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 JUNE 30, 1998
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: 333-48221
NEBRASKA BOOK COMPANY, INC.
(Exact name of registrant as specified in its charter)
KANSAS 47-0549819
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4700 SOUTH 19TH STREET
LINCOLN, NEBRASKA 68501-0529
(Address of principal (Zip Code)
executive offices
Registrant's telephone number, including area code: (402) 421-7300
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 [ ] NO [X ]
TOTAL NUMBER OF PAGES: 12
EXHIBIT INDEX: PAGE 12
1
<PAGE>
PART I. FINANCIAL INFORMATION
NEBRASKA BOOK COMPANY, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
(UNAUDITED)
June 30, March 31, June 30,
1998 1998 1997
ASSETS --------- ---------- -----------
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents $4,964,261 $5,806,890 $4,635,624
Receivables 22,618,397 21,383,146 18,485,492
Inventories 66,780,007 48,810,714 61,648,812
Recoverable income tax 4,220,442 4,125,957 1,944,935
Deferred income tax benefit 1,183,529 1,183,529 1,156,540
Prepaid expenses and other assets 148,807 189,950 4,071,062
----------- ----------- -----------
Total current assets 99,915,443 81,500,186 91,942,465
PROPERTY AND EQUIPMENT 29,843,943 28,716,839 26,070,078
Less accumulated depreciation (6,404,741) (5,984,932) (4,057,372)
----------- ----------- -----------
23,439,202 22,731,907 22,012,706
GOODWILL AND OTHER INTANGIBLES, net of amortization 40,104,631 41,498,725 30,620,565
OTHER ASSETS 2,789,708 2,798,270 1,466,237
----------- ----------- -----------
$166,248,984 $148,529,088 $146,041,973
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $13,227,637 $14,418,843 $6,804,713
Accrued employee compensation and benefits 3,161,734 3,797,242 2,797,834
Accrued interest 4,224,591 1,788,547 1,496,152
Accrued expenses 508,096 498,740 285,733
Deferred revenue 1,349,004 463,917 -
Current maturities of long-term debt 1,765,609 1,327,696 264,024
Revolving credit facility 25,500,000 5,400,000 25,200,000
----------- ----------- -----------
Total current liabilities 49,736,671 27,694,985 36,848,456
LONG-TERM DEBT, net of current maturities 168,815,767 169,257,327 79,306,375
OTHER LONG-TERM LIABILITIES 159,880 150,604 505,493
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, authorized 50,000 shares
of $1.00 par value;
issued and outstanding 100 shares 100 100 100
Additional paid-in capital 30,967,876 30,935,250 30,763,790
Retained earnings (deficit) (83,431,310) (79,509,178) (1,382,241)
----------- ----------- -----------
Total stockholder's equity (deficit) (52,463,334) (48,573,828) 29,381,649
----------- ----------- -----------
$166,248,984 $148,529,088 $146,041,973
=========== =========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
NEBRASKA BOOK COMPANY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
1998 1997
---------- ------------
REVENUES, net of returns $30,278,178 $27,527,591
COSTS OF SALES 17,561,769 16,306,186
---------- ----------
Gross profit 12,716,409 11,221,405
OPERATING EXPENSES:
Selling, general and administrative 11,811,375 10,625,313
Depreciation 529,284 548,176
Amortization 1,767,051 1,109,192
---------- ----------
14,107,710 12,282,681
---------- ----------
LOSS FROM OPERATIONS (1,391,301) (1,061,276)
OTHER EXPENSES (INCOME):
Interest expense 4,603,981 2,726,565
Interest income (18,899) (33,955)
Other income (78,053) (112,040)
---------- ----------
4,507,029 2,580,570
---------- ----------
LOSS BEFORE INCOME TAXES (5,898,330) (3,641,846)
INCOME TAX BENEFIT (1,976,198) (1,326,316)
---------- ----------
NET LOSS ($3,922,132) ($2,315,530)
========= =========
See notes to financial statements.
3
<PAGE>
NEBRASKA BOOK COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(UNAUDITED)
------------------------------------------------------------------------------
Additional Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
-------- -------------- ----------- --------------
BALANCE, APRIL 1, 1998 $ 100 $30,935,250 ($79,509,178) ($48,573,828)
Contributed capital - 32,626 - 32,626
Net loss - - (3,922,132) (3,922,132)
-------- -------------- ----------- -------------
BALANCE, JUNE 30, 1998 $100 $30,967,876 ($83,431,310) ($52,463,334)
======== ============== =========== =============
BALANCE, APRIL 1, 1997 $ 100 $30,763,790 $ 933,289 $31,697,179
Net loss - - (2,315,530) (2,315,530)
-------- -------------- ----------- ------------
BALANCE, JUNE 30, 1997 $100 $30,763,790 ($1,382,241) $29,381,649
======== ============== =========== ============
See notes to financial statements.
4
<PAGE>
NEBRASKA BOOK COMPANY, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------
<S> <C> <C>
Net loss ($3,922,132) ($2,315,530)
Adjustment to reconcile net loss to net cash flows
from operating activities:
Depreciation 529,284 548,176
Amortization 2,102,262 1,277,951
Original issue discount amortization - 75,000
Loss on disposal of assets 19,972 55,742
Changes in operating assets and liabilities,
net of effect of acquisitions:
Receivables (1,235,251) (3,163,217)
Inventories (18,210,113) (17,360,420)
Recoverable income tax (94,484) (1,370,560)
Prepaid expenses and other assets 41,143 (1,614,611)
Other assets 59,814 305,265
Accounts payable (1,189,907) (4,066,107)
Accrued employee compensation and benefits (635,508) (162,241)
Accrued interest 2,436,044 230,272
Accrued expenses 9,356 (67,209)
Deferred revenue 421,170 -
Other liabilities 9,276 6,807
---------- ----------
Net cash flows from operating activities (19,659,074) (27,620,682)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,282,414) (724,598)
Bookstores acquisitions, net of cash acquired - (674,000)
Acquisition of other businesses - (1,451,928)
Proceeds from sale of property and equipment 25,863 10,530
Software development costs (51,252) (52,384)
---------- ----------
Net cash flows from investing activities (1,307,803) (2,892,380)
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (4,731) -
Principal payments on long-term debt (3,647) (28,278)
Net proceeds from revolving credit facility 20,100,000 25,200,000
Capital contribution 32,626 -
---------- ----------
Net cash flows from financing activities 20,124,248 25,171,722
NET DECREASE IN CASH AND CASH EQUIVALENTS (842,629) (5,341,340)
CASH AND CASH EQUIVALENTS, Beginning of period 5,806,890 9,976,964
---------- ----------
CASH AND CASH EQUIVALENTS, End of period $4,964,261 $4,635,624
========= =========
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for:
Interest $1,692,534 $2,190,408
========= =========
Income taxes ($1,881,713) $44,244
========= =========
</TABLE>
See notes to financial statements.
5
<PAGE>
NEBRASKA BOOK COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
1. MANAGEMENT REPRESENTATIONS - The accompanying unaudited financial statements
and notes thereto reflect all adjustments which are, in the opinion of
management, necessary to summarize fairly the financial position of Nebraska
Book Company, Inc. (the "Company") and the results of the Company's
operations for the periods presented. All of these adjustments are of a
normal recurring nature. Because of the seasonal nature of the Company's
operations, results of operations of any single reporting period should not
be considered as indicative of results for a full year. Certain
reclassifications have been made to prior period financial statements to
conform with current year presentation. These statements should be read in
conjunction with the Company's audited financial statements for the year
ended March 31, 1998 included in the Company's Form S-4 Registration
Statement (No. 333-48221) dated July 14, 1998.
2. RECAPITALIZATION - On February 13, 1998, the Company's parent, NBC
Acquisition Corp. ("NBC") consummated a merger among NBC Merger Corp. (a
newly created, indirect wholly-owned subsidiary of HWH Capital Partners, LP.
["HWH"]), NBC and certain shareholders of NBC pursuant to which the
Company's outstanding debt and NBC's stock were restructured (the
"Recapitalization"). Significant components of the Recapitalization,
together with the applicable accounting effects, were as follows:
(i) HWH contributed $45.6 million in capital to NBC Merger Corp., which was
then merged into NBC, with NBC being the surviving corporation.
(ii)Existing management shareholders of NBC reinvested approximately $4.4
million in NBC. HWH and management shareholders were reissued surviving
corporation shares of NBC Class A Common Stock.
(iii)The Company obtained approximately $170 million in new debt financing
and retired substantially all of its existing debt. The early
extinguishment of debt resulted in an extraordinary loss on the
transaction.
(iv)NBC obtained approximately $45 million in debt financing through the
issuance of Senior Discount Debentures.
(v) The Company paid a dividend of approximately $72.7 million to NBC to be
utilized in the repurchase of NBC Common Stock and accrued approximately
$2.6 million for additional costs of the Recapitalization.
(vi)The Company agreed to purchase management's outstanding options
relative to its 1995 Stock Incentive Plan, for a cash payment in lieu of
the options. This resulted in stock based compensation of approximately
$8.3 million for the year ended March 31, 1998. In addition, NBC agreed
to purchase all outstanding warrants for approximately $16.7 million.
(vii)NBC reacquired its outstanding shares of Class A and Class B Common
Stock of certain shareholders for approximately $149.2 million. NBC
accounted for this reacquisition of shares as a treasury stock
transaction, and such reacquired shares were retired. As the new
investor did not acquire substantially all of the common stock of NBC, a
new basis of accounting was not established in connection with the
Recapitalization.
In connection with the Recapitalization, a transaction fee of $4.0 million was
paid to HWH. Additionally, the Company reimbursed HWH approximately $0.1
million for expenses incurred by HWH in conjunction with the
Recapitalization. NBC recorded approximately $600,000 of such costs against
additional paid-in capital for non-deductible costs of the Recapitalization.
