U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended March 31, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee
Required]
For the transition period from _________
_________________ to ___________________
Commission file number 1-6299
EMCEE BROADCAST PRODUCTS, INC.
(Name of small business issuer in its charter)
DELAWARE 13-1926296
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
SUSQUEHANNA STREET EXTENSION,
WEST, PO BOX 68, WHITE HAVEN, PA 18661-0068
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number: (717) 443-9575
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Name of each exchange on which
registered:
Common NASDAQ National Market
- - --------------------------------------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
None
(TITLE OF CLASS)
<PAGE>
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 twelve (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 ninety (90) days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is met contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year. $12,522,811.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is $8,097,534 computed by reference to the closing bid price of
the stock at June 26, 1997. This computation is based on the number of issued
and outstanding shares held by persons other than directors and officers of the
Registrant.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
CLASS OUTSTANDING AT JUNE 27, 1997
Common stock, par value $.1-2/3 per sh. 4,165,601
DOCUMENTS INCORPORATED BY REFERENCE
Items 9, 10, 11 and 12 in Part III of this report are incorporated
by reference from the Proxy Statement expected to be filed within one hundred
twenty (120) days of the close of the Registrant's fiscal year ended March 31,
1997.
Transitional Small Business Disclosure Format (Check One)
Yes ; No X .
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
FORM 10-KSB
FISCAL YEAR ENDED MARCH 31, 1997
TABLE OF CONTENTS
PART I.
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 2
ITEM 3. LEGAL PROCEEDINGS 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 6
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 7
ITEM 7. FINANCIAL STATEMENTS 20
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES 20
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT 21
ITEM 10. EXECUTIVE COMPENSATION 21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 21
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 24
<PAGE> PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Registrant (sometimes alternatively referred to in this report
as the "Company" or "EMCEE") is a corporation, organized and existing under the
laws of the State of Delaware, having been incorporated in 1960.
The Registrant is engaged principally in the manufacture and sale of
Multichannel Multipoint Distribution Service ("MMDS") microwave transmitters and
related equipment for the wireless cable industry and low power television
("LPTV") transmitters and related equipment for the television broadcast
industry. These principal products are distributed primarily through the
Registrant's sales staff and independent representatives, with most sales
occurring in the commercial, educational and private television system markets.
The Registrant also provides all services relative to the design, procurementand
installation of television broadcast stations, with the exception of licensing
submissions.
For more than the past three years, the Company's primary sales and
marketing focus has been on the wireless cable industry. While the Company was
also involved in the manufacture and sale of products to the LPTV market during
the same period of time, LPTV product sales have been overwhelmingly subordinate
to the Company's MMDS products. The Company anticipates that its MMDS sales will
continue to dominate in both domestic and foreign markets.
At March 31, 1997, the Registrant employed 69 people, of whom 67 were
full time employees.
The Registrant has a variety of raw material sources available to
conduct its present business. However, substantial periods of lead time for
delivery are sometimes experienced by the Registrant, making it necessary to
inventory varied quantities of materials.
Significant portions of the Registrant's revenues come from contracts
with customers who generally do not place orders on a regular basis. In addition
the timing of these contracts relate to economic and regulatory developments
over which the Registrant has little or no control.
In fiscal year 1997, purchases by three MMDS customers constituted,
in the aggregate, $4,448,809, or approximately 35.5% of the Company's net sales.
Although these purchases were significant in both amount and as a percentage of
sales, the Company's management believes that the loss of the contract the
Company has with only one of these customers would have a material adverse
impact on the Company. That customer, which constituted approximately 16.9% of
the Company's net sales during fiscal year 1997, represents approximately 81% of
th eCompany's current backlog.
The Registrant's principal suppliers are Andrew Corporation,
Scientific Atlanta, Inc., and Microwave Filter Company, Inc.
Substantially all of the Registrant's domestic products must receive
Federal Communications Commission (FCC) approval prior to being marketed and
sold. The Registrant is currently in the process of securing FCC approval for
its DS line and the digital version of its HS line of MMDS transmitters.
While FCC regulations, as promulgated or amended from time to time,
can have an effect on the demand for the Registrant's domestic products, the
Registrant does not presently know of any existing governmental regulation and
<PAGE>
does not anticipate any probable governmental regulation which would have a
material effect on its business. However, recently issued FCC regulations
concerning high definition television (HDTV) may, for an interim period during
which television stations must simulcast HDTV signals and ordinary television
signals, create a temporary market for a modified version of one of the
Registrant's LPTV transmitters which would facilitate such simulcasting. At this
time, though, it is not possible to predict whether such a temporary market for
this product will arise and what effect, if any, it will have on the
Registrant's business.
The amount of money spent on the Registrant's research and
development activities in fiscal years 1996 and 1997 was, respectively, $460,884
and $444,669. An additional $30,000 and $61,296 of research and development
costs were funded by customers in fiscal years 1996 and 1997, respectively.
With respect to the Registrant's research and development activities,
it is relevant to note that the Registrant and a manufacturer of connection
equipment for internet and local loop telephony have been researching andtesting
the feasibility of using MMDS transmitters for high speed internet connections
and local loop telephony. However, given that this technology is still in the
development stages, the Registrant cannot predict with any degree of certainty
what, if any, effect it will have on the Registrant's business.
Competitive conditions in the Registrant's industry continue to be
intense. Nevertheless, in the field of MMDS, the Registrant occupies a strong
position among its competitors.
In the Registrant's opinion, the primary methods of competition in
its industry are product pricing, the ready availability of quality products to
accommodate demand, offering quality service of products after sale, and
maintaining a reputation for having a high degree of technical knowledge.
There has been no material effect on the Registrant as a result of
compliance with federal, state or local environmental laws.
The Registrant's principal corporate logos, "EMCEE" and "EMCEE
Broadcast Products", are registered in the United States Patent and Trademark
Office and are used by the Registrant pursuant to a license with its whollyowned
subsidiary corporation, EMCEE Cellular Inc., which owns the marks. In the same
manner, the Registrant also uses the trademark, "Site Lock", which is a mark
associated with a product sold by the Registrant that enhances picture quality
for MMDS systems in close proximity to systems operating on the same frequency,
and utilizes a patent for a solid state S-band transmitter.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant conducts operations at its facility located on 25
acres, which the Registrant owns in fee, in White Haven, Pennsylvania.
The building was constructed specifically for the Registrant in 1968
and consists of approximately 27,000 square feet, with the majority of the area
devoted to manufacturing. The front portion of the building, consisting of two
floors, houses administrative, engineering and sales offices. The land, building
and improvements are well maintained and in good condition.
In the first quarter of fiscal year 1998, pursuant to a prior written
agreement, the Registrant conveyed an unimproved 1-acre parcel of the
Registrant's land, together with a 490' x 20' ingress/egress and utility
easement, to the White Haven Municipal Authority. No entry on the financial
<PAGE>
statements accompanying this report was made with respect to this conveyance, as
the value thereof was deemed not to be material.
The Registrant's land, building and improvements are subject to
encumbrances held by the Registrant's primary lending institution, CoreStates
Bank, N.A. These encumbrances secure the Registrant's working line of credit,
mortgage loan and two term loans with the lender. As of the date of this report,
the aggregate principal balance of these encumbrances is $942,548.
ITEM 3. LEGAL PROCEEDINGS
There is no information relevant to the Registrant which must be
disclosed under this Item 3.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of fiscal year 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The NASDAQ National Market is the principal market on which the
Registrant's common stock is traded.
MARKET INFORMATION
STOCK PRICE
The table below presents the high and low bid prices of the
Registrant's common equity for the two most recent fiscal years:
<TABLE> FISCAL YEAR 1997
<CAPTION>
QTR ENDED: JUNE 30 SEPT 30 DEC 31 MAR 31
<S> <C> <C> <C> <C>
(BID) HIGH $10.50 $7.875 $7.975 $7.50
(BID) LOW $6.50 $5.875 $5.375 $3.00
</TABLE>
<TABLE> FISCAL YEAR 1996
<CAPTION>
QTR ENDED: JUNE 30 SEPT 30 DEC 31 MAR 31
<S> <C> <C> <C> <C>
(BID) HIGH $7.75 $8.375 $8.25 $8.125
(BID) LOW $5.00 $5.375 $6.25 $5.875
</TABLE>
The above high/low bid information was obtained from the NASDAQ Stock
Market, Inc.
HOLDERS
At March 31, 1997, the number of holders of the Registrant's common
stock was 1,622.
<PAGE>
DIVIDENDS
No dividends were declared during fiscal year 1996 or fiscal year
1997. The Registrant's loan documents with its primary lending institution
contain certain financial covenants with which the Registrant must comply in
order to declare and pay dividends on its common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net sales for the fiscal year ended March 31, 1997 were $12,523,000,
a decrease of $1,770,000 or 12% from the net sales of $14,293,000 for the fiscal
year ended March 31, 1996.
The primary reason for the reduction in sales was due to the halt in
shipments to the Company's primary customer in the second quarter of the fiscal
period. Although shipments to this customer were at $2,113,000 (17% of total
sales and the highest sales to any one customer), sales to that customer hadbeen
anticipated to be approximately $5,000,000 for the 1997 fiscal year.
The halt in these shipments, which are under a subcontract agreement
with a U.S. general contractor and are destined for Saudi Arabia, occurred due
to a frequency allocation issue not due to any responsibility of the
Registrant.Although additional shipments did occur in the fourth quarter of
fiscal year 1997, and while management believes a solution to the frequency
allocation issue is imminent, the total contract will be materially reduced (See
the discussion below on the backlog of unsold orders).
Also, domestic demand in the Multichannel Multipoint Distribution
Service (MMDS) industry started to decline in the second quarter of fiscal 1997
and continues to be low as operators wait for the successful testing and
installation of digital compression technology. Management is confident thatthis
technology will provide better picture quality and will increase programming
capacity four to five fold, but it believes that the market will not respond
until the next calendar year.
Foreign sales, which included the previously mentioned subcontract
order, totaled $7,056,000 or 56% of shipments for the fiscal year ended March31,
1997, compared to $8,132,0000 for the previous fiscal year; domestic sales
equaled $5,467,000 for the fiscal 1997, compared to $6,161,000 for the like
period one year ago.
Gross profit totaled $4,500,000 or 35.9% of net sales for the fiscal
year 1997, compared to $5,191,000 or 36.3% of net sales for fiscal 1996. EMCEE
produced product in which the Company receives higher margins than equipment
purchased from others for resale (referred to as O.E.M. sales) constituted 81%
of total sales for fiscal 1997, compared to 78% for fiscal 1996. However, this
slight increase in profit mix was offset by lower margins on the large
subcontract order referred to previously.
