<PAGE> 1
1998 Second Quarter
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NO. 0-18706
BLACK BOX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 95-3086563
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 Park Drive
Lawrence, Pennsylvania 15055
(Address of principal executive offices)
412-746-5500
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ______
The number of shares outstanding of the Registrant's common stock, $.001 par
value, as of October 31, 1997 was 16,687,805 shares.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
ASSETS 1997 1997
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,245 $ 1,353
Accounts receivable, net of allowance for doubtful
accounts of $2,408 and $2,499, respectively 45,842 43,900
Inventories, net 36,273 30,435
Other current assets 11,224 8,227
--------- ---------
Total current assets 94,584 83,915
Property, plant and equipment, net of accumulated depreciation
of $13,034 and $9,939, respectively 13,210 12,923
Intangibles, net of accumulated amortization of $23,036 and
$21,165, respectively 74,084 75,955
Other assets 470 486
--------- ---------
Total assets $ 182,348 $ 173,279
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt $ 9,321 $ 8,128
Accounts payable 18,313 19,924
Other accrued expenses 9,955 11,815
Accrued income taxes 6,470 5,816
--------- ---------
Total current liabilities 44,059 45,683
Long-term debt 17,359 21,175
Other liabilities, primarily deferred taxes 11,984 12,157
Stockholders' equity:
Preferred stock authorized 5,000,000; par value $1.00;
none issued and outstanding
Common stock authorized 40,000,000; par value $.001; issued
and outstanding 16,602,141 and 16,518,682, respectively 17 17
Additional paid-in capital 30,884 29,897
Retained earnings 80,678 66,504
Cumulative foreign currency translation adjustments (2,633) (2,154)
--------- ---------
Total stockholders' equity 108,946 94,264
--------- ---------
Total liabilities and stockholders' equity $ 182,348 $ 173,279
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 3
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three month period ended Six month period ended
September 30, September 30,
1997 1996 1997 1996
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 68,931 $56,912 $ 133,129 $110,700
Cost of sales 34,020 26,317 65,220 51,127
-------- ------- --------- --------
Gross profit 34,911 30,595 67,909 59,573
Selling, general and administrative expenses 20,783 18,460 40,329 36,081
Intangibles amortization 952 963 1,906 1,926
-------- ------- --------- --------
Operating income 13,176 11,172 25,674 21,566
Interest expense, net 739 1,040 1,547 2,166
Other (income)/expense, net (262) 82 (166) 56
-------- ------- --------- --------
Income before income taxes 12,699 10,050 24,293 19,344
Provision for income taxes 5,252 4,225 10,119 8,314
-------- ------- --------- --------
Net income $ 7,447 $ 5,825 $ 14,174 $ 11,030
======== ======= ========= ========
Earnings per share $ 0.42 $ 0.34 $ 0.81 $ 0.64
======== ======= ========= ========
Weighted average common and
common equivalent shares 17,687 17,293 17,604 17,161
======== ======= ========= ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Total
--------------- ------- ------------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 16,302,254 $16 $25,904 $42,209 $ (988) $ 67,141
Net income for the year
ended March 31, 1997 -- -- -- 24,295 -- 24,295
Exercise of options 216,428 1 2,473 -- -- 2,474
Tax benefit from exercised options -- -- 1,520 -- -- 1,520
Foreign currency translation
adjustments -- -- -- -- (1,166) (1,166)
---------- --- ------- ------- ------- ---------
Balance at March 31, 1997 16,518,682 17 29,897 66,504 (2,154) 94,264
Net income for the six month
period ended September 30, 1997 -- -- -- 14,174 -- 14,174
Exercise of options 83,459 -- 642 -- -- 642
Tax benefit from exercised options -- -- 345 -- -- 345
Foreign currency translation
adjustments -- -- -- -- (479) (479)
---------- --- ------- ------- ------- ---------
Balance at September 30, 1997 16,602,141 $17 $30,884 $80,678 $(2,633) $ 108,946
========== === ======= ======= ======= =========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six month period ended
September 30,
1997 1996
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,174 $ 11,031
Adjustments to reconcile net income to
cash provided by operating activities:
Intangibles amortization 1,871 1,890
Depreciation 1,242 1,127
Other 32 (46)
Changes in working capital items:
Account receivable, net (1,943) (2,009)
Inventories, net (5,862) (4,113)
Other current assets (2,961) (81)
Accounts payable (1,611) 2,172
Accrued expenses (1,061) 1,444
-------- --------
Cash provided by operating activities 3,881 11,415
-------- --------
Cash flows from investing activities:
Capital expenditures (1,529) (1,041)
Cash flows from financing activities:
Repayment of borrowings (62,186) (39,141)
Proceeds from borrowings 59,563 28,776
Proceeds from exercise of options 642 761
-------- --------
Cash used in financing activities (1,981) (9,604)
-------- --------
Foreign currency translation adjustment (479) (462)
-------- --------
Change in cash and cash equivalents (108) 308
Cash and cash equivalents at beginning of period 1,353 1,924
-------- --------
Cash and cash equivalents at end of period $ 1,245 $ 2,232
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 1 - BASIS OF PRESENTATION
The Financial Statements presented herein and these notes are
unaudited. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Although the
Company believes that all adjustments necessary for a fair presentation have
been made, interim periods are not necessarily indicative of the results of
operations for a full year. As such, these financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's most recent Form 10-K which was filed with the SEC for the fiscal
year ended March 31, 1997.
NOTE 2 - FISCAL YEARS AND INTERIM PERIODS
The Company has a 52 or 53 week fiscal year that ends on the Sunday
nearest March 31. Each fiscal quarter consists of 13 weeks. The last quarter is
adjusted for those years which have 53 weeks. The ending dates for the periods
ended September 30, 1997, March 31, 1997 and September 30, 1996 were actually
September 28, 1997, March 30, 1997 and September 29, 1996, respectively.
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. The net inventory balances are as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
---- ----
<S> <C> <C>
Raw materials $ 2,273 $ 2,152
Work-in-process 51 28
Finished goods 35,828 29,865
Inventory reserve (1,879) (1,610)
-------- --------
Inventory, net $ 36,273 $ 30,435
======== ========
</TABLE>
6
<PAGE> 7
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 4 - FINANCIAL DERIVATIVES
The Company has entered and will continue in the future, on a
selective basis, to enter into forward exchange contracts to reduce the foreign
currency exposure related to certain intercompany transactions. On a monthly
basis, the open contracts are revalued to the current exchange rates and the
resulting gains and losses are recorded in other income. These gains and losses
offset the revaluation of the related foreign currency denominated receivables.
