SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED April 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-9186
TOLL BROTHERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2416878
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006
(Address of principal executive offices) (Zip Code)
(215) 938-8000
(Registrant's telephone number, including area code)
Not applicable
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.01 par value: 33,528,948 shares as of June 5, 1995
<PAGE>
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
No.
PART I. Financial Information
ITEM 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets 1
April 30, 1995 (Unaudited) and October 31, 1994
Condensed Consolidated Statements of Income (Unaudited) 2
For the Six Months and Three Months Ended
April 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows 3
(Unaudited)
For the Six Months Ended April 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements 4
(Unaudited)
ITEM 2. Management's Discussion and Analysis of 5
Financial Condition and Results of Operations
PART II. Other Information 7
SIGNATURES 8
</TABLE>
<PAGE>
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
--------- -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 11,646 $38,026
Marketable securities, -- 3,674
Residential inventories 598,831 506,347
Property, construction and office
equipment 11,452 11,537
Receivables, prepaid expenses and
other assets 21,494 22,695
Mortgage notes receivable 4,167 4,614
-------- --------
$647,590 $586,893
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $ 70,107 $ 17,506
Subordinated notes 224,197 227,969
Customer deposits on sales
contracts 32,832 30,071
Accounts payable 30,020 28,914
Accrued expenses 37,308 40,872
Collateralized mortgage
obligations payable 4,133 4,686
Income taxes payable 26,802 32,699
-------- --------
Total liabilities 425,399 382,717
-------- --------
Shareholders' equity:
Preferred stock
Common stock 335 334
Additional paid-in capital 36,508 36,198
Retained earnings 185,348 167,644
-------- --------
Total shareholders' equity 222,191 204,176
-------- --------
$647,590 $586,893
======== ========
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months
ended April 30 ended April 30
--------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues:
<S> <C> <C> <C> <C>
Housing sales $258,426 $208,682 $137,128 $ 90,978
Interest and other 1,379 890 360 466
-------- -------- -------- --------
259,805 209,572 137,488 91,444
-------- -------- -------- --------
Costs and expenses:
Land and housing
construction 195,244 158,233 103,103 68,475
Selling, general &
administrative 27,182 22,775 13,940 12,398
Interest 9,451 8,092 5,364 3,595
-------- -------- -------- --------
231,877 189,100 122,407 84,468
-------- -------- -------- --------
Income before income taxes 27,928 20,472 15,081 6,976
Income taxes 10,224 7,617 5,636 2,626
-------- -------- -------- --------
Net income $ 17,704 $ 12,855 $ 9,445 $ 4,350
======== ======== ======== ========
Net income per share:
Primary $ .53 $ .38 $ .28 $ .13
Fully-diluted $ .51 $ .37 $ .27 $ .13
Weighted average number
of shares
Primary 33,617 33,708 33,707 33,676
Fully-diluted 36,095 35,236 36,153 36,317
</TABLE>
See accompanying notes
PAGE
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months
ended April 30
--------------------
1995 1994
------- -------
Cash flows from operating activities:
<S> <C> <C>
Net income $17,704 $12,855
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,425 1,281
Gain from repurchase of subordinated notes (523) (78)
Deferred Taxes 483 1,140
Net realizable provisions 1,500 2,575
Changes in operating assets and liabilities:
(Increase) in residential inventories (93,984) (48,009)
Decrease (increase) in receivables, prepaid
expenses and other assets 661 (725)
Increase in customer deposits on sales
contracts 2,761 7,592
(Decrease) increase in accounts payable,
accrued expenses and other liabilities (2,458) 3,848
Decrease in current income taxes payable (6,289) (8,268)
------- -------
Net cash used in operating activities (78,720) (27,789)
------- -------
Cash flows from investing activities:
Proceeds from (purchase of) marketable
securities, net 3,674 (7,754)
Purchase of property, construction and office
equipment, net (900) (1,362)
Principal repayments of mortgage notes receivable 453 3,527
------- -------
Net cash provided by (used in) investing
activities 3,227 (5,589)
------- -------
Cash flows from financing activities:
Proceeds from loans payable 124,000 13,493
Principal payments of loans payable (71,474) (24,433)
Net proceeds from issuance of subordinated notes -0- 55,575
Repurchase of subordinated notes (3,166) (405)
Principal payments of collateralized mortgage
obligations (558) (3,858)
Proceeds from stock options exercised and employee
stock plan purchases 311 823
------- -------
Net cash provided by financing activities 49,113 41,195
------- -------
Net (decrease) increase in cash and cash
equivalents (26,380) 7,817
Cash and cash equivalents, beginning of period 38,026 32,329
------- -------
Cash and cash equivalents, end of period $11,646 $40,146
======= =======
Supplemental disclosures of cash flow information
Interest paid, net of capitalized amount $ 2,265 $ 2,150
======= =======
Income taxes paid $15,999 $14,745
======= =======
Supplemental disclosures of non-cash financing
activities:
Income tax benefit relating to exercise of
employee stock options $ 30 $ 223
======= =======
</TABLE>
See accompanying notes
PAGE
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for interim financial information.
The October 31, 1994 balance sheet amounts and disclosures included
herein have been derived from the October 31, 1994 audited financial
statements of the Registrant. Since the accompanying condensed
consolidated financial statements do not include all the information and
footnotes required by generally accepted accounting principles for
complete financial statements, it is suggested that they be read in
conjunction with the financial statements and notes thereto included in
the Registrant's October 31, 1994 Annual Report on Form 10-K. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, which are of a normal
recurring nature, necessary to present fairly the Company's financial
position as of April 30, 1995 and 1994, the results of its operations
for the six months and three months then ended and its cash flows for
the six months then ended. The results of operations for such interim
period are not necessarily indicative of the results to be expected for
the full year.
2. Residential Inventories
Residential inventories consisted of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
--------- -----------
<S> <C> <C>
Land and land development costs $162,460 $158,686
Construction in progress 363,797 277,098
Sample homes 28,007 22,641
Land deposits and costs of future
development 15,863 13,943
Loan assets acquired for future
development 18,054 25,186
Deferred marketing and financing
costs 10,650 8,793
-------- --------
$598,831 $506,347
======== ========
</TABLE>
Construction in progress includes the cost of homes under construction,
land and land development and carrying costs of lots that have been
substantially improved.
The Company capitalizes certain interest costs to inventories during the
development and construction period. Capitalized interest is charged to
interest expense when the related inventories are closed. Interest
incurred, capitalized and expensed is summarized as follows:
<TABLE>
<CAPTION>
Six months Three months
ended April 30 ended April 30
------------------ -----------------
1995 1994 1995 1994
------- ------- ------- -------
Interest capitalized,
<S> <C> <C> <C> <C>
beginning of period $39,835 $38,270 $41,548 $37,437
Interest incurred 12,417 10,569 6,577 5,493
Interest expensed (9,451) (8,092) (5,364) (3,595)
Write off to cost of sales (97) (1,412) (57) 0
------- ------- ------- -------
Interest capitalized,
end of period $42,704 $39,335 $42,704 $39,335
======= ======= ======= =======
</TABLE>
<PAGE>
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement items related to the Company's operations as percentages of total
revenues and certain other data:
<TABLE>
<CAPTION>
Six months Three months
ended April 30 ended April 30
--------------- ----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Land and housing construction 75.2 75.5 75.0 74.9
Selling, general and
administrative 10.5 10.9 10.1 13.6
Interest 3.6 3.8 3.9 3.9
------ ------ ------ ------
Total costs and expenses 89.3 90.2 89.0 92.4
------ ------ ------ ------
Income before taxes and change
in accounting 10.7% 9.8% 11.0% 7.6%
====== ====== ====== ======
Number of homes closed 754 682 390 296
====== ====== ====== ======
</TABLE>
Revenues for the six months and three months ended April 30, 1995 were higher
than those of the comparable periods of 1994 by approximately $50.2 million,
or 24%, and $46.0 million, or 50%, respectively. The higher revenues were
primarily attributable to the increased number of homes closed during the
periods, which was due to the significantly larger contract backlog at the
beginning of fiscal 1995 as compared to the beginning of fiscal 1994 and to
the construction delays caused by the adverse weather conditions during the
early part of fiscal 1994.
