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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
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Commission File Number 0-25498
CONCENTRA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2827026
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 NORTH AVENUE
BURLINGTON, MA 01803-3301
(Address of principal executive offices)
(781) 229-4600
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
AS OF NOVEMBER 10, 1997, THERE WERE ISSUED AND OUTSTANDING 5,587,581 SHARES OF
THE REGISTRANT'S COMMON STOCK.
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CONCENTRA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
ITEM 1. Condensed Consolidated Financial Statements:
a) Condensed Consolidated Balance Sheets as of
September 30, 1997 (unaudited) and March 31, 1997............ 3
b) Condensed Consolidated Statements of Operations
for the three- and six-months ended September 30, 1997
and 1996 (unaudited) ........................................ 4
c) Condensed Consolidated Statements of Cash Flows for
the six-months ended September 30, 1997 and 1996
(unaudited).................................................. 5
d) Notes to Condensed Consolidated Financial Statements......... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 8
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders............... 12
ITEM 6. Exhibits and Reports on Form 8-K.................................. 13
Signatures........................................................ 14
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONCENTRA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30,
1997 March 31,
(Unaudited) 1997
-------------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,489 $ 3,890
Marketable securities -- 203
Accounts receivable, net of allowance for doubtful accounts
of $225 and $125, respectively 6,010 13,128
Other current assets 1,557 1,615
-------- --------
Total current assets 12,056 18,836
Property and equipment, net 2,321 2,612
Capitalized software costs, net 1,944 1,878
Intangible assets, net 707 1,333
Other assets 361 372
======== ========
Total assets $ 17,389 $ 25,031
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 980 $ 1,551
Accrued expenses 2,707 4,123
Income tax payable 253 273
Deferred revenue 2,516 2,898
Current portion of capital lease obligations 347 423
-------- --------
Total current liabilities 6,803 9,268
Capital lease obligations 617 611
Deferred revenue 58 84
Commitments and contingencies (Note B) -- --
Stockholders' equity:
Preferred stock - $.01 par value; 4,000,000 shares authorized,
no shares issued or outstanding -- --
Common stock - $.00001 par value; 40,000,000 shares authorized,
5,545,355 and 5,499,211 shares issued and outstanding at
September 30, 1997 and March 31, 1997, respectively -- --
Additional paid-in capital 25,813 25,578
Accumulated deficit (15,443) (10,099)
Cumulative translation adjustment (459) (411)
-------- --------
Total stockholders' equity 9,911 15,068
-------- --------
Total liabilities and stockholders' equity $ 17,389 $ 25,031
======== ========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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CONCENTRA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 1,968 $ 5,484 $ 2,902 $ 8,234
Services 2,910 1,453 5,163 3,730
Related party software and services 100 4 646 93
-------- -------- -------- --------
Total revenues 4,978 6,941 8,711 12,057
Operating expenses:
Cost of software licenses 428 542 1,428 971
Cost of services 472 979 2,161 1,641
Sales and marketing 2,542 3,611 6,605 6,457
Research and development 780 873 1,688 1,454
General and administrative 590 735 1,371 1,294
Restructuring charge -- -- 283 --
-------- -------- -------- --------
Total operating expenses 4,812 6,740 13,536 11,817
Income (loss) from operations 166 201 (4,825) 240
Interest income 54 80 120 175
Interest expense (26) (27) (52) (53)
Other (expense) income (588) 438 (567) 407
-------- -------- -------- --------
Income (loss) before income taxes (394) 692 (5,324) 769
Provision for income taxes 10 173 20 193
-------- -------- -------- --------
Net income (loss) $ (404) $ 519 $ (5,344) $ 576
======== ======== ======== ========
Net income (loss) per common and common
equivalent share $ (0.07) $ 0.09 $ (0.97) $ 0.10
======== ======== ======== ========
Weighted average number of common and
common equivalent shares outstanding 5,545 5,623 5,526 5,612
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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CONCENTRA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(5,344) $ 576
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,251 1,107
Foreign exchange (gain) loss 3 (6)
Write off of intangible assets 372 --
Provision for bad debt 100 --
Loss on sale of marketable securities 14 --
Write down of other asset 82 --
Changes in operating assets and liabilities:
Accounts receivable 6,964 (1,419)
Other assets 66 (192)
Accounts payable (566) (490)
Accrued expenses (1,393) 76
Deferred revenue (403) (131)
Income taxes payable (20) 163
------- -------
Net cash provided by (used in) operating activities 1,126 (316)
------- -------
Cash flows from investing activities:
Purchase of property and equipment (93) (139)
Capitalized software costs (475) (520)
Purchase of intangible assets (102) (21)
Proceeds from sale of marketable securities 189 --
------- -------
Net cash used in investing activities (481) (680)
------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance cost 60 --
Proceeds from exercise of stock options 174 105
Principal payments under capital lease obligations (174) (115)
------- -------
Net cash provided by (used in) financing activities 60 (10)
------- -------
Effects of exchange rates on cash and cash equivalents (106) 5
Net increase (decrease) in cash and cash equivalents 599 (1,001)
Cash and cash equivalents at beginning of year 3,890 9,121
======= =======
Cash and cash equivalents at end of period $ 4,489 $ 8,120
======= =======
Supplemental disclosure of cash flow information:
Interest paid $ 52 $ 53
Income taxes paid $ 40 $ 30
Supplemental disclosure of non-cash investing
and financing activities:
Equipment acquired under capital lease obligations $ 104 $ --
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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CONCENTRA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Concentra Corporation (the "Company") and its wholly-owned foreign subsidiaries.
