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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarterly Period Ended December 31, 1999
Commission file number 0-14427
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DISPLAY TECHNOLOGIES, INC.
--------------------------
(Exact name of registrant as specified in its charter)
NEVADA 38-2286268
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or other organization) Identification Number)
5029 EDGEWATER DRIVE, ORLANDO, FLORIDA 32810 (407)521-7477
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(Address, including zip code, and telephone number, including
area code, of registrant's office)
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Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities 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. [X] Yes [ ] No
As of February 14, 2000, 7,887,753 shares of Common Stock were outstanding.
================================================================================
<PAGE>
PART I - FINANCIAL INFORMATION
DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1999
(Unaudited) June 30, 1999
----------- -----------
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 878,774 $ 79,832
Accounts receivable:
Trade, less allowance for doubtful accounts of $368,797and $309,543 14,401,807 10,977,251
Other 3,598,127 1,747,635
Inventories 9,958,587 6,084,709
Costs and estimated earnings in excess of billings on uncompleted contracts 7,377,295 4,442,012
Prepaid expenses 988,568 859,371
Deferred taxes 216,000 133,000
----------- -----------
Total current assets 37,419,158 24,323,810
----------- -----------
Property, plant and equipment, net 11,176,632 7,947,010
----------- -----------
Other assets:
Intangible, less accumulated amortization 14,992,908 11,283,095
Investment in preferred stock of AmeriVision 500,000 500,000
Other 1,111,430 1,301,729
----------- -----------
Total other assets 16,604,338 13,084,824
----------- -----------
$65,200,128 $45,355,644
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,162,961 $ 4,833,042
Customer deposits 2,277,637 785,391
Accrued expenses 3,156,665 2,762,897
Billings in excess of costs and estimated earnings on uncompleted contracts 312,665 191,304
Current portion of long-term debt 888,592 781,926
Current portion of obligations under capital leases 732,618 336,096
----------- -----------
Total current liabilities 14,531,138 9,690,656
----------- -----------
Long-term liabilities:
Borrowings against lines of credit 8,962,788 5,302,630
Long-term debt, less current portion 10,914,795 9,108,519
Obligations under capital leases, less current portion 1,443,379 962,483
Deferred tax liabilities 389,000 170,000
Other liabilities 132,951 169,876
----------- -----------
Total long term liabilities 21,842,913 15,713,508
----------- -----------
Stockholders' equity:
Common stock 7,850 6,303
Additional paid-in capital 22,976,850 18,999,292
Preferred stock 5,000,000 --
Retained earnings 841,377 945,885
----------- -----------
Total stockholders' equity 28,826,077 19,951,480
----------- -----------
$65,200,128 $45,355,644
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, December 31,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 46,166,597 $ 34,471,630 $ 23,070,039 $ 17,437,617
Cost of sales 31,227,265 22,374,607 15,712,485 11,339,827
------------ ------------ ------------ ------------
Gross profit 14,939,332 12,097,023 7,357,554 6,097,790
------------ ------------ ------------ ------------
Operating expenses:
Selling 5,471,607 4,927,865 2,531,096 2,466,625
General and administrative 5,657,667 3,598,383 2,834,571 1,846,325
------------ ------------ ------------ ------------
Total operating expenses 11,129,274 8,526,248 5,365,667 4,312,950
------------ ------------ ------------ ------------
Income from operations 3,810,058 3,570,775 1,991,887 1,784,840
------------ ------------ ------------ ------------
Other income (expense):
Interest income 191,355 60,983 147,929 42,226
Interest expense (924,232) (642,970) (491,333) (337,688)
Gain (loss) on sales of assets, net 10,138 4,377 3,293 (407)
Other, net 38,311 (13,209) 8,195 (14,130)
------------ ------------ ------------ ------------
(684,428) (590,819) (331,916) (309,999)
------------ ------------ ------------ ------------
Income before provision for income taxes 3,125,630 2,979,956 1,659,971 1,474,841
Provision for income taxes 1,235,000 1,162,000 656,000 575,000
------------ ------------ ------------ ------------
Net income 1,890,630 1,817,956 1,003,971 899,841
Preferred dividends (109,375) -- (65,625) --
------------ ------------ ------------ ------------
Net income available to common shareholders $ 1,781,255 $ 1,817,956 $ 938,346 $ 899,841
============ ============ ============ ============
Earnings Per Common Share:
Basic $ .24 $ .33 $ .12 $ .16
============ ============ ============ ============
Diluted $ .19 $ .24 $ .10 $ .11
============ ============ ============ ============
Weighted average number of shares outstanding:
Basic 7,474,509 5,480,032 7,805,008 5,530,525
============ ============ ============ ============
Diluted 10,373,365 7,989,739 11,017,932 8,543,579
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, December 31,
------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income $ 1,890,630 $ 1,817,956 $ 1,003,971 $ 899,841
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 901,448 470,644 506,478 223,093
(Gain) loss on disposal of property and equipment (10,138) 4,377 (3,293) (407)
Contribution of common stock to 401(k) plan 171,662 116,504 85,212 87,249
Change in deferred income taxes 12,000 138,000 -- 69,000
Other 10,613 (41,715) 2,241 (20,858)
Changes in assets and liabilities, net of effects
of acquisitions:
Accounts receivable, trade (2,154,721) (3,121,635) (1,058,442) (921,516)
Other receivables (1,724,622) (24,280) (889,686) (21,282)
Inventories, including adjustments to costs,
billings and estimated earnings (5,297,747) (3,600,974) (939,006) (976,871)
Prepaid expenses (132,318) 143,429 (417,699) (92,228)
Accounts payable 1,499,462 2,227,680 242,285 1,338,052
Customer deposits 1,122,264 (453,039) 799,671 (241,531)
Accrued expenses 320,715 97,087 (367,830) (83,609)
Other 28,336 19,074 (344) 13,648
----------- ----------- ----------- -----------
Net cash provided by (used for) operating activities (3,362,416) (2,206,892) (1,036,442) 272,581
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,113,376) (645,868) (573,415) (437,662)
Business acquisitions, net of cash acquired (1,844,980) -- -- --
Patent, trademark and other intangible acquisition costs -- (1,542) -- (535)
Proceeds from sales of assets 47,534 38,026 10,475 27,500
Other (34,538) 36,000 (34,538) 36,000
----------- ----------- ----------- -----------
Net cash used for investing activities (2,945,360) (573,384) (597,478) (374,697)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Net change in line of credit borrowings 3,410,158 2,723,905 2,549,577 (129,151)
Principal payments on notes payable (693,583) (384,391) (84,907) (12,316)
Proceeds from sales of stock, including option and
warrants exercises, net of issuance costs 94,755 258,457 27,246 225,020
Payments on capital lease obligations (342,133) (158,739) (144,754) (81,874)
Proceeds from the sale of preferred stock, net 4,946,000 -- -- --
Payment of preferred stock dividends (43,750) -- -- --
Other (264,729) (1,257) (246,233) (1,257)
----------- ----------- ----------- -----------
Net cash provided by financing activities 7,106,718 2,437,975 2,100,929 422
----------- ----------- ----------- -----------
Increase (decrease) in cash 798,942 (342,301) 467,009 (101,694)
Cash, beginning of period 79,832 537,564 411,765 296,957
----------- ----------- ----------- -----------
Cash, end of period $ 878,774 $ 195,263 $ 878,774 $ 195,263
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited and does not
include all of the information and disclosures required by generally accepted
accounting principles; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of our financial position and
results of operations for the interim periods. Certain reclassifications have
been made to the prior year financial statements to conform to the current year
presentations. This report should be read in conjunction with the Consolidated
Financial Statements included in our Annual Report on Form 10-KSB for the year
ended June 30, 1999.
The results of operations for the six and three months ended December
31, 1999 are not necessarily indicative of the results to be expected for the
full year.
NOTE 2 - ACQUISITIONS
On July 1, 1999, we acquired all of the outstanding common stock of
Lockwood Sign Group, Inc. ("Lockwood") in exchange for 415,000 shares of our
common stock valued at $1,909,000 and $1,900,000 in cash. Up to an additional
285,000 shares of our common stock are contingently issuable on a pro-rata basis
if Lockwood's net income for the year ending June 30, 2000 is between $350,000
and $625,000. The contingent shares are issuable at a rate of 25,909 shares for
each $25,000 of net income in excess of $350,000 up to the maximum of 285,000
shares to be issued for net income of $625,000 or higher. The acquisition was
recorded using the purchase method of accounting. Accordingly, the purchase
price was allocated to the net assets acquired based upon their estimated fair
market values. The excess of the purchase price over the estimated fair value of
the net assets acquired was $3,840,000, which has been accounted for as goodwill
and is being amortized over 40 years. The operating results of Lockwood are
included in our consolidated results of operations from the date of the
acquisition.
NOTE 3 - INVENTORIES
Inventories at the end of interim periods are based on perpetual
inventory records and physical counts. Inventories consist of the following:
December 31,
1999 June 30,
(Unaudited) 1999
----------- -----------
Raw materials and work in progress $ 9,132,432 $ 5,938,552
Finished goods 826,155 146,157
----------- -----------
$ 9,958,587 $ 6,084,709
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5
<PAGE>
NOTE 4 - UNCOMPLETED CONTRACTS
The costs and estimated earnings in excess of billings on uncompleted
contracts consist of the following:
December 31,
1999 June 30,
(unaudited) 1999
----------- -----------
Costs incurred on uncompleted contracts $10,323,428 $ 5,851,502
Estimated earnings 4,288,765 3,441,933
----------- -----------
14,612,193 9,293,435
Billings to date (7,547,563) (5,042,727)
----------- -----------
$ 7,064,630 $ 4,250,708
=========== ===========
Included in the accompanying balance sheet under the following
captions:
Costs and estimated earnings in excess of
billings on completed contracts $ 7,377,295 $ 4,442,012
Billings in excess of costs and estimated
earnings on completed contracts (312,665) (191,304)
----------- -----------
$ 7,064,630 $ 4,250,708
=========== ===========
NOTE 5 - REVOLVING LINE OF CREDIT
We have a $10 million revolving line of credit. The line of credit
bears interest, at our option, at either (A) three quarters of a percent over
the bank's prime rate or (B) 325 basis points over LIBOR and matures June 30,
2002. At December 31, 1999, the interest rate was 8.66%. The line of credit is
secured by eligible receivables and inventory and is cross-collateralized with
two letters of credit from the same lender and $4,775,000 in notes payable
secured by the letters of credit. As of December 31, 1999, $7,963,274 was
borrowed against this line of credit. This line of credit contains certain
financial and operating covenants. We were in compliance with all covenants at
December 31, 1999.
We also have, through our Lockwood subsidiary, an additional $2,000,000
revolving line of credit. Advances on the credit line carry an interest rate of
0.5% over prime. The line of credit, which is renewable, initially matures June
22, 2001 and is collateralized by accounts receivable and inventory of Lockwood
and its real property in Charlotte, NC. At December 31, 1999, $999,514 was
outstanding against this line of credit. This line of credit contains certain
financial and operating covenants. We were in compliance with all covenants at
December 31, 1999.
NOTE 6 - CAPITAL STOCK
During the six months ended December 31, 1999, a total of 138,121
options to purchase our common stock were exercised for total cash proceeds of
$94,755.
Also during the six months ended December 31, 1999, 46,588 shares of
our common stock valued at $171,662 were issued in connection with our 401(k)
plan matching contribution.
6
<PAGE>
On July 1, 1999, in conjunction with the acquisition of Lockwood, we
issued 415,000 shares of common stock valued at $1,909,000.
On August 1, 1999, 50,000 shares of Series A Convertible Preferred
Stock were issued for $5 million. The issuance costs of $54,000 reduced
additional paid in capital. The Series A Preferred Stock pays dividends of 5.25%
per year on the last day of March, June, September, and December in each year
and is redeemable on July 30, 2004. The preferred stock is entitled to a
preference over common stock at liquidation at the liquidation price of $100 per
share plus any accrued but unpaid dividends and is convertible into shares of
common stock at the conversion price of $3.33 per share, subject to certain
anti-dilution and other adjustments. Cash dividends of $109,375 on the preferred
stock were declared during the six months ended December 31, 1999.
On September 10, 1999, accrued executive bonuses totaling $64,795 were
paid through the issuance of 16,456 shares of common stock.
On November 22, 1999, a 5% stock dividend was granted to shareholders
of record on December 3, 1999, which resulted in the issuance of 370,173
additional shares and cash payments totaling $1,330 in lieu of issuing factional
shares. Earnings per share for periods prior to the stock dividend have been
retroactively restated to reflect the effects of this stock dividend.
