-----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, VCV2fh2cGKcAvDsfyUgNFHqEhy1HvaRDyl3VZqY5KEJcU/GUV0GTY0DqmcyAme6s wiJUkZgVJExSKmHi5qv2pQ== 0000950116-02-002530.txt : 20021112 0000950116-02-002530.hdr.sgml : 20021111 20021112161109 ACCESSION NUMBER: 0000950116-02-002530 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARLTON TECHNOLOGIES INC CENTRAL INDEX KEY: 0000096988 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 221825970 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07708 FILM NUMBER: 02817358 BUSINESS ADDRESS: STREET 1: 2828 CHARTER RD STE 101 CITY: PHILADELPHIA STATE: PA ZIP: 19154 BUSINESS PHONE: 2156766900 MAIL ADDRESS: STREET 1: 2828 CHARTER RD CITY: PHILADELPHIA STATE: PA ZIP: 19154 FORMER COMPANY: FORMER CONFORMED NAME: TELESCIENCES INC DATE OF NAME CHANGE: 19880201 10-Q 1 tenq.txt TENQ.TXT 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 September 30, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to_______ Commission file number 1-7708 MARLTON TECHNOLOGIES, INC. ------------------------------------------------- (Exact name of issuer as specified in its charter) Pennsylvania 22-1825970 - -------------------------------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 2828 Charter Road Philadelphia PA 19154 - -------------------------------------------------------------------------------- (Address of principal City State Zip executive offices) Issuer's telephone number (215) 676-6900 -------------- Former name, former address and former fiscal year, if changed since last report. Check whether the issuer (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 ---------------- --------------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court Yes No --------------- --------------- APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity as of the last practicable date: 12,988,499 Transitional Small Business Disclosure Form (check one): Yes No X -------------- --------------- MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands except share data)
September 30, December 31, ASSETS 2002 2001 --------------- -------------- Current: Cash and cash equivalents $ 720 $ 1,233 Accounts receivable, net of allowance of $312 and $836, respectively 10,440 10,646 Inventory 5,127 6,598 Prepaids and other current assets 1,379 1,247 Deferred income taxes 779 779 --------- --------- Total current assets 18,445 20,503 Investment in affiliates 259 1,415 Deferred income taxes 3,796 487 Property and equipment, net of accumulated depreciation of $9,095 and $7,976, respectively 4,190 4,847 Rental assets, net of accumulated depreciation of $3,030 and $2,765, respectively 2,680 2,422 Goodwill, net of accumulated amortization of $4,183 at December 31, 2001 2,714 18,599 Other assets, net of accumulated amortization of $1,293 and $1,063, respectively 216 392 Notes receivable 394 777 --------- --------- Total assets $ 32,694 $ 49,442 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 150 $ 124 Accounts payable 4,673 3,879 Accrued expenses and other 8,283 9,628 --------- --------- Total current liabilities 13,106 13,631 --------- --------- Long-term debt, net of current portion 4,500 6,635 --------- --------- Total liabilities 17,606 20,266 Commitments and contingencies -- -- Stockholders' equity: Preferred stock, $.10 par - shares authorized 10,000,000; no shares issued or outstanding -- -- Common stock, no par value - shares authorized 50,000,000; 12,993,499 issued at September 30, 2002 and December 31, 2001 1,299 1,299 Stock warrants 742 742 Additional paid-in capital 31,652 31,652 Accumulated deficit (18,493) (4,405) --------- --------- 15,200 29,288 Less cost of 5,000 treasury shares (112) (112) --------- --------- Total stockholders' equity 15,088 29,176 --------- --------- Total liabilities and stockholders' equity $ 32,694 $ 49,442 ========= =========
The accompanying notes and the notes in the financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 2 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except per share data)
For the three months ended For the nine months ended September 30, September 30, September 30, September 30, 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Sales $ 15,204 $ 17,072 $ 53,419 $ 60,099 Cost of sales 12,576 13,121 42,299 45,827 -------- -------- -------- -------- Gross profit 2,628 3,951 11,120 14,272 Selling 1,814 2,087 6,192 7,371 Administrative and general 1,395 1,843 5,115 5,421 -------- -------- -------- -------- Operating profit (loss) (581) 21 (187) 1,480 Other income (expense): Interest income and other income 1 23 38 94 Interest expense (124) (268) (346) (905) Loss from investments in affiliates -- (203) (1,156) (283) -------- -------- -------- -------- Income (loss) before income taxes and change in accounting principle (704) (427) (1,651) 386 Provision for (benefit from) income taxes (239) (171) 52 154 -------- -------- -------- -------- Net income (loss) before change in accounting principle (465) (256) (1,703) 232 Cumulative effect of change in accounting principle, net of tax benefit -- -- (12,385) -- -------- -------- -------- -------- Net income (loss) $ (465) $ (256) $(14,088) $ 232 ======== ======== ======== ======== Income (loss) per common share before change in accounting principle: Basic ($ 0.04) ($ 0.03) ($ 0.13) $ 0.03 ======== ======== ======== ======== Diluted ($ 0.04) ($ 0.03) ($ 0.13) $ 0.03 ======== ======== ======== ======== Income (loss) per common share after change in accounting principle: Basic ($ 0.04) ($ 0.03) ($ 1.08) $ 0.03 ======== ======== ======== ======== Diluted ($ 0.04) ($ 0.03) ($ 1.08) $ 0.03 ======== ======== ======== ========
The accompanying notes and the notes in the financial statements included in the Registrant's Annual report on Form 10-K are an integral part of these financial statements. 3 MARLTON TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
For the nine months ended September 30, September 30, 2002 2001 --------------- --------------- Cash flows from operating activities: Net income (loss) $(14,088) $ 232 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization 1,614 2,261 Loss from investment in affiliates 1,156 283 Cumulative effect of change in accounting principle 12,385 -- Non-cash compensation and other operating items 191 (51) Change in assets and liabilities: Decrease in accounts receivable, net 206 5,474 Decrease in inventory 1,471 553 (Increase) decrease in prepaid and other assets (132) 1,036 Decrease in notes receivable 383 -- Decrease in accounts payable, accrued expenses and other (551) (6,307) -------- -------- Net cash provided by operating activities 2,635 3,481 -------- -------- Cash flows from investing activities: Guaranteed payments to sellers -- (18) Capital expenditures (985) (1,016) -------- -------- Net cash used for investing activities (985) (1,034) -------- -------- Cash flows from financing activities: Principal payments on revolving credit facility (2,000) (3,000) Payments for loan origination fees (50) (60) Payments for promissory and seller notes (113) (55) -------- -------- Net cash used for financing activities (2,163) (3,115) -------- -------- Increase / (decrease) in cash and cash equivalents (513) (668) Cash and cash equivalents - beginning of period 1,233 749 -------- -------- Cash and cash equivalents - end of period $ 720 $ 81 ======== ========
The accompanying notes and the notes in the financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 4 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION: The consolidated financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The financial statements reflect all adjustments (of a normal and recurring nature), which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the quarter are not necessarily indicative of the results that may be expected for the full year or for future periods. These financial statements should be read in conjunction with the Annual Report to Shareholders and Form 10-K for the year ended December 31, 2001. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates. 2. EXCLUSIVE SUBCONTRACTOR ARRANGEMENT: The Company's San Diego trade show exhibit subsidiary, Sparks Exhibits and Environments, Ltd. ("Sparks"), entered into an interim operating agreement on July 15, 2002 to manufacture and service trade show exhibit projects as the exclusive subcontractor for Exhibitron, Inc., a San Diego area trade show exhibit company in Chapter 11 proceedings. In early October 2002, the bankruptcy court dismissed Exhibitron's bankruptcy proceedings. Subsequently, Sparks hired three of Exhibitron's former sales and telemarketing employees, and Sparks continues to perform in accordance with certain of the economic provisions of the interim operating agreement. Sparks also has had discussions regarding the acquisition of certain Exhibitron assets, but any acquisition would be subject to future mutual agreement and approval by Exhibitron creditors. 3. MAJOR CUSTOMERS: During the third quarter and first nine months of 2002, one customer accounted for 30% and 24%, respectively, of the Company's total net sales. During the third quarter and first nine months of 2001, no customer accounted for over 10% of the Company's total net sales. 5 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. PER SHARE DATA: The following table sets forth the computation of basic and diluted net income per common share (in thousands except per share data):
