<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
( ) 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 1-11008
CATALINA MARKETING CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-0499007
- ----------------------------------- -----------------------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
11300 9th Street North
St. Petersburg, Florida 33716-2329
- ----------------------------------- -----------------------------------
(813) 579-5000
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
At August 12, 1997, Registrant had outstanding 18,348,399 shares of
Common Stock.
<PAGE> 2
CATALINA MARKETING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the three month periods ended
June 30, 1997 and 1996 3
Condensed Consolidated Balance Sheets at
June 30, 1997 and March 31, 1997 4
Condensed Consolidated Statements of Cash Flow
for the three month periods ended
June 30, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION 10
SIGNATURES 11
</TABLE>
2
<PAGE> 3
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
-------- --------
<S> <C> <C>
Revenues $ 46,659 $ 38,127
Costs and Expenses:
Direct operating expenses 18,033 13,136
Selling, general and administrative 12,896 11,154
Depreciation and amortization 5,691 3,664
-------- --------
Total costs and expenses 36,620 27,954
-------- --------
Income From Operations 10,039 10,173
Interest Income (Expense) and Other (393) 232
-------- --------
Income Before Income Taxes and
Minority Interest 9,646 10,405
Income Taxes (4,009) (4,271)
Minority Interest in losses of subsidiaries -- 160
-------- --------
Net Income $ 5,637 $ 6,294
======== ========
Net Income Per Common and
Common Equivalent Share $ 0.30 $ 0.31
======== ========
Weighted Average Shares Outstanding 19,072 20,432
======== ========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(unaudited)
June 30, March 31,
ASSETS 1997 1997
----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,017 $ 13,698
Accounts receivable, net 21,002 28,367
Deferred tax asset 9,264 7,467
Prepaid expenses and other current assets 11,919 12,217
--------- ---------
Total current assets 45,202 61,749
--------- ---------
Property and Equipment:
Property and equipment 145,222 142,163
Accumulated depreciation and amortization (77,332) (72,585)
--------- ---------
Property and equipment, net 67,890 69,578
--------- ---------
Purchased intangible assets, net 18,929 18,805
Other assets 4,303 4,564
--------- ---------
Total Assets $ 136,324 $ 154,696
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 9,513 $ 12,674
Accrued expenses 26,999 23,361
Deferred revenue 12,958 11,611
Short term borrowings 5,259 5,820
--------- ---------
Total current liabilities 54,729 53,466
--------- ---------
Deferred tax liability 3,522 3,423
Long term debt 12,563 869
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $0.01 par value; 5,000,000
authorized shares; none issued and outstanding -- --
Common stock; $0.01 par value; 50,000,000 and 30,000,000
authorized shares and 20,883,496 and 20,778,557 shares
issued at June 30, 1997 and
March 31, 1997, respectively 209 208
Paid-in capital 44,292 41,770
Cumulative translation adjustment 1,161 749
Retained earnings 89,851 84,214
Less common stock in treasury, at cost (2,575,885 and
1,172,408 shares at June 30, 1997 and March 31,
1997, respectively) (70,003) (30,003)
--------- ---------
Total stockholders' equity 65,510 96,938
--------- ---------
Total Liabilities and Stockholders' Equity $ 136,324 $ 154,696
========= =========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
CATALINA MARKETING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,637 $ 6,294
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,751 3,688
Minority interest -- (160)
Other (1,192) 254
Changes in operating assets and liabilities 10,811 4,124
-------- --------
Net cash provided by operating activities 21,007 14,200
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (3,512) (9,092)
Purchase of investments, net of cash acquired (2,087) (11,915)
-------- --------
Net cash used in investing activities (5,599) (21,007)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations 32,627 --
Principal payments on debt obligations (21,067) --
Proceeds from issuance of common and subsidiary stock 2,375 662
Tax benefit from exercise of non-qualified options 76 --
Payment for repurchase of company common stock (40,000) --
-------- --------
Net cash (used in) provided by financing activities (25,989) 662
-------- --------
NET DECREASE IN CASH (10,581) (6,145)
Effect of exchange rate changes on cash (100) (53)
CASH, at end of prior period 13,698 25,778
-------- --------
CASH, at end of current period $ 3,017 $ 19,580
======== ========
</TABLE>
The accompanying Notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
CATALINA MARKETING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Condensed Consolidated Financial Statements:
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of June 30, 1997 and March 31, 1997, and the results of operations
and cash flows for the three month periods ended June 30, 1997 and 1996.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. The first quarter
results of the majority owned foreign subsidiaries are included as of and for
the three month periods ended March 31, 1997 and 1996. All material intercompany
profits, transactions and balances have been eliminated. The Company's
investment in a non-majority owned company is accounted for on the equity
method.
These financial statements, including the condensed consolidated balance sheet
as of March 31, 1997, which has been derived from audited financial statements,
are presented in accordance with the requirements of Form 10-Q and consequently
may not include all disclosures normally required by generally accepted
accounting principles or those normally made in the Company's Annual Report on
Form 10-K. The accompanying condensed consolidated financial statements and
related notes should be read in conjunction with the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997.
Note 2. Net Income Per Common and Common Equivalent Share:
Net income per common and common equivalent share is based on the weighted
average number of shares of common stock outstanding and dilutive common
equivalent shares using the treasury stock method.
Note 3: Stockholder Protection Agreement:
On May 8, 1997, the Company announced that it had adopted a Stockholder
Protection Plan. To implement this plan, the Company declared a dividend of one
Preferred Share Purchase Right on each outstanding share of the Company's common
stock. The dividend distribution was payable to stockholders of record on May
12, 1997. The rights will be exercisable for fractions of a share of the
Company's Series X Junior Participating Preferred Stock only if a person or
group acquires 15 percent or more of the Company's common stock or announces or
commences a tender offer for 15 percent or more of the common stock, except for
certain instances defined in the Stockholder Protection Plan.
