UNITED STATES
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 Quarterly Period Ended Commission File Number
May 1, 1999 1-10259
HomeBase, Inc.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0109661
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3345 Michelson Drive
Irvine, CA 92612
(Address of principal executive offices) (Zip Code)
(949) 442-5000
(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
At June 4, 1999, there were 37,877,636 shares outstanding.
<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOMEBASE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
- ----------------------------------------------------------------------------------- --------------------------------
- ----------------------------------------------------------------------------------- --------------- ----------------
May 1, May 2,
1999 1998
- ----------------------------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Net sales $ 365,293 $ 348,897
Cost of sales, including buying and occupancy costs 286,996 271,960
- ----------------------------------------------------------------------------------- --------------- ----------------
Gross profit 78,297 76,937
Selling, general and administrative expenses 74,579 75,666
Pre-opening expenses 1,569 1
- ----------------------------------------------------------------------------------- --------------- ----------------
Operating income 2,149 1,270
Interest on debt and capital leases, net 1,071 1,118
- ----------------------------------------------------------------------------------- --------------- ----------------
Income before income taxes 1,078 152
Provision for income taxes 425 61
- ----------------------------------------------------------------------------------- --------------- ----------------
Net income $ 653 $ 91
=================================================================================== =============== ================
Net income per share:
Basic $ 0.02 $ -
Diluted $ 0.02 $ -
Weighted average common and common equivalent shares used in computation of net
income per share:
Basic 37,878 37,764
Diluted 37,954 38,068
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
HOMEBASE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
May 1, January 30, May 2,
1999 1999 1998
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 55,356 $ 35,578 $ 50,707
Marketable securities 17,959 27,939 9,382
Accounts receivable (net of allowance for doubtful
accounts of $235, $220 and $283, respectively) 25,459 20,759 26,755
Merchandise inventories 377,496 339,650 346,468
Current deferred income taxes 9,627 9,803 12,185
Prepaid expenses and other current assets 17,537 17,044 9,478
Prepaid and refundable income taxes - - 10,281
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
Total current assets 503,434 450,773 465,256
Property and equipment, net 259,819 256,835 257,120
Property under capital leases, net 5,088 5,198 5,527
Deferred income taxes 10,338 10,205 13,762
Other assets 5,655 5,971 12,962
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
Total assets $ 784,334 $ 728,982 $ 754,627
================================================================= ================ ================= ===============
LIABILITIES
Current liabilities:
Accounts payable $ 148,419 $ 103,248 $ 134,727
Restructuring reserve 2,241 2,066 6,356
Accrued expenses and other current liabilities 81,470 75,838 82,803
Accrued income taxes 5,583 691 -
Current installments of long-term debt 6,637 6,716 74
Obligations under capital leases due within one year 294 284 247
- ---------------------------------------------------------------------------------- ----------------- --------------
Total current liabilities 244,644 188,843 224,207
Long-term debt 100,000 100,293 106,996
Obligations under capital leases, less portion due
within one year 8,289 8,366 8,583
Noncurrent restructuring reserve 3,289 3,862 5,714
Other noncurrent liabilities 44,854 45,119 50,049
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
Total liabilities 401,076 346,483 395,549
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized
190,000,000 shares; issued and outstanding 37,876,636,
37,879,044 and 37,807,610 shares 379 379 378
Additional paid-in capital 374,695 374,705 374,173
Unearned compensation (667) (798) (1,385)
Unrealized holding gains (losses) 7 22 (7)
Retained earnings (deficit) 8,844 8,191 (14,081)
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
Total stockholders' equity 383,258 382,499 359,078
- ----------------------------------------------------------------- ---------------- ----------------- ---------------
Total liabilities and stockholders' equity $ 784,334 $ 728,982 $ 754,627
================================================================= ================ ================= ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
HOMEBASE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
- ------------------------------------------------------------------------- ------- ----------------------------------
May 1, May 2,
1999 1998
- ------------------------------------------------------------------------- ------- ---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 653 $ 91
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 6,896 6,824
Loss on property disposals 2 65
Amortization of discount on marketable securities (199) (19)
Other non-cash items 97 166
Deferred income taxes 43 (9)
Increase (decrease) in cash due to changes in:
Accounts receivable (4,700) (1,358)
Merchandise inventories (37,846) (32,280)
Prepaid expenses and other current assets (493) 379
