SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998, 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 0-15932
BF ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3038456
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
100 Bush Street, Suite 1250, San Francisco, CA 94104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 989-6580
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
$.10 Par Value Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
---- ----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB. [X]
The registrant's revenues for its most recent fiscal year, ending December 31,
1998, were $5,639,000.
As of March 11, 1999, the aggregate market value of the $.10 Par Value Common
Stock held by non-affiliates of the registrant was approximately $14,522,094
based on the closing sale price for the stock on that date. This amount
excludes the market value of 1,694,521 shares of Common Stock beneficially
owned by the registrant's directors and officers.
As of March 11, 1999, there were outstanding 3,553,349 shares of the
registrant's $.10 Par Value Common Stock.
Document Incorporated by Reference
Portions of the registrant's Proxy Statement to be mailed to stockholders in
connection with the registrant's Annual Meeting of Stockholders, scheduled to be
held in May 1999, are incorporated by reference in Part III of this report.
Except as expressly incorporated by reference, the registrant's Proxy Statement
shall not be deemed a part of this report.
Exhibit Index begins on page 36
<PAGE>
PART I
Item 1. Business.
--------
General
- -------
BF Enterprises, Inc. and its subsidiaries (collectively the "Company")
currently is engaged primarily in the real estate business, including the
development of a large tract of land, known as Meadow Pointe, in suburban Tampa,
Florida, and, as owner and landlord, leasing a 228,000 square foot building on
16 acres in Tempe, Arizona. In addition, the Company owns approximately 21
acres of undeveloped land in suburban Nashville, Tennessee.
At December 31, 1998, the Company's assets also included approximately
$4.1 million of cash, cash equivalents and marketable securities, which the
Company intends to use for general corporate purposes, including development of
the Meadow Pointe project and payment of principal and interest on subordinated
debentures and other obligations.
Real Estate
- -----------
The Company's principal real estate assets consist of the following:
Meadow Pointe. As of February 28, 1999, the Company owned
approximately 427 acres in a master planned unit development, encompassing
approximately 1,724 acres, known as Meadow Pointe, in Pasco County, Florida.
Since 1992, the Company has sold 1,807 lots, consisting of approximately 380
acres, to six homebuilders and 834 acres to the two community development
districts described below. The Company also donated 79 acres to Pasco County,
primarily for parks and a school site, sold an acre to a local utility and, in
1997, sold a two-acre church site and a one-acre day care site. Meadow Pointe
is located about 20 miles northeast of downtown Tampa, on County Road 581.
The Company commenced development of Meadow Pointe in 1992. Meadow
Pointe is being developed in accordance with a Development Order issued by the
Pasco County Board of County Commissioners, and is currently zoned for
approximately 2,750 single family homes, 1,500 multifamily residential units
and 61.5 acres of commercial facilities.
Infrastructure construction at Meadow Pointe began in late February
1992, and the initial sales of residential lots to homebuilders closed in June
1992. The Company sold 314 lots in 1998, 297 lots in 1997, 269 lots in 1996,
211 lots in 1995, 284 lots in 1994, 267 lots in 1993 and 99 lots during the last
seven months of 1992, and sold 66 lots in the first two months of 1999, for
prices ranging from approximately $19,000 to $47,000. The homebuilders
currently are offering finished houses at base prices ranging from approximately
$90,000 to $300,000.
The Company is engaged in the development of residential lots and
multifamily and commercial parcels for sale to homebuilders and others. The
Company does not expect that it or any subsidiary or affiliate will engage in
the construction of houses on finished lots. In March 1991, the Company entered
into a Development and Management Agreement (the "Development Agreement") with
Devco II Corporation ("Devco"), a Florida corporation whose principals are
experienced Tampa-area real estate developers. Under the Development Agreement,
Devco is responsible for planning and managing, and advising the Company with
1
<PAGE>
respect to, the development of Meadow Pointe, including the sale of single
family lots and multifamily and commercial parcels.
Two community development districts, both local units of Florida
special purpose government, have been formed in conjunction with the development
of Meadow Pointe. These districts, whose jurisdiction is limited to the Meadow
Pointe project, together encompass all of the 1,724 acres within the project.
During the period February 1992 through September 1998, the two community
development districts issued an aggregate $74.9 million of capital improvement
revenue bonds. All of these bonds were issued to finance the acquisition of
property, and the construction of roads, utilities, recreation facilities and
other infrastructure systems. These infrastructure improvements are essential
to the development of finished lots by the Company and the sale of those lots to
homebuilders. The Company currently anticipates that $3 million of additional
capital will be required to finance the acquisition of property and the
construction of roads, utilities and other infrastructure systems within the
project.
In January 1999, the Company signed an agreement with a developer for
the possible purchase of approximately 16 acres of the Company's commercial
tracts. The developer has 120 days to determine the feasibility of his project
and to secure a nationally known grocery store anchor tenant who already has
expressed interest in the site. If the buyer elects to purchase the property,
the price will be approximately $3,450,000, net of closing costs, assuming the
entire tract is sold. The Company and Devco have assumed marketing
responsibility for the remainder of the commercial property.
Commercial Building in Tempe. The Company owns a 228,000 square foot
commercial building, with approximately 1,000 parking spaces, on 16 acres in the
Hohokam Industrial Park in Tempe, Arizona, which is currently subject to a
10-year triple net lease to Bank One, Arizona, NA, a subsidiary of Banc One
Corporation. The lease became effective March 1, 1995, and provided for the
tenant's phased occupancy of space during 1995. Rental of the entire premises
commenced January 1, 1996. Base rents due under the lease are: $1,452,000 in
1996; $1,628,000 in 1997; $1,707,200 in 1998; $1,826,000 in 1999; $1,848,000
in 2000; $1,936,000 in 2001; $1,953,600 in 2002; $1,975,600 in 2003; $1,980,000
in 2004; and $330,000 for the two months ending February 28, 2005, when the
original lease term ends. During that period, the Company will amortize income
from the lease on a straight-line basis, as required by generally accepted
accounting principles. Accordingly, in 1996, 1997 and 1998 the Company reported
- - and in each of the remaining six years of the original lease term will report
- - rental income from the lease of $1,815,000, the average rental during the
period January 1, 1996 through February 28, 2005. The lease also provides for
two five-year renewal periods, with base rents equal to the market rental rates
then in effect in the metropolitan Phoenix area.
Other Real Estate. The Company also owns approximately 21 acres of
undeveloped land in suburban Nashville, Tennessee of which 15 acres is zoned
high density residential and 6 acres is zoned commercial. The Company is
currently preparing grading plans for the commercial acres and expects to
complete the grading work in mid-1999. At that time the commercial property
will be listed for sale.
In 1997 the Company formed a new subsidiary to make an initial
investment of $300,000, as a member of a limited liability company, in the
construction and ownership of 130 four bedroom student townhome units located
near the University of North Carolina at Charlotte, North Carolina. By the
end of the first quarter of 1999, the Company expects to have its entire
investment repaid and, thereafter, the Company will retain a 5% equity
investment in the project.
2
<PAGE>
Foreign Operations
- ------------------
The Company has no foreign operations and has no material assets in
foreign countries. A wholly owned foreign subsidiary holds 22% of the common
stock of Trout Creek Development Corporation, a Delaware corporation, the
Company's development subsidiary.
Employees
- ---------
Currently, the Company has eight employees.
Competition
- -----------
The Company competes with many other firms and individuals who develop
real estate or hold undeveloped property for lease or sale or developed property
for lease or sale. While competitive conditions vary substantially, depending
upon the geographical area and the type of real estate asset, within a
particular market the most significant competitive factors generally are
location, price and zoning.
Development of the Meadow Pointe project will take several more years
and is dependent upon, among other things, the availability of future financing
on terms satisfactory to the Company, the strength of the general economy and
employment growth in the Tampa area, residential mortgage interest rates,
competitive residential developments serving the same group of home buyers and
other factors related to the local Tampa real estate market. During 1997 and
1998 construction began at several other residential projects in the same market
area as Meadow Pointe, along or near County Road 581. These new projects may
have an adverse impact on the rate of lot sales at Meadow Pointe or lot prices,
or both.
It is expected that the Tempe, Arizona property will remain under lease
with the existing tenant until at least March 2005. The Company expects to sell
or develop its Nashville property when local conditions warrant as mentioned
above.
Other Information
- -----------------
The Company's current business constitutes a single business segment,
real estate, consisting of several properties. Financial and other information
relating to the Company's operations by industry segments for the past three
years is, therefore, omitted. See the Company's Consolidated Financial
Statements.
Except for the lease of the 228,000 square foot Tempe commercial
building to one tenant, the Company's business is not dependent upon a single
customer or a limited number of customers, and is not seasonal. The Company
does not utilize raw materials, has no order backlog, and no material portion of
its business is subject to government contracts. The Company has no trademarks,
service marks or tradenames other than Meadow Pointe. The Company does not
engage in or make any expenditures with respect to research and development
activities, and the Company's business is not materially affected by compliance
with federal, state or local provisions regulating the discharge of materials
into the environment or otherwise relating to the protection of the environment.
3
<PAGE>
Item 2. Properties.
----------
The Company leases its headquarters office space, consisting of
approximately 2,241 square feet, in the Shell Building at 100 Bush Street, in
San Francisco, under a lease expiring January 31, 2004. The Company believes
this office space is adequate for its current needs.
Item 3. Legal Proceedings.
-----------------
California Franchise Tax Board Litigation
In February 1996, the Company's predecessor, on behalf of the Company,
filed a complaint against the California Franchise Tax Board (the "FTB") for a
refund of assessed income taxes and accrued interest for the year ended
December 31, 1981. The suit arises out of the FTB's assessment for 1981 taxes,
based on its contention that a loss attributable to the 1981 acquisition by the
Company's predecessor of a warrant for the purchase of its common stock should
have been treated as a business deduction rather than a non-business deduction.
The Company appealed the FTB's assessment to the California State Board of
Equalization, which denied the appeal in July 1994. In March 1995, the Company
made payment to the FTB of the assessment and accrued interest and filed a
request for refund in the full amount of that payment. The amount the Company
paid to the FTB, after reimbursement by the Company's predecessor of the related
federal and state income tax benefits, was approximately $400,000. The Company's
request for refund was denied and the action described above was filed. On
May 30, 1997, the Court granted the FTB's motion for summary judgement and
dismissed the Company's action. The Company filed an appeal of the judgement
with a California Court of Appeal. In late 1998 the California Court of
Appeal unanimously upheld the Company's position. The Appellate Court ordered
reimbursement to the Company of the entire amount originally paid to the FTB
plus interest to the date of reimbursement. The precise amount and date of this
reimbursement have not as yet been determined.
Meadow Pointe Litigation
In March 1998, an action was commenced in the Pasco County, Florida
Circuit Court against a subsidiary of the Company and others relating to the
Meadow Pointe development. The Amended Complaint alleges that certain
individuals who purchased homes assumed that a homeowners association had been
established for the development. Plaintiffs seek money damages from all
defendants named in the Amended Complaint, except for the Company's subsidiary.
The only relief sought against the Company's subsidiary is an injunction
compelling the subsidiary to operate and maintain architectural control at
Meadow Pointe.
On July 2, 1998, the Court granted the subsidiary's motion to sever and
denied the subsidiary's motion to dismiss. Accordingly, on July 13, 1998,
plaintiffs filed a Severed Complaint against the Company's subsidiary, which
seeks injunctive relief and declaratory relief, but no damages.
On October 16, 1998, the Court granted summary judgment in favor of the
Company's subsidiary on Count 1 of the Severed Complaint for Declaratory Relief.
The Court ruled that the recently established voluntary homeowners association
for Meadow Pointe, to which the Company's subsidiary had assigned certain of its
rights pursuant to the Declarations of Restrictions recorded in the public
records of Pasco County, Florida, had standing to enforce said Declarations of
Restrictions. Plaintiffs have moved for reconsideration of the Court's ruling,
and that motion is currently pending. On November 3, 1998, the Company's
subsidiary moved for summary judgment on the remaining count for injunctive
relief. The Company believes that it has meritorious defenses to the claims
made against its subsidiary, and it intends to continue to vigorously contest
the action.
4
<PAGE>
The Company is not a party to any other pending legal proceedings
except routine litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
5
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
-------------------------------------------------
Stockholder Matters.
-------------------
The Company's common stock trades on the Nasdaq National Market System
tier of The Nasdaq Stock Market under the symbol "BFEN". On March 9, 1999,
there were approximately 570 holders of record of the common stock.
Following is a list by calendar quarter of the reported high and low
closing bid quotations per share for the Company's common stock during 1998 and
1997, all of which quotations represent prices between dealers, do not include
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions:
<TABLE>
<CAPTION>
Bid Quotations
--------------
1998 High Low
---- ---- ---
<S> <C> <C>
1st Quarter $ 9 1/8 $ 8 1/8
2nd Quarter 8 3/8 8
3rd Quarter 8 3/16 7 3/4
4th Quarter 8 1/4 7 3/4
1997 High Low
---- ---- ----
1st Quarter $ 6 1/2 $ 6 1/4
2nd Quarter 8 1/4 6 1/2
3rd Quarter 8 1/4 8
4th Quarter 8 1/4 8 1/4
</TABLE>
The source of the foregoing quotations was the National Quotation
Bureau, Inc.
No cash dividends were paid in 1998 or 1997, and the Board of Directors
of the Company currently does not expect to declare cash dividends, in an effort
to conserve the Company's cash resources for payment of subordinated debentures,
real estate development activities and other corporate purposes.
6
<PAGE>
Item 6. Selected Financial Data.
-----------------------
Following is a table of selected financial data of the Company for the last
five years:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Income statement data:
Revenues $ 5,639 $ 5,606 $ 4,559 $ 3,550 $ 3,883
Income before income taxes 2,859 2,980 2,137 477 1,608
Net income 2,829 3,079 2,137 445 1,608
Net income per share:
Basic .78 .83 .57 .12 .43
Diluted .70 .75 .53 .11 .41
Average shares used in computing basic
net income per share 3,640 3,697 3,746 3,788 3,782
Average shares and equivalents used
in computing diluted net income per share 4,039 4,078 4,042 4,029 3,947
Balance sheet data
(at end of period):
Total assets $23,918 $21,842 $19,901 $18,521 $20,446
Subordinated debentures, unmatured 719 719 805 817 817
Stockholders' equity 21,758 19,592 16,955 14,867 14,625
Stockholders' equity per
share (diluted) (1) 5.71 5.12 4.36 3.84 3.74
</TABLE>
Note: (1) Calculation of diluted stockholders' equity per share assumes
exercise at the end of each year of all dilutive options outstanding
at that time.
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
--------------------------------------------------
Condition and Results of Operations.
-----------------------------------
Results of Operations for the Three Years Ended December 31, 1998
- -----------------------------------------------------------------
During the years ended December 31, 1998, 1997 and 1996, the Company
realized net income of $2,829,000, $3,079,000 and $2,137,000, respectively. The
increases in net income from 1996 to 1997 and 1998 were primarily the result of
higher gains from sales of residential lots and other real estate at the
Company's Meadow Pointe project near Tampa, Florida.
Results for the years 1998, 1997 and 1996 included gains from sales of
lots within Meadow Pointe of $2,829,000, $2,662,000 and $1,575,000,
respectively, on sales to homebuilders of 314 lots in 1998, 297 lots in 1997 and
269 lots in 1996. The Company's reported gains from property sales at Meadow
Pointe are based in part upon estimates of the total revenues and costs to be
derived by the Company over the life of the project (see Note B of Notes to
Consolidated Financial Statements). As set forth in prior reports, it is the
Company's practice to review periodically these revenue and cost estimates and
make cumulative adjustments to reflect any revised estimates. Accordingly, the
decline in cost of real estate sold in 1997 and 1998 from that cost in 1996, and
the related reduction in cost of real estate sold as a percentage of real estate
sales, is primarily the result of cumulative adjustments the Company made in
1997 and 1998 to reflect changes in its revenue and cost estimates. Property
sales at Meadow Pointe are dependent upon, among other things, the strength of
the general economy in the Tampa area, residential mortgage interest rates,
competitive residential developments serving the same group of home buyers and
other factors related to the local Tampa real estate market.
In addition to gains from Meadow Pointe residential lot sales, results
for 1997 included aggregate gains of $79,000 from sales of a two-acre church
site, a one-acre day care center site and a model home, all within the Meadow
Pointe project, and a lot in a residential development adjacent to Meadow
Pointe. Real estate sales in 1997 also included a gain of $61,000 from the sale
of a half acre of raw land in Nashville, Tennessee. There were no such gains
in 1996 and 1998.
Real estate leasing income in each of 1996, 1997 and 1998 included
$1,815,000 of rental income from the Company's Tempe property (see Note G of
Notes to Consolidated Financial Statements). The rental of model homes at
Meadow Pointe accounted for $7,000, $26,000 and $27,000 of real estate leasing
income in 1996, 1997 and 1998, respectively. Depreciation and amortization
expense during each of these three years was entirely attributable to the Tempe
property.
Interest and dividends from investments in the years 1998, 1997 and
1996 has varied with the amount of funds available for investment.
General and administrative expenses charged against income were $72,000
greater in 1998 than in 1997, and $353,000 greater in 1997 than in 1996. The
higher expenses in 1998 and 1997 were due principally to higher employee
compensation and benefits expenses and professional fees. Employee compensation
expenses capitalized against Tampa, Florida real estate in the years ended
December 31, 1998, 1997 and 1996 were $73,000, $77,000 and $108,000,
respectively, representing 7%, 8% and 12%, respectively, of total compensation
for those years. The Company capitalizes a portion of the compensation of
certain employees who devote a significant portion of their time directly to
the Meadow Pointe project.
8
<PAGE>
In 1996 the Company realized gains of $94,000 from sales of a
marketable equity security. There were no such gains or losses in 1997 and
1998.
In 1998 the Company provided for estimated Florida income taxes of
$30,000. The $99,000 benefit for state income taxes in 1997 resulted from the
reversal of prior years' state income tax provisions.
Liquidity and Capital Resources
- -------------------------------
During the year ended December 31, 1998, cash and cash equivalents
decreased by $691,000. This decrease was due principally to reductions in the
Company's matured subordinated debentures, an increase in investments in
marketable securities and purchases of the Company's common stock. At December
31, 1998, the Company held $4,059,000 in cash, cash equivalents and marketable
securities as compared to $2,160,000 for all short-term and long-term
liabilities. From time to time, the Company purchases shares of its common
stock in the open market (see Note L of Notes to Consolidated Financial
Statements).
The Company's business plan calls for substantial expenditures during
the next several years relating to the planned development of Meadow Pointe.
During the period February 1992 through September 1998, two community
development districts encompassing the Meadow Pointe project issued
approximately $74.9 million of capital improvement revenue bonds. The Company
currently anticipates the need for approximately $3 million of additional
financing by one of the districts. The proceeds of such financing have been and
are expected to be used to construct infrastructure improvements necessary for
the development and sale of residential lots, and multifamily and commercial
parcels, in Meadow Pointe (see Note H of Notes to Financial Statements). At
December 31, 1998, real estate inventory held for current sale and land held for
future development at Meadow Pointe was $2,330,000 greater than at December 31,
1997, as a result of the capitalization of various costs including payment of
periodic bond assessments to the two community development districts.
The Company intends to pay for its future expenditures at Meadow Pointe
and its other operating expenses (including those related to debenture payments)
with (i) cash generated from sales of property within Meadow Pointe and its
other operations, and (ii) cash and cash equivalents on hand. There can be no
assurance that the Company will generate sufficient cash or have sufficient cash
and cash equivalents on hand to cover such expenditures.
The statements in this Report on Form 10-KSB regarding Meadow Pointe
property sales, financing of Meadow Pointe expenditures and any other statements
which are not historical facts are forward looking statements. Such statements
involve risks and uncertainties, including, but not limited to, competition,
general economic conditions, ability to manage and continue growth and other
factors detailed in the Company's filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.
Year 2000
- ---------
The Company utilizes a number of computer software programs in
conducting its business, primarily for financial and administrative purposes.
The Company has addressed the "Year 2000 Problem" by upgrading its internal
systems to the extent that the Company's software applications contain source
code that is able to appropriately interpret the upcoming year "2000" and
beyond. The cost of these upgrades was not material to the Company's
financial position or results of operations.
9
<PAGE>
In addition, the Company is dependent to varying extents on the
software applications of certain organizations with and through which it
conducts business. The Company is in the process of identifying the extent of
the Year 2000 problem which may exist within relevant outside organizations. The
impact of the Year 2000 problem on those organizations is not known, however,
management does not believe that impact will have a material adverse effect on
the Company's financial position or results of operations. In management's
opinion, the primary risk of a Year 2000 problem within its operations is a
possible slowdown in the processing of information needed to complete short-term
transactions. It is not believed that it would affect the timeframe for
completion of the Meadow Pointe project or the value of other Company assets.
The Company does not have a Year 2000 contingency plan as it does not
believe that a worst case scenario would have a material adverse effect on its
financial position or results of operations.
Qualitative and Quantitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company holds certain cash equivalents and marketable securities for
non-trading purposes which are sensitive to changes in market value. In
addition, the Company has issued debt which is subject to floating rates of
interest. The Company does not believe that changes in the market value of
these financial instruments will have a material impact, either favorable or
unfavorable, on its financial position or results of operations. The Company
has not in the past engaged in transactions requiring the use of derivative
financial instruments either for hedging or speculative purposes, and has no
plans to do so in the future.
