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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-9264
AMERICAN CLASSIC VOYAGES CO.
(Exact name of registrant as specified in its charter)
DELAWARE 31-0303330
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, IL 60606
(Address of principal executive offices) (Zip Code)
(312) 258-1890
(Registrant's telephone number, including area code)
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 August 3, 1998, there were 14,097,055 shares of Common Stock outstanding.
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AMERICAN CLASSIC VOYAGES CO.
INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
- ---------------- ----
<S> <C> <C>
Part I. Financial Information:
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations for
the Three Months and Six Months Ended June 30, 1998
and 1997............................................... 3
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1997.................................. 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1998 and 1997............ 5
Notes to Condensed Consolidated Financial Statements... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
Part II. Other Information:
Item 1. Legal Proceedings...................................... 15
Item 4. Submission of Matters to a Vote of Security Holders.... 15
Item 5. Other Information...................................... 15
Item 6. Exhibits and Reports on Form 8-K....................... 15
</TABLE>
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AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1998 1997 1998 1997
--------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues...................................................... $53,535 $42,356 $94,203 $82,728
Cost of operations (exclusive of depreciation expense shown
below)...................................................... 32,973 24,695 62,432 51,834
------- ------- ------- -------
Gross profit.................................................. 20,562 17,661 31,771 30,894
Selling, general and administrative expenses.................. 12,292 10,657 25,388 22,176
Depreciation expense.......................................... 4,233 3,553 8,489 7,136
------- ------- ------- -------
Operating income (loss)....................................... 4,037 3,451 (2,106) 1,582
Interest income............................................... 263 251 514 519
Interest expense.............................................. 1,686 1,740 3,356 3,453
Other income.................................................. -- -- 300 --
------- ------- ------- -------
Income (loss) before income taxes............................. 2,614 1,962 (4,648) (1,352)
Income tax (expense) benefit.................................. (1,040) (785) 1,860 541
------- ------- ------- -------
Net income (loss)............................................. $ 1,574 $ 1,177 $(2,788) $ (811)
======= ======= ======= =======
Per Share Information
Basic:
Basic weighted average shares outstanding................. 14,120 13,940 14,094 13,925
Earnings (loss) per share................................. $ 0.11 $ 0.08 $ (0.20) $ (0.06)
Diluted:
Diluted weighted average shares outstanding............... 14,897 14,138 14,094 13,925
Earnings (loss) per share................................. $ 0.11 $ 0.08 $ (0.20) $ (0.06)
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and par value)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 20,972 $ 19,187
Restricted short-term investments................ 60 325
Accounts receivable.............................. 1,436 1,299
Prepaid expenses and other current assets........ 8,650 7,813
-------- --------
Total current assets......................... 31,118 28,624
Property and equipment, net...................... 165,973 171,105
Deferred income taxes, net....................... 11,321 9,564
Other assets..................................... 2,744 1,602
-------- --------
Total assets................................. $211,156 $210,895
======== ========
LIABILITIES
Accounts payable................................. $ 11,205 $ 14,282
Other accrued liabilities........................ 15,277 18,093
Current portion of long-term debt................ 4,100 4,100
Unearned passenger revenues...................... 43,311 33,713
-------- --------
Total current liabilities.................... 73,893 70,188
Long-term debt, less current portion............. 79,438 81,488
-------- --------
Total liabilities............................ 153,331 151,676
======== ========
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value (5,000,000 shares
authorized, none issued and outstanding)....... -- --
Common stock, $.01 par value (20,000,000 shares
authorized; 14,148,055 and 14,006,015 shares
issued, respectively) ......................... 141 140
Additional paid-in capital....................... 78,750 77,059
Accumulated deficit.............................. (20,768) (17,980)
Common stock in Treasury, at cost (20,000 shares) (298) --
-------- --------
Total stockholders' equity....................... 57,825 59,219
-------- --------
$211,156 $210,895
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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AMERICAN CLASSIC VOYAGES CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------
1998 1997
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................ $ (2,788) $ (811)
Depreciation expense........................ 8,489 7,136
Gain on sale of assets...................... (300) --
Changes in working capital and other:
Working capital changes and other......... (7,834) (3,792)
Unearned passenger revenues............... 9,598 9,068
-------- --------
Net cash provided by operating activities... 7,165 11,601
-------- --------
INVESTING ACTIVITIES:
Decrease in restricted short-term investments... 265 2,375
Capital expenditures............................ (4,801) (12,980)
Proceeds from sale of assets.................... 300 --
-------- --------
Net cash used in investing activities....... (4,236) (10,605)
-------- --------
FINANCING ACTIVITIES:
Repayment of borrowings......................... (2,050) (2,050)
Purchase of common stock........................ (298) --
Issuance of common stock........................ 1,204 460
-------- --------
Net cash used in financing activities....... (1,144) (1,590)
-------- --------
Increase (decrease) in cash and cash equivalents.. 1,785 (594)
Cash and cash equivalents, beginning of period.... 19,187 17,908
-------- --------
Cash and cash equivalents, end of period.......... $ 20,972 $ 17,314
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................... $ 3,041 $ 3,129
Income taxes................................ -- 194
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Drydock expenditures:
Capital expenditures........................ $ -- $ (3,490)
Increase in accounts payable................ -- 3,490
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN CLASSIC VOYAGES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
1. BASIS OF PRESENTATION:
These accompanying unaudited Condensed Consolidated Financial Statements
("Financial Statements") have been prepared pursuant to Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included on Form 10-K
for the year ended December 31, 1997 (the "Form 10-K") for American Classic
Voyages Co. ("AMCV") and its subsidiaries. These Financial Statements include
the accounts of AMCV and its wholly owned subsidiaries, The Delta Queen
Steamboat Co. ("DQSC") and Great Hawaiian Cruise Line, Inc. ("GHCL")
(collectively with such subsidiaries, the "Company"). The following notes to the
Financial Statements highlight significant changes to the notes included in the
Form 10-K and such interim disclosures as required by the SEC. These Financial
Statements reflect, in the opinion of management, all adjustments necessary for
a fair presentation of the interim financial statements. All such adjustments
are of a normal and recurring nature. Certain previously reported amounts have
been reclassified to conform to the 1998 presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2. RECENT PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Standards ("SFAS") No. 129, "Disclosure of Information
about Capital Structure." This statement is effective for financial statements
for periods ending after December 15, 1997. See activities presented below:
<TABLE>
<S> <C>
Common Stock: Shares of Stock
At December 31, 1997..................................................... 14,006,015
Issued under employee benefit plans including exercises of stock options.. 135,040
Issued upon conversion of stock units..................................... 7,000
----------
At June 30, 1998.......................................................... 14,148,055
==========
Treasury Stock:
At December 31, 1997..................................................... --
Purchased................................................................. 20,000
----------
At June 30, 1998.......................................................... 20,000
==========
</TABLE>
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information," which requires the reporting of certain
information about operating segments and related disclosures about products and
services, geographic areas, and major customers. The Company is required to
adopt the new standard in 1998; however, this statement need not be applied to
interim financial statements during the initial year.
