<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________________________________
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
COMMISSION FILE NUMBER 0-5351
EIP MICROWAVE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 95-2148645
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3 Civic Plaza, Suite 265, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(714) 720-1766
(Issuer's telephone number)
__________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
OUTSTANDING COMMON STOCK: As of May 2, 1995, Registrant had only one class
of common stock, and had 423,307 shares of this $.01 par value common stock
outstanding.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
Total Number of Pages: 20
Exhibit Index 11
1
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EIP MICROWAVE, INC.
FORM 10-QSB
Quarter Ended March 31, 1995
Part I Financial Information
Item 1. Consolidated Financial Statements Pages 3 - 6
Item 2. Management's Discussion and Analysis of Pages 7 - 8
Results of Operations and Financial Condition
Part II Other Information
Item 2. Changes in Securities Page 9
Item 6. Exhibits and Reports on Form 8-K Page 9
Signatures Page 10
Index to Exhibits Page 11
2
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EIP MICROWAVE, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
--------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 77 $ 211
Short-term investments 308 308
-------------------------
385 519
Accounts receivable, net 936 714
Inventories 1,073 984
Prepaid expenses 34 38
-------------------------
Total current assets 2,428 2,255
-------------------------
Property, plant and equipment, net 338 459
Other assets 30 30
-------------------------
$2,796 $2,744
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 441 $ 527
Accrued liabilities 624 626
-------------------------
Total current liabilities 1,065 1,153
-------------------------
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value, authorized -
10,000,000 shares, 423,307 and 423,307 shares
issued and outstanding, respectively 5 5
Additional paid-in capital 844 844
Retained earnings 882 742
-------------------------
Total shareholders' equity 1,731 1,591
-------------------------
$2,796 $ 2,744
=========================
</TABLE>
3
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EIP MICROWAVE, INC.
PART I/ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(In thousands except per share data, unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
--------------- --------------
<S> <C> <C> <C> <C>
Net sales $1,750 $1,581 $3,201 $2,636
Costs and expenses:
Cost of sales 773 812 1,573 1,483
Research, development and engineering 196 162 372 318
Selling, general and administrative 661 607 1,170 1,130
Interest and other, net (56) (8) (55) (8)
--------------- --------------
Income (loss) before income tax 176 8 141 (287)
Income tax provision 1 1 1 1
--------------- --------------
Net income (loss) 175 7 140 (288)
Retained earnings at beginning of period 707 900 742 1,195
--------------- --------------
Retained earnings at end of period $ 882 $ 907 $ 882 $ 907
=============== ==============
Income (loss) per share $ .41 $ .02 $ .33 $ (.68)
=============== ==============
Shares of common stock 423 423 423 423
=============== ==============
</TABLE>
4
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EIP MICROWAVE, INC.
PART I/ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (decrease) in cash
(In thousands, unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 140 $(288)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization 93 128
Change in assets and liabilities:
Accounts receivable, net (222) (39)
Inventories (89) 71
Prepaid expenses and other assets 4 53
Accounts payable (86) 119
Accrued liabilities (2) (2)
----------------
Cash provided (used) by operating activities (162) 42
----------------
Cash flows from investing activities:
Capital expenditures (1) --
Sales of capital equipment 29 --
----------------
Cash provided by investing activities 28 --
----------------
Increase (decrease) in cash and equivalents (134) 42
Cash and equivalents at beginning of year 211 247
----------------
Cash and equivalents at end of second quarter $ 77 $ 289
================
</TABLE>
5
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EIP MICROWAVE, INC.
PART I/ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(a) The consolidated financial information presented in this Form 10-QSB
has been prepared from the accounting records without audit and
conforms with the financial statements included in the Company's
annual report filed with the Commission for the preceding fiscal
year. The information furnished reflects all adjustments and
disclosures which are, in the opinion of management, of a normal,
recurring nature, and necessary for a fair statement of the results
for the interim periods. This report should be read in conjunction
with the Company's 1994 Annual Report on Form 10-KSB.
