United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Period Ended June 30, 1996
----------
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 No. 0-15760
----------
<TABLE>
HARDINGE INC.
------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
<S> <C>
NEW YORK 16-0470200
- -------------------------------------------------------------- -----------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
ONE HARDINGE DRIVE, ELMIRA, NEW YORK 14902
- -------------------------------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(607) 734-2281
---------------------------------------------------
(Registrant's telephone number, including area code)
</TABLE>
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
-- --
At June 30, 1996, there were 6,471,388 shares of Common Stock of the
Registrant outstanding.
1
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Part I Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995. 3
Consolidated Statements of Income and Retained
Earnings for the three months ended June 30, 1996 and
1995, and the six months ended June 30, 1996 and 1995. 5
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and 1995. 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Part II Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE>
Part I, Item 1.
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
----------- ---------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 4,733 $ 5,120
Accounts receivable 42,163 41,095
Notes receivable 6,451 5,053
Inventories 92,775 84,968
Deferred income taxes 2,574 2,585
Prepaid expenses 1,824 1,332
-------- ---------
Total current assets 150,520 140,153
Property, plant and equipment:
Property, plant and equipment 113,801 109,320
Less accumulated depreciation 52,170 49,716
-------- ---------
61,631 59,604
Other assets:
Notes receivable 11,599 10,936
Other 195 163
-------- ---------
11,794 11,099
-------- ---------
Total assets $223,945 $210,856
======== =========
</TABLE>
See accompanying notes.
3
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 13,113 $ 18,409
Notes payable to bank 10,270 10,504
Accrued expenses 11,697 9,297
Accrued pension plan expense 470 126
Accrued income taxes 1,547 1,323
Current portion long-term debt 714 714
--------- ---------
Total current liabilities 37,811 40,373
Other liabilities:
Long-term debt 36,731 27,100
Accrued pension plan expense 1,133 1,087
Deferred income taxes 1,056 1,200
Accrued postretirement benefits 5,062 4,993
--------- ---------
43,982 34,380
Shareholders' equity
Preferred stock, Series A, par value $.01:
Authorized - 2,000,000; issued - none
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued shares - 6,476,703 65 65
Additional paid-in capital 56,917 56,323
Retained earnings 93,258 86,666
Treasury shares (139) (2,599)
Cumulative foreign currency translation adjustment (2,898) (1,728)
Deferred employee benefits (5,051) (2,624)
--------- ---------
Total shareholders' equity 142,152 136,103
--------- ---------
Total liabilities and shareholders' equity $223,945 $210,856
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $55,266 $41,501 $114,888 $82,188
Cost of sales 36,789 27,294 77,079 54,068
------- ------- ------- --------
Gross profit 18,477 14,207 37,809 28,120
Selling, general and administrative expenses 10,946 8,406 22,516 16,821
------- ------- ------- --------
Income from operations 7,531 5,801 15,293 11,299
Interest expense 675 497 1,197 973
Interest (income) (167) (175) (382) (296)
(Gain) on sale of asset (326)
------- ------- ------- --------
Income before income taxes 7,023 5,479 14,478 10,948
Income taxes 2,703 2,204 5,688 4,369
------- ------- ------- --------
Net income 4,320 3,275 8,790 6,579
Retained earnings at beginning of period 90,035 77,633 86,666 74,853
Less dividends declared 1,097 1,547 2,198 2,071
------- ------- ------- --------
Retained earnings at end of period $93,258 $79,361 $ 93,258 $79,361
======= ======= ======= ========
Weighted average number of common shares
outstanding 6,228 4,349 6,228 3,941
======= ======= ======= ========
Per share data:
Net Income $ .69 $ .75 $ 1.41 $ 1.67
======= ======= ======= ========
Dividends Declared $ .17 $ .30 $ .34 $ .45
======= ======= ======= ========
</TABLE>
See accompanying notes.
5
<PAGE>
HARDINGE INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
-------- -------
<S> <C> <C>
Net cash (used in) operating activities ($2,398) ($8,981)
Investing activities:
Capital expenditures (6,384) (3,059)
Proceeds from sale of assets 24 497
------- -------
Net cash (used in) investing activities (6,360) (2,562)
Financing activities:
Increase (decrease) in short-term notes payable to bank 364 (3,500)
Increase (decrease) in long-term debt 10,036 (11,426)
Sale (purchase) of treasury stock 171 (317)
Dividends paid (2,199) (2,062)
Proceeds from public stock offering 43,457
------- -------
Net cash provided by financing activities 8,372 26,152
Effect of exchange rate changes on cash (1) 97
------- -------
Net (decrease) increase in cash ($ 387) $14,706
======= =======
</TABLE>
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
HARDINGE INC. AND SUBSIDIARIES
June 30, 1996
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six month periods ended June 30, 1996, are not necessarily
indicative of the results that may be expected for the year ended December
31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report for
the year ended December 31, 1995.
NOTE B--INVENTORIES
Inventories are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Finished products $ 33,971 $ 29,231
Work-in-process 27,995 29,083
Raw materials and purchased components 30,809 26,654
-------- --------
$ 92,775 $ 84,968
======== ========
</TABLE>
NOTE C--CHANGES IN SHAREHOLDERS' EQUITY
In June 1995, the Company issued 2,540,000 shares of its common stock at
$19.00 per share in a public common stock offering. Proceeds from the
offering, net of commissions and expenses, were $43,457,000. The proceeds
were used to reduce the Company's debt, fund building expansion, and fund
working capital growth.
NOTE D--EARNINGS PER SHARE AND WEIGHTED SHARES OUTSTANDING
Earnings per share are calculated using a monthly weighted average shares
outstanding and include common stock equivalents related to restricted stock.
Second quarter and year to date 1995 averages have been calculated treating
the 2,250,000 shares sold in the public offering as outstanding for the month
of June. The 290,000 shares sold upon exercise of the over-allotment option
were not included since they were not issued until the end of June 1995.
NOTE E--DIVIDENDS DECLARED
Dividends declared for the first half of 1995 include the dividends paid
for March and June 1995, and the dividend payable for September of 1995.
Dividends declared for the first half of 1996 include only dividends paid for
March and June 1996.
NOTE F--ACQUISITION
On November 29, 1995, the Company acquired 100% of the outstanding stock
of L. Kellenberger & Co. AG and subsidiary ("Kellenberger"), a St. Gallen,
Switzerland based manufacturer of grinding machines.