Prepaid and refundable income taxes - 183
Other assets 107 (42)
Accounts payable 45,171 38,605
Restructuring reserve (223) (618)
Accrued expenses and other current liabilities 4,861 11,439
Accrued income taxes 4,905 -
Other noncurrent liabilities (265) (336)
- ------------------------------------------------------------------------- ------- ---------------- -----------------
Net cash provided by operating activities 19,009 23,090
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (3,500) (3,861)
Sale of marketable securities 5,000 -
Maturity of marketable securities 8,664 -
Property additions (8,968) (13,518)
Property disposals 1 157
- ------------------------------------------------------------------------- ------- ---------------- -----------------
Net cash provided by (used in) investing activities 1,197 (17,222)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (372) (17)
Repayment of capital lease obligations (67) (46)
Debt issuance costs - (18)
Proceeds from sale and issuance of common stock 11 317
- ------------------------------------------------------------------------- ------- ---------------- -----------------
Net cash provided by (used in) financing activities (428) 236
- ------------------------------------------------------------------------- ------- ---------------- -----------------
Net increase in cash and cash equivalents 19,778 6,104
Cash and cash equivalents at beginning of year 35,578 44,603
- ------------------------------------------------------------------------- ------- ---------------- -----------------
Cash and cash equivalents at end of period $ 55,356 $ 50,707
========================================================================= ======= ================ =================
Supplemental cash flow information:
Interest paid $ 2,110 $ 2,591
Income tax refunds received (4,582) (146)
Non-cash financing and investing activities:
Tax benefit of employee stock options $ 13 $ 199
========================================================================= ======= ================ =================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
HOMEBASE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------- ------------------- ----------- -------------- ----------- ----------- ---------------
Unrealized
Common Stock Additional Holding Retained Total
------------------- Paid-In Unearned Gains Earnings Stockholders'
Shares Amount Capital Compensation (Losses) (Deficit) Equity
- ------------------------------- --------- --------- ----------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1998 37,707 $ 377 $ 375,026 $ (1,570) $ 6 $ (14,172) $ 359,667
Net income - - - - - 91 91
Unrealized holding losses - - - - (13) - (13)
Exercise of stock options 101 1 316 - - - 317
Income tax benefit of
stock options - - 199 - - - 199
Amortization of restricted
stock grants - - - 166 - - 166
Equity transfer adjustment
related to spin-off of
BJ's Wholesale Club, Inc. - - (1,349) - - - (1,349)
- ------------------------------- --------- --------- ----------- -------------- ----------- ----------- ---------------
Balance, May 2, 1998 37,808 $ 378 $ 374,192 $ (1,404) $ (7) $ (14,081) $ 359,078
=============================== ========= ========= =========== ============== =========== =========== ===============
- ------------------------------- ------------------- ----------- -------------- ----------- ----------- ---------------
Unrealized
Common Stock Additional Holding Retained Total
------------------- Paid-In Unearned Gains Earnings Stockholders'
Shares Amount Capital Compensation (Losses) (Deficit) Equity
- ------------------------------- --------- --------- ----------- -------------- ----------- ----------- ---------------
Balance, January 30, 1999 37,879 $ 379 $ 374,705 $ (798) $ 22 $ 8,191 $ 382,499
Net income - - - - - 653 653
Unrealized holding losses - - - - (15) - (15)
Exercise of stock options 3 - 11 - - - 11
Income tax benefit of
stock options - - 13 - - - 13
Amortization of restricted
stock grants - - - 114 - - 114
Cancellation of restricted
stock grants (5) - (34) 17 - - (17)
- ------------------------------- --------- --------- ----------- -------------- ----------- ----------- ---------------
Balance, May 1, 1999 37,877 $ 379 $ 374,695 $ (667) $ 7 $ 8,844 $ 383,258
=============================== ========= ========= =========== ============== =========== =========== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
HOMEBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying interim consolidated financial statements are unaudited and
have been prepared in accordance with the instructions to Form 10-Q and Article
10 of Regulation S-X. In the opinion of management, all adjustments (consisting
of normal and recurring accruals) considered necessary for a fair presentation
have been included. These interim financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Annual Report on Form 10-K for the fiscal year ended January
30, 1999. The January 30, 1999 balances reported herein are derived from the
audited financial statements included in the Annual Report on Form 10-K for the
fiscal year ended January 30, 1999.
The results for the interim periods are not necessarily indicative of results
for the full fiscal year because, among other things, the Company's business is
subject to seasonal influences. Sales and earnings for the Company have
typically been higher in the second and third quarters of the fiscal year, which
include the most active seasons for home improvement sales, and lower in the
first and fourth quarters.
