UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996
Commission File Number 0-10436
L. B. Foster Company
(Exact name of registrant as specified in its charter)
Delaware 25-1324733
(State of Incorporation) (I.R.S. Employer Identification No.)
415 Holiday Drive, Pittsburgh, Pennsylvania 15220
(Address of principal executive offices) (Zip Code)
(412) 928-3417
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest
practicable date.
Class Outstanding at October 28, 1996
Class A Common Stock, Par Value $.01 9,972,738 Shares
<PAGE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
INDEX
PART I. Financial Information Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,093 $1,325
Accounts and notes receivable (Note 3):
Trade 51,747 48,166
Other 323 111
52,070 48,277
Inventories (Note 4) 42,398 40,304
Current deferred tax assets 1,005 1,005
Other current assets 515 831
Property held for resale 2,970 985
Total current assets 100,051 92,727
Property, Plant & Equipment-At Cost 43,952 43,561
Less Accumulated Depreciation (22,921) (20,956)
21,031 22,605
Property Held for Resale 1,227 4,545
Deferred Tax Assets 96 2,018
Other Assets 3,269 2,528
TOTAL ASSETS $125,674 $124,423
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $1,302 1,266
Short-term borrowings (Note 5) 7,995 9,750
Accounts payable 19,273 18,065
Accrued payroll and employee benefits
payable 3,158 2,682
Other current liabilities 1,648 3,105
Total current liabilities 33,376 34,868
Long-Term Debt 24,180 25,034
Other Long-Term Liabilities 1,932 1,348
Stockholders' Equity:
Class A Common stock 102 102
Paid-in capital 35,268 35,148
Retained earnings 31,373 28,480
Treasury stock (557) (557)
Total stockholders' equity 66,186 63,173
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $125,674 $124,423
</TABLE>
See notes to Condensed Consolidated Financial Statements.
- -Page 2-
<PAGE>
<TABLE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $65,525 $75,662 $178,586 $203,682
Costs and Expenses:
Cost of Goods Sold 56,914 67,379 155,582 181,227
Selling and Administrative
Expenses 5,957 5,790 16,970 16,752
Interest Expense 606 807 1,781 2,143
Other (Income) Expense (226) (339) (562) (591)
63,251 73,637 173,771 199,531
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Method 2,274 2,025 4,815 4,151
Income Taxes 856 1,922
Income Before Cumulative Effect
of Change in Accounting Method 1,418 2,025 2,893 4,151
Cumulative Effect of Change in
Accounting Method (Note 2) (219)
Net Income $1,418 $2,025 $2,893 $3,932
Earnings Per Common Share Before
Cumulative Effect of Change in
Accounting Method $ 0.14 $ 0.21 $ 0.29 $ 0.42
Earnings Per Common Share From
Cumulative Effect of Change in
Accounting Method (0.02)
Earnings Per Common Share (Note 6) $ 0.14 $ 0.21 $ 0.29 $ 0.40
Average Number of Common Shares
Outstanding 9,959 9,930 9,946 9,925
Cash Dividend per Common Share $ - $ - $ - $ -
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
- -Page 3-
<PAGE>
<TABLE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Nine Months
Ended September 30,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $2,893 $3,932
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Deferred income taxes 1,922
Depreciation and amortization 2,277 2,132
Gain on sale of property, plant and equipment (512) (480)
Cumulative effect of change in accounting method 219
Change in Operating Assets and Liabilities:
Accounts receivable (3,793) (8,161)
Inventories (2,094) 833
Property held for resale 1,333
Other current asset 316 9
Other non-current assets (852) (163)
Accounts payable-trade 1,208 2,592
Accrued payroll and employee benefits 476 (80)
Other current liabilities (1,457) (783)
Other liabilities 584 152
Net Cash Provided by Operating Activities 2,301 202
Cash Flows from Investing Activities:
Proceeds from sale of property, plant
and equipment 1,986 3,609
Capital expenditures on property, plant
and equipment (1,929) (3,414)
Net Cash Provided by Investing Activities 57 195
Cash Flows from Financing Activities:
(Repayments) proceeds from issuance of
revolving credit agreement borrowings (1,755) 810
Exercise of stock options 120 30
Repayments of long-term debt (955) (672)
Net Cash (Used) Provided by Financing Activities (2,590) 168
Net Increase (Decrease) in Cash and Cash
Equivalents (232) 565
Cash and Cash Equivalents at Beginning of
Period 1,325 1,180
Cash and Cash Equivalents at End of Period $1,093 $1,745
Supplemental Disclosures of Cash Flow Information:
Interest Paid $1,775 $2,082
Income Taxes Paid $343 $171
</TABLE>
During 1996 and 1995, the Company financed the purchase of
certain capital expenditures totaling $137,000 and $3,768,000,
respectively, through the issuance of capital leases.