The acquisition was accounted for as a purchase. The three month period
and six month period ended June 30, 1996 results of operations of
Kellenberger are included in the consolidated financial statements of the
Company.
NOTE G--DEBT
In March, 1996 Hardinge entered into a seven-year $17,750,000 unsecured
credit agreement with a syndication of banks. The proceeds were applied to
pay down amounts on the Company's revolving loan agreement which had been
used to finance the acquisition of Kellenberger. This agreement calls for
variable quarterly interest payments based upon the London Interbank Offered
Rates plus additional basis points based upon attaining certain financial
ratios. Principal payments begin in May, 1998 and will be made in equal
quarterly payments through 2003. Hardinge
7
<PAGE>
also entered into a cross-currency interest rate swap agreement with a major
international bank related to this borrowing. The swap agreement effectively
changes the dollar principal payment commitment to a commitment to pay
21,000,000 Swiss Francs over the same period, the effect of which is to hedge
exchange rate fluctuations on the Kellenberger equity purchased in November,
1995. The swap agreement also effectively changes the Company's variable
interest rate exposure to a fixed rate of 4.49%.
Part I, Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following are management's comments relating to significant changes in
the results of operations for the three month and six month periods ended
June 30, 1996 and 1995 and in the Company's financial condition during the
six month period ended June 30, 1996.
Results of Operations
Net Sales. Net sales for the quarter ended June 30, 1996 increased by 33%
to $55,266,000 from $41,501,000 in the same 1995 period. Year to date sales
of $114,888,000 for the first six months of 1996 represent a 39.8% increase
over the $82,188,000 net sales for the same 1995 period.
Sales of machines accounted for $35,974,000 of net sales for the second
quarter of 1996, representing a 38.4% increase from the same 1995 period.
Year to date June 30, 1996 sales in the same product grouping accounted for
$74,739,000 or a 47.2% increase over the $50,771,000 in the same 1995 period.
Sales of non-machine products and services in the second quarter of 1996
increased to $19,292,000, a 24.4% increase over the levels in the same 1995
period, while year to date sales of this product group increased to
$40,149,000, a 27.0% increase over the previous year.
Machine shipments accounted for 65.1% of total net sales for the second
quarter and first half of 1996. In 1995, sales of this product group
accounted for 63.1% and 61.8% of second quarter and first half total net
sales. Sales by our Kellenberger subsidiary, acquired in late 1995, were an
important contributor to the increase in machine sales. The proportion of
Kellenberger's machine sales, as compared to non-machine products, is higher
than our traditional relationships.
Geographically, the largest amount of sales increase came from European
markets, where net sales tripled from the level of sales in the same periods
of 1995 to $15,379,000 in the second quarter and to $33,495,000 in the six
month period ended on June 30, 1996 . Approximately two-thirds of the
increase in European sales in the second quarter and year to date came as a
result of the Kellenberger acquisition. Also, sales of other Hardinge
products increased, especially in France and England. Shipments in our United
States markets remained relatively flat compared to last year, with a small
3.5% increase coming primarily from sales of Kellenberger machines.
Gross Profit. Gross margin, as a percentage of sales, was 33.4% in the
second quarter and 32.9% in the first half of 1996. During the same periods
of 1995, we achieved slightly higher percentages of 34.2% in both periods.
The majority of the reduction is the result of changes in product mix. Sales
in the machine product group traditionally have generated lower gross margins
than the non-machine products and services group. Therefore, overall gross
margin, as a percentage of sales, is negatively affected when sales in the
machine product group increase as a proportion of total net sales, as it has
in the first half of 1996.
Selling, General, and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses decreased as a percent of net sales to 19.8%
and 19.6% in the first quarter and first half of 1996, respectively, compared
to 20.3% and 20.5% in the same periods of 1995. The reduction in percentage
results from the fixed portion of these expenses being compared to a higher
sales volume. The addition of Kellenberger's expenses was the most
significant factor in increasing the amount of expense from year to year.
Income from Operations. Income from operations as a percentage of net
sales decreased slightly in the three and six month periods ended June 30,
1996, to 13.6% and 13.3%, respectively, from the same 1995 periods, which
were 14.0% and 13.7%, respectively. This decrease was primarily the result of
the decrease in gross margin percentages.
8
<PAGE>
Interest Expense. Interest expense increased to $675,000 in the second
quarter of 1996 from $497,000 in the same 1995 period. Interest expense
increased in the first half of 1996 to $1,197,000 compared to $973,000 in the
same 1995 period. Higher average borrowings in 1996 resulted from borrowings to
fund the acquisition of Kellenberger and increases in working capital caused the
majority of these increases.
Interest Income. Interest income remained fairly constant in the
comparative periods of 1996 and 1995, with the majority of this category
coming from interest on financing of customer purchases.
Gain on Sale of Assets. Results for the first half of 1995 included a gain
of $326,000 (approximately $198,000 on an after-tax basis) on the sale of a
branch office building.
Income Taxes. The provision for income taxes as a percentage of net income
was 38.5% and 39.3%, for the second quarter and first half of 1996,
respectively, compared to 40.2% and 39.9% for the same 1995 periods. The 1996
consolidated tax rates were lower due to profits in our foreign operations
where effective tax rates are slightly lower than in the United States.
Net Income. Net income for the second quarter of 1996 was $4,320,000, an
increase of $1,045,000 or 31.9% from the same 1995 period. Year to date 1996
net income was $8,790,000, an increase of 33.6% or $2,211,000 from the same
1995 period. These increases represent an accumulation of the factors
discussed above. Geographically, results of operations in Western Europe have
improved significantly on higher sales, while performance in North America
continues to provide the large base of profitable operations.
Quarterly Information
The following table sets forth certain quarterly financial data for each
of the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
(in thousands, except per share data)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 40,687 $ 41,501 $ 42,217 $ 56,181 $ 59,622 $ 55,266
Gross Profit 13,913 14,207 14,439 18,052 19,332 18,477
Income from operations 5,498 5,801 4,949 8,287 7,762 7,531
Net income 3,304 3,275 3,182 5,084 4,470 4,320
Net income per share .92 .75 .52 .82 .72 .69
Weighted average shares outstanding 3,584 4,349 6,176 6,217 6,199 6,228
</TABLE>
Liquidity and Capital Resources
Hardinge's current ratio at June 30, 1996 was 3.98:1 compared to 3.47:1 at
December 31, 1995. Current assets increased by $10,367,000 during the first
half of 1996 as we increased our work in process and finished goods inventory
prior to the launch of our newest product, the Cobra[trademark] CNC lathe.