Total operating expenses of $3,116,000 for the twelve month period
ended March 31, 1997 decreased by $156,000 or 4.8% from the immediatelypreceding
twelve month period. Selling expense decreased by $113,000 (7%) for the two
periods. Domestic related sales expenses decreased by 12% for fiscal 1997,
compared to fiscal 1996, while international related expenses increased by 8%
for the same time frame reflecting the Company's efforts to increase its foreign
<PAGE>
market share. Advertising expenses totaled $75,000 for the twelve months ended
March 31, 1997, compared to $150,000 for the twelve months ended March 31, 1996,
as the latter included a large outlay for set-up and publishing of a new
brochure. Also, domestic advertising was curtailed in fiscal 1997 in
recognition of the downturn in market demand.
General and administrative expense totaled $1,186,000 for the year
ended March 31, 1997. This was a modest decrease from the total of $1,214,000for
the year ended March 31, 1996, although it was a higher percent of net sales at
9.5% for fiscal 1997, compared to 8.5% for fiscal 1996 due to the decrease in
sales volume. Decreases were shown in public relations expense and salary and
salary related expenses while increased costs were experienced in depreciation
expense and additional reserve for bad debts.
Research and development expenses totaled $445,000 for the year ended
March 31, 1997, which was $16,000 less than the previous fiscal year due to
additional credits for the non-recurring engineering received in the current
year. The Registrant is committed to continue research and development and has
budgeted in excess of $500,000 for the fiscal year 1998 to maintain
technological leadership in the MMDS industry.
Income from operations decreased to $1,384,000 (11% of net sales) for
the twelve months ended March 31, 1997 from $1,919,000 (13.4% of net sales) for
the twelve months ended March 31, 1996, due primarily to the decrease in sales
volume.
On August 21, 1991, the Registrant entered into an agreement to sell
a cellular license for $3,100,000. The amount of $1,000,000 was received in
fiscal 1992 with the balance of $2,100,000 plus interest at 7% to be paid on
December 16, 1996. On March 27, 1997, following a lawsuit by the Company when
payment was not received, the parties agreed to a settlement of $2,500,000 to be
paid (and which was paid) on April 3, 1997 and an additional $500,000 to be paid
to the Company upon the occurrence of certain events, including a sale or
material change in ownership of the obligor. The Company recorded as income for
fiscal 1997 the proceeds on the sale of the license of $2,500,000 including
interest income of $400,000. The remaining $500,000 receivable is recorded on
the balance sheet and is fully reserved because there is no reasonable basis to
evaluate the likelihood of collection.
Interest income for the fiscal year 1997 totaling $110,000 resulted
primarily from the investments of U.S. Treasury bills. The equivalent income for
the previous fiscal year totaled $105,000.
Interest expense for fiscal 1997 totaled $93,000, compared to
$141,000 for fiscal 1996. The reduction of interest expense reflects the net
reduction of long-term debt during the twelve months ended March 31, 1997.Also,
in the prior fiscal year, a large commercial letter of credit was discounted at
an interest cost of $23,000.
The Company sold one half of the 35,000 shares of an investment in
a wireless cable operator during fiscal 1997 for a net gain of $210,000.
Additional other income of $32,000 was earned in the year ended March 31, 1997
primarily from forfeitures of customer deposits and rental income. The amount of
net other income for the previous year was $18,000.
Net other income for the twelve months ended March 31, 1997 totaled
$2,759,000 which increased net income before provision for federal income taxes
to $4,143,000, compared to net income before federal income taxes of $1,901,000
for the prior fiscal year.
<PAGE>
Federal income taxes aggregated $1,127,000 and $306,000 for the
fiscal years ended March 31, 1997 and March 31, 1996, respectively. The
Registrant was able to reduce federal income taxes for both fiscal years by
utilizing a foreign sales corporation (FSC). There is no state tax liability for
these same periods since all profitable companies in the consolidated reporting
group are domiciled in jurisdictions that do not impose income taxes.
Net income for fiscal year ended March 31, 1997 was $3,016,000, or
$.72 cents per common and common equivalent share, compared to net income of
$1,595,000 or $.36 cents per common and common equivalent share for the fiscal
year ended March 31, 1996.
Selected financial data by quarter for the years ended March 31, 1997
and March 31, 1996 are as follows:
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1997 1996 1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $4,299 $2,793 $3,322 $2,899 $3,019 $3,832 $1,883 $4,769
Gross Profit $1,565 $1,034 $1,383 $1,139 $1,193 $1,373 $ 359 $1,645
Income before
extra-ordinary
items & cum-
ulative
effect of a
change in
accounting $ 638 $ 303 $ 404 $ 204 $ 283 $ 401 $1,691 $ 687
Per Share $ .15 $ .07 $ .09 $ .05 $ .07 $ .09 $ .41 $ .15
Net Income $ 638 $ 303 $ 404 $ 204 $ 283 $ 401 $1,691 $ 687
</TABLE>
As mentioned previously, the fourth quarter of fiscal 1996 and first
quarter of fiscal 1997 were impacted favorably by the sales to one customer for
equipment destined for Saudi Arabia. Earnings for the fourth quarter of fiscal
1997 included $2,500,000 of proceeds on a Note Receivable connected with the
sale of a cellular license.
LIQUIDITY AND CAPITAL RESOURCES
Technical changes are inherent in the industry in which the
Registrant operates. It is impossible to accurately predict the future of the
wireless cable industry. The management of the Company believes in the
technological feasibility of digital compression in which the operator can
increase the number of channels from 33 to in excess of 150 and provide an
enhanced digital picture and video-on-demand programming. Management believes
further that High Definition Television Service (HDTV), local loop telephony and
Internet communication are areas where the expertise and research conducted by
the Company will provide internal growth for the next seven to ten years.
In fiscal 1997 the Company's cash requirements were satisfied
principally from the cash flow from operations, cash on hand and customer
<PAGE>
deposits. These funds were sufficient to meet the Company's working capital
needs, capital expenditures and required debt payments.
The Company recognizes that industry demand for the remainder of
calendar year 1997 will be less than the preceding calendar year, especially in
the domestic market. The Company believes that its financial strength as
evidenced by the balance sheet, especially the cash and cash equivalent amount,
will allow it to continue to develop and market the latest technology until the
demand increases.
Cash and cash equivalents totaled $681,000 at March 31, 1997 compared
to $1,538,000 as of March 31, 1996; U.S. Treasury Bills increased from
$1,569,000 to $1,679,000 for the same periods. The net decrease in these
accounts are due to the decrease in sales activity in the second half of fiscal
1997 and the acquisition of treasury stock in the first quarter of fiscal 1997.
Due to the decrease in sales volume, especially in the fourth quarter
of fiscal 1997 compared to the fourth quarter of fiscal 1996, the accounts
receivable balance, net of allowance for doubtful accounts, decreased from
$1,819,000 as of March 31, 1996 to $934,000 as of March 31, 1997. Customer
deposits on orders decreased in tandem from $526,000 as of March 31, 1996 to
$121,000 at March 31, 1997.
Bad debt write-offs for fiscal 1997 totaled $30,000, the same as the
amount written off in the prior fiscal year. The reserve was increased from
$95,000 as of March 31, 1996 to $100,000 as of March 31, 1997 which management
believes is adequate.
Inventories totaled $3,628,000 as of March 31, 1997, an increase of
$252,000 over the same date one year earlier. The increase was due primarily to
build-up for the previously mentioned customer which had been placed on "hold"
status. Restrictions have been placed on new inventory purchases in an endeavor
to relate inventory levels to sales levels.
Accounts payable balance at March 31, 1997 of $355,000 is $430,000
less than the balance at March 31, 1996, reflecting the reduction of inventory
purchases.
Deferred income taxes, which was an asset as of March 31, 1996,
became a liability as of March 31, 1997 due to the timing of the collection of
the cellular license settlement.
The Note Receivable, which included interest of $400,000, increased
to $2,500,000 at March 31, 1997 from a net balance of zero as of March 31, 1996
due to the collection of the Note on April 3, 1997.An additional $500,000 of the
settlement agreement has been shown as a long-term receivable with a like amount
fully reserved as the likelihood or time of collection cannot be determined at
the time of this report.
Capital expenditures for the fiscal year ended March 31, 1997 totaled
$355,000 compared to $231,000 for the prior fiscal year. Of the total amount of
$355,000, approximately $272,000 was used to procure testing equipment including
$76,000 for digital testing. Capital assets of $388,000, which were fully
depreciated, were "scrapped" and written-off during fiscal 1997.Included in this
write-off was an amount of $221,000 for the old data processing hardware and
software which was replaced in fiscal 1996. Depreciation expense for fiscal 1997
totaled $243,000, an increase of $44,000 from the previous fiscal year.Plans for
future expansion of the Registrant's production and office space as mentioned in
last year's annual report have been delayed until sales volume increases. The
Company has, since June 1996, leased approximately 1,500 square feet of space
used for research and development.
<PAGE>
The balance shown in the category "Other Assets" for March 31, 1996
in the financial statements accompanying this report included $212,000 for the
Company's investment in a Wireless Cable operator. In fiscal 1997 the Company
sold one half of this investment for $318,200. The remaining stock of the
operator, which was acquired by a Regional Bell Operating Company, was sold
during the first quarter of fiscal 1998 for $383,300. The remaining $2,000
difference between these accounts for the respective dates represents costs
associated with organizing subsidiaries of the Registrant.
In February 1997, the Company refinanced its borrowing with a
different financial institution as follows:
1. Line of credit of $2,000,000 bearing interest at the bank's prime
rate less 1/2 percent or LIBOR plus 175 basis points. There are no borrowings
outstanding as of March 31, 1997.
2. Mortgage bearing interest at the bank's prime rate plus 1/4
percent or LIBOR plus 225 basis points. As of March 31, 1997, the mortgage
aggregated $735,000 and required monthly principal payments of $4,083 plus
interest at LIBOR plus 225 basis points, which was 7.6875%.
3. Term loan bearing interest at the bank's prime rate or LIBOR plus
200 basis points. At March 31, 1997, $152,000 was outstanding bearing interest
at 7.4375% with monthly principal payments of $2,533. An additional amount of
$70,000 was borrowed on April 1, 1997 at the same interest rate and required
monthly principal payments of $1,218.
Although the change produced favorable interest rates, Management's
decision to change was based on the international expertise provided by the new
financial institution.
Long-term debt, less the current portion of $108,000, equaled
$807,000 as of March 31, 1997, compared to $938,000 as of March 31, 1996.
Accrued expenses at March 31, 1997, which consisted of payroll and
related expenses of $207,000 and other of $130,000 for a total of $337,000 was
$216,000 less than the balance of $553,000 for the same date one year ago.
