FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-545
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Moore Products Co.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-1427830
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Spring House, PA 19477
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (215) 646-7400
----------------------------
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 October 31, 1997, the number of shares of Registrant's Common Stock
outstanding was 2,588,828.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30
---------------------------
1997 1996
------------ -------------
Net sales $116,138,000 $107,105,000
Cost of sales 65,577,000 61,870,000
------------ ------------
Gross profit 50,561,000 45,235,000
Selling, research and development, administrative
and general expenses 44,386,000 43,276,000
Interest expense 170,000 363,000
Loss on joint-venture restructuring (Note D) -- 1,000,000
Gain from early retirement program (Note C) -- (1,300,000)
Other income (147,000) (93,000)
------------ ------------
Income before income taxes 6,152,000 1,989,000
Income tax provision 2,262,000 1,349,000
------------ ------------
Net income $ 3,890,000 $ 640,000
============ ============
Earnings per common share:
Primary $1.44 $.24
===== ====
Fully diluted $1.40 $.24
===== ====
See Notes to Condensed Consolidated Financial Statements.
2
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MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30
----------------------------
1997 1996
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Net sales $ 40,423,000 $ 35,982,000
Cost of sales 22,466,000 20,528,000
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Gross profit 17,957,000 15,454,000
Selling, research and development, administrative
and general expenses 14,873,000 14,646,000
Interest expense 3,000 110,000
Other income (84,000) (31,000)
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Income before income taxes 3,165,000 729,000
Income tax provision 1,378,000 377,000
------------ ------------
Net income $ 1,787,000 $ 352,000
============ ============
Earnings per common share:
Primary $.66 $.13
==== ====
Fully diluted $.64 $.13
==== ====
See Notes to Condensed Consolidated Financial Statements.
3
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MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
ASSETS 1997 1996
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CURRENT ASSETS (Unaudited) (Note A)
Cash and cash equivalents $ 4,622,000 $ 4,066,000
Trade accounts receivable 33,926,000 30,541,000
Inventories 21,806,000 21,479,000
Prepaid expenses and deferred taxes 3,715,000 3,608,000
------------ ------------
TOTAL CURRENT ASSETS 64,069,000 59,694,000
PROPERTY, PLANT AND EQUIPMENT 59,436,000 58,183,000
Less: Accumulated depreciation (43,758,000) (41,639,000)
------------ ------------
15,678,000 16,544,000
OTHER ASSETS 11,035,000 9,809,000
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$ 90,782,000 $ 86,047,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank $ -- $ 4,230,000
Accounts payable 15,046,000 12,370,000
Accrued compensation 4,100,000 2,638,000
Advances from customers 6,471,000 5,129,000
------------ ------------
TOTAL CURRENT LIABILITIES 25,617,000 24,367,000
OTHER LIABILITIES 7,126,000 7,126,000
STOCKHOLDERS' EQUITY
Preferred Stock, 5% cumulative, voting
and convertible, par value $1 per share:
Authorized - 325,000 shares
Issued and outstanding - 175,950 shares 176,000 176,000
Common Stock, par value $1 per share:
Authorized - 7,500,000 shares
Outstanding - 2,588,728 shares
and 2,585,972 shares 2,589,000 2,586,000
Capital in excess of par value 10,923,000 10,885,000
Retained earnings 46,051,000 42,200,000
Foreign currency translation adjustments (1,700,000) (1,293,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 58,039,000 54,554,000
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$ 90,782,000 $ 86,047,000
============ ============
See Notes to Condensed Consolidated Financial Statements.
4
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MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
--------------------------
1997 1996
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OPERATING ACTIVITIES:
Net income $ 3,890,000 $ 640,000
Noncash (income) expenses:
Depreciation 2,619,000 2,564,000
Deferred income taxes (209,000) 208,000
Pension and other postretirement
benefits (Note C) (1,226,000) (1,861,000)
Changes in operating assets and liabilities:
Trade accounts receivable (3,385,000) 1,051,000
Inventories (327,000) (1,612,000)
Accounts payable 2,676,000 (1,146,000)
Accrued compensation 1,462,000 44,000
Advances from customers 1,342,000 2,202,000
Prepaid expenses 102,000 435,000
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6,944,000 2,525,000
INVESTING ACTIVITY:
Net purchase of property, plant and equipment (1,904,000) (2,578,000)
FINANCING ACTIVITIES:
Decrease in notes payable to bank (4,230,000) (176,000)
Proceeds from exercise of stock options 41,000 12,000
Dividends paid on Preferred Stock (39,000) --
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(4,228,000) (164,000)
Effect of exchange rate changes (256,000) 44,000
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 556,000 (173,000)
Cash and cash equivalents at beginning of year 4,066,000 1,103,000
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CASH AND CASH EQUIVALENTS
END OF PERIOD $ 4,622,000 $ 930,000
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MOORE PRODUCTS CO.
September 30, 1997
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in compliance with the Instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1997, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
The balance sheet at December 31, 1996, has been derived from the audited
financial statements at that date.
Primary earnings per share have been computed using the average number of shares
of Common Stock and dilutive Common Stock equivalents (stock options)
outstanding during the period and subtracting the Preferred Stock dividends,
declared or cumulative even though not declared, from net income. Unless
antidilutive, fully diluted earnings per share are computed based upon the
assumption that the outstanding shares of Preferred Stock were converted into
Common Stock as of the beginning of the period and that no Preferred Stock
dividends were paid. The average number of common shares used to compute primary
earnings per share were 2,691,563 shares and 2,620,191 shares for the nine month
periods ended September 30, 1997 and 1996, respectively; and 2,690,534 shares
and 2,617,204 shares for the three month periods ended September 30, 1997 and
1996, respectively. The average number of common shares used to compute fully
diluted earnings per share were 2,777,128 shares and 2,690,446 shares for the
nine month periods ended September 30, 1997 and 1996, respectively; and
2,780,452 shares and 2,687,885 shares for the three month periods ended
September 30, 1997 and 1996, respectively.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is effective for financial statements issued for
periods ending after December 15, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be excluded. The
impact is expected to result in increases in primary earnings per share of $.06
per share and $.03 per share for the nine and three month periods ended
September 30, 1997 and no material change for the nine and three month periods
ended September 30, 1996.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MOORE PRODUCTS CO.
September 30, 1997
Note A - Basis of Presentation (continued)
The impact of Statement 128 on the calculation of fully diluted earnings per
share for these periods is not expected to be material.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
Certain reclassifications have been made in prior periods' financial statements
in order to conform with the current-period basis of presentation.
Note B - Inventories
The components of inventory consist of the following:
September 30 December 31
1997 1996
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Completed instruments $ 4,346,000 $ 4,554,000
Finished parts 9,704,000 11,091,000
Work in process 7,216,000 4,957,000
Raw material 540,000 877,000
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$21,806,000 $21,479,000
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Note C - Gain from Early Retirement Program
During the quarter ended June 30, 1996, the Company recorded an estimated,
special, pretax net gain of $1,300,000 for the combined net effect of
settlements, curtailments and special termination benefits in connection with an
early retirement program offered to certain eligible employees in the United
States.
Note D - Loss on Joint-Venture Restructuring
During the quarter ended June 30, 1996, the Company recognized a special pretax
charge of $1,000,000 consisting principally of a provision to write-off certain
carrying values of assets related to its joint-venture investment in Brazil. The
provision was based on a special review of the operations and decisions to
refocus business activities in Brazil and certain South American markets.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Sales for the third quarter of 1997 were $40,423,000 compared to $35,982,000 for
the same period last year, a 12% increase. Year to date sales for the nine
months ended September 30, 1997 were $116,138,000 compared to $107,105,000 for
the same period last year, an 8% increase. These increases are primarily
attributed to sales of control systems in the United States and the United
Kingdom.
