<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 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: 0-20510
AMERICAN STUDIOS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1758321
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
11001 Park Charlotte Boulevard, Charlotte, NC 28273
(Address of principal executive office)
(Zip Code)
(704) 588-4351
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUES:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
Common Stock, $.001 par value 21,433,160
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
<S> <C>
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 1
Consolidated Statements of Operations -
Thirteen Weeks Ended March 31, 1996
and April 2, 1995 2
Consolidated Statements of Shareholders' Equity -
Thirteen Weeks Ended
March 31, 1996 and April 2, 1995 3
Consolidated Statements of Cash Flows -
Thirteen Weeks Ended
March 31, 1996 and April 2, 1995 4
Condensed Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 564 $ 1,681
Accounts receivable:
Trade 623 809
Employees, principally travel advances 74 183
Income tax receivable 1,327 1,365
Inventories 2,604 3,027
Prepaid expenses and other 446 491
-------- --------
Total current assets 5,638 7,556
PROPERTY, PLANT AND EQUIPMENT, NET 28,287 30,010
NON-COMPETE AGREEMENTS AND OTHER INTANGIBLE ASSETS 4,323 4,485
DEFERRED TAX ASSET 1,301 1,301
OTHER ASSETS 469 478
-------- --------
TOTAL $ 40,018 $ 43,830
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 12,826 $ 7,240
Trade accounts payable 4,632 4,324
Commissions payable to Wal-Mart Stores, Inc. 1,178 2,232
Salaries, commissions and bonuses 1,681 1,809
Taxes (other than income) 1,226 1,974
Self-insurance reserves 2,618 2,447
Other 796 753
-------- --------
Total current liabilities 24,957 20,779
-------- --------
LONG TERM DEBT 6,250 10,380
SHAREHOLDERS' EQUITY:
Preferred stock - $1.00 par value (authorized 1,000,000 shares; no
shares issued) -- --
Common stock - $.001 par value (authorized 70,000,000 shares;
outstanding 21,433,160 and 21,393,465 shares, respectively) 21 21
Additional paid-in capital 12,794 12,794
Deficit (4,080) (223)
Cumulative foreign currency translation adjustments 76 79
-------- --------
Total shareholders' equity 8,811 12,671
-------- --------
TOTAL $ 40,018 $ 43,830
======== ========
</TABLE>
See condensed notes to consolidated financial statements.
1
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Thirteen
Weeks
Ended
----------------------------
March 31, April 2,
-------------- ------------
1996 1995
-------------- ------------
NET SALES $ 19,597 $ 18,678
COST OF SALES 18,517 16,239
------------ ------------
GROSS PROFIT 1,080 2,439
GENERAL AND ADMINISTRATIVE EXPENSES 4,331 4,083
AMORTIZATION OF NON-COMPETE AGREEMENTS
AND OTHER INTANGIBLE ASSETS 162 168
FOREIGN EXCHANGE LOSSES (GAINS) (6) 128
------------ ------------
LOSS BEFORE INTEREST (3,407) (1,940)
INTEREST 450 21
------------ ------------
LOSS BEFORE INCOME TAXES (3,857) (1,961)
INCOME TAX BENEFIT -- (828)
------------ ------------
NET LOSS ($ 3,857) ($ 1,133)
============ ============
NET LOSS PER COMMON SHARE ($ 0.18) ($ 0.05)
============ ============
CASH DIVIDEND PER COMMON SHARE -- $ 0.02
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
AND COMMON STOCK EQUIVALENTS 21,433,160 21,424,172
============ ============
See condensed notes to consolidated financial statements.
2
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
----------------------------FOR THE THIRTEEN WEEKS ENDED-----------------------------
RETAINED CUMULATIVE TOTAL
COMMON STOCK ADDITIONAL EARNINGS TRANSLATION SHAREHOLDERS'
-------------------------
SHARES AMOUNT PAID-IN CAPITAL (DEFICIT) ADJUSTMENTS EQUITY
----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 21,426,465 $ 21 $ 12,871 $ 6,626 $ 7 $ 19,525
NET LOSS (1,133) (1,133)
CASH DIVIDEND DECLARED ($.02
PER SHARE) (429) (429)
ACQUISITION OF COMPANY STOCK (33,000) (102) (102)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 58 58
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT APRIL 2, 1995 21,393,465 $ 21 $ 12,769 $ 5,064 $ 65 $ 17,919
=========== =========== =========== =========== =========== ===========
BALANCE AT DECEMBER 31, 1995 21,433,160 $ 21 $ 12,794 ($ 223) $ 79 $ 12,671
NET LOSS (3,857) (3,857)
FOREIGN CURRENCY TRANSALATION
ADJUSTMENT (3) (3)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT MARCH 31, 1996 21,433,160 $ 21 $ 12,794 ($ 4,080) $ 76 $ 8,811
=========== =========== =========== =========== =========== ===========
</TABLE>
See condensed notes to consolidated financial statements.
3
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------
March 31, April 2,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($3,857) ($1,133)
------- -------
Adjustments to reconcile net loss to net cash used by operating activities
Deferred income tax benefit -- 73
Depreciation of property, plant and equipment 1,763 688
Amortization of intangible assets 162 168
Foreign exchange losses (gains) (6) 128
Change in operating assets and liabilities net of effects from purchase of
CVS, Inc.:
Decrease (increase) in accounts receivable 351 (32)
Decrease (increase) in inventories 423 (417)
Decrease in prepaid expenses and other assets 54 476
Decrease in accounts payable and accrued liabilities (1,426) (2,613)
------- -------
Total adjustments 1,321 (1,529)
------- -------
Net cash used by operating activities (2,536) (2,662)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (40) (1,097)
Payment for purchase of CVS, Inc. -- (460)
------- -------
Net cash used in investing activities (40) (1,557)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 2,300 --
Principal payments under notes payable (734) (500)
Principal payments under capital lease obligations (110) --
Dividends paid -- (429)
Acquisition of company stock -- (102)
------- -------
Net cash provided by (used in) financing activities 1,456 (1,031)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3 (101)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,117) (5,351)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,681 9,058
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 564 $ 3,707
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes -- $ 1,377
======= =======
Cash paid during the period for interest $ 475 $ 21
======= =======
</TABLE>
See condensed notes to consolidated financial statements.
4
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
With respect to the significant accounting policies of American Studios, Inc.
(the "Company"), reference is made to Note 1 of the financial statements in the
Company's Form 10-K for the year ended December 31, 1995. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in such Form 10-K.
In the opinion of the Company's management, the accompanying unaudited interim
financial statements reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods presented. Interim results are not necessarily indicative of results for
the entire year.
Principles of Consolidation - The accompanying financial statements include the
accounts of the Company, its wholly owned subsidiary, ASI Distribution, Inc.
(presently inactive) and its 99.99% owned subsidiary American Studios de Mexico,
S.A. de C.V. All significant intercompany transactions have been eliminated.
5
<PAGE>
NOTE 2 - LONG TERM DEBT AND CAPITAL LEASES
Long-term debt and capital lease obligations are summarized as follows (in
000's):
<TABLE>
<CAPTION>
Long-term debt: 1996 1995
------ ------
<S> <C> <C>
Revolving credit facility due January 31, 1997, bearing interest
at lender's prime rate, which at March 31, 1996 was 8.25% $ 5,996 $ 3,696
Collateralized note payable, 8.00%, due in monthly installments
of $41,438, including interest through 1998 1,089 1,191
Collateralized note payable, 8.00%, due in monthly installments
of $54,945, including interest through 1998 1,490 1,623
Notes payable, at prime, in one installment, due on
December 31, 1996 500
Collateralized note payable, at prime, due in monthly installments
of $500,000 through 1996 3,670 4,169
Capital lease obligations:
Leases of certain digital imaging technology systems and sales/portrait
order entry stations with lease periods expiring
through 2000, at interest of 7.69% 4,503 4,781
Leases of certain digital imaging technology systems with lease
periods expiring through 1999, at interest of 8.5% 1,791 1,660
Lease of certain film processing equipment with lease period
expiring in 1998 37 -
------ ------
Total debt 19,076 17,620
Less current portion due within one year 12,826 7,240
------ ------
Long-term debt and capital loan obligation, net of current portion $ 6,250 $ 10,380
======== ========
</TABLE>
Aggregate principal payments for the next five years are as follows:
1996 $ 12,826
1997 2,384
1998 2,444
1999 1,180
2000 242
--------
Total $ 19,076
========
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Net Sales - Net sales were $19.6 million for the first quarter ended March 31,
1996 as compared to $18.7 million for the comparable period in 1995. The
increase in net sales was due to an increase in net sales for fashion
photography operations and permanent studio operations for the first quarter of
1996 as compared to the same period in 1995, which was partially offset by a
decrease in net sales for traveling studio operations. The increase in net sales
for fashion photography operations was principally due to an increase in the
number of fashion photography studio promotions in the first quarter of 1996 as
compared to the same period in 1995 as a result of the expansion of fashion
photography operations in 1995. The increase in net sales for permanent
studio operations was principally due to the continued establishment of
permanent studios in most larger, new Wal-Mart stores, which was significantly
offset by a decrease in average sales per customer in permanent studio
operations of 17% as well as a decline in the number of customers per promotion
of 5% as compared to the same period in 1995. The decrease in net sales for
traveling studio operations for the first quarter of 1996 as compared to the
same period in 1995 was principally due to (i) a decrease in the number of
traveling studio promotions due to the establishment of permanent studios
previously served by traveling studios, (ii) a decrease in average sales per
customer of 11%, and (iii) a decrease in the number of customers per traveling
studio promotion of 5%. Management believes the average sales per customer have
declined due to the elimination of the paper proof program in non-digital
permanent studios, 16"x20" and composite portrait offers in both permanent
studios and traveling studios as well as COD sales for the traveling studio
operations. Although the average sales per customer have recovered to 1995
levels in recent weeks, the Company is monitoring the continuing effect on the
average sale per customer as well as on other areas of operations due to the
elimination of such portrait products and COD payment method.
