Exhibit Index on Page 14
----
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1996
-------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
Commission file number: 1-8821
GENERAL MICROWAVE CORPORATION
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-1956350
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5500 New Horizons Boulevard, Amityville, New York 11701
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 226-8900
- ----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
As of December 31, 1996, there were 1,205,659 shares of common stock
outstanding.
Page 1 of 24
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements.
---------------------
Page 2
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOVEMBER 30, 1996
Page 3
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
November 30, 1996 February 29, 1996
(Unaudited)
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,374,633 $ 1,139,731
Restricted cash 80,000 -
Accounts receivable, net of allowance for
doubtful accounts 4,142,020 5,150,561
Inventories 6,806,953 6,744,203
Prepaid expenses and other current assets 247,369 278,785
Income taxes receivable - 155,733
Deferred income taxes, net 560,073 560,073
---------- ----------
Total current assets 13,211,048 14,029,086
---------- ----------
Property, plant and equipment, net 6,122,780 6,356,052
Debt issuance costs, net 59,975 75,626
Other intangible assets, net 148,961 178,015
Costs in excess of fair market value of
net assets acquired, net 802,531 872,731
Other assets 50,139 70,098
---------- ----------
$ 20,395,434 $ 21,581,608
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
November 30, 1996 February 29, 1996
(Unaudited)
----------------- -----------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 709,664 $ 709,670
Short-term borrowing 721,324 323,463
Accounts payable 1,017,915 1,201,775
Accrued payroll and other employee benefits 854,956 767,126
Accrued expenses and other current liabilities 968,445 803,038
Accrued commissions 227,368 274,192
--------- ---------
Total current liabilities 4,499,672 4,079,264
--------- ---------
Long term debt, less current installments 1,679,352 2,325,589
Deferred income taxes 584,068 584,068
Minority interest 23,221 18,171
Stockholders' equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized and unissued - -
Common stock, $.01 par value; 5,000,000
shares authorized; issued 1,672,761 at
November 30,1996 and 1,664,492 at
February 29, 1996. 16,728 16,645
Additional paid-in capital 9,605,549 9,549,402
Retained earnings 7,175,493 8,197,118
---------- ----------
16,797,770 17,763,165
Less: Treasury stock, at cost 3,188,649 3,188,649
---------- ----------
13,609,121 14,574,516
---------- ----------
$ 20,395,434 $ 21,581,608
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>STATEMENT OF OPERATIONS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED NINE MONTHS ENDED
<S> <C> <C> <C> <C>
November 30,1996 December 2,1995 November 30, 1996 December 2,1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------------- --------------- ----------------- ---------------
Net sales $ 6,077,611 $ 5,655,179 $ 17,575,933 $ 15,450,774
Cost of sales 4,595,300 4,893,306 13,076,104 12,156,532
---------- ---------- ----------- -----------
Gross earnings 1,482,311 761,873 4,499,829 3,294,242
Operating expenses:
Selling 748,308 829,227 2,220,921 2,398,037
General and administrative 843,152 744,951 2,519,376 2,312,897
Research and development 179,618 368,534 570,937 984,637
---------- ---------- ---------- ----------
1,771,078 1,942,712 5,311,234 5,695,571
---------- ---------- ---------- ----------
Operating loss (288,767) (1,180,839) (811,405) (2,401,329)
Other expenses (income):
Interest expense 57,736 54,351 163,105 156,640
Dividend and interest income (12,779) (12,245) (33,217) (79,800)
Minority interest in earnings
(loss) of consolidated subsidiary 691 1,834 5,050 (46,832)
Other 13,055 21,637 32,290 54,489
---------- ---------- ---------- ----------
58,703 65,577 170,228 84,497
---------- ---------- ---------- ----------
Loss before provision for (recovery of)
income taxes (347,470) (1,246,416) (981,633) (2,485,826)
Provision for (recovery of) income taxes 40,000 (191,000) 40,000 (450,000)
---------- ---------- ---------- ----------