All significant intercompany transactions and balances have been eliminated. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present such information fairly. 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 Securities and Exchange Commission rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997. Operating results for the three-month and six-month periods
ended September 30, 1997 may not necessarily be indicative of the results to be
expected for any other interim period or for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates in the financial statements
include accounts receivable, sales and return, and income tax valuation
allowances. Actual results could differ from those estimates.
Certain fiscal year 1997 balances have been reclassified to conform to
fiscal year 1998 presentation.
B. COMMITMENTS AND CONTINGENCIES
Lines of Credit
The Company's demand line of credit of $2,500,000 expired on June 30, 1997.
This line of credit contained financial covenants consisting of minimum tangible
capital base, ratio of total liabilities to tangible capital base and debt
service coverage. The Company would not currently be in compliance with these
covenants were the line of credit in effect and is negotiating with the
commercial lender to extend and amend the line of credit. The Company's
$1,750,000 equipment line of credit, collateralized by equipment, expired on
March 31, 1997. The Company is negotiating with the commercial lender to extend
and amend this line of credit. As of September 30, 1997, the Company had
borrowed $1,413,000 under the equipment line of credit. There can be no
assurance the Company will be successful in extending and amending the lines of
credit, nor can there be any assurance that such extended and amended lines of
credit will be on similar terms as the existing agreements. Additionally, there
can be no assurance that alternative funding will be available if required.
Consulting Arrangements
During fiscal 1996, the Company entered into a $5,000,000 five-year
applications consulting services contract with a significant customer of the
Company. The five-year applications consulting services contract contains volume
pricing discounts subject to adjustments for increased costs. The Company has a
minimum commitment of $2,500,000 for outside applications services to be used by
the Company over a five-year period. The minimum commitment of $2,500,000 will
be paid in five yearly payments commencing December 31, 1996. These yearly
payments are $250,000, $500,000, $550,000, $600,000
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and $600,000 for the five calendar years beginning December 31, 1996,
respectively. The Company recognizes the consulting service expenses as
incurred. The Company believes that the minimum payment accruals will be fully
utilized based on current forecasts. However, given the significant sales
fluctuations which may occur in any given period, it is possible the minimum
commitments would not be met, thus requiring the Company to record a charge in
excess of the services utilized. At September 30, 1997, the Company had fully
used the minimum first-year commitment of $250,000.
C. INVESTMENT IN LOANDATA.INC.
At fiscal year end 1997, the Company had an investment of $82,000 in
Loandata.inc., an e-commerce company developing the electronic underwriting of
car leases and loans using the SellingPoint product. Additional investments of
$143,000 and $200,000 were made in the three-month periods ended June 30, 1997,
and September 30, 1997, respectively. The Company has recorded this investment
under the equity method and recognizes its share of income or loss each
reporting period. Accordingly, the Company recorded a loss of $50,000 in the
three-month period ended June 30, 1997 and a loss of $527,000 for the
three-month period ended September 30, 1997. Such losses are recorded in other
expense/income. Additionally, included in the $527,000 loss recorded for the
three-month period ended September 30, 1997 are operating expenses of $152,000
which represents cross-functional work performed on the Loandata.inc. product.
