<PAGE>
SECURITIES AND 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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1998.
Commission file number 000-22713
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OUTDOOR COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 38-3286430
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
512 TAYLOR STREET, CORINTH, MISSISSIPPI 38834
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 286-3334
---------------
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
----- -----
As of April 30, 1998 there were issued and outstanding 8,417.72 shares of
the registrant's Class A Common Stock, par value $0.01 per share, and 3,689.28
shares of the registrant's Class B Common Stock, par value $0.01 per share.
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at March 31,
1998 (unaudited) and June 30, 1997......................... 1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997 (unaudited)
and the Nine Months Ended March 31, 1998 and 1997
(unaudited)................................................ 3
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1998 and 1997 (unaudited)...... 4
Notes to Condensed Consolidated Financial Statements....... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 17
Item 2. Changes in Securities and Use of Proceeds.................. 17
Item 6. Exhibits and Reports on Form 8-K........................... 17
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
Assets (unaudited)
-------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,137,836 $ 1,712,827
Trade accounts receivable, less allowance for doubtful
accounts of $354,395 at March 31, 1998 and
$317,914 at June 30, 1997 6,613,323 7,253,391
Refundable income taxes 200,058 616,100
Prepaid rent expense 2,028,436 1,805,431
Other assets 1,283,560 978,023
Deferred income taxes 420,785 438,967
------------ ------------
Total current assets 11,683,998 12,804,739
------------ ------------
Property and equipment, net 61,021,474 55,786,503
Intangible assets, less accumulated amortization 83,091,162 72,239,682
Deferred financing costs (net of accumulated
amortization of $352,230 at March 31, 1998 and
$797,622 at June 30, 1997) 5,015,546 4,240,033
Other assets 418,378 605,899
------------ ------------
Total assets $161,230,558 $145,676,856
============ ============
</TABLE>
See accompnaying notes to condensed consolidated financial statements.
-1-
<PAGE>
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
Liabilities and Stockholders' Equity (Deficit) (unaudited)
----------------------------------------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 5,876,875 $ 5,876,875
Trade accounts payable 871,658 760,257
Income taxes payable - 615,418
Accrued salaries, wages and benefits 731,258 1,187,104
Accrued interest 1,274,954 541,895
Other accrued expenses 1,233,187 491,848
Deferred advertising revenues and non-compete income 386,913 405,500
------------ ------------
Total current liabilities 10,374,845 9,878,897
------------ ------------
Long-term debt:
Credit facility, excluding current installments 34,400,000 115,650,000
Senior subordinated notes 105,000,000 -
Subordinated debt - 22,425,000
Deferred income taxes 2,657,981 4,070,180
Preferred interests of a subsidiary 5,483,616 -
Accrued interest - 1,671,666
Deferred non-compete income, less current portion - 26,667
------------ ------------
Total liabilities 157,916,442 153,722,410
------------ ------------
Stockholders' equity (deficit):
Series A preferred stock, $0.01 par value. Authorized
300,000 shares; issued and outstanding 186,220.93
shares at March 31, 1998 (liquidation preference of
$20,018,750) 1,862 -
Undesignated preferred stock, $0.01 par value.
Authorized 4,700,000 shares; none issued and
outstanding at March 31, 1998 - -
Class A common stock, $0.01 par value. Authorized
10,000 shares; issued and outstanding 8,385.72
shares at March 31, 1998 and June 30, 1997 84 84
Class B common stock, $0.01 par value. Authorized
10,000 shares; issued and outstanding 3,689.28 shares
at March 31, 1998 and June 30, 1997 37 37
Additional paid-in capital 22,431,707 3,811,475
Accumulated deficit (19,119,574) (11,857,150)
------------ ------------
Total stockholders' equity (deficit) 3,314,116 (8,045,554)
------------ ------------
Commitments and contingencies
Total liabilities and stockholders' equity (deficit) $161,230,558 $145,676,856
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross revenues $14,634,688 $11,858,981 $45,165,228 $35,105,189
Less agency commissions 1,299,787 1,120,283 4,112,877 3,363,915
----------- ----------- ----------- -----------
Net revenues 13,334,901 10,738,698 41,052,351 31,741,274
----------- ----------- ----------- -----------
Operating expenses:
Direct operating expenses 4,646,236 3,717,651 13,826,106 10,330,816
Selling, general, and administrative 3,852,826 3,085,250 11,406,468 8,502,570
Depreciation and amortization 3,498,695 3,582,451 10,268,854 7,256,820
----------- ----------- ----------- -----------
Total operating expenses 11,997,757 10,385,352 35,501,428 26,090,206
----------- ----------- ----------- -----------
Operating income 1,337,144 353,346 5,550,923 5,651,068
Interest expense (3,260,773) (2,761,278) (9,635,629) (7,597,020)
Gain (loss) on disposal of equipment 7,082 (94,926) (81,420) (94,816)
Other income (expense), net (274,355) 71,003 (349,691) 147,365
Expenses written off related to proposed
equity offering - - (148,506) -
----------- ----------- ----------- -----------
Loss before income taxes and
extraordinary item (2,190,902) (2,431,855) (4,664,323) (1,893,403)
Income tax benefit (1,062,033) (649,601) (77,971) (439,605)
----------- ----------- ----------- -----------
Loss before extraordinary (1,128,869) (1,782,254) (4,586,352) (1,453,798)
item
Extraordinary loss from early
extinguishment of debt, net of
income tax benefit of $1,710,931 - - (2,676,072) -
----------- ----------- ----------- -----------
Net loss $(1,128,869) $(1,782,254) $(7,262,424) $(1,453,798)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION> Nine Months Ended
March 31,
-----------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Net cash provided by operating activities $ 6,897,966 $ 4,674,010
------------- ------------
Cash flows from investing activities:
Purchase of Jennings Outdoor, Inc. and Jennings Media
Services, LLC (14,159,837) -
Purchase of Skoglund Communications, Inc. and Skoglund
Communications of St. Cloud, Inc. - (21,246,850)
Purchase of Outdoor West of Tennessee - (11,802,444)
Purchase of other companies (6,690,124) (8,417,714)
Capital expenditures (4,616,771) (2,293,566)
Deferred acquisition costs (475,893) (1,478,222)
Proceeds from sale of equipment 87,444 -
------------- ------------
Net cash used in investing activities (25,855,181) (45,238,796)
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of senior subordinated notes 105,000,000 -