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3. EARNINGS PER SHARE:
In February 1997, FASB issued SFAS No. 128, "Earnings Per Share", which requires
dual presentation of basic and diluted earnings per share. The Company has
adopted the new standard and earnings per share information for prior years has
been restated accordingly. See reconciliations presented (in thousands, except
per share data) below:
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
----------------------
1998 1997
-------- -------
<S> <C> <C>
Basic:
Net income.......................................................... $ 1,574 $ 1,177
Weighted average shares............................................. 14,120 13,940
------- -------
Basic per share amount.............................................. $ 0.11 $ 0.08
======= =======
Diluted:
Net income.......................................................... $ 1,574 $ 1,177
Weighted average shares............................................. 14,120 13,940
Additional shares assuming exercise of dilutive stock options and
immediate vesting of stock units................................... 777 198
------- -------
Diluted weighted average shares..................................... 14,897 14,138
------- -------
Diluted per share amount............................................ $ 0.11 $ 0.08
======= =======
</TABLE>
As the Company reported losses for the six months ended June 30, 1998 and 1997,
diluted earnings per share was computed in the same manner as basic earnings per
share.
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<PAGE> 8
4. DEBT:
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
U.S. Government Guaranteed Ship Financing Note, American Queen
Series, LIBOR + 0.25% floating rate notes due semi-annually
beginning February 24, 1996 through August 24, 2005............. $ 18,021 $ 19,233
U.S. Government Guaranteed Ship Financing Bond, American Queen
Series, 7.68% fixed rate, sinking fund bonds due semi-annually
beginning February 24, 2006 through June 2, 2020................ 36,198 36,198
U.S. Government Guaranteed Ship Financing Note, Independence
Series A, LIBOR + 0.27% floating rate notes due semi-annually
beginning June 7, 1996 through December 7, 2005................. 9,909 10,570
U.S. Government Guaranteed Ship Financing Bond, Independence
Series A, 6.84% fixed rate sinking fund bonds due semi-annually
beginning June 7, 2006 through December 7, 2015................. 13,215 13,215
U.S. Government Guaranteed Ship Financing Note, Independence
Series B, LIBOR + 0.27% floating rate notes due semi-annually
beginning December 7, 1996 through December 7, 2005............. 2,655 2,832
U.S. Government Guaranteed Ship Financing Bond, Independence
Series B, 7.46% fixed rate sinking fund bonds due semi-annually
beginning June 7, 2006 through December 7, 2015................. 3,540 3,540
Revolving credit facility (maximum availability of $15 million)... -- --
-------- --------
83,538 85,588
Less current portion.............................................. 4,100 4,100
-------- --------
$ 79,438 $ 81,488
======== ========
</TABLE>
As of June 30, 1998, the Company complied with all covenants under its various
debt agreements.
5. ACCUMULATED DEFICIT:
Changes in accumulated deficit for the six months ended June 30, 1998 were (in
thousands):
<TABLE>
<S> <C>
Accumulated deficit at December 31, 1997........... $(17,980)
Net loss........................................... (2,788)
--------
Accumulated deficit at June 30, 1998............... $(20,768)
========
</TABLE>
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AMERICAN CLASSIC VOYAGES CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
American Classic Voyages Co. ("AMCV," or along with its subsidiaries, the
"Company"), is a holding company which owns and controls The Delta Queen
Steamboat Co. ("DQSC") and Great Hawaiian Cruise Line, Inc. ("GHCL"). The
Company, through its various subsidiaries, operates two cruise lines: "Delta
Queen", which owns and operates the American Queen, Mississippi Queen and Delta
Queen steamboats, and "American Hawaii", which owns and operates the
Independence steamship.
The following discusses the Company's consolidated results of operations and
financial condition for the second quarter and six month period ended June 30,
1998 versus the comparable periods ended June 30, 1997. This section should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Form 10-K for the
year ended December 31, 1997.
Delta Queen's operations are seasonal. Historically, there is greater passenger
interest and higher yields in the spring and fall months of the year and the
vessels typically undergo an annual lay-up in December and/or January. American
Hawaii historically experiences greater passenger interest in the summer and
fall months of the year. During the summer months, in particular, American
Hawaii tends to have average occupancy in excess of 100% as the number of
families sharing cabins with children increases significantly during this
period.