The fiscal years ending January 29, 2000 and January 30, 1999 are referred to
herein as "fiscal 1999" and "fiscal 1998", respectively. The 13 weeks ended May
1, 1999 and May 2, 1998 are referred to herein as the "first quarter of fiscal
1999" and the "first quarter of fiscal 1998", respectively.
The consolidated financial statements of the Company include the financial
statements of the Company's subsidiaries, all of which are wholly owned.
2. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Reclassifications
Certain prior period amounts have been reclassified to conform to the current
year presentation.
4. Interest on Debt and Capital Leases
Interest on debt and capital leases in the consolidated statements of income is
presented net of interest and investment income of $0.8 million in the first
quarter of both fiscal 1999 and fiscal 1998.
<PAGE>
HOMEBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
5. Net Income Per Share
The following is a reconciliation of the numerator and the denominator used in
the calculation of net income per share:
<TABLE>
<CAPTION>
13 Weeks Ended
- ----------------------------------------------------------------------- ----------------------------------
May 1, May 2,
(In thousands) 1999 1998
- ----------------------------------------------------------------------- ---------------- -----------------
Numerator:
<S> <C> <C>
Net income $ 653 $ 91
- ----------------------------------------------------------------------- ---------------- -----------------
Numerator for basic net income per share 653 91
Effect of dilutive securities:
5.25% convertible subordinated notes(1) - -
- ----------------------------------------------------------------------- ---------------- -----------------
Numerator for diluted net income per share $ 653 $ 91
======================================================================= ================ =================
13 Weeks Ended
- ----------------------------------------------------------------------- ----------------------------------
May 1, May 2,
(In thousands) 1999 1998
- ----------------------------------------------------------------------- ---------------- -----------------
Denominator:
Denominator for basic net income per share - Weighted
average shares 37,878 37,764
Effect of dilutive securities:
Employee stock options 76 304
Assumed conversion of 5.25% convertible subordinated notes(1) - -
- ----------------------------------------------------------------------- ---------------- -----------------
Denominator for diluted net income per share 37,954 38,068
======================================================================= ================ =================
</TABLE>
(1) The effect of the convertible securities has been excluded from the
computation of diluted net income per share because it was antidilutive in
the first quarter of both fiscal 1999 and fiscal 1998.
6. Supplemental Balance Sheet Information
Property and equipment consists of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------- ---------------- -----------------
May 1, January 30, May 2,
(In thousands) 1999 1999 1998
- ----------------------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Land and buildings $ 157,774 $ 157,760 $ 157,589
Leasehold improvements 70,670 69,577 65,023
Furniture, fixtures and equipment 156,716 148,674 141,273
- ----------------------------------------------------- ----------------- ---------------- -----------------
385,160 376,011 363,885
Accumulated depreciation (125,341) (119,176) (106,765)
- ----------------------------------------------------- ----------------- ---------------- -----------------
Property and equipment, net $ 259,819 $ 256,835 $ 257,120
===================================================== ================= ================ =================
</TABLE>
Property under capital leases consists of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------- ---------------- -----------------
May 1, January 30, May 2,
(In thousands) 1999 1999 1998
- ----------------------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Property under capital leases $ 9,696 $ 9,696 $ 9,696
Accumulated depreciation (4,608) (4,498) (4,169)
- ----------------------------------------------------- ----------------- ---------------- -----------------
Property under capital leases, net $ 5,088 $ 5,198 $ 5,527
===================================================== ================= ================ =================
</TABLE>
HOMEBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
7. Pension Plan
On July 26, 1997, the Board of Directors approved the termination of the Waban
Inc. Retirement Plan (the "Plan"). In accordance with generally accepted
accounting principles, the costs to terminate the Plan were not recognized until
the Plan was settled, which occurred in the first quarter of fiscal 1998. Net
income for the 13 weeks ended May 2, 1998 includes a charge of approximately
$0.7 million, net of taxes, related to the settlement of the Plan.
8. Restructuring Reserve
As of January 30, 1999, $5.9 million of the Company's fiscal 1993 restructuring
charge remained accrued on the Company's consolidated balance sheet. During the
13 weeks ended May 1, 1999, the Company incurred cash expenditures of $0.4
million for lease obligations on closed facilities. As of May 1, 1999, $5.5
million remained accrued on the Company's balance sheet consisting primarily of
lease obligations on closed facilities, which extend through 2007.
