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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended SEPTEMBER 30, 1996 or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ______________
Commission file number: 0-18613
TRIMARK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4272695
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2644 30TH STREET
SANTA MONICA, CALIFORNIA 90405
(Address of principal executive offices) (Zip code)
(310) 314-2000
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of October 25, 1996, 4,247,731 shares of Trimark Holdings, Inc. common stock
were outstanding, excluding shares held by Trimark Holdings, Inc. as treasury
stock.
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Exhibit Index: Page 15
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TRIMARK HOLDINGS, INC.
INDEX
Part I. Financial Information Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 1996 3
and June 30, 1996
Consolidated Statements of Operations - Three 4
months ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows - Three 5
months ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of 8-12
Financial Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
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TRIMARK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars in Thousands, Except Share Data)
September 30, June 30,
Assets 1996 1996
------ ------------- ------------
(Unaudited)
Cash and cash equivalents $ 688 $ 344
Accounts receivable, less allowances of
$4,985 and $4,269, respectively 13,624 12,457
Film costs, net (Note 2) 32,213 29,853
Deferred marketing costs 1,269 1,524
Inventories, net 427 624
Property and equipment at cost, less accumulated
depreciation of $1,893 and $1,749, respectively 461 604
Other assets 2,972 2,995
---------- ----------
$ 51,654 $ 48,401
---------- ----------
---------- ----------
Liabilities and Stockholders' Equity
------------------------------------
Debt $ 19,000 $ 15,000
Accounts payable and accrued expenses 2,295 2,191
Minimum guarantees and royalties payable 3,820 4,639
Deferred income 1,909 2,144
Income taxes payable 216 77
---------- ----------
Total liabilities 27,240 24,051
---------- ----------
Commitments and contingencies (Note 4) -- --
---------- ----------
Stockholders' equity:
Common stock, $.001 par value. Authorized
20,000,000 shares; 5,064,581 shares issued
at September 30, 1996 and 5,064,581 shares
issued at June 30, 1996 5 5
Additional paid in capital 15,385 15,385
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding -- --
Retained earnings 12,901 12,683
Less treasury shares, at cost - 816,850 shares
and 789,850 shares (3,877) (3,723)
---------- ----------
Stockholders' equity 24,414 24,350
---------- ----------
$ 51,654 $ 48,401
---------- ----------
---------- ----------
See accompanying notes to consolidated financial statements
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TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Amounts in Thousands, Except Earnings Per Share)
Three Months Ended
September 30,
-------------------------
1996 1995
---------- ----------
(Unaudited)
Net revenues (Note 3) $ 14,215 $ 16,067
Film costs and distribution expenses 10,928 12,624
---------- ----------
Gross profit 3,287 3,443
---------- ----------
Operating expenses:
Selling 1,484 1,443
General and administrative 1,144 1,340
Bad debt 101 312
---------- ----------
2,729 3,095
---------- ----------
Operating earnings 558 348
Other (income) expenses:
Interest expense 213 271
Interest and investment income (12) (22)
Minority interest -- (37)
---------- ----------
201 212
---------- ----------
Earnings before income taxes 357 136
Income taxes 139 54
---------- ----------
Net earnings $ 218 $ 82
---------- ----------
---------- ----------
Net earnings per common share $ 0.05 $ 0.02
---------- ----------
---------- ----------
Average common and common equivalent shares
outstanding used in computation above 4,296 4,440
---------- ----------
---------- ----------
See accompanying notes to consolidated financial statements
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TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Dollars in Thousands)
Three Months Ended
September 30,
------------------------
1996 1995
--------- --------
(Unaudited)
Operating activities:
Net earnings $ 218 $ 82
Adjustments to reconcile net earnings to
net cash used by operating activities:
Film amortization 6,333 7,994
Depreciation and other amortization 144 83
Provision for returns 615 571
Provision for bad debt 101 320
Provision for inventory obsolescence 37 (51)
Minority interest in net earnings -- (37)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,883) 4,057
Additions to film costs (8,693) (16,035)
Decrease in deferred marketing costs 255 258
Decrease in inventories 160 34
Decrease in other assets 23 705
Increase (decrease) in accounts payable and
accrued expenses 104 (66)
(Decrease) increase in minimum guarantees and
royalties payable (819) 1,951
Increase (decrease) in income taxes payable 139 (96)
Decrease in deferred income (235) (314)
---------- ----------
Net cash used by operating activities (3,501) (544)
---------- ----------
Investing activities:
Acquisition of property and equipment (1) (75)
---------- ----------
Net cash used by investing activities (1) (75)
---------- ----------
Financing activities:
Net increase in debt 4,000 --
Exercise of stock options -- 2
Purchase of treasury stock (154) (170)
---------- ----------
Net cash provided (used) by financing activities 3,846 (168)
---------- ----------
Increase (decrease) in cash and cash equivalents 344 (787)
Cash and cash equivalents at beginning of period 344 1,735
---------- ----------
Cash and cash equivalents at end of period $ 688 $ 948
---------- ----------
---------- ----------
See accompanying notes to consolidated financial statements
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TRIMARK HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - THE COMPANY:
The consolidated financial statements of Trimark Holdings, Inc. and subsidiaries
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
financial statements should be read in conjunction with the more detailed
financial statements and related footnotes filed with the Form 10K for the year
ended June 30, 1996. Significant accounting policies used by the Company are
summarized in Note (2) to the June 30, 1996 financial statements.
In the opinion of management, all adjustments required for a fair presentation
of the financial position as of September 30, 1996 and the results of operations
and cash flows for the periods ended September 30, 1996 and September 30, 1995
have been made and all adjustments were of a normal and recurring nature.
Operating results for the quarter are not necessarily indicative of the
operating results for a full year.
NOTE 2 - FILM COSTS:
Film costs, net of amortization, consist of the following:
September 30, June 30,
1996 1996
------------ ------------
(in thousands)
Released $ 14,814 $ 17,766
Completed not released 7,078 3,065
In process and development 10,321 9,022
------------ ------------
$ 32,213 $ 29,853
------------ ------------
------------ ------------
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NOTE 3 - NET REVENUES:
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
---------- ----------
(IN THOUSANDS)
Domestic:
Home video distribution $ 10,371 $ 8,216
Theatrical distribution 16 --
Television distribution 1,373 985
Foreign:
All media 1,549 6,856
Interactive:
All media 906 10
------------ ------------
$ 14,215 $ 16,067
------------ ------------
------------ ------------
NOTE 4 - COMMITMENTS & CONTINGENCIES:
The Company has entered into certain agreements which provide for royalty
advances and promotional and advertising commitments totaling $34.3 million. If
the conditions to these agreements are not met by the licensors, the Company may
withdraw from the arrangements. These commitments extend to May 1997.
NOTE 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the three month period for:
September 30,
1996 1995
------------ ------------
(in thousands)
Interest $ 151 $ 333
Income taxes 125 286
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES: Net revenues for the quarter ended September 30, 1996 decreased
$1.9 million or 11.5% compared with the quarter ended September 30, 1995. The
decrease for the quarter was primarily due to decreases in net revenues from
foreign distribution of $5.3 million partially offset by increases of $2.2
million from domestic home video. In the first three months of fiscal 1997, one
(1) motion picture, Leprechaun 4, was initially released into the foreign
market compared with three (3) motion pictures released in the same time period
in fiscal 1996.