See Notes to Condensed Consolidated Financial Statements.
- -Page 4-
<PAGE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all estimates and adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included, however, actual results could
differ from those estimates. Operating results for the nine
months ended September 30, 1996 are not necessarily indicative
of the results that may be expected for the year ended December
31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December
31, 1995.
2. ACCOUNTING PRINCIPLES
The Company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," in its financial statements for the year ended
December 31, 1995. The cumulative effect as of January 1, 1995,
of adopting Statement 121 decreased net income by $219,000, or
$0.02 per share.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement is effective for
fiscal years beginning after December 15, 1995. The Company
will continue to record stock-based compensation under the
provisions of APB 25, and will provide the disclosures and pro
forma results mandated by SFAS 123, for year end reporting.
3. ACCOUNTS RECEIVABLE
Credit is extended on an evaluation of the customer's financial
condition and, generally, collateral is not required. Credit
terms are consistent with industry standards and practices.
Trade accounts receivable at both September 30, 1996 and
December 31, 1995 have been reduced by an allowance for doubtful
accounts of $1,800,000. Bad debt expense was $35,000 and
$147,000 for the nine month periods ended September 30, 1996 and
1995, respectively.
- -Page 5-
<PAGE>
4. INVENTORIES
Inventories of the Company at September 30, 1996 and December
31, 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION> September 30, December 31,
1996 1995
<S> <C> <C>
Finished goods $ 29,076 $ 33,570
Work-in-process 12,931 6,687
Raw materials 3,453 2,659
Total inventories at current
costs: 45,460 42,916
(Less):
Current costs over LIFO
stated values (2,462) (2,012)
Reserve for decline in
market value of inventories (600) (600)
$ 42,398 $ 40,304
</TABLE>
Inventories of the Company are generally valued at the lower of
last-in, first-out (LIFO) cost or market. Other inventories of
the Company are valued at average cost or market, whichever is
lower. An actual valuation of inventory under the LIFO method
can be made only at the end of each year based on the inventory
levels and costs at that time. Accordingly, interim LIFO
calculations must necessarily be based on management's estimates
of expected year-end levels and costs.
5. SHORT-TERM BORROWINGS
During 1995, the Company entered into an Amended and Restated
Loan Agreement with its banks. The agreement increased the
borrowing commitment to $45 million from $40 million, reduced
interest rates and extended the term of the agreement to July 1,
1999. Borrowings under the agreement are secured by accounts
receivable and inventory.
The agreement includes financial covenants requiring a minimum
net worth, and minimum levels for the fixed charge coverage
ratio, the leverage ratio and the current ratio. The agreement
also restricts dividends, investments, capital expenditures,
indebtedness and sales of certain assets.
6. EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by
the average number of Class A common shares and common stock
equivalents outstanding during the quarterly periods ending
September 30, 1996 and 1995 of approximately 9,959,000 and
9,930,000, respectively.
- -Page 6-
<PAGE>
Common stock equivalents are the net additional number of shares
which would be issuable upon the exercise of the outstanding
common stock warrants and common stock options, assuming that
the Company used the proceeds to purchase additional shares at
market value. Common stock equivalents had no material effect on
the computation of earnings per share for the periods ending
September 30, 1996 and 1995.