NOTE 7 - EARNINGS PER SHARE
Diluted earnings per share are calculated as follows:
<TABLE>
<CAPTION>
Six months ended Three months ended
December 31 December 31
--------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 1,890,630 $ 1,817,956 $ 1,003,971 $ 899,841
Convertibles debt interest, net 100,705 109,975 49,346 53,738
----------- ----------- ----------- -----------
Net income for purposes of calculating
diluted earnings per share $ 1,991,335 $ 1,927,931 $ 1,053,317 $ 953,579
=========== =========== =========== ===========
Basic weighted average shares 7,474,509 5,480,032 7,805,008 5,530,525
Convertible securities 2,123,040 934,862 2,373,040 934,862
Options and warrants 503,816 1,520,712 554,884 1,753,395
Acquisition contingent shares 272,000 54,133 285,000 324,797
----------- ----------- ----------- -----------
Diluted weighted average shares 10,373,365 7,989,739 11,017,932 8,543,579
=========== =========== =========== ===========
Diluted earnings per share $ .19 $ .24 $ .10 $ .11
=========== =========== =========== ===========
</TABLE>
7
<PAGE>
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest for the first two quarters of fiscal 2000
totaled $750,972. The following summarizes noncash investing and financing
transactions for the six months ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Equity issued for the acquisition of Lockwood $ 1,909,000 -
Issuance of common stock for 5% stock dividend 1,791,267 1,320,045
Capital lease obligations incurred to acquire fixed assets 814,282 -
Contributions of common stock to 401(k) plan 171,662 116,504
Stock issued for employee bonuses 64,795 61,274
Fair value of stock options issued for
investment consulting services - 76,950
</TABLE>
NOTE 9 - INDUSTRY SEGMENTS
Our operations are classified into two business segments: image
enhancement displays ("displays") and other.
The display segment markets and produces custom designed and stock sign
products for internal and external use by institutional, governmental and
commercial enterprises. The display segment also provides peripheral services on
the sign products such as installation, maintenance and service.
Operations within the other segment include the manufacture and sale of
a line of products which, when installed in compressed air lines, substantially
reduce or totally eliminate water and condensation problems and most foreign
contaminants in the air line.
The following table shows sales and operating income from continuing
operations and other financial information by segment:
<TABLE>
<CAPTION>
Six months ended Three months ended
December 31 December 31
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales to external customers
Displays $ 45,388,752 $ 33,638,231 $ 22,704,378 $ 17,034,344
Other 777,845 833,399 365,661 403,273
------------ ------------ ------------ ------------
$ 46,166,597 $ 34,471,630 $ 23,070,039 $ 17,437,617
============ ============ ============ ============
Operating income
Displays $ 4,850,017 $ 4,160,404 $ 2,498,290 $ 2,112,539
Other 93,352 298,541 28,393 99,668
Corporate expenses (1,133,311) (888,170) (534,796) (427,367)
------------ ------------ ------------ ------------
$ 3,810,058 $ 3,570,775 $ 1,991,887 $ 1,784,840
============ ============ ============ ============
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Six months ended Three months ended
December 31 December 31
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Depreciation and amortization
Displays $837,320 $419,867 $480,366 $196,991
Other 19,066 20,483 3,274 10,474
Corporate 45,062 30,294 22,838 15,628
-------- -------- -------- --------
$901,448 $470,644 $506,478 $223,093
======== ======== ======== ========
Interest income
Displays $191,355 $ 60,983 $147,929 $ 42,226
Other -- -- -- --
Corporate -- -- -- --
-------- -------- -------- --------
$191,355 $ 60,983 $147,929 $ 42,226
======== ======== ======== ========
Interest expense
Displays $305,232 $329,764 $161,892 $177,987
Other -- -- -- --
Corporate 619,000 313,206 329,441 159,701
-------- -------- -------- --------
$924,232 $642,970 $491,333 $337,688
======== ======== ======== ========
</TABLE>
NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 requires companies to recognize all
derivative contracts as either assets or liabilities in the balance sheet and to
measure them at fair value. FAS 133, as amended by FAS 137, is effective for
periods beginning after June 15, 2000. Historically, we have not entered into
derivative contracts. Accordingly, FAS 133 is not expected to affect our
financial statements.
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
9
<PAGE>
DISPLAY TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
---------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following discussion should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations set forth in our Annual Report on Form 10-KSB for the year ended June
30, 1999, filed with the Securities and Exchange Commission on September 28,
1999, which discussion is incorporated herein by reference.
Certain matters addressed in this report may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of
1934, as amended. Such forward-looking statements are subject to a variety of
risks and uncertainties that could cause actual results to be different
materially from those anticipated by our management. The Private Securities
Litigation Reform Act of 1995 provides certain "safe harbor" provisions for
forward-looking statements. All forward-looking statements made in this
Quarterly Report on form 10-Q are made pursuant to such act. For more
information on the potential factors which could affect our financial results,
reference should be made to our filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1999.
The results of operations for the six and three months ended December
31, 1999, are not necessarily indicative of the results to be expected for the
full year.
SIX MONTHS ENDED DECEMBER 31, 1999 VS. DECEMBER 31, 1998
- --------------------------------------------------------
Our sales for the six months ended December 31, 1999 increased by
$11,694,967, or 34% over the same period in the prior year. Operating income
increased by $239,283, or 7% while income before provision for income taxes
increased by $145,674, or 5%. Net income for the six months ended December 31,
1999 increased by $72,674, or 4% over the same period in the prior year.
The increased sales resulted from increases in the sign and image
enhancement display segment (the "display segment"). The $45,388,752 display
segment's sales, which accounted for 98.3% of consolidated sales for the six
months ended December 31, 1999, increased by $11,750,521, or 35%, while filter
sales decreased by $55,554, or 7%, over the same period of the prior year. The
sales growth in the display segment can be broken down into internal sales
growth of $2,252,715 and growth from acquisitions of $9,497,806.
The acquisition growth in the display segment resulted from the July 1,
1999 acquisition of Lockwood. However, Lockwood's sales have grown dramatically
since our acquisition. During the calendar year ended immediately prior to the
acquisition, Lockwood reported sales of $10,069,183, or an average of $2,517,296
per quarter. During the six months ended December 31, 1999, Lockwood has
reported sales totaling $9,497,806, or an average of $4,748,903 per quarter.
Therefore, Lockwood's growth rate has exceeded 89% since our July 1, 1999
acquisition. Excluding the effects of Lockwood, display segment sales increased
from $33,638,231 in the first six months of fiscal 1999 to $35,890,946 in the
first six months of fiscal 2000. The internal sales growth resulted from growth
in sales of commercial displays of $2,022,555 and growth in sales of
institutional displays of $230,160.
10
<PAGE>
Our overall gross profit margin dropped to 32.4% of sales for the six
months ended December 31, 1999 from 35.1% for the same period of the previous
year. The drop in gross margin is due to the drop in margins on the display
segment from 35% to 32%, while the filter sales margins increased from 56% to
57%. The decrease in margins on display segment sales is a result of a change in
the sales mix from the same period last year. The first six months of the
current year includes a significant amount of low margin work on certain
national accounts that are expected to produce higher margins in future periods.
A significant portion of that higher margin work with these national accounts
has been secured for production during our third and fourth quarters.
Selling expense increased by 11% from $4,927,865 in the first six
months of fiscal 1999, to $5,471,607 in the first six months of fiscal 2000. Of
this $543,742 increase, $514,311 relates to the display segment, mostly a result
of the Lockwood acquisition. Selling expenses, as a percentage of sales, dropped
from 14% of sales during the first six months of last year to 12% of sales
during the first six months of this year.
General and administrative (G&A) expenses increased by 57% from
$3,598,383 in the six months ended December 31, 1998 to $5,657,667 in the six
months ended December 31, 1999. Of this $2,059,284 increase, $1,748,651 related
to the display segment. The portion of this increase relating directly to the
acquisition of Lockwood was $1,277,522. Additionally, for the six months ended
December 31, 1999, corporate G&A expenses increased by $245,141 over the same
period of the prior year.
A majority of the increase in the display segment's G&A expenses,
excluding the result of acquisitions, was due to a general increases in
operating costs that have been incurred to support the growth of the Company.
The most significant areas of increase have been in personnel costs and
depreciation, as we have continued to invest in our employees and our equipment.
These increased costs will continue to support our growth throughout the
remainder of the fiscal year.
Corporate general and administrative expenses primarily consist of
executive compensation and benefits, occupancy costs of the corporate office,
and other compliance costs incurred as a result of being a public company, such
as legal fees, director fees, SEC and NASDAQ filing costs, and investor
relations and publicity costs. A majority of the increase in corporate G&A costs
resulted from increased executive salaries due to the new positions of Corporate
Counsel and Chief Operating Officer, as well as salary increases over the prior
year for executives whose compensation is calculated under a formula based upon
the financial performance of the Company.
Non-operating items netted to a $590,819 expense for the first six
months in fiscal 1999 compared to a $684,428 expense in the first six months of
fiscal 2000 - a net increase in expenses of $93,609. The main component of this
increase is interest expense, which increased by $281,262 or 44%, from $642,970
for the six months ended December 31, 1998 to $924,232 for the six months ended
December 31, 1999. A majority of the increase in interest expense is
attributable to the Lockwood acquisition, which contributed an additional
$184,221 in interest expense for the six months ended December 31, 1999, while
the remaining increase relates to increased debt. The increase in interest
expense was partially offset by increases in interest income and other
miscellaneous income.
Net income decreased by 4%, from $1,817,956 for the six months ended
December 31, 1998 to $1,890,630 for the six months ended December 31, 1999. On a
per share basis, basic earnings per share decreased by 27% from $0.33 per share
for the first six months of fiscal 1999 to $0.24 per share for the first
11
<PAGE>
six months of fiscal 2000, due mostly to the 36% increase in weighted average
shares outstanding. Diluted earnings per share decreased by 21% from $0.24 for
the six months ended December 31, 1998 to $0.19 for the six months ended
December 31, 1999, again, due mostly to a 30% increase in diluted weighted
average shares outstanding.
The 30% increase in our diluted weighted average shares outstanding is
due to the 5% common stock dividend granted in November, shares issued in the
acquisition of Lockwood, as well as the convertible preferred stock issued in
August 1999 for net proceeds of $4,946,000. A portion of these proceeds was used
to fund the Lockwood acquisition and $500,000 was invested in convertible
preferred stock of AmeriVision Outdoor, Inc. The remainder is held for future
acquisitions.
AmeriVision is an outdoor electronic media company that owns L.E.D.
(light emitting diode) displays that are used for third party advertising
primarily at major shopping malls. AmeriVision owns and operates the signs and
collects revenue from the advertisers who buy time on the displays. AmeriVision
has identified sites for its first 150 displays in major markets, secured
advertising for the displays currently operating, and received serious
expressions of interest from major national advertisers for its network of
displays. During November 1999, AmeriVision sold two of its displays that were
not located at shopping malls. Currently, AmeriVision has 6 displays that are
either operating or scheduled for installation by March 2000. Management expects
an additional 6 displays to be installed during the fourth quarter of fiscal
2000 for a total of 12 displays operating by June 30, 2000.
Pursuant to an agreement dated June 28, 1999, we purchased 8,000 newly
issued shares of convertible preferred stock from AmeriVision for $500,000. The
preferred stock pays quarterly cumulative dividends at a rate of 9% per year.
Upon the satisfaction of certain conditions, the preferred stock is convertible
into common stock of AmeriVision at the price of $62.50 per share, which upon
issuance would be 80% of the outstanding common stock of AmeriVision. We also
have the option, upon certain conditions, to purchase the remaining 20% of the
common stock of AmeriVision.
THREE MONTHS ENDED DECEMBER 31, 1999 VS. DECEMBER 31, 1998
- ----------------------------------------------------------
Our sales for the quarter ended December 31, 1999 increased by
$5,632,422, or 32% over the same quarter in the prior year. Operating income
increased by $207,047, or 12%, while net income increased by $104,130, or 12%.
The increased sales resulted from increases in the display segment,
which accounted for 98.4% of consolidated sales for the three months ended
December 31, 1999. Sales from this segment increased by $5,670,034, or 33%,
while filter sales decreased by $37,612, or 9%, over the same quarter of the
prior year. The sales growth in the display segment can be broken down into
internal sales growth of $2,010,431 and growth from the Lockwood acquisition of
$3,659,603. However, as discussed previously, Lockwood has been growing at an
internal rate of 89% since our July 1, 1999 acquisition.
Excluding the effects of acquisitions, display segment sales increased
from $17,034,344 in the second quarter of fiscal 1999 to $19,044,775 in the
second quarter of fiscal 2000. The internal sales growth resulted from growth in
commercial displays sales of $1,799,014 and growth in our institutional displays
of $211,417.
