<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27738
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THE JPM COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1702908
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
155 North 15th Street, Lewisburg,PA 17837
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code 570-524-8225
----------------------
- ------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------------ ------------------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At July 30, 1999, 7,360,745 shares of common stock, $.000067 par value,
were issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited-in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 42,985 $ 32,333 $ 127,864 $ 94,172
Cost of sales 35,185 26,883 104,596 78,097
----------- ----------- ----------- -----------
Gross profit 7,800 5,450 23,268 16,075
Selling, general and
administrative expenses 4,046 3,339 12,227 10,156
Secondary offering costs - - - 400
Plant shutdown expenses - - 178 1,412
----------- ----------- ----------- -----------
Operating profit 3,754 2,111 10,863 4,107
Other income (expense)
Interest expense (956) (531) (2,931) (1,238)
Other, net 70 (13) (22) 35
----------- ----------- ----------- -----------
(886) (544) (2,953) (1,203)
----------- ----------- ----------- -----------
Income before income taxes and
minority interest 2,868 1,567 7,910 2,904
Provision for income taxes 1,078 595 2,888 1,103
----------- ----------- ----------- -----------
Income before minority interest 1,790 972 5,022 1,801
Minority interest 34 - 311 -
----------- ----------- ----------- -----------
Net income $ 1,756 $ 972 $ 4,711 $ 1,801
=========== =========== =========== ===========
Basic earnings per share $ 0.24 $ 0.14 $ 0.65 $ 0.26
=========== =========== =========== ===========
Diluted earnings per share $ 0.23 $ 0.13 $ 0.62 $ 0.24
=========== =========== =========== ===========
Average number of shares
outstanding (Basic) 7,356 7,047 7,297 7,011
Average number of shares
outstanding (Diluted) 7,633 7,348 7,586 7,460
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
<CAPTION>
THE JPM COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (in thousands)
June 30, September 30,
1999 1998
----------------- -------------------
<S> <C> <C>
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 542 $ 2,625
Accounts receivable, net 22,697 19,681
Inventories, net 33,285 23,984
Other current assets 5,017 3,711
------------- --------------
Total current assets 61,541 50,001
Property, plant and equipment, net 29,093 21,267
Excess of cost over fair value of net assets acquired and other intangible
assets, net 25,029 15,445
Other assets 1,928 2,308
------------- --------------
$ 117,591 $ 89,021
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 320 $ 290
Current maturities of long-term debt 544 544
Notes payable 2,000 -
Accounts payable 15,638 7,707
Accrued expenses 6,604 4,448
Deferred income taxes 1,620 1,620
------------- --------------
Total current liabilities 26,726 14,609
Long-term debt 49,232 42,193
Other long-term liabilities 3,217 1,457
Minority interest 389 -
------------- --------------
79,564 58,259
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000
shares authorized; none issued and outstanding - -
Common Stock, $.000067 par value,
40,000 shares authorized, issued
7,350 at June 30, 1999 and
7,060 at September 30, 1998 - -
Additional paid-in capital 20,243 17,513
Retained earnings 18,325 13,614
Accumulated other comprehensive loss (541) (365)
-------------- -----------
Total shareholders' equity 38,027 30,762
-------------- -----------
$ 117,591 $ 89,021
============== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
THE JPM COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited-in thousands)
Nine Months Ended
June 30, June 30,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,711 $ 1,801
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,997 2,187
Foreign currency translation (gain) loss (81) (45)
Loss (gain) on sale of property, plant and equipment (18) (1)
Deferred taxes 1,769 (57)
Minority interest 311 -
Deferred compensation expense 149 106
Change in assets and liabilities,
net of effects from businesses acquired:
(Increase) decrease in accounts receivable (2,420) (3,282)
(Increase) decrease in inventories (8,108) (1,794)
(Increase) decrease in other assets (1,748) (1,002)
Increase (decrease) in accounts payable 7,433 (1,998)
Increase (decrease) in accrued expenses 1,254 837
--------- ---------
Net cash provided by (used in) operating activities 6,249 (3,248)
--------- ---------
Cash flows from investing activities:
Payments for assets and businesses acquired, net of cash
acquired ($465 in 1999 and $1,233 in 1998) (5,827) (15,267)
Capital expenditures (9,496) (5,374)
Proceeds from sale of property, plant and equipment 28 124
Deferred compensation plan contributions (157) (105)
--------- ---------
Net cash provided by (used in) investing
activities (15,452) (20,622)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities 7,468 25,915
Proceeds from issuance of long-term debt - 2,895
Principal payments on long-term debt (419) (2,573)
Proceeds from exercise of stock options 230 264
--------- ---------
Net cash provided by (used in) financing activities 7,279 26,501
--------- ---------
Effect of changes in exchange rates on cash (159) -
--------- ---------
Increase (decrease) in cash (2,083) 2,631
Cash at beginning of period 2,625 543
--------- ---------
Cash at end of period $ 542 $ 3,174
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share data)
Accounting Policies
The consolidated balance sheet as of June 30, 1999 and the related
consolidated statements of operations and of cash flows for the three and nine
month periods ended June 30, 1999 and June 30, 1998 have been prepared by the
Company without audit. In the opinion of management, the financial statements
include all of the adjustments necessary for fair presentation. All adjustments
made were of a normal recurring nature. Interim results are not necessarily
indicative of results for a full year. These financial statements should be read
in conjunction with the audited financial statements of the Company and the
notes thereto for the fiscal year ended September 30, 1998, included in the
Company's Form 10-K dated December 22, 1998.
Acquisition
On November 12, 1998, the Company acquired 60% of AF Datalink Equipamentos
de Telecomunicacao, Ltda. ("Datalink"), a Sao Paulo, Brazil based manufacturer
of wire harnesses and cable assemblies for $6,000 in cash, $2,500 in stock (256
shares of JPM stock) and one-year notes for $2,000. The transaction has been
accounted for as a purchase in accordance with APB 16. Datalink had sales of
approximately $2,393 in the first eight months since the acquisition.
Inventories
Inventories are valued at the lower of cost or market as determined on the
first-in, first-out basis. Cost includes raw materials, direct labor and
manufacturing overhead. The Company generally provides reserves for inventory
considered to be in excess of 12 months of future demand.