Reductions in accrued payroll included an amount of $98,000 for officers and
management bonuses accrued as of March 31, 1996. Bonus calculations are based on
income from operations goals that were not achieved for fiscal 1997. Reductions
also incurred in payroll tax liability of approximately $45,000 as these are now
paid through electronic funds transfer (EFT). An amount of $37,000 included in
other accrued expense as of March 31, 1996 represented the final deferred
portion of an asset purchased in fiscal 1996 with final payment in April 1997
and reclassified as accounts payable at March 31, 1997.
Common stock and additional paid-in capital accounts increased $45,000
during the year ended March 31, 1997 as employees exercised stock options for
19,000 shares at an average price of $2.37 (See note 8 to the financial
statements accompanying this report for further discussion).
In May, 1996, the Registrant, through a subsidiary, purchased 200,000
shares of the Company's stock from the estate of a former director through an
agreement negotiated with the beneficiary for $1,262,500. In consideration of
this agreement, the Company has issued a nonnegotiable, non-transferable stock
warrant to the beneficiary that expires on May 22, 2001, for 200,000 shares of
the Company's stock at an exercise price of $9.46875 per share.
In addition, 5,438 shares of the Company stock was purchased from
former employees (including 2,184 shares from a former officer) under the KSOP
Plan Agreement for an aggregate amount of $47,710.
Inflation has not had a significant impact on cost or price in the
two fiscal years under review. However, as a significant portion of component
materials are obtained from sources outside the United States, the Registrant is
subject to the fluctuations in the international money market.
The backlog of unsold orders amounted to $2,853,000 compared to
$10,912,000 as of March 31, 1996. The backlog as of March 31, 1997 has ben
restated to anticipate the expected change in the subcontract order for Saudi
Arabia.Indications are that a major portion if not all of this order will change
from analog to digital compression which would reduce the number of transmitters
required to complete the project. While this reduction valued at approximately
$4.3 million adversely affects the short-term sales, the Registrant believesthat
the participation in this new technology will enhance its reputation over the
next several years and initiate the potential for additional volume.
The Company employed 67 persons plus 2 part-time employees as of
March 31, 1997 compared to 83 (plus 9 part-time) people at March 31, 1996 and a
total high of 95 employees in July 1996. A further decrease to approximately 60
full and part-time employees occurred in the first quarter of fiscal 1998.
ACCOUNTING DEVELOPMENTS
In February 1997, the FASB issued Statement of Financial Accounting
Standard (SFAS) No. 128, Earnings per Share (SFAS No. 128) and SFAS No. 129
Disclosure of Information about Capital Structure. SFAS No. 128 replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. It also requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all entities with complex capital
structures. SFAS No. 129 establishes standards for disclosing information about
an entity's capital structure. Management does not believe that SFAS No. 128 and
SFAS No. 129 will have a material effect on the financial statements of the
Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Any statements contained in this report which are not historical
facts are forward looking statements; and, therefore, many important factors
could cause actual results to differ materially from those in the forwardlooking
statements. Such factors include, but are not limited to, changes (legislative,
regulatory and otherwise) in the MMDS or LPTV industry, demand for the Company's
products (both domestically and internationally), the development of competitive
products, competitive pricing, the timing of foreign shipments (including, but
not limited to, the resumption and/or further modification of the subcontract
for Saudi Arabia mentioned above),market acceptance of new product introductions
(including, but not limited to, the Company's digital products), technological
changes, economic conditions, litigation and other factors, risks and
uncertainties identified in the Company's Securities and Exchange Commission
filings.
ITEM 7. FINANCIAL STATEMENTS
See pages 25 to 40 of this report for the financial statements
required by this Item.
<PAGE>
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There is no information relevant to the Registrant which must be
disclosed under this Item 8.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item 9 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days of
the close of the Registrant's fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days of
the close of the Registrant's fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item 11 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days of
the close of the Registrant's fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days of
the close of the Registrant's fiscal year.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following constitutes an Exhibit Index of the applicable
Exhibits to this report:
DESCRIPTION OF EXHIBIT EXHIBIT NUMBER PAGE NUMBER
----------------------- -------------- -----------
Articles of Incorporation
and Bylaws
Restated Certificate
of Incorporation 3 i 41
Bylaws 3 ii (1)
Material Contracts
1996 Stock Option Plan 10 49
1988 Stock Option Plan 10 (1)
Officers Incentive Compensation
Plan 10 60
Agreement (Change in Control
Agreements for certain Executive
Officers) 10 (2)
Non-Negotiable, Non-Transferable
Stock Warrant 10 (2)
Purchase Order Master Contract 10 (3)
Settlement and Release Agreement 10 62
Subsidiaries 21 (4)
Financial Data Schedule 27 (5)
(1) Incorporated by reference from the Form 10-KSB filed by the Registrant
with the U.S. Securities and Exchange Commission for fiscal year ended 1993.
(2) Incorporated by reference from the From 10-KSB filed with the
Securities and Exchange Commission for fiscal year ended 1996.
(3) Incorporated by reference from the Form 10-KSB/A (No. 2) filed with the
U.S. Securities and Exchange Commission for fiscal year ended 1996.
(4) Incorporated by reference from the Form 10-KSB filed with the U.S.
Securities and Exchange Commission for fiscal year ended 1995.
(5) This Exhibit was filed electronically, but is not included in the paper
copy of this report.
(b) Form 8-K filings: The Registrant filed two Form 8-Ks during the
last quarter of the period covered by this report. The Form 8-K which was filed
with the U.S. Securities and Exchange Commission on January 9, 1997, reported
the death of Leonard S. Teven, a member of the Registrant's Board of Directors.
The Form 8-K which was filed on January 15, 1997, reported the Registrant's
<PAGE>
initiation of a lawsuit,which was eventually settled and is also discussed in
Item 6 above, with respect to $2.1 million of indebtedness, plus accrued
interest, owing to the Registrant under a Note delivered to the Registrant in
connection with the Registrant's sale of a cellular license in 1991.
<PAGE>
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EMCEE BROADCAST PRODUCTS, INC.
/s/ JAMES L. DESTEFANO
---------------------------------
James L. DeStefano, President/CEO
Date: June 27, 1997
/s/ ALLAN J. HARDING
--------------------------------
Allan J. Harding, Vice President-
Finance
Date: June 27, 1997
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
/s/ JAMES L. DESTEFANO Date: June 27, 1997
- - ----------------------------
James L. DeStefano, Director
/s/ JOE B. HASSOUN Date: June 27, 1997
- - ----------------------------
Joe B. Hassoun, Director
/s/ MICHAEL J. LEIB Date: June 27, 1997
- - ----------------------------
Michael J. Leib, Director
/s/ RICHARD J. NARDONE Date: June 27, 1997
- - ----------------------------
Richard J. Nardone, Director
/s/ EVAGELIA ROGIOKOS Date: June 27, 1997
- - ----------------------------
Evagelia Rogiokos, Director
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
YEARS ENDED
MARCH 31, 1997 AND 1996
<PAGE>
Independent Auditors' Report
Board of Directors
EMCEE Broadcast Products, Inc.
White Haven, Pennsylvania
We have audited the consolidated balance sheets of EMCEE Broadcast Products,Inc.
and subsidiaries as of March 31, 1997 and 1996 and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards.Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EMCEE Broadcast
Products, Inc. and subsidiaries as of March 31, 1997 and 1996, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
Kingston, Pennsylvania
May 22, 1997
<PAGE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
<CAPTION>
ASSETS
1997 1996
-----------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 681,335 $ 1,537,759
U.S. Treasury Bills 1,679,164 1,569,026
Accounts receivable, net of allowance for
doubtful accounts (1997, $100,000; 1996,
$95,000) 933,535 1,818,988
Inventories 3,627,803 3,375,901
Prepaid expenses 379,358 247,933
Deferred income taxes 226,000
Note receivable 2,500,000 2,100,000
Less deferred portion (2,100,000)
------------------------------
Total current assets 9,801,195 8,775,607
------------------------------
Property, plant and equipment:
Land and land improvements 246,841 246,841
Building 629,211 621,215
Machinery 2,019,718 2,060,799
-----------------------------
2,895,770 2,928,855
Less accumulated depreciation 1,836,630 1,982,113
------------------------------
1,059,140 946,742
------------------------------
Other assets 108,173 214,900
------------------------------
Note receivable 500,000
Less deferred portion ( 500,000)
------------------------------
0
------------------------------
Total assets $10,968,508 $9,937,249
------------------------------
------------------------------
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
1997 1996
--------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 108,000 $200,000
Accounts payable 355,401 785,159
Accrued expenses:
Payroll and related expenses 206,612 285,000
Other 130,172 267,506
Deposits from customers 121,195 526,199
Deferred income taxes 554,000
---------------------------------------
Total current liabilities 1,475,380 2,063,864
---------------------------------------
Long-term debt, net of current portion 807,189 938,217
---------------------------------------
Shareholders' equity:
Common stock, $.01 - 2/3 par;
authorized 9,000,000 shares; issued
4,378,364 shares, 1997; 4,359,381 shares,
1996 72,987 72,653
Additional paid-in capital 3,562,523 3,517,778
Retained earnings 6,412,703 3,396,801
---------------------------------------
10,048,213 6,987,232
Less shares held in treasury, at cost
(1997, 212,763; 1996, 7,325) 1,362,274 52,064
----------------------------------------
8,685,939 6,935,168
---------------------------------------
Total liabilities and equity $10,968,508 $ 9,937,249
---------------------------------------
</TABLE> ---------------------------------------
<PAGE>
<TABLE> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
1997 1996
--------------------------
<S> <C> <C>
Net sales $12,522,811 $14,292,562
Costs of products sold 8,023,300 9,101,277
--------------------------
Gross profit 4,499,511 5,191,285
--------------------------
Operating expenses:
Selling 1,484,962 1,597,549
General and administrative 1,186,329 1,213,996
Research and development 444,669 460,884
--------------------------
3,115,960 3,272,429
--------------------------
Income from operations 1,383,551 1,918,856
--------------------------
Other income (expense), net:
Interest expense ( 92,909)( 140,723)
Interest income 109,976 105,279
Other 242,084 17,674
Settlement of note receivable 2,500,000
--------------------------
2,759,151 ( 17,770)
--------------------------
Income before income taxes 4,142,702 1,901,086
Income taxes 1,126,800 306,000
---------------------------
Net income $ 3,015,902$ 1,595,086
---------------------------
---------------------------
Earnings per common and common
equivalent share $.72 $.36
---------------------------
---------------------------
Shares used in computing earnings per
common share and common share
equivalent 4,215,300 4,403,500
---------------------------
---------------------------
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
Common stock Additional
Shares Amount paid-in capital
<S> <C> <C> <C>
Balance, March 31, 1995 4,300,155 $ 71,670 $3,472,200
Common stock issued under
stock option plan 59,226 983 45,578
Treasury stock purchased
Net income for the year
--------------------------------
Balance, March 31, 1996 4,359,381 72,653 3,517,778
Common stock issued under
stock option plan 18,983 334 44,745
Treasury stock purchased
Net income for the year
---------------------------------
Balance, March 31, 1997 4,378,364 $ 72,987 $3,562,523
---------------------------------
---------------------------------
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Retained Treasury stock
earnings Shares Amount Total
<C> <C> <C> <C>
$ 1,801,715 3,221 $( 21,061) $ 5,324,524
46,561
4,104 ( 31,003) ( 31,003)
1,595,086 1,595,086
- - ----------------------------------------------------
3,396,801 7,325 ( 52,064) 6,935,168
45,079
205,438 (1,310,210) (1,310,210)
3,015,902 3,015,902
- - --------------------------------------------------
$ 6,412,703 212,763 $(1,362,274) $ 8,685,939
- - --------------------------------------------------
- - --------------------------------------------------
</TABLE>
<PAGE>
<TABLE> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1997 AND 1996
<CAPTION> 1997 1996
--------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $3,015,902 $1,595,086
Adjustments:
Depreciation 242,625 198,632
Recognition of note receivable (2,500,000)
Disposal of fixed assets 30,647
(Increase) decrease in:
Accounts receivable 885,453 ( 151,493)
Inventory ( 251,902) 672,045
Prepaid expenses ( 131,425) ( 159,886)
Deferred income taxes 226,000 ( 38,000)
Other assets 106,727 300
Increase (decrease) in:
Accounts payable ( 429,758) 153,107
Accrued expenses ( 215,722) ( 904,093)
Deposits from customers ( 405,004) ( 38,004)
Deferred income taxes 554,000
-------------------------
Net cash provided by operating activities 1,096,896 1,358,341
------------------------
Cash flows from investing activities:
Purchases of:
Property, plant and equipment ( 355,023) ( 231,197)
U.S. Treasury Bills (2,310,138) (2,388,498)
Proceeds from maturities of U.S. Treasury
Bills 2,200,000 1,400,000
------------------------
Net cash used in investing activities ( 465,161) (1,219,695)
------------------------
Cash flows from financing activities:
Acquisition of treasury stock (1,310,210) ( 31,003)
Proceeds from issuance of:
Long-term debt 887,000 115,000
Common stock 45,079 46,561
Repayment of long-term debt (1,110,028)( 171,525)
------------------------
Net cash used in financing activities (1,488,159)( 40,967)
------------------------
Net increase (decrease) in cash and
equivalents ( 856,424) 97,679
Cash and equivalents, beginning 1,537,759 1,440,080
------------------------
Cash and equivalents, ending $ 681,335 $1,537,759
------------------------
------------------------
</TABLE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED MARCH 31, 1997 AND 1996
Supplemental disclosures of cash flow information:
Cash paid for interest expense amounted to $95,000 and $142,000 in
1997 and 1996, respectively. Cash paid for income taxes was $531,000 and
$1,473,000 in 1997 and 1996, respectively.
