SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
[x] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934.
For the Period ended March 31, 1995.
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
Commission File Number: 0-13143
INNOVEX, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1223933
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1313 South Fifth Street, Hopkins, Minnesota 55343-9904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 938-4155
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
As of April 18, 1995, 4,558,758 shares of the registrant's common stock, $.04
par value per share, were outstanding.
Exhibit Index, page 10
PART 1: ITEM 1 FINANCIAL INFORMATION
INNOVEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,211,453 $ 1,719,587
Short-term investments 14,357,846 11,396,797
Accounts receivable, less allowance for
doubtful accounts of $248,000 (1994 - $220,000) 6,000,741 4,722,091
Inventories 1,843,234 1,782,156
Notes receivable 72,440 97,610
Deferred income taxes 464,335 539,335
Other current assets 1,064,602 734,036
Total current assets 25,014,651 20,991,612
Property, plant and equipment, net of accumulated depreciation
of $5,174,000 and $4,421,000 6,696,855 6,730,612
Intangible and other assets, net of amortization of $422,000
and $186,000 2,467,867 2,212,200
$34,179,373 $29,934,424
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 350,300 $ 350,300
Accounts payable 1,622,847 1,019,896
Accrued compensation 1,130,934 1,190,558
Income taxes payable 530,289 107,187
Other accrued liabilities 626,144 697,019
Total current liabilities 4,260,514 3,364,960
Long-term debt 1,232,362 1,532,140
Deferred compensation and income taxes 443,681 321,017
Stockholders' equity:
Common stock, $.04 par value; 10,000,000 shares authorized,
4,554,758 and 4,523,468 shares issued and outstanding 182,191 180,939
Capital in excess of par value 7,043,333 6,865,574
Retained earnings 21,017,292 17,669,794
Total stockholders' equity 28,242,816 24,716,307
$34,179,373 $29,934,424
</TABLE>
See accompanying notes.
INNOVEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
1995 1994
Net Sales $ 11,692,830 $ 6,451,230
Cost and expenses:
Cost of sales 6,789,487 4,608,891
Selling, general and administrative 1,121,464 800,728
Engineering 621,177 267,894
Net interest (income) expense (159,110) (93,080)
Other (income) expense 108,986 53,268
Income from continuing operations before taxes 3,210,826 813,529
Provision for income taxes 1,028,000 254,000
Net income $ 2,182,826 $ 559,529
Net income per share: $ 0.46 $ 0.12
Six months Ended March 31,
1995 1994
Net sales $ 21,668,689 $ 12,113,445
Cost and expenses:
Cost of sales 12,878,528 8,737,173
Selling, general and administrative 2,244,947 1,365,499
Engineering 1,054,267 544,012
Net interest (income) expense (290,173) (179,738)
Other (income) expense 212,781 56,133
Income from continuing operations before taxes 5,568,339 1,590,366
Provision for income taxes 1,829,000 494,000
Net income $ 3,739,339 $ 1,096,366
Net income per share: $ 0.79 $ 0.24
See accompanying notes.
INNOVEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ending March 31
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,739,339 $ 1,096,366
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,266,352 889,764
Deferred income taxes -- 20,921
Other non-cash charges (credits) (34,573) 27,585
Changes in operating assets and liabilities:
Receivables (1,278,650) (54,464)
Inventories (61,078) 321,487
Other assets (305,396) 403,024
Payables 602,951 75,052
Other liabilities (76,770) (569,926)
Income taxes payable 423,102 64,538
Net cash provided by operating activities 4,275,277 2,274,347
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,043,879) (679,550)
Cash paid for product line acquisitions (241,763) (1,670,000)
Capitalized software (181,153) (177,928)
Proceeds from sale of assets 75 2,850,000
Purchase of held-to-maturity securities (9,610,000) (5,150,250)
Maturity of held-to-maturity securities 3,720,000 1,630,000
Sale of available-for-sale securities 3,215,915 --
Net cash provided by (used in) investing activities (4,140,805) (3,197,728)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (299,778) (146,601)
Proceeds from exercise of options 179,011 81,034
Dividends paid (521,839) (474,360)
Net cash provided by (used in) financing activities (642,606) (539,927)
Increase (decrease) in cash and cash equivalents (508,134) (1,463,308)
Cash and cash equivalents at beginning of year 1,719,587 2,292,611
Cash and cash equivalents at end of period $ 1,211,453 $ 829,303
SUPPLEMENTAL DISCLOSURES:
The Company considers all highly liquid investments with a maturity date of
three months or less when purchased to be "cash equivalents."