Management believes that the Company's net sales were adversely impacted by a
generally weak retail market and severe inclement weather conditions during the
first quarter of 1996 and, to a lesser extent, continued competitive pressures.
Cost of Sales - Cost of sales was $18.5 million, or 94% of net sales for the
first quarter of 1996 as compared to $16.2 million, or 87% of net sales for the
first quarter of 1995. The increase in cost of sales as a percentage of net
sales was principally due to lower than expected average sales per customer and
to a lesser extent, lower than expected customers per promotion, in permanent
studio and traveling studio operations. In addition, depreciation expense of
$1.1 million associated with the digital imaging systems and sales/portrait
order entry systems installed during the third and fourth quarter of 1995
contributed to the increase in cost of sales. While the Company experienced
certain reductions in costs related to portrait processing operations in the
first quarter of 1996 as compared to the same period in 1995, the increase in
the number of portraits offered in the specially-priced promotional assortment
partially offset these reductions in portrait processing operations. This
increase in cost of sales as a percentage of net sales was partially offset
by significant cost savings in field labor and related costs, advertising
expenses and certain other expenses resulting from the Company's efforts to
controls costs. Cost of sales per customer for the first quarter of 1996 as
compared to the same period in 1995 decreased 10% in permanent studio
operations, decreased 27% in fashion photography operations and increased 4%
in traveling studio operations.
7
<PAGE>
General and Administrative Expenses - General and administrative expenses were
$4.3 million, or 22% of net sales for the first quarter of 1996 as compared to
$4.1 million, or 22% of net sales for the first quarter of 1995. The increase in
general and administrative expenses is principally due to (i) increases in field
management for the expansion of the Company's traveling fashion photography
operations, (ii) expenses associated with the conversion of its portrait
photography services from a permanent studio to a traveling studio basis, and
(iii) severance expense of $.2 million associated with the Company's termination
of certain personnel. This increase was partially offset by cost savings as a
result of the Company's restructuring of field management to increase the span
of control of field managers.
Amortization Expense - Amortization expense principally relates to the
intangible assets arising from a leveraged transaction in 1988 in which a
predecessor company acquired the business and the assets of the original
predecessor of the Company, as well as intangible assets arising from the
purchase of substantially all of the equipment, inventory and supplies of CVS,
Inc. on January 3, 1995. Amortization expense was $0.2 million for the first
quarter of 1996 as compared to $0.2 million for the first quarter of 1995.
Interest Expense - Interest expense was $450,000 for the first quarter of 1996,
as compared to $21,000 for the same period in 1995. The increase in interest
expense for the first quarter of 1996 is primarily due to borrowings on the
Company's revolving credit facility to support working capital needs, and
long-term capital lease and note obligations to finance the Company's digital
imaging and electronic order entry systems.
Income Tax Benefit - During the first quarter of 1995, the Company recognized
income tax benefits totaling approximately $0.8 million relating principally to
operating losses incurred during the period. Historically, during quarters in
which the Company experiences a loss, the Company has recognized income tax
benefits at an effective tax rate of 40%; however, during the first quarter of
1996, there was no income tax benefit due to the Company's utilization of net
operating loss carrybacks as a result of the 1995 net loss.
Seasonality
Like the business of many retailers, the Company's business is seasonal, with
its highest sales historically occurring in the fourth quarter and its lowest
sales historically occurring in the first quarter. The fourth quarter accounted
for approximately 35% of the Company's net sales in 1995 and the first quarter
accounted for approximately 18% of the Company's net sales in 1995.
Liquidity and Capital Resources
The Company's working capital at March 31, 1996 decreased $6.1 million as
compared to December 31, 1995 . This decrease resulted principally from the
first quarter 1996 net loss, a decrease in cash, a decrease in inventories and
accounts receivable and net borrowings under the revolving credit facility which
was partially offset by a decrease in accounts payable and other accrued
liabilities.
The Company believes that cash flow from operations and borrowings under its
existing revolving credit facility will be adequate to fund the Company's
operating requirements for 1996. The Company plans to continue to examine
appropriate cost cutting measures, its method of operating in certain Wal-Mart
stores, non-profitable areas of its operations and ways to continue to improve
its operating and portrait processing efficiency. However, the Company's
ability to meet its liquidity needs for 1996 will depend principally on the
success of management's efforts to increase sales and reduce costs.
8
<PAGE>
On November 1, 1995, the Company obtained a new secured revolving credit
facility that expires on January 31, 1997 from its commercial bank lender.
The Company and the commercial bank amended this facility on March 26, 1996
to, among other things, modify certain financial covenants to facilitate the
Company's compliance therewith and to reduce the maximum amount available
thereunder. The maximum amount available under this facility, as amended,
including amounts available for letters of credit issued in connection with
the Company's workmen's compensation insurance arrangements, is $14.5 million
through March 31, 1996, $13.5 million from April 1, 1996 through May 31, 1996,
$13.0 million from June 1, 1996 through July 31, 1996, $11.5 million from
August 1, 1996 through October 31, 1996, $9.5 million from November 1, 1996
through November 30, 1996 and $8.5 million from December 1, 1996 until maturity.
As of March 31, 1996, the Company had obligations of approximately $6.0 million
under this facility and the bank had issued letters of credit under this
facility in the aggregate amount of approximately $2.3 million in connection
with the Company's workmen's compensation insurance arrangements. The Company's
obligations under the facility are secured by a first priority security interest
in all of the Company's assets (other than certain equipment used in the
Company's digital imaging systems with regard to which the Company had granted
a first security interest to a vendor prior to obtaining the facility),
including any federal and state tax refunds.
The interest rate under the facility is the bank's prime rate. The Company has
agreed to deposit all of its funds into an account with the bank. The facility
contains certain financial covenants of the Company relating to minimum tangible
net worth and debt to tangible net worth and interest coverage ratios. In
addition, the facility contains covenants of the Company that, among other
things, prohibit capital expenditures or acquisitions without the bank's
consent, limit operating lease expense, restrict the Company's ability to
incur additional debt or liens and require the Company to maintain a majority
of its senior management. At March 31, 1996, the Company was in compliance
with the covenants under the facility.
The Company obtained several long-term leases and a secured long-term note
totaling $9.7 million from several vendors to finance certain equipment
associated with the Company's digital imaging systems and sales/
portrait order entry stations during 1995. At March 31, 1996, the Company
had obligations of approximately $9.4 million under such arrangements
discussed above.
In November 1995, the Company entered into a short-term note financing
arrangement with its primary supplier evidenced by a promissory note in the
principal amount of $4.1 million and a security agreement pursuant to which the
Company's obligations under such note are secured by a security interest in all
inventories of supplies sold by such supplier to the Company. The principal
amount of the note is payable in monthly payments of $500,000 beginning March
1996 until paid, together with monthly payments of interest at Citibank's
prime rate on the outstanding principal balance. At March 31, 1996, the Company
had obligations of approximately $3.7 million under the short-term financing
arrangement.
During the first quarter of 1996, total capital expenditures to date were
approximately $200,000. The Company's present expectation is that these and
other capital expenditures will be approximately $600,000 for 1996. This
estimate does not include any expenditures by the Company for any additional
digital imaging systems.
The Company's 1991 and 1992 federal income tax returns are presently being
examined by the Internal Revenue Service. Although the results of such
examination cannot be predicted with certainty, management believes that
additional assessments, if any, arising from this examination will not have a
material effect on the Company's financial position or future results of
operations.
The statements herein as to the Company's beliefs concerning, and plans for, the
future are forward-looking statements that involve a number of risks and
uncertainties. In addition, to the other factors discussed herein, among other
factors that could cause actual results to differ materially are the following
(i)the Company's inability to increase net sales, (ii)the Company's inability to
attract customers in a sufficient number and/or achieve a sufficient sales
average to enable the Company to offset the costs associated with its
operations, (iii)the Company's inability to control the variable costs of its
operations, (iv)the Company's inability to maintain satisfactory portrait
processing operations in terms of costs and quality, (v)the adverse impact on
the Company of strategies pursued by its competitors and (vi)the unsatisfactory
resolution of the claims, investigations and lawsuits and the examination
discussed herein. All such factors could have an adverse effect on the Company's
results of operations and liquidity needs for 1996.
9
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit 10(A) - American Studios, Inc. Equity Compensation
Plan, as amended and restated effective as of February 27, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN STUDIOS, INC.
Date: May 15, 1996 By:/s/ J. Robert Wren, Jr.
J. Robert Wren, Jr.
Chief Executive Officer
Date: May 15, 1996 By:/s/ Lisa A. George
Lisa A. George
Controller (Principal Accounting
Officer)
11
AMERICAN STUDIOS, INC.