Three months ended Nine months ended -------------------------- -------------------------- September September September September 30, 2002 30, 2001 30, 2002 30, 2001 --------- --------- --------- --------- Net income (loss) before change in accounting principle $(465) $(256) $ (1,703) $232 ===== ====== ======== ==== Net income (loss) after change in accounting principle $(465) $(256) $(14,088) $232 ===== ====== ======== ==== Weighted average common shares outstanding used to compute basic net income per common share 12,988 7,520 12,988 7,613 Additional common shares to be issued assuming the exercise of stock options, net of shares assumed reacquired -- -- -- -- ----- ------ -------- ----- Total shares used to compute diluted net income per common share 12,988 7,520 12,988 7,613 ====== ====== ======== ===== Before change in accounting principle: Basic net income (loss) per share $ (.04) $ (.03) $ (.13) $.03 ====== ====== ====== ===== Diluted net income (loss) per share $ (.04) $ (.03) $ (.13) $.03 ====== ====== ====== ===== After change in accounting principle: Basic net income (loss) per share $ (.04) $ (.03) $ (1.08) $.03 ====== ====== ====== ===== Diluted net income (loss) per share $ (.04) $ (.03) $ (1.08) $.03 ====== ====== ====== =====
The increase in the weighted average number of common shares outstanding was principally attributable to an investment transaction on November 20, 2001 whereby the Company issued 5,300,000 shares of its common stock for an aggregate of $2,650,000. Excluded in the computation of diluted income per common share were options and warrants to purchase 7,400,000 and 2,110,000 shares of common stock, which were outstanding at September 30, 2002 and 2001, respectively, because the option and warrant exercise prices were greater than the average market price of the common shares. 5. INVENTORIES: Inventories, as of the respective dates, consists of the following (in thousands): September 30, 2002 December 31, 2001 ------------------ ----------------- Raw materials $ 431 $ 395 Work in process 3,383 3,636 Finished goods 1,313 2,567 ------ ------ $5,127 $6,598 ====== ====== 6 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. EMPLOYMENT AGREEMENTS: Certain employment agreements were mutually terminated on January 23, 2001, which reduced administrative and general expenses by $544,000 in the first quarter of 2001. 7. INVESTMENTS IN AFFILIATES: The Company recorded an impairment loss of $1.2 million for its investment in a portable trade show exhibit manufacturer in the first quarter of 2002. No income tax benefit was recorded in connection with this capital loss. During the first quarter of 2002 the Company also recorded a valuation allowance of $191,000 against a deferred tax asset associated with a capital loss, which resulted from the write-off of an investment in an affiliate located in the United Kingdom. Management has concluded that the Company will most likely not generate capital gains in the next two years that would be sufficient to realize the tax benefit from this capital loss. 8. ACCOUNTING CHANGE (ADOPTION OF SFAS NO. 142) Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which eliminates amortization of these assets and requires annual testing for impairment. The Company's reporting units for purposes of applying the provisions of SFAS 142 are the DMS Store Fixtures business ("DMS") and the Sparks Exhibits & Environments businesses ("Sparks"). SFAS 142 requires a comparison of the reporting unit's fair value, which is determined based on discounted cash flows, to its carrying value to determine potential impairment. If the fair value is less than the carrying value, an impairment loss is recognized. 7 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table reconciles net income and net income per share for the first nine months of 2002 and 2001 adjusted for SFAS 142:
September, September 30, 2002 30, 2001 -------- -------- (In thousands except per share amounts) Net income (loss) before change in accounting principle $(1,703) $232 Add back: goodwill amortization, net of tax of $114 -- 502 --------- ---- Adjusted net income (loss) before change in accounting principle $(1,703) $734 Cumulative effect of change in accounting principle, net of tax of $3,500 (12,385) -- --------- ---- Adjusted net income (loss) $(14,088) $734 ========= ==== Net income per share: Basic net income (loss) per share before change in accounting principle $(.13) $.03 Add back: goodwill amortization, net of tax -- .07 --------- ---- Adjusted basic net income (loss) per share before accounting change $(.13) $.10 Cumulative effect of change in accounting principle, net of tax (.95) -- --------- ---- Adjusted basic net income (loss) per share $(1.08) $.10 ======= ==== Diluted net income (loss) per share before change in accounting principle $(.13) $.03 Add back: goodwill amortization, net of tax -- .07 --------- ---- Adjusted diluted net income (loss) per share before accounting change $(.13) $.10 Cumulative effect of accounting change, net of tax (.95) -- --------- ---- Adjusted diluted net income (loss) per share $(1.08) $.10 ======== ====
Changes in the carrying amount of goodwill for the impairment write-down recognized in 2002 are as follows:
DMS Sparks Total -------- -------- -------- Balance at December 31, 2001 $ 15,885 $ 2,714 $ 18,599 Impairment write-down in the first quarter 2002 (15,885) -- (15,885) -------- -------- -------- Balance at September 30, 2002 -- $ 2,714 $ 2,714 -------- ======== ========
The tax effect of the accounting change is approximately $3.5 million after giving effect to the portion of the goodwill that was not deductible for tax reporting purposes. The Company has recognized non-current deferred tax assets of approximately $3.8 million that primarily reflect the tax effect of the impairment of the Company's goodwill. The amount of the deferred tax asset considered realizable could be reduced if the Company does not generate taxable income in the future. 8 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 9. RECENTLY ISSUED ACCOUNTING STANDARDS In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets" (SFAS 144). SFAS 144, which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of, supersedes SFAS No. 121 and is effective for fiscal years beginning after December 15, 2001. The Adoption of SFAS 144 did not have a material impact on the Company's financial position or results of operations. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement No., 4, 44 and 64 Amendment of SFAS 13 and Technical Connections" (SFAS 145). SFAS 145 rescinds SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt" and the amendment to SFAS 4, SFAS 64 "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". Through this rescission, SFAS 145 eliminates the requirement (in both SFAS 4 and SFAS 64) that gains and losses from the extinguishments of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. The adoption of SFAS 145 is not expected to have a material effect on the Company's financial position or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities." SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. The Company believes this Statement will not materially affect the Company's financial position or results of operations. 9 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three and nine month periods ended September 30, 2002 and 2001.