6
<PAGE> 7
Note 4: Effect of SFAS No. 128, No. 130 and No. 131:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), effective for financial
statements issued for periods ending after December 15, 1997. SFAS No. 128
replaces the presentation of primary EPS with a presentation of basic EPS,
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. The effect of the
adoption of SFAS No. 128 on the accompanying financial statements will be as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1997 1996
------ ------
<S> <C> <C>
Net Income $5,637 $6,294
PER SHARE AMOUNTS:
Earnings per share, as reported $ 0.30 $ 0.31
Effect of SFAS No. 128 $ 0.01 $ 0.01
------ ------
Basic Earnings per share $ 0.31 $ 0.32
</TABLE>
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130) and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131).
SFAS No. 130 requires that an enterprise classify items of other comprehensive
income by their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet. SFAS No.
130 is effective for financial statements relating to periods beginning after
December 15, 1997.
SFAS No. 131 requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. SFAS No. 131 is
effective for financial statements relating to periods beginning after December
15, 1997.
The effects of SFAS No. 130 and SFAS No. 131 on the Company have not been
considered at this time.
7
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
FISCAL 1998 COMPARED TO FISCAL 1997
The Company's revenues for the first quarter of fiscal 1998 increased 22
percent, compared with the same period in fiscal 1997. The increase in revenues
is primarily due to a greater distribution of Checkout Coupon incentives
worldwide. The outdoor media business ( 51 percent of which was acquired on
October 10, 1996) contributed $2.8 million of revenues in the first quarter of
fiscal 1998, representing 7 percent of the 22 percent revenue increase for the
quarter. In the U.S., the Catalina Marketing Network printed 597 million
promotions during the first quarter of fiscal 1998, up 15 percent compared to
the comparable fiscal 1997 period with 521 million promotions. Catalina
Marketing Services, operating in the U.S., contributed approximately $40.0
million of revenues in the first quarter of fiscal 1998, up 13 percent over
revenues of $35.3 million in the comparable fiscal 1997 period. The greater
distribution of Checkout Coupon promotions is attributable to the broader reach
of the Catalina Marketing Network and additional sales of category cycles.
In the U.S., the Catalina Marketing Network was in 10,832 stores at June 30,
1997, which reach 147 million shoppers each week as compared to 10,085 stores
reaching 135 million shoppers each week at June 30, 1996 and 10,745 stores
reaching 144 million shoppers each week at March 31, 1997. The Health Resources
Network was in 1,394 pharmacies at June 30, 1997 as compared to 380 pharmacies
at June 30, 1996 and 1,195 pharmacies at March 31, 1997. Outside the U.S., the
Catalina Marketing Network was in 1,057 stores at June 30, 1997, which reach 20
million shoppers each week as compared to 622 stores reaching 14 million
shoppers each week at June 30, 1996 and 941 stores reaching 18 million shoppers
each week at March 31, 1997. The Company installed its Catalina Marketing
Network in 87 stores in the U.S. and also installed its Health Resources Network
in 199 pharmacies in the first quarter of fiscal 1998 as compared to 319 stores
and 143 pharmacies in the comparable fiscal 1997 period. Outside the U.S., the
Company installed 116 stores in the first quarter of fiscal 1998 as compared to
64 stores in the comparable fiscal 1997 period.
Direct operating expenses consist of retailer fees, paper, sales commissions and
the expenses of operating and maintaining the Catalina Marketing Network
(primarily expenses relating to operations personnel and service offices),
provision for doubtful accounts and the direct expenses associated with
operating the outdoor media business in a majority-owned subsidiary in Japan
(purchased in October 1996). Direct operating expenses increased in absolute
terms to $18.0 million for the first quarter of fiscal 1998 from $13.1 million
in the comparable period of fiscal 1997. Direct operating expenses in the first
quarter of fiscal 1998 as a percentage of revenues increased to 38.6 percent
from 34.4 percent in the comparable period of fiscal 1997. This increase in
fiscal 1998 is principally attributable to the addition of the direct costs
associated with running the outdoor media business in Japan.
Selling, general and administrative expenses include personnel-related costs of
selling and administrative staff, overhead and new product development expenses.
Selling, general and
8
<PAGE> 9
administrative expenses for the first quarter of fiscal 1998 were $12.9 million,
compared to $11.1 million for the comparable period of fiscal 1997, an increase
of 16 percent or $1.8 million. The increase relates primarily to higher costs
associated with a larger sales force, and administrative expenses of new
business ventures and products. As a percentage of revenues, selling, general
and administrative expenses decreased 1 percent in the first quarter of fiscal
1998, to 28 percent from 29 percent for the comparable period of fiscal 1997.
This decrease is principally due to the outdoor media business in Japan, which
typically has a higher percentage of direct costs (as indicated above) and a
smaller percentage of selling, general and administrative expenses than the
Company's other businesses.
Depreciation and amortization increased to $5.7 million for the first quarter of
fiscal 1998 from $3.7 million for the comparable period in fiscal 1997.
Depreciation increased due to the increase in fiscal 1997 capital expenditures
associated with new business ventures and data processing equipment.
Interest income (expense) and other decreased to $0.4 million expense for the
first quarter of fiscal 1998 from $0.2 million income for the comparable period
in fiscal 1997. The decrease is primarily due to the Company incurring interest
expense on borrowings from its credit facility the first quarter of fiscal
1998.
The provision for income taxes decreased to $4.0 million, 41.6 percent of income
before income taxes and minority interest, for the first quarter of fiscal 1998,
compared to $4.3 million, 41.1 percent of income before income taxes and
minority interest for the same period in fiscal 1997. The Company's effective
tax rate is higher than the expected federal statutory tax rate due to state and
foreign income taxes and the inability to utilize currently losses of majority
owned foreign subsidiaries for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital expenditures are store equipment and third-party
store installation costs, as well as data processing equipment for the Company's
hub data processing facilities. Total store equipment and third-party store
installation costs range from $5,000 to $13,000 per store. During the first
quarter of fiscal 1998 and 1997, the Company made capital expenditures of $3.5
million and $9.2 million, respectively. The pace of installations varies
depending on the timing of contracts entered into with retailers and the
scheduling of store installations by mutual agreement. During the first quarter
of fiscal 1998, the Company had a slower pace of U.S. store installations and
spent $1.9 million less in data processing equipment and furniture and fixtures
compared to the comparable fiscal 1997 period. Management believes that
expenditures for capital equipment will remain between $25 and $35 million
annually for the foreseeable future.
