U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1999
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 1-8631
Dover Investments Corporation
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 94-1712121
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization Identification No.)
100 Spear Street, Suite 520, San Francisco, CA 94105
(Address of Principal Executive Offices) (Zip Code)
(415) 777-0414
(Issuer's Telephone Number)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1999 were as follows:
Class A Common Stock, $.01 par value 806,633 Shares of Common Stock
Class B Common Stock, $.01 par value 315,558 Shares of Common Stock
Transitional Small Business Disclosure Format
(Check one):
Yes No X
DOVER INVESTMENTS CORPORATION
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
as of June 30, 1999 and December 31, 1998...................... 3
Consolidated Statements of Operations for the Three
Months and Six Months Ended June 30, 1999 and 1998......... ... 4
Consolidated Statement of Stockholders'
Equity for the Six Months Ended June 30, 1999.................. 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999 and 1998................ 6
Notes to Consolidated Financial Statements..................... 7
Item 2. Management's Discussion and Analysis or Plan of Operation...... 7
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........10
Item 6. EXHIBITS AND REPORTS ON FORM 8-K..............................10
Signatures ...................................................12
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOVER INVESTMENTS CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998
(in thousands, except share amounts)
06-30-99 12-31-98
ASSETS
Cash and Cash Equivalents $ 12,418 $ 8,622
Restricted Cash 401 394
Homes Held for Sale 2,137 2,136
Property Held for Development 19,107 23,302
Notes Receivable 2,559 1,678
Other Assets 1,481 1,335
TOTAL ASSETS $38,103 $37,467
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued Interest and Other Liabilities $ 1,918 $ 1,800
Notes Payable 7,799 12,650
Minority Interest in Joint Venture 1,557 220
TOTAL LIABILITIES 11,274 14,670
STOCKHOLDERS' EQUITY
Class A Common Stock Par Value, $.01
Per Share -- Authorized 2,000,000
Shares; Issued 806,633 at
6/30/99 and 806,864 at 12/31/98 8 8
Class B Common Stock Par Value, $.01
Per Share -- Authorized 1,000,000
Shares; Issued 315,558 at
6/30/99 and 320,137 at 12/31/98 3 3
Additional Paid-In Capital 21,212 20,441
Retained Earnings from January 1, 1993 5,631 2,682
Treasury Stock (250 at 6/30/99
and 60,066 at 12/31/98 of Class A
Common Stock and 4,560 of Class B
Common Stock. (25) (337)
TOTAL STOCKHOLDERS' EQUITY 26,829 22,797
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,103 $37,467
See accompanying Notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1999 and 1998
(in thousands, except share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Home Sales $17,103 $ 2,152 $32,963 $ 5,267
Lot Sales 1,488 2,021 2,595 2,021
Total Sales 18,591 4,173 35,558 7,288
Cost of Home Sales 12,579 1,739 24,699 4,328
Cost of Lot Sales 1,161 1,653 2,025 1,653
Total Cost of Sales 13,740 3,392 26,724 5,981
Minority Interest in
Joint Venture 1,361 8 2,382 8
GROSS PROFIT 3,490 773 6,452 1,299
Selling Expenses 856 175 1,562 282
General and Administrative
Expenses 223 180 439 321
1,079 355 2,001 603
Operating Income 2,411 418 4,451 696
Other Income
Interest 188 30 346 77
Fees - 32 - 32
Total Other Income 188 62 346 109
Income before Income Taxes 2,599 480 4,797 805
Provision for Income Taxes 1,037 208 1,848 338
NET INCOME $1,562 $ 272 $2,949 $ 467
Basic Earnings Per Share $1.47 $0.27 $2.77 $0.45
Diluted Earnings Per Share $1.38 $0.25 $2.61 $0.43
See accompanying Notes to Consolidated Financial Statements.
<TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1999
(in thousands)
<CAPTION>
Additional Treasury
Common Stock Paid-In Retained Stock
Class A Class B Capital Earnings at Cost Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $ 8 $ 3 $20,441 $2,682 $(337) $22,797
Re-issuance of Treasury
Stock $ - - 15 - 312 327
Realization of Prequasi-
reorganization Net
Operating Loss Tax
benefits $ - - 756 - - 756
Net Income $ - - - 2,949 - 2,949
Balance at June 30, 1999 $ 8 $ 3 $21,212 $5,631 $ (25) $26,829
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
DOVER INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(in thousands)
Six Months
Ended June 30,
1999 1998
Cash Flows from Operating Activities:
Net Income $ 2,949 $ 467
Reconciliation of Net Income to Net Cash
Provided by (Used in) Operating Activities:
Minority Interest 1,337 (51)
Tax Benefit of Utilizing Prequasi-
reorganization Net Operating Losses 756 310
Changes in Assets and Liabilities:
Restricted Cash (7) 413
Property Held for Development 4,194 (2,673)
Other Assets (146) 182
Notes Receivable (881) -
Accrued Interest and Other Liabilities, Net 118 289
Net Cash Provided by (Used in)
Operating Activities 8,320 (1,063)
Cash Flows from Financing Activities:
(Repayment of) Proceeds from Notes Payable (4,851) 429
Re-issuance of Treasury Stock 327 326
Net Cash (Used in) Provided by
Financing Activities (4,524) 755
Net Increase (Decrease) in Cash
and Cash Equivalents 3,796 (308)
Cash and Cash Equivalents at Beginning of Period 8,622 2,660
Cash and Cash Equivalents at End of Period $12,418 $2,352
See accompanying Notes to Consolidated Financial Statements.
DOVER INVESTMENTS CORPORATION
Notes to Consolidated Financial Statements
June 30, 1999
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets as of June 30, 1999, and December 31, 1998, the related
consolidated statements of operations for the three month and six month
periods ended June 30, 1999 and 1998, the consolidated statement of
stockholders' equity for the six months period ended June 30, 1999, and
consolidated statements of cash flows for the six month periods ended June 30,
1999 and 1998, reflect all adjustments (consisting of normal recurring
accruals and elimination of significant inter-company transactions and
balances) necessary in order to make such financial statements not misleading.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Accordingly, these statements
should be read in conjunction with the statements and notes thereto included
in the Company's 1998 Form 10-KSB and the Notes to the Consolidated Financial
Statements, included therein. The results of operations for the three months
and six months ended June 30, 1999, are not necessarily indicative of the
results which may be expected for the entire year.
2. NET INCOME PER SHARE
Basic income per share is computed, on a combined basis, for the two classes
of common stock, Class A and Class B. Computations are based upon the
weighted average number of common shares outstanding. The weighted
average number of Class A and Class B share equivalents used to compute basic
income per share was 1,063,946 at June 30, 1999, and 1,026,794 at
June 30, 1998. Diluted income per share took into consideration the
outstanding stock options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's investment in property held for development
and homes held for sale decreased by $4,194,000 from its carrying value at
December 31, 1998. This decrease resulted primarily from the sale of a
higher number of homes in San Leandro, California (the "Marina Vista"
property), and the sale of homes and lots in Tracy, California
(the "Glenbriar Joint Venture"). For the quarter ended June 30, 1999, the
Company closed the sale of twenty four homes at the Marina Vista and seventy
five homes and seventy five lots at the Glenbriar Estates project, compared
to fifteen home sales at the Marina Vista and eighty eight lot sales at the
Glenbriar Estates project for the same period in 1998.
REAL ESTATE DEVELOPMENT - MARINA VISTA.
At June 30, 1999, the Company is nearing completion of its Marina Vista
Development project in San Leandro, California and has twenty four homes
under construction. All of the production homes and model homes have been
sold.
REAL ESTATE DEVELOPMENT - GLENBRIAR ESTATES.
The Company continues to develop the Glenbriar Estate Project in Tracy,
California, through three entities (the "Developers") that it has formed with
Westco Community Builders, Inc. [Glenbriar Joint Venture, a California
Partnership ("GJV"); Glenbriar Venture #2, LLC ("GV #2, LLC") and Tracy
Residential Venture Partners, LLC ("TRVP")]. At June 30, 1999, the
Developers have constructed major infra structure improvements, sold one
hundred and eighty unimproved lots to a merchant builder, completed lot
improvements on one hundred and sixty lots, commenced lot improvements on two
hundred and three lots, commenced construction of single family homes
on one hundred and forty eight lots, sold all one hundred and forty eight
homes, and closed the sale on approximately one hundred and five homes.