EQUITY COMPENSATION PLAN
Effective as of February 7, 1995
As Amended on February 27, 1996
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed, for the benefit of the Company, to attract
and retain for the Company personnel of exceptional ability; to
motivate such personnel through added incentives to make a maximum
contribution to the Company; to develop and maintain a highly
competent management team; and to be competitive with other
companies with respect to executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of
(i) Incentive Stock Options; (ii) Nonqualified Stock Options; (iii)
Stock Appreciation Rights; (iv) Restricted Stock; (v) Deferred
Stock; (vi) Stock Awards; (vii) Performance Shares; and (viii)
Other Stock-Based Awards and other forms of equity-based
compensation as may be provided and are permissible under this Plan
and the law.
1.3 The Plan shall be effective February 7, 1995 (the "Effective
Date"), subject to the approval of shareholders of the Company
within the 12-month period before such date or the 12-month period
after such date. Awards may be granted prior to such approval, but
such Awards shall be contingent upon such approval being obtained
and, in addition to any other terms thereof or restrictions thereon
under the Plan or an Award Agreement, may not be exercised or
transferred prior to such approval.
ARTICLE II -- DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Acceleration Event" means the occurrence of an event defined in
Article XIII of the Plan.
2.2 "Act" means the Securities Exchange Act of 1934, as now in effect
or as hereafter amended. All citations to sections of the Act or
rules thereunder are to such sections or rules as they may from
time to time be amended or renumbered.
2.3 "Agreement" means the written agreement evidencing each Award
granted to a Participant under the Plan.
2.4 "Award" means an award granted to a Participant in accordance with
the provisions of the Plan, including, but not limited to, a Stock
Option, Stock Right, Restricted Stock, Deferred Stock, Stock
Awards, Performance Shares, Other Stock-Based Awards, or any
combination of the foregoing.
2.5 "Board" means the Board of Directors of American Studios, Inc.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended. All citations to sections of the Code are to
such sections as they may from time to time be amended or
renumbered.
2.7 "Committee" means the Stock Option/Compensation Committee of the
Board or such other committee consisting of two or more members as
may be appointed by the Board to administer this Plan pursuant to
Article III. To the extent required by Rule 16b-3 under the Act,
the Committee shall consist of individuals who are members of the
Board and Disinterested Persons. Committee members may also be
appointed for such limited purposes as may be provided by the
Board.
<PAGE>
2.8 "Company" means American Studios, Inc., a North Carolina
corporation, and its successors and assigns. The term "Company"
shall include any corporation which is a member of a controlled
group of corporations (as defined in Section 414(b) of the Code, as
modified by Section 415(h) of the Code) which includes the Company;
any trade or business (whether or not incorporated) which is under
common control (as defined in Section 414(c) of the Code, as
modified by Section 415(h) of the Code) with the Company; any
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code)
which includes the Company; and any other entity required to be
aggregated with the Company pursuant to regulations under Section
414(o) of the Code. With respect to all purposes of the Plan,
including, but not limited to, the establishment, amendment,
termination, operation and administration of the Plan, American
Studios, Inc. shall be authorized to act on behalf of all other
entities included within the definition of "Company".
2.9 "Deferred Stock" means the stock awarded under Article IX of the
Plan.
2.10 "Disability" means a disability as determined under procedures
established by the Committee or in any Award.
2.11 "Discount Stock Options" means Nonqualified Stock Options which
provide for an exercise price of less than the Fair Market Value of
the Stock at the date of the Award.
2.12 "Disinterested Person" shall have the meaning set forth in Rule
16b-3 under the Act.
2.13 "Early Retirement" shall mean retirement from active employment
with the Company, with the express consent of the Committee,
pursuant to the early retirement provisions established by the
Committee or in any Award.
2.14 "Eligible Participant" means any employee of the Company, as shall
be determined by the Committee, as well as any other person,
including directors, subject to such limitations imposed on a
person designated as a Disinterested Person, whose participation
the Committee determines is in the best interest of the Company,
subject to limitations as may be provided by the Code, the Act or
the Committee.
2.15 "Fair Market Value" means, if the Stock is listed for trading on
any national securities exchange, the last sale price regular way
of the Stock on the date of reference, or, if no sale of the Stock
takes place on such date, the average of the closing high bid and
low asked prices regular way of the Stock on such date, in either
case on such exchange. If the Stock is not listed for trading on a
national securities exchange, but is listed on The NASDAQ Stock
Market, then "fair market value" means the last sale price of the
Stock on the date of reference, or, if no sale of the Stock takes
place on such date, the average of the closing high bid and low
asked prices of the Stock on such date, in either case as reported
by The NASDAQ Stock Market. The Committee may establish an
alternative method of determining Fair Market Value.
2.16 "Incentive Stock Option" means a Stock Option granted under Article
IV of the Plan, and as defined in Section 422 of the Code.
2.17 "Limited Stock Appreciation Rights" means a Stock Right which is
exercisable only in the event of a Change in Control and/or a
Potential Change in Control, as described in Section 6.9 of the
Plan, which provides for an amount payable solely in cash, equal to
the excess of the Stock Appreciation Right Fair Market Value of a
share of Stock on the day the Stock Right is surrendered over the
price at which a Participant could exercise a related Stock Option
to purchase the share of Stock.
2.18 "Nonqualified Stock Option" means a Stock Option granted under
Article V of the Plan.
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2.19 "Normal Retirement" shall mean retirement from active employment
with the Company on or after age 65, or pursuant to such other
requirements as may be established by the Committee or in any
Award.
2.20 "Option Grant Date" means, as to any Stock Option:
(a) the date on which the Committee grants the Stock Option
by entering into an Award Agreement with the Participant;
(b) the date the Participant receiving the Stock Option
becomes an employee of the Company, to the extent
employment status is a condition of the grant or a
requirement of the Code or the Act; or
(c) such other date as the Committee may designate.
2.21 "Participant" means an Eligible Participant to whom an Award has
been granted and who has entered into an Agreement evidencing the
Award.
2.22 "Performance Share" means an Award under Article XI of the Plan of
a unit valued by reference to a designated number of shares of
Stock, which value may be paid to the Participant by delivery of
such property as the Committee shall determine, including without
limitation, cash or Stock, or any combination thereof, upon
achievement of such Performance objectives during the Performance
Period as the Committee shall establish at the time of such Award
or thereafter.
2.23 "Plan" means the American Studios, Inc. Equity Compensation Plan,
as amended from time to time.
2.24 "Restricted Stock" means an Award of Stock under Article VIII of
the Plan, which Stock is issued with the restriction that the
holder may not sell, transfer, pledge, or assign such Stock and
with such other restrictions as the Committee, in its sole
discretion, may impose, including without limitation, any
restriction on the right to vote such Stock, and the right to
receive any cash dividends, which restrictions may lapse separately
or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
2.25 "Restriction Period" means the period commencing on the date an
Award of Restricted Stock is granted and ending on such date as the
Committee shall determine.
2.26 "Retirement" shall mean Early Retirement or Normal Retirement.
2.27 "Stock" means the common stock of American Studios, Inc., par value
$.001 per share, as may be adjusted pursuant to the provisions of
Section 3.11.
2.28 "Stock Appreciation Right" means a Stock Right, as described in
Article VI of this Plan, which provides for an amount payable in
Stock and/or cash, as determined by the Committee, equal to the
excess of the Fair Market Value of a share of Stock on the day the
Stock Right is exercised over the price at which the Participant
could exercise a related Stock Option to purchase the share of
Stock.
2.29 "Stock Appreciation Right Fair Market Value" means a value
established by the Committee for the exercise of a Stock
Appreciation Right or a Limited Stock Appreciation Right. If such
exercise occurs during any quarterly "window period," as specified
by Rule 16b-3 under the Act, the Committee may establish a common
value for exercises during such window period.
2.30 "Stock Award" means an Award of Stock granted in payment of
compensation, as provided in Article X of the Plan.
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2.31 "Stock Option" means an Award under Article IV or V of the Plan of
an option to purchase Stock. A Stock Option may be either an
Incentive Stock Option or a Nonqualified Stock Option.
2.32 "Stock Right" means an Award under Article VI of the Plan. A Stock
Right may be either a Stock Appreciation Right or a Limited Stock
Appreciation Right.
2.33 "Termination of Employment" means the discontinuance of employment
of a Participant with the Company for any reason. The determination
of whether a Participant has discontinued employment shall be made
by the Committee in its discretion. In determining whether a
Termination of Employment has occurred, the Committee may provide
that service as a consultant or service with a business enterprise
in which the Company has a significant ownership interest shall be
treated as employment with the Company. The Committee shall have
the discretion, exercisable either at the time the Award is granted
or at the time the Participant terminates employment, to establish
as a provision applicable to the exercise of one or more Awards
that during the limited period of exercisability following
Termination of Employment, the Award may be exercised not only with
respect to the number of shares of Stock for which it is
exercisable at the time of the Termination of Employment but also
with respect to one or more subsequent installments for which the
Award would have become exercisable had the Termination of
Employment not occurred.
ARTICLE III -- ADMINISTRATION
3.1 This Plan shall be administered by the Committee. A Committee
member who is not a Disinterested Person, with respect to action to
be taken by the Committee, shall not be able to participate in the
decision to the extent prescribed by Rule 16b-3 under the Act. The
Committee, in its discretion, may delegate to one or more of its
members such of its powers as it deems appropriate. The Committee
also may limit the power of any member to the extent necessary to
comply with Rule 16b-3 under the Act or any other law. Members of
the Committee shall be appointed originally, and as vacancies
occur, by the Board, to serve at the pleasure of the Board. The
Board may serve as the Committee, if by the terms of the Plan all
Board members are otherwise eligible to serve on the Committee.