See notes to consolidated financial statements
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1997 AND 1996
1. Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of
EMCEE Broadcast Products, Inc. and its subsidiaries, all of which are
wholly-owned (together, the Company). All significant intercompany
accounts and transactions have been eliminated.
Revenue recognition, sale of license:
During 1992, a rural cellular license was sold for $3,100,000.
The initial payment was $845,000, net of closing costs of $155,000. The
balance, which bore interest at 7% payable at maturity, was due in
December 1996. The deferred payment and the related interest income was
not previously recognized because of its extended collection period and
because there was not a reasonable basis to evaluate the likelihood of
collection. On April 3, 1997 the Company collected $2,500,000 and
received a non-interest bearing, unsecured $500,000 note receivable as
settlement of the note.
The $500,000 note receivable is due and payable upon the occur-
rence of any one or more of certain specified events involving the debtor,
including but not limited to acquisition, merger, bankruptcy, and
insolvency. None of the specified events relate to the debtor's normal
operations. The note receivable is fully reserved because it has no
definite collection period and because there is not a reasonable basis to
evaluate the likelihood of collection.
Cash and U.S. Treasury Bills:
The Company considers cash equivalents to be all highly liquid
investments purchased with an original maturity of three months or less.
U.S. Treasury Bills with an original maturity of more than three months
are considered to be investments. All U.S. Treasury Bills are stated at
cost which approximates market and are considered as available for sale.
All U.S. Treasury Bills not included as cash equivalents had contracted
maturities of six months.
Inventories:
Inventories are stated at the lower of standard cost which approximates
current actual cost (on a first-in, first-out basis) or market (net
realizable value).
Property, plant and equipment and depreciation:
Property, plant and equipment are stated at cost. Depreciation
is provided on the straight-line method over the estimated useful lives of
the assets.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1997 AND 1996
1. Summary of significant accounting policies (continued):
Advertising:
These expenses are recorded when incurred. They amounted to
$75,000 and $150,000 for 1997 and 1996, respectively.
Fair value:
The fair value of long-term debt that is variable rate debt that
reprices regularly, the notes receivable of $2,500,000 which were
collected in April 1997 and U.S. Treasury Bills approximates the amounts
recorded in the financial statements. It was not practicable to estimate
the fair value of the $500,000 note receivable at March 31, 1997 and the
note receivable at March 31, 1996 because the Company was unable to
estimate the timing and form of the ultimate settlement of the amounts due
to it. The Company has fully provided for any potential loss resulting
from the non-payment of these receivables.
Earnings per share:
Earnings per common and common equivalent share are computed using
the weighted average number of shares outstanding adjusted for the
incremental shares attributed to outstanding options to purchase common
stock.
Use of estimates:
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported revenues and expenses.
Reclassification:
Certain reclassifications have been made to 1996 balance sheet to
conform to the 1997 presentation.
2. Industry, sales and accounts receivable concentration information:
The Company's primary activity is in one segment which consists
of the assembly and sale of equipment for the domestic and foreign
television broadcasting industry. Major customers are those that
individually account for more than 10% of the Company's consolidated
revenues. For the years ended March 31, 1997 and 1996, two customers with
total sales of $3,476,000 and two customers with total sales of
$4,864,000, respectively, qualified as major customers. Worldwide
export sales amounted to $7,056,000 and $8,174,000 for 1997 and 1996,
respectively. At March 31, 1997, there were no significant accounts
receivable concentrations. The Company performs ongoing credit
evaluations of its customers and typically requires deposits and a letter
of credit on foreign sales and deposits on domestic sales. Historically,
the Company's uncollectible accounts receivable have been immaterial.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997 AND 1996
3. Cash and equivalents:
At March 31, 1997, cash held at a financial institution is in
excess of the Federal Deposit Insurance coverage by $358,000. In addition,
$198,000 of U.S. Treasury Bills were recorded as cash equivalents.
4. Inventories:
1997 1996
-------------------------
Finished goods $ 399,000 $ 554,000
Work-inprocess 738,000 681,000
Raw materials 1,574,000 1,614,000
Manufactured components 916,803 526,901
-------------------------
$3,627,803 $3,375,901
-------------------------
-------------------------
5. Line of credit:
The Company has a line of credit agreement with a bank aggregating
$2,000,000 collateralized by inventories, accounts receivable and all property,
plant and equipment. The line of credit agreement requires monthly interest
payments at .50% below the bank's prime rate of interest or 1.75% above LIBOR
which was 5.4375% at March 31, 1997. There were no principal borrowings during
the years ended March 31, 1997 and 1996.
The loan agreement contains restrictive covenants when amounts are
outstanding which, among other things, require the Company to maintain a maximum
total liabilities to net worth ratio, a minimum current ratio and a debt
coverage ratio. The Company is allowed to pay dividends on its common stock if
it is in compliance with the financial covenants and ratios.
6.Long-term debt:
1997 1996
----------------------
Term loans, bank $ 735,000 $ 823,369
Equipment loans 152,000 231,693
Other 28,189 83,155
----------------------
915,189 1,138,217
Less current portion 108,000 200,000
-----------------------
$ 807,189 $ 938,217
-----------------------
-----------------------
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997 AND 1996
6. Long-term debt (continued):
The term loan, bank at March 31, 1997 matures in 2012 and requires
principal payments of $4,083, plus interest. Interest is calculated at
2.25% above LIBOR which was 5.4375% at March 31, 1997. The bank has the
option of adjusting the monthly payments required under this loan to
provide for changes in the interest rates. The term and equipment loans
are cross-collateralized with and have the same restrictive covenants as
the line of credit (see Note 5).
Principal payments on long-term debt, based on current interest
rates, are as follows:
1998 $ 108,000
1999 79,000
2000 79,000
2001 79,000
2002 79,000
Thereafter 491,189
-----------
$ 915,189
-----------
-----------
7. Defined contribution pension plan:
A defined contribution pension plan covers all full time employees
who meet age and service requirements. Contributions to the plan,
determined at the discretion of the Board of Directors, were $29,000 in
1997 and 1996.
8. Common stock:
Nonqualified stock option plans provide for the grant of options
to purchase up to 300,000 shares. Upon the termination or expiration of
any stock options granted, the shares covered by such terminated or
expired stock options will be available for further grant; 37,100 options
were available for grant at March 31, 1997. The Board of Directors, at
the date of grant of an option, determines the number of shares subject to
the grant and the terms of such option. All outstanding options granted
expire after 5 years and vest over two years.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997 AND 1996
8. Common stock (continued):
Changes in outstanding common stock options granted are summarized
below:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------
Number Average Number Average
of exercise of exercise
shares price shares price
-----------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning
of year 80,083 $ 2.82 145,920 $ 3.45
Options granted 115,200 6.16
-------- -------
195,283 145,920
Options exercised 18,983 2.37 59,226 .79
Options expired 13,050 1.31 6,611 .34
-------- -------
Balance at end of
year 163,250 $ 5.36 80,083 $ 2.82
-----------------------------------------
-----------------------------------------
Options exercisable
at year-end 48,050 $ 3.44 58,500 $ 2.59
Weighted-average fair
value of options
granted during the
year $ 3.09
</TABLE>
At March 31, 1997, the range of exercise prices and the weighted-
average remaining contractual life of outstanding options was $3.44 -
$6.16 and 3.4 years, respectively.
The Company in accordance with an election under generally accepted
accounting principles for stock options has recorded no compensation cost
for its stock options in the accompanying consolidated financial state
ments.
Had compensation cost been determined based on the fair value
at the grant dates for awards under the plans, the Company's net income
and earnings per share would have been reduced to the proforma amounts
disclosed below:
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997 AND 1996
1997
-----------
Net income:
As reported $3,015,902
Proforma 2,972,000
Earnings per common share:
As reported $ .72
Proforma .71
8. Common stock (continued):
Proforma net income does not reflect options granted before April 1, 1995.