In addition, the average selling price per home closed increased in 1995 as
compared to 1994 as the result of a shift in the location of homes closed to
more expensive communities, a change in product mix and increases in selling
prices. Based on the backlog of homes under contract at April 30, 1995 and
the homes that the Company expects to deliver during the remainder of 1995,
the Company anticipates that the average price of the homes delivered for the
remainder of 1995 will be higher than the homes delivered in the same period
of 1994.
As of April 30, 1995 and 1994, the backlog of homes under contract amounted to
$432.9 million(1,174 homes) and $369.9 million(1,091 homes), respectively.
The aggregate sales value of new contracts signed during the six months and
three months ended April 30, 1995 amounted to $320.8 million(903 homes) and
$209.2 million(594 homes), respectively. This compares to $293.2 million(881
homes) and $193.9 million (582 homes) for the same periods of 1994.
The increase in new contracts signed and backlog in 1995 over 1994 is
attributable to the increase in the number of communities in which the Company
is offering homes for sale, a shift in location of the communities to more
expensive areas, an increase in the size of the homes that our customers
purchased and increases in selling prices. On a per community basis, customer
traffic and new contracts signed has declined.
As a percentage of revenues, land and housing construction costs decreased
slightly in the first six months of 1995 as compared to the same period of
1994 and increased slightly for the second quarter of 1995 over the second
quarter of 1994. During both periods of 1995, the Company saw, as a
percentage of revenues, increases in material and labor costs and a decrease
in land, land development and overhead costs as compared to the same periods
of 1994. The Company also provided approximately $2 million and $.5 million
in the six month and three month periods of 1995, and $2.6 million the first
three months of fiscal 1994, for the writeoff of inventory and previously
capitalized costs that the Company no longer considered realizable. The
Company did not provide for any writeoff of inventory in the second quarter
of fiscal 1994.
Selling, general and administrative expenses("SG&A") as a percentage of
revenues decreased in both periods of 1995 as compared to 1994 although SG&A
spending increased for the 1995 periods over the same periods of 1994. The
increased spending was principally due to the increased number of communities
that the Company was operating in during the 1995 periods. SG&A decreased as
a percentage of revenues for the three months ended April 30, 1995 as compared
to 1994 from 13.6% to 10.1%. This decrease is due in part to SG&A expenses
increasing significantly in the second quarter of 1994 over the first quarter
of 1994 in anticipation of increased revenues which were delayed due to the
adverse weather conditions that the Company encountered in the early part of
fiscal 1994. The Company anticipates that SG&A as a percentage of revenues
will continue to decrease for the full fiscal year as compared to the six
months and three months ended April 30, 1995, due to revenues increasing at a
faster pace than SG&A expenses.
Interest expense was slightly lower as a percentage of revenues in the six
month and three month periods of 1995 as compared to 1994. Interest expense is
determined on a specific house by house basis and will vary depending on many
factors including the period of time that the land was owned, the period of
time that the house was under construction, and the interest rates and the
amount of debt carried by the Company in proportion to the amount of its
inventory during those periods.
Income taxes for the six month periods of 1995 and 1994 were provided at
effective rates of 36.6% and 37.2%, respectively. For the three month periods
of 1995 and 1994, income taxes were provided at effective rates of 37.4% and
37.6%, respectively.
CAPITAL RESOURCES AND LIQUIDITY
Funding for the Company's residential development activities has been
principally provided by cash flows from operations, unsecured bank borrowings
and the public debt and equity markets.
The Company has a $150 million unsecured revolving credit facility with nine
banks which extends through October 1997. As of April 30, 1995, the Company
had $63 million of loans and approximately $47.6 million of letters of credit
outstanding under the facility.
The Company believes that it will be able to fund its activities through a
combination of operating cash flow, cash balances and existing sources of
credit.
<PAGE>
<PAGE>
PART II. Other Information
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
(a) The Company's 1995 Annual Meeting of Shareholders was held
on March 16, 1995.
(b) Not required.
(c) The following proposals were submitted to a vote of
shareholders and were approved by the affirmative vote of
a majority of the shares of common stock of the Company
that were present in person or by proxy, as indicated
below.
The approval of Ernst & Young as the Company's independent
auditors for the 1995 fiscal year.
FOR AGAINST ABSTAIN
------- ------- -------
25,232,423 41,184 19,439
To consider and act upon the adoption of the Toll
Brothers, Inc. Stock Option and Incentive Stock Plan (1995).
FOR AGAINST ABSTAIN
------- ------- -------
20,413,069 1,679,002 168,381
To consider and act upon the adoption of the Amendment to
the Toll Brothers, Inc. Key Employee and Non-Employee
Directors Stock Plan (1993).
FOR AGAINST ABSTAIN
------- ------- -------
20,865,812 1,216,328 178,312
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1. Toll Brothers, Inc. Stock Option and Incentive
Stock Plan (1995)
Exhibit 10.2. Amendment to the Toll Brothers, Inc. Key Employee
and Non-Employee Directors Stock Plan (1993)
Exhibit 11. Statement Regarding Computation of Per Share
Earnings.
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
<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.
TOLL BROTHERS, INC.
(Registrant)
Date: June 9, 1995 By: /s/ Joel H. Rassman
--------------------------
Joel H. Rassman
Senior Vice President,
Treasurer and Chief
Financial Officer
Date: June 9, 1995 By: /s/ Joseph R. Sicree
-------------------------
Joseph R. Sicree
Vice President -
Chief Accounting Officer
(Principal Accounting Officer)
<PAGE>
TOLL BROTHERS, INC.
STOCK OPTION AND INCENTIVE STOCK PLAN
(1995)
1. Purpose. The Toll Brothers, Inc. Stock Option and Incentive
Stock Plan (the "Plan") is intended as an additional incentive to employees
and non-employee members of the Board of Directors (together the "Optionees")
to enter into or remain in the employ of Toll Brothers, Inc., a Delaware
corporation (the "Company") or any Affiliate (as defined below), or serve on
the Board of Directors of the Company (the "Board of Directors") or of any
Affiliate, and to devote themselves to the Company's success by providing them
with an opportunity to acquire or increase their proprietary interest in the
Company (a) through receipt of rights (the "Options") to acquire the Company's
Common Stock, par value $0.01 per share (the "Common Stock") and (b) through
incentive stock awards involving the transfer or issuance of Common Stock
subject to conditions of forfeiture (the "Awards"). Each Option granted under
the Plan to an employee of the Company or an Affiliate is intended to be an
incentive stock option ("ISO") within the meaning of section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), for federal income tax
purposes, except to the extent (i) any such ISO grant would exceed the
limitation of subsection 6(a), (ii) any Option is specifically designated at
the time of grant (the "Grant Date") as not being an ISO ("Non-Qualified Stock
Option"), and (iii) any Option is granted under Section 8. No Option granted
to a person who is not an employee of the Company or any Affiliate on the
Grant Date shall be an ISO.
For purposes of the Plan, the term "Affiliate" shall mean a
corporation which is a parent corporation or a subsidiary corporation with
respect to the Company within the meaning of section 424(e) or (f) of the
Code.
2. Administration. The Plan shall be administered by the Board
of Directors of the Company, without participation by any director on any
matter pertaining to him. However, the Board of Directors may designate a
Stock Option Committee composed of two or more of its members to operate and
administer the Plan in its stead, provided, however, that the Performance
Based Compensation Committee for the Toll Brothers, Inc. Stock Option and
Incentive Stock Plan (1995) (as hereinafter described) shall administer
Options granted to Executive Officers. The Stock Option Committee, the
Performance Based Compensation Committee for the Toll Brothers, Inc. Stock
Option Plan (1995) with respect to Options granted under Section 8 and the
Board of Directors in its administrative capacity with respect to the Plan is
referred to herein as the "Committee". Notwithstanding anything in this
Section 2 to the contrary, in the case of Executive Officers (as hereinafter
defined in this Section 2) who are granted Options in accordance with the
provisions of Section 8, the Executive Officers to whom such Options will be
granted, the timing of grants of such Options, the Option Price (as defined in
subsection 6(b)) of such Options and the number of Option Shares (as defined
in Section 4) included in such Options shall be as specifically set forth in
Section 8. For all purposes of this Plan the term "Executive Officer" means
Robert I. Toll, chief executive officer of the Company, and Bruce E. Toll,
chief operating officer and secretary of the Company, so long as they continue
in the employ of the Company in those positions.