10
<PAGE>
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
Index to Financial Statements and Schedule Covered by Report of Independent
Public Accountants
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent public accountants........................................................12
Consolidated balance sheets at December 31, 1998 and 1997 ......................................13
Consolidated statements of income for the years ended December 31,
1998, 1997 and 1996 ............................................................................14
Consolidated statements of stockholders' equity for the years ended
December 31, 1998, 1997 and 1996 ...............................................................15
Consolidated statements of cash flows for the years ended December 31,
1998, 1997 and 1996 ............................................................................16
Notes to consolidated financial statements .....................................................17-27
Schedule III - Real estate and accumulated depreciation at
December 31, 1998...............................................................................28
11
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of
Directors of BF Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of BF Enterprises,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and the disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BF
Enterprises, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying schedule
listed in the index to the financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic consolidated financial statements. This
information has been subjected to the auditing procedures applied in our audit
of the basic consolidated financial statements and, in our opinion, fairly
states, in all material respects, the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
February 12, 1999
12
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
------------
1998 1997
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 3,347 $ 4,038
Marketable securities 712 280
Receivables 74 89
Real estate rental property, net of depreciation 2,267 2,318
Real estate inventory held for current sale
and land held for future development 16,005 13,657
Lease contract receivable 661 599
Deferred tax assets 95 46
Other assets 757 815
------- -------
TOTAL ASSETS $23,918 $21,842
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 1,441 $ 1,531
Subordinated debentures, unmatured 719 719
------- -------
Total Liabilities 2,160 2,250
------- -------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value
Authorized -- 10,000,000 shares
Issued and outstanding --
3,578,599 and 3,670,193 shares 358 367
Capital surplus 15,887 16,614
Retained earnings 5,376 2,547
Other accumulated comprehensive income 137 64
------- -------
Total Stockholders' Equity 21,758 19,592
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $23,918 $21,842
------- -------
------- -------
</TABLE>
The accompanying notes are an integral
part of these statements.
13
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Real estate sales $ 3,577 $ 3,456 $ 2,444
Real estate rental income 1,842 1,841 1,822
Interest and dividends 207 287 278
Other 13 22 15
----- ----- -----
5,639 5,606 4,559
Costs and Expenses:
Cost of real estate sold 748 654 869
Real estate operating 43 52 74
Depreciation and amortization 96 96 98
Interest on subordinated debentures 52 55 59
General and administrative 1,841 1,769 1,416
----- ----- -----
2,780 2,626 2,516
Gross profit 2,859 2,980 2,043
Gains from sales of securities -- -- 94
----- ----- -----
Income before income taxes 2,859 2,980 2,137
Provision (benefit) for state income taxes 30 (99) --
----- ----- -----
Net income $ 2,829 $3,079 $ 2,137
------- ------ -------
------- ------ -------
Net income per share:
Basic $ .78 $ .83 $ .57
------- ------- -------
------- ------- -------
Diluted $ .70 $ .75 $ .53
------- ------- -------
------- ------- -------
Average shares used in computing basic
net income per share 3,640 3,697 3,746
Average shares and equivalents used in
computing diluted net income per share 4,039 4,078 4,042
</TABLE>
The accompanying notes are an integral
part of these statements
14
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Common Stock:
Balance at beginning of period $ 367 $ 373 $ 375
Purchases of common stock -- par value (9) (6) (2)
-------- ------- -------
Balance at end of period $ 358 $ 367 $ 373
-------- ------- -------
-------- ------- -------
Capital Surplus:
Balance at beginning of period $16,614 $17,078 $17,208
Purchases of common stock --
excess over par value (727) (464) (118)
Purchases of stock options -- -- (12)
------- ------- -------
Balance at end of period $15,887 $16,614 $17,078
------- ------- -------
------- ------- -------
Retained Earnings (Deficit):
Balance at beginning of period $ 2,547 $ (532) $ (2,669)
Net income 2,829 3,079 2,137
-------- ------- --------
Balance at end of period $ 5,376 $ 2,547 $ (532)
-------- ------- -------
-------- ------- -------
Other Accumulated Comprehensive Income
Balance at beginning of period $ 64 $ 36 $ (47)
Unrealized gains from marketable equity
securities during period 73 28 83
------- ------- -------
Balance at end of period $ 137 $ 64 $ 36
------- ------- --------
------- ------- --------
Accumulated Comprehensive
Income (Loss):
Balance at beginning of period $ 2,611 $ (496) $(2,716)
------ ------- -------
Net income 2,829 3,079 2,137
Unrealized gains from marketable
equity securities during period 73 28 83
------ ------- -------
Comprehensive income for period 2,902 3,107 2,220
------ ------- -------
Balance at end of period $ 5,513 $ 2,611 $ (496)
------- ------- ------
------- ------- ------
</TABLE>
The accompanying notes are an integral part of
these statements.
15
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,829 $ 3,079 $ 2,137
Adjustments to reconcile net income to
net cash used by operating activities:
Gains from securities -- -- (94)
Gains from sales of real estate (2,829) (2,802) (1,575)
Net cash proceeds from sales of real estate 1,929 2,083 1,615
Mortgage loan payments -- 100 610
Real estate development costs (2,878) (2,094) (1,946)
Reimbursement of real estate
development costs 1,430 694 272
Changes in certain assets and liabilities:
Decrease in receivables 15 30 24
Increase in lease contract receivable (62) (236) (318)
Increase (decrease) in payables
and accrued liabilities 95 (14) (212)
Decrease in deferred income taxes -- (8) (8)
Other net 60 (248) (132)
------ ------ ------
Total adjustments to net income (2,240) (2,495) (1,764)
------ ------ ------
Net cash provided
by operating activities 589 584 373
Cash flows from investing activities:
Purchases of marketable securities (359) (212) --
Proceeds from sales of marketable securities -- -- 675
Investment in limited liability company -- (300) --
------ ------ ------
Net cash provided (used) by investing activities (359) (512) 675
Cash flows from financing activities:
Reductions in subordinated debentures (185) (662) (486)
Purchases of the Company's common stock (736) (470) (120)
Other -- -- (12)
------ ------ ------
Net cash used by financing activities (921) (1,132) (618)
------ ------ ------
Net increase (decrease) in cash
and cash equivalents (691) (1,060) 430
Cash and cash equivalents at beginning of period 4,038 5,098 4,668
------ ------ ------
Cash and cash equivalents at end of period $ 3,347 $ 4,038 $ 5,098
------ ------ ------
------ ------ ------
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest (net of amount capitalized) $ 52 $ 55 $ 61
------ ------ ------
------ ------ ------
</TABLE>
The accompanying notes are
an integral part of these statements.
16
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Business and Principles of Consolidation
BF Enterprises, Inc. and its subsidiaries (collectively the "Company") currently
is engaged primarily in the real estate business, including the development of a
large tract of land, known as Meadow Pointe, in suburban Tampa, Florida, and, as
owner and landlord, leasing a 228,000 square foot building on 16 acres in Tempe,
Arizona. In addition, the Company owns approximately 21 acres of undeveloped
land in suburban Nashville, Tennessee.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
balances have been eliminated.
Note B - Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported results of operations during the reporting period. Actual results
could differ from those estimates.
Note C - Business Segments
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS No. 131 requires the
Company to disclose information used by management to evaluate its individual
business segments. As the Company currently is engaged in only one business
segment, no additional disclosures are required. The Company's net investment
in and the operating results of its various real estate activities may be
derived directly from the accompanying consolidated financial statements.
Note D - Earnings Per Share
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 requires the disclosure of
basic earnings per share and modifies existing guidance for computing fully
diluted earnings per share. Under the new standard, basic earnings per share is
computed as earnings divided by the weighted average number of shares
outstanding during the reported period, excluding the dilutive effects of stock
options and other potentially dilutive securities. Diluted earnings per share
give effect to such dilutive securities. The Company adopted the disclosure
requirements of SFAS 128 in the fourth quarter of 1997. Earnings per share data
for the periods reported have
17
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
been computed as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income $2,829 $3,079 $2,137
------ ------ ------
------ ------ ------
Weighted average number of shares
outstanding:
Common Stock 3,640 3,697 3,746
Common stock equivalents -
stock options (1) 399 381 296
----- ------ ------
4,039 4,078 4,042
------ ------ ------
------ ------ ------
Net income per share:
Basic - based on weighted average
number of shares of common stock
outstanding $. 78 $ .83 $ .57
------ ------- -------
------ ------- -------
Diluted - based on weighted average
number of shares of common stock
and common stock equivalents
outstanding $ .70 $ .75 $ .53
------ ------- -------
------ ------- -------
</TABLE>
(1) Computation is based on the treasury stock method using the average
market price.
Note E - Cash and Cash Equivalents
Cash and cash equivalents include short-term investments with original
maturities of 90 days or less, such as treasury bills and notes, government
agency bills and notes, bank deposits, time deposits, certificates of deposit,
repurchase agreements, bankers' acceptances, and commercial paper, all of which
are carried at cost, which approximated market value.
18
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note F - Marketable Securities
The amortized cost and fair values of marketable securities available for sale
as of December 31, 1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------------------------------- --------------------------------------
Gross Gross
Amortized Unrealized Fair Amortized Unrealized Fair
Cost Gains Value Cost Gains Value
---- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Common Stock $ 575 $ 137 $ 712 $ 216 $ 64 $ 280
----- ----- ----- ----- ---- -----
----- ----- ----- ----- ---- -----
</TABLE>
Unrealized gains and losses are presented in stockholders' equity.
Proceeds from sales of securities available for sale were $675,000 in 1996.
There were no such sales in 1997 or 1998. Gross gains of $94,000 were realized
on securities sales in 1996. Gains and losses are computed using the specific
identification method.
Note G - Real Estate Rental Property
Real estate rental property is an office building and 16 acres of land in Tempe,
Arizona. In 1995, the Company entered into a new 10-year net lease with Bank
One, Arizona, NA, a subsidiary of Banc One Corporation. The lease provided for
the phased occupancy and rental of space by Bank One during 1995, with rental of
the entire premises commencing January 1, 1996. At December 31, 1998,
contractual rental revenues from the lease with Bank One are projected as
follows:
1999 1,826,000
2000 1,848,000
2001 1,936,000
2002 1,953,600
2003 1,975,600
2004 and after 2,310,000
On January 1, 1996, in accordance with generally accepted accounting principles
(GAAP), the Company began amortizing on a straight-line basis (1) income from
the lease with Bank One, resulting in annual real estate leasing income of
$1,815,000 for the period ending February 28, 2005, and (2) a related $423,000
lease commission, with annual amortization expense of $46,000 over the same
period.
19
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Real estate rental property is carried at cost less accumulated depreciation
which is computed using the straight-line method over the estimated useful
lives of the assets. Real estate rental property for the years ended December
31, 1998 and 1997 was as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation Net
---- ------------ ----
<S> <C> <C> <C> <C>
1998 $4,470 $2,203 $2,267
------ ------ ------
------ ------ ------
1997 $4,470 $2,152 $2,318
------ ------ ------
------ ------ ------
</TABLE>
Note H - Real Estate Inventory Held for Current Sale and
Land Held for Future Development
Real estate inventory held for current sale and land held for future development
consists primarily of approximately 436 acres of the 1,724 acres originally
included in the Company's master-planned, mixed use development known as Meadow
Pointe near Tampa, Florida. The parcels within this project are in various
stages of development. Parcels on which the Company has completed substantially
all of its development activities are considered to be held for current sale.
Parcels on which development is not yet complete are considered to be held
for future development. These assets were carried at a cost of $15,859,000 at
December 31, 1998 and $13,529,000 at December 31, 1997, which the Company
believes was less than their fair value. Due to uncertainties inherent in the
valuation process and in the economy, it is reasonably possible that the actual
sales value of the Company's inventory of land held for current sale and future
development could be materially different than current expectations.
Two community development districts, both local units of Florida special purpose
government, have been formed in conjunction with the development of Meadow
Pointe. These districts, whose jurisdiction is limited to the Meadow Pointe
project, together encompass all of the 1,724 acres within the project. During
the period February 1992 through September 1998, the two community development
districts issued an aggregate $74.9 million of capital improvement revenue
bonds, including $14.2 million issued in 1998. All of these bonds were issued
to finance the acquisition of property, and the construction of roads,
utilities, recreation facilities and other infrastructure systems.
Approximately $22 million of the capital improvement revenue bonds issued by the
districts are payable in equal annual installments of principal and interest
over 20 years. The balance of the bonds are payable over a fixed term, but must
be prepaid in part each time a developed lot or other land is sold. Annual bond
installments are paid by special assessments levied against individual parcels
of land within the district areas. These special assessments are collected
either directly by the districts or by the Pasco County Assessor, in the same
manner as county property taxes, on behalf of the districts. The outstanding
bonds are secured by a first lien upon and pledge of the special assessments.
20
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
If any parcel owner, including the Company's subsidiaries (until such time as
their land has been developed and sold or otherwise transferred), but excluding
the districts and the county, fails to make payment of an assessment, then such
owner's parcel will become subject to a lien which may ultimately be foreclosed
for nonpayment. As of December 31, 1998, parcels of land owned by the Company's
subsidiaries were subject to bonds in the principal amount of approximately $31
million.
The two community development districts have purchased land from one of the
Company's subsidiaries for use in the construction of roads, ponds, conservation
areas and neighborhood parks. The Company has accounted for payments it
received from the two districts in connection with those transactions, as of the
date received, as reductions in the carrying value of all property to be
developed within the district areas.
Note I - Income Taxes
As of December 31, 1998 and 1997, the Company had recorded the following net
deferred tax assets. Amounts at December 31, 1997 have been adjusted to conform
to the Company's 1997 federal income tax returns as filed in September 1998.
<TABLE>
<CAPTION>
Tax Effect (in thousands)
------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 3,946 $ 3,888
Federal Alternative Minimum Tax
payments 95 46
Deferred tax liabilities:
Land basis (1,843) (761)
Effect of accelerated depreciation (195) (181)
Other (152) (117)
------- -------
1,851 2,875
Less: valuation allowance (1,756) (2,829)
------- -------
Net deferred tax assets $ 95 $ 46
------- ------
------- ------
</TABLE>
21
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company did not include a provision for federal income taxes in the
consolidated statement of operations for the years ended December 31, 1998, 1997
and 1996 because it realized the benefits, respectively, of $1,073,000,
$1,202,000 and $793,000 of deferred tax assets. In 1998 the Company provided
for estimated Florida income taxes of $30,000. The $99,000 benefit for state
income taxes for the year ended December 31, 1997, resulted from the reversal
of prior years' state income tax provisions.
Following is a reconciliation from the expected federal statutory income tax
rate to the effective tax rate, expressed as a percentage of pre-tax income, for
the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Expected federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit 3.9 3.9 4.3
Reversal of prior years' state income tax provisions -- (3.3) --
income
Utilization of deferred tax assets (36.9) (37.9) (38.3)
----- ----- -----
Effective tax rate 1.0% (3.3)% --%
----- ----- -----
----- ----- -----
</TABLE>
At December 31, 1998, the Company had available for federal income tax purposes
unused operating loss carryforwards of approximately $10,400,000 which expire as
follows (in thousands):
<TABLE>
<CAPTION>
Year of Expiration
------------------
<S> <C>
2002 $ 600
2003 1,100
2004 700
2005 500
2006 700
2007 1,500
2008 2,100
2009 2,200
2010 100
2011 800
2012 100
--------
$10,400
--------
--------
</TABLE>
22
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note J - Subordinated Debentures
At December 31, 1998, $719,000 of the Company's Floating Rate Subordinated
Debentures due December 31, 1999, was outstanding. The interest rate for the
floating rate debentures is variable and equal to 1% above the average monthly
yield on three-month United States Treasury bills, subject to a minimum of 7%
per annum and a maximum of 10% per annum. The average interest rate for these
debentures was 7% for the years ended December 31, 1998, 1997 and 1996.
In connection with a corporate reorganization in June 1987, pursuant to which
the Company took transfer of certain businesses, the Company also assumed
related liabilities, including the obligations with respect to five series of
subordinated debentures. At December 31, 1998, the $982,000 of these debentures
still due and outstanding, all of which have matured, was included in payables
and accrued liabilities. At December 31, 1998, the Company had outstanding a
$1,000,000 letter of credit for the benefit of the debenture trustee in
connection with principal payments on two series, the Series D and E debentures.
This letter of credit secures the Company's obligations to pay the outstanding
principal of, and accrued interest on, those debentures upon presentment thereof
in accordance with the indenture governing the debentures.
Note K - Rental Commitments
Rental expense, primarily for office premises, amounted to $52,000, $59,000 and
$56,000 for the years ended December 31, 1998, 1997 and 1996, respectively. As
of December 31, 1998, the approximate minimum rental commitments under the
Company's office lease, which expires on January 31, 2004 were:
<TABLE>
<S> <C>
1999 $ 70,000
2000 72,000
2001 72,000
2002 72,000
2003 72,000
2004 6,000
</TABLE>
Note L - Stockholders' Equity
From time to time, the Company purchases shares of its common stock in the open
market. In 1998, 1997 and 1996 the Company purchased shares of its common
23
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
stock, primarily in open market transactions: 91,594 shares for $736,000 in
1998, 63,700 shares for $470,000 in 1997 and 19,300 shares for $120,000 in 1996.
Note M - Stock Plans
The Company's 1997 Long-Term Incentive Plan (the "1997 Plan") was approved by
the stockholders of the Company at its Annual Meeting of Stockholders on May 27,
1998. The 1997 Plan provides that 560,000 shares of the Company's common stock
be made available for the granting of non-qualified stock options, incentive
stock options, stock appreciation rights, restricted stock, performance awards,
stock payments and deferred stock to employees, who may also be directors of the
Company. The Company's 1993 Long-Term Equity Incentive Plan (the "1993 Employee
Plan") and Amended and Restated Management Incentive Compensation Plan (the
"Original Employee Plan") govern certain non-qualified stock options issued to
officers and employees prior to adoption of the 1997 Plan; no new grants of
options or other stock rights may be made under the 1993 Employee Plan or the
Original Employee Plan. The Company's 1994 Stock Option Plan for Outside
Directors (the "1994 Director Plan"), provides for the grant of stock options to
those of its directors who are not employed by the Company (the
"Outside Directors").
The 1997 Plan, the 1993 Employee Plan and the Original Employee Plan are
administered by the Board of Directors or a committee (the "Committee"),
composed of not less than two directors who are disinterested persons (as that
term is defined in Rule 16b-3, promulgated pursuant to the Securities Exchange
Act of 1934, as amended). The Committee selects participants in the 1997 Plan
and determines the number of shares subject to the options and other stock
rights granted pursuant to that plan, and the terms of those options and other
rights.
The 1994 Director Plan replaced the Company's Non-Employee Directors' Option
Plan (the "Original Director Plan"). Under the Original Director Plan, each
Outside Director was automatically granted, upon election as a director, a
non-qualified option for 5,000 shares of the Company's common stock. All of the
options which were granted under the Original Director Plan have been exercised.
No new options may be granted under the Original Director Plan.
Pursuant to the 1994 Director Plan, any person who becomes an Outside Director
is to be granted a non-qualified option to purchase 5,000 shares of the
Company's common stock, the grant to be effective on the date of his or her
election or appointment as an Outside Director, and each Outside Director who
has served as such for at least one year will also receive an option to purchase
2,000 shares of the Company's common stock on the date of each annual meeting of
stockholders at which he or she is reelected a director. In accordance with the
1994 Director Plan, two Outside Directors were granted options for 5,000 shares
each upon approval of the plan in May 1994 and subsequently received options for
2,000 shares each on the dates of the annual meetings of stockholders in May
1995, May 1996, May 1997 and May 1998. Another Outside Director was granted, at
the time of his appointment in October 1996, a non-qualified option to purchase
5,000 shares of the Company's common stock, and, in accordance with the 1994
Director Plan, subsequently received options for 2,000 shares on the date of the
annual meeting of stockholders in May 1998. All options granted pursuant to the
24
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1994 Director Plan have a per share exercise price equal to the fair market
value of the Company's common stock on the grant date.
The Company does not recognize any compensation expense related to the options
that it grants as they are all exercisable at the fair value of the Company's
stock on the date of grant. This method of accounting for options is acceptable
under GAAP. In 1996 the FASB established a second, preferred method of
accounting for compensation awarded through options which applies an option
pricing theory to measuring option compensation. This method of accounting
is set forth in Statement of Financial Accounting Standards No. 123 "Accounting
for Stock Based Compensation" (SFAS 123). SFAS 123 permits the continued
application of the method employed by the Company. Had compensation costs for
the Company's option plans been determined consistent with SFAS 123, the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts as of December 31, 1998, 1997 and 1996 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income: As reported $ 2,829 $ 3,079 $ 2,137
SFAS 123 adjustment (157) (188) (163)
------- ------ ------
Pro forma $ 2,672 $ 2,891 $ 1,974
------ ------ ------
------ ------ ------
Diluted income
per share: As reported $ .70 $ .75 $ .53
SFAS 123 adjustment (.04) (.04) (.04)
------ ------ ------
Pro forma $ .66 $ .71 $ .49
------ ------ ------
------ ------ ------
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
As of December 31, 1998 and March 1, 1999, 411,000 shares were available for
future grant under the 1997 Plan, 67,000 shares were available for future grant
under the 1994 Director Plan and 895,500 of the stock options were exercisable.
The options expire 10 years following their grant. Options granted under the
1997 Plan are fully vested at the date of grant. Options granted pursuant to
the 1994 Director Plan, and granted prior to May 27, 1998, vest at the rate
of 25% per year, for each of the first four years. On May 27, 1998, the Board
of Directors amended the 1994 Director Plan to provide that all options granted
on and after that date become fully vested on the date of grant.