Borrowings under long-term debt agreement 41,050,000 52,300,000
Repayment of long-term debt (122,300,000) (7,100,000)
Deferred financing costs (5,367,776) (1,728,268)
Proceeds from issuance of subordinated notes - 325,000
Proceeds from issuance of common stock - 175,000
Payments on obligation under non-compete agreement - (100,000)
------------- ------------
Net cash provided by financing activities 18,382,224 43,871,732
------------- ------------
Net (decrease) increase in cash and cash equivalents (574,991) 3,306,946
Cash and cash equivalents at beginning of the period 1,712,827 1,259,441
------------- ------------
Cash and cash equivalents at end of the period $ 1,137,836 $ 4,566,387
============= ============
Supplemental cash flow disclosures:
Cash paid for interest $ 9,129,772 $ 5,917,804
Cash paid for income taxes 189,280 57,196
Supplemental noncash financing activities:
Preferred stock issued in exchange for subordinated
debt including accrued interest of $1,332,093 $ 18,622,093 $ -
Preferred interests issued in exchange for subordinated
debt including accrued interest of $348,616 5,483,616 -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Nine months ended March 31, 1998 and 1997
(Unaudited)
Basis of Presentation
- ---------------------
The accompanying unaudited condensed consolidated financial statements of
Outdoor Communications, Inc. and subsidiaries, (the Company) have been prepared
in conformity with generally accepted accounting principles and with the
instructions for Form 10-Q and Rule 10-01 of Regulation S-X as they apply to
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. All significant intercompany transactions
have been eliminated in consolidation. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Special Financial Report on Form 10-K
for the fiscal year ended June 30, 1997. Certain 1997 financial statement
amounts have been reclassified to conform to the 1998 presentation.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of financial position
and results of operations have been included. The operating results for the
nine month period ended March 31, 1998 are not necessarily indicative of the
results to be expected for the year ending June 30, 1998.
Property and Equipment
- ----------------------
Major categories of property, plant, and equipment at March 31, 1998 and June
30, 1997 were as follows:
<TABLE>
<CAPTION>
Estimated March 31, June 30,
Life (Years) 1998 1997
------------ ----------- -----------
(unaudited)
<S> <C> <C> <C>
Land -- $ 1,670,626 $ 1,610,126
Building and improvements 10-25 1,481,293 1,469,852
Advertising structures 8-15 66,808,650 57,910,710
Leasehold improvements 2-20 1,083,734 872,674
Equipment 3-10 4,938,673 4,317,355
Construction in progress -- 368,541 102,666
----------- -----------
76,351,517 66,283,383
Less accumulated depreciation 15,330,043 10,496,880
----------- -----------
Net property and equipment $61,021,474 $55,786,503
=========== ===========
</TABLE>
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
Intangible Assets
- ------------------
Intangible assets at March 31, 1998 and June 30, 1997 consist of the following:
<TABLE>
<CAPTION>
Estimated March 31, June 30,
Life (Years) 1998 1997
------------ ----------- -----------
(unaudited)
<S> <C> <C> <C>
Covenants not to compete 4-10 $ 8,780,667 $ 8,495,667
Goodwill 20-25 60,794,046 46,619,981
Customer lists 8 28,218,644 26,833,154
----------- -----------
97,793,357 81,948,802
Less accumulated amortization 14,702,195 9,709,120
----------- -----------
$83,091,162 $72,239,682
=========== ===========
</TABLE>
Public Offering of Senior Subordinated Notes
- --------------------------------------------
On August 15, 1997, the Company completed a Public Note Offering (the Offering)
of $105 million aggregate principal amount of 9.25% subordinated notes due
August 15, 2007 (the Notes). Net proceeds of the Offering, after deduction of
associated expenses, were approximately $100.3 million. Accrued interest on the
Notes is payable in semi-annual installments on each February 15 and August 15,
commencing February 15, 1998. The Notes are redeemable at the Company's option,
in whole or in part, at any time on or after August 15, 2002 in accordance with
a prepayment premium as described in the indenture governing the Notes. Other
prepayments may occur prior to August 15, 2000 based on certain limitations as
described in the indenture governing the Notes.
The Notes are fully and unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally by all of the Company's direct and indirect subsidiaries. Separate
financial statements of the Company's subsidiaries have not been presented
because (a) such guarantor subsidiaries have jointly and severally guaranteed
the notes on a full and unconditional basis, (b) the aggregate assets,
liabilities, earnings and equity of the guarantor subsidiaries are substantially
equivalent to the assets, liabilities, earnings and equity of the parent on a
consolidated basis and (c) the Company has not presented separate financial
statements and other disclosures concerning the subsidiary guarantors because
management has determined that such information is not material to investors.
New Credit Facility
- -------------------
Simultaneous to the Offering, the Company entered into a new $150 million senior
credit facility (New Credit Facility) with The Chase Manhattan Bank and a
syndicate consisting of various other financial institutions (collectively, the
New Bank). The New Credit Facility consists of a Revolving Loan Commitment (the
New Revolver) of $110 million and a Term Loan Commitment for $40 million
(collectively the New Borrowings). The New Revolver matures on December 21,
2004 and the Term Loan Commitment matures on June 30, 2005. The New Credit
Facility provides for annual reductions in the New Revolver and amortization of
the term loan facility. Collateral includes a first lien on all tangible and
intangible property of the Company, assignment of all leases, and guaranties by
the Company's subsidiaries.
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
The New Credit Facility enables the Company to borrow funds at a rate equal to
2.25% plus LIBOR or 1.0% over the New Bank's base rate, as defined. The New
Credit Facility also enables the Company to realize a lower interest rate if its
leverage ratio meets certain levels as stipulated in the Credit Facility. For
the quarter ended March 31, 1998, the average interest rate under the New Credit
Facility was 8.04%. Accrued interest is payable in quarterly installments on
March 31, June 30, September 30, and December 31. The Credit Facility also
requires payment of a commitment fee of 0.375% per annum, which may be reduced
based on the Company's leverage ratio, on the daily average aggregate unutilized
commitment from the Bank. Accrued commitment fees are due quarterly on March
31, June 30, September 30, and December 31.
