SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19867
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ESKIMO PIE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0571720
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
901 Moorefield Park Drive
Richmond, VA 23236
(Address of principal executive offices, including zip code)
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Registrant's phone number, including area code:
(804) 560-8400
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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 ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1998.
Class Outstanding at April 30, 1998
----- -----------------------------
Common Stock, $1.00 Par Value 3,458,001
<PAGE>
ESKIMO PIE CORPORATION
Index
Page
Number
------
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997 1
Condensed Consolidated Balance Sheets
March 31, 1998; December 31, 1997 and March 31, 1997 2
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
<TABLE>
ESKIMO PIE CORPORATION
Condensed Consolidated Statements of Income (Unaudited)
<CAPTION>
For the three months ended March 31, 1998 1997
--------------------------------------------------------------------------------------- ------------------- -----------------
(In thousands, except Per Share Data)
<S> <C>
Net sales $ 16,031 $ 18,078
Cost of products sold 9,501 10,589
------------------- -----------------
Gross profit 6,530 7,489
Advertising and sales promotion expenses 3,662 4,482
Selling, general and administrative expenses 2,418 2,789
------------------- -----------------
Operating income 450 218
Interest income 61 41
Interest expense and other - net 192 174
------------------- -----------------
Income before income taxes 319 85
Income tax expense 118 32
------------------- -----------------
Net income $ 201 $ 53
=================== =================
Per Share Data
Basic:
Weighted average number of common shares outstanding 3,458,002 3,450,684
Net income $ 0.06 $ 0.02
=================== =================
Assuming dilution:
Weighted average number of common shares outstanding 3,463,107 3,452,467
Net income $ 0.06 $ 0.02
=================== =================
Cash dividend $ 0.05 $ 0.05
=================== =================
1
<PAGE>
ESKIMO PIE CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
<CAPTION>
March 31, December 31, March 31,
As of 1998 1997 1997
- ----------------------------------------------------------------------------- ---------------- ----------------- ---------------
(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents $ 1,830 $ 3,353 $ 1,139
Receivables 8,880 5,321 9,053
Inventories 4,762 4,342 6,499
Prepaid expenses 1,293 1,617 1,639
---------------- ----------------- ---------------
Total current assets 16,765 14,633 18,330
Property, plant and equipment - net 7,901 7,892 8,696
Goodwill and other intangibles 17,433 17,588 17,837
Other assets 1,417 1,467 1,568
---------------- ----------------- ---------------
Total assets $ 43,516 $ 41,580 $ 46,431
================ ================= ===============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 4,087 $ 3,386 $ 4,759
Accrued advertising and promotion 2,784 1,389 3,446
Accrued compensation and related amounts 442 530 435
Other accrued expenses 932 698 862
Current portion of long term debt 1,317 1,317 944
---------------- ----------------- ---------------
Total current liabilities 9,562 7,320 10,446
Long term debt 4,889 5,218 6,206
Convertible subordinated notes 3,800 3,800 3,800
Postretirement benefits and other liabilities 3,146 3,161 3,504
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares
authorized, none issued and outstanding - - -
Common stock, $1.00 par value; 10,000,000 shares
authorized, 3,458,002 issued and outstanding in 1998 and
at December 31,1997 and 3,457,573 at March 31, 1997 3,458 3,458 3,458
Additional capital 4,361 4,353 4,283
Retained earnings 14,300 14,270 14,734
---------------- ----------------- ---------------
Total shareholders' equity 22,119 22,081 22,475
---------------- ----------------- ---------------
Total liabilities and shareholders' equity $ 43,516 $ 41,580 $ 46,431
================ ================= ===============
2
<PAGE>
ESKIMO PIE CORPORATION
Condensed Consolidated Statements Of Cash Flows (Unaudited)
<CAPTION>
For the three months ended March 31, 1998 1997
- ------------------------------------------------------------------------------------------ ------------------- ------------------
(In thousands)
Operating activities
Net income $ 201 $ 53
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 626 649
Change in deferred income taxes and other assets (80) (17)
Change in postretirement benefits and other liabilities (70) 88
Change in receivables (3,559) (5,002)
Change in inventories and prepaid expenses (96) 1,758
Change in accounts payable and accrued expenses 2,244 738
------------------- ------------------
Net cash used in operating activities (734) (1,733)
Investing activities
Capital expenditures (376) (348)
Other 87 100
------------------- ------------------
Net cash used in investing activities (289) (248)
Financing activities
Borrowings - 1,150
Principal payments on long term debt (329) -
Cash dividends (171) (173)
------------------- ------------------
Net cash (used in) provided by financing activities (500) 977
------------------- ------------------
Change in cash and cash equivalents (1,523) (1,004)
Cash and cash equivalents at the beginning of the year 3,353 2,143
------------------- ------------------
Cash and cash equivalents at the end of the quarter $ 1,830 $ 1,139
=================== ==================
</TABLE>
3
<PAGE>
<TABLE>
ESKIMO PIE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation of the
Company's financial position as of March 31, 1998 and its results of operations
for the three months ended March 31, 1998 and 1997. The results of operations
for any interim period are not necessarily indicative of results for the full
year. These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's 1997 Annual
Report.
NOTE B - INVENTORIES Inventories are classified as follows:
<CAPTION>
<S> <C>
- ------------------------------------------------ -------------------------- ------------------------ -----------------------
As of March 31, 1998 December 31, 1997 March 31, 1997
- ------------------------------------------------ -------------------------- ------------------------ -----------------------
(In thousands)
Finished goods $ 2,562 $ 2,943 $ 4,491
Raw materials and packaging supplies 3,131 2,330 3,059
---------- --------- ----------
Total FIFO inventories 5,693 5,273 7,550
LIFO reserves (931) ( 931) (1,051)
---------- --------- ----------
$ 4,762 $ 4,342 $ 6,499
========== ========= ==========
- ------------------------------------------------ -------------------------- ------------------------ -----------------------
</TABLE>
NOTE C - CONVERTIBLE SUBORDINATED NOTES
The Company's convertible subordinated notes mature in February 1999 if not
previously converted to common stock. These notes remain classified with long
term debt in accordance with the Company's intention and ability to refinance
the notes on a long term basis (through April 2000) under the available $10
million committed line of credit.