At September 30, 1997, the open foreign exchange contracts were
exclusively in Yen. These open contracts were valued at approximately $4.6
million, with contract rates ranging from 112.29 to 114.75 Yen per U.S. dollar,
and will expire over the next six months. The effect of these contracts on net
income for the three and six month periods ended September 30, 1997 was not
material.
NOTE 5 - ADOPTION OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
per Share", which establishes new standards for computing and presenting
earnings per share ("EPS"). As required by the SFAS, the Company will adopt the
new standard in the quarter ended December 31, 1997, and restate all prior
periods. The Company has reviewed SFAS No. 128 and determined that had the SFAS
been adopted during Fiscal 1998, basic and diluted EPS would have been $0.45
and $0.42, respectively, for the Second Quarter 1998, and $0.85 and $0.81,
respectively, for the six month period ended September 30, 1997.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in financial statements. As required by the SFAS, the
Company expects to adopt the new standard in the first quarter of Fiscal 1999.
The Company has reviewed SFAS No. 130 and determined that the only component of
comprehensive income which applies to the Company will be foreign currency
translation adjustments currently recorded directly to Stockholder's Equity in
accordance with SFAS No. 52.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (dollars in thousands)
GENERAL
FORWARD-LOOKING STATEMENTS
When included in this Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words "expects," "intends,"
"anticipates," "believes," "estimates," and analogous expressions are intended
to identify forward-looking statements. Such statements are inherently subject
to a variety of risks and uncertainties that could cause actual results to
differ materially from those projected. Such risks and uncertainties include,
among others, general economic and business conditions, competition, changes in
foreign, political and economic conditions, fluctuating foreign currencies
compared to the U.S. dollar, rapid changes in technologies, customer
preferences and various other matters, many of which are beyond the Company's
control. These forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and speak
only as of the date of this Quarterly Report on Form 10-Q. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or any changes in the Company's expectations with regard thereto or any
change in events, conditions, or circumstances on which any statement is based.
RESULTS OF OPERATIONS
The table below should be read in conjunction with the following
discussion (percentages are based on total revenues).
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 68,931 $ 56,912 $ 133,129 $ 110,700
========= ========= ========== ==========
Revenues:
U.S./Canada 52.2% 55.1% 53.2% 55.0%
International 47.8 44.9 46.8 45.0
--------- --------- ---------- ----------
Total 100.0 100.0 100.0 100.0
Cost of sales 49.4 46.2 49.0 46.2
--------- --------- ---------- ----------
Gross profit 50.6 53.8 51.0 53.8
Selling, general and
administrative expenses 30.2 32.4 30.3 32.6
--------- --------- ---------- ----------
Operating income
before amortization 20.5 21.3 20.7 21.2
Intangibles amortization 1.4 1.7 1.4 1.7
--------- --------- ---------- ----------
Operating income 19.1% 19.6% 19.3% 19.5%
========= ========= ========== ==========
</TABLE>
8
<PAGE> 9
Revenues for the three and six month periods ended September 30, 1997
increased 21.1% and 20.3%, respectively, over the comparable periods for the
prior year reflecting strong growth worldwide. For the three months ended
September 30, 1997 ("Second Quarter 1998") ,U.S./Canada revenues increased
14.7% over the three months ended September 30, 1996 ("Second Quarter 1997").
For the six months ended September 30, 1997, U.S./Canada revenues increased
16.4% over the same period in the prior year. U.S./Canada revenue growth for
the quarter was primarily driven by the continued success of new products sales
while year-to-date revenue growth was driven by both the success of new product
sales and an increase in the number of medium and large orders.
Reported revenues from International operations for Second Quarter
1998 increased 28.9% over Second Quarter 1997, and for the six months ended
September 30, 1997 increased 25.0% over the same periods in the prior year. If
exchange rates had remained constant from the corresponding periods in the
prior year, International revenues for the three and six month periods ended
September 30, 1997 would have increased 38.1% and 32.6%, respectively.
Reported revenue dollar and percentage growth of the Company's largest
subsidiaries over the comparable periods in the prior year were as follows:
Japan increased $2,139 or 37% in Second Quarter 1998 and increased $3,234 or
28% year-to-date; United Kingdom increased $1,761 or 37% in Second Quarter 1998
and increased $3,149 or 35% year-to-date; France increased $48 or 1% in Second
Quarter 1998 and decreased $501 or 6% year-to-date; and Brazil increased $1,640
or 86% in Second Quarter 1998 and increased $2,891 or 83% year-to-date.
Operating revenues in France for the six months ended September 30, 1997
increased 9% over the same period in the prior year, but were down 6% in U.S.
dollars due to a stronger U.S. dollar during the first six months of Fiscal
1998. Excluding Japan, United Kingdom, France and Brazil, the remaining
International business units grew $1,813 or 20.8% in Second Quarter 1998 and
increased $3,673 or 21.8% year-to-date. The growth in International revenue for
both the quarter end and year-to-date was due to an increase in the number of
orders as well as the success of new product sales.
Gross profit margin for the three and six month periods ended
September 30, 1997 was 50.6% and 51.0%, respectively, compared to 53.8% for
both of the same periods last year. The decrease in gross profit margin is due
to the combined effects of an increase in medium and large orders, which
receive larger discounts and hence carry slightly lower profit margins than
small orders, and the impact of branded products sales, introduced in the last
quarter of Fiscal 1997.
Selling, general and administrative ("SG & A") expense as a percentage
of revenues for the three and six month periods ended September 30, 1997 was
30.2% and 30.3%, respectively, compared to 32.4% and 32.6% for the same periods
last
9
<PAGE> 10
year. SG & A expense decreased as a percentage of revenues as the Company was
able to leverage its existing support structure. The dollar increases from the
same periods in the prior year of $2,323 and $4,248 for the three and six
months ended September 30, 1997 relate to additional marketing and personnel
costs primarily at the International locations.
Operating income before amortization for the three and six month
periods ended September 30, 1997 increased $1,993 and $4,088, respectively,
over the same periods last year. Intangibles amortization for the three and six
month periods ended September 30, 1997 was consistent with the prior year,
decreasing as a percentage of revenues.
Net interest expense for the three and six month periods ended
September 30, 1997 decreased from the same periods last year, $301 and $619,
respectively, due to lower average borrowings and lower average interest rates.
The estimated annual effective income tax rate for Fiscal 1998 is
41.5%, which is higher than the U.S. statutory rate of 35.0% primarily due to
state income taxes and the unfavorable impact of non-deductible intangibles
amortization.