The New Credit Facility contains certain warranties and affirmative covenants
that must be complied with on a continuing basis. In addition, the New Credit
Facility contains certain restrictive covenants which, among other things,
restrict the Company from incurring additional debt and liens on assets, limits
the amount of capital expenditures during any fiscal year, and prohibits the
consolidation, merger or sale of assets, or issuance of common stock except as
permitted by the New Credit Facility. The New Credit Facility also requires the
Company to maintain certain financial ratios.
Under the terms of the New Credit Facility, the subsidiaries are restricted in
their ability to make distributions to the Company to distributions necessary to
enable the Company to make interest payments due under the New Credit Facility
and make federal income tax payments. The indenture governing the Notes
provides that the Company will not, and will not permit any of the subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of the subsidiaries to make distributions to the Company with certain
limited exceptions including the restrictions under the New Credit Facility
described in the preceding sentence.
As of March 31, 1998, borrowings under the New Revolver totaled $34.4 million.
The Company has the right to prepay the Borrowings in whole or in part, without
premium or penalty, as stipulated in the New Credit Facility.
Preferred Stock
- ---------------
In July 1997, the Company entered into an agreement, effective June 30, 1997,
with the Company's Series A and B subordinated debt holders to exchange such
notes and accrued and unpaid interest through June 30, 1997 thereon, for Series
A preferred stock and/or preferred interest in OCIH LLC (OCIH) (the Debt
Conversion).
-7-
<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
The Board of Directors has authorized 5,000,000 shares of preferred stock, par
value $0.01 per share, of which 300,000 shares are designated Series A (Series A
Preferred Stock) and 4,700,000 shares are undesignated (Undesignated Preferred
Stock). Upon the closing of the Public Note Offering on August 15, 1997,
186,220.93 shares of Series A Preferred Stock were issued in exchange for
subordinated notes and the related unpaid and accrued interest thereon through
June 30, 1997, totaling $17,290,000 and $1,332,093, respectively, resulting in a
corresponding increase in stockholders' equity of $18,622,093. Additionally,
$5,135,000 of subordinated notes and $348,616 of unpaid and accrued interest
thereon through June 30, 1997 were assigned by certain subordinated note holders
to OCIH in exchange for all of the preferred interests of OCIH.
No dividends will be declared or paid on the common stock during any year unless
the full amount of accrued dividends on the Series A Preferred Stock has been
paid. Upon declaration, the holders of the Series A Preferred Stock are
entitled to cumulative cash dividends of $10 per annum, per share.
In the event of liquidation or dissolution of the Company, the holders of the
Series A Preferred Stock are entitled to receive a preferential amount equal to
$100 per share of the issued and outstanding Series A Preferred Stock and a
further preferential amount equal to all declared and unpaid dividends thereon.
The liquidation amount of $20.0 million as of March 31, 1998 includes $1.4
million of cumulative preferred dividends. This liquidation value will be paid
before the payment or distribution of any assets of the Company to the holders
of the common stock.
Abandoned Equity Offering
- -------------------------
The Company abandoned plans for an initial public offering of its common stock
during July 1997. As a result, the Company has recognized approximately
$149,000 of expense in the first quarter of fiscal year 1998, due to the write
off of costs incurred related to the abandoned offering.
Extraordinary Loss
- ------------------
Effective August 15, 1997, the proceeds from the Offering were used for the
early extinguishment of the outstanding debt related to the prior credit
facility. As a result, deferred financing fees of $4,387,003 were written off
and have been recorded as an extraordinary loss.
Earnings Per Share
- ------------------
An earnings per share calculation has not been presented because the Company is
closely held by a private investor group and, accordingly, earnings per share is
not required or meaningful.
Acquisitions
- ------------
On October 2, 1997, the Company acquired the stock of Jennings Outdoor, Inc. and
the assets of Jennings Media Services, L.L.C. for a cash payment of $14.2
million of which $14 million was financed through the New Credit Facility. As a
result of this acquisition, the Company acquired approximately 740 display faces
in Alabama. The acquisitions have been accounted for by the purchase method and
the unaudited condensed consolidated financial statements include the operating
results of each business from the date of acquisition.
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
The Company also consummated five smaller acquisitions consisting of
approximately 349 display faces during the nine months ended March 31, 1998 for
aggregate cash payments of $6.7 million. The acquisitions have been accounted
for using the purchase method.
New Accounting Pronouncements
- -----------------------------
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income",
which will require the Company to disclose, in financial statement format, all
non-owner changes in equity. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Adoption of this standard is not expected to
have a material impact on disclosures in the Company's financial statements.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information", which established a new accounting principle for
reporting information about operating segments in annual financial statements
and interim financial reports. It also established standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997.
The Company is currently evaluating the applicability of this standard.
However, the Company does not expect a material impact on disclosures in the
Company's financial statements.
Commitments and Contingencies
- -----------------------------
In July 1997, the Company and a prospective seller agreed to terminate a
contract for the Company to purchase the assets of an outdoor advertising
company. The Company tendered a deposit in the form of a letter of credit in the
amount of $1.0 million in connection with the proposed purchase. After
termination of the purchase contract, the Company and the prospective seller
each made claims to the deposit. Pursuant to the contract, the prospective
seller filed for arbitration before the Center for Public Resources seeking an
order permitting it to draw upon the letter of credit. In March 1998, the
Company and prospective seller reached a settlement agreement pursuant to which
the Company paid to the prospective seller $0.5 million in satisfaction of all
claims. This payment is reflected in other expenses in the condensed
consolidated statements of operations for the three and nine month periods ended
March 31, 1998.
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<PAGE>
OUTDOOR COMMUNICATIONS, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
Long-Term Incentive Compensation Plan
- -------------------------------------
In February 1998, the Company adopted the 1998 Stock Option and Incentive Plan.
As part of the plan, stock options on 621 shares of common stock were granted to
senior management with exercise prices ranging from $6,023 to $6,626 per share.
The options vest over a five year period with none being currently exercisable.
The Company accounts for its stock option plan under the provisions of Statement
of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense, over the vesting
period, the fair value of all stock-based awards on the date of grant. SFAS No.
123 also allows entities to continue to apply the provisions of APB Opinion No.
25 under which, compensation expense is recorded on the date of grant only if
the current market price of the underlying stock exceeds the exercise price.
The Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosure provisions of SFAS No. 123.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain "forward-looking" information (as
defined in the Private Securities Litigation Reform Act of 1995). The words
"believe," "expect," "anticipate," "intend," "estimate," "assume" and other
similar expressions which are predictions of or indicate future events and
trends and which do not relate to historical matters identify forward-looking
statements. Reliance should not be placed on forward-looking statements because
they involve known and unknown risks, uncertainties and other factors, which are
in some cases beyond the control of the Company and may cause the actual
results, performance or achievements of the Company to differ materially from
anticipated future results, performance or achievements expressed or implied by
such forward-looking statements.
For further discussion identifying other important factors that could cause
actual results to differ materially from those anticipated in forward-looking
statements, see the Company's SEC filings, particularly the "Risk Factors"
discussion in the Company's Registration Statement on Form S-1 (No. 333-28489)
which was declared effective on August 12, 1997. Such factors include risks to
the Company presented by financial leverage, government regulation with respect
to zoning, restrictions on outdoor advertising by the tobacco industry,
competition and general economic conditions.
The Company was formed in April 1996 to acquire the operations of its
subsidiaries OCI (N) Corp. ("OCI North") and OCI (S) Corp. ("OCI South").
Unless otherwise indicated, references to the Company in the following
discussion refer to the consolidated operations of the Company and its
subsidiaries.
RESULTS OF OPERATIONS
Nine Months Ended March 31, 1998 Compared To The Nine Months Ended March 31,
1997.
The Company's net revenues increased $9.4 million, or 29.3%, to $41.1
million for the nine months ended March 31, 1998 compared to $31.7 million in
net revenues for the nine months ended March 31, 1997. This increase was
primarily due to revenues from acquisitions completed during the twelve-month
period ended March 31, 1998 and increased rates. Occupancy levels declined
slightly compared to the same period in 1997, as anticipated, due in part to the
absence of revenues related to the 1996 Olympics in the Company's Georgia and
Birmingham divisions.
The Company's direct operating expenses increased $3.5 million, or 33.8%,
to $13.8 million for the nine months ended March 31, 1998 compared to $10.3
million in direct operating expenses for the nine months ended March 31, 1997.
Operating expenses attributed to the Skoglund companies, acquired by the Company
on October 31, 1996, Outdoor West of Tennessee, acquired by the Company on March
31, 1997 and the Jennings companies,
-11-
<PAGE>
acquired by the Company on October 1, 1997, accounted for $2.7 million of the
increase in direct operating expenses. The remaining $0.8 million of the
increase was directly related to operating expenses associated with in-market
acquisitions and normal inflationary cost increases.
The Company's selling, general and administrative expenses increased $2.9
million, or 34.2%, to $11.4 million for the nine months ended March 31, 1998
compared to $8.5 million in selling, general and administrative expenses for the
nine months ended March 31, 1997. Increased selling, general and administrative
expenses attributable to the Skoglund companies, Outdoor West of Tennessee and
the Jennings companies, accounted for $1.6 million of this increase. The
remaining $1.3 million of the increase was due to costs generated by in-market
acquisitions, increases in corporate overhead and normal inflationary cost
increases.
The Company's depreciation and amortization expense increased $3.0 million,
or 41.5%, to $10.3 million for the nine months ended March 31, 1998 compared to
$7.3 million in depreciation and amortization expense for the nine months ended
March 31, 1997. This increase was a result of the acquisitions previously
discussed which were completed in the last twelve months.
The Company's operating expenses, excluding depreciation and amortization,
as a percentage of net revenues for the nine months ended March 31, 1998
increased to 61.5% compared to operating expenses, excluding depreciation and
amortization, as a percentage of net revenues of 59.3% for the nine months ended
March 31, 1997.
The Company's interest expense increased $2.0 million, or 26.8%, to $9.6
million for the nine months ended March 31, 1998 compared to $7.6 million in
interest expense for the nine months ended March 31, 1997. The increase is
attributable to debt incurred as a result of acquisitions completed during the
twelve months ending March 31, 1998.
During the nine months ended March 31, 1998 the Company recognized an
extraordinary loss of $2.7 million, net of an income tax benefit of $1.7
million. This loss was due to the write-off of deferred financing costs related
to its previous credit facility which was refinanced in August of 1997.
As a result of the foregoing factors, the Company's net loss for the nine
months ended March 31, 1998 was $7.3 million as compared to $1.5 million of net
loss for the nine months ended March 31, 1997.
-12-
<PAGE>
Three Months Ended March 31, 1998 Compared To The Three Months Ended March 31,
1997
The Company's net revenues increased $2.6 million, or 24.2%, to $13.3
million for the three months ended March 31, 1998 compared to $10.7 million in
net revenues for the three months ended March 31, 1997. This increase was
primarily due to revenues from acquisitions completed during the twelve-month
period ended March 31, 1998.
The Company's direct operating expenses increased $0.9 million, or 25.0%,
to $4.6 million for the three months ended March 31, 1998 compared to $3.7
million in direct operating expenses for the three months ended March 31, 1997.
Operating expenses attributed to Outdoor West of Tennessee and the Jennings
companies, accounted for $0.7 million of the increase in direct operating
expenses. The remaining $0.2 million of the increase was directly related to
operating expenses associated with in-market acquisitions and normal
inflationary cost increases.
The Company's selling, general and administrative expenses increased $0.8
million, or 24.9%, to $3.9 million for the three months ended March 31, 1998
compared to $3.1 million in selling, general and administrative expenses for the
three months ended March 31, 1997. Increased selling, general and
administrative expenses attributable to Outdoor West of Tennessee and the
Jennings companies, accounted for $0.4 million of this increase. The remaining
$0.4 million of the increase was due to costs generated by in-market
acquisitions, increases in corporate overhead and normal inflationary cost
increases.
The Company's depreciation and amortization expense decreased $0.1 million,
or 2.3%, to $3.5 million for the three months ended March 31, 1998 compared to
$3.6 million in depreciation and amortization expense for the three months ended
March 31, 1997. This decrease was due primarily to longer amortization lives of
deferred financing costs associated with the Senior Subordinated Notes.
The Company's operating expenses, excluding depreciation and amortization,
as a percentage of net revenues for the three months ended March 31, 1998
increased to 63.7% compared to operating expenses, excluding depreciation and
amortization, as a percentage of net revenues of 63.3% for the three months
ended March 31, 1997.