4
<PAGE>
<TABLE>
NOTE D - EARNINGS PER SHARE
The following table sets forth the computation of earnings per share:
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------- ------------------------ ----------------------
For the three months ended March 31, 1998 1997
- ---------------------------------------------------------------------------- ------------------------ ----------------------
Net income $ 201,000 $ 53,000
Reversal of interest expense from convertible subordinated
notes (after tax) - -
--------- ----------
Net income assuming potential dilution $ 201,000 $ 53,000
========= ==========
Weighted average number of common shares outstanding 3,458,002 3,450,684
Effect of dilutive securities:
Stock options 5,105 1,783
Convertible subordinated notes - -
Weighted average number of common shares outstanding assuming
potential dilution 3,463,107 3,452,467
========= =========
Basic earnings per share $0.06 $0.02
===== =====
Earnings per share - assuming dilution $0.06 $0.02
===== =====
- ---------------------------------------------------------------------------- ------------------------ ----------------------
</TABLE>
Options to purchase 202,316 shares in 1998 and 170,339 in 1997 were not
considered for their dilutive effect because the exercise price of the options
exceeded the average market price for the respective year, and as such, the
effect would be anti-dilutive. The effect of the assumed conversion of the
convertible subordinated notes was also excluded from the earnings per share
calculations as the assumed conversion would also have been anti-dilutive.
5
<PAGE>
ESKIMO PIE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Eskimo Pie Corporation markets and manufactures through its own plants
and licensed dairies a broad range of frozen novelties, frozen yogurt, ice cream
and sorbet products under the Eskimo Pie, RealFruit, Welch's, Weight Watchers,
SnackWell's and OREO brand names. The Company also continues to manufacture
ingredients and packaging for sale to the dairy industry.
RESULTS OF OPERATIONS
Net Sales and Gross Profit
- --------------------------
First quarter 1998 sales of $16.0 million were consistent with
management's expectations although below 1997 results by approximately 11.3%.
The decline in revenues reflects the continued weakness of the Snackwell's and
RealFruit brands which accounted for approximately half of the decline.
Unusually poor weather in the Western United States resulted in a 10% decline in
consumer purchases of frozen novelty products in that region, as compared to
1997, according to Information Resources, Inc. The reduced consumption led to
lower volume sales of the Company's licensed brands.
Gross profit, as a percent of sales, decreased to 40.7% for the first
quarter of 1998 as compared with 41.4% in 1997. This decline is entirely
attributable to the change in product mix which included a lower percentage of
licensed brand sales in 1998 than in 1997.
The regional product introductions and expanded distribution included in
the Company's 1998 sales plan is not expected to be fully in place until the
retail trade completes their ice cream case resets in the late Spring. As such,
the benefits anticipated from 1998 plan initiatives are not expected until the
second and third quarters of the year when these products are made available to
consumers.
Expenses and Other Income
- -------------------------
Advertising and sales promotion expenses declined by $820,000, as
compared with 1997, in response to a change in the Company's promotional
spending pattern. The 1998 marketing plan calls for heavier "in-season"
promotional support as compared with the 1997 plan which included an emphasis on
"pre-season" spending in an attempt to renew interest in the Company's core
licensed brands business in response to the general business decline of 1996.
Although total 1998 spending is planned to approximate 1997 spending, the
spending will begin later and continue through the selling season.
Selling, general and administrative expenses were reduced by $371,000
(13.3%) from the first quarter of 1997. Savings continue to be realized from
management's initiatives to control these costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remains strong. The net cash used in
operations is consistent with historical seasonal working capital requirements
and its current ratio is consistent with prior years. The Company believes that
the annual cash generated from operations and funds available under its credit
agreements will provide the Company with sufficient funds and the financial
flexibility to support its ongoing business, strategic objectives and debt
repayment requirements.
6
<PAGE>
On May 6, 1998, the Board of Directors declared a quarterly cash dividend
of $.05 per share, payable July 2, 1998, to Shareholders of Record on June 12,
1998. While the Company anticipates a regular quarterly dividend, the amount and
timing of any future dividends will depend on the general business conditions
encountered by the Company, as well as the financial condition, earnings and
capital requirements of the Company and other factors deemed relevant by the
Board of Directors.
7
<PAGE>
PART II, OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
10.1 Eskimo Pie Corporation 1996 Incentive Stock Plan, as
amended effective March 6, 1998, filed herewith.
27. Financial Data Schedules, filed herewith.
b. Reports on Form 8-K: None
8
<PAGE>
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.
ESKIMO PIE CORPORATION
Date: May 14, 1998 By /s/ David B. Kewer
-------------------
David B. Kewer
President and Chief Executive Officer
Date: May 14, 1998 By /s/ Thomas M. Mishoe, Jr.
--------------------------
Thomas M. Mishoe, Jr.
Chief Financial Officer, Vice President,
Treasurer and Corporate Secretary
Date: May 14, 1998 By /s/ William T. Berry, Jr.
--------------------------
William T. Berry, Jr.
Assistant Vice President, Controller
9
EXHIBIT 10.1
ESKIMO PIE CORPORATION
1996 INCENTIVE STOCK PLAN
(As Amended effective March 6, 1998)
ARTICLE I
Establishment, Purpose, and Duration
1.1 Establishment of the Plan. Eskimo Pie Corporation, hereby
establishes an incentive compensation plan to be known as the "1996 Incentive
Stock Plan", as set forth in this document. Unless otherwise defined herein, all
capitalized terms shall have the meanings set forth in Section 2.1 herein. The
Plan permits the grant of Incentive Stock Options, Non-qualified Stock Options,
Stock Appreciation Rights and Stock Awards.