The Company recorded the remaining $3.5 million as debt issue costs and is
amortizing such costs over the life of the related debt.
3. INVENTORIES - Inventories are summarized as follows:
June 30, March 31, June 30,
1998 1998 1997
--------------------------------------------------------------------
Wholesale $37,059,645 $23,974,308 $32,802,554
College bookstores 28,816,072 21,889,631 27,896,246
Other 904,290 2,946,775 950,012
--------------------------------------------------------------------
Inventories $66,780,007 $48,810,714 $61,648,812
====================================================================
6
<PAGE>
4. LONG-TERM DEBT - On February 13, 1998, the Company obtained new financing as
part of the Recapitalization. Such financing included a bank-administered
Senior Credit Facility provided through a syndicate of lenders. The facility
was comprised of a $27,500,000 term loan (Tranche A Loan), a $32,500,000
term loan (Tranche B Loan) and a $50,000,000 Revolving Credit Facility. The
Revolving Credit Facility expires on March 31, 2004. Availability under the
Revolving Credit Facility is determined by the calculation of a borrowing
base which at any time is equal to a percentage of eligible accounts
receivable and inventory. The borrowing base at June 30, 1998 was $50.0
million. The interest rate is prime plus 1.50% or, on Eurodollar borrowings,
LIBOR plus 2.50%. Effective for fiscal years ending on or after March 31,
1999, the Senior Credit Facility requires excess cash flows as defined in
the Credit Agreement to be applied initially towards prepayment of the term
loans and then utilized to permanently reduce commitments under the
Revolving Credit Facility. Additional funding of the Recapitalization
included the proceeds of $110,000,000 face amount of 8.75% Senior
Subordinated Notes due 2008.
5. NEW ACCOUNTING PRONOUNCEMENT - In June 1997, the Financial Accounting
Standards Board adopted Statement of Financial Accounting Standard (SFAS)
No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS 131, effective for fiscal 1999, redefines how operating
segments are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. The Statement
does not need to be applied to interim financial statements in the initial
year of application. The required disclosure under this Statement will be
provided in the Company's fiscal 1999 Form 10-K filing.
6. STOCK BASED COMPENSATION - On June 30, 1998, NBC's Board of Director's
adopted the NBC Acquisition Corp. 1998 Performance Stock Option Plan (the
"Plan"). This Plan provides for the granting of options to purchase 52,000
shares of NBC's Class A Common Stock to selected members of senior
management of NBC and its affiliates. All options granted are intended to be
nonqualified stock options, although the Plan also provides for incentive
stock options. NBC will grant a portion of the available options in fiscal
years 1999-2002 upon the attainment of pre-established financial targets.
Twenty-five percent of the options granted become exercisable immediately
upon granting, with the remaining options becoming exercisable in 25%
increments over the subsequent three years on the anniversary of the date of
grant. The options will have an exercise price of not less than fair market
value on the date the options are granted and expire ten years from the date
of grant. No options were granted as of June 30, 1998.
On June 30, 1998, NBC's Board of Director's adopted the NBC Acquisition
Corp. 1998 Stock Option Plan (the "Option Plan"). This Option Plan provides
for the granting of options to purchase 31,000 shares of NBC's Class A
Common Stock to selected employees, officers, and directors of NBC and its
affiliates. All options granted are intended to be nonqualified stock
options, although the Option Plan also provides for incentive stock options.
NBC will grant such options at the discretion of a committee designated by
the Board of Directors (the "Committee"). Twenty-five percent of the options
granted become exercisable immediately upon granting, with the remaining
options becoming exercisable in 25% increments over the subsequent three
years on the anniversary of the date of grant. Incentive stock options will
have an exercise price of not less than fair market value on the date the
options are granted, while the Committee will determine the exercise price
for nonqualified options, which may be below fair market value, at the time
of grant. All options expire ten years from the date of grant. No options
were granted as of June 30, 1998.
7. SUBSEQUENT EVENT - During the quarter ended June 30, 1998, the Company and
NBC filed Form S-4 Registration Statements with the Securities and Exchange
Commission for purposes of registering debt securities which will be issued
in exchange for the Company's Senior Subordinated Notes and NBC's Senior
Discount Debentures. Such Registration Statements were declared effective by
the Securities and Exchange Commission on July 14, 1998. The terms of the
securities being issued in the exchange offer are identical to those in
effect at June 30, 1998.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 COMPARED WITH QUARTER ENDED JUNE 30, 1997.
REVENUES.Revenues for the quarters ended June 30, 1998 and 1997 were as follows:
1998 1997
-------------------------------
Wholesale operations $19,056,931 $18,123,797
College bookstore operations 12,184,939 11,064,294
Complimentary services 3,384,111 2,565,260
Itercompany eliminations (4,347,803) (4,225,760)
--------------------------------
$30,278,178 $27,527,591
================================
Revenues for the quarter ended June 30, 1998 increased $2.8 million, or 10.0%,
to $30.3 million from $27.5 million for the quarter ended June 30, 1997. This
increase was due to a $1.0 million, or 5.1 %, increase in wholesale sales, a
$1.1 million, or 10.1 %, increase in college bookstore sales and a $0.8 million,
or 31.9%, increase in revenues related to complementary services. Wholesale
sales for the quarter ended June 30, 1998 increased to $19.1 million from $18.1
million for the quarter ended June 30, 1997. This increase in wholesale sales
was due primarily to publisher price increases and unit volume sales growth.
College bookstore sales for the quarter ended June 30, 1998 increased to $12.2
million from $11.1 million for the quarter ended June 30, 1997. The increase in
college bookstore sales was primarily the result of the eight bookstores opened
or acquired during fiscal 1998 and same store sales increases of 2.1%.
Complimentary services sales for the quarter ended June 30, 1998 increased to
$3.4 million from $2.6 million for the quarter ended June 30, 1997 due to the
acquisitions of Specialty Books, Inc. on May 1, 1997 and Collegiate Stores
Corporation on January 23, 1998. As the Company's wholesale and college
bookstore operations have grown, the Company's intercompany transactions have
also increased.
GROSS PROFIT. Gross profit for the quarter ended June 30, 1998 increased $1.5
million, or 13.3%, to $12.7 million from $11.2 million for the quarter ended
June 30, 1997. This increase was primarily due to higher revenues, combined with
an increase in gross margin percent. Gross margin for the quarter ended June 30,
1998 increased to 42.0% from 40.8% for the quarter ended June 30, 1997. This
increase was primarily due to sales mix, including an increase in used textbook
sales through the Company's bookstores, which generate an average gross margin
of 58.0% compared to an average gross margin of 37.0% for sales through other
channels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the quarter ended June 30, 1998 increased $1.2
million, or 11.2%, to $11.8 million from $10.6 million for the quarter ended
June 30, 1997. Selling, general and administrative expenses as a percentage of
revenues increased to 39.0% for the quarter ended June 30, 1998 from 38.6% for
the quarter ended June 30, 1997. These increases resulted primarily from the
higher expense base associated with the Company's expansion of its operations in
fiscal 1998 through bookstore and other business acquisitions.
AMORTIZATION EXPENSE. Amortization expense for the quarter ended June 30, 1998
increased $0.7 million, or 59.3%, to $1.8 million from $1.1 million for the
quarter ended June 30, 1997. This increase resulted primarily from a full
quarter of amortization on the goodwill associated with the fiscal 1998
acquisitions.
INTEREST EXPENSE, NET. Interest expense, net for the quarter ended June 30, 1998
increased by $1.9 million, or 70.3%, to $4.6 million from $2.7 million for the
quarter ended June 30, 1997 as a result of the additional debt incurred relating
to the Recapitalization which occurred on February 13, 1998.
INCOME TAXES. Income taxes for the quarter ended June 30, 1998 were recorded at
an effective tax rate of 33.5% as compared with an effective tax rate of 36.4%
for the quarter ended June 30, 1997.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity requirements are for debt service under the
Senior Credit Facility, the Senior Subordinated Notes and other outstanding
indebtedness, for working capital, and for capital expenditures. The Company has
historically funded these requirements primarily through internally generated
cash flow and funds borrowed under the Company's credit facility. At June 30,
1998, the Company's total indebtedness was approximately $196.1 million,
consisting of $60.0 million in Term Loans, $25.5 million under the Revolving
Credit Facility, $110.0 million of the Senior Subordinated Notes, and $0.6
million of other indebtedness.
Principal and interest payments under the Senior Credit Facility and the
Senior Subordinated Notes represent significant liquidity requirements for the
Company. Under the terms of the Tranche A and B Loans, the Company is required
to make principal payments totaling approximately $1.3 million in fiscal 1999,
$3.1 million in fiscal 2000, $4.4 million in fiscal 2001, $6.3 million in fiscal
2002, $6.8 million in fiscal 2003, $8.5 million in fiscal 2004, $11.2 million in
fiscal 2005 and $18.4 million in fiscal 2006. Loans under the Senior Credit
Facility bear interest at floating rates based upon the interest rate option
selected by the Company. Under the terms of the Senior Credit Facility, the
Company is required to purchase and maintain interest rate protection to the
extent necessary to provide that at least 50% of the aggregate principal amount
of the Senior Subordinated Notes and the Tranche A and B Loans are subject to
fixed interest rates. The Senior Subordinated Notes require semi-annual interest
payments at a fixed rate of 8.75% and mature on February 15, 2008.
The Company's capital expenditures were $1.3 million and $0.7 million for
the quarters ended June 30, 1998 and 1997, respectively. The Company estimates
that for fiscal 1999, approximately $2.5 million of capital expenditures will be
required, primarily for maintenance. Capital expenditures consist primarily of
bookstore opening costs, bookstore renovations and miscellaneous maintenance
requirements. The Company believes that as a result of the availability of
excess capacity in its distribution facilities, it will be able to pursue its
strategy over the next several years without making significant additional
capital expenditures to expand capacity. The Company's ability to make capital
expenditures is subject to certain restrictions under the Senior Credit
Facility.