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to laws and regulations relating to the
protection of the environment and the Company's efforts to
comply with increasingly stringent environmental regulations may
have an adverse effect on the Company's future earnings. In the
opinion of management, compliance with the present environmental
protection laws will not have a material adverse effect on the
financial position, competitive position, or capital
expenditures of the Company.
The Company is subject to legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to
these actions will not materially affect the financial position
of the Company.
At September 30, 1996, the Company had outstanding letters of
credit of approximately $1,122,000.
- -Page 7-
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Rail Products $28,968 $30,927 $ 77,596 $ 82,320
Construction Products 18,921 24,877 58,602 69,574
Tubular Products 17,636 19,858 42,388 51,788
Total Net Sales 65,525 75,662 178,586 203,682
Gross Profit:
Rail Products 4,028 3,956 11,091 10,330
Construction Products 2,569 2,719 7,940 7,557
Tubular Products 2,014 1,608 3,973 4,568
Total Gross Profit 8,611 8,283 23,004 22,455
Expenses:
Selling and administrative
expenses 5,957 5,790 16,970 16,752
Interest expense 606 807 1,781 2,143
Other (income) expense (226) (339) (562) (591)
Total Expenses 6,337 6,258 18,189 18,304
Income Before Income Taxes 2,274 2,025 4,815 4,151
Income Tax 856 1,922
Income Before Cumulative Effect
of Change in Accounting Method 1,418 2,025 2,893 4,151
Cumulative Effect of Change
in Accounting Method (219)
Net Income $1,418 $2,025 $2,893 $3,932
</TABLE>
Third Quarter 1996 Results of Operations
The net income for the 1996 third quarter was $1.4 million or
$0.14 per share on net sales of $65.5 million. This compares to
a 1995 third quarter net income of $2.0 million or $0.21 per
share on net sales of $75.7 million.
Rail products' net sales in the 1996 third quarter of $29.0
million decreased 6% from the comparable period last year which
benefited from the shipment of a large order to the Port of Los
Angeles. Construction products' third quarter net sales
decreased 24% primarily due to the continued reduced availability
of piling products which was partially offset by a
significant increase in the sales of fabricated highway
products. Tubular products' net sales in the quarter were $17.6
million or a decrease of 11%. Increases in Fosterweld sales
- -Page 8-
<PAGE>
were offset by the Company's withdrawal from the warehouse pipe
market. Changes in net sales are primarily the result of
changes in volume rather than changes in prices.
The gross margin percentage for the total company in the 1996
third quarter increased to 13% from 11% in the 1995 third
quarter. Rail products' gross margin percentage increased
slightly to 14%. Construction products' gross margin percentage
increased to 14% from 11% in the prior year due to higher
margins on fabricated highway products and a reduction in the
sale of lower margin piling products. The gross margin
percentage for tubular products increased to 11% from 8% as a
result of substantially higher margins on Fosterweld products
due to current market conditions for water systems and large
diameter pipe piling.
Selling and administrative expenses increased 3% in the 1996
third quarter from the same period last year. Operating income
before taxes increased 12% to $2.3 million from $2.0 million.
First Nine Months of 1996 Results of Operations
Net income for the first nine months of 1996 was $2.9 million or
$0.29 per share. This compares to a 1995 first nine months' net
income of $3.9 million or $0.40 per share. The restated 1995
results included a charge of $0.2 million relating to the
adoption of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
Rail products' net sales in the first nine months of 1996
declined 6% from the first nine months of 1995 which benefited
from the shipment of a large order to the Port of Los Angeles.
Construction products' net sales decreased 16% primarily due to
the lack of availability of piling products which was partially
offset by a significant increase in the sales of fabricated
highway products. Tubular products' net sales decreased 18%
which primarily reflects the Company's withdrawal from the
warehouse pipe market. Changes in net sales are primarily the
result of changes in volume rather than changes in prices.
