10-K405
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GLENAYRE TECHNOLOGIES, INC. 10-K405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 0-15761
GLENAYRE TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 98-0085742
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4201 CONGRESS STREET, SUITE 455, CHARLOTTE, NORTH CAROLINA 28209
(Address of principal executive offices) Zip Code
(704) 553-0038
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Shares, $.02 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant on March 8, 1995 was approximately $891,614,000. The
number of shares of the Registrant's common stock outstanding on March
8, 1995 was 25,185,697.
DOCUMENTS INCORPORATED BY REFERENCE:
Document Location in Form 10-K
Proxy Statement for 1995 Annual Meeting of Stockholders Part III
Except as noted, the information in this Form 10-K has been adjusted to
reflect a 3-for-2 stock split of the Company's common stock effected in
the form of a 50% stock dividend distributed January 5, 1995 to
stockholders of record on December 22, 1994. All references to "1992
net sales" mean pro forma net sales for the year ended December 31, 1992
as set forth in Management's Discussion and Analysis of Financial
Condition and Results of Operations - Part II Item 7 of this report.
PART I
ITEM 1. BUSINESS
INTRODUCTION
Glenayre Technologies, Inc. ("Glenayre" or the "Company") is a leading
worldwide supplier of telecommunications equipment and related software
used by service providers in the rapidly growing paging and other
wireless personal communications markets. The Company designs,
manufactures, markets and services switches, transmitters, controls and
software used in personal communications systems (including paging,
voice messaging, and message management and mobile data systems),
transit communication systems and radio telephone systems.
Glenayre believes, based on the number of units sold to paging service
providers, that it has the leading market share in the United States
paging market and that it is a leading participant in the international
markets for sales of paging systems, including switches, transmitters,
controllers and related software. See "Competition." Paging systems
represented approximately 71% of the Company's 1994 net sales, while
voice messaging systems, the Company's second largest product line,
represented approximately 16% of 1994 net sales. The Company believes
its proprietary software and hardware represent a significant
technological and physical competitive advantage, and that its large
base of installed equipment provides Glenayre with the opportunity for
follow-on sales of additional products to existing customers. See
"Products--Paging Systems--Switches" and "--Radio Frequency Equipment -
Transmitters and Receivers".
Glenayre markets its products in over 80 countries worldwide directly to
the major paging, cellular and telephone operating companies and to
governmental agencies. The Company's extensive customer base includes,
among others, most of the leading United States paging service
providers, based upon numbers of pagers in service, such as: Paging
Network, Inc., MobileMedia Paging Services Inc., Mobile Communications
Corporation of America, Airtouch Paging, Inc. and AT&T Wireless, Inc.
International customers include, among others, Importaciones
Electronicas Ribesa, S.A. de C.V.; Telechamada - Chamada de Pessoas,
S.A.; Infomobile, S.A.; CERSA; Korean Mobile Telephone Corporation;
various agencies and provinces of People's Republic of China; Hutchison
Paging Ltd.; Goldstar Telecommunication Co. Ltd.; and Pilipino Telephone
Company.
The Company was incorporated pursuant to the laws of the State of
Delaware on September 21, 1987, and is the successor to a corporation
organized on April 7, 1945. The principal executive offices of the
Company are located at 4201 Congress Street, Suite 455, Charlotte, NC
28209. The Company's telephone number is (704) 553-0038.
PENDING BUSINESS ACQUISITION
On January 3, 1995, the Company entered into an agreement to acquire
Western Multiplex Corporation ("MUX"), located in Belmont, California.
MUX designs, manufactures and markets products for use in point-to-point
microwave communication systems. The estimated purchase price of
approximately $30.3 million consists of 750,000 shares of the Company's
common stock (including approximately 228,000 shares issuable upon
exercise of stock options) valued at approximately $29.1 million based
on the stock price at the date of the agreement and approximately $1.2
million in acquisition costs. The actual purchase price may differ from
the estimated purchase price because of fluctuations in the price of the
Company's common stock between the date of the agreement and the date of
closing. The acquisition will be accounted for as a purchase and is
expected to be completed by May 1995. The acquisition is subject to
approval by the MUX shareholders.
INDUSTRY BACKGROUND
The wireless personal communications industry has grown rapidly over the
last decade, driven by the increasing demand for mobile
telecommunications services and the recent development and expansion of
global markets for paging, cellular, mobile data, and other mobile
personal communications technologies. Changes in telecommunications
regulations, including new allocations of radio spectrum, have further
stimulated growth in this industry. While the wireless personal
communications industry today is primarily focused on the delivery of
paging-based messaging and cellular telephony, the industry is expected
to broaden dramatically over the next decade with the deployment of new
personal communications services. Personal communications services
represent a range of alternative (complementary or competitive) services
that are expected to provide voice and/or data communications
capabilities through the linkage of computers and communications
technologies.
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Such capabilities are likely to include advanced paging and messaging,
mobile data, micro-cellular, second generation cordless telephones
(CT-2) and wireless PBX. The features of these alternative systems, such
as equipment and service costs, size of the end-user device, length of
battery life and extent of coverage, will vary. These features are
expected to expand the market beyond traditional business applications
into the broader consumer market. As paging is currently considered the
lowest cost form of wireless personal communication, the Company
believes it is uniquely qualified to constitute a platform for the
delivery of many new personal communication services. Not only is paging
inexpensive relative to other alternatives, it also provides virtually
ubiquitous coverage and has the advantage of using a compact end-user
device with extended battery life.
Economic and Management Consultants International, Inc. ("EMCI")
estimates that at the end of 1993, there were 44 million paging
subscribers worldwide. EMCI forecasts that the total number of
pager-type devices in use worldwide by the year 2000 will exceed 130
million. According to a 1994 market study by EMCI, in the United
States, there were approximately 19.8 million pagers in service in 1993
and over 24.5 million in 1994, an increase of nearly 24%. While the
growth rate of the paging industry is difficult to determine precisely,
EMCI estimated in 1994 that the number of pagers in service in the
United States will grow at the rate of approximately 3-4 million units
or 12-16% per year for the next few years. Based upon the relatively
low level of paging service penetration in international markets such as
People's Republic of China, South Korea and India, and the continuing
trend towards privatization of telecommunication services in many
countries, the Company expects the rate of growth of pagers in use in
international markets to exceed the rate of growth of pagers in use in
the United States. There can be no assurance that such growth will
occur. Although the Company believes that rapid growth in the number of
pagers in use will result in increased demand for the Company's
products, growth rates in revenue from paging system equipment sold by
Glenayre does not directly correlate with the growth rates of pagers in
use. From 1992 to 1994, the Company's revenues from sales of paging
equipment grew at an annual compound rate of approximately 33%. Based
on information from various sources, the Company estimates that during
that same period, the number of pagers in use worldwide grew at an
annual compound rate of approximately 25%. However, the Company's
growth rate in sales in subsequent years may be lower than the growth
rate of pagers in use due to the continued development of products
provided by the Company and others making paging system equipment more
efficient, thereby allowing more paging subscribers to be served by the
expansion of existing equipment rather than the more costly replacement
of existing equipment.
The paging services industry has been in existence since 1949 when the
Federal Communications Commission ("FCC") allocated radio spectrum for
use in providing one-way and two-way types of mobile communications
services. The paging services industry initially grew slowly as the
quality and reliability of equipment was developed and the market began
to perceive the benefits of mobile communications. Equipment reliability
improved dramatically in the 1970s and potential customers gained a
better understanding of the time savings and efficiencies that paging
services could provide.
The 1980s saw significant developments in the paging services industry.
The numeric pager supplanted tone and voice pagers as the most popular
paging product. In addition, certain large paging service providers grew
rapidly by acquiring smaller local service providers. RCR, an industry
publication, reported in 1994 that approximately 59% of the pagers in
service in the United States were served by the twenty companies in the
industry having the largest subscriber bases, with three companies
representing the majority of this percentage. Finally, in 1994, the FCC
allocated additional radio frequencies which expanded the capacity of
the paging services industry and allowed new entrants into markets where
additional frequencies were previously unavailable.
Internationally, paging has historically been offered by state-owned
telephone companies through what is known as operator-assisted service.
As a result, a person seeking to reach a paging subscriber had to speak
with an operator. This process impeded the growth of paging and in most
countries, paging service did not evolve as rapidly as it did in United
States. Except in a few countries such as Singapore, Japan and Hong
Kong, development of paging systems has been more limited. Recent
allocations of radio paging frequencies to other than government-owned
telephone companies in a number of countries including the United
Kingdom, Hong Kong, Thailand, Indonesia, South Korea, India, Japan,
Austria, Spain and Germany, together with the upgrade of telephone
systems generally, have led to considerably higher growth rates of
paging subscribers in these countries than in United States.
The most common paging service is numeric paging, in which a subscriber
receives a numeric message that may consist of a telephone number, an
account number or coded information. The newest paging service offers
alphanumeric capabilities, enabling subscribers to receive complete
messages of words and numbers. The Company believes that the growth in
alphanumeric pagers and other personal communications devices that
receive alphanumeric messages, such as portable computers and electronic
organizers, will continue to be driven by increased demand for mobile
data communications. Additionally, a new generation of Narrowband
Personal Communications Services ("NPCS") as described below is expected
provide subscriber growth as a result of these enhanced features and
capabilities.
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Narrowband Personal Communication Services Spectrum
The FCC, the United States' federal-level frequency governing
organization and NPCS auctioning body, has provided new frequencies
(through auctions) for new narrowband personal communications services.
In mid 1994, the FCC auctioned ten nationwide Narrowband PCS licenses
for approximately $650 million. Many of Glenayre's existing customers
were successful in the auction process and paid more than $70 million
for a NPCS license. During the last half of 1994, the FCC awarded eleven
nationwide licenses (one of which was a Pioneer's Preference license
granted to Mobile Telecommunication Technologies Corp. before the
auction took place) and thirty U.S. nationwide regional licenses for
NPCS. During 1995, the FCC will accept bids for 1,344 additional NPCS
outbound licenses covering smaller geographic areas called Major and
Basic Trading Areas (MTA/BTA licenses). In the future, there will also
be auctions for 1,968 MTA/BTA inbound channels. The FCC has not
designated specific uses for this NPCS spectrum but it anticipates that
the auction winners will use these licenses to provide such new services
as advanced voice paging, two-way acknowledgment paging, location
paging, and data services. However, the FCC is restricting these
licenses to exclude the provision of traditional broadcasting services
or fixed services unless such services are reasonably ancillary to
mobile services.
The NPCS spectrum is at three separate locations within the total
frequency spectrum, specifically at 901- 902 MHz, 930-931 MHz and
940-941 MHz. Initially, the spectrum located at 930-931 MHz and 940-941
MHz will be used for outbound or forward message transmission to the
NPCS end-user device. This spectrum usage is similar to traditional
paging except that substantially more information can be transmitted
based on the higher speeds and the increased spectrum allocated to each
NPCS licensee.
The 901-902 MHz spectrum will be used for inbound or reverse signaling
from the NPCS end-user device back to the call initiator. The
capability of inbound signaling from the NPCS end-user device is another
service that differentiates NPCS from traditional paging which is
one-way (outbound) only.
A NPCS nationwide license gives the licensee the right to transmit
signals at a designated frequency within all fifty states of the United
States, Washington D.C., American Samoa, Guam, the Northern Marianas
Islands, Puerto Rico, and the United States Virgin Islands. These
nationwide licenses are divided into 50 KHz paired (outbound and
inbound) and unpaired (outbound only) channel categories, including five
50/50 KHz paired licenses, three 50/12.5 KHz paired licenses and three
50 KHz unpaired licenses. The thirty NPCS regional licenses are divided
into ten 50/50 KHz and twenty 50/12.5 Khz licenses.
Glenayre's Opportunity in NPCS
All of the nationwide licensees and nine of the twelve regional licensees
as of December 31, 1994 are considered current Glenayre customers.
Additionally, based on available information, approximately 130 applicants
will be bidding for the MTA/BTA licenses, of which approximately 75% are
thought to be current Glenayre customers.
This emerging market for the Company's current core products as well as
products under development should provide Glenayre with significant
sales opportunities over the next few years. In recognition of the
importance of NPCS, the Company anticipates using dedicated NPCS sales
and product management teams as well as applying specific engineering
resources to the development of an optimal NPCS system architecture as
well as the individual system components. In addition, manufacturing
facility expansions are underway to accommodate Company growth. See
Item 2. Properties.
Industry Competition in Future Years
The paging industry and the Company's business are subject to
competition from alternative forms of data communication. In addition,
the Company's business is focused primarily upon the wireless
telecommunications industry. Future technological advances in the
wireless telecommunications industry, including digital-based cellular
telephone systems, could result in new products which are competitive
with the Company's products. There can be no assurance that the Company
will not be adversely affected in the event of such technological
advances. While the introduction of more advanced forms of
telecommunications, such as the personal communication networks
currently under development, may provide opportunities to the Company
for the development of new products, these advanced forms of
telecommunications may reduce the demand for pagers and thus the type of
paging transmission systems and related software designed and sold by
the Company. There can be no assurance that the NPCS market will develop
or that Glenayre will be able to successfully develop new products or to
provide additional enhancements to its existing products in support of
this market.
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GENERAL DEVELOPMENT OF THE GEMS BUSINESS
On November 10, 1992, the Company acquired the telecommunications
equipment and related software business (the "GEMS Business" or "GEMS")
of Glentel Inc., a Canadian corporation ("GEL"), for a combination of
cash and common stock of the Company (the "Acquisition"). In connection
with the Acquisition, substantially all of the GEMS Business employees,
including senior management of the GEMS Business, joined the Company.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The GEMS Business was established in Canada in 1963 by GEL to design,
manufacture and market industrial and educational electronic equipment.
By 1979, maturing markets and technological changes resulted in GEL
entering the mobile radio telephone and paging markets. GEL expanded
this business in the 1980s as a result of increasing demand for mobile
telecommunications products, market share growth, introduction of new
products and acquisitions.
John J. Hurley, Vice Chairman, and Ramon D. Ardizzone, President and
Acting Chief Executive Officer of the Company, joined the GEMS Business
in 1988. At that time the GEMS Business sales totalled approximately
$27.2 million, principally in Canada. Management's initial objectives
were to expand GEMS' market share in the United States and to
participate in the growth in international markets. The first objective
was accomplished in 1989 with the acquisition of Quintron Corporation of
Quincy, Illinois, a manufacturer of radio paging transmitters and BBL
Industries, Inc. ("BBL") of Atlanta, Georgia, a manufacturer of paging
switches and voice messaging equipment. In 1989, GEMS' switch
manufacturing operations were consolidated at its Vancouver, British
Columbia facility. In 1990, the manufacturing of transmitters was
consolidated at the Quincy, Illinois facility, the BBL plant was closed,
and a smaller space was leased for sales, marketing, administrative,
customer service, and voice-messaging engineering personnel in Atlanta,
Georgia. Immediately following the restructuring, management
implemented a plan to aggressively pursue the sale of wireless
telecommunications equipment in international markets by adding sales
personnel and offices in targeted high-growth markets. For a
description of the Company's revenues with respect to domestic and
international operations, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
PRODUCTS
Glenayre designs, manufactures, markets and services switches,
transmitters, controllers and software used in wireless personal
communications systems throughout the world. The Company's principal
product families include: paging systems; voice messaging systems;
message management systems and mobile data systems; wide-area rural
radio telephone systems; and transit communication systems.
PAGING SYSTEMS
Glenayre's paging system products, accounted for approximately 71%, 72%
and 70% of net sales for 1994, 1993, and 1992, respectively. Major
paging products include switches, transmitters, receivers, controllers
and related software. Glenayre believes it has the leading market share
in the United States and that it is a leading participant
internationally in the paging switch, control, and transmitter market.
Paging is a method of wireless telecommunication which uses an assigned
radio frequency to contact a paging subscriber anywhere within a service
area. Each paging subscriber is assigned a distinct telephone number
which a caller dials to activate a subscriber's pager (a pocket-sized
radio receiver carried by the subscriber). Telephone calls for a
subscriber are received by a paging switch. A network of transmitters,
that broadcasts a signal over a specific geographic area, then receives
information from the paging switch through the controller and a radio
signal is sent by the transmitters via antennae to a subscriber's pager.
The transmitters manufactured by Glenayre are specifically designed to
simulcast, which is the transmission of the same signal over two or more
transmitters on the same channel at the same time in an overlap area,
resulting in superior voice and data quality and coverage area. The
radio signal causes the pager to emit a beep or to vibrate and to
provide the subscriber with information from the caller in the form of a
voice, tone, numeric or alphanumeric message. A pager has an advantage
over a landline telephone in that the pager's reception is not
restricted to a single location, and has an advantage over a cellular
portable telephone in that a pager is smaller, has a much longer battery
life, and most importantly, is substantially less expensive to use. The
principal disadvantage of traditional paging service in comparison to
landline telephones or cellular portable telephones is that paging
provides only one-way communication capabilities. However, many of the
larger United States paging service providers are expected to introduce
advanced two-way wireless messaging services (NPCS) in late 1995 and
1996 which should overcome this limitation of traditional one-way
paging.
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The design of a paging system is customer specific and depends on (i)
the number of paging subscribers the service provider must accommodate,
(ii) the operating radio frequency, (iii) the geography of the service
area, (iv) the expected system growth and (v) specific features desired
by the customer. Paging equipment hardware and software developed by the
Company may be used with all types of paging service, including voice,
tone, numeric (telephone number display) or alphanumeric messaging
(words and numbers display).
Switches. The smallest Glenayre switches, the GL3000S and the
GL3000ES, can serve as few as 200 subscribers and can be expanded
incrementally to a capacity of 50,000 subscribers. Glenayre's large
paging switches, the GL3000L and the GL3000XL, support subscriber levels
from 30,000 to 1,000,000.
The Company works closely with its customers in the design of large,
complex paging networks. The Company also is involved at an early stage
in the development of industry wide technology standards. Glenayre is
familiar with developments in paging protocol standards throughout the
world. Glenayre personnel serve on a Personal Communication Industry
Association ("PCIA") committee which is working on new paging protocol
standards to supplement current United States paging protocol standards.
Therefore, Glenayre believes that its customers' purchasing decisions
are based, in large part, on the technological capabilities of such
networks, and has adopted networking specifications developed by PCIA.
Glenayre believes that its switches have the most advanced networking
capability in the industry. This networking capability allows the
interconnection of multiple switches to offer a number of wide area
capabilities (such as remote billing, roaming and database backup).
Glenayre believes that the advanced hardware and software features of
its switches ensure high reliability and high volume call processing.
Paging switches manufactured by the Company are constructed in modular
fashion, which permits expansion to accommodate growth and the addition
of technological enhancements. Paging switch enhancements and upgrades
also require the purchase of the Company's components and software. This
results from the unique and proprietary software incorporated in
Glenayre switches, which the Company believes represents a significant
technological competitive advantage.
Radio Frequency ("RF") Equipment - Transmitters and Receivers.
Transmitters are available in frequency ranges of 30MHz to 960MHz and in
power levels of 4 watts to 500 watts. Radio link receivers are
available in frequency ranges of 66MHz to 960MHz. Satellite link
receivers are available for integration directly with the transmitters
at both Ku- and C-band frequencies.
Depending upon frequency, antenna height, topography and power, Glenayre
transmitter systems are designed to cover broadcast cells with a
diameter from 3 to 100 miles. Typical simulcast systems have broadcast
cells which vary from 3 to 15 miles in diameter. Glenayre transmitters
are designed specifically for the high performance and reliability
required for high speed simulcast networks.
Current technology allows a transmitter that is manufactured by Glenayre
or by its competitors to be used with the Company's paging switches.
However, within a single geographic paging network (comprised of a
switch, a control system and a number of transmitters installed in a
specific geography) where transmitters simulcast on a single frequency,
all transmitters must be of the same make in order to avoid substantial
and expensive modifications that would be necessary to assure the
integrity of the paging system. The Company believes its large installed
base of transmitter equipment provides it with a significant competitive
advantage in selling products for system expansions to existing
customers.
Controllers. The Company currently offers three controller products.
The GL5000 control system is a medium-feature transmitter control system
used primarily in international markets; and the QT1000 is a premier
full-feature system providing automatic early notification of system
variances and automatic remote adjustment capabilities to ensure that
all transmitters in the system remain synchronized. Glenayre's newest
control system, the GL-C2000, introduced in 1993, supports all existing
digital paging formats and when coupled with the appropriate Glenayre RF
hardware, will support all currently proposed "high speed" paging and
messaging formats with data transmission rates from 200 to 6,400 bits
per second. Glenayre is presently working closely with its customers to
develop and test systems which operate at transmission rates up to
25,000 bits per second.
VOICE MESSAGING SYSTEMS
Glenayre's voice messaging products, which accounted for approximately
16% of 1994 net sales, include high speed switches and software designed
to serve as the platform for a voice messaging "mailbox" or for direct
voice transmission to pagers or other personal communication devices.
Such products represented approximately 14% of net sales in each of the
years 1993 and 1992. The MVP, a switching product designed by Glenayre
exclusively for enhanced messaging systems, allows subscribers both to
send and receive voice and data messages to and from other subscribers,
or to receive these messages from
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non-subscribers. The MVP is offered in four sizes. The MVP-E, a small
starter system, is capable of supporting from 100 to 10,000 subscribers.
The medium sized MVP supports 500 to 35,000 subscribers. The large
MVP-MAP (Multi Application Platform) accommodates up to 50,000
subscribers. For systems requiring substantial capacity, the MVP-PCS can
accommodate in excess of 200,000 subscribers. The MVP is designed to
meet the reliability requirements of, and is marketed to,
telecommunication service providers. The MVP has the flexibility to
provide multiple services to multiple customers simultaneously. Glenayre
believes there are significant opportunities to market these systems
directly to businesses in the future.
In addition to its current applications, the MVP switch is presently
approved by vendors of cellular and CT-2 products in several countries
as a voice switching platform. The MVP, together with the Company's
Constant Touch software, provides "one-number access," allowing a
subscriber to direct communications to his choice of receiving devices.
In addition, it combines the uses of different types of existing
communication services such as paging, voice mail, cellular telephone,
CT-2 and facsimile.
When a user leaves a voice mail message or facsimile in a subscriber's
voice mail box, the MVP switch can automatically page the subscriber,
thereby providing notification of the message. The MVP also allows a
subscriber to manage telephone calls using a variety of receiving
devices. With the "Meet-Me" feature, a telephone call to a subscriber
can be routed into the MVP switch where it can be held while the
subscriber is immediately notified through a paging device. The
subscriber can then choose to accept the call through a wireline or
wireless telephone and be connected immediately. Through the "Direct
Call with Call Screening" feature, the MVP answers the call, and the
caller is asked to record the caller's name and stay on hold while the
subscriber is located through a page or telephone call. Once located,
the subscriber has numerous options, including connecting with the
waiting call, sending the caller to a voice mail box or another
telephone number, disconnecting, or listening to the caller's voice
message.
Another feature enhancement is "Find-Me," through which the MVP will
call a pager, cellular phone or wireline telephone either simultaneously
or in a sequence predetermined by the subscriber, to notify the
subscriber of an incoming call. In addition to the subscriber's ability
to determine these notification priorities, the MVP also allows a
subscriber to program a daily schedule of such call destinations,
whereby the MVP routes the call to the destinations defined by the
subscriber based on the time and day of the week. Finally, the MVP also
has integrated facsimile capabilities which can receive an incoming
facsimile and notify a subscriber of receipt. The subscriber can
select or preprogram the location for fax delivery, forward the fax to
another subscriber, or broadcast the fax to individuals on a
distribution list. The MVP provides an advanced platform as a service
enhancement node for integration into an intelligent network.
OTHER PRODUCTS
Other product sales (message management systems and mobile data systems;
wide-area rural radio telephone systems; and transit communication
systems) accounted for approximately 4% and 6% of 1994 and 1993 net
sales, respectively.
Glenayre's message management systems and mobile data systems combine
its paging switch hardware with its proprietary software. Although these
products comprised only a small portion of 1994 and 1993 net sales, the
Company believes sales of alphanumeric messaging switches and related
software will increase as paging subscribers seek expanded data
services. Glenayre's GL3900S and GL3900A alphanumeric switches are fully
compatible with the Company's paging switches and allow extensive data
entry by as few as two to more than 200 telephone operators. Glenayre's
alphanumeric messaging and mobile data system products allow an operator
at a telephone answering service or at a paging or cellular provider to
input, store and transmit messages containing words and numbers by
utilizing a paging switch. Alphanumeric and mobile data messages can be
sent by telephone, facsimile or computer and can be received by pagers,
portable computers, electronic organizers, facsimile equipment and
similar personal communication devices. Alphanumeric messages can be
transmitted in either analog or digital formats. Due to the continuing
demand for lengthier messages and the impact of such demand on scarce
radio frequencies, most service providers are migrating to the more
efficient, higher speed digital format. Consequently, Glenayre's
sophisticated high speed switches and software are particularly well
suited for alphanumeric applications. The Company believes that
alphanumeric messaging will evolve from the current one-way wireless
transmission to a two-way message and response system and that the
Company will be a provider of such systems.
In past years, the Company has focused on wide-area mobile radio
telephone systems. In 1994, the Company shifted its focus to fixed
radio telephone systems to leverage the Company's extensive installed
base and experience in this market segment. Glenayre provides the
switches, transmitters, and fixed telephones necessary for these
systems. The Company's Improved Mobile Telephone Service (IMTS) system
is primarily marketed in rural areas as a cost effective alternative to
a wireline system. Glenayre's technology in this market has generally
been replaced in the United States by rural cellular service. Increased
sales of rural radio telephone products will require the development of
new markets, particularly in rural areas of
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developing countries. The Company sells rural radio telephone systems
in Asia, Europe, Western Canada, Latin America, and the Middle East.
Wide-area rural radio telephone systems differ from cellular phone
systems in that they operate at VHF or UHF radio frequencies, provide
single site wide-area coverage (unlike the multiple small coverage areas
needed for cellular systems), and do not have the roaming capability of
cellular systems.
Glenayre's transit communication systems provide two-way on-board
communications between buses or light rail trains and central dispatch
monitoring stations. The system permits a control dispatcher to monitor
automatically the transit vehicle for such information as engine
condition, passenger count and money collected. In addition, the
operator of the transit vehicle has the ability to verbally communicate,
via radio, with the central dispatcher. Glenayre markets these transit
communication systems primarily to municipal transit authorities in the
United States, Canada and Europe on either a prime or subcontractor
basis. Sales of transit communication systems are dependent upon a
variety of factors, including the provision of government funding to
local transportation authorities.