Order bookings for the third quarter of fiscal 1997 were $42,300,000 compared to
$36,100,000 for the same period last year, a 15% increase. Year-to-date order
bookings grew by 9% to $120,000,000 from $109,800,000 last year. These increases
are primarily attributed to orders placed for control systems products and
services. The consolidated backlog of unshipped orders as of September 30, 1997
was $47,900,000 compared to $39,800,000 as of September 30, 1996.
Gross profit for the quarter was $17,957,000, or 44% of sales, compared to
$15,454,000, or 43% of sales, for the third quarter of 1996. Gross profit
year-to-date was $50,561,000, or 44% of sales, compared to $45,235,000, or 42%
of sales, in 1996. Both the quarter and year-to-date increases in gross margin
percentages were attributable to higher levels of sales and production volume,
and improved manufacturing efficiencies.
Selling, research and development, administrative and general expenses for the
quarter were $14,873,000, or 37% of sales, compared to $14,646,000, or 41% of
sales, in 1996. Such expenses year-to-date were $44,386,000, or 38% of sales,
compared to $43,276,000, or 40% of sales, in 1996. The percent to sales decrease
in these expenses was due to the substantially fixed nature of these expenses
and the higher sales volume. The amount of increase in these expenses was
attributed to higher payroll-related costs and selling expenses needed to
support the Company's growth.
The 1996 nine month operating results included a $1,300,000 gain resulting from
the settlement of pension benefits relating to an early retirement offer and a
$1,000,000 loss due to the write-off of assets related to a joint venture in
Brazil.
Interest expense for the third quarter of 1997 was $3,000 compared to $110,000
for the third quarter last year. Interest expense year-to-date was $170,000
compared to $363,000 in 1996. The decrease from last year was attributed to a
reduction in borrowing levels in 1997.
8
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The Company's year-to-date effective tax rate was 37% of pre-tax income compared
to 68% for the first nine months of 1996. The fluctuation in the rates was
attributable to a changing mix of operating results in countries for which loss
benefit carryovers are available. Statutory rates are applied to pretax income
in the United States. Consistent with previous reporting periods, tax benefits
for losses incurred by certain international subsidiaries in tax jurisdictions
outside the United States have not been fully recognized for financial reporting
purposes because the realization of such benefits is not presently assured.
Net income for the third quarter ended September 30, 1997 was $1,787,000 or
$0.66 per share compared to net income of $352,000 or $0.13 per share for the
third quarter of 1996. For the nine months ended September 30, 1997, net income
was $3,890,000 or $1.44 per share. This compares with net income of $640,000 or
$0.24 per share for the same period last year. The increased net income for the
quarter and year-to-date was driven by higher volume of shipments.
Liquidity and Capital Resources
Cash and cash equivalents increased during the first nine months of 1997 by
$556,000 primarily from $6,944,000 of cash generated from operations, offset by
a $4,230,000 payoff of bank borrowings and $1,904,000 in capital expenditures.
Capital expenditures related primarily to personal computers and network
hardware in support of ongoing product development and sales promotion.
The Company generated $6,944,000 in cash from operations for the first nine
months of 1997. The $5,074,000 in cash generated from net income before non-cash
income and expenses was offset by net increases in other elements of working
capital, especially trade accounts receivable and accounts payable, in response
to the growth in sales volume.
Cash and cash equivalents which amounted to $4,622,000 at September 30, 1997 are
expected to be used to fund working capital needs and further capital
expenditures. The Company had no outstanding advances under credit arrangements
at September 30, 1997. While the Company does not anticipate utilizing advances
from current bank lines of credit for the balance of 1997, it is expected that
current revolving credit facilities of approximately $16,000,000 will be
extended beyond the current terms for one year.
9
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Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock. This Statement is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. The basic
earnings per share as defined by SFAS No. 128 for net income for the three and
nine month periods ending September 30, 1997 would have been $0.69 and $1.50,
respectively. Basic income per share for the three and nine month periods ending
September 30, 1996 would not change from amounts previously reported. The
diluted earnings per share as defined by SFAS No. 128 approximates the
historically presented earnings per share.
10
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number Description
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3 (i) Restated Articles of Incorporation.
10a* 1994 Incentive Stock Option and Non-qualified Stock Option Plan, as
amended.
10b* 1997 Non-Employee Directors' Equity Incentive Plan.
27 Financial Data Schedule.
(Schedule submitted in electronic format only.)
* Indicates a management contract, arrangement or compensatory plan.
--------------------
(b) No reports on Form 8-K were filed during the most recently completed
fiscal quarter.
11
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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.
MOORE PRODUCTS CO.
Dated: November 13, 1997 By: /s/ R. E. Wisniewski
------------------------------------
As Secretary and Treasurer and as
Principal Financial and Accounting Officer
12
RESTATED ARTICLES OF INCORPORATION
OF
MOORE PRODUCTS CO.
(A Pennsylvania Business Corporation)
In compliance with the requirements of Sections 1914 and 1915 of the
Pennsylvania Business Corporation Law of 1988, as amended, (15 Pa. C.S.A.
ss.1914 and ss.1915), Moore Products Co. hereby restates its Articles of
Incorporation, as heretofore amended, in their entirety to read as follows:
First. The name of the corporation is Moore Products Co.
Second. The location and post office address of its registered office in this
Commonwealth is Sumneytown Pike, Spring House, Montgomery County,
Pennsylvania 19477.
Third. To manufacture, sell and deal in instruments and gages of any and all
kinds, with parts and supplies therefor, and to have all powers
necessary and essential thereto.
Fourth. The term of its existence is perpetual.
Fifth. The aggregate number of shares of capital stock which the Company shall
have authority to issue is 7,825,000 shares divided into 325,000 shares
of Preferred Stock of the par value of $1 per share (the "Preferred
Shares"), and 7,500,000 shares of Common Stock of the par value of
$1 per share (the "Common Shares").
The voting rights, preferences, qualifications, privileges,
limitations, options, conversion rights and other special rights of
each class, and the provisions authorizing the Board of Directors of
the Company (the "Board") to create and designate series and to fix
and determine certain variations in the relative rights and
preferences as between series of Preferred Shares are as follows:
1. Series. Preferred Shares may be divided into and issued in one
or more series from time to time as herein provided. The Preferred
Shares of all series shall be identical, except as to the following
rights and preferences, in respect of any or all of
<PAGE>
which there may be variations as between series, namely:
(a) The designation of each series and the number of shares
initially included in or thereafter added to such series;
(b) The rate of dividend (hereinafter called the "Dividend Rate")
specified for such series, payable as set forth herein;
(c) The price, which may vary according to the time and
circumstances of redemption (such price being hereinafter called the
"Redemption Price"), at which shares of such series may be redeemed in
accordance with the provisions for redemption set forth herein; and
(d) The price, which may vary according to the time and
circumstances of conversion, at which the shares of such series may be
converted into Common Shares (such price being hereinafter called the
"Conversion Price"), in accordance with the provisions for conversion
and subject to adjustment as set forth herein.
The designation of each series (which shall be such as to
distinguish the shares of such series from the shares of all other
series and classes) and the relative rights and preferences thereof
shall be specified prior to the issuance thereof by resolutions of the
Board and as provided by law, except that the relative rights and
preferences of the Series A Preferred Shares shall be as specified in
these Articles.
