FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 0-0000
CARVER CORPORATION
(Exact Name of Registrant as specified in its charter)
WASHINGTON 91-1043157
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
20121 - 48th Avenue West, Lynnwood, WA 98036
(Address of principal executive offices) (Zip Code)
(206) 775-1202
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At June 30, 1995, 3,679,538 shares of $.01 par value common stock
of the Registrant were outstanding.
Page 1 of 40 pages.
Exhibit Index appears
at Page 13.
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
CARVER CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 105,000 $ 249,000
Marketable securities 5,000 5,000
Accounts receivable 3,064,000 3,830,000
Inventories 6,963,000 8,050,000
Current portion of note receivable 13,000 13,000
Prepaid assets 543,000 634,000
Total current assets 10,693,000 12,781,000
Property and equipment,
less accumulated depreciation 2,410,000 2,528,000
Other assets and deferred charges
Note receivable, net of
current portion 984,000 989,000
Other 279,000 330,000
Total assets $ 14,366,000 $ 16,628,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable $ 2,732,000 $ 3,067,000
Accounts payable 1,383,000 1,383,000
Accrued liabilities
Commissions and advertising 162,000 221,000
Payroll and related taxes 382,000 243,000
Warranty 103,000 103,000
Other 125,000 155,000
Current maturities of
long-term debt 20,000 20,000
Total current liabilities 4,907,000 5,192,000
Long-term settlement payable,
net of current portion 169,000 203,000
Long-term debt, net of
current portion 686,000 696,000
Total long-term liabilities 855,000 899,000
Shareholders' equity
Preferred stock, par value $.01
per share, 2,000,000 shares
authorized, no shares issued
Common stock, par value $.01 per
share, 2,000,000 shares
authorized, 3,679,538 shares
issued and outstanding 37,000 37,000
Additional paid-in capital 15,933,000 15,931,000
Accumulated deficit (7,366,000) (5,431,000)
Total shareholders' equity 8,604,000 10,537,000
Total liabilities and
shareholders' equity $ 14,366,000 $ 16,628,000
</TABLE>
<TABLE>
CARVER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $4,931,000 $4,800,000 $10,161,000 $10,316,000
Cost of sales 4,226,000 3,855,000 8,273,000 8,215,000
Gross profit 705,000 945,000 1,888,000 2,101,000
Operating expense
Selling 1,058,000 892,000 2,048,000 1,854,000
General & admin 472,000 594,000 954,000 988,000
Engrg, research
and devmt 315,000 325,000 568,000 587,000
1,845,000 1,811,000 3,570,000 3,429,000
Loss from
operations (1,140,000) (866,000) (1,682,000) (1,328,000)
Other income (expense)
Interest exp (96,000) (81,000) (192,000) (168,000)
Interest inc 22,000 21,000 43,000 43,000
Other (89,000) (22,000) (104,000) (39,000)
Loss before
income tax (1,303,000) (948,000) (1,935,000) (1,492,000)
Income tax
benefit -0- -0- -0- -0-
Net loss $(1,303,000) $ (948,000) $(1,935,000)$(1,492,000)
Loss per share $ (0.35) $ (0.26) $ (0.53)$ (0.41)
(See Notes to Consolidated Financial Statements)
</TABLE>
<TABLE>
CARVER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,935,000) $(1,492,000)
Adjustments to reconcile net loss
to cash flows from operating activities:
Depreciation and amortization 237,000 165,000
Changes in:
Accounts receivable 766,000 1,388,000
Inventories 1,087,000 1,552,000
Prepaid expenses 91,000 (174,000)
Accounts payable and
accrued liabilities 16,000 (339,000)
Other assets and deferred charges (31,000) (71,000)
Net cash provided by operating
activities 231,000 1,029,000
INVESTING ACTIVITIES:
Proceeds from repayment of note
receivable 5,000 -
Acquisition of property, plant and
equipment, net (37,000) (39,000)
Net cash used by investing activities (32,000) (39,000)
FINANCING ACTIVITIES:
Repayment of notes payable (335,000) (979,000)
Repayment of long-term debt (10,000) (9,000)
Issuance of Common Stock 2,000 1,000
Net cash used by financing activities (343,000) (987,000)
Increase (decrease) of cash and
cash equivalents (144,000) 3,000
Cash and cash equivalents:
Beginning of period 249,000 171,000
End of period $ 105,000 $ 174,000
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 192,000 $ 169,000
</TABLE>
CARVER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(unaudited)
NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PREPARATION
In the opinion of management, the consolidated financial statements
include all adjustments (which include only normal recurring
adjustments) necessary to present fairly the changes in financial
position and results of operations for the interim periods
reported. The results of operations for any interim period are not
necessarily indicative of the results for the entire year.
The financial statements should be read with reference to
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained herein and the "Notes to
Consolidated Financial Statements" set forth in the Company's 10-K
filing for the year ended December 31, 1994.
NOTE 2 - INVENTORIES
Inventories consisted of the following:
June 30, December 31,
1995 1994
Raw materials $1,383,000 $1,444,000
Work-in-progress 2,070,000 1,712,000
Finished goods 3,510,000 4,894,000
$6,963,000 $8,050,000
NOTE 3 - EARNINGS PER SHARE
The earnings per share computations are based upon the weighted
average number of shares outstanding for the interim periods
presented as set forth in Exhibit 11, "Computation of Earnings per
Share." The earnings per share calculation for periods in
which a loss is recorded excludes common share equivalents because
the effect would be antidilutive.
NOTE 4 - PROPERTY AND EQUIPMENT
June 30, December 31,
1995 1994
Land $ 440,000 $ 440,000
Building & improvements 2,452,000 2,444,000
Equipment 2,039,000 2,026,000
4,931,000 4,910,000
Less accumulated
depreciation (2,521,000) (2,382,000)
$2,410,000 $2,528,000
NOTE 5 - INCOME TAXES - Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes", under which income tax expense is
determined using an asset and liability approach. There was no
effect on the Company's financial position or results of
operations as a result of implementing this accounting standard.
Management is of the opinion that it is not appropriate to record
a benefit for net operating loss carryforwards of approximately
$12,500,000 at this time. As future operating results improve,
management will re-assess its position in this matter.
NOTE 6 - COMMITMENTS - As of June 30, 1995, the Company has
committed to purchase approximately $1,200,000 of inventory
expected to be received in 1995 from various offshore vendors.
NOTE 7 - CONTINGENCIES - See Customs Audit, Part 1, Item 2
"Management's Discussion and Analysis of Financial Condition and
Results of Operations".
PART 1. FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS -
The following tables set forth items in the consolidated statement
of income as a percentage of net sales for the three-month periods
ended June 30, 1995 and 1994.
Percentage of Net Sales
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 85.7 80.3 81.4 79.6
Gross profit 14.3 19.7 18.6 20.4
Operating expenses
Selling 21.4 18.6 20.1 18.0
General and admin 9.6 12.4 9.4 9.6
Engineering, research
and development 6.4 6.8 _5.6 _5.7
Loss from operations (23.1) (18.1) (16.5) (12.9)
Interest expense ( 2.0) ( 1.7) ( 1.9) ( 1.6)
Interest income 0.5 0.5 0.4 0.4
Other expense ( 1.8) ( 0.5) ( 1.0) ( 0.4)
Loss before tax (26.4) (19.8) (19.0) (14.5)
Income tax benefit - - - -
Net loss (26.4%) (19.8%) (19.0%)
(14.5%)
RECENT DEVELOPMENTS -
Strategic Alternatives. The Company has retained the services of
the investment banking firm of Cruttenden Roth with the intention
of seeking a strategic partner, capital infusion
or buyer for part or all of the Company. Management has reached the
conclusion that outside investment of capital is necessary to fund
the Company's current operating and future growth plans. While
the Company is currently conducting discussions with various
interested parties, there can be no assurances any outside
investment can be obtained on terms favorable for the Company and
its shareholders. If the Company is unable to obtain additional
financing, it will be necessary to further streamline the
Company's operations. (See "Liquidity and Capital Resources".)
Customs Audit. Between 60% to 65% of the Company's revenues in
recent years are of products which are sourced from offshore
suppliers primarily from the Far East. Late in 1994 the United
States Customs Service conducted an audit of the Company's import
operations. The Customs Service found that the Company had made
late duty payments totaling $99,000 on tooling between 1989 to
1993. On March 9, 1995, the Customs Service issued to the Company
a prepenalty notice indicating that it will assess a penalty up to
approximately $400,000. The Company provided documentation to the
Customs Service which the Company believes will result in a
significant mitigation of this penalty.
In July, 1995 the Company paid United States Customs $50,000 as an
offer in compromise to the penalties. While the Company believes
its offer will be accepted, there can be no assurances. The
Company's current cash flow position would not allow it to pay a
$400,000 penalty.
Mobile. The Company has concluded that it does not have the
resources to successfully develop and market a mobile product line.
It has also been unsuccessful in trying to sell the mobile assets
and brand name to other parties. It is the Company's intention to
sell its current mobile finished goods inventory and continue to
support its mobile distribution through the end of 1995 . The
Company has discontinued production of new mobile product and
therefore, provision has been made for the write off of residual
raw material. In addition, all intangible assets have been written
off. While the Company expects to recover its investment in its
finished goods mobile inventory, further write downs or write offs
of mobile inventory may be necessary.