The Company's interest expense increased $0.5 million, or 18.1%, to $3.3
million for the three months ended March 31, 1998 compared to $2.8 million in
interest expense for the three months ended March 31, 1997. The increase was
due to debt incurred as a result of acquisitions completed during the twelve
months ending March 31, 1998.
As a result of the foregoing factors, the Company's net loss for the three
months ended March 31, 1998 was $1.1 million as compared to $1.8 million of net
loss for the three months ended March 31, 1997.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its working capital requirements
with cash from operations and revolving credit borrowings. Its acquisitions
have been financed primarily with borrowed funds.
On August 15, 1997, the Company successfully completed a public offering
(the "Offering") of $105,000,000 aggregate principal amount of its 9 1/4% Senior
Subordinated Notes due 2007 (the "Notes") and entered into a new secured credit
facility (the "New Credit Facility") pursuant to which the Company may borrow up
to $150 million. Net proceeds to the Company, after underwriting discounts,
from the Offering totaled $100.3 million. In addition, holders of the Company's
subordinated notes exchanged such notes, together with accrued but unpaid
interest thereon, for shares of the Company's Series A Preferred Stock, par
value $0.01 per share, or Series A Preferred Interests of the Company's OCIH LLC
subsidiary. The proceeds from the Financing Plan were used by the Company to
repay all outstanding amounts under its then-existing facility.
The New Credit Facility consists of an immediately available revolving line
of credit facility providing for borrowings of up to $110.0 million and a $40.0
million term loan facility that, upon the request of the Company, will become
available subject to the approval of the lenders under the New Credit Facility.
At March 31, 1998, the outstanding borrowings under the New Credit Facility were
$34.4 million. The New Credit Facility is secured by all of the assets and
capital stock of OCI North, OCI South and OCIH LLC. Permitted borrowings under
the New Credit Facility are subject to various conditions, including the
attainment of certain performance measures by the Company.
The Company's growth since its formation in April 1996 has been facilitated
by strategic acquisitions that have substantially increased the Company's
inventory of advertising display faces. The Company currently operates
approximately 14,700 advertising displays in 12 midwestern and southeastern
states. The Company intends to continue its growth by pursuing an aggressive
acquisition strategy emphasizing acquisitions in new markets as well as those
currently served by the Company. In the past, its acquisitions have been funded
by borrowings under its credit facilities. To finance future acquisitions, the
Company will likely be required to borrow under the New Credit Facility. In
addition, the Company may require additional debt or equity financing. There
can be no assurance that such additional sources of funding will be available on
terms acceptable to the Company.
The Company's primary sources of cash are net cash generated from operating
activities and borrowings under the New Credit Facility. The Company's net cash
provided from operations increased $2.2 million, or 47.6%, to $6.9 million for
the nine months ended March 31, 1998 compared to $4.7 million for the nine
months ended March 31, 1997. Net cash used in investing activities was $25.9
million for the nine months ended March 31, 1998, resulting primarily from
acquisitions and capital expenditures. Net cash provided by financing activities
was $18.4 million for the nine months ended March 31, 1998, resulting primarily
from net borrowings under the New Credit Facility and the Notes.
-14-
<PAGE>
The Company made capital expenditures of $4.6 million during the nine
months ended March 31, 1998 compared to $2.3 million during the nine months
ended March 31, 1997.
Under the terms of the New Credit Facility, the Subsidiaries are restricted
in their ability to make distributions to the Company to distributions necessary
to enable the Company to make interest payments due under the Notes and tax
payments. The indenture pursuant to which the Notes were issued (the
"Indenture") provides that the Company will not, and will not permit any of its
subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of the Company's subsidiaries to make distributions to the
Company with certain limited exceptions including the restrictions under the New
Credit Facility described in the preceding sentence. The agreement governing
the New Credit Facility contains a number of covenants that are more restrictive
than those contained in the Indenture, including covenants requiring the Company
to maintain certain financial ratios that become more restrictive over time.
The Company believes that its cash from operations, together with available
borrowings under the New Credit Facility, will be sufficient to satisfy its cash
requirements, including anticipated capital expenditures, for the foreseeable
future. However, in the event that cash from operations, together with available
funds under the New Credit Facility, are insufficient to satisfy cash
requirements, the Company may require additional indebtedness to finance its
operations including, without limitation, additional acquisitions. There can be
no assurance that such additional debt will be available or that the Company
will be able to incur such additional debt.
-15-
<PAGE>
REGULATION OF TOBACCO ADVERTISING
In June 1997, it was reported that certain cigarette manufacturers who are
defendants in numerous class-action suits throughout the United States have
reached agreement with the Attorneys General of various states for an out of
court settlement with respect to such suits. The settlement is subject to
various conditions including approval and implementing legislation by the
federal government. A reduction in outdoor advertising by the tobacco industry
would cause an immediate reduction in the Company's direct revenue from such
advertisers at least in the immediate term following the imposition of such ban
while alternate sources of advertising are secured. Such ban would also increase
the available space on the existing inventory of billboards in the outdoor
advertising industry. This could in turn result in a reduction of outdoor
advertising rates in each of the Company's outdoor advertising markets or limit
the ability of industry participants to increase rates for some period of time.
Accordingly, there can be no assurance that the Company will immediately replace
tobacco industry advertising revenue in the event of a total ban of tobacco
advertising on outdoor billboards and signs and the consequences of such ban
could have a material adverse affect on the Company.
In addition, the State of Mississippi has entered into a separate
settlement of litigation with the tobacco industry. This settlement is not
conditioned on federal government approval and provides for the elimination of
all outdoor advertising of tobacco products by February 1998 in Mississippi.
The Company operates approximately 600 outdoor advertising displays in markets
in Mississippi and approximately $0.3 million of its approximately $3.7 million
in net revenues in Mississippi for the fiscal year ended June 30, 1997 were
attributable to tobacco advertising. Further, the settlement of tobacco-related
claims and litigation in other jurisdictions may also adversely affect outdoor
advertising revenues; however, the Company does not believe that the settlement
will have a material adverse effect on the financial condition or operations of
the Company.
INFLATION
In the last three years, inflation has not had a significant impact on the
Company.