The Developers own or have under option, land for an additional three
hundred and five lots (approximately). All of the land owned or under
contract to purchase by the Developers is covered by a vesting tentative
subdivision map and several final subdivision maps have been filed with the
City of Tracy for approval. The market for homes built by the Developers has
been very strong during 1998 and in the first six months of 1999.
The development of the project during 1999 will depend largely upon the
availability of Residential Growth Allocations issued by the City of Tracy
and the state of the economy generally in the Bay Area.
REAL ESTATE DEVELOPMENT - HIGHER PRICED HOMES.
During 1997 and 1998, the Company entered into joint ventures to develop
three higher priced homes with Westco Community Builders, Inc. In January of
1999, one of the three higher priced homes was sold and closed. Two other
homes, both located in Menlo Park, California, are currently under
construction with completion scheduled for July and September 1999,
respectively.
During the six months ended June 30, 1999, the Company used its liquidity to
fund expenditures in connection with the Marina Vista property, the Tracy
Joint Venture, and its general and administrative expenses. The Company met
its funding requirements primarily from cash reserves and from revenues from
home sales. The Company also obtained construction financing from private
sources secured by the homes under construction. The Company's primary
source of liquidity in the future will continue to be from revenues generated
from home sales, lot sales, and from construction financing when deemed
appropriate. The Company believes that it has sufficient cash available
to complete the development and construction of the Marina Vista property,
as well as pay off the debt discussed below when it becomes due, and make
its required contributions to the Glenbriar Joint Ventures.
At June 30, 1999, the Company borrowed a total of $7,799,000 to pay for
home construction costs. The loans are secured by lots and homes under
construction and will be paid from the proceeds of home and lot sales. The
loans bear interest at the rate of prime plus 1.25 percent per annum,
maturity dates through February 27, 2000. The Company has repaid the $802,000
loan secured by the four model homes, and the lender has released the models
from the lien of its Deed of Trust.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1999, the Company had income of $1,562,000,
compared to $272,000 for the same period in 1998. For the six months ended
June 30, 1999, net income was $2,949,000, compared to $467,000 for
the same period in 1998. Total sales for the six months ended June 30, 1999,
were $35,558,000, resulting in a gross profit of $6,452,000, compared to
$7,288,000 in sales and a gross profit of $1,299,000 for the same period
in 1998.
Minority Interest at June 30, 1999 increased to $1,557,000, compared to
$220,000 at December 31, 1998. The increase in minority interest is
attributable to the sale of homes and lots at the Glenbriar Estates project
and the sale of the higher priced home located in Los Gatos, California.
The Company expects that the Marina Vista project and the Glenbriar Joint
Ventures will provide a profit from the sale of homes and lots. Factors such
as interest rates and general economic conditions influence the prices at
which the Company is able to sell homes. In order to maintain its market
share of new home sales, the Company keeps home prices competitive with
other builders of a similar product in the vicinity of the property.
Interest income in the second quarter of 1999 increased to $188,000, compared
to $30,000 in 1998, due to higher cash balances from increased home sales
and notes receivable.
Selling expenses for the period ended June 30, 1999, increased by $1,280,000
compared to the same period in 1998. Selling expenses increased primarily due
to increased sales and marketing labor costs and related commission expenses.
For the six months ended June 30, 1999, general and administrative expenses
increased by $118,000 compared to the same period in 1998. This expense
increase resulted from an increase in administrative expenses.