The Committee shall hold meetings at such times and places
as it may determine. Acts approved at a meeting by a majority of the members
of the Committee or acts approved in writing by the unanimous consent of the
members of the Committee shall be the valid acts of the Committee.
Except with respect to Options which may be granted to
Executive Officers (as defined in Section 8) under Section 8, the Committee
shall from time to time at its discretion direct the Company to grant Options
and Awards pursuant to the provisions of the Plan. The Committee shall have
plenary authority to determine the Optionees to whom and the times at which
Options and Awards shall be granted, the number of Option Shares (as defined
in Section 4) or Awards to be granted and the price and other terms and
conditions thereof, including a specification with respect to whether an
Option is intended to be an ISO subject, however, to the express provisions of
the Plan. In making such determinations, the Committee may take into account
the nature of the Optionee's services and responsibilities, the Optionee's
present and potential contribution to the Company's success and such other
factors as it may deem relevant. The interpretation and construction by the
Committee of any provision of the Plan or of any Option or Award granted under
it shall be final, binding and conclusive.
No member of the Board of Directors or the Committee shall
be personally liable for any action or determination made in good faith with
respect to the Plan or any Option or Award granted under it. No member of the
Committee shall be liable for any act or omission of any other member of the
Committee or for any act or omission on his own part, including but not
limited to the exercise of any power and discretion given to him under the
Plan, except those resulting from (i) any breach of such member's duty of
loyalty to the Company or its stockholders, (ii) acts or omissions not in good
faith or involving intentional misconduct or a knowing violation of law, (iii)
acts or omissions that would result in liability under Section 174 of the
General Corporation Law of the State of Delaware, as amended, and (iv) any
transaction from which the member derived an improper personal benefit.
In addition to such other rights of indemnification as he
may have as a member of the Board of Directors or the Committee, and with
respect to administration of the Plan and the granting of Options and Awards
under it, each member of the Board of Directors and of the Committee shall be
entitled without further act on his part to indemnity from the Company for all
expenses (including the amount of any judgment and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit or proceeding with respect
to the administration of the Plan or the granting of Options or Awards under
it in which he may be involved by reason of his being or having been a member
of the Board of Directors or the Committee, whether or not he continues to be
such member of the Board of Directors or the Committee at the time of the
incurring of such expenses; provided, however, that such indemnity shall not
include any expenses incurred by such member of the Board of Directors or the
Committee: (i) in respect of matters as to which he shall be finally adjudged
in such action, suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of his duties as a member of the Board
of Directors or the Committee; or (ii) in respect of any matter in which any
settlement is effected to an amount in excess of the amount approved by the
Company on the advice of its legal counsel; and provided further, that no
right of indemnification under the provisions set forth herein shall be
available to or accessible by any such member of the Board of Directors or the
Committee unless within five days after institution of any such action, suit
or proceeding he shall have offered the Company in writing the opportunity to
handle and defend such action, suit or proceeding at its own expense. The
foregoing right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Board of Directors or
the Committee and shall be in addition to all other rights to which such
member of the Board of Directors or the Committee would be entitled as a
matter of law, contract or otherwise.
Notwithstanding anything to the contrary contained herein, the
Plan shall be administered with respect to Options which may be granted to
Executive Officers by the Performance Based Compensation Committee for the
Toll Brothers, Inc. Stock Option Plan (1995), which committee shall consist of
such members of the Board of Directors as may be designated by the Board of
Directors from time to time. It is intended that such committee shall consist
of two or more "outside directors" as that term is used in Section
162(m)(4)(C)(i) of the Code.
3. Eligibility. All employees of the Company or its Affiliates
(who may also be directors of the Company or its Affiliates) shall be eligible
to receive ISOs hereunder. All Optionees shall be eligible to receive Options
and Awards hereunder; provided, however, that only an Executive Officer is
eligible to be granted an Option under Section 8 and provided further that no
Executive Officer shall be eligible to receive an Award. The Committee, in
its sole discretion, shall determine whether an individual qualifies as an
employee or an Optionee. An Optionee may receive more than one Option or
Award, but only on the terms and subject to the restrictions of the Plan.
4. Shares Under the Plan. The number of shares of Common Stock
available for granting Options and Awards under the Plan in the calendar year
the Plan is adopted shall be two million (2,000,000), subject to adjustment as
provided in Section 9. The number of shares of Common Stock available for
granting Options and Awards under the Plan for each calendar following the
calendar year the Plan is adopted shall be equal to the sum of (i) the number
of shares of Common Stock available for granting Options and Awards in the
immediately preceding calendar year reduced by the number of shares of Common
Stock with respect to which Options and Awards were granted in such calendar
year and (ii) two percent (2%) of the outstanding shares of Common Stock
(including treasury shares) as of the first day of such calendar year;
provided, however that no more than two million five hundred thousand
(2,500,000) shares of Common Stock shall be available for granting Options and
Awards under the Plan in any single calendar year. In no event, however,
shall more than 2,500,000 shares of Common Stock (subject to adjustment as
provided in Section 9) be cumulatively available for the granting of ISO's
under the Plan. If any shares subject to any Option ("Option Shares") or
shares subject to an Award granted hereunder ("Award Shares") are forfeited or
such Option otherwise terminates without the issuance of such shares, the
shares subject to such Option or Award, to the extent of any such forfeiture
or termination, shall again be available for the grant of Options and Awards
under the Plan. Option Shares and Awards shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company. If any outstanding Option granted under the Plan
expires, lapses or is terminated for any reason, or if the shares of Common
Stock that has been transferred pursuant to an Award under the Plan are
forfeited for any reason, the Option Shares allocable to the unexercised
portion of such Option and the forfeited shares of Common Stock may again be
the subject of an Option or Award granted pursuant to the Plan.
Notwithstanding anything to the contrary otherwise contained in the Plan, no
employee shall be granted more than 1,000,000 Option Shares during any
calendar year.
5. Term of Plan. The Plan is adopted effective as of January
31, 1995, the date on which it is adopted by the Board of Directors; provided,
however that the Plan is approved by vote of a majority of the outstanding
voting stock of the Company on or before January 31, 1996. No Option or Award
may be granted under the Plan after January 31, 2005
6. Terms and Conditions of Options. Options granted pursuant
to the Plan shall be evidenced by written documents (the "Option Documents")
in such form as the Committee shall from time to time approve, which Option
Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions which the Committee shall from
time to time require which are not inconsistent with the terms of the Plan.
However, the provisions of this Section 6 shall not apply for Options granted
to Executive Officers under Section 8 except as otherwise provided for in
Section 8.
(a) Number of Option Shares. Each Option Document shall
state the number of Option Shares to which it pertains. In no event shall the
aggregate fair market value of the Option Shares (determined at the time the
ISO is granted) with respect to which an ISO is exercisable for the first time
by the Optionee during any calendar year (under all incentive stock option
plans of the Company or its Affiliates) exceed $100,000. No director may
receive Options under the Plan for more than 450,000 Option Shares in the
aggregate, adjusted as provided in Section 9, other than Option Shares issued
under Options granted to Executive Officers under Section 8.
(b) Option Price. Each Option Document shall state the
price at which Option Shares may be purchased (the "Option Price"), which
shall be at least 100% of the fair market value of the Common Stock on the
date the Option is granted as determined by the Committee; provided, however,
that if an ISO is granted to an Optionee who then owns, directly or by
attribution under section 424(d) of the Code, shares possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or an Affiliate, then the Option Price shall be at least 110% of the
fair market value of the Option Shares on the date the Option is granted. If
the Common Stock is traded in a public market, then the fair market value per
share shall be, if the Common Stock is listed on a national securities
exchange or included in the NASDAQ National Market System, the last reported
sale price thereof on the relevant date, or, if the Common Stock is not so
listed or included, the mean between the last reported "bid" and "asked"
prices thereof on the relevant date, as reported on NASDAQ or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines.