(b) Composition of certain balance sheet captions (in thousands,
unaudited):
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
--------- -------------
<S> <C> <C>
Inventories, net:
Raw materials $ 480 $ 576
Work-in-process 568 401
Finished goods 25 7
------ ------
$1,073 $ 984
------ ------
Property, plant and equipment:
Cost $5,327 $5,388
Accumulated depreciation (4,989) (4,929)
------ ------
$ 338 $ 459
------ ------
</TABLE>
(c) On December 20, 1994, the Company obtained a bank line of credit
("line") which provides for borrowings up to 60% of eligible accounts
receivable, not to exceed $500,000, which expires December 5, 1995.
Interest is charged at the bank's prime rate plus 3.5% provided that
the interest rate in effect each month shall not be less than 7.5% per
annum, and is payable monthly. This line is secured by the Company's
accounts receivable, inventory and fixed assets. The agreement, as
amended, contains various restrictive covenants requiring, among other
matters, the maintenance of minimum levels of tangible net worth and
certain financial ratios, including debt to net worth. At March 31,
1995, the Company was in compliance with the restrictive covenants of
the line. No borrowings were outstanding under the line at March 31,
1995.
6
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EIP MICROWAVE, INC.
PART I/ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 1995, were $1,750,000, an 11%
increase from the same period last year. Net sales for the six months ended
March 31, 1995, were $3,201,000, a 21% increase from the same period last
year. The increase in sales for both periods was primarily attributable to
increased sales to government contractors, increased sales of product
configured in the VXIbus standard, and an increase in international sales,
compared to the same periods last year. The Company still believes the
overall softness in domestic and foreign markets for the Company's products
will continue to affect sales.
Product cost of sales decreased to 44% of sales in the second fiscal quarter
of 1995, from 51% of sales in the second fiscal quarter of 1994. Product
cost of sales was 49% of sales for the six months ended March 31, 1995, as
compared to 56% of sales for the same period last year. The decrease for
both periods was primarily attributable to substantially higher production
volume, and change in product mix, compared to the same periods last year.
Incoming orders for the second fiscal quarter were $1,573,000, a 93% increase
from the same period a year ago. Incoming orders for the six months ended
March 31, 1995, were $3,234,000, a 20% increase from the same period a year
ago. Backlog at March 31, 1995, was $836,000, a 104% increase from the end of
the second fiscal quarter last year. The increase in orders for both
periods, and backlog, resulted primarily from increased orders from
government contractors, increased orders of product configured in the VXIbus
standard, and an increase in international orders, compared to the same
periods last year. The Company still believes the overall softness in
domestic and foreign markets for the Company's products will continue to
affect orders.
Research, development and engineering expenses increased 21% to $196,000 in
the second fiscal quarter of 1995, compared to the same quarter last year.
Research, development and engineering expenses increased 17% to $372,000 for
the six months ended March 31, 1995, compared to the same period last year.
The increase in research, development and engineering expenses for both
periods was primarily attributable to new product development.
Selling, general and administrative expenses increased 9% to $661,000 during
the second fiscal quarter of 1995, compared to the same quarter last year.
Selling, general and administrative expenses increased 4% to $1,170,000 for
the six months ended March 31, 1995, compared to the same period last year.
The increase in selling, general and administrative expenses for both periods
is due primarily to increased commission expense resulting from increased
sales volume and increased payroll costs.
7
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EIP MICROWAVE, INC.
PART I/ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
The Company earned $175,000 for the second fiscal quarter of 1995, as
compared to net income of $7,000 recorded for the second fiscal quarter of
the previous year. The Company earned $140,000 for the six months ended
March 31, 1995, compared to a $288,000 loss for the same period last year. A
gain on sale of fixed assets of $56,000 is included in the second quarter and
six month earnings figures. The Company still believes that the overall
softness in domestic and foreign markets for the Company's products will
continue to affect earnings.