Primarily as a result of continuing competition in the domestic home video
market, the Company is focusing its resources on distributing an increased
number of films with theatrical potential (both mainstream and specialized) and
decreasing the releases of straight-to-video films. The initial slate of
theatrical films are scheduled to begin release in January 1997.
GROSS PROFITS: The Company's gross profits for the quarter ended September 30,
1996 decreased $156,000 or 4.5% compared with the quarter ended September 30,
1995, primarily due to the decrease in net revenues. Gross profits as a
percentage of net revenues, however, increased to 23% from 21% for the quarter
ended September 30, 1996 compared with the prior year quarter. The Company
anticipates that the domestic home video market will continue to be extremely
competitive.
SELLING EXPENSES: The Company's selling expenses for the quarter ended
September 30, 1996 increased $41,000 or 3% compared with the quarter ended
September 30, 1995. The marginal increase reflects the Company's efforts to
control overhead costs. This expense category, however, is expected to increase
in future periods as the Company initiates marketing and distribution of its
upcoming domestic theatrical slate. See "Liquidity and Capital Resources" for
further discussion of the Company's upcoming theatrical releases. Selling
expenses as a percentage of net revenues for the quarters ended September 30,
1996 and 1995 were 10% and 9%, respectively.
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ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for
the quarter ended September 30, 1996 decreased $196,000 or 15% compared with the
quarter ended September 30, 1995. The decrease was primarily due to layoffs
made in January 1996.
BAD DEBT EXPENSE: Bad debt expense decreased $211,000 or 68% for the quarter
ended September 30, 1996, compared with the quarter ended September 30, 1995.
The decrease was primarily due to additional reserves recorded for certain
domestic video receivables in the three months ended September 30, 1995 without
any similar reserves taken in the three months ended September 30, 1996.
INTEREST EXPENSE: Interest expense decreased $58,000 or 21% for the quarter
ended September 30, 1996 compared with the quarter ended September 30, 1995.
The decrease in interest expense was due to lower levels of borrowing under the
credit facility for purposes of funding the costs associated with acquiring and
distributing motion pictures. As of September 30, 1996, there was $19 million
outstanding under the bank facility. See "Liquidity and Capital Resources."
INTEREST AND INVESTMENT INCOME: Interest and investment income decreased
$10,000 or 45.5% for the quarter ended September 30, 1996 compared with the
quarter ended September 30, 1995. The decrease is primarily due to interest
income from federal tax returns received in the period ended September 30, 1995
without any comparable interest income in the period ended September 30, 1996.
NET EARNINGS: Net earnings increased $136,000 or 166% for the quarter ended
September 30, 1996 compared with the quarter ended September 30, 1995. The
increase for the quarter was primarily due to higher gross profit margins and
decreased general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended September 30, 1996, the Company generated negative
cash flow from operations primarily as a
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ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
result of increased film inventory expenditures related to the Company's build
up of its theatrical film slate and increased accounts receivable due to the
timing of domestic video releases. In addition, the Company increased its bank
borrowings by $4.0 million at September 30, 1996. The Company's cash
requirements vary with the size and timing of delivery and minimum guarantee
payments along with the timing of its home video, theatrical, television,
international and interactive releases. In the three months ended September 30,
1996 the principal sources of funds have been provided by cash flow from
operations and availability of the Company's credit line.
The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., have a $25 million revolving credit facility with Bank
of America NT & SA and Westdeustche Landesbank which expires November 1, 1996.
Under the credit agreement, the Company may borrow for various corporate
purposes provided that the aggregate borrowings do not exceed the Borrowing Base
which is derived from specified percentages of approved accounts receivable and
film library. The credit agreement is guaranteed by the Company and secured by
substantially all of the assets of the Company and its significant subsidiaries.
Loans outstanding under the credit facility bear interest at the rate of .75%
above Bank of America's prime rate or 2.25% above Bank of America's offshore
dollar interbank rate for the loan term specified. An unused commitment fee is
payable on the average unused availability under the credit facility, at the
rate of .3125% per annum. As of September 30, 1996 there was $19 million
outstanding under the bank facility. The Company has entered into a commitment
with The Chase Manhattan Bank to agent and arrange a $75 million syndicated
revolving credit agreement. The Company believes the $75 million credit
facility will provide sources of cash sufficient to maintain and expand its
level of operations in accordance with the anticipated release schedule, as
described below, and will be closed before January 1997. Consummation of the
facility is subject to customary closing conditions, including satisfactory
syndication arrangements. The Company believes the expiration date of its
current credit facility will be extended until the new facility is in place.
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ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1997, the Company plans to distribute approximately six (6) films
in the domestic theatrical market, to release approximately 30 motion pictures
into the domestic home video market, and to expand distribution in the sell-
through market.
The Company has entered into certain contingent contractual obligations which
provide for guaranteed royalty advances and print and advertising commitments of
approximately $34.3 million at September 30, 1996.
Technicolor Videocassette, Inc. currently serves as the Company's video cassette
duplicator and fulfillment contractor. Technicolor Videocassette, Inc. has a
general lien on all of the Company's materials and products in its possession.
As of September 30, 1996, the Company had expended a total of $5.5 million in
Trimark Interactive, its 90% owned subsidiary.
Management of the Company is conducting an ongoing strategic review of Trimark
Interactive and has retained the financial advisory firm of Cruttenden Roth,
Inc. to assist it in such review. The strategic review includes discussions
with third parties regarding the merger or sale of all or part of Trimark
Interactive. There can be no assurance that any such transaction will occur or
as to the impact of such transaction on the Company's business
On December 6, 1994, the Company announced a stock repurchase program pursuant
to which it could buy up to $1,250,000 of its outstanding Common Stock in the
open market. During the three months ended September 30, 1996, the Company
purchased 27,000 shares for approximately $154,000 under the repurchase program.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
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ITEM 2: (CONTINUED)
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievement of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: General economic and business
conditions, which will, among other things, impact demand for the Company's
products; changes in public tastes, industry trends and demographic changes,
which may influence the distribution and exhibition of films in certain areas;
competition, including competition from major motion picture studios, which may
affect the Company's ability to generate revenues; reliance on management and
key personnel; consolidation in the retail video industry; new methods of
distributing motion pictures; and other factors referenced in this Form 10-Q and
the Form 10K filed for the year ended June 30, 1996.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No Description
- ---------- ----------------------------------------------------------------
10.13 1990 Stock Option and Stock Appreciation Rights Plan of the
Registrant, as amended to date.
10.32 Directors' Stock Option Plan of the Registrant as amended to date.
10.62 Non-Qualified Stock Option Agreement dated July 2, 1996, by and
between the Registrant and Timothy Swain.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
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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.
TRIMARK HOLDINGS, INC.
By: /s/ James E. Keegan
----------------------------------
James E. Keegan
Senior Vice President - Finance
and Chief Financial Officer
(Principal Financial Officer
and authorized to sign on
behalf of the Registrant)
Date: November 1, 1996
----------------
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INDEX TO EXHIBITS
Exhibit No Description Method of Filing
- ---------- --------------------------------- ----------------
10.13 1990 Stock Option and Stock filed herewith
Appreciation Rights Plan of the electronically
Registrant, as amended to date.
10.32 Directors' Stock Option Plan of filed herewith
the Registrant as amended to date. electronically
10.62 Non-Qualified Stock Option filed herewith
Agreement dated July 2, 1996, by electronically
and between the Registrant and
Timothy Swain.
