-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qy4yB6xJtsM77QgvPb6PJoFRRNH1VXAhQEV1E9+HSKObHSTw8O8JJXWJNhlErGgY Y3uI5xIIRTZnFIaLzMMCDQ== 0000032312-97-000020.txt : 19970710 0000032312-97-000020.hdr.sgml : 19970710 ACCESSION NUMBER: 0000032312-97-000020 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970627 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCEE BROADCAST PRODUCTS INC CENTRAL INDEX KEY: 0000032312 STANDARD INDUSTRIAL CLASSIFICATION: 3663 IRS NUMBER: 131926296 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-06299 FILM NUMBER: 97631044 BUSINESS ADDRESS: STREET 1: P O BOX 68 STREET 2: SUSQUEHANNA STREET EXTENSION WEST CITY: WHITE HAVEN STATE: PA ZIP: 18661-0068 BUSINESS PHONE: 7174439575 MAIL ADDRESS: STREET 1: P O BOX 68 STREET 2: SUSQUEHANNA STREET EXTENSION CITY: WHITE HAVEN STATE: PA ZIP: 18661 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONICS MISSILES & COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 10KSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB (Mark One) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE X SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended March 31, 1997 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _________ _________________ to ___________________ Commission file number 1-6299 EMCEE BROADCAST PRODUCTS, INC. (Name of small business issuer in its charter) DELAWARE 13-1926296 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) SUSQUEHANNA STREET EXTENSION, WEST, PO BOX 68, WHITE HAVEN, PA 18661-0068 (Address of principal executive (Zip Code) offices) Issuer's telephone number: (717) 443-9575 Securities registered under Section 12(b) of the Exchange Act: Title of each class: Name of each exchange on which registered: Common NASDAQ National Market - - -------------------------------------------------------------------- Securities registered under Section 12(g) of the Exchange Act: None (TITLE OF CLASS) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past twelve (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 ninety (90) days. Yes X No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is met contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. X State issuer's revenues for its most recent fiscal year. $12,522,811. The aggregate market value of the voting stock held by non-affiliates of the Registrant is $8,097,534 computed by reference to the closing bid price of the stock at June 26, 1997. This computation is based on the number of issued and outstanding shares held by persons other than directors and officers of the Registrant. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: CLASS OUTSTANDING AT JUNE 27, 1997 Common stock, par value $.1-2/3 per sh. 4,165,601 DOCUMENTS INCORPORATED BY REFERENCE Items 9, 10, 11 and 12 in Part III of this report are incorporated by reference from the Proxy Statement expected to be filed within one hundred twenty (120) days of the close of the Registrant's fiscal year ended March 31, 1997. Transitional Small Business Disclosure Format (Check One) Yes ; No X . EMCEE BROADCAST PRODUCTS, INC. FORM 10-KSB FISCAL YEAR ENDED MARCH 31, 1997 TABLE OF CONTENTS PART I. ITEM 1. DESCRIPTION OF BUSINESS 1 ITEM 2. DESCRIPTION OF PROPERTY 2 ITEM 3. LEGAL PROCEEDINGS 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6 PART II. ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 6 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 7 ITEM 7. FINANCIAL STATEMENTS 20 ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES 20 PART III. ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 21 ITEM 10. EXECUTIVE COMPENSATION 21 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 21 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 21 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 21 SIGNATURES 24 PART I ITEM 1. DESCRIPTION OF BUSINESS The Registrant (sometimes alternatively referred to in this report as the "Company" or "EMCEE") is a corporation, organized and existing under the laws of the State of Delaware, having been incorporated in 1960. The Registrant is engaged principally in the manufacture and sale of Multichannel Multipoint Distribution Service ("MMDS") microwave transmitters and related equipment for the wireless cable industry and low power television ("LPTV") transmitters and related equipment for the television broadcast industry. These principal products are distributed primarily through the Registrant's sales staff and independent representatives, with most sales occurring in the commercial, educational and private television system markets. The Registrant also provides all services relative to the design, procurementand installation of television broadcast stations, with the exception of licensing submissions. For more than the past three years, the Company's primary sales and marketing focus has been on the wireless cable industry. While the Company was also involved in the manufacture and sale of products to the LPTV market during the same period of time, LPTV product sales have been overwhelmingly subordinate to the Company's MMDS products. The Company anticipates that its MMDS sales will continue to dominate in both domestic and foreign markets. At March 31, 1997, the Registrant employed 69 people, of whom 67 were full time employees. The Registrant has a variety of raw material sources available to conduct its present business. However, substantial periods of lead time for delivery are sometimes experienced by the Registrant, making it necessary to inventory varied quantities of materials. Significant portions of the Registrant's revenues come from contracts with customers who generally do not place orders on a regular basis. In addition the timing of these contracts relate to economic and regulatory developments over which the Registrant has little or no control. In fiscal year 1997, purchases by three MMDS customers constituted, in the aggregate, $4,448,809, or approximately 35.5% of the Company's net sales. Although these purchases were significant in both amount and as a percentage of sales, the Company's management believes that the loss of the contract the Company has with only one of these customers would have a material adverse impact on the Company. That customer, which constituted approximately 16.9% of the Company's net sales during fiscal year 1997, represents approximately 81% of th eCompany's current backlog. The Registrant's principal suppliers are Andrew Corporation, Scientific Atlanta, Inc., and Microwave Filter Company, Inc. Substantially all of the Registrant's domestic products must receive Federal Communications Commission (FCC) approval prior to being marketed and sold. The Registrant is currently in the process of securing FCC approval for its DS line and the digital version of its HS line of MMDS transmitters. While FCC regulations, as promulgated or amended from time to time, can have an effect on the demand for the Registrant's domestic products, the Registrant does not presently know of any existing governmental regulation and does not anticipate any probable governmental regulation which would have a material effect on its business. However, recently issued FCC regulations concerning high definition television (HDTV) may, for an interim period during which television stations must simulcast HDTV signals and ordinary television signals, create a temporary market for a modified version of one of the Registrant's LPTV transmitters which would facilitate such simulcasting. At this time, though, it is not possible to predict whether such a temporary market for this product will arise and what effect, if any, it will have on the Registrant's business. The amount of money spent on the Registrant's research and development activities in fiscal years 1996 and 1997 was, respectively, $460,884 and $444,669. An additional $30,000 and $61,296 of research and development costs were funded by customers in fiscal years 1996 and 1997, respectively. With respect to the Registrant's research and development activities, it is relevant to note that the Registrant and a manufacturer of connection equipment for internet and local loop telephony have been researching andtesting the feasibility of using MMDS transmitters for high speed internet connections and local loop telephony. However, given that this technology is still in the development stages, the Registrant cannot predict with any degree of certainty what, if any, effect it will have on the Registrant's business. Competitive conditions in the Registrant's industry continue to be intense. Nevertheless, in the field of MMDS, the Registrant occupies a strong position among its competitors. In the Registrant's opinion, the primary methods of competition in its industry are product pricing, the ready availability of quality products to accommodate demand, offering quality service of products after sale, and maintaining a reputation for having a high degree of technical knowledge. There has been no material effect on the Registrant as a result of compliance with federal, state or local environmental laws. The Registrant's principal corporate logos, "EMCEE" and "EMCEE Broadcast Products", are registered in the United States Patent and Trademark Office and are used by the Registrant pursuant to a license with its whollyowned subsidiary corporation, EMCEE Cellular Inc., which owns the marks. In the same manner, the Registrant also uses the trademark, "Site Lock", which is a mark associated with a product sold by the Registrant that enhances picture quality for MMDS systems in close proximity to systems operating on the same frequency, and utilizes a patent for a solid state S-band transmitter. ITEM 2. DESCRIPTION OF PROPERTY The Registrant conducts operations at its facility located on 25 acres, which the Registrant owns in fee, in White Haven, Pennsylvania. The building was constructed specifically for the Registrant in 1968 and consists of approximately 27,000 square feet, with the majority of the area devoted to manufacturing. The front portion of the building, consisting of two floors, houses administrative, engineering and sales offices. The land, building and improvements are well maintained and in good condition. In the first quarter of fiscal year 1998, pursuant to a prior written agreement, the Registrant conveyed an unimproved 1-acre parcel of the Registrant's land, together with a 490' x 20' ingress/egress and utility easement, to the White Haven Municipal Authority. No entry on the financial statements accompanying this report was made with respect to this conveyance, as the value thereof was deemed not to be material. The Registrant's land, building and improvements are subject to encumbrances held by the Registrant's primary lending institution, CoreStates Bank, N.A. These encumbrances secure the Registrant's working line of credit, mortgage loan and two term loans with the lender. As of the date of this report, the aggregate principal balance of these encumbrances is $942,548. ITEM 3. LEGAL PROCEEDINGS There is no information relevant to the Registrant which must be disclosed under this Item 3. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of fiscal year 1997. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The NASDAQ National Market is the principal market on which the Registrant's common stock is traded. MARKET INFORMATION STOCK PRICE The table below presents the high and low bid prices of the Registrant's common equity for the two most recent fiscal years: FISCAL YEAR 1997
QTR ENDED: JUNE 30 SEPT 30 DEC 31 MAR 31 (BID) HIGH $10.50 $7.875 $7.975 $7.50 (BID) LOW $6.50 $5.875 $5.375 $3.00
FISCAL YEAR 1996
QTR ENDED: JUNE 30 SEPT 30 DEC 31 MAR 31 (BID) HIGH $7.75 $8.375 $8.25 $8.125 (BID) LOW $5.00 $5.375 $6.25 $5.875