9. Subsequent Event
On May 17, 1999, the Company paid $6.6 million to redeem its 11% senior
subordinated notes. In July 1997, the Company purchased U.S. Treasury securities
and deposited the funds in escrow with the trustee of the notes, which were used
to retire the debt and pay interest through the retirement date.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Organization and Presentation
The fiscal years ending January 29, 2000 and January 30, 1999 are referred to
herein as "fiscal 1999" and "fiscal 1998", respectively. The 13 weeks ended May
1, 1999 and May 2, 1998 are referred to herein as the "first quarter of fiscal
1999" and the "first quarter of fiscal 1998", respectively.
The following table presents the results of operations for the periods indicated
as a percentage of net sales.
<TABLE>
<CAPTION>
13 Weeks Ended
- ------------------------------------------------------------------------------ ---------------------------
May 1, May 2,
1999 1998
- ------------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales, including buying and occupancy costs 78.6 78.0
- ------------------------------------------------------------------------------ ------------- -------------
Gross profit 21.4 22.0
Selling, general and administrative expenses 20.4 21.7
Pre-opening expenses 0.4 -
- ------------------------------------------------------------------------------ ------------- -------------
Operating income 0.6 0.3
Interest on debt and capital leases, net 0.3 0.3
- ------------------------------------------------------------------------------ ------------- -------------
Income before income taxes 0.3 -
Provision for income taxes 0.1 -
- ------------------------------------------------------------------------------ ------------- -------------
Net income 0.2% - %
============================================================================== ============= =============
</TABLE>
Net Sales
Net sales for the first quarter of fiscal 1999 increased 4.7% to $365.3 million
from $348.9 million in the first quarter of fiscal 1998. There were 85 stores in
operation at the end of the first quarter of fiscal 1999 versus 83 open at the
end of the first quarter of fiscal 1998. Comparable store sales grew 2.7%,
driven by an increase in the size of the average transaction.
Gross Profit
Gross profit decreased to 21.4% of net sales in the first quarter of fiscal 1999
compared to 22.0% in the first quarter of fiscal 1998. This decrease was the
result of a sales mix in the first quarter of fiscal 1998 which favored higher
gross margin categories due to El Nino weather. The sales mix during the first
quarter of fiscal 1999 reflects a more traditional lumber and building materials
contribution to total sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") decreased to 20.4% of net
sales for the first quarter of fiscal 1999, from 21.7% of net sales for the
first quarter of fiscal 1998. Higher payroll expenses related to the Company's
previously announced strategic initiative to build customer service levels were
offset by the absence of incremental remodel costs in the current year and by
the leverage provided by comparable sales increases. Additionally, in the first
quarter of fiscal 1998, the Company incurred pre-tax settlement costs of
approximately $1.1 million associated with the termination of the Waban Inc.
Retirement Plan.
<PAGE>
Pre-opening Expenses
Pre-opening expenses were $1.6 million for the first quarter of fiscal 1999
compared to $0.0 million for the first quarter of fiscal 1998. The expenses are
primarily attributable to one store, which opened in March 1999, and spending
for three stores scheduled to open in May 1999.
Interest on Debt and Capital Leases
Interest on debt and capital leases, net, was $1.1 million for both the first
quarter of fiscal 1999 and the first quarter of fiscal 1998. Interest on debt
and capital leases is presented net of interest and investment income of $0.8
for both the first quarter of fiscal 1999 and the first quarter of fiscal 1998.
Net Income
Net income for the first quarter of fiscal 1999 was $0.7 million, or $0.02 per
share, diluted, compared to $0.1 million, or $0.00 per share, diluted, in the
comparable prior year period. This year's net income includes pre-tax costs of
$1.6 million for pre-opening expenses, whereas virtually no such costs were
incurred in the first quarter of fiscal 1998. Net income in the first quarter of
fiscal 1998 included a pre-tax charge of $1.1 million for the termination of the
Waban Inc. Retirement Plan.
Liquidity and Capital Resources
Cash flows from operating activities provides the Company with a significant
source of liquidity. Additionally, the Company has a revolving line of credit of
$105 million to provide capital as needed for corporate growth and working
capital purposes.
At May 1, 1999, the Company had no borrowings under its revolving credit
facility, and had $22.1 million in letters of credit outstanding. At May 29,
1999, the Company had $86.5 million available for borrowing under the revolving
credit facility.
At May 1, 1999, the Company had $73.3 million in cash, cash equivalents and
marketable securities. The Company believes that its current resources, together
with internally generated cash flows from operations, lease financing and
amounts available under its revolving credit facility will be sufficient to
finance the expansion plan and other operating needs during fiscal 1999.