Sales Three Months Ended (In thousands) September 30, September 30, 2002 2001 % Increase ------------- ------------- ---------- Trade show exhibits group $ 6,575 $ 7,486 (12.2)% Permanent and scenic displays group 8,629 9,586 (10.0) -------- ------- ----- Total sales $ 15,204 $17,072 (10.9)% ======== ======= ===== Nine Months Ended (In thousands) September 30, September 30, 2002 2001 % Increase ------------- ------------- ---------- Trade show exhibits group $31,914 $39,284 (18.8)% Permanent and scenic displays group 21,505 20,815 3.3 ------- ------- ----- Total sales $53,419 $60,099 (11.1)% ======= ======= =====
Total net sales of $15.2 million for the third quarter of 2002 decreased 10.9% below the third quarter of 2001, and total net sales of $53.4 million for the first nine months of 2002 decreased 11.1% from the same prior year period. The third quarter decrease was attributable to lower sales of trade show exhibits, which decreased 12.2%, and lower sales of permanent and scenic displays (store fixtures and permanent museum exhibits), which decreased 10% due to lower sales of store fixtures. The sales decrease for the first nine months of 2002 was primarily due to lower sales of trade show exhibits and related services, which was largely the result of reductions in many customers' trade show marketing budgets in response to a slower economy. The loss of a trade show exhibit client also accounted for approximately one third of the sales decrease for the first nine months of 2002. Gross Profit Gross profit, as a percentage of net sales, decreased to 17.3% in the third quarter and to 20.8% for the first nine months of 2002 from 23.1% and 23.7% in the respective prior year periods. These decreases were due in large part to lower gross profit percentages generated by sales of store fixtures, and higher permanent museum exhibit sales, which generate a lower gross profit percentage than trade show exhibits. Cost reductions, including production facility consolidation, mitigated the impact of lower sales volume for the Company's trade show exhibits. Management continues to pursue cost reduction initiatives, including facility and staff reductions, to offset lower sales volume. Selling Expenses Selling expenses were reduced to 11.9% of net sales in the third quarter and to 11.6% for the first nine months of 2002 from 12.2% in the same periods of 2001. These decreases were principally attributable to reductions in discretionary marketing expenses in 2002 and to lower variable selling expenses for store fixture sales. 10 Administrative and general expenses Administrative and general expenses were reduced $0.4 million to $1.4 million in the third quarter of 2002 from $1.8 million for the same prior year period. This reduction was attributable to several factors, including staff and cost reductions implemented at the Company's West Coast operations, shortened workweek time schedules during the third quarter of 2002 and the elimination of goodwill amortization expense in connection with the adoption of a new accounting principle discussed below under "Recently Issued Accounting Standards." For the first nine months of 2002, administrative and general expenses were reduced $0.3 million to $5.1 million from $5.4 million in the comparable period of 2001. This reduction was attributable to several factors, including staff and cost reduction initiatives. Management is planning further profit improvement initiatives in the fourth quarter of 2002 and into 2003, to mitigate the impact of lower sales volume. Operating profit (loss) An operating loss of $0.6 million was incurred in the third quarter of 2002 as compared with a breakeven level for 2001, and an operating loss of $0.2 million was incurred for the first nine months of 2002 as compared with operating profit of $1.5 million for the first nine months of 2001. The third quarter decrease was primarily due to lower overall sales volume and lower gross profits generated by store fixture sales and permanent museum exhibit sales. The decrease for the nine-month period was also attributable in large part to these factors. Other income/(expense) Interest expense was reduced to $0.1 million and to $0.3 million in the third quarter and first nine months of 2002, respectively, from $0.3 million and $0.9 million in the comparable 2001 periods. These reductions were principally attributable to significantly lower borrowings under the Company's revolving credit facility and to lower interest rates. A loss of $1.2 million from investments in affiliates was recorded in the first quarter of 2002 to write down the Company's investment in a portable trade show exhibit manufacturer, versus a loss of $0.3 million in 2001 primarily for a write-down of the Company's investment in its Sparks Europe affiliate. Provision for (benefit from) income taxes The Company established a valuation allowance for the income tax benefit from the $1.2 million write down of investments in affiliates recorded in the first quarter of 2002 because this capital loss is not expected to be offset by capital gains within the required statutory period. The provision for income taxes recorded in the first quarter of 2002 also included a valuation allowance of $191,000 related to a 1999 capital loss incurred in connection with the Company's investment in a United Kingdom affiliate. Cumulative effect of change in accounting principle The Company recorded an impairment loss of $12.4 million (net of $3.5 million income tax benefit) in connection with adoption of Statement of Financial Accounting Standards No. 142 (SFAS 142) discussed below under the discussion of "Recently Issued Accounting Standards. Backlog The Company's backlog of orders was approximately $27 million at September 30, 2002 and $19 million at September 30, 2001. This increase is primarily due to a higher backlog of permanent and scenic displays. Exclusive Subcontractor Arrangement The Company's San Diego trade show exhibit subsidiary, Sparks Exhibits and Environments, Ltd. ("Sparks"), entered into an interim operating agreement on July 15, 2002 to manufacture and service trade show exhibit projects as the 11 exclusive subcontractor for Exhibitron, Inc., a San Diego area trade show exhibit company in Chapter 11 proceedings. In October 2002, the bankruptcy court dismissed Exhibitron's bankruptcy proceedings. Subsequently, Sparks hired three of Exhibitron's former sales and telemarketing employees, and Sparks continues to perform in accordance with certain of the economic provisions of the interim operating agreement. Sparks also has had discussions regarding the acquisition of certain Exhibitron assets, but any acquisition would be subject to future mutual agreement and approval by Exhibitron creditors. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital decreased $1.6 million to $5.3 million at September 30, 2002 from $6.9 million at December 31, 2001. This decrease was primarily due to inventory reductions totaling $1.5 million, which was largely the result of lower store fixture inventories. Net cash of $2.6 million generated from operating activities in the first nine months of 2002 plus available cash were used to reduce long-term debt by $2.1 million and for capital expenditures of $1 million in the first nine months of 2002. On May 16, 2002, the Company amended its Revolving Credit and Security Agreement (the "Facility") with its bank to change from an EBITDA basis to an asset-based arrangement. The Facility provides for borrowings of up to $12 million based on a percentage of qualified accounts receivable and a percentage of up to $6.7 million of inventories. The Facility, which expires on January 1, 2004, is collateralized by all the Company's assets and bears interest at rates based primarily on the London Inter Bank Offering Rate (LIBOR), plus 3.25%. The Facility includes certain financial covenants requiring a minimum tangible net worth and maintenance of certain financial ratios and restricts the Company's ability to pay dividends. Borrowings under this Facility were $4.5 million at September 30, 2002. The Company's borrowing capacity under the Facility was $7.9 million at September 30, 2002. The Company has off-balance sheet lease commitments for several facilities under non-cancelable operating leases. Timing of future lease commitments as well as maturities of long-term debt is as follows:
(In thousands) 2002 2003 2004 2005 2006 After 2006 ---- ---- ---- ---- ---- ---------- Lease commitments $514 $1,728 $1,704 $1,686 $987 $10,794 Debt maturities -- 150 4,500 -- -- --
The Company leases a facility from a partnership controlled by two shareholders of the Company. This lease, which expires on May 14, 2019, requires minimum annual rent of $771,000 at a fixed rate for the first 10 years, and the Company is responsible for taxes, insurance and other operating expenses. In connection with the DMS Store Fixtures acquisition, employment agreements were made with two shareholders of the Company, which provided for guaranteed minimum payments. These agreements were mutually terminated in January 2001 eliminating the guaranteed minimum payments after February 2, 2001, which reduced administrative and general expenses by $544,000 in the first quarter of 2001. On November 20, 2001, the Company issued 5,300,000 shares of its common stock and warrants expiring on November 19, 2011 to purchase 5,300,000 shares of its common stock, for an aggregate of $2,650,000. The Company's shareholders at the Annual Meeting of Shareholders held on November 7, 2001 approved this transaction. Costs incurred in connection with this transaction were $378,000. 12 OUTLOOK The Company expects sales to decrease in 2002 from 2001 levels. In view of current economic conditions, the Company's trade show exhibit client base, including Fortune 1000 companies, is expected to curtail their marketing budgets, which would adversely impact the Company's trade show exhibit sales and profit margins. Adversely affected Internet and technology-driven businesses, particularly in the Western Region, have also led to a decline in trade show exhibit sales. In addition, the events of September 11, 2001 may continue to reduce business travel, trade show attendance and related spending. Although the Company currently expects sales to stabilize or increase slightly in 2003 as compared with expected levels in 2002, the sales mix is expected to increase margin pressure. Specifically, the higher backlog is primarily attributable to new permanent and scenic exhibits, which yield lower profit margins than the Company's trade show exhibits. The Company continues to explore new sales opportunities while pursuing operating efficiency improvements and cost reduction initiatives to mitigate the impact of lower trade show exhibit sales and lower overall margins. RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141. "Business Combinations" (SFAS 141), which supersedes Accounting Principles Board Opinion No. 16 "Business Combinations" (APB 16) and SFAS No. 38 "Accounting for Preacquisition Contingencies of Purchased Enterprises" (SFAS 38). It is expected that SFAS 141 will improve the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under the purchase method. Use of the pooling-of-interests method is no longer permitted. The Company adopted SFAS 141 in the third quarter of 2001. The