The above high/low bid information was obtained from the NASDAQ Stock Market, Inc. HOLDERS At March 31, 1997, the number of holders of the Registrant's common stock was 1,622. DIVIDENDS No dividends were declared during fiscal year 1996 or fiscal year 1997. The Registrant's loan documents with its primary lending institution contain certain financial covenants with which the Registrant must comply in order to declare and pay dividends on its common stock. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS Net sales for the fiscal year ended March 31, 1997 were $12,523,000, a decrease of $1,770,000 or 12% from the net sales of $14,293,000 for the fiscal year ended March 31, 1996. The primary reason for the reduction in sales was due to the halt in shipments to the Company's primary customer in the second quarter of the fiscal period. Although shipments to this customer were at $2,113,000 (17% of total sales and the highest sales to any one customer), sales to that customer hadbeen anticipated to be approximately $5,000,000 for the 1997 fiscal year. The halt in these shipments, which are under a subcontract agreement with a U.S. general contractor and are destined for Saudi Arabia, occurred due to a frequency allocation issue not due to any responsibility of the Registrant.Although additional shipments did occur in the fourth quarter of fiscal year 1997, and while management believes a solution to the frequency allocation issue is imminent, the total contract will be materially reduced (See the discussion below on the backlog of unsold orders). Also, domestic demand in the Multichannel Multipoint Distribution Service (MMDS) industry started to decline in the second quarter of fiscal 1997 and continues to be low as operators wait for the successful testing and installation of digital compression technology. Management is confident thatthis technology will provide better picture quality and will increase programming capacity four to five fold, but it believes that the market will not respond until the next calendar year. Foreign sales, which included the previously mentioned subcontract order, totaled $7,056,000 or 56% of shipments for the fiscal year ended March31, 1997, compared to $8,132,0000 for the previous fiscal year; domestic sales equaled $5,467,000 for the fiscal 1997, compared to $6,161,000 for the like period one year ago. Gross profit totaled $4,500,000 or 35.9% of net sales for the fiscal year 1997, compared to $5,191,000 or 36.3% of net sales for fiscal 1996. EMCEE produced product in which the Company receives higher margins than equipment purchased from others for resale (referred to as O.E.M. sales) constituted 81% of total sales for fiscal 1997, compared to 78% for fiscal 1996. However, this slight increase in profit mix was offset by lower margins on the large subcontract order referred to previously. Total operating expenses of $3,116,000 for the twelve month period ended March 31, 1997 decreased by $156,000 or 4.8% from the immediatelypreceding twelve month period. Selling expense decreased by $113,000 (7%) for the two periods. Domestic related sales expenses decreased by 12% for fiscal 1997, compared to fiscal 1996, while international related expenses increased by 8% for the same time frame reflecting the Company's efforts to increase its foreign market share. Advertising expenses totaled $75,000 for the twelve months ended March 31, 1997, compared to $150,000 for the twelve months ended March 31, 1996, as the latter included a large outlay for set-up and publishing of a new brochure. Also, domestic advertising was curtailed in fiscal 1997 in recognition of the downturn in market demand. General and administrative expense totaled $1,186,000 for the year ended March 31, 1997. This was a modest decrease from the total of $1,214,000for the year ended March 31, 1996, although it was a higher percent of net sales at 9.5% for fiscal 1997, compared to 8.5% for fiscal 1996 due to the decrease in sales volume. Decreases were shown in public relations expense and salary and salary related expenses while increased costs were experienced in depreciation expense and additional reserve for bad debts. Research and development expenses totaled $445,000 for the year ended March 31, 1997, which was $16,000 less than the previous fiscal year due to additional credits for the non-recurring engineering received in the current year. The Registrant is committed to continue research and development and has budgeted in excess of $500,000 for the fiscal year 1998 to maintain technological leadership in the MMDS industry. Income from operations decreased to $1,384,000 (11% of net sales) for the twelve months ended March 31, 1997 from $1,919,000 (13.4% of net sales) for the twelve months ended March 31, 1996, due primarily to the decrease in sales volume. On August 21, 1991, the Registrant entered into an agreement to sell a cellular license for $3,100,000. The amount of $1,000,000 was received in fiscal 1992 with the balance of $2,100,000 plus interest at 7% to be paid on December 16, 1996. On March 27, 1997, following a lawsuit by the Company when payment was not received, the parties agreed to a settlement of $2,500,000 to be paid (and which was paid) on April 3, 1997 and an additional $500,000 to be paid to the Company upon the occurrence of certain events, including a sale or material change in ownership of the obligor. The Company recorded as income for fiscal 1997 the proceeds on the sale of the license of $2,500,000 including interest income of $400,000. The remaining $500,000 receivable is recorded on the balance sheet and is fully reserved because there is no reasonable basis to evaluate the likelihood of collection. Interest income for the fiscal year 1997 totaling $110,000 resulted primarily from the investments of U.S. Treasury bills. The equivalent income for the previous fiscal year totaled $105,000. Interest expense for fiscal 1997 totaled $93,000, compared to $141,000 for fiscal 1996. The reduction of interest expense reflects the net reduction of long-term debt during the twelve months ended March 31, 1997.Also, in the prior fiscal year, a large commercial letter of credit was discounted at an interest cost of $23,000. The Company sold one half of the 35,000 shares of an investment in a wireless cable operator during fiscal 1997 for a net gain of $210,000. Additional other income of $32,000 was earned in the year ended March 31, 1997 primarily from forfeitures of customer deposits and rental income. The amount of net other income for the previous year was $18,000. Net other income for the twelve months ended March 31, 1997 totaled $2,759,000 which increased net income before provision for federal income taxes to $4,143,000, compared to net income before federal income taxes of $1,901,000 for the prior fiscal year. Federal income taxes aggregated $1,127,000 and $306,000 for the fiscal years ended March 31, 1997 and March 31, 1996, respectively. The Registrant was able to reduce federal income taxes for both fiscal years by utilizing a foreign sales corporation (FSC). There is no state tax liability for these same periods since all profitable companies in the consolidated reporting group are domiciled in jurisdictions that do not impose income taxes. Net income for fiscal year ended March 31, 1997 was $3,016,000, or $.72 cents per common and common equivalent share, compared to net income of $1,595,000 or $.36 cents per common and common equivalent share for the fiscal year ended March 31, 1996. Selected financial data by quarter for the years ended March 31, 1997 and March 31, 1996 are as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1997 1996 1997 1996 1997 1996 1997 1996 ------------------------------------------------------------------- (Thousands of Dollars) Net Sales $4,299 $2,793 $3,322 $2,899 $3,019 $3,832 $1,883 $4,769 Gross Profit $1,565 $1,034 $1,383 $1,139 $1,193 $1,373 $ 359 $1,645 Income before extra-ordinary items & cum- ulative effect of a change in accounting $ 638 $ 303 $ 404 $ 204 $ 283 $ 401 $1,691 $ 687 Per Share $ .15 $ .07 $ .09 $ .05 $ .07 $ .09 $ .41 $ .15 Net Income $ 638 $ 303 $ 404 $ 204 $ 283 $ 401 $1,691 $ 687
As mentioned previously, the fourth quarter of fiscal 1996 and first quarter of fiscal 1997 were impacted favorably by the sales to one customer for equipment destined for Saudi Arabia. Earnings for the fourth quarter of fiscal 1997 included $2,500,000 of proceeds on a Note Receivable connected with the sale of a cellular license. LIQUIDITY AND CAPITAL RESOURCES Technical changes are inherent in the industry in which the Registrant operates. It is impossible to accurately predict the future of the wireless cable industry. The management of the Company believes in the technological feasibility of digital compression in which the operator can increase the number of channels from 33 to in excess of 150 and provide an enhanced digital picture and video-on-demand programming. Management believes further that High Definition Television Service (HDTV), local loop telephony and Internet communication are areas where the expertise and research conducted by the Company will provide internal growth for the next seven to ten years. In fiscal 1997 the Company's cash requirements were satisfied principally from the cash flow from operations, cash on hand and customer deposits. These funds were sufficient to meet the Company's working capital needs, capital expenditures and required debt payments. The Company recognizes that industry demand for the remainder of calendar year 1997 will be less than the preceding calendar year, especially in the domestic market. The Company believes that its financial strength as evidenced by the balance sheet, especially the cash and cash equivalent amount, will allow it to continue to develop and market the latest technology until the demand increases. Cash and cash equivalents totaled $681,000 at March 31, 1997 compared to $1,538,000 as of March 31, 1996; U.S. Treasury Bills increased from $1,569,000 to $1,679,000 for the same periods. The net decrease in these accounts are due to the decrease in sales activity in the second half of fiscal 1997 and the acquisition of treasury stock in the first quarter of fiscal 1997. Due to the decrease in sales volume, especially in the fourth quarter of fiscal 1997 compared to the fourth quarter of fiscal 1996, the accounts receivable balance, net of allowance for doubtful accounts, decreased from $1,819,000 as of March 31, 1996 to $934,000 as of March 31, 1997. Customer deposits on orders decreased in tandem from $526,000 as of March 31, 1996 to $121,000 at March 31, 1997. Bad debt write-offs for fiscal 1997 totaled $30,000, the same as the amount written off in the prior fiscal year. The reserve was increased from $95,000 as of March 31, 1996 to $100,000 as of March 31, 1997 which management believes is adequate. Inventories totaled $3,628,000 as of March 31, 1997, an increase of $252,000 over the same date one year earlier. The increase was due primarily to build-up for the previously mentioned customer which had been placed on "hold" status. Restrictions have been placed on new inventory purchases in an endeavor to relate inventory levels to sales levels. Accounts payable balance at March 31, 1997 of $355,000 is $430,000 less than the balance at March 31, 1996, reflecting the reduction of inventory purchases. Deferred income taxes, which was an asset as of March 31, 1996, became a liability as of March 31, 1997 due to the timing of the collection of the cellular license settlement. The Note Receivable, which included interest of $400,000, increased to $2,500,000 at March 31, 1997 from a net balance of zero as of March 31, 1996 due to the collection of the Note on April 3, 1997.An additional $500,000 of the settlement agreement has been shown as a long-term receivable with a like amount fully reserved as the likelihood or time of collection cannot be determined at the time of this report. Capital expenditures for the fiscal year ended March 31, 1997 totaled $355,000 compared to $231,000 for the prior fiscal year. Of the total amount of $355,000, approximately $272,000 was used to procure testing equipment including $76,000 for digital testing. Capital assets of $388,000, which were fully depreciated, were "scrapped" and written-off during fiscal 1997.Included in this write-off was an amount of $221,000 for the old data processing hardware and software which was replaced in fiscal 1996. Depreciation expense for fiscal 1997 totaled $243,000, an increase of $44,000 from the previous fiscal year.Plans for future expansion of the Registrant's production and office space as mentioned in last year's annual report have been delayed until sales volume increases. The Company has, since June 1996, leased approximately 1,500 square feet of space used for research and development. The balance shown in the category "Other Assets" for March 31, 1996 in the financial statements accompanying this report included $212,000 for the Company's investment in a Wireless Cable operator. In fiscal 1997 the Company sold one half of this investment for $318,200. The remaining stock of the operator, which was acquired by a Regional Bell Operating Company, was sold during the first quarter of fiscal 1998 for $383,300. The remaining $2,000 difference between these accounts for the respective dates represents costs associated with organizing subsidiaries of the Registrant. In February 1997, the Company refinanced its borrowing with a different financial institution as follows: 1. Line of credit of $2,000,000 bearing interest at the bank's prime rate less 1/2 percent or LIBOR plus 175 basis points. There are no borrowings outstanding as of March 31, 1997. 