Net loss $ (387,470) $ (1,055,416) $(1,021,633) $(2,035,826)
=========== ============ =========== ===========
Net loss per share $ (0.32) $ (0.88) $ (0.85) $ (1.70)
=========== ============ =========== ===========
Weighted average number of
common shares outstanding 1,205,659 1,197,390 1,203,821 1,196,446
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
<PAGE>
<TABLE>STATEMENT OF CASH FLOWS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
<S> <C> <C>
November 30, 1996 December 2, 1995
(Unaudited) (Unaudited)
----------------- ----------------
Cash flows from operating activities:
Net loss $ (1,021,633) $ (2,035,826)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 680,426 707,914
Change in minority interest 5,050 (46,832)
Changes in assets and liabilities:
Accounts receivable, net 1,008,541 1,674,836
Inventories (62,750) 54,895
Prepaid expenses and other current assets 31,416 (157,933)
Income taxes payable and receivable 386,152 (551,809)
Other assets 19,959 (8,723)
Accounts payable (183,860) 878,863
Accrued expenses and other current liabilities (24,006) (45,379)
---------- ----------
Net cash provided by operating activities 839,295 470,006
---------- ----------
Cash flows from investing activities:
Proceeds from sale of short-term investments - 757,909
Purchase of plant & equipment (315,540) (434,655)
Purchase of intangible assets (16,700) (10,950)
Purchase of additional interest in subsidiary - (279,000)
---------- ----------
Net cash provided by (used in) investing activities (332,240) 33,304
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (646,237) (645,376)
Proceeds from short-term borrowings 397,855 -
Proceeds from issuance of common stock
pursuant to employee stock purchase plan 56,229 -
Proceeds from exercise of stock options - 18,404
Payments to acquire treasury stock - (4,466)
---------- ----------
Net cash used in financing activities (192,153) (631,438)
---------- ----------
Cash and cash equivalents:
Net increase (decrease) during the period 314,902 (128,128)
Balance, beginning of the period 1,139,731 1,053,861
---------- ----------
Balance, end of the period (including restricted cash) $ 1,454,633 $ 925,733
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 154,870 156,640
Income taxes 53,099 113,063
Liability due to purchase of additional interest
in subsidiary - 279,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1996
(Unaudited)
NOTE 1: The consolidated financial statements include the accounts of General
Microwave Corporation, its wholly owned subsidiaries, General
Microwave Foreign Sales Corporation (FSC), Micro-El Patent
Corporation and Math Associates, Inc. (Math), its indirect
wholly-owned subsidiaries, General Microwave Israel Corporation
(GMIC) and General Microwave Israel (1987) Ltd. (GMIL), and its
majority-owned subsidiary General Microcircuits Corporation (GMCC).
All intercompany accounts and transactions have been eliminated in
consolidation.
NOTE 2: The information furnished in this report reflects all adjustments
(which include only normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of the results
for the interim period. The interim figures are not necessarily
indicative of the results for the year.
<TABLE>INVENTORIES ON HAND
<CAPTION>
NOTE 3: Inventories on hand at:
November 30, 1996 February 29, 1996
----------------- -----------------
<S> <C> <C>
Raw materials $ 2,883,333 $ 2,962,588
Work in process 3,274,217 3,514,340
Finished goods 738,943 773,925
---------- ----------
6,896,493 7,250,853
Less progress billings (89,540) (506,650)
---------- ----------
$ 6,806,953 $ 6,744,203
</TABLE>
Inventories are valued at the lower of cost or market on a first-in,
first-out basis.
NOTE 4: Accumulated depreciation and amortization of property, plant and
equipment was $7,886,262 at November 30, 1996 and $7,337,449 at
February 29, 1996.
NOTE 5: On March 2, 1995, the minority stockholders of General Microcircuits
(GMCC) exercised their option to require the Company to purchase, in
fiscal 1996, 15,000 shares of GMCC common stock at a cost of $
279,000, thereby increasing the Company's ownership in GMCC from 92%
to 97%. This transaction was accounted for by the purchase method
of accounting with the cost of the additional ownership recorded as
costs in excess of fair value of net assets acquired.
