SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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 0-9040
METRO TEL CORP.
___________________________________________________________________________
(Exact name of small business issuer as specified in its charter)
DELAWARE 11-2014231
____________________________________________________________________________
(State of other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
250 South Milpitas Blvd., Milpitas, California 95035
___________________________________________________________________________
(Address of principal executive offices)
(408) 946-4600
- ---------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X. No .
State the number of shares outstanding of each of the issuer's
classes of common equity as of the latest practicable date:
Common Stock, $.025 par value per share - 2,004,046 shares
outstanding as of October 15, 1996
===========================================================================
Metro Tel Corp.
Statement of Operations
(Unaudited, Note A)
For the three months
ended September 30,
1996 1995
Net Sales $ 1,016,250 $ 923,012
Cost of goods sold 626,614 590,719
____________________________________________________________________________
Gross Profit 389,636 332,293
____________________________________________________________________________
Selling, general and
administrative
expenses 280,385 296,814
Research & development 68,603 72,813
Interest and other income (1,372) (306)
____________________________________________________________________________
347,616 369,321
Earnings (loss) before provision
for income taxes 42,020 (37,028)
Provision (credit) for
income taxes 16,800 (14800)
____________________________________________________________________________
Net Earnings $ 25,220 $ (22,228)
============================================================================
Earnings per common
share (Note B) $ .01 $ (.01)
============================================================================
Weighted average number
of shares
outstanding (Note B) 2,004,046 2,004,046
============================================================================
Metro Tel Corp.
Balance Sheets
(Unaudited, Note A)
ASSETS
September 30, June 30,
1996 1996
Current Assets
Cash and cash equivalents $ 367,974 $ 411,924
Accounts receivable, net 501,363 716,103
Inventories 1,553,195 1,413,379
Prepaid expenses and other 44,644 14,254
Deferred income taxes 31,000 31,000
____________________________________________________________________________
Total current assets 2,498,176 2,586,660
Property and equipment - at cost
Machinery and equipment 478,110 470,433
Furniture and fixtures 88,963 88,414
Leasehold improvements 8,765 8,765
____________________________________________________________________________
575,838 567,612
Less accumulated depreciation 485,418 477,054
____________________________________________________________________________
90,420 90,558
Other assets
Goodwill, net of accumulated
amortization of $376,893
on September 30, 1996 and
$369,438 on June 30, 1996 815,807 823,262
Other, net 21,233 21,562
____________________________________________________________________________
837,040 844,824
$3,425,636 $3,522,042
==========================================================================
Metro Tel Corp.
Balance Sheets
(Unaudited, Note A)
LIABILITIES AND
STOCKHOLDERS' EQUITY
September 30, June 30,
1996 1996
Current Liabilities
Accounts payable $ 159,343 $ 209,968
Accrued liabilities 117,330 174,204
Income taxes payable 4,739 18,866
_____________________________________________________________________________
Total current liabilities 281,412 403,038
Defrred Income Taxes 14,000 14,000
Stockholders' Equity
Preferred stock, $1 par value,
200,000 shares authorized,
none issued or outstanding
Common stock, $.025 par value,
6,000,000 shares authorized,
2,030,296 shares issued,
2,004,046 shares outstanding 50,757 50,757
Additional paid-in capital 2,107,173 2,107,173
Retained earnings 1,041,044 1,015,824
_____________________________________________________________________________
3,198,974 3,173,754
Less 26,250 shares of treasury
stock - at cost (68,750) (68,750)
_____________________________________________________________________________
3,130,224 3,105,004
_____________________________________________________________________________
$3,425,636 $3,522,042
=============================================================================
Metro Tel Corp.