FINANCIAL CONDITION
At March 31, 1995, the Company's cash and short-term investment balance was
$385,000, as compared with a cash and short-term investment balance of
$519,000 at September 30, 1994. At March 31, 1995, the Company had no
material commitments for capital expenditures. At March 31, 1995, working
capital increased $261,000 from September 30, 1994, and the Company's current
ratio increased to 2.3:1 from 2.0:1 over the same time period.
The Company still believes that the overall softness in domestic and foreign
markets for the Company's products will continue to affect incoming orders
and net sales and may result in a loss for fiscal 1995. This market softness
will be at least partially offset by increased orders and sales of products
configured in the VXIbus standard and the recently introduced pulsed
frequency counter with peak power measurement. The Company will continue to
control expenses and minimize debt during fiscal 1995.
On December 20, 1994, the Company obtained a line of credit agreement with a
bank that allows the Company to borrow on a short-term basis through December
5, 1995. The maximum borrowings under this agreement are the lesser of
$500,000, or 60% of the net amount of the Company's eligible accounts
receivable as determined by the bank, bearing interest at the prime rate plus
3.5% per annum, provided that the interest rate in effect each month shall
not be less than 7.50% per annum. The agreement, as amended, contains
various restrictive covenants requiring, among other matters, the maintenance
of minimum levels of tangible net worth and certain financial ratios,
including debt to net worth.
The Company believes that the cash on hand, funds generated from operations
and the Company's line of credit will adequately finance the Company's
operations during fiscal 1995.
8
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EIP MICROWAVE, INC.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
The existing credit facility between the Company and its commercial bank
contains restrictions on dividend payments and financial ratios regarding,
among other matters, the maintenance of minimal levels of tangible net worth,
minimum quick ratio and limits of debt to net worth. The credit agreement is
more fully described in Part I/Item 2 - Financial Condition.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on
February 8, 1995. Two items were voted on by the shareholders.
(1) Robert D. Johnson was re-elected as a Class III member of
the Board of Directors with term expiring at the 1998
Annual Meeting. The votes cast for or withheld for Robert
D. Johnson were as follows: For - 312,142; Withheld -
2,165. John F. Bishop, and J. Bradford Bishop, each a
Class I director, and J. Sidney Webb, Jr., and James J.
Shelton, each a Class II director, were not up for
re-election and continue in office.
(2) The shareholders approved the Company's 1994 Stock Option
Plan, as adopted by the Board of Directors. Vote to
approve as follows: For - 218,510; Against - 11,335;
Abstain - 764.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10(a) Non-qualified Stock Option Agreement-Form
10(b) Incentive Stock Option Agreement-Form
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company did not file with the Commission any reports on
Form 8-K in the quarter ended March 31, 1995.
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EIP MICROWAVE, INC.
(Registrant)
DATE: May 2, 1995 BY: /s/ J. Bradford Bishop
---------------------------
J. Bradford Bishop
Chairman of the Board and
Chief Executive Officer
DATE: May 2, 1995 BY: /s/ John Ardizzone
----------------------------
John Ardizzone
Vice President - Finance and
Chief Financial Officer
10
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EIP MICROWAVE, INC.
INDEX TO EXHIBITS
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
10(a) Non-qualified Stock Option Agreement-Form 12
10(b) Incentive Stock Option Agreement-Form 16
27 Financial Data Schedule 20
11
<PAGE>
EXHIBIT 10(a)
NON-QUALIFIED STOCK OPTION AGREEMENT--FORM
THE FOLLOWING IS A FORM OF AGREEMENT PRESCRIBED BY THE STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS FOR USE IN CONNECTION WITH THE ISSUANCE OF
NONSTATUTORY OPTIONS (AS DEFINED IN THE EIP MICROWAVE, INC. 1994 STOCK OPTION
PLAN) TO DIRECTORS. THIS FORM IS BEING FILED IN LIEU OF THE INDIVIDUAL
AGREEMENTS WITH PARTICIPATING DIRECTORS.
