<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 000-26889
JORE CORPORATION
(Exact Name as Registrant as Specified in Its Charter)
Montana 81-0465233
(State of Incorporation) (I.R.S. Employer Identification No.)
45000 Highway 93 South
Ronan, Montana 59864
(Address of principal executive offices)
(406) 676-4900
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- -----
As of April 28, 2000, 13,840,887 shares of the Registrant's Common Stock,
without par value, were outstanding.
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JORE CORPORATION
FORM 10-Q
INDEX
<TABLE>
<S> <C>
PAGE NUMBER
Part I: Financial Information..............................................2
Item 1 Financial Statements...............................................2
Consolidated Balance Sheets........................................2
Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999......................................3
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999......................................4
Notes to Consolidated Financial Statements.........................5
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................6
Item 3 Qualitative And Quantitative Disclosures About Market
Risk..............................................................10
PART II. OTHER INFORMATION.................................................10
Item 1 Legal Proceedings.................................................10
Item 2 Changes in Securities and Use of Proceeds.........................11
Item 6 Exhibits and Reports on Form 8-K..................................12
Signatures..................................................................12
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
JORE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
---------------------------------------------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 94,283 $ 166,898
Short term investments 7,691,791 4,798,046
Accounts receivable, net of allowances for doubtful
accounts of $57,533 and $56,645, respectively 19,031,479 7,119,264
Shareholder notes receivable 1,564,219 1,499,494
Notes receivable from affiliates 11,799 54,637
Inventory 27,795,284 32,296,295
Other current assets 2,494,509 3,859,573
---------------------------------------------------
Total current assets 58,683,364 49,794,207
Property, plant and equipment, net 58,560,925 65,141,472
Intangibles & other long-term assets, net 663,268 837,941
---------------------------------------------------
Total assets $ 117,907,557 $ 115,773,620
===================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,815,501 $ 6,641,429
Accrued expenses 3,406,448 2,739,867
Operating line of credit 25,000,000 19,910,608
Shareholder note payable 81,495 57,784
Other current liabilities 770,981 622,017
Current portion of long-term debt 3,530,287 4,109,602
---------------------------------------------------
Total current liabilities 42,604,712 34,081,307
Long-term debt, net of current portion 27,779,153 34,068,992
Deferred income tax liabilities 2,769,253 3,289,087
---------------------------------------------------
Total liabilities 73,153,118 71,439,386
Commitments and contingencies (See Note 10)
Shareholders' equity:
Preferred stock, no par value
Authorized, 30,000,000 shares; issued and
outstanding, 0 shares
Common stock, no par value
Authorized, 100,000,000 shares; issued and
outstanding, 13,840,887 and 13,826,020, respectively 40,757,891 40,856,877
Deferred compensation - stock options (16,529) (12,746)
Retained earnings 4,013,077 3,490,103
---------------------------------------------------
Total shareholders' equity 44,754,439 44,334,234
---------------------------------------------------
Total liabilities and shareholders' equity $ 117,907,557 $ 115,773,620
===================================================
</TABLE>
See notes to consolidated financial statements.
2
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JORE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the quarter ending March 31,
--------------------------------------------------
1999 2000
--------------------------------------------------
<S> <C> <C>
Net revenues $ 9,798,361 $ 7,063,854
Cost of goods sold 6,858,694 4,988,495
--------------------------------------------------
Gross profit 2,939,667 2,075,359
Operating expenses:
Product development 116,801 110,446
Sales & marketing 376,652 482,902
General & administrative 1,149,883 1,679,159
--------------------------------------------------
Total operating expenses 1,643,336 2,272,507
--------------------------------------------------
Income (loss) from operations 1,296,331 (197,148)
Other (income) expense:
Interest expense, net 454,904 618,820
Other (income) expense 1,863 (11,310)
--------------------------------------------------
Net other expense 456,767 607,510
Income (loss) before income taxes 839,564 (804,658)
Provision (benefit) for income taxes (281,680)
--------------------------------------------------
Net income (loss) $ 839,564 $ (522,978)
==================================================
Net income (loss) per common share:
Basic $ 0.09 $ (0.04)
Diluted $ 0.09 $ (0.04)
Shares used in calculation of income (loss) per share
Basic 9,522,642 13,836,432
Diluted 9,664,681 14,034,599
Pro forma data (unaudited):
Net income $ 839,564
Pro forma provision for income taxes 332,445
Pro forma net income $ 507,119
Pro forma net income per common share (unaudited):
Basic $ 0.05
Diluted $ 0.05
</TABLE>
See notes to consolidated financial statements.
3
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JORE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the quarter ending March 31,
--------------------------------------------------
2000 1999
--------------------------------------------------
<S> <C> <C>
Operating activities:
Net income $ (522,978) $ 839,564
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation 951,278 393,189
Amortization 6,884 23,155
Compensation expense - stock options 3,783 325
Bad debt expense 14,338 -
Provision for inventory obsolescence 35,421 -
Amortization of discount on investments (106,255) -
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable 11,897,877 7,815,650
Other receivables - (13,817)
Inventory (4,536,430) (3,692,795)
Prepaid expenses and other current assets (1,365,064) 442,183
Deferred income taxes 519,834 -
Intangibles and other long-term assets (181,557) (163,365)
Accounts payable (3,174,072) 178,086
Accrued expenses (666,581) 1,634,808
Other current liabilities - (40,973)
Income taxes payable (56,420) -
--------------------------------------------------
Net cash provided by operating activities $ 2,820,058 $ 7,416,010
Investing activities:
Advances on notes receivable - (25,885)
Advances on shareholder notes receivable (36,077) -
Payments on shareholder notes receivable 100,802 77,764
Advances on notes receivable from affiliates (42,838) -
Payments on notes receivable from affiliates - 75,747
Proceeds from investments 3,000,000 -
Purchase of property and equipment (7,531,825) (4,916,903)
--------------------------------------------------
Net cash used by investing activities $ (4,509,938) $ (4,789,277)
--------------------------------------------------
Financing activities:
Proceeds from options exercised 85,406 -
Proceeds from long-term debt 11,020,373 1,804,560
Payments on long-term debt (4,151,219) (527,219)
Proceeds from short-term debt - -
Payments on short-term debt (102,675) -
Payments on operating line of credit, net (5,089,390) (3,916,194)
--------------------------------------------------
Net cash provided (used) by financing activities $ 1,762,495 $ (2,638,853)
--------------------------------------------------
Net increase (decrease) in cash 72,615 (12,120)
Cash and cash equivalents:
Beginning of period 94,283 34,736
--------------------------------------------------
End of period $ 166,898 $ 22,616
==================================================
Supplemental disclosures:
Cash paid:
Interest paid $ 1,635,231 $ 639,225
Noncash financing and investing activities:
Common stock issued for land $ - $ 82,302
</TABLE>
See notes to consolidated financial statements.
