UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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 No. 0-19492
nVIEW Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-1413745
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
860 Omni Boulevard, Newport News, Virginia 23606
(Address of principal executive office)
Registrant's telephone number, including area code: (804) 873-1354
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. [ X ] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 1, 1996: 4,953,051 shares of common stock without par
value.
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nVIEW CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1996
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets June 30, 1996
(unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three Months
Ended June 30, 1996 and 1995 (unaudited) and the Six
Months Ended June 30, 1996 and 1995 (unaudited). . . . . . . . . . . . . . . . 4
Consolidated Statement of Shareholders'
Equity for the Six Months Ended June 30,
1996 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1996 and
1995 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . 9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Information
nVIEW CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1996 December 31,
--------------- -----------------
(Unaudited) 1995
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,543,527 $ 1,404,816
Receivables, net 8,489,387 7,831,395
Inventories, net 7,981,506 10,002,590
Prepaid expenses 230,686 364,496
Income taxes receivable 99,203 566,000
--------------- -----------------
Total current assets 20,344,309 20,169,297
Property and equipment, net 1,055,629 1,189,248
Other assets, net 218,357 228,186
--------------- -----------------
$21,618,295 $21,586,731
=============== =================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 4,035,964 $ 3,000,993
Accrued warranties 235,000 235,000
Accrued sales returns and allowances 252,758 287,500
Accrued expenses 462,373 520,994
--------------- -----------------
Total current liabilities 4,986,095 4,044,487
Shareholders' equity:
Common stock, no par value.
Authorized 20,000,000 shares;
4,953,051 shares issued and
outstanding at June 30, 1996;
4,904,241 shares issued and
outstanding at December 31,1995 0 0
Additional paid-in capital 24,664,767 24,496,067
Accumulated deficit (8,032,567) (6,953,823)
--------------- -----------------
Total shareholders' equity 16,632,200 17,542,244
--------------- -----------------
$21,618,295 $21,586,731
=============== =================
</TABLE>
See accompanying notes to consolidated financial statements.
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nVIEW CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------------------------
1996 1995 1996 1995
----------------- ---------------- ------------------ -------------------
<S> <C>
Sales $7,371,031 $9,612,615 $14,860,469 $18,034,410
Cost of goods sold 5,459,873 6,939,369 11,636,946 12,598,995
----------------- ---------------- ------------------ -------------------
Gross profit 1,911,158 2,673,246 3,223,523 5,435,415
Marketing and promotion 873,863 1,884,903 2,087,981 3,603,711
Research and development 384,437 1,189,520 1,027,731 2,368,284
General and administrative 598,671 638,319 1,146,093 1,153,088
----------------- ---------------- ------------------ -------------------
Operating expenses 1,856,971 3,712,742 4,261,805 7,125,083
----------------- ---------------- ------------------ -------------------
Earnings (loss) from operations 54,187 (1,039,496) (1,038,282) (1,689,668)
Other income (expense):
Interest expense (67,891) (2,448) (88,546) (3,871)
Interest income 31,474 30,575 47,837 91,717
Miscellaneous 117 22 247 (1,922)
----------------- ---------------- ------------------ -------------------
(36,300) 28,149 (40,462) 85,924
----------------- ---------------- ------------------ -------------------
Earnings (loss) before income taxes 17,887 (1,011,347) (1,078,744) (1,603,744)
Income tax benefit 0 (300,000) 0 (300,000)
----------------- ---------------- ------------------ -------------------
Net earnings (loss) $17,887 ($711,347) ($1,078,744) ($1,303,744)
================= ================ ================== ===================
Weighted average number of
common and common share
equivalents outstanding 4,922,488 4,895,998 4,913,365 4,894,964
================= ================ ================== ===================
Earnings (loss) per share $0.00 ($0.15) ($0.22) ($0.27)
================= ================ ================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
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nVIEW CORPORATION AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
(Unaudited)
Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
Common Stock
Additional Total
Number of Paid-in Accumulated Shareholders'
Shares Amount Capital Deficit Equity
---------------- ---------------- ------------------- -------------------- -------------------
<S> <C>
Balance at
December 31, 1995 4,904,241 $0 $24,496,067 ($6,953,823) $17,542,244
Stock options exercised 48,810 --- 168,700 --- 168,700
Net loss --- --- --- (1,078,744) (1,078,744)
---------------- ---------------- ------------------- -------------------- -------------------
Balance at
June 30, 1996 4,953,051 $0 $24,664,767 ($8,032,567) $16,632,200
================ ================ =================== ==================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
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nVIEW CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1996 1995
<S> <C>
Cash flows from operating activities:
Net loss ($1,078,744) ($1,303,744)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 383,666 353,647
Accounts receivable allowance (20,591) 77,000
Issuance of restricted stock 0 3,486
Changes in assets and liabilities increasing (decreasing) cash:
Receivables (637,401) (2,126,359)
Inventories 2,021,084 (2,990,877)
Prepaid expenses 133,810 132,886
Income taxes receivable 466,797 (130,000)
Accounts payable 1,034,971 832,629
Accrued expenses (93,363) (220,129)
-------------------- ---------------------
Total adjustments 3,288,973 (4,067,717)
-------------------- ---------------------
Net cash provided by (used in) operating activities 2,210,229 (5,371,461)
-------------------- ---------------------
Cash flows from investing activities:
Purchase of marketable investment securities 0 (195,716)
Sale of marketable investment securities 0 926,368
Additions to property and equipment (233,850) (111,420)
Purchase of patents (6,368) (38,913)
Other Assets 0 31
-------------------- ---------------------
Net cash provided by (used in) investing activities (240,218) 580,350
Cash flows from financing activities:
Proceeds from revolving line of credit 0 1,074,000
Repayments of revolving line of credit 0 (530,000)
Stock options excercised 168,700 19,270
-------------------- ---------------------
Net cash provided by financing activities 168,700 563,270
-------------------- ---------------------
</TABLE>
6
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nVIEW CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1996 1995
<S> <C>
Net increase (decrease) in cash and cash equivalents $2,138,711 ($4,227,841)
Cash and cash equivalents at beginning of period 1,404,816 4,571,600
---------------- -----------------
Cash and cash equivalents at end of period $3,543,527 $343,759
================ =================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $67,435 $451
================ =================
Cash paid during the period for income taxes $40,326 $9,251
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
7
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nVIEW CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. In the opinion of management, the accompanying unaudited interim
consolidated financial statements contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial
position as of June 30, 1996 and the results of operations,
shareholders' equity and cash flows for the six months ended June 30,
1996 and 1995.
