-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EMiWiRGOzyOdsUVfgwyCKMR06BXqZGGBMbuYdf6LeKbYkII5/m5jqFjbgwrCgtJM eT3L7O0OgMf+ccshMN6Ofw== /in/edgar/work/20000814/0000912057-00-037037/0000912057-00-037037.txt : 20000921 0000912057-00-037037.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037037 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUMEREX CORP /PA/ CENTRAL INDEX KEY: 0000870753 STANDARD INDUSTRIAL CLASSIFICATION: [3669 ] IRS NUMBER: 112948749 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22920 FILM NUMBER: 697046 BUSINESS ADDRESS: STREET 1: 1600 PARKWOOD CIRCLE STREET 2: SUITE 200 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 6109412844 MAIL ADDRESS: STREET 1: 1400 N PROVIDENCE ROAD STE 5500 CITY: MEDIA STATE: PA ZIP: 19063 10-Q 1 a10-q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended Commission File Number JUNE 30, 2000 0-22920 ------------------------------ ---------------------- NUMEREX CORP. (Exact name of registrant as specified in its charter) PENNSYLVANIA 11-2948749 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1600 Parkwood Circle, Suite 200 ATLANTA, GEORGIA 30339-2119 ---------------------------------------- (Address of principal executive offices) (770) 693-5950 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 / / As of July 28, 2000, an aggregate of 10,368,213 shares of the registrant's Class A Common Stock, no par value (being the registrant's only class of common stock outstanding), were outstanding. NUMEREX CORP. AND SUBSIDIARIES INDEX
PAGE ---- Part I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and October 31, 1999 5 Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three-month period ended March 31, 2000 and 1999 7 Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three-month period ended March 31, 2000 and 1999 8 Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three-month and six-month period ended June 30, 2000 and 1999 9 Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three-month and six-month period ended June 30, 2000 and 1999 10 Condensed Consolidated Statements of Cash Flows (unaudited) for the six-month period ended June 30, 2000 and 1999 11 Notes to Condensed Consolidated Financial Statements (unaudited) 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures about Market Risks 19 Part II. OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults Upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security Holders 20
- 2 - NUMEREX CORP. AND SUBSIDIARIES INDEX (Continued)
PAGE ---- Item 5. Other Information 21 Item 6. Exhibits and Reports on Form 8-K 22 Signature Page 22
- 3 - FORWARD-LOOKING STATEMENTS The information contained in this Quarterly Report on Form 10-Q for the period ended June 30, 2000 contains forward-looking statements (as such term is defined in the Securities Exchange Act of 1934 and the regulations thereunder), including without limitation, statements as to trends or management's beliefs, expectations or opinions, which are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors, which may cause actual results to differ materially from those in the forward-looking statements. Certain of these risks, uncertainties and other factors, are discussed in the Company's Annual Report on Form 10-K for the year ended October 31, 1999 and in other reports filed with the Securities and Exchange Commission. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. - 4 - NUMEREX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS U.S. DOLLARS)
JUNE 30, DECEMBER 31, OCTOBER 31, 2000 1999 1999 (UNAUDITED) (UNAUDITED) ----------- ------------ ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 19,357 $ 21,490 $ 5,691 Accounts receivable, net 5,378 6,241 11,015 Inventory 3,986 3,618 4,525 Prepaid taxes 0 0 311 Prepaid expenses 129 259 293 -------- -------- -------- TOTAL CURRENT ASSETS 28,850 31,608 21,835 PROPERTY AND EQUIPMENT, NET 2,707 2,899 3,792 GOODWILL, NET 11,086 11,404 8,808 INTANGIBLE ASSETS, NET 10,131 10,410 12,108 OTHER ASSETS 84 84 85 -------- -------- -------- TOTAL ASSETS $ 52,858 $ 56,405 $ 46,628 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,056 $ 2,823 $ 4,159 Income taxes 444 854 1,902 Other current liabilities 2,396 3,094 3,231 Obligations under capital leases, current portion 26 25 30 -------- -------- -------- TOTAL CURRENT LIABILITIES 4,922 6,796 9,322 LONG TERM LIABILITIES Obligations under capital leases 64 85 84 -------- -------- -------- MINORITY INTEREST 5,370 6,616 7,201 -------- -------- -------- SHAREHOLDERS' EQUITY Preferred stock--no par value; authorized 3,000,000; issued 30,000 at June 30, 2000 and December 31, 1999 and 0 at October 31, 1999 3,000 3,000 0 Class A , common stock--no par value; authorized 30,000,000; issued 12,047,542 at June 30, 2000 and 11,609,492 at October 31, and December 1, 1999 31,425 29,870 29,870 Additional paid-in-capital 370 370 370 Treasury stock, at cost, 1,266,400 shares at June 30, 2000 and December 31 and October 31, 1999 (5,222) (5,222) (5,222) Accumulative other comprehensive income (47) (20) 4 Retained earnings 12,976 14,910 4,999 -------- -------- -------- 42,502 42,908 30,021 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 52,858 $ 56,405 $ 46,628 ======== ======== ========