LIQUIDITY AND CAPITAL RESOURCES
In Second Quarter 1998, the Company paid down $4,847 of borrowings
through cash flows from operations. This paydown offset the increase in
borrowings of $2,224 in First Quarter 1998, and enabled the Company to reduce
debt by $2,623 as of the end of the first six months of Fiscal 1998. Borrowings
increased in First Quarter 1998 to increase inventory levels to stock new
products, support overall business growth, and strengthen order fulfillment
rates. As of September 30, 1997, the Company had cash and cash equivalents of
$1,245, working capital of $50,525, and long-term debt of $17,359.
The Company's total debt at September 30, 1997 of $26,680 was
comprised of $9,300 under the Mellon Credit Agreement, dated as of May 6, 1994,
among the Company and Mellon Bank, as amended (the "Mellon Credit Agreement"),
$16,000 aggregate principal amount of 8.81% Senior Notes, and $1,380 of various
other loans. The weighted average interest rate on all indebtedness of the
Company as of September 30, 1997 was approximately 8.2% compared to 8.3% as of
September 30, 1996. In addition, at September 30, 1997 the Company had $30,340
of additional funds available under the Mellon Credit Agreement.
The Company has entered and will continue in the future, on a
selective basis, to enter into forward exchange contracts to reduce foreign
currency exposure related to certain intercompany inventory transactions. On a
monthly basis, the open contracts are revalued to the current exchange rates
and the resulting gains
10
<PAGE> 11
and losses are recorded in other income. These gains and losses offset the
revaluation of the related foreign currency denominated receivables.
At September 30, 1997, the open foreign exchange contracts were
exclusively in Yen. These open contracts were valued at approximately $4.6
million, with contract rates ranging from 112.29 to 114.75 Yen per U.S. dollar,
and will expire over the next six months. The effect of these contracts on net
income for the three and six month periods ended September 30, 1997 was not
material.
The Company believes that its cash flow from operations and existing
credit facilities will be sufficient to satisfy its liquidity needs for the
foreseeable future.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
per Share", which establishes new standards for computing and presenting
earnings per share ("EPS"). As required by the SFAS, the Company will adopt the
new standard in the quarter ended December 31, 1997, and restate all prior
periods. The Company has reviewed SFAS No. 128 and determined that had the SFAS
been adopted during Fiscal 1998, basic and diluted EPS would have been $0.45
and $0.42, respectively, for the Second Quarter 1998, and $0.85 and $0.81,
respectively for the six month period ended September 30, 1997.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in financial statements. As required by the SFAS, the
Company expects to adopt the new standard in the first quarter of Fiscal 1999.
The Company has reviewed SFAS No. 130 and determined that the only component of
comprehensive income which applies to the Company will be foreign currency
translation adjustments currently recorded directly to Stockholder's Equity in
accordance with SFAS No. 52.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
11
<PAGE> 12
PART II OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 11, 1997, the Company held its annual meeting of
stockholders. The four matters voted upon at the annual meeting were: (i) the
election of directors; (ii) the amendment to the 1992 Stock Option Plan ("the
Plan") to increase the number of shares authorized under the Plan; (iii) the
amendment to the Second Restated Certificate of Incorporation to increase the
number of shares of Common Stock authorized under the Plan; and (iv) the
ratification of the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending March 31, 1998.
Each of the Company's nominees for director was re-elected at the
annual meeting by the following vote:
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
VOTED FOR WITHHELD ABSTAINING NON-VOTES
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
William F. Andrews 13,778,607 321,093 0 0
Michael E. Barker 13,778,437 321,263 0 0
Jeffery M. Boetticher 13,778,637 321,063 0 0
William R. Newlin 13,778,637 321,063 0 0
William Norred 13,778,637 321,063 0 0
Brian D. Young 13,778,637 321,063 0 0
Fred C. Young 13,778,637 321,063 0 0
</TABLE>
The amendment to the 1992 Stock Option Plan to increase the number of
shares authorized under the plan was approved by the following vote:
<TABLE>
<CAPTION>
SHARES SHARES VOTED SHARES BROKER
VOTED FOR AGAINST ABSTAINING NON-VOTES
--------- ------- ---------- ---------
<S> <C> <C> <C>
12,564,911 1,509,838 24,951 0
</TABLE>
The amendment to the Second Restated Certificate of Incorporation to
increase the number of shares of Common Stock authorized under the Plan was
approved by the following vote:
<TABLE>
<CAPTION>
SHARES SHARES VOTED SHARES BROKER
VOTED FOR AGAINST ABSTAINING NON-VOTES
--------- ------- ---------- ---------
<S> <C> <C> <C>
13,687,792 375,490 7,199 29,219
</TABLE>
12
<PAGE> 13
The appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending March 31, 1998 was approved by the
following vote:
<TABLE>
<CAPTION>
SHARES SHARES VOTED SHARES BROKER
VOTED FOR AGAINST ABSTAINING NON-VOTES
--------- ------- ---------- ---------
<S> <C> <C> <C>
14,089,279 2,900 7,521 0
</TABLE>
13
<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1 Second Restated Certificate of Incorporation, as
amended on August 13, 1997
10.1 1992 Stock Option Plan, as amended on August 13, 1997
27.1 Financial Data Schedules
(b) Reports on Form 8-K.
None.
14
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLACK BOX CORPORATION
By: /s/ Anna M. Baird
--------------------------
Anna M. Baird, Vice President
and Chief Financial Officer
November 10, 1997
15
<PAGE> 16
EXHIBIT INDEX
Exhibit
- -------
No.
- ---
3.1 Second Restated Certificate of Incorporation, as amended on August 13,
1997
10.1 1992 Stock Option Plan, as amended on August 13, 1997
27.1 Financial Data Schedules
<PAGE> 1
Exhibit 3.1
SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLACK BOX CORPORATION
AS AMENDED
FIRST: The name of the Corporation is: BLACK BOX CORPORATION.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, State of Delaware. The name of the registered agent of the Corporation
in the State of Delaware at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the DGCL, as from
time to time amended.
FOURTH: (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 45,000,000 shares, consisting
of
(a) 5,000,000 shares of Preferred Stock, par value $1.00 per
share, and
(b) 40,000,000 shares of Common Stock, having a par value of
$.001 per share.
(b) Except as otherwise provided by law, the shares of stock
of the Corporation, regardless of class, may be issued by the Corporation from
time to time in such amounts, for such consideration and for such corporate
purposes as the Board of Directors may from time to time determine.
(c) Shares of Preferred Stock may be issued from time to time
in one or more series of any number of shares as may be determined from time to
time by the Board of Directors, provided that the aggregate number of shares
issued and not cancelled of any and all such series shall not exceed the total
number of shares of Preferred Stock authorized by this Certificate of
Incorporation. Each series of Preferred Stock shall be distinctly designated.