2. Subsequent to June 30, 1996, the Company entered into a letter of credit
agreement in favor of a supplier. The letter of credit agreement is for
$700,000 and reduces the available credit line under the Company's loan
and security agreement with a bank. As of August 9, 1996, there was no
outstanding balance on the letter of credit.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The net loss for the first six months of 1996 was $1,078,744, or $.22 per share,
compared to a net loss of $1,303,744, or $.27 per share for the same period of
1995. For the second quarter of 1996, the net income was $17,887, or $0.00 per
share, compared to a net loss of $711,347, or $.15 per share, for the second
quarter of 1995.
Sales decreased 18% to $14.9 million for the first six months of 1996 from $18.0
million for the first six months of 1995. For the second quarter of 1996, sales
decreased 23% to $7.4 million from $9.6 million for the second quarter of 1995.
The decrease in sales for the six months and second quarter of 1996 was
primarily related to reduced unit sales and declining sales prices of the
Company's LCD panel products. Unit sales of the LCD panel products decreased 36%
for the first six months of 1996 and the average sales price decreased 19% from
the same period in 1995. The Company believes that the decline in unit sales is
the result of several factors. First, there has been a shift in the market for
the Company's products from projection panels to self contained projectors.
Second, competition has increased dramatically to where supply is outpacing
demand, thus impacting the number of units sold and the average sales price per
unit. Lastly, the Company is still experiencing limited capacity through its
existing distribution channels, primarily the professional audio visual channel.
The Company anticipates that these factors may continue and could adversely
affect future quarterly sales results.
Unit sales of the Company's self contained projector products increased 71% for
the first six months of 1996, while the average sales price per unit decreased
8% from the same period in 1995. The Company introduced three new projectors in
1996, two incorporating Texas Instruments Incorporated Digital Light
Processing(TM) technology (DLP(TM)) and the L500, a polysilicon LCD projector.
Two of these projectors began production shipments during June and came too late
in the quarter to offset the decline in projection panel sales.
Sales were also affected by dealer anticipation of new products and price
reductions at the June, 1996 INFOCOMM trade show, with many dealers refusing to
purchase product for inventories.
As a percentage of sales, gross profit decreased to 22% for the six months and
to 26% for the second quarter ending June 30, 1996 from 30% and 28% for the
respective periods of 1995. These decreases in gross profit are primarily the
result of reduced pricing on certain products to continue the reduction of the
Company's inventory level. During the first quarter of 1996, 54% of the
Company's sales were in projection panel products with a gross profit of 9%. For
the same period, sales of self contained projectors accounted for 35% of the
Company's sales with a gross profit of 22%. The reduction of the margin in the
first quarter was the result of the Company reducing prices of selected products
to more quickly reduce inventory levels. The Company showed marked improvement
in gross profit during the second quarter of 1996 with panel sales being 40% of
sales with a gross profit of 18% and projector products totaling 55% of sales
with a gross profit of 31%. The improvement is primarily related to newer
self-contained projector products becoming a larger portion of the Company's
sales.
Operating expenses decreased 40% to $4.3 million (29% of sales) for the first
six months of 1996 from $7.1 million (39% of sales) for the comparable period of
1995. For the second quarter of 1996, operating expenses decreased 50% to $1.9
million (25% of sales) from $3.7 million (39% of sales) for the second quarter
of 1995. The significant decrease is primarily the result of organizational
changes and cost reduction measures implemented by management during the first
six months of 1996. The Company anticipates that operating expenses will
increase in subsequent quarters, but management will strive to maintain the
proper relationship between revenues and operating expenses.
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Marketing and promotion expenses for the first six months and the second quarter
of 1996 decreased $1.5 million and $1.0 million, respectively, from the
comparable periods of 1995. As a percentage of sales, marketing and promotion
expenses were 14% and 12% for the six months and the quarter ended June 30,
1996, respectively, and were 20% for both the six months and the quarter ended
June 30, 1995. The decrease was, to a large degree, the result of management's
efforts to bring marketing and promotion expenses to an appropriate level
relative to the sales being generated. To mitigate the potential loss of sales
from the decrease in marketing and promotion expenses, the Company has begun to
supplement its sales and distribution strategy to market and distribute its
projection and direct view display products through distributors and original
equipment manufacturers (OEMs). This approach will permit the Company to
leverage the brand awareness, sales and marketing costs and distribution
channels of the distributors and OEMs.