27 Financial Data Schedule. filed herewith
electronically
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Exhibit 10.13
16
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1990 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
OF
TRIMARK HOLDINGS, INC., AS AMENDED
1. PURPOSE.
The purpose of this 1990 Stock Option and Stock Appreciation Rights Plan
(the "Plan") of Trimark Holdings, Inc., a Delaware corporation (the "Company"),
is to secure for the Company and its stockholders the benefits arising from
stock ownership and participation in stock appreciation by selected employees of
the Company or its subsidiaries, Directors or consultants ("Participants") as a
committee of the Board of Directors constituted for the purpose, may from time
to time determine. This Plan will provide a means whereby (i) such employees
may purchase shares of the Common Stock of the Company pursuant to options that
will qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) such employees, Directors
and consultants may purchase shares of the Common Stock of the Company pursuant
to "nonqualified stock options" and (iii) such employees, Directors and
consultants may acquire the right to participate in the appreciation of the
Common Stock of the Company pursuant to "stock appreciation rights." Incentive
stock options and nonqualified stock options are sometimes referred to
collectively as "options."
2. ADMINISTRATION.
2.1. This Plan shall be administrated by a committee of the Board of
Directors consisting of two or more Directors of the Company (the "Committee")
who are "Non-Employee Directors" as that term is defined in Rule 16b-3(b)(3) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In the event that two or more members of the
Board are not Non-Employee Directors, the Committee shall be comprised of at
least two Directors, and in such case, any grants or awards hereunder to a
Participant subject to Section 16 of the Exchange Act shall also be approved by
the Board of Directors of the Company. If two or more members of the Board of
Directors of
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the Company are "Outside Directors" as defined herein, the Committee shall be
comprised of at least two Board members, all of whom are Outside Directors and
Non-Employee Directors. "Outside Director" shall mean any Director other than a
Director who is (i) a current employee of the Company or any Parent or
Subsidiary of the Company, (ii) a former employee of the Company or any Parent
or Subsidiary of the Company who is receiving compensation for prior services
(other than benefits under a tax-qualified pension plan), (iii) a current or
former officer of the Company or any Parent or Subsidiary of the Company or (iv)
currently receiving compensation, directly or indirectly, for personal services
in any capacity, other than as a director, from the Company or any Parent or
Subsidiary of the Company; provided, however, that at such time as the term
"Outside Director," as is used in Section 162(m) of the Code is defined under
regulations promulgated under such Code Section, "Outside Director" shall have
the meaning set forth in such regulations, as amended from time to time and as
interpreted by the Internal Revenue Service. "Parent" shall mean a parent
corporation, whether now or hereafter existing, as defined in Sections 425(e)
and (g) of the Code. "Subsidiary" shall mean a subsidiary corporation, whether
now or hereafter existing, as defined in Sections 425(e) and (g) of the Code.
Any action of the Committee with respect to administration of this Plan shall be
taken by a majority vote or written consent of its members.
2.2. Subject to the provisions of this Plan, the Committee shall have
authority (i) to construe and interpret this Plan, (ii) to define the terms used
therein, (iii) to prescribe, amend and rescind rules and regulations relating to
this Plan, (iv) to determine the individuals to whom and the time or times at
which options or stock appreciation rights shall be granted, whether any options
granted will be incentive stock options or nonqualified stock options, the
number of shares to be subject to each option or stock appreciation right, the
exercise price of an option or the Initial Value of a stock appreciation right,
(subject to the limitations set forth in Section 6 hereof) the number of
installments, if any, in which each option or stock appreciation right may be
exercised, and the duration of each option or stock appreciation right, (v) to
approve and determine the duration of leaves of absence which may be granted to
Participants without constituting a termination of their employment for the
purposes of this Plan, and (vi) to make all
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other determinations necessary or advisable for the administration of this Plan.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all Participants in this Plan and their legal representatives
and beneficiaries.
3. SHARES SUBJECT TO THIS PLAN.
Subject to adjustment as provided in Paragraph 15 hereof, the shares to be
issued under this Plan shall consist of the Company's authorized but unissued
Common Stock, and the aggregate amount of such stock which may be issued upon
exercise of all options under the Plan shall not exceed 820,000 shares. If any
options granted under this Plan shall expire or terminate for any reason,
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for options to be granted under this Plan. Subject to
adjustment as provided in Paragraph 15 hereof, the aggregate number of stock
appreciation rights that may be granted under this Plan shall not exceed 820,000
with a corresponding reduction for any options (other than Related Options as
defined in Paragraph 7.4 hereof) outstanding under this Plan. If any stock
appreciation rights granted under this Plan should expire or terminate for any
reason without having been exercised in full, the unexercised stock appreciation
rights shall again be available to be granted under this Plan. Notwithstanding
the foregoing, commencing July 1, 1994, during any fiscal year of the Company,
no Participant shall be granted options and stock appreciation rights that are
issuable for more than 200,000 shares of Common Stock, subject to adjustment as
provided in Paragraph 15 hereof.
4. ELIGIBILITY AND PARTICIPATION.
4.1. All regular salaried employees of the Company or any Subsidiary shall
be eligible to receive incentive stock options, nonqualified stock options and
stock appreciation rights. Directors of the Company or any Subsidiary are not
eligible to receive incentive stock options, but are eligible to receive
nonqualified stock options and stock appreciation rights.
4.2. No incentive stock options may be granted to any employee who, at the
time the incentive stock option is granted, owns shares possessing more than ten
percent of the total
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combined voting power of all classes of stock of the Company (or of its
Subsidiaries) unless the exercise price of such incentive stock option is at
least one hundred ten percent of the fair market value of the stock subject to
the incentive stock option and such incentive stock option by its terms is not
exercisable after the expiration of five years from the date such incentive
stock option is granted, determining fair market value as of the date each
respective option is granted.
4.3. The aggregate fair market value of the Common Stock for which
incentive stock options granted to any one employee under this Plan or any other
incentive stock option plan of the Company may by their terms first become
exercisable during any calendar year shall not exceed $100,000, determining fair
market value as of the date each respective option is granted.
4.4. All options and stock appreciation rights granted under this Plan
shall be granted within ten years from May 22, 1990.
5. DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS.
Each option and stock appreciation right and all rights associated
therewith shall expire on such date as the Board of Directors or the Committee
may determine, but in no event later than ten years from the date on which the
option or stock appreciation right is granted, and shall be subject to earlier
termination as provided herein.
6. PRICE AND EXERCISE OF OPTIONS.
6.1. The exercise price of the Common Stock covered by each option shall
be determined by the Committee, but in the case of an incentive stock option
shall not be less than one hundred percent of the fair market value of such
Common Stock on the date the incentive stock option is granted, provided,
however, that if the optionee owns at least 10% of the then outstanding shares
of the Common Stock, then the exercise price shall be at least one hundred ten
percent (110%) of the fair market value per share of the Common Stock on the
date such option is granted. The purchase price of the Common Stock upon
exercise of an option shall be paid in full at the time of exercise (i) in cash
or by certified or cashier's check payable to the order of the Company,
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(ii) by cancellation of indebtedness owed by the Company to the Participant,
(iii) by delivery of shares of Common Stock of the Company already owned by, and
in the possession of the Participant, (iv) if authorized by the Committee or if
specified in the option being exercised, by a promissory note made by the
Participant in favor of the Company, subject to terms and conditions determined
by the Committee, secured by the Common Stock issuable upon exercise, and in
compliance with applicable law (including, without limitation, state corporate
and federal margin requirements), (v) by any combination thereof, or (vi) in
such other manner as the Committee may specify in order to facilitate the
exercise of options by the holders thereof. Shares of Common Stock used to
satisfy the exercise price of an option shall be valued at their fair market
value determined in accordance with Paragraph 8 hereof.
