<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 SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 23346
EQUITY MARKETING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.)
DELAWARE 13-3534145
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
131 SOUTH RODEO DRIVE
BEVERLY HILLS, CA 90212
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(310) 887-4300
(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 periods 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $.001 Par Value, 6,201,603 shares as of November 12, 1998.
1
<PAGE> 2
EQUITY MARKETING, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EQUITY MARKETING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------- -------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,935 $ 3,011
Accounts receivable (net of allowances for doubtful
accounts of $600 and $1,852 as of December 31, 1997
and September 30, 1998, respectively) 27,773 20,635
Inventory 8,658 16,302
Prepaid expenses and other current assets 3,749 7,345
------- -------
Total current assets 49,115 47,293
FIXED ASSETS, net 2,550 3,895
INTANGIBLE ASSETS, net 5,079 28,907
OTHER ASSETS 409 393
------- -------
Total assets $57,153 $80,488
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE> 4
EQUITY MARKETING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 14,560 $ 19,005
Short-term debt -- 12,000
Accrued expenses and other current liabilities 5,491 9,212
-------- --------
Total current liabilities 20,051 40,217
LONG-TERM LIABILITIES 962 926
-------- --------
Total liabilities 21,013 41,143
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value per share; 1,000,000
shares authorized, none issued or outstanding -- --
Common stock, par value $.001 per share, 20,000,000 shares authorized,
6,010,103 and 6,085,585 shares outstanding as of December 31, 1997
and September 30, 1998, respectively -- --
Additional paid-in capital 13,371 15,095
Retained earnings 25,056 26,537
-------- --------
38,427 41,632
Less--
Treasury stock, 1,892,841 shares, at cost, as of December 31, 1997
and September 30, 1998 (1,279) (1,279)
Stock subscription receivable (43) (43)
Unearned compensation (965) (965)
-------- --------
Total stockholders' equity 36,140 39,345
-------- --------
Total liabilities and stockholders' equity $ 57,153 $ 80,488
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
4
<PAGE> 5
EQUITY MARKETING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $ 27,588 $ 29,987 $ 95,844 $ 84,376
COST OF SALES 19,818 21,985 69,832 60,985
----------- ----------- ----------- -----------
Gross profit 7,770 8,002 26,012 23,391
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Salaries, wages and benefits 2,495 3,208 7,812 8,933
Selling, general and administrative 3,161 4,066 8,844 10,412
Business process reengineering -- 1,549 -- 1,549
----------- ----------- ----------- -----------
Total operating expenses 5,656 8,823 16,656 20,894
----------- ----------- ----------- -----------
Income (loss) from operations 2,114 (821) 9,356 2,497
INTEREST INCOME (EXPENSE), net 241 (317) 397 (90)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes 2,355 (1,138) 9,753 2,407
PROVISION (BENEFIT) FOR INCOME TAXES 907 (438) 3,755 926
----------- ----------- ----------- -----------
Net income (loss) $ 1,448 $ (700) $ 5,998 $ 1,481
=========== =========== =========== ===========
BASIC NET INCOME (LOSS) PER SHARE $ 0.24 $ (0.12) $ 1.01 $ 0.25
=========== =========== =========== ===========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 5,956,307 6,085,585 5,911,302 6,043,585
=========== =========== =========== ===========
DILUTED NET INCOME (LOSS) PER SHARE $ 0.23 $ (0.12) $ 0.97 $ 0.24
=========== =========== =========== ===========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 6,289,128 6,085,585 6,192,197 6,238,634
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
5
<PAGE> 6
EQUITY MARKETING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,998 $ 1,481
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 890 1,401
Provision for doubtful accounts 240 282
Tax benefit from exercise of stock options 407 529
Other 18 --
Changes in operating assets and liabilities, excluding effects of acquisition:
Increase (decrease) in cash and cash equivalents:
Accounts receivable (9,992) 9,019
Inventory (3,046) (6,000)
Prepaid expenses and other current assets (33) (1,648)
Other assets 176 36
Accounts payable 9,871 2,193
Accrued expenses and other current liabilities (950) (1,030)
Deferred Revenue 689 357
Long-term liabilities (39) (36)
-------- --------
Net cash provided by operating activities 4,229 6,584
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (922) (1,947)
Payment for purchase of EPI Group -- (1,003)
Payment for purchase of Synergy Minority Interest -- (68)
Payment for purchase of Contract Marketing, Inc. and U.S. Import
& Promotions Co. -- (15,429)
Payment for purchase of Corinthian and Trademark -- (8,435)
-------- --------
Net cash used in investing activities (922) (26,882)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of underwriters' warrants 458 --
Proceeds from exercise of stock options 412 1,195
Borrowings under short-term debt -- 24,300
Repayments on short-term debt -- (12,300)
-------- --------
Net cash provided by financing activities 870 13,195
-------- --------
Net increase (decrease) in cash and cash equivalents 4,177 (7,103)
CASH ACQUIRED FROM PURCHSASED COMPANIES -- 1,179
CASH AND CASH EQUIVALENTS, beginning of period 8,502 8,935
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 12,679 $ 3,011
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR
Interest $ 52 $ 289
======== ========
Income taxes $ 2,774 $ 1,456
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
EQUITY MARKETING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1 - ORGANIZATION AND BUSINESS
Equity Marketing, Inc., a Delaware corporation (the "Company"), designs,
develops, produces, and markets a broad variety of consumer products,
collectibles and promotional products incorporating licensed characters from
films, television, sports, publishing, oil and gas and other sources.
Equity Marketing Hong Kong, Ltd., a Delaware corporation("EMHK"), is a 100%
owned subsidiary of the Company. EMHK manages production of the Company's
products by third parties in the Far East and currently is responsible for
performing and/or procuring product sourcing, product engineering, quality
control inspections, independent safety testing and export/import documentation.
Synergy Promotions S.A. de C.V. ("Synergy") was incorporated in Mexico in 1996
and is 100% owned by the Company. Synergy markets the Company's consumer
products in Mexico. Prior to June 1998, the Company owned 65% of Synergy. The
Company acquired the 35% minority interest during June 1998 for $68.
In September 1996, the Company purchased 100% of the common stock of EPI Group
Limited ("EPI"), a Delaware corporation, a designer, developer, producer and
distributor of promotional products for sale to oil companies, consumer products
companies and retailers. In July 1998, the Company paid $1,003 to the former
stockholders of EPI as additional cash consideration related to the Company's
purchase of EPI. This amount was allocated to Goodwill.
As discussed in Note 3, in April 1998, the Company purchased 100% of the common
stock of Corinthian Marketing, Inc., a Delaware corporation ("Corinthian").
Corinthian is engaged principally in the design, manufacture, marketing and
distribution of the Headliners brand of collectible sports figurines.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management and subject to year-end audit, the accompanying
unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for a full year. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
Certain reclassifications have been made to the accompanying 1997 financial
statements to conform them to the current period presentation.
7
<PAGE> 8
NET INCOME PER SHARE
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" ("EPS"), effective for the year ended December 31,
1997. Under SFAS No. 128, primary EPS is replaced by "Basic" EPS, which excludes
dilution and is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period.
"Diluted" EPS, which is computed similarly to the previously used fully diluted
EPS, reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
When dilutive, stock options are included as share equivalents in computing
diluted earnings per share using the treasury stock method. During a loss
period, the assumed exercise of in-the-money stock options and warrants has an
antidilutive effect. As a result, theses shares are not included with the
weighted average shares outstanding of 6,085,585 used in the calculation of
diluted loss per share for the three months ended September 30, 1998. The impact
of including unexercised dilutive options and warrants was to increase weighted
average shares outstanding by 332,821 at quarter end September 30, 1997. The
impact of including unexercised dilutive options and warrants was to increase
weighted average shares outstanding by 280,895 and 195,049 for the nine months
ended September 30, 1997 and 1998, respectively. Options to purchase 10,000 and
1,587,981 shares of common stock which were outstanding as of September 30, 1997
and 1998, respectively, were excluded from the three months ended September 30,
1998 computation of diluted income per share as they would have been
anti-dilutive. Prior year EPS has been conformed to current year presentation.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. The implementation of SFAS No. 130 did
not have an impact on the Company's results of operations. There are no
adjustments to net income to arrive at comprehensive income.
INVENTORY
Inventory consists of production-in-process which represents direct costs
related to product development, raw materials and tooling which are deferred and
amortized over the life of the products and finished products held for sale to
customers, including finished products in transit to customers' distribution
centers. Inventory is stated at the lower of average cost or market. As of
September 30, 1998 and December 31, 1997, inventory consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------- -------
(Unaudited)
<S> <C> <C>
Production-in-process $ 4,935 $ 7,459
Finished goods 3,723 8,843
------- -------
$ 8,658 $16,302
======= =======
</TABLE>
8
<PAGE> 9
NOTE 3 - ACQUISITIONS
On April 24, 1998, the Company acquired 100% of the common stock of Corinthian
and certain trademarks related to its business, including the "Headliners"
trademark (the "Trademark") from Corinthian Marketing PLC, for cash
consideration of $7,892 in cash plus related transaction costs of $543 at the
closing and potential contingent cash consideration of approximately $750
payable within one year after the closing upon satisfaction of certain
conditions. Corinthian is engaged principally in the design, manufacture,
marketing and distribution of the Headliners brand of collectible sports
figurines.
The Corinthian acquisition has been accounted for under the purchase method of
accounting. The financial statements reflect the preliminary allocations of the
purchase price and the assumption of liabilities and include the operating
results of Corinthian from the date of acquisition. The purchase price has been
preliminarily allocated to the assets acquired and liabilities assumed based on
their estimated fair values as of the acquisition date. As of September 30,
1998, the excess of the purchase price over the estimated fair values of the net
assets acquired was $6,512 which has been recorded as goodwill and is being
amortized on a straight-line basis over 20 years. The Trademark has been
preliminarily valued at $3,000 and is being amortized on a straight line basis
over 20 years. The Company is in the process of obtaining valuations of the
individual assets. The allocation of the excess purchase price may change based
upon these valuations.
On July 23, 1998 the company acquired substantially all of the assets of
Contract Marketing, Inc., a Massachusetts corporation, and U.S. Import and
Promotions Co., a Florida corporation (collectively referred to herein as
"CMI/USI"), in exchange for $15,000 plus related transaction costs of $429.
Potential additional cash consideration may be paid based upon the results of
operations of CMI/USI during each calendar year through December 31, 2002 as set
forth in the respective Asset Purchase Agreements, dated as of July 23,1998, by
and among the Company and each of Contract Marketing, Inc. and U.S. Import and
Promotions Co. The source of funds used for the acquisition was bank borrowings
from the Company's existing credit facility.
CMI/USI focuses primarily on promotions for oil and gas and other retailers. The
Company intends to continue to use the acquired assets for this purpose. The
primary operations of CMI/USI are located in West Boylston, Massachusetts and
St. Augustine, Florida.