Research and development expenses decreased $1.3 million and $805 thousand for
the first six months and the second quarter of 1996, respectively, over the same
periods of 1995. Research and development expenses as a percentage of sales
decreased to 7% and 5% for the first six months and the second quarter of 1996,
respectively, from 13% and 12% for the same periods of 1995. The decrease in
research and development expenses was, once again, part of management's effort
to reduce operating expenses. A significant portion of the costs incurred in
1995 related to the development of a new multimedia projector incorporating
DLP(TM) technology. Development time and costs were significantly extended in
designing a product using this new technology. Further, 1995 costs were higher
due to redesign of the Company's nFINITY projector. The Company anticipates that
research and development expenses will increase in subsequent quarters, although
management intends that its rate of growth will more closely match the growth
rate of sales than in previous quarters.
For the first six months and the second quarter of 1996, general and
administrative expenses were $7 thousand and $40 thousand less than the first
six months and the second quarter of 1995, respectively. General and
administrative expenses as a percentage of sales were 8% for both the first six
months and the second quarter of 1996 compared to 6% and 7%, respectively, for
the same periods a year earlier. Neither the type nor the amount of the
Company's general and administrative expenses changed materially during 1996
from comparable periods of 1995.
Other income (expense) decreased $127 thousand and $64 thousand for the six
months and second quarter ended June 30, 1996, respectively. The decrease is
primarily related to a reduction in interest income earned on lower cash
balances, and an increase in interest expense due to performance fees and the
amortization of loan origination costs associated with the loan and security
agreement with a bank, entered into on February 6, 1996. No amounts had been
advanced under the line as of August 9, 1996.
No income tax expense was estimated for the period ended June 30, 1996.
Financial Condition
Total assets increased $32 thousand to $21.6 million at June 30, 1996 from the
December 31, 1995 balance. The increase primarily represents a $2.1 million
increase in cash, a $658 thousand increase in accounts receivable offset by a
$2.0 million reduction in inventory and a reduction of $467 thousand in income
taxes receivable. Other assets did not significantly change.
The higher net receivables balance at June 30, 1996 resulted from a larger
portion of the second quarter's sales occurring near the end of the quarter and
delayed payments by certain customers. Any amounts that management believes to
be uncollectible are covered by appropriate allowances at June 30, 1996.
Net inventories decreased to $8.0 million at June 30, 1996 from $10.0 million at
December 31, 1995. Net
10
<PAGE>
inventories originally increased in 1995 due to additional purchases of
components for products in expectation of higher sales than were actually
realized for certain products. Since those purchases, the Company has placed and
continues to place strong emphasis on reducing inventories. Component order
rates have been changed to more closely match existing inventory levels and the
amounts required to meet current demand for the Company's products. The Company
is continuing to strive to decrease inventory levels by reducing the number of
months committed for components and developing sales programs for moving the
older inventory. The older inventory continued to decline during the second
quarter of 1996, but was replaced with new products and components. This
resulted in no change in the inventory balance from March 31, 1996.
The increase in the cash and cash equivalents and marketable investment
securities balances was primarily attributable to reduced operating expenses, a
$467 thousand refund of federal income taxes paid and cash generated from sales
of older inventory. Component and production costs associated with the older
inventory were paid in prior periods.
The Company believes that existing cash, cash generated from ongoing operations
and a revolving bank line of credit will be adequate to meet the anticipated
operating and financing needs of the Company for the foreseeable future.
However, there can be no assurances that these sources of funds will be
sufficient. As of June 30, 1996, the Company was in compliance with all of the
covenants required by the Company's loan and security agreement with a bank.
Working capital at June 30, 1996 was $15.3 million. The Company's current ratio
decreased to 4.1 : 1 at June 30, 1996 from 5.0 : 1 at December 31, 1995. The
decrease was primarily the result of increased current liabilities for new
products and components purchased during the month of June 1996. The Company
experienced a positive cash flow of $2.2 million from operating activities for
the first six months of 1996, primarily the result of a $2.0 million reduction
in net inventories and reduction of income taxes receivable of $467 thousand.
Shareholders' equity decreased to $16.6 million at June 30, 1996 from $17.5
million at December 31, 1995. The decrease was due to the net loss incurred
during the first six months of 1996.
11
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Risk Factors
The following discussion of risk factors describes certain aspects of the
business environment in which the Company operates. These risk factors, along
with other information in this report, should be carefully considered by users
of this report.
The markets in which the Company operates are characterized by rapidly changing
technology, resulting in short product lives. Actual or anticipated product
releases by the Company or its competitors could cause customers to delay
purchases until the new products are available and/or to discontinue purchases
of existing products altogether. The Company's competitors may introduce
products which utilize new technologies to which the Company does not have
access. Any of these factors could have a material adverse affect on the
Company's business and results of operations. While the Company believes that it
can deliver competitive products in a timely manner in this environment, there
can be no assurance that it will succeed in doing so.
One of the Company's new projector products uses a subassembly developed and
produced by a single source vendor. While the Company believes the subassembly
will be available in quantities to produce a sufficient number of projectors to
satisfy anticipated demand, there can be no assurance that it will be available.
The vendor has widely marketed the subassembly to many manufacturers for
inclusion in their products. To date, such manufacturers' interest in the
technology has been high. If demand by other larger manufacturers is strong, the
vendor may be forced to allocate distribution of the subassemblies, and sales to
smaller manufacturers, such as nVIEW could be restricted. As with any new
technology, unknown circumstances outside the Company's control, could affect
availability of this critical, single-source component. It is the Company's
understanding that the vendor does not intend to compete with the Company
directly, through the manufacture and sale of similar projection equipment.
However, the vendor is selling this subassembly to other manufacturing companies
which directly compete with the Company and several of the Company's competitors
have announced or demonstrated products utilizing the new technology. While the
Company believes its new projector will be successful against the competition,
there can be no assurance that it will be competitive in the market.