Therefore, the full impact of calculating compensation cost for
stock options is not reflected in the proforma amounts presented above
because compensation cost is reflected over the options' vesting period
of two years and compensation cost for options granted in the year ended
March 31, 1995 are not considered.
The fair values were determined using the Black-Scholes option-
pricing model with the following weighted average assumptions:
Earnings dividend yield .0%
Risk free interest rate 5.84%
Expected life 5 Years
Volatility 48.88%
During 1997, warrants to purchase 200,000 shares of common stock at $9.76
a share were issued and remain outstanding at March 31, 1997.
9. Income taxes:
The following table sets forth the current and deferred amounts
of the provisions for income taxes for the years ended March 31, 1997 and
1996:
1997 1996
Current $346,800 $ 780,000
Deferred (38,000) 306,000
--------------------------------
$ 306,800 $1,126,800
--------------------------------
--------------------------------
The provisions for income taxes at the Company's effective rate
differed from the provision for income taxes at the statutory rate of 34%
for the years ended March 31, 1997 and 1996 as follows:
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Federal income tax at
the statutory rate $ 1,408,000 $646,000
Foreign sales corporation benefit (180,000) (173,000)
Federal income tax credit (50,000) (49,000)
Other, net (51,200) (118,000)
Provision for income taxes $ 1,126,800 $ 306,000
----------------------------
----------------------------
</TABLE>
9. Income taxes (continued):
The tax effects of temporary differences that give rise to
deferred income taxes at March 31, 1997 and 1996 are presented in the
table below:
<TABLE>
<CAPTION> 1997 1996
--------------------------
<S> <C> <C>
Deferred tax assets:
Inventory $ 101,000 $ 124,000
Other differences 59,000 102,000
---------------------------
Total gross deferred tax assets 160,000 226,000
Deferred tax liabilities,
Note receivable ( 714,000)
---------------------------
Net deferred tax asset (liability) $( 554,000) $ 226,000
---------------------------
---------------------------
</TABLE>
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
EMCEE BROADCAST PRODUCTS, INC.
EMCEE Broadcast Products, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is EMCEE Broadcast Products, Inc., and
the name under which the corporation was originally incorporated is Electronics,
Missiles & Communications, Inc.
The date of filing of its original Certificate of Incorporation with
the Secretary of State was May 23, 1960.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented, and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or changes
to read as herein set forth in full:
FIRST. The name of the corporation is EMCEE BROADCAST
PRODUCTS, INC.
SECOND. Its principal office in the State of Delaware is
located at No. 100 West Tenth Street, in the City of Delaware,
County of New Castle. The name and address of its resident agent is
The Corporation Trust Company, No. 100 West Tenth Street, Wilmington
99, Delaware.
THIRD. The nature of the business, or objects or purposes
to be transacted, promoted or carried on are:
To manufacture, produce, assemble, fabricate, import,
lease, purchase or otherwise acquire; to invest in, use, hold, own,
license the use of, install, handle, maintain, service or repair, to
sell, pledge, mortgage, exchange, export, import, distribute, lease,
assign, and otherwise dispose of, and generally trade in and deal
in, to carry on research, development, engineering, design,
technical studies, consulting, invention, and revision of,
electronic systems, equipment and components, and electrical, and
electromechanical apparatus and equipment of all kinds and
descriptions, electronics, telecommunications, communications and
similar equipment of all descriptions, including but not limited to
high frequency, very high frequency, ultra high frequency,
microwave, infra-red, relays and repeaters, electronic test
equipment, equipment and systems for relaying broadcasting,
transmitting and receiving signals, equipment and systems for
computing measurements and control of signals, radio, sonar, radar,
television and related and similar devices and equipment, cables,
motors, dynamos, generating plants, meters, supplies, parts,
equipment, apparatus, machinery, improvements, appliances, tools and
goods, wares, merchandise, commodities, articles of commerce and
<PAGE>
property of every kind and description, services of every kind and description
dealing with communications, reception and transmission of sound and light
waves,and all and any products, machinery, equipment and supplies used or useful
in connection with the foregoing.
To manufacture, purchase or otherwise acquire, invest
in, own, mortgage, pledge, sell, assign and transfer or otherwise
dispose of, trade, deal in and deal with goods, wares and
merchandise and personal property of every class and description.
To acquire, and pay for in cash, stock or bonds of this
corporation or otherwise, the good will, rights, assets and
property, and to undertake or assume the whole or any part of the
obligations or liabilities of any person, firm, association or
corporation.
To acquire, hold, use, sell, assign, lease, grant
licenses in respect of, mortgage or otherwise dispose of letters
patent of the United States or any foreign country, patent rights,
licenses and privileges, inventions, improvements and processes,
copyrights, trade-marks and trade names, relating to or useful in
connection with any business of this corporation.
To acquire by purchase, subscription or otherwise, and
to receive, hold, own, guarantee, sell, assign, exchange, transfer,
mortgage, pledge or otherwise dispose of or deal in and with any of
the shares of the capital stock, or any voting trust certificates in
respect of the shares of capital stock, scrip, warrants, rights,
bonds, debentures, notes, trust receipts, and other securities,
obligations, choses in action and evidences of indebtedness or
interest issued or created by any corporations, joint stock
companies, syndicates, associations, firms, trusts or persons,
public or private, or by the government of the United States of
America, or by any foreign government, or by any state, territory,
province, municipality or other political subdivision or by any
governmental agency, and as owner thereof to possess and exercise
all the rights, powers and privileges of ownership, including the
right to execute consents and vote thereon, and to do any and all
acts and things necessary or advisable for the preservation,
protection, improvement and enhancement in value thereof.
To enter into, make and perform contracts of every kind
and description with any person, firm, association, corporation,
municipality, county, state, body politic or government or colony or
dependency thereof.
To borrow or raise moneys for any of the purposes of the
corporation and, from time to time without limit as to amount, to
draw, make, accept, endorse, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures and other
<PAGE>
negotiable or non-negotiable instruments and evidences of indebtedness,
and to secure the payment of any thereof and of the interest thereon by
mortgage upon or pledge, conveyance or assignment in trust of the whole or
any part of the property of the corporation, whether at the time owned or
thereafter acquired, and to sell, pledge or otherwise dispose of such
bonds or other obligations of the corporation for its corporate purposes.
To loan to any person, firm or corporation any of its
surplus funds, either with or without security.
To purchase, hold, sell and transfer the shares of its
own capital stock; provided it shall not use its funds or property
for the purchase of its own shares of capital stock when such use
would cause any impairment of its capital except as otherwise
permitted by law, and provided further that shares of its own
capital stock belonging to it shall not be voted upon directly or
indirectly.
To have one or more offices, to carry on all or any of
its operations and business and without restriction or limit as to
amount to purchase or otherwise acquire, hold, own, mortgage, sell,
convey or otherwise dispose of, real and personal property of every
class and description in any of the states, districts, territories
or colonies of the United States, and in any and all foreign
countries, subject to the laws of such state, district, territory,
colony or country.
In general, to carry on any other business in connection
with the foregoing, and to have and exercise all the powers
conferred by the laws of Delaware upon corporations formed under the
General Corporation Law of the State of Delaware, and to do any or
all of the things hereinbefore set forth to the same extent as
natural persons might or could do.
The objects and purposes specified in the foregoing clauses
shall, except where otherwise expressed, be in nowise limited or
restricted by reference to, or inference from, the terms of any
other clause in this certificate of incorporation, but the objects
and purposes specified in each of the foregoing clauses of this
article shall be regarded as independent objects and purposes.
FOURTH. The total number of shares which the company shall
be authorized to issue is nine million (9,000,000) shares of the Par
Value of One and Two-Thirds Cents ($.01667) per share.
No stockholder of this corporation shall by reason of his
holding shares of any class have any preemptive or preferential
right to purchase or subscribe to any shares of any class of this
corporation, now or hereafter to be authorized, or any notes,
debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or
hereafter to be authorized, whether or not the issuance of any such
shares, or such notes, debentures, bonds or other securities, would
<PAGE>
adversely affect the dividend or voting rights of such stockholder, other
than such rights, if any, as the board of directors, in its discretion
from time to time may grant and at such price as the board of directors in
its discretion may fix; and the board of directors may issue shares of any
class of this corporation, or any notes, debentures, bonds, or other
securities convertible into or carrying options or warrants to purchase
shares of any class, without offering any such shares of any class, either
in whole or in part, to the existing stockholders of any class.
FIFTH. The minimum amount of capital with which the
corporation will commence business is One Thousand Dollars
($1,000.00).
SIXTH. The names and places of residence of the
incorporators are as follows:
NAMES RESIDENCES
R. F. Westover Wilmington, Delaware
L. A. Schoonmaker Wilmington, Delaware
S. E. Manuel Wilmington, Delaware
SEVENTH. The corporation is to have perpetual existence.
EIGHTH. The private property of the stockholders shall not
be subject to the payment of corporate debts to any extent whatever.
NINTH. In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly
authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was
created.
By resolution passed by a majority of the whole board, to
designate one or more committees, each committee to consist of two
or more of the directors of the corporation, which, to the extent
provided in the resolution or in the by-laws of the corporation,
shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have
such name or names as may be stated in the by-laws of the
corporation or as may be determined from time to time by resolution
adopted by the board of directors.
When and as authorized by the affirmative vote of the holders
of a majority of the stock issued and outstanding having voting
power given at a stockholders' meeting duly called for that purpose,
or when authorized by the written consent of the holders of a
majority of the voting stock issued and outstanding, to sell, lease
or exchange all of the property and assets of the corporation,
including its good will and its corporate franchises, upon such
<PAGE>
terms and conditions and for such consideration, which may be in whole or
in part shares of stock in, and/or other securities of, any other
corporation or corporations, as its board of directors shall deem
expedient and for the best interests of the corporation.
TENTH. Meetings of stockholders may be held outside the
State of Delaware, if the by-laws so provide. The books of the
corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in
the by-laws of the corporation. Elections of directors need not be
by ballot unless the by-laws of the corporation shall so provide.
ELEVENTH. The corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of
incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted
subject to this reservation.
TWELFTH. The personal liability of a director of this
corporation to the corporation or to its stockholders for monetary
damages for breach of fiduciary duty as a director is eliminated,
provided that such elimination shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under the provisions of Section
174 of the Delaware Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. Such
elimination shall eliminate the liability of the director for any
act or omission occurring at or after the date when this Article has
been filed with and approved by the Secretary of the State of
Delaware.
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with Section 245 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said EMCEE Broadcast Products, Inc. has caused this
Certificate to be signed by James L. DeStefano, its President/CEO, this 19th day
of November, 1996.