25
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of each option grant is estimated as of the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Risk free interest rate 4.6% 5.7% 6.4%
Expected dividend yield none none none
Expected life of options 5 years 5 years 5 years
Expected volatility 0.1% 0.1% 5.0%
</TABLE>
Based on these assumptions, the weighted average fair value of options granted
would be calculated as $1.59 in 1998, $2.06 in 1997 and $1.68 in 1996. The
SFAS 123 adjustments for 1998, 1997 and 1996 appearing above are the product of
these weighted average fair values and the number of options granted in each of
the three years, after giving effect to the capitalization of a portion of these
compensation costs to the Meadow Pointe project.
A summary of the status of the Company's stock option plans at December 31,
1998, 1997 and 1996 and changes during the years then ended is presented in the
table below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Outstanding at
Beginning Of
Year 804,500 $ 4.14 704,500 $ 3.55 598,500 $ 3.06
Granted 99,500 7.80 100,000 8.28 109,000 6.24
Purchased -- -- -- -- (3,000) 2.88
------- ------ ------- ------ ---------
Outstanding at End
of Year 904,000 4.54 804,500 4.14 704,500 3.55
------- ------- --------
------- ------- --------
Exercisable at End
of Year 895,500 4.52 789,250 4.10 687,500 3.51
------- ------- -------
------- ------- -------
</TABLE>
26
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about stock options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------------------------- Options Exercisable
---------------------------
<S> <C> <C> <C> <C> <C>
Weighted Weighted -
Number Average Average Number Weighted -
Range of Outstanding at Remaining Exercise Exercisable at Average
Exercise Prices 12/31/98 Contractual Life Price 12/31/98 Exercise Price
--------------- -------- ---------------- ------ -------- --------------
$2.50 to $2.88 481,500 3.73 years $2.67 481,500 $2.67
$3.87 to $4.75 110,000 6.83 years 4.67 110,000 4.67
$5.87 to $6.25 113,000 7.87 years 6.23 107,500 6.23
$7.75 to $9.00 199,500 9.40 years 8.04 196,500 8.03
------- -------
904,000 895,500
------- -------
------- -------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
BF ENTERPRISES, INC. AND SUBSIDIARIES
December 31, 1998
(Thousands of dollars)
Initial Cost Cost Capitalized Subsequent Gross Amount at Which
to Company to Acquisition Carried at Close of Period
----------- --------------- --------------------------
Life on
Which
Gross Amount Depreciation
At Which Carried in Latest
Initial Cost to Company At Close of Period Statements
of Operations
Buildings and Buildings and Accumulated Date of Date is
Description Land Improvements Land Improvements Total Depreciation Construction Acquired Computed
- ----------- ---- ------------ ---- ------------ ----- ------------ ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Office and
Manufacturing
Building -
Tempe, Arizona $ 736 $ 3,734 $ 736 $ 3,734 $ 4,470 $ 2,203 1977 1977 40 Years
----- ------- ----- ------- ------- -------
----- ------- ----- ------- ------- -------
</TABLE>
Notes:
(1) For Federal income tax purposes at December 31, 1998, real estate was
carried at a cost of $1,754,000.
(2) Reconciliation of "Real Estate and Accumulated Depreciation":
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996
------------------------ ------------------------ --------------------
Investment Accumulated Investment Accumulated Investment Accumulated
Amount Depreciation Amount Depreciation Amount Depreciation
------ ------------ ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
year $ 4,470 $ 2,152 $ 4,470 $ 2,101 $ 4,470 $ 2,050
Additions:
Depreciation
charged to
costs &
expenses 51 51 51
------- ------- ------- ------- ------- -------
Balance at end
of year $ 4,470 $ 2,203 $ 4,470 $ 2,152 $ 4,470 $ 2,101
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
28
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
-----------------------------------------------------------
and Financial Disclosure.
------------------------
None.
PART III
The information required by Items 10 through 13 of this Part is
incorporated by reference from the Company's Proxy Statement, under the captions
"Nomination and Election of Directors," "Beneficial Stock Ownership," and
"Compensation of Executive Officers and Directors," which Proxy Statement will
be mailed to stockholders in connection with the Company's annual meeting of
stockholders which is scheduled to be held in May 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
-------------------------------------------------------
Form 8-K.
--------
(a) 1. Financial Statements
The following consolidated financial statements of BF Enterprises, Inc.
and its subsidiaries are included in Item 8 of this report:
Report of independent public accountants.
Consolidated balance sheets at December 31, 1998 and 1997.
Consolidated statements of income for the years ended
December 31, 1998, 1997 and 1996.
Consolidated statements of stockholders' equity for the years
ended December 31, 1998, 1997 and 1996.
Consolidated statements of cash flows for the years ended
December 31, 1998, 1997 and 1996.
Notes to financial statements.
Selected quarterly financial data for the years ended
December 31, 1998 and 1997 have not been included in the
notes to the financial statements as they were not required.
Financial Statement Schedules:
III - Real estate and accumulated depreciation
Schedules I, II, IV and V have been omitted as they are
inapplicable.
29
<PAGE>
(a) 3. Exhibits
Exhibit
Number Description
------ -----------
3.1 Restated Certificate of Incorporation - incorporated by
reference to Exhibit 3 (a) to Amendment No. 1 on Form 8
to the registrant's Form 10 registration statement, filed
with the Securities and Exchange Commission on June 23,
1987.
3.2 By-Laws - incorporated by reference to Exhibit 3 (b) to
the registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989.
4.1 Restated Certificate of Incorporation (filed as
Exhibit 3.1).
4.2 By-Laws (filed as Exhibit 3.2).
4.3 Specimen common stock certificate - incorporated by
reference to Exhibit 4 (c) to Amendment No. 1 on Form 8
to the registrant's Form 10 registration statement, filed
with the Securities and Exchange Commission on
June 23, 1987.
4.4 Indenture dated as of October 1, 1972, as amended,
between IDS Realty Trust and First National Bank of
Minneapolis - incorporated by reference to Exhibits 6(t)
and 6(v) to the Form S-14 Registration Statement of
Boothe Financial Corporation (formerly known as Boothe
Interim Corporation and now known as Robert Half
International Inc.) filed with the Securities and
Exchange Commission on December 31, 1979.
4.5 Indenture, dated as of October 26, 1993, between the
registrant and American National Bank and Trust Company,
as Trustee for the registrant's Floating Rate
Subordinated Debentures due December 31, 1999 -
incorporated by reference to Exhibit 4.5 to the
registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1993.
4.6 Specimen certificate for the registrant's Floating Rate
Subordinated Debentures due December 31, 1999 -
incorporated by reference to Exhibit 4.6 to the
registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1993.
10.1 Reorganization and Distribution Agreement between the
registrant and Boothe Financial Corporation (now known as
Robert Half International Inc.), as amended and restated
as of June 15, 1987 - incorporated by reference to
Exhibit 2 to Amendment No. 2 on Form 8 to the
registrant's Form 10 registration statement, filed with
the Securities and Exchange Commission on July 17, 1987.
10.2 Pledge and Security Agreement between the registrant and
30
<PAGE>
Boothe Financial Corporation (now known as Robert
Half International Inc.), dated as of June 15, 1987 -
incorporated by reference to Exhibit 10 (b) to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987.
10.3 Tax Sharing Agreement between the registrant and Boothe
Financial Corporation (now know as Robert Half
International Inc.), dated as of June 15, 1987 -
incorporated by reference to Exhibit 10 (c) to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987.
10.4 Agreement of Assignment and Assumption of Rights under
the Indenture, dated June 15, 1987, between the
registrant and Boothe Financial Corporation (now known
as Robert Half International Inc.) - incorporated by
reference to Exhibit 10 (f) to the registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1987.
10.5 Assumption of Obligations and Liabilities, dated June 15,
1987, between the registrant and Boothe Financial
Corporation (now known as Robert Half International Inc.)
- incorporated by reference to Exhibit 10 (g) to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987.
*10.6 Amended and Restated Management Incentive Compensation
Plan of the registrant - incorporated by reference to
Exhibit 10.9 to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991.
*10.7 Non-Employee Directors' Option Plan of the registrant,
as amended - incorporated by reference to Exhibit 10 (j)
to the registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989.
*10.8 The registrant's 1993 Long-Term Equity Incentive Plan -
incorporated by reference to Exhibit 10.8 to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.
*10.9 The registrant's 1994 Stock Option Plan for Outside
Directors - incorporated by reference to Exhibit 10.9 to
the registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1994.
*10.10a Employment Agreement between the registrant and Brian P.
Burns, dated as of November 30, 1992 - incorporated by
reference to Exhibit 10.15 to the registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1992.
*10.10b Amendment to Employment Agreement between the registrant
and Brian P. Burns, dated as of December 28, 1995 -
incorporated by reference to Exhibit 10.10b to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
*10.10c Second Amendment to Employment Agreement between the
registrant and Brian P. Burns, dated as of January 1,
1997 - incorporated by reference to Exhibit 10.10c to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
31
<PAGE>
*10.11 Employment Agreement by and between the registrant and
Paul Woodberry, dated as of December 22, 1992 -
incorporated by reference to Exhibit 10.16 to the
registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.
*10.12a The registrant's Profit Sharing Plan, as amended and
restated effective July 1, 1989 - incorporated by
reference to Exhibit 10.9 to the registrant's
Registration Statement on Form S-1 and Form S-4
(Registration No. 33-56290) filed with the Securities and
Exchange Commission on December 24, 1992.
*10.12b First Amendment of the registrant's Profit Sharing Plan,
adopted December 12, 1994 - incorporated by reference to
Exhibit 10.12 (b) to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
*10.12c Second Amendment of the registrant's Profit Sharing Plan,
adopted March 31, 1995 - incorporated by reference to
Exhibit 10.12c to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
*10.13 Amended Trust Agreement, under the registrant's Profit
Sharing Plan, dated September 7, 1992, between the
registrant and John M. Price, as trustee - incorporated
by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-1 and Form S-4
(Registration No. 33-56290) filed with the Securities and
Exchange Commission on December 24, 1992.
10.14 Amended and Restated Letter of Credit Reimbursement
Agreement, dated April 30, 1994, among IBJ Schroder Bank
& Trust Company, the registrant and the registrant's
wholly-owned subsidiary, Boothe Financial Corporation -
incorporated by reference to Exhibit 10.14 to the
registrant's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1994.
10.15 Loan and Security Agreement, dated April 30, 1994,
executed by the registrant and its wholly-owned
subsidiary, Boothe Financial Corporation, in favor of IBJ
Schroder Bank & Trust Company - incorporated by reference
to Exhibit 10.15 to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1994.
10.16 Lease, regarding premises at 1515 W. 14th Street, Tempe,
Arizona, dated as of March 1, 1995, between the
registrant, as landlord, and Bank One, Arizona, NA, as
tenant - incorporated by reference to Exhibit 10.17 to
the registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
10.17 Development and Management Agreement, dated as of
March 1, 1991, between Trout Creek Development
Corporation, a wholly-owned subsidiary of the registrant,
and DEVCO II Corporation - incorporated by reference to
Exhibit 10.20 (a) to the registrant's Form 8-K report
dated March 14, 1991, filed with the Securities and
Exchange Commission on March 15, 1991.
10.18 Guarantee, dated as of March 1, 1991, by the registrant -
incorporated by reference to Exhibit 10.20 (b) to the
registrant's Form 8-K report dated March 14, 1991, filed
with the Securities and Exchange Commission on March 15,
1991.
32
<PAGE>
10.19a Office Lease, dated as of March 26, 1990, between Bush
Street Limited Partnership, as landlord, and the
registrant, as tenant - incorporated by reference to
Exhibit 10.24 (a) to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990.
10.19b Lease Extension Agreement, dated as of January 19, 1995,
between JMB Group Trust IV, as landlord, and the
registrant, as tenant - incorporated by reference to
Exhibit 10.21 (b) to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
10.19c Second Amendment to Lease, dated as of May 15, 1998,
between 100 Bush Corporation, as landlord, and the
registrant, as tenant - filed herewith to the
registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998.
10.20 Property Acquisition Agreement, dated as of September 25,
1995, between Meadow Pointe II Community Development
District and Trout Creek Properties, Inc., a wholly-owned
subsidiary of the registrant - incorporated by reference
to Exhibit 10.22 to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
*10.21 1997 Long-Term Incentive Plan of BF Enterprises, Inc.
dated as of December 10, 1997 and approved by the
Company's stockholders at the Company's 1998 Annual
Meeting of Stockholders held on May 27, 1998 - filed
herewith to the registrant's Annual Report on Form-10KSB
for the fiscal year ended December 31, 1998.
*10.22 Amended BF Enterprises, Inc. 1994 Stock Option Plan for
Outside Directors including all amendments through
May 27, 1998 - filed herewith to the registrant's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1998.
10.23 Amended and Restated Letter of Credit Reimbursement
Agreement, dated July 31, 1998, among IBJ Schroder Bank
& Trust Company, the registrant and the registrant's
wholly-owned subsidiary, Boothe Financial Corporation -
filed herewith to the registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998.
21 Subsidiaries of the registrant.
- --------------------------------------------
* Management contract or compensatory plan required to be filed as
an exhibit pursuant to Item 14 (c) of Form 10-K.
33
<PAGE>
b) Reports on Form 8-K
The registrant did not file any report on Form 8-K during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BF ENTERPRISES, INC.
--------------------
(Registrant)
Date: March 26, 1999 By: /s/ S. Douglas Post
---------------------------------
S. Douglas Post, Vice President
and Treasurer
(Principal Accounting Officer)
34
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Date: March 26, 1999 By: /s/ Brian P. Burns
--------------------------
Brian P. Burns
Chairman of the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
Date: March 26,1999 By: /s/ Paul Woodberry
---------------------------
Paul Woodberry
Executive Vice President,
Chief Financial Officer and a Director
(Principal Financial Officer)
Date: March 26, 1999 By: /s/ Daniel S. Mason
---------------------------
Daniel S. Mason, Director
Date: March 26, 1999 By: /s/ Ralph T. McElvenny, Jr.
----------------------------
Ralph T. McElvenny, Jr., Director
Date: March 26, 1999 By: /s/ Charles E.F. Millard
----------------------------
Charles E.F. Millard, Director
Date: March 26, 1999 By: /s/ S. Douglas Post
-----------------------------
S. Douglas Post, Vice President and Treasurer
(Principal Accounting Officer)
</TABLE>
35
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Numbers
- ------ ------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation - incorporated by reference to Exhibit
3 (a) to Amendment No. 1 on Form 8 to the registrant's Form 10 registration
statement, filed with the Securities and Exchange Commission on June 23, 1987.
3.2 By-Laws - incorporated by reference to Exhibit 3 (b) to the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989.
4.1 Restated Certificate of Incorporation (filed as Exhibit 3.1).
4.2 By-Laws (filed as Exhibit 3.2).
4.3 Specimen common stock certificate - incorporated by reference to Exhibit 4 (c)
to Amendment No. 1 on Form 8 to the registrant's Form 10 registration statement,
filed with the Securities and Exchange Commission on June 23, 1987.
4.4 Indenture dated as of October 1, 1972, as amended, between IDS Realty Trust and First
National Bank of Minneapolis - incorporated by reference to Exhibits 6(t) and 6(v) to the
Form S-14 Registration Statement of Boothe Financial Corporation (formerly known as
Boothe Interim Corporation and now known as Robert Half International Inc.) filed with
the Securities and Exchange Commission on December 31, 1979.
4.5 Indenture, dated as of October 26, 1993, between the registrant and American National
Bank and Trust Company, as Trustee for the registrant's Floating Rate Subordinated
Debentures due December 31, 1999 - incorporated by reference to Exhibit 4.5 to the
registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993.
4.6 Specimen certificate for the registrant's Floating Rate Subordinated Debentures due December
31, 1999 - incorporated by reference to Exhibit 4.6 to the registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1993.
10.1 Reorganization and Distribution Agreement between the registrant and Boothe
Financial Corporation (now known as Robert Half International Inc.), as amended
and restated as of June 15, 1987 - incorporated by reference to Exhibit 2 to
Amendment No. 2 on Form 8 to the registrant's Form 10 registration statement,
filed with the Securities and Exchange Commission on July 17, 1987.
10.2 Pledge and Security Agreement between the registrant and Boothe Financial Corporation (now
known as Robert Half International Inc.), dated as of June 15, 1987 - incorporated by reference to
Exhibit 10 (b) to the registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1987.
10.3 Tax Sharing Agreement between the registrant and Boothe Financial Corporation
(now know as Robert Half International Inc.), dated as of June 15, 1987 - incorporated
by reference to Exhibit 10 (c) to the registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987.
36
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
- ------ -----------
<S> <C> <C>
10.4 Agreement of Assignment and Assumption of Rights under the Indenture, dated
June 15, 1987, between the registrant and Boothe Financial Corporation (now known as
Robert Half International Inc.) - incorporated by reference to Exhibit 10 (f) to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1987.
10.5 Assumption of Obligations and Liabilities, dated June 15, 1987, between the registrant
and Boothe Financial Corporation (now known as Robert Half International Inc.)
- incorporated by reference to Exhibit 10 (g) to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987.
*10.6 Amended and Restated Management Incentive Compensation Plan of the registrant
- incorporated by reference to Exhibit 10.9 to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991.
*10.7 Non-Employee Directors' Option Plan of the registrant, as amended - incorporated by
reference to Exhibit 10 (j) to the registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
*10.8 The registrant's 1993 Long-Term Equity Incentive Plan - incorporated by reference to
Exhibit 10.8 to the registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
*10.9 The registrant's 1994 Stock Option Plan for Outside Directors - incorporated by reference
to Exhibit 10.9 to the registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1994.
*10.10a Employment Agreement between the registrant and Brian P. Burns, dated as of
November 30, 1992 - incorporated by reference to Exhibit 10.15 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
*10.10b Amendment to Employment Agreement between the registrant and Brian P. Burns, dated
as of December 28, 1995 - incorporated by reference to Exhibit 10.10b to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
*10.10c Second Amendment to Employment Agreement between the registrant and Brian P. Burns,
dated as of January 1, 1997 - incorporated by reference to Exhibit 10.10c to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
*10.11 Employment Agreement by and between the registrant and Paul Woodberry, dated as of
December 22, 1992 - incorporated by reference to Exhibit 10.16 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
*10.12a The registrant's Profit Sharing Plan, as amended and restated effective July 1, 1989
- incorporated by reference to Exhibit 10.9 to the registrant's Registration Statement on
Form S-1 and Form S-4 (Registration No. 33-56290) filed with the Securities and
Exchange Commission on December 24, 1992.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
- ------ -----------
<S> <C> <C>
*10.12b First Amendment of the registrant's Profit Sharing Plan, adopted December 12, 1994 -
incorporated by reference to Exhibit 10.12 (b) to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
*10.12c Second Amendment of the registrant's Profit Sharing Plan, adopted March 31, 1995 -
incorporated by reference to Exhibit 10.12c to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
*10.13 Amended Trust Agreement, under the registrant's Profit Sharing Plan, dated
September 7, 1992, between the registrant and John M. Price, as trustee - incorporated
by reference to Exhibit 10.10 to the registrant's Registration Statement on Form S-1 and
Form S-4 (Registration No. 33-56290) filed with the Securities and Exchange
Commission on December 24, 1992.
10.14 Amended and Restated Letter of Credit Reimbursement Agreement, dated April 30, 1994,
among IBJ Schroder Bank & Trust Company, the registrant and the registrant's
wholly-owned subsidiary, Boothe Financial Corporation - incorporated by reference to
Exhibit 10.14 to the registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1994.
10.15 Loan and Security Agreement, dated April 30, 1994, executed by the registrant and its
wholly-owned subsidiary, Boothe Financial Corporation, in favor of IBJ Schroder Bank
& Trust Company - incorporated by reference to Exhibit 10.15 to the registrant's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994.
10.16 Lease, regarding premises at 1515 W. 14th Street, Tempe, Arizona, dated as of
March 1, 1995, between the registrant, as landlord, and Bank One, Arizona, NA, as tenant -
incorporated by reference to Exhibit 10.17 to the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994.
10.17 Development and Management Agreement, dated as of March 1, 1991, between Trout
Creek Development Corporation, a wholly-owned subsidiary of the registrant, and
DEVCO II Corporation - incorporated by reference to Exhibit 10.20 (a) to the registrant's
Form 8-K report dated March 14, 1991, filed with the Securities and Exchange
Commission on March 15, 1991.
10.18 Guarantee, dated as of March 1, 1991, by the registrant - incorporated by reference to
Exhibit 10.20 (b) to the registrant's Form 8-K report dated March 14, 1991, filed with
the Securities and Exchange Commission on March 15, 1991.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
- ------ -----------
<S> <C> <C>
10.19a Office Lease, dated as of March 26, 1990, between Bush Street Limited Partnership,
as landlord, and the registrant, as tenant - incorporated by reference to Exhibit 10.24 (a)
to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990.
10.19b Lease Extension Agreement, dated as of January 19, 1995, between JMB Group Trust IV, as
landlord, and the registrant, as tenant - incorporated by reference to Exhibit 10.21 (b) to the
registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.
10.19c Second Amendment to Lease, dated as of May 15, 1998, between 100 Bush Corporation, as landlord, 40
and the registrant, as tenant - filed herewith to the registrant's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1998.
10.20 Property Acquisition Agreement, dated as of September 25, 1995, between Meadow
Pointe II Community Development District and Trout Creek Properties, Inc., a
wholly-owned subsidiary of the registrant - incorporated by reference to Exhibit
10.22 to the registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
*10.21 1997 Long-Term Incentive Plan of BF Enterprises, Inc. dated as of December 10, 1997 and approved 42
by the Company's stockholders at the Company's 1998 Annual Meeting of Stockholders held on May 27,
1998 - filed herewith to the registrant's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998.