THE STOCK OPTION COMMITTEE MAY PRESCRIBE A DIFFERENT FORM OF AGREEMENT, AND
MAY MODIFY PREVIOUSLY EXECUTED INDIVIDUAL AGREEMENTS. ANY SUCH DIFFERENT
FORM AND ANY SUCH MODIFICATION MAY ELIMINATE OR ACCELERATE VESTING
PROVISIONS, MAY MODIFY OPTION PRICE PAYMENT PROVISIONS, MAY EXTEND THE
TERMINATION DATE AND MAY ADOPT OTHER PROVISIONS MORE BENEFICIAL TO THE
OPTIONEE, PROVIDED THAT SUCH TERMS AND CONDITIONS ARE CONSISTENT WITH THE
1994 STOCK OPTION PLAN
___________________________________________________
EIP MICROWAVE, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR THE
1994 STOCK OPTION PLAN
(DIRECTORS)
WHEREAS, __________________ (the "Optionee") is a Director of EIP
Microwave, Inc. (the "Company"); and
WHEREAS, the execution of a Stock Option Agreement in the form hereof
has been duly authorized by a resolution of the Board of Directors of the
Company duly adopted on February 22, 1995 and incorporated herein by
reference;
WHEREAS, the option granted hereby is intended as a non-qualified stock
option and shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code");
NOW, THEREFORE, the Company hereby grants to the Optionee an option
pursuant to the Company's 1994 Stock Option Plan (the "Plan") to purchase
______ shares of common stock, $.01 par value per share (the "Common Stock"),
of the Company at the price of ______ dollars ($________) per share, and
agrees to cause certificates for any shares purchased hereunder to be
delivered to the Optionee upon payment of the purchase price in full, all
subject, however, to the terms and conditions hereinafter set forth.
1. (a) This option (until terminated as hereinafter provided) shall be
exercisable only to the extent of one-third of the shares hereinabove
specific after the Optionee shall have continuously served as a Director of
the Company or any Subsidiary for one year from the date hereof and to the
extent of an additional one-third of such shares after each of the next four
successive periods of one year thereafter during which the Optionee shall
have been in the continuous employ of the Company or any Subsidiary. For the
purposes of this paragraph, leaves of absence approved by the Stock Option
Committee of the Company for illness, military or governmental service, or
other cause, shall be considered as service as a Director. To the extent
exercisable, this option may be exercised in whole or in part from time to
time.
12
<PAGE>
(b) Upon a filing pursuant to any federal or state law in connection
with any tender offer for shares of the Company (other than a tender offer by
the Company) or upon the signing of any agreement for the merger or
consolidation of the Company with another corporation or for sale of all or
substantially all of the assets of the Company or upon adoption of any
resolution of reorganization or dissolution of the Company by the
stockholders or upon the occurrence of any other event or series of events,
which tender offer, merger, consolidation, sale, reorganization, dissolution
or other event or series of events, in the option of the Board of Directors,
will, or is likely to, if carried out, result in a change of control of the
Company, or if during any period of two consecutive years, individuals who at
the beginning of such period constituted the Directors of the Company cease
for any reason to constitute a majority thereof (unless the election, or the
nomination for election by the Company's stockholders, of each Director of
the Company first elected during such period was approved by a vote of at
least two-thirds of the Directors then still in office who were Directors of
the Company at the beginning of any such period), the option granted hereby
shall, notwithstanding the provisions of paragraph (a) above, become
immediately exercisable in full. If any such tender offer, merger,
consolidation, sale, reorganization, liquidation or other event or series of
events mentioned in the immediately preceding sentence shall be abandoned,
the Board of Directors may by notice to the Optionee nullify the effect
thereof and reinstate the provisions of paragraph (a) above, but without
prejudice to any exercise of this option that may have occurred prior to such
nullification. Notwithstanding anything to the contrary in this Agreement,
in the event of a merger or consolidation in which the Company is not the
surviving corporation and the agreement of merger or consolidation provides
for the assumption of options granted, and the Company's obligations, under
the Plan, the date of exercisability of each outstanding option granted
hereby shall not be accelerated as referenced above and the shares of common
stock of securities of the successor corporation may be issued under the Plan
in lieu of shares of Common Stock, subject to all the adjustments which the
Stock Option Committee may determine is equitably required under Paragraph 6
of the Plan and Paragraph 7 of this Agreement; in such event the Optionee
hereby consents to the substitution of such successor corporation's
securities.