2. Dividends. The Preferred Shares shall entitle the holders to
receive, as and when declared by the Board, cumulative dividends at
the Dividend Rate specified for the series and no more, out of funds
legally available therefor, in cash or (subject to the limitations set
forth below) in Preferred Shares, in preference to the holders of the
Common Shares. Dividends on the Preferred Shares may be declared and
paid quarterly, semi-annually or annually, in the discretion of the
Board on such dates as it may determine; and if full cumulative
dividends in cash or in Preferred Shares shall not have been paid or
declared and set apart for payment for the first three fiscal quarters
in any year, no dividend shall be paid or distribution made thereafter
on the Common Shares
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(other than dividends payable in Common Shares) until full cumulative
dividends in cash or in Preferred Shares for such year and all prior
periods shall have been paid or declared and set apart for payment. If
in any year there shall be paid one or more stock dividends payable in
Common Shares upon the outstanding Common Shares, there may also be
declared and paid an equal number of stock dividends payable in
Preferred Shares upon the outstanding Preferred Shares in lieu of
cash; but in no case shall any such dividend on the Preferred Shares
be at a percentage rate higher than the rate of such dividend on the
Common Shares, nor shall the aggregate of cash and stock dividends
paid on any series of Preferred Shares exceed in percentage of par
value the Dividend Rate specified for such series, on a cumulative
basis, taking the Preferred Shares distributed in the dividend at a
value of $1 per share. Preferred Shares issued in a stock dividend may
be of a series different from any series theretofore outstanding or,
in the discretion of the Board, may constitute additional shares of
any series. Subject to the foregoing provisions, dividends on the
Common Shares shall be payable as and when declared by the Board in
its discretion out of funds legally available therefor.
3. Voting Rights. The Preferred Shares of each series shall
entitle the holders to five (5) votes per share, and the Common Shares
shall entitle the holders to one (1) vote per share, in the election
of directors and all other corporate matters submitted to a
shareholders' vote, without voting separately by series or classes
except as otherwise required by law or by the Company's Articles of
Incorporation or Bylaws. Shareholders shall have no right to cumulate
their votes in the election of directors.
4. Redemption and Retirement of Preferred Shares. The Preferred
Shares of each series shall be subject to redemption at the option of
the Company, as a whole at any time or in part from time to time, on
thirty (30) days' written notice to the holders of the shares to be
redeemed, at the Redemption Price specified for the series plus an
amount equal to all unpaid cumulative dividends accrued thereon to the
date fixed for redemption in the notice, whether or not earned. If
less than all the Preferred Shares are to be redeemed, those to be
redeemed shall be selected by lot or pro rata or by such other
equitable method as the Board shall direct. If the Company shall
deposit
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in a bank, bank and trust company or national banking association in
the City of Philadelphia sufficient funds to pay the full Redemption
Price of the shares to be redeemed and all dividends accrued thereon
to the date fixed for redemption, in trust to be paid to the holders
of such shares upon due surrender of the certificates therefor, and
shall state in the notice of redemption that such deposit has been or
will be made, then from and after the date fixed for redemption in
such notice or the date on which the deposit is made, whichever is
later, the shares to be redeemed shall no longer be deemed to be
outstanding, and the holders thereof shall have no other rights than
to receive the amount of the Redemption Price and dividends aforesaid
from the depositary upon surrender of the certificates for such shares
properly indorsed. Upon any redemption of the Preferred Shares they
shall be retired and cancelled and shall not be reissued.
5. Restriction on Redemptions and Purchases. The Company shall
not call for redemption or purchase less than all the outstanding
Preferred Shares unless full cumulative dividends on all the
outstanding Preferred Shares shall have been paid or declared and set
apart for payment in respect of all periods up to the end of the
preceding year.
6. Conversion Rights. The Preferred Shares of any series may at
the election of the holder be converted into Common Shares in whole at
any time or in part from time to time, prior to redemption, at the
Conversion Price specified for such series, subject to adjustment of
such price as hereinafter provided. Any Preferred Shares which have
been called for redemption may be converted at any time up to but not
later than the close of business on the date fixed for redemption in
the aforesaid notice, unless default shall be made and be continuing
in payment therefor. To exercise the right of conversion the holder
shall surrender the certificate for the Preferred Shares to be
converted, properly indorsed, at the office of the Company in
Philadelphia, or at such other place as the Board may determine and as
shall be specified by written notice given to the holders of Preferred
Shares. In no event upon conversion shall there be made any allowance
or adjustment in respect of dividends on shares of either class. Upon
any conversion of Preferred Shares they shall be retired and cancelled
and shall not be reissued.
-4-
<PAGE>
To protect the conversion privilege from dilution the Conversion
Price shall be subject to adjustment according to the following
provisions:
(1) In determining the Conversion Price the Preferred Shares
shall be taken at $1 per share, so that the initial Conversion Price
shall be expressed in terms of the dollars and cents resulting from
multiplying $1 by the number of whole and fractional Preferred Shares
of the particular series that must be surrendered upon conversion into
one (1) Common Share.
(2) Whenever the Company shall issue any Common Shares in excess
of 364,518 (all Common Shares in excess of that amount being
hereinafter called "Additional Shares"), and the Additional Shares are
issued at a price (calculated as hereinafter provided) which is less
than the Conversion Price, applicable to any one or more series, in
effect immediately prior to the issue of such Additional Shares, then
the Conversion Price applicable to each such series shall be adjusted
forthwith, separately for each series having a different Conversion
Price, and as often as such event occurs, to an amount determined as
follows:
(a) The number of Common Shares outstanding immediately
prior to the issue of Additional Shares shall be multiplied by
the Conversion Price then in effect; to the result there shall be
added the price at which the Additional Shares were issued; and
the sum so obtained shall be divided by the number of Common
Shares outstanding immediately after such issue. The quotient
shall be the adjusted Conversion Price of the Common Shares until
a further adjustment is required, provided that the Conversion
Price shall in no event be increased by any adjustment resulting
from an issue of Additional Shares, and provided that the
Conversion Price shall be adjusted to the nearest cent
disregarding fractions.
(b) If in any calendar year the Company issues Additional
Shares as one or more stock dividends not in the aggregate
exceeding 5% of the largest number of Common Shares outstanding
at any time in such calendar year, or if it issues Additional
Shares at any time upon conversion of Preferred Shares, or if it
issues Additional Shares in any calendar year (otherwise than as
a
-5-
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stock dividend) for consideration less than the Conversion
Price then in effect but in an aggregate amount less than 5% of
the number of Common Shares outstanding at the beginning of that
calendar year, then in each such case or combination of cases the
Additional Shares so issued shall be deemed to have been issued
for a price equal to the Conversion Price, and no adjustment
shall be made therefor; but if the Company shall issue Additional
Shares as one or more stock dividends exceeding such 5% in any
calendar year, or as a subdivision of the outstanding Common
Shares into a greater number of Common Shares, the Additional
Shares which (as a stock dividend) exceed such 5% or which are
issued in such subdivision shall be deemed to have been issued at
a price of zero; and if in any calendar year the Company shall
issue Additional Shares (otherwise than as a stock dividend) for
consideration less than the Conversion Price then in effect and
in an aggregate amount exceeding 5% of the number of Common
Shares outstanding at the beginning of that calendar year,
adjustment of the Conversion Price shall be made on the basis of
the consideration for all the Additional Shares so issued
(otherwise than as a stock dividend) in that calendar year. In
determining the number of Common Shares outstanding at the
beginning of a calendar year, for the purposes of this paragraph,
adjustment shall be made retroactively to reflect any subsequent
subdivision of outstanding shares or stock dividend in excess of
5% aforesaid effective at or before the date as of which such
determination is made.
(c) If the Company shall issue any securities (other than
Preferred Shares) convertible into Common Shares, or options for
the purchase of Common Shares, such action shall be deemed to be
an issue of Additional Shares occurring as of the date of issue
of such securities in the amount of the total number of Common
Shares initially issuable upon conversion of such securities or
exercise of such options; and the aggregate consideration (if
any) for which such securities or options were issued, plus the
additional consideration (if any) initially payable upon
conversion of such securities or exercise of such options, shall
be deemed to be the price of the Additional Shares.