<TABLE>
June 30, September 30,
1999 1998
<S> <C> <C>
------------ ------------
Finished goods $ 9,592 $ 5,915
Work-in-process 4,219 4,194
Raw material and supplies 20,787 15,172
Valuation reserves (1,313) (1,297)
------------ ------------
$ 33,285 $ 23,984
============ ============
</TABLE>
Comprehensive Income
During the quarter ended December 31, 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), which is required for fiscal years beginning
after December 15, 1997. SFAS 130 establishes standards for reporting
comprehensive income and its components in a full set of general-purpose
financial statements.
The components of accumulated other comprehensive loss are as follows:
<TABLE>
June 30, September 30,
1999 1998
----------- ----------
<S> <C> <C>
Foreign currency translation adjustments $ (541) $(365)
---------- ----------
Accumulated other comprehensive loss $ (541) $ (365)
========== ==========
</TABLE>
The components of comprehensive income of the Company for the three and
nine month periods ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income $ 1,756 $ 972 $ 4,711 $1,801
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 171 (28) (109) (35)
(net of taxes of $104 and $(18)for the three months
ended June 30, 1999 and 1998, respectively
and $(67) and $(22)for the nine months
ended June 30, 1999 and 1998, respectively)
--------- --------- -------- -------
Other comprehensive income (loss) 171 (28) (109) (35)
--------- --------- -------- -------
Comprehensive income $ 1,927 $ 944 $ 4,602 $1,766
======== ======== ======= ======
</TABLE>
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<PAGE>
Earnings Per Share Information
Basic and diluted earnings (loss) per common share computations are made in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("SFAS 128"). The difference between the basic average number of
shares outstanding and the diluted average number of shares outstanding is due
to the treasury stock method calculation of the impact of unexercised stock
options granted under the Company's stock option plans.
Credit Facility
On December 17, 1998, the Company amended and modified its current line of
credit agreement. The amended agreement provides for maximum borrowings of
$70,000. The maximum allowable debt is determined quarterly based upon
computations specified in the debt convenants. Certain covenants were also
modified. The credit facility maturity date remains April 2001 and provides for
both short and long-term borrowing. The interest rate on the line is an
adjustable rate which varies between the bank's prime lending rate plus 0% up to
0.25% or, at the Company's election, a LIBOR-based rate plus 0.875% up to 2.0%
measured on a sliding scale tied to the Company's debt to annualized EBITDA
ratio. Borrowings under the line of credit at June 30, 1999 were $43,638 with
interest at an average LIBOR rate of 6.61%. At June 30, 1999, the Company was in
compliance with all loan covenants.
Closing of South Carolina Manufacturing Facility
On March 27, 1998, the Company announced plans to cease operations at its
Winnsboro, S.C. manufacturing location and subsequently transfer all business to
other plants in Pennsylvania, California and Mexico.
The plant ceased production on June 26, 1998. Supervisory and breakdown
crews remained at the facility until July 17, 1998. The Company had accrued
expenses totaling approximately $1,412 in closing and severance costs. These
costs are reflected in the income statement as a separate line item described as
"Plant shutdown expenses". At March 31, 1999, the Company reported an additional
incurred cost of $178 above the original estimate of $1,412, for a total plant
shutdown expense of $1,590. All activity has ceased and the Company is seeking a
buyer for the physical facility.
Recent Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and if it is, the type
of hedge transaction. Management of the Company anticipates that due to its
limited use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on the Company's results of operations or its financial
position.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table presents, in thousands of dollars and as a percentage
of sales, certain selected consolidated financial data for the quarters ended
June 30, 1999 and 1998.
<TABLE>
June 30, Change June 30,
(in thousands) 1999 1998 in Dollars 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales............ $ 42,985 $ 32,333 $10,652 100.0% 100.0%
Cost of sales........ 35,185 26,883 8,302 81.9 83.1
-------------------------------------------------------
Gross profit......... 7,800 5,450 2,350 18.1 16.9
Selling, general and
administrative expenses. 4,046 3,339 707 9.4 10.4
-----------------------------------------------------
Income from operations.. 3,754 2,111 1,643 8.7 6.5
Interest expense........ (956) (531) (425) (2.2) (1.6)
Other income (expense).. 70 (13) 83 0.2 (0.1)
-----------------------------------------------------
Income before taxes and
minority interest......$ 2,868 $ 1,567 $ 1,301 6.7% 4.8%
=======================================================
</TABLE>
Results of Operations
Net sales for the three and nine months ended June 30, 1999 increased
$10,652 or 32.9% and $33,692 or 35.8% to $42,985 and $127,864, respectively,
compared to the same periods one year earlier. The year to date figure is a new
record in net sales. The net increase for the three and nine month periods was
primarily the result of the inclusion of sales of Antrum Interface 725, Ltd.
after the acquisition in June 1998, the inclusion of eight months sales of AF
Datalink Equipamentos de Telecomunicacao, Ltda, which was acquired in November
1998 and internal sales growth through increased volumes with existing
customers. The additional sales of the acquisitions amounted to $7,607 and
$22,889 for the three and nine month periods, respectively. However, since the
Company determines the site to manufacture products for its customers on a
worldwide basis, this increase in sales also reflects a portion of sales, and
gross margins, transferred to the acquired operations from pre-existing JPM
operations.
Gross profit for the three and nine months ended June 30, 1999, increased
$2,350 or 43.1%, and $7,193 or 44.7% to $7,800 and $23,268, respectively, when
compared to the corresponding periods one year earlier. Gross profit as a
percentage of net sales for the three and nine month periods increased to 18.1%
from 16.9% and to 18.2% from 17.1%, respectively, when compared to the same
periods one year earlier. The increase in gross profit as a percentage of net
sales for the three and nine month periods was primarily the result of increased
fixed cost absorption that offset premium freight charges, overtime premium and
training costs related to the ramp up in business earlier in the year.
Selling, general and administrative ("SG & A") expenses for the three and
nine month periods ended June 30, 1999, increased $707 or 21.2% and $2,071 or
20.4% to $4,046 and $12,227, respectively, when compared to the corresponding
periods one year earlier. As a percentage of sales, SG&A expenses decreased to
9.4% from 10.4% for the three month period and to 9.6% from 10.8% for the nine
month period compared to the same periods one year earlier. The increase in
dollars was primarily because of increased goodwill amortization and personnel
costs. The decrease in the percentage was primarily due to greater absorption as
a result of increased sales.