Page 8
<PAGE>
NOTE 6: The agreements relating to the Company's 7-day Demand Industrial
Development Revenue Bonds contain several restrictive covenants. The
agreement with the letter of credit issuer requires the Company to
maintain a minimum level of tangible net worth as defined and
continuing profitable operations. After giving effect to the results
of operations for the quarter ended November 30, 1996, the Company
required and received a waiver of both covenants for the quarter.
This waiver modifies the tangible net worth covenant to require the
Company to maintain its tangible net worth, as defined, at the
November 30, 1996 level, subject to increases dependent upon future
operations. The Company has agreed to make equal monthly sinking fund
payments towards its October 1, 1997 $500,000 bond payment, which are
reflected as restricted cash on the accompanying consolidated balance
sheet. Because management anticipates compliance with the covenants
now in effect, the Industrial Development Revenue Bonds debt is
classified as long-term debt.
NOTE 7: Reclassifications are made whenever necessary to conform with the
current year's presentation.
Page 9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
For the Quarter Ended November 30, 1996 compared with the Quarter Ended
- -----------------------------------------------------------------------
December 2, 1995.
- -----------------
During the third quarter of fiscal 1997, net sales were $6,077,611 compared
to $5,655,179 during the comparable quarter of fiscal 1996, an increase of
7.5%. This increase is due to increased shipments of microwave products
which more than offset decreased sales of fiber optic products. The net loss
for the current quarter was $387,470 compared with a net loss of $1,055,416
for the third quarter of fiscal 1996. This improvement is attributed
principally to increased gross profit margins on increased shipments, and the
increase in the provision for obsolete and excess inventory levels being
significantly less in the third quarter of fiscal 1997 versus the third
quarter of fiscal 1996.
Cost of sales, as a percentage of sales, decreased from 86.5% during the
third quarter of last year to 75.6% during the third quarter of this year.
The decrease is attributed to resolution of technical problems and production
difficulties experienced last year, as well as improved efficiencies this
year. However, some continuing new product technical difficulties and some
additional inventory valuation reserves recorded in the quarter, did not
allow the quarter to become profitable.
Notwithstanding increased sales, the aggregate of selling and general and
administrative expenses remained essentially unchanged in the current quarter
compared to the comparable quarter last year, while research and development
expenses declined because the Israeli operation significantly moved into
increased production operations.
The current tax provision is associated with the Company's Israeli
subsidiary, while the tax benefit recorded in the third quarter of fiscal
1996 represented the amount of taxes recoverable under net operating loss
carrybacks.
During the third quarter of fiscal 1997, sales orders booked were $5.2
million and the closing backlog was $10.9 million compared with $5.7 million
sales orders booked and a closing backlog of $13.9 million for the third
quarter of fiscal 1996.
For the Nine Months Ended November 30, 1996 compared with the Nine Months
- -------------------------------------------------------------------------
Ended December 2, 1995.
- -----------------------
During the first nine months of fiscal 1997, net sales were $17,575,933
compared with $15,450,774 for the first nine months of fiscal 1996,
representing a 13.8% increase. A net loss of $1,021,633 for the current
period compares with a net loss of $2,035,826 for the comparable period last
year. The increase in sales is due to an increase in microwave components
and hybrid microcircuits sales. Losses decreased primarily due to lower cost
of sales while shipments increased.
Page 10
<PAGE>
Cost of sales, as a percentage of sales, decreased to 74.4% during the first
nine months of fiscal 1997, compared to 78.7% in the first nine months of
fiscal 1996, due primarily to resolution of technical problems and production
difficulties experienced last year, as well as a reduction in the increase
of inventory valuation provisions and adjustments from approximately $870,000
for the nine months ended December 2, 1995 to $208,000 for the nine months
ended November 30, 1996.
During the current nine months, the Company decreased its research and
development expenses as its Israeli operation significantly moved into
increased production operations.