The CMI/USI acquisition has been accounted for under the purchase method of
accounting. The financial statements reflect the preliminary allocations of the
purchase price to the acquired net assets based on their estimated fair value as
of the acquisition date. As of September 30, 1998, the excess of the purchase
price over the estimated fair value of the net assets acquired was $13,806 which
has been recorded as goodwill and is being amortized on a straight line basis
over 20 years. The Company is in the process of obtaining valuations of the
individual assets. The allocation of the excess purchase price may change based
upon these valuations.
The following unaudited pro-forma information presents a summary of the
consolidated results of operations of the Company as if the acquisitions of
Corinthian and CMI/USI had occurred at the beginning of each period presented
and includes pro-forma adjustments to give effect to the amortization of
goodwill, decreased interest income and increased interest expense associated
with funding the acquisitions, and certain other adjustments, together with the
related income tax effects. The pro-forma financial information is presented for
informational purposes only and may not be indicative of the results of
operations as they would have been if the Company, Corinthian and CMI/USI had
been a single entity during 1997 and during the nine months ended September 30,
1998, nor is it necessarily indicative of the results of operations that may
occur in the future.
9
<PAGE> 10
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
1997 1998
---------- ----------
<S> <C> <C>
Revenues $ 110,409 $ 91,734
Income from operations 7,430 1,420
Net income 4,904 801
Diluted net income per share .79 .13
Diluted Weighted average
shares outstanding 6,192,197 6,238,634
========== ==========
</TABLE>
NOTE 4 - INFORMATION SYSTEMS
Based on strategic and operational assessments, the Company decided to replace
its existing information systems. The new enterprise system is designed to
enhance management information, financial reporting, inventory management, order
entry and cost evaluation and control. The conversion to the new system and the
related business process reengineering is scheduled to be completed in the first
half of 1999. These projects are expected to cost approximately $5,000, of which
approximately $3,500 is expected to be spent on business process reengineering.
In accordance with Emerging Issues Task Force Issue No. 97-13, such business
process reengineering costs are expensed as incurred. These expenses totaled
$1,549 for the three months ended September 30, 1998 and are presented as
business process reengineering expenses in the accompanying condensed
consolidated statements of operations. The expenditures for hardware, software,
and software implementation associated with the conversion to the new system are
capitalizable and are expected to total approximately $1,500. For the nine
months ended September 30, 1998, approximately $1,100 of these costs have been
capitalized and are reflected in fixed assets in the accompanying condensed
consolidated balance sheet.
The "Year 2000 Issue" is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The new enterprise system
discussed above has the added benefit of addressing Year 2000 systems issues.
The Company is also communicating with suppliers, distributors, financial
institutions and others with which it does business to evaluate and coordinate
Year 2000 requirements. There can be no assurance that the systems of other
companies on which the Company's systems rely will also be timely converted or
that any such failure to convert by another company would not have an adverse
effect on the Company's systems. Failure to complete the system conversion in a
timely manner or any significant disruption of the Company's ability to
communicate electronically with its business partners could negatively impact
the Company's business, financial condition and results of operations. The
statements set forth herein are forward looking; and actual results may differ
materially (see Cautionary Statement below).
10
<PAGE> 11
NOTE 5 - SHORT-TERM DEBT
The Company maintains a revolving credit agreement ("Credit Agreement") with two
commercial banks which makes available to the Company a line of credit of up to
$25 million. The Credit Agreement is secured by substantially all of the
Company's assets. As of September 30, 1998, there was a total of $12,000
outstanding under the Credit Agreement. In addition, letter of credit amounts
outstanding as of December 31, 1997 and September 30, 1998 were $4,156 and
$2,776 respectively. Borrowings under the Credit Agreement are reflected under
short-term debt in the accompanying condensed consolidated balance sheets.
On July 23, 1998, the Credit Agreement was amended (a) to reflect the impact of
the acquisition of CMI/USI on certain of the agreement's covenants relating to
the maintenance of financial ratios, (b) to amend the maturity date to December
31, 1999 and (c) to amend the rate of interest on bank borrowings, through
approximately the first quarter of 1999, to a fixed rate equivalent to the
Eurodollar rate plus 2.25% or a variable rate equivalent to the Bank's reference
rate plus .25%. These rates are reduced by .25% thereafter.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING CAUTIONARY STATEMENT IS INCLUDED IN THIS QUARTERLY REPORT PURSUANT
TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995.
SEVERAL OF THE MATTERS DISCUSSED IN THIS DOCUMENT CONTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. EQUITY MARKETING, INC. (THE
"COMPANY") WISHES TO CAUTION READERS THAT FORWARD-LOOKING STATEMENTS ARE BASED
ON ASSUMPTIONS WHICH MAY OR MAY NOT PROVE ACCURATE AND ACCORDINGLY ARE
NECESSARILY SPECULATIVE. READERS SHOULD NOT PLACE UNDUE RELIANCE ON ANY SUCH
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. ACTUAL RESULTS
COULD VARY MATERIALLY FROM THOSE ANTICIPATED FOR A VARIETY OF REASONS,
INCLUDING, WITHOUT LIMITATION, THE POTENTIAL CANCELLATION AND/OR DELAY OF
PROMOTIONS DUE TO DELAYS IN RELEASE OF THEATRICAL MOTION PICTURES UPON WHICH
THOSE PROMOTIONS ARE BASED, THE FAILURE OF THE COMPANY TO OBTAIN PROMOTIONS
PROJECTS BASED ON THESE MOTION PICTURES AT ANTICIPATED LEVELS, THE SUCCESS OR
FAILURE OF A SPECIFIC MOTION PICTURE OR TELEVISION PROPERTY, THE LOSS OF
EXISTING LICENSES OR THE INABILITY TO RENEW OR EXTEND LICENSES UNDER FAVORABLE
TERMS, CONSUMER DEMAND FOR ITS PRODUCTS, THE COMPANY'S DEPENDENCE ON A SINGLE
CUSTOMER, QUARTERLY FLUCTUATIONS IN FINANCIAL RESULTS, DIFFICULTIES IN
CONSUMMATING AND INTEGRATING ACQUISITIONS, AND INCREASES IN INTERNATIONAL TARIFF
RATES, WHICH WOULD INCREASE THE COMPANY'S COST OF SALES. FORWARD LOOKING
STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS
"MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE," "CONTINUE,"
"PLANS," "INTENDS," OR OTHER SIMILAR TERMINOLOGY.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements, which may be made to reflect
events or circumstance after the date hereof or to reflect the occurrence of
unanticipated events. The risks highlighted herein should not be assumed to be
the only items that could affect future performance of the Company. In addition
to the information contained in this document, readers are advised to review the
Company's Form 10-K for the year ended December 31, 1997, under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statements and Risk Factors."
11
<PAGE> 12
Equity Marketing, Inc., a Delaware corporation (the "Company"), designs,
develops, produces, and markets a broad variety of consumer products,
collectibles and promotional products incorporating licensed characters from
films, television, sports, publishing, oil and gas and other sources.
Equity Marketing Hong Kong, Ltd., a Delaware corporation ("EMHK"), is a 100%
owned subsidiary of the Company. EMHK manages production of the Company's
products by third parties in the Far East and currently is responsible for
performing and/or procuring product sourcing, product engineering, quality
control inspections, independent safety testing and export/import documentation.
Synergy Promotions S.A. de C.V. ("Synergy") was incorporated in Mexico in 1996
and is 100% owned by the Company. Synergy markets the Company's consumer
products in Mexico. Prior to June 1998, the Company owned 65% of Synergy. The
Company acquired the 35% minority interest during June 1998 for $68.
In September 1996, the Company purchased 100% of the common stock of EPI Group
Limited ("EPI"), a Delaware corporation, a designer, developer, producer and
distributor of promotional products for sale to oil companies, consumer products
companies and retailers.
In April 1998, the Company purchased 100% of the common stock of Corinthian
Marketing, Inc., a Delaware corporation ("Corinthian"). Corinthian is engaged
principally in the design, manufacture, marketing and distribution of the
Headliners brand of collectible sports figurines.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the Company's
operating results as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- ---------------------
1997 1998 1997 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.8 73.3 72.9 72.3
------- ------- ------- -------
Gross profit 28.2 26.7 27.1 27.7
------- ------- ------- -------
Operating Expenses:
Salaries, wages and benefits 9.0 10.7 8.1 10.6
Selling, general and administrative 11.5 13.5 9.2 12.3
Business process reengineering -- 5.2 -- 1.8
------- ------- ------- -------
Total operating expenses 20.5 29.4 17.3 24.7
------- ------- ------- -------
Income (loss) from operations 7.7 (2.7) 9.8 3.0
Interest income (expense), net 0.8 (1.1) 0.4 (0.1)
------- ------- ------- -------
Income (loss) before provision for income taxes 8.5 (3.8) 10.2 2.9
Provision (benefit) for income taxes 3.3 (1.5) 3.9 1.1
------- ------- ------- -------
Net income (loss) 5.2% (2.3)% 6.3% 1.8%
======= ======= ======= =======
</TABLE>
12
<PAGE> 13
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997 (DOLLARS IN THOUSANDS):
Revenues for the three months ended September 30, 1998 increased $2,399 or 9% to
$29,987 from $27,588 in the comparable period in 1997. Promotions revenue for
the three months ended September 30, 1998 increased $40 to $18,278 primarily as
a result of sales associated with a Burger King promotion related to
Nickelodeon's Nickel-O-Zone television programming block. Promotions revenue was
also generated from the recent acquisitions of Contract Marketing, Inc. and U.S.
Import & Promotions Co. ("CMI/USI"). These revenues were offset by reduced
promotional activities in Latin America and Asia due to those regions' weak
economic conditions compared to the prior year period. Consumer products revenue
increased $2,359 to $11,709 primarily due to sales of product related to
Universal Studio's upcoming release of Babe: Pig in the City and sales of
Headliners products subsequent to the Company's acquisition of Corinthian
Marketing, Inc. ("Corinthian"), offset by signficantly lower sales under the
Company's Warner Bros.'s International Looney Tunes license, which terminates at
the end of 1998.
Cost of sales increased $2,167 to $21,985 (73.3% of revenues) for the three
months ended September 30, 1998 from $19,818 (71.8% of revenues) in the
comparable period in 1997. The gross margin percentage for the period decreased
because of write downs on excess inventories of toys based on licenses that the
Company has chosen not to renew for 1999, offset by a more profitable mix of
revenues in 1998.
Operating expenses increased $3,167 (56%) to $8,823 (29.4% of revenues) from
$5,656 (20.5% of revenues) in the comparable period in 1997 primarily due to
costs associated with business process reengineering related to the replacement
of the Company's information systems. Operating expenses also increased as a
result of an increase in salaries, wages and benefits of $713. This increase is
primarily attributable to the addition of employees from the acquisitions of
Corinthian and CMI/USI. In addition, operating expenses increased as a result of
increases in the Company's occupancy, depreciation and amortization and
marketing costs. Occupancy costs for facilities are higher to support the higher
number of employees in 1998. Depreciation and amortization expenses increased
due to higher fixed asset levels and amortization of intangibles related to the
acquisitions of Corinthian in April 1998 and CMI/USI in July 1998. Marketing
costs also increased for the Company's consumer products lines in 1998.