6.2. No option granted under this Plan shall be exercisable if such
exercise would involve a violation of any applicable law or regulation
(including without limitation, federal and state securities laws and
regulations). Each option shall be exercisable in such installments during the
period prior to its expiration date as the Committee shall determine; provided,
however, that unless otherwise determined by the Committee, if the Participant
shall not in any given installment period purchase all of the shares which the
Participant is entitled to purchase in such installment period, then such
Participant's right to purchase any shares not purchased in such installment
period shall continue until the expiration date or sooner termination of the
Participant's option. No option may be exercised for a fraction of a share and
no partial exercise of any option may be for less than ten shares.
7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
All stock appreciation rights shall be evidenced by a Certificate of Grant
(sometimes referred to herein as the "Certificate") in such form as the
Committee shall from time to time approve. A grant of stock appreciation rights
shall be subject to the following terms and conditions:
7.1. Each stock appreciation right shall entitle a Participant to an
amount (the "Appreciation") equal to the excess of the Exercise Value of one
share of Common Stock over the
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Initial Value of one share of Common Stock. The Initial Value of each stock
appreciation right shall be specified in the Certificate of Grant. The Exercise
Value of each stock appreciation right shall be the fair market value of a share
of Common Stock on the date the stock appreciation right is exercised,
determined as set forth in Paragraph 8. The total Appreciation available to a
Participant from the exercise of any stock appreciation right shall be equal to
the number of stock appreciation rights exercised, multiplied by the amount of
Appreciation per stock appreciation right. Participants acknowledge that a
stock appreciation right is a method of incentive compensation for key
employees, Directors and consultants and does not constitute an offering or sale
of Common Stock to anyone.
7.2. The Appreciation available to a Participant upon exercise of the
Participant's stock appreciation rights shall be paid to the Participant in cash
or Common Stock as determined by the Committee. If payment is made in Common
Stock of the Company, then the fair market value of the Common Stock for
purposes of calculating the number of shares of Common Stock that shall be
issued to pay the Appreciation of a stock appreciation right shall be based upon
the fair market value of the Common Stock as determined in Paragraph 8 on the
date of exercise of the stock appreciation right. If the total Appreciation is
paid in Common Stock, the total Appreciation will be reduced to the largest
amount divisible by the fair market value of one share of Common Stock.
Appreciation shall be paid as compensation and without interest by the Company
as specified in the Certificate of Grant.
7.3. A maximum of 820,000 stock appreciation rights may be granted,
subject to a reduction for any options (other than Related Options as defined in
Paragraph 7.4) outstanding under this Plan. Such stock appreciation rights
shall have an Initial Value of no less than the fair market value of a share of
Common Stock as determined in Paragraph 8 as of the date of grant of the stock
appreciation right.
7.4. A stock appreciation right (a "Related Right") may be granted under
this Plan pursuant to a Certificate of Grant providing that the exercise of the
stock appreciation right affects the exercise of an option granted pursuant to
this Plan
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(the "Related Option"). Unless the Certificate of Grant pursuant to which the
Related Right is granted provides otherwise, the Related Right may be exercised
only to the extent to which the Related Option is exercisable. Upon the
exercise or termination of the Related Right, the Related Option shall cease to
be exercisable and shall be canceled to the extent of the number of shares with
respect to which the Related Right was exercised or terminated. Upon the
exercise or termination of the Related Option, the Related Right shall cease to
be exercisable and shall be canceled to the extent of the number of shares to
which the Related Option was exercised or terminated. In addition to the
foregoing, if the Related Option is an "incentive stock option" granted pursuant
to this Plan, then the Related Right must satisfy the following conditions.
(i) The Related Right must be granted only at the time of grant of
the Related Option;
(ii) The Related Right must expire no later than the expiration of the
Related Option;
(iii)The Related Right must be granted for an amount of Appreciation
equal to or less than one hundred percent of the difference between the exercise
price of the Related Option and the market price of the Common Stock subject to
the Related Option at the time the Related Right is exercised;
(iv) The Related Right may be transferable only when the Related
Option is transferable, and only under the same conditions;
(v) The Related Right may be exercised only when the Related Option
is eligible to be exercised; and
(vi) The Related Right may be exercised only when the market price of
the Common Stock subject to the Related Option exceeds the exercise
price of the Related Option.
7.5. No stock appreciation right granted under this Plan shall be
exercisable if such exercise would involve a violation of any applicable law or
regulation (including without limitation, federal and state securities laws and
regulations). Each stock appreciation right shall be exercisable in such
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installments during the period prior to its expiration date as the Committee
shall determine; provided, however, that, unless otherwise determined by the
Committee, if the Participant shall not in any given installment period exercise
all of the stock appreciation rights which the Participant is entitled to
exercise in such installment period, then the Participant's right to exercise
any stock appreciation rights not exercised in such installment period shall
continue until the expiration date or sooner termination of the Participant's
stock appreciation right.
8. FAIR MARKET VALUE OF COMMON STOCK.
The fair market value of a share of Common Stock of the Company for
purposes of this Plan shall be the closing price or last trade price of a share
as supplied by the National Association of Securities Dealers through NASDAQ (or
its successor in function) or, if such shares are then traded on a principal
stock exchange, by reference to the closing price of a share on the principal
stock exchange on which such shares are traded, in each case as reported by The
Wall Street Journal for the business day immediately preceding the date on which
the fair market value is determined (or, if for any reason no such price is
available, in such other manner as the Committee may deem appropriate to reflect
the then fair market value thereof).
9. WITHHOLDING TAX.
Upon (i) the disposition by an employee of shares of Common Stock acquired
pursuant to the exercise of an incentive stock option granted pursuant to this
Plan within two years of the granting of the incentive stock option or within
one year after exercise of the incentive stock option, (ii) the exercise of a
nonqualified stock option, or (iii) the exercise of a stock appreciation right,
the Company shall have the right to require such employee, and such employee by
accepting the options or stock appreciation rights granted under this Plan
agrees, to pay the Company the amount of any taxes which the Company may be
required to withhold with respect thereto and the Company shall not be obligated
to issue certificates representing the shares of Common Stock to be acquired
through the exercise of such options if the optionee fails to provide the
Company with adequate assurance that such optionee will pay such amounts to the
Company as hereinabove required. In the event of (i) or (ii), or in the
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event of (iii) if the Appreciation is paid with Common Stock, then such employee
or other person may elect to pay the amount of any taxes which the Company may
be required to withhold by delivering to the Company shares of the Company's
Common Stock having a fair market value determined in accordance with Paragraph
8 hereof equal to the withholding tax obligation determined by the Company.
Such shares so delivered may be either shares withheld by the Company upon the
exercise of the option or stock appreciation right or other shares.