SERVICE AND SUPPORT
Glenayre provides service to customers on a regular basis and most
customers have installation, service or extended warranty contracts with
the Company. These revenue generating service activities of Glenayre
accounted for approximately 9% and 7% of 1994 and 1993 net sales,
respectively. The Company believes that it is essential to provide
reliable service to customers in order to solidify customer
relationships and to be the vendor of choice when new services or system
expansions are sought by a customer. This relationship is further
developed as customers come to depend upon the Company for installation,
system optimization, warranty and post-warranty services.
The Company has a warranty and maintenance program for both its hardware
and software products and maintains a large customer service
organization, known as the Glenayre Care Group, throughout the world.
Glenayre's standard warranty provides its customers with repair (at a
Glenayre facility) or replacement of all defective Glenayre manufactured
equipment. The warranty is valid, in the case of the majority of its
transmitters, for two years and, in the case of all other products, for
one year from the later of date of shipment or date of installation by a
Glenayre qualified technician. The major locations of the Glenayre Care
Group are Vancouver, British Columbia; Quincy, Illinois; Atlanta,
Georgia; London, England; and Singapore. The Glenayre Care Group, the
majority of which consist of technical specialists, maintain the
Company's installed base of equipment and are equipped with an automated
field service management system to provide more responsive customer
service.
8
CUSTOMERS
Glenayre sells to a range of customers worldwide. In the United States,
customers include the regional Bell operating companies, public and
private radio common carriers and private carrier paging operators.
Internationally, customers include public telephone and telegraph
companies, as well as private telecommunication service providers. The
following is a partial list of the Company's customers:
UNITED STATES
Alltel Mobile Communications, Inc.
A+ Communications, Inc.
Airtouch Paging, Inc.
American Paging, Inc.
Ameritech Corporation
Arch Communications Group Inc.
AT&T Wireless, Inc.
Bell Atlantic Mobile Systems, Inc.
Dial Page, Inc.
Map Mobile Communications
Metrocall, Inc.
Mobile Communications Corporation of America
MobileMedia Paging Services Inc.
Mobile Telecommunication Technologies Corp. (Mtel)
Nextel Communications, Inc.
OneComm Corporation
Pacific Bell Mobile
PacWest Telecomm, Inc.
Pagemart, Inc.
Paging Network, Inc. (PageNet)
ProNet, Inc.
Source One Wireless
Tri-State Radio Corp.
USA Mobile Communications, Inc.
INTERNATIONAL
British Columbia Telephone Company (Canada)
British Telecommunications PLC (United Kingdom)
Cia Europea de Radiobusqueda, S.A. (CERSA) (Spain)
China Media Development (The People's Republic of China)
Goldstar Telecommunication Co. Ltd. (South Korea)
Heilongjiong PTT (The People's Republic of China)
Hing Tat Investment Ltd. (The People's Republic of China)
Hutchison Paging Ltd. (Hong Kong)
Hutchison Paging U.K. Ltd. (United Kingdom)
Importaciones Electronicas Ribesa, S.A. de C.V. (Mexico)
Infomobile, S.A. (France)
Korean Mobile Telephone Corporation (South Korea)
Nippon Telegraph & Telephone Corporation (Japan)
Nokia Cellular Systems (Finland)
Pilipino Telephone Company (Philippines)
Radio Telecommunication Company (Bulgaria)
Shandong PTT (The People's Republic of China)
Shinawatra Computer Group (Thailand)
Singapore Telecom International Private Limited (Singapore)
Telechamada - Chamada de Pessoas, S.A. (Spain)
World Page Company LTD (Thailand)
Sales to one customer totalled approximately 13% of 1994 net sales.
Sales to two customers were each approximately 10% of 1993 net sales.
The customers with whom the Company does the largest amount of business
generally change from year to year. This results from the timing for
development and expansion of its customers' and new customers' systems.
MARKETING AND SALES
The Company markets its products and services in the United States and
internationally primarily through a direct sales force. The Company also
utilizes distributors and agents to sell its products in certain
countries and geographic regions to markets outside of the Company's
core markets. The Company has divided the world market into three sales
groups (North and South America; Europe, the Middle East, and Africa;
and Asia Pacific), each of which is supervised by a sales director/vice
president. Additional sales effort in the United States is provided by
a sales team which is focused specifically on the voice messaging
business. The Company maintains sales offices throughout the United
States.
In an effort to better serve its international customers, Glenayre has
established sales offices in various locations worldwide, including
Manila, the Philippines; New Delhi, India; Singapore; Toronto, Canada;
Vancouver, Canada; Hong Kong; Mexico City, Mexico; Milton Keynes,
England; Guangzhou, China; Beijing, China; Dubai, United Arab Emirates;
and Prague, Czech Republic. Glenayre has staffed each of these offices
with either local or expatriate multilingual personnel. The Company
expects to add new offices and personnel outside of the United States to
meet the increasing demand for its products in international markets.
Additionally, on a selective basis in certain countries and regions,
Glenayre utilizes external distributors and agents. See Note 14 to the
Company Consolidated Financial Statements for information relating to
export sales.
As part of the Company's integrated marketing and sales efforts,
Glenayre encourages a philosophy of open communication between the
Company and its customers. Toward that end, the Company often invites
customer representatives to meet with Glenayre's engineers and marketing
personnel to collaborate in the development of new and enhanced
products.
9
INTERNATIONAL BUSINESS RISKS
Approximately 33% of 1994 net sales were generated in markets outside of
the United States. International sales are subject to the customary
risks associated with international transactions, including political
risks, local laws and taxes, the potential imposition of trade or
currency exchange restrictions, tariff increases, transportation delays,
difficulties or delays in collecting accounts receivable, and, to a
lesser extent, exchange rate fluctuations. Although a substantial
portion of 1994 international sales of the Company's products and
services were negotiated in U.S. dollars, there can be no assurance that
the Company will be able to maintain such a high percentage of U.S.
dollar denominated international sales. The Company seeks to mitigate
its currency exchange fluctuation risk by entering into currency hedging
transactions. The Company also acts to mitigate certain risks associated
with international transactions through the purchase of political risk
insurance and the use of letters of credit.
RESEARCH AND DEVELOPMENT
The Company believes that a strong commitment to research and
development is essential to the continued growth of its business.
Glenayre has consistently developed innovative products and product
improvements for the wireless personal communications services industry
and has often been the first to bring such products to market. One of
the key components of the Company's development strategy is the
promotion of a close relationship between its development staff,
internally with Glenayre's manufacturing and marketing personnel, and
externally with Glenayre's customers. This strategy has allowed Glenayre
to develop and bring to market customer-driven products in a timely
manner.
The Company has extensive expertise in the technologies required to
develop wireless communications systems and products. The key wireless
communications technologies in which the Company's development staff has
extensive experience include: digital signal processing (DSP), real-time
software, high-speed digital logic, very large scale integrated circuits
(VLSI), radio frequency and data network design. The Company believes
that by having a research and development staff with expertise in these
key areas, it is well positioned to develop enhancements for its
existing products as well as the next generation of personal
communication products. Investment in advanced computer-aided design
tools for simulation and analysis has allowed Glenayre to reduce the
time for bringing new products to market.
The majority of the Company's research and development staff are
engineers or computer science professionals. Glenayre's research and
development efforts are located in its Vancouver, British Columbia;
Quincy, Illinois; and Atlanta, Georgia facilities. Total research and
development costs for the Company accounted for approximately $16.0
million, $11.8 million and $8.7 million (pro forma) or approximately
9.3%, 8.7% and 8.7% of net sales for 1994, 1993 and 1992, respectively.
NEW PRODUCTS AND UPGRADES
During 1994, the Company introduced several significant new products and
enhancements. Included were: (i) additions in UHF/VHF frequencies to
the Company's line of high-speed/high power digital paging transmitters;
(ii) a satellite paging receiver and network service; (iii) a RF network
manager with WindowsTM user interface; (iv) advanced features for paging
switches provided by software and hardware updates including high speed
FLEXTM and ERMES paging protocols, higher density voice storage, Chinese
character paging and a new billing protocol; (v) a low cost compact 320
MHz paging transmitter for the Korean market; (vi) improved redundancy
for the complete line of paging switches; (vii) a new improved paging
data distribution bridge for wireline RF simulcast networks; and (viii)
link based synchronization for the GL-C2000 digital controller.
In 1993, the Company introduced several significant new products. Some
of the major new products developed in 1993 for the paging market were:
(i) a new line of high speed/high power digital paging transmitters;
(ii) a new advanced transmitter control system, GL-C2000; (iii)
integration of the transmitter control system into the paging switch;
and (iv) many advanced messaging features provided by software and
hardware updates including new optical disk drives, a new data interface
and voice switching. Some of the significant developments in 1993 to
the MVP, the voice messaging switching platform, were: (i) adoption of a
new telephone signaling scheme - SS7; (ii) enhanced software that
includes "One Number Access" capability; (iii) a short message interface
to cellular networks; and (iv) a new advanced hardware platform.
10
MANUFACTURING
Glenayre currently manufactures its products at Company facilities in
Quincy, Illinois and Vancouver, British Columbia. The Company's
manufacturing expertise resides in assembling sub-assemblies and final
systems that are configured to its customers' specifications. The
components and assemblies used in the Company's products include
electronic components such as resistors, capacitors, semiconductors and
transistors; mechanical materials such as cabinets in which the systems
are built; and peripherals, including disk drives. Of the approximately
23,000 parts listed for the Company's products, less than 2% are
obtained from single source suppliers. Glenayre believes that minor
design changes would allow replacement sources of supply to be used with
respect to such parts. The Company ensures that all products are tested,
tuned and verified prior to shipment to the customer.
The Company has adopted a "Total Quality Management" philosophy
throughout all its operations. The Company has certification to the ISO
9001 international standard for quality assurance in areas including
design, manufacture, assembly and service for the Quincy, Illinois;
Vancouver, British Columbia; and Atlanta, Georgia facilities. ISO is a
worldwide federation of national standards bodies which have united to
develop internationally accepted quality systems standards so that
customers and manufacturers have a system in place that provides a known
quality. The standards set by ISO cover every facet of quality from
management responsibility to service and delivery. Management believes
that adhering to the stringent ISO 9001 procedures not only creates
efficiency in its operations, but also positions Glenayre to meet the
exacting standards required by its customers.
The Company utilizes Materials Resource Planning (MRP) systems for
production planning in both manufacturing locations and state-of-the-art
workstations for its engineering functions. A 63,000 square feet
expansion to the Quincy facility and a 50,000 square feet expansion to
the Vancouver facility are currently in process and are expected to be
completed in 1995. Glenayre believes its manufacturing facilities, upon
completion of the expansions, will be sufficient to accommodate
foreseeable near-term growth in the Company's business.
PATENTS AND TRADEMARKS
The Company owns or licenses numerous patents used in its current
operations. The Company believes that while these patents are useful to
the Company, they are not critical or valuable on an individual basis,
and that the collective value of the intangible property of the Company
is comprised of its patents, blueprints, specifications, technical
processes and cumulative employee knowledge. Although the Company
attempts to protect its proprietary technology through a combination of
trade secrets, patent law, non-disclosure agreements and technical
measures, such protection may not preclude competitors from developing
products with features similar to the Company's products. The laws of
some foreign countries in which the Company sells or may sell its
products, including South Korea, People's Republic of China, Saudi
Arabia, Thailand, Dubai, India and Brazil, do not protect the Company's
proprietary rights in the products to the same extent as do the laws of
the United States. Although the Company believes that its products and
technology do not infringe on the proprietary rights of others, the
Company is currently party to certain infringement claims, and there can
be no assurance that third parties will not assert additional
infringement claims against the Company in the future. If such
litigation resulted in the Company's inability to use technology, the
Company might be required to expend substantial resources to develop
alternative technology or to license the prior technology. There can be
no assurance that the Company could successfully develop alternative
technology or license the prior technology on commercially reasonable
terms. The Company does not believe, however, that an adverse
resolution of the pending claims would have a material adverse effect on
the Company.
The Company considers its trademark "Glenayre" to be a valuable asset.
The "Glenayre" trademark is protected through trademark registrations.
BACKLOG
The Company's firm backlog at December 31, 1994 and 1993 was
approximately $67 million and $32 million, respectively. The Company's
growth in its backlog is due to expansion of sales coverage, market
growth and increased acceptance of the Company's products. The orders
supporting the Company's backlog amounts consist of signed purchase
orders and, in general, are expected to be shipped within six months of
the respective backlog dates.
11
COMPETITION
The Company is a leading worldwide supplier of switches, transmitters,
receivers, controllers and software used in paging, voice messaging, and
message management and mobile data systems. While the services from the
foregoing products represent a significant portion of the wireless
personal communications systems industry today, the industry is
expanding to include new services and new markets. The wireless personal
communications industry includes equipment manufacturers that serve many
of the same personal communications services markets served by the
Company. Certain of the Company's competitors have significantly greater
resources than the Company, and there can be no assurance that Glenayre
will be able to compete successfully in the future. In addition,
manufacturers of wireless telecommunications equipment, including those
in the cellular telephone industry, certain of which are larger and have
significantly greater resources than the Company, could elect to enter
into the Company's markets and compete with Glenayre's products.
Competition in Glenayre's markets is based upon quality, reliability,
product features and price. While equipment and systems of the type sold
by Glenayre represent less than one-half of a paging service provider's
total capital investment, such equipment and systems are nevertheless
critical for the operation of the pager devices and the paging network.
Glenayre believes that it compares favorably with its competitors due to
its reputation for high quality products and service and its ability to
offer complete turn-key systems customized to specifications provided by
the customer.
The Company's determination of its competitive market position is based
upon its knowledge of sales of products of the type sold by the Company
in the segment of the wireless personal communications industry in which
the Company competes, information derived from its close working
relationship with large paging service providers and market information
obtained from industry trade publications and sources.
UNITED STATES
The Company's believes that it has the leading market share (based on
the number of units sold) of the United States market for sales of
paging switches, paging transmitters, and controllers. It is the
Company's belief that its leadership position with respect to the sale
of paging switches in the United States substantially exceeds that of
its principal competitors in this market, which are Unipage, Inc.,
("Unipage"), a subsidiary of Motorola, Inc., ("Motorola"); Commonwealth
Communications Industries, Ltd.; and Spectrum Communications Electronics
Corp., a subsidiary of L M Ericsson Telephone Company ("Spectrum"). The
Company believes that the GEMS Business captured the largest percentage
of sales of paging switches serving more than 10,000 subscribers in each
of the last four years.
The Company believes that its leadership position with respect to the
sale of paging transmitters and controllers in the United States was
shared with Motorola, the other principal United States paging
transmitter and controllers manufacturer, through 1991, after which, the
Company believes, sales of transmitter and controllers products by the
Company exceeded sales of such products by Motorola. The Company
believes that Motorola remains a substantial competitor with a
significant market share in this market. Other competitors in this
market include L M Ericsson Telephone Company ("Ericsson") and smaller
manufacturers that primarily serve small local paging service providers.
For sales of voice messaging products, the Company competes in the
United States and internationally primarily with Boston Technology,
Inc., Octel Communications Corporation, Comverse Technologies, Inc.,
Unisys Corporation and Centigram Communications Corporation.
INTERNATIONAL
The Company believes that it is a leading participant in markets outside
of the United States in the sale of paging switches, paging
transmitters, and controllers (based on the number of units sold). The
Company believes that it sold the most paging switches outside of the
United States during each of the years 1994, 1993, and 1992, exceeding
sales by each of its two principal competitors in this market, Motorola
and Ericsson. It is the Company's belief that prior to 1992, Motorola
held the largest market share in the international market for paging
switches, with the Company holding approximately a market share slightly
less than that of Motorola. From 1992 to present, the Company believes
that sales of paging switches have been slightly more than sales of such
products by Motorola. Spectrum and Telelink Corporation are also
competitors of the Company in the international paging switch market.
The Company believes that the Company and Motorola have the largest and
approximately equivalent shares of the international paging transmitter
and controller market. Ericsson also is a significant competitor in this
market with what the Company believes to be a substantially smaller
share of the market than either of Motorola or the Company.
12
The Company competes for sales of certain components of wide-area rural
radio telephone systems with companies such as Motorola, Telemobile,
Inc., Exicom Corporation, Tait Inc., and Carlson Communications.
For sales of bus transit communication systems, the Company's primary
competitors include ElectroComm Communications Systems, L.P., E-Systems,
Inc., and Harris Corporation; rail communication competitors include
Telephonics Corporation and SES Co., Inc.
REGULATION
Many of the Company's products operate on radio frequencies. Radio
frequency transmissions and emissions, and certain equipment used in
connection therewith, are regulated in the United States, Canada and
internationally. Regulatory approvals generally must be obtained by the
Company in connection with the manufacture and sale of such products and
by the customers of the Company to operate the Company's products. The
enactment by federal, state, local or governments of other countries of
new laws or regulations or a change in the interpretation of existing
regulations could affect the market for the Company's products.
The Company does not anticipate that regulatory changes will have a
material negative impact on the Company. However, there can be no
assurance that the trend toward deregulation and current regulatory
developments favorable to the promotion of new and expanded personal
communications services will continue or that future regulatory changes
will have a positive impact on the Company.
DISCONTINUED OPERATIONS
Effective December 31, 1992 and July 6, 1993, the Company adopted formal
plans to dispose of its oil and gas pipeline construction and real
estate operations, respectively, in order to focus exclusively on the
telecommunications industry. In October 1993, the Company sold its
interest in the oil and gas pipeline construction operation. The sales
of the Company's remaining parcels of undeveloped real estate were
completed as of June 30, 1994. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
EMPLOYEES
At December 31, 1994, the Company and its subsidiaries employed
approximately 1,100 persons. The Company believes its employee
relations to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers are appointed annually by the Board of Directors.
The names, ages and positions of the executive officers of the Company
are as follows:
Name Age Positions Held
Gerald B. Cramer 64 Chairman; Director
Clarke H. Bailey 40 Vice Chairman; Chairman of the Executive Committee; Director
John J. Hurley 60 Vice Chairman; Director
Ramon D. Ardizzone 57 President; Acting Chief Executive Officer; Director
Gary B. Smith 36 Executive Vice President; General Manager, Wireless Messaging Group
Kenneth C. Thompson 48 Executive Vice President; General Manager, Voice and Data Technologies Group
Russ K. Allen 54 Executive Vice President, Field Sales and Support Operations
Stanley Ciepcielinski 39 Executive Vice President, Finance and Administration Operations; Chief Financial
Officer; Secretary; Treasurer
Beverly W. Cox 37 Vice President, Human Resources
Billy C. Layton 48 Controller; Chief Accounting Officer
13
Gerald B. Cramer has served as Chairman of the Board of Directors of the
Company since 1986. Mr. Cramer has also served as Chairman and Chief
Executive Officer of Cramer Rosenthal McGlynn, Inc. ("CRM"), an
investment management firm, since 1973.
Clarke H. Bailey has served as Vice Chairman of the Company since
November 1992, Chairman of the Executive Committee since March 1994 and
as a director of the Company since December 1990. Mr. Bailey was Chief
Executive Officer of the Company from December 1990 to March 1994, and
Acting Chief Executive Officer of the Company from May 1994 until
December 1994. Mr. Bailey has served as Chairman and Chief Executive
Officer of United Acquisition Company and its parent, United Gas Holding
Corporation since February 1995. Mr. Bailey served in a variety of
capacities for the investment banking firm of Oppenheimer & Co., Inc.
from March 1984 to December 1990, most recently as Managing Director and
head of the Principal Investments Department.
John J. Hurley has served as Vice Chairman of the Company since December
1994 and as a director of the Company since November 1992. Mr. Hurley
was President of the Company from November 1992 until December 1994 and
Chief Operating Officer of the Company from November 1992 until March
1994. Mr. Hurley was Chief Executive Officer of the Company from March
1994 until May 1994. Mr. Hurley was President of GEL from July 1988 to
November 1992 and a director of GEL from July 1988 to June 1993. From
1985 to 1988, Mr. Hurley was Chief Operating Officer of Antenna
Specialists Company, a communications antenna manufacturer. Mr. Hurley
was employed by General Electric Company from 1966 to 1985, where he
held several positions, including General Manager of General Electric
Company's cellular business.
Ramon D. Ardizzone has served as President and Acting Chief Executive
Officer of the Company since December 1994 and as a director of the
Company since November 1992. Mr. Ardizzone was Chief Operating Officer
of the Company from June 1994 until December 1994 and Acting Chief
Operating Officer of the Company from May 1994 until June 1994. Mr.
Ardizzone served as Executive Vice President of the Company from
November 1992 until December 1994. Mr. Ardizzone served as Executive
Vice President of the Company in charge of Sales and Marketing from
November 1992 until May 1994. Mr. Ardizzone served as Executive Vice
President - Sales and Marketing of GEL from August 1988 to November
1992. From 1986 to 1988, Mr. Ardizzone was President of Aerotron, Inc.,
a land-mobile radio manufacturing company. From 1956 to 1986, Mr.
Ardizzone worked for General Electric Company in various management
positions.
Gary B. Smith has served as Executive Vice President of the Company
since September 1994 and General Manager, Wireless Messaging Group since
February 1995. Mr. Smith served as Chief Technical Officer of the
Company from September 1994 until February 1995. From 1983 to September
1994, Mr. Smith served in various engineering management positions with
the Company or GEMS.
Kenneth C. Thompson has served as Executive Vice President and General
Manager, Voice and Data Technologies Group of the Company since February
1995. From December 1990 to February 1995, Mr. Thompson served in
various marketing management positions with the Company or GEMS. From
December 1987 to December 1990, Mr. Thompson served as the General
Manager of a division of Science Application International Corporation.
Russ K. Allen has served as Executive Vice President, Field Sales and
Support Operations of the Company since February 1995. From 1985 to
February 1995, Mr. Allen served in various sales management positions
with the Company or GEMS.
Stanley Ciepcielinski has served as Executive Vice President, Finance
and Administration Operations of the Company since February 1995, as
Executive Vice President and Chief Financial Officer of the Company
since January 1993, and as Secretary and Treasurer since April 1993.
Mr. Ciepcielinski served as the Director of Finance for the Transformer
Business Unit of Square D Company in Charlotte, North Carolina from
August 1989 to December 1992. From December 1984 through July 1989, Mr.
Ciepcielinski served as Corporate Accounting Manager of Alcatel, Inc.
Beverly W. Cox has served as Vice President, Human Resources of the
Company since February 1995. From November 1993 to February 1995, Ms.
Cox served as Corporate Director - Human Resources with the Company.
Ms. Cox served in various Human Resource management positions with
Cadmus Communications, Inc. of Richmond, Virginia from July 1989 to
November 1993, most recently as Vice President - Human Resources.
Billy C. Layton has served as Controller and Chief Accounting Officer of
the Company since November 1992. From 1990 to November 1992, Mr. Layton
served in various accounting management positions with GEMS.
14
ITEM 2. PROPERTIES
The following table sets forth certain information regarding the
Company's principal facilities:
Location Size Owned or Lease
(Square Feet) Leased Expiration Date Uses
Vancouver, British Columbia 101,889 70,000 owned Manufacturing, service,
31,889 leased 1997-1998 accounting, purchasing and
training facilities, research and
development.
Quincy, Illinois 94,100 86,000 owned Manufacturing, service, sales,
8,100 leased 1997 accounting, purchasing and
training facilities, research and
development.
Atlanta, Georgia 25,531 leased 1996 Offices for voice messaging
products, sales, service, research
and development, and training
facilities.
Charlotte, North Carolina 21,482 leased 1999-2002 Corporate headquarters,
marketing, accounting and finance,
sales office and training facilities.
In addition to its sales offices in Atlanta, Georgia; Charlotte, North
Carolina; and Quincy, Illinois listed above, the Company also maintains
sales offices throughout the United States and internationally. See
"Business--Marketing and Sales." The Company is currently in the
process of expanding the manufacturing space at both its Quincy,
Illinois and Vancouver, British Columbia facilities. The 63,000 square
feet Quincy expansion and the 50,000 square feet Vancouver expansion are
expected to be completed in the third quarter 1995 and second quarter
1995, respectively. See Note 6 to the Company Consolidated Financial
Statements. The Company believes that the existing principal offices
and manufacturing facilities (after considering the aforementioned
expansion) are suitable and adequate for the Company's business and to
accommodate foreseeable near-term growth in its business.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to several intellectual property claims and
disputes, related to its business operations. The Company believes that
the ultimate resolution of these claims and disputes will not have a
material effect on the Company's financial position or future results of
operations. However, if such litigation resulted in the Company's
inability to use technology, the Company might be required to expend
substantial resources to develop alternative technology or to license
such technology on commercially reasonable terms.
ITEM 4 is inapplicable and is omitted
15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the
symbol "GEMS." The table below sets forth the high and low sale prices
for the Company's common stock on The Nasdaq Stock Market for the
periods indicated, as adjusted to reflect a 3-for-2 stock split effected
in the form of a 50% stock dividend distributed on January 5, 1995 to
stockholders of record on December 22, 1994.
Price Range of
Common Stock
High Low
Year Ended December 31, 1993
First Quarter $ 8.50 $ 4.78
Second Quarter 14.33 7.55
Third Quarter 32.67 12.25
Fourth Quarter 36.92 23.59
Year Ended December 31, 1994
First Quarter 29.33 23.33
Second Quarter 31.17 21.67
Third Quarter 40.50 25.00
Fourth Quarter 42.17 34.17
At March 8, 1995, there were approximately 600 holders of record of the
Company's common stock.
The Company has not paid cash dividends since October 28, 1982 and does
not anticipate paying cash dividends in the foreseeable future. The
Company expects to utilize future earnings to finance the development
and expansion of its business. The actual amount of any dividends paid
would be subject to the discretion of the Board of Directors of the
Company and would depend on the Company's operations and business
requirements and other factors.
16
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
A. GLENAYRE TECHNOLOGIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
Year Ended December 31,
1994 1993 1992(1) 1991 1990
Operating Data:
Net sales............................................................ $172,107 $136,139 $ 15,586 $ -- $ --
Income (loss) from continuing
operations before extraordinary item(2)............................ 33,095 23,700 865 (183) 906
Discontinued operations.............................................. 388 100 (7,990) 687 (812)
Extraordinary item................................................... --- (1,695) -- -- --
Net income (loss).................................................... 33,483 22,105 (7,125) 504 94
Primary Per share Data:
Income (loss) from continuing operations
before extraordinary item........................................ 1.27 1.08 0.05 (0.01) 0.05
Net income (loss)................................................... 1.28 1.01 (0.43) 0.03 0.01
At December 31,
1994 1993 1992 1991 1990
Balance Sheet Data:
Working capital (3)................................................. $135,209 $ 94,898 $ 20,217 $ 48,575 $ --
Total assets........................................................ 284,961 228,244 169,476 80,650 81,531
Long-term debt, including current portion........................... 2,019 3,451 67,981 1,751 7,005
Minority interest in consolidated subsidiaries...................... -- -- 3,565 6,180 5,370
Put warrants........................................................ -- -- 459 -- --
Stockholders' equity................................................ 245,435 198,708 64,022 59,964 59,328
(1) Reflects 51 days of operating results for the GEMS Business
following the Acquisition on November 10, 1992. Effective December
31, 1992 and July 6, 1993, the Company adopted formal plans to
dispose of its oil and gas pipeline construction and real estate
operations, respectively. These operations are accounted for as
discontinued for all periods presented. See Note 1 to the Company
Consolidated Financial Statements.