-16-
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 1997, the Company and a prospective seller agreed to terminate a
contract for the Company to purchase the assets of an outdoor advertising
company. The Company tendered a deposit in the form of a letter of credit in
the amount of $1.0 million in connection with the proposed purchase. After
termination of the purchase contract, the Company and the prospective seller
each made claims to the deposit. Pursuant to the contract, the prospective
seller filed for arbitration before the Center for Public Resources seeking an
order permitting it to draw upon the letter of credit. In March 1998, the
Company and prospective seller reached a settlement agreement pursuant to which
the Company paid to the prospective seller $0.5 million in satisfaction of all
claims.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In February 1998, the Company issued options to purchase 621 shares of
Common Stock to employees of the Company pursuant to the Company's 1998 Stock
Option and Incentive Plan. The Company believes that such issuances are exempt
from the registration requirements of the Securities Act by reason of Rule 701
promulgated thereunder because the issuance of the options described was
pursuant to a written compensatory benefit plan of the Company, a copy of which
was given to each participant in the plan, and the aggregate offering price did
not exceed the limit prescribed by Rule 701.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
--------
3.1 Amended and Restated Certificates of Incorporation of the
Company (1)
3.2 By-laws of the Company (1)
-17-
<PAGE>
10.1 Outdoor Communications, Inc. 1998 Stock Option and
Incentive Plan
27.1 Financial Data Schedule
b. Reports on Form 8-K: No reports on Form 8-K were filed by the
-------------------
Company during the period covered by this report.
---------------
(1) Incorporated by reference to the relevant exhibit to the
Company's Registration Statement on Form S-1 (333-28489) as
declared effective by the Commission on August 12, 1997.
-18-
<PAGE>
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.
OUTDOOR COMMUNICATIONS, INC.
May 14, 1998 /s/ John C Stanley IV
---------------------
John C Stanley IV
Chairman and Chief Executive Officer
May 14, 1998 /s/ Ricky W. Thomas
-------------------
Ricky W. Thomas
Chief Financial Officer and Treasurer
(Principal Accounting Officer)
<PAGE>
Exhibit Index
-------------
EXHIBIT NUMBER DESCRIPTION
- -----------------------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of the
Company (1)
3.2 By-laws of the Company (1)
10.1 Outdoor Communications, Inc. 1998 Stock Option and
Incentive Plan
27 Financial Data Schedule
- --------------
(1) Incorporated by reference to the relevant exhibit to the Company's
Registration Statement on Form S-1 (333-28489) as declared
effective by the Commission on August 12, 1997.
<PAGE>
Exhibit 10.1
OUTDOOR COMMUNICATIONS, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
----------------------------------------
The name of the plan is the Outdoor Communications, Inc. 1998 Stock Option
and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, Directors and other key persons (including
consultants) of Outdoor Communications, Inc. (the "Company") and its
Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Class A Common Stock" means the Class A Common Stock, par value $.01 per
share, of the Company.
"Class B Common Stock" means the Class B Common Stock, par value $.01 per
share, of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Deferred Stock Award" means Awards granted pursuant to Section 8.
<PAGE>
"Dividend Equivalent Right" means Awards granted pursuant to Section 11.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 18.
"Fair Market Value" of the Stock on any given date means the fair market
value of the Stock determined in good faith by the Administrator; provided,
however, that (i) if the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
Fair Market Value on any given date shall not be less than the average of the
highest bid and lowest asked prices of the Stock reported for such date or, if
no bid and asked prices were reported for such date, for the last day preceding
such date for which such prices were reported, or (ii) if the Stock is admitted
to trading on a national securities exchange or the NASDAQ National Market
System, the Fair Market Value on any date shall not be less than the closing
price reported for the Stock on such exchange or system for such date or, if no
sales were reported for such date, for the last date preceding the date for such
a sale was reported. Notwithstanding the foregoing, the Fair Market Value on
the first day of the Company's initial public offering of Stock shall be the
initial public offering price as set forth in the final prospectus for the
Company's initial public offering.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means Awards granted pursuant to Section 10.
"Restricted Stock Award" means Awards granted pursuant to Section 7.
"Stock" means Class A Common Stock subject to adjustments pursuant to
Section 3 or other authorized capital stock of the Company into which shares of
Class A Common Stock and Class B Common Stock are convertible or converted.
"Stock Appreciation Right" means any Award granted pursuant to Section 6.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the
2
<PAGE>
corporations or entities (other than the last corporation or entity in the
unbroken chain) owns stock or other interests possessing 50 percent or more of
the economic interest or the total combined voting power of all classes of stock
or other interests in one of the other corporations or entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 9.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
---------------------------------------------------------
PARTICIPANTS AND DETERMINE AWARDS
---------------------------------
(a) Committee. The Plan shall be administered by either the Board or a
---------
committee of not less than two Independent Directors (in either case, the
"Administrator"). On and after the date the Stock is first admitted to trading
on a national securities exchange or the NASDAQ National Market System, each
member of the Committee shall be a "non-employee director" within the meaning of
Rule 16b-3(b)(3)(i) promulgated under the Act or any successor definition under
said rule, and on and after the date the Company is first subject to the
provisions of Section 162(m) of the Code with respect to grants made or
compensation earned under the Plan, each member of the Committee shall be an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
(b) Powers of Administrator. The Administrator shall have the power and
-----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be
granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock
Awards, Performance Share Awards and Dividend Equivalent Rights, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award;
3
<PAGE>
(vi) subject to the provisions of Section 5(a)(ii), to extend at any
time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under
what circumstances distribution or the receipt of Stock and other amounts
payable with respect to an Award shall be deferred either automatically or
at the election of the participant and whether and to what extent the
Company shall pay or credit amounts constituting interest (at rates
determined by the Administrator) or dividends or deemed dividends on such
deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Administrator, in its
---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Administrator
shall include a limitation as to the amount of Awards that may be granted during
the period of the delegation and shall contain guidelines as to the
determination of the exercise price of any Option, the conversion ratio or price
of other Awards and the vesting criteria. The Administrator may revoke or amend
the terms of a delegation at any time but such action shall not invalidate any
prior actions of the Administrator's delegate or delegates that were consistent
with the terms of the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
----------------------------------------------------
(a) Stock Issuable. The maximum number of shares of Stock reserved and
--------------
available for issuance under the Plan shall be 1,328 shares; provided that not
more than 300 of the shares shall be issued in the form of Unrestricted Stock
Awards, Restricted Stock Awards, or Performance Share Awards. For purposes of
this limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan. Subject to such overall
limitation, shares of Stock may be issued up to such maximum number pursuant to
any type or types of Award; provided, however, that on and after the date the
Company is first subject to the provisions of
4
<PAGE>
Section 162(m) of the Code with respect to grants made or compensation earned
under the Plan, Stock Options or Stock Appreciation Rights with respect to no
more than 300 of the shares of Stock may be granted to any one individual
participant during any one calendar year period. The shares available for
issuance under the Plan may be authorized but unissued shares of Stock or shares
of Stock reacquired by the Company and held in its treasury.