There were no business acquisition expenditures in the quarter ended June
30, 1998. Business acquisition expenditures were $2.1 million for the quarter
ended June 30, 1997. The Company estimates that for fiscal 1999, it will spend
approximately $2.0 million on business acquisition expenditures.
The Company's principal sources of cash to fund its future liquidity needs
will be net cash from operating activities and borrowings under the Revolving
Credit Facility. Net cash flows used in operating activities for the quarter
ended June 30, 1998 were $19.7 million, a decrease of $7.9 million from $27.6
million for the quarter ended June 30, 1997. This decrease was primarily due to
higher uses of cash in the quarter ended June 30, 1997 to fund increases in
accounts receivable and reductions in accounts payable.
Access to the Company's principal sources of cash is subject to various
restrictions. The availability of additional borrowings under the Revolving
Credit Facility is subject to the calculation of a borrowing base which at any
time is equal to a percentage of eligible accounts receivable and inventory. The
Senior Credit Facility restricts the Company's ability to make loans or advances
and pay dividends, except that, among other things, the Company may pay
dividends to NBC (i) after August 15, 2003 in an amount not to exceed the amount
of interest required to be paid on NBC's Senior Discount Debentures and (ii) to
pay corporate overhead expenses not to exceed $250,000 per year and any taxes
due by NBC. The Indenture governing the Senior Subordinated Notes (the
"Indenture") restricts the ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to pay dividends or make other
Restricted Payments (as defined in the Indenture) to their respective
stockholders, subject to certain exceptions, unless certain conditions are met,
including that (i) no default under the Indenture shall have occurred and be
continuing, (ii) the Company shall be permitted by the Indenture to incur
additional indebtedness and (iii) the amount of the dividend or payment may not
exceed a certain amount based on, among other things, the Company's consolidated
net income. Such restrictions are not expected to impact the Company's ability
to meet its cash obligations.
9
<PAGE>
As of June 30, 1998, the Company could borrow up to $50.0 million under the
Revolving Credit Facility. Of the amount available, $25.5 million was drawn by
the Company. Amounts available under the Revolving Credit Facility may be used
for working capital and general corporate purposes (including up to $10.0
million for letters of credit), subject to certain limitations contained in the
Senior Credit Facility.
SEASONALITY
The Company's wholesale and bookstore operations experience two distinct
selling periods and the wholesale operations experience two distinct buying
periods. The peak selling periods for the wholesale operations occur prior to
the beginning of each school semester in August and December. The buying periods
for the wholesale operations occur at the end of each school semester in late
December and May. In fiscal 1998, approximately 42% of the Company's annual
revenues occurred in the second fiscal quarter (July-September), while
approximately 27% of the Company's annual revenues occurred in the fourth fiscal
quarter (January-March). The primary selling periods for the bookstore
operations are in September and January. Accordingly, the Company's working
capital requirements fluctuate throughout the year, increasing substantially at
the end of each semester, in May and December, as a result of the buying
periods. The Company funds its working capital requirements primarily through a
revolving credit facility, which historically has been repaid with cash provided
from operations.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented
based upon historical costs. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on its results of
operations and financial condition have been minor. However, there can be no
assurance that during a period of significant inflation, the Company's results
of operations would not be adversely affected.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those programs
recognize a date using "00" as the year 1900 rather than the year 2000 (the
"Year 2000 Issue"). This problem could cause a system failure or miscalculations
resulting in disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices or engage in similar
routine business activities.
The Company has completed an assessment of the impact of the Year 2000
Issue on its operations, and has been modifying and will continue to modify and
replace portions of its software so that its internal computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
Company has been addressing the Year 2000 Issue consistently as part of its
regular program of updating and rewriting its internal corporate applications
during the last seven years. As a result, all of the Company's own retail
applications have been modified completely. The only remaining internal
corporate application that remains to be replaced is the general ledger
application, which the Company is currently in the process of addressing by
evaluating commercial software solutions. The Company expects the cost to
replace its current general ledger software with a commercial application that
is "Year 2000 compliant" will not be significant. The Company plans to have such
new application in place during 1999.
The Company is currently in the process of identifying and evaluating
potential risks associated with the Year 2000 Issue on non-information
technology systems (i.e. telecommunications, heating and cooling, security,
electrical, and freight). Although potentially disruptive, management does not
believe that such Year 2000 Issue system difficulties will adversely affect
day-to-day operations at the Company's retail locations. Difficulties
encountered with the telecommunications and freight systems could potentially
hinder the Company's ability to receive and ship wholesale orders. Contingency
plans are being developed to minimize the effect of any such disruptions on
day-to-day operations.
10
<PAGE>
Although the Company's assessment did not address its exposure to third
parties' (e.g., vendors' and customers') failures to correct their systems for
the Year 2000 Issue, the Company believes that there is not a material risk to
the Company's business relating to such failures, because most of its customers
use Company software which has already been modified and, based on conversations
with its vendors and information provided in trade publications, the Company
believes that its vendors are taking steps to address the Year 2000 Issue.
Nonetheless, there can be no guarantee that the systems of other companies on
which the Company's systems rely will be corrected in a timely manner.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This Quarterly Report on Form 10-Q contains or incorporates by reference
certain statements that are not historical facts, including, most importantly,
information concerning possible or assumed future results of operations of the
Company and statements preceded by, followed by or that include the words "may,"
"believes," "experts," "anticipates," or the negation thereof, or similar
expressions, which constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). All
statements which address operating performance, events or developments that are
expected or anticipated to occur in the future, including statements relating to
volume and revenue growth, earnings per share growth or statements expressing
general optimism about future operating results, are forward-looking statements
within the meaning of the Reform Act. Such forward-looking statements involve
risks, uncertainties and other factors which may cause the actual performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. For those statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Reform Act. Several
important factors could affect the future results of the Company and could cause
those results to differ materially from those expressed in the forward-looking
statements contained herein. The factors that could cause actual results to
differ materially include, but are not limited to, the following: increased
competition; ability to integrate recent acquisitions; loss or retirement of key
members of management; increases in the Company's cost of borrowing or inability
or unavailability of additional debt or equity capital; inability to purchase a
sufficient supply of used textbooks; changes in pricing of new and/or used
textbooks; changes in general economic conditions and/or in the markets in which
the Company competes or may, from time to time, compete; and other risks
detailed in the Company's aforementioned Form S-4 Registration Statement dated
July 14, 1998, all of which are difficult or impossible to predict accurately
and many of which are beyond the control of the Company. The Company will not
undertake and specifically declines any obligation to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS
(a) Exhibits
10.1 NBC Acquisition Corp. 1998 Performance Stock Option Plan adopted
June 30, 1998 [EDGAR filing only]
10.2 NBC Acquisition Corp. 1998 Stock Option Plan adopted June 30, 1998
[EDGAR filing only]
10.3 NBC Acquisition Corp. Senior Management Bonus Plan adopted
June 30, 1998 [EDGAR filing only]
27 Financial Data Schedule [EDGAR filing only]
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Lincoln, Nebraska, on
August 21, 1998.
NEBRASKA BOOK COMPANY, INC.
/s/ Mark W. Oppegard
--------------------------
Mark W. Oppegard
Chief Executive Officer
/s/ Bruce E. Nevius
--------------------------
Bruce E. Nevius
Chief Financial Officer
and Treasurer
12
Item 6. Exhibit
10.1 NBC Acquisition Corp. 1998 Performance Stock Option Plan adopted
June 30, 1998
NBC ACQUISITION CORP.
1998 PERFORMANCE STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Purpose..........................................................1
SECTION 2. Administration...................................................1
SECTION 3. Eligibility......................................................2
SECTION 4. Shares of Stock Subject to the Plan..............................2
4.1 Reserved Shares.............................................2
4.2 Type of Shares..............................................2
SECTION 5. Stock Options....................................................2
5.1 Grant and Type of Stock Options.............................2
5.2 Agreements Evidencing Options...............................3
5.3 Exercisability of Options...................................4
5.4 Payment of Option Price.....................................5
5.5 Termination of Employment...................................5
5.6 Special ISO Requirements....................................6
SECTION 6. Certain Definitions..............................................7
SECTION 7. Amendment of the Plan; Modification of Options...................7
7.1 Plan Amendments.............................................7
7.2 Option Modifications........................................7
SECTION 8. Restrictions.....................................................8
8.1 Consent Requirements........................................8
8.2 Consent Defined.............................................8
SECTION 9. Nontransferability...............................................8
SECTION 10. Withholding Taxes...............................................9
10.1 General.....................................................9
10.2 Use of Shares...............................................9
SECTION 11. Adjustments.....................................................9
11.1 Upon Changes in Capitalization..............................9
11.2 Other.......................................................9
SECTION 12. Right of Discharge Reserved....................................10
SECTION 13. No Rights as a Shareholder.....................................10
SECTION 14. Nature of Payments.............................................10
14.1 Consideration.............................................10
14.2 Other Plans...............................................10
14.3 Waiver....................................................10
SECTION 15. Non-Uniform Determinations.....................................10
SECTION 16. Other Payments or Options......................................11
SECTION 17. Reorganization.................................................11
SECTION 18. Governing Law..................................................11
SECTION 19. Headings.......................................................11
SECTION 20. Effective Date.................................................12
20.1 Effective Date.............................................12
20.2 Term.......................................................12
<PAGE>
Draft 6/12/98
NBC ACQUISITION CORP.
1998 PERFORMANCE STOCK OPTION PLAN
SECTION 1. Purpose.
The purpose of this Plan is to promote the interests of NBC
Acquisition Corp. (the "Company") and its Affiliates, by (a) attracting,
motivating and retaining executive personnel of outstanding ability; (b)
focusing the attention of executive management on achievement of sustained long
term results; (c) fostering management's attention on overall corporate
performance and thereby promoting cooperation and teamwork among management of
the operating units; and (d) providing executives with a direct economic
interest in the attainment of demanding long term business objectives.