3.2 The Committee shall meet at such times and places as it determines.
A majority of its members shall constitute a quorum, and the
decision of a majority of those present at any meeting at which a
quorum is present shall constitute the decision of the Committee. A
memorandum signed by all of its members shall constitute the
decision of the Committee without necessity, in such event, for
holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe
and administer the Plan, to select the persons who are eligible to
receive an Award, and to act in all matters pertaining to the
granting of an Award and the contents of the Agreement evidencing
the Award, including without limitation, the determination of the
number of Stock Options, Stock Rights, shares of Stock or
Performance Shares subject to an Award and the form, terms,
conditions and duration of each Award, and any amendment thereof
consistent with the provisions of the Plan. All acts,
determinations and decisions of the Committee made or taken
pursuant to grants of authority under the Plan or with respect to
any questions arising in connection with the administration and
interpretation of the Plan, including the severability of any and
all of the provisions thereof, shall be conclusive, final and
binding upon all Participants, Eligible Participants and their
beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as it
deems appropriate.
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3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
notwithstanding any other provisions of the Plan, the Committee is
authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to
an Award in the event of an Acceleration Event as defined in
Article XIII. Such action may include, but shall not be limited to,
establishing, amending or waiving the forms, terms, conditions and
duration of an Award and the Award Agreement, so as to provide for
earlier, later, extended or additional times for exercise or
payments, differing methods for calculating payments, alternate
forms and amounts of payment, an accelerated release of
restrictions or other modifications. The Committee may take such
actions pursuant to this Section 3.5 by adopting rules and
regulations of general applicability to all Participants or to
certain categories of Participants, by including, amending or
waiving terms and conditions in an Award and the Award Agreement,
or by taking action with respect to individual Participants.
3.6 The aggregate number of shares of Stock which are available for
Award under the Plan shall be 1,050,000(1) or any larger number
that, subsequent to the effective date this Plan, may be authorized
for issuance by the Company. Such shares of Stock shall be made
available from authorized and unissued shares.
(a) If, for any reason, any shares of Stock or Performance
Shares awarded or subject to purchase under the Plan are
not delivered or purchased, or are reacquired by the
Company, for reasons including, but not limited to, a
forfeiture of Restricted Stock or termination, expiration
or cancellation of a Stock Option, Stock Right or
Performance Share, or any other termination of an Award
without payment being made in the form of Stock, whether
or not Restricted Stock, such shares of Stock or
Performance Shares shall not be charged against the
aggregate number of shares of Stock available for Awards
under the Plan, and may again be available for Award
under the Plan.
(b) For all purposes under the Plan, each Performance Share
awarded shall be counted as one share of Stock subject to
an Award.
(c) To the extent a Stock Right granted in connection with a
Stock Option is exercised without payment being made in
the form of Stock, whether or not Restricted Stock, the
shares of Stock which otherwise would have been issued
upon the exercise of such related Stock Option shall not
be charged against the aggregate number of shares of
Stock subject to Awards under the Plan, and may again be
available for Award under the Plan.
3.7 Each Award granted under the Plan shall be evidenced by a written
Award Agreement. Each Award Agreement shall be subject to and
incorporate, by reference or otherwise, the applicable terms and
conditions of the Plan, and any other terms and conditions, not
inconsistent with the Plan, as may be imposed by the Committee.
3.8 The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which
the Stock may then be listed;
(b) the listing of such shares on The NASDAQ Stock Market, if
the Stock is then listed on The NASDAQ Stock Market; and
- - --------
(1)On February 27, 1996, the Board of Directors amended the Plan to
increase the number of shares available for Award under the Plan from 650,000 to
1,050,000, subject to the approval of the shareholders of the Company.
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(c) the completion of any registration or qualification of
such shares of Stock under any federal or state law, or
any ruling or regulation of any government body which the
Company shall, in its discretion, determine to be
necessary or advisable.
3.9 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed and any
applicable federal or state laws, and the Committee may cause a
legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions. In making such
determination, the Committee may rely upon an opinion of counsel
for the Company.
3.10 Subject to the restrictions on Restricted Stock, as provided in
Article VIII of the Plan and in the Restricted Stock Award
Agreement, each Participant who receives an Award of Restricted
Stock shall have all of the rights of a shareholder with respect to
such shares of Stock, including the right to vote the shares to the
extent, if any, such shares possess voting rights and receive
dividends and other distributions. Except as provided otherwise in
the Plan or in an Award Agreement, no Participant awarded a Stock
Option, Stock Right, Deferred Stock, Stock Award or Performance
Share shall have any right as a shareholder with respect to any
shares of Stock covered by his or her Stock Option, Stock Right,
Deferred Stock, Stock Award or Performance Share prior to the date
of issuance to him or her of a certificate or certificates for such
shares of Stock.
3.11 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock,
merger or consolidation of the Company or sale or other disposition
by the Company of all or a portion of its assets, any other change
in the Company's corporate structure, or any distribution to
shareholders other than a cash dividend results in the outstanding
shares of Stock, or any securities exchanged therefor or received
in their place, being exchanged for a different number or class of
shares of Stock or other securities of the Company, or for shares
of Stock or other securities of any other corporation; or new,
different or additional shares or other securities of the Company
or of any other corporation being received by the holders of
outstanding shares of Stock, then equitable adjustments shall be
made by the Committee in:
(a) the limitation on the aggregate number of shares of Stock
that may be awarded as set forth in Section 3.6 of the
Plan;
(b) the number and class of Stock that may be subject to an
Award, and which have not been issued or transferred
under an outstanding Award;
(c) the purchase price to be paid per share of Stock under
outstanding Stock Options and the number of shares of
Stock to be transferred in settlement of outstanding
Stock Rights; and
(d) the terms, conditions or restrictions of any Award and
Award Agreement, including the price payable for the
acquisition of Stock; provided, however, that all
adjustments made as the result of the foregoing in
respect of each Incentive Stock Option shall be made so
that such Stock Option shall continue to be an Incentive
Stock Option, as defined in Section 422 of the Code.
3.12 In addition to such other rights of indemnification as they may
have as directors or as members of the Committee, the members of
the Committee shall be indemnified by the Company against
reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any
Award granted thereunder, and against all amounts paid by them in
settlement thereof, provided
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such settlement is approved by independent legal counsel selected
by the Company, or paid by them in satisfaction of a judgment or
settlement in any such action, suit or proceeding, except as to
matters as to which the Committee member has been negligent or
engaged in misconduct in the performance of his duties; provided,
that within 60 days after institution of any such action, suit or
proceeding, a Committee member shall in writing offer the Company
the opportunity, at its own expense, to handle and defend the same.
3.13 The Committee may require each person purchasing shares of Stock
pursuant to a Stock Option or other Award under the Plan to
represent to and agree with the Company in writing that he is
acquiring the shares of Stock without a view to distribution
thereof. The certificates for such shares of Stock may include any
legend which the Committee deems appropriate to reflect any
restrictions on transfer.
3.14 The Committee shall be authorized to make adjustments in
performance based criteria or in the terms and conditions of other
Awards in recognition of unusual or nonrecurring events affecting
the Company or its financial statements or changes in applicable
laws, regulations or accounting principles. The Committee may
correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement in the manner and
to the extent it shall deem desirable to carry it into effect. In
the event the Company shall assume outstanding employee benefit
awards or the right or obligation to make future such awards in
connection with the acquisition of another corporation or business
entity, the Committee may, in its discretion, make such adjustments
in the terms of Awards under the Plan as it shall deem appropriate.
3.15 The Committee shall have full power and authority to determine
whether, to what extent and under what circumstances, any Award
shall be canceled or suspended. In particular, but without
limitation, all outstanding Awards to any Participant may be
canceled if (a) the Participant, without the consent of the
Committee, while employed by the Company or after termination of
such employment, becomes associated with, employed by, renders
services to, or owns any interest in, other than any insubstantial
interest, as determined by the Committee, any business that is in
competition with the Company or with any business in which the
Company has a substantial interest as determined by the Committee;
or (b) is terminated for cause as determined by the Committee.
ARTICLE IV -- INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock
Option granted hereunder shall be construed in accordance with the
provisions of Section 422 of the Code, and any provision hereof
that cannot be so construed shall be disregarded.
4.2 Incentive Stock Options shall be granted only to Eligible
Participants who are in the active employment of the Company, each
of whom may be granted one or more such Incentive Stock Options for
a reason related to his employment at such time or times determined
by the Committee following the Effective Date through the date
which is ten (10) years following the Effective Date, subject to
the following conditions:
(a) The Incentive Stock Option price per share of Stock shall
be set in the Award Agreement, but shall not be less than
100% of the Fair Market Value of the Stock on the Option
Grant Date. If the Eligible Participant owns more than
10% of the outstanding Stock (as determined pursuant to
Section 424(d) of the Code) on the Option Grant Date, the
Incentive Stock Option price per share shall not be less
than 110% of the Fair Market Value of the Stock on the
Option Grant Date.