2. Mortgage bearing interest at the bank's prime rate plus 1/4 percent or LIBOR plus 225 basis points. As of March 31, 1997, the mortgage aggregated $735,000 and required monthly principal payments of $4,083 plus interest at LIBOR plus 225 basis points, which was 7.6875%. 3. Term loan bearing interest at the bank's prime rate or LIBOR plus 200 basis points. At March 31, 1997, $152,000 was outstanding bearing interest at 7.4375% with monthly principal payments of $2,533. An additional amount of $70,000 was borrowed on April 1, 1997 at the same interest rate and required monthly principal payments of $1,218. Although the change produced favorable interest rates, Management's decision to change was based on the international expertise provided by the new financial institution. Long-term debt, less the current portion of $108,000, equaled $807,000 as of March 31, 1997, compared to $938,000 as of March 31, 1996. Accrued expenses at March 31, 1997, which consisted of payroll and related expenses of $207,000 and other of $130,000 for a total of $337,000 was $216,000 less than the balance of $553,000 for the same date one year ago. Reductions in accrued payroll included an amount of $98,000 for officers and management bonuses accrued as of March 31, 1996. Bonus calculations are based on income from operations goals that were not achieved for fiscal 1997. Reductions also incurred in payroll tax liability of approximately $45,000 as these are now paid through electronic funds transfer (EFT). An amount of $37,000 included in other accrued expense as of March 31, 1996 represented the final deferred portion of an asset purchased in fiscal 1996 with final payment in April 1997 and reclassified as accounts payable at March 31, 1997. Common stock and additional paid-in capital accounts increased $45,000 during the year ended March 31, 1997 as employees exercised stock options for 19,000 shares at an average price of $2.37 (See note 8 to the financial statements accompanying this report for further discussion). In May, 1996, the Registrant, through a subsidiary, purchased 200,000 shares of the Company's stock from the estate of a former director through an agreement negotiated with the beneficiary for $1,262,500. In consideration of this agreement, the Company has issued a nonnegotiable, non-transferable stock warrant to the beneficiary that expires on May 22, 2001, for 200,000 shares of the Company's stock at an exercise price of $9.46875 per share. In addition, 5,438 shares of the Company stock was purchased from former employees (including 2,184 shares from a former officer) under the KSOP Plan Agreement for an aggregate amount of $47,710. Inflation has not had a significant impact on cost or price in the two fiscal years under review. However, as a significant portion of component materials are obtained from sources outside the United States, the Registrant is subject to the fluctuations in the international money market. The backlog of unsold orders amounted to $2,853,000 compared to $10,912,000 as of March 31, 1996. The backlog as of March 31, 1997 has ben restated to anticipate the expected change in the subcontract order for Saudi Arabia.Indications are that a major portion if not all of this order will change from analog to digital compression which would reduce the number of transmitters required to complete the project. While this reduction valued at approximately $4.3 million adversely affects the short-term sales, the Registrant believesthat the participation in this new technology will enhance its reputation over the next several years and initiate the potential for additional volume. The Company employed 67 persons plus 2 part-time employees as of March 31, 1997 compared to 83 (plus 9 part-time) people at March 31, 1996 and a total high of 95 employees in July 1996. A further decrease to approximately 60 full and part-time employees occurred in the first quarter of fiscal 1998. ACCOUNTING DEVELOPMENTS In February 1997, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 128, Earnings per Share (SFAS No. 128) and SFAS No. 129 Disclosure of Information about Capital Structure. SFAS No. 128 replaces the presentation of primary earnings per share with a presentation of basic earnings per share. It also requires dual presentation of basic and diluted earnings per share on the face of the income statement for all entities with complex capital structures. SFAS No. 129 establishes standards for disclosing information about an entity's capital structure. Management does not believe that SFAS No. 128 and SFAS No. 129 will have a material effect on the financial statements of the Company. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Any statements contained in this report which are not historical facts are forward looking statements; and, therefore, many important factors could cause actual results to differ materially from those in the forwardlooking statements. Such factors include, but are not limited to, changes (legislative, regulatory and otherwise) in the MMDS or LPTV industry, demand for the Company's products (both domestically and internationally), the development of competitive products, competitive pricing, the timing of foreign shipments (including, but not limited to, the resumption and/or further modification of the subcontract for Saudi Arabia mentioned above),market acceptance of new product introductions (including, but not limited to, the Company's digital products), technological changes, economic conditions, litigation and other factors, risks and uncertainties identified in the Company's Securities and Exchange Commission filings. ITEM 7. FINANCIAL STATEMENTS See pages 25 to 40 of this report for the financial statements required by this Item. ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There is no information relevant to the Registrant which must be disclosed under this Item 8. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The information required by this Item 9 is incorporated herein from the Proxy Statement expected to be filed within one hundred twenty (120) days of the close of the Registrant's fiscal year. ITEM 10. EXECUTIVE COMPENSATION The information required by this Item 10 is incorporated herein from the Proxy Statement expected to be filed within one hundred twenty (120) days of the close of the Registrant's fiscal year. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item 11 is incorporated herein from the Proxy Statement expected to be filed within one hundred twenty (120) days of the close of the Registrant's fiscal year. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item 12 is incorporated herein from the Proxy Statement expected to be filed within one hundred twenty (120) days of the close of the Registrant's fiscal year. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) The following constitutes an Exhibit Index of the applicable Exhibits to this report: DESCRIPTION OF EXHIBIT EXHIBIT NUMBER PAGE NUMBER ----------------------- -------------- ----------- Articles of Incorporation and Bylaws Restated Certificate of Incorporation 3 i 41 Bylaws 3 ii (1) Material Contracts 1996 Stock Option Plan 10 49 1988 Stock Option Plan 10 (1) Officers Incentive Compensation Plan 10 60 Agreement (Change in Control Agreements for certain Executive Officers) 10 (2) Non-Negotiable, Non-Transferable Stock Warrant 10 (2) Purchase Order Master Contract 10 (3) Settlement and Release Agreement 10 62 Subsidiaries 21 (4) Financial Data Schedule 27 (5) (1) Incorporated by reference from the Form 10-KSB filed by the Registrant with the U.S. Securities and Exchange Commission for fiscal year ended 1993. (2) Incorporated by reference from the From 10-KSB filed with the Securities and Exchange Commission for fiscal year ended 1996. (3) Incorporated by reference from the Form 10-KSB/A (No. 2) filed with the U.S. Securities and Exchange Commission for fiscal year ended 1996. (4) Incorporated by reference from the Form 10-KSB filed with the U.S. Securities and Exchange Commission for fiscal year ended 1995. (5) This Exhibit was filed electronically, but is not included in the paper copy of this report. (b) Form 8-K filings: The Registrant filed two Form 8-Ks during the last quarter of the period covered by this report. The Form 8-K which was filed with the U.S. Securities and Exchange Commission on January 9, 1997, reported the death of Leonard S. Teven, a member of the Registrant's Board of Directors. The Form 8-K which was filed on January 15, 1997, reported the Registrant's initiation of a lawsuit,which was eventually settled and is also discussed in Item 6 above, with respect to $2.1 million of indebtedness, plus accrued interest, owing to the Registrant under a Note delivered to the Registrant in connection with the Registrant's sale of a cellular license in 1991. In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EMCEE BROADCAST PRODUCTS, INC. /s/ JAMES L. DESTEFANO --------------------------------- James L. DeStefano, President/CEO Date: June 27, 1997 /s/ ALLAN J. HARDING -------------------------------- Allan J. Harding, Vice President- Finance Date: June 27, 1997 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ JAMES L. DESTEFANO Date: June 27, 1997 - - ---------------------------- James L. DeStefano, Director /s/ JOE B. HASSOUN Date: June 27, 1997 - - ---------------------------- Joe B. Hassoun, Director /s/ MICHAEL J. LEIB Date: June 27, 1997 - - ---------------------------- Michael J. Leib, Director /s/ RICHARD J. NARDONE Date: June 27, 1997 - - ---------------------------- Richard J. Nardone, Director /s/ EVAGELIA ROGIOKOS Date: June 27, 1997 - - ---------------------------- Evagelia Rogiokos, Director EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES YEARS ENDED MARCH 31, 1997 AND 1996 Independent Auditors' Report Board of Directors EMCEE Broadcast Products, Inc. White Haven, Pennsylvania We have audited the consolidated balance sheets of EMCEE Broadcast Products,Inc. and subsidiaries as of March 31, 1997 and 1996 and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 financial position of EMCEE Broadcast Products, Inc. and subsidiaries as of March 31, 1997 and 1996, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. Kingston, Pennsylvania May 22, 1997 EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND 1996