*10.22 Amended BF Enterprises, Inc. 1994 Stock Option Plan for Outside Directors including all amendments 62
through May 27, 1998 - filed herewith to the registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998.
10.23 Amended and Restated Letter of Credit Reimbursement Agreement, dated July 31, 1998, among IBJ Schroder 75
Bank & Trust Company, the registrant and the registrant's wholly-owned subsidiary, Boothe Financial
Corporation - filed herewith to the registrant's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998.
21 Subsidiaries of the registrant. 101
- --------------------------------------------
* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 14
(c) of Form 10-K.
</TABLE>
39
SECOND AMENDMENT TO LEASE
I. PARTIES AND DATE
This Second Amendment to Lease ("Amendment"), dated May 15, 1998, by and
between 100 Bush Corporation ("Landlord") and BF Enterprises, Inc.
("Tenant")
II. RECITALS
Landlord and Tenant are parties to a lease dated as of March 26, 1990,
as amended by an amendment dated January 19, 1995 ("Lease"), for the
premises ("Premises") located at 100 Bush Street, Suite 1250, San
Francisco, California, in the property commonly known as the Shell
Building, San Francisco, CA 94104.
Landlord and Tenant desire to modify the Lease in the matter provided in
Section V below as "Modifications," which modifications shall be deemed
effective on the date of this amendment as indicated above.
III. GENERAL
A. Effect of Amendments. Except to the extent the Lease is modified by this
Amendment, or by the March 1990 amendment, the remaining terms and
provisions of the Lease shall remain unmodified and in full force and
effect.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to its subject matter and can be
changed only by an instrument in writing signed by Landlord and Tenant.
C. Counterparts. If this Amendment is executed in counterparts, each
counterpart shall be deemed an original, and all counterparts shall
constitute one agreement.
D. Defined Terms. All words commencing with initial capital letters in this
Amendment and not defined in. this Amendment, but defined in the Lease,
shall have the same meaning in this Amendment as in the Lease.
E. Corporate and Partnership Authority. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents
that he or she is duly authorized to execute and deliver this Amendment
for the corporation or partnership and that this Amendment is binding upon
the corporation or partnership in accordance with its terms.
P. Attorneys' Fees. In the event that either Landlord or Tenant shall
institute any action or proceeding against the other relating to the
provisions of this Amendment or the Lease or any default thereunder, the
40
<PAGE>
party not prevailing in such action or proceeding shall reimburse the
prevailing party for its actual reasonable attorneys' fees, and all fees,
costs and expenses reasonably incurred in connection with such action or
proceedings including, without limitation, any post-judgment fees, costs
or expenses incurred on any appeal or in collection of any judgment,
IV. MODIFICATIONS
A. Term. The term of the Lease currently expires on January 31, 1999. Article
I Lease is hereby amended to provide for a Second extension of the term of
the for a period of five (5) years (Second Extended Term), commencing
February 1, 1999 and expiring January 31, 2004 unless sooner terminated in
accordance with the Lease.
B. Base Rent. Article 2 of the Lease is hereby amended by adding thereto the
following:
Base Rent During the Second Extended Term:
Dollars per square foot per annum: $32.00
Dollars per annum: $71,712.00
Dollars per month: $5,976.00
C. Base Year. Article 3 of the Lease is hereby amended by adding thereto the
following:
Effective during the Second Extended Term, the Base Year shall be:
(A) Base Tax Year: Calendar year 1999.
(B) Base Expense Year: Calendar year 1999.
D. During the balance of the Extended Term and Second Extended Term, the
Tenant's pro-rata share of operating expenses and like charges shall not
increase above the current 1.1042% of the total building, and for the
purposes of rent calculation, the Premises shall remain at 2,241 square
feet.
LANDLORD TENANT
100 Bush Corporation, BF Enterprises, Inc.,
a California corporation a Delaware corporation
By: /s/ C.K. Kwan By: /s/ Brian P. Burns
--------------------- -------------------
Its: President Its: Chairman
41
1997 LONG-TERM INCENTIVE PLAN
OF
BF ENTERPRISES, INC.
The Board of Directors of BF Enterprises, a Delaware corporation (the
"Company") on December 10, 1997 adopted the Company's 1997 Long-Term
Incentive Plan, subject to approval by the Company stockholders at the
Company's 1998 Annual Meeting of Stockholders.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for Employees and consultants
to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company
stock and/or rights which recognize such growth, development and
financial success.
(2) To enable the Company to obtain and retain the services of Employees
and consultants considered essential to the long range success of the
Company by offering them an opportunity to own stock in the Company
and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this
Plan they shall have the meanings specified below, unless the context clearly
indicates otherwise.
1.2 Award Limit. "Award Limit" shall mean 200,000 shares of
Common Stock, as may be adjusted in accordance with Section 10.3.
1.3 Board. "Board" shall mean the Board of Directors of the Company.
1.4 Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
(a) any person or related group of persons (other than
the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) that
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders which the Board does not
recommend such stockholders to accept; or
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(b) there is a change in the composition of the Board over
a period of thirty-six (36) consecutive months (or less) such that a
majority of the Board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election
of Board members, to be comprised of individuals who either (i) have
been Board members continuously since the beginning of such period or
(ii) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described
in clause (i) who were still in office at the time such election or
nomination was approved by the Board.
1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 Committee. "Committee" shall mean the Compensation Committee of
the Board, or another committee of the Board, appointed as provided in
Section 9.1.
1.7 Common Stock. "Common Stock" shall mean the common stock of
the Company, par value $.10 per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
preferred stock and any warrants, options or other rights to purchase
Common Stock. Debt securities of the Company convertible into Common Stock
shall be deemed equity securities of the Company.
1.8 Company. "Company" shall mean BF Enterprises, Inc., a Delaware
corporation.
1.9 Corporate Transaction. "Corporate Transaction" shall mean
any of the following stockholder-approved transactions to which the Company
is a party:
(a) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose
of which is to change the State in which the Company is
incorporated, form a holding company or effect a similar reorganization
as to form whereupon this Plan and all Options are assumed by the
successor entity;
(b) the sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company, in complete
liquidation or dissolution of the Company in a transaction not
covered by the exceptions to clause (a), above; or
(c) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred or issued to a person or
persons different from those who held such securities immediately prior
to such merger.
1.10 Deferred Stock. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.
1.11 Director. "Director" shall mean a member of the Board.
1.12 Employee. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
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1.13 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.14 Fair Market Value. "Fair Market Value" of a share of Common
Stock as of any given date shall mean:
(a) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation
the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, the closing sales price
for the Common Stock, as reported on such system or exchange (or the
largest such exchange) for the date the value is to be determined
(or if there is no sale for such date, then for the last preceding
business day on which there was a sale), as reported in the Wall Street
Journal or similar publication.
(b) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the mean between
the high bid and low asked prices for the Common Stock on the date the
value is to be determined (or if there are no quoted prices for the date
of grant, then for the last preceding business day on which there were
quoted prices).
(c) In the absence of an established market for the Common
Stock, as determined in good faith by the Committee.
1.15 Grantee. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Stock Payment or Stock Appreciation Right, or an
award of Deferred Stock, under this Plan.
1.16 Incentive Stock Option. "Incentive Stock Option" shall mean
an option which conforms to the applicable provisions of Section 422 of the
Code and which is designated as an Incentive Stock Option by the Committee.
1.17 Independent Director. "Independent Director" shall mean a
Director who is not an Employee.
1.18 Non-Qualified Stock Option. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.19 Option. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to consultants shall be
Non-Qualified Stock Options.
1.20 Optionee. "Optionee" shall mean an Employee or consultant
granted an Option under this Plan.
1.21 Performance Award. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid in
cash, Common Stock or a combination of both, awarded under Article VII of
this Plan.
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1.22 Plan. "Plan" shall mean this 1997 Long-Term Incentive Plan of
BF Enterprises, Inc.
1.23 QDRO. "QDRO" shall mean a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
1.24 Restricted Stock. "Restricted Stock" shall mean Common
Stock awarded under Article VI of this Plan.
1.25 Restricted Stockholder. "Restricted Stockholder" shall mean
an Employee or consultant granted an award of Restricted Stock under Article VI
of this Plan.
1.26 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
1.27 Stock Appreciation Right. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article VIII of this Plan.
1.28 Stock Payment. "Stock Payment" shall mean (i) a payment
in the form of shares of Common Stock, or (ii) an option or other right to
purchase shares of Common Stock, as part of a deferred compensation
arrangement, made in lieu of all or any portion of the compensation, including
without limitation, salary, bonuses and commissions, that would otherwise
become payable to an Employee or consultant in cash, awarded under Article
VII of this Plan.
1.29 Subsidiary. "Subsidiary" shall mean any corporation
in an unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the unbroken chain
then owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
1.30 Termination of Consultancy. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee, Grantee or Restricted
Stockholder as a consultant to the Company or a Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation,
by resignation, discharge, death or retirement; but excluding terminations
where there is a simultaneous commencement of employment with the Company or
any Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate a consultant's
service at any time for any reason whatsoever, with or without cause, except to
the extent expressly provided otherwise in writing.
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1.31 Termination of Employment. "Termination of Employment"
shall mean the time when the employee-employer relationship between an Optionee,
Grantee or Restricted Stockholder and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee, Grantee or Restricted
Stockholder by the Company or any Subsidiary, (ii) at the discretion of the
Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company or a Subsidiary with the former
employee. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that, unless otherwise determined by the Committee in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for
the purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under said Section. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options, awards
of Restricted Stock, Performance Awards, awards of Deferred Stock,
Stock Payments or Stock Appreciation Rights shall be Common Stock,
initially shares of the Company's Common Stock, par value $.10 per
share. The aggregate number of such shares which may be issued upon
exercise of such options or rights or upon any such awards under the
Plan shall not exceed Five Hundred Sixty Thousand (560,000). The shares
of Common Stock issuable upon exercise of such options or rights or
upon any such awards may be either previously authorized but unissued
shares or treasury shares.
(b) The maximum number of shares which may be subject
to Options or Stock Appreciation Rights granted under the Plan to any
individual in any calendar year shall not exceed the Award Limit. To the
extent required by Section 162(m)of the Code, shares subject to Options
which are canceled continue to be counted against the Award Limit and if,
after grant of an Option, the price of shares subject to such Option is
reduced, the transaction is treated as a cancellation of the Option and
a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.
Furthermore, to the extent required by Section 162(m) of the Code, if,
after grant of a Stock Appreciation Right, the base amount on which stock
appreciation is calculated is reduced to reflect a reduction in the Fair
Market Value of the Common Stock, the transaction is treated as a
cancellation of the Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right deemed to be
canceled and the Stock Appreciation Right deemed to be granted are
counted against the Award Limit.
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2.2 Add-back of Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other award under this
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration, cancellation or exercise
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Options or other awards
which are adjusted pursuant to Section 10.3 and become exercisable with respect
to shares of stock of another corporation shall be considered canceled and may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are delivered by the Optionee or
Grantee or withheld by the Company upon the exercise of any Option or other
award under this Plan, in payment of the exercise price thereof, may again be
optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. If any share of Restricted Stock is forfeited by the Grantee or
repurchased by the Company pursuant to Section 6.5 hereof, such share may again
be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of
Common Stock may again be optioned, granted or awarded if such action would
cause an Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option.
3.2 Disqualification for Stock Ownership. No person may be
granted an Incentive Stock Option under this Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option conforms
to the applicable provisions of Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.
3.4 Granting of Options.
(a) The Committee shall from time to time, in its
absolute discretion, and subject to applicable limitations of this Plan:
(i) Select from among the Employees and consultants
(including Employees or consultants who have previously received
Options or other awards under this Plan) such of them as in its
opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected
Employees and consultants;
(iii) Subject to Section 3.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and
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(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C)of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m)
of the Code.
(b) Upon the selection of an Employee or consultant to
be granted an Option, the Committee shall instruct the Secretary of
the Company to issue the Option and may impose such conditions on the
grant of the Option as it deems appropriate. Without limiting the
generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee or consultant that the
Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, or Stock Payments or other
rights which have been previously granted to him under this Plan or
otherwise. An Option, the grant of which is conditioned upon such
surrender, may have an option price lower (or higher) than the exercise
price of such surrendered Option or other award, may cover the same (or
a lesser or greater) number of shares as such surrendered Option or other
award, may contain such other terms as the Committee deems appropriate,
and shall be exercisable in accordance with its terms, without regard to
the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan
may be modified by the Committee to disqualify such option from treatment
as an "incentive stock option" under Section 422 of the Code.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by
a written Stock Option Agreement, which shall be executed by the Optionee and
an authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Stock
Option Agreements evidencing Options intended to qualify as performance-based
compensation, as described in Section 162(m)(4)(C) of the Code, shall contain
such terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code. Stock Option Agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 422 of the Code.
4.2 Option Price. The price per share of the shares subject to
each Option shall be set by the Committee; provided, however, that such price
shall be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Incentive Stock
Options and Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; and (ii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code) such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.
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4.3 Option Term. The term of an Option shall be set by the
Committee in its discretion; provided, however, that, in the case of Incentive
Stock Options, the term shall not be more than ten (10) years from the date the
Incentive Stock Option is granted, or five (5) years from such date if the
Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings
thereunder applicable to Incentive Stock Options, the Committee may extend the
term of any outstanding Option in connection with any Termination of Employment
or Termination of Consultancy of the Optionee, or amend any other term or
condition of such Option relating to such a termination.
4.4 Option Vesting.
(a) The period during which the right to exercise an Option
in whole or in part vests in the Optionee shall be set by the Committee
and the Committee may determine that an Option may not be exercised in
whole or in part for a specified period after it is granted; provided,
however, that, unless the Committee otherwise provides in the terms of
the Option or otherwise, no Option shall be exercisable by any Optionee
who is then subject to Section 16 of the Exchange Act within the period
ending six months and one day after the date the Option is granted. At
any time after grant of an Option, the Committee may, in its sole and
absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at
Termination of Employment or Termination of Consultancy, as applicable,
shall thereafter become exercisable, except as may be otherwise provided
by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the
Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code, but without regard to Section 422(d)
of the Code) are exercisable for the first time by an Optionee during any
calendar year (under the Plan and all other incentive stock option plans
of the Company and any Subsidiary) exceeds $100,000, such Options shall
be treated as Non-Qualified Options to the extent required by Section 422
of the Code. The rule set forth in the preceding sentence shall be
applied by taking Options into account in the order in which they were
granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such
stock is granted.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised
in whole or in part. However, an Option shall not be exercisable with respect
to fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Optionee or
other person then entitled to exercise the Option or such portion;
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(b) Such representations and documents as the Committee in its
absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as
amended, and any other federal or state securities laws or regulations.
The Committee or Board may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is
exercised. However, the Committee may, in its discretion (i) allow a
delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised; (ii) allow payment, in whole or in part,
through the delivery of shares of Common Stock owned by the Optionee,
duly endorsed for transfer to the Company with a Fair Market Value on the
date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part,
through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iv) allow payment, in whole or in part,
through the delivery of property of any kind which constitutes good and
valuable consideration; (v) allow payment, in whole or in part, through
the delivery of a full recourse promissory note bearing interest (at no
less than such rate as shall then preclude the imputation of interest
under the Code) and payable upon such terms as may be prescribed by the
Committee or the Board; (vi) allow payment, in whole or in part, through
the delivery of a notice that the Optionee has placed a market sell order
with a broker with respect to shares of Common Stock then issuable
upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company
in satisfaction of the Option exercise price; or (vii) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a
promissory note, the Committee may also prescribe the form of such note
and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from
the Company when or where such loan or other extension of credit is
prohibited by law.
5.3 Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in its
absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable;
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(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time
for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 Rights as Stockholders. The holders of Options shall not
be, nor have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.
5.5 Ownership and Transfer Restrictions. The Committee, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require an Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of granting such
Option to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 Award of Restricted Stock.
(a) The Committee may from time to time, in its absolute
discretion:
(i) Select from among the Employees and consultants (including
Employees or consultants who have previously received other awards under
this Plan) such of them as in its opinion should be awarded Restricted
Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this
Plan.
(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; provided, however, that
such purchase price shall be no less than the par value of the Common
Stock to be purchased, unless otherwise permitted by applicable state
law. In all cases, legal consideration shall be required for each
issuance of Restricted Stock.
(c) Upon the selection of an Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of
the Company to issue such Restricted Stock and may impose such
conditions on the issuance of such Restricted Stock as it deems
appropriate.
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6.2 Restricted Stock Agreement. Restricted Stock shall be
issued only pursuant to a written Restricted Stock Agreement, which shall be
executed by the selected Employee or consultant and an authorized officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan.
6.3 Rights as Stockholders. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.6, the Restricted
Stockholder shall have, unless otherwise provided by the Committee, all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his Restricted Stock Agreement, including the right to receive all dividends
and other distributions paid or made with respect to the shares; provided,
however, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 6.4.
6.4 Restrictions. All shares of Restricted Stock issued under
this Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on duration
of employment with the Company, Company performance and individual performance;
provided, however, that, unless the Committee otherwise provides in the terms
of the Restricted Stock Agreement or otherwise, no share of Restricted Stock
granted to a person subject to Section 16 of the Exchange Act shall be sold,
assigned or otherwise transferred until at least six months and one day have
elapsed from the date on which the Restricted Stock was issued, and provided,
further, that by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire. Unless provided otherwise by
the Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon Termination of
Consultancy with the Company.
6.5 Repurchase of Restricted Stock. The Committee shall
provide in the terms of each individual Restricted Stock Agreement that the
Company shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy between the Restricted Stockholder and the Company,
at a cash price per share equal to the price paid by the Restricted Stockholder
for such Restricted Stock; provided, however, that provision may be made that
no such right of repurchase shall exist in the event of a Termination of
Employment or Termination of Consultancy without cause, or following a Change
in Control or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.6 Escrow. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions
imposed under the Restricted Stock Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.
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6.7 Legend. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted
Stock that are still subject to restrictions under Restricted Stock
Agreements, which legend or legends shall make appropriate reference to the
conditions imposed thereby.
ARTICLE VII
PERFORMANCE AWARDS, DEFERRED STOCK, STOCK PAYMENTS
7.1 Performance Awards. Any Employee or consultant selected
by the Committee may be granted one or more Performance Awards. The value of
such Performance Awards may be linked to the earnings per share, return on
equity, return on assets, total shareholder return, net profits, or net
operating income of the Company, or to the market value, book value, or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee, or may be based
upon the appreciation in the earnings per share, return on equity, return on
assets, total shareholder return, net profits, or net operating income of the
Company, or upon the appreciation in the market value, book value, or other
measure of the value of a specified number of shares of Common Stock over a
fixed period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular Employee or
consultant.
7.2 Stock Payments. Any Employee or consultant selected by
the Committee may receive Stock Payments in the manner determined from time to
time by the Committee. The number of shares shall be determined by the
Committee and may be based upon the Fair Market Value, book value, net profits
or other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.
7.3 Deferred Stock. Any Employee or consultant selected by
the Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock
shall be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.4 Performance Award Agreement, Deferred Stock Agreement,
Stock Payment Agreement. Each Performance Award, award of Deferred Stock and/or
Stock Payment shall be evidenced by a written agreement, which shall be
executed by the Grantee and an authorized officer of the Company and which shall
contain such terms and conditions as the Committee shall determine, consistent
with this Plan.
7.5 Term. The term of a Performance Award, award of
Deferred Stock and/or Stock Payment shall be set by the Committee, in its
discretion, but shall not exceed ten years.
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7.6 Exercise Upon Termination of Employment. A
Performance Award, award of Deferred Stock and/or Stock Payment is exercisable
or payable only while the Grantee is an Employee or consultant; provided that
the Committee may determine that the Performance Award, award of Deferred
Stock and/or Stock Payment may be exercised or paid subsequent to Termination
of Employment or Termination of Consultancy without cause, or following a Change
in Control, or because of the Grantee's retirement, death or disability, or
otherwise.
7.7 Payment on Exercise. Payment of the amount determined
under Section 7.1 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 Relationship to Options: No Payment by Participant. A
Stock Appreciation Right may be awarded either (i) with respect to Common
Stock subject to an Option held by an Optionee, or (ii) without reference to an
Option. If an Option is an Incentive Stock Option, a Stock Appreciation Right
granted with respect to such Option may be granted only at the time of grant of
the related Incentive Stock Option, but if the Option is a Non-Qualified Stock
Option, the Stock Appreciation Right may be granted either simultaneously with
the grant of the related Non-Qualified Stock Option or at any time during the
term of such related Non-Qualified Stock Option. The Committee, in its
discretion, may determine whether a Stock Appreciation Right is to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and Stock Appreciation Right Agreements evidencing Stock Appreciation
Rights intended to so qualify shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. No
consideration shall be paid by a participant with respect to a Stock
Appreciation Right.
8.2 When Exercisable. A Stock Appreciation Right shall be
exercisable at such times and in whole or in part, each as determined by the
Committee. If a Stock Appreciation Right is granted with respect to an Option,
the Stock Appreciation Right shall be exercisable only when and to the extent
the related Option is exercisable. If a Stock Appreciation Right is unrelated
to an Option, it is exercisable only while the Grantee is an Employee or
consultant; provided, that the Committee may determine that the Stock
Appreciation Right may be exercised subsequent to Termination of Employment or
Termination of Consultancy without cause, or following a Change in Control, or
because of the Grantee's retirement, death or disability, or otherwise.