D. SUBSEQUENT EVENTS
On October 22, 1997, the Company entered into an agreement to acquire a
53.4% majority interest in a newly-created limited liability company that will
be the successor to the business of Loandata.inc. Loandata.inc. will
contribute all of its assets, including its proprietary technology, to the
newly-established subsidiary of the Company, in exchange for a minority
interest in the subsidiary.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Management's Discussion and Analysis of Financial Condition and Results of
Operations include certain forward-looking statements about the Company's
business and new products, revenues, expenditures and operating and capital
requirements. In addition, forward-looking statements may be included in various
other Company documents to be issued in the future and in various oral
statements by Company representatives to security analysts and investors from
time to time. Any such statements are subject to risks that could cause the
actual results or needs to vary materially. The Company discusses such risks in
detail in its Annual Report on Form 10-K for the year ended March 31, 1997.
RESULTS OF OPERATIONS
TOTAL REVENUES. Substantially all of the Company's revenues are derived
from the licensing of software products and the performance of related services.
The Company's total revenues decreased 28% to $5.0 million for the three-month
period ended September 30, 1997, from $6.9 million for the three-month period
ended September 30, 1996. The Company's total revenues decreased 28% to $8.7
million for the six-month period ended September 30, 1997, from $12.1 million
for the six-month period ended September 30, 1996. These decreases were
primarily due to the decrease in software license fees.
SOFTWARE LICENSES. Software license fees decreased 64% to $2.0 million for
the three-month period ended September 30, 1997, from $5.5 million for the
three-month period ended September 30, 1996, and decreased as a percentage of
revenues to 40% from 79%. Software license fees decreased 65% to $2.9 million
for the six-month period ended September 30, 1997, from $8.2 million for the
six-month period ended September 30, 1996, and decreased as a percentage of
revenues to 33% from 68%. The decreases were primarily due to the decrease in
ICAD software license revenues. The decrease in ICAD software license fees was
partially mitigated by an increase in SellingPoint license fees. The Company
expects SellingPoint license fees to become an increasingly significant
component of the Company's revenues in future periods.
SERVICES. Service fees increased 100% to $2.9 million for the three-month
period ended September 30, 1997, from $1.4 million for the three-month period
ended September 30, 1996, and increased as a percentage of revenues to 58% from
21%. Service fees increased 38% to $5.2 million for the six-month period ended
September 30, 1997, from $3.7 million for the six-month period ended September
30, 1996, and increased as a percentage of revenues to 59% from 31%. Service
revenues are derived from customer support, consulting, and training services.
The increases were primarily due to higher consulting revenues.
RELATED PARTY SOFTWARE AND SERVICES. Revenues from related parties
increased to $0.1 million for the three-month period ended September 30, 1997,
compared to $4,000 for the three-month period ended September 30, 1996, and
increased as a percentage of revenues to 2%. Revenues from related parties
increased to $0.6 million for the six-month period ended September 30, 1997,
compared to $93,000 for the six-month period ended September 30, 1996, and
increased as a percentage of revenues to 7%. The dollar and percentage increases
were due to a software license sale and consulting agreement with a related
party.
COST OF SOFTWARE LICENSES. Cost of software licenses, consisting of the
amortization of capitalized software, license fees to third-party suppliers and
software duplication and fulfillment costs, decreased 21% to $0.4 million for
the three-month period ended September 30, 1997, from $0.5 million for the
three-month period ended September 30, 1996, and increased as a percentage of
software revenues to 22% from 10%. The dollar increase for the three-month
period ended September 30, 1997 was primarily due to lower license fees to third
parties. Cost of software licenses increased 47% to $1.4 million for the
six-month period ended September 30, 1997, from $1.0 million for the six-month
period ended September 30, 1996, and increased as a percentage of software
revenues to 49% from 12%. The dollar and percentage increases for the six-month
period ended September 30, 1997 were primarily due to a write off of an
intangible asset amounting to $372,000 and amortization of capitalized software.