Cash paid for interest was $74,000 and $71,000 in 1995 and 1994, respectively.
Income tax payments were $1,403,000 and $411,000 in 1995 and 1994, respectively.
See accompanying notes.
INNOVEX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions on Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The unaudited condensed
consolidated financial statements include the accounts of Innovex, Inc. and its
subsidiaries (the "Company") after elimination of all significant intercompany
transactions and accounts. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of operating results have been made. Operating results for interim periods are
not necessarily indicative of results which may be expected for the year as a
whole. For further information, refer to the consolidated financial statements
and footnotes included in the registrant's annual report on Form 10-K for the
year ended September 30, 1994.
NOTE 2 - SHORT-TERM INVESTMENTS
Under FASB #115 which was adopted by the Company in fiscal 1994, the
Company classifies debt and equity securities in three categories: trading,
available-for-sale and held-to-maturity securities. Trading securities are
measured at fair value, with unrealized holding gains and losses included in
income. The Company was not holding any trading securities at March 31, 1995.
Available-for-sale securities are measured at fair value, with net unrealizable
gains or losses reported in stockholder's equity net of applicable deferred
taxes. The unrealized holding loss for available-for-sale securities held at
March 31, 1995 was $243,000, with $133,000 of the loss considered a permanent
impairment of the available-for-sale securities which was recorded as a loss in
prior period Statements of Operations. The sale of available-for-sale securities
during the current quarter resulted in the realization of a $140,000 loss.
$109,000 of this loss was recorded in the current quarter while $31,000 of the
loss had been recognized in prior periods. Held-to-maturity securities are
carried at amortized cost.
The amortized cost adjusted for recognized permanent impairment losses,
unrealized gains and losses, and fair value of the Company's available-for-sale
and held-to-maturity securities at March 31, 1995 are summarized as follows
(thousands of dollars):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available-for-sale securities:
Adjustable rate term trusts $ 1,803 -- $ 110 $ 1,693
Bond mutual funds 525 -- -- 525
$ 2,328 -- $ 110 $ 2,218
Held-to-maturity securities:
Mutual obligation bonds $11,690 $ 17 -- $11,707
Auction rate municipal preferreds 450 -- -- 450
$12,140 $ 17 -- $12,157
PART I: ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
Innovex, Inc. (the Company), through its largest division, Precision
Products, develops, engineers and manufactures specialty precision
electromagnetic products for original equipment manufacturers ("OEM's"). Lead
wire assemblies for the thin film disk drive market are the group's primary
product.
The Company also operates two other divisions, Iconovex and InnoMedica.
These divisions currently only produce a small portion of the Company's revenue.
Iconovex is responsible for the further development and marketing of a document
handling software product, Syntactica, which was purchased in November 1993. The
purchased software prepares indexes and abstracts of documents stored on
electronic media. The initial application derived from the purchased software,
Indexicon, was designed for use on personal computers and began shipping in
fiscal 1994. Other applications are currently in development for use in on-line
and other large installed base environments. The first of these products,
AnchorPage, is scheduled for release in the fiscal 1995 third quarter.
AnchorPage enables Internet World Wide Web sites to provide their users access
to web site information automatically using conceptual navigational techniques.
The current method involves the manual insertion of tags to create hypertext
links used for accessing the information. The new software provides faster and
more reliable access to that information.
InnoMedica was formed late in fiscal 1993 to further develop the
Company's medical business. In line with this strategy, the Company acquired
Daig Corporation's pacemaker lead wire and adapter product line in September
1993 and Possis Medical, Inc's pacemaker lead wire product line in March 1994.