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8.3 Effect on Related Right; Termination of Stock
Appreciation Right. If a Stock Appreciation Right granted with respect to an
Option is exercised, the Option shall cease to be exercisable and shall be
canceled to the extent of the number of shares with respect to which the Stock
Appreciation Right was exercised. Upon the exercise or termination of an
Option, related Stock Appreciation Rights shall terminate to the extent of the
number of shares as to which the Option was exercised or terminated, except
that, unless otherwise determined by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Option shall not be reduced until the number of shares
covered by exercise or termination of the related Option exceeds the number of
shares not covered by the Stock Appreciation Right. A Stock Appreciation Right
granted independently from an Option shall terminate and shall be no longer
exercisable at the time determined by the Committee at the time of grant, but
not later than 10 years from the date of grant. Upon Termination of Employment
or Termination of Consultancy, as the case may be, a Stock Appreciation Right
granted with respect to an Option shall be exercisable only to the extent to
which the Option is then exercisable.
8.4 Form of Payment Upon Exercise. Despite any attempt by an
Employee or consultant to elect payment in a particular form upon exercise of a
Stock Appreciation Right, the Committee, in its discretion, may elect to cause
the Company to pay cash, Common Stock, or a combination of cash and Common Stock
upon exercise of the Stock Appreciation Right.
8.5 Amount of Payment Upon Exercise. Upon the exercise of a
Stock Appreciation Right, the Grantee shall be entitled to receive one of the
following payments, as determined by the Committee under Section 8.4:
(i) Common Stock. That number of whole shares of Common Stock equal
to the number computed by dividing (A) an amount (the "Stock Appreciation
Right Spread"), rounded to the nearest whole dollar, equal to the product
computed by multiplying (x) the excess of (1) the Fair Market Value on
the date the Stock Appreciation Right is exercised, over (2) the exercise
price per share of Common Stock of the related Option, or in the case
of a Stock Appreciation Right granted without reference to an Option,
such other price as the Committee establishes at the time the Stock
Appreciation Right is granted, by (y) the number of shares of Common
Stock with respect to which a Stock Appreciation Right is being exercised
by (B) the Fair Market Value on the date the Stock Appreciation Right is
exercised; plus, if the foregoing calculation yields a fractional share,
an amount of cash equal to the applicable Fair Market Value multiplied by
such fraction (such payment to be the difference of the fractional
share); or
(ii) Cash. An amount in cash equal to the Stock Appreciation Right
Spread; or
(iii) Cash and Common Stock. A combination of cash and Common
Stock, the combined value of which shall equal the Stock Appreciation
Right Spread.
ARTICLE IX
ADMINISTRATION
9.1 Compensation Committee. The Compensation Committee (or
another committee or a subcommittee of the Board assuming the functions of the
Committee under this Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each of
whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board. Vacancies in
the Committee may be filled by the Board.
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9.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights or Stock Payments are
granted or awarded, and to adopt such rules for the administration,
interpretation, and application of this Plan as are consistent therewith and to
interpret, amend or revoke any such rules. Any such grant or award under
this Plan need not be the same with respect to each Optionee, Grantee or
Restricted Stockholder. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Committee under this
Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of
the Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
9.3 Majority Rule; Unanimous Written Consent. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by
all members of the Committee.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Not Transferable. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed; provided,
however, such rights or awards may be sold, pledged, assigned, or otherwise
transferred (i) by will or the laws of descent and distribution, (ii) pursuant
to a QDRO, or (iii) when authorized by the Committee, at any time and in its
sole discretion, by gift of an Option by an Employee to a Permitted Transferee
(as defined below) subject to the following terms and conditions: (a) an Option
transferred to a Permitted Transferee shall not be assignable or transferable
by the Permitted Transferee other than by domestic relations order or by will
or the laws of descent and distribution; (b) any Option which is transferred
to a Permitted Transferee shall continue to be subject to all the terms and
conditions of the Option as applicable to the original holder (other than the
ability to further transfer the Option); (c) the Employee and the Permitted
Transferee shall execute any and all documents reasonably requested by the
Committee, including without limitation documents to (i) confirm the status of
the transferee as a Permitted Transferee, (ii) satisfy any requirements for
exemption for the transfer under applicable federal and state securities laws,
and (iii) evidence of the transfer; (d) the shares of Common Stock acquired by
a Permitted Transferee through exercise of an Option have not been registered
under the Securities Act of 1933, as amended, or any state securities act,
and may not be transferred, nor will any assignee or transferee thereof be
recognized as an owner of such shares of Common Stock for any purpose, unless a
registration statement under the Securities Act of 1933, as amended, and any
applicable state securities act with respect to such shares shall then be in
effect or unless the availability of an exemption from registration with
respect to any proposed transfer or disposition of such shares shall be
established to the satisfaction of counsel for the Company. As used in this
Section 10.1, "Permitted Transferee" shall mean (i) one or more of the
following family members of an Employee: spouse, former spouse, child
(whether natural or adopted), stepchild, and any other lineal descendent of
the Employee, (ii) a trust, partnership, or other entity established and
existing for the sole benefit of, or under the sole control of, one or more
of the above family members of the Employee, or (iii) any other transferee
specifically approved by the Committee after taking into account any
state or federal tax or securities laws applicable to transferable Options.
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No Option, Restricted Stock award, Deferred Stock award,
Performance Award, Stock Appreciation Right or Stock Payment or interest or
right therein shall be liable for the debts, contracts or engagements of
the Optionee, Grantee or Restricted Stockholder or his successors in interest
or shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law, by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and of
no effect, except to the extent that such disposition is permitted by the
preceding sentence.
During the lifetime of the Optionee or Grantee, only he
may exercise an Option or other right or award (or any portion thereof)
granted to him under the Plan, unless it has been disposed of pursuant to a
QDRO or a transfer authorized by the Committee in accordance with Section
10.1(iii). After the death of the Optionee or Grantee, any exercisable portion
of an Option or other right or award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement or
other agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's or Grantee's will or under the
then applicable laws of descent and distribution.
10.2 Amendment, Suspension or Termination of This Plan. Except as
otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 10.3, increase the limits imposed in Section 2.1 on
the maximum number of shares which may be issued under this Plan or modify the
Award Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights or Stock Payments, alter
or impair any rights or obligations under any Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights or Stock
Payments theretofore granted or awarded, unless the award itself otherwise
expressly so provides. No Options, Restricted Stock, Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments may be granted or awarded during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock Option
be granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted
by the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 10.4.
10.3 Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 10.3(d), in the event that the Committee
determines that any dividend or other distribution (whether in the form
of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or
other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Corporate Transaction), or
exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of
the Company, or other similar corporate transaction or event, in the
Committee's sole discretion, affects the Common Stock such that an
adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an
Option, Restricted Stock award, Performance Award, Stock Appreciation
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Right, Deferred Stock award or Stock Payment, then the Committee shall,
in such manner as it may deem equitable, adjust any or all of:
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance
Awards, Stock Appreciation Rights or Stock Payments may be granted under
the Plan, or which may be granted as Restricted Stock or Deferred Stock
(including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued
and adjustments of the Award Limit);
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance
Awards, Stock Appreciation Rights, or Stock Payments, and in the number
and kind of shares of outstanding Restricted Stock or Deferred Stock; and
(iii) the grant or exercise price with respect to any Option,
Performance Award, Stock Appreciation Right or Stock Payment.
(b) Subject to Sections 10.3(b)(vii) and 10.3(d), in the event of
any Corporate Transaction or other transaction or event described in
Section 10.3(a) or any unusual or nonrecurring transactions or events
affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable
laws, regulations, or accounting principles, the Committee in its
discretion is hereby authorized to take any one or more of the following
actions whenever the Committee determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan or
with respect to any option, right or other award under this Plan, to
facilitate such transactions or events or to give effect to such changes
in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either
by the terms of the agreement or by action taken prior to the occurrence
of such transaction or event and either automatically or upon the
request of an Optionee, Restricted Stockholder or Grantee for either the
purchase of any such Option, Performance Award, Stock Appreciation
Right or Stock Payment, or any Restricted Stock or Deferred Stock for
an amount of cash equal to the amount that could have been attained upon
the exercise of such Option, right or award or realization of the
rights of the Optionee, Restricted Stockholder or Grantee had such
Option, right or award been currently exercisable or payable or fully
vested or the replacement of such option, right or award with other
rights or property selected by the Committee in its sole discretion;
(ii) In its sole and absolute discretion, the Committee may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right or
Stock Payment, or Restricted Stock or Deferred Stock or by action taken
prior to the occurrence of such transaction or event, that for a
specified period of time prior to such transaction or event, such
Option, right or award shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in (i) Section 4.4 or
(ii) the provisions of such Option, Performance Award, Stock
Appreciation Right or Stock Payment, or Restricted Stock or Deferred
Stock;
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(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right or
Stock Payment, or Restricted Stock or Deferred Stock or by action taken
prior to the occurrence of such transaction or event, that upon such
event, such Option, right or award be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock
of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of
shares and prices;
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may make adjustments
in the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Stock
Appreciation Rights or Stock Payments, and in the number and kind of
outstanding Restricted Stock or Deferred Stock and/or in the terms and
conditions of (including the grant or exercise price), and the criteria
included in, outstanding options, rights and awards and options, rights
and awards which may be granted in the future;
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by
the terms of a Restricted Stock award or Deferred Stock award or
by action taken prior to the occurrence of such event that, for a
specified period of time prior to such event, the restrictions imposed
under a Restricted Stock Agreement or a Deferred Stock Agreement upon
some or all shares of Restricted Stock or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or all shares
of such Restricted Stock may cease to be subject to repurchase under
Section 6.5 or forfeiture under Section 6.4 after such event; and
(vii) In the event of any Corporate Transaction, each outstanding
Option, Performance Award, Stock Appreciation Right, Stock Payment,
Restricted Stock, or Deferred Stock award shall, immediately prior to
the effective date of the Corporate Transaction, automatically become
fully exercisable for all of the shares of Common Stock at the time
subject to such rights or fully vested, as applicable, and may be
exercised for any or all of those shares as fully-vested shares of
Common Stock. However, an outstanding right shall not so accelerate
if and to the extent: (i) such right is, in connection with the
Corporate Transaction, either to be assumed by the successor or survivor
corporation (or parent thereof) or to be replaced with a comparable
right with respect to shares of the capital stock of the successor or
survivor corporation (or parent thereof) or (ii) the acceleration of
exercisability of such right is subject to other limitations imposed by
the Committee at the time of grant. The determination of
comparability of rights under clause (i) above shall be made by the
Committee, and its determination shall be final, binding and conclusive.
(c) Subject to Section 10.3(d) and 10.7, the Committee may, in
its discretion, include such further provisions and limitations in any
Option, Performance Award, Stock Appreciation Right, or Stock Payment,
or Restricted Stock or Deferred Stock agreement or certificate, as it
may deem equitable and in the best interests of the Company.
(d) With respect to Incentive Stock Options and Options and Stock
Appreciation Rights intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in
this Section 10.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the
Plan to violate Section 422(b)(1) of the Code or would cause such
Option or Stock Appreciation Right to fail to so qualify under Section
162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee determines that the option or other award is
not to comply with such exemptive conditions. The number of shares of
Common Stock subject to any option, right or award shall always be
rounded to the next whole number.
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10.4 Approval of Plan by Stockholders. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options, Performance Awards,
Stock Appreciation Rights or Stock Payments may be granted and Restricted Stock
or Deferred Stock may be awarded prior to such stockholder approval, provided
that such Options, Performance Awards, Stock Appreciation Rights or Stock
Payments shall not be exercisable and such Restricted Stock or Deferred Stock
shall not vest prior to the time when this Plan is approved by the stockholders,
and provided further that if such approval has not been obtained at the end of
said twelve-month period, all Options, Performance Awards, Stock
Appreciation Rights or Stock Payments previously granted and all Restricted
Stock or Deferred Stock previously awarded under this Plan shall thereupon be
canceled and become null and void.
10.5 Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Stockholder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting or exercise
of any Option, Restricted Stock, Deferred Stock, Performance Award, Stock
Appreciation Right or Stock Payment. The Committee may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee, Grantee or
Restricted Stockholder to elect to have the Company withhold shares of Common
Stock otherwise issuable under such Option or other award (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums
required to be withheld.
10.6 Loans. The Committee may, in its discretion, extend one or
more loans to Employees in connection with the exercise or receipt of an
Option, Performance Award, Stock Appreciation Right or Stock Payment granted
under this Plan, or the issuance of Restricted Stock or Deferred Stock awarded
under this Plan. The terms and conditions of any such loan shall be set by the
Committee.
10.7 Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of
this Plan, this Plan, and any Option, Performance Award, Stock
Appreciation Right or Stock Payment granted, or Restricted Stock or Deferred
Stock awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in
any applicable exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan, Options,
Performance Awards, Stock Appreciation Rights, Stock Payments, Restricted Stock
and Deferred Stock granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option or Stock
Appreciation Right intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.
10.8 Effect of Plan Upon Options and Compensation Plans. The
adoption of this Plan shall not affect Options outstanding before the Board
adopted this Plan or any other compensation or incentive plans in effect for the
Company or any Subsidiary. Nothing in this Plan shall be construed to limit
the right of the Company (i) to establish any other forms of incentives or
compensation for Employees or consultants of the Company or any Subsidiary or
(ii) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate purpose including, but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.
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10.9 Compliance With Laws. This Plan, the granting and vesting of
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights or Stock Payments under this Plan and the issuance
and delivery of shares of Common Stock and the payment of money under this Plan
or under Options, Performance Awards, Stock Appreciation Rights or Stock
Payments granted or Restricted Stock or Deferred Stock awarded hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory
or governmental authority as may, in the opinion of counsel for the Company,
be necessary or advisable in connection therewith. Any securities delivered
under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan, Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights or Stock Payments granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
10.10 Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
10.11 Governing Law. This Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of the State
of Delaware without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of BF Enterprises, Inc. on December 10, 1997.
Executed on this 21st day of April, 1998.
/s/ Carol Young
----------------------------------
Carol Young
Secretary
61
BF ENTERPRISES, INC.
1994 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
(Including all amendments through May 27, 1998)
BF ENTERPRISES, INC., a Delaware corporation (the "Company"), hereby adopts
this BF Enterprises, Inc. 1994 Stock Option Plan for Outside Directors. The
purpose of this stock option plan is to obtain, motivate and retain experienced
Outside Directors by offering them an opportunity to become owners of the
Common Stock of the Company.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the meaning
specified below unless the context clearly indicates to the contrary. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, where the context so indicates.
Section 1.1 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Chief Executive Officer
"Chief Executive Officer" shall mean the chief executive officer of the Company.
Section 1.3 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.4 - Common Stock
"Common Stock" shall mean the Company's common stock, $.10 par value.
Section 1.5 - Company
"Company" shall mean BF Enterprises, Inc.
Section 1.6 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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Section 1.7 - Fair Market Value
"Fair Market Value" of a share of the Common Stock as of a given date shall be:
(i) the closing price of a share of the Common Stock on the principal exchange
on which shares of the Common Stock are then trading, if any, on such date, or,
if shares were not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if such stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, (1) the last
sales price (if the stock is then listed as a National Market Issue under the
NASDAQ National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on such
date as reported by NASDAQ or such successor quotation system; or (iii) is such
stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the stock, on such date, as determined in good faith by the Secretary;
or (iv) if the Common Stock is not publicly traded, the fair market value
established by the Secretary acting in good faith.
Section 1.8 - Option
"Option" shall mean a non-qualified option to purchase Common Stock, granted
under the Plan.
Section 1.9 - Optionee
"Optionee" shall mean an Outside Director to whom an Option is granted under
the Plan.
Section 1.10 - Outside Director
"Outside Director" shall mean a member of the Board who is not an employee of
the Company, a Parent Corporation or a Subsidiary under Section 3401(c) of the
Code and who is not legally or contractually prohibited from receiving and
holding personally an Option.
Section 1.11 - Parent Corporation
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
Section 1.12 - Plan
"Plan" shall mean this BF Enterprises, Inc. 1994 Stock Option Plan for Outside
Directors.
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Section 1.13 - Retirement
"Retirement" shall mean acceptance by the Board of an Outside Director's
resignation from the Board by reason of retirement as determined by the Chief
Executive Officer.
Section 1.14 - Rule 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such
Rule may be amended in the future.
Section 1.15 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.16 - Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.17 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. "Subsidiary" shall also mean any partnership in
which the Company and/or any Subsidiary owns more than 50% of the capital
or profits interests.
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan
The shares of stock subject to Options shall be shares of the Common Stock.
The aggregate number of such shares which may be issued upon exercise of
Options shall not exceed 100,000.
Section 2.2 - Unexercised Options
If any Option expires or is cancelled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation shall again be available for
issuance pursuant to Options subsequently granted hereunder, subject to the
limitations of Section 2.1.
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Section 2.3 - Changes in Company's Shares
In the event that the outstanding shares of Common Stock are hereafter changed
into or exchanged for a different number or kind of shares or other securities
of the Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, or the number of shares is
increased or decreased by reason of a stock split-
up, stock dividend, combination of shares or any other increase or decrease in
the number of such shares of Common Stock effected without receipt of
consideration by the Company (provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been effected
without receipt of consideration), the Secretary acting in good faith shall
make appropriate adjustments in the number and kind of shares for the purchase
of which Options may be granted, including adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued on
exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility
Any Outside Director of the Company shall be eligible to be granted Options.
Section 3.2 - Granting of Options
3.2.1 - Initial Grant
Each person who is an Outside Director at the time the Plan is approved by the
stockholders of the Company shall immediately upon such approval be granted an
Option to purchase 5,000 shares of Common Stock. Any person who is not an
Outside Director at such time, but who later becomes an Outside Director, shall
be granted on the date of his election or appointment as an Outside Director an
Option to purchase 5,000 shares of Common Stock.
3.2.2 - Yearly Grant
Each Outside Director who has received a grant pursuant to Section 3.2.1 and
who has served at least one year as an Outside Director (or in the case of
persons who are Outside Directors at the time of approval of the Plan by the
stockholders, persons who serve until the next annual meeting of stockholders)
shall be granted on the date of each annual meeting of stockholders (so long
as he is an Outside Director at the close of business on such date) an
Option to purchase 2,000 shares of Common Stock.
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Section 3.3 - No Option Grant Where Prohibited
No person shall be granted an Option under this Plan if at the time of such
grant, the grant is prohibited by applicable law or by the policies of the
employer of such person or of any other company of which such person is a
member of the board of directors or a general partner.
ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement
As soon as practicable after an Outside Director becomes entitled to the grant
of an Option under Section 3.2 above, the Secretary shall cause to be executed
a written Stock Option Agreement, which shall be executed by the Outside
Director and an authorized officer of the Company and which shall contain such
terms and conditions as approved by the Secretary consistent with the Plan.
Section 4.2 - Option Price
The exercise price per share of Common Stock subject to each Option granted
pursuant to Section 3.2.1 and each Option granted pursuant to Section 3.2.2
shall be the Fair Market Value of a share of Common Stock on the date such
Option is granted; provided, however, that in no event shall the exercise price
per share of an Option be less than $.10.
Section 4.3 - Term
The term of each Option shall be ten years and one day from date of grant,
subject to earlier termination in accordance with Sections 4.5 or 4.6.
Section 4.4 - Exercise Schedule
An Option shall be exercisable on the following schedule: (i) for any Option
granted prior to May 27, 1998, beginning on the first anniversary of the date
of grant, for up to 25% of the shares covered by the Option; beginning on the
second anniversary of the date of grant, for up to 50% of such shares; beginning
on the third anniversary of the date of grant for up to 75% of such shares; and
beginning on the fourth anniversary of the date of grant, and thereafter until
the earlier of expiration of the Option's term or termination of the Option in
accordance with Sections 4.5 or 4.6, for up to 100% of such shares; and (ii) for
any Option granted on or after May 27, 1998, all such shares shall vest and
become exercisable, in whole or in part, immediately upon the grant of the
Option and thereafter until the earlier of expiration of the Option's term or
termination of the Option in accordance with Sections 4.5 or 4.6.
Notwithstanding the foregoing, an Option held by an Outside Director shall
become immediately exercisable in full upon the death or disability of such
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Outside Director, upon Retirement of such Outside Director from the Board, upon
an unsuccessful attempt by such Outside Director to win reelection to the Board
after nomination for election at the recommendation of the Board, or upon the
adoption by the Company of a plan for a liquidation, dissolution, merger,
consolidation or reorganization as described in clause (x), (y) or (z) of
Section 4.6.
Section 4.5 - Termination of Membership on the Board
Except in the case of death, disability, Retirement from the Board, or an
unsuccessful attempt to win reelection to the Board after nomination for
election at the recommendation of the Board, if an Outside Director's
membership on the Board terminates for any reason, an Option held at the date
of termination (but only to the extent exercisable at the time of such
termination in accordance with Section 4.4) may be exercised in whole or in
part at any time within one year after the date of such termination (but in no
event after the term of the Option expires) and shall thereafter terminate.
If an Outside Director's membership terminates because of death, disability,
Retirement from the Board, or an unsuccessful attempt to win reelection to the
Board after nomination for election at the recommendation of the Board, an
Option held at the date of such termination may be exercised for up to 100% of
the shares covered by such Option at any time within three years after the
date of such termination (but in no event after the term of the Option expires)
and shall thereafter terminate.
Section 4.6 - Change of Control
In the event of (x) a dissolution or liquidation of the Company, (y) a merger
or consolidation in which the Company is not the surviving corporation, or (z)
any other capital reorganization in which more than fifty percent (50%) of the
shares the Company entitled to vote are exchanged, the Company shall give to
the Outside Director, at the time of adoption of the plan for liquidation,
dissolution, merger, consolidation or reorganization, either (i) a reasonable
time thereafter within which to exercise each Option, prior to the
effectiveness of such liquidation, dissolution, merger, consolidation or
reorganization, at the end of which time such Option shall terminate, or (ii)
the right to exercise such Option as to an equivalent number of shares of stock
of the corporation succeeding the Company or acquiring its business by reason
of such liquidation, dissolution, merger, consolidation or reorganization.