adoption of SFAS 141 has not had a material effect on the Company's financial position or results of operations. In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets" (SFAS 142), which supersedes APB No. 17 "Intangible Assets". SFAS 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. It is expected that this change will provide investors with greater transparency regarding the economic value of goodwill and its impact on earnings. The Company adopted SFAS 142 effective January 1, 2002. This new accounting standard requires a two-step test for operating units having unamortized goodwill balances. The first step requires a comparison of the book value of the net assets to the fair value of the respective operating unit. If the fair value is determined to be less than the book value, a second step is required to determine the impairment. This second step includes evaluation of other intangible assets, and any shortfall of the adjusted book value below fair value determines the amount of the goodwill impairment. Goodwill amortization expense was $502,000 (net of a tax benefit of $114,000) in the first nine months of 2001. The impact of adopting SFAS 142 reduced net income by $12.4 million ($15.9 million goodwill write down, net of $3.5 million income tax benefit) in the first quarter of 2002, identified as a cumulative effect of a change in accounting principle. This charge, which reduced the carrying value of goodwill recognized in connection with the 1997 acquisition of DMS Store Fixtures, differs from the previous accounting standard method, which was based on undiscounted cash flows, because the new method is based on fair value measurement estimates as of January 1, 2002. 13 In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities." SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. The Company believes this Statement will not materially affect the Company's financial position or results of operations. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. When used in this report, the words "intends," "believes," "plans," "expects," "anticipates" and similar words are used to identify these forward looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, there are certain important factors that could cause the Company's actual results to differ materially from those included in such forward-looking statements. Some of the important factors which could cause actual results to differ materially from those projected include, but are not limited to: the Company's ability to continue to identify and enter new markets, execute and manage acquisitions and expand existing business; the actions and approvals of third parties; continued availability of financing to provide additional sources of funding for capital expenditures, working capital and investments; the effects of competition on products and pricing; growth and acceptance of new product lines through the Company's sales and marketing programs; changes in material and labor prices from suppliers; changes in customers' financial condition; the Company's ability to attract and retain competent employees; the Company's ability to add and retain customers; changes in sales mix; the Company's ability to integrate and upgrade technology; uncertainties regarding accidents or litigation which may arise; the financial impact of facilities consolidations; the Company's ability to generate sufficient pre-tax income to utilize deferred income tax assets; the impact from the events of September 11, 2001 on business travel, trade show attendance and related spending; and the effects of, and changes in the economy, monetary and fiscal policies, laws and regulations, inflation and monetary fluctuations as well as fluctuations in interest rates, both on a national and international basis. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's revolving credit facility bears a floating rate of interest, based on LIBOR rates, plus an applicable spread. The Company had borrowings of $4.5 million from its revolving credit facility at September 30, 2002. Fluctuations in foreign currency exchange rates do not significantly affect the Company's financial position and results of operations. ENVIRONMENTAL The Company believes it is in compliance with federal, state and local provisions regulating discharge of materials into the environment or otherwise relating to protection of the environment. Federal or state authorities have not identified the Company as a potentially responsible party for environmental clean-ups at any of its sites. LITIGATION The Company from time to time is a defendant and counterclaimant in various lawsuits that arise out of, and are incidental to, the conduct of its business. The resolution of pending legal matters should not have a material effect on the financial position of the Company. 14 ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures Within the 90 days prior to the date of this report, the Company established a Disclosure Committee chaired by the Company's Chief Financial Officer and comprised of managers representing the Company's major areas, including financial reporting and control, sales, operations and information technology. This Committee carried out an evaluation of the effectiveness and operation of the Company's disclosure controls and procedures, and established ongoing procedures to monitor and evaluate these controls and procedures in the future. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal controls There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. PART II - OTHER INFORMATION Responses to Items 1, 2, 3, 4 and 5 are omitted since these items are either inapplicable or the response thereto would be negative. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Page ---- 3(ii)(a) Amended and Restated Bylaws -October 23, 2002 18 ------ 10(ee) Option Agreement dated October 23, 2002 with Washburn Oberwager 31 ------ (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. 15 SIGNATURES In accordance with 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. MARLTON TECHNOLOGIES, INC. /s/ Robert B. Ginsburg - --------------------------- Robert B. Ginsburg President and Chief Executive Officer /s/ Stephen P. Rolf - --------------------------- Stephen P. Rolf Chief Financial Officer Dated: November 12, 2002 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Marlton Technologies, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert B. Ginsburg Chief Executive Officer of the Company and Stephen P. Rolf, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, based on their knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Robert B. Ginsburg /s/ Stephen P. Rolf - ----------------------- ------------------- Robert B. Ginsburg Stephen P. Rolf Chief Executive Officer Chief Financial Officer November 12, 2002 November 12, 2002 16 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert B. Ginsburg and Stephen P. Rolf, certify that: 1. I have reviewed this quarterly report on Form 10-Q for Marlton Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ Robert B. Ginsburg /s/ Stephen P. Rolf - --------------------------- ----------------------- Robert B. Ginsburg Stephen P. Rolf Chief Executive Officer Chief Financial Officer 17 EX-3 3 exh3-ii.txt EXH3-II.TXT EXHIBIT 3(ii)(a) AMENDED AND RESTATED BYLAWS OF MARLTON TECHNOLOGIES, INC. October 23, 2002 ARTICLE 1 OFFICES Section 1.1 Registered Office. The registered office of Marlton Technologies, Inc. (the "Corporation") in the Commonwealth of Pennsylvania shall be as specified in the Articles of Incorporation of the Corporation, as they may be amended from time to time (the "Articles"), or at such other place as the Board of Directors of the Corporation (the "Board") may specify in a statement of change of registered office filed with the Department of State of the Commonwealth of Pennsylvania. Section 1.2 Other Offices. The Corporation may also have an office or offices at such other place or places either within or without the Commonwealth of Pennsylvania as the Board may from time to time determine or the business of the Corporation requires. ARTICLE 2 MEETINGS OF THE SHAREHOLDERS Section 2.1 Place. All meetings of the shareholders shall be held at such places, within or without the Commonwealth of Pennsylvania, as the Board may from time to time determine. Section 2.2 Annual Meeting. A meeting of the shareholders for the election of directors and the transaction of such other business as may properly be brought before the meeting shall be held in each calendar year at such time and place as may be determined by the Board. Section 2.3 Written Ballot. Unless required by vote of the shareholders before the voting begins, elections of directors need not be by written ballot. Section 2.4 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, may be called at any time by, the Chairman of the Board, the Vice Chairman of the Board and the President and Chief Executive Officer (each a "Primary Officer"), by the Board or shareholders entitled to cast at least 30% of the votes all shareholders are entitled to cast at the special meeting, upon written request delivered to the Secretary of the Corporation. Any request for a special meeting of shareholders shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, it shall be the duty of the Secretary to give notice, in a manner consistent with Section 2.6 of these Bylaws, of a special meeting of the shareholders to be held at such time as the Secretary may fix, which time may not be, if the meeting is called pursuant to a statutory right, more than sixty (60) days after receipt of the request. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Section 2.5 Scope of Special Meetings. Business transacted at any special meeting shall be confined to the business stated in the notice. Section 2.6 Notice. Written notice of every meeting of the shareholders, stating the place, the date and hour thereof and, in the case of a special meeting of the shareholders, the general nature of the business to be transacted thereat, shall be given in a manner consistent with the provisions of Section 12.4 of these Bylaws at the direction of the Secretary of the Corporation or, in the absence of the Secretary of the Corporation, any Assistant Secretary of the Corporation, at least ten (10) days prior to the day named for a meeting called to consider a fundamental change under Chapter 19 of 1 the Pennsylvania Business Corporation Law of 1988, as it may from time to time be amended (the "1988 BCL"), or five (5) days prior to the day named for the meeting in any other case, to each shareholder entitled to vote thereat on the date fixed as a record date in accordance with Section 8.1 of these Bylaws or, if no record date be fixed, then of record at the close of business on the tenth (10th) day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day immediately preceding the day of the meeting, at such address (or telex, TWX, facsimile or telephone number), as appears on the transfer books of the Corporation. Any notice of any meeting of shareholders may state that, for purposes of any meeting that has been previously adjourned for one or more periods aggregating at least fifteen (15) days because of an absence of a quorum, the shareholders entitled to vote who attend such a meeting, although less than a quorum pursuant to Section 2.7 of these Bylaws, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the original notice of the meeting that was so adjourned. Section 2.7 Quorum. The shareholders present in person or by proxy, entitled to cast at least a majority of the votes that all shareholders are entitled to cast on any particular matter to be acted upon at the meeting, shall constitute a quorum for the purposes of consideration of, and action on, such matter. The shareholders present in person or by proxy at a duly organized meeting can continue to do business until the adjournment thereof notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, the shareholders present in person or by proxy may, except as otherwise provided by the 1988 BCL and subject to the provisions of Section 2.8 of these Bylaws, adjourn the meeting to such time and place as they may determine. Section 2.8 Adjournment. Any meeting of the shareholders, including one at which directors are to be elected, may be adjourned for such period as the shareholders present in person or by proxy and entitled to vote shall direct. Other than as provided in the last sentence of Section 2.6 of these Bylaws, notice of the adjourned meeting or the business to be transacted thereat need not be given, other than announcement at the meeting at which adjournment is taken, unless the Board fixes a new record date for the adjourned meeting or the 1988 BCL requires notice of the business to be transacted and such notice has not previously been given. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally noticed. Those shareholders entitled to vote present in person or by proxy, although less than a quorum pursuant to Section 2.7 of these Bylaws, shall nevertheless constitute a quorum for the purpose of (a) electing directors at a meeting called for the election of directors that has been previously adjourned for lack of a quorum, and (b) acting, at a meeting that has been adjourned for one or more periods aggregating fifteen (15) days because of an absence of a quorum, upon any matter set forth in the original notice of such adjourned meeting, provided that such original notice shall have complied with the last sentence of Section 2.6 of these Bylaws. Section 2.9 Majority Voting. Any matter brought before a duly organized meeting for a vote of the shareholders, including, without limitation, the amendment of any bylaw, shall be decided by a majority of the votes cast at such meeting by the shareholders present in person or by proxy and entitled to vote thereon, unless the matter is one for which a different vote is required by express provision of the 1988 BCL, the Articles or a bylaw adopted by the shareholders, in any of which case(s) such express provision shall govern and control the decision on such matter. Section 2.10 Voting Rights. Except as otherwise provided in the Articles, at every meeting of the shareholders, every shareholder entitled to vote shall have the right to one vote for each share having voting power standing in his or her name on the books of the Corporation. Shares of the Corporation owned by it, directly or indirectly, and controlled by the Board, directly or indirectly, shall not be voted. Section 2.11 Proxies. Every shareholder entitled to vote at a meeting of the shareholders may authorize another person to act for him or her by proxy. The presence of, or vote or other action at a meeting of shareholders, by a proxy of a shareholder, shall constitute the presence of, or vote or action by, the shareholder. Every proxy shall be executed in writing by the shareholder or by the shareholder's duly authorized attorney-in-fact and filed with the 2 Secretary of the Corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice of revocation has been given to the Secretary of the Corporation. No unrevoked proxy shall be valid after three (3) years from the date of its execution, unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is given to the Secretary of the Corporation. Section 2.12 Voting Lists. The officer or agent having charge of the transfer books for securities of the Corporation shall make a complete list of the shareholders entitled to vote at a meeting of the shareholders, arranged in alphabetical order, with the address of and the number of shares held by each shareholder, which list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. If the Corporation has five thousand (5000) or more shareholders, it may make such information available at the meeting by any other means. Section 2.13 Judges of Election. In advance of any meeting of the shareholders, the Board may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of any such meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one (1) or three (3), as determined by the Board to be appropriate under the circumstances. No person who is a candidate for office to be filled at the meeting shall act as a judge at the meeting. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them, if requested by the presiding officer of the meeting or any shareholder or the proxy of any shareholder. If there are three (3) judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. Section 2.14 Participation by Conference Call. No shareholder may participate in any meeting of shareholders by means of conference telephone or similar communications equipment. ARTICLE 3 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING Section 3.1 Unanimous Written Consent. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting, if prior or subsequent to the action, a written consent or consents thereto signed by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the Secretary of the Corporation. Section 3.2 Record Date - Consents. Except as otherwise provided in Section 8.1 of these Bylaws, the record date for determining shareholders entitled to (a) express consent to corporate action in writing without a meeting, when prior action by the Board is not necessary, (b) call a special meeting of the shareholders, or (c) propose an amendment of the Articles, shall be at the close of business on the day on which the written consent, request for a special meeting or petition proposing an amendment of the Articles is filed with the Secretary of the Corporation. If prior action by the Board is necessary, the record date for determining such shareholders shall be at the close of business on the day on which the Board adopts the resolution relating to such action. 3 ARTICLE 4 DIRECTORS Section 4.1 Number and Qualifications. The number of directors shall not be less than three nor more than 12, as shall from time to time (a) be determined by the Board or (b) be set forth in a notice of a meeting of shareholders called for the election of the Board, provided, however, if there is only one shareholder there may be one director. Except as provided in Section 4.4 of these Bylaws in the case of vacancies, directors, other than those constituting the first board of directors, shall be elected by the shareholders. Directors shall be natural persons of full age and need not be residents of the Commonwealth of Pennsylvania or shareholders of the Corporation. Section 4.2 Term. Each director shall be elected to serve a term of one (1) year and until a successor is elected and qualified or until the director's earlier death, resignation or removal. Section 4.3. Nominations of Directors. Nominees for election to the Board shall be selected by the Board or a committee of the Board to which the Board has delegated the authority to make such selections pursuant to Section 4.12 of these Bylaws. The Board or such committee, as the case may be, may consider written recommendations from shareholders for nominees for election to the Board provided any such recommendation, together with (a) such information regarding each nominee as would be required to be included in a proxy statement filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), and (b) the consent of each nominee to serve as a director of the Corporation if so elected, is received by the Secretary of the Corporation, in the case of an annual meeting of shareholders, not later than the date specified in the most recent proxy statement of the Corporation as of the date by which shareholder proposals for consideration at the next annual meeting of shareholders must be received and, in the case of a special meeting of shareholders, not later than the tenth (10th) day after the giving of notice of such meeting. Only persons duly nominated for election to the Board in accordance with this Section 4.3 and persons with respect to whose nominations proxies have been solicited pursuant to a proxy statement filed pursuant to the Exchange Act shall be eligible for election to the Board. Section 4.4 Vacancies. Vacancies in the Board, including vacancies resulting from an increase in the number of directors, shall be filled by a majority vote of the remaining members of the Board, even though less than a quorum, or by a sole remaining director, and each person so elected shall serve as a director for the balance of the unexpired term. If one or more directors resign from the Board effective at a future date, the directors then in office, including those who have resigned, shall have the power to fill the vacancies by a majority vote, the vote thereon to take effect when the resignations become effective. Section 4.5 Removal. The entire Board or any one or more directors may be removed from office without assigning any cause by the vote of the shareholders. Section 4.6 Powers. The business and affairs of the Corporation shall be managed under the direction of its Board, which may exercise all powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles or these Bylaws directed or required to be exercised and done by the shareholders. Section 4.7 Place of Board Meetings. Meetings of the Board may be held at such place within or without the Commonwealth of Pennsylvania as the Board may from time to time appoint or as may be designated in the notice of the meeting. Section 4.8 First Meeting of Newly Elected Board. The first meeting of each newly elected Board may be held at the same place and immediately after the meeting at which such directors were elected and no notice shall be required other than announcement at such meeting. If such first meeting of the newly elected Board is not so held, notice of such meeting shall be given in the same manner as set forth in Section 4.10 of these Bylaws with respect to notice of special meetings of the Board. Section 4.9 Regular Board Meetings; Notice. Regular meeting of the Board may be held at such times and places as shall be determined from time to time by resolution of at least a majority of the whole Board at a duly convened meeting, or by unanimous written consent. Notice of each regular meeting of the Board shall specify the date, place and hour of the meeting and shall be given to each director at least fifteen (15) days before the meeting. Notice shall be given in a manner consistent with Section 12.4 of these Bylaws. 