(2) Income (loss) from continuing operations prior to November 10,
1992, resulted primarily from interest income and gains (losses)
related to the Company's cash and marketable securities and other
income and expenses unrelated to the discontinued operations. See
Note 12 to the Company Consolidated Financial Statements.
(3) Prior to the year ended December 31, 1991, the Company did not
classify its balance sheet between current and non-current
amounts. Working capital includes approximately $2.1 million and
$9.5 million attributable to the Company's discontinued oil and
gas pipeline construction operations at December 31, 1992 and
1991, respectively.
17
B. GEMS BUSINESS (Predecessor Business Acquired by Glenayre
Technologies, Inc. in 1992)
SELECTED FINANCIAL DATA
(In thousands, except conversion rates)
The following selected financial data of the GEMS Business have been
derived from the GEMS Business Consolidated Financial Statements, which
have been audited by Grant Thornton, independent public accountants. All
such financial information has been converted from the functional
currency of Canadian dollars to U.S. dollars for comparative purposes
using the average of the exchange rates (in effect as of the end of each
calendar month within such period and at November 10, 1992), as reported
by The Wall Street Journal. Although the prior owner of the GEMS
Business was a Canadian corporation that reported its results of
operations in Canadian dollars, a substantial majority of sales were in
U.S. dollars for the period presented. The Company acquired the GEMS
Business on November 10, 1992. The selected financial data set forth
below should be read in conjunction with the GEMS Business Consolidated
Financial Statements and related Notes. The GEMS Business Consolidated
Financial Statements have been prepared in accordance with Canadian
generally accepted accounting principles. The differences between
Canadian generally accepted accounting principles and United States
generally accepted accounting principles are not material with respect
to the GEMS Business results of operations or financial condition. For a
discussion of such differences, see Note 10 to the GEMS Business
Consolidated Financial Statements.
Period January 1 to
November 10, 1992
(CDN$) (US$)
Operating Data: (1)
Net sales................................................ $100,900 $83,648
Cost of sales............................................ 41,038 34,018
Gross profit............................................. 59,862 49,630
Selling, general and administrative
expense............................................... 24,842 20,596
Research and development expense......................... 9,022 7,481
Depreciation and amortization
expense............................................... 3,766 3,122
Income from operations................................... 22,232 18,431
Interest expense, net.................................... 2,938 2,436
Income before income taxes............................... 19,294 15,995
Income taxes............................................. 7,718 6,398
Net income............................................... $ 11,576 $ 9,597
Conversion rate from CDN$ to US$: 0.8290
(1) The financial statement captions reflect the method used by the
Company for reporting its results following the Acquisition. For
presentation purposes, the Company has retitled certain of the
captions in the GEMS Business Consolidated Financial Statements to
conform to the Company's reporting system.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BACKGROUND
On November 10, 1992, Glenayre acquired the GEMS Business from GEL. The
GEMS Business designs, manufactures, markets and services switches,
transmitters, controls and related software used in personal
communications systems (including its paging, voice messaging and
message management and mobile data systems), transit communications
systems and mobile telephone systems. In connection with the
Acquisition, substantially all of the employees of the GEMS Business
became employees of the Company.
Prior to 1986, the Company was engaged in the real estate development
business. In 1986, Glenayre ceased real estate development and, as part
of a plan to refocus its business activities, began seeking business
acquisitions. In 1989, the Company acquired a majority interest in a
company engaged in the construction of oil and gas pipelines. In order
to focus exclusively on the telecommunications industry, Glenayre
adopted formal plans to dispose of its oil and gas pipeline construction
and real estate operations, effective December 31, 1992 and July 6,
1993, respectively. These business segments are accounted for as
discontinued operations for all periods presented and, accordingly,
their operating results are excluded from continuing operations.
The Company believes that a comparison of the Company's results from
continuing operations for the year ended December 31, 1993 to the
Company's results of operations for the years ended December 31, 1992
(which reflect 51 days of operating results for the GEMS Business) would
not be meaningful since the prior periods' business segments have been
discontinued and the GEMS Business was not acquired until November 10,
1992. Therefore, set forth below are (i) a comparison of the Company's
results from continuing operations for the year ended December 31, 1994
to the continuing operations for the year ended December 31, 1993, (ii)
a comparison of the results from continuing operations for the year
ended December 31, 1993 to the pro forma results of operations for the
year ended December 31, 1992, (iii) a discussion of the Company's 1992
results of operations, (iv) a discussion of the Company's discontinued
operations and (v) a discussion of the Company's financial condition and
liquidity.
The consolidated financial information discussed below for the GEMS
Business for the period January 1, 1992 to November 10, 1992 has been
derived from the GEMS Business Consolidated Financial Statements, and
has been converted from the functional currency of Canadian dollars to
U.S. dollars for comparative purposes using the average of the exchange
rates (in effect as of the end of each calendar month within such period
and at November 10, 1992), as reported by The Wall Street Journal.
Although the prior owner of the GEMS Business was a Canadian corporation
that reported its results of operations in Canadian dollars, a
substantial majority of sales were in U.S. dollars for the period
presented. The GEMS Business Consolidated Financial Statements have been
prepared in accordance with Canadian generally accepted accounting
principles. The differences between Canadian generally accepted
accounting principles and United States generally accepted accounting
principles are not material with respect to the GEMS Business results of
operations or financial condition. For a discussion of such differences,
see Note 10 to the GEMS Business Consolidated Financial Statements.
Because the GEMS Business represents substantially all of the Company's
continuing business operations, the Company has elected to include
estimated pro forma combined results of operations for the year ended
December 31, 1992 assuming the Acquisition occurred on January 1, 1992.
The pro forma results for the year ended December 31, 1992 have been
derived from the Company's audited statement of operations for the year
ended December 31, 1992, and from the GEMS Business audited statement of
operations for the period January 1, 1992 to November 10, 1992, as
adjusted to give effect to the Acquisition and related financing as if
they had occurred on January 1, 1992 and assuming that the Company
discontinued its oil and gas pipeline construction and real estate
operations effective December 31, 1991 and that the Company did not
realize any income or loss from such discontinued operations in 1992.
These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
Acquisition been made on that date.
19
The following discussion should be read in conjunction with each of the
GEMS Business Consolidated Financial Statements, the Company
Consolidated Financial Statements and related Notes.
The Company's results of continuing operations (tabular amounts in
thousands of dollars) and as a percentage of net sales are presented
below:
1994 1993 1992
Pro Forma (Unaudited)
Net sales $172,107 100.0% $136,139 100.0% $99,234 100.0%
Cost of sales 72,908 42.4 60,561 44.5 41,335 41.7
Gross profit 99,199 57.6 75,578 55.5 57,899 58.3
Selling, general and
administrative expense 41,079 23.9 31,638 23.2 26,965 27.2
Research and development
expense 15,991 9.3 11,843 8.7 8,654 8.7
Depreciation and amortization
expense 5,884 3.4 5,059 3.7 5,186 5.2
Income from operations (1) 36,245 21.1 27,038 19.9 17,094 17.2
Interest income, net 4,450 2.6 2,828 2.1 5,163 5.2
Income from continuing
operations before income
taxes and extraordinary item 40,295 23.4 24,161 17.7 11,801 11.9
Provision for income taxes 7,200 4.2 461 0.3 3,405 3.4
Income from continuing
operations before
extraordinary item $ 33,095 19.2% $ 23,700 17.4% $ 8,396 8.5%
(1) The 1992 (Pro Forma) income from operations reflects a net foreign
exchange gain of $842,000. The currency exchange gains and losses
experienced by the GEMS Business prior to the Acquisition are not
expected to be of the same magnitude in the future due to the Company's
current operating and business structure as well as its currency hedging
policies.
INDUSTRY GROWTH
The wireless personal communications industry has grown rapidly over the
last decade, driven by the increasing demand for mobile
telecommunications services and the recent development and expansion of
global markets for paging, cellular, mobile data and other mobile
personal communications technologies. The Company believes, based on
industry reports, that the proliferation of wireless personal
communications services will continue and that the paging industry,
which provides the lowest cost wireless personal communications service
available, will continue to grow rapidly. Although the Company believes
that rapid growth in the number of pagers in use will result in
increased demand for the Company's products, growth rates in revenue
from paging system equipment sold by Glenayre does not directly
correlate the growth rates of pagers in use. Additionally, the Company's
growth rate in subsequent years may be lower than the growth rate of
pagers in use due to the continued development of products provided by
the Company and others making paging system equipment more efficient,
thereby allowing more paging subscribers to be served by the expansion
of existing equipment rather than the more costly replacement of
existing equipment.
The growth in the wireless personal communications industry,
particularly the paging industry, has provided the foundation for the
Company's growth. The Company believes that the anticipated continued
expansion of this industry will provide the main source of growth for
the Company due in part to the Company's significant physical and
technological competitive advantage in selling its products to the large
base of Glenayre's existing paging industry customers. The Company
believes that as these customers expand their systems to accommodate new
subscribers, services and territories, the Company's revenues from sales
of expansion and enhancement products and related software and from
customer service contracts will increase. The growth in follow-on sales
and in revenues from customer service contracts are expected to be aided
by the Company's sales of equipment and related software to new
customers in the United States and internationally. The Company expects
that follow-on sales and increased revenues from customer service
contracts from new and existing customers will favorably affect income
from continuing operations.
20
PENDING BUSINESS ACQUISITION
On January 3, 1995, the Company entered into an agreement to acquire
MUX, located in Belmont, California. MUX designs, manufactures and
markets products for use in point-to-point microwave communication
systems. The estimated purchase price of approximately $30.3 million
consists of 750,000 shares of the Company's common stock (including
approximately 228,000 shares issuable upon exercise of stock options)
valued at approximately $29.1 million based on the stock price at the
date of the agreement and approximately $1.2 million in acquisition
costs. The actual purchase price may differ from the estimated purchase
price because of fluctuations in the price of the Company's common stock
between the date of the agreement and the date of closing. The
acquisition will be accounted for as a purchase and is expected to be
completed by May 1995. The acquisition is subject to approval by the
MUX shareholders. The Company does not expect the MUX operations will
require material financing commitments by the Company.
RESULTS OF CONTINUING OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
COMPARED WITH YEAR ENDED DECEMBER 31, 1993
NET SALES
Net sales in 1994 increased to approximately $172.1 million from 1993
net sales of approximately $136.1 million, an increase of $36.0 million,
or 26.4%. This increase was primarily attributable to greater sales of
paging products of approximately $26.5 million, or 27.8% over 1993, and
increased sales of voice messaging products of approximately $9.4
million, or 50.0% over 1993. The increase of paging products sales was
primarily due to: (i) the continued expansion and upgrading of existing
systems within the installed customer base; (ii) the build out of
private carrier paging systems which the FCC reallocated from
non-exclusive to exclusive in 1993; and (iii) sales of new paging
systems both in the United States and internationally. The increase of
voice messaging product sales was principally comprised of additional
sales to existing customers in order to upgrade their service to their
paging subscribers, sales to resellers and sales to cellular operators.
Net sales to United States customers in 1994 increased by 45.4% over
1993 while 1994 net sales to international customers were comparable to
1993.
GROSS PROFIT
Gross profit increased to approximately $99.2 million, or 57.6% of 1994
net sales, from approximately $75.6 million, or 55.5% of 1993 net sales.
The increase in gross profit margin is primarily a result of a favorable
mix in products shipped and services provided, the impact of increased
sales volume versus fixed manufacturing costs, and favorable material
pricing due to higher volume purchasing levels. The Company's net
selling prices realized in 1994 were, on average, equivalent to those
realized in 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased to approximately
$41.1 million, or 23.9% of 1994 net sales, from approximately $31.6
million, or 23.2% of 1993 net sales. Selling, general and
administrative expense increased by approximately $9.4 million from 1993
to 1994. The increase primarily resulted from: (i) increased selling
and marketing expenses of approximately $7.5 million (due to increased
staffing, commissions, travel expenses, promotional material and new
international sales offices openings) required to achieve growth in net
sales; (ii) approximately $1.2 million related to increased
administrative staffing and travel expenses; and (iii) general increases
in employee costs and purchased services.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased to approximately $16.0
million, or 9.3% of 1994 net sales, from approximately $11.8 million, or
8.7% of 1993 net sales. These research and development costs were for
new product development and enhancements to existing products. Both
hardware and software development costs are included in research and
development costs. All research and development costs are expensed as
incurred. The Company expects future annual expenditures for research
and development to approximate 9% to 10% of net sales.
21
INTEREST INCOME, NET
Interest income, net increased to approximately $4.5 million, or 2.6% of
1994 net sales, from approximately $2.8 million or 2.1% of 1993 net
sales. The increase is primarily attributable to the October 1993
payoff of the bank debt originally incurred in connection with the
Acquisition and interest income earned on significant cash and cash
equivalents and short-term investments for all of 1994 compared to only
the last quarter of 1993. See Note 12 to the Company Consolidated
Financial Statements and "-Financial Condition and Liquidity".
INCOME TAXES
The difference between the combined U.S. federal and state statutory tax
rate of approximately 40% and the effective tax rate of 18% for 1994 and
2% for 1993 is primarily the result of the utilization of the Company's
Net Operating Losses ("NOLs") and the application of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
("SFAS 109"), in computing the Company's tax provision. The difference
between the effective tax rate of 18% in 1994 and 2% in 1993 is
primarily the result of a significant variance between the 1994 and 1993
adjustments for realization of tax benefits for financial statement
purposes in accordance with SFAS 109 primarily due to revisions during
each year to the estimated future taxable income during the Company's
loss carryforward period. See Note 8 to the Company Consolidated
Financial Statements and "--Financial Condition and Liquidity."
RESULTS OF CONTINUING OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993
COMPARED WITH PRO FORMA YEAR ENDED DECEMBER 31, 1992
NET SALES
Net sales in 1993 increased to approximately $136.1 million from 1992
net sales of approximately $99.2 million, an increase of $36.9 million,
or 37%. This increase was primarily attributable to greater sales of
paging products of approximately $29.7 million, or 43% over 1992,
increased revenues from service contracts of approximately $3.6 million,
or 57% over 1992, and increased sales of voice messaging products of
approximately $5.5 million, or 41% over 1992. The increase of paging
products sales was due to the continued expansion and upgrading of
existing systems within the installed customer base and to sales of new
paging systems both in the U.S. and internationally. The increase in
service contract revenue was primarily attributable to additional
services offered under the "Glenayre Care" program which provides
maintenance and service for Glenayre software and hardware products.
The increase of voice messaging product sales was principally comprised
of additional existing customers purchasing these systems to upgrade
their service to their paging subscribers, sales to resellers and sales
to cellular operators. In 1993, net sales to United States customers
increased by 41% while net sales to international customers increased by
33%. The increase in international sales was primarily a result of
increased shipments to China and Singapore.
GROSS PROFIT
Gross profit increased to approximately $75.6 million, or 55.5% of 1993
net sales, from approximately $57.9 million, or 58.3% of 1992 net sales.
After adjusting for $2.4 million of currency exchange gains included in
pro forma 1992 cost of sales, gross profit as a percentage of net sales
was 56.0% and is similar to the gross profit percentage realized in
1993. Currency exchange gains or losses incurred in 1993 are reported as
a component of other income (expenses).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased to approximately
$31.6 million, or 23.2% of 1993 net sales, from approximately $27.0
million, or 27.2% of 1992 net sales. Selling, general and
administrative expense in 1992 included a currency exchange loss of
approximately $1.5 million. Exclusive of this item, selling, general
and administration expense increased by approximately $6.2 million from
1992 to 1993. The $6.2 million increase primarily resulted from: (i)
increased selling and marketing expenses of approximately $3.7 million
(including an approximately $900,000 increase in selling commissions and
approximately $2.6 million related to increased staffing and travel)
required to achieve growth in net sales; (ii) increased customer support
cost of approximately $440,000 required to support increased growth in
net sales; (iii) approximately $1.0 million related to increased
administrative staffing; and (iv) general increases in employee costs
and purchased services. Currency exchange gains or losses incurred in
1993 are reported as a component of other income (expenses).
22
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense increased to approximately $11.8
million, or 8.7%, of 1993 net sales, from approximately $8.7 million, or
8.7%, of 1992 net sales. These costs are shown net of Canadian
government research grants of approximately $12,000 in 1993 and net of
Canadian government research grants and GEMS Business Canadian
investment tax credits of approximately $804,000 in 1992. Canadian
investment tax credits realized in 1993 are not included in research and
development expense. These research and development costs were for new
product development and enhancements to existing products.
INTEREST EXPENSE, NET
Interest expense, net decreased to approximately $2.8 million, or 2.1%
of 1993 net sales, from approximately $5.2 million or 5.2% of 1992 net
sales. The decrease is primarily attributable to the October 1993
payoff of the bank debt originally incurred in connection with the
Acquisition .
INCOME TAXES
The difference between the combined U.S. federal and state statutory tax
rate of approximately 40% and the effective tax rate of 2% for 1993 and
29% (or 25% net of Canadian investment tax credit set forth above) for
1992 is primarily the result of the utilization of the Company's NOLs
and the application of SFAS 109, in computing the Company's tax
provision. The difference between the effective tax rate of 2% in 1993
and 29% in 1992 is the result of an adjustment for realization of a tax
benefit for financial statement purposes in accordance with SFAS 109
primarily due to revisions to the estimated future taxable income during
the Company's loss carryforward period. See Note 8 to the Company
Consolidated Financial Statements and "- Financial Condition and
Liquidity".
RESULTS OF CONTINUING OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1992
The following table sets forth certain financial information (in
thousands of dollars) for the year ended December 31, 1992:
Net sales $15,586
Cost of sales. 7,317
Gross profit 8,269
Selling, general and administrative expense 6,145
Research and development expense 1,173
Depreciation and amortization expense 725
Income from operations 226
Interest income, net 864
Other, net (130)
Income from continuing operations before income taxes 960
Income taxes 95
Income from continuing operations $ 865
Net sales of approximately $15.6 million represent GEMS Business sales
from the completion of the Acquisition on November 10, 1992 to December
31, 1992. Sales to each of two customers amounted to approximately 11%
of sales for the period from November 10, 1992 to December 31, 1992.
Gross profit was approximately $8.3 million, or 53.1% of net sales, for
such period. Selling, general and administrative expense was
approximately $6.1 million, or 39.4% of 1992 net sales. Included in
selling, general and administrative expense was a non-cash charge of
approximately $1.9 million for stock compensation expense, which was
recorded as a result of the grant of options and issuance of stock at
below market prices in connection with the Acquisition. Research and
development costs, primarily for new product development and
enhancements to existing products, totalled approximately 8% of 1992 net
sales.
Interest income, net included interest income of approximately $1.9
million that was earned primarily from short-term investments in
government securities, which securities were liquidated to partially
finance the Acquisition.
The Company adopted SFAS 109 "Accounting for Income Taxes," effective
January 1, 1992. See Note 2 to the Company Consolidated Financial
Statements for a discussion of the impact of adoption of SFAS 109.
23
GLENAYRE TECHNOLOGIES, INC. DISCONTINUED OPERATIONS
Subsequent to the Acquisition, the Company decided to dispose of its oil
and gas pipeline construction operations and its real estate operations
in order to focus exclusively on the telecommunications industry.
The results of discontinued operations for the year ended December 31,
1994 resulted in a gain from the sale of real estate of $388,000, net of
tax. The results of discontinued operations for the year ended December
31, 1993 consisted of a $100,000 gain, net of tax, on the sale of its
oil and gas pipeline operations. The results of discontinued operations
for the year ended December 31, 1992 consisted of net income of $565,000
and net loss of $8.6 million for the oil and gas pipeline construction
operations and real estate operations, respectively.
OIL AND GAS PIPELINE CONSTRUCTION OPERATIONS
Effective December 31, 1992, the Company adopted a formal plan to
dispose of its oil and gas pipeline construction operations. Glenayre
did not effect any valuation adjustment in connection with the adoption
of the plan to dispose of its oil and gas pipeline construction
operations since the Company anticipated selling its interest in the
business for an amount in excess of the net asset carrying value of the
Company's investment at December 31, 1992. The Company sold its
interest in the oil and gas pipeline construction business on October
22, 1993, receiving approximately $3.3 million in cash and a $3.6
million promissory note which is collateralized by, among other things,
certain pipeline construction equipment.
REAL ESTATE OPERATIONS
The $8.6 million loss from real estate operations in 1992 includes a
fourth quarter non-cash charge of approximately $6.2 million, which
resulted from the implementation of a new sales program and business
strategy related to the Company's real estate operation. The $6.2
million charge consisted of an approximate $5.7 million reduction in the
estimated net realizable value of the Company's real estate assets and
the establishment of a $558,000 reserve for the estimated shutdown costs
of its Phoenix real estate office. The Phoenix real estate office was
closed on June 30, 1993.
On July 6, 1993, the Company adopted a formal disposal plan which called
for the disposal of its remaining real estate assets (principally four
parcels of undeveloped land in the western United States). Adoption of
the disposal plan did not result in any further write-downs of the real
estate held for sale or any additional reserves related to the shutdown
of the Phoenix real estate office. Portions of the four parcels were
sold during 1993. The sales of the remaining parcels were completed as
of June 30, 1994 with an aggregate recognized gain in 1994 of
approximately $388,000, net of income taxes of $248,000.
FINANCIAL CONDITION AND LIQUIDITY
The Company's financial condition and liquidity strengthened during 1994
and 1993 as demonstrated in this table (dollars in thousands):
December 31,
1994 1993 1992
Cash and cash equivalents and short-term investments...$ 91,505 $ 66,099 $ 4,932
Working capital........................................ 135,209 94,898 20,217
Long-term bank debt, including current portion ........ -- -- 62,600
Stockholders' equity................................... 245,435 198,708 64,022
These significant financial condition and liquidity improvements
resulted principally from two factors:
1. In October 1993, the Company received net cash proceeds of
approximately $103 million from the sale of 3.8 million shares of
common stock. The Company used a portion of the net proceeds to pay
off all short-term and long- term bank borrowings incurred in
connection with the Acquisition, which aggregated approximately $48
million.
2. The Company achieved significantly favorable operating results
during 1994 and 1993. Net income amounted to $33.5 million in 1994 and
$22.1 million in 1993. Net cash generated from continuing operations
amounted to $27.6 million in 1994 and $20.0 million in 1993. In 1994
and 1993 net income and operating cash flows were favorably impacted by
the Company's availability of U.S. operating loss carryforwards (see
Income Tax Matters below).
24
Other important factors have impacted the Company's financial condition
or liquidity (or are expected to affect financial condition and
liquidity in the immediate future). Capital expenditures during 1994
and 1993 amounted to $8.6 million and $3.4 million, respectively. The
Company expects to spend $8 to $10 million in 1995 for capital
equipment. Additionally, the Company is currently in the process of
expanding both its Quincy, Illinois and Vancouver, British Columbia
manufacturing facilities. The total cost of these expansions is
expected to be approximately $8 to $9 million, of which $640,000 had
been incurred through December 31, 1994. These expansions are expected
to be completed in 1995. During 1994, the Company generated $4.9 million
of net cash proceeds from the sale of its remaining real estate
properties. During 1993, the Company received approximately $903,000 in
net cash proceeds from the sale of its ownership interest in an oil and
gas pipeline construction business; a $3.6 million promissory note
received from the purchaser is expected to be collected during 1995.
Even though the Company is currently involved in various disputes and
legal actions related to its business operations, the ultimate
resolution of these actions is not expected to have a material effect on
the Company's financial position or future results of operations or cash
flows.
Accounts receivable; trade notes receivable; inventories; property,
plant and equipment; accounts payable; and accrued liabilities at
December 31, 1994 increased from December 31, 1993 primarily as a result
of increased levels of operating activities during 1994.
The Company's cash and cash equivalents consist of high-grade commercial
paper, bank certificates of deposit, U.S. Treasury bills and notes, and
repurchase agreements backed by U.S. Government securities with original
maturities of three months or less. The Company's short-term
investments are comprised of identical types of investments with the
exception that their original maturities are greater than three months,
but do not exceed one year. The Company expects to use its cash, cash
equivalents and short-term investments for working capital and other
general corporate purposes, including the expansion and development of
its existing products and markets and the expansion into complementary
businesses.
The Company believes that funds generated from continuing operations,
together with its current cash reserves and short- term investments,
will be sufficient to support the short-term and long-term liquidity
requirements for current operations (including annual capital
expenditures). Company management believes that, if needed, it can
establish appropriate borrowing arrangements with lending institutions.
INCOME TAX MATTERS
The Company presently has a favorable income tax position principally
because of the existence of a significant amount of U.S. tax net
operating and capital loss carryforwards. These tax loss carryforwards
are available to shelter future U.S. taxable income generated by the
Company. Under the Company's current operating and business structure,
the Company expects that the majority of the worldwide taxable income
will be earned in the United States. Therefore, the Company's actual
cash outlay for income taxes for the next several years will be limited
to U.S. alternative minimum tax and foreign and state income taxes.
As described in Note 8 to the Company Consolidated Financial Statements,
at December 31, 1994, the Company had U.S. net operating loss
carryforwards and capital loss carryforwards aggregating $137.6 million
and $4.5 million, respectively. However, several factors somewhat
mitigate the Company's favorable tax position. Approximately $25
million of the Company's NOLs are subject to limitations and are likely
to expire unused. Approximately 71% of the $137.6 million of NOLs will
expire, if unused, between 1996 and 1998. Accordingly, there is no
assurance that the U.S. taxable income will be sufficient to fully use
these NOLs. The Company's capital loss carryforwards substantially
expire in 1995 and 1996. The Company presently anticipates no
transactions that will generate sufficient capital gains to utilize
these carryforwards. Additionally, as the volume of international sales
is expected to grow, the percentage of worldwide income taxable in
international jurisdictions may increase in the future.
The Company has recorded a deferred tax asset of $29.0 million, net of a
valuation allowance of $33.2 million, at December 31, 1994, in
accordance with SFAS 109. This amount represents management's best
estimate of the amount of NOLs and other future deductions that are more
likely than not to be realized as offsets to future taxable income. The
factors that affect the amount of U.S. taxable income in the future, in
relation to reported income before income taxes, primarily include the
amount of employee stock options exercised and the portion of such
income taxable in jurisdictions outside the U.S., both of which reduce
the amount of income subject to U.S. tax, and therefore reduce the
utilization of existing NOL carryforwards.