Excluding business process reengineering costs, net income for the three months
ended September 30, 1998 would have been $253 or $0.04 per basic and diluted
share.
The effective tax rate for the three months ended September 30, 1998 is 38.5%,
which is consistent with the prior year.
Net income decreased $2,148 or 148.3% to a loss of $700 from a $1,448 profit in
1997. Increased revenues were offset by a lower gross margin percentage and
increased operating expenses for the three months ended September 30, 1998.
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NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997 (DOLLARS IN THOUSANDS):
Revenues for the nine months ended September 30, 1998 decreased $11,468 or 12.0%
to $84,376 from $95,844 in the comparable period in 1997. Promotions revenues
decreased $12,784 to $57,941 primarily as a result of lower sales volumes in the
second quarter of 1998 on a Burger King promotion related to Dreamworks SKG's
Small Soldiers movie, in contrast to two Burger King promotions associated with
the release of Universal Studios' The Lost World: Jurassic Park and a video
release of the Land Before Time for the corresponding period in the prior year.
The decrease also resulted from slowed promotional activities in Latin America
and Asia due to those regions' weak economic conditions compared to the
corresponding period in the prior year. These decreases were offset by
additional promotion revenue generated by CMI/USI. Consumer products revenue
increased $1,316 to $26,435 primarily due to sales of product related to
Columbia/Tri-Star Pictures' Godzilla, Universal Studios' upcoming release of
Babe: Pig in the City and sales of Headliners products subsequent to the
acquisition of Corinthian, offset by significantly lower sales under the
Company's Warner Bros. International Looney Tunes license which terminates at
the end of 1998.
Cost of sales decreased $8,847 to $60,985 (72.3% of revenues) for the nine
months ended September 30, 1998 from $69,832 (72.9% of revenues) in the
comparable period in 1997 due primarily to lower sales in 1998. The gross margin
percentage for the period increased slightly because of a more profitable mix of
revenues in 1998 partially offset by write-downs on excess inventories of toys
based on licenses that the Company has decided not to renew for 1999
Operating expenses increased $4,238 (25.4%) to $20,894 (24.7% of revenues) from
$16,656 (17.3% of revenues) in the comparable period in 1997 primarily due to
the costs associated with business process reengineering related to the
replacement of the Company's computer systems. Operating expenses also increased
as a result of an increase in salaries, wages and benefits of $1,121. This
increase is primarily attributable to the addition of employees from the
acquisitions of Corinthian and CMI/USI. In addition, operating expenses
increased as a result of increases in the Company's occupancy, depreciation and
amortization and marketing costs. Occupancy costs for facilities are higher to
support a higher number of employees in 1998. Depreciation and amortization
expense increased due to higher fixed asset levels and amortization of
intangibles related to the acquisitions of Corinthian in April 1998 and CMI/USI
in July 1998. Marketing costs also increased for the Company's consumer product
lines in 1998.
Excluding business process reengineering costs, net income for the nine months
ended September 30, 1998 would have been $2,434 or $0.40 per basic share and
$0.39 per diluted share.
The effective tax rate for the nine months ended September 30, 1998 is 38.5%,
which is consistent with the prior year.
Net income decreased $4,517 or 75.3% to $1,481 (1.8% of revenues) from $5,998
(6.3% of revenues) in 1997 primarily due to lower revenues earned in addition to
increases in operating expenses partially offset by a higher gross margin
percentage in 1998.
FINANCIAL CONDITION AND LIQUIDITY
As of September 30, 1998, the Company's investment in cash and cash equivalents
decreased $5,924 from the balance at December 31, 1997. This decrease was
primarily due to cash paid in the acquisition of Corinthian in April 1998 and
CMI/USI in July 1998 and additional cash consideration paid in July 1998
associated with the purchase of EPI.
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As of September 30, 1998, the Company's investment in accounts receivable
decreased $7,138 from the balance at December 31, 1997. This decrease is
primarily due to collections of fourth quarter programs shipped late in the
fourth quarter of 1997, partially offset by accounts receivable acquired in the
Corinthian and CMI/USI acquisitions. As of September 30, 1998 inventory
increased $7,644 from December 31, 1997 primarily as a result of
production-in-process related to Toys and Promotions programs which are
scheduled to ship in the fourth quarter of 1998. The increase in inventory is
also attributable to inventory acquired in the Corinthian and CMI/USI
acquisitions.
As of September 30, 1998, working capital was $7,076 compared to $29,064 at
December 31, 1997. The decrease in working capital was primarily a result of
cash used in the acquisitions of Corinthian in April 1998 and CMI/USI in July
1998. The decrease was also a result of cash used in the conversion to the new
information system and the related business process reengineering, and was
partially offset by profits for the nine months ended September 30, 1998. As a
result of additional funds expected to be spent on the conversion to the new
information system and the related business process reengineering (see
Information Systems below), together with potential growth in the Company's
business and other potential acquisitions, the Company will likely require
additional financing. It is anticipated that such financing will be obtained,
depending on availability and market conditions, through bank financing, the
issuance of additional equity or debt securities, or a combination of these
sources. The Company is currently in negotiations with its banks to increase the
credit facility. There can be no assurance, however, that such negotiations will
be successful or that sufficient funding from other sources will be available at
terms considered favorable by the Company. Any failure by the Company to timely
obtain sufficient funding on favorable terms could negatively impact the
Company's business, financial condition and results of operations. The
statements set forth herein are forward-looking, and actual results may differ
materially (see the Cautionary Statement above).
CREDIT FACILITIES
The Company maintains a revolving credit agreement ("Credit Agreement") with two
commercial banks which makes available to the Company a line of credit of up to
$25 million. The Credit Agreement is secured by substantially all of the
Company's assets. As of September 30, 1998, there was a total of $12,000
outstanding under the Credit Agreement. In addition, letter of credit amounts
outstanding as of December 31, 1997 and September 30, 1998 were $4,156 and
$2,776 respectively.
RELIANCE ON FOREIGN MANUFACTURERS
The Company's products are manufactured at facilities located in the Far East.
Foreign manufacturing is subject to a number of risks, including, without
limitation, transportation delays and interruptions, political and economic
disruptions, foreign currency instability, the imposition of tariffs, quotas and
other import or export controls, and changes in governmental policies.
FOREIGN CURRENCY RISK
As part of the Company's business, the Company enters into contracts for the
purchase and sale of its products with entities in foreign countries. While the
vast majority of the Company's contracts are denominated in U.S. dollars,
significant fluctuations in the local currencies of the entities with whom the
Company transacts business may adversely affect these entities' abilities to
fulfill their obligations under their contracts.
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INFORMATION SYSTEMS
Based on strategic and operational assessments, the Company decided to replace
its existing information systems. The new enterprise system is designed to
enhance management information, financial reporting, inventory management, order
entry and cost evaluation and control. The conversion to the new system and the
related business process reengineering is scheduled to be completed in the first
half of 1999. These projects are expected to cost approximately $5,000, of which
approximately $3,500 is expected to be spent on business process
reengineering. In accordance with Emerging Issues Task Force Issue No. 97-13,
such business process reengineering costs are expensed as incurred. These
expenses totaled $1,549 for the three months ended September 30, 1998 and are
presented as business process reengineering expenses in the accompanying
condensed consolidated statements of operations. The expenditures for hardware,
software, and software implementation associated with the conversion to the new
system, are capitalizable and are expected to total approximately $1,500. For
the nine months ended September 30, 1998, approximately $1,100 of these costs
have been capitalized and are reflected in fixed assets in the accompanying
condensed consolidated balance sheet.
The "Year 2000 Issue" is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The new enterprise system
discussed above has the added benefit of addressing Year 2000 systems issues.
The Company is also communicating with suppliers, distributors, financial
institutions and others with which it does business to evaluate and coordinate
Year 2000 requirements. There can be no assurance that the systems of other
companies on which the Company's systems rely will also be timely converted or
that any such failure to convert by another company would not have an adverse
effect on the Company's systems. Failure to complete the system conversion in a
timely manner or any significant disruption of the Company's ability to
communicate electronically with its business partners could negatively impact
the Company's business, financial condition and results of operations. The
statements set forth herein are forward looking, actual results may differ
materially (see Cautionary Statement above).
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PART II.
ITEM 5. OTHER INFORMATION
The Company's Bylaws require advance notice for any business to be
brought before a meeting of stockholders. In general, for business to be
brought before an annual meeting by a stockholder, written notice of the
stockholder proposal must be delivered to the Secretary of the Company
not less than the close of business on the ninetieth day nor earlier
than the close of business on the one hundred twentieth day prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more
than thirty days before or more than sixty days after such anniversary
date, notice by the stockholder to be timely must be so delivered not
earlier than the close of business on the one hundred twentieth day
prior to such annual meeting and not later than the close of business on
the later of the ninetieth day prior to such annual meeting or the tenth
day following the day on which public announcement of the date of such
annual meeting is first made. In general, the stockholder's notice to
the Secretary must contain a brief description of the business to be
brought before the meeting and the reasons for conducting such business
at the meeting, as well as certain other information. Written notice of
any such stockholder proposal should be sent to the Secretary, Equity
Marketing Inc., 131 South Rodeo Drive, Beverly Hills, California
90212-2428.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Amended and restated Bylaws of the Company.
10.1 Amended and restated Stock Option Plan of the Company.
10.2 Form of Grant Agreement under the amended and restated Stock
Option Plan of the Company.
10.3 Form of Indemnification Agreement.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K:
Report on Form 8-K/A filed with the Securities and Exchange Commission
on July 8, 1998.
Report on Form 8-K filed with the Securities and Exchange Commission on
August 7, 1998.
Report on Form 8-K filed with the Securities and Exchange Commission on
September 29, 1998.
Report on Form 8-K/A filed with Securities and Exchange Commission on
October 6, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITY MARKETING, INC.
(Registrant)
Date: As of November 16, 1998 /s/ MICHAEL J. WELCH
--------------------------------------------
Michael J. Welch
Executive Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
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EXHIBIT INDEX
EXHIBIT
3.1 Amended and restated Bylaws of the Company.
10.1 Amended and restated Stock Option Plan of the Company.
10.2 Form of Grant Agreement under the amended and restated Stock Option Plan
of the Company.
10.3 Form of Indemnification Agreement.
27.0 Financial Data Schedule.
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<PAGE> 1
EXHIBIT 3.1
BYLAWS
OF
EQUITY MARKETING, INC.
