<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 1-13906
BALLANTYNE OF OMAHA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 47-0587703
(State of incorporation) (I.R.S. Employer Identification No.)
4350 MCKINLEY STREET, OMAHA, NEBRASKA 68112
(Address of principal executive offices)
Registrant's telephone number, including area code: (402) 453-4444
Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK,
$0.01 PAR VALUE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 March 10, 2000, 12,459,323 shares of Common Stock of Ballantyne
of Omaha, Inc., were outstanding and the aggregate market value of such Common
Stock held by nonaffiliates (based upon the closing price of the stock on the
NYSE) was approximately $41,075,682.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for it's Annual Meeting of
Shareholders to be held on June 14, 2000 (the "Proxy Statement") are
incorporated by reference in Part III.
<PAGE>
TABLE OF CONTENTS
PART I.
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Stockholders' Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure 45
PART III.
Item 10. Directors and Executive Officers of the Registrant 45
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and
Management 45
Item 13. Certain Relationships and Related Transactions 45
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 46
</TABLE>
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements made in this report are "forward-looking" in nature, as
defined in the Private Litigation Reform Act of 1995, which involve risks and
uncertainties, including but not limited to, quarterly fluctuations in results;
customer demand for the Company's products; the development of new technology
for alternate means of motion picture presentation; domestic and international
economic conditions; the management of growth; and other risks detailed from
time to time in the Company's other Securities and Exchange Commission filings.
Actual results may differ materially from management expectations.
PART I
ITEM 1. BUSINESS
GENERAL
Ballantyne of Omaha, Inc. and its subsidiaries (the "Company") designs,
develops, manufactures and distributes commercial motion picture equipment,
lighting systems and restaurant equipment. The Company primarily operates within
three business segments; 1) theatre, 2) lighting and 3) restaurant equipment.
The Company's business was founded in 1932. Since that time, the Company has
manufactured and supplied equipment and services to the commercial motion
picture projection industry and to sports and concert arenas and theme parks.
In 1983, the Company acquired the assets of the Simplex Projector Division of
the National Screen Services Corporation, thereby expanding its commercial
motion picture projection equipment business. The Company further expanded
its commercial motion picture projection equipment business with the 1993
acquisition of the business of the Cinema Products Division of Optical
Radiation Corporation. That division manufactured the Century-Registered
Trademark- projector and distributed ISCO-Optic lenses to the theatre and
audio visual industries in North America. ISCO-Optic is a trademark of
ISCO-Optic GmbH. In December 1994, the Company increased its presence in the
international marketplace with the acquisition of Westrex Company, Asia
("Westrex"), which provides the Company with a strategic Far Eastern location
and access to the Pacific Rim. In April 1998, the Company vertically
integrated their motion picture projection business with the acquisition of
Design & Manufacturing, Ltd. ("Design"). Design is a supplier of film platter
systems to the motion picture exhibition industry.
The Company also manufactures customized motion picture projection equipment for
use in special venues, such as large screen format presentations and other forms
of motion picture-based entertainment requiring visual and multimedia special
effects. The Company helped pioneer the special venue market more than 20 years
ago by working with its customers to design and build customized projection
systems featuring special effects. Customers for these products include The Walt
Disney Company, Universal Studios and MegaSystems, Inc. During 1998, the Company
and MegaSystems, Inc., a full service provider of products and services for the
large-format film industry, collaborated on a large format projection system
that is currently being manufactured by the Company and distributed by
MegaSystems, Inc.
The Company manufactures and distributes long-range follow spotlights, which
are used for both permanent installations and touring applications. During
1997, the Company complemented its long-range follow spotlights product line
with the acquisition of substantially all of the net assets of Xenotech, Inc.
("Xenotech") and Sky-Tracker of America, Inc. ("Sky-Tracker"). Xenotech is a
supplier of high intensity searchlights and computer-based lighting systems
for the motion picture production,
-1-
<PAGE>
television, live entertainment, theme park and architectural industries.
Sky-Tracker sells and rents computer and manually operated high intensity
searchlights. Sky-Tracker and Xenotech were merged together and operate a sales
and rental office out of a facility in North Hollywood, California. During
January 1998, the Company further complemented its lighting segment with the
acquisition of Sky-Tracker of Florida, Inc., a rental agent and distributor of
high intensity promotional searchlights.
The Company also has an audio visual division in Florida called Strong
Communications. The scope of services that Strong Communications provides are
design consulting, rental services and equipment sales in the audio visual
industry. Strong Communications has offices in Orlando, Fort Lauderdale and
Tampa, Florida.
The Company also manufactures commercial food service equipment, which is sold
to convenience store and fast food restaurant operators and to equipment
suppliers for resale on a private label basis.
The Company's product lines are distributed on a worldwide basis through a
network of over 200 domestic and international dealers. The Company's broad
range of both standard and custom-made equipment can completely outfit and
automate a motion picture projection booth and is currently being used by major
motion picture exhibitors such as AMC Entertainment, Inc., Regal Cinemas, Inc.
and Loews Cineplex. As a major supplier of motion picture equipment to the
theatre exhibitors, the Company has benefited directly from both the domestic
and international growth in motion picture screens.
The Company believes that its position as a fully integrated equipment
manufacturer enables it to be more responsive to its customers' specific
design requirements, thereby giving it a competitive advantage over other
manufacturers who rely more on outsourcing components. In addition, the
Company believes its expertise in engineering, manufacturing, prompt order
fulfillment, delivery, after-sale technical support and emergency service
have allowed the Company to build and maintain strong customer relationships.
The Company's principal objective is to increase its U.S. market share and
its established international presence and position itself to maintain its
current standing as the industry's leading supplier of cinema equipment
whether it be film or digital. In order to achieve this objective, the
Company is pursuing a number of strategies including (i) expanding its
presence outside the U.S. by leveraging its relationships with domestic
customers who are expanding internationally and building relationships with
international theatre exhibitors, (ii) developing and maintaining strong
customer relationships through fully understanding customer needs and
furnishing value-added services, (iii) leveraging its manufacturing
expertise, (iv) making strategic acquisitions of complementary or related
niche market products, (v) expanding the special venue business, (vi)
expanding certain niche areas of the lighting segment and (vii) positioning
itself in the digital cinema industry.
MOTION PICTURE EXHIBITION INDUSTRY OVERVIEW
The motion picture theatre industry has experienced competition from in-home
sources of entertainment in recent years, forcing theatre exhibitors to build
higher quality theatres with more screens per location in order to lure
consumers to theatres. As a result, U.S. theatre exhibitors have been developing
multiple screen theatres to provide a more consumer friendly destination and a
wider range of film choices than traditional single screen theatres. More
recently, domestic theatre exhibitors have accelerated the addition of new
screens and in many cases, are
-2-
<PAGE>
constructing "multiplex" or "megaplex" theatres which have an even larger
number of screens per location (sometimes as many as 30 screens). Coupled
with wide body seats and stadium seating, these new generation theatres offer
patrons a new and invigorating movie going experience. While the Company
believes that the multiplex trend will continue, the Company is experiencing
domestic theatre exhibitors curtailing new screen growth expansion during
2000. Therefore, the Company believes that theatre sales in 2000 will be
below 1999 levels. To offset this impact, management of the Company intends
on expanding international distribution channels, improving manufacturing
processes, reducing costs and accelerating new product development. However,
there can be no assurance that the impact of the expected screen growth
curtailment will not have a material adverse impact on the Company.
The domestic exhibition industry is highly concentrated with management
estimating that the top ten exhibitors represent approximately 60% of the total
industry. Management believes that the trend toward multiplexing or megaplexing
is also accelerating internationally as the international marketplace is one
which has historically been underserved. U.S.-based theatre exhibitors are
entering the international markets with plans to build modern multiplexes and
megaplexes in response to increased movie theatre attendance. International
exhibitors, faced with this increased competition, are expected to respond by
becoming more aggressive in building these new multiplexes. According to the 2nd
EDITION OF THE GLOBAL FILM EXHIBITION REPORT AND DISTRIBUTION published by
Baskerville Communications in 1998, there were an estimated 108,800 screens in
the world at the end of 1998 and this number is expected to increase by
approximately 24,000 net new screens through the year 2007, and over 75% of this
growth is expected to be international. It should be noted, however, that since
the date of this publication, certain domestic exhibitors have announced plans
to decrease the number of screens built in 2000 compared to earlier estimates.
BUSINESS STRATEGY
The Company's principal objective is to increase its U.S. market share and
its established international presence and position itself to maintain its
current standing as the industry's leading supplier of cinema equipment
whether it be film or digital. The Company's strategy combines the following
key elements:
EXPAND INTERNATIONAL PRESENCE. As construction of new multiple screen motion
picture theatres has extended to the international market, sales of the
Company's products to international end users are becoming increasingly
important to the Company. Net sales to foreign customers, primarily of
theatre products, increased from $11.3 million or 29.4% of consolidated net
revenues in 1995 to $16.5 million or 19.2% of consolidated net revenues in
1999 including sales by Westrex, the Company's division in Hong Kong.
However, during 1999, sales to foreign customers decreased $5.5 million to
$16.5 million from $22.0 million in 1998. The decrease was mainly due to
lower sales in Canada, which resulted from 1998 being near record levels for
theater construction in Canada. The most significant future growth is
expected to be in Latin and South America where favorable demographics and
low screen penetration support their development. The Company believes that
its smaller international market share represents an attractive growth
opportunity in other countries as well, as the Company intends to seek a
greater market share for its products internationally by working with its
domestic dealers and U.S.-based motion picture exhibitor customers as they
expand abroad. In addition, the Company is seeking to strengthen and develop
its international presence through its international dealer network and the
Company's sales force will continue to travel extensively worldwide to market
the Company's products. The Company believes that as a result of these
efforts, it is well-positioned to expand its brand name recognition and
international market share.
-3-
<PAGE>
EMPHASIZE CUSTOMER SERVICE. The Company seeks to develop and maintain strong
customer relationships by offering a wide variety of standardized commercial
theatre, lighting and restaurant products, working closely with its customers to
fully understand their needs and furnishing value-added services such as (i)
expertise in engineering and manufacturing high-quality, reliable and innovative
products (often designed to customer specifications), (ii) prompt order
fulfillment and delivery and (iii) after-sale technical support and emergency
service. The Company further supports its products through its replacement parts
business, which represents an additional source of recurring income that is less
dependent on new screen construction. The Company believes that one of its
competitive advantages is its superior customer service, which has resulted in
strong, long-lasting customer relationships.
LEVERAGE MANUFACTURING EXPERTISE. The Company's position as a fully integrated
manufacturer enables it to develop, design and customize its products to meet
customer specifications and to respond quickly to customers' requests for
replacement parts and repair. The Company believes that its integrated
manufacturing capabilities allow it to rapidly increase its manufacturing
capacity, thereby providing it with a competitive advantage in meeting its
customers' accelerating delivery schedules. In addition, its manufacturing
capabilities, combined with its emphasis on customer service, have contributed
to retaining strong customer relationships and developing new business
opportunities and products in both the traditional theatre equipment market and
the special venue market.
EXPLORE STRATEGIC ACQUISITIONS. The Company has historically been successful in
identifying and acquiring complementary businesses, which have been profitable
for its core operations. The Company plans to continue to explore opportunities
to acquire companies which complement its sales and marketing and manufacturing
expertise, as well as companies which provide opportunities for geographical
expansion of its dealer network and product line expansion. Additionally,
opportunities to acquire businesses that can assist the Company in the digital
cinema market will be explored.
EXPAND SPECIAL VENUE BUSINESS. The Company believes that there is increasing
consumer demand for large screen format presentations and other forms of motion
picture-based entertainment which use visual and multimedia special effects.
Although sales of special venue products currently represent only a small
percentage of the Company's net sales, the Company believes that increasing
public demand for such products and the increased publicity generally associated
with special venue products create a small but attractive opportunity for future
growth.
EXPAND AND REORGANIZE LIGHTING SEGMENT. The Company intends on growing the
lighting segment by focusing on certain key niche areas of the segment and
leveraging its existing customer network to grow these niche areas through
internal expansion. Additionally, the Company plans on reorganizing certain
areas of the promotional lighting division of this segment to obtain more
profitable results.
EXPLORE DIGITAL CINEMA. The Company is currently exploring options relating to
digital cinema to position itself to be a supplier of digital equipment when
digital cinema becomes a reality.
-4-
<PAGE>
PRODUCTS
THEATRE PRODUCTS
MOTION PICTURE PROJECTION EQUIPMENT
The Company is a leading developer, manufacturer and distributor of
commercial motion picture projection equipment worldwide. The Company's
commercial motion picture projection equipment can fully outfit and automate
a motion picture projection booth and consists of 35mm and 70mm motion
picture projectors, combination 35/70mm projectors, xenon lamphouses and
power supplies, a console system combining a lamphouse and power supply into
a single cabinet, soundhead reproducers and related products such as film
handling equipment and sound systems. The Company's commercial motion picture
projection equipment is marketed under the industrywide recognized trademarks
of Strong-TM-, Simplex-TM, Century-Registered Trademark-, Optimax-Registered
Trademark-, and Ballantyne-TM-. The Company manufactures the entire motion
picture projection system in-house, except for the audio rack components and
lenses. This equipment may be sold individually or as an integrated system
with other components manufactured by the Company.
The Company's lamphouse consoles are unique to the industry in that they
incorporate a solid state power supply, which allows for a broader range of
wattages, thereby reducing operating costs. The Company's lamphouse consoles
incorporate all elements required for quality film presentations while requiring
minimum booth floor space.
The Company's film handling equipment consists of either a three-deck or
five-deck platter and a make-up table, which allows the reels of a full-length
motion picture to be spliced together, thereby eliminating the need for an
operator to change reels during the showing of the motion picture. The majority
of the Company's film transport systems are sold under the Strong-TM- name,
although the Company sells systems on an OEM basis to a competitor.
Pursuant to a distribution agreement with ISCO-Optic GmbH of Germany, the
Company has the exclusive right to distribute ISCO-Optic lenses in North
America. Under the distribution agreement, the Company's exclusive right
continues through April 30, 2006, subject to the attainment of minimum sales
quotas (which the Company has historically exceeded), and thereafter is
automatically renewed for successive two-year periods until terminated by either
party upon 12 months' prior notice. ISCO-Optic lenses have developed a
reputation for delivering high-image quality and resolution over the entire
motion picture screen. In addition to incorporating the ISCO-Optic lenses into
its own equipment, the Company distributes ISCO-Optic lenses to customers with
operations in the theatre and audio visual industries. ISCO-Optic lenses have a
leading market share in the U.S. commercial motion picture projector lens market
and have won two Academy Awards for technical achievement.
-5-
<PAGE>
REPLACEMENT PARTS
The Company has a significant installed base of over 35,000 motion picture
projectors. Although these projectors have an average useful life in excess of
20 years, periodic replacement of components is required as a matter of routine
maintenance, in most cases with parts manufactured by the Company. The Company
believes that growth in the installed base of commercial motion picture
projectors should result in increased net sales of replacement parts for the
Company's commercial motion picture projection equipment. Replacement part sales
represent a recurring revenue source for the Company, which is less dependent on
new screen construction. Net sales of the Company's theatre replacement parts
were $8.8 million, $6.8 million and $6.9 million for the years ended December
31, 1999, 1998 and 1997, respectively. Sales of replacement parts fluctuate from
quarter to quarter and are not directly related to the volume of projection
equipment currently sold but are more a function of the needs of current
customers which have projection systems previously purchased from the Company.
SPECIAL VENUE PRODUCTS
The Company has sold customized commercial motion picture equipment directly to
special venue customers such as Imax Corporation, The Walt Disney Company and
Electrosonic Systems, Inc. for use at special venue sites such as the Magic
Kingdom, EPCOT Center, IMAX Ridefilms Simulators, Universal Studios and Busch
Gardens. The Company works closely with its customers to develop, design and
engineer customized projection equipment to accommodate various formats required
for the special venue industry. The Company manufacturers 4, 5, 8 and 10
perforation 35mm and 70mm projection systems for large-screen, simulation ride
and planetarium applications and for other venues that require special effects.
The Company's ability as a fully integrated manufacturer enables it to work
closely with its customers from initial concept and design through manufacturing
to the customers' specifications. The Company believes that its reputation for
quality and responsiveness and its collaboration with MegaSystems, Inc. provides
a competitive advantage in these markets.
LIGHTING PRODUCTS
SPOTLIGHT
The Company has been a leading developer, manufacturer and distributor of
long-range follow spotlights since 1950. Ballantyne's long-range follow
spotlights are marketed under the Strong-TM- trademark and recognized brand
names such as Super Trouper-Registered Trademark-, Gladiator-TM- and
Roadie-TM-. The Super Trouper-Registered Trademark- follow spotlight has been
the industry standard since 1958. The Company's long-range follow spotlights
are high-intensity general use illumination products designed for both
permanent installations such as indoor arenas, theatres, auditoriums, theme
parks, amphitheatres and stadiums and touring applications. The Company's
long-range follow spotlights consist of eight basic models ranging in output
from 400 watts to 3,000 watts. The 400 watt spotlight model, which has a
range of 20 to 150 feet, is compact, portable and appropriate for small
venues and truss mounting. The 3,000 watt spotlight model, which has a range
of 300 to 600 feet, is a high-intensity xenon light spotlight appropriate for
large theatres, arenas and stadiums. All of the Company's long-range follow
spotlights employ a variable focal length lens system which increases the
intensity of the light beam as it is narrowed from flood to spot.
-6-
<PAGE>
The Company sells its long-range follow spotlights through dealers and to end
users to arenas, stadiums, theme parks, theatres, auditoriums and equipment
rental companies. These spotlight products are used in over 100 major arenas,
including among other venues, the Toronto SkyDome, the United Center in
Chicago, the RCA Dome in Indianapolis, the Continental Airlines Arena in the
New Jersey Meadowlands and the Sheffield Arena in the United Kingdom, as well
as at special venue sites such as the 1996 Summer Olympics and in world tours
by, among others, the Rolling Stones, R.E.M. and Pink Floyd.
PROMOTIONAL LIGHTING
The Company, through its wholly-owned subsidiary, Xenotech Strong, Inc.
("Xenotech") is a supplier (through both rental and outright sale) of high
intensity searchlights and computer-based lighting systems for the motion
picture production, television, live entertainment, theme park and
architectural industries. The Company's computer-based lighting systems are
marketed under the Xenotech-TM- and Britelights-Registered Trademark-
trademarks, while the high intensity searchlights are marketed under the
Sky-Tracker-TM- trademark.
Xenotech's and Britelight's specialty illumination products have been used in
numerous feature films including BATMAN, TERMINATOR I, TERMINATOR II and
INDEPENDENCE DAY and have also been used at live performances such as the Super
Bowl half-time shows and are currently illuminating such venues as the Luxor
Hotel Casino and the Stratosphere Hotel and Casino in Las Vegas, Nevada. These
products are marketed directly to customers in North America, Europe, South
America and the Pacific Rim.
The Company's high intensity searchlights come in single or multiple head
configurations, primarily for use in outside venues requiring extremely
bright lighting that can compete with other forms of outdoor illumination.
These high intensity searchlights, which are primarily used for outdoor
promotional lighting, are marketed through the Company's Sky-Tracker division
under the Sky-Tracker-TM- trademark. Sky-Tracker's products have been used at
Walt Disney World, Universal Studios, various Olympic Games, grand openings
and also have been used by touring musical acts such as the Rolling Stones
and Van Halen. The Company's promotional lighting products are primarily
marketed directly to customers in North America, Europe, South America and
the Pacific Rim through a direct sales force.
AUDIO-VISUAL
The Company, through its division Strong Communications, is a full service
audio-visual company established to meet the need for presentation equipment by
hotels and convention centers. Strong Communications provides design consulting,
rental services and equipment sales with offices in Orlando, Fort Lauderdale and
Tampa, Florida.
RESTAURANT PRODUCTS
The Company's restaurant product line consists of commercial food service
equipment, principally pressure fryers and barbecue/slow roast ovens. The
Company's pressure fryers account for the majority of its commercial food
service equipment net sales. The Company's restaurant product line is
marketed under the Flavor-Crisp-Registered Trademark- and
Flavor-Pit-Registered Trademark- trademarks. The Company's commercial food
service equipment is supplemented by seasonings, marinades and barbecue
sauces manufactured to the Company's specifications by various food product
-7-
<PAGE>
contractors, and by mesquite and hickory woods, paper serving products and point
of purchase displays.
The Company sells its restaurant product line through dealers, who sell
primarily to independent convenience store/fast food restaurant operators. The
Company also sells its pressure fryers to equipment suppliers directly, on a
private label basis, for resale to major chains such as Pathmark and Wal-Mart
for use in their delicatessens and sit-down eateries. One of these suppliers is
the Hobart Corporation, through which the Company sells approximately 50% of its
restaurant equipment.
SALES, MARKETING AND CUSTOMER SERVICE
The Company markets and sells its product primarily through a network of over
200 domestic and international dealers to major movie exhibitors, sports arenas
and amusement park operators. The Company also sells directly to end users. The
sales effort is supplemented by a small internal sales force. The Company
services its customers in large part through the dealer network, however, the
Company does have technical support personnel to provide necessary assistance to
the end user or to assist the dealer network. Sales and marketing professionals
principally develop business by maintaining regular personal customer contact
including conducting site visits, while customer service and technical support
functions are primarily centralized and dispatched when needed. In addition, the
Company markets its products in trade publications such as Film Journal and Box
Office and by participating in annual major industry trade shows such as
ShoWest in Las Vegas, ShowEast in Atlantic City, CineAsia in Asia and Cinema
Expo in Europe. The Company recently opened an office in Miami to help support
what the Company believes is an emerging market in Latin and South America.
The Company's sales and marketing professionals in all three business segments
have extensive experience with the Company's product lines and have long-term
relationships with many current and potential customers. By virtue of these
relationships, the Company can anticipate marketplace demand, and alter its
production schedule accordingly. The Company believes that its continuing sales
and marketing focus on anticipating and addressing customer needs and providing
consistent, high-level service has enabled it to become the industry market
leader in the theatre segment.
For the years ended December 31, 1999, 1998 and 1997, sales to a customer
represented approximately 16%, 15% and 20% of consolidated net revenues,
respectively. For the years ended December 31, 1999 and 1998, sales to another
customer represented approximately 21% and 14%, respectively, of consolidated
net revenues. The loss of these or other top customers could adversely affect
the Company.
BACKLOG
At December 31, 1999 and 1998, the Company had backlogs of $10.7 million and
$16.6 million, respectively. Such backlogs mainly consisted of orders received
with a definite shipping date within twelve months. These backlogs typically
increase during the year to reflect increases in the construction of new motion
picture screens in anticipation of the holiday movie season. Even though backlog
figures are not necessarily indicative of sales or income for any full
twelve-month period, the Company is experiencing domestic theatre exhibitors
curtailing new screen growth expansion during 2000. As such, the Company's
revenues in that segment will be lower in 2000 compared to 1999.
-8-
<PAGE>
MANUFACTURING
The Company's manufacturing operations are primarily conducted at its Omaha,
Nebraska manufacturing facility and the manufacturing facility in Fisher,
Illinois acquired with the purchase of Design & Manufacturing, Ltd. in 1998.
The Company's manufacturing operations at both locations consist primarily of
engineering, quality control, testing, material planning, machining,
fabricating, assembly and packaging and shipping. The Company believes that
Omaha's and Fisher's central location has and will serve to reduce the
Company's transportation costs and delivery times of products to the East and
West Coasts of the U.S. The Company's manufacturing strategy is to (i)
minimize costs through manufacturing efficiencies, (ii) employ flexible
assembly processes that allow the Company to customize certain of its
products and adjust the relative mix of products to meet demand, (iii) reduce
labor costs through the increased use of computerized numerical control
machines for the machining of products and (iv) use outside contractors as
necessary to meet customer demand.
The Company currently manufactures the majority of the components used in its
products. The Company believes that its integrated manufacturing operations help
maintain the high quality of its products and its ability to customize products
to customer specifications. The principal raw materials and components used in
the Company's manufacturing processes include aluminum, solid state electronic
sub-assemblies and sheet metal. The Company utilizes a single contract
manufacturer for each of its intermittent movement components and lenses for its
commercial motion picture projection equipment and aluminum kettles for its
pressure fryers. Although the Company has not to-date experienced a significant
difficulty in obtaining these components, no assurance can be given that
shortages will not arise in the future. The loss of any one or more of such
contract manufacturers could have a short-term adverse effect on the Company
until alternative manufacturing arrangements were secured. The Company is not
dependent upon any one contract manufacturer or supplier for the balance of its
raw materials and components. The Company believes that there are adequate
alternative sources of such raw materials and components of sufficient quantity
and quality. The Company believes that its manufacturing capabilities, combined
with its emphasis on customer service, have contributed to retaining strong
customer relationships and developing new business opportunities.
QUALITY CONTROL
The Company believes that its design standards, quality control procedures, and
the quality standards for the materials and components used in its products have
contributed significantly to the reputation of its products for high performance
and reliability. The Company has implemented a quality control program for its
theatre, lighting and restaurant product lines, which is designed to ensure
compliance with the Company's manufacturing and assembly specifications and the
requirements of its customers. Essential elements of this program are the
inspection of materials and components received from suppliers and the
monitoring and testing of all of the Company's products during various stages of
production and assembly.