12
<PAGE>
Our overall gross profit margin dropped to 31.9% for the quarter ended
December 31, 1999, from 35.0% for the same quarter of the previous year. The
drop in gross margin was due to the drop in margins in the display segment from
34% to 32% and the drop in margins on filter sales from 58% to 55%. The decrease
in margins on display segment sales was a result of a change in the sales mix
from last year's second quarter. The current year's second quarter included low
margin work on certain national accounts that are expected to produce higher
margins in future periods. A significant portion of that higher margin work with
these national accounts has been secured for production during our third and
fourth quarters.
Selling expense increased by 3% from $2,466,625 in the second quarter
of fiscal 1999, to $2,531,096 in the second quarter of fiscal 2000. Of this
$64,471 increase, $232,687 resultrd from the acquisition, offset by a decrease
in display segment selling costs of $156,032, and a decrease in other segment's
selling costs of $12,184. Selling expenses, as a percentage of sales, dropped
from 14% of sales during last year's second quarter to 11% of sales during this
year's second quarter.
General and administrative expenses increased from $1,846,325 to
$2,834,571 for the three months ended December 31, 1998 and 1999, respectively.
The display segment, which includes the effects of the Lockwood acquisition, had
an increase from $1,357,591 to $2,214,890. Additionally, corporate general and
administrative expenses increased from $427,367 to $534,796 for the second
quarters of fiscal 1999 and 2000, respectively.
A majority of the increase in the display segment's general and
administrative expenses came from the acquisition of Lockwood, which added
$707,246. The remainder of the increase was a result of general increases in
operating costs that have been incurred to support the growth of the Company.
The most significant area of increase has been in depreciation as we have
continued to invest in our equipment. These increased costs will continue to
support our growth throughout the remainder of the fiscal year.
Corporate general and administrative expenses primarily consist of
executive compensation and benefits, occupancy costs of the corporate office,
and other compliance costs incurred as a result of being a public company, such
as legal fees, director fees, SEC and NASDAQ filing costs, and investor
relations and publicity costs. From the quarter ended December 31, 1998 to the
quarter ended December 31, 1999 corporate general and administrative costs
increased $107,429. A majority of this increase resulted from increased
consulting costs and increased investor relations costs.
Non-operating items netted to a $309,999 expense for the second quarter
in fiscal 1999 compared to a $331,916 expense in the second quarter of fiscal
2000 - a net increase in expenses of $21,917. The main component of this
increase is interest expense, which increased by $153,645 or 45%, from $337,688
for the three months ended December 31, 1998 to $491,333 for the three months
ended December 31, 1999. A majority of the increase in interest expense is
attributable to the Lockwood acquisition, which contributed an additional
$93,917 in interest expense for the three months ended December 31, 1999, while
the remaining increase relates to increased debt. The increase in interest
expense was partially offset by increases in interest income and other
miscellaneous income.
Net income increased by 12%, from $899,841 for the three months ended
December 31, 1998 to $1,003,971 for the three months ended December 31, 1999. On
a per share basis, basic earnings per share decreased by 25% from $0.16 per
share for the second quarter of fiscal 1999 to $0.12 per share for the second
quarter of fiscal 2000, due mostly to the 41% increase in weighted average
shares outstanding. Diluted earnings per share decreased by 9% from $0.11 for
the three months ended December 31, 1998 to $0.10 for
13
<PAGE>
the three months ended December 31, 1999, again, due mostly to a 29% increase in
diluted weighted average shares outstanding.
The 29% increase in our diluted weighted average shares outstanding was
due to the 5% common stock dividend granted in November, shares issued in the
acquisition of Lockwood, as well as convertible preferred stock issued in August
1999.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash used for continuing operating activities for the six months
ended December 31, 1999 was $3,447,628. Net income for the period provided cash
of $2,891,002, net of non-cash charges for depreciation and amortization, gains
on fixed asset sales, stock contributions to our 401(k) plan, the change in
deferred income taxes and other non-cash items. This cash provided was offset by
a net change of $6,338,630 in our operating assets and liabilities, consisting
primarily of increases in inventories and receivables.
Net cash used for investing activities for the first two quarters ended
December 31, 1999 was $2,945,360 of which $1,844,980 was used to purchase
Lockwood. Additionally, $1,113,376 was used for capital expenditures and $34,538
was used for other investing activities, offset by $47,534 provided by the sale
of fixed assets.
Net cash provided by financing activities for the six months ended
December 31, 1999 was $7,191,930. Of this amount, $4,946,000 (net of issuance
costs) was received from the sale of preferred stock, $3,410,158 was received
through advances on our lines of credit, and $179,967 was received upon the
exercise of outstanding stock options. Other financing activities included
payments of notes payable, capital lease obligations, and other financing
activities of $693,583, $342,133, and $264,729, respectively, and the payment of
preferred stock dividends of $43,750.
We have a $10,000,000 revolving bank line of credit. Advances on the
credit line carry an interest rate of either (A) 3/4% over prime or (B) 325
basis points over LIBOR, and initially matures June 30, 2002. The line of credit
is collateralized by eligible receivables and inventory and is
cross-collateralized with the two letters of credit from the same lender and
$4,775,000 in notes payable secured by the letters of credit. As of February 14,
2000, $9,190,178 was borrowed against this line of credit.
We also have, through our Lockwood subsidiary, an additional $2,000,000
revolving line of credit. Advances on the credit line carry an interest rate of
1/2% over prime. The line of credit, which is renewable, initially matures June
22, 2001 and is collateralized by accounts receivable and inventory of Lockwood
and its real property in Charlotte, NC. At February 14, 2000, $999,514 was
outstanding against this line of credit.
During the first quarter of fiscal 1999, we issued 50,000 shares of
Series A Convertible Preferred Stock for $5 million. The issuance costs of
$54,000 reduced additional paid in capital. The Series A Preferred Stock pays
dividends of 5.25% per year on the last day of March, June, September, and
December in each year and is required to be redeemed by the Company on July 30,
2004. The preferred stock is entitled to a preference over common stock at
liquidation at the liquidation price of $100 per share plus any accrued
14
<PAGE>
but unpaid dividends and is convertible into shares of common stock at the
conversion price of $3.50 per share, subject to certain anti-dilution and other
adjustments.
YEAR 2000 COMPUTER COMPLIANCE
- -----------------------------
Many existing computer programs only use two digits to identify a year
in the date field, with the result that data referring to the Year 2000 and
subsequent years may be misinterpreted by these programs. If present in our
computer applications or our suppliers and not corrected, this problem could
cause computer applications to fail or to create erroneous results and could
cause a disruption in operations and have an adverse effect on our business and
results of operations.
Over the last few years, we have analyzed and evaluated all internal
information technology systems, equipment and operations to ensure their Year
2000 compliance. We have been actively implementing new systems over the last
few years, and believe that all of our major information technology, including
our computer operated electronic display products, are Year 2000 complaint.
Letters of compliance have been requested from each vendor and, when the need is
identified, we intend to work with our vendors in determining appropriate
testing and compliance processes. Expenditures to remediate Year 2000 issues
have not been material and are not expected to be material in the future.
We do not assess as high the risks to operations of Year 2000
noncompliance by vendors, since numerous alternate sources of suppliers exist.
However, despite this fact and our efforts to ensure our Year 2000 compliance
and that of our vendors, we could potentially experience a disruption in our
operations as a result of Year 2000 noncompliance of certain vendors, financial
institutions, governmental agencies or other third parties or external systems.
Such a disruption could potentially affect various aspects of business
operations, such as the timeliness of completion and delivery of major
electronic display products.
(THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK)
15
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
- --------------------------
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
- ------------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
- ----------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY - HOLDERS.
- ------------------------------------------------------------
The Company held its 1999 annual meeting of shareholders (the "1999
Annual Meeting") on November 18, 1999.
Proxies for the 1999 Annual Meeting were solicited by the Company's
management pursuant to Regulation 14A under the Exchange Act, there was no
solicitation in opposition to management's nominees for election of directors as
listed in the Company's October 1, 1999 Proxy Statement delivered in connection
with the 1999 Annual Meeting, and all of such nominees were elected.
At the Annual Meeting, 12 persons were elected to serve as directors of
the Company until their successors are elected and qualified, and the Company's
shareholders ratified the appointment of BDO Seidman, LLP, as independent
auditors of the Company for the June 30, 2000 fiscal year. The Company's
shareholders also approved a new Stock Incentive Plan. The number of votes cast
for, against or withheld, as well as the number of abstentions (including broker
non-votes), as to each of such matters was as follows:
<TABLE>
<CAPTION>
Votes Votes Votes Votes
For Against Withheld Abstaining
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gary J. Arnold 7,676,523 0 3,045 0
Gary Donald Bell 7,679,568 0 8,511 0
J. William Brandner 7,636,645 0 42,923 0
Thomas N. Grant 7,672,948 0 6,620 0
Kevin L. Jackson 7,671,057 0 8,511 0
Lester Jacobs 7,637,045 0 42,523 0
Larry L. Johnson 7,678,768 0 800 0
Terry J. Long 7,679,168 0 400 0
Lou A. Papais 7,673,111 0 6,457 0
William A. Retz 7,678,836 0 732 0
Robert M. Smither 7,646,276 0 33,292 0
J. Melvin Stewart 7,630,820 0 48,748 0
Stock Incentive Plan 5,249,693 473,087 0 54,012
Ratification of appointment of
BDO Seidman, LLP 7,735,475 36,170 0 12,977
</TABLE>
16
<PAGE>
ITEM 5. OTHER INFORMATION.
- --------------------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -----------------------------------------
3.34 November 18, 1999 Amended and Restated Bylaws of Registrant
10.141 Display Technologies, Inc. 1999 Stock Incentive Plan
27 Financial Data Schedule
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.
DISPLAY TECHNOLOGIES, INC.
Date: February 14, 1999 By: /S/ J. WILLIAM BRANDNER
----------------------------------
J. William Brandner, President &
Chief Executive Officer
By: /s/ TODD D. THRASHER
----------------------------------
Todd D. Thrasher, Vice President &
Treasurer, Chief Financial Officer
and Chief Accounting Officer
17
EXHIBIT 3.34
AMENDED AND RESTATED
BYLAWS
DATED AS OF NOVEMBER 18, 1999
OF
DISPLAY TECHNOLOGIES, INC.
ARTICLE I
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Nevada as may be designated by the Board of Directors, for
the purpose of electing Directors and for the transaction of such other business
as may be properly brought before the meeting. Notwithstanding that the date for
the annual meeting has been established by the Board of Directors, the Board of
Directors may postpone the meeting to such other date as it may designate.
SECTION 2. SPECIAL MEETINGS. Except as otherwise provided in the Articles of
Incorporation, a special meeting of the shareholders of the Corporation may be
called at any time by the Board of Directors, the Chairman of the Board or the
President. Any special meeting of the shareholders shall be held on such date,
at such time and at such place within or without the State of Nevada as the
Board of Directors or the officer calling the meeting may designate.
Notwithstanding that the date for a special meeting has been established by the
Board of Directors, the Board of Directors may cancel the meeting or postpone
the meeting to such other date as it may designate. At a special meeting of the
shareholders, no business shall be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting unless all of the
shareholders are present in person or by proxy, in which case any and all
business may be transacted at the meeting even though the meeting is held
without notice.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise provided in these Bylaws or
by law, a written notice of each meeting of the shareholders shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
shareholder of the Corporation entitled to vote at such meeting at his address
as it appears on the records of the Corporation. The notice shall state the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
SECTION 4. QUORUM. At any meeting of the shareholders, the holders of a majority
in number of the total outstanding shares of stock of the Corporation entitled
to vote at such meeting, present in person or represented by proxy, shall
constitute a quorum of the shareholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Articles of Incorporation or by these Bylaws, in which case the representation
of the number of shares so required shall constitute a quorum; provided that at
any meeting of the shareholders at which the
<PAGE>
holders of any class of stock of the Corporation shall be entitled to vote
separately as a class, the holders of a majority in number of the total
outstanding shares of such class, present in person or represented by proxy,
shall constitute a quorum for purposes of such class vote unless the
representation of a larger number of shares of such class shall be required by
law, by the Articles of Incorporation or by these Bylaws.
SECTION 5. ADJOURNED MEETINGS. Whether or not a quorum shall be present in
person or represented at any meeting of the shareholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the shareholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the adjourned meeting.