The Plan was adopted by the Board of Directors on, and shall become
effective, as of February 23, 1996 (the "Effective Date"), subject to the
approval by vote of shareholders of the Company in accordance with applicable
laws. Awards may be granted prior to shareholder approval of the Plan, but each
such Award shall be subject to the approval of the Plan by the shareholders.
1.1 Purpose of the Plan. The purpose of the Plan is to promote the
success of the Company and its Subsidiaries by providing incentives to Key
Employees that will promote the identification of their personal interest with
the long-term financial success of the Company and with growth in shareholder
value. The Plan is designed to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of Key Employees upon whose
judgment, interest, and special effort the successful conduct of its operation
is largely dependent. The Plan is also intended to promote a greater identity of
interest between Non-Employee Directors and the Company's shareholders by
increasing the Non-Employee Director's proprietary interest in the Company
through receipt of Awards in lieu of cash payments for a portion of each
Non-Employee Director's fees.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant
to Article 13 herein, until February 23, 2006 (the "Term"), at which time it
shall terminate except with respect to Awards made prior to, and outstanding on,
that date which shall remain valid in accordance with their terms.
ARTICLE II.
Definitions
2.1 Definitions. Except as otherwise defined in the Plan, the following
terms shall have the meanings set forth below:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(b) "Agreement" means a written agreement implementing the
grant of each Award signed by an authorized officer of the Company and by the
Participant.
(c) "Automatic Grant Date" means the first business day after
the annual meeting of stockholders of the Company of each year during the Term.
(d) "Award" means, individually or collectively, a grant under
this Plan of Automatic Options, Automatic Restricted Stock Awards,
Incentive Stock Options, Non-qualified Stock Options, Stock
Appreciation Rights, Stock Awards and Stock Payment Awards. Automatic
Options and Automatic Restricted Stock Awards are collectively referred
to as "Automatic Awards."
(e) "Award Date" or "Grant Date" means the date on which an
Award is made by the Committee under this Plan.
(f) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act.
(g) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(h) "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(1) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Common
Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled
to vote generally in the election of directors (the
"Outstanding Voting Securities"). Notwithstanding the
foregoing, the following acquisitions shall not
constitute a Change in Control: (A) any acquisition
directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by, or benefit
distribution from, any employee benefit plan (or
related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, (D) any
acquisition pursuant to any compensatory stock option
or stock purchase plan for employees, or (E) any
acquisition pursuant to a reorganization, merger or
consolidation, if, following such reorganization,
merger or consolidation, the conditions described in
clauses (A), (B), and (C) of Subsection (3) of this
Section 2.1(h) are satisfied; or
(2) Individuals who, as of the Effective Date hereof,
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of
the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date
whose election or nomination for election was
approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall
be considered as though such individual were a member
of the Incumbent Board (with his predecessor
thereafter ceasing to be a member); or
(3) Approval by the shareholders of the Company of
the reorganization, merger, or consolidation of the
Company unless, following such reorganization,
merger, or consolidation, (A) more than 60% of the
then outstanding shares of common stock and the then
outstanding voting securities of the resulting
corporation is then beneficially owned by all or
substantially all of the beneficial owners,
respectively, of the Outstanding Common Stock and
Outstanding Securities immediately prior to such
reorganization, merger, or consolidation, (B) no
Person (excluding (I) the Company, (II) any employee
benefit plan (or related trust) of the Company or
such corporation resulting from such reorganization,
merger, or consolidation, and (III) any Person
beneficially owning, immediately prior to such
reorganization, merger, or consolidation, 20% or more
of the Outstanding Common Stock or Outstanding Voting
Securities, as the case may be) beneficially owns 20%
or more of the then outstanding shares of common
stock or the combined voting power of the then
outstanding voting securities of the resulting
corporation, and (C) at least a majority of the
members of the board of directors of the resulting
corporation were members of the Incumbent Board at
the time of the execution of the initial agreement
providing for such reorganization, merger, or
consolidation; or
(4) Approval by the shareholders of the Company of
(A) a complete liquidation or dissolution of the
Company, or (B) the sale or other disposition of all
or substantially all of the assets of the Company
other than to a corporation with respect to which,
following such sale or other disposition, (I) more
than 60% of the outstanding shares of common stock
and the then outstanding voting securities of such
corporation is beneficially owned by all or
substantially all of the beneficial owners,
respectively, of the Outstanding Common Stock and
Outstanding Voting Securities immediately prior to
such sale or disposition; (II) no Person (excluding
(x) the Company , (y) any employee benefit plan (or
related trust) of the Company or such corporation,
and (z) any Person beneficially owning, immediately
prior to such sale or other disposition, 20% or more
of the Outstanding Common Stock or Outstanding Voting
Securities, as the case may be) beneficially owns 20%
or more of the then outstanding shares of common
stock or the combined voting power of the then
outstanding voting securities of such corporation,
and (III) at least a majority of the members of the
board of directors of such corporation were members
of the Incumbent Board at the time of the execution
of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(j) "Committee" means the committee of the Board appointed to
administer the Plan pursuant to Article 3 herein, all of the members of
which shall be "disinterested persons" as defined in Rule 16b-3, as
amended, under the Exchange Act or any similar or successor rule and
"outside directors" within the meaning of Section 162(m)(4)(C)(i) of
the Code, as amended.
(k) "Company" means Eskimo Pie Corporation, or any successor
thereto as provided in Article 14 herein.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Fair Market Value" of a Share means (i) with respect to
Awards other than Stock Payment Awards, the mean between the high and
low sales price of the Stock on the relevant date if it is a trading
date, or if not, on the most recent date on which the Stock was traded
prior to such date, as reported by NASDAQ National Market System, or
if, in the opinion of the Committee, this method is inapplicable or
inappropriate for any reason, the fair market value as determined
pursuant to a reasonable method adopted by the Committee in good faith
for such purpose and (ii) with respect to Stock Payment Awards, the
average annual closing sale price of the Stock based upon the closing
sales price of the Stock, as reported by the NASDAQ National Market
System, for all trading dates from the beginning of the relevant
calendar year up through and including the Determination Date (as
defined in Section 9.3).