During the first quarter of fiscal 1998, the Company made a payment of $2.0
million in accordance with terms of the purchase agreement for Pacific Media,
K.K. (PMK). The agreement calls for the Company to make a series of three annual
cash payments, which are contingent upon the financial performance of PMK for
the 1996, 1997 and 1998 calendar years.
9
<PAGE> 10
During the first quarter of fiscal 1998, the Company purchased 1,403,477 shares
of its common stock for $40 million, initiating and completing a $40 million
share repurchase program approved by the Company's board as of March 31, 1997.
The Company may consider additional share repurchases as part of an
ongoing and regular part of its financial strategy.
During the first quarter of fiscal 1998, the Company borrowed approximately $22
million against its existing credit facility in connection with the completion
of the $40 million common stock repurchase program referenced above and repaid
approximately $10.5 million, for a net borrowing of $11.5 during the first
quarter of fiscal 1998.
The Company believes working capital generated by operations along with existing
credit facilities are sufficient for its overall capital requirements.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
10.4.1 Amended and Restated 1989 Stock Option Plan
15 Acknowledgment Letter
27 Financial Data Schedule (for SEC use only)
99 Review Report of Independent Certified Public Accountants
10
<PAGE> 11
CATALINA MARKETING CORPORATION
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, Registrant's principal financial officer, thereunto duly
authorized.
August 13, 1997 CATALINA MARKETING CORPORATION
-----------------------------------------------
(Registrant)
/s/ Philip B. Livingston
-----------------------------------------------
Philip B. Livingston
Senior Vice President and
Chief Financial Officer
(Authorized officer of Registrant and principal
financial officer)
11
<PAGE> 1
EXHIBIT 10.4.1
APPENDIX A
FINAL
6/19/97
SECOND AMENDED AND RESTATED
CATALINA MARKETING CORPORATION
1989 STOCK OPTION PLAN*
1. PURPOSE.
The Plan is intended to provide incentive to key employees
and directors of the Corporation and its Subsidiaries, to encourage proprietary
interest in the Corporation, and to attract new employees and directors with
outstanding qualifications.
2. DEFINITIONS.
Whenever the following terms are used in this
Plan, they shall have the meaning specified below unless the context clearly
indicates otherwise.
(a) "Act" shall mean the Securities Act of 1933,
as amended.
(b) "Administrator" shall mean the Board or the
Committee, whichever shall be administering the Plan from time to time in the
discretion of the Board, as described in Section 4 of the Plan.
(c) "Board" shall mean the Board of Directors of
the Corporation.
(d) "Cause" in respect of an Optionee shall mean
the dishonesty, fraud, misconduct, unauthorized use or disclosure of
confidential information or trade secrets, conviction or confession of a crime
punishable by law (except misdemeanor violations), or engaging in practices
contrary to stock "insider trading" policies of the Corporation, by such
Optionee in each case as determined by the Administrator, with such
determination to be conclusive and binding on such affected Optionee and all
other persons.
(e) "Code" shall mean the Internal Revenue Code
of 1986, as amended.
- --------------------------------------------------------------------------------
* Amended and Restated to include revisions adopted
January 28, 1992, April 19, 1994, April 30, 1996 and April
22, 1997.
<PAGE> 2
(f) "Committee" shall mean the committee
appointed by the Board in accordance with Section 4 of the Plan.
(g) "Common Stock" shall mean the Common Stock,
par value $.01 per share, of the Corporation.
(h) "Corporation" shall mean Catalina Marketing
Corporation, a Delaware corporation, or any successor hereunder.
(i) "Disability" shall mean the condition of an
Employee who is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
(j) "Disinterested Person" shall have the meaning
assigned to this phrase in Rule 16b-3 of the Securities and Exchange Commission
adopted under the Exchange Act.
(k) "Employee" shall mean an individual who is
employed (within the meaning of Section 3401 of the Code and the regulations
thereunder) by the Corporation or a Subsidiary.
(l) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(m) "Exercise Price" shall mean the price per
Share of Common Stock, determined by the Administrator, at which an Option may
be exercised.
(n) "Fair Market Value" shall mean the value of
one (1) Share of Common Stock, determined as follows, without regard to any
restriction other than a restriction which, by its terms, will never lapse:
(1) If the Shares are traded on a nationally
recognized exchange or the National Market System (the "NMS") of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"),
the closing price as reported for composite transactions on the date of
valuation or, if no sales occurred on that date, then the average of the highest
bid and lowest ask prices on such exchange or the NMS at the end of the day on
such date;
-2-
<PAGE> 3
(2) If the Shares are not traded on an
exchange or the NMS but are otherwise traded over-the-counter, the average of
the highest bid and lowest asked prices quoted in the NASDAQ system as of the
close of business on the date of valuation, or, if on such day such security is
not quoted in the NASDAQ system, the average of the representative bid and asked
prices on such date in the domestic over-the-counter market as reported by the
National Quotation Bureau, Inc., or any similar successor organization; and
(3) If neither (1) nor (2) applies, the fair
market value as determined by the Administrator in good faith. Such
determination shall be conclusive and binding on all persons.
