<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-77728
PENDA CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-463658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2344 WEST WISCONSIN STREET, PORTAGE, WISCONSIN 53901-0449
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(608) 742-5301
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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At May 1, 1996, the Registrant had 999,700 shares of $0.01 par value common
stock outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENDA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31,
(UNAUDITED) 1995
-------------- ------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 583 $ 467
Accounts receivable, net 12,425 8,514
Inventories, net 6,297 6,175
Other 864 1,747
-------- --------
Total current assets 20,169 16,903
Property, plant and equipment, net 23,542 23,688
Intangible assets, net 97,135 97,885
Other 702 661
-------- --------
Total assets $141,548 $139,137
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,104 $ 3,440
Accrued liabilities 3,600 5,352
-------- --------
Total current liabilities 7,704 8,792
Long-term debt 93,610 92,015
Deferred income taxes 3,588 3,591
-------- --------
Total liabilities 104,902 104,398
-------- ---------
Shareholders' equity:
Common stock 10 10
Additional paid-in capital 24,970 24,970
Retained earnings 11,610 9,706
Foreign currency translation adjustment 56 53
-------- --------
Total shareholders' equity 36,646 34,739
-------- --------
Total liabilities and shareholders' equity $141,548 $139,137
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE> 3
PENDA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED)
-----------------------------------------
1996 1995
------------------- -----------------
(In thousands, except for per share data)
<S> <C> <C>
Net sales $22,094 $17,879
Cost of sales 13,585 10,896
------- -------
Gross profit 8,509 6,983
Selling expenses 1,110 1,013
General and administrative expenses 1,065 1,232
Amortization 750 643
------- -------
Operating income 5,584 4,095
Interest expense 2,427 2,253
------- -------
Income before provision for income taxes 3,157 1,842
Provision for income taxes 1,253 730
------- -------
Net income $ 1,904 $ 1,112
======= =======
Net income per common share $ 1.90 $ 1.11
======= =======
Weighted average common shares outstanding 1,000 1,000
------- -------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
PENDA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED)
-----------------------------------------
1996 1995
------------------- -----------------
(In thousands, except for per share data)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,904 $ 1,112
Non-cash adjustments to net income:
Depreciation 756 547
Amortization 750 650
Net change in other assets and liabilities (3,498) (3,721)
-------- --------
Net cash used in operating activities (88) (1,412)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (611) (4,502)
Payment of contingent acquisition consideration (1,000) (1,000)
-------- --------
Net cash used in investing activities (1,611) (5,502)
-------- --------
Cash flows from financing activities:
Proceeds of sale lease back of equipment 1,940 -
Payments on notes payable (125) -
Net changes in revolving credit borrowings - 7,000
-------- --------
Net cash provided by financing activities 1,815 7,000
-------- --------
Net change in cash 116 86
Cash and cash equivalents:
Beginning of period 467 120
-------- ---------
End of period $ 583 $ 206
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Penda Corporation (the "Company"), manufactures and distributes plastic
bedliners, other accessories for pickup trucks, vans and other sport utility
vehicles, and sleeper cabs for heavy duty trucks. The Company's sales are
principally in the United States and Canada. The Company also distributes
pickup truck accessories manufactured by other companies through its original
equipment manufacturer and aftermarket distribution systems. The Company
operates in one business segment, light truck accessory products.
These financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission (the "SEC")
and, in the opinion of the Company, include all adjustments (all of which are
normal and recurring in nature) necessary to present fairly the financial
position, results of operations and cash flows of the Company for the interim
periods presented. These financial statements include the accounts of the
Company's wholly-owned subsidiaries, and all significant intercompany
transactions have been eliminated. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These unaudited consolidated financial
statements should be read in conjunction with the annual consolidated financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1995 as filed with the SEC.
2. INVENTORIES
Inventories at March 31, 1996 consist of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Finished goods $ 2,238
Work in process 522
Raw materials and supplies 3,537
--------
$ 6,297
========
</TABLE>
3. INCOME TAXES
The Company estimates that annual income taxes will be incurred, thus the
allocation of income tax to interim periods is required. The Company recorded
an income tax provision by estimating the annual effective income tax rate and
applied that rate to pretax income.