Section 4.7 - Adjustments in Outstanding Options
In the event that the outstanding shares of Common Stock subject to Options are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, or the number of shares is increased or
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decreased by reason of a stock split-up, stock dividend, combination of shares
or any other increase or decrease in the number of such shares of Common Stock
effected without receipt of consideration by the Company (provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been effected without receipt of consideration), the Secretary
acting in good faith shall make appropriate adjustments in the number and kind
of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion
of the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in Option price per share. Any such adjustment made
by the Secretary shall be final and binding upon all Optionees, the Company and
all other interested persons. This Section 4.7 shall be subject to Section 4.6.
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only the Optionee may exercise an Option
(or any portion thereof) granted to the Optionee. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Stock
Option Agreement, be exercised by the Optionee's personal representative or by
any person empowered to do so under the deceased Optionee's will or under the
then applicable laws of descent and distribution.
Section 5.2 - Partial Exercise
At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under the Plan or
the applicable Stock Option Agreement, such Option or portion thereof may be
exercised in whole or in part; provided, however, that the Company shall not be
required to issue fractional shares and any partial exercise of the Option
shall be with respect to no less than 100 shares (or such lesser remaining
number of shares subject to the Option).
Section 5.3 - Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary of all of the following prior to the time
when such Option or such portion becomes unexercisable under the Plan or the
applicable Stock Option Agreement:
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5.3.1 - Notice
Notice in writing signed by the Optionee or other person then entitled to
exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by the
Secretary; and
5.3.2 - Payment
(a) Full payment (in cash or by check) for the shares with respect to which
such Option or portion is thereby exercised; or
(b) With the consent of the Chief Executive Officer, shares of the Common Stock
owned by the Optionee duly endorsed for transfer to the Company; or
(c) With consent of two Outside Directors, each of whom is a "disinterested
person" as defined in Rule 16b-3, and subject to the timing requirements of
Section 5.4, shares of the Common Stock issuable to the Optionee upon exercise
of the Option, with a Fair Market Value on the date of Option exercise equal to
the aggregate Option price of the shares with respect to which such Option or
portion is thereby exercised; or
(d) With the consent of the Chief Executive Officer, a full recourse promissory
note bearing interest (of at least such rate as shall then preclude the
imputation of interest under the Code or any successor provision) and payable
upon such terms as may be prescribed by the Chief Executive Officer. The Chief
Executive Officer may also prescribe the form of such note and the security to
be given for such note. No Option may, however, be exercised by delivery of
a promissory note or by a loan from the Company when or where such loan or
other extension of credit is prohibited by law; or
(e) With the consent of the Chief Executive Officer, any combination of the
consideration provided in the foregoing subsections (a), (b), (c) and (d).
5.3.3 - Tax Withholding
The payment to the Company of all amounts, if any, which it is required to
withhold under federal, state or local law in connection with the exercise of
the Option; with the consent of (i) the Chief Executive Officer, shares of the
Common Stock owned by the Optionee duly endorsed for transfer, or (ii) two
Outside Directors, each of whom is a "disinterested person" as defined in
Rule 16b-3, and subject to the timing requirements of Section 5.4, shares of
the Common Stock issuable to the Optionee upon exercise of the Option, valued
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at Fair Market Value as of the date of Option exercise, may be used to make
all or part of such payment.
5.3.4 - Securities Representations
Such representations and documents as the Secretary deems necessary or
advisable to effect compliance with all applicable provisions of the
Securities Act and any other federal or state securities laws or regulations.
The Secretary may also take whatever additional actions he deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars; and
5.3.5 - Proof of Third Party Right to Exercise
In the event that the Option or portion thereof shall be exercised pursuant to
Section 5.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option or portion
thereof.
Section 5.4 - Certain Timing Requirements
Shares of the Common Stock issuable to the Optionee upon exercise of the Option
may be used to satisfy the Option price or the tax withholding consequences of
such exercise only (i) during the period beginning on the third business day
following the date of release of the quarterly or annual summary statement of
sales and earnings of the Company and ending on the twelfth business day
following such date or (ii) pursuant to an irrevocable written election
by the Optionee to use shares of the Common Stock issuable to the Optionee
upon exercise of the Option to pay all or part of the Option price or the
withholding taxes (subject to the approval required under Sections 5.3.2 and
5.3.3) made at least six months prior to the payment of such Option price or
withholding taxes.
Section 5.5 - Conditions to Issuance of Stock Certificates
The shares of Common Stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of Common Stock purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following
conditions:
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(a) The admission of such shares to listing on all stock exchanges on which
the Common Stock is then listed;
(b) The completion of any registration or other qualification of such shares
under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission, or any other governmental regulatory body,
which the Secretary shall deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Secretary shall determine to be necessary or
advisable;
(d) The payment to the Company (or other employer corporation) of all amounts
which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of the
Option as the Secretary may establish from time to time for reasons of
administrative convenience.
Section 5.6 - Rights as Stockholders
The holders of Options shall not be, nor have any of the rights or privileges
of, stockholders of the Company in respect to any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such holders.
Section 5.7 - Transfer Restrictions
Unless otherwise approved in writing by the Board, no shares acquired upon
exercise of any Option by any Outside Director may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have elapsed from
(but excluding) the date that such Option was granted.
ARTICLE VI
ADMINISTRATION
Section 6.1 - Duties and Powers of the Secretary
It shall be the duty of the Secretary to conduct the general administration of
the Plan in accordance with its provisions. The Secretary shall have the
power to interpret the Plan and the Options and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
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Section 6.2 - Compensation; Professional Assistance; Good Faith Actions
All expenses and liabilities incurred by the Secretary in connection with the
administration of the Plan shall be borne by the Company. The Secretary may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Secretary, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Secretary in good faith shall be final and binding upon all Optionees, the
Company and all other interested persons. The Secretary shall not be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options, and the Secretary shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
ARTICLE VII
OTHER PROVISIONS
Section 7.1 - Options Not Transferable
No Option or interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Optionee or his successors in interest
or shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 7.1 shall prevent transfers by
will or by the applicable laws of descent and distribution.
Section 7.2 - Amendment, Suspension or Termination of the Plan
The Plan may be wholly or partially amended or otherwise modified (generally
not more frequently than once every six months), suspended or terminated at any
time or from time to time by the Board. However, without approval of the
Company's stockholders given within twelve months before or after the action
by the Board, no action of the Board may: (i) except as provided in
Section 2.3, increase any limit imposed in Section 2.1 on the maximum number
of shares which may be issued on exercise of Options; (ii) materially modify
the eligibility requirements of Section 3.1; (iii) reduce the minimum Option
price requirements of Section 4.2; (iv) extend the limit imposed in this
Section 7.2 on the period during which Options may be granted; or (v) amend or
modify the Plan in a manner requiring stockholder approval under Rule 16b-3.
Notwithstanding anything to the contrary herein, the Board, with respect to the
Plan or any Option, shall not (y) amend or modify any provision concerning the
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amount, price and timing of any Option (including, without limitation, the
provisions of Sections 3.2 and 4.2 of the Plan) more than once every six
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, or
(z) otherwise amend or modify the Plan or any Option in any manner inconsistent
with the requirements of Rule 16b-3(c)(2)(ii). Neither the amendment,
suspension nor termination of the Plan shall, without the consent of the holder
of the Option, alter or impair any rights or obligations under any Option
theretofore granted. No Option may be granted during any period of suspension
nor after termination of the Plan, and in no event may any Option be granted
under the Plan after the expiration of ten years from the date the Plan is
adopted by the Board.
Section 7.3 - Approval of Plan by Stockholders
The Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of the
Plan. Options may not be granted prior to such stockholder approval. The
Company shall take such actions with respect to the Plan as may be necessary
to satisfy the requirements of Rule 16b-3(b).
Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans
The adoption of the Plan shall not affect any other compensation or incentive
plans in effect for the Company, any Parent Corporation or any Subsidiary.
Nothing in the Plan shall be construed to limit the right of the Company, any
Parent Corporation or any Subsidiary (a) to establish any other forms of
incentives or compensation for directors of the Company or (b) to grant or
assume options otherwise than under the Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
Section 7.5 - No Right to Continued Membership on the Board
Nothing in the Plan or in any Stock Option Agreement shall confer upon any
Outside Director any right to continue as a director of the Company or shall
interfere with or restrict in any way the rights of the Company and its
stockholders, which are hereby expressly reserved, to remove any Outside
Director at any time for any reason whatsoever, with or without cause.
Section 7.6 - Titles
Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of the Plan.
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Section 7.7 - Conformity to Securities Laws
The Plan is intended to conform to the extent necessary with all provisions of
the Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. Without limiting the generality of the
foregoing, the Plan is intended to comply with the formula award plan
provisions set forth in Rule 16b-3(c)(2)(ii). Notwithstanding anything herein
to the contrary, the Plan shall be administered, and Options shall be granted
and may be exercised, only in such a manner as to conform to such laws, rules
and regulations. To the extent permitted by applicable law, the Plan and
Options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
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AMENDED AND RESTATED LETTER OF CREDIT
REIMBURSEMENT AGREEMENT
July 31, 1998
Boothe Financial Corporation
BF Enterprises, Inc.
100 Bush Street
Suite 1250
San Francisco, CA 94104
Gentlemen:
With reference to our recent discussions, we are pleased to
confirm our agreement to amend and restate our Letter of Credit Reimbursement
Agreement with you dated April 30, 1994 (as so amended and restated, and as the
same may be hereafter amended, supplemented or otherwise modified, the
"Agreement") and to issue, from the date hereof until the date which is
364 days from the date of this Agreement, irrevocable standby letters of credit
for your joint and several account on the following terms and conditions:
1. Issuance of Letter of Credit; Maximum Amount of Letters of Credit.
-----------------------------------------------------------------
(a) We agree, from the date hereof until the date which is
364 days from the date of this Agreement, on the terms and conditions
hereinafter set forth, (i) to continue for the account of Boothe Financial
Corporation our irrevocable letter of credit not to exceed US$1,200,000
(together with any replacements or extensions thereto, the "Existing Letter of
Credit"), which Existing Letter of Credit was issued in favor of American
National Bank and Trust Company, trustee of your subordinated debentures issued
under an original indenture dated October 1, 1972 and six supplemental
indentures, and (ii) upon reduction or termination of the Existing Letter of
Credit, one or more other irrevocable letters of credit in such form as
we shall approve in our sole discretion (each, a "Letter of Credit" and,
together with the Existing Letter of Credit, collectively, the "Letters of
Credit").
(b) Notwithstanding anything to the contrary contained in
this Agreement, the face amount of all Letters of Credit issued pursuant to this
Agreement and outstanding at any time shall not exceed, in the aggregate,
US$1,200,000. In addition, and without in any way limiting the limitation set
forth in the immediately preceding sentence, no Letter of Credit will be issued
hereunder if, after giving effect to the issuance of such Letter of Credit, the
sum of (i) the aggregate principal amount of Loans under (and as defined in) the
Promissory Note, dated the date hereof, in the original principal amount of
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US$3,700,000, executed by each of you in favor of us (as amended, supplemented
or otherwise modified from time to time, together with all replacements thereof
and substitutions therefor, the "Revolving Note"), plus (ii) the aggregate face
amount of all outstanding Letters of Credit issued hereunder, plus (iii) the
aggregate amount of all unpaid and outstanding reimbursement obligations and
fees hereunder in respect of such Letters of Credit (the "Minimum Coverage
Amount"), exceeds the lesser of (i) US$3,700,000 and (ii) the Value of
Investments (as defined in paragraph 6(d) hereof).
(c) Unless extended pursuant to paragraph (d) below, each
Letter of Credit issued hereunder shall have an expiry date (each, an "Expiry
Date") no later than the date which is 364 days from the date of this Agreement.
(d) The current Expiry Date of the Existing Letter of
Credit is December 31, 1998. Subject to the next sentence, we agree to extend
(i) the current Expiry Date of the Existing Letter of Credit at our option, for
additional periods of either one-year or ninety-days and (ii) to extend the
Expiry Date of any other Letter of Credit in our sole discretion.
Notwithstanding the foregoing, we may, in our sole discretion, elect not to
renew the Existing Letter of Credit upon notice to you given not less than sixty
days prior to any Expiry Date. You agree, not less than ten days prior to any
Expiry Date to notify us of any request for an extension of the Expiry Date,
such request to include the following information: (a) the face amount of the
Letter of Credit (which, in the case of the Existing Letter of Credit, shall be
decreased by the amount of any draw and by the amount of any debentures, paid or
purchased by you), (b) the period by which the Expiry Date shall be extended,
and (c) any other change with respect to the Letter of Credit during such
extended term.
2. Letter of Credit Fees.
---------------------
You shall pay us non-refundable fees for our rendering of the
letter of credit services requested. Such fees will be in amounts set by us and
will include, but not be limited to, the following:
(a) Letter of Credit Fee. You shall pay us a letter of
credit fee equal to (i) 3/8 of 1% per annum of the face amount of each Letter of
Credit issued hereunder. The letter of credit fee shall be charged on the face
amount of each Letter of Credit from its issuance date until its Expiry Date,
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in advance, beginning on the initial issuance
date and on each Expiry Date thereafter.
(b) Amendment Fee. You shall pay us an amendment fee
equal to $150 for each amendment requested.
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3. Reimbursement for Payments under the Letter of Credit.
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We shall promptly notify you in writing each time we are
presented with the requisite documents for a payment pursuant to the terms of a
Letter of Credit (and in such notice specify the amount of such payment). You
agree promptly to reimburse us for such payment, together with interest thereon
from the date of payment by us to the date of reimbursement by you at a
fluctuating interest rate per annum (computed on the basis of a year
of 360 days for the actual number of days elapsed) equal to the fluctuating
rate of interest announced by us as our base rate ("Base Rate") as in effect
from time to time plus one percent (1%), with each change in such fluctuating
rate to take effect simultaneously with the corresponding change in the Base
Rate.
4. Increased Costs.
---------------
If any change in any law or regulation or in the interpretation
thereof by any court or administrative or governmental authority charged with
the administration thereof shall either (i) impose, modify or deem applicable
any reserve, special deposit or similar requirement against Letters of Credit
issued by us to you hereunder or against any other extension of credit by us to
you hereunder, or other assets of, or any deposits or other liabilities taken or
entered into by us or (ii) impose on us any other condition regarding this
Agreement or any Letter of Credit and the result of any event referred to in
clause (i) or (ii) above shall be to increase the cost to us of issuing or
maintaining such Letter of Credit or your reimbursement obligations hereunder or
reduce the amounts receivable by us hereunder (which increase in cost or
reduction in amount receivable shall be the direct result of our reasonable
allocation of the aggregate of such cost increases or reductions resulting from
such events), then, upon demand by us, you shall immediately pay to us for our
account, from time to time as we specify, additional amounts which shall be
sufficient to compensate us for the actual amount of such increased cost or
reduction from the date of such change, together with interest on each such
amount from the date demanded until payment in full thereof at the rate provided
in paragraph 3 above. A certificate setting forth in reasonable detail such
increased cost incurred by us as a result of any event mentioned in clause (i)
or (ii) above, submitted by us to you, shall be conclusive, absent manifest
error, as to the amount thereof.
5. Obligations.
-----------
Your obligations under this Agreement shall be paid strictly in
accordance with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances:
(i) Any lack of validity or enforceability of any Letter
of Credit or any other agreement or instrument relating to it
(collectively, the "related documents");
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(ii) Any amendment or waiver of or any consent to or
departure from all or any of the related documents;
(iii) The existence of any claim, setoff, defense or other
rights which you may have at any time against any beneficiary or any
transferee of a Letter of Credit, ourselves (other than the defense of
payment to us in accordance with the terms of this Agreement) or any other
person or entity, whether in connection with this Agreement, the related
documents or any unrelated transactions;
(iv) Any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(v) Payment by us under a Letter of Credit against
presentation of a sight draft or certificate which does not comply with
the terms of such Letter of Credit, provided that such payment shall not
have constituted negligence or willful misconduct on our part; and
(vi) Any other circumstances or happening whatsoever that
may constitute a legal or equitable discharge or defense to payment,
whether or not similar to any of the foregoing.
6. Collateral; Minimum Coverage Amount.
-----------------------------------
(a) In order to secure your obligations (i) under this
Agreement and (ii) under the Revolving Note, each of you pledges and grants or
has pledged and granted, as the case may be, to us a security interest in and a
general lien upon the property (the "Collateral") on deposit in Account No.
70-5032-01-9 maintained with us (the "Account"), all as more particularly
described in the Pledge and Security Agreement dated as of the date hereof,
between each of you and us (as amended, supplemented or otherwise modified from
time to time, the "Security Agreement").
(b) You agree that at all times you shall maintain
sufficient Collateral in the Account so that the Value of Investments (as
defined below) in such Account equals or exceeds the Minimum Coverage Amount
(as defined in paragraph 1(b) hereof).
(c) If at any time and for any reason, the Minimum
Coverage Amount exceeds the Value of Investments, then upon our election and
demand, you shall, within 5 business days of written notice from us, repay or
prepay, as the case may be, Loans (as defined in the Revolving Note) in the
amount of such excess or provide additional Investments with an aggregate Value
equal to such excess. You also agree that in the event of your failure to
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comply with the foregoing provisions of this clause (c), we shall have the
right, in addition to the right to require repayment of the Loans or additional
Collateral, to sell such of the Collateral as we may reasonably select and
determine to be necessary to remedy such shortfall.
(d) You agree to furnish us, or cause to be furnished to
us, within fifteen (15) days of the end of each fiscal month, monthly valuation
reports with respect to the Investments with sufficient detail for us to
establish the Value of Investments.
(d) For purposes hereof, the terms "Minimum Coverage",
"Moody's", "Value", "Investments", "Value of Investments" and "S&P" shall have
the following meanings:
"Investments" shall mean, the types of investments set forth in
the definition of "Value" which are on deposit in, or credit to, the Account.
"Minimum Coverage Amount" shall mean, at any time of
determination, the sum of (i) the aggregate amount which is undrawn and
available under all issued and outstanding Letters of Credit, (ii) the aggregate
amount of all unpaid and outstanding reimbursement obligations hereunder, and
(iii) the aggregate principal amount of Loans (as defined in the Revolving Note)
outstanding under the Revolving Note.
"Moody's" shall mean Moody's Investment Service, Inc., and any
successor thereto.
"S&P" shall mean Standard & Poor's Corporation Ratings Services,
a division of McGraw-Hill, and any successor thereto.
"Value" shall mean, at any time of determination, with respect
to any of the following types of Investments set forth below (which shall be
denominated in U.S. dollars), the value of each such Investment times the
percentage set forth opposite such Investment below:
<TABLE>
<CAPTION>
Investment Assigned Value
---------- ---------------
<S> <C>
Cash and Cash Equivalents - 100%
money market accounts, eurodollar
deposits and other time deposits limited
to one year or less
U.S. Government and Federal agency 90%
obligations with a maturity of less than
five years
</TABLE>
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<TABLE>
<CAPTION>
Investment Assigned Value
---------- --------------
<S> <C>
U.S. Government and Federal agency 80%
obligations with a maturity of more than
five years
Commercial Paper- rated A-1 or better To be determined on a case-by-case basis
by S&P or P-1 or better by Moody's, with and, in any event, not to exceed 90%
maturities of 270 days or less
Corporate Bonds- rated BBB or better by 75%
S&P or Baa or better by Moody's, with
maturities of note less than two years
Stock- common or preferred stock traded Coverage rate, amounts, and acceptability
on a U.S. exchange, broadly traded in to be determined by us in our sole
volumes that permit sales without unduly discretion and, in any event, not to exceed
depressing prices and free of legends and 75%
restrictions on sale or transfer
Other money market instruments acceptable 100%
to us in our sole discretion
</TABLE>
"Value of Investments" shall mean the aggregate sum of the Value
of all Investments.
7. Payments.
--------
All payments of principal, interest, fees and other amounts
payable by you hereunder shall be made in immediately available and freely
transferable funds of U.S. Dollars by 10:00 a.m., New York time, on the date of
payment to us at our office at One State Street, New York, New York 10004,
U.S.A., free and clear of, and without deduction for, any taxes, withholdings or
other charges imposed on such payments (other than taxes, withholdings or
other charges imposed on or measured by our net income or net profits). Should
any such taxes, withholdings or other charges be imposed on any such payment
(other than taxes, withholdings or other charges imposed on or measured by our
net income or net profits), you will pay them and remit to us an amount equal to
what we would have received had such a tax, withholding or other charge not been
imposed, together with receipts evidencing payment of same.
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8. Conditions Precedent.
--------------------
Our obligation to continue the Existing Letter of Credit or issue
any other Letter of Credit and to extend credit to you hereunder is subject to
our receipt in form satisfactory to us of (a) a certified copy of resolutions of
your board of directors authorizing your execution, delivery and performance of
this Agreement, the Revolving Note and the Security Agreement (and the documents
hereinafter referred to); (b) a certified copy of your charter and by-laws,
together with a secretary's or assistant secretary's certificate certifying as
to the authority of each person executing any of the documents referred to
herein, together with specimen signatures of each such person, (c) payment of
all Letter of Credit fees referred to in paragraph 2; (d) an executed copy of
the Security Agreement and the Revolving Note, together with the Collateral;
(e) such other documents and approvals, or certified copies thereof, and
opinions as we may from time to time reasonably request.
9. Representations and Warranties.
------------------------------
You each hereby represent and warrant that:
(a) You are duly incorporated, validly existing and in
good standing under the laws of the state of your incorporation.