SECTION 2. Administration.
2.1 The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board"),
which Committee shall consist of two or more directors. It is intended that the
directors appointed to serve on the Committee shall be "non-employee directors"
(within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 (the "Act") and "outside directors" (within the meaning of section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") to the
extent Rule 16b-3 and Code section 162(m), respectively, are applicable;
however, the mere fact that a Committee member shall fail to qualify under
either of the foregoing requirements shall not invalidate any award made by the
Committee which award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time in the discretion of, the Board.
2.2 The Committee shall have the authority (a) to exercise all of
the powers granted to it under the Plan, (b) to construe, interpret and
implement the Plan and any option agreements executed pursuant to the Plan, (c)
to prescribe, amend and rescind rules relating to the Plan, (d) to make any
determination necessary or advisable in administering the Plan, (e) to correct
any defect, supply any omission and reconcile any inconsistency in the Plan, (f)
to determine and to adjust performance targets (as described in Section 5) and
option allocations as it deems appropriate in general and to reflect
acquisitions, divestitures and other corporate transactions occurring during a
Fiscal Year and (g) generally, to make any and all adjustments it deems
appropriate to reflect the intent and purposes of the Plan.
2.3 The determination of the Committee on all matters relating to
the Plan or any option agreement shall be conclusive.
1
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2.4 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
2.5 Notwithstanding anything to the contrary contained herein:
(a) until the Board shall appoint the members of the Committee, the Plan shall
be administered by the Board, and (b) the Board may, in its sole discretion, at
any time and from time to time, resolve to administer the Plan. In either of the
foregoing events, the term Committee as used herein shall mean the Board.
SECTION 3. Eligibility.
Options under the Plan may be granted to such members of senior
management (including employees, officers and directors) of the Company and its
Affiliates ("Eligible Employees") as the Committee shall from time to time in
its sole discretion select. The Committee may, but shall not be required to,
consult with such executives of the Company and its Affiliates as it deems
appropriate prior to making such grants.
SECTION 4. Shares of Stock Subject to the Plan.
4.1 Reserved Shares. Subject to Section 11 (relating to
adjustments upon changes in capitalization), the aggregate number of shares of
Stock (as defined in Section 6) that may be acquired under the Plan by any one
Eligible Employee and by all Eligible Employees pursuant to options granted
hereunder shall not exceed 52,000 shares. Shares of Stock covered by options
granted under the Plan, which options expire, terminate or are canceled for any
reason (other than an option, or part thereof, that is canceled by the Committee
and for which cash is paid in respect thereof) shall again become available for
award under the Plan.
4.2 Type of Shares. Shares of Stock that shall be subject to
issuance pursuant to the Plan shall be authorized and unissued shares or
treasury shares.
SECTION 5. Stock Options.
5.1 Grant and Type of Stock Options.
(a) General. Subject to the terms of the Plan, the Committee
may grant options to purchase shares of Stock in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine.
2
<PAGE>
(b) If the Company attains the targets established by the
Committee ("level 1 targets") in Fiscal Year 1999, 2000, 2001 and/or 2002,
following each such Fiscal Year the Committee will grant to Eligible Employees
collectively options to purchase 25% of the total number shares of Stock
available under the Plan, rounded to the nearest whole share, to be allocated
among such Eligible Employees in such manner as the Committee, in its
discretion, determines.
(c) If the Company does not attain the level 1 target but
attains lower targets established by the Committee ("level 2 targets") in Fiscal
Year 1999, 2000, 2001 and/or 2002 as of the commencement of Fiscal Year 2000,
2001, 2002 and/or 2003, as the case may be, the Committee will grant to Eligible
Employees options to purchase only a portion (to be determined by the Committee)
of the number of shares of Stock described in Section 5.1(c), to be allocated
among Eligible Employees in such manner as the Committee, in its discretion,
determines.
(d) Except as otherwise provided by the Committee, if the
Company attains less than its level 2 targets in Fiscal Year 1999, 2000, 2001
and/or 2002, no options will be granted for Fiscal Year 2000, 2001, 2002 and/or
2003, as the case may be.
(e) Subject to Section 4.1, the Committee, in its sole
discretion, may allocate additional options to Eligible Employees in any of
Fiscal Years 1999, 2000, 2001 and/or 2002 if the Company attains more than 100%
of the level 1 target for the Fiscal Year immediately preceding such Fiscal
Year.
(f) Types of Options Under Plan.
(i) Options granted under the Plan may be either
(A) "nonqualified" stock options subject to the provisions of Code
section 83, or (B) options intended to qualify for incentive stock
option treatment described in section 422 of the Code; provided,
however, that incentive stock options may only be granted to employees
of the Company or its "Parent Corporation" or "Subsidiary Corporation"
in accordance with Code section 424.
(ii) All options when granted are intended to be
nonqualified stock options, unless the applicable option agreement
explicitly states that the option is intended to be an incentive stock
option. If an option is intended to be an incentive stock option, and
if for any reason such option (or any portion thereof) shall not
qualify as an incentive stock option, then, to the extent of such
nonqualification, such option (or portion) shall be regarded as a
nonqualified stock option appropriately granted under the Plan,
provided that such option (or portion) otherwise meets the Plan's
requirements relating to nonqualified stock options.
5.2 Agreements Evidencing Options.
3
<PAGE>
(a) General. Options granted under the Plan shall be
evidenced by written agreements, which shall (i) contain such provisions not
inconsistent with the terms of the Plan as the Committee may in its sole
discretion deem necessary or desirable and (ii) be referred to herein as "option
agreements." If the grantee is party to an employment or consulting agreement
the terms of which relate to stock options and which are inconsistent with the
terms of any such option agreement, the terms of such option agreement shall
govern.
(b) Certain Terms. Each option agreement shall set forth the
number of shares of Stock subject to the option granted thereby and the amount
(the "option exercise price") payable by the grantee to the Company in
connection with the exercise of the option evidenced thereby. The exercise price
per share shall not be less than the Fair Market Value of a share of Stock on
the date the option is granted. Each option agreement shall set forth conditions
subject to which the option evidenced thereby shall become exercisable.
5.3 Exercisability of Options.
(a) Standard Exercise Provisions. Subject to Section 5.5 and
the other terms of the Plan or as otherwise determined by the Committee:
(i) Each option shall become exercisable (A) with
respect to 25% of the shares of Stock subject thereto, rounded down to
the next lower full share, on the date of grant; (B) with respect to
50% of the shares of Stock originally subject thereto on the first
anniversary of the date of grant; (C) with respect to 75% of the
shares of Stock originally subject thereto on the second anniversary
of the date of grant; and (D) with respect to 100% of the shares of
Stock originally subject thereto on the third anniversary of the date
of grant;
(ii) Each option shall become exercisable with
respect to 100% of the shares of stock subject thereto in the event
the optionee's employment terminates by reason of death or disability;
(iii) In the Committee's sole discretion, each
option or portion thereof may become exercisable with respect to all
or a portion of the shares of Stock subject thereto in the event of a
Change of Control (as defined in Section 6);
(iv) Each option shall terminate and cease to be
exercisable on the tenth anniversary of the date of grant thereof; and
(v) Each option, once exercisable may be exercised
from time to time as to all or part of the full number of shares as to
which such option shall then be exercisable.
(b) Notice of Exercise; Exercise Date.
(i) An option shall be exercisable by the filing
of a written notice of exercise with the Company, on such form and in
such manner as the Committee shall in its sole discretion prescribe,
and by payment in accordance with Section 5.4.
4
<PAGE>
(ii) For purposes of the Plan, the "option
exercise date" shall be deemed to be the first business day
immediately following the date written notice of exercise is received
by the Company.
5.4 Payment of Option Price.
(a) Tender Due Upon Notice of Exercise. Unless the
applicable option agreement otherwise provides or the Committee in its sole
discretion otherwise determines, (i) any written notice of exercise of an option
shall be accompanied by payment of the full purchase price for the shares being
purchased and (ii) the grantee shall have no right to receive shares of Stock
with respect to an option exercise prior to the option exercise date.
(b) Manner of Payment. Payment of the option exercise price
shall be made in any combination of the following:
(i) by certified or official bank check payable to
the Company (or the equivalent thereof acceptable to the Committee);
(ii) with the consent of the Committee in its sole
discretion, by personal check (subject to collection); and
(iii) if and to the extent provided in the
applicable option agreement, by delivery of previously acquired shares
of Stock owned by the grantee for at least six months having a Fair
Market Value (determined as of the option exercise date) equal to the
portion of the option exercise price being paid thereby, provided that
the Committee may require the grantee to furnish an opinion of counsel
acceptable to the Committee to the effect that such delivery would not
result in the grantee incurring any liability under Section 16(b) of
the Act and does not require any Consent (as defined in Section 8.2).
(c) Issuance of Shares. As soon as practicable after receipt
of full payment, the Company shall, subject to the provisions of Section 8,
deliver to the grantee one or more certificates for the shares of Stock so
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
5.5 Termination of Employment.
(a) General Rule. All options granted to a grantee shall
terminate and no longer be exercisable upon such grantee's termination of
employment for any reason, except to the extent post-employment exercise of the
exercisable portion of an option (as determined under Section 5.3) is permitted
in accordance with this Section 5.5.
5
<PAGE>
(b) Cause. All options granted to a grantee shall terminate
and expire on the day the grantee's employment with the Company and its
subsidiaries is terminated for Cause. For purposes of the Plan, a grantee's
employment shall be deemed to be terminated for "Cause" if (i) the Executive
neglects his duties, is convicted of any felony or gross misdemeanor (except
traffic related), is guilty of gross misconduct in connection with the
performance of his duties, or materially breaches affirmative or negative
covenants or undertakings under any employment agreement with the Company or an
Affiliate, or (ii) such grantee terminates his employment with the Company and
its subsidiaries and the Committee determines, within 90 days after the
grantee's termination date, that such grantee's employment could have been
terminated for Cause pursuant to clause (i).