2. The option price shall be payable (a) in cash or by check acceptable
to the Company, (b) by transfer to the Company of shares of Common Stock
which have been owned by the Optionee (i) more than one year if previously
acquired upon exercise of an incentive stock option or (ii) more than six
months if previously acquired otherwise which have a fair market value on the
date of exercise equal to the option price, or (c) by a combination of such
methods of payment. The requirement of payment in cash shall be deemed
satisfied if the Optionee shall have made arrangements satisfactory to the
Company with a broker who is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of the shares being
purchased so that the net proceeds of the sale transaction will at least
equal the option exercise price and pursuant to which the broker undertakes
to promptly deliver the full option exercise price to the Company.
3. This option shall terminate on the earliest of the following dates:
(a) On the date on which the Optionee ceases to be a Director of the
Company or Subsidiary, unless he ceases to be such a Director by reason of
death or disability or in a manner described in (b) below:
(b) Three months after the date of a qualified domestic relations
order, as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, requiring the transfer of all or a
portion of this Option to the spouse of the Optionee(a "Qualified Domestic
Relations Order");
(c) One year after the death or disability of the Optionee if the
Optionee dies or becomes disabled while a Director of the Company or
Subsidiary or within the three-month period referred to in (b) above;
(d) Ten years from the date on which this option was granted.
13
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In the event the Optionee shall intentionally commit an act materially
inimical to the interests of the Company or Subsidiary, and the Stock Option
Committee shall so find, this option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in Section 3 hereof shall be construed to modify or enlarge the
rights of the Optionee as set forth in Section 1(a) hereof and at no time
shall any right to exercise any installment of this option accrue to the
Optionee unless and to the extent that he shall have continuously served as a
Director of the Company or Subsidiary for the period specified with respect
to such installment in Section 1(a) hereof. In the event the Optionee's
service as a Director of the Company or Subsidiary is terminated for any
reason whatsoever, all rights of the Optionee (except the right to purchase
in accordance with Section 2 hereof any installments of this option which
have theretofore accrued pursuant to Section 1(a) hereof) shall cease and
terminate as of the date of such termination of service as a Director and
under no circumstances shall the Optionee have or acquire any rights with
respect to any installment of this option which would have become exercisable
subsequent to the date of such termination of service as a Director. Nothing
contained in this option shall limit whatever right the Company or Subsidiary
might otherwise have to terminate Optionee's service as a Director and the
terms of this option shall not be affected in any manner by any other
agreement between the Optionee and the Company or any Subsidiary.
For purposes of this Paragraph 3, "disability" shall mean the condition of
an Optionee who is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve months.
4. This option is not transferable by the Optionee otherwise than (i)
by will or the laws of descent and distribution or (ii) pursuant to a
Qualified Domestic Relations Order.
5. This option is exercisable, during the lifetime of the Optionee (i)
only by him or, in the event of his legal incapacity to do so, by his
guardian or legal representative.
6. This option shall not be exercisable if such exercise would involve
a violation of any applicable Federal or state securities law, and the
Company hereby agrees to make reasonable efforts to comply with such
securities laws.
7. The Stock Option Committee shall make such adjustments in the option
price and in the number or kind of shares of Common Stock or other securities
covered by this option as such Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of the optionee that otherwise would result from
(i) any stock dividend, stock split, combination of shares, recapitalization
or other change in the capital structure of the Company, or (ii) any merger,
consolidation, reorganization, separation, or partial or complete
liquidation, or (iii) any other corporate transaction or event having an
effect similar to any of the foregoing (including, without limitation, a
merger or consolidation in which the Company is not the surviving corporation
and the agreement of merger or consolidation provides for the assumption of
the options granted pursuant to the Plan by the successor to the Company).
