UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-511
COBRA ELECTRONICS CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 36-2479991
(State of incorporation) (I.R.S. Employer Identification No.)
6500 WEST CORTLAND STREET
CHICAGO, ILLINOIS 60707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(773) 889-8870
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.33 1/3 Per Share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock of Registrant outstanding at May 8, 2000:
6,132,380
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
For the Three Months Ended
(Unaudited)
--------------------------
March 31, March 31,
2000 1999
--------- ---------
Net sales........................... $ 21,299 $ 19,874
Cost of sales....................... 15,163 14,809
--------- ---------
Gross profit....................... 6,136 5,065
Selling, general and
administrative expense............. 5,156 4,829
--------- ---------
Operating income................... 980 236
Other income (expense):
Interest expense.................. (74) (258)
Other income, net................. 113 82
--------- ---------
Income before taxes................. 1,019 60
Income taxes........................ (391) 23
--------- ---------
Net income ......................... $ 628 $ 37
========= =========
Net income per common share:
Basic............................... $ 0.10 $ 0.01
Diluted............................. $ 0.10 $ 0.01
Weighted average shares outstanding:
Basic.............................. 6,146 6,077
Diluted............................ 6,364 6,223
Cash dividends...................... None None
See notes to condensed consolidated financial statements.
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
As of As of
March 31, December 31,
2000 1999
(Unaudited)
------------ ------------
ASSETS:
Current assets:
Cash........................ $ 587 $ 93
Receivables, less allowance
for claims and doubtful
accounts of $1,430 at March
31, 2000 and $1,381 at
December 31, 1999 ........ 22,356 25,565
Inventories, primarily
finished goods............ 15,205 8,689
Deferred income taxes....... 4,997 4,997
Other current assets........ 1,874 4,192
------------ ------------
Total current assets........ 45,019 43,536
------------ ------------
Property, plant and equipment,
at cost:
Land........................ 330 330
Building and improvements... 3,654 3,619
Tooling and equipment....... 14,112 13,915
------------ ------------
18,096 17,864
Accumulated depreciation.... (13,475) (13,042)
------------ ------------
Net property, plant and
equipment................. 4,621 4,822
------------ ------------
Other assets:
Deferred income taxes...... 4,581 4,581
Cash surrender value of
officers= life insurance
policies................... 5,629 5,499
Other...................... 1,014 1,141
------------ ------------
Total other assets 11,224 11,221
------------ ------------
Total assets.................. $ 60,864 $ 59,579
============ ============
See notes to condensed consolidated financial statements.
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
As of As of
March 31, December 31,
2000 1999
(Unaudited)
------------ ------------
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current liabilities:
Accounts payable............ $ 2,254 $ 2,792
Accrued salaries and
commissions................. 698 1,326
Accrued advertising and
sales promotion costs....... 2,106 2,800
Accrued product warranty
costs....................... 2,175 2,916
Other accrued liabilities... 1,684 1,456
Short-term debt............. 7,158 4,083
------------ ------------
Total current liabilities... 16,075 15,373
------------ ------------
Deferred compensation....... 2,729 2,634
----------- ------------
Total liabilities:............ 18,804 18,007
----------- ------------
Shareholders' equity:
Preferred stock, $1 par
value, shares authorized-
1,000,000; none issued.... --- ---
Common stock, $.33 1/3 par
value,12,000,000 shares
authorized; 7,039,100
issued for 2000 and 1999;. 2,345 2,345
Paid-in capital............. 20,207 20,301
Retained earnings........... 25,083 24,455
------------ ------------
47,635 47,101
Treasury stock, at cost
(903,766 for 2000 and
921,009 for 1999) ...... (5,575) (5,529)
------------ ------------
Total shareholders' equity.. 42,060 41,572
Total liabilities and share-
holders' equity............. $ 60,864 $ 59,579
============ ============
See notes to condensed consolidated financial statements.