SECTION 6. ORGANIZATION. The Chairman of the Board or, in his absence, the
President shall call all meetings of the shareholders to order, and shall act as
Chairman of such meetings. In the absence of the Chairman of the Board and the
President, the holders of a majority in number of the shares of stock of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings of the
shareholders; but in the absence of the Secretary, the Chairman may appoint any
person to act as Secretary of the meeting. It shall be the duty of the Secretary
to prepare and make, at least ten days before every meeting of shareholders, a
complete list of shareholders entitled to vote at such meeting, arranged in
alphabetical order and showing the address of each shareholder and the number of
shares registered in the name of each shareholder. Such list shall be open,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting or, if not so specified, at the
place where the meeting is to be held, for the ten days next preceding the
meeting, to the examination of any shareholder, for any purpose germane to the
meeting, during ordinary business hours, and shall be produced and kept at the
time and place of the meeting during the whole time thereof and subject to the
inspection of any shareholder who may be present.
SECTION 7. VOTING. Except as otherwise provided in the Articles of Incorporation
or by these Bylaws, each shareholder shall be entitled to one vote for each
share of the capital stock of the Corporation registered in the name of such
shareholder upon the books of the Corporation. Each
2
<PAGE>
shareholder entitled to vote at a meeting of shareholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. When directed by the presiding officer or upon the demand
of any shareholder, the vote upon any matter before a meeting of shareholders
shall be by ballot. Except as otherwise provided by law or by the Articles of
Incorporation, Directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the shareholders entitled to vote in the election
and, whenever any corporate action, other than the election of Directors is to
be taken, it shall be approved if the number of eligible votes cast in favor of
the action exceeds the number of eligible votes cast in opposition to the
action.
Shares of the capital stock of the Corporation belonging to the Corporation or
to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
SECTION 8. INSPECTORS. When required by law or directed by the presiding officer
or upon the demand of any shareholder entitled to vote, but not otherwise, the
polls shall be opened and closed, the proxies and ballots shall be received and
taken in charge, and all questions touching the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided at
any meeting of the shareholders by two or more Inspectors who may be appointed
by the Board of Directors before the meeting, or if not so appointed, shall be
appointed by the presiding officer at the meeting. If any person so appointed
fails to appear or act, the vacancy may be filled by appointment in like manner.
SECTION 9. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Unless otherwise provided
in the Articles of Incorporation, any action required to be taken or which may
be taken at any annual or special meeting of the shareholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
SECTION 10. ADVANCE NOTICE PROVISIONS FOR ELECTION OF DIRECTORS. Only persons
who are nominated in accordance with the following procedures shall be eligible
for election as directors of the Corporation. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
shareholders, or at any special meeting of shareholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any shareholder of the
Corporation (i) who is a shareholder of record on the date of the giving of the
notice provided for in this Section 10 and on the record date for the
determination of shareholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 10.
3
<PAGE>
In addition to any other applicable requirements, for a nomination to be made by
a shareholder such shareholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered to or
mailed and received at the principal executive offices of the Corporation (a) in
the case of an annual meeting, not less than 90 days prior to the date of the
anniversary of the previous year's annual meeting; provided, however, that in
the event the annual meeting is scheduled to be held on a date more than 30 days
prior to or delayed by more than 60 days after such anniversary date, notice by
the shareholder in order to be timely must be so received not later than the
later of (x) the close of business 120 days prior to such annual meeting or (y)
the 10th day following the earlier of the day on which notice of the date of the
annual meeting was mailed or public disclosure of the date of the annual meeting
was made and (b) in the case of a special meeting of shareholders called for the
purpose of electing directors, not later than the close of business on the 10th
day following the earlier of the day on which notice of the date of the special
meeting was mailed or public disclosure of the date of the special meeting was
made.
To be in proper written form, a shareholder's notice to the Secretary must set
forth (a) as to each person whom the shareholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the shareholder giving the
notice (i) the name and record address of such shareholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such shareholder, (iii) a description of all
arrangements or understandings between such shareholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such shareholder, (iv) a
representation that such shareholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such shareholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 10. If the
Chairman of the meeting determines that a nomination was not made in accordance
with the foregoing procedures, the
4
<PAGE>
Chairman shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
SECTION 11. ADVANCE NOTICE PROVISIONS FOR BUSINESS TO BE TRANSACTED AT ANNUAL
MEETING. No business may be transacted at an annual meeting of shareholders,
other than business that is either (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (c) otherwise properly brought before
the annual meeting by any shareholder of the Corporation (i) who is a
shareholder of record on the date of the giving of the notice provided for in
this Section 11 and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 11.
In addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a shareholder, such shareholder must have
given timely notice thereof in proper written form to the Secretary of the
Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 120 days prior to the date of the anniversary of the previous year's
annual meeting; provided, however, that in the event the annual meeting is
scheduled to be held on a date more than 30 days prior to or delayed by more
than 60 days after such anniversary date, notice by the shareholder in order to
be timely must be so received not later than the later of the close of business
120 days prior to such annual meeting or the 10th day following the earlier of
the day on which notice of the date of the annual meeting was mailed or public
disclosure of the date of the annual meeting was made.
To be in proper written form, a shareholder's notice to the Secretary must set
forth as to each matter such shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such shareholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such business
by such shareholder and any material interest of such shareholder in such
business and (v) a representation that such shareholder intends to appear in
person or by proxy at the annual meting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of shareholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 11, provided, however, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 11 shall be deemed to preclude discussion by any
shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the
5
<PAGE>
Chairman shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
SECTION 12. ORDER OF BUSINESS. The order of business at all meetings of the
shareholders shall be as determined by the Chairman of the meeting.
ARTICLE II
BOARD OF DIRECTORS
------------------
SECTION 1. NUMBER AND TERM . The Board of Directors of the Corporation shall be
comprised of not less than three (3) nor more than fifteen (15) members. The
number of directors constituting the Board of Directors shall be fixed from time
to time by resolution passed by a majority of the Board of Directors. The Board
of Directors shall be divided into three (3) classes, comprised of Class A
Directors, Class B Directors and Class C Directors, with each such class being
as nearly equal in number as possible. The terms of office of the Class A
Directors, the Class B Directors, and Class C Directors shall be staggered so
that, following the 1999 annual meeting of the Corporation's stockholders, one
class of directors shall be elected annually at each annual meeting of the
Corporation=s stockholders; provided, however, that not less than one-fourth of
the number of the directors of the Corporation shall be elected annually. The
term of office for each director shall be three (3) years; provided, however,
that (i) the terms of office of the directors first elected as Class A Directors
shall expire at the time of the 2000 annual meeting of stockholders; (ii) the
terms of office of the directors first elected as Class B Directors shall expire
at the time of the 2001 annual meeting of stockholders; and (iii) the terms of
office of the directors first elected as Class C Directors shall expire at the
time of the 2002 annual meeting of stockholders, and in each case the terms of
office shall not expire until their successors are elected and qualified. At
each annual meeting of stockholders subsequent to the 2000 annual meeting,
directors of each class elected to succeed those whose terms are expiring shall
be elected for three-year terms of office and until their respective successors
are elected and qualified. Stockholders of the Corporation shall not be
permitted to cumulate their votes for the election of directors.
SECTION 2. RESIGNATIONS; VACANCIES; REMOVAL.. Any director, member of a
committee or other officer may resign at any time. Such resignation shall be
made in writing, and shall take effect at the time specified therein, and if no
time be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective. Any
vacancy occurring in the Board of Directors, including any vacancy created by
reason of an increase in the number of directors, shall be filled by a majority
vote of the directors then in office, whether or not a quorum is present, or by
a sole remaining director, and any director so chosen shall hold office for the
remainder of the term to which the director has been selected and until such
director's successor has been elected and qualified. When the number of
directors is changed, the Board of Directors shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided that no decrease in the number of directors shall shorten
the term of any incumbent director. Any director, including persons elected by
directors to fill vacancies in the Board of Directors, may be removed from
office by an affirmative vote of not less than two-thirds (2/3) of the votes
eligible to be cast by stockholders at a duly constituted meeting of
stockholders called expressly for such purpose. At least
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thirty (30) days prior to such meeting of stockholders, written notice shall be
sent to the director whose removal shall be considered at such meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may hold its meetings in
such place or places in the State of Nevada or outside the State of Nevada as
the Board from time to time shall determine.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be
held at such times and places as the Board from time to time by resolution shall
determine. No notice shall be required for any regular meeting of the Board of
Directors; but a copy of every resolution fixing or changing the time or place
of regular meetings shall be mailed to every Director at least five (5) days
before the first meeting held in pursuance thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be
held whenever called by direction of the President or by any two of the
Directors then in office.
Notice of the day, hour and place of holding of each special meeting shall be
given by mailing the same at least two (2) days before the meeting or by causing
the same to be transmitted by telegraph, cable or wireless at least one day
before the meeting to each Director. Unless otherwise indicated in the notice
thereof, any and all business other than an amendment of these Bylaws may be
transacted at any special meeting, and an amendment of these Bylaws may be acted
upon if the notice of the meeting shall have stated that the amendment of these
Bylaws is one of the purposes of the meeting. At any meeting at which every
Director shall be present, even though without any notice, any business may be
transacted, including the amendment of these Bylaws.
SECTION 6. QUORUM. Subject to the provisions of Section 2 of this Article II, a
majority of the members of the Board of Directors in office (but, unless the
Board shall consist solely of one Director, in no case less than one-third of
the total number of Directors nor less than two Directors) shall constitute a
quorum for the transaction of business and the vote of the majority of the
Directors present at any meeting of the Board of Directors at which a quorum is
present shall be the act of the Board of Directors. If at any meeting of the
Board there is less than a quorum present, a majority of those present may
adjourn the meeting from time to time.
SECTION 7. ORGANIZATION. The Chairman of the Board, or in his absence, the
President shall preside at all meetings of the Board of Directors. In the
absence of the Chairman of the Board and the President, a Chairman shall be
elected from the Directors present. The Secretary of the Corporation shall act
as Secretary of all meetings of the Directors; but in the absence of the
Secretary, the Chairman may appoint any person to act as Secretary of the
meeting.
SECTION 8. COMMITTEE. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
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In the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
passed by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Articles of Incorporation, adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
shareholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these Bylaws; and unless such resolution, these Bylaws, or the
Articles of Incorporation expressly so provide, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
SECTION 9. CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted by the
Articles of Incorporation or by these Bylaws, the members of the Board of
Directors or any committee designated by the Board, may participate in a meeting
of the Board or such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
SECTION 10. CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF MEETING. Unless
otherwise restricted by the Articles of Incorporation or by these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereto, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
ARTICLE III
OFFICERS
--------
SECTION 1. OFFICERS. The officers of the Corporation shall be a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary and a Treasurer,
and such additional officers, if any, as shall be elected by the Board of
Directors pursuant to the provisions of Section 8 of this Article III. The
Chairman of the Board, the President, one or more Vice Presidents, the Secretary
and the Treasurer shall be elected by the Board of Directors at its first
meeting after each annual meeting of the shareholders. The failure to hold such
election shall not of itself terminate the term of office of any officer. All
officers shall hold office at the pleasure of the Board of Directors. Any
officer may resign at any time upon written notice to the Corporation. Officers
may, but need not, be Directors. Any number of offices may be held by the same
person. All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All
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agents and employees other than officers elected by the Board of Directors shall
also be subject to removal, with or without cause, at any time by the officers
appointing them.
Any vacancy caused by the death of any officer, his resignation, his removal, or
otherwise, may be filled by the Board of Directors, and any officer so elected
shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation as set
forth in these Bylaws, the officers shall have such authority and shall perform
such duties as from time to time may be determined by the Board of Directors.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside at all meetings of the shareholders and at all meetings of
the Board of Directors and shall have such other powers and perform such other
duties as may from time to time be assigned to him by these Bylaws or by the
Board of Directors.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President shall be the chief
executive officer of the Corporation and, subject to the control of the Board of
Directors, shall have general charge and control of all its business and affairs
and shall have all powers and shall perform all duties incident to the office.
In the absence of the Chairman of the Board he shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors and shall have
such other powers and perform such other duties as may from time to time be
assigned to him by these Bylaws or by the Board of Directors or the Chairman of
the Board.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. Each Vice President shall
have all powers and shall perform all duties incident to the office of Vice
President and shall have such other powers and perform such other duties as may
from time to time be assigned to him by these Bylaws or by the Board of
Directors, the Chairman of the Board or the President.
SECTION 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep the
minutes of all meetings of the Board of Directors and the minutes of all
meetings of the shareholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors or the President shall
authorize and direct; he shall have charge of the stock certificate books,
transfer books and stock ledgers and such other books and papers as the Board of
Directors or the President shall direct, all of which shall at all reasonable
times be open to the examination of any Director, upon application, at the
office of the Corporation during business hours; and whenever required by the
Board of Directors, the Chairman of the Board or the President shall render
statements of such accounts; and he shall have all powers and shall perform all
duties incident to the office of Secretary and shall also have such other powers
and shall perform such other duties as may from time to time be assigned to him
by these Bylaws or by the Board of Directors, the Chairman of the Board or the
President.