4 Section 4.10 Special Board Meetings; Notice. Special meetings of the Board may be called by any of the Primary Officers on notice to each director, specifying the date, place and hour of the meeting. Notice shall be given to each director at least one (1) day before the meeting, in a manner consistent with Section 12.4 of these Bylaws. Special meeting shall be called by the Secretary in like manner and on like notice on the written request of two directors. Section 4.11 Quorum of the Board. At all meetings of the Board and committees of the Board, the presence of a majority of the directors in office or a majority of the members of such committee, as the case may be, shall constitute a quorum for the transaction of business, and the acts of a majority of the directors or a majority of the members of such committee, as the case may be, present and voting at a meeting at which a quorum is present shall be the acts of the Board or committee as applicable. If a quorum shall not be present at any meeting of directors or committee, the directors or members of the committee present thereat may adjourn the meeting. It shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. Section 4.12 Committees of Directors. The Board may, by resolution adopted by a majority of the directors in office, establish one or more committees, each committee to consist of one or more of the directors, and may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. Any such committee, to the extent provided in such resolution of the Board or in these Bylaws, shall have and may exercise all of the powers and authority of the Board; provided, however, that no such committee shall have any power or authority to (a) submit to the shareholders any action requiring approval of the shareholders under the 1988 BCL, (b) create or fill vacancies on the Board, (c) amend or repeal these Bylaws or adopt new bylaws, (d) amend or repeal any resolution of the Board that by its terms is amendable or repealable only by the Board, (e) unless such committee is an Executive Committee, act on any matter committed by these Bylaws or by resolution of the Board to another committee of the Board, (f) amend the Articles or adopt a resolution proposing an amendment to the Articles, or (g) adopt a plan or an agreement of merger or consolidation, share exchange, asset sale or division. In the absence or disqualification of a member or alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not a quorum is present, may unanimously appoint another director to act at the meeting in the place of any absent or disqualified member. Minutes of all meetings of any committee of the Board shall be kept by the person designated by such committee to keep such minutes. Copies of such minutes and any writing setting forth an action taken by written consent without a meeting shall be distributed to each member of the Board promptly after such meeting is held or such action is taken. Each committee of the Board shall serve at the pleasure of the Board. Section 4.13 Participation in Board Meetings by Telephone. One or more directors may participate in a meeting of the Board or of a committee of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and all directors so participating shall be deemed present at the meeting. Section 4.14 Action by Consent of Directors. Any action required or permitted to be taken at a meeting of the Board or of a committee of the Board may be taken without a meeting if, prior or subsequent to the action, a consent or consents in writing setting forth the action so taken shall be signed by all of the directors in office or the members of the committee, as the case may be, and filed with the Secretary of the Corporation. Section 4.15 Compensation of Directors. The Board may, by resolution, fix the compensation of directors for their services as directors. A director may also serve the Corporation in any other capacity and receive compensation therefore. 5 Section 4.16 Directors' Liability. No person who is or was a director of the Corporation shall be personally liable for monetary damages for any action taken, or any failure to take any action, unless (a) such director has breached or failed to perform the duties of his or her office under the 1988 BCL and (b) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness, or unless such liability is imposed pursuant to a criminal statute or for the payment of taxes pursuant to local, state or federal law. ARTICLE 5 OFFICERS Section 5.1 Principal Officers. The officers of the Corporation shall be chosen by the Board, and shall include a Chairman of the Board, a Vice Chairman of the Board, a President and Chief Executive Officer, one or more Vice Presidents, a Secretary and a Treasurer (collectively, the "Principal Officers"). The Board shall designate one officer (who need not be a Principal Officer but shall not be an assistant officer) to be the chief financial officer of the Corporation, and another officer (who need not be a Principal Officer but shall not be an assistant officer) to be the chief accounting officer of the Corporation. The President and Chief Executive Officer, all Vice Presidents and the Secretary shall be natural persons of full age. The Treasurer may be a corporation, but if a natural person, shall be of full age. Any number of offices may be held by the same person. Section 5.2 Electing Principal Officers. The Board, immediately after each annual meeting of the shareholders, shall elect the Principal Officers of the Corporation, none of whom (other than the Chairman of the Board and the Vice Chairman of the Board) need be members of the Board. Section 5.3 Other Officers. The Corporation may have such other officers, assistant officers, agents and employees as the Board may deem necessary, each of whom shall hold office for such period, have such authority and perform such duties as the Board, the Chairman of the Board, the Vice Chairman of the Board or the President and Chief Executive Officer may from time to time determine. The Board may delegate to any Principal Officer the power to appoint or remove, and set the compensation of, any such other officers and any such agents or employees. Section 5.4 Compensation. Except as provided in Section 5.3 of these Bylaws, the salaries of all officers of the Corporation shall be fixed by the Board. Section 5.5 Term of Office; Removal. Each officer of the Corporation shall hold office until his or her successor has been chosen and qualified or until his or her earlier death, resignation or removal. Vacancies of any office shall be filled by the Board. Any officer or agent may be removed by the Board with or without cause, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. The election or appointment of an officer or agent shall not of itself create any contract rights. Section 5.6 The Chairman of the Board. Unless otherwise determined by the Board of Directors, the Chairman of the Board shall have the usual duties of an executive officer with general active management of the affairs of the Corporation. In the exercise of these duties and subject to the limitations of the laws of the Commonwealth of Pennsylvania, these By-laws, and the actions of the Board of Directors, the Chairman of the Board shall supervise officers, may appoint, suspend and discharge employees and agents, shall sign or countersign all certificates, contracts, or other instruments of the Corporation as authorized by the Board of Directors and shall preside at all meetings of the shareholders and Board of Directors at which he shall be present. The Chairman of the Board shall also have such other powers and perform such other duties as may be assigned to him by the Board of Directors. 6 Unless otherwise determined by the Board of Directors, the Chairman of the Board shall have full power and authority on behalf of the Corporation, to attend and to act and to vote at any meeting of the shareholders of any corporation in which the Corporation may hold stock and, at any such meeting, shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock and which, as the owner thereof, the Corporation might have possessed and exercised. Section 5.7 The President and Chief Executive Officer. Unless otherwise determined by the Board of Directors, the President and Chief Executive Officer shall have general supervision of the affairs of the Corporation, shall sign or countersign all certificates, contracts, or other instruments of the Corporation as authorized by the Board of Directors, may appoint, suspend and discharge employees and agents, and shall perform any and all other duties as are incident to her or his office or are properly required of him or her by the Board of Directors. Section 5.8 The Vice Chairman of the Board. Unless otherwise determined by the Board of Directors, the Vice Chairman of the Board shall have the usual duties of an executive officer with general active management of the affairs of the Corporation. In the exercise of these duties and subject to the limitations of the laws of the Commonwealth of Pennsylvania, these By-laws, and the actions of the Board of Directors, the Vice Chairman of the Board shall be the president and chief executive officer of each subsidiary of the Corporation, may appoint, suspend and discharge employees and agents, shall sign or countersign all certificates, contracts, or other instruments of the Corporation as authorized by the Board of Directors, and shall in the absence of the Chairman of the Board, preside at all meetings of the shareholders and Board of Directors at which he shall be present. The Vice Chairman of the Board shall also have such other powers and perform such other duties as may be assigned to him by the Board of Directors Section 5.9 The Vice Presidents. The Vice-President or Vice-Presidents, in the order designated by the Board, shall, in the absence or disability of the President and Chief Executive Officer, perform the duties and exercise the powers of the President and Chief Executive Officer, and shall perform such other duties as the Board may prescribe or the President and Chief Executive Officer may delegate to them. Section 5.10 The Secretary. The Secretary shall attend all sessions of the Board and all meetings of the shareholders and record all the votes of the Corporation and the minutes of all the transactions in a book to be kept for that purpose, and shall perform like duties for the committees of the Board when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board, and shall perform such other duties as may be prescribed by the Board or the President and Chief Executive Officer, under whose supervision the Secretary shall be. He or she shall keep in safe custody the corporate seal, if any, of the Corporation. Section 5.11 The Treasurer. (1) 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 shall be designated by the Board. (2) The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and Chief Executive Officer and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his or her transactions as Treasurer. Section 5.12 Bonds. If required by the Board, any officer shall give the Corporation a bond in such sum, and with such surety or sureties as may be satisfactory to the Board, for the faithful discharge of the duties of his or her office and for the restoration to the Corporation, in the case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. 