American Hawaii is required by the U.S. Coast Guard to drydock the Independence
once every 30 months, and as such, the Independence was out of service for a
four-week period ending June 13, 1997 ("Independence drydock"). As a result of
the factors mentioned above, interim results of operations are not necessarily
indicative of results for a full year.
RESULTS OF OPERATIONS
The following tables set forth various financial results and operating
statistics for the three months and six months ended June 30, 1998 and 1997 (in
thousands):
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues.................... $53,535 $42,356 $94,203 $82,728
======= ======= ======= =======
Operating income (loss)..... $ 4,037 $ 3,451 $(2,106) $ 1,582
======= ======= ======= =======
Net income (loss)........... $ 1,574 $ 1,177 $(2,788) $ (811)
======= ======= ======= =======
</TABLE>
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<TABLE>
<CAPTION>
OPERATING STATISTICS
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fare revenue per passenger night............ $ 231 $ 245 $ 222 $ 233
Total revenue per passenger night........... $ 322 $ 313 $ 315 $ 308
Weighted average operating days (1):
DELTA QUEEN.............................. 91 91 164 162
AMERICAN HAWAII.......................... 91 63 181 153
Vessels capacity per day (berths) (2):
DELTA QUEEN.............................. 1,026 1,026 1,026 1,026
AMERICAN HAWAII.......................... 867 817 867 817
Passenger nights (3)........................ 166,497 135,486 298,822 268,375
Physical occupancy percentage (berths) (4).. 97% 94% 92% 92%
</TABLE>
___________________
(1) Weighted average operating days for each cruise line is determined by
dividing capacity passenger nights for each cruise line by the cruise
line's total vessel capacity per day. Capacity passenger nights is
determined by multiplying, for the respective period, the actual operating
days of each vessel by each vessel's capacity per day.
(2) Vessel capacity per day represents the number of passengers each cruise
line can carry assuming double occupancy for cabins which accommodate two
or more passengers. Some cabins on the Independence and the American Queen
can accommodate three or four passengers.
(3) A passenger night represents one passenger spending one night on a vessel;
for example, one passenger taking a three-night cruise would generate three
passenger nights.
(4) Physical occupancy percentage is passenger nights divided by capacity
passenger nights.
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QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30, 1997
Consolidated second quarter 1998 revenues increased $11.1 million to $53.5
million from $42.4 million for the second quarter 1997 representing a $5.3
million increase in fare revenues combined with a $5.8 million increase in other
revenues. Delta Queen's fare revenues increased $0.8 million, reflecting slight
increases in both fare revenue per passenger night ("fare per diems") and
occupancy rates. American Hawaii's fare revenues increased $4.5 million on a 59%
increase in passenger nights primarily associated with additional operating days
in 1998 as compared to the same period in 1997 when the Independence was out of
service for a four-week drydock. American Hawaii's fare per diems decreased 9.0%
in 1998 as a result of price competition from land-based Hawaiian vacation
alternatives, increased Hawaiian port calls from other cruise lines and a
strategic decision by the Company to attract a greater mix of group business
earlier in the booking cycle at lower yields. The $5.8 million increase in
other revenues was mainly due to the increase in passenger nights at American
Hawaii and an increase in passengers electing to purchase air travel through
American Hawaii under various air promotions. As a result, consolidated total
revenues per passenger night increased to $322; however, the increase in air
revenue was offset by a corresponding increase in related air expenses.
Consolidated cost of operations increased $8.3 million to $33.0 million for the
second quarter of 1998 from $24.7 million for the comparable period of 1997.
American Hawaii's operating costs increased $7.4 million as a result of
increased operating days and an increase in air package expenses corresponding
to the related air revenue increase, as noted above. Delta Queen's operating
costs increased $0.9 million primarily corresponding to the increase in
passenger nights. Consolidated gross profit increased $2.9 million for the
second quarter 1998 as compared to 1997.
Consolidated selling, general and administrative ("SG&A") expenses increased
$1.6 million to $12.3 million for the second quarter of 1998 from $10.7 million
for the same period in 1997. Included in consolidated SG&A expenses were $0.7
million of expenses related to capacity expansion at American Hawaii and at
Delta Queen. The remaining increase was primarily due to an increase in
marketing expenses for both cruise lines. The $0.7 million increase in
depreciation expense was attributable to expenditures capitalized during the
second quarter 1997 Independence drydock and Delta Queen vessel layups completed
earlier in 1998.
The consolidated operating income for the second quarter of 1998 was $4.0
million as compared to $3.5 million for the comparable period of 1997.
Interest expense decreased slightly due to a lower outstanding debt balance in
the second quarter of 1998. The Company's consolidated effective tax rate was
40% for both periods in 1998 and 1997.
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SIX MONTHS ENDED JUNE 30, 1998 VERSUS SIX MONTHS ENDED JUNE 30, 1997
Consolidated first half 1998 revenues increased $11.5 million to $94.2 million
from $82.7 million for the first half of 1997 representing a $3.8 million
increase in fare revenues combined with a $7.7 million increase in other
revenues, mainly from the sale of air packages. Delta Queen's fare revenues
decreased $0.4 million, reflecting a slight increase in fare per diems offset by
a 3% decrease in occupancy rates. American Hawaii's fare revenues increased
$4.2 million on a 29% increase in passenger nights associated with the
additional operating days in 1998 as compared to the same period in 1997 when
the Independence was out of service for a four-week drydock. American Hawaii's
fare per diems decreased 9.0% as a result of price competition from land-based
Hawaiian vacation alternatives, increased Hawaiian port calls from other cruise
lines and a strategic decision by the Company to attract a greater mix of group
business earlier in the booking cycle at lower yields. The $7.7 million increase
in other revenues was mainly due to the increase in passenger nights at American
Hawaii and an increase in passengers electing to purchase air travel through
American Hawaii under various air promotions. As a result, consolidated total
revenues per passenger night increased to $315; however, the increase in air
revenue was offset by a corresponding increase in related air expenses.