- 5 - See accompanying notes to condensed consolidated financial statements - 6 - NUMEREX CORP.--DIRECT COMPARISON CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, --------------------------- 2000 1999 (UNAUDITED) (UNAUDITED) ----------- ----------- Net sales $ 5,139 $ 5,691 Cost of sales 2,426 3,506 Selling, general, administrative and other expenses 3,985 4,935 -------- -------- Operating profit (loss) (1,272) (2,750) Interest and other income, net 309 82 Gain on disposition of assets and business, net of income tax 0 0 Minority interest 581 713 -------- -------- Earnings (loss) before income taxes (382) (1,955) Provision for income taxes 0 323 Net earnings (loss) (382) (2,278) Preferred stock dividend 60 0 Net earnings (loss) applicable to common shareholders (442) (2,278) ======== ======== Other comprehensive earnings (loss), net of income taxes Foreign currency translation adjustment (17) 24 -------- -------- Comprehensive earnings (loss) $ (459) $ (2,254) ======== ======== Basic earnings (loss) per common share $ (0.04) $ (0.22) Diluted earnings (loss) per common share (0.04) (0.22) -------- -------- Number of shares used in per share calculation Basic 10,434 10,351 Diluted 10,434 10,351 -------- --------
The Direct Comparison Condensed Consolidated Statements of Operations and Comprehensive Income are presented inclusive of the impact of (i) the disposition of assets and business, net of income tax, relating to the Company's wireline Derived Channel (`Derived Channel') and, (ii) operations relating to certain of the Company's wireline Derived Channel, in the periods ended March 31, 2000 and 1999, respectively. See accompanying notes to condensed consolidated financial statements - 7 - NUMEREX CORP.--PRO FORMA COMPARISON CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, --------------------------- 2000 1999 (UNAUDITED) (UNAUDITED) ----------- ----------- Net sales $ 5,139 $ 2,865 Cost of sales 2,426 2,479 Selling, general, administrative and other expenses 3,985 4,199 -------- -------- Operating profit (loss) (1,272) (3,813) Interest and other income, net 309 54 Minority interest 581 713 -------- -------- Earnings (loss) before income taxes (382) (3,046) Provision for income taxes 0 0 -------- -------- Net earnings (loss) (382) (3,046) Preferred stock dividend 60 0 -------- -------- Net earnings (loss) applicable to common shareholders (442) (3,046) ======== ======== Other comprehensive earnings (loss), net of income taxes Foreign currency translation adjustment (17) 75 -------- -------- Comprehensive earnings (loss) $ (459) $ (2,971) ======== ======== Basic earnings (loss) per common share $ (0.04) $ (0.29) Diluted earnings (loss) per common share (0.04) (0.29) -------- -------- Number of shares used in per share calculation Basic 10,434 10,351 Diluted 10,434 10,351 -------- --------
The Pro Forma Comparison Condensed Consolidated Statements of Operations and Comprehensive Income are presented exclusive of the impact of (i) the disposition of assets and business, net of income tax, relating to the Company's wireline Derived Channel (`Derived Channel') and, (ii) operations relating to certain of the Company's wireline Derived Channel, in the periods ended March 31, 2000 and 1999, respectively. See accompanying notes to condensed consolidated financial statements - 8 - NUMEREX CORP.--DIRECT COMPARISON CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTH FOR THE SIX MONTH PERIOD ENDED JUNE 30, PERIOD ENDED JUNE 30, ------------------------- ------------------------- 2000 1999 2000 1999 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- ----------- Net sales $ 4,933 $ 10,011 $ 10,072 $ 15,702 Cost of sales 2,831 4,742 5,257 8,248 Selling, general, administrative and other expenses 4,668 5,029 8,653 9,964 -------- -------- -------- -------- Operating profit (loss) (2,566) 240 (3,838) (2,510) Interest and other income, net 431 25 740 107 Gain on disposition of assets and business, net of income tax 0 0 0 0 Minority interest 703 728 1,284 1,441 -------- -------- -------- -------- Earnings (loss) before income taxes (1,432) 993 (1,814) (962) Provision for income taxes 0 643 0 966 -------- -------- -------- -------- Net earnings (loss) (1,432) 350 (1,814) (1,928) Preferred stock dividend 60 0 120 0 -------- -------- -------- -------- Net earnings (loss) applicable to common shareholders (1,492) 350 (1,934) (1,928) ======== ======== ======== ======== Other comprehensive income (loss), net of income taxes Foreign currency translation adjustment (10) (399) (27) (375) -------- -------- -------- -------- Comprehensive earnings (loss) $ (1,502) $ (49) $ (1,961) $ (2,303) ======== ======== ======== ======== Basic earnings (loss) per common share $ (0.14) $ 0.03 $ (0.18) $ (0.19) Diluted earnings (loss) per common shar (0.14) 0.03 (0.18) (0.19) -------- -------- -------- -------- Number of shares used in per share calculation Basic 10,781 10,343 10,608 10,347 Diluted 10,781 10,401 10,608 10,347 -------- -------- -------- --------
The Direct Comparison Condensed Consolidated Statements of Operations and Comprehensive Income are presented inclusive of the impact of (i) the disposition of assets and business, net of income tax, relating to the Company's wireline Derived Channel (`Derived Channel') and, (ii) operations relating to certain of the Company's wireline Derived Channel, in the periods ended June 30, 2000 and 1999, respectively. See accompanying notes to condensed consolidated financial statements - 9 - NUMEREX CORP. - PRO FORMA COMPARISON CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTH FOR THE SIX MONTH PERIOD ENDED JUNE 30, PERIOD ENDED JUNE 30, 2000 1999 2000 1999 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Net sales $ 4,933 $ 6,087 $ 10,072 $ 8,952 Cost of sales 2,831 3,673 5,257 6,152 Selling, general, administrative and other expenses 4,668 4,281 8,653 8,480 -------- -------- -------- -------- Operating profit (loss) (2,566) (1,867) (3,838) (5,680) Interest and other income, net 431 16 740 70 Minority interest 703 728 1,284 1,441 -------- -------- -------- -------- Earnings (loss) before income taxes (1,432) (1,123) (1,814) (4,169) Provision for income taxes 0 0 0 0 -------- -------- -------- -------- Net earnings (loss) (1,432) (1,123) (1,814) (4,169) Preferred stock dividend 60 0 120 0 -------- -------- -------- -------- Net earnings (loss) applicable to common shareholders (1,492) (1,123) (1,934) (4,169) ======== ======== ======== ======== Other comprehensive income (loss), net of income taxes Foreign currency translation adjustment (10) (107) (27) (32) -------- -------- -------- -------- Comprehensive earnings (loss) $ (1,502) $ (1,230) $ (1,961) $ (4,201) ======== ======== ======== ======== Basic earnings (loss) per common share $ (0.14) $ (0.11) $ (0.18) $ (0.40) Diluted earnings (loss) per common share (0.14) (0.11) $ (0.18) $ (0.40) -------- -------- -------- -------- Number of shares used in per share calculation Basic 10,781 10,343 10,608 10,347 Diluted 10,781 10,343 10,608 10,347 -------- -------- -------- --------