Also, there has been an increase in inventory caused by work in process for
large orders which will have significant turnkey work done on them and will
not be completed and shipped until the fourth quarter.
In the first half of 1996, operating activities used $2,398,000 of cash,
while operating activities in the first half of 1995 used $8,981,000 of cash.
Operating activities used cash in these periods, notwithstanding the
Company's improved net income, primarily because of the increases in accounts
receivable and inventory. During these periods, we have also required cash
for capital expenditures and dividend payments in our investing and financing
activities. We have used the cash flow from income and our revolving credit
facility to finance these 1996 increases in expenditures.
Hardinge provides long-term financing for the purchase of its equipment by
qualified customers. We regard this program as an important part of our
marketing efforts. Customer financing is offered for a term of up to seven
years, with Hardinge retaining a security interest in the purchased
equipment. In the event of a customer default and foreclosure, we recondition
and resell the equipment and have historically realized the approximate
remaining contract value.
9
<PAGE>
We periodically sell portfolios of our customer notes to financial
institutions in order to reduce debt and finance current operations. We sold
$15,000,000 of customer notes in the first half of 1996, compared to $7,700,000
during the same period of 1995. Recourse against Hardinge from customer defaults
is limited to 10% of the outstanding balance of each portfolio of notes sold,
and is effected in the form of a hold back of funds at the time of the sale. The
hold back portion of customer notes and any notes that have not been sold are
included in notes receivable in the consolidated balance sheet.
Although Hardinge has no formal arrangements with financial institutions
who might purchase its customer notes, we have not experienced difficulty in
arranging such sales. Our customer financing program has an impact on our
month-to-month borrowings, but it has had little long-term impact on our
working capital because of the ability to sell the underlying notes.
Capital expenditures in the first half of 1996 were approximately
$6,384,000. We completed the expansion of the Elmira manufacturing facility
and the related equipment is operational. We anticipate capital expenditures
will total approximately $10,000,000 during 1996, which includes further
expenditures to improve productivity and distribution efforts.
Hardinge maintains a loan agreement with two banks which provides for
borrowing up to $30,000,000 on a revolving basis through August 1, 1997. At
that time, the outstanding amounts convert to a term loan payable quarterly
over four years through 2001. This facility, along with other short term
credit agreements, provide for immediate access of up to $45,000,000. At June
30, 1996, outstanding borrowings under these arrangements totaled
$17,900,000. We currently have commitment from a bank to increase our
revolving loan agreement to $50,000,000. We anticipate completing the
negotiation of terms and execution of final documents during the second half
of 1996. The increase will provide us with further flexibility in financing
our world-wide operations. We believe that the currently available funds and
credit facilities, along with internally generated funds, will provide
sufficient financial resources for ongoing operations.
In March, 1996, we completed negotiations with a syndication of banks on a
long term credit agreement for $17,750,000. The proceeds were used to pay
down the amount on the revolving loan agreement which had originally been
used to finance the acquisition of Kellenberger. Quarterly interest payments
begin in 1996, and principal payments begin in 1998. The agreement contains
financial covenants consistent with the revolving loan agreement.
10
<PAGE>
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security-Holders
The 1996 Annual Meeting of Shareholders of Hardinge Inc. was held on April
23.
A total of 6,153,036 of the Company's shares were present or represented
by proxy at the meeting. This represented more than 95% of the Company's
shares outstanding.
The two Class I directors named below were elected to serve two-year terms
and the Class III director named below was elected to serve a one-year term.
<TABLE>
<CAPTION>
Votes Votes
for Withheld
--------- --------
<S> <C> <C>
Class I Directors:
Robert E. Agan 6,146,956 6,080
Richard J.Cole 6,144,817 8,219
Class III Director:
Douglas A. Greenlee 6,146,495 6,541
</TABLE>
John W. Bennett, James L. Flynn, E. Martin Gibson, J. Philip Hunter and
Eve L. Menger continue as Directors of the Company.
The proposal to adopt the Hardinge Inc. 1996 Incentive Stock Plan was
approved with 4,877,844 shares voting for, 1,143,910 shares voting against,
48,318 shares abstaining and 82,964 non-votes.
The election of Ernst & Young LLP as the Company's independent accountants
was ratified, with 6,141,785 shares voting for, 5,255 shares voting against
and 5,996 shares abstaining.
No other matters were presented for vote at that meeting.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
See the Exhibit Index which is located on page 13.
B. Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HARDINGE INC.
/s/ Robert E. Agan
-----------------------------------------------
Robert E. Agan
Chairman of the Board, President
and Chief Executive Officer
/s/ Malcolm L. Gibson
-----------------------------------------------
Malcolm L. Gibson
Senior Vice President,
Chief Financial Officer and Assistant Secretary
(Principal Financial Officer)
/s/ Richard L. Simons
-----------------------------------------------
Richard L. Simons
Controller
(Principal Accounting Officer)
DATE: August 13, 1996
12
<PAGE>
HARDINGE INC.
Exhibit Index
These exhibits are numbered in accordance with Exhibit Table I of Item 601
of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit # Description
- ------------ -------------------------------------------------
<S> <C>
10 The Hardinge Inc. 1996 Incentive Stock Plan as
adopted by shareholders at the April 23, 1996
Annual Meeting.
23 Registrant's proxy statement dated March 15, 1996,
filed with the Securities and Exchange Commission
as a definitive proxy statement on March 15, 1996,
is incorporated herein by reference.
27 Financial Data Schedule
</TABLE>
13
EXHIBIT 10
HARDINGE INC.
1996 INCENTIVE STOCK PLAN
1. Establishment of Plan.
Hardinge Inc. (hereafter referred to as the "Company") proposes to grant
to selected employees of the Company and its subsidiaries: (a) Incentive
Stock Options, (b) Non-Qualified Stock Options, (c) Stock Appreciation
Rights, (d) Restricted Stock Incentives, and (e) Performance Share Incentives
(collectively hereinafter sometimes referred to as "Incentives") for the
purpose of enhancing the profitability and value of the Company for the
benefit of its shareholders by providing stock awards to attract, retain and
motivate officers and other key employees who make important contributions to
the success of the Company.
