRECTORS OF THE COMPANY ON THE 17TH DAY OF FEBRUARY, 2000
18
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