INFLATION
For the three fiscal years ended December 31, 1994, the Company does not
believe inflation has had a material effect on its results of
operations.
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its
subsidiaries as of December 31, 1994 and 1993 and for each of the three
years in the period ended December 31, 1994, and the consolidated
financial statements of the GEMS Business as of November 10, 1992 and
for the period from January 1, 1992 to November 10, 1992, as well as the
independent auditors' reports thereon, are set forth on the following
pages. The index to such financial statements and required financial
statement schedules is set forth below and at Item 14 of this Annual
Report on Form 10-K.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
(a) Financial Statements: Page
GLENAYRE TECHNOLOGIES, INC.
Independent Auditors' Report 27
Consolidated Balance Sheets at December 31, 1994 and 1993 28
Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992 29
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994,
1993 and 1992 30
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 31
Notes to Consolidated Financial Statements 33
GEMS BUSINESS (Predecessor Business Acquired by Glenayre Technologies, Inc. in 1992)
Auditors' Report 46
Consolidated Balance Sheet at November 10, 1992 47
Consolidated Statement of Income and Net Assets for the period January 1, 1992 to
November 10, 1992 48
Consolidated Statement of Cash Flows for the period January 1, 1992 to November 10, 1992 49
Notes to Consolidated Financial Statements 50
(b) Supplemental Schedules:
GLENAYRE TECHNOLOGIES, INC.
(For the years ended December 31, 1994, 1993 and 1992)
Schedule VIII - Valuation and Qualifying Accounts and Reserves 59
GEMS BUSINESS
(For the period January 1, 1992 to November 10, 1992 )
Schedule VIII - Valuation and Qualifying Accounts and Reserves 60
Schedules not listed above have been omitted because of the absence of
conditions under which they are required or because the required
information is included in the consolidated financial statements or
notes thereto.
26
INDEPENDENT AUDITORS' REPORT
Glenayre Technologies, Inc.
We have audited the accompanying consolidated balance sheets of
Glenayre Technologies, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1994. Our audits also included the
supplemental schedule listed in the Index at Item 14. These financial
statements and the supplemental schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and the supplemental schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Glenayre Technologies, Inc. and subsidiaries at December 31, 1994 and
1993, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994 in conformity
with generally accepted accounting principles. Also, in our opinion,
such supplemental schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 3, 1995
27
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31,
1994 1993
ASSETS
Current Assets:
Cash and cash equivalents (Note 2) $ 52,043 $ 66,099
Short-term investments (Note 3) 39,462 --
Accounts receivable, net (Note 4) 33,707 27,085
Trade notes receivable, current 8,816 1,489
Inventories (Note 5) 24,261 19,053
Deferred income taxes (Note 8) 6,518 3,600
Prepaid expenses and other current assets (Note 1) 5,526 1,124
Real estate held for sale (Note 1) -- 2,312
Total current assets 170,333 120,762
Trade notes receivable 12,480 6,633
Property, plant and equipment, net (Note 6) 17,707 12,548
Goodwill (Note 2) 61,436 64,124
Deferred income taxes (Note 8) 22,510 20,210
Other assets (Note 1) 495 3,967
TOTAL ASSETS $284,961 $228,244
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 9,871 $ 4,787
Accrued liabilities (Note 7) 25,035 19,633
Other current liabilities 218 1,444
Total current liabilities 35,124 25,864
Other liabilities 4,402 3,672
Contingencies and commitments (Notes 13 and 6)
Stockholders' Equity (Note 11):
Preferred stock, $.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $.02 par value; authorized: 50,000,000 shares;
outstanding: 1994-24,885,129 shares; 1993-23,907,234 shares 497 478
Contributed capital 216,485 193,424
Retained earnings from February 1, 1988 28,453 5,296
Unearned stock compensation -- (490)
Total stockholders' equity 245,435 198,708
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $284,961 $228,244
See notes to consolidated financial statements.
28
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
Year Ended December 31,
1994 1993 1992
NET SALES (Note 1) $172,107 $136,139 $15,586
COSTS AND EXPENSES:
Cost of sales 72,908 60,561 7,317
Selling, general and administrative expense (Notes 11 and 15) 41,079 31,638 6,145
Research and development expense 15,991 11,843 1,173
Depreciation and amortization expense 5,884 5,059 725
Total costs and expenses 135,862 109,101 15,360
INCOME FROM OPERATIONS 36,245 27,038 226
OTHER INCOME (EXPENSES):
Interest income 4,750 1,344 1,877
Interest expense (Note 12) (300) (4,172) (1,013)
Writedown of marketable equity securities (Note 12) -- -- (199)
Foreign exchange gain (loss) (220) (137) 126
Other, net (180) 88 (57)
Total other income (expenses), net 4,050 (2,877) 734
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 40,295 24,161 960
PROVISION FOR INCOME TAXES (Note 8) 7,200 461 95
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM 33,095 23,700 865
GAIN (LOSS) FROM DISCONTINUED OPERATIONS (Note 1) 388 100 (7,990)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 33,483 23,800 (7,125)
EXTRAORDINARY LOSS FROM
EARLY RETIREMENT OF DEBT (Note 12) -- (1,695) --
NET INCOME (LOSS) $33,483 $22,105 $(7,125)
PRIMARY INCOME (LOSS) PER COMMON SHARE (Note 11):
Continuing operations $ 1.27 $ 1.08 $ .05
Discontinued operations .01 -- (.48)
Income (loss) before extraordinary item 1.28 1.08 (.43)
Extraordinary item -- (.07) --
NET INCOME (LOSS) PER COMMON SHARE--PRIMARY $ 1.28 $ 1.01 $ (.43)
FULLY DILUTED INCOME (LOSS) PER
COMMON SHARE (Note 11):
Continuing operations $ 1.27 $ 1.07 $ .05
Discontinued operations .01 -- (.48)
Income (loss) before extraordinary item 1.28 1.07 (.43)
Extraordinary item -- (.07) --
NET INCOME (LOSS) PER COMMON SHARE--FULLY
DILUTED $ 1.28 $ 1.00 $ (.43)
See notes to consolidated financial statements.
29
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars and shares in thousands)
Unrealized
Unearned Loss on
Retained Stock Marketable Total
Common Stock Contributed Earnings Compen- Equity Stockholders'
Shares Amount Capital (Deficit) sation Securities Equity
Balances, December 31, 1991 16,323 $327 $58,021 $1,755 $-- $(139) $59,964
Net loss (7,125) (7,125)
Shares issued in connection
with the Acquisition (Note 1) 1,903 38 7,682 7,720
Other shares issued 540 10 2,179 (123) 2,066
Stock options granted 2,132 (863) 1,269
Change in net unrealized loss
on marketable equity securities 128 128
Balances, December 31, 1992 18,766 375 70,014 (5,370) (986) (11) 64,022
Net income 22,105 22,105
Effect of exercise of put warrants 459 459
Amortization of unearned
stock compensation 496 496
Utilization of net operating
loss carryforwards (Note 8) 11,898 (11,898)
Stock offering 3,750 75 102,855 102,930
Other shares issued 1,391 28 3,235 3,263
Stock options granted 822 822
Tax benefit of stock options
exercised (Note 11) 4,600 4,600
Change in net unrealized loss
on marketable equity securities 11 11
Balances, December 31, 1993 23,907 478 193,424 5,296 (490) -- 198,708
Net income 33,483 33,483
Amortization of unearned stock
compensation 490 490
Utilization of net operating
loss carryforwards (Note 8) 10,326 (10,326)
Stock options exercised 1,016 20 4,296 4,316
Tax benefit of stock options
exercised (Note 11) 9,726 9,726
Repurchase of common stock (Note 11) (38) (1) (1,287) (1,288)
Balances, December 31, 1994 24,885 $497 $216,485 $28,453 $-- $ -- $245,435
See notes to consolidated financial statements.
30
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year Ended December 31,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $33,483 $22,105 $(7,125)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,884 5,059 725
Write-off (payments) of debt issuance costs -- 2,734 (2,952)
(Gain) loss on disposal of discontinued operations (388) (100) 6,234
Changes in deferred income taxes (5,218) (9,782) --
Loss on sale of equipment 65 257 --
Tax benefit of stock options exercised 9,726 4,600 --
Stock compensation expense 490 1,318 1,920
Other noncash expenses 222 454 265
Changes in operating assets and liabilities, net of
effects of the sale of discontinued operations
and the Acquisition:
Restricted cash -- 510 485
Accounts receivable (6,622) (5,132) 6,840
Notes receivable (13,174) (1,391) (723)
Inventories (5,207) 614 (3,493)
Prepaids and other current assets (802) 1,529 (1,094)
Real estate held for sale 2,700 1,119 --
Other assets (143) 659 (29)
Accounts payable 5,085 (2,908) (107)
Accrued liabilities 4,002 (2,594) 9,023
Other liabilities 2,337 1,333 (2,900)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 32,440 20,384 7,069
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (8,627) (3,447) (895)
Proceeds from sale of equipment 13 1,510 26
Net proceeds from sale of interest in oil and gas
pipeline construction business -- 903 --
Payments for Acquisition -- -- (108,868)
Maturities of short-term investments 29,503 -- 41,534
Purchases of short-term investments (68,965) -- (8,195)
NET CASH USED IN INVESTING ACTIVITIES (48,076) (1,034) (76,398)
31
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year Ended December 31,
1994 1993 1992
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings -- 347 65,113
Repayments of long-term borrowings (1,448) (64,723) (2,371)
Issuance of common stock 4,316 106,193 1,408
Common stock repurchases (1,288) -- --
Dividends paid to minority interest holder -- -- (2,880)
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,580 41,817 61,270
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (14,056) 61,167 (8,059)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 66,099 4,932 12,991
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 52,043 $ 66,099 $ 4,932
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 144 $ 3,951 $ 384
Income taxes 1,176 1,042 4
SUPPLEMENTAL INFORMATION OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
During 1993, the Company sold its interest in the oil and gas
pipeline construction business. In connection with this sale the
Company received $3,298,000 in cash and a $3,600,000
promissory note for the stock of such business with net
assets of $6,798,000 (including $2,395,000 in cash).
During 1992, the Company acquired the GEMS Business. In
connection with this Acquisition, the Company paid
$108,868,000 in cash and issued stock valued at
$7,720,000 for assets with a fair value of $137,066,000 and
assumed liabilities of $20,478,000.
See notes to consolidated financial statements.
32
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands of dollars except per share amounts)
1. Business Acquisition and Discontinued Operations
(a) Business Acquisition
On November 10, 1992, Glenayre Technologies, Inc. (the "Company")
acquired the telecommunications equipment and related software business
(the "GEMS Business") of Glentel Inc., British Columbia, Canada ("GEL"),
formerly known as Glenayre Electronics Ltd. (the "Acquisition"). The
GEMS Business designs, manufactures, markets and services switches,
transmitters, controls and software used in personal communications
systems (including its paging, voice messaging, and message management
and mobile data systems), transit communications systems and mobile
telephone systems. The GEMS Business has manufacturing facilities in
Quincy, Illinois and Vancouver, British Columbia and an engineering and
technical support center in Atlanta, Georgia. The purchase price of
$116,588,000 consisted of $103,090,000 in cash, $5,778,000 in
acquisition costs, and 1,903,648 shares of the Company's common stock
valued at $7,720,000 at the date of the Acquisition. The 1992
consolidated financial statements include the operating results of the
GEMS Business for the period November 10, 1992 to December 31, 1992. The
Acquisition, which was funded from available cash and the proceeds from
new bank borrowings, was accounted for as a purchase and the purchase
price was assigned to the net assets acquired based on the fair values
of such assets and liabilities at the date of the Acquisition.
(b) Discontinued Operations
Subsequent to the Acquisition, the Company decided to dispose of its oil
and gas pipeline construction operations headquartered in Houston, Texas
and its real estate operations headquartered in Phoenix, Arizona in
order to focus exclusively on the telecommunications industry. These
operations are being accounted for as discontinued operations for all
periods presented. The GEMS Business represents the Company's sole
continuing operations. Income (loss) from operations of these two
businesses for the year ended December 31, 1992 were as follows (no
income tax effect):
Pipeline construction $ 565
Real estate operations (8,555)
$(7,990)
Oil and Gas Pipeline Construction Operations. Effective December 31,
1992, the Company adopted a formal plan to dispose of its oil and gas
pipeline construction operations. The Company sold its interest in the
oil and gas pipeline construction business on October 22, 1993 for
approximately $6.9 million, resulting in a gain of $100,000, net of tax.
The Company received approximately $3.3 million in cash and a $3.6
million promissory note (included in other current assets at December
31, 1994 and other non-current assets at December 31, 1993) which is
collateralized by, among other things, certain pipeline construction
equipment.
Revenues of the oil and gas pipeline construction operations amounted to
$16,300,000 and $13,791,000 for the period from January 1, 1993 to the
date of sale and for the year ended December 31, 1992, respectively.
There was no material operating income or loss from this operation in
1993.
Real Estate Operations. Following the Acquisition, the Company
restructured its real estate operations headquartered in Phoenix,
Arizona. The restructuring plan called for a new real estate sales
strategy and the shutdown of the Phoenix real estate office. In
connection with this restructuring plan, the Company incurred a non-cash
charge of approximately $6.2 million in the fourth quarter of 1992. This
charge consisted of a $5.7 million reduction in the estimated net
realizable value of the Company's real estate assets and the
establishment of a $558,000 reserve for the estimated shutdown costs of
its Phoenix real estate office. The Phoenix real estate office was
closed on June 30, 1993.
On July 6, 1993, the Company adopted a formal plan of disposal which
called for disposal of its remaining real estate assets (principally
four parcels of undeveloped land in the western United States).
Adoption of the disposal plan did not result in any further write-downs
of the real estate held for sale or any additional reserves related to
the shutdown of the Phoenix real estate office. The sales of the
remaining parcels were completed as of June 30, 1994, with an aggregate
recognized gain in 1994 of approximately $388,000, net of income taxes
of $248,000.
33
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
Revenues from the sale of real estate amounted to $6,515,000, $571,000
and $646,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of Glenayre
Technologies, Inc. and its subsidiaries. All significant intercompany
accounts and transactions are eliminated in consolidation.
Operating Cycle
Assets and liabilities related to long-term contracts are included in
current assets and current liabilities in the consolidated balance
sheets, as they will be liquidated in the normal course of contract
completion.
Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
These investments consist of high-grade commercial paper, bank
certificates of deposits, U.S. Treasury bills and notes and repurchase
agreements backed by U.S. Government securities.
Inventories
Inventories are valued at the lower of average cost or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally using the
straight-line method based on the estimated useful lives of the related
assets (buildings, 20 years; furniture, fixtures and equipment, 3-7
years).
Goodwill
Goodwill represents the excess of cost over assigned fair market value
of net assets acquired and is being amortized on a straight-line basis
over 25 years. Goodwill is shown net of accumulated amortization of
$5,750,000 and $3,063,000 at December 31, 1994 and 1993, respectively.
Management evaluates the recoverability of goodwill based on the
expected future profitability of acquired businesses.
Foreign Currency Translation
The accounts of foreign subsidiaries have been translated into U.S.
dollars using the current exchange rate in effect at the balance sheet
date for monetary assets and liabilities; and for non-monetary items,
the exchange rates in effect when acquired. Revenues and expenses are
translated into U.S. dollars using average exchange rates, except for
depreciation, which is translated at the exchange rate in effect when
the related assets were acquired. The resulting gains or losses on
currency translations are included in the consolidated statement of
operations.
34
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
Revenue Recognition
The Company recognizes revenues at the time products are shipped (except
for certain long-term contracts described below) and collection of the
resulting receivable is deemed probable by the Company. Existing
customers may purchase product enhancements and upgrades after such
enhancements or upgrades are developed by the Company. The Company has
no obligations to customers after the date products, product
enhancements and upgrades are shipped, except for product warranties as
described below.
The Company recognizes fees from installation and repair services when
such services are provided to customers. Revenues derived from
contractual postcontract support services are recognized ratably over
the one-year contract period of required support.
The Company uses the percentage-of-completion method to recognize
revenues on certain long-term telecommunications hardware and
installation contracts. Earnings are accrued based on the completion of
key contract performance requirements. As long-term contracts extend
over one or more years, revisions in cost and profit estimates are
reflected in the accounting period in which the facts that require the
revision become known. At the time a loss on a contract becomes known,
the entire amount of the estimated ultimate loss is accrued.
Computer Software Development Costs
Computer software development costs are expensed as incurred. Such costs
are required to be expensed until the point of technological feasibility
is established. Costs which may otherwise be capitalized after such
point are generally not significant and are therefore expensed as
incurred.
Estimated Warranty Costs
The Company warrants its telecommunications products other than certain
transmitters for one year after sale. The majority of the Company's
transmitters are warranted for two years after sale. A provision for
estimated warranty costs is recorded at the time of sale.
Research and Development
All research and development costs are expensed as incurred.
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109
("SFAS 109"), "Accounting for Income Taxes," effective January 1, 1992.
The adoption of SFAS 109 did not have a significant impact on the
Company's financial position or results of operations. This standard
requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been included in
the financial statements.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, short-term
investments, trade accounts and notes receivable, and other current and
long-term liabilities approximates their respective fair values.
Reclassifications
Certain 1993 and 1992 amounts have been reclassified to conform with the
1994 financial statement presentation.
35
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
3. Short-Term Investments
Short-term investments amounting to $39,462,000 at December 31, 1994 are
comprised of highly liquid, high-grade commercial paper, bank
certificates of deposit and U.S. Treasury notes with original maturities
greater than three months, but not exceeding one year. Short-term
investments are stated at cost which approximates fair market value.
4. Accounts Receivable
Accounts receivable at December 31, 1994 and 1993 consist of:
1994 1993
Trade receivables $34,320 $26,273
Retainage receivable 1,333 2,768
Other 1,159 484
Less: allowance for doubtful accounts 36,812 29,525
(3,105) (2,440)
$33,707 $27,085
5. Inventories
Inventories at December 31, 1994 and 1993 consist of:
1994 1993
Raw materials $10,999 $ 7,214
Work-in-process: 762 3,554
Uncompleted contracts 6,425 4,466
Other 6,075 3,819
Finished goods $24,261 $19,053
6. Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and 1993 consist of:
1994 1993
Land $ 1,228 $ 1,228
Buildings 5,937 5,230
Furniture, fixtures and equipment 15,899 8,966
Other 531 291
23,595 15,715
Less: Accumulated depreciation (5,888) (3,167)
$17,707 $ 12,548
The Company is currently in the process of expanding both its Quincy,
Illinois and Vancouver, British Columbia manufacturing facilities.
Total costs of these expansions will be approximately $8.8 million, of
which $640,000 had been incurred through December 31, 1994. These
expansions are expected to be completed in 1995.
36
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
7. Accrued Liabilities
Accrued liabilities at December 31, 1994 and 1993 consist of:
1994 1993
Accrued project costs $ 3,039 $ 4,675
Accrued warranty costs 4,312 3,774
Accrued sales commissions 2,274 783
Accrued compensation and benefits 4,402 3,982
Accrued income taxes 3,220 2,122
Other accruals 7,788 4,297
$25,035 $19,633
8. Income Taxes
The Company's income tax provision (benefit) consists of the following:
1994 1993 1992
Current provision:
United States Federal $ -- $ 1,062 $ --
Charge equivalent to tax benefit of stock
option exercises 9,726 4,600 --
Foreign 2,653 3,509 95
State and local 40 744 --
Total current 12,419 9,915 95
Deferred provision (benefit):
Before valuation allowance adjustment 5,107 2,444 --
Adjustment to valuation allowance (10,326) (11,898) --
Total deferred provision (benefit) (5,219) (9,454) --
Total provision $ 7,200 $ 461 $95
The sources of income from continuing operations before income taxes and
extraordinary item are presented as follows:
1994 1993 1992
United States $35,437 $20,588 $935
Foreign........... 4,858 3,573 25
Income from continuing operations $40,295 $24,161 $960
37
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
The consolidated income tax provision from continuing operations was
different from the amount computed using the U.S. statutory income tax
rate for the following reasons:
1994 1993 1992
Income tax provision at U.S. statutory rate $14,104 $ 8,456 $ 326
Reduction in valuation allowance (10,326) (11,898) --
Reduction of tax provision attributable to losses from
discontinued operations -- -- (326)
Foreign taxes at rates other than U.S. statutory rate 1,997 2,053 22
State taxes (net of federal benefit) 655 909 73
Non-deductible goodwill amortization 770 941 --
Income tax provision $ 7,200 $ 461 $ 95
The tax effect of temporary differences and net operating loss
carryforwards that gave rise to the Company's deferred tax assets and
liabilities at December 31, 1994 and 1993 are as follows:
1994 1993
Assets:
U.S. net operating loss carryforwards $48,173 $46,944
State net operating loss carryforwards 2,342 3,739
U.S. capital loss carryforwards 1,588 22,191
Other 11,522 16,427
63,625 89,301
Less: Valuation allowance (33,246) (63,988)
30,379 25,313
Liabilities (1,351) (1,503)
Deferred tax asset, net $29,028 $23,810
The reduction in the valuation allowance of $30,742,000 during the year
ended December 31, 1994 included $20,603,000 related to the expiration
of U.S. capital loss carryforwards as well as $10,326,000 related to the
recognition of tax benefits which arose prior to the 1988
quasi-reorganization (see below). The Company believes that it is more
likely than not that the net deferred tax asset recorded at December 31,
1994 will be fully realized.
At December 31, 1994, the Company has U.S. net operating loss
carryforwards and capital loss carryforwards as follows:
Operating Capital
Year of Expiration Losses Losses
1995 $ 8,647 $3,282
1996 26,954 1,254
1997 25,992 --
1998 45,290 --
1999 -- --
2000 5,318 --
2001 5,397 --
Thereafter 20,038 --
$137,636 $4,536
38
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
The deferred tax asset is broken down between current and noncurrent
amounts in the accompanying 1994 consolidated balance sheet according to
the classification of the related asset and liability or, in the case of
tax loss carryforwards, based on their expected utilization date.
Subsequent to the quasi-reorganization completed on February 1, 1988, as
described in Note 11, the benefits derived from the utilization of these
tax net operating loss carryforwards are reported in the statement of
operations in the year such tax benefits are realized and then
reclassified from retained earnings to contributed capital. The Company
adopted the accounting method for utilization of these tax net operating
loss carryforwards outlined above on February 1, 1988. On September 28,
1989, the Securities and Exchange Commission ("SEC") released Staff
Accounting Bulletin No. 86 ("SAB 86") which set forth the SEC staff's
position with respect to this accounting treatment. According to the SEC
staff's interpretation of SFAS 96 contained in SAB 86, realized tax
benefits should be reported as a direct addition to contributed capital.
Subsequently, the Company consulted with SEC staff and determined that
the SEC staff would not object to the accounting method outlined above
for companies which had adopted such accounting methods prior to the
issuance of SAB 86.
If the original guidance in SAB 86 had been applied, the Company's net
income for the years ended December 31, 1994 and 1993 would have been
reduced by the amount of the benefit from utilization of tax net
operating loss carryforwards. Such reduction in net income would have
been $10,326,000 ($.40 per share) in 1994 and $11,898,000 ($.54 per
share) in 1993. There was no utilization during 1992 of tax net
operating loss carryforwards arising prior to the quasi-reorganization.
9. Operating Lease Commitments
The Company leases office facilities and various equipment under
noncancelable operating leases. Future minimum lease payments under
noncancellable operating leases (with minimum or remaining lease terms
in excess of one year) for calendar years subsequent to December 31,
1994 are as follows:
1995............................. $1,034
1996............................. 871
1997............................. 659
1998............................. 477
1999............................. 446
Thereafter...................... 325
$3,812
Rent expense for continuing operations amounted to $1,254,000, $923,000
and $207,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
10. Employee Benefit Plans
(a) Postretirement Health Care Benefits
The Company provides its U.S. employees with certain health care
benefits upon retirement assuming the employees meet minimum age and
service requirements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other than Pensions" ("SFAS 106"), which requires the Company
to accrue the estimated cost of retiree benefit payments during the
years the employee provides services. The Company previously expensed
the cost of these benefits as claims were incurred, and such costs were
not material in 1992. Because these benefits relate to an acquired
business, SFAS 106 requires that the Company's accumulated
postretirement benefit obligations be amortized over a period of up to
twenty years. The Company elected to recognize this initial obligation
at January 1, 1993 (approximately $1,017,000) over twenty years.
39
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
The Company's accumulated postretirement benefit obligation at December
31, 1994 and 1993 relate to:
1994 1993
Retirees $387 $ 312
Fully eligible plan participants 331 339
Other active plan participants 248 518
$966 $1,169
Net postretirement benefit cost for the years ended December 31, 1994
and 1993 consist of the following components:
1994 1993
Service cost $ 84 $ 68
Interest cost on accumulated postretirement
benefit obligation 87 88
Amortization of transition obligation 51 51
$ 222 $207
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation as of December 31, 1994
was 13% for 1995, decreasing linearly each successive year until it
reaches 5.5% in 2003, after which it remains constant. A
one-percentage-point increase in the assumed health care cost trend rate
for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 and the 1994 net postretirement
health care cost by approximately 14.0% and 4.5%, respectively. The
assumed discount rate used in determining the accumulated postretirement
benefit obligation at December 31, 1994 and December 31, 1993 was 8% and
7%, respectively.
(b) Defined Contribution Plans
The Company has defined contribution plans covering substantially all of
its full-time employees. Under the plans, the employees can contribute a
certain percentage of their compensation and the Company matches a
portion of the employees' contribution. The Company's contributions
under these plans attributable to continuing operations amounted to
approximately $1,159,000, $1,051,000 and $155,000 during the years ended
December 31, 1994, 1993 and 1992, respectively.
11. Stockholders' Equity
(a) Quasi-Reorganization
On February 1, 1988, the Company completed a quasi-reorganization. After
determining that the Company's balance sheet reflected approximate fair
value on that date and that revaluation was not necessary, the
accumulated deficit and the cumulative translation adjustment were
adjusted to zero by reclassifying them to contributed capital. A new
retained earnings account was established as of February 1, 1988.
(b) Stock Split
On December 8, 1994, the Board of Directors of the Company adopted a
resolution authorizing a three-for-two split of the Company's common
stock, effected in the form of a 50% stock dividend distributed on
January 5, 1995 to stockholders of record on December 22, 1994.
All share and per share amounts have been restated to reflect this stock
dividend.
40
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
(c) Increase in Common Stock Authorized
On May 26, 1994, the Company's stockholders approved an amendment to the
Company's Restated Certificate of Incorporation providing for an
increase in the number of shares of common stock authorized from
30,000,000 shares to 50,000,000 shares.
(d) Stock Repurchase Plan
On December 8, 1994, the Board of Directors of the Company adopted a
resolution authorizing the repurchase from time-to- time of the
Company's common stock not to exceed in the aggregate 750,000 shares.