The current tax provision is associated with the Company's foreign
subsidiary. The tax benefit recorded for the nine months ended November 30,
1996 represented the amount of taxes recoverable under net operating loss
carrybacks.
During the first nine months of fiscal 1997 sales orders booked were $16.7
million and the closing backlog was $10.9 million compared with $19.6 million
and $13.9 million respectively, for the first nine months of fiscal 1996.
The current backlog represents acceptable levels to maintain current
operations. The prior period's backlog was higher due to delayed shipments
as a result of technical problems.
Liquidity and Capital Resources
- -------------------------------
November 30, 1996 compared with February 29, 1996
- -------------------------------------------------
At November 30, 1996, the Company's ratio of current assets to current
liabilities was 2.9 to 1 compared to 3.44 to 1 at February 29, 1996.
During the first nine months of fiscal 1997, cash flows provided from
operations amounting to approximately $839,000 were utilized principally to
purchase equipment for $316,000 and increase cash balances. Cash flows used
in financing activities were $192,000 which represented proceeds of short
term borrowings of $398,000 associated with the Israeli subsidiaries which
were utilized in those subsidiaries' operations, and proceeds of $56,000 from
issuance of common stock pursuant to the employee stock purchase plan, offset
by $646,000 used for payments on long term debt. Accounts receivable as of
November 30, 1996 were $1,009,000 less than the balance as of February 29,
1996 due to the high level of fourth quarter fiscal 1996 sales, which were
subsequently collected. The Company expects to spend up to $100,000 during
the remainder of the year for capital equipment.
See Note 6 to the Consolidated Financial Statements for information
concerning the Company's 7-Day Demand Industrial Development Revenue Bonds
and its sinking fund obligations with respect to them.
The Company believes that its present resources and projected sources of
funds are sufficient to meet its needs for the foreseeable future.
Page 11
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
---------
The following exhibits are filed with this Quarterly Report
on Form 10-Q.
10.1 Amendment and Waiver of
Reimbursement Agreement and
Cash Collateral Agreement
10.2 General Microwave Corporation
1990 Stock Option Plan, as amended effective October 10, 1996
27 Financial Data Schedule (filed with electronically filed copy
only)
(b) Reports on Form 8-K:
--------------------
None
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL MICROWAVE CORPORATION
-----------------------------
(Registrant)
Date: January 13, 1997 By:S/Arnold H. Levine
---------------------
Arnold H. Levine, Vice
President-Finance, Treasurer,
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 13
<PAGE>
Exhibit Index
Page Number in
Sequential
Exhibit No. Numbering
10.1 Amendment and Waiver of 15
Reimbursement Agreement and
Cash Collateral Agreement
10.2 General Microwave Corporation 19
1990 Stock Option Plan, as amended
effective October 10, 1996
27 Financial Data Schedule (Filed with 24
electronically filed copy only)
Page 14
<PAGE>
AMENDMENT AND WAIVER OF
REIMBURSEMENT AGREEMENT
AND CASH COLLATERAL AGREEMENT
THIS AMENDMENT is dated the 11th day of October, 1996 by and between
FLEET BANK, N.A. (formerly NatWest Bank N.A. formerly known as National
Westminster Bank USA), a national banking association, having an office at
300 Broad Hollow Road, Melville, New York 11747 (the "Bank") and GENERAL
MICROWAVE CORPORATION, a New York corporation having an office at 550 New
Horizons Boulevard, Amityville, New York 11701 (the "Company").