EMCEE BROADCAST PRODUCTS, INC.
BY: /s/ James L. DeStefano
-----------------------------
TITLE: President/CEO
EMCEE BROADCAST PRODUCTS, INC.
NONSTATUTORY STOCK OPTION PLAN
THIS NONSTATUTORY STOCK OPTION PLAN (the "PLAN"), approved by the
affirmative vote of a majority of the stockholders of EMCEE Broadcast Products,
Inc. (the "COMPANY"), a Delaware corporation, present in person or represented
by proxy, at the 1996 Annual Meeting of Stockholders on August 26, 1996 (the
"EFFECTIVE DATE"), in accordance with the applicable laws of the State of
Delaware.
ARTICLE I - DEFINITIONS
1.1 The following is a list which sets forth the meaning of certain terms
used in this Plan which are not elsewhere defined herein:
1.1.1 "Administering Body" shall mean the Board or the Committee.
1.1.2 "Board" shall mean the Board of Directors of the Company.
1.1.3 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.1.4 "Committee" shall mean the Stock Option Committee of the
Board or such other committee of the Board, duly established and constituted by
the Board from time to time by resolution.
1.1.5 "Company Stock" shall mean the common stock of the Company.
1.1.6 "Date of Grant" shall mean the date on which the
Administering Body, by resolution, grants an Option to an Optionee.
1.1.7 "Disinterested Person" shall have the meaning ascribed to it
in Rule 16b-3 under the 1934 Act.
1.1.8 "Fair Market Value" shall mean the average of the highest
and lowest prices per share of Company Stock on the NASDAQ National Market or
on such other market or exchange on which the Company Stock is then traded, as
reported in the Wall Street Journal; in the absence of such a report on the Date
of Grant in question, the first preceding day on which there was such a report
shall be used.
1.1.9 "1934 Act" shall mean the Securities Exchange Act of 1934.
1.1.10 "Option" shall mean an option to purchase Company Stock
pursuant to the provisions of this Plan.
1.1.11 "Optionee" shall mean any director (unless he is a member of
the Administering Body), officer or other key management employee of the Company
or any Subsidiary to whom an Option, which has not expired or been terminated,
has been granted under the provisions of this Plan.
1.1.12 "Stock Option Agreement" shall mean a written instrument
approved by the Administering Body from time to time, setting forth the terms
and conditions under which an Optionee has been granted an Option.
1.1.13 "Subsidiary" shall mean a subsidiary corporation of the
Company as defined in Section 424 of the Code.
1.1.14 "Termination Date" shall mean August 25, 2006, at 5:00 P.M.
ARTICLE II - PLAN FORMATION
2.1 This Plan shall be known as the "1996 EMCEE Broadcast Products Stock
Option Plan".
2.2 The purpose of this Plan is to advance the interests of the Company
and its shareholders by affording eligible directors, officers and key
management
<PAGE>
employees of the Company and its Subsidiaries the opportunity to become owners,
or to increase their ownership of, Company Stock, and to motivate and retain
such individuals, upon whose judgment, initiative, leadership and continued
efforts the success of the Company in large measure depends, as well as to
attract highly competent individuals to such positions.
2.3 The Options are not "incentive stock options" within the meaning of
Section 422 of the Code.
2.4 This Plan is intended to be a plan, the transactions of which, as to
directors and officers, shall be exempt from Section 16 (b) of the 1934 Act,
pursuant to Rule 16b-3 under the 1934 Act.
2.5 This Plan shall begin and take effect on the Effective Date and shall
end and terminate on and as of the Termination Date.
ARTICLE III - PLAN ADMINISTRATION
3.1 This Plan shall be administered by the Administering Body. If the
Administering Body is the Committee, it shall report all action taken by it to
the Board. All members of the Administering Body must be Disinterested Persons.
3.2 Subject to the provisions of this Plan, the Administering Body shall
have full and final authority, in its discretion, to take any and all actions
and to make any and all determinations deemed necessary or advisable for the
proper administration of this Plan, for which all such actions and
determinations shall be conclusively binding for all purposes and upon all
persons and entities, including, but not limited to:
3.2.1 determining and choosing Optionees;
3.2.2 determining the time or times at which Options shall be
granted;
3.2.3 determining the number of shares of Company Stock which
shall be subject to each Option;
3.2.4 construing and interpreting this Plan; and
3.2.5 determining the terms and conditions of Stock Option
Agreements, which need not be identical, including, but not limited to, terms
covering the payment of the "Option Price" (defined hereinafter).
3.3 In determining the eligibility of, and in choosing an Optionee, as
well as the number of shares of Company Stock covered by an Option granted to
each such Optionee, the Administering Body shall consider such individual's
position and responsibilities, the nature and value to the Company or its
Subsidiary of such individual's services, such individual's present and/or
potential contribution to the success of the Company or a Subsidiary and such
other performance and contribution factors applicable to such individual as the
Administering Body may deem relevant.
ARTICLE IV - COMPANY STOCK SUBJECT TO OPTIONS;
OPTION PRICE; ANTIDILUTION
4.1 Subject to Section 4.5 hereof, the aggregate number of shares of
Company Stock available for Options granted pursuant to this Plan shall not
exceed one hundred thousand (100,000).
4.2 In the event of a forfeiture or rejection of an Option, or in the
event any Stock Option Agreement or Option shall terminate or expire for any
reason or be surrendered without having been fully exercised, then, in any such
event, the shares of Company Stock subject thereto which were not purchased by
the Optionee shall again become available for Options to be granted subsequently
under this Plan.
4.3 The Company Stock to be issued pursuant to the exercise of any Option
shall be registered under applicable federal and state securities laws prior to
the date on which the Option may be exercised by the Optionee, and may come from
<PAGE>
authorized but unissued shares or treasury stock.
4.4 The price per share of Company Stock for which Options may be granted
hereunder (the "OPTION PRICE") shall be the Fair Market Value thereof on theDate
of Grant. If the Company Stock is at any time traded on more than one market or
exchange, the Administering Body shall exercise its discretion in determining
which such market or exchange shall be used in determining Fair Market Value.
4.5 Subject to the provisions of Article VI hereof, in order to prevent
the enlargement or dilution of rights, in the event that the outstanding shares
of Company Stock are hereafter changed into or exchanged for a different number
or kind of shares or other securities of the Company or of another corporation,
whether by reason of merger, consolidation, other reorganization,
recapitalization, reclassification, combination of shares, stock split, stock
dividend, subdivision, reverse split or otherwise, the Administering Body shall,
on the basis of a determination made by the Company's independent auditors,which
determination shall be binding on the Company, its Subsidiaries and all
Optionees, proportionately adjust the aggregate number and kind of shares
available hereunder for Options and the rights under outstanding Options granted
hereunder, both as to the number of shares and the Option Price.
ARTICLE V - GENERAL TERMS AND CONDITIONS OF OPTIONS
5.1 Each Option granted under this Plan shall be evidenced by a Stock
Option Agreement, which will incorporate by reference all of the provisions of
this Plan, and which must be duly executed by the Company and the Optionee. The
date of each Stock Option Agreement shall be the Date of Grant of the Option
therefor, irrespective of the date of execution thereof. The Administering Body
shall have the discretion to cause a forfeiture of the grant of any Option if
the Optionee has not executed and delivered the Stock Option Agreement by a date
certain specified by the Administering Body, which shall in no event be less
than seven (7) calendar days from the date the Stock Option Agreement is
delivered to the Optionee for execution.
5.2 The Expiration Date of each Option shall be fixed by the
Administering Body, but such expiration date shall not exceed ten (10) years
from the Date of Grant. Provided that the Date of Grant of an Option shall
precede the Termination Date, the expiration date thereof, subject to the
immediately preceding sentence in this Section 5.2, may be subsequent to the
Termination Date.
5.3 Notwithstanding any possible contrary interpretation of any provision
set forth in any Stock Option Agreement or this Plan, neither this Plan nor any
Stock Option Agreement shall entitle an Optionee to any of the rights of a
stockholder of the Company. No Optionee shall have any such rights unless and
until duly authorized certificates evidencing the shares of Company Stock
purchased are delivered to the Optionee.
5.4 An Option may be exercised all at one time or in part from time to
time, at the discretion of the Optionee, during the term thereof; provided,
however, that each Stock Option Agreement shall provide that no Optionee may
exercise an Option, in whole or in part, until at least two (2) years have
expired from the Date of Grant; and provided further that no partial exercise of
an Option may be for less than one hundred (100) shares or, if less, the number
of shares remaining available thereunder.
5.5 Subject to the expiration date thereof and the provisions of this
Plan, each Option shall be exercisable during the Optionee's lifetime only by
the Optionee. No Option shall be transferable or assignable by an Optionee other
than by will or the laws of descent and distribution or pursuant to a "qualified
<PAGE>
domestic relations order" as defined by the Code or Title I of the Employee
Retirement Income Security Act ("ERISA"), or the rules thereunder. Except as
expressly permitted herein, an Option shall terminate and become null and void
if it or the Stock Option Agreement therefor is transferred, assigned, pledged
or hypothecated in any way or becomes subject to any security interest, lien or
other encumbrance, or to levy, execution, attachment or similar process.
5.6 Upon termination of an Optionee's employment with the Company or its
Subsidiary, or the date on which he ceases to be a director, as the case may be,
the Optionee's rights and privileges with respect to an Option granted to him
pursuant to this Plan shall be limited in the manner set forth in his Stock
Option Agreement or, if not specified therein, to the shares of Company Stock
subject to an Option or Options which were exercisable by him on the date ofsuch
termination or cessation, with such Option rights and privileges to expire and
the Stock Option Agreement(s) therefor to terminate in thirty (30) calendar days
from such date.
5.7 If an Optionee shall die while all or any part of an Option granted
to him under this Plan remains outstanding, then, notwithstanding Section 5.5
hereof, such Optionee's personal representative shall have one hundred eight
(180) calendar days from the date of the Optionee's death to exercise such
Option, to the extent it is exercisable during such time, after which such
Option shall expire and the Stock Option Agreement therefor shall terminate.
ARTICLE VI - FUNDAMENTAL CHANGES
6.1 Notwithstanding any other provision contained in this Plan or in any
Stock Option Agreement, in the event the Company resolves to (1) consolidate or
merge with or into another corporation, (2) accept an offer to purchase thirty
(30%) percent or more of the then issued and outstanding Company Stock, (3) sell
all or substantially all of its assets, or (4) voluntarily or involuntarily
dissolve or liquidate, then, in any such event, the Administering Body may
terminate all Options then outstanding in whole or in part and the Stock Option
Agreements therefor after having given thirty (30) days advance written notice
to each Optionee, during which time each such Optionee shall have the right to
exercise, to the extent then exercisable, his Option or Options in accordance
with this Plan and his Stock Option Agreement(s).