Product Reviews. Purchasers of high quality audio equipment tend
to rely on favorable reviews in audio specialty publications when
they are selecting new audio components for their home. Carver
consumer amplifiers have received twelve such reviews over the last
few months. Extremely favorable reviews have been published on
Lightstar Reference Power Amplifier, the AV-806x Six Channel Home
THX Stereo Power Amplifier, and the Company's new A-400x Home
Stereo Amplifier among others. These publications include Home
Theater, Home Theater Technology, Stereophile, Sound and Image,
Inner Ear Report, and Stereo Review among others. Management
anticipates the recent excellent press its consumer amplifiers have
received should positively contribute to its fall selling effort.
Seasonality. The markets for consumer audio equipment are
moderately seasonal, with somewhat higher sales expected to occur
in the last six months of the year. The introduction of new
products may affect this seasonality and quarter-to-quarter
comparisons. Demand for audio products also exhibits some
cyclicality, reflecting the general state of the economy and
consumer expectations.
NET SALES AND NET LOSSES -
Net sales for the quarter ended June 30, 1995 were $4,931,000 up to
2.7% from net sales of $4,800,000 for the second quarter of 1994.
Net sales for the six months ended June 30, 1995 were $10,161,000,
a slight decrease from net sales of $10,316,000 for the first six
months of 1994. An increase in sales of consumer amplifiers and
sales to OEM customers has more than offset the decline in sales of
sourced product which the Company has discontinued. While sales of
professional amplifiers to domestic customers declined, sales of
professional amplifiers to international customers increased by
24%. Export sales of consumer product increased slightly from the
same period in 1994. Sales of product built in the Company's
manufacturing facility in Lynnwood, Washington increased to 51% of
total revenues from approximately 42% for the same period in 1994.
The Company reported net losses of $1,303,000 (26.4% of sales) or
$0.35 per share and $1,935,000 (19.0% of sales) or $0.53 per share
for the three and six month periods respectively ended June 30,
1995. This compares to net losses of $948,000 (19.8% of sales) or
$0.26 per share for the three month period and $1,492,000 (14.5% of
sales) or $0.41 per share for the six month period ended June 30,
1994. The Company attributes this decline in its performance
primarily to the decline in its gross profits as cited below.
GROSS PROFIT -
Gross profit decreased as a percent of net sales to 14.3% in the
second quarter of 1995 from 19.7% in the second quarter of 1994.
Gross profit for the first six months of 1995 declined to 18.6% of
net sales from 20.4% for the first six months of 1994. The major
factor in this decline of gross profit was higher material costs on
product sourced from Japan due to the weakness of the U.S. dollar
versus the Japanese yen. The Company has been unable to move
production back to its Lynnwood factory fast enough nor raise
prices high enough to counteract this effect. The percentage of
sales sold to export markets as well as to other manufacturers does
not achieve margins as high as those sold directly to the Company's
domestic customers. Thus, the mix of products sold in the second
quarter of 1995 negatively affected gross profit as a percent of
sales. Second quarter results also included the write down of
certain mobile amplifier raw materials and the impact of severance
paid and payable to manufacturing and service employees of the
Company who were laid off in a work force reduction on June 20,
1995.
OPERATING EXPENSE -
Selling expense has increased in both quarter to quarter and year
to date comparisons of 1995 to 1994 due to increased expenditures
for media advertising, higher variable selling expense, higher
personnel expense and associated travel expense and severance
expense paid and payable. Management has substantially cut its
budget for sales and marketing expense for the third and fourth
quarter of 1995 and therefore expects much lower selling costs for
the remainder of the year. This expense reduction could negatively
affect the Company's net revenues.
General and administrative expenses have decreased when comparing
1995 to 1994 primarily due to a reduction in legal fees that the
Company incurred in 1994. Management anticipates General and
Administrative costs would increase in the second half of 1995 due
to the costs associated with seeking outside investment in the
Company.
Research and development expense has decreased slightly when
comparing the second quarter of 1995 to the same period in 1994.
Approximately $40,000 of severance expense associated with the work
force reduction in June, 1995 has been recorded. Research and
development expense is likely to be substantially reduced in the
second half of 1995 as the majority of the Company's product
development projects are now complete.
OTHER INCOME AND EXPENSE -
Other expense recorded in the second quarter include a write off of
the remainder of the patent acquired with the assets of KLW
Corporation. The Company has concluded it does not have the
resources to successfully market mobile amplifiers and signal
processors. Year to date interest expense has increased by $24,000
largely due to an increase in interest rates.
LIQUIDITY AND CAPITAL RESOURCES -
The Company's working capital on June 30, 1995 was $5,786,000 which
included cash and short term investments aggregating approximately
$110,000. This compares with working capital of $7,589,000 and
cash and short-term investments of $251,000 at December 31, 1994.
At August 4, 1995, the Company's immediate capital resources
consisted of approximately $90,000 in cash (and cash equivalents)
and the credit facility described below.
The Company has a $6,000,000 revolving line of credit, $1,000,000
of which can be used to open commercial letters of credit.
Borrowings under this agreement are restricted to 70% of eligible
accounts receivable and 50% of eligible inventory, which at August
4, 1995 produced a borrowing base of $2,600,000. The line is
collateralized by substantially all assets of the Company and bears
interest at the prime lending rate plus 2%. This line expires
April 30, 1996. At August 4, 1995, borrowings of $2,300,000 were
outstanding under this line.
The Company's inventory has decreased $1,087,000 from December 31,
1994 primarily in sourced finished goods. Raw materials and work
in process have increased as the Company is now building a greater
percentage of its sales in its Lynnwood, Washington factory.
Accounts receivable have decreased $766,000 from the end of 1994
due to the seasonal drop in sales.
As the Company's borrowing base is dependent on its inventory and
receivables and as the Company has continued to experience a
decline in sales accompanied by higher than expected losses, the
Company's borrowing availability has contracted to a level at which
current cash requirements exceed its ability to borrow. Therefore,
the Company has been and will continue to be forced to delay prompt
payment of certain of its vendors. In response, the Company has
negotiated payment and delivery schedules with some of its foreign
suppliers and has canceled purchase orders for certain products.
In addition certain products have been and will continue to be
discounted and sold to generate cash which will impair margins. An
aggressive cost cutting program has also been implemented to
preserve cash and allow the Company to operate within its cash
availability. It is the intention of management to not jeopardize
its Lynnwood production and to maintain a reliable supply of
domestic built product.
The Company has announced that it has retained the services of an
investment banker to seek alternative or additional sources of
working capital or a buyer for all or part of the Company. There
can be no assurance that the Company will be able to obtain
additional financing or other sources of working capital, or if it
is able, that the terms will be favorable to the Company. Nor can
there be any assurance that the Company will be able to obtain
concessions from its suppliers or reduce its expenses sufficient to
achieve positive cash flow.
If the Company does not attract additional financing and if it
continues to record losses, the Company likely would have to delay
payment of suppliers and be forced to seek other relief from its
creditors.
EFFECTS OF INFLATION AND CHANGES IN FOREIGN CURRENCY
EXCHANGE RATES
Due to the competitive conditions in the market for consumer
electronics, historically the Company has been limited in its
ability to increase prices for its products in amounts sufficient
to offset increased production and operating costs. The Company
increased its domestic consumer and worldwide professional prices
on average of 5% on January 15,1995 due to the increase in material
and labor costs it has been experiencing as well as the continued
erosion in the strength of the U.S. dollar. Consumer export prices
were also increased in July 1995. While some revenue fall off is
anticipated due to these price increases, the Company believes that
it is appropriate to trade some decline in sales for an improvement
in margins. The Company intends to continue to monitor costs and
its market and adjust prices taking into consideration the
Company's costs and competitive conditions.
Approximately 60% of the Company's net sales in 1994 and 46% year
to date in 1995 were of products designed by and/or manufactured to
the Company's specifications by overseas suppliers. The Company
purchased a substantial portion of these products at an agreed per
unit price payable in Japanese yen. Accordingly, the weakening in
the value of the dollar versus the yen has had an adverse effect on
the Company's gross margin. The yen-to-dollar rate deteriorated
11% in 1994 and an additional 18% in the first half of 1995, though
it has recently made a mild recovery. This has inflated costs to
the point many of the Japanese built products are unprofitable for
the Company to sell. This adverse impact of the weak dollar has
been somewhat mitigated by the Company's decreased reliance on
offshore sourcing of its products. The Company's 1995 plan
presently is for only 40% of its revenues to be attributed to
products sourced offshore. It is presently the Company's intention
to discontinue certain Japanese built products by fall of 1995
which is likely to result in write offs of prepaid tooling. The
Company is currently evaluating a strategy which involves sourcing
from countries that do not require payment in yen and evaluating
the impact of this change. However, the transition to alternate
suppliers will take several months and may occasion an initial
increase in quality control issues, delays in delivery of product
and other transitional problems.
Due to credit restrictions experienced by the Company it has not
been able to hedge against foreign currency exposure. Accordingly,
the Company has considerable exposure to currency fluctuations
which will adversely affect its gross profit in 1995 unless the
U.S. dollar strengthens considerably against the yen.
PART II. OTHER INFORMATION
CARVER CORPORATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Shareholders was held May 16, 1995.
Election of Directors. The nominees identified in the following
table were elected for a term of one year or until their successors
are duly elected and qualified. Except as set forth in the
following table, there was no director of the Company whose term of
office continued after the Annual Meeting.