W I T N E S S E T H :
WHEREAS, the Company and the Bank entered into a reimbursement agreement
dated as of October 1, 1984, as same may have been amended from time to time
(the "Agreement"), in connection with a letter of credit issued by the Bank
in support of the Town of Babylon Industrial Development Agency $6,000,000.00
Variable Rate 7-Day Demand Industrial Development Revenue Bonds (General
Microwave Corporation Facility) Series 1984 (the "Bonds"); and
WHEREAS, the Company and the Bank (for the benefit of itself and for the
Bank (formerly Shawmut Bank, N.A.), as successor trustee under the Indenture,
as such term is defined in the Cash Collateral Agreement) entered into a Cash
Collateral Agreement dated as of January 16, 1996 (the "Cash Collateral
Agreement") pursuant to which, among other things, the Company deposited a
sum of money into an account established with the Bank which account was
pledged to the Bank as security and which account was available to the
Company to use towards making a sinking funds installment payment on the
Bonds which was due October 1, 1996;
Page 15
<PAGE>
WHEREAS, the Company has requested certain modifications and certain
waivers to the Agreement and the Bank has agreed to such modifications and
waivers provided that the Company enters into this agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Bank hereby
agree as follows:
1. As used in this agreement, capitalized terms not defined herein shall
have the meaning set forth in the Agreement.
2. As an inducement for the Bank to enter into this Agreement, the
Company represents and warrants as follows:
A. That with respect to the Agreement, the Cash Collateral Agreement
and any other documents executed in connection therewith:
(i) There are currently no defenses or offsets to the Company's
obligations under the Agreement or any other documents executed in
connection with the Agreement, including, without limitation, the Cash
Collateral Agreement, and if any such defenses or offsets currently exist
without the knowledge of the Company, the same are hereby waived.
(ii) All of the representations and warranties made by the Company in
the Agreement are true and correct in all material respects as if made
on the date hereof.
3. The Bank hereby waives any Default or Event of Default resulting from
the failure by the Company to maintain a minimum tangible net worth of
$13,100,000.00 as at the fiscal quarter end August 31, 1996 provided the
Page 16
<PAGE>
tangible net worth is at least $12,945,000.00 until February 28, 1997 and
provided further, for each fiscal year end after February 28, 1997, the
Company shall be required to maintain a minimum tangible net worth in an
amount not less than $12,945,000.00 which shall be increased by an amount
equal to 50% of the net income earned by the Company during the same fiscal
year.
4. The Bank hereby waives any Default or Event of Default resulting from
the failure by the Company to not have a fiscal loss at fiscal quarter end
August 31, 1996.
5. Section 2.01 and Section 2.02 of the Cash Collateral Agreement are
hereby amended to read as follows:
"2.01 Grant of Security Interests. As collateral security for the
prompt and complete payment and performance by the Pledgor when due of all
of the Obligations, the Pledgor does hereby pledge, assign and transfer unto
the Bank and the Trustee, and does hereby grant to the Bank and the Trustee
for the benefit of the Bank and the Trustee, a security interest of first
priority in, all of the right, title and interest of the Pledgor in the
Account No. 2517005730 with the bank (the "Account") and to the extent
provided in this Cash Collateral Agreement, proceeds of the foregoing (all
of the above collectively, the "Collateral").
2.02 Deposit into Account. The Pledgor agrees to deposit the sum of
$40,000.00 on the first business day of each month into the Account beginning
October 1, 1996 and continuing on the first day of each month thereafter."
6. Section 4.01 of the Cash Collateral Agreement is hereby amended to
read as follows:
"4.01 Release of Collateral. The Bank, for itself and as agent for the
Trustee, shall release a portion of the Collateral from the pledge of this
Cash Collateral Agreement in order to enable the Pledgor to make the sinking
fund installments on the Bonds due each October 1. The Pledgor shall deliver
to the Bank wire transfer instructions in order to make said payment."
7. The Company shall pay to the Bank and shall be otherwise responsible
Page 17
<PAGE>
for all reasonable fees, costs, expenses and disbursements incurred by the
Bank of any kind and description relating to the negotiation, preparation,
enforcement or interpretation of this amendment and any other documents
contemplated hereby, including without limitation, the fees of the Bank in
the amount of $3,000.00 as well as the reasonable fees and expenses of the
Bank's legal counsel.
10. Except as hereby amended, the Agreement and any other document
executed in connection therewith are in all respects ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
as of the year and date first above written.