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
For the Three Months Ended
(Unaudited)
--------------------------------
March 31, March 31,
2000 1999
---------- ----------
Cash flows from operating activities:
Net income from operations $ 628 $ 37
Adjustments to reconcile net income
from operations to net cash
provided by (used for)
operating activities:
Depreciation and amortization 501 404
Other current assets......... 2,298 53
Other assets................. (53) (203)
Accounts payable............. (538) 220
Accrued liabilities.......... (1,835) (1,610)
Deferred compensation........ 95 15
Net cash flows from (used by)
operating activities........ (2,211) 1,626
---------- ----------
Cash flows from investing activities:
Capital expenditures.......... (232) (278)
Net cash flows (used in)
Investing activities......... (232) (278)
---------- ----------
Cash flows from financing activities:
Net borrowings (repayments)under the
line-of-credit agreement..... 3,075 (168)
Transactions related to exercise
of common stock options, net. 87 82
Transactions related to stock
repurchase................... (225) (19)
---------- ----------
Net cash flows from (used in)
financing activities......... 2,937 (105)
---------- ----------
Net increase in cash... ......... 494 1,243
Cash at beginning of period...... 93 100
---------- ----------
Cash at end of period............ $ 587 $ 1,343
========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 64 $ 258
Taxes 115 63
See notes to condensed consolidated financial statements.
Cobra Electronics Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. The Condensed Consolidated Balance
Sheet as of December 31, 1999 has been derived from the audited consolidated
balance sheet as of that date. It is suggested that these financial state-
ments be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K. In the
opinion of management, the information contained herein reflects all adjust-
ments necessary to make the results of operations for the interim periods a
fair statement of such operations. All such adjustments are of a normal
recurring nature. The results of operations of any interim period are not
necessarily indicative of the results that may be expected for a fiscal year.
ll such adjustments are of a nor
(1) PURCHASE ORDERS AND COMMITMENTS
At March 31, 2000 and 1999, the Company had outstanding purchase orders with
suppliers totaling approximately $54.9 million and $20.9 million, respectively.
(2) EARNINGS PER SHARE
2000 1999
Income:
Income available to common
shareholders (thousands) $ 628 $ 37
Basic earnings per share:
Weighted-average shares
outstanding 6,145,648 6,076,749
========= =========
Basic earnings per share $ 0.10 $ 0.01
========== =========
Diluted earnings per share:
Weighted-average shares
outstanding 6,145,648 6,076,749
Diluted shares issuable
in connection with stock
option plans 594,625 691,250
Less: shares purchasable
with proceeds (376,599) (544,802)
---------- ----------
Total 6,363,674 6,223,197
========= =========
Diluted earnings per share $ 0.10 $ 0.01
========= =========
(3) NEW ACCOUNTING PRONOUNCEMENTS -
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative instruments
and for hedging activities. It requires that an entity recognize all deriva-
tives as either assets or liabilities in the balance sheet and measure these
instruments at fair value. This statement also requires changes in the fair
value of derivatives to be recorded each period depending on the intended use
of derivatives. In June 1999, the FASB deferred the effective date of FASB
No. 133 to fiscal years beginning as of June 15, 2000. The Company must adopt
SFAS No. 133 no later than fiscal year 2001. The Company is in the process of
assessing the impact that adopting SFAS No. 133 will have on its financial
position and results of operations when such statement is adopted.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ANALYSIS OF RESULTS OF OPERATIONS
First Quarter 2000 vs. First Quarter 1999:
- ------------------------------------------
For the first quarter ended March 31, 2000, net income was $628,000, or $0.10
per diluted share, compared to net income of $37,000, or $0.01 per diluted
share, in the first quarter of 1999. The increase is primarily due to higher
sales and stronger margins.