Except in respect of the particulars fixed for series by the Board of Directors
as permitted hereby, all shares shall be alike in every particular, except that
shares of any one series issued at different times may differ as to the dates
from which dividends thereon shall be cumulative. The voting powers, if any, of
each such series and the preferences and relative, participating, optional and
other special rights of each such series and the qualifications, limitations
and restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and the Board of Directors is hereby expressly
granted authority to fix, in the resolution or resolutions providing for the
issue of a particular series of Preferred Stock, the voting powers, if any, of
each such series and the designations, preferences and relative, participating,
optional and other special rights of each such series and the qualifications,
limitations and restrictions thereof to the full
<PAGE> 2
extent now or hereafter permitted by this Certificate of Incorporation and the
laws of the State of Delaware.
(d) Subject to the provisions of applicable law or of the
by-laws with respect to the closing of the transfer books or the fixing of a
record date for the determination of stockholders entitled to vote, and except
as otherwise provided by law or by the resolution or resolutions providing for
the issue of any series of Preferred Stock, the holders of outstanding shares
of Common Stock shall exclusively possess the voting power for the election of
directors and for all other purposes, each holder of record of shares of Common
Stock being entitled to one vote for each share of Common Stock standing in his
name on the books of the Corporation.
FIFTH: In furtherance and not in limitation of the powers conferred by
law, subject to any limitations contained elsewhere in this Restated
Certificate of Incorporation, the by-laws of the Corporation may be adopted,
amended or repealed by a majority of the board of directors of the Corporation,
but any by-laws adopted by the board of directors may be amended or repealed by
the stockholders entitled to vote thereon. Election of directors need not be by
written ballot.
SIXTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, or (ii) for
acts or omissions which are not in good faith or which involve intentional
misconduct or knowing violation of the law, or (iii) for any matter in respect
of which such director shall be liable under Section 174 of Title 8 of the
General Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (iv) for any transaction from which the
director shall have derived an improper personal benefit. Neither amendment nor
repeal of this paragraph (a) nor the adoption of any provision of the Restated
Certificate of Incorporation inconsistent with this paragraph (a) shall
eliminate or reduce the effect of this paragraph (a) in respect of any matter
occurring, or any cause of action, suit or claim that, but for this paragraph
(a) of this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
(b) The Corporation shall indemnify and advance expenses to
any person who was or is a party or is threatened to be made a party to, or
testifies in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, by reason
of the fact that such person is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding to the full extent permitted by law, and the Corporation may
adopt by-laws or enter into agreements with any such person for the purpose of
providing for such indemnification.
<PAGE> 3
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of stockholders, of this Corporation,
as the case may be, and also on this Corporation.
<PAGE> 1
Exhibit 10.1
BLACK BOX CORPORATION
1992 STOCK OPTION PLAN
(AS AMENDED THROUGH AUGUST 13, 1997)
I. PURPOSES
BLACK BOX CORPORATION (the "Company") desires to afford certain of its key
employees and the key employees of any subsidiary corporation or parent
corporation of the Company now existing or hereafter formed or acquired who are
responsible for the continued growth of the Company an opportunity to acquire a
proprietary interest in the Company, and thus to create in such key employees
an increased interest in and a greater concern for the welfare of the Company
and its subsidiaries.
The Company, by means of this 1992 Stock Option Plan as originally
approved on November 11, 1992, and as further amended on May 10, 1994, August
9, 1994, August 7, 1995, August 12, 1996 and August 13, 1997 (the "Plan"),
seeks to retain the services of persons now holding key positions and to secure
the services of persons capable of filling such positions.
The stock options ("Options") and stock appreciation rights ("Rights")
offered pursuant to the Plan are a matter of separate inducement and are not in
lieu of any salary or other compensation for the services of any key employee.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
meet the requirements for Incentive Options ("Non-Qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an Incentive
Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of common stock of the Company which may be
purchased or acquired pursuant to the exercise of Options or Rights granted
under the Plan shall not exceed, in the aggregate, 3,200,000 shares of the
authorized common stock, $.001 par value per share, of the Company (the
"Shares"), such number subject to adjustment as provided in Article XII hereof.
Shares that are the subject of Rights and related Options shall be counted only
once in determining whether the maximum number of Shares that may be purchased
or awarded under the Plan has been exceeded.
Shares acquired under the Plan may be either authorized but unissued
Shares or Shares of issued stock held in the Company's treasury, or both, at
the discretion of the Company. If and to the extent that Options or Rights
granted under the Plan expire or terminate without having been exercised, the
Shares covered by such expired or terminated Options or Rights shall again
become available for award under the Plan.
Except as provided in Articles XIX and XXII and subject to Article II, the
Company may, from time to time during the period beginning on the date on which
the Company consummates an underwritten initial public offering of Shares (the
"Effective Date") and ending on November 30, 2002 (the "Termination Date"),
grant to certain key employees of the Company, or of any subsidiary corporation
or parent corporation of the Company now existing or hereafter formed or
acquired, Incentive Options and/or Non-Qualified Options and/or Rights under
the terms hereinafter set forth.
Provisions of the Plan that pertain to Options or Rights granted to an
employee shall apply to Options, Rights or a combination thereof.
As used in the Plan, the term "subsidiary corporation" and "parent
corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Sections 424(f) and 424(e) of the Code.
<PAGE> 2
III. ADMINISTRATION
The board of directors of the Company (the "Board of Directors") shall
designate from among its members an option committee, which may be the
Compensation Committee of the Board of Directors (the "Committee"), to
administer the Plan. The Committee shall consist of no fewer than two members
of the Board of Directors, each of whom shall be a "disinterested person"
within the meaning of Rule 16b-3 (or any successor rule or regulation)
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). A majority of the members of the Committee shall constitute a
quorum, and the act of a majority of the members of the Committee shall be the
act of the Committee. Any member of the Committee may be removed at any time
either with or without cause by resolution adopted by the Board of Directors,
and any vacancy on the Committee at any time may be filled by resolution
adopted by the Board of Directors.
Subject to the express provisions of the Plan the Committee shall have
authority, in its discretion, to determine the employees to whom Options or
Rights shall be granted, the time when such Options or Rights shall be granted,
the number of Shares which shall be subject to each Option or Right, the
purchase price or exercise price of each Option or Right, the period(s) during
which such Options or Rights shall become exercisable (whether in whole or in
part) and the other terms and provisions thereof (which need not be identical).