The Company's other new projector product, the L-500, is manufactured for the
Company by a supplier/competitor. Should demand for the projector exceed supply,
the supplier/competitor may choose to allocate distribution of the projector and
the supply to nVIEW could be limited. Additionally, should the competitor
significantly change the pricing structure of the projector in the market, it
could have an adverse affect on the Company.
A significant portion of the Company's shipments typically occur in the last
month of a quarter due to customers' ordering patterns, the timing of sales
promotions, component availability or technical challenges. These factors may
cause volatility in quarterly and annual results in future periods.
The Company's focus on quickly reducing inventory levels and moving older
inventory is expected to have a positive effect on the net inventories balance
and on the balance sheet. However, price reductions of certain of the Company's
older products could occur and would result in lower gross margins in the
future.
The trading price of the Company's common stock has been and is expected to
continue to be subject to immediate and wide fluctuations due to factors both
within and outside of the Company's control. These factors include, but are not
limited to, the following: fluctuations in operating results or financial
position, availability of financing, new product introductions by the Company or
its competitors, product reviews by trade publications, estimates or statements
made by analysts regarding the Company or the industry and markets in which the
Company operates and stock market price fluctuations.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 13, 1996
nVIEW CORPORATION
By: /s/ Angelo Guastaferro
Angelo Guastaferro
President, Chief Executive Officer
By: /s/ Jerry W. Stubblefield
Jerry W. Stubblefield
Chief Financial Officer
Vice-President, Finance
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
10.16 nVIEW Corporation 1996 Employee Stock Option
Plan
10.17 nVIEW Corporation 1996 Non-Employee Director
Stock Option Plan
14
Exhibit 10.16
nVIEW CORPORATION
1996 EMPLOYEE STOCK OPTION PLAN
1. Purpose.
The purpose of this Stock Option Plan (the "Plan") is to give
employees (collectively, the "personnel") of nVIEW Corporation, a Virginia
corporation (the "Company"), and corporations with respect to which the Company
directly or indirectly controls 50% or more of the combined voting power
("subsidiaries") an opportunity to acquire shares of the common stock of the
Company, without par value ("Common Stock") to provide an incentive for
personnel to continue to promote the best interests of the Company and enhance
its long-term performance, and to provide an incentive for key personnel to join
or remain with the Company and its subsidiaries.
2. Administration.
(a) Committee. The Plan shall be administered by a stock option
committee (the "Committee") appointed by the Board and composed of not less than
two (2) members of the Board. Notwithstanding the preceding provisions of the
Section, no member of the Committee may exercise discretion with respect to, or
participate in, the administration of the Plan if, at any time while serving on
the Committee or within one year prior to such exercise or participation, he or
she has received stock or stock options pursuant to the Plan or any other plan
of the Company or any affiliate thereof entitling the participants therein to
acquire stock or stock options of the Company or any of its affiliates.
(b) Powers. Within the limits of the express provisions of the
Plan, the Committee shall determine: (i) the personnel to whom awards hereunder
shall be granted, (ii) the time or times at which such awards shall be granted,
(iii) the form and amount of the awards, and (iv) the limitations, restrictions
and conditions applicable to any such award. In making such determinations, the
Committee may take into account the nature of the services rendered by such
personnel, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.
(c) Interpretations. Subject to the express provisions of the
Plan, the Committee may interpret the Plan, prescribe, amend and rescind rules
and regulations relating to it, determine the terms and provisions of the
respective awards and make all other determinations it deems necessary or
advisable for the administration of the Plan.
<PAGE>
(d) Determinations. The determinations of the Committee on all
matters regarding the Plan shall be conclusive. A member of the Committee shall
only be liable for any action taken or determination made in bad faith.
(e) Nonuniform Determinations. The Committee's determinations
under the Plan, including without limitation, determinations as to the persons
to receive awards, the terms and provisions of such awards and the agreements
evidencing the same, need not be uniform and may be made by it selectively among
persons who receive or are eligible to receive awards under the Plan, whether or
not such persons are similarly situated.
3. Awards Under the Plan.
(a) Form. Awards under the Plan may be granted in the form of
Stock Options, as hereinafter described. Stock Options granted hereunder may be
in the form of incentive stock options, if the conditions of Section 4 are met,
or nonqualified options if the conditions of Section 4 are not met or if so
designated by the Committee.
(b) Maximum Limitations. The aggregate number of shares of Common
Stock available for grant under the Plan is 120,000, subject to adjustment
pursuant to Section 7. Shares of Common Stock issued pursuant to the Plan shall
be authorized but unissued shares. In the event that, prior to the end of the
period during which Stock Options may be granted under the Plan, any Stock
Option under the Plan expires unexercised or is terminated, surrendered or
cancelled without being exercised, in whole or in part, for any reason, the
number of shares theretofore subject to such Stock Option, or the unexercised,
terminated, forfeited or unearned portion thereof, shall be added to the
remaining number of shares of Common Stock available for grant as a Stock Option
under the Plan, including a grant to a former holder of such Stock Option, upon
such terms and conditions as the Committee shall determine, which terms may be
more or less favorable than those applicable to such former Stock Option.
(c) Type of Stock Options. It is intended that some or all of the
Stock Options granted under the Plan shall constitute "Incentive Stock Options"
within the meaning of Section 422 of the Code and taxable in accordance with
Section 421 of the Code; provided, however, that the Committee may in its
discretion choose to issue certain stock options, within the aggregate number of
shares of Common Stock available under the Plan, which violate one or more of
the requirements of Section 4 below ("Nonqualified Options"), as long as the
person(s) to whom such Nonqualified Options are granted is/are advised that such
options will be taxable under Section 83 of the Code, rather than Section 421.