4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The consolidated balance sheet of Jore Corporation as of March 31,
2000, the related consolidated statements of operations for the three month
period ended March, 31, 2000 and 1999, and the consolidated statements of cash
flows for the three months ended March 31, 2000 and 1999 are unaudited. In the
opinion of management, these unaudited financial statements include all
adjustments, consisting only of normal recurring items, that are necessary for a
fair presentation of the financial information set forth therein. Interim
results are not necessarily indicative of results for a full year.
The consolidated financial statements and notes are presented as
required by the rules and regulations of the Securities and Exchange Commission
and do not contain certain information included in our annual financial
statements and notes. You should read these interim financial statements in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our audited financial statements and the notes
thereto for the year ended December 31, 1999 included in our Annual Report on
Form 10-K/A filed with the Securities and Exchange Commission.
(2) Significant customers:
Our sales are concentrated among a few major customers. Sales to
customers who individually accounted for 10% of total sales for the three months
ended March 31, 1999 and 2000, and receivables from customers who individually
accounted for 10% of total receivables at March 31, are as follows:
Three months ended Three months ended
March 31, 1999 March 31, 2000
-------------- --------------
Sales to:
Customer A 45.5% 47.6%
Customer B 29.2 21.2
Customer C 14.4 22.6
All other customers 10.9 8.6
------------------------------------
100.0% 100.0%
====================================
5
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Receivables from:
Customer A 58.2% 50.2%
Customer B 28.1 25.5
Customer C 8.9 15.9
All other customers 4.8 8.4
------------------------------------
100.0% 100.0%
====================================
(3) Balance Sheet Components
December 31, March 31,
1999 2000
------------------------------------
Inventory
Component parts/raw materials $13,135,170 $15,344,611
Work in progress* 11,880,461 10,417,613
Finished goods 3,268,238 6,770,859
Provision for obsolescence (488,585) (236,788)
-------------------------------------
Totals $27,795,284 $32,296,295
====================================
*Work-in progress is composed primarily of finished sub-assemblies, which
includes hex-shank drill bits, hex-shank masonry bits, completed but unlabeled
screw guides and other component parts.
(4) Subsequent Events
In May 2000, we received a written commitment from First Security
Bank for the revision of our working capital line through participation by
another lender to increase the maximum borrowing limit to $35.0 million.
Limits on the line advances linked to inventory and accounts receivable
levels will continue to be 65% of eligible inventory and 85% of eligible
accounts receivable, and the interest rate terms will also be maintained.
Under the commitment, the interest rate will decline upon the achievement of
certain declines in the ratio of funded debt to EBITDA (earnings before
interest, taxes, depreciation and amortization). The term of the line will be
for two years. Outstanding advances on the line as of May 13, 2000 were $20.0
million. The line will continue to be secured with receivables, inventory,
equipment, patents, and general intangibles. Final implementation of the
modifications is subject to usual and customary conditions, including mutual
execution of amendment documentation.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion in conjunction with our
Unaudited Consolidated Financial Statements and Notes thereto included at
Item 1 of this quarterly report. Certain statements contained in this report,
including, without limitation, projections of revenues, income, expenses, and
loss, plans for product development, future operations, and financing needs
or plans, as well as statements containing words like "believe,"
"anticipate," "estimate," "intend," "seek," "expect," and other similar
expressions, constitute "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. You should
not rely on these forward-looking statements, which reflect our opinion as of
the date of this report. Our actual results could differ materially from
those anticipated in these forward-looking statements. Factors that could
cause or contribute to such material differences include but are not limited
to risks described in Item 1, "Business-Risk Factors" in our annual report on
Form 10-K/A for the fiscal year ended December 31, 1999.
OVERVIEW
Jore Corporation was founded to develop and produce innovative power
tool accessories to meet the increasing demand resulting from the growth in the
cordless power tool market. Our revenues have grown through the addition of new
customers, increased sales to established customers and expanded product
offerings. We began our business selling a limited number of drilling and
driving accessories to independent local and regional hardware stores and
building supply centers. In 1990, Makita became our first national customer and
we devoted significant resources to servicing its demand for our products.
6
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By 1996, we had expanded our product portfolio to include our reversible
drill and drivers and contractor versions of our products. We also began to
diversify our customer base by selling products to Black & Decker/DeWalt, as
well as to retail customers. In 1997 and 1998, we continued to expand our
customer base by selling to Sears, Home Depot, Canadian Tire and Tru*Serv and
further expanded our product line by introducing our quick change system and
new drilling and driving accessories such as wood boring and masonry bits. In
1999, we increased our revenues and margins by pursuing direct relationships
with major retailers through sales of private label and STANLEY-REGISTERED
TRADEMARK- branded products, increasing sales to existing customers, and
augmenting our existing product portfolio.
Net revenues are recognized at the time of shipment and sales terms are
typically net 60 or 90 days. Historically, we have experienced negligible bad
debt and do not expect bad debt to be material in the future.
Cost of goods sold consists primarily of raw materials, labor,
shipping, depreciation, and other direct and indirect manufacturing expenses
associated with the production and packaging of products.
Our operating expenses include product development costs, sales and
marketing expenses and general and administrative expenses. Product development
expenses consist principally of personnel costs and material associated with the
development of new products and changes to existing products, which are charged
to operations as incurred. Sales and marketing expenses consist primarily of
selling commissions paid to Manufacturers' Sales Associates, our sales
representative, salaries and employee benefits for internal sales personnel and
costs of advertising and promotional activities. General and administrative
expenses consist primarily of salaries and employee benefits for executive,
managerial and administrative personnel, license fees, facility leases,
depreciation and amortization of capitalized administrative equipment and
building costs and travel and business development costs. Other expense consists
primarily of interest expense associated with our borrowings, net of interest
income on cash and cash equivalents.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
NET REVENUES. Net revenues decreased from $9.8 million for the three
months ended March 31, 1999 to $7.1 million for the three months ended March 31,
2000, representing a 27.9% decrease. This was due primarily to a delay in timing
from 1999 to 2000 of a significant promotional effort by one of our principal
customers and the continuing transition from our OEM customers to the direct-to-
retail channel. While sales to our OEM customers remained relatively flat during
the first quarter of 2000, sales to retailers under their private labels slowed.
Sales under the Stanley-Registered Trademark- brand are not comparable on a
quarterly basis, as we obtained the license during the second quarter of 1999.