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COST OF SERVICES. Cost of services, consisting primarily of personnel costs
for customer support, training and applications consulting, decreased 52% to
$0.5 million for the three-month period ended September 30, 1997, from $1.0
million for the three-month period ended September 30, 1996, and decreased as a
percentage of service revenues to 16% from 67%. The decreases were primarily due
to decreased outsourcing expenses for consulting in the current three-month
period ended September 30, 1997. Cost of services increased 32% to $2.2 million
for the six-month period ended September 30, 1997, from $1.6 million for the
six-month period ended September 30, 1996, and decreased as a percentage of
service revenues to 42% from 44%. The dollar increase for the six-month period
ended September 30, 1997 was due primarily to the outsourcing of additional
personnel at higher rates to support consulting services and increased headcount
during the three-month period ended June 30, 1997. This increase was partially
offset by decreased outsourcing expenses in the current three-month period ended
September 30, 1997.
SALES AND MARKETING. Sales and marketing expenses, which include
distribution, pre-sales support and marketing costs, decreased 30% to $2.5
million for the three-month period ended September 30, 1997, from $3.6 million
for the three-month period ended September 30, 1996, and decreased as a
percentage of revenues to 51% from 52%. The decreases were primarily due to
decreased commissions associated with decreased revenues and lower marketing
expenses in the current three-month period ended September 30, 1997. Sales and
marketing expenses increased 2% to $6.6 million for the six-month period ended
September 30, 1997, from $6.5 million for the six-month period ended September
30, 1996. As a percentage of revenues, sales and marketing expenses increased to
76% for the six-month period ended September 30, 1997, compared to 54% for the
comparable period in 1996. These increases for the six-month period ended
September 30, 1997 were primarily due to the addition of sales and marketing
employees and increased marketing and promotional activities during the
three-month period ended June 30, 1997. These increases were partially offset by
decreased commissions associated with decreased revenues and decreased marketing
expenses during the three-month period ended September 30, 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses, consisting
primarily of employee salaries and benefits and development costs, decreased 11%
to $0.8 million for the three-month period ended September 30, 1997, from $0.9
million for the three-month period ended September 30, 1996, and increased as a
percentage of revenues to 16% from 13%. Research and development expenses
increased 16% to $1.7 million for the six-month period ended September 30, 1997,
from $1.5 million for the six-month period ended September 30, 1996, and
increased as a percentage of revenues to 19% from 12%. The increases were
primarily due to the addition of research and development employees associated
with the development of the Company's SellingPoint product.
GENERAL AND ADMINISTRATIVE. General and administrative expenses, consisting
primarily of expenses associated with the finance, human resources and
administrative departments, decreased 20% to $0.6 million for the three-month
period ended September 30, 1997, from $0.7 million for the three-month period
ended September 30, 1996, and increased as a percentage of revenues to 12% from
11%. The decrease was primarily due to decreased headcount-related expenses in
the current three-month period ended September 30, 1997. General and
administrative expenses increased 6% to $1.4 million for the six-month period
ended September 30, 1997, from $1.3 million for the six-month period ended
September 30, 1996, and increased as a percentage of revenues to 16% from 11%.
These increases for the six-month period ended September 30, 1997 were primarily
due to higher legal costs and an increase in the bad debt provision during the
three-month period ended June 30, 1997. These increases were partially offset by
decreased headcount-related expenses during the three-month period ended
September 30, 1997.
INTEREST INCOME. Interest income, consisting of interest from cash and cash
equivalents, for the three- and six-month period ended September 30, 1997 was
$54,000 and $120,000, respectively. Interest income for the three-and six-month
period ended September 30, 1996 was $80,000 and $175,000, respectively.
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INTEREST EXPENSE. Interest expense for the three- and six-month period
ended September 30, 1997 was $26,000 and $52,000, respectively. Interest expense
for the three- and six-month period ended September 30, 1996 was $27,000 and
$53,000, respectively.
OTHER INCOME (EXPENSE). Other income (expense), consisting primarily of
recording of losses related to an investment in Loandata.inc., foreign exchange
gains (losses) on intercompany transactions, and marking to market certain
trading securities, for the three-month period ended September 30, 1997, was an
expense of $588,000, compared with income of $438,000 for the three-month period
ended September 30, 1996. Other income for the six-month period ended September
30, 1997, was an expense of $567,000 compared with income of $407,000 for the
six-month period ended September 30, 1996. During the three-month period ended
September 30, 1997, the Company adjusted the investment in Loandata.inc., to
recognize its proportionate share of losses under the equity method and sold its
marketable securities.