-6-
<PAGE>
(d) If any part of the consideration for Additional Shares
consists of property or services, the fair value of such property
or services as determined by the Board in connection with the
issue shall be deemed to be the consideration therefor; and the
price or consideration for an issue of Additional Shares shall be
determined without deduction for the amount of any commissions,
underwriting charges or expenses paid or allowed by the Company
in connection with such issue.
(e) For purposes of adjusting the Conversion Price, the term
"Common Shares" shall mean Common Shares now authorized and
shares of any class by whatever name designated which does not
have priority over the Common Shares in respect of dividends and
distribution of assets.
(3) If the Company shall at any time be consolidated or merged with or
into, or shall sell its property substantially as an entirety to, one or
more other corporations, or in the event of any recapitalization or
reclassification of its shares, proper provision shall be made as part of
the terms of such transaction so that the holders of Preferred Shares shall
be entitled to conversion and other rights equivalent to those granted
hereunder.
7. Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Company the holders of Preferred Shares without
distinction as to series shall be entitled, in preference to the holders of
Common Shares, to receive distribution out of assets available therefor to
the amount of $1 per share if such event be involuntary, or $1.05 per share
if it be voluntary, together in either case with an amount equal to full
cumulative dividends unpaid and accrued thereon to the date fixed for
distribution (whether or not earned), and no more. The assets remaining
thereafter shall be distributed among the holders of Common Shares, pro
rata according to the number of shares held by them respectively.
8. Modification of Rights. No modification of any of the rights,
preferences or privileges of the Preferred Shares of any series shall be
made by amendment of the Articles of Incorporation, merger, consolidation,
sale of assets substantially as an
-7-
<PAGE>
entirety, voluntary liquidation, or otherwise, without either (a) the prior
written consent of all the holders of Preferred Shares adversely affected
by such modification, or (b) the prior consent of holders owning 66-2/3% of
the outstanding Preferred Shares as a class and 66-2/3% of the outstanding
Preferred Shares of each series adversely affected by such modification,
given by vote in person or by proxy at a duly constituted meeting of such
holders.
9. Series A Preferred Shares. There is hereby created and established
a series of Preferred Shares with the designation and initial number of
shares, Dividend Rate, Redemption Price and Conversion Price hereby
specified as follows:
(a) Designation of Series and Number of Shares: The series is hereby
designated the Series A Preferred Shares, which shall consist of 176,000
Preferred Shares.
(b) Dividend Rate: Five per cent (5%) of the par value of the shares,
per annum.
(c) Redemption Price: One Dollar Five Cents ($1.05) per share.
(d) Conversion Price: Two Dollars Fifty Cents ($2.50), being at the
rate of 2-1/2 Series A Preferred Shares for each Common Share.
Sixth. The value of the property with which the corporation will begin
business is $500.00.
Seventh. The names and addresses of the first directors:
Name Address
---- (including street number, if any)
---------------------------------
C.B. Moore Uwchland P.O., Chester County Pa.
Chas. H. Thompson 1058 Huntingdon Pike, Huntingdon
Valley, Pa.
Walter G. Trumbower 245 Berkley Road, Glenside, Pa.
Robert Buhner 2104 Benezet Road, Abington, Pa.
James J. FitzGerald 546 Highland Avenue, Glenside, Pa.
C.H. Welles, III Waverly, Pa.
-8-
<PAGE>
Eighth. In furtherance and not in limitation of the powers conferred
by statute the board of directors is expressly authorized to
make, alter, amend and repeal by-laws, subject to the power of
the shareholders to change or repeal such by-laws.
- ------------------
Articles First, Third, Fourth, Sixth, Seventh and Eighth (formerly
Article Tenth) have not been amended since the Company's original Articles of
Incorporation were filed in December 1953.
MOORE PRODUCTS CO.
AMENDED
1994 INCENTIVE STOCK OPTION
AND
NON-QUALIFIED STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 Purpose.................................................. 1
SECTION 2 Administration........................................... 2
SECTION 3 Eligibility.............................................. 3
SECTION 4 Stock.................................................... 3
SECTION 5 Granting of Options...................................... 3
SECTION 6 Annual Limit............................................. 4
SECTION 7 Terms and Conditions of Options.......................... 4
SECTION 8 Option Agreements - Other Provisions..................... 10
SECTION 9 Capital Adjustments...................................... 10
SECTION 10 Amendment or Discontinuance of the Plan.................. 11
SECTION 11 Termination of Plan...................................... 13
SECTION 12 Shareholder Approval..................................... 13
SECTION 13 Miscellaneous............................................ 13
-i-
<PAGE>
MOORE PRODUCTS CO.
1994 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
SECTION 1
Purpose
-------
This 1994 INCENTIVE STOCK OPTION AND NON-QUALIFIED STOCK OPTION PLAN (the
"Plan") is intended to provide a means whereby Moore Products Co. (the
"Company") may, through the grant of incentive stock options and non-qualified
stock options (collectively, "Options") to purchase common stock of the Company
("Common Stock") to officers, other key employees and certain consultants
(collectively, "Key Individuals"), attract and retain such Key Individuals and
motivate them to exercise their best efforts on behalf of the Company and of any
related corporation ("Related Corporation").
As used herein:
(a) The term "Related Corporation" shall mean either a corporate
subsidiary of the Company, as defined in section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), or the corporate parent of
the Company, as defined in section 424(e) of the Code;
(b) The term "Incentive Stock Option" ("ISO") shall mean an option
which, at the time such option is granted under the Plan, qualifies as an
ISO within the meaning of section 422 of the Code and is designated as an
ISO in the Option Agreement (as defined in Section 8 hereof); and
(c) The term "Non-Qualified Stock Option" ("NQSO") shall mean an
option which, at the time such option is granted, does not qualify as an
ISO, and is designated as an NQSO in the Option Agreement.
Notwithstanding (b) and (c) above and Sections 7 and 8 hereof, if the
Option is not designated in the Option Agreement as an ISO or NQSO, the Option
shall constitute an ISO if it complies with the terms of section 422 of the
Code, and otherwise, it shall constitute an NQSO.
<PAGE>
SECTION 2
Administration
--------------
The Plan shall be administered by the Company's Compensation Committee (the
"Committee"), which shall consist solely of not fewer than two (2) "non-employee
directors" (within the meaning of Rule 16b-3 (b) (3) under the Securities
Exchange Act of 1934 (the "Exchange Act") who shall be appointed by, and shall
serve at the pleasure of, the Company's Board of Directors (the "Board"). Each
member of such Committee, while serving as such, shall be deemed to be acting in
his or her capacity as a director of the Company.
The Committee shall have full authority, subject to the terms of the Plan,
to select the Key Individuals to be granted ISOs and/or NQSOs under the Plan, to
grant Options on behalf of the Company and to set the date of grant and the
other terms of such Options. The Committee may correct any defect, supply any
omission and reconcile any inconsistency in this Plan and in any Option granted
hereunder in the manner and to the extent it shall deem desirable. The Committee
also shall have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper administration of
the Plan, and to amend, modify or rescind any such rules and regulations, and to
make such determinations and interpretations under, or in connection with, the
Plan, as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and conclusive upon the
Company, its shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
Without limiting the effect of any other applicable exculpatory,
indemnification or similar provisions contained in the charter or by-laws of the
Company, in any contract or agreement, or afforded by law, no member of the
Board or the Committee shall be liable for any action, inaction, or
determination taken or made in good faith under or in connection with the Plan
or any Option granted under it.
SECTION 3
Eligibility
-----------
The class of persons who shall be eligible to receive Options under the
Plan shall be the Key employees (including any directors who also are officers,
other key employees or consultants under contract with the Company) of the
Company and/or of a Related Corporation. More than one Option may be granted to
a Key Individual under the Plan.