Against/ Abstentions/
Nominee's Name For Withheld Broker Non-votes
Robert A. Fulton 2,902,087 293,329 0
Thomas C. Graham 2,899,987 295,429 0
Walter C. Howe 2,902,837 292,579 0
John F. Vynne 2,903,037 292,379 0
Stephen M. Williams 2,900,937 294,479 0
Proposal to Approve the Adoption of the Company's 1995 Stock Option
Plan. A proposal to approve the Carver Corporation 1995 Stock
Option Plan (the "Plan") was approved. The Plan provides for
discretionary grant for incentive stock options to employees,
discretionary grant of non-qualified stock options to employees,
consultants and certain other persons, and non-discretionary annual
grants of non-qualified stock options to non-employee directors.
The Plan provides for the grant of options to purchase an aggregate
of 360,000 shares of the Company's Common Stock. Of these, 60,000
shares are reserved for issuance to non-employee directors pursuant
to a formula set forth in the Plan.
The proposal to approve the adoption of the Company's 1995 Stock
Option Plan received the following votes:
For Against Abstain Broker Non-votes
1,016,533 414,923 12,915 1,751,045
Proposal to Approve the Adoption of the Company's 1995 Stock Bonus
Plan. A proposal to approve the adoption of the Carver Corporation
1995 Stock Bonus Plan (the "Stock Bonus Plan") was approved. The
Stock Bonus Plan provides for the discretionary grant by the
Company of restricted or unrestricted stock bonuses to employees
and certain other persons and for the non-discretionary grant of
unrestricted stock bonuses to non-employee directors of the
Company. Grants to non-employee directors are made pursuant to a
formula and schedule set forth in the Stock Bonus Plan.
The proposal to approve the adoption of the Stock Bonus Plan
received the following votes:
For Against Abstain Broker Non-votes
1,200,513 428,138 13,720 1,751,045
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.26
The Company's 1995 Stock Option Plan
(b) Exhibit 10.27
The Company's 1995 Stock Bonus Plan
(c) Exhibit 11
Computation of Earnings per Share
(d) Reports on Form 8-K
None.
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.
CARVER CORPORATION
Dated: August 11, 1995 /s/ Sandra L. Jenkins
Sandra L. Jenkins
Vice President - Finance
(Principal Financial and
Accounting Officer)
CARVER CORPORATION
EXHIBIT INDEX
Exhibit Title Page
10.26 The Company's 1995 Stock Option Plan 15
10.27 The Company's 1995 Stock Bonus Plan 31
11 Computation of Earnings Per Share 39
EXHIBIT 10.26
CARVER CORPORATION
1995 STOCK OPTION PLAN
This 1995 Stock Option Plan (the "Plan") provides for the grant of
options to acquireshares of common stock, .01 par value (the
"Common Stock"), of Carver Corporation, a Washington corporation
(the "Company"). Stock options granted under this Plan that
qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), are referred to in this Plan as "Incentive
Stock Options." Incentive Stock Options and stock options that do
not qualify under Section 422 of the Code ("Non-Qualified Stock
Options") granted under this Plan are referred to as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of directors,
valued key employees and consultants of the Company and such other
persons as the Plan Administrator shall select in accordance with
Section 3 below, to encourage such persons to acquire a greater
proprietary interest in the Company, thereby strengthening their
incentive to achieve the objectives of the shareholders of the
Company, and to serve as an aid and inducement in the hiring of new
employees and to provide an equity incentive to directors,
consultants and other persons selected by the Plan Administrator.
2. ADMINISTRATION.
This Plan shall be administered by the Board of Directors of the
Company (the "Board") if each director is a "disinterested person"
(as defined below). If all directors are not independent
directors, the Plan shall be administered by a committee designated
by the Board and composed of two (2) or more members of the Board,
which committee (the "Committee") may be an executive, compensation
or other committee, including a separate committee especially
created for this purpose. The term "disinterested person" shall
have the meaning assigned to it under Rule 16b-3 (as amended from
time to time) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor rule or
regulatory requirement (the "Rule"). The Committee shall have the
powers and authority vested in the Board hereunder (including the
power and authority to interpret any provision of this Plan or of
any Option). The members of any such Committee shall serve at the
pleasure of the Board. A majority of the members of the Committee
shall constitute a quorum, and all actions of the Committee shall
be taken by a majority of the members present. Any action may be
taken by a written instrument signed by all of the members of the
Committee and any action so taken shall be fully effective as if it
had been taken at a meeting. The Board, or any committee thereof
appointed to administer the Plan, is referred to herein as the
"Plan Administrator."
Subject to the provisions of this Plan, and with a view to
effecting its purpose, the Plan Administrator shall have sole
authority, in its absolute discretion, to (a) construe and
interpret this Plan; (b) define the terms used in this Plan; (c)
prescribe, amend and rescind rules and regulations relating to this
Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) grant Options under this Plan
(other than pursuant to Section 6); (f) determine the individuals
to whom Options shall be granted under this Plan and whether the
Option is an Incentive Stock Option or a Non-Qualified Stock
Option; (g) determine the time or times at which Options shall be
granted under this Plan; (h) determine the number of shares of
Common Stock subject to each Option, the exercise price of each
Option, the duration of each Option and the times at which each
Option shall become exercisable; (i) determine all other terms and
conditions of Options; and (j) make all other determinations
necessary or advisable for the administration of this Plan. All
decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants
in this Plan and on their legal representatives, heirs and
beneficiaries.
The Plan Administrator shall have no authority, discretion or power
to select the persons who will receive Options under Section 6
hereof or to set the number of shares to be covered by such
Options, the exercise price of such Options, the timing of the
grant of such Options or the period within which such Options may
be exercised.
The Board or the Committee may delegate to one or more executive
officers of the Company the authority to grant Options under this
Plan to employees of the Company who, on the Date of Grant, are not
subject to Section 16(b) of the Exchange Act with respect to the
Common Stock ("Non-Insiders"), and in connection therewith the
authority to determine: (a) the number of shares of Common Stock
subject to such Option; (b) the duration of the Option; (c) the
vesting schedule for determining the times at which such Option
shall become exercisable; and (d) all other terms and conditions of
such Options. The exercise price for any Option granted by action
of an executive officer or officers pursuant to such delegation of
authority shall not be less than the fair market value per share of
the Common Stock on the Date of Grant. Unless expressly approved
in advance by the Board or the Committee, such delegation of
authority shall not include the authority to accelerate the
vesting, extend the period for exercise or otherwise alter the
terms of outstanding Options. The term "Plan Administrator" when
used in any provision of this Plan other than Sections 2, 5(m),
5(n) and 12 shall be deemed to refer to the Board or the Committee,
as the case may be, and an executive officer who has been
authorized to grant Options pursuant hereto, insofar as such
provision may be applied to Non-Insiders and Options granted to
Non-Insiders.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at
the time the Option is granted, is an employee of the Company or
any Related Corporation (as defined below), including employees who
are directors of the Company ("Employees"). Non-Qualified Stock
Options may be granted to Employees and to such other persons as
the Plan Administrator shall select. Options shall be granted
hereunder to directors who are not employees of the Company or any
related Corporation, but solely on the terms and conditions set
forth in Section 6 hereof. Options may be granted in substitution
for outstanding Options of another corporation in connection with
the merger, consolidation, acquisition of property or stock or
other reorganization between such other corporation and the Company
or any subsidiary of the Company. Options also may be granted in
exchange for outstanding Options. No person shall be eligible to
receive in any fiscal year Options to purchase more than 50,000
shares of Common Stock (subject to adjustment as set forth in
Section 5(m) hereof). Any person to whom an Option is granted
under this Plan is referred to as an "Optionee." Any person who is
the owner of an Option is referred to as a "Holder."
As used in this Plan, the term "Related Corporation," shall mean
any corporation (other than the Company) that is a "Parent
Corporation" of the Company or "Subsidiary Corporation" of the
Company, as those terms are defined in Sections 424(e) and 424(f),
respectively, of the Code (or any successor provisions), and the
regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up
to a total of 360,000 shares of the Company's authorized but
unissued, or reacquired, Common Stock. The number of shares with
respect to which Options may be granted hereunder is subject to
adjustment as set forth in Section 5(m) hereof. Of these 360,000
shares, 60,000 shares are available exclusively for grant to
certain directors of the Company under Section 6 hereof, subject to
adjustment in as set forth in Section 5(m). In the event that any
outstanding Option expires or is terminated for any reason, the
shares of Common Stock allocable to the unexercised portion of such
Option may again be subject to an Option to the same Optionee or to
a different person eligible under Section 3 of this Plan; provided
however, that any cancelled Options will be counted against the
maximum number of shares with respect to which Options may be
granted to any particular person as set forth in Section 3 hereof.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement").
Agreements may contain such provisions, not inconsistent with this
Plan, as the Plan Administrator in its discretion may deem
advisable. All Options also shall comply with the following
requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an
Incentive Stock Option or a Non-Qualified Stock Option. In the
absence of action to the contrary by the Plan Administrator in
connection with the grant of an Option, all Options shall be
Non-Qualified Stock Options. The aggregate fair market value
(determined at the Date of Grant, as defined below) of the stock
with respect to which Incentive Stock Options are exercisable for
the first time by the Optionee during any calendar year (granted
under this Plan and all other Incentive Stock Option plans of the
Company, a Related Corporation or a predecessor corporation) shall
not exceed $100,000, or such other limit as may be prescribed by
the Code as it may be amended from time to time. Any portion of an
Option which exceeds the annual limit shall not be void but rather
shall be a Non-Qualified Stock Option.