WARRANTY POLICY
The Company provides a warranty to end users of substantially all of its
products, which generally covers a period of 12 months, but may be extended
under certain circumstances and for certain products. Under the Company's
warranty policy, the Company will repair or replace defective products or
components at its election. Costs of warranty service and product replacements
were approximately $839,000, $446,000 and $404,000 for the years ended December
31, 1999, 1998 and 1997, respectively. The increase in 1999 relates to a
warranty
-9-
<PAGE>
issue with a specific product. This issue has been resolved and the Company
believes warranty expense will normalize in the future.
RESEARCH AND DEVELOPMENT
The Company's ability to compete successfully depends, in part, upon its
continued close work with its existing and new customers. The Company focuses
its research and development efforts on the development of new products based on
its customers' requirements, including the development of products used for
special venues and the development of digital cinema technology. Research and
development costs charged to operations amounted to approximately $846,000,
$746,000 and $647,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
COMPETITION
Although the Company has a leading position in the domestic motion picture
projection equipment market, the domestic and international markets for
commercial motion picture projection equipment are highly competitive. Major
competitors for the Company's motion picture projection equipment include
Christie Electric Corporation, Cinemeccanica SpA and Kinoton GmbH. In addition
to existing motion picture equipment manufacturers, the Company may also
encounter competition from new competitors, as well as from the development of
new technology for alternative means of motion picture presentation. No
assurance can be given that the equipment manufactured by the Company will not
become obsolete as technology advances. Certain of the Company's competitors for
its motion picture projection equipment have significantly greater resources
than the Company. The Company competes in the commercial motion picture
projection equipment industry primarily on the basis of quality, fulfillment and
delivery, price, after-sale technical support and product customization
capabilities.
The markets for the Company's long-range follow spotlight, other illumination
and restaurant products are also highly competitive. The Company competes in
the illumination industry primarily on the basis of quality, price and
product line variety. The Company competes in the restaurant products
industry primarily on the basis of price and equipment design. Certain of the
Company's competitors for its long-range follow spotlight, other illumination
and restaurant products have significantly greater resources than the Company.
PATENTS AND TRADEMARKS
The Company owns or otherwise has rights to numerous trademarks used in
conjunction with the sale of its products. The Company believes that its success
will not be dependent upon patent protection, but rather upon its scientific and
engineering "know-how" and research and production techniques.
EMPLOYEES
As of March 10, 2000 the Company had a total of 367 employees. Of these
employees 295 were considered manufacturing, 3 were executive and 69 were
considered administrative. The Company is not a party to any collective
bargaining agreement and believes that its relationship with its employees is
good.
-10-
<PAGE>
ENVIRONMENTAL MATTERS
Health, safety and environmental considerations are a priority in the Company's
planning for all new and existing products. The Company's policy is to operate
its plants and facilities in a manner that protects the environment and the
health and safety of its employees and the public. The Company's operations
involve the handling and use of substances that are subject to Federal, state
and local environmental laws and regulations that impose limitations on the
discharge of pollutants into the soil, air and water and establish standards for
their storage and disposal. A risk of environmental liabilities is inherent in
manufacturing activities. The Company believes that it is in material compliance
with environmental laws, but there can be no assurance that future additional
environmental compliance or remediation obligations will not arise or that such
operations could not have a material adverse effect on the Company. The Company
does not anticipate any material capital expenditures for environmental matters
during 2000.
DIGITAL CINEMA
The current motion picture exhibition industry is based on the use of film
technology to deliver motion pictures to the public. However, in the last few
years, there have been innovations in technology to show motion pictures
digitally. While this technology is still in the prototypical stage, the
Company is currently in the process of weighing its alternatives. Although
there can be no assurance that the Company will participate in the digital
cinema industry, the Company believes that it is well positioned to maintain
its current position as the industry's leading supplier of motion picture
projection equipment whether it be digital or film.
EXECUTIVE OFFICERS OF THE COMPANY
John P. Wilmers, age 55, has been CEO of the Company since March 1997 and a
Director since 1995. Mr. Wilmers joined the Company in 1981 and has served in
various positions in the Company including Executive Vice President of Sales
from 1992 to 1997. Mr. Wilmers is a past President of the Theater Equipment
Association, a member of the Nebraska Variety Club and a sustaining member of
the Society of Motion Picture and Television Engineers. Mr. Wilmers attended
the University of Minnesota at Duluth.
Brad J. French, age 47, joined the Company as the Controller in 1990 and was
named Secretary and Treasurer in 1992. Mr. French was named Chief Financial
Officer of the Company in January 1996. Prior to joining the Company, Mr. French
held several accounting positions with UTBHL, Inc. (f/k/a Hanovia Lamp, Inc.), a
subsidiary of Canrad, Inc. and Purolator Products Inc. Mr. French earned a B.S.
from Union College.
Ray F. Boegner, age 51, has been Senior Vice President of Sales since 1997. Mr.
Boegner joined the Company in 1985 and has acted in various sales roles. Prior
to joining the Company, he served as Vice President of Marketing at Cinema Film
Systems. Mr. Boegner earned a B.A. from Citrus College and a B.S. from the
University of Southern California.
ITEM 2. PROPERTIES
The Company's headquarters and main manufacturing facility is located at 4350
McKinley Street, Omaha, Nebraska, where it owns a building consisting of
approximately 160,000 square feet on approximately 12.0 acres. The premises are
used for offices and for the manufacture, assembly and distribution of its
products, other than those for one of its wholly-owned subsidiaries, Design and
Manufacturing, Inc. ("Design"). The Design subsidiary is located in Fisher,
Illinois on 2.0 acres with a 31,600 square foot building. The Company leases a
sales and
-11-
<PAGE>
rental facility for its audio visual division in Orlando and Ft. Lauderdale,
Florida. The Company also leases a sales and service facility in Hong Kong.
Through its wholly-owned subsidiary, Xenotech Strong, Inc., the Company leases a
24,500 square foot sales and rental facility in North Hollywood, California for
the sale and rental of its specialty lighting products. Xenotech Strong, Inc.
also leases a sales and rental facility in Orlando, Florida and one in Atlanta,
Georgia.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of its
operations in the normal course of business. Management believes that the
ultimate resolution of all pending litigation will not have a material adverse
effect on the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1999, no issues were submitted to a vote of
stockholders.
-12-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
The Common Stock is listed and traded on the NYSE under the symbol "BTN". Prior
to December 5, 1997, the Company was listed on the American Stock Exchange (the
"AMEX"). The following table sets forth the high and low per share sale price
for the Common Stock as reported by the NYSE and the AMEX for the periods
indicated (rounded to the nearest 1/8).
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C>
1999
First Quarter 11 7
Second Quarter 8 13/16 5 7/8
Third Quarter 7 7/8 4 3/4
Fourth Quarter 6 3/4 4 7/8
1998
First Quarter 11 1/8 9 1/8
Second Quarter 13 1/8 6 1/4
Third Quarter 8 5/8 6 3/8
Fourth Quarter 8 3/8 5 1/2
1997
First Quarter 10 3/8 7 3/4
Second Quarter 11 5/8 8 7/8
Third Quarter 14 1/4 10 7/8
Fourth Quarter 12 1/2 9 1/2
</TABLE>
On March 10, 2000 the last reported per share sale price for the Common Stock
was $4 9/16. At March 10, 2000, there were 213 holders of record of the Common
Stock and the Company had 12,459,323 shares of Common Stock outstanding.
DIVIDEND POLICY
The Company intends to retain its earnings to assist in financing its business
and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. The declaration and payment of dividends by the Company are
also subject to the discretion of the Board. The Company's line of credit
contains certain prohibitions on the payment of cash dividends. Any
determination by the Board as to the payment of dividends in the future will
depend upon, among other things, business conditions and the Company's financial
condition and capital requirements, as well as any other factors deemed relevant
by the Board.
-13-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (2)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net revenue $86,143 75,057 70,205 51,754 38,441
Gross profit 25,197 23,554 20,725 15,357 10,990
Net income $ 7,759 8,344 7,709 5,037 3,040
Net income per share (1)
Basic $ 0.62 0.59 0.56 0.43 0.29
Diluted $ 0.59 0.57 0.52 0.40 0.29
BALANCE SHEET DATA
Working capital $34,401 31,002 27,403 19,742 8,625
Total assets 60,756 56,553 46,753 32,462 19,828
Total debt 10,438 12,276 242 458 8,059
Stockholders' equity $39,863 34,615 35,623 24,029 5,055
</TABLE>
(1) Adjusted for all stock dividends and stock splits.
(2) All amounts in thousands (000's) except per share data.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
document. Management's discussion and analysis contains forward-looking
statements that involve risks and uncertainties, including but not limited to,
quarterly fluctuations in results; customer demand for the Company's products;
the development of new technology for alternate means of motion picture
presentation; domestic and international economic conditions; the management of
growth; and, other risks detailed from time to time in the Company's other
Securities and Exchange Commission filings. Actual results may differ materially
from management expectations.
The following table sets forth, for the periods indicated, the percentage of net
revenue represented by certain items reflected in the Company's consolidated
statements of income:
RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues 70.8 68.6 70.5 70.3 71.4
Gross profit 29.2 31.4 29.5 29.7 28.6
Operating expenses 14.5 14.1 13.1 13.6 14.8
Income from operations 14.7 17.3 16.4 16.1 13.8
Net income 9.0 11.1 11.0 9.7 7.9
</TABLE>
-14-
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
REVENUES
Net Revenues for 1999 increased 14.8% to $86.1 million from $75.1 million for
1998. The following table sets forth comparative consolidated net revenues of
theatre, lighting and restaurant products for the respective years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Theatre $74,115,104 $65,814,807
Lighting 9,874,195 7,107,905
Restaurant 2,153,269 2,134,655
------------ ------------
Total net revenues $86,142,568 $75,057,367
============ ==========
</TABLE>
The increase for 1999 reflects higher revenues from the sale of theatre
products and the sale and rental of lighting products. Net revenues in the
theatre segment increased $8.3 million or 12.6% to $74.1 million from $65.8
million for 1998. This reflects higher revenues from domestic customers as
motion picture exhibitors continued to build new multi-screen theatre
complexes. This increase was offset by lower sales to foreign customers,
which decreased $5.5 million or 24.8% from $22.0 million in 1998 to $16.5
million in 1999. Of the drop in sales to foreign customers, $4.5 million
related to sales to Canada, which resulted from 1998 being near record levels
for theatre construction in Canada. Also contributing to the increase in
theatre revenues were higher sales of replacement parts, which rose $2.0
million or 28.5% to $8.8 million from $6.8 million in 1998. This increase
reflects a higher installed base of projection systems.
Sales of ISCO-Optic lenses within the theatre segment were flat at $5.8 million
for both 1999 and 1998. Sales of these lenses fluctuate from quarter to quarter
and are not directly related to the volume of projection equipment purchased
from the Company.
The Company is experiencing domestic theatre exhibitors curtailing new screen
growth expansion during 2000. Therefore, the Company believes that theatre sales
in 2000 will be below 1999 levels.
Lighting segment revenue contributed $9.9 million in 1999, an increase of $2.8
million or 38.9% over the $7.1 million contributed in 1998. The majority of the
increase was due to the Company's audio visual operating division in Florida,
which contributed $2.7 million of revenue in 1999 compared to $0.4 million in
1998. In large part this increase in audio visual revenue was due to the
division just getting underway in 1998. Sales and rentals of the Company's
promotional lighting division increased 6.3% from the prior year, while the
Company's spotlight sales increased 9.0% from $2.0 million in 1998 to $2.2
million in 1999.
Restaurant sales remained flat at approximately $2.1 million for the 1999 and
1998 periods.
GROSS PROFIT
Overall gross profit increased $1.6 million or 7.0% in 1999 to $25.2 million
from $23.6 million in 1998, but as a percent of revenue decreased to 29.2% from
31.4% in 1998.
-15-
<PAGE>
Theatre gross profit decreased to 29.9% as a percentage of revenues in 1999
from 32.8% in 1998. This decrease was primarily due to certain pricing
concessions with a major customer and due to increased lower margin console
sales during the 1999 period. Downward pressure on gross profit is expected
to continue in 2000 as a result of the domestic sales environment discussed
earlier.
Lighting segment gross profit increased to 25.8% as a percentage of revenues
compared to 19.7% in 1998. Again, the increase can be attributed to the
Company's audio visual operating division in Florida where gross margins
increased to 42.4% in 1999 from 13.8% in 1998. This increase mainly relates
to higher rental revenues compared to the prior year, which carry a higher
margin than sales in the audio visual industry. Also contributing to the
increase in gross margin in the lighting segment were margins on spotlight
sales, which rose to 31.7% in 1999 compared to 31.0% in 1998. Gross margins
in the promotional lighting division decreased to 13.8% from 15.3% in 1998 as
rental revenues continued to be disappointing.
Gross profit for the restaurant segment decreased to 23.0% as a percentage of
sales compared to 27.7% in 1998 due to lower replacement part sales compared
to the prior year.
OPERATING EXPENSES
Overall, operating expenses increased $1.9 million or 18.2% from $10.6
million in 1998 to $12.5 million in 1999. As a percentage of sales, operating
expenses increased to 14.5% from 14.1% in the 1998 period. Net of certain
costs relating to an attempted acquisition during the third quarter of
approximately $0.4 million, the percentage would have been consistent with
1998. Generally, operating expenses for all three segments were consistent as
a percentage of revenues from year to year, however, operating expenses in
lighting segment are historically higher as a percentage of revenues compared
to the theatre segment, mainly due to the nature of the distribution channels.
INTEREST EXPENSE
Net interest expense increased to $0.9 million in 1999 from $0.04 million in
1998 reflecting higher borrowings on the Company's line of credit. These
borrowings were necessitated due to the repurchase of $15.3 million of common
stock for treasury during 1998 and 1999 and an increase in inventory.
INCOME TAXES
The Company's effective tax rate for 1999 was 34.3% compared to 35.5% for
1998. The decline from 1998 reflects certain state tax credits and the
benefit of the new foreign sales corporation created in 1999. The difference
between the Company's effective tax rate and the federal statutory rate of
34% reflects the non-deductibility of certain intangible assets, principally
Goodwill and the impact of state income taxes.
NET INCOME
Due to the reasons described above, net income decreased $0.6 million or 7.0% to
$7.7 million in 1999 from $8.3 million in 1998. Basic earnings per share were
$0.62 per share in 1999 compared to $0.59 per share in 1998, while diluted
earnings per share were $0.59 per share in 1999 compared to $0.57 per share in
1998. The increase in basic and diluted earnings per share compared to 1998
represents the benefit from the stock repurchases during 1998 and 1999, which
resulted in fewer shares being outstanding.
-16-
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
REVENUES
Net Revenues for 1998 increased $4.9 million or 6.9% to $75.1 million from $70.2
million for 1997. The increase reflects higher revenues from theatre and
lighting products. The following table shows comparative net revenues for
theatre, lighting and restaurant products for the respective years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Theatre $65,814,807 $62,306,249
Lighting 7,107,905 5,360,617
Restaurant 2,134,655 2,538,245
------------ -----------
Total net revenues $75,057,367 $70,205,111
============ ===========
</TABLE>
The increase in total net revenues primarily reflects higher sales of theatre
products. The increase in theatre products relate to higher sales of commercial
motion picture projection equipment ("projection equipment"), which rose $4.2
million or 8.6% from $48.9 million in 1997 to $53.1 million in 1998. This
reflects increased sales of projection equipment to both foreign and domestic
customers as motion picture exhibitors continue to build new multi-screen
theatre complexes.
Offsetting the higher sales of projection equipment among theatre sales were
lower sales of ISCO-Optic lenses, which decreased $0.6 million to $5.8 million
in 1998 from $6.4 million in 1997. ISCO-Optic is a trademark of ISCO-Optic GmbH.
Replacement parts sales for the theatre segment were also lower in 1998
decreasing from $6.9 million in 1997 to $6.8 million in 1998. Sales of
ISCO-Optic lenses and replacement parts fluctuate from quarter to quarter and
are not directly related to the volume of projection equipment sold, but are
more a reflection of the needs of current customers which have projection
equipment systems previously purchased from the Company.
Lighting segment revenue also contributed to the increase in total net revenues,
contributing $7.1 million in sales and rentals, an increase of $1.7 million over
the $5.4 million contributed in 1997. This increase was entirely due to
acquisitions made by the Company during 1998 and 1997.
Restaurant sales decreased $0.4 million from $2.5 million in 1997 to $2.1
million in 1998. The decrease was due to lower sales of pressure fryers and
smokers.
Overall, consolidated net revenues from domestic customers increased $1.4
million to $53.1 million in 1998 from $51.7 million in 1997. The increase was
smaller than the previous year due to a temporary slowdown in the middle of the
year by a few of the larger theatre exhibition companies, however, as the year
progressed, sales returned to expected levels. Net revenues from foreign
customers increased $3.5 million or 18.5% to $22.0 million from $18.5 million in
1997. This increase was attributable to higher sales in Canada and Europe,
however, sales were lower in Asia and Mexico compared to the prior year.
-17-
<PAGE>
GROSS PROFIT
Gross profit increased $2.8 million or 13.7% in 1998 to $23.6 million, and as a
percent of revenue increased to 31.4% from 29.5% in 1997. The higher gross
profit as a percentage of net revenues was primarily due to the theatre segment
where the gross margin increased to 32.8% in 1998 from 28.7% in 1997. This
increase can be attributed to synergies obtained through the purchase of Design
& Manufacturing Ltd. ("Design") in April 1998 and certain manufacturing
efficiencies due to an increase in production volume during 1998. The purchase
of Design has enabled the Company to generate cost savings by vertically
integrating the supply of certain components sold with the Company's projection
equipment. Restaurant margins as a percent of sales increased from 25.6% in 1997
to 27.7% mainly due to a change in product mix while lighting segment margins
decreased from 41.2% in 1997 to 19.7%. The decline in lighting margins was due
to lower rental revenues as a percentage of total revenues in 1998. Rental
revenue generally carries a higher margin than product sales.
OPERATING EXPENSES
Operating expenses in 1998 increased approximately $1.4 million or 15.4% from
1997. As a percentage of net revenues, such expenses increased to 14.1% in 1998
from 13.1% in 1997. The increase can be attributed to the acquisition of Design
and to costs related to the lighting segment. Operating expenses as a percentage
of revenue are relatively high for Design because a majority of Design's sales
are eliminated in consolidation. This impact is offset by Design's ability to
produce a low-cost product for the Company and thus increase gross margins. The
reason for the increased operating expenses in the lighting segment was due to
the Company making a concerted effort to grow this segment but has not yet seen
the revenue growth that was anticipated.
INTEREST EXPENSE
Net interest expense was $36,265 in 1998 compared to net interest income of
$254,030 in 1997. The change from the prior year reflects lower cash on hand and
higher interest expense due to borrowings on the Company's line of credit with
Norwest Bank. These borrowings were necessitated due to lower cash flows from
operations and the repurchase of 1.8 million shares of common stock during the
third and fourth quarters of 1998.
INCOME TAXES
The Company's effective tax rate in 1998 was 35.5% compared to 34.7% in 1997.
The increase reflects higher state taxes related to the Company having
operations in more states than the prior year. The difference between the
Company's effective tax rate and the Federal statutory rate of 34% reflects the
non-deductibility of certain intangible assets, principally Goodwill and the
impact of state income taxes.
NET INCOME
For the reason outlined above, net income increased $0.6 million or 8.2% to $8.3
million in 1998 from $7.7 million in 1997. Basic earnings per share were $0.59
per share in 1998 compared to $0.56 per share in 1997. Diluted earnings per
share were $0.57 per share in 1998 compared to $0.52 per share in 1997.
-18-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company maintained a $20 million line of credit
with Norwest Bank Nebraska, N.A. (the "Norwest Facility"). At December 31, 1999,
$9.6 million of the Norwest Facility was unused. Borrowings outstanding under
the Norwest Facility bear interest, payable monthly, at a rate equal to the
Prime Rate less 0.5% (7.75% at December 31, 1999). All of the Company's assets
secure the Norwest Facility. The Company was in compliance with all restrictive
covenants at December 31, 1999 and 1998.
Historically, the Company has funded its working capital requirements through
cash flow generated by its operations. Net cash provided by operating activities
("operating cash flow") for the years ended December 31, 1999, 1998 and 1997
were $7.4 million, $0.5 million and $5.3 million, respectively. The increase in
operating cash flow was primarily due to reductions in accounts receivable and
increases in accounts payable offset by higher levels of inventory compared to
the prior year.
The Company anticipates that internally generated funds and borrowings available
under the Norwest Facility will be sufficient to meet its working capital needs,
planned 2000 capital expenditures and to pursue opportunities to expand its
markets and businesses.
Net cash used in investing activities for the years ending December 31, 1999,
1998 and 1997 were $2.7 million, $7.5 million and $4.7 million, respectively.
Investing activities in 1998 reflect the purchase of Sky-Tracker of Florida,
Inc. during January of 1998 and the purchase of Design in the second quarter of
1998. During 1999 no acquisitions were made. Capital expenditures were
approximately $2.7 million in 1999 compared to $3.6 million in 1998 and $3.5
million in 1997 and primarily relate to the purchase of rental equipment in the
lighting segment and plant equipment in the theatre segment.
Net cash used in financing activities in 1999 was $4.5 million compared to $0.15
million in 1998 and $1.1 million provided by financing activities in 1997. The
reasons for the change from prior years relate to the repurchase of treasury
stock for $15.3 million during 1999 and 1998. This stock repurchase was financed
by borrowings on the Norwest Facility. Also, the Company received $1.8 million
from the exercise of certain stock options in 1997 compared to only $0.2 million
and $0.09 million in 1999 and 1998, respectively.
The Company does not engage in any hedging activities, including currency
hedging activities, in connection with its foreign operations and sales. To
date, all of the Company's international sales have been denominated in U.S.
dollars, exclusive of Strong Westrex, Inc. sales, which are denominated in Hong
Kong dollars.
RECENT DEVELOPMENTS
The Company is currently experiencing a sales slowdown during the first quarter
of 2000. In reaction to that slowdown, the Company reduced it's workforce by
approximately 17%. The Company expects to take a charge as a result of this
reduction in the first quarter of 2000. The charge is expected to be $430,000
to $480,000 on a pre-tax basis.
The Company also announced on March 22, 2000, that it has terminated its review
of strategic alternatives with Donaldson, Lufkin and Jenrette Securities, which
had been retained in October 1999 to explore various options for the Company.
-19-
<PAGE>
SEASONALITY
Generally, the Company's business exhibits a moderate level of seasonality as
sales of theatre products typically increase during the third and fourth
quarters. The Company believes that such increased sales reflect seasonal
increases in the construction of new motion picture screens in anticipation of
the holiday movie season.
INFLATION
The Company believes that the relatively moderate rates of inflation in recent
years have not had a significant impact on its net revenues or profitability.
Historically, the Company has been able to offset any inflationary effects by
either increasing prices or improving cost efficiencies.
YEAR 2000 UPDATE
The Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000.
Additionally, the Company is not currently aware of any significant year 2000 or
similar problems that have arisen for its customers and suppliers. The Company
expended an immaterial amount to ready itself for the year 2000. Management does
not expect year 2000 issues to have a material adverse effect on the Company's
operations or financial results in 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivatives and hedging. It requires that all
derivatives be recognized as either assets or liabilities at fair value and
establish specific criteria for the use of hedging accounting. SFAS No. 137
deferred the effective date of SFAS No. 133, according the Company's required
adoption date is July 1, 2000. SFAS No. 133 is not to be applied
retroactively to financial statements of prior periods and as of December 31,
1999 the Company had no derivatives or hedging activities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated its exposure to fluctuation in the foreign currency
environment and has concluded that its exposure to fluctuation would not be
material to the consolidated financial statements. The Company has also
evaluated its exposure to fluctuations in interest rates and the corresponding
effect on the rate of interest on the Company's floating rate line of credit.
Assuming amounts remain outstanding on the line of credit, increases in interest
rates would increase interest expense. A 1% increase in the interest rate
would increase interest expense by approximately $104,000. The Company has
not historically and is not currently using derivative instruments to manage
the above risks.
-20-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Management's Responsibility for Financial Statements 22
Independent Auditors' Report 23
Consolidated Financial Statements
Consolidated Balance Sheets -
December 31, 1999 and 1998 24
Consolidated Statements of Income - Years ended
December 1999, 1998 and 1997 25
Consolidated Statements of Stockholders' Equity - Years ended
December 1999, 1998 and 1997 26
Consolidated Statements of Cash Flows - Years ended
December 1999, 1998 and 1997 27
Notes to Consolidated Financial Statements - Years ended
December 31, 1999, 1998 and 1997 28
Financial Statement Schedule Supporting
Consolidated Financial Statements
Schedule - Valuation and Qualifying Accounts 44
</TABLE>
-21-
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated financial statements of Ballantyne of Omaha, Inc. and
Subsidiaries and the other information contained in the 10-K Annual Report were
prepared by and are the responsibility of management. The Statements have been
prepared in accordance with generally accepted accounting principles and
necessarily include amounts based on management's best estimates and judgments.
In fulfilling its responsibilities, management relies on a system of internal
controls, which provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining accountability of
assets. Internal controls are designed to reduce the risk that material errors
or irregularities in the financial statements may occur and not be timely
detected. These systems are augmented by written policies, careful selection and
training of qualified personnel, an organizational structure providing for the
division of responsibilities and a program of financial, operational and systems
reviews.