COST OF GOODS SOLD. Cost of goods sold decreased from $6.9 million for
the three months ended March 31, 1999 to $5.0 million for
7
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the three months ended March 31, 2000, representing a 27.3% decrease. The
decrease relates primarily to the reduction in sales. Cost of goods sold as a
percentage of revenues increased slightly from 70.0% for the three months
ended March 31, 1999 to 70.6% for the three months ended March 31, 2000. A
number of issues impacted our gross margin in the first quarter. In the first
quarter of 2000, a substantial portion of our revenue was with our OEM
customers, which resulted in lower margins. Another issue which impacted our
gross margin was our vertical integration. As we have become more vertically
integrated, our fixed costs have increased, which depress our margins in times
of lower sales. Lastly, a majority of our sales were comprised of higher
cost, purchased inventory items.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses decreased
from $117,000 for the three months ended March 31, 1999 to $110,000 for the
three months ended March 31, 2000, representing a 5.4% decrease. In addition to
the labor expensed for the three months ended March 31, 1999 and for the three
months ended March 31, 2000, we capitalized $262,000 and $477,000, respectively,
of labor related to equipment constructed in-house. These amounts are included
in property, plant and equipment on the balance sheet and depreciated over the
life of the equipment. The increase in capitalized costs is related to an
increase in engineers who are focused on automation of our processes in our
assembly and packaging areas.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased
from $377,000 for the three months ended March 31, 1999 to $483,000 for the
three months ended March 31, 2000, representing a 28.2% increase. Advertising
and promotion expenses increased by $122,000 during the first quarter of 2000 as
compared to the first quarter of 1999, due to increased retail advertising as we
continue to focus efforts on the penetration of our direct-to-retail channels
under both private labels and the Stanley-Registered Trademark- brand.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased from $1.1 million for the three months ended March 31, 1999
to $1.7 million for the three months ended March 31, 2000, representing a 46.0%
increase. The increase was a result of the expansion of our management team and
infrastructure to accommodate future growth. We increased our general and
administrative staff, which includes executive, managerial and administrative
personnel, from 61 at March 31, 1999 to 107 at March 31, 2000. Professional
fees, insurance costs, and other equity related costs related to being a public
company also increased.
OTHER EXPENSE. Other expense increased from $457,000 for the three
months ended March 31, 1999 to $608,000 for the three months ended March 31,
2000, representing a 33.0% increase. This increase was the result of greater
borrowings and a corresponding increase in interest expense.
NET INCOME / LOSS. As a result of all these factors, we experienced a
loss of $523,000 for the three months ended March 31, 2000, compared with pro
forma net income of $507,000 for the three months ended March 31, 1999. Because
we were an S corporation not subject to income taxes in the first quarter of
1999, there was no provision for income taxes. For comparison purposes, we
have calculated and presented a pro forma provision for income taxes totalling
8
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$332,000 for the first quarter of 1999, computed as if we had been a
C corporation subject to income taxes for such period.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded operations with short-term lines of credit
and term loans for equipment purchases, and, to a lesser extent, net income from
operations. Our initial public offering of common stock in September 1999
yielded net proceeds to us of $38.6 million, including the exercise of the
underwriters' over-allotment option. These proceeds were used to repay debt,
distribute the accumulated but undistributed S corporation earnings of the
Company, and provide for capital expenditures. Cash, cash equivalents and
short-term investments were $5.0 million as of March 31, 2000, compared to $7.8
million as of December 31, 1999.
Operations provided net cash of $2.8 million for the three months ended
March 31, 2000. The net cash provided consisted primarily of a decrease in
accounts receivable which was offset by increased inventory, decreased
accounts payable and other current assets.
Net cash used by investing activities for the three months ended March
31, 2000, was $4.5 million. Cash used in investing activities consisted
primarily of property and equipment purchases, which was offset by the sale of
investments.
Net cash provided by financing activities was $1.8 million for the
three months ended March 31, 2000. Cash provided from financing activities was
primarily from term debt which was offset by a pay down of our line of credit.
We have a revolving line of credit with First Security Bank, N.A., with
a maximum borrowing limit of $25.0 million. Advances on the line are limited to
85% of eligible accounts receivable and 65% of eligible inventory. Trade
accounts receivable and inventory are assigned as collateral. Interest on the
revolving credit line is at the prime rate plus one-half percent or, at our
option, LIBOR plus 2.5%, currently at 8.60%. The term of the agreement is
through August 2001. This line is secured by receivables, inventory, equipment
and general intangibles. At March 31, 2000, we had outstanding advances of $19.9
million on this line.
In January 2000, we borrowed $8.6 million from Mountain West Bank, N.A.
The loan is collateralized by real estate and buildings owned by us and is
personally guaranteed by Matthew B. Jore, our principal shareholder and our
Chief Executive Officer. The terms include a 20-year amortization, monthly
payment of $77,734, with interest at the Wall Street Journal Prime Rate plus
.5%, adjusted every five years. This loan refinanced short-term debt of $2.5
million from the same lender.
Total capital expenditures, net of dispositions, were $7.5 million in
the three months ended March 31, 2000 compared to $4.9 million for the three
months ended March 31, 1999 and $40.9 million for the year ended December 31,
1999. Ninety percent of the expenditures in the first quarter of 2000 have
been related to the acquisition of
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manufacturing equipment to increase production capacity. In order to maintain
an exclusive relationship with the manufacturer of some of our equipment, we
must continue to purchase approximately $5.6 million of such equipment per
year until May 2004, and we currently plan to invest an additional $17.0
million (approximate) in manufacturing equipment during the balance of 2000.
We believe that our cash, cash equivalents and short-term investments
at March 31, 2000, will be sufficient to meet the cash requirements of our
current business plan for the next twelve months. Depending on our rate of
growth and expansion of our business beyond our current business plan,
however, we may require additional equity or debt financing to meet future
working capital needs. We cannot assure you that such additional financing
will be available or, if available, that such financing can be obtained on
satisfactory terms.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and established standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and hedging activities. The FASB delayed implementation of this
standard, therefore, it will now be effective for the Company beginning in
fiscal 2001. The Company does not expect adoption of SFAS No. 133 to have a
material effect on the financial statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Substantially all of our cash equivalents and marketable securities are
at fixed interest rates and, as such, the fair value of these instruments is
affected by changes in market interest rates. However, all of our cash
equivalents and marketable securities mature within one year. As a result, we
believe that the market risk arising from our holding of these financial
instruments is minimal. In addition, all of our accounts receivable and accounts
payable are denominated in U.S. dollars, our current customers pay in U.S.
dollars and we pay our vendors in U.S. dollars, and, consequently, our foreign
currency exchange rate risk is immaterial. We do not have any derivative
instruments and do not currently engage in hedging transactions.
The Company has exposure to interest rate risk from its short-term and
long-term debt. The Company's long-term debt is both fixed rate and variable
rate. The Company had $23.0 million of long-term debt with fixed rates at March
31, 2000. Market risk for fixed-rate long-term debt is estimated as the
potential decrease in fair value resulting from a hypothetical 100 basis points
increase in interest rates and amounts to $953,000 as of March 31, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we have been, and expect to continue to be, subject
to legal proceedings and claims in the ordinary course of our
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business, including claims of alleged infringement of third-party trademarks
and other intellectual property rights. Such claims, even if not meritorious,
could require the expenditure of significant financial and managerial
resources.
In May 2000, we entered into litigation with International Tool
Machines of Florida, Inc. ("ITM"), the manufacturer and supplier of our
proprietary drill bit manufacturing machinery, which litigation was commenced
because we believe that ITM intends to sell and make available these machines
and the related technology to third parties in violation of our exclusive
dealing and nondisclosure agreements with ITM. We seek to prevent ITM from
selling these or similar machines to others, including our competitors, in
violation of existing agreements with ITM.