PROVISION FOR INCOME TAXES. The income tax provision for the three- and
six-month periods ended September 30, 1997, was $10,000 and $20,000,
respectively, and relates to foreign taxes. The income tax provision for the
three- and six-month period ended September 30, 1996, was $173,000 and $193,000,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had cash and cash equivalents of
approximately $4.5 million. The Company had a line of credit with a commercial
lender, bearing interest at the bank's base lending rate which expired on June
30, 1997. Under this line of credit, as amended, the Company had a $2,500,000
unsecured working capital line of credit. The line of credit contained financial
convenants which consisted of minimum tangible capital base, ratio of total
liabilities to tangible capital base and debt service coverage. The Company
would not currently be in compliance with these covenants were the line of
credit in effect and is negotiating with the commercial lender to extend and
amend the line of credit. The Company's $1,750,000 equipment line of credit,
collateralized by equipment, expired on March 31, 1997. The Company is
negotiating with the commercial lender to extend and amend the equipment line of
credit. As of September 30, 1997, the Company had borrowed $1,413,000 under the
equipment line of credit. There can be no assurance that the Company will be
successful in extending and amending the lines of credit nor can there be any
assurance that such extended and amended lines of credit will be on similar
terms as the existing agreements. Additionally, there can be no assurance that
alternative financing will be available if required.
During the six-month period ended September 30, 1997, the Company had a net
loss of $5.3 million and generated a net cash increase of $0.6 million. The
increase in cash and cash equivalents was due primarily to $1.1 million provided
by operating activities. The Company's operating activities included a decrease
in accounts receivable of $7.0 million. Investing activities included
capitalized software costs of $0.5 million and the purchase of property and
equipment for $0.1 million consisting primarily of computer equipment.
During fiscal 1996, the Company entered into a $5,000,000 five-year
applications consulting services contract with a significant customer of the
Company. The five-year applications consulting services contract contains volume
pricing discounts subject to adjustments for increased costs. The Company has a
minimum commitment of $2,500,000 of outside applications services that will be
used by the Company over a five-year period. The minimum commitment of
$2,500,000 will be paid in five yearly payments commencing December 31, 1996.
These yearly payments are $250,000, $500,000, $550,000, $600,000 and $600,000
for the five calendar years beginning December 31, 1996, respectively. The
Company's policy is to recognize the consulting service expenses as the expenses
are incurred. The Company believes that based on current forecasts the minimum
payment accruals will be utilized. However, given that significant sales
fluctuations which may occur in any given period, it is possible that the
minimum commitment would not be met, thus requiring the Company to record a
charge in excess of the services utilized. At September 30, 1997, the Company
had used the minimum first-year commitment of $250,000.
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On October 22, 1997, the Company entered into an agreement to acquire a
53.4% majority interest in a newly-created limited liability company that will
be the successor to the business of Loandata.inc., an e-commerce company
developing the electronic underwriting of car leases and loans using the
SellingPoint product. Loandata.inc. will contribute all its assets, including
its proprietary technology, to the newly-established subsidiary of the Company,
in exchange for a minority interest in the subsidiary.
The Company believes that existing sources of liquidity and anticipated
funds from operations will satisfy the Company's working capital and capital
expenditure requirements at least through fiscal 1998.
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PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) On August 29, 1997, the Annual Meeting of the Shareholders of the Company
was held at the Renaissance Bedford Hotel, 44 Middlesex Turnpike, Bedford,
Massachusetts.
b) The Board of Directors is divided into three classes serving staggered
terms in accordance with the Company's Restated Certificate of
Incorporation. The Board of Directors has determined that the number of
directors constituting the full board of directors shall be six. Stephen J.
Cucchiaro and Vincenzo Cannatelli were reelected as directors at the Annual
Meeting to serve a three-year term ending in 2000. The term of office of
each Lawrence W. Rosenfeld, Alberto de Benedictis, A. William Berkman, Jr.
and William E. Kelly continued after the Annual Meeting.
c) At the Annual Meeting, the Shareholders also voted (1) to approve an
amendment to authorize an additional 250,000 shares of common stock for
issuance under the Company's 1993 Stock Plan, and (2) to ratify the
selection of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the fiscal year ending March 31, 1998.