Sales for the first quarter of 2000 increased 7.2% to $21.3 million from
sales of $19.9 million in the first quarter of 1999. Contributing to this
increase were higher sales of radar detectors and of microTALK(tm) Family
Radio Service ("FRS") and European Private Mobile Radio ("PMR") two-way
radios. Radar sales benefited from shipments of the Company's new 9 Band(tm)
detectors, which have the Company's exclusive Strobe Alert(tm) technology.
Sales of microTALK were up because of shipments of several new models
hich approved the U.S. technology late in the first quarter.
Gross margins improved in the current quarter to 28.8% from 25.5%, primarily
due to stronger margins on 9 Band(tm) radar detectors and on both domestic
and European microTALK radios.
Net selling, general and administrative expense increased $327,000 in the first
quarter of 2000 from the same period a year ago, but as a percentage of net
sales, decreased to 24.2% from 24.3% in the prior year's quarter. The overall
increase primarily reflects additional variable selling expenses due to the
increase in sales volume and an increase in overall payroll related expenses.
Partially offsetting these increases was a decrease of approximately $230,000
related to a one-time charge in the first quarter expenses incurred for the
terminated Beltronics acquisition.
Interest expense for the current quarter decreased $184,000 compared to the
prior year's first quarter, primarily due to lower average debt levels, the
result of lower inventory levels compared to the prior year's quarter.
For the first quarter of 2000, the Company had a provision for income taxes
of $391,000 compared to a $23,000 tax provision for the prior year's quarter.
Both years reflect an effective tax rate of 38.4%
LIQUIDITY AND CAPITAL RESOURCES
Operating activities used cash of $2.2 million during the first quarter of
2000, primarily due to an increase in inventories and a decrease in other
accrued liabilities, partially offset by a decrease in receivables.
Inventories increased due mainly to MicroTALK radios and radar detectors in
anticipation of increased purchases by mass merchant customers for spring
promotions. Accrued liabilities decreased because deductions were taken by
customers against normal year-end advertising accruals during the first
quarter of 2000. Additionally, payments relating to awards earned in 1999
under the Company's incentive bonus and profit sharing programs were made in
the first quarter of 2000. The decrease in receivables reflected heavy
collections related to the high volume of fourth quarter sales, particularly
strong December 1999 sales. Debt increased $3.1 million during the first
quarter primarily due to higher inventory levels and, at March 31, 2000, the
Company had approximately $17.8 million of unused credit line.
In late August 1998, the Company's board of directors authorized a program to
repurchase up to $1 million of the Company's common shares. On May 17, 1999,
the Company announced that a second repurchase program had been approved to
acquire up to a $1 million of common stock. During the first quarter of 2000,
the Company spent $225,000 to repurchase 40,000 of its common shares. Through
March 31, 2000, the Company has repurchased 359,200 of its common shares at a
total cost of approximately $1.4 million.
Item 3 Market Risk and Financial Instruments
The Company is subject to market risk associated principally with changes in
interest rates. Interest rate exposure is principally limited to the $7.2
million of debt of the Company outstanding at March 31, 2000. The debt is
priced at interest rates that float with the market, which therefore minimizes
interest rate exposure. A 50 basis point movement in the interest rate on the
floating rate debt would result in an approximately $36,000 increase or
decrease in interest expense and cash flows. The Company does not use deriva-
tive financial or commodity instruments for trading or other purposes.
The Company's suppliers are located in foreign countries, principally in the
Far East, and the Company made approximately 3.9% of its sales outside the
United States in 1999, however, the Company minimizes its foreign currency
exchange rate risk by conducting all of its transactions in US dollars.
PART II
OTHER INFORMATION
Items 1, 2, 3, 4 and 5 Not Applicable.