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(b) The Incentive Stock Option and its related Stock Right,
if any, may be exercised in whole or in part from time to
time within ten (10) years from the Option Grant Date
(five (5) years if the Eligible Participant owns more
than 10% of the Stock on the Option Grant Date), or such
shorter period as may be specified by the Committee in
the Award; provided, that in any event, the Incentive
Stock Option and related Stock Right shall lapse and
cease to be exercisable upon a Termination of Employment
or within such period following a Termination of
Employment as shall have been specified in the Incentive
Stock Option Award Agreement or its related Stock Right
Award Agreement, which period shall in no event exceed
three months unless:
(i) employment shall have terminated as a result
of death or Disability, in which event such
period shall not exceed one year after the
date of death or Disability; or
(ii) death shall have occurred following a Termination of
Employment and while the Incentive Stock Option or
Stock Right was still exercisable, in which event
such period shall not exceed one year after the date
of death; provided, further, that such period
following a Termination of Employment shall in no
event extend the original exercise period of the
Incentive Stock Option or any related Stock Right.
(c) To the extent the aggregate Fair Market Value, determined
as of the Option Grant Date, of the shares of Stock with
respect to which Incentive Stock Options (determined
without regard to this subsection) are first exercisable
during any calendar year by any Eligible Participant
exceeds $100,000, such options shall be treated as
Nonqualified Stock Options granted under Article V.
(d) The Committee may adopt any other terms and conditions
which it determines should be imposed for the Incentive
Stock Option to qualify under Section 422 of the Code, as
well as any other terms and conditions not inconsistent
with this Article IV as determined by the Committee.
4.3 The Committee may at any time offer to buy out for a payment in
cash, Stock, Deferred Stock or Restricted Stock an Incentive Stock
Option previously granted, based on such terms and conditions as
the Committee shall establish and communicate to the Participant at
the time that such offer is made.
4.4 If the Incentive Stock Option Award Agreement so provides, the
Committee may require that all or part of the shares of Stock to be
issued upon the exercise of an Incentive Stock Option shall take
the form of Deferred or Restricted Stock, which shall be valued on
the date of exercise, as determined by the Committee, on the basis
of the Fair Market Value of such Deferred Stock or Restricted Stock
determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
ARTICLE V -- NONQUALIFIED STOCK OPTIONS
5.1 One or more Stock Options may be granted as Nonqualified Stock
Options to Eligible Participants to purchase shares of Stock at
such time or times determined by the Committee, following the
Effective Date, subject to the terms and conditions set forth in
this Article V.
5.2 The Nonqualified Stock Option price per share of Stock shall be
established in the Award Agreement and may be less than 100% of the
Fair Market Value at the time of the grant, or at such later date
as the Committee shall determine.
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5.3 The Nonqualified Stock Option and its related Stock Right, if any,
may be exercised in full or in part from time to time within such
period as may be specified by the Committee or in the Award
Agreement; provided, that, in any event, the Nonqualified Stock
Option and the related Stock Right shall lapse and cease to be
exercisable three months following the Participant's Termination of
Employment or on such other date as may be specified by the
Committee in a Nonqualified Stock Option Award Agreement or Stock
Right Award Agreement.
5.4 The Nonqualified Stock Option Award Agreement may include any other
terms and conditions not inconsistent with this Article V or in
Article VII, as determined by the Committee.
ARTICLE VI - STOCK APPRECIATION RIGHTS
6.1 A Stock Appreciation Right may be granted to an Eligible
Participant in connection with an Incentive Stock Option or a
Nonqualified Stock Option granted under Article IV or Article V of
this Plan, or may be granted independent of any related Stock
Option.
6.2 A related Stock Appreciation Right shall entitle a holder of a
Stock Option, within the period specified for the exercise of the
Stock Option, to surrender the unexercised Stock Option, or a
portion thereof, and to receive in exchange therefor a payment in
cash or shares of Stock having an aggregate value equal to the
amount by which the Fair Market Value of each share of Stock
exceeds the Stock Option price per share of Stock, times the number
of shares of Stock under the Stock Option, or portion thereof,
which is surrendered.
6.3 Each related Stock Appreciation Right granted hereunder shall be
subject to the same terms and conditions as the related Stock
Option, including limitations on transferability, and shall be
exercisable only to the extent such Stock Option is exercisable and
shall terminate or lapse and cease to be exercisable when the
related Stock Option terminates or lapses. The grant of Stock
Appreciation Rights related to Incentive Stock Options must be
concurrent with the grant of the Incentive Stock Options. With
respect to Nonqualified Stock Options, the grant either may be
concurrent with the grant of the Nonqualified Stock Options, or in
connection with Nonqualified Stock Options previously granted under
Article V, which are unexercised and have not terminated or lapsed.
6.4 The Committee shall have sole discretion to determine in each case
whether the payment with respect to the exercise of a Stock
Appreciation Right will be in the form of all cash or all Stock, or
any combination thereof. If payment is to be made in Stock, the
number of shares of Stock shall be determined based on the Fair
Market Value of the Stock on the date of exercise. If the Committee
elects to make full payment in Stock, no fractional shares of Stock
shall be issued and cash payments shall be made in lieu of
fractional shares.
6.5 The Committee shall have sole discretion as to the timing of any
payment made in cash or Stock, or a combination thereof, upon
exercise of Stock Appreciation Rights. Payment may be made in a
lump sum, in annual installments or may be otherwise deferred; and
the Committee shall have sole discretion to determine whether any
deferred payments may bear amounts equivalent to interest or cash
dividends.
6.6 Upon exercise of a Stock Appreciation Right, the number of shares
of Stock subject to exercise under any related Stock Option shall
automatically be reduced by the number of shares of Stock
represented by the Stock Option or portion thereof which is
surrendered.
6.7 Notwithstanding any other provision of the Plan, the exercise of a
Stock Appreciation Right is required to satisfy the applicable
requirements under Rule 16b-3 under the Act.
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6.8 The Committee, in its sole discretion, may also provide that, in
the event of a Change in Control and/or a Potential Change in
Control, as defined in Article XIII, the amount to be paid upon the
exercise of a Stock Appreciation Right or Limited Stock
Appreciation Right shall be based on the Change in Control Price,
as defined in Section 13.9, subject to such terms and conditions as
the Committee may specify.
6.9 In its sole discretion, the Committee may grant Limited Stock
Appreciation Rights under this Article VI. Limited Stock
Appreciation Rights become exercisable only in the event of a
Change in Control and/or a Potential Change in Control, subject to
such terms and conditions as the committee, in its sole discretion,
may specify. Such Limited Stock Appreciation Rights shall be
settled solely in cash. A Limited Stock Appreciation Right shall
entitle the holder of the related Stock Option to surrender such
Stock Option, or any portion thereof, to the extent unexercised in
respect of the number of shares of Stock as to which such Limited
Stock Appreciation Right is exercised, and to receive a cash
payment equal to the difference between (a) the Stock Appreciation
Right Fair Market Value, at the date of surrender, of a share of
Stock for which the surrendered Stock Option or portion thereof is
then exercisable, and (b) the price at which a Participant could
exercise a related Stock Option to purchase the share of Stock.
Such Stock Option shall, to the extent so surrendered, thereupon
cease to be exercisable. A Limited Stock Appreciation Right shall
be subject to such further terms and conditions as the Committee
shall, in its sole discretion, deem appropriate, including any
restrictions necessary to comply with Section 16(b) of the Act.
ARTICLE VII -- INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS
7.1 Each Stock Option and Stock Right shall be granted subject to such
terms and conditions, if any, not inconsistent with this Plan, as
shall be determined by the Committee, including any provisions as
to continued employment as consideration for the grant or exercise
of such Stock Option or Stock Right and any provisions which may be
advisable to comply with applicable laws, regulations or rulings of
any governmental authority.
7.2 A Stock Option or Stock Right shall not be transferable by the
Participant other than by will or by the laws of descent and
distribution, or, to the extent otherwise allowed by Rule 16b-3
under the Act, or other applicable law, pursuant to a qualified
domestic relations order as defined by the Code or the Employee
Retirement Income Security Act, or the rules thereunder, and shall
be exercisable during the lifetime of the Participant only by him
or by his guardian or legal representative.
7.3 Shares of Stock purchased upon exercise of a Stock Option shall be
paid for in such amounts, at such times and upon such terms as
shall be determined by the Committee, subject to limitations set
forth in the Stock Option Award Agreement. Without limiting the
foregoing, the Committee may establish payment terms for the
exercise of Stock Options which permit the Participant to deliver
shares of Stock, or other evidence of ownership of Stock
satisfactory to the Company, with a Fair Market Value equal to the
Stock Option price as payment.
7.4 No cash dividends shall be paid on shares of Stock subject to
unexercised Stock Options. The Committee may provide, however, that
a Participant to whom a Stock Option has been granted which is
exercisable in whole or in part at a future time for shares of
Stock shall be entitled to receive an amount per share equal in
value to the cash dividends, if any, paid per share on issued and
outstanding Stock, as of the dividend record dates occurring during
the period between the date of the grant and the time each such
share of Stock is delivered pursuant to exercise of such Stock
Option or the related Stock Right. Such amounts (herein called
"dividend equivalents") may, in the discretion of the Committee,
be:
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(a) paid in cash or Stock either from time to time prior to,
or at the time of the delivery of, such Stock, or upon
expiration of the Stock Option if it shall not have been
fully exercised; or
(b) converted into contingently credited shares of Stock,
with respect to which dividend equivalents may accrue, in
such manner, at such value, and deliverable at such time
or times, as may be determined by the Committee. Such
Stock, whether delivered or contingently credited, shall
be charged against the limitations set forth in Section
3.6.