The Company also proposes to grant to Outside Directors options to
purchase common stock of the Company pursuant to the Plan. The purpose of
such Director Options is to provide incentives for highly qualified
individuals to stand for election to the Board and to continue service on the
Board and to encourage increased stock ownership by Outside Directors in
order to promote long-term stockholder value. Restricted Stock Incentives,
Incentive Stock Options (as defined in Section 422A of the Internal Revenue
Code), Stock Appreciation Rights and Performance Share Incentives will not be
granted to Outside Directors under the Plan.
Incentives shall be granted pursuant to the plan herein set forth, which
shall be known as the Hardinge Inc. 1996 Incentive Stock Plan (hereinafter
referred to as the "Plan").
2. Definitions of Certain Terms Used in the Plan.
a. "Affiliate" means any subsidiary, whether directly or indirectly owned,
or parent of the Company, or any other entity designated by the Committee.
b. "Board" means the Company's Board of Directors.
c. "Change of Control" is defined in Section 18 of the Plan.
d. "Code" means the Internal Revenue Code of 1986, as amended, or any
successor code thereto.
e. "Committee" means the Incentive Compensation Committee of the Board of
Directors of the Company or any successor committee the Board of Directors
may designate to administer the Plan.
f. "Common Stock" means the Hardinge Inc. Common Stock, par value $.01 per
share.
g. "Competition" means to manage, operate, join, control, participate in,
provide consulting advice to, act as an agent or director of, or have any
financial interest in (as a partner, stockholder, investor or otherwise), any
firm, corporation, partnership, association, joint stock company, joint
venture, unincorporated organization, limited liability company or any such
similar business operation or activity (or any portion thereof), directly or
indirectly, in competition with any of the business operations or activities
of the Company or its Affiliates or affecting or attempting to affect a
Change of Control.
h. "Director Stock Option" means a Nonqualified Option granted to Outside
Directors pursuant to Section 7 of the Plan.
i. "Employee" means any person who is employed by the Company or a
subsidiary of the Company.
j. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
k. "Fair Market Value" of Stock means the fair and reasonable value
thereof as determined by the Committee according to prices in trades as
reported on the NASDAQ National Market. If there are no prices so reported or
if, in the opinion of the Committee, such reported prices do not represent
the fair and reasonable value of the Stock, then the Committee shall
determine Fair Market Value by any means it deems reasonable under the
circumstances.
l. "Incentive Stock Options" means stock options granted under the Plan
that meet the definition of Incentive Stock Options under Section 422 of the
Code.
m. "Nonqualified Options" means stock options granted under the Plan that
are not Incentive Stock Options.
<PAGE>
n. "Outside Director" means any member of the Company's Board of Directors
who is not also an employee.
o. "Performance Share Incentives" means Incentives granted under Section 9
of the Plan.
p. "Restricted Stock Incentives" means Incentives granted under Section 10
of the Plan.
q. "Retirement" means retirement under any pension or retirement plan of
the Company or of a subsidiary, or termination of employment with the Company
or a subsidiary, by action of the employing company, because of disability.
r. "Stock" means the Common Stock or any other authorized class or series
of common stock or any such other security outstanding upon the
reclassification of any of such classes or series of common stock, including,
without limitation, any stock split-up, stock dividend, creation of targeted
stock, or other distributions of stock in respect of stock, or any reverse
stock split-up, or recapitalization of the Company or any merger or
consolidation of the Company with any Affiliate.
s. "Stock Appreciation Rights" means Incentives granted under Section 8 of
the Plan.
t. "Stock Options" means Incentive Stock Options and Nonqualified Options
granted under the Plan.
u. A "subsidiary" means any corporation in which the Company owns,
directly or indirectly, at least thirty-five percent (35%) of the total
combined voting power of all classes of stock; except that for purposes of
any option subject to the provisions of Section 424 of the Internal Revenue
Code, as amended, the term "subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company if, at the time of the
granting of an Option, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock of one of
the other corporations in such chain.
v. "Termination for Cause" means an Employee's termination of employment
with the Company or an Affiliate or an Outside Director's removal from office
as a director of the Company because of such person's willful engaging in
gross misconduct; provided, however, that a Termination for Cause shall not
include termination attributable to (i) poor work performance, bad judgment
or negligence, (ii) an act or omission believed by such person in good faith
to have been in or not opposed to the best interests of the Company and
reasonably believed by such person to be lawful, or (iii) the good faith
conduct of such person in connection with a Change of Control (including
opposition to or support of such Change of Control).
3. Stock Reserved for Incentives.
A maximum of 300,000 shares of Common Stock or the number of securities to
which said number of shares may be adjusted in accordance with Section 4
below, may be issued upon granting of Restricted Stock Incentives,
Performance Share Incentives, and the exercise of Stock Options and Stock
Appreciation Rights under the Plan. Such shares may be either authorized and
unissued shares or previously issued shares purchased by the Company for
purposes of the Plan. Subject to adjustment in accordance with Section 4
below, a maximum of one percent (1%) of the outstanding shares of the
Company's Common Stock as of the first business day of any calendar year may
be the subject of Incentives granted under the Plan in that calendar year.
The shares available for granting Incentives in any year shall be increased
by the number of shares available under the Plan in previous years but not
covered by Incentives granted under the Plan in those years plus any shares
as to which options or other benefits granted under the Plan have lapsed,
expired, terminated or been cancelled. Any shares subject to stock options,
grants or Incentives may thereafter be subject to new stock options, grants
or Incentives under the Plan if there is a forfeiture of any such grants or
Incentives, or the lapse, expiration or termination of any such option but
not if there is a surrender of an option or portion thereof pursuant to a
Stock Appreciation Right as provided hereafter in Section 8. The maximum
number of shares in respect of which Incentives may be granted during the
term of the Plan to an individual recipient of Incentives shall be 75,000.