ASSETS 1997 1996 ----------------- Current assets: Cash and equivalents $ 681,335 $ 1,537,759 U.S. Treasury Bills 1,679,164 1,569,026 Accounts receivable, net of allowance for doubtful accounts (1997, $100,000; 1996, $95,000) 933,535 1,818,988 Inventories 3,627,803 3,375,901 Prepaid expenses 379,358 247,933 Deferred income taxes 226,000 Note receivable 2,500,000 2,100,000 Less deferred portion (2,100,000) ------------------------------ Total current assets 9,801,195 8,775,607 ------------------------------ Property, plant and equipment: Land and land improvements 246,841 246,841 Building 629,211 621,215 Machinery 2,019,718 2,060,799 ----------------------------- 2,895,770 2,928,855 Less accumulated depreciation 1,836,630 1,982,113 ------------------------------ 1,059,140 946,742 ------------------------------ Other assets 108,173 214,900 ------------------------------ Note receivable 500,000 Less deferred portion ( 500,000) ------------------------------ 0 ------------------------------ Total assets $10,968,508 $9,937,249 ------------------------------ ------------------------------ See notes to consolidated financial statements
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996 -------------------------------------- Current liabilities: Current portion of long-term debt $ 108,000 $200,000 Accounts payable 355,401 785,159 Accrued expenses: Payroll and related expenses 206,612 285,000 Other 130,172 267,506 Deposits from customers 121,195 526,199 Deferred income taxes 554,000 --------------------------------------- Total current liabilities 1,475,380 2,063,864 --------------------------------------- Long-term debt, net of current portion 807,189 938,217 --------------------------------------- Shareholders' equity: Common stock, $.01 - 2/3 par; authorized 9,000,000 shares; issued 4,378,364 shares, 1997; 4,359,381 shares, 1996 72,987 72,653 Additional paid-in capital 3,562,523 3,517,778 Retained earnings 6,412,703 3,396,801 --------------------------------------- 10,048,213 6,987,232 Less shares held in treasury, at cost (1997, 212,763; 1996, 7,325) 1,362,274 52,064 ---------------------------------------- 8,685,939 6,935,168 --------------------------------------- Total liabilities and equity $10,968,508 $ 9,937,249 ---------------------------------------
--------------------------------------- EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED MARCH 31, 1997 AND 1996
1997 1996 -------------------------- Net sales $12,522,811 $14,292,562 Costs of products sold 8,023,300 9,101,277 -------------------------- Gross profit 4,499,511 5,191,285 -------------------------- Operating expenses: Selling 1,484,962 1,597,549 General and administrative 1,186,329 1,213,996 Research and development 444,669 460,884 -------------------------- 3,115,960 3,272,429 -------------------------- Income from operations 1,383,551 1,918,856 -------------------------- Other income (expense), net: Interest expense ( 92,909)( 140,723) Interest income 109,976 105,279 Other 242,084 17,674 Settlement of note receivable 2,500,000 -------------------------- 2,759,151 ( 17,770) -------------------------- Income before income taxes 4,142,702 1,901,086 Income taxes 1,126,800 306,000 --------------------------- Net income $ 3,015,902$ 1,595,086 --------------------------- --------------------------- Earnings per common and common equivalent share $.72 $.36 --------------------------- --------------------------- Shares used in computing earnings per common share and common share equivalent 4,215,300 4,403,500 --------------------------- --------------------------- See notes to consolidated financial statements
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED MARCH 31, 1997 AND 1996
Common stock Additional Shares Amount paid-in capital Balance, March 31, 1995 4,300,155 $ 71,670 $3,472,200 Common stock issued under stock option plan 59,226 983 45,578 Treasury stock purchased Net income for the year -------------------------------- Balance, March 31, 1996 4,359,381 72,653 3,517,778 Common stock issued under stock option plan 18,983 334 44,745 Treasury stock purchased Net income for the year --------------------------------- Balance, March 31, 1997 4,378,364 $ 72,987 $3,562,523 --------------------------------- --------------------------------- See notes to consolidated financial statements
Retained Treasury stock earnings Shares Amount Total $ 1,801,715 3,221 $( 21,061) $ 5,324,524 46,561 4,104 ( 31,003) ( 31,003) 1,595,086 1,595,086 - - ---------------------------------------------------- 3,396,801 7,325 ( 52,064) 6,935,168 45,079 205,438 (1,310,210) (1,310,210) 3,015,902 3,015,902 - - -------------------------------------------------- $ 6,412,703 212,763 $(1,362,274) $ 8,685,939 - - -------------------------------------------------- - - --------------------------------------------------
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 31, 1997 AND 1996
1997 1996 -------------------------- Cash flows from operating activities: Net income $3,015,902 $1,595,086 Adjustments: Depreciation 242,625 198,632 Recognition of note receivable (2,500,000) Disposal of fixed assets 30,647 (Increase) decrease in: Accounts receivable 885,453 ( 151,493) Inventory ( 251,902) 672,045 Prepaid expenses ( 131,425) ( 159,886) Deferred income taxes 226,000 ( 38,000) Other assets 106,727 300 Increase (decrease) in: Accounts payable ( 429,758) 153,107 Accrued expenses ( 215,722) ( 904,093) Deposits from customers ( 405,004) ( 38,004) Deferred income taxes 554,000 ------------------------- Net cash provided by operating activities 1,096,896 1,358,341 ------------------------ Cash flows from investing activities: Purchases of: Property, plant and equipment ( 355,023) ( 231,197) U.S. Treasury Bills (2,310,138) (2,388,498) Proceeds from maturities of U.S. Treasury Bills 2,200,000 1,400,000 ------------------------ Net cash used in investing activities ( 465,161) (1,219,695) ------------------------ Cash flows from financing activities: Acquisition of treasury stock (1,310,210) ( 31,003) Proceeds from issuance of: Long-term debt 887,000 115,000 Common stock 45,079 46,561 Repayment of long-term debt (1,110,028)( 171,525) ------------------------ Net cash used in financing activities (1,488,159)( 40,967) ------------------------ Net increase (decrease) in cash and equivalents ( 856,424) 97,679 Cash and equivalents, beginning 1,537,759 1,440,080 ------------------------ Cash and equivalents, ending $ 681,335 $1,537,759 ------------------------ ------------------------
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED MARCH 31, 1997 AND 1996 Supplemental disclosures of cash flow information: Cash paid for interest expense amounted to $95,000 and $142,000 in 1997 and 1996, respectively. Cash paid for income taxes was $531,000 and $1,473,000 in 1997 and 1996, respectively. See notes to consolidated financial statements EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 1997 AND 1996 1. Summary of significant accounting policies: Principles of consolidation: The consolidated financial statements include the accounts of EMCEE Broadcast Products, Inc. and its subsidiaries, all of which are wholly-owned (together, the Company). All significant intercompany accounts and transactions have been eliminated. Revenue recognition, sale of license: During 1992, a rural cellular license was sold for $3,100,000. The initial payment was $845,000, net of closing costs of $155,000. The balance, which bore interest at 7% payable at maturity, was due in December 1996. The deferred payment and the related interest income was not previously recognized because of its extended collection period and because there was not a reasonable basis to evaluate the likelihood of collection. On April 3, 1997 the Company collected $2,500,000 and received a non-interest bearing, unsecured $500,000 note receivable as settlement of the note. The $500,000 note receivable is due and payable upon the occur- rence of any one or more of certain specified events involving the debtor, including but not limited to acquisition, merger, bankruptcy, and insolvency. None of the specified events relate to the debtor's normal operations. The note receivable is fully reserved because it has no definite collection period and because there is not a reasonable basis to evaluate the likelihood of collection. Cash and U.S. Treasury Bills: The Company considers cash equivalents to be all highly liquid investments purchased with an original maturity of three months or less. U.S. Treasury Bills with an original maturity of more than three months are considered to be investments. All U.S. Treasury Bills are stated at cost which approximates market and are considered as available for sale. All U.S. Treasury Bills not included as cash equivalents had contracted maturities of six months. Inventories: Inventories are stated at the lower of standard cost which approximates current actual cost (on a first-in, first-out basis) or market (net realizable value). Property, plant and equipment and depreciation: Property, plant and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets. EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 1997 AND 1996 1. Summary of significant accounting policies (continued): Advertising: These expenses are recorded when incurred. They amounted to $75,000 and $150,000 for 1997 and 1996, respectively. Fair value: The fair value of long-term debt that is variable rate debt that reprices regularly, the notes receivable of $2,500,000 which were collected in April 1997 and U.S. Treasury Bills approximates the amounts recorded in the financial statements. It was not practicable to estimate the fair value of the $500,000 note receivable at March 31, 1997 and the note receivable at March 31, 1996 because the Company was unable to estimate the timing and form of the ultimate settlement of the amounts due to it. The Company has fully provided for any potential loss resulting from the non-payment of these receivables. Earnings per share: Earnings per common and common equivalent share are computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock. Use of estimates: Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Reclassification: Certain reclassifications have been made to 1996 balance sheet to conform to the 1997 presentation. 2. Industry, sales and accounts receivable concentration information: The Company's primary activity is in one segment which consists of the assembly and sale of equipment for the domestic and foreign television broadcasting industry. Major customers are those that individually account for more than 10% of the Company's consolidated revenues. For the years ended March 31, 1997 and 1996, two customers with total sales of $3,476,000 and two customers with total sales of $4,864,000, respectively, qualified as major customers. Worldwide export sales amounted to $7,056,000 and $8,174,000 for 1997 and 1996, respectively. At March 31, 1997, there were no significant accounts receivable concentrations. The Company performs ongoing credit evaluations of its customers and typically requires deposits and a letter of credit on foreign sales and deposits on domestic sales. Historically, the Company's uncollectible accounts receivable have been immaterial. EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED MARCH 31, 1997 AND 1996 3. Cash and equivalents: At March 31, 1997, cash held at a financial institution is in excess of the Federal Deposit Insurance coverage by $358,000. In addition, $198,000 of U.S. Treasury Bills were recorded as cash equivalents. 4. Inventories: 1997 1996 ------------------------- Finished goods $ 399,000 $ 554,000 Work-inprocess 738,000 681,000 Raw materials 1,574,000 1,614,000 Manufactured components 916,803 526,901 ------------------------- $3,627,803 $3,375,901 ------------------------- ------------------------- 5. Line of credit: The Company has a line of credit agreement with a bank aggregating $2,000,000 collateralized by inventories, accounts receivable and all property, plant and equipment. The line of credit agreement requires monthly interest payments at .50% below the bank's prime rate of interest or 1.75% above LIBOR which was 5.4375% at March 31, 1997. There were no principal borrowings during the years ended March 31, 1997 and 1996. The loan agreement contains restrictive covenants when amounts are outstanding which, among other things, require the Company to maintain a maximum total liabilities to net worth ratio, a minimum current ratio and a debt coverage ratio. The Company is allowed to pay dividends on its common stock if it is in compliance with the financial covenants and ratios. 