Common use of STOCKHOLDERS' EQUITY Clause in Contracts

STOCKHOLDERS' EQUITY. The Company's redeemable preferred stock carries a 12% cumulative dividend payable quarterly, is convertible into common stock at any time for $12.50 per share, carries a preference on liquidation or dissolution of the Company, and has equal voting rights with the Company's outstanding common stock. The Company is obligated to pay $1.00 per share plus accrued but unpaid dividends upon redemption of the redeemable preferred stock. As of December 31, 1998, the redemption value of the preferred stock ($160,000) plus accrued but unpaid dividends ($88,000) totaled $247,744. The preferred shares are callable by the Company at any time with 60 days' written notice, and all outstanding shares must be redeemed by 2002. The Company has no obligation to redeem the preferred stock prior to 2002. In 1996, the Company redeemed 25,000 shares of preferred stock for total consideration of $22,500. The dividend payable to officer/shareholder is evidenced primarily by a note payable to the Company's majority stockholder and Chairman. The Company paid approximately $200,000 of this dividend during 1998 and approximately $200,000 in 1997. The note is noninterest-bearing, due on demand and subordinated to the revolving line of credit. Pursuant to the debt subordination agreement, the Company can only make payments up to $200,000 in a calendar year. STOCK SUBSCRIPTION RECEIVABLE The Company advanced $469,500 to an employee which was used to purchase shares of common stock. The balance is due in full by September 2000. During 1998, the employee repaid $185,500 of the loan, and 142,000 shares of common stock are held by the Company as collateral on the note at December 31, 1998.

STOCKHOLDERS' EQUITY. The Company's redeemable preferred stock carries a 12% cumulative dividend payable quarterly, is convertible into common stock at any time for $12.50 per share, carries a preference on liquidation or dissolution of the Company, and has equal voting rights with the Company's outstanding common stock. The Company is obligated to pay $1.00 per share plus accrued but unpaid dividends upon redemption of the redeemable preferred stock. As of December 31, 1998, the redemption value of the preferred stock ($160,000) plus accrued but unpaid dividends ($88,000) totaled $247,744. The preferred shares are callable by the Company at any time with 60 days' written notice, and all outstanding shares must be redeemed by 2002. The Company has no obligation to redeem the preferred stock prior to 2002. In 1996, the Company redeemed 25,000 shares of preferred stock for total consideration of $22,500. The dividend payable to officer/shareholder is evidenced primarily by a note payable to the Company's majority stockholder and Chairman. The Company paid approximately $200,000 of this dividend during 1998 and approximately $200,000 in 1997. The note is noninterest-bearing, due on demand and subordinated to the revolving line of credit. Pursuant to the debt subordination agreement, the Company can only make payments up to $200,000 in a calendar year. STOCK SUBSCRIPTION RECEIVABLE The Company advanced $469,500 to an employee which was used to purchase shares of common stock. The balance is due in full by September 2000. During 1998, the employee repaid $185,500 of the loan, and 142,000 shares of common stock are held by the Company as collateral on the note at December 31, 1998.