10. NONTRANSFERABILITY.
Except as otherwise provided by the Committee at the time of grant or
otherwise, an option or stock appreciation right granted under this Plan shall,
by its terms, be nontransferable by the holder either voluntarily or by
operation of law, other than by will or the laws of descent and distribution,
and shall be exercisable during the holder's lifetime only by the holder,
regardless of any community property interest therein of the spouse of the
holder, or such spouse's successors in interest. If the spouse of the holder
shall have acquired a community property interest in an option or stock
appreciation right, the holder, or the holder's permitted successors in
interest, may exercise the option or stock appreciation right on behalf of the
spouse of the holder or such spouse's successors in interest.
11. HOLDING OF STOCK AFTER EXERCISE OF OPTION.
At the discretion of the Committee, any option or stock appreciation right
may provide that the Participant, by accepting such option or stock appreciation
right, represents and agrees, for the Participant and the Participant's
permitted transferees that none of the shares acquired upon exercise of an
option or stock appreciation right will be acquired with a view to any sale,
transfer or distribution of said shares in violation of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, and the person entitled to exercise the same shall
furnish evidence satisfactory to the Company (including a written and signed
representation) to that effect in form and substance satisfactory to the
Company, including an indemnification of the Company in the event of any
violation of the Securities Act by such person.
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12. TERMINATION OF EMPLOYMENT.
If a holder of an incentive stock option ceases to be employed by the
Company or a Subsidiary for any reason other than the holder's death or
permanent disability (within the meaning of Section 105(d)(4) of the Code), the
holder's incentive stock options shall immediately become void and of no further
force or effect; provided, however, that if such cessation of employment shall
be due to the holder's voluntary resignation with the consent of the Board of
Directors of the Company or the Committee, expressed in the form of a written
resolution, or shall be due to the holder's retirement under the provisions of
any pension or retirement plan of the Company or such Subsidiary then in effect,
then within three months after the date the holder ceases to be an employee of
the Company or such Subsidiary such incentive stock option may be exercised to
the extent exercisable on the date of such cessation of employment. A leave of
absence approved in writing by the Board of Directors or the Committee shall not
be deemed a termination of employment for the purposes of this Paragraph 12, but
no incentive stock option may be exercised during any such leave of absence,
except during the first three months thereof. Termination of employment or
other relationship with the Company that qualifies the optionee as a
Participant, by the holder of a nonqualified stock option or stock appreciation
right, will have the effect specified in the individual option agreement or
Certificate of Grant as determined by the Committee.
13. DEATH OR PERMANENT DISABILITY OF OPTION HOLDER.
If the holder of an incentive stock option dies or becomes permanently
disabled while the option holder is employed by the Company or a
Subsidiary, the holder's option shall expire one year after the date of
such death or permanent disability unless by its terms it expires sooner.
During such period after death, such incentive stock options may, to the
extent that they remained unexercised (but exercisable by the holder
according to such option's terms) on the date of such death, be exercised
by the person or persons to whom the option holder's rights under the
incentive stock option shall pass by the option holder's will or by the
laws of descent and distribution. The death or permanent disability of a
holder of a nonqualified stock
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option or stock appreciation right will have the effect specified in the
individual option agreement or Certificate of Grant as determined by the
Committee.
14. PRIVILEGES OF STOCK OWNERSHIP.
No person entitled to exercise any option or stock appreciation right
granted under this Plan shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of Common Stock
issuable upon exercise of such option or stock appreciation right until
certificates representing such shares shall have been issued and delivered.
No shares shall be issued and delivered upon exercise of any option or
stock appreciation right unless and until, in the opinion of counsel for
the Company, there shall have been full compliance with any applicable
registration requirements of the Securities Act, any applicable listing
requirements of any national securities exchange or automated quotation
system on which the Common Stock is then listed or quoted, and any other
requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
15. ADJUSTMENTS.
15.1. If the outstanding shares of the Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities of the Company through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of stock appreciation
rights and shares as to which options may be granted under this Plan. A
corresponding adjustment changing the number or kind of stock appreciation
rights and shares allocated to unexercised options or portions thereof, which
shall have been granted prior to any such change, shall likewise be made.
Any such adjustment in the outstanding options shall be made without change
to the aggregate purchase price applicable to the unexercised portion of the
option but with a corresponding adjustment in the purchase price for each
share covered by the option. Any such adjustment in the outstanding stock
appreciation rights shall be made without change in the aggregate Initial
Value applicable to the
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unexercised portion of the stock appreciation rights but with a corresponding
adjustment in the Initial Value for each share of Common Stock covered by the
stock appreciation right.
15.2. Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon the sale of substantially all the property or more than eighty percent
of the then outstanding stock of the Company to another corporation, this Plan
shall terminate, and any stock appreciation rights and options theretofore
granted hereunder shall terminate.
15.3. Notwithstanding the foregoing, the Board of Directors or the
Committee may provide in writing in connection with such transaction (or in the
individual option agreement or Certificate of Grant) for any or all of the
following alternatives (separately or in combinations): (i) for the stock
appreciation rights and options theretofore granted to become immediately
exercisable; (ii) for the assumption by the successor corporation of the stock
appreciation rights and options theretofore granted or the substitution by such
corporation for such stock appreciation rights and options of new stock
appreciation rights and options covering the stock of the successor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; or (iii) for the continuance of this Plan by such
successor corporation in which event the Plan and the stock appreciation rights
and options theretofore granted shall continue in the manner and under the terms
so provided.
15.4. Adjustments under this Paragraph 15 shall be made by the Board of
Directors or the Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive. No
fractional shares of stock shall be issued under this Plan on any such
adjustment.
16. AMENDMENT AND TERMINATION OF PLAN.
16.1. The Board of Directors or the Committee may at any time suspend
or terminate this Plan. The Board of Directors or the Committee may also at any
time amend or revise the terms of this Plan, provided that no such amendment or
revision shall,
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unless appropriate stockholder approval of such amendment or revision is
obtained, (i) increase the maximum number of shares which may be acquired
pursuant to options, and the maximum number of stock appreciation rights,
granted under this Plan, except as permitted under the provisions of Paragraph
15 hereof, (ii) change the minimum purchase price set forth in Paragraph 6
hereof or the Initial Value set forth in Paragraph 7 hereof, (iii) increase the
maximum term of options or stock appreciation rights provided for in Paragraph 5
hereof, or (iv) change the designation of persons eligible to receive options or
stock appreciation rights as provided in Paragraph 4 hereof.
16.2. No amendment, suspension or termination of this Plan shall, without
the consent of the holder, alter or impair any rights or obligations under any
option or stock appreciation right theretofore granted under this Plan.
17. EFFECTIVE DATE OF PLAN.
No option or stock appreciation right may be granted under this Plan unless
and until (i) the options and underlying shares and stock appreciation rights
have been registered under the Securities Act of 1933 and qualified with the
appropriate state regulatory agencies, or (ii) the Company has been advised by
counsel that such options, shares and stock appreciation rights are exempt from
such registration and/or qualification. This Plan shall be submitted for
approval by the holders of the outstanding voting stock of the Company within
twelve months from the date this Plan is adopted by the Board of Directors.
This Plan shall be deemed approved by the holders of the outstanding voting
stock of the Company by (i) the affirmative vote of the holders of a majority of
the voting shares of the Company represented and voting at a duly held meeting
at which a quorum is present or (ii) the written consent of the holders of a
majority of the outstanding voting shares of the Company. Any options or stock
appreciation rights granted under this Plan prior to obtaining such stockholder
approval shall be granted under the conditions that the options or stock
appreciation rights so granted (i) shall not be exercisable prior to such
approval, and (ii) shall become null and void if such stockholder approval is
not obtained.