(n) "Incentive Stock Option" or "ISO" means an option to
purchase Stock, granted under Article 6 herein, which is designated as an
incentive stock option and is intended to meet the requirements of Section 422
of the Code.
(o) "Key Employee" means an officer or other key employee of
the Company or its Subsidiaries, who, in the opinion of the Committee,
can contribute significantly to the growth and profitability of, or
perform services of major importance to, the Company and its
Subsidiaries. "Key Employee" does not include Non-Employee Directors.
(p) "Non-Employee Director" means (i) with respect to
Automatic Awards an individual who is a member of the Board on the
applicable Automatic Grant Date and who is not an employee of the
Company or a Subsidiary and (ii) with respect to Stock Payment Awards
an individual who is a member of the Board at any time during the
calendar year and who is not an employee of the Company or Subsidiary.
(q) "Non-qualified Stock Option" or "NQSO" means an option to
purchase Stock, granted under Article 6 or Article 9 herein, which is not
intended to be an Incentive Stock Option.
(r) "Option" means an Incentive Stock Option or a
Non-qualified Stock Option.
(s) "Participant" means a Key Employee or Non-Employee
Director who is granted or receives an Award under the Plan.
(t) "Performance Criteria" means one or more specified
performance goals, which may be stated in terms of the value of the
Common Stock, return on equity, earnings per share, total earnings,
earnings growth, return on assets or return on capital, with respect to
awards of Restricted Stock pursuant to Article 8.
(u) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is restricted, pursuant to Article 8 or
Article 9 herein.
(v) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d).
(w) "Plan" means the Eskimo Pie Corporation 1996 Incentive
Stock Plan, as described herein and as hereafter from time to time amended.
(x) "Related Option" means an Option with respect to which a
Stock Appreciation Right has been granted.
(y) "Restricted Stock" means a Stock Award which is subject to
a Period of Restriction and/or satisfaction of Performance Criteria granted to a
Participant pursuant to Article 8 or Article 9 herein.
(z) "Restrictions" means any applicable Period of Restriction
and/or Performance Criteria with respect to Shares of Restricted Stock.
(aa) "Stock" or "Shares" means the Common Stock of the
Company.
(bb) "Stock Appreciation Right" or "SAR" means an Award,
designated as a stock appreciation right, granted to a Participant pursuant to
Article 7 herein.
(cc) "Stock Payment Awards" means an award of Stock made to a
Non-Employee Director in payment of director fees (retainer and meeting
attendance fees) in accordance with the formula and other provisions established
in Section 9.3 herein.
(dd) "Stock Awards" means an award of Stock granted to a
Participant pursuant to Article 8 herein.
(ee) "Subsidiary" shall mean a corporation at least 50% of the
total combined voting power of all classes of stock of which is owned by the
Company, either directly or through one or more of its Subsidiaries.
ARTICLE III.
Administration
3.1 The Committee. Subject to the Board's right to retain
administration of the Plan and except as otherwise provided in Section 3.4, the
Plan shall be administered by the Committee which shall have all powers
necessary or desirable for such administration. Except as otherwise provided in
Section 3.4 and Article 9, the express grant in this Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. In addition to any other powers and, subject to the provisions of
the Plan, the Committee shall have the following specific powers: (i) to
determine the terms and conditions upon which the Awards may be made and
exercised; (ii) to determine all terms and provisions of each Agreement, which
need not be identical; (iii) to construe and interpret the Agreements and the
Plan; (iv) to establish, amend or waive rules or regulations for the Plan's
administration; (v) to accelerate the exercisability of any Award or the
termination of any Period of Restriction; and (vi) to make all other
determinations and take all other actions necessary or advisable for the
administration of the Plan.
3.2 Delegation of Certain Duties. The Committee may in its sole
discretion delegate all or part of its duties and obligations to designated
officer(s) to administer the Plan with respect to Awards to Key Employees who
are not subject to Section 16 of Exchange Act.
3.3 Selection of Key Employees. The Committee shall have the authority
to grant Awards under the Plan, from time to time, to such Key Employees as may
be selected by it. Each Award shall be evidenced by an Agreement.
3.4 Awards to Non-Employee Directors. With respect to Awards made to
Non-Employee Directors pursuant to Article 9, except as otherwise provided in
Article XI, the Plan shall be administered by employee directors of the Board or
their delegate who shall have complete authority to interpret all provisions of
Article 9; to prescribe the form of Agreements for Awards to Non-Employee
Directors pursuant to Article 9; to adopt, amend and rescind rules and
regulations pertaining to Awards to Non-Employee Directors and to make all other
determinations necessary or advisable for the administration of Article 9 of the
Plan.
3.5 Decisions Binding. All determinations and decisions made by the
Board, the Committee or the employee directors pursuant to the provisions of the
Plan shall be final, conclusive and binding.
3.6 Requirements of Rule 16b-3 and Code Section 162(m). Notwithstanding
any other provision of the Plan, the Board or the Committee may impose such
conditions on any Award, and amend the Plan in any such respects, as may be
required to satisfy the requirements of Rule 16b-3, as amended (or any successor
or similar rule), under the Exchange Act. Any provision of the Plan to the
contrary notwithstanding, and except to the extent that the Committee determines
otherwise: (a) transactions by and with respect to officers and directors of the
Company who are subject to Section 16(b) of the Exchange Act (hereafter,
"Section 16 Persons") shall comply with any applicable conditions of SEC Rule
16b-3; (b) transactions with respect to persons whose remuneration is subject to
the provisions of Section 162(m) of the Code shall conform to the requirements
of Section 162(m)(4)(C) of the Code; and (c) every provision of the Plan shall
be administered, interpreted and construed to carry out the foregoing provisions
of this sentence. Notwithstanding any provision of the Plan to the contrary, the
Plan is intended to give the Committee the authority to grant Awards that
qualify as performance-based compensation under Code Section 162(m)(4)(C) as
well as Awards that do not so qualify. Every provision of the Plan shall be
administered, interpreted and construed to carry out such intention and any
provision that cannot be so administered, interpreted and construed shall to
that extent be disregarded; and any provision of the Plan that would prevent an
Award that the Committee intends to qualify as performance-based compensation
under Code Section 162(m)(4)(C) from so qualifying shall be administered,
interpreted and construed to carry out such intention and any provision that
cannot be so administered, interpreted and construed shall to that extent be
disregarded.