SG&A expenses for the nine month period ended June 30, 1999 excludes an
additional $178 of plant shutdown expense related to the South Carolina
manufacturing facility. The plant shutdown expense for the nine month period in
the prior year was $1,412. The nine month comparison also excludes the $400
charge for the write-off of expenses related to the cancelled secondary offering
in the first fiscal quarter 1998.
Interest expense for the three and nine months ended June 30, 1999
increased $425 or 80.0% to $956 and $1,693 or 136.8% to $2,931 when compared to
the same periods one year earlier. As a percentage of sales, interest expense
increased to 2.2% from 1.6% for the three month period and increased to 2.3%
from 1.3% for the nine month period compared to the same periods one year
earlier. The increase is primarily attributable to the borrowings for the
acquisition of Antrum Interface 725, Ltd in June 1998 and AF Datalink
Equipamentos de Telecomunicacao, Ltda. in November 1998 and borrowings related
to increases in accounts receivable and inventory.
The Company's effective tax rate for the three and nine month periods was
38%. This rate was calculated using income before taxes, which amounted to
$2,868 and $7,910 less pre-tax minority interest, which amounted to $37 and $338
for the three and nine month periods, respectively. The minority interest amount
of $34 for the three month period and $311 for the nine month period,
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<PAGE>
which is net of Brazilian tax, is from JPM's 60% ownership of AF Datalink
Equipamentos de Telecomunicacao, Ltda.
Net income for the three and nine month periods ended June 30, 1999
amounted to $1,756 and $4,711, respectively. The nine months ended June 30, 1999
includes $178 of additional expense related to the South Carolina plant shutdown
($0.01 per share). The net income increase during the three and nine month
periods was primarily due to increased sales and margins as dicussed above. This
compares to net income of $972 for the three month period and net income of
$1,801 for the nine month period one year earlier. Diluted earnings per share
for the current three and nine month periods increased to $0.23 and $0.62, in
comparison to $0.13 and $0.24 for the three and nine month periods one year
earlier. The nine month fiscal period ended June 30, 1998 includes the $400
first quarter write-off of the cancelled secondary offering ($0.03 per share)
and the $1,412 second quarter write-off relating to the South Carolina plant
shutdown ($0.12 per share).
Liquidity and Capital Resources
Operating activities during the nine months of fiscal 1999 provided cash in
the amount of $6,249, primarily attributable to earnings and non-cash charges to
operations for depreciation, amortization and deferred taxes plus an increase in
accounts payable, partially offset by increases in accounts receivable and
inventories. Operating activies used cash in the amount of $3,248 during the
same period one year earlier. Working capital at June 30, 1999 was $34,815, a
decrease of $577 from September 30, 1998. During the first nine months of fiscal
1999, the Company had capital expenditures of $9,496, comprised primarily of
costs related to new manufacturing facilities in Mexico and the Czech Republic
and the Company's acquisition of the PeopleSoft ERP system.
Borrowings under the Company's line of credit at June 30, 1999 were $43,638
under the terms of the line of credit agreement at an average LIBOR rate of
6.61% with an availability of up to $70,000 providing compliance with the debt
convenants. At June 30, 1999, the Company was in compliance with all loan
covenants.
The Company believes cash flow from operations and funds available from its
bank line of credit will be sufficient to satisfy its working capital
requirements and capital expenditure needs for at least the next twelve months.
However, depending upon its rate of growth, acquisitions and profitability, the
Company may require additional equity or debt financing to meet its working
capital requirements or capital expenditure needs, including the possible need
for additional manufacturing capacity.
Foreign Operations
The Company maintains manufacturing facilities located in Guadalajara,
Mexico; Toronto and Calgary, Canada; Bela, Czech Republic and Sao Paulo, Brazil.
The Company also has manufacturing service arrangements in Northern Ireland,
Taiwan and the People's Republic of China. While the Company believes it has
good relationships with each local government, the spread of the manufacturing
process over multiple countries subjects the Company to risks inherent in
international operations. Those risks include currency fluctuations,
inflationary pressures, unexpected changes in regulatory requirements, tariffs
and barriers, potentially limited intellectual property protection, potential
cross border shipment delays, changes in political climate, difficulties in
coordinating and managing foreign operations, increases in employee turnover and
potentially adverse tax consequences. Any of the foregoing could have a material
adverse effect on the Company's business, financial condition, and results of
operations and cash flow.
The Company has determined that the U.S. Dollar is the functional currency
of its Mexican operations. Foreign currency inventories and property, plant and
equipment are remeasured into U.S. Dollars at historical rates; all other
foreign currency assets and liabilities are remeasured at year-end exchange
rates. Income and expenses are remeasured at average rates prevailing during the
year, except for expenses related to inventories and property, plant and
equipment, which are remeasured at historical rates. Exchange gains and losses
resulting from remeasurement are included in the earnings statement.
The Company has determined that the Canadian, Czech Republic and Brazilian
operations use their respective currency as their functional currency. As such,
translation adjustments are not included in determining net income but are
reported separately and accumulated in a separate component of equity.
Adjustments, however, may be necessary if any of the Company's operations were
deemed to be part of a highly inflationary economy in the future.
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New ERP Computer Software System
On Jan. 7, 1999, the Company announced the selection of PeopleSoft version
7.5 Global Manufacturing System to facilitate the integration of its nine (9)
worldwide manufacturing facilities as well as remote sales, engineering, and
distribution locations during a 24 month rollout. The ERP system includes
Manufacturing, Distribution, Financial, and Human Resource Management modules,
including Performance Measurement functionality. The selection of a tier one ERP
system is consistent with the Company's strategic plan to promote its global
manufacturing capability, better serve its customers, align its organization,
and finally, implement an infrastructure and tools to integrate its worldwide
operations. The ERP project will be supported by a new network infrastructure
and complemented by a new global messaging and document management system as
well as computer aided design tools. The Company intends to utilize PeopleSoft's
E-business initiatives by integrating these information systems with its
customers and suppliers via extranets, the Internet, electronic data interchange
(EDI), and electronic funds transfer (EFT). The PeopleSoft ERP implementation is
intended to allow the Company to unify operations by providing consistency and
standardization of the entire company. The Company expects its cash outlay to be
approximately $5,000 over the two year period of its installation. The majority
of this outlay will be capitalized.