7 ARTICLE 6 CERTIFICATES FOR SHARES Section 6.1 Share Certificates. The certificates representing shares of the Corporation shall be numbered and registered in a share register as they are issued. The share register shall exhibit the names and addresses of all registered holders and the number and class of shares and the series, if any, held by each. The Certificate shall state that the Corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the registered holder and the number and class of shares and the series, if any, represented thereby. If, under its Articles, the Corporation is authorized to issue shares of more than one class or series, each Certificate shall set forth, or shall contain a statement that the Corporation will furnish to any shareholder upon request and without charge, a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the Board to fix and determine such rights. Section 6.2 Execution of Certificates. Every share certificate shall be executed, by facsimile or otherwise, by or on behalf of the Corporation, by the President and Chief Executive Officer, by any Vice-President, or by the Secretary. In case any officer who has signed or whose facsimile signature has been placed upon any share certificate shall have ceased to be such officer, because of death, resignation or otherwise, before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the time of issue. ARTICLE 7 TRANSFER OF SHARES Section 7.1 Transfer. Upon presentment to the Corporation or its transfer agent of a share certificate endorsed by the appropriate person or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate canceled and the transfer registered upon the books of the Corporation, unless either: (a) the Corporation has received a demand from an appropriate person to make an indorsement on such certificate that the Corporation not register transfer; or (b) the Corporation has been served with a restraining order, injunction or other process from a court of competent jurisdiction enjoining it from registering the transfer. Any demand to the Corporation not to register transfer shall identify the registered owner and the issue of which such share is a part and provide an address to send communications directed to the person making the demand. No demand described in Section 7.1(a) above shall be effective unless it is received by the Corporation at a time and in a manner affording the Corporation a reasonable opportunity to act on it. Section 7.2 Request to Register Transfer After Demand. If a share certificate is presented to the Corporation or its transfer agent with a request to register transfer after a demand that the Corporation not register transfer of such certificate has become effective pursuant to Section 7.1 of these Bylaws, then the Corporation shall promptly communicate to each of the person who initiated the demand and the person who presented the certificate for registration of transfer a notification stating that: (a) the certificate has been presented for registration of transfer; (b) a demand that the Corporation not register transfer of such certificate had previously been received; and (c) the Corporation will withhold registration of transfer of such certificate for a period of thirty (30) days (or such shorter period of time as stated in the notification that is not manifestly unreasonable) from the date of the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond. Section 7.3 Limitation of Liability. The Corporation shall not be liable to a person who initiated a demand that the Corporation not register transfer for any loss the person suffers as a result of registration of transfer 8 if the person who initiated demand does not, within the time stated in the notification described in Section 7.2 of these Bylaws, either (a) obtain an appropriate restraining order, injunction or other process from a course of competent jurisdiction enjoining the Corporation from registering the transfer, or (b) file with the Corporation an indemnity bond, sufficient in the Corporation's to protect the Corporation or its transfer agent from any loss it or they may suffer by refusing to register the transfer. ARTICLE 8 RECORD DATE; IDENTITY OF SHAREHOLDERS Section 8.1 Record Date. The Board may fix a time, prior to the date of any meeting of the shareholders, as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall not be more than ninety (90) days prior to the date of the meeting. Except as otherwise provided in Section 8.2 of these Bylaws, only the shareholders of record at the close of business on the date so fixed shall be entitled to notice of, or to vote at, such meeting, notwithstanding any transfer of securities on the books of the Corporation after any record date so fixed. The Board may similarly fix a record date for the determination of shareholders for any other purpose. When a determination of shareholders of record has been made as herein provided for purposes of a meeting, the determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. Section 8.2 Certification of Nominee. The Board may adopt a procedure whereby a shareholder may certify in writing to the Secretary of the Corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. The Board, in adopting such procedure, may specify (a) the classification of shareholder who may certify, (b) the purpose or purposes for which the certification may be made, (c) the form of certification and the information to be contained therein, (d) as to certifications with respect to a record date, the date after the record date by which the certification must be received by the Secretary of the Corporation, and (e) such other provisions with respect to the procedure as the Board deems necessary or desirable. Upon receipt by the Secretary of the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holders of record of the number of shares specified instead of the persons making the certification. ARTICLE 9 REGISTERED SHAREHOLDERS Section 9.1 Before due presentment for transfer of any shares, the Corporation shall treat the registered owner thereof as the person exclusively entitled to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim or interest in such securities, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the Commonwealth of Pennsylvania or Section 8.2 of these Bylaws. ARTICLE 10 LOST CERTIFICATES Section 10.1 If the owner of a share certificate claims that it has been lost, destroyed, or wrongfully taken, the Corporation shall issue a new certificate in place of the original certificate if the owner so requests before the Corporation has notice that the certificate has been acquired by a bona fide purchaser, and if the owner has filed with the Corporation an indemnity bond and an affidavit of the facts satisfactory to the Board or its designated agent, and has complied with such other reasonable requirements, if any, as the Board may deem appropriate. 9 ARTICLE 11 DISTRIBUTIONS Section 11.1 Distributions. Distributions upon the shares of the Corporation, whether by dividend, purchase or redemption or other acquisition of its shares subject to any provisions of the Articles related thereto, may be authorized by the Board at any regular or special meeting of the Board and may be paid directly or indirectly in cash, in property or by the incurrence of indebtedness by the Corporation. Section 11.2 Reserves. Before the making of any distributions, there may be set aside out of any funds of the Corporation available for distributions such sum or sums as the Board from time to time, in its absolute discretion, deems proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board shall deem conducive to the interests of the Corporation, and the Board may abolish any such reserve in the manner in which it was created. Section 11.3 Stock Dividends/Splits. Stock dividends or splits upon the shares of the Corporation, subject to any provisions of the Articles related thereto, may be authorized by the Board at any regular or special meeting of the Board. ARTICLE 12 GENERAL PROVISIONS Section 12.1 Checks and Notes. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board may from time to time designate. Section 12.2 Fiscal Year. The fiscal year of the Corporation shall be as determined by the Board. Section 12.3 Seal. The corporate seal, if any, shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania." Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement of any instrument or other document by the Corporation. Section 12.4 Notices. Whenever, under the provisions of the 1988 BCL or of the Articles or of these Bylaws or otherwise, written notice is required to be given to any person, it may be given to such person either personally or by sending a copy thereof by first class or express mail, postage prepaid, telegram (with messenger service specified), telex, TWX (with answerback received), courier service (with charges prepaid) or facsimile transmission, to his or her address, (or to his or her telex, TWX, or facsimile number), appearing on the books of the Corporation or, in the case of directors, supplied by the director to the Corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person. A notice given by telex or TWX shall be deemed to have been given when dispatched. If mailed at least twenty (20) days prior to the meeting or corporate action to be taken, notice may be sent by any class of post paid mail (including bulk mail). Section 12.5 Waiver of Notice. Whenever any notice is required to be given by the 1988 BCL or by the Articles or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted nor the purpose of a meeting need be specified in the waiver of notice of the meeting. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting, except where any person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened, and the person so objects at the beginning of the meeting. 10 ARTICLE 13 AMENDMENTS Section 13.1 Amendments. The Bylaws may be adopted, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened or, except for a bylaw on a subject expressly committed to the shareholders by the 1988 BCL, by a majority vote of the members of the Board at any regular or special meeting duly convened, subject always to the power of the shareholders to change such action by the directors; however, whenever the Bylaws require for the taking of any action by the shareholders or a class of shareholders a specific number or percentage of votes, the provision of the Bylaws setting forth that requirement shall not be amended or repealed by any lesser number or percentage of votes of the shareholders or of the class of shareholders. In the case of a meeting of shareholders, written notice shall be given to each shareholder that the purpose, or one of the purposes, of a meeting is to consider the adoption, amendment or repeal of the Bylaws. There shall be included in, or enclosed with the notice, a copy of the proposed amendment or a summary of the changes to be effected thereby. Any change in the Bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. ARTICLE 14 INDEMNIFICATION Section 14.1 Officers and Directors - Direct Actions. The Corporation shall indemnify any director or officer of the Corporation (as used herein, the phrase "director or officer of the Corporation" shall mean any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise (including any subsidiary of the Corporation)), any person who was or is a party (other than a party plaintiff suing on his or her own behalf), or who is threatened to be made such a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director or officer of the Corporation, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she met the standard of conduct of (a) acting in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and (b) with respect to any criminal proceeding, having no reasonable cause to believe his or her conduct was unlawful. The termination of any action or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person (a) did not act in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and (b) with respect to any criminal proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 14.2 Officers and Directors - Derivative Actions. The Corporation shall indemnify any director or officer of the Corporation who was or is a party (other than a party suing in the right of the Corporation), or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in the Corporation's favor by reason of the fact that he or she is or was a director or officer of the Corporation, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of the action, suit or proceeding if he or she met the standard of conduct of acting in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation. Indemnification shall not be made under this Section in respect of any claim, issue or matter as to which the person has been adjudged to be liable to the Corporation unless and only to the extent that the Court of Common Pleas of the judicial district embracing the county in which the registered office of the Corporation is located or the court in which the action, suit or proceeding was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for the expenses that the Court of Common Pleas or other court deems proper. 