(b) Date of Grant.
Each Agreement shall state the date the Plan Administrator has
deemed to be the effective date of the Option for purposes of this
Plan (the "Date of Grant").
(c) Option Price.
Each Agreement shall state the price per share of Common Stock at
which it is exercisable. The exercise price shall be fixed by the
Plan Administrator at whatever price the Plan Administrator may
determine in the exercise of its sole discretion; provided that
the per share exercise price for an Incentive Stock Option shall
not be less than the fair market value per share of the Common
Stock at the Date of Grant as determined by the Plan Administrator
in good faith; provided further, that with respect to Incentive
StockOptions granted to greater-than-10 percent (>10%) shareholders
of the Company (as determined with reference to Section 424(d) of
the Code), the exercise price per share shall not be less than 110
percent (110%) of the fair market value per share of the Common
Stock at the Date of Grant as determined by the Plan Administrator
in good faith; and, provided further, that Options granted in
substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of property
or stock or other reorganization involving such other corporation
and the Company or any subsidiary of the Company may be granted
with an exercise price equal to the exercise price for the
substituted option of the other corporation, subject to any
adjustment consistent with the terms of the transaction pursuant to
which the substitution is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan Administrator
shall designate, subject to paragraph 5(g) below, the expiration
date of the Option, which date shall not be later than 10 years
from the Date of Grant in the case of Incentive Stock Options;
provided, that the expiration date of any Incentive Stock Option
granted to a greater-than-10 percent (>10%) shareholder of the
Company (as determined with reference to Section 424(d) of the
Code) shall not be later than five years from the Date of Grant.
In the absence of action to the contrary by the Plan Administrator
in connection with the grant of a particular Option, and except in
the case of Incentive Stock Options as described above, all Options
granted under this Section 5 shall expire ten (10) years from the
Date of Grant.
(e) Vesting Schedule
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan
Administrator at the time of grant of the Option prior to the
provision of services with respect to which such Option is granted;
provided, that if no vesting schedule is specified at the time of
grant, the Option shall vest according to the following schedule:
Number of Years Percentage of Total
Following Date of Grant Option Vested
One 25%
Two 50%
Three 75%
Four 100%
The Plan Administrator may specify a vesting schedule for all or
any portion of an Option based on the achievement of performance
objectives established in advance of the commencement by the
Optionee of services related to the achievement of the performance
objectives. Performance objectives shall be expressed in terms of
one or more of the following: return on equity, return on assets,
share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross
margin or the Company's performance relative to its internal
business plan. Performance objectives may be in respect of the
performance of the Company as a whole (whether on a consolidated or
unconsolidated basis), a Related Corporation, or a subdivision,
operating unit, product or product line of either of the foregoing.
Performance objectives may be absolute or relative and may be
expressed in terms of a progression or a range. An option which is
exercisable (in whole or in part) upon the achievement of one or
more performance objectives may be exercised only following written
notice to the Optionee and the Company by the Plan Administrator
that the performance objective has been achieved.
(f) Acceleration of Vesting
The vesting of one or more outstanding Options may be accelerated
by the Plan Administrator at such times and in such amounts as it
shall determine in its sole discretion. The vesting of Options
also shall be accelerated under the circumstances described in
Sections 5(m) and 5(n) below.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following
events: (i) the expiration of the Option, as designated by the
Plan Administrator in accordance with Section 5(d) above; (ii) the
date of an Optionee's termination of employment or contractual
relationship with the Company or any Related Corporation for cause
(as determined in the sole discretion of the Plan Administrator);
(iii) the expiration of ninety (90) days from the date of an
Optionee's termination of employment or contractual relationship
with the Company or any Related Corporation for any reason
whatsoever other than cause, death or Disability (as defined below)
unless, the exercise period is extended by the Plan Administrator
until a date not later than the expiration date of the Option; or
(iv) the expiration of one year from (A) the date of death of the
Optionee or (B) cessation of an Optionee's employment or
contractual relationship by reason of Disability (as defined below)
unless, the exercise period is extended by the Plan Administrator
until a date not later than the expiration date of the Option. If
an Optionee's employment or contractual relationship is terminated
by death, any Option held by the Optionee shall be exercisable only
by the person or persons to whom such Optionee's rights under such
Option shall pass by the Optionee's will or by the laws of descent
and distribution of the state or county of the Optionee's domicile
at the time of death. For purposes of the Plan, unless otherwise
defined in the Agreement, "Disability" shall mean any physical,
mental or other health condition which substantially impairs the
Optionee's ability to perform his or her assigned duties for one
hundred twenty (120) days or more in any two hundred forty (240)
day period or that can be expected to result in death. The Plan
Administrator shall determine whether an Optionee has incurred a
Disability on the basis of medical evidence acceptable to the Plan
Administrator. Upon making a determination of Disability, the Plan
Administrator shall, for purposes of the Plan, determine the date
ofan Optionee's termination of employment or contractual
relationship.
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment
of the Optionee by the Company for any reason whatsoever, including
death or Disability. For purposes of this Plan, transfer of
employment between or among the Company and/or any Related
Corporation shall not be deemed to constitute a termination of
employment with the Company or any Related Corporation. For
purposes of this subsection with respect to Incentive Stock
Options, employment shall be deemed to continue while the Optionee
is on military leave, sick leave or other bona fide leave of
absence (as determined by the Plan Administrator). The foregoing
notwithstanding, employment shall not be deemed to continue beyond
the first ninety (90) days of such leave, unless the Optionee's re-
employment rights are guaranteed by statute or by contract.
(h) Exercise of Options.
Options shall be exercisable, either all or in part, at any time
after vesting, until termination; provided, however, that any
Optionee who is subject to the reporting and liability provisions
of Section 16 of the Exchange Act with respect to the Common Stock
shall be precluded from selling or transferring any Common Stock or
other security underlying an Option during the six (6) months
immediately following the grant of that Option. If less than all
of the shares included in the vested portion of any Option are
purchased, the remainder may be purchased at any subsequent time
prior to the expiration of the Option term. No portion of any
Option for less than one hundred (100) shares (as adjusted pursuant
to Section 5(m) below) may be exercised; provided, that if the
vested portion of any Option is less than one hundred (100) shares,
it may be exercised with respect to all shares for which it is
vested. Only whole shares may be issued pursuant to an Option, and
to the extent that an Option covers less than one (1) share, it is
unexercisable. Options or portions thereof may be exercised by
giving written notice to the Company, which notice shall specify
the number of shares to be purchased, and be accompanied by
payment in the amount of the aggregate exercise price for the
Common Stock so purchased, which payment shall be in the form
specified in Section 5(i) below. The Company shall not be
obligated to issue, transfer or deliver a certificate of Common
Stock to the Holder of any Option, until provision has been made by
the Holder, to the satisfaction of the Company, for the payment of
the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax with
holding obligations associated with such exercise. During the
lifetime of an Optionee, Options are exercisable only by the
Optionee or a transferee who takes title to the Option in the
manner permitted by Subsection 5(k) hereof.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall
be paid to the Company in cash or by certified or cashier's check.
In addition, the Holder may pay for all or any portion of the
aggregate exercise price by complying with one or more of the
following alternatives:
(1) by delivering to the Company shares of Common Stock previously
held by such Holder, or by the Company withholding shares of
Common Stock otherwise deliverable pursuant to exercise of the
Option, which shares of Common Stock received or withheld shall
have a fair market value at the date of exercise (as determined by
the Plan Administrator) equal to the aggregate exercise price to be
paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to
the Company the amount of sale or loan proceeds to pay the exercise
price; or
(3) by complying with any other payment mechanism approved by the
Plan Administrator at the time of exercise.
(j) Rights as a Shareholder.
A Holder shall have no rights as a shareholder with respect to any
shares covered by an Option until such Holder becomes a record
holder of such shares, irrespective of whether such Holder has
given notice of exercise. Subject to the provisions of Sections
5(m) and 5(n) hereof, no rights shall accrue to a Holder and no
adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights declared on, or created in, the
Common Stock for which the record date is prior to the date the
Holder becomes a record holder of the shares of Common Stock
covered by the Option, irrespective of whether such Holder has
given notice of exercise.
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or
otherwise) other than by will, by applicable laws of descent and
distribution or (except in the case of an Incentive Stock Option)
pursuant to a qualified domestic relations order, and shall not be
subject to execution, attachment or similar process; provided
however, that any Agreement may provide or be amended to provide
that the Option to which it relates is transferrable without
payment of consideration to immediate family members of the
Optionee or to trusts or partnerships established exclusively for
the benefit of the Optionee and the Optionee's immediate family
members. Upon any attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of any Option or of any right or privilege
conferred by this Plan contrary to the provisions hereof, or upon
the sale, levy or any attachment or similar process upon the
rights and privileges conferred by this Plan, such Option shall
thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option unless
the exercise of such Option and the issuance and delivery of such
shares shall comply with all relevant provisions of law, including,
without limitation, any applicable state securities laws, the
Securities Exchange Act of 1933, as amended, the Exchange Act, the
rules and regulations thereunder and the requirements of any stock
exchange upon which such shares may then be listed, and such
issuance shall be further subject to the approval of counsel for
the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and
sale of such shares. The inability of the Company to obtain from
any regulatory body the authority deemed by the Company to be
necessary for the lawful issuance and sale of any shares under this
Plan, or the unavailability of an exemption from registration for
the issuance and sale of any shares under this Plan, shall relieve
the Company of any liability with respect to the non-issuance or
sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator
may require the Holder to represent and warrant in writing at the
time of such exercise that the shares are being purchased only for
investment and without any then-present intention to sell or
distribute such shares. At the option of the Plan Administrator,
a stop-transfer order against such shares may be placed on the
stock books and records of the Company, and a legend indicating
that the stock may not be pledged, sold or otherwise transferred
unless an opinion of counsel is provided stating that such transfer
is not in violation of any applicable law or regulation, may be
stamped on the certificates representing such shares in order to
assure an exemption from registration. The Plan Administrator also
may require such other documentation as may from time to time be
necessary to comply with federal and state securities laws. THE
COMPANY HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR
THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF OPTIONS.