(c) Death and Disability. If a grantee's employment with the
Company and its subsidiaries terminates by reason of death or disability (as
defined in section 22(e)(3) of the Code), all of the grantee's options shall be
exercisable by such grantee or, as the case may be, by such grantee's
court-appointed legal representative or, in the case of the grantee's death, by
the person or persons to whom such options pass under the grantee's will (or, if
applicable, pursuant to the laws of descent and distribution) until the earlier
of (i) one year after the grantee's termination by reason of death or
disability, and (ii) the date on which such options terminate or expire in
accordance with the other provisions of the Plan and the option agreement.
(d) Regular Termination; Leaves of Absence. If the grantee's
employment terminates for reasons other than as provided in Section 5.5(b) or
(c), the portion, if any, of options granted to such grantee that were
exercisable (as determined under Section 5.3) immediately prior to such
termination of employment may be exercised until the earlier of (i) 90 days
after the grantee's date of termination, and (ii) the date on which such options
terminate or expire in accordance with the other provisions of the Plan and the
option agreement. The Committee may in its discretion determine (x) whether any
leave of absence (including short-term or long-term disability or medical leave)
shall constitute a termination of employment for purposes of the Plan and (y)
the impact, if any, of any such leave on outstanding awards under the Plan.
5.6 Special ISO Requirements.
(a) Term. No incentive stock option may have a term in
excess of ten years.
(b) 10% Owner. If an option granted under the Plan is
intended to be an incentive stock option and if the grantee, at the time of
grant, owns stock possessing 10% or more of the total combined voting power of
all classes of stock of the grantee's employer corporation or of its parent or
subsidiary corporation, then (a) the option exercise price per share shall in no
event be less than 110% of the Fair Market Value of the Stock on the date of
such grant and (b) such option shall not be exercisable after the expiration of
five years after the date such option is granted.
6
<PAGE>
SECTION 6. Certain Definitions
6.1 "Affiliate" shall mean, any person or entity which, at the
time of reference, directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.
6.2 "Change of Control" shall mean, with respect to the Company,
a transaction pursuant to which a person or group (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act")), other than
HWP and its Affiliates, acquires the collective ability to designate directly or
indirectly a majority of the members of the Board (whether by contract or
otherwise).
6.3 "Effective Date" shall mean April 1, 1998.
6.4 "Fair Market Value" shall mean as of any date in respect of
any share of Stock traded on a national securities exchange, the closing price
of a share of Stock as reported on the exchange on which such shares primarily
trade on such date. If Stock is not traded on a national exchange on such date,
Fair Market Value shall be determined by the Committee in its sole discretion.
6.5 "Fiscal Year" shall mean the fiscal year ending March 31,
whether or not such period is the fiscal year of the Company.
6.6 "Plan" shall mean the NBC Acquisition Corp. 1998 Performance
Stock Option Plan.
6.7 "Stock" shall mean common stock, par value $.01 per share, of
the Company as constituted on the effective date of the Plan, and any other
shares into which such common stock shall thereafter be changed by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
SECTION 7. Amendment of the Plan; Modification of Options.
7.1 Plan Amendments. The Board may at any time and from time to
time suspend, discontinue or amend the Plan in any respect whatsoever, except
that (i) no such amendment or action shall materially and adversely impair any
rights under any option theretofore granted under the Plan without either
providing fair consideration to the grantee of such option or obtaining the
consent of the grantee of such option and (ii) no such amendment for which
shareholder approval would be required under any law, (including Code section
162(m) and Rule 16b-3, to the extent applicable) or the rules of any securities
exchange or other regulatory organization shall be effective without such
shareholder approval.
7.2 Option Modifications. With the consent of the grantee and
subject to the terms and conditions of the Plan (including Section 7.1), the
Committee may amend outstanding option agreements with such grantee, including,
without limitation, any amendment that would (i) accelerate the time or times at
which an option may become exercisable and/or (ii) extend the scheduled
termination or expiration date of the option.
7
<PAGE>
SECTION 8. Restrictions
8.1 Consent Requirements. If the Committee shall at any time
determine that any Consent (as hereinafter defined) is necessary or desirable as
a condition of, or in connection with, the granting of any option under the
Plan, the acquisition, issuance or purchase of shares or other rights hereunder
or the taking of any other action hereunder (each such action, a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee. Without limiting the generality of the foregoing, if (i) the
Company may make any payment under the Plan in cash, Stock or both and (ii) the
Committee determines that a Consent is necessary or desirable as a condition of,
or in connection with, payment in any one or more of such forms, then the
Committee shall be entitled to determine not to make any payment whatsoever
until such Consent has been obtained.
8.2 Consent Defined. The term "Consent" as used herein with
respect to any Plan Action means (a) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or other
regulatory organization or under any federal, state or local law, rule or
regulation, (b) the expiration, elimination or satisfaction of any prohibitions,
restrictions or limitations under any federal, state or local law, rule or
regulation or the rules of any securities exchange or other regulatory
organization, (c) any and all written agreements and representations by the
grantee with respect to the disposition of shares, or with respect to any other
matter which the Committee shall deem necessary or desirable to comply with the
terms of any such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing, qualification or
registration be made, and (d) any and all consents, waivers, clearances and
approvals in respect of a Plan Action by any governmental or other regulatory
bodies or any parties to any loan agreements or other contractual obligations of
the Company or any of its subsidiaries.
SECTION 9. Nontransferability.
No option granted to any grantee shall be assignable or
transferable by the grantee other than by will or by the laws of descent and
distribution. During the lifetime of the grantee, all rights with respect to any
option granted to the grantee shall be exercisable only by the grantee or the
grantee's court-appointed legal representative. Notwithstanding the foregoing,
the Committee may provide in an applicable option agreement that an option may
be transferred for estate planning purposes, to a family trust or family
partnership for the benefit of immediate members of the optionee's family.
8
<PAGE>
SECTION 10. Withholding Taxes.
10.1 General. Whenever under the Plan shares of Stock are to be
delivered pursuant to an option, the Committee may require as a condition of
delivery that the grantee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirements related thereto.
Whenever cash is to be paid under the Plan, the Company may, as a condition of
its payment, deduct therefrom, or from any salary or other payments due to the
grantee, an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto or to the delivery of
any shares of Stock under the Plan.
10.2 Use of Shares. Subject to the Committee's consent, a grantee
may elect to satisfy all or part of the foregoing withholding requirements by
delivery of unrestricted shares of Stock owned by the grantee for at least six
months (or such other period as the Committee may determine) having a Fair
Market Value (determined as of the date of such delivery by the grantee) equal
to all or part of the amount to be so withheld, provided that the Committee may
require, as a condition of accepting any such delivery, the grantee to furnish
an opinion of counsel acceptable to the Committee to the effect that such
delivery would not result in the grantee incurring any liability under Section
16(b) of the Act or any other federal or state securities laws, rules or
regulations.
SECTION 11. Adjustments.
11.1 Upon Changes in Capitalization. To the extent specified by
the Committee, the number of shares of Stock that may be issued pursuant to
options under the Plan, the number of shares of Stock subject to options, the
exercise price of options theretofore granted under the Plan and the amount
payable by a grantee in respect of an option shall be appropriately adjusted (as
the Committee may determine) for any change in the number of issued shares of
Stock resulting from the subdivision or combination of shares of Stock or other
capital adjustments, or the payment of a stock dividend after the effective date
of the Plan, or other change in such shares of Stock effected without receipt of
consideration by the Company; provided that any options covering fractional
shares of Stock resulting from any such adjustment shall be eliminated.
Adjustments under this Section 11 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
11.2 Other. In the event of any acquisition, divestiture or any
other corporate transaction of any kind involving the Company or its
subsidiaries which the Committee, in its discretion, determines to be of such a
kind or nature as to make appropriate an amendment or adjustment to the Plan in
order to effectuate the intent and purposes of the Plan, the Committee, in its
discretion, may make such amendment or adjustment. Without limiting the
generality of the foregoing, the Committee, in its discretion, may, in
connection with any such corporate transaction, (a) reduce or increase the
performance targets established under Section 2, and/or (b) amend any other
terms or provisions of the Plan, all as it deems appropriate to effectuate the
intent and purposes of the Plan.
9
<PAGE>
SECTION 12. Right of Discharge Reserved.
Nothing in the Plan or in any option agreement shall confer upon
any person the right to continue in the service of the Company or any Affiliate
or affect or restrict any right which the Company or any Affiliate may have to
terminate the service of such person.
SECTION 13. No Rights as a Shareholder.
No grantee or other person shall have any of the rights of a
shareholder of the Company with respect to shares of Stock subject to an option
until the issuance of a stock certificate to such grantee for such shares of
Stock. Except as otherwise provided in Section 11, no adjustment shall be made
for dividends, distributions or other rights (whether ordinary or extraordinary,
and whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.
SECTION 14. Nature of Payments.
14.1 Consideration. All options, shares or payments hereunder
shall be granted, issued, delivered or paid, as the case may be, in
consideration of services performed for the Company or for its subsidiaries by
the grantee.
14.2 Other Plans. No options, shares or payments hereunder shall,
unless otherwise determined by the Committee, be taken into account in computing
the grantee's salary or compensation for the purposes of determining any
benefits under (a) any pension, retirement, life insurance or other benefit plan
of the Company or any subsidiary or (b) any agreement between the Company or any
subsidiary and the grantee.
14.3 Waiver. By accepting an option under the Plan, the grantee
thereby waives any claim to the continued exercisability of an option or to
damages or severance entitlement related to non-continuation of the option
beyond the period provided herein or in the applicable option agreement,
notwithstanding any contrary provision in any written employment contract with
the grantee, whether any such contract is executed before or after the grant
date of the option.