Revenue generated by this division should continue to increase throughout fiscal
1995 as its production capacity expands.
Prior to December 1992, the Company operated another division, the
Photo Group. The Company discontinued its photo business in two stages.
Effective November 29, 1992, the operating assets and liabilities, with the
exception of the receivables, were sold to Lucht Acquisition Corporation (LAC),
an unrelated third party, for approximately $4,000,000 cash and a 40 percent
interest in LAC. On November 1, 1993, the Company sold the remaining 40 percent
interest in LAC to LAC's majority shareholder for $2,850,000 in cash.
RESULTS OF OPERATIONS
NET SALES
The Company's net sales from operations totaled $11,693,000 for the
quarter, up 81% from $6,451,000 reported in fiscal 1994. Sales of $21,669,000
for the six months ended March 31, 1995 increased 79% from the prior year
period. The increases were due to the strong demand for lead wire assemblies
caused by the increased demand for thin-film disk drives. The lead wire assembly
demand is expected to remain strong throughout the remainder of the fiscal year.
GROSS MARGINS
The Company's consolidated gross profit as a percent of sales for the
second quarter increased to 42% from the 29% reported for the same period last
year while the gross margin percent for the first six months increased to 41%
from 28% for the same period last year. This is primarily due to increased sales
volume in the current year compounded by low fiscal 1994 sales volume caused by
the temporary weak disk drive demand in the first half of fiscal 1994. The high
level of sales in the current year resulted in more efficient utilization of the
Company's automation-related fixed costs. The gross margin should remain
relatively stable for the remainder of the fiscal year as improved manufacturing
efficiencies should offset any price concessions which may occur.
OPERATING EXPENSES
Operating expenses were 14.9% of sales for the current quarter, down
from 16.6% in the prior year's second quarter. Operating expenses for the first
six months of fiscal 1995 were 15.2% of sales, down from 15.8% for the prior
year's first six months. The decrease in operating expenses as a percent of
sales for the current year is primarily due to the significant increase in sales
more than offsetting the increase in total operating expenses. Total operating
expenses increased due to the higher level of costs being incurred by the two
start-up divisions, higher accruals for incentive based compensation and
increased process and new product research spending as compared to the prior
year. The level of operating expenses is not expected to change significantly
for the remainder of the fiscal year.
OPERATING PROFIT
Consolidated operating profit of $3,161,000 in the current quarter was
up from the $774,000 profit for the prior year second quarter. Consolidated
operating profit for the first six months was $5,491,000 versus $1,467,000 for
the same period last year. This is primarily the result of the increased sales
volume. Operating profit for the remainder of the fiscal year is expected to
remain strong due to the continued high demand for thin-film lead wire
assemblies. Revenues from the Company's Iconovex and InnoMedica Divisions are
expected to continue to increase with each division expected to be operating at
a profitable level by the end of the fiscal year.
NET INCOME
Consolidated net income for the 1995 second quarter was $2,183,000 or
$0.46 per share as compared to $560,000 or $0.12 per share for the prior year
second quarter. Consolidated net income for the first six months of fiscal 1995
was $3,739,000 or $0.79 per share versus $1,096,000 or $0.24 per share for the
same period last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased to $15.6 million at March 31,
1995 from $13.1 million at September 30, 1994. This increase was primarily due
to income generated by the Company's operating activities.
Accounts receivable at March 31, 1994 increased by $1,279,000 from
September 30, 1994 due to the increased level of sales at the end of the second
quarter. Accounts payable at March 31, 1995 increased by $603,000 from September
30, 1994 due to fixed asset purchases and inventory purchases to support the
sales increase.
Working capital totaled $20,800,000 and $17,600,000 at March 31, 1995
and September 30, 1994, respectively.
Since September 30, 1994, the Company has invested $1,044,000 in fixed
assets. These additions primarily include approximately $750,000 for equipment
to expand and further automate the lead wire assembly production and packaging
process. The Company also paid an additional $242,000 related to the March 1994
agreement to purchase Possis Medical, Inc.'s pacemaker lead wire product line.
Management believes that internally generated funds will provide
adequate sources of capital for supporting projected growth in fiscal 1995.