(2) The Holder shall pay to the Company by certified or cashier's
check, promptly upon exercise of an Option or, if later, the date
that the amount of such obligations becomes determinable, all
applicable federal, state, local and foreign withholding taxes that
the Plan Administrator, in its discretion, determines to result
upon exercise of an Option or from a transfer or other disposition
of shares of Common Stock acquired upon exercise of an Option or
otherwise related to an Option or shares of Common Stock acquired
in connection with an Option. Upon approval of the Plan
Administrator, a Holder may satisfy such obligation by complying
with one or more of the following alternatives selected by the Plan
Administrator:
(A) by delivering to the Company shares of Common Stock previously
held by such Holder or by the Company withholding shares of Common
Stock otherwise deliverable pursuant to the exercise of the Option,
which shares of Common Stock received or withheld shall have a fair
market value at the date of exercise (as determined by the Plan
Administrator) equal to the tax obligation to be paid by the
Optionee upon such exercise; provided that if the Holder is an
Insider or if beneficial ownership of the shares issuable upon
exercise of the Option is attributable to an Insider pursuant to
the regulations under Section 16 of the Exchange Act, the Holder
will have executed, by a date not later than six (6) months prior
to the date of exercise, an irrevocable election to satisfy its
obligations under this Paragraph 2 through the Company withholding
shares of Common Stock otherwise deliverable pursuant to the
exercise of the Option;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Company to
pay the withholding taxes due under this Paragraph 2, with such
repayment terms as the Plan Administrator shall select;or
(C) by complying with any other payment mechanism approved by the
Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common
Stock pursuant to the exercise of Options may be delayed, at the
discretion of the Plan Administrator, until the Plan Administrator
is satisfied that the applicable requirements of the federal and
state securities laws and the withholding provisions of the Code
have been met.
(m) Stock Dividend, Reorganization or Liquidation.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any
successor provision) or any "corporate transaction" described
in the regulations thereunder; (ii) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common
Stock or (iii) any other event with substantially the same effect
shall occur, the Plan Administrator shall, with respect to each
outstanding Option, proportionately adjust the number of shares of
Common Stock subject to such Option and/or the exercise price per
share so as to preserve the rights of the Holder substantially
proportionate to the rights of the Holder prior to such event,
and to the extent that such action shall include an increase or
decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section
4 of this Plan and the number of shares of Common Stock underlying
Options to be granted pursuant to Section 6 hereof shall
automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Plan
Administrator, the Company, the Company's shareholders, or any
Holder.
(2) If the Company shall at any time declare an extraordinary
dividend with respect to the Common Stock, whether payable in cash
or other property, the Plan Administrator may, in the exercise of
its sole discretion and with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock subject
to such Option and/or adjust the exercise price per share so as to
preserve the rights of the Holder substantially proportionate to
the rights of the Holder prior to such event, and to the extent
that such action shall include an increase or decrease in the
number of shares of Common Stock subject to outstanding Options,
the number of shares available under Section 4 of this Plan and the
number of shares of Common Stock underlying Options to be granted
pursuant to Section 6 hereof shall automatically be increased or
decreased, as the case may be, proportionately, without further
action on the part of the Plan Administrator, the Company, the
Company's shareholders, or any Holder.
(3) If the Company is liquidated or dissolved, the Plan
Administrator may allow the Holders of any outstanding Options to
exercise all or any part of the unvested portion of the Options
held by them; provided, however, that such Options must be
exercised prior to the effective date of such liquidation or
dissolution. If the Holders do not exercise their Options prior to
such effective date, each outstanding Option shall terminate as of
the effective date of the liquidation or dissolution.
(4) The foregoing adjustments in the shares subject to Options
shall be made by the Plan Administrator, or by any successor
administrator of this Plan, or by the applicable terms of any
assumption or substitution document.
(5) The grant of an Option shall not affect in any way the right
or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to
merge, consolidate or dissolve, to liquidate or to sell or transfer
all or any part of its business or assets.
(n) Change in Control
(1) Any and all Options that are outstanding under the Plan at the
time of occurrence of any of the events described in Subparagraphs
(A), (B), (C) and (D) below (an "Eligible Option") shall become
immediately vested and fully exercisable for the periods indicated
(each such exercise period referred to as an "Acceleration
Window"):
(A) For a period of forty-five (45) days beginning on the day on
which any Person together with all Affiliates and Associates (as
such terms are defined below) of such Person shall become the
Beneficial Owner (as defined below) of twenty-five percent (25%) or
more of the shares of Common Stock then outstanding, but shall not
include the Corporation, any subsidiary of the Corporation, any
employee benefit plan of the Corporation or of any subsidiary of
the Corporation, or any Person or entity organized, appointed or
established by the Corporation for or pursuant to the terms of any
such employee benefit plan;
(B) Beginning on the date that a tender or exchange offer for
Common Stock by any Person (other than the Corporation, any
subsidiary of the Corporation, any employee benefit plan of the
Corporation or of any subsidiary of the Corporation, or any Person
or entity organized, appointed or established by the Corporation
for or pursuant to the terms of any such employee benefit plan) is
first published or sent or given within the meaning of Rule 14d-2
under the Exchange Act and continuing so long as such offer remains
open (including any extensions or renewals of such offer), unless
by the terms of such offer the offeror, upon consummation thereof,
would be the Beneficial Owner of less than thirty percent (30%) of
the shares of Common Stock then outstanding;
(C) For a period of twenty (20) days beginning on the day on which
the shareholders of the Corporation (or, if later, approval by the
shareholders of any Person) duly approve any merger, consolidation,
reorganization or other transaction providing for the conversion or
exchange of more than fifty percent (50%) of the outstanding shares
of Common Stock into securities of any Person, or cash, or
property, or a combination of any of the foregoing; or
(D) For a period of twenty (20) days beginning on the day on
which, at any meeting of the shareholders of the Company involving
a contest for the election of directors, individuals constituting
a majority of the Board of Directors who were not the Board of
Director's nominees for election immediately prior to the meeting
are elected; provided, however, that with respect to the events
specified in Subparagraphs (A), (B) and (C) above, such accelerated
vesting shall not occur if the event that would otherwise trigger
the accelerated vesting of Eligible Options has received the prior
approval of a majority of all of the directors of the Corporation,
excluding for such purposes the votes of directors who are
directors or officers of, or have a material financial interest in
any Person (other than the Corporation) who is a party to the event
specified in Subparagraph (A), (B) or (C) above which otherwise
would trigger acceleration of vesting and provided, further, that
no Option which is to be converted into an option to purchase
shares of Exchange Stock as stated at item (3) below shall be
accelerated pursuant to this Section 5(n).
(2) The exercisability of any Eligible Option which remains
unexercised following expiration of an Acceleration Window shall be
governed by the vesting schedule and other terms of the Agreement
representing such Option.
(3) If the shareholders of the Corporation receive shares of
capital stock of another Person ("Exchange Stock") in exchange for
or in place of shares of Common Stock in any transaction involving
any merger, consolidation, reorganization or other transaction
providing for the conversion or exchange of all or substantially
all outstanding shares of Common Stock into Exchange Stock, then at
the closing of such transaction all Options granted hereunder shall
be converted into options to purchase shares of Exchange Stock
unless the Corporation (by the affirmative vote of a majority of
all of the directors of the Corporation, excluding for such
purposes the votes of directors who are directors or officers of,
or have a material financial interest in the Person issuing the
Exchange Stock and any Affiliate of such Person), in its sole
discretion, determines that any or all such Options granted
hereunder shall not be so converted but instead shall terminate.
The amount and price of converted Options shall be determined by
adjusting the amount and price of the Options granted hereunder in
the same proportion as used for determining the shares of Exchange
Stock the holders of the Common Stock received in such merger,
consolidation, reorganization or other transaction. Unless altered
by the Plan Administrator, the vesting schedule set forth in the
Option Agreement shall continue to apply to the Options granted for
Exchange Stock. For the purposes of this Subsection 5(n): (i)
"Person" shall include any individual, firm, corporation,
partnership or other entity; (ii) "Affiliate" and "Associate" shall
have the meanings assigned to them in Rule 12b-2 under the Exchange
Act; and (iii) "Beneficial Owner" shall have the meaning assigned
to it in Rule 16a-1 under the Exchange Act.
6. NON-EMPLOYEE DIRECTORS.
Directors who are not also employees of the Company ("Non-Employee
Directors") shall be eligible to receive options under the Plan
only in accordance with the terms and conditions of this Section 6.