3.7 Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee and the employee directors or their delegate shall
be indemnified by the Company against reasonable expenses, including attorneys'
fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Award granted or made hereunder,
and against all amounts reasonably paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or proceeding, if
such members acted in good faith and in a manner which they believed to be in,
and not opposed to, the best interests of the Company and its Subsidiaries.
ARTICLE IV.
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.4
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 200,000. No more than one-half of
the aggregate number of such Shares shall be issued in connection with Stock
Awards. Except as provided in Sections 4.2 and 4.3 herein, the issuance of
Shares in connection with the exercise of, or as other payment for Awards, under
the Plan shall reduce the number of Shares available for future Awards under the
Plan.
4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this
Plan (for which no material benefits of ownership have been received, including
dividends) terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, or if Shares issued pursuant to Awards (for which no
material benefits of ownership have been received, including dividends) are
forfeited, any Stock subject to such Award again shall be available for the
grant of an Award under the Plan, subject to Section 7.2.
4.3 Delivery of Shares as Payment. In the event a Participant pays the
Option Price for Shares pursuant to the exercise of an Option with previously
acquired Shares, the number of Shares available for future Awards under the Plan
solely to Key Employees who are not Section 16 Persons shall be reduced only by
the net number of new Shares issued upon the exercise of the Option.
4.4 Capital Adjustments. The number and class of Shares subject to each
outstanding Award and each Automatic Award, the Option Price and the aggregate
number and class of Shares for which Awards thereafter may be made shall be
subject to such adjustment, if any, as the Committee in its sole discretion
deems appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations of or by the
Company.
ARTICLE V.
Eligibility
Persons eligible to participate in the Plan include all employees of
the Company and its Subsidiaries who, in the opinion of the Committee, are Key
Employees. Key Employees do not include Non-Employee Directors. Non-Employee
Directors shall receive Automatic Awards, and may elect to receive Stock Payment
Awards, under the Plan pursuant to Article 9.
ARTICLE VI.
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Key Employee, provided, however, (a) no Key Employee may be granted Options
in any calendar year for more than 50,000 shares of Common Stock and (b) that
the aggregate Fair Market Value (determined at the time the Award is made) of
Shares with respect to which any Key Employee may first exercise ISOs granted
under the Plan during any calendar year may not exceed $100,000 or such amount
as shall be specified in Section 422 of the Code and rules and regulation
thereunder.
6.2 Option Agreement. Each Option grant shall be evidenced by an
Agreement that shall specify the type of Option granted, the Option Price (as
hereinafter defined), the duration of the Option, the number of Shares to which
the Option pertains, any conditions imposed upon the exercisability of Options
in the event of retirement, death, disability or other termination of
employment, and such other provisions as the Committee shall determine. The
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option within the meaning of Section 422 of the Code, or Nonqualified Stock
Option not intended to be within the provisions of Section 422 of the Code.
6.3 Option Price. The exercise price per share of Stock covered by an
Option ("Option Price") shall be determined by the Committee subject to the
following limitations. The Option Price shall not be less than 100% of the Fair
Market Value of such Stock on the Grant Date. In addition, an ISO granted to an
employee who, at the time of grant, owns (within the meaning of Section 425(d)
of the Code) Stock possessing more than 10% of the total combined voting power
of all classes of Stock of the Company, shall have an Option Price which is at
least equal to 110% of the Fair Market Value of the Stock.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant provided, however, that no ISO
shall be exercisable later than the tenth (10th) anniversary date of its Award
Date.
6.5 Exercisability. Options granted under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall determine, which need not be the same for all Key Employees.
6.6 Method of Exercise. Options shall be exercised by the delivery of a
written notice to the Company in the form prescribed by the Committee setting
forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares which shall be deemed to include
arrangements approved by the Committee for the delivery to the Company of the
proceeds of a sale or margin loan in the case of a "cashless" exercise. The
Option Price shall be payable to the Company in full either in cash (including
the proceeds of a cashless exercise in the Committee's discretion), by delivery
of Shares of Stock valued at Fair Market Value at the time of exercise, delivery
of a promissory note (in the Committee's discretion) or by a combination of the
foregoing. As soon as practicable after receipt of written notice and payment,
the Company shall deliver to the Participant, stock certificates in an
appropriate amount based upon the number of Options exercised, issued in the
Participant's name. No Participant who is awarded Options shall have rights as a
shareholder until the date of exercise of the Options.
6.7 Restrictions on Stock Transferability. The Committee shall impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under the applicable Federal securities law, under the requirements
of the National Association of Securities Dealers, Inc. or any stock exchange
upon which such Shares are then listed and under any blue sky or state
securities laws applicable to such Shares.
6.8 Nontransferability of Options. Except as specifically provided in
an Agreement pursuant to 6.9 below, no Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution. Further, all
Options granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or legal representative.
6.9 Transferability of Certain Options and SARs. In addition to
nontransferable Options, the Committee may grant Nonqualified Stock Options
(with or without tandem SARs) or SARs that are transferable during the lifetime
of the Key Employee, provided that (i) no consideration is paid for the transfer
and (ii) no Options granted to Section 16 Persons may be transferable unless and
except to the extent such transferability would not result in the loss of any
Rule 16b-3 exemptions for nontransferable Options granted or to be granted under
the Plan. The transferee of an Option shall be subject to all restrictions
applicable to the Option prior to its transfer. The Agreement granting the
Option shall set forth the transfer conditions and restrictions. The Committee
may impose on any transferable Option and on Stock issued upon the exercise of
any Option such limitations and conditions as the Committee deems appropriate.
ARTICLE VII.
Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and
conditions of the Plan, Stock Appreciation Rights may be granted to Key
Employees, at the discretion of the Committee (a) in connection with the grant,
and exercisable in lieu of Options ("Tandem SARs"), (b) independent of the grant
of the Options ("Freestanding SARs") or (c) in any combination of the foregoing.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect
to all or part of the Shares subject to the Related Option. The exercise of
Tandem SARs shall cause a reduction in the number of Shares subject to the
Related Option equal to the number of Shares with respect to which the Tandem
SAR is exercised. Conversely, the exercise, in whole or in part, of a Related
Option, shall cause a reduction in the number of Shares subject to the Tandem
Option equal to the number of Shares with respect to which the Related Option is
exercised. Shares with respect to which the SAR shall have been exercised may
not be subject again to an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, a
Tandem SAR shall expire no later than the expiration of the Related Option,
shall be transferable only when and under the same conditions as the Related
Option and shall be exercisable only when the Related Option is eligible to be
exercised. In addition, if the Related Option is an ISO, a SAR shall be
exercised for no more than 100% of the difference between the Option Price of
the Related Option and the Fair Market Value of Shares subject to the Related
Option at the time the SAR is exercised.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in it sole discretion, imposes
upon such SARs.
7.4 Other Conditions Applicable to SARs. In no event shall the term of
any SAR granted under the Plan exceed ten years from the Grant Date. A SAR may
be exercised only when the Fair Market Value of a Share exceeds either (a) the
Option Price of the Related Option in the case of a Tandem SAR or (b) the Fair
Market Value of a Share on the Grant Date in the case of a Freestanding SAR. A
SAR shall be exercised by delivery to the Committee of a notice of exercise in
the form prescribed by the Committee.
7.5 Payment Upon Exercise of SARs. Subject to the provisions of the
Agreement, upon the exercise of a SAR, the Participant is entitled to receive,
without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of Shares
with respect to which the SAR is exercised by (ii) an amount equal to the excess
of (A) the Fair Market Value per Share on the date of exercise of the SAR over
(B) either (x) the Option Price of the Related Option in the case of a Tandem
SAR or (y) the Fair Market Value per Share on the Award Date in the case of a
Freestanding SAR.
Payment to the Key Employee shall be made in Shares, valued at the Fair
Market Value on the date of exercise, in cash if the Key Employee has so elected
in his written notice of exercise and Committee has consented thereto, or a
combination thereof. To the extent required to satisfy the conditions of Rule
16b-3(e) under the Exchange Act, or any successor or similar rule, or as
otherwise provided in the Agreement, the Committee shall have the sole
discretion to consent to or disapprove the election of any Key Employee to
receive cash in full or partial settlement of a SAR. In cases where an election
of settlement in cash must be consented to by the Committee, the Committee may
consent to, or disapprove, such election at any time after such election, or
within such period for taking action as is specified in the election, and
failure to give consent shall be disapproval. Consent may be given in whole or
as to a portion of the SAR surrendered by the Key Employee. If the election to
receive cash is disapproved in whole or in part, the SAR shall be deemed to have
been exercised for Shares, or, if so specified in the notice of exercise and
election, not to have been exercised to the extent the election to receive cash
is disapproved.
7.6 Nontransferability of SARs. Unless the Committee provides otherwise
pursuant to Section 6.9, no SAR granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, otherwise than by
will or by the laws of descent and distribution. Further, all SARs granted to a
Key Employee under the Plan shall be exercisable during his lifetime only by
such Key Employee or his guardian or legal representative.
ARTICLE VIII.
Stock Awards
8.1 Grant of Stock Awards. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Stock Awards
under the Plan to such Key Employees, which may but need not be Restricted
Stock, and in such amounts as it shall determine; provided, however, that no Key
Employee may be granted Stock Awards in any calendar year for more than 50,000
shares of Common Stock. Key Employees receiving Stock Awards are not required to
pay the Company therefor (except for applicable tax withholding) other than the
rendering of services.
8.2 Stock Award Agreement. Each Stock Award shall be evidenced by an
Agreement that shall specify the number of shares of Stock covered by the Stock
Award, any applicable Restrictions and such other provisions as the Committee
shall determine. The Committee may impose such other restrictions to be set
forth in the Agreement as it may deem advisable, including without limitation,
restrictions under applicable Federal or state securities laws, and may legend
the certificates representing Stock Awards to give appropriate notice of such
restrictions.
8.3 Transferability. Except as otherwise provided in the Agreement
pursuant to which Stock Awards are made and subject to the limitation in the
next sentence, the Shares of Stock granted as Stock Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
termination of any applicable Restrictions or upon earlier satisfaction of other
conditions as specified by the Committee in its sole discretion and set forth in
the Agreement. All rights with respect to the Stock Awards granted to a
Participant under the Plan shall be exercisable during his lifetime only by such
Participant or his guardian or legal representative.
8.4 Restrictions on Restricted Stock. With respect to Shares of
Restricted Stock granted pursuant to the Plan, the Committee shall either (a)
impose a Period of Restriction which requires continuation of employment for a
prescribed period, or (b) require the satisfaction of one or more specified
Performance Criteria to be achieved within a stated time period, in order for
the Participant to be fully vested in the Shares of Restricted Stock. Shares of
Restricted Stock issued prior to the termination of applicable Restrictions
shall be retained by the Company until the termination of such Restrictions.
8.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 8.2 herein, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:
The sale or other transfer of the Shares of Stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the 1996
Incentive Stock Plan of Eskimo Pie Corporation, in the rules and
administrative procedures adopted pursuant to such Plan, and in an
Agreement dated ____________. A copy of the Plan, such rules and
procedures, and such Restricted Stock Agreement may be obtained from
the Secretary of Eskimo Pie Corporation.