The following votes were tabulated on the aforementioned proposals:
1. Election of Directors.
Number of Shares
----------------
For Withheld Authority
--- ------------------
Stephen J. Cucchiaro 4,570,765 40,462
Vincenzo Cannatelli 4,583,930 27,297
2. Approval of an amendment to increase by 250,000 the number of shares
of common stock authorized for issuance under the Company's 1993 Stock
Plan.
Number of Shares
----------------
For 4,427,374
Against 168,403
Abstain 15,450
Broker non-votes 0
3. Ratification of the selection of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ending March 31,
1998.
Number of Shares
----------------
For 4,591,327
Against 17,500
Abstain 2,400
(d) Not applicable.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
+3.01 Restated Certificate of Incorporation of the Registrant, as
amended to date
++3.02 Restated By-Laws of the Registrant.
++4.01 Specimen Stock Certificate for Common Stock, $.00001 par value.
+++4.02 Rights Agreement dated as of April 24, 1997, between the
Registrant and The First National Bank of Boston, as Rights
Agent.
+++4.03 Form of Certificate of Designations of the Voting Powers,
Preferences and Relative, Participating, Optional and Other
Special Rights, Qualifications, Limitations or Restrictions of
Series A Participating Cumulative Preferred Stock of the
Registrant.
+++4.04 Form of Right Certificate.
++4.05 1987 Stock Plan.
++++4.06 1993 Stock Plan (as amended through August 29, 1997).
++4.07 1994 Non-Employee Directors Stock Option Plan.
++++27 Financial Data Schedule.
- ---------------
+ Previously filed with the Registrant's Annual Report on Form 10-K
for the fiscal ended March 31, 1997.
++ Previously filed as an Exhibit to the Registrant's Registration
Statement No. 33-86550.
+++ Previously filed as an Exhibit to the Registrant's form 8-K dated
April 24, 1997.
++++ Filed herewith.
(b) No reports on Form 8-K were filed by the Company during the fiscal quarter
covered by this report.
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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.
CONCENTRA CORPORATION
Date: November 14, 1997
By: /s/ Alex Braverman
---------------------------------------
Alex Braverman
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
14
<PAGE> 1
CONCENTRA CORPORATION
1993 STOCK PLAN
(as amended through August 29, 1997)
1. PURPOSE. This 1993 Stock Plan (the "Plan") is intended to provide
incentives: (a) to the officers and other employees of Concentra Corporation
(the "Company"), its parent (if any) and any present or future subsidiaries of
the Company (collectively, "Related Corporations") by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which qualify as "incentive stock options" under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); (b) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in the
Company pursuant to options granted hereunder which do not qualify as ISOs
("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors, officers,
employees and consultants of the Company and Related Corporations by providing
them with awards of stock in the Company ("Awards"); and (d) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with opportunities to make direct purchases of stock in the
Company ("Purchases"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options". Options,
Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 425 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. The Plan shall be administered by the Board of Directors of the
Company (the "Board"). The Board may appoint a Stock Plan Committee (the
"Committee") of three or more of its members to administer the Plan. Subject to
ratification of the grant or authorization of each Stock Right by the Board (if
so required by applicable state law), and subject to the terms of the Plan, the
Committee, if so appointed, shall have the authority to (i) determine the
employees of the Company and Related Corporation (from among the class of
employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be
granted, and to determine (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and Awards and to
make Purchases) to whom Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Purchases made; (iii) determine the option price of
shares subject to each Option, which price shall not be less than the minimum
price specified in paragraph 6, and the purchase price of shares subject to each
Purchase; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 7) the time or times
when each Option shall become exercisable and the duration of the exercise
period; (vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options,
<PAGE> 2
Awards and Purchases and the nature of such restrictions, if any, and (vii)
interpret the Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Stock Rights granted under it shall be final unless
otherwise determined by the Board. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
B. The Committee may select one of its members as its chairman, and
shall hold meetings at such time and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee. All references in this Plan to the Committee shall mean the Board if
no Committee has been appointed. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
C. Stock Rights may be granted to members of the Board, but no Stock
Right shall be granted to any person who is, at the time of the proposed grant,
a member of the Board, unless such grant has been approved by a majority vote of
the other members of the Board. All grants of Stock Rights to members of the
Board shall in all other respects be made in accordance with the provisions of
this Plan applicable to other eligible persons. Members of the Board who are
either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been
granted Stock Rights may vote on any matters affecting the administration of the
Plan or the grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself of Stock Rights, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting to him of
Stock Rights.