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SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the chief
financial officer of the Corporation and shall have custody of, and when proper
shall pay out, disburse or otherwise dispose of, all funds and securities of the
Corporation which may have come into his hands; he may endorse on behalf of the
Corporation for collection checks, notes and other obligations and shall deposit
the same to the credit of the Corporation in such bank or banks or depositary or
depositories as the Board of Directors may designate; he shall sign all receipts
and vouchers for payments made to the Corporation; he shall enter or cause to be
entered regularly in the books of the Corporation kept for the purpose full and
accurate accounts of all moneys received or paid or otherwise disposed of by him
and whenever required by the Board of Directors, the Chairman of the Board or
the President shall render statements of such accounts; he shall, at all
reasonable times, exhibit his books and accounts to any Director of the
Corporation upon application at the office of the Corporation during business
hours; and he shall have all powers and he shall perform all duties incident to
the office of Treasurer and shall also have such other powers and shall perform
such other duties as may from time to time be assigned to him by these Bylaws or
by the Board of Directors, the Chairman of the Board or the President.
SECTION 7. ADDITIONAL OFFICERS. The Board of Directors may from time to time
elect such other officers (who may but need not be Directors), including a
Controller, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board or the President.
The Board of Directors may from time to time by resolution delegate to any
Assistant Treasurer or Assistant Treasurers any of the powers or duties herein
assigned to the Treasurer; and may similarly delegate to any Assistant Secretary
or Assistant Secretaries any of the powers or duties assigned to the Secretary.
SECTION 8. GIVING OF BOND BY OFFICERS. All officers of the Corporation, if
required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such penalties and
with such conditions and security as the Board shall require.
SECTION 9. VOTING UPON STOCKS. Unless otherwise ordered by the Board of
Directors, the Chairman of the Board, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote, or in the name of the Corporation to execute proxies to vote, at
any meeting of shareholders of any corporation in which the Corporation may hold
stock, and at any such meeting shall possess and may exercise, in person or by
proxy, any and all rights, powers and privileges incident to the ownership of
such stock. The Board of Directors may from time to time, by resolution, confer
like powers upon any other person or persons.
SECTION 10. COMPENSATION OF OFFICERS. The officers of the Corporation shall be
entitled to receive such compensation for their services as shall from time to
time be determined by the Board of Directors.
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ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
SECTION 1. LIMITATION OF LIABILITY. To the maximum extent allowable by law, no
director of the corporation shall have any personal liability to the corporation
or its stockholders for damages for breach of fiduciary duty as a director. The
above elimination of personal liability shall not be construed to eliminate or
limit the liability of a director for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or for the payment
of dividends in violation of N.R.S. 78.300.
SECTION 2. NATURE OF INDEMNITY. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was or has agreed to
become a Director or officer of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a Director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action alleged to have been taken or omitted in such capacity,
and may indemnify any person who was or is a party or is threatened to be made a
party to such an action, suit or proceeding by reason of the fact that he is or
was or has agreed to become an employee or agent of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; except that in the case of an action or suit by or in the
right of the Corporation to procure a judgment in its favor (1) such
indemnification shall be limited to expenses (including attorneys' fees)
actually and reasonably incurred by such person in the defense or settlement of
such action or suit, and (2) no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Orange County,
Florida Circuit Court or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Orange County,
Florida Circuit Court or such other court shall deem proper. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a Director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 2 of this
Article IV or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
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SECTION 4. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any indemnification of
a Director or officer of the Corporation under Section 2 of this Article IV
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the Director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 2. Any indemnification of an employee or agent of
the Corporation under Section 2 (unless ordered by a court) may be made by the
Corporation upon a determination that indemnification of the employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1. Any such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
shareholders.
SECTION 5. ADVANCE PAYMENT OF EXPENSES. Unless the Board of Directors otherwise
determines in a specific case, expenses incurred by a Director or officer in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IV.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or proceeding.
SECTION 6. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing indemnification
provisions shall be deemed to be a contract between the Corporation and each
Director, officer, employee and agent who serves in any such capacity at any
time while these provisions as well as the relevant provisions of the Nevada
General Corporation Law are in effect and any repeal or modification thereof
shall not affect any right or obligation then existing with respect to any state
of facts then or previously existing or any action, suit, or proceeding
previously or thereafter brought or threatened based in whole or in part upon
any such state of facts. Such a contract right may not be modified retroactively
without the consent of such Director, officer, employee or agent.
The indemnification provided by this Article IV shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of shareholders or disinterested Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. The Corporation may enter
into an agreement with any of its Directors, officers, employees or
agents providing for indemnification and advancement of expenses, including
attorneys fees, that may change, enhance, qualify or limit any right to
indemnification or advancement of expenses created by this Article IV.
SECTION 7. SEVERABILITY. If this Article IV or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each
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Director or officer and may indemnify each employee or agent of the Corporation
as to costs, charges and expenses (including attorneys' fees), judgment, fines
and amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action by
or in the right of the Corporation, to the fullest extent permitted by any
applicable portion of this Article IV that shall not have been invalidated and
to the fullest extent permitted by applicable law.
SECTION 8. SUBROGATION. In the event of payment of indemnification to a person
described in Section 1 of this Article IV, the Corporation shall be subrogated
to the extent of such payment to any right of recovery such person may have and
such person, as a condition of receiving indemnification from the Corporation,
shall execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
SECTION 9. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under
this Article IV to make any payment in connection with any claim made against a
person described in Section 2 of this Article IV to the extent such person has
otherwise received payment (under any insurance policy, bylaw or otherwise) of
the amounts otherwise indemnifiable hereunder.
ARTICLE V
STOCK-SEAL-FISCAL YEAR
----------------------
SECTION 1. CERTIFICATES FOR SHARES OF STOCK. The certificates for shares of
stock of the Corporation shall be in such form, not inconsistent with the
Articles of Incorporation, as shall be approved by the Board of Directors. All
certificates shall be signed by the Chairman of the Board, the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates had not ceased to be such
officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as the same
are issued. The name of the person owning the shares represented thereby with
the number of such shares and the date of issue thereof shall be entered on the
books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the Corporation
for transfer shall be canceled, and no new certificates shall be issued until
former certificates for the same number of shares have been surrendered and
canceled.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a person owning a
certificate for shares of stock of the Corporation alleges that it has been
lost, stolen or destroyed, he shall
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file in the office of the Corporation an affidavit setting forth, to the best of
his knowledge and belief, the time, place and circumstances of the loss, theft
or destruction, and, if required by the Board of Directors, a bond of indemnity
or other indemnification sufficient in the opinion of the Board of Directors to
indemnify the Corporation and its agents against any claim that may be made
against it or them on account of the alleged loss, theft or destruction of any
such certificate or the issuance of a new certificate in replacement therefor.
Thereupon the Corporation may cause to be issued to such person a new
certificate in replacement for the certificate alleged to have been lost, stolen
or destroyed. Upon the stub of every new certificate so issued shall be noted
the fact of such issue and the number, date and the name of the registered owner
of the lost, stolen or destroyed certificate in lieu of which the new
certificate is issued.
SECTION 3. TRANSFER OF SHARES. Shares of stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof, in person or
by his attorney duly authorized in writing, upon surrender and cancellation of
certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article V.
SECTION 4. REGULATIONS. The Board of Directors shall have power and authority to
make such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. RECORD DATE. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
as the case may be, the Board of Directors may fix, in advance, a record date,
which shall not be (i) more than 60 nor less than 10 days before the date of
such meeting, or (ii) in the case of corporate action to be taken by consent in
writing without a meeting prior to, or more than 10 days after, the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, or (iii) more than 60 days prior to any other action.
If no record date is fixed, the record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; the record date for determining shareholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is delivered to the Corporation; and the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the Articles of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
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Subject to the provisions of the Articles of Incorporation, any dividends
declared upon the stock of the Corporation shall be payable on such date or
dates as the Board of Directors shall determine. If the date fixed for the
payment of any dividend shall in any year fall upon a legal holiday, then the
dividend payable on such date shall be paid on the next day not a legal holiday.
SECTION 7. CORPORATE SEAL. The Board of Directors shall provide a suitable seal,
containing the name of the Corporation, which seal shall be kept in the custody
of the Secretary. A duplicate of the seal may be kept and be used by any officer
of the Corporation designated by the Board of Directors, the Chairman of the
Board or the President.
SECTION 8. FISCAL YEAR. The fiscal year of the Corporation shall be such fiscal
year as the Board of Directors from time to time by resolution shall determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
SECTION 1. CHECKS, NOTES, ETC. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and orders
for the payment of money made payable to the Corporation may be endorsed for
deposit to the credit of the Corporation with a duly authorized depository by
the Treasurer and/or such other officers or persons as the Board of Directors
from time to time may designate.
SECTION 2. LOANS. No loans and no renewals of any loans shall be contracted on
behalf of the Corporation except as authorized by the Board of Directors. When
authorized so to do, any officer or agent of the Corporation may effect loans
and advances for the Corporation from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. When authorized so to do, any
officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. CONTRACTS. Except as otherwise provided in these Bylaws or by law or
as otherwise directed by the Board of Directors, the Chairman of the Board, the
President or any Vice President shall be authorized to execute and deliver, in
the name and on behalf of the Corporation, all agreements, bonds, contracts,
deeds, mortgages, and other instruments, either for the Corporation's own
account or in a fiduciary or other capacity, and the seal of the Corporation, if
appropriate, shall be affixed thereto by any of such officers or the Secretary
or an Assistant Secretary. The Board of Directors, the Chairman of the
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Board, the President or any Vice President designated by the Board of Directors,
the Chairman of the Board or the President may authorize any other officer,
employee or agent to execute and deliver, in the name and on behalf of the
Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or other
capacity, and, if appropriate, to affix the seal of the Corporation thereto.
The grant of such authority by the Board or any such officer may be general or
confined to specific instances.
SECTION 4. WAIVERS OF NOTICE. Whenever any notice whatever is required to be
given by law, by the Articles of Incorporation or by these Bylaws to any person
or persons, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
SECTION 5. OFFICES OUTSIDE OF NEVADA. Except as otherwise required by the laws
of the State of Nevada, the Corporation may have an office or offices and keep
its books, documents and papers outside of the State of Nevada at such place or
places as from time to time may be determined by the Board of Directors, the
Chairman of the Board or the President.
ARTICLE VII
AMENDMENTS
----------
The Board of Directors shall have the power to adopt, amend and repeal from time
to time Bylaws of the Corporation, subject to the right of the shareholders
entitled to vote with respect thereto to amend or repeal such Bylaws as adopted
or amended by the Board of Directors; provided, however, that unless a different
percentage is called for in a particular provision hereof, any amendment or
repeal of the Bylaws of the Corporation by the shareholders shall be by a vote
of the holders of at least 66 2/3 percent of the total votes eligible to be cast
by holders of voting stock with respect to such amendment or repeal.
------------------------------------
Marshall S. Harris, Secretary
16
EXHIBIT 10.141
DISPLAY TECHNOLOGIES, INC.
1999 STOCK INCENTIVE PLAN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1
GENERAL.....................................................................................1
-------
1.1 Defined Terms.............................................................1
1.2 Purpose...................................................................1
1.3 Effective Date and Duration of the Plan...................................1
1.4 Administration............................................................1
1.5 Shares Subject to the Plan................................................1
1.6 Award Limitations.........................................................2
1.7 Eligibility and Participation.............................................2
1.8 Rules Applicable to Awards................................................2
SECTION 2
OPTIONS.....................................................................................5
-------
2.1 ISOs and NQOs.............................................................5
2.2 Exercise Price............................................................5
2.3 Exercise..................................................................5
2.4 Payment of Option Exercise Price..........................................5
2.5 Time and Manner of Exercise...............................................5
2.6 Settlement of Awards......................................................5
SECTION 3
OTHER STOCK AWARDS..........................................................................6
------------------
SECTION 4
EFFECT OF CERTAIN TRANSACTIONS..............................................................6
------------------------------
4.1 Changes In and Distributions with Respect to the Stock....................6
4.2 Change in Control.........................................................6
SECTION 5
COMMITTEE...................................................................................7
---------
5.1 Administration............................................................7
5.2 Powers of Committee.......................................................7
5.3 Delegation by Committee...................................................7
5.4 Information to be Furnished to Committee..................................7
SECTION 6
MISCELLANEOUS...............................................................................8
-------------
6.1 Conditions on Delivery of Stock...........................................8
6.2 Amendment and Termination.................................................8
6.3 Gender and Number.........................................................8
6.4 Non-Limitation of the Company's Rights....................................8
6.5 Governing Law.............................................................8
APPENDIX A
DEFINED TERMS...........................................................................A - 1
-------------
APPENDIX B
FEDERAL INCOME TAX EFFECTS..............................................................B - 1
--------------------------
</TABLE>
i
<PAGE>
DISPLAY TECHNOLOGIES, INC.