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Exhibit 10.32
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TRIMARK HOLDINGS, INC. DIRECTORS' STOCK OPTION PLAN
I. PURPOSE.
The purposes of the Plan are to enable the Company to attract and retain
the services of non-employee, non-consultant members of the Board and to provide
them with increased motivation and incentive to exert their best efforts on
behalf of the Company by enlarging their personal stake in the Company.
II. DEFINITIONS.
A. As used in the Plan, the following definitions apply to the terms
indicated below:
"Board" means the Board of Directors of the Company or any committee
thereof authorized to exercise the powers of the Board of Directors.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Company" means Trimark Holdings, Inc. a Delaware corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fair Market Value" of a Share on a given day means, if Shares are
listed on an established stock exchange or exchanges or quoted on the NASDAQ
National Market System, the highest closing or last sales price of a Share as
reported on such stock exchange or exchanges or system; or if not so reported,
the average of the bid and asked prices, as reported on the NASDAQ. If the
price of a Share shall not be so quoted, the Fair Market Value shall be
determined by taking into account all relevant facts and circumstances.
"Option" means a non-qualified option to purchase Shares under the
terms and conditions of the Plan as evidenced by an option certificate in such
form not inconsistent with the Plan.
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"Participant" means a director, eligible to participate in the Plan
under Section 4 hereof, to whom an Option is granted under the Plan.
"Plan" means Trimark Holdings, Inc. Directors' Stock Option Plan,
including any amendments to the Plan.
"Shares" means shares of the Company's Common Stock, par value $0.001
per share, now or hereafter owned by the Company as treasury stock or authorized
but unissued shares of the Company's Common Stock, subject to adjustment as
provided in the Plan.
As used herein, the masculine includes the feminine, the plural
includes the singular, and the singular includes the plural.
III. PLAN ADOPTION AND TERM.
A. The Plan shall become effective following its adoption by the Board,
but no Option granted under the Plan shall be exercisable unless and until the
Plan has been approved by the shareholders of the Company.
B. Subject to the provisions hereinafter contained relating to amendment
or discontinuance, the Plan shall continue in effect through and including
January 14, 2003. No Option may be granted hereunder after such date.
IV. ELIGIBILITY; AUTOMATIC GRANT.
Each director of the Company, who is not an employee or consultant of the
Company or any of its subsidiaries, in office as of January 14, 1994 (the
"Effective Date") shall be eligible to participate in the Plan and shall
automatically receive, on the Effective Date, a non-qualified Option to purchase
2,000 Shares. In addition, each person who is a director of the Company on an
annual anniversary date of the Effective Date (including and terminating with
the anniversary date in the year 2003) and who is not an employee or consultant
of the Company or any of its subsidiaries, shall be eligible to participate in
the Plan and shall automatically receive, on such anniversary date, a non-
qualified Option to purchase 2,000 Shares. The price per share at which Shares
may be purchased pursuant to any Option
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granted under the Plan shall be the Fair Market Value of a Share on the date the
Option is granted (the "Date of Grant"). All Options granted under the Plan
shall be evidenced by an option certificate in such form not inconsistent with
the Plan.
V. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 10 hereof, Options may be
issued pursuant to the Plan with respect to a number of Shares that, in the
aggregate, does not exceed 40,000 Shares. If, prior to the termination of the
Plan, an Option shall expire or terminate for any reason without having been
exercised in full, the unpurchased Shares subject thereto shall again be
available for the purposes of the Plan.
VI. DURATION OF OPTIONS.
No Option granted hereunder shall be exercisable after the expiration
of ten years from the Date of Grant. All Options shall be subject to earlier
termination as provided elsewhere in the Plan.
VII. CONDITIONS RELATING TO EXERCISE OF OPTIONS.
A. Options granted to Participants shall become exercisable in full on the
Date of Grant. Once exercisable, an Option may be exercised at any time prior
to its expiration, cancellation or termination as provided in the Plan. Partial
exercise is permitted from time to time provided that no partial exercise of an
Option shall be for a number of Shares having a purchase price of less than
$1,000 or for a fractional number of Shares.
B. No Option shall be transferable by a Participant otherwise than by will
or the laws of descent and distribution and Options shall be exercisable during
the lifetime of a Participant only by such Participant.
C. An Option shall be exercised by the delivery to the Company of a
written notice signed by the Participant, which specifies the number of Shares
with respect to which the Option is being exercised and the date of the proposed
exercise. Such notice shall be delivered to the Company's principal office, to
the attention of its Secretary, no less than three business days in advance of
the date of the proposed exercise and shall be accompanied by the applicable
option certificate evidencing the
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Option. A Participant may withdraw such notice at any time prior to the close
of business on the proposed date of exercise, in which case the option
certificate evidencing the Option shall be returned to him or her.
D. Payment for Shares purchased upon exercise of an Option shall be made
at the time of exercise either in cash, by certified check or bank cashier's
check or, at the option of the Board, in Shares owned by the Participant and
valued at their Fair Market Value on the date of exercise, or partly in Shares
with the balance in cash or by certified check or bank cashier's check. Any
payment in Shares shall be effected by their delivery to the Secretary of the
Company, endorsed in blank or accompanied by stock powers executed in blank.
E. Certificates for Shares purchased upon exercise of Options shall be
issued and delivered as soon as practicable following the date the Option is
exercised. Certificates for Shares purchased upon exercise of Options shall be
issued in the name of the Participant.
F. Notwithstanding any other provision in the Plan, no Option may be
exercised unless and until the Shares to be issued upon the exercise thereof
have been registered under the Securities Act of 1933 and applicable state
securities laws, or are, in the opinion of counsel to the Company, exempt from
such registration. The Company shall not be under any obligation to register
under applicable federal or state securities laws any Shares to be issued upon
the exercise of an Option granted hereunder, or to comply with an appropriate
exemption from registration under such laws in order to permit the exercise of
an Option and the issuance and sale of the Shares subject to such Option. If
the Company chooses to comply with such an exemption from registration, the
Shares issued under the Plan may bear an appropriate restrictive legend
restricting the transfer or pledge of the Shares represented thereby, and the
Company may also give appropriate stop-transfer instructions to the transfer
agent to the Company.
G. Any person exercising an Option or transferring or receiving Shares
shall comply with all regulations and requirements of any governmental authority
having jurisdiction over the issuance, transfer, or sale of capital stock of the
Company, and as a condition to receiving any Shares, shall
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execute all such instruments as the Company in its sole discretion may deem
necessary or advisable.
H. In the event that a Participant shall cease to be a director by reason
of such Participant's retirement, any outstanding Option held by such
Participant shall remain so exercisable but only for a period of three months
after commencement of such retirement, at the end of which time it shall
terminate (unless such Option expires earlier by its terms).
I. In the event that a Participant shall cease to be a director by reason
of such Participant's disability within the meaning of Section 22(e)(3) of the
Code, any outstanding Option held by such Participant shall remain so
exercisable but only for a period of one year after such date, at the end of
which time it shall terminate (unless such Option expires earlier by its terms).