D. Notwithstanding any other provision of this paragraph 2, in the
event the Company registers any class of any equity security pursuant to Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
grants to directors of Stock Rights made at any time from the effective date of
such registration until six months after the termination of such registration
shall be made only by the Board; provided, however, that if a majority of the
Board is eligible to participate in the Plan or in any other stock option or
other stock plan of the Company or any of its affiliates, or has been so
eligible at any time within the preceding year, any grant to directors of Stock
Rights must be made by, or only in accordance with the recommendation of, a
committee consisting of three
-2-
<PAGE> 3
or more persons, who may but need not be directors or employees of the Company,
appointed by the Board but having full authority to act in the matter, none of
whom is eligible to participate in this Plan or any other stock option or other
stock plan of the Company or any of its affiliates, or has been eligible at any
time within the preceding year. The requirements imposed by the preceding
sentence shall also apply with respect to grants to officers who are also
directors. Once appointed, such Committee shall continue to serve until
otherwise directed by the Board.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any director (whether or not an employee), officer, employee or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.
Granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.00001
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 1,409,091, subject to adjustment as provided in
paragraph 13. Any such shares may be issued as ISOs, Non-Qualified Options or
Awards, or to persons or entities making Purchases, so long as the number of
shares so issued does not exceed such number, as adjusted. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, or if the Company shall reacquire any unvested shares issued pursuant to
Awards or Purchases, the unpurchased shares subject to such Options and any
unvested shares so reacquired by the Company shall again be available for grants
of Stock Rights under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after June 11, 1993 and prior to June 11, 2003. The date of
grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. The Committee shall have the right, with the consent of the optionee, to
convert as ISO granted under the Plan to a Non-Qualified Option pursuant to
paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. The price per share specified in the agreement relating to each
Non- Qualified Option granted under the Plan shall in no event be less than the
lesser of (i) the
-3-
<PAGE> 4
book value per share of Common Stock as of the end of the fiscal year of the
Company immediately preceding the date of such grant, or (ii) 50 percent of the
fair market value per share of Common Stock on the date of such grant.
B. The price per share specified in the agreement relating to each ISO
granted under the Plan shall not be less than the fair market value per share of
Common Stock on the date of such grant. In the case of an ISO to be granted to
an employee owning stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any Related Corporation,
the price per share specified in the agreement relating to such ISO shall not be
less than 110 percent of the fair market value per share of Common Stock on the
date of grant.
C. In no event shall the aggregate fair market value (determined at
the time an ISO is granted) of Common Stock for which ISOs granted to any
employee are exercisable for the first time by such employee during any calendar
year (under all stock option plans of the Company and any Related Corporation)
exceed $100,000; provided that this paragraph 6(C) shall have no force or effect
if its inclusion in the Plan is not necessary for Options issued as ISOs to
qualify as ISOs pursuant to Section 422(b)(7) of the Code.
D. If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the NASDAQ
National Market List. However, if the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company or any
Related Corporation. Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO,
-4-
<PAGE> 5
except with respect to any part of such ISO that is converted into a Non-
Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. The Option shall either be fully exercisable on the date of grant
or shall become exercisable thereafter in such installments as the Committee may
specify.
B. Once an installment becomes exercisable it shall remain exercisable
until expiration or termination of the Option, unless otherwise specified by the
Committee.
C. Each Option or installment may be exercised at the acceleration
time named at the Board's discretion, or from time to time, in whole or in part,
for up to the total number of shares with respect to which it is then
exercisable.
D. The Committee shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Committee shall not
accelerate the exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to paragraph 16) if such acceleration would violate the annual vesting
limitation contained in Section 422(b)(7) of the Code, as described in paragraph
6(C).
9. TERMINATION OF EMPLOYMENT. If an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of 60 days
from the date of termination of his employment, but in no event later than on
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
-5-
<PAGE> 6
10. DEATH; DISABILITY.
A. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his death, any ISO of his may be exercised, to
the extent of the number of shares with respect to which he could have exercised
it on the date of his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the ISO's specified expiration
date or 180 days from the date of the optionee's death.
B. If an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his disability, he shall have the right to
exercise any ISO held by him on the date of termination of employment, to the
extent of the number of shares with respect to which he could have exercised it
on that date, at any time prior to the earlier of the ISO's specified expiration
date or 180 days from the date of the termination of the optionee's employment.