(o) "Good Reason" in respect of an Optionee shall
mean the occurrence of any of the following events or conditions following a
Terminating Transaction:
(1) A change in the Optionee's status,
title, position or responsibilities (including reporting responsibilities) that
represents a substantial reduction of the status, title, position or
responsibilities in respect of the Corporation's business as in effect
immediately prior thereto; the assignment to the Optionee of substantial duties
or responsibilities that are inconsistent with such status, title, position or
responsibilities; or any removal of the Optionee from or failure to reappoint or
reelect the Optionee to any of such positions, except in connection with the
termination of the Optionee's employment for Cause, for Disability or as a
result of his or her death, or by the Optionee other than for Good Reason;
(2) A reduction in the Optionee's annual
base salary;
(3) The Corporation's requiring the Optionee
(without the Optionee's consent) to be based at any place outside a 35-mile
radius of his or her place of employment prior to a Terminating Transaction,
except for reasonably required travel on the Corporation's business that is not
materially greater than such travel requirements prior to such Terminating
Transaction;
(4) The Corporation's failure to (i)
continue in effect any material compensation or benefit plan (or a reasonable
replacement therefor) in which the Optionee was participating at the time of a
Terminating Transaction,
-3-
<PAGE> 4
including, but not limited to the Plan, or (ii) provide the Optionee with
compensation and benefits at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each employee benefit plan,
program and practice as in effect immediately prior to a Terminating Transaction
(or an in effect following the Terminating Transaction, if greater); or
(5) Any material breach by the Corporation
of any provision of the Plan.
(p) "Incentive Stock Option" shall mean an option
described in Section 422(b) of the Code.
(q) "Nonstatutory Stock Option" shall mean an
option not described in Section 422(b) or 423(b) of the Code.
(r) "Option" shall mean any stock option granted
pursuant to the Plan.
(s) "Option Profit" shall mean the amount (not
less than zero) by which the Fair Market Value of a share of Common Stock
subject to a Nonstatutory Stock Option on the date of a Participant's exercise
of a Nonstatutory Stock Option exceeds the exercise price of such Nonstatutory
Stock Option.
(t) "Optionee" shall mean a Participant who has
received an Option.
(u) "Participant" shall have the meaning assigned
to it in Section 5(a) hereof.
(v) "Plan" shall mean this Amended and Restated
Catalina Marketing Corporation 1989 Stock Option Plan, as it may be amended from
time to time.
(w) "Purchase Price" shall mean the Exercise
Price times the number of Shares with respect to which an Option is exercised.
(x) "Retirement" shall mean the voluntary
cessation of employment by an Employee at such time as may be specified in the
then current personnel policies of the Corporation, in the sole discretion of
the Administrator or, in lieu thereof, upon the attainment of age sixty-five
(65) and the completion of not less than twenty (20) years of service with the
Corporation or a Subsidiary.
-4-
<PAGE> 5
(y) "Share" shall mean one (1) share of Common
Stock, adjusted in accordance with Section 10 of the Plan (if applicable).
(z) "Subsidiary" shall mean any subsidiary
corporation as defined in Section 424(f) of the Code.
(aa) "Terminating Transaction" shall have the
meaning assigned to it in Section 10 hereof.
3. EFFECTIVE DATE.
The Plan was adopted by the Board effective
April 26, 1989, subject to the approval of the Corporation's stockholders
pursuant to Section 14 of the Plan, and amended effective January 28, 1992 and
April 19, 1994, in each case subject to the approval of the Corporation's
stockholders to the extent set forth in Sections 12 and 14 of the Plan.
4. ADMINISTRATION.
The Plan shall be administered, in the discretion
of the Board from time to time, by the Board or by the Committee. The Committee
shall be appointed by the Board and shall consist of not less than three (3)
members of the Board, none of whom shall be eligible to receive Options under
the Plan. The Board may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, however caused, shall be filled
by the Board. The Board shall appoint one of the members of the Committee as
Chairman. The Administrator shall hold meetings at such times and places as it
may determine. Acts of a majority of the Administrator at which a quorum is
present, or acts reduced to or approved in writing by a unanimous consent of the
members of the Administrator, shall be the valid acts of the Administrator.
The Administrator shall from time to time at its
discretion select the Employees who are to be granted Options, determine the
number of Shares to be subject to Options to be granted to each Optionee and
designate such Options as Incentive Stock Options or Nonstatutory Stock Options.
A Committee or Board member shall in no event participate in any determination
relating to Options held by or to be granted to such Board member. The
interpretation and construction by the Administrator of any provisions of the
Plan or of any Option granted thereunder shall be final. No member of the
Administrator shall be liable for any
-5-
<PAGE> 6
action or determination made in good faith with respect to the Plan or any
Option granted thereunder.
If the Common Stock is registered under Section 12
of the Exchange Act, then notwithstanding the first or second sentences of the
immediately preceding paragraph, after such registration, selection of officers
for participation and decisions concerning the timing, pricing and amount of an
Option shall be made solely by the Board, if each member is a Disinterested
Person, or by the Committee, each of the members of which is a Disinterested
Person.
5. PARTICIPATION.
(a) Eligibility.
The Optionees shall be such Employees (who
may be officers, whether or not they are directors) (collectively,
"Participants"; individually a "Participant") as the Administrator may select
subject to the terms and conditions of Section 5(b) below:
(b) Ten-Percent Stockholders.
A Participant who owns more than ten percent
(10%) of the total combined voting power of all classes of outstanding stock of
the Corporation, its parent or any of its Subsidiaries shall not be eligible to
receive an Incentive Stock Option unless (i) the Exercise Price of the Shares
subject to such Option is at least one hundred ten percent (110%) of the Fair
Market Value of such Shares on the date of grant and (ii) in the case of an
Incentive Stock Option, such Option by its terms is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Stock Ownership.
For purposes of Section 5(b) above, in
determining stock ownership, a Participant shall be considered as owning the
stock owned, directly or indirectly, by or for his or her brothers and sisters
(by whole or half blood), spouse, ancestors and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate or trust
shall be considered as being owned proportionately by or for its shareholders,
partners or beneficiaries. Stock with respect to which such Participant holds an
Option or any other option if (as of the time the Option or such other option is
-6-
<PAGE> 7
granted) the terms of such Option or other option provide that it will not be
treated as an Incentive Stock Option, shall not be counted.