ARTICLE I
OFFICES
SECTION 1.1. REGISTERED OFFICE. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. MEETINGS. All meetings of the stockholders for the
election of directors shall be held in such place, either within or without the
State of Delaware, as may be fixed from time to time by the Board of Directors
and as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
SECTION 2.2. ANNUAL MEETINGS. An annual meeting of the
stockholders, for the election of directors to succeed those whose terms expire
and for the transaction of such other business as may properly come before the
meeting, shall be held at such place, on such date, and at such time as the
Board of Directors shall each year fix.
SECTION 2.3. WRITTEN NOTICE OF ANNUAL MEETINGS. Written notice of
the annual meeting stating the place, date and hour of the meeting shall be
delivered to each stockholder entitled to vote at such meeting not less than ten
(10) nor more than sixty (60) days before the date of the meeting, except as
otherwise provided herein or required by law.
SECTION 2.4. STOCK LEDGER. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
<PAGE> 2
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose or purposes prescribed in the notice of the
meeting, may be called by the Board of Directors or the chief executive officer
and shall be held at such place, on such date, and at such time as they or he
shall fix.
SECTION 2.6. WRITTEN NOTICE OF SPECIAL MEETINGS. Written notice
of a special meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting, except as otherwise provided
herein or required by law.
SECTION 2.7. BUSINESS AT SPECIAL MEETINGS.Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.
SECTION 2.8. QUORUM. The holders of a majority of each class of
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by law
or by the Certificate of Incorporation. For purposes of the foregoing, two or
more classes or series of stock shall be considered a single class if the
holders thereof are entitled to vote together as a single class at the meeting.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, the chairman of the meeting or the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 2.9. VOTING.When a quorum is present at any meeting, the
vote of the holders of a majority of each class of stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of law or of the Certificate of Incorporation, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
SECTION 2.10. VOTING AND PROXIES. Unless otherwise provided in
the Certificate of Incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by him which has voting power upon the matter in question, and no
stockholder shall be entitled to cumulate his votes. If the Certificate of
Incorporation provides for more or less than one vote for any share on any
matter, every reference in these Bylaws to a majority or other proportion of
stock shall refer to such majority or other proportion of the votes of such
stock. A stockholder may vote the shares owned of record by him either in person
or by proxy executed in writing (which shall include writings sent by telex,
telegraph, cable, facsimile transmission or other means of electronic
transmission) by
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the stockholder himself or his duly authorized attorney-in-fact; provided,
however, that any such telex, telegram, cablegram, facsimile transmission or
other means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telex, telegram,
cablegram, facsimile transmission or other means of electronic transmission was
authorized by the stockholder. If it is determined that such telexes, telegrams,
cablegrams, facsimile transmissions or other electronic transmissions are valid,
the inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to the foregoing sentences of this Section 2.10
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
Execution of the proxy may be accomplished by the stockholder or his authorized
officer, director, employee or agent signing such writing or causing his
signature to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature. No such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation. Voting at
meetings of stockholders need not be by written ballot and need not be conducted
by inspectors unless required by Section 2.11 of these Bylaws or unless the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at such meeting shall so
determine.
SECTION 2.11. INSPECTORS OF ELECTION. Before any meeting of
stockholders, the Board of Directors may appoint any persons other than nominees
for office to act as inspectors of election at the meeting or its adjournment.
If the Corporation has a class of voting stock that is (i) listed on a national
securities exchange, (ii) authorized for quotation on an inter-dealer quotation
system of a registered national securities exchange, or (iii) held of record by
more than 2,000 stockholders, the Board of Directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors other than nominees for
office to act at the meeting. If no inspectors of election are appointed, the
chairman of the meeting may, and on the request of any stockholder or his proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be determined by the Board of Directors before the meeting or by the
chairman of the meeting at the meeting. If any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment by the Board of Directors before the meeting, or by the meeting
chairman at the meeting. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
The duties of these inspectors shall be as follows: (i) ascertain
the number of shares outstanding and the voting power of each; (ii) determine
the shares represented at a meeting and the validity of proxies and ballots;
(iii) count all votes and ballots; (iv) determine
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and retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors; and (v) certify their determination
of the number of shares represented at the meeting, and their count of all votes
and ballots. The inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of the inspectors.
The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto shall be accepted by the inspectors after the closing
of the polls.
Except as otherwise required by applicable law, in determining
the validity and counting of proxies and ballots, the inspectors shall be
limited to an examination of the proxies, any envelopes submitted with those
proxies, any information provided in accordance with Section 2.10 hereof,
ballots and the regular books and records of the Corporation.
SECTION 2.12. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
Annual Meetings of Stockholders. (a) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or
at the direction of the Board of Directors or (iii) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in this Section 2.12 and who was a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation.
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a) above of this Section 2.12, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must be a proper matter for stockholder action. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not less than the close of business on the ninetieth (90th) day
nor earlier than the close of business on the one hundred twentieth (120th) day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than
thirty (30) days before or more than sixty (60) days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the one hundred twentieth (120th) day prior to
such annual meeting and not later than the close of business on the later of the
ninetieth (90th) day prior to such annual meeting or the tenth (10th) day
following the day on which public announcement of the date of such annual
meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice shall set
forth (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act
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of 1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (ii) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of paragraph
(b) of this Bylaw to the contrary, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement naming all of the nominees for director or specifying
the size of the increased Board of Directors made by the Corporation at least
one hundred (100) days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this Bylaw shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complies with the notice procedures set forth in this Bylaw
and who is a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation. In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be), for election to such positions if the stockholder's notice
required by paragraph (b) above of this Section 2.12 shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier than
the close of business on the one hundred twentieth (120th) day prior to such
special meeting and not later than the close of business on the later of the
ninetieth (90th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
General. (a) Only persons who are nominated in accordance with
the procedures set forth in this Bylaw shall be eligible to serve as a director
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in
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accordance with the procedures set forth in this Bylaw. Except as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, the chairman
of the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Bylaw and, if any proposed nomination or
business is not in compliance with this Bylaw, to declare that such defective
proposal or nomination shall be disregarded.
(b) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(c) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or the holders of any
series of preferred stock to elect directors under specified circumstances.
SECTION 2.13. STOCKHOLDER ACTION BY WRITTEN CONSENT. (a) Any
action required to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the Corporation by delivery to
its registered office in Delaware or to the Secretary of the Corporation at its
principal place of business. Delivery shall be made by hand or by certified or
registered mail, return receipt request.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty (60) days
of the date the earliest dated consent is delivered to the Corporation, a
written consent or consents signed by a sufficient number of holders to take
action are delivered to the Corporation in the manner prescribed in paragraph
(c) of this Section 2.13.
(c) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days
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after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within ten (10) days of the date on which such a request is received,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation in accordance with paragraphs (a) and (b) of this
Section. If no record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
(d) Within five (5) business days after receipt of the earliest
dated consent delivered to the Corporation in the manner provided in this
Section 2.13, the Corporation, shall retain nationally recognized independent
inspectors of elections for the purposes of performing a ministerial review of
the validity of consents and any revocations thereof. The cost of retaining
inspectors of election shall be borne by the Corporation.
(e) At any time that stockholders soliciting consents in writing
to corporate action have a good faith belief that the requisite number of valid
and unrevoked consents to authorize or take the action specified has been
received by them, the consents shall be delivered by the soliciting stockholders
to the Corporation's registered office in the State of Delaware or to the
Secretary of the Corporation at its principal place of business, together with a
certificate stating their belief that the requisite number of valid and
unrevoked consents has been received as of a specific date, which date shall be
identified in the certificate. Such delivery shall be made by hand or by
certified or registered mail, return receipt requested. Upon receipt of such
consents, the Corporation shall cause the consents to be delivered promptly to
the inspectors of election. The Corporation also shall deliver promptly to the
inspectors of election any revocations of consents in its possession, custody or
control as of the time of receipt of the consents.
(f) As promptly as practicable after the consents and revocations
are received by them, the inspectors of election shall issue a preliminary
report to the Corporation stating: (i) the number of shares represented by valid
and unrevoked consents; (ii) the number of shares represented by invalid
consents; (iii) the number of shares represented by invalid revocations; and
(iv) the number of shares entitled to submit consents as of the record date.
Unless the Corporation and the soliciting stockholders agree to a shorter or
longer period, the Corporation and the soliciting stockholders shall have five
(5) days to review the consents and revocations and to advise the inspectors and
the opposing party in writing as to whether they intend to challenge the
preliminary report. If no timely written notice of an intention to challenge the
preliminary report is received, the inspectors shall certify the preliminary
report (as corrected or modified by virtue of the detection by the inspectors of
clerical errors) as their final report and deliver it to the Corporation. If the
Corporation or the soliciting stockholders give timely written notice of an
intention to challenge the preliminary report, a challenge session shall be
scheduled by the inspectors as promptly as practicable. A transcript of the
challenge session shall be
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recorded by a certified court reporter. Following completion of the challenge
session, the inspectors shall issue as promptly as practicable their final
report and deliver it to the Corporation. A copy of the final report shall be
included in the book in which the proceedings of meetings of stockholders are
required.
(g) The Corporation shall give prompt notice to the stockholders
of the results of any consent solicitation or the taking of corporate action
without a meeting by less than unanimous written consent.
(h) This Section 2.13 shall in no way impair or diminish the
right of any stockholder or director, or any officer whose title to office is
contested, to contest the validity of any consent or revocation thereof, or to
take any other action with respect thereto.
ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER AND TERM OF OFFICE. The Board of Directors
shall consist of one or more members, the exact number thereof to be determined
from time to time by resolution of the Board of Directors. The Board of
Directors may, by resolution passed by a majority of the whole board, create new
directorships. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3.2, and each director elected shall
hold office until his successor is elected and qualified. Directors need not be
stockholders, residents of Delaware or citizens of the United States.
SECTION 3.2. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced.
SECTION 3.3. POWERS. The business of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
SECTION 3.4. MEETINGS OF THE BOARD OF DIRECTORS. The Board of
Directors of the Corporation may hold meetings, both regular and special, either
within or without the State of Delaware.
SECTION 3.5. REGULAR MEETINGS OF THE BOARD OF DIRECTORS. Regular
meetings of the Board of Directors may be held upon notice, or without notice,
at such time and at such place as shall from time to time be determined by the
Board of Directors.
SECTION 3.6. SPECIAL MEETINGS OF THE BOARD OF DIRECTORS. Special
meetings of the Board of Directors may be called by one-third of the directors
then in office or by the chief
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executive officer and shall be held at such place, on such date, and at such
time as they or he shall fix. Notice of the place, date and time of each such
special meeting shall be given each director by whom it is not waived by mailing
written notice not less than three (3) days before the meeting or by
telegraphing or sending by facsimile transmission the same not less than
eighteen (18) hours before the meeting. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at a special meeting.