(c) Medium of Payment. An Optionee shall pay for Option
Shares: (i) in cash, (ii) by certified check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may approve,
including payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Furthermore, the Committee may
provide in an Option Document that payment may be made in whole or in part in
shares of the Common Stock held by the Optionee for more than one year. If
payment is made in whole or in part in shares of the Common Stock, then the
Optionee shall deliver to the Company certificates registered in the name of
such Optionee representing shares of Common Stock legally and beneficially
owned by such Optionee, free of all liens, claims and encumbrances of every
kind and having a fair market value on the date of delivery of such notice
that is not greater than the Option Price of the Option Shares with respect to
which such Option is to be exercised, accompanied by stock powers duly
endorsed in blank by the record holder of the shares represented by such
certificates. In the event that certificates for shares of the Company's
Common Stock delivered to the Company represent a number of shares in excess
of the number of shares required to make payment for the Option Price of the
Option Shares (or relevant portion thereof) with respect to which such Option
is to be exercised by payment in shares of Common Stock, the stock certificate
issued to the Optionee shall represent the Option Shares in respect of which
payment is made, and such excess number of shares. Notwithstanding the
foregoing, the Board of Directors, in its sole discretion, may refuse to
accept shares of Common Stock in payment of the Option Price. In that event,
any certificates representing shares of Common Stock which were delivered to
the Company shall be returned to the Optionee with notice of the refusal of
the Board of Directors to accept such shares in payment of the Option Price.
The Board of Directors may impose such limitations and prohibitions on the use
of shares of the Common Stock to exercise an Option as it deems appropriate,
subject to the provisions of the Plan.
(d) Termination of Options. No Option shall be
exercisable after the first to occur of the following:
(i) Expiration of the Option term specified in the
Option Document, which for an ISO shall not exceed (A) ten years from the
Grant Date or (B) five years from the Grant Date if the Optionee on the date
of grant owns, directly or by attribution under section 424(d) of the Code,
shares possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or of an Affiliate and for any other
Option shall not exceed ten years and one day from the date of grant;
(ii) Expiration of three months (or such shorter
period as the Committee may select) from the date the Optionee's employment or
service with the Company or its Affiliates terminates for any reason other
than: (a) disability (within the meaning of section 22(e)(3) of the Code) or
death or (b) circumstances described by paragraph (d)(vi), below;
(iii) Expiration of one year from the date the
Optionee's employment with the Company or its Affiliates terminates by reason
of the Optionee's disability (within the meaning of section 22(e)(3) of the
Code) or death;
(iv) The date, if any, set by the Committee under
terms specified in an Option Document to be an accelerated expiration date in
the event of a "Change in Control" (as defined in subsection 6(f) below)
provided an Optionee who holds an Option is given written notice at least 30
days before the date so fixed.
(v) The date set by the Committee to be an
accelerated expiration date after a finding by the Committee that a change in
the financial accounting treatment for Options from that in effect on the date
the Plan was adopted adversely affects or, in the determination of the
Committee, may adversely affect in the foreseeable future, the Company,
provided the Committee may take whatever other action, including acceleration
of any exercise provisions, it deems necessary should it make the
determination referred to hereinabove.
(vi) A finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the Optionee has breached his employment or service contract
with the Company or an Affiliate, or has been engaged in any sort of
disloyalty to the Company or an Affiliate, including, without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty in the
course of his employment or service or has disclosed trade secrets of the
Company or an Affiliate. In such event, in addition to immediate termination
of the Option, the Optionee, upon a determination by the Committee, shall
automatically forfeit all Option Shares for which the Company has not yet
delivered the share certificates upon refund by the Company of the Option
Price.
Notwithstanding the foregoing, except as may be specifically
provided in an Option Document at the discretion of the Committee, no Option
shall be exercisable after the termination of an Optionee's service or
employment with the Company or any of its Affiliates except to the extent such
Option was exercisable on the date of such termination of service or
employment. The Committee may extend the period during which an Option may be
exercised to a date no later than the date of the expiration of the Option
term specified in the Option Documents.
(e) Executive Officer Limitations. An Executive Officer
who ceases to be an Executive Officer shall not (A) be granted any additional
Options under Section 8 unless all events establishing the former Executive
Officer's entitlement to one or more Options, other than the grant itself,
occur prior to his ceasing to be an Executive Officer nor (B) be permitted to
exercise his Option or Options solely with respect to Option Shares granted
pursuant to subsection 8(a)(i) which were not exercisable by the former
Executive Officer when he ceased to be an Executive Officer.
(f) Change of Control. In the event of a Change of Control
(as defined below), the Committee may take whatever action with respect to the
Options outstanding that it deems necessary or desirable, including, without
limitation, accelerating the expiration or termination date in the respective
Option Documents to a date no earlier than thirty (30) days after notice of
such acceleration is given to the Optionees. In addition to the foregoing, in
the event of a Change of Control, Options granted pursuant to the Plan shall
become immediately exercisable in full. A "Change of Control" shall be deemed
to have occurred upon the earliest to occur of the following events: (i) the
date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) approve a plan or other arrangement
pursuant to which the Company will be dissolved or liquidated, or (ii) the
date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) approve a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the Company, or (iii)
the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) and the stockholders of the other
constituent corporation (or its board of directors if stockholder action is
not required) have approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, other than, in either case, a
merger or consolidation of the Company in which holders of shares of the
Common Stock immediately prior to the merger or consolidation will hold at
least a majority of the ownership of common stock of the surviving corporation
(and, if one class of common stock is not the only class of voting securities
entitled to vote on the election of directors of the surviving corporation, a
majority of the voting power of the surviving corporation's voting securities)
immediately after the merger or consolidation, which common stock (and, if
applicable, voting securities) is to be held in the same proportion as such
holders' ownership of Common Stock immediately before the merger or
consolidation, or (iv) the date any entity, person or group, (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934, as amended), (other than (A) the Company or any of its subsidiaries
or any employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries or (B) any person who, on the date the Plan
is effective, shall have been the beneficial owner of at least twenty percent
(20%) of the outstanding Common Stock), shall have become the beneficial owner
of, or shall have obtained voting control over, more than fifty percent (50%)
of the outstanding shares of the Common Stock, or (v) the first day after the
date this Plan is effective when directors are elected such that a majority of
the Board of Directors shall have been members of the Board of Directors for
less than twenty-four (24) months, unless the nomination for election of each
new director who was not a director at the beginning of such twenty-four (24)
month period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.
(g) Transfers. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution.
During the lifetime of the person to whom an Option is granted, such Option
may be exercised only by him. Notwithstanding the foregoing a NSO may be
transferred pursuant to the terms of a "qualified domestic relations order,"
within the meaning of Sections 401(a)(13) and 414(p) of the Code or within the
meaning of Title I of the Employee Retirement Income Security Act of 1974, as
amended.
(h) Other Provisions. The Option Documents shall contain
such other provisions, subject to the provisions of Section 8 including,
without limitation, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option, as the Committee shall
deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Option Documents issued to an
Optionee, subject to the Optionee's consent if such amendment is not favorable
to the Optionee except that the consent of the Optionee shall not be required
for any amendment made under subsection 6(f).
7. Exercise. No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise and of
payment in full of the Option Price for the Option Shares to be purchased.
Each such notice shall specify the number of Option Shares to be purchased and
shall (unless the Option Shares are covered by a then current registration
statement or a Notification under Regulation A under the Securities Act of
1933 (the "Act")), contain the Optionee's acknowledgment in form and substance
satisfactory to the Company that (a) such Option Shares are being purchased
for investment and not for distribution or resale (other than a distribution
or resale which, in the opinion of counsel satisfactory to the Company, may be
made without violating the registration provisions of the Act), (b) the
Optionee has been advised and understands that (i) the Option Shares may not
have been registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on transfer
and (ii) the Company is under no obligation to register the Option Shares
under the Act or to take any action which would make available to the Optionee
any exemption from such registration, (c) such Option Shares may not be
transferred without compliance with all applicable federal and state
securities laws, and (d) an appropriate legend referring to the foregoing
restrictions on transfer and any other restrictions imposed under the Option
Documents may be endorsed on the certificates. Notwithstanding the above,
should the Company be advised by counsel that issuance of shares should be
delayed pending (A) registration under federal or state securities laws (B)
the receipt of an opinion that an appropriate exemption therefrom is
available, (C) the listing or inclusion of the shares on any securities
exchange or in an automated quotation system or (D) the consent or approval of
any governmental regulatory body whose consent or approval is necessary in
connection with the issuance of such Option Shares, the Company may defer
exercise of any Option granted hereunder until event A, B, C, or D has
occurred. No Option granted pursuant to Section 8 may be exercised until one
year has elapsed from the Grant Date.