PART II - OTHER INFORMATION
Responses to Items 1 through 3 and 5 are omitted since these items are either
inapplicable or the response thereto would be negative.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of the shareholders of Innovex, Inc. was held on
March 7, 1995. There were 4,542,758 shares of common stock entitled to
vote at the meeting and a total of 3,863,494 shares were represented at
the meeting.
b) Five directors were elected at the meeting to serve for one year or
until their successors are elected and qualified. Shares were voted as
follows:
For Against
Thomas W. Haley 3,847,917 15,577
Michael C. Slagle 3,845,042 18,452
Bernt M. Tessem 3,848,017 15,477
Gerald M. Bestler 3,847,817 15,677
Willis K. Drake 3,845,817 17,677
c) Other matters voted on at the meeting:
Proposal #2. A proposal was made to ratify and approve the Innovex,
Inc. 1994 stock Option Plan as adapted by the Company's Board of
Directors on April 21, 1994. Shares were voted as follows:
For Against Abstain Broker Non-Vote
3,602,189 201,925 36,515 22,865
Proposal #3. A proposal was made to ratify and approve the appointment
of Grant Thornton L.L.P. as the Company's independent auditors for the
fiscal year ending September 30, 1995. Shares were voted as follows:
For Against Abstain
3,823,517 15,212 24,765
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 1994 Stock Option Plan
11 Statement regarding Computation of Per Share Earnings
27 Financial Data Schedule
b) Reports on Form 8-K
None.
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.
INNOVEX, INC.
Registrant
Date: May 1, 1995
By_______________________________
Thomas W. Haley
Chief Executive Officer
By________________________________
Douglas W. Keller
Corporate Controller
INDEX TO EXHIBITS
Exhibits Page
10.1 1994 Stock Option Plan 13-22
11 Computation of Per Share Net Income 11
27 Financial Data Schedule 12
EXHIBIT 10.1
INNOVEX, INC.
1994 STOCK OPTION PLAN
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SECTION CONTENTS PAGE
1. Purpose A-3
2. Definitions A-3
3. Shares Available Under Plan A-4
4. Administration A-4
5. Participants A-5
6. Terms and Conditions A-6
7. Exercise of Options A-7
8. Extraordinary Corporate Transactions A-7
9. Changes in Corporation's Capital Structure A-8
10. Assignments A-8
11. Severance; Death; Disability A-8
12. Rights of Participants A-9
13. Securities Registration A-9
14. Duration and Amendment A-10
15. Approval of Shareholders A-10
16. Conditions of Employment A-10
A-2
INNOVEX, INC.
1994 STOCK OPTION PLAN
1. Purpose. The purpose of the Innovex, Inc. 1994 Stock Option Plan is
to provide a continuing, long-term incentive to selected eligible officers, key
employees and consultants of Innovex, Inc. (the "Corporation") and of any
subsidiary corporation of the Corporation (a "Subsidiary"), as herein defined;
to provide a means of rewarding outstanding performance; and to enable the
Corporation to maintain a competitive position to attract and retain key
personnel necessary for continued growth and profitability.
2. Definitions. The following words and phrases as used herein shall
have the meanings set forth below:
2.1 "Board" shall mean the Board of Directors of the Corporation.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.3 "Committee" shall mean the Compensation Committee of the Board, if
any, or such other committee of the Board as may be designated by the Board,
from time to time, for the purpose of administering this plan as contemplated by
Article 3 hereof.
2.4 "Common Stock" shall mean the common stock, $.04 par value, of the
Corporation.
2.5 "Corporation" shall mean Innovex, Inc., a Minnesota corporation.
2.6 "Fair Market Value" of any security on any given date shall be
determined by the Committee as follows: (a) if the security is listed for
trading on one or more national securities exchanges (including the NASDAQ
National Market System), the mean of the highest and lowest sales price on such
exchange on the date in question, or if such security shall not have been traded
on such exchange on such date, the mean of the highest and lowest sales price on
such exchange on the first day prior thereto on which such security was so
traded; or (b) if the security is not listed for trading on a national
securities exchange (including the NASDAQ National Market System) but is traded
in the over-the-counter market, the mean of the highest and lowest bid prices
for such security on the date in question, or if there are no such bid prices
for such security on such date, the mean of the highest and lowest bid prices on
the first day prior thereto on which such prices existed; or (c) if neither (a)
nor (b) is applicable, by any means deemed fair and reasonable by the Committee,
which determination shall be final and binding on all parties.