Any Nonqualified Options issued hereunder shall be subject to such terms and
conditions as may be imposed by the Committee. All Stock Options granted
hereunder shall be designated by the Committee as either "Nonqualified Options"
or "Incentive Stock Options" on the agreements between the Company and personnel
evidencing the grant of such options.
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4. Incentive Stock Options.
Incentive Stock Options shall be in such form and upon such
conditions as the Committee shall from time to time determine, subject to the
following:
(a) Personnel Who May Receive Incentive Stock Options. Incentive
Stock Options may only be granted to personnel who, at the time the Options are
granted, are employed by the Company.
(b) Option Prices. The option price of each Incentive Stock
Option shall be at least 100% of the fair market value of the Common Stock
subject to such Incentive Stock Option on the date of grant.
(c) Terms of Options. No Incentive Stock Option shall be
exercisable after the date ten (10) years from the date such Incentive Stock
Option is granted.
(d) Limitation on Amounts. The aggregate fair market value
(determined with respect to each Incentive Stock Option as of the time such
Incentive Stock Option is granted) of the capital stock with respect to which
Incentive Stock Options are exercisable for the first time by an employee during
any calendar year (under this Plan or any other plan of the Company or the
parent or any subsidiary of the Company) shall not exceed $100,000.
(e) Ten percent Shareholder. Notwithstanding any other provision
herein contained, no person may receive an Incentive Stock Option under the Plan
if such person, at the time the award is granted, owns (as defined in Section
424(d) of the Internal Revenue Code of 1986, as amended (the "Code")) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its parent or any subsidiary, unless the person to whom
the option is granted is an employee of the Company and the option price for
such Incentive Stock Option is at least 110% of the fair market value of the
Common Stock subject to such Option on the date of grant and such Option is not
exercisable after the date five years from the date such Option is granted.
(f) Termination of Employment.
(i) Each Incentive Stock Option shall, unless sooner
expired pursuant to subsection (ii) or (iii) below, expire on the first to occur
of the tenth (10th) anniversary of the date of grant thereof and the expiration
date set forth in the applicable option agreement.
(ii) An Incentive Stock Option shall expire on the first
to occur of the applicable date set forth in paragraph (i) next above and thirty
(30) days after the date that the employment of the employee with the Company
terminates for any reason other than death or disability. Notwithstanding the
preceding provisions of this paragraph, the Committee, in its sole discretion,
may, by written notice given to an ex-employee, permit the ex-employee to
exercise Incentive Stock Options during a period following his or her
termination of employment,
3
<PAGE>
which period shall not exceed three months. In no event, however, may the
Committee permit an ex-employee to exercise an Incentive Stock Option after the
expiration date contained in the agreement evidencing such Incentive Stock
Option. Notwithstanding the preceding provisions of this paragraph, if the
Committee permits an ex-employee to exercise Incentive Stock Options during a
period following his or her termination of employment pursuant to such preceding
provisions, such Incentive Stock Options shall, to the extent unexercised,
expire on the date that such ex-employee violates (as determined by the
Committee) any covenant not to compete in effect between the Company and the
ex-employee.
(iii) If the employment of a person with the Company
terminates by reason of disability (as defined in Section 422(c)(9) of the Code
as determined by the Committee) or by reason of death, his or her Incentive
Stock Options, if any, shall expire on the first to occur of the date set forth
in paragraph (i) of this Section 4(f) and the first anniversary of such
termination of employment.
5. Provisions Applicable to All Stock Options.
(a) Exercise. All Stock Options granted hereunder shall be
subject to such terms and conditions, shall be exercisable at such time or
times, and shall be evidenced by such form of written option agreement between
the optionee and the Company, as the Committee shall determine; provided, that
if such Options are to be issued as Incentive Stock Options, such determinations
are not inconsistent with the other provisions of the Plan, and with Section 422
of the Code or regulations thereunder.
(b) Manner of Exercise of Options and Payments for Common Stock.
Stock Options may be exercised by an optionee by giving written notice to the
Secretary of the Company stating the number of shares of Common Stock with
respect to which the Stock Option is being exercised and tendering payment
therefor. At the time that a Stock Option granted under the Plan, or any part
thereof, is exercised, payment for the Common Stock issuable thereupon shall be
made in full in cash or by certified check or, if the Committee in its
discretion agrees to accept, in shares of Common Stock of the Company (the
number of such shares paid for each share subject to the Stock Option, or part
thereof, being exercised shall be determined by dividing the option price by the
fair market value per share of the Common Stock on the date of exercise). As
soon as reasonably possible following such exercise, a certificate representing
shares of Common Stock purchased, registered in the name of the optionee shall
be delivered to the optionee.
6. Transferability.
No Stock Option may be transferred, assigned, pledged or
hypothecated (whether by operation of law or otherwise), except as provided by
will or the applicable laws of descent or distribution, and no Stock Option
shall be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of a Stock
Option, or levy of attachment or similar process upon the Stock Option not
specifically permitted herein
4
<PAGE>
shall be null and void and without effect. A Stock Option may be exercised only
by an Optionee during his or her lifetime or by his or her estate or the person
who acquires the right to exercise such Stock Option upon his or her death by
bequest or inheritance.
7. Adjustment Provisions.
The aggregate number of shares of Common Stock with respect to
which Stock Options may be granted, the aggregate number of shares of Common
Stock subject to each outstanding Stock Option, and the option price per share
of each such Stock Option, may all be appropriately adjusted as the Committee
may determine for any increase or decrease in the number of shares of issued
Common Stock resulting from a subdivision or consolidation of shares, whether
through reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the repayment of a share dividend or other increase or
decrease in the number of such shares outstanding effected without receipt of
consideration by the Company. Adjustments under this Section 7 shall be made
according to the sole discretion of the Committee, and its decisions shall be
binding and conclusive.