The Pro Forma Comparison Condensed Consolidated Statements of Operations and Comprehensive Income are presented exclusive of the impact of (i) the disposition of assets and business, net of income tax, relating to the Company's wireline Derived Channel (`Derived Channel') and, (ii) operations relating to certain of the Company's wireline Derived Channel, in the periods ended June 30, 2000 and 1999, respectively. See accompanying notes to condensed consolidated financial statements - 10 - NUMEREX CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS U.S. DOLLARS)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, --------------------------- 2000 1999 (UNAUDITED) (UNAUDITED) ----------- ----------- Cash flows from operating activities: Net earnings (loss) $ (1,814) $ (1,928) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,405 1,701 Minority interest (1,284) (1,441) Gain on disposition of assets 0 0 Gain on disposition of business 0 0 Changes in assets and liabilities which provided (used) cash: Accounts receivable 863 (2,202) Inventory (366) (1,156) Prepaid expenses and taxes (280) 1,056 Accounts payable (768) 2,226 Other assets and liabilities (698) 106 -------- -------- Net cash provided by (used in) operating activities (2,942) (1,638) -------- -------- Cash flows from investing activities Proceeds from disposition of assets 0 0 Proceeds from disposition of business 0 0 Purchase of property and equipment (475) (1,028) Purchase of intangible and other assets (120) (349) Investment in business (22) 0 -------- -------- Net cash provided by (used in) investing activities (617) (1,377) -------- -------- Cash flows from financing activities Principal payment on revolving credit facility 0 (6,000) Proceeds from exercise of stock options 1,593 0 Principal payment on capital lease obligations (20) (2) Dividend payments (120) 0 Purchase of treasury stock 0 (158) -------- -------- Net cash provided by (used in) financing activities 1,453 (6,160) -------- -------- Effect of exchange differences on cash (27) (921) -------- -------- Net increase (decrease) in cash and cash equivalents (2,133) (10,096) Cash and cash equivalents, beginning of period 21,490 5,684 -------- -------- Cash and cash equivalents, end of period $ 19,357 $ 5,588 ======== ========
See accompanying notes to condensed consolidated financial statement - 11 - NUMEREX CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2000 may not be indicative of the results that may be expected for the year ending December 31, 2000. For further information, reference is also made to the Company's Annual Report on Form 10-K for the year ended October 31, 1999 and the consolidated financial statements contained therein. 2. REPORTING CURRENCY The condensed consolidated financial statements and the notes thereto are stated in U.S. Dollars for all periods presented. 3. RECLASSIFICATION Certain prior year amounts have been reclassified to conform to the current period presentation. 4. INVENTORY
JUNE 30, 2000 DECEMBER 31, 1999 OCTOBER 31, 1999 ------------- ----------------- ---------------- ($'000's omitted) Raw materials $1,521 $1,978 $ 1,871 Work-in-progress 54 70 698 Finished goods 2,411 1,570 1,956 ------- ------- ------- Total $ 3,986 $ 3,618 $ 4,525 ------- ------- -------
5. REVOLVING CREDIT FACILITY The Company had a revolving credit facility, which provided for maximum borrowings of $10,000,000 and included the option to convert, at maturity, the outstanding balance to an amortizing term loan payable over a maximum period of up to three years, with a maximum five-year amortization. Interest was charged at the bank's prime lending rate less 0.25% or LIBOR plus 1.25%. - 12 - On January 8, 1999, the Company terminated its revolving credit facility and repaid amounts due including interest totaling $6,008,733. 6. SHAREHOLDER'S EQUITY The Company in the six-month period to June 30, 2000 issued 438,050 shares of Class A Common Stock of the Company following the exercise of stock options and warrants. - 13 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL This quarterly report on Form 10-Q for the period ended June 30, 2000 is the first quarterly report filed by the Company following its change in fiscal year end from October 31 to December 31. Under applicable SEC regulations, the Company is permitted to combine the information presented below for the quarter ended June 30, 2000 with the information for the two months of February 2000 and March 2000. To facilitate an understanding of the Company's financial condition and results of operations, however, the Company has chosen to present information for the combined period of January 1, 2000 to June 30, 2000. The Company also has included separate financial statements (unaudited) in this quarterly report for the three-month periods ended March 31, 2000 and March 31, 1999, respectively. The following tables set forth, for the periods indicated the amounts and percentages of net sales represented by selected items in the Company's Direct Comparison Condensed Consolidated Statements of Operations and Pro Forma Comparison Condensed Consolidated Statements of Operations.