The gross margin percentage for the Company was 13% in the first
nine months of 1996 compared to 11% in the 1995 first nine
months. Rail products' gross margin percentage increased
slightly to 14% due primarily to higher margins in transit
products' business. Construction products' gross profit margin
increased to 14% from 11% as a result of higher margins on
fabricated highway products and a reduction in the sale of lower
margin piling products. The gross margin percentage for tubular
products remained unchanged at 9%.
Selling and administrative expenses for the first nine months of
1996 increased slightly from the first nine months of 1995.
Operating income before taxes increased 16% to $4.8 million from
$4.2 million.
- -Page 9-
<PAGE>
Liquidity and Capital Resources
The Company's ability to generate internal cash flow
("liquidity") results from the sale of inventory and the
collection of accounts receivable. During the first nine months
of 1996, the average turnover rate for inventory decreased
slightly from the prior year. The turnover rate for accounts
receivable during the first nine months of 1996 was also
slightly lower than during the same period of the prior year.
Working capital at September 30, 1996 was $66.7 million compared
to $57.9 million at December 31, 1995.
During the first nine months of 1996, the Company had capital
expenditures of $1.9 million. The Company financed the
purchase of certain capital expenditures totaling $137,000
through the issuance of capital leases. Capital expenditures in
1996 are not expected to exceed $3.0 million and are anticipated
to be funded by cash flows from operations.
Total revolving credit agreement borrowings at September 30,
1996 were $28.0 million or a decrease of $1.8 million from the
end of the prior year. At September 30, 1996, the Company had
approximately $15.9 million in available unused borrowing
commitment. Management believes its internal and external
sources of funds are adequate to meet anticipated needs.
Other Matters
The previously disclosed exclusive negotiating arrangement for
the sale of the Company's Fosterweld operation has been
terminated. The Company, however, has commenced discussions
with another potential buyer. The outcome of these discussions
is uncertain.
The Company owns stock in a privately held short-line railroad.
The railroad's financial statements indicate a book value of
approximately $2.9 million for this stock. The market value of
the stock is not readily determinable and, therefore, the
investment is recorded in the Company's accounts at its
historical cost of $0.2 million. The Company has been advised
of the railroad's intent to sell this business. Although no
assurances can be given as to timing or results of this sale,
the Company believes that the potential sales price of the stock
could significantly exceed $2.9 million.
Outlook
The Company's future operating results may be affected by a
number of factors. The Company is dependent upon a number of
major suppliers. If a supplier had operational problems or
ceased making material available to the Company, operations
could be adversely affected. The Company's primary supplier of
piling products, Bethlehem Structural Products Corporation, has
announced plans to sell its hot rolled sheet piling and
structural products facility in Bethlehem, PA. Bethlehem
- -Page 10-
<PAGE>
also announced that if the sale cannot be completed within an
unspecified "scheduled period of time", the operation would be
shut down and efforts will continue thereafter to sell the
business and, if this is not possible, the assets will be sold.
The Company is actively pursuing several possible options to
preserve its position in the piling market although no
assurances can be given that these actions will be successful.
Sales and related rentals of Bethlehem Structural Products
Corporation's piling products represent approximately 17% of the
Company's 1996 sales to date.
The Company's operations are in part dependent on governmental
funding of infrastructure projects. Significant changes in the
level of government funding of these projects could have a
favorable or unfavorable impact on the operating results of the
Company.
Additionally, governmental actions concerning taxation, tariffs,
the environment or other matters could impact the operating
results of the Company. The Company's operations results may
also be affected by the weather.
Although backlog is not necessarily indicative of future
operating results, total Company backlog at September 30, 1996,
was approximately $86 million. The following table provides the
backlog by business segment.