8. Dissolution, Merger and Consolidation.
Upon the dissolution or liquidation of the Company, or upon a
merger or consolidation of the Company in which the Company is not the surviving
corporation, each Stock Option granted hereunder shall expire as of the
effective date of such transaction; provided, however, that the Committee shall
give at least 30 days' prior written notice of such event to each optionee to
exercise his or her wholly or partially unexercised Stock Option (without regard
to installment exercise limitations, if any) and, subject to prior expiration
pursuant to Section 4(f), each Stock Option shall be exercisable after receipt
of such written notice and prior to the effective date of such transaction.
9. Effective Date and Conditions Subsequent to Effective Date.
The Plan shall be effective upon adoption by the Board of
Directors; provided, however, Section 4 of the Plan shall become effective on
the date of the approval of the Plan by the holders of a majority of the shares
of Common Stock of the Company as long as such shareholder approval is obtained
within twelve (12) months after the date of adoption of the Plan by the Board.
Section 4 of the Plan shall be null and void and of no effect if the foregoing
condition is not fulfilled, and in such event each Stock Option granted
hereunder shall not be qualified as an Incentive Stock Option under Section 422
of the Code.
No grant or award shall be made under the Plan more than 10 years from
the earlier of the date of adoption of the Plan by the Board of Directors;
provided, however, that the Plan and all Stock Options granted under the Plan
prior to such date shall remain in effect and subject to adjustment and
amendment as herein provided until they have been satisfied or terminated in
accordance with the terms of the respective grants or awards and the related
agreement.
5
<PAGE>
10. Miscellaneous.
(a) Legal and Other Requirements. The obligation of the Company
to sell and deliver Common Stock under the Plan shall be subject to all
applicable laws, regulations, rules and approvals, including, but not by way of
limitation, the effectiveness of a registration statement under the Securities
Act of 1933 if deemed necessary or appropriate by the Company. Certificates for
shares of Common Stock issued hereunder may be legended as the Committee shall
deem appropriate.
(b) No Obligation To Exercise Options. The granting of a Stock
Option shall impose no obligation upon an optionee to exercise such Stock
Option.
(c) Termination and Amendment of Plan. The Committee may from
time to time alter, amend or suspend the Plan or any Stock Option granted
hereunder or may at any time terminate the Plan, except that it may not (except
to the extent provided in Section 7 hereof): (i) change the total number of
shares of Common Stock available for grant under the Plan; (ii) extend the
duration of the Plan; (iii) increase the maximum term of Stock Options; (iv)
decrease the minimum option price of Incentive Stock Options; or (v) change the
class of persons eligible to be granted Stock Options under the Plan.
(d) Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Stock Options issued hereunder will be
used for general corporate purposes.
(e) Withholding Taxes. Upon the exercise of any Stock Option, the
Company shall have the right to require the optionee to remit to the Company an
amount sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for shares
of Common Stock.
Upon the disposition of any Common Stock acquired by the
exercise of a Stock Option, the Company shall have the right to require the
optionee to remit to the Company an amount sufficient to satisfy all federal,
state and local withholding tax requirements as a condition to the registration
of the transfer of such Common Stock on its books. Whenever under the Plan
payments are to be made by the Company in cash or by check, such payments shall
be net of any amounts sufficient to satisfy all federal, state and local
withholding tax requirements.
(f) Right to Terminate Employment. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon any optionee the
right to continue in the employment or service of the Company or any subsidiary
or affect any right which the Company or any subsidiary may have to terminate
its employment or contract relationship with such optionee.
(g) Rights as a Shareholder. No optionee shall have any right as
a shareholder unless and until certificates for shares of Common Stock are
issued to him or her.
6
<PAGE>
(h) Leaves of Absence and Disability. The Committee shall be
entitled to make such rules, regulations and determinations as it deems
appropriate under the Plan in respect of any leave of absence taken by or
disability of any optionee who is an employee. Without limiting the generality
of the foregoing, the Committee shall be entitled to determine (i) whether or
not any such leave of absence shall constitute a termination of employment
within the meaning of the Plan, and (ii) the impact, if any, of any such leave
of absence on awards under the Plan theretofore made to any optionee who takes
such leave of absence.
(i) Fair Market Value. Whenever the fair market value of Common
Stock is to be determined under the Plan as of a given date, such fair market
value shall be:
(i) If the Common Stock is traded on the over-the-counter
market, the average of the mean between the bid and the asked price for
the Common Stock at the close of trading for the 10 consecutive trading
days immediately preceding such given date;
(ii) If the Common Stock is admitted to quotation on the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ") or other comparable quotation system and has been designated
as a National Market System ("NMS") security, the average of the last
sale price reported for the Common Stock on such system for the 10
consecutive trading days immediately preceding such given date;
(iii) If the Common Stock is listed on a national
securities exchange, the average of the closing prices of the Common
Stock of the Composite Tape for the 10 consecutive trading days
immediately preceding such given date; and
(iv) If the Common Stock is neither traded on the
over-the-counter market nor listed on a national securities exchange,
such value as the Committee, in good faith, shall determine.
Notwithstanding any provision of the Plan to the contrary, no determination made
with respect to the fair market value of Common Stock subject to an Incentive
Stock Option shall be inconsistent with Section 422 of the Code or regulations
thereunder.
(j) Notices. Every direction, revocation or notice authorized or
required by the Plan shall be deemed delivered to the Company (1) on the date it
is personally delivered to the Secretary of the Company at its principal
executive offices, or (2) three business days after it is sent by registered or
certified mail, postage prepaid, addressed to the Secretary at such offices, and
shall be deemed delivered to an optionee (1) on the date it is personally
delivered to him or her, or (2) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to him or her at the
last address shown for him or her on the records of the Company.