The Audit Committee, composed of non-employee directors, is responsible for
recommending to the Board of Directors, the independent accounting firm to be
retained each year. The Audit Committee meets regularly, and when appropriate
separately, with the independent certified accountants and management to review
Company performance. The independent certified public accountants and the Audit
Committee have unrestricted access to each other in the discharge of their
responsibilities.
/S/ JOHN P. WILMERS
- -----------------------------
John P. Wilmers
President and Chief Executive Officer
/S/ BRAD FRENCH
- -------------------------------------------------
Brad French
Secretary/Treasurer and Chief Financial Officer
-22-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Ballantyne of Omaha, Inc.
We have audited the accompanying consolidated balance sheets of Ballantyne of
Omaha, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1999.
In connection with our audits of the consolidated financial statements, we
have also audited the financial statement schedule for each of the years in
the three-year period ended December 31, 1999. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Ballantyne of Omaha, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the consolidated results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles. Also, in our
opinion the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects the information set forth therein.
KPMG LLP
Omaha, Nebraska
January 21, 2000
-23-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 857,089 $ 594,686
Accounts receivable (less allowance for
doubtful accounts of $526,221 in
1999 and $396,785 in 1998) 15,510,265 17,255,221
Inventories 26,210,431 21,434,395
Deferred income taxes 1,039,733 864,568
Other current assets 523,841 43,611
------------ ------------
Total current assets 44,141,359 40,192,481
Plant and equipment, net 13,319,706 12,695,989
Other assets, net 3,295,165 3,664,710
------------ ------------
Total assets $ 60,756,230 $56,553,180
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 20,000 $ --
Accounts payable 6,063,078 $ 5,936,825
Accrued expenses 3,437,885 2,500,614
Income taxes payable 219,499 752,809
------------ ------------
Total current liabilities 9,740,462 9,190,248
Deferred income taxes 735,271 471,319
Long-term debt, excluding current installments 48,877 47,372
Notes payable to bank 10,369,000 12,229,000
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 1,000,000 shares, none outstanding -- --
Common stock, par value $.01 per share;
authorized 25,000,000 shares; issued
14,557,128 shares in 1999 and 14,450,702
shares in 1998 145,571 144,507
Additional paid-in capital 31,663,043 31,211,329
Retained earnings 23,369,460 15,610,511
------------ ------------
55,178,074 46,966,347
Less cost of common shares in treasury, at cost
(2,097,805 shares in 1999 and 1,801,800
shares in 1998) (15,315,454) (12,351,106)
------------ ------------
Total stockholders' equity 39,862,620 34,615,241
------------ ------------
Total liabilities and stockholders' equity $ 60,756,230 $ 56,553,180
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-24-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Income
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net revenues $86,142,568 $75,057,367 $70,205,111
Cost of revenues 60,945,902 51,503,053 49,480,113
----------- ----------- -----------
Gross profit 25,196,666 23,554,314 20,724,998
Operating expenses:
Selling 4,868,817 3,740,582 3,350,758
General and administrative 7,645,514 6,844,407 5,819,876
----------- ----------- -----------
Total operating expenses 12,514,331 10,584,989 9,170,634
----------- ----------- -----------
Income from operations 12,682,335 12,969,325 11,554,364
Interest income 27,209 103,207 285,932
Interest expense (895,425) (139,472) (31,902)
----------- ----------- -----------
Net interest income (expense) (868,216) (36,265) 254,030
----------- ----------- -----------
Income before income taxes 11,814,119 12,933,060 11,808,394
Income taxes 4,055,170 4,589,326 4,099,055
----------- ----------- -----------
Net income $ 7,758,949 $ 8,343,734 $ 7,709,339
=========== =========== ===========
Net income per share:
Basic $ 0.62 $ 0.59 $ 0.56
=========== =========== ===========
Diluted $ 0.59 $ 0.57 $ 0.52
=========== =========== ===========
Weighted average shares outstanding:
Basic 12,590,234 14,098,491 13,854,304
=========== =========== ===========
Diluted 13,149,869 14,749,350 14,830,423
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-25-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Additional Total
Preferred Common Paid-In Retained Treasury Stockholders'
Stock Stock Capital Earnings Stock Equity
------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ -- 128,548 18,863,706 5,036,693 -- 24,028,947
Net income -- -- -- 7,709,339 -- 7,709,339
Issuance of 684,075 shares of
common stock upon exercise
of stock options -- 6,840 1,838,042 -- -- 1,844,882
Issuance of 9,865 shares of
common stock under the
employees stock purchase plan -- 98 60,673 -- -- 60,771
Income tax benefit related to
stock option plans -- -- 1,979,090 -- -- 1,979,090
------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 -- 135,486 22,741,511 12,746,032 -- 35,623,029
Net income -- -- -- 8,343,734 -- 8,343,734
Issuance of 25,950 shares of
common stock upon exercise
of stock options -- 259 88,997 -- -- 89,256
Issuance of 15,679 shares of
common stock under the
employees stock purchase plan -- 156 99,405 -- -- 99,561
Issuance of 259,058 shares for
business combination -- 2,590 2,797,410 -- -- 2,800,000
Income tax benefit related to
stock option plans -- -- 10,767 -- -- 10,767
Purchase of treasury stock -- -- -- -- (12,351,106) (12,351,106)
Issuance of 5% stock dividend
declared January 28, 1999,
payable March 1, 1999 -- 6,016 5,473,239 (5,479,255) -- --
------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 -- 144,507 31,211,329 15,610,511 (12,351,106) 34,615,241
Net income -- -- -- 7,758,949 -- 7,758,949
Issuance of 73,818 shares of
common stock upon exercise
of stock options -- 738 196,697 -- -- 197,435
Issuance of 32,608 shares of
common stock under the
employees stock purchase plan -- 326 140,867 -- -- 141,193
Income tax benefit related to
stock option plans -- -- 114,150 -- -- 114,150
Purchase of treasury stock -- -- -- -- (2,964,348) (2,964,348)
------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 $ -- 145,571 31,663,043 23,369,460 (15,315,454) 39,862,620
======= =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-26-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,758,949 $ 8,343,734 $ 7,709,339
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation of plant and equipment 2,071,428 1,476,275 783,338
Other amortization 437,643 376,948 218,434
Loss on sale of fixed assets 792 7,297 --
Deferred income taxes 88,787 (17,431) (261,265)
Changes in assets and liabilities, net of assets acquired:
Accounts receivable 1,744,956 (5,243,401) (2,210,958)
Inventories (4,776,036) (3,065,576) (4,676,096)
Other current assets (480,230) 77,776 (2,326)
Accounts payable 126,253 (2,561,127) 2,069,566
Accrued expenses 937,271 104,361 294,212
Income taxes payable (419,160) 1,254,342 1,352,094
Other assets (46,593) (253,836) (5,420)
------------ ------------ ------------
Net cash provided by
operating activities 7,444,060 499,362 5,270,918
------------ ------------ ------------
Cash flows from investing activities:
Business combinations -- (3,886,922) (1,150,000)
Capital expenditures (2,698,437) (3,594,472) (3,531,913)
Proceeds from sale of equipment 2,500 28,500 --
------------ ------------ ------------
Net cash used in investing
activities (2,695,937) (7,452,894) (4,681,913)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds (payments) from line of credit (1,860,000) 12,229,000 --
Payments on long-term debt -- (220,000) (835,744)
Proceeds from employee stock purchase plan 141,193 99,561 60,771
Proceeds from exercise of stock options 197,435 89,256 1,844,882
Purchase of common stock for treasury (2,964,348) (12,351,106) --
------------ ------------ ------------
Net cash provided by (used in)
financing activities (4,485,720) (153,289) 1,069,909
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents 262,403 (7,106,821) 1,658,914
Cash and cash equivalents at beginning of year 594,686 7,701,507 6,042,593
------------ ------------ ------------
Cash and cash equivalents at end of year $ 857,089 $ 594,686 $ 7,701,507
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-27-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
1. Company
Ballantyne of Omaha, Inc., a Delaware corporation ("Ballantyne" or the
"Company"), and its wholly-owned subsidiaries Strong Westrex, Inc., Design &
Manufacturing, Inc., Xenotech Rental Corp. and Xenotech Strong, Inc., design,
develop, manufacture and distribute commercial motion picture equipment,
lighting systems and restaurant equipment. The Company's products are
distributed worldwide through a domestic and international dealer network and
are sold to major movie exhibition companies, sports arenas, auditoriums,
amusement parks, special venues, restaurants, supermarkets and convenience food
stores. Approximately 26% of the Company's common stock is owned by Canrad of
Delaware Inc. ("Canrad") which is an indirect wholly-owned subsidiary of ARC
International Corporation.
2. Summary of Significant Accounting Policies
The principal accounting policies upon which the accompanying consolidated
financial statements are based are summarized as follows:
a. Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.
b. Stock Dividend and Splits
The Company's Board of Directors declared a 5% stock dividend of the Company's
common stock on January 28, 1999. The stock dividend was payable March 1, 1999
to shareholders of record on February 15, 1999. The stock dividend resulted in
the issuance of 601,455 shares of common stock. The dividend was accounted for
as if it occurred on December 31, 1998.
The Company's Board of Directors declared a 3-for-2 stock split of the Company's
common stock on April 21, 1998. The stock split was in the form of a 50% common
stock dividend payable June 12, 1998 to shareholders of record on May 29, 1998.
The Company's Board of Directors declared a 3-for-2 stock split of the Company's
common stock on January 29, 1997. The stock split was in the form of a 50%
common stock dividend payable March 5, 1997 to shareholders of record on
February 10, 1997.
Unless otherwise noted, share and per share data have been restated to reflect
the stock dividend and stock splits as of the earliest period presented.
c. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
include appropriate elements of material, labor and manufacturing overhead.
-28-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
d. Goodwill and Other Intangibles
The Company capitalizes and includes in other assets the excess of cost over
the fair value of assets of business acquired ("Goodwill"), the present value
of non-compete agreements and the costs of acquiring patents on its products.
These assets are stated at cost less accumulated amortization and are being
amortized on a straight-line basis over the expected periods to be benefited,
3 to 25 years. Accumulated amortization as of December 31, 1999 and 1998
amounted to $1,344,531 and $928,393, respectively. The balance of Goodwill
included in other assets, net of accumulated amortization, was $2,990,865 and
$3,240,213 as of December 31, 1999 and 1998, respectively. The Company
assesses and would recognize any deficiency of the recoverability of Goodwill
by determining whether the amortization of the asset balance over its
remaining life can be recovered through undiscounted future operating cash
flows of the acquired operations.
e. Plant and Equipment
Significant expenditures for the replacement or expansion of plant and equipment
are capitalized. Depreciation of plant and equipment is provided over the
estimated useful lives of the respective assets using the straight-line method.
Estimated useful lives range from 3 to 20 years.
f. Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
g. Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the customer.
Revenues related to equipment rental and services are recognized as earned over
the terms of the contracts.
h. Research and Development
Research and development costs are charged to operations in the period incurred.
Such costs charged to operations amounted to approximately $846,000, $746,000
and $647,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
i. Advertising Costs
Advertising and promotional costs are expensed as incurred and amounted to
approximately $1,160,000, $1,046,000 and $904,000 for the years ended December
31, 1999, 1998 and 1997, respectively.
-29-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
j. Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the instruments
could be exchanged into a current transaction between willing parties. Cash and
cash equivalents, accounts receivable, debt, notes payable to bank and accounts
payable reported in the consolidated balance sheets equal or approximate fair
values.
k. Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
l. Cash and Cash Equivalents
All highly liquid financial instruments with maturities of three months or less
from date of purchase are classified as cash equivalents in the consolidated
balance sheets and statements of cash flows.
m. Earnings Per Common Share
Basic earnings per share of common stock have been computed on the basis of the
weighted average number of shares of common stock outstanding. Diluted earnings
per share has been computed on the basis of the weighted average number of
shares of common stock outstanding after giving effect to potential common
shares from dilutive stock options. Diluted earnings per share includes an
increase in the weighted average shares outstanding for dilutive stock options
of 559,635, 650,859 and 976,119 for 1999, 1998 and 1997, respectively.
n. Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
The Company reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
o. Comprehensive Income
The Company's comprehensive income consists solely of net income. The Company
had no other comprehensive income for the years ended December 31, 1999, 1998
and 1997.
-30-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
3. Equity Offerings
On June 30, 1997, the Company completed a public offering pursuant to a
Registration Statement on Form S-3 (the "S-3 Offering"). Pursuant to the S-3
Offering, Canrad sold 1,932,860 shares of Ballantyne common stock to the public
at the price of $16.875 per share. In addition, Canrad granted the underwriters
an option to purchase an aggregate of up to 333,729 additional shares of common
stock at $16.875 per share less underwriting discounts and commissions to cover
over-allotments, if any. The underwriters purchased all 333,729 shares. While
the Company did not offer any shares or pay any expenses incurred in the S-3
Offering, the Company did receive approximately $1,146,000 from the exercise of
a warrant and certain stock options, which in aggregate totaled 280,750 shares
and were sold in connection with the S-3 Offering.
Share information and per share prices in the preceding paragraph have not been
adjusted for the stock dividend or stock splits occurring after the offering
described above.
4. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Raw materials and supplies $20,041,081 $16,404,416
Work in process 3,564,972 3,115,163
Finished goods 2,604,378 1,914,816
----------- -----------
$26,210,431 $21,434,395
=========== ===========
</TABLE>
5. Plant and Equipment
Plant and equipment include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Land $ 343,500 $ 343,500
Buildings and improvements 4,564,677 4,456,186
Machinery and equipment 15,314,930 12,729,984
---------- ----------
20,223,107 17,529,670
Less accumulated depreciation 6,903,401 4,833,681
---------- ----------
Net plant and equipment $13,319,706 $12,695,989
=========== ===========
</TABLE>
-31-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
6. Long-term Debt
Long-term debt consists entirely of non-competition contracts payable in
installments related to the acquisition of Xenotech, Inc. and Sky-Tracker of
America, Inc. in 1997. $20,000 of the payments are due in 2000, with the
remaining payments due in 2002.
The Company maintains a $20 million line of credit with Norwest Bank, N.A. At
December 31, 1999, $9.6 million of the line of credit was unused. Borrowings
outstanding under the line of credit bear interest, payable monthly, at a rate
equal to the Prime Rate less 0.5% (7.75% at December 31, 1999). The Company's
line of credit expires on May 31, 2001. The amounts outstanding have been
classified as long-term based on the maturity date of the agreement. All of the
Company's assets secure the credit facility. The Company was in compliance with
all restrictive covenants relating to the line of credit at December 31, 1999
and 1998.
7. Income Taxes
The provisions for income taxes consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 3,674,213 $ 4,190,431 $ 4,124,265
State 271,000 391,000 237,000
Foreign 21,170 25,326 (945)
Deferred - Federal 88,787 (17,431) (261,265)
----------- ----------- -----------
$ 4,055,170 $ 4,589,326 $ 4,099,055
=========== =========== ===========
</TABLE>
Actual tax expense differs from the "expected" tax expense (computed by applying
the U.S. Federal corporate tax rate of 34% to income before income taxes) as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense 4,016,800 $4,397,240 $4,014,854
State income taxes, net of Federal benefit 178,860 258,060 156,420
Non-deductible amortization 16,356 16,356 16,356
Foreign sales corporation benefit (59,840) -- --
Other (97,006) (82,330) (88,575)
--------- ---------- ----------
4,055,170 $4,589,326 $4,099,055
========= ========== ==========
</TABLE>
-32-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Deferred tax assets and the deferred tax liability were comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Inventory reserves $ 523,387 $ 558,610
Accounts receivable reserve 179,255 134,907
Other 454,734 255,703
---------- ----------
Total deferred assets 1,157,376 949,220
Deferred tax liability:
Depreciation 852,914 555,971
---------- ----------
Net deferred tax asset $ 304,462 $ 393,249
========== ==========
</TABLE>
There was no valuation allowance for deferred tax assets of December 31, 1999 or
1998. Based upon the scheduled reversal of deferred tax liabilities, projected
future taxable income and tax planning strategies, management believes it is
more likely than not the Company will realize the benefits of deferred tax
assets as of December 31, 1999.
Deferred tax assets and liabilities are included in the accompanying
consolidated balance sheets based on their classification as current or
long-term as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Current deferred tax assets $1,039,733 $ 864,568
Long-term deferred tax liability 735,271 471,319
---------- ----------
Net deferred tax asset $ 304,462 $ 393,249
========== ==========
</TABLE>
8. Supplemental Cash Flow Information
Supplemental disclosures to the consolidated statements of cash flows are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Interest paid $ 895,425 $ 139,472 $ 31,902
========== ========== ==========
Income taxes paid $4,385,543 $3,352,415 $3,008,226
========== ========== ==========
</TABLE>
Other non-cash activities in 1999 and 1998 included recording an income tax
benefit relating to the Company's stock option plans of $114,150 and $10,767,
respectively. Other non-cash activities in 1997 included recording the present
value of non-compete contracts of approximately $248,000 and an income tax
benefit relating to the Company's stock option plans of $1,979,090. See Note 10
for non-cash activities concerning acquisitions.
-33-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
9. Related Party Transactions
Amounts charged to operations of the Company by Canrad were management fees of
$150,000, $150,000 and $225,000 for the years ended December 31, 1999, 1998 and
1997. Included in accrued expenses are payables to Canrad of $23,353 and
$171,377 as of December 31, 1999 and 1998.
On June 24, 1999, the Company advanced $500,000 to the Chairman of the Board of
the Company under a term loan agreement. The loan bears interest, payable
monthly, at 1% above the current rate on the Company's revolving credit
facility. At December 31, 1999, the unpaid balance on the loan was $500,000 and
is due on June 24, 2000. In conjunction with the agreement, the Chairman entered
into an agreement with ARC International Corporation ("ARC") to loan the
proceeds from this note to ARC under similar terms.
10. Acquisitions
During January of 1998, the Company purchased substantially all of the net
assets of Sky-Tracker of Florida, Inc. ("Sky-Tracker of Florida") for cash of
$575,000. Sky-Tracker of Florida is a rental agent and distributor of high
intensity promotional searchlights.
Effective April 1, 1998, the Company purchased substantially all of the net
assets of Design and Manufacturing, Ltd. ("Design") for cash and stock of
approximately $5.5 million. The Company also assumed liabilities of
approximately $207,000. The common stock issued in this acquisition was
repurchased by the Company during 1999 for approximately $2.8 million. The cash
portion of the purchase price was financed through operating cash flows. In
connection with the acquisition, Goodwill of approximately $2.5 million was
recorded and will be amortized over 15 years. Design is a leading supplier of
film platter systems to the motion picture exhibition industry and was a vendor
of the Company. In a related transaction in May 1998, the Company purchased land
and a building for $500,000 from the former owner of Design.
During June of 1998, the Company purchased substantially all of the assets of a
distributor of follow spotlights for a purchase price of $125,000.
Effective April 1, 1997, the Company purchased certain net assets, primarily
accounts receivable, inventories and fixed assets of Xenotech, Inc. ("Xenotech")
for cash of $750,000. The Company also assumed liabilities of $1,175,897. No
Goodwill was recorded in connection with the acquisition. In addition, the
Company entered into a 5-year non-compete agreement with Xenotech's founder and
sole proprietor. The agreement is for a total of $250,000 payable by the Company
in equal installments of $50,000. During 1998, the Company prepaid certain
payments under the contract. The present value of the non-compete payments has
been included in other assets and long-term debt in the accompanying
consolidated balance sheets.
During September of 1997, the Company acquired certain assets of Sky-Tracker of
America, Inc. ("Sky-Tracker") for cash of approximately $400,000. In connection
with the purchase, the Company recorded approximately $167,000 of Goodwill which
is being amortized over 5 years. In addition, the Company entered into a 3 year
non-compete agreement with the owner of Sky-Tracker. The agreement is for a
total of $60,000 payable in equal installments and is included in other assets
and long-term debt in the accompanying consolidated balance sheets. The terms of
-34-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
this agreement also provides for additional cash consideration to be paid if
Sky-Tracker's revenues exceed certain targeted levels. The maximum
amount of consideration is approximately $500,000 through September of 2002.
The purchase prices for all acquisitions in 1998 and 1997 were assigned to the
assets acquired and liabilities assumed based upon the fair market value of such
assets and liabilities.
The allocations of the purchase prices for the 1998 and 1997 acquisitions are as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accounts receivable $ 283,589 $ 426,657
Inventories 923,187 868,413
Other current assets 3,359 12,000
Plant and equipment 3,213,599 787,606
Other assets 2,520,000 479,332
Accounts payable (146,560) (522,104)
Accrued expenses (110,252) (242,766)
Income taxes payable -- (56,476)
Long-term debt -- (602,662)
Purchase price paid in stock (2,800,000) --
----------- ----------
Cash paid $ 3,886,922 $1,150,000
=========== ==========
</TABLE>
The following unaudited pro forma financial information presents combined
results of operations of the Company as if the 1998 acquisitions had occurred as
of the beginning of 1997, after giving effect to certain adjustments, including
amortization of Goodwill and related income tax effects. The pro forma impact of
the 1997 acquisitions would not be material. The pro forma financial information
does not necessarily reflect the results of operations that would have occurred
had the acquisitions constituted a single entity during such periods.
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
---- ----
<S> <C> <C>
Net revenues $75,750,256 $72,970,757
=========== ===========
Net income $ 8,784,851 $ 9,053,828
=========== ===========
Earnings per share:
Basic $ 0.62 $ 0.65
=========== ===========
Diluted $ 0.60 $ 0.61
=========== ===========
</TABLE>
-35-
<PAGE>
11. Common Stock
a. Option Plans
The Company has adopted a 1995 Incentive and Non-Incentive Stock Option Plan and
a 1995 Non-Employee Directors Non-Incentive Stock Option Plan (the "Plans"). A
total of 748,256 shares of Ballantyne common stock have been reserved for
issuance pursuant to these Plans at December 31, 1999. The 1995 Stock Option
Plan provides for the granting of incentive and non-incentive stock options. The
1995 Outside Directors Stock Option Plan provides for the granting of
non-incentive stock options only. The per share exercise price of incentive
stock options may not be less than 100% of the fair market value of a share of
Ballantyne common stock on the date of grant (110% of fair market value in the
case of an incentive stock option granted to any person who, at the time the
incentive stock option is granted, owns (or is considered as owning within the
meaning of Section 424 (d) of the Internal Revenue Code of 1986, as amended)
stock possessing more than 10% of the total combined voting powers of all
classes of stock of the Company or any parent or subsidiary). With respect to
non-incentive stock options, the per share exercise price may not be less than
85% of the fair market value of a share of Ballantyne common stock on the date
of grant.
Information as to shares subject to stock option plans is as follows:
<TABLE>
<CAPTION>
Number Exercise price Weighted average
of options per option exercise price
---------- ---------- --------------
<S> <C> <C> <C>
Options outstanding at December 31, 1996 1,130,456 $ 2.50 - 3.08 $ 2.57
Granted 199,238 8.09 - 11.43 10.35
Exercised (548, 179) 2.50 - 3.08 2.57
--------- --------------- ------
Options outstanding at December 31, 1997 781,515 2.50 - 11.43 3.91
Granted 336,000 7.29 - 11.94 10.92
Exercised (27,248) 2.50 - 11.43 3.28
--------- --------------- ------
Options outstanding at December 31, 1998 1,090,267 2.50 - 11.94 6.38
Granted 28,875 8.16 - 9.24 8.43
Exercised (73,818) 2.50 - 2.69 2.67
Forfeited (8,024) 11.94 11.94
--------- --------------- ------
Options outstanding at December 31, 1999 1,037,300 $ 2.50 - 11.94 $ 6.65
========= =============== ======
Exercisable options at:
December 31, 1999 1,005,799 $ 2.50 - 11.94 $ 6.53
December 31, 1998 1,043,017 $ 2.50 - 11.94 $ 6.12
December 31, 1997 781,515 $ 2.50 - 11.43 $ 3.91
///
</TABLE>
-36-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1999 EXERCISABLE AT DECEMBER 31, 1999
- -------------------------------------------------------------- --------------------------------
Weighted Weighted Weighted Weighted
average average average average
remaining exercise remaining exercise
Range of option Number of contractual price per Number of contractual price per
exercise price options life option options life option
- ------------------------ ------------- --------------- ---------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 2.50 to 3.08 483,424 5.05 2.53 483,424 5.05 2.53
$ 7.30 to 11.94 553,876 7.25 10.25 522,375 7.47 10.18
- ------------------------ ------------- --------------- ---------------- --------------- --------------- -------------
$ 2.50 to 11.94 1,037,300 6.22 6.65 1,005,799 6.31 6.53
======================== ============= =============== ================ =============== =============== =============
</TABLE>
The Company has also adopted the 1995 Employee Stock Purchase Plan. The Employee
Stock Purchase Plan provides for the purchase of shares of Ballantyne common
stock by eligible employees at a per share purchase price equal to 85% of the
fair market value of a share of Ballantyne common stock at either the beginning
or end of the offering period, as defined, whichever is lower. Purchases are
made through payroll deductions of up to 10% of each participating employee's
salary and participants are limited to purchasing 1,000 shares of Ballantyne
common stock in any offering period. At December 31, 1999, 161,551 shares of
Ballantyne common stock have been reserved pursuant to the Employee Stock
Purchase Plan.
b. Warrants
The Company has granted Merita Bank Ltd., a warrant to purchase 509,355 shares
of Ballantyne common stock. During 1997, Merita Bank, Ltd. exercised 170,100
shares under its warrant leaving 339,255 shares remaining to be purchased at
December 31, 1999 at exercise price of $2.50 per share.
c. Change in Control Stock Options
The Company has granted the executive officers of the Company an aggregate of
100,000 stock options at an exercise price of $5.50 per share upon the
occurrence of a Change in Control, as defined. These options expire on October
26, 2000.
d. Accounting for Stock-Based Compensation
The Company applies APB Opinion No. 25 and related Interpretations in accounting
for its plans and the exercise price of all options issued have equaled the
market value of the stock on the date of grant. Accordingly, no compensation
cost has been recognized for any of the aforementioned stock compensation plans.