SECTION 3.7. QUORUM. At all meetings of the board a majority of
the directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Certificate of Incorporation. If a quorum
shall not be present at any meeting of the Board of Directors the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
SECTION 3.8. BOARD ACTION BY WRITTEN CONSENT. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
SECTION 3.9. TELEPHONIC MEETINGS. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
SECTION 3.10. COMMITTEES OF DIRECTORS. The Board of Directors may
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to (i) approving or adopting, or recommending to the
stockholders, any action expressly required by law to be submitted to the
stockholders for approval, or (ii) adopting, amending or repealing any bylaw of
the Corporation. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
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SECTION 3.11. CONDUCT OF BUSINESS BY COMMITTEES. Unless the Board
of Directors otherwise provides, each committee designated by the Board of
Directors may adopt, amend and repeal rules for the conduct of its business. In
the absence of a provision by the Board of Directors or a provision in the rules
of such committee to the contrary, a majority of the entire authorized number of
members of such committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the time
of such vote if a quorum is then present shall be the act of such committee, and
in other respects each committee shall conduct its business in the same manner
as the Board of Directors conducts its business pursuant to Article III of these
Bylaws. Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
SECTION 3.12. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. Nothing herein
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
SECTION 3.13. REMOVAL OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation or Bylaws, any director or the entire Board
of Directors may be removed, with or without cause, by the holders of a majority
of shares entitled to vote at an election of directors at a special meeting of
stockholders called for that purpose.
ARTICLE IV
NOTICES
SECTION 4.1. NOTICES. Whenever notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telecopy or overnight delivery service.
SECTION 4.2. WAIVER. Whenever any notice is required to be given,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE V
OFFICERS
SECTION 5.1. GENERAL. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a chairman (or any number of
co-chairman), a president, one or more vice presidents (who may at the pleasure
of the Board of Directors be designated as Senior Vice Presidents, Executive
Vice Presidents, Vice Presidents in charge of a particular function such as Vice
President-Finance, or merely Vice President), a secretary and a treasurer. The
Board of Directors may also choose a controller, one or more assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, except the offices of chairman and secretary.
Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
stockholders. The Board of Directors may appoint such other officers and agents
as it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board. Except as otherwise provided in a resolution of the Board of
Directors electing any officer, each officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier death, resignation or removal. Any officer may resign at any
time upon written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board of Directors may
remove any officer with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled for the unexpired portion
of the term by the Board of Directors at any regular or special meeting.
SECTION 5.2. THE CHAIRMAN. The chairman of the Board of Directors
(or, if there are co-chairmen, that co-chairman who is designated by the Board
of Directors) shall be the chief executive officer of the Corporation. Subject
to the provisions of these Bylaws and to the direction of the Board of
Directors, he shall have the responsibility for the general management and
control of the affairs and business of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him by the Board of Directors.
The Board of Directors may, at its discretion, appoint co-chief
executive officers, each of whom shall have such duties and other powers as are
commonly incident to such office or are delegated to each of them by the Board
of Directors.
The chairman (or any co-chairmen) of the Board of Directors shall
have power to sign all stock certificates, contracts and other instruments of
the Corporation which are authorized. He shall have general supervision and
direction of all of the other officers and agents of the
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Corporation.
SECTION 5.3. THE PRESIDENT. The president shall have such duties
and powers as may from time to time be delegated to him by the Board of
Directors or by the chairman of the Board of Directors (or if there are
co-chairmen of the Board of Directors, the chief executive officer). In the
absence or disability of the chairman (or co-chairmen) of the Board of
Directors, or during the period of a vacancy in that office, he shall act as the
chief executive officer of the Corporation and shall have the duties and powers
of the chairman. The president shall, in the absence or disability of the
chairman, preside at meetings of the stockholders and the Board of Directors.
SECTION 5.4. THE VICE PRESIDENTS. The vice president or, if there
shall be more than one, the vice presidents in the order determined by the Board
of Directors shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
SECTION 5.5. THE SECRETARY AND ASSISTANT SECRETARIES. The
secretary shall attend all meetings of the Board of Directors and all meetings
of the stockholders and record all the proceedings of the meetings of the
Corporation and of the Board of Directors in a book to be kept for that purpose
and shall perform like duties for the standing committees when required. The
secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or person
serving as chief executive officer, under whose supervision he shall be. The
secretary shall have custody of the corporate seal of the Corporation and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and, when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
The assistant secretary or, if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
SECTION 5.6. THE TREASURER AND ASSISTANT TREASURERS. The
treasurer shall have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors.
The treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the person serving as chief executive
officer, the president and Board of Directors at its regular meetings, or when
the Board of Directors so requires, an account of all his transactions as
treasurer and of the
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financial condition of the Corporation.
The assistant treasurer, or, if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors, shall,
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.1. GENERAL. The shares of the Corporation shall be
represented by certificates; provided, however, that the Board of Directors may
provide by resolution or resolutions that some or all of any or all classes or
series of the Corporation's stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by, or in the name of the Corporation by,
the chairman or the president or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation, certifying the number of shares owned by him in certificated form.
Any of or all the signatures on the certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
SECTION 6.2. LOST CERTIFICATES. In the event of the loss, theft
or destruction of any certificate of stock, another may be issued in its place
pursuant to such regulations as the Board of Directors may establish concerning
proof of such loss, theft or destruction and concerning the giving of a
satisfactory bond or bonds of indemnity.
SECTION 6.3. REGULATIONS REGARDING STOCK. The issue, transfer,
conversion and registration of certificates of stock shall be governed by such
other regulations as the Board of Directors may establish.
SECTION 6.4. RECORD DATES. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date: (i) in the case of determination of stockholders entitled to
vote at any meeting of stockholders or adjournment thereof, shall, unless
otherwise required by law, not be more than sixty (60) nor less than ten (10)
days before the date of such meeting; (ii) in the case of determination of
stockholders entitled to express consent to corporate action in writing
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without a meeting, shall not be more than ten (10) days from the date upon which
the resolution fixing the record date is adopted by the Board of Directors; and
(iii) in the case of any other action, shall not be more than sixty (60) days
prior to such other action. If no record date is fixed: (i) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (ii) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action of the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation in accordance with applicable law, or, if prior action by the
Board of Directors is required by law, shall be at the close of business on the
day on which the Board of Directors adopts the resolution taking such prior
action; and (iii) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR
IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 7.2. ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF
THE CORPORATION. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
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him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
SECTION 7.3. EXPENSES INCURRED. To the extent that a present or
former director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 7.1 or 7.2 or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.4. DETERMINATION OF INDEMNIFICATION. Any
indemnification under Sections 7.1 or 7.2 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 7.1 or 7.2. Such
determination shall be made with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (iii) if
there are not such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iv) by the stockholders.
SECTION 7.5. ADVANCEMENT OF EXPENSES. Expenses (including
attorneys' fees) incurred by an officer or director of the Corporation in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article VII
or where indemnification is granted to the extent the expenses so advanced by
the Corporation or allowed by a court exceed the indemnification to which he is
entitled.
SECTION 7.6. NON-EXCLUSIVITY. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article VII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
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SECTION 7.7. INSURANCE. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation, as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VII.
SECTION 7.8. INCLUSION OF CONSTITUENT CORPORATION. For purposes
of this Article VII, references to "the Corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
SECTION 7.9. INCLUSION OF OTHER TERMS. For purposes of this
Article VII, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to any employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves
service by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VII.
SECTION 7.9. PARTIAL INDEMNIFICATION. If any person is entitled
under any provisions of this Article VII to indemnification by the Corporation
for some or a portion of the judgments, fines, penalties, costs, charges or
reasonable expenses (including attorneys' fees) incurred in, and amounts paid or
to be paid in settlement of, an action or proceeding described in Section 7.1 or
any appeal therein, but not, however, for all of the total amount thereof, the
Corporation shall nevertheless indemnify such person for the portion thereof to
which such person is entitled.
SECTION 7.10. CONTRACT RIGHT. The foregoing indemnification
provisions of this Article VII shall be deemed to be a contract between the
Corporation and each director, officer, employee or agent who serves in any such
capacity at any time while these provisions are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such
16
<PAGE> 17
"contract right" may not be modified retroactively without the consent of such
director, officer employee or agent.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. GENDER. Any reference to the masculine gender in
these Bylaws shall be construed to mean the feminine gender, as the situation
may demand.
SECTION 8.2. CHECKS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
SECTION 8.3. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed, and shall be subject to change, by the Board of Directors.
SECTION 8.4. SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 8.5. AMENDMENTS. These Bylaws may be amended or repealed
by the Board of Directors at any meeting or by the stockholders at any meeting.
SECTION 8.6. FACSIMILE SIGNATURES. In addition to the provisions
for the use of facsimile signatures elsewhere specifically authorized in these
bylaws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors.
SECTION 8.7. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each
director, each member of any committee designated by the Board of Directors, and
each officer of the Corporation shall, in the performance of his duties, be
fully protected in relying in good faith upon the books of account or other
records of the Corporation, including reports made to the Corporation by any of
its officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
SECTION 8.8. TIME PERIODS. In applying any provision of these
Bylaws which require that an act be done or not done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to any event, calendar days shall be used, the day of the doing of
the act shall be excluded, and the day of the event shall be included.
SECTION 8.9. INDEPENDENT ACCOUNTANTS. The Board of Directors
shall appoint on an annual basis such firm of independent public accountants as
it shall deem appropriate to examine the Corporation's financial books and
records on at least an annual basis. The appointment of said independent
accountants shall, at the next succeeding annual meeting of stockholders be
presented to the stockholders of the Corporation for ratification. Should the
stockholders fail to ratify the
17
<PAGE> 18
appointment by the Board of Directors of said independent public accountants,
the Board of Directors shall take the matter under consideration and the vote of
the stockholders in that regard shall be deemed advisory in nature.
18
<PAGE> 1
EXHIBIT 10.1
EQUITY MARKETING, INC.
STOCK OPTION PLAN
1. PURPOSE. The purpose of the Equity Marketing, Inc. Stock
Option Plan (the "Plan") is to enable Equity Marketing, Inc. (the "Company") and
its stockholders to secure the benefits of common stock ownership by key
personnel of the Company and its subsidiaries. The Board of Directors of the
Company (the "Board") believes that the granting of options under the Plan will
foster the Company's ability to attract, retain and motivate those individuals
who will be largely responsible for the profitability and long-term future
growth of the Company.
2. STOCK SUBJECT TO THE PLAN. The Company may issue and sell a
total of 2,240,000 shares of its common stock (the "Common Stock"), pursuant to
the Plan. Such shares may be either authorized and unissued or held by the
Company in its treasury. New options may be granted under the Plan with respect
to shares of Common Stock which are covered by the unexercised portion of an
option which has terminated or expired by its terms, by cancellation or
otherwise.