- ----------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits:
Exhibit No. Description
----------- ---------------------------------------------
10-17 Employment Agreement addendum between Cobra
Electronics Corporation and Atnyony A. Mirabelli
10-18 2000 Stock Option Plan
27 Financial data schedule required under
Article 5 of Regulation S-X
b) During the quarter, the Company filed no Current Reports on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COBRA ELECTRONICS CORPORATION
By: /S/ Gerald M. Laures
------------------------
Gerald M. Laures
Vice President - Finance,
and Corporate Secretary
Dated: May 15, 2000
EXHIBIT 10-17
Anthony Mirabelli
Addendum to Employment Agreement
April 20, 1999
Page 1 of 2
ADDENDUM TO EMPLOYMENT AGREEMENT PROVISIONS
This addendum to the Employment Agreement between Anthony Mirabelli
("Employee") and Cobra Electronics Corporation ("Company"), is entered into
and effective as of the date last appearing opposite the signatures of
Employee and Company below.
Employee and the Company acknowledge that the Agreement between them dated
January 31, 1997 ("the Agreement") must be modified in order to coordinate
the annual salary reviews and bonus awards given to Employee by the Company
consistent with the terms of the Agreement, and the parties agree and
acknowledge that the following modifications to the Agreement shall be made
for good and value both consideration, receipt and sufficiency of which is
acknowledged including, but not limited to, the provisions of this addendum
("Addendum") to the Agreement.
Therefore, Employee and Company further agree as follows:
"During your employment for the calendar year 1998 (January 1 - December 31),
you shall receive a regular annual salary at the rate of $182,000 per year,
payable biweekly. Thereafter, your salary will be reviewed on an annual
basis by the Compensation Committee of the Company's Board of Directors, with
any salary adjustments, effective to January 1st of that year. Any future
adjustments to your base salary will be computed pursuant to the provision of
Sections II and III of your "Annual Employee Compensation Program" docment
signed and agreed to by yourself and James R. Bazet, President and Chief
Executive Officer. (See "1998 Employee Compensation Program" attached). The
Company shall in no event reduce Employee's salary below the highest regular
annual salary rate at any time paid or payable to Employee by the Company
pursuant to the terms of this Agreement or otherwise, for any year in which
Employee is employed by the Company. No salary review may be utilized to
reduce Employee's regular annual salary below the rate in effect for Employee
at the time of that review. Any increase in Employee's regular annual salary
awarded by the Company pursuant to these provisions shall operate as the base
for any bonus computation pursuant to this Agreement and pursuant to the
"Annual Employee Compensation Program" in effect for any year the Employee
remains employed by the Company. In addition, if Employee is granted
severance pursuant to Paragraph 9 of this Agreement, the rate of regular
annual salary upon which said severance is based shall be the regular annual
salary in effect pursuant to this Agreement for the Employee for the year in
which termination of employment by Employee occurs, and like the regular
annual salary said severance shall not be reduced by any action of the Board
of Directors of the Company or by the Company below the rate for the regular
annual salary and bonus in effect in such year."
C. Paragraph 3 of the Agreement is amended as follows:
"In addition to your regular annual salary, you shall be eligible to receive
a bonus of 35% of your January 1st annualized base salary, for any full year
of employment with the Company. For 1998, your target bonus amount would be
$63,700. While your target bonus percentage will remain at 35% of annual
base salary, the future criteria for determining the actual amount of bonus
that you may receive will be reflected in Section IV of your "Annual Employee
Compensation Program" document, as agreed to and signed by both yourself and
James R. Bazet, President and Chief Executive Officer."
D. The Company and Employee agree that in all other respects the Agreement
remains in full force and effect pursuant to its provisions as originally
executed January 31, 1997.
COBRA ELECTRONICS CORPORATION
BY: /S/ James R. Bazet
As its: President and Chief Executive Officer Date: April 20, 1999
/s/Anthony Mirabelli Date: April 20, 1999
EXHIBIT 10-18
COBRA ELECTRONICS CORPORATION 2000 STOCK OPTION PLAN
I. Introduction
1.1 Purposes. The purpose of the 2000 Stock Option Plan (the "Plan") of
Cobra Electronics Corporation (the "Company") and its subsidiaries from
time to time (individually a "Subsidiary" and collectively the "Subsidiaries")
are to align the interests of the Company's stockholders and the receipients
of options under this Plan by increasing the proprietary interest of such
recipients in the Company's growth and success and to advance the interests
of the Company by attracting and retaining officers and other employees.