(d) Outstanding Stock
For purposes of Section 5(b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee. "Outstanding stock"
shall not include shares authorized for issuance under outstanding Options held
by the Optionee or by any other person.
6. STOCK.
The stock subject to Options granted under the
Plan shall be Shares of the Corporation's authorized but unissued or reacquired
Common Stock. The aggregate number of Shares which may be issued upon exercise
of Options under the Plan shall not exceed two million two hundred fifty
thousand (2,250,000).* Effective April 22, 1997, subject to stockholder
approval, the number of Shares remaining for issuance hereunder has been
increased by 1,250,000 Shares. The number of Shares subject to Options
outstanding at any time shall not exceed the number of Shares remaining
available for issuance under the Plan. In the event that any outstanding Option
for any reason expires or is terminated, the Shares allocable to the unexercised
portion of such Option or the Shares so reacquired may again be made subject to
an Option. The limitations established by this Section 6 shall be subject to
adjustment in the manner provided in Section 10 hereof upon the occurrence of an
event specified therein. Commencing April 1, 1994, no Person shall receive
Options under the Plan relating to in excess of 300,000 Shares; provided,
however, that any Options granted to an Optionee prior to such date are not
affected by this limitation and do not count in determining whether an
individual Optionee has received Options in excess of such limitation.
- --------------------------------------------------------------------------------
* On July 15, 1996, a two-for-one split of the Corporation's Common Stock was
effected. Pursuant to Section 10, the number of Shares covered by the Plan as
reflected in Section 6 was adjusted to reflect such stock split such that the
number of Shares remaining for issuance under the Plan as of July 15, 1996 was
doubled. This adjustment is not reflected above.
-7-
<PAGE> 8
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock
option agreements in such form as the Administrator shall from time to time
determine. Such agreements need not be identical but shall comply with and be
subject to the terms and conditions set forth below. No Option shall be
effective until the applicable stock option agreement is executed by both
parties thereto.
(b) Optionee's Undertaking.
Each Optionee shall agree to remain in the
employ or service of the Corporation or a Subsidiary and to render services for
a period as shall be determined by the Administrator, from the date of the
granting of the Option, but such agreement shall not impose upon the Corporation
or its Subsidiaries any obligation to retain the Optionee in their employ or
service for any period.
(c) Number of Shares.
Each Option shall state the number of Shares
to which it pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 10 hereof.
(d) Exercise Price.
Each Option shall state the Exercise Price.
The Exercise Price shall not be less than the Fair Market Value on the date of
grant and, in the case of an Incentive Stock Option granted to an Optionee
described in Section 5(b) hereof, shall not be less than one hundred ten percent
(110%) of the Fair Market Value on the date of grant.
(e) Medium and Time of Payment.
The Purchase Price shall be payable in full
in United States dollars upon the exercise of the Option; provided, however,
that if the applicable option agreement so provides, or the Administrator, in
its sole discretion otherwise approves thereof, the Purchase Price may be paid
by the surrender of Shares in good form for transfer, owned by the person
exercising the Option and having a Fair Market Value on the date of exercise
equal to the Purchase Price, or in any combination of cash and Shares, as long
as the sum
-8-
<PAGE> 9
of the cash so paid and the Fair Market Value of the Shares so surrendered
equals the Purchase Price.
In the event the Corporation determines that
it is required to withhold state or Federal income tax as a result of the
exercise of an Option, as a condition to the exercise thereof, an Optionee may
be required to make arrangements satisfactory to the Corporation to enable it to
satisfy such withholding requirements. Payment of such withholding requirements
may be made, in the discretion of the Administrator, (i) in cash, (ii) by
delivery of Shares registered in the name of the Optionee, or by the Corporation
not issuing such number of Shares subject to the Option, having a Fair Market
Value at the time of exercise equal to the amount to be withheld or (iii) any
combination of (i) and (ii) above. If the Common Stock is registered under
Section 12 of the Exchange Act and if the Optionee is an officer or director of
the Corporation subject to Section 16(b) of the Exchange Act, an election under
the preceding sentence may only be made during the period beginning on the third
business day following the date of release of quarterly and annual summary
statements of sales and earnings as provided by Rule 16b-3(e)(3)(iii) of the
Securities and Exchange Commission and ending on the twelfth business day
following such date. The election need not be made during the ten day window
period if counsel to the Corporation determines that compliance with such
requirement is unnecessary.
If the Corporation is required to register
under Section 207.3 of Regulation G of the Board of Governors of the Federal
Reserve System (Title 12 Code of Federal Regulations Part 207), then so long as
such registration is in effect, the credit extended by the Corporation to an
Optionee for the purpose of paying the Purchase Price shall conform to the
requirements of such Regulation G.
Upon a duly made deferral election by an
Optionee eligible to participate under the Corporation's Deferred Compensation
Plan, Shares otherwise issuable to the Optionee upon the exercise of a
Nonstatutory Stock Option and payment of the Purchase Price by the surrender of
Shares in accordance with the first paragraph of this Section 7(e), will not be
delivered to the Optionee. In lieu of delivery of such Shares, the Common Stock
Account of the Optionee maintained pursuant to the Corporation's Deferred
Compensation Plan shall be credited with a number of stock units having a value,
calculated pursuant to such plan,
-9-
<PAGE> 10
equal to the Option Profit associated with the exercised Nonstatutory Stock
Option. Such deferral of Option Profit under the Corporation's Deferred
Compensation Plan is available to Optionees only if the Shares surrendered in
payment of the Purchase Price upon the exercise of a Nonstatutory Stock Option
have been held by the Optionee for at least six months.
(f) Term and Nontransferability of Options.