In December 1994, the Company repurchased 37,500 shares at a cost of
$1,287,500, which is shown as a reduction of common stock and
contributed capital.
(e) Stock Option Plans
On May 14, 1991, the Company's stockholders approved the establishment
of the 1991 Long-Term Incentive Plan (the "Plan") to promote the
long-term financial interests and growth of the Company, reserving
1,710,000 common shares for directors, officers and other key employees
of the Company and its subsidiaries. The Plan is administered by a
committee of the Board of Directors (the "Committee"). On October 30,
1992, the Company's stockholders approved an amendment to the Plan (i)
to increase the number of shares of common stock available for issuance
pursuant to awards under the plan from 1,710,000 to 3,600,000; (ii) to
permit the Company to sell stock under the Plan at less than fair market
value; and (iii) to provide for formula-based awards of stock options to
the non-employee directors of the Company based on their years of
service. Further, on May 26, 1994, the Company's stockholders approved
an amendment to the Plan (i) to change the name to the Long-Term
Incentive Plan and (ii) to increase the number of shares of common stock
available for issuance pursuant to awards under the plan from 3,600,000
to 5,100,000 shares.
In connection with the Acquisition, the Company sold 404,305 shares to
certain key management employees of the GEMS Business for $2.44 per
share and granted the GEMS Business managers options to purchase (i)
787,497 shares of common stock at $2.89 per share, (ii) 383,190 shares
of common stock at $3.27 per share, and (iii) 337,497 shares of common
stock at $5.56 per share. In addition to the options granted to the GEMS
Business managers, the Committee granted options to purchase 405,000
shares of common stock at $2.89 per share to certain officers and
directors of the Company for services provided in connection with the
Acquisition. Also, during 1994, 1993 and 1992, the Committee granted
options to purchase 27,000, 108,000 and 27,000 shares of common stock at
$25.00, $2.89 and $2.89 per share, respectively, to six directors
pursuant to the formula-based award provision of the Plan. In addition,
at various dates during 1994 and 1993, the Committee granted options to
purchase in the aggregate 911,850 and 79,500 shares, respectively, of
common stock at the fair market value at the date of grant to certain
officers and employees. All these options to purchase shares expire
from five to ten years from the date of grant.
Since certain options granted in 1993 and 1992 were fully vested
immediately and as the exercise price of certain stock options was below
the market price at the date of grant, the Company recorded compensation
expense for the vested portion of $490,000, $1,286,000 and $1,920,000 in
1994, 1993 and 1992, respectively, which is included in selling, general
and administrative expenses.
41
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
Activity and price information regarding the Plan is summarized as
follows:
Price
Shares Range
Outstanding, December 31, 1991 967,500 $2.85
Granted 2,425,500 2.45 -- 5.55
Exercised (404,307) 2.45
Outstanding, December 31, 1992 2,988,693 2.85 -- 5.55
Granted 106,500 2.89 -- 25.00
Exercised (635,548) 2.89 -- 5.55
Canceled (112,500) 2.85
Outstanding, December 31, 1993 2,347,145 2.85 -- 25.00
Granted 938,850 25.00 -- 38.83
Exercised (884,287) 2.85 -- 28.67
Canceled (15,000) 28.67
Outstanding, December 31, 1994 2,386,708 $2.85 -- $38.83
Of the outstanding options at December 31, 1994, 1,764,308 are currently
exercisable.
On June 23, 1987, the Company's stockholders approved the establishment
of the 1987 Stock Option Plan (the "1987 Plan"), reserving 1,710,000
common shares for directors, officers and other key employees of the
Company and its subsidiaries. The 1987 Plan is also administered by the
Committee. Effective July 15, 1992, the Board of Directors amended the
1987 Plan to reduce the number of shares reserved to 778,500. All
options granted under the 1987 Plan expire ten years from the date of
grant.
Activity and price information regarding the 1987 Plan is summarized as
follows:
Price
Shares Range
Outstanding, December 31, 1991 778,500 $2.30 - $2.85
Canceled (27,000) 2.33
Outstanding, December 31, 1992 751,500 2.30 - 2.85
Exercised (346,491) 2.30 - 2.85
Outstanding, December 31, 1993 405,009 2.33 - 2.83
Exercised (114,000) 2.33 - 2.83
Canceled (9) 2.83
Outstanding, December 31, 1994 291,000 $2.33 - $2.83
All outstanding options at December 31, 1994 are currently exercisable.
Contributed capital was increased in 1994 and 1993 by $9,726,000 and
$4,600,000, respectively, which represents the income tax benefits the
Company realized from stock options exercised during these periods.
42
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
(f) Employee Stock Purchase Plan
Effective July 1, 1993, the Company established the Glenayre
Technologies, Inc. Employee Stock Purchase Plan (the "ESP Plan"). The
purpose of the ESP Plan is to give employees an opportunity to purchase
common stock of the Company through payroll deductions, thereby
encouraging employees to share in the economic growth and success of the
Company.
All permanent, full-time employees of the Company are eligible to enter
the ESP Plan as of the first day of each six-month period beginning
every January 1 and July 1. The price for common stock offered under
the ESP Plan for each six-month period is equal to 90% of the average
market price of the common stock for the five trading days prior to the
first day of the six-month period. For the January 1, 1995 to June 30,
1995 period, the stock purchase price is $34.36. The Company has
reserved 225,000 shares of common stock for issuance under the ESP Plan.
During 1994, employees purchased 9,576 shares and 7,612 shares pursuant
to the ESP Plan at $12.59 per share and $25.29 per share, respectively.
There were no shares purchased pursuant to the ESP Plan during 1993.
(g) Income (Loss) per Common Share
Primary income (loss) per common share was computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding plus, for the years ended December 31, 1994 and 1993, the
shares that would be outstanding assuming exercise of dilutive stock
options, which are considered to be common stock equivalents. The number
of common shares that would be issued from the exercise of stock options
has been reduced by the number of common shares that could be purchased
from the proceeds at the average market price of the Company's stock.
For the year ended December 31, 1992, the effect of common stock
equivalents would be anti-dilutive.
The number of shares used to compute primary per share data for the
years ended December 31, 1994, 1993 and 1992 was 26,090,430, 21,955,158
and 16,670,426, respectively.
For purposes of the fully diluted income per share computations, the
number of shares that could be issued from the exercise of stock options
outstanding at the end of the period has been reduced by the number of
shares which could have been purchased from the proceeds at the higher
of the market price of the Company's stock on December 31, 1994 and 1993
or the average market prices during the periods such options were
outstanding. For those options exercised during the period, the
computation for the period prior to exercise is based on the market
price when the option was exercised. The number of shares used to
compute fully diluted per share data for the years ended December 31,
1994, 1993 and 1992 was 26,129,654, 22,168,668, and 16,670,426,
respectively.
12. Other Income (Expenses)
During 1993, the Company paid off all bank debt incurred in connection
with the Acquisition and wrote off the entire remaining balance of debt
issuance costs of approximately $2.7 million, resulting in an
extraordinary loss of approximately $1.7 million after income tax
benefit.
During 1992, the Company determined that the decline in the market value
of certain marketable equity securities was other than temporary. The
Company therefore adjusted the carrying value of such securities and
recorded a loss of $199,000 for year ended December 31, 1992.
13. Contingencies
The Company is currently involved in various disputes and legal actions
related to its business operations. In the opinion of the Company, the
ultimate resolution of these actions will not have a material effect on
the Company's financial position, or future results of operations or
cash flows.
43
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
14. Line of Business and Operations by Geographic Areas
The Company's continuing operations involve one business segment: the
manufacture and sale of telecommunications equipment and related
software used by service providers and other wireless personal
communications markets. The Company markets and services its products
in the United States, Canada and other foreign countries through its own
direct sales organization or outside distributors and agents.
Information about the Company's operations in different geographic areas
at December 31, 1994, 1993 and 1992, and for the years then ended (which
included 51 days of the GEMS Business in 1992), is presented below:
1994 1993 1992
Net Sales:
United States $171,780 $131,707 $14,263
Canada 30,925 27,146 4,231
Other countries 327 96 145
Eliminations (30,925) (22,810) (3,053)
$172,107 $136,139 $15,586
Net sales include intergeographic sales ($30,925,000 in Canada during
1994; $1,613,000 in the U.S. and $21,197,000 in Canada during 1993; and
$279,000 in the U.S. and $2,774,000 in Canada during 1992) which have
been eliminated in consolidation. Sales to one customer amounted to 13%
of sales for 1994. Sales to two customers amounted to approximately 10%
each of sales for 1993. Sales to two customers amounted to approximately
11% each of sales for the period from November 10, 1992 to December 31,
1992. Export sales from the U.S. to unaffiliated customers were
approximately $56,868,000 in 1994, which includes sales of approximately
$612,000 to the Middle East, $39,895,000 to the Pacific Rim and
$8,306,000 to Europe. Export sales from the U.S. to unaffiliated
customers were approximately $50,865,000 in 1993, which includes sales
of approximately $4,252,000 to the Middle East and $38,585,000 to the
Pacific Rim. Export sales from the U.S. to unaffiliated customers were
approximately $6,127,000 in 1992, which includes sales of approximately
$2,134,000 to the Middle East and $2,079,000 to the Pacific Rim.
1994 1993 1992
Operating Profit:
United States $36,564 $ 28,885 $ 3,373
Canada 5,560 4,353 203
Other countries 828 143 (17)
42,952 33,381 3,559
Less corporate, interest and other income (expenses)
and eliminations (2,657) (9,220) (2,599)
Income from continuing operations before income taxes
and extraordinary item $40,295 $ 24,161 $ 960
Identifiable Assets:
United States $174,538 $ 150,362 $145,912
Canada 18,078 17,617 22,248
Other countries 1,200 1,460 991
Geographic totals 193,816 169,439 169,151
General corporate assets 91,145 58,805 325
Total assets $284,961 $ 228,244 $169,476
44
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(tabular amounts in thousands of dollars except per share amounts)
15. Related Party Transaction
The Company obtains various financial advisory services from an
investment management firm, two of the principals of which serve on the
Board of Directors of the Company. For each of the years ended December
31, 1994, 1993 and 1992, the Company paid $200,000 for such services,
which are included in selling, general and administrative expense.
16. Pending Business Acquisition
On January 3, 1995, the Company entered into an agreement to acquire
Western Multiplex Corporation ("MUX"), located in Belmont, California.
MUX designs, manufactures and markets products for use in point-to-point
microwave communication systems. The estimated purchase price of
approximately $30.3 million consists of 750,000 shares of the Company's
common stock (including 230,299 shares issuable upon exercise of stock
options) valued at approximately $29.1 million based on the stock price
at the date of the agreement and approximately $1.2 million in
acquisition costs. The actual purchase price may differ from the
estimated purchase price because of fluctuations in the price of the
Company's common stock between the date of the agreement and the date of
closing. The acquisition will be accounted for as a purchase and is
expected to be completed by May 1995. The acquisition is subject to
approval by the MUX shareholders.
45
To the Directors of
Glenayre Technologies, Inc.
We have audited the consolidated balance sheets of Glenayre
Electronics Manufacturing (a division of Glenayre Electronics Ltd.,
subsequently renamed Glentel Inc.) ("GEMS") as at November 10, 1992 ,
and the consolidated statements of income and net assets, and cash flows
for the period from January 1, 1992 to November 10, 1992 . Our audit
also included the supplemental schedule listed in the Index at Item 14.
These financial statements and supplemental schedule are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements and supplemental
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the division
as at November 10, 1992 and the results of operations and changes in net
assets and cash flows for the period from January 1, 1992 to November
10, 1992 in accordance with generally accepted accounting principles in
Canada. Also, in our opinion, such supplemental schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
Vancouver, Canada
April 21, 1993
GRANT THORNTON*
Chartered Accountants
* Also operating as Doane Raymond
46
GLENAYRE ELECTRONICS MANUFACTURING
(A Division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
CONSOLIDATED BALANCE SHEET
November 10, 1992
(Cdn. $ in thousands)
Assets
Current assets
Cash $ 2,504
Accounts receivable (net of $1,296 allowance) 30,709
Inventories (Note 3) 17,647
Agreements and notes receivable (Note 4) 1,055
Prepaid expenses 1,071
Total current assets 52,986
Agreements and notes receivable (Note 4) 4,700
Property and equipment (Note 5) 12,410
Goodwill 24,983
$95,079
Liabilities and Net Assets
Current liabilities
Accounts payable and accrued liabilities $20,518
Income taxes 6,974
Current portion of long-term debt 1,381
Total current liabilities 28,873
Long-term debt (Note 6) 22,419
51,292
Net assets 43,787
$95,079
(The accompanying notes are an integral part of the statements)
47
GLENAYRE ELECTRONICS MANUFACTURING
(A Division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
CONSOLIDATED STATEMENT OF INCOME AND NET ASSETS
Period January 1, 1992 to November 10, 1992
(Cdn. $ in thousands)
Sales....................................................$100,900
Cost of sales ......................................... 41,038
Operating and administrative .......................... 24,842
Depreciation and amortization ......................... 3,766
Research and developement................................ 9,022
78,668
Operating income before.................................. 22,232
Interest on long-term debt............................... 3,193
Interest income.......................................... (255)
Income before............................................ 19,294
Income taxes (Note 1).................................... 7,718
Net income............................................... 11,576
Net asset balance, January 1, 1992....................... 32,788
Net advances to other divisions.......................... (577)
Net asset balance, November 10, 1992..................... $43,787
(The accompanying notes are an integral part of the statements)
48
GLENAYRE ELECTRONICS MANUFACTURING
(A Division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS
Period January 1, 1992 to November 10, 1992
(Cdn. $ in thousands)
Operating Activities
Income from operations $11,576
Item not requiring cash from operations:
Depreciation and amortization 3,766
Changes in operational balances:
Accounts receivable (6,907)
Inventories (354)
Payables and accruals 470
Other (1,495)
Cash provided by operating activities 7,056
Investing Activities
Additions to property and equipment (1,943)
Increase in agreements and notes receivable (3,851)
Cash utilized in investing activities (5,794)
Financing Activities
Net change in long-term debt 1,991
Net advances to other divisions (577)
Decrease in bank indebtedness (172)
Cash provided by financing activities 1,242
Increase in cash 2,504
Cash, beginning of period --
Cash, end of period 2,504
(The accompanying notes are an integral part of the statements)
49
GLENAYRE ELECTRONICS MANUFACTURING
(a division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands of Cdn. dollars)
November 10, 1992
1. Basis of Presentation
These consolidated divisional financial statements have been prepared
from the audited accounts of Glenayre Electronics Ltd. (subsequently
renamed Glentel Inc.) The assets, liabilities, revenues, and expenses
reflected in these financial statements are those related to the
business of designing, manufacturing, marketing and servicing switches,
transmitters, controls and software used in personal communications
systems (including paging, voice messaging, and alphanumeric messaging
and mobile data systems), transit communications systems and mobile
telephone systems (the "GEMS Business").
These financial statements reflect the following:
(a) Overhead
The allocation method for overhead costs was based on the direct
relation of such costs to the related specific divisional activities.
Management believes that these allocations are reasonable and if these
costs were incurred directly by this division, these costs would not be
materially different from the allocated amounts. For the period January
1, 1992 to November 10, 1992, the GEMS Business was allocated overhead
costs of $375,000 out of total corporate overhead amounting to
$2,128,000.
(b) Income Taxes
The tax provision for the period is assumed to be 40%. The actual taxes
for the period are less than the statutory rates because of timing
differences, other book losses, and net operating loss carryforwards.
The operating results presented in this consolidated divisional
statement of income are not necessarily indicative of future divisional
operating results nor of operating results that would have been reported
had the division previously been an entity separate from Glenayre
Electronics Ltd. (subsequently renamed Glentel Inc.)
2. Significant Accounting Policies
The financial statements have been prepared by the GEMS Business
management in accordance with consistently applied accounting principles
generally accepted in Canada, and conform in all material respects with
International Accounting Standards.
(a) Consolidation
All material intradivisional accounts and transactions have been
eliminated upon consolidation.
(b) Inventories
Raw materials are valued at the lower of the average cost of materials
purchased or replacement costs. Work-in-process and finished goods are
valued at the lower of cost or net realizable value.
(c) Property and Equipment
Property and equipment are stated at cost, net of investment tax credits
earned.
Depreciation is computed principally on the declining balance method
based on annual rates established to amortize the cost of depreciable
assets over their estimated useful lives as follows:
Buildings 4%
Equipment 20%-50%
50
GLENAYRE ELECTRONICS MANUFACTURING
(a division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(d) Goodwill
Goodwill, representing the excess of purchase consideration over the
fair market value of the net assets acquired, is amortized on a straight
line basis over various periods up to twenty years. To the extent that
there is a permanent impairment in the carrying value of goodwill, the
carrying value is written down.
(e) Foreign Currency Translation
The accounts of foreign subsidiaries have been translated into Canadian
dollars as follows:
monetary assets and liabilities at the exchange rate in effect at the
balance sheet date; non-monetary items at the exchange rates in effect
when they were acquired; revenue and expenses at the average exchange
rate during the period except for depreciation and amortization which
are translated at the exchange rate in effect when the related assets
were acquired. The resulting gains or losses on translation are included
in the results of operations.
For the period January 1, 1992 to November 10, 1992, included in
operations is the foreign currency exchange on translation of foreign
subsidiary accounts (net of exchange on foreign denominated
transactions) amounting to a $1,569,000 gain.
(f) Revenue Recognition
Revenue is recognized at the time products are shipped or services are
provided to customers. The percentage of completion method is used to
recognize revenue from communications hardware and installation
contracts.
(g) Research and Development
All research and development costs are charged against earnings in the
period they are incurred, and are reported net of investment tax credits
and government grants.
3. Inventories
Raw materials $ 8,091
Work-in-process 4,781
Finished goods 4,775
$17,647
4. Agreements and Notes Receivables
Agreements and notes receivable represent secured contracts or loans
between the GEMS Business and certain customers and employees which bear
interest at various rates.
51
GLENAYRE ELECTRONICS MANUFACTURING
(a division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
5. Property and Equipment
Land.................................... $ 1,598
Buildings............................... 7,846
Equipment................................ 23,719
Other ................................. 1,574
34,737
Accumulated depreciation................. 22,327
$12,410
6. Long-Term Debt
Loan from corporate office.............. $19,442
Other................................... 4,358
23,800
Current portion......................... 1,381
$22,419
Included in other long-term debt are obligations of the Company in
respect of long-term capital leases, debentures, bonds, and notes
payable.
Annual principal payments on long-term debt during the next five years
are:
1993 ......................... $ 1,381
1994 ......................... 20,999
1995 ......................... 317
1996 ......................... 335
1997 ......................... 32
$23,064
7. Segmented Information
Operating Identifiable
Sales Income Assets
Canada ............................... $ 66,876 $21,061 $51,548
United States ........................ 32,527 1,108 43,347
Other ................................ 1,497 63 184
$100,900 $22,232 $95,079
52
GLENAYRE ELECTRONICS MANUFACTURING
(a division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Concluded)
8. Commitments
The GEMS Business has entered into agreements to lease certain of its
premises and office equipment for various periods until 1997. The annual
rent of premises consist of minimum rent plus realty taxes, maintenance
and other operating expenses. Minimum rent payable for premises and
equipment in aggregate and for each of the next five years is as
follows:
1993 $1,043
1994 843
1995 435
1996 238
1997 43
$2,602
9. Contingencies
Legal actions have been commenced against Glenayre Electronics Ltd.
(subsequently renamed Glentel Inc.) and its subsidiaries alleging
certain breaches of contract entered into during the conduct of normal
business activities. The management of the GEMS Business is of the
opinion that the ultimate resolution of these actions will not have a
significant effect on the Company's future results of operations.
Glenayre Electronics Ltd. (subsequently renamed Glentel Inc.) is
contingently liable under letters of credit and bond guarantees
totalling $3,222,869.
10. Reconciliation between Canadian and U.S. Generally Accepted
Accounting Principles
There would not be any material differences if the financial statements
had been prepared in accordance with U.S. generally accepted accounting
principles.
The following additional note disclosure would be required under U.S.
generally accepted accounting principles:
Post-retirement health care benefits
The GEMS Business provides its U.S. employees with certain health care
benefits upon retirement. Currently, the GEMS Business charges the cost
of these post-retirement benefits to operations when paid.
In December, 1990, the Financial Accounting Standards Board issued a
Statement of Financial Accounting Standards No. 106 ("SFAS 106"),
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which is effective for years beginning after December 31, 1992. SFAS 106
requires the accrual of future retiree benefit costs over the active
service period of employees to the date of full eligibility for such
benefits.
Adoption of this new U.S. rule, required in 1993, is expected to
increase the GEMS Business' annual expense for post-retirement health
care benefits by approximately $250,000. The GEMS Business estimates
that it will have an obligation for post-retirement health care benefits
at the date of adoption of approximately $1,300,000. This obligation
will be accrued over the average remaining years of service to the
expected retirement date of employees in place at the time the new
standard is adopted.
11. Disposition of the GEMS Business
On November 10, 1992, Glenayre Electronics Ltd. (subsequently renamed
Glentel Inc.) sold the GEMS Business for approximately $137 million.
53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Items 10 through 13 are incorporated herein by reference to the sections
captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT," "ELECTION OF DIRECTORS," "COMPENSATION--Compensation of
Directors," "COMPENSATION--Executive Compensation,"
"COMPENSATION--Employment Agreements," "COMPENSATION - Option
Agreements," "COMPENSATION- -Compensation Committee Interlocks and
Insider Participation," and "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS," in the Company's Proxy Statement for the Annual Meeting
of Stockholders to be held May 24, 1995.
54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. Index to Financial Statements and Supplemental Schedules
(i) Financial Statements Page
GLENAYRE TECHNOLOGIES, INC.
Independent Auditors' Report 27
Consolidated Balance Sheets at December 31, 1994 and 1993 28
Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992 29
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994,
1993 and 1992 30
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 31
Notes to Consolidated Financial Statements 33
GEMS BUSINESS (Predecessor Business Acquired by Glenayre Technologies, Inc. in 1992)
Auditors' Report 46
Consolidated Balance Sheet at November 10, 1992 47
Consolidated Statement of Income and Net Assets for the period January 1, 1992 to
November 10, 1992 48
Consolidated Statement of Cash Flows for the period January 1, 1992 to November 10, 1992 49
Notes to Consolidated Financial Statements 50
(ii) Supplemental Schedules:
GLENAYRE TECHNOLOGIES, INC.
(For the years ended December 31, 1994, 1993 and 1992)
Schedule VIII - Valuation and Qualifying Accounts and Reserves 59
GEMS BUSINESS
(For the period January 1, 1992 to November 10, 1992)
Schedule VIII - Valuation and Qualifying Accounts and Reserves 60
Schedules not listed above have been omitted because of the absence of
conditions under which they are required or because the required
information is included in the consolidated financial statements or
notes thereto.
B. Reports on Form 8-K
There were no reports on Form 8-K for the three months ended December
31, 1994.
55
C. Exhibits
Exhibit
Number Description
2.1 Purchase and Sale Agreement dated as of July 16, 1992 among
Glenayre Electronics Ltd. ("GEL"), as Seller and N-W Group,
Inc. ("N-W"), Nu-West, Inc. ("Nu-West") and N-W Group Canada
Inc. ("N-W Canada''), as Purchasers, was filed as Exhibit 2
to the Registrant's Current Report on Form 8-K filed on July
27, 1992 and is incorporated herein by reference.
2.2 Amendment to Purchase and Sale Agreement, dated November 10,
1992, among GEL, N-W, Nu-West, Glenayre Manufacturing, Ltd.
(formerly called N-W Canada) ("Manufacturing"), and Glenayre
R & D, Inc. ("R&D") was filed as Exhibit 2(b) to the
Registrant's Current Report on Form 8-K filed November 25,
1992 and is incorporated herein by reference.
3.1 Restated Certificate of Incorporation of N-W dated June 7,
1990 was filed as Exhibit 3(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990 and
is incorporated herein by reference.
3.2 Certificate of Amendment to Restated Certificate of
Incorporation of N-W, dated November 3, 1992 and effective as
of November 10, 1992 was filed as Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 and is incorporated herein by
reference.
3.3 Certificate of Amendment to the Restated Certificate of
Incorporation of Glenayre, effective October 7, 1993, was set
forth as Exhibit A to Registrant's definitive Proxy Statement
dated September 9, 1993, and is incorporated herein by
reference.
3.4 Certificate of Amendment to the Restated Certificate of
Incorporation of Glenayre, effective May 26, 1994, was set
forth as Exhibit A to Registrant's definitive Proxy Statement
dated April 24, 1994, and is incorporated herein by
reference.
3.5 Restated by-laws of Glenayre Technologies, Inc. effective
June 7, 1990, as amended September 21, 1994 is filed
herewith.
4 Pursuant to Item 601(4)(iii) of Regulation S-K, an Indenture,
dated September 15, 1981, between Hallcraft Homes, Inc. and
U.S. Trust Company of New York, and Supplemental Indentures,
dated April 30, 1987 and March 11, 1983, are not filed as
exhibits to Annual Report on Form 10-K. The Company hereby
agrees to furnish a copy of such instrument to the Commission
upon request.
10.1 Employment Agreement, dated December 3, 1990, between the
Company and Clarke H. Bailey was filed as Exhibit 10(i) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990 and is incorporated herein by
reference.*
10.2 Stock option agreement, dated December 3, 1990, between the
Company and Clarke H. Bailey which, in part, amends the
Employment Agreement, dated December 31, 1990, between the
Company and Clarke H. Bailey was filed as Exhibit 10(a)(1) to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994 and is incorporated herein by
reference.*
56
10.3 First Amendment, dated April 15, 1994, to the Employment
Agreement, dated December 3, 1990, between the Company and
Clarke H. Bailey was filed as Exhibit 10(a)(2) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994 and is incorporated herein by reference.*
10.4 Amendment Agreement, dated February 1, 1995, which in part,
amends the Employment Agreement dated December 3, 1990 and the
Stock Option agreement dated December 3, 1990 between the
Company and Clarke H. Bailey, is filed herewith*
10.5 Employment Agreement, dated November 10, 1992, between N-W and
John J. Hurley was filed as Exhibit 10(a) to the Registrant's
Current Report on Form 8-K filed November 25, 1992 and is
incorporated herein by reference.*
10.6 Amendment, dated December 8, 1994, to the Employment Agreement
dated November 10, 1992 between the Company and John J. Hurley
is filed herewith.*
10.7 Employment Agreement, dated November 10, 1992, between N-W and
Ramon D. Ardizzone was filed as Exhibit 10(b) to the
Registrant's Current Report on Form 8-K filed November 25,
1992 and is incorporated herein by reference.*
10.8 Amendment, dated March 9, 1995, to the Employment Agreement
dated November 10, 1992 between the Company and Ramon D.