2.7 "ISO" shall mean any stock option granted pursuant to this Plan as
an "incentive stock option" within the meaning of Section 422 of the Code.
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2.8 "NQO" shall mean any stock option granted pursuant to this Plan
which is not an ISO.
2.9 "Option" shall mean any stock option granted pursuant to this Plan,
whether an ISO or an NQO.
2.10 "Optionee" shall mean any person who is the holder of an Option
granted pursuant to this Plan.
2.11 "Plan" shall mean this 1994 Stock Option Plan of the Corporation.
2.12 "Subsidiary" shall mean any corporation which at the time
qualifies as a subsidiary of the Corporation under Section 424(f) of the Code.
3. Shares Available Under Plan. The number of shares which may be
issued pursuant to options granted under this Plan shall not exceed 200,000
shares of the Common Stock of the Corporation; provided, however, that shares
which become available as a result of cancelled, unexercised, lapsed or
terminated options granted under this Plan shall be available for issuance
pursuant to options subsequently granted under this Plan. The shares issued upon
exercise of options granted under this Plan may be authorized and unissued
shares or shares previously acquired or to be acquired by the Corporation. In
the event of any merger, reorganization, consolidation, recapitalization, stock
dividend, other change in corporate structure affecting the Common Stock, or
spin-off or other distribution of assets to shareholders, such substitution or
adjustment shall be made in the aggregate number of shares reserved for issuance
under the Plan, in the number and option price of shares subject to outstanding
options granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject to
any award shall always be a whole number.
4. Administration.
4.1 The Plan will be administered by the Board, or at the Board's
discretion, by the Committee. Other than references in this Section 4.1,
references to the "Committee" in this Plan shall be deemed to refer to the Board
where the Board has not designated a Committee to administer the Plan.
4.2 The Committee will have plenary authority, subject to provisions of
the Plan, to determine when and to whom options will be granted, the term of
each Option, the number of shares covered by it, the participation by the
Optionee in other plans, and any other terms or conditions of each Option. The
Committee shall determine with respect to each grant of an Option whether a
participant shall receive an ISO or an NQO. The number of shares, the term and
the other terms and conditions of a particular kind of Option need not be the
same, even as to options granted at the same time. The
A-4
Committee's recommendations regarding option grants and terms and conditions
thereof will be conclusive.
4.3 The Committee will have the sole responsibility for construing and
interpreting the Plan, for establishing and amending any rules and regulations
as it deems necessary or desirable for the proper administration of the Plan,
and for resolving all questions arising under the Plan. Any decision or action
taken by the Committee arising out of or about the construction, administration,
interpretation and effect of the Plan and of its rules and regulations will, to
the extent permitted by law, be within its absolute discretion, except as
otherwise specifically provided herein, and will be conclusive and binding on
all Optionees, all successors, and any other person, whether that person is
claiming under or through any Optionee or otherwise.
4.4 No member of the Committee will be liable, in the absence of bad
faith, for any act or omission with respect to his services on the Committee.
Service on the Committee will constitute service as a member of the Board, so
that the members of the Committee will be entitled to indemnification and
reimbursement as Board members pursuant to its Bylaws.
4.5 The Committee will regularly inform the Board as to its actions
with respect to all options granted under the Plan and the terms and conditions
and any such options in a manner, at any times, and in any form as the Board may
reasonably request.
5. Participants.
5.1 Participation in this Plan shall be limited to key personnel of the
Corporation or of a Subsidiary, who are salaried employees of the Corporation or
of a Subsidiary and to officers and consultants.
5.2 Subject to other provisions of this Plan, Options may be granted to
the same participants on more than one occasion.