3. ADMINISTRATION. The Plan will be administered by the Board, or
at the discretion of the Board, a committee (the "Committee") consisting of at
least two directors appointed by and serving at the pleasure of the Board. If
the Plan is administered by the Board, references in the Plan to the "Committee"
shall mean the "Board". Subject to the provisions of the Plan, the Committee,
acting in its sole and absolute discretion, will have full power and authority
to grant options under the Plan, to interpret the provisions of the Plan, to fix
and interpret the provisions of option agreements made under the Plan, to
supervise the administration of the Plan, and to take such other action as may
be necessary or desirable in order to carry out the provisions of the Plan. A
majority of the members of the Committee will constitute a quorum. The Committee
may act by the vote of a majority of its members present at a meeting at which
there is a quorum or by unanimous written consent. The decision of the Committee
as to any disputed question, including questions of construction, interpretation
and administration, will be final and conclusive on all persons. The Committee
will keep a record of its proceedings and acts and will keep or cause to be kept
such books and records as may be necessary in connection with the proper
administration of the Plan.
4. ELIGIBILITY. Options may be granted under the Plan to present
or future key employees of the Company or a subsidiary of the Company (a
"Subsidiary") within the meaning of Section 424(f) of the Internal Revenue Code
of 1986 (the "Code"), and to consultants to the Company or a Subsidiary who are
not employees. Options may also be granted to directors of the Company who are
not employees of or consultants to the Company and/or a Subsidiary. (An option
may be granted to an employee, in connection with hiring, retention or
otherwise, prior to the date the employee first performs services for the
Company or a Subsidiary, provided that such options shall not become vested
prior to the date the employee first performs such services.) Subject to the
provisions of the Plan, the Committee may from time to time select the persons
to whom options will be granted,
<PAGE> 2
and will fix the number of shares covered by each such option and establish the
terms and conditions thereof (including, without limitation, the exercise price,
restrictions on exercisability of the option and/or on the disposition of the
shares of Common Stock issued upon exercise thereof, and whether or not the
option is to be treated as an incentive stock option within the meaning of
Section 422 of the Code (an "Incentive Stock Option")).
5. TERMS AND CONDITIONS OF OPTIONS. Each option granted under the
Plan will be evidenced by a written agreement in a form approved by the
Committee. Each such option will be subject to the terms and conditions set
forth in this paragraph and such additional terms and conditions not
inconsistent with the Plan as the Committee deems appropriate. No person may
receive options to purchase more than 500,000 shares of Common Stock under the
Plan.
(a) OPTION EXERCISE PRICE. In the case of an option which
is not treated as an Incentive Stock Option, the exercise price per share may
not be less than the par value of a share of Common Stock on the date the option
is granted; and, in the case of an Incentive Stock Option, the exercise price
per share may not be less than 100% of the fair market value of a share of
Common Stock on the date the option is granted (110% in the case of an optionee
who, at the time the option is granted, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or a
Subsidiary (a "ten percent shareholder")). For purposes hereof, the fair market
value of a share of Common Stock on any date will be equal to the closing sale
price per share as published by a national securities exchange on which shares
of the Common Stock are traded on such date or, if there is no sale of Common
Stock on such date, the average of the bid and asked prices on such exchange at
the closing of trading on such date or, if shares of the Common Stock are not
listed on a national securities exchange on such date, the closing price or, if
none, the average of the bid and asked prices in the over the counter market at
the close of trading on such date, or if the Common Stock is not traded on a
national securities exchange or the over the counter market, the fair market
value of a share of the Common Stock on such date as determined in good faith by
the Committee.
(b) OPTION PERIOD. The period during which an option may
be exercised will be fixed by the Committee and will not exceed ten years from
the date the option is granted (five years in the case of an Incentive Stock
Option granted to a "ten percent shareholder").
(c) EXERCISE OF OPTIONS. No option will become exercisable
unless the person to whom the option is granted remains in the continuous employ
or service of the Company or a Subsidiary for at least one year (or for such
other period as the Committee may designate) from the date the option is
granted. The Committee will determine and will set forth in the option agreement
any vesting or other restrictions on the exercisability of the option, subject
to any earlier termination of the option required hereunder. All or part of the
exercisable portion of an option may be exercised at any time during the option
period. An option may be exercised by transmitting to the Company (1) a written
notice specifying the number of shares to be purchased, and (2) payment of the
exercise price, together with the amount, if any, deemed necessary by the
Committee to
2
<PAGE> 3
enable the Company to satisfy its income tax withholding obligations with
respect to such exercise (unless other arrangements acceptable to the Company
are made with respect to the satisfaction of such withholding obligations).
(d) PAYMENT OF EXERCISE PRICE. Options are exercised by
payment of the full amount of the purchase price to the Company. The payment
shall be in the form of cash or such other forms of consideration as the
Committee shall deem acceptable or such other methods of payment as the
Committee shall deem acceptable.
(e) RIGHTS AS A STOCKHOLDER. No shares of Common Stock
will be issued in respect of the exercise of an option granted under the Plan
until full payment therefor has been made. The holder of an option will have no
rights as a stockholder with respect to any shares covered by an option until
the date a stock certificate for such shares is issued to him or her. Except as
otherwise provided herein, no adjustments shall be made for dividends or
distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
(f) NONTRANSFERABILITY OF OPTIONS. Unless otherwise
determined by the Committee, no option shall be assignable or transferable
except upon the optionee's death to a beneficiary designated by the optionee in
accordance with procedures established by the Committee or, if no designated
beneficiary shall survive the optionee, pursuant to the optionee's will or by
the laws of descent and distribution. Unless otherwise determined by the
Committee, during an optionee's lifetime, options may be exercised only by the
optionee or, in the event of the optionee's disability (as defined below), the
optionee's guardian or legal representative.
(g) TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless
otherwise determined by the Committee, if an optionee ceases to be employed by
or to perform services for the Company or any Subsidiary for any reason other
than death or disability (as defined below), then each outstanding option
granted to him or her under the Plan will terminate six months after the date of
such termination of employment or service. If an optionee's employment or
service is terminated by reason of the optionee's death or disability, then each
outstanding option granted to the optionee under the Plan will terminate on the
date one year after the date of such termination of employment or service. For
purposes hereof, the term "disability" means a determination to that effect
under the group long-term disability plan of the Company; provided, however,
that in no event will an optionee be considered to be disabled for purposes of
this Plan if, at the sole discretion of the Committee, the optionee's disability
is a result of intentionally self-inflicted injuries (while sane or insane),
alcohol or drug abuse, or a criminal act for which the optionee is convicted or
to which the optionee pleads guilty or nolo contendere.
(h) OTHER PROVISIONS. The Committee may impose such other
conditions with respect to the exercise of options, including, without
limitation, any conditions relating to the application of federal or state
securities laws, as it may deem necessary or advisable.
3
<PAGE> 4
6. CAPITAL CHANGES, REORGANIZATION, SALE.
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the
event of a stock split, stock dividend, recapitalization, merger, consolidation,
split-up, combination, exchange of shares, or similar change affecting Common
Stock, the Committee shall authorize such adjustments as it may deem appropriate
with respect to the following: (1) the number and/or kind of shares covered by
each outstanding option; (2) the aggregate number and/or kind of shares for
which options may be granted under this Plan; and (3) the exercise price per
share in respect of each outstanding option. The Committee may also make such
adjustments in the event of a spinoff (or other distribution) of Company assets
to stockholders, other than normal cash dividends. Except as set forth above in
this section 6(a), no issuance by the Company of shares of stock of any class,
or securities convertible into, or options or warrants to purchase shares of any
class of stock, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to any
option.
(b) CASH, STOCK OR OTHER PROPERTY FOR STOCK. In the event
of an Exchange Transaction (as defined below), all optionees will be permitted
to exercise their outstanding options in whole or in part (whether or not
otherwise exercisable) immediately prior to such Exchange Transaction, and any
outstanding options which are not exercised before the Exchange Transaction will
thereupon terminate.
(c) DEFINITION OF EXCHANGE TRANSACTION. For purposes
hereof, the term "Exchange Transaction" means a sale of substantially all of the
assets of the Company, a liquidation or dissolution of the Company, or a merger,
consolidation or similar transaction in which the Company is not the Surviving
Corporation. The determination as to which party to a merger or consolidation is
the "Surviving Corporation" shall be made on the basis of the relative equity
interests of the shareholders in the corporation existing after the transaction,
as follows: if immediately following any merger or consolidation the holders of
outstanding voting securities of the Company immediately prior to the merger or
consolidation own equity securities possessing more than 50% of the voting power
of the corporation existing following the merger or consolidation, then for
purposes of this Plan, the Company shall be the Surviving Corporation. In all
other cases, the Company shall not be the Surviving Corporation. In making the
determination of ownership by the shareholders of a corporation immediately
after the merger or consolidation, equity securities which the shareholders
owned immediately before the merger or consolidation as shareholders of another
party to the transaction shall be disregarded. Further, for purposes of this
section 6(c) only, outstanding voting securities of a corporation shall be
calculated by assuming the conversion of all equity securities convertible
(immediately or at some future time) into shares entitled to vote.
(d) FRACTIONAL SHARES. In the event of any adjustment in
the number of shares covered by any option pursuant to the provisions hereof,
any fractional shares resulting from such adjustment will be disregarded, and
each such option will cover only the number of full shares resulting from the
adjustment.
4
<PAGE> 5
7. AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend or
terminate the Plan. Except as otherwise provided in the Plan with respect to
equity changes, any amendment which would increase the aggregate number of
shares of Common Stock as to which options may be granted under the Plan,
materially increase the benefits under the Plan, or modify the class of persons
eligible to receive options under the Plan shall be subject to the approval of
the Company's stockholders. No amendment or termination may affect adversely any
outstanding option without the written consent of the optionee.
8. NO RIGHTS CONFERRED. Neither the adoption of this Plan nor the
granting of any option shall affect or restrict in any way the power of the
Company to undertake any corporate action otherwise permitted under applicable
law or confer upon any optionee the right to continue performing services for
the Company or a Subsidiary, nor shall it interfere in any way with the right of
the Company or a Subsidiary to terminate the services of any optionee at any
time, with or without cause. No optionee shall have any rights as a stockholder
with respect to any shares covered by an option until the date a certificate for
such shares has been issued to the optionee following the exercise of an option.
9. GOVERNING LAW. The Plan and each option agreement granted
thereunder shall be governed by the laws of the State of Delaware, without
regard to the conflict of law provisions of any state.
10. DECISIONS AND DETERMINATIONS OF COMMITTEE TO BE FINAL. Except
to the extent rights or powers under this Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee are
final and binding.
11. TERM OF THE PLAN. The Plan shall be effective as of January
1, 1992, the date on which it was adopted by the Board and approved by the
stockholders of the Company. The Plan will terminate on December 31, 2001, the
date ten years after the date of adoption, unless sooner terminated by the
Board. The rights of optionees under options outstanding at the time of the
termination of the Plan shall not be affected solely by reason of the
termination and shall continue in accordance with the terms of the option (as
then in effect or thereafter amended).