Ardizzone is filed herewith.*
10.9 Executive Severance Benefit Agreement, dated February 1, 1995,
between the Company and Stan Ciepcielinski, is filed
herewith.*
10.10 ET Securities Agreement, dated November 10, 1992, between N-W
and seven senior employees of the Company was filed as
Exhibit 10(c) to the Registrant's Current Report on Form 8-K
filed November 25, 1992 and is incorporated herein by
reference.*
10.11 First Amendment to ET Securities Agreement, dated December
29, 1992, between the Company and seven senior employees of
the Company was filed as Exhibit 25(a) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1992 and is incorporated herein by reference.*
10.12 Second Amendment to ET Securities Agreement, dated March 17,
1994, between the Company and seven senior employees of the
Company was filed as Exhibit 10(f) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 and
is incorporated herein by reference.*
10.13 Third Amendment to ET Securities Agreement, dated March 9,
1995, between the Company and seven senior employees of the
Company is filed herewith.*
10.14 ET Securities Agreement Releases dated as of June 21, 1994
and August 31, 1994 was filed as Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 and is incorporated herein by
reference.*
57
10.15 Glenayre Management By Objective Plan for the year ended
December 31, 1994 was filed as Exhibit 10(h) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 and is incorporated herein by reference.*
10.16 Glenayre Management By Objective Plan for the year ended
December 31, 1995 is filed herewith.*
10.17 Glenayre Long-Term Incentive Plan, as amended and restated
effective May 26, 1994, was filed as Exhibit 4 to the
Registrant's Form S-8 filed June 16, 1994 and is incorporated
herein by reference.
10.18 N-W 1987 Stock Option Plan (conformed to incorporated first
amendment effective as of January 12, 1990, second amendment
effective as of May 1, 1991 and third amendment effective as
of July 15, 1992) was filed as Exhibit 10(v) to the
Registrant's Current Report on Form 8-K filed November 25,
1992 and is incorporated herein by reference.
10.19 Glenayre Employee Stock Purchase Plan, set forth as Exhibit B
to Registrant's definitive Proxy Statement, dated September
9, 1993, is incorporated herein by reference.
10.20 Amendment, effective July 1, 1994, to the Glenayre Employee
Stock Purchase Plan is filed herewith.
10.21 Investment Advisory Agreement, dated October 7, 1988, between
Nu-West, Inc. and Cramer Rosenthal McGlynn, Inc. was filed as
Exhibit 28(b) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989 and is incorporated
herein by reference.
11 Computation of Earnings per Common Share is filed herewith.
21 Subsidiaries of the Company is filed herewith.
23.1 Consent of Deloitte & Touche LLP is filed herewith.
23.2 Consent of Grant Thornton is filed herewith.
27 Financial Data Schedule. (Filed in electronic format only.
Pursuant to Rule 402 of Regulation S-T, this schedule shall not
be deemed filed for purposes of Section 11 of the Securities
Act of 1933 or Section 18 of the Securities Exchange Act of
1934.)
*Management Contract
58
GLENAYRE TECHNOLOGIES, INC. AND SUBSIDIARIES
Schedule VIII -- Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1994, 1993 and 1992
(dollars in thousands)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Periods
Allowance for Doubtful Accounts on
Accounts and Notes Receivable:
Year ended December 31, 1994 $2,499 $129 $603 $83 $3,148
Year ended December 31, 1993 1,560 640 956(2) 657(3) 2,499
Year ended December 31, 1992 549 64 962(1) 15 1,560
Valuation Allowance on
Notes Receivable - Fair Market
Value Adjustment:
Year ended December 31, 1994 -- 442 -- -- 442
Year ended December 31, 1993 -- -- -- -- --
Year ended December 31, 1992 -- -- -- -- --
Valuation Allowance on
Inventories:
Year ended December 31, 1994 1,481 2,687 -- 1,015(6) 3,153
Year ended December 31, 1993 -- 1,622 -- 141 1,481
Year ended December 31, 1992 -- -- -- -- --
Valuation Allowance on Real
Estate Held for Sale:
Year ended December 31, 1994 19,657 -- (1,844)(5) 17,813(4) --
Year ended December 31, 1993 19,503 -- 488 294 19,657
Year ended December 31, 1992 11,941 5,676 3,563(2) 1,677(4) 19,503
(1)Business acquisition.
(2) Previously established reserves reclassified from accrued liabilities.
(3)Includes amounts written off ($139) and amounts related to
discontinued operations ($518).
(4)Reduction on real estate assets sold.
(5)Previously established reserves reclassified to accrued liabilities.
(6)Includes amounts written off ($700) or revalued ($315).
59
GLENAYRE ELECTRONICS MANUFACTURING
(A division of Glenayre Electronics Ltd., subsequently renamed
Glentel Inc.) Schedule VIII - Valuation and Qualifying Accounts and
Reserves The Period January 1, 1992 to November 10, 1992
(Cdn. $ in thousands)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
Allowance for Doubtful Accounts on
Accounts and Notes Receivable ............ $1,928 $ 239 $84 $955 $1,296
Valuation Allowances on Inventories...... 4,068 2,144 -- 2,533 3,679
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, The Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on
March 29, 1995.
GLENAYRE TECHNOLOGIES, INC.
By /s/ Ramon D. Ardizzone
Ramon D. Ardizzone
President, Acting Chief Executive Officer,
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on March 29, 1995:
/s/ Gerald B. Cramer /s/ Barry W. Gray
Gerald B. Cramer Barry W. Gray
Chairman of the Board and Director Director
/s/ Clarke H. Bailey /s/ Thomas C. Israel
Clarke H. Bailey Thomas C. Israel
Vice Chairman and Director Director
/s/ John J. Hurley /s/ Alma M. McConnell
John J. Hurley Alma M. McConnell
Vice Chairman Director
and Director
/s/ Ramon D. Ardizzone /s/ Edward J. Rosenthal
Ramon D. Ardizzone Edward J. Rosenthal
President, Acting Chief Executive Officer Director
and Director
/s/ Stan Ciepcielinski /s/ Thomas E. Skidmore
Stan Ciepcielinski Thomas E. Skidmore
Executive Vice President, Chief Financial Officer, Director
Secretary and Treasurer
/s/ Billy C. Layton
Billy C. Layton
Controller and Chief Accounting Officer
EXHIBIT INDEX
Exhibit
Number Description
2.1 Purchase and Sale Agreement dated as of July 16, 1992 among
Glenayre Electronics Ltd. ("GEL"), as Seller and N-W Group,
Inc. ("N-W"), Nu-West, Inc. ("Nu-West") and N-W Group Canada
Inc. ("N-W Canada''), as Purchasers, was filed as Exhibit 2
to the Registrant's Current Report on Form 8-K filed on July
27, 1992 and is incorporated herein by reference.
2.2 Amendment to Purchase and Sale Agreement, dated November 10,
1992, among GEL, N-W, Nu-West, Glenayre Manufacturing, Ltd.
(formerly called N-W Canada) ("Manufacturing"), and Glenayre
R & D, Inc. ("R&D") was filed as Exhibit 2(b) to the
Registrant's Current Report on Form 8-K filed November 25,
1992 and is incorporated herein by reference.
3.1 Restated Certificate of Incorporation of N-W dated June 7,
1990 was filed as Exhibit 3(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990 and
is incorporated herein by reference.
3.2 Certificate of Amendment to Restated Certificate of
Incorporation of N-W, dated November 3, 1992 and effective
as of November 10, 1992 was filed as Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 and is incorporated herein by
reference.
3.3 Certificate of Amendment to the Restated Certificate of
Incorporation of Glenayre, effective October 7, 1993, was
set forth as Exhibit A to Registrant's definitive Proxy
Statement dated September 9, 1993, and is incorporated
herein by reference.
3.4 Certificate of Amendment to the Restated Certificate of
Incorporation of Glenayre, effective May 26, 1994, was set
forth as Exhibit A to Registrant's definitive Proxy
Statement dated April 24, 1994, and is incorporated herein
by reference.
3.5 Restated by-laws of Glenayre Technologies, Inc. effective
June 7, 1990, as amended September 21, 1994 is filed
herewith.
4 Pursuant to Item 601(4)(iii) of Regulation S-K, an
Indenture, dated September 15, 1981, between Hallcraft
Homes, Inc. and U.S. Trust Company of New York, and
Supplemental Indentures, dated April 30, 1987 and March 11,
1983, are not filed as exhibits to Annual Report on Form
10-K. The Company hereby agrees to furnish a copy of such
instrument to the Commission upon request.
10.1 Employment Agreement, dated December 3, 1990, between the
Company and Clarke H. Bailey was filed as Exhibit 10(i) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990 and is incorporated herein by
reference.*
10.2 Stock option agreement, dated December 3, 1990, between the
Company and Clarke H. Bailey which, in part, amends the
Employment Agreement, dated December 31, 1990, between the
Company and Clarke H. Bailey was filed as Exhibit 10(a)(1)
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994 and is incorporated herein by
reference.*
Exhibit Number Description
10.3 First Amendment, dated April 15, 1994, to the Employment
Agreement, dated December 3, 1990, between the Company and
Clarke H. Bailey was filed as Exhibit 10(a)(2) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994 and is incorporated herein by
reference.*
10.4 Amendment Agreement, dated February 1, 1995, which in part,
amends the Employment Agreement dated December 3, 1990 and the
Stock Option agreement dated December 3, 1990 between the
Company and Clarke H. Bailey, is filed herewith.*
10.5 Employment Agreement, dated November 10, 1992, between N-W and
John J. Hurley was filed as Exhibit 10(a) to the Registrant's
Current Report on Form 8-K filed November 25, 1992 and is
incorporated herein by reference.*
10.6 Amendment, dated December 8, 1994, to the Employment Agreement
dated November 10, 1992 between the Company and John J. Hurley
is filed herewith.*
10.7 Employment Agreement, dated November 10, 1992, between N-W and
Ramon D. Ardizzone was filed as Exhibit 10(b) to the
Registrant's Current Report on Form 8-K filed November 25,
1992 and is incorporated herein by reference.*
10.8 Amendment, dated March 9, 1995, to the Employment Agreement
dated November 10, 1992 between the Company and Ramon D.
Ardizzone is filed herewith.*
10.9 Executive Severance Benefit Agreement, dated February 1, 1995,
between the Company and Stan Ciepcielinski, is filed
herewith.*
10.10 ET Securities Agreement, dated November 10, 1992, between N-W
and seven senior employees of the Company was filed as Exhibit
10(c) to the Registrant's Current Report on Form 8-K filed
November 25, 1992 and is incorporated herein by reference.*
10.11 First Amendment to ET Securities Agreement, dated December
29, 1992, between the Company and seven senior employees of
the Company was filed as Exhibit 25(a) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1992 and is incorporated herein by reference.*
10.12 Second Amendment to ET Securities Agreement, dated March 17,
1994, between the Company and seven senior employees of the
Company was filed as Exhibit 10(f) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 and
is in corporated herein by reference.*
10.13 Third Amendment to ET Securities Agreement, dated March 9,
1995, between the Company and seven senior employees of the
Company is filed herewith.*
10.14 ET Securities Agreement Releases dated as of June 21, 1994
and August 31, 1994 was filed as Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 and is incorporated herein by
reference.*
Exhibit
Number Description
10.15 Glenayre Management By Objective Plan for the year ended
December 31, 1994 was filed as Exhibit 10(h) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993
and is incorporated herein by reference.*
10.16 Glenayre Management By Objective Plan for the year ended
December 31, 1995 is filed herewith.*
10.17 Glenayre Long-Term Incentive Plan, as amended and restated
effective May 26, 1994, was filed as Exhibit 4 to the
Registrant's Form S-8 June 16, 1994 and is incorporated herein
by reference.
10.18 N-W 1987 Stock Option Plan (conformed to incorporated first
amendment effective as of January 12, 1990, second amendment
effective as of May 1, 1991 and third amendment effective as of
July 15, 1992) was filed as Exhibit 10(v) to the Registrant's
Current Report on Form 8-K filed November 25, 1992 and is
incorporated herein by reference.
10.19 Glenayre Employee Stock Purchase Plan, set forth as Exhibit B to
Registrant's definitive Proxy Statement, dated September 9,
1993, is incorporated herein by reference.
10.20 Amendment, effective July 1, 1994, to the Glenayre Employee
Stock Purchase Plan is filed herewith.
10.21 Investment Advisory Agreement, dated October 7, 1988, between
Nu-West, Inc. and Cramer Rosenthal McGlynn, Inc. was filed as
Exhibit 28(b) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989 and is incorporated herein by
reference.
11 Computation of Earnings per Common Share is filed herewith.
21 Subsidiaries of the Company is filed herewith.
23.1 Consent of Deloitte & Touche LLP is filed herewith.
23.2 Consent of Grant Thornton is filed herewith.
27 Financial Data Schedule. (Filed in electronic format only.
Pursuant to Rule 402 of Regulation S-T, this schedule shall not
be deemed filed for purposes of Section 11 of the Securities Act
of 1933 or Section 18 of the Securities Exchange Act of 1934.)
*Management Contract
EX-3
2
EXHIBIT 3.5
EXHIBIT 3.5
RESTATED
BY-LAWS
OF
GLENAYRE TECHNOLOGIES, INC.
ARTICLE I
OFFICES
Section I. The registered office of the Corporation shall be in the
City of Dover, County of Kent, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section II. Time and Place of Meetings. All meetings of the stock-
holders for the election of directors or for any other purpose shall be
held at such time and place, within or without the State of Delaware, as
shall be designated by the Board of Directors, the Chairman of the Board,
the Vice Chairman of the Board or the President. In the absence of any
such designation, each such meeting shall be held at the principal office
of the Corporation.
Section III. Annual Meetings. An annual meeting of stockholders
shall be held for the purpose of electing Directors and transacting such
other business as may properly be brought before the meeting. The date of
the annual meeting shall be determined by the Board of Directors.
Section IV. Special Meetings. Except as otherwise required by law
and subject to the rights of the holders of any class or series of shares
issued by the Corporation, having a preference over the Common Shares as to
dividends or upon liquidation, to elect directors in certain circumstances,
special meetings of the stockholders of the Corporation may be called only
by (i) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office, (ii) the
Chairman of the Board, if one is elected or (iii) the President. Only
those matters set forth in the notice of the special meeting may be
considered or acted upon at such special meeting, unless otherwise provided
by law.
Section V. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall be given
not less than ten nor more than sixty days before the date of the meeting,
to each stockholder entitled to
vote at such meeting, subject to such exceptions as may be permitted by
the General Corporation Law of Delaware. The notice of any special meeting of
stockholders shall state the purpose or purposes for which the meeting is
called.
Section VI. Quorum. The holders of one-third of the shares of stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided
by law. If a quorum is not present or represented, the holders of the
stock present in person or represented by proxy at the meeting and entitled
to vote thereat shall have power, by the affirmative vote of the holders of
a majority of such stock, to adjourn the meeting to another time and/or
place, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting, at
which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the original meeting. If
the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the ad-
journed meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section VII. Voting. At all meetings of the stockholders, each
stockholder shall be entitled to vote, in person or by proxy, the shares of
voting stock owned by such stockholder of record on the record date for the
meeting. When a quorum is present or represented at any meeting, the vote
of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before
such meeting, unless (1) the question is one upon which, by express
provision of law or of the certificate of incorporation or the by-laws, a
different vote is required, in which case such express provision shall
govern and control the decision of such question; or (2) the vote relates
to the election of directors, who shall be elected by the vote of the
holders of a plurality of the stock having voting power present in person
or represented by proxy.
Section VIII. Informal Action by Stockholders. Any action required
or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of such holders and may
not be effected by a consent in writing by any such holders.
Section IX. Advance Notification of Proposals at Stockholder's
Meetings. If a stockholder desires to submit a proposal for consideration
at an annual or special stockholders' meeting, or to nominate persons for
election as directors at any stockholders' meeting duly called for the
election of directors, written notice of such stockholders's intent to make
such a proposal or nomination must be given and received by the Secretary
of the Corporation at
2
the principal executive offices of the Corporation
either by personal delivery or by United States mail not later than (i)
with respect to an annual meeting of stockholders, 60 days prior to the
anniversary date of the immediately preceding annual meeting, and (ii) with
respect to a special meeting of stockholders, the close of business on the
tenth day following the date on which notice of such meeting is first sent
or given to stockholders. Each notice shall describe the proposal or
nomination in sufficient detail for the proposal or nomination to be
summarized on the agenda for the meeting and shall set forth (i) the name
and address, as it appears on the books of the Corporation, of the stock-
holder who intends to make the proposal or nomination; (ii) a representa-
tion that the stockholder is a holder of record of stock of the Corporation
entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to present such proposal or nomination; and (iii) the
class and number of shares of the Corporation which are beneficially owned
by the stockholder. In addition, in the case of a stockholder proposal,
the notice shall set forth the reasons for conducting such proposed
business at the meeting and any material interest of the stockholder in
such business. In the case of a nomination of any person for election as a
director, the notice shall set forth: (i) the name and address of any
person to be nominated; (ii) a description of all arrangements or under-
standings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iii) such other information
regarding such nominee proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended; and (iv) the consent of each
nominee to serve as a director of the Corporation if so elected. The
presiding officer of the annual or special meeting shall, if the facts
warrant, refuse to acknowledge a proposal or nomination not made in
compliance with the foregoing procedure, and any such proposal or nomina-
tion not properly brought before the meeting shall not be considered.
Section X. Advisory Stockholder Votes. In order for the stockholders
to adopt or approve any precatory proposal submitted to them for the
purpose of requesting the Board of Directors to take certain actions, a
majority of the outstanding stock of the Corporation entitled to vote
thereon must be voted for the proposal.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corpora-
tion shall be managed and controlled by or under the direction of a Board
of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as
3
are not by law or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 2. Number, Qualification and Tenure. Except as otherwise
permitted by any provisions of the Certificate of Incorporation relating to
the rights of holders of any class or series, having a preference over the
Common Shares as to dividends or upon liquidation, to elect directors in
certain circumstances, the number of directors of the Corporation shall be
fixed from time to time by the vote of a majority of the entire Board of
Directors, but such number shall in no case be less than three. Any such
determination made by the Board of Directors shall continue in effect
unless and until changed by the Board of Directors, but no such changes
shall affect the term of any director then in office. Directors need not
be stockholders.
The directors shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the
entire Board of Directors. At the 1990 annual meeting of stockholders,
Class I directors shall be elected for a one year term, Class II directors
for a two-year term and Class III directors for a three-year term. At such
succeeding annual meeting of stockholders beginning in 1991, successors to
the class of directors whose term expires at that annual meeting shall be
elected for a three-year term. If the authorized number of directors is
changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a
vacancy resulting from any increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no
case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting
for the year in which his or her term expires and until his or her succes-
sor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of shares, having a preference over the Common Shares as
to dividends or upon liquidation, issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of the Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article III, Section 2.
4
Any director elected by the stockholders, or by the Board of Directors
to fill a vacancy, may be removed only for cause by the affirmative vote of
the holders of a majority of the voting power represented by all the shares
of stock of the Corporation outstanding and entitled to vote for the
election of directors, given at a duly called annual or special meeting of
stockholders.
Section 3. Vacancies. Except as otherwise required by law or
permitted by any provisions of the Certificate of Incorporation relating to
the rights of holders of any class or series of shares, having a preference
over the Common Shares as to dividends or upon liquidation, to elect
directors in certain circumstances, any vacancy on the Board of Directors
the results from any increase in the number of directors shall be filled
only by a majority of the Board of Directors then in office, provided that
a quorum is present, and any other vacancy occurring in the Board of
Directors shall be filled by a majority of the directors then in office,
even if less than a quorum, or by a sole remaining director. Any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his or her prede-
cessor.
Section 4. Place of Meetings. The Board of Directors amy hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Regular Meetings. The Board of Directors shall hold a
regular meeting, to be known as the annual meeting, immediately following
each annual meeting of the stockholders. Other regular meetings of the
Board of Directors shall be held at such time and at such place as shall
from time to time be determined by the Board. No notice of regular
meetings need be given.
Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the Vice Chairman of
the Board or the President, and meetings shall be called by the Secretary
on the written request of any Director. Such meeting shall be held at such
place or places as shall be stated in the call of the meeting. Notice of
any special meeting shall be given at least twenty-four (24) hours previous
thereto in any one of the following methods: by oral or telephonic notice,
by written notice delivered personally or mailed to each director at his
business address, or by telegram, cable or telex; provided, that if notice
is given by mail only, it shall be given at least forty-eight (48) hours
prior to such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in a post office or public letter box so ad-
dressed, with postage thereon prepaid and a notice given by means of
transmitted or recorded communication shall be deemed to have been given
when dispatched or delivered to the appropriate communication company or
its representative for dispatch.
5
Section 7. Quorum. At all meetings of the Board or any committee
thereof, one-half of the total number of Directors, or members of such
committee, as the case may be, shall constitute a quorum for the transac-
tion of business and the act of a majority of the Directors or the commit-
tee members present at any meeting at which there is a quorum shall be act
of the Board of Directors or such committee, as the case may be, except as
may be otherwise specifically provided by law or the certificate of
incorporation or by-laws. If a quorum shall not be present at any meeting
of the Board of Directors or any committee thereof, the Directors present
thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 8. Organization. Each meeting of the Board of Directors
shall be presided over by the Chairman of the Board (if there is a Chairman
of the Board), or, in the absence of the Chairman of the Board by the Vice
Chairman of the Board (if there is a Vice Chairman of the Board), or in the
absence of both the Chairman of the Board and the Vice Chairman of the
Board by the President, or in the absence of the Chairman of the Board, the
Vice Chairman of the Board and the President by a Director chosen by a
majority of the Directors present.
Section 9. Executive Committee. The Board of Directors, by resolu-
tion adopted by a majority of the whole Board, may designate one or more
Directors to constitute an Executive Committee, to serve as such, unless
the resolution designating the Executive Committee is sooner amended or
rescinded by the Board of Directors, until the next annual meeting of the
Board or until their respective successors are designated. The Board of
Directors, by resolution adopted by a majority of the whole Board, may also
designate additional Directors as alternate members of the Executive
Committee to serve as members of the Executive Committee in the place and
stead of any regular member or members thereof who may be unable to attend
a meeting or otherwise unavailable to act as a member of the Executive
Committee. In the absence or disqualification of a member and all alter-
nate members who may serve in the place and stead of such member, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of
any such absent or disqualified member.
Except as expressly limited by the General Corporation Law of the
State of Delaware or the Certificate or Incorporation, the Executive
Committee shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation between the meetings of the Board of Directors. The Executive
Committee shall keep a record of its acts and proceedings, which shall form
a part of the records of the Corporation in the custody of the Secretary,
and all actions of
6
the Executive Committee shall be reported to the Board of Directors at the
next meeting of the Board.
Meetings of the Executive Committee may be called at any time by the
Chairman of the Board, the Vice Chairman of the Board, the President or any
two of its members. No notice of the meetings need be given. Except as
expressly provided in this Section, the Executive Committee shall fix its
own rules of procedure.
Section 10. Other Committees. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate one or more other
committees, each such committee to consist of one or more Directors.
Except as expressly limited by the General Corporation Law of the State of
Delaware or the Certificate of Incorporation, any such committee shall have
and may exercise such powers as the Board of Directors may determine and
specify in the resolution designating such committee. The Board of
Directors, by resolution adopted by a majority of the whole Board, also may
designate one or more additional Directors as alternate members of any such
committee to replace any absent or disqualified member at any meeting of
the committee, and at any time may change the membership of any committee
or amend or rescind the resolution designating the committee. In the
absence or disqualification of a member or alternate member of a committee,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not such member or members constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of
any such absent or disqualified member, provided that the Director so
appointed meets any qualifications stated in the resolution designating the
committee. Each committee shall keep a record of proceedings and report
the same to the Board of Directors to such extent and in such form as the
Board of Directors may required. Unless otherwise provided in the resolu-
tion designating a committee, a majority of all of the members of any such
committee may select its Chairman, fix its rules or procedure, fix the time
and place of its meetings and specify what notice of meetings, if any,
shall be given.
Section 11. Action without Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 12. Attendance by Telephone. Members of the Board of
Directors, or of any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by
means of conference telephone or similar communications equipment by means
of which all persons participat-
7
ing in the meeting can hear each other, and such participation in a meeting
shall constitute presence in person at the meeting.
Section 13. Compensation. The Board of Directors shall have the
authority to fix the compensation of Directors, which may include their
expenses, if any, of attendance at each meeting of the Board of Directors
or of a committee.
ARTICLE IV
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be
elected by the Board of Directors and shall consist of a Chief Executive
Officer (who shall be either the Chairman of the Board, the Vice Chairman
of the Board or the President, as provided in these By-Laws), a President,
a Secretary and a Treasurer, and may also include a Chairman of the Board,
a Vice Chairman of the Board, a Chief Operating Officer, and such Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers
as may be elected by the Board of Directors or otherwise provided in these
By-Laws. Any two or more offices may be simultaneously held by the same
person, but no person may act in more than one capacity where action of two
or more officers is required. The title of any officer may include any
additional designation descriptive of such officer's duties as the Board of
Directors may prescribe.
Section 2. Term of Office. The officers of the Corporation shall be
elected at the annual meeting of the Board of Directors and shall hold
office until their successors are elected and qualified or until their
earlier death, resignation or removal. Any officer elected or appointed by
the Board of Directors may be removed at any time by the Board of Direc-
tors. Any vacancy occurring in any office of the Corporation required by
this Article shall be filed by the Board of Directors, and any vacancy in
any other office may be filled by the Board of Directors.
Section 3. Chairman of the Board. The Board of Directors may, but
need not, elect from among its members an officer designated as the
Chairman of the Board. If there is a Chairman of the Board and such
Chairman of the Board is also designated by the Board of Directors to be
the Chief Executive Officer, then the Chairman of the Board shall have all
of the duties and authority of the Chief Executive Officer and shall also,
when present, preside over meetings of the Board of Directors and the
stockholders. If there is a Chairman of the Board but the Chairman of the
Board is not also designated as the Chief Executive Officer, then the
Chairman of the Board shall, when present, preside over meetings of the
Board of Directors and the stockholders and shall have such other duties
and authority as may be prescribed from time to time by the Board of
Directors or as are provided for elsewhere in these By-Laws.