11 Section 14.3 Employees and Agents. The Corporation may, to the extent permitted by the 1988 BCL, indemnify any employee or agent of the Corporation (as used in this Article 14, the phrase "employee or agent of the Corporation shall mean any person who is or was an employee or agent of the Corporation, other than an officer, or is or was serving at the request of the Corporation as an employee or agent of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise (including any subsidiary of the Corporation) who was or is a party, or who is threatened to be made such a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding by reason of the fact that he or she is or was an employee or agent of the Corporation, provided he or she has met the standard of conduct set forth in Sections 14.1 and 14.2, subject to the limitations set forth in Section 14.2 in the case of an action, suit or proceeding by or in the right of the Corporation to procure a judgment in the Corporation's favor. Section 14.4 Mandatory Indemnification. To the extent that a director or officer of the Corporation or any employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action or proceeding referred to in Sections 14.1, 14.2 or 14.3 of this Article 14, or in defense of any claim, issue or matter therein, he or she shall be indemnified by the Corporation against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. Section 14.5 Advancing Expenses. Expenses (including attorneys' fees) incurred by a director or officer of the Corporation or an employee or agent of the Corporation in defending any action or proceeding referred to in this Article 14 may be paid by the Corporation in advance of the final disposition of the action or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article 14. Section 14.6 Procedure. (a) Unless ordered by a court, any indemnification under Section 14.1, 14.2 or 14.3 or advancement of expenses under Section 14.5 of this Article 14 shall be made by the Corporation only as authorized in a specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 14.1, 14.2 or 14.3. (b) All determinations under this Section 14.6 shall be made: (i) With respect to indemnification under Section 14.3 and advancement of expenses to an employee or agent of the Corporation, other than an officer, by the Board by a majority vote. (ii) With respect to indemnification under Section 14.1 or 14.2 and advancement of expenses to a director or officer of the Corporation, (A) By the Board by a majority vote of a quorum consisting of directors who were not parties to such action or proceeding, or (B) If such a quorum is not obtainable, or, if obtainable and if a majority vote of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (C) By the shareholders. 12 Section 14.7 Nonexclusivity of Indemnification. (a) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article 14 shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to actions in his or her official capacity and as to actions in another capacity while holding that office. Section 1728 (relating to interested directors; quorum) of the 1988 BCL, or any successor section, shall be applicable to any Bylaw, agreement or transaction authorized by the directors under this Section 14.7. The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations, whether arising under or pursuant to this Article 14 or otherwise. (b) Indemnification pursuant to Section 14.7(a) hereof shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. (c) Indemnification pursuant to Section 14.7(a) under any Bylaw, agreement, vote of shareholders or directors or otherwise, may be granted for any action taken or any failure to take any action and may be made whether or not the Corporation would have the power to indemnify the person under any other provision of law except as provided in this Section 14.7 and whether or not the indemnified liability arises or arose from any threatened or pending or completed action by or in the right of the Corporation. Section 14.8 Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation or an employee or agent of the Corporation, against any liability asserted against such person and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against that liability under the provisions of this Article 14 or otherwise. Section 14.9 Past Officers and Directors. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article 14 shall continue as to a person who has ceased to be a director, officer, employee or agent of the Corporation and shall inure to the benefit of the heirs and personal representatives of that person. Section 14.10 Surviving or New Corporations. References to "the Corporation" in this Article 14 include all constituent corporations absorbed in a consolidation, merger or division, as well as the surviving or new corporation resulting therefrom, so that any director, officer, employee or agent of the constituent, surviving or new corporation shall stand in the same position under the provisions of this Article 14 with respect to the surviving or new corporation as he or she would if he or she had served the surviving or new corporation in the same capacity. Section 14.11 Employee Benefit Plans. (a) References in this Article 14 to "other enterprises" shall include employee benefit plans and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation that imposes duties on, or involves services by, the person with respect to an employee benefit plan, its participants or beneficiaries. (b) Excise taxes assessed on a person with respect to an employee benefit plan pursuant to applicable law shall be deemed "fines." 13 (c) Action with respect to an employee benefit plan taken or omitted in good faith by a director, officer, employee or agent of the Corporation in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be action in a manner that is not opposed to the best interests of the Corporation. 14 EX-10 4 exh10-ee.txt EXH10-EE.TXT EXHIBIT 10 (ee) MARLTON TECHNOLOGIES, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION (the "Option") is granted as of the 23rd day of October, 2002, by MARLTON TECHNOLOGIES, INC., a Pennsylvania corporation (the "Company") to Washburn Oberwager (the "Optionee"). W I T N E S S E T H : - --------------------- 1. Grant. The Company hereby grants to the Optionee Stock Options (the "Options") to purchase on the terms and conditions set forth herein and in the Company's 2001 Equity Incentive Plan (the "Plan"), an aggregate of One Hundred Thousand, (100,000) shares (appropriately adjusted for any subsequent stock splits, stock combinations or similar capital restructuring) of the Company's Common Stock, no par value per share (the "Option Shares"), at a purchase price per share of Fifty Cents ($.50) (the "Option Price"). 2. Term. This Option Agreement and Optionee's right to exercise Options vested in accordance with Paragraph 3 shall terminate on the earlier of (i) October 22, 2007, or (ii) upon termination of Optionee's services as a director of the Company, provided that Optionee (or in the event of termination due to Optionee's death or disability, Optionee's spouse or estate) may exercise this Option Agreement for a period of six months following the date of termination as to Options fully vested on or before the date of termination. 3. Vesting. The Options will vest as follows: (i) 50% will vest as of the date of this Agreement, and (ii) 25% will vest on each of the next two Annual Meetings of Shareholders of the Company at which Optionee is elected as a director of the Company. Notwithstanding the foregoing, all unvested options shall immediately vest upon a Change in Control (as defined in the Plan). 4. Method of Exercise and Payment. Vested Options may be exercised from time to time, in whole or in part. When exercisable under Paragraph 3, the Option may be exercised by written notice to the Company specifying the total number of Option Shares to be exercised. The notice shall be accompanied by payment in cash or by check equal to the aggregate Option Price of all Option Shares covered by such notice. 5. Notices. Any notice to be given to the Company shall be addressed to the Company at its principal executive office, and any notice to be given to the Optionee shall be addressed to the Optionee at the address then appearing on the records of the Company or at such other address as either party hereafter may designate in writing to the other. Any such notice shall be deemed to have been duly given when deposited in the United States mail, addressed as aforesaid, registered or certified mail, and with proper postage and registration or certification fees prepaid. 6. General. This Option shall not be assignable by Optionee. This Option Agreement shall not be subject to the provisions and restrictions of Section 421, 422A(b) et. seq. of the Internal Revenue Code of 1986, as it may be amended from time to time. This Option Agreement is issued under and is subject to the terms and conditions of the Plan, as it may be amended from time to time. Stock certificates representing the Option Shares acquired shall bear any legends required by applicable state and federal securities laws. Company stock issuances are currently unregistered, requiring a one year holding period prior to sale of such stock. IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the day and year first above written MARLTON TECHNOLOGIES, INC. Attest: /s/ Alan I. Goldberg By: /s/ Jeffrey K. Harrow - ----------------------------- --------------------------------- Alan I. Goldberg, Secretary Jeffrey K. Harrow, Chairman Witness: Optionee: /s/ Washburn Oberwager --------------------- --------------------------- Washburn Oberwager 1 -----END PRIVACY-ENHANCED MESSAGE-----