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions in operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company is aware of potential Year 2000 issues in its internal computer
systems and software, customer and supplier systems and software, Electronic
Data Interchange (EDI) software, and security and production equipment
containing micro-processors.
The Company has implemented a Year 2000 project previously headed by its
Director of Management Information Services and now being coordinated by its
Corporate Treasurer. Each JPM facility also has a Year 2000 project team. The
project team has identifed areas with potential Year 2000 issues and developed,
assessed, and evaluated projects in each of those areas. A report on the status
of Year 2000 projects is issued to the Company's Chief Executive Officer and the
Chief Financial Officer on a monthly basis. This information is then summarized
and reported to the Board of Directors at its quarterly meetings.
The Company's enterprise software, consisting of its internal financial and
manufacturing systems, has been evaluated with the following status:
1. Corporate BPCS/AS400 Upgraded to Year 2000 compliant version
2. Lewisburg BPCS/AS400 Upgraded to Year 2000 compliant version
3. Beaver Springs BPCS/AS400 Upgraded to Year 2000 compliant version
4. Toronto Network based Upgraded to Year 2000 compliant version
5. Calgary Network based Upgraded to Year 2000 compliant version
6. Czech Republic Network based Upgraded to Year 2000 compliant version
7. San Jose Comet/Network based Software is Year 2000 compliant
8. Mexico Visual Mfg & PC based Software is Year 2000 compliant
The Company has implemented and validated its enterprise system software
upgrades that are required so that its computer systems will properly utilize
dates beyond December 31, 1999. The Company presently believes with the
conversion and modifications of the software, the Year 2000 issue can be
mitigated. However, if such modifications or conversions are not adequate, the
Year 2000 issue could have a material impact on the operations of the Company.
The Company has inventoried its computer hardware and validated its Year
2000 compliance. The Company does not believe that it will require any
additional significant investment to upgrade any such hardware.
The Company generally utilizes Microsoft based office suites and networking
products for its computing software needs and upgrades to newer software as it
becomes available. The Company's current standard products are Windows 95 and
Office 97. The Company utilizes Auto-Cad for its engineering functions. These
products have been validated for Year 2000 compliance by software provided by
the suppliers. Because of its recent investment in this upgraded software, the
Company does not believe that any additional investment would be material.
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The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. These communications ask for written assurances that they are or will be
Year 2000 compliant. The Company utilizes some of its larger customers'
forecasts as part of its material requirements planning system. The Company has
alternate sources for substantially all of its raw materials as a contingency if
any of its suppliers are not able to supply material. The Company believes that
it cannot produce an adequate contingency plan if the customer is not able to
order its parts or supply its forecasts.
The Company assessed and validated the Electronic Data Interchange systems
that it utilizes to communicate and transmit data between the Company and its
suppliers and customers.
The Company has inventoried those security systems, production assets and
testing and quality assurance equipment that contain micro-processors and is in
the process of validating Year 2000 compliance. The Company is not heavily
mechanized and expects that any remediation costs yet to be recognized would not
be material.
The Company's total estimated Year 2000 project costs of approximately
$250 include the estimated cost and time associated with the impact of third
parties' Year 2000 issues on the Company and are based on presently available
information. There can be no guarantee that the systems of other companies on
which the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company. The
Company has determined it has no exposure to contingencies related to the Year
2000 issue for the products it manufactures or it has sold.
The Company has completed the modifications and conversions of its
enterprise system software at a cost of approximately $200. Additional
expenditures will be required to complete the upgrade of any software contained
in any hardware or production equipment found not to be Year 2000 compliant. The
Company currently estimates it will incur additional costs of approximately $50
to upgrade such equipment and complete the assessments described above.
The Company does not currently believe that it has any material exposure to
the Year 2000 issue. However, if the Company discovers any such exposure, it
will implement projects to correct or prepare contingency plans to address any
such issue. The Company believes that a material failure would occur if a
utility supplier was unable to provide service to one or more of the Company's
facilities. The Company does not currently have an alternative for this
contingency.
The Company intends to provide the funds for the Year 2000 project through
utilization of its internally generated funds and its bank line of credit.
The costs of the project and the dates on which the Company plans to
complete the Year 2000 assessments, modifications, conversions and validation
are based on management's best judgement. The projected costs were derived
utilizing assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from these plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct relevant computer codes and similar uncertainties.
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Item 3
Quantitative and Qualitative Disclosures About Market Risk
During the first three quarters of fiscal 1999, the Company has experienced
an immaterial amount of exposure to changes in financial market conditions due
to business transactions denominated in foreign currencies. The Company has not
engaged in the hedging of foreign currency exposures. The Company believes that
it will experience significant increases in transactions denominated in foreign
currencies in fiscal 1999 and beyond. As a result, future earnings, cash flows
and fair value of assets and liabilities will be subject to uncertainty. The
Company intends to establish policies, procedures and internal processes
governing its management of certain market conditions, and will use both
operational and financial market actions in its risk management activities.
The Company is exposed to changes in interest rates due to its high level
of borrowing needed to maintain liquidity and fund its business operations. The
Company has entered into an interest rate hedge on $15,000 of its long-term debt
effectively fixing the interest rate at no more than 7.79% including margin
until at least June 2000.
Recent Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and if it is, the type
of hedge transaction. Management of the Company anticipates that due to its
limited use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on the Company's results of operations or its financial
position.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995.
The above discussion may contain forward-looking statements that involve
risks and uncertainties. Among the important factors which could cause actual
results to differ materially from those forward-looking statements are the
impact of competitive products and pricing, reliability of computer hardware and
software systems, product demand, the presence of competitors with greater
financial resources, availability of additional sources of financing and
commercialization risks, costs associated with integration and administration of
acquired operations, capacity and supply constraints or difficulties, the
results of financing efforts and other factors detailed in the Company's filings
with the Securities and Exchange Commission including recent filings of Forms
10-K and 10-Q.