8. Grants to Executive Officers. Options granted to an
Executive Officer (as defined above) pursuant to the Plan shall be granted,
without further action by the Committee, only in accordance with the terms set
forth in this Section 8, shall be evidenced by Option Documents in such form
as the Committee shall from time to time approve, which Option Documents shall
comply with and be subject to the following terms and conditions and such
other terms and conditions as the Committee shall from time to time require
which are not inconsistent with terms of the Plan. Each Option granted under
this Section 8 shall be a NSO and shall have an Option Price equal to 100% of
the fair market value (as defined in subsection 6(b)) of the Common Stock on
the Grant Date.
(a) Option Grants.
(i) Each Executive Officer shall be granted an Option
to purchase fifty thousand (50,000) shares of Common Stock effective on
November 1, 1996 and on each of the following two successive November firsts
thereafter.
(ii) For each Fiscal Year (as defined below) during the
period commencing November 1, 1995 and ending October 31, 1998 in which the
Pre-Tax Return on Equity Ratio (as defined below) is at least twenty percent
(20%) each Executive Officer shall be granted an Option, sixty (60) days after
the end of such Fiscal Year (or if the Company's net income before income
taxes and extraordinary items has not at that time been determined by its
independent auditors, then 10 days after the Company announces its net income
before income taxes and extraordinary items for such Fiscal Year), to purchase
(A) thirty thousand (30,000) shares of Common Stock plus (B) one thousand two
hundred fifty (1,250) shares of Common Stock for each additional one percent
(1%) by which the Pre-Tax Return on Equity Ratio exceeds twenty percent (20%)
(but no more than an aggregate of 75,000 Option Shares in any Fiscal Year).
The Pre-Tax Return on Equity Ratio is equal to the percentage of Stockholders'
Equity (as defined below) as of the beginning of the applicable Fiscal Year
represented by the Company's net income before income taxes and extraordinary
items for such Fiscal Year.
(iii) Each Executive Officer shall be granted an Option
to purchase one hundred thousand (100,000) shares of Common Stock for the
three Fiscal Year period commencing November 1, 1994 and ending October 31,
1997 if the After-Tax Return on Equity (as defined below) is equal to at least
forty-five percent (45%) for such three year period. Each Executive Officer
shall also be granted an Option for an additional two thousand five hundred
(2,500) Option Shares for each one percent (1%) by which the After-Tax Return
on Equity exceeds forty-five percent (45%) for such three year period (but no
more than an aggregate of 100,000 additional Option Shares for such three
Fiscal Year period). Options to be granted under this Section shall be
granted sixty (60) days after the end of the three year period (or if the
Company's net income after income taxes has not at that time been determined
by its independent auditors, then 10 days after the Company announces its net
income after income taxes for the last Fiscal Year of the three year period).
For purposes of this subsection, the After-Tax Return on Equity is equal to
the percentage of Stockholders' Equity, as of October 31, 1994, represented by
the sum of the Company's after-tax net income (or loss) for each Fiscal Year
in the three Fiscal Year period beginning November 1, 1994 and ending October
31, 1997.
(iv) Each Executive Officer shall be granted an Option
to purchase thirty thousand (30,000) shares of Common Stock at the end of each
two year period commencing on each of March 1, 1995, March 1, 1996, and March
1, 1997 in which the Increase on Common Stock Value (as defined below) is at
least forty percent (40%). The Executive Officer shall also be granted an
Option for an additional one thousand two hundred fifty (1,250) shares of
Common Stock for each one percent (1%) by which the Increase on Common Stock
Value exceeds forty percent (40%) for such two year period, (but no more than
an aggregate of 100,000 Option Shares in respect of any such two year period).
Options to be granted under this Section shall be granted ten (10) Business
Days (as defined below) after the end of the applicable two year period. The
Increase on Common Stock Value is equal to the percentage of the fair market
value (as defined in subsection 6(b)) of the Common Stock at the beginning of
the applicable period represented by the difference between the fair market
value at the end of the period and the fair market value at the beginning of
the period.
(v) Each Option granted to an Executive Officer under
this Section 8 shall be exercisable immediately, except for Options granted
under Section 8(a)(i), which shall first become exercisable one year after the
date of grant of such Option.
If an Option under subsection 8(a) would be granted on a
date that is not a Business Day, such Option shall be granted on the first
Business Day preceding such date.
(b) Definitions.
For purposes of this Section 8, the following terms are
defined as follows:
(i) "Business Day" means a day other than any day
on which a bank in the Commonwealth of Pennsylvania is or is permitted to be
closed.
(ii) "Fiscal Year" means the twelve month period
beginning November 1 and ending October 31 or such other period designated by
the Company as the fiscal year of the Company.
(iii) "Stockholders' Equity" means, for any Fiscal
Year of the Company, the total of the preferred stock, Common Stock,
additional paid in capital, retained earnings, less any treasury stock, as
shown on the balance sheet of the Company and its consolidated affiliates
certified by its independent certified public accountants for such Fiscal
Year.
For purposes of subsection 8(a), the amount of net income,
income taxes, extraordinary items, Stockholders' Equity, and net income after
taxes are to be determined on a consolidated basis consistent with such amount
as reported on the audited financial statements prepared by the Company.
(c) Applicability of Certain Provisions of Section 6
to Options Granted Pursuant to Section 8. The provisions of Section 6 shall
be applicable subject to the provisions of this Section 8 to Options granted
pursuant to this Section 8 (provided that with respect to such sections no
Option granted pursuant to this Section 8 shall be an ISO).
(d) Re-allocation of Option Shares under Non-
exercisable Options. Options that would have been granted but for the
limitations on Option Shares available under the Plan for Options granted
under Section 8(a) shall be granted to the extent there are sufficient Option
Shares available as a result of Options which cannot be exercised pursuant to
subsection 6(e)(B).
9. Adjustments on Changes in Common Stock. The aggregate
number of shares of Common Stock as to which Options or Awards may be granted
hereunder, the number of Option Shares covered by each outstanding Option and
the Option Price per Option Share shall be appropriately adjusted in the event
of a stock dividend, stock split or other increase or decrease in the number
of issued and outstanding shares of Common Stock resulting from a subdivision
or consolidation of the Common Stock or other capital adjustment (not
including the issuance of Common Stock on the conversion of other securities
of the Company which are convertible into Common Stock) effected without
receipt of consideration by the Company. The Committee shall have authority
to determine the adjustments to be made under this Section and any such
determination by the Committee shall be final, binding and conclusive;
provided, however, that no adjustment shall be made which will cause an ISO to
lose its status as such.
10. Amendment of the Plan. The Board of Directors may amend the
Plan from time to time in such manner as it may deem advisable. Nevertheless,
the Board of Directors may not, without obtaining approval by vote of a
majority of the outstanding voting stock of the Company, within twelve months
before or after such action, change the class of individuals eligible to
receive an ISO, extend the expiration date of the Plan, decrease the minimum
Option Price of an ISO granted under the Plan or increase the maximum number
of shares as to which Options may be granted. In addition, the provisions of
Section 8 that determine (i) which Executive Officers shall be granted Options
pursuant to Section 8; (ii) the number of Option Shares subject to Options
granted pursuant to Section 8; (iii) the Option Price of Option Shares subject
to Options granted pursuant to Section 8; and (iv) the timing of grants of
Options pursuant to Section 8 shall not be amended more than once every six
months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended, if applicable.
11. Continued Employment. The grant of an Option or an Award
pursuant to the Plan shall not be construed to imply or to constitute evidence
of any agreements express or implied, on the part of the Company or any
Affiliate to retain the Optionee in the employ of the Company or an Affiliate,
as a member of the Board of Directors or in any other capacity, whichever the
case may be.
12. Withholding of Taxes. Whenever the Company proposes or is
required to issue or transfer Option Shares pursuant to the terms of an
Option or Award Shares pursuant to an Award, the Company shall have the right
to (i) require the recipient or transferor to remit to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Option Shares or Award Shares or (ii) take whatever
action it deems necessary to protect its interests. The Company's obligation
to make any delivery or transfer of Option Shares or Award Shares shall be
conditioned on the recipient's compliance, to the Company's satisfaction, with
any withholding requirement. The Committee may establish requirements and
procedures with respect to the Company's withholding of Option Shares or Award
Shares to satisfy any federal, state and/or local withholding tax requirements
which arise in connection with the transfer of Option Shares or Award Shares,
as the Committee deems appropriate.