(a) Number of Shares and Date of Grant
Concurrent with election to the Board of Directors, and so long as
shares are available for grant pursuant to Section 4, each
Non-Employee Director shall automatically receive an option to
purchase 2,500 shares of Common Stock, subject to adjustment as set
forth in Section 5(m) hereof. Every first Wednesday in May for so
long as shares are available for grant pursuant to Section 4, each
Non-Employee Director who was a director of the Company as of
December 31 of the immediately preceding year shall receive an
additional option to purchase 2,500 shares of Common Stock, subject
to adjustment as set forth in Section 5(m) hereof. In addition,
each Non-Employee Director holding office on the date of approval
of this Plan by the Company's shareholders shall receive an option
(a "Recognition Option") to purchase up to the number of shares of
Common Stock equal to the product of (x) 2,500, multiplied by (y)
the number of complete years of continuous service of such person
as a Non-Employee Director, subject to adjustment as set forth in
Section 5(m) hereof. Options granted pursuant to this Section 6
shall be Non-Qualified Stock Options.
(b) Option Price
The exercise price of Options granted under this Section 6 shall be
the fair market value of the Company's Common Stock on the Date of
Grant. For the purposes of this Section, the term "fair market
value" on any given day means: (i) if the Common Stock is listed
on a national securities exchange, the average of the high and low
prices of the Common Stock of the Company on such exchange; or (ii)
if the Common Stock is quoted in the over-the-counter securities
market, the last sale price of the Common Stock as quoted by NASDAQ
National Market System or, if the Common Stock is not quoted in the
National Market System, the mean between the closing bid and asked
prices of Common Stock as quoted by NASDAQ.
(c) Vesting
In order to ensure that the Company will receive the benefits
contemplated in exchange for the Options, no Option granted under
this Section 6 shall be exercisable until it has vested. Options
(other than Recognition Options) shall vest and become exercisable
as follows: forty percent (40%) on the Date of Grant; thirty
percent (30%) on the first anniversary of the Date of Grant; and
thirty percent (30%) on the second anniversary of the Date of
Grant. Recognition Options shall vest according to the same
schedule but assuming that the Recognition Options had been granted
in annual increments of 2,500 shares beginning on the first
Wednesday in May of each of the calendar years following the
Optionee's initial election to the Board of Directors.
(d) Term of Option
Options shall terminate, to the extent not previously exercised,
upon the occurrence of the first of the following events:
(i) ten (10) years from the Date of Grant;
(ii) the expiration of ninety (90) days from the date of
Optionee's termination as a Director of the Company for any reason
other than death or Disability (as defined below); or
(iii) the expiration of one (1) year from the date of death of
Optionee or the cessation of Optionee's service as a Director by
reason of Disability (as defined below).
For purposes of this Section 6, unless otherwise defined in the
Agreement, "Disability" shall mean any physical, mental or other
health condition which substantially impairs the Optionee's ability
to perform his or her duties as a director of the Company for one
hundred twenty (120) days or more in any two hundred forty (240)
day period or that can be expected to result in death.
(e) Other Terms
Except as otherwise provided in this Section 6, all Options granted
to Non-Employee Directors shall be subject to the provisions of the
Plan, including Section 5.
(f) Amendments
The provisions of this Section 6 shall not be amended more than
once every six (6) months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules
thereunder.
7. EFFECTIVE DATE; TERM.
This Plan shall be effective as of February 15, 1995. Incentive
Stock Options may be granted by the Plan Administrator from time to
time thereafter until February 14, 2005. Non-Qualified Stock
Options may be granted until this Plan is terminated by the Board
in its sole discretion. Termination of this Plan shall not
terminate any Option granted prior to such termination. Any
Options granted by the Plan Administrator prior to the approval of
this Plan by the shareholders of the Company shall be granted
subject to ratification of this Plan by the shareholders of the
Company within twelve (12) months after this Plan is adopted by the
Board. The Plan Administrator may require any shareholder approval
that it considers necessary for the Company to comply with or to
avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or
regulatory requirement. If such shareholder ratification
is sought within twelve (12) months after this Plan is adopted by
the Board and such shareholder ratification is not obtained, each
and every Option granted under this Plan shall be null and void and
shall convey no rights to the Holder thereof.
8. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee
to exercise such Option.
9. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Except for the grant of options pursuant to Section 6 hereof,
whether or not any Options are to be granted under this Plan shall
be exclusively within the discretion of the Plan Administrator, and
nothing contained in this Plan shall be construed as giving any
person any right to participate under this Plan. The grant of an
Option shall in no way constitute any form of agreement or
understanding binding on the Company or any Related Company,
express or implied, that the Company or any Related Company will
employ or contract with an Optionee for any length of time, nor
shall it interfere in any way with the Company's or, where
applicable, a Related Company's right to terminate Optionee's
employment at any time, which right is hereby reserved.
10. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general
corporate purposes, unless otherwise directed by the Board.
11. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as
members of the Board, members of the Plan Administrator shall be
indemnified by the Company for all reasonable expenses and
liabilities of any type or nature, including attorneys' fees,
incurred in connection with any action, suit or proceeding to which
they or any of them are a party by reason of, or in connection
with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such
settlement is approved by independent legal counsel selected by the
Company), except to the extent that such expenses relate to matters
for which it is adjudged that such Plan Administrator member is
liable for willful misconduct; provided, that within fifteen (15)
days after the institution of any such action, suit or proceeding,
the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the
Company may have the opportunity to make appropriate arrangements
to prosecute or defend the same.
12. AMENDMENT OF PLAN.
Except as set forth in Section 6 hereof, the Plan Administrator
may, at any time, modify, amend or terminate this Plan or modify or
amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to
maintain compliance with applicable statutes, rules or regulations;
provided however, no amendment with respect to an outstanding
Option which has the effect of reducing the benefits afforded to
the Holder thereof shall be made over the objection of such Holder;
further provided, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or
eliminated without the consent of Holders. The Plan Administrator
may condition the effectiveness of any such amendment on the
receipt of shareholder approval at such time and in such manner as
the Plan Administrator may consider necessary for the Company to
comply with or to avail the Company and/or the Optionees of the
benefits of any securities, tax, market listing or other
administrative or regulatory requirement. Without limiting the
generality of the foregoing, the Plan Administrator may modify
grants to persons who are eligible to receive Options under
this Plan who are foreign nationals or employed outside the United
States to recognize differences in local law, tax policy or custom.
Date Approved by Board of Directors of Company: February 15, 1995.
Date Approved by Shareholders of Company: May 16, 1995.
EXHIBIT 10.27
CARVER CORPORATION
1995 STOCK BONUS PLAN
This 1995 Stock Bonus Plan (the "Plan") provides for the grant of
bonuses consisting of shares of common stock, $.01 par value (the
"Common Stock"), of Carver Corporation, a Washington corporation
(the "Company"). Bonuses granted under this plan shall be
Restricted Bonuses or Unrestricted Bonuses as defined in Section
5(a) of the Plan.
1. PURPOSES. The purposes of this Plan are to reward directors,
valued key employees and consultants of the Company and such other
persons as the Plan Administrator shall select in accordance with
Section 3 below for their services to the Company, to enable such
persons to acquire a greater proprietary interest in the Company,
thereby strengthening their incentive to achieve the objectives of
the shareholders of the Company, and to serve as an aid and
inducement in the hiring of new employees.
2. ADMINISTRATION. This Plan shall be administered by the Board
of Directors of the Company (the "Board") if each director is a
"disinterested person" (as defined below). If all directors are not
disinterested persons, the Plan shall be administered by a
committee designated by the Board and composed of two (2) or more
members of the Board who are disinterested persons, which committee
(the "Committee") may be an executive, compensation or other
committee, including a separate committee especially created for
this purpose. "Disinterested person" shall have the meaning
assigned to it under Rule 16b-3 (as amended from time to time)
promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor rule or regulatory
requirement ("Rule 16b-3"). The Committee shall have the powers
and authority vested in the Board hereunder (including the power
and authority to interpret any provision of this Plan or of any
Bonus). The members of any such Committee shall serve at the
pleasure of the Board. A majority of the members of the Committee
shall constitute a quorum, and all actions of the Committee shall
be taken by a majority of the members present. Any action may be
taken by a written instrument signed by all of the members of the
Committee and any action so taken shall be fully effective as if it
had been taken at a meeting. The Board, or any committee thereof
appointed to administer the Plan, is referred to herein as the
"Plan Administrator".
Subject to the provisions of this Plan, and with a view to
effecting its purpose, the Plan Administrator shall have sole
authority, in its absolute discretion, to (a) construe and
interpret this Plan; (b) define the terms used in this Plan; (c)
prescribe, amend and rescind rules and regulations relating to this
Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) determine the individuals to whom
Bonuses shall be granted under this Plan and whether the Bonus
shall be a Restricted Bonus or an Unrestricted Bonus; (f) determine
the time or times at which Bonuses shall be granted under this
Plan; (g) determine the number of shares of Common Stock covered by
each Bonus; (h) determine all other terms and conditions of
Bonuses; and (i) make all other determinations necessary or
advisable for the administration of this Plan. All decisions,
determinations and interpretations made by the Plan Administrator
shall be binding and conclusive on all participants in this Plan
and on their legal representatives, heirs and beneficiaries.
The Plan Administrator shall have no authority, discretion or power
to award bonuses hereunder to directors of the Company. Benefits
for such persons shall accrue solely in accordance with Section 6
hereof.