SIX-MONTH PERIOD ENDED JUNE 30, (In Thousands U.S. Dollars) 2000 1999 1999 ---- ---- ---- PRO FORMA Net sales: Digital Multimedia and Networking $ 4,840 $ 5,587 $ 5,587 Wireless Communications and Security 5,232 10,115 3,365 -------- -------- -------- Total net sales 10,072 15,702 8,952 Cost of sales 5,257 8,248 6,152 -------- -------- -------- Gross profit (loss) 4,815 7,454 2,800 Selling, general, administrative and other expenses 8,653 9,964 8,480 -------- -------- -------- Operating profit (loss) $ (3,838) $ (2,510) $ (5,680) -------- -------- --------
(As a Percentages of Net Sales)
2000 1999 1999 ---- ---- ---- PRO FORMA Net sales: Digital Multimedia and Networking 48.1% 35.6% 62.4% Wireless Communications and Security 51.9% 64.4% 37.6% -------- -------- -------- Total net sales 100.0% 100.0% 100.0% Cost of sales 52.2% 52.5% 68.7% -------- -------- -------- Gross profit (loss) 47.8% 47.5% 31.3% Selling, general, administrative and other expenses 85.9% 63.5% 94.7% -------- -------- -------- Operating profit (loss) (38.1%) (16.0%) (63.4%) -------- -------- --------
- 14 - RESULTS OF OPERATIONS In November 1999 the Company divested its Derived Channel technology to British Telecommunications plc. The transaction comprised the sale of the Company's Derived Channel technology and wholly owned subsidiary, Bronzebase Limited, an English limited liability company, which owned all of the stock of Versus Technology Limited. As part of the transaction the Company retained the right to market, under license, derived channel in North, Central and South America, South Korea and Australia. The management discussion and analysis of financial condition and results of operations which follows covers the Company's six-month period ended June 30, 2000 comparing same against (i) the six-month period ended June 30, 1999 and (ii) on a pro forma basis the six-month period ended June 30, 1999 adjusted for income and expenditures directly related to the Company's divested Derived Channel technology. DIRECT COMPARISON Net sales decreased 35.9% to $10,072,000 for the six-month period ended June 30, 2000, as compared to $15,702,000 for the comparable period in 1999. Digital Multimedia and Networking product and service sales and revenues decreased by 13.4% to $4,840,000 for the six-month period ended June 30, 2000 as compared to the comparable period in 1999. The principal reason for the reduction in sales was a 36.2% decrease in Digital Multimedia product sales resulting from the transition from the marketing and sale of analog based product to the marketing and sale of the new digital hardware and software based product platform, `PowerPlay'. The reduction in sales was, however, partially offset by a 53.0% increase in Networking product and service sales resulting from growth in its core business activities. Wireless Communications and Security product and service sales and revenues decreased by 48.3% to $5,232,000 for the six-month period ended June 30, 2000 as compared to the comparable period in 1999. The principal reason for the reduction in sales was the loss, for the entire period, of Derived Channel Systems product sales resulting from the divestment of Derived Channel. The reduction in sales was, however, partially offset by the continued growth in Wireless Communications product and service revenues, an increase of 76.7%, resulting from the marketing and sales effort to establish the Company as a recognized national wireless data service. Cost of sales decreased by 36.3% to $5,257,000 for the six-month period ended June 30, 2000 as compared to $8,248,000 for the comparable period in 1999. The reduction in cost of sales resulted primarily from the loss, for the entire period, of Derived Channel Systems product sales resulting from the divestment of Derived Channel. - 15 - Gross profit as a percentage of net sales increased to 47.8% for the six-month period ended June 30, 2000 as compared to 47.5% for the comparable period in 1999. Selling, general, administrative and other expenses decreased by 13.2% to $8,653,000 for the six-month period ended June 30, 2000 as compared to $9,964,000 for the comparable period in 1999. The principal reason for the reduction resulted primarily from the loss, for the entire period, of Derived Channel Systems expenses resulting from the divestment of Derived Channel. Interest and other income increased by 591.6% to $740,000 for the six-month period ended June 30, 2000 as compared to $107,000 for the comparable period in 1999. The increase was primarily related to interest income earned on cash balances. Minority interest decreased by 10.9% to $1,284,000 for the six-month period ended June 30, 2000 as compared to $1,441,000 for the comparable period in 1999. The gain represents that portion of the losses of the Company's Wireless Communications business that is not accounted for by the Company. The Company, due to the loss position from operations, did not record a tax provision for the six-month period ended June 30, 2000 as compared to a tax provision of $966,000 for the comparable period in 1999. The change in tax provision resulted from the sale of the Company's United Kingdom Derived Channel business as part of the divestment of Derived Channel. The Company recorded a net loss of $1,814,000 for the six-month period ended June 30, 2000 as compared to a net loss of $1,928,000 for the comparable period in 1999. The weighted average and diluted shares outstanding increased to 10,608,000 for the period ended June 30, 2000 as compared to weighted average and diluted shares outstanding of 10,347,000 for the comparable period in 1999. PRO FORMA COMPARISON On a pro forma comparative basis, excluding sales of the divested Derived Channel for the six-month period ended June 30, 1999, net sales increased by 12.5% to $10,072,000 for the six-month period ended June 30, 2000 as compared to $8,952,000 for the comparable period in 1999. On a pro forma comparative basis, Wireless Communications and Security product and service sales and revenues increased by 55.5% to $5,232,000 for the six-month period ended June 30, 2000 as compared to the comparable period in 1999. The principal reason for the improvement was the continued growth in Wireless Communications product and service revenues, an increase of 76.7%, resulting from the marketing and sales effort to establish the Company as a recognized national wireless data service. Additionally, residual Derived Channel wireline Security product and service sales increased by 30.4%. The increase in Security revenues resulted from one-time product and service contract revenues earned in Australia that was reflected in the three-month period ended March 31, 2000. Excluding the Australian - 16 - product and services contract revenues, residual Derived Channel wireline Security product and service contract revenues decreased by 53.6%. On a pro forma comparative basis, excluding cost of sales of the divested Derived Channel for the six-month period ended June 30, 1999, cost of sales decreased by 14.6% to $5,257,000 for the six-month period ended June 30, 2000 as compared to $6,152,000 for the comparable period in 1999. The reduction in cost of sales was primarily accounted for by the decrease in Digital Multimedia product and service sales resulting from the transition from the marketing and sale of analog based product to the marketing and sale of the new digital hardware and software based product platform, `PowerPlay'. The reduction in cost of sales was also favorably impacted by the increase in Wireless Communication product and service sales and revenues, particularly from the continuing growth in recurring service revenues. On a pro forma comparative basis, excluding gross profit of the divested Derived Channel for the six-month period ended June 30, 1999, gross profit as a percentage of net sales increased to 47.8% for the six-month period ended June 30, 2000 as compared to 31.3% for the comparable period in 1999. The improvement in gross profit margin resulted from the combined impact of the increase in Company product and service sales revenues and the decrease in Company cost of sales