Each Option shall state the time or times
when all or part thereof becomes exercisable; provided, however, that no Option
shall become exercisable prior to one (1) year following the grant thereof. No
Option shall be exercisable after the expiration of six (6) years (or less, in
the discretion of the Administrator) from the date it was granted, and no
Incentive Stock Option granted to an Optionee described in Section 5(b) hereof
shall be exercisable after the expiration of five (5) years (or less, in the
discretion of the Administrators) from the date it was granted. During the
lifetime of the Optionee, the Option shall be exercisable only by the Optionee
and shall not be assignable or transferable. In the event of the Optionee's
death, the Option shall not be transferable by the Optionee other than by will
or the laws of descent and distribution.
If the Common Stock is registered under
Section 12 of the Exchange Act, all Options granted thereafter to an officer of
the Corporation shall be subject to the limitation that such Options shall not
be exercised within six months from the date of grant except that this
limitation shall not apply in the event the death or Disability of the Optionee
occurs prior to the expiration of the six-month period.
(g) Cessation of Employment (Except by Death,
Disability or Retirement).
If an Optionee ceases to be an Employee for
any reason other than his or her death, Disability or Retirement, such Optionee
shall have the right, subject to the restrictions referred to in Section 7(f)
above, to exercise the Option at any time within ninety (90) days (or such
shorter period as the Administrator may determine) after cessation of
employment, but, except as otherwise provided in the applicable option
agreement, only to the extent that, at the date of cessation of employment, the
Optionee's right to exercise such Option had accrued pursuant to the terms of
the applicable option agreement and
-10-
<PAGE> 11
had not previously been exercised. The foregoing notwithstanding, a stock option
agreement may, in the sole discretion of the Administrator, but need not,
provide that the Option shall cease to be exercisable on the date of such
cessation if such cessation arises by reason of termination for cause (as
defined in the applicable stock option agreement) or if the Optionee upon
cessation becomes an employee, director or consultant of a person or entity that
the Administrator, in its sole discretion, determines is in direct competition
with the Corporation.
For purposes of this Section 7(g) the
employment relationship shall be treated as continuing intact while the Optionee
is on military leave, sick leave or other bona fide leave of absence (to be
determined in the sole discretion of the Administrator). The foregoing
notwithstanding, employment shall not be deemed to continue beyond the ninetieth
(90th) day after the Optionee ceased active employment, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
If the Common Stock is registered under
Section 12 of the Exchange Act, with respect to any Option held by an officer of
the Corporation that was granted within six (6) months of a Change in Control
(as hereinafter defined), and notwithstanding the ninety (90)-day exercise
period referred to in the first paragraph of this subsection (g), if such
Optionee ceases to be an Employee after such Change in Control, such Optionee
shall have the right, subject to the restrictions referred to in Section 7(f)
above, to exercise such Option at any time during the one month period
immediately following the six (6)-month period commencing with the grant of such
Option. For the purposes of this Section 7(g), a "Change in Control" shall be
deemed to occur upon (i) the sale of all or substantially all of the assets of
the Corporation, (ii) any person or group of persons acquiring the ownership or
right to vote shares constituting greater than fifty percent (50%) of the
outstanding capitalization of the Corporation or (iii) the consummation of a
merger or consolidation of the Corporation where the stockholders of the
Corporation immediately prior to such merger or consolidation do not own at
least fifty percent (50%) of the voting equity (in terms of the right to vote
for the election of directors) of the entity which is the surviving entity
following such merger or consolidation.
-11-
<PAGE> 12
(h) Death of Optionee.
If an Optionee dies while a Participant, or
after ceasing to be a Participant but during the period in which he or she could
have exercised the Option under this Section 7, and has not fully exercised the
Option, then the Option may be exercised in full, subject to the restrictions
referred to in Section 7(f) above, at any time within twelve (12) months (or
such shorter period as the Administrator may determine) after the Optionee's
death by the executor or administrator of his or her estate or by any person or
persons who have acquired the Option directly from the Optionee by bequest or
inheritance, but, except as otherwise provided in the applicable option
agreement, only to the extent that, at the date or death, the Optionee's right
to exercise such Option had accrued and had not been forfeited pursuant to the
terms of the applicable option agreement and had not previously been exercised.
(i) Disability of Optionee.
If an Optionee ceases to be an Employee by
reason of Disability, such Optionee shall have the right, subject to the
restrictions referred to in Section 7(f) above, to exercise the Option at any
time within twelve (12) months (or such shorter period as the Administrator may
determine) after such cessation of employment, but, except as provided in the
applicable option agreement, only to the extent that, at the date of such
cessation of employment, the Optionee's right to exercise such Option had
accrued pursuant to the terms of the applicable option agreement and had not
previously been exercised.
(j) Retirement of Optionee.
If an Optionee ceases to be an Employee by
reason of Retirement, such Optionee shall have the right, subject to the
restrictions referred to in Section 7(f) above, to exercise the Option at any
time within ninety (90) days (or such longer or shorter period as the
Administrator may determine) after cessation of employment, but only to the
extent that, at the date of cessation of employment, the Optionee's right to
exercise such Option had accrued pursuant to the terms of the applicable option
agreement and had not previously been exercised.
-12-
<PAGE> 13
(k) Rights as a Stockholder.
An Optionee, or a permitted transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. After such issuance of a stock certificate for such
Shares, the Optionee shall have all rights as a stockholder including, without
limitation, the right to vote any such Shares. No adjustment shall be made for
dividends (ordinary or extra-ordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 10
hereof.
(l) Modification, Extension and Renewal of
Options.
Within the limitations of the Plan, the
Administrator may modify an Option, accelerate the rate at which an Option may
be exercised or extend or renew outstanding Options. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, alter or impair any rights or obligations under any Option previously
granted.
(m) Other Provisions.
The stock option agreements authorized under
the Plan may contain such other provisions not inconsistent with the terms of
the Plan (including, without limitation, restrictions upon the exercise of the
Option or the transfer of Shares of stock following exercise of the Option) as
the Administrator shall deem advisable.
8. LIMITATION ON ANNUAL AWARDS.
The aggregate Fair Market Value (determined as of
the date an Option is granted) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year under this Plan and all other plans maintained by the Corporation,
its parent or its Subsidiaries, shall not exceed $100,000.