The effective income tax rate for the Company varies from the Federal
statutory tax rate due to state and foreign income taxes.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations included as Item 7 of Part II of the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
RESULTS OF OPERATIONS
Net sales increased $4.2 million or 23.6% as compared to the first
quarter of 1995. The Company's newly acquired (July, 1995) subsidiary, Tri-Glas
Corporation, contributed $3.2 million of new sales in 1996. Other sales
increased $1.0 million due to higher selling prices during 1996 and on
increased sales volume. Market penetration continued to increase despite some
of the Company's competitors having reduced their selling prices. The Company
has continued to differentiate itself from its competition by taking advantage
of its product quality, customer service and production techniques.
The increase in sales during the first quarter of 1996 resulted in
higher gross profit dollars compared to the same period last year. Gross
profit as a percentage of sales fell 0.6% compared to the first quarter of 1995
due to higher raw material costs.
First quarter 1996 selling, general and administrative ("SG&A")
expenses represented 9.8% of sales, compared to 12.6% of sales in 1995.
SG&A expenses were lower in 1996 due to reduced personnel and less advertising.
Amortization was higher due to additional intangible assets recorded
as a result of acquiring Tri-Glas Corporation.
Interest expense was higher as average borrowings outstanding were
higher in 1996, due to the acquisition of Tri-Glas Corporation, offset by a
lower weighted average interest rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements for its operations are
working capital (principally accounts receivable and inventory) and capital
expenditures. The Company's capital needs have historically been provided by
internally generated cash and through utilization of Company's revolving credit
facility. Working capital at March 31, 1996 was $12.5 million compared to $8.1
million at December 31, 1995. The change in working capital was due to higher
accounts receivable balances resulting from higher sales in the first quarter
of 1996 versus the fourth quarter of 1995.
At March 31, 1996, the Company had approximately $94.1 million of
outstanding debt, including $80.0 million of senior notes payable, $9.9 million
under its revolving credit facility and $4.1 million in various notes payable.
In January 1996, the Company entered into a 5 year sales lease back agreement
in the principle amount of $1.9 million for certain production equipment. The
agreement requires the Company to make monthly principal and interest payments
of $29,000, with a final payment of $805,000. The transaction resulted in no
gain or loss being recognized.
Cash used in operating activities totaled $0.1 million for the three
months ended March 31, 1996 compared to $1.4 million for the same period in
1995 due principally to the increase in net income. The consolidated
debt-to-equity ratio improved to 2.57:1 at March 31, 1996 versus 2.66:1 at
December 31, 1995. As of March 31, 1996, the Company had approximately $8.0
million of availability under its revolving credit facility based on eligible
collateral.
Management believes that funds generated from operations and funds
available under the revolving credit facility will be sufficient to satisfy the
Company's debt service obligations, working capital requirements and
commitments for capital expenditures through at least 1996. To the extent
available, excess funds will be used to reduce outstanding borrowings under the
revolving credit facility.
6
<PAGE> 7
On a longer term basis, the Company has significant future debt service
obligations. The Company's ability to satisfy these obligations and to secure
adequate capital resources in the future are dependent on its ability to
generate adequate cash flows. The Company expects that its cash flows from
operations, available borrowings and access to the capital markets will be
sufficient to fund future debt service. This will be dependent on its overall
operating performance and be subject to general business, financial and other
factors affecting the Company and the light truck industry, certain of which
are beyond the control of the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of its business. The Company
maintains insurance coverage against claims in an amount which it believes to be
adequate. The Company believes that it is not presently a party to any
litigation the outcome of which would have a material adverse effect on its
financial condition or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amended and Restated Management Stock Option Plan.
27 Financial Data Schedule (for SEC use only).
7
<PAGE> 8
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.