Restructuring Reserve
As of January 30, 1999, $5.9 million of the Company's fiscal 1993 restructuring
charge remained accrued on the Company's consolidated balance sheet. During the
first quarter of fiscal 1999, the Company incurred cash expenditures of $0.4
million for lease obligations on closed facilities. As of May 1, 1999, $5.5
million remained accrued on the Company's balance sheet consisting primarily of
lease obligations on closed facilities, which extend through 2007.
Year 2000 Compliance
The Company has conducted a review of its computer systems and has identified
the systems that could be affected by the Year 2000 issue. The Year 2000 issue
relates to the inability of information systems to recognize and process
date-sensitive information beyond December 31, 1999. In addition, many systems
and equipment that are not typically thought of as "computer-related" contain
imbedded hardware and software that may be date-sensitive and can be impacted by
the Year 2000 issue. If the Company's computer systems cannot recognize a date
using "00" as the Year 2000, it could result in miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoice payments or engage in other normal
business activities.
Early in fiscal 1996, the Company commenced a program to address the Year 2000
issue and to pursue compliance with vendors. The scope of the project includes:
ensuring the compliance of all applications, operating systems and hardware on
mainframe, personal computer and local area network platforms; addressing issues
related to systems and equipment that do not contain embedded hardware and
software; and addressing the compliance of third party vendors.
The Company estimates the total cost of this compliance program to be
approximately $2.0 million, including internal staff costs and the cost to write
off any unamortized existing hardware and software that may need to be replaced.
The Company has incurred approximately $1.1 million in costs through the first
quarter of fiscal 1999, with the remaining $0.9 million in projected
expenditures expected to be incurred by the end of fiscal 1999.
The Company believes that more than 90% of its mainframe applications, including
all financial and accounting systems, are now Year 2000 compliant. The Company
expects that the remaining mainframe systems will be Year 2000 compliant by the
second quarter of fiscal 1999. All other equipment and systems, including
personal computers, local area networks, and other peripherals are expected to
be Year 2000 compliant by the end of the third quarter of fiscal 1999.
Although management anticipates that its systems and applications will be Year
2000 compliant on a timely basis, there can be no assurance that the systems of
other companies with which the Company does business will be Year 2000 compliant
on a timely basis. In March 1998, the Company established a Year 2000 committee,
which includes senior members from various business units within the Company.
The committee members identified the major third party vendors from their
respective business units. The Company sent Year 2000 compliance questionnaires
and, to date, has received responses from more than 80% of the vendors polled.
Management is reviewing their responses and assessing the need to develop
contingency plans for those vendors who may not be Year 2000 compliant. The
risks involved with not solving the Year 2000 issue include, but are not limited
to, the following: loss of local or regional electric power, loss of
telecommunication services, delays or cancellations of shipping or
transportation, the inability to process credit card transactions and bank
errors.
The discussion of the Company's efforts, and management's expectations, relating
to Year 2000 compliance are forward-looking statements. The Company's ability to
achieve Year 2000 compliance could be affected by, among other things, the
availability of programming and testing resources, failure to identify all
susceptible systems, non-compliance by third parties, and other similar
uncertainties. These and other unforeseen factors could harm the Company's
financial position, liquidity and results of operations.
================================================================================
Forward-Looking Information
- --------------------------------------------------------------------------------
This report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. When used in this
report, the words "believe," "estimate," "expect," "anticipate," "plans," and
similar expressions are intended to identify forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Such statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those expected. Although the Company believes that
comments reflected in such forward-looking statements are reasonable, they are
based on information existing at the time made. Important factors that could
cause actual results to differ materially from expectations include, but are not
limited to, the Company's ability to successfully implement the new operating
and sales strategy, its ability to execute its accelerated store opening plan,
the competitive marketplace, and the risk factors described in the Company's
Annual Report on Form 10-K for the fiscal year ended January 30, 1999.
================================================================================
<PAGE>
Part II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
first quarter of fiscal 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.31 Equity Unit Agreement, dated February 8, 1999, with Thomas F.
Gallagher
10.32 Equity Unit Agreement, dated February 8, 1999, with
William B. Langsdorf
10.33 Equity Unit Agreement, dated February 8, 1999, with Scott L.
Richards
27 Financial Data Schedule
b) Reports on Form 8-K
On February 1, 1999, the Company filed a report on Form 8-K which
coincided with a press release announcing the preliminary results for the
fourth quarter and fiscal year ended January 30, 1999, and a new
strategic program aimed at enhancing same store sales.