SECTION 15. Non-Uniform Determinations.
10
<PAGE>
The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, options under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective option agreements,
as to (a) the persons to receive options under the Plan, (b) the terms and
provisions of options under the Plan and (c) the treatment of leaves of absence
pursuant to Section 5.5(d).
SECTION 16. Other Payments or Options.
Nothing contained in the Plan shall be deemed in any way to limit
or restrict the Company, any Affiliate or the Committee from making any option,
award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect; provided, however,
that the option agreement may contain (but shall not be required to contain)
such provisions as the Committee deems appropriate to insure that the penalty
provisions of Code section 4999 will not apply with respect to any option
granted under the Plan.
SECTION 17. Reorganization.
In the event that the Company is merged or consolidated with
another corporation and, (whether or not the Company shall be the surviving
corporation), or in the event there shall be any change in the shares of Stock
by reason of such merger or consolidation, or in the event that all or
substantially all of the assets of the Company are acquired by another person,
or in the event of a Change of Control after the date of the adoption of this
Plan or in the event of a reorganization or liquidation of the Company (each
such event, a "Reorganization Event") or in the event that the Board shall
propose that the Company enter into a Reorganization Event, then the Committee
may in its discretion, by written notice to a grantee, provide that such
grantee's options will be terminated unless exercised within 30 days (or such
longer period as the Committee shall determine in its sole discretion) after the
date of such notice. The Committee also may in its discretion by written notice
to a grantee provide that all or some of the restrictions on any of his options
may lapse in the event of a Reorganization Event upon such terms and conditions
as the Committee may determine. Whenever deemed appropriate by the Committee,
the actions referred to in this Section 17 may be made conditional upon the
consummation of the applicable Reorganization Event.
SECTION 18. Governing Law.
The Plan shall be governed by the laws of the State of Delaware
applicable to agreements made and to be performed entirely within such State.
SECTION 19. Headings.
The Section headings contained herein are for convenience only
and are not intended to define or limit the contents of said Sections.
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SECTION 20. Effective Date; Term.
20.1 Effective Date. The Plan shall be deemed adopted and become
effective upon the approval thereof by the Board or on such other date as the
Board shall determine; provided that, notwithstanding any other provision of the
Plan, no option granted under the Plan shall be exercisable unless the Plan is
approved, directly or indirectly, by the express consent of shareholders holding
at least a majority of the Company's voting stock voting in person or by proxy
at a duly held shareholders' meeting (or by written consent in lieu of meeting)
within 12 months before or after the date the Plan is adopted.
20.2 Term. The Plan shall terminate ten years after the earlier
of the date on which it becomes effective or is approved by shareholders, and no
options shall thereafter be granted under the Plan. Notwithstanding the
foregoing, all options granted under the Plan prior to such termination date
shall remain in effect until such options have been exercised or terminated in
accordance with the terms and provisions of the Plan and the applicable option
agreement.
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Item 6. EXHIBITS
10.2 NBC Acquisition Corp. 1998 Stock Option Plan adopted June 30, 1998
NBC ACQUISITION CORP.
1998 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Purpose..........................................................1
SECTION 2. Administration...................................................1
SECTION 3. Eligibility......................................................2
SECTION 4. Shares of Stock Subject to the Plan..............................2
SECTION 5. Stock Options....................................................2
5.1 Grant and Type of Stock Options.............................2
5.2 Agreements Evidencing Options...............................3
5.3 Exercisability of Options...................................3
5.4 Payment of Option Price.....................................4
5.5 Termination of Employment...................................5
5.6 Special ISO Requirements....................................6
SECTION 6. Certain Definitions..............................................6
SECTION 7. Amendment of the Plan; Modification of Options...................7
SECTION 8. Restrictions.....................................................7
8.1 Consent Requirements........................................7
8.2 Consent Defined.............................................8
SECTION 9. Nontransferability...............................................8
SECTION 10. Withholding Taxes...............................................8
10.1 General.....................................................8
10.2 Use of Shares...............................................8
SECTION 11. Adjustments.....................................................9
11.1 Upon Changes in Capitalization..............................9
11.2 Other.......................................................9
SECTION 12. Right of Discharge Reserved.....................................9
SECTION 13. No Rights as a Shareholder......................................9
SECTION 14. Nature of Payments.............................................10
14.1 Consideration.............................................10
14.2 Other Plans...............................................10
14.3 Waiver....................................................10
SECTION 15. Non-Uniform Determinations.....................................10
SECTION 16. Other Payments or Options......................................10
SECTION 17. Reorganization.................................................10
SECTION 18. Governing Law..................................................11
SECTION 19. Headings.......................................................11
SECTION 20. Effective Date.................................................11
20.1 Effective Date.............................................11
20.2 Term.......................................................11
<PAGE>
Draft 6/12/98
NBC ACQUISITION CORP.
1998 STOCK OPTION PLAN
SECTION 1. Purpose.
The purpose of this Plan is to promote the interests of NBC
Acquisition Corp. (the "Company") and its Affiliates, by (a) attracting,
motivating and retaining executive personnel of outstanding ability; (b)
focusing the attention of executive management on achievement of sustained long
term results; (c) fostering management's attention on overall corporate
performance and thereby promoting cooperation and teamwork among management of
the operating units; and (d) providing executives with a direct economic
interest in the attainment of demanding long term business objectives.
SECTION 2. Administration.
2.1 The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board"),
which Committee shall consist of two or more directors. It is intended that the
directors appointed to serve on the Committee shall be "non-employee directors"
(within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 (the "Act") and "outside directors" (within the meaning of section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") to the
extent Rule 16b-3 and Code section 162(m), respectively, are applicable;
however, the mere fact that a Committee member shall fail to qualify under
either of the foregoing requirements shall not invalidate any award made by the
Committee which award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time in the discretion of, the Board.
2.2 The Committee shall have the authority (a) to exercise all of
the powers granted to it under the Plan, (b) to construe, interpret and
implement the Plan and any option agreements executed pursuant to the Plan, (c)
to prescribe, amend and rescind rules relating to the Plan, (d) to make any
determination necessary or advisable in administering the Plan, (e) to correct
any defect, supply any omission and reconcile any inconsistency in the Plan, and
(f) generally, to make any and all adjustments it deems appropriate to reflect
the intent and purposes of the Plan.
2.3 The determination of the Committee on all matters relating to
the Plan or any option agreement shall be conclusive.
2.4 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
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2.5 Notwithstanding anything to the contrary contained herein:
(a) until the Board shall appoint the members of the Committee, the Plan shall
be administered by the Board, and (b) the Board may, in its sole discretion, at
any time and from time to time, resolve to administer the Plan. In either of the
foregoing events, the term Committee as used herein shall mean the Board.
SECTION 3. Eligibility.
Options under the Plan may be granted to such employees,
officers, directors and consultants of the Company and its Affiliates ("Eligible
Employees") as the Committee shall from time to time in its sole discretion
select. The Committee may, but shall not be required to, consult with such
executives of the Company and its Affiliates as it deems appropriate prior to
making such grants.
SECTION 4. Shares of Stock Subject to the Plan.
4.1 Reserved Shares. Subject to Section 11 (relating to
adjustments upon changes in capitalization), the aggregate number of shares of
Stock (as defined in Section 6) that may be acquired under the Plan by any one
Eligible Employee and by all Eligible Employees pursuant to options granted
hereunder shall not exceed 31,000 shares. Shares of Stock covered by options
granted under the Plan, which options expire, terminate or are canceled for any
reason (other than an option, or part thereof, that is canceled by the Committee
and for which cash is paid in respect thereof) shall again become available for
award under the Plan.
4.2 Type of Shares. Shares of Stock that shall be subject to
issuance pursuant to the Plan shall be authorized and unissued shares or
treasury shares.
SECTION 5. Stock Options.
5.1 Grant and Type of Stock Options.
(a) General. Subject to the terms of the Plan, the
Committee may grant options to purchase shares of Stock in such amounts and
subject to such terms and conditions as the Committee shall from time to time in
its sole discretion determine.
(b) Types of Options Under Plan.
(i) Options granted under the Plan may be either
(A) "nonqualified" stock options subject to the provisions of Code
section 83, or (B) options intended to qualify for incentive stock
option treatment described in section 422 of the Code; provided,
however, that incentive stock options may only be granted to employees
of the Company or its "Parent Corporation" or "Subsidiary Corporation"
in accordance with Code section 424.
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(ii) All options when granted are intended to be
nonqualified stock options, unless the applicable option agreement
explicitly states that the option is intended to be an incentive stock
option. If an option is intended to be an incentive stock option, and
if for any reason such option (or any portion thereof) shall not
qualify as an incentive stock option, then, to the extent of such
nonqualification, such option (or portion) shall be regarded as a
nonqualified stock option appropriately granted under the Plan,
provided that such option (or portion) otherwise meets the Plan's
requirements relating to nonqualified stock options.
5.2 Agreements Evidencing Options.
(a) General. Options granted under the Plan shall be
evidenced by written agreements, which shall (i) contain such provisions not
inconsistent with the terms of the Plan as the Committee may in its sole
discretion deem necessary or desirable and (ii) be referred to herein as "option
agreements." If the grantee is party to an employment or consulting agreement
the terms of which relate to stock options and which are inconsistent with the
terms of any such option agreement, the terms of such option agreement shall
govern.
(b) Certain Terms. Each option agreement shall set forth
the number of shares of Stock subject to the option granted thereby and the
amount (the "option exercise price") payable by the grantee to the Company in
connection with the exercise of the option evidenced thereby. In the case of an
incentive stock option, the exercise price per share shall not be less than the
Fair Market Value of a share of Stock on the date the option is granted.
Nonqualified options may be granted at less than Fair Market Value. Each option
agreement shall set forth conditions subject to which the option evidenced
thereby shall become exercisable.