GENERAL MICROWAVE CORPORATION
By:s/ ARNOLD LEVINE
Name: Arnold Levine
Title: V.P. Finance
NATWEST BANK N.A.
By:s/ PETER G. BRANDEL
Peter G. Brandel
Vice President
Page 18
<PAGE>
[As amended 10/10/96]
GENERAL MICROWAVE CORPORATION
l990 STOCK OPTION PLAN
l. Purposes. The purposes of the plan ("Plan") are to provide an
incentive to key employees of General Microwave Corporation ("Company") and
its subsidiaries, including officers and directors who are employees, to
contribute to the success of the Company by purchasing a proprietary interest
in the Company, and to offer an additional inducement in obtaining and
retaining the services of key personnel. Purchases shall be made in
accordance with "incentive stock options" or "nonqualified stock options"
issued pursuant to the Internal Revenue Code of l986, as amended ("Code"),
the Regulations and Rulings promulgated thereunder.
2. Stock Subject to the Plan. Options may be granted under the
Plan to purchase in the aggregate not more than 125,000 shares of the
Company's common stock, par value $.0l per share ("Common Stock") which may
be authorized but unissued shares or treasury shares. Any shares subject to
an option which for any reason expires or is terminated unexercised as to
such shares, shall again become available for options under the Plan.
3. Value of the Stock. The aggregate fair market value
(determined as of the time the option is granted) of the Common Stock with
respect to which incentive stock options are exercisable (under this and all
other stock option plans of the Company) for the first time during any
calendar year by an employee to whom an incentive stock option is granted
shall not exceed $100,000.
4. Administration and Selection. The Plan shall be administered
by a committee designated as the Stock Option Committee ("Committee") to be
appointed by, and to serve at the pleasure of, the Board of Directors which
committee shall consist of not less than three nor more than five directors
of the Company. The Committee shall have full power to interpret the Plan,
and to establish and amend rules and regulations for its administration. The
interpretations and decisions with regard to any question arising under the
Plan made by the Committee shall be final and conclusive on all employees of
the Company and its subsidiaries participating or eligible to participate in
the Plan. Subject to the terms hereof, the Committee shall also have full
power to determine the terms and conditions of options granted under the Plan
including, but not limited to, option price, term and exercisability of
options and restrictions on Common Stock issued pursuant thereto.
The Board of Directors may from time to time appoint members
of the Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the Committee. The
Committee shall hold its meetings at such times and places as it shall deem
Page 19
<PAGE>
advisable. A majority of its members shall constitute a quorum. Action of
the Committee shall be taken by a majority of its members at the meeting.
Any action may be taken by a written instrument signed by a majority of the
members, and action so taken shall be fully as effective as if it had been
taken by a vote of a majority of the members at a meeting duly called and
held.
5. Eligibility. The Committee, in its sole discretion, may grant
options from time to time to key employees of the Company and its
subsidiaries, including officers and directors who are employees (but
excluding members of the Committee), for such number of shares of Common
Stock as the Committee may determine.
6. Option Price. The purchase price of the Common Stock under
each option shall be such amount as the Committee, in its sole discretion,
shall determine, provided, however, the purchase price pursuant to an
incentive stock option shall not be less than the fair market value of the
Common Stock on the date the option was granted, and shall not be less than
the par value of the Common Stock. Such fair market value shall be
determined by the Committee on a consistent basis pursuant to any rules or
regulations applicable to incentive stock options.
7. Term of Options. The term of each option granted pursuant to
the Plan shall be for a period not exceeding ten (l0) years from the date of
granting thereof. The term of any option, validly granted, may extend beyond
the termination of the Plan. Options shall be subject to earlier termination
as provided hereinafter or in the Option Agreement.
8. Ten Percent Stockholders. Notwithstanding Sections 6 and 7
hereof, if an optionee, at the time an incentive stock option is granted,
owns Common Stock possessing more than ten (l0%) percent of the total
combined voting power of all classes of stock of the Company, the option
price shall be one hundred ten (ll0%) percent of the fair market value of the
Common Stock at the time the option is granted, and the option shall
terminate not later than five (5) years from the date the option is granted.