ARTICLE VII - TERMINATION; AMENDMENT
7.1 The Board may at any time, upon recommendation of the Committee, if
the Committee is then the Administering Body, but otherwise in its sole
discretion, terminate and in any respect amend this Plan; provided, however,that
no such action without approval of the majority of the stockholders of the
Company may:
7.1.1 Materially increase the benefits accruing to Optionees under
this Plan;
7.1.2 Materially increase the number of shares of Company Stock
which may be issued under this Plan; or
7.1.3 Materially modify the requirements as to eligibility for
participation in this Plan;
Provided further, however, that no termination, except as provided in
Article VI hereof, or amendment of this Plan shall in any manner affect any
Option granted under this Plan which is then outstanding, without the consent of
the Optionee.
7.2 Notwithstanding Section 7.1 hereof, in no event shall this Plan be
amended more than once every six months, other than to comport with changes in
the Code or ERISA, or the rules thereunder, with respect to any provision
<PAGE>
hereof which may now or hereafter cover "formula awards" as described in Rule
16b-3 under the 1934 Act.
ARTICLE VIII - MISCELLANEOUS
8.1 Nothing in this Plan or in any Stock Option Agreement shall confer
upon any Optionee the right to continue in the Company's or any Subsidiary's
employ, or to continue to be engaged as a director thereof, as the case may be.
8.2 The adoption of this Plan shall not affect any other stock option,
incentive or other compensation plan of the Company or any Subsidiary, nor shall
this Plan preclude the Company or any Subsidiary from establishing any such plan
for its directors, officers or employees in the future.
8.3 This Plan shall be binding upon the Company and its successors and
assigns and, subject to the restrictions and limitations contained in Section5.5
- - -- 5.7 hereof, inclusive, each Optionee and his heirs, personal representatives
and assigns. The Company shall provide each Optionee with a copy of this Plan at
the time the Optionee's Stock Option Agreement is delivered to him for execu-
tion,and each such Optionee shall be deemed to have accepted and agreed to each
of the provisions of this Plan by virtue of his execution of such Stock Option
Agreement.
8.4 Any conflicts or inconsistencies between this Plan and any Stock
Option Agreement shall be resolved in favor of this Plan.
8.5 Whenever used herein nouns in the singular shall include the plural,
and the masculine pronoun shall include the feminine gender.
8.6 The Article titles set forth in this Plan are inserted for
convenience and reference only and shall not be considered to constitute a part
of this Plan or limit, expand or change any of the provisions of this Plan.
OFFICERS' INCENTIVE COMPENSATION PLAN
1. Purpose of Plan
To provide additional incentive to the participants to increase their
contribution to the achievement of company objectives by providing
significant and competitive incentive compensation that relates directly
to the performance of the company and the business results achieved,
thereby promoting and protecting the interests of the shareholders and
enhancing the Company's ability to attract, retain, and motivate and
compensate key management employees. The plan is authorized by the Board
of Directors and, once established, can be changed only by their approval.
2. Eligibility for Participation
Participation in the Plan for any year shall be the officers, excluding
the President
3. Establishment of Goal
The goal will be the income from operations established in the budget
prepared by the management, and approved by the Board of Directors for the
ensuing fiscal year. The amount for the base will be the Income from
Operations as promulgated by this budget including all incentives based on
profitability.
4. Incentive Award Calculation
The award calculation will be equal to the Income from Operations for the
fiscal year as certified by the auditing firm and including any and all
adjustments necessary to receive such certification compared to the budget
established in section 3 above and will include all incentive awards
including incentive awards for officers and key employees. To establish
the basis for calculating the incentive award, Income from Operations will
include incentive award amounts and officers bonus amounts equal to the
budgeted dollar amounts for the fiscal period in which the award is
calculated.
5. Individual Award Calculation
The award will be based as a percent of the base salary received by the
qualified individual for the period April 1 through March 31 in which the
award is calculated.
INCENTIVE COMPENSATION PLAN - Continued
A) The salary class level as shown on the Salary Administration
Bulletin (PS1-2) as of December 31 of the fiscal year (Officers are
Level 11 ) and;
<PAGE>
B) Years of service at December 31 as follows:
6 months but less than 5 years = 0
5 years but less than 10 years = 1
10 years but less than 15 years = 2
15 years but less than 20 years = 3
20 years and up = 4
Example: Subject employee is a level 8 with 17 years service:
Level 8 = 8
17 Years = 3
TOTAL 11%
-----
6. Proration of Incentive Award
The minimum amount will be awarded if actual Income from Operations, as
stated in section 4 is at least 75% of such stated goal. The award will be
the ratio of the achieved amount to the predetermined goal with a maximum
of 150% achieved and rounded to the nearest whole percent.
7. Examples
A) Income from Operations is budgeted for $3,000,000. The actual Income
from Operations totals $2,850,000 with incentives included as
budgeted.
1. The incentive goal is $3,000,000.
2. The amount to be awarded an individual would be 95%
($2,850,000 + $3,000,000).
B) With the same budget, the company's actual Income from Operations
is $3,250,000 with incentives included as budgeted.
1. The amount to be awarded is $3,250,000 + $3,000,000 or
108%.
C) The individual shown in the example in section 5 would receive 10%
(11% x .95) of his base salary in example A above: 12% (11% x 1.08)
in example B above.
APPROVED 6/20/97
JLD
CERTAIN OF THE INDEBTEDNESS DESCRIBED HEREIN AND CREATED HEREBY, AS
WITH RESPECT TO AMERICELL ONLY, IS SUBJECT TO A CERTAIN
SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE PARTIES
HERETO AND NTFC CAPITAL CORPORATION
SETTLEMENT AND RELEASE AGREEMENT
--------------------------------
THIS SETTLEMENT AND RELEASE AGREEMENT ("AGREEMENT") is made and entered
into this 27th day of March, 1997, by and among EMCEE Broadcast Products, Inc.
("EMCEE"), a Delaware corporation, AND EMCEE Cellular Inc. ("CELLULAR"), a
Delaware corporation, AND AmeriCell PA -- 3 Limited Partnership ("AMERICELL"),
a Pennsylvania limited partnership, AND Rigas Communications, Inc. (the "GENERAL
PARTNER"), a Florida corporation, AND Constantine J. Rigas ("RIGAS"), an adult
individual.
BACKGROUND:
A. AmeriCell and EMCEE entered into a Purchase and Sale Agreement dated
the 21st day of August, 1991 (the "PURCHASE AND SALE AGREEMENT"), with respect
to, among other things, the sale by EMCEE to AmeriCell of a certain construction
permit issued by the Federal Communications Commission for a nonwireline
Domestic Public Cellular Radiotelephone System more specifically described
therein. Pursuant to the Purchase and Sale Agreement, AmeriCell executed and
delivered to EMCEE a certain Promissory Note dated December 16, 1991, in the
principal sum of Two Million One Hundred Thousand ($2,100,000.00) Dollars (the
"NOTE"), which Note was guaranteed by Rigas pursuant to a certain Personal
Guaranty dated December 16, 1991 (the "GUARANTY").
B. As a result of AmeriCell's and Rigas's failure and refusal to pay the
sums due and owing under the Note and the Guaranty, respectively, EMCEE filed a
certain lawsuit in the Court of Common Pleas of Luzerne County, Pennsylvania, at
No. 274-C of 1997, against AmeriCell, the General Partner, which is the sole
general partner of AmeriCell, and Rigas entitled, "EMCEE Broadcast Products,Inc.
vs. AmeriCell PA -- 3 Limited Partnership, Rigas Communications, Inc. and
Constantine J. Rigas" (the "LAWSUIT").
C. In order to avoid the time, expense and inherent uncertainties of
litigation, the parties desire to resolve their disputes and differences by and
through this Agreement.
D. Cellular is a part of this Agreement in that EMCEE has assigned to
it the right to receive certain sums identified herein, contingent upon this
Agreement being fully executed and performed by the parties.
NOW, THEREFORE, the parties hereto, each intending to be legally bound
hereby, covenant, agree and represent as follows:
1. Subject to the full and complete performance of each and every term
and condition of this Agreement, and in full settlement of all sums due and
owing under the Note and all liabilities under or with respect to the Lawsuit,
AmeriCell, the General Partner and Rigas hereby jointly and severally covenant
and agree to pay to Cellular, as assignee of EMCEE, the sum of Three Million
($3,000,000.00) Dollars in accordance with the provisions of Section 2 hereof.
In addition, AmeriCell, the General Partner and Rigas jointly and severally
<PAGE>
covenant and agree to pay to EMCEE the sum of Ten Thousand Nine Hundred Fifty-
eight Dollars and Forty-six ($10,958.46) Cents, representing all of EMCEE's
attorney's fees incurred since December 16, 1996 in connection with the
attempted collection of the Note and Guaranty and the prosecution of the
Lawsuit. Said attorney's fees shall also be paid in accordance with the
provisions of Section 2 hereof.
2. All of EMCEE's attorney's fees described in Section 1 hereof, as well
as Two Million Five Hundred Thousand ($2,500,000.00) Dollars of the Three
Million ($3,000,000.00) Dollars owing to Cellular pursuant to Section 1 hereof,
must be paid to and received by EMCEE and Cellular, respectively, on April 2,
1997, via wire transfer (at the payor parties' expense) in accordance with the
following wiring instructions: transfer to Wilmington Trust Company,
Wilmington, DE, ABA 031100092. Credit EMCEE Cellular Inc. Account Number
2524-7426.
The remaining Five Hundred Thousand ($500,000.00) Dollars to be paid
to Cellular pursuant to Section 1 hereof shall become immediately due and
payable upon the occurrence of any one or more of the following events: (a) the
sale or other transfer, whether or not voluntary, not in the ordinary course of
business of all or substantially all of AmeriCell's assets or any sale or other
transfer of the nonwireline Domestic Public Cellular Radiotelephone System
described in the Purchase and Sale Agreement, whether or not in the ordinary
course ofbusiness; (b) the merger, consolidation, division or dissolution
(judicial or nonjudicial) of AmeriCell; (c) the filing by or against AmeriCell
of a Petition in Bankruptcy which is not dismissed within thirty (30) days of
the date of filing; (d) the making of an assignment for the benefit of
AmeriCell's creditors;(e) AmeriCell's insolvency or an admission by AmeriCell of
the inability to pay its debts when due; (f) if at any time the General Partner
shall for any reason no longer be AmeriCell's general partner; or (g) if
AmeriCell shall ever be in default under the "Loan and Security Agreement" (as
defined in the Subordination Agreement referenced in the legend above) and such
default is continuing after the expiration of any applicable cure periods.