expense. On a pro forma comparative basis, excluding the selling, general, administrative and other expenses of the divested Derived Channel for the six-month period ended June 30, 1999, selling, general, administrative and other expenses increased by 2.0% to $8,653,000 for the six-month period ended June 30, 2000 as compared to $8,480,000 for the comparable period in 1999. On a pro forma comparative basis, excluding interest and other income of the divested Derived Channel for the six-month period ended June 30, 1999, interest and other income increased to $740,000 for the six-month period ended June 30, 2000 as compared to $70,000 for the comparable period in 1999. The increase was primarily related to interest income earned on cash balances. Minority interest decreased by 10.9% to $1,284,000 for the six-month period ended June 30, 2000 as compared to $1,441,000 for the comparable period in 1999. The gain represents that portion of the losses of the Company's Wireless Communications business that is not accounted for by the Company. On a pro forma comparative basis, excluding the results of operations of the divested Derived Channel for the six-month period ended June 30, 1999, the net loss recorded by the Company decreased by 56.5% to $1,814,000 for the six-month period ended June 30, 2000 as compared to $4,169,000 for the comparable period in 1999. The reduction in net loss primarily resulted from the increased level of sales activity, composition of product and service sales revenues and the continuing growth of the Company's recurring service revenues. The weighted average shares and diluted shares outstanding increased to 10,608,000 for the period ended June 30, 2000 as compared to weighted average and diluted shares outstanding of 10,347,000 for the comparable period in 1999. - 17 - LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY The Company has been able to fund its operations and working capital requirements from cash flow generated by operations, the proceeds from a public offering completed in April 1995 and the proceeds from the sale of its Derived Channel technology in November 1999. Net cash used in operating activities increased by 79.6% to $2,942,000 for the six-month period ended June 30, 2000 as compared to $1,638,000 for the comparable period in 1999. The increase in cash used was primarily due to changes in working capital. Net cash used in investing activities decreased by 55.2% to $617,000 for the six-month period ended June 30, 2000 as compared to net cash used in investing activities of $1,377,000 for the comparable period in 1999. The decrease was the result of reduced investment in tangible and intangible assets. Net cash provided by financing activities amounted to $1,453,000 for the six-month period ended June 30, 2000 as compared to net cash used in financing activities of $6,160,000 for the comparable period in 1999. The change in cash position was primarily accounted for by the receipt of $1,593,000 of proceeds from the exercise of stock options which resulted in the issue of an additional 438,050 shares of the Company's Class A Common Stock in the period to June 30, 2000 and the repayment, in full in January 1999, of amounts due under the Company's then Revolving Credit Facility and the buy-back of the Company's common stock in the corresponding period in 1999. The Company had working capital balances of $23,928,000 and $12,513,000, respectively, as of June 30, 2000 and October 31, 1999. The Company's business has not been capital intensive and, accordingly, capital expenditures have not been material. To date, the Company has funded all capital expenditures from working capital, proceeds from the public offering and the proceeds from the sale of Derived Channel in November 1999. The Company is obligated under the First Amendment to the Operating Agreement of Cellemetry LLC to fund the operations of Cellemetry LLC to an amount of $5,500,000 by way of interest bearing debt financing. The financing will be used to fund the operations of Cellemetry LLC and Uplink Security, Inc. as both operations are expected to be cash flow negative in fiscal 2000. Expansion of the Company's Digital Multimedia Networking business in fiscal 2000, including the establishment and increased market penetration of PowerPlay-TM-, may require greater capital investments than in the past. - 18 - The Company believes that its cash and cash equivalents, including funds available from the divestment of its Derived Channel technology will be sufficient to finance its operating and capital requirements in fiscal 2000. Cash requirements for future expansion of the Company's operations will be evaluated on an as-needed basis and may involve external financing. The Company does not expect that such expansion, should it occur, will have a materially negative impact on the Company's ability to fund its existing operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. At June 30, 2000 the Company was not invested in any material balances of market risk sensitive instruments held for either trading purposes or for purposes other than trading. As a result, the Company is not subject to interest rate risk, foreign currency rate risk, commodity price risk, or other relevant market risks, such as equity price risk. The Company invests cash balances in excess of operating requirements in an overnight investment account. At June 30, 2000 the Company has no outstanding borrowings payable except for obligations under capital leases. The Company believes that the effect, if any, of reasonably possible near-term changes in interest rates or foreign currency exchange rates on the Company's financial position, results of operations and cash flows should not be material. - 19 - PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. As previously reported in the Company's Form 10 - Q for the three-month period ended January 31, 2000, in connection with the Company's acquisition of the entire equity interest in Uplink Security, Inc. ("Uplink") a petition was filed by Uplink in the Superior Court of Fulton County, Georgia seeking an appraisal of the value of a minority stockholders shares. The minority stockholder has alleged that the acquisition of Uplink was procedurally improper and should be set aside and that Uplink and certain of its officers (together with the Company and certain of its officers) conspired to oppress the minority stockholder of Uplink and acted fraudulently in effectuating the acquisition. The case is entering the discovery phase. Neither the Company nor its officers are parties to the litigation. The Company believes however, that the value the minority stockholder is claiming for the shares is in excess of the fair value of those shares. The Company also believes that the minority stockholder's other claims are without merit, and Uplink intends to vigorously defend the litigation. ITEM 2. CHANGES IN SECURITIES. None--not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None--not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual Meeting of Shareholders of the Company was held on April 28, 2000 (the "Meeting"). Three proposals were presented for a vote at the Meeting. Proposal 1--The election of six directors, George Benson, Matthew J. Flanigan, Allan H. Liu, Stratton J. Nicolaides, John G. Raos and Andrew J. Ryan, each to serve as a director of the Company for a one-year term expiring at the annual meeting of shareholders to be held in 2001 and until the election and qualification of each successor. - 20 - Proposal 1--To elect a Board of Directors consisting of six persons to serve until the next annual meeting of shareholders and until their respective successors have been duly elected and qualified. The proposal was approved as follows:
FOR WITHHELD --- -------- George Benson 8,782,267 459,700 Matthew J. Flanigan 8,782,267 459,700 Allan H. Liu 8,782,267 459,700 Stratton J. Nicolaides 8,782,242 459,725 John G. Raos 8,782,267 459,700 Andrew J. Ryan 8,782,267 459,700
Proposal 2--The approval of the Company's Long -Term Incentive Plan. Proposal 2--To approve the Company's Long-Term Incentive Plan. The proposal was approved as follows:
FOR AGAINST ABSTAIN --- ------- ------- 5,327,246 585,981 45,800
Proposal 3--The ratification of the appointment of Grant Thornton LLP as the Company's independent public accountants for the current fiscal year ending October 31, 2000. Proposal 3--To consider and vote upon the ratification of the selection by the Board of Directors of Grant Thornton LLP as independent accountants to the Company for the current fiscal year ending October 31, 2000. The proposal was approved as follows:
FOR AGAINST ABSTAIN --- ------- -------
9,237,417 2,850 1,700 ITEM 5. OTHER INFORMATION. None - not applicable. - 21 - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10.10 Numerex Corp. 1999 Long-term Incentive Plan 27 Financial Data Schedule (b) Reports on Form 8-K (i) On May 12, 2000, the Company filed an 8-K advising of its change in its fiscal year end from a fiscal year ending October 31 to a calendar fiscal year ending on December 31. - 22 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NUMEREX CORP. ------------- (Registrant) Date: AUGUST 11, 2000 By: /s/ STRATTON J. NICOLAIDES -------------------- ------------------------------------------ STRATTON J. NICOLAIDES Chairman and Chief Executive Officer Date: AUGUST 11, 2000 By: /s/ PETER J. QUINN -------------------- ------------------------------------------ PETER J. QUINN Executive Vice President, Chief Financial Officer, and Principal Financial and Accounting Officer - 23 - EX-10.10 2 ex-10_10.txt EXHIBIT 10.10 EXHIBIT 10.10 NUMEREX CORP. 1999 LONG-TERM INCENTIVE PLAN 1. Purpose and Types of Awards NumereX Corp., a Pennsylvania corporation (the "Corporation"), maintained the NumereX Corp. Amended and Restated 1994 Employee Stock Option Plan (the "Prior Plan"). The Prior Plan has been replaced with the 1999 Long-Term Incentive Plan as set forth herein, effective October 25, 1999, subject to the approval of the shareholders of the Corporation within twelve months of such 2effective date (the "Plan"). Notwithstanding anything herein to the contrary, nothing in this Plan shall adversely affect the rights or obligations, under any Award granted under the Prior Plan, of any grantee or holder of an Award without such person's approval. The purpose of the Plan is to promote the long-term growth and profitability of the Corporation by: (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Corporation and (ii) enabling the Corporation to attract, retain and reward the best-available persons. The Plan permits the granting of stock options (including incentive stock options qualifying under Code section 422 and nonqualified stock options), stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, or any combination of the foregoing. 2. Definitions Under this Plan, except where the context otherwise indicates, the following definitions apply: (a) "Administrator" shall have the meaning set forth in Section 3(a). (b) "Affiliate" shall mean any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, the Corporation (including, but not limited to, joint ventures, limited liability companies, and partnerships). For this purpose, "control" shall mean ownership of 50% or more of the total combined voting power or value of all classes of stock or interests of the entity. (c) "Award" shall mean any stock option, stock appreciation right, stock award, phantom stock award, or performance award. (d) "Board" shall mean the Board of Directors of the Corporation. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. (f) "Common Stock" shall mean shares of common stock of the Corporation, no par value. (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" of a share of the Corporation's Common Stock for any purpose on a particular date shall mean the last reported sale price per share of Common Stock, regular way, on such date or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on a national securities exchange or included for quotation on the Nasdaq-National Market, or if the Common Stock is not so listed or admitted to trading or included for quotation, the last quoted price, or if the Common Stock is not so quoted, the average of the high bid and low asked prices, regular way, in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices, regular way, as furnished by a professional market maker making a market in the Common Stock as selected in good faith by the Administrator or by such other source or sources as shall be selected in good faith by the Administrator. If, as the case may be, the relevant date is not a trading day, the determination shall be made as of the next preceding trading day. As used herein, the term "trading day" shall mean a day on which public trading of securities occurs and is reported in the principal consolidated reporting system referred to above, or if the Common Stock is not listed or admitted to trading on a national securities exchange or included for quotation on the Nasdaq-National Market, any business day. (i) "Grant Agreement" shall mean a written document memorializing the terms and conditions of an Award granted pursuant to the Plan and shall incorporate the terms of the Plan. (j) "Participants" shall have the meaning set forth in Section 5. (k) "Parent" shall mean a corporation, whether nor or hereafter existing, within the meaning of the definition of "parent corporation" provided in Code section 424(e), or any successor thereto. (l) "Performance Goals" shall mean performance goals established by the Administrator which may be based on one or more business criteria selected by the Administrator that apply to an individual or group of individuals, a business unit, or the Corporation and/or one or more of its Affiliates either separately or together, over such performance period as the Administrator may designate, including, but not limited to, business criteria based on operating income, earnings or earnings growth, sales, return on assets, equity or investment, satisfactory internal or external audits, improvement of financial ratings, achievement of balance sheet or income statement objectives, or any other objective goals established by the Administrator, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. (m) "Subsidiary" and "subsidiaries" shall mean only a corporation or corporations, whether now or hereafter existing, within the meaning of the definition of "subsidiary corporation" provided in section 424(f) of the Code, or any successor thereto. - 2 - (n) "Ten-Percent Stockholder" shall mean a grantee who (applying the rules of Code section 424(d)) owns stock possessing more than 10% of the total combined voting power or value of all classes of stock or interests of the Corporation or an Affiliate. 3. Administration (a) Administration of the Plan. The Plan shall be administered by the Board or by such committee or committees as may be appointed by the Board from time to time (the Board, committee or committees hereinafter referred to as the "Administrator"). (b) Powers of the Administrator. The Administrator shall have all the powers vested in it by the terms of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards. The Administrator shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted; (ii) determine the types of Awards to be granted; (iii) determine the number of shares to be covered by or used for reference purposes for each Award; (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Administrator shall deem appropriate, including, but not limited to, whether a stock option shall be an incentive stock option or a nonqualified stock option, any exceptions to nontransferability, any Performance Goals applicable to Awards, any provisions relating to vesting, any circumstances in which the Awards would terminate, the period during which Awards may be exercised, and the period during which Awards shall be subject to restrictions; (v) modify, amend, extend or renew outstanding Awards, accept the surrender of outstanding Awards and substitute new Awards, or specify a lower or higher exercise price, or a longer or shorter term, for any substituted Awards than the surrendered Awards, or impose any other provisions that are authorized by this Plan (provided