Subject to the express provisions of the Plan, the Committee also shall
have authority to construe the Plan and the Options and Rights granted
thereunder, to amend the Plan and the Options and Rights granted thereunder, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the Options (which need not be identical)
and Rights (which need not be identical) granted thereunder and to make all
other determinations necessary or advisable for administering the Plan. The
Committee also shall have the authority to require, in its discretion, as a
condition of the granting of any such Option or Right, that the employee agree
(i) not to sell or otherwise dispose of Shares acquired pursuant to the
exercise of such Option or Right for a period of six (6) months following the
date of the acquisition of such Option or Right and (ii) that in the event of
termination of employment of such employee, other than as a result of dismissal
without cause, such employee will not, for a period to be fixed at the time of
the grant of the Option or Right, enter into any other employment or
participate directly or indirectly in any other business or enterprise which is
competitive with the business of the Company or any subsidiary corporation or
parent corporation of the Company, or enter into any employment in which such
employee will be called upon to utilize special knowledge obtained through
employment with the Company or any subsidiary corporation or parent corporation
thereof. In no event will an employee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act be entitled to sell or
otherwise dispose of any Shares acquired pursuant to exercise of any such
Options or Rights for a period of six (6) months from the date of the
acquisition of such Options or Rights.
The determination of the Committee on matters referred to in this Article
III shall be conclusive.
The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such legal counsel, consultant or
agent. Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company. No member or former member of
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any award of Options or Rights granted
hereunder.
IV. ELIGIBILITY
Options and Rights may be granted only to salaried key employees of the
Company or of any subsidiary corporation or parent corporation of the Company,
except as hereinafter provided, and shall not be granted to any officer or
director who is not also a salaried key employee or to any member of the
Committee. Any person who shall have retired from active employment by the
Company or a subsidiary corporation or parent corporation thereof, although
such person shall have entered into a consulting contract with the Company or a
subsidiary corporation or parent corporation thereof, shall not be eligible to
receive an Option or a Right.
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<PAGE> 3
The Plan does not create a right in any employee to participate in the
Plan, nor does it create a right in any employee to have any Options or Rights
granted to him or her.
V. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Non-Qualified Option
granted hereunder shall be such amount as the Committee shall deem appropriate.
The price for each Share purchasable under any Incentive Option granted
hereunder shall be such amount as the Committee shall, in its best judgment,
determine to be not less than one hundred percent (100%) of the fair market
value per Share at the date the Option is granted; provided, however, that in
the case of an Incentive Option granted to a person who, at the time such
Option is granted, owns shares of the Company or any subsidiary corporation or
parent corporation of the Company which possesses more than ten percent (10%)
of the total combined voting power of all classes of shares of the Company or
of any subsidiary corporation or parent corporation of the Company, the
purchase price for each Share shall be such amount as the Committee in its best
judgment shall determine to be not less than one hundred ten percent (110%) of
the fair market value per Share at the date the Option is granted. In
determining stock ownership of an employee for any purposes under the Plan, the
rules of Section 424(d) of the Code shall be applied, and the Committee may
rely on representations of fact made to it by the employee and believed by it
to be true.
If the Shares are listed on a national securities exchange in the United
States (which, for purposes of this Article V, shall be deemed to include any
last sale reported over-the-counter market), on any date on which the fair
market value per Share is to be determined, the fair market value per Share
shall be deemed to be the average of the high and low quotations at which such
Shares are sold on such national securities exchange on the date such Option is
granted. If the Shares are listed on a national securities exchange in the
United States on such date, but the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair
market value per Share shall be determined as of the closest preceding date on
which such exchange shall have been open for business and the Shares shall have
been traded. If the Shares are listed on more than one national securities
exchange in the United States on the date on which the fair market value per
Share is to be determined, the Committee shall determine which national
securities exchange shall be used for the purpose of determining the fair
market value per Share.
If a public market exists for the Shares on any date on which the fair
market value per Share is to be determined but the Shares are not listed on a
national securities exchange in the United States, the fair market value per
Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on such date. If there
are no bid and asked quotations for the Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and
asked quotations in the over-the-counter market for the Shares on the closest
date preceding such date for which such quotations are available.
If no public market exists for the Shares on any date on which the fair
market value per Share is to be determined, the Committee shall, in its sole
discretion and best judgment, determine the fair market value of a Share.
For purposes of this Plan, the determination by the Committee of the fair
market value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the Company shall cause
the purchased Shares to be issued only when it shall have received the full
purchase price for the Shares in cash or by certified check; provided, however,
that in lieu of cash, the holder of an Option may, if and to the extent the
terms of such Option so provide and to the extent permitted by applicable law,
exercise an Option (i) in whole or in part, by delivering to the Company shares
of common stock of the Company (in proper form for transfer and accompanied by
all
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<PAGE> 4
requisite stock transfer stamps or cash in lieu thereof) owned by such holder
having a fair market value equal to the exercise price applicable to that
portion of the Option being exercised by the delivery of such Shares or (ii)
in part, by delivering to the Company an executed promissory note on such terms
and conditions as the Committee shall determine, at the time of grant, in its
sole discretion; provided, however, that the principal amount of such note
shall not exceed eighty percent (80%) (or such lesser percentage as would be
permitted by applicable margin regulations) of the aggregate purchase price of
the Shares then being purchased pursuant to the exercise of such Option. The
fair market value of the stock so delivered shall be determined as of the date
immediately preceding the date on which the Option is exercised, or as may be
required in order to comply with or to conform to the requirements of any
applicable laws or regulations.
VI. USE OF PROCEEDS
The cash proceeds of the sale of Shares pursuant to the Plan are to be
added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
VII. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option shall be exercisable at such times, in such amounts and during
such period or periods as the Committee shall determine at the date of the grant
of such Option; provided, however, that an Incentive Option shall not be
exercisable after the expiration of ten (10) years from the date such Option is
granted; and provided further that, in the case of an Incentive Option granted
to a person who, at the time such Option is granted, owns stock of the Company
or any subsidiary corporation or parent corporation of the Company possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any subsidiary corporation or parent corporation of
the Company, such Option shall not be exercisable after the expiration of five
(5) years from the date such Option is granted.
Except to the extent otherwise provided under the Code, to the extent that
the aggregate fair market value of stock for which Incentive Options are
exercisable for the first time by an employee during any calendar year (under
all stock option plans of the Company and of any parent corporation or
subsidiary corporation of the Company) exceeds one hundred thousand dollars
($100,000), such Options shall be treated as Non-Qualified Options. For
purposes of this limitation, (i) the fair market value of stock is determined as
of the time the Option is granted, and (ii) the limitation will be applied by
taking into account Options in the order in which they were granted.
Subject to the provisions of Article XVIII, the Committee shall have the
right to accelerate, in whole or in part, from time to time, conditionally or
unconditionally, rights to exercise any Option granted hereunder.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
In no event shall an Option granted hereunder be exercised for a fraction
of a Share.