7.5 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in
cash at a future time.
7.6 In the event of Disability or death, the Committee, with the
consent of the Participant or his legal representative, may
authorize payment, in cash or in Stock, or partly in cash and
partly in Stock, as the Committee may direct, of an amount equal to
the difference at the time between the Fair Market Value of the
Stock subject to a Stock Option and the option price in
consideration of the surrender of the Stock Option.
7.7 If a Participant is required to pay to the Company an amount with
respect to income and employment tax withholding obligations in
connection with exercise of a Nonqualified Stock Option, and/or
with respect to certain dispositions of Stock acquired upon the
exercise of an Incentive Stock Option, the Committee, in its
discretion and subject to such rules as it may adopt, may permit
the Participant to satisfy the obligation, in whole or in part, by
making an irrevocable election that a portion of the total Fair
Market Value of the shares of Stock subject to the Nonqualified
Stock Option and/or with respect to certain dispositions of Stock
acquired upon the exercise of an Incentive Stock Option, be paid in
the form of cash in lieu of the issuance of Stock and that such
cash payment be applied to the satisfaction of the withholding
obligations. The amount to be withheld shall not exceed the
statutory minimum federal and state income and employment tax
liability arising from the Stock Option exercise transaction.
Notwithstanding any other provision of the Plan, any election under
this Section 7.7 is required to satisfy the applicable requirements
under Rule 16b-3 of the Act.
7.8 The Committee may permit the voluntary surrender of all or a
portion of any Stock Option granted under the Plan to be
conditioned upon the granting to the Participant of a new Stock
Option for the same or a different number of shares of Stock as the
Stock Option surrendered, or may require such surrender as a
condition precedent to a grant of a new Stock Option to such
Participant. Subject to the provisions of the Plan, such new Stock
Option shall be exercisable at such price, during such period and
on such other terms and conditions as are specified by the
Committee at the time the new Stock Option is granted. Upon
surrender, the Stock Options surrendered shall be canceled and the
shares of Stock previously subject to them shall be available for
the grant of other Stock Options.
ARTICLE VIII -- RESTRICTED STOCK
8.1 Restricted Stock Awards may be made to certain Participants as an
incentive for the performance of future services that will
contribute materially to the successful operation of the Company.
Awards of Restricted Stock may be made either alone, in addition to
or in tandem with other Awards granted under the Plan and/or cash
payments made outside of the Plan.
8.2 With respect to Awards of Restricted Stock, the Committee shall:
(a) determine the purchase price, if any, to be paid for such
Restricted Stock, which may be equal to or less than par
value and may be zero, subject to such minimum
consideration as may be required by applicable law;
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(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the Restricted
Stock such as service or performance, other than those
set forth in this Article VIII;
(d) determine if the restrictions shall lapse as to all
shares of Restricted Stock at the end of the Restriction
Period or as to a portion of the shares of Restricted
Stock in installments during the Restriction Period; and
(e) determine if dividends and other distributions on the
Restricted Stock are to be paid currently to the
Participant or paid to the Company for the account of the
Participant.
8.3 Awards of Restricted Stock must be accepted within a period of 60
days, or such shorter period as the Committee may specify, by
executing a Restricted Stock Award Agreement and paying whatever
price, if any, is required. The prospective recipient of a
Restricted Stock Award shall not have any rights with respect to
such Award, unless such recipient has executed a Restricted Stock
Award Agreement and has delivered a fully executed copy thereof to
the Committee, and has otherwise complied with the applicable terms
and conditions of such Award.
8.4 Except when the Committee determines otherwise, or as otherwise
provided in the Restricted Stock Award Agreement, if a Participant
terminates employment with the Company for any reason before the
expiration of the Restriction Period, all shares of Restricted
Stock still subject to restriction shall be forfeited by the
Participant and shall be reacquired by the Company.
8.5 Except as otherwise provided in this Article VIII, no shares of
Restricted Stock received by a Participant shall be sold,
exchanged, transferred, pledged, hypothecated or otherwise disposed
of during the Restriction Period.
8.6 To the extent not otherwise provided in a Restricted Stock Award
Agreement, in cases of death, Disability or Retirement or in cases
of special circumstances, the Committee, if it finds that a waiver
would be appropriate, may elect to waive any or all remaining
restrictions with respect to such Participant's Restricted Stock.
8.7 In the event of hardship or other special circumstances of a
Participant whose employment with the Company is involuntarily
terminated, the Committee may waive in whole or in part any or all
remaining restrictions with respect to any or all of the
Participant's Restricted Stock, based on such factors and criteria
as the Committee may deem appropriate.
8.8 The certificates representing shares of Restricted Stock may
either:
(a) be held in custody by the Company until the Restriction
Period expires or until restrictions thereon otherwise
lapse, and the Participant shall deliver to the Company a
stock power endorsed in blank relating to the Restricted
Stock; and/or
(b) be issued to the Participant and registered in the name
of the Participant, and shall bear an appropriate
restrictive legend and shall be subject to appropriate
stop-transfer orders.
8.9 Except as provided in this Article VIII, a Participant receiving a
Restricted Stock Award shall have, with respect to the shares of
Restricted Stock covered by any Award, all of the rights of a
shareholder of the Company, including the right to vote the shares
to the extent, if any, such shares possess voting rights and the
right to receive any dividends; provided, however, the Committee
may require that any dividends on such shares of Restricted Stock
shall be automatically deferred and reinvested in additional
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Restricted Stock subject to the same restrictions as the underlying
Award, or may require that dividends and other distributions on
Restricted Stock shall be paid to the Company for the account of
the Participant. The Committee shall determine whether interest
shall be paid on such amounts, the rate of any such interest, and
the other terms applicable to such amounts.
8.10 If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, unrestricted certificates for such shares shall be
delivered to the Participant.
8.11 In order to better ensure that Award payments actually reflect the
performance of the Company and the service of the Participant, the
Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted
Stock Award, subject to such performance, future service, deferral
and other terms and conditions as may be specified by the
Committee.
ARTICLE IX -- DEFERRED STOCK
9.1 Shares of Deferred Stock together with cash dividend equivalents,
if so determined by the Committee, may be issued either alone or in
addition to other Awards granted under the Plan in the discretion
of the Committee. The Committee shall determine the individuals to
whom, and the time or times at which, such Awards will be made, the
number of shares to be awarded, the price, if any, to be paid by
the recipient of a Deferred Stock Award, the time or times within
which such Awards may be subject to forfeiture, and all other
conditions of the Awards. The Committee may condition Awards of
Deferred Stock upon the attainment of specified performance goals
or such other factors or criteria as the Committee may determine.
9.2 Deferred Stock Awards shall be subject to the following terms and
conditions:
(a) Subject to the provisions of this Plan and the applicable
Award Agreement, Deferred Stock Awards may not be sold,
transferred, pledged, assigned or otherwise encumbered
during the period specified by the Committee for purposes
of such Award (the "Deferral Period"). At the expiration
of the Deferral Period, or the Elective Deferral Period
defined in Section 9.3, share certificates shall be
delivered to the Participant, or his legal
representative, in a number equal to the number of shares
of Stock covered by the Deferred Stock Award. Based on
service, performance and/or such other factors or
criteria as the Committee may determine, the Committee,
however, at or after grant, may accelerate the vesting of
all or any part of any Deferred Stock Award and/or waive
the deferral limitations for all or any part of such
Award.
(b) Unless otherwise determined by the Committee, amounts
equal to any dividends that would have been payable
during the Deferral Period with respect to the number of
shares of Stock covered by a Deferred Stock Award if such
shares of Stock had been outstanding shall be
automatically deferred and deemed to be reinvested in
additional Deferred Stock, subject to the same deferral
limitations as the underlying Award.
(c) Except to the extent otherwise provided in this Plan or
in the applicable Award Agreement, upon Termination of
Employment during the Deferral Period for a given Award,
the Deferred Stock covered by such Award shall be
forfeited by the Participant; provided, however, the
Committee may provide for accelerated vesting in the
event of Termination of Employment due to death,
Disability or Retirement, or in the event of hardship or
other special circumstances as the Committee deems
appropriate.
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(d) The Committee may require that a designated percentage of
the total Fair Market Value of the shares of Deferred
Stock held by one or more Participants be paid in the
form of cash in lieu of the issuance of Stock and that
such cash payment be applied to the satisfaction of the
federal and state income and employment tax withholding
obligations that arise at the time the Deferred Stock
becomes free of all restrictions. The designated
percentage shall be equal to the minimum income and
employment tax withholding rate in effect at the time
under applicable federal and state laws.
(e) The Committee may provide one or more Participants
subject to the mandatory cash payment with an election to
receive an additional percentage of the total value of
the Deferred Stock in the form of a cash payment in lieu
of the issuance of Deferred Stock. The additional
percentage shall not exceed the difference between 50%
and the designated percentage cash payment.
(f) The Committee may impose such further terms and
conditions on partial cash payments with respect to
Deferred Stock as it deems appropriate, including any
restrictions necessary to comply with Section 16(b) of
the Act.