PENDA CORPORATION
Date: May 3, 1996 By: /s/ Daniel E. Braun
----------------------------------------
Daniel E. Braun, President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 3, 1996 By: /s/ Mark J. Blume
----------------------------------------
Mark J. Blume, Chief Financial Officer
(Principal Financial
and Accounting Officer)
8
<PAGE> 1
EXHIBIT 10.1
PENDA CORPORATION
FIRST AMENDED AND RESTATED MANAGEMENT STOCK OPTION PLAN
WHEREAS, the Company has adopted the Penda Corporation (fka Penda
Industries, Inc.) Management Stock Option Plan, as modified pursuant to action
taken by the Company's Board of Directors as of July 14, 1995 (the "Original
Plan");
WHEREAS, the Company did not achieve the Operating Profit and Return
on Investment targets specified in Section 4(b) of the Original Plan for the
Company's fiscal year ended December 31, 1995 and, accordingly, Options to
purchase, in the aggregate, 10,526.31 Shares granted as of January 1, 1995
pursuant to Section 4(b) of the Original Plan have lapsed;
WHEREAS, notwithstanding such non-achievement of the Operating Profit
and Return on Investment targets specified in Section 4(b) of the Original
Plan, in order to provide an additional incentive to certain key Employees the
Board of Directors desires to amend the Original Plan, on the terms and subject
to the conditions contained herein, to provide for the grant of Options to
Purchase 3,726.18 Shares to certain Employees in respect of the Company's
fiscal year beginning January 1, 1996; and
WHEREAS, the Company's Board of Directors desires to provide for the
grant of Options to certain employees of the Company not specifically named in
the Original Plan;
NOW, THEREFORE, the Original Plan be, and it hereby is, amended and
restated in its entirety as follows:
1. PURPOSES. The purposes of this First Amended and Restated
Management Stock Option Plan (the "Plan") are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to the employees of the Company or its Subsidiaries (as
defined in Section 2 below) and to promote the success of the Company's
business. Options granted hereunder shall be Nonqualified Stock Options (as
defined in Section 2 below).
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Book Value Per Share of Common Stock" shall be
determined as follows: The book value of the Company (the "Book Value of the
Company") shall be equal to the stockholders' equity of the Company (determined
in accordance with United States generally accepted accounting principles
consistently applied with respect to the Company and its Subsidiaries). The
values utilized in the audited financial statements prepared by the Company's
independent accountant or accounting firm for the Company and its Subsidiaries
as of a specific valuation date shall control for the purposes of determining
the Book Value of the Company. The Book Value of the Company shall be divided
by the aggregate number of outstanding shares of Common Stock. The result
thereof shall be the Book Value Per Share of Common Stock.
(b) "Cause" shall mean: (i) a willful breach by the
Optionee of any of the material terms or provisions of any employment agreement
with the Company or any of its Subsidiaries, (ii) the conviction of the
Optionee of a felony, (iii) commission by the Optionee of an act or acts
involving fraud, embezzlement, misappropriation, theft, breach of fiduciary
duty or dishonesty against the Company or any of its Subsidiaries, their
respective properties or personnel, or (iv) conduct by the Optionee which the
Board of Directors of the Company in good faith determines could reasonably be
expected to have a material adverse effect on the business assets, properties,
results of operations, financial condition, personnel or prospects of the
Company and its Subsidiaries that is not cured within 10 days of written notice
by the Company to the Optionee; provided that, with respect to any Optionee who
has entered into a written employment agreement with the Company, the term
"Cause" shall have the meaning as set forth in such Optionee's employment
agreement in lieu of the definition of "Cause" set forth in this Section 2(b).
<PAGE> 2
(c) "Change of Control" shall be deemed to have occurred
if: (i) there occurs any transaction (which shall include a series of
transactions occurring within 90 days or occurring pursuant to a plan), that
has the result that the members of the Trivest Group or their affiliates cease
to have the contractual or other power to elect a majority of the directors of
the Company or of any entity that results from the participation of the Company
in a reorganization, consolidation, merger, liquidation or any other form of
corporate transaction; or (ii) the consummation of the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Company.
(d) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "Common Stock" shall mean the Common Stock of the
Company.
(f) "Company" shall mean Penda Corporation (fka Penda
Industries, Inc.), a Florida corporation.
(g) "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company.
(h) "Nonqualified Stock Option" shall mean a stock option
not intended to qualify as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code.