<TABLE>
<CAPTION> Backlog
September 30, December 31,
1996 1995 1995
(Dollars in thousands)
<S> <C> <C> <C>
Rail Products $49,009 $50,957 $43,879
Construction Products 27,256 27,392 28,239
Tubular Products 9,585 12,789 8,857
Total Backlog $85,850 $91,138 $80,975
</TABLE>
- -Page 11-
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
Unless marked by an asterisk, all exhibits are incorporated
herein by reference:
3.1 Restated Certificate of Incorporation as amended to date filed
as Exhibit 3.1 to Form 10-Q for the quarter ended March 31, 1987.
3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit
3.2 to Form 10-K for the year ended December 31, 1993.
4.1 Amended and Restated Loan Agreement by and among the
Registrant and Mellon Bank, N.A., NBD Bank, and
Corestates Bank, N.A. dated as of November 1, 1995 and filed
as Exhibit 4.1 to Form 10-K for the year ended December 31,
1995.
10.15 Lease between the Registrant and Amax, Inc. for
manufacturing facility at Parkersburg, West Virginia,
dated as of October 19, 1978, filed as Exhibit 10.15 to
Registration Statement No. 2-72051.
10.16 Lease between Registrant and Greentree Building
Associates for Headquarters office, dated as of June
9, 1986, as amended to date, filed as Exhibit 10.16 to Form
10-K for the year ended December 31, 1988.
10.16.1 Amendment dated June 19, 1990 to lease between
Registrant and Greentree Building Associates, filed as
Exhibit 10.16.1 to Form 10-Q for the quarter ended June 30,
1990.
10.19 Lease between the Registrant and American Cast Iron
Pipe Company for Pipe Coating Facility in Birmingham,
Alabama dated December 11, 1991 and filed as Exhibit 10.19
to Form 10-K for the year ended December 31, 1991.
10.33.2 Amended and Restated 1985 Long-Term Incentive Plan, as
amended and restated March 2, 1994 and filed as
Exhibit 10.33.2 to Form 10-K for the year ended December
31, 1993. **
10.45 Medical Reimbursement Plan filed as Exhibit 10.45
to Form 10-K for the year ended December 31, 1992. **
- -Page 12-
<PAGE>
10.46 Leased Vehicle Plan as amended to date. Filed as
Exhibit 10.46 to Form 10-K for the year ended December
31, 1993. **
10.49 Lease agreement between Newport Steel Corporation
and L.B. Foster Company dated as of October 12, 1994 and
filed as Exhibit 10.49 to Form 10-Q for the quarter
ended September 30, 1994.
10.50 L. B. Foster Company 1996 Incentive Compensation
Plan. Filed as Exhibit 10.50 to Form 10-K for the year
ended December 31, 1995. **
10.51 Supplemental Executive Retirement Plan. Filed as
exhibit 10.51 to Form 10-K for the year ended December
31, 1994. **
* 10.52 L. B. Foster Company Officer Loan Program. **
19 Exhibits marked with an asterisk are filed herewith.
** Identified management contract or compensatory plan or
arrangement required to be filed as an exhibit.
b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant during the
three month period ended September 30, 1996.
- -Page 13-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
L. B. FOSTER COMPANY
(Registrant)
Date: November 12, 1996
By /s/Roger F. Nejes
Roger F. Nejes
Sr. Vice President-
Finance and Administration
& Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer
of Registrant)
- -Page 14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1093
<SECURITIES> 0
<RECEIVABLES> 52070
<ALLOWANCES> 1800
<INVENTORY> 42398
<CURRENT-ASSETS> 100051
<PP&E> 60742
<DEPRECIATION> 35514
<TOTAL-ASSETS> 125674
<CURRENT-LIABILITIES> 33376
<BONDS> 24180
0
0
<COMMON> 102
<OTHER-SE> 66186
<TOTAL-LIABILITY-AND-EQUITY> 125674
<SALES> 178586
<TOTAL-REVENUES> 178586
<CGS> 155582
<TOTAL-COSTS> 155582
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1781
<INCOME-PRETAX> 4815
<INCOME-TAX> 1922
<INCOME-CONTINUING> 2893
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2893
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
L. B. FOSTER COMPANY Exhibit 10.52
OFFICER LOAN PROGRAM
The Loan Program shall operate as follows:
1. Subject to the limitations in paragraph 2 below, Officers
elected by the Board of Directors may borrow less than Sixty
Thousand Dollars ($60,000) from the Company for the sole purpose
of purchasing the Company's Class A Common Stock, either on the
open market or through the exercise of a stock option granted by
the Company. Assistant Secretaries and Assistant Treasurers are
not eligible to participate in this Program.