For the purposes of the Plan, the term "disability" shall mean "permanent and
total disability" as defined in Section 22(e)(3) of the Code or successor
statute.
11. ASSIGNABILITY. No Stock Right shall be assignable or transferable by
the grantee except by will or by the laws of descent and distribution, and
during the lifetime of the grantee each Stock Right shall be exercisable only by
him.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 and 11 hereof and may contain such other
provisions as the Committee deems advisable which are not inconsistent with the
Plan, including restrictions applicable to shares of Common Stock issuable upon
exercise of Options. In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and cancellation
provisions as the Committee may determine. The Committee may from time to time
confer authority and responsibility on one or more of its own members and/or one
or more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
A. If the shares of Common Stock shall be subdivided or combined into
a greater or smaller number of shares or if the Company shall issue any shares
of Common Stock as a stock dividend on its outstanding Common Stock, the number
of shares of
-6-
<PAGE> 7
Common Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall be
made in the purchase price per share to reflect such subdivision, combination or
stock dividend.
B. If the Company is to be consolidated with or acquired by another
entity in a merger, sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "Successor
Board"), shall, as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options the consideration payable with respect
to the outstanding shares of Common Stock in connection with the Acquisition; or
(ii) upon written notice to the optionees, provided that all Options must be
exercised, to the extent then exercisable, within a specified number of days of
the date of such notice, at the end of which period the Options shall terminate;
or (iii) terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such Options (to the
extent then exercisable) over the exercise price thereof.
C. In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior to such
recapitalization or reorganization.
D. Notwithstanding the foregoing, any adjustments made pursuant to
subparagraphs A, B or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 425 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the Committee determines that such adjustments
made with respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments.
E. In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as shall be determined by the Committee.
F. 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 subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Company.
-7-
<PAGE> 8
G. No fractional shares shall be issued under the Plan and the
optionee shall receive from the Company cash in lieu of such fractional shares.
H. Upon the happening of any of the foregoing events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise
of a Stock Right made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares or Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (d) at the discretion of the Committee, by
any combination of (a), (b) and (c) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c) or (d) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO in
question. The holder of a Stock Right shall not have the rights of a shareholder
with respect to the shares covered by his Stock Right until the date of issuance
of a stock certificate to him for such shares. Except as expressly provided
above in paragraph 13 with respect to changes in capitalization and stock
dividends, no adjustment shall be made for dividends or similar rights for which
the record date is before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
June 11, 1993, and (with respect to the validation of ISOs granted under the
Plan) approved by the stockholders of the Company on June 16, 1993. Subsequent
amendments to the Plan were approved by the stockholders of the Company on
August 30, 1996 and August 29, 1997. The Plan shall expire on June 11, 2003
(except as to Options outstanding on that date).
-8-
<PAGE> 9
Subject to the provisions of paragraph 5 above, Stock Rights may be granted
under the Plan prior to the date of stockholder approval of the Plan. The Board
may terminate or amend the Plan in any respect at any time, except that, without
the approval of the stockholders obtained within 12 months before or after the
Board adopts a resolution authorizing any of the following actions: (a) the
total number of shares that may be issued under the Plan may not be increased
(except by adjustment pursuant to paragraph 13); (b) the provisions of paragraph
3 regarding eligibility for grants of ISOs may not be modified; (c) the
provisions of paragraph 6(B) regarding the exercise price at which shares may be
offered pursuant to ISOs may not be modified (except by adjustment pursuant to
paragraph 13); and (d) the expiration date of the Plan may not be extended.
Except as provided in the fourth sentence of this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without his consent, under any Stock Right previously granted to him.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such Options. At
the time of such conversion, the Committee (with the consent of the Optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of
-9-
<PAGE> 10
the amount that is considered compensation includable in such person's gross
income. The Committee in its discretion may condition (i) the exercise of an
Option, (ii) the grant of an Award, (iii) the making of a Purchase of Common
Stock for less than its fair market value, or (iv) the vesting of restricted
Common Stock acquired by exercising a Stock Right on the grantee's payment of
such additional withholding taxes.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
21. GOVERNING LAW; CONSTRUCTION. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of Delaware. In construing this Plan, the singular shall include the
plural and the masculine gender shall include the feminine and neuter, unless
the context otherwise requires.
-10-
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