Had compensation cost for the Company's stock compensation plans been determined
consistent with FASB Statement No. 123, the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:
-37-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net income
As reported $ 7,758,949 $ 8,343,734 $ 7,709,339
Pro forma $ 7,510,743 $ 6,489,170 $ 7,136,263
Basic earnings per share
As reported $ 0.62 $ 0.59 $ 0.56
Pro forma $ 0.60 $ 0.46 $ 0.51
Diluted earnings per share
As reported $ 0.59 $ 0.57 $ 0.52
Pro forma $ 0.57 $ 0.44 $ 0.48
</TABLE>
The average fair value of each option granted in 1999, 1998 and 1997 was
$5.59, $7.77 and $8.18, respectively. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model
made with the following weighted average assumptions:
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate 6.34 - 6.56% 4.73% 6.15%
Dividend yield 0% 0% 0%
Expected volatility 73.1% 78% 75.7%
Expected life in years 3-10 3-10 3-10
</TABLE>
12. Commitments, Contingencies and Concentrations
a. Profit Sharing Plan
The Company has in place a profit sharing plan for key management employees.
Amounts due pursuant to the plan are based upon the attainment of specific
operating levels that are established by the Board of Directors. Amounts charged
to operations pursuant to the profit sharing plan amounted to $863,635, $945,562
and $1,127,795 for 1999, 1998 and 1997, respectively. The amounts payable of
$871,253 and $945,818 at December 31, 1999 and 1998, respectively, are included
in accrued expenses in the accompanying consolidated balance sheets.
b. Retirement Plans
The Company sponsors a defined contribution 401-K plan (the "Plan") for all
employees. Pursuant to the provisions of the Plan, employees may defer up to 6%
of their compensation. The Company will match 50% of the amount deferred. An
additional amount of up to 9% of the employee's compensation for the year may
also be deferred with no matching contribution by the Company. The contributions
made to the Plan by the Company for the years ended December 31, 1999, 1998 and
1997 amounted to $295,858, $182,077 and $150,577, respectively.
-38-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
c. Concentrations
For the years ended December 31, 1999, 1998 and 1997, sales to a customer
represented approximately sixteen percent (16%), fifteen percent (15%) and
twenty percent (20%) of consolidated net revenues, respectively. The balance in
trade receivables owed by this customer was $1,569,953 at December 31, 1999 and
$751,233 at December 31, 1998. For the years ended December 31, 1999 and 1998,
sales to another customer represented approximately twenty-one percent (21%) and
fourteen percent (14%) of consolidated net revenues, respectively. The balance
in trade receivables owed by this customer was $972,301 at December 31, 1999 and
$1,888,594 at December 31, 1998. Financial instruments that potentially expose
the Company to a concentration of credit risk principally consist of accounts
receivable. The Company sells product to a large number of customers in many
different geographic regions. To minimize credit concentration risk, the Company
performs on going credit evaluations of its customers' financial condition. The
Company utilizes a single contract manufacturer for each of its intermittent
movement components and lenses for its commercial motion picture projection
equipment and aluminum kettles for its pressure fryers. Although the Company has
not to-date experienced a significant difficulty in obtaining these components,
no assurance can be given that shortages will not arise in the future. The loss
of any one or more of such contract manufacturers could have a short-term
adverse effect on the Company until alternative manufacturing arrangements were
secured.
Sales to foreign customers were approximately $16,500,000, $22,000,000 and
$18,500,000 for 1999, 1998 and 1997, respectively. These sales were principally
to customers in Mexico, Canada, Europe and Asia. To minimize credit risk, the
Company generally requires sales to foreign customers be guaranteed by letter of
credit or are shipped C.O.D.
d. Leases
The Company leases rental facilities and office space from an employee of a
wholly-owned subsidiary. The lease expires on March 31, 2002 with the Company
having the option to renew the lease for one additional five-year term. The
Company expects to renew or replace this lease in the ordinary course of
business. The Company also leases other properties and equipment under operating
leases which contain renewal and escalation clauses.
Aggregate minimum rental commitments for leases having noncancelable lease terms
of more than one year are as follows: 2000 - $338,915; 2001 - $320,956; 2002 -
$193,780 and 2003 - $76,602.
e. Self-insurance
The Company is self-insured up to certain stop loss limits for group health
insurance (the "Plan"). Accruals for claims incurred but not paid as of December
31, 1999 are included in the accompanying consolidated balance sheet.
-39-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
f. Change in Control Agreement
The Company has entered into Change in Control employment agreements with its
executive officers. According to the agreements, upon a Change in Control, as
defined, the employee will receive certain severance payments.
g. Litigation
The Company is involved in certain pending litigation arising under the normal
course of business. Management believes the ultimate resolution of these matters
will not have a material adverse effect on the consolidated financial statements
of the Company.
13. Business Segment Information
The presentation of segment information reflects the manner in which management
organizes segments for making operating decisions and assessing performance.
The Company's operations are conducted principally through three business
segments: Theatre, Lighting and Restaurant. Theatre operations include the
design, manufacture, assembly and sale of motion picture projectors, xenon
lamphouses and power supplies, sound systems and the sale of film handling
equipment and lenses for the theatre exhibition industry. The lighting
segment operations include the sale and rental of follow spotlights,
stationary searchlights and computer operated lighting systems for the motion
picture production, television, live entertainment, theme parks and
architectural industries. The lighting segment also includes design
consulting, rental services and equipment sales in the audio-visual industry.
The restaurant segment includes the design, manufacture, assembly and sale of
pressure fryers, smoke ovens and rotisseries and the sale of seasonings,
marinades and barbecue sauces, mesquite and hickory woods and point of
purchase displays.
The Company allocates resources to business segments and evaluates the
performance of these segments based upon reported segment gross profit. However,
certain key operations of a particular segment are tracked on the basis of
operating profit. There are no significant intersegment sales. All intersegment
transfers are recorded at historical cost.
-40-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
SUMMARY BY BUSINESS SEGMENTS
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net revenue
Theatre $ 74,115,104 $ 65,814,807 $ 62,306,249
Lighting
Sales 5,958,085 5,042,178 3,807,836
Rental 3,916,110 2,065,727 1,552,781
------------ ------------ ------------
Total lighting 9,874,195 7,107,905 5,360,617
Restaurant 2,153,269 2,134,655 2,538,245
------------ ------------ ------------
Total revenue $ 86,142,568 $ 75,057,367 $ 70,205,111
Gross profit
Theatre $ 22,157,511 $ 21,559,565 $ 17,866,879
Lighting
Sales 1,860,768 1,361,765 1,292,690
Rental 683,884 40,911 915,405
------------ ------------ ------------
Total lighting 2,544,652 1,402,676 2,208,095
Restaurant 494,503 592,073 650,024
------------ ------------ ------------
Total gross profit 25,196,666 23,554,314 20,724,998
Corporate overhead (12,514,331) (10,584,989) (9,170,634)
------------ ------------ ------------
Operating income 12,682,335 12,969,325 11,554,364
Net interest income (expense) (868,216) (36,265) 254,030
------------ ------------ ------------
Income before income taxes $ 11,814,119 $ 12,933,060 $ 11,808,394
============ ============ ============
Identifiable assets
Theatre $ 52,100,915 $ 48,484,693 $ 42,239,030
Lighting 7,258,787 7,187,781 3,665,474
Restaurant 1,396,528 880,706 847,994
------------ ------------ ------------
Total $ 60,756,230 $ 56,553,180 $ 46,752,498
============ ============ ============
Expenditures on capital equipment
Theatre $ 1,454,487 1,072,110 2,980,764
Lighting 1,243,950 2,522,362 551,149
Restaurant -- -- --
------------ ------------ ------------
Total $ 2,698,437 $ 3,594,472 $ 3,531,913
============ ============ ============
Depreciation and amortization
Theatre $ 1,440,970 $ 1,243,061 $ 833,661
Lighting 1,068,101 610,162 168,111
Restaurant -- -- --
------------ ------------ ------------
Total $ 2,509,071 $ 1,853,223 $ 1,001,772
============ ============ ============
</TABLE>
-41-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
SUMMARY BY GEOGRAPHICAL AREA
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net revenue
United States $69,613,541 $53,078,993 $51,656,965
Canada 5,338,109 9,845,049 5,960,640
Asia 4,355,419 4,256,493 4,787,409
Mexico 1,224,104 1,726,712 2,722,675
Europe 4,159,848 4,197,172 3,735,009
Other 1,451,547 1,952,948 1,342,413
----------- ----------- -----------
Total $86,142,568 $75,057,367 $70,205,111
=========== =========== ===========
Identifiable assets
United States $59,912,380 $55,677,111 $45,792,078
Canada -- -- --
Asia 843,850 876,069 960,420
Mexico -- -- --
Europe -- -- --
Other -- -- --
----------- ----------- -----------
Total $60,756,230 $56,553,180 $46,752,498
=========== =========== ===========
</TABLE>
Net revenues by business segment are to unaffiliated customers. Net sales by
geographical area are based on destination of sales. Identifiable assets by
geographical area are based on location of facilities.
-42-
<PAGE>
Ballantyne of Omaha, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
14. Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations for
1999, 1998 and 1997:
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999:
Net revenue $20,197,020 21,303,110 21,623,624 23,018,814
Gross profit 6,179,687 6,200,030 6,315,315 6,501,634
Net income 1,836,552 1,823,192 1,644,929* 2,454,276
Basic earnings per share 0.14 0.14 0.13 0.20
Diluted earnings per share 0.14 0.14 0.13 0.19
1998:
Net revenue $17,271,887 15,412,796 20,852,022 21,520,662
Gross profit 5,308,422 4,768,704 6,570,393 6,906,795
Net income 1,901,418 1,425,732 2,418,041 2,598,543
Basic earnings per share 0.13 0.10 0.17 0.20
Diluted earnings per share 0.13 0.09 0.16 0.19
1997:
Net revenue $14,724,814 16,348,995 17,378,858 21,752,444
Gross profit 4,356,047 4,932,506 5,147,498 6,288,947
Net income 1,568,200 1,855,250 2,052,831 2,233,058
Basic earnings per share 0.12 0.14 0.15 0.16
Diluted earnings per share 0.11 0.13 0.14 0.15
</TABLE>
* Includes approximately $263,000, net of tax of certain costs relating to an
attempted acquisition.
-43-
<PAGE>
Schedule II
Ballantyne Of Omaha, Inc.
and Subsidiaries
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Amounts Balance
beginning - costs and written at end
of year expenses off (1) of year
--------- -------- ------- -------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1999 -
Allowance for doubtful accounts $ 396,785 145,000 15,564 526,221
========== ======= ======= =========
Year ended December 31, 1998 -
Allowance for doubtful accounts $ 215,823 273,122 92,160 396,785
========== ======= ======= =========
Year ended December 31, 1997 -
Allowance for doubtful accounts $ 143,000 187,110 114,287 215,823
========== ======= ======= =========
INVENTORY RESERVES
Year ended December 31, 1999 -
Inventory reserves $1,103,995 646,950 665,192 1,085,753
========== ======= ======= =========
Year ended December 31, 1998 -
Inventory reserves $ 957,683 293,503 147,191 1,103,995
========== ======= ======= =========
Year ended December 31, 1997 -
Inventory reserves $ 879,486 601,201 523,004 957,683
========== ======= ======= =========
WARRANTY RESERVES
Year ended December 31, 1999 -
Warranty reserves $ 175,983 838,705 713,360 301,328
========== ======= ======= =========
Year ended December 31, 1998 -
Warranty reserves $ 98,720 446,085 368,822 175,983
========== ======= ======= =========
Year ended December 31, 1997 -
Warranty reserves $ 165,953 403,656 470,889 98,720
========== ======= ======= =========
</TABLE>
(1) The deductions from reserves are net of recoveries
-44-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Ballantyne of Omaha, Inc. Proxy Statement for
the annual Meeting of Stockholders to be held June 14, 2000, under the captions
ELECTION OF DIRECTORS, LIST OF CURRENT EXECUTIVE OFFICERS OF THE COMPANY, and
ADDITIONAL INFORMATION - Compliance with Section 16(a) of the Securities
Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Ballantyne of Omaha, Inc. Proxy Statement for
the Annual Meeting of Stockholders to be held June 14, 2000, under the caption
REPORT ON EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Ballantyne of Omaha, Inc. Proxy Statement for
the Annual Meeting of Stockholders to be held June 14, 2000, under the captions
GENERAL AND ELECTION OF DIRECTORS.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Ballantyne of Omaha, Inc. Proxy Statement for
the Annual Meeting of Stockholders to be held June 14, 2000, under the captions
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-45-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
a. The following documents are filed as part of this report
<S> <C>
1. Financial Statements:
An Index to the Financial Statements filed as a part of this Item 8
Financial Statements of the Registrant's subsidiaries are
omitted because the Registrant is primarily an operating
company and the subsidiaries are wholly-owned
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts is included on
page 44
b. Reports on Form 8-K filed for the three months ended December 31, 1999:
1. None
c. Exhibits (Numbered in accordance with Item 601 of Regulation S-K):
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
2.5 Asset Purchase Agreement dated April 1, 1997 between the
Company and Xenotech, Inc. (incorporated by reference to
Exhibit 2.5 to the Form 10-Q for the quarter ended June 30,
1997)
2.6 Asset Purchase Agreement dated September 8, 1997 between the
Company and Sky-Tracker of America, Inc. (incorporated by
reference to Exhibit 2.6 to the Form 10-Q for the quarter
ended September 30, 1997)
2.7 Asset Purchase Agreement dated January 29, 1998 between the
Company and Sky-Tracker of Florida, Inc. (incorporated by
reference to Exhibit 2.7 to the Form 10-K for the year ended
December 31, 1997) (the "1997 10-K")
2.8 Asset Purchase Agreement between the Company and Design and
Manufacturing, Ltd. (incorporated by reference to Exhibit 2.8
to the Form 10-Q for the quarter ended March 31, 1998)
2.9 Asset Purchase Agreement between the Company and ARC, EFX,
Inc. (incorporated by reference to Exhibit 2.9 to the
Company's Annual Report on Form 10-K filed for the year ended
December 31, 1998 (the "1998 Form 10-K")
</TABLE>
-46-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.1 Certificate of Incorporation as amended through July 20, 1995
(incorporated by reference to Exhibits 3.1 and 3.3 to the
Registration Statement on Form S-1, File No. 33-93244) (the
"Form S-1")
3.1.1 Amendment to the Certificate of Incorporation (incorporated by
reference to Exhibit 3.1.1 to Form 10-Q for the quarter ended
June 30, 1997)
3.2 Bylaws of the Company as amended through August 24, 1995
(incorporated by reference to Exhibit 3.2 to the Form S-1)
4.2 Loan Agreement dated August 30, 1995, as amended November 24,
1995 between the Company and Norwest Bank, N.A. (incorporated
by reference to Exhibit 4.2 to the Company's Annual Report on
Form 10-K filed for the year ended December 31, 1995) (the
"1995 Form 10-K")
4.3 Second Amendment to Loan Agreement dated August 30, 1995
between the Company and Norwest Bank Nebraska, N.A. dated
August 29, 1997 (incorporated by reference to Exhibit 4.3 to
the Form 10-Q for the quarter ended September 30, 1997)
4.4 Third Amendment to Loan Agreement dated August 30, 1995
between the Company and Norwest Bank, N.A. dated December 1,
1998 (incorporated by reference to exhibit 4.4 to the
1998 Form 10-K)
4.5 Fourth Amendment to Loan Agreement dated August 30, 1995
between the Company and Norwest Bank, N.A. (incorporated by
reference to Exhibit 4.5 to the Form 10-Q for the quarter
ended June 30, 1999)
5.5 Term Promissory Note between the Company and Arnold S.
Tenney dated June 24, 1999 (incorporated by reference to
Exhibit 10.41 to the Form 10-Q for the quarter ended June
30, 1999)
10.17 Amendment to the Company's 1995 Stock Option Plan
(incorporated by reference to Exhibit 10.17 to the Form 10-Q
for the quarter ended June 30, 1998)
10.18 Amendment to the Company's 1995 Outside Directors Stock Option
Plan (incorporated by reference to Exhibit 10.18 to the Form
10-Q for the quarter ended June 30, 1999)
10.19 Amendment to the Company's 1995 Stock Option Plan
(incorporated by reference to Exhibit 10.18 to the Form
10-Q for the quarter ended June 30, 1999)
10.3.2 Employment Agreement between the Company and John Wilmers
dated January 1, 1997 (incorporated by reference to the 1996
Form 10-K) *
10.3.3 Employment Agreement between the Company and Ray F. Boegner
dated November 20, 1996 (incorporated by reference to Exhibit
10.3.3 to the Form 10-Q for the quarter ended March 31, 1997)
*
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.3.4 Employment Agreement between the Company and Richard Hart
dated April 1, 1997 (incorporated by reference to Exhibit
10.3.4 to the Form 10-Q for the quarter ended June 30, 1997) *
10.3.5 Non-competition Agreement between the Company and Richard Hart
(incorporated by reference to Exhibit 10.3.5 to the Form 10-Q
for the quarter ended June 30, 1997) *
10.3.6 Consulting Agreement between the Company and Marlowe A. Pichel
(incorporated by reference to Exhibit 10.3.6 to Form 10-Q for
the quarter ended September 30, 1997) *
10.3.7 Non-competition Agreement between the Company and Marlowe A.
Pichel (incorporated by reference to Exhibit 10.3.7 to Form
10-Q for the quarter ended September 30, 1997) *
10.3.8 Employment Agreement dated May 1, 1998 between the Company and
Brad French (incorporated by reference to Exhibit 10.36 to the
Form 10-Q for the quarter ended June 30, 1998) *
10.3.9 Consulting Agreement between the Company and Arnold S. Tenney
dated January 1, 1999 (incorporated by reference to Exhibit 10.3.9
to the 1998 Form 10-K)
10.4 Amendment to Consulting Agreement between the
Company and Arnold S. Tenney dated January 1, 2000
10.4.1 Amendment to Employment Agreement between the Company and Brad
French dated October 25, 1999*
10.4.2 Employment Security Agreement between the Company and Brad
French dated October 26, 1999*
10.4.3 Option to Purchase Common Shares of Ballantyne of Omaha, Inc.
Agreement between the Company and Brad French, dated October
26, 1999*
10.4.4 Amendment to Employment Agreement between the Company and John
P. Wilmers dated October 25, 1999*
10.4.5 Employment Security Agreement between the Company and John P.
Wilmers dated October 26, 1999*
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.4.6 Option to Purchase Common Shares of Ballantyne of Omaha, Inc.
Agreement between the Company and John P. Wilmers, dated
October 26, 1999*
10.4.7 Amendment to Employment Agreement between the Company and Ray
F. Boegner dated October 25, 1999*
10.4.8 Employment Security Agreement between the Company and Ray F.
Boegner dated October 26, 1999*
10.4.9 Option to Purchase Common Shares of Ballantyne of Omaha, Inc.
Agreement between the Company and Ray F. Boegner, dated
October 26, 1999*
10.6 Distributorship Agreement dated as of March 1, 1992 between
ISCO-Optic GmbH and the Company (incorporated by reference to
Exhibit 10.6 to the Form S-1)
10.6.1 First Amendment dated December 4, 1998, to Distributorship
Agreement dated as of March 1, 1992, between ISCO-Optic GmbH
and the Company (incorporated by reference to Exhibit 10.6.1 to
the 1998 Form 10-K)
10.7 Form of 1995 Stock Option Plan (incorporated by reference to
Exhibit 10.7 to the Form S-1)
10.7.1 Amendment to Stock Option Agreement (incorporated by reference
to Exhibit 10.16 to the Form 10-Q for the quarter ended June
30, 1997)
10.8 Form of 1995 Outside Directors Stock Option Plan as amended as
of June 11, 1996 (incorporated by reference to Exhibit 10.8 to
the Form S-1)
10.8.1 Amendment to 1995 Outside Directors Stock Option Plan, as
amended through July 8, 1996 (incorporated by reference to
exhibit 10.8 to the Form 10-Q for the quarter ended June 30,
1996)
10.9 Form of 1995 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.9 to the Form S-1)
10.9.1 Amendment to the 1995 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.9.1 to the 1996 Form
10-K)
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.10 Form of Management Services Agreement by and between the
Company and Canrad, Inc. (incorporated by reference to Exhibit
10.10 to the Form S-1) *
10.10.1 Amendment to Management Services Agreement by and between the
Company and Canrad, Inc. dated July 1, 1997 (incorporated by
reference to the 1997 Form 10-K)*
10.10.2 Second Amendment to Management Services Agreement by and
between the Company and Canrad, Inc. dated January 1, 1999
(incorporated by reference to Exhibit 10.10.2 to the 1998
Form 10-K)
10.11 Profit Sharing Plan (incorporated by reference to Exhibit
10.11 to the Form S-1)
10.11.1 Amendment to the Profit Sharing Plan (incorporated by
reference to Exhibit 10.11.1 to the 1996 Form 10-K)
11 Computation of net earnings per share
21 Registrant owns 100% of the outstanding capital stock of the
following subsidiaries:
</TABLE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- -------------
<S> <C> <C>
a. Strong Westrex, Inc. Nebraska
b. Xenotech Rental Corp. Nebraska
c. Design & Manufacturing, Inc. Nebraska
d. Xenotech Strong, Inc. Nebraska
</TABLE>
23 Consent of KPMG LLP
27 Financial Data Schedule (for SEC information only)
* Management contract or compensatory plan.
-50-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BALLANTYNE OF OMAHA, INC.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ John Wilmers By: /s/ Brad French
------------------------------------- ----------------------------------
John Wilmers, President, Brad French, Secretary, Treasurer,
Chief Executive Officer, and Director and Chief Financial Officer
Date: March 29, 2000 Date: March 29, 2000
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Arnold S. Tenney By: /s/ Ronald H. Echtenkamp
------------------------------------- ----------------------------------
Arnold S. Tenney, Chairman and Ronald H. Echtenkamp, Director
Director
Date: March 29, 2000 Date: March 29, 2000
By: /s/ Jeffrey D. Chelin By: /s/ Colin G. Campbell
------------------------------------- ----------------------------------
Jeffrey D. Chelin, Director Colin G. Campbell, Director
Date: March 29, 2000 Date: March 29, 2000
By: /s/ Marshall Geller
-------------------------------------
Marshall Geller, Director
Date: March 29, 2000
</TABLE>
-51-
<PAGE>
Exhibit 10.4
AMENDMENT TO CONSULTING AGREEMENT
This Amendment to Consulting Agreement is executed effective as of the
1st day of January, 2000 by and between Ballantyne of Omaha, Inc.
("Ballantyne"), a Delaware corporation, with its principal offices at 4350
McKinley Street, Omaha, Nebraska 68112, (the "Company"), and Arnold S. Tenney,
an individual, whose mailing address is 4000 Chesswood Drive, DownsView,
Ontario, Canada M3J2B9, ("Tenney").
WITNESSETH that certain Consulting Agreement entered into between the
parties effective as of January 1, 1999 is hereby amended as follows:
Section 1. Engagement of said Agreement is hereby amended to extend
the term of said Consulting Agreement for an additional six (6) month term
commencing as of January 1, 2000 and ending on June 30, 2000. Notwithstanding
the foregoing, either party may terminate said Agreement immediately for cause.
Section 2. Except for the changes set forth, all of the terms,
provisions and conditions of said Consulting Agreement effective as of January
1, 1999 shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed by the
parties hereto as of the 1st day of January, 2000.
BALLANTYNE OF OMAHA, INC.,
"Ballantyne"
By: /s/ John Wilmers
-------------------------
John Wilmers, President
/s/ Arnold S. Tenney
-------------------------
Arnold S. Tenney, "Tenney"
-1-
<PAGE>
Exhibit 10.4.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is executed on the 25th day of
October, 1999, by and between BALLANTYNE OF OMAHA, INC. ("Ballantyne"), a
Delaware corporation, with its principal offices at 4350 McKinley Street, Omaha,
Nebraska 68112 (the "Company"), and BRAD J. FRENCH, an individual residing at
1602 Clark Street, Fort Calhoun, Nebraska 68023 (the "Employee").
WITNESSETH:
That certain Employment Agreement entered into between the parties on
May 1, 1998, is hereby amended as follows:
1. Paragraph 3(b) of said Employment Agreement is hereby amended to
read:
"(b) Notwithstanding anything to the contrary provided herein, the
Company or the Employee may give the other 120 days' notice prior to
the end of the term, or of any extension or renewal thereof, of such
parties' intention to negotiate a new employment arrangement
commencing at the end of the term or to terminate this Agreement. In
the event no such notice is given, the term described at subparagraph
(a) above shall automatically renew for an additional year, and this
subsection (b) shall be applicable again within such extension."