8.6 Removal of Restrictions. Except as otherwise provided in this
Article, Shares of Restricted Stock covered by each Restricted Stock Award made
under the Plan shall become freely transferable by Participant after the last
day of the Period of Restriction or on the day immediately following the date on
which the Performance Criteria have been timely satisfied. Once the Shares are
released from the restrictions, the Company shall deliver the certificate
representing the Restricted Stock to the Participant and the Participant shall
be entitled to have the legend required by Section 8.5 herein removed from his
Stock certificate.
8.7 Voting Rights. Participants holding Shares of Restricted Stock
still subject to Restrictions may exercise full voting rights with respect to
those Shares.
8.8 Dividends and Other Distributions. Participants holding shares of
Restricted Stock still subject to Restrictions shall be entitled to receive all
dividends and other distributions paid with respect to those shares while they
are so held. If any such dividends or distributions are paid in Shares, the
Shares shall be subject to the same restrictions on transferability as the
Shares of Restricted Stock with respect to which they were distributed.
8.9 Termination of Employment Due to Retirement. Unless otherwise
provided in the Agreement, in the event that a Key Employee terminates his
employment with the Company or one of its Subsidiaries because of normal
retirement (as defined in the plans and/or policies of the Company in effect at
the time), any remaining Restrictions applicable to the Restricted Stock Shares
pursuant to Section 8.4 herein shall automatically terminate and, except as
otherwise provided in Section 8.2 herein the Shares of Restricted Stock shall
thereby be free of restrictions and freely transferable. Unless otherwise
provided in the Agreement, in the event that a Key Employee terminates his
employment with the Company because of early retirement (as defined in the
policies and/or plans of the Company in effect at the time), the Committee, in
its sole discretion, may waive the restrictions remaining on any or all Shares
of Restricted Stock pursuant to Section 8.2 herein and add such new restrictions
to those Shares of Restricted Stock as it deems appropriate.
8.10 Termination of Employment Due to Death or Disability. In the event
a Key Employee's employment is terminated because of death or disability, any
remaining Restriction applicable to the Restricted Stock pursuant to Section 8.4
herein shall automatically terminate and, except as otherwise provided in
Section 8.2 herein the shares of Restricted Stock shall thereby be free of
restrictions and fully transferable.
8.11 Termination of Employment for Other Reasons. Unless otherwise
provided in the Agreement, in the event that a Key Employee terminates his
employment with the Company for any reason other than for death, disability, or
retirement, as set forth in Sections 8.9 and 8.10 herein, then any shares of
Restricted Stock still subject to Restrictions as of the date of such
termination shall automatically be forfeited and returned to the Company.
8.12 Failure to Satisfy Performance Criteria. In the event that a Key
Employee fails to satisfy the specified Performance Criteria within the time
period established by the Committee, the Shares of Restricted Shares which were
awarded subject to the satisfaction of such Performance Goals shall be
automatically forfeited and returned to the Company.
ARTICLE IX.
Automatic Awards to Non-Employee Directors
9.1. Automatic Options. On each Automatic Grant Date, each Non-Employee
Director will automatically receive a Non-Qualified Stock Option covering 200
Shares ("Automatic Option") to be evidenced by an Agreement. The Option Price of
Automatic Options shall be 100% of the Fair Market Value on the Automatic Grant
Date. Unless otherwise provided in the Agreement pursuant to which they are
received, Automatic Option Awards first become exercisable 6 months after their
Automatic Grant Date, provided however that an Automatic Option Award shall be
immediately exercisable if the Non-Employee Director's membership on the Board
terminates as a result of the Non-Employee Director's retirement from Board
service in accordance with the Company's policy, death or permanent and total
disability (as such term is defined in Section 22(e)(3) of the Code). An
Automatic Option shall be forfeited if, as of the termination of the
Non-Employee Director's membership on the Board, the Automatic Option is not
then exercisable and such termination occurs for any reason other as a result of
the Non-Employee Director's retirement from Board service in accordance with the
Company's policy, death or permanent and total disability (as such term is
defined in Section 22(e)(3) of the Code). Automatic Options that are exercisable
or that become exercisable upon the Non-Employee Director's termination of
membership on the Board will remain exercisable until the tenth anniversary of
the Automatic Option's Automatic Grant Date. An Automatic Option may be
exercised with respect to any number of whole shares less than the full number
for which the Option could be exercised. A partial exercise of an Automatic
Option shall not affect the right to exercise the Automatic Option from time to
time in accordance with this Plan and the applicable Agreement with respect to
the shares remaining subject to the Automatic Option. The provisions of Sections
6.6, 6.7 and 6.8 shall be applicable to Automatic Options.
9.2 Automatic Restricted Stock Awards. On each Automatic Grant Date,
each Non-Employee Director shall automatically receive a Restricted Stock Award
for 200 Shares ("Automatic Restricted Stock Award") to be evidenced by an
Agreement. The applicable Period of Restriction for each Automatic Restricted
Stock Award shall be three years from the Automatic Grant Date; provided,
however, that any remaining Period of Restriction shall automatically terminate
and the shares of Automatic Restricted Stock shall be free of restrictions and
fully transferable upon termination of the Non-Employee Director's service as a
Director as a result of the Non-employee Director's retirement from Board
service in accordance with the Company's policy, death or permanent and total
disability (as such term is defined in Section 22(e)(3) of the Code). In the
event of termination of service as a Director for any other reason during the
Period of Restriction, any shares of Restricted Stock still subject to
restrictions as the date of such termination shall automatically be forfeited
and returned to the Company. The provisions of Sections 8.5, 8.6, 8.7 and 8.8
shall be applicable to Automatic Restricted Stock Awards.
9.3 Stock Payment Awards. Non-Employee Directors may elect to receive
payment of their retainer and meeting attendance fees in the form of Stock
Payment Awards in accordance with the provisions of this Section. An election to
receive Stock Payment Awards must be made on an annual basis by delivering
written notice to the Secretary of the Company on the election form provided by
the Company for that purpose ("Election Form"). With respect to elections for
1998, the election form must be delivered on or before March 31, 1998, and, with
respect to elections for subsequent calendar years, on or before the date of the
last Board meeting in the calendar year preceding the year to which the election
relates. In the event an individual becomes a Non-Employee Director after the
deadline for delivery of the election notice for a particular calendar year, the
Company may, but shall not be required to, permit such Non-Employee Director to
make an election to receive a Stock Payment Award for such calendar year. Once
made, an election for a particular calendar year may not be revoked and will be
effective for all retainer and meeting attendance fees owing to an electing
Non-Employee Director for services to be rendered as a director during that
calendar year ("Fees").