8
Section 4. Vice Chairman of the Board. The Board of Directors may,
but need not, elect from among its members an officer designated as the
Vice Chairman of the Board. If there is a Vice Chairman of the Board and
such Vice Chairman of the Board is also designated by the Board of Direc-
tors to be the Chief Executive Officer, then the Vice Chairman of the Board
shall have all of the duties and authority of the Chief Executive Officer
and shall also, when present and in the event of the absence of the
Chairman of the Board, preside over meetings of the Board of Directors and
the stockholders. If there is a Vice Chairman of the Board but the Vice
Chairman of the Board is not also designated as the Chief Executive
Officer, then the Vice Chairman of the Board shall, when present and in the
event of the absence of the Chairman of the Board, preside over meetings of
the Board of Directors and the stockholders and shall have such other
duties and authority as may be prescribed from time to time by the Board of
Directors or the Chairman of the Board or as are provided for elsewhere in
these By-Laws.
Section 5. Chief Executive Officer. If there is a Chairman of the
Board and the Board of Directors designates the Chairman of the Board as
the Chief Executive Officer, then the Chairman of the Board shall be the
Chief Executive Officer of the Corporation. If there is a Vice Chairman of
the Board and the Board of Directors designates the Vice Chairman of the
Board as the Chief Executive Officer, then the Vice Chairman of the Board
shall be the Chief Executive Officer of the Corporation. Otherwise, the
President shall be the Chief Executive Officer of the Corporation. Subject
to the direction and control of the Board of Directors , the Chairman of
the Board and the Vice Chairman of the Board, the Chief Executive Officer
shall supervise and control the management of the Corporation and shall
have such duties and authority as are normally incident to the position of
chief executive officer of a corporation and such other duties and authori-
ty as may be prescribed from time to time by the Board of Directors, the
Chairman of the Board or the Vice Chairman of the Board or as are provided
for elsewhere in these By-Laws. The title of the Chairman of the Board,
Vice Chairman of the Board or President, as the case may be, serving as the
Chief Executive Officer may, but need not, also refer to his or her
position as Chief Executive Officer.
Section 6. Chief Operating Officer. If there is a Chairman of the
Board or a Vice Chairman of the Board and either is also the Chief Execu-
tive Officer, then the President shall be the Chief Operating Officer of
the Corporation. If the President is the Chief Executive Officer, then
the President shall also serve as the Chief Operating Officer unless the
Board of Directors shall designate some other officer of the Corporation as
the Chief Operating Officer. Subject to the direction and control of the
Chairman of the Board, the Vice Chairman of the Board, the Chief Executive
Officer and the Board of Directors, the Chief Operating
9
Officer shall supervise and control the operations of the Corporation, shall
have such duties and authority as are normally incident to the position of chief
operating officer of a corporation and such other duties as may be pre-
scribed from time to time by the Chairman of the Board, the Vice Chairman
of the Board, the Chief Executive Officer or the Board of Directors, and,
in the event of the absence or disability of the Chief Executive Officer,
shall have the authority and perform the duties of the Chief Executive
Officer. The title of the President or other officer serving as the Chief
Operating Officer may, but need not, also refer to his or her position as
Chief Operating Officer.
Section 7. President. Unless there is a Chairman of the Board or a
Vice Chairman of the Board and either is also the Chief Executive Officer,
the President shall be the Chief Executive Officer of the Corporation and
shall have all of the duties and authority of the Chief Executive Officer.
If the President is not the Chief Executive Officer, then the President
shall be the Chief Operating Officer and shall have all of the duties and
authority of the Chief Operating Officer. If the President shall be the
Chief Executive Officer and no other officer shall have been designated by
the Board of Directors as the Chief Operating Officer, then the President
shall also have all of the duties and authority of the Chief Operating
Officer. During any period in which there shall not be a Chairman of the
Board or a Vice Chairman of the Board, the President shall have all of the
duties and authority of the Chairman of the Board. The President shall
preside over meetings of the Board of Directors and the stockholders if
there is no Chairman of the Board or Vice Chairman of the Board or, if
there is a Chairman of the Board or Vice Chairman of the Board, in the
event of their absence. The President shall also have such other duties
and authority as may be prescribed from time to time by the Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer or the
Board of Directors.
Section 8. Vice President. The Vice President, and if there be more
than one, the Vice President designated by the Board of Directors, shall,
in the event of the absence or disability of the President, have the
authority and duties of the President (including the duties and authority
of the President as either Chief Executive Officer or Chief Operating
Officer or both, if the President serves as such). In addition, each Vice
President shall have such other duties and authority as are normally
incident to the office of Vice President or as shall be prescribed from
time to time by the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer or the Chief Operating
Officer.
Section 9. Secretary. The Secretary shall keep a record of all
proceedings of the stockholders and the Board of Directors, and shall
perform like duties for committees of the Board of Directors when required.
The Secretary shall give, or cause to be given,
10
notice, if any, of all meetings of the stockholders and shall have such other
duties and authority as may be prescribed from time to time by the Board of
Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer or the Chief Operating Officer. The Secretary shall have
custody of the corporate seal of the Corporation and the Secretary, or in the
event of the absence or disability of the Secretary any Assistant Secretary,
shall have authority to affix the same to any instrument requiring it, and
when so affixed it may be attested by the signature of the Secretary or an
Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest such
affixing of the seal.
Section 10. Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined
by the Board of Directors (or if there be no such determination, then in
the order of their election), shall, in the event of the absence or
disability of the Secretary, have the duties and authority of the Secretary
and shall have such other duties and authority as may from time to time be
prescribed by the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer or the Secretary.
Section 11. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer and the Board of Directors, at its regular meetings or when the
Board of Directors so requires, an account of all transactions as Treasurer
and of the financial condition of the Corporation. The Treasurer shall
have such other duties and authority as may from time to time be prescribed
by the Board of Directors, the Chairman of the Board, the Vice Chairman of
the Board, the Chief Executive Officer, the Chief Operating Officer or the
Chief Financial Officer.
Section 12. Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors (or if there be no such determination,
then in the order of their election) shall, in the event of the absence or
disability of the Treasurer, have the duties and authority of the Treasurer
and shall have such other duties and authority as may from time to time be
prescribed by the Board of Directors, the Chairman of the Board, the Vice
Chairman of
11
the Board, the Chief Executive Officer, the Chief Operating Officer or
the Treasurer.
Section 13. Other Officers. Any officer who is elected or appointed
from time to time by the Board of Directors and whose duties and authority
are not specified in these By-Laws shall have such duties and authority as
may be prescribed from time to time by the Board of Directors, the Chairman
of the Board, the Vice Chairman of the Board, the Chief Executive Officer
or the Chief Operating Officer.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. The shares of the Corporation shall be represented
by certificates; provided, however, that the Board of Directors may provide
by resolution or resolutions that some or all of any or all classes or
series of the Corporation's stock shall be uncertificated shares. Certif-
icates of stock in the Corporation, if any, shall be signed by or in the
name of the Corporation by the Chairman of the Board, the Vice Chairman of
the Board, the Chief Executive Officer, the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation. Where a certificate is coun-
tersigned by a transfer agent, other than the Corporation or an employee of
the Corporation, or by a registrar, the signatures of the Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer, the
President or a Vice President and the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were such officer, transfer agent
or registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certifi-
cate of stock or uncertificated shares in place of any certificate therefor
issued by the Corporation to the person entitled thereto, cancel the old
certificate and record the transaction on its books.
Section 3. Replacement. In case of the loss, destruction or theft of
a certificate for any stock of the Corporation, a new certificate of stock
or uncertificated shares in place of any certificate therefor issued by the
Corporation may be issued upon
12
satisfactory proof of such loss, destruction or theft and upon such terms as
the Board of Directors may prescribe. The Board of Directors may in its
discretion require the owner of the lost, destroyed or stolen certificate,
or his legal representative, to give the Corporation a bond, in such sum
and in such form and with such surety or sureties as it may direct, to
indemnify the Corporation against any claim that may be made against it with
respect to a certificate alleged to have been lost, destroyed or stolen.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. The corporation shall indemnify its directors and offi-
cers, and may indemnify its agents and employees, to the full extent now or
hereafter permitted under the Certificate of Incorporation of the Corpora-
tion and under the General Corporation Law of the State of Delaware;
provided, however, that the corporation shall be required to indemnify an
officer or director in connection with an action, suit or proceeding
initiated by such person only if such action, suit or proceeding was autho-
rized by the corporation.
Section 2. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertak-
ing by or on behalf of such director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to
be indemnified by the Corporation under this article.
Section 3. The indemnification and advancement of expenses provided
by or granted pursuant to the other subsections of this Article shall not
be deemed exclusive or any other rights to which those seeking indemnifica-
tion or advancement of expenses may be entitled under any by-law, agree-
ment, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity
while holding such office.
Section 4. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partner-
ship, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not he would be entitled to indemnity
against such liability under the provisions of this Article.
13
Section 5. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 2. Corporate Seal. The corporate seal shall be in such form
as may be approved from time to time by the Board of Directors. The seal
may be used by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced.
Section 3. Waiver of Notice. Whenever any notice is required to be
given under law or the provisions of the Certificate of Incorporation or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent to notice.
ARTICLE VIII
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may
be adopted by the Board of Directors. The fact that the power to amend,
alter, repeal or adopt By-Laws has been conferred upon the Board of
Directors shall not divest the stockholders of the same powers.
14
EX-10
3
EXHIBIT 10.4
EXHIBIT 10.4
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (this "Amendment") is made and entered into
as of the 1st day of February, 1995 by and between GLENAYRE TECHNOLOGIES,
INC., a Delaware corporation formerly known as "N-W Group, Inc." (the
"Company"), and CLARKE H. BAILEY (the "Executive").
Statement of Purpose
The Company and the Executive have entered into (1) an Employment
Agreement dated December 3, 1990 (the "Employment Agreement"), (2) a Stock
Option Agreement dated as of December 3, 1990, as amended, with respect to
options awarded under the Company's 1987 Stock Option Plan (the "Option
Agreement (1987 Plan)"), (3) a Stock Option Agreement dated as of December
3, 1990, as amended, with respect to options awarded under the Company's
1991 Long-Term Incentive Plan (the "First Option Agreement (1991 Plan)")
and (4) a Stock Option Agreement dated as of November 10, 1992 with respect
to options awarded under the Company's 1991 Long-Term Incentive Plan (the
"Second Option Agreement (1991 Plan)"). The Option Agreement (1987 Plan),
the First Option Agreement (1991 Plan) and the Second Option Agreement
(1991 Plan) are collectively referred to herein as the "Option Agreements."
The Company and the Executive desire to amend the Employment Agreement and
the Option Agreements as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Statement of Purpose
and the mutual covenants and agreements herein contained, the parties
hereto agree as follows:
A. Amendments to Employment Agreement
1. Section 1(a) of the Employment Agreement is hereby amended to
read as follows:
"(a) During the term of this Agreement, the Executive will
serve in such executive position or positions with the Company as
shall be mutually acceptable to the Executive and the Company.
The Executive shall serve in such position or positions subject
to the supervision of the Board of Directors of the Company and
shall report to the Chairman of the Board of Directors of the
Company."
2. Section 1(b) of the Employment Agreement is hereby amended to
read as follows:
"(b) The Executive shall be nominated for a position on the
Board of Directors of the Company during his entire period of
employment hereunder. So long as he shall be a member of the
Board of Directors, the Execu-
tive shall serve as Vice Chairman of the Board of Directors of the
Company and/or as Chairman of the Executive Committee of the Board
of Directors of the Company. The Executive and the Company agree
that either such position shall satisfy the requirements of Section 1(a)
hereof."
3. Section 1(c) of the Employment Agreement is hereby amended to
read as follows:
"(c) During the term of this Agreement, the Executive shall
devote his attention and abilities to the business and affairs of
the Company in the capacity described in Section 1(a) or 1(b)
hereof, it being agreed, however, that the Executive may also
serve in executive position(s) with, and/or as director of, other
corporations as previously reported to and consented to by the
Company and as subsequently reported to and consented to by the
Company from time to time, provided that no such services shall
interfere with the performance by the Executive of his duties to
the Company hereunder."
4. Section 2 of the Employment Agreement is hereby amended to read
as follows:
"During the term of this Agreement, the Executive's princi-
pal place of employment (the "Principal Office") shall be in the
New York metropolitan area (including White Plains, N.Y.)."
5. The first sentence of Section 4 of the Employment Agreement is
hereby amended to read as follows:
"The Executive's basic salary ("Basic Salary") shall be at the
rate of $150,000 annually, payable in accordance with the Com-
pany's normal payroll practices."
6. Section 5 of the Employment Agreement is hereby amended to read
as follows:
"The Executive shall be paid such bonus by the Company, if
any, as shall be approved from time to time by the Board of
Directors of the Company or a Compensation Committee thereof in
its sole discretion."
7. Section 6 of the Employment Agreement is amended as set forth in
Paragraph 1 of Part B below.
2
8. Section 7 of the Employment Agreement is amended as set forth in
Paragraph 2 of Part B below.
9. Section 8(a) of the Employment Agreement is hereby amended to
read as follows:
"(a) The Executive expressly waives any right to participate
in any bonus, compensation, savings, stock purchase, stock option
or other incentive plans and programs and in any retirement,
life, medical/dental, disability insurance or other benefit plans
of the Company, regardless of whether he would otherwise qualify
under the eligibility requirements of the respective plan or
program, except as expressly (i) set forth in this Agreement or
(ii) awarded to him by the Board of Directors of the Company or a
Compensation Committee thereof."
10. Section 10(a) of the Employment Agreement is hereby amended to
read as follows:
"[Intentionally Omitted]"
11. Section 11(a) of the Employment Agreement is hereby amended by
deleting therefrom the following sentence: "The Executive's options and
SAR(s) shall be accorded the treatment provided by the provisions of this
Agreement."
12. Section 11(b) of the Employment Agreement is hereby amended to
read as follows:
"(b) In the event of the Executive's death or in the event
his employment shall be terminated by reason of disability, the
Executive's estate, the Executive or his legal representative, as
appropriate, shall be entitled to all salary, bonus and other
compensation entitlements hereunder which have been accrued for
him through the date of such termination, and the Company shall
be relieved of any obligation to make any other salary or bonus
payments provided hereunder."
13. Section 12(a)(1) of the Employment Agreement is hereby amended to
read as follows:
"(1) A significant diminution of, or the assignment to the
Executive of any duties or reporting responsibilities inconsis-
tent with, his status, duties or responsibilities in a position
which satisfies the requirements of Section 1(a) hereof. Without
limiting the generality of the foregoing, such a `diminution'
shall be deemed to occur (i) in the event of a change in the
Executive's place of employment to a location other than the
Principal Office (as defined in Section 2 hereof) or (ii) if
3
the Executive shall cease to be a member of the Board of Directors of
the Company unless the Executive refuses to be nominated as a
director or resigns without Good Reason as a director of the
Company."
14. Section 12(a)(2) of the Employment Agreement is hereby amended to
read as follows:
"(2) A failure by the Company to continue in effect for the
Executive any of the plans or benefits provided for Executive
hereunder, which by itself or in the aggregate is material to the
Executive's total compensation, unless there shall have been
instituted a comparable replacement or substitute plan or benefit
which is reasonably satisfactory to the Executive and which has
been agreed to in writing by the Executive."
15. Section 12(b) of the Employment Agreement is hereby amended to
read as follows:
"(b) In the event that the Company terminates the employment
of the Executive without Cause prior to the expiration of the
then current term of this Agreement or in the event that the
Executive resigns his employment for Good Reason, the Company,
within 10 days after such termination, shall pay to the Executive
in a lump sum as liquidated damages, and not as a penalty, the
Executive's then existing Basic Salary for the remainder of the
term of this Agreement."
16. The parties confirm that Section 12(c) of the Employment Agree-
ment has been deleted in its entirety.
17. Section 13(b) of the Employment Agreement is hereby amended to
read as follows:
"(b) In the event that the Executive terminates his employ-
ment by reason of a Change in Control of the Company, the Compa-
ny, within 10 days after such termination, shall pay to the
Executive in a lump sum as liquidated damages, and not as a
penalty, the Executive's then existing Basic Salary for the
remainder of the term of this Agreement."
18. The parties confirm that Section 13(c) of the Employment Agree-
ment has been deleted in its entirety.
4
19. Any notices or consents to be given to the Executive pursuant to
Section 17 of the Employment Agreement shall be addressed to him as
follows:
Clarke H. Bailey
10 Oxford Road
Larchmont, New York 10538
Any notices or consents to be given to the Company pursuant to Section 17
of the Employment Agreement shall be addressed to the Company as follows:
Glenayre Technologies, Inc.
4201 Congress Street, Suite 455
Charlotte, North Carolina 28209
Attention: Chief Executive Officer
20. The Executive acknowledges and agrees no event has occurred prior
to the date hereof which constitutes "Good Reason" (as defined in Section
12(a) of the Employment Agreement) or a "Change in Control" of the Company
(as defined in Section 13(a) of the Employment Agreement), which in either
case would entitle the Executive to terminate his employment under the
Employment Agreement and to be paid certain payments under Section 12 or 13
of the Employment Agreement, as applicable.
21. Except as expressly amended hereby, the Employment Agreement
shall continue in full force and effect.
B. Amendments to Option Agreements
1. The Company and the Executive confirm that all options awarded to
the Executive under the Option Agreement (1987 Plan) are now fully vested.
The Company and the Executive confirm that, as a result of the Option
Agreement (1987 Plan), the Employment Agreement was amended to the extent
set forth in the Option Agreement (1987 Plan). Section 6(b) of the
Employment Agreement is hereby deleted in its entirety so that the Execu-
tive (or his legal representative) may exercise any of the options awarded
to him under the Option Agreement (1987 Plan) at any time on or before
December 3, 2000 (regardless of whether the Executive's employment by the
Company has previously terminated, or the reason therefor, or whether the
Executive has ceased to provide any services to the Company, or the reason
therefor).
2. The Company and the Executive confirm that all options awarded to
the Executive under the First Option Agreement (1991 Plan) are now fully
vested. The Company and the Executive confirm that, as a result of the
First Option Agreement (1991 Plan), the Employment Agreement was amended to
the extent set forth in the First Option Agreement (1991 Plan). Section
7(c) of the Employment Agreement is hereby deleted in its entirety so that
the Executive
5
(or his legal representative) may exercise any of the options
awarded to him under the First Option Agreement (1991 Plan) at any time on
or before May 14, 2001 (regardless of whether the Executive's employment by
the Company has previously terminated, or the reason therefor, or whether
the Executive has ceased to provide any services to the Company, or the
reason therefor.) Section 7(d) of the Employment Agreement is hereby
deleted in its entirety.
3. The Company and the Executive confirm that all options awarded to
the Executive under the Second Option Agreement (1991 Plan) are now fully
vested. Section 6 of the Second Option Agreement (1991 Plan) is hereby
deleted in its entirety so that the Executive (or his legal representative)
may exercise any of the options awarded to him under the Second Option
Agreement (1991 Plan) at any time on or before November 10, 2002 (regard-
less of whether the Executive's employment by the Company has previously
terminated, or the reason therefor, or whether the Executive has ceased to
provide any services to the Company, or the reason therefor).
4. Except as expressly amended hereby, the Option Agreements shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
By: s/Ramon D. Ardizzone
Title: President and Acting Chief
Executive Officer
s/C. H. Bailey
Clarke H. Bailey
6
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4
EXHIBIT 10.6
EXHIBIT 10.6
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made and
entered into as of the 8th day of December, 1994 by and between GLENAYRE
TECHNOLOGIES, INC., a Delaware corporation formerly known as "N-W Group,
Inc." (the "Corporation"), and JOHN J. HURLEY (the "Executive").
Statement of Purpose
The Corporation and the Executive entered into an Employment Agreement
dated as of November 10, 1992 (the "Employment Agreement"). The Corpora-
tion and the Executive desire to amend the Employment Agreement as herein-
after set forth.
NOW, THEREFORE, in consideration of the foregoing Statement of Purpose
and the terms and provisions of this Agreement, the parties hereto agree as
follows:
4. Paragraph 1(a) of the Employment Agreement is hereby amended to
read as follows:
"The Corporation hereby employs the Executive, and the Executive
hereby agrees to serve, as Vice Chairman of the Board of Direc-
tors of the Corporation (the "Board"). The Executive shall be
nominated for re-election to a new three-year term as a member of
the Board at the Corporation's 1995 annual shareholders' meet-
ing."
5. The first sentence of Paragraph 1(b) of the Employment Agreement
is hereby amended to read as follows:
"In such capacity, the Executive agrees to perform such duties
and exercise such powers commensurate with his office as may be
vested in him by the Bylaws of the Corporation and to furnish to
the Corporation such services of an advisory or consulting nature
with respect to the Corporation's business and affairs as the
Corporation may reasonably call upon him to furnish and as his
health may permit."
6. Paragraph 1(b)(1) of the Employment Agreement is hereby amended
to read as follows:
"(1) [Intentionally omitted]"
7. The second sentence of Paragraph 2(a) of the Employment Agreement
is hereby amended to read as follows:
"The term of the Executive's employment hereunder may be renewed
on terms mutually acceptable to the Corporation
and the Executive, unless written notice is given by either party to the
other party not later than 30 days prior to the expiration of the
initial term."
8. Paragraph 2(b)(2) of the Employment Agreement is hereby amended
to read as follows:
"(2) The Executive may terminate his employment hereunder
upon the Executive's "Total and Permanent Disability" (as defined
in Paragraph 2(d) below)."
9. Paragraph 2(c)(1) of the Employment Agreement is hereby amended
to read as follows:
"(1) the Executive's resignation from the office of Vice
Chairman of the Board without its prior consent for any reason
other than the Executive's "Total and Permanent Disability";"
10. Paragraph 2(e)(1) of the Employment Agreement is hereby amended
to read as follows:
"(1) except where such failure or change is specifically
approved by the Executive (whether as a member of the Board or
individually), failure to elect or reelect or to appoint or
reappoint the Executive to the office of Vice Chairman of the
Board, or any other material change by the Corporation of the
Executive's functions, duties or responsibilities which would
cause the ranking or level, dignity, responsibility, importance
or scope of the Executive's position with the Corporation to
become of less dignity, responsibility, importance or scope from
the position and attributes thereof described in Paragraph 1
above; provided, however, that the Executive must first (i)
provide the Board with written notice specifying the particular
failure of the Corporation under this Paragraph 2(e)(1), and (ii)
allow the Board 60 days from receipt of notice to cure such
failure;"
11. Paragraph 2(f)(2) of the Employment Agreement is hereby amended
to read as follows:
"(2) In the event that the Executive's employment hereunder
is terminated prior to January 1, 1995 (i) by the Executive
because of the Executive's "Total and Permanent Disability"
pursuant to Paragraph 2(b)(2) above, (ii) because of the Execu-
tive's death pursuant to Paragraph 2(b)(4) above or (iii) by the
Executive for "Good Reason" pursuant to Paragraph 2(b)(3) above,
then and in any such event, the Corporation shall also pay to the
Executive a pro rata share of his Incentive Bonus
2
(less any prior payments thereof) under the President's Incentive Bonus
Plan described in Paragraph 3(b) below for the fiscal year of the
Corporation in which such termination occurs, calculated under
the assumption that the Corporation's "Operating Income" (as
defined in such Plan) equals the "Operating Income" for the
period from the first day of such fiscal year through the last
day of the calendar month prior to such termination, multiplied
by a fraction the numerator of which is 12 and the denominator of
which is the number of full calendar months in such fiscal year
prior to such termination."
12. Paragraph 2(f)(4) of the Employment Agreement is hereby amended
to read as follows:
"(4) In the event that the Executive's employment hereunder
is terminated by the Executive on account of the Executive's
Total and Permanent Disability, then the Corporation shall pay to
the Executive (or to the Executive's beneficiary) the sum of
$250,000."
13. Paragraph 2(f)(5) of the Employment Agreement is hereby amended
to read as follows:
"(5) In the event that the Executive's employment is
terminated upon expiration of the initial term on November 10,
1995, then:
"(A) the Corporation shall pay to the Executive (or
the Executive's beneficiary) the sum of $250,000 if the
Executive then has a Total and Permanent Disability (as
determined pursuant to Paragraph 2(d) above but with refer-
ence to the ability of the Executive to perform the duties
of Chief Executive Officer of the Corporation); or
"(B) the Corporation shall pay to the Executive (or
the Executive's beneficiary) the sum of $122,475.60 if (i)
the Executive does not then have a Total and Permanent
Disability (as determined pursuant to Paragraph 2(f)(5)(A)
above) and (ii) the Executive is willing to negotiate an
employment agreement with the Corporation on terms substan-
tially similar to this Agreement (prior to amendment) but
the Corporation does not desire to extend the Executive's
employment with the Corporation on such terms; or
"(C) the Corporation shall not be obligated to pay the
Executive (or the Executive's beneficiary) any amount under
this Paragraph 2(f)(5) if (i) the Executive does not then
have a Total and Perma-
3
nent Disability (as determined pursuant to Paragraph 2(f)(5)(A)
above) and (ii) the Executive refuses to negotiate with the
Corporation for an employment agreement with terms substantially
similar to this Agreement (prior to amendment)."
14. Paragraph 3(a) of the Employment Agreement is hereby amended to
read as follows:
"(a) Base Salary. The Corporation shall pay to the Execu-
tive as a Base Salary an amount which, when combined with any
payments received by the Executive under the Corporation's Long-
Term Disability Plan, shall equal on an after tax basis an amount
which is approximately equivalent to a Base Salary of $244,951.-
20, payable in accordance with the Corporation's normal payroll
practices."
15. Paragraph 3(b) of the Employment Agreement is hereby amended to
read as follows:
"(b) President's Incentive Bonus Plan. Through December 31,
1994, the Executive shall participate in the President's Incen-
tive Bonus Plan, a copy of which is attached hereto as Exhibit A
and hereby made a part hereof. Beginning on January 1, 1995, the
Executive shall not participate in the President's Incentive
Bonus Plan."
16. The following new subparagraph (6) is hereby added to the end of
Paragraph 2(f) of the Employment Agreement:
"(6) In the event that the Executive's employment hereunder
is terminated for any reason, then the Executive (and his depen-
dents) shall be entitled to participate in the Corporation's
Retiree Medical Plan, as amended from time to time, notwithstand-
ing any otherwise applicable eligibility requirements of, or
limitations on the term of participation in, the Corporation's
Retiree Medical Plan."
17. Paragraph 3(g) of the Employment Agreement shall be amended to
read as follows:
"(g) [Intentionally Omitted]"
18. Paragraph 3(h) of the Employment Agreement shall be amended to
read as follows:
"(h) [Intentionally Omitted]"
4
19. The Executive acknowledges and agrees that no event has occurred
prior to the date hereof which constitutes "Good Reason" (as defined in
Paragraph 2(e) of the Employment Agreement), including without limitation a
"Change in Control", as defined in Paragraph 2(e)(6) of the Employment
Agreement), which would entitle the Executive to terminate his employment
under the Employment Agreement and to be paid certain payments under
Paragraph 2(f) of the Employment Agreement.