(b) Changes in Stock. If, as a result of any reorganization,
----------------
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options or Stock Appreciation Rights that can be
granted to any one individual participant, (iii) the number and kind of shares
or other securities subject to any then outstanding Awards under the Plan, and
(iv) the price for each share subject to any then outstanding Stock Options and
Stock Appreciation Rights under the Plan, without changing the aggregate
exercise price (i.e., the exercise price multiplied by the number of Stock
Options and Stock Appreciation Rights) as to which such Stock Options and Stock
Appreciation Rights remain exercisable. The adjustment by the Administrator
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan resulting from any such adjustment, but the Administrator
in its discretion may make a cash payment in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan.
(c) Mergers. In contemplation of and subject to (i) the dissolution or
-------
liquidation of the Company, (ii) a reorganization, merger, consolidation or
other business combination in which the Company is acquired by another entity
(other than a holding company formed by the Company) or in which the Company is
not the surviving entity, (iii) the sale of all or substantially all of the
assets of the Company to another entity, or (iv) the exchange of outstanding
shares of Stock for securities of an unrelated corporation or business entity
(each, a "Transaction"), the Board, or the board of directors of any corporation
assuming the obligations of the Company, may, in its discretion, take any one or
more of the following actions, as to outstanding Awards: (i) provide that such
Awards shall be assumed or equivalent awards shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), and/or (ii) upon
written notice to the participants, provide that all Awards will terminate
immediately prior to the consummation of
5
<PAGE>
the Transaction. In the event that, pursuant to clause (ii) above, Awards will
terminate immediately prior to the consummation of the Transaction, all vested
Awards, other than Stock Options and Stock Appreciation Rights, shall be fully
settled in cash or in kind at such appropriate consideration as determined by
the Administrator in its sole discretion after taking into account the
consideration payable per share of Stock pursuant to the business combination
(the "Transaction Price"), and all vested Stock Options and vested Stock
Appreciation Rights shall be fully settled, in cash or in kind, in an amount
equal to the difference between (A) the Transaction Price times the number of
shares of Stock subject to such outstanding Stock Options and Stock Appreciation
Rights (to the extent then exercisable at prices not in excess of the
Transaction Price) and (B) the aggregate exercise price of all such outstanding
Stock Options and Stock Appreciation Rights. Notwithstanding the foregoing,
immediately prior to the closing of any Transaction, each participant in the
Plan shall be permitted, within a specified period determined by the
Administrator prior to the consummation of the Transaction, to exercise one
hundred percent (100%) of all outstanding Stock Options and Stock Appreciation
Rights, whether then vested, unvested, exercisable or not exercisable, subject
to the consummation of the Transaction.
(d) Substitute Awards. The Administrator may grant Awards under the Plan
-----------------
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
-----------
Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company and its Subsidiaries as are selected from time to
time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
-------------
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a Non-
Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after the date
which is ten years from the date the Plan is approved by the Board.
6
<PAGE>
(a) Grant of Stock Options. Stock Options granted pursuant to this Section
----------------------
5 shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Administrator shall deem desirable. If the Administrator so determines,
Stock Options may be granted in lieu of cash compensation at the participant's
election, subject to such terms and conditions as the Administrator may
establish, as well as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock
--------------
covered by a Stock Option granted pursuant to this Section 5 shall be
determined by the Administrator at the time of grant but shall not be less
than 100 percent of the Fair Market Value on the date of grant in the case
of Incentive Stock Options, or 85 percent of the Fair Market Value on the
date of grant, in the case of Non-Qualified Stock Options. If an employee
owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10 percent of the combined voting power of
all classes of stock of the Company or any parent or subsidiary corporation
and an Incentive Stock Option is granted to such employee, the option price
of such Incentive Stock Option shall be not less than 110 percent of the
Fair Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
-----------
the Administrator, but no Incentive Stock Option shall be exercisable more
than ten years after the date the option is granted. If an employee owns or
is deemed to own (by reason of the attribution rules of Section 424(d) of
the Code) more than 10 percent of the combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation and an
Incentive Stock Option is granted to such employee, the term of such option
shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
---------------------------------------
become exercisable at such time or times, whether or not in installments,
as shall be determined by the Administrator at or after the grant date;
provided, however, that Stock Options granted in lieu of compensation shall
be exercisable in full as of the grant date. The Administrator may at any
time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
------------------
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods to the extent provided in the
Option Award agreement, provided, however, that methods (B) and (C) shall
only be available subsequent to the date the Stock is first admitted to
trading on a national securities exchange or the NASDAQ National Market
System:
7
<PAGE>
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been beneficially
owned by the optionee for at least six months, if permitted by the
Administrator in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company for the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Administrator shall prescribe as a condition of such payment
procedure.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(v) Annual Limit on Incentive Stock Options. To the extent required
---------------------------------------
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Reload Options. At the discretion of the Administrator, Options
--------------
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the number delivered to exercise the original Option with an Option term
equal to the remainder of the original Option term unless the Administrator
otherwise determines in the Award agreement for the original Option grant.
8
<PAGE>
(c) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Notwithstanding the foregoing, the
Administrator, in its sole discretion, may provide in the Award agreement
regarding a given Option that the optionee may transfer, without consideration
for the transfer, his Non-Qualified Stock Options to members of his immediate
family, to trusts for the benefit of such family members, or to partnerships in
which such family members are the only partners, provided that the transferee
agrees in writing with the Company to be bound by all of the terms and
conditions of this Plan and the applicable Option.
(d) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement, or subject to Section 14 below, in writing after
the Award agreement is issued, an optionee's rights in all Stock Options shall
automatically terminate upon the participant's termination of employment (or
cessation of business relationship) with the Company and its Subsidiaries for
any reason.
SECTION 6. STOCK APPRECIATION RIGHTS.