(b) The execution, delivery and performance by you of
this Agreement are within your corporate powers, have been duly authorized by
all necessary corporate action, have received all necessary governmental
approvals and do not contravene (i) your charter or by-laws, or (ii) any law,
regulation or contractual restriction binding on or affecting you which may
have a material adverse affect on your financial condition, operations or
affairs.
(c) This Agreement is your legal, valid and binding
obligation enforceable against you in accordance with its terms.
(d) There is no pending or, to the best of your
knowledge, threatened action or proceeding affecting you before any court,
governmental agency or arbitrator which may materially adversely affect your
financial condition, operations or affairs.
(e) There has been no material adverse change in your
financial condition, operations or affairs as reflected in your most recent
audited consolidated financial statements, copies of which have been furnished
to us.
(f) You wholly-own the Collateral pledged to us free and
clear of all liens and encumbrances whatsoever. No further action, including
any filing or recording of any security agreement or financing statement is
necessary in order to establish and perfect our prior security interest in or
first lien on the Collateral.
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(g) You have filed all tax returns which you are required
to file, have paid all taxes and assessments due and payable and no taxing
authority has asserted any claim for unpaid taxes or assessments against you
except those claims which are being contested in accordance with paragraph 10(g)
below.
The representations and warranties contained herein shall be true
and correct as of the date of each extension of the Expiry Date of a Letter of
Credit.
10. Covenants.
---------
So long as this Agreement is in effect and until all your
obligations hereunder shall have been paid in full, with accrued interest, you
each covenant and agree that:
(a) Financial Statements; No Default Certificate. You
shall furnish us, (i) within 100 days after the close of each fiscal year, with
your audited financial statements, prepared and certified by your independent
certified public accountants without "going concern" or like qualification as of
the end of such period, including a balance sheet and related statements of
earnings, shareholder's equity and changes in financial position for such fiscal
year, in each case setting forth in comparative form the figures for the
previous year, (ii) within 50 days after the close of each of the first three
quarters of your fiscal year, similar financial statements to those referred to
in (i) above, unaudited but prepared in accordance with generally accepted
accounting principles consistently applied and certified as true and correct by
your Treasurer or chief financial officer; (iii) within 100 days after the close
of each fiscal year and 50 days after the close of each fiscal quarter a
certificate signed by your chief financial officer to the effect that no default
has occurred and is continuing, or, if a default shall have occurred or is
continuing, specifying each such default in reasonable detail, the nature and
status thereof and the actions taken or proposed to be taken by you with respect
to such default; and (iv) such other financial or other information as we may
from time to time reasonably request.
(b) Notice. You shall promptly give notice in writing to
us of (i) the occurrence of a default hereunder or under the Revolving Note or
the occurrence of any event which according to your judgment with notice or the
passage of time or both would result in the occurrence of a default hereunder,
(ii) any material adverse condition affecting you or your operations and (iii)
any action or event known to you which may materially and adversely affect your
performance of this Agreement.
(c) Regulations. You shall observe and comply in all
material respects with all statutes, rules, regulations, guidelines or other
requirements having the force of law that now or at any time hereafter may be
applicable to you, the noncompliance with which could materially adversely
affect your business, operations or financial condition.
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(d) Negative Pledge. Except for the security interest
granted in our favor, you shall not create, incur, assume or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any kind on any of the Collateral, whether now owned or hereafter
acquired.
(e) Taxes. You shall duly file all tax returns with
respect to you and your property which are required to be filed and duly pay all
taxes shown thereon to be due and payable, unless such taxes are being contested
in accordance with clause (g) below.
(f) Corporate Existence. You shall cause to be done all
things necessary to preserve and keep in full force and effect your corporate
existence, rights and franchises so as to maintain your business as in existence
on the date hereof; at all times maintain, preserve and protect in all material
respects all trade names, trademarks, copyrights, patents, permits, service
marks and licenses, or rights thereto used in the conduct of your business;
preserve, in all material respects, property used or useful in the conduct of
your business and keep the same in good repair, working order and condition,
ordinary wear and tear expected, and from time to time make, or cause to be
made, all needful and proper repairs and improvements thereto so that the
business carried on in connection therewith may be properly conducted at all
times; and maintain insurance to such extent and against such risks as is
customary for companies similarly situated.
(g) Obligations. You shall pay all of your indebtedness
and obligations promptly and in accordance with normal terms and trade
practices; and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon you or upon
your income and profits, or upon any of your property, real, personal or mixed,
or upon any part thereof, before the same becomes in default, as well as all
lawful claims for labor, materials and supplies or otherwise that, if unpaid,
might become a lien upon your properties or any part thereof; provided, however,
that you shall not be required to pay and discharge or cause to be paid and
discharged any such indebtedness, obligation, tax assessment, charge, levy or
claim so long as (i) the applicability or validity thereof is being contested in
good faith by appropriate corporate procedures, and (ii) you have set aside on
your books adequate reserves with respect to contests in excess of US$100,000.
(h) Books and Records. You shall keep proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles and all requirements of law shall be
made of all dealings and transactions in relation to your business and
activities; and permit our authorized representatives to visit your offices
from time to time during normal business hours, to examine such books and
records and make a reasonable number of copies or extracts therefrom and to
discuss your affairs and accounts with your officers and accountants.
(i) Tangible Net Worth. You shall at all times maintain a
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tangible net worth of not less than US$12,000,000. For purposes of this
covenant, guarantees not shown on the financial statements delivered pursuant to
subparagraph (a) above shall be excluded from the calculation of tangible net
worth.
(j) Acquisition; Merger. You shall not consolidate or
merge into any other entity or acquire through the purchase of assets or stock
any business entity with an aggregate value in excess of US$5,000,000 without
our prior written consent, which consent shall not be unreasonably withheld.
(k) Further Acts. From time to time you shall execute
and deliver to us all such further documents and instruments and do all such
other acts and things as may be reasonably required in our opinion to enable us
to exercise and enforce our rights hereunder and under the other documents
referred to herein.
11. Miscellaneous.
-------------
(a) Amendments, Waivers, Etc. No amendment or waiver of
any provision of this Agreement nor consent to any departure by you therefrom,
shall in any event be effective unless the same shall be in writing and signed
by us and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on our part
to exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by
us of any right, remedy or power hereunder preclude any other or future exercise
of any other right, remedy or power. You further agree that our rights,
remedies and powers hereunder shall continue unimpaired and that you shall
remain obligated in accordance with the terms hereof notwithstanding the partial
exercise by us of any right, remedy or power. Each and every right, remedy and
power hereby granted to us or allowed us by law or other agreement shall be
cumulative and not exclusive and may be exercised by us from time to time.
(b) Notices, Etc. Notices and other communications
provided for hereunder shall be in writing (including telex or telegraphic
communications) and mailed, telexed, telegraphed or delivered to you at your
address as shown on the first page hereof; and, if to us, at One State Street,
New York, New York 10004, Attention: Middle Market Corporate Finance; or as to
each of us at such other address as shall be designated by such party in a
written notice to the other party.
(c) Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in paragraph 10(a) and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
such principles.
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(d) Costs and Expenses. You agree to pay all of our
reasonable expenses (including, but not limited to, reasonable legal fees and
disbursements) of every kind incidental to the enforcement of this Agreement or
the collection of any sums due to us hereunder. You hereby indemnify us and
hold us harmless from and against any and all claims, damages, losses,
liabilities, reasonable costs or expenses whatsoever which we may incur (or
which may be claimed against us by any person or entity whatsoever) by reason of
or in connection with the execution and delivery or transfer of, or payment or
failure to pay under, the Letter of Credit; provided that you shall not be
required to indemnify us for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by our willful
misconduct or negligence in determining whether a sight draft or certificate
presented under a Letter of Credit complied with the terms of such Letter of
Credit. Nothing in this paragraph is intended to limit your reimbursement
obligation contained in this Agreement.
(e) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York. Except as
otherwise provided in the Letter of Credit, such Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
subsequent revisions thereof approved by a Congress of the International
Chamber of Commerce and adhered to by us. The provisions herein are
supplemental to, and not in substitution of, said Uniform Customs and Practice.
(f) Consent to Jurisdiction. You represent that you have
no immunity with respect to any action or proceeding brought in connection with
this Agreement, and agree that any legal or equitable action or proceeding with
respect to this Agreement or the enforcement thereof may be brought in any
Federal or State court of competent jurisdiction located in the City of New York
and, by execution and delivery of this Agreement, you accept for yourself
and your property, generally and unconditionally, the jurisdiction of the
aforesaid courts and any related appellate court, irrevocably agree to be bound
by any judgment rendered thereby in connection with this Agreement, and
irrevocably waive any objection you may now or hereafter have as to the venue of
any such action or proceeding brought in such a court or that such court
is an inconvenient forum. You consent to the service of process out of any of
the aforementioned courts in any such action or proceeding by mailing of copies
thereof by registered mail, postage prepaid, such service to become effective
three business days after such mailing. Nothing herein shall affect our right
to serve process in any other manner prescribed by law or the right to bring
legal or equitable actions or proceedings in other competent jurisdictions. Any
judicial proceeding by you against us involving, directly or indirectly, any
matter in any way arising out of, related to or connected with this Agreement
shall be brought only in a court located in the City of New York. YOU HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING BROUGHT BY YOU OR US INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT.
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(g) Continuing Obligation. This Agreement shall
constitute your continuing obligation, shall survive the termination of a
Letter of Credit and shall (i) be binding on yourselves, your successors and
assigns and (ii) inure to the benefit of and be enforceable by ourselves and our
successors and assigns, provided that you may not assign all or any part of this
Agreement without our prior written consent.
(h) Responsibility. The beneficiary (or beneficiaries as
the case may be) of a Letter of Credit shall be deemed to be your agent and you
assume all risks for its acts or omissions. We do not assume any liability for
our failure to pay under a Letter of Credit if such failure is due to any
restriction in force at the time and place of presentment and you agree to
indemnify us and hold us harmless from any consequences that may arise
therefrom. Neither we nor our correspondents, if any, shall be responsible: for
the validity, sufficiency, or genuineness of documents, even if such documents
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged; for failure of any draft to bear any reference or adequate
reference to an applicable Letter of Credit, or failure of any person to note
the amount of any draft on such Letter of Credit or to surrender or take up such
Letter of Credit; each of which provisions, if contained in such Letter of
Credit itself, it is agreed may be waived by us, provided, however, that with
respect to each of the above, we have acted in good faith and without gross
negligence or willful misconduct. We and our correspondents, if any, may
receive, accept or pay as complying with the terms of a Letter of Credit, any
drafts or other documents, otherwise in order, which may be signed by, or issued
to, the administrator or executor of, or the trustee in bankruptcy of, or the
receiver for any of the property of, or any other person or entity acting as the
representative or in the place of, the party in whose name such Letter of Credit
provides drafts or other documents should be drawn or issued. Furthermore,
neither we nor our correspondents, if any, shall be responsible for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, facsimile transmission or otherwise; nor shall we be
responsible for any error, neglect, or default of any of our correspondents, if
any; and none of the above shall affect, impair, or prevent the vesting of any
of your rights or powers hereunder. In furtherance and not in limitation of the
specific provisions hereinbefore set forth, you agree that any action taken or
not taken by us in good faith, or by any correspondent of ours, if any, in good
faith, under or in connection with a Letter of Credit or the drafts or documents
pertaining thereto, shall be binding on you and shall not put us or such
correspondents under any resulting liability to you.
12. Termination; Acceleration.
--------------------------
(a) This Agreement shall remain effective, and your
obligations hereunder shall continue, until the termination or expiration, as
applicable, of all Letters of Credit issued hereunder and the payment in full of
all amounts due hereunder and under the Revolving Note.
(b) If (i) you fail to pay when due any principal or
interest or any other amount payable hereunder; or (ii) you fail to perform or
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observe any term, covenant or agreement contained in this Agreement, the
Revolving Note or the Security Agreement or in any instrument, document or
agreement delivered pursuant hereto or in connection herewith; or (iii) any
representation or warranty made or deemed to be made by you hereunder or in any
application, financial statement, instrument, document or agreement delivered
pursuant hereto or in connection herewith shall prove to have been incorrect in
any material respect when made or shall prove to be incorrect in any material
respect as of the date made or deemed to be made; or (iv) you shall, with
respect to any obligation (other than your obligations under this Agreement or
the Revolving Note) in excess of US$1,500,000, (x) fail to pay any of your
indebtedness for borrowed money or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period,
if any, or (y) fail to perform or observe any term, covenant or condition on
your part to be performed or observed under any agreement or instrument
relating to any such indebtedness for borrowed money, when required to be
performed or observed, and such failure shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such failure to perform or observe is to accelerate the maturity of such
indebtedness for borrowed money, or any such indebtedness for borrowed money
shall be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or (v) an Event of Default under (and as defined in) the Revolving Note
shall have occurred and be continuing, then, our agreement to issue Letters of
Credit shall terminate and in any such event, we may, by notice of default given
to you, take any one or more of the following actions: (1) declare all of your
outstanding obligations to us hereunder (including, but not limited to, all
contingent and unmatured obligations hereunder), together with accrued interest
to the date of payment, to be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which you hereby waive,
and/or (2) require that you provide us, within five business days of the date
you receive notice from us of such default, with cash collateral in
an amount equal to the sum of (A) the maximum aggregate amount of all drafts
that might thereafter be drawn under all Letters of Credit, plus (B) all fees
thereafter payable in respect of all Letters of Credit.
(c) In the event of the commencement by you of a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by you to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or the
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of you or of any substantial part of
your property, or the making by you of any general assignment for the benefit of
creditors, or your failure generally to pay your debts as such debts become due,
or the taking of corporate action by you in furtherance of any of the foregoing,
then, and in any such event, our agreement to issue Letters of Credit shall
terminate and all of your outstanding obligations to us hereunder (including,
but not limited to, all contingent and unmatured obligations hereunder),
together with accrued interest to the date of payment, shall thereupon
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which you hereby waive; and
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we may require that you provide us with cash collateral in an amount equal to
the sum of (A) the maximum aggregate amount of all drafts that might thereafter
be drawn under all Letters of Credit plus (B) all fees thereafter payable in
respect of all Letters of Credit.
13. Joint and Several Obligations.
-----------------------------
For all purposes of this Agreement, the provisions hereof shall,
unless specifically stated to the contrary, apply to each or any of you and you
shall be jointly and severally liable for all of your obligations hereunder,
under the Revolving Note, the Security Agreement or any other agreement or
document relating hereto or thereto. It is understood and agreed that the
obligations of each of you under this Agreement, the Revolving Note, the
Security Agreement or any other agreement or document relating hereto or thereto
shall not be affected by any release or other indulgence granted by us to any
one of you with respect to the obligations of any other party hereto.
If the foregoing agreement is acceptable to you, please sign and
return to us the enclosed copy of this letter and the other documents referred
to above.
Very truly yours,
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ John Duncan
---------------------------
John Duncan
Managing Director
Agreed to and accepted:
BOOTHE FINANCIAL CORPORATION
By: /s/ Brian P. Burns
--------------------------
Name: Brian P. Burns
Title:
BF ENTERPRISES, INC.
By: /s/ Brian P. Burns
----------------------------
Name: Brian P. Burns
Title:
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PLEDGE AND SECURITY AGREEMENT
(Possessory Lien)
PLEDGE AND SECURITY AGREEMENT (this "Security Agreement")
dated July 31, 1998 among BF ENTERPRISES and BOOTHE FINANCIAL CORPORATION
(collectively, the "Pledgors") and IBJ SCHRODER BANK & TRUST COMPANY
(the "Bank").
WHEREAS, the Pledgors are parties to the Loan and Security
Agreement dated April 30, 1994 (the "Existing Security Agreement") pursuant to
which, among other things, the Pledgors party thereto granted the Bank a lien on
and security interest in the Account (as defined below) maintained with the
Bank, and all property on deposit therein as security for the payment and
performance of the Pledgors' obligations under the Letter of Credit
Reimbursement Agreement dated April 30, 1994 (the "Existing Reimbursement
Agreement") pursuant to which, among other things, the Bank agreed to issue
letters of credit for the joint and several account of the Pledgors; and
WHEREAS, concurrently with the execution and delivery of this
Security Agreement, (i) the Pledgors and the Bank are entering into an Amended
and Restated Letter of Credit and Reimbursement Agreement dated the date hereof
which amends and restates the Existing Reimbursement Agreement (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"Reimbursement Agreement") and (ii) the Pledgors are executing a Promissory
Note, dated the date hereof, in favor of the Bank in the original principal
amount of $3,700,000 pursuant to which, subject to the terms and conditions
therein, the Bank has agreed to extend credit to the Pledgors (as the same may
be amended, restated, supplemented or otherwise modified from time to time,
together with any substitution therefor, the "Note"); and
WHEREAS, it is a condition precedent to extensions of credit
under the Note and the issuance of letters of credit under the Reimbursement
Agreement that the Pledgors amend and restate the Existing Security Agreement;
NOW THEREFORE, in consideration of the foregoing premises, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree to amend and restate the
Existing Security Agreement as follows:
1. Security Interest. Subject to the terms and conditions
hereinafter set forth and as security for the prompt payment and performance of
the Pledgors' obligations to the Bank under the Note and the Reimbursement
Agreement, each Pledgor hereby ratifies and confirms the security interests and
liens granted pursuant to the Existing Security Agreement and pledges, assigns,
hypothecates, transfers, sets over, grants a security interest in and delivers
to the Bank all of such Pledgor's rights, title and interest in and to all cash,
time deposits, certificates of deposit, securities, financial assets, securities
entitlements, financial instruments, investment property and other property, and
any permitted substitutions therefor or additions thereto (the "Collateral") on
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<PAGE>
deposit with the Bank in Custody Account No. 70-5032-01-9 (the "Account")
and/or any other account maintained by any of the Pledgors with the Bank,
together with any and all proceeds thereof.
Each Pledgor covenants and agrees to maintain Collateral in
the Account acceptable to the Bank in the amounts and subject to the margins set
forth in the Reimbursement Agreement and the Note. The Account and all
Collateral on deposit therein shall be under the sole dominion and control of
the Bank, provided that the Pledgors shall be entitled to make withdrawals from
the Account, if (i) the Bank shall have consented to such withdrawal, such
consent not to be unreasonably withheld, (ii) after giving effect to such
withdrawal, the Value of Investments (as such term is defined in the
Reimbursement Agreement) equal or exceeds the Minimum Coverage Amount (as
defined in the Reimbursement Agreement) and (iii) immediately prior to and after
giving effect to such withdrawal, no default shall have occurred and be
continuing under the Note or the Reimbursement Agreement.
2. Representations and Warranties. Each Pledgor
represents and warrants that (a) such Pledgor has the power and authority to
enter into this Security Agreement and to grant a security interest in the
Collateral and the Account pursuant to the provisions hereof and (b) such
Pledgor or one of the other Pledgors is the sole beneficial owner of the
Collateral and the Account and the assets contained therein, free and clear of
all security interests, liens and other encumbrances, and the transferability
of the Collateral is not restricted in any way.
3. Default. Upon the occurrence of any event described in
Paragraphs 12(b) or (c) of the Reimbursement Agreement or an Event of Default
under (and as defined in) the Note, the Bank may, in addition to any other
rights and remedies it may have with respect to the Account and the Collateral,
(a) immediately and without further demand declare all obligations under the
Reimbursement Agreement and the Note, together with accrued interest thereon and
all fees payable thereunder, immediately due and payable, (b) cause the
Collateral to be registered in the Bank's name or in the name of the Bank's
nominee, (c) vote the Collateral so transferred, and receive income and make or
receive collections thereon and hold said income and collections as Collateral
or apply said income and collections to any of the obligations owing hereunder
or under the Note or the Reimbursement Agreement, and (d) exercise any and all
of the rights and remedies of a secured party upon default under the Uniform
Commercial Code and otherwise including, without limitation, the right without
further demand or notice of any kind, all of which are hereby expressly waived
by the Pledgors to the extent permitted by applicable law, to sell and deliver
the Collateral, or any of it, at any broker's board, or at public or private
sale, in whole at any time or in part from time to time, within New York City or
elsewhere, for cash, upon credit or for future delivery and at such price or
prices as it shall deem satisfactory.
The Bank may be a purchaser at any sale and may apply the
amounts due and unpaid under the Note and the Reimbursement Agreement to the
payment of the purchase price for the Collateral. In case of any sale by the
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<PAGE>
Bank, any of the Collateral sold may be retained by the Bank until the selling
price is paid by the purchaser, but the Bank shall incur no liability in
case of the failure of the purchaser to take up and pay for the Collateral so
sold. In case of any such failure, such Collateral so sold may be again
similarly sold. All proceeds from any such sale or sales shall be held and
applied by the Bank against the outstanding obligations of Borrower to the Bank.
4. Waivers by Pledgors. Each Pledgor hereby waives (a)
all rights, if any, of marshalling the Account or any other property, and (b)
all protests and notices of dishonor and all other notices except those
specifically provided for herein.
5. Reimbursement of Expenses. Each Pledgor hereby agrees,
jointly and severally, to reimburse the Bank on demand for all reasonable
expenses incurred by it in connection with the enforcement of this Security
Agreement including reasonable attorneys fees. Each Pledgor further agrees,
jointly and severally, to indemnify the Bank and to hold it harmless from and
against any all liability incurred by it hereunder or in connection herewith,
unless such liability shall be due to willful misconduct or gross negligence on
the part of the Bank.
6. Further Pledge, Etc. Except for withdrawals permitted
by Section 1 hereof, no Pledgor shall sell, withdraw, assign, transfer,
mortgage, pledge or otherwise hypothecate or encumber the Account or the
Collateral to anyone other than the Bank, and none of the Pledgors shall permit
a financing statement describing the Collateral or the Account to be filed in
any jurisdiction.