(i) "Operating Profit" shall mean the Company's
consolidated net income, as computed in accordance with generally accepted
accounting principles ("GAAP") and set forth in the Company's regularly
prepared financial statements, plus, in each case to the extent deducted in
computing net income (without duplication) (i) income taxes deducted in
determining net income, (ii) any interest on indebtedness (including, without
limitation, any original issue discount), (iii) any management fees payable by
the Company to Trivest II, Inc. or any of its affiliates, (iv) any amortization
of financing costs, (v) any non-cash charge arising from variable accounting
treatment of options to purchase Common Stock granted pursuant to this Plan or
otherwise, and (vi) any depreciation or amortization to the extent attributable
to the goodwill or "write-up" of assets resulting from the purchase accounting
treatment of the transactions contemplated by that certain Asset Purchase
Agreement, dated as of February 24, 1994 (the "Purchase Agreement"), between
Penda Industries, Inc. and Penda Corporation.
(j) "Option" shall mean a stock option granted pursuant
to the Plan.
(k) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(l) "Optionee" shall mean an Employee who receives an
Option.
(m) "Parent" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(n) "Plan" shall mean this Amended and Restated
Management Stock Option Plan.
(o) "Return on Investment" shall mean the percentage
obtained by dividing (x) the Company's Operating Profit for a specified period,
by (y) the average of the Company's Specified Assets on the first and last day
of such period.
(p) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(q) "Specified Assets", as of any date of determination,
shall mean the sum of (x) the amount of Company's consolidated current assets,
computed in accordance with GAAP, less (y) the amount of cash included in such
current assets, plus (z) the book amount of the Company's fixed assets, net of
depreciation, in each case prior to the "write up" of assets resulting from the
purchase accounting treatment of the transactions contemplated by the Purchase
Agreement.
-2-
<PAGE> 3
(r) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
(s) "Trivest Group" shall mean Trivest Institutional
Fund, Ltd., a Florida limited partnership, Trivest Investors Fund, Ltd., a
Florida limited partnership, and Blue Sky Partners, a Florida general
partnership.
3. COMMON STOCK SUBJECT TO OPTION. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 52,632 Shares of authorized, but unissued,
or reserved Common Stock.
4. ADMINISTRATION.
(a) Powers of the Board of Directors. The Plan shall be
administered by the Company's Board of Directors, as more specifically
described in this Section 4. Subject to the provisions of the Plan, the Board
of Directors shall have the authority, in its reasonable discretion, to: (i)
interpret the Plan; (ii) with the consent of the holder thereof, modify or
amend each Option; (iii) defer (with the consent of the Optionee) or accelerate
the exercise date of any Option; and (iv) make all other determinations deemed
necessary or advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Board of Directors shall be final and
binding on all Optionees and any other holders of any Options granted under the
Plan. In addition, following each significant corporate transaction (and in any
event not less often than annually), the Company's Board of Directors shall in
good faith review for reasonableness the Operating Profit and Return on
Investment targets established pursuant to this Agreement and shall take such
action, if any, as the Board in good faith determines is necessary or
appropriate to adjust such targets in light of the circumstances existing at
the time of such review.
(b) Grant of Options to Original Executive Group.