Year 2000 Disclosure. The Company replaced its accounting software
with Solomon IV which is year 2000 compliant. Personal Computers have been
replaced or upgraded and are also compliant. The expense, to become
Year 2000 compliant had no material effect on the Company's financial
position or results of operations. The Company believes all joint venture
entities and major suppliers are year 2000 compliant. In the event that these
entities are not compliant, it would not impact the Company's operations.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 5, 1999, the Company held its annual meeting of
stockholders for the purpose of electing directors, ratification
and approval of an amendment to the 1995 stock option plan
increasing the authorized shares available for option grants and
ratifying the appointment of the Company's auditors. All of the
Company's nominees were elected directors as follows: Arnold
Addison, 696,885 votes for, 4,019 votes against and 45,894 broker
non-votes; John Gilbert 2,943,250 votes for, 12,050 votes against
and 200,470 broker non-votes; Lawrence Weissberg, 2,943,250 votes
for, 12,050 against and 200,470 broker non-votes; and Will C. Wood,
2,943,250 votes for, 12,050 votes against and 200,470 broker non-
votes. The proposal to ratify and approve the amendment to the
1995 stock option plan increasing the authorized shares available
for option grants, was approved with 3,140,562 votes for, 26,285
votes against, 100,662 votes abstaining and 635,059 broker non-
votes. The proposal to ratify the appointment of Grant Thornton LLP
as the Company's independent public accountant for the year ended
December 31, 1999, was approved with 3,642,083 votes for, 1,705
votes against, 12,416 votes abstaining and 246,364 broker
non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed below are filed with this report.
Exhibit No. Description.
10.16 1995 Stock Option Plan as amended.
27.1 Financial Data Schedule for the Quarter Ended
June 30, 1999.
(b) Reports on Form 8-K.
None.
EXHIBIT INDEX
Exhibit Number Description
10.16 1995 Stock Option Plan as amended.
27.1 Financial Data Schedule for the Quarter Ended
June 30, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DOVER INVESTMENTS CORPORATION
Date: July 22, 1999 By: /s/Lawrence Weissberg
Lawrence Weissberg
Chairman of the Board, President
and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 12,819
<SECURITIES> 0
<RECEIVABLES> 2,559
<ALLOWANCES> 0
<INVENTORY> 21,244
<CURRENT-ASSETS> 36,622
<PP&E> 1,481
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,103
<CURRENT-LIABILITIES> 3,475
<BONDS> 7,799
0
0
<COMMON> 11
<OTHER-SE> 26,818
<TOTAL-LIABILITY-AND-EQUITY> 38,103
<SALES> 6,452
<TOTAL-REVENUES> 35,904
<CGS> 30,668
<TOTAL-COSTS> 30,668
<OTHER-EXPENSES> 439
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,797
<INCOME-TAX> 1,848
<INCOME-CONTINUING> 2,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,949
<EPS-BASIC> 2.77
<EPS-DILUTED> 2.61
</TABLE>
EXHIBIT 10.16
DOVER INVESTMENTS CORPORATION
1995 STOCK OPTION PLAN
(Amended and Restated, Effective January 26, 1999)
ARTICLE I
GENERAL
1. PURPOSE.
This 1995 Stock Option Plan (the "Plan") is intended to contribute
to maintaining the Company's performance by providing certain officers and
key employees of the Company with long-term incentives in the form of options
to purchase shares of the Company's Class A Common Stock, $.01 par value per
share (the "Class A Common Stock"), Class B Common Stock, $.01 par value per
share (the "Class B Common Stock"), or any combination thereof.
2. ADMINISTRATION.
The plan shall be administered by the Compensation Committee of the
Board of Directors of the Company, a standing committee (the "Committee").
The Committee shall from time to time at its discretion make determinations
with respect to the officers and key employees of the Company to whom options
shall be granted and the amount of such options. The Committee shall
consist of not less than two (2) members of the Board of Directors. Each
member of the Committee shall be a "disinterested person" within the meaning
of Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended.
The interpretation and construction by the Committee of any
provisions of the Plan or of any option granted under it shall be final.
No member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY.
Subject to Section 2 of this Article I, the persons who shall be
eligible to receive options under the Plan shall be such officers and key
employees (including directors who are also salaried employees of the Company)
of the Company as the Committee shall select. The terms "officers and key
employees" as used herein shall mean officers and assistant officers, both
elective and appointive, presidents and general managers of divisions and
subsidiaries and such other key employees as may be determined by the
Committee in its sole discretion.
Except where the context otherwise requires, the term "Company," as
used herein, shall include (i) Dover Investments Corporation and (ii) any of
its "subsidiary corporations" which meet the definition of subsidiary
corporation contained in Section 425(f) of the Internal Revenue Code of 1986,
as amended, as now in effect or as hereafter amended (the "Code"), and the
terms "officers and key employees of the Company," and words of similar
import, shall include officers and key employees of each such subsidiary
corporation, as well as officers and key employees of Dover Investments
Corporation.
4. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be issued under the Plan shall be authorized
and unissued or reacquired shares of the Company's Class A Common Stock and
Class B Common Stock. The aggregate number of shares which may be issued
under the Plan shall not exceed 400,000 shares of Class A Common Stock,
400,000 shares of Class B Common Stock or an aggregate of 400,000
shares of any combination of shares of Class A Common Stock and Class B
Common Stock, unless an adjustment is required in accordance with
Section 3(I) of Article II hereof.
5. AMENDMENT OF THE PLAN.
The Board of Directors of the Company may, insofar as permitted by
law, from time to time, suspend or discontinue the Plan or revise or amend it
in any respect whatsoever, except that no such amendment shall alter or impair
any rights or obligations under any option theretofore granted under the Plan
without the consent of the Person to whom such option was granted.
Furthermore, without further stockholder approval, no such amendment shall
increase the number of shares subject to the Plan (except as authorized by
Section 3(I) of Article II hereof), change the designation in Section 3 of
Article I of the class of employees eligible to receive options under the
Plan, provide for the grant of stock options having a purchase price less
than the fair market value on the date of grant, extend the term during which
stock options granted under the Plan may be exercised, extend the date
pursuant to which options under the Plan may be granted, or otherwise
amend the Plan in a way that would require stockholder approval promulgated
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
6. TERM OF PLAN.
Awards may be made under the Plan until January 16, 2005, the date
of termination of the Plan. Notwithstanding the foregoing, all options
granted under the Plan shall remain in effect until such options have been
satisfied by the issuance of shares or terminated in accordance with
their terms and the terms of the Plan.
7. RESTRICTIONS.
All options granted under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to stock options granted under the Plan upon any securities exchange
or under any state or federal law, or the consent or approval of any
government regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such option or the issue or purchase
of shares thereunder, such option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Committee.
8. NONASSIGNABILITY.
No stock option shall be assignable or transferable by the grantee
except by will or by the laws of descent and distribution. During the life
of the grantee, any stock options which have been granted to the grantee
shall be exercisable only by the grantee.
9. WITHHOLDING TAXES.
Whenever under the Plan shares of Class A Common Stock, Class B
Common Stock or any combination thereof are to be issued, the Company shall
have the right to require the grantee to remit to the Company an amount
sufficient to satisfy federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such shares.
10. CERTAIN INFORMATION.
The Company shall provide to each optionee, during the period that
such optionee has one or more outstanding options, copies of all annual
reports and other information which are provided to all stockholders of the
Company. The Company shall not be required to provide such information to
key employees whose duties in connection with the Company assure their access
to equivalent information.
ARTICLE II
STOCK OPTIONS
1. AWARD OF STOCK OPTIONS.
Awards of stock options may be made under the Plan. It is intended
that certain options granted pursuant to the Plan shall constitute incentive
stock options within the meaning of Section 422 of the Code ("incentive stock
options"), and that certain options granted pursuant to the Plan shall not
constitute incentive stock options ("nonqualified stock options").
The aggregate fair market value (determined at the time the option is granted)
of the stock with respect to which incentive stock options are exercisable
for the first time by such individual during any calendar year (under all
incentive stock option plans of the individual's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000. The date on
which an option is granted shall be the date of the Committee's authorization
of such grant or such later date as may be determined by the Committee at the
time such grant is authorized.
2. EFFECT OF TERMINATION OF OPTIONS.
In the event that any outstanding option under the Plan terminates
before it would otherwise have expired under its terms or expires by its
terms without being fully exercised, the shares of Class A Common Stock,
Class B Common Stock or any combination thereof subject to such option not
issued pursuant to the exercise of such option shall again become available
in the pool of shares provided under the Plan.
3. TERMS AND CONDITIONS OF OPTIONS.
Stock options granted pursuant to the Plan shall be evidenced by
agreements in such form as the Committee shall from time to time determine,
which agreements shall comply with the following terms and conditions:
(A) Optionee's Agreement
Each optionee shall agree to remain in the employ of and
to render to the Company his or her services for a period of one (1) year
from the date of the option, but such agreement shall not impose upon
the Company any obligation to retain the optionee in its employ for
any period.