6.Long-term debt: 1997 1996 ---------------------- Term loans, bank $ 735,000 $ 823,369 Equipment loans 152,000 231,693 Other 28,189 83,155 ---------------------- 915,189 1,138,217 Less current portion 108,000 200,000 ----------------------- $ 807,189 $ 938,217 ----------------------- ----------------------- EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED MARCH 31, 1997 AND 1996 6. Long-term debt (continued): The term loan, bank at March 31, 1997 matures in 2012 and requires principal payments of $4,083, plus interest. Interest is calculated at 2.25% above LIBOR which was 5.4375% at March 31, 1997. The bank has the option of adjusting the monthly payments required under this loan to provide for changes in the interest rates. The term and equipment loans are cross-collateralized with and have the same restrictive covenants as the line of credit (see Note 5). Principal payments on long-term debt, based on current interest rates, are as follows: 1998 $ 108,000 1999 79,000 2000 79,000 2001 79,000 2002 79,000 Thereafter 491,189 ----------- $ 915,189 ----------- ----------- 7. Defined contribution pension plan: A defined contribution pension plan covers all full time employees who meet age and service requirements. Contributions to the plan, determined at the discretion of the Board of Directors, were $29,000 in 1997 and 1996. 8. Common stock: Nonqualified stock option plans provide for the grant of options to purchase up to 300,000 shares. Upon the termination or expiration of any stock options granted, the shares covered by such terminated or expired stock options will be available for further grant; 37,100 options were available for grant at March 31, 1997. The Board of Directors, at the date of grant of an option, determines the number of shares subject to the grant and the terms of such option. All outstanding options granted expire after 5 years and vest over two years. EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED MARCH 31, 1997 AND 1996 8. Common stock (continued): Changes in outstanding common stock options granted are summarized below:
1997 1996 ----------------------------------------- Number Average Number Average of exercise of exercise shares price shares price ----------------------------------------- Balance at beginning of year 80,083 $ 2.82 145,920 $ 3.45 Options granted 115,200 6.16 -------- ------- 195,283 145,920 Options exercised 18,983 2.37 59,226 .79 Options expired 13,050 1.31 6,611 .34 -------- ------- Balance at end of year 163,250 $ 5.36 80,083 $ 2.82 ----------------------------------------- ----------------------------------------- Options exercisable at year-end 48,050 $ 3.44 58,500 $ 2.59 Weighted-average fair value of options granted during the year $ 3.09
At March 31, 1997, the range of exercise prices and the weighted- average remaining contractual life of outstanding options was $3.44 - $6.16 and 3.4 years, respectively. The Company in accordance with an election under generally accepted accounting principles for stock options has recorded no compensation cost for its stock options in the accompanying consolidated financial state ments. Had compensation cost been determined based on the fair value at the grant dates for awards under the plans, the Company's net income and earnings per share would have been reduced to the proforma amounts disclosed below: EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED MARCH 31, 1997 AND 1996 1997 ----------- Net income: As reported $3,015,902 Proforma 2,972,000 Earnings per common share: As reported $ .72 Proforma .71 8. Common stock (continued): Proforma net income does not reflect options granted before April 1, 1995. Therefore, the full impact of calculating compensation cost for stock options is not reflected in the proforma amounts presented above because compensation cost is reflected over the options' vesting period of two years and compensation cost for options granted in the year ended March 31, 1995 are not considered. The fair values were determined using the Black-Scholes option- pricing model with the following weighted average assumptions: Earnings dividend yield .0% Risk free interest rate 5.84% Expected life 5 Years Volatility 48.88% During 1997, warrants to purchase 200,000 shares of common stock at $9.76 a share were issued and remain outstanding at March 31, 1997. 9. Income taxes: The following table sets forth the current and deferred amounts of the provisions for income taxes for the years ended March 31, 1997 and 1996: 1997 1996 Current $346,800 $ 780,000 Deferred (38,000) 306,000 -------------------------------- $ 306,800 $1,126,800 -------------------------------- -------------------------------- The provisions for income taxes at the Company's effective rate differed from the provision for income taxes at the statutory rate of 34% for the years ended March 31, 1997 and 1996 as follows: EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED MARCH 31, 1997 AND 1996
1997 1996 ---------------------------- Federal income tax at the statutory rate $ 1,408,000 $646,000 Foreign sales corporation benefit (180,000) (173,000) Federal income tax credit (50,000) (49,000) Other, net (51,200) (118,000) Provision for income taxes $ 1,126,800 $ 306,000 ---------------------------- ----------------------------
9. Income taxes (continued): The tax effects of temporary differences that give rise to deferred income taxes at March 31, 1997 and 1996 are presented in the table below:
1997 1996 -------------------------- Deferred tax assets: Inventory $ 101,000 $ 124,000 Other differences 59,000 102,000 --------------------------- Total gross deferred tax assets 160,000 226,000 Deferred tax liabilities, Note receivable ( 714,000) --------------------------- Net deferred tax asset (liability) $( 554,000) $ 226,000 --------------------------- ---------------------------
EX-99 2 RESTATED CERTIFICATE OF INCORPORATION OF EMCEE BROADCAST PRODUCTS, INC. EMCEE Broadcast Products, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is EMCEE Broadcast Products, Inc., and the name under which the corporation was originally incorporated is Electronics, Missiles & Communications, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State was May 23, 1960. 2. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 3. The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full: FIRST. The name of the corporation is EMCEE BROADCAST PRODUCTS, INC. SECOND. Its principal office in the State of Delaware is located at No. 100 West Tenth Street, in the City of Delaware, County of New Castle. The name and address of its resident agent is The Corporation Trust Company, No. 100 West Tenth Street, Wilmington 99, Delaware. THIRD. The nature of the business, or objects or purposes to be transacted, promoted or carried on are: To manufacture, produce, assemble, fabricate, import, lease, purchase or otherwise acquire; to invest in, use, hold, own, license the use of, install, handle, maintain, service or repair, to sell, pledge, mortgage, exchange, export, import, distribute, lease, assign, and otherwise dispose of, and generally trade in and deal in, to carry on research, development, engineering, design, technical studies, consulting, invention, and revision of, electronic systems, equipment and components, and electrical, and electromechanical apparatus and equipment of all kinds and descriptions, electronics, telecommunications, communications and similar equipment of all descriptions, including but not limited to high frequency, very high frequency, ultra high frequency, microwave, infra-red, relays and repeaters, electronic test equipment, equipment and systems for relaying broadcasting, transmitting and receiving signals, equipment and systems for computing measurements and control of signals, radio, sonar, radar, television and related and similar devices and equipment, cables, motors, dynamos, generating plants, meters, supplies, parts, equipment, apparatus, machinery, improvements, appliances, tools and goods, wares, merchandise, commodities, articles of commerce and property of every kind and description, services of every kind and description dealing with communications, reception and transmission of sound and light waves,and all and any products, machinery, equipment and supplies used or useful in connection with the foregoing. To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade-marks and trade names, relating to or useful in connection with any business of this corporation. To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof. To borrow or raise moneys for any of the purposes of the corporation and, from time to time without limit as to amount, to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the corporation for its corporate purposes. To loan to any person, firm or corporation any of its surplus funds, either with or without security. To purchase, hold, sell and transfer the shares of its own capital stock; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital except as otherwise permitted by law, and provided further that shares of its own capital stock belonging to it shall not be voted upon directly or indirectly. To have one or more offices, to carry on all or any of its operations and business and without restriction or limit as to amount to purchase or otherwise acquire, hold, own, mortgage, sell, convey or otherwise dispose of, real and personal property of every class and description in any of the states, districts, territories or colonies of the United States, and in any and all foreign countries, subject to the laws of such state, district, territory, colony or country. In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Delaware upon corporations formed under the General Corporation Law of the State of Delaware, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do. The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this certificate of incorporation, but the objects and purposes specified in each of the foregoing clauses of this article shall be regarded as independent objects and purposes. FOURTH. The total number of shares which the company shall be authorized to issue is nine million (9,000,000) shares of the Par Value of One and Two-Thirds Cents ($.01667) per share. No stockholder of this corporation shall by reason of his holding shares of any class have any preemptive or preferential right to purchase or subscribe to any shares of any class of this corporation, now or hereafter to be authorized, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities, would adversely affect the dividend or voting rights of such stockholder, other than such rights, if any, as the board of directors, in its discretion from time to time may grant and at such price as the board of directors in its discretion may fix; and the board of directors may issue shares of any class of this corporation, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class, without offering any such shares of any class, either in whole or in part, to the existing stockholders of any class. FIFTH. The minimum amount of capital with which the corporation will commence business is One Thousand Dollars ($1,000.00). SIXTH. The names and places of residence of the incorporators are as follows: NAMES RESIDENCES R. F. Westover Wilmington, Delaware L. A. Schoonmaker Wilmington, Delaware S. E. Manuel Wilmington, Delaware SEVENTH. The corporation is to have perpetual existence. EIGHTH. The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. NINTH. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized: To make, alter or repeal the by-laws of the corporation. To authorize and cause to be executed mortgages and liens upon the real and personal property of the corporation. To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By resolution passed by a majority of the whole board, to designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in the resolution or in the by-laws of the corporation, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the by-laws of the corporation or as may be determined from time to time by resolution adopted by the board of directors. When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called for that purpose, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease or exchange all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the corporation. TENTH. Meetings of stockholders may be held outside the State of Delaware, if the by-laws so provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Elections of directors need not be by ballot unless the by-laws of the corporation shall so provide. ELEVENTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. TWELFTH. The personal liability of a director of this corporation to the corporation or to its stockholders for monetary damages for breach of fiduciary duty as a director is eliminated, provided that such elimination shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under the provisions of Section 174 of the Delaware Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Such elimination shall eliminate the liability of the director for any act or omission occurring at or after the date when this Article has been filed with and approved by the Secretary of the State of Delaware. 4. This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said EMCEE Broadcast Products, Inc. has caused this Certificate to be signed by James L. DeStefano, its President/CEO, this 19th day of November, 1996. EMCEE BROADCAST PRODUCTS, INC. BY: /s/ James L. DeStefano ----------------------------- TITLE: President/CEO EX-99 3 EMCEE BROADCAST PRODUCTS, INC. NONSTATUTORY STOCK OPTION PLAN THIS NONSTATUTORY STOCK OPTION PLAN (the "PLAN"), approved by the affirmative vote of a majority of the stockholders of EMCEE Broadcast Products, Inc. (the "COMPANY"), a Delaware corporation, present in person or represented by proxy, at the 1996 Annual Meeting of Stockholders on August 26, 1996 (the "EFFECTIVE DATE"), in accordance with the applicable laws of the State of Delaware. ARTICLE I - DEFINITIONS 1.1 The following is a list which sets forth the meaning of certain terms used in this Plan which are not elsewhere defined herein: 1.1.1 "Administering Body" shall mean the Board or the Committee. 1.1.2 "Board" shall mean the Board of Directors of the Company. 1.1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.1.4 "Committee" shall mean the Stock Option Committee of the Board or such other committee of the Board, duly established and constituted by the Board from time to time by resolution. 1.1.5 "Company Stock" shall mean the common stock of the Company. 1.1.6 "Date of Grant" shall mean the date on which the Administering Body, by resolution, grants an Option to an Optionee. 1.1.7 "Disinterested Person" shall have the meaning ascribed to it in Rule 16b-3 under the 1934 Act. 1.1.8 "Fair Market Value" shall mean the average of the highest and lowest prices per share of Company Stock on the NASDAQ National Market or on such other market or exchange on which the Company Stock is then traded, as reported in the Wall Street Journal; in the absence of such a report on the Date of Grant in question, the first preceding day on which there was such a report shall be used. 1.1.9 "1934 Act" shall mean the Securities Exchange Act of 1934. 1.1.10 "Option" shall mean an option to purchase Company Stock pursuant to the provisions of this Plan. 1.1.11 "Optionee" shall mean any director (unless he is a member of the Administering Body), officer or other key management employee of the Company or any Subsidiary to whom an Option, which has not expired or been terminated, has been granted under the provisions of this Plan. 1.1.12 "Stock Option Agreement" shall mean a written instrument approved by the Administering Body from time to time, setting forth the terms and conditions under which an Optionee has been granted an Option. 1.1.13 "Subsidiary" shall mean a subsidiary corporation of the Company as defined in Section 424 of the Code. 1.1.14 "Termination Date" shall mean August 25, 2006, at 5:00 P.M. ARTICLE II - PLAN FORMATION 2.1 This Plan shall be known as the "1996 EMCEE Broadcast Products Stock Option Plan". 2.2 The purpose of this Plan is to advance the interests of the Company and its shareholders by affording eligible directors, officers and key management employees of the Company and its Subsidiaries the opportunity to become owners, or to increase their ownership of, Company Stock, and to motivate and retain such individuals, upon whose judgment, initiative, leadership and continued efforts the success of the Company in large measure depends, as well as to attract highly competent individuals to such positions. 2.3 The Options are not "incentive stock options" within the meaning of Section 422 of the Code. 2.4 This Plan is intended to be a plan, the transactions of which, as to directors and officers, shall be exempt from Section 16 (b) of the 1934 Act, pursuant to Rule 16b-3 under the 1934 Act. 2.5 This Plan shall begin and take effect on the Effective Date and shall end and terminate on and as of the Termination Date. ARTICLE III - PLAN ADMINISTRATION 3.1 This Plan shall be administered by the Administering Body. If the Administering Body is the Committee, it shall report all action taken by it to the Board. All members of the Administering Body must be Disinterested Persons. 3.2 Subject to the provisions of this Plan, the Administering Body shall have full and final authority, in its discretion, to take any and all actions and to make any and all determinations deemed necessary or advisable for the proper administration of this Plan, for which all such actions and determinations shall be conclusively binding for all purposes and upon all persons and entities, including, but not limited to: 3.2.1 determining and choosing Optionees; 3.2.2 determining the time or times at which Options shall be granted; 3.2.3 determining the number of shares of Company Stock which shall be subject to each Option; 3.2.4 construing and interpreting this Plan; and 3.2.5 determining the terms and conditions of Stock Option Agreements, which need not be identical, including, but not limited to, terms covering the payment of the "Option Price" (defined hereinafter). 3.3 In determining the eligibility of, and in choosing an Optionee, as well as the number of shares of Company Stock covered by an Option granted to each such Optionee, the Administering Body shall consider such individual's position and responsibilities, the nature and value to the Company or its Subsidiary of such individual's services, such individual's present and/or potential contribution to the success of the Company or a Subsidiary and such other performance and contribution factors applicable to such individual as the Administering Body may deem relevant. ARTICLE IV - COMPANY STOCK SUBJECT TO OPTIONS; OPTION PRICE; ANTIDILUTION 4.1 Subject to Section 4.5 hereof, the aggregate number of shares of Company Stock available for Options granted pursuant to this Plan shall not exceed one hundred thousand (100,000). 4.2 In the event of a forfeiture or rejection of an Option, or in the event any Stock Option Agreement or Option shall terminate or expire for any reason or be surrendered without having been fully exercised, then, in any such event, the shares of Company Stock subject thereto which were not purchased by the Optionee shall again become available for Options to be granted subsequently under this Plan. 4.3 The Company Stock to be issued pursuant to the exercise of any Option shall be registered under applicable federal and state securities laws prior to the date on which the Option may be exercised by the Optionee, and may come from authorized but unissued shares or treasury stock. 4.4 The price per share of Company Stock for which Options may be granted hereunder (the "OPTION PRICE") shall be the Fair Market Value thereof on theDate of Grant. If the Company Stock is at any time traded on more than one market or exchange, the Administering Body shall exercise its discretion in determining which such market or exchange shall be used in determining Fair Market Value. 4.5 Subject to the provisions of Article VI hereof, in order to prevent the enlargement or dilution of rights, in the event that the outstanding shares of Company Stock are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, whether by reason of merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split, stock dividend, subdivision, reverse split or otherwise, the Administering Body shall, on the basis of a determination made by the Company's independent auditors,which determination shall be binding on the Company, its Subsidiaries and all Optionees, proportionately adjust the aggregate number and kind of shares available hereunder for Options and the rights under outstanding Options granted hereunder, both as to the number of shares and the Option Price. ARTICLE V - GENERAL TERMS AND CONDITIONS OF OPTIONS 5.1 Each Option granted under this Plan shall be evidenced by a Stock Option Agreement, which will incorporate by reference all of the provisions of this Plan, and which must be duly executed by the Company and the Optionee. The date of each Stock Option Agreement shall be the Date of Grant of the Option therefor, irrespective of the date of execution thereof. The Administering Body shall have the discretion to cause a forfeiture of the grant of any Option if the Optionee has not executed and delivered the Stock Option Agreement by a date certain specified by the Administering Body, which shall in no event be less than seven (7) calendar days from the date the Stock Option Agreement is delivered to the Optionee for execution. 5.2 The Expiration Date of each Option shall be fixed by the Administering Body, but such expiration date shall not exceed ten (10) years from the Date of Grant. Provided that the Date of Grant of an Option shall precede the Termination Date, the expiration date thereof, subject to the immediately preceding sentence in this Section 5.2, may be subsequent to the Termination Date. 5.3 Notwithstanding any possible contrary interpretation of any provision set forth in any Stock Option Agreement or this Plan, neither this Plan nor any Stock Option Agreement shall entitle an Optionee to any of the rights of a stockholder of the Company. No Optionee shall have any such rights unless and until duly authorized certificates evidencing the shares of Company Stock purchased are delivered to the Optionee. 5.4 An Option may be exercised all at one time or in part from time to time, at the discretion of the Optionee, during the term thereof; provided, however, that each Stock Option Agreement shall provide that no Optionee may exercise an Option, in whole or in part, until at least two (2) years have expired from the Date of Grant; and provided further that no partial exercise of an Option may be for less than one hundred (100) shares or, if less, the number of shares remaining available thereunder. 5.5 Subject to the expiration date thereof and the provisions of this Plan, each Option shall be exercisable during the Optionee's lifetime only by the Optionee. No Option shall be transferable or assignable by an Optionee other than by will or the laws of descent and distribution or pursuant to a "qualified domestic relations order" as defined by the Code or Title I of the Employee Retirement Income Security Act ("ERISA"), or the rules thereunder. Except as expressly permitted herein, an Option shall terminate and become null and void if it or the Stock Option Agreement therefor is transferred, assigned, pledged or hypothecated in any way or becomes subject to any security interest, lien or other encumbrance, or to levy, execution, attachment or similar process. 