9. Exercise of Options. Except as otherwise provided herein, an
option may provide for its exercise during its term in such amounts and at
such times as shall be specified in the Option Agreement. The Committee, in
its sole discretion, may grant options or accelerate the exercise of options
granted so that options are exercisable over a shorter period of time than
that stated therein. If the full number of shares available for purchase in
a period shall not be purchased, the balance may be purchased at any time or
from time to time thereafter but prior to the termination of such option.
Notwithstanding anything contained in this Plan to the contrary, no option
granted hereunder shall be exercisable until this Plan has been approved by
Page 20
<PAGE>
the stockholders of the Company as provided in Paragraph l7 hereof.
An option shall be exercised by giving written notice to the
Company at its executive offices, specifying the number of shares to be
purchased and accompanied by payment in full of the aggregate purchase price
thereof. In no case may a fraction of a share be purchased or issued
pursuant to the exercise of an option. The purchase price may be paid in
cash, by certified or cashier's check or in full shares of Common Stock, or
any combination of the foregoing. Any shares of Common Stock used as payment
for shares being acquired shall be deemed to have a value per share equal to
the closing sales price of the Common Stock on the day the written notice of
exercise is received by the Company as reported by the American Stock
Exchange, or, if no sales of Common Stock shall have been made on that day,
the average of the high and low sales prices on the next preceding day on
which sales were made as reported by the American Stock Exchange. Payment
of taxes, if any, required to be withheld by the Company as a result of the
exercise of an option, shall be in cash at the time of exercise or on the
applicable tax date under Section 83 of the Code, if later; provided,
however, tax withholding obligations may be met by the withholding of Common
Stock otherwise deliverable to the optionee pursuant to procedures approved
by the Committee and with the consent of the Committee. In no event shall
Common Stock be delivered to any optionee until he has paid to the Company,
in cash, the amount of tax required to be withheld by the Company or has
elected to have his tax withholding obligation met by the withholding of
Common Stock in accordance with the procedures approved by the Committee and
with the Committee's consent; except that in the case of later tax dates
under Section 83 of the Code, Common Stock may be delivered prior to the
optionee's satisfaction of tax withholding obligations if the optionee makes
arrangements satisfactory to the Company that such obligations will be met
on the applicable tax date.
Each option may provide that the optionee may exercise the option
without payment of the option price by delivery to the Company of an exercise
notice and irrevocable instructions to deliver shares of Common Stock
directly to the stockbroker named therein in exchange for payment of the
option price and withholding taxes by such broker to the Company.
10. Restrictions on Common Stock. In connection with the granting
of any non-qualified stock option hereunder, the Committee may in its sole
discretion impose upon the holder thereof such restrictions as it shall deem
advisable to be applicable to the Common Stock to be purchased pursuant to
such option. Such restrictions may include, but shall not be limited to,
restrictions which render the Common Stock non-transferable, restrictions
which create a substantial risk of forfeiture of the Common Stock, or
restrictions which by their terms will never lapse.
Page 21
<PAGE>
Unless expressly stated to the contrary in any Option
Agreement, the Committee, in its sole discretion, shall have the right to
cancel, alleviate or modify, in whole or in part, any such restrictions;
provided, however, that no such action shall be taken without the consent of
the optionee if such action would have the effect of rendering the
restrictions more onerous to the optionee.
11. Termination of Employment. Any optionee whose employment has
terminated for any reason other than death or disability may exercise his
option within one (1) month after the date of such termination to the extent
the option was exercisable on the date of such termination. If the
employment of an optionee is terminated because he becomes disabled, as
defined in Section l05(d)(4) of the Code, the optionee may exercise his
option within one (l) year after the date of such termination, or within such
shorter period, if any, specified in his Option Agreement to the extent the
option was exercisable on the date of such termination. In no event,
however, shall the term of an option be extended beyond its normal
termination date as a result of the foregoing. Options granted under the
Plan shall not be affected by any change of employment so long as the
optionee continues to be an employee of the Company, a parent or subsidiary
corporation of the Company, or of a corporation issuing or assuming the
options in a transaction to which Section 425(a) of the Code applies or a
parent or subsidiary corporation thereof.