7. Governing Law. This Security Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, U.S.A.
8. Consent to Jurisdiction. Each Pledgor represents that
it has no immunity with respect to any action or proceeding brought in
connection with this Security Agreement, and agrees that any legal or equitable
action or proceeding with respect to this Security Agreement or the enforcement
thereof may be brought in any Federal or State court of competent jurisdiction
located in the City of New York and, by execution and delivery of this
Agreement, such Pledgor accepts for itself and its property pledged hereunder,
generally and unconditionally, the jurisdiction of the aforesaid courts and any
related appellate court, irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement, and irrevocably waives any objection
it may now or hereafter as to the venue of any such action or proceeding
brought in such a court or that such court is an inconvenient forum. Each
Pledgor consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by hand delivery or by mailing of copies
thereof by certified mail, postage prepaid, such service to become effective
upon receipt if delivered by hand, otherwise five business days after such
mailing. Nothing herein shall affect the Bank's right to serve process in any
other manner prescribed by law or the right to bring legal or equitable actions
or proceedings in other competent jurisdictions. Any judicial proceeding by any
Pledgor against the Bank involving, directly or indirectly, any matter in any
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<PAGE>
way arising out of, related to or connected with this Agreement shall be brought
only in a court located in the City of New York. EACH PLEDGOR HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING BROUGHT BY THE PLEDGOR OR THE BANK
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED, OR CONNECTED WITH THIS AGREEMENT.
[Signature page follows.]
92
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement as of the date and year first written above.
Pledgors:
--------
BF ENTERPRISES, INC.
By: /s/ Brian P. Burns
---------------------------
Name: Brian P. Burns
Title: Chairman
BOOTHE FINANCIAL CORPORATION
By: /s/ Brian P. Burns
----------------------------
Name: Brian P. Burns
Title: Chairman
Bank:
- ----
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ John Duncan
-----------------------------
John Duncan
Managing Director
93
<PAGE>
IBJ Schroder CORPORATE-REVOLVER
Bank & Trust Company
PROMISSORY NOTE
US $3,700,000 New York, New York
July 31, 1998
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the
order of IBJ SCHRODER BANK & TRUST COMPANY (the "Bank"), the principal sum of
THREE MILLION SEVEN HUNDRED THOUSAND U.S. Dollars (US$3,700,000), or such lesser
amount as may be outstanding hereunder from time to time, on the Maturity Date
(defined below), together with accrued and unpaid interest, fees and expenses.
The amount due and owing from time to time by the undersigned and the interest
rate applicable thereto shall be evidenced by the Bank's records which shall be
conclusive evidence thereof.
1. Maturity Date. For purposes of this Note, "Maturity Date" shall mean the
earlier of (i) the date of any default hereunder and (ii) the date which is 364
days from the date of this Note.
2. Maximum Amount of Loans. Notwithstanding anything to the contrary contained
in this Note, including, without limitation, the stated original principal
amount, the Bank shall not be required to make any loan or advance to the
undersigned (each, a "Loan" and, collectively, "Loans") hereunder if, after
giving effect to the making of such Loan, the sum of (i) the aggregate
principal amount of Loans outstanding under this Note, plus (ii) the aggregate
face amount of all outstanding Letters of Credit issued under (and as defined
in) the Amended and Restated Letter of Credit Facility Agreement between the
Bank and the undersigned, dated as of the date hereof (as amended, supplemented
or otherwise modified from time to time, the "Reimbursement Agreement") plus
(iii) the aggregate amount of all unpaid and outstanding reimbursement
obligations and fees under the Reimbursement Agreement in respect of such
Letters of Credit (the "Minimum Coverage Amount"), exceeds the lesser of
(i) US$3,700,000 and (ii) the Value of Investments (as such term is defined in
the Reimbursement Agreement). The undersigned further acknowledges and agrees
that, notwithstanding anything to the contrary contained in this Note or the
Reimbursement Agreement, the face amount of all outstanding Letters of Credit
issued under (and as defined in) the Reimbursement Agreement shall not exceed,
in the aggregate, US$1,200,000.
3. Interest. The undersigned promises to pay interest on the unpaid principal
balance hereof from time to time outstanding from the date hereof until such
amount is due and payable at an interest rate per annum (computed on the basis
of a year of 360 days for the actual number of days elapsed) for each Interest
Period (as hereinafter defined) equal to 1.50% in excess of the rate of interest
at which U.S. Dollar deposits are offered to the Cayman Islands Branch of the
Bank in the London Interbank Eurodollar Market two business days (as hereafter
defined) prior to the commencement of such Interest Period for a period equal to
such Interest Period, plus the cost, as determined in good faith by the Bank, of
complying with any reserve, special deposit, or similar requirement (including,
but not limited to reserve requirements) imposed or deemed applicable by any
U.S. governmental authority against any assets held by the Bank or deposits or
accounts
94
<PAGE>
with the Bank or credit extended by the Bank ("LIBOR"). "Interest Period" shall
mean a period of one month, provided that (i) any Interest Period which would
end on a date beyond the Maturity Date shall end on the Maturity Date, and
(ii) any Interest Period which would otherwise end on a non-business day shall
end on the next succeeding business day (defined below), unless such day falls
in a new calendar month, in which event such Interest Period shall end on the
next preceding business day. The availability of Loans using the LIBOR Rate
shall be subject in each instance to the availability of U.S. Dollar deposits to
the Cayman Islands Branch, such availability to be determined in the Bank's sole
discretion. All references to "business day" shall mean a day on which the Bank
is open for business at its New York City headquarters and, in the case of
determining LIBOR, "business day" shall also mean a day in which dealings in
U.S. dollars are carried on in the London Interbank Eurodollar Market.
The undersigned shall pay the Bank accrued interest on each Loan from
time to time outstanding hereunder on the last day of each Interest Period and
on the Maturity Date. The undersigned promises to pay the Bank interest on any
overdue principal and any overdue interest from the due date thereof (whether by
acceleration or otherwise) at a floating rate per annum equal at all times to 4%
over the greater of the interest rate then in effect and the Base Rate (as
defined in the Reimbursement Agreement) (the "Default Rate"). Interest shall be
charged by offset against the Account (as defined in paragraph 14) which
undersigned maintains with the Bank.
Notwithstanding anything to the contrary above, no amount outstanding
hereunder shall bear interest in excess of the maximum rate of interest
permitted by law.
4. Increased Costs; Illegality. If, after the date hereof, due to any
increase in reserve requirements or other charges or costs imposed by any
governmental authority (whether or not having the force of law), the Bank shall
determine in good faith that there has been a direct increase in the costs to
the Bank of making, funding or maintaining any Loan, or a reduction in the
yield received by the Bank thereon, then the undersigned shall from time to
time, upon the Bank's demand to such effect, pay to the Bank additional amounts
sufficient to compensate the Bank for such increased costs or reduction in
yield to the Bank. A detailed statement as to the amount of such increased
costs or reduction in yield, submitted to the undersigned by the Bank shall be
conclusive and binding for all purposes. Notwithstanding anything to the
contrary herein contained, if any law, regulation or treaty or any change
therein or in the interpretation or application thereof by any authority or
agency charged with the administration thereof or by any court shall make it
unlawful for the Bank to make or fund or maintain any Loan or to give effect to
any of its obligations as contemplated hereby, then, on written notice thereof
and demand therefor by the Bank to the undersigned, (i) the obligation of the
Bank to make such Loan to the undersigned shall terminate or (ii) if any such
Loan shall be outstanding, the undersigned shall, on the last day of the
applicable Interest Period for each such Loan or, if earlier, the latest date
allowed by applicable law, prepay such Loan together with all accrued interest
thereon and all fees and other amounts payable to the Bank hereunder.
5. Representations and Warranties. The undersigned represents and warrants
on the date hereof that: (i) it is duly organized, validly existing and in good
95
<PAGE>
standing under the laws of its jurisdiction of incorporation; (ii) the
execution, delivery and performance by the undersigned of this Note are within
the powers of the undersigned, have been duly authorized by all necessary
action, have received all necessary governmental approvals, and do not
contravene its organizational documents, or any law, regulation or contractual
restriction binding on or affecting the undersigned; (iii) this Note is the
legal, valid and binding obligation of the undersigned enforceable against the
undersigned in accordance with its terms; (iv) there is no pending or threatened
action or proceeding affecting the undersigned before any court, governmental
agency or arbitrator which may materially adversely affect the financial
condition, operations or affairs of the undersigned; (v) there has been no
material adverse change in the financial condition, operations or affairs of the
undersigned as reflected in the most recent audited financial statements of the
undersigned, copies of which have been furnished to the Bank or any material
adverse change in the undersigned's ability to perform its obligations
hereunder; (vi) except as being contested by the undersigned in good faith, all
tax returns with respect to the undersigned and the undersigned's property which
are required to be filed have been duly filed, all taxes and assessments shown
thereon to be due and payable by the undersigned have been paid, and no taxing
authority has asserted any claim for unpaid taxes or assessments against the
undersigned; and (vii) the undersigned shall apply the proceeds of the Loan
evidenced by this Note toward general business requirements or as otherwise
permitted by the Bank.
6. Covenants. The undersigned covenants that until all obligations of the
undersigned hereunder shall have been paid in full, with accrued interest, the
undersigned shall: (i) furnish the Bank, (a) within 100 days after the close of
each fiscal year, with audited consolidated and consolidating financial
statements of the undersigned prepared and certified by independent certified
public accountants acceptable to the Bank as of the end of such period,
including a balance sheet and related statements of earnings, shareholders'
equity (if applicable) and changes in financial position for such fiscal year,
in each case setting forth in comparative form the figures for the previous year
prepared in accordance with generally accepted accounting principles
consistently applied during the period involved without a "going concern" or
like qualification or exception or any qualification arising out of the scope of
the audit; (b) within 50 days after the close of each of the first three
quarters of each fiscal year, similar financial statements to those referred to
in (a) above, unaudited but prepared in accordance with generally accepted
accounting principles consistently applied and certified by the chief financial
officer of the undersigned; and (c) such other financial or other information as
the Bank may from time to time request; (ii) duly file all tax returns with
respect to the undersigned and its property which are required to be filed and
duly pay all taxes shown thereon to be due and payable by the undersigned;
(iii) not use the proceeds of any Loan evidenced by this Note for the purpose of
purchasing or carrying "margin stock" as defined in Regulation U of the Board of
Governors of the Federal Reserve System; (iv) comply, at all times in all
material respects with to the Employee Retirement Income Security Act of 1974,
as amended, including any regulations promulgated thereunder and carry all
insurance available through the Pension Benefits Guaranty Corporation ("PBGC")
or any private insurance companies covering its obligations to the PBGC;
and (v) notify the Bank promptly of the occurrence of an Event of Default (as
defined in paragraph 4) or an event which with notice or lapse of time or both
would constitute an Event of Default. So long as the Reimbursement Agreement
96
<PAGE>
remains in effect, compliance by the undersigned with its obligations under the
Reimbursement Agreement shall be deemed to satisfy the obligations of the
undersigned in this paragraph, but only to the extent that such obligations are
duplicative.
7. Events of Default; Acceleration. If any of the following events ("Events
of Default") shall occur: (i) any amount payable hereunder shall not be paid
when due; (ii) any representation, warranty or statement made or deemed made by
the undersigned in this Note, in any collateral documents executed
contemporaneously herewith, or if subsequent hereto, contemplated hereby
or which is contained in any certificate, document, financial or other
statement, furnished at any time in connection with this Note shall prove to be
incorrect or untrue in any material respect when made or deemed made; (iii)
failure by the undersigned to perform or observe any covenant or agreement
contained in this Note, the Reimbursement Agreement or the Security Agreement
(as defined below); (iv) any event described in Paragraphs 12(b) or (c) of the
Reimbursement Agreement shall have occurred which event entitles the Bank to
terminate its obligation to issue Letters of Credit under (and as defined in)
the Reimbursement Agreement (whether or not the Reimbursement Agreement is then
in effect and whether or not the Bank has actually terminated its obligation to
issue Letters of Credit thereunder); (v) the undersigned shall be dissolved or
shall become insolvent or admit in writing its inability to pay its debts or
make a general assignment for the benefit of creditors, or if any proceeding
shall be instituted by or against the undersigned seeking a garnishment, an
adjudication of bankruptcy or insolvency, or seeking reorganization,
arrangement, adjustment or composition of the debts of such person or entity
under any law relating to bankruptcy, insolvency, reorganization or relief of
debtors, or seeking appointment of or the taking possession by a receiver,
trustee, liquidator, assignee, custodian, sequestrator or other similar official
for such person or entity or the property thereof, or the undersigned shall take
any action to authorize any of the foregoing; (vi) any governmental authority or
any court at the instance thereof shall take possession of any substantial part
of the property of, or assume control over the affairs or operations of, the
undersigned, or the transaction of the usual business of the undersigned shall
be suspended; or (vii) the undersigned shall grant or suffer to exist any
security interest, lien, charge or other encumbrance on the Collateral (as
defined in paragraph 14); then, and in each such event (unless the Bank shall
otherwise elect in writing), any obligation on the Bank's part to extend or
maintain credit to the undersigned hereunder shall immediately cease and this
Note and all obligations of the undersigned hereunder shall forthwith be due and
payable without presentment, demand, protest or other notices of any kind, all
of which are hereby waived by the undersigned. Notwithstanding any other rights
the Bank may have under any applicable law and hereunder, upon the occurrence of
an Event of Default, the Bank shall have the right to apply (including by
way of set off) any of the property of the undersigned now or hereafter in the
possession or control of the Bank (including account balances) to a reduction of
the obligations of the undersigned under this Note. The undersigned hereby
pledges all such property to the Bank to secure this Note.
8. Payments and Prepayments; Reborrowings Prohibited. All payments to be made
hereunder shall be made not later than 11:00 a.m. New York City time on the date
97
<PAGE>
on which such payment shall become due in immediately available and freely
transferable funds of U.S. Dollars for the account of the Bank at One State
Street, New York, New York 10004, free and clear, and without deduction for, any
and all present and future taxes, withholdings and other charges (excluding
taxes, withholdings or other charges imposed on or measured by the Bank's net
income or net profits) imposed on such payments (all such non-excluded taxes,
withholdings or other charges, collectively referred to as "Taxes"). Should any
Taxes be imposed on such payments, or any documentary, stamp, excise or similar
type tax be imposed on this Note or on the execution, delivery or enforcement
hereof, the undersigned shall pay the same and remit payment to the Bank in an
amount equal to that which would have been payable had no Taxes or such other
impositions been imposed thereon, together with receipts evidencing payment of
such taxes.
If any date of payment is not a business day in New York City, payment
shall be made the next succeeding business day (except with respect to payments
of interest, which shall be subject to the definition of "Interest Period" set
forth in paragraph 3). All payments and prepayments will first be applied to
accrued interest and any remaining amount will then be applied to principal.
From and until the Maturity Date, amounts borrowed hereunder and repaid
may be reborrowed. An request for a borrowing hereunder shall be made at least
three business days prior to the date such Loan is to be made, and each
borrowing hereunder shall be in a minimum principal amount of US$100,000 or in
multiples of US$100,000 in excess thereof.
In the event that the Bank shall incur any loss or expense (including
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Bank to make any Loan hereunder) as a
result of any repayment or prepayment of a Loan on a date other than the
scheduled last day of an Interest Period or any Loan not being made on the
date such Loan was requested to be made, then, upon written notice to the
undersigned, the undersigned agree, within five business days of such notice,
to pay the Bank such amount as will (in the reasonable determination of the
Bank) reimburse the Bank for such loss or expense. Such written notice shall,
in the absence of manifest error, be conclusive and binding on the undersigned.
9. Fees and Expenses. The undersigned shall pay the Bank on demand all
reasonable expenses (including, but not limited to, reasonable legal fees and
disbursements) of any kind incidental to the enforcement of this Note or the
collection of any sums due to the Bank hereunder.
10. Successors and Assigns; Benefits of Note; Joint and Several Obligations.
This Note shall inure to the benefit of the Bank and its successors and assigns.
This Note and the provisions hereof are binding upon the assigns and successors
of the undersigned and they shall continue in force notwithstanding any change
in any partnership party hereto, whether such change occurs through death,
retirement or otherwise. The undersigned, if more than one, shall be jointly
and severally liable hereunder, and all provisions hereof shall apply to each or
any of the undersigned; provided that the obligations of each of the undersigned
shall not be affected by any release or other indulgence granted by the Bank to
any other of the undersigned with respect to its obligations hereunder.
98
<PAGE>
11. Notices. Notices and other communications provided for hereunder shall be
in writing (including telex, electronic or telegraphic communications) and
mailed, telexed, sent, telegraphed or delivered to the undersigned at the
address as shown on the signature page hereof; and, if to the Bank, at One
State Street, New York, New York 10004, Attention: Middle Market Corporate
Finance; or as to each party at such other address as shall be designated by
such party in a written notice to the other party.
12. Governing Law; Waiver of Immunities; Consent to Jurisdiction; Waiver of
Jury Trial. This Note shall be governed by and construed in accordance with the
laws of the State of New York. To the extent that the undersigned has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to the
undersigned or its property, the undersigned hereby irrevocably waives such
immunity in respect of its obligations hereunder. The undersigned agrees that
any legal or equitable action or proceeding with respect to this Note or the
enforcement hereof may be brought in any Federal or State court of competent
jurisdiction located in the City of New York and, by execution and delivery of
this Note, the undersigned accepts for the undersigned and the property of the
undersigned, generally and unconditionally, the jurisdiction of the aforesaid
courts and any related appellate court, irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Note, and irrevocably waives
any objection the undersigned may now or hereafter have as to the venue of any
such action or proceeding brought in such a court or that such court is an
inconvenient forum. The undersigned consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by mailing of
copies thereof by registered air mail, postage prepaid, to the address(es) set
forth below, such service to become effective three business days after such
mailing. Nothing herein shall affect the Bank's right to serve process in any
other manner prescribed by law or the right to bring legal or equitable actions
or proceedings in other competent jurisdictions. Any judicial proceeding by the
undersigned against the Bank involving, directly or indirectly, any matter in
any way arising out of, related to or connected with this Note shall be brought
only in a court located in the borough of Manhattan.
THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING BROUGHT BY THE UNDERSIGNED OR THE BANK INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS NOTE.
13. Amendment; Waiver. No provision hereof shall be modified or limited
except by a written instrument expressly referring to this Note. No delay on
the part of the Bank in exercising any power or right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any power or right
hereunder preclude any other or further exercise thereof or the exercise of
any other power or right. The rights, remedies, and benefits granted herein are
cumulative and not exclusive of any rights, remedies or benefits which the Bank
may otherwise have. The undersigned hereby waives presentment, notice of
dishonor and protest of this Note.
99
<PAGE>
14. Grant of Security Interest; Minimum Coverage Amount. In order to the
obligations of the undersigned under this Note and the Reimbursement Agreement,
the undersigned pledges and grant or has pledged and granted, as the case may
be, to the Bank us a security interest in and a general lien upon the property
(the "Collateral") on deposit in Account No. 70-5032-01-9 maintained with the
(the "Account"), all as more particularly described in the Pledge and
Security Agreement dated as of the date hereof, between each of you and us
(as amended, supplemented or otherwise modified from time to time, the
"Security Agreement").
The undersigned agree that at all times there shall be sufficient
Collateral in the Account so that the Value of Investments (as such term is
defined in the Reimbursement Agreement referred to in paragraph 1) in such
Account equals or exceeds the Minimum Coverage Amount (as defined in
paragraph 1).
If at any time and for any reason, the Minimum Coverage Amount exceeds
the Value of Investments, then upon the Bank's election and demand, the
undersigned shall, within 5 business days of written notice from the Bank, repay
or prepay, as the case may be, any Loans outstanding in the amount of such
excess or provide additional Investments with a Value equal to such excess. The
undersigned also agree that in the event that the undersigned fail to comply
with the foregoing provisions of this paragraph, the Bank shall have the right,
in addition to the right to require repayment of the Loan or additional
Collateral, to sell such of the Collateral as the Bank may reasonably select
and determine to be necessary to remedy such shortfall.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date set forth above, retaining one copy for the undersigned's records.
BOOTHE FINANCIAL CORPORATION BF ENTERPRISES, INC.
By: /s/ Brian P. Burns By: /s/ Brian P. Burns
------------------------ -----------------------
Name: Name:
Title: Title:
Address for Notices: Address for Notices:
c/o BF Enterprises, Inc. 100 Bush Street, Suite 1250
100 Bush Street, Suite 1250 San Francisco, CA 94104
San Francisco, CA 94104 Attn: Ms. Paula Lawrence
Attn: Ms. Paula Lawrence
100
Exhibit 21
BF ENTERPRISES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary State or Country of Incorporation
- ------------------ ------------------------------------
<S> <C>
BF Holdings, Ltd. Cayman Islands
BF University Club Apartments, Inc. Delaware
Boothe Financial Corporation Delaware
Trout Creek Properties, LLC Delaware
Trout Creek Development Corporation Delaware
</TABLE>
101
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,347
<SECURITIES> 712
<RECEIVABLES> 74
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,918
<CURRENT-LIABILITIES> 0
<BONDS> 719
0
0
<COMMON> 358
<OTHER-SE> 21,400
<TOTAL-LIABILITY-AND-EQUITY> 23,918
<SALES> 3,577
<TOTAL-REVENUES> 5,639
<CGS> 748
<TOTAL-COSTS> 748
<OTHER-EXPENSES> 1,980
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<INTEREST-EXPENSE> 52
<INCOME-PRETAX> 2,859
<INCOME-TAX> 30
<INCOME-CONTINUING> 2,829
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,829
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