13. Terms and Conditions of Awards. Awards granted pursuant to
the Plan shall be evidenced by written Award agreements (the "Award
Agreements") in such form as the Committee shall from time to time approve,
which Award Agreements shall comply with and be subject to the provisions
contained in the Plan and subject to such conditions and restrictions
(including conditions which may result in a forfeiture) as the Committee shall
from time to time require which are not inconsistent with the terms of the
Plan. The Award may provide for the lapse of restrictions on transfer and
forfeiture conditions in installments. The Committee may, in its sole
discretion, shorten or waive any condition or restiction with respect to all
or any portion of any Award. Notwithstanding the foregoing, all restrictions
and conditions shall lapse or terminate with respect to shares of Common Stock
subject to an Award upon the death or disability (within the meaning of
section 22(e)(3) of the Code) of the recipient of the Award (the "Awardee").
(a) Number of Shares. Each Award Agreement shall state
the number of shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify
the purchase price, if any, which applies to the Award. If the Committee
specifies a purchase price, the Awardee shall be required to make payment on
or before the date specified in the Award Agreement. An Awardee shall pay for
such shares of Common Stock (i) in cash, (ii) by certified check payable to
the order of the Company, or (iii) by such other mode of payment as the
Committee may approve.
(c) Transfer of Shares. In the case of an Award which
provides for a transfer of shares of Common Stock without any payment by the
Awardee, the transfer shall take place on the date specified in the Award
Agreement. In the case of an Award which provides for a payment, the transfer
shall take place on the date the initial payment is delivered to the Company,
unless the Committee or the Award Agreement otherwise specifies. Stock
certificates evidencing shares of Common Stock transferred pursuant to an
Award shall be issued in the sole name of the Awardee. Notwithstanding the
foregoing, as a precondition to a transfer, the Company may require an
acknowledgment by the Awardee as required with respect to Options under
Section 7 and may further require that the Awardee satisfy any of the
Company's withholding obligations attributable to any federal, state or local
law as a result of such transfer.
(d) Forfeiture Conditions. The Committee may specify in
an Award Agreement any conditions under which the Awardee shall be required to
convey to the Company the shares of Common Stock covered by the Award. Upon
the occurrence of any such specified condition, the Awardee shall forthwith
surrender and deliver to the Company the certificates evidencing such shares
as well as completely executed instruments of conveyance. The Committee, in
its discretion, may provide that certificates for shares of Common Stock
transferred pursuant to an Award be held in escrow by the Company's Treasurer
or an appropriate officer of the Company, together with an undated stock power
executed by the Awardee, until such time as each and every condition that may
result in a forfeiture has lapsed, and that the Awardee be required, as a
condition of the transfer, to deliver to such escrow agent stock powers
covering the transferred shares of Common Stock duly endorsed by the Awardee.
Stock certificates evidencing shares of Common Stock subject to forfeiture
shall bear a legend to the effect that the Common Stock evidenced thereby is
subject to repurchase or conveyance to the Company in accordance with an Award
made under the Plan and that the shares of Common Stock may not be sold or
otherwise transferred.
(e) Lapse of Conditions. Upon termination or lapse of
each and every forfeiture condition, the Company shall cause certificates
without the legend referring to the Company's repurchase right (but with any
other legends that may be appropriate, including legends indicating the
restrictions that have been established by the terms of the Award) evidencing
the shares of Common Stock covered by the Award to be issued to the Awardee
upon the Awardee's surrender of the legended certificates held by him to the
Company.
(f) Rights as Stockholder. Upon payment of the purchase
price, if any, for shares of Common Stock covered by an Award and compliance
with the acknowledgment requirement of subsection 13(c), the Awardee shall
have all of the rights of a stockholder with respect to the shares of Common
Stock covered thereby, including the right to vote such shares and receive all
dividends and other distributions paid or made with respect thereto, except to
the extent otherwise provided by the Committee or in the Award Agreement.
(g) Lapse of Restrictions. Upon the expiration or
termination of the restrictions applicable under the terms of an Award, and
the satisfaction of any other conditions set forth in an Award Agreement by
the Committee as permitted under the Plan, the restrictions applicable to the
shares of Common Stock granted pursuant to an Award shall lapse and a stock
certificate for the number of shares of Common Stock with respect to which the
restrictions have lapsed shall be delivered, free of all such restrictions,
except any that may be imposed by law or pursuant to any shareholders
agreement then in effect, to the Awardee or the beneficiary or estate of the
Awardee, as the case may be. The Company shall not, however, be required to
deliver any fractional share of Common Stock but will pay, in lieu thereof,
the fair market value (determined as of the date the restrictions lapse) of
such fractional share to the Awardee or the Awardee's beneficiary or estate,
as the case may be.
(h) Section 83(b) Elections. An Awardee who files an
election with the Internal Revenue Service to include the fair market value of
any shares of Common Stock granted pursuant to an Award in gross income while
they are still subject to restrictions shall promptly furnish the Company with
a copy of such election together with the amount of any federal, state, local
or other taxes required to be withheld to enable the Company to claim an
income tax deduction with respect to such election.
(i) Forfeiture for Breach of Duty to Company. Upon a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Awardee, that the Awardee has breached his
or her employment or service contract with the Company or an Affiliate, or has
been engaged in disloyalty to the Company or an Affiliate, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, or has disclosed
trade secrets or confidential information of the Company or an Affiliate,
Awardee shall automatically forfeit all shares of Common Stock granted
pursuant to an Award for which (1) the Company has not yet delivered the share
certificates to the Awardee or (ii) any restrictions applicable to such shares
have not lapsed. Notwithstanding anything herein to the contrary, the Company
may withhold delivery of certificates for shares of Common Stock granted
pursuant to an Award pending the resolution of any inquiry that could lead to
a finding resulting in a forfeiture.
(j) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Awards issued to an Awardee, subject
to the Awardee's consent if such amendment is not favorable to the Awardee,
except that the consent of the Awardee shall not be required for any amendment
made pursuant to Section 10 of the Plan.
(k) Change of Control. In the event of a Change of
Control (as defined in Section 6(f) above), the Committee may take whatever
action with respect to Awards that have been granted under the Plan that it
deems necessary or desirable. In addition to the foregoing, in the event of a
Change of Control, the restrictions applicable to shares of Common Stock
issued pursuant to Awards under the Plan shall lapse.
14. Interpretation. The Plan is intended to enable transactions
under the Plan with respect to directors and officers (within the meaning of
Section 16(a) under the Securities Exchange Act of 1934, as amended) to
satisfy the conditions of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended; any provision of the Plan which would cause a
conflict with such conditions shall be deemed null and void to the extent
permitted by applicable law and in the discretion of the Board of Directors.
15. Effective Date. The Plan shall be effective as of January
31, 1995.
<PAGE>
AMENDMENT TO THE
TOLL BROTHERS, INC.
KEY EXECUTIVES AND
NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN
(1993)
WHEREAS, the Company desires to amend the Toll Brothers, Inc. Key
Executives and Non-employee Directors Stock Option Plan (1993) (the "Plan") to
increase the aggregate maximum number of shares of common stock of the Company
which may be subject to grants under the Plan from 1,0000,000 to 1,200,000
shares; and
WHEREAS, the Company desires to amend the Plan to clarify the
manner in which fair market value of the common stock of the Company is
determined; and
WHEREAS, the Company desires to amend the Plan to permit the
Committee to (i) grant stock awards and (ii) establish rules and procedures
regarding the withholding of Company common stock to satisfy federal, state
and/or local withholding tax requirements arising in connection with the Plan;
and
WHEREAS, the Board of Directors is generally authorized under
Section 10 of the Plan to amend the Plan from time to time in such manner as
it may deem advisable.