8. If the Company shall be required to withhold any federal, state,
local or foreign tax in connection with exercise by this option, it shall be
a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
9. The term "Subsidiary" as used in this Agreement means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain. For purposes of this Agreement, the
continuous service as a Director of the Company or Subsidiary shall not be
deemed interrupted, and the Optionee shall not be deemed to have ceased to be
a Director of the Company or any Subsidiary, by reason of the transfer of his
service as a Director among the Company and its Subsidiaries.
14
<PAGE>
10. This Agreement shall be subject to the terms and conditions of the
Plan.
EXECUTED at Newport Beach, California this 21st day of April, 1995.
EIP MICROWAVE, INC.
By: ________________________________________
John F. Bishop, President
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Stock Option Agreement and accepts the option granted
thereunder.
________________________________________
Optionee
15
<PAGE>
EXHIBIT 10(b)
INCENTIVE STOCK OPTION AGREEMENT--FORM
THE FOLLOWING IS A FORM OF AGREEMENT PRESCRIBED BY THE STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS FOR USE IN CONNECTION WITH THE ISSUANCE OF
INCENTIVE OPTIONS (AS DEFINED IN THE EIP MICROWAVE, INC. 1994 STOCK OPTION
PLAN) TO OFFICERS AND OTHER KEY EMPLOYEES. THIS FORM IS BEING FILED IN LIEU
OF THE INDIVIDUAL AGREEMENTS WITH PARTICIPATING OFFICERS AND KEY EMPLOYEES.
THE STOCK OPTION COMMITTEE MAY PRESCRIBE A DIFFERENT FORM OF AGREEMENT, AND
MAY MODIFY PREVIOUSLY EXECUTED INDIVIDUAL AGREEMENTS. ANY SUCH DIFFERENT
FORM AND ANY SUCH MODIFICATION MAY ELIMINATE OR ACCELERATE VESTING
PROVISIONS, MAY MODIFY OPTION PRICE PAYMENT PROVISIONS, MAY EXTEND THE
TERMINATION DATE AND MAY ADOPT OTHER PROVISIONS MORE BENEFICIAL TO THE
OPTIONEE, PROVIDED THAT SUCH TERMS AND CONDITIONS ARE CONSISTENT WITH THE
1994 STOCK OPTION PLAN.
___________________________________________________
EIP MICROWAVE, INC.
INCENTIVE STOCK OPTION AGREEMENT
FOR THE
1994 STOCK OPTION PLAN
WHEREAS, _______________________ (the "Optionee") is
___________________(title) of EIP Microwave, Inc. (the "Company"); and
WHEREAS, the execution of a Stock Option Agreement in the form hereof
has been duly authorized by a resolution of the Board of Directors of the
Company duly adopted on February 22, 1995 and incorporated herein by
reference;
WHEREAS, the option granted hereby is intended as an "incentive stock
option" within the meaning of that term under Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, the Company hereby grants to the Optionee an option
pursuant to the Company's 1994 Stock Option Plan (the "Plan") to purchase
________ shares of common stock, $.01 par value per share (the "Common
Stock"), of the Company at the price of ________ dollars ($______) per share,
and agrees to cause certificates for any shares purchased hereunder to be
delivered to the Optionee upon payment of the purchase price in full, all
subject, however, to the terms and conditions hereinafter set forth.
1. (a) This option (until terminated as hereinafter provided) shall be
exercisable only to the extent of one-fifth of the shares hereinabove
specific after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary for one year from the date hereof and to the extent
of an additional one-fifth of such shares after each of the next four
successive periods of one year thereafter during which the Optionee shall
have been in the continuous employ of the Company or any Subsidiary. For the
purposes of this paragraph, leaves of absence approved by the Stock Option
Committee of the Company for illness, military or governmental service, or
other cause, shall be considered as employment. To the extent exercisable,
this option may be exercised in whole or in part from time to time.