(B) Number of Shares
Each option agreement shall state the class and number of
shares to which the option pertains.
(C) Option Price
Each option agreement shall state the option price per
share, which shall be not less than 100% of the fair market value of the
Class A Common Stock or Class B Common Stock, as the case may be, on the
date that the option is granted. Notwithstanding the foregoing, the
option price per share of an incentive stock option granted to a person
who, on the date of such grant and in accordance with Section 425(d) of
the Code, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company shall be not less
than 110% of the fair market value of a shares of the Class A Common
Stock or Class B Common Stock, as the case may be, on the date that the
option is granted. Fair market value as used herein shall be the mean
of the closing sales prices of the Class A Common Stock or Class B Common
Stock, as the case may be, on the Composite Tape for New York Stock
Exchange Listed Stocks on the date that such option is granted or, if
the option date is not a trading date, the trading date next following
the option date. If the Class A Common Stock or the Class B Common
Stock is not listed on the New York Stock Exchange, fair market value
shall be the highest closing sales price on the principal United States
securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which such stock is listed, or, if such stock is
not listed on any such securities exchange, the highest closing sales
price or bid quotation with respect to a share of such stock on the date
such option is granted on the National Association of Securities
Dealers, Inc. Automated Quotations System or any successor system or, if
no such quotations are available, the fair market value on the date in
question of a share of such stock as determined in good faith by the
Board of Directors.
(D) Medium and Time of Payment
The option price shall be payable upon the exercise of an
option in the legal tender of the United States or, in the discretion of
the Committee, in shares of the Class A Common Stock, Class B Common
Stock, in a combination of such legal tender and such shares or in the
form of such other consideration (including, without limitation,
promissory notes). Upon receipt of payment, the Company shall deliver
to the optionee (or person entitled to exercise the option) a certificate
or certificates for the shares of Class A Common Stock or Class B Common
Stock, as the case may be, to which the option pertains.
(E) Terms and Exercise of Option
Each option shall state the time or times when it becomes
exercisable, which shall be determined by the Committee; provided,
however, that, except as otherwise provided herein, no option shall
become exercisable until six months has elapsed from the date of
grant and no incentive stock option shall become exercisable until one
(1) year has elapsed from the date of grant. The Committee may specify
such option exercise schedule, if any, for each option as it, in its
discretion, deems appropriate. To the extent that an option has
become exercisable, it may be exercised in whole or in such lesser
amount as authorized by the option agreement. If exercised in part, the
unexercised portion of an option shall continue to be held by the
optionee and may thereafter be exercised as herein provided.
Notwithstanding any other provision of the Plan, no option granted under
the Plan shall be exercisable after the expiration of ten (10) years
from the date of its grant, subject, in the Committee's discretion,
to Section 3(H) of this Article II. In addition, no incentive stock
option granted under the Plan to a person who, at the time such option
is granted and in accordance with Section 425(d) of the Code, owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company shall be exercisable after
the expiration of five (5) years from the date of its grant. During the
lifetime of the optionee, the option shall be exercisable only by the
optionee and shall not be assignable or transferable by the optionee,
and no other person shall acquire any rights therein.
(F) Termination of Employment Except Disability or Death
In the event that an optionee shall cease to be employed
by the Company for any reason other than the optionee's death or
disability, the optionee's option shall terminate 30 days after the date
of cessation of employment; provided, however, that if such cessation
of employment is with the consent of the Board of Directors of the
Company, expressed in the form of a resolution, or is pursuant to the
optionee's retirement under the provisions of any pension, profit
sharing or other retirement plan of the Company then in effect, such
option may be exercised within three (3) months after the date that he
ceases to be an employee of the Company, but only to the extent such
option was exercisable or would have been exercisable but for the
existence of earlier-granted incentive stock options on the date
of such cessation of employment; and, provided, further, that if such
cessation of employment occurs after a Change in Control (as defined in
Section 3(l)(i) of Article II hereof) and the provisions of Section
3(l)(i) are applicable to such option, such option shall
terminate upon the earlier of 180 days after the date of such cessation
of employment or the
expiration date of such option.