2. Officers may borrow only once in any six-month period and an
Officer's total outstanding borrowing at any time may not equal
or exceed $60,000. The total borrowing outstanding at any time
under this Program shall not exceed $1,200,000.
3. This Loan Program will be administered by the Company's
Treasurer acting for the Company and subject to review by the
Personnel & Compensation Committee of the Board of Directors.
Officers who wish to purchase stock under the Program should
inform the Treasurer of the dollar amount or number of shares
that he or she would like to purchase. If the shares are to be
purchased on the open market (Nasdaq National Market), the order
will be placed by the Officer, through the Treasurer, with a
brokerage firm or firms from time to time selected by the
Company (the "Broker") and the shares will be purchased for and
maintained in a special pledge account at Broker (the "Pledge
Account") in the name of the Company, as pledgee. If the shares
are to be purchased under a stock option, the Company will
deliver to Broker, for deposit to the Pledge Account, a stock
certificate for the shares purchased. The Officer will be the
beneficial owner and pledgor of the shares held in the Pledge
Account for the Officer, and the Company will be the pledgee of
the shares.
4. The Company will pay the cost of shares purchased on the open
market for the participating Officer (including brokerage
commissions and other standard charges) or the cost of shares
purchased under a stock option, and such payment will constitute
a loan to the Officer under the Loan Program. Such loan, and
all other loans made to the Officer under this Program, will be
secured by the pledge of the acquired shares held in the Pledge
Account. When the Officer wishes to sell any of the shares, he
or she must issue appropriate directions to the Treasurer, who
will arrange for the shares to be sold in the open market out of
the Pledge Account. The net proceeds of the sale (after
brokerage commissions and other standard charges) first will be
applied by the Company to the payment of outstanding loans to
the Officer under this Program as the Treasurer shall determine.
<PAGE>
5. The loans will be for the earlier of (i) five (5) years after
the loan is made; or (ii) fifteen (15) days after cessation of
employment, with interest accruing at the applicable Federal
Rate in effect at the inception of the loan. Interest will be
collected monthly via payroll deduction. A Borrower may prepay
the loan in full or in part at any time and may elect at the
time the loan is made to fully or partially amortize the loan
via payroll deductions. Except for payments made from the
proceeds of stock sales under paragraph 4 above, voluntary
prepayments must be in minimum increments of One Thousand
Dollars ($1,000), unless the prepayment pays the loan in full.
The Company must consent to any change in the payment plan
initially selected by the Borrower. Upon default, the interest
rate shall increase to Mellon Bank, N.A.'s prime rate of
interest, plus one percent (1%). Upon payment in full of all
loans made to the Borrower under this Program, any shares of the
Borrower remaining in the Pledge Account will be returned to the
Borrower.
6. In the event of default, the Company may pursue any and all
remedies available to it under applicable law, including without
limitation, a public or private sale of the shares securing the
defaulted loan, with the Borrower remaining liabile for payment
of any deficiency.
7. This Loan Program will be administered and interpreted by the
Company's Treasurer, subject to the review of the Personnel &
Compensation Committee of the Board of Directors. In connection
with his administration of this Loan Program, the Treasurer
shall require that Borrowers execute documents to insure that
Borrowers comply with their obligations. Such documents shall
include, without limitation, for each borrowing: a loan
application, a promissory note, a pledge agreement and such
documents as the Company's General Counsel shall deem advisable
to comply with applicable law.
8. This Loan Program may be amended or terminated at any time
and for any reason.