Page-11
<PAGE>
PART II - OTHER INFORMATION
Item 1. N/A
Item 2. N/A
Item 3. N/A
Item 4. N/A
Item 5. N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Employment Agreement dated April 26, 1999 by and
between David S. Surgala and The JPM Company
99.2 Employment Agreement dated May 19, 1999 by and
between Gary L. Lambert and The JPM Company
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE JPM COMPANY
Registrant
Date: August 12, 1999 By:/s/ John H. Mathias
--------------- ----------------------
John H. Mathias
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: August 12, 1999 By: /s/ William D. Baker
--------------- ------------------------
William D. Baker
Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
Exhibit No. Exhibit
Description
3.1.* Amended and Restated Articles of Incorporation of the Company
3.2.* Amended and Restated Bylaws of the Company
4.1.* Specimen Certification of Common Stock of the Company
27 Financial Data Schedule
99.1 Employment Agreement dated April 26, 1999 by and
between David S. Surgala and The JPM Company
99.2 Employment Agreement dated May 19, 1999 by and
between Gary L. Lambert and The JPM Company
* Filed as part of the Company's Registration Statement filed on Form S-1 on
February 9, 1996 and declared effective April 30, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE JPM COMPANY AND SUBSIDIARIES AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 542
<SECURITIES> 0
<RECEIVABLES> 23,004
<ALLOWANCES> 307
<INVENTORY> 33,285
<CURRENT-ASSETS> 61,541
<PP&E> 40,580
<DEPRECIATION> 11,487
<TOTAL-ASSETS> 117,591
<CURRENT-LIABILITIES> 26,726
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 38,027
<TOTAL-LIABILITY-AND-EQUITY> 117,591
<SALES> 127,864
<TOTAL-REVENUES> 127,864
<CGS> 104,596
<TOTAL-COSTS> 123,153
<OTHER-EXPENSES> 22
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,931
<INCOME-PRETAX> 7,910
<INCOME-TAX> 2,888
<INCOME-CONTINUING> 4,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,711
<EPS-BASIC> .65
<EPS-DILUTED> .62
</TABLE>
EMPLOYMENT AGREEMENT
This Employment Agreement is made by and between The JPM Company, a Pennsylvania
corporation (EMPLOYER), and David S. Surgala, the undersigned individual
(EMPLOYEE).
RECITALS
EMPLOYER is engaged in the business of wire and cable assemblies, being referred
to as the "Business."
The parties wish to provide for an employment arrangement under the terms and
conditions herein set forth.
I. Term of Employment. EMPLOYER hereby employs EMPLOYEE, and EMPLOYEE agrees
to be employed by EMPLOYER, under the terms and conditions set forth. The
term of EMPLOYEE's employment shall begin on the commencement date set
forth in Section XIV, and shall continue until terminated as set forth in
Section IX.
II. Compensation. As full payment for all services rendered by EMPLOYEE under
this Agreement, EMPLOYEE agrees to accept, and shall, subject to the terms
and conditions set forth herein, receive compensation, as follows:
A. Direct Compensation. During the term of this Agreement, EMPLOYEE shall,
subject to the terms and conditions set forth herein, receive a base salary
in the amount of $110,000, payable in accordance with EMPLOYER's normal
payroll practice.
B. Fringe Benefits. EMPLOYEE will be entitled to participate in such fringe
benefit plans and financial incentive plans, in accordance with their
terms, as shall be made available from time to time by EMPLOYER in its
discretion to its EMPLOYEEs in EMPLOYEE's position.
C. Compensation Adjustment. The base salary, fringe benefits and any other
compensation are subject to review by EMPLOYER at any time in its
discretion, at which time EMPLOYER, in its sole discretion, may elect to
adjust or modify same.
III. Deductions. EMPLOYER is authorized to deduct from the compensation of the
EMPLOYEE such sums as may be required to be deducted or withheld under the
provisions of any law now in effect or hereafter put into effect during the
term of this Agreement, or which are authorized by EMPLOYEE, including, but
not limited to, social security and income tax withholding.
IV. Duties. It is understood and agreed that EMPLOYEE will faithfully and
diligently serve EMPLOYER to the best of EMPLOYEE's ability in the position
set forth in Section 13, and EMPLOYEE further agrees to perform such duties
and to assume such additional responsibilities as may be assigned from time
to time by EMPLOYER. EMPLOYEE will devote full time, attention, loyalty and
energies to the performance of the duties as an EMPLOYEE of EMPLOYER.
V. Leave. EMPLOYEE shall be entitled to time off, with or without pay, in
accordance with the standard practices of EMPLOYER for individuals in
EMPLOYEE's position, which are subject to change. Such absences shall not
be deemed to be a termination of this Agreement.
VI. Proprietary Information. EMPLOYEE understands and acknowledges that in the
course of EMPLOYEE's employment with EMPLOYER, EMPLOYER will incur
substantial expenditures of time and money in providing EMPLOYEE with
specialized instruction and training, and will impart to EMPLOYEE, or
EMPLOYEE will have access to, certain proprietary and confidential
information and knowledge concerning EMPLOYER and its business
(collectively called "Proprietary Information"). As used herein,
"Proprietary Information" shall be deemed to include, without limitation,
EMPLOYER's sales and marketing information and techniques, business plans,
financial data, Trade Secrets, pricing lists, supplier lists and other
confidential supplier data, customer lists and other confidential customer
data, and any other information or knowledge concerning EMPLOYER and its
business, whether or not in tangible form, that is of a proprietary or
confidential nature, or has been heretofore or is hereafter treated as
secret by EMPLOYER. As used herein, "Trade Secret(s)" shall mean the whole
or any portion or phase of any technical information, hardware, software,
designs or specifications, drawings, sketches, processes, procedures,
formulae, data, reports, computer programs, charts, improvements and any
other technical information or knowledge relating to the development,
design and implementation of EMPLOYER's projects, products and services.
The parties agree that it is of great importance to the success of EMPLOYER
that Proprietary Information be treated with great care and that improper
disclosure or use be prevented. EMPLOYEE, during the course of employment
with EMPLOYER and after the termination of such employment, shall maintain
secrecy with regard to such information and shall not, directly or
indirectly, disclose, use or permit the disclosure or use of any
Proprietary Information received, acquired or obtained during the course of
employment, whether or not EMPLOYEE was the creator or originator thereof,
unless such disclosure or use is consented to in advance in writing by
EMPLOYER.