(G) Disability of Optionee
If an optionee shall cease to be employed by the Company
by reason of the optionee becoming permanently and totally disabled
within the meaning of Section 22(e)(3) of the Code and shall not have
fully exercised the optionee's option, such option may be exercised to
the extent it was exercisable immediately prior to the optionee's
disability at any time within one (1) year after cessation of employment
due to such disability.
(H) Death of Optionee and Transfer of Option
If an optionee should die while in the employ of the
Company, or within a period of three (3) months after a termination of
the optionee's employment with the Company during which the optionee is
still permitted to exercise an option in accordance with Subsection 3(F)
of this Article II and shall not have fully exercised the optionee's
option, such option may be exercised to the extent it was exercisable
immediately prior to the optionee's death at any time within one (1)
year after the optionee's death. Such option may be exercised to the
extent it was exercisable immediately prior to the optionee's death
by the executors or administrators of the optionee's estate or by any
person or persons who shall have acquired the option directly from the
optionee by the optionee's will or the applicable law of descent
and distribution.
(I) Recapitalizations and Reorganizations
The number of shares of Class A Common Stock and Class B
Common Stock covered by the Plan, and each outstanding option hereunder
and the price per share thereof, shall be proportionately adjusted for
any increase or decrease in the number of issued and outstanding shares
of Class A Common Stock and Class B Common Stock resulting from
a subdivision or consolidation of shares or the payment of a stock
dividend in excess of 2% or any other increase or decrease in the number
of issued and outstanding shares of Class A Common Stock and Class B
Common Stock effected without receipt of consideration by the Company.
If the Company shall be the continuing or surviving
corporation in any reorganization, consolidation or merger, each
outstanding option shall pertain to and apply to the securities, if any,
to which a holder of the same number of shares of Class A Common
Stock and/or Class B Common Stock that are subject to that option would
have been entitled.
A "Change in Control" of the Company (as defined below)
shall cause each outstanding option to terminate, unless any agreement
relating to a Change in Control shall otherwise provide or unless such
Change in Control is an event described in clauses (a)(2) or (a)(3) of
the following paragraph; provided, however, that each optionee holding
an outstanding option in the event of a Change in Control shall have the
right immediately prior to such a Change in Control, regardless of
whether such option will terminate, to exercise his or her option in
whole or in part without regard to any limitations on exercisability
and thereafter such option shall be considered fully vested.
For the purposes hereof, a "Change in Control" shall be
deemed to have occurred when (a) there shall be consummated (1) any
reorganization, consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation, or (2) any
reorganization, consolidation or merger of the Company in which the
Company is the continuing or surviving corporation and pursuant to which
shares of the Company's Class A Common Stock and Class B Common Stock
would be converted into cash, securities or other property, or (3) any
sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, of the assets of
the Company, or (b) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the Company, or (c) the
Board of Directors of the Company or the Committee shall have been
determined that such a "Change in Control" otherwise has occurred.
To the extent that the foregoing adjustments in this
Section 3(I) relate to stock or securities of the Company, such
adjustments shall be made by the Committee, whose determination in
that respect shall be final, binding and conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations of changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
(J) Rights as a Stockholder
An optionee or a transferee of an option shall have no
rights as a stockholder with respect to any shares covered by his or her
option until the date of the receipt of payment by the Company and the
issuance of a stock certificate to him or her for such shares
pursuant to Section 3(D) of this Article II. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which
the record date is prior to such date, except as provided in Section
3(I) of this Article II.
(K) Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend, renew or
cancel outstanding options granted under the Plan. Notwithstanding the
foregoing, however, no modification of an option shall, without the
consent of the optionee, alter or impair any right or obligations under
any option theretofore granted under the Plan.
(L) Other Provisions
The option agreements authorized under the Plan shall
contain such other provisions, including, without limitation,
restrictions upon the exercise of the option or restrictions required
by any applicable securities laws, as the Committee, in its discretion,
shall deem advisable.
4. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Class A
Common Stock, Class B Common Stock or any combination thereof pursuant to
options will be used for general corporate purposes.
5. NO OBLIGATION TO EXERCISE OPTION.
The granting of an option shall impose no obligation upon the
optionee to exercise such option.