9.3 A Participant may elect to further defer receipt of Deferred Stock
for a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's approval
and to such terms as are determined by the Committee. Subject to
any exceptions adopted by the Committee, such election must
generally be made at least 12 months prior to completion of the
Deferral Period for the Deferred Stock Award in question, or for
the applicable installment of such an Award.
9.4 Each Award shall be confirmed by, and subject to the terms of, a
Deferred Stock Award Agreement.
9.5 In order to better ensure that the Award actually reflects the
performance of the Company and the service of the Participant, the
Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Deferred
Stock Award, subject to such performance, future service, deferral
and other terms and conditions as may be specified by the
Committee.
ARTICLE X -- STOCK AWARDS
10.1 A Stock Award shall be granted only in payment of compensation that
has been earned or as compensation to be earned, including without
limitation, compensation awarded concurrently with or prior to the
grant of the Stock Award.
10.2 For the purposes of this Plan, in determining the value of a Stock
Award, all shares of Stock subject to such Stock Award shall be
valued at not less than 100% of the Fair Market Value of such
shares of Stock on the date such Stock Award is granted, regardless
of whether or when such shares of Stock are issued or transferred
to the Participant and whether or not such shares of Stock are
subject to restrictions which affect their value.
10.3 Shares of Stock subject to a Stock Award may be issued or
transferred to the Participant at the time the Stock Award is
granted, or at any time subsequent thereto, or in installments from
time to time, as the Committee shall determine. If any such
issuance or transfer shall not be made to the Participant at the
time the Stock Award is granted, the Committee may provide for
payment to such Participant, either in cash or shares of Stock,
from time to time or at the time or times such shares of Stock
shall be issued or transferred to such Participant, of amounts not
exceeding the dividends which would have been payable to such
Participant in respect of such shares of Stock, as adjusted under
Section 3.11, if
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such shares of Stock had been issued or transferred to such
Participant at the time such Stock Award was granted. Any issuance
payable in shares of Stock under the terms of a Stock Award, at the
discretion of the Committee, may be paid in cash on each date on
which delivery of shares of Stock would otherwise have been made,
in an amount equal to the Fair Market Value on such date of the
shares of Stock which would otherwise have been delivered.
10.4 A Stock Award shall be subject to such terms and conditions,
including without limitation, restrictions on the sale or other
disposition of the Stock Award or of the shares of Stock issued or
transferred pursuant to such Stock Award, as the Committee shall
determine; provided, however, that upon the issuance or transfer of
shares pursuant to a Stock Award, the Participant, with respect to
such shares of Stock, shall be and become a shareholder of the
Company fully entitled to receive dividends, to vote to the extent,
if any, such shares possess voting rights and to exercise all other
rights of a shareholder except to the extent otherwise provided in
the Stock Award. Each Stock Award shall be evidenced by a written
Award Agreement in such form as the Committee shall determine.
ARTICLE XI -- PERFORMANCE SHARES
11.1 Awards of Performance Shares may be made to certain Participants as
an incentive for the performance of future services that will
contribute materially to the successful operation of the Company.
Awards of Performance Shares may be made either alone, in addition
to or in tandem with other Awards granted under the Plan and/or
cash payments made outside of the Plan.
11.2 With respect to Awards of Performance Shares, which may be issued
for no consideration or such minimum consideration as is required
by applicable law, the Committee shall:
(a) determine and designate from time to time those
Participants to whom Awards of Performance Shares are to
be made;
(b) determine the performance period (the "Performance
Period") and/or performance objectives (the "Performance
Objectives") applicable to such Awards;
(c) determine the form of settlement of a Performance Share;
and
(d) generally determine the terms and conditions of each such
Award. At any date, each Performance Share shall have a
value equal to the Fair Market Value, determined as set
forth in Section 2.15.
11.3 Performance Periods may overlap, and Participants may participate
simultaneously with respect to Performance Shares for which
different Performance Periods are prescribed.
11.4 The Committee shall determine the Performance Objectives of Awards
of Performance Shares. Performance Objectives may vary from
Participant to Participant and between Awards and shall be based
upon such performance criteria or combination of factors as the
Committee may deem appropriate, including for example, but not
limited to, minimum earnings per share or return on equity. If
during the course of a Performance Period there shall occur
significant events which the Committee expects to have a
substantial effect on the applicable Performance Objectives during
such period, the Committee may revise such Performance Objectives.
11.5 The Committee shall determine for each Participant the number of
Performance Shares that shall be paid to the Participant if the
applicable Performance Objectives are exceeded or met in whole or
in part.
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11.6 If a Participant terminates service with the Company during a
Performance Period because of death, Disability, Retirement or
under other circumstances in which the Committee in its discretion
finds that a waiver would be appropriate, that Participant, as
determined by the Committee, may be entitled to a payment of
Performance Shares at the end of the Performance Period based upon
the extent to which the Performance Objectives were satisfied at
the end of such period and pro rated for the portion of the
Performance Period during which the Participant was employed by the
Company; provided, however, the Committee may provide for an
earlier payment in settlement of such Performance Shares in such
amount and under such terms and conditions as the Committee deems
appropriate or desirable. If a Participant terminates service with
the Company during a Performance Period for any other reason, then
such Participant shall not be entitled to any payment with respect
to that Performance Period unless the Committee shall otherwise
determine.
11.7 Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash as the Committee
shall determine, with payment to be made as soon as practicable
after the end of the relevant Performance Period.
11.8 The Committee shall have the authority to approve requests by
Participants to defer payment of Performance Shares on terms and
conditions approved by the Committee and set forth in a written
Award Agreement between the Participant and the Company entered
into in advance of the time of receipt or constructive receipt of
payment by the Participant.
ARTICLE XII -- OTHER STOCK-BASED AWARDS
12.1 Other awards that are valued in whole or in part by reference to,
or are otherwise based on, Stock ("Other Stock-Based Awards"),
including without limitation, convertible preferred stock,
convertible debentures, exchangeable securities, phantom stock and
Stock awards or options valued by reference to book value or
performance, may be granted either alone or in addition to or in
tandem with Stock Options, Stock Rights, Restricted Stock, Deferred
Stock or Stock Awards granted under the Plan and/or cash awards
made outside of the Plan. Subject to the provisions of the Plan,
the Committee shall have authority to determine the Eligible
Participants to whom and the time or times at which such Awards
shall be made, the number of shares of Stock subject to such
Awards, and all other conditions of the Awards. The Committee also
may provide for the grant of shares of Stock upon the completion of
a specified Performance Period. The provisions of Other Stock-Based
Awards need not be the same with respect to each recipient.
12.2 Other Stock-Based Awards made pursuant to this Article XII shall be
subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the Award
Agreement, shares of Stock subject to Awards made under
this Article XII may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on
which the shares are issued, or, if later, the date on
which any applicable restriction, performance or deferral
period lapses.
(b) Subject to the provisions of this Plan and the Award
Agreement and unless otherwise determined by the
Committee at the time of the Award, the recipient of an
Award under this Article XII shall be entitled to
receive, currently or on a deferred basis, interest or
dividends or interest or dividend equivalents with
respect to the number of shares covered by the Award, as
determined at the time of the Award by the Committee, in
its sole discretion, and the Committee may provide that
such amounts, if any, shall be deemed to have been
reinvested in additional Stock or otherwise reinvested.
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(c) Any Award under this Article XII and any Stock covered by
any such Award shall vest or be forfeited to the extent
so provided in the Award Agreement, as determined by the
Committee, in its sole discretion.
(d) Upon the Participant's Retirement, Disability or death,
or in cases of special circumstances, the Committee may,
in its sole discretion, waive in whole or in part any or
all of the remaining limitations imposed hereunder, if
any, with respect to any or all of an Award under this
Article XII.
(e) Each Award under this Article XII shall be confirmed by,
and subject to the terms of, an Award Agreement.
(f) Stock, including securities convertible into Stock,
issued on a bonus basis under this Article XII may be
issued for no cash consideration.
12.3 Other Stock-Based Awards may include a phantom stock Award, which
is subject to the following terms and conditions:
(a) The Committee shall select the Eligible Participants who
may receive phantom stock Awards. The Eligible
Participant shall be awarded a phantom stock unit, which
shall be the equivalent to a share of Stock.
(b) Under an Award of phantom stock, payment shall be made on
the dates or dates as specified by the Committee or as
stated in the Award Agreement and phantom stock Awards
may be settled in cash, Stock, or some combination
thereof.
(c) The Committee shall determine such other terms and
conditions of each Award as it deems necessary in its
sole discretion.
ARTICLE XIII -- ACCELERATION EVENTS
13.1 For the purposes of the Plan, an Acceleration Event shall occur in
the event of a "Potential Change in Control," or "Change in
Control" or a "Board-Approved Change in Control," as those terms
are defined below.