J. In the event that a Participant shall cease to be a director by reason
of death (including death during an approved leave of absence or following a
Participant's retirement or disability), any Option then held by him or her
which shall not have lapsed or terminated prior to his or her death shall be or
immediately become fully exercisable by the executors, administrators, legatees,
or distributees of his or her estate, as may be appropriate, as to the total
number of Shares subject thereto and shall remain so exercisable but only for a
period of one year after death, at the end of which time it shall terminate
(unless such Option expires earlier by its terms).
K. In the event that a Participant shall cease to be a director otherwise
than as described in paragraphs (H), (I) and (J), any outstanding Option held by
such Participant shall terminate.
VIII. NO ELECTION RIGHTS.
Nothing contained in the Plan or any Option shall confer upon any
Participant any right with respect to the continuation of his or her tenure as a
director of the Company or interfere in any way with the right of the Company's
shareholders or the Board, at any time, to terminate such tenure or to fail to
elect such Participant to the Board.
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IX. RIGHTS OF A SHAREOWNER.
No person shall have any rights with respect to any Shares covered by
or relating to any grant hereunder of an Option until the date of issuance of a
certificate to him or her evidencing such Shares. Except as otherwise expressly
provided in the Plan, no adjustment to any Option shall be made for dividends or
other rights for which the record date occurs prior to the date such certificate
is issued.
X. ADJUSTMENT UPON CHANGES IN CAPITAL STOCK.
A. If the capital stock of the Company shall be subdivided or combined,
whether by reclassification, stock dividend, stock split, reverse stock split or
other similar transaction, then the number of Shares authorized under the Plan,
the number of Shares then subject to or relating to unexercised Options granted
hereunder and the exercise price per Share will be adjusted proportionately. A
stock dividend shall be treated as a subdivision of the whole number of Shares
outstanding immediately prior to such dividend into a number of Shares equal to
such whole number of Shares so outstanding plus the number of Shares issued as a
stock dividend.
B. In the case of any capital reorganization or any reclassification of
the capital stock of the Company (except pursuant to a transaction described in
Paragraph A of this Section 10) (a "Reorganization"), appropriate adjustment may
be made in the number and class of shares authorized to be issued under the Plan
and the number and class of shares subject to or relating to Options awarded
under the Plan and outstanding at the time of such Reorganization.
C. Each Participant will be notified of any adjustment made pursuant to
this Section 10 and any such adjustment, or the failure to make such adjustment,
shall be binding on the Participant.
D. Except as expressly set forth herein, the number and kind of Shares
subject to Options awarded under the Plan, and the exercise prices of any such
Options, shall not be affected by any transaction (including, without
limitation, any merger, recapitalization, stock split, stock dividend, issuance
of stock or similar transaction) affecting the capital stock of the
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Company and no Participant shall be entitled to any additional Options on
account thereof.
XI. WITHHOLDING TAXES.
A. Whenever Shares are to be issued upon the exercise of an Option, the
Company shall have the right to require the Participant to remit to the Company
in cash an amount sufficient to satisfy federal, state and local withholding tax
requirements, if any, prior to the delivery of any certificate or certificates
for such Shares.
B. Notwithstanding Paragraph A of this Section 11, at the election of a
Participant when Shares are to be issued upon the exercise of an Option, the
Participant may tender to the Company a number of Shares, or the Company shall
withhold a number of such Shares, the Fair Market Value of which is sufficient
to satisfy the federal, state and local tax requirements, if any, attributable
to such exercise or occurrence.
XII. AMENDMENT OF THE PLAN.
A. The Board may at any time and from time to time suspend, discontinue,
modify or amend the Plan in any respect whatsoever except that the Board may not
suspend, discontinue, modify or amend the Plan so as to adversely affect the
rights of a Participant with respect to any grants that have heretofore been
made to such Participant without such Participant's approval.
B. No amendment to or modification of the Plan which: (i) materially
increases the benefits accruing to Participants; (ii) except as provided in
Section 10 hereof, increases the number of Shares that may be issued under the
Plan; or (iii) modifies the requirements as to eligibility for participation
under the Plan, shall be effective without shareholder approval.
XIII. MISCELLANEOUS.
A. It is expressly understood that the Plan grants powers to the Board but
does not require their exercise; nor shall any rights be deemed to accrue under
the Plan except as Options may be granted hereunder.
B. All expenses of the Plan, including the cost of maintaining records,
shall be borne by the Company.
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Exhibit 10.62
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Non-Qualified Stock Option
Agreement for Tim Swain
NON-QUALIFIED STOCK OPTION AGREEMENT ("Option Agreement") dated as of the
2nd day of July, 1996 providing for the granting of an option by Trimark
Holdings, Inc., a Delaware corporation (the "Company"), to TIM SWAIN, an
employee of the Company or of a subsidiary (the "Employee").
The Board of Directors of the Company has duly adopted, and the
stockholders of the Company have approved, the 1990 Stock Option and Stock
Appreciation Rights Plan of Trimark Holdings, Inc., as amended from time to time
(the "Plan"), which is incorporated herein by reference. Unless other wise
expressly stated, all defined terms herein shall have the same meaning ascribed
to them in the Plan. In accordance with Paragraph 2 of the Plan, the Stock
Option Plan Committee of the Board of Directors of the Company (the "Committee")
has determined that the Employee is to be granted an option under the Plan to
buy shares of the Company's common stock, par value $.001 (the "Shares"), on the
terms and subject to the conditions hereinafter provided.
I. NUMBER OF SHARES, OPTION PRICE. The Company hereby grants to the Employee a
non-qualified option (the "Option"), to purchase 42,000 Shares (the "Option
Shares") at a price per Share (the "Option Price") of $5.38 with respect to 24,
000 shares and $8.00 with respect to 18,000 shares on the terms and subject to
the conditions set forth herein. The Employee shall not have any of the rights
of a stockholder with respect to the Option Shares covered hereby unless and
until the Employee has paid the Option Price with respect thereto.
II. PERIOD OF OPTION AND CONDITIONS OF EXERCISE.
A. The term of the Option shall commence on July 2, 1996 (the "Date of
Grant") and terminate upon the earlier of July 2, 2006 (the "Expiration
Date") and the time at which the Option is completely terminated pursuant
to Section 3 or Section 4 hereof. Upon the termination of the Option, all
rights of the Employee hereunder and under the Plan shall cease. Employee
understands and agrees that the Option granted to him is intended to comply
with the provisions of Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and is subject to the express terms thereof and the
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interpretations of the Securities and Exchange Commission thereunder.
B. The Option, subject to the following provisions of this Section 2 and
to Section 3, shall become exercisable with respect to 33 1/3% of the
Shares subject to such Option on August 8, 1997 and shall become
exercisable with respect to an additional 33 1/3% of the Shares on August
8, 1998, and an additional 33 1/3% of the Shares on August 8, 1999.
C. The Option may be exercised only to purchase whole Shares, and in no
case may a fraction of a Share be purchased. The right of the Employee to
purchase Option Shares may be exercised in whole at any time or in part
from time to time after and to the extent that the Option becomes
exercisable and prior to the earlier of the Expiration Date and, as to any
portion of the Option, the time at which such portion is terminated
pursuant to Section 3 or Section 4. No partial exercise of the Option for
less than ten (10) Option Shares is permissible.