2. Paragraph 3(e) of said Employment Agreement is hereby amended to
read as follows:
"(e) In the event the company shall be sold, whether by a sale of
assets or stock, such sale will automatically trigger a simultaneous
renewal of the term of this Agreement as provided in paragraph 3(a)
hereof, with the first day of such renewal term being the day of
closing of the sale, and this Agreement shall remain in full force and
effect."
Except for the changes herein set forth, all other terms, provisions
and conditions of said Employment Agreement of May 1, 1998, shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the date
above written.
BALLANTYNE OF OMAHA, INC.
BY: /s/ John P. Wilmers
------------------------------
President
/s/ Brad J. French
------------------------------
Brad J. French
-1-
<PAGE>
Exhibit 10.4.2
EMPLOYMENT SECURITY AGREEMENT
This Employment Security Agreement is entered into as of the 26th day
of October, 1999, by and between Ballantyne of Omaha, Inc., a Delaware
corporation, with its principal place of business located at 4350 McKinley
Street, Omaha, Nebraska 68112, (hereinafter the "Company") and Brad J. French of
1602 Clark Street, Fort Calhoun, Nebraska 68023, (hereinafter "Executive").
WHEREAS, Ballantyne of Omaha, Inc. (the "Company") considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders,
and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control exists, and
that possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders, and
WHEREAS, the Board of Directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including
Executive, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change in
control of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties set forth herein, and for other good and valuable
consideration, the parties agree as follows:
Section 1. CHANGE IN CONTROL.
1.1 RIGHT TO CHANGE IN CONTROL SEVERANCE BENEFITS. In order to induce
Executive to remain in its employ, the Company agrees to provide
Executive the payments and benefits described in this Agreement
(in lieu of compensation and benefits under Executive's
Employment Agreement with the Company, dated as of May 1, 1998,
and any severance payments and benefits Executive would otherwise
receive in accordance with the Company's severance pay practices)
if Executive's employment with the Company is terminated
subsequent to a "Change in Control" of the Company as defined in
SECTION 3, under the circumstances described in SECTION 4.
1.2 NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not give
Executive any right to continued employment by the Company or a
Subsidiary, and any such right shall be governed solely by
Executive's Employment Agreement with the Company dated as of May
1, 1998, and the right the Company or a Subsidiary otherwise may
have to terminate Executive's employment.
Section 2. TERM OF THIS AGREEMENT. This Agreement will be effective as
of October 26, 1999, and, except as otherwise provided in this Agreement, will
continue in effect until October 26, 2002; provided, that commencing on January
1, 2000, and on each subsequent January 1, the terms of this agreement will be
extended automatically so as to remain in effect for three (3) years
-1-
<PAGE>
from that January 1, unless at least sixty (60) days prior to January 1 of a
given year, the Company notifies Executive that it does not wish to continue
this Agreement in effect beyond its then current expiration date; and provided
further, that if a Change in Control occurs prior to the expiration of this
Agreement, this Agreement will continue in effect for three (3) years from the
Change in Control.
Section 3. DEFINITION OF CHANGE IN CONTROL. No benefits will be
payable under this Agreement unless there is a Change in Control and Executive's
employment by the Company is terminated subsequently under the circumstances
described in SECTION 4 entitling Executive to benefits. For purposes of this
Agreement, a Change in Control of the Company means the occurrence of any of the
following events during the period in which this Agreement remains in effect. A
Change in Control will be deemed to occur on the date the event occurs:
3.1 CHANGE IN VOTING POWER. Any person or persons acting together
which would constitute a "group" for purposes of Section 13(d) of
the Exchange Act (other than the Company, ARC International,
Inc., any subsidiary of either, or any entity beneficially owned
by any of the foregoing) beneficially own (as defined in Rule
13(d)-3 under the Exchange Act) without Board approval or
consent, directly or indirectly, at least forty percent (40%) of
the total voting power of the Company entitled to vote generally
in the election of the Board;
3.2 CHANGE IN BOARD OF DIRECTORS. Either:
(a) the Current Directors (as hereinafter defined) cease for any
reason to constitute at least a majority of the members of
the Board (for these purposes, a "Current Director" means
any member of the Board as of the date of this Agreement,
and any successor of a Current Director whose election or
nomination for election by the company's stockholders was
approved by at least a majority of the current Directors
then on the Board) or
(b) at any meeting of the stockholders of the Company called for
the purpose of electing directors, a majority of the persons
nominated by the Board for election as directors fail to be
elected;
3.3 LIQUIDATION, MERGER OR CONSOLIDATION. The stockholders of the
Company approve:
(a) a plan of complete liquidation of the Company, or
(b) an agreement providing for the merger or consolidation of
the Company (i) in which the Company is not the continuing
or surviving corporation (other than consolidation or merger
with a wholly-owned subsidiary of the Company in which all
Shares outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration) or (ii) pursuant to which the Shares are
converted into cash, securities or other property, except a
consolidation or merger of the Company in which the holders
of the Shares immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of
the common stock of the continuing or surviving corporation
immediately after such consolidation or merger, or in which
the Board
-2-
<PAGE>
immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or
surviving corporation; or
3.4 SALE OF ASSETS. The stockholders of the Company approve an
agreement (or agreements) providing for the sale or other
disposition (in one transaction or a series of transactions) of
all or substantially all of the assets of the Company.
Section 4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the
events described in SECTION 3 constituting a Change in Control occurs, Executive
will be entitled to the payments and benefits provided for in SECTION 5 if a
subsequent termination of Executive's employment occurs within three (3) years
from the date of that Change in Control, unless that termination is:
(a) because of Executive's death;
(b) by the Company for Cause or Disability; or
(c) by Executive other than for Good Reason.
Those payments and benefits will be in lieu of any future compensation under
Executive's Employment Agreement and/or severance payments Executive would
otherwise receive in accordance with the Company's severance pay practices.
4.1 CAUSE. Termination by the Company of Executive's employment for
"Cause" means termination by the Company of Executive's
employment for cause as defined in Section 4(c) of Executive's
Employment Agreement dated as of May 1, 1998, after a written
notice is delivered to Executive by the Chief Executive Officer
of the Company (or if Executive is the Chief Executive Officer,
the Chairman of the Compensation Committee of the Board of
Directors) that specifically identifies the manner in which the
Chief Executive Officer (or the Chairman of the Compensation
Committee) believes that Executive has given the Company cause
for termination of Executive's employment, and giving Executive
an opportunity for Executive, together with Executive's counsel,
to be heard before the Board of Directors of the Company, and a
finding that in the good faith opinion of two-thirds of the Board
of Directors, Executive committed conduct set forth in Section
4(c) of Executive's Employment Agreement, and specifying the
particulars of that finding in detail. For purposes of this
SUBSECTION 4.1, no act, or failure to act, on Executive's part
will be considered "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the
Company.
4.2 DISABILITY. Termination by the Company of Executive's employment
for "Disability" means termination by the Company of Executive's
employment following and because of Executive's failure to
perform substantially all of the material duties of his position
for a period of at least one hundred eighty (180) consecutive
calendar days due to physical or mental illness or injury.
Executive will continue to receive Executive's full base salary
at the rate in effect and any bonus payments under the Key
Employee Bonus Plan payable during the one hundred eighty (180)
day qualification period until termination of Executive's
employment for Disability. After that termination, Executive's
benefits will be
-3-
<PAGE>
determined in accordance with the Company's other benefit plans
and practices then in effect that apply to Executive. The company
will have no further obligation to Executive under this Agreement
and all supplemental benefits will be terminated. If the Company
and Executive disagree as to Executive's incapacity, each may
appoint a medical doctor to certify his opinion as to Executive's
incapacity, and if the doctors do not agree as to Executive's
incapacity, then the two doctors will appoint a third medical
doctor to certify his opinion as to Executive's incapacity, and
the decision of a majority of the three doctors will prevail.
(The Company will bear the costs of the doctors' opinions.)
4.3 GOOD REASON. Termination by Executive of Executive's employment
for "Good Reason" means termination by Executive of Executive's
employment based on:
(a) The assignment to Executive of duties inconsistent with his
position and status with the Company as they existed
immediately prior to a Change in Control, or a substantial
change in Executive's title, offices or authority, or in the
nature of his responsibilities, as they existed immediately
prior to a Change in Control, except in connection with the
termination of his employment for Cause or Disability or as
a result of his death or by Executive other than for Good
Reason;
(b) A reduction by the Company in Executive's base salary as in
effect on the date of this Agreement or as his salary may be
increased from time to time;
(c) A failure by the Company to continue the Company's Key
Employees' Bonus Plan, as it may be modified from time to
time, substantially in the form in effect immediately prior
to a Change in Control (the "Plan"), or a failure by the
Company to continue Executive as a participant in the Plan
on a basis substantially similar to his participation
immediately prior to a Change in Control, or to pay
Executive the amounts that Executive would be entitled to
receive in accordance with the Plan;
(d) The Company's requiring Executive to be based more than
thirty-five (35) miles from the location where Executive is
based immediately prior to a Change in Control, except for
required travel on the Company's business to an extent
substantially consistent with Executive's business travel
obligations prior to the Change in Control, or if Executive
consents to that relocation, the failure by the Company to
pay (or reimburse Executive for) all reasonable moving
expenses incurred by Executive or to indemnify Executive
against any loss realized in the sale of his principal
residence in connection with that relocation;
(e) The failure by the Company to continue in effect any
retirement plan, life insurance plan, medical insurance
plan, disability plan or any other benefit plan in which
Executive is participating immediately prior to Change in
Control of the Company (or provide plans providing Executive
with substantially similar benefits), the taking of any
action by the Company that would adversely affect
Executive's participation or materially reduce his benefits
under any of those plans or deprive
-4-
<PAGE>
Executive of any material fringe benefit enjoyed by
Executive immediately prior to a Change in Control; or
(f) The failure by the Company to obtain the assumption of this
Agreement by any successor, as contemplated in SECTION 6.
4.4 NOTICE OF TERMINATION. Any purported termination by the Company
pursuant to SUBSECTIONS 4.1 OR 4.2 or by Executive pursuant to
SUBSECTION 4.3 will be communicated by written Notice of
Termination to the other party. For purposes of this Agreement, a
"Notice of Termination" means a notice that indicates the
specific termination provision in this Agreement relied upon and
setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's
employment under the provision so indicated. Any purported
termination not effected pursuant to a Notice of Termination
meeting the requirements set forth in this Agreement will not be
effective.
4.5 DATE OF TERMINATION. For purposes of this Agreement, the date of
the termination of Executive's employment ("Date of Termination")
will be:
(a) if Executive's employment is terminated by his death, the
end of the month in which his death occurs,
(b) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given, or
(c) if Executive's employment is terminated by Executive or the
company for any other reason, the date specified in the
Notice of Termination, which will not be later than thirty
(30) days after the date on which the Notice of Termination
is given.
Section 5. BENEFITS UPON CERTAIN TERMINATIONS FOLLOWING A CHANGE IN
CONTROL. If within three (3) years following the Change in Control, Executive's
employment by the Company is terminated by the Company other than for Death,
Disability or Cause, or if Executive terminates his employment for Good Reason,
then the following provisions will apply:
5.1 COMPENSATION THROUGH DATE OF TERMINATION. The Company will pay
Executive within thirty (30) days after termination:
(a) Any unpaid amount of Executive's base salary through the
date of termination;
(b) With respect to any year then completed, any unpaid amount
accrued to Executive pursuant to the Key Employees' Bonus
Plan; and
(c) With respect to any year then partially completed, a pro
rata portion through the date of termination of Executive's
annual bonus under the Key Employees' Bonus Plan, based upon
the amount of his bonus for the previous year.
5.2 ADDITIONAL SEVERANCE. In lieu of any further salary and bonus
payments to Executive for periods subsequent to the date of
termination or other severance
-5-
<PAGE>
payments, the Company will pay as severance pay to Executive
three times the sum of:
(a) Executive's annual base salary as of the date of Change in
Control, or as of the date of termination of employment,
whichever is greater;
(b) Executive's annual bonus under the Key Employees' Bonus
Plan. Executive's annual bonus amount is to be based on the
greater of:
(1) the average of Executive's bonus for the two fiscal
years of the Company preceding the year in which the
Change in Control occurs, or
(2) the average of Executive's bonus for the two fiscal
years of the Company preceding the year in which the
termination of employment occurs.
The additional severance pay provided for in this SECTION 5.2
shall be transferred to a "Rabbi Trust", effective as of the date of
termination of employment, and paid to Executive in thirty-six (36)
equal monthly installments commencing on the first day of the next
month following the date of termination, and on the first day of each
subsequent month, until fully paid.
5.3 BENEFIT PLANS. Unless Executive's employment is terminated for
cause, the Company will maintain in full force and effect for
Executive's continued benefit for a period of three (3) years after
the Change in Control, health, dental, disability and other welfare
benefits, plans, programs and arrangements substantially equivalent to
the most valuable coverage provided under any plan maintained by the
Company from time to time during such period. In addition, the Company
shall continue to provide Executive with the same life insurance
coverage maintained by the Company on his life immediately prior to
the date of termination. These benefits shall be reduced by the amount
of similar benefits provided to Executive during such Period by a
subsequent employer, as determined solely by the Board. For the
purposes of enforcing this offset provision, Executive shall notify
the Company as to the terms and conditions of any subsequent
employment and the corresponding benefits received pursuant thereto,
and shall provide, or cause to provide the Company, correct, complete,
and timely information concerning the same.
5.4 NO MITIGATION REQUIRED. Executive will not be required to
mitigate the amount of any payment provided for in this SECTION 5 by
seeking other employment or otherwise, nor will the amount of any
payment provided for in this SECTION 5 be reduced by any compensation
earned by Executive as the result of employment by another employer
after the Date of Termination, or otherwise (except for a reduction in
benefits as set forth in SUBSECTION 5.3).
5.5 TAX GROSS-UP PAYMENT. If any payments or benefits provided
pursuant to this Agreement or any other payments or benefits provided
to Executive by the Company are subject to an excise tax on an "excess
parachute payment" under Section 4999 of the Internal Revenue Code of
1986 (the "Code"), or any successor provision of the Code, or are
subject to an excise or penalty tax under any similar provision of any
other revenue system to which Executive may be subject, the Company
will provide a gross-up
-6-
<PAGE>
payment to Executive in order to place Executive in the same after-tax
position Executive would have been in had no excise or penalty tax
become due and payable under Code Section 4999 (or any successor
provision) or any similar provision of that other revenue system. No
gross-up payment will be made for any excise or penalty tax
attributable to any stocks option granted to Executive.
Section 6. SUCCESSORS: BINDING AGREEMENT.
6.1 ASSUMPTION BY COMPANY'S SUCCESSOR. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and
substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement. Failure of the Company to obtain
that agreement prior to the effectiveness of any succession will be a
breach of this Agreement and will entitle Executive to compensation
from the Company in the same amount and on the same terms as Executive
would be entitled under this Agreement if Executive terminated
Executive's employment for Good Reason within three (3) years
following a Change in Control, except that for purposes of
implementing the foregoing, the date on which that succession becomes
effective will be deemed the Date of Termination. As used in this
Agreement, "Company" means Ballantyne of Omaha, Inc. and any successor
to its business and/or assets that executes and delivers the agreement
provided for in this SUBSECTION 6.1 or that otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
6.2 ENFORCEMENT BY EXECUTIVE'S SUCCESSOR. This Agreement will inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees. If Executive dies subsequent to
the termination of Executive's employment while any amount would still
be payable to Executive pursuant to this Agreement if Executive had
continued to live, all those amounts, unless otherwise provided in
this Agreement, will be paid in accordance with the terms of this
Agreement to executive's devisee, legatee or other designee or, if
there be no designee, to Executive's estate; that payment to be made
in a lump sum within sixty (60) days from the date of the Executive's
death.
Section 7. NOTICE. For purposes of this Agreement, notices and all
other communications provided for in this Agreement will be in writing and will
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage pre-paid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company will be directed to the attention of the Chief
Executive Officer of the Company (or if the notice is from the Chief Executive
Officer, to the Secretary of the Company), or to that other address as either
party may have furnished to the other in writing in accordance with this SECTION
7, except that notice of change of address will be effective only upon receipt.
Section 8. MODIFICATION AND WAIVER. No provision of this Agreement may
be modified, waived or discharged unless that waiver, modification or discharge
is agreed to in writing by Executive and that officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
at any time of any breach by the other party of, or compliance with, any
condition or provision of this Agreement to be performed by that other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
time or at any prior or subsequent time.
-7-
<PAGE>
Section 9. CONSTRUCTION. This Agreement supersedes any oral
agreement between Executive and the Company and any oral representation by
the Company to Executive with respect to the subject matter of this
Agreement. The validity, interpretation, construction and performance of the
Agreement will be governed by the laws of the State of Nebraska.
Section 10. SEVERABILITY. If any one or more of the provisions of this
Agreement, including but not limited to SECTION 16 hereof, or any word, phrase,
clause, sentence or other portion of a provision is deemed illegal or
unenforceable for any reason, that provision or portion will be modified or
deleted in such a manner as to make this Agreement as modified legal and
enforceable to the fullest extent permitted under applicable laws. The validity
and enforceability of the remaining provisions or portions will remain in full
force and effect.
Section 11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will take effect as an original and all of
which will evidence one and the same agreement.
Section 12. LEGAL FEES. If the Company breaches this Agreement or if,
within three (3) years following a Change in Control, (a) Executive's employment
is terminated by the Company other than for Cause or Disability or (b) Executive
terminates Executive's employment for Good Reason, the Company will reimburse
Executive for all legal fees and expenses reasonably incurred by Executive as a
result of that termination (including all those fees and expenses, if any,
incurred in contesting or disputing the termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement, unless the Company is
the prevailing party in such litigation).
Section 13. EMPLOYMENT BY A SUBSIDIARY. Either the Company or a
Subsidiary may be Executive's legal employer. For purposes of this Agreement,
any reference to Executive's termination of employment with the Company means
termination of employment with the company and all Subsidiaries, and does not
include a transfer of employment between any of them. The actions referred to
under the definition of "Good Reason" in SUBSECTION 4.3 include the actions of
the Company or Executive's employing Subsidiary, as applicable. The obligations
created under this Agreement are obligations of the Company. A Change in Control
of a Subsidiary will not constitute a Change in Control for purposes of this
Agreement unless there is also a contemporaneous Change in Control of the
Company. For purposes of SECTION 1 and this paragraph, a "Subsidiary" means an
entity more than fifty percent (50%) of whose equity interests are owned
directly or indirectly by the Company.
Section 14. EMPLOYMENT CONTRACT. In the event of any discrepancy
between the terms of this Employment Security Agreement and the terms of
Executive's Employment Agreement dated as of May 1, 1998, the terms of this
Employment Security Agreement shall take precedence. In all other respects, the
terms and provisions of Executive's Employment Contract dated May 1, 1998,
except SECTIONS 8 AND 9 thereof, which sections are modified and clarified by
SECTION 16 of this Employment Security Agreement, shall remain in full force and
effect, and are incorporated herein by this reference.
Section 15. ARBITRATION. Except for the rights and duties of the
parties set forth in SECTION 16 of this Agreement, any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Omaha, Nebraska, according to the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be
-8-
<PAGE>
entitled to seek specific performance of his right to be paid for all periods up
to the date of termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
Section 16. RESTRICTIVE COVENANT.
16.1 NEED FOR PROTECTION. Executive acknowledges that, because of his
Senior Executive position with the Company, his knowledge of the affairs of the
Company and his relations with its dealers, distributors and customers are such
that he could do serious damage to the financial welfare of the Company, should
he compete or assist others in competing with the business of the Company.
Consequently, in his Employment Agreement with the Company dated as of May 1,
1998, he agreed, in SECTION 8 thereof, not to disclose certain information to
any competitor, and, in SECTION 9 thereof, not to compete with the Company for
three (3) years after the termination of his employment. Both parties hereto
agree that SECTIONS 8 AND 9 of the Executive's Employment Agreement dated as of
May 1, 1998, need clarification and modification, while maintaining the basic
intent of the parties in said regard. Accordingly, SECTIONS 8 AND 9 are modified
as follows:
16.2 CONFIDENTIAL INFORMATION.
(a) NON-DISCLOSURE. Except as the Company may permit or direct
in writing, during the term of this Agreement and
thereafter, Executive agrees that he will never disclose to
any person or entity any confidential or proprietary
information, knowledge, or data of the Company, which he may
have obtained while in the employ of the Company, relating
to any customers, customer lists, methods of distribution,
sales, prices, profits, costs, contracts, inventories,
suppliers, dealers, distributors, business prospects,
business methods, manufacturing ideas, formulas, plans or
techniques, research, trade secrets, or know how of the
Company.
(b) RETURN OF RECORDS. All records, documents, software,
computer disks, and any other form of information relating
to the business of the Company, which are or were prepared
or created by Executive, or which may or did come into his
possession during the term of his employment with the
Company, including any and all copies thereof, shall be
returned to, or, as the case may be, shall remain in the
possession of the Company.
(c) FUTURE EMPLOYMENT. Nothing in this section shall limit the
Executive's right to carry the Executive's accumulated
career knowledge and professional skills to any future
employment, subject to the specific limitations of the
foregoing provisions of this section and the respective
covenants set forth below.
16.3 NON-COMPETITION.
(a) GLOBAL OPERATIONS. The parties hereto acknowledge that the
Company's operations are global, and that it sells and
distributes its products to dealers, distributors and
customers worldwide; thus, the company's need for protection
against unfair competition is global.
-9-
<PAGE>
(b) COVENANT NOT TO COMPETE. Executive agrees that he will not,
during the term of this Agreement and for a period of three
(3) years after his employment with the Company has
terminated:
(1) engage directly or indirectly, for his own personal
benefit or for the benefit of any person or entity
other than the Company, in the manufacture, assembly,
distribution or sale of such motion picture theatre
equipment, restaurant equipment, or any other type of
products manufactured, assembled, distributed or sold
by the Company anywhere in the world, or,
(2) develop, promote, invest in, provide financing for, be
employed by, or operate any business on his own behalf,
or for any other person or entity, which is in
competition with the Company, or, assist any other
person in doing so.
(c) COVENANT NOT TO SOLICIT. Executive agrees that he will not,
for a period of three (3) years after his employment with
the Company has terminated:
(1) directly or indirectly, on behalf of himself or any
person or entity, engage in, or assist any other person
or entity to engage in, the manufacture, assembly,
distribution, or sale to any customer, distributor or
dealer of the Company, wherever located, of said motion
picture theatre equipment, restaurant equipment, or any
other type of product manufactured, assembled,
distributed or sold by the Company, if said customer,
distributor or dealer is one with whom he had contact
or with whose account he was involved during the twelve
(12) months prior to the termination of his employment,
or,
(2) directly or indirectly request or advise any of the
aforesaid customers, distributors or dealers referred
to in (1) above, of this subsection, to curtail their
business with the Company or to patronize another
business which is in competition with the Company, or,
(3) directly or indirectly, on behalf of himself or any
other person or entity, request, advise, or solicit any
employee of the Company to leave that employment in
order to engage in, or assist any other person or
entity to engage in, competition with the Company.
16.4 TERMINATION WITHOUT CAUSE. It is understood and agreed that, in
the event the Company terminates the Executive's employment
without cause, or if the Company breaches its Employment
Agreement dated as of May 1, 1998, and does not cure said breach
after ten (10) days' written notice, SUBSECTION 16.3 hereof shall
be null and void. Notwithstanding the foregoing provision,
however, if the Executive's employment is terminated under
circumstances which entitle him to receive the benefits provided
in SECTION 5 of this Agreement, then and in
-10-
<PAGE>
such event, the provisions of SECTION 16.3 hereof shall remain in
full force and effect.
16.5 JUDICIAL MODIFICATION. In the event that any court of law or
equity shall consider or hold any aspect of this section to be
unreasonable or otherwise unenforceable, the parties hereto agree
that the aspects of this section so found may be reduced or
modified by appropriate order of the court, and shall thereafter
continue, as so modified, in full force and effect.
16.6 INJUNCTIVE RELIEF. The parties hereto acknowledge that the
remedies at law for breach of this section will be inadequate,
and the Company shall be entitled to injunctive relief for
violation thereof; provided, however, that nothing herein shall
be construed as prohibiting the Company from pursuing any other
remedies available for such breach or threatened breach,
including the recovery of damages from the Executive.
In witness whereof, the parties have executed this Agreement as of the
date first above written.
BALLANTYNE OF OMAHA, INC.