The Board or the Committee may delegate to one or more executive
officers of the Company the authority to grant Bonuses under this
Plan to employees of the Company who, on the Date of Grant, are not
subject to Section 16(b) of the Exchange Act with respect to the
Common Stock ("Non-Insiders"), and in connection therewith the
authority to determine the number of shares of Common Stock covered
by such Bonus and all other terms and conditions of such Bonuses.
Unless expressly approved in advance by the Board or the Committee,
such delegation of authority shall not include the authority to
alter the terms of outstanding Bonuses. The term "Plan
Administrator" when used in any provision of this Plan other than
Sections 2 and 12 shall be deemed to refer to the Board or the
Committee, as the case may be, and an executive officer who has
beenauthorized to grant Bonuses pursuant hereto, insofar as such
provision may be applied to Non-Insiders and Bonuses granted to
Non-Insiders.
3. ELIGIBILITY. Bonuses may be granted to any individual who, at
the time the Bonus is granted, is an employee of the Company or any
Related Corporation (as defined below), including employees who are
directors of the Company ("Employees"), and to such other persons
as the Plan Administrator shall select. Bonuses shall be granted
hereunder to directors who are not employees of the Company or any
Related Corporation, but solely on the terms and conditions set
forth in Section 6 hereof. During each calendar year of the term
of the Plan, no person shall be eligible to receive Bonuses
covering more than 100,000 shares of Common Stock (subject to
adjustment in the event of a stock split, stock dividend,
recapitalization, reorganization or similar event). Any person to
whom a Bonus is granted under this Plan is referred to as a
"Grantee".
As used in this Plan, the term "Related Corporation", shall mean
any corporation (other than the Company) that is a "Parent
Corporation" of the Company or "Subsidiary Corporation" of the
Company, as those terms are defined in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (or
any successor provisions) (the "Code"), and the regulations
thereunder (as amended from time to time).
4. STOCK. In each year during the term of the Plan, the Plan
Administrator is authorized to grant Bonuses to acquire an amount
of shares of the Company's authorized but unissued, or reacquired,
Common Stock equal in amount to one percent (1%) of the number of
issued and outstanding shares of Common Stock on the record date
for the meeting of shareholders of the Company at which this Plan
is approved, in the case of 1995, and on January 1 of each year
thereafter. The number of shares with respect to which Bonuses may
be granted in each year hereunder is subject to adjustment in the
event of a stock split, stock dividend, recapitalization,
reorganization or similar event. In the event that any outstanding
Bonus is forfeited for any reason, the shares of Common Stock
allocable to the forfeited portion of such Bonus may again be
subject to a Bonus to the same Grantee or to a different person
eligible under Section 3 of this Plan. Shares of Common Stock
granted to a Grantee pursuant to a Bonus are referred to herein as
"Bonus Shares".
5. TERMS AND CONDITIONS OF BONUSES.
(a) Grant of Bonus. The Plan Administrator may grant to a Grantee
(i) Bonus Shares subject to the restrictions described in Section
5(c) hereof (such grant a "Restricted Bonus" and such shares
"Restricted Bonus Shares"); or (ii) Bonus Shares which are not
subject to the restrictions described in Section 5(c) hereof (such
grant an "Unrestricted Bonus" and such shares "Unrestricted Bonus
Shares"). The Grantee shall pay no consideration for Restricted
Bonus Shares or Unrestricted Bonus Shares.
(b) Bonus Agreement. As soon as practicable after the date of a
Bonus grant, the Company and the Grantee shall enter into a written
agreement (a "Bonus Agreement") identifying the date of grant, and
specifying the terms and conditions of the Bonus. Any Bonus under
this Plan shall be governed by the terms of the Plan and the
applicable Bonus Agreement.
(c) Restricted Bonus Shares.
(i) Restrictions. Subject to the provisions of the Plan and the
Bonus Agreement, during the period (the "Restriction Period"), if
any, set by the Plan Administrator at the time of award of the
Bonus (the "Date of Grant"), commencing with, and not exceeding ten
(10) years from, the Date of Grant, the Grantee shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber
Restricted Bonus Shares. Within these limits, the Plan
Administrator may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions, in
whole or in part, based on service, performance or such other
factors or criteria as the Plan Administrator may determine.
(ii) Dividends on Restricted Bonus Shares. Unless otherwise
determined by the Plan Administrator, with respect to dividends on
Restricted Bonus Shares, dividends payable in cash shall be paid to
the Grantee and dividends payable in Common Stock shall be paid in
the form of Restricted Bonus Shares. The payment of share
dividends in additional Restricted Bonus Shares shall only be
permissible if sufficient shares of Common Stock are available
under Section 4 for such reinvestment.
(iii) Termination. Except to the extent otherwise provided in the
Bonus Agreement and pursuant to Section 5(c)(i), in the event the
Grantee ceases to be, for any reason, employed by, or a consultant
to, the Company or a Related Corporation (such event
a"Termination") during the Restriction Period, all Restricted Bonus
Shares then subject to restriction shall be forfeited by the
Grantee.
(iv) Escrow and Voting of Restricted Bonus Shares. As soon as
practicable following the Grant Date, the appropriate officers of
the Company shall prepare, issue and deliver certificate(s)
representing Restricted Bonus Shares to the Chief Financial Officer
or General Counsel of the Company (the "Administrative Executive")
to be held by such person in accordance with this paragraph. Any
grant of Resticted Bonus Shares under this Plan shall be made
conditioned on the Grantee's delivery to the Administrative
Executive of stock power(s) duly transferring ownership of the
Restricted Bonus Shares to the Company. The Administrative
Executive shall deliver the share certificate(s) and stock power(s)
to the Grantee only following the receipt of written certification
from the Plan Administrator that the Restricted Period relating to
the Restricted Bonus Shares has expired. Pending the delivery of
share certificates representing Restricted Bonus Shares to the
Grantee as provided in this paragraph 5(c)(iv) or the forfeiture of
such shares as provided in paragraph 5(c)(iii), the Grantee shall
be entitled to vote such shares.
(d) Performance Goals. Any Bonus may be granted either alone or
in addition to other Bonuses granted under the Plan. The Plan
Administrator may condition the grant of any Bonus upon the
attainment of specified performance goals or such other factors or
criteria, including continued employment or consulting, as the Plan
Administrator shall determine. Performance objectives may vary
from Grantee to Grantee and among groups of Grantees and shall be
based upon such Company, subsidiary, group or division factors or
criteria as the Plan Administrator may deem appropriate, including,
but not limited to, earnings per share or return on equity. The
other provisions of Bonuses also need not be the same with respect
to each recipient. Unless specified otherwise in the Plan or by
the Plan Administrator, the date of grant of a Bonus shall be the
date of action by the Plan Administrator to grant the Bonus.
(e) Right of Repurchase. At the option of the Plan Administrator,
Bonus Shares issued under this Plan may be subject to a right of
repurchase in favor of the Company upon Termination (as defined in
Section 5(c)(iii) hereof) of the Grantee. The terms and conditions
of such right of repurchase, if any, shall be set forth in the
Bonus Agreement.
(f) Securities Regulation and Tax Withholding.
(i) Bonus Shares shall not be issued with respect to a Bonus,
unless the grant of such Bonus and the issuance and delivery of
such Bonus Shares shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities
laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations thereunder and the requirements of any stock
exchange or quotation system upon which such Bonus Shares may then
be listed or quoted, and such issuance shall be further subject to
the approval of counsel for the Company with respect to such
compliance, including the availability of an exemption from
registration for the issuance of such Bonus Shares. The inability
of the Company to obtain from any regulatory body the authority
deemed by the Company to be necessary for the lawful issuance of
any Bonus Shares under this Plan, or the unavailability of an
exemption from registration for the issuance of any Bonus Shares
under this Plan, shall relieve the Company of any liability with
respect to the non-issuance of such Bonus Shares.
As a condition to the issuance of Bonus Shares, the Plan
Administrator may require the Grantee to represent and warrant in
writing at the time of such issuance that such Bonus Shares are
being acquired only for investment and without any then-present
intention to sell or distribute such Bonus Shares. At the option
of the Plan Administrator, a stop-transfer order against such Bonus
Shares may be placed on the stock books and records of the Company,
and a legend indicating that the Bonus Shares may not be pledged,
sold or otherwise transferred, unless an opinion of counsel is
provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates
representing such Bonus Shares in order to assure an exemption from
registration. The Plan Administrator also may require such other
documentation as may from time to time be necessary to comply with
federal and state securities laws. THE COMPANY HAS NO OBLIGATION
TO UNDERTAKE REGISTRATION OF BONUS SHARES.
(ii) The Grantee shall pay to the Company by certified or
cashier's check, promptly upon grant of a Bonus or, if later, the
date that the amount of such obligations becomes determinable (in
either case, the "Tax Date"), all applicable federal, state, local
and foreign withholding taxes that the Plan Administrator, in its
discretion, determines to result upon grant of a Bonus, lapse of
restrictions on transfer of Restricted Bonus Shares, transfer or
other disposition of Bonus Shares or otherwise related to a Bonus
or Bonus Shares. Upon approval of the Plan Administrator, a
Grantee may satisfy such obligation by complying with one or more
of the following alternatives selected by the Plan Administrator:
(A) by delivering to the Company shares of Common Stock previously
held by such Grantee or by the Company withholding Bonus Shares
otherwise issuable pursuant to the Bonus, which have a fair market
value at the Tax Date (as determined by the Plan Administrator)
equal to the tax obligation to be paid by the Grantee on such Tax
Date; provided, that if the Grantee is an Insider or if beneficial
ownership of Bonus Shares is attributable to an Insider pursuant to
the regulations under Section 16 of the Exchange Act, the Grantee
will have executed, by a date not later than six (6) months prior
to the Tax Date, an irrevocable election to satisfy its obligations
under this Paragraph (ii) through the Company withholding shares of
Common Stock otherwise deliverable pursuant to the Bonus;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Grantee borrows funds from the Company
to pay the withholding taxes due under this Paragraph (ii), with
such repayment terms as the Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved by the
Plan Administrator from time to time.