4. Adjustment Provisions.
In the event of any extraordinary dividend, reorganization,
recapitalization, stock dividend, stock split-up, change in par or no par
value, combination of shares, merger, consolidation, sale of all or
substantially all of the
<PAGE>
assets of the Company, warrant or rights offering or combination, exchange or
reclassification of Common Stock or any other similar event or any other
change in the corporate structure or shares of the Company, the Committee or
its delegate shall cause such equitable adjustment as it deems appropriate to
be made in the number and kind of shares then remaining available for issue
under the Plan, and in the terms of the outstanding Incentives to reflect
such event and preserve the value of such Incentives. In the event the
Committee determines that any such event has a minimal effect on the value of
Incentives, it may elect not to cause any such adjustments to be made. In all
events, the determination of the Committee or its delegee shall be
conclusive. If any such adjustment would result in a fractional security
being issuable or awarded under the Plan, such fractional security shall be
disregarded.
5. Administration of the Plan.
The authority to grant Incentives to employees under the Plan shall be
vested in the Committee; provided, however, that the Committee shall have no
authority regarding the granting of Director Stock Options to Outside
Directors, which grants shall be non-discretionary. The Committee shall
determine those eligible to receive Incentives and the amount, type and terms
of each Incentive, subject to the provisions of the Plan. Each member of the
Committee shall be (i) an "outside director" within the meaning of Section
162(m) of the Code, subject to any transitional rules applicable to the
definition of outside director, and (ii) a "disinterested person" within the
meaning of Rule 16b-3 under the Exchange Act, or otherwise qualified to
administer this Plan as contemplated by that Rule or any successor Rule under
the Exchange Act. In making any determinations under the Plan, the Committee
shall be entitled to rely on reports, opinions or statements of officers or
employees of the Company, as well as those of counsel, public accountants and
other professional or expert persons. All determinations, interpretations and
other decisions under or with respect to the Plan or any Incentives by the
Committee shall be final, conclusive and binding upon all parties, including
without limitation, the Company, any Employee, and any other person with
rights to any Incentive under the Plan, and no member of the Committee shall
be subject to individual liability with respect to the Plan.
Subject to the provisions of the Plan, the Committee from time to time
shall determine the individuals to whom, and the time or times at which,
Incentives shall be granted and the terms thereof. In the case of officers to
whom Incentives may be granted, the selection of such officers and all of the
foregoing determinations shall be made directly by the Committee in its sole
discretion. In the case of key employees other than officers, the selection
of such employees and all of the foregoing determinations may be delegated by
the Committee to an administrative group of officers chosen by the Committee.
Incentives granted to one employee need not be identical to those granted
other employees.
The Committee shall administer and shall have full power to construe and
interpret the Plan; prescribe, amend and rescind rules and regulations
relating to the Plan; and make all other determinations and take all other
actions that the Committee believes reasonable and proper, including the
power to delegate responsibility to others to assist it in administering the
Plan. The determinations of the Committee shall be made in accordance with
its judgment as to the best interests of the Company and its stockholders and
in accordance with the purposes of the Plan. The Committee's determinations
shall in all cases be conclusive.
A majority of the members of the Committee shall constitute a quorum, and
all determinations of the Committee shall be made by a majority of the entire
Committee. Any determination of the Committee may be made, without notice or
meeting, by the written consent of a majority of the Committee members.
6. Eligibility.
Any Employee selected by the Committee, except a member of the Committee,
shall be eligible for any Incentive contemplated under the Plan. Outside
Directors of the Company shall be eligible for grants of Director Stock
Options under Section 7 of the Plan. An Employee or Director who has been
granted an Incentive under this or any other plan of the Company or any of
its Affiliates may or may not be granted additional Incentives under the Plan
at the discretion of the Committee.
7. Stock Options.
Commencing with the 1996 annual meeting of the stockholders of the
Company, Director Stock Options with an option period of ten (10) years and
an option price equal to 100% of the fair market value of the Common Stock
<PAGE>
on the date the Director Stock Option is granted, shall be granted to each
Outside Director for 500 shares of the Company's Common Stock effective as of
the close of each annual meeting of the stockholders of the Company (i) at
which such individual is elected a director, or (ii) following which such
individual will continue to serve as a director or member of a continuing
class of directors, and except as specifically provided in this paragraph
such Director Stock Options shall be subject to the terms and conditions of
this Section 7 of the Plan.
The Committee may grant Incentive Stock Options, other statutory options
under the Code, and Nonqualified Options to eligible Employees, and such
Stock Options shall be subject to the terms and conditions of this Section 7
of the Plan and such other terms and conditions as the Committee may
prescribe.
(a) Option Price. The option price per share with respect to each Stock
Option shall be determined by the Committee, but shall not be less than 100%
of the fair market value of the Common Stock on the date the Stock Option is
granted, as determined by the Committee.
(b) Period of Option. The period of each Stock Option shall be fixed by
the Committee; provided, however, that such period shall not exceed ten (10)
years from the grant date in the case of Incentive Stock Options.
(c) Payment. The option price shall be payable at the time the Stock
Option or the Director Stock Option is exercised in cash or, at the
discretion of the Committee, in whole or in part in the form of shares of
Common Stock already owned by the grantee (based on the fair market value of
the Common Stock on the date the option is exercised by the Committee). No
shares shall be issued until full payment therefor has been made. A grantee
of a Stock Option or a Director Stock Option shall have none of the rights of
a stockholder until the shares are issued.
(d) Exercise of Option. The shares covered by a Stock Option may be
purchased in such installments and on such exercise dates as the Committee
may determine. Any shares not purchased on the applicable exercise date may
be purchased thereafter at any time prior to the final expiration of the
Stock Option. In no event (including those specified in paragraphs (e), (f)
and (g) of this section below) shall any Stock Option or any Director Stock
Option be exercisable after its specified expiration period and in no event
shall a Stock Option or Director Stock Option be exercised after the
expiration of ten (10) years from the date such option is granted. The
Committee may provide that, subject to such conditions as it considers
appropriate, upon the delivery of shares of Common Stock to the Company in
payment of the exercise price of a Stock Option, the grantee of such Stock
Option automatically be awarded a replacement Stock Option (a "Reload
Option") for up to the number of shares of Common Stock so delivered;
provided, however, that a Reload Option shall not be awarded upon the
delivery of shares of Common Stock in payment of the exercise price of a
Reload Option previously awarded pursuant to this Section 7(d).