BY: /s/ Arnold Tenney
------------------------------
Chairman
/s/ Brad J. French
------------------------------
Executive
-11-
<PAGE>
Exhibit 10.4.3
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF 1933
AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN
THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
Void after 5:00 P.M., Omaha, Nebraska USA Time on October 26, 2000
OPTION TO PURCHASE COMMON SHARES
OF
BALLANTYNE OF OMAHA, INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, BRAD J. FRENCH, or permitted
transferees ("Optionee") are together entitled to purchase, subject to the
provisions of this Option, from BALLANTYNE OF OMAHA, INC., a Delaware
corporation ("Corporation"), at a price of $5.50 (US) per Share, up to
Twenty-Five Thousand (25,000) common shares of the Corporation ("Shares") at any
time during the period commencing 12:01 A.M. on October 26, 1999 and terminating
on 11:59 P.M. on the date on which a sale of substantially all of the capital
stock or substantially all of the assets of the Corporation is consummated;
provided, however,
(1) that the occurrence of such sale and the closing thereof on or
before October 26, 2000, shall be a condition precedent to the exercise of the
option herein granted, and
(2) that the option rights granted herein shall expire in any event
at 5:00 P.M., Omaha, Nebraska USA Time, on October 26, 2000.
The Shares deliverable upon the exercise of this option are hereinafter
sometimes referred to as the "Underlying Shares" and the exercise price per
share of this Option to purchase is hereinafter sometimes referred to as the
"Exercise Price." The Shares deliverable upon the exercise of the Options are
hereinafter sometimes referred to as the "Option Shares."
SECTION 1. EXERCISE OF OPTION. Subject to the provisions hereof, this Option
may be exercised, in whole or in part, by presentation and surrender hereof
to the Corporation at its principal office, with the purchase form annexed
hereto, duly executed and accompanied by payment of the Exercise Price for
the number of shares specified in such form. Upon receipt by the Corporation
of this Option at its principal office, in proper form for exercise, the
Optionee shall be deemed to be the holder of record of the Option Shares
issuable upon such exercise, notwithstanding that the shares transfer books
of the Corporation shall then be closed or that certificates representing
such Option Shares shall not then be actually delivered to the Optionee.
SECTION 2. RESERVATION AND STATUS OF SHARES. The Corporation hereby agrees that
at all times there shall be reserved for issuance and delivery upon exercise of
this Option such number of its
-1-
<PAGE>
common shares as shall be required for issuance and delivery upon exercise of
this Option, and that such shares, when issued in accordance with the terms of
this Option, shall be validly issued, fully paid, and non-assessable.
SECTION 3. FRACTIONAL SHARES. Fractional Shares or script representing
Fractional Shares may be issued upon the exercise of this Option.
SECTION 4. NO ASSIGNMENT, TRANSFER UPON DEATH, EXCHANGE, OR LOSS OF OPTION.
4.1 This Option shall not be assignable except that it may be transferred, upon
the death of the Optionee, to the beneficiaries of the Optionee by testamentary
instrument or to the heirs of the Optionee by operation of law.
4.2 This Option is exchangeable, without expense, at the option of the
Optionee, upon presentation and surrender hereof to the Corporation at its
principal office, for other Options of different denominations entitling the
Optionee to purchase, in the aggregate, the same number of Shares purchasable
hereunder.
4.3 Upon receipt by the Corporation of evidence satisfactory to it of the loss,
theft, destruction, or mutilation of this Option, and (in the case of loss,
theft, or destruction) of reasonably satisfactory indemnification, and (in the
case of mutilation) upon surrender and cancellation of this Option, the
Corporation will execute and deliver a new Option, in lieu of the original.
SECTION 5. RIGHTS OF THE OPTIONEE. Except as provided in the last sentence of
Section 1, the Optionee shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Corporation, either at law or equity. The rights of the
Optionee are limited to those expressed in this Option and are not enforceable
against the Corporation except to the extent set forth herein.
SECTION 6. ANTI-DILUTION PROVISIONS. The number and kind of securities
purchasable upon the exercise of this Option and the Exercise Price shall be
subject to adjustment from time to time as follows:
6.1 In case the Corporation shall (i) pay a dividend or make a distribution on
the outstanding Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares into a greater number of shares, (iii) combine the
outstanding Common Shares into a lesser number of shares, or (iv) issue by
reclassification of the Common Shares any Common Shares of the Corporation, the
Optionee of this Option shall thereafter be entitled, upon exercise, to receive
the number and kind of shares which, if this Option had been exercised
immediately prior to the happening of such an event, the Optionee would have
owned upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, or reclassification. Such adjustment
shall become effective on the day next following (x) the record date of such
dividend or distribution or (y) the day upon which such subdivision,
combination, or reclassification shall become effective.
6.2 In case the Corporation shall consolidate or merge into or with another
corporation, or in case the Corporation shall sell or convey to any other person
or persons all or substantially all the property of the Corporation, the
Optionee of this Option shall thereafter be entitled, upon exercise, to receive
this kind and amount of shares, other securities, cash, and property receivable
upon such consolidation, merger, sale, or conveyance by a holder of the number
of Common Shares which might have been purchased upon exercise of this Option
immediately prior to such
-2-
<PAGE>
consolidation, merger, sale, or conveyance, and shall have no other conversion
rights. In any such event, effective provision shall be made, in the certificate
or articles of incorporation of the resulting or surviving corporation, in any
contracts of sale and conveyance, or otherwise so that, so far as appropriate
and as nearly as reasonably may be, the provisions set forth herein for the
protection of the rights of the Optionee of this Option shall thereafter be made
applicable.
6.3 Whenever the number of shares purchasable upon exercise of this Option is
adjusted pursuant to this Section 6, the Exercise Price per share shall be
adjusted simultaneously by multiplying that Exercise Price per share in effect
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of shares purchasable upon exercise of this Option immediately
prior to such adjustment, and of which the denominator shall be the number of
shares so purchasable immediately after such adjustment, so that the aggregate
exercise price of this Option remains the same.
6.4 In the event that at any time, as a result of an adjustment made pursuant
to this Section 6, the Optionee shall become entitled to receive upon exercise
of this Option cash, property, or securities other than Shares, then references
to Shares in this Section 6 shall be deemed to apply, so far as appropriate and
as nearly as may be, to such cash, property, or other securities.
6.5 Irrespective of any adjustments in the Exercise Price or in the number or
kind of Shares purchasable upon exercise of this Option, the form of Options
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Option.
SECTION 7. OFFICER'S CERTIFICATE. Whenever the number or kind of securities
purchasable upon exercise of this Option or the Exercise Price shall be adjusted
as required by the provisions of Section 6, the Corporation shall forthwith file
with its Secretary or Assistant Secretary at its principal office an officer's
certificate showing the adjusted number of kind of securities purchasable upon
exercise of this Option and the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail such facts as shall be necessary
to show the reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Optionee and the Corporation shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to the Optionee.
SECTION 8. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt, if to the Optionee, to:
Brad J. French
1602 Clark Street
Fort Calhoun, Nebraska 68023
-3-
<PAGE>
And if to the Corporation, at its principal office:
Ballantyne of Omaha, Inc.
4350 McKinley Street
Omaha, Nebraska 68112
Or such other addresses as a party shall so notify the other party in writing.
Any notice or other communication given by certified mail shall be deemed given
at the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
SECTION 9. BINDING EFFECT. The provisions of this Option shall be binding upon
and inure to the benefit of (A) the parties hereto, (B) the successors and
assigns of the Corporation, and (C) the heirs and personal representative of the
Optionee.
SECTION 10. LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the Sate of Delaware, United States of America.
SECTION 11. TITLES AND CAPTIONS. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
SECTION 12. PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
SECTION 13. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
SECTION 14. PARTIES IN INTEREST. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
Dated:
BALLANTYNE OF OMAHA, INC.
A Delaware Corporation
By: /s/ Arnold Tenney
-----------------------------
(OFFICER'S NAME & TITLE)
Arnold Tenney, Chairman
-4-
<PAGE>
Exhibit 10.4.4
AMMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is executed on the 25th day of
October, 1999, by and between BALLANTYNE OF OMAHA, INC. ("Ballantyne"), a
Delaware corporation, with its principal offices at 4350 McKinley Street, Omaha,
Nebraska 68112 (the "Company"), and JOHN P. WILMERS, AN INDIVIDUAL RESIDING AT
17566 Baywood Drive, Omaha, Nebraska 68130 (the "Employee").
WITNESSETH:
That certain Employment Agreement entered into between the parties on
January 1, 1997, is hereby amended as follows:
1. Paragraph 4(e) of said Employment Agreement is hereby amended to
read as follows:
"(e) In the event the Company shall be sold, either by a sale of
assets or corporate stock, the Purchaser shall assume this Contract of
Employment. If, at the time of such sale, the remaining term of this
Contract shall be less than three (3) years, this Contract shall be
automatically extended for a period expiring three (3) years from the
closing date of the sale."
2. Except for the changes herein set forth, all other terms,
provisions and conditions of said Employment Agreement of January 1, 1997, shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the date
above written.
BALLANTYNE OF OMAHA, INC.
BY: /s/ Arnold Tenney
------------------------------
Arnold Tenney, Chairman
/s/ John P. Wilmers
------------------------------
John P. Wilmers
-1-
<PAGE>
Exhibit 10.4.5
EMPLOYMENT SECURITY AGREEMENT
This Employment Security Agreement is entered into as of the 26th day
of October, 1999, by and between Ballantyne of Omaha, Inc., a Delaware
corporation, with its principal place of business located at 4350 McKinley
Street, Omaha, Nebraska 68112, (hereinafter the "Company") and John P. Wilmers
of 17566 Baywood Drive, Omaha, Nebraska 68130, (hereinafter "Executive").
WHEREAS, Ballantyne of Omaha, Inc. (the "Company") considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders,
and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control exists, and
that possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders, and
WHEREAS, the Board of Directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including
Executive, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change in
control of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties set forth herein, and for other good and valuable
consideration, the parties agree as follows:
Section 1. CHANGE IN CONTROL.
1.1 RIGHT TO CHANGE IN CONTROL SEVERANCE BENEFITS. In order to induce
Executive to remain in its employ, the Company agrees to provide
Executive the payments and benefits described in this Agreement
(in lieu of compensation and benefits under Executive's
Employment Agreement with the Company, dated as of January 1,
1997, and any severance payments and benefits Executive would
otherwise receive in accordance with the Company's severance pay
practices) if Executive's employment with the Company is
terminated subsequent to a "Change in Control" of the Company as
defined in SECTION 3, under the circumstances described in
SECTION 4.
1.2 NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not give
Executive any right to continued employment by the Company or a
Subsidiary, and any such right shall be governed solely by
Executive's Employment Agreement with the Company dated as of
January 1, 1997, and the right the Company or a Subsidiary
otherwise may have to terminate Executive's employment.
Section 2. TERM OF THIS AGREEMENT. This Agreement will be effective as
of October 26, 1999, and, except as otherwise provided in this Agreement, will
continue in effect until October 26, 2002; provided, that commencing on January
1, 2000, and on each subsequent January 1, the terms of this agreement will be
extended automatically so as to remain in effect for three (3) years
-1-
<PAGE>
from that January 1, unless at least sixty (60) days prior to January 1 of a
given year, the Company notifies Executive that it does not wish to continue
this Agreement in effect beyond its then current expiration date; and provided
further, that if a Change in Control occurs prior to the expiration of this
Agreement, this Agreement will continue in effect for three (3) years from the
Change in Control.
Section 3. DEFINITION OF CHANGE IN CONTROL. No benefits will be
payable under this Agreement unless there is a Change in Control and Executive's
employment by the Company is terminated subsequently under the circumstances
described in SECTION 4 entitling Executive to benefits. For purposes of this
Agreement, a Change in Control of the Company means the occurrence of any of the
following events during the period in which this Agreement remains in effect. A
Change in Control will be deemed to occur on the date the event occurs:
3.1 CHANGE IN VOTING POWER. Any person or persons acting together
which would constitute a "group" for purposes of Section 13(d) of
the Exchange Act (other than the Company, ARC International,
Inc., any subsidiary of either, or any entity beneficially owned
by any of the foregoing) beneficially own (as defined in Rule
13(d)-3 under the Exchange Act) without Board approval or
consent, directly or indirectly, at least forty percent (40%) of
the total voting power of the Company entitled to vote generally
in the election of the Board;
3.2 CHANGE IN BOARD OF DIRECTORS. Either:
(a) the Current Directors (as hereinafter defined) cease for any
reason to constitute at least a majority of the members of
the Board (for these purposes, a "Current Director" means
any member of the Board as of the date of this Agreement,
and any successor of a Current Director whose election or
nomination for election by the company's stockholders was
approved by at least a majority of the current Directors
then on the Board) or
(b) at any meeting of the stockholders of the Company called for
the purpose of electing directors, a majority of the persons
nominated by the Board for election as directors fail to be
elected;
3.3 LIQUIDATION, MERGER OR CONSOLIDATION. The stockholders of the
Company approve:
(a) a plan of complete liquidation of the Company, or
(b) an agreement providing for the merger or consolidation of
the Company (i) in which the Company is not the continuing
or surviving corporation (other than consolidation or merger
with a wholly-owned subsidiary of the Company in which all
Shares outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration) or (ii) pursuant to which the Shares are
converted into cash, securities or other property, except a
consolidation or merger of the Company in which the holders
of the Shares immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of
the common stock of the continuing or surviving corporation
immediately after such consolidation or merger, or in which
the Board
-2-
<PAGE>
immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or
surviving corporation; or
3.4 SALE OF ASSETS. The stockholders of the Company approve an
agreement (or agreements) providing for the sale or other
disposition (in one transaction or a series of transactions) of
all or substantially all of the assets of the Company.
Section 4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the
events described in SECTION 3 constituting a Change in Control occurs, Executive
will be entitled to the payments and benefits provided for in SECTION 5 if a
subsequent termination of Executive's employment occurs within three (3) years
from the date of that Change in Control, unless that termination is:
(a) because of Executive's death;
(b) by the Company for Cause or Disability; or
(c) by Executive other than for Good Reason.
Those payments and benefits will be in lieu of any future compensation under
Executive's Employment Agreement and/or severance payments Executive would
otherwise receive in accordance with the Company's severance pay practices.
4.1 CAUSE. Termination by the Company of Executive's employment for
"Cause" means termination by the Company of Executive's
employment for cause as defined in Section 4(c) of Executive's
Employment Agreement dated as of January 1, 1997, after a written
notice is delivered to Executive by the Chief Executive Officer
of the Company (or if Executive is the Chief Executive Officer,
the Chairman of the Compensation Committee of the Board of
Directors) that specifically identifies the manner in which the
Chief Executive Officer (or the Chairman of the Compensation
Committee) believes that Executive has given the Company cause
for termination of Executive's employment, and giving Executive
an opportunity for Executive, together with Executive's counsel,
to be heard before the Board of Directors of the Company, and a
finding that in the good faith opinion of two-thirds of the Board
of Directors, Executive committed conduct set forth in Section
4(c) of Executive's Employment Agreement, and specifying the
particulars of that finding in detail. For purposes of this
SUBSECTION 4.1, no act, or failure to act, on Executive's part
will be considered "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the
Company.
4.2 DISABILITY. Termination by the Company of Executive's employment
for "Disability" means termination by the Company of Executive's
employment following and because of Executive's failure to
perform substantially all of the material duties of his position
for a period of at least one hundred eighty (180) consecutive
calendar days due to physical or mental illness or injury.
Executive will continue to receive Executive's full base salary
at the rate in effect and any bonus payments under the Key
Employee Bonus Plan payable during the one hundred eighty (180)
day qualification period until termination of Executive's
employment for Disability. After that termination, Executive's
benefits will be
-3-
<PAGE>
determined in accordance with the Company's other benefit plans
and practices then in effect that apply to Executive. The company
will have no further obligation to Executive under this Agreement
and all supplemental benefits will be terminated. If the Company
and Executive disagree as to Executive's incapacity, each may
appoint a medical doctor to certify his opinion as to Executive's
incapacity, and if the doctors do not agree as to Executive's
incapacity, then the two doctors will appoint a third medical
doctor to certify his opinion as to Executive's incapacity, and
the decision of a majority of the three doctors will prevail.
(The Company will bear the costs of the doctors' opinions.)
4.3 GOOD REASON. Termination by Executive of Executive's employment
for "Good Reason" means termination by Executive of Executive's
employment based on:
(a) The assignment to Executive of duties inconsistent with his
position and status with the Company as they existed
immediately prior to a Change in Control, or a substantial
change in Executive's title, offices or authority, or in the
nature of his responsibilities, as they existed immediately
prior to a Change in Control, except in connection with the
termination of his employment for Cause or Disability or as
a result of his death or by Executive other than for Good
Reason;
(b) A reduction by the Company in Executive's base salary as in
effect on the date of this Agreement or as his salary may be
increased from time to time;
(c) A failure by the Company to continue the Company's Key
Employees' Bonus Plan, as it may be modified from time to
time, substantially in the form in effect immediately prior
to a Change in Control (the "Plan"), or a failure by the
Company to continue Executive as a participant in the Plan
on a basis substantially similar to his participation
immediately prior to a Change in Control, or to pay
Executive the amounts that Executive would be entitled to
receive in accordance with the Plan;
(d) The Company's requiring Executive to be based more than
thirty-five (35) miles from the location where Executive is
based immediately prior to a Change in Control, except for
required travel on the Company's business to an extent
substantially consistent with Executive's business travel
obligations prior to the Change in Control, or if Executive
consents to that relocation, the failure by the Company to
pay (or reimburse Executive for) all reasonable moving
expenses incurred by Executive or to indemnify Executive
against any loss realized in the sale of his principal
residence in connection with that relocation;
(e) The failure by the Company to continue in effect any
retirement plan, life insurance plan, medical insurance
plan, disability plan or any other benefit plan in which
Executive is participating immediately prior to Change in
Control of the Company (or provide plans providing Executive
with substantially similar benefits), the taking of any
action by the Company that would adversely affect
Executive's participation or materially reduce his benefits
under any of those plans or deprive
-4-
<PAGE>
Executive of any material fringe benefit enjoyed by
Executive immediately prior to a Change in Control; or
(f) The failure by the Company to obtain the assumption of this
Agreement by any successor, as contemplated in SECTION 6.
4.4 NOTICE OF TERMINATION. Any purported termination by the Company
pursuant to SUBSECTIONS 4.1 OR 4.2 or by Executive pursuant to
SUBSECTION 4.3 will be communicated by written Notice of
Termination to the other party. For purposes of this Agreement, a
"Notice of Termination" means a notice that indicates the
specific termination provision in this Agreement relied upon and
setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's
employment under the provision so indicated. Any purported
termination not effected pursuant to a Notice of Termination
meeting the requirements set forth in this Agreement will not be
effective.
4.5 DATE OF TERMINATION. For purposes of this Agreement, the date of
the termination of Executive's employment ("Date of Termination")
will be:
(a) if Executive's employment is terminated by his death, the
end of the month in which his death occurs,
(b) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given, or
(c) if Executive's employment is terminated by Executive or the
company for any other reason, the date specified in the
Notice of Termination, which will not be later than thirty
(30) days after the date on which the Notice of Termination
is given.
Section 5. BENEFITS UPON CERTAIN TERMINATIONS FOLLOWING A CHANGE IN
CONTROL. If within three (3) years following the Change in Control, Executive's
employment by the Company is terminated by the Company other than for Death,
Disability or Cause, or if Executive terminates his employment for Good Reason,
then the following provisions will apply:
5.1 COMPENSATION THROUGH DATE OF TERMINATION. The Company will pay
Executive within thirty (30) days after termination:
(a) Any unpaid amount of Executive's base salary through the
date of termination;
(b) With respect to any year then completed, any unpaid amount
accrued to Executive pursuant to the Key Employees' Bonus
Plan; and
(c) With respect to any year then partially completed, a pro
rata portion through the date of termination of Executive's
annual bonus under the Key Employees' Bonus Plan, based upon
the amount of his bonus for the previous year.
5.2 ADDITIONAL SEVERANCE. In lieu of any further salary and bonus
payments to Executive for periods subsequent to the date of
termination or other severance
-5-
<PAGE>
payments, the Company will pay as severance pay to Executive
three times the sum of:
(a) Executive's annual base salary as of the date of Change in
Control, or as of the date of termination of employment,
whichever is greater;
(b) Executive's annual bonus under the Key Employees' Bonus
Plan. Executive's annual bonus amount is to be based on the
greater of:
(1) the average of Executive's bonus for the two fiscal
years of the Company preceding the year in which the
Change in Control occurs, or
(2) the average of Executive's bonus for the two fiscal
years of the Company preceding the year in which the
termination of employment occurs.
The additional severance pay provided for in this SECTION 5.2
shall be transferred to a "Rabbi Trust", effective as of the date of
termination of employment, and paid to Executive in thirty-six (36)
equal monthly installments commencing on the first day of the next
month following the date of termination, and on the first day of each
subsequent month, until fully paid.
5.3 BENEFIT PLANS. Unless Executive's employment is terminated for
cause, the Company will maintain in full force and effect for
Executive's continued benefit until Executive attains the age of
sixty-five (65) years, health, dental, disability and other welfare
benefits, plans, programs and arrangements substantially equivalent to
the most valuable coverage provided under any plan maintained by the
Company from time to time during such period. In addition, the Company
shall continue to provide Executive with the same life insurance
coverage maintained by the Company on his life immediately prior to
the date of termination. These benefits shall be reduced by the amount
of similar benefits provided to Executive during such Period by a
subsequent employer, as determined solely by the Board. For the
purposes of enforcing this offset provision, Executive shall notify
the Company as to the terms and conditions of any subsequent
employment and the corresponding benefits received pursuant thereto,
and shall provide, or cause to provide the Company, correct, complete,
and timely information concerning the same.
5.4 NO MITIGATION REQUIRED. Executive will not be required to
mitigate the amount of any payment provided for in this SECTION 5 by
seeking other employment or otherwise, nor will the amount of any
payment provided for in this SECTION 5 be reduced by any compensation
earned by Executive as the result of employment by another employer
after the Date of Termination, or otherwise (except for a reduction in
benefits as set forth in SUBSECTION 5.3).
5.5 TAX GROSS-UP PAYMENT. If any payments or benefits provided
pursuant to this Agreement or any other payments or benefits provided
to Executive by the Company are subject to an excise tax on an "excess
parachute payment" under Section 4999 of the Internal Revenue Code of
1986 (the "Code"), or any successor provision of the Code, or are
subject to an excise or penalty tax under any similar provision of any
other revenue system to which Executive may be subject, the Company
will provide a gross-up
-6-
<PAGE>
payment to Executive in order to place Executive in the same after-tax
position Executive would have been in had no excise or penalty tax
become due and payable under Code Section 4999 (or any successor
provision) or any similar provision of that other revenue system. No
gross-up payment will be made for any excise or penalty tax
attributable to any stocks option granted to Executive.
Section 6. SUCCESSORS: BINDING AGREEMENT.
6.1 ASSUMPTION BY COMPANY'S SUCCESSOR. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and
substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement. Failure of the Company to obtain
that agreement prior to the effectiveness of any succession will be a
breach of this Agreement and will entitle Executive to compensation
from the Company in the same amount and on the same terms as Executive
would be entitled under this Agreement if Executive terminated
Executive's employment for Good Reason within three (3) years
following a Change in Control, except that for purposes of
implementing the foregoing, the date on which that succession becomes
effective will be deemed the Date of Termination. As used in this
Agreement, "Company" means Ballantyne of Omaha, Inc. and any successor
to its business and/or assets that executes and delivers the agreement
provided for in this SUBSECTION 6.1 or that otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
6.2 ENFORCEMENT BY EXECUTIVE'S SUCCESSOR. This Agreement will inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees. If Executive dies subsequent to
the termination of Executive's employment while any amount would still
be payable to Executive pursuant to this Agreement if Executive had
continued to live, all those amounts, unless otherwise provided in
this Agreement, will be paid in accordance with the terms of this
Agreement to executive's devisee, legatee or other designee or, if
there be no designee, to Executive's estate; that payment to be made
in a lump sum within sixty (60) days from the date of the Executive's
death.
Section 7. NOTICE. For purposes of this Agreement, notices and all
other communications provided for in this Agreement will be in writing and will
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage pre-paid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company will be directed to the attention of the Chief
Executive Officer of the Company (or if the notice is from the Chief Executive
Officer, to the Secretary of the Company), or to that other address as either
party may have furnished to the other in writing in accordance with this SECTION
7, except that notice of change of address will be effective only upon receipt.
Section 8. MODIFICATION AND WAIVER. No provision of this Agreement may
be modified, waived or discharged unless that waiver, modification or discharge
is agreed to in writing by Executive and that officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
at any time of any breach by the other party of, or compliance with, any
condition or provision of this Agreement to be performed by that other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
time or at any prior or subsequent time.
-7-
<PAGE>
Section 9. CONSTRUCTION. This Agreement supersedes any oral agreement
between Executive and the Company and any oral representation by the Company to
Executive with respect to the subject matter of this Agreement. The validity,
interpretation, construction an performance of the Agreement will be governed by
the laws of the State of Nebraska.
Section 10. SEVERABILITY. If any one or more of the provisions of this
Agreement, including but not limited to SECTION 16 hereof, or any word, phrase,
clause, sentence or other portion of a provision is deemed illegal or
unenforceable for any reason, that provision or portion will be modified or
deleted in such a manner as to make this Agreement as modified legal and
enforceable to the fullest extent permitted under applicable laws. The validity
and enforceability of the remaining provisions or portions will remain in full
force and effect.
Section 11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will take effect as an original and all of
which will evidence one and the same agreement.