Consolidated cost of operations increased $10.6 million to $62.4 million for the
first half of 1998 from $51.8 million for the comparable period of 1997.
American Hawaii's operating costs increased $10.8 million primarily as a result
of increased operating days and an increase in air package expenses
corresponding to the related air revenue increase, as noted above. Delta
Queen's operating costs decreased slightly by $0.2 million. Consolidated gross
profit increased $0.9 million for the first half of 1998.
Consolidated SG&A expenses increased $3.2 million to $25.4 million for the first
half of 1998 from $22.2 million for the same period in 1997. Included in
consolidated SG&A expenses were $1.1 million of expenses related to capacity
expansion at American Hawaii and at Delta Queen. The remaining increase was
primarily due to an increase in marketing expenses for both cruise lines. The
$1.4 million increase in depreciation expense was primarily attributable to
expenditures capitalized during the second quarter 1997 Independence drydock and
Delta Queen vessel layups completed earlier in 1998.
The consolidated operating loss for the first half of 1998 was $2.1 million as
compared to a operating income of $1.6 million for the first half of 1997.
Interest expense decreased slightly due to a lower outstanding debt balance in
the first half of 1998. The Company's consolidated effective tax rate was 40%
for both periods in 1998 and 1997.
12
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LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Operating Activities
For the six months ended June 30, 1998, cash used in operations before changes
in unearned passenger revenues ("Operating Cash Flow") was $2.4 million compared
to cash provided by operations of $2.5 million in the prior year. The change in
Operating Cash Flow reflected the increase in expenses as mentioned above and
changes in other working capital accounts. Unearned passenger revenues,
representing passenger cruise deposits, increased $9.6 million in the first half
of 1998 from December 31, 1997 reflecting the seasonal increase in advance
reservation levels typically experienced at both cruise lines.
Capital Expenditures
Capital expenditures of $4.8 million in the first half of 1998 included $3.8
million related to the Delta Queen and American Queen lay-ups, which were
completed in the first quarter of 1998. Other significant capital expenditures
included $0.6 million related to design fees and costs associated with capacity
expansion in Hawaii, as discussed below. For the remainder of the year, the
Company anticipates spending approximately $5.0 million, including capitalized
expenditures, on capacity expansion costs mainly related to the vessel design
phase for both American Hawaii and Delta Queen.
Debt
As of June 30, 1998, the Company complied with all covenants under its various
debt agreements.
The Company believes it will have adequate access to capital resources, both
internally and externally, to meet its short-term and long-term capital
commitments. Such resources may include cash on hand and the ability to secure
additional financing through the capital markets. The Company continually
evaluates opportunities to increase capacity at both Delta Queen and American
Hawaii and to strategically grow its business. As discussed below, the Company
announced plans to expand capacity at Delta Queen and American Hawaii. As it
proceeds with such plans, the Company intends to seek additional financing,
although it has not yet determined the nature or amount of such financing.
Although the Company believes that it will be able to obtain sufficient funding
from the capital markets to construct the new vessels, there can be no
assurances that the Company will be able to obtain additional financing at
commercially acceptable levels to finance such new construction and, if the
Company so chooses, to pursue a strategic business opportunity.
Other
In April 1998, the Company announced plans to expand capacity at Delta Queen.
For the Delta Queen fleet, the Company intends to build up to five new small
coastal ships over the next seven to 10 years. The ships, which will each
accommodate 200 to 225 passengers, will cruise in coastal areas and other
itineraries not currently served by existing Delta Queen vessels such as the
East Coast and the Pacific Northwest of the United States. The Company has
completed naval contract designs and is presently pursuing bids from
approximately 15 U.S. shipyards. In addition, the Company is in the process of
obtaining market research to assist in the final determination of the
feasibility of these new vessels. If the Company decides to go forward with the
expansion plan and enter into a shipyard contract, construction of the first new
vessel will begin in early 1999 with its completion in the second half of 2000.
As more fully discussed in the Company's Form 10-K, in October 1997, the Company
announced plans to expand capacity at American Hawaii. The Company intends to
construct two new cruise ships over the next seven years and plans to introduce
an existing foreign-flag cruise ship in the Hawaii market while awaiting
construction of the new vessels. The Company is in the process of selecting a
shipyard and developing cost estimates for the construction of the new cruise
ships and anticipates entering into a shipyard contract by the first quarter of
1999.
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<PAGE> 14
The Federal Maritime Commission ("FMC") regulates passenger vessels with 50 or
more berths departing from U.S. ports and requires that operators post security
to be used in the event the operator fails to provide cruise services, or
otherwise satisfy certain financial standards. The Company has been approved as
a self-insurer by the FMC, and therefore, subject to continued approval, is not
required to post security for passenger cruise deposits. The FMC has reviewed
its standards and in June 1996 issued proposed regulations to increase the
financial responsibility requirements. The Company filed its objection to the
proposals, as it believes that the FMC's current standards provide passengers
with adequate protection in the event of an operator's non-performance and that
further requirements may impose an undue burden on operators. If implemented,
these proposed regulations would be phased in over time and, among other things,
would require operators qualifying as a self-insurer, such as the Company, to
satisfy a working capital test, in addition to the existing net worth test, and
to provide third-party coverage for 25% of its unearned passenger revenue in the
form of a surety bond or similar instrument. At this time, the Company cannot
predict if the proposed changes will be approved as currently constituted, or at
all. If they are implemented, the proposed changes would require that the
Company establish a bond to cover a portion of its passenger deposits and
payments, which may impact the Company's liquidity.