12. INDEMNIFICATION. To the maximum extent permitted by law, the
Company shall indemnify each member of the Committee and of the Board, as well
as any other employee of the Company with duties under this Plan, against
expenses (including any amount paid in settlement) reasonably incurred by the
individual in connection with any claims against the individual by reason of the
performance of the individual's duties under this Plan, unless the losses are
due to the individual's gross negligence or lack of good faith. The Company will
have the right to select counsel and to control the prosecution or defense of
the suit. The Company will not be required to indemnify any person for any
amount incurred through any settlement unless the Company consents in writing to
the settlement.
5
<PAGE> 1
EXHIBIT 10.2
EQUITY MARKETING, INC.
STOCK OPTION AGREEMENT
AGREEMENT made as of the _____ day of ___________, 1998, by and
between EQUITY MARKETING, INC., a Delaware corporation (the "Company") and
____________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, pursuant to the Equity Marketing, Inc. Stock Option Plan
(the "Plan"), the Company desires to grant to the Optionee and the Optionee
desires to accept an option to purchase shares of common stock of the Company
(the "Common Stock") upon the terms and conditions set forth in this agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. The Company hereby grants to the Optionee an option to
purchase ____________ shares of Common Stock at a purchase price per share of
$_________. This option is intended to be treated as an option which is NOT an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986.
2. RESTRICTIONS ON EXERCISABILITY. Except as specifically
provided otherwise herein, the option will become exercisable in accordance with
the following schedule based upon the number of full years of the Optionee's
continuous employment or service with the Company or a Subsidiary following the
date hereof:
<TABLE>
<CAPTION>
Full Years of Continuous Incremental Percentage of Cumulative Percentage of
Employment/Service Option Exercisable Option Exercisable
------------------------ ------------------------- ------------------------
<S> <C> <C>
</TABLE>
-1-
<PAGE> 2
<TABLE>
<CAPTION>
Full Years of Continuous Incremental Percentage of Cumulative Percentage of
Employment/Service Option Exercisable Option Exercisable
------------------------ ------------------------- ------------------------
<S> <C> <C>
</TABLE>
No shares of Common Stock may be purchased hereunder unless the Optionee shall
have remained in the continuous employ or service of the Company or a Subsidiary
for one year from the date hereof. If the Optionee performs services for the
Company or a Subsidiary in a capacity other than as a director or employee,
then, for purposes hereof, those services will be deemed to be continuous until
they are terminated, and they will be deemed to be terminated at the time
provided therefor in the consulting or other agreement governing the performance
of such services or, if there is no such agreement, at the time the Company
notifies the Optionee that it no longer contemplates the utilization of such
services. Unless sooner terminated, the option will expire if and to the extent
it is not exercised within ten years from the date hereof.
3. EXERCISE. To the extent exercisable, the option may be
exercised in whole or in part by delivering to the Secretary of the Company (a)
a written notice specifying the number of shares to be purchased and (b) payment
in full of the exercise price, together with the amount, if any, deemed
necessary by the Company to enable it to satisfy any income tax withholding
obligations with respect to the exercise (unless other arrangements, acceptable
to the Company, are made for the satisfaction of such withholding obligations).
The exercise price shall be payable in the form of cash or such other forms of
consideration as the Committee shall deem acceptable or such other methods of
payment as the Committee shall deem acceptable.
4. RIGHTS AS STOCKHOLDER. No shares of Common Stock shall be sold
-2-
<PAGE> 3
or delivered hereunder until full payment for such shares has been made. The
Optionee shall have no rights as a stockholder with respect to any shares
covered by this option until a stock certificate for such shares is issued to
him or her. No adjustment shall be made for dividends or distributions of other
rights for which the record date is prior to the date such stock certificate is
issued.
5. NONTRANSFERABILITY OF OPTION. This option is not assignable or
transferable except upon the Optionee's death to a beneficiary designated by the
Optionee or, if no designated beneficiary shall survive the Optionee, pursuant
to the Optionee's will and/or the laws of descent and distribution. During an
Optionee's lifetime, options may be exercised only by the Optionee, or, in the
event of Optionee's Disability (as defined below), the Optionee's guardian or
legal representative.
6. TERMINATION OF SERVICE, DISABILITY OR DEATH. Unless otherwise
determined by the Committee, if the Optionee ceases to be employed by or to
perform services for the Company or any Subsidiary for any reason other than
death or Disability (as defined below), then this option will terminate six
months after the date of such termination of employment or service. If the
Optionee's employment or service is terminated by reason of the Optionee's death
or Disability, then this option will terminate on the date one year after the
date of such termination of employment or service. For purposes hereof, the term
"Disability" means a determination to that effect under the group long-term
disability plan of the Company; provided, however, that in no event will the
Optionee be considered to be disabled for purposes of this Agreement if, at the
sole discretion of the Committee, the Optionee's disability is a result of
intentionally self-inflicted injuries (while sane or insane), alcohol or drug
-3-
<PAGE> 4
abuse, or a criminal act for which the Optionee is convicted or to which the
Optionee pleads guilty or nolo contendere.
7. SECURITIES RESTRICTIONS. No shares issuable upon the exercise
of this option shall be issued and delivered unless and until all applicable
registration requirements of the Securities Act of 1933, all applicable listing
requirements of any national securities exchange on which the Common Stock is
then listed, and all other requirements of law or of any regulatory bodies
having jurisdiction over such issuance and delivery shall have been complied
with. In particular, the Committee may require certain investment (or other)
representations and undertakings in connection with the issuance of securities
in connection with the Plan in order to comply with applicable law.
8. NO EMPLOYMENT RIGHTS. Neither the grant of this option nor its
exercise shall (a) confer upon the Optionee any right to continue in the employ
of the Company or a Subsidiary, (b) interfere in any way with the rights of the
Company or a Subsidiary to terminate such employment at any time for any reason,
with or without cause, or (c) interfere with the right of the Company or a
Subsidiary to undertake any lawful corporate action. The Optionee acknowledges
that he or she is an "employee at will." The provisions of this paragraph 8 are
subject to the terms of any employment agreement between the Optionee and the
Company (or a Subsidiary).
9. PLAN GOVERNS. Nothwithstanding anything in this Agreement to
the contrary, the terms of this Agreement shall be subject to the terms of the
Plan. This Agreement is subject to all interpretations, amendments, rules and
regulations promulgated by the Board or the Committee from time to time pursuant
to the Plan.
-4-
<PAGE> 5
The Optionee acknowledges that he or she has received a copy of the Plan prior
to the execution of this Agreement.
10. ADMINISTRATION. The Board or the Committee appointed by the
Board to administer the Plan will have full power and authority in its sole
discretion to interpret and apply the provisions of this Agreement, and the
decision of the Board or the Committee as to any matter arising under this
Agreement shall be binding and conclusive as to all persons.
11. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware, without regard for the conflict of law provisions of any state.
12. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have such meanings assigned to such terms in the Plan.
IN WITNESS WHEREOF, this agreement has been executed as of the
date first above written.
EQUITY MARKETING, INC.
--------------------------------------
Leland P. Smith
Senior Vice President, General Counsel
and Secretary
--------------------------------------
Optionee
-5-
<PAGE> 1
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "AGREEMENT") is made and
entered into as of _____________ between Equity Marketing, Inc., a Delaware
corporation (the "COMPANY"), and _____________ (collectively with such person's
heirs, executors, administrators and other personal representatives, the
"INDEMNITEE"), an officer, director, employee or agent of the Company.
WHEREAS, the Indemnitee is currently serving as an officer,
director, employee or agent of the Company and the Company wishes the Indemnitee
to continue in such capacity; and
WHEREAS, the Board of Directors has concluded that the Company's
officers, directors, employees and agents should be provided with reasonable and
appropriate protection against inordinate risks in order to insure that the most
capable persons will be attracted to, and will continue to serve in, such
positions, and therefore has determined to contractually obligate itself to
indemnify in a reasonable and adequate manner its officers and directors and
certain of its employees and agents, and to assume for itself liability for
expenses and damages in connection with claims lodged against such persons as a
result of their service to the Company;
WHEREAS, applicable law empowers the Company to indemnify a
person who serves as a director, officer, employee or agent of the Company or a
person who serves at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, or other
enterprise; and
WHEREAS, in order to induce the Indemnitee to serve or continue
to serve as an officer, director, employee or agent of the Company, the Company
has determined and agreed to enter into this Agreement with the Indemnitee.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. SERVICE BY INDEMNITEE. The Indemnitee will serve and/or
continue to serve as a director or officer of the Company faithfully and to the
best of his or her ability so long as the Indemnitee is duly elected or
qualified in accordance with the Bylaws of the Company or until such time as the
Indemnitee tenders his or her resignation in writing. The Indemnitee may at any
time and for any reason resign from such position (subject to any other
contractual obligation or other obligation imposed by operation of law), in
which event the Company shall have no obligation under this Agreement to
continue the Indemnitee in any such position. Nothing in this Agreement shall
confer upon the Indemnitee any right to continue in the employ of the Company or
continue in the employ of the Company in any capacity, or affect the right of
the Company to terminate the Indemnitee's employment at any time in the sole
discretion of the Company, with or without cause.
2. INDEMNIFICATION. The Company shall (i) indemnify the
Indemnitee and hold the Indemnitee harmless against any judgments, penalties,
fines, amounts paid in settlement and Expenses (as hereinafter defined) incurred
in connection with any actual or threatened Proceeding (as hereinafter defined)
arising in connection with the Indemnitee's status or service as
1
<PAGE> 2
a director, officer, employee or agent of the Company to the full extent
permitted by the Company's Certificate of Incorporation (the "CERTIFICATE"),
Bylaws (the "BYLAWS") and the Delaware General Corporation Law as in effect on
the date hereof and to such greater extent as the Delaware General Corporation
Law may hereafter from time to time permit ("DELAWARE LAW"), and (ii) advance to
Indemnitee, in accordance with Section 3 below, Expenses incurred in connection
therewith. It is the intent of the Company to indemnify Indemnitee hereunder to
the same extent as such person would be indemnified under the Certificate and
Delaware Law if he or she were a director, officer, employee or agent of the
Company, whether or not Indemnitee is serving as such. "PROCEEDING" includes,
without limitation, any action, suit, arbitration, alternate dispute resolution
mechanism, investigation, administrative hearing or any other actual, threatened
or completed proceeding, whether civil, criminal, administrative or
investigative, whether by a third party or by or in the right of the Company.
The right to indemnification or advancement of Expenses under this Agreement is
intended to be retroactive and shall be available with respect to Proceedings
which relate to events occurring prior to the date of this Agreement.