(b) Upon a filing pursuant to any federal or state law in connection
with any tender offer for shares of the Company (other than a tender offer by
the Company) or upon the signing of any agreement for the merger or
consolidation of the Company with another corporation or for sale of all or
substantially all of the assets of the
16
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Company or upon adoption of any resolution of reorganization or dissolution
of the Company by the stockholders or upon the occurrence of any other event
or series of events, which tender offer, merger, consolidation, sale,
reorganization, dissolution or other event or series of events, in the option
of the Board of Directors, will, or is likely to, if carried out, result in a
change of control of the Company, or if during any period of two consecutive
years, individuals who at the beginning of such period constituted the
Directors of the Company cease for any reason to constitute a majority
thereof (unless the election, or the nomination for election by the Company's
stockholders, of each Director of the Company first elected during such
period was approved by a vote of at least two-thirds of the Directors then
still in office who were Directors of the Company at the beginning of any
such period), the option granted hereby shall, notwithstanding the provisions
of paragraph (a) above, become immediately exercisable in full. If any such
tender offer, merger, consolidation, sale, reorganization, liquidation or
other event or series of events mentioned in the immediately preceding
sentence shall be abandoned, the Board of Directors may by notice to the
Optionee nullify the effect thereof and reinstate the provisions of paragraph
(a) above, but without prejudice to any exercise of this option that may have
occurred prior to such nullification. Notwithstanding anything to the
contrary in this Agreement, in the event of a merger or consolidation in
which the Company is not the surviving corporation and the agreement of
merger or consolidation provides for the assumption of options granted, and
the Company's obligations, under the Plan, the date of exercisability of each
outstanding option granted hereby shall not be accelerated as referenced
above and the shares of common stock of securities of the successor
corporation may be issued under the Plan in lieu of shares of Common Stock,
subject to all the adjustments which the Stock Option Committee may determine
is equitably required under Paragraph 6 of the Plan and Paragraph 7 of this
Agreement; in such event the Optionee hereby consents to the substitution of
such successor corporation's securities.
2. The option price shall be payable (a) in cash or by check acceptable
to the Company, (b) by transfer to the Company of shares of Common Stock
which have been owned by the Optionee (i) more than one year if previously
acquired upon exercise of an incentive stock option or (ii) more than six
months if previously acquired otherwise which have a fair market value on the
date of exercise equal to the option price, or (c) by a combination of such
methods of payment. The requirement of payment in cash shall be deemed
satisfied if the Optionee shall have made arrangements satisfactory to the
Company with a broker who is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of the shares being
purchased so that the net proceeds of the sale transaction will at least
equal the option exercise price, plus interest at the applicable Federal rate
for the period from the exercise date to the date of payment, and pursuant to
which the broker undertakes to promptly deliver the full option exercise
price plus such interest to the Company.
3. This option shall terminate on the earliest of the following dates:
(a) On the date on which the Optionee ceases to be an employee of
the Company or Subsidiary, unless he ceases to be such employee by reason of
death or disability or in a manner described in (b) below:
(b) Three months after the Optionee ceases to be an employee of the
Company or Subsidiary by reason of termination of employment under
circumstances determined by the Stock Option Committee to be for the
convenience of the Company;
(c) Three months after the date of a qualified domestic relations
order, as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, requiring the transfer of all or a
portion of this Option to the spouse of the Optionee (a "Qualified Domestic
Relations Order");
(d) One year after the death or disability of the Optionee if the
Optionee dies or becomes disabled while an employee of the Company or
Subsidiary or within the three-month period referred to in (b) above;
(e) Ten (or Five if Optionee owns more than 10% of the voting power
of the Company or Subsidiary) years from the date on which this option was
granted.