In June 1997, the Board of Directors of the Company approved a stock repurchase
plan. The plan authorizes the Company to repurchase up to one million shares of
its stock. These shares may be purchased from time to time in the public market
or through privately negotiated transactions. As of August 3, 1998, the Company
had repurchased 51,000 shares at an average purchase price of $14.84 per share
under the plan.
Factors Concerning Forward-Looking Statements
Certain statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions which may impact passenger yields and occupancy; weather patterns
affecting either the inland waterways in the Continental U.S. or the Hawaiian
Islands; unscheduled repairs and drydocking of the Company's vessels;
development, planning and construction costs; construction delays and/or cost
overruns during regularly scheduled lay-ups and/or drydocks; delays and/or costs
overruns during the development and/or construction of new vessels; the impact
of changes and/or repeal of laws and implementation of government regulations;
an increase in capacity at American Hawaii and/or Delta Queen; pursuit of a
strategic business opportunity; and the ability to obtain additional financing,
if necessary.
14
<PAGE> 15
AMERICAN CLASSIC VOYAGES CO.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no other material legal proceedings, to which the Company is
a party or of which any of its property is the subject, other than
ordinary routine litigation and claims incidental to the business. The
Company believes it maintains adequate insurance coverage and reserves
for such claims.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of American Classic Voyages Co.,
held on June 3, 1998, the stockholders voted on the election of
Directors. The number of shares issued, outstanding and eligible to
vote at the meeting as of the record date of April 3, 1998 were
14,063,451. Proxies representing 12,795,822 shares, or 90.98% of the
shares eligible to vote were received.
Proposal 1 - Election of Directors
<TABLE>
<CAPTION>
Number of Shares/Votes
--------------------------
Name For Authority Withheld
---- --- ------------------
<S> <C> <C>
Phillip C. Calian 12,776,688 19,134
Arthur A. Greenberg 12,776,588 19,234
Jerry R. Jacob 12,776,588 19,234
Emanuel L. Rouvelas 12,776,656 19,166
Mark Slezak 12,776,756 19,066
Joseph P. Sullivan 12,772,756 23,066
Jeffrey N. Watanabe 12,776,756 19,066
Samuel Zell 12,776,688 19,134
</TABLE>
ITEM 5. Other Information
If a stockholder proposal is introduced at the 1999 Annual Meeting
without any discussion of the proposal in the proxy statement, and if
the proponent does not notify the Company on or before March 15, 1999,
as required by Rule 14a-4(c)(1) under the Securities Exchange Act of
1934, of the intent to raise such proposal at the Annual Meeting, then
proxies received by the Company for the 1999 Annual Meeting will be
voted by the persons named as proxies in their discretion in regard to
such proposal. Notice is to be given to the Company in writing at its
principal office, Two North Riverside Plaza, Suite 200, Chicago,
Illinois 60606, directed to the attention of the Secretary.
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits:
10.(iii)(A)(8) American Classic Voyages Co. Amended and Restated
1995 Employee Stock Purchase Plan - Effective July
1, 1998.
27. Financial data schedule.
b) Reports on Form 8-K:
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN CLASSIC VOYAGES CO.
By: /s/ Philip C. Calian
------------------------------------------
Philip C. Calian
Chief Executive Officer
By: /s/ O. Ivy Wu
------------------------------------------
O. Ivy Wu
Treasurer
Dated: August 13, 1998
----------------------
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 21,032<F1>
<SECURITIES> 0
<RECEIVABLES> 1,436
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,118
<PP&E> 233,362
<DEPRECIATION> 67,389
<TOTAL-ASSETS> 211,156
<CURRENT-LIABILITIES> 73,893
<BONDS> 79,438
0
0
<COMMON> 141
<OTHER-SE> 57,684
<TOTAL-LIABILITY-AND-EQUITY> 211,156
<SALES> 0
<TOTAL-REVENUES> 94,203
<CGS> 0
<TOTAL-COSTS> 62,432
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,356
<INCOME-PRETAX> (4,648)
<INCOME-TAX> (1,860)
<INCOME-CONTINUING> (2,788)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,788)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
<FN>
<F1>Includes restricted short-term investments of $582.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 10.(iii)(A)(8)
AMERICAN CLASSIC VOYAGES CO.
AMENDED AND RESTATED
1995 EMPLOYEE STOCK PURCHASE PLAN
(EFFECTIVE JULY 1, 1998)
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
1. Purpose of the Plan 1
2. Definitions 1
2.1 "Account" 1
2.2 "Base Pay" 1
2.3 "Board" 1
2.4 "Common Stock" 1
2.5 "Designated Affiliate" 1
2.6 "Eligible Employee" 1
2.7 "Fair Market Value" 2
2.8 "Offering" 2
2.9 "Offering Date" 2
2.10 "Parent" 2
2.11 "Participant" 2
2.12 "Pay Day" 2
2.13 "Plan Administrator" 2
2.14 "Subsidiary" or "Subsidiaries" 2
3. Offerings 3
4. Price 3
5. Stock Subject to the Plan 3
6. Changes in Capital Structure 3
7. Participation 4
8. Base Pay Deductions 4
9. Granting of Option 5
10. Exercise of Option 5
11. Employee's Rights as a Stockholder 5
12. Disposition of Common Stock 6
13. Withdrawal 6
<PAGE> 3
14. Carryover of Account 7
15. Interest 7
16. Rights Not Transferable 7
18. Administration of the Plan 8
19. Termination and Amendments to Plan 8
20. Approval of Stockholders 9
<PAGE> 4
AMERICAN CLASSIC VOYAGES CO.