Subject to the provisions of Section 6 hereof, Options to purchase 10,526.31
Shares of Common Stock shall be granted on the first day of each of the
Company's fiscal years 1994, 1995, 1996, 1997 and 1998; provided, however,
notwithstanding any provision of this Plan which may be to the contrary, no
such Options shall vest (i.e., become exercisable in accordance with Section
9(a) hereof) unless the Company's actual Operating Earnings and Return on
Investment are both equal to or greater than the target Operating Profit and
Return on Investment for such fiscal year as set forth in the following table:
<TABLE>
<CAPTION>
TARGET OPERATING TARGET RETURN
YEAR PROFIT ON INVESTMENT
<S> <C> <C>
1994 $18.500 million 75.0%
1995 $22.100 million 75.0%
1996 $24.225 million 65.0%
1997 $26.500 million 65.0%
1998 $28.925 million 65.0%
</TABLE>
The following table sets forth, with respect to each participating officer of
the Company as of March 18, 1994, the number of shares subject to the Options
to be granted with respect to each such year pursuant to this Section 4(b):
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO ANNUAL
NAME OPTIONS
<S> <C>
Daniel E. Braun 3,820.58
Bruce D. Knutson 1,099.26
Scot D. Harvey 1,325.51
Gary L. Witt 1,206.99
Phillip L. Emery 1,036.81
Mark A. Holmes 1,216.11
Earle W. Wirth 821.05
--------
Total 10,526.31
=========
</TABLE>
-3-
<PAGE> 4
(c) Grant of Options to Additional Employees. Subject to
the provisions of Section 6 hereof, Options to purchase 1,000.00 Shares of
Common Stock shall be granted to the Additional Employees (as hereinafter
defined) on the first day of each of the Company's fiscal years 1996, 1997 and
1998; provided, however, notwithstanding any provision of this Plan which may
be to the contrary, no such Options shall vest (i.e., become exercisable in
accordance with Section 9(a) hereof) unless the Company's actual Operating
Earnings and Return on Investment are both equal to or greater than the target
Operating Profit and Return on Investment for such fiscal year as set forth in
the following table:
<TABLE>
<CAPTION>
TARGET OPERATING TARGET RETURN
YEAR PROFIT ON INVESTMENT
<S> <C> <C>
1996 $24.225 million 65.0%
1997 $26.500 million 65.0%
1998 $28.925 million 65.0%
</TABLE>
The following table sets forth the name of each person entitled to a grant of
Options pursuant to this Section 4(c) (an "Additional Employee"), together with
the number of shares subject to the Options to be granted with respect to each
such year pursuant to this Section 4(c):
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO ANNUAL
NAME OPTIONS
<S> <C>
Mark E. Blume 500.00
Gerard T. Mydlowski 500.00
--------
Total 1,000.00
=========
</TABLE>
(d) Evidence of Grant. Any Options granted under the
provisions of this Sections 4(b) and 4(c) shall be evidenced by the delivery of
a written Option agreement within 90 days of the beginning of each such fiscal
year. The date of grant of an Option shall be the first day of the year to
which the Option relates, with the vesting and exercisability of such Option to
be subject in all respects to the Company achieving the specified Operating
Profit and Return on Investment targets and the further limitations set forth
in Section 9(a) hereof.
(e) Effect of Failure to Achieve Targets. In the event
that the Company does not achieve the specified Operating Profit and Return on
Investment targets with respect to any Options granted pursuant to Sections
4(b) and 4(c), such Options shall lapse, effective as of the last day of the
fiscal year with respect to which the Options were granted. In such case, new
Options may thereafter be granted covering the Shares subject to such Options
to such Employees and on such terms as the Board of Directors of the Company
shall determine in its absolute discretion. Notwithstanding the provisions of
Section 4(b) hereof, the number of shares subject to the Options to be granted
to the persons listed below in respect of the Company's fiscal year beginning
January 1, 1996 shall be increased by the number of Shares set forth opposite
their names (provided, however, that such additional shares shall not be taken
into account for purposes of clause (x) of Section 4(f) hereof):
<TABLE>
<CAPTION>
NUMBER OF
ADDITIONAL SHARES
SUBJECT TO 1996
NAME OPTIONS
<S> <C>
Daniel E. Braun 1,910.29
Bruce D. Knutson 549.63
Scot D. Harvey 662.76
Gary L. Witt 603.50
--------
Total 3,726.18
========
</TABLE>
(f) Change of Control. Immediately prior to any Change
of Control, the Company shall grant all Options that would otherwise have been
granted pursuant to Sections 4(b) and 4(c) hereof subsequent to the date of
-4-
<PAGE> 5
such Change of Control; provided, however, that (i) the per share exercise
price for Shares subject to such Options shall be equal to the Book Value per
Share of Common Stock as of the first day of the fiscal year in which the
Change of Control occurs, and (ii) the number of Shares otherwise subject to
such Options shall be multiplied by a fraction, (x) the numerator of which is
the total number of Shares subject to Options which have theretofore been both
granted and vested by reason of the Company achieving the specified Operating
Profit and Return on Investment targets, and (y) the denominator of which is
the total number of Shares subject to Options which have theretofore been
granted, whether or not such Options become vested.