ITM stipulated in this case, which is filed in United States Federal
District Court, not to disclose or transfer proprietary information until
expedited discovery is had. Both parties are moving towards a prompt
resolution of the matter, including expedited discovery and hearings on
motions for injunctions. However, no assurances can be made that the case
will be resolved short of trial.
If ITM is permitted to sell our proprietary drill bit manufacturing
equipment to third parties, including our competitors, we would lose our
exclusive right to these technologically advanced drill bit manufacturing
machines. As a result, the comparative advantages that we enjoy over our
competitors in our drill bit manufacturing process could be lost, and our
competitors would be able to achieve significant cost savings and quality
improvements in producing drill bits. An outcome unfavorable to us in this
matter could have a material adverse effect on our competitive position in the
drill bit market.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
USE OF PROCEEDS FROM REGISTERED SECURITIES. As of March 31, 2000, we had
used the net proceeds of our initial public offering as follows:
(In Millions)
Net Proceeds from Sale of 4,300,000 shares $38.6
USE OF PROCEEDS
11
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Repayment of Indebtedness $12.9
S corporation Dividend and shareholder advances 4.0
Capital expenditures and working capital 16.9
Investments In marketable securities 4.8
-----
Total $38.6
=====
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this Form 10-Q:
Exhibit 10.1 Jore Corporation 1999 Employee Stock Purchase
Plan, as Amended
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
Jore Corporation filed no reports on Form 8-K during the
quarter ended March 31, 2000.
Items 3, 4 and 5 of Part II have been omitted from this Report as not
applicable.
- - ----------------------------------------------------------------------
SIGNATURES
- - ----------------------------------------------------------------------
In accordance with the requirements of the Securities Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
JORE CORPORATION
/s/ Monte W. Giese
----------------------------------
By: Monte W. Giese
Chief Financial Officer
(Principal Financial and
Accounting Officer and Duly
Authorized Officer)
Date: May 15, 2000
12
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Exhibit 10.1
JORE CORPORATION 1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1.
PURPOSE: The purposes of the Jore Corporation 1999 Employee Stock
Purchase Plan (the "Plan") are (a) to assist employees of Jore Corporation, a
Montana corporation (the "Company"), and its designated subsidiaries in
acquiring a stock ownership interest in the Company pursuant to a plan that is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended, and (b) to encourage employees
to remain in the employ of the Company and its subsidiaries.
SECTION 2.
DEFINITIONS: For purposes of the Plan, the following terms shall be
defined as set forth below:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Company's Compensation Committee.
"Common Stock" means the common stock, without par value, of the
Company.
"Company" means Jore Corporation, a Montana corporation.
"Corporate Transaction" means either of the following events: (a)
consummation of any merger or consolidation of the Company with or into another
corporation; or (b) consummation of any sale, lease, exchange or other transfer
in one transaction or a series of related transactions of all or substantially
all of the Company's assets or outstanding securities other than a transfer of
the Company's assets or securities to a majority-owned Subsidiary Corporation.
"Designated Subsidiary" has the meaning set forth under the definition
of "Eligible Employee" in this Section 2.
"Effective Date" has the meaning set forth in Section 23.
"Eligible Compensation" means all base salary and wages. Eligible
Compensation does not include overtime, cash bonuses, commissions, severance
pay, hiring and relocation bonuses, pay in lieu of vacations, sick leave, gain
from stock option exercises or any other special payments.
"Eligible Employee" means any employee of the Company or any
Subsidiary Corporation designated by the Board or the Committee (a "Designated
Subsidiary"), who is in the employ of the Company (or any Designated
Subsidiary) on one or more Offering Dates and who meets the following criteria:
(a) the employee does not, immediately after the option is granted, own stock
(as defined by the Code) possessing 5% or more of the total combined voting
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power or value of all classes of stock of the Company or of a Parent
Corporation or Subsidiary Corporation of the Company; (b) the employee's
customary employment is for 20 hours or more per week; provided, however, that
the Plan Administrator may decrease this minimum requirement for any future
Offering so long as the required number of hours does not exceed 20; (c) if
specified by the Plan Administrator for a future Offering, the employee
customarily works a minimum of 5 months per year or any lesser number of months
established by the Plan Administrator; and (d) if specified by the Plan
Administrator for a future Offering, the employee has been employed for a
certain minimum period of time prior to an Offering Date; provided, however,
that any such minimum employment period may not exceed two years. If the
Company permits any employee of a Designated Subsidiary to participate in the
Plan, then all employees of that Designated Subsidiary who meet the
requirements of this paragraph shall also be considered Eligible Employees.
"Enrollment Deadline" has the meaning set forth in Section 7.1.
"ESPP Broker" has the meaning set forth in Section 10.
"Fair Market Value" shall be as established in good faith by the Plan
Administrator, or (a) if the Common Stock is listed on the Nasdaq National
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market on the Offering Date or the
Purchase Date, as applicable, or (b) if the Common Stock is listed on the New
York Stock Exchange or the American Stock Exchange, the average of the high and
low per share sales prices for the Common Stock as such price is officially
quoted in the composite tape of transactions on such exchange on the Offering
Date or the Purchase Date, as applicable. If there is no such reported price for
the Common Stock for the date in question, then such price on the last preceding
date for which such price exists shall be determinative of Fair Market Value.
"Offering" has the meaning set forth in Section 5.1.
"Offering Date" means the first day of an Offering.
"Option" means an option granted under the Plan to an Eligible Employee
to purchase shares of Common Stock.
"Parent Corporation" means any corporation, other than the Company, in
an unbroken chain of corporations ending with the Company, if, at the time of
the granting of the Option, each of the corporations, other than the Company,
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
"Participant" means any Eligible Employee who has elected to
participate in an Offering in accordance with the procedures set forth in
Section 7.1 and who has not withdrawn from the Plan or whose participation in
the Plan is not terminated.
"Plan" means the Jore Corporation 1999 Employee Stock Purchase Plan.
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"Purchase Date" means the last day of each Purchase Period.
"Purchase Period" has the meaning set forth in Section 5.2.
"Purchase Price" has the meaning set forth in Section 6.
"Subscription" has the meaning set forth in Section 7.1.
"Subsidiary Corporation" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the Company, if,
at the time of the granting of the Option, each of the corporations, other than
the last corporation in the unbroken chain, owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
SECTION 3.
ADMINISTRATION:
3.1 PLAN ADMINISTRATOR: The Plan shall be administered by the Board or
the Committee or, if and to the extent the Board or the Committee designates an
executive officer of the Company to administer the Plan, by such executive
officer (each, the "Plan Administrator"). Any decisions made by the Plan
Administrator shall be applicable equally to all Eligible Employees.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR:
Subject to the provisions of the Plan, the Plan Administrator shall have the
authority, in its sole discretion, to determine all matters relating to Options
granted under the Plan, including all terms, conditions, restrictions and
limitations of Options; provided, however, that all Participants granted Options
pursuant to the Plan shall have the same rights and privileges within the
meaning of Section 423 of the Code.