5.6 Upon termination of an Optionee's employment with the Company or its Subsidiary, or the date on which he ceases to be a director, as the case may be, the Optionee's rights and privileges with respect to an Option granted to him pursuant to this Plan shall be limited in the manner set forth in his Stock Option Agreement or, if not specified therein, to the shares of Company Stock subject to an Option or Options which were exercisable by him on the date ofsuch termination or cessation, with such Option rights and privileges to expire and the Stock Option Agreement(s) therefor to terminate in thirty (30) calendar days from such date. 5.7 If an Optionee shall die while all or any part of an Option granted to him under this Plan remains outstanding, then, notwithstanding Section 5.5 hereof, such Optionee's personal representative shall have one hundred eight (180) calendar days from the date of the Optionee's death to exercise such Option, to the extent it is exercisable during such time, after which such Option shall expire and the Stock Option Agreement therefor shall terminate. ARTICLE VI - FUNDAMENTAL CHANGES 6.1 Notwithstanding any other provision contained in this Plan or in any Stock Option Agreement, in the event the Company resolves to (1) consolidate or merge with or into another corporation, (2) accept an offer to purchase thirty (30%) percent or more of the then issued and outstanding Company Stock, (3) sell all or substantially all of its assets, or (4) voluntarily or involuntarily dissolve or liquidate, then, in any such event, the Administering Body may terminate all Options then outstanding in whole or in part and the Stock Option Agreements therefor after having given thirty (30) days advance written notice to each Optionee, during which time each such Optionee shall have the right to exercise, to the extent then exercisable, his Option or Options in accordance with this Plan and his Stock Option Agreement(s). ARTICLE VII - TERMINATION; AMENDMENT 7.1 The Board may at any time, upon recommendation of the Committee, if the Committee is then the Administering Body, but otherwise in its sole discretion, terminate and in any respect amend this Plan; provided, however,that no such action without approval of the majority of the stockholders of the Company may: 7.1.1 Materially increase the benefits accruing to Optionees under this Plan; 7.1.2 Materially increase the number of shares of Company Stock which may be issued under this Plan; or 7.1.3 Materially modify the requirements as to eligibility for participation in this Plan; Provided further, however, that no termination, except as provided in Article VI hereof, or amendment of this Plan shall in any manner affect any Option granted under this Plan which is then outstanding, without the consent of the Optionee. 7.2 Notwithstanding Section 7.1 hereof, in no event shall this Plan be amended more than once every six months, other than to comport with changes in the Code or ERISA, or the rules thereunder, with respect to any provision hereof which may now or hereafter cover "formula awards" as described in Rule 16b-3 under the 1934 Act. ARTICLE VIII - MISCELLANEOUS 8.1 Nothing in this Plan or in any Stock Option Agreement shall confer upon any Optionee the right to continue in the Company's or any Subsidiary's employ, or to continue to be engaged as a director thereof, as the case may be. 8.2 The adoption of this Plan shall not affect any other stock option, incentive or other compensation plan of the Company or any Subsidiary, nor shall this Plan preclude the Company or any Subsidiary from establishing any such plan for its directors, officers or employees in the future. 8.3 This Plan shall be binding upon the Company and its successors and assigns and, subject to the restrictions and limitations contained in Section5.5 - - -- 5.7 hereof, inclusive, each Optionee and his heirs, personal representatives and assigns. The Company shall provide each Optionee with a copy of this Plan at the time the Optionee's Stock Option Agreement is delivered to him for execu- tion,and each such Optionee shall be deemed to have accepted and agreed to each of the provisions of this Plan by virtue of his execution of such Stock Option Agreement. 8.4 Any conflicts or inconsistencies between this Plan and any Stock Option Agreement shall be resolved in favor of this Plan. 8.5 Whenever used herein nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender. 8.6 The Article titles set forth in this Plan are inserted for convenience and reference only and shall not be considered to constitute a part of this Plan or limit, expand or change any of the provisions of this Plan. EX-99 4 OFFICERS' INCENTIVE COMPENSATION PLAN 1. Purpose of Plan To provide additional incentive to the participants to increase their contribution to the achievement of company objectives by providing significant and competitive incentive compensation that relates directly to the performance of the company and the business results achieved, thereby promoting and protecting the interests of the shareholders and enhancing the Company's ability to attract, retain, and motivate and compensate key management employees. The plan is authorized by the Board of Directors and, once established, can be changed only by their approval. 2. Eligibility for Participation Participation in the Plan for any year shall be the officers, excluding the President 3. Establishment of Goal The goal will be the income from operations established in the budget prepared by the management, and approved by the Board of Directors for the ensuing fiscal year. The amount for the base will be the Income from Operations as promulgated by this budget including all incentives based on profitability. 4. Incentive Award Calculation The award calculation will be equal to the Income from Operations for the fiscal year as certified by the auditing firm and including any and all adjustments necessary to receive such certification compared to the budget established in section 3 above and will include all incentive awards including incentive awards for officers and key employees. To establish the basis for calculating the incentive award, Income from Operations will include incentive award amounts and officers bonus amounts equal to the budgeted dollar amounts for the fiscal period in which the award is calculated. 5. Individual Award Calculation The award will be based as a percent of the base salary received by the qualified individual for the period April 1 through March 31 in which the award is calculated. INCENTIVE COMPENSATION PLAN - Continued A) The salary class level as shown on the Salary Administration Bulletin (PS1-2) as of December 31 of the fiscal year (Officers are Level 11 ) and; B) Years of service at December 31 as follows: 6 months but less than 5 years = 0 5 years but less than 10 years = 1 10 years but less than 15 years = 2 15 years but less than 20 years = 3 20 years and up = 4 Example: Subject employee is a level 8 with 17 years service: Level 8 = 8 17 Years = 3 TOTAL 11% ----- 6. Proration of Incentive Award The minimum amount will be awarded if actual Income from Operations, as stated in section 4 is at least 75% of such stated goal. The award will be the ratio of the achieved amount to the predetermined goal with a maximum of 150% achieved and rounded to the nearest whole percent. 7. Examples A) Income from Operations is budgeted for $3,000,000. The actual Income from Operations totals $2,850,000 with incentives included as budgeted. 1. The incentive goal is $3,000,000. 2. The amount to be awarded an individual would be 95% ($2,850,000 + $3,000,000). B) With the same budget, the company's actual Income from Operations is $3,250,000 with incentives included as budgeted. 1. The amount to be awarded is $3,250,000 + $3,000,000 or 108%. C) The individual shown in the example in section 5 would receive 10% (11% x .95) of his base salary in example A above: 12% (11% x 1.08) in example B above. APPROVED 6/20/97 JLD EX-99 5 CERTAIN OF THE INDEBTEDNESS DESCRIBED HEREIN AND CREATED HEREBY, AS WITH RESPECT TO AMERICELL ONLY, IS SUBJECT TO A CERTAIN SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE PARTIES HERETO AND NTFC CAPITAL CORPORATION SETTLEMENT AND RELEASE AGREEMENT -------------------------------- THIS SETTLEMENT AND RELEASE AGREEMENT ("AGREEMENT") is made and entered into this 27th day of March, 1997, by and among EMCEE Broadcast Products, Inc. ("EMCEE"), a Delaware corporation, AND EMCEE Cellular Inc. ("CELLULAR"), a Delaware corporation, AND AmeriCell PA -- 3 Limited Partnership ("AMERICELL"), a Pennsylvania limited partnership, AND Rigas Communications, Inc. (the "GENERAL PARTNER"), a Florida corporation, AND Constantine J. Rigas ("RIGAS"), an adult individual. BACKGROUND: A. AmeriCell and EMCEE entered into a Purchase and Sale Agreement dated the 21st day of August, 1991 (the "PURCHASE AND SALE AGREEMENT"), with respect to, among other things, the sale by EMCEE to AmeriCell of a certain construction permit issued by the Federal Communications Commission for a nonwireline Domestic Public Cellular Radiotelephone System more specifically described therein. Pursuant to the Purchase and Sale Agreement, AmeriCell executed and delivered to EMCEE a certain Promissory Note dated December 16, 1991, in the principal sum of Two Million One Hundred Thousand ($2,100,000.00) Dollars (the "NOTE"), which Note was guaranteed by Rigas pursuant to a certain Personal Guaranty dated December 16, 1991 (the "GUARANTY"). B. As a result of AmeriCell's and Rigas's failure and refusal to pay the sums due and owing under the Note and the Guaranty, respectively, EMCEE filed a certain lawsuit in the Court of Common Pleas of Luzerne County, Pennsylvania, at No. 274-C of 1997, against AmeriCell, the General Partner, which is the sole general partner of AmeriCell, and Rigas entitled, "EMCEE Broadcast Products,Inc. vs. AmeriCell PA -- 3 Limited Partnership, Rigas Communications, Inc. and Constantine J. Rigas" (the "LAWSUIT"). C. In order to avoid the time, expense and inherent uncertainties of litigation, the parties desire to resolve their disputes and differences by and through this Agreement. D. Cellular is a part of this Agreement in that EMCEE has assigned to it the right to receive certain sums identified herein, contingent upon this Agreement being fully executed and performed by the parties. NOW, THEREFORE, the parties hereto, each intending to be legally bound hereby, covenant, agree and represent as follows: 1. Subject to the full and complete performance of each and every term and condition of this Agreement, and in full settlement of all sums due and owing under the Note and all liabilities under or with respect to the Lawsuit, AmeriCell, the General Partner and Rigas hereby jointly and severally covenant and agree to pay to Cellular, as assignee of EMCEE, the sum of Three Million ($3,000,000.00) Dollars in accordance with the provisions of Section 2 hereof. In addition, AmeriCell, the General Partner and Rigas jointly and severally covenant and agree to pay to EMCEE the sum of Ten Thousand Nine Hundred Fifty- eight Dollars and Forty-six ($10,958.46) Cents, representing all of EMCEE's attorney's fees incurred since December 16, 1996 in connection with the attempted collection of the Note and Guaranty and the prosecution of the Lawsuit. Said attorney's fees shall also be paid in accordance with the provisions of Section 2 hereof. 