For purposes of this Plan, references to employment by the Company shall also
mean employment by a Subsidiary.
1.2 Administration. This Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the Company (the "Board")
consisting of at least two members of the Board, each of whom may be a "Non-
Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code").
The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and determine the number of shares
of common stock, $.33 1/3 par value, of the Company ("Common Stock") subject
to each option granted hereunder, the exercise price of such option, the time
and conditions of exercise of such option and all other terms and conditions
of such option, including, without limitation, the form of the option agree-
ment. The Committee shall, subject to the terms of this Plan, interpret this
Plan and the application thereof, establish rules and regulations it deems
necessary or desirable for the administration of this Plan, and may impose,
incidental to the grant of an option, conditions with respect to the grant,
such as limiting competitive employment or other activities. All such inter-
pretations, rules, regulations and conditions shall be conclusive and binding
on all parties. Each option hereunder shall be evidenced by a written agree-
ment (an "Agreement") between the Company and the optionee setting forth the
terms and conditions applicable to such option.
A majority of the committee sshall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts
approved in writing by all of the members of the Committee without a meeting.
1.3 Eligibility. Participants in this Plan shall consist of such officers and
other employees or persons who are expected to become employees of the
Company and its Subsidiaries as the Committee in its sole discretion may
select from time to time. The Committee's selection of a person to partici-
pate in this Plan at any time shall not require the Committee to select such
person to participate in this Plan at any other time.
1.4 Shares Available. Subject to adjustment as provided in Section 3.7,
300,000 shares of Common Stock shall be available for grants of options under
this Plan. To the extent that shares of Common Stock subject to an
outstanding option are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such option or by reason of the
delivery of shares of Common Stock to pay all or a portion of the exercise
price of such option or to satisfy all or a portion of the tax withholding
obligations relating to such option, then such shares of Common Stock shall
again be available under this Plan.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized
and issued shares of Common Stock reacquired and held as treasury shares or
otherwise, or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options may be granted during any calendar year to any
person shall be 150,000, subject to adjustment as provided in Section 3.7.
II. STOCK OPTIONS
2.1 Grants Of Stock Options. The Committee may, in its discretion, grant
options to purchase shares of Common Stock to such eligible persons as may be
selected by the Committee. Each option, or portion thereof, that is not an
incentive stock option, shall be a non-qualified stock option. An incentive
stock option shall mean an option to purchase shares of Common Stock that
meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an incentive stock
option. Each incentive stock option shall be granted within ten years of the
effective date of this Plan. To the extent that the aggregate Fair Market
Value (determined as of the date of grant) of shares of Common Stock with
respect to which options designated as incentive stock options are exercisable
for the first time by a participant during any calendar year (under this Plan
or any other plan of the Company, or any parent or Subsidiary) exceeds the
amount (currently $100,000) established by the Code, such options shall
constitute non-qualified stock options. "Fair Market Value" shall mean the
closing price of a share of Common Stock on The Nasdaq Stock Market on the
date as of which such value is being determined or, if there shall be no
closing price on such date, on the next preceding date for which a closing
price was reported; provided, however, that if Fair Market Value for any
date cannot be determined as above provided, Fair Market Value shall be
determined by the Committee by whatever means or method as the Committee, in
the good faith exercise of its discretion, shall at such time deem appropriate.
(b) Option Period and Exercisability. The period during which an option may be
exercised shall be determined by the Committee; provided, however, that no
incentive stock option shall be exercised later than ten years after its date
of grant; provided further, that if an incentive stock option shall be
granted to a Ten Percent Holder, such option shall not be exercised later
than five years after its date of grant. The Committee may, in its discre-
tion, establish performance measures which sprice was reported cannot be
determined as above provided, Fair Market Value shall be determined by the
Committee by whatever means or method as the Committe, in good faith exercise
of its discretion, shall at such time deem appropriate.