9. TERM OF PLAN.
Options may be granted pursuant to the Plan until
the expiration of the Plan on April 26, 1999.
-13-
<PAGE> 14
10. RECAPITALIZATIONS.
Subject to any required action by stockholders,
the number of Shares covered by the Plan as provided in Section 6 hereof, the
number of Shares covered by each outstanding Option and the Exercise Price
thereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a subdivision or consolidation of Shares
or the payment of a stock dividend (but only of Common Stock) or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Corporation.
Subject to any required action by stockholders, if
the Corporation shall merge with another corporation and the Corporation is the
surviving corporation in such merger and under the terms of such merger the
shares of Common Stock outstanding immediately prior to the merger remain
outstanding and unchanged, each outstanding Option shall continue to apply to
the Shares subject thereto and shall also pertain and apply to any additional
securities and other property, if any, to which a holder of the number of Shares
subject to the Option would have been entitled as a result of the merger. If the
Corporation sells all, or substantially all, of its assets, or the Corporation
merges (other than a merger of the type described in the immediately preceding
sentence) or consolidates with another corporation (each a "Terminating
Transaction"), this Plan and each Option shall terminate; provided that in such
event (i) each Optionee to whom no Option has been tendered by the surviving or
acquiring corporation (or the parent corporation of the surviving or acquiring
corporation) in accordance with all of the terms of clause (ii) or (iii)
immediately below, shall have the right, for a period of at least thirty days,
until five days before the effective date of such sale, merger or consolidation,
to exercise, in whole or in part, any unexpired Option or Options issued to him
or her, without regard to the installment or vesting provisions of any option
agreement, or (ii) in its sole and absolute discretion, the surviving or
acquiring corporation (or the parent corporation of the surviving or acquiring
corporation) may, but shall not be so obligated, (I) tender to all Optionees
with then outstanding Options under the Plan an option or options to purchase
shares of the surviving or acquiring corporation (or of the parent corporation
of the surviving or acquiring corporation), which new option or options contain
such terms and provisions as shall be required substantially to preserve the
rights and benefits of all Options then held by such
-14-
<PAGE> 15
Optionees or, (II) grant the choice to all Optionees with then outstanding
Options of (A) exercising the Options in full as described in clause (i) above
or (B) receiving a replacement Option as set forth in clause (ii)(I), or (iii)
if the Common Stock is registered under Section 12 of the Exchange Act, with
respect to any Option held by a director or officer of the Corporation that was
granted within six (6) months prior to the effectiveness of the proposed sale,
merger or consolidation (a "Designated Option"), the surviving or acquiring
corporation (or the parent corporation of the surviving or acquiring
corporation) shall tender to such Optionee with respect to the Designated Option
a new option or options to purchase shares of the surviving or acquiring
corporation (or of the parent corporation of the surviving or acquiring
corporation), which new option or options contain such terms or provisions as
shall be required substantially to preserve the rights and benefits of such
Designated Option, provided that if the surviving or acquiring corporation (or
its parent) does not tender options to all non-officer and non-director
Optionees in accordance with clause (ii) above, then the option or options
exchanged for such Designated Option shall permit the Optionee to exercise such
substitute option or options in whole or in part, without regard to any
installment or vesting provisions, at any time after the expiration of six
months from the original date of grant of the Designated Option. A dissolution
or liquidation of the Corporation, other than a dissolution or liquidation
immediately following a sale of all or substantially all of the assets of the
Corporation, which shall be governed by the immediately preceding sentence,
shall cause each Option to terminate. In the event an Optionee exercises any
unexpired Option or Options prior to the effectiveness of a sale of all or
substantially all of the Corporation's assets or a merger or consolidation of
the Corporation with another corporation in accordance with clause (i) of this
Section 10, such exercise of any Option or Options shall be subject to the
consummation of such sale, merger or consolidation. If such sale, merger or
consolidation is not consummated, any otherwise unexpired Option or Options
shall be deemed to have not been exercised, and the Optionee and the Corporation
shall take all steps necessary to achieve this effect including, without
limitation, the Optionee delivering to the Corporation the stock certificate
representing the Shares issued upon the exercise of the Option, endorsed in
favor of the Corporation, and the Corporation returning to the Optionee the
consideration representing the Purchase Price paid by the Optionee upon the
exercise of the Option.
-15-
<PAGE> 16
Notwithstanding any other provision of the Plan to
the contrary and except as otherwise expressly provided in the applicable stock
option agreement, the vesting or similar installment provisions relating to the
exercisability of any replacement option tendered to an Optionee pursuant to or
as a result of, or relating to, a Terminating Transaction under clauses (ii) or
(iii) of the preceding paragraph shall be accelerated and the Optionee shall
have the right, for a period of at least thirty days, to exercise such option in
the event the Optionee's employment or services should subsequently terminate
within two years following the effectiveness of the Terminating Transaction in
respect of which such replacement options were granted, unless such employment
or services are terminated by the Corporation for Cause or by the Optionee
voluntarily without Good Reason, or such employment or services are terminated
due to the death or Disability of the Optionee. Notwithstanding the foregoing,
no Incentive Stock Option shall become exercisable pursuant to the foregoing
without the Optionee's consent, if the result would be to cause such option not
to be treated as an Incentive Stock Option.
To the extent that the foregoing adjustments
relate to securities of the Corporation, such adjustments shall be made by the
Administrator, whose determination shall be conclusive and binding on all
persons.
Except as expressly provided in this Section 10,
the Optionee shall have no rights by reason of any subdivision of consolidation
of shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.
-16-
<PAGE> 17
11. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Shares shall be issued upon the exercise
of any Option unless and until the Corporation has
determined that:
(i) it and the Optionee have taken all actions
required to register the offer and sale of the Shares under the Act, or to
perfect an exemption from the registration requirements thereof;
(ii) any applicable listing requirement of
any stock exchange on which the Common Stock is listed has been satisfied; and
(iii) any other applicable provision of state or
Federal law has been satisfied.