VII. Non-Competition. During the term of EMPLOYEE's employment with the EMPLOYER
and for a period of two (2) years from the voluntary or involuntary
termination of EMPLOYEE's agreement with the EMPLOYER for any reason
whatsoever, EMPLOYEE will not directly or indirectly, own, manage, operate,
control, be employed by, perform services for, consult with, solicit
business for, participate in, or be connected with the ownership,
management, operation, or control of any business which performs the
services materially similar to or competitive with those provided by the
EMPLOYER in any location where the EMPLOYER has had an office or has sold
products or provided services to customers during the period EMPLOYEE is
employed by the EMPLOYER.
During the term of EMPLOYEE's employment with the EMPLOYER for a period of
two (2) years from the voluntary or involuntary termination of EMPLOYE's
employment with the EMPLOYER for any reason whatsoever, EMPLOYEE shall not
either on his own account or for any person, firm, partnership,
corporation, or other entity solicit, interfere with, or endeavor to cause
any EMPLOYEE of the EMPLOYER to leave his or her employment, or induce or
attempt to induce, any such EMPLOYEE to breach his or her employment
agreement with the EMPLOYER.
VIII.Remedies. It is recognized that damages in the event of breach of Sections
VI and VII of this Agreement by EMPLOYEE would be difficult, if not
impossible, to ascertain, and it is therefore agreed that in the event of a
breach or threatened breach of Sections VI or VII, EMPLOYER shall be
entitled to an injunction against such breach, without prejudice to any
other remedies available to EMPLOYER.
The provisions set forth in the paragraphs under Section VI and VII are
intended by the parties to be separate and divisible. If any covenant or
provision in this paragraph is found by a court of competent jurisdiction
to be unreasonable in duration, geographical scope or character of
restrictions, the covenant or agreement shall not be rendered unenforceable
thereby, but rather the duration, geographical scope or character of
restrictions of such covenant or agreement shall be deemed reduced or
modified with retroactive effect to render such covenant or agreement
reasonable and such covenant shall be enforced as thus modified. If the
court having jurisdiction will not review the covenant or agreement, then
the parties shall mutually agree to a revision having an effect as close as
permitted by law to the provisions declared unenforceable. EMPLOYEE further
agrees that in the event a court having jurisdiction determines, despite
the express intent of the EMPLOYEE, that any portion of the restrictive
covenants in this Section VI and VII are not enforceable, the remaining
provisions shall be valid and enforceable.
IX. Termination. This Agreement shall terminate in the event Section IX becomes
operative:
A. Resignation as full-time EMPLOYEE. EMPLOYEE, at any time, may choose to
resign as a full-time EMPLOYEE.
B. Death or disability. Upon the death or disability of EMPLOYEE, this
Agreement shall terminate. For purpose of this Agreement, the term
"disability" shall mean the determination by Employer that Employee is
unable to perform substantially all of the duties that were being performed
for Employer prior to such determination, and the continuation of such
inability for a consecutive period in excess of three (3) months following
such determination (unbroken by return to work for an aggregate period in
excess of thirty (30) days).
C. Involuntary Termination. EMPLOYER may terminate this Agreement without
cause.
D. Compensation Payable upon Termination. In the event of termination of this
Agreement by EMPLOYER for any reason set forth hereinabove (in
subparagraphs B or C) other than death of the EMPLOYEE, EMPLOYEE shall be
entitled to receive termination pay equal to six months of the annual
salary then in effect, payable in six monthly installments, PROVIDED,
however, that any salary paid during a period of disability preceding
termination shall be credited toward the payments due hereunder.
E. Termination for Cause. EMPLOYER may terminate this Agreement immediately
for cause, including without limitation, fraud, misrepresentation, theft or
embezzlement of the Company's assets, intentional violations of law or
company policies, or a breach of this Agreement. In the event of
termination for cause, no severance pay shall be due EMPLOYEE.
F. Return of Documents. Upon termination of employment for any reason, all
documents, writings, or any other such material produced or received in the
course of employment shall be returned to EMPLOYER.
X. Corporate Policies. EMPLOYEE shall be subject to EMPLOYER's corporate
policies applicable to EMPLOYEE's generally, as amended from time to time,
except to the extent that any provision of this Agreement is expressly
contrary thereto.
XI. Special Conditions. In addition to the conditions set forth above, the
following special conditions shall apply to EMPLOYEE:
A. Relocation. EMPLOYEE shall receive relocation benefits as provided in
EMPLOYER's benefit plan.
B. Stock Options. EMPLOYEE will receive 10,000 stock options pursuant to the
Employee Stock Option Plan of 1995 and subject to the terms thereof.
C. Signing Bonus. EMPLOYEE shall receive, as additional compensation, a single
payment of $7,000.00 six weeks after the commencement of employment. In the
event EMPLOYEE resigns his position with EMPLOYER within one year of his
employment date, the signing bonus shall be repaid to EMPLOYER.
XII. Miscellaneous. The waiver by either party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by either party. The obligations undertaken by
EMPLOYEE shall not be assigned or delegated except as may be specifically
provided herein. The rights and obligations of the EMPLOYER hereunder shall
be binding upon, and inure to the benefit of, its successors and assigns.
The laws of the Commonwealth of Pennsylvania shall apply and bind the
parties in any and all questions arising hereunder. The provisions of
Sections VI and VII shall survive any termination of this Agreement.
XIII.Final Expression of Agreement. This writing represents the entire
agreements and understandings of the EMPLOYEE and EMPLOYER with respect to
subject matter hereof and supersedes all prior agreements and
understandings of the EMPLOYEE and EMPLOYER in connection therewith; except
as otherwise provided herein, it may not be altered or amended except by
mutual agreement evidenced by a writing signed by both EMPLOYEE and
EMPLOYER and specifically identified as an amendment to this Agreement.
EMPLOYEE EXPRESSLY ACKNOWLEDGES THAT EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY PRIOR TO ENTERING THIS AGREEMENT TO CONSULT WITH EMPLOYEE'S OWN
COUNSEL REGARDING EMPLOYEE'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THIS
AGREEMENT AND THAT EMPLOYEE EITHER HAS DONE SO OR HAS ELECTED NOT TO
CONSULT WITH SUCH COUNSEL.
XIV. Specific Data. Full name of EMPLOYEE: David S. Surgala Position: Treasurer
Commencement Date:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed this _26________day of _____April______________, 1999.