2.2 Terms Of Stock Options. Options shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem
advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common Stock
subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of any stock option shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the date of grant of such
option or, if earlier, on the date on which the Company agreed to grant such
option; provided further, that if an incentive stock option shall be granted
to any person who, at the time such option is granted, owns capital stock
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Company (or of any parent or Subsidiary) (a
"Ten Percent Holder"), the purchase price per share of Common Stock shall be
the price (currently 110% of Fair Market Value) required by the Code in order
to constitute an incentive stock option.
2.3 Termination Of Employment.
(a) Death. Subject to paragraph (d) below and unless otherwise specified in
the Agreement relating to an option, if an optionee's employment by the
Company terminates by reason of death, each option held by such optionee
shall be exercisable only to the extent that such option is exercisable on
the date of such optionee's death and may thereafter be exercised by such
optionee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be, until and including the earliest to
occur of (i) the date which is one year (or such other period as set forth
in the Agreement relating to such option) after the date of death and (ii)
expiration date of the term of such option.
(b) Other Termination. Subject to paragraph (d) below and unless otherwise
specified in the Agreement relating to an option, if an optionee's employment
with the Company terminates for any reason other than death, each option held
by such optionee shall be exercisable only to the extent that such option is
exercisable on the effective date of such optionee's termination of employ-
ment and may thereafter be exercised by such optionee (or such optionee's
legal representative or similar person) until and includ
(c) Death Following Termination of Employment. Subject to paragraph (d) below
and unless otherwise specified in the Agreement relating to an option, if an
optionee dies during the three-month period (or such other period as set
forth in the Agreement relating to such option) following termination of
employment for any other reason other than death, each option held by such
optionee shall be exercisable only to the extent that such option is
exercisable on the date of such optionee's death and may thereafter be
exercised by such optionee's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until and including the
earliest to occur of (i) the date which is three months (or such other
period as set forth in the Agreement relating to such option) after the date
of death and (ii) the expiration date of the term of such option.
(d) Termination of Employment-Incentive Stock Options. If the employment with
the Company of a holder of an incentive stock option terminates by reason of
death or Permanent and Total Disability (as defined in Section 22(e)(3) of
the Code), each incentive stock option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the date of
such optionee's death or on the effective date of such optionee's termination
of employment by reason of Permanent and Total Disability, as the case may be,
and may thereafter by exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person) until and
including the earliest to occur of (i) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option) after
the date of death or the effective date of such optionee's termination of
employment by reason of Permanent and Total Disability, as the case may be,
and (ii) the expiration date of the term of such option.
If the employment with the Company of a holder of an incentive stock option
terminates for any reason other than death or Permanent and Total Disability,
each incentive stock option held by such optionee shall be exercisable only
to the extent such option is exercisable on the effective date of such
optionee's termination of employment, and may thereafter be exercised by such
optionee (or such optionee's legal representative or similar person) until
and including the earliest to occur of (i) the date which is three months
after the effective date of such optionee's termination of employment and
(ii) the expiration date of the term of such option.
If the holder of an incentive stock option dies during the one-year period
following termination of employment by reason of Permanent and Total Disabi-
lity (or such shorter period as set forth in the Agreement relating to such
option), or if the holder of an incentive stock option dies during the three-
month period following termination of employment for any reason other than
death or Permanent and Total Disability, each incentive stock option held by
such optionee shall be exercisable only to the extent such option is
exercisable on the date of the optionee's death and may thereafter be
exercised by the optionee's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until and including the
earliest to occur of (i) the date which is six months (or such shorter period
as set forth in the Agreement relating to such option) after the date of
death and (ii) the expiration date of the term of such option.