III. TERMINATION OF EMPLOYMENT. Subject to Section 4 hereof, the Option
(whether or not exercisable) shall terminate three (3) months after the Employee
ceases to be a full-time employee of the Company or any of its subsidiaries;
provided, however, that in the event of the Employee's termination for Cause (as
defined below), the Option shall terminate immediately. Notwithstanding the
foregoing provisions and Section 4, no portion of the Option which is
unexercisable as of the date Employee ceases to be a full-time Employee of the
Company or any of its subsidiaries shall thereafter become exercisable. For
purposes of the Option Agreement, "Cause" means the engaging by the Employee in
gross and willful misconduct involving a substantial and material obligation
under an employment agreement between the Employee and the Company (or
subsidiary) or, if no such employment agreement is in effect, Cause means
Employee's negligence or misconduct or habitual failure or inability to perform
his employment duties.
IV. DEATH OR PERMANENT DISABILITY OF EMPLOYEE. If the Employee dies or becomes
permanently disabled while the Employee is employed by the Company or one of its
subsidiary corporations (as defined in Section 425(f) of the Code), the Option
shall expire one year after the date of such death or permanent disability
unless by its terms it expires sooner. During such period after death, such
Option may, to the extent that it remained unexercised (but exercisable by the
Employee according to the
40
<PAGE>
Option's terms) on the date of such death, be exercised by the person or persons
to whom the rights under the Option shall pass by the Employee's will or by the
laws of descent and distribution. The term "permanent disability" shall have
the meaning set forth in the Company's disability policy then in effect which
shall allow Employee to receive disability benefits thereunder. If there is no
disability policy in effect at the date of Employee's potential disability and
Employee is unable to render services for a period of six consecutive months
upon the determination of two physicians Board certified in the field of
disability (in the case of dispute as to permanent disability), Employee shall
be deemed to be permanently disabled.
V. NON-TRANSFERABILITY OF OPTION. The Option and this Option Agreement shall
not be transferable otherwise than by will or by the laws of descent and
distribution; and the Option may be exercised, during the lifetime of the
Employee, only by the Employee, regardless of any community property interest
therein of the spouse of the Employee, or such spouse's successors in interest.
If the spouse of the Employee shall have acquired a community property interest
in the Option, the Employee, or the Employee's permitted successors in interest,
may exercise the Option on behalf of the spouse of the Employee or such spouse's
successors in interest. More particularly, but without limiting the generality
of the foregoing, the Option may not be assigned, transferred (except as
provided above), pledged or hypothecated in any way, shall not be assignable by
operation of law and shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof shall be null and
void and without effect.
VI. EXERCISE OF OPTION. The Option shall be exercised as specified in Paragraph
6 of the Plan.
VII. WITHHOLDING TAX. Upon the exercise of the Option, the Company shall have
the right to require the Employee, and such Employee agrees, to pay the Company
the amount of any taxes which the Company may be required to withhold with
respect thereto and the Company shall not be obligated to issue certificates
representing the Shares to be acquired through the exercise of such Options if
the Employee fails to provide the Company with adequate assurance that the
Employee will pay such amounts to the Company as herein required. Such
withholding tax may be paid in accordance with the provisions of Paragraph 9 of
the Plan.
41
<PAGE>
VIII. HOLDING OF STOCK AFTER EXERCISE OF OPTION. By accepting the Option,
Employee represents and agrees, for the Employee and the Employee's permitted
transferees, that none of the Option Shares acquired upon exercise of the Option
will be acquired with a view to any sale, transfer or distribution of said
shares in violation of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations promulgated thereunder, and the person
entitled to exercise the same shall furnish evidence satisfactory to the Company
(including a written and signed representation) to that effect in form and
substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation of the Securities Act by such person.
A. Employee acknowledges that in the event of the exercise of this
Option, unless the Option Shares received upon such exercise shall have
been registered under an effective registration statement under the
Securities Act, such shares will constitute "restricted securities," as
defined in Rule 144 promulgated under such Act, and agrees that such shares
(a) may not be sold except in compliance with the applicable provisions of
such Act and the rules and regulations promulgated thereunder, and (b) have
been acquired for investment purposes, and not with a view to distribution.
The Company may issue stop-transfer restrictions to its transfer agent with
respect to the Option Shares. The certificate or certificate representing
the Option Shares may in the discretion of the Committee bear the following
legend:
1. "No sale, offer to sell or transfer of the shares represented by
this certificate shall be made unless a registration statement under the
Securities Act of 1933, as amended, with respect to such shares is then in
effect or an exemption from the registration requirements of such Act is then in
effect applicable to such shares."
IX. NOTICES. Any notice required or permitted under this Option Agreement
shall be deemed given when delivered personally, or when deposited in a United
States Post Office as registered mail, postage prepaid, addressed, as
appropriate, either to the Employee at his or her address set forth below or
such other address as he or she may designate in writing to the Company, or to
Trimark Holdings, Inc., 2644 30th Street, Santa Monica, California 90405-3009,
Attention: Secretary or such other address(es) as the Company may designate in
writing to the Employee.
42
<PAGE>
X. FAILURE TO ENFORCE NOT A WAIVER. The failure of the Company to enforce at
any time any provision of this Option Agreement shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
XI. GOVERNING LAW. The Option Agreement shall be governed by and construed
according to the laws of the State of Delaware.
XII. ADJUSTMENTS UPON CERTAIN CHANGES. In the event of a transaction specified
in Paragraph 15.1 of the Plan, the Board of Directors or the Committee shall, in
order to prevent the dilution or enlargement of rights under this Option
Agreement, make such adjustments in the number and type of Option Shares subject
to the Option and the Option Price as may be determined to be appropriate and
equitable. Adjustments made by the Board of Directors or Committee shall be
final, binding and conclusive. No fractional shares of stock will be issued on
any such adjustment.
XIII. TERMINATION. Upon the dissolution or liquidation of the Company, or upon
a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon the sale of substantially all the property or more than eighty percent
of the then outstanding stock of the Company to another corporation, the Option
granted hereunder shall terminate.
XIV. PROVISIONS OF THE PLAN. The Option provided for herein is granted pursuant
to the Plan, and said Option and this Option Agreement are in all respects
governed by the Plan and subject to all of the terms and provisions thereof,
whether such terms and provisions are incorporated in this Option Agreement
solely by reference or are expressly cited herein. A copy of the Plan has been
furnished to the Employee, and the Employee hereby acknowledges receipt thereof.
43
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Option Agreement in
duplicate on the day and year first above written.
TRIMARK HOLDINGS, INC.
BY:
Title
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
_____________________________
Tim Swain
_____________________________
_____________________________
_____________________________
[Address]
44
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 688
<SECURITIES> 0
<RECEIVABLES> 18,609
<ALLOWANCES> 4,985
<INVENTORY> 427
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,354
<DEPRECIATION> 1,893
<TOTAL-ASSETS> 51,654
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 19,000
0
0
<COMMON> 5
<OTHER-SE> 24,409
<TOTAL-LIABILITY-AND-EQUITY> 51,654
<SALES> 14,215
<TOTAL-REVENUES> 14,215
<CGS> 10,928
<TOTAL-COSTS> 10,928
<OTHER-EXPENSES> 2,628
<LOSS-PROVISION> 101
<INTEREST-EXPENSE> 213
<INCOME-PRETAX> 357
<INCOME-TAX> 139
<INCOME-CONTINUING> 218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
<FN>
<F1>IN ACCORDANCE WITH INDUSTRY PRACTICE, THE COMPANY PREPARES AN UNCLASSIFIED
BALANCE SHEET.
</FN>
</TABLE>