The Plan Administrator shall also have exclusive authority to interpret
the Plan and may from time to time adopt, and change, rules and regulations of
general application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions taken
and determinations made by the Plan Administrator pursuant to the Plan, unless
reserved to the Board or the Committee, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company's other officers or employees as the Plan
Administrator so determines.
SECTION 4.
STOCK SUBJECT TO PLAN: Subject to adjustment from time to time as
provided in Section 21, the maximum number of shares of Common Stock which shall
be available for issuance under the Plan shall be (a) 1,000,000 shares plus (b)
an annual increase to be added on the first day of each fiscal year beginning
January 1, 2001 equal to the least of (i) of 100,000 shares of Common Stock, or
(ii) 1.5% of the adjusted average common shares outstanding of the
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Company used to calculate fully diluted earnings per share as reported in the
Company's annual financial statements for the preceding fiscal year, or (iii) a
lesser amount determined by the Board; provided, however, that any shares from
any increases in previous years that are not actually issued shall be added to
the aggregate number of shares available for issuance under the Plan. Shares
issued under the Plan shall be drawn from authorized and unissued shares or
shares now held or subsequently acquired by the Company as treasury shares.
SECTION 5.
OFFERING DATES AND PURCHASE PERIODS:
5.1 OFFERINGS:
(a) Except as otherwise set forth below, the Plan shall be implemented
by a series of two-year Offerings (each, an "Offering"). Offerings shall
generally commence on February 15 and August 15 of each year and end on the
second February 15 and August 15, respectively, occurring thereafter; provided,
however, that the first Offering shall begin on December 31, 1999 (instead of
February 15, 2000) and shall end on February 15, 2002.
(b) The first day of each Offering shall be an "Offering Date." On each
Offering Date, each Eligible Employee is hereby granted an Option subject to the
terms and conditions of the Plan to purchase shares of Common Stock on the
Purchase Dates for the Offering for the price determined under Section 6
exclusively through payroll deductions authorized under Section 9.
(c) Notwithstanding the foregoing, the Plan Administrator may establish
(i) a different term for one or more Offerings, and (ii) different commencing
and ending dates for such Offerings; provided, however, that an Offering may not
exceed 27 months.
(d) In the event the first or the last day of an Offering is not a
regular business day, then the first or last day of the Offering shall be deemed
to be the next regular business day.
5.2 PURCHASE PERIODS:
(a) Except as otherwise set forth below, each Offering shall consist of
four consecutive purchase periods of six months' duration (each, a "Purchase
Period"). The last day of each Purchase Period shall be the Purchase Date for
such Purchase Period. Except as otherwise set forth below, a Purchase Period
shall commence on February 15 and August 15 of each year and end on the next
August 15 and February 15, respectively, occurring thereafter; provided,
however, that the first Purchase Period for the first Offering shall begin on
December 31, 1999 (instead of February 15, 2000) and shall end on August 15,
2000.
(b) Notwithstanding the foregoing, the Plan Administrator may establish
(i) a different term for one or more Purchase Periods, and (ii) different
commencing and ending dates for any such Purchase Period.
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(c) In the event the first or last day of a Purchase Period is not a
regular business day, then the first or last day of the Purchase Period shall be
deemed to be the next regular business day.
5.3 GOVERNMENTAL APPROVAL: Notwithstanding any other provision of the
Plan to the contrary, an Option granted pursuant to the Plan shall be subject to
obtaining all necessary governmental approvals and qualifications of the Plan
and of the issuance of Options and sale of Common Stock pursuant to the Plan.
SECTION 6.
PURCHASE PRICE:
6.1 "Purchase Price" at which Common Stock may be acquired on any
Purchase Date in an Offering pursuant to the exercise of all or any portion of
an Option granted under the Plan shall be 85% of the lesser of (a) the Fair
Market Value of the Common Stock on the Offering Date of such Offering, and (b)
the Fair Market Value of the Common Stock on the Purchase Date.
6.2 Notwithstanding the foregoing, if an increase in the number of
shares authorized for issuance under the Plan (other than an annual increase
pursuant to Section 4 and other than the initial authorization on the Effective
Date) is approved and all or a portion of such additional shares are to be
issued during one or more Offerings that are underway at the time of shareholder
approval of such increase (the "Additional Shares"), then, if as of the date of
such shareholder approval, the Fair Market Value of a share of Common Stock is
higher than the Fair Market Value on the Offering Date for any such Offering,
the Purchase Price for the Additional Shares shall be 85% of the lesser of (i)
the Common Stock's Fair Market Value on the date of such shareholder approval,
and (ii) the Fair Market Value of the Common Stock on the Purchase Date.
SECTION 7.
PARTICIPATION IN THE PLAN:
7.1 INITIAL PARTICIPATION: If a person is an Eligible Employee on the
Offering Date for an Offering, such person may become a Participant in the
Offering by delivering to the Company on or prior to the Enrollment Deadline for
such Offering a subscription (the "Subscription"): (a) indicating the Eligible
Employee's election to participate in the Plan; (b) authorizing payroll
deductions and stating the amount to be deducted regularly from the
Participant's pay; and (c) authorizing the purchase of Common Stock for the
Participant in each Purchase Period. Unless otherwise determined by the Plan
Administrator, the "Enrollment Deadline" for each Offering shall be 10 days
prior to the Offering Date; provided, however, that the "Enrollment Deadline"
for the first Offering shall be February 15, 2000. An Eligible Employee who does
not deliver a Subscription as provided above on or prior to the Enrollment
Deadline shall not participate in the Plan for that Offering or for any
subsequent Offering unless such Eligible Employee subsequently enrolls in the
Plan by filing a Subscription with the Company on or prior to the Enrollment
Deadline for such subsequent Offering. Except as provided in Section 7.2, an
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employee who becomes eligible to participate in the Plan after an Offering has
commenced shall not be eligible to participate in such Offering but may
participate in any subsequent Offering, provided that such employee is still an
Eligible Employee as of the commencement of any such subsequent Offering.
Eligible Employees may not participate in more than one Offering at a time.
7.2 ALTERNATIVE INITIAL PARTICIPATION: Notwithstanding any other
provisions of the Plan, the Board or the Committee may provide for any future
Offering that any employee of the Company or any Designated Subsidiary who first
becomes an Eligible Employee during the course of an Offering shall, on a date
or dates specified in the Offering which coincides with the date on which such
person first meets such requirements or occurs on a specified date thereafter,
receive an Option under that Offering which Option shall thereafter be deemed to
be a part of that Offering. Such Option shall have the same characteristics as
any Options originally granted under that Offering, except that: (a) the date on
which such Option is granted shall be the "Offering Date" of such Option for all
purposes, including determining the Purchase Price of such Option; provided,
however, that if the Fair Market Value of the Common Stock on the date on which
such Option is granted is less than the Fair Market Value of Common Stock on the
first day of the Offering, then, solely for the purpose of determining the
Purchase Price of such Option, the first day of the Offering shall be the
"Offering Date" for such Option; (b) the Purchase Period(s) for such Option
shall begin on its Offering Date and end coincident with the remaining Purchase
Date(s) for such Offering; and (c) the Board or the Committee may provide that
if such employee first meets such requirements within a specified period of time
before the end of a Purchase Period for such Offering, he or she will not
receive any Option for that Purchase Period.