5.3 Exercisability of Options.
(a) Standard Exercise Provisions. Subject to Section 5.5
and the other terms of the Plan or as otherwise determined by the Committee:
(i) Each option shall become exercisable on such
dates (A) with respect to 25% of the shares of Stock subject thereto,
rounded down to the next lower full share, on the date of grant; (B)
with respect to 50% of the shares of Stock originally subject thereto
on the first anniversary of the date of grant; (C) with respect to 75%
of the shares of Stock originally subject thereto on the second
anniversary of the date of grant; and (D) with respect to 100% of the
shares of Stock originally subject thereto on the third anniversary of
the date of grant;
(ii) Each option shall become exercisable with
respect to 100% of the shares of stock subject thereto in the event
the optionee's employment terminates by reason of death or disability;
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(iii) In the Committee's sole discretion, each
option or portion thereof may become exercisable with respect to all
or a portion of the shares of Stock subject thereto in the event of a
Change of Control (as defined in Section 6) or on the sale or
disposition of all or substantially all of an Affiliate;
(iv) Each option shall terminate and cease to be
exercisable on the tenth anniversary of the date of grant thereof; and
(v) Each option, once exercisable may be exercised
from time to time as to all or part of the full number of shares as to
which such option shall then be exercisable.
(b) Notice of Exercise; Exercise Date.
(i) An option shall be exercisable by the filing
of a written notice of exercise with the Company, on such form and in
such manner as the Committee shall in its sole discretion prescribe,
and by payment in accordance with Section 5.4.
(ii) For purposes of the Plan, the "option
exercise date" shall be deemed to be the first business day
immediately following the date written notice of exercise is received
by the Company.
5.4 Payment of Option Price.
(a) Tender Due Upon Notice of Exercise. Unless the
applicable option agreement otherwise provides or the Committee in its sole
discretion otherwise determines, (i) any written notice of exercise of an option
shall be accompanied by payment of the full purchase price for the shares being
purchased and (ii) the grantee shall have no right to receive shares of Stock
with respect to an option exercise prior to the option exercise date.
(b) Manner of Payment. Payment of the option exercise
price shall be made in any combination of the following:
(i) by certified or official bank check payable to
the Company (or the equivalent thereof acceptable to the Committee);
(ii) with the consent of the Committee in its sole
discretion, by personal check (subject to collection); and
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(iii) if and to the extent provided in the
applicable option agreement, by delivery of previously acquired shares
of Stock owned by the grantee for at least six months having a Fair
Market Value (determined as of the option exercise date) equal to the
portion of the option exercise price being paid thereby, provided that
the Committee may require the grantee to furnish an opinion of counsel
acceptable to the Committee to the effect that such delivery would not
result in the grantee incurring any liability under Section 16(b) of
the Act and does not require any Consent (as defined in Section 8.2).
(c) Issuance of Shares. As soon as practicable after
receipt of full payment, the Company shall, subject to the provisions of Section
8, deliver to the grantee one or more certificates for the shares of Stock so
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
5.5 Termination of Employment.
(a) General Rule. All options granted to a grantee shall
terminate and no longer be exercisable upon such grantee's termination of
employment for any reason, except to the extent post-employment exercise of the
exercisable portion of an option (as determined under Section 5.3) is permitted
in accordance with this Section 5.5.
(b) Cause. All options granted to a grantee shall
terminate and expire on the day the grantee's employment with the Company and
its subsidiaries is terminated for Cause. For purposes of the Plan, a grantee's
employment shall be deemed to be terminated for "Cause" if (i) the Executive
neglects his duties, is convicted of any felony or gross misdemeanor (except
traffic related), is guilty of gross misconduct in connection with the
performance of his duties, or materially breaches affirmative or negative
covenants or undertakings under any employment agreement with the Company or an
Affiliate, or (ii) such grantee terminates his employment with the Company and
its subsidiaries and the Committee determines, within 90 days after the
grantee's termination date, that such grantee's employment could have been
terminated for Cause pursuant to clause (i).
(c) Death and Disability. If a grantee's employment with
the Company and its subsidiaries terminates by reason of death or disability (as
defined in section 22(e)(3) of the Code), all of the grantee's options shall be
exercisable by such grantee or, as the case may be, by such grantee's
court-appointed legal representative or, in the case of the grantee's death, by
the person or persons to whom such options pass under the grantee's will (or, if
applicable, pursuant to the laws of descent and distribution) until the earlier
of (i) one year after the grantee's termination by reason of death or
disability, and (ii) the date on which such options terminate or expire in
accordance with the other provisions of the Plan and the option agreement.
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(d) Regular Termination; Leaves of Absence. If the
grantee's employment terminates for reasons other than as provided in Section
5.5(b) or (c), the portion, if any, of options granted to such grantee that were
exercisable (as determined under Section 5.3) immediately prior to such
termination of employment may be exercised until the earlier of (i) 90 days
after the grantee's date of termination, and (ii) the date on which such options
terminate or expire in accordance with the other provisions of the Plan and the
option agreement. The Committee may in its discretion determine (x) whether any
leave of absence (including short-term or long-term disability or medical leave)
shall constitute a termination of employment for purposes of the Plan and (y)
the impact, if any, of any such leave on outstanding awards under the Plan.
5.6 Special ISO Requirements.
(a) Term. No incentive stock option may have a term in
excess of ten years.
(b) 10% Owner. If an option granted under the Plan is
intended to be an incentive stock option and if the grantee, at the time of
grant, owns stock possessing 10% or more of the total combined voting power of
all classes of stock of the grantee's employer corporation or of its parent or
subsidiary corporation, then (a) the option exercise price per share shall in no
event be less than 110% of the Fair Market Value of the Stock on the date of
such grant and (b) such option shall not be exercisable after the expiration of
five years after the date such option is granted.
SECTION 6. Certain Definitions.
6.1 "Affiliate" shall mean, any person or entity which, at the
time of reference, directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.
6.2 "Change of Control" shall mean, with respect to the Company,
a transaction pursuant to which a person or group (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act")), other than
HWP and its Affiliates, acquires the collective ability to designate directly or
indirectly a majority of the members of the Board (whether by contract or
otherwise).
6.3 "Effective Date" shall mean April 1, 1998.
6.4 "Fair Market Value" shall mean as of any date in respect of
any share of Stock traded on a national securities exchange, the closing price
of a share of Stock as reported on the exchange on which such shares primarily
trade on such date. If Stock is not traded on a national exchange on such date,
Fair Market Value shall be determined by the Committee in its sole discretion.
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6.5 "Fiscal Year" shall mean the fiscal year ending March 31,
whether or not such period is the fiscal year of the Company.
6.6 "Plan" shall mean the NBC Acquisition Corp. 1998 Stock Option
Plan.
6.7 "Stock" shall mean common stock, par value $.01 per share, of
the Company as constituted on the effective date of the Plan, and any other
shares into which such common stock shall thereafter be changed by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
SECTION 7. Amendment of the Plan; Modification of Options.
7.1 Plan Amendments. The Board may at any time and from time to
time suspend, discontinue or amend the Plan in any respect whatsoever, except
that (i) no such amendment or action shall materially and adversely impair any
rights under any option theretofore granted under the Plan without either
providing fair consideration to the grantee of such option or obtaining the
consent of the grantee of such option and (ii) no such amendment for which
shareholder approval would be required under any law, (including Code section
162(m) and Rule 16b-3, to the extent applicable) or the rules of any securities
exchange or other regulatory organization shall be effective without such
shareholder approval.
7.2 Option Modifications. With the consent of the grantee and
subject to the terms and conditions of the Plan (including Section 7.1), the
Committee may amend outstanding option agreements with such grantee, including,
without limitation, any amendment that would (i) accelerate the time or times at
which an option may become exercisable and/or (ii) extend the scheduled
termination or expiration date of the option.
SECTION 8. Restrictions.
8.1 Consent Requirements. If the Committee shall at any time
determine that any Consent (as hereinafter defined) is necessary or desirable as
a condition of, or in connection with, the granting of any option under the
Plan, the acquisition, issuance or purchase of shares or other rights hereunder
or the taking of any other action hereunder (each such action, a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee. Without limiting the generality of the foregoing, if (i) the
Company may make any payment under the Plan in cash, Stock or both and (ii) the
Committee determines that a Consent is necessary or desirable as a condition of,
or in connection with, payment in any one or more of such forms, then the
Committee shall be entitled to determine not to make any payment whatsoever
until such Consent has been obtained.
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8.2 Consent Defined. The term "Consent" as used herein with
respect to any Plan Action means (a) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or other
regulatory organization or under any federal, state or local law, rule or
regulation, (b) the expiration, elimination or satisfaction of any prohibitions,
restrictions or limitations under any federal, state or local law, rule or
regulation or the rules of any securities exchange or other regulatory
organization, (c) any and all written agreements and representations by the
grantee with respect to the disposition of shares, or with respect to any other
matter which the Committee shall deem necessary or desirable to comply with the
terms of any such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing, qualification or
registration be made, and (d) any and all consents, waivers, clearances and
approvals in respect of a Plan Action by any governmental or other regulatory
bodies or any parties to any loan agreements or other contractual obligations of
the Company or any of its subsidiaries.
SECTION 9. Nontransferability.
No option granted to any grantee shall be assignable or
transferable by the grantee other than by will or by the laws of descent and
distribution. During the lifetime of the grantee, all rights with respect to any
option granted to the grantee shall be exercisable only by the grantee or the
grantee's court-appointed legal representative. Notwithstanding the foregoing,
the Committee may provide in an applicable option agreement that an option may
be transferred for estate planning purposes, to a family trust or family
partnership for the benefit of immediate members of the optionee's family.
SECTION 10. Withholding Taxes.
10.1 General. Whenever under the Plan shares of Stock are to be
delivered pursuant to an option, the Committee may require as a condition of
delivery that the grantee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirements related thereto.