20. Except as expressly amended hereby, the Employment Agreement
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
By: s/C. H. Bailey
Title: Vice Chairman
s/John J. Hurley
John J. Hurley
5
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5
EXHIBIT 10.8
EXHIBIT 10.8
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into as of the 9th day of March, 1995, by and between GLENAYRE
TECHNOLOGIES, INC., a Delaware corporation formerly known as "N-W Group,
Inc." (the "Corporation"), and RAMON D. ARDIZZONE, a resident of Charlotte,
North Carolina (the "Executive").
Statement of Purpose
The Corporation and the Executive entered into an Employment Agreement
dated as of November 10, 1992 (the "Employment Agreement"). The Corpora-
tion and the Executive desire to amend the Employment Agreement in certain
respects as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Statement of Purpose
and the terms and provisions of this Amendment, the parties hereto agree as
follows:
1. The following new subparagraph (6) is hereby added to the end of
Paragraph 2(f) of the Employment Agreement:
"(6) In the event the Executive's employment hereunder is
terminated for any reason whatsoever other than termination by
the Corporation for "Cause," the Executive (and his dependents)
shall be entitled to participate in the Corporation's Retiree
Medical Plan, as amended from time to time, notwithstanding any
otherwise applicable eligibility requirements of, or limitations
on the term of participation in, said Retiree Medical Plan, until
the earlier of:
(i) the date on which the Executive becomes
covered under any other group health plan as an employ-
ee; or
(ii) with respect to the Executive's participation
in the Retiree Medical Plan, the Executive's death or
with respect to a dependent's participation in the
Retiree Medical Plan, the dependent's death."
2. Except as expressly amended hereby, the Employment Agreement
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
By: s/ C. H. Bailey
Title: Vice Chairman
s/ Ramon D. Ardizzone
Ramon D. Ardizzone
2
EX-10
6
EXHIBIT 10.9
EXHIBIT 10.9
EXECUTIVE SEVERANCE BENEFIT AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFIT AGREEMENT (this "Agreement") is made
and entered into as of the 1st day of February, 1995, by and between
GLENAYRE TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and
STAN CIEPCIELINSKI (the "Executive").
Statement of Purpose
It is important to the success of the Company that it continues to
have the benefit of the services of experienced management personnel such
as the Executive. It is therefore desirable and in the best interest of
the Company that, in the event of any prospective change in control of the
Company, the Executive be reasonably secure in the Executive's position
with the Company so that the Executive can exercise independent judgment
for the best interests of the Company and its shareholders, without concern
for the security of the Executive's own continued employment with the
Company. For such purpose, the Company and the Executive are entering into
this Agreement to provide compensation to the Executive in certain events
in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the Statement of Purpose and the
mutual covenants and agreements hereinafter set forth, the Company and the
Executive do hereby agree as follows:
21. Definitions and Construction.
(a) Definitions. As used herein, the following terms shall have the
following meanings:
"Board" means the Board of Directors of the Company.
"Cause" means (1) dishonesty or fraud on the part of the Executive
which is intended to result in the Executive's substantial personal
enrichment at the expense of the Company or its affiliates; (2) a material
violation of the Executive's responsibilities as an executive of the
Company or its subsidiaries which is willful and deliberate; or (3) the
conviction (after the exhaustion of all appeals) of the Executive of a
felony involving moral turpitude or the entry of a plea of nolo contendere
for such a felony. However, "Cause" shall not include (i) any personal or
policy disagreement between the Executive and the Company or any member of
the Board or (ii) any action taken by the Executive in connection with the
Executive's duties if the Executive acted in good faith and in a manner the
Executive reasonably believed to be in the best interest of the Company and
had no reasonable cause to believe the Executive's conduct was unlawful.
"Change in Control" means a change in the beneficial ownership of the
Company's voting stock or a change in the composition of the Board which
occurs as follows:
(1) any "person" (as such term is used in Section 13(d) of the
Exchange Act), other than a trustee or other fiduciary of securities held
under an employee benefit plan of the Company or any of its subsidiaries,
is or becomes a beneficial owner, directly or indirectly, of stock of the
Company representing 25 percent or more of the total voting power of the
Company's then outstanding stock in one or a series of transactions that
are not approved by the Board and the Executive prior to such person
becoming a 25 percent beneficial owner;
(2) a tender offer (for which a filing has been made with the
Securities and Exchange Commission ("SEC")) which purports to comply with
the requirements of Section 14(d) of the Exchange Act and the corresponding
SEC rules) is made for the stock of the Company, which has not been
negotiated and approved by the Board and the Executive, provided that in
case of a tender offer described in this paragraph (2), the Change in
Control will be deemed to have occurred upon the first to occur of:
(i) any time during the offer when the person (using the
definition in (1) above and in Section 14(d)(2) of the Exchange
Act) making the offer owns or has accepted for payment stock of
the Company representing 25 percent or more of the total voting
power of the Company's stock; or
(ii) three business days before the offer is to terminate
unless the offer is withdrawn first, if the person (using the
definition in (1) above) making the offer could own, by the terms
of the offer plus any shares owned by such person, stock repre-
senting 50 percent or more of the total voting power of the Com-
pany's stock when the offer terminates; or
(3) individuals who were the Board's nominees for election as
directors of the Company immediately prior to a vote or consent of the
stockholders of the Company involving a contest for the election of
directors shall not constitute a majority of the Board following the
election.
"Disability" means the inability of the Executive, due to the condi-
tion of the Executive's physical, mental or emotional health, to regularly
and satisfactorily perform the duties of the Executive's responsibilities
as an executive of the Company or its subsidiaries for a continuous period
in excess of three months. If the existence of the Executive's Disability
shall be disputed by either party, the determination by a physician duly
licensed to practice medicine that such Disability exists shall be
necessary to
2
establish such Disability, unless the Executive refuses to submit
to appropriate examinations at the request of the Board, in which case the
determination of the Board in good faith and after the requisite period of
Disability shall be conclusive as to whether such Disability exists.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Good Reason" means the occurrence of any of the following without the
Executive's express written consent: (1) a significant change in the nature
or the scope of the Executive's authority as in effect immediately prior to
a Change in Control; (2) an assignment to the Executive of duties (or a
change in the Executive's title resulting in duties) which are materially
inconsistent with the Executive's status, duties or responsibilities
immediately prior to a Change in Control; (3) a reduction in the Execu-
tive's rate of base salary; or (4) a change (or the requirement by the
Company of a change) in the principal location where the Executive is
required to perform services.
"Retirement" means the termination of the Executive's employment with
the Company on or after the Executive attains 65 years of age.
"Termination of Employment" means the termination of the Executive's
employment with the Company and its subsidiaries for any reason other than
(1) the Executive's death, (2) the Executive's Disability, (3) the Execu-
tive's Retirement, (4) the termination by the Company of the Executive's
employment for Cause or (5) the Executive's voluntary termination of
employment other than for Good Reason.
(b) Construction. Paragraph headings and subheadings have been
inserted herein for convenience of reference only and shall not be deemed
to have any legal effect whatsoever in the interpretation of this Agree-
ment. As used herein, the singular shall include the plural and the plural
the singular, the word "any" means one or more or all, and the conjunction
"or" includes both the conjunctive and the disjunctive.
2. Severance Benefits. If a Change in Control occurs and if the
Executive's Termination of Employment occurs within three years after the
Change in Control, the Company shall pay to the Executive, within 10 days
after such termination, in cash or equivalent a lump sum severance benefit
equal to (i) 140% of the Executive's base salary in effect on such termina-
tion date (or if the base salary was then greater, on the date immediately
preceding the date of the Change in Control), plus (2) a pro rata share of
any bonus in which the Executive participates for the fiscal year of the
Company in which such termination occurs, calculated under the assumption
that all objectives and goals for the payment of such
3
bonus are met. The Executive shall also be entitled to the sum of (1) the
Executive's accrued but unpaid base salary through the date of such termination,
plus (2) the Executive's accrued but unpaid vacation pay through such date,
plus (3) any other compensation payments or benefits which have accrued and are
payable in connection with such termination. In addition, the Company will take
such steps as may be necessary to ensure that the Executive and the
Executive's dependents continue to receive pursuant to the requirements of
COBRA or otherwise, for a period of 18 months after the Executive's
termination of employment, group health insurance benefits at the same or a
higher level as in effect on the date of such termination; furthermore, the
Company agrees to pay the full premium for such coverage for a period of 12
months after such termination of employment; provided, however, that the
obligations of the Company to provide such group health benefits for said
18-month period and to pay for such benefits for said 12-month period shall
terminate upon the employment of the Executive by another company which
provides the Executive and the Executive's dependents with substantially
similar group health benefits (and does not contain any exclusion or
limitation with respect to any preexisting condition of the Executive or
the Executive's dependents) as those provided hereunder.
3. Legal Expenses. The Company agrees to pay any reasonable legal
expenses incurred by the Executive in connection with the enforcement of
this Agreement or any determination of the validity of this Agreement.
4. Effect of Agreement on Other Rights. This Agreement shall not be
construed to provide the Executive with any right of continued employment
by the Company or its subsidiaries. This Agreement shall not diminish or
increase other rights the Executive (or the Executive's heirs or legal
representatives) may have under any other contract, employee benefit plan
or policy of the Company except as expressly provided in this Agreement.
5. Assignment. Neither this Agreement nor any rights or benefits
hereunder shall be assignable, either voluntarily or involuntarily, by the
Executive, except that all rights of the Executive under this Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives and heirs.
6. Notices. All notices and other communications hereunder to a
party hereto shall be in writing and, except as otherwise expressly
provided herein, shall be deemed to have been duly given when placed in the
United States mail by registered or certified mail, return receipt request-
ed, postage prepaid, addressed to such party as follows:
4
As to the Company: Glenayre Technologies, Inc.
4201 Congress Street, Suite 455
Charlotte, North Carolina 28209
Attention: Chief Executive Officer
As to the Executive: Stan Ciepcielinski
632 Stanhope Lane
Matthews, NC 28105
Either party hereto may change such party's address (and in the case of the
Company the title of the person to whose attention communications hereunder
shall be directed) from time to time by serving notice thereof upon the
other party hereto as provided herein.
7. Survival. The provisions of this Agreement shall survive the
termination of the Executive's employment with the Company and its subsid-
iaries regardless of the date, cause or manner of such termination, and
such termination shall not impair or otherwise affect the Executive's
rights to the severance benefits to the extent set forth in Paragraph 2.
8. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof and
all prior or contemporaneous oral or written agreements or instruments are
merged herein. No amendment to or modification of this Agreement shall be
effective unless in writing and signed by both parties hereto.
9. Severability. If any provision of this Agreement is declared
invalid or unenforceable as a matter of law, such in-validity or unenforce-
ability shall not affect or impair the validity or enforceability of any
other provision of this Agreement or the remainder of this Agreement as a
whole.
10. Law Applicable. The construction, interpretation and validity of
this Agreement shall be determined in accordance with and governed by the
laws of the State of North Carolina.
11. Freedom of the Company to Act. No provision of Agreement shall
be deemed to restrict the absolute right of the Company at any time to sell
or dispose of all or any part of its business or assets, or to reconstitute
the same into any one or more subsidiaries or to merge, consolidate, sell
or otherwise dispose of said subsidiaries or any of the assets thereof.
12. Execution. This Agreement is hereby executed in multiple
originals, one of which is being retained by each of the parties hereto and
each of which shall be deemed an original hereof.
5
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officers and its corporate seal to be hereunto
affixed and the Executive has hereunto set the Executive's hand and seal,
all as of the day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
[CORPORATE SEAL]
ATTEST: By: s/Ramon D. Ardizzone
Title: President and Acting
Chief Executive Officer
s/Billy C. Layton
Assistant Secretary
s/Stan Ciepcielinski [SEAL]
Stan Ciepcielinski
6
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7
EXHIBIT 10.13
EXHIBIT 10.13
THIRD AMENDMENT TO
ET SECURITIES AGREEMENT
This THIRD AMENDMENT TO ET SECURITIES AGREEMENT (this "Amendment") is
made as of March 9, 1995 by and between GLENAYRE TECHNOLOGIES, INC.
(formerly "N-W Group, Inc."), a Delaware corporation ("N-W"), and each of
the persons whose name is subscribed to this Amendment (each a "GEM
Employee" and collectively the "GEM Employees"). Capitalized terms used
herein without definition shall have the meanings herein as set forth in
that certain ET Securities Agreement dated as of November 10, 1992, as
amended by the First Amendment to ET Securities Agreement dated as of
December 29, 1992 and the Second Amendment to ET Securities Agreement dated
as of March 17, 1994 (collectively, the "ET Securities Agreement") by and
between the parties hereto.
R E C I T A L S:
WHEREAS, the parties hereto entered into the ET Securities Agreement;
and
WHEREAS, the parties hereto desire to amend the ET Securities Agree-
ment to release all restrictions on the transferability of the "$11.00
Shares" (as defined in the ET Securities Agreement) pursuant to Section 3
of the ET Securities Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties agree as
follows:
22. Amendments. The ET Securities Agreement is hereby amended as
follows:
(a) Section 3 of the ET Securities Agreement is hereby deleted
in its entirety and the following is hereby substituted in lieu thereof:
"3. [Intentionally Omitted]"
(b) Section 7(e) of the ET Securities Agreement is hereby
deleted in its entirety and the following is hereby substituted in lieu
thereof:
"(e) [Intentionally Omitted]"
(c) Section 7(k) of the ET Securities Agreement is hereby
amended to provide that any notice to be mailed to N-W shall be mailed to
the following address: 4201 Congress Street, Suite 455, Charlotte, North
Carolina 28209, Attention: Corporate Secretary.
7
23. Reference to and Effect on the ET Securities Agreement.
(a) Each reference in the ET Securities Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import
referring to the ET Securities Agreement shall mean and be a reference to
the ET Securities Agreement, as amended by this Amendment.
(b) The ET Securities Agreement, as amended by this Amendment,
shall remain in full force and effect and is hereby ratified and confirmed.
24. Miscellaneous.
(a) Binding Agreement. This Amendment shall bind and inure to
the benefit of the successors, assigns, personal representatives, heirs and
legatees of each GEM Employee and N-W; provided, however, that a GEM
Employee may not assign any of the GEM Employee's rights or obligations
hereunder without the prior written consent of N-W in each instance.
(b) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York without
regard to the conflicts of laws rules thereof.
(c) Entire Agreement. This Amendment, together with the ET
Securities Agreement, constitutes the entire agreement and understanding
among the parties pertaining to the subject matter hereof and supersedes
any and all prior agreements, whether written or oral, relating thereto.
(d) Headings. Introductory headings at the beginning of each
section of this Amendment are solely for the convenience of the parties and
shall not be deemed to be a limitation upon or description of the contents
of any such section.
(e) Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
8
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the day and year first above written.
GLENAYRE TECHNOLOGIES, INC.
s/Ramon D. Ardizzone
Ramon D. Ardizzone
President
GEM EMPLOYEES
s/John Hurley
John Hurley
s/Ramon D. Ardizzone
Ramon D. Ardizzone
s/Phil Bradley
Phil Bradley
s/Gary Smith
Gary Smith
s/Dan Case
Dan Case
s/Eric White
Eric White
s/Michael Hodson
Michael Hodson
9
EX-10
8
EXHIBIT 10.16
Exhibit 10.16
Glenayre Management By Objective Plan
for the year ended
December 31, 1995
In accordance with Instruction 2 of Item 402(k) of Regulation S-K, certain
information relating to target levels and factors involving confidential
business information, the disclosure of which would have an adverse effect on
Registrant, has been omitted from this Exhibit.
1
GLENAYRE TECHNOLOGIES, INC.
MANAGEMENT BY OBJECTIVE (MBO) PLAN
FOR THE YEAR ENDED DECEMBER 31, 1995
The Management By Objectives Plan (the "Plan") is established to motivate
and provide incentive to the key operations managers of Glenayre Technologies,
Inc. and its wholly-owned subsidiaries around the world ("the Company") to
improve profits over budgeted amounts.
MINIMUM AND MAXIMUM PERFORMANCE
The focus of the Plan is for "Earnings" to exceed $ US, i.e., the top level
of annualized "Earnings" of Glenayre Technologies, Inc. required to maximize
the 1995 MBO payment, where "Earnings" is defined as Income from Operations plus
Goodwill Amortization Expense.1 The 1995 Minimum Annual Target of annualized
Earnings for any MBO payments to be made has been set at $ US. These Targets
have been established by the Board of Directors.
This Plan is only valid and funds will only be paid if the Company's
Quarterly and Annual 1995 Earnings exceed the respective quarterly Minimum
Targets described below.
EMPLOYMENT TERM
All participants must remain as full-time employees of the Company for the
full year ending December 31, 1995.
PARTICIPANTS
Each Plan participant will have a maximum potential MBO bonus, as
established by management, and approved annually by the Board of Directors,
ranging from % to % of his/her respective Base Annual Salary. An employee may
only participate in one bonus or incentive pay program within the Company.
Any additions or changes to the 1995 MBO Plan participants must have
advance approval of the President. An individual who becomes eligible to
participate in the Plan after the first of the Plan year at any level will be
paid on a prorated basis for the period of time that he/she participates in the
Plan. Also, if an approved change occurs for a Plan participant, such change
will be implemented prospectively from the effective date of the change.
PERFORMANCE MEASUREMENT FOR BONUS PAYMENT
An individual's actual Bonus payments will be based on the following two
Performance
Measurement Segments:
* 70% of the Bonus will be based on the Company achieving the Earnings
Target used to establish the Payment Pool, as defined below ("Earnings
Segment").
* 30% of the Bonus will be based on achievement of Individual Objectives as
provided on the Glenayre Performance Appraisal form ("Performance Segment").
1 "Earnings" does not include the impact of interest income or expense,
exchange gain/(loss), other income/(loss), income taxes or investment tax
credits, any real estate transactions and expenses, and business unit
disposal or acquisition costs.
2
Each individual must have at least three measurable objectives stated on the
Glenayre Performance Appraisal form, as established in a partnership manner
between the employee and his/her manager, in order for him/her to participate.
The achievement of these objectives will be monitored by the employee's
respective supervisor.
BONUS PAYMENTS
Bonus payments will be made on a quarterly basis in 1995 based on the
following parameters:
- Achievement of Board-MINIMUM quarterly cumulative Earnings Targets, as
defined below:
Calendar Cumulative Target
Quarter % of Cumulative Minimum
Annual Minimum Target Earnings
1 25% $ US
2 50% $ US
3 75% $ US
4 100% $ US
-If the MAXIMUM quarterly cumulative Earnings Targets, as defined below, are
not met, all individual bonus payments will be made on a pro rata basis.
Calendar Cumulative Target Cumulative
Quarter % of Maximum
Annual Maximum Target Earnings
1 25% $ US
2 50% $ US
3 75% $ US
4 100% $ US
--No portion of the Performance Segment, (i.e., the 30% portion, as defined
under Performance Measurement) is paid out until the year end bonus payment is
made, as described below.
--The Earnings Segment of the 1995 bonus payment (i.e., the 70% portion as
defined under Performance Measurement) has the following cumulative quarterly
limitations on the amount that will actually be paid in a given quarter:
Calendar
Quarter Cumulative Limitation
1st 50% of cumulative bonus
2nd 50% of cumulative bonus
3
3rd 70% of cumulative bonus
Year End Balance of cumulative bonus
EXAMPLE OF BONUS PAYMENT ON THE EARNINGS SEGMENT (I.E., THE 70% SEGMENT)
BEFORE YEAR END:
A Plan participant with a Base Annual Salary of $ per year who is employed
for the full year with a maximum potential MBO bonus percentage of Base Annual
Salary of % has a total 1995 bonus potential of $ , i.e., $ Salary times %
Maximum potential MBO bonus percentage.
This maximum $ bonus potential would be paid out if all Targets are met as
follows:
- 70% (i.e., $ ) on fully achieving the pro rata portion of the top level
Earnings Objective of $ US
- 30% (i.e., $ ) on fully achieving Individual Objectives of the Performance
Segment
Based on this allocation, the potential bonus available to be paid for the
Earnings Segment of the Plan before year end is as follows:
Quarterly Maximum Estimated
Calendar Cumulative Cumulative Payment
Quarter Limitation Calculation Potential Date
(1)
1st 50% $ $ May 1995
2nd 50% $ August 1995
3rd 70% $ November 1995
(1) Assumes 100% of the cumulative top level Earnings Target is achieved.
These amounts do not include any amounts for achievement of individual
objectives under the Performance Segment which is determined and paid out after
year end. Also, each quarter's payment as calculated above is reduced by any
previously received payments under the Plan.
YEAR END MBO BONUS PAYMENT
The Year End MBO Bonus payment for 1995, as described in the example below,
will be made within forty-five (45) days after the audit completion and Board
approval of the Company's 1995 year-end financial statements.
The Year End MBO Bonus payment will be comprised of two segments. The
following formulae reflects achieving 100% of the top level Target Earnings
Objective of $ US. If less than 100% of such Objective is achieved, the Year
End MBO Bonus will be reduced on a pro rata basis. The formulae are as follows:
Target Earnings Segment (i.e., the 70% segment):
((1995 Base Annual Salary) X (Individual's % of Base Pay for Bonus) X (70%)
X (% of Target Earnings Achieved))
Less (1995 Bonus Amounts Previously Paid)
Equals Final "Earnings Segment" Bonus
4
Individual Performance Segment (i.e., the 30% segment):
((1995 Base Salary) X (Individual's % of Base Pay for Bonus) X (30%)
X (Achievement % of Individual Objectives) X (% of Target Earnings Achieved)
Equals Final "Performance Segment" Bonus
The sum of these two segments represents the total final 1995 Year End MBO
Bonus amount to be paid.
5
EX-10
9
EXHIBIT 10.20
EXHIBIT 10.20
AMENDMENT, EFFECTIVE JULY 1, 1994, TO GLENAYRE TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Glenayre Technologies, Inc. Employee Stock Purchase Plan (the
"Plan") was amended as follows: the first sentence of Article IV, Para-
graph 1 of the Plan was amended effective as of July 1, 1994 to read as
follows:
"Any Member may contribute on a monthly basis in any Six-Month
Period toward the purchase of Glenayre Common Shares for his
account under the Plan, an amount which shall not exceed 10% of
his Salary during each month."
EX-11
10
EXHIBIT 11
Exhibit 11
GLENAYRE TECHNOLOGIES, INC.
Computation of Earnings per Common Share
For the Three Years Ended December 31, 1994(1)
(In Thousands Except per Share Amounts)
Year Ended December 31,
1994 1993 1992
Income from continuing operations
before extraordinary item $ 33,095 $ 23,700 $ 865
Gain (loss) from discontinued operations 388 100 (7,990)
Income (loss) before extraordinary item 33,483 23,800 (7,125)
Extraordinary item -- (1,695) --
Net income (loss) $ 33,483 $ 22,105 $ (7,125)
Primary Earnings Per Share
Weighted average shares outstanding
during the period 24,448 20,161 16,670
Add incremental shares from:
- 1987 Stock Option Plan 295 408 --
- Long-Term Incentive Plan 1,344 1,119 --
- Common Stock Warrants -- 265 --
- Employee Stock Purchase Plan 3 2 --
Total 26,090 21,955 16,670
Continuing operations $ 1.27 $ 1.08 $ .05
Discontinued operations .01 -- (.48)
Income (loss) before extraordinary item 1.28 1.08 (.43)
Extraordinary item -- (.07) --
Net income (loss) per share $ 1.28 $ 1.01 $ (.43)
Fully Diluted Earnings Per Share
Weighted average shares outstanding
during the period 24,448 20,161 16,670
Add incremental shares from:
- 1987 Stock Option Plan 300 447 --
- Long-Term Incentive Plan 1,378 1,245 --
- Common Stock Warrants -- 314 --
- Employee Stock Purchase Plan 4 2 --
Total 26,130 22,169 16,670
Continuing operations $ 1.27 $ 1.07 $ .05
Discontinued operations .01 -- (.48)
Income (loss) before extraordinary item 1.28 1.07 (.43)
Extraordinary item -- (.07) --
Net income (loss) per share $ 1.28 $ 1.00 $ (.43)
(1) Financial information contained in this report has been adjusted
for a three-for-two common stock split distributed on January 5,
1995.
EX-21
11
EXHIBIT 21
Exhibit 21
GLENAYRE TECHNOLOGIES, INC.
SUBSIDIARIES OF THE COMPANY
Company Jurisdiction of Incorporation
Glenayre Electronics, Inc. Colorado, U.S.A.
Glenayre Manufacturing Ltd. Canada
Glenayre R & D, Inc. Canada
Glenayre Electronics Singapore PTE Ltd. Singapore
Glenayre Electronics (U.K.) Limited United Kingdom
Glenayre Digital Systems, Inc. North Carolina, U.S.A.
Glenayre Services Ltd. Canada
Glenayre Electronics (India) Private Ltd. India
Glenayre de Mexico SA de CV Mexico
Glenayre Administracion SA de CV Mexico
Genera Hawaii Commerce Corp. Hawaii, U.S.A.
Headway Colorado, Inc. Colorado, U.S.A.
Headway Hawaii, Inc. Hawaii, U.S.A.
Headway Texas, Inc. Texas, U.S.A.
Sunway Financial Services, Inc. Texas, U.S.A.
Sunway Management, Inc. Texas, U.S.A.
Voyager Petroleums (N.Z.) Limited New Zealand
Western SCC, Inc. California, U.S.A.
Certain subsidiaries have been omitted. Such subsidiaries,
considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary as defined in the rules and
regulations of the United States Securities and Exchange Commission as of
the end of the year covered by this report.
EX-23
12
EXHIBIT 23.1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Glenayre Technologies, Inc.'s
Registration Statements No. 33-43797 on Form S-8, No. 33-43798 on Form S-8,
No. 33-68766 on Form S-8 and No. 33-80464 on Form S-8 of our
report dated February 3, 1995 appearing in the Annual Report on Form 10-K of
Glenayre Technologies, Inc. for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
March 27, 1995
EX-23
13
EXHIBIT 23.2
Exhibit 23.2
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the incorporation by reference in Glenayre Technologies, Inc.'s
Registration Statements No. 33-43797 on Form S-8, No. 33-43798 on Form S-8,
No. 33-68766 on Form S-8 and No. 33-80464 on Form S-8 of our report dated
April 21, 1993 appearing in the Annual Report on Form 10-K of Glenayre
Technologies, Inc. for the year ended December 31, 1994.
Grant Thornton
Chartered Accountants
Vancouver, Canada
March 27, 1995
EX-27
14
EXHIBIT 27
5
YEAR
DEC-31-1994
DEC-31-1994
91,505
0
55,616
3,105
24,261
170,333
23,595
5,888
284,961
35,124
0
216,982
0
0
28,453
284,961
172,107
172,107
72,908
72,908
62,954
0
0
40,295
7,200
33,095
388
0
0
33,483
1.28
1.28