1999 STOCK INCENTIVE PLAN
SECTION 1
GENERAL
-------
1.1 DEFINED TERMS. Except where otherwise defined below, capitalized
terms used in the Plan are defined in attached Appendix A, which is incorporated
by reference.
1.2 PURPOSE. The Plan has been established to: (a) strengthen the
commonality of interests between the Company's employees and shareholders; (b)
link effectively employee motivation and compensation with the Company's
performance; (c) provide incentives and rewards for employees, directors,
consultants and other persons to accomplish the Company's goals and objectives;
(d) offer a comprehensive and competitive total compensation program; and (e)
attract and retain employees of high caliber and ability.
1.3 EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan will become
effective as of May 7, 1999 (the "Effective Date") and will be submitted to the
Company's shareholders for approval at the 1999 annual meeting of shareholders;
PROVIDED, HOWEVER, that to the extent Awards are granted under the Plan prior to
its approval by shareholders, such Awards will be contingent on approval of the
Plan by the shareholders of the Company. The Plan will be unlimited in duration
and, in the event of Plan termination, will remain in effect as long as any
Awards under it are outstanding; provided, however, that, to the extent required
by the Code, no ISO may be granted under the Plan on a date that is more than 10
years following the Effective Date.
1.4 ADMINISTRATION. The Committee has discretionary authority, subject
only to the express provisions of the Plan, to interpret the Plan; determine
eligibility for and grant Awards; determine, modify or waive the terms and
conditions of any Award; prescribe forms, rules and procedures (which it may
modify or waive); and otherwise do all things necessary to carry out the
purposes of the Plan. Once an Award has been communicated in writing to a
Participant, the Committee may not, without the Participant's consent, alter the
terms of the Award so as to affect adversely the Participant's rights under the
Award, unless the Committee expressly reserved the right to do so. In the case
of any Award intended to be eligible for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code, the Committee will exercise
its discretion consistent with qualifying the Award for such exception.
1.5 SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section
4.1, a total of 1,500,000 shares of Stock have been reserved for issuance under
the Plan. The following shares of Stock will also be available for future
grants:
(a) Shares remaining under an Award that terminates without
having been exercised in full (in the case of an Award requiring exercise by a
Participant for delivery of Stock);
(b) Shares subject to an Award, where cash is delivered to a
Participant in lieu of such shares;
(c) Shares of Restricted Stock that are forfeited to the
Company;
<PAGE>
(d) Shares of Stock tendered by a Participant as payment upon
exercise of an Award;
(e) Shares of Stock held back by the Committee, or tendered by
a Participant, in satisfaction of tax withholding requirements;
(f) Up to 500,000 shares of Stock, to the extent authorized by
the Board, that are reacquired by the Company in the open market or in private
transactions after the Effective Date; and
Stock delivered under the Plan may be authorized but unissued Stock or
previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
1.6 AWARD LIMITATIONS. Subject to the provisions of Section 4.1, shares
of Stock for which Awards may be granted under the Plan will be subject to the
following limitations:
(a) The maximum number of shares of Stock that may be issued
as Stock Awards will be 500,00 shares plus up to 33 1/3 % of shares reacquired
by the Company pursuant to Section 1.5(f).
(b) Not more than 50,000 shares of Stock may be subject to
Stock Awards granted to any one individual during any one fiscal-year period
(regardless of when such shares are deliverable) that are intended to be
"performance-based compensation" as that term is used for purposes of Code
section 162(m).
1.7 ELIGIBILITY AND PARTICIPATION. The Committee will select
Participants from among those key Employees, directors, officers and other
individuals or entities providing services to the Company or its Affiliates who,
in the opinion of the Committee, are in a position to make a significant
contribution to the success of the Company and its Affiliates. Eligibility for
ISOs is further limited to those individuals whose employment status would
qualify them for the tax treatment described in Sections 421 and 422 of the
Code.
1.8 RULES APPLICABLE TO AWARDS.
(a) General Restrictions. Delivery of shares of Stock or other
amounts under the Plan will be subject to the following:
(i) Notwithstanding any other provision of the
Plan, the Company will have no liability to
deliver any shares of Stock under the Plan
or make any other distribution of benefits
under the Plan unless such delivery or
distribution complies with all applicable
laws (including without limitation the
requirements of the Securities Act of 1933)
and the applicable requirements of any
securities exchange or similar entity.
(ii) To the extent that the Plan or Award
Agreement provides for issuance of stock
certificates to reflect the issuance of
shares of Stock, the issuance may be
effected on a non-certificated basis, to the
extent not prohibited by applicable law or
the applicable rules of any stock exchange.
2
<PAGE>
(b) Performance Objectives. Where rights under an Award depend
in whole or in part on attainment of performance objectives, actions by the
Company that have an effect, however material, on such performance objectives or
on the likelihood that they will be achieved will not be deemed an amendment or
alteration of the Award unless accomplished by a change in the express terms of
the Award or other action that is without substantial consequence except as it
affects the Award.
(c) Alternative Settlement. The Company retains the right at
any time to extinguish rights under an Award in exchange for payment in cash,
Stock (subject to the limitations of Sections 1.5 and 1.6) or other property on
such terms as the Committee determines.
(d) Transferability Of Awards. Except as the Committee
otherwise expressly provides, Awards (other than an Award in the form of an
outright transfer of cash or Unrestricted Stock) may not be transferred other
than by will or by the laws of descent and distribution and, during a
Participant's lifetime an Award requiring exercise may be exercised only by the
Participant (or in the event of the Participant's incapacity, the person or
persons legally appointed to act on the Participant's behalf).
(e) Vesting, Etc. The Committee may determine the time or
times at which an Award will vest (i.e., become free of restrictions) or become
exercisable. Unless the Committee expressly provides otherwise, an Award
requiring exercise will cease to be exercisable, and all other Awards to the
extent not already fully vested will be forfeited, immediately upon the
cessation (for any reason, including death) of the Participant's employment or
other service relationship with the Company and its Affiliates.
(f) Tax Withholding. All distributions under the Plan will be
subject to withholding of all applicable taxes, and the Committee may condition
the delivery of any shares or other benefits under the Plan upon satisfaction of
the applicable withholding obligations. The Committee, in its discretion and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan. A summary
of the federal income tax effects, as of the Effective Date, of various types of
Awards that may be granted under the Plan is attached as Appendix B.
(g) Use of Shares. Subject to the overall limitation on the
number of shares of Stock that may be delivered under the Plan, the Committee
may use available shares of Stock as the form of payment for compensation,
grants or rights earned or due under any other compensation plans or
arrangements of the Company or an Affiliate, including the plans and
arrangements of the Company or an Affiliate assumed in business combinations.
(h) Dividends and Dividend Equivalents. An Award (including
without limitation an Option Award) may provide the Participant with the right
to receive dividend payments or dividend equivalent payments with respect to
Stock subject to the Award (both before and after the Stock subject to the Award
is earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee may
establish, including the reinvestment of such credited amounts in Stock
equivalents.
3
<PAGE>
(i) Payments. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or a
combination thereof as the Committee may determine. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. The Committee may permit or
require the deferral of any Award payment, subject to such rules and procedures
as it may establish, which may include provisions for the payment or crediting
of interest, or dividend equivalents, including converting such credits into
deferred Stock equivalents. Each Affiliate will be liable for payment of cash
due under the Plan with respect to any Participant to the extent that such
benefits are attributable to services performed for that Affiliate by the
Participant. Any disputes relating to liability of an Affiliate for cash
payments will be resolved by the Committee.
(j) Form and Time of Elections. Unless otherwise specified
herein, each election required or permitted to be made by any Participant or
other person entitled to benefits under the Plan, and any permitted modification
or revocation thereof, must be in writing filed with the Committee at such
times, in such form and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee may require.
(k) Agreement With the Company. Awards under the Plan will be
subject to such terms and conditions, not inconsistent with the Plan, as the
Committee in its sole discretion may prescribe. The terms and conditions of any
Award to any Participant will be reflected in such form of written document as
is determined by the Committee. A copy of such document will be provided to the
Participant, and the Committee may, but need not require, that the Participant
sign a copy of such document. Such document is referred to as an "Award
Agreement" regardless of whether any Participant signature is required.
(l) Action by the Company or an Affiliate. Any action required
or permitted to be taken by the Company or any Affiliate will be by resolution
of its board of directors, or by action of one or more members of its board
(including a committee of the board) who is duly authorized to act for the
board, or (except to the extent prohibited by applicable law or applicable rules
of any stock exchange) by a duly authorized officer of such company.
(m) Rights Limited. Nothing in the Plan is to be construed as
giving any person the right to continued employment or service with the Company
or its Affiliates, nor any rights as a shareholder except as to shares actually
issued under the Plan. The loss of existing or potential profit in Awards will
not constitute an element of damages in the event of termination of employment
or service for any reason, even if the termination is in violation of an
obligation of the Company or Affiliate to the Participant. No Participant or any
other person will, by reason of participation in the Plan, acquire any right in
or title to any assets, funds or property of the Company or any Affiliate
whatsoever, including without limitation any specific funds, assets, or other
property which the Company or any Affiliate, in its sole discretion, may set
aside in anticipation of a liability under the Plan. A Participant will have
only a contractual right to the Stock or amounts, if any, payable under the
Plan, unsecured by any assets of the Company or any Affiliate and nothing
contained in the Plan will constitute a guarantee that the assets of the Company
or any Affiliate will be sufficient to pay any benefits to any person.
(n) Evidence. Evidence required of anyone under the Plan may
be by certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or presented by
the proper party or parties.
4
<PAGE>
(o) Section 162(m). In the case of an Award intended to be
eligible for the performance-based compensation exception under Section
162(m)(4)(C) of the Code, the Plan and such Award will be construed in a manner
consistent with qualifying the Award for such exception.
SECTION 2
OPTIONS
-------
2.1 ISOS AND NQOS. The grant of an Option entitles the Participant to
purchase shares of Stock at an Exercise Price established by the Committee.
Options granted under the Plan may either be ISOs or NQOs, as determined in the
discretion of the Committee.
2.2 EXERCISE PRICE. The Exercise Price of each Option granted will be
established by the Committee or will be determined by a method established by
the Committee at the time the Option is granted, except that the Exercise Price
will not be less than 100% of the Fair Market Value of a share of Stock on the
date of grant.
2.3 EXERCISE. All Options will be exercisable in accordance with such
terms and conditions and during such periods as may be established by the
Committee.
2.4 PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise Price
of Options will be subject to the following:
(a) Subject to the following provisions of this subsection
2.4, the full Exercise Price for shares of Stock purchased upon the exercise of
any Option is to be paid at the time of such exercise (except that, in the case
of an exercise arrangement approved by the Committee and described in paragraph
2.4(c), payment may be made as soon as practicable after the exercise).
(b) The Exercise Price will be payable in cash or by
tendering, by either actual delivery or by attestation, shares of Stock
acceptable to the Committee and valued at Fair Market Value as of the date of
exercise, or in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price by irrevocably authorizing a third party to sell shares of Stock
(or a sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.
2.5 TIME AND MANNER OF EXERCISE. Unless the Committee expressly
provides otherwise:
(a) An Option will not be deemed to have been exercised until
the Company receives a written notice of exercise (in form acceptable to the
Company) signed by the appropriate person and accompanied by any payment
required under the Award; and
(b) If the Option is exercised by any person other than the
Participant, the Committee may require satisfactory evidence that the person
exercising the Option has the right to do so.
2.6 SETTLEMENT OF AWARDS. Shares of Stock delivered pursuant to the
exercise of an Option will be subject to such conditions, restrictions and
contingencies as the Committee may establish in the applicable Award Agreement.
5
<PAGE>
SECTION 3
OTHER STOCK AWARDS
------------------
Each Stock Unit Award, Restricted Stock Award, Restricted Stock Unit
Award and Performance Share Award will be subject to the following:
(a) Such conditions, restrictions and contingencies as the
Committee may determine; and
(b) The Committee may designate whether any such Award being
granted to any Participant is intended to be "performance-based compensation" as
that term is used in section 162(m) of the Code. Any such Award designated as
intended to be "performance-based compensation" will be conditioned on the
achievement of one or more Performance Measures. For Awards intended to be
"performance-based compensation," the grant of the Awards and the establishment
of the Performance Measures will be made during the period required under Code
section 162(m).