-------------------------
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
-----------------------------------
Award entitling the recipient to receive an amount in cash or shares of Stock or
a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price Stock
Appreciation Right, which price shall not be less than one hundred percent
(100%) of the Fair Market Value of the Stock on the date of grant (or more than
the option exercise price per share, if the Stock Appreciation Right was granted
in tandem with a Stock Option) multiplied by the number of shares of Stock with
respect to which the Stock Appreciation Right shall have been exercised, with
the Administrator having the right to determine the form of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
-----------------------------------------------
Rights may be granted by the Administrator in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.
A Stock Appreciation Right or applicable portion thereof granted in tandem
with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
-------------------------------------------------
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Administrator, subject to the following:
9
<PAGE>
(i) Stock Appreciation Rights granted in tandem with Options shall be
exercisable at such time or times and to the extent that the related Stock
Options shall be exercisable.
(ii) Upon exercise of a Stock Appreciation Right, the applicable
portion of any related Option shall be surrendered.
(iii) All Stock Appreciation Rights shall be exercisable during the
participant's lifetime only by the participant or the participant's legal
representative.
(d) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement, or subject to Section 14 below, in writing after
the Award agreement is issued, an optionee's rights in all Stock Appreciation
Rights shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 7. RESTRICTED STOCK AWARDS
-----------------------
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
---------------------------------
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives. The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and participants.
(b) Rights as a Stockholder. Upon execution of a written instrument
-----------------------
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 7(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a stock power
endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
------------
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a participant's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company shall have the right to
repurchase Restricted Stock that has not vested at the time of termination at
its original purchase price, from the participant or the participant's legal
representative.
10
<PAGE>
(d) Vesting of Restricted Stock. The Administrator at the time of grant
---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment
of such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted Stock
and shall be deemed "vested." Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 14 below, in
writing after the Award agreement is issued, a participant's rights in any
shares of Restricted Stock that have not vested shall automatically terminate
upon the participant's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be
subject to the Company's right of repurchase as provided in Section 7(c) above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
SECTION 8. DEFERRED STOCK AWARDS
---------------------
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
-------------------------------
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be
based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. The grant of a
Deferred Stock Award is contingent on the participant executing the Deferred
Stock Award agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among
individual Awards and participants. At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be paid to the participant in
the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
-----------------------------------------------------------------
Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such
election shall be made in writing and shall be delivered to the Company no later
than the date specified by the Administrator and in accordance with rules and
procedures established by the Administrator. The Administrator shall have the
sole right to determine whether and under what circumstances to permit such
elections and to impose such limitations and other terms and conditions thereon
as the Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a participant
-----------------------
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Administrator may determine.
11
<PAGE>
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.
SECTION 9. UNRESTRICTED STOCK AWARDS
-------------------------
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
-----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.
SECTION 10. PERFORMANCE SHARE AWARDS
------------------------
(a) Nature of Performance Share Awards. A Performance Share Award is an
----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan. The Administrator in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals, the periods during which performance is to be measured, and all other
limitations and conditions.
(b) Rights as a Stockholder. A participant receiving a Performance Share
-----------------------
Award shall have the rights of a stockholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the Performance Share Award agreement (or in a performance plan
adopted by the Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
12
<PAGE>
(d) Acceleration, Waiver, Etc. At any time prior to the participant's
-------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 14, amend any or all of the goals, restrictions or
conditions applicable to a Performance Share Award.
SECTION 11. DIVIDEND EQUIVALENT RIGHTS
--------------------------
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
--------------------------
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient. A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or
shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon
exercise, settlement, or payment of, or lapse of restrictions on, such other
award, and that such Dividend Equivalent Right shall expire or be forfeited or
annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and
conditions different from such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in
--------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
SECTION 12. TAX WITHHOLDING
---------------
(a) Payment by Participant. Each participant shall, no later than the date
----------------------
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of,
13
<PAGE>
any Federal, state, or local taxes of any kind required by law to be withheld
with respect to such income. The Company and its Subsidiaries shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant. The Company's obligation
to deliver stock certificates to any participant is subject to and conditioned
on tax obligations being satisfied by the participant.
(b) Payment in Stock. Subject to approval by the Administrator, a
----------------
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.
SECTION 13. TRANSFER, LEAVE OF ABSENCE, ETC.
-------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.
SECTION 14. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. The Administrator may provide substitute Awards at the
same or reduced exercise or purchase price or with no exercise or purchase price
in a manner not inconsistent with the terms of the Plan, but such price, if any,
must satisfy the requirements which would apply to the substitute or amended
Award if it were then initially granted under this Plan, but no such action
shall adversely affect rights under any outstanding Award without the holder's
consent. If and to the extent determined by the Administrator to be required by
the Code to ensure that Incentive Stock Options granted under the Plan are
qualified under Section 422 of the Code or to ensure that compensation earned
under Stock Options and Stock Appreciation Rights qualifies as performance-based
compensation under Section 162(m) of the Code, if and to the extent intended to
so qualify, Plan amendments shall be subject to approval by the Company
stockholders entitled to vote at a
14
<PAGE>
meeting of stockholders. Nothing in this Section 14 shall limit the Board's
authority to take any action permitted pursuant to Section 3(c).
SECTION 15. STATUS OF PLAN
--------------
With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Administrator may authorize the creation of trusts or other arrangements to meet
the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.
SECTION 16. GENERAL PROVISIONS
------------------
(a) No Distribution; Compliance with Legal Requirements. The Administrator
---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to participants
------------------------------
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
-----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
(d) Trading Policy Restrictions. Option exercises and other Awards under
---------------------------
the Plan shall be subject to such Company's insider-trading-policy-related
restrictions, terms and conditions as may be established by the Administrator,
or in accordance with policies set by the Administrator, from time to time.
SECTION 17. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present or
by a unanimous written consent of stockholders. Subject to such approval by the
stockholders and to the requirement
15
<PAGE>
that no Stock may be issued hereunder prior to such approval, Stock Options and
other Awards may be granted hereunder on and after adoption of this Plan by the
Board.
SECTION 18. GOVERNING LAW
-------------
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: February 11, 1998
16
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<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,137,836
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<RECEIVABLES> 6,967,718
<ALLOWANCES> 354,395
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<CURRENT-ASSETS> 11,683,998
<PP&E> 76,351,517
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1,862
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<SALES> 13,334,901
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