(e) Retirement and Termination. Upon Retirement or termination of the
Stock Option grantee for reasons other than those described in Section 15 of
the Plan, Stock Option privileges shall apply only to those Options
immediately exercisable at the date of such Retirement or termination. The
Committee, however, in its discretion, may provide on a case by case basis
that any Stock Options outstanding but not yet exercisable upon such
Retirement or termination of the Stock Option grantee may become exercisable
in accordance with a schedule to be determined by the Committee. Options
exercisable upon Retirement shall remain exercisable for three (3) years
after Retirement; Options exercisable upon termination for reasons other than
Retirement or those described in Section 15 of the Plan shall remain
exercisable for six (6) months after such termination.
(f) Death. Upon the death of a Stock Option or Director Stock Option
grantee, Stock Option or Director Stock Option privileges shall apply only to
those shares which were immediately exercisable at the time of death, and
options exercisable upon death shall remain exercisable for three (3) years
after death. The Committee, in its discretion, may provide that any Stock
Options or Director Stock Options outstanding but not yet exercisable upon
the death of a Stock Option or Director Stock Option grantee may become
exercisable in accordance with a schedule to be determined by the Committee.
Such privileges shall expire unless exercised by legal representatives within
such period of time as determined by the Committee but in no event later than
the date of the expiration of the Stock Option or Director Stock Option.
(g) Limits on Incentive Stock Options. Except as may otherwise be
permitted by the Code, the Committee shall not, in the aggregate, grant to
any Employee Incentive Stock Options that are first exercisable
<PAGE>
during any one calendar year (under all such plans of such Employee's
employer corporation and its parent and subsidiary corporations) to the
extent that the aggregate fair market value of the Common Stock, at the
time the Incentive Stock Options are granted, exceeds $100,000.
8. Stock Appreciation Rights.
The Committee may, in its discretion, grant a right to receive the
appreciation in the fair market value of shares of Common Stock either singly
or in combination with an underlying Stock Option granted hereunder. Such
Stock Appreciation Rights shall be subject to the following terms and
conditions and such other terms and conditions as the Committee may
prescribe:
(a) Time and Period of Grant. If a Stock Appreciation Right is granted in
connection with an underlying Stock Option, it may be granted at the time of
the Stock Option Grant or at any time thereafter but prior to the expiration
of the Stock Option Grant. If a Stock Appreciation Right is granted in
connection with an underlying Stock Option, at the time the Stock
Appreciation Right is granted the Committee may limit the exercise period for
such Stock Appreciation Right, before and after which period no Stock
Appreciation Right shall attach to the underlying Stock Option. In no event
shall the exercise period for a Stock Appreciation Right granted with respect
to an underlying Stock Option exceed the exercise period for such Stock
Option. If a Stock Appreciation Right is granted without an underlying Stock
Option, the period for exercise of the Stock Appreciation Right shall be set
by the Committee.
(b) Value of Stock Appreciation Right. If a Stock Appreciation Right is
granted in connection with an underlying Stock Option, the grantee shall be
entitled to surrender such Stock Appreciation Right and the Stock Option
which is then exercisable and receive in exchange therefor an amount equal to
the excess of the fair market value of the Common Stock on the date the
election to surrender is received by the Company over the Stock Option price
multiplied by the number of shares covered by the Stock Options which are
surrendered. If a Stock Appreciation Right is granted without an underlying
Stock Option, the grantee shall receive upon exercise of the Stock
Appreciation Right an amount equal to the excess of the fair market value of
the Common Stock on the date the election to surrender such Stock
Appreciation Right is received by the Company over the fair market value of
the Common Stock on the date of grant multiplied by the number of shares
covered by the grant of the Stock Appreciation Right.
(c) Payment of Stock Appreciation Right. Payment of a Stock Appreciation
Right shall be in the form of shares of Common Stock, cash, or any
combination of shares and cash. The form of payment upon exercise of such a
right shall be determined by the Committee either at the time of the grant of
the Stock Appreciation Right or at the time of exercise of the Stock
Appreciation Right.
9. Performance Share Incentives.
The Committee may grant awards under which payment may be made in shares
of Common Stock, cash or any combination of shares and cash if the
performance of the Company or any subsidiary or division of the Company
selected by the Committee during the award period meets certain goals
established by the Committee. Such Performance Share Incentives shall be
subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe.
(a) Incentive Period and Performance Goals. The Committee shall determine
and include in a Performance Share Incentive grant the period of time for
which a Performance Share Incentive is made ("Incentive Period"). The
Committee shall also establish performance objectives ("Performance Goals")
to be met by the Company, subsidiary or division during the Incentive Period
as a condition to payment of the Performance Share Incentive. The Performance
Goals may include earnings per share, return on stockholders' equity, return
on assets, net income, Company earnings performance compared to its domestic
competition or any other financial or other measurement established by the
Committee. The Performance Goal may include minimum and optimum objectives or
a single set of objectives.
(b) Payment of Performance Share Incentives. The Committee shall establish
the method of calculating the amount of payment to be made under a
Performance Share Incentive if the Performance Goals are met,
<PAGE>
including the fixing of a maximum payment. The Performance Share Incentive
shall be expressed in terms of shares of Common Stock referred to as
"Performance Shares". After the completion of an Incentive Period, the
performance of the Company, subsidiary or division shall be measured
against the Performance Goals and the Committee shall determine whether
all, none or any portion of a Performance Share Incentive shall be paid.
The Committee, in its discretion, may elect to make payment in shares of
Common Stock, cash or a combination of shares and cash. Any cash payment
shall be based on the fair market value of Performance Shares on, or as
soon as practicable prior to, the date of payment.
(c) Revision of Performance Goals. At any time prior to the end of an
Incentive Period, the Committee may revise the Performance Goals and the
computation of payment if unforeseen events occur which have a substantial
effect on the performance of the Company, subsidiary or division and which in
the judgment of the Committee make the application of the Performance goals
unfair unless a revision is made.
(d) Requirement of Employment. A grantee of a Performance Share Incentive
must remain in the employment of the Company until the completion of the
Incentive Period in order to be entitled to payment under the Performance
Share Incentive; provided that the Committee may, in its sole discretion,
provide for a partial payment where such an exception is deemed equitable.
(e) Dividends. The Committee may, in its discretion, at the time of the
granting of a Performance Share Incentive, provide that any dividends
declared on the Common Stock during the Incentive Period, and which would
have been paid with respect to the Performance Shares had they been owned by
a grantee, be (i) paid to the grantee, or (ii) accumulated for the benefit of
the grantee and used to increase the number of Performance Shares of the
grantee.