SECTION 4
EFFECT OF CERTAIN TRANSACTIONS
------------------------------
4.1 CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK.
(a) Basic Antidilution Provisions. In the event of a stock
dividend, stock split or combination of shares, recapitalization or other change
in the Company's capital structure, the Committee will make appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under Sections 1.5 and 1.6, and will also make appropriate adjustments to the
number and kind of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating to Awards and
any other provision of Awards affected by such change.
(b) Certain Other Adjustments. The Committee may also make
adjustments of the type described in paragraph (a) above to take into account
distributions to common stockholders other than stock dividends or normal cash
dividends, mergers, consolidations, acquisitions, dispositions or similar
corporate transactions, or in any other event, if the Committee determines that
adjustments are appropriate to avoid distortion in the operation of the Plan and
to preserve the value of Awards made hereunder; PROVIDED, that no such
adjustment shall be made to an Award intended to be eligible for the
performance-based exception under Section 162(m)(4)(C) of the Code, except to
the extent consistent with that exception.
4.2 CHANGE IN CONTROL. Subject to the provisions of Section 4.1
(relating to the adjustment of shares), and except as otherwise provided in the
Plan or the Award Agreement reflecting the applicable Award, upon the occurrence
of a Change in Control:
(a) All outstanding Options will become fully exercisable.
(b) All Stock Units, Restricted Stock, Restricted Stock Units
and Performance Shares will become fully vested.
6
<PAGE>
SECTION 5
---------
COMMITTEE
5.1 ADMINISTRATION. The authority to control and manage the operation
and administration of the Plan will be vested in the Committee in accordance
with this Section 5. The Committee will be selected by the Board, and will
consist solely of three or more members of the Board who are not employees. If
the Committee does not exist, or for any other reason determined by the Board,
the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
5.2 POWERS OF COMMITTEE. The Committee's administration of the Plan
will be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to select from among the Eligible Participants
those persons who will receive Awards, to determine the time or times of
receipt, to determine the types of Awards and the number of shares covered by
the Awards, to establish the terms, conditions, performance criteria,
restrictions and other provisions of such Awards, and to cancel or suspend
Awards. However, the Committee will not have the power or authority to cancel
and reissue Option Awards.
(b) To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of the material
purposes of the Awards in jurisdictions outside the United States, the Committee
will have the authority and discretion to modify those restrictions as the
Committee determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any Award
Agreement made pursuant to the Plan, and to make all other determinations that
may be necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan will be final and binding on all persons.
(e) In controlling and managing the operation and
administration of the Plan, the Committee will take action in a manner that
conforms to the articles of incorporation and by-laws of the Company, and
applicable state corporate law.
5.3 DELEGATION BY COMMITTEE. Except to the extent prohibited by
applicable law or applicable stock exchange rules, the Committee may allocate
all or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and powers to
any person or persons selected by it unless such delegation would jeopardize the
benefits of complying with Rule 16b-3 of the Exchange Act or Section 162(m) of
the Code. Any such allocation or delegation may be revoked by the Committee at
any time.
5.4 INFORMATION TO BE FURNISHED TO COMMITTEE. The Company and the
Affiliates will furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and the Affiliates as to an employee's or Participant's employment,
termination of employment, leave of absence, re-employment and compensation will
be conclusive on all persons unless determined by the Committee to be incorrect.
Participants and other
7
<PAGE>
persons entitled to benefits under the Plan must furnish the Committee such
evidence, data or information as the Committee considers desirable to carry out
the terms of the Plan.
SECTION 6
MISCELLANEOUS
-------------
6.1 CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated
to deliver any shares of Stock pursuant to the Plan or to remove any restriction
from shares previously delivered under the Plan until: the Company's counsel has
approved all legal matters in connection with the issuance and delivery of such
shares; if the outstanding Stock is at the time listed on any stock exchange or
national market system, the shares to be delivered have been listed or
authorized to be listed on such exchange or system upon official notice of
notice of issuance; and all conditions of the Award have been satisfied or
waived. If the sale of Stock has not been registered under the Securities Act of
1933, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act. The Company may require that
certificates evidencing Stock issued under the Plan bear an appropriate legend
reflecting any restriction on transfer applicable to such Stock.
6.2 AMENDMENT AND TERMINATION. Subject to the last sentence of Section
1.4, the Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment or termination will, without the approval of the stockholders of the
Company, effectuate a change for which stockholder approval is required in order
for the Plan to continue to qualify under Section 422 of the Code or for Awards
to be eligible for the performance-based exception under Section 162 (m)(4)(C)
of the Code.
6.3 GENDER AND NUMBER. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
6.4 NON-LIMITATION OF THE COMPANY'S RIGHTS. The existence of the Plan
or the grant of any Award shall not in any way affect the Company's right to
award a person bonuses or other compensation in addition to Awards under the
Plan.
6.5 GOVERNING LAW. The Plan will be construed and interpreted in
accordance with the laws of the State of Florida.
-----------------------------------------------------
8
<PAGE>
APPENDIX A
DEFINED TERMS
-------------
In addition to the other definitions contained in the Plan, the
following definitions shall apply:
AFFILIATE. The term "Affiliate" means any corporation or other entity:
(a) Owning, directly or indirectly, 50% or more of the
outstanding Stock of the Company; or
(b) In which the Company or any such corporation or other
entity owns, directly or indirectly, 50% of the outstanding capital stock
(determined by aggregate voting rights) or other voting interests; or
(c) Designated by the Committee in which the Company has a
significant interest, as determined in the discretion of the Committee.
AWARD. The term "Award" means any of the following:
(a) Options entitling the recipient to acquire shares of Stock
upon payment of the exercise price. Each Option (except as otherwise expressly
provided by the Committee consistent with continued qualification of the Option
as a performance-based award for purposes of Section 162(m) of the Code, or
unless the Committee expressly determines that such Option is not subject to
Section 162(m) of the Code or that the Option is not intended to qualify for the
performance-based exception under Section 162(m) of the Code) will have an
exercise price not less than the Fair Market Value of the Stock subject to the
Option, determined as of the date of grant, except that an ISO granted to an
Employee described in Section 422(b)(6) of the Code will have an exercise price
not less than 110% of such Fair Market Value. The Committee will determine the
medium in which the exercise price is to be paid, the duration of the Option,
the time or times at which an option will become exercisable, provisions for
continuation (if any) of option rights following termination of the
Participant's employment with the Company and its Affiliates, and all other
terms of the Option. No Option awarded under the Plan will be an ISO unless the
Committee expressly provides for ISO treatment.
(b) Stock subject to restrictions ("Restricted Stock") under
the Plan requiring that the Stock be redelivered to the Company if specified
conditions are not satisfied. The conditions to be satisfied in connection with
any Award of Restricted Stock, the terms on which such Stock must be redelivered
to the Company, the purchase price of such Stock, and all other terms shall be
determined by the Committee.
(c) Stock not subject to any restrictions under the Plan
("Unrestricted Stock").
(d) A promise to deliver Stock or other securities in the
future on such terms and conditions as the Committee determines.
(e) Securities (other than Options) that are convertible into
or exchangeable for Stock on such terms and conditions as the Committee
determines.
A - 1
<PAGE>
(f) Awards described in any of (a) through (e) above where the
right to exerciseability, vesting or full enjoyment of the Award is conditioned
in whole or in part on the satisfaction of specified performance criteria
("Performance Awards"). The Committee in its discretion may grant Performance
Awards that are intended to qualify for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code and Performance Awards that are
not intended so to qualify.
In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) of the Code, the Committee
shall in writing preestablish a specific performance goal (based solely on one
or more qualified performance criteria) no later than 90 days after the
commencement of the period of service to which the performance relates (or at
such earlier time as is required to qualify the award as performance-based under
Code Section 162(m)(4)(C)). For purposes of the Plan, a qualified performance
criterion is any of the following: (1) earnings or earnings per share (whether
on a pre-tax, after-tax, operational or other basis), (2) return on equity, (3)
return on assets, (4) revenues, (5) sales, (6) expenses, (7) one or more
operating ratios, (8) stock price, (9) stockholder return, (10) market share,
(11) cash flow, (12) inventory levels or inventory turn, (13) capital
expenditures, (14) net borrowing, debt leverage levels or credit quality, (15)
the accomplishment of mergers, acquisitions, dispositions, public offerings or
similar extraordinary business transactions or (16) any combination of the
foregoing. The performance goals selected in any case need not be applicable
across the Company, but may be particular to an individual's function or
business unit. Prior to payment of any Performance Award intended to qualify as
performance-based under Section 162(m)(4)(C) of the Code, the Committee will
certify whether the performance goal has been attained and such determination
will be final and conclusive. If the performance goal is not attained, no other
Award will be provided in substitution of the Performance Award.
(g) Grants of cash, or loans, made in connection with other
Awards in order to help defray in whole or in part the economic cost (including
tax cost) of the Award to the Participant. The terms of any such grant or loan
shall be determined by the Committee.
Awards may be combined in the Committee's discretion.
BOARD. The term "Board" means the Board of Directors of the Company.
CHANGE IN CONTROL. The term "Change in Control" means a change in the
beneficial ownership of the Company's voting stock or a change in the
composition of the Board which occurs as follows:
(a) Any "person" (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial
owner, directly or indirectly, of stock of the Company representing 25 % or more
of the total voting power of the Company's then outstanding stock.
(b) A tender offer (for which a filing has been made with the
SEC which purports to comply with the requirements of Section 14(d) of the
Securities Exchange Act of 1934 and the corresponding SEC rules) is made for the
stock of the Company. In case of a tender offer described in this paragraph (b),
the Change in Control will be deemed to have occurred upon the first to occur of
(i) any time during the offer when the person (using the definition in (a)
above) making the offer owns or has accepted for payment stock of the Company
with 25 % or more of the total voting power of the Company's outstanding stock
or (ii) three business days before the offer is to terminate unless the offer is
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<PAGE>
withdrawn first, if the person making the offer could own, by the terms of the
offer plus any shares owned by this person, stock with 50 % or more of the total
voting power of the Company's outstanding stock when the offer terminates.
(c) Individuals who were the Board's nominees for election as
directors of the Company immediately prior to a meeting of the shareholders of
the Company involving a contest for the election of directors shall not
constitute a majority of the Board following the election.
CODE. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference to any
successor provision of the Code.
COMMITTEE. The term "Committee" means a committee of the Board
comprised solely of two or more persons who are both "outside directors" within
the meaning of Section 162(m) of the Code and "nonemployee directors" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934. The Committee may
delegate ministerial tasks to such persons (including Employees) as it deems
appropriate.
COMPANY. The term "Company" means Display Technologies, Inc.
EMPLOYEE. The term "Employee" means any person who is employed by the
Company or an Affiliate.
EXCHANGE ACT. The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
EXERCISE PRICE. The term "Exercise Price" means the price established
by the Committee required to be paid to exercise an Option.
FAIR MARKET VALUE. For purposes of determining the "Fair Market Value"
of a share of Stock as of any date, the following rules apply:
(a) If the principal market for the Stock is a national
securities exchange or the Nasdaq stock market, then the Fair Market Value as of
the applicable date will be the closing sales price of the Stock on that date on
the principal exchange on which the Stock is then listed or admitted to trading.
(b) If sale prices are not available or if the principal
market for the Stock is not a national securities exchange and the Stock is not
quoted on the Nasdaq stock market, then the Fair Market Value as of the
applicable date will be the average between the highest bid and lowest asked
prices for the Stock on such day as reported on the NASDAQ OTC Bulletin Board
Service or by the National Quotation Bureau, Incorporated or a comparable
service.
(c) If the date is not a business day, and as a result,
paragraphs (a) and (b) next above are inapplicable, the Fair Market Value of the
Stock will be determined as of the last preceding business day. If paragraphs
(a) and (b) next above are otherwise inapplicable, then the Fair Market Value of
the Stock will be determined in good faith by the Committee.
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<PAGE>
ISO. The term "ISO" means an Option that is intended to satisfy the
requirements applicable to an "incentive stock option" described in Section
422(b) of the Code.
NQO. The term "NQO" means an Option that is not intended to be an ISO.
OPTION. The term "Option" means the right, for a specified period of
time, to purchase shares of Stock from the Company at a specified price.
PARTICIPANT. The term "Participant" means an employee, director or
other person providing services to the Company or its Affiliates who is granted
an Award under the Plan.
PERFORMANCE SHARE AWARD. The term "Performance Share Award" means the
grant of a right to receive shares of Stock or Stock Units that is contingent on
the achievement of performance or other objectives during a specified period.