Whenever cash is to be paid under the Plan, the Company may, as a condition of
its payment, deduct therefrom, or from any salary or other payments due to the
grantee, an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto or to the delivery of
any shares of Stock under the Plan.
10.2 Use of Shares. Subject to the Committee's consent, a grantee
may elect to satisfy all or part of the foregoing withholding requirements by
delivery of unrestricted shares of Stock owned by the grantee for at least six
months (or such other period as the Committee may determine) having a Fair
Market Value (determined as of the date of such delivery by the grantee) equal
to all or part of the amount to be so withheld, provided that the Committee may
require, as a condition of accepting any such delivery, the grantee to furnish
an opinion of counsel acceptable to the Committee to the effect that such
delivery would not result in the grantee incurring any liability under Section
16(b) of the Act or any other federal or state securities laws, rules or
regulations.
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SECTION 11. Adjustments.
11.1 Upon Changes in Capitalization. To the extent specified by
the Committee, the number of shares of Stock that may be issued pursuant to
options under the Plan, the number of shares of Stock subject to options, the
exercise price of options theretofore granted under the Plan and the amount
payable by a grantee in respect of an option shall be appropriately adjusted (as
the Committee may determine) for any change in the number of issued shares of
Stock resulting from the subdivision or combination of shares of Stock or other
capital adjustments, or the payment of a stock dividend after the effective date
of the Plan, or other change in such shares of Stock effected without receipt of
consideration by the Company; provided that any options covering fractional
shares of Stock resulting from any such adjustment shall be eliminated.
Adjustments under this Section 11 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
11.2 Other. In the event of any acquisition, divestiture or any
other corporate transaction of any kind involving the Company or its
subsidiaries which the Committee, in its discretion, determines to be of such a
kind or nature as to make appropriate an amendment or adjustment to the Plan in
order to effectuate the intent and purposes of the Plan, the Committee, in its
discretion, may make such amendment or adjustment. Without limiting the
generality of the foregoing, the Committee, in its discretion, may, in
connection with any such corporate transaction, amend any terms or provisions of
the Plan, all as it deems appropriate to effectuate the intent and purposes of
the Plan.
SECTION 12. Right of Discharge Reserved.
Nothing in the Plan or in any option agreement shall confer upon
any person the right to continue in the service of the Company or any Affiliate
or affect or restrict any right which the Company or any Affiliate may have to
terminate the service of such person.
SECTION 13. No Rights as a Shareholder.
No grantee or other person shall have any of the rights of a
shareholder of the Company with respect to shares of Stock subject to an option
until the issuance of a stock certificate to such grantee for such shares of
Stock. Except as otherwise provided in Section 11, no adjustment shall be made
for dividends, distributions or other rights (whether ordinary or extraordinary,
and whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.
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SECTION 14. Nature of Payments.
14.1 Consideration. All options, shares or payments hereunder
shall be granted, issued, delivered or paid, as the case may be, in
consideration of services performed for the Company or for its subsidiaries by
the grantee.
14.2 Other Plans. No options, shares or payments hereunder shall,
unless otherwise determined by the Committee, be taken into account in computing
the grantee's salary or compensation for the purposes of determining any
benefits under (a) any pension, retirement, life insurance or other benefit plan
of the Company or any subsidiary or (b) any agreement between the Company or any
subsidiary and the grantee.
14.3 Waiver. By accepting an option under the Plan, the grantee
thereby waives any claim to the continued exercisability of an option or to
damages or severance entitlement related to non-continuation of the option
beyond the period provided herein or in the applicable option agreement,
notwithstanding any contrary provision in any written employment contract with
the grantee, whether any such contract is executed before or after the grant
date of the option.
SECTION 15. Non-Uniform Determinations.
The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, options under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective option agreements,
as to (a) the persons to receive options under the Plan, (b) the terms and
provisions of options under the Plan and (c) the treatment of leaves of absence
pursuant to Section 5.5(d).
SECTION 16. Other Payments or Options.
Nothing contained in the Plan shall be deemed in any way to limit
or restrict the Company, any Affiliate or the Committee from making any option,
award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect; provided, however,
that the option agreement may contain (but shall not be required to contain)
such provisions as the Committee deems appropriate to insure that the penalty
provisions of Code section 4999 will not apply with respect to any option
granted under the Plan.
SECTION 17. Reorganization.
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In the event that the Company is merged or consolidated with
another corporation and, (whether or not the Company shall be the surviving
corporation), or in the event there shall be any change in the shares of Stock
by reason of such merger or consolidation, or in the event that all or
substantially all of the assets of the Company are acquired by another person,
or in the event of a Change of Control after the date of the adoption of this
Plan or in the event of a reorganization or liquidation of the Company (each
such event, a "Reorganization Event") or in the event that the Board shall
propose that the Company enter into a Reorganization Event, then the Committee
may in its discretion, by written notice to a grantee, provide that such
grantee's options will be terminated unless exercised within 30 days (or such
longer period as the Committee shall determine in its sole discretion) after the
date of such notice. The Committee also may in its discretion by written notice
to a grantee provide that all or some of the restrictions on any of his options
may lapse in the event of a Reorganization Event upon such terms and conditions
as the Committee may determine. Whenever deemed appropriate by the Committee,
the actions referred to in this Section 17 may be made conditional upon the
consummation of the applicable Reorganization Event.
SECTION 18. Governing Law.
The Plan shall be governed by the laws of the State of Delaware
applicable to agreements made and to be performed entirely within such State.
SECTION 19. Headings.
The Section headings contained herein are for convenience only
and are not intended to define or limit the contents of said Sections.
SECTION 20. Effective Date; Term.
20.1 Effective Date. The Plan shall be deemed adopted and become
effective upon the approval thereof by the Board or on such other date as the
Board shall determine; provided that, notwithstanding any other provision of the
Plan, no option granted under the Plan shall be exercisable unless the Plan is
approved, directly or indirectly, by the express consent of shareholders holding
at least a majority of the Company's voting stock voting in person or by proxy
at a duly held shareholders' meeting (or by written consent in lieu of meeting)
within 12 months before or after the date the Plan is adopted.
20.2 Term. The Plan shall terminate ten years after the earlier
of the date on which it becomes effective or is approved by shareholders, and no
options shall thereafter be granted under the Plan. Notwithstanding the
foregoing, all options granted under the Plan prior to such termination date
shall remain in effect until such options have been exercised or terminated in
accordance with the terms and provisions of the Plan and the applicable option
agreement.
11
<PAGE>
Item 6. Exhibit
10.3 NBC Acquisition Corp. Senoir Management Bonus Plan adopted
June 30, 1998
NBC ACQUISITION CORP.
SENIOR MANAGEMENT FY 3/99 BONUS PLAN
PURPOSE
To incentivize and reward Nebraska Book senior management for meeting and/or
exceeding annual financial goals.
PARTICIPANTS
The Participants listed below will be eligible to earn a management bonus
during FY 3/99.
Mark W. Oppegard William H. Allen
Larry R. Rempe Ardean A. Arndt
Thomas A. Hoff Bruce E. Nevius
Kenneth F. Jirovsky
BONUS PLAN
The Bonus will be paid based upon the actual level of FY 3/99 EBITDA
achieved. The EBITDA Bonus will be calculated in accordance with Attachment
A.
OTHER
In the event of an acquisition or divestiture during the year, the schedules
in Attachments A will be equitably adjusted by the Board of Directors.
Earned bonuses will be paid to the Participants upon receipt of the audit.
Fifty percent of the aggregate bonuses earned will be allocated among the
Participants pro-rata to their respective salaries. The remaining fifty
percent will be allocated among the Participants at the discretion of the
Board of Directors.
<PAGE>
Attachment A
CALCULATION OF BONUS
($ 000'S)
The bonus schedule will call for no bonus to be paid if Pre Bonus EBITDA is
below $30,000. For points between the $30,000 level and the budgeted level of
$32,400, bonus amounts will be on a pro rata basis.
Pre Bonus
EBITDA Bonus
------------------
$32,400 $225
$30,000 $ 75
If, for example, Pre Bonus EBITDA is $31,200, the applicable bonus will be $150
Should FY 3/99 EBITDA exceed $32,400, the EBITDA bonus will be increased by 5.0%
of the incremental EBITDA. As an example, assuming a FY 3/99 EBITDA of $34,400,
the EBITDA bonus would be calculated in the following manner:
FY 3/99 EBITDA 34,400
Less: 32,400
------
Incremental EBITDA 2,000
Bonus percentage 5.0%
------
Incremental bonus 100
Bonus at $32,400 225
------
Total EBITDA bonus 325
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001056758
<NAME> NEBRASKA BOOK COMPANY, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 4,964,261
<SECURITIES> 0
<RECEIVABLES> 22,783,226
<ALLOWANCES> 164,829
<INVENTORY> 66,780,007
<CURRENT-ASSETS> 99,915,443
<PP&E> 29,843,943
<DEPRECIATION> 6,404,741
<TOTAL-ASSETS> 166,248,984
<CURRENT-LIABILITIES> 49,736,671
<BONDS> 168,815,767
100
0
<COMMON> 0
<OTHER-SE> (52,463,434)
<TOTAL-LIABILITY-AND-EQUITY> 166,248,984
<SALES> 30,278,178
<TOTAL-REVENUES> 30,278,178
<CGS> 17,561,769
<TOTAL-COSTS> 17,561,769
<OTHER-EXPENSES> 14,009,121
<LOSS-PROVISION> 20,536
<INTEREST-EXPENSE> 4,585,082
<INCOME-PRETAX> (5,898,330)
<INCOME-TAX> (1,976,198)
<INCOME-CONTINUING> (3,922,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,922,132)
<EPS-PRIMARY> (39,221)
<EPS-DILUTED> (39,221)
</TABLE>