On April 5, 1999, the Company filed a report on Form 8-K under Item 5
thereof, announcing the adoption of a replacement stockholder rights
plan. The new stockholder rights plan replaced an existing stockholder
rights plan that expired, by its terms, on April 6, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HomeBase, Inc.
Date: June 8, 1999 /s/ ALLAN P. SHERMAN
---------------------------- -------------------------------
Allan P. Sherman
President and Chief
Executive Officer
Date: June 8, 1999 /s/ WILLIAM B. LANGSDORF
---------------------------- -------------------------------
William B. Langsdorf
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAY-01-1999
<CASH> 55,356
<SECURITIES> 17,959
<RECEIVABLES> 25,694
<ALLOWANCES> (235)
<INVENTORY> 377,496
<CURRENT-ASSETS> 503,434
<PP&E> 385,160
<DEPRECIATION> (125,341)
<TOTAL-ASSETS> 784,334
<CURRENT-LIABILITIES> 244,644
<BONDS> 108,289
0
0
<COMMON> 379
<OTHER-SE> 382,879
<TOTAL-LIABILITY-AND-EQUITY> 784,334
<SALES> 365,293
<TOTAL-REVENUES> 365,293
<CGS> 286,996
<TOTAL-COSTS> 286,996
<OTHER-EXPENSES> 76,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,071
<INCOME-PRETAX> 1,078
<INCOME-TAX> 425
<INCOME-CONTINUING> 653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 653
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
HOMEBASE, INC. EQUITY UNIT AGREEMENT
This Equity Unit Agreement ("Agreement") is made and entered into as of
February 8, 1999 by and between HomeBase, Inc., a Delaware corporation (the
Company"), and Thomas F. Gallagher ("Executive").
WHEREAS, Executive is a valued employee of the Company; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of
the Company ("ECC") has approved the grant to Executive of the number of Units
indicated below, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto agree as follows:
1. Grant of Units; Certain Terms and Conditions. The Company hereby grants
to Executive, and Executive hereby accepts, 100,000 Units, subject to the
vesting schedule indicated below and all of the terms and conditions set forth
in this Agreement.
Number of Units Vesting Date
50,000 January 27, 2001
25,000 January 26, 2002
25,000 January 25, 2003
Notwithstanding any other provision hereof, if a Change of Control Event (as
defined in Annex A hereto) occurs, all of Executives' Units shall become fully
vested and nonforfeitable.
2. Payment of Vested Units. A cash payment in respect of vested Units shall
be made to Executive not later than the 15th of March following the date such
Unit vests and shall equal the applicable number of vested Units multiplied by
the lesser of (a) $12.00 or (b) the greater of (i) $6.00 or (ii) the average
closing price of the Company's common stock (as reported in the Wall Street
Journal) for the first five trading days immediately following the Company's
annual earnings release in respect of the Company's fiscal years ending in
January 2001, 2002, or 2003, as the case may be. Notwithstanding the foregoing,
if Units vest by reason of a Change of Control Event, a cash payment in respect
of such Units shall be made to Executive as soon as practicable after the Change
of Control Event and shall equal the applicable number of Units multiplied by
the lesser of (x) $12.00, or (y) the greater of (i) $6.00 or (ii) the tender
offer price per common share of Company Stock in the case of a cash transaction
or the average closing price for the Company (as reported in the Wall Street
Journal) for the five trading days immediately preceding the Change of Control
Event date in the case of a noncash transaction.
3. Forfeitures. If Executive's employment with the Company terminates for
any reason, any Units remaining unvested as of the date of employment
termination shall be forfeited.
4. Adjustment to Common Stock of Company. In the event of any stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change
in capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, the number of Units and/or the payment price for
Units described in Section 2 hereof shall be appropriately adjusted by the
Company (or substituted awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate.
5. Transferability of Units. Neither the Units nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner.
6. Payment of Withholding Tax. If the Company is obligated to withhold an
amount on account of any federal, state or local tax imposed as a result of the
redemption of the Units, including, without limitation, any federal, state or
other income tax, or any F.I.C.A., state disability insurance tax or other
employment tax, then the Company shall deduct such amount from the amount
otherwise payable to Executive upon payment in respect of the Units.
7. Employment Rights. No provision of this Agreement or of the Units
granted hereunder shall (a)confer upon Executive the right to continue in the
employ of the Company, (b)affect the right of the Company to terminate the
employment of Executive, with or without cause, or (c)confer upon Executive any
right to participate in any employee welfare or benefit plan or other program of
the Company. Executive hereby acknowledges and agrees that the Company may
terminate the employment of Executive at any time and for any reason, or for no
reason, unless Executive and the Company are parties to a written employment
agreement that expressly provides otherwise.