(g) Reallocation of Prospective Options for Terminated
Optionees. In the event that (i) any of the Options contemplated to be granted
pursuant to Section 4(b) or Section 4(c) hereof are not granted by reason of
the termination of employment of an Optionee for any reason, including death
(each an "Ungranted Option"), and (ii) such Ungranted Options are not awarded
within one year to a new or existing employee of the Company who is named to
the officer position previously held by such terminated Optionee (the
"Replacement Officer"), if any, then the Company shall grant to the remaining
participants in the Plan, in proportion to the initial grants set forth in
Sections 4(b) and 4(c) hereof, substitute options for the aggregate number of
shares subject to the Ungranted Options (less the number of shares subject to
Options granted to the Replacement Officer).
5. ELIGIBILITY. Notwithstanding any provision to the contrary
set forth herein, Options may be granted only to Employees.
6. TERM OF PLAN. The Plan shall become effective upon its
adoption by the Board of Directors. Options may be granted under the Plan
until April 1, 1999. On such date, the Plan shall expire except with respect
to all Options which are then outstanding, which Options shall remain in effect
until they have expired or been exercised, or been terminated pursuant to
Section 9 of the Plan. Upon a Change of Control, the Plan shall expire, except
with respect to all Options which are then outstanding, which Options shall
remain in effect until they have expired or been exercised, or been terminated
pursuant to Section 9 of the Plan.
7. TERM OF OPTION. Subject to Section 9 of the Plan, the term of
each Option shall be ten years from the date of grant thereof; provided,
however, that the term of each Option shall automatically be extended to 15
years if, prior to the tenth anniversary of its grant, there has not occurred
either (i) a Change of Control, or (ii) an underwritten public offering of
Common Stock whose registration has become effective under the Securities Act
of 1933, as amended.
8. EXERCISE PRICE AND CONSIDERATION. Except as set forth in
Section 4(f), the per share exercise price for the Shares to be issued pursuant
to the exercise of an Option shall be equal to the Book Value Per Share of
Common Stock on the date of grant of the Option. The type of consideration
payable shall be determined by the Board of Directors and may consist entirely
of cash, check, already owned shares of Common Stock (which, for purposes of
this Section 8, shall be deemed to have a per share value equal to the Book
Value Per Share of Common Stock at the beginning of the fiscal quarter on the
date of exercise), or by any combination of such methods of payment, or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under Florida law.
9. EXERCISE OF OPTIONS.
(a) Vesting Schedule. Subject to satisfying the
financial targets established as a condition to vesting pursuant to Sections
4(b) and 4(c) hereof, and subject to the other terms and conditions hereof,
each Option shall become exercisable with respect to twenty-five percent (25%)
of the Shares covered by such Option on the one-year anniversary of the date
the Option is granted and on each of the three successive one-year
anniversaries thereafter. Subject to the terms hereof, and notwithstanding the
immediately preceding sentence, each Option held by an Optionee shall become
immediately and fully exercisable immediately prior to a Change of Control or,
if earlier, the termination of such Optionee's employment with the Company for
any reason other than Cause or his voluntary termination of employment.
(b) Termination of Status as an Employee.
Notwithstanding the terms of Sections 7 and 9(a) hereof, if an Optionee's
employment with the Company is terminated by the Company for any reason other
than termination by the Company for Cause or death, then the unexercised
portion of any Option granted to the Optionee shall terminate (i) on the date
of termination if the Company gives the Optionee 30 days' prior written notice
of such termination or (ii) 30 days after such termination if such Optionee is
not given such prior written notice. Notwithstanding the terms of Sections 7
and 9(a) hereof, if the Company terminates an Optionee's employment with the
-5-
<PAGE> 6
Company for Cause, then the unexercised portion of any Option granted to him
shall terminate upon such termination for Cause. Notwithstanding the terms of
Sections 7 and 9(a) hereof, in the event of the death of an Optionee, the
unexercised portion of any vested Option may be exercised at any time within 60
days following the date of death by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, and after
such 60-day period the unexercised portion of such Option shall terminate.
Notwithstanding the terms of Sections 7 and 9(a) hereof, if an Optionee's
employment is terminated voluntarily by the Optionee for any reason, then the
unexercised portion of any Option granted to him shall terminate upon such
termination.