2. All of EMCEE's attorney's fees described in Section 1 hereof, as well as Two Million Five Hundred Thousand ($2,500,000.00) Dollars of the Three Million ($3,000,000.00) Dollars owing to Cellular pursuant to Section 1 hereof, must be paid to and received by EMCEE and Cellular, respectively, on April 2, 1997, via wire transfer (at the payor parties' expense) in accordance with the following wiring instructions: transfer to Wilmington Trust Company, Wilmington, DE, ABA 031100092. Credit EMCEE Cellular Inc. Account Number 2524-7426. The remaining Five Hundred Thousand ($500,000.00) Dollars to be paid to Cellular pursuant to Section 1 hereof shall become immediately due and payable upon the occurrence of any one or more of the following events: (a) the sale or other transfer, whether or not voluntary, not in the ordinary course of business of all or substantially all of AmeriCell's assets or any sale or other transfer of the nonwireline Domestic Public Cellular Radiotelephone System described in the Purchase and Sale Agreement, whether or not in the ordinary course ofbusiness; (b) the merger, consolidation, division or dissolution (judicial or nonjudicial) of AmeriCell; (c) the filing by or against AmeriCell of a Petition in Bankruptcy which is not dismissed within thirty (30) days of the date of filing; (d) the making of an assignment for the benefit of AmeriCell's creditors;(e) AmeriCell's insolvency or an admission by AmeriCell of the inability to pay its debts when due; (f) if at any time the General Partner shall for any reason no longer be AmeriCell's general partner; or (g) if AmeriCell shall ever be in default under the "Loan and Security Agreement" (as defined in the Subordination Agreement referenced in the legend above) and such default is continuing after the expiration of any applicable cure periods. AmeriCell, the General Partner and Rigas shall notify EMCEE and Cellular immediately upon the occurrence of any one or more of the foregoing events. 3. It is understood and agreed that all sums payable to EMCEE or Cellular hereunder shall not be subject to deduction by reason of set off, defense, counterclaim, recoupment or other defalcation. It is further understood and agreed that no interest shall accrue on any sum payable to EMCEE or Cellular hereunder; provided, however, that if the remaining Five Hundred Thousand ($500,000.00) Dollar balance owing to Cellular pursuant to the second paragraph of Section 2 hereof is not paid within thirty (30) days from the date it becomes due and owing, interest shall accrue and be payable on such amount immediately following such 30-day period and until fully paid at the lower of eighteen (18%) percent per annum or the highest rate of interest per annum permitted to be charged under applicable law. 4. Upon execution of this Agreement, EMCEE shall authorize its legal counsel, Robert S. Sensky, Esquire, to prepare and execute a Praecipe for Discontinuance of the Lawsuit with prejudice, in form and content as shown and set forth on Exhibit "A" attached hereto and made a part hereof(the "PRAECIPE"). Upon Emcee's and Cellular's receipt of the sums described in the first paragraph of Section 2 hereof, EMCEE shall authorize and direct its legal counsel to deliver the Praecipe to AmeriCell's legal counsel, Susan Kercher, Esquire, for filing in the Office of the Prothonotary of Luzerne County, Pennsylvania, at AmeriCell's expense. 5. Notwithstanding any possible contrary interpretation of any provision contained herein, in the event all of the sums described in the first paragraph of Section 2 hereof have not been received by EMCEE and Cellular in strict accordance with the provisions of this Agreement by April 2, 1997,this Agreement shall automatically become null and void and of no force or effect; whereupon, EMCEE may direct its legal counsel to destroy the Praecipe, and EMCEE shall be free to continue to proceed with the Lawsuit as if this Agreement never existed. 6. In consideration of EMCEE's and Cellular's covenants and agreements set forth herein, and subject to EMCEE's legal counsel's delivery of the Praecipe in accordance with the provisions of this Agreement, AmeriCell, the General Partner and Rigas hereby release EMCEE and Cellular, and all of their affiliated corporate entities, and their respective directors, officers, employees, agents, successors and assigns, from all actions, causes of action, suits, proceedings, rights, remedies, debts, claims, demands, obligations and liabilities whatsoever (collectively, "CLAIMS"), at law or in equity, known or unknown, liquidated or unliquidated, direct or contingent, which they (or any one or more of them) ever had, now have or may hereafter have against all orany one or more of such released parties, by reason of any matter, cause or thing whatsoever, including,but not limited to, the Purchase and Sale Agreement,Note, Guaranty and/or the Lawsuit, occurring at any time from the beginning of time through and including the date of this Agreement. 7. In consideration of AmeriCell's, the General Partner's and Rigas's covenants and agreements set forth herein, except for the joint and several obligations and liabilities of AmeriCell, the General Partner and Rigas pursuant to Sections 1 and 2 hereof, EMCEE and Cellular hereby release AmeriCell, the General Partner and Rigas, and all of their affiliated corporate entities, and their partners, directors, officers, employees, agents, successors and assigns, from all Claims, at law or in equity, known or unknown, liquidated or unliquidated, direct or contingent, which they (or any one of them) ever had,now have or may hereafter have against all or any one or more of such released parties, by reason of any matter, cause or thing whatsoever, including, but not limited to, the Purchase and Sale Agreement, Note, Guaranty and/or Lawsuit, occurring at any time from the beginning of time through and including the date of this Agreement. 8. Except with respect to the aforementioned contingent assignment from EMCEE to Cellular, each party hereto represents to the other parties hereto that it/he has not sold or assigned any of the Claims which have been released pursuant to Sections 6 and 7 hereof. It is also understood and agreed that ifany party hereto shall ever bring an action or proceeding against any other party hereto in violation of Section 6 or Section 7 of this Agreement, such otherparty shall be entitled to recover from the violating party all of its/his reasonable attorney's fees incurred as a result thereof. 9. AmeriCell, the General Partner and Rigas agree that while all or any part of the Five Hundred Thousand ($500,000.00) Dollars described in the second paragraph of Section 2 hereof remains outstanding, they shall provide EMCEE and Cellular with current annual financial statements of AmeriCell (prepared by a reputable independent certified public accounting firm) within one hundred fifty (150) days from the end of each of AmeriCell's fiscal years, and in form as required by AmeriCell's lender, NTFC Capital Corporation, but in all events at least on a review basis. Failure to provide such financial statements withinsuch time shall cause the aforementioned Five Hundred Thousand ($500,000.00) Dollar sum to become immediately due and payable by AmeriCell, the General Partner and Rigas (jointly and severally) to Cellular, notwithstanding any other provision contained herein. 10. All disputes arising under or related in any way to this Agreement shall be settled by arbitration in Wilkes-Barre, Pennsylvania, pursuant to the Commercial Arbitration Rules of the American Arbitration Association, in which there shall be one arbitrator whose decision shall be final and binding on the parties hereto, and the judgment upon any award rendered may be entered in the court of competent jurisdiction. The prevailing party in any such arbitration shall also be entitled to an award of all of its reasonable attorney's fees actually incurred as a result thereof, but the cost of the arbitration proceeding shall be borne equally by the parties. If for any reason the foregoing arbitration provisions are declared or determined to be illegal, invalid or otherwise inapplicable with respect to any dispute arising hereunder or related hereto, the parties hereto hereby agree that such dispute shall be litigated and resolved only in the Court of Common Pleas of Luzerne County, Pennsylvania, and the parties hereto irrevocably consent to the exclusive jurisdiction and venue of said court for such purposes. The prevailing party in any such litigation shall be entitled to recover all of its reasonable attorney's fees incurred as a result thereof. 11. It is understood and agreed that this Agreement and any acts undertaken hereby shall not be construed as an admission of liability, fault or wrongdoing under any law, regulation or ordinance on the part of any party hereto. 12. This Agreement shall inure to the benefit of and be binding on the parties hereto and their respective successors and assigns. 13. Should any provision of this Agreement be declared or determined to be illegal or invalid, the legality and validity of the remaining provisions shall not be affected thereby, and said illegal or invalid provision shall be deemed not to be a part of this Agreement. 14. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law rules or principles. 15. Section 22 of the Subordination Agreement described in the legend above is incorporated herein by reference and made a part hereof as if fully set forth at length herein. 16. This Agreement may be executed in as many counterparts as the parties deem necessary or convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 17. Except for the provisions of Sections 6 and 7 hereof, no third party beneficiary rights are intended or created hereby. 18. No provision of this Agreement is to be interpreted for or against any party because that party's legal counsel drafted such provision. 19. This Agreement constitutes the entire, complete and final agreement of the parties hereto with respect to the subject matter hereof, supersedes any and all prior agreements, understandings or discussions (verbal or in writing), and may be amended, modified or supplemented subsequent to the date hereof only by a written instrument signed by the party or parties to be bound thereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above. ATTEST: EMCEE BROADCAST PRODUCTS,INC. /s/ Sharon L. Barry By: /s/ James L. DeStefano - - ------------------------------- ----------------------------- Asst. Corporate Secretary Title: President/CEO (SEAL) ATTEST: EMCEE CELLULAR INC. /s/ Robert S. Sensky By: /s/ John Saul - - ------------------------------- ------------------------------ Corporate Secretary Title: President (SEAL) WITNESS: AMERICELL PA -- 3 LIMITED PARTNERSHIP By: Rigas Communications, Inc., General Partner /s/ John W. Steer, IV By: /s/ John Rigas - - ------------------------------- ------------------------------ Title: Vice President ATTEST: RIGAS COMMUNICATIONS, INC. /s/ Diane Rein By: /s/ John Rigas - - -------------------------- ------------------------------- Corporate Secretary Title: Vice President (SEAL) WITNESS: CONSTANTINE J. RIGAS /s/ Rheba Riga /s/ Constantine J. Rigas - - --------------------------- ------------------------------ Signature EMCEE BROADCAST PRODUCTS, IN THE COURT OF COMMON PLEAS INC., OF LUZERNE COUNTY Plaintiff PENNSYLVANIA vs. AMERICELL PA -- 3 LIMITED CIVIL ACTION -- LAW PARTNERSHIP, RIGAS COMMUNICATIONS, INC. and CONSTANTINE J. RIGAS, Defendants NO. 274-C OF 1997 PRAECIPE FOR DISCONTINUANCE TO THE PROTHONOTARY OF LUZERNE COUNTY: Please mark the above-captioned matter as settled, discontinued, and ended with prejudice. LAPUTKA, BAYLESS, ECKER & COHN, P.C. Attorneys for Plaintiff, EMCEE Broadcast Products, Inc. BY:_______________________________________ Robert S. Sensky, Esquire Atty. I.D.#47287 2 East Broad Street, 6th Floor Hazleton, PA 18201 (717) 455-4731 Date: DISCONTINUANCE AND NOW, this ______ day of _________________, 1997, upon Praecipe of counsel for the Plaintiff, the above-captioned matter is hereby settled, discontinued, and ended with prejudice. PROTHONOTARY: Date:__________________________ BY:_______________________________________ EXHIBIT "A" EX-27 6
5 0000032312 EMCEE BROADCAST PRODUCTS, INC. YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 681,335 1,679,164 1,033,535 100,000 3,627,803 9,801,195 2,895,770 1,836,630 10,968,508 1,475,380 0 72,987 0 0 8,612,952 10,968,508 12,522,811 12,522,811 8,023,300 11,139,260 (2,642,084) 35,382 109,976 4,142,702 1,126,800 3,015,902 0 0 0 3,015,902 .72 .72
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