5.3 The Committee's determination under the Plan including, without
limitation, determination of the persons to receive options, the form, amount
and type of such options, and the terms and provisions of Options need not be
uniform and may be made selectively among otherwise eligible participants,
whether or not the participants are similarly situated. Consultants shall
receive only NQOs which shall be subject to the same terms and provisions as are
then in effect with respect to granting of NQOs to officers and employees of the
Company, except that the term of each such option shall expire upon the earlier
of (i) five years, or (ii) such other time as the Committee shall determine.
Subject to the foregoing, all provisions of this Plan not inconsistent with the
foregoing shall apply to NQOs granted to consultants.
A-5
6. Terms and Conditions.
6.1 Each Option granted under the Plan shall be evidenced by a written
agreement, which shall be subject to the provisions of this Plan and to such
other terms and conditions as the Corporation may deem appropriate.
6.2 Each Option agreement shall specify the period for which the Option
thereunder is granted (which in no event shall exceed ten years from the date of
the grant for any NQO or any ISO subject to the pricing requirements of Section
6.3(a) hereof and five years from the date of grant for any ISO subject to the
pricing requirements of Section 6.3(b) hereof) and shall provide that the Option
shall expire at the end of such period.
6.3 The exercise price per share shall be determined by the Committee
at the time any Option is granted. The exercise price of any ISO granted
pursuant to the Plan shall be determined as follows:
(a) For employees who do not own stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary, the ISO exercise price
per share shall not be less than one hundred percent (100%) of Fair
Market Value of the Common Stock of the Corporation on the date the
Option is granted, as determined by the Committee.
(b) For employees who own stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of any Subsidiary, the ISO exercise price
per share shall not be less than one hundred ten percent (110%) of the
Fair Market Value of the Common Stock of the Corporation on the date
the option is granted, as determined by the Committee.
6.4 The aggregate Fair Market Value (determined as of the time the
Option is granted) of the Common Stock with respect to which an ISO under this
Plan or any other plan of the Corporation or its Subsidiaries is exercisable for
the first time by an Optionee during any calendar year shall not exceed
$100,000.
6.5 An Option shall be exercisable at such time or times, and with
respect to such minimum number of shares, as may be determined by the Committee
at the time of the grant; provided, however, that the Committee may, in its
discretion, accelerate the exercise date for any unexercisable options when the
Committee deems such action to be appropriate under the circumstances. The
Option agreement may require, if so determined by the Committee, that no part of
the Option may be exercised until the Optionee shall have remained in the employ
of the Corporation or of a Subsidiary for such period after the date of the
Option as the Committee may specify.
6.6 The Corporation may prescribe the form of legend which shall be
affixed to the stock certificate representing shares to be issued and the shares
shall be subject to the
A-6
provisions of any repurchase agreement or other agreement restricting the sale
or transfer thereof. Such agreements or restrictions shall be noted on the
certificate representing the shares to be issued.
7. Exercise of Option.
7.1 Each exercise of an option granted hereunder, whether in whole or
in part, shall be by written notice thereof, delivered to the Chief Financial
Officer of the Corporation (or such other person as he may designate). The
notice shall state the number of shares with respect to which the Options are
being exercised and shall be accompanied by payment in full for the number of
shares so designated. Shares shall be registered in the name of the Optionee
unless the Optionee otherwise directs in his or her notice of election.
7.2 Such notice shall be accompanied by payment in full of the purchase
price, either by certified or bank check, or by any other form of legal
consideration deemed sufficient by the Committee and consistent with the Plan's
purpose and applicable law, including promissory notes or a properly executed
exercise notice together with irrevocable instructions to a broker acceptable to
the Company to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee. In the case of an ISO, the
right to make a payment in the form of already owned shares may be authorized
only at the time the option is granted. If the terms of an option so permit, an
optionee may elect to pay all or part of the option exercise price by having the
Company withhold from the shares of Stock that would otherwise be issued upon
exercise that number of shares of Stock having a Fair Market Value equal to the
aggregate option exercise price for the shares with respect to which such
election is made. No shares of Stock shall be issued until full payment therefor
has been made. An optionee shall generally have the rights to dividends and
other rights of a shareholder with respect to shares subject to the option when
the optionee has given written notice of exercise and has paid in full for such
shares.