7.3 CONTINUED PARTICIPATION: A Participant shall automatically
participate in the next Offering until such time as such Participant withdraws
from the Plan pursuant to Section 11.2 or 11.3 or terminates employment as
provided in Section 13.
SECTION 8.
LIMITATIONS ON RIGHT TO PURCHASE SHARES:
8.1 NUMBER OF SHARES PURCHASED:
(a) No Option granted under the Plan shall permit an employee's right
to purchase Common Stock under the Plan (and all other employee stock purchase
plans of the Company, any Parent Corporations and any Subsidiary Corporations to
which Section 423 of the Code applies) to accrue at a rate that exceeds $25,000
of fair market value of shares (determined at the Offering Date) for each
calendar year in which such Option is outstanding.
(b) No Participant shall be entitled to purchase more than 4,000 shares
of Common Stock (or such other number as the Board or the Committee shall
specify for a future Offering) under the Plan in any single Purchase Period.
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(c) For a future Offering, the Board or the Committee may specify a
maximum number of shares that may be purchased by any Participant, as well as a
maximum aggregate number of shares that may be purchased by all Participants
pursuant to such Offering. In addition, for a future Offering with more than
one Purchase Date, the Board or the Committee may specify a maximum aggregate
number of shares that may be purchased by all Participants on any given
Purchase Date under the Offering.
8.2 PRO RATA ALLOCATION: In the event the number of shares of Common
Stock that might be purchased by all Participants in the Plan exceeds the number
of shares of Common Stock available in the Plan or available for any Offering or
Purchase Date, the Plan Administrator shall make a pro rata allocation of the
remaining shares of Common Stock in as uniform a manner as shall be practicable
and as the Plan Administrator shall determine to be equitable. Fractional shares
may not be issued under the Plan unless the Plan Administrator determines
otherwise for any future Offering.
SECTION 9.
PAYMENT OF PURCHASE PRICE:
9.1 GENERAL RULES SUBJECT TO SECTION 9.11: Common Stock that is
acquired pursuant to the exercise of all or any portion of an Option may be paid
for only by means of payroll deductions from the Participant's Eligible
Compensation. Except as set forth in this Section 9, the amount of compensation
to be withheld from a Participant's Eligible Compensation during each pay period
shall be determined by the Participant's Subscription.
9.2 PERCENT WITHHELD: The amount of payroll withholding for each
Participant for purchases pursuant to the Plan during any pay period shall be at
least 1% but shall not exceed 15% of the Participant's Eligible Compensation for
such pay period. Amounts shall be withheld in whole percentages only.
9.3 PAYROLL DEDUCTIONS: Payroll deductions shall commence on the first
payday following the Offering Date and shall continue through the last payday of
the Offering unless sooner altered or terminated as provided in the Plan;
provided, however, that with respect to the first Offering payroll deductions
shall commence (a) on January 24, 2000 for an Eligible Employee who delivers his
or her Subscription to the Company on or prior to January 19, 2000, (b) on
February 7, 2000 for an Eligible Employee who delivers his or her Subscription
to the Company on or prior to February 2, 2000, and (c) on February 21, 2000 for
an Eligible Employee who delivers his or her Subscription to the Company on or
prior to February 15, 2000.
9.4 MEMORANDUM ACCOUNTS: Individual accounts shall be maintained for
each Participant for memorandum purposes only. All payroll deductions from a
Participant's compensation shall be credited to such account but shall be
deposited with the general funds of the Company. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose.
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9.5 NO INTEREST: No interest shall be paid on payroll deductions
received or held by the Company.
9.6 ACQUISITION OF COMMON STOCK: On each Purchase Date of an Offering,
each Participant shall automatically acquire, pursuant to the exercise of the
Participant's Option, the number of shares of Common Stock arrived at by
dividing the total amount of the Participant's accumulated payroll deductions
for the Purchase Period by the Purchase Price; provided, however, that the
number of shares of Common Stock purchased by the Participant shall not exceed
the number of whole shares of Common Stock so determined, unless the Plan
Administrator has determined for any future Offering that fractional shares may
be issued under the Plan; and provided, further, that the number of shares of
Common Stock purchased by the Participant shall not exceed the number of shares
for which Options have been granted to the Participant pursuant to Section 8.1.
9.7 REFUND OF EXCESS AMOUNTS: Any cash balance remaining in the
Participant's account at the termination of each Purchase Period shall be
refunded to the Participant as soon as practical after the Purchase Date
without the payment of any interest; provided, however, that if the Participant
participates in the next Purchase Period, any cash balance remaining in the
Participant's account because it was less than the amount required to purchase
a whole share shall be applied to the purchase of Common Stock in the new
Purchase Period, provided such purchase complies with Section 8.1.
9.8 WITHHOLDING OBLIGATIONS: At the time the Option is exercised, in
whole or in part, or at the time some or all of the Common Stock is disposed of,
the Participant shall make adequate provision for federal and state withholding
obligations of the Company, if any, that arise upon exercise of the Option or
upon disposition of the Common Stock. The Company may withhold from the
Participant's compensation the amount necessary to meet such withholding
obligations.
9.9 TERMINATION OF PARTICIPATION: No Common Stock shall be purchased on
behalf of a Participant on a Purchase Date if his or her participation in the
Offering or the Plan has terminated on or before such Purchase Date.
9.10 PROCEDURAL MATTERS: The Company may, from time to time, establish
(a) limitations on the frequency and/or number of any permitted changes in the
amount withheld during an Offering, as set forth in Section 11.1, (b) an
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, (c) payroll withholding in excess of the amount designated by a
Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections and (d) such other
limitations or procedures as deemed advisable by the Company in the Company's
sole discretion that are consistent with the Plan and in accordance with the
requirements of Section 423 of the Code.
9.11 LEAVES OF ABSENCE: During leaves of absence approved by the
Company and meeting the requirements of the applicable Treasury Regulations
promulgated under the Code, a Participant may elect to continue participation in
the Plan by delivering cash payments to the Company on the Participant's normal
paydays equal to the amount of his or her payroll deduction under the Plan had
the Participant not taken a leave of absence. Currently, the
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Treasury Regulations provide that a Participant may continue participation in
the Plan only during the first 90 days of a leave of absence unless the
Participant's reemployment rights are guaranteed by statute or contract.
SECTION 10.