AMENDED AND RESTATED
1995 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. The American Classic Voyages Co. 1995 Employee
Stock Purchase Plan (the "Plan") was adopted by American Classic Voyages Co., a
Delaware corporation (the "Company"), to encourage stock ownership by all
eligible employees of the Company and its subsidiaries so that they may share in
the results of the Company's operations by acquiring or increasing their
proprietary interest in the Company. The Plan was designed to encourage
eligible employees to remain in the employ of the Company. It has been and is
intended that options issued pursuant to this Plan shall constitute options
issued pursuant to an "employee stock purchase plan" within the meaning of
Section423 of the Internal Revenue Code of 1986, as amended (the "Code").
The Board of Directors of the Company (the "Board") reserved the right
to amend the Plan and has amended the Plan from time to time. The Board hereby
further amends the Plan and restates the Plan and all amendments in this
document, effective as of July 1, 1998.
2. Definitions.
2.1 "Account" means the record of the funds accumulated with respect
to an individual employee as a result of deductions from his or her paycheck for
the purpose of purchasing stock under the Plan.
2.2 "Base Pay" means regular straight time earnings or draw, but
excludes compensation for overtime, commissions, bonuses, amounts paid as
reimbursement of expenses and other additional compensation.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Common Stock" means the Company's Common Stock, $.01 par value.
2.5 "Designated Affiliate" means any corporation which is either a
Subsidiary or a Parent with respect to the Company and whose employees are
designated as eligible to participate in the Plan pursuant to Section 3.3.
2.6 "Eligible Employee" means any person who is an employee of the
Company or a Designated Affiliate on an Offering Date and who has then been an
employee of the Company or a Designated Affiliate continuously for at least
ninety (90) days prior thereto. Notwithstanding the foregoing, a person shall
not be an Eligible Employee if (i) his or her customary employment is 20 hours
or less per week; (ii) his
1
<PAGE> 5
or her customary employment is for not more than five months in the calendar
year; or (iii) immediately after the grant of options hereunder in the specific
Offering, he or she would own shares (including all shares which may be
purchased under outstanding options) possessing 5% or more of the total combined
voting power or value of all classes of shares of the Company, or, if
applicable, any Subsidiary or, if applicable, a Parent. For this purpose, the
rules of Section 424(d) of the Code shall apply in determining share ownership.
2.7 "Fair Market Value" (i) as of a day, means the last sale price for
the Common Stock as reported on the National Association of Securities Dealers
Automated Quotation System for such day; or (ii) for an Offering, means the
average of such prices for all of the business days during such Offering.
2.8 "Offering" means one of a series of periods described in Section
3.1 during which Base Pay deductions are made as described in Section 8.
2.9 "Offering Date" means the commencement date of an Offering if such
date is a regular business day or the first business day following such
commencement date.
2.10 "Parent" means any corporation, other than the Company, in the
unbroken chain of corporations ending with the Company if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2.11 "Participant" means an Eligible Employee who has elected to make
Base Pay deductions in connection with an Offering.
2.12 "Pay Day" means the day as of which Base Pay is paid to an
Eligible Employee.
2.13 "Plan Administrator" means the Board or the Committee described in
Section 18 and, except to the extent prohibited by Securities and Exchange
Commission Rule 16b-3, as amended from time to time ("SEC Rule 16b-3"), may
include an agent designated by the Board or such Committee.
2.14 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the Company in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the broken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such claim.
2
<PAGE> 6
3. Offerings.
3.1 The first Offering under the Plan shall commence on July 1, 1995,
and terminate on September30, 1995. Thereafter, Offerings shall commence on the
first day of each calendar quarter and terminate on the last day of each
calendar quarter until the Plan is terminated by the Board or no additional
shares of Common Stock of the Company are available for purchase under the Plan.
3.2 In connection with an Offering, each Eligible Employee with
respect to such Offering will be given the opportunity to elect Base Pay
deductions sufficient to purchase Common Stock subject to options granted in
such Offering.
3.3 Any corporation which is either a Parent or a Subsidiary may be
designated by the Plan Administrator as a Designated Affiliate and such
designation shall remain in effect unless and until revoked by the Plan
Administrator.
4. Price. The purchase price per share for each Offering shall be 85% of
the lesser of: (i) the Fair Market Value of the Common Stock on the last
business day of the Offering; or (ii) the greater of (A) the Fair Market Value
of the Common Stock for the Offering, and (B) the Fair Market Value of the
Common Stock on the first business day of the Offering.
5. Stock Subject to the Plan. The aggregate number of shares of Common
Stock available for grant under options shall not exceed 500,000, subject to
adjustment pursuant to Section 6 hereof. Shares of Common Stock subject to
options granted pursuant to the Plan may be either authorized but unissued
shares, shares now held in the treasury of the Company, or shares hereafter
acquired by the Company. In the event that any option granted under the Plan
expires unexercised or is terminated, surrendered or canceled without being
exercised, in whole or in part, for any reason, the number of shares of Common
Stock theretofore subject to such option shall again be available for grant
under an option pursuant to the Plan and shall not reduce the aggregate number
of shares of Common Stock available for grant under such options as set forth in
this Section.
6. Changes in Capital Structure.
6.1 In the event that the outstanding shares of Common Stock of the
Company are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation, by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
dividend payable in shares, appropriate adjustment shall be made by the Board in
the number or kind of shares as to which an option granted under this Plan shall
be exercisable, to the end that the option holder's proportionate interest shall
be maintained as before the occurrence of such
3
<PAGE> 7
event. Any such adjustment made by the Board shall be consistent with Section
424(a) of the Code and shall be conclusive.
6.2 If the Company is not the surviving or resulting corporation in
any reorganization, merger, consolidation or recapitalization, each outstanding
option shall be assumed by the surviving or resulting corporation and each
option shall continue in full force and effect, and shall apply to the same
number and class of securities of the surviving corporation as a holder of the
number of shares of Common Stock subject to such option would have received in
such consolidation or recapitalization.