(c) Change of Control. Notwithstanding the terms of
Sections 7 and 9(a) hereof, if the Company gives the Optionee 30 days' prior
written notice of a Change of Control, then the unexercised portion of any
Option granted to him shall terminate upon such Change of Control.
(d) Conditions to Exercise. Subject to the terms hereof,
an Option shall be deemed to be exercised when written notice of exercise is
received by the Company in accordance with the terms of the Option, along with
payment in full of the per share exercise price. Although the Company intends
to use its best efforts to ensure that the Shares purchasable upon the exercise
of an Option, when it first becomes exercisable, will be registered under, or
exempt from the registration requirements of all applicable state and federal
securities laws, if the exercise of an Option would result in the violation by
the Company of any provision of such securities laws, the Company may require
that such exercise be deferred until the Company has taken appropriate action
to avoid such violation. If only the Company can cure such violation, then the
exercise period for the affected Option shall be tolled until the violation is
cured by the Company. As a condition to the exercise of an Option, the Company
may require the person exercising such Option to (i) represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law and (ii) enter
into such shareholders' agreements as the Trivest Group may reasonably request,
consistent with the other shareholders' agreements to which the Trivest Group
is then a party. As a further condition to the exercise of any Option, the
Company may require the Optionee to deliver to the Company the entire amount of
any taxes which the Company is required to withhold by reason of such exercise,
in such amount as the Company shall determine.
10. TRANSFERABILITY OF OPTIONS. No Option may be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution. No Option may be exercised,
during the lifetime of the Optionee, by any person other than the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The number of
Shares which may be optioned under the Plan, the number of Shares of Common
Stock covered by each outstanding Option, and the number of Shares of Common
Stock which have been authorized for grant under the Plan but as to which no
Options have yet been granted, as well as the exercise price per share of
Common Stock covered by each such Option, shall be proportionately adjusted for
any increase or decrease in the number of issued Shares of Common Stock
resulting from a stock split or the payment of a stock dividend with respect to
the Common Stock or any other increase or decrease in the number of issued
Shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any Convertible Securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board of Directors of the
Company, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, 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 an Option.
12. STOCK OPTION AGREEMENT. Options shall be evidenced by written
stock option agreements in such form as the Board of Directors of the Company
shall approve. Subject to the terms hereof, each stock option agreement
authorized under the Plan shall contain such other provisions as the Board of
Directors of the Company shall deem advisable.
13. LIABILITY. No member of the Board of Directors or any officer
or director of the Company or its Subsidiaries shall be personally liable for
any act or omission made in good faith in connection with the Plan.
14. OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in
effect for the Company or any Subsidiary, nor shall the Plan preclude the
-6-
<PAGE> 7
Company and its Subsidiaries from establishing any other forms of incentive or
other compensation for employees and directors of the Company or any
Subsidiary.
15. MISCELLANEOUS PROVISIONS. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment by the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment at any time. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by his Option until the date of
the exercise of such Option as to such Shares. Whenever used herein, nouns in
the singular shall include the plural, and the masculine pronoun shall include
the feminine. Headings of Sections hereof are inserted for convenience and
they constitute no part of the Plan. The Plan shall be governed and construed
in accordance with the laws of the State of Florida, without regard to
conflicts of laws provisions thereof.
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 583
<SECURITIES> 0
<RECEIVABLES> 12,611
<ALLOWANCES> 186
<INVENTORY> 6,297
<CURRENT-ASSETS> 20,169
<PP&E> 26,911
<DEPRECIATION> 3,369
<TOTAL-ASSETS> 141,548
<CURRENT-LIABILITIES> 7,704
<BONDS> 93,610
0
0
<COMMON> 10
<OTHER-SE> 36,636
<TOTAL-LIABILITY-AND-EQUITY> 141,548
<SALES> 22,094
<TOTAL-REVENUES> 22,094
<CGS> 13,585
<TOTAL-COSTS> 13,585
<OTHER-EXPENSES> 1,815
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 2,427
<INCOME-PRETAX> 3,157
<INCOME-TAX> 1,253
<INCOME-CONTINUING> 1,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,904
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