VIII. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to
all or part of the Shares covered thereby by the giving of written notice of
the exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date
such notice is given for the payment of the purchase price against delivery of
the Shares being purchased. Subject to the terms of Articles XIV, XVI, and
XVII, the Company shall cause certificates for the Shares so purchased to be
delivered to the optionee at the principal
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<PAGE> 5
business office of the Company, against payment of the full purchase price, on
the date specified in the notice of exercise.
IX. STOCK APPRECIATION RIGHTS
In the discretion of the Committee, a Right may be granted (i) alone, (ii)
simultaneously with the grant of an Option (either Incentive or Non-Qualified)
and in conjunction therewith or in the alternative thereto or (iii) subsequent
to the grant of a Non-Qualified Option and in conjunction therewith or in the
alternative thereto.
The exercise price of a Right granted alone shall be determined by the
Committee but shall not be less than one hundred percent (100%) of the fair
market value of one Share on the date of grant of such Right. A Right granted
simultaneously with or subsequent to the grant of an Option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as
the related Option, shall be transferable only upon the same terms and
conditions as the related Option, and shall be exercisable only to the same
extent as the related Option; provided, however, that a Right, by its terms,
shall be exercisable only when the fair market value of the Shares subject to
the Right and related Option exceeds the exercise price thereof.
Upon exercise of a Right granted simultaneously with or subsequent to an
Option and in the alternative thereto, the number of Shares for which the
related Option shall be exercisable shall be reduced by the number of Shares
for which the Right shall have been exercised. The number of Shares for which a
Right shall be exercisable shall be reduced upon any exercise of a related
Option by the number of Shares for which such Option shall have been exercised.
Any Right shall be exercisable upon such additional terms and conditions
as may from time to time be prescribed by the Committee.
A Right shall entitle the holder upon exercise thereof to receive from the
Company, upon a written request filed with the Secretary of the Company at its
principal offices (the "Request"), a number of Shares (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Shares and cash, as specified in the Request (but subject to the
approval of the Committee in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having an
aggregate fair market value equal to the product of (i) the excess of the fair
market value, on the day of such Request, of one Share over the exercise price
per share specified in such Right or its related Option, multiplied by (ii) the
number of Shares for which such Right shall be exercised.
Any election by a holder of a Right to receive cash in full or partial
settlement of such Right, and any exercise of such Right for cash, may be made
only by a Request filed with the Corporate Secretary of the Company during the
period beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date. Within
thirty (30) days of the receipt by the Company of a Request to receive cash in
full or partial settlement of a Right or to exercise such Right for cash, the
Committee shall, in its sole discretion, either consent to or disapprove, in
whole or in part, such Request. A Request to receive cash in full or partial
settlement of a Right or to exercise a Right for cash may provide that, in the
event the Committee shall disapprove such Request, such Request shall be deemed
to be an exercise of such Right for Shares.
If the Committee disapproves in whole or in part any election by a holder
to receive cash in full or partial settlement of a Right or to exercise such
Right for cash, such disapproval shall not affect such holder's right to
exercise such Right at a later date, to the extent that such Right shall be
otherwise exercisable, or to elect the form of payment at a later date,
provided that an election to receive cash upon such later exercise shall be
subject to the approval of the Committee. Additionally, such disapproval shall
not affect such holder's right to exercise any related Option or Options
granted to such holder under the Plan.
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<PAGE> 6
A holder of a Right shall not be entitled to request or receive cash in
full or partial payment of such Right unless such Right shall have been held
for six (6) months from the date of acquisition to the date of cash settlement
thereof; provided, however, that such prohibition shall not apply if the holder
of such Right is not subject to the reporting requirements of Section 16(a) of
the Exchange Act. In no event will a holder of a Right who is subject to the
reporting requirements of Section 16(a) of the Exchange Act be entitled to make
such a request or receive cash in full or partial payment of such Right until
the Company shall have satisfied the informational requirements of Rule
16b-3(e)(1) promulgated under the Exchange Act for the specified one year
period.
A Right shall be deemed exercised on the last day of its term, if not
otherwise exercised by the holder thereof, provided that the fair market value
of the Shares subject to the Right exceeds the exercise price thereof on such
date.
For all purposes of this Article IX, the fair market value of Shares shall
be determined in accordance with the principles set forth in the Article V.
X. NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Neither an Option nor a Right granted hereunder shall be transferable,
whether by operation of law or otherwise, other than by will or the laws of
descent and distribution, and any Option or Right granted hereunder shall be
exercisable during the lifetime of the holder only by such holder. Except to
the extent provided above, Options and Rights may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
XI. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee with the Company and all
subsidiary corporations and parent corporations of the Company, an Option or
Right previously granted to the employee, unless otherwise specified by the
Committee in the Option or Right, shall, to the extent not theretofore
exercised, terminate and become null and void, provided that:
(a) if the employee shall die while in the employ of such corporation
or during either the three (3) month or one (1) year period, whichever is
applicable, specified in clause (b) below and at a time when such employee
was entitled to exercise an Option or Right as herein provided, the legal
representative of such employee, or such person who acquired such Option or
Right by bequest or inheritance or by reason of the death of the employee,
may, not later than one (1) year from the date of death, exercise such
Option or Right, to the extent not theretofore exercised, in respect of any
or all of such number of Shares as specified by the Committee in such
Option or Right; and
(b) if the employment of an employee to whom such Option or Right
shall have been granted shall terminate by reason of the employee's
retirement (at such age or upon such conditions as shall be specified by
the Board of Directors), disability (as described in Section 22(e)(3) of
the Code) or dismissal by the employer other than for cause (as defined
below), and while such employee is entitled to exercise such Option or
Right as herein provided, such employee shall have the right to exercise
such Option or Right so granted, to the extent not theretofore exercised,
in respect of any or all of such number of Shares as specified by the
Committee in such Option or Right, at any time up to and including (i)
three (3) months after the date of such termination of employment in the
case of termination by reason of retirement or dismissal other than for
cause and (ii) one (1) year after the date of termination of employment in
the case of termination by reason of disability.
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<PAGE> 7
If an employee voluntarily terminates his or her employment, or is
discharged for cause, any Option or Right granted hereunder shall, unless
otherwise specified by the Committee in the Option or Right, forthwith
terminate with respect to any unexercised portion thereof.
If an Option or Right granted hereunder shall be exercised by the legal
representative of a deceased or disabled employee or former employee, or by a
person who acquired an Option or Right granted hereunder by bequest or
inheritance or by reason of death of any employee or former employee, written
notice of such exercise shall be accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such legal representative or
other person to exercise such Option or Right.