Statements of Cash Flows
(Unaudited, Note A)
For the three months ended
September 30,
1996 1995
Cash flows from operating activities
Net earnings (loss) $ 25,220 $ (22,228)
Adjustments to reconcile net earnings
to cash provided by operating
activities
Depreciation and amortization 16,147 18,022
(Increase) decrease in operating assets
Accounts receivable 214,740 166,689
Inventories (139,816) (16,609)
Prepaid expenses and other (30,390) (55,753)
Increase (decrease) in operating
liabilities
Accounts payable (50,625) (58,608)
Accrued liabilities (56,873) 17,392
Income taxes payable (14,127) (30,965)
____________________________________________________________________________
Net cash (used) provided
by operating activities (35,724) 17,940
____________________________________________________________________________
Cash flows from investing activities
Capital expenditures (8,226) (15,556)
____________________________________________________________________________
Net cash used in
investing activities (8,226) (15,556)
___________________________________________________________________________
Net increase (decrease) in cash
and cash equivalents (43,950) 2,384
Cash and cash equivalents at beginning
of year 411,924 297,157
____________________________________________________________________________
Cash and cash equivalents at end of
period $ 367,974 $ 299,541
============================================================================
Supplement disclosures of cash flow
information
Cash paid during the period for
Income taxes $ 30,927 $ 29,540
[FN]
METRO TEL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - General: The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-QSB
related to interim period financial statements. Accordingly, these
financial statements do not include certain information and footnotes
required by generally accepted accounting principles for complete
financial statements. However, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary in order to
make the financial statements not misleading. The results of operations
for interim periods are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the
Company's financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended June 30, 1996.
Note B - Earnings Per Common Share: Earnings per common share is based upon
the weighted average number of shares of common stock outstanding during the
year. Stock options have not been included in the calculation since their
inclusion would not be materially dilutive.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Liquidity and Capital Resources
During the three month period ended September 30, 1996, cash
decreased by $43,950. The decrease included $35,724 used by operating
activities and $8,226 used to purchase capital assets. Cash generated by
profits ($25,220) and depreciation ($16,147) were used in operations to
support changes in operating assets and liabilities, primarily a
temporary increase in inventories ($139,816) and decrease in liabilities
($121,625), offset in part by a reduction in accounts receivable ($214,740).
The Company believes that the cash which it expects to generate from
operations will be sufficient to meet operational needs.
Results of Operations
Net sales inreased by $93,238 (10.1%) in the first quarter of fiscal
1997 from the same period in fiscal 1996. The increase in sales in the
current year's first quarter was mainly due to increased sales of new test
equipment products to the Regional Bell Operating Companies (RBOCs). Prices
remained constant. Sales of telephone test equipment increased by $155,559
(19.8%) in the first quarter of fiscal 1997 from the same period in fiscal
1996, with increases in sales of outside plant test sets (23.6%) and
installer's test sets (53.4%) being offset, in part, by decreases in
transmission test equipment (49.0%). Sales of customer's premise equipment
decreased by $32,514 (46.9%) during the first three months of fiscal 1997
when compared to the same period of fiscal 1996, which period included
substantial sales of CSU/DSU products to a large interexchange carrier
during fiscal 1996. Sales of miscellaneous products, parts and repairs
decreased by $27,200 (39.9%).
The Company's gross profit margin, expressed as a percentage of sales,
improved to 38.3% in the first quarter of fiscal 1997 from 36.0% for the same
period of fiscal 1996. The improvement was mainly due to the increased level
of sales which permitted the Company to better absorb its fixed expenses and
to the retirement of the VP of Manufacturing which reduced indirect labor
expenses.
Selling, general and administrative expenses decreased in dollar amount
by $16,429 (5.5%) for the first quarter of fiscal 1997 from the comparable
period of fiscal 1996. The decrease was mainly due to a reduction in sales
expense (19.1%) which was partially offset by an incraese in certain
administration expenses (3.6%). The improvement in the percentage of these
categories of expenses to sales (to 27.6% in the first quarter of fiscal
1997 compared to 32.2% in the first quarter of fiscal 1996) was due to a
combination of the decreased level of expense and increased level of sales.
Research and development expenses decreased by $4,210 (5.8%) due to
salaries associated with staff changes.
PART 11 - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1996 Annual Meeting of Stockholders held
on November 6, 1996, stockholders re-elected the Company's
existing Board of Directors by the following votes:
For Withheld
Michael Epstein 1,452,234 9,585
Lloyd Frank 1,452,234 9,585
Venerando J. Indelicato 1,452,722 9,097
Michael Michaelson 1,452,722 9,097
Item 7. Exhibits and Reports on Form 8-K
(a) Exhibits
10. The Company's 1991 Stock Option Plan, as amended. This
exhibit is designated as a compensatory plan
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended September 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
METRO-TEL CORP.