The number of Shares constituting an annual Stock Payment Award for
each electing Non-Employee Director shall be that number of Shares, rounded to
the nearest whole number, which results from dividing the respective
Non-Employee Director's Fees by the Fair Market Value of the Shares as of the
Determination Date (as hereinafter defined). The Company shall send each
electing Non-Employee Director a letter agreement setting forth the number of
Shares constituting each Stock Payment Award and such other terms and conditions
of the Award as are consistent with this Section 9.3. Determination Date shall
mean (a) the earlier of December 31 of the calendar year for which an election
to receive a Stock Payment Award is in effect or (b) the effective date of an
electing Non-Employee Director's termination as a member of the Board prior to
the end of such calendar year.
A Non-Employee Director shall have no voting or dividend rights with
respect to, and no right to transfer any interest in, any Stock Payment Awards
prior to the Determination Date for such Award. Following a Determination Date,
a Non-Employee Director shall be entitled to vote Stock Payment Award Shares and
to receive dividends thereafter declared and payable on such Shares. Following a
Determination Date, the Stock Payment Award Shares shall not be subject to any
restrictions on transfer and the Company shall, in accordance with each
Non-Employee Director's written request made on an Election Form, either cause a
stock certificate to be issued evidencing the Stock Payment Award Shares or
maintain a book-entry record evidencing such Shares. Stock Payment Award Shares
for which no such written request is made shall be evidenced by a book-entry
record. Dividends on Stock Payment Award Shares evidenced by a stock certificate
shall be paid in cash, and dividends on Stock Payment Award Shares evidenced by
a book entry record shall be reinvested in Shares, in each case only as and when
dividends are declared and paid to shareholders of record of Shares.
ARTICLE X.
Loans to Participants
The Committee is authorized to make loans to Participants, upon such
terms and conditions as deemed appropriate by the Committee (including loans in
connection with cashless exercises), for the purpose of enabling Participants to
pay the Option Price for Shares or other purchase price of Awards made under the
Plan. Such loans may include amounts necessary to pay Participant's tax
liability in connection with an Award.
ARTICLE XI.
Change in Control
The Committee, as constituted before a Change in Control, in its sole
discretion may, as to any outstanding Award, either at the time the Award is
made or any time thereafter, take any one or more of the following actions with
respect to a Change in Control: (i) provide for the acceleration of any time
periods relating to the exercise or realization of any such Award so that such
Award may be exercised or realized in full on or before a date initially fixed
by the Committee; (ii) provide for the purchase or settlement of any such Award
by the Company, upon a Participant's request, for an amount of cash equal to the
amount which could have been obtained upon the exercise of such Award or
realization of such Participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in such
Change in Control.
ARTICLE XII.
Modification, Extension and Renewals of Awards
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to the
extent not yet exercised) granted under the Plan and authorize the granting of
new Awards pursuant to the Plan in substitution therefor, and the substituted
Awards may specify a longer term than the surrendered Awards or may contain any
other provisions that are authorized by the Plan; provided, however, that the
substituted Awards may not specify a lower exercise price than the surrendered
Awards. The Committee may also modify the terms of any outstanding Agreement.
Notwithstanding the foregoing, however, no modification of an Award, shall,
without the consent of the Participant, adversely affect the rights or
obligations of the Participant.
ARTICLE XIII.
Amendment, Modification and Termination of the Plan
13.1 Amendment, Modification and Termination. At any time and from time
to time, the Board may terminate, amend, or modify the Plan. Such amendment or
modification may be without shareholder approval except to the extent that such
approval is required by the Code, pursuant to the rules under Section 16 of the
Exchange Act, by any national securities exchange or system on which the Stock
is then listed or reported, by any regulatory body having jurisdiction with
respect thereto or under any other applicable laws, rules or regulations.
13.2 Awards Previously Granted. No termination, amendment or
modification of the Plan other than pursuant to Section 4.4 herein shall in any
manner adversely affect any Award theretofore granted under the Plan, without
the written consent of the Participant.
ARTICLE XIV.
Withholding
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan.
14.2 Stock Withholding. With respect to withholding required upon the
exercise of Nonqualified Stock Options, or upon the lapse of restrictions on
Restricted Stock, or upon the occurrence of any other similar taxable event,
participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares of Stock having a Fair Market Value equal to the amount required to be
withheld. The value of the Shares to be withheld shall be based on Fair Market
Value of the Shares on the date that the amount of tax to be withheld is to be
determined. All elections shall be irrevocable and be made in writing, signed by
the Participant on forms approved by the Committee in advance of the day that
the transaction becomes taxable.
ARTICLE XV.
Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE XVI.
General
16.1 Requirements of Law. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies as may be
required.
16.2 Effect of Plan. The establishment of the Plan shall not confer
upon any Key Employee or any Non-Employee Director any legal or equitable right
against the Company, a Subsidiary, the Committee, or the employee directors,
except as expressly provided in the Plan. The Plan does not constitute an
inducement or consideration for the employment of any Key Employee, nor is it a
contract between the Company or any of its Subsidiaries and any Key Employee or
any Non-Employee Director. Participation in the Plan shall not give any Key
Employee any right to be retained in the service of the Company or any of its
Subsidiaries.
16.3 Creditors. The interests of any Participant under the Plan or any
Agreement are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered.
16.4 Governing Law. The Plan, and all Agreements hereunder, shall be
governed, construed and administered in accordance with and governed by the laws
of the Commonwealth of Virginia and the intention of the Company is that ISOs
granted under the Plan qualify as such under Section 422 of the Code.
16.5 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
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<NET-INCOME> 201
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