For the purposes of the Plan, the term "for cause" shall mean (i) with
respect to an employee who is party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
a subsidiary corporation or parent corporation of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of like
import) for purposes of termination of employment thereunder by the Company or
such subsidiary corporation or parent corporation of the Company, "for cause"
or "cause" as defined in the most recent of such agreements or plans, or (ii)
in all other cases, (a) the willful commission by an employee of a criminal or
other act that causes substantial economic damage to the Company or a
subsidiary corporation or parent corporation of the Company or substantial
injury to the business reputation of the Company or a subsidiary corporation or
parent corporation of the Company; (b) the commission by an employee of an act
of fraud in the performance of such employee's duties on behalf of the Company
or a subsidiary corporation or parent corporation of the Company; or (c) the
continuing willful failure of an employee to perform the duties of such
employee to the Company or a subsidiary corporation or parent corporation of
the Company (other than such failure resulting from the employee's incapacity
due to physical or mental illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to be
heard and cure such failure are given to the employee by the Board of Directors
or the Committee. For purposes of the Plan, no act, or failure to act, on the
employee's part shall be considered "willful" unless done or omitted to be done
by the employee not in good faith and without reasonable belief that the
employee's action or omission was in the best interest of the Company or a
subsidiary corporation or parent corporation of the Company.
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for
purposes of Section 422(a) of the Code. If an individual is on military, sick
leave or other bona fide leave of absence, such individual shall be considered
an "employee" for purposes of the exercise of an Option or Right and shall be
entitled to exercise such Option or Right during such leave if the period of
such leave does not exceed 90 days, or, if longer, so long as the individual's
right to reemployment with the corporation granting the option (or a related
corporation) is guaranteed either by statute or by contract. If the period of
leave exceeds ninety (90) days, the employment relationship shall be deemed to
have terminated on the ninety-first (91st) day of such leave, unless the
individual's right to reemployment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of an employee from employment by the Company to employment by a
subsidiary corporation or a parent corporation of the Company or (ii) the
transfer of an employee from employment by a subsidiary corporation or a parent
corporation of the Company to employment by the Company or by another
subsidiary corporation or parent corporation of the Company. Furthermore,
solely for purposes of determining the rights and obligations under any
outstanding Options or Rights theretofore granted, in the event that the
Company ceases to own, directly or indirectly, stock possessing 50% or more of
the total combined voting power of all classes of stock of a subsidiary company
by virtue of a recapitalization, stock dividend, stock split, split-up,
spin-off, combination of shares or other like change in capital structure of
the Company, the Committee may determine that employment by such former
subsidiary (or any parent or subsidiary company of such subsidiary) shall
continue to be deemed to be employment by the Company for purposes of the Plan.
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<PAGE> 8
In the event of the complete liquidation or dissolution of a subsidiary
corporation, or in the event that the Company ceases to own, directly or
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock of such corporation, any unexercised Options or Rights
theretofore granted to any person employed by such subsidiary corporation will
be deemed canceled unless such person is employed by the Company or by any
parent corporation or another subsidiary corporation after the occurrence of
such event. In the event an Option or Right is to be canceled pursuant to the
provisions of the previous sentence, notice of such cancellation will be given
to each employee holding unexercised Options or Rights and such holder will
have the right to exercise such Options or Rights in full (without regard to
any limitation set forth or imposed pursuant to Article VII) during the 30 day
period following notice of such cancellation.
Notwithstanding anything to the contrary contained in this Article XI, in
no event, however, shall any person be entitled to exercise any Option or Right
after the expiration of the period of exercisability of such Option or Right as
specified therein.
XII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination of shares, exchange of shares,
issuance of rights to subscribe for Shares, or other like change in capital
structure of the Company, the Committee shall make such adjustment to each
outstanding Option and Right that it, in its sole discretion, deems
appropriate. The term "Shares" after any such change shall refer to the
securities, cash and/or property then receivable upon exercise of an Option or
Right. In addition, in the event of any such change, the Committee shall make
any further adjustments as may be appropriate to the maximum number of Shares
which may be acquired under the Plan pursuant to the exercise of Options and
Rights, the maximum number of Shares which may be so acquired by one employee
and the number of Shares and prices per Share subject to outstanding Options
and Rights as shall be equitable to prevent dilution or enlargement of rights
under such Options or Rights, and the determination of the Committee as to
these matters shall be conclusive. Notwithstanding the foregoing, (i) each
such adjustment with respect to an Incentive Option and any related Right shall
comply with the rules of Section 424(a) of the Code and (ii) in no event shall
any adjustment be made which would render any Incentive Option granted
hereunder to be other than an "incentive stock option" for purposes of Section
422 of the Code.
In the event of a "change in control" of the Company, all then outstanding
Options and Rights shall immediately become exercisable. For purposes of the
Plan, a "change in control" of the Company occurs if: (a) any "Person" (as such
term is used in Sections 13(d) and 14(d)2 of the Exchange Act), other than
Odyssey Partners, L.P. and its affiliates (which, for purposes of this Article
XII only, is deemed to include E.R. Yost) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of
securities of the Company representing (i) 50% or more of the combined voting
power of the Company's then-outstanding securities; or (ii) 25% or more but
less than 50% of the combined voting power of the Company's then-outstanding
securities if such transaction(s) giving rise to such beneficial ownership are
not approved by the Company's Board of Directors; or (b) at any time a majority
of the members of the Board of Directors has been elected or designated by any
Person, other than Odyssey Partners, L.P. and its affiliates (which, for
purposes of this Article XII only, is deemed to include E.R. Yost); or (c) the
Board of Directors shall approve a sale of all or substantially all of the
assets of the Company or any merger, consolidation, issuance of securities or
purchase of assets, in all cases other than to or with Odyssey Partners, L.P. or
its affiliates (which, for purposes of this Article XII only, is deemed to
include E.R. Yost), the result of which would be the occurrence of any event
described in clause (a) or (b) above.
The Committee, in its discretion, may determine that, upon the occurrence
of a transaction described in the preceding paragraph, each Option or Right
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each Share
subject to such Option or Right, cash in an amount equal to the excess of the
fair market value of such Shares immediately prior to the occurrence of such
transaction over the exercise price per share of such Option or Right. The
provisions contained in the preceding sentence shall be inapplicable to an
Option or Right granted within six (6) months
-8-
<PAGE> 9
before the occurrence of a transaction described above if the holder of such
Option or Right is subject to the reporting requirements of Section 16(a) of
the Exchange Act.
XIII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the employment
of any holder of Options or Rights and it shall not impose any obligation on
the part of any holder of Options or Rights to remain in the employ of the
Company or of any subsidiary corporation or parent corporation thereof.