8. Governing Law. This Agreement and the Units granted hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware.
IN WITNESS WHEREOF, the Company and Executive have duly executed this
Agreement as of the date just noted above.
HomeBase, Inc.
By___________________________________
Allan P. Sherman
Chief Executive Officer and President
_____________________________________
Thomas F.Gallagher
ANNEX A
DEFINITION OF CHANGE OF CONTROL EVENT
For the purpose of the Plan, a "Change of Control Event" shall mean:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")(a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control Event: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequently
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
when comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (except that this proviso shall
not apply to any individual whose initial assumption of office as a director
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board); or
(c) Consummation of a reorganization, merger or consolidation involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless, immediately
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in section
(c) of this definition shall include, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation and (iii) at least half
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
HOMEBASE, INC. EQUITY UNIT AGREEMENT
This Equity Unit Agreement ("Agreement") is made and entered into as of
February 8, 1999 by and between HomeBase, Inc., a Delaware corporation (the
Company"), and William B. Langsdorf ("Executive").
WHEREAS, Executive is a valued employee of the Company; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of
the Company ("ECC") has approved the grant to Executive of the number of Units
indicated below, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto agree as follows:
1. Grant of Units; Certain Terms and Conditions. The Company hereby grants
to Executive, and Executive hereby accepts, 100,000 Units, subject to the
vesting schedule indicated below and all of the terms and conditions set forth
in this Agreement.
Number of Units Vesting Date
50,000 January 27, 2001
25,000 January 26, 2002
25,000 January 25, 2003
Notwithstanding any other provision hereof, if a Change of Control Event
(as defined in Annex A hereto) occurs, all of Executives' Units shall become
fully vested and nonforfeitable.
2. Payment of Vested Units. A cash payment in respect of vested Units shall
be made to Executive not later than the 15th of March following the date such
Unit vests and shall equal the applicable number of vested Units multiplied by
the lesser of (a) $12.00 or (b) the greater of (i) $6.00 or (ii) the average
closing price of the Company's common stock (as reported in the Wall Street
Journal) for the first five trading days immediately following the Company's
annual earnings release in respect of the Company's fiscal years ending in
January 2001, 2002, or 2003, as the case may be. Notwithstanding the foregoing,
if Units vest by reason of a Change of Control Event, a cash payment in respect
of such Units shall be made to Executive as soon as practicable after the Change
of Control Event and shall equal the applicable number of Units multiplied by
the lesser of (x) $12.00, or (y) the greater of (i) $6.00 or (ii) the tender
offer price per common share of Company Stock in the case of a cash transaction
or the average closing price for the Company (as reported in the Wall Street
Journal) for the five trading days immediately preceding the Change of Control
Event date in the case of a noncash transaction.
3. Forfeitures. If Executive's employment with the Company terminates for
any reason, any Units remaining unvested as of the date of employment
termination shall be forfeited.
4. Adjustment to Common Stock of Company. In the event of any stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change
in capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, the number of Units and/or the payment price for
Units described in Section 2 hereof shall be appropriately adjusted by the
Company (or substituted awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate.
5. Transferability of Units. Neither the Units nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner.
6. Payment of Withholding Tax. If the Company is obligated to withhold an
amount on account of any federal, state or local tax imposed as a result of the
redemption of the Units, including, without limitation, any federal, state or
other income tax, or any F.I.C.A., state disability insurance tax or other
employment tax, then the Company shall deduct such amount from the amount
otherwise payable to Executive upon payment in respect of the Units.
7. Employment Rights. No provision of this Agreement or of the Units
granted hereunder shall (a)confer upon Executive the right to continue in the
employ of the Company, (b)affect the right of the Company to terminate the
employment of Executive, with or without cause, or (c)confer upon Executive any
right to participate in any employee welfare or benefit plan or other program of
the Company. Executive hereby acknowledges and agrees that the Company may
terminate the employment of Executive at any time and for any reason, or for no
reason, unless Executive and the Company are parties to a written employment
agreement that expressly provides otherwise.
8. Governing Law. This Agreement and the Units granted hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware.
IN WITNESS WHEREOF, the Company and Executive have duly executed this
Agreement as of the date just noted above.
HomeBase, Inc.