COMMON STOCK PURCHASED UNDER THE PLAN:
10.1 ESPP BROKER: If the Plan Administrator designates or approves a
stock brokerage or other financial services firm (the "ESPP Broker") to hold
shares purchased under the Plan for the accounts of Participants, the following
procedures shall apply. Promptly following each Purchase Date, the number of
shares of Common Stock purchased by each Participant shall be deposited into an
account established in the Participant's name with the ESPP Broker. Each
Participant shall be the beneficial owner of the Common Stock purchased under
the Plan and shall have all rights of beneficial ownership in such Common
Stock. A Participant shall be free to undertake a disposition of the shares of
Common Stock in his or her account at any time, but, in the absence of such a
disposition, the shares of Common Stock must remain in the Participant's
account at the ESPP Broker until the holding period set forth in Section 423 of
the Code has been satisfied. With respect to shares of Common Stock for which
the holding period set forth above has been satisfied, the Participant may move
those shares of Common Stock to another brokerage account of the Participant's
choosing or request that a stock certificate be issued and delivered to him or
her. Dividends paid in the form of shares of Common Stock with respect to
Common Stock in a Participant's account shall be credited to such account. A
Participant who is not subject to payment of U.S. income taxes may move his or
her shares of Common Stock to another brokerage account of his or her choosing
or request that a stock certificate be delivered to him or her at any time,
without regard to the holding period required by Section 423 of the Code.
10.2 NOTICE OF DISPOSITION: By entering the Plan, each Participant
agrees to promptly give the Company notice of any Common Stock disposed of
within the later of one year from the Purchase Date and two years from the
Offering Date for such Common Stock, showing the number of such shares disposed
of and the Purchase Date and Offering Date for such Common Stock. This notice
shall not be required if and so long as the Company has a designated ESPP
Broker.
SECTION 11.
CHANGES IN WITHHOLDING AMOUNTS AND VOLUNTARY WITHDRAWAL:
11.1 CHANGES IN WITHHOLDING AMOUNTS:
(a) Unless the Plan Administrator establishes otherwise for a future
Offering, a Participant may elect to decrease or increase the amount withheld
from his or her Eligible Compensation up to two times during any Purchase Period
by completing and filing with the Company an amended Subscription authorizing a
change in the payroll deduction rate. The
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change in rate shall be effective as of the next payday following the date of
filing the amended Subscription if the amended Subscription is filed at least
10 days prior to such payday (the "Change Notice Date") and, if not, as of the
next succeeding payday. All payroll deductions accrued by a Participant as of a
Change Notice Date shall continue to be applied toward the purchase of Common
Stock on the Purchase Date, unless a Participant withdraws from an Offering or
the Plan, pursuant to Section 11.2 or Section 11.3 below. An amended
Subscription shall remain in effect until the Participant changes such
Subscription in accordance with the terms of the Plan.
(b) Unless otherwise determined by the Plan Administrator for a future
Offering, a Participant may elect to increase or decrease the amount to be
withheld from his or her compensation for a future Offering by completing and
filing with the Company an amended Subscription on or prior to the Enrollment
Deadline for such Offering.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Code Section 423 and Section 8.1, a Participant's payroll deductions may
be decreased during any Purchase Period to 0%. Payroll deductions shall
re-commence at the rate provided in such Participant's Subscription at the
beginning of the first Purchase Period in which the Participant can participate
in compliance with Code Section 423 and Section 8.1, unless the Participant
terminates participation in the Offering or the Plan as provided in Section
11.2 or Section 11.3 below.
11.2 WITHDRAWAL FROM AN OFFERING: A Participant may withdraw from an
Offering by signing and delivering to the Company a written notice of withdrawal
on a form provided by the Company for such purpose. Such withdrawal must be
elected at least 10 days prior to the end of the Purchase Period for which such
withdrawal is to be effective or by any other date specified by the Plan
Administrator for any future Offering. Withdrawal shall not affect Common Stock
previously acquired by the Participant under the Plan. Unless otherwise
indicated, withdrawal from an Offering shall not result in a withdrawal from the
Plan or any succeeding Offering therein. A Participant is prohibited from again
participating in the same Offering at any time upon withdrawal from such
Offering. The Company may, from time to time, impose a requirement that the
notice of withdrawal be on file with the Company for a reasonable period prior
to the effectiveness of the Participant's withdrawal.
11.3 WITHDRAWAL FROM THE PLAN: A Participant may withdraw from the Plan
by signing a written notice of withdrawal on a form provided by the Company for
such purpose and delivering such notice to the Company. Such notice must be
delivered at least 10 days prior to the end of the Purchase Period for which
such withdrawal is to be effective or by any other date specified by the Plan
Administrator for any future Offering. In the event a Participant voluntarily
elects to withdraw from the Plan, the Participant may not resume participation
in the Plan during the same Offering, but may participate in any subsequent
Offering under the Plan by again satisfying the definition of Eligible Employee
and timely delivering a Subscription. The Company may impose, from time to time,
a requirement that the notice of withdrawal be on file with the Company for a
reasonable period prior to the effectiveness of the Participant's withdrawal.
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11.4 RETURN OF PAYROLL DEDUCTIONS: Upon withdrawal from an Offering
pursuant to Section 11.2 or from the Plan pursuant to Section 11.3, the
withdrawing Participant's accumulated payroll deductions that have not been
applied to the purchase of Common Stock shall be returned as soon as practical
after the withdrawal, without the payment of any interest, to the Participant
and the Participant's interest in the Offering shall terminate. Such accumulated
payroll deductions may not be applied to any other Offering under the Plan.
SECTION 12.
AUTOMATIC WITHDRAWAL: If the Fair Market Value of the Common Stock on
any Purchase Date of an Offering is less than the Fair Market Value of the
Common Stock on the Offering Date for such Offering, then every Participant
shall automatically (a) be withdrawn from such Offering after the acquisition of
the shares of Common Stock on such Purchase Period, and (b) be enrolled in the
Offering commencing on such Purchase Date, provided the Participant is eligible
to participate in the Plan and has not elected to terminate participation in the
Plan pursuant to Section 11.2 or 11.3.
SECTION 13.
TERMINATION OF EMPLOYMENT: Termination of a Participant's employment
with the Company for any reason, including retirement, death or the failure of a
Participant to remain an Eligible Employee, shall immediately terminate the
Participant's participation in the Plan. The payroll deductions credited to the
Participant's account since the last Purchase Date shall, as soon as practical,
be returned to the Participant or, in the case of a Participant's death, to the
Participant's legal representative or designated beneficiary as provided in
Section 14.2, and all of the Participant's rights under the Plan shall
terminate. Interest shall not be paid on sums returned to a Participant pursuant
to this Section 13.
SECTION 14.
RESTRICTIONS ON ASSIGNMENT:
14.1 TRANSFERABILITY: An Option granted under the Plan shall not be
transferable and such Option shall be exercisable during the Participant's
lifetime only by the Participant. The Company will not recognize, and shall be
under no duty to recognize, any assignment or purported assignment by a
Participant of the Participant's interest in the Plan, of his or her Option or
of any rights under his or her Option.