12. Death of Employee. If an optionee dies while employed by the
Company or a parent or subsidiary corporation of the Company, the option may
be exercised to the extent exercisable on the date of his death, by his
executor, administrator or other person entitled by law to the optionee's
rights under the option, at any time within six (6) months after death, but
in no event after the expiration of the term of the option.
13. Option Agreements. Options shall be evidenced by Option
Agreements which need not be identical and which shall contain such
provisions as the Committee shall deem appropriate or advisable. Each Option
Agreement shall state whether it will or will not be treated as an incentive
stock option. Nothing in the Plan shall confer any rights on an employee
other than those set forth in the Option Agreement, and neither the Plan nor
the Option Agreement shall confer upon any employee any rights to continue
in the employ of the Company or interfere in any way with the rights of the
Company to terminate his employment at any time without liability by the
Company.
14. Adjustments. Notwithstanding any other provision of the Plan,
in the event of any change in the outstanding Common Stock by reason of a
share distribution, recapitalization, merger, consolidation, split-up,
combination or exchange of shares, or the like, the aggregate number and kind
of shares available under the Plan and the number and kind of shares subject
to each outstanding option and the option price shall be appropriately
adjusted by the Committee.
Page 22
<PAGE>
15. Amendment and Termination. The Committee may at any time
suspend or terminate the Plan or amend it from time to time in such respects
as it may deem advisable to provide that options granted hereunder may
qualify as incentive stock options under the Code, or may so amend it in any
other respect not involving a substantial departure from the principles
herein set forth. No amendment by the Committee shall serve to alter the
class of persons eligible to receive options hereunder, or, except as
provided in Section l4, increase the maximum number of shares with respect
to which options may be granted hereunder. Unless sooner terminated by the
Committee, the Plan shall terminate on June 26, 2000.
16. Non-Transferability of Options and Other Terms. An option
granted under the Plan shall not be transferable other than by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code, shall not be exercisable for at least
six (6) months after the date of grant except in the case of death or
disability, and may be exercised during the lifetime of the holder thereof
only by him.
17. Effective Date of the Plan. The Plan shall become effective
upon the date of adoption hereof by the Board of Directors of the Company,
provided that the Plan shall be submitted for approval to the stockholders
of the Company at an annual meeting to be held in 1990. If this Plan is not
approved by the stockholders at such meeting, it shall become null and void,
and all options granted pursuant hereto shall be null and void and of no
force and effect.
Page 23
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
Page 24 of 24
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> FEB-28-1997 FEB-28-1997
<PERIOD-START> MAR-1-1996 SEP-1-1996
<PERIOD-END> NOV-30-1996 NOV-30-1996
<CASH> 1455 1455
<SECURITIES> 0 0
<RECEIVABLES> 4193 4193
<ALLOWANCES> 51 51
<INVENTORY> 6807 6807
<CURRENT-ASSETS> 13211 13211
<PP&E> 14009 14009
<DEPRECIATION> 7886 7886
<TOTAL-ASSETS> 20395 20395
<CURRENT-LIABILITIES> 4500 4500
<BONDS> 0 0
<COMMON> 17 17
0 0
0 0
<OTHER-SE> 13592 13592
<TOTAL-LIABILITY-AND-EQUITY> 20395 20395
<SALES> 17576 6078
<TOTAL-REVENUES> 17576 6078
<CGS> 13076 4595
<TOTAL-COSTS> 5311 1771
<OTHER-EXPENSES> 7 1
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 163 58
<INCOME-PRETAX> (981) (347)
<INCOME-TAX> 40 40
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1021) (387)
<EPS-PRIMARY> (0.85) (0.32)
<EPS-DILUTED> (0.85) (0.32)