-2-
<PAGE>
SECTION 4
Stock
-----
Options may be granted under the Plan to purchase up to a maximum of seven
hundred and fifty thousand (750,000) shares of the Company's Common Stock, par
value $1.00 per share, subject to adjustment as hereinafter provided. Shares
issuable under the Plan may be authorized but unissued shares or reacquired
shares, and the Company may purchase shares required for this purpose, from time
to time, if it deems such purchase to be advisable.
If any Option granted under the Plan expires or otherwise terminates for
any reason whatever (including, without limitation, the Key Individual's
surrender thereof) without having been exercised, the shares subject to the
unexercised portion of such Option shall continue to be available for the
granting of Options under the Plan as fully as if such shares had never been
subject to an Option.
SECTION 5
Granting of Options
-------------------
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Individuals under the Plan such Options as it determines are warranted;
provided, however, that grants of ISOs and NQSOs shall be separate and not in
tandem, and further provided that consultants shall not be eligible to receive
ISOs under the Plan. The granting of an Option under the Plan shall not be
deemed either to entitle the Key Individual to, or to disqualify the Key
Individual from, any participation in any other grant of Options under the Plan.
In making any determination as to whether a Key Individual shall be granted an
Option and as to the number of shares to be covered by such Option, the
Committee shall take into account the duties of the Key Individual, his or her
present and potential contributions to the success of the Company or a Related
Corporation, and such other factors as the Committee shall deem relevant in
accomplishing the purposes of the Plan. Moreover, the Committee may provide in
the Option that said Option may be exercised only if certain conditions, as
determined by the Committee, are fulfilled.
-3-
<PAGE>
SECTION 6
Annual Limit
------------
(a) ISOs. The aggregate fair market value (determined as of the date
the ISO is granted) of the Common Stock with respect to which ISOs are
exercisable for the first time by a Key Individual during any calendar year
(under this Plan and any other ISO plan of the Company or a Related
Corporation) shall not exceed one hundred thousand dollars ($100,000).
(b) NQSOs. The annual limits set forth above for ISOs shall not apply
to NQSOs.
SECTION 7
Terms and Conditions of Options
-------------------------------
The Options granted pursuant to the Plan shall expressly specify whether
they are ISOs or NQSOs. In addition, the Options granted pursuant to the Plan
shall include expressly or by reference the following terms and conditions, as
well as such other provisions not inconsistent with the provisions of this Plan
and, for ISOs granted under this Plan, the provisions of section 422(b) of the
Code, as the Committee shall deem desirable:
(a) Number of Shares. A statement of the number of shares to which the
Option pertains.
(b) Price. A statement of the Option price which shall be determined
and fixed by the Committee in its discretion but, shall not be less than
the higher of (i) one hundred percent (100%) (one hundred ten percent
(110%) in the case of ISO's granted to more than ten percent (10%)
shareholders as discussed in subsection (j) below) of the fair market value
of the optioned shares of Common Stock, or (ii) the par value thereof, on
the date the Option is granted.
The fair market value of the optioned shares of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be:
(1) The mean between the highest and lowest quoted selling price,
if there is a market for the Common Stock on a registered securities
exchange or in an over the counter market, on the date of grant;
-4-
<PAGE>
(2) The weighted average of the mean between the highest and
lowest sales on the nearest date before and the nearest date after the
date of grant, if there are no sales on the date of grant but there
are sales on dates within a reasonable period both before and after
the date of grant;
(3) The mean between the bid and asked prices, as reported by the
National Quotation Bureau on the date of grant, if actual sales are
not available during a reasonable period beginning before and ending
after the date of grant; or
(4) Such other method of determining fair market value as shall
be authorized by the Code, or the rules or regulations thereunder, and
adopted by the Committee.
Where the fair market value of the optioned shares of Common Stock is
determined under (2) above, the average of the mean between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant is to be weighted inversely by the respective numbers of trading days
between the selling dates and the date of grant (i.e., the valuation date) in
accordance with Treas. Reg. ss.20.2031-2(b)(1).
(c) Term.
(1) ISOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term
of each ISO shall be not more than ten (10) years (five (5) years in
the case of more than ten percent (10%) shareholders as discussed in
Subsection (j) below) from the date of grant.
(2) NQSOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term
of each NQSO shall be not more than ten (10) years from the date of
grant.
(d) Exercise.
(1) General. Options shall be exercisable in such installments
and on such dates, not less than six (6) months from the date of
grant, as the Committee may specify, provided that:
-5-
<PAGE>
(A) In the case of new Options granted to a Key Individual
in replacement for options (whether granted under the Plan or
otherwise) held by the Key Individual, the new Options may be
made exercisable, if so determined by the Committee, in its
discretion, at the earliest date the replaced options were
exercisable, but not earlier than three (3) months from the date
of grant of the new Options; and
(B) The Committee may accelerate the exercise date of any
outstanding Options (including, without limitation, the six (6)
and three (3) month exercise dates referred to in (A) above), in
its discretion, if it deems such acceleration to be desirable.
Any Option shares, the right to the purchase of which has
accrued, may be purchased at any time up to the expiration or
termination of the Option. Exercisable Options may be exercised, in
whole or in part, from time to time by giving written notice of
exercise to the Company at its principal office, specifying the number
of shares to be purchased and accompanied by payment in full of the
aggregate Option price for such shares. Only full shares shall be
issued under the Plan, and any fractional share which might otherwise
be issuable upon exercise of an Option granted hereunder shall be
forfeited.
(2) Manner of Payment. The Option price shall be payable:
(A) In cash or its equivalent;
(B) In the discretion of the Committee, in Company Common
Stock previously acquired by the Key Individual, provided that if
such shares of Common Stock were acquired through the exercise of
an ISO and are used to pay the Option price of an ISO, such
shares have been held by the Key Individual for a period of not
less than the holding period described in section 422(a)(1) of
the Code on the date of exercise, or if such shares of Common
Stock were acquired through exercise of an NQSO or of an option
under a similar plan or through exercise of an ISO and are used
to
-6-
<PAGE>
pay the Option price of an NQSO, such shares have been held by
the Key Individual for a period of more than six (6) months on
the date of exercise;
(C) In the discretion of the Committee, in Company Common
Stock newly acquired by the Optionee upon exercise of such Option
(which shall constitute a disqualifying disposition in the case
of an Option which is an ISO);
(D) In the discretion of the Committee, in any combination
of (A), (B) and (C) above; or
(E) In the discretion of the Committee, by delivering a
properly executed notice of exercise of the Option to the Company
and a broker, with irrevocable instructions to the broker
promptly to deliver to the Company the amount of sale or loan
proceeds necessary to pay the exercise price of the Option.
In the event such Option price is paid, in whole or in part, with
shares of Common Stock, the portion of the Option price so paid shall
be equal to the "fair market value" on the date of exercise of the
Option, as such "fair market value" is determined in Subsection (b),
above, of the Common Stock surrendered in payment of such Option
price.
(e) Termination. If a Key Individual's employment or consultancy by or
with the Company (and Related Corporations) is terminated by either party
prior to the expiration date fixed for his or her Option for any reason
other than death or disability, such Option may be exercised, to the extent
of the number of shares with respect to which the Key Individual could have
exercised it on the date of such termination of employment or consultancy,
or to any greater extent permitted by the Committee, by the Key Individual
at any time prior to the earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the Committee,
in its discretion, except that, subject to Section 9 hereof, such
accelerated termination date shall not be earlier than the date of the
Key Individual's termination
-7-
<PAGE>
of employment or consultancy, and in the case of ISOs, such
termination date shall not be later than three (3) months after the
date of such termination of employment.