The JPM Company
BY: /s/ David S. Surgala By: /s/ William D. Baker
- ------------------------- -----------------------------------
Name: William D. Baker
Title: Chief Financial Officer
Witness: Attest:
BY:/s/ Sheri L. Andrews BY: /s/ Wayne A. Bromfield
EMPLOYMENT AGREEMENT
This Employment Agreement is made by and between The JPM Company, a Pennsylvania
corporation (EMPLOYER), and Gary L. Lambert, the undersigned individual
(EMPLOYEE).
RECITALS
EMPLOYER is engaged in the business of manufacturing wire and cable assemblies,
being referred to as the "Business."
The parties wish to provide for an employment arrangement under the terms and
conditions herein set forth.
I. Term of Employment. EMPLOYER hereby employs EMPLOYEE, and EMPLOYEE agrees
to be employed by EMPLOYER, under the terms and conditions set forth. The
term of EMPLOYEE's employment shall begin on the commencement date set
forth in Section XIV, and shall continue until terminated as set forth in
Section IX.
II. Compensation. As full payment for all services rendered by EMPLOYEE under
this Agreement, EMPLOYEE agrees to accept, and shall, subject to the terms
and conditions set forth herein, receive compensation, as follows:
A. Direct Compensation. During the term of this Agreement, EMPLOYEE shall,
subject to the terms and conditions set forth herein, receive a base salary
in the amount of $120,000, payable in accordance with EMPLOYER's normal
payroll practice.
B. Fringe Benefits. EMPLOYEE will be entitled to participate in such fringe
benefit plans and financial incentive plans, in accordance with their
terms, as shall be made available from time to time by EMPLOYER in its
discretion to its EMPLOYEEs in EMPLOYEE's position.
C. Compensation Adjustment. The base salary, fringe benefits and any other
compensation are subject to review by EMPLOYER at any time in its
discretion, at which time EMPLOYER, in its sole discretion, may elect to
adjust or modify same.
III. Deductions. EMPLOYER is authorized to deduct from the compensation of the
EMPLOYEE such sums as may be required to be deducted or withheld under the
provisions of any law now in effect or hereafter put into effect during the
term of this Agreement, or which are authorized by EMPLOYEE, including, but
not limited to, social security and income tax withholding.
IV. Duties. It is understood and agreed that EMPLOYEE will faithfully and
diligently serve EMPLOYER to the best of EMPLOYEE's ability in the position
set forth in Section XIV, and EMPLOYEE further agrees to perform such
duties and to assume such additional responsibilities as may be assigned
from time to time by EMPLOYER. EMPLOYEE will devote full time, attention,
loyalty and energies to the performance of the duties as an EMPLOYEE of
EMPLOYER.
V. Leave. EMPLOYEE shall be entitled to time off, with or without pay, in
accordance with the standard practices of EMPLOYER for individuals in
EMPLOYEE's position, which are subject to change. Such absences shall not
be deemed to be a termination of this Agreement.
VI. Proprietary Information. EMPLOYEE understands and acknowledges that in the
course of EMPLOYEE's employment with EMPLOYER, EMPLOYER will incur
substantial expenditures of time and money in providing EMPLOYEE with
specialized instruction and training, and will impart to EMPLOYEE, or
EMPLOYEE will have access to, certain proprietary and confidential
information and knowledge concerning EMPLOYER and its business
(collectively called "Proprietary Information"). As used herein,
"Proprietary Information" shall be deemed to include, without limitation,
EMPLOYER's sales and marketing information and techniques, business plans,
financial data, Trade Secrets, pricing lists, supplier lists and other
confidential supplier data, customer lists and other confidential customer
data, and any other information or knowledge concerning EMPLOYER and its
business, whether or not in tangible form, that is of a proprietary or
confidential nature, or has been heretofore or is hereafter treated as
secret by EMPLOYER. As used herein, "Trade Secret(s)" shall mean the whole
or any portion or phase of any technical information, hardware, software,
designs or specifications, drawings, sketches, processes, procedures,
formulae, data, reports, computer programs, charts, improvements and any
other technical information or knowledge relating to the development,
design and implementation of EMPLOYER's projects, products and services.
The parties agree that it is of great importance to the success of EMPLOYER
that Proprietary Information be treated with great care and that improper
disclosure or use be prevented. EMPLOYEE, during the course of employment
with EMPLOYER and after the termination of such employment, shall maintain
secrecy with regard to such information and shall not, directly or
indirectly, disclose, use or permit the disclosure or use of any
Proprietary Information received, acquired or obtained during the course of
employment, whether or not EMPLOYEE was the creator or originator thereof,
unless such disclosure or use is consented to in advance in writing by
EMPLOYER.
VII. Non-Competition. During the term of EMPLOYEE's employment with the EMPLOYER
and for a period of two (2) years from the voluntary or involuntary
termination of EMPLOYEE's agreement with the EMPLOYER for any reason
whatsoever, EMPLOYEE will not directly or indirectly, own, manage, operate,
control, be employed by, perform services for, consult with, solicit
business for, participate in, or be connected with the ownership,
management, operation, or control of any business which performs the
services materially similar to or competitive with those provided by the
EMPLOYER in any location where the EMPLOYER has had an office or has sold
products or provided services to customers during the period EMPLOYEE is
employed by the EMPLOYER.
During the term of EMPLOYEE's employment with the EMPLOYER for a period of
two (2) years from the voluntary or involuntary termination of EMPLOYEE's
employment with the EMPLOYER for any reason whatsoever, EMPLOYEE shall not
either on his own account or for any person, firm, partnership,
corporation, or other entity solicit, interfere with, or endeavor to cause
any EMPLOYEE of the EMPLOYER to leave his or her employment, or induce or
attempt to induce, any such EMPLOYEE to breach his or her employment
agreement with the EMPLOYER.
VIII.Remedies. It is recognized that damages in the event of breach of Sections
VI and VII of this Agreement by EMPLOYEE would be difficult, if not
impossible, to ascertain, and it is therefore agreed that in the event of a
breach or threatened breach of Sections VI or VII, EMPLOYER shall be
entitled to an injunction against such breach, without prejudice to any
other remedies available to EMPLOYER.