Section 12. LEGAL FEES. If the Company breaches this Agreement or if,
within three (3) years following a Change in Control, (a) Executive's employment
is terminated by the Company other than for Cause or Disability or (b) Executive
terminates Executive's employment for Good Reason, the Company will reimburse
Executive for all legal fees and expenses reasonably incurred by Executive as a
result of that termination (including all those fees and expenses, if any,
incurred in contesting or disputing the termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement, unless the Company is
the prevailing party in such litigation).
Section 13. EMPLOYMENT BY A SUBSIDIARY. Either the Company or a
Subsidiary may be Executive's legal employer. For purposes of this Agreement,
any reference to Executive's termination of employment with the Company means
termination of employment with the company and all Subsidiaries, and does not
include a transfer of employment between any of them. The actions referred to
under the definition of "Good Reason" in SUBSECTION 4.3 include the actions of
the Company or Executive's employing Subsidiary, as applicable. The obligations
created under this Agreement are obligations of the Company. A Change in Control
of a Subsidiary will not constitute a Change in Control for purposes of this
Agreement unless there is also a contemporaneous Change in Control of the
Company. For purposes of SECTION 1 and this paragraph, a "Subsidiary" means an
entity more than fifty percent (50%) of whose equity interests are owned
directly or indirectly by the Company.
Section 14. EMPLOYMENT CONTRACT. In the event of any discrepancy
between the terms of this Employment Security Agreement and the terms of
Executive's Employment Agreement dated as of January 1, 1997, the terms of this
Employment Security Agreement shall take precedence. In all other respects, the
terms and provisions of Executive's Employment Contract dated January 1, 1997,
except SECTIONS 8 AND 9 thereof, which sections are modified and clarified by
SECTION 16 of this Employment Security Agreement, shall remain in full force and
effect, and are incorporated herein by this reference.
Section 15. ARBITRATION. Except for the rights and duties of the
parties set forth in SECTION 16 of this Agreement, any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Omaha, Nebraska, according to the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be
-8-
<PAGE>
entitled to seek specific performance of his right to be paid for all periods up
to the date of termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
Section 16. RESTRICTIVE COVENANT.
16.1 NEED FOR PROTECTION. Executive acknowledges that, because of his
Senior Executive position with the Company, his knowledge of the affairs of the
Company and his relations with its dealers, distributors and customers are such
that he could do serious damage to the financial welfare of the Company, should
he compete or assist others in competing with the business of the Company.
Consequently, in his Employment Agreement with the Company dated as of January
1, 1997, he agreed, in SECTION 8 thereof, not to disclose certain information to
any competitor, and, in SECTION 9 thereof, not to compete with the Company for
three (3) years after the termination of his employment. Both parties hereto
agree that SECTIONS 8 AND 9 of the Executive's Employment Agreement dated as of
January 1, 1997, need clarification and modification, while maintaining the
basic intent of the parties in said regard. Accordingly, SECTIONS 8 AND 9 are
modified as follows:
16.2 CONFIDENTIAL INFORMATION.
(a) NON-DISCLOSURE. Except as the Company may permit or direct
in writing, during the term of this Agreement and
thereafter, Executive agrees that he will never disclose to
any person or entity any confidential or proprietary
information, knowledge, or data of the Company, which he may
have obtained while in the employ of the Company, relating
to any customers, customer lists, methods of distribution,
sales, prices, profits, costs, contracts, inventories,
suppliers, dealers, distributors, business prospects,
business methods, manufacturing ideas, formulas, plans or
techniques, research, trade secrets, or know how of the
Company.
(b) RETURN OF RECORDS. All records, documents, software,
computer disks, and any other form of information relating
to the business of the Company, which are or were prepared
or created by Executive, or which may or did come into his
possession during the term of his employment with the
Company, including any and all copies thereof, shall be
returned to, or, as the case may be, shall remain in the
possession of the Company.
(c) FUTURE EMPLOYMENT. Nothing in this section shall limit the
Executive's right to carry the Executive's accumulated
career knowledge and professional skills to any future
employment, subject to the specific limitations of the
foregoing provisions of this section and the respective
covenants set forth below.
16.3 NON-COMPETITION.
(a) GLOBAL OPERATIONS. The parties hereto acknowledge that the
Company's operations are global, and that it sells and
distributes its products to dealers, distributors and
customers worldwide; thus, the company's need for protection
against unfair competition is global.
-9-
<PAGE>
(b) COVENANT NOT TO COMPETE. Executive agrees that he will not,
during the term of this Agreement and for a period of three
(3) years after his employment with the Company has
terminated:
(1) engage directly or indirectly, for his own personal
benefit or for the benefit of any person or entity
other than the Company, in the manufacture, assembly,
distribution or sale of such motion picture theatre
equipment, restaurant equipment, or any other type of
products manufactured, assembled, distributed or sold
by the Company anywhere in the world, or,
(2) develop, promote, invest in, provide financing for, be
employed by, or operate any business on his own behalf,
or for any other person or entity, which is in
competition with the Company, or, assist any other
person in doing so.
(c) COVENANT NOT TO SOLICIT. Executive agrees that he will not,
for a period of three (3) years after his employment with
the Company has terminated:
(1) directly or indirectly, on behalf of himself or any
person or entity, engage in, or assist any other person
or entity to engage in, the manufacture, assembly,
distribution, or sale to any customer, distributor or
dealer of the Company, wherever located, of said motion
picture theatre equipment, restaurant equipment, or any
other type of product manufactured, assembled,
distributed or sold by the Company, if said customer,
distributor or dealer is one with whom he had contact
or with whose account he was involved during the twelve
(12) months prior to the termination of his employment,
or,
(2) directly or indirectly request or advise any of the
aforesaid customers, distributors or dealers referred
to in (1) above, of this subsection, to curtail their
business with the Company or to patronize another
business which is in competition with the Company, or,
(3) directly or indirectly, on behalf of himself or any
other person or entity, request, advise, or solicit any
employee of the Company to leave that employment in
order to engage in, or assist any other person or
entity to engage in, competition with the Company.
16.4 TERMINATION WITHOUT CAUSE. It is understood and agreed that, in
the event the Company terminates the Executive's employment
without cause, or if the Company breaches its Employment
Agreement dated as of January 1, 1997, and does not cure said
breach after ten (10) days' written notice, SUBSECTION 16.3
hereof shall be null and void. Notwithstanding the foregoing
provision, however, if the Executive's employment is terminated
under circumstances which entitle him to receive the benefits
provided in SECTION 5 of this Agreement, then and in
-10-
<PAGE>
such event, the provisions of SECTION 16.3 hereof shall remain in
full force and effect.
16.5 JUDICIAL MODIFICATION. In the event that any court of law or
equity shall consider or hold any aspect of this section to be
unreasonable or otherwise unenforceable, the parties hereto agree
that the aspects of this section so found may be reduced or
modified by appropriate order of the court, and shall thereafter
continue, as so modified, in full force and effect.
16.6 INJUNCTIVE RELIEF. The parties hereto acknowledge that the
remedies at law for breach of this section will be inadequate,
and the Company shall be entitled to injunctive relief for
violation thereof; provided, however, that nothing herein shall
be construed as prohibiting the Company from pursuing any other
remedies available for such breach or threatened breach,
including the recovery of damages from the Executive.
In witness whereof, the parties have executed this Agreement as of the
date first above written.
BALLANTYNE OF OMAHA, INC.
BY: /s/ Arnold Tenney
------------------------------
Chairman
/s/ John P. Wilmers
------------------------------
Executive
-11-
<PAGE>
Exhibit 10.4.6
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF 1933
AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN
THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
Void after 5:00 P.M., Omaha, Nebraska USA Time on October 26, 2000
OPTION TO PURCHASE COMMON SHARES
OF
BALLANTYNE OF OMAHA, INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, JOHN P. WILMERS, or permitted
transferees ("Optionee") are together entitled to purchase, subject to the
provisions of this Option, from BALLANTYNE OF OMAHA, INC., a Delaware
corporation ("Corporation"), at a price of $5.50 (US) per Share, up to Fifty
Thousand (50,000) common shares of the Corporation ("Shares") at any time during
the period commencing 12:01 A.M. on October 26, 1999 and terminating on 11:59
P.M. on the date on which a sale of substantially all of the capital stock or
substantially all of the assets of the Corporation is consummated; provided,
however,
(1) that the occurrence of such sale and the closing thereof on or
before October 26, 2000, shall be a condition precedent to the exercise of the
option herein granted, and
(2) that the option rights granted herein shall expire in any event
at 5:00 P.M., Omaha, Nebraska USA Time, on October 26, 2000.
The Shares deliverable upon the exercise of this option are hereinafter
sometimes referred to as the "Underlying Shares" and the exercise price per
share of this Option to purchase is hereinafter sometimes referred to as the
"Exercise Price." The Shares deliverable upon the exercise of the Options are
hereinafter sometimes referred to as the "Option Shares."
SECTION 1. EXERCISE OF OPTION. Subject to the provisions hereof, this Option may
be exercised, in whole or in part, by presentation and surrender hereof to the
Corporation at its principal office, with the purchase form annexed hereto, duly
executed and accomplished by payment of the Exercise Price for the number of
shares specified in such form. Upon receipt by the Corporation of this Option at
its principal office, in proper form for exercise, the Optionee shall be deemed
to be the holder of record of the Option Shares issuable upon such exercise,
notwithstanding that the shares transfer books of the Corporation shall then be
closed or that certificates representing such Option Shares shall not then be
actually delivered to the Optionee.
-1-
<PAGE>
SECTION 2. RESERVATION AND STATUS OF SHARES. The Corporation hereby agrees that
at all times there shall be reserved for issuance and delivery upon exercise of
this Option such number of its common shares as shall be required for issuance
and delivery upon exercise of this Option, and that such shares, when issued in
accordance with the terms of this Option, shall be validly issued, fully paid,
and non-assessable.
SECTION 3. FRACTIONAL SHARES. Fractional Shares or script representing
Fractional Shares may be issued upon the exercise of this Option.
SECTION 4. NO ASSIGNMENT, TRANSFER UPON DEATH, EXCHANGE, OR LOSS OF OPTION.
4.1 This Option shall not be assignable except that it may be transferred, upon
the death of the Optionee, to the beneficiaries of the Optionee by testamentary
instrument or to the heirs of the Optionee by operation of law.
4.2 This Option is exchangeable, without expense, at the option of the
Optionee, upon presentation and surrender hereof to the Corporation at its
principal office, for other Options of different denominations entitling the
Optionee to purchase, in the aggregate, the same number of Shares purchasable
hereunder.
4.3 Upon receipt by the Corporation of evidence satisfactory to it of the loss,
theft, destruction, or mutilation of this Option, and (in the case of loss,
theft, or destruction) of reasonably satisfactory indemnification, and (in the
case of mutilation) upon surrender and cancellation of this Option, the
Corporation will execute and deliver a new Option, in lieu of the original.
SECTION 5. RIGHTS OF THE OPTIONEE. Except as provided in the last sentence of
Section 1, the Optionee shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Corporation, either at law or equity. The rights of the
Optionee are limited to those expressed in this Option and are not enforceable
against the Corporation except to the extent set forth herein.
SECTION 6. ANTI-DILUTION PROVISIONS. The number and kind of securities
purchasable upon the exercise of this Option and the Exercise Price shall be
subject to adjustment from time to time as follows:
6.1 In case the Corporation shall (i) pay a dividend or make a distribution on
the outstanding Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares into a greater number of shares, (iii) combine the
outstanding Common Shares into a lesser number of shares, or (iv) issue by
reclassification of the Common Shares any Common Shares of the Corporation, the
Optionee of this Option shall thereafter be entitled, upon exercise, to receive
the number and kind of shares which, if this Option had been exercised
immediately prior to the happening of such an event, the Optionee would have
owned upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, or reclassification. Such adjustment
shall become effective on the day next following (x) the record date of such
dividend or distribution or (y) the day upon which such subdivision,
combination, or reclassification shall become effective.
6.2 In case the Corporation shall consolidate or merge into or with another
corporation, or in case the Corporation shall sell or convey to any other person
or persons all or substantially all the property of the Corporation, the
Optionee of this Option shall thereafter be entitled, upon exercise, to receive
this kind and amount of shares, other securities, cash, and property receivable
-2-
<PAGE>
upon such consolidation, merger, sale, or conveyance by a holder of the number
of Common Shares which might have been purchased upon exercise of this Option
immediately prior to such consolidation, merger, sale, or conveyance, and shall
have no other conversion rights. In any such event, effective provision shall be
made, in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contracts of sale and conveyance, or otherwise so
that, so far as appropriate and as nearly as reasonably may be, the provisions
set forth herein for the protection of the rights of the Optionee of this Option
shall thereafter be made applicable.
6.3 Whenever the number of shares purchasable upon exercise of this Option is
adjusted pursuant to this Section 6, the Exercise Price per share shall be
adjusted simultaneously by multiplying that Exercise Price per share in effect
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of shares purchasable upon exercise of this Option immediately
prior to such adjustment, and of which the denominator shall be the number of
shares so purchasable immediately after such adjustment, so that the aggregate
exercise price of this Option remains the same.
6.4 In the event that at any time, as a result of an adjustment made pursuant
to this Section 6, the Optionee shall become entitled to receive upon exercise
of this Option cash, property, or securities other than Shares, then references
to Share in this Section 6 shall be deemed to apply, so far as appropriate and
as nearly as may be, to such cash, property, or other securities.
6.5 Irrespective of any adjustments in the Exercise Price or in the number or
kind of Shares purchasable upon exercise of this Option, the form of Options
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Option.
SECTION 7. OFFICER'S CERTIFICATE. Whenever the number or kind of securities
purchasable upon exercise of this Option or the Exercise Price shall be adjusted
as required by the provisions of Section 6, the Corporation shall forthwith file
with its Secretary or Assistant Secretary at its principal office an officer's
certificate showing the adjusted number or kind of securities purchasable upon
exercise of this Option and the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail such facts as shall be necessary
to show the reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Optionee and the Corporation shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to the Optionee.
SECTION 8. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt, if to the Optionee, to:
John P. Wilmers
17566 Baywood Drive
Omaha, Nebraska 68130
-3-
<PAGE>
And if to the Corporation, at its principal office:
Ballantyne of Omaha, Inc.
4350 McKinley Street
Omaha, Nebraska 68112
Or such other addresses as a party shall so notify the other party in writing.
Any notice or other communication given by certified mail shall be deemed given
at the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
SECTION 9. BINDING EFFECT. The provisions of this Option shall be binding upon
and inure to the benefit of (A) the parties hereto, (B) the successors and
assigns of the Corporation, and (C) the heirs and personal representative of the
Optionee.
SECTION 10. LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the Sate of Delaware, United States of America.
SECTION 11. TITLES AND CAPTIONS. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
SECTION 12. PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
SECTION 13. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
SECTION 14. PARTIES IN INTEREST. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
Dated:
BALLANTYNE OF OMAHA, INC.
A Delaware Corporation
By: /s/ Arnold Tenney
-----------------------------
(OFFICER'S NAME & TITLE)
Arnold Tenney, Chairman
-4-
<PAGE>
Exhibit 10.4.7
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is executed on the 25th day of
October, 1999, by and between BALLANTYNE OF OMAHA, INC. ("Ballantyne"), a
Delaware corporation, with its principal offices at 4350 McKinley Street, Omaha,
Nebraska 68112 (the "Company"), and RAY F. BOEGNER, an individual residing at
1144 South 185th Circle, Omaha, Nebraska 68130 (the "Employee").
WITNESSETH:
That certain Employment Agreement entered into between the parties on
November 20, 1996, is hereby amended as follows:
1. Paragraph 4(b) of said Employment Agreement is hereby amended to
read:
"(b) Notwithstanding anything to the contrary provided herein, the
Company or the Employee may give the other 120 days' notice prior to
the end of the term, or of any extension or renewal thereof, of such
parties' intention to negotiate a new employment arrangement
commencing at the end of the term or to terminate this Agreement. In
the event no such notice is given, the term described at subparagraph
(a) above shall automatically renew for an additional year, and this
subsection (b) shall be applicable again within such extension."
2. Except for the changes herein set forth, all other terms,
provisions and conditions of said Employment Agreement of November 20, 1996,
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have set their hands the date
above written.
BALLANTYNE OF OMAHA, INC.
BY: /s/ John P. Wilmers
------------------------------
President
/s/ Ray F. Boegner
------------------------------
Ray F. Boegner
-1-
<PAGE>
Exhibit 10.4.8
EMPLOYMENT SECURITY AGREEMENT
This Employment Security Agreement is entered into as of the 26th day
of October 1999, by and between Ballantyne of Omaha, Inc., a Delaware
corporation, with its principal place of business located at 4350 McKinley
Street, Omaha, Nebraska 68112, (hereinafter the "Company") and Ray F. Boegner of
1144 South 185th Circle, Omaha, Nebraska 68130, (hereinafter "Executive").
WHEREAS, Ballantyne of Omaha, Inc. (the "Company") considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and its shareholders,
and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control exists, and
that possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders, and
WHEREAS, the Board of Directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including
Executive, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change in
control of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties set forth herein, and for other good and valuable
consideration, the parties agree as follows:
Section 1. CHANGE IN CONTROL.
1.1 RIGHT TO CHANGE IN CONTROL SEVERANCE BENEFITS. In order to induce
Executive to remain in its employ, the Company agrees to provide
Executive the payments and benefits described in this Agreement
(in lieu of compensation and benefits under Executive's
Employment Agreement with the Company, dated as of November 20,
1996, and any severance payments and benefits Executive would
otherwise receive in accordance with the Company's severance pay
practices) if Executive's employment with the Company is
terminated subsequent to a "Change in Control" of the Company as
defined in SECTION 3, under the circumstances described in
SECTION 4.
1.2 NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not give
Executive any right to continued employment by the Company or a
Subsidiary, and any such right shall be governed solely by
Executive's Employment Agreement with the Company dated as of
November 20, 1996, and the right the Company or a Subsidiary
otherwise may have to terminate Executive's employment.
Section 2. TERM OF THIS AGREEMENT. This Agreement will be effective as
of October 26, 1999, and, except as otherwise provided in this Agreement, will
continue in effect until October 26, 2002; provided, that commencing on January
1, 2000, and on each subsequent January 1, the terms of this agreement will be
extended automatically so as to remain in effect for three (3) years
-1-
<PAGE>
from that January 1, unless at least sixty (60) days prior to January 1 of a
given year, the Company notifies Executive that it does not wish to continue
this Agreement in effect beyond its then current expiration date; and provided
further, that if a Change in Control occurs prior to the expiration of this
Agreement, this Agreement will continue in effect for three (3) years from the
Change in Control.
Section 3. DEFINITION OF CHANGE IN CONTROL. No benefits will be
payable under this Agreement unless there is a Change in Control and Executive's
employment by the Company is terminated subsequently under the circumstances
described in SECTION 4 entitling Executive to benefits. For purposes of this
Agreement, a Change in Control of the Company means the occurrence of any of the
following events during the period in which this Agreement remains in effect. A
Change in Control will be deemed to occur on the date the event occurs:
3.1 CHANGE IN VOTING POWER. Any person or persons acting together
which would constitute a "group" for purposes of Section 13(d) of
the Exchange Act (other than the Company, ARC International,
Inc., any subsidiary of either, or any entity beneficially owned
by any of the foregoing) beneficially own (as defined in Rule
13(d)-3 under the Exchange Act) without Board approval or
consent, directly or indirectly, at least forty percent (40%) of
the total voting power of the Company entitled to vote generally
in the election of the Board;
3.2 CHANGE IN BOARD OF DIRECTORS. Either:
(a) the Current Directors (as hereinafter defined) cease for any
reason to constitute at least a majority of the members of
the Board (for these purposes, a "Current Director" means
any member of the Board as of the date of this Agreement,
and any successor of a Current Director whose election or
nomination for election by the company's stockholders was
approved by at least a majority of the current Directors
then on the Board) or
(b) at any meeting of the stockholders of the Company called for
the purpose of electing directors, a majority of the persons
nominated by the Board for election as directors fail to be
elected;
3.3 LIQUIDATION, MERGER OR CONSOLIDATION. The stockholders of the
Company approve:
(a) a plan of complete liquidation of the Company, or
(b) an agreement providing for the merger or consolidation of
the Company (i) in which the Company is not the continuing
or surviving corporation (other than consolidation or merger
with a wholly-owned subsidiary of the Company in which all
Shares outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration) or (ii) pursuant to which the Shares are
converted into cash, securities or other property, except a
consolidation or merger of the Company in which the holders
of the Shares immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of
the common stock of the continuing or surviving corporation
immediately after such consolidation or merger, or in which
the Board
-2-
<PAGE>
immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or
surviving corporation; or
3.4 SALE OF ASSETS. The stockholders of the Company approve an
agreement (or agreements) providing for the sale or other
disposition (in one transaction or a series of transactions) of
all or substantially all of the assets of the Company.
Section 4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the
events described in SECTION 3 constituting a Change in Control occurs, Executive
will be entitled to the payments and benefits provided for in SECTION 5 if a
subsequent termination of Executive's employment occurs within three (3) years
from the date of that Change in Control, unless that termination is:
(a) because of Executive's death;
(b) by the Company for Cause or Disability; or
(c) by Executive other than for Good Reason.
Those payments and benefits will be in lieu of any future compensation under
Executive's Employment Agreement and/or severance payments Executive would
otherwise receive in accordance with the Company's severance pay practices.
4.1 CAUSE. Termination by the Company of Executive's employment for
"Cause" means termination by the Company of Executive's
employment for cause as defined in Section 4(c) of Executive's
Employment Agreement dated as of November 20, 1996, after a
written notice is delivered to Executive by the Chief Executive
Officer of the Company (or if Executive is the Chief Executive
Officer, the Chairman of the Compensation Committee of the Board
of Directors) that specifically identifies the manner in which
the Chief Executive Officer (or the Chairman of the Compensation
Committee) believes that Executive has given the Company cause
for termination of Executive's employment, and giving Executive
an opportunity for Executive, together with Executive's counsel,
to be heard before the Board of Directors of the Company, and a
finding that in the good faith opinion of two-thirds of the Board
of Directors, Executive committed conduct set forth in Section
4(c) of Executive's Employment Agreement, and specifying the
particulars of that finding in detail. For purposes of this
SUBSECTION 4.1, no act, or failure to act, on Executive's part
will be considered "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the
Company.
4.2 DISABILITY. Termination by the Company of Executive's employment
for "Disability" means termination by the Company of Executive's
employment following and because of Executive's failure to
perform substantially all of the material duties of his position
for a period of at least one hundred eighty (180) consecutive
calendar days due to physical or mental illness or injury.
Executive will continue to receive Executive's full base salary
at the rate in effect and any bonus payments under the Key
Employee Bonus Plan payable during the one hundred eighty (180)
day qualification period until termination of Executive's
employment for Disability. After that termination, Executive's
benefits will be
-3-
<PAGE>
determined in accordance with the Company's other benefit plans
and practices then in effect that apply to Executive. The company
will have no further obligation to Executive under this Agreement
and all supplemental benefits will be terminated. If the Company
and Executive disagree as to Executive's incapacity, each may
appoint a medical doctor to certify his opinion as to Executive's
incapacity, and if the doctors do not agree as to Executive's
incapacity, then the two doctors will appoint a third medical
doctor to certify his opinion as to Executive's incapacity, and
the decision of a majority of the three doctors will prevail.
(The Company will bear the costs of the doctors' opinions.)
4.3 GOOD REASON. Termination by Executive of Executive's employment
for "Good Reason" means termination by Executive of Executive's
employment based on:
(a) The assignment to Executive of duties inconsistent with his
position and status with the Company as they existed
immediately prior to a Change in Control, or a substantial
change in Executive's title, offices or authority, or in the
nature of his responsibilities, as they existed immediately
prior to a Change in Control, except in connection with the
termination of his employment for Cause or Disability or as
a result of his death or by Executive other than for Good
Reason;
(b) A reduction by the Company in Executive's base salary as in
effect on the date of this Agreement or as his salary may be
increased from time to time;
(c) A failure by the Company to continue the Company's Key
Employees' Bonus Plan, as it may be modified from time to
time, substantially in the form in effect immediately prior
to a Change in Control (the "Plan"), or a failure by the
Company to continue Executive as a participant in the Plan
on a basis substantially similar to his participation
immediately prior to a Change in Control, or to pay
Executive the amounts that Executive would be entitled to
receive in accordance with the Plan;
(d) The Company's requiring Executive to be based more than
thirty-five (35) miles from the location where Executive is
based immediately prior to a Change in Control, except for
required travel on the Company's business to an extent
substantially consistent with Executive's business travel
obligations prior to the Change in Control, or if Executive
consents to that relocation, the failure by the Company to
pay (or reimburse Executive for) all reasonable moving
expenses incurred by Executive or to indemnify Executive
against any loss realized in the sale of his principal
residence in connection with that relocation;
(e) The failure by the Company to continue in effect any
retirement plan, life insurance plan, medical insurance
plan, disability plan or any other benefit plan in which
Executive is participating immediately prior to Change in
Control of the Company (or provide plans providing Executive
with substantially similar benefits), the taking of any
action by the Company that would adversely affect
Executive's participation or materially reduce his benefits
under any of those plans or deprive
-4-
<PAGE>
Executive of any material fringe benefit enjoyed by
Executive immediately prior to a Change in Control; or
(f) The failure by the Company to obtain the assumption of this
Agreement by any successor, as contemplated in SECTION 6.