13.2 A "Change in Control" shall be deemed to have occurred if:
(a) Any "Person" as defined in Section 3(a)(9) of the Act,
including a "group" (as that term is used in Sections
13(d)(3) and 14(d)(2) of the Act), but excluding the
Company and any employee benefit plan sponsored or
maintained by the Company, including any trustee of such
plan acting as trustee, who:
(i) makes a tender or exchange offer for any
shares of the Company's Stock (as defined
below) pursuant to which any shares of the
Company's Stock are purchased (an "Offer");
or
(ii)together with its "affiliates" and "associates" (as
those terms are defined in Rule 12b-2 under the Act)
becomes the "Beneficial Owner" (within the meaning
of Rule 13d-3 under the Act) of at least 20% of the
Company's Stock (an "Acquisition");
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(b) The shareholders of the Company approve a definitive
agreement or plan to merge or consolidate the Company
with or into another corporation, to sell or otherwise
dispose of all or substantially all of its assets, or to
liquidate the Company (individually, a "Transaction"); or
(c) When, during any period of 24 consecutive months during
the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board (the
"Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof;
provided, however, that a director who was not a director
at the beginning of such 24 month period shall be deemed
to have satisfied such 24 month requirement, and be an
Incumbent Director, if such director was elected by, or
on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as
Incumbent Directors either actually, because they were
directors at the beginning of such 24 month period, or by
prior operation of this Section 13.2(c).
13.3 A "Board-Approved Change in Control" shall be deemed to have
occurred if the Offer, Acquisition or Transaction, as the case may
be, is approved by a majority of the Directors serving as members
of the Board at the time of the Potential Change in Control or
Change in Control.
13.4 A "Potential Change in Control" means the happening of any one of
the following:
(a) The approval by shareholders of an agreement by the
Company, the consummation of which would result in a
Change in Control of the Company, as defined in Section
13.2; or
(b) The acquisition of Beneficial Ownership, directly or
indirectly, by any entity, person or group, other than
the Company or any Company employee benefit plan,
including any trustee of such plan acting as such
trustee, of securities of the Company representing five
percent or more of the combined voting power of the
Company's outstanding securities and the adoption by the
Board of a resolution to the effect that a Potential
Change in Control of the Company has occurred for the
purposes of this Plan.
13.5 Upon the occurrence of an Acceleration Event, subject to the
approval of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, all then outstanding Performance
Shares with respect to which the applicable Performance Period has
not been completed shall be paid as soon as practicable as follows:
(a) all Performance Objectives applicable to the Award of
Performance Shares shall be deemed to have been satisfied
to the extent necessary to result in payment of 100% of
the Performance Shares covered by the Award; and
(b) the applicable Performance Period shall be deemed to have
ended on the date of the Acceleration Event;
(c) the payment to the Participant shall be the amount
determined either by the Committee, in its sole
discretion, or in the manner stated in the Award
Agreement. This amount shall then be multiplied by a
fraction, the numerator of which is the number of full
calendar months of the applicable Performance Period that
have elapsed prior to the date of the Acceleration Event,
and the denominator of which is the total number of
months in the original Performance Period; and
(d) upon the making of any such payment, the Award Agreement
as to which it relates shall be deemed canceled and of no
further force and effect.
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13.6 Upon the occurrence of an Acceleration Event, subject to the
approval of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, the Committee in its discretion
may declare any or all then outstanding Stock options, and any or
all related Stock Rights outstanding for at least six months, not
previously exercisable and vested as immediately exercisable and
fully vested, in whole or in part.
13.7 Upon the occurrence of an Acceleration Event, subject to the
approval of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, the Committee in its discretion,
may declare the restrictions applicable to Awards of Restricted
Stock, Deferred Stock or Other Stock-Based Awards to have lapsed,
in which case the Company shall remove all restrictive legends and
stop-transfer orders applicable to the certificates for such shares
of Stock, and deliver such certificates to the Participants in
whose names they are registered.
13.8 The value of all outstanding Stock Option, Stock Rights, Restricted
Stock, Deferred Stock, Performance Shares, Stock Awards and Other
Stock-Based Awards, in each case to the extent vested, shall,
unless otherwise determined by the Committee in its sole discretion
at or after grant but prior to any Change in Control, be cashed out
on the basis of the "Change in Control Price" (as defined in
Section 13.9) as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control.
13.9 For purposes of Section 13.8, "Change in Control Price" means the
highest price per share of Stock paid in any transaction reported
on the exchange on which the Stock is then traded or on The NASDAQ
Stock Market if the Stock is then traded on The NASDAQ Stock
Market, or paid or offered in any bona fide transaction related to
a Potential or actual Change in Control of the Company at any time
during the 60 day period immediately preceding the occurrence of
the Change in Control, or, where applicable, the occurrence of the
Potential Change in Control event, in each case as determined by
the Committee except that, in the case of Incentive Stock Options
and Stock Appreciation Rights, or Limited Stock Appreciation
Rights, relating to such Incentive Stock options, such price shall
be based only on transactions reported for the date on which the
optionee exercises such Stock Appreciation Rights, or Limited Stock
Appreciation Rights.
ARTICLE XIV -- AMENDMENT AND TERMINATION
14.1 The Board, upon recommendation of the Committee, or otherwise, at
any time and from time to time, may amend or terminate the Plan. To
the extent required by Rule 16b-3 under the Act, no amendment,
without approval by the Company's shareholders, shall:
(a) alter the group of persons eligible to participate in the
Plan;
(b) except as provided in Section 3.6, increase the maximum
number of shares of Stock or Stock Options or Stock
Rights which are available for Awards under the Plan;
(c) extend the period during which Incentive Stock Option
Awards may be granted beyond the date which is ten (10)
years following the Effective Date.
(d) limit or restrict the powers of the Committee with
respect to the administration of this Plan;
(e) change the definition of an Eligible Participant for the
purpose of an Incentive Stock Option or increase the
limit or the value of shares of Stock for which an
Eligible Participant may be granted an Incentive Stock
option;
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(f) materially increase the benefits accruing to Participants
under this Plan;
(g) materially modify the requirements as to eligibility for
participation in this Plan; or
(h) change any of the provisions of this Article XIV.
14.2 No amendment to or discontinuance of this Plan or any provision
thereof by the Board or the shareholders of the Company shall,
without the written consent of the Participant, adversely affect,
as shall be determined by the Committee, any Award theretofore
granted to such Participant under this Plan; provided, however, the
Committee retains the right and power to:
(a) annul any Award if the Participant is terminated for
cause as determined by the Committee;
(b) provide for the forfeiture of shares of Stock or other
gain under an Award as determined by the Committee for
competing against the Company; and
(c) convert any outstanding Incentive Stock Option to a
Nonqualified Stock Option.
14.3 If an Acceleration Event has occurred, no amendment or termination
shall impair the rights of any person with respect to an
outstanding Award as provided in Article XIII.
ARTICLE XV -- MISCELLANEOUS PROVISIONS
15.1 Nothing in the Plan or any Award granted hereunder shall confer
upon any Participant any right to continue in the employ of the
Company, or to serve as a director thereof, or interfere in any way
with the right of the Company to terminate his or her employment at
any time. Unless specifically provided otherwise, no Award granted
under the Plan shall be deemed salary or compensation for the
purpose of computing benefits under any employee benefit plan or
other arrangement of the Company for the benefit of its employees
unless the Company shall determine otherwise. No Participant shall
have any claim to an Award until it is actually granted under the
Plan. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall, except
as otherwise provided by the Committee, be no greater than the
right of an unsecured general creditor of the Company. All payments
to be made hereunder shall be paid from the general funds of the
company, and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such
amounts, except as provided in Article VIII with respect to
Restricted Stock and except as otherwise provided by the Committee.
15.2 The Company may make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of any taxes
which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic
or foreign, to withhold in connection with any Stock Option or the
exercise thereof, any Stock Right or the exercise thereof, or in
connection with any other type of equity-based compensation
provided hereunder or the exercise thereof, including, but not
limited to, the withholding of payment of all or any portion of
such Award or another Award under this Plan until the Participant
reimburses the Company for the amount the Company is required to
withhold with respect to such taxes, or canceling any portion of
such Award or another Award under this Plan in an amount sufficient
to reimburse itself for the amount it is required to so withhold,
or selling any property contingently credited by the Company for
the purpose of paying such Award or another Award under this Plan,
in order to withhold or reimburse itself for the amount it is
required to so withhold.
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15.3 The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such
approvals by any United States government or regulatory agency as
may be required. Any provision herein relating to compliance with
Rule 16b-3 under the Act shall not be applicable with respect to
participation in the Plan by Participants who are not subject to
Section 16(b) of the Act.
15.4 The terms of the Plan shall be binding upon the Company, and its
successors and assigns.
15.5 Neither a Stock Option, Stock Right, nor any other type of
equity-based compensation provided for hereunder, shall be
transferable except as provided for herein. Unless otherwise
provided by the Committee or in an Award Agreement, transfer
restrictions shall only apply to Incentive Stock Options as
required in Article IV and to the extent otherwise required by
federal or state securities laws. If any Participant makes such a
transfer in violation hereof, any obligation of the Company shall
forthwith terminate.
15.6 This Plan and all actions taken hereunder shall be governed by the
laws of the State of North Carolina.
15.7 The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Company. In its sole discretion,
the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver shares of Stock or payments in lieu of or with respect to
Awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected Participant,
the existence of such trusts or other arrangements is consistent
with the "unfunded" status of the Plan.
15.8 Each Participant exercising an Award hereunder agrees to give the
Committee prompt written notice of any election made by such
Participant under Section 83(b) of the Code, or any similar
provision thereof.
15.9 If any provision of this Plan or an Award Agreement is or becomes
or is deemed invalid, illegal or unenforceable in any jurisdiction,
or would disqualify the Plan or any Award Agreement under any law
deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it
cannot be construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan or the
Award Agreement, it shall be stricken and the remainder of the Plan
or the Award Agreement shall remain in full force and effect.
21
<PAGE>
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