7. Participation.
7.1 An Eligible Employee with respect to an Offering may become a
Participant in connection with the Offering by completing, signing and filing an
enrollment agreement ("Enrollment Agreement") and any other necessary papers
with the Company at least 15 days prior to the commencement of the particular
Offering. Base Pay deductions for a Participant shall commence on the first Pay
Day in the Offering and shall end on the last Pay Day in the Offering unless
earlier terminated by the Participant as provided in Section 13. Subject to
Section 7.2, participation in one Offering under the Plan shall neither limit,
or require, participation in any other offering.
7.2 Unless otherwise specified, an Enrollment Agreement will continue
to apply to succeeding Offerings unless modified or revoked.
8. Base Pay Deductions.
8.1 At the time a Participant files his or her Enrollment Agreement,
he or she shall elect to have deductions made from his or her Base Pay of not
less than $10 or more than 20% of his or her Base Pay on each Pay Day during the
time he or she is a Participant in the Offering.
8.2 All Base Pay deductions made for a Participant shall be credited
to his or her Account under the Plan. A Participant may not make any separate
cash payment into such Account nor may payment for shares be made other than by
Base Pay deduction.
8.3 A Participant may discontinue his or her Base Pay deductions or
participation in the Plan only as provided in Section 13.
8.4 A Participant may change the amount of his or her Base Pay
deductions, pursuant to procedures established by the Company, by submitting a
revised Enrollment Agreement. Any such change shall be effective as soon as
administratively feasible.
4
<PAGE> 8
9. Granting of Option.
9.1 On each Offering Date, the Plan shall be deemed to have granted to
the Participant an option for as many full shares as he or she will be able to
purchase with the Base Pay deductions credited to his or her Account during his
or her participation in that Offering.
9.2 Notwithstanding the foregoing, no employee shall be granted an
option which permits his or her rights to purchase Common Stock under the Plan
and any similar employee stock purchase plans of the Company and, if applicable,
a Subsidiary and, if applicable, a Parent to accrue at a rate which exceeds
$25,000 of Fair Market Value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time. The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code.
9.3 Except as specifically provided herein, all Eligible Employees
shall have the same rights and privileges under the Plan. All rules and
determinations of the Board in the administration of the Plan shall be uniformly
and consistently applied to all persons in similar circumstances.
9.4 If the total number of shares for which options are to be granted
on any Offering Date in accordance with Section 9.1 exceeds the number of shares
then available under the Plan (after deduction of all shares for which options
have been exercised or are then outstanding), the Company shall make a pro rata
allocation of the shares remaining available in as nearly a uniform manner as
shall be practical and as it shall determine to be equitable.
10. Exercise of Option. Each employee who continues to be a Participant in
an Offering on the last business day of that Offering shall be deemed to have
exercised his or her option on such date and shall be deemed to have purchased
from the Company such number of full shares of Common Stock reserved for the
purpose of the Plan as his or her accumulated Base Pay deductions on such date
will pay for the purchase price. Any balance remaining in a Participant's
Account after such purchase will be subject to Section 14.
11. Employee's Rights as a Stockholder.
11.1 No Eligible Employee shall have any right as a stockholder with
respect to any shares under the Plan until the shares have been purchased in
accordance with Section 10 above and the purchase has been evidenced on the
ownership records of the Company.
5
<PAGE> 9
11.2 Shares purchased in an Offering shall be reflected by means of a
book entry record maintained by the Company except to the extent that the
Participant requests that certificates be delivered with respect to such Shares
pursuant to procedures established by the Company, or that certificates are
required to be delivered pursuant to Section 17.3.
11.3 Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant, or, if the Participant so directs, by
written notice to the Company prior to the termination date of the pertinent
Offering, in the names of the Participant and one such other person as may be
designated by the Participant, as joint tenants with right of survivorship, to
the extent and in the manner permitted by applicable law.
11.4 The obligations of the Company to sell and deliver Common Stock
under the Plan shall be subject to all applicable laws, regulations, rules and
approvals, including, but not by way of limitation, the effectiveness of a
registration statement under the Securities Act of 1933 if deemed necessary or
appropriate by the Company.
11.5 Certificates for shares of Common Stock issued hereunder may be
legended as the Board shall deem appropriate, and may be legended to reflect the
restrictions of Section 12.
12. Disposition of Common Stock. Except as provided in the next sentence,
no "disposition" (as that term is defined in Section 424(c) of the Code) may be
made of any Common Stock purchased under the Plan until the first anniversary of
such purchase. Notwithstanding the foregoing, (i) if a Participant who owns
Common Stock subject to the foregoing restriction is determined by the Plan
Administrator in its discretion to have a serious financial need for the
proceeds of the sale of such Common Stock, then upon application made by the
Participant, the Plan Administrator shall consent to a disposition of such
Common Stock to the extent necessary to satisfy the serious financial need, and
shall give instructions to the transfer agent to register such disposition on
the stock records of the Company; and (ii) if a Participant is no longer an
employee, a director or consultant of the Company or a Designated Affiliate, the
foregoing restriction shall not apply.
13. Withdrawal.
13.1 A Participant may withdraw from the Plan, in whole but not in
part, by delivering a withdrawal notice ("Withdrawal Notice") to the Company at
least 15 days prior to the end of such Offering, in which event the Company will
refund the entire balance of his or her Account as soon as practicable
thereafter.
13.2 To re-enter the Plan, an Eligible Employee who has previously
withdrawn must file a new Enrollment Agreement in accordance with Section 7. His
or
6
<PAGE> 10
her re-entry into the Plan cannot, however, become effective before the
beginning of the next Offering following his or her withdrawal. A Participant
may not withdraw from and re-enter the Plan more than twice in any calendar
year.