3. INTERIM EXPENSES. Expenses incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal of any
Proceeding for which Indemnitee may be entitled to indemnification hereunder
shall be paid by the Company in advance of the final disposition of such
Proceeding. The Indemnitee hereby undertakes to repay such amounts advanced only
if, and to the extent that, it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Company as authorized by
this Agreement. The advances to be made hereunder shall be paid by the Company
to or on behalf of the Indemnitee within thirty (30) days following delivery of
a written request therefor by the Indemnitee to the Company. "EXPENSES" means
all reasonable attorneys' fees and expenses, retainers, court costs, transcript
costs, fees of experts, fees of witnesses, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage and delivery fees,
service fees and all other reasonable costs and expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating or being or preparing to be a witness in a
Proceeding.
4. REQUEST FOR INDEMNIFICATION. (a) Any indemnification requested
by the Indemnitee under Section 2 hereof shall be made no later than thirty (30)
days after receipt of the written request of the Indemnitee, unless a good faith
determination is made within said thirty (30) day period (i) by the Board of
Directors of the Company by a majority vote of a quorum thereof consisting of
directors who are not parties to such proceedings or (ii) in the event such a
quorum is not obtainable, by independent legal counsel in a written opinion,
that the Indemnitee is not or ultimately will not be entitled to indemnification
hereunder.
(b) Notwithstanding a determination under Section 4(a) above that
the Indemnitee is not entitled to indemnification with respect to any specific
Proceeding, the Indemnitee shall have the right to apply to any court of
competent jurisdiction for the purpose of enforcing the Indemnitee's right to
indemnification pursuant to this Agreement. Neither the failure of the Company
(including its Board of Directors or independent legal counsel) to have made a
determination prior to the commencement of such action that the Indemnitee is
entitled to indemnification hereunder, nor an actual determination by the
Company (including its Board of Directors or independent legal counsel) that the
Indemnitee is not entitled to indemnification
2
<PAGE> 3
hereunder, shall be a defense to the action or create any presumption that the
Indemnitee is not entitled to indemnification hereunder; provided, however, that
such a determination shall be admissible as evidence in any such action brought
by Indemnitee. It shall be a defense to any such action that Indemnitee has not
met the standards of conduct which make it permissible under Delaware Law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company.
5. CERTAIN AGREEMENTS OF INDEMNITEE. (a) Indemnitee shall advise
the Company in writing upon being notified of the institution of any Proceeding
which is or may be subject to this Agreement and generally keep the Company
informed of, and consult with the Company with respect to, the status of any
such Proceeding; provided, however, that the failure to comply with this Section
5(a) shall not affect Indemnitee's entitlement to indemnification or other
payments hereunder if such failure to comply is inadvertent and does not
materially adversely affect the ability of the Company to defend such Proceeding
or to obtain the benefits of applicable insurance coverage.
(b) Indemnitee agrees to do all things reasonably requested by
the Board of Directors of the Company to enable the Company to coordinate
Indemnitee's defense with, if applicable, the Company's defense; provided,
however, that Indemnitee shall not be required to take any action that would in
any way prejudice his or her defense or waive any defense or position available
to him or her in connection with any Proceeding.
(c) Indemnitee agrees to do all things reasonably requested by
the Board of Directors of the Company to subrogate to the Company any rights of
recovery (including rights to insurance or indemnification from persons other
than the Company) which Indemnitee may have with respect to amounts paid by the
Company with respect to any Proceeding.
(d) Indemnitee agrees to be represented in any Proceeding by a
law firm selected by the Company; provided however, that Indemnitee shall have
the right to employ his or her counsel in any Proceeding, but the Expenses of
such counsel shall be borne by the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the Company, (ii) the
Indemnitee reasonably shall have concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of the defense of
such Proceeding (in which case the Company shall not have the right to direct
the defense of such Proceeding on behalf of the Indemnitee) or (iii) the Company
shall not in fact have employed counsel to assume the defense of such
Proceeding, in each of which cases the Expenses of counsel shall be borne by the
Company.
(e) Indemnitee agrees to cooperate with the Company and its
counsel, and any insurance carrier, and maintain any confidences revealed to him
or her by the Company in connection with the Company's defense of any
Proceeding. The Company agrees to cooperate with Indemnitee and his or her
counsel and maintain any confidences revealed to it by Indemnitee in connection
with Indemnitee's defense of any Proceeding.
6. INSURANCE. The Company may, but is not obligated to, obtain
directors' and officers' liability insurance ("D&O INSURANCE") as may be or
become available with respect to which the Indemnitee is named as an insured.
Notwithstanding any other provision of this
3
<PAGE> 4
Agreement, the Company shall not be obligated to indemnify the Indemnitee for
any judgments, penalties, fines, amounts paid in settlement and Expenses which
have been paid directly to the Indemnitee by D&O Insurance. If the Company has
D&O Insurance in effect at the time the Company receives from the Indemnitee any
notice of the commencement of a Proceeding, the Company shall give prompt notice
of the commencement of such Proceeding to the insurers in accordance with the
procedures set forth in the policy. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such Proceeding in accordance
with the terms of such policy.
7. EXCEPTIONS. (a) Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee on account of any Proceeding with
respect to (i) remuneration paid to the Indemnitee if it is determined by final
judgment or other final adjudication that such remuneration was in violation of
law, (ii) which final judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section 16(b) or Section
20A of the Securities Exchange Act of 1934, as amended, or similar provisions of
any federal, state or local statute or (iii) which (but only to the extent that)
it is determined by final judgment or other final adjudication that the
Indemnitee's conduct was in bad faith, knowingly fraudulent or deliberately
dishonest. For purposes of the foregoing sentence, a final judgment or other
adjudication may be reached in either the underlying Proceeding in connection
with which indemnification is sought or a separate Proceeding to establish
rights and liabilities under this Agreement.
(b) Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to
indemnify or advance Expenses to the Indemnitee with respect to Proceedings
initiated or brought voluntarily by the Indemnitee and not by way of defense.
(c) Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to
indemnify the Indemnitee for any Expenses incurred by the Indemnitee with
respect to any Proceeding instituted by the Indemnitee to enforce or interpret
this Agreement if the Indemnitee does not prevail in such Proceeding.
(d) Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to
indemnify the Indemnitee under this Agreement for any amounts paid in settlement
of a Proceeding effected without the Company's written consent. Neither the
Company nor the Indemnitee shall unreasonably withhold consent to any proposed
settlement; provided, however, that the Company may in any event decline to
consent to (or to otherwise admit or agree to any liability for indemnification
hereunder in respect of) any proposed settlement if the Company determines in
good faith (pursuant to Section 4(a) above) that the Indemnitee is not or
ultimately will not be entitled to indemnification hereunder.
(e) Any provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement to
indemnify the Indemnitee, pay or advance Expenses or otherwise act in violation
of Delaware Law or any undertaking appearing in
4
<PAGE> 5
and required by the rules and regulations promulgated under the Securities Act
of 1933, as amended (the "ACT") in any registration statement filed with the
Securities and Exchange Commission under the Act. The Indemnitee acknowledges
that paragraph (h) of Item 512 of Regulation S-K currently generally requires
the Company to undertake in connection with any registration statement filed
under the Act to submit the issue of the enforceability of the Indemnitee's
rights under this Agreement in connection with any liability under the Act on
public policy grounds to a court of appropriate jurisdiction and to be governed
by any final adjudication of such issue. The Indemnitee specifically agrees that
any such undertaking shall supersede the provisions of this Agreement and to be
bound by any such undertaking.
8. ENTIRE AGREEMENT; MODIFICATION AND WAIVER. This Agreement
constitutes the entire agreement between the Company and the Indemnitee with
regard to the subject matter hereof, and supersedes all prior agreements between
or among the Company and the Indemnitee, whether written or oral, relating to
the same subject matter. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
9. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines or penalties) actually and reasonably incurred
by him or her in the investigation, defense, settlement or appeal of a
Proceeding but is not entitled, however, to indemnification for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the portion
thereof to which the Indemnitee is entitled.
10. NOTICE. Except as otherwise provided herein, any notice or
demand which, by the provisions hereof, is required or which may be given to or
served upon the parties hereto shall be in writing and, if by telegram, telecopy
or telex, shall be deemed to have been validly served, given or delivered when
sent, if by personal delivery, shall be deemed to have been validly served,
given or delivered upon actual delivery and, if mailed, shall be deemed to have
been validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid.
11. SUCCESSORS. This Agreement establishes contract rights which
shall be binding upon, and shall inure to the benefit of, the successors,
assigns, heirs and legal representatives of the parties hereto.
12. CONTRACT RIGHTS NOT EXCLUSIVE. The contract rights conferred
by this Agreement shall be in addition to, but not exclusive of, any other right
which Indemnitee may have or may hereafter acquire under any law, provision of
the Certificate or Bylaws, written agreement not precluded by Section 8 hereof,
vote of stockholders or disinterested directors or otherwise.
13. SEVERABILITY. Should any provision or paragraph of this
Agreement, or any clause hereof, be held to be invalid, illegal or
unenforceable, in whole or in part, the remaining
5
<PAGE> 6
provisions, paragraphs and clauses of this Agreement shall remain fully
enforceable and binding on the parties.
14. CHOICE OF LAW. This Agreement shall be governed exclusively
by and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
15. CONTINUATION OF INDEMNIFICATION. The indemnification under
this Agreement shall continue as to Indemnitee with respect to matters that
occurred while Indemnitee was an officer, director, employee and/or agent of the
Company even though he or she may have ceased to be a director, officer,
employee and/or agent of the Company and shall inure to the benefit of the heirs
and personal representatives of the Indemnitee. The Company acknowledges that,
in providing services to the Company, Indemnitee is relying on this Agreement.
Accordingly, the Company agrees that its obligations hereunder will survive (i)
any actual or purported termination of this Agreement by the Company or its
successors or assigns whether by operation of law or otherwise, (ii) any change
in the Certificate or Bylaws and (iii) termination of the Indemnitee's services
to the Company (whether such services were terminated by the Company or the
Indemnitee), whether or not a claim is made or a Proceeding is threatened or
commenced before or after the actual or purported termination of this Agreement,
change in the Certificate or Bylaws or termination of Indemnitee's services.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and signed as of the day and year first above written.
- -----------------------------------
Indemnitee
EQUITY MARKETING, INC.
By:
-------------------------------
Leland P. Smith
Senior Vice President, General Counsel
and Secretary
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,011
<SECURITIES> 0
<RECEIVABLES> 22,487
<ALLOWANCES> 1,852
<INVENTORY> 16,302
<CURRENT-ASSETS> 47,293
<PP&E> 6,481
<DEPRECIATION> 2,586
<TOTAL-ASSETS> 80,488
<CURRENT-LIABILITIES> 40,217
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 41,632
<TOTAL-LIABILITY-AND-EQUITY> 80,488
<SALES> 84,376
<TOTAL-REVENUES> 84,376
<CGS> 60,985
<TOTAL-COSTS> 60,985
<OTHER-EXPENSES> 20,894
<LOSS-PROVISION> 282
<INTEREST-EXPENSE> 289
<INCOME-PRETAX> 2,407
<INCOME-TAX> 926
<INCOME-CONTINUING> 1,481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,481
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