(iii) The issuance, transfer or delivery of certificates
representing Bonus Shares may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that
the applicable requirements of the federal and state securities
laws and the withholding provisions of the Internal Revenue Code
have been met.
(g) Adjustment of Bonuses; Waivers. The Plan Administrator may
adjust the restrictions, performance goals and measurements
applicable to Bonuses (i) to take into account changes in law and
accounting and tax rules; (ii) to make such adjustments as
the Plan Administrator deems necessary or appropriate to reflect
the inclusion or exclusion of the impact of extraordinary or
unusual items, events or circumstances in order to avoid windfalls
or hardships; and (iii) to make such adjustments as the Plan
Administrator deems necessary or appropriate to reflect any
material changes in business conditions. In the event of hardship
or other special circumstances of a Grantee and otherwise in its
discretion, the Plan Administrator may waive in whole or in part
any or all restrictions, conditions, vesting or forfeiture with
respect to any Bonus granted to such Grantee. The provisions of
this Section 5(g) shall not apply to Bonuses granted under Section
6 hereof.
(h) Non-Competition. The Plan Administrator, in addition to any
other requirement it may impose, may condition any discretionary
adjustment or waiver pursuant Section 5(g) hereof upon a Grantee's
agreement to (i) not engage in any business or activity competitive
with any business or activity conducted by the Company; and (ii) be
available for consultations at the request of the Company's
management, all on such terms and conditions (including conditions
in addition to (i) and (ii)) as the Plan Administrator may
determine.
(i) Rights as Shareholder. Unless the Plan or the Plan
Administrator expressly specifies otherwise, a Grantee shall have
no rights as a shareholder with respect to any Bonus Shares until
the issuance (as evidenced by the appropriate entry on the books of
the Company or a duly authorized transfer agent) of a certificate
representing the Bonus Shares. Subject to Sections 4 and 5(c)(ii),
no adjustment shall be made for dividends or other rights for which
the record date is prior to the date the certificate is issued.
(j) Beneficiary Designation. The Plan Administrator, in its
discretion, may establish procedures for a Grantee to designate a
beneficiary to whom any Bonus Shares issuable or amounts payable in
the event of the Grantee's death are to be issued or paid.
(k) Transfer Limitation on Stock. In addition to any other
transfer restrictions which may be imposed under the Plan or any
Bonus Agreement, a Grantee who is an Insider may not sell or
otherwise transfer, in whole or in part, any Bonus Shares prior to
the six-month anniversary of the issuance of such Bonus Shares,
unless the Plan Administrator determines that the foregoing
provisions are not necessary to make the transaction exempt from
Section 16(b) of the Exchange Act pursuant to Rule 16b-3.
6. NON-EMPLOYEE DIRECTORS. Directors who are not also employees
of the Company ("Non-Employee Directors") shall be eligible to
receive Bonuses under the Plan only in accordance with the terms
and conditions of this Section 6.
On each February 15, May 15, August 15 and November 15, following
shareholder approval of this Plan and for so long thereafter as
shares are available for grant pursuant to Section 4, each person
who served as a Non-Employee Director during the then most recently
completed calendar quarter shall receive 250 Bonus Shares. Any
person who served as a Non-Employee Director for less than the
entire quarter shall receive a pro-rated number of Bonus Shares
based on the number of days of service as a Non-Employee Director
during such quarter.
7. EFFECTIVE DATE; TERM. This Plan shall be effective as of
February 15, 1995. Bonuses may be granted by the Plan Administrator
from time to time thereafter until February 15, 2005, or until this
Plan is terminated by the Board in its sole discretion.
Termination of this Plan shall not terminate any Bonus granted
prior to such termination. No Bonuses shall be granted hereunder
to directors of the Company pursuant to Section 6 hereof or to
Insiders prior to the approval of this Plan by the shareholders of
the Company. The Plan Administrator may require any shareholder
approval that it considers necessary for the Company to comply with
or to avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or
regulatory requirement.
8. NO OBLIGATIONS TO ACCEPT BONUS SHARES. The grant of an Bonus
shall impose no obligation upon the Grantee to receive Bonus
Shares.
9. NO RIGHT TO BONUSES OR TO EMPLOYMENT. Except for the grant of
Bonuses pursuant to Section 6 hereof, whether or not any Bonuses
are to be granted under this Plan shall be exclusively within the
discretion of the Plan Administrator, and nothing contained in this
Plan shall be construed as giving any person any right to
participate under this Plan. The grant of a Bonus shall in no way
constitute any form of agreement or understanding binding on the
Company or any Related Corporation, express or implied, that the
Company or any Related Corporation will employ or contract with a
Grantee for any length of time, nor shall it interfere in any way
with the Company's or, where applicable, a Related Corporation's
right to terminate a Grantee's employment at any time, which right
is hereby reserved.
10. RULE 16b-3. With respect to Insiders, transactions under this
Plan are intended to comply with the applicable conditions of Rule
16b-3. To the extent any provision of this Plan or action by the
Plan Administrator fails to so comply, it shall be adjusted to
comply with Rule 16b-3 to the extent permitted by law and deemed
advisable by the Plan Administrator. It shall be the
responsibility of Insiders and not of the Company or the Plan
Administrator, to comply with the requirements of Section 16 of the
Exchange Act; and neither the Company nor the Plan Administrator
shall be liable if this Plan or any transaction under this Plan
fails to comply with the applicable conditions of Rule 16b-3,
or if any Insider incurs any liability under Section 16 of the
Exchange Act.
11. INDEMNIFICATION OF PLAN ADMINISTRATOR. In addition to all
other rights of indemnification they may have as members of the
Board, members of the Plan Administrator shall be indemnified by
the Company for all reasonable expenses and liabilities of any type
or nature, including attorneys' fees, incurred in connection with
any action, suit or proceeding to which they or any of them are a
party by reason of, or in connection with, this Plan or any Bonus
granted under this Plan, and against all amounts paid by them in
settlement thereof (provided that such settlement is approved by
independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is
adjudged that such Plan Administrator member is liable for willful
misconduct; provided, that within fifteen (15) days after the
institution of any such action, suit or proceeding, the Plan
Administrator member involved therein shall, in writing, notify the
Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute
or defend the same.
12. AMENDMENT OF PLAN. Except as set forth in Section 6 hereof,
the Plan Administrator may, at any time, modify, amend or terminate
this Plan or modify or amend Bonuses granted under this Plan,
including, without limitation, such modifications or amendments as
are necessary to maintain compliance with applicable statutes,
rules or regulations; provided, however, no amendment with respect
to an outstanding Bonus which has the effect of reducing the
benefits afforded to the Grantee thereof shall be made over the
objection of such Grantee. The Plan Administrator may condition
the effectiveness of any such amendment on the receipt of
shareholder approval at such time and in such manner as the Plan
Administrator may consider necessary for the Company to comply with
or to avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or
regulatory requirement. Without limiting the generality of the
foregoing, the Plan Administrator may modify grants to persons who
are eligible to receive Bonuses under this Plan who are foreign
nationals or employed outside the United States to recognize
differences in local law, tax policy or custom.
13. UNFUNDED STATUS OF PLAN. The Plan shall constitute an
"unfunded" plan for incentive compensation. The Plan Administrator
may authorize the creation of trusts or arrangements to meet the
obligations created under the Plan to deliver Stock or make
payments; provided, however, that unless the Plan Administrator
otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the
Plan.
Date Approved by Board of Directors of Company: February 15, 1995.
Date Approved by Shareholders of Company: May 16, 1995.
EXHIBIT 11
CARVER CORPORATION AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
PRIMARY EARNINGS PER
SHARE NET LOSS $(1,303,000)$(948,000) $(1,935,000)$(1,492,000)
Weighted avg no.
outstanding shares 3,679,107 3,677,771 3,678,891 3,677,664
Add shares issuable from
the assumed exercise
of options * * * *
Weighted average number
outstanding shares
as adjusted 3,679,107 3,677,771 3,678,891 3,677,664
LOSS PER SHARE $ (0.35) $ (0.26) $ (0.53) $ (0.41)
*Effect on loss per share is antidilutive
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Jun-30-1995
<CASH> 105
<SECURITIES> 5
<RECEIVABLES> 3283
<ALLOWANCES> 219
<INVENTORY> 6963
<CURRENT-ASSETS> 10693
<PP&E> 4931
<DEPRECIATION> 2521
<TOTAL-ASSETS> 14366
<CURRENT-LIABILITIES> 4907
<BONDS> 0
<COMMON> 37
0
0
<OTHER-SE> 8567
<TOTAL-LIABILITY-AND-EQUITY> 8604
<SALES> 10161
<TOTAL-REVENUES> 10161
<CGS> 8273
<TOTAL-COSTS> 12096
<OTHER-EXPENSES> 253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192
<INCOME-PRETAX> (1935)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1935)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
</TABLE>