III. GENERAL
3.1 Effective Date and Term of Plan. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 2000 Annual Meeting of Stockholders, shall become
effective as of the date of approval by the Board. This Plan shall terminate
ten years after its effective date unless terminated earlier by the Board.
Termination of this Plan shall not affect the terms or conditions of any
option granted prior to termination.
Options may be granted hereunder at any time prior to the termination of this
Plan, provided that no option may be granted later than ten years after the
effective date of this Plan. In the event that this Plan is not approved by
the stockholders of the Company, this Plan and any options granted hereunder
shall be void and of no force or effect.
3.2 Amendments. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable
law, rule or regulation, including Section 162(m) of the Code; provided,
however, that no amendment shall be made without stockholder approval if such
amendment would (i) increase the number of shares of Common Stock available
under the Plan (other than by reason of Section 3.7), (ii) materially
increase the benefits available under the Plan or (iii) change the class or
category of persons eligible to participate in the Plan. No amendment may
impair the rights of a holder of an outstanding option without the consent of
such holder.
3.3 Agreement. No option shall be valid until an Agreement is executed by the
Company and the optionee and, upon execution by the Company and the optionee
and delivery of the Agreement to the Company, such option shall be effective
as of the date set forth in the Agreement.
3.4 Non-Transferability. No option shall be transferable other than (i) by
will or the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or (ii) as set forth in the
Agreement relating to an option. Each option may be exercised during the
optionee's lifetime only by the optionee or the optionee's legal representa-
tive or similar person. Except as permited by the second preceding sentence,
no option shall be sold, transferred, assigned, pledged, hypothecated, en-
cumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt
to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise
dispose of any option, such option and all rights thereunder shall
immediately become null and void.
3.5 Tax Withholding. The Company shall have the right to require, prior to
the issuance or delivery of any shares of Common Stock, payment by the
optionee of any Federal, state, local or other taxes which may be required to
be withheld or paid in connection with an option hereunder. An Agreement may
provide that the optionee may satisfy any obligation to withhold or pay taxes
arising on any date (the "Tax Date") in connection with the option in the
amount necessary to satisfy any such obligation by any of following means:
(A) a cash payment to the Company, (B) delivery to the Company of previously
owned whole shares of Common Stock (which the optionee has held for at least
six months prior to the delivery of such shares and for which the optionee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the Tax Date, equal to the
amount necessary to satisfy any such obligation, (C) a cash payment by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irreovacable notice of exercise or (D) a combination of (A) and (B), in each
case to the extent set forth in the Agreement relating to the option, pro-
vided, however, that the Committee shall have sole discretion to disapprove of
an election pursuant to any of clauses (B)-(D). An Agreement may provide for
shares of Common Stock to be delivered having an aggregate Fair Market Value
in excess of the minimum amount required to be withheld, but not in excess
of the amount determined by applying the optionee's maximum marginal tax rate.
Any fraction of a share of Common Stock which would be required to satisfy
such an obligation shall be disregarded and the remaining amount due shall
be paid in cash by the optionee.
3.8 No Right of Participation or Employment. No person shall have any right
to participate in this Plan. Neither this Plan nor any option granted here-
under shall confer upon any person any right to continued employment by the
Company, any Subsidiary or any affiliate of the Company or affect in any
manner the right of the Company, any Subsidiary or any affiliate of the
Company to terminate the employment of any person at any time without
liability hereunder.
3.9 Rights as Stockholder. No person shall have any right as a stockholder of
the Company with respect to any shares of Common Stock which are subject to
an option hereunder until such person becomes a stockholder of record with
respect to such shares of Common Stock.
3.10 Governing Law. This Plan, each option hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United
States, shall be governed by the laws of the State of Delaware and construed
in accordance therewith without giving effect to principles of conflicts of
laws.
Adopted by the Board of Directors on March 31, 2000.