(b) Restrictions on Transfer; Representations of
Optionee; Legends.
Regardless of whether the offering and sale
of Shares under the Plan has been registered under the Act or has been
registered or qualified under the securities laws of any state, the Corporation
may impose restrictions upon the sale, pledge or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Corporation and its counsel, such restrictions are necessary
or desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an exemption is
available which requires an investment representation or other representation,
each Optionee shall be required to represent that such Shares are being acquired
for investment, and not with a view to the sale or distribution thereof, and to
make such other representations as are deemed necessary or appropriate by the
Corporation and its counsel. Stock certificates evidencing Shares acquired under
the Plan pursuant to an unregistered transaction shall bear the following
restrictive legend (or similar legend in the discretion of the Administrator)
and such other restrictive legends as are required or deemed advisable under the
provisions of any applicable law:
-17-
<PAGE> 18
"THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES
ACT OF 1933. THESE SECURITIES
HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW
TO DISTRIBUTION AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES
ACT OF 1933 OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY
IN FORM AND CONTENT TO THE
ISSUER THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT."
Any determination by the Corporation and its
counsel in connection with any of the matters set forth in this Section 11 shall
be conclusive and binding on all persons.
(c) Registration or Qualification of Securities.
The Corporation may, but shall not be
obligated to, register or qualify the sale of Shares under the Act or any other
applicable law. The Corporation shall not be obligated to take any affirmative
action in order to cause the sale of Shares under the Plan to comply with any
law.
(d) Exchange of Certificates.
If, in the opinion of the Corporation and its
counsel, any legend placed on a stock certificate representing Shares sold under
the Plan is no longer required, the holder of such certificate shall be entitled
to exchange such certificate for a certificate representing the same number of
Shares but without such legend.
12. AMENDMENT OF THE PLAN.
The Board may from time to time, with respect to
any Shares at the time not subject to Options, suspend or discontinue the Plan
or revise or amend it in any respect whatsoever except that, without the
approval of the Corporation's stockholders, no such revision or amendment shall:
-18-
<PAGE> 19
(a) Materially increase the benefits accruing to
Participants under the Plan;
(b) Increase the number of Shares which may be
issued under the Plan;
(c) Change the designation in Section 5 hereof
with respect to the classes of persons eligible to receive Options;
(d) Upon the registration of the Common Stock
under Section 12 of the Exchange Act, modify the Plan such that it fails to meet
the requirements of Rule 16b-3 of the Securities and Exchange Commission for the
exemption of the acquisition, cancellation, expiration or surrender of Options
from the operation of Section 16(b) of the Exchange Act; or
(e) Amend this Section 12 to defeat its purpose.
13. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the
sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes.
14. APPROVAL OF STOCKHOLDERS.
The original adoption of the Plan was subject to
approval by the affirmative vote of the holders of a majority of the outstanding
shares present and entitled to vote at the first annual meeting of stockholders
of the Corporation following the adoption of the Plan, and in no event later
than April 26, 1990, which approval was obtained. The amendments to the Plan
adopted by the Board on January 28, 1992, April 19, 1994 and April 30, 1996,
were subject to approval by the affirmative vote of such a majority, which
approvals were obtained. The effectiveness of the amendments to Section 6 and
Section 10 of the Plan adopted by the Board on April 22, 1997 are also subject
to approval by the stockholders of the Corporation at a meeting to be held on
July 22, 1997, and none of such amendments to the Plan shall be effective until
so approved. Any additional amendment described in Section 12 shall also be
subject to approval by the Corporation's stockholders.
-19-
<PAGE> 20
15. EXECUTION.
To record the adoption of the Plan by the Board on
April 26, 1989, and the amendments described on the first page hereof, the
Corporation has caused its authorized officers to affix the corporate name and
seal hereto.
CATALINA MARKETING CORPORATION
By /s/ Tommy D. Greer
--------------------
Tommy D. Greer, Chairman
By /s/ Barry A. Brooks
--------------------
Barry A. Brooks, Secretary
[Seal]
-20-
<PAGE> 1
EXHIBIT 15
July 16, 1997
Catalina Marketing Corporation
11300 9th Street North
St. Petersburg, Florida 33716
Catalina Marketing Corporation:
We are aware that Catalina Marketing Corporation has incorporated, by reference
in its Registration Statement File Nos. 33-46793, 33-77100, 33-82456,
333-07525 and 333-13335, its Form 10-Q for the three-month period ended June
30, 1997, which includes our report dated July 16, 1997, covering the unaudited
interim financial information contained therein. Pursuant to Regulation C of
the Securities Act of 1933 (the Act), that report is not considered a part of
the registration statement prepared or certified by our firm or a report
prepared or certified by our firm within the meaning of Sections 7 and 11 of
the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
By
William J. Meurer
DMS
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,017
<SECURITIES> 0
<RECEIVABLES> 21,002
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,202
<PP&E> 145,222
<DEPRECIATION> 77,332
<TOTAL-ASSETS> 136,324
<CURRENT-LIABILITIES> 54,729
<BONDS> 12,563
0
0
<COMMON> 209
<OTHER-SE> 65,301
<TOTAL-LIABILITY-AND-EQUITY> 136,324
<SALES> 46,659
<TOTAL-REVENUES> 46,659
<CGS> 18,033
<TOTAL-COSTS> 36,620
<OTHER-EXPENSES> 393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,646
<INCOME-TAX> 4,009
<INCOME-CONTINUING> 5,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,637
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
<PAGE> 1
EXHIBIT 99
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Catalina Marketing Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Catalina Marketing Corporation (a Delaware corporation) as of June 30, 1997,
and the related condensed consolidated statement of income for the three-month
period then ended, and the condensed consolidated statement of cash flows for
the three-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of March 31, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented separately herein), and in our report dated
April 18, 1997, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of March 31, 1997, is fairly stated in
all material respects in relation to the consolidated balance sheet from which
it has been derived.
Tampa, Florida,
July 16, 1997