NOW, THEREFORE, the Plan is hereby amended, effective as of
January 31, 1995, as follows:
1. Section 2 of the Plan is amended to read as follows:
"2. Administration. The Plan shall be administered by the Board
of Directors of the Company, without participation by any director on any
matter pertaining to him, or by a Stock Option Committee composed of two or
more of its members to operate and administer the Plan in its stead. The
Stock Option Committee or the Board of Directors in its administrative
capacity with respect to the Plan is referred to herein as the "Committee".
Notwithstanding anything in this Section 2 to the contrary, in the case of the
non-employee members of the Board of Directors who are granted Options in
accordance with the provisions of Section 8, the members of the Stock Option
Committee to whom such Options will be granted, the timing of grants of such
Options, the Option Price (as defined in subsection 6(b)) of such Options and
the number of Option Shares (as defined in Section 4) included in such Options
shall be as specifically set forth in Section 8 respectively.
The Committee shall hold meetings at such times and places
as it may determine. Acts approved at a meeting by a majority of the members
of the Committee or acts approved in writing by the unanimous consent of the
members of the Committee shall be the valid acts of the Committee.
Except with respect to Options which may be granted to
members of the Stock Option Committee under Section 8, the Stock Option
Committee shall from time to time at its discretion direct the Company to
grant Options and awards involving the transfer or issuance of Common Stock
subject to conditions of forfeiture (the "Awards") pursuant to the provisions
of the Plan. The Committee shall have plenary authority to determine the
Optionees and the recipients of Awards ("Awardees") to whom and the times at
which Options and Awards shall be granted, the number of Option Shares (as
defined in Section 4) or shares of Common Stock covering an Award ("Award
Shares") to be granted and the price and other terms and conditions thereof,
including a specification with respect to whether an Option is intended to be
an ISO subject, however, to the express provisions of the Plan. In making
such determinations, the Committee may take into account the nature of the
Optionee's services and responsibilities, the Optionee's present and potential
contribution to the Company's success, the recommendations of those employees
or officers of the Company with knowledge of the performance of the Optionee,
and such other factors as it may deem relevant. The interpretation and
construction by the Committee of any provision of the Plan or of any Option or
Award granted under it shall be final, binding and conclusive.
No member of the Board of Directors or the Committee shall
be personally liable for any action or determination made in good faith with
respect to the Plan or any Option or Award granted under it. No member of the
Committee shall be liable for any act or omission of any other member of the
Committee or for any act or omission on his own part, including but not
limited to the exercise of any power and discretion given to him under the
Plan, except those resulting from (i) any breach of such member's duty of
loyalty to the Company or its stockholders, (ii) acts or omissions not in good
faith or involving intentional misconduct or a knowing violation of law, (iii)
acts or omissions that would result in liability under Section 174 of the
General Corporation Law of the State of Delaware, as amended, and (iv) any
transaction from which the member derived an improper personal benefit.
In addition to such other rights of indemnification as he
may have as a member of the Board of Directors or the Committee, and with
respect to administration of the Plan and the granting of Options and Awards
under it, each member of the Board of Directors and of the Committee shall be
entitled without further act on his part to indemnity from the Company for all
expenses (including the amount of any judgment and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit or proceeding with respect
to the administration of the Plan or the granting of Options or Awards under
it in which he may be involved by reason of his being or having been a member
of the Board of Directors or the Committee, whether or not he continues to be
such member of the Board of Directors or the Committee at the time of the
incurring of such expenses; provided, however, that such indemnity shall not
include any expenses incurred by such member of the Board of Directors or the
Committee: (i) in respect of matters as to which he shall be finally adjudged
in such action, suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of his duties as a member of the Board
of Directors or the Committee; or (ii) in respect of any matter in which any
settlement is effected to an amount in excess of the amount approved by the
Company on the advice of its legal counsel; and provided further, that no
right of indemnification under the provisions set forth herein shall be
available to or accessible by any such member of the Board of Directors or the
Committee unless within five days after institution of any such action, suit
or proceeding he shall have offered the Company in writing the opportunity to
handle and defend such action, suit or proceeding at its own expense. The
foregoing right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each such member of the Board of Directors or
the Committee and shall be in addition to all other rights to which such
member of the Board of Directors or the Committee would be entitled as a
matter of law, contract or otherwise."
2. Section 3 of the Plan is hereby amended to read as follows:
"3. Eligibility. Those key executives of the Company or its
Affiliates (who may also be directors of the Company or its Affiliates) who
the Committee determines from time to time should be eligible to participate
in the Plan because they are critical to the operations of the Company or
because the Committee determines that such employees are or may become
"covered employees", as that term is used in Section 162(m) of the Code, and
the non-employee members of the Board of Directors shall be eligible to
receive Options and Awards hereunder; provided, however, that non-employee
members of the Board of Directors are only eligible to be granted an Option
under Section 8 and provided further that no such non-employee member of the
Board of Directors shall be eligible to receive an Award. The Committee, in
its sole discretion, shall determine whether an individual, other than a non-
employee member of the Board of Directors, qualifies as eligible to
participate in the Plan. An Optionee may receive more than one Option and an
Awardee may receive more than one Award, but only on the terms and subject to
the restrictions of the Plan."
3. Section 4 of the Plan is amended to read as follows:
"4. Option Shares. The aggregate maximum number of shares of
the Common Stock for which Options and Awards may be issued under the Plan is
One Million Two Hundred Thousand (1,200,000) shares, adjusted as provided in
Section 9 (the "Option Shares"). Option Shares and Award Shares shall be
issued from authorized and unissued Common Stock or Common Stock held in or
hereafter acquired for the treasury of the Company. If any outstanding Option
granted under the Plan expires, lapses or is terminated for any reason, or if
any Award Shares is forfeited the Option Shares allocable to the unexercised
portion of such Option and the forfeited Award Shares may again be the subject
of an Option or Award granted pursuant to the Plan."
4. Section 6(b) of the Plan is amended to read as follows:
"(b) Option Price. Each Option Document shall state the
price at which Option Shares may be purchased (the "Option Price"), which
shall be at least 100% of the fair market value of the Common Stock on the
date the Option is granted as determined by the Committee; provided, however,
that if an ISO is granted to an Optionee who then owns, directly or by
attribution under section 424(d) of the Code, shares possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or an Affiliate, then the Option Price shall be at least 110% of the
fair market value of the Option Shares on the date the Option is granted. If
the Common Stock is traded in a public market, then the fair market value per
share shall be, if the Common Stock is listed on a national securities
exchange or included in the NASDAQ National Market System, the last reported
sale price thereof on the relevant date, or, if the Common Stock is not so
listed or included, the mean between the last reported "bid" and "asked"
prices thereof on the relevant date, as reported on NASDAQ or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines."
5. Section 11 of the Plan is amended to read as follows:
"11. Continued Employment. The grant of an Option or an Award
pursuant to the Plan shall not be construed to imply or to constitute evidence
of any agreements express or implied, on the part of the Company or any
Affiliate to retain the Optionee in the employ of the Company or an Affiliate,
as a member of the Board of Directors or in any other capacity, whichever the
case may be."
6. Section 12 of the Plan is amended to read as follows:
"12. Withholding of Taxes. Whenever the Company proposes or is
required to issue or transfer Option Shares or Award Shares, the Company shall
have the right to (a) require the recipient or transferor to remit to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Option Shares or Award Shares or (b) take
whatever action it deems necessary to protect its interests. The Company's
obligation to make any delivery or transfer of Option Shares or Award Shares
shall be conditioned on the recipient's compliance, to the Company's
satisfaction, with any withholding requirement. The Committee may establish
requirements and procedures with respect to the Company's withholding of
Option Shares or Award Shares to satisfy any federal, state and/or local
withholding tax requirements which arise in connection with the transfer of
Option Shares or Award Shares, as the Committee deems appropriate."
7. Sections 13 and 14 of the Plan are hereby renumbered as
Sections 14 and 15, respectively.
8. The Plan is hereby amended by adding the following new Section
13:
"13. Terms and Conditions of Awards. Awards granted pursuant to
the Plan shall be evidenced by written Award agreements (the "Award
Agreements") in such form as the Committee shall from time to time approve,
which Award Agreements shall comply with and be subject to the following terms
and conditions and such other terms and conditions which the Committee shall
from time to time require which are not inconsistent with the terms of the
Plan. The Committee may, in its sole discretion, shorten or waive any term or
condition with respect to all or any portion of any Award. Notwithstanding
the foregoing, all restrictions shall lapse or terminate with respect to Award
Shares upon the death or disability (within the meaning of section 22(e)(3) of
the Code) of an Awardee.