(f) Exercise upon Disability of Key Individual. If a Key
Individual shall become disabled (within the meaning of section
22(e)(3) of the Code) during his or her employment or consultancy and,
prior to the expiration date fixed for his or her Option, his or her
employment or consultancy is terminated as a consequence of such
disability, such Option may be exercised, to the extent of the number
of shares with respect to which the Key Individual could have
exercised it on the date of such termination of employment or
consultancy, or to any greater extent permitted by the Committee, by
the Key Individual at any time prior to the earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9
hereof, such accelerated termination date shall not be earlier
than the date of the Key Individual's termination of employment
or consultancy by reason of disability, and in the case of ISOs,
such date shall not be later than one (1) year after the date of
such termination of employment. In the event of the Key
Individual's legal disability, such Option may be so exercised by
the Key Individual's legal representative.
(g) Exercise upon Death of Key Individual. If a Key Individual
shall die during his or her employment or consultancy, and prior to
the expiration date fixed for his or her Option, or if a Key
Individual whose employment or consultancy is terminated for any
reason, shall die following his or her termination of employment or
consultancy but prior to the earliest of:
(1) The expiration date fixed for his or her Option;
(2) The expiration of the period determined under
Subsections (e) and (f) above; or
(3) In the case of an ISO, three (3) months following
termination of employment or consultancy;
-8-
<PAGE>
Such Option may be exercised, to the extent of the number of
shares with respect to which the Key Individual could have
exercised it on the date of his or her death, or to any greater
extent permitted by the Committee, by the Key Individual's
estate, personal representative or beneficiary who acquired the
right to exercise such Option by bequest or inheritance or by
reason of the death of the Key Individual, at any time prior to
the earlier of:
(A) The expiration date specified in such Option; or
(B) An accelerated termination date determined by the
Committee, in its discretion except that, subject to Section
9 hereof, such accelerated termination date shall not be
earlier than one (1) year, nor later than three (3) years
after the date of death.
(h) Non-Transferability. No Option which is to remain an ISO
and, except as otherwise provided by the Committee, no other
Option shall be assignable or transferable by the Key Individual
otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Key Individual, the
Option shall be exercisable only by him or by his or her guardian
or legal representative. If the Key Individual is married at the
time of exercise and if the Key Individual so requests at the
time of exercise, the certificate or certificates shall be
registered in the name of the Key Individual and the Key
Individual's spouse, jointly, with right of survivorship.
(i) Rights as a Shareholder. Holders of Options shall have
no rights as a shareholder with respect to any shares covered by
such Options until the issuance of a stock certificate for such
shares.
(j) Ten Percent Shareholder. If the Key Individual owns more
than ten percent (10%) of the total combined voting power of all
shares of stock of the Company or of a Related Corporation at the
time an ISO is granted to such Key Individual, the Option price
for the ISO shall be not less than one hundred ten percent (110%)
of the fair market value of the optioned shares of Common Stock
on the date the ISO is granted, and such ISO, by its terms, shall
not be exercisable after the expiration of five (5) years from
the date the ISO is granted. The conditions set forth in this
Subsection (j) shall not apply to NQSOs.
-9-
<PAGE>
(k) Listing and Registration of Shares. Each Option shall be
subject to the requirement that, if at any time the Committee
shall determine, in its discretion, that the listing,
registration or qualification of the shares covered thereby upon
any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with,
the granting of such Option or the purchase of shares thereunder,
or that action by the Company or by the Key Individual should be
taken in order to obtain an exemption from any such requirement,
no such Option may be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken
under conditions acceptable to the Committee. Without limiting
the generality of the foregoing, each Key Individual or his or
her legal representative or beneficiary may also be required to
give satisfactory assurance that shares purchased upon exercise
of an Option are being purchased for investment and not with a
view to distribution, and certificates representing such shares
may be legended accordingly.
(l) Withholding and Use of Shares to Satisfy Tax
Obligations. The obligation of the Company to deliver shares of
Common Stock upon the exercise of any Option shall be subject to
applicable federal, state and local tax withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal tax laws, the Committee, in
its discretion (and subject to such withholding rules
("Withholding Rules") as shall be adopted by the Committee), may
permit the Key Individual to satisfy the federal withholding tax,
in whole or in part, by electing to have the Company withhold (or
by returning to the Company) shares of Common Stock, which shares
shall be valued, for this purpose, at their fair market value on
the date of exercise of the Option (or if later, the date on
which the Optionee recognizes ordinary income with respect to
such exercise) (the "Determination Date"). An election to use
shares of Common Stock to satisfy tax withholding requirements
must be made in compliance with and subject to the Withholding
Rules. The Committee may not withhold shares in excess of the
number necessary to satisfy the minimum federal income tax
withholding requirements. In the event shares of Common Stock
acquired under the exercise of an ISO are used to satisfy such
withholding requirement, such shares of Common Stock must have
been held by the Key Individual for a period of not less than the
holding period described in section 422(a)(1) of the
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<PAGE>
Code on the Determination Date, or if such shares of Common Stock
were acquired through exercise of an NQSO or of an option under a
similar plan, such option was granted to the Key Individual at
least six (6) months prior to the Determination Date.
SECTION 8
Option Agreements - Other Provisions
------------------------------------
Options granted under the Plan shall be evidenced by written instruments
("Option Agreements") in such form as the Committee shall, from time to time,
approve, which Option Agreements shall contain such provisions, not inconsistent
with the provisions of the Plan for NQSOs granted pursuant to the Plan, and such
conditions, not inconsistent with section 422(b) of the Code or the provisions
of the Plan for ISOs granted pursuant to the Plan, as the Committee shall deem
advisable. Each Key Individual shall enter into, and be bound by, such Option
Agreements, as soon as practicable after the grant of an Option.
SECTION 9
Capital Adjustments
-------------------
The number of shares which may be issued under the Plan, as stated in
Section 4 hereof, and the number of shares issuable upon exercise of outstanding
Options under the Plan (as well as the Option price per share under such
outstanding Options), shall, subject to the provisions of section 424(a) of the
Code, be adjusted, as may be deemed appropriate by the Committee, to reflect any
stock dividend, stock split, share combination, or similar change in the
capitalization of the Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options if it determines that such termination
is in the best interests of the Company. If the Committee decides to terminate
outstanding Options, the Committee shall give each Key Individual holding an
Option to be terminated not less than fifteen (15) days' notice prior to any
such termination by reason of such a corporate transaction, and any such Option
which is to be so terminated may be exercised (if and only to the extent that it
is then exercisable) up to, and including the date immediately preceding such
termination. Further, as provided in Section 7(d) hereof the Committee, in its
discretion, may accelerate, in whole or in part, the date on which any or all
Options become
-11-
<PAGE>
exercisable.
The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that, in
the case of ISOs which are to remain ISOs, such change is excluded from the
definition of a "modification" under section 424(h) of the Code unless the
Option holder consents to such change.
SECTION 10
Amendment or Discontinuance of the Plan
---------------------------------------
(a) General.The Board from time to time may suspend or discontinue the
Plan or amend it in any respect whatsoever, except that the following
amendments shall require shareholder approval (given in the manner set
forth in Section 10(b) below):
(1) With respect to Options, any amendment which would:
(A) Materially increase the benefits accruing to directors
and to officers, within the meaning of 17 CFR ss. 240.16a-1(f)
(hereinafter referred to as "Officers"), under the Plan;
(B) Materially increase the number of shares of Common Stock
which may be issued to directors and Officers under the Plan; or
(C) Materially modify the requirements as to eligibility for
directors and Officers to participate in the Plan;
and
(2) With respect to ISOs, any amendment which would:
(A) Change the class of employees eligible to
participate in the Plan;
(B) Except as permitted under Section 9 hereof,
increase the maximum number of shares of Common Stock with
respect to which ISOs may be granted under the Plan; or
(C) Extend the duration of the Plan under Section 11
hereof with respect to any ISOs granted hereunder.
-12-
<PAGE>
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.