The provisions set forth in the paragraphs under Section VI and VII are
intended by the parties to be separate and divisible. If any covenant or
provision in this paragraph is found by a court of competent jurisdiction
to be unreasonable in duration, geographical scope or character of
restrictions, the covenant or agreement shall not be rendered unenforceable
thereby, but rather the duration, geographical scope or character of
restrictions of such covenant or agreement shall be deemed reduced or
modified with retroactive effect to render such covenant or agreement
reasonable and such covenant shall be enforced as thus modified. If the
court having jurisdiction will not review the covenant or agreement, then
the parties shall mutually agree to a revision having an effect as close as
permitted by law to the provisions declared unenforceable. EMPLOYEE further
agrees that in the event a court having jurisdiction determines, despite
the express intent of the EMPLOYEE, that any portion of the restrictive
covenants in this Section VI and VII are not enforceable, the remaining
provisions shall be valid and enforceable.
IX. Termination. This Agreement shall terminate in the event Section IX becomes
operative:
A. Resignation as full-time EMPLOYEE. EMPLOYEE, at any time, may choose to
resign as a full-time EMPLOYEE.
B. Death or disability. Upon the death or disability of EMPLOYEE, this
Agreement shall terminate. For purpose of this Agreement, the term
"disability" shall mean the determination by Employer that Employee is
unable to perform substantially all of the duties that were being performed
for Employer prior to such determination, and the continuation of such
inability for a consecutive period in excess of three (3) months following
such determination (unbroken by return to work for an aggregate period in
excess of thirty (30) days).
C. Involuntary Termination. EMPLOYER may terminate this Agreement without
cause.
D. Compensation Payable upon Termination. In the event of termination of this
Agreement by EMPLOYER for any reason set forth hereinabove (in
subparagraphs B or C) other than death of the EMPLOYEE, EMPLOYEE shall be
entitled to receive termination pay equal to six months of the annual
salary then in effect, payable in six monthly installments, PROVIDED,
however, that any salary paid during a period of disability preceding
termination shall be credited toward the payments due hereunder.
E. Termination for Cause. EMPLOYER may terminate this Agreement immediately
for cause, including without limitation, fraud, misrepresentation, theft or
embezzlement of the Company's assets, intentional violations of law or
company policies, or a breach of this Agreement. In the event of
termination for cause, no severance pay shall be due EMPLOYEE.
F. Return of Documents. Upon termination of employment for any reason, all
documents, writings, or any other such material produced or received in the
course of employment shall be returned to EMPLOYER.
X. Corporate Policies. EMPLOYEE shall be subject to EMPLOYER's corporate
policies applicable to EMPLOYEE's generally, as amended from time to time,
except to the extent that any provision of this Agreement is expressly
contrary thereto.
XI. Special Conditions. In addition to the conditions set forth above, the
following special conditions shall apply to EMPLOYEE:
A. Relocation. EMPLOYEE shall receive relocation benefits as provided in
EMPLOYER's benefit plan.
B. Stock Options. EMPLOYEE will receive 20,000 stock options pursuant to the
Employee Stock Option Plan of 1995 and subject to the terms thereof.
C. Deferred Compensation. EMPLOYEE will be eligible to participate in the
EMPLOYER's Non-qualified Deferred Compensation Plan, subject to
modifications from time-to-time consistent with EMPLOYER's policies for
similarly situate employees. Under the plan in effect at the date of
employment, EMPLOYER deposits an amount equal to ten percent (10%) of
EMPLOYEE's salary into such plan, subject to certain vesting requirements,
timing eligibility and investment criteria. EMPLOYEE is eligible to defer
up to an additional twenty-five percent (25%) of his salary into the plan.
D. Company Vehicle. EMPLOYEE shall be provided with a company car comparable
to a Mercury Sable or equivalent for his business use. All reasonable
expenses of maintenance and operation will be paid by the company. The
EMPLOYEE shall be responsible for fuel charges for personal use of the
vehicle.
E. Bonus. EMPLOYEE will be eligible for participation in EMPLOYER's
Performance Sharing Plan, as in effect during the period of EMPLOYEE's
employment. As of the date of employment, EMPLOYEE's eligibility would be
for a bonus target of 10% with a maximum eligibility of 30% of his annual
salary.
F. Life Insurance. EMPLOYEE shall be eligible for participation in EMPLOYER's
life insurance coverage, as then in effect pursuant to EMPLOYER's policies.
At the current time, that coverage provides life insurance in an amount up
to 1 1/2 times EMPLOYEE's annual salary, to a maximum of $100,000.
XII. Miscellaneous. The waiver by either party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by either party. The obligations undertaken by
EMPLOYEE shall not be assigned or delegated except as may be specifically
provided herein. The rights and obligations of the EMPLOYER hereunder shall
be binding upon, and inure to the benefit of, its successors and assigns.
The laws of the Commonwealth of Pennsylvania shall apply and bind the
parties in any and all questions arising hereunder. The provisions of
Sections VI and VII shall survive any termination of this Agreement.
XIII.Final Expression of Agreement. This writing represents the entire
agreements and understandings of the EMPLOYEE and EMPLOYER with respect to
subject matter hereof and supersedes all prior agreements and
understandings of the EMPLOYEE and EMPLOYER in connection therewith; except
as otherwise provided herein, it may not be altered or amended except by
mutual agreement evidenced by a writing signed by both EMPLOYEE and
EMPLOYER and specifically identified as an amendment to this Agreement.
EMPLOYEE EXPRESSLY ACKNOWLEDGES THAT EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY PRIOR TO ENTERING THIS AGREEMENT TO CONSULT WITH EMPLOYEE'S OWN
COUNSEL REGARDING EMPLOYEE'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THIS
AGREEMENT AND THAT EMPLOYEE EITHER HAS DONE SO OR HAS ELECTED NOT TO
CONSULT WITH SUCH COUNSEL.
XIV. Specific Data. Full name of EMPLOYEE: Gary L. Lambert Position: Vice
President of Manufacturing Commencement Date: February 8, 1999
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed this ___19__________day of _____May______________, 1999 .
The JPM Company
BY: /s/ Gary L. Lambert By: Robert R. Langton
- ----------------------- --------------------------------
Name: Robert R. Langton
Title: Senior Vice President
Computing & Contract Manufacturing
Witness: Attest:
- ----------------------- --------------------------------