however, that, except as provided in Section 7(f)(ii) of the Plan, any modification that would materially adversely affect any outstanding Award shall not be made without the consent of the holder); (vi) accelerate, extend (as long as such extension shall not cause the Plan to fail to comply with Code section 422, if applicable) or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award due to termination of any grantee's employment or other relationship with the Corporation; and (vii) establish objectives and conditions, if any, for earning Awards and determining whether Awards will be paid after the end of a performance period. In making these determinations, the Administrator may take into account the nature of the services rendered or to be rendered by the Award recipients, their present and potential contributions to the success of the Corporation and its Affiliates, and such other factors as the Administrator in its discretion shall deem relevant. Subject to the provisions of the Plan, the Administrator shall have full power and authority, in its sole and absolute discretion, to administer and interpret the Plan and to adopt and interpret such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable. - 3 - (c) Non-Uniform Determinations. The Administrator's determinations under the Plan (including, without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Grant Agreements evidencing such Awards) need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. (d) Limited Liability. To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. (e) Effect of Administrator's Decision. All actions taken and decisions and determinations made by the Administrator on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Administrator's sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Corporation, its shareholders, any Participants and any other employee, consultant, or director of the Corporation, and their respective successors in interest. 4. Shares Available for the Plan (a) Maximum Issuable Shares. Subject to adjustments as provided in Section 7(f), the shares of Common Stock that may be issued with respect to Awards granted under the Plan shall not exceed an aggregate of 1,500,000 shares of Common Stock. The Corporation shall reserve such number of shares for Awards under the Plan, subject to adjustments as provided in Section 7(f). If any Award, or portion of an Award, under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares, or if any shares of Common Stock are surrendered to the Corporation in connection with any Award (whether or not such surrendered shares were acquired pursuant to any Award), the shares subject to such Award and the surrendered shares shall thereafter be available for further Awards under the Plan; provided, however, that any such shares that are surrendered to the Corporation in connection with any Award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Code section 422. (b) Maximum Awards. Subject to adjustments as provided in Section 7(f), the maximum number of shares of Common Stock subject to Awards of any combination that may be granted during any one calendar year of the Corporation to any one individual under this Plan shall be limited to 100,000. 5. Participation Participation in the Plan shall be open to all persons who are at the time of the grant of an Award employees (including persons who may become employees), officers, directors, and consultants of the Corporation, or of any Affiliate of the Corporation, as may be selected by the Administrator from time to time. A Participant who has been granted an Award may, if he or she is otherwise eligible, be granted additional Awards if the Administrator so determines. 6. Awards - 4 - The Administrator, in its sole discretion, establishes the terms of all Awards granted under the Plan. All Awards shall be subject to the terms and conditions provided in the Grant Agreement. (a) Stock Options. The Administrator may from time to time grant to eligible Participants Awards of incentive stock options as that term is defined in Code section 422 or nonqualified stock options; provided, however, that Awards of incentive stock options shall be limited to employees of the Corporation or of any Parent or Subsidiary of the Corporation. Options intended to qualify as incentive stock options under Code section 422 must have an exercise price at least equal to Fair Market Value on the date of grant or at least 110% of Fair Market Value in the case of a Ten-Percent Stockholder. No stock option shall be an incentive stock option unless so designated by the Administrator at the time of grant and such designation is reflected in the Grant Agreement evidencing such stock option. Nonqualified stock options may not be granted with an exercise price below Fair Market Value on the date of grant. (b) Stock Appreciation Rights. The Administrator may from time to time grant to eligible Participants Awards of Stock Appreciation Rights ("SARs"). A SAR may be exercised in whole or in part as provided in the applicable Grant Agreement and entitles the grantee to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Grant Agreement, multiplied by (ii) the number of shares covered by the SAR, or portion thereof, which is exercised. Payment by the Corporation of the amount receivable upon any exercise of a SAR may be made by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as specified in the Grant Agreement. If upon settlement of the exercise of a SAR a grantee is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated. (c) Stock Awards. The Administrator may from time to time grant restricted or unrestricted stock Awards to eligible Participants in such amounts, on such terms and conditions (which terms and conditions may condition the vesting or payment of Stock Awards on the achievement of one or more Performance Goals), and for such considerations, including no consideration or such minimum consideration as may be required by law, as it shall determine. (d) Phantom Stock. The Administrator may from time to time grant Awards to eligible Participants denominated in stock-equivalent units ("Phantom Stock") in such amounts and on such terms and conditions as it shall determine, which terms and conditions may condition the vesting or payment of Phantom Stock on the achievement of one or more Performance Goals. Phantom Stock units granted to a Participant shall be credited to a bookkeeping reserve account solely for accounting purposes and shall not require a segregation of any of the Corporation's assets. An Award of Phantom Stock may be settled in Common Stock, in cash, or in a combination of Common Stock and cash, as specified in the Grant Agreement. Except as otherwise provided in the applicable Grant Agreement, the grantee shall not have the rights of a stockholder with respect to any shares of Common Stock represented by a Phantom Stock unit solely as a result of the grant of a Phantom Stock unit to the grantee. - 5 - (e) Performance Awards. The Administrator may, in its discretion, grant performance Awards, which become payable on account of attainment of one or more Performance Goals established by the Administrator. Performance Awards may be paid by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as specified in the Grant Agreement. 