PLAN. The term "Plan" means the Display Technologies, Inc. 1999 Stock
Incentive Plan as from time to time amended and in effect.
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS. The term "Restricted
Stock Award" means the grant of shares of Stock, and a "Restricted Stock Unit
Award" means the grant of a right to receive shares of Stock in the future, that
is subject to a risk of forfeiture or other restrictions that will lapse upon
the achievement of one or more goals relating to completion of service by the
Participant, or achievement of performance or other objectives, as determined by
the Committee.
SECURITIES ACT. The term "Securities Act" means the Securities Act of
1933, as amended.
STOCK. The term "Stock" means shares of common stock of the Company.
STOCK UNIT AWARD. The term "Stock Unit Award" means the grant of a
right to receive shares of Stock in the future.
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<PAGE>
APPENDIX B
FEDERAL INCOME TAX EFFECTS
--------------------------
INDEPENDENT TAX ADVICE
THE FOLLOWING DISCUSSION IS BASED ON FEDERAL TAX LAWS AND REGULATIONS
PRESENTLY IN EFFECT, WHICH ARE SUBJECT TO CHANGE, AND THE DISCUSSION DOES NOT
PURPORT TO BE A COMPLETE DESCRIPTION OF THE FEDERAL INCOME TAX ASPECTS OF THE
PLAN. A PARTICIPANT MAY ALSO BE SUBJECT TO STATE AND LOCAL TAXES IN CONNECTION
WITH THE GRANT OF AWARDS UNDER THE PLAN. THE COMPANY SUGGESTS THAT PARTICIPANTS
CONSULT WITH THEIR INDIVIDUAL TAX ADVISORS TO DETERMINE THE APPLICABILITY OF THE
TAX RULES TO THE AWARDS GRANTED TO THEM IN THEIR PERSONAL CIRCUMSTANCES.
Under Federal income tax laws in effect as of the Effective Date of the
Plan, Awards granted under the Plan will have the following tax consequences:
INCENTIVE STOCK OPTIONS
The grant of an incentive stock option ("ISO") will not result in
taxable income to the Participant. The exercise of an ISO will not result in
taxable income to the Participant provided that the Participant was, without a
break in service, an employee of the Company or an Affiliate during the period
beginning on the date of the grant of the option and ending on the date three
(3) months prior to the date of exercise (one year prior to the date of exercise
if the Participant is disabled, as that term is defined in the Internal Revenue
Code). If the Participant does not sell or otherwise dispose of the stock within
two years from the date of the grant of the ISO or within one year after the
transfer of such stock to him, then, upon disposition of such shares, any amount
realized in excess of the exercise price will be taxed to the Participant as
capital gain, and the Company will not be entitled to any deduction for Federal
income tax purposes. If the foregoing holding period requirements are not met,
the Participant will generally realize ordinary income, and a corresponding
deduction will be allowed to the Company, at the time of the disposition of the
shares, in an amount equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price, or (ii) the
excess, if any, of the amount realized upon disposition of the shares over the
exercise price. The excess of the fair market value of the shares at the time of
the exercise of an ISO over the exercise price is an adjustment that is included
in the calculation of the Participant's alternative minimum taxable income for
the tax year in which the ISO is exercised. For purposes of determining the
Participant's alternative minimum tax liability for the year of disposition of
the shares acquired pursuant to the ISO exercise, the Participant will have a
basis in those shares equal to the fair market value of the shares at the time
of exercise.
The exercise of an ISO through the exchange of previously acquired
stock will generally be treated in the same manner as such an exchange would be
treated in connection with the exercise of an NQO; that is, as a non-taxable,
like-kind exchange as to the number of shares given up and the identical number
of shares received under the option. That number of shares will take the same
basis and, for capital gains purposes, the same holding period as the shares
that are given up. However, such holding period will not be credited for
purposes of the one-year holding period required for the new shares to receive
ISO treatment. Shares received in excess of the number of shares given up will
have a new holding period and will have a basis of zero or, if any cash was paid
as part of the exercise price, the excess shares received will have a basis
equal to the amount of the cash. If a disqualifying disposition (a
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<PAGE>
disposition before the end of the applicable holding period) occurs with respect
to any of the shares received from the exchange, it will be treated as a
disqualifying disposition of the shares with the lowest basis.1
If the exercise price of an ISO is paid with shares of stock of the
Company acquired through a prior exercise of an ISO, gain will be realized on
the shares given up (and will be taxed as ordinary income) if those shares have
not been held for the minimum ISO holding period (two years from the date of
grant and one year from the date of transfer), but the exchange will not affect
the tax treatment, as described in the immediately preceding paragraph, of the
shares received.
NON-QUALIFIED OPTIONS
The grant of a non-qualified option ("NQO") will not result in taxable
income to the Participant. Except as described below, the Participant will
realize ordinary income at the time of exercise in an amount equal to the excess
of the fair market value of the shares acquired over the exercise price for
those shares, and the Company will be entitled to a corresponding deduction.
Gains or losses realized by the Participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of exercise.
The exercise of a NQO through the delivery of previously acquired stock
will generally be treated as a non-taxable, like-kind exchange as to the number
of shares surrendered and the identical number of shares received under the
option. That number of shares will take the same basis and, for capital gains
purposes, the same holding period as the shares that are given up. The value of
the shares received upon such an exchange that are in excess of the number given
up will be taxed to the Participant at the time of the exercise as ordinary
income. The excess shares will have a new holding period for capital gains
purposes and a basis equal to the value of such shares determined at the time of
exercise.
Neither the Participant nor the transferee will realize taxable income
at the time of a non-arm's length transfer of a NQO as a gift. Upon the
subsequent exercise of the option by the transferee, the Participant will
realize ordinary income in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the option price. Upon a
subsequent disposition of the shares by the transferee, the transferee will
generally realize short-term or long-term capital gain or loss, with the basis
for computing such gain or loss equal to the fair market value of the stock at
the time of exercise. If a Participant makes a gift of an option, and surrenders
all dominion and control over the option, the gift should be complete for
Federal gift tax purposes at the time of transfer and should be valued at that
time (or, if later, at the time the option becomes vested). For gift and estate
tax purposes, the gift of an option would generally cause the option (and the
stock acquired by exercise) to be excluded from the Participant's estate.
Special rules may apply if the Participant makes a gift of an Award to a charity
or to a "living trust" under which the Participant retains the right to revoke
the trust or substantially alter its terms.
- ---------------
1 Although the ISO regulations have been in proposed form for several
years, and are not formally authoritative in the manner that final regulations
would be, they generally form the basis for IRS interpretations relating to
ISOs.
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<PAGE>
PERFORMANCE UNITS
A Participant who has been granted performance shares will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time. The Participant will have compensation income at the
time of distribution equal to the then fair market value of the distributed
performance shares, and the Company will have a corresponding deduction.
RESTRICTED AND OTHER STOCK
A Participant who has been granted a restricted stock Award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time, assuming that the restrictions constitute
a "substantial risk of forfeiture" for Federal income tax purposes. Upon the
vesting of shares subject to an Award, the holder will realize ordinary income
in an amount equal to the then fair market value of those shares, and the
Company will be entitled to a corresponding deduction. Gains or losses realized
by the Participant upon disposition of such shares will be treated as capital
gains and losses, with the basis in such shares equal to the fair market value
of the shares at the time of vesting. Dividends paid to the holder during the
restriction period will also be compensation income to the Participant and
deductible as such by the Company.
A Participant may elect pursuant to section 83(b) of the Internal
Revenue Code to have the income recognized and measured at the date of grant of
restricted stock and to have the applicable capital gain holding period commence
as of that date, as described below.
A Participant who has been granted a stock Award that is not subject to
a substantial risk of forfeiture for Federal income tax purposes (for example,
bonus stock) will realize ordinary income in an amount equal to the fair market
value of the shares at such time, and the Company will be entitled to a
corresponding deduction.
SECTION 83(B) ELECTION
If a Participant is granted shares of Stock that are subject to a
substantial risk of forfeiture, recognition of income may be accelerated to the
date of grant if the Participant files an election under Internal Revenue Code
section 83(b). Such an election must be filed with the IRS not later than 30
days after the date the property was transferred (i.e., the date of grant), and
may be filed prior to the date of transfer. A copy of the election should be
filed with the Company. If such an election is properly filed in a timely
manner: (i) the Company will be entitled to a deduction at the time of grant in
an amount equal to the fair market value of the shares at the time of grant
(determined without regard to forfeiture restrictions and other non-permanent
restrictions), (ii) dividends paid to such holder during the restriction period
will be taxable as dividends to such holder and not deductible by the Company,
and (iii) there will be no further tax consequences when the restrictions lapse.
Gains or losses realized by the Participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of grant. If a Participant who
has made such an election subsequently forfeits the shares, the Participant will
not be entitled to any deduction or loss. The Company, however, will be required
to include as ordinary income the lesser of the fair market value of the
forfeited shares or the amount of the deduction originally claimed with respect
to the shares.
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<PAGE>
DEFERRED DELIVERY OF SHARES
If delivery of stock pursuant to the settlement of an Award under the
Plan is deferred to a date that is later than the regularly scheduled delivery
date (by reason of the Participant filing a properly completed deferral form, or
by reason of action of the Company), the Participant will recognize income at
the time of distribution, in an amount equal to the then fair market value of
the shares. However, if stock is subject to a substantial risk of forfeiture at
the time of distribution, recognition of income will be deferred until the risk
of forfeiture lapses. If the shares acquired pursuant to the exercise of an
option are to be delivered following a specified period of deferral, recognition
of income will be deferred until the end of the deferral period (or, if later,
upon the lapse of any substantial risk of forfeiture applicable to the shares).
WITHHOLDING OF TAXES
Pursuant to the Plan, the Company may deduct, from any payment or
distribution of shares under the Plan, the amount of any tax required by law to
be withheld with respect to such payment, or may require the Participant to pay
such amount to the Company prior to, and as a condition of, making such payment
or distribution. Subject to rules and limitations established by the Committee,
a Participant may elect to satisfy the withholding required, in whole or in
part, either by having the Company withhold shares of Company common stock from
any payment under the Plan or by the Participant delivering shares of Company
common stock to the Company. Any election must be made in writing on or before
the date when the amount of taxes to be withheld is determined. The portion of
the withholding that is so satisfied will be determined using the fair market
value of the Company common stock on the date when the amount of taxes to be
withheld is determined.
The use of shares of Company common stock to satisfy any withholding
requirement will be treated, for Federal income tax purposes, as a sale of such
shares for an amount equal to the fair market value of the stock on the date
when the amount of taxes to be withheld is determined. If previously- owned
shares of Company common stock are delivered by a Participant to satisfy a
withholding requirement, the disposition of such shares would result in the
recognition of gain or loss by the Participant for tax purposes, depending on
whether the basis in the delivered shares is less than or greater than the fair
market value of the shares at the time of disposition.
CHANGE IN CONTROL
Any acceleration of the vesting or payment of Awards under the Plan in
the event of a change in control in the Company may cause part or all of the
consideration involved to be treated as an "excess parachute payment" under the
Internal Revenue Code, which may subject the Participant to a 20% excise tax and
which may not be deductible by the Company.
B - 4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S DECEMBER 31, 1999 FOR 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> JUL-01-1999 OCT-01-1999
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 878,774 878,774
<SECURITIES> 0 0
<RECEIVABLES> 18,368,731 18,368,731
<ALLOWANCES> 368,797 368,797
<INVENTORY> 9,958,587 9,958,587
<CURRENT-ASSETS> 37,419,158 37,419,158
<PP&E> 16,139,140 16,139,140
<DEPRECIATION> 4,962,508 4,962,508
<TOTAL-ASSETS> 65,200,128 65,200,128
<CURRENT-LIABILITIES> 14,531,138 14,531,138
<BONDS> 11,803,387 11,803,387
7,850 7,850
5,000,000 5,000,000
<COMMON> 5,000,000 5,000,000
<OTHER-SE> 23,818,227 23,818,227
<TOTAL-LIABILITY-AND-EQUITY> 65,200,128 65,200,128
<SALES> 46,166,597 23,070,039
<TOTAL-REVENUES> 46,166,597 23,070,039
<CGS> 31,227,265 15,712,485
<TOTAL-COSTS> 11,129,274 5,365,667
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 924,232 491,333
<INCOME-PRETAX> 3,125,630 1,659,971
<INCOME-TAX> 1,235,000 656,000
<INCOME-CONTINUING> 1,890,630 1,003,971
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,890,630 1,003,971
<EPS-BASIC> .24 .12
<EPS-DILUTED> .19 .10
</TABLE>