10. Restricted Stock Incentives.
The Committee may issue shares of Common Stock to a grantee which shares
shall be subject to the following terms and conditions and such other terms
and conditions as the Committee may prescribe:
(a) Requirement of Employment. A grantee of a Restricted Stock Incentive
must remain in the employment of the Company during a period designated by
the Committee ("Restriction Period"). If the grantee leaves the employment of
the Company prior to the end of the Restriction Period, the Restricted Stock
Incentive shall terminate and the shares of Common Stock shall be returned
immediately to the Company; provided that the Committee may, at the time of
the grant, provide for the employment restriction to lapse with respect to a
portion or portions of the Restricted Stock Incentive at different times
during the Restriction Period. The Committee may, in its discretion, also
provide for such complete or partial exceptions to the employment restriction
as it deems equitable.
(b) Restrictions on Transfer and Legend on Stock Certificates. During the
Restriction Period, the grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Common Stock except as provided under
Section 12 hereof. Each certificate for shares of Common Stock issued
hereunder shall contain a legend giving appropriate notice of the
restrictions in the grant.
(c) Escrow Agreement. The Committee may require the grantee to enter into
an escrow agreement providing that the certificates representing the
Restricted Stock Incentive will remain in the physical custody of an escrow
holder until all restrictions are removed or expire.
(d) Lapse of Restrictions. All restrictions imposed under the Restricted
Stock Incentive shall lapse upon the expiration of the Restriction Period if
the conditions as to employment set forth above have been met. The grantee
shall then be entitled to have the legend removed from the certificates.
(e) Dividends. The Committee shall, in its discretion, at the grant of the
Restricted Stock Incentive, provide that any dividends declared on the Common
Stock during the Restriction Period shall either be (i) paid to the grantee,
or (ii) accumulated for the benefit of the grantee and paid to the grantee
only after the expiration of the Restriction Period.
<PAGE>
11. Nontransferability.
Each Incentive granted under the Incentive Stock Plan shall not be
transferable other than by Will or the laws of descent and distribution, and
with respect to Stock Options, shall be exercisable during the grantee's
lifetime only by the grantee or the grantee's guardian or legal
representative.
12. No Right of Employment.
The Incentive Stock Plan and the Incentives granted hereunder shall not
confer upon any eligible employee the right to continued employment with the
Company or affect in any way the right of the Company to terminate the
employment of an eligible employee at any time and for any reason.
13. Taxes.
The Company shall be entitled to withhold, or otherwise collect from the
recipient, the amount of any tax attributable to any amount payable or shares
deliverable under the Plan after giving the person entitled to receive such
amount or shares notice as far in advance as practicable. The recipient may
elect, subject to approval by the Committee, to have shares withheld by the
Company in satisfaction of such taxes, or to deliver other shares of Stock
owned by the recipient in satisfaction of such taxes. With respect to
officers of the Company or a subsidiary or other recipients subject to
Section 16(b) of the Exchange Act, the Committee may impose such other
conditions on the recipient's election as it deems necessary or appropriate
in order to exempt such withholding from the penalties set forth in said
Section. The number of shares to be withheld or delivered shall be calculated
by reference to the Fair Market Value of the appropriate class or series of
Stock on the date that such taxes are determined.
14. Forfeiture of Incentives.
Unless the Committee shall have determined otherwise, the recipient of an
Incentive shall forfeit all amounts not payable or privileges with respect to
Stock Options not immediately exercisable upon the occurrence of any of the
following events:
a. The recipient is Terminated for Cause.
b. The recipient voluntarily terminates his or her employment other than
by Retirement after attainment of age 55, or such other age as may be provided
for in the Incentive.
c. The recipient engages in Competition with the Company or any Affiliate.
d. The recipient engages in any activity or conduct contrary to the best
interests of the Company or any Affiliate.
Stock Options and Director Stock Options immediately exercisable upon the
occurrence of any of the preceding events shall remain exercisable for seven
(7) days after the occurrence of such event unless the Committee in its sole
discretion shall provide that such Stock Options and Director Stock Options
shall remain exercisable for a longer period.
The Committee may include in any Incentive any additional or different
conditions of forfeiture it may deem appropriate. The Committee also, after
taking into account the relevant circumstances, may waive any condition of
forfeiture stated above or in the Incentive contract.
In the event of forfeiture, the recipient shall lose all rights in and to
the Incentive. Except in the case of Restricted Stock Incentives as to which
the restrictions have not lapsed, this provision, however, shall not be
invoked to force any recipient to return any Stock already received under an
Incentive.
Such determinations as may be necessary for application of this Section,
including any grant of authority to others to make determinations under this
Section, shall be at the sole discretion of the Committee, and its
determinations shall be conclusive.
<PAGE>
15. Acceleration.
The Committee may, in its sole discretion, accelerate the date of
exercise, vesting, lapse of restrictions or other receipt of any Incentive.
16. Rights as a Shareholder.
A recipient of an Incentive shall, unless the terms of the Incentive
provide otherwise, have no rights as a shareholder, with respect to any
options or shares which may be issued in connection with the Incentive until
the issuance of a Stock certificate for such shares, and no adjustment other
than as stated herein shall be made for dividends or other rights for which
the record date is prior to the issuance of such Stock certificate. In
addition, with respect to Restricted Stock Incentives, recipients shall have
only such rights as a shareholder as may be set forth on the certificate or
in the terms of the Incentive.
17. Foreign Nationals.
Incentives may be awarded to persons who are foreign nationals or employed
outside the United States on such terms and conditions different from those
specified in the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable laws.
18. Change in Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in control, any Incentives outstanding
as of the date such Change in Control is determined to have occurred and not
then exercisable and vested shall become fully exercisable and vested to the
full extent of the original grant and all restrictions on Incentives shall
immediately lapse.