XIV. PURCHASE FOR INVESTMENT
Except for hereinafter provided, the Committee may require an employee, as
a condition upon exercise of any Option or Right granted hereunder, to execute
and deliver to the Company (a) stock powers with respect to Shares underlying a
particular Option or Right and required to be held by a custodian, and (b) a
written statement, in form satisfactory to the Committee in which the employee
represents and warrants that Shares are being acquired for such person's own
account for investment only and not with a view to the resale or distribution
thereof. The employee shall, at the request of the Committee, be required to
represent and warrant in writing that any subsequent resale or distribution of
Shares by the Employee shall be made only pursuant to either (i) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement has become effective and
is current with regard to the Shares being sold, or (ii) a specific exemption
from the registration requirements of the Securities Act, but in claiming such
exemption the employee shall, prior to any offer of sale or sale of such
Shares, obtain a prior favorable written opinion of counsel, in form and
substance satisfactory to counsel for the Company, as to the application of
such exemption thereto. The foregoing restriction shall not apply to (i)
issuances by the Company so long as the Shares being issued are registered
under the Securities Act and a prospectus in respect thereof is current or (ii)
re-offerings of Shares by affiliates of the Company (as defined in Rule 405 or
any successor rule or regulation promulgated under the Securities Act) if the
Shares being re-offered are registered under the Securities Act and a
prospectus in respect thereof is current.
XV. ISSUE OF CERTIFICATES, LEGENDS, PAYMENT OF EXPENSES
Upon any exercise of an Option or Right which may be granted hereunder
and, in the case of an Option, payment of the purchase price, a certificate or
certificates for the Shares shall be issued by the Company in the name of the
person exercising the Option or Right and shall be delivered to or upon the
order of such person.
The Company may endorse such legend or legends upon the certificates for
Shares issued pursuant to the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares as, in its
discretion, it determines to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, (ii) implement the provisions of the Plan and any agreement
between the Company and the optionee or grantee with respect to such Shares, or
(iii) permit the Company to determine the occurrence of a disqualifying
disposition, as described in Section 421(b) of the Code, of Shares transferred
upon exercise of an Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance of transfer of Shares, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a
Registration Statement under the Securities Act, which fees and expenses shall
be borne by the recipient of the Shares unless such Registration Statement has
been filed by the Company for its own corporate purposes (and the Company so
states) in which event the recipient of the Shares shall bear only fees and
expenses as are attributable solely to the inclusion of the Shares he or she
received in the Registration Statement.
-9-
<PAGE> 10
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XVI. WITHHOLDING TAXES
The Company may require an employee exercising a Right or Non-Qualified
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Option in a disqualifying disposition (within the
meaning of Section 421(b) of the Code), to reimburse the corporation that
employs such employee for any taxes required by any government to be withheld
or otherwise deducted and paid by such corporation in respect of the issuance
or disposition of such Shares. In lieu thereof, the corporation that employs
such employee shall have the right to withhold the amount of such taxes from
any other sums due or to become due from such corporation to the employee upon
such terms and conditions as the Committee shall prescribe. The corporation
that employs such employee may, in its discretion, hold the stock certificate
to which such employee is entitled upon the exercise of an Option as security
for the payment of such withholding tax liability, until cash sufficient to pay
that liability has been accumulated. In addition, at any time that the Company
becomes subject to a withholding obligation under applicable law with respect
to the exercise of a Right or Non-Qualified Option (the "Tax Date"), except as
set forth below, a holder of a Right or Non-Qualified Option may elect to
satisfy, in whole or in part, the holder's related personal tax liabilities (an
"Election") by (i) directing the Company to withhold from Shares issuable in
the related exercise either a specified number of Shares or Shares having a
specified value (in each case not in excess of the related personal tax
liabilities), (ii) tendering Shares previously issued pursuant to the exercise
of an Option or Right or other Shares of the Company's common stock owned by
the holder or (iii) combining any or all of the foregoing options in any
fashion. An Election shall be irrevocable. The withheld Shares and other Shares
tendered in payment shall be valued at their fair market value (determined in
accordance with the principles set forth in Article V of the Plan) on the Tax
Date. The Committee may disapprove of any Election, suspend or terminate the
right to make Elections or provide that the right to make Elections shall not
apply to particular Shares or exercises. The Committee may prescribe additional
rules, in its discretion, to permit a holder of an Option or Right who is
subject to the reporting requirements of Section 16(a) of the Exchange Act to
effect such tax withholding in compliance with the Rules promulgated under
Section 16 of the Exchange Act and the positions of the staff of the Securities
and Exchange Commission expressed in no-action or interpretative letters
exempting such tax withholding transactions from liability under Section 16(b)
of the Exchange Act. The Committee may also impose any additional conditions or
restrictions on the right to make an Election as it shall deem appropriate.
XVII. LISTING OF SHARES AND RELATED MATTERS
The Committee may delay any award, issuance or delivery of Shares if it
determines that listing, registration or qualification of Shares or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the sale or purchase of Shares under the
Plan, until such listing, registration, qualification, consent or approval
shall have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.
XVIII. AMENDMENT OF THE PLAN
The Board of Directors or the Committee, as the case may be, may, from
time to time, amend the Plan, provided that no amendment shall be made, without
the approval of the stockholders of the Company, that will (i) increase the
total number of Shares reserved for Options under the Plan (other than an
increase resulting from an adjustment provided for in Article XII), (ii) reduce
the exercise price of any Incentive Option granted hereunder below the price
required by Article V, (iii) modify the provisions of the Plan relating to
eligibility, or (iv) materially increase the benefits accruing to participants
under the Plan. The Board of Directors or the Committee, as the case may be,
shall be authorized to amend the Plan and the Options granted thereunder to
permit the Incentive Options granted thereunder to qualify as incentive stock
options within the meaning of Section 422 of the Code. The rights and
obligations under any Option or Right granted before amendment of the Plan or
any
-10-
<PAGE> 11
unexercised portion of such Option or Right shall not be adversely affected by
amendment of the Plan, Option or Right without the consent of the holder of
such Option or Right.
XIX. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan. The
Plan, unless sooner terminated by action of the Board of Directors, shall
terminate at the close of business on the Termination Date. Options and Rights
may not be granted while the Plan is suspended or after it is terminated.
Rights and obligations under any Option or Right granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the consent of the person to whom the Option or Right was
granted. The power of the Committee to construe and administer any Options or
Rights granted prior to the termination or suspension of the Plan under Article
III nevertheless shall continue after such termination or during such
suspension.
XX. GOVERNING LAW
The Plan, such Options and Rights as may be granted thereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware from time to time obtaining.
XXI. PARTIAL INVALIDITY
The invalidity or illegibility of any provision hereof shall not be deemed
to affect the validity of any other provision.
XXII. EFFECTIVE DATE
This Plan became effective at 5:30 P.M., New York City Time, on the
Effective Date.
-11-
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