AmeriCell, the General Partner and Rigas shall notify EMCEE and Cellular
immediately upon the occurrence of any one or more of the foregoing events.
3. It is understood and agreed that all sums payable to EMCEE or
Cellular hereunder shall not be subject to deduction by reason of set off,
defense, counterclaim, recoupment or other defalcation. It is further understood
and agreed that no interest shall accrue on any sum payable to EMCEE or Cellular
hereunder; provided, however, that if the remaining Five Hundred Thousand
($500,000.00) Dollar balance owing to Cellular pursuant to the second paragraph
of Section 2 hereof is not paid within thirty (30) days from the date it becomes
due and owing, interest shall accrue and be payable on such amount immediately
following such 30-day period and until fully paid at the lower of eighteen (18%)
percent per annum or the highest rate of interest per annum permitted to be
charged under applicable law.
4. Upon execution of this Agreement, EMCEE shall authorize its legal
counsel, Robert S. Sensky, Esquire, to prepare and execute a Praecipe for
Discontinuance of the Lawsuit with prejudice, in form and content as shown and
set forth on Exhibit "A" attached hereto and made a part hereof(the "PRAECIPE").
Upon Emcee's and Cellular's receipt of the sums described in the first paragraph
of Section 2 hereof, EMCEE shall authorize and direct its legal counsel to
<PAGE>
deliver the Praecipe to AmeriCell's legal counsel, Susan Kercher, Esquire, for
filing in the Office of the Prothonotary of Luzerne County, Pennsylvania, at
AmeriCell's expense.
5. Notwithstanding any possible contrary interpretation of any provision
contained herein, in the event all of the sums described in the first paragraph
of Section 2 hereof have not been received by EMCEE and Cellular in strict
accordance with the provisions of this Agreement by April 2, 1997,this Agreement
shall automatically become null and void and of no force or effect; whereupon,
EMCEE may direct its legal counsel to destroy the Praecipe, and EMCEE shall be
free to continue to proceed with the Lawsuit as if this Agreement never existed.
6. In consideration of EMCEE's and Cellular's covenants and agreements
set forth herein, and subject to EMCEE's legal counsel's delivery of the
Praecipe in accordance with the provisions of this Agreement, AmeriCell, the
General Partner and Rigas hereby release EMCEE and Cellular, and all of their
affiliated corporate entities, and their respective directors, officers,
employees, agents, successors and assigns, from all actions, causes of action,
suits, proceedings, rights, remedies, debts, claims, demands, obligations and
liabilities whatsoever (collectively, "CLAIMS"), at law or in equity, known or
unknown, liquidated or unliquidated, direct or contingent, which they (or any
one or more of them) ever had, now have or may hereafter have against all orany
one or more of such released parties, by reason of any matter, cause or thing
whatsoever, including,but not limited to, the Purchase and Sale Agreement,Note,
Guaranty and/or the Lawsuit, occurring at any time from the beginning of time
through and including
the date of this Agreement.
7. In consideration of AmeriCell's, the General Partner's and Rigas's
covenants and agreements set forth herein, except for the joint and several
obligations and liabilities of AmeriCell, the General Partner and Rigas pursuant
to Sections 1 and 2 hereof, EMCEE and Cellular hereby release AmeriCell, the
General Partner and Rigas, and all of their affiliated corporate entities, and
their partners, directors, officers, employees, agents, successors and assigns,
from all Claims, at law or in equity, known or unknown, liquidated or
unliquidated, direct or contingent, which they (or any one of them) ever had,now
have or may hereafter have against all or any one or more of such released
parties, by reason of any matter, cause or thing whatsoever, including, but not
limited to, the Purchase and Sale Agreement, Note, Guaranty and/or Lawsuit,
occurring at any time from the beginning of time through and including the date
of this Agreement.
8. Except with respect to the aforementioned contingent assignment from
EMCEE to Cellular, each party hereto represents to the other parties hereto that
it/he has not sold or assigned any of the Claims which have been released
pursuant to Sections 6 and 7 hereof. It is also understood and agreed that ifany
party hereto shall ever bring an action or proceeding against any other party
hereto in violation of Section 6 or Section 7 of this Agreement, such otherparty
shall be entitled to recover from the violating party all of its/his reasonable
attorney's fees incurred as a result thereof.
9. AmeriCell, the General Partner and Rigas agree that while all or any
part of the Five Hundred Thousand ($500,000.00) Dollars described in the second
paragraph of Section 2 hereof remains outstanding, they shall provide EMCEE and
Cellular with current annual financial statements of AmeriCell (prepared by a
<PAGE>
reputable independent certified public accounting firm) within one hundred fifty
(150) days from the end of each of AmeriCell's fiscal years, and in form as
required by AmeriCell's lender, NTFC Capital Corporation, but in all events at
least on a review basis. Failure to provide such financial statements withinsuch
time shall cause the aforementioned Five Hundred Thousand ($500,000.00) Dollar
sum to become immediately due and payable by AmeriCell, the General Partner and
Rigas (jointly and severally) to Cellular, notwithstanding any other provision
contained herein.
10. All disputes arising under or related in any way to this Agreement
shall be settled by arbitration in Wilkes-Barre, Pennsylvania, pursuant to the
Commercial Arbitration Rules of the American Arbitration Association, in which
there shall be one arbitrator whose decision shall be final and binding on the
parties hereto, and the judgment upon any award rendered may be entered in the
court of competent jurisdiction. The prevailing party in any such arbitration
shall also be entitled to an award of all of its reasonable attorney's fees
actually incurred as a result thereof, but the cost of the arbitration
proceeding shall be borne equally by the parties. If for any reason the
foregoing arbitration provisions are declared or determined to be illegal,
invalid or otherwise inapplicable with respect to any dispute arising hereunder
or related hereto, the parties hereto hereby agree that such dispute shall be
litigated and resolved only in the Court of Common Pleas of Luzerne County,
Pennsylvania, and the parties hereto irrevocably consent to the exclusive
jurisdiction and venue of said court for such purposes. The prevailing party in
any such litigation shall be entitled to recover all of its reasonable
attorney's fees incurred as a result thereof.
11. It is understood and agreed that this Agreement and any acts
undertaken hereby shall not be construed as an admission of liability, fault or
wrongdoing under any law, regulation or ordinance on the part of any party
hereto.
12. This Agreement shall inure to the benefit of and be binding on the
parties hereto and their respective successors and assigns.
13. Should any provision of this Agreement be declared or determined to
be illegal or invalid, the legality and validity of the remaining provisions
shall not be affected thereby, and said illegal or invalid provision shall be
deemed not to be a part of this Agreement.
14. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law
rules or principles.
15. Section 22 of the Subordination Agreement described in the legend
above is incorporated herein by reference and made a part hereof as if fully set
forth at length herein.
16. This Agreement may be executed in as many counterparts as the parties
deem necessary or convenient, and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
17. Except for the provisions of Sections 6 and 7 hereof, no third party
beneficiary rights are intended or created hereby.
18. No provision of this Agreement is to be interpreted for or against
any party because that party's legal counsel drafted such provision.
<PAGE>
19. This Agreement constitutes the entire, complete and final agreement
of the parties hereto with respect to the subject matter hereof, supersedes any
and all prior agreements, understandings or discussions (verbal or in writing),
and may be amended, modified or supplemented subsequent to the date hereof only
by a written instrument signed by the party or parties to be bound thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
ATTEST: EMCEE BROADCAST PRODUCTS,INC.
/s/ Sharon L. Barry By: /s/ James L. DeStefano
- - ------------------------------- -----------------------------
Asst. Corporate Secretary Title: President/CEO
(SEAL)
ATTEST: EMCEE CELLULAR INC.
/s/ Robert S. Sensky By: /s/ John Saul
- - ------------------------------- ------------------------------
Corporate Secretary Title: President
(SEAL)
WITNESS: AMERICELL PA -- 3 LIMITED
PARTNERSHIP
By: Rigas Communications, Inc., General
Partner
/s/ John W. Steer, IV By: /s/ John Rigas
- - ------------------------------- ------------------------------
Title: Vice President
ATTEST: RIGAS COMMUNICATIONS, INC.
/s/ Diane Rein By: /s/ John Rigas
- - -------------------------- -------------------------------
Corporate Secretary Title: Vice President
(SEAL)
WITNESS: CONSTANTINE J. RIGAS
/s/ Rheba Riga /s/ Constantine J. Rigas
- - --------------------------- ------------------------------
Signature
<PAGE>
<PAGE>
EMCEE BROADCAST PRODUCTS, IN THE COURT OF COMMON PLEAS
INC., OF LUZERNE COUNTY
Plaintiff PENNSYLVANIA
vs.
AMERICELL PA -- 3 LIMITED CIVIL ACTION -- LAW
PARTNERSHIP, RIGAS
COMMUNICATIONS, INC. and
CONSTANTINE J. RIGAS,
Defendants NO. 274-C OF
1997
PRAECIPE FOR DISCONTINUANCE
TO THE PROTHONOTARY OF LUZERNE COUNTY:
Please mark the above-captioned matter as settled, discontinued, and
ended with prejudice.
LAPUTKA, BAYLESS, ECKER & COHN, P.C.
Attorneys for Plaintiff, EMCEE Broadcast
Products, Inc.
BY:_______________________________________
Robert S. Sensky, Esquire
Atty. I.D.#47287
2 East Broad Street, 6th Floor
Hazleton, PA 18201
(717) 455-4731
Date:
DISCONTINUANCE
AND NOW, this ______ day of _________________, 1997, upon Praecipe
of counsel for the Plaintiff, the above-captioned matter is hereby settled,
discontinued, and ended with prejudice.
PROTHONOTARY:
Date:__________________________ BY:_______________________________________
EXHIBIT "A"
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000032312
<NAME> EMCEE BROADCAST PRODUCTS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 681,335
<SECURITIES> 1,679,164
<RECEIVABLES> 1,033,535
<ALLOWANCES> 100,000
<INVENTORY> 3,627,803
<CURRENT-ASSETS> 9,801,195
<PP&E> 2,895,770
<DEPRECIATION> 1,836,630
<TOTAL-ASSETS> 10,968,508
<CURRENT-LIABILITIES> 1,475,380
<BONDS> 0
<COMMON> 72,987
0
0
<OTHER-SE> 8,612,952
<TOTAL-LIABILITY-AND-EQUITY> 10,968,508
<SALES> 12,522,811
<TOTAL-REVENUES> 12,522,811
<CGS> 8,023,300
<TOTAL-COSTS> 11,139,260
<OTHER-EXPENSES> (2,642,084)
<LOSS-PROVISION> 35,382
<INTEREST-EXPENSE> 109,976
<INCOME-PRETAX> 4,142,702
<INCOME-TAX> 1,126,800
<INCOME-CONTINUING> 3,015,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,015,902
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