(b) Change in Control Cash Out. Notwithstanding any other provision of the
Plan, upon the occurrence of a Change of Control all outstanding Stock
Options shall immediately become fully exercisable, and during the 60-day
period from and after such Change in Control (the "Exercise Period"), an
optionee shall have the right, in lieu of the payment of the exercise price
for the shares of Stock being purchased under the Stock Option or Director
Stock Option and by giving notice to the Company, to elect (within the
Exercise Period) to surrender all or part of the Stock Option or Director
Stock Option to the Company and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change in Control Price
per share of Stock on the date of such election shall exceed the exercise
price per share of Stock under the Stock Option or Director Stock Option (the
"Spread") multiplied by the number of shares of Stock granted under the Stock
Option or Director Stock Option as to which the right granted under this
section shall have been exercised; provided, however, that if the end of such
60-day period from and after a Change in Control is within six months of the
date of grant of a Stock Option or Director Stock Option held by an optionee
who is an officer or director of the Company and is subject to Section 16(b)
of the Exchange Act, such Stock Option or Director Stock Option shall be
cancelled in exchange for a cash payment to the optionee, effected on the day
which is six months and one day after the date of grant of such Option, equal
to the Spread multiplied by the number of shares of Stock granted under the
Stock Option or Director Stock Option. Notwithstanding the foregoing, if any
right granted pursuant to this section would make a Change in Control
transaction ineligible for pooling of interests accounting under APB No. 16
that but for this section would otherwise be eligible for such accounting
treatment, the Committee shall have the authority to replace the cash payable
pursuant to this section with Stock having a Fair Market Value equal to the
cash that would otherwise be payable hereunder. For purposes of this
paragraph only, the date of grant of any Stock Option or Director Stock
Option approved by the Committee prior to the date on which the Plan is
approved by the Company's shareholders shall be deemed to be the date on
which the Plan is approved by the Company's shareholders.
(c) Definition of Change in Control. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
resulting in beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (x) the then
outstanding shares of
<PAGE>
Common Stock of the Company (the "Outstanding Company Common Stock") or
(y) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the
following acquisitions of Outstanding Company Common Stock and Outstanding
Company Voting Securities: (1) any acquisition directly from the Company
(other than an acquisition pursuant to the exercise of a conversion
privilege), (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation or other entity controlled by the Company or
(4) any acquisition by any person pursuant to a reorganization, merger or
consolidation if, following such reorganization, merger or consolidation,
the conditions described in clauses (1), (2) and (3) of subsection (iii)
of this section are satisfied, or
(ii) Individuals who, as of the effective date of the Plan, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual who
becomes a member of the Board subsequent to such effective date, whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of directors then comprising the
Incumbent Board, shall be considered as though such individual were a
member of the incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf
of a person other than the Board shall not be so considered as a member of
the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Business Combination");
excluding, however, such a Business Combination pursuant to which (1) all
or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation or other entity resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no person
(other than the Company, any employee benefit plan or related trust
sponsored or maintained by the Company or any corporation or other entity
controlled by the Company or such corporation resulting from such Business
Combination and any person beneficially owning, immediately prior to such
Business Combination, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) will beneficially own, directly or indirectly, 20% or
more of, respectively, the outstanding shares of common stock of the
corporation or other entity resulting from such Business Combination or
the combined voting power of the outstanding voting securities of such
corporation or other entity entitled to vote generally in the election of
directors and (3) at least a majority of the members of the board of
directors of the corporation or other entity resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) The approval by the shareholders of the Company of a plan of
partial or complete liquidation or dissolution of the Company.
(d) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way,
of a share of Stock in any transaction reported on the NASDAQ National Market
or other national securities exchange on which such shares are listed, as
applicable, during the 60-day period prior to and including the date of a
Change in Control and (ii) if the Change in Control is the result of a tender
or exchange offer or a Business Combination, the highest price per share of
Stock paid
<PAGE>
in such tender or exchange offer or Business Combination; provided, however,
that in the case of a Stock Option which (A) is held by an optionee who is an
officer or director of the Company and is subject to Section 16(b) of the
Exchange Act and (B) was granted within 240 days of the Change in Control,
then the Change in Control Price for such Stock Option shall be the Fair
Market Value of the Stock on the date such Stock Option is exercised,
cancelled or cashed out pursuant to the terms of the Plan. To the extent that
the consideration paid in any such transaction described above consists all
or in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Board.
19. Amendment of Incentive.
The Committee may amend, modify or terminate any outstanding Incentive,
including substituting therefor another Incentive of the same or a different
type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
holder's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Employee.
20. Effective Date and Term.
This Plan shall be effective upon adoption by the shareholders of the
Company at its 1996 Annual Meeting to be held on April 23, 1996. The Plan
shall continue in effect until April 22, 2006, when it shall terminate. Upon
termination, any balances of shares reserved for issuance under the Plan
shall be cancelled, and no Incentives shall be granted under the Plan
thereafter. The Plan shall continue in effect, however, insofar as is
necessary to complete all of the Company's obligations under outstanding
Incentives to conclude the administration of the Plan.
21. Termination and Amendment of Plan.
The Plan may be terminated at any time by the Board of Directors except
with respect to any Stock Options, Director Stock Options, Restricted Stock
Incentives, Stock Appreciation Rights or Performance Share Incentives then
outstanding. Also, the Board may, from time to time, amend the Plan as it may
deem proper and in the best interests of the Company or as may be necessary
to comply with any applicable laws or regulations, provided that no such
amendment shall, without approval of the holders of a majority of the
outstanding shares of Common stock, (i) increase the total number of shares
which may be issued under the Plan, (ii) reduce the minimum purchase price or
otherwise materially increase the benefits under the Plan, (iii) change the
basis for valuing Stock Appreciation Rights, (iv) impair any outstanding
Incentives without the consent of the holder, (v) alter the class of
employees eligible to receive Incentives, or (vi) withdraw the administration
of the Plan from the Committee.
22. Construction of Plan.
The place of administration of the Plan shall be in the State of New York,
and the validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws, but not the laws
pertaining to choice of laws, of the State of New York.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,733
<SECURITIES> 0
<RECEIVABLES> 60,213
<ALLOWANCES> 0
<INVENTORY> 92,775
<CURRENT-ASSETS> 150,520
<PP&E> 113,801
<DEPRECIATION> 52,170
<TOTAL-ASSETS> 223,945
<CURRENT-LIABILITIES> 37,811
<BONDS> 36,731
0
0
<COMMON> 65
<OTHER-SE> 142,087
<TOTAL-LIABILITY-AND-EQUITY> 223,945
<SALES> 114,888
<TOTAL-REVENUES> 114,888
<CGS> 77,079
<TOTAL-COSTS> 22,516
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,197
<INCOME-PRETAX> 14,478
<INCOME-TAX> 5,688
<INCOME-CONTINUING> 8,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,790
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