7.3 Upon notification of the amount due and prior to, or concurrently
with, the delivery to the Optionee of a certificate representing any shares
purchased pursuant to the exercise of an option, the Optionee shall promptly pay
to the Corporation any amount necessary to satisfy applicable federal, state or
local withholding tax requirements.
8. Extraordinary Corporate Transactions. New options may be substituted
for the Options granted under the Plan, or the Corporation's duties as to
Options outstanding under the Plan may be assumed, by a corporation other than
the Corporation, or by a parent or subsidiary of the Corporation or such
corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the
Corporation is involved. Notwithstanding the foregoing or the provisions of
Section 9 hereof, in the event such corporation, or parent or subsidiary of the
Corporation or such corporation, does not substitute new Options for, and
substantially equivalent to, the Options
A-7
granted hereunder, or assume the Options granted hereunder, the Options granted
hereunder shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Corporation, or similar occurrence, (ii) upon
any merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, where the Corporation will not be a surviving entity or (iii) upon a
transfer of substantially all of the assets of the Corporation or more than 80%
of the outstanding Common Stock; provided, however, that each Optionee shall
have the right within a 30-day period prior to or concurrently with such
dissolution, liquidation, merger, consolidation, acquisition, separation,
reorganization or similar occurrence, to exercise any unexpired Option granted
hereunder without regard to any installment exercise restrictions.
9. Changes in Corporation's Capital Structure. The existence of
outstanding options shall not affect in any way the right or power of the
Corporation or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's capital
structure or its business, or any merger or consolidation of the Corporation, or
any issuance of Common Stock or subscription rights thereto, or any merger or
consolidation of the Corporation, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the corporation, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise;
provided, however, that if the outstanding shares of Common Stock of the
Corporation shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares or recapitalization, the number and
kind of shares subject to the Plan or subject to any Options theretofore
granted, and the option exercise prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of shares without changing
the aggregate option exercise price.
10. Assignments. Any option granted under this Plan shall be
exercisable only by the Optionee to whom granted during his or her lifetime and
shall not be assignable or transferable otherwise than by will or by the laws of
descent and distribution.
11. Severance: Death: Disability. An Option shall terminate, and no
rights thereunder may be exercised, if the person to whom it is granted ceases
to be employed by the Corporation or by a Subsidiary except that:
11.1 If the employment of the Optionee is terminated by any reason
other than his or her death or disability, the Optionee may at any time within
not more than one month after termination of his or her employment, exercise his
or her option rights but only to the extent they were exercisable by the
Optionee on the date of termination of his or her employment; provided, however,
that if the employment is terminated as a result of the Optionee's deliberate,
willful or gross misconduct as determined by the Committee, all rights under the
Option shall terminate and expire upon such termination.
A-8
11.2 If the Optionee dies while in the employ of the Corporation or a
Subsidiary, or within not more than one month after termination of his or her
employment, the Optionee's rights under the option may be exercised in whole or
in part, without regard to any installment exercise restrictions, at any time
within six months following such death by his or her personal representative or
by the person or persons to whom such rights under the Option shall pass by will
or by the laws of descent and distribution.
11.3 If the employment of the Optionee is terminated because of
permanent disability, the Optionee, or his or her legal representative, may at
any time within not more than six months after termination of his or her
employment, exercise his or her Option rights in whole or in part, without
regard to any installment exercise restrictions.
11.4 Notwithstanding anything contained in sections 11.1, 11.2 and 11.3
to the contrary, no option rights shall be exercisable by anyone after the
expiration of the term of the option.
11.5 Transfers of employment between the Corporation and a Subsidiary,
or between subsidiaries, will not constitute termination of employment for
purposes of any Option granted under this Plan. The Committee may specify in the
terms and conditions of an Option whether any authorized leave of absence or
absence for military or government service or for any other reasons will
constitute a termination of employment for purposes of the option and the Plan.