By___________________________________
Allan P. Sherman
Chief Executive Officer and President
_____________________________________
William B. Langsdorf
ANNEX A
DEFINITION OF CHANGE OF CONTROL EVENT
For the purpose of the Plan, a "Change of Control Event" shall mean:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")(a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control Event: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequently
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
when comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (except that this proviso shall
not apply to any individual whose initial assumption of office as a director
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board); or
(c) Consummation of a reorganization, merger or consolidation involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless, immediately
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in section
(c) of this definition shall include, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation and (iii) at least half
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
HOMEBASE, INC. EQUITY UNIT AGREEMENT
This Equity Unit Agreement ("Agreement") is made and entered into as of
February 8, 1999 by and between HomeBase, Inc., a Delaware corporation (the
Company"), and Scott L. Richards ("Executive").
WHEREAS, Executive is a valued employee of the Company; and
WHEREAS, the Executive Compensation Committee of the Board of Directors of
the Company ("ECC") has approved the grant to Executive of the number of Units
indicated below, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto agree as follows:
1. Grant of Units; Certain Terms and Conditions. The Company hereby grants
to Executive, and Executive hereby accepts, 100,000 Units, subject to the
vesting schedule indicated below and all of the terms and conditions set forth
in this Agreement.
Number of Units Vesting Date
50,000 January 27, 2001
25,000 January 26, 2002
25,000 January 25, 2003
Notwithstanding any other provision hereof, if a Change of Control Event
(as defined in Annex A hereto) occurs, all of Executives' Units shall become
fully vested and nonforfeitable.
2. Payment of Vested Units. A cash payment in respect of vested Units shall
be made to Executive not later than the 15th of March following the date such
Unit vests and shall equal the applicable number of vested Units multiplied by
the lesser of (a) $12.00 or (b) the greater of (i) $6.00 or (ii) the average
closing price of the Company's common stock (as reported in the Wall Street
Journal) for the first five trading days immediately following the Company's
annual earnings release in respect of the Company's fiscal years ending in
January 2001, 2002, or 2003, as the case may be. Notwithstanding the foregoing,
if Units vest by reason of a Change of Control Event, a cash payment in respect
of such Units shall be made to Executive as soon as practicable after the Change
of Control Event and shall equal the applicable number of Units multiplied by
the lesser of (x) $12.00, or (y) the greater of (i) $6.00 or (ii) the tender
offer price per common share of Company Stock in the case of a cash transaction
or the average closing price for the Company (as reported in the Wall Street
Journal) for the five trading days immediately preceding the Change of Control
Event date in the case of a noncash transaction.
3. Forfeitures. If Executive's employment with the Company terminates for
any reason, any Units remaining unvested as of the date of employment
termination shall be forfeited.
4. Adjustment to Common Stock of Company. In the event of any stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change
in capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, the number of Units and/or the payment price for
Units described in Section 2 hereof shall be appropriately adjusted by the
Company (or substituted awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate.
5. Transferability of Units. Neither the Units nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner.
6. Payment of Withholding Tax. If the Company is obligated to withhold an
amount on account of any federal, state or local tax imposed as a result of the
redemption of the Units, including, without limitation, any federal, state or
other income tax, or any F.I.C.A., state disability insurance tax or other
employment tax, then the Company shall deduct such amount from the amount
otherwise payable to Executive upon payment in respect of the Units.
7. Employment Rights. No provision of this Agreement or of the Units
granted hereunder shall (a)confer upon Executive the right to continue in the
employ of the Company, (b)affect the right of the Company to terminate the
employment of Executive, with or without cause, or (c)confer upon Executive any
right to participate in any employee welfare or benefit plan or other program of
the Company. Executive hereby acknowledges and agrees that the Company may
terminate the employment of Executive at any time and for any reason, or for no
reason, unless Executive and the Company are parties to a written employment
agreement that expressly provides otherwise.
8. Governing Law. This Agreement and the Units granted hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware.
IN WITNESS WHEREOF, the Company and Executive have duly executed this
Agreement as of the date just noted above.
HomeBase, Inc.
By___________________________________
Allan P. Sherman
Chief Executive Officer and President
_____________________________________
Scott L. Richards
ANNEX A
DEFINITION OF CHANGE OF CONTROL EVENT
For the purpose of the Plan, a "Change of Control Event" shall mean:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")(a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control Event: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequently
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
when comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (except that this proviso shall
not apply to any individual whose initial assumption of office as a director
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board); or
(c) Consummation of a reorganization, merger or consolidation involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless, immediately
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in section
(c) of this definition shall include, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation and (iii) at least half
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