(b) Shareholder Approval Requirements. Shareholder approval must meet the
following requirements:
(1) The approval of shareholders must be by a majority of the
outstanding shares of Common Stock present, or represented, and entitled to
vote at a meeting duly held in accordance with the applicable laws of the
Commonwealth of Pennsylvania; and
(2) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state law
prescribing the method and degree of shareholder approval required for the
issuance of corporate stock or options. If the applicable state law does
not prescribe a method and degree of shareholder approval in such case, the
approval of shareholders must be effected:
(A) By a method and in a degree that would be treated as adequate
under applicable state law in the case of an action requiring
shareholder approval (i.e., an action on which shareholders would be
entitled to vote if the action were taken at a duly held shareholders'
meeting); or
(B) By a majority of the votes cast at a duly held shareholders'
meeting at which a quorum representing a majority of all outstanding
voting stock is, either in person or by proxy, present and voting on
the Plan.
SECTION 11
Termination of Plan
-------------------
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
February 7, 2004, which date is within ten (10) years after the date the Plan
was adopted by the Board, and no Options hereunder shall be granted thereafter.
Nothing contained in this Section 11, however, shall terminate or affect the
continued existence of rights created under Options
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<PAGE>
issued hereunder and outstanding on February 7, 2004, which by their terms
extend beyond such date.
SECTION 12
Effective Date
--------------
This Plan originally became effective on February 8, 1994 (the date the
Plan was adopted by the Board) and was approved by the shareholders on May 5,
1994.
SECTION 13
Miscellaneous
-------------
(a) Governing Law. With respect to any ISOs granted pursuant to the
Plan and the Option Agreements thereunder, the Plan, such Option Agreements
and any ISOs granted pursuant thereto shall be governed by the applicable
Code provisions to the maximum extent possible. Otherwise, the operation
of, and the rights of Key Individuals under, the Plan, the Option
Agreements and any Options granted thereunder shall be governed by
applicable federal law and otherwise by the laws of the Commonwealth of
Pennsylvania.
(b) Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to
be granted an Option, or any other right hereunder, unless and until the
Committee shall have granted such individual an Option, and then his or her
rights shall be only such as are provided by the Option Agreement. Further,
notwithstanding any provisions of the Plan or the Option Agreement with a
Key Individual, the Company shall have the right, in its discretion, to
retire a Key Individual at any time pursuant to its retirement rules or
otherwise to terminate his or her employment or consultancy at any time for
any reason whatsoever.
(c) Indemnification of Board and Committee. Without
limiting any other rights of indemnification which they may have from
the Company and any Related Corporation, the members of the Board and
the members of the Committee shall be indemnified by the Company to the
fullest extent permitted by applicable Pennsylvania law against all
expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by them in connection
with any claim, action, suit, or proceeding to which they or any of
them may be a party by reason of any action taken or failure to act
under, or in connection with, the Plan, or any Option granted
thereunder.
-14-
<PAGE>
The Board or Committee member shall notify the Company promptly in
writing of the making or institution of any such claim, action, suit
or proceeding, giving the Company an opportunity, at its own expense,
to handle and defend the same before such Board or Committee member
undertakes to handle it on his or her own behalf.
(d) Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Options granted under the
Plan shall be used for general corporate purposes. Any cash received
in payment for shares upon exercise of an Option to purchase Common
Stock shall be added to the general funds of the Company and shall be
used for its corporate purposes. Any Common Stock received in payment
for shares upon exercise of an Option to purchase Common Stock shall
become treasury stock.
(e) No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon a Key Individual to exercise such
Option.
MOORE PRODUCTS CO.
1997 NON-EMPLOYEE DIRECTORS'
EQUITY INCENTIVE PLAN
1. Purpose
This 1997 NON-EMPLOYEE DIRECTORS' EQUITY INCENTIVE PLAN (the "Plan") is
intended to provide a means whereby Moore Products Co. (the "Company") may,
through the grant of non-qualified stock options ("Options") to purchase common
stock of the Company ("Common Stock") to Non-Employee Directors (as defined in
Section 3 hereof), attract and retain capable outside directors and motivate
such outside directors to promote the best interests of the Company, its related
corporations and shareholders.
For purposes of the Plan, a Related Corporation of the Company shall mean a
corporate subsidiary of the Company, as defined in section 424(f) of the
Internal Revenue Code of 1986, as amended ("Code"). Further, as used in the
Plan, the term "non-qualified stock option" shall mean an option which, at the
time such option is granted, does not qualify as an incentive stock option
within the meaning of section 422 of the Code.
2. Administration
The Plan shall be administered by the Company's Board of Directors (the
"Board"). The Board shall have all the powers vested in it by the terms of the
Plan, such powers to include authority (within any limitations described herein)
to prescribe the form of the agreement embodying awards of Options. The Board
shall, subject to the provisions of the Plan, implement the grant of Options
under the Plan and shall have the power to construe the Plan, to determine all
questions arising thereunder and to adopt and amend such rules and regulations
for the administration of the Plan as it may deem desirable. Any decisions of
the Board in the administration of the Plan, as described herein, shall be final
and conclusive. The Board may authorize any one or more of its number or the
Secretary or any other officer of the Company to execute and deliver documents
on behalf of the Board. No member of the Board shall be liable for anything done
or omitted to be done by him or by any other member of the Board in connection
with the Plan, except for his own willful misconduct or as expressly provided by
statute.
3. Eligibility
The persons who shall be eligible to receive Options under the Plan
("Non-Employee Directors") shall be those directors of the Company who:
(a) Are not employees of the Company or of any Related Corporation; and
(b) Have not been employees of the Company or of any Related Corporation
during the immediately preceding twelve (12) month period.
<PAGE>
4. Authorized Shares
Options may be granted under the Plan to purchase up to a maximum of fifty
thousand (50,000) shares of Common Stock, par value $1.00 per share, subject to
adjustment as hereinafter provided. Shares issuable under the Plan may be
authorized but unissued shares or reacquired shares, and the Company may
purchase shares of Common Stock against which Options may be granted hereunder,
from time to time, if it deems such purchases to be advisable.
If any Option granted under the Plan expires or otherwise terminates, in
whole or in part, for any reason whatever (including, without limitation, a
Non-Employee Director's surrender thereof) without having been exercised, the
shares subject to the unexercised portion of such Option shall continue to be
available for the granting of Options under the Plan as fully as if such shares
had never been subject to an Option.
5. Granting of Options
Each year, commencing in 1997, on the third business day following the date
of the Company's Annual Meeting of Shareholders, each person elected, reelected
or continuing as a Non-Employee Director automatically shall be granted an
Option to purchase one thousand (1,000) shares of Common Stock, subject to the
terms of the Plan, including, without limitation, Sections 7 and 12(d) hereof.
6. Terms and Conditions of Options
Options granted pursuant to the Plan shall include expressly or by
reference the following terms and conditions:
(a) Number of Shares. A statement of the number of shares to which Option
pertains.
(b) Price. A statement of the Option exercise price (the "Option Price").
The Option Price shall be the greater of one hundred percent (100%) of
the Fair Market Value of the Common Stock, or the par value thereof,
on the date the Option is granted. For the purposes of the Plan, the
Fair Market Value of the Common Stock shall be:
(i) The average of the high and low sale prices of a share of Common
Stock as reported on the Nasdaq Stock Market or, if the Nasdaq
Stock Market is closed on that date, or if the Common Stock on
that date did not trade then; on the last preceding date on which
the Nasdaq Stock Market was open for trading and the Common Stock
did trade; or
(ii) If paragraph (b) (i) above is inapplicable, such other method of
determining Fair Market Value as shall be authorized by the Code,
or the rules or regulations thereunder, and adopted by the Board.
2
<PAGE>
(c) Term. Subject to earlier termination as provided in Sections 6(e) and
in Section 8 hereof, the term of each Option shall be ten (10) years
from the date of grant.