12. Rights of Participants. Neither the participant nor the personal
representatives, heirs, or legatees of such participant shall be or have any of
the rights or privileges of a shareholder of the corporation in respect of any
of the shares issuable upon the exercise of an Option granted under this Plan
unless and until certificates representing such shares shall have been issued
and delivered to the participant or to such personal representatives, heirs or
legatees.
13. Securities Registration. If any law or regulation of the Securities
and Exchange Commission or of any other body having jurisdiction shall require
the Corporation or the participant to take any action in connection with the
exercise of an option, then notwithstanding any contrary provision of an Option
agreement or this Plan, the date for exercise of such Option and the delivery of
the shares purchased thereunder shall be deferred until the completion of the
necessary action. In the event that the Corporation shall deem it necessary, the
Corporation may condition the grant or exercise of an Option granted under this
Plan upon the receipt of a satisfactory certificate that the Optionee is
acquiring the option or the shares obtained by exercise of the Option for
investment purposes and not with the view or intent to resell or otherwise
distribute such Option or shares. In such event, the stock certificate
evidencing such shares shall bear a legend referring to applicable laws
restricting transfer of such shares. In the event that the Corporation shall
deem it necessary to register under the Securities Act of 1933, as amended, or
any other applicable statute, any Options or any shares with respect to which
A-9
an option shall have been granted or exercised, then the participant shall
cooperate with the Corporation and take such action as is necessary to permit
registration or qualification of such Options or shares.
14. Duration and Amendment.
14.1 There is no express limitation upon the duration of the Plan,
except for the requirement of the Code that all ISOs must be granted within ten
years from the date the Plan is adopted by the Board.
14.2 The Board may terminate or may amend the Plan at any time,
provided, however, that the Board may not, without approval of the shareholders
of the Corporation, (i) increase the maximum number of shares as to which
options may be granted under the Plan, (ii) permit the granting of ISOs at less
than 100% of Fair Market Value at time of grant, or (iii) change the class of
employees eligible to receive Options under the Plan.
15. Approval of Shareholders. This Plan expressly is subject to
approval of shareholders of the Corporation, and if it is not so approved on or
before one year after the date of adoption of this Plan by the Board, the Plan
shall not come into effect, and any options granted pursuant to this Plan shall
be deemed cancelled.
16. Conditions of Employment. The granting of an Option to a
participant under this Plan who is an employee shall impose no obligation on the
Corporation to continue the employment of any participant and shall not lessen
or affect the right of the Corporation to terminate the employment of the
participant.
Adopted by the Board of Directors on April 21, 1994.
Approved by shareholders on March 7, 1995.
A-10
EXHIBIT 11 - COMPUTATION OF PER SHARE NET INCOME
For the Three Months Ended
March 31,
1995 1994
Net income for the period used in
determining net income per share $2,182,826 $ 559,529
Weighted average common and common equivalent shares
used in determining net income per share 4,734,888 4,520,077
Net income per share $ 0.46 $ 0.12
For the Six Months Ended
March 31,
1995 1994
Net income for the period used
in determining net income per share $3,739,339 $1,096,366
Weighted average common and common equivalent shares
used in determining net income per share 4,712,759 4,515,702
Net income per share $ 0.79 $ 0.24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THE 10-Q FOR THE QUARTER ENDED MARCH
31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,211
<SECURITIES> 14,358
<RECEIVABLES> 6,321
<ALLOWANCES> 248
<INVENTORY> 1,843
<CURRENT-ASSETS> 25,015
<PP&E> 11,871
<DEPRECIATION> 5,174
<TOTAL-ASSETS> 34,179
<CURRENT-LIABILITIES> 4,261
<BONDS> 1,232
<COMMON> 182
0
0
<OTHER-SE> 28,061
<TOTAL-LIABILITY-AND-EQUITY> 34,179
<SALES> 21,669
<TOTAL-REVENUES> 21,669
<CGS> 12,879
<TOTAL-COSTS> 12,879
<OTHER-EXPENSES> 3,299
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 5,568
<INCOME-TAX> 1,829
<INCOME-CONTINUING> 3,739
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,739
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