13.3 A Participant may elect to discontinue his or her Base Pay
deductions during the course of a particular Offering and with respect to such
Offering, by delivering an election to discontinue deductions to the Company,
and such election shall be effective as soon as administratively feasible and
shall not constitute a withdrawal for the purpose of this Section13. In the
event that a Participant elects to discontinue his or her Base Pay deductions
pursuant to this Section 13.3, he or she shall remain a Participant in such
Offering and shall be entitled to purchase from the Company such number of full
shares of Common Stock as set forth in and in accordance with Section 10 of the
Plan. A discontinuance pursuant to this Section 13.3 shall not constitute a
modification or revocation of a Participant's Enrollment Agreement with respect
to subsequent Offerings.
14. Carryover of Account. Unless a Participant elects otherwise, the
Company shall carry over the remaining balance of his or her Account to the next
Offering; provided that only amounts less than the price of a single share in an
Offering may be carried over from the Offering to the next Offering. Upon
termination of the Plan, the balance of each employee's Account shall be
returned to him or her.
15. Interest. No interest will be paid or allowed on any money in the
Accounts of Participants.
16. Rights Not Transferable. No Participant shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber either the Base
Pay deductions credited to his or her Account or any rights with regard to the
exercise of an option or to receive shares under the Plan, other than by will or
the laws of descent and distribution, and such right and interest shall not be
liable for, or subject to, the debts, contracts, or liabilities of the
Participant. If any such action is taken by the Participant, or any claim is
perfected by any other party in respect of such right and interest whether by
garnishment, levy, attachment or otherwise, such action or claim will be treated
as an election to withdraw funds in accordance with Section 13.
17. Termination of Employee's Rights.
17.1 An Eligible Employee's rights under the Plan will terminate when
he or she ceases to be an employee because of resignation, layoff, or discharge.
Subject to Section 17.2, a Withdrawal Notice will be considered as having been
received from the employee on the day his or her employment ceases, and all Base
Pay deductions not used will be refunded.
17.2 If a Participant's employment shall be terminated by reason of
retirement, death, or disability prior to the end of an Offering, he or she (or
his or her
7
<PAGE> 11
designated beneficiary, in the event of his or her death, or if none, his or her
legal representative) shall have the right, within ninety (90) days of such
retirement, death or disability, to elect to have the balance of his or her
Account either paid to him or her in cash or applied at the end of the current
Offering toward the purchase of Common Stock.
17.3 If a Participant's employment is terminated for any reason,
certificates for shares of Common Stock purchased for him or her (or his or her
designated beneficiary, in the event of his or her death, or if none, his or her
legal representative) shall be distributed, to the extent not previously
distributed, no later than thirty (30) days after the later of (i) the end of
the Offering during which such employment is terminated; or (ii) if applicable,
the end of the Offering during which the election under Section 17.2 is made.
18. Administration of the Plan.
18.1 The Plan shall be administered by the Board, or by a committee
consisting of two or more members of the Board, each of whom shall be a
"non-employee director," which committee (the "Committee") may be an executive,
compensation or other committee, including a separate committee especially
created for this purpose. The Committee shall have such of the powers and
authority vested in the Board hereunder as the Board may delegate to it
(including the power and authority to interpret any provision of this Plan or of
any option). The members of such Committee shall serve at the discretion of the
Board. A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members of the Committee and any action so taken shall be fully effective as if
it had been taken at a meeting. The Board and/or the Committee, if one has been
established by the Board, shall be referred to in this Plan as the "Plan
Administrator." "Non-Employee Director" shall be defined by reference to the
rules and regulations promulgated under Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Act").
18.2 Subject to the provisions of the Plan, and with a view to
effecting its purpose, the Plan Administrator shall have sole authority, in its
absolute discretion, to (i) construe and interpret the Plan; (ii) define the
terms used in the Plan; (iii) prescribe, amend and rescind rules and regulations
relating to the Plan; (iv) correct any defect, supply any omission or reconcile
any inconsistency in the Plan; (v) determine the time or times at which options
shall be granted under the Plan; (vi) determine all other terms and conditions
of options; and (vii) make all other determinations necessary or advisable for
the administration of the Plan. All decisions, determinations and
interpretations made by the Plan Administrator shall be binding and conclusive
on all Participants in the Plan and on their legal representatives, heirs and
beneficiaries.
8
<PAGE> 12
18.3 Expenses of administration of the Plan will be paid by the
Company.
19. Termination and Amendments to Plan. The Plan may be terminated at any
time by the Board. It will terminate in any case on the earlier of (a) the date
on which all or substantially all of the unissued shares of Common Stock
reserved for the purpose of the Plan have been purchased, or (b) 10 years from
the date the Plan is adopted by the Board. Upon termination of the Plan, all
Base Pay deductions not used to purchase shares will be refunded.
The Board also reserves the right to amend the Plan from time to time in
any respect, provided, however, that no amendment shall be effective without
prior approval of the stockholders (a) which would, except as provided in
Sections 5 and 6, increase the aggregate number of shares of Common Stock to be
issued under the Plan, (b) which would change the class of employees eligible to
receive options under the Plan, or (c) if such amendment requires stockholder
approval for any other reason in order for the Plan to be eligible or continue
to qualify for the benefits conferred by SEC Rule 16b-3, or any successor rule
or regulatory requirements. No amendment may adversely affect an outstanding
option without the consent of the holder thereof unless such amendment is
required by law.
20. Approval of Stockholders. The Plan shall not take effect until
approved by the holders of a majority of the outstanding shares of Common Stock
of the Company, which approval must occur within the period beginning twelve
months before and ending twelve months after the date the Plan is adopted by the
Board.
Date Approved by Board: June 3, 1998
Date Approved by Stockholders: July 1, 1995
9