(d) Exercise. Options shall be exercisable commencing six (6) months after
the date of grant except that, if the date of the next succeeding
annual meeting of shareholders is less than six (6) months from the
date of grant of the Options, then such Options shall be exercisable,
commencing on the day preceding the date of the annual meeting of
shareholders next succeeding the date of grant of such Options. Any
Option shares, the right to the purchase of which has accrued, may be
purchased at any time up to the expiration or termination of the
Option. Exercisable Options may be exercised, in whole or in part,
from time to time by giving written notice of exercise to the Company
at its principal office, specifying the number of shares to be
purchased and accompanied by payment in full of the aggregate price
for such shares. Only full shares shall be issued under the Plan, and
any fractional share which might otherwise be issuable upon exercise
of an Option granted hereunder shall be forfeited.
The Option Price shall be payable:
(1) In United States dollars by cash or check; or
(2) In lieu thereof, by tendering to the Company Common
Stock owned by the person exercising the Option and
having a Fair Market Value on the date of exercise
equal to the Option Price applicable to such Option; or
(3) By a combination of United States dollars and Common
Stock as aforesaid.
(e) Termination of Status as a Non-Employee Director. If a Non-Employee
Director for any reason (including, but not limited to, his or her
becoming an employee of the Company or any Related Corporation, or his
or her ceasing to be director of the Company), whether voluntarily or
involuntarily, permanently or temporarily, his or her unexercised
Options shall remain exercisable, to the extent they were exercisable
at the time he or she ceased to be a Non-Employee Director
(the"Cessation Date"), but only for a period of nine (9) months
following the Cessation Date or until the earlier expiration date
specified in such Options or their termination pursuant to Section 8
hereof. Any Options not so exercised shall terminate.
(f) In the event of a Non-Employee Director's legal disability, such
Options may be so exercised by the Non-Employee Director's legal
representative. In the event of a Non-Employee Director's death, such
Options may be so exercised by the Non-Employee Director's estate,
personal representative or beneficiary who acquired the right to
exercise such Option by bequest or inheritance or by reason of the
death of the Non-Employee Director.
3
<PAGE>
(g) Non-Transferability. Except as otherwise provided in any Option
Agreement (as defined in Section 7 hereof), no Option shall be
assignable or transferable by the Non-Employee Director otherwise than
by will or by the laws of descent and distribution, and during the
lifetime of the Non-Employee Director, the Option shall be exercisable
only by him or by his or her guardian or legal representative. If the
Non-Employee Director is married at the time of exercise and if the
Non-Employee Director so requests at the time of exercise, the share
certificate or certificates shall be registered in the name of the
Non-Employee Director and the Non-Employee Director's spouse, jointly,
with right of survivorship.
(h) Rights as a Shareholder. An optionee under the Plan shall have no
rights as a shareholder with respect to any shares covered by his or
her Option until the issuance of a stock certificate to him or her for
such shares.
(i) Listing and Registration of Shares. Each Option shall be subject to
the requirement that, if at any time the Board shall determine, in its
discretion that the listing, registration or qualification of the
shares covered thereby upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the purchase of shares
thereunder, or that action by the Company or by a Non-Employee
Director should be taken in order to obtain an exemption from any such
requirement no such Option may be granted or be exercised, in whole or
in part, unless and until such listing, registration, qualification,
consent, approval, or action shall have been effected, obtained, or
taken under conditions acceptable to the Board. Without limiting the
generality of the foregoing, each Non-Employee Director or his or her
legal representative or beneficiary may also be required to give
satisfactory assurance that shares purchased upon exercise of an
Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be
legended accordingly.
7. Option Agreements - Other Provisions
Options granted under the Plan shall be evidenced by written documents
(Option Agreements") in such form as the Board shall, from time to time,
approve, which Option Agreements shall contain such provisions, not inconsistent
with the provisions of the Plan as the Board shall deem advisable. Each
Non-Employee Director shall enter into, and be bound by, such Option Agreements.
8. Capital Adjustments
The number of shares of Common Stock which may be issued under the Plan, as
stated in Section 4 hereof, the number of shares covered by future Option
grants, as stated in Section 5 hereof, and the number of shares issuable upon
exercise of outstanding Options under the Plan (as well as the Option price per
share under such outstanding Options) shall be adjusted proportionately to
reflect any stock dividend, stock split, share combination, or similar change in
the capitalization of the Company.
4
<PAGE>
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation) and provision is not made for the
continuance and assumption of Options under the Plan, or the substitution of
such Options of new Options to acquire securities or other property to be
delivered in connection with the transaction, the Board shall, upon written
notice to the holders of Options, provide that all unvested Options immediately
shall vest and become fully exercisable, but all unexercised Options will
terminate immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization, liquidation, sale or transfer unless exercised by
the holder within a specified number of days (which shall be less than fourteen
(14) days) following the date of such notice.
9. Amendment, Suspension and Discontinuance of the Plan
The Board, from time to time, may suspend or discontinue the Plan or amend
the Plan or any Option outstanding under it in any respect whatsoever,
including, without limitation, increasing the number of shares authorized for
issuance under the Plan and extending the duration of the Plan, provided,
however, that no amendment to the Plan shall become effective without
shareholder approval if such shareholder approval is required by applicable law,
rule or regulation, and provided further, that no amendment shall materially
impair the rights of any holder of an outstanding Option without the consent of
such holder.
10. Effective Date
The Plan shall become effective when the Plan is approved and adopted by
the Company's shareholders.
11. Termination of Plan
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
December 31, 2004, and no Options hereunder shall be granted thereafter. Nothing
contained in this Section 11, however, shall terminate or affect the continued
existence in accordance with their terms of Options outstanding on the date of
termination of the Plan.
12. General Provisions
(a) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements for directors (subject
to shareholder approval if such approval is required); and such
arrangements may be either generally applicable or applicable only in
specific cases.
(b) The adoption of the Plan and the receipt of grants hereunder shall not
confer upon any person any right to continued services as a director
of the Company.
(c) In the event of exercise of an Option, the optionee shall pay to the
Company, upon its demand, such amount as may be requested by the
Company for the
5
<PAGE>
purpose of satisfying any liability to withhold Federal, state, local,
or foreign income or other taxes (which payment may be made in any
manner prescribed in Section 6(d) hereof). The obligations of the
Company under the Plan shall be conditioned on such payment, and the
Company shall have the right to withhold the issuance of shares to the
optionee and, to the extent permitted by law, shall have the right to
deduct any such taxes from any payment of any kind otherwise due to
the Non-Employee Director.
(d) At the time of grant of any Option, The Board may provide that any
shares of Common Stock received as a result of exercise of such
Option shall be subject to a right of first refusal, pursuant to
which the Non-Employee Director shall be required to offer to the
Company any such shares that he or she wishes to sell, with the
price being the then Fair Market Value of the shares, subject to
such other terms and conditions as the Board may specify at the
time of grant.
(e) Each person who is or shall have been a member of the Board shall be
indemnified and held harmless by the Company, to the fullest extent
permissible by Pennsylvania Law, against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred
by such person in connection with or resulting from any claim, action,
suit, or proceeding to which such person may be made a party or in
which such person may be involved by reason of any action taken or
failure to act under or with respect to the Plan and against and from
any and all amounts paid by such person in settlement thereof, with
the Company's approval, or paid by such person in satisfaction of any
judgement in any such action, suit, or proceeding against such person,
provided such person shall give the Company an opportunity, at the
Company's expense, to handle and defend the same before such person
undertakes to handle and defend it on such person's own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such
persons may be entitled under the Company's Articles of Incorporation
or By-laws, by contract, as a matter of law, or otherwise.
(f) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with laws of the Commonwealth
of Pennsylvania.
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<CASH> 4622000
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<INVENTORY> 21806000
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0
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<CGS> 65577000
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