(a) Number of Shares. Each Award Agreement shall state
the number of shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify
the purchase price, if any, which applies to the Award. If the Committee
specifies a purchase price, the Awardee shall be required to make payment on
or before the date specified in the Award Agreement. An Awardee shall pay for
such shares (i) in cash, (ii) by certified check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may approve.
(c) Conditions for Transfer of Shares. In the case of an
Award which provides for a transfer of Award Shares without any payment by the
Awardee, the transfer shall take place on the date specified in the Award
Agreement. In the case of an Award which provides for a payment, the transfer
shall take place on the date the initial payment is delivered to the Company,
unless the Committee or the Award Agreement otherwise specifies. Stock
certificates evidencing Award Shares transferred pursuant to an Award shall be
issued in the sole name of the Awardee. Notwithstanding the foregoing, as a
precondition to a transfer, the Company may require an acknowledgment by the
Awardee as required with respect to Options under Section 7.
(d) Forfeiture Conditions. The Committee may specify in
an Award Agreement any conditions under which the Awardee shall be required to
convey to the Company the shares of Common Stock covered by the Award. Upon
the occurrence of any such specified condition, the Awardee shall forthwith
surrender and deliver to the Company the certificates evidencing such Award
Shares as well as completely executed instruments of conveyance. The
Committee, in its discretion, may provide that certificates for Award Shares
transferred pursuant to an Award be held in escrow by the Company's Treasurer
or an appropriate officer of the Company, together with an undated stock power
executed by the Awardee, until such time as each and every forfeiture
condition has lapsed, and that the Awardee be required, as a condition of the
transfer, to deliver to such escrow agent stock powers covering the
transferred shares of Common Stock duly endorsed by the Awardee. Stock
certificates evidencing shares of Common Stock subject to forfeiture shall
bear a legend to the effect that the Common Stock evidenced thereby is subject
to repurchase or conveyance to the Company in accordance with an Award made
under the Plan and that such shares may not be sold or otherwise transferred.
(e) Lapse of Conditions. Upon termination or lapse of
each and every forfeiture condition, the Company shall cause certificates
without the legend referring to the Company's repurchase right (but with any
other legends that may be appropriate) evidencing the shares of Common Stock
covered by the Award to be issued to the Awardee upon the Awardee's surrender
of the legended certificates held by him to the Company.
(f) Rights as Stockholder. Upon payment of the purchase
price, if any, for shares of Common Stock covered by an Award and compliance
with the acknowledgment requirement of subsection 13(c), the Awardee shall
have all of the rights of a stockholder with respect to the shares of Common
Stock covered thereby, including the right to vote such shares and receive all
dividends and other distributions paid or made with respect thereto, except to
the extent otherwise provided by the Committee or in the Award Agreement.
(g) Lapse of Restrictions. Upon the expiration or
termination of the Restrictions and the satisfaction of any other conditions
prescribed by the Committee as provided for in the Plan and the Award
Agreement, the restrictions applicable to the shares of Common Stock granted
pursuant to an Award shall lapse and a stock certificate for the number of
shares of Common Stock with respect to which the restrictions have lapsed
shall be delivered, free of all such restrictions, except any that may be
imposed by law or pursuant to any shareholders agreement then in effect, to
the Awardee or the beneficiary or estate, as the case may be. The Company
shall not, however, be required to deliver any fractional share of Common
Stock but will pay, in lieu thereof, the fair market value (determined as of
the date the restrictions lapse) of such fractional share to the Awardee or
the Awardee's beneficiary or estate, as the case may be. The Award may
provide for the lapse of restrictions on transfer and forfeiture conditions in
installments.
(h) Section 83(b) Elections. An Awardee who files an
election with the Internal Revenue Service to include the fair market value of
any shares of Common Stock granted pursuant to an Award in gross income while
they are still subject to restrictions shall promptly furnish the Company with
a copy of such election together with the amount of any federal, state, local
or other taxes required to be withheld to enable the Company to claim an
income tax deduction with respect to such election.
(i) Forfeiture for Breach of Duty to Company. Upon a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Awardee, that the Awardee has breached his
or her employment or service contract with the Company or an Affiliate, or has
been engaged in disloyalty to the Company or an Affiliate, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, or has disclosed
trade secrets or confidential information of the Company or an Affiliate,
Awardee shall automatically forfeit all shares of Common Stock granted
pursuant to an Award for which (1) the Company has not yet delivered the share
certificates to the Awardee or (ii) any restrictions applicable to such shares
have not lapsed. Notwithstanding anything herein to the contrary, the Company
may withhold delivery of certificates for shares of Common Stock granted
pursuant to an Award pending the resolution of any inquiry that could lead to
a finding resulting in a forfeiture.
(j) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Awards issued to an Awardee, subject
to the Awardee's consent if such amendment is not favorable to the Awardee,
except that the consent of the Awardee shall not be required for any amendment
made pursuant to Section 10 of the Plan.
(k) Change of Control. In the event of a Change of
Control (as defined in Section 6(f) above), the Committee may take whatever
action with respect to Awards that have been granted under the Plan that it
deems necessary or desirable. In addition to the foregoing, in the event of a
Change of Control, the restrictions applicable to shares of Common Stock
issued pursuant to Awards under the Plan shall lapse."
<PAGE>
TOLL BROTHERS, INC. & SUBSIDIARIES EXHIBIT 11
STATEMENT: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Six Months Six Months
ended April 30 ended April 30
-------------- --------------
1995 1994
-------------- --------------
<S> <C> <C>
Net income per income statement $17,704,000 $12,855,000
Addback: Interest on convertible
debentures, net of income taxes 795,000 320,000
----------- -----------
Net income (Fully-diluted) $18,499,000 $13,175,000
=========== ===========
Earnings per share:
Primary $ 0.53 $ 0.38
Fully-diluted $ 0.51 $ 0.37
PRIMARY SHARES:
Weighted average shares outstanding 33,447,960 33,376,043
Common stock equivalents - stock options 168,995 332,268
----------- -----------
TOTAL 33,616,955 33,708,311
=========== ===========
FULLY-DILUTED SHARES:
Weighted average shares outstanding 33,447,734 33,375,447
Common stock equivalents - stock options 191,253 386,354
Shares issuable on conversion of
subordinated debentures 2,456,466 1,473,932
----------- -----------
TOTAL 36,095,453 35,235,733
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Three Months
ended April 30 ended April 30
-------------- --------------
1995 1994
-------------- --------------
<S> <C> <C>
Net income per income statement $ 9,445,000 $ 4,350,000
Addback: Interest on convertible
debentures, net of income taxes 395,000 271,000
----------- -----------
Net income (Fully diluted) $ 9,840,000 $ 4,621,000
=========== ===========
Earnings per share:
Primary $ 0.28 $ 0.13
Fully Diluted $ 0.27 $ 0.13
PRIMARY SHARES:
Weighted average shares outstanding 33,461,796 33,412,331
Common stock equivalents - stock options 245,269 263,805
----------- -----------
TOTAL 33,707,065 33,676,136
=========== ===========
FULLY-DILUTED SHARES:
Weighted average shares outstanding 33,461,796 33,412,331
Common stock equivalents - stock options 245,286 263,788
Shares issuable on conversion of
subordinated debentures 2,445,931 2,641,095
----------- -----------
TOTAL 36,153,013 35,235,733
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000794170
<NAME> TOLL BROTHERS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<CASH> 11,646
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 598,831
<CURRENT-ASSETS> 0
<PP&E> 24,528
<DEPRECIATION> 13,076
<TOTAL-ASSETS> 647,590
<CURRENT-LIABILITIES> 0
<BONDS> 224,197
<COMMON> 335
0
0
<OTHER-SE> 221,856
<TOTAL-LIABILITY-AND-EQUITY> 647,590
<SALES> 258,426
<TOTAL-REVENUES> 259,805
<CGS> 195,244
<TOTAL-COSTS> 222,426
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,451
<INCOME-PRETAX> 27,928
<INCOME-TAX> 10,224
<INCOME-CONTINUING> 17,704
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,704
<EPS-PRIMARY> .53
<EPS-DILUTED> .51
</TABLE>