7
<PAGE>
(k) Applicable Law. All questions pertaining to the validity,
construction and administration of the Plan and Stock Options granted hereunder
shall be determined in conformity with the laws of the Commonwealth of Virginia.
(l) Elimination of Fractional Shares. If under any provision of
the Plan which requires a computation of the number of shares of Common Stock
subject to a Stock Option, the number so computed is not a whole number of
shares of Common Stock, such number of shares of Common Stock shall be rounded
down to the next whole number.
8
Exhibit 10.17
nVIEW CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose.
The purpose of the Plan is to promote the interest of the Company and
its shareholders by (i) attracting, retaining, and motivating experienced and
knowledgeable non-employee directors; and (ii) enabling such directors to
participate in the long-term success of the Company.
2. Definitions.
For purposes of the Plan, the following terms shall have the meanings
set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" means the happening of any of the
following:
(i) when any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act, (other than the Company or a subsidiary of
the Company or any Company employee benefit plan, including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding securities without the consent of a majority
of the Board;
(ii) the occurrence of any transaction or event relating
to the Company required to be described pursuant to the requirements of Item
6(e) of Schedule 14A of the Exchange Act.;
(iii) when, during a period of two consecutive years
during the existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board of Directors of the Company cease for any reason
other than death to constitute at least a two-thirds majority thereof, provided
however, that a director who was not a director at the beginning of such period
shall be deemed to have satisfied the two-year requirement if such director was
elected by, or on the recommendation of, at least two-thirds of the directors
who were directors at the beginning of such period (either actually or by prior
operation of this (iii)); or
(iv) the occurrence of a transaction requiring
shareholder approval for the acquisition of the Company by an entity other than
the Company through purchase of assets, or by merger, or otherwise.
<PAGE>
(c) "Code" means the Internal Revenue Code of 1986, as
amended, or any successor thereto.
(d) "Committee" means the Compensation Committee of the Board. If
at any time no Committee shall be in office, then the functions of the Committee
specified in the Plan shall be exercised by the Board.
(e) "Company" means nVIEW Corporation, a corporation organized
under the laws of the Commonwealth of Virginia.
(f) "Disability" means permanent and total disability as
determined under the Company's long-term disability program.
(g) "Eligible Director" means a member of the Board who is
eligible for grants under the Plan pursuant to the provisions of Section 6.
(h) "Effective Date" means the date of shareholder approval of
the Plan.
(i) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor thereto.
(k) "Fair Market Value" means as of any given date, the average
last reported sale price for the preceding twenty (20) business days of the
Stock on the NASDAQ National Market (consolidated trading).
(l) "Options" means non-statutory stock options granted under
this Plan to purchase shares of Stock.
(m) "Option Agreement" means an agreement evidencing the grant of
an Option under the Plan in such form as the Committee may prescribe.
(n) "Participant" means an Eligible Director who has received an
Option grant under this Plan.
(o) "Plan" means the nVIEW Corporation 1996 Non-Employee Director
Stock Option Plan, as set forth herein and as it may be amended from time to
time.
(p) "Potential Change in Control" means the entering into an
agreement by the Company, or the commencement of a tender offer, the
consummation of which would result in a Change in Control of the Company as
defined in the definition of "Change in Control" above.
2
<PAGE>
(q) "Retirement" means cessation of active services as a member
of the Board at or after age 65, or with the consent of the Board, any early
retirement date so specified.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Stock" means the Common Stock, without par value, of the
Company.
3. Administration.
The Committee will administer the Plan, subject to approval of the
Board. The Committee is authorized to interpret the provisions of the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
resolve all disputes arising under the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. Any
determination of the Committee shall be final and binding upon all persons
having or claiming any interest under the Plan or under any Option granted
pursuant to the Plan.
4. Shares of Stock Subject to the Plan.
The stock to be subject or related to Options under the Plan shall be
authorized and unissued shares of the Company's Stock. The maximum number of
shares of Stock authorized with respect to the grant of Options under the Plan,
subject to adjustment in accordance with Section 5 below, shall be up to 100,000
shares of Stock.
5. Capital Adjustments.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, or other change in corporate structure
affecting the Stock, such substitution or adjustment shall be made in (i) the
aggregate number of shares reserved for issuance under the Plan, (ii) the number
and Option price of shares subject to outstanding Options granted under the Plan
and (iii) in the number of shares of Stock to be subject to Options granted
pursuant to Section 7 of the Plan as may be determined to be appropriate by the
Committee in its sole discretion, provided that the number of shares subject to
any Options shall always be a whole number.
6. Eligibility.
Only members of the Board who (i) are not employees of the Company or of
any subsidiary or affiliate of the Company and (ii) are elected, appointed, or
are subject to election, as directors by the holders of the Company's Stock are
eligible to receive grants of Options under the Plan ("Eligible Director"). Any
Eligible Director to whom Options have been granted and who thereafter becomes
an employee of the Company or of any subsidiary or affiliate of the Company
shall cease to be eligible for any further Option grants under the Plan while an
employee, but shall not, by reason of becoming an employee, cease to be eligible
to retain Options previously granted under the Plan.
3
<PAGE>
7. Terms of Option Grants. Options under the Plan shall be granted on
the following terms:
(a) Initial Option Grant. Each Eligible Director serving on the
Board prior to the Effective Date has been granted an Option to purchase 5,000
shares of Stock, subject to shareholder approval of the Plan at the Company's
1996 Annual Meeting of Shareholders. On the Effective Date of the Plan, each of
these Eligible Directors shall enter into an Option Agreement with respect to
his or her Option grant. Thereafter, during the term of the Plan, each new or
additional Eligible Director appointed or elected to the Board who has not
previously been granted any Options pursuant to the Plan shall automatically
receive an initial Option grant to purchase 5,000 shares of Stock (subject to
adjustment pursuant to Section 5) on the date of such election or appointment
and shall enter into an Option Agreement with respect thereto.