In the event the Optionee shall intentionally commit an act materially
inimical to the interests of the Company or Subsidiary, and the Stock Option
Committee shall so find, this option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
17
<PAGE>
Nothing in Section 3 hereof shall be construed to modify or enlarge the
rights of the Optionee as set forth in Section 1(a) hereof and at no time
shall any right to exercise any installment of this option accrue to the
Optionee unless and to the extent that he shall have been in the continuous
employ of the Company or Subsidiary for the period specified with respect to
such installment in Section 1(a) hereof. In the event the employment of the
Optionee by the Company or Subsidiary is terminated for any reason
whatsoever, all rights of the Optionee (except the right to purchase in
accordance with Section 2 hereof any installments of this option which have
theretofore accrued pursuant to Section 1(a) hereof) shall cease and
terminate as of the date of such termination of employment and under no
circumstances shall the Optionee have or acquire any rights with respect to
any installment of this option which would have become exercisable subsequent
to the date of such termination of employment. Nothing contained in this
option shall limit whatever right the Company or Subsidiary might otherwise
have to terminate the employment of the Optionee and the terms of this option
shall not be affected in any manner by any employment or other agreement
between the Optionee and the Company or any Subsidiary.
For purposes of this Paragraph 3, "disability" shall mean the condition
of an Optionee who is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve months.
4. This option is not transferable by the Optionee otherwise than (i)
by will or the laws of descent and distribution or (ii) pursuant to a
Qualified Domestic Relations Order.
5. This option is exercisable, during the lifetime of the Optionee (i)
only by him or, in the event of his legal incapacity to do so, by his
guardian or legal representative acting in a fiduciary capacity under state
law on behalf of the Optionee and under court supervision or (ii) in the case
of the transfer of all or a part of this option pursuant to a Qualified
Domestic Relations Order, by the spouse of the Optionee.
6. This option shall not be exercisable if such exercise would involve
a violation of any applicable Federal or state securities law, and the
Company hereby agrees to make reasonable efforts to comply with such
securities laws.
7. The Stock Option Committee shall make such adjustments in the option
price and in the number or kind of shares of Common Stock or other securities
covered by this option as such Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of the optionee that otherwise would result from
(i) any stock dividend, stock split, combination of shares, recapitalization
or other change in the capital structure of the Company, or (ii) any merger,
consolidation, reorganization, separation, or partial or complete
liquidation, or (iii) any other corporate transaction or event having an
effect similar to any of the foregoing (including, without limitation, a
merger or consolidation in which the Company is not the surviving corporation
and the agreement of merger or consolidation provides for the assumption of
the options granted pursuant to the Plan by the successor to the Company);
provided, however, that without the prior written consent of the Optionee no
such adjustment shall be made if it would constitute a "modification" of this
option within the meaning of Section 425(h) of the Code.
8. If the Company shall be required to withhold any federal, state,
local or foreign tax in connection with exercise by this option, it shall be
a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
9. The term "Subsidiary" as used in this Agreement means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain. For purposes of this Agreement, the
continuous employ of the Optionee with the Company or Subsidiary shall not be
deemed interrupted, and the Optionee shall not be deemed to have ceased to be
an employee of the Company or any Subsidiary, by reason of the transfer of
his employment among the Company and its Subsidiaries.
18
<PAGE>
10. This Agreement shall be subject to the terms and conditions of the
Plan.
EXECUTED at Newport Beach, California this 21st day of April, 1995.
EIP MICROWAVE, INC.
By: ________________________________________
John F. Bishop, President
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Stock Option Agreement and accepts the option granted
thereunder.
________________________________________
Optionee
19
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 77
<SECURITIES> 308
<RECEIVABLES> 1,010
<ALLOWANCES> 74
<INVENTORY> 1,073
<CURRENT-ASSETS> 2,428
<PP&E> 5,327
<DEPRECIATION> 4,989
<TOTAL-ASSETS> 2,796
<CURRENT-LIABILITIES> 1,065
<BONDS> 0
<COMMON> 5
0
0
<OTHER-SE> 1,726
<TOTAL-LIABILITY-AND-EQUITY> 2,796
<SALES> 3,201
<TOTAL-REVENUES> 3,201
<CGS> 1,573
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<OTHER-EXPENSES> 1,486
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140
<EPS-PRIMARY> .33
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