4.4 NOTICE OF TERMINATION. Any purported termination by the Company
pursuant to SUBSECTIONS 4.1 OR 4.2 or by Executive pursuant to
SUBSECTION 4.3 will be communicated by written Notice of
Termination to the other party. For purposes of this Agreement, a
"Notice of Termination" means a notice that indicates the
specific termination provision in this Agreement relied upon and
setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's
employment under the provision so indicated. Any purported
termination not effected pursuant to a Notice of Termination
meeting the requirements set forth in this Agreement will not be
effective.
4.5 DATE OF TERMINATION. For purposes of this Agreement, the date of
the termination of Executive's employment ("Date of Termination")
will be:
(a) if Executive's employment is terminated by his death, the
end of the month in which his death occurs,
(b) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given, or
(c) if Executive's employment is terminated by Executive or the
company for any other reason, the date specified in the
Notice of Termination, which will not be later than thirty
(30) days after the date on which the Notice of Termination
is given.
Section 5. BENEFITS UPON CERTAIN TERMINATIONS FOLLOWING A CHANGE IN
CONTROL. If within three (3) years following the Change in Control, Executive's
employment by the Company is terminated by the Company other than for Death,
Disability or Cause, or if Executive terminates his employment for Good Reason,
then the following provisions will apply:
5.1 COMPENSATION THROUGH DATE OF TERMINATION. The Company will pay
Executive within thirty (30) days after termination:
(a) Any unpaid amount of Executive's base salary through the
date of termination;
(b) With respect to any year then completed, any unpaid amount
accrued to Executive pursuant to the Key Employees' Bonus
Plan; and
(c) With respect to any year then partially completed, a pro
rata portion through the date of termination of Executive's
annual bonus under the Key Employees' Bonus Plan, based upon
the amount of his bonus for the previous year.
5.2 ADDITIONAL SEVERANCE. In lieu of any further salary and bonus
payments to Executive for periods subsequent to the date of
termination or other severance
-5-
<PAGE>
payments, the Company will pay as severance pay to Executive
three times the sum of:
(a) Executive's annual base salary as of the date of Change in
Control, or as of the date of termination of employment,
whichever is greater;
(b) Executive's annual bonus under the Key Employees' Bonus
Plan. Executive's annual bonus amount is to be based on the
greater of:
(1) the average of Executive's bonus for the two fiscal
years of the Company preceding the year in which the
Change in Control occurs, or
(2) the average of Executive's bonus for the two fiscal
years of the Company preceding the year in which the
termination of employment occurs.
The additional severance pay provided for in this SECTION 5.2
shall be transferred to a "Rabbi Trust", effective as of the date of
termination of employment, and paid to Executive in thirty-six (36)
equal monthly installments commencing on the first day of the next
month following the date of termination, and on the first day of each
subsequent month, until fully paid.
5.3 BENEFIT PLANS. Unless Executive's employment is terminated for
cause, the Company will maintain in full force and effect for
Executive's continued benefit for a period of three (3) years after
the Change in Control, health, dental, disability and other welfare
benefits, plans, programs and arrangements substantially equivalent to
the most valuable coverage provided under any plan maintained by the
Company from time to time during such period. In addition, the Company
shall continue to provide Executive with the same life insurance
coverage maintained by the Company on his life immediately prior to
the date of termination. These benefits shall be reduced by the amount
of similar benefits provided to Executive during such Period by a
subsequent employer, as determined solely by the Board. For the
purposes of enforcing this offset provision, Executive shall notify
the Company as to the terms and conditions of any subsequent
employment and the corresponding benefits received pursuant thereto,
and shall provide, or cause to provide the Company, correct, complete,
and timely information concerning the same.
5.4 NO MITIGATION REQUIRED. Executive will not be required to
mitigate the amount of any payment provided for in this SECTION 5 by
seeking other employment or otherwise, nor will the amount of any
payment provided for in this SECTION 5 be reduced by any compensation
earned by Executive as the result of employment by another employer
after the Date of Termination, or otherwise (except for a reduction in
benefits as set forth in SUBSECTION 5.3).
5.5 TAX GROSS-UP PAYMENT. If any payments or benefits provided
pursuant to this Agreement or any other payments or benefits provided
to Executive by the Company are subject to an excise tax on an "excess
parachute payment" under Section 4999 of the Internal Revenue Code of
1986 (the "Code"), or any successor provision of the Code, or are
subject to an excise or penalty tax under any similar provision of any
other revenue system to which Executive may be subject, the Company
will provide a gross-up
-6-
<PAGE>
payment to Executive in order to place Executive in the same after-tax
position Executive would have been in had no excise or penalty tax
become due and payable under Code Section 4999 (or any successor
provision) or any similar provision of that other revenue system. No
gross-up payment will be made for any excise or penalty tax
attributable to any stocks option granted to Executive.
Section 6. SUCCESSORS: BINDING AGREEMENT.
6.1 ASSUMPTION BY COMPANY'S SUCCESSOR. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and
substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement. Failure of the Company to obtain
that agreement prior to the effectiveness of any succession will be a
breach of this Agreement and will entitle Executive to compensation
from the Company in the same amount and on the same terms as Executive
would be entitled under this Agreement if Executive terminated
Executive's employment for Good Reason within three (3) years
following a Change in Control, except that for purposes of
implementing the foregoing, the date on which that succession becomes
effective will be deemed the Date of Termination. As used in this
Agreement, "Company" means Ballantyne of Omaha, Inc. and any successor
to its business and/or assets that executes and delivers the agreement
provided for in this SUBSECTION 6.1 or that otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
6.2 ENFORCEMENT BY EXECUTIVE'S SUCCESSOR. This Agreement will inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees. If Executive dies subsequent to
the termination of Executive's employment while any amount would still
be payable to Executive pursuant to this Agreement if Executive had
continued to live, all those amounts, unless otherwise provided in
this Agreement, will be paid in accordance with the terms of this
Agreement to executive's devisee, legatee or other designee or, if
there be no designee, to Executive's estate; that payment to be made
in a lump sum within sixty (60) days from the date of the Executive's
death.
Section 7. NOTICE. For purposes of this Agreement, notices and all
other communications provided for in this Agreement will be in writing and will
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage pre-paid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company will be directed to the attention of the Chief
Executive Officer of the Company (or if the notice is from the Chief Executive
Officer, to the Secretary of the Company), or to that other address as either
party may have furnished to the other in writing in accordance with this SECTION
7, except that notice of change of address will be effective only upon receipt.
Section 8. MODIFICATION AND WAIVER. No provision of this Agreement may
be modified, waived or discharged unless that waiver, modification or discharge
is agreed to in writing by Executive and that officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
at any time of any breach by the other party of, or compliance with, any
condition or provision of this Agreement to be performed by that other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
time or at any prior or subsequent time.
-7-
<PAGE>
Section 9. CONSTRUCTION. This Agreement supersedes any oral agreement
between Executive and the Company and any oral representation by the Company to
Executive with respect to the subject matter of this Agreement. The validity,
interpretation, construction an performance of the Agreement will be governed by
the laws of the State of Nebraska.
Section 10. SEVERABILITY. If any one or more of the provisions of this
Agreement, including but not limited to SECTION 16 hereof, or any word, phrase,
clause, sentence or other portion of a provision is deemed illegal or
unenforceable for any reason, that provision or portion will be modified or
deleted in such a manner as to make this Agreement as modified legal and
enforceable to the fullest extent permitted under applicable laws. The validity
and enforceability of the remaining provisions or portions will remain in full
force and effect.
Section 11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will take effect as an original and all of
which will evidence one and the same agreement.
Section 12. LEGAL FEES. If the Company breaches this Agreement or if,
within three (3) years following a Change in Control, (a) Executive's employment
is terminated by the Company other than for Cause or Disability or (b) Executive
terminates Executive's employment for Good Reason, the Company will reimburse
Executive for all legal fees and expenses reasonably incurred by Executive as a
result of that termination (including all those fees and expenses, if any,
incurred in contesting or disputing the termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement, unless the Company is
the prevailing party in such litigation).
Section 13. EMPLOYMENT BY A SUBSIDIARY. Either the Company or a
Subsidiary may be Executive's legal employer. For purposes of this Agreement,
any reference to Executive's termination of employment with the Company means
termination of employment with the company and all Subsidiaries, and does not
include a transfer of employment between any of them. The actions referred to
under the definition of "Good Reason" in SUBSECTION 4.3 include the actions of
the Company or Executive's employing Subsidiary, as applicable. The obligations
created under this Agreement are obligations of the Company. A Change in Control
of a Subsidiary will not constitute a Change in Control for purposes of this
Agreement unless there is also a contemporaneous Change in Control of the
Company. For purposes of SECTION 1 and this paragraph, a "Subsidiary" means an
entity more than fifty percent (50%) of whose equity interests are owned
directly or indirectly by the Company.
Section 14. EMPLOYMENT CONTRACT. In the event of any discrepancy
between the terms of this Employment Security Agreement and the terms of
Executive's Employment Agreement dated as of November 20, 1996, the terms of
this Employment Security Agreement shall take precedence. In all other respects,
the terms and provisions of Executive's Employment Contract dated November 20,
1996, except SECTIONS 8 AND 9 thereof, which sections are modified and clarified
by SECTION 16 of this Employment Security Agreement, shall remain in full force
and effect, and are incorporated herein by this reference.
Section 15. ARBITRATION. Except for the rights and duties of the
parties set forth in SECTION 16 of this Agreement, any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Omaha, Nebraska, according to the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be
-8-
<PAGE>
entitled to seek specific performance of his right to be paid for all periods up
to the date of termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
Section 16. RESTRICTIVE COVENANT.
16.1 NEED FOR PROTECTION. Executive acknowledges that, because of his
Senior Executive position with the Company, his knowledge of the affairs of the
Company and his relations with its dealers, distributors and customers are such
that he could do serious damage to the financial welfare of the Company, should
he compete or assist others in competing with the business of the Company.
Consequently, in his Employment Agreement with the Company dated as of November
20, 1996, he agreed, in SECTION 8 thereof, not to disclose certain information
to any competitor, and, in SECTION 9 thereof, not to compete with the Company
for three (3) years after the termination of his employment. Both parties hereto
agree that SECTIONS 8 AND 9 of the Executive's Employment Agreement dated as of
November 20, 1996, need clarification and modification, while maintaining the
basic intent of the parties in said regard. Accordingly, SECTIONS 8 AND 9 are
modified as follows:
16.2 CONFIDENTIAL INFORMATION.
(a) NON-DISCLOSURE. Except as the Company may permit or direct
in writing, during the term of this Agreement and
thereafter, Executive agrees that he will never disclose to
any person or entity any confidential or proprietary
information, knowledge, or data of the Company, which he may
have obtained while in the employ of the Company, relating
to any customers, customer lists, methods of distribution,
sales, prices, profits, costs, contracts, inventories,
suppliers, dealers, distributors, business prospects,
business methods, manufacturing ideas, formulas, plans or
techniques, research, trade secrets, or know how of the
Company.
(b) RETURN OF RECORDS. All records, documents, software,
computer disks, and any other form of information relating
to the business of the Company, which are or were prepared
or created by Executive, or which may or did come into his
possession during the term of his employment with the
Company, including any and all copies thereof, shall be
returned to, or, as the case may be, shall remain in the
possession of the Company.
(c) FUTURE EMPLOYMENT. Nothing in this section shall limit the
Executive's right to carry the Executive's accumulated
career knowledge and professional skills to any future
employment, subject to the specific limitations of the
foregoing provisions of this section and the respective
covenants set forth below.
16.3 NON-COMPETITION.
(a) GLOBAL OPERATIONS. The parties hereto acknowledge that the
Company's operations are global, and that it sells and
distributes its products to dealers, distributors and
customers worldwide; thus, the company's need for protection
against unfair competition is global.
-9-
<PAGE>
(b) COVENANT NOT TO COMPETE. Executive agrees that he will not,
during the term of this Agreement and for a period of three
(3) years after his employment with the Company has
terminated:
(1) engage directly or indirectly, for his own personal
benefit or for the benefit of any person or entity
other than the Company, in the manufacture, assembly,
distribution or sale of such motion picture theatre
equipment, restaurant equipment, or any other type of
products manufactured, assembled, distributed or sold
by the Company anywhere in the world, or,
(2) develop, promote, invest in, provide financing for, be
employed by, or operate any business on his own behalf,
or for any other person or entity, which is in
competition with the Company, or, assist any other
person in doing so.
(c) COVENANT NOT TO SOLICIT. Executive agrees that he will not,
for a period of three (3) years after his employment with
the Company has terminated:
(1) directly or indirectly, on behalf of himself or any
person or entity, engage in, or assist any other person
or entity to engage in, the manufacture, assembly,
distribution, or sale to any customer, distributor or
dealer of the Company, wherever located, of said motion
picture theatre equipment, restaurant equipment, or any
other type of product manufactured, assembled,
distributed or sold by the Company, if said customer,
distributor or dealer is one with whom he had contact
or with whose account he was involved during the twelve
(12) months prior to the termination of his employment,
or,
(2) directly or indirectly request or advise any of the
aforesaid customers, distributors or dealers referred
to in (1) above, of this subsection, to curtail their
business with the Company or to patronize another
business which is in competition with the Company, or,
(3) directly or indirectly, on behalf of himself or any
other person or entity, request, advise, or solicit any
employee of the Company to leave that employment in
order to engage in, or assist any other person or
entity to engage in, competition with the Company.
16.4 TERMINATION WITHOUT CAUSE. It is understood and agreed that, in
the event the Company terminates the Executive's employment
without cause, or if the Company breaches its Employment
Agreement dated as of November 20, 1996, and does not cure said
breach after ten (10) days' written notice, SUBSECTION 16.3
hereof shall be null and void. Notwithstanding the foregoing
provision, however, if the Executive's employment is terminated
under circumstances which entitle him to receive the benefits
provided in SECTION 5 of this Agreement, then and in
-10-
<PAGE>
such event, the provisions of SECTION 16.3 hereof shall remain in
full force and effect.
16.5 JUDICIAL MODIFICATION. In the event that any court of law or
equity shall consider or hold any aspect of this section to be
unreasonable or otherwise unenforceable, the parties hereto agree
that the aspects of this section so found may be reduced or
modified by appropriate order of the court, and shall thereafter
continue, as so modified, in full force and effect.
16.6 INJUNCTIVE RELIEF. The parties hereto acknowledge that the
remedies at law for breach of this section will be inadequate,
and the Company shall be entitled to injunctive relief for
violation thereof; provided, however, that nothing herein shall
be construed as prohibiting the Company from pursuing any other
remedies available for such breach or threatened breach,
including the recovery of damages from the Executive.
In witness whereof, the parties have executed this Agreement as of the
date first above written.
BALLANTYNE OF OMAHA, INC.
BY: /s/ Arnold Tenney
------------------------------
Chairman
/s/ Ray F. Boegner
------------------------------
Executive
-11-
<PAGE>
Exhibit 10.4.9
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF 1933
AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN
THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
Void after 5:00 P.M., Omaha, Nebraska USA Time on October 26, 2000
OPTION TO PURCHASE COMMON SHARES
OF
BALLANTYNE OF OMAHA, INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, RAY F. BOEGNER, or permitted
transferees ("Optionee") are together entitled to purchase, subject to the
provisions of this Option, from BALLANTYNE OF OMAHA, INC., a Delaware
corporation ("Corporation"), at a price of $5.50 (US) per Share, up to
Twenty-Five Thousand (25,000) common shares of the Corporation ("Shares") at any
time during the period commencing 12:01 A.M. on October 26, 1999 and terminating
on 11:59 P.M. on the date on which a sale of substantially all of the capital
stock or substantially all of the assets of the Corporation is consummated;
provided, however,
(1) that the occurrence of such sale and the closing thereof on or
before October 26, 2000, shall be a condition precedent to the exercise of the
option herein granted, and
(2) that the option rights granted herein shall expire in any event
at 5:00 P.M., Omaha, Nebraska USA Time, on October 26, 2000.
The Shares deliverable upon the exercise of this option are hereinafter
sometimes referred to as the "Underlying Shares" and the exercise price per
share of this Option to purchase is hereinafter sometimes referred to as the
"Exercise Price." The Shares deliverable upon the exercise of the Options are
hereinafter sometimes referred to as the "Option Shares."
SECTION 1. EXERCISE OF OPTION. Subject to the provisions hereof, this Option may
be exercised, in whole or in part, by presentation and surrender hereof to the
Corporation at its principal office, with the purchase form annexed hereto, duly
executed and accomplished by payment of the Exercise Price for the number of
shares specified in such form. Upon receipt by the Corporation of this Option at
its principal office, in proper form for exercise, the Optionee shall be deemed
to be the holder of record of the Option Shares issuable upon such exercise,
notwithstanding that the shares transfer books of the Corporation shall then be
closed or that certificates representing such Option Shares shall not then be
actually delivered to the Optionee.
-1-
<PAGE>
SECTION 2. RESERVATION AND STATUS OF SHARES. The Corporation hereby agrees that
at all times there shall be reserved for issuance and delivery upon exercise of
this Option such number of its common shares as shall be required for issuance
and delivery upon exercise of this Option, and that such shares, when issued in
accordance with the terms of this Option, shall be validly issued, fully paid,
and non-assessable.
SECTION 3. FRACTIONAL SHARES. Fractional Shares or script representing
Fractional Shares may be issued upon the exercise of this Option.
SECTION 4. NO ASSIGNMENT, TRANSFER UPON DEATH, EXCHANGE, OR LOSS OF OPTION.
4.1 This Option shall not be assignable except that it may be transferred, upon
the death of the Optionee, to the beneficiaries of the Optionee by testamentary
instrument or to the heirs of the Optionee by operation of law.
4.2 This Option is exchangeable, without expense, at the option of the
Optionee, upon presentation and surrender hereof to the Corporation at its
principal office, for other Options of different denominations entitling the
Optionee to purchase, in the aggregate, the same number of Shares purchasable
hereunder.
4.3 Upon receipt by the Corporation of evidence satisfactory to it of the loss,
theft, destruction, or mutilation of this Option, and (in the case of loss,
theft, or destruction) of reasonably satisfactory indemnification, and (in the
case of mutilation) upon surrender and cancellation of this Option, the
Corporation will execute and deliver a new Option, in lieu of the original.
SECTION 5. RIGHTS OF THE OPTIONEE. Except as provided in the last sentence of
Section 1, the Optionee shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Corporation, either at law or equity. The rights of the
Optionee are limited to those expressed in this Option and are not enforceable
against the Corporation except to the extent set forth herein.
SECTION 6. ANTI-DILUTION PROVISIONS. The number and kind of securities
purchasable upon the exercise of this Option and the Exercise Price shall be
subject to adjustment from time to time as follows:
6.1 In case the Corporation shall (i) pay a dividend or make a distribution on
the outstanding Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares into a greater number of shares, (iii) combine the
outstanding Common Shares into a lesser number of shares, or (iv) issue by
reclassification of the Common Shares any Common Shares of the Corporation, the
Optionee of this Option shall thereafter be entitled, upon exercise, to receive
the number and kind of shares which, if this Option had been exercised
immediately prior to the happening of such an event, the Optionee would have
owned upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, or reclassification. Such adjustment
shall become effective on the day next following (x) the record date of such
dividend or distribution or (y) the day upon which such subdivision,
combination, or reclassification shall become effective.
6.2 In case the Corporation shall consolidate or merge into or with another
corporation, or in case the Corporation shall sell or convey to any other person
or persons all or substantially all the property of the Corporation, the
Optionee of this Option shall thereafter be entitled, upon exercise, to receive
this kind and amount of shares, other securities, cash, and property receivable
-2-
<PAGE>
upon such consolidation, merger, sale, or conveyance by a holder of the number
of Common Shares which might have been purchased upon exercise of this Option
immediately prior to such consolidation, merger, sale, or conveyance, and shall
have no other conversion rights. In any such event, effective provision shall be
made, in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contracts of sale and conveyance, or otherwise so
that, so far as appropriate and as nearly as reasonably may be, the provisions
set forth herein for the protection of the rights of the Optionee of this Option
shall thereafter be made applicable.
6.3 Whenever the number of shares purchasable upon exercise of this Option is
adjusted pursuant to this Section 6, the Exercise Price per share shall be
adjusted simultaneously by multiplying that Exercise Price per share in effect
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of shares purchasable upon exercise of this Option immediately
prior to such adjustment, and of which the denominator shall be the number of
shares so purchasable immediately after such adjustment, so that the aggregate
exercise price of this Option remains the same.
6.4 In the event that at any time, as a result of an adjustment made pursuant
to this Section 6, the Optionee shall become entitled to receive upon exercise
of this Option cash, property, or securities other than Shares, then references
to Share in this Section 6 shall be deemed to apply, so far as appropriate and
as nearly as may be, to such cash, property, or other securities.
6.5 Irrespective of any adjustments in the Exercise Price or in the number or
kind of Shares purchasable upon exercise of this Option, the form of Options
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Option.
SECTION 7. OFFICER'S CERTIFICATE. Whenever the number or kind of securities
purchasable upon exercise of this Option or the Exercise Price shall be adjusted
as required by the provisions of Section 6, the Corporation shall forthwith file
with its Secretary or Assistant Secretary at its principal office an officer's
certificate showing the adjusted number or kind of securities purchasable upon
exercise of this Option and the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail such facts as shall be necessary
to show the reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Optionee and the Corporation shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to the Optionee.
SECTION 8. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt, if to the Optionee, to:
Ray F. Boegner
1144 South 185th Circle
Omaha, Nebraska 68130
-3-
<PAGE>
And if to the Corporation, at its principal office:
Ballantyne of Omaha, Inc.
4350 McKinley Street
Omaha, Nebraska 68112
Or such other addresses as a party shall so notify the other party in writing.
Any notice or other communication given by certified mail shall be deemed given
at the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
SECTION 9. BINDING EFFECT. The provisions of this Option shall be binding upon
and inure to the benefit of (A) the parties hereto, (B) the successors and
assigns of the Corporation, and (C) the heirs and personal representative of the
Optionee.
SECTION 10. LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the Sate of Delaware, United States of America.
SECTION 11. TITLES AND CAPTIONS. All section titles or captions contained in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
SECTION 12. PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
SECTION 13. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
SECTION 14. PARTIES IN INTEREST. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
Dated:
BALLANTYNE OF OMAHA, INC.
A Delaware Corporation
By: /s/ Arnold Tenney
-----------------------------
(OFFICER'S NAME & TITLE)
Arnold Tenney, Chairman
-4-
<PAGE>
Exhibit 11
Ballantyne of Omaha, Inc. and Subsidiaries
Computation of Earnings Per share of Common Stock
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
BASIC EARNINGS
Earnings applicable to
common stock $ 7,758,949 $ 8,343,734 $ 7,709,339
Weighted average common
shares outstanding* $12,590,234 $14,098,491 $13,854,304
----------- ----------- -----------
Basic earnings per share 0.62 $ 0.59 $ 0.56
=========== =========== ===========
DILUTED EARNINGS
Earnings applicable to
common stock $ 7,758,949 8,343,734 7,709,339
Weighted average common
shares outstanding* 12,590,234 14,098,491 13,854,304
Assuming conversion
of options outstanding* 559,635 650,859 976,119
----------- ----------- -----------
Weighted average common
shares outstanding, as adjusted* 13,149,869 14,749,350 14,830,423
----------- ----------- -----------
Diluted earning per share $ 0.59 $ 0.57 $ 0.52
=========== =========== ===========
</TABLE>
*Adjusted for all stock splits and stock dividends
-1-
<PAGE>
Exhibit 23
ACCOUNTANTS' CONSENT
The Board of Directors
Ballantyne of Omaha, Inc.:
We consent to incorporation by reference in the Registration Statement No.
333-03849 on Form S-8 and No. 333-22357 on Form S-3 of Ballantyne of Omaha, Inc.
of our report dated January 21, 2000, relating to the consolidated balance
sheets of Ballantyne of Omaha, Inc. and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1999, and related schedule, which report appears in the December 31, 1999
Annual Report on Form 10-K of Ballantyne of Omaha, Inc.
/s/ KPMG LLP
Omaha, Nebraska
March 29, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 857,089
<SECURITIES> 0
<RECEIVABLES> 16,036,486
<ALLOWANCES> (526,221)
<INVENTORY> 26,210,431
<CURRENT-ASSETS> 44,141,359
<PP&E> 20,223,107
<DEPRECIATION> (6,903,401)
<TOTAL-ASSETS> 60,756,230
<CURRENT-LIABILITIES> 9,740,462
<BONDS> 10,369,000
0
0
<COMMON> 145,571
<OTHER-SE> 39,717,049
<TOTAL-LIABILITY-AND-EQUITY> 60,756,230
<SALES> 82,226,458
<TOTAL-REVENUES> 86,142,568
<CGS> 24,512,782
<TOTAL-COSTS> 25,196,666
<OTHER-EXPENSES> 12,369,331
<LOSS-PROVISION> 145,000
<INTEREST-EXPENSE> 895,425
<INCOME-PRETAX> 11,814,119
<INCOME-TAX> 4,055,170
<INCOME-CONTINUING> 7,758,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,758,949
<EPS-BASIC> $0.62<F1>
<EPS-DILUTED> $0.59<F1>
<FN>
<F1>Adjusted for all stock dividends and stock splits.
</FN>
</TABLE>