Date: November 12, 1996 By: Venerando J. Indelicato
President, Treasurer and
Principal Financial and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit Number Description
10. The Company's 1991 Stock Option Plan. This exhibit is
designated as a compensatory plan.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 267,974
<SECURITIES> 100,000
<RECEIVABLES> 511,363
<ALLOWANCES> 10,000
<INVENTORY> 1,553,195
<CURRENT-ASSETS> 2,498,176
<PP&E> 575,838
<DEPRECIATION> 485,418
<TOTAL-ASSETS> 3,425,636
<CURRENT-LIABILITIES> 281,412
<BONDS> 0
<COMMON> 50,757
0
0
<OTHER-SE> 3,093,467
<TOTAL-LIABILITY-AND-EQUITY> 3,425,636
<SALES> 1,016,250
<TOTAL-REVENUES> 1,016,250
<CGS> 626,614
<TOTAL-COSTS> 347,616
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 42,020
<INCOME-TAX> 16,800
<INCOME-CONTINUING> 25,220
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,220
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
1991 STOCK OPTION PLAN
OF
METRO-TEL CORP.
(AS AMENDED OCTOBER 25, 1996)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to promote the interests of Metro-Tel Corp., a Delaware corporation
(the "Company"), and its present and future subsidiary corporations, as defined
in Paragraph 19 ("Subsidiaries"), in attracting and retaining key employees
(including directors and officers who are key employees) by enabling them to
acquire or increase a proprietary interest in the Company, to benefit from
appreciation in the value of the Company's Common Stock and, thus, participate
in the long-term growth of the Com pany. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options ("NQSOs"), but the Company makes no warranty as to the qualification of
any option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of Common Stock, $.025 par value per share,
of the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 250,000. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan. Subject to the provisions of Paragraph 13, any shares of Common Stock
subject to an option which for any reason expires, is canceled or is terminated
unexercised or which ceases for any reason to be exercisable shall again become
available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors which, to the extent it shall determine may delegate its
powers with respect to the administration of the Plan to a Committee of the
Board of Directors of the Company consisting of not less than two directors,
each of whom shall be a "non-employee director" within the meaning of Rule 16b-3
(or any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). References in the Plan to
determinations or actions by the Committee shall be deemed to include
determinations and actions by the Board of Directors.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the key employees who
shall receive options; the times when they shall receive options; whether an
option shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole, in part or
in installments, and,
<PAGE>
if in installments, the number of shares of Common Stock to be subject to each
installment, the date each installment shall become exercisable and whether the
installments shall be cumulative; whether to accelerate the date of exercise of
any option or installment; whether shares of Common Stock may be issued on
exercise of an option as partly paid, and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price of each option; the form of payment of the
exercise price; the amount, if any, necessary to satisfy the Company's
obligation to withhold taxes; whether to restrict the sale or other disposition
of the shares of Common Stock acquired upon the exercise of an option and to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
Contract referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company and its Parent and Subsidiaries, to financial objectives for
the Company, a Subsidiary, a division, a product line or other category, and/or
the period of continued employment of the optionee with the Company, its Parent
or its Subsidiaries, and to determine whether such contingencies have been met;
to construe the respective Contracts and the Plan; with the consent of the
optionee, to cancel or modify an option, provided such option as modified would
be permitted to be granted on such date under the terms of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; and to
make all other determinations necessary or advisable for administering the Plan.
The determinations of the Committee on the matters referred to in this Paragraph
3 shall be conclusive.
4. ELIGIBILITY. The Committee may, consistent with the purposes of
the Plan, grant options from time to time, to key employees (including directors
and officers who are key employees) of the Company or any of its Subsidiaries.