(b) Annual Option Grant. Commencing with the Company's 1997
Annual Meeting of shareholders, each Eligible Director shall automatically
receive an annual Option grant on the date of the final adjournment of each of
the Company's Annual Meetings of shareholders, provided such Eligible Director
is still a member of the Board after each Annual Meeting. The number of shares
of Stock included in such annual Option grant shall be 3,000 shares (subject to
adjustment pursuant to Section 5).
(c) Option Exercise Price. The exercise price of all Options
granted under this Plan shall be the Fair Market Value of the Stock at the time
of grant.
(d) Vesting of Option. All Options granted under this Plan
shall vest immediately.
(e) Exercise of Option. All Options granted under this Plan shall
be exercisable on and after the date of grant and shall expire five (5) years
following the date of grant.
(f) Payment of Exercise Price. Options may be exercised in whole
or in part at any time and from time to time by giving written notice of
exercise to the Company specifying the number of shares to be purchased. Such
notice shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or such other instrument as the Committee may accept.
Payment in full or in part may also be made in the form of Stock already owned
by the Participant. If payment of the Option exercise price is made in whole or
in part in the form of Stock already owned by the Participant, the Company may
require that the Stock be owned by the Participant for a period of six months or
longer so that such payment would not result in a pyramid exercise. No shares of
Stock shall be issued until full payment therefor has been made. A Participant
shall generally have the rights to dividends or other rights of a shareholder
with respect to shares subject to the Option when the Participant has given
written notice of exercise, has paid in full the purchase price for such shares,
and, if requested, has given the representation described in Section 12(a).
4
<PAGE>
(g) Holding Period. Any other provision of this Plan
notwithstanding, a Participant may not sell or dispose of any shares of Stock
acquired pursuant to the exercise of an Option until at least six (6) months
have elapsed from the date of the grant of the Option.
(h) Cashless Exercise. To the extent permitted under the
applicable laws and regulations under Section 16 of the Exchange Act, and the
rules promulgated thereunder by the SEC, the Company agrees to cooperate in a
"cashless exercise" of an Option. The cashless exercise shall be effected by the
Participant delivering to a registered securities broker acceptable to the
Company instructions to sell a sufficient number of shares of Stock to cover the
costs and expenses associated therewith.
8. Non-Transferability of Options.
No Option shall be transferable by a Participant otherwise than by will
or by the laws of descent and distribution and all Options shall be exercisable,
during the Participant's lifetime, only by the Participant.
9. Option Agreement.
A Participant who has received an Option grant shall not have any rights
with respect to such Option unless, within thirty (30) days of the date of the
Option grant, such recipient delivers an executed copy of the Option Agreement
to the Company, and complies with the applicable terms and conditions of the
Option Agreement.
10. Amendment and Termination.
The Board may terminate or amend this Plan at any time and from time to
time; provided, however, that the Board may not, without approval of the
shareholders of the Company, increase the maximum number of shares of Stock
reserved for issuance under the Plan (other than for adjustments pursuant to
Section 5), materially increase the benefits accorded to Participants under the
Plan or change the description of the individuals eligible to receive Options;
and provided further, that no amendment of any provision of the Plan governing
the amount of Stock and price under, and timing of, grants of Options pursuant
to the Plan (or of any other provision of the Plan to the extent a limitation on
amendments to such provisions is required to preserve the status of Eligible
Directors as "disinterested" persons under Rule 16b-3 as promulgated by the SEC
under the Exchange Act) shall be made more frequently than once in any six month
period, other than to comport with changes in the Code, ERISA or the rules
thereunder. No termination of or amendment to the Plan may adversely affect the
rights of a Participant with respect to any Option held by the Participant as of
the date of such termination or amendment without such Participant's consent.
5
<PAGE>
11. General Provisions.
(a) The Committee may require each person purchasing shares
pursuant to an Option under the Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be subject
to such stock transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the Exchange
Act, any stock exchange or automated quotation system upon which the Stock is
then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional award or compensation arrangements,
subject to shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only if specific
cases.
(c) The adoption of the Plan shall not confer upon any director
of the Company any right to continue as a member of the Board.
(d) The Committee shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom any amounts
payable in the event of the Participant's death are to be paid.
(e) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia, except to the extent federal law and the rules and
regulations promulgated thereunder by the SEC apply.
(f) It is the intent of the Company that transactions involving
equity securities under the Plan be exempt under Rule 16b-3 under the Exchange
Act. Accordingly, if any provision of the Plan or any Option or Option Agreement
does not comply with the requirements of Rule 16b-3 as then applicable to such a
transaction, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such transaction.
6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,543,527
<SECURITIES> 0
<RECEIVABLES> 8,858,796
<ALLOWANCES> (369,409)
<INVENTORY> 7,981,506
<CURRENT-ASSETS> 20,344,309
<PP&E> 3,188,801
<DEPRECIATION> (2,137,749)
<TOTAL-ASSETS> 21,618,295
<CURRENT-LIABILITIES> 4,986,096
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,632,199
<TOTAL-LIABILITY-AND-EQUITY> 21,618,295
<SALES> 14,860,469
<TOTAL-REVENUES> 14,860,469
<CGS> 11,636,946
<TOTAL-COSTS> 15,898,751
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,462
<INCOME-PRETAX> (1,078,744)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,078,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,078,744)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