7. Miscellaneous (a) Investment Representations. The Administrator may require each person acquiring shares of Common Stock pursuant to Awards hereunder to represent to and agree with the Corporation in writing that such person is acquiring the shares without a view to distribution thereof. The certificates for such shares may include any legend that the Administrator deems appropriate to reflect any restrictions on transfer. All certificates for shares issued pursuant to the Plan shall be subject to such stock transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or interdealer quotation system upon which the Common Stock is then quoted, and any applicable federal or state securities laws. The Administrator may place a legend or legends on any such certificates to make appropriate reference to such restrictions. (b) Compliance with Securities Law. Each Award shall be subject to the requirement that if, at any time, counsel to the Corporation shall determine that the listing, registration or qualification of the shares subject to such an Award upon any securities exchange or interdealer quotation system or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of nonpublic information or the satisfaction of any other condition is necessary in connection with the issuance or purchase of shares under such an Award, such Award may not be exercised, in whole or in part, unless such satisfaction of such condition shall have been effected on conditions acceptable to the Administrator. Nothing herein shall be deemed to require the Corporation to apply for or to obtain such listing, registration or qualification, or to satisfy such condition. (c) Withholding of Taxes. Grantees and holders of Awards shall pay to the Corporation or its Affiliate, or make provision satisfactory to the Administrator for payment of, any taxes required to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. The Corporation or its Affiliate may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the grantee or holder of an Award. In the event that payment to the Corporation or its Affiliate of such tax obligations is made in shares of Common Stock, such shares shall be valued at Fair Market Value on the applicable date for such purposes. (d) Loans. The Corporation or its Affiliate may make or guarantee loans to grantees to assist grantees in exercising Awards and satisfying any withholding tax obligations. (e) Transferability. Except as otherwise determined by the Administrator or provided in a Grant Agreement, no Award granted under the Plan shall be transferable by a grantee except by will or the laws of descent and distribution. Unless otherwise determined by the Administrator in accordance with the provisions of the immediately preceding sentence, during the lifetime of the grantee, the Award may be exercised only by the grantee, by such permitted transferees or, during the period the grantee is under a legal disability, by the grantee's guardian or legal representative. Except as provided above, the Award - 6 - may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. (f) Adjustments; Business Combinations. (i) Adjustments for Events Affecting Common Stock. In the event of changes in the Common Stock of the Corporation by reason of any stock dividend, spin-off, split-up, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares and the like, the Administrator shall, in its discretion, make appropriate substitutions for or adjustments to the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan to any individual as provided in Section 4 of the Plan and to the number, kind and price of shares covered to any individual by outstanding Awards (without changing the aggregate purchase price as to which such Awards remain exercisable) and shall, in its discretion and without the consent of holders of Awards, make any other substitutions for or adjustments in outstanding Awards, including but not limited to reducing the number of shares subject to Awards or providing or mandating alternative settlement methods such as settlement of the Awards in cash or in shares of Common Stock or other securities of the Corporation or of any other entity, or in any other matters which relate to Awards as the Administrator shall, in its sole discretion, determine to be necessary or appropriate. (ii) Pooling of Interests Transaction. Notwithstanding anything in the Plan to the contrary and without the consent of holders of Awards, the Administrator, in its sole discretion, may make any modifications to any Awards, including but not limited to cancellation, forfeiture, surrender or other termination of the Awards in whole or in part regardless of the vested status of the Award, in order to facilitate any business combination that is authorized by the Board to comply with requirements for treatment as a pooling of interests transaction for accounting purposes under generally accepted accounting principles. (iii) Adjustments for Other Events. The Administrator is authorized to make, in its discretion and without the consent of holders of Awards, adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Corporation, or the financial statements of the Corporation or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. (g) Substitution of Awards in Merger and Acquisitions. Awards may be granted under the Plan from time to time in substitution for Awards held by employees or directors of entities who become or are about to become employees or directors of the Corporation or an Affiliate as the result of a merger or consolidation of the employing entity with the Corporation or an Affiliate, or the acquisition by the Corporation or an Affiliate of the assets or stock of the employing entity. The terms and conditions of any substitute Awards so granted may vary from the terms and conditions set forth herein to the extent that the Administrator deems appropriate at the time of grant to conform the substitute Awards to the provisions of the awards for which they are substituted. Substitute Awards shall not be counted toward the share limit imposed by Section 4(b). - 7 - (h) Foreign Participants. The Administrator may, without amending the Plan, modify Awards granted to Participants who are foreign nationals or employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters. (i) Termination, Amendment and Modification of the Plan. The Board may amend, alter or terminate the Plan, or portion thereof, at any time. (j) Non-Guarantee of Employment or Service. Nothing in the Plan or in any Grant Agreement shall confer on an individual any legal or equitable right against the Corporation, any Affiliate or the Administrator, except as expressly provided in the Plan or the Grant Agreement. Nothing in the Plan or in any Grant Agreement thereunder shall (i) constitute inducement, consideration, or contract for employment or service between an individual and the Corporation or any Affiliate; (ii) confer any right on an individual to continue in the service of the Corporation or any Affiliate; or (iii) shall interfere in any way with the right of the Corporation or any Affiliate to terminate such service at any time with or without cause or notice, or to increase or decrease compensation for such service. (k) Other Employee Benefits. Except as to plans that by their terms include such amounts as compensation, the amount of any compensation deemed to be received by a Participant as a result of the exercise of an Award or the sale of shares received upon such exercise will not constitute compensation with respect to which any other employee benefits of such Participant are determined, including, without limitation, benefits under any bonus, pension, profit-sharing, life insurance or salary continuation plan, except as otherwise specifically determined by the Administrator. (l) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Corporation and a grantee or any other person. To the extent that any grantee or other person acquires a right to receive payments from the Corporation pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Corporation. (m) Governing Law. The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of Pennsylvania without regard to its conflict of laws principles. (n) Effective Date, Termination Date. The Plan is effective as of October 25, 1999, the date on which the Plan, as a replacement to the Prior Plan, was adopted by the Board, subject to the approval of the shareholders of the Corporation within twelve months of such effective date. No Award shall be granted under the Plan after the close of business on October 24, 2009. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards. - 8 - Date Approved by the Shareholders: April 28, 2000 - 9 - EX-27 3 ex-27.txt FDS FOR THE 2ND QUARTER 10-Q
5 1000 U.S. DOLLARS 6-MOS DEC-31-2000 JUN-30-2000 1 19,357 0 5,378 0 3,986 28,850 2,707 0 52,858 4,922 0 0 3,000 31,425 7,707 52,858 10,072 0 0 5,257 5,257 8,653 0 0 (1,184) 0 0 0 0 (1,814) (0.18) (0.18)
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