14.2 BENEFICIARY DESIGNATION: The Plan Administrator may permit a
Participant to designate a beneficiary who is to receive any shares and cash, if
any, from the Participant's account under the Plan in the event the Participant
dies after the Purchase Date for an Offering but prior to delivery to such
Participant of such shares and cash. In addition, the Plan Administrator may
permit a Participant to designate a beneficiary who is to receive any cash from
the Participant's account under the Plan in the event that the Participant dies
before the Purchase Date for an Offering. Such designation may be changed by the
Participant at any time by written notice to the Company.
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SECTION 15.
RESERVED.
SECTION 16.
NO RIGHTS AS SHAREHOLDER UNTIL SHARES ISSUED: With respect to shares
of Common Stock subject to an Option, a Participant shall not be deemed to be a
shareholder of the Company, and he or she shall not have any of the rights or
privileges of a shareholder. A Participant shall have the rights and privileges
of a shareholder of the Company when, but not until, a certificate or its
equivalent has been issued to the Participant for the shares following exercise
of the Participant's Option.
SECTION 17.
LIMITATIONS ON SALE OF COMMON STOCK PURCHASED UNDER THE PLAN: The Plan
is intended to provide Common Stock for investment and not for resale. The
Company does not, however, intend to restrict or influence any Participant in
the conduct of his or her own affairs. A Participant, therefore, may sell
Common Stock purchased under the Plan at any time he or she chooses, subject to
compliance with any applicable federal and state securities laws. A Participant
assumes the risk of any market fluctuations in the price of the Common Stock.
SECTION 18.
AMENDMENT OR TERMINATION OF THE PLAN:
18.1 The Board may amend the Plan in such respects as it shall deem
advisable; provided, however, that, to the extent required for compliance with
Section 423 of the Code or any applicable law or regulation, shareholder
approval will be required for any amendment that will (i) increase the total
number of shares as to which Options may be granted under the Plan, (ii) modify
the class of employees eligible to receive Options, or (iii) otherwise require
shareholder approval under any applicable law or regulation.
18.2 The Plan shall continue in effect for ten (10) years from the
Effective Date, or until it is terminated or suspended by the Board, if
earlier. The Board may terminate or suspend the Plan at any time and for any
reason. During any period of suspension or upon termination of the Plan, no
Options shall be granted.
18.3 Except as provided in Section 21, no such termination of the Plan
may affect Options previously granted, provided that the Plan or an Offering
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering and a Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering is in the best interests of the Company and the shareholders or if
continuation of the Plan and/or the Offering would cause the Company to incur
adverse
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accounting charges as a result of a change after the Effective Date of the Plan
in the generally accepted accounting rules applicable to the Plan.
SECTION 19.
NO RIGHTS AS AN EMPLOYEE: Nothing in the Plan shall be construed to
give any person (including any Eligible Employee or Participant) the right to
remain in the employ of the Company or a Parent or Subsidiary Corporation or to
affect the right of the Company or a Parent or Subsidiary Corporation to
terminate the employment of any person (including any Eligible Employee or
Participant) at any time with or without cause.
SECTION 20.
EFFECT UPON OTHER PLANS: The adoption of the Plan shall not affect any
other compensation or incentive plans in effect for the Company or any Parent
or Subsidiary Corporation. Nothing in the Plan shall be construed to limit the
right of the Company, or any Parent Corporation or Subsidiary Corporation, to
(a) establish any other forms of incentives or compensation for employees of
the Company, a Parent Corporation or Subsidiary Corporation, or (b) grant or
assume options otherwise than under the Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
SECTION 21.
ADJUSTMENTS:
21.1 ADJUSTMENT OF SHARES: In the event that, at any time or from time
to time, a stock dividend, stock split, spin-off, combination or exchange of
shares, recapitalization, merger, consolidation, distribution to shareholders
other than a normal cash dividend, or other change in the Company's corporate
or capital structure results in (a) the outstanding shares, or any securities
exchanged therefor or received in their place, being exchanged for a different
number or kind of securities of the Company or of any other corporation, or (b)
new, different or additional securities of the Company or of any other
corporation being received by the holders of shares of Common Stock, then
(subject to any required action by the Company's shareholders), the Board or
the Committee, in its sole discretion, shall make such equitable adjustments as
it shall deem appropriate in the circumstances in (i) the maximum number and
kind of shares of Common Stock subject to the Plan as set forth in Section 4,
(ii) the number and kind of securities that are subject to any outstanding
Option and the per share price of such securities, and (iii) the maximum number
of shares of Common Stock that may be purchased by a Participant in a Purchase
Period. The determination by the Board or the Committee as to the terms of any
of the foregoing adjustments shall be conclusive and binding. Notwithstanding
the foregoing, a Corporate Transaction, dissolution or liquidation of the
Company shall not be governed by this Section 21.1 but shall be governed by
Sections 21.2 and 21.3, respectively.
13
<PAGE>
21.2 MERGER OR ASSET SALE OF THE COMPANY: In the event of a proposed
Corporate Transaction, each outstanding Option shall be assumed or continued or
an equivalent option substituted by the surviving corporation, the successor
corporation or its parent corporation, as applicable (the "Successor
Corporation"). In the event that the Successor Corporation refuses to assume,
continue or substitute for the Option, the Offering then in progress shall be
shortened by setting a new Purchase Date. The new Purchase Date shall be a
specified date before the date of the Company's proposed sale or merger.
The Board shall notify each Participant in writing, at least 10
business days prior to the new Purchase Date, that the Purchase Date for the
Participant's Option has been changed to the new Purchase Date and that the
Participant's Option shall be exercised automatically on the new Purchase Date,
unless prior to such date the Participant has withdrawn from the Offering or
the Plan as provided in Section 11.
21.3 DISSOLUTION OR LIQUIDATION OF THE COMPANY: In the event of the
proposed dissolution or liquidation of the Company, the Offering then in
progress shall be shortened by setting a new Purchase Date and shall terminate
immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board. The new Purchase Date
shall be a specified date before the date of the Company's proposed dissolution
or liquidation. The Board shall notify each Participant in writing, at least 10
business days prior to the new Purchase Date, that the Purchase Date for the
Participant's Option has been changed to the new Purchase Date and that the
Participant's Option shall be exercised automatically on the new Purchase Date,
unless prior to such date the Participant has withdrawn from the Offering or
the Plan as provided in Section 11.
21.4 LIMITATIONS: The grant of Options will in no way affect the
Company's right to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
SECTION 22.
REGISTRATION; CERTIFICATES FOR SHARES: The Company shall be under no
obligation to any Participant to register for offering or resale under the
Securities Act of 1933, as amended, or register or qualify under state
securities laws, any shares of Common Stock. The Company may issue certificates
for shares with such legends and subject to such restrictions on transfer and
stop-transfer instructions as counsel for the Company deems necessary or
desirable for compliance by the Company with federal and state securities laws.
SECTION 23.
EFFECTIVE DATE: The Plan's Effective Date is December 31, 1999.
14
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<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
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<SECURITIES> 4,798,046 0
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<OTHER-EXPENSES> (11,310) 1,863
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<NET-INCOME> (522,978) 839,564
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