Options granted shall cover such number of shares of Common Stock as the
Committee may determine; provided, however, that the aggregate market value
(determined at the time the option is granted) of the shares of Common Stock for
which any eligible person may be granted ISOs under the Plan or any other plan
of the Company, or of a Parent or a Subsidiary of the Company, which are
exercisable for the first time by such optionee during any calendar year shall
not exceed $100,000. The $100,000 ISO limitation shall be applied by taking ISOs
into account in the order in which they were granted. Any option (or the portion
thereof) granted in excess of such amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee; provided, however, that
the exercise price shall not be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and further provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of the Common Stock on any day shall be (a) if
the principal market for the Common Stock is a national securities exchange, the
average between the high and low sales prices of the Common Stock on such day as
reported by such exchange or on a consolidated tape reflecting transactions on
such exchange, (b) if the principal market for the
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<PAGE>
Common Stock is not a national securities exchange and the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), and (i) if actual sales price information is available with
respect to the Common Stock, the average between the high and low sales prices
of the Common Stock on such day on NASDAQ, or (ii) if such information is not
available, the average between the highest bid and the lowest asked prices for
the Common Stock on such day on NASDAQ, or (c) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is not
quoted on NASDAQ, the average between the highest bid and lowest asked prices
for the Common Stock on such day as reported on the NASDAQ OTC Bulletin Board
Service or by National Quotation Bureau, Incorporated or a comparable service;
provided that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available for such
day, the fair market value of the Common Stock shall be determined by the
Committee by any method consistent with applicable regulations adopted by the
Treasury Department relating to stock options. The determination of the
Committee shall be conclusive in determining the fair market value of the stock.
6. TERM OF OPTIONS. The term of each option granted pursuant to the
Plan shall be such term as is established by the Committee, in its sole
discretion, at or before the time such option is granted; provided, however,
that the term of each ISO granted pursuant to the Plan shall be for a period not
exceeding ten (10) years from the date of grant thereof, and further, provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than ten (10%) percent
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five (5) years from the date of grant. Options shall be
subject to earlier termination as hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company (attention: President) at its principal office, stating which ISO or
NQSO is being exercised, specifying the number of shares of Common Stock as to
which such option is being exercised and accompanied by payment in full of the
aggregate exercise price therefor (or the amount due on exercise if the Contract
permits installment payments) (a) in cash or by certified check or (b) with the
consent of the Committee (in the Contract or otherwise), with previously
acquired shares of Common Stock having an aggregate fair market value, on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock. The Committee may, in its discretion, permit payment of the exercise
price of options by delivery of a properly executed exercise notice, together
with a copy of irrevocable instructions from the Optionee to a broker
(acceptable to the Committee) to deliver promptly to the Company the amount of
sale or loan proceeds to pay such exercise price. To facilitate the foregoing,
the Company may enter into agreements for coordinated procedures with one or
more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of
-3-
<PAGE>
issuance of a stock certificate to him for such shares; provided, however, that
until such stock certificate is issued, any option holder using previously
acquired shares of Common Stock in payment of an option exercise price shall
continue to have the rights of a stockholder with respect to such previously
acquired shares.
No option may be exercised in an amount less than 100 shares (or the
remaining shares then covered by the option if less than 100 shares). In no case
may a fraction of a share of Common Stock be purchased or issued under the Plan.
8. TERMINATION OF EMPLOYMENT. Any holder of an option whose
employment with the Company (and its Parent and Subsidiaries) has terminated for
any reason other than his death or Disability (as defined in Paragraph 19) may
exercise such option, to the extent exercisable on the date of such termination,
at any time within three months after the date of termination, but not
thereafter and in no event after the date the option would otherwise have
expired; provided, however, that if his employment shall be terminated either
(a) for cause, or (b) without the consent of the Company, said option shall
terminate immediately upon termination of employment. Options granted under the
Plan shall not be affected by any change in the status of the holder so long as
he continues to be a full-time employee of the Company, its Parent or any of the
Subsidiaries (regardless of having been transferred from one corporation to
another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or interfere in any way with the right of the
Company, its Parent or any of its Subsidiaries to terminate the employee's
employment at any time for any reason whatsoever without liability to the
Company, its Parent or any of its Subsidiaries.
9. DISABILITY OR DEATH OF AN OPTIONEE. Any optionee whose employment
has terminated by reason of Disability may exercise his option, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.
If an optionee dies (a) while he is employed by the Company, its
Parent or any of its Subsidiaries, (b) within three months after the termination
of his employment (unless such termination
-4-
<PAGE>
was for cause or without the consent of the Company or by reason of Disability)
or (c) within one year following the termination of his employment by reason of
Disability, the option may be exercised, to the extent exercisable on the date
of his death, by his executor, administrator or other person at the time
entitled by law to his rights under such option, at any time within one year
after death, but not thereafter and in no event after the date the option would
otherwise have expired.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require in its
discretion, as a condition to the exercise of any option, that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b) in
the opinion of counsel for the Company, there is an exemption from registration
under the Securities Act for the issuance of such shares. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act. The Committee may require the optionee to execute and
deliver to the Company his representation and warranty, in form and substance
satisfactory to the Committee, that the shares of Common Stock to be issued upon
the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof. In addition, the Committee may require the optionee to represent and
warrant in writing that any subsequent resale or distribution of shares of
Common Stock by such optionee will be made only pursuant to (i) a Registration
Statement under the Securities Act which is effective and current with respect
to the shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel, in form
and sub stance satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine in its
discretion that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an option or
the issue of shares of Common Stock thereunder, such option may not be exercised
in whole or in part unless such listing, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwith standing any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, stock split, stock combination,
recapitalization, merger or consolidation in which the Company is the surviving
corporation, reorganization or the like, the aggregate number and kind of shares
subject to the Plan, the aggregate number and kind of shares
-5-
<PAGE>
subject to each outstanding option and the exercise price thereof shall be
appropriately adjusted by the Board of Directors, whose determination shall be
conclusive.
In the event of (a) the liquidation or dissolution of the Company, (b)
a merger or consolidation in which the Company is not the surviving corporation,
or (c) any other capital reorganization in which more than 50% of the shares of
Common Stock of the Company entitled to vote in the election of directors are
exchanged, outstanding options shall terminate, unless other provision is made
therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on September 26, 1991. No option may be granted under the
Plan after September 25, 2001. The Board of Directors, without further approval
of the Company's stockholders, may at any time suspend or terminate the Plan, in
whole or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with applicable requirements of the Securities Act and the Exchange Act, and to
conform to any change in applicable law or to regulations or rulings of
administrative agencies; provided, however, that no amendment shall be effective
without the requisite prior or subsequent stockholder approval which would (a)
change the class of those eligible to receive options, (b) except as
contemplated in Paragraph 12, increase the maximum number of shares of Common
Stock for which options may be granted under the Plan, (c) extend the term of
the 1991 Plan or (d) materially increase the benefits to participants under the
Plan. No termination, suspension or amendment of the Plan shall, without the
consent of the holder of an existing option affected thereby, adversely affect
his rights under such option. The power of the Committee to construe and
administer any options granted under the Plan prior to the termination or
suspension of the Plan nevertheless shall continue after such termination or
during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may (i) require the holder of an
option to pay, or the Company may withhold, cash, and/or (ii) with the consent
of the Committee (in the Contract or otherwise), accept previously acquired
shares of Common Stock and/or may withhold shares of Common Stock to be issued
with respect to the option having an aggregate fair market value determined on
the date of exercise of the option or date of disposition of the shares issued
upon exercise of the option determined in accordance with Paragraph 5, in each
case equal to the amount which it determines is necessary to satisfy its
obligation to withhold Federal, state and local income taxes or other taxes
incurred by reason of the grant or exercise of an option or the disposition of
the underlying shares of Common Stock, as the case may be. The Company shall not
be required to issue
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any shares of Common Stock pursuant to any such option until all required
payments have been made.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend
or legends upon the certificates for shares of Common Stock issued upon exercise
of an option under the Plan and may issue such "stop transfer" instructions to
its transfer agent in respect of such shares as it determines, in its
discretion, to be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act,
(b) implement the provisions of the Plan or any agreement between the Company
and the optionee with respect to such shares of Common Stock, or (c) permit the
Company to determine the occurrence of a "disqualifying disposition," as
described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for such corporate purposes as the
Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent Corporation"
shall mean any corporation which engages with the Company, its Parent or any
Subsidiary in a transaction to which Section 424(a) of the Code applies (or
would apply if the option assumed or substituted were an ISO), or any Parent or
any Subsidiary of such corporation.
(d) Disability. The term "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code.
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20. GOVERNING LAW. The Plan, such options as may be granted hereunder
and all related matters shall be governed by, and construed in accordance with,
the laws of the State of Delaware.
21. PARTIAL INVALIDITY. The invalidity or illegality of any provision
herein shall not affect the validity of any other provision.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy at the next meeting of the
Company's stockholders at which a quorum is present. No options granted
hereunder may be exercised prior to such approval, provided that the date of
grant of any options granted hereunder shall be determined as if the Plan had
not been subject to such approval. Notwithstanding the foregoing, if the Plan is
not approved by a vote of the stockholders of the Company on or before September
25, 